Clayton Antitrust Act
1
Clayton Antitrust Act
Competition law
Basic concepts
•
History of competition law
•
Monopoly
•
•
Coercive monopoly
Natural monopoly
•
Barriers to entry
•
Herfindahl–Hirschman Index
•
Market concentration
•
Market power
•
SSNIP test
•
Relevant market
•
Merger control
Anti-competitive practices
•
Monopolization
•
Collusion
•
•
•
Formation of cartels
Price fixing
Bid rigging
•
Product bundling and tying
•
Refusal to deal
•
•
Group boycott
Essential facilities
•
Exclusive dealing
•
Dividing territories
•
Conscious parallelism
•
Predatory pricing
•
Misuse of patents and copyrights
Enforcement authorities and organizations
•
•
International Competition Network
List of competition regulators
The Clayton Antitrust Act of 1914 (Pub.L. 63-212, 38 Stat. 730, enacted October 15, 1914, codified at 15
U.S.C. §§ 12 [1]–27 [2], 29 U.S.C. §§ 52 [3]–53 [4]), was enacted in the United States to add further substance to the
U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with
the Sherman Antitrust Act of 1890, the first Federal law outlawing practices safe considered harmful to consumers
(monopolies, cartels, and trusts). The Clayton Act specified particular prohibited conduct, the three-level
enforcement scheme, the exemptions, and the remedial measures.
Passed during the Wilson administration, the legislation was introduced by Alabama Democrat Henry De Lamar
Clayton Jr. in the U.S. House of Representatives, where the 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
Clayton Antitrust Act
(written after deliberation between Senate and the House), did not pass the Senate until October 5 and the House
until October 8 of the same year.
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.
Provisions
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 Act of 1890. In those sections, the Act thoroughly discusses the
following four principles of economic trade and business:
• price discrimination between different purchasers if such a discrimination substantially lessens competition or
tends to create a monopoly in any line of commerce (Act Section 2, codified at 15 U.S.C. § 13 [5];
• sales on the condition that (A) the buyer or lessee not deal with the competitors of the seller or lessor ("exclusive
dealings") or (B) the buyer also purchase another different product ("tying") but only when these acts
substantially lessen competition (Act Section 3, codified at 15 U.S.C. § 14 [6]);
• mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at 15
U.S.C. § 18 [7]) or where the voting securities and assets threshold is met (Act Section 7a, codified at 15
U.S.C. § 18a [8]);
• any person from being a director of two or more competing corporations, if those corporations would violate the
anti-trust criteria by merging (Act Section 8; codified at 15 U.S.C. § 19 [9]).
Comparisons to other acts
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
Section 7 elaborates on specific and crucial concepts of the Clayton Act; "holding company" defined as a "common
and favorite method of promoting monopoly",[10] but more precisely as "a company whose primary purpose is to
hold stocks of other companies"[11] which the government saw as an abomination and a mere corporated form of the
'old fashioned' trust.
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.
2
Clayton Antitrust Act
Pre-merger notification
Section 7a, 15 U.S.C. § 18a [8], requires that companies notify the Federal Trade Commission and the Assistant
Attorney General of the United States Department of Justice Antitrust Division of any contemplated mergers and
acquisitions that meet or exceed certain thresholds. Pursuant to the Hart–Scott–Rodino Antitrust Improvements Act,
section 7A(a)(2) requires the Federal Trade Commission to revise those thresholds annually, based on the change in
gross national product, in accordance with Section 8(a)(5) and take effect 30 days after publication in the Federal
Register. (For example, see 74 F.R. 1687 [12] and 16 C.F.R. 801 [13].)
Section 8
Section 8 of the Act refers to the prohibition of one person of serving as director of two or more corporations if the
certain threshold values are met, which are required to be set by regulation of the Federal Trade Commission, revised
annually based on the change in gross national product, pursuant to the Hart–Scott–Rodino Antitrust Improvements
Act. (For example, see 74 F.R. 1688 [14].)
Other
Because the act singles out exclusive dealing and tying arrangements, one may assume they would be subject to
heightened scrutiny, perhaps they would even be illegal per se. That is not the case. When exclusive dealings or
tying arrangements are challenged under Clayton-3 (or Sherman-1), they are treated as rule of reason cases.
Under the 'rule of reason', the conduct is only illegal, and the plaintiff can only prevail, upon proving to the court that
the defendants are doing substantial economic harm. Despite what the statute may suggest, the regime makes sense.
The reason for the per se rule in Sherman-1 price fixing cases is the overwhelming likelihood that price fixing is
harmful. It is a recognizable fact that exclusive dealings and tying arrangements are quite common, and potentially
beneficial to consumers, and the economy. Therefore, the Court has seen fit not to apply a per se rule to Clayton-3
conduct.
Exemptions
An important difference between the Clayton Act and its predecessor, the Sherman act, is that the Clayton Act
contained safe harbors for union activities. Section 6 of the Act (codified at 15 U.S.C. § 17 [15]) exempts labor
unions and agricultural organizations, saying ‘that the labor of a human being is not a commodity or article of
commerce, and permit[ting] labor organizations to carry out their legitimate objective’. Therefore, boycotts, peaceful
strikes, peaceful picketing, and collective bargaining are not regulated by this statute. Injunctions could be used to
settle labor disputes only when property damage was threatened.
Major League Baseball is another company exempt from the Clayton Antitrust Act due to the national heritage
associated with it.
