Clayton Act

A federal law enacted in 1914 as an amendment to the SHERMAN ANTI-TRUST ACT (15 U.S.C.A. § 1 et seq. [1890]), prohibiting undue restriction of trade and commerce by designated methods.

The Clayton Act (15 U.S.C.A. § 12 et seq. [1914]) was originally enacted to exempt unions from the scope of ANTITRUST LAWS by refusing to treat human labor as a commodity or an article of commerce. Today, it is used primarily to prohibit the suppression of free competition by making illegal four business practices: price discrimination, which is the sale of the same product to comparably situated buyers at different prices; tying and exclusive dealing contracts, which are the sale of products on condition that the buyer stop dealing with the seller's competitors; corporate mergers, the acquisition of competing companies by one company; and interlocking directorates, the members of which are common members on the boards of directors of competing companies.

These practices are illegal when they might substantially lessen competition or tend to create a MONOPOLY in any line of commerce. By making the suppression of free competition unlawful the Clayton Act supplements the provisions of the Sherman Act, which outlaws monopolies.