Anti-trust law aims at ensuring fair competition in business. The law proceeds from the position that the presence of free trade enables businesses to thrive, and benefits the consumers and the economy. In its quest, the anti-trust law has had far reaching effects on business practices and their organization especially in the United States. To this end, the law has evolved measures to proscribe monopolization and restraints of trade by businesses among other practices.
Reason for creating the law
The Sherman Anti-trust Act was the first piece of legislation to be enacted by the United States Congress to proscribe trusts and other non-competitive practices. The enactment of the legislation was informed by the increasing trend of unfair competition and a need to protect consumers from monopolies and cartels. For instance, in 1882,attorney Samuel Dodd acting for Standard Oil Trust set up a trust to which all the properties of the company were placed and with each stockholder receiving 20 trust certificates for each of the share held. All profits accruing form the component of the firm were sent to nine trustees in the company who set the dividends to be paid as well as exercising the power of electing directors and officers of the component companies. This practice had the effect of causing Standard Oil to operate as a monopoly since the nine trustees essentially ran all the component companies.
The Sherman Act was therefore enacted to cure such practices so as to ensure that consumers were protected by getting the best services in a free market where competition is not muzzled. Further, some states that had promulgated similar laws that proscribed such practices but the same pieces of legislation did not have a legal force throughout the nation as to regulate interstate commerce. The author of the Act explained the purport of the Sherman Act as meant to protect consumers by preventing arrangements that were designed or tended to advance the cost of goods to consumers.
Benefit of creating the law
In order to ascertain the benefits of creating the law, it is necessary to examine the intent of the law and explore whether the Act has achieved its intended purpose. Essentially, the Sherman Act empowered the Federal Government to file legal proceedings against trusts in a bid to dissolve such trusts by illegalizing any combination in the form of trust that tended to restrain trade or commerce among a number of states or even with other nations. The Supreme Court decision in Spectrum Sports, Inc. v McQuillan is illustrative of the purpose of the Sherman Act. The Court held that the purpose of the Act was not to protect businesses from the working of the market but to protect the public from market failure. In a nutshell, the law seeks to prevent artificial fixing of prices through trade restrictions. However, it must be borne in mind that monopoly that arises purely on merit and without any dubious dealings is perfectly within the law and would not found an action as against the Act.
The benefit of the Act can be gleaned from the purpose for which the Act was enacted. The Act has protected ultimate consumers from high prices that would otherwise result from cartels and monopolization of trade. More so, the law has opened up the market allowing fair competition and thus enabling the setting up of several businesses which contribute to an improved economy through payment of taxes. Equally important is the fact that, other honest competitors are able to set shop and thus benefit from the large market, a feat that would otherwise be impossible to achieve as the monopolies would tend to buy them out causing them to go bankrupt so as to continue dominating the market.
Who will be happy for the law?
It follows that those whom the law benefits are surely those that will be happy about the law. Consequently, the consumers who enjoy lower prices for goods and other competitors in business are a happy lot as they are able to transact. The lower prices for consumers enable them to increase their purchasing power as well as engage in other essential affairs besides say, travelling by air.
Who will be sad for the law?
On an equal footing, by proscribing unfair competition practices, the law acts to the detriment of the interests of monopolies, cartels and dominant players in the market. The monopolies would like to enjoy the market alone so as to derive the maximum benefit without the rigors wrought by competition from similar businesses. Needless to say, such businesses are thus likely to be unappreciative of such a law.
Who created this law?
The Sherman Anti-trust Act was created in the year 1890 and forms the basis of anti-trust litigation in the United States. The Act is named after its main author Senator John Sherman who was a Republican from the State of Ohio and the then chairman of the Senate Finance Committee. The Act was ratified in the Senate and subsequent in the House of Representatives and then assented into law by President Benjamin Harrison on the 2nd of July, 1890.
The Clayton Anti-Trust Act of 1914
The Clayton Act amended the Sherman act by expanding on the general prohibitions embodied by the Sherman Act which lays the foundation n of anti-trust law in the United States. The provision prohibits against contracts or arrangements or conspiracies that tend to be in restraint of trade while section 2 of the same Act proscribes monopolization, or any attempts and conspiracies to do so. The Clayton Act supplemented both the substance and procedure of the Sherman Act by plugging the gaps left gaping by the erstwhile Act. After the enactment of the Sherman Act, courts in the United States interpreted the provisions of the law on cartels as applying against trade unions thus presenting an arduous task for workers who had to forge themselves in a bid to cushion against the unequal bargaining power. In a bid to circumvent this provision, the businesses forged mergers instead of cartels thus benefiting from the market power that they would still have enjoyed. The legislation was tabled in the House of Representatives by Alabama Democrat Henry De Lamar Clayton Jr. after whom the Act is named and later in the Senate before becoming law in October 1914. In particular, the Clayton Act sought to nip anti-competitive practices in the bud by outlining a number of issues that were not effectively captured by the existing law. Section 2 of the Act proscribed price discrimination amongst various buyers where the same tended to lessen competition of create a monopoly in a line of commerce. Section 7 of the Act outlawed mergers and acquisitions where the effect of such practice may reduce competition. Section 8 of the Act restricted any person from being a director of two or more competing corporations if those corporations would violate the anti-trust criteria by merging.
Sherman Act and relation to aviation
The anti-trust law and practices are also present in transport and specifically airlines. As already set out, the Sherman Act founds the basis of competition law and litigation over unfair competitive practices. In this era of increased use of air as a means of transport in the United States, the law on anti-trust has spread its tentacles to create sanity in the sector. The Congress passed the Airline Deregulation Act in 1978 which essentially exercised extensive regulatory control over fares, entry, mergers and agreements among airlines. Critical to this, is the fact that the regulatory control brought by this Act borrows and finds its legitimacy in the parent act, the Sherman Act. Parties to litigation over alleged aviation law violations can still rely on the Sherman Anti-trust Act to base their claim.
Consequences for violators
Section 1 of the Sherman Act prescribed a fine not exceeding five thousand dollars or a jail term not exceeding one year or both, on conviction for engaging in a combination of conspiracy in restraint of trade or commerce. Section 2 sets out the same penalty for monopolization of trade or any conspiracy to do so. Section 6 of the Act is to the effect that all property that is subject of prohibition in this Act and which is in conveyance from a State to another or to another country shall forfeit to the United States or may be seized. In addition, section 7 of the Sherman Act provides that a party who suffers injury owing to the actions of a party in breach of the provisions of the Act, may recover up to three times the damage sustained by him as well as the legal costs against the violator of the Act.
The law as it stands today is as amended by the Robinson-Patman Act of 1936 which amended the Clayton Act by illegalizing particular anti-competitive practices where manufacturers engaged in price discrimination. The Clayton Act in turn had supplemented and complemented the Sherman Anti-trust Act which remains the parent law on competition law.
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