Congress passed the Sherman Antitrust Act on July 2, 1890, and President Benjamin Harrison signed it into law the same day. It was the first federal statute to outlaw monopolies and agreements that restrain interstate or international trade, and more than 135 years later it still anchors American antitrust enforcement.1National Archives. Sherman Anti-Trust Act (1890)
How the Bill Moved Through Congress
Senator John Sherman of Ohio introduced the legislation in the 51st Congress. The Senate Judiciary Committee rewrote much of the original language to make sure the statute could reach a wide range of industries and hold up in court. The revised bill passed the Senate 51 to 1 on April 8, 1890, and cleared the House by a unanimous 242-to-0 vote on June 20, 1890. President Harrison signed it on July 2. The lopsided margins reflected how thoroughly the trust problem had unsettled both parties by the end of the 1880s.1National Archives. Sherman Anti-Trust Act (1890)
What the Sherman Act Prohibits
The statute has two operative sections, and each one addresses a different kind of anticompetitive conduct.
Section 1: Agreements That Restrain Trade
Section 1, codified at 15 U.S.C. § 1, makes it illegal for separate businesses to enter into any agreement that restrains interstate or international trade.2Office of the Law Revision Counsel. 15 USC 1 – Trusts, Etc., in Restraint of Trade Illegal; Penalty The classic targets are price fixing, bid rigging, and deals in which competitors carve up customers or territories among themselves. Section 1 requires coordination between independent parties; a single firm acting alone cannot violate it.
Section 2: Monopolization
Section 2, at 15 U.S.C. § 2, focuses on individual firms. It prohibits monopolizing, attempting to monopolize, or conspiring to monopolize any part of interstate or international commerce.3Office of the Law Revision Counsel. 15 US Code 2 – Monopolizing Trade a Felony; Penalty Size alone is not the offense. A company that dominates its market through better products or smarter operations is fine under Section 2. The provision reaches firms that acquire or protect monopoly power through predatory or exclusionary tactics rather than legitimate competition.
How Courts Test Conduct
Not every restraint gets the same scrutiny. Some conduct is treated as illegal on its face, with no need to weigh actual market effects. Price fixing, bid rigging, and agreements among competitors to divide up customers or territories all fall into this “per se” category. Everything else is judged under the “rule of reason,” which asks whether a practice’s competitive harms outweigh its benefits. Vertical arrangements between manufacturers and distributors, for instance, are always analyzed this way because they can sometimes make markets more efficient even while limiting certain choices.4Cornell Law School. Antitrust Laws
Private Lawsuits and Treble Damages
People and businesses injured by antitrust violations can sue in federal court and recover three times their actual damages. That private right of action now sits in Section 4 of the Clayton Act, at 15 U.S.C. § 15, which superseded the Sherman Act’s original damages provision.5Office of the Law Revision Counsel. 15 US Code 15 – Suits by Persons Injured Any private antitrust suit must be filed within four years of the violation.6Office of the Law Revision Counsel. 15 US Code 15b – Limitation of Actions Trebling the damages award is what makes it financially rational for private plaintiffs to take on the cost and complexity of an antitrust case.
What Violators Face Today
The penalties in the 1890 statute were mild by modern standards. Violations were misdemeanors punishable by fines of up to $5,000 and up to a year in jail, which meant almost nothing to corporations earning millions.1National Archives. Sherman Anti-Trust Act (1890) Congress upgraded violations to felonies in 1974 and raised the maximums sharply again with the Antitrust Criminal Penalty Enhancement and Reform Act of 2004.7U.S. Government Publishing Office. Public Law 108-237
The current ceilings, for both Section 1 and Section 2 offenses, are:
- Corporations: fines up to $100 million per violation.
- Individuals: fines up to $1 million and up to 10 years in prison.2Office of the Law Revision Counsel. 15 USC 1 – Trusts, Etc., in Restraint of Trade Illegal; Penalty
Criminal cases tend to concentrate on the most flagrant conduct, especially price-fixing cartels and bid-rigging schemes, where intent is easiest to prove.8Federal Trade Commission. The Antitrust Laws
How Courts Have Shaped the Statute
The Sherman Act’s plain text is broad, and much of what it means in practice comes from Supreme Court decisions applying it. The most important is Standard Oil Co. v. United States (1911), which ordered the breakup of John D. Rockefeller’s Standard Oil empire and required the parent company to transfer stock in its subsidiaries back to their shareholders.9Justia. Standard Oil Co. of New Jersey v. United States, 221 US 1 (1911) The Court also held in that case that the Act prohibits only unreasonable restraints, those producing monopoly consequences such as higher prices, reduced output, or lower quality. If the statute were read to ban every literal restraint of trade, it would swallow countless ordinary business contracts. That reasoning became the rule of reason still used today.
The Sherman Act has since been used to break up AT&T and other dominant firms, and in recent years enforcement has moved into the technology sector. The Department of Justice’s 2020 civil lawsuit against Google over its search dominance was the first major monopolization case the DOJ had brought and litigated to a decision since the Microsoft case filed in 1998. The DOJ has also signaled renewed willingness to pursue criminal cases under Section 2 after decades of leaving that tool aside.
Two Companion Laws That Fill the Gaps
The Sherman Act does not stand alone. In 1914, Congress passed the Clayton Antitrust Act to reach specific practices the Sherman Act left ambiguous, including mergers that substantially lessen competition, price discrimination between different buyers, and interlocking directorates where the same person serves on the boards of competing firms.8Federal Trade Commission. The Antitrust Laws The same year, the Federal Trade Commission Act created the FTC and gave it authority to investigate and challenge unfair methods of competition. Neither statute replaced the Sherman Act; they operate alongside it, and together they give federal antitrust enforcers a broader set of tools than the 1890 law provides on its own.