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Sherman Antitrust Act

From Academic Kids

The Sherman Anti-Trust Act,15 U.S.C. 1, was the first government action to limit trust companies (A corporate front for a combination of firms or corporations who agree not to lower prices below a certain rate for the purpose of reducing competition and controlling prices throughout a business or an industry). It was passed in 1890 and was named for its author, Senator John Sherman of Ohio. It made illegal any form of contract or combination between entities in regards to trade and commerce that would have the effect of restraining trade. And it also put responsibility on government attorneys and district courts to pursue and investigate trusts.

The Act was not used in court cases for some years, but Theodore Roosevelt used the Act extensively in his Anti-Trust campaign and managed to divide the Northern Securities Company. It was even further used by President Taft to split and divide the American Tobacco Company and the Standard Oil trust. The Act was aimed at regulating the businesses of the time, but it was not specific (It did not specifically refer to a monopoly, instead prohibiting unlawful business combinations). It was used for many years as an anti-union tool, until that use was finally revoked in 1914 by the Clayton Antitrust Act, which contained the word monopoly.

For many years the Sherman Act was not enforced criminally, but Congress ultimately criminalized violations of the act and has significantly increased the penalties for criminal violations of the Sherman Act over the years, first making it a felony, then increasing the maximum fines and terms of imprisonment for violations. In June of 2004, President George W. Bush signed into law the Criminal Antitrust Penalty Enhancement and Reform Act, increasing the maximum criminal penalty for individuals to ten years' imprisonment and a $1 million fine, and the maximum penalty for corporations to a $100 million fine.

Some alleged violations of the Sherman Act are not prosecuted criminally, but rather are adjudicated in civil proceedings under a "rule of reason" standard, which examines the economic benefits and harm of allegedly anticompetitive conduct to determine whether it is, on balance, beneficial to consumer and should be permitted to continue. However, the United States Supreme Court has deemed three types of conduct so lacking in economic justification as to be "per se" illegal. The "per se" violations include price fixing, bid rigging, and market allocation schemes, and are generally prosecuted criminally by the Antitrust Division (http://www.usdoj.gov/atr/) of the United States Department of Justice. The Antitrust Division has sole authority within the Federal Government to file criminal antitrust cases, though it shares responsibility for civil enforcement with the Federal Trade Commission.

Companies facing potential prosecution for criminal violations can suffer severe consequences. Fines in excess of the statutory maximum fine are often imposed under the alternative sentencing provisions of 18 U.S.C. 3571, which permits courts to impose fines up to twice the loss caused to victims or twice the gain to the conspirators. In order to avoid criminal sanctions and to limit civil damages, companies that discover violations within their companies often avail themselves of the Antitrust Division's Corporate Leniency Policy (http://www.usdoj.gov/atr/public/guidelines/lencorp.htm), which permits companies that self-report violations or offer early cooperation with criminal investigations to avoid criminal prosecution.

There have been many supplementing acts to aid the Sherman Act in preventing monopolies. Some of these were the Clayton Antitrust Act in 1914, Robinson-Patman Act of 1936 and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 among others.

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