The last third of the 19th century witnessed the development of business conglomerates or trusts. Many people believed that this new form of business organization stifled competition and led to manipulation of prices. State governments, mostly in the West and South, passed laws to regulate corporate behavior, but the wily trusts simply established themselves in friendly states such as Delaware and New Jersey.
The Sherman Antitrust Act, the first federal antitrust law, authorized federal action against any "combination in the form of trusts or otherwise, or conspiracy, in restraint of trade." In the eyes of many Congressmen, the measure would look good to the public, but be difficult to enforce.
Lack of specificity in the act's wording led the courts to struggle for years before they could agree on the meanings of "trust", "combinations," and "restraint of trade." In the first 10 years of the law's existence, many more actions were brought against unions than big business.
The first meaningful challenge to the Sherman Antitrust Act came in the E.C. Knight case in 1895. The American Sugar Refining Company purchased four independent operations, thereby accomplishing a 98% controlling factor in the nation's output. The Supreme Court ruled that the acquisition of refineries and the business of sugar manufacturing with in a state bore no direct relation to interstate commerce and consequently were not in violation of the act. The decision stimulated the formation of trusts.
Later, in the Addyston Pipe Company Cas, the Supreme Court ruled unanimously in 1899 that six producers of cast-iron pipe were obliged to end an agreement to eliminate competition among themselves. It was ruled that unlike the Knight case, the Addyston Pipe case involved definite agreements to interfere with interstate commerce, limit competition, and fix prices, and thus the Sherman Antitrust Act could be constitutionally applied.
Provisions of the Sherman Antitrust Act
A: Trusts, etc., in restraint of trade illegal; penalty
"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court."
B: Monopolizing trade a felony; penalty
"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 felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court."
C: Trusts in Territories or District of Columbia illegal; combination a felony
"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 declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court."
D: Jurisdiction of courts; duty of United States attorneys; procedure
"The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7 of this title; and it shall be the duty of the several United States attorneys, 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."
E: Bringing in additional parties
"Whenever it shall appear to the court before which any proceeding under section 4 of this title 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."
F: Forfeiture of property in transit
"Any property owned under any contract or by any combination, or pursuant to any conspiracy (and being the subject thereof) mentioned in section 1 of this title, 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."
G: Conduct involving trade or commerce with foreign nations
"Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless--
1. such conduct has a direct, substantial, and reasonably foreseeable effect--
1. on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or
2. on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and
3. such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section.
If sections 1 to 7 of this title apply to such conduct only because of the operation of paragraph (1) (B), then sections 1 to 7 of this title shall apply to such conduct only for injury to export business in the United States."
H: "Person" or "persons" defined
"The word 'person,' or 'persons,' wherever used in sections 1 to 7 of this title 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.