Antitrust

Evolution of American Antitrust Regulation

Introduction

Economists and policy makers have long been concerned over the power that trusts, monopolies, and other restraints impose on economies and economic development. It is this concern over trusts in particular that gave rise to the Sherman Act in 1890. Since the inception of the Sherman Act, federal enforcement of antitrust has changed. The reasons behind the changes in federal antitrust enforcement, as well as the means by which the changes were brought about are presented in this paper.

After the passage of the Sherman Act, the federal courts were not clear on how to interpret the language contained in the first two sections. Through changes in the political and social climate, along with court challenges, the federal courts have refined the definitions for antitrust concepts such as monopolies, horizontal restraints (agreements among competitors) and vertical restraints (agreements among the supply chain). Subsequent acts were passed by Congress to help federal courts enforce and define antitrust behavior. In addition, economic theories have evolved which allow for the analysis of potential antitrust behavior. A broader interpretation of interstate commerce, which changed due to pressure on many social issues, especially during the 1960s, has also given more power to the federal government for antitrust enforcement.

Early Views on Monopolies

There have been restraints on trade dating far back into history, including the trade guilds from the Middle Ages in Europe. During the late 14th Century, Britain’s Parliament was not against the concept of monopolies. In some situations the king or queen would grant a letters-patent, which gave an exclusive right to make or sell a product, when the patent would pay the government good returns. [1]

Britain’s movement against monopolies began towards the latter part of the 16th Century. [2] The case of Darcy v. Allin was decided in 1602 where the court held that a royal grant of a patent to make, import, and sell playing cards was invalid because restraint of trade is not good for the economy and development of the kingdom. [3]