One of the most complicated, and controversial, pieces of legislation from the turn of the 20th century was the Sherman Antitrust Act of 1890. It was written in response to several important events at the time, all of which affected the direction the country and the economy was headed.
Standard Oil had become accustomed to the practice of offering rebates to railroads, which helped lessen the costs of transportation for the railroad and improved their profit margins. Because Standard Oil had grown so massive so quickly, the company was sitting on a large cash reserve and able to absorb some of the hit.
At the time, and today to some extent, it was popular for large businesses to hold multiple properties in a trust. Those trusts were criticized by journalists and detractors as schemes for price fixing. Standard Oil represented a good example of why. The company was exercising its rights within the system of free capitalism, but those rights threatened to disrupt competition in the market. Economists argue whether more or less regulation was the solution, but the Federal Government, specifically Senator John Sherman, was concerned that this practice was granting Standard Oil an unfair advantage over its competition.
Congress had already attempted to enact antitrust legislation before, which Sherman had helped to write, but he was never concerned with the concept of trusts. The Sherman Act focused on the “unfair advantage” aspect. He sought to make it illegal for companies to create an environment that naturally favored their interests, which he felt would create a monopolistic climate.
