Sherman Antitrust Act

By the late nineteenth century businesses producing refined oil, sugar, or providing services such as railroad transportation fought for market dominance by agreeing to become trusts. Both the government and public were becoming alarmed at the rapid growth of trusts and their power to limit competition. Limited competition results in higher prices, reduced availability, and lowered quality. Methods used to hinder competition included forcing rivals out of business through price fixing; buying out competitors; and, forcing customers to sign long-term contracts with one trust.

Congress passed the Sherman Antitrust Act in 1890 as the first federal legislation to prohibit trusts. The act was named after Senator John Sherman of Ohio. The act passed in the Senate on April 8, 1890, by a vote of 51 to 1 and in the House on June 20, 1890, by a vote of 242 to 0. The vote illustrated the high level of concern over trusts among lawmakers. President Benjamin Harrison (1833–1901; served 1889–93) signed the act into law on July 2, 1890.

The Sherman Antitrust Act allowed the federal government, under direction of the attorney general, to prosecute trusts and dissolve them (break them up). Any trust found to restrain trade—hamper or eliminate competition—was illegal. The original act allowed any person forming such an illegal trust to be subject to fines of up to $5,000 and a year in jail. Businesses as well as individuals who suffered economic losses due to trust actions could sue the trust for three times as much as they lost.

The following primary source is the entire Sherman Antitrust Act as approved and signed into law in 1890. Sections 1 and 2 prohibit the formation of trusts, monopolies, or conspiracy to restrain interstate (between states) or foreign trade, trade meaning competition. Section 3 is worded exactly as Section 1 and merely adds that restraint of trade is also illegal in territories of the United States and in the District of Columbia. Sections 4, 5, and 6 define legal procedures to be followed when an individual or company is suspected of restraint of trade. Section 7 allows for victims to recover damages. Section 8 defines the terms "person" and "persons" found in the act.