The Clayton Antitrust Act of 1914 made good some of the deficiencies of the Sherman Antitrust Act of 1890.The Sherman Antitrust Act was rather vaguely worded that enabled a businessman to engage in restrictive trade practices adversely affecting competition but without offending any provision of the said statute. Moreover, there was no independent or separate enforcement authority under the said Act to implement this law against unfair or restrictive trade practice. It is no gainsaying that this state of the antitrust legislation was from desirable. In this background the Congress passed the Clayton Anti-Trust Act in 1914 in order to supplement the provisions of the Sherman Antitrust Act.
Earlier a group bought a controlling interest in a rival firm's stock at the first instance and thereafter used this control to transfer to itself the target company’s assets to render the competitor virtually defunct. Thus the buyer quickly converted their stock acquisition into a purchase of assets, thereby taking over the business of the rival for all practical purposes. In order to meet such an eventuality the Clayton Anti-Trust Act 1914 forbade a business from purchasing the stock or assets of another entity if "the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."
Through the device of interlocking directorates a few persons control an industry by serving simultaneously on the board of directors of rival corporations. So under the Clayton Act common directorship of the same individual in competing corporations capitalized at $1 million or more in the same line of business is banned. Moreover, inter corporate stock holdings by and between competing companies operating in the same field is forbidden, since that allows one such concern to dominate over its rival outfit lessening competition. Further, the Act bans price discrimination among different buyers where that tends to create monopoly or lessen competition.
The Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) are the authorities responsible for enforcement of the Act. It allows the FTC and DOJ to regulate all mergers and gives the government discretion to approve or turn down a merger proposal based on the parameters of market dominance or concentration.
The Act allows aggrieved private parties injured by violations of the Act to sue for treble damages under Section 4 and injunctive relief under Section 16. Appeals may be directed to the Federal Trade Commission, which was, in part, created to enforce the antitrust provisions of the act and which is empowered to issue cease-and-desist orders.
