The Sherman Antitrust Act, passed on July 2, 1890, was the first federal law to prohibit monopolistic business practices.
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- What was the purpose of the Sherman Antitrust Act of 1890?
- What did the Sherman Antitrust Act strike down?
- What is significant about the Sherman Antitrust Act questionnaire of 1890?
- Why Did the Sherman Antitrust Act Quiz Fail?
The Sherman Antitrust Act of 1890 was the first measure to prohibit trusts passed by the United States Congress. It was named for Senator John Sherman of Ohio, who was Chairman of the Senate Treasury Committee and Secretary of the Treasury under President Hayes.
Several states had enacted similar laws, but limited to domestic companies. The Sherman Antitrust Act relied on the constitutional power of Congress to regulate interstate commerce. (For more background, see earlier historical documents: the Constitution, Gibbons v. Ogden, and the Interstate Commerce Act.)
The Sherman Antitrust Act was passed unanimously by the Senate on April 8, 1890, by a vote of 51 to 1, and by the House of Representatives on June 20, 1890, by a vote of 242 to 0. President Benjamin Harrison signed the Act into law. law on July 2, 1890.
A trust is an arrangement whereby shareholders of multiple companies transfer their shares to a single set of trustees. In exchange, the shareholders receive a certificate that entitles them to a certain participation in the consolidated results of the joint management companies.
By the end of the 19th century, trusts dominated a number of important industries, destroying competition. For example, on January 2, 1882, the Standard Oil Trust was formed. Standard Oil lawyer Samuel Dodd first came up with the idea of a trust. A board of trustees was established and all standard properties were placed in its hands. Each shareholder received 20 trust certificates for each Standard Oil share. All profits from the divisions were sent to the nine trustees, who set the dividends. The nine trustees elected the directors and officers of each division. This allowed Standard Oil to function as a monopoly as the nine trustees ran all the component companies.
The Sherman Antitrust Act authorized the federal government to bring proceedings against trusts to dissolve them. Any combination "in the form of a trust or otherwise restricting trade or commerce between the several states or with foreign nations" was declared illegal. People who formed such combinations were fined $5,000 and imprisoned for one year. Individuals and corporations suffering losses as a result of the trusts could sue in federal court for tripled damages.
The law was intended to restore competition, but it was vaguely worded and did not define such critical terms as "trust," "association," "conspiracy," and "monopoly." Five years later, the Supreme Court struck down the law in United States v. E. C. Knight Company (1895). The court ruled that the American Sugar Refining Company, one of the defendants in the case, did not violate the law despite the fact that the company controlled about 98% of all sugar refineries in the United States. The Supreme Court reasoned that the company's manufacturing control was not a commercial control.
You. C. Knightruling appeared to end all government regulation of trusts. Nonetheless, the Sherman Antitrust Act was used with notable success during President Theodore Roosevelt's "trust-busting" campaigns at the turn of the century. In 1904, the Supreme Court upheld the government's action to dissolve the Northern Securities Company in Northern Securities Co. v. USA. In 1911, President Taft had used the law against the Standard Oil Company and the American Tobacco Company. In another attempt to ensure a competitive free-market system, in the late 1990s, the federal government used the then-more than 100-year-old Sherman Anti-Trust Act against software giant Microsoft.
Congress passed the first antitrust law, the Sherman Act, in 1890 as a "comprehensive charter of economic liberty designed to preserve free and unrestricted competition as a rule of commerce." In 1914, Congress passed two other antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. With some revisions, these are the top three federal antitrust laws still in effect today.
Antitrust laws prohibit illegal mergers and business practices in general, leaving it up to courts to determine which are illegal based on the facts of each individual case. Courts have applied antitrust laws to changing markets, from the days of horse-drawn carriages to today's digital age. Yet antitrust laws have had the same basic goal for more than 100 years: to protect the competitive process for the benefit of consumers and to ensure that there are strong incentives for businesses to operate efficiently while keeping prices low and quality high. .
Here you will find an overview of the three fundamental laws of federal antitrust law.
