Clayton Antitrust Act

What is the 'Clayton Antitrust Act'

The Clayton Antitrust Act is an amendment passed by U.S. Congress in 1914 that provides further clarification and substance to the Sherman Antitrust Act of 1890 on topics such as price discrimination, price fixing and unfair business practices. The Acts are enforced by the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ).

BREAKING DOWN 'Clayton Antitrust Act'

At the turn of the 20th century, large corporations had developed strong strategic positions in entire segments by using predatory pricing, exclusive dealings and anticompetitive mergers. These practices directly impacted local operations and drove smaller entities out of business. In 1914, Henry De Lamar Clayton of Alabama introduced the Clayton Antitrust Bill to regulate massive corporations. The bill passed the House of Representatives with a wide majority on June 5, 1914. President Woodrow Wilson signed the initiative into law on Oct. 15, 1914.

Specific Sections of the Act

As of 2016, the Clayton Antitrust Act has 26 sections. Of these, some are more notable than others. The second section handles the unlawfulness of price discrimination, price cutting and predatory pricing. The third section addresses exclusive dealings or the attempt to create a monopoly. The fourth section states the right of private lawsuits of any individual injured by anything forbidden in the antitrust laws. The sixth section handles labor and the exemption of the workforce. The Clayton Antitrust Act provides that labor is not an economic commodity. The seventh section handles mergers and acquisitions and is often referred to when multiple companies attempt to become one entity.

Additional Legislation From the Act

The Act banned the practice of price discrimination and anticompetitive mergers. It also declared peaceful strikes, picketing, boycotts, agricultural cooperatives and labor unions legal under federal law. Certain holding companies were forbidden while discriminatory freight agreements were also banned. The Act prohibited exclusive sales contracts, certain rebates and local price cutting.

Relationship to Other Historical Acts

The Sherman Antitrust Act of 1890 was the first Act to prohibit trusts and outlaw monopolistic business practices. However, the vague language of the bill allowed businesses to continue engaging in operations that discouraged competition and fair pricing. While the Sherman Antitrust Act made monopolies illegal, the Clayton Antitrust Act banned operations conducive to the formation of monopolies. The Clayton Antitrust Act was later amended by the Robinson-Patman Act of 1936 and the Celler-Kefauver Act of 1950. The Robinson-Patman Act reinforced laws against price discrimination among customers. The Celler-Kefauver Act prohibited the transfer of assets or equity if an acquisition reduced competition.