Background of the Sherman Antitrust Act You Must Know

After the Civil War had ended and reconstruction began, the Federal Government of the United States began to realize simply that business practices, both large and small, may be threatened by a lack of regulation. The first attempt to curtail the effects of a purely unregulated market occurred in 1887 with the passage of the Interstate Commerce Act, which regulated trade between states.

Three years later Senator John Sherman, the brother of the famous Civil War general of the North, was able to pass what would become known as the Sherman Antitrust Act, in an effort to increase competition within United States industry.

Senator Sherman, who was considered a financial authority of his day, had already begun to recognize the diminishing capacity with the US industry sector to sustain fair competitive trade. More and more companies were seeking to vertically integrate within their business models, either through colluding with fellow industry leaders or making an attempt to control their industry sector as a whole from top to bottom. These actions ran against what is the American form of capitalistic free trade.

The free market is defined by many sellers and buyers able to enter into the market. Such competitiveness would thereby ensure a lower price for a good to a buyer. Sherman recognized that by the forming of monopolies within certain sectors, whether by an individual or by companies working in unison, companies could control the price of their goods, and thus, limit the options for an everyday consumer.

With technology advancing at a rapid rate there was both many more goods consumers could purchase and many more sectors that could be manipulated. While laws governing these actions were present, they were not always consistent from state to state nor were they commonly known. The public and their elected legislators did begin to recognize this threat to the American system of free market trade. The passage of the Sherman Antitrust Act sought to correct this market imbalance through government regulation and judicial enforcement ensuring a level of protection to the consumer.

Within the first to sections of the Sherman Antitrust Act, passed in 1890, the government would eliminate the largest threats to the free market. The first section, Section 1, would go onto explain the how relationships through contracts, both oral and written, could threaten the free market and would therefore be deemed illegal. Section 2 goes onto outline that not all market control just happens between two or more business entities, but a person or company can seek to control a market on a whole creating a monopoly, which is also illegal.

The Sherman Antitrust Act would lay the legal foundation of what it would take to break up monopolies within the United States. Unlike the Interstate Commerce Law, the Sherman Act also included threats to US business practices by individuals outside American borders. Foreign interests could also disrupt fair business practices and had to be taken into account when forming the law. While his brother was the famous Civil War general, Senator John Sherman was a financial general within the United States Senate creating and passing one of the central business laws which is still readily referenced and applied today.