Sherman Act Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Sherman Act, written in plain English, along with examples of how it is used.

What is Sherman Act?

The primary Federal antitrust law that was established to put an end to companies conspiring with competitors to fix prices.

History and Meaning of Sherman Act

The Sherman Antitrust Act is a federal law that was passed by Congress in 1890. The act prohibits any anti-competitive practices such as price-fixing, monopolization, and rigging bids among businesses. Its main purpose was to preserve competition and protect consumers by preventing companies from creating business monopolies that would potentially harm consumers.

The law is named after Senator John Sherman, who championed the antitrust movement in the United States. It was the first major law designed to restrict the power of big business and was strengthened over time by other acts, such as the Clayton Antitrust Act of 1914.

Examples of Sherman Act

  • A group of oil companies agrees to increase oil production and raise its price. This violates the Sherman Act since it's considered price-fixing and restricts competition.
  • A famous software company uses its dominant market position to restrict competitors or stifle innovation. This can also violate the Sherman Act, as it is considered monopolization.
  • Two leading healthcare providers agree to divide their territories and not compete against each other, violating the Sherman Act's prohibition against market allocation.

Legal Terms Similar to Sherman Act

  • Clayton Antitrust Act: The Clayton Antitrust Act builds on the Sherman Antitrust Act of 1890 by defining specific prohibited practices and further restricting anti-competitive behaviors.
  • Federal Trade Commission Act: The Federal Trade Commission Act established the Federal Trade Commission as an independent government agency that enforces antitrust laws and protects consumers from unfair business practices.
  • Robinson-Patman Act: The Robinson-Patman Act is another federal law that prohibits price discrimination, where a seller charges different prices to different customers for the same product. It is an amendment to the Clayton Antitrust Act.