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July 2, 2003

Happy Birthday, Sherman Act

Filed under: pre-06-2006 — David Giacalone @ 10:55 am

On July 2, 1890, the Sherman Act was born, making monopolies and combinations in restraint of trade illegal.  One century later, in the 1990 case of FTC v. Superior Court Trial Lawyers Assn., the U.S. Supreme Court confirmed that Sherman Act principles apply to restraints in the market for legal services — even when quality of service claims are being raised as justification for the restraints or the lawyers are attempting to change Government policy or action. [493 U.S. 411 (1990)]

As a result, the antitrust laws are available to help protect consumers of law-related services from attempts by combinations of lawyers to limit the choices available to consumers or to raise prices above market level.

Here are two crucial paragraphs from the SCTLA decision [493 U.S. 411, 423-424], which should be studied by all bar groups and lawyers, not just antitrusters :

As we have remarked before, the “Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services.” National Society of Professional Engineers v. United States, 435 U.S. 679, 695 (1978). This judgment “recognizes that all elements of a bargain – quality, service, safety, and durability – and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers.” Ibid. That is equally so when the quality of legal advocacy, rather than engineering design, is at issue.

The social justifications proffered for respondents’ restraint of trade thus do not make it any less unlawful. The statutory policy underlying the Sherman Act “precludes inquiry into the question whether competition is good or bad.” Ibid. Respondents’ argument, like that made by the petitioners in Professional Engineers, ultimately asks us to find that their boycott is permissible because the price it seeks to set is reasonable. But it was settled shortly after the Sherman Act was passed that it “is no excuse that the prices fixed are themselves reasonable. See, e. g., United States v. Trenton Potteries Co., 273 U.S. 392, 397 -398 (1927);

The birthday of the Sherman Act is also, in a way then, Customer Independence Day — offering American consumers freedom from cartel activities that would raise prices and limit choices, even those done from a sense of paternalism or noblesse oblige.  Like all rights, of course, they need to be vigorously guarded and asserted in order to survive and serve their purpose. 

Read this piece on Antitrust and the Learned Professions, from the American Antitrust Institute, for a short history on the topic.

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