THE SHERMAN ACT
The Sherman Act prevents certain contracts, combinations, or conspiracies in restraint of trade or commerce, and industry monopolies and attempts to monopolize. The following are the basic concepts behind the Sherman Act.
7. What is a “contract, combination, or conspiracy” in restraint of trade?
Section 1 of the Sherman Act prohibits “contracts, combinations, and conspiracies in restraint of trade or commerce”, but it does not define these types of agreements. Common law surrounding the Sherman Act identifies numerous forms of concerted actions between market competitors or members of the value chain that have the intent or effect of restraining trade in the relevant product or service market. These relationships are generally broken into “vertical restraints” and “horizontal restraints” of trade. The various types of vertical and horizontal trade are discussed individually.
• Note: While these above definitions appear to be broad, interdependent or independent activity is not a restraint of trade and will not give rise to a cause of action under Section 1.
• Discussion: What common element do you see among each type of prohibited conduct? Do each of these activities demonstrate the same company intent? Does prohibiting each of these activities seem to serve the same objective?