The Anti-Trust Law was introduced by Senator John Sherman on March 21, 1890. It was drawn up in response to the very strong public feeling excited by the movement of that day, for combination of manufacturing enterprises in this country into single powerful corporations. From the debates on the hill, it is evident that the legislators had in mind primarily such industrial undertakings, and not combinations of the railways. This was not strange, in view of the novelty of the phenomenon of industrial trusts, of the pledge of political convention platforms to restrain the powers of such amalgamations, and of the fact that railway combinations were not an incident of the period. With the railways of 1890, indeed, the problem was rather to make both ends meet in the finances of any given company than to reach out for acquisition of competitors. But, on the other hand, the legislation of 1890 unquestionably did not exclude the railways—a point of much importance in its bearing on subsequent discussion.

As originally proposed, the Act of 1890 declared illegal "all arrangements, contracts, agreements, trusts, or combinations . . . to prevent full and free competition," not only in the sale of articles of production and manufacture, but in their transportation. As finally amended and enacted, the law made the very broad declaration that "every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is hereby declared to be illegal," and it declared it to be the duty of the Federal attorney-general and the several district attorneys "to institute proceedings in equity to prevent and restrain such violations. " . . .

In the opinion of the highest court, the Anti-Trust Law applied, not alone to industrial, but to railway combinations. We have seen to what extent, under the auspices of the ambitious railway promoters of 1901 and 1906, this consolidation movement had gone forward, and to what results it seemed to point. In large measure, the subsequent moves of the Roosevelt Administration's law department were concerned with the industrial trusts or combinations; but it was not illogical that in 1902, its first challenge should have been directed against these railway projects. The note was sounded in February, 1902, when the Attorney-General, Mr. P. C. Knox,2 entered suit for the Government against the Northern Securities Company. This concern was an outgrowth of the famous "Northern Pacific corner" of May 9, 1901, when the disastrous contest between the Harriman and Morgan interests, for ownership of the Northern Pacific Railway, was compromised by deposit of their stock and that of the parallel Great Northern Railway Company in the hands of a holding corporation. This corporation had a stock of $400,000,000, which it exchanged for shares in the two railways; its directors were selected from the rival boards.

Mr. Knox attacked the merger as "a virtual consolidation of two competing transcontinental lines," whereby not only would "monopoly of the interstate and foreign commerce, formerly carried on by them as competitors, be created," but whereby, through use of the same machinery, "the entire railway systems of the country may be absorbed, merged, and consolidated." A year after its introduction, on April 9, 1903, the Circuit Court before which the suit was brought decided for the Government, the essential part of its decision being the dictum that the merger "destroyed every motive for competition between the two roads engaged in interstate traffic, which were natural competitors for business." Appealing thence to the Federal Supreme Court, the company's counsel fought on the theory that the merger was no restraint of trade because the Northern Securities had committed no overt act in such direction, and because the combination had primarily been formed to protect and develop trade. The court, in its decision of March 14, 1904, found that, "necessarily, the constituent companies ceased, under such a combination, to be in active competition for trade and commerce," and that, independently of overt acts, "the mere existence of such a combination, and the power acquired by the holding company, . . constitute a menace to, and a restraint upon, that freedom of commerce which Congress intended to recognize and protect."

In a bench of nine, four justices ruled on this ground against the appeal and four in favor of it. The ninth member, Justice Brewer, dissented from the larger application of the above-cited principles, on the ground that "the broad and sweeping language of the opinion of the court might tend to unsettle legitimate business enterprises, stifle or retard wholesome business activities," and he rejected the application of the Anti-Trust Law to "minor contracts in partial restraint of trade," already recognized by common law. But he held the Northern Securities device to be one which "might be extended until a single corporation whose stock was owned by three or four parties would be in practical control . . . . of the whole transportation system of the country," and on that ground concurred in dismissing the appeal. The order of the lower court, that the Northern Securities Company be dissolved, was therefore reaffirmed. In due course, tho not until after another legal fight over methods of redistributing its holdings to owners of Northern Securities shares, the company surrendered its Northern Pacific and Great Northern stock, and practically went out of existence.

