The Antitrust Act of 1890, also known as “The Sherman Act,” is an important piece of legislation that guides antitrust law today. It’s also highly divisive, with intentionally simple language meant to mimic common law. “Restraint of trade” is a concept that frequently comes into play.
At the time, journalists were highly critical of what they viewed as schemes to fix prices and collude businesses. Business trusts allows multiple holdings to be placed under a separate entity. What was stopping businesses from colluding, and from doing so legally? It was believed that collusion reduced the effectiveness of smaller businesses, who could be pushed out by larger interests that do not wish to compete.
Critics say that true capitalism was never given the chance to function. If prices were fixed on the national level, smaller companies that can better service local communities would challenge that dominance. Innovation was stifled because those smaller companies were never given the chance.
One of the most interesting critiques involves what happened just a few months later, when Sherman helped sponsor the McKinley tariff of 1890. This tariff would increase the cost of imports by 50%, a very protectionist approach to American foreign trade. Domestic businesses were about to get a huge competitive advantage. The argument goes further, pointing out that trusts were publicly scrutinized and a very hot topic. Consumers needed reassurance these evil trusts would not collude and raise prices.
If the goal was to protect consumers, the Sherman Act of 1890 ultimately did a pretty poor job.