![John-Sherman-2](https://upload.wikimedia.org/wikipedia/commons/5/5c/John-Sherman-2.jpg)
The Sherman Antitrust Act of 1890 (, ) is a
United States antitrust law
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman ...
which prescribes the rule of free competition among those engaged in commerce. It was passed by
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...
and is named for Senator
John Sherman
John Sherman (May 10, 1823October 22, 1900) was an American politician from Ohio throughout the Civil War and into the late nineteenth century. A member of the Republican Party, he served in both houses of the U.S. Congress. He also served as ...
, its principal author.
The Sherman Act broadly prohibits 1) anticompetitive agreements and 2) unilateral conduct that monopolizes or attempts to monopolize the relevant market. The Act authorizes the
Department of Justice
A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
to bring
suits to
enjoin
An injunction is a legal and equitable remedy in the form of a special court order that compels a party to do or refrain from specific acts. ("The court of appeals ... has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in pa ...
(i.e. prohibit) conduct violating the Act, and additionally authorizes private parties injured by conduct violating the Act to bring suits for
treble damages
In United States law, treble damages is a term that indicates that a statute permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff. Treble damages are a multiple of, and not an addition t ...
(i.e. three times as much money in damages as the violation cost them). Over time, the federal courts have developed a body of law under the Sherman Act making certain types of anticompetitive conduct per se illegal, and subjecting other types of conduct to case-by-case analysis regarding whether the conduct unreasonably restrains trade.
The law attempts to prevent the artificial raising of prices by restriction of trade or supply. "Innocent monopoly", or
monopoly
A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
achieved solely by merit, is legal, but acts by a monopolist to artificially preserve that status, or nefarious dealings to create a monopoly, are not. The purpose of the Sherman Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses.
["This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it has also been said that competition law in the European Union (EU) tends to protect the competitors in the marketplace, even at the expense of market efficiencies and consumers."< ]
Background
In ''
Spectrum Sports, Inc. v. McQuillan'' 506 U.S. 447 (1993) the Supreme Court said:
According to its authors, it was not intended to impact market gains obtained by honest means, by benefiting the consumers more than the competitors. Senator
George Hoar
George Frisbie Hoar (August 29, 1826 – September 30, 1904) was an American attorney and politician who represented Massachusetts in the United States Senate from 1877 to 1904. He belonged to an extended family that became politically prominen ...
of
, another author of the Sherman Act, said the following:
At ''Apex Hosiery Co. v. Leader'
310 U.S. 46993 and n. 15:
At ''
Addyston Pipe and Steel Company v. United States
''Addyston Pipe and Steel Co. v. United States'', 175 U.S. 211 (1899), was a Supreme Court of the United States, United States Supreme Court case in which the Court held that for a restraint of trade to be lawful, it must be ancillary to the main ...
'', 85 F.2d 1, ''affirmed''
175 U. S. 175U.S. 211;
At ''
Standard Oil Co. of New Jersey v. United States''
221 U. S. 158.
Provisions
Original text
The Sherman Act is divided into three sections. Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anti-competitive in nature. Thus, these sections supplement each other in an effort to prevent businesses from violating the spirit of the Act, while technically remaining within the letter of the law. Section 3 simply extends the provisions of Section 1 to U.S. territories and the District of Columbia.
Subsequent legislation expanding its scope
The
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipie ...
, passed in 1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman Antitrust Act. For example, the Clayton Act added certain practices to the list of impermissible activities:
* price discrimination between different purchasers, if such discrimination tends to create a monopoly
* exclusive dealing agreements
* tying arrangements
* mergers and acquisitions that substantially reduce market competition.
The
Robinson–Patman Act
The Robinson–Patman Act (RPA) of 1936 (or Anti-Price Discrimination Act, Pub. L. No. 74-692, 49 Stat. 1526 (codified at )) is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination. ...
of 1936 amended the Clayton Act. The amendment proscribed certain anti-competitive practices in which manufacturers engaged in price discrimination against equally-situated distributors.
