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Clayton Antitrust Act of 1914
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Clayton Antitrust Act of 1914
The Clayton Antitrust Act of 1914 (Pub. L. 63–212, 38 Stat. 730, enacted October 15, 1914, codified at 15 U.S.C. §§ 12–27, 29 U.S.C. §§ 52–53) is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipiency.
That regime began with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices that were harmful to consumers (monopolies, cartels, and trusts). The Clayton Act specified prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures. Like the Sherman Act, much of the substance of the Clayton Act has been developed and animated by the U.S. courts, particularly the Supreme Court.
Since the Sherman Antitrust Act of 1890, courts in the United States interpreted the law on cartels as applying against trade unions. This created a problem for workers, who needed to organize to balance the equal bargaining power against their employers. The Sherman Act also triggered the largest wave of mergers in US history, as businesses realized that instead of creating a cartel they could simply fuse into a single corporation, and have all the benefits of market power that a cartel could bring. At the end of the Taft administration, and the start of the Woodrow Wilson administration, a Commission on Industrial Relations was established. During its proceedings, and in anticipation of its first report on October 23, 1914, legislation was introduced by Alabama Democrat Henry De Lamar Clayton Jr. in the U.S. House of Representatives. The Clayton Act passed by a vote of 277 to 54 on June 5, 1914. Though the Senate passed its own version on September 2, 1914, by a vote of 46–16, the final version of the law (written after deliberation between Senate and the House), did not pass the Senate until October 6 and the House until October 8 of 1914.
The Clayton Act made both substantive and procedural modifications to federal antitrust law. Substantively, the act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct not deemed in the best interest of a competitive market. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Antitrust Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business:
Unilateral price discrimination is clearly outside the reach of Section 1 of the Sherman Act, which only extended to "concerted activities" (agreements). Exclusive dealing, tying, and mergers are all agreements, and theoretically, within the reach of Section 1 of the Sherman Act. Likewise, mergers that create monopolies would be actionable under Sherman Act Section 2.
Section 7 of the Clayton Act allows greater regulation of mergers than just Sherman Act Section 2, since it does not require a merger-to-monopoly before there is a violation. It allows the Federal Trade Commission and Department of Justice to regulate all mergers, and gives the government discretion whether to give approval to a merger or not, which it still commonly does today. The government often employs the Herfindahl-Hirschman Index (HHI) test for market concentration to determine whether the merger is presumptively anticompetitive; if the HHI level for a particular merger exceeds a certain level, the government will investigate further to determine its probable competitive impact.
Section 7 elaborates on specific and crucial concepts of the Clayton Act; "holding company" defined as "a company whose primary purpose is to hold stocks of other companies", which the government saw as a "common and favorite method of promoting monopoly" and a mere corporated form of the 'old fashioned' trust. Section 7 prohibits acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly.
Another important factor to consider is the amendment passed in Congress on Section 7 of the Clayton Act in 1950. This original position of the US government on mergers and acquisitions was strengthened by the Celler-Kefauver amendments of 1950, so as to cover asset as well as stock acquisitions.
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Clayton Antitrust Act of 1914
The Clayton Antitrust Act of 1914 (Pub. L. 63–212, 38 Stat. 730, enacted October 15, 1914, codified at 15 U.S.C. §§ 12–27, 29 U.S.C. §§ 52–53) is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipiency.
That regime began with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices that were harmful to consumers (monopolies, cartels, and trusts). The Clayton Act specified prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures. Like the Sherman Act, much of the substance of the Clayton Act has been developed and animated by the U.S. courts, particularly the Supreme Court.
Since the Sherman Antitrust Act of 1890, courts in the United States interpreted the law on cartels as applying against trade unions. This created a problem for workers, who needed to organize to balance the equal bargaining power against their employers. The Sherman Act also triggered the largest wave of mergers in US history, as businesses realized that instead of creating a cartel they could simply fuse into a single corporation, and have all the benefits of market power that a cartel could bring. At the end of the Taft administration, and the start of the Woodrow Wilson administration, a Commission on Industrial Relations was established. During its proceedings, and in anticipation of its first report on October 23, 1914, legislation was introduced by Alabama Democrat Henry De Lamar Clayton Jr. in the U.S. House of Representatives. The Clayton Act passed by a vote of 277 to 54 on June 5, 1914. Though the Senate passed its own version on September 2, 1914, by a vote of 46–16, the final version of the law (written after deliberation between Senate and the House), did not pass the Senate until October 6 and the House until October 8 of 1914.
The Clayton Act made both substantive and procedural modifications to federal antitrust law. Substantively, the act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct not deemed in the best interest of a competitive market. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Antitrust Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business:
Unilateral price discrimination is clearly outside the reach of Section 1 of the Sherman Act, which only extended to "concerted activities" (agreements). Exclusive dealing, tying, and mergers are all agreements, and theoretically, within the reach of Section 1 of the Sherman Act. Likewise, mergers that create monopolies would be actionable under Sherman Act Section 2.
Section 7 of the Clayton Act allows greater regulation of mergers than just Sherman Act Section 2, since it does not require a merger-to-monopoly before there is a violation. It allows the Federal Trade Commission and Department of Justice to regulate all mergers, and gives the government discretion whether to give approval to a merger or not, which it still commonly does today. The government often employs the Herfindahl-Hirschman Index (HHI) test for market concentration to determine whether the merger is presumptively anticompetitive; if the HHI level for a particular merger exceeds a certain level, the government will investigate further to determine its probable competitive impact.
Section 7 elaborates on specific and crucial concepts of the Clayton Act; "holding company" defined as "a company whose primary purpose is to hold stocks of other companies", which the government saw as a "common and favorite method of promoting monopoly" and a mere corporated form of the 'old fashioned' trust. Section 7 prohibits acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly.
Another important factor to consider is the amendment passed in Congress on Section 7 of the Clayton Act in 1950. This original position of the US government on mergers and acquisitions was strengthened by the Celler-Kefauver amendments of 1950, so as to cover asset as well as stock acquisitions.