DEFINITION of Celler-Kefauver Act

The Celler-Kefauver Act is one of several U.S. laws designed to prevent certain mergers and acquisitions which would lead to the creation of a monopoly or otherwise significantly reduce competition. The Celler-Kefauver Act was passed in 1950 to create additional restrictions in addition to the Clayton and Sherman Antitrust Act.

BREAKING DOWN Celler-Kefauver Act

The former antitrust legislation provided controls on certain mergers and acquisitions, but only in the case of buying outstanding stock. Antitrust rules could thus be largely circumvented by only buying the assets of the target corporation. The Celler-Kefauver Act prevents this work-around measure thus strengthening anti-trust rules in the United States.

History of the Celler-Kefauver Act

In response to the Sherman Act's vague language and many loopholes, in 1914, the U.S. Congress amended the Sherman Act with the Clayton Antitrust Act. Although the Clayton Act clarified many interpretation issues by adding specific examples of illegal actions by companies, it still suffered from ambiguity surrounding price-discrimination. To give bite to the Clayton Act's powers to prevent mergers resulting in reduced competition, Congress passed the Celler-Kefauver Act in 1950. Today, the Celler-Kefauver Act remains one of American's strongest antitrust laws, arming the government with potent legal sway in preventing vertical and conglomerate mergers.

An example of a vertical merger includes a vendor company merging with a customer company. The Celler-Kefauver Act may be evoked on the grounds the government thinks the transaction creates entry barriers and or prevents potential consumers from fair access to other companies with similar products. To challenge a conglomerate merger, the act makes the case that a company is using its success, resources and money from one market to create a monopoly over another market.

Modern, digital and high tech businesses and industries are reigniting debates surrounding U.S. antitrust laws; perhaps the next chapter awaits.