Had a Good Ghost Writer
Said Ghost Writer
The Sherman Act, ostensibly authored by Senator John Sherman (R-Ohio) (pictured first above), turned 125 today. The Senate passed the Act 51-1 on April 8, 1890, and the House followed suit unanimously on June 20. President Harrison signed the bill into law on this date in 1890. For a photo of the Act, go here.
While the Act contains eight sections (see the complete text reproduced below), the statute's basic prohibitions are found in the first two. Thus, Section 1 forbids: "contracts, combinations and conspiracies in restraint of trade or commerce among the several states." Section 2 forbids "monopolization," "conspiracy to monopolize," and "attempt[s] to monopolize." Senator George F. Edmunds (R-Vermont) (pictured second above), Chairman of the Senate Judiciary Committee, drafted these two sections in late March and early April, 1890, narrowing Sherman's pending draft, which exceeded the scope of the commerce power. See Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 115 & n. 59 (1988).
Although the Supreme Court initially held that Section 1 merely prohibits "direct restraints" of interstate commerce, see United States v. Joint Traffic Association, 171 U.S. 505 (1898), it would subsequently hold that Section 1 bans all "unreasonable" restraints. See Standard Oil v. United States, 221 U.S. 1 (1911), while Section 2 only forbids unreasonable methods of acquiring or maintaining a monopoly. See American Tobacco Co. v. United States, 221 U.S. 106 (1911). These three limiting constructions ensured that the Act did not interfere with liberty of contract, thereby assuring that the statute banned only those practices that reduce wealth. (See here and here.) While once controversial, Standard Oil's "Rule of Reason" survives to this day as the definitive construction of the Act.
The Act has proved remarkably resilient, in part because of the Rule of Reason's flexibility. To be sure, Congress has exempted various industries from the Act. Moreover, Congress partially suspended the Act when it passed FDR's National Industrial Recovery Act in 1933. Under the NIRA, President Roosevelt approved over 500 so-called "Codes of Fair Competition," limiting competition in each such industry. Fortunately the Supreme Court unanimously invalidated the NIRA in Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), restoring the Sherman Act. Thus, the operative language of Sections 1 and 2 survives, protecting markets from wealth-reducing restraints.
As promised above, here is the text of the original Sherman Act:
An act to protect trade and commerce against unlawful restraints and monopolies.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
Sec. 1. Every contract, combination in the form of trust or other- wise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, at the discretion of the court.
Sec. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof; shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.
Sec. 3. Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any Territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any such Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any State or States or foreign nations, is hereby declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.
Sec. 4. The several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney-General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.
Sec. 5. Whenever it shall appear to the court before which any proceeding under section four of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not; and subpoenas to that end may be served in any district by the marshal thereof.
Sec. 6. Any property owned under any contract or by any combination, or pursuant to any conspiracy (and being the subject thereof) mentioned in section one of this act, and being in the course of transportation from one State to another, or to a foreign country, shall be- forfeited to the United States, and may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure, and condemnation of property imported into the United States contrary to law.
Sec. 7. Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover three fold the damages by him sustained, and the costs of suit, including a reasonable attorney's fee.
Sec. 8. That the word "person," or " persons," wherever used in this act shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country.