Final answer:
The Sherman Act is a foundational federal law established in 1890 to combat monopolies and antitrust practices by breaking up companies that restrain free trade. It served to foster competition and has been supplemented by additional antitrust legislation over the years. The act's provisions have been wielded to break up large conglomerates, including the historic case against Standard Oil.
Step-by-step explanation:
The Sherman Act is a significant federal law passed in 1890 as a tool against anti-competitive practices. It was designed to address the concerns about monopolies that were prevalent during the industrialization period of the United States. The act gave the government the authority to break up companies that were found to be restraining free trade by forming monopolies or engaging in other practices, such as price-fixing or creating barriers to entry, which allowed them to maintain high prices and reduce output. In its quest to protect consumers and competition, the act targeted those large firms that had organized themselves in the legal form of a 'trust'.
The legislation addressed the issues related to restraint of trade and was initially a broad and somewhat vague law. At its core, the Sherman Act's purpose was to encourage competition and to provide a fair playing field for businesses by preventing those with too much market power from abusing that power. An early application of the act's power was the 1911 Supreme Court decision that resulted in the breakup of Standard Oil into several smaller companies.
The Sherman Act has been supplemented over the years by additional antitrust laws such as the Clayton Antitrust Act and the Federal Trade Commission Act. Anti-competitive practices like price discrimination, exclusive dealing contracts, and certain mergers and acquisitions intended to reduce competition significantly have all come under scrutiny.