It was a victory of high importance, and a check, whose completeness was not fully recognized at first, to the effort of consolidated capital to seat itself in complete and impregnable control of industry. Much was made, by critics, of the Administration's attitude, of the fact that redistribution of the holdings left the Morgan and Harriman interests still in possession of their part of the disputed shares. But this argument overlooked the facts that the stocks were now again very largely on the open market, and that the most promising machinery ever contrived for complete eventual monopoly had been shattered.

In my judgment, the overthrow of the Northern Securities combination was the most positive achievement of the Roosevelt Administration in the field of corporation finance. It was something more even than protection of the citizen from the aggression of capital suggested by Justice Brewer; the interest of investors, of the financial markets themselves, would have been placed in the most serious jeopardy had that merger been upheld. For the promoters of the Northern Securities were traveling on a path of capital inflation which logically had no end except in eventual exhaustion of credit and general bankruptcy.

The Northern Securities victory by no means ended the activities of the Government prosecutors against corporations, tho no subsequent achievement was of equal importance. To a large extent, the later moves of the Roosevelt Administration had to do with secret discriminations in railway rates. In some of these suits the gravity of the abuse was not clear, and in others the outcome much less gratifying, than in the Northern Securities case. The Standard Oil prosecution, announced by the President in a special message of May 4, 1906, ended in such a way as largely to defeat the Government's own purposes. The exploits of the Standard Oil Company, in the matter of secret concessions from the railways, had been exposed sensationally in the popular magazines,3 and the Government won a jury verdict, in August, 1907, wholly against the company. The Elkins Law, on which the suit was based, provided that "every person or corporation who shall offer, grant, give or solicit, accept or receive" from a railway any "rebates, concession, or discrimination," should on conviction be punished for each offense by a fine of not less than $1,000 or more than $20,000.

Judge Landis, sitting in the Federal District Court of Indiana, had to pass on the question how many separate offenses were to be subject to such fine. The railway rebates had been granted during the period from September, 1903, to March, 1905, inclusive; counsel for the company asked, first, that the whole series be adjudged one infraction of the law, or, second, that the violations he fixt at three in number, because the rate was determined once a year, or, third, that the number he declared as thirty-six, because that number of bills were rendered. The court rejected all three suggestions; declared on August 3, 1907, that each of the 1,462 loaded cars forwarded at the discriminating rate was a separate offense; imposed for each the maximum fine of $20,000, and thereby arrived at the somewhat extraordinary penalty of $29,240,000.

This fine, imposed as it was, not on the $98,000,000 "Standard Oil Trust," but on the immediate offender, the $1,000,000 subsidiary Standard Oil Company of Indiana, went, even in the popular judgment of the day, beyond the bounds of reason; it was commonly expected that the higher courts would set it aside, and, as a matter of fact, the Illinois Circuit Court, in July, 1908, found that a fine thus computed "had no basis in any intention or fixt rule discoverable in the statute," and was many times confiscatory. The court to whom the case was remanded for retrial directed, in March, 1909, a verdict of acquittal for lack of proper evidence. In this matter, despite an overwhelming and not unfounded dislike to the methods of the Standard Oil Company, public sympathy was with the corporation.4

1 From Noyes's "Forty Years of American Finance." BY permission of the publishers, G. P. Putnam's Sons. Copyright, 1898, 1909.
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2 Now Secretary of State in President Taft's Cabinet.
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3 Notably by Ida X. Tarbell in McClure's Magazine.
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4 Various suits followed the decision of March, 1909, including suits in Texas and Missouri. The most important of these was concluded at St. Louis in November, 1909, the testimony covering 10,000 pages, and other evidences covering 15,000 more. The decision in this case, covering 20,000 words, was rendered in St. Paul. It-upheld the Sherman Anti-trust law as a rightful exercise of the power of Congress to control commerce between States and with foreign nations, and declared the Standard Oil Company a combination in restraint of trade. The case was appealed by the company to the United States Supreme Court, which rendered a decision in May, 1911, under which the company was directed to dissolve into its component parts, and was restrained from continuing by any device whatever, directly or indirectly, the illegal combination. The trust had until December, 1911, in which to effect a dissolution. When the dissolution took place certificates for stock in more than thirty companies were sent to owners of stock in the old Standard Oil Company of New Jersey. Small holders received in some of these companies only fractional shares.
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