Enforcement
Procedurally, the Act empowers private parties injured by violations of the Act to sue for treble damages under
Section 4 and injunctive relief under Section 16.
Under the Clayton Act, only civil suits could be brought to the court's attention and a provision "permits a suit in the
federal courts for three times the actual damages caused by anything forbidden in the antitrust laws",[16] including
court costs and attorney's fees.
The Act is enforced by the Federal Trade Commission, which was also created and empowered during the Wilson
Presidency by the Federal Trade Commission Act, and also the Antitrust Division of the U.S. Department of Justice.
3
Clayton Antitrust Act
Legacy
The Clayton Act of 1914 reformed and emphasized certain concepts of the Sherman Act of 1890 that are still active
today in a growing interconnected market and merging of the industries.
Notes
[1] http:/ / www. law. cornell. edu/ uscode/ 15/ 12. html
[2] http:/ / www. law. cornell. edu/ uscode/ 15/ 27. html
[3] http:/ / www. law. cornell. edu/ uscode/ 29/ 52. html
[4] http:/ / www. law. cornell. edu/ uscode/ 29/ 53. html
[5] http:/ / www. law. cornell. edu/ uscode/ 15/ 13. html
[6] http:/ / www. law. cornell. edu/ uscode/ 15/ 14. html
[7] http:/ / www. law. cornell. edu/ uscode/ 15/ 18. html
[8] http:/ / www. law. cornell. edu/ uscode/ 15/ 18a. html
[9] http:/ / www. law. cornell. edu/ uscode/ 15/ 19. html
[10] Martin, David Dale, Mergers and the Clayton Act, University of California, Berkeley and Los Angeles, 1959
[11] Martin, David Dale, Mergers and the Clayton Act, University of California, Berkeley and Los Angeles, 1959
[12] http:/ / frwebgate. access. gpo. gov/ cgi-bin/ getpage. cgi?dbname=2009_register& position=all& page=1687
[13] http:/ / www. access. gpo. gov/ nara/ cfr/ waisidx_09/ 16cfr801_09. html
[14] http:/ / frwebgate. access. gpo. gov/ cgi-bin/ getpage. cgi?dbname=2009_register& position=all& page=1688
[15] http:/ / www. law. cornell. edu/ uscode/ 15/ 17. html
[16] Kintner & Joelson, An International Antitrust Primer, New York, 1974,p.20
External links
• Brief History of the Federal Trade Commission (http://www.ftc.gov/ftc/history/docs/90thanniv_program.
pdf) (PDF)
• "Clayton Antitrust Act" (http://www.infoplease.com/ce6/history/A0812484.html). Pearson Education.
Retrieved 19 January 2012.
• Why Did The Clayton Act Pass? An Analysis of the Interest Group Hypothesis (http://economics.gmu.edu/
working/WPE_98/98_03.pdf) (PDF)
• Full Text of the Clayton Antitrust Act (http://www.stolaf.edu/people/becker/antitrust/statutes/clayton.html)
4
Article Sources and Contributors
Article Sources and Contributors
Clayton Antitrust Act Source: http://en.wikipedia.org/w/index.php?oldid=517086513 Contributors: A E Francis, ABF, Addshore, Allens, Anaxial, Andreaskeller, Armoreno10, Arnowaschk,
Artyom, Atf1206, Atoman 25, Attilios, Beland, Bender235, Blake ms, Blethering Scot, BlueCanary9999, Bmclaughlin9, Bobisculous, Bookandcoffee, Brainwidth, Chris the speller, Chrisminter,
Closedmouth, Conny, Courcelles, Cputrdoc, Crosbiesmith, Davejagoda, Davemcarlson, David.rand, DavidLevinson, DeadEyeArrow, Denelson83, Download, DrBradish, Duckzilla2000,
DuctoMan16, Eastlaw, Edward, Etherialemperor, Famspear, Farosdaughter, Feydey, Filipo, Flcelloguy, Friginator, Geographyfanatic, GoldRingChip, Hmains, Int21h, Iridescent, John Quiggin,
JohnnyB256, Jonster71, Jovianeye, Jrtayloriv, Karenjc, Khart316, Knotwork, Kozuch, L Kensington, Legalskeptic, Levineps, Lorax101, Majorly, Makeemlighter, Marj Tiefert, Meelar,
Melchica1, Mentifisto, Montgomery '39, Morgis, MrTsunami, Mtpruitt, Muhandes, NawlinWiki, NeilKelty, NerdyScienceDude, Niggapleez, Nihiltres, Non Curat Lex, OwenX, Penubag,
Pianoguy91, Postdlf, Punctilious-one, R'n'B, RadioFan, RandomAct, ResearchRave, Retired username, Riking8, Romainz, RussBlau, SaltyBoatr, Sardanaphalus, SarekOfVulcan, Shanmugamp7,
Sm8900, Snowolf, Superm401, Tbarron314, TenPoundHammer, Tim!, Treybien, User6985, Wavelength, Wdflake, WikHead, Wikidea, Wikimanknowsall, Wikipedian2, 228 anonymous edits
Image Sources, Licenses and Contributors
Image:Scale of justice 2.svg Source: http://en.wikipedia.org/w/index.php?title=File:Scale_of_justice_2.svg License: Public Domain Contributors: DTR
License
Creative Commons Attribution-Share Alike 3.0 Unported
//creativecommons.org/licenses/by-sa/3.0/
5