The Sherman Act prohibits "any treaty, combination, or conspiracy to restrain commerce" and any "monopoly, attempted monopoly, or conspiracy or combination to monopolize." The Supreme Court ruled long ago that the Sherman Act does not prohibit all trade restrictions, only those that are unreasonable. For example, an agreement between two people to form a partnership restricts trade in some way, but it must not do so unreasonably and therefore may be lawful under antitrust laws. On the other hand, certain actions are considered so anti-competitive that they are almost always illegal. These include simple agreements between competing individuals or companies to fix prices, share markets, or rig bids. These actions are violations "per se" of the Sherman Act; that is, there is no defense or justification.
The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil in nature, the Sherman Act is also a criminal law and violators can be prosecuted by the Department of Justice for individuals and businesses. Criminal proceedings are often limited to intentional and clear violations, e.g. B. when competitors fix prices or rig bids. The Sherman Act carries penalties of up to $100 million for a corporation and $1 million for an individual, and up to 10 years in prison. Under federal law, the maximum penalty can be increased to twice the amount the conspirators made from the illegal acts, or twice the money the victims of the crime lost, if either amount exceeds $100 million.
The Federal Trade Commission Act prohibits "unfair competitive practices" and "unfair or deceptive acts or practices." The Supreme Court has ruled that all violations of the Sherman Act also violate the FTC statute. Therefore, while the FTC does not technically enforce the Sherman Act, it can bring lawsuits under the FTC Act against the same types of activities that violate the Sherman Act. The FTC law also addresses other practices that are anticompetitive but may not fit neatly into the categories of conduct formally prohibited by the Sherman Act. Only the FTC brings cases under the FTC Act.
The Clayton Act addresses certain practices that the Sherman Act does not clearly prohibit, such as: B. Mergers and interdependence of boards (ie, the same person making business decisions for competing companies). Section 7 of the Clayton Law prohibits mergers and acquisitions where the effect "is likely to significantly reduce competition or tend to create a monopoly." The Clayton Act, as modified by the Robinson-Patman Act of 1936, also prohibits certain discriminatory prices, services, and concessions in commerce between merchants. The Clayton Act was amended again in 1976 by the Hart-Scott-Rodino Antitrust Improvements Act to require companies planning major mergers or acquisitions to notify the government in advance of their plans. The Clayton Act also empowers private parties to claim treble damages when they have been injured by conduct that violates the Sherman Act or the Clayton Act and obtain a court order prohibiting future anticompetitive practice.
In addition to these federal laws, most states have antitrust laws that are enforced by attorneys general or private prosecutors. Many of these laws are based on federal antitrust laws.
What was the purpose of the Sherman Antitrust Act of 1890?
an actProtect trade and trade from illegal restrictions and monopolies..
What did the Sherman Antitrust Act strike down?
More than a decade after its passage, the Sherman Act was rarely applied against industrial monopolies, and then it was unsuccessful, mainly because ofnarrow judicial interpretation of what constitutes commerce or commerce between states.
What is significant about the Sherman Antitrust Act questionnaire of 1890?
-1890 the Sherman Antitrust Act was passedthe first major law passed to address repressive business practices related to oppressive cartels and monopolies. The Sherman Antitrust Act is a federal law that prohibits any treaty, trust, or conspiracy to restrict interstate or foreign commerce.
Why Did the Sherman Antitrust Act Quiz Fail?
The law prohibited treaties, mergers, and conspiracies to restrict trade. The law was ineffective due tointentionally vague language from Congress, which passed it to appease the public rather than truly limit corporate power.
FAQs
What did critics of the Sherman Antitrust Act argue? ›
Its critics pointed out that it failed to define such key terms as "combination," "conspiracy," "monopoly" and "trust." Also working against it were narrow judicial interpretations as to what constituted trade or commerce among states.
Which of the following is the main criticism of the Sherman Act? ›The Sherman Act has been criticized to be too vague. Which of the following acts of Congress declared restraint of trade illegal and declared any attempt at monopolizing unlawful?
What was the major importance of the Sherman Anti Trust Act of 1890? ›What is the purpose of the Sherman Antitrust Act? The Sherman Antitrust Act was enacted in 1890 to curtail combinations of power that interfere with trade and reduce economic competition. It outlaws both formal cartels and attempts to monopolize any part of commerce in the United States.
