Final answer:
The Sherman Antitrust Act targets actual monopolies, while the Clayton Act is designed to prevent actions that could lessen competition. The FTC and the U.S. Department of Justice enforce these laws. Although monopolies themselves are not illegal if achieved through mechanisms like innovation, restrictions exist against practices that reduce competitive conditions.
Step-by-step explanation:
The Sherman Antitrust Act forbids actual monopolies, whereas the Clayton Act forbids actions that are likely to lessen competition. The Sherman Antitrust Act was the first significant law against monopolies and was passed in 1890 to do away with monopolies and restraints that hinder competition.
One powerful application of this act was the breakup of Standard Oil in 1911, which controlled a vast majority of the oil refining in the United States. On the other hand, the Clayton Act of 1914 outlawed mergers and acquisitions where the outcome would substantially lessen competition, as well as price discrimination and tied sales.
The act was further extended by the Celler-Kefauver Act in 1950, which also restricted vertical and conglomerate mergers. The Federal Trade Commission (FTC) and the U.S. Department of Justice continue to enforce these antitrust laws in the 21st century.
It is important to note that having a monopoly is not inherently illegal under U.S. law. For example, a company may hold a monopoly due to a newly patented invention, allowing it to earn higher-than-normal profits for some time as a reward for innovation.
However, the antitrust laws target restrictive practices that could reduce competition without involving explicit agreements to raise prices or reduce quantity produced.