- Historic Sites
The Other Sherman’s Legacy
May/june 1990 | Volume 41, Issue 4
The Sherman Act, in short, expressed little more than an ideal. It required American businesses to play fair in the great game of the free market. But because it failed to state exactly what the rules of the game were, it left it up to the executive branch and the courts to enforce and interpret it. At first the lack of specificity was not thought important. “The Act has been criticized,” wrote a law journal in 1893, “because it contains no definition; but the common law terms used in it seem to be sufficient. The language is searching and the provisions are drastic.” The Supreme Court would soon show how far off the mark that was.
The Harrison, Cleveland, and McKinley administrations were all very pro-business, and the Attorneys General were in no hurry to apply the law too rigorously. Indeed, only eighteen cases were brought in the first ten years of the Sherman Act’s existence. One case was against the American Sugar Refining Company, which, already controlling more than 70 percent of the sugar business, sought to merge with six companies controlling an additional 17 percent. In 1895 the case finally made it to the Supreme Court, where the act received a near-fatal blow.
Chief Justice Melville W. Fuller, writing for the Court’s conservative majority, held that while the American Sugar Refining Company indeed sought a monopoly of sugar manufacturing, manufacturing was not per se commerce. “Contracts, combinations, or conspiracies to control domestic enterprise in manufacturing, agriculture, mining, production in all its forms, or to raise or lower prices or wages, might unquestionably tend to restrain external as well as domestic trade,” Fuller wrote with majestic indifference to the practical consequences of his reasoning, “but the restraint would be an indirect result, however inevitable and whatever its extent, and such result would not necessarily determine the object of the contract, combination or conspiracy.”
Justice John Marshall Harlan gave forth with one of his blistering and, it turned out, prophetic dissents, but the Sherman Act in 1895 was thought largely a dead letter. This was fine with big business and its friends in government. Certainly Cleveland’s Attorney General, Richard Olney, was a good deal less than distraught over his defeat in court. “You will observe that the government has been defeated in the Supreme Court on the trust question,” he wrote. “I always supposed it would be, and have taken responsibility of not prosecuting under a law 1 believed to be no good.”
Sherman was a friend of business; he backed the legislation that immortalized him only from political necessity.
The consolidation of American industry proceeded apace. In 1897 there were 69 mergers, in 1898 there were 303, and the following year 1,208. In 1901 U.S. Steel was formed with control of two-thirds of the American steel market and an initial capitalization of $1.4 billion, three times the annual revenues of the federal government.
But already the tide was turning, and the Supreme Court came more and more to adopt Marian’s view, not Fuller’s. In 1897 the court ruled that the Sherman Act outlawed restraints of trade, period, not just “unreasonable” restraints. In 1899 it upheld a government suit against six iron-pipe manufacturers who had been fixing prices.
And in the same year that U.S. Steel was organized Theodore Roosevelt became President. The executive branch was at last headed by someone more than willing to take on the trusts and to use all the powers of government to do so. In 1904 Roosevelt challenged J. P. Morgan’s attempted merger of two major Western railroads, and the Court upheld Roosevelt. In 1911 mighty Standard Oil itself, the first and largest of the trusts, was ordered broken up. The power of the federal government to referee the marketplace was firmly established.
By the 1930s the federal government, often invoking the Sherman Act, expanded its powers over the marketplace to an extent that would have boggled Senator Sherman’s mind. Even in today’s global economy his famous act remains a powerful force, its influence on corporate and even professional behavior immense. Just this year the Supreme Court ruled that lawyers working as public defenders formed a combination in restraint of trade forbidden by the Sherman Act when they banded together to demand higher fees.
There is a final irony for Sen. John Sherman. If life, not to mention politics, were fair, the act that has kept his name alive for a hundred years would be known as the Hoar Antitrust Act. It was Sen. George Hoar, Republican of Massachusetts, who wrote the final draft that became law, not Sherman. Indeed, Hoar was mightily annoyed when Sherman’s name became attached to it nonetheless. It was called the “Sherman Act,” he huffed in his autobiography, “for no other reason that I can think of except that Mr. Sherman had nothing to do with framing it whatever.”