Sherman Antitrust Act

John Sherman

John Sherman

Big Business and Monopolies

During the Gilded Age, a few powerful business leaders controlled huge parts of the American economy. John D. Rockefeller’s Standard Oil, Andrew Carnegie’s steel company, and other large corporations grew into monopolies, meaning they controlled almost all of one industry. Without competition, they could raise prices, lower wages, and push smaller companies out of business. Many Americans began to worry that these monopolies threatened both the economy and democracy.

Standard Oil Logo

Standard Oil was broken up as a result of the Sherman Antitrust Act

Calls for Government Action

Farmers, workers, and small business owners demanded that the federal government step in. They argued that the Constitution gave Congress the power to regulate trade between states. Reformers believed that only national laws could control giant companies that operated across the country.

Passing the Sherman Antitrust Act

In 1890, Congress passed the Sherman Antitrust Act, named after Senator John Sherman of Ohio. The law made it illegal to form “combinations” or “conspiracies” that restrained trade. In simple terms, it said that businesses could not work together to fix prices, limit competition, or create monopolies. The act gave the government the power to take companies to court and break them up if necessary.

Early Enforcement Problems

At first, the Sherman Act was not very strong. Courts often sided with big business, and some judges even used the law against labor unions, claiming that strikes hurt trade. However, over time, new presidents and reformers began using the act more aggressively. In the early 1900s, President Theodore Roosevelt became known as a “trust buster” for breaking up several large companies.

Long-Term Importance

The Sherman Antitrust Act was the first major law to limit the power of big business in the United States. It set the foundation for later antitrust laws that still exist today. The act showed that the government had a responsibility to protect competition and prevent any single company from becoming too powerful.

Timeline

  • 1870s–1880s – Large monopolies like Standard Oil grow.
  • 1890 – Sherman Antitrust Act is passed by Congress.
  • 1890s – Law is used weakly and sometimes against unions.
  • 1902–1904 – Theodore Roosevelt’s administration breaks up major trusts.
  • 1914 – New antitrust laws strengthen government power.

Glossary

  • Monopoly – A company that completely controls an industry.
  • Antitrust – Laws designed to prevent monopolies and keep competition fair.
  • Trust – A combination of companies run as a single business.
  • Regulate – To control or direct by making rules or laws.
  • Competition – When different companies try to win customers by offering better prices or products.

Discussion Questions

  1. Why were monopolies seen as dangerous to consumers and small businesses?
  2. What did the Sherman Antitrust Act try to stop?
  3. Why was the law hard to enforce at first?
  4. Do you think the government should limit the size and power of companies today? Why or why not?

Too Much Power

In the Gilded Age, a few very large companies controlled whole industries. Standard Oil controlled most of the oil, and other big companies controlled steel, railroads, and more. These monopolies could raise prices and crush smaller businesses.

A New Law

Many Americans wanted the government to stop these powerful companies. In 1890, Congress passed the Sherman Antitrust Act. This law said that it was illegal for businesses to join together to limit competition or create a monopoly.

Early Problems

At first, the law was not used very well. Some judges used it against labor unions instead of big companies. Still, the act was important because it was the first national law to control big business.

Why It Matters

Later presidents, like Theodore Roosevelt, used the Sherman Act to break up powerful trusts. Today, antitrust laws still help keep businesses from becoming too strong and protect consumers from unfair prices.

Timeline

  • 1890 – Sherman Antitrust Act becomes law.
  • 1890s – Courts struggle to enforce the act.
  • Early 1900s – President Roosevelt breaks up big trusts.

Glossary

  • Monopoly – One company controlling an entire industry.
  • Antitrust law – A rule to stop monopolies and keep competition fair.
  • Trust – A large group of companies run together.

Discussion Questions

  1. Why can a monopoly be bad for customers?
  2. What was the main goal of the Sherman Antitrust Act?
  3. Should the government step in when companies get too powerful? Explain.