Legacy
The federal government began filing cases under the Sherman Antitrust Act in 1890. Some cases were successful and others were not; many took several years to decide, including appeals.
Notable cases filed under the act include:
* ''United States v. Workingmen's Amalgamated Council of New Orleans'' (1893), which was the first to hold that the law applied to labor unions (reversed by the
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipie ...
).
* ''Chesapeake & Ohio Fuel Co. v. United States'' (1902), in which the trust was dissolved
* ''
Northern Securities Co. v. United States'' (1904), which reached the Supreme Court, dissolved the company and set many precedents for interpretation.
* ''
Hale v. Henkel'' (1906) also reached the Supreme Court. Precedent was set for the production of documents by an officer of a company, and the self-incrimination of the officer in his or her testimony to the
grand jury
A grand jury is a jury—a group of citizens—empowered by law to conduct legal proceedings, investigate potential criminal conduct, and determine whether criminal charges should be brought. A grand jury may subpoena physical evidence or a pe ...
. Hale was an officer of the
American Tobacco Co.
* ''
Standard Oil Co. of New Jersey v. United States'' (1911), which broke up the company based on geography, and contributed to the
Panic of 1910–11
Panic is a sudden sensation of fear, which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reactio ...
.
* ''
United States v. American Tobacco Co.
''United States v. American Tobacco Company'', , was a decision by the Supreme Court of the United States, United States Supreme Court, which held that the combination in this case is one in restraint of trade and an attempt to monopolize the busin ...
'' (1911), which split the company into four.
* ''
United States v. General Electric Co'' (1911), where GE was judged to have violated the Sherman Anti-Trust Act, along with International General Electric,
Philips
Koninklijke Philips N.V. (), commonly shortened to Philips, is a Dutch multinational conglomerate corporation that was founded in Eindhoven in 1891. Since 1997, it has been mostly headquartered in Amsterdam, though the Benelux headquarters i ...
,
Sylvania, Tungsol, and Consolidated and Chicago Miniature. Corning and Westinghouse made consent decrees.
* ''
United States v. Motion Picture Patents Co.'' (1917), which ruled that the company was abusing its monopolic rights, and therefore, violated the Sherman act.
* ''
Federal Baseball Club v. National League
''Federal Baseball Club v. National League'', 259 U.S. 200 (1922), is a case in which the U.S. Supreme Court ruled that the Sherman Antitrust Act did not apply to Major League Baseball.
Background
After the Federal League folded in 1915, most of ...
'' (1922) in which the Supreme Court ruled that
Major League Baseball
Major League Baseball (MLB) is a professional baseball organization and the oldest major professional sports league in the world. MLB is composed of 30 total teams, divided equally between the National League (NL) and the American League (AL), ...
was not
interstate commerce
The Commerce Clause describes an enumerated power listed in the United States Constitution ( Article I, Section 8, Clause 3). The clause states that the United States Congress shall have power "to regulate Commerce with foreign Nations, and amo ...
and was not subject to the antitrust law.
* ''United States v. National City Lines'' (1953), related to the
General Motors streetcar conspiracy
The General Motors streetcar conspiracy refers to the convictions of General Motors (GM) and related companies that were involved in the monopolizing of the sale of buses and supplies to National City Lines (NCL) and subsidiaries, as well as to ...
.
* ''
United States v. AT&T Co.'', which was settled in 1982 and resulted in the breakup of the company.
*''
Wilk v. American Medical Association'' (1990) Judge Getzendanner issued her opinion that the AMA had violated Section 1, but not 2, of the Sherman Act, and that it had engaged in an unlawful conspiracy in
restraint of trade
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of '' Mitchel v Reynolds'' (1711) Lord S ...
"to contain and eliminate the chiropractic profession."
* ''
United States v. Microsoft Corp.'' was settled in 2001 without the breakup of the company.
