Six years
later, Congress addressed these and other concerns
by creating the Interstate Commerce Commission to
regulate the railroads. The early ICC, a compromise
between industry and those who wanted to police it,
was a paper tiger. It could only publicize--not
set--rates, and it had only vague guidelines for
what rates were considered fair. "Our image of
a federal agency is one with coercive power,"
says Tony Freyer, professor of history and law at
the University of Alabama. "But this one
didn't have that." Yet the ICC set a
hugely important precedent: It was the first agency
to regulate any industry, and it served as a model
for the alphabet soup of agencies to come. It even
grew some teeth during the administration of
Theodore Roosevelt, gaining the power to set rates.
And in the 1950s, it famously used its authority to
prohibit segregation on railroad cars.
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(Much
later, in the 1970s and 1980s, the tide turned
toward deregulation, and the airline,
telecommunications, energy, and financial industries
felt a loosening of government strictures. The ICC,
seen as a relic of bureaucratic bloat, was
eliminated in 1996, though many of its duties were
farmed out to other agencies.)
In 1890,
responding to a troubling increase in large,
industry-dominating companies, Congress took a
broader tack, setting rules for trade in general,
not just for specific businesses. The sweeping
Sherman Act outlawed "every contract,
combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce."
It criminalized monopolization, and it left
enforcement not to a new agency but to the
courts--giving them great leeway to interpret the
act's often vague language. Along with the
commerce act, Sherman was "the first of the
major legislative acts that really took the whole
economy as the focus," says Eric Orts, a
professor at the University of Pennsylvania's
Wharton School of Business.
Trustbuster. The
law particularly targeted trusts, large combinations
of similar businesses controlled by a few people.
The most egregious example of such a monopoly was
the Standard Oil Trust, which so dominated the oil
industry that owner John D. Rockefeller amassed a
personal wealth equaling more than 2 percent of the
U.S. gross national product. But the law was hardly
bulletproof. In 1895, the Supreme Court ruled that
even though the American Sugar Refining Co.
controlled 98 percent of the refining industry, the
federal government couldn't regulate it because
all the sugar was manufactured in one state.
Theodore Roosevelt beefed up the government's
ability to investigate potential violations by
dedicating some of the Justice Department's
lawyers to antitrust. And Woodrow Wilson created the
Federal Trade Commission to enforce the law. In
1914, the Clayton Act gave the government even more
regulatory clout by prohibiting interlocking
directorates and outlawing mergers that lessened
competition. The acts would eventually be used to
stop monopolistic practices by such giants as
Standard Oil, AT&T, and Microsoft.
As
powerful as the government is, the Sherman Act has
been an even more potent weapon for private
companies, which have used it successfully to sue
rivals and collect damages. It is partly because of
the Sherman Act that the United States is the most
entrepreneurial country in the world. Other
countries have taken note: Parts of our antitrust
policy have been adopted by Australia, Poland,
Romania, and even Japan. "It's a
distinctly American creation," says William
Page of the University of Florida's Levin
College of Law. "And it's one of our most
successful legal exports."
