Sherman Antitrust Act

Even as Congress created regulatory commissions, the alternative of direct legislative action persisted. On matters of economic competition, Congress chose not to delegate its authority to an administrative body but to enact a regulatory statute, the Sherman Antitrust Act. As with the ICC, the passage of the Sherman Act illustrates the ambivalence with which "Americans have regarded competition, cooperation, and corporate growth," as well as their perhaps too great a confidence in the powers of legislation to produce changed behavior. ³⁰

Monopoly power emerged as a genuine threat to economic order in the late nineteenth century. Fierce competition among maturing industries created pinched profit margins that prompted corporate managers to consolidate control over greater portions of the market. To do so, they turned to new legal devices--first the trust and, in the 1890s, the holding company--that permitted a single company to control the pricing and market structure of several "foreign" corporations. The new national corporate structure of the economy depended heavily for its growth on law and legal institutions.

The Sherman Antitrust Act, named after Senator John Sherman of Ohio, was passed amid great public uproar over corporate consolidation. Antimonopoly sentiment had a long history in the United States and the Sherman Act was merely its latest manifestation. It declared that "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, is hereby declared illegal." ³¹ The act created no administrative structure, as had the Interstate Commerce Act; instead, the task of enforcement fell to the Department of Justice and the federal courts. Violators were susceptible to fine, imprisonment, and, in the case of corporations, dissolution.

The key provisions of the act were ambiguous at best and the policy sentiments underlying it at odds with the promotional role (the release of creative economic energy) that Congress was pursuing elsewhere. In the highly competitive atmosphere of the late nineteenth century, all businesses had to restrict trade and consolidate the marketplace if they expected to remain viable. Despite the wording, the framers of the statute did not intend to ban all combinations, revealing that "both fear of competition and fear for competition were important factors in bringing about" the Sherman Act. ³²

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The statute's vague wording simply captured the contradiction of a public policy that sought both to promote and to regulate in ways that did not always complement one another.

The Sherman Act was problematic in another way. While the act covered transportation of goods across state lines, there was at least reasonable debate about whether manufacturing (the production of goods, even by a corporation that operated in several states) was encompassed within the statute and the commerce clause of the Constitution. Manufacturing had traditionally been treated as a local enterprise, the control of which properly belonged to the states. But the rise of an industrial market economy of transcontinental proportions posed difficult regulatory problems for the states.

The overwhelming support for the measure, which passed the Senate by a vote of fifty-two to one and by voice vote in the House of Representatives, suggests that critics thought that the Supreme Court would nullify it. In any case, in a pattern repeated throughout the legal history of the United States, members of Congress were willing, given the diverse political pressures that played on them, to permit the federal courts to pour meaning into the hollow phrases of the nation's first--and to this day most important--antitrust act.

In the Progressive period, Congress (this time at the urging of Woodrow Wilson) sought to infuse greater regulation into antitrust policies. The Clayton Antitrust Act of 1914 added the following phrase to the prohibited business practices: "where the effect may be to substantially lessen competition or tend to create a monopoly in any line of commerce." ³³ The act also excluded labor unions, which the federal courts had held to be included under the Sherman Act. The additional wording, however, handed greater rather than less discretion to the courts. In the same year, Congress also created the Federal Trade Commission (FTC) with broad powers to investigate companies and to issue "cease and desist" orders against unfair trade practices that violated antitrust law. These measures, however, depended for effective enforcement, like the ICC, on a bipartisan board of commissioners whose orders were subject to review in federal courts.

Date: 2015-01-29; view: 712