Legal application
Constitutional basis for legislation
Congress claimed power to pass the Sherman Act through its
constitutional authority to regulate interstate commerce. Therefore, federal courts only have jurisdiction to apply the Act to conduct that restrains or substantially affects either interstate commerce or trade within the District of Columbia. This requires that the plaintiff must show that the conduct occurred during the flow of interstate commerce or had an appreciable effect on some activity that occurs during interstate commerce.
Elements
A Section 1 violation has three elements:
:(1) an agreement;
:(2) which unreasonably restrains competition; and
:(3) which affects interstate commerce.
A Section 2 monopolization violation has two elements:
:(1) the possession of monopoly power in the relevant market; and
:(2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
Section 2 also bans attempted monopolization, which has the following elements:
:(1) qualifying exclusionary or anticompetitive acts designed to establish a monopoly
:(2) specific intent to monopolize; and
:(3) dangerous probability of success (actual monopolization).
Violations "per se" and violations of the "rule of reason"
Violations of the Sherman Act fall (loosely) into two categories:
* Violations "per se": these are violations that meet the strict characterization of Section 1 ("agreements, conspiracies or trusts in restraint of trade"). A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Conduct characterized as per se unlawful is that which has been found to have a "'pernicious effect on competition' or 'lack
. . . any redeeming virtue'" Such conduct "would always or almost always tend to restrict competition and decrease output." When a per se rule is applied, a civil violation of the antitrust laws is found merely by proving that the conduct occurred and that it fell within a per se category. (This must be contrasted with rule of reason analysis.) Conduct considered per se unlawful includes horizontal price-fixing, horizontal market division, and concerted refusals to deal.
* Violations of the "rule of reason": A totality of the circumstances test, asking whether the challenged practice promotes or suppresses market competition. Unlike with per se violations, intent and motive are relevant when predicting future consequences. The rule of reason is said to be the "traditional framework of analysis" to determine whether Section 1 is violated. The court analyzes "facts peculiar to the business, the history of the restraining, and the reasons why it was imposed," to determine the effect on competition in the relevant product market. A restraint violates Section 1 if it unreasonably restrains trade.
::Quick-look: A "quick look" analysis under the rule of reason may be used when "an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets," yet the violation is also not one considered illegal per se. Taking a "quick look," economic harm is presumed from the questionable nature of the conduct, and the burden is shifted to the defendant to prove harmlessness or justification. The quick-look became a popular way of disposing of cases where the conduct was in a grey area between illegality "per se" and demonstrable harmfulness under the "rule of reason".
Modern trends
Inference of conspiracy
A modern trend has increased difficulty for antitrust plaintiffs as courts have come to hold plaintiffs to increasing burdens of pleading. Under older Section 1 precedent, it was not settled how much evidence was required to show a conspiracy. For example, a conspiracy could be inferred based on parallel conduct, etc. That is, plaintiffs were only required to show that a conspiracy was conceivable. Since the 1970s, however, courts have held plaintiffs to higher standards, giving antitrust defendants an opportunity to resolve cases in their favor before significant discovery under
FRCP 12(b)(6). That is, to overcome a
motion to dismiss
In United States law, a motion is a procedural device to bring a limited, contested issue before a court for decision. It is a request to the judge (or judges) to make a decision about the case. Motions may be made at any point in administrativ ...
, plaintiffs, under ''
Bell Atlantic Corp. v. Twombly
''Bell Atlantic Corp. v. Twombly'', 550 U.S. 544 (2007), was a decision of the Supreme Court of the United States involving antitrust law and civil procedure. Authored by Justice David Souter, it established that parallel conduct, absent evidence ...
'', must plead facts consistent with
FRCP 8(a) sufficient to show that a conspiracy is plausible (and not merely conceivable or possible). This protects defendants from bearing the costs of antitrust "fishing expeditions"; however it deprives plaintiffs of perhaps their only tool to acquire evidence (discovery).
