SHERMAN ANTITRUST ACT

1890, first measure passed by the U.S. Congress to prohibit trusts; it was named for Senator John Sherman. Prior to its enactment, various states had passed similar laws, but they were limited to intrastate businesses. Finally opposition to the concentration of economic power in large corporations and in combinations of business concerns led Congress to pass the Sherman Act. The act, based on the constitutional power of Congress to regulate interstate commerce, declared illegal 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 set as the maximum penalties for violating the act.

The Sherman Act authorized the federal government to institute proceedings against trusts in order to dissolve them, but Supreme Court rulings prevented federal authorities from using the act for some years. As a result of President Theodore Roosevelt's "trust-busting" campaigns, the Sherman Act began to be invoked with some success, and in 1904 the Supreme Court upheld the government in its suit for dissolution of the Northern Securities Company. The act was further employed by President Taft in 1911 against the Standard Oil trust and the American Tobacco Company.

In the Wilson administration the Clayton Antitrust Act (1914) was enacted to supplement the Sherman Antitrust Act, and the Federal Trade Commission (FTC) was set up (1914). Antitrust action sharply declined in the 1920s, but under President Franklin Delano Roosevelt new acts supplementary to the Sherman Antitrust Act were passed (e.g., the Robinson-Patman Act), and antitrust action was vigorously resumed. As a result of a suit filed in 1974 under the Sherman Antitrust Act, the American Telephone and Telegraph (AT&T) monopoly was broken up in 1982.

The Hart-Scoss-Rodino Antitrust Improvement Act (1976) made it easier for regulators to investigate mergers for antitrust violations, but few mergers were blocked during the merger boom of the 1980s, when the FTC and Justice Dept. adopted a looser interpretation of antitrust legislation. By the 1990s, still a time of large corporate mergers, the FTC became more litigious in antitrust actions, and the Justice Dept. aggressively pursued the Microsoft Corp. (see Gates, Bill). Antitrust legislation is primarily regulated by the Antitrust Division of the Dept. of Justice and the FTC. U.S. corporations with international operations also face antitrust scrutiny from European Union regulators.

See R. Posner, Anti-Trust Law (1976); R. Bork, The Antitrust Paradox (1978).

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