Sherman Antitrust Act (1890)

An important piece of legislation that had a major impact on United States history was the Sherman Antitrust Act of 1890. In the period after the Civil War, the United States entered a period of rapid industrialization. This era saw the rise of big business, powerful companies that became outrageously powerful. They controlled a large portion of the country’s economy. They influenced the government. Big business refers to the companies and the wealthy industrialists of this period that owned them, including John D. Rockefeller, who owned the Standard Oil Company, Andrew Carnegie, who owned Carnegie Steel and J. P. Morgan, who ran the financial firm J. P. Morgan and Company.

Big business sought to maximize their profits by eliminating competition. By buying up their competitors or by driving them out of business, it allowed them to increase profits by artificially driving up their prices. Many businesses also engaged in other unfair business practices to maximize profits, such as price fixing and colluding. They also used creative forms of business to create monopolies, such as holding companies and trusts. By the late 1880s, trusts created monopolies in several industries. The larger ones included the Sugar Trust, the Whisky Trust, the Cordage Trust (rope and twine), the Beef Trust, the Tobacco Trust, John D. Rockefeller’s Oil Trust (Standard Oil of New Jersey) and J. P. Morgan’s Steel Trust (U.S. Steel Corporation). These monopolies resulted in huge profits for the companies, but hurt American consumers.

In 1890, Ohio Senator John Sherman introduced a bill giving the federal government the power to investigate trusts and punish businesses that were limited competition through unfair business practices. This was during the beginnings of the Progressive Era, a time period where reformers sought to tackle problems in American society, mostly tied to changes made to America by the Industrial Revolution. Progressive reformers sought to get the government to intervene by creating limits on the work day and work week, create a minimum wage, impose safety standards, outlaw child labor, etc. As part of this, public demand that something be done about the unchecked power of big business was widespread. The bill was passed by the House and the Senate and signed into law by Republican President Benjamin Harrison. This law is a departure from the laissez-faire philosophy followed by the government to this point. The government was threatening to use its power to regulate businesses.

The Sherman Antitrust Act eventually caused the federal government to regulate trusts and prevent anti-competitive businesses practices. However, the law was not immediately successful. Congress had trouble enforcing the law. When the government went after the Sugar Trust, the case eventually reached the Supreme Court in United States v. E. C. Knight Co. (1895). The Court said that the federal government had no jurisdiction because it was only empowered by the Constitution to oversee interstate trade, not all business (in this case, manufacturing). This caused a period where the Sherman Antitrust Act wasn’t enforced.

When Republican President Theodore Roosevelt was elevated to the Presidency (when William McKinley was assassinated), he sought to enforce the Sherman Antitrust Act. Roosevelt felt that big business was creating a situation in America that could cause massive social upheaval, perhaps even a revolution. TR ordered the Attorney General to prosecute the Northern Securities Company for violating the Act in 1904.

Northern Securities was a trust company that created a monopoly on the western railroads. Powerful financier J. P. Morgan–so wealthy that he bailed out the U. S. government twice–was one of the businessmen behind the company. Many people considered him the most powerful man in America, even more powerful than the President.

The case reached the Supreme Court, who reversed the precedent set in the Sugar Trust case. This time, it upheld the government’s ability to use the Sherman Antitrust Act and setting a precedent that the federal government could limit monopolies. Northern Securities was ordered to break up into competing companies. More importantly, the case was a warning shot to big business that TR would go after big business, earning him the moniker “trustbuster.”

Government’s involvement in the economy to protect consumers has continued. The Clayton Antitrust Act (1914) was passed under President Woodrow Wilson to strengthen regulations against monopolies. To enforce it, the Federal Trade Commission was created by the Federal Trade Commission Act. This federal agency investigates and prosecutes business in violation of antitrust laws.

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