What was the purpose of the Sherman Antitrust Act of 1890?
Named for Senator John Sherman, chairman of the Senate Finance Committee, the Sherman Antitrust Act of 1890 was intended to protect the public from avaricious business practices designed to limit or eliminate competition in the marketplace.
Antipathy towards monopolies, especially monopolies authorized by government, was integral to the movement of Britain’s North American colonies towards independence. The Boston Tea Party had its origins in hostility among colonists towards the British Crown’s imposition of a monopoly on trade in tea. Article I of the Constitution, which established the legislative branch of the federal government, includes provisions intended to minimize the prospects of government-sponsored or imposed monopolies. It did this by vesting with Congress the authority to regulate interstate commerce. Additionally, Section 9 of Article I includes the following provision clearly intended to prevent the government from choosing favorites among business entities:
“No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.”
Now, provisions in the Constitution intended to address the regulation of business are vague. The document does not specifically prohibit the establishment of monopolies. It is well-known, however, that prominent anti-federalists like Thomas Jefferson had argued for more forceful language to be included in the Constitution specifically prohibiting restraints on competition. The final draft of the Constitution reflects compromise between federalists and anti-federalists, although it would require the subsequent passage of a series of amendments, the Bill of Rights, to assuage fears on the part of the anti-federalists regarding the concentration of excessive power in the federal government.
As the American economy grew, especially with the advent of the Industrial Revolution in the newly established United States, certain businesses, including Standard Oil, began to accrue greater and greater shares of the marketplace until they remained the sole, or one of a few, suppliers available to the public for specific goods. The emergence of such monopolies and oligopolies, then, led to passage of the Sherman Antitrust Act, which expressly prohibited restraint of competition.
In the late 1800s, there was a big growth in the number of big businesses in the United States. By using various techniques, consumers saw their choices of competitors shrinking by 1890. Businesses began to reduce competition by merging competing companies in a process known as horizontal integration. In some industries, monopolies existed through a process called vertical integration where one company controlled every aspect of an industry. Reducing competition is good for business owners, but it usually isn’t good for consumers.
As more and more business mergers occurred, the government passed the Sherman Antitrust Act in 1890. This law was designed to make it much more difficult for business mergers to occur and for monopolies to form. However, it was so poorly written, the courts wouldn’t enforce the law, in part, because the courts weren’t sure what the law was actually saying or requiring. As a result, this law was very ineffective. Many business mergers occurred after this law was passed despite its intent to prevent these mergers from occurring.
The purpose of the Sherman Antitrust Act was to destroy monopolies that were using their power to harm society.
In the late 1800s, the US economy had come to be dominated by huge companies that controlled the vast majority of certain markets. People felt that the companies were using their monopoly power to hurt society. The companies did so by forcing people to pay excessively high prices for the goods or services they provided. Because of this, there was pressure on the government to break up monopolies, which is what the purpose of the Sherman Act was.