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Sherman Act's Major Provisions You Must Know

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.

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