Home Anti Trust Law Background of the Sherman Antitrust Act You Must Know

Background of the Sherman Antitrust Act You Must Know


The Sherman Antitrust Act is one of the most significant pieces of legislation in modern American history. Passed by Congress in 1890, it was designed to prevent monopolies and promote fair competition in industry. This article explores the background of the Sherman Antitrust Act and its impact on American business.

The Need for Antitrust Legislation

In the late 19th century, industrialization in America led to the rise of large corporations and conglomerates. These companies often became so powerful that they could control entire markets and stifle competition. This led to concerns among policymakers, who believed that such monopolies were harmful to the economy and the broader public interest.

The Role of John Sherman

Senator John Sherman of Ohio was the driving force behind the Sherman Antitrust Act. In 1888, he introduced his first antitrust bill, which was voted down. Two years later, he introduced another bill, which became the foundation of the Sherman Antitrust Act. The bill was finally passed by Congress in 1890 and signed into law by President Benjamin Harrison.

The Purpose of the Sherman Antitrust Act

The Sherman Antitrust Act was designed to promote fair competition in industry by preventing monopolies and other forms of anticompetitive behavior. The law prohibits contracts, combinations, and conspiracies that restrain trade or commerce among the states or with foreign nations.

Enforcement of the Sherman Act

The Sherman Antitrust Act is enforced by the Department of Justice and the Federal Trade Commission (FTC). Violators of the act can be fined up to $100 million for corporations and $1 million for individuals. In some cases, antitrust violators can also face jail time.

Impact of the Sherman Antitrust Act

Since its passage, the Sherman Antitrust Act has had a significant impact on American business. It has been used to break up several major monopolies, including Standard Oil, AT&T, and Microsoft. It has also led to the growth of consumer protection and antitrust activism.


The Sherman Antitrust Act remains an essential piece of American legislation that has helped to promote fair competition and prevent monopolies. It has been used to break up some of the largest corporations in history and continues to play a vital role in protecting consumers from anticompetitive behavior.

After the Civil War had ended and reconstruction began, the Federal Government of the United States began to realize simply that business practices, both large and small, may be threatened by a lack of regulation. The first attempt to curtail the effects of a purely unregulated market occurred in 1887 with the passage of the Interstate Commerce Act, which regulated trade between states.

Three years later Senator John Sherman, the brother of the famous Civil War general of the North, was able to pass what would become known as the Sherman Antitrust Act, in an effort to increase competition within United States industry.

Senator Sherman, who was considered a financial authority of his day, had already begun to recognize the diminishing capacity with the US industry sector to sustain fair competitive trade. More and more companies were seeking to vertically integrate within their business models, either through colluding with fellow industry leaders or making an attempt to control their industry sector as a whole from top to bottom. These actions ran against what is the American form of capitalistic free trade.

The free market is defined by many sellers and buyers able to enter into the market. Such competitiveness would thereby ensure a lower price for a good to a buyer. Sherman recognized that by the forming of monopolies within certain sectors, whether by an individual or by companies working in unison, companies could control the price of their goods, and thus, limit the options for an everyday consumer.

With technology advancing at a rapid rate there was both many more goods consumers could purchase and many more sectors that could be manipulated. While laws governing these actions were present, they were not always consistent from state to state nor were they commonly known. The public and their elected legislators did begin to recognize this threat to the American system of free market trade. The passage of the Sherman Antitrust Act sought to correct this market imbalance through government regulation and judicial enforcement ensuring a level of protection to the consumer.

Within the first to sections of the Sherman Antitrust Act, passed in 1890, the government would eliminate the largest threats to the free market. The first section, Section 1, would go onto explain the how relationships through contracts, both oral and written, could threaten the free market and would therefore be deemed illegal. Section 2 goes onto outline that not all market control just happens between two or more business entities, but a person or company can seek to control a market on a whole creating a monopoly, which is also illegal.

The Sherman Antitrust Act would lay the legal foundation of what it would take to break up monopolies within the United States. Unlike the Interstate Commerce Law, the Sherman Act also included threats to US business practices by individuals outside American borders. Foreign interests could also disrupt fair business practices and had to be taken into account when forming the law. While his brother was the famous Civil War general, Senator John Sherman was a financial general within the United States Senate creating and passing one of the central business laws which is still readily referenced and applied today.