The Sherman Antitrust ActOfficially re-designated as the "Sherman Act" by Congress in the Hart–Scott–Rodino Antitrust Improvements Act of 1976, (Public Law 94-435, Title 3, Sec. 305(a), 90 Stat. 1383 at p. 1397). (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies. It was passed by Congress in 1890 and is named for Senator John Sherman, its principal author.
The Sherman Act broadly prohibits 1) anticompetitive agreements and 2) unilateral conduct that monopolizes or attempts to monopolize the relevant market. The Act authorizes the Department of Justice to bring suits to enjoin (i.e., prohibit) conduct violating the Act, and additionally authorizes private parties injured by conduct violating the Act to bring suits for treble damages (i.e. three times as much money in damages as the violation cost them). Over time, the federal courts have developed a body of law under the Sherman Act making certain types of anticompetitive conduct per se illegal, and subjecting other types of conduct to case-by-case analysis regarding whether the conduct unreasonably restrains trade.
The law attempts to prevent the artificial raising of prices by restriction of trade or supply. "Innocent monopoly," or monopoly achieved solely by merit, is legal, but acts by a monopolist to artificially preserve that status, or nefarious dealings to create a monopoly, are not. The purpose of the Sherman Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses."This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it has also been said that competition law in the European Union (EU) tends to protect the competitors in the marketplace, even at the expense of market efficiencies and consumers."<
Background In Spectrum Sports, Inc. v. McQuillan 506 U.S. 447 (1993) the Supreme Court said:
According to its authors, it was not intended to impact market gains obtained by honest means, by benefiting the consumers more than the competitors. Senator George Hoar of Massachusetts, another author of the Sherman Act, stated that "a man who merely by superior skill and intelligence [...] got the whole business because nobody could do it as well as he could was not a monopolist," but that it was monopoly if their business practices "made it impossible for other persons to engage in fair competition".
In 1937, the business Apex Hosiery suffered losses when strikers occupied their business, and prevented shipments of orders, including shipments to other states. Apex attempted to sue the union leader for treble damages as provided by the Sherman Act. Apex argued that the union had interfered with interstate commerce. The court held that the Sherman Act did not apply to the unlawful occupation of a business.
The Supreme Court stated in the case Apex Hosiery Co. v. Leader 310 U.S. 469, 310 U. S. 492-93 and n. 15:
At Addyston Pipe and Steel Company v. United States, 85 F.2d 1, affirmed, 175 U. S. 175 U.S. 211;
At Standard Oil Co. of New Jersey v. United States, 221 U. S. 1, 221 U. S. 54-58.
Provisions Original text The Sherman Act is divided into three sections. Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anti-competitive in nature. Thus, these sections supplement each other in an effort to prevent businesses from violating the spirit of the Act, while technically remaining within the letter of the law. Section 3 simply extends the provisions of Section 1 to U.S. territories and the District of Columbia.
Subsequent legislation expanding its scope The Clayton Antitrust Act, passed in 1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman Antitrust Act. The Clayton Antitrust Act added certain practices to the list of impermissible activities: price discrimination against competing companies conditioning sales on "exclusive dealing" agreements one person serving on the board of directors for two competing companies mergers and acquisitions that may significantly reduce market competition The Clayton Antitrust Act specifically states that unions are exempt from this ruling.
The Robinson–Patman Act of 1936 amended the Clayton Act. The amendment proscribed certain anti-competitive practices in which manufacturers engaged in price discrimination against equally-situated distributors. For example, if a wholesale supplier sells products to a franchise at a price that is not available to a smaller business.
Legacy
The federal government began filing cases under the Sherman Antitrust Act in 1890. Some cases were successful and others were not; many took several years to decide, including appeals.
