Introduction

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CHAPTER I
INTRODUCTION
On July 2, 1890, President Benjamin Harrison signed into law what
has become known as the Sherman Act. Section 1 of the act succinctly
states that “[e]very 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.”1 This chapter will
consider what Congress meant by these words and then examine early
decisions by the Supreme Court that provide further insight into what
Congress sought to regulate through Section 1.
A. The Text and Background of Section 1
1. Why Congress Determined That a Federal Statute Was Needed
Following the Civil War, the country was poised for economic growth
and expansion of national transportation and communication networks.
Firms rapidly moved into new geographic markets and took advantage of
resulting increased economies of scale.2 They developed increasingly
sophisticated measures for control of industrial organizations. Standard
Oil Company—which had control of the majority of the country’s
petroleum refining assets—formed the first industrial trust in 1879.3 The
Standard Oil Trust was reorganized in 1882, and it was this organization
that served as a model for creation of trusts by other firms.4
Under the reorganized trust, all stockholders of the corporations and
some limited partnerships in which John D. Rockefeller had an interest or
1. An Act to Protect Trade & Commerce Against Unlawful Restraints &
Monopolies, § 1, ch. 647, 26 Stat. 209 (1890) (current version codified at
15 U.S.C. § 1).
2. See, e.g., James May, Antitrust in the Formative Era: Politica l and
Economic Theory in Constitutional and Antitrust Analysis, 1880-1918, 50
OHIO ST. L.J. 257, 283 (1989).
3. See, e.g., HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY :
ORGANIZATION OF AN AMERIC AN TRADITION 76-77 (1955).
4. See id. at 76-77, 96.
2 Proof of Conspiracy Under Federal Antitrust Laws
control, as well as forty individuals, ceded their ownership to a board of
trustees in return for trust certificates issued by the trustees.5 The trustees
exercised complete working control over the business interests of the
trust.6 This form of organization was in short order adopted by firms
controlling other industries, including cotton oil production, sugar
refining, whiskey production and lead manufacturing.7
Public denunciation of the new legal device surfaced quickly. Popular
opinion equated trusts with government-created monopolies, and
outspoken antitrust advocates condemned trusts for driving out
competitors by lowering prices, victimizing consumers by raising prices,
defrauding investors by watering stocks, putting laborers out of work by
closing down plants, and other abuses.8
Political parties recognized the potential for gaining popu lar support
in the upcoming 1888 presidential election by denouncing the trusts that
“the public found to be a growing and intolerable evil.”9 The Republican
Party mounted a condemnation of trusts and recommended in its 1888
convention “such legislation as will prevent the execution of all schemes
to oppress the people by undue charges on their supplies, or by unjust rates
for the transportation of their products to market.”10 After Republican
candidate Benjamin Harrison won the Presidency and the Republicans
gained control of Congress, the party needed to deliver on the campaign
promise to eradicate trusts.
Meanwhile, individual states had begun to take action against the
largest industrial combinations. Prior to the passage of the Sherman Act,
several states successfully secured forfeiture of corporate charters or other
penalties against large trusts or combinations.11 These initiatives were
5. Id. at 77.
6. Id.
7. See id. at 78-79. For a discussion of the principa l varieties of trusts
developed for industrial use at this time, see generally HERBERT
HOVENKAMP, ENTERPRISE & AMERICAN LAW, 1836-1937, 249-67 (1991).
8. See William L. Letwin, Congress and the Sherman Antitrust Law: 1887-
1890, 23 U. CHI. L. REV. 221, 235 (1956).
9. Id. at 223 (quoting WILL IAM HOWARD TAFT, THE ANTI-TRUST ACT AND
THE SUPREME COURT 2 (1914)).
10. Id. at 248.
11. See, e.g., THORELLI, supra note 3, at 79-82 (discussing enforcement
initiatives in Louisiana, California, New York, Nebraska and Ohio). For a
summary of state antitrust enforcement activity prio r to the passage of the
Sherman Act, see generally James May, Antitrust Practice and Procedure
in the Formative Era: The Constitutional and Conceptual Reach of State

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