Duhaime's Law Dictionary

Sherman Antitrust Act Definition:

American federal statutes that defines and prohibits contracts or conspiracies which are designed to restrain trade.

Related Terms: Anti-trust

Although called antitrust, the statute is not directly related to trusts but, rather, imposes standards upon practise elsewhere descriptively referred to as competition law such as Canada's Competition Act.

Called Sherman after the principal author of the statute, Ohio Senator John Sherman (pictured below, 1823-1900).

It is also known as a charter of economic freedom.

The Sherman Antitrust Act codifies competition law in the United States. As elsewhere with competition law, it attempts to prohibit anti-competitive and usually secret agreements (such as monopolies and price-fixing) between merchants to control prices or distribution and to ensure fairness in the marketplace and transparent supply and demand pricing.

The Sherman Antitrust Act, passed in 1890, now forms Chapter 15 of the United States Code.

John ShermanThe core of the statute is at §1 and 2:

"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

"Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony....

"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony"

In the 1940 case of Apex Hosiery, Justice Stone of the United States Supreme Court wrote of "the evil at which the Sherman (Antitrust) Act was aimed":

"(The statute) was enacted in the era of trusts and of combinations of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern. The end sought was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury. For that reason the phrase restraint of trade, which, as will presently appear, had a well understood meaning at common law, was made the means of defining the activities prohibited."

In Spectrum Sports, Justice White of the United States Supreme Court wrote:

The purpose of the (Sherman Antitrust) Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself."


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