Celler-Kefauver Act of 1950
The Celler-Kefauver Act of 1950 is a significant piece of legislation aimed at preventing anti-competitive practices in the U.S. economy. It was enacted in response to growing concerns about the consolidation of corporate power and its potential to harm competition, consumers, and innovation. The Act expanded upon earlier antitrust laws, notably the Sherman Act of 1890 and the Clayton Act of 1914, by prohibiting all mergers and acquisitions that could threaten competition or create monopolies, thereby closing loopholes that corporations had previously exploited.
The Act was championed by Congress members Emanuel Celler and Estes Kefauver, who effectively leveraged Cold War sentiments to frame their arguments against the dangers posed by large corporations. They posited that unchecked corporate power could threaten the democratic foundations of the United States, thus rallying support for the legislation. In practice, the Celler-Kefauver Act has been enforced by the Antitrust Division of the Justice Department and the Federal Trade Commission, which require that significant mergers and acquisitions be reported in advance for regulatory review. This framework continues to be relevant in discussions about corporate mergers and competition, reflecting ongoing concerns about economic concentration in modern society.
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Celler-Kefauver Act of 1950
Identification First effective federal law to prevent corporate mergers and acquisitions that lessen competition
Date Enacted on December 29, 1950
The Celler-Kefauver Act closed important loopholes in federal antitrust laws and prohibited certain types of mergers between firms in the same industry.
The Sherman Act, the first federal antitrust law, was passed in 1890 to punish price-fixing agreements (cartels) and monopolies that injured competition, competitors, and consumers through higher prices, restricted production, and restrictions on innovation. Corporations reacted by simply buying up their competitors, suppliers, and customers in ways that the law did not cover. Congress then passed the Clayton Act in 1914, which contained provisions barring certain mergers that tended to lessen competition substantially or create a monopoly. However, corporate lawyers quickly found loopholes around these prohibitions as well. Congressional hearings during the 1930’s and 1940’s highlighted how the economy was becoming more and more concentrated in the hands of fewer and fewer companies.
In 1950, Congress, led by Emanuel Celler of New York and Senator Estes Kefauver of Tennessee, passed the Celler-Kefauver Act, which prohibited all mergers and acquisitions of any form if they threatened to compromise competition or create a monopoly.
Impact
Historians have argued that Celler and Kefauver were successful in their efforts to pass the act because of the manner in which they emphasized the evils of big business. By arguing that big business would require big government and a powerful bureaucracy to regulate the country’s monopolies, the congressmen successfully used Cold War rhetoric to heighten fears of anything that might compromise U.S. democratic foundations.
During the early twenty-first century, the act was enforced by both the Antitrust Division of the Justice Department and the United States Federal Trade Commission. Most significant mergers and acquisitions had to be reported in advance to the two agencies so that the federal government could decide whether to challenge the mergers in court before they actually took place.
Bibliography
Adams, Walter, and James W. Brock. Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire. Princeton, N.J.: Princeton University Press, 1991. A dialogue in the form of a mock trial discussing the evolution of antitrust policy from the 1950’s through the 1990’s with an emphasis on mergers and acquisitions.
Kwoka, John E., Jr., and Lawrence J. White, eds. The Antitrust Revolution: Economics, Competition, and Policy. 4th ed. New York: Oxford University Press, 2004. A series of case studies showing evolution of antitrust policy from the 1950’s to the end of the twentieth century.
Report of the Federal Trade Commission on the Merger Movement: A Summary Report. Washington, D.C.: United States Government Printing Office, 1948. A landmark study of corporate mergers and acquisitions which helped lead to the passage of the Celler-Kefauver Act.