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On 2nd July 1890 the US Congress passed the Sherman Antitrust Act. This was the first national legislation to try and deal with price fixing deals between companies, which in theory were competitors, to the detriment of their customers. 

The act, named after its author, Senator John Sherman, an Ohio Republican and chairman of the Senate Finance Committee, declared illegal “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several [United] States, or with foreign nations.” 

Criminal penalties were provided for violators of the law, and aggrieved persons were entitled to recover three times the amount of losses suffered as a result of the violation. The Sherman Act has been amended and supplemented by several subsequent enactments. Most notable among these enactments was the Clayton Antitrust Act of 1914. 

The Purpose of the Act 

The purpose of the act was to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels. The American term anti-trust arose not because the US statutes had anything to do with ordinary trust law, but because the large American corporations used trusts to conceal the nature of their business arrangements. Elsewhere what the Americans call “Antitrust” is more commonly known as “competition law.” 

Criticism of the Sherman Antitrust Act 

The Sherman act has been a magnet for controversy. One branch of the criticism focuses on whether the Act improves competition and benefits consumers, or merely aids inefficient businesses at the expense of larger, more innovative ones. Alan Greenspan (former head of the Federal Reserve Bank) in his essay entitled “Antitrust” condemns the Sherman Act as stifling innovation and harming society. “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.” 

The Hart-Scoss-Rodino Antitrust Improvement Act (1976) made it easier for regulators to investigate mergers for antitrust violations, but few mergers were blocked during the merger boom of the 1980s. By the 1990s, still a time of large corporate mergers, the US authorities became more litigious in antitrust actions, and the Justice Department aggressively pursued the Microsoft Corporation aided and abetted by the European Union, which seems to have become even more “anti-trust” than the Americans – to the point of total stupidity in fact. But that’s an issue for a separate posting – probably in “rants and raves”. Keep your eyes open.

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