Sherman Antitrust Act: Difference between revisions

| longtitle = An Act to Protectprotect Tradetrade and Commercecommerce Againstagainst Unlawfulunlawful Restraintsrestraints and Monopoliesmonopolies

| cite public law = {{uspl|51|647}}<!--{{uspl}} can be used-->

| title amended = <!--US[[Title code15 titlesof changed-->the United States Code|Title 15—Commerce and Trade]]

| sections created = <!--{{USCusc|15|1|7}} can be used-->

| passeddate1 = April 8, 1890

| passeddate2 = June 20, 1890

| passedvote2 = unanimous vote

The '''Sherman Antitrust Act of 1890'''<ref>Officially re-designated as the "Sherman Act" by Congress in the [[Hart-Scott-Rodino Antitrust Improvements Act|Hart–Scott–Rodino Antitrust Improvements Act of 1976]], (Public Law 94-435, Title 3, Sec. 305(a), 90 Stat. 1383 at [[s:Page:United States Statutes at Large Volume 90 Part 1.djvu/1447|p. 1397]]).</ref> ({{USStat|26|209}}, {{usc|15|1|7}}) is a [[United States antitrust law]] which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair [[Monopoly|monopolies]]. It was passed by [[United States Congress|Congress]] and is named for Senator [[John Sherman]], its principal author.

The law attempts to prevent the artificial raising of prices by restriction of trade or supply.<ref>{{cite web|url=http://butnowyouknow.net/those-who-fail-to-learn-from-history/sherman-anti-trust-act-and-analysis/|title=Sherman AntiTrust Act, and Analysis|date=12 March 2011|url-status=live|archive-url=http://archive.wikiwix.com/cache/20111118040849/http://butnowyouknow.net/those-who-fail-to-learn-from-history/sherman-anti-trust-act-and-analysis/|archive-date=18 November 2011}}</ref> "Innocent monopoly", or [[monopoly]] achieved solely by merit, is legal, but acts by a monopolist to artificially preserve that status, or nefarious dealings to create a monopoly, are not. The purpose of the Sherman Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses.<ref name="Cseres2005">"This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it has also been said that competition law in the European Union (EU) tends to protect the competitors in the marketplace, even at the expense of market efficiencies and consumers."< {{cite book|title=Competition law and consumer protection|last=Cseres|first=Katalin Judit|year=2005|publisher=Kluwer Law International|isbn=9789041123800|pages=291–293|url=https://books.google.com/books?id=y3IOROCcVacC|access-date=July 15, 2009|url-status=live|archive-url=https://web.archive.org/web/20130512183804/http://books.google.com/books?id=y3IOROCcVacC&printsec=frontcover&cad=0|archive-date=May 12, 2013}}</ref>

:Every contract, combination in the form of [[Trust (19th century)|trust]] or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.<ref>See {{usc|15|1}}.</ref>

: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 felonymisdemeanor [. . . ]<ref>See {{usc|15|2}}.</ref>}}

The [[Clayton Antitrust Act]], passed in 1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman Antitrust Act. For example, as ''The Oxford Encyclopedia of American Business, Labor, and Economic History'' states, the Clayton Act added certain practices to the list of impermissible activities:<ref>{{Cite book |last=Mochoruk |first=James |title=The Oxford Encyclopedia of American Business, Labor, and Economic History |publisher=Oxford University Press |year=2013 |isbn=9780199738816 |editor-last=Dubofsky |editor-first=Melvyn |location=New York |chapter=Clayton Antitrust Act}}</ref>

* "price discrimination" between different purchasers, if such discrimination tends to create a monopoly

* "exclusive dealing" agreements

* " 'tying' " arrangements

* ''United States v. Workingmen's Amalgamated Council of New Orleans'' (1893), which was the first to hold that the law applied to labor unions (reversed by the [[Clayton Antitrust Act]]).

* ''[[United States v. General Electric Co]]'' (1911), where GE was judged to have violated the Sherman Anti-Trust Act, along with International General Electric, [[Philips]], [[Sylvania Electric Products|Sylvania]], Tungsol, and Consolidated and Chicago Miniature. Corning and Westinghouse made consent decrees.<ref name="US v GE 1911">{{cite web |title=United States v. General Electric Co., 82 F. Supp. 753 (D.N.J. 1949) |url=https://law.justia.com/cases/federal/district-courts/FSupp/82/753/1755675/ |website=Justia Law |access-date=15 September 2019 |language=en |date=4 April 1949}}</ref>

* ''[[United States v. Motion Picture Patents Co.]]'' (19171915), which ruled that the company was abusing its monopolicmonopolistic rights, and therefore, violated the Sherman act.

* ''[[United States v. AT&T (1982)|United States v. AT&T Co.]]'', which was settled in 1982 and resulted in the breakup of the company.

