The Sherman Antitrust Act is the 1890 federal law that makes it illegal for businesses to conspire in ways that restrain trade and for any single firm to monopolize a market through unfair tactics. Its two operative sections are short, but between them they cover most of what American antitrust law prohibits. Violations are federal felonies punishable by up to 10 years in prison for individuals and fines reaching $100 million for corporations, and injured parties can sue for three times their actual damages plus attorney’s fees. More than 130 years after its passage, the statute remains the backbone of competition enforcement in the United States, applied today against digital platforms with the same force it once carried against oil and rail trusts.
What Section 1 Prohibits
Section 1 targets collective conduct. It outlaws any agreement between two or more independent businesses that unreasonably restricts interstate or international trade.1Office of the Law Revision Counsel. 15 USC 1 – Trusts, Etc., in Restraint of Trade Illegal; Penalty A single company acting on its own cannot violate Section 1; the prosecutor or plaintiff has to show coordination between separate actors.
Courts split those agreements into two categories based on how obviously harmful the conduct is.
Per Se Violations
Some agreements are treated as automatically illegal, and the defendant does not get to argue that the arrangement was reasonable or produced benefits. Price-fixing among competitors is the classic example. If rival companies agree on what they will charge, the deal is unlawful whether or not the agreed price looks fair. Bid-rigging works the same way: competitors quietly decide in advance who will win a contract. Market-allocation schemes, where rivals split up territories or customer groups so they never have to compete, also fall in this bucket, as do horizontal group boycotts where competitors collectively refuse to deal with someone.2Federal Trade Commission. The Antitrust Laws
Rule of Reason Analysis
Everything else gets a more nuanced review. Under the rule of reason, courts weigh the competitive harm of an agreement against its benefits to consumers. A joint venture between two companies might restrict competition in some narrow sense while producing a better product or lowering costs. If the pro-competitive effects outweigh the harm, the agreement stands.2Federal Trade Commission. The Antitrust Laws Vertical agreements, meaning arrangements between a manufacturer and its distributors rather than between competitors, are always evaluated this way.
What Section 2 Prohibits
Section 2 aims at individual firms. It makes it a felony to monopolize, attempt to monopolize, or conspire to monopolize any part of interstate or international trade.3Office of the Law Revision Counsel. 15 USC 2 – Monopolizing Trade a Felony; Penalty Having a monopoly is not itself illegal. A company that dominates its market because it built a better product, ran smarter operations, or got lucky has broken no law. The statute reaches only firms that use their dominance to shut out competitors through improper means.
Courts apply a two-part test. First, the firm must actually hold monopoly power in a defined market, meaning the ability to raise prices or exclude rivals without losing significant business. Second, it must have gained or preserved that power through exclusionary conduct rather than superior performance.4U.S. Department of Justice. Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act – Chapter 2
Predatory pricing is a textbook example. A dominant firm cuts prices below its own costs long enough to drive competitors out, then raises prices once the market clears. Tying arrangements are another common target. A tying arrangement forces a buyer who wants one product to also purchase a second, unrelated product. Courts ask whether the seller has enough power in the first product to distort competition in the second, and whether a meaningful amount of commerce is affected. Tying was once treated as automatically illegal, but courts now increasingly balance anticompetitive harm against legitimate business justifications.
Penalties for a Sherman Act Violation
Violations under either section are federal felonies carrying the same maximum criminal punishments:
- Individuals face up to $1 million in fines and up to 10 years in federal prison.
- Corporations face fines of up to $100 million.
Those statutory caps are not always the ceiling. Under the Alternative Fines Act, a court can impose a fine of up to twice the gross gain the defendant earned from the scheme or twice the gross loss victims suffered, whichever is greater, when that figure exceeds the statutory maximum.5Office of the Law Revision Counsel. 18 USC 3571 – Sentence of Fine In large international cartel cases, actual fines have run into the hundreds of millions.
Civil exposure is often larger. Anyone injured by an antitrust violation can sue for three times their actual damages, plus attorney’s fees.6Office of the Law Revision Counsel. 15 USC 15 – Suits by Persons Injured That treble-damages remedy, which actually lives in the Clayton Act, turns $10 million in provable harm into a $30 million judgment before fees. Courts can also award prejudgment interest on actual damages when circumstances justify it. Businesses and individuals facing threatened harm from anticompetitive conduct can additionally ask a federal court for an injunction ordering the violator to stop.7Office of the Law Revision Counsel. 15 USC 26 – Injunctive Relief for Private Parties In government cases, courts can go further and order divestiture or restructuring to restore competition.
