Book Opener

y the U.S. Supreme Court held that contracts or combinations wouldbe illegal only if they formed an “unreasonable restraint of trade.” Thisstep displeased Congress, which took steps to counteract the negativeeffect.Clayton ActCongress passed the Clayton Act in 1914. In contrast to the ShermanAct, the Clayton Act made specific practices illegal. For example,a business could not sell goods to one company for less than the priceit charged another company if the effect of the price difference was toreduce competition. It also became illegal to sell goods on the conditionthat a buyer would not buy products from the seller’s competition.Federal Trade Commission ActCongress also passed the Federal Trade Commission Act in 1914.This measure was designed to protect businesses from the wrongful actsof other business firms. It stated, “Unfair methods of competition incommerce are hereby declared unlawful.”The Federal Trade Commission Act, however, does not define anunfair method of competition. Instead, it allows the courts to determinethese methods on a case-by-case basis. The act also created the FederalTrade Commission (FTC) and charged it with preventing businessesfrom violating the Federal Trade Commission Act.Robinson-Patman ActThe Robinson-Patman Act is an amendment to the Clayton Act. Itsays companies cannot sell goods at lower prices to high-volume purchaserswithout offering the same discount to smaller purchasers if thispractice lessens or eliminates competition or creates a monopoly. TheRobinson-Patman Act is not limited to discrimination on pricing. Ingeneral, it requires sellers to treat all buyers equally. Any fraud, such aspreferential delivery schedules that help one seller but hurt others, hasbeen outlawed.Later AmendmentsThe Federal Trade Commission Act was amended in 1938 and 1975.The latest amendment provides protection to consumers as well as businesspeople. The act now says, “Unfair methods of competition in oraffecting commerce, unfair or deceptive acts or practices in or affectingcommerce are hereby declared unlawful.” The FTC also now has thepower to make rules and regulations that define specific activities thatare considered unfair and deceptive.650 Unit 6: Starting a Business