=Manipulation of market
=
Second, courts have employed more sophisticated and principled definitions of markets. Market definition is necessary, in rule of reason cases, for the plaintiff to prove a conspiracy is harmful. It is also necessary for the plaintiff to establish the market relationship between conspirators to prove their conduct is within the per se rule.
In early cases, it was easier for plaintiffs to show market relationship, or dominance, by tailoring market definition, even if it ignored fundamental principles of economics. In ''
U.S. v. Grinnell'', 384 U.S. 563 (1966), the trial judge,
Charles Wyzanski
Charles Edward Wyzanski Jr. (May 27, 1906 – September 3, 1986) was a United States federal judge, United States district judge of the United States District Court for the District of Massachusetts.
Education and career
Born in Boston, Massachu ...
, composed the market only of alarm companies with services in every state, tailoring out any local competitors; the defendant stood alone in this market, but had the court added up the entire national market, it would have had a much smaller share of the national market for alarm services that the court purportedly used. The appellate courts affirmed this finding; however, today, an appellate court would likely find this definition to be flawed. Modern courts use a more sophisticated market definition that does not permit as manipulative a definition.
Monopoly
Section 2 of the Act forbade monopoly. In Section 2 cases, the court has, again on its own initiative, drawn a distinction between
coercive
Coercion () is compelling a party to act in an involuntary manner by the use of threats, including threats to use force against a party. It involves a set of forceful actions which violate the free will of an individual in order to induce a desi ...
and innocent monopoly. The act is not meant to punish businesses that come to dominate their market passively or on their own merit, only those that intentionally dominate the market through misconduct, which generally consists of conspiratorial conduct of the kind forbidden by Section 1 of the Sherman Act, or Section 3 of the Clayton Act.
Application of the act outside pure commerce
The Act was aimed at regulating businesses. However, its application was not limited to the commercial side of business. Its prohibition of the cartel was also interpreted to make illegal many labor union activities. This is because unions were characterized as cartels as well (cartels of laborers). This persisted until 1914, when the
Clayton Act
The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipie ...
created exceptions for certain union activities.
Preemption by Section 1 of state statutes that restrain competition
To determine whether the Act preempts a state law, courts will engage in a two-step analysis, as set forth by the Supreme Court in
Rice v. Norman Williams Co.
*First, they will inquire whether the state legislation "mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or ... places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute."
Rice v. Norman Williams Co., 458 U.S. 654, 661; see also
324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) ("Our decisions reflect the principle that the federal antitrust laws pre-empt state laws authorizing or compelling private parties to engage in anticompetitive behavior.")
*Second, they will consider whether the state statute is saved from preemption by the
state action immunity doctrine
The Parker immunity doctrine is an exemption from Legal liability, liability for engaging in antitrust violations. It applies to the state when it exercises legislative authority in creating a regulation with anticompetitive effects, and to priva ...
(aka Parker immunity). In ''
California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc.
''California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc.'', 445 U.S. 97 (1980), was a United States Supreme Court case in which the Court created a two-part test for the application of the state action immunity doctrine that it had previo ...
'', 445 U.S. 97, 105 (1980), the Supreme Court established a two-part test for applying the doctrine: "First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself." Id. (citation and quotation marks omitted).
The antitrust laws allow coincident state regulation of competition. The Supreme Court enunciated the test for determining when a state statute is in irreconcilable conflict with Section 1 of the Sherman Act in
Rice v. Norman Williams Co. Different standards apply depending on whether a statute is attacked on its face or for its effects.
*A statute can be condemned on its face only when it mandates, authorizes or places irresistible pressure on private parties to engage in conduct constituting a per se violation of Section 1.
:If the statute does not mandate conduct violating a per se rule, the conduct is analyzed under the rule of reason, which requires an examination of the conduct's actual effects on competition. If unreasonable anticompetitive effects are created, the required conduct violates Section 1 and the statute is in irreconcilable conflict with the Sherman Act. Then statutory arrangement is analyzed to determine whether it qualifies as "state action" and is thereby saved from preemption.
