Clayton Antitrust Act (1914)

The Clayton Antitrust Act of 1914 (38 Stat. 730), enacted during the first term of the Woodrow Wilson administration, operated as a supplement to the Sherman Antitrust Act of 1890 (26 Stat. 209) clarifying federal anticompetitive legislation through a heightened regime of proscribed business practices. The Clayton act targeted both organizational and substantive business reforms. Major substantive provisions of the act eliminated price fixing, exclusivity agreements, and owning stocks in competing corporations. The act also sought to control structural elements of businesses through the elimination of interlocking directorates and mergers and acquisitions. Portions of the act were designed to dissuade the predatory and abusive practices of businesses, thereby encouraging competition, consumer choice, lower prices, and innovation in the marketplace. Unlike the trailblazing legislation embodied in the Sherman Antitrust Act, the Clayton Antitrust Act signified the continuing efforts of the federal government to spell out appropriate business practices. The act sought to discourage more generally the consolidation of businesses and economic power into too few hands.

The Sherman Antitrust Act was the first foray by the federal government into the realm of business regulation. The act was designed to deter restraints on trade and the formation of business, sapping trusts and monopolies. The Sherman act grew out of state anticompetitive laws, such as those in place in Ohio and Wisconsin, which had a mixed record of success. Businesses were able to fashion novel legal devices enabling corporations to own other business entities, thus effectively circumventing the letter of state law. This led to the passage of the Sherman Antitrust Act. Unfortunately, the act was seldom used in its infancy until the administration of Theodore Roosevelt, who assumed the mantle of progressive reform and the mixed record of William Howard Taft. Early “trust busting” efforts against John D. Rockefeller's Standard Oil and J. P. Morgan's Northern Securities Trust are noteworthy. Due to a lack of legislative specificity and an inadequate enforcement regime, legal ambiguities became obvious, hindering the intent of the Sherman Antitrust Act.

The Clayton Antitrust Act was further updated by the Robinson-Patman Act of 1936 (49 Stat. 1526) forbidding price discrimination by producers. Robinson-Patman specifically aimed at the removal of tiered pricing schemes benefiting business-to-business transactions at the expense of sales to individual purchasers. The object of the act was industry-wide fairness in pricing and sales schemes. The Celler-Kefauver Act of 1950 (64 Stat. 1125) further amended the Clayton act through the exclusion of anticompetitive mergers. Businessmen were able to exploit loopholes in Clayton language enabling stock purchases of firms in varied industries, referred to as conglomerate mergers. Additionally, Celler-Kefauver outlawed the formation of vertical mergers, augmenting earlier proscriptions against horizontal ones. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (90 Stat. 1390) mandated reporting requirements for mergers, acquisitions, and tenders.

The Clayton Antitrust Act represents an evolution in federal anticompetitive legislation, standing behind Sherman and in front of Robinson-Patman, Celler-Kefauver, and others. It brought clarity to regulations and teeth to enforcement, and sought to level the economic playing field toward consumers and small businesses.