Clayton Antitrust Act
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The Clayton Antitrust Act is a federal law passed in 1914 amending the Sherman Antitrust Act and expanding the federal government's power to regulate trusts and monopolies.[1]
Background
Industrial trusts, cartels, and monopolies had proliferated and gained large amounts of market power in the late 19th century. Congress passed its first major antitrust law, the Sherman Antitrust Act in 1890. Since the Sherman Act only targeted combinations involving separate companies, many companies merged into single corporations following its passage. The government had also used the law to target labor unions, which had become more common during the same period. The rise of the Progressive Era brought increased scrutiny of trusts and more favorable attitudes towards labor unions. President Woodrow Wilson signed the Clayton Act into law in 1914.[2]
Provisions
Ban on Price Discrimination
Section 2 of the act banned price discrimination between different customers buying the exact same goods.[1]
Ban on Monopolies
Section 3 banned companies from making contracts or agreements to avoid competing with each other, or to form monopolies.[1]
Protection for Labor Unions and Agricultural Organizations
Section 6 of the act established protections for labor unions and agricultural organizations, which had been targeted by the federal government under the Sherman Antitrust Act.
| “ | That the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit...[1][3] | ” |
Standing to Sue
Section 4 gave anyone injured in business or property by an organization prohibited by the act standing to sue for damages in their District Court. Section 14 gave any "person, firm, corporation, or association" similar standing to sue for injunctive relief against another party using practices that violated the act.[1]
Mergers and Acquisitions
Section 7 prohibited companies from acquiring or merging with another company if the effect of that combination would be to "substantially lessen competition." This did not restrict mergers and acquisitions undertaken "solely for investment" or the creation of subsidiary corporations for legitimate business purposes.[1]
Financial Fraud
Section 9 banned embezzling and other forms of financial fraud, and labeled these crimes as felonies punishable by a fine of up to $500 and one year in prison.[1]
Conflicts of Interest
Section 8 held that "no person shall at the same time be a director or other officer or employee of more than one bank, banking association, or trust company" with assets over $5 million. Section 10 banned common carriers from making contracts or transactions with companies in which their own officers or board members served or held a significant financial interest. Such a transaction could take place however, if the Interstate Commerce Commission determined that it was the fairest and most competitive option possible. Common carriers participating in such transactions had to submit a full report to the ICC for review, who would then contact the Attorney General if any wrongdoing had occurred.[1]
Enforcement
Section 11 gave authority to the Interstate Commerce Commission to prosecute violations of sections 2, 3, 7, and 8 of the act by common carriers. Violations of those sections by banks fell under the jurisdiction of the Federal Reserve Board, and all other business types were to be handled by the Federal Trade Commission. Upon finding a violation, the relevant board could issue a complaint to the company and schedule a hearing in which both sides would argue their respective cases. The board could then issue a cease-and-desist or a divestment order to the individual or company. Such proceedings could also be initiated by third parties by submitting a complaint to the prosecuting board. If the person or company refused to obey the order, the board could then refer the case to the relevant Circuit Court of Appeals. The judgment of the Appeals Court would be final, unless the case proceeded to the Supreme Court.[1]
Culpability of Directors
Section 14 held that if a corporation was found guilty of violating the act, then the directors and officers who had ordered or authorized the illegal practices would also be found guilty of a misdemeanor, subject to either a fine not exceeding $5,000 or imprisonment of one year.[1]
Amending statutes
Below is a partial list of subsequent laws that amended provisions of the Clayton Antitrust Act:
- Robinson-Patman Act of 1936 strengthened the ban on price discrimination.[4]
- Celler-Kefauver Act of 1950 closed a loophole in the Clayton Act that had allowed businesses to acquire a competitor's assets in order to reduce competition.[5]
- Hart–Scott–Rodino Antitrust Improvements Act of 1976 updated rules for mergers and acquisitions, placing most types under Federal Trade Commission supervision, and made several other changes to the Clayton Act.[6]
See also
- Sherman Antitrust Act
- Interstate Commerce Act
- Securities and Exchange Commission v. Chenery Corporation
- Federal Trade Commission (FTC) v. Standard Oil Company of California
External links
Footnotes
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Legisworks.org. Clayton Antitrust Act, accessed January 18, 2018
- ↑ Investopedia, Clayton Antitrust Act, accessed January 18, 2018
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Legal Information Institute, 15 U.S. Code § 13 - Discrimination in price, services, or facilities, accessed January 18, 2018
- ↑ LegisWorks.org, Celler-Kefauver Act, accessed January 18, 2018
- ↑ US Code, 15 USC 18a: Premerger notification and waiting period, accessed January 18, 2018
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