Sherman Act: Sections 1 and 2, Penalties, and Lawsuits

The Sherman Antitrust Act makes two kinds of business conduct illegal: agreements between separate companies that unreasonably restrain trade, and conduct by a single firm that acquires or protects monopoly power through means other than competing on the merits. Violations of the Sherman Act are federal felonies. Corporations face fines up to $100 million, individuals face up to $1 million and ten years in federal prison, and anyone injured by the conduct can sue in federal court for three times their actual damages plus attorney’s fees.¹²

What Section 1 Prohibits

Section 1 covers group conduct. It declares illegal every contract, combination, or conspiracy that restrains trade or commerce among the states or with foreign nations.¹ Read literally, that language would sweep in nearly every commercial contract, so courts long ago narrowed it to reach only agreements that unreasonably restrain competition. Two tracks of analysis flow from that reading.

Per Se Violations

Some agreements are treated as illegal on sight, without any inquiry into their competitive effects. These are the classic horizontal cartels between competitors:

Price fixing, where competitors agree on what to charge.
Bid rigging, where companies that should be bidding against each other coordinate so a chosen winner takes the contract at an inflated price.
Market allocation, where rivals divide up customers, territories, or product lines and stay out of each other’s zones.

These are the offenses the DOJ prosecutes criminally. The government does not have to prove that the agreement actually raised prices or hurt any particular customer. Proving the agreement existed is enough.

The Rule of Reason

Most other arrangements between separate companies are judged under the Rule of Reason, which weighs an agreement’s competitive benefits against its harms. Courts examine the specific market, the actual economic impact of the arrangement, and whether the parties could have achieved any legitimate benefit through less restrictive means. A joint venture between two manufacturers to share distribution costs, for example, can survive if it lowers prices without eliminating meaningful competition. Rule of Reason litigation is expensive; both sides typically need economists and detailed market evidence.

Wage-Fixing and No-Poach Agreements

Section 1 applies to labor markets, not just product markets. When competing employers agree to fix wages or agree not to hire each other’s workers, those deals restrain competition for labor the way price fixing restrains competition for goods. The DOJ and FTC announced in 2016 that they would treat naked wage-fixing and no-poach agreements as per se criminal violations when they stand alone rather than serving as part of a legitimate collaboration. The DOJ has since brought criminal charges in several industries on that theory.

What Section 2 Prohibits

Section 2 targets a single dominant firm. It makes it a felony to monopolize, attempt to monopolize, or conspire to monopolize any part of trade or commerce.³ Being a monopoly is not itself illegal. A company that reaches a dominant position through a better product, smarter strategy, or luck has broken no law. Section 2 applies only when a firm gains or holds that power through exclusionary conduct that goes beyond simply outcompeting rivals.

A monopolization claim has two elements. First, the defendant holds monopoly power in a relevant market, meaning the ability to control prices or exclude competitors. Courts generally will not infer monopoly power below a 50 percent market share, and most successful cases involve shares above 70 percent sustained over time.⁴⁵ Second, the firm acquired or maintained that power through anticompetitive conduct rather than competition on the merits.

Before market share can be measured, the court has to define the market. That involves both a product market (all goods or services consumers treat as reasonably interchangeable) and a geographic market (where competition actually happens, given transportation costs and shipping patterns).⁶ Market definition often decides the case. A company that looks dominant in a narrow market may look ordinary in a broad one, so both sides fight hard over the boundary lines.

Criminal Penalties

Sherman Act violations are felonies. The statute sets the maximum fine at $100 million for a corporation and $1 million for an individual, with up to ten years in federal prison.¹ Those caps understate the exposure. A separate federal sentencing statute lets a judge impose a fine of up to twice the gross gain the conspirators earned or twice the gross loss they caused, whichever is greater.⁷ In major cartel cases, that alternative calculation can push corporate fines well above $100 million.

The DOJ reserves criminal prosecution for hard-core per se violations like price fixing and bid rigging. Everything else is handled on the civil side. Recent cases show the range. In early 2026, a man was sentenced to 30 months in federal prison for monopolizing a border-region transit industry through a violent conspiracy, and a storage company owner pleaded guilty to rigging bids on U.S. Air Force healthcare projects.