Rice sets out guidelines to aid in preemption analysis. Preemption should not occur "simply because in a hypothetical situation a private party's compliance with the statute might cause him to violate the antitrust laws." This language suggests that preemption occurs only if economic analysis determines that the statutory requirements create "an unacceptable and unnecessary risk of anticompetitive effect," and does not occur simply because it is possible to use the statute in an anticompetitive manner. It should not mean that preemption is impossible whenever both procompetitive and anticompetitive results are conceivable. The per se rule "reflects the judgment that such cases are not sufficiently common or important to justify the time and expense necessary to identify them."
Another important, yet, in the context of Rice, ambiguous guideline regarding preemption by Section 1 is the Court's statement that a "state statute is not preempted by the federal antitrust laws simply because the state scheme might have an anticompetitive effect." The meaning of this statement is clarified by examining the three cases cited in Rice to support the statement.
:In
New Motor Vehicle Board v. Orrin W. Fox Co.
New is an adjective referring to something recently made, discovered, or created.
New or NEW may refer to:
Music
* New, singer of K-pop group The Boyz (South Korean band), The Boyz
Albums and EPs
* New (album), ''New'' (album), by Paul McCartn ...
, automobile manufacturers and retail franchisees contended that the Sherman Act preempted a statute requiring manufacturers to secure the permission of a state board before opening a new dealership if and only if a competing dealer protested. They argued that a conflict existed because the statute permitted "auto dealers to invoke state power for the purpose of restraining intrabrand competition."
:In
Exxon Corp. v. Governor of Maryland
''Exxon Corp. v. Governor of Maryland'', 437 U.S. 117 (1978), was a case in which the Supreme Court of the United States upheld a Maryland law prohibiting oil producers and refiners from operating filling station, service stations within its border ...
, oil companies challenged a state statute requiring uniform statewide gasoline prices in situations where the
Robinson-Patman Act would permit charging different prices. They reasoned that the Robinson-Patman Act is a qualification of our "more basic national policy favoring free competition" and that any state statute altering "the competitive balance that Congress struck between the Robinson-Patman and Sherman Acts" should be preempted.
:In both New Motor Vehicle and Exxon, the Court upheld the statutes and rejected the arguments presented as
::
Merely another way of stating that the . . . statute will have an anticompetitive effect. In this sense, there is a conflict between the statute and the central policy of the Sherman Act – 'our charter of economic liberty'. . . . Nevertheless, this sort of conflict cannot itself constitute a sufficient reason for invalidating the . . . statute. For if an adverse effect on competition were, in and of itself, enough to render a state statute invalid, the States' power to engage in economic regulation would be effectively destroyed.
:This indicates that not every anticompetitive effect warrants preemption. In neither Exxon nor New Motor Vehicle did the created effect constitute an antitrust violation. The Rice guideline therefore indicates that only when the effect unreasonably restrains trade, and is therefore a violation, can preemption occur.
:The third case cited to support the "anticompetitive effect" guideline is
Joseph E. Seagram & Sons v. Hostetter, in which the Court rejected a facial Sherman Act preemption challenge to a statute requiring that persons selling liquor to wholesalers affirm that the price charged was no higher than the lowest price at which sales were made anywhere in the United States during the previous month. Since the attack was a facial one, and the state law required no per se violations, no preemption could occur. The Court also rejected the possibility of preemption due to Sherman Act violations stemming from misuse of the statute. The Court stated that rather than imposing "irresistible economic pressure" on sellers to violate the Sherman Act, the statute "appears firmly anchored to the assumption that the Sherman Act will deter any attempts by the appellants to preserve their . . . price level
n one stateby conspiring to raise the prices at which liquor is sold elsewhere in the country." Thus, Seagram indicates that when conduct required by a state statute combines with other conduct that, taken together, constitutes an illegal restraint of trade, liability may be imposed for the restraint without requiring preemption of the state statute.
