The Sherman act was passed in the summer of 1890 and was the first federal law to directly address the areas of cartels and monopolies. It was subjected to severe criticism in later days but served as the stepping stone for statutes with regard to the public policy towards monopoly for decades to follow (Sullivan, Nonprice Predation Under Section 2 of the Sherman Act, 1991).
The Sherman act was designed in order to encourage the flow of business in a manner such that monopolistic hold would be prohibited altogether. The act functioned in a manner such that it differentiated between coercive and innocent monopoly. It was designed to primarily address coercive monopoly. In the event that a firm acquired monopolistic control over the industry on the basis of its pure merit and has acquired monopolistic hold without the actual intention of doing so, the act did not categories those firms to have engaged in misconduct. However, in cases where the firm has made use of underhanded means or has intentionally exploited market mechanisms in order to generate a monopolistic environment for itself, the act mandated legal action according to section 2 and 3 (Fugate & Simowitz, 1996). Actions such as the raising of prices through artificial means and the limitation of trading and supplies are considered condemnable and illegal under this act and are to be subjected to legal action.
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