Sherman Act (15 U.S.C. §§ 1–2)
Citation: 15 U.S.C. §§ 1–7
Overview
The Sherman Antitrust Act of 1890 is the foundational federal antitrust statute. It contains two core prohibitions: § 1 targets concerted anticompetitive conduct (agreements), and § 2 targets unilateral monopolistic conduct. Both sections use broad language that courts have spent over a century interpreting. Violations carry criminal penalties (for the most serious § 1 offenses) and civil liability.
§ 1 — Restraints of Trade
Statutory text: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
Courts have interpreted “every” to mean “unreasonable” — not literally every agreement that incidentally restrains trade.
Elements
- Agreement / concerted action — must involve two or more legally distinct entities; unilateral conduct cannot violate § 1 (Copperweld — parent-subsidiary are one entity).
- Unreasonable restraint of trade — analyzed under per se rule, rule of reason, or quick look.
Per Se Rule
Applied to categories of conduct so clearly anticompetitive that no procompetitive justification can redeem them. Once categorized, plaintiff need only prove the agreement existed.
| Conduct | Authority |
|---|---|
| Horizontal price fixing | United States v. Socony-Vacuum Oil |
| Horizontal market/customer allocation | United States v. Topco Associates |
| Horizontal bid rigging | Per se |
| Group boycotts (hard-core) | Klor’s, Inc. v. Broadway-Hale (some flexibility post-Nynex) |
| Tying arrangements (traditional rule) | Jefferson Parish (four-part test; some argue rule of reason applies) |
Rule of Reason
The default standard for most § 1 cases (Board of Trade of Chicago v. United States). A structured burden-shifting framework:
- Plaintiff’s burden: Define the relevant market; show that the agreement has actual or likely anticompetitive effects (e.g., market power, output reduction, price increase).
- Defendant’s burden: Proffer procompetitive justifications for the restraint.
- Plaintiff’s rebuttal: Show that less restrictive alternatives exist, or that anticompetitive effects outweigh procompetitive benefits.
Ohio v. American Express (2018) reinforced that in two-sided platform markets, plaintiffs must show net harm across both sides of the market.
Quick Look (Truncated Rule of Reason)
Applied when the anticompetitive nature of the conduct is obvious but per se treatment is not warranted — typically for restraints in “new” contexts or those with at least some potential justification. Defendant must offer a plausible procompetitive justification; if none, condemned without full market analysis.
Key case: NCAA v. Board of Regents of University of Oklahoma — horizontal restrictions on TV broadcasts; obviously anticompetitive; quick look applied.
Proving Agreement
Direct evidence: Written communications, witness testimony, recorded conversations.
Circumstantial evidence: Parallel conduct alone is insufficient (Theatre Enterprises). Must add “plus factors”:
- Acts against individual self-interest absent agreement.
- Exchange of price or output information.
- Opportunity to conspire (e.g., trade association meetings).
- Motive to conspire.
Pleading standard: Bell Atlantic Corp. v. Twombly — complaint must allege “plausible” conspiracy, not merely parallel conduct; mere parallel conduct insufficient.
§ 2 — Monopolization
Statutory text: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”
Monopolization
Elements:
- Monopoly power in the relevant market — generally defined as power to control prices or exclude competition; courts often use market share as a proxy (70%+ typically sufficient; 50–70% may suffice depending on barriers to entry).
- Willful acquisition or maintenance of monopoly power — distinguishable from growth through superior product, business acumen, or historical accident (United States v. Grinnell Corp. — lawful monopoly vs. unlawful maintenance).
Conduct examples: Exclusive dealing, predatory pricing, refusal to deal (Aspen Skiing), bundled discounts, product design changes with no efficiency justification.
Attempted Monopolization
Elements:
- Anticompetitive conduct — exclusionary behavior directed at excluding rivals.
- Specific intent to monopolize.
- Dangerous probability of success — assessed by current market share and trajectory.
Predatory Pricing
- Below-cost pricing intended to drive out rivals, followed by recoupment through supracompetitive pricing.
- Brooke Group test: (1) pricing below an appropriate measure of cost; (2) reasonable prospect (or dangerous probability) of recouping the investment through later supracompetitive pricing.
- Courts are skeptical of predatory pricing claims because low prices benefit consumers in the short run.
Relevant Market Definition
Required for both § 1 (rule of reason) and § 2.
Product market:
- SSNIP test (Small but Significant Non-transitory Increase in Price): what products are reasonably interchangeable from consumer perspective?
- Cross-elasticity of demand: high cross-elasticity = same market.
- Brown Shoe practical indicia: industry recognition, distinct customers, distinct prices, sensitivity to price changes.
Geographic market:
- Area in which sellers compete for the same customers.
- May be local, regional, national, or global depending on transport costs and trade barriers.
Enforcement
| Method | Authority |
|---|---|
| Criminal prosecution | DOJ (hard-core cartels — price fixing, bid rigging) |
| Civil injunctive relief | DOJ and FTC |
| Private treble damages | § 4 of Clayton Act (15 U.S.C. § 15) |
| State AG enforcement | State AGs under parens patriae |