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Clayton Act

Clayton Act and Antitrust Regulations - 15 U.S.C. § 12-27

Let's review the Clayton Act and Antitrust Regulations defined in 15 U.S. Code 12-27. The United States has strict antitrust regulations to protect free market competition and prevent certain companies from developing monopolies or controlling trusts in a particular market. 

Key among these regulations is the Clayton Act of 1914, formally codified in Title 15 of the United States Code, sections 12-27. The Clayton Act prohibits various anti-competitive practices, including mergers or acquisitions that would substantially lessen competition in a particular market. 

Clayton Act and Antitrust Regulations - 15 U.S.C. § 12-27
The Clayton Act has some strict antitrust regulations to protect free market competition.

It also prevents companies from engaging in exclusive dealing agreements, price discrimination, and tying arrangements, which can restrict competition and harm consumers. Individuals or companies who are found in violation of these regulations can face stiff civil penalties.

15 U.S. Code 12(a) says, “Antitrust laws,” as used herein, includes the Act entitled “An Act to protect trade and commerce against unlawful restraints and monopolies,” approved July second, eighteen hundred and ninety; sections seventy-three to seventy-six, inclusive, of an Act entitled “An Act to reduce taxation, to provide revenue for the Government, and for other purposes,” of August twenty-seventh, eighteen hundred and ninety-four; an Act entitled “An Act to amend sections seventy-three and seventy-six of the Act of August twenty-seventh, eighteen hundred and ninety-four, entitled ‘An Act to reduce taxation, to provide revenue for the Government, and for other purposes,' ” approved February twelfth, nineteen hundred and thirteen; and also this Act. (b) This Act may be cited as the “Clayton Act.

15 U.S. Code 2 Monopolizing trade a felony says, “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding ten years, or by both said punishments, in the discretion of the court.

What Is the Historical Background?

The late 19th and early 20th centuries were a time of significant economic transformation in the United States. The country's rapid industrialization led to the emergence of powerful corporations, some of which began to engage in practices that stifled competition. 

This period, known as the "Gilded Age," saw the creation of several monopolies and trusts that dominated significant industries, leading to growing concerns about the concentration of economic power.

Congress enacted the Sherman Antitrust Act in 1890 in response to these developments. This was the first federal law designed to combat monopolistic practices by prohibiting agreements or practices that restrained trade or created monopolies. 

However, while the Sherman Act was a significant step forward, it soon became apparent that it was insufficient to curb all anti-competitive practices. This led to the development and eventual passage of the Clayton Antitrust Act in 1914, which filled in certain "loopholes" the Sherman Act did not cover. 

The Federal Trade Commission Act, passed the same year, bans unfair methods of competition and established the Federal Trade Commission (FTC) to enforce antitrust laws. These three laws—the Sherman Act, the Clayton Act, and the FTC Act form the core of the antitrust laws in the U.S.

What Are the Provisions of the Clayton Act?

The Clayton Act was designed to strengthen the Sherman Act and to target specific anti-competitive actions that may not necessarily result in a monopoly but still harm competition. It prohibits several specific business practices, including:

  • Harmful mergers and acquisitions: The law prohibits mergers or acquisitions that would substantially reduce competition in any line of commerce in any section of the country. This provision aims to prevent the eventual development of monopolies.
  • Exclusive dealing agreements: One party agrees to deal exclusively with another party, excluding competitors from the market.
  • Price discrimination against competing companies: It's against the law to price in a manner that unfairly benefits one buyer over another.
  • Serving on the board of directors for two competing companies simultaneously: Doing so can open the door to anti-competitive behavior within the two companies.

One of the critical distinctions between the Clayton Act and the Sherman Act is that the latter broadly targets any actions that restrain trade or create monopolies. In contrast, the former focuses on specific business practices that harm competition. This makes the Clayton Act a more targeted piece of legislation, complementing and expanding upon the provisions of the Sherman Act.

What Is the Exception to the Rule?

The one type of collective that the Clayton Act expressly excludes from the requirements of antitrust laws is the labor union. Title 15 U.S.C. Section 17 opens with a simple explanation for this exception: "The labor of a human being is not a commodity or article of commerce." 

This exception recognizes the value of collective bargaining for workers, allowing them to negotiate with employers on fair wages and working conditions. 

What Are Related Federal Laws?

