Phase II: The Historical Perspective of Sherman Antitrust
The Winds of Economic change
Coming to the close of the 19th century America’s economic conditions encouraged large concerns in manufacturing and distribution. Those firms which could make their products at one location using large scale and then ship their wares nationwide were advantaged. Those firms began to destroy small producers and distributors built on older distribution networks. They began to worry farmers and producers of raw materials. The populist political attacks on the large manufacturing and distribution concerns soon added the claims of harm through “concentration of power” to their list of antitrust arguments. They also added arguments against immigrants and Wall Street.
The sides
Northeastern traders and industrialists favored high protective tariffs. They also supported adherence to a gold standard to encourage foreign investment. Post-Civil War weakness in the South allowed free rein on the issue to the Northeastern interests. Farmers and shippers in the South and Mid-West opposed tariffs. They also wanted a depreciated currency to help them sell their output abroad.
The Sherman strategy
Politically ambitious John Sherman of Ohio came to understand he had to satisfy the populist antitrust concerns to have a chance at reelection. Populists were campaigning for inflation; a switch to a silver standard. The populists saw tariffs as increasing the cost of their inputs. They urged that this was in significant part because tariffs encouraged monopoly. Populists were concerned with harms to small business and with higher prices. Sherman’s reelection strategy was to blame the trusts for the higher prices people were paying. He did not support silver standard or lower tariffs. And so he introduced his antitrust bill.
Antitrust offered symbolic reassurance to diffuse a constituency fearful of developments they did not understand and could not control. Independent businesses, such as smaller refiners were being harmed by larger more efficient competitors. This was true certainly in the oil markets, where Standard Oil was in the ascendency. It was also true in the meat markets where local slaughterhouses struggled to compete with refrigerated dressed meat.
What the Sherman Antitrust Act did and how it did it
Monopoly was accepted practice and everywhere present in medieval through early modern times. The Sherman Antitrust Act prohibited contracts, combinations or conspiracies in restraint of trade or commerce. It also made illegal monopolization or the attempt to monopolize trade or commerce. As a term of legal art “restraint of trade” came from common law. In common law it did not refer to monopoly; it was not used in that context at all. Its use was unquestioned and the term was used primarily in conjunction with to non-compete clauses.
The very succinctness of the Sherman Antitrust Act coupled with the linkage of the term restraint of trade in association with monopoly created a legacy of unintended consequences. Enforcing the act had never been the purpose. It was a reelection campaign device. No one had thought to include within the bill sufficient detail and mechanisms to allow enforcement. The law of unintended consequences gave the act a life of its own.
From the desire to solve interpretative complications the content of the bill was judicially edited and expanded. It should have been sent back to congress to solve the issues. But that did not happen. At first the act was used mainly against interstate cartels among smaller producers. The Supreme Court initially ruled manufacturing did not count as trade or commerce.
More to come
Tomorrow we will look at more of the Sherman Antitrust Act, FCC and Woodrow Wilson as we build toward an understanding of what viable applications for Big Tech might be available and why they may be advisable or avoidable.