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The 'Sherman Antitrust Act' ('Sherman Act'^[1], July 2, 1890, ch. 647, , ), was the first United States government action to limit cartels and monopolies. It is the oldest of all U.S. antitrust laws.
The Sherman Act provides: "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, is declared to be illegal".^[2] The Act also provides: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony [. . . ]"^[2] The Act put responsibility upon government attorneys and district courts to pursue and investigate trusts, companies and organizations suspected of violating the Act.
The Act was signed by President Benjamin Harrison in 1890 and was named after its author, Senator John Sherman, an Ohio Republican, chairman of the Senate Finance Committee, the Secretary of Treasury under President Rutherford Hayes, and Secretary of State under President William McKinley. After passing in the Senate on April 8, 1890 by a vote of 51-1, the legislation passed unanimously (242-0) in the House of Representatives on June 20, 1890.
The Act was not used in court cases for some years. President Theodore Roosevelt used the Act extensively in his antitrust campaign, including to divide the Northern Securities Company. President William Howard Taft used the Act to split the American Tobacco Company.
Despite its name, the Act was not aimed at trusts in particular, but at any form which would create a "restraint of trade". The word "antitrust" was used because the Act was initially proposed to break up the Standard Oil trust. Ironically, by the time antitrust laws were finally brought to bear against the company, it was no longer using the form of a trust. The term "antitrust law" has persisted in the United States for what the rest of the world calls "competition law," even though antitrust laws are almost never used against trusts.
Although the Act was aimed at regulating businesses, it was not specific to them: the prohibition is of ''combinations in restraint of trade''. It was used for many years as an anti-union tool, until that use was revoked in 1914 by the Clayton Antitrust Act.
The Act was intended to prevent arrangements designed to, or which tend to, increase the cost of goods to the consumer. It was not specifically intended to prevent the dominance of an industry by a specific company, despite misconceptions to the contrary. According to Senator George Hoar, an author of the bill, any company that "got the whole business because nobody could do it as well as he could" would not be in violation of the act. The law attempts to prevent the artificial raising of prices by restriction of trade or supply [1].

Contents

Criticism of the Sherman Antitrust Act

See also

Notes

External links

Official websites

Additional information

Criticism of the Sherman Antitrust Act

Critics question whether the Act improves competition and benefits consumers, or merely aids inefficient businesses at the expense of larger, more innovative ones. Alan Greenspan, in his essay entitled ''Antitrust'' [2] condemns the Sherman Act as stifling innovation and harming society. He says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible."
Others debate whether the goal of antitrust legislation should be increased competition or lower prices. For example, arguing in favor of the Act in 1890, Representative William Mason said "trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to people of this country by the trusts which have destroyed legitimate competition and driven honest men from legitimate business enterprise."^[4] On the other hand, some believe that as long as a monopoly is not a coercive monopoly where a firm is securely insulated from ''potential'' competition, it will keep prices low in order to discourage competition from arising. Hence, they believe legal action is uncalled for, and wrongly harms the firm and consumers.
Some believe that antitrust laws have a protectionist effect. Economist Thomas DiLorenzo notes that Senator Sherman sponsored the 1890 William McKinley tariff just three months after the Sherman Act, and agrees with ''The New York Times'' which wrote on October 1, 1890: "That so-called Anti-Trust law was passed to deceive the people and to clear the way for the enactment of this...law relating to the tariff" and said Sherman attacked trusts because they "subverted the tariff system; they undermined the policy of government to protect American industries by levying duties on imported goods." Dilorenzo says: "Protectionists did not want prices paid by consumers to fall. But they also understood that to gain political support for high tariffs they would have to assure the public that industries would not combine to increase prices to politically prohibitive levels. Support for both an antitrust law and tariff hikes would maintain high prices while avoiding the more obvious bilking of consumers."^[5]
Another possible angle is that provided by energy rents, that is the difference between the value (to producer or consumer) of energy and its cost. The Sherman Act, being directed specifically at John D. Rockefeller's Standard Oil trust, can be seen as a precursor to the Public Utilities Commissions established in the 1930s in response to electrification and the corresponding profit opportunities. Historically, new energy sources have yielded rents to both consumers and producers (of energy). The mood in the 1880s was that no one individual should be given reign over as large a chunk of energy rents, despite the fact that Standard Oil's gas, kerosene, and oil prices were below those of its competitors.

See also

★ Alcoa

★ American Tobacco Company

★ AT&T

★ Microsoft

★ Northern Securities Company

★ Ticketmaster

★ Standard Oil

★ Tying (commerce)

★ Antitrust

★ Cartel

★ Clayton Antitrust Act of 1914

★ List of corporate executives charged with crimes

★ DRAM price fixing

★ Monopoly

★ Price fixing

★ Resale price maintenance

Notes

1. As it was formally designated by the Hart-Scott-Rodino Antitrust Improvements Act in 1976.
2. See .
3. See .
4. Congressional Record, 51st Congress, 1st session, House, June 20, 1890, p. 4100.
5. DiLorenzo, Thomas, ''Cato Handbook for Congress'', Antitrust.

External links

Official websites

★ U.S. Department of Justice: Antitrust Division

★ U.S. Department of Justice: Antitrust Division - text of SHERMAN ANTITRUST ACT, 15 U.S.C. §§ 1-7

Additional information

★ Antitrust Division's "Corporate Leniency Policy"

★ ''Antitrust'' by Alan Greenspan

★ Dr. Edward W. Younkins (February 19, 2000). "Antitrust Laws Should Be Abolished".

★ DiLorenzo, Thomas ''Cato Handbook for Congress'', ''Antitrust''.

★ Sherman Anti-Trust Act Full text and commentary