Rice v. Norman Williams Co. supports this misuse limitation on preemption. Rice states that while particular conduct or arrangements by private parties would be subject to per se or rule of reason analysis to determine liability, "
ere is no basis . . . for condemning the statute itself by force of the Sherman Act."
Thus, when a state requires conduct analyzed under the rule of reason, a court must carefully distinguish rule of reason analysis for preemption purposes from the analysis for liability purposes. To analyze whether preemption occurs, the court must determine whether the inevitable effects of a statutory restraint unreasonably restrain trade. If they do, preemption is warranted unless the statute passes the appropriate state action tests. But, when the statutory conduct combines with other practices in a larger conspiracy to restrain trade, or when the statute is used to violate the antitrust laws in a market in which such a use is not compelled by the state statute, the private party might be subjected to antitrust liability without preemption of the statute.
Evidence from legislative history
The Act was not intended to regulate existing state statutes regulating commerce within state borders. The House committee, in reporting the bill which was adopted without change, declared:
No attempt is made to invade the legislative authority of the several States or even to occupy doubtful grounds. No system of laws can be devised by Congress alone which would effectually protect the people of the 22 U.S. 533, 575 United States against the evils and oppression of trusts and monopolies. Congress has no authority to deal, generally, with the subject within the States, and the States have no authority to legislate in respect of commerce between the several States or with foreign nations.
See also the statement on the floor of the House by Mr. Culberson, in charge of the bill,
There is no attempt to exercise any doubtful authority on this subject, but the bill is confined strictly and alone to subjects over which, confessedly, there is no question about the legislative power of Congress. ...
And see the statement of Senator Edmunds, chairman of the Senate Judiciary Committee which reported out the bill in the form in which it passed, that in drafting that bill the committee thought that "we would frame a bill that should be clearly within our constitutional power, that we would make its definition out of terms that were well known to the law already, and would leave it to the courts in the first instance to say how far they could carry it or its particular definitions as applicable to each particular case as the occasion might arise."
Similarly Senator Hoar, a member of that committee who with Senator Edmunds was in charge of the bill, stated
Now we are dealing with an offense against interstate or international commerce, which the State cannot regulate by penal enactment, and we find the United States without any common law. The great thing that this bill does, except affording a remedy, is to extend the common-law principles, which protected fair competition in trade in old times in England, to international and interstate commerce in the United States.
Criticism
Alan Greenspan
Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
, in his essay entitled ''Antitrust'' described the Sherman Act as stifling innovation and harming society. "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." Greenspan summarized the nature of antitrust law as: "a jumble of economic irrationality and ignorance." Greenspan at that time was a disciple and friend of
Ayn Rand
Alice O'Connor (born Alisa Zinovyevna Rosenbaum;, . Most sources transliterate her given name as either ''Alisa'' or ''Alissa''. , 1905 – March 6, 1982), better known by her pen name Ayn Rand (), was a Russian-born American writer and p ...
, and he first published ''Antitrust'' in Rand's monthly publication ''The Objectivist Newsletter.'' Rand, who described herself as "a radical for capitalism", opposed antitrust law not only on economic grounds but also morally, as a violation of property rights, asserting that the "meaning and purpose" of antitrust law is "the penalizing of ability for being ability, the penalizing of success for being success, and the sacrifice of productive genius to the demands of envious mediocrity."
In 1890, Representative
William E. Mason said "trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to people of this country by the trusts which have destroyed legitimate competition and driven honest men from legitimate business enterprise." Consequently, if the primary goal of the act is to protect consumers, and consumers are protected by lower prices, the act may be harmful if it reduces
economy of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...
, a price-lowering mechanism, by breaking up big businesses. Mason put small business survival, a justice interest, on a level concomitant with the pure economic rationale of consumer interest.
