Glossary term
Sherman Antitrust Act of 1890
The Sherman Antitrust Act of 1890 is a foundational U.S. antitrust law prohibiting certain restraints of trade and monopolization.
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What Is the Sherman Antitrust Act of 1890?
The Sherman Antitrust Act of 1890 is a foundational U.S. antitrust law. It prohibits certain agreements that restrain trade and conduct that monopolizes, attempts to monopolize, or conspires to monopolize markets.
The law remains central to U.S. competition policy. It works alongside later statutes, including the Federal Trade Commission Act and the Clayton Act.
Key Takeaways
- The Sherman Act was passed in 1890 and remains a core U.S. antitrust law.
- Section 1 addresses contracts, combinations, or conspiracies that restrain trade.
- Section 2 addresses monopolization, attempted monopolization, and conspiracy to monopolize.
- Some conduct, such as price fixing among competitors, can be treated especially harshly.
- Antitrust analysis is fact-specific and should not be reduced to company size alone.
How the Sherman Act Works
The Sherman Act targets anticompetitive conduct, not ordinary success. A company can become large by competing well, but it can violate antitrust law if it unlawfully restrains competition or maintains monopoly power through exclusionary conduct.
Enforcement can come from the U.S. Department of Justice, the Federal Trade Commission, state attorneys general, and private plaintiffs. Remedies may include injunctions, damages, penalties, or changes to business practices.
Criminal enforcement is especially associated with hard-core cartel conduct, while many civil cases involve detailed analysis of market power and competitive effects.
Key Sherman Act Concepts
Concept | Meaning | Example concern |
|---|---|---|
Restraint of trade | Agreement that unreasonably limits competition | Price fixing or market allocation |
Monopolization | Maintaining monopoly power through improper conduct | Exclusionary practices |
Attempt to monopolize | Conduct aimed at gaining monopoly power unlawfully | Predatory or exclusionary behavior |
Rule of reason | Fact-specific balancing of competitive effects | Some vertical agreements |
Per se treatment | Certain conduct treated as inherently illegal | Hard-core cartel behavior |
Why It Matters
The Sherman Act matters because competition affects prices, wages, innovation, quality, and market access. Antitrust law is designed to protect the competitive process, not individual competitors from fair competition.
For businesses, antitrust risk can affect pricing, distribution, mergers, joint ventures, trade association activity, and communications with competitors.
Limits and Misunderstandings
The Sherman Act does not make every monopoly illegal. The legal issue is how market power was obtained or maintained and whether conduct harmed competition.
It also does not automatically prohibit aggressive competition, low prices, or business growth. The facts, market definition, and competitive effects matter.
The Bottom Line
The Sherman Antitrust Act is a cornerstone of U.S. competition law. It targets unlawful restraints of trade and monopolization while leaving room for companies to compete, grow, and win customers lawfully.