* '''Violations "per se":''' theseThese are violations that meet the strict characterization of Section 1 ("agreements, conspiracies or trusts in restraint of trade"). A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Conduct characterized as unlawful per se unlawful is that which has been found to have a "'pernicious effect on competition' or 'lack[s] . . . any redeeming virtue'"<ref>{{ussc|name=Continental T.V., Inc. v. GTE Sylvania Inc.|link=|volume=433|page=36|pin=58|year=1977}} (quoting {{ussc|name=Northern Pac. Ry. v. United States|link=|volume=356|page=1|pin=5|year=1958}}).</ref> Such conduct "would always or almost always tend to restrict competition and decrease output."<ref>{{ussc|name=Broadcast Music, Inc. v. CBS|link=|volume=441|page=1|pin=19–20|year=1979}}.</ref> When a per se rule is applied (in contrast to a rule of reason analysis), a civil violation of the antitrust laws is found merely by proving that the conduct occurred and that it fell within a per se category.<ref>{{ussc|name=Jefferson Parish Hosp. Dist. No. 2 v. Hyde|link=Jefferson Parish Hospital District No. 2 v. Hyde|volume=466|page=2|pin=|year=1984}}; ''[[Gough v. Rossmoor Corp.]]'', [https://law.justia.com/cases/federal/appellate-courts/F2/585/381/424532/ 585 F.2d 381], 386–89 (9th Cir. 1978), cert. denied, {{ussc|440|936|1979|el=no}}; see {{ussc|name=White Motor v. United States|link=|volume=372|page=253|pin=259–60|year=1963}} (a per se rule forecloses analysis of the purpose or market effect of a restraint); ''Northern Pac. Ry.'', 356 U.S. at 5 (same).</ref> (This must be contrasted with rule of reason analysis.) Conduct considered unlawful per se unlawful includes horizontal price-fixing,<ref>{{ussc|name=United States v. Trenton Potteries Co.|link=|volume=273|page=392|pin=397–98|year=1927}}.</ref> horizontal market division,<ref>''Continental T.V.'', 433 U.S. at 50 n. 16 (limiting {{ussc|name=United States v. Topco Assocs.|link=|volume=405|page=596|pin=608|year=1972}} by making vertical market division rule-of-reason analysis).</ref> and concerted refusals to deal.<ref>{{ussc|name=FTC v. Superior Court Trial Lawyers Ass'n|link=|volume=493|page=411|pin=|year=}} for collusive effects and {{ussc|name=NW Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co.|link=|volume=472|page=284|pin=|year=1985}} for exclusionary effects.</ref>

::'''Quick-look:''' A "quick look" analysis under the rule of reason may be used when "an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets," yet the violation is also not one considered illegalunlawful per se.<ref>''Cal. Dental Ass'n'', 526 U.S. at 770.</ref> Taking a "quick look," economic harm is presumed from the questionable nature of the conduct, and the burden is shifted to the defendant to prove harmlessness or justification. The quick-look became a popular way of disposing of cases where the conduct was in a grey area between illegality "per se" and demonstrable harmfulness under the "rule of reason".

TheWhile the Act was aimed at regulating businesses. However, its applicationprohibition wasof notcontracts limitedrestricting commerce was applied to the commercial sideactivities of businesslabor unions until the 1930s.<ref Itsname="Clark prohibition1948">{{cite journal |last1=Clark |first1=O. L. |date=January 1948 |title=Application of the cartelSherman wasAnti-Trust also interpretedAct to makeUnions illegalsince manythe laborApex unionCase activities|journal=SMU Law Review |volume=1 |issue=1 |pages=94–103 |url=https://scholar.smu.edu/smulr/vol2/iss1/6}}</ref> This is because unions were characterized as cartels as well (cartels of laborers).<ref>See {{ussc|name=Loewe v. Lawlor|link=|volume=208|page=274|pin=|year=1908}}.</ref> This persisted untilIn 1914, when the [[Clayton Antitrust Act|Clayton Act]] created exceptions for certain union activities, but the Supreme Court ruled in ''[[Duplex Printing Press Co. v. Deering]]'' that the actions allowed by the Act were already legal. Congress included provisions in the [[Norris–La Guardia Act]] in 1932 to more explicitly exempt organized labor from antitrust enforcement, and the Supreme Court upheld these exemptions in ''United States v. Hutcheson'' [https://supreme.justia.com/cases/federal/us/312/219/ 312 U.S. 219].<ref name="Clark 1948"></ref>

