What Did the Sherman Antitrust Act Do?

The Sherman Antitrust Act of 1890, named after its author Sen. John Sherman, protected consumers from the efforts of trusts, cartels and monopolies to unfairly restrain trade. Its aim was to preserve economic competition in the marketplace, and it imposed severe penalties on those violating the legislation.

The U.S. Constitution granted Congress power to regulate interstate commerce, and Congress invoked this power when passing the Sherman Antitrust Act. Because the activities of multistate corporations fell outside the jurisdiction of state courts, federal intervention was necessary to oversee them. Violations almost always considered illegal under the Sherman Act included price fixing, excluding competition, rigging bids, limiting output, dividing markets and refusing to deal. Punishments for violating the act included imprisonment, fines and three-fold payment of damages to the victims.

Early invocations of the Sherman Antitrust Act were against trade unions, which courts ruled to be illegal. Congress passed the Clayton Antitrust Act and the Federal Trade Commission Act in 1914 to strengthen the Sherman Antitrust Act and delineate further practices that violated it. Companies prosecuted under the act included the Aluminum Company of America, which was convicted of monopolistic practices, and American Telephone and Telegraph Company, which was forced to break up into smaller companies. Although Microsoft Corporation was convicted of monopolistic practices concerning its Internet browser software in 1999, the decision was overturned after appeal.