The Sherman Antitrust Act was born 126 years ago today, and Senator Rand Paul (R-Ky.) wants to make this birthday bash its very last.
His legislation, the Anti-Trust Freedom Act, will rip the teeth out of this business-killing legislation in one fell swoop, making all voluntary economic agreements between consenting parties legal again. And that’s good news, because the Sherman Act has caused nothing but trouble for the American economy since its July 2, 1896 inception.
The Sherman Act was supposedly created to prevent giant, monopolistic corporations from engaging in predatory business practices. The problem is that history shows otherwise. Contrary to popular belief, big companies don’t generally leverage their market share to raise prices on American consumers. That’s a fairy tale that was invented to prop up failing businesses incapable of competing with market leaders on their own merits.
In reality, successful companies create quality products at lower prices. That’s why consumers choose to shop with them. This has always been the case, even in the 1890s when the Sherman Act was being deliberated. The so-called “anticompetitive” organizations that spurred the creation of the legislation weren’t harming consumers; rather, they were dropping the prices in their respective industries to record lows.
During the early congressional debates for antitrust laws, supporters of trust-busting legislation provided a list of monopolized industries, which were allegedly distorting the market and wreaking havoc on the American economy. That list included steel, sugar, lead, and zinc. Contrary to what was said at the time, the organizations within these industries did not restrain production in order to rig prices upwards. Conversely, most of them actually increased production of these products to record highs.
As a result, prices for these goods spiraled downwards. As Loyola University professor Dr. Thomas DiLorenzo explained:
The average price of steel rails…fell by 53 percent from $68 per ton in 1880 to $32 per ton in 1890. The price of refined sugar fell from 9 cents per pound in 1880, to 7 cents in 1890, to 4.5 cents in 1900. The price of lead dropped 12 percent, from $5.04 per pound in 1880 to $4.41 in 1890. The price of zinc declined by 20 percent, from $5.51 to $4.40 per pound from 1880 to 1890.
And the price-slashing list goes on and on. So much for harming consumers, huh?
These market leaders weren’t harming everyday Americans, they were merely upsetting aspiring steel, sugar, lead, and zinc salesmen who were distraught that they couldn’t make products as good and popular as theirs.
Did the companies in question possess high market shares in their given industries? Yes, but that’s not a bad thing; it’s because consumers flocked to their superior products. And that’s not to say that others were restricted from competing — they could, that is, if they could produce goods of comparable price or quality.
Despite these facts, Congress passed the Sherman Act anyway, a piece of legislation which gives the federal government the power to break up any popular company for merely getting “too big.” The statute disregards consumer choice and artificially raises prices on American goods, all in the name of increasing competition and leveling the playing field.
Fast-forward to the present, and the Sherman Act continues to threaten to break up some of American consumers’ favorite companies. Perhaps the most famous recent instance was United States v. Microsoft Corp. (2001), a case in which the federal government dangled the Sherman Act in Microsoft’s face and harassed the company for allegedly holding 90 percent market share in the desktop operating system market. The Justice Department argued that this was unfair to Netscape, its leading competitor. By the grace of God, Netscape lost the case, and consumers rejected its outdated browser, which now ceases to exist.
Today, as technology has progressed to an even further degree, many internet users have now kicked Microsoft’s Internet Explorer (the former market leader) to the curb and turned to more user-friendly browsers like Safari and Google Chrome. And that’s okay — that’s how the market works. Entrepreneurship is all about the survival of the fittest. A corporation might be on top today, but that doesn’t mean that it will be there tomorrow.
If mediocre corporations want to sell more products and compete, they shouldn’t rely on the government to bash successful businesses around the head with a big stick. Instead, they should earn consumers’ business the old fashioned way — by making a product that’s better or cheaper than their competitors’. The concept of plowing over efficient businesses with antitrust legislation in order to make room for competitors is utterly ridiculous.
Over the past 126 years, the draconian Sherman Act has broken up some of America’s best and brightest companies. Thankfully, at least one person in Washington is refusing to eat its birthday cake. I commend Sen. Rand Paul for taking a stand against this destructive statute, and I hope that he pushes Majority Leader Mitch McConnell to schedule his Anti-Trust Freedom Act for a floor vote so that the Sherman Act can be dispelled into nothingness once and for all.