:If the statute does not mandate conduct violating a per se rule, the conduct is analyzed under the rule of reason, which requires an examination of the conduct's actual effects on competition.<ref>''See ''[''Rice,'' 458 U.S. at 661.]</ref> If unreasonable anticompetitive effects are created, the required conduct violates Section 1<ref>National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 687–90 (1978); Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977)</ref> and the statute is in irreconcilable conflict with the Sherman Act.<ref>See Battipaglia v. New York State Liquor Auth., 745 F.2d 166, 175 (2d Cir. 1984) (while declining to decide whether a statute required an antitrust violation in a facial attack, the court left open the possibility of preemption based on the statute's operation), cert. denied, 105 S. Ct. 1393 (1985); Lanierland Distribs. v. Strickland, 544 F. Supp. 747, 751 (N.D. Ga. 1982) (plaintiff failed to show anticompetitive effects sufficient to violate the rule of reason); Wine & Spirits Specialty, Inc. v. Daniel, 666 S.W.2d 416, 419 (Mo.) ([[en banc]]) (declining to decide whether the rule of reason might invalidate a law on the record before them), Appeal dismissed, 105 S. Ct. 56 (1984); United States Brewers Ass'n v. Director of N.M. Dept' of Alcoholic Beverage Control, 100 N.M. 216, , 668 P.2d 1093, 1099 (1983) (rejecting a facial attack on a statute but reserving a decision on whether the actual application of the statute might violate the antitrust laws), appeal dismissed, 104 S. Ct. 1581 (1984). But see infra note 149 for a discussion on the possibility of a much more limited rule of reason preemption analysis.</ref> Then statutory arrangement is analyzed to determine whether it qualifies as "state action" and is thereby saved from preemption.<ref>See Rice, 458 U.S. at 662–63 n.9 ("because of our resolution of the pre-emption issue, it is not necessary for us to consider whether the statute may be saved from invalidation under the [state action] doctrine"); Capitol Tel. Co. v New York Tel. Co., 750 F.2d 1154, 1157, 1165 (2d Cir. 1984) (holding that the state action doctrine protected the conduct of a private party after assuming that it violated the federal antitrust laws), cert. denied, 105 S. Ct. 2325 (1985); Allied Artists Picture Corp. v. Rhodes, 679 F.2d 656, 662 (6th Cir. 1982) (even if conduct violated Sherman Act, the statute is saved by the state action doctrine); Miller v. Hedlund, 579 F. Supp. 116, 124 (D. Or. 1984) (statute violating Section 1 saved by state action); Flav-O-Rich, Inc. v. North Carolina Milk Comm'n, 593 F. Supp. 13, 17–18 (E.D.N.C. 1983) (though conduct violates Section 1, state action saves statute).</ref>

Rice sets out guidelines to aid in preemption analysis. Preemption should not occur "simply because in a hypothetical situation a private party's compliance with the statute might cause him to violate the antitrust laws."<ref>Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982).</ref> This language suggests that preemption occurs only if economic analysis determines that the statutory requirements create "an unacceptable and unnecessary risk of anticompetitive effect,"<ref>Id. at 668 (Stevens, J., concurring in the judgment).</ref> and does not occur simply because it is possible to use the statute in an anticompetitive manner.<ref>See Grendel's Den, Inc. v. Goodwin, 662 F.2d 88, 100 n.15 (1st Cir.) (power to control others not sufficient for facial preemption where party had no institutional reason to make anticompetitive decisions especially likely), aff'd on other grounds, 662 F.2d 102 (1st Cir. 1981) ([[en banc]]), aff'd sub nom. Larkin v. Grendel's Den, Inc., 459 U.S. 116 (1982); Flav-O-Rich, Inc. v. North Carolina Milk Comm'n, 593 F. Supp. 13, 15 (E.D.N.C. 1983) (in an oligopolistic market, price posting would result in an antitrust violation).</ref> It should not mean that preemption is impossible whenever both procompetitive and anticompetitive results are conceivable.<ref>But cf. Allied Artists Pictures Corp. v. Rhodes, 496 F. Supp. 408, 449 (S.D. Ohio 1980) (indicating that a statute neither requiring nor permitting an anticompetitive collaboration gives the private party enough freedom of choice to preclude preemption), aff'd in part and remanded in part, 679 F.2d 656 (6th Cir. 1982)</ref> The per se rule "reflects the judgment that such cases are not sufficiently common or important to justify the time and expense necessary to identify them."

* [https://www.justice.gov/atr/file/761131/download U.S. Department of Justice: Antitrust Division – text of SHERMANthe ANTITRUSTSherman ACTAntitrust Act, 15 U.S.C. §§ 1–7]

* [http://www.polyconomics.com/index.php?option=com_content&view=article&id=1605:antitrust-by-alan-greenspan&catid=47:1998&Itemid=31 ''Antitrust''] {{Webarchive|url=https://web.archive.org/web/20140511002404/http://www.polyconomics.com/index.php?option=com_content&view=article&id=1605:antitrust-by-alan-greenspan&catid=47:1998&Itemid=31 |date=May 11, 2014 }} by [[Alan Greenspan]]

* "Labor and the Sherman Act" (1940). ''[[Yale Law Journal]]'' 49(3) p.&nbsp;518. {{jstorJSTOR|792668}}.