Economist
Thomas DiLorenzo
Thomas James DiLorenzo (; born August 8, 1954) identifies as an adherent of the Austrian School of economics. He is a research fellow at The Independent Institute, a senior fellow of the Ludwig von Mises Institute,Faculty Directoryan, ''accessed ...
notes that Senator Sherman sponsored the 1890
William McKinley
William McKinley (January 29, 1843September 14, 1901) was the 25th president of the United States, serving from 1897 until his assassination in 1901. As a politician he led a realignment that made his Republican Party largely dominant in ...
tariff just three months after the Sherman Act, and agrees with ''
The New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' which wrote on October 1, 1890: "That so-called Anti-Trust law was passed to deceive the people and to clear the way for the enactment of this Pro-Trust law relating to the tariff." The ''Times'' went on to assert that Sherman merely supported this "humbug" of a law "in order that party organs might say...'Behold! We have attacked the trusts. The Republican Party is the enemy of all such rings.'"
Dilorenzo writes: "Protectionists did not want prices paid by consumers to fall. But they also understood that to gain political support for high tariffs they would have to assure the public that industries would not combine to increase prices to politically prohibitive levels. Support for both an antitrust law and tariff hikes would maintain high prices while avoiding the more obvious bilking of consumers."
Robert Bork
Robert Heron Bork (March 1, 1927 – December 19, 2012) was an American jurist who served as the solicitor general of the United States from 1973 to 1977. A professor at Yale Law School by occupation, he later served as a judge on the U.S. Court ...
was well known for his outspoken criticism of the antitrust regime. Another conservative legal scholar and judge,
Richard Posner
Richard Allen Posner (; born January 11, 1939) is an American jurist and legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chica ...
of the
Seventh Circuit
The United States Court of Appeals for the Seventh Circuit (in case citations, 7th Cir.) is the U.S. federal court with appellate jurisdiction over the courts in the following districts:
* Central District of Illinois
* Northern District of Ill ...
, does not condemn the entire regime, but expresses concern with the potential that it could be applied to create inefficiency, rather than to avoid inefficiency.
[Richard Posner, ''Economic Analysis of Law'', p. 295 et seq. (explaining the optimal antitrust regime from an economic point of view)] Posner further believes, along with a number of others, including Bork, that genuinely inefficient cartels and coercive monopolies, the target of the act, would be self-corrected by market forces, making the strict penalties of antitrust legislation unnecessary.
Conversely, liberal
U.S. Supreme Court
The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
Justice
William O. Douglas
William Orville Douglas (October 16, 1898January 19, 1980) was an American jurist who served as an associate justice of the Supreme Court of the United States, who was known for his strong progressive and civil libertarian views, and is often ci ...
criticized the judiciary for interpreting and enforcing the antitrust law unequally: "From the beginning it
he Sherman Acthas been applied by judges hostile to its purposes, friendly to the empire builders who wanted it emasculated... trusts that were dissolved reintegrated in new forms... It is ironic that the Sherman Act was truly effective in only one respect, and that was when it was applied to labor unions. Then the courts read it with a literalness that never appeared in their other decisions."
According to a 2018 study in the journal ''Public Choice'', "Senator John Sherman of Ohio was motivated to introduce an antitrust bill in late 1889 partly as a way of enacting revenge on his political rival, General and former Governor Russell Alger of Michigan, because Sherman believed that Alger personally had cost him the presidential nomination at the 1888 Republican national convention... Sherman was able to pursue his revenge motive by combining it with the broader Republican goals of preserving high tariffs and attacking the trusts."
See also
*
Alcoa
Alcoa Corporation (an acronym for Aluminum Company of America) is a Pittsburgh-based industrial corporation. It is the world's eighth-largest producer of aluminum. Alcoa conducts operations in 10 countries. Alcoa is a major producer of primary ...
*
American Bar Association
The American Bar Association (ABA) is a voluntary bar association of lawyers and law students, which is not specific to any jurisdiction in the United States. Founded in 1878, the ABA's most important stated activities are the setting of acad ...
