A monopoly is a situation in which there is a single supplier or seller of a good or service for which there are no close substitutes. Economists and others have long known that unregulated monopolies tend to damage the economy by:
1. charging higher prices 2. providing inferior goods and services and 3. suppressing innovation as compared with a competitive situation (i.e., the existence of numerous, competing suppliers of a good or service). During the Gilded Age, the federal government took few steps to curb the power of “Big Business.” In general, government helped business by its absence of regulations or corporate taxes, and its failure to protect either workers or consumers. Under the laissez faire ideology of the Gilded Age, government was not supposed to interfere in the relations between producers and buyers, or employers and employees. |
Reformers demanded that the government take measures to regulate “Big Business” and to prevent the formation of monopolies. The abuses of some businesses were so glaring that U.S. lawmakers acknowledged that monopolies posed a greater threat to free enterprise than the risks of government interference. This led to the passage of one of the first anti-trust laws (laws against monopolies), the Sherman Anti-Trust Act (1890).
This ground breaking piece of legislation was the first measure enacted by the U.S. Congress to prohibit trusts (or monopolies of any type). Although several states had previously enacted similar laws, they were limited to intrastate commerce. The Sherman Antitrust Act, in contrast, was based on the constitutional power of Congress to regulate interstate commerce. The goals of this law was to protect consumers from the efforts of monopolies to unfairly restrain trade and to preserve economic competition. |