Glossary · Antitrust

Sherman Antitrust Act: §§ 1 & 2, Treble Damages & Consumer Class Actions

By Steve Levine · Updated July 2, 2026 · 8 min read

Quick Answer

The Sherman Antitrust Act (1890, 15 U.S.C. §§ 1–7) is the foundation of U.S. antitrust law. Section 1 prohibits agreements that unreasonably restrain trade — with horizontal price-fixing, bid-rigging, and market allocation treated as per se illegal — and Section 2 prohibits monopolization and attempts to monopolize. The DOJ Antitrust Division enforces it criminally and civilly (the FTC reaches the same conduct through the FTC Act), and private victims can sue under Clayton Act § 4 for three times their damages plus attorneys' fees, generally within four years. Under Illinois Brick, only direct purchasers recover damages under federal law — but many states' "repealer" statutes let ordinary consumers recover as indirect purchasers, which is why antitrust class actions regularly produce large consumer settlements.

What the Sherman Act Is

Signed into law on July 2, 1890, the Sherman Antitrust Act was Congress's response to the railroad, oil, and industrial "trusts" of the Gilded Age. It remains the core of federal competition law: nearly every antitrust case filed today — from cartel prosecutions to monopolization suits against technology platforms — rests on its two operative sections, codified at 15 U.S.C. §§ 1 and 2.

The statute's language is famously broad ("every contract, combination... or conspiracy, in restraint of trade"), so more than a century of Supreme Court case law supplies the working rules. Read literally, every contract restrains trade in some way; the courts therefore condemn only unreasonable restraints, sorting conduct into the per se and rule-of-reason categories described below. Later statutes build on the Sherman Act — most importantly the Clayton Act (1914), which created the private damages remedy that powers antitrust class actions, and the FTC Act (1914), which created the Federal Trade Commission.

Section 1 — Restraints of Trade, Per Se Rules & the Rule of Reason

Section 1 requires an agreement — two or more separate actors acting in concert. A company acting alone, however aggressively, cannot violate § 1. The classic § 1 violations are horizontal agreements between competitors, and three of them are per se illegal, meaning courts condemn them without hearing any business justification:

  1. Price-fixing. Competitors agreeing on the prices they will charge (or the wages they will pay — see the wage cases below), or on price-related terms like discounts and credit.
  2. Bid-rigging. Competitors coordinating who will win a bid, taking turns, or submitting deliberately losing bids on contracts.
  3. Market or customer allocation. Competitors dividing up territories, product lines, or customers and agreeing not to compete for each other's share.
Everything else — most vertical arrangements between manufacturers and distributors, joint ventures, exclusivity deals, information sharing, and (since Leegin in 2007) resale price maintenance — is judged under the rule of reason: the plaintiff must define a market and show the restraint's anticompetitive effects outweigh its procompetitive benefits. Modern cases also test new fact patterns against these old categories: for example, plaintiffs have alleged that competing landlords' shared use of the same pricing algorithm functioned as a price-fixing agreement — the theory behind the $141.8M RealPage rental-pricing class action settlement, which resolved such claims without any admission of wrongdoing.

Section 2 — Monopolization

Section 2 targets single-firm conduct: monopolization, attempted monopolization, and conspiracies to monopolize. Holding a monopoly is not itself illegal — a firm that wins its market through a better product or lower prices keeps its prize. The offense requires monopoly power in a properly defined market plus the willful acquisition or maintenance of that power through exclusionary conduct: predatory pricing, exclusive dealing that forecloses rivals, tying, refusals to deal in narrow circumstances, and similar tactics that suppress competition rather than beat it.

Section 2 supplies the framework for the government's landmark monopolization cases — from Standard Oil (1911) and AT&T (1982) to Microsoft (2001) and the recent platform cases — and for private suits alleging that a dominant firm's conduct inflated prices or suppressed output. Pay-for-delay pharmaceutical cases, where a brand-drug maker allegedly pays generic rivals to stay off the market, blend § 1 and § 2 theories; consumer settlements like the $35M QVAR inhaler antitrust settlement grew out of that family of claims, resolved without admissions of liability.

Who Enforces It — DOJ, FTC & Private Treble-Damages Suits

The Department of Justice Antitrust Division enforces the Sherman Act both criminally and civilly. Criminal prosecution is generally reserved for per se conduct — hard-core cartels — and the penalties are serious: corporate fines up to $100 million per violation (or up to twice the gain or loss under the alternative-fine statute) and, for individuals, fines up to $1 million and up to 10 years in prison. The FTC does not prosecute the Sherman Act directly, but conduct that violates it is an "unfair method of competition" under FTC Act § 5, so the agency reaches the same conduct civilly. State attorneys general enforce both federal and state antitrust law on behalf of their residents.

For consumers and businesses, the engine is private litigation. Clayton Act § 4 (15 U.S.C. § 15) lets "any person" injured in their business or property by an antitrust violation recover threefold the damages sustained, plus the cost of suit and reasonable attorneys' fees, generally subject to a four-year statute of limitations. Treble damages are deliberately punitive — Congress wanted private plaintiffs to act as "private attorneys general" — and they are why antitrust settlements are routinely among the largest consumer class-action recoveries.

