The Clayton Act made both substantive and procedural modifications to federal antitrust law. Substantively, the act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct not deemed in the best interest of a competitive market. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Antitrust Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business: •
price discrimination between different purchasers if such a discrimination substantially lessens competition or tends to create a
monopoly in any line of commerce (Act Section 2, codified at ); • sales on the condition that (A) the buyer or lessee not deal with the competitors of the seller or lessor ("
exclusive dealings") or (B) the buyer also purchase another different product ("
tying") but only when these acts substantially lessen competition (Act Section 3, codified at ); •
mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at ) or where the voting securities and assets threshold is met (Act Section 7a, codified at ); • any person from being a
director of two or more competing corporations, if those corporations would violate the antitrust criteria by merging (Act Section 8; codified 1200 at ).
Comparisons to other acts Unilateral price discrimination is clearly outside the reach of Section 1 of the Sherman Act, which only extended to "concerted activities" (agreements). Exclusive dealing, tying, and mergers are all agreements, and theoretically, within the reach of Section 1 of the Sherman Act. Likewise, mergers that create monopolies would be actionable under Sherman Act Section 2. Section 7 of the Clayton Act allows greater regulation of mergers than just Sherman Act Section 2, since it does not require a merger-to-monopoly before there is a violation. It allows the Federal Trade Commission and Department of Justice to regulate all mergers, and gives the government discretion whether to give approval to a merger or not, which it still commonly does today. The government often employs the
Herfindahl-Hirschman Index (HHI) test for market concentration to determine whether the merger is presumptively anticompetitive; if the HHI level for a particular merger exceeds a certain level, the government will investigate further to determine its probable competitive impact.
Section 7 Section 7 elaborates on specific and crucial concepts of the Clayton Act; "
holding company" defined as "a company whose primary purpose is to hold stocks of other companies", and a mere corporated form of the 'old fashioned' trust. Section 7 prohibits acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly. Another important factor to consider is the amendment passed in Congress on Section 7 of the Clayton Act in 1950. This original position of the US government on mergers and acquisitions was strengthened by the Celler-Kefauver amendments of 1950, so as to cover asset as well as stock acquisitions.
Pre-merger notification Section 7a, , requires that companies notify the
Federal Trade Commission and the
Assistant Attorney General of the
United States Department of Justice Antitrust Division of any contemplated
mergers and acquisitions that meet or exceed certain thresholds. Pursuant to the
Hart–Scott–Rodino Antitrust Improvements Act, section 7A(a)(2) requires the Federal Trade Commission to revise those thresholds annually, based on the change in
gross national product, in accordance with Section 8(a)(5) and take effect 30 days after publication in the Federal Register. (For example, see and .)
Section 8 Section 8 of the Act refers to the prohibition of one person of serving as director of two or more corporations if the certain threshold values are met, which are required to be set by regulation of the Federal Trade Commission, revised annually based on the change in gross national product, pursuant to the Hart–Scott–Rodino Antitrust Improvements Act. (For example, see .)
Other Because the act singles out exclusive dealing and tying arrangements, one may assume they would be subject to heightened scrutiny, perhaps they would even be
illegal per se. That remains true for tying, under the authority of
Jefferson Parish Hospital District No. 2 v. Hyde. However, when exclusive dealings are challenged under Clayton-3 (or Sherman-1), they are treated under the
rule of reason. Under the 'rule of reason', the conduct is only illegal, and the plaintiff can only prevail, upon proving to the court that the defendants are doing substantial economic harm. ==Exemptions==