A BEECHMONT CREST ONLINE GUIDE
MERGERS & ACQUISITIONS
Antitrust Law
Antitrust law limits the ability of companies to merge with or acquire other firms.
After more than a century of antitrust legislation, these laws now often have a preemptive effect. Many potential mergers never make it to the initial stages, because of the likelihood that they will likely run afoul of antitrust law. Many other mergers are stopped by antitrust intervention after they pass through the initial stages.
Sherman Antitrust Act
Originally passed in 1890, the Sherman Antitrust Act is the foundation of all subsequent antitrust laws.
The Sherman Act was signed by President Benjamin Harrison. The law is named for its author, Senator John Sherman of Ohio.
The Sherman Act contains broad, expansive language, so that it can be applied to a wide range of situations.
The first two sections of the Sherman Act are the most significant:
Section 1 prohibits any conspiracy, combination, or agreement that restrains trade.
Section 2 prohibits monopolies, and attempts to monopolize.
From the Sherman Act:
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal”
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony….”
During its initial years in force, the Sherman Act prevented few mergers. The 1890s was characterized by high rates of merger activity and market concentration in many industries.
The so-called “trustbusting” presidents, Theodore Roosevelt and William Howard Taft, vigorously enforced the Sherman Act.