Key Acts, Cases, and Concepts in American Antitrust History

A Case-by-Case Illustration of the Injustices of Antitrust Laws

The following brief review of key acts and cases in American antitrust history as well as the legal theories they spawned may help introduce readers to the twisted, contradictory, and utterly unjust morass that is antitrust.

Sherman Act (1890): Section 1: Forbade all behavior "in restraint of trade." It was interpreted to prohibit price fixing, price discrimination, and cooperation with competitors. It had the unintended consequence of creating greater incentives for firms to merge, since the act blocked firms' abilities to cooperate with their competitors.

Section 2: Prohibited "monopolizing behavior," even if such behavior was unsuccessful. The meaning of "monopolizing behavior" is ambiguous, as businesses always try to undercut their competitors by offering better products and services at more attractive prices. The act did not specify the behaviors which qualified as "monopolizing."

Rule of Reason vs. Per Se Rule: First introduced in the 1911 Standard Oil Case, the Rule of Reason stated that only "unreasonable" attempts to monopolize violated the Sherman Act and left it up to the judges to figure out which particular business activities qualified as unreasonable. This has led to interpretation of antitrust laws to be unpredictable and subject to the changing fashions of the day, as both the standard for what is "reasonable" and the precedents referred to by judges changed dramatically over the subsequent decades. The Rule of Reason failed to set up clear rules of the game and thus made it impossible for firms to know in advance whether their behaviors constituted a violation of antitrust laws.

An action is illegal per se if there is no acceptable legal justification for undertaking the action. A few types of price discrimination under the Robinson-Patman Act cannot be justified as being "reasonable" restraints of trade and do not come under the Rule of Reason; they are illegal in all circumstances.