On the Origins of the Sherman Antitrust Act

This year is the 100th anniversary of one of the most famous (or infamous depending on perspective) statutes in U.S. history: the Sherman Antitrust Act of 1890. This law banned business arrangements in restraint of trade (Section 1) and prohibited attempts to monopolize (Section 2). While much emphasis in this centennial year will be placed on the law’s application, the origin and intent of the Sherman Act are also important to understand why the law has been used to restrain competition and efficiency rather than promote it (Ai’mentano 1982). This inquiry was inspired by an anonymous reviewer of the antitrust chapter in my forthcoming history of oil and gas regulation. He criticized my“cynical explanation ofthe passage ofthe Sherman Act, a view not shared by most contemporary economists.” Indeed, while not neglecting the fact that there was public support for regulating the trusts and a congressional bias toward protecting small firms, I identified Congress’s high tariff policy as an important reason for political support for the Act. I also mentioned that Senator John Sherman (B-Ohio) had a personal score to settle with a trust entrepreneur. The antitrust specialist suggested that I turn to the commonly accepted explanations of William Letwin (1956, 1965) and Hans Thorelli (1955). Their correct interpretation, he stated, was that “the passage of the Sherman Act was motivated by widespread hostility