What was the weakness of the 1890 Sherman anti trust law? ›The most important weakness of the Sherman Antitrust Act was that: a. the Supreme Court refused to enforce it.
What was the Sherman Antitrust Act against? ›The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize." Long ago, the Supreme Court decided that the Sherman Act does not prohibit every restraint of trade, only those that are ...
How was the Sherman Antitrust Act violated? ›The most common violations of the Sherman Act and the violations most likely to be prosecuted criminally are price fixing, bid rigging, and market allocation among competitors (commonly described as “horizontal agreements”).
What is significant about the Sherman Antitrust Act of 1890 quizlet? ›- The major purpose of the Sherman Antitrust Act was to prohibit monopolies and sustain competition so as to protect companies from each other and to protect consumers from unfair business practices.
What was a weakness of the Sherman Antitrust Act quizlet? ›The most important weakness of the Sherman Antitrust Act was that: it wasn't specific about the types of acts which would violate the law. The primary purpose of antitrust legislation is to: protect the competitiveness of U.S. business.
What was the Sherman Antitrust Act and why was it not successful quizlet? ›A federal law that committed the American government to opposing monopolies. The law prohibited contracts, combinations and conspiracies in restraint of trade. The act was ineffective due to intentionally vague language by Congress who passed it to placate the public rather then really restrain corporate power.
Was the Sherman Antitrust Act good or bad? ›The federal government utilized this legislation throughout the late 1800s and the 1900s to break up monopolies, including that of the Standard Oil Company in 1911. The Sherman Anti-Trust Act resulted from the increased unhappiness of many United States citizens.
How successful was the Sherman Antitrust Act quizlet? ›
How successful was the Sherman Antitrust Act in accomplishing it's goals? not very sucessful vecause the act didn't clearly define the terms of trust. and the supreme court threw out 7 of the 8 cases the government brought against trusts.
What was the biggest problem with the Sherman Antitrust Act? ›The act was designed to restore competition, but it was loosely worded and failed to define such critical terms as "trust," "combination," "conspiracy," and "monopoly." Five years later, the Supreme Court dismantled the act in United States v. E. C. Knight Company (1895).
What is the problem with antitrust laws? ›Antitrust Laws Are Against Innovation
The problem with antitrust laws is that it prevents the company from growing beyond a certain point. Hence, the company with the maximum resources, which can invest the maximum amount, is prohibited from growing. As a result, technological development stagnates.
Sherman Antitrust Act of 1890 is a federal statute which prohibits activities that restrict interstate commerce and competition in the marketplace. It outlaws any contract, conspiracy, or combination of business interests in restraint of foreign or interstate trade. The Sherman Act is codified in 15 U.S.C.
What companies have violated the Sherman Act? ›| Defendant (FY) | Product |
|---|---|
| Samsung Electronics Company, Ltd. Samsung Semiconductor, Inc. (2006) | DRAM |
| Korean Air Lines Co., Ltd. (2007) | Air Transportation (Cargo & Passenger) |
| British Airways PLC (2007) | Air Transportation (Cargo & Passenger) |
It made monopolization and other contracts that unreasonably restrain trade illegal. It is one of three core federal antitrust laws, along with the Clayton Antitrust Act and the Federal Trade Commission Act. The Sherman Act was named for Sen. John Sherman of Ohio, who was considered an expert on regulating commerce.
How did Americans feel about the Sherman Antitrust Act? ›The federal government utilized this legislation throughout the late 1800s and the 1900s to break up monopolies, including that of the Standard Oil Company in 1911. The Sherman Anti-Trust Act resulted from the increased unhappiness of many United States citizens.
What are the 3 controversial business practices addressed by antitrust policy explain? ›Through both civil and criminal enforcement, antitrust laws seek to stop price and bid rigging, monopolization, and anti-competitive mergers and acquisitions.
What is the Sherman Antitrust Act easy definition? ›The Sherman Antitrust Act of 1890 (26 Stat. 209, 15 U.S.C. §§ 1–7) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author.