920). Before 1890, firms were able to do this legally by joining a business trust. The Standard Oil trust of the late 1800’s was a prime example of this, but in turn reflected the negative effects that legal trusts incurred. Many felt that the Standard Oil trust had so much economic power that other corporations which did not belong to the trust could not compete in the marketplace (920).
To remedy the problem, the Federal Government enacted the Interstate Commerce Act along with the Sherman Antitrust Act in 1890 (920). Later, it was followed by the Clayton Act and the Federal Trade Commission Act in 1914 (920). The Sherman Act was the first and most significant in attempting to prevent trusts. Section One of the Sherman Act concludes that society’s welfare is damaged if rival companies enter an agreement to consolidate their power over the market. The Act prevents horizontal restraints, or any agreement that restricts normal competition. Price fixing is one important example of this type of infraction (922).
Vertical restraints on trade are also prohibited under Section One of the Sherman Act. These are any restraints on trade created by agreements between firms at different levels in the manufacturing or distribution process (923). Monopolization and attempts to monopolize through predatory pricing or other means are forbidden (924).
Another important piece of legislation was the Clayton Act of 1914 (926). The major portions of the Clayton Act deal with four types of business behavior that is considered illegal, but not criminal. Further, it is only considered illegal if the effect is to considerably lessen competition or create a monopoly like situation (926).
The Clayton Act of 1914 had four important areas. The first area dealt with regulating price discrimination. This was where a seller reduced a price to one buyer below the price charged to a buyer’s competitor. The second area dealt with ...
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