Difference between Section 1 and Section 2 of the Sherman Act
Difference between Section 1 and Section 2 of the Sherman Act
Section 1 of Sherman Act reads: “Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among several States, or with foreign nations, is
declared to be illegal”.Section 2 of Sherman Act reads: “Every person who shall monopolize, or
attempt to monopolize, or combine or conspire with any person or persons, shall be deemed
guilty of a felony”. Section 1 illegalizes trusts. A trust is defined as an organization that controls
a wide range of companies in an industry. Formation of trusts is an anti-competitive business
activity. Hence, it prevents normal business competition and this affects consumers. It
addresses oligopolies through formation of trusts and collusion. Hence, it forbids contracts and
conspiracy between potential competitors. These contracts include price-fixing contracts
between potential competitors.Section 2 of Sherman Act on the other hand is against
monopolization or misuse of monopoly power. Hence, business actions can be perceived as
violating section 2 of Sherman law if they exhibit monopoly power or the intent to achieve
monopoly power.
How Alcoa case represent a departure
The case represents a departure due to the fact that the final decision issued by the Supreme
Court redefined a standard through which future courts were to evaluate claims of
monopolization. The decision was written a Judge Learned Hand. The decision stressed on the
need to maintain competition and incentives in order to innovate without punishing a superior
and successful producer. The decision that was made by Judge Hand is used today since it
provides language for defending monopolization claims. Moreover, the Alcoa case establishes a
new standard by which monopolization is determined through the classic test.The court
therefore declared and found out that Alcoa had violated section 2 of Sherman Act. This
represents more like a final decision or departure. The final decision was based on the fact and
belief on the undesirability of great industrial consolidations without regard to the economic
results. Hence, the ruling of Alcoa case is an important departure from the rule of reason which
dictates determination of actions in a way that ensures predatory and intent to violate section 2,
monopolization.
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Difference between Section 1 and Section 2 of the Sherman Act
Market power and its significance
Market power is a component of monopolization that may be defined as the ability to influence
the price of a commodity. Market power plays a critical role in judicial setting with the support of
market share. Market power is used to determine monopolization with respect to Alcoa
standard. Market definition on the other hand is important since it is among the vital components
of any given antitrust analysis such as analysis of Sherman Act.Courts make use of cross-price
elasticity of demand during definition of relevant market for calculating market share. After,
definition of relevant market, it becomes easier to determine market power. Sherman Act,
section 2 focuses on monopolization, which can be demonstrated sufficiently by use of market
power combined with a given exclusionary conduct. Examples of such conducts include
leveraging, vertical restraints and refusal to deal.
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