Monopoly

Congress intervened after abuses became widespread. In 1887, Congress, pursuant to its constitutional power to regulate interstate commerce, passed the INTERSTATE COMMERCE ACT (49 U.S.C.A. § 1 et seq.) in response to the monopolistic practices of railroad companies. Although competition among railroad companies for long-haul routes was great, it was minimal for short-haul runs. Railroad companies discriminated in the prices they charged to passengers and shippers in different localities by providing rebates to large shippers or buyers, in order to retain their long-haul business. These practices were especially harmful to farmers because they lacked the volume of traffic necessary to obtain more favorable rates. Although states attempted to regulate the railroads, they were powerless to act where interstate commerce was involved. The Interstate Commerce Act was intended to regulate shipping rates. It mandated that charges be set fairly, and it outlawed unreasonable discrimination among customers through the use of rebates or other preferential devices.

Congress soon moved ahead on another front, enacting the SHERMAN ANTI-TRUST ACT OF 1890 (15 U.S.C.A. §§ 31 et seq.). A trust was an arrangement by which stockholders in several companies transferred their shares to a set of trustees in exchange for a certificate that entitled them to a specified share of the consolidated earnings of the jointly managed companies. The trusts came to dominate a number of major industries, destroying their competitors. The Sherman Act prohibited such trusts and their anticompetitive practices. From the 1890s through 1920, the federal government used the act to break up these trusts.

The Sherman Act provides for criminal prosecution by the federal government against corporations and individuals who restrain trade, but criminal sanctions are rarely sought. The act also provides for civil remedies for private persons who start an action under it for injuries caused by monopolistic acts. The award of treble damages (the tripling of the amount of damages awarded) is authorized under the act in order to promote the interest of private persons in safeguarding a free and competitive society and to deter violators and others from future illegal acts.

The Clayton Anti-Trust Act of 1914 (15 U.S.C.A. §§ 12 et seq.) was passed as an amendment to the Sherman Act. The CLAYTON ACT specifically defined which monopolistic acts were illegal but not criminal. The act proscribed price discrimination (the sale of the same product at different prices to similarly situated buyers), exclusive-dealing contracts (sales on condition that the buyer stop dealing with the seller's competitors), corporate mergers, and interlocking directorates (the same people serving on the boards of directors of competing companies). Such practices were illegal only if, as a result, they materially reduced competition or tended to create a monopoly in trade.

The Federal Trade Commission Act of 1914 (15 U.S.C.A. §§ 41 et seq.) established the FEDERAL TRADE COMMISSION, the regulatory body that promotes free and fair competitive trade in interstate commerce through the prohibition of price-fixing arrangements, FALSE ADVERTISING, boycotts, illegal combinations of competitors, and other methods of UNFAIR COMPETITION.

Congress passed the ROBINSON-PATMAN ACT of 1936 (15 U.S.C.A. §§ 13 et seq.) to amend the Clayton Act. The act makes it unlawful for any seller engaged in commerce to directly or indirectly discriminate in the sale price charged on commodities of comparable grade and quality where the effect might injure, destroy, or prevent competition unless the seller discriminated in order to dispose of perishable or obsolete goods or to meet the equally low price of a competitor.