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The Oxford Companion to the Supreme Court of the United States, 2nd Edition edited by Hall, Kermit L (23rd June 2005)

S, Sherman Antitrust Act.

Edited By: Kermit L. Hall, James W. Ely Jr., Joel B. Grossman

From: The Oxford Companion to the Supreme Court of the United States (2nd Edition)

Edited By: Kermit L. Hall

From: Oxford Constitutions (http://oxcon.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 04 July 2020

Sherman Antitrust Act.

The oldest and most important federal antitrust law, the Sherman Antitrust Act has provided the primary statutory basis for American antitrust enforcement and case law since 1890. Like the other antitrust laws, the Sherman Act targets activities restricting marketplace competition. The act’s sweeping prohibition of “[e]very contract, combination … or conspiracy” in restraint of interstate or foreign trade or commerce, set forth in its first section, addresses collusive or exclusionary group behavior. Section 2, prohibiting monopolization and attempted monopolization, primarily addresses single-firm conduct, although it also condemns conspiracies to monopolize. Violations of the act currently are punishable by fines of up to $350,000 for individuals and up to $10 million for corporations, as well as by imprisonment of up to three years. Both the United States and private parties can seek federal court *injunctions against threatened breaches of the act and are entitled to collect three times the amount of any injury they have sustained because of its violation. In addition, individual states are authorized to sue for treble damages on behalf of injured natural persons residing in the state.

The nearly unanimous congressional adoption of the act in 1890 responded to mounting public concerns generated by dramatic late nineteenth-century increases in cartelization, consolidation, and apparent predatory business behavior. The congressional deliberations reflected traditional American concerns that anti-competitive conduct potentially imperils distributional fairness, productive efficiency, individual economic opportunity, and political liberty. Ever since 1890, however, scholars have disagreed with regard to specific congressional aims. Scholars, judges, and enforcement officials increasingly have posited an exclusive congressional desire to promote economic efficiency. A prominent alternative view has suggested that Congress primarily sought to prevent unfair wealth transfers resulting from noncompetitive pricing. These interpretations reflect a modern perception that the various economic, political, and moral goals reflected in the debates are in substantial tension. In late nineteenth-century thinking, however, they largely were deemed to be complementary, so that most congressmen may well have sought to further all of these ends.

Rather than specifying the act’s application in any detail, Congress left the task of further doctrinal development to the federal courts. Congress intended to incorporate in a general way the existing common-law restraint of trade approaches of the state courts. The Sherman Act’s enforcement provisions, however, went substantially beyond traditional common-law doctrines that merely denied legal enforcement to restrictive agreements.

Despite the Supreme Court’s initial limitation of the act’s reach in United States v. *E. C. Knight Co. (1895), the Court found for the government in a series of early cases culminating in its landmark decisions in *Standard Oil Co. v. United States (1911) and United States v. American Tobacco Co. (1911). The Court’s ambiguous new embrace of a generalized *“rule of reason” standard for Sherman Act interpretation in those cases sparked new political debate and ultimately prompted Congress to pass the Clayton and Federal Trade Commission Acts in 1914 to supplement the Sherman Act.

*World War I and the prosperous 1920s saw only limited Sherman Act enforcement. Federal antitrust enforcement activity dramatically expanded, however, in the later *New Deal and since then has remained at a much higher level than at any time prior to the 1930s.

Over time, judicial interpretation of the act also has changed substantially. Sherman Act interpretation, scholarship, and enforcement have changed particularly dramatically since the middle 1970s. In recent cases, for example, the Court greatly has reduced, although not entirely eliminated, its use of “per se” rules to condemn summarily particular agreements among competitors or among firms in a (p. 916) supplier-purchaser relationship. Simultaneously, the Court has given increasing weight to new economic perspectives suggesting that various collaborative arrangements beneficially may increase output and efficiency. The Supreme Court and lower courts similarly have shown growing tolerance for potentially efficient conduct that furthers the market position of dominant firms, even while continuing to condemn exclusionary behavior by such firms in the absence of such an efficiency justification.

Numerous special exceptions limit or preclude the normal application of the Sherman Act in particular circumstances. Some of the more important of these relate to *labor activities, conduct within particular regulated industries, activities attributable to state rather than private decision making, and *First Amendment protected activities.

See also antitrust; capitalism.

E. Thomas Sullivan and Jeffrey L. Harrison, Understanding Antitrust and Its Economic Implications (1988).

James May