*
American Tobacco Company
The American Tobacco Company was a tobacco company founded in 1890 by J. B. Duke through a merger between a number of U.S. tobacco manufacturers including Allen and Ginter and Goodwin & Company. The company was one of the original 12 members of ...
*
Antitrust
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
*
Bell System divestiture
The breakup of the Bell System was mandated on January 8, 1982, by an agreed consent decree providing that AT&T Corporation would, as had been initially proposed by AT&T, relinquish control of the Bell Operating Companies, which had provided loc ...
*
Cartel
A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals. Mos ...
*
Clayton Antitrust Act of 1914
The Clayton Antitrust Act of 1914 (, codified at , ), is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipie ...
*
DRAM price fixing
In 2002, the United States Department of Justice, under the Sherman Antitrust Act, began a probe into the activities of dynamic random-access memory (DRAM) manufacturers in response to claims by US computer makers, including Dell and Gateway, t ...
*
George H. Earle, Jr.
**
Plan of Bill Proposed by Hon. George H. Earle, Jr., Philadelphia. (1911) at Wikisource
* ''
Federal Baseball Club v. National League
''Federal Baseball Club v. National League'', 259 U.S. 200 (1922), is a case in which the U.S. Supreme Court ruled that the Sherman Antitrust Act did not apply to Major League Baseball.
Background
After the Federal League folded in 1915, most of ...
''
*
Laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
*
Lysine price-fixing conspiracy The lysine price-fixing conspiracy was an organized effort during the mid-1990s to raise the price of the animal feed additive lysine. It involved five companies that had commercialized high-tech fermentation technologies, including American compan ...
* ''
Monsanto Co. v. Spray-Rite Service Corp.''
*
National Linseed Oil Trust
*
Northern Securities Company
The Northern Securities Company was a short-lived American railroad trust formed in 1901 by E. H. Harriman, James J. Hill, J.P. Morgan and their associates. The company controlled the Northern Pacific Railway; Great Northern Railway; Chicago, ...
*
Price fixing
Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...
*
Resale price maintenance
Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), a ...
*
Sarbanes–Oxley Act
The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations.
The act, (), also known as the "Public Company Accounting Reform and Investor Protecti ...
*
Standard Oil
Standard Oil Company, Inc., was an American oil production, transportation, refining, and marketing company that operated from 1870 to 1911. At its height, Standard Oil was the largest petroleum company in the world, and its success made its co-f ...
* ''
Standard Oil Co. of New Jersey v. United States''
*
Ticketmaster
Ticketmaster Entertainment, Inc. is an American ticket sales and distribution company based in Beverly Hills, California with operations in many countries around the world. In 2010, it merged with Live Nation under the name Live Nation Entert ...
*
Tying (commerce)
Tying (informally, product tying) is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a ''tying sale'' makes the sale of one good (the ''tying good'') to the ...
* ''
United States v. Microsoft
''United States v. Microsoft Corporation'', 253 F.3d 34 (D.C. Cir. 2001), was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally ...
''
Notes and references
External links
; Official websites
U.S. Department of Justice: Antitrust DivisionU.S. Department of Justice: Antitrust Division – text of SHERMAN ANTITRUST ACT, 15 U.S.C. §§ 1–7
;Additional information
* Antitrust Division'
''Antitrust''by
Alan Greenspan
Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
* "Labor and the Sherman Act" (1940). ''
Yale Law Journal
The ''Yale Law Journal'' (YLJ), known also as the ''Yale Law Review'', is a student-run law review affiliated with the Yale Law School. Published continuously since 1891, it is the most widely known of the eight law reviews published by students ...
'' 49(3) p. 518. .
* Dr. Edward W. Younkins (February 19, 2000)
"Antitrust Laws Should Be Abolished"
{{authority control
United States federal antitrust legislation
United States federal criminal legislation
History of the petroleum industry in the United States
1890 in American law
Monopoly (economics)
1890 in American politics
Progressive Era in the United States