The United States Since the Civil War

by Charles Ramsdell Lingley

Surely it must be the great new chimera "Trust." Quick, cries every masked member of the Ways and Means. Quick, let us lower the tariff. Let us call in the British. Let them save our devastated homes.

More serious was the almost universal lack of knowledge of the elements involved in the situation. Industrial leaders were unenlightened and wrapped up in the attempt to outdo rivals who were equally unenlightened and absorbed; the nation needed instruction and leadership, and neither was to be found. Instead, the poorer classes became more and more hostile to big business interests; the capitalist class set itself stolidly to the preservation of its interests. The one saw only the abuses, the other only the benefits of combinations. Thoughtful men felt that industrialism was afflicted with a malady which would kill the nation unless a remedy were found.

The legal and constitutional position of the trusts was almost impregnable. Ever since the decision of the Supreme Court in the Dartmouth College case, handed down in 1819, franchises and charters granted by states to corporations had been regarded as contracts which could not be altered by subsequent legislation. Moreover, the Court had so interpreted the Fourteenth Amendment, as has been seen, that the states had found great difficulty in framing regulatory legislation that would pass muster before the judiciary.[3] It was doubtful whether federal attempts at regulation would be more fortunate. More fundamental still, for public opinion underlies even constitutional interpretation, American industrial and commercial expansion had run ahead of our conception of the possible and proper functions of government. Government as the protector of property was an ancient concept and commonly held in the United States; government as the guardian of the individual against the powerful holder of a great deal of property was a new idea and not generally looked upon with favor.

It has already been seen that the prevailing economic theory, laissez faire, was diametrically opposed to government regulation of the economic activities of the individual. According to this view, unrestricted industrial liberty would result in adjustment by business itself on honorable lines. Men whose integrity was such that they were in control of great enterprises, asserted an attorney for the Standard Oil Company, would be the first to realize that a fair policy toward competitors and the public was the most successful policy. Combination was declared to be inevitable in modern life and reductions in the price of many commodities were pointed to as a justification for leaving the trusts unhampered.

Public opinion, however, was reaching the point where it was prepared to brush aside theoretical difficulties. President Harrison, Senator Sherman and others urged action. Large numbers of anti-monopoly bills were presented in Congress. The indifference of some members and the opposition of others was somewhat neutralized by the fiery zeal of such men as Senator Jones of Arkansas, who declared that the fortunes made by the Standard Oil Company did not represent a single dollar of honest toil or one trace of benefit to mankind. "The sugar trust," declared the senator, "has its 'long, felonious fingers' at this moment in every man's pocket in the United States, deftly extracting with the same audacity the pennies from the pockets of the poor and the dollars from the pockets of the rich."

After much study of the mass of suggested legislation, Congress relied upon its constitutional power to regulate commerce among the several states and passed the Sherman Anti-trust Act, which received President Harrison's signature on July 2, 1890. Its most significant portions are the following:

Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is … illegal.

Sec. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other such person … to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of misdemeanor.

The purpose of the framers of the Act seems clearly to have been to draw up a general measure whose terms should be those usual in the English common law and then rest on the assurance that the courts would interpret its meaning in the light of former practice. For some centuries restraint of trade had been considered illegal in England, but no contract was held to be contrary to law if it provided only a reasonable restraint—that is, if the restraint was merely minor and subsidiary. The Sherman act was a Senate measure, was presented from the Judiciary Committee and was passed precisely as drawn up by it. In speaking from the Committee, both Edmunds and Hoar took the attitude which the latter expressed as follows: "The great thing that this bill does … is to extend the common-law principles, which protected fair competition … in England, to international and interstate commerce in the United States." Just how far the members of Congress who were not on the Judiciary Committee of the Senate shared in this view or really understood the bill can not be said. Indeed, many members of both chambers absented themselves when the bill came to a vote.[4]

For a long time the Sherman Act like the Interstate Commerce Act was singularly ineffective and futile. Trusts were nominally dissolved, but the separate parts were conducted under a common and uniform policy by the same board of managers. The Standard Oil Company changed its form by selecting the Standard Oil Company of New Jersey as a "holding corporation." Stock of the members of the combination was exchanged for stock in the New Jersey organization, leaving control in the same hands as before. The "same business was carried on in the same way but 'under a new sign.'" The wide variety of conditions tolerated under the corporation laws of the several states made confusion worse confounded. In its early attempts to convict corporations of violation of the law, the government was uniformly defeated.