Alcoa Inc (AA), AT&T Inc. (T): America’s Secret Weapon Against Too-Big-to-Fail

Page 1 of 2

On this day in economic and business history…

President Benjamin Harrison signed the Sherman Antitrust Act into law on July 2, 1890. Its lasting impact on American industry makes it the most memorable element of an otherwise forgettable presidency. But what is the Sherman Antitrust Act and how has it affected the relationship between government and industry in the United States? Let’s take a quick look at the Act’s major provisions:

Alcoa Inc (NYSE:AA)

Any unreasonable effort to restrain interstate trade is made illegal.

Monopolistic interstate commercial activities are classified as felonies.

Pretty simple, right? The complete Act’s sweeping prohibitions and its subsequent explanation of terms and punishments take up fewer than 1,000 words. This short bill (about the length of this article) has nevertheless been used to dismantle some of the world’s largest companies. It was designed as a way to remedy competitive imbalances brought on by cartel agreements or other artificial means a business might use to sustain its market position. The Supreme Court further defined its purpose in a 1993 case as “not to protect businesses from the working of the market; [but] to protect the public from the failure of the market.”

Ironically, the Act did not break up any monopolistic or cartelized businesses in an era known by its robber barons for over a decade. Instead, it was used as a legal cudgel against labor unions, initially defined as “illegal combinations” under the scope of the Act. It was nearly destroyed as an anti-monopolistic weapon five years after its passage when the Supreme Court ruled that a sugar refining trust did not violate the Act despite controlling 98% of all sugar refining in the country.

Theodore Roosevelt’s ascent to the presidency following President William McKinley’s assassination revived the Sherman Antitrust Act from near-death, and it was finally used to dismantle a company in 1904. That year, the Northern Securities railroad trust — controlled by J.P. Morgan and John D. Rockefeller, among others — was found to control an unreasonably large part of American railroad traffic, and was broken back up into its component railroads. This reestablished the Act as a potent weapon against monopolies, and it was used many times over the following century against major companies, if not always successfully. Here are some of the landmark decisions issued under an interpretation of the Sherman Antitrust Act, with brief explanations provided below (you can also click on their links for more information):

Standard Oil Co. of New Jersey v. United States, 1911.

United States v. Alcoa Inc (NYSE:AA) , 1945.

United States v. AT&T Inc. (NYSE:T) , 1982.

United States v. United States Steel Corporation (NYSE:X) , 1920.

United States v. Microsoft Corporation (NASDAQ:MSFT) , 2001.

United States v. American Tobacco, 1911.

The Standard Oil breakup in 1911 is the most important turning point of the Act’s early history. It set a standard for “reasonableness” that has since been applied many times to determine what made a monopoly truly anticompetitive. Between this decision and the one that broke the American Tobacco trust several weeks later, the Supreme Court of 1911 is responsible for creating three long-tenured members of the Dow Jones Industrial Average — two of which (both oil companies) are still on the index today.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!