Sherman Antitrust Act and its Outcomes
The Sherman Antitrust Act 1890 was one of the significant developments of the US law and constitution that stopped companies from merging and creating monopolies in the market. The law was passed to stop companies from controlling, manipulating, and dictating markets by issuing their own prices. The act was designed by the US Congress to address unruly means to control the market and misuse the loopholes of non-existing business ethics. In this article, we will discuss how this act was introduced to reduce the power of some individuals controlling the industries.
What is Sherman Antitrust Act?
The Sherman Antitrust Act definition suggests an act designed in the year 1890 by US Congress to stop the industrialists from merging with each other and controlling the markets creating a monopoly. This act aimed to stop business owners from practicing unethical business techniques just for the sake of earning money and for controlling an existing market.
This was the first attempt of the US Congress to bring economic parity and competitiveness in the US markets by eradicating unethical monopoly trends and regulating interstate commerce. It aimed to create a fair platform for all the businesses to enjoy parity to conduct business operations and to follow the same rules without considering unethical monopoly practices.
Sherman Antitrust Overview and History
As mentioned earlier, the Sherman Antitrust Act was introduced in the year 1890 by Senator John Sherman in the state of Ohio. It was the first step taken by the US Congress to prohibit monopolies, trusts, and cartels to take over the markets. It was introduced during the tenure of President Benjamin Harrison.
The growing unrest and hostility of the public towards bigger corporations such as the American Railway Union and Standard Oil who were monopolizing unfairly in the markets and regulating prices at an unbelievable level. The introduction of the Sherman Antitrust Act led to the foundation of a strong platform where the government can take action to commence fair commerce practice in different industries. The US Congress wanted to reduce the unfairly increased prices of essential goods and let the competitors practice fair business on the same ground.
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You can understand who did Sherman Antitrust Act affect the most. It was the larger corporations that wanted to control these markets and increase the prices of essential goods at a very high level. People were forced to buy such items at that price and face hardships. In fact, the other enterprises had to close their businesses and leave the market.
The formation of this act signaled a crucial stage of the US Constitution where this unfair behavior of the wealthy corporations needed to be curbed down. The advent of big business during the 19th Century signaled the development of commerce laws to regulate the practices.
This act paved the way for better commerce and business-related acts such as Clayton Act. These acts were intended to control and regulate the markets and businesses to produce a fairground for buyers and sellers. This act got a huge response from the citizens resulting in the enactment for creating a competitive business market.
It prohibited the competing individuals and businesses from fixing prices, dividing markets, and rigging bids with their contacts and wealth. A law was designed for penalizing the practices that made markets look miserable for other business owners and consumers. As per the Sherman Antitrust Act definition, it was designed in such a way that unfair business practices can be penalized in terms of criminal and civil clauses.
Why did Sherman Antitrust Act Fail?
Even though the act was designed to protect the best interest of the people, businesses, commerce, and economy, the enactment was short-lived. The law was not enacted properly and had to be withdrawn or went out of practice due to its rare invocation for ten years. During the presidential tenure of Theodore Roosevelt, this law saw some light of hope. Previously, it was not abided by the law department and the industries went on suffering from such malicious business practices.
The US President Theodore Roosevelt (1901 - 1909) took this act very seriously and vouched to enact it in a more vigorous form. Under his initiative, the US Congress passed two measures in the legislation in accordance with the Sherman Antitrust Act 1890. One of these legislative measures was the Clayton Antitrust Act. This act put forward the general provisions of the Sherman Act against unfair monopolization of the industries.
The second measure was dedicated to the formation of the Federal Trade Commission. This commission was designated with the power to investigate and scrutinize businesses for checking any possible violations. The prime reason for designing and commencing this act in the US Constitution was to stop the unreasonable and unethical practice of merging, acquiring, and excluding businesses to create a monopoly and use it for benefits.
In a nutshell, the Sherman Antitrust Act President is considered to be Roosevelt as he introduced the provisions of this act with a new version by enacting Clayton Antitrust Act in 1914. The prime intention was to create a healthy environment for all business owners to sell their products in a healthy competitive market without creating an unnecessary monopoly and utilizing the loopholes of the US law.
FAQs on Sherman Antitrust Act
1. What is the Sherman Antitrust Act of 1890?
The Sherman Antitrust Act of 1890 is a landmark U.S. federal statute that was the first law to prohibit business activities that the federal government deemed to be anti-competitive. It outlaws any contract, combination, or conspiracy in restraint of trade and makes it illegal to monopolise or attempt to monopolise any part of interstate or foreign commerce. Its primary goal is to protect economic competition and prevent the formation of powerful trusts and monopolies that could harm consumers.
2. Why was the Sherman Antitrust Act created?
The Act was created in response to widespread public concern during the late 19th century about the immense power of large corporate trusts. Companies like Standard Oil had formed massive monopolies that stifled competition, controlled prices, and dictated market terms. The law was designed to address these issues by restoring competition and ensuring a fairer marketplace for both smaller businesses and consumers who were being harmed by these monopolistic practices.
3. How did powerful industrialists and corporations initially react to the Sherman Antitrust Act?
Wealthy industrialists and the leaders of large corporations were largely against the implementation of the Sherman Antitrust Act as it directly threatened their business models. However, its initial impact was limited due to its vague language and conservative court interpretations. For nearly a decade, enforcement was weak, and in some cases, the law was even used more effectively against labour unions than against the corporate trusts it was designed to regulate.
4. What is the key difference between the Sherman Antitrust Act and the later Clayton Antitrust Act?
The primary difference lies in their specificity. The Sherman Antitrust Act was a broad law that outlawed monopolies and restraint of trade in general terms. In contrast, the Clayton Antitrust Act of 1914 was much more specific. It strengthened the Sherman Act by explicitly prohibiting certain business practices that were conducive to forming monopolies, such as:
- Price discrimination
- Exclusive dealing and tying arrangements
- Anti-competitive mergers and acquisitions
5. How effective was the Sherman Antitrust Act in its early years?
In its early years, the Sherman Antitrust Act was not very effective. Its broad and somewhat ambiguous language made it difficult to enforce, and the courts often interpreted it narrowly, siding with big businesses. A major limitation was that its provisions against "conspiracies in restraint of trade" were frequently used to prosecute labour union strikes. The Act's true power wasn't fully realised until the presidency of Theodore Roosevelt, who became known as the "trust buster" for his vigorous use of the law to break up major monopolies.
6. What are some famous examples of cases brought under the Sherman Antitrust Act?
Several landmark cases have been prosecuted under the Sherman Antitrust Act, demonstrating its long-term importance. Some of the most famous examples include:
- Standard Oil Co. of New Jersey v. United States (1911): This case resulted in the breakup of John D. Rockefeller's massive oil monopoly into several smaller companies.
- United States v. American Tobacco Co. (1911): Similar to the Standard Oil case, this led to the dissolution of the powerful tobacco trust.
- United States v. Microsoft Corp. (2001): A more modern example where Microsoft was found to have used monopolistic practices to stifle competition in the PC operating system and browser markets.
7. Which U.S. President signed the Sherman Antitrust Act into law?
The Sherman Antitrust Act was signed into law by President Benjamin Harrison on July 2, 1890. While he signed it, the legislation is named after its principal author, Senator John Sherman of Ohio, who was a leading expert on finance and commerce at the time.
