The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies, who co-operated with rivals to fix outputs, prices and market shares, initially through pools and later through trusts. Trusts first appeared in the US railroads, where the capital requirement of railroad construction precluded competitive services in then scarcely settled territories. This trust allowed railroads to discriminate on rates imposed and services provided to consumers and businesses and to destroy potential competitors. Different trusts could be dominant in different industries. The Standard Oil Company trust in the 1880s controlled a number of markets, including the market in fuel oil, lead and whiskey. Vast numbers of citizens became sufficiently aware and publicly concerned about how the trusts negatively impacted them that the Act became a priority for both major parties. A primary concern of this act is that competitive markets themselves should provide the primary regulation of prices, outputs, interests and profits. Instead, the Act outlawed anticompetitive practices, codifying the common law restraint of trade doctrine. Prof Rudolph Peritz has argued that competition law in the United States has evolved around two sometimes conflicting concepts of competition: first that of individual liberty, free of government intervention, and second a fair competitive environment free of excessive economic power. Since the enactment of the Sherman Act enforcement of competition law has been based on various economic theories adopted by Government.
Section 1 of the Sherman Act declared illegal “every contract, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations”. Section 2 prohibits monopolies, or attempts and conspiracies to monopolize. Following the enactment in 1890 US court applies these principles to business and markets. Courts applied the Act without consistent economic analysis until 1914, when it was complemented by the Clayton Act which specifically prohibited exclusive dealing agreements, particularly tying agreements and interlocking directorates, and mergers achieved by purchasing stock. From 1915 onwards the rule of reason analysis was frequently applied by courts to competition cases. However, the period was characterized by the lack of competition law enforcement. From 1936 to 1972 courts’ application of anti-trust law was dominated by the structure-conduct-performance paradigm of the Harvard School. From 1973 to 1991, the enforcement of anti-trust law was based on efficiency explanations as the Chicago School became dominant. Since 1992 game theory has frequently been used in anti-trust cases.

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