Sherman Antitrust Act of 1890

• Author: Phyllis Bunn
• Pages: 665-666

Page 665

The Sherman Antitrust Act of 1890, the first and most significant of the U.S. antitrust laws, outlawed trusts and prohibited "illegal" monopolies. The act applies to both domestic companies and foreign companies doing business in the United States. A trust is a relationship between businesses that collaborate through anticompetitive agreements to gain market dominance. Trusts cut prices to drive competitors out of business. Illegal monopolies are those that can be shown to use their power to suppress competition. A monopolist has the power to dominate markets—the ability to set the price by altering supply. Anticompetitive techniques include:

Buying out competitors

Requiring customers to sign long-term agreements

Compelling customers to buy products they do not want in order to receive other goods

The Sherman Antitrust Act, along with the Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914, constitutes a large part of the regulatory umbrella under which U.S. business operates. Through the passage of the Sherman Antitrust Act, the U.S. Congress provided safeguards to prevent firms from merging with other firms if the effect was to substantially lessen competition and create monopolies.

The Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice enforce antitrust laws. The FTC has the power to temporarily stop companies from employing suspected anti-competitive practices, while the Justice Department probes and prosecutes businesses.

The Sherman Antitrust Act was passed in response to strong and widespread political pressure to deal with "the trust problem" that reached a peak during the presidential election campaign of 1888. The trusts were corporate holding companies that by 1888 had consolidated a very large share of U.S. manufacturing and mining industries into nationwide monopolies. Some of the most notorious corporate holding companies were the sugar trust, John D. Rockefeller's oil trust, and J. P. Morgan's steel trust. The original legal form of these organizations had been as business trusts.

The Sherman Antitrust Act made trusts and those who violated the act subject to civil remedies and criminal penalties in actions by the Department of Justice and to treble damages in private suits. The act was broad, providing few standards, which meant the executive branch and federal courts...