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. The Act focuses on topics such as price discrimination, price fixing, and unfair business practices. Enforcement of the Acts is 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 developed influential strategic positions in entire industry segments by using predatory pricing, exclusive dealings, and anti-competitive mergers. These controlling 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 vast majority on June 5, 1914. President Woodrow Wilson signed the initiative into law on Oct. 15, 1914.

Notable Sections of the Clayton Antitrust Act

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

As of 2016, the Clayton Antitrust Act has 26 sections. Some of these sections are more notable than others and continue to influence business practices in the United States. 

  • The second section deals with the unlawfulness of price discrimination, price cutting, and predatory pricing. 
  • Exclusive dealings or the attempt to create a monopoly is addressed in the third section. 
  • The fourth section states the right of private lawsuits of any individual injured by anything forbidden in the antitrust laws. 
  • Labor and the exemption of the workforce are handled by the sixth section, and 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 a single entity.

Clayton Antitrust 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.