ANTITRUST MOVEMENT
To the average American in the last two decades of the nineteenth century, economic and political life seemed to be moving out of control. In a country that valued independent entrepreneurs, rural self-sufficiency, and middle-class religious values, politics seemed to be growing corrupt and opportunities for leading a morally satisfying life were becoming fewer. Economic power was clearly concentrating into small groups that were not open to the average citizen. A feeling of impotence in the face of these perceptions led to numerous movements for reform; antitrust was one of these.
Trusts had emerged as sensible ways of rationalizing economic life. Basic industries needed dependable supplies, means of transportation, markets, and banking connections. Competing local, state, and federal jurisdictions interfered with efficient business practice without providing firm legal guidelines specifying which practices were illegal, unethical, or merely inevitable. In order to survive fierce competition after the Civil War, businesses were soon negotiating agreements that froze competitors out of markets and enabled surviving firms to raise prices. Certain companies, such as Standard Oil, set the pace: ruthlessly buying out or forcing out its competition in the production of oil, it was soon in a position to charge whatever it wanted for its products. Independent businesses and consumers were both at risk. Industries that dealt with the company, most obviously the railroads, especially felt threatened, for so large a customer could intimidate those who supplied it with goods or services. Politicians soon got the message that something had to be done or the American way would be in danger.
Agitation against the trusts grew in the 1880s and resulted in the Sherman Antitrust Act (1890). Its first two provisions made illegal "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," and declared that "every person who shall monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States, or with foreign nations," was guilty of a misdemeanor. The law was vague and unclear, and never defined what a "trust" or a "monopoly" was. It seemed yet another example of congressional irresponsibility, substituting rhetoric and ritual for meaningful reform. The courts soon made hash of any effective application: cases against the whiskey and sugar trusts were thrown out. The pattern of many reforms of the Progressive Era was being set: economic forces led to problems unknown a few decades earlier; agitation by those who were hurt in some way led to political debate and the enactment of a statute; and the courts, in their leisurely way, made sure that few businesses suffered in practice. In America, economic activity had divine sanction in all but the most egregious cases, and the protection of property took legal precedence over any sense of damage to the community as a whole.
Theodore Roosevelt, like most Americans, was both proud and fearful of successful trusts. They represented something new and native in modern life and were premonitions of a wider American role in world affairs. To him, some trusts were good and some were bad. Good trusts were run by gentlemen who were often his friends and contributors to Republican campaigns; with their capital concentrations and huge markets they could pour new products into an ever greater democracy: electric lights, farm machinery, and automobiles, to select almost at random, were on the way, promising a more bountiful life for all. Bad trusts were those whose leaders were greedy financiers interested in private profit regardless of consequences, thus undermining the public sense of moral and decent behavior.
Roosevelt was no radical, but he knew when conditions were getting out of hand. Eager for favorable publicity and preferring a conservative approach that would preempt a more destructive, radical reform, he authorized his attorney general in 1902 to file suit against a huge and growing railway trust, the Northern Securities Company. In 1904, in a narrow 5-4 vote, the Supreme Court backed him up, effectively overruling its own earlier decisions and issuing a significant public warning against certain industrial combinations. Businessmen, always easily shocked, were publicly outraged at such restrictions on their liberties; the public seemed delighted. In practice, the impact was mostly cautionary and journalistic: the Court in effect had warned businessmen to be careful. The decision also encouraged numerous articles by muckrakers eager to expose the "money trust," the "meat trust," the "patent medicine trust," and the rest.
Roosevelt instituted a reasonable number of other prosecutions, and his successor, William Howard Taft, began even more. But few critics were happy, and in 1914 Woodrow Wilson asked for further controls on interlocking directorates and an interstate trade commission with enhanced regulatory authority especially over railways, as well as clearer definitions of what precisely was illegal. He won the Federal Trade Commission Act to regulate unlawful trade practices and the Clayton Antitrust Act, which tightened some of the loopholes in the Sherman Act. This legislation specifically prohibited pricing agreements that restrained trade, outlawed interlocking directorates in large corporations, and made it illegal for a firm to acquire stock in a competitor.
Once again, these reforms were more public relations than substance, and court interpretations gutted any meaningful effect. Little of substance occurred during the 1920s. Not until late in the New Deal, under the direction of Thurman Arnold, once one of antitrust policy's sharpest critics, did antitrust revive as an issue. It remained alive, well funded, and occasionally effective through the 1970s. In the 1980s, during the presidency of Ronald Reagan, public faith in antitrust reached an all-time low, with few prosecutions being initiated and others being abandoned. Even the vogue of the leveraged buyout, which threatened the independence of many industries throughout the economy, and the bad publicity surrounding the issuing of so-called junk bonds, failed to stir the public or the regulators to antitrust activity.
As America entered the 1990s, antitrust remained a possibility rather than an actuality in the minds of both politicians and businesspeople. In a world where competition often spoke Japanese or Korean, antitrust seemed almost quaint. Some of its victories, such as the one that broke up American Telephone and Telegraph, seemed quixotic at best, confusing consumers and raising the phone bills of most citizens, all in an effort to restrain a company that seemed to be a model of public service. But the mere existence of an antitrust division probably prevented numerous unhealthy combinations and modified the practice of many others. In a complex society, it plays a small but important role as a lingering progressive conscience, cautioning business leaders against excessive behavior.
Thomas K. McCraw, Prophets of Regulation (1984); H. B. Thorelli, Federal Antitