Question

7. Explain how the lawfulness of mergers is examined under Section 7 of the Clayton Act?

Answer 1

Under Section 7 of the Clayton Act the mergers and acquisitions are prohibited when the effect can be substantially to lessen rivals, or to tend to create a monopoly. The lawfulness of merger is examined in a manner that mergers of those must be prohibited that negatively affects competition. Moreover it further bans specific discriminatory prices, services, and allowances in dealings among the merchants.

Thus the corporation should not acquire, directly or indirectly, any part or the whole of the stock or other share capital. Moreover no corporation subject to the Federal Trade Commission jurisdiction can acquire any part or the whole of the assets of one or more corporations that are engaged in commerce, where in any section in any line of commerce of the country, such acquisition effect of assets or stock, or of the usage of such stock by the granting or voting of proxies or otherwise, can be substantially to lessen rivals or with an intent to create a monopoly