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Finance: What are the Clayton Act and the Sherman Antitrust Act? 72 Views


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What are the Clayton Act and the Sherman Antitrust Act? The Sherman Antitrust Act of 1890 was the first legislation enacted by Congress to outlaw monopolies and cartels. This was specifically targeted at monopolies such as John D. Rockefeller’s Standard Oil, which was the most glaring example at the time. The Clayton Act of 1914 expanded the Sherman Act to include prohibiting of predatory pricing and preventing mergers that could potentially lead to pseudo monopolies based on their possible impact to free trade. The Clayton Act also legalized trade union practices, such as strikes, picketing, and boycotts.

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Transcript

00:00

Finance a la shmoop what are the Clayton Antitrust Act and the Sherman Antitrust

00:07

Act? well they're all about controlling monopolies which a century ago were

00:14

called Trust's ironic in that well they essentially stole the trust from the

00:18

people, the common Jo, Ma and Pa Kettle well in late 19th century even more so [Ma and Pa Kettle standing together]

00:24

than today white men generally ruled the Western

00:27

world and were you know very clubby, Bob here in church pew seven likes to do

00:34

business with Mike here in pew eight Bob ran a tugboat shipping line hauling [Bob sailing a tugboat]

00:40

grain down the Mississippi, Mike here had a bunch of farms and liked to do

00:44

business with Bob and well there's Jim here in pew six who runs the entire

00:49

region's worth of banks then he liked loaning money to farms because well back [Jim with stack of cash]

00:55

then they were always money good to pay their debts yeah there was a time farms

01:00

were considered you know safe bet and the three of them formed essentially a

01:05

vertical monopoly controlling grain distribution in the center of the [Ship travels through center of the US]

01:10

country from creation to distribution to sales to you know all the financing and

01:16

banking and stuff underneath it if they wanted to raise prices on the grain for

01:20

bread well who was to stop them you know there were no competitors why were there

01:25

no competitors, because the three had teamed up to elbow out anyone else [competitor appears and Mike elbows him away]

01:30

who might come along and well you know cut them out of the precious resource

01:34

flows of whatever was needed and soon the three had enough scale so that if

01:38

they were buying resources for a million acres of farmland well, their volume

01:44

discount pricing discount discount discount were so massive that they could

01:50

undercut anyone who came along wanting to compete fair and square [Prices of grain appear]

01:53

well the Sherman Antitrust Act of 1890 was the first set of anti monopoly laws

01:58

to come down the pike like it says right there in the name the act was anti

02:02

trusts it was passed to bust up any unfairly organized legal arrangements or [Sherman Antitrust Act strikes company]

02:08

would-be monopolies which would prevent from taking advantage of unknowing

02:13

consumers and provide for a competitive marketplace because then who wins and a

02:18

consumer that's who the government's protecting right so what did this mean [Jim Bob and Mike in a farm]

02:22

for poor old Mike Bob and Jim well now they couldn't just raise grain prices

02:27

Willy or nilly suddenly there were strictures in place

02:31

and our gruesome threesome had to abide by this new rule of law which meant [Jim Bob and Mike in court and judge holds up Sherman Antitrust Act]

02:37

pricing their product fairly and reasonably whatever that meant so that

02:41

no one was having to sell the family farm to afford to buy a loaf of

02:46

sourdough you know for their kids and then clever lawyers defending bazillionaires

02:51

poked so many holes in the Sherman Act it looked like one of the real [Lawyer poking holes through document]

02:55

housewives after her latest Botox treatment so along came the Clayton

03:00

Antitrust Act in 1914 to fill in those holes and puff up the cheeks of law as

03:06

it were well any little loopholes discovered by the clever lawyers were [Plasters appear on Sherman Antitrust Act]

03:10

closed and more specifics were added to the language so it was even harder for

03:16

folks like Mike Bob and Jim to pull one over on Ma and Pa Kettle, so yeah you

03:21

know it's a Billy Joel famously saying 'It's just a matter of trust'.... [Man in club singing]

03:27

ask your parents

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