Clayton Antitrust Act: Incipiency, Labor's Magna Carta and Treble Damages

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The Sherman Antitrust Act of 1890 outlawed agreements in restraint of trade, but courts used it against labor unions, treating strikes as illegal combinations. It also invited mergers, because companies that fused into one entity no longer had an agreement to police, and the largest merger wave in U.S. history followed. In 1914 Alabama Democrat Henry De Lamar Clayton Jr. introduced the Clayton Antitrust Act, which let the government stop anticompetitive conduct in its incipiency rather than after a monopoly formed. It targeted predatory price discrimination, tying and exclusive dealing, mergers that substantially lessen competition, and interlocking directorates, where one person sits on the boards of competing companies.

Section 7 first covered holding companies that bought rivals' stock. The 1950 Celler-Kefauver Amendment extended it to asset purchases, and the Hart-Scott-Rodino Act added pre-merger notification for deals above thresholds updated annually. Regulators measure concentration with the Herfindahl-Hirschman Index, which squares and sums each firm's market share. Section 6 declared that human labor is not a commodity or article of commerce, exempting unions and farm groups from antitrust law, and AFL leader Samuel Gompers called the act Labor's Magna Carta. Private parties can sue for treble damages plus attorney's fees, and courts can order divestiture.

• Ten firms with 10% each produce an HHI of 1,000, while one firm with 90% alone scores 8,100.
• Tying is often judged illegal per se, as affirmed in the Jefferson Parish Hospital case.
• Exclusive dealing falls under the rule of reason, so plaintiffs must prove harm to the whole market.
• Federal injunctions in labor disputes were limited to cases threatening irreparable property damage.
• The 1922 Federal Baseball Club v. National League ruling exempted Major League Baseball from federal antitrust law.