Sherman Antitrust Act facts for kids
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| Long title | An Act to protect trade and commerce against unlawful restraints and monopolies |
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| Enacted by | the 51st United States Congress |
| Citations | |
| Public law | Pub.L. 51-647 |
| Statutes at Large | 26 Stat. 209 |
| Codification | |
| Titles amended | Title 15—Commerce and Trade |
| U.S.C. sections created | 15 U.S.C. §§ 1–7 |
| Legislative history | |
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The Sherman Antitrust Act of 1890 is a United States law. It helps make sure businesses compete fairly. The law stops companies from forming unfair monopolies. A monopoly happens when one company controls almost all of a product or service.
This act was passed by the U.S. Congress. It is named after Senator John Sherman, who was the main person to write it. The law broadly stops two things:
- Agreements between companies that limit competition.
- Actions by one company to create or keep a monopoly.
The Department of Justice can sue companies that break this law. Also, private citizens or businesses hurt by these actions can sue for damages. The law aims to prevent companies from unfairly raising prices. It does this by stopping them from limiting trade or supply.
It's okay for a company to become big and successful because it's good at what it does. This is called an "innocent monopoly." But it's not okay for a company to act unfairly to keep its power. The Sherman Act protects consumers by keeping the marketplace competitive. It does not protect businesses from fair competition.
Contents
What Does the Sherman Act Do?
The Sherman Act has three main parts. Section 1 stops certain unfair business actions. Section 2 deals with companies that become monopolies in a bad way. Section 3 applies these rules to U.S. territories and Washington D.C.
Stopping Unfair Agreements
Section 1 says that any agreement or plan to limit trade is illegal. This includes agreements between companies in different states or with other countries. For example, companies cannot agree to fix prices. They also cannot agree to divide up customers.
Stopping Monopolies
Section 2 makes it illegal for a person or company to become a monopoly unfairly. It also stops them from trying to become a monopoly. This means a company cannot try to control all of a market. They also cannot try to stop others from competing.
How the Law Grew Over Time
The Sherman Act was the first big law against monopolies. But over time, new laws were added to make it stronger.
More Laws to Help Competition
The Clayton Antitrust Act was passed in 1914. It added more rules about what companies could not do. For example, it made these actions illegal:
- Charging different prices to different buyers if it creates a monopoly.
- Agreements where a buyer must only buy from one seller.
- Making a customer buy one product to get another.
- Company mergers that greatly reduce competition.
The Robinson–Patman Act of 1936 changed the Clayton Act. It stopped manufacturers from unfairly charging different prices to similar distributors.
Important Cases and Their Impact
The government started using the Sherman Act in 1890. Some cases were won, and some were lost. Many cases took years to finish.
Famous Cases Using the Act
- United States v. Workingmen's Amalgamated Council of New Orleans (1893): This was the first case to say the law applied to labor unions.
- Northern Securities Co. v. United States (1904): The Supreme Court broke up a large railroad company. This case helped set rules for how the law should be understood.
- Standard Oil Co. of New Jersey v. United States (1911): This case broke up the huge Standard Oil company. It was divided into many smaller companies.
- United States v. American Tobacco Co. (1911): This case split the American Tobacco Company into four parts.
- United States v. AT&T Co. (1982): This case led to the breakup of the large AT&T phone company.
- United States v. Microsoft Corp. (2001): This case was settled without breaking up Microsoft.
- United States v. Google LLC (2020): A judge ruled that Google acted illegally to keep its monopoly in online search.
How the Law is Used Today
The Sherman Act is a federal law. This means it applies across all states. Courts can only use it for actions that affect trade between states.
What Makes a Violation?
For a Section 1 violation (unfair agreements), three things must be true:
- There was an agreement between companies.
- This agreement unfairly limited competition.
- It affected trade between states.
For a Section 2 violation (monopoly), two things must be true:
- A company had a lot of power in a market (monopoly power).
- They got or kept this power on purpose through bad actions. This is different from just being good at business.
Section 2 also stops companies from *trying* to become a monopoly. This means:
- They did unfair things to try to get a monopoly.
- They specifically wanted to become a monopoly.
- They had a good chance of succeeding.
Different Kinds of Violations
Violations of the Sherman Act are usually seen in two ways:
- "Per Se" Violations: These are actions that are always illegal. They are so clearly harmful to competition that courts don't need to look at why they happened. Examples include companies agreeing to fix prices or divide up markets. If a company does one of these, it's automatically a violation.
- "Rule of Reason" Violations: For these, courts look at all the details. They ask if the action actually helps or hurts competition. The court looks at the business, its history, and why the action was taken. If the action unfairly limits trade, it's a violation.
Quick Look Rule
Sometimes, courts use a "quick look" rule. This is for cases that are not "per se" illegal but still look very suspicious. If it seems clear that the action would hurt customers, the company must prove it was harmless.
Monopolies and Misconduct
Section 2 of the Act forbids monopolies that are created unfairly. The law does not punish companies that become big and successful on their own. It only targets companies that intentionally gain or keep market control through bad behavior. This bad behavior often involves the same kinds of agreements forbidden by Section 1.
Unions and the Sherman Act
At first, the Sherman Act was used against labor unions. Unions were seen as groups that limited trade. But in 1914, the Clayton Antitrust Act made some union activities legal. Later, the Norris–La Guardia Act in 1932 made it even clearer that unions were mostly exempt from antitrust laws. The Supreme Court agreed with these exemptions.
See also
In Spanish: Ley Sherman Antitrust para niños
