Sherman Antitrust Act

The Sherman Antitrust Act of 1890 was a landmark federal law against monopoly, but its significance in this account lies in more than its formal prohibition: it became a tool through which organized citizens and political reformers could contest the power of dominant firms. Its later use against the trusts contrasts with Mexico, where regulatory efforts to curb Telmex’s monopoly repeatedly failed, and demonstrates how law can help preserve competitive markets when political institutions make powerful businesses answerable to public authority.

Origins in Organized Opposition

The law followed a long period of agrarian discontent and collective organizing. The National Grange, founded in 1867, mobilized farmers against unfair and discriminatory business practices. In 1873 and 1874, Grangers won control of eleven Midwestern state legislatures. Rural protest later helped produce the People’s Party, which received 8.5 percent of the popular vote in the 1892 presidential election. Although the Populists declined after supporting unsuccessful Democratic campaigns led by William Jennings Bryan, their movement had helped organize opposition to the influence of John D. Rockefeller and other powerful industrialists.

Farmers were also a force behind federal action. Early state efforts to regulate railroads in the 1870s arose from farmers’ organizations, and nearly all of the fifty-nine petitions concerning trusts sent to Congress before the Sherman Act passed came from farming states. Groups including the Farmers’ Union, Farmers’ Alliance, Farmers’ Mutual Benefit Association, and Patrons of Animal Husbandry gave dispersed grievances a shared political voice. The Sherman Act followed the Interstate Commerce Act of 1887, which created the Interstate Commerce Commission and began federal regulation of industry.

Enforcement Against the Trusts

The Act became the basis for federal attacks on trusts, particularly under presidents committed to limiting the power of monopolies. In 1902, Theodore Roosevelt used it to break up the Northern Securities Company, affecting the interests of J.P. Morgan. Subsequent suits were brought against DuPont, the American Tobacco Company, and Standard Oil. Roosevelt also strengthened federal oversight of railways through the Hepburn Act of 1906, which enlarged the Interstate Commerce Commission’s authority, including its power to inspect railway financial accounts.

Roosevelt’s successor, William Taft, prosecuted trusts even more assiduously. The breakup of Standard Oil in 1911 was a high point of that campaign. The Act remained part of the legal foundation for antitrust action as the Progressive reform program expanded: Woodrow Wilson supported the Clayton Antitrust Act of 1914, which strengthened the Sherman Act, and established the Federal Trade Commission to enforce the newer law. Together, these developments made federal regulation more than a declaration of principle; they created continuing means to investigate and challenge concentrated corporate power.

Political Reform and Inclusive Markets

The Act’s history also shows why markets alone do not guarantee broad economic opportunity. A market dominated by a few firms can impose high prices, block more efficient rivals, and prevent new technologies from entering. Monopoly backed by political influence turns the formal existence of markets into something less inclusive, concentrating opportunity and power in the hands of established firms.

The book sets this U.S. response against Mexico’s unsuccessful attempts to curb Telmex. The Mexican Competition Commission found in 1997 that Telmex possessed substantial monopoly power in local, national long-distance, and international long-distance telephony, yet regulatory efforts to limit its monopolies came to nothing. Telmex could invoke the recurso de amparo, a petition arguing that a particular law did not apply to it. Originally intended as a protection for individual rights, this remedy became a means for monopolies to entrench their position and evade equal application of the law. In the United States, by contrast, the Sherman and Clayton Acts were repeatedly used to restrict trusts, monopolies, and cartels.

That contrast gives the Sherman Act its broader institutional importance. When political institutions are pluralistic, citizens can organize against concentrated economic power, and government can act as a counterweight to firms that might otherwise shape public policy in their own interest. The Act and its later enforcement thus form part of a reinforcing relationship between inclusive political institutions and markets that offer opportunities beyond the already powerful.