Illinois Brick — Direct vs. Indirect Purchasers

One doctrine shapes who actually gets paid. In Illinois Brick Co. v. Illinois (1977), the Supreme Court held that only direct purchasers — those who bought straight from the price-fixer — may recover damages under federal antitrust law. An ordinary consumer who bought the overpriced product through a retailer is an indirect purchaser and, under federal law, generally cannot recover damages even though the overcharge was passed through to them.

The catch: most states have "Illinois Brick repealer" laws — state antitrust statutes (California's Cartwright Act is the best known) that expressly let indirect purchasers recover. Roughly two-thirds of states plus the District of Columbia allow indirect-purchaser damages in some form. Large antitrust class settlements are therefore often structured with a direct-purchaser class under federal law and consumer (indirect-purchaser) classes under the repealer states' laws. The Supreme Court's Apple v. Pepper (2019) decision, which treated App Store customers as direct purchasers from Apple, shows the line can also be contested case by case.

Antitrust Class Actions — Consumer and Wage Cases

Price-fixing injures everyone who bought the product, in roughly the same way — which is exactly the shape of case the class action was built for. Overcharges are usually small per person and provable classwide through economic analysis, treble damages and fee-shifting make the cases economically viable, and multi-defendant cartels tend to settle in waves. That is why antitrust cases produce some of the largest consumer settlements on this site — from the $50M Disney YouTube TV & DirecTV Stream antitrust settlement over streaming-TV pricing to pharmaceutical and component-price cases. Most such settlements resolve the claims without any admission of wrongdoing, and class members typically share the fund pro rata.

The same law protects workers, because labor markets are markets too. Agreements among employers to fix or suppress wages, or "no-poach" pacts not to hire each other's employees, are restraints of trade in the labor market; since 2016 federal enforcers have treated naked wage-fixing and no-poach agreements as candidates for criminal prosecution. On the civil side, workers have won substantial recoveries: the $200.2M beef and pork processing-plant wage settlement resolved claims that meat processors conspired to suppress plant workers' pay, and the $375M UFC fighter-pay antitrust settlement resolved fighters' claims that the promotion suppressed athlete compensation — in each case without admissions of liability. Antitrust class actions also interact with the procedural machinery covered elsewhere in this dictionary, including CAFA federal jurisdiction and class certification fights over whether the overcharge can be proven classwide.

Frequently Asked Questions

What does the Sherman Antitrust Act prohibit?

Two things. Section 1 prohibits contracts, combinations, and conspiracies in restraint of trade — agreements between separate businesses that unreasonably restrict competition, such as price-fixing, bid-rigging, and dividing up markets or customers. Section 2 prohibits monopolization, attempted monopolization, and conspiracies to monopolize — using improper, exclusionary conduct to acquire or maintain monopoly power, as opposed to winning through a better product or lower prices.

What is the difference between a per se violation and the rule of reason?

Certain horizontal agreements between competitors — price-fixing, bid-rigging, and market or customer allocation — are treated as per se illegal, meaning courts condemn them without weighing any claimed business justification. Most other restraints, including most vertical arrangements between manufacturers and distributors, are judged under the rule of reason, where the court weighs the restraint's anticompetitive effects against its procompetitive benefits in a defined market.

Can consumers get money from a Sherman Act violation?

Yes. Section 4 of the Clayton Act lets any person injured by an antitrust violation sue for three times their actual damages plus costs and attorneys' fees, generally within four years. Under the Supreme Court's Illinois Brick rule, only direct purchasers can recover damages under federal law, but many states have "repealer" statutes that let indirect purchasers — ordinary consumers who bought through retailers — recover under state antitrust law. Many large consumer antitrust settlements combine both kinds of claims.

Who enforces the Sherman Act?

The Department of Justice Antitrust Division enforces it both criminally and civilly — criminal prosecution is generally reserved for per se conduct like price-fixing and bid-rigging, with corporate fines up to $100 million (or more, based on gain or loss) and individual penalties up to $1 million and 10 years in prison. The Federal Trade Commission reaches the same conduct civilly as an unfair method of competition under the FTC Act, and state attorneys general and private plaintiffs also sue.

Does the Sherman Act cover wages and hiring, not just prices?

Yes. Agreements among employers to fix or suppress wages, or not to poach each other's workers, are analyzed as restraints of trade in labor markets. Since 2016, federal enforcers have said naked wage-fixing and no-poach agreements can be prosecuted criminally, and workers have brought civil class actions on the same theories — the meat-processing wage cases and the UFC fighter-pay litigation are prominent examples that produced large settlements resolving such claims without admissions of wrongdoing.

Related Terms

About This Page

General legal information about the Sherman Antitrust Act, not legal advice. OpenClassActions.com is a consumer news site and is not a law firm or a settlement administrator. Statutes and case law change, and how they apply depends on the facts of a particular situation. For the controlling text, see 15 U.S.C. §§ 1–7 and the Clayton Act (15 U.S.C. § 12 et seq.), along with the federal court decisions interpreting them. Cases described on this page involved allegations that were resolved by settlement, typically without any admission of wrongdoing. If you think your rights were affected, consult a qualified attorney in your jurisdiction.

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