Timing matters. Criminal charges must be brought within five years of the offense, and civil plaintiffs have four years from when the cause of action accrued to file suit.8Office of the Law Revision Counsel. 15 US Code 15b – Limitation of Actions
Who Enforces the Law
The Department of Justice Antitrust Division is the only federal agency with authority to bring criminal charges under the Sherman Act. Its prosecutors concentrate on price-fixing and bid-rigging cartels, particularly those affecting government contracts and consumer goods.9U.S. Department of Justice. Criminal Enforcement The Federal Trade Commission can challenge anticompetitive practices through civil proceedings but cannot pursue criminal cases. State attorneys general can also file suit on behalf of their residents.10U.S. Department of Justice. 7-3.000 – Criminal Enforcement
The Antitrust Division’s most effective weapon against cartels is not a subpoena but an incentive. Under its Corporate Leniency Policy, the first company to voluntarily disclose its role in a price-fixing, bid-rigging, or market-allocation conspiracy can escape criminal prosecution entirely, provided it fully cooperates with the investigation.11U.S. Department of Justice. Leniency Policy A parallel Individual Leniency Policy offers the same deal to individuals who self-report. The result is a genuine prisoner’s dilemma inside every cartel: whoever confesses first walks, while everyone else faces the full force of prosecution. That dynamic has cracked open some of the largest cartels in history.
Who and What Is Exempt
The Sherman Act does not reach every industry or every kind of coordination. Several important carve-outs exist.
Labor Organizations
Federal law declares that human labor is “not a commodity or article of commerce” and that unions and agricultural cooperatives formed for mutual help are not illegal combinations under the antitrust laws.12Office of the Law Revision Counsel. 15 USC 17 – Antitrust Laws Not Applicable to Labor Organizations Without that provision, collective bargaining itself could be attacked as a conspiracy to fix the price of labor.
Insurance
The McCarran-Ferguson Act historically shielded the “business of insurance” from federal antitrust scrutiny, so long as the activity was regulated by state law and did not involve boycott or coercion. That exemption still covers life insurance and property or casualty insurance. The Competitive Health Insurance Reform Act removed it for health insurance and dental insurance, keeping only narrow safe harbors for sharing historical loss data and developing standard policy forms.
Petitioning the Government
Under the Noerr-Pennington doctrine, a company cannot face antitrust liability for lobbying legislators, filing lawsuits, or otherwise petitioning the government, even when the goal is to hurt a competitor. The right to petition is constitutionally protected. The exception is a “sham” petition, meaning one that is objectively baseless and filed to weaponize the process itself against a rival rather than to obtain a government outcome.
State-Authorized Conduct
When a state legislature deliberately displaces competition in a particular industry and actively supervises the private conduct that results, businesses operating under that framework are immune from federal antitrust claims. Professional licensing schemes are the common example. Immunity requires both a clearly articulated state policy and active state supervision; a private actor cannot claim it just by pointing at a loose state connection.
How Courts Have Applied the Law
The Sherman Act’s two operative sections are deliberately broad, and most of its real content comes from Supreme Court decisions interpreting them.
The 1911 Standard Oil case was the first major test. The Court ordered the breakup of John D. Rockefeller’s Standard Oil Company, which controlled roughly 90 percent of the nation’s oil refining, into more than 30 separate entities. The decision also established a legal standard that still governs today: the Sherman Act prohibits only “unreasonable” restraints of trade, not every agreement that technically limits competition.13Justia. Standard Oil Co. of New Jersey v. United States, 221 US 1 (1911) That rule-of-reason framework remains the default analytical approach for most antitrust claims.
The AT&T breakup in 1982 and the Microsoft case of the late 1990s carried the same principles into modern network industries. More recently, a federal court held in 2024 that Google violated Section 2 by maintaining its search engine monopoly through exclusive default agreements with device manufacturers and browsers. The remedies ordered in 2025 barred Google from entering exclusive distribution contracts for its search engine, Chrome browser, and AI assistant, and required Google to share certain search data with competitors so they could build viable alternatives.14U.S. Department of Justice. Department of Justice Wins Significant Remedies Against Google Section 2’s prohibition on exclusionary conduct, the ruling made clear, applies to digital platforms as squarely as it once applied to oil trusts.
How It Fits With the Rest of Antitrust Law
The Sherman Act is the core, not the whole. Congress passed the Clayton Act in 1914 to address competitive harms the Sherman Act’s language did not clearly cover, including mergers that substantially lessen competition, interlocking directorates, and certain forms of price discrimination.2Federal Trade Commission. The Antitrust Laws The Clayton Act also created the private treble-damages remedy and the injunction right that give the Sherman Act much of its practical bite. The Federal Trade Commission Act, passed the same year, created the FTC and gave it authority to challenge “unfair methods of competition,” a phrase broad enough to reach conduct that might not technically violate the Sherman Act.
Even so, the Sherman Act carries the weight. It is the only one of the three that authorizes criminal penalties, it established the doctrines courts still apply, and it supplies the legal framework for the biggest monopolization cases the government brings.