SHERMAN ANTITRUST ACT
The Sherman Act
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Signed on July 2, 1890.
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Was a landmark federal statute on competition law passed
by the U.S. Congress.
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Prohibits certain business activities that reduce
competition in the marketplace.
The Sherman Act
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The act requires the United States federal government to
investigate and pursue trusts, companies, and
organizations suspected of being in violation.
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It was the first federal statute to limit cartels and
monopolies.
Senator John Sherman (R-Ohio)
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Nicknamed "The Ohio
Icicle"
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Principal author of the Act.
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Sherman served as a
Congressman and Senator
from Ohio during the Civil
War and into the late 19th
century.
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After being ratified in the Senate on April 8th,
1890 by a vote of 51-1, the Sherman Act passed
unanimously (242-0) in the House of
Representatives on June 20, 1890.
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The Sherman Act was signed into law on July 2,
1890 by President Benjamin Harrison.
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According to Senator Sherman, the act was to:
"protect the consumers by preventing
arrangements designed, or which tend, to
advance the cost of goods to the consumer."
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Another author of the act, Senator George Hoar
of Massachusetts said that a person: "...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 was if) it
involved something like the use of means which
made it impossible for other persons to engage in
fair competition."
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The law attempts to prevent the artificial raising
of prices by restriction of trade or supply.
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In other words, an innocent monopoly, or a
monopoly achieved solely by merit, is perfectly
legal, but acts by a monopolist to artificially
preserve his/her status, or nefarious dealings to
create a monopoly, are not.
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What do you think these statements mean?
Monopoly
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Section 2 of the Act forbade monopoly but draws a
distinction between coercive and innocent monopoly.
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The Act is not meant to punish businesses that come to
dominate their market passively or on their own merit.
Only those that intentionally dominate the market
through misconduct, which generally consists of
conspiratorial conduct.
Constitutional Basis For Legislation
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Congress claimed power to
pass the Sherman Act
through its constitutional
authority to regulate
interstate commerce.
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Federal courts only have
jurisdiction to apply the act to
conduct that restrains or
substantially affects either
interstate commerce or trade
within the District of
Columbia.
Criticism of the Act
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One branch of criticism focuses on whether the Act
improves competition and benefits consumers, or merely
aids inefficient businesses at the expense of more
innovative ones.
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Do you think this is a fair criticism?
Political Cartoons
Reflection Questions
Answer In Notebook
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Why was it necessary for government to enact antitrust
laws?
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What was the main goal of the Sherman Antitrust Act?
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In which instance is a monopoly ok?
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Do you think the government has a responsibility to
interfere in the marketplace? Why or why not?
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Please answer in complete sentences.