Just as the Industrial Revolution began to boom in the United States, monopolies began to take over industries. It destroyed competition and small businesses across the country, fixed product prices and limited consumers’ choices. With that, on July 2, 1890, The Sherman Antitrust Act was approved. The Act passed the Senate on April 8, 1890 with a vote 51-1, and passed the house by a unanimous vote on June 20, 1890. The Act was finally signed into law by Benjamin Harrison on July 2, 1890. The Sherman Antitrust Act would be the first federal act to outlaw monopolistic business practices. States had previously passed similar laws. However, these state laws were limited only to intrastate commerce, thus the Sherman Antitrust Act was passed. The Act was named after US Senator John Sherman of Ohio who was an expert on the regulation of commerce.
The Sherman Antitrust Act authorized the United States federal government to institute proceedings against trusts. More specifically, any combination “in the form of trust or otherwise that was in restraint of trade or commerce among the several states, or with the foreign nations” was declared illegal. Also, specific individuals and companies that have suffered losses due to trusts are permitted to sue in federal court for triple damages. This was an attempt to dissolve trusts that destroy business. Those who went against the Act are subjected to a fine of $5,000 and a year in jail.
However, there was an issue with the Sherman Antitrust Act- its vagueness. The Act was signed into law to restore competition in industry, but the Act is so loosely worded and failed to define critical terms like “‘trust,’ ‘combination,’ ‘conspiracy,’ ‘monopoly.’” Fortunately, this issue was dismantled in United States v. E.C. Knight Company in 1895. The company had control over 98 percent of all sugar refining in the U.S.. Nevertheless, it was declared that the American Sugar Refining Company did not in fact violate the Sherman Antitrust Act because the company’s control of manufacture did not necessarily constitute a control of trade. The Act was further reformed with in 1914 with the Clayton Antitrust Act, which “elaborated on the general provisions of the Sherman Antitrust Act and specified many illegal practices that either contributed to or results from monopolization,” and the Federal Trade Commission, which “provided the government with an agency that had the power to investigate possible violations of antitrust legislation and issue orders forbidding unfair competition practices.” Then in 1920, the Supreme Court of the United States applied their interpretation of the Sherman Antitrust Act with the “rule of reason.” This rule of reason instituted that not every contract or combination restraining trade is unlawful.
In all, the Sherman Antitrust Act has been successful in eliminating monopolies in United States’ industries. It has given small businesses the chance to thrive as the Act has allowed competition in industries. With competitions, consumers then have choices in what they buy, whether it is regarding a larger range of prices of goods or larger range of quality of goods. The Act especially helps lower class consumers as they are not stuck with fixed prices that may be too expensive. Although the Act targets large companies and puts restrictions on these large companies, it may be seen as beneficial as companies have the chance to focus on producing the best product.
Sources:
https://www.britannica.com/event/Sherman-Antitrust-Act
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