Definition
The Sherman Antitrust Act of 1890 was the first law in the United States to limit business activities thought to be anticompetitive. Furthermore, this law requires the federal government to investigate what are thought to be violations of this law.
Named after its principal author, Senator John Sherman of Ohio, the act remains the foundation for antitrust litigation in the United States.
Explanation
The Sherman Antitrust Act of 1890, along with the Clayton Act of 1914 and the Federal Trade Commission Act of 1914, were groundbreaking statutes geared towards limiting monopolies and cartels. The Second Industrial Revolution (also known as the Technological Revolution) began in the 1860s, and included innovations such as electrification, production lines, as well as mass production. The Sherman Act was a result of public opposition to the power that large corporations were now able to exert in the marketplace. This included railroads, which played a critical role in the transportation of farm crops and other raw materials.
As stated by its author, the intent of the law included:
"To protect the consumers by preventing arrangements designed, or which tend, to advance the cost of goods to the consumer."
Today, the act has a broader interpretation, which includes monopolies, cartels, and other combinations of entities that could potentially impair competition.
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