Antitrust Legislation

ANTITRUST LEGISLATION

In the United States, at the end of the nineteenth century, widespread business combinations known as trust agreements existed. These agreements usually involved two or more companies that combined with the purpose of raising prices and lowering output, giving the trustees the power to control competition and maximize profits at the public's expense. These trust agreements would result in a monopoly. To combat this sort of business behavior, Congress passed antitrust legislation.

In 1890 Congress passed the Sherman Antitrust Act, which forbade all combinations or conspiracies in restraint of trade. The act contained two substantive provisions. Section 1 declared illegal contracts and conspiracies in restraint of trade, and Section 2 prohibited monopolization and attempts to monopolize. When an injured party or the government filed suits, the courts could order the guilty firms to stop their illegal behavior or the firms could be dissolved. The Sherman Antitrust Act pertained only to trade within the states, and monopolies still flourished as companies found ways around the law.

In 1914 Congress passed the Clayton Act as an amendment to the Sherman Act. The Clayton Act made certain practices illegal when their effect was to lessen competition or to create a monopoly. The main provisions of this act included (1) forbidding discrimination in price, services, or facilities between customers; (2) determining that antitrust laws were not applicable to labor organizations; (3) prohibiting requirements that customers buy additional items in order to obtain products desired; and (4) making it illegal for one corporation to acquire the stock of another with intention of creating a monopoly. Because loopholes were also present in the Clayton Act, the Federal Trade Commission (FTC) was established to enforce the antitrust legislation.

Passed in 1914, the Federal Trade Commission Act provided that "unfair methods of competition in or affecting commerce are hereby declared unlawful." The FTC consists of five members appointed by the president and has the power to investigate persons, partnerships, or corporations in relation to antitrust acts. Examples of unlawful trade practices include misbranding goods quality, origin, or durability; using false advertising; mislabeling to mislead consumer about product size; and advertising or selling rebuilt goods as new. The act also gave the FTC the power to institute court proceedings against alleged violators and provided the penalties if found guilty.

The Robinson-Patman Act of 1936 strengthened the price discrimination provisions of the Clayton Act. One amendment involved the discrimination in rebates, discounts, or advertising service charges; underselling and penalties. Another provided for the exemption of non-profit institutions from price-discrimination provisions. The main purpose of this act was to justify the differences in product costs between customers and clarify the Robinson-Patman Act.

The Celler-Kefauver Antimerger Act, passed in 1950, extended the Clayton Act's injunction against mergers. Because the purpose of this act was to forbid mergers that prevented competition, corporations that were major

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competitors were prohibited from merging in any manner. This amendment extended the FTC's jurisdiction to all corporations. This act, however, was not intended to stop the merger of two smaller companies or the sale of one in a failing condition. Due to court decisions that had weakened the Clayton Act, the Celler-Kefauver Antimerger Act was necessary to restrict mergers.

Although antitrust laws have contributed enormously to improving the degree of competition in the U.S. economic system, they have not been a complete success. A sizable number of citizens would like to see these laws broadened to cover professional baseball teams, labor unions, and professional organizations. Without the antitrust legislation that now exists, however, the national economy would be worse off in the end.

see also Federal Trade Commission Act of 1914; Robinson-Patman Act of 1936; Sherman Antitrust Act of 1890

bibliography

Antitrust statutes. Retrieved September 6, 2005, from http://www.stolaf.edu/people/becker/antitrust/statutes/sherman.html.

"The Clayton Antitrust Act (1914)." Retrieved September 7, 2005, from http://www.stolaf.edu/people/becker/antitrust/statutes/clayton.html.

"The Federal Trade Commission Act (1914)." Retrieved September 7, 2005, from http://www.stolaf.edu/people/becker/antitrust/statutes/ftc.html.

Mueller, Charles E. (1997). "Antitrust Law and Economics Review." Retrieved September 7, 2005, from http://www.metrolink.net/~cmueller/i-overvw.html?

Janel Kupferschmid