The Clayton Act was enacted in 1914 as a supplement to the Sherman Act -- the basic statute embodying the antitrust law policy of the United States. Section 7 of the Clayton Act, as originally enacted, prohibited the acquisition by one corporation of the stock of another corporation where the effect may be substantially to lessen competition or to restrain trade between the corporations, or tend to create a monopoly. In 1950, after a long campaign "to plug the loophole" in Section 7, the section was amended to include the prohibition of asset as well as stock acquisitions. The purpose of this study is to examine the reasons for the passage by Congress of the original and the amended Section 7, and to analyze the administration of the section and the implications of its amendment. Some observations are offered on the basic economic issues in the corporate merger policy of the United States.
It will be shown that the amendment of Section 7 in 1950 was a major change in the substantive provisions of the antitrust laws of the United States and not the mere plugging of a loophole; that merger by means of asset acquisition was not a new stratagem devised to avoid the prohibitions of Section 7 after 1914;