Sherman Antitrust Act

It seemed from the historical records and the Congressional chronicles of USA that some members of the US Congress did not have enough trust on the concept of trusts. Don't trust me? Well, thanks to Senator John Sherman, that a leash was put on the trusts, companies and organizations who did not abide by the rules laid down by the act. It was also implemented to restrict the cartels and the monopolies. It was passed in 1890 on July 2. Here is a bit of a blast from the past as I elaborate on the Sherman Anti Trust act.

Summary of the Sherman Antitrust Act

What was the Sherman Antitrust act? The answer to this question is very interesting and this act was the foundation of the anti trust litigation by the federal government of the USA. Primarily, as mentioned previously, the Sherman Act restricted the trusts and the cartels to go haywire and gain monopoly. Hence the objective of this act was to resist the combination of the entities, posing a potential risk to the competitors. Surprisingly and interestingly, this act did not have a lot to do with trusts. A more appropriate term for it is 'Competition Law'. So the entities talked about here, posing risk were monopolies and cartels. The law which was eventually made, tries to prevent the artificial price hike on account of trade or supply restriction. It is also said in a few cases that this act does not protect competitors, but protects the competition.

The act, based on the power given to Congress by the US Constitution to regulate interstate commerce, declared every contract, combination (in the form of trust or otherwise), or conspiracy in restraint of interstate and foreign trade. A fine of $5,000 and imprisonment for one year were fixed as the maximum penalties for violating the act. There two main basic provisions of this act - the first delineated and prohibited the means of anti competitive conduct and monopoly. The other section of the Sherman Antitrust Act dabbles into the end results that are anti competitive in nature. Apart from being applicable to dealings of pure commerce, the prohibition of cartels was interpreted to hold a number of labor union activities illegal.

How it All Began

Senator John Sherman of Ohio, was the main individual behind the Sherman Antitrust Act of 1980. He was also the chairman of the Senate finance committee. Sherman was good at managing finances and financial affairs, so he came up with the Sherman Act. One of the very initial applications of this act was in the year 1894. The American Railway union was dragged into court by Eugene Debs to settle the Pullman strike. Although the act was passed in 1890, a number of politicians were not happy with the implementation of the act till early 1900, when Theodore Roosevelt would take over.

The Sherman Antitrust act was succeeded by legislation, sometime later, in 1914 by way of the Clayton Antitrust Act. It added several things to the prohibited activities along with those laid down by the Sherman Act, 1890. Some of them were exclusively dealing agreements, tying arrangements and the Clayton Act laid down the mergers and acquisitions substantially reducing market competition and creating a secure marketing environment.

No individual is perfect and nor are his thoughts and the Sherman Act proved that once again as it attracted a good amount of controversy. One of the major criticisms on the Sherman act was curbing of innovation and hindrance to the progress. It was also said that anything new touted to come in the market was killed and thus it hindered the US economy, thanks to the Sherman Antitrust Act. There were some more criticisms from the economic perspective as well.

Eventually, Sherman Antitrust Act in 1980s, started undergoing changes and got new contexts. Nevertheless, it was passed and criticisms did not matter apart from an academic interest. This is where I end my treatise on the Sherman Act 1890! Hope it was useful!