The Sherman Act of 1890

Who was the Rockefeller that is referred to in this statement and why was he so concerned about the Sherman Act? John D. Rockefeller was the man. To some, enormous wealth, power and intrigue, is like a powerful aphrodisiac, once they have it, they never want it to stop, and they want more and more. John D. Rockefeller was such a man, he had enormous wealth and power, but he wanted much more than he was entitled to. He felt he had earned it. He had realized all of his dreams at an early age. He had risen to the height of power that we cannot begin to imagine. An American success, the story of John D. Rockefeller is also a rag to riches story. He was born in Richmond, IL in 1839, the second of six children from a working class family. The family moved to a farm in Strongsville, Ohio, near Cleveland in 1853. In the 1880's John had everything he could possibly want but he wanted more. In the Titanic, men like John Davidson Rockefeller and Cal Hockley imagined themselves to be the Masters of the Universe. However in John's time he was the Master.

Standard Oil Company

In 1870, John D. Rockefeller, together with his brother William, Henry M. Flagler and Samuel Andrews, established the Standard Oil Company of Ohio. The petroleum refining industry was still highly decentralized during this period with more than 250 competitors in the U.S.

In just a little over a decade, the Standard Oil Company of Ohio had attained control of nearly all the oil refineries in the U.S. The company almost immediately began using a variety of cutthroat techniques to acquire or destroy competitors and thereby "consolidate" the industry. This dominance of the oil industry as well as other investments into the railroads, other industries, and even control of various levels of government, persisted and intensified, despite a growing public outcry and repeated attempts to break it up, until the U.S. Supreme Court was finally able to act decisively in 1911.

The Sherman Act, formed in 1890 was named for Senator John Sherman and authorized the federal government to institute proceedings against trusts in order to dissolve them. However, Supreme Court rulings prevented federal authorities from using the act for some years. President Theodore Roosevelt's “trust-busting” campaigns ensured that the Sherman Act began to be invoked with some success, and in 1904 the Supreme Court upheld the government in its suit for dissolution of the Northern Securities Company. The act was further employed by President Taft in 1911 against the Standard Oil trust and the American Tobacco Company.

In the case of The Standard Oil Company of New Jersey et al vs. The United States (221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 1911 U.S. Lexis 1725), defendant oil companies sought a review of an order from the Circuit Court of the United States for the Eastern District of Missouri, which held that the combining of defendants' stock constituted a restraint of trade and an attempt to monopolize the oil industry. The Plaintiff United States filed an action alleging that the defendants, an oil corporation and 37 other corporations, were engaged in conspiring to restrain the trade and commerce in petroleum and to monopolize the petroleum industry. The trial court agreed and awarded judgment to the plaintiff, finding that the combining of defendants' stock constituted a restraint of trade and an attempt to monopolize. The Supreme Court affirmed this judgment, holding that plaintiff established prima facie (at first view) intent and purpose on the part of defendants to maintain dominance over the oil industry, not as a result of normal methods of industrial development, but by new means of combination that were resorted to in order that greater power might be added than would otherwise have arisen had normal methods been followed. The Court found that defendants sought to exclude others from the trade and to control the movement of petroleum in the channels of interstate commerce.

The decision finding that the combining of defendant oil companies' stock constituted a restraint of trade and an attempt to monopolize the oil industry was affirmed because the plaintiff government established prima facie intent on the part of defendants to exclude others from the trade and to control the movement of petroleum in the channels of interstate commerce. There are 604 cases on the Lexis data base of cases before the Supreme Court with rulings on the Sherman Act. In the case of United States vs. Union Pacific Railroad Company (226 U.S. 61, 33 S. Ct. 53, 57 L. Ed. 124, 1912 U.S. Lexis 2131), the district court dismissed the petitioner's complaint seeking to enforce theSherman Antitrust Act of 1890

, against alleged combinations in restraint of trade resulting from respondent railway's purchase of shares of capital stock of another railway. The Petitioner appealed and the Supreme Court reversed the judgment in part. Sections of the judgment addressing and resolving issues not related to the stock purchase were not reversed. A decree was to be entered conforming to the Court's opinion. The Court held that the fact that the purchase was legal where made and was within corporate powers was no defense because it violated the Act. The consolidation of two competing railroad systems engaged in interstate commerce by a transfer to one of a dominating stock interest in the other created a combination restraining interstate commerce within the Act's meaning. In destroying or greatly reducing competition, it tended to lead to higher rates and to less prompt and efficient service. In those respects it restrained interstate commerce. It was the combination's scope and its power to suppress competition or create monopoly that determined the Act's applicability. The Court reversed in part a judgment dismissing a complaint by petitioner, the United States, seeking to enforce the Sherman Antitrust Act against alleged conspiracies in restraint of trade arising from the respondent railway's purchase of stock of another railway where the purchase violated the antitrust law. The Court did not reverse parts of the judgment that addressed and resolved other issues.

Cal's associate was right when he said that Cal's lawyers were going to have a hard time making Cal's argument stick. The Clayton Antitrust Act, drafted by Henry De Lamar Clayton, was passed in 1914 by the U.S. Congress as an amendment to clarify and supplement the Sherman Antitrust Act of 1890. The Clayton Antitrust Act prohibited exclusive sales contracts, local price cutting to freeze out competitors, rebates, and interlocking directorates in corporations capitalized at $1 million or more in the same field of business, and intercorporate stock holdings. Labor unions and agricultural cooperatives were excluded from the prohibited combinations due to the restraint of trade. The act legalized peaceful strikes, picketing, and boycotts and restricted the use of the injunction against labor, as it declared that “the labor of a human being is not a commodity or article of commerce.”

Conclusion

The Sherman Antitrust Act of 1890 and The Clayton Antitrust Act stopped the monopolies of “big” companies that threatened to restrain the trade of interstate commerce and free enterprise, and encouraged labor unions and agricultural cooperatives. Because of these two Acts, business is, as we see it today. The Bill Gate's (Microsoft), and Donald Trumps (Trump Industries), still rule their vast empire's, we still have the GE's, and AT&T's, the constant mergers and acquisitions, but no one company will ever have a monopoly as long as these Acts remain law.