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21.1: Sherman Act
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- What is the first U.S. antitrust law?
- What is antitrust anyway?
- A trust (now known as a cartel) is a group of firms acting in concert. The antitrust laws made such trusts illegal and were intended to protect competition. In the United States, these laws are enforced by the Department of Justice’s (DOJ) Antitrust Division and by the Federal Trade Commission (FTC).
- The Sherman Act, passed in 1890, is the first significant piece of antitrust legislation. It prevents mergers and cartels that would increase prices.
- Having a monopoly is legal, provided it is obtained through legal means. Legal means include “superior product, business acumen or historic accident.”
- Modern antitrust investigations involve a two-part test. First, does the firm have monopoly power in a market? If it does not, no monopolization has occurred and there is no issue for the court. If it does, did the firm use illegal tactics to extend or maintain that monopoly power?
- The Sherman Act provides criminal penalties, which are commonly applied in price-fixing cases.