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. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

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!