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Sherman Anti-Trust Act

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Competition law
Basic concepts
Anti-competitive practices
Enforcement authorities and organizations

The Sherman Antitrust Act (Sherman Act, 26 Stat. 209, 15 U.S.C. §§ 17) is a landmark federal statute in the history of United States antitrust law (or "competition law") passed by Congress in 1890. Passed under the presidency of Benjamin Harrison, it prohibits certain business activities that federal government regulators deem to be anti-competitive, and requires the federal government to investigate and pursue trusts.

In the general sense, a trust is a centuries-old form of a contract whereby one party entrusts its property to a second party. These are commonly used to hold inheritances for the benefit of children, for example. The specific sense from 19th Century America used in the law refers to a type of trust which combines several large businesses for monopolistic purposes – to exert complete control over a market – though the law addresses monopolistic practices even if they have nothing to do with this specific legal arrangement. In most countries outside the United States, antitrust law is known as "competition law."

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 perfectly 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.

Over time, the Act has also been used more broadly, to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels.

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.


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