Private Lawsuits and Treble Damages

Government enforcement is only half the picture. Anyone injured in their business or property by an antitrust violation can file suit in federal court and recover three times the actual damages proven, plus attorney’s fees and court costs.² The treble-damages remedy comes from Section 4 of the Clayton Act rather than the Sherman Act itself, and it is one of the strongest private enforcement tools in American law. A company that caused $50 million in provable harm faces a $150 million judgment before legal fees are counted. Private plaintiffs can also seek injunctions to stop ongoing conduct; a court that grants injunctive relief must also award the prevailing plaintiff’s costs and a reasonable attorney’s fee.⁸

There is a significant catch for consumers. Under the Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, only direct purchasers can sue for treble damages in federal court.⁹ If a manufacturer fixes prices and sells to a wholesaler, who sells to a retailer, who sells to you, you are an indirect purchaser and cannot bring a federal antitrust claim, even though you ultimately paid the inflated price. Most states have responded by passing their own antitrust laws that let indirect purchasers sue under state law; more than 40 jurisdictions, including the District of Columbia, now allow some form of indirect purchaser action. In states that do not, the attorney general can often bring restitution suits on behalf of consumers.

Deadlines to Sue or Prosecute

A private antitrust lawsuit must be filed within four years after the cause of action accrues.¹⁰ Criminal charges generally must be brought within five years of the offense under the standard federal statute of limitations for non-capital crimes.¹¹

These deadlines are not as rigid as they look. Antitrust conspiracies are often hidden by design, so the clock may not start until the plaintiff discovers, or reasonably should have discovered, the violation. The fraudulent concealment doctrine can toll the limitations period when a defendant actively hid the conspiracy, and pending government proceedings and class actions can pause the clock on private claims.

How Violations Come to Light

The DOJ’s leniency program is the single most important tool for cracking cartels. It offers full immunity from criminal prosecution to the first company or individual to self-report participation in a price-fixing, bid-rigging, or market-allocation conspiracy, provided the Division has not already learned about the violation from another source.¹² Corporate leniency protects not just the company but its cooperating directors, officers, and employees from criminal charges. Individual employees can apply on their own, but they must be first in, must not have led or organized the conspiracy, must not have coerced others, and must cooperate fully.¹³ The program creates a prisoner’s dilemma inside every cartel: the first to confess walks away clean, and that fact alone makes conspiracies unstable.

Anyone with information about a suspected antitrust crime can contact the DOJ Antitrust Division’s Complaint Center by email, phone, or mail to the Antitrust Division, U.S. Department of Justice, 950 Pennsylvania Avenue NW, Washington, DC 20530. The Division will disclose a whistleblower’s identity only for law enforcement purposes, and specialized reporting portals exist for healthcare, the concert industry, and government procurement fraud.¹⁴

The Sherman Act’s reach extends past the U.S. border. Foreign companies that participate in cartels or anticompetitive schemes can face U.S. prosecution when their conduct has a direct, substantial, and reasonably foreseeable effect on U.S. commerce.¹⁵ That standard, set by the Foreign Trade Antitrust Improvements Act of 1982, means a cartel operating entirely overseas can still violate the Sherman Act if it raises prices paid by American importers or consumers. The DOJ has used this authority against international cartels in auto parts, air cargo, and LCD panels, and foreign executives have been extradited and imprisoned.¹⁶ Any global conspiracy that touches U.S. markets carries the risk of American criminal prosecution, American treble-damages suits, and American-scale fines.

1
Office of the Law Revision Counsel. 15 USC 1 – Trusts, Etc., in Restraint of Trade Illegal; Penalty
2
Office of the Law Revision Counsel. 15 U.S. Code 15 – Suits by Persons Injured
3
Office of the Law Revision Counsel. 15 USC 2 – Monopolizing Trade a Felony; Penalty
4
Federal Trade Commission. Monopolization Defined
5
U.S. Department of Justice. Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act – Chapter 2
6
United States Department of Justice. 4.3. Market Definition
7
Office of the Law Revision Counsel. 18 U.S. Code 3571 – Sentence of Fine
8
Office of the Law Revision Counsel. 15 USC 26 – Injunctive Relief for Private Parties; Exception; Costs
9
Justia U.S. Supreme Court Center. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)
10
Office of the Law Revision Counsel. 15 U.S. Code 15b – Limitation of Actions
11
Office of the Law Revision Counsel. 18 USC 3282 – Offenses Not Capital
12
Department of Justice. Leniency Policy
13
Department of Justice. Antitrust Division Leniency Policy and Procedures
14
United States Department of Justice. Report Violations
15
Office of the Law Revision Counsel. 15 U.S. Code 6a – Conduct Involving Trade or Commerce With Foreign Nations
16
U.S. Department of Justice. Antitrust Enforcement Guidelines for International Operations