The Clayton Act – Antitrust Attorneys // White Collar Firm
Henry Clayton Jr. was a powerful and learned man. A democratic congressman representing the state of Alabama in 1914, he believed that anticompetitive practices were amongst the greatest threats to society. As a lawyer, he was aware of jurisprudence springing from the Sherman Act, but still unsatisfied. The problem with the Sherman Act was that it could be applied only to monopolies after they were established. Moreover, it required demonstration that the monopolies in question were not merited. Clayton was determined to make the law tougher, and as Chair of the Congressional Judicial Committee he was able to do so.
The Clayton Act, as it was to be called, contained four powerful provisions. Three provisions were conditioned on a substantial decrease in competition: the government must first establish a competitive detriment before enforcing the provision. With this condition, the Act prohibited:
•§ Price Discrimination (charging different prices for the same product to different buyers)
•§ Exclusive Dealing (tying two separate levels of trade together with an exclusive contract, for example – requiring a retailer to deal only with one supplier)
•§ Mergers and Acquisitions
Clayton proposed that the government create an agency to monitor and regulate such deals on the market.
The Clayton Act also prohibited directly any single person from owning any two competing companies, and this was perhaps its most controversial component. Interestingly, reflecting the political interests of the party at the time, the Act exempted all organized labor groups from its provisions. In other words, trade unions were free to organize as a monopoly for the purpose of collective bargaining. To some this seemed like class warfare, extending far beyond the Sherman Act passed just a generation ago. Nevertheless, for political reasons, opposition was relatively tame; the act passed the House with a vote of 277 to 54.
That left the Democratic Senate and progressive president Woodrow Wilson, a fierce defender of antitrust law. With more consolidated control, the opposition put up stiffer resistance in the Senate, convincing 16 members to vote against. That still left 46 senators in favor (73%, as compared to 84% of the House), easily enough to pass. President Wilson signed the Clayton Act into law on October 8th, 1914. It is now incorporated in Title 15 of the United States Code in Chapter 1, Sections 12 through 27, and in Title 29 of the United States Code, Chapter 5, Sections 52 and 53.
The Supreme Court would be left to interpret the history of the Act, which it would over the coming years. What was immediately clear was that the Clayton Act dramatically expanded the role of the government in antitrust law. Unlike the Sherman Act which dealt exclusively with horizontal monopolies, the Clayton Act attacked vertically integrated monopolies as well, directly targeting the type of diffuse corporate monopoly exemplified by the Zaibatsu in Japan. Moreover, the language of the Act was stronger than that of Sherman, more specifically defining the activities which could be investigated and punished. Congressman Clayton made his mark.
If your organization faces antitrust charges, contact Antitrust Attorneys at The Blanch Law Firm to provide you aggressive legal defense.