Blog Post #11

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 Sherman Anti-Trust Act

In 1890, Senator John Sherman of Ohio successfully proposed and passed a law that prohibited trusts, monopolies, and cartels from assuming control over the general market, this became known as the Sherman Anti-Trust Act. The main objective of this law was to safe guard the process of competition for the benefit of consumers. It made sure there were strong motives for businesses to operate efficiently, it kept prices down, and it kept quality up. This is obviously a monumentally important law because it banned businesses from merging to form a monopoly that could dictate, control, and manipulate prices uninterrupted with customers at the will of the businesses. 

“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 declared to be illegal.” -Sherman Anti-Trust Act
The need for such an act came from the growing public uproar over large corporations such as Standard Oil and the American Railway Union who were unfairly monopolizing certain industries. Customers were slammed with high prices on essential goods while competitors were shut down because large corporations intentionally kept them out of the market. By 1882, Standard Oil had agreements with forty companies which formed into the Standard Oil Trust which was the first large trust in the United States. It wouldn't be until 1911 that the U.S. Supreme Court would conclude that Standard Oil was in violation of the Sherman Anti-Trust Act in the case, Standard Oil New Jersey v. United States. After the court's ruling, Standard Oil was forced to separate into smaller companies. 

The names of those companies included:
  • American Standard
  • Chevron 
  • Esso
  • Exxon
  • Mobil
In 1914, the Sherman Anti-trust Act was amended by the Clayton Anti-Trust Act which addressed certain practices that the Sherman Act did not ban and closed loopholes created by the latter. Some acts that the Clayton Anti-Trust Act prohibited included:
  • Anticompetitive mergers
  • Predatory and discriminatory pricing 
  • Operations intended to lead to the formation of monopolies 
  • Appointing the same person to make business decisions for competing companies 

Penalties for Violating The Sherman Anti-Trust Act
Those who are found guilty of violating the Sherman Anti-Trust Act face hefty punishments. It is a criminal offense that can have prison sentences up to 10 years. You may also face massive fines, so much as up to $1 million for an individual and up to $100 million for a corporation or business. In more extreme cases, heftier fines can be presented either worth twice the amount the offender gained from this illegal act or twice the mount lost by the victims.

The Sherman Anti-Trust Act in Action
In 1984, this telephone service monopoly was forced to breakup into seven regional companies. It took roughly 7 years before a verdict could be reached in the trial to have them split up. After the breakup, consumers had access to more choices and lower prices for long distant service and phones. Today, only three of the companies that formed after the split survived. They are AT&T, Qwest, and Verizon.


In 1998, antitrust charges were filed against Microsoft to determine whether the company's bundling of additional programs such as Windows and Explorer constituted monopolistic actions. The lawsuit was brought on when their top competitor, Netscape collapsed because Microsoft began giving away its browser software for free. Microsoft was found guilty and was forced to divide and create two separate entities. One would be the operating system and the second the software arm. The company would end up losing roughly $70 billion in market value as a result.
















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