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The Other Sherman’s Legacy

May 2024
5min read

History abounds in ironies, and never more so than in the capriciousness with which it hands out enduring fame. Consider Sen. John Sherman, Republican of Ohio. His older brother, William Tecumseh, marched through Georgia into immortality in a single autumn. John served six years in the House of Representatives, thirty-two in the Senate. He was one of the country’s ablest Secretaries of the Treasury and was a major contender for the Republican nomination for President three times. He ended his political career as Secretary of State under McKinley. Yet today he might be remembered only for bringing the term fence mending to American politics were it not for one piece of legislation, the Sherman Antitrust Act.

Part of the irony is that Sherman, a firm friend of business, supported the legislation that immortalized him more out of political necessity than real conviction. Both politically and economically Sherman was deeply conservative, and he would have been horrified had he lived to see what one historian has described as how the Sherman Act helped awaken “Congress to the realization of the vast power wrapped up in the Commerce Clause.”

The Sherman Act would have been unthinkable twenty-five years earlier. But in the quarter-century following the Civil War, the American economy was transformed, and the power of those at the top of the economic pyramid grew swiftly to what many felt were dangerous proportions.

As with much nineteenth-century economic history, the railroads lay at the heart of the matter. There had been only 35,000 miles of railroad track in the country in 1865. By 1890 there were 167,000 miles, knitting the country together and making an integrated national economy possible for the first time. This made economies of scale in manufacturing more important than ever. Bigness was efficient. American industry not only grew by a factor of ten in these years but consolidated into larger and larger units as well.


At the end of the Civil War most factories were individually owned and managed. In 1865 there was not a single industrial concern listed on the New York Stock Exchange, where the stocks of the nation’s biggest companies were traded. By 1900, however, forty-six industrial companies were trading on the Big Board, and many of them had come to dominate their industries by merging with smaller companies.

At first state incorporation laws made mergers difficult and kept companies small. Companies were forbidden to own stock in other companies. Then Samuel C. T. Dodd, on the legal staff of Standard Oil, devised a way around this. Dodd pointed out that if one company’s board members were appointed trustees to hold and vote the stock of other companies, the same effect was achieved as in an actual merger. Standard Oil became the first “trust” in 1882. The need for a trust arrangement soon disappeared when the state of New Jersey, in search of easy tax revenue, passed very liberal incorporation laws making holding companies legal. Companies flocked to incorporate there, and the trust form of corporate organization soon disappeared; but the name trust , one of the great bogeymen of American politics, lives on.

While the industrial trusts made many people nervous, railroads, not Standard Oil, were the big business that people encountered in everyday life. Most of the railroad mileage was held by a few very large companies that did not hesitate to use their powers as the sole haulers of freight to pursue their economic self-interests. Where a railroad held a monopoly, it charged what the traffic would bear and invariably favored large customers over small ones with rebates and other favors. Where railroads competed with others, they often formed pools to divvy up business and keep rates high. All this was bitterly resented, especially by farmers and other small businessmen. They demanded action to curb the power of the railroads.

The first response by Congress to the clamor to do something was to establish the Interstate Commerce Commission, in 1887, to regulate the railroads. The commission was, in its early years, singularly ineffective and, in any case, did not apply to industrial trusts.

As the trusts multiplied in the 1880s, many states passed legislation to regulate them, but this was hopelessly inadequate with regard to corporations of national scope because only the federal government had power over interstate commerce. The Sherman Act, passed a hundred years ago this July, was the result.

This uniquely American piece of legislation swept through a pro-business, Republican-controlled Congress with only a single dissenting vote and became law. Undoubtedly it passed so overwhelmingly because it lacked specifics. With splendid vagueness it stated that “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 hereby declared to be illegal.” Further, it made it a crime to “monopolize or attempt to monopolize, or combine or conspire ... to monopolize any part of the trade or commerce among the several states.”

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.”

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