Clayton Antitrust Act
Summary
monopoly.jpg
The Clayton Antitrust Act was passed by the US Congress in October of 1914. It was drafted by Henry De Lamar Clayton Jr., an Alabama representative in the House of Representatives. The act passed with a sweeping majority, facing little political opposition. The act was constructed to disband and prevent the future formation of monopolies, in hopes of protecting the rights of the average worker in the process. The act prohibited exclusive sales contracts, corporate pooling, and the formation of trusts. In addition, the Clayton Antitrust Act also prohibited men from serving on the board of connected companies, as well as punishments (fines) for unfair business practices. However, unlike the Sherman Antitrust Act that proceeded it, the Clayton Antitrust act protected the rights of unions and excluded agricultural formations from its prohibitions. The act would be reinforced twice. In 1936, it made provisions to stop unfair price cutting and in 1950 was amended to restrict inter-corporate stock holding. Overall, the two goals were simple:

  1. Restrict businesses from becoming too large and controlling prices
  2. Promote healthy competition amongst businesses

To view a copy of the actual Clayton Antitrust Act verbatim click Here

clayton.jpgHenry De Lamar Clayton Jr. (1857-1929)

Henry De Lamar Clayton Jr. was born in Alabama in 1857 into a wealthy family. His father was a prominent attorney, politician, and at one point Confederate general. He followed in his father's footsteps, practicing law. After establishing his law career, Clayton was elected by the Alabama people to be their representative in 1890 and 1896. He was the act's creator and its most influential figure.
"The strength of this country relies on the strength of the poor and middle classes, groups that we cannot afford to suppress." -Henry Clayton Jr.



Why the need?
octopus-monopoly600.jpg
Railroad monopolies effected everyone, not just the people who used them for travel

During the industrial revolution time period in the late 19th century there was little to no government intervention against monopolies. Companies grew quickly by exploiting cheap child labor and pooling, both of which the government did little to stop. Large industries such as the railroad were monopolized using government subsidies. Since only a few large companies controlled almost all of the railroads, prices could be kept high. The prices had devastating effects on the farmers who depended greatly on the system to transport their goods from the midwest to the east. Higher railroad prices meant higher food prices. Thus, since food prices were essentially controlled by the fluctuating cost of the railroad transportation system, the railroad prices effected the lives of everyone, not just farmers.

politics.jpg
Rockefeller's Standard Oil Company's tight grip on Washington

In addition to growth of companies, a few number of select men began to collect large quantities of wealth at the expense of all the other citizens. During this time men such as John Rockefeller and Andrew Carnegiegained voluminous amount of wealth. Men such as this monopolized industries, such as the oil and steel industries. These monopolies limited competition, allowing companies to control prices, and then instill a system of economic slavery for the lower classes. Essentially in this period the rich became richer, and ensured the poor remained poor. Unfortunately, monopolies used their money to gain political influence. With a stranglehold on both economics and politics the monopolies were untouchable.


Capitalism's fatal flaw

capitalism.jpg
Just like all other government ideologies, capitalism at its purest form has a few fatal flaws.
At its purest form capitalism has no government involvement in politics. However, as much of an paradox as it may seem, government is needed to keep capitalism alive. The problem with pure capitalism is that it involves Social Darwinism: to climb up the "corporate ladder" someone must be trampled in the process. In other words, pure capitalism is only regulated by one thing, competition. However, eventually one company gains enough power, often immorally, to form a monopoly. At this time capitalism ceases as competition no longer exist to fairly regulate prices. This has been demonstrated in history with Rockefeller's and Carnegie's companies and most recently in companies, such as Walmart. Recent literature, such as the book The Hunger Games demonstrate the power of untamed capitalism. A few privileged lived in opulence, while most live in squalor, usually at no fault of their own. Thus, Congress decided to try to preserve capitalism by regulating competition. Congress decided in 1890 to restrict monopolies in the Sherman Antitrust Act. Unfortunately it was a failure.

Sherman Antitrust Act

220px-John-Sherman-2.jpg
Senator John Sherman

The Sherman Antitrust Act was passed by Congress in 1890. It was drafted by Senator John Sherman, a Republican from Ohio. Interestingly enough, he was a friend of Rockefeller. The act prohibited any business activity that prevented fair competition. It gave the federal government the right to punish cartels and monopolies. Unfortunately, the vagueness of the wording in the act was twisted. For many years the act was interpreted to hurt the same people the act was originally trying to protect. Unions were considered to be a group that prevented fair competition, thus were condemned using the act as justification. The Sherman Antitrust Act failed simply because it was ahead of its time. Although passed in Congress, it lacked the support overall in the government. In the late 1800's monopolies still had grand amounts of power in politics. For this reason it was not enforced and misinterpreted.


mon.jpg
The Clayton Antitrust Act in 1914 would be the
response the the Sherman Antitrust Act.
The Clayton Antitrust Act fixed the vague language and put into affect the intended purpose of the original Sherman Antitrust Act.




To see more about the Sherman Antitrust Act, including exact language of it VIEW BELOW:











A Model for the Future

walmart.png
The Clayton Antitrust Act was the first successful anti-monopoly legislation. By successful, it did not prevent monopolies completely, but at least had the support to be enforced. It, along with the Sherman Antitrust Act, would serve as the models for future legislation relating to monopolies. However, although the Clayton Antitrust Act was ideologically progressive, its true power can be debated. Through the progressive era and the New Deal it can be argued that the attitude towards monopolies shifted to a stronger negative connotation. However, monopolies still exist today. If anything the problem has only gotten worse. The wealth gap between Americans has continued to grow, to absurd proportions. It cannot be said that capitalism cannot be successful. However, regulation needs to be in place to stop monopolization in order for the system to be successful. In theory there are more than one way to resolve the issue of growing monopolies and economic gaps between the nation's people. Some people, and most that hold a liberal ideal, would argue that the government needs to get directly involved in economics: investing directly into smaller corporations to help them fight against larger companies. Others, especially conservatives, would argue that government needs to ensure wealth trickles down to the lower classes by giving businesses incentives to hire. Of course, these are gross generalizations the two main ideologies can be seen. Despite one's belief on economics one thing is clear: monopolies can still gain extreme power in the country today.

To watch more about the economic gap in America WATCH BELOW:







BibliographyThe following sites and texts were used in the production of this website:

A Survey American History Textbook
http://www.stolaf.edu/people/becker/antitrust/statutes/sherman.html
http://www.stolaf.edu/people/becker/antitrust/statutes/clayton.html
http://bioguide.congress.gov/scripts/biodisplay.pl?index=C000495
Rodabaugh, Karl. “Congressman Henry D. Clayton and the Dothan Post Office Fight: Patronage and Politics in the Progressive Era.”