Home Major Provisions Sherman Act’s Major Provisions You Must Know

Sherman Act’s Major Provisions You Must Know


The Sherman Antitrust Act of 1890 is a landmark piece of legislation which was passed by the U.S. Congress to prevent businesses from engaging in anti-competitive behavior. It was enacted to protect American consumers from the domination of big corporations and to maintain a healthy competitive environment. In this article, we will discuss the major provisions of the Sherman Act and their significance.

Section 1: Contracts, Combinations, and Conspiracies in Restraint of Trade Prohibited

Section 1 of the Sherman Act prohibits any contract, combination, or conspiracy that restrains trade or commerce among the several states, or with foreign nations. This includes agreements to fix prices, limit production, and allocate markets or customers. The Act was designed to promote competition and prevent the formation of monopolies, thereby protecting consumers and businesses alike.

Section 2: Monopolization and Attempted Monopolization Prohibited

Section 2 of the Sherman Act prohibits any entity from monopolizing, or attempting to monopolize, any part of trade or commerce among the several states, or with foreign nations. This section is intended to prevent businesses from using their market power to engage in anti-competitive behavior, such as predatory pricing or exclusionary practices, that harm consumers and prevent competition.

Clayton Antitrust Act Amendments

The Clayton Antitrust Act was enacted in 1914 as an amendment to the Sherman Act. It was designed to strengthen existing antitrust laws and prevent the formation of monopolies. The Clayton Act includes the following important provisions:

1. Price Discrimination: The Clayton Act prohibits price discrimination between different purchasers of similar goods, where the discrimination leads to a lessening of competition.

2. Tying Arrangements: The Clayton Act prohibits tying arrangements, where a seller makes the sale of one product conditional on the purchase of another product.

3. Exclusive Dealing and Requirements Contracts: The Clayton Act prohibits contracts that require buyers to purchase exclusively from one seller, or that require sellers to only sell to one buyer.

Federal Trade Commission Act

The Federal Trade Commission Act was enacted in 1914 to create the Federal Trade Commission (FTC), a regulatory agency that is responsible for enforcing the antitrust laws. The FTC’s jurisdiction includes the enforcement of the Sherman Act, the Clayton Act, and other laws that regulate competition.


The Sherman Antitrust Act, along with its amendments and companion laws, has had a significant impact on American businesses and consumers. Its major provisions, including the prohibition of contracts and combinations that restrain trade, and the prohibition of monopolization and attempted monopolization, are designed to promote competition and protect consumers. The Clayton Antitrust Act amendments and the Federal Trade Commission Act have reinforced the government’s ability to enforce antitrust laws and maintain a competitive marketplace. Understanding these provisions is essential for businesses and consumers alike to ensure that competition remains vibrant and fair in the United States.

During the late 1800s many different moving factors were in play within all the realms of American culture. Socially, politically and with regards to business, new laws had to be developed to ensure protection for the average everyday citizen. The Sherman Act, formally known as “An Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies”, was developed by Senator John Sherman in order to ensure the protection of an American free market system.

The late 19th century marks the beginning of progressivism within the United States, and this bill was preceded three years earlier by the Interstate Commerce Act, which marked the start of this movement. Progressivism became a response to a rapidly changing American society.

Technology, seemed to change daily. From the late 1800s to the early 1900s the country would experience the major completion of the US railway system, the beginning of an oil sector as a large part of the economy, and the mass production of goods large and small. The public was afraid in many cases of one entity, a person or group of companies colluding together, gaining too much power within the market.

Progressivism sought to correct this balance as a political movement, enacting new regulatory reforms that would shape American culture. The Sherman Act would be one of the first forms of business progressivism seen within the United States.

The Sherman Act’s major provisions are found within its first two sections. The formal title of the Act delineates these sections and provisions fairly well. Unlawful restraints were addressed within the first section, while monopolies were addressed within the second section.

Both sections have a high level of importance with respect to legal business activities. Companies need not always be a monopoly to affect pricing within the market; companies can also work together in an effort to drive up prices for services benefiting both entities.  These benefits can be obtained through either written or oral arguments, market manipulation deemed by the Federal legislature and the courts, as just as dangerous to the free market as a set in stone monopoly.

Usually, implicitly within Section 1, this refers to rival companies coming to an agreement in order to achieve greater market control. While rivals, there are times enemies can see the benefits of becoming friends behind the scenes. In many ways this would then eliminate small time competitors within the market since, unbeknownst to those entities, a large market share is actually controlled by top rivals. This restrains the inherent competitive nature of a free market system, and thereby, is deemed illegal and considered as a felony.

Section 2 is much more specific and does not have as broad of an interpretation as Section 1 may have.  Restraint of fair market practices are no longer the concern in Section 2 of the Sherman Act, but rather the direct attempts of a person or persons to capture a market on a whole exercising monopolistic power. Through a monopoly, a single provider of services exists, the opposite of what a free market is.

However, the law does inherently recognize that a monopoly can arise naturally. In some cases this can be expected, and in such instances it is the exercise of monopolistic power that is deemed illegal. However, what occurs more often in the United States is the actions of companies to dominate a sector. It is easier to control a market (become monopoly) if a company simply just absorbs its competitors and vertically integrates. This is seen as an act of creating a monopoly, also deemed illegal under Section 2.

Through the Sherman Act, progressivism was allowed to take hold within the first two sections of the document. It ended up building off of the prior conceived Interstate Commerce Act, yet now focused more so on business regulation as a whole within the United States and concerning the influences of foreign actors as well. While other laws would need to be developed in the future in order to expand upon the Sherman Act, it has become the basic anti-trust law within the United States.