15 U.S. Code Chapter 1 – Monopolies and Combinations in Restraint of Trade has numerous laws associated with the Clayton Act and Antitrust Regulations, such as the following:

  • 15 U.S.C. 1 - Trusts, etc., in restraint of trade illegal; penalty,
  • 15 U.S.C. 2 - Monopolizing trade a felony; penalty,
  • 15 U.S.C. 3 - Trusts in Territories or District of Columbia illegal,  
  • 15 U.S.C. 4 - Jurisdiction of courts; duty of United States attorneys,
  • 15 U.S.C. 5 - Bringing in additional parties,
  • 15 U.S.C. 6 - Forfeiture of property in transit,
  • 15 U.S.C. 6a - Conduct involving trade or commerce with foreign nations,
  • 15 U.S.C. 7 - “Person” or “persons” defined,
  • 15 U.S.C. 7a – Definitions,
  • 15 U.S.C. 7a–1 - Limitation on recovery,
  • 15 U.S.C. 7a–2 - Rights, authorities, and liabilities not affected,
  • 15 U.S.C. 7a–3 - Anti-retaliation protection for whistleblowers,
  • 15 U.S.C. 8 - Trusts in restraint of import trade illegal; penalty,
  • 15 U.S.C. 9 - Jurisdiction of courts; duty of United States attorneys,
  • 15 U.S.C. 10 - Bringing in additional parties,
  • 15 U.S.C. 11 - Forfeiture of property in transit,
  • 15 U.S.C. 12 - Definitions: short title,
  • 15 U.S.C. 13 - Discrimination in price, services, or facilities,
  • 15 U.S.C. 13a - Discrimination in rebates, discounts, or advertising service charges; underselling localities; penalties,
  • 15 U.S.C. 13b - Cooperative association; return of net earnings or surplus,
  • 15 U.S.C. 13c - Exemption of non-profit institutions from price discrimination provisions,
  • 15 U.S.C. 14 - Sale, etc., on agreement not to use goods of a competitor,
  • 15 U.S.C. 15 - Suits by persons injured,
  • 15 U.S.C. 15a - Suits by United States; amount of recovery; prejudgment interest,
  • 15 U.S.C. 15b - Limitation of actions,
  • 15 U.S.C. 15c - Actions by State attorneys general,
  • 15 U.S.C. 15d - Measurement of damages,
  • 15 U.S.C. 15e - Distribution of damages,
  • 15 U.S.C. 15f - Actions by Attorney General,
  • 15 U.S.C. 15g - Definitions,
  • 15 U.S.C. 15h - Applicability of parens patriae actions,
  • 15 U.S.C. 16 - Judgments,
  • 15 U.S.C. 17 - Antitrust laws not applicable to labor organizations,
  • 15 U.S.C. 18 - Acquisition by one corporation of stock of another,
  • 15 U.S.C. 18a - Premerger notification and waiting period,
  • 15 U.S.C. 18b - Mergers involving foreign government subsidies,
  • 15 U.S.C. 19 - Interlocking directorates and officers,
  • 15 U.S.C. 21 - Enforcement provisions,
  • 15 U.S.C. 21a - Actions and proceedings pending before June 19, 1936; additional and continuing violations,
  • 15 U.S.C. 22 - District in which to sue the corporation,
  • 15 U.S.C. 23 - Suits by the United States; subpoenas for witnesses,
  • 15 U.S.C. 24 - Liability of directors and agents of the corporation,
  • 15 U.S.C. 25 - Restraining violations; procedure,
  • 15 U.S.C. 26 - Injunctive relief for private parties; exception; costs,
  • 15 U.S.C. 26a - Restrictions on the purchase of gasohol and synthetic motor fuel,
  • 15 U.S.C. 26b - Application of antitrust laws to professional major league baseball,
  • 15 U.S.C. 27 - Effect of partial invalidity.

What Are the Penalties?

While violations of the Sherman Act can result in criminal charges, sometimes punishable by fines in the millions and prison time of up to 10 years, penalties for violating the Clayton Act are strictly civil damages

Penalties for violating the Clayton Act

Nevertheless, these penalties can be pretty significant. The act empowers individuals harmed by anti-competitive actions to sue for triple damages for their losses plus the cost of the lawsuit. 

The United States government can also sue for triple damages if it is the entity harmed. In addition, harmed victims can seek an injunction preventing future anti-competitive behavior. 

This is a powerful deterrent against engaging in anti-competitive practices and underscores the seriousness with which such actions are viewed under U.S. law. If you are under investigation, contact our federal criminal defense lawyers for a case review and to discuss legal options. Eisner Gorin LLP has offices in Los Angeles, CA.

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