What federal act outlaws monopolies and contracts that restrain trade?

The Sherman Act of 1890 is the correct answer because it was one of the first pieces of federal legislation aimed specifically at preventing anti-competitive practices. This landmark law prohibits monopolies and any contracts, combinations, or conspiracies that restrain trade or commerce among the states or with foreign nations. The essence of the Sherman Act is to promote fair competition and protect consumers from the economic harm that can arise from monopolies and collusion between competing businesses.

Understanding this historical context is crucial in the study of U.S. antitrust laws. The Sherman Act laid the foundation for modern antitrust policies and has been the basis for numerous legal actions against monopolistic practices. It addresses both the formation of monopolies and the actions that might lead to anticompetitive behavior, ensuring that market dynamics remain fair and competitive, which benefits consumers and promotes innovation.

This knowledge may also help one analyze the effects of subsequent legislation, like the Clayton Act and the Federal Trade Commission Act, which build upon the principles established in the Sherman Act to address specific concerns related to competition and consumer protection.