Notable cases filed under the act include: United States v. Workingmen's Amalgamated Council of New Orleans (1893), which was the first to hold that the law applied to labor unions. Chesapeake & Ohio Fuel Co. v. United States (1902), in which the trust was dissolved Northern Securities Co. v. United States (1904), which reached the Supreme Court, dissolved the company and set many precedents for interpretation. Hale v. Henkel (1906) also reached the Supreme Court. Precedent was set for the production of documents by an officer of a company, and the self-incrimination of the officer in his or her testimony to the grand jury. Hale was an officer of the American Tobacco Co. Standard Oil Co. of New Jersey v. United States (1911), which broke up the company based on geography, and contributed to the Panic of 1910–1911. United States v. American Tobacco Co. (1911), which split the company into four. United States v. General Electric Co (1911), where GE was judged to have violated the Sherman Anti-Trust Act, along with International General Electric, Philips, Sylvania, Tungsol, and Consolidated and Chicago Miniature. Corning and Westinghouse made consent decrees. United States v. Motion Picture Patents Co. (1915), which ruled that the company was abusing its monopolistic rights, and therefore, violated the Sherman act. Federal Baseball Club v. National League (1922) in which the Supreme Court ruled that Major League Baseball was not interstate commerce and was not subject to the antitrust law. United States v. National City Lines (1953), related to the General Motors streetcar conspiracy. United States v. AT&T Co., which was settled in 1982 and resulted in the breakup of the company. Wilk v. American Medical Association (1990) Judge Getzendanner issued her opinion that the AMA had violated Section 1, but not 2, of the Sherman Act, and that it had engaged in an unlawful conspiracy in restraint of trade "to contain and eliminate the chiropractic profession." United States v. Microsoft Corp. was settled in 2001 without the breakup of the company. Fleischman vs Albany Medical Center (2010), where nurses alleged Albany Medical Center suppressed their wages in violation of the Sherman Anti-Trust Act, by sharing wage information with other area hospitals. References: (1) Casetext Fleischman vs Albany Medical Center (2) Justia Docket No. 10-0846-mv United States v. Google LLC (2020, ongoing as of 2025), wherein Judge Amit P. Mehta ruled Google acted illegally to maintain a monopoly in online search.
Legal application Constitutional basis for legislation Congress claimed power to pass the Sherman Act through its constitutional authority to regulate interstate commerce. Therefore, federal courts only have jurisdiction to apply the Act to conduct that restrains or substantially affects either interstate commerce. (Congress also has ultimate authority over economic rules within the District of Columbia and US territories under the 17th enumerated power and the Territorial Clause, respectively.) This requires that the plaintiff must show that the conduct occurred during the flow of interstate commerce or had an appreciable effect on some activity that occurs during interstate commerce.
Elements A Section 1 violation has three elements:E.g., Richter Concrete Corp. v. Hilltop Basic Resources, Inc., 547 F. Supp. 893, 917 (S.D. Ohio 1981), aff'd, 691 F.2d 818 (6th Cir. 1982); Consolidated Farmers Mut. Ins. Co. v. Anchor Sav. Association, 480 F. Supp. 640, 648 (D. Kan. 1979); Mardirosian v. American Inst. of Architects, 474 F. Supp. 628, 636 (D.D.C. 1979).
an agreement; which unreasonably restrains competition; and which affects interstate commerce.
A Section 2 monopolization violation has two elements:; see also
the possession of monopoly power in the relevant market; and the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
Section 2 also bans attempted monopolization, which has the following elements:
qualifying exclusionary or anticompetitive acts designed to establish a monopoly specific intent to monopolize; and dangerous probability of success (actual monopolization).
Violations "per se" and violations of the "rule of reason" Violations of the Sherman Act fall (looselyThe truth is that our categories of analysis of anticompetitive effect are less fixed than terms like 'per se', 'quick look', and 'rule of reason' tend to make them appear. We have recognized, for example, that 'there is often no bright line separating per se from rule of reason analysis,' since 'considerable inquiry into market conditions' may be required before the application of any so-called 'per se' condemnation is justified. Cal. Dental Association v. FTC at 779 (quoting NCAA, 468 U.S. at 104 n.26). "Whether the ultimate finding is the product of a presumption or actual market analysis, the essential inquiry remains the same whether or not the challenged restraint enhances competition." 526 U.S. at 779–80 (quoting NCAA, 468 U.S. at 104).) into two categories:
Violations "per se": These are violations that meet the strict characterization of Section 1 ("agreements, conspiracies or trusts in restraint of trade"). A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Conduct characterized as unlawful per se is that which has been found to have a pernicious effect on competition' or 'lack[s] ... any redeeming virtue (quoting ). Such conduct "would always or almost always tend to restrict competition and decrease output".. When a per se rule is applied (in contrast to a rule of reason analysis), a civil violation of the antitrust laws is found merely by proving that the conduct occurred and that it fell within a per se category.; Gough v. Rossmoor Corp., 585 F.2d 381, 386–89 (9th Cir. 1978), cert. denied, ; see (a per se rule forecloses analysis of the purpose or market effect of a restraint); Northern Pac. Ry., 356 U.S. at 5 (same). Conduct considered unlawful per se includes horizontal price-fixing,. horizontal market division,Continental T.V., 433 U.S. at 50 n. 16 (limiting by making vertical market division rule-of-reason analysis). and concerted refusals to deal. for collusive effects and for exclusionary effects.