Sherman Act

2012-09-05 08:30:07

The Sherman Act, commonly known as the Sherman Anti-Trust Act, was the first government action taken to limit trust companies, which often monopolized certain industries, and therefore, segments of the economy. Passed in 1890, it was named after Senator John Sherman of Ohio, and made ‘‘every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations . . . illegal.’’ The Sherman Act also placed a burden of responsibility on district courts and government attorneys to investigate possible trust violations and explained the possible consequences to violators.

Changes in manufacturing practices contributed to the Act’s passage. Starting in the late nineteenth century, large corporations integrated horizontally and vertically to form oligopolies and monopolies in their respective areas of industry. Some of the trusts that emerged in the late nineteenth and early twentieth centuries were Standard Oil, American Sugar Refining Company, American Tobacco Company, and United States Steel. Despite its aims, the Sherman Act failed to regulate trusts until Theodore Roosevelt’s presidency because of adverse court rulings.

Roosevelt undertook a trust-busting campaign and overcame the Supreme Court ruling in United States v. E. C. Knight (1895), which impaired the enforcement of the Sherman Act by exempting manufacturing corporations from the Act’s authority. However, in 1904, the Supreme Court consented that Northern Securities Company, a railroad monopoly, should be dissolved because it dealt with interstate transportation. President Roosevelt continued to pursue antitrust suits, initiating more than forty antitrust proceedings. Roosevelt’s successor, William Howard Taft, also supported trustbusting. Under Taft’s presidency there were twice as many antitrust suits as during his predecessor’s terms.

The Sherman Act was also used against labor movements. By including all organizations in its original wording, the Act could be used against labor unions during strikes by claiming they unlawfully interfered with commerce. The most famous of such cases was the 1894 Pullman strike near Chicago, Illinois. Employees paid high rent for company-owned housing within the model town of Pullman and suffered from reduced wages simultaneously. Those conditions, among others, caused the workers at the Pullman Palace Car Company, a luxury sleeper rail car manufacturer, to strike. In doing so, the strikers asked the American Railway Union (ARU) to boycott Pullman cars and to disconnect them from every train and depart without them. Once the ARU agreed, the General Managers Association (GMA), formed by twenty-four railway companies to help combat the increasing power of labor unions, claimed only railway managers could determine which cars made up the trains and that they would fire any worker supporting the boycott. These actions resulted in 150,000 ARU members striking, causing rail traffic to halt, and the intervention of the federal government on the side of the GMA. United States Attorney General Richard Olney obtained an injunction against the strikers, claiming the strike prevented mail delivery and violated the Sherman Act by restricting commerce. Persuaded by Olney and fearful of violence, President Grover Cleveland authorized the use of United States marshals and federal troops to protect the trains operated by strikebreakers. Violence increased with the arrival of the troops; railroad property was attacked and burned, and fights broke out in the streets of Chicago between the authorities and strikers. The strike, which had started May 12, ended July 8 with the death of thirty-four people. The use of the injunction made striking illegal and thus in effect denied the union members freedom of expression and freedom of association.

This type of use of the Sherman Act resulted in criticism from organized labor, the People’s Party, Progressives in both parties, and liberal academics and political activists. In 1914, during Woodrow Wilson’s presidency, the Sherman Act was amended through the passage of the Clayton Antitrust Act. The latter Act banned practices such as price fixing but also exempted unions and farmers’ organizations from prosecution under antitrust laws. Since 1914, the Unites States Congress passed additional legislation aimed to strengthen the Sherman Act’s effectiveness, such as the Robinson-Patman Act of 1936 and the Hart-Scott-Rodino Antitrust Improvements Act of 1976. In June 2004, President George W. Bush signed into law the Criminal Antitrust Penalty Enhancement and Reform Act, which increased the maximum Sherman Act penalties for corporations to $100 million, for individuals to $1 million, and for jail terms to ten years. This most recent act also heightened incentives for corporations to self-report criminal activity and aims to enhance the antimonopoly policy.


References and Further Reading

  • Chandler, Alfred D. Jr. The Visible Hand: The Managerial Revolution in American Business. Cambridge, Mass.: The Belknap Press of Harvard University Press, 1977.
  • ‘‘Clayton Anti-Trust Act of 1914.’’ United States Statutes at Large (63rd Congress, Session II, Chapter 323), pp. 730– 740 and in Online Serial Essential Documents in American History, Essential Documents 1492–Present (1997).
  • Johnsen, Julia E. Trade Unions and the Anti-Trust Laws, The Reference Shelf, Vol. 13, No. 10. New York: H.W. Wilson Company, 1940.
  • Labor Law. Application of Sherman Anti-Trust Act to Sit- Down Strikes, Virginia Law Review, 26 (February, 1940): 4: 518–519.
  • Painter, Nell Irvin. Standing at Armageddon: The United States 1877–1919. New York: W.W. Norton & Company, 1987.
  • Pate, R. Hewitt. ‘‘Assistant Attorney General for Antitrust, R. Hewitt Pate, Issues Statement on Enactment of Antitrust Criminal Penalty Enhancement and Reform Act of 2004,’’, (June 23, 2004).
  • ‘‘Sherman Anti-Trust Act of 1890.’’ United States Statutes at Large (51st Congress, Session I, Chapter 647), pp. 209–210 and in Online Serial Essential Documents in American History, Essential Documents 1492–Present (1997).
  • Taft, William Howard. The Anti-Trust Act and the Supreme Court. New York: Harper & Brothers Publishers, 1914.