Clayton Antitrust Act

Categories: Regulations, Econ, Tax

It's all about controlling monopolies, which a century ago were called "trusts." Ironic...in that they essentially stole trust from The People...the common Joe...Ma & Pa Kettle.

In the late 19th century (even more so than today), white men generally ruled the western world and were very, um...clubby. Bob in church pew #7 liked to do business with Mike in pew #8. Bob ran a tug boat shipping line hauling grain down the Mississippi. Mike had a bunch of farms and liked to do business with Bob. And then there’s Jim in pew #6, who runs the entire region’s worth of banks. He liked loaning money to farms, because they were almost always money good to pay their debts.

The three of them formed essentially a vertical monopoly, controlling grain distribution in the center of the country, from creation to distribution to sales to the banking underneath all of it. If they wanted to raise prices on the grain for bread...well, who was to stop them? There were no competitors.

Why were there no competitors? Because the three had teamed up to elbow out anyone else who might come along, and cut them out of the precious resource flows of whatever was needed.

Soon the three had enough scale so that, if they were buying resources for a million acres of farmland, their volume discounts were so massive they could undercut anyone who came along wanting to compete fair n’ square.

The Sherman Antitrust Act of 1890 was the first set of anti-monopoly laws to come down the pike. Like it says right there in the name, the act was…anti…trusts. It was passed to bust up any unfairly organized legal arrangements or would-be monopolies that would prevent them from taking advantage of unknowing consumers, and provide for a competitive marketplace.

So…what did this mean for poor ol’ Mike, Bob, and Jim? Now they couldn’t just raise grain prices willy-nilly. Suddenly, there were strictures in place, and our gruesome threesome had to abide by the new rule of law. Which meant pricing their product fairly and reasonably, so that no one was having to sell the family farm to afford a loaf of sourdough. And then clever lawyers defending bazillionaires poked so many holes in the Sherman Act, it looked like Nicole Kidman after her latest botox treatment.

So along came the Clayton Antitrust Act, in 1914, to fill in those holes and...puff up the cheeks of law, as it were. Any little loopholes discovered by the clever lawyers were closed, and more specifics were added to the language so that it was even harder for folks like Mike, Bob and Jim to pull one over on Ma and Pa Kettle.

So yeah, as Billy Joel famously said…"It's just a matter of trust…"

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