Definition
The Clayton Antitrust Act of 1914 was enacted to strengthen existing anti-trust laws and further limit business practices thought to be anticompetitive. Named after its principle author, Henry De Lamar Clayton Jr., the act would attempt to close some of the loopholes businesses found in the years following the Sherman Act of 1890 as well as curtail monopolistic activity.
Explanation
The Sherman Antitrust Act of 1890, along with the Clayton Act of 1914 and the Federal Trade Commission Act of 1914, were groundbreaking statutes geared towards limiting monopolies and cartels. In the years following the Sherman Act, courts applied the law to trade unions, which found it impossible to organize so they could bargain with their employers. There were also a number of mergers, which reestablished the market power of the cartels outlawed by the Sherman Act.
Adding further strength to the Sherman Act, the Clayton Antitrust Act of 1914 would specifically outlaw the following conduct:
Price Discrimination: a strategy where similar or identical merchandise or services are sold by the same producer for different prices in different markets or geographies.
Tying Arrangements / Exclusive Dealing: arrangements whereby one party is only willing to do business with another party if they agree to deal with them exclusively, or they agree to purchase a large share of their total requirements from the first party.
Mergers and Acquisitions: applies to those transactions that would substantially lessen competition. Provides the Federal Trade Commission and Department of Justice with the authority to regulate mergers and acquisitions.
Board of Directors: persons were prohibited from being a director of two or more corporations that could be considered competitors.