The Sherman Antitrust Act was the first federal legisalation in the United States to outlaw monopolies and restraint of trade. It still forms the centerpiece of U.S. antitrust law.
The period following the U.S. Civil War was one of rapid economic growth and change in the United States. Creation of a nationwide network of railroads gave individual firms a way to serve a nationwide market, enabling them to grow to a large size to improve their efficiency or simply to gain strategic advantages. A conspicuous firm was the Standard Oil
Standard Oil effectively controlled the petroleum-refining industry by 1879. In addition to lubricants, its principal product was kerosene
Opposition to big-business abuses spread among farmers and in small-business sectors such as the grocery business. Popular concern was fueled by writings such as Edward Bellamy’s
Both major political parties had adopted vague antimonopoly statements in their platforms for the 1888 election, but neither rushed to submit appropriate legislation at the next congressional session. President Benjamin Harrison
The Sherman Antitrust Act contained three important types of provisions. First, the law outlawed “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations. . . .” This came to be viewed as dealing with “loose combinations” of several firms undertaking joint action. Second, the law made it illegal for any person to monopolize or attempt to monopolize any part of that trade or commerce. This was viewed as dealing with activities of individual large firms. The key terms were not defined, and it remained for lawyers and judges to try to find satisfactory and consistent meanings for them. Third, the law provided for a variety of means of enforcement. The attorney general was empowered to bring criminal or civil court actions against violators. Civil remedies often proved attractive, because the burden of proof was not so difficult to achieve, and the remedies could involve changing industry structure and behavior, not merely applying punishments. In addition, private individuals could sue offending firms for triple the value of their losses.
Between 1890 and 1904, only eighteen suits were filed under the act. Several of these aimed at collusive rate-fixing by railroads, despite their regulated status under the Interstate Commerce Commission
The Sherman Act’s effectiveness was limited severely by the Supreme Court in an 1895 case against the sugar trust, United States v. E. C. Knight Company
Again, public outcry arose. Congress appointed an industrial commission in 1899 to consider the trust problem. A preliminary report in 1900 observed that “industrial combinations have become fixtures in our business life. Their power for evil should be destroyed and their means for good preserved.” The commission’s 1902 report recommended stronger actions against price discrimination. Some large firms were prosecuted successfully. A giant railroad merger was blocked in the Northern Securities case of 1904, helping to gain for President Theodore Roosevelt
In 1914, Congress adopted the Clayton Act
Until 1950, Sherman Act prosecutions tended to be relatively effective against collusive actions by separate firms in interstate commerce, situations involving, for example, price fixing and agreements to share markets, to boycott suppliers, or to assign market territories. On the other hand, individual firms were left relatively free, even if large and dominant. Treatment of individual large firms shifted somewhat after the government successfully prosecuted the Aluminum Company of America (ALCOA) in 1945. The court agreed with the prosecution that the firm’s market share was large enough to constitute a monopoly, and that ALCOA had deliberately undertaken to achieve this monopoly. This case provided a basis for successful antitrust actions against United Shoe Machinery Company in 1954 and against American Telephone and Telegraph (AT&T) in 1982. In the AT&T case, the telephone industry was drastically reorganized. The various regional operating companies became independent, and entry into long-distance phone services was opened up for new competitors. The government’s ability to block the formation of giant-firm monopoly was strengthened in 1950, when Congress passed the Celler-Kefauver Antimerger Act, which gave the government stronger authority to block mergers that seemed to threaten to produce monopoly.
-
Blair, Roger D., and David L. Kaserman. Antitrust Economics. Homewood, Ill.: Irwin, 1985. This university textbook puts the Sherman Act into a broad economic context. -
Hylton, Keith N. Antitrust Law: Economic Theory and Common Law Evolution. New York: Cambridge University Press, 2003. Compares the Sherman Antitrust Act and other statutes with antitrust common law. -
Kovaleff, Theodore P., ed. The Antitrust Impulse: An Economic, Historical, and Legal Analysis. 2 vols. Armonk, N.Y.: M. E. Sharpe, 1994. Diverse essays reexamine the history and impact of the law. -
Letwin, William L. Law and Economic Policy in America: The Evolution of the Sherman Act. New York: Random House, 1956. Surveys the background and early application of the law, finding it an unsuccessful experiment. -
Thorelli, Hans. The Federal Antitrust Policy: Origination of an American Tradition. Baltimore: Johns Hopkins University Press, 1955. This encyclopedic study focuses on the political and legal background of the Sherman Act, its legislative history, and its early application. -
Whitney, Simon N. Antitrust Policies: American Experience in Twenty Industries. 2 vols. New York: Twentieth Century Fund, 1958. Excellent case studies give deeper meaning to the law’s application.
U.S. Civil War
Congress Passes the National Bank Acts
Standard Oil Company Is Incorporated
Standard Oil Trust Is Organized
Pendleton Act Reforms the Federal Civil Service
Interstate Commerce Act
Birth of the People’s Party
Pullman Strike
Congress Passes Dingley Tariff Act
Benjamin Harrison; John D. Rockefeller.