In 1890, the 51st Congress passed the Sherman Antitrust Act, named for Senator John Sherman of Ohio. The law, intended to thwart trusts and monopolies that operated in "restraint of trade or commerce," was a response to a growing concern over the expanding power of big business.

Sherman said at the time that the statute "does not announce a new principle of law, but applies old and well recognized principles of common law."

While the Sherman Act made it illegal to monopolize or to restrain trade through unfair collaborations or conspiracies, the statute didn't specify exactly what conduct would be prohibited. That task was left to federal judges who would continually shape and change the law.

Early Applications

Shortly after 1890, antitrust sentiment waned, and the Sherman Act was not widely applied. Where it was employed, its effects were often minor.

In the early days of antitrust legislation, the Supreme Court maintained a strict interpretation of the Sherman Act. The first came in 1895 with U.S. v. E.C. Knight Co., when the court ruled that the Sherman Act did not apply to a trust composed of major sugar producers which controlled 98% of the country's sugar refining capacity. The court held that the law did not extend to manufacturing, stating that "commerce succeeds to manufacture, and is not a part of it."

The Act's Rebirth

During the first decade of the 20th century, concern grew around the country over major corporations' growing monopolistic practices. Theodore Roosevelt's "square deal" philosophy -- which struck a balance between the rights of companies and those of the average citizen -- bolstered the effectiveness of antitrust legislation.

In 1902 Roosevelt began his war on trusts. He persuaded Congress to form a Bureau of Corporations to regulate big business and on Feb. 19, he brought his first antitrust suit under the Sherman Act against J.P. Morgan's Northern Securities Corp.

During his time in office, Roosevelt would file suit against more than 40 large corporations.

In Northern Securities Co. v. United States, the Supreme court ruled that the Sherman Act could be applied to holding companies. The court stated that an arrangement putting two competing railroads under one larger company illegally restrained trade.

In 1909, William Howard Taft succeeded Roosevelt both as President and trust-buster. Under Taft, two historic antitrust cases would further shape the Sherman Act. In 1911, American Tobacco was declared an illegal monopoly and was broken up into separate companies. That same year, the court ruled that John D. Rockefeller's Standard Oil should be broken up into 33 companies.

But the court also qualified their ruling on Standard Oil, stressing that the Sherman Act outlawed only unreasonably anticompetitive restraints.

New Laws Arrive

While the Sherman Act helped the government break up many large trusts, it soon proved to be too open to interpretation. Furthermore, the act was often used to prosecute labor unions rather than trusts, an eventuality that flew in the face of the statute's protect-the-common-man spirit. It would take further legislation to ensure the protection of a competitive business climate in the 20th century.

During Woodrow Wilson's "New Freedom," Congress passed the Clayton Antitrust Act of 1914. Wilson wanted to create a law that would clearly prohibit certain specific business practices: price discrimination; tying together multiple products; corporate mergers; and interlocking directorates, trusts formed by companies with common members on their respective boards of directors. After passing the Clayton Act, Congress created the Federal Trade Commission to enforce antitrust law.

Sherman and Clayton, coupled with the Federal Trade Commission, make up the backbone of antitrust law in the U.S.

Enforcement

The Federal Trade Commission is responsible for temporarily halting suspected anticompetitive practices. The Justice Dept. investigates and, if necessary, prosecutes offending companies.

The Antitrust Boom

Despite a lapse from 1920-37, antitrust prosecution grew more plentiful as the 20th century progressed. In the peak year of 1977, the FTC and the Justice Dept. filed nearly 100 antitrust cases. Injured private plaintiffs filed 1611 suits that year alone.

The 1970s and 1980s witnessed some of the largest antitrust actions ever. In 1982, IBM won a decade-long battle when charges of illegal monopoly against it were dropped. And in 1983, Justice won a victory in what was arguably the largest antitrust case in the latter half of the century when the Supreme Court broke AT&T into a single long-distance service and the seven "baby Bells." But 12 years of Republican Administration swayed the courts toward a more conservative bent. By 1992, Ronald Reagan and George Bush had appointed two-thirds of the the nation's federal judges. As the court became more solidly conservative, antitrust prosecution dwindled.

The Supreme Court had epitomized this trend in the 1986 case Matsushita v. Zenith, when they invited the lower courts to weed out claims that they deemed economically irrational. Moreover, federal budget cuts ensured limited resources for antitrust prosecution.

Antitrust Under Clinton

Antitrust practices have experienced a renaissance under the Clinton Administration as a result of the expanding economy and the political climate. The number of investigations are once again on the rise. As of May 1998, the Justice Dept. was involved in 415 antitrust investigations and 93 court cases. There is good reason for the renewed activity: in 1997, Justice and the FTC received notice of 3,702 mergers, twice as many as in 1991.

In addition to the current Microsoft suit, Justice is investigating alleged antitrust violations by companies from MasterCard to Fort Worth's A-1 Auto Glass.

The department has recently accepted guilty pleas from 25 New York real estate brokers and speculators who rigged bids at real estate foreclosure auctions in Queens, N.Y., and from industry giant Eastman Chemical for participating in an international price-fixing conspiracy in the food preservatives industry.

Assistant Attorney General Anne Bingaman led off the current era at Justice's Antitrust Division. It was Bingaman who first decided to investigate Microsoft in 1993. Bingaman pursued the investigation of Microsoft's software licensing practices even after a three-year probe by the FTC failed to result in antitrust charges.

On July 17, 1997, Joel I. Klein succeeded Bingaman as Justice's antitrust czar, and has continued the trend she began. Upon his confirmation, Attorney General Janet Reno succinctly summed up the government's current mood on antitrust issues: "In this global economy, it is so important for the Antitrust Division to be vigilant in looking out for the interests of American consumers and businesses -- and Joel will continue to be their champion."

Given their current legal woes, Microsoft and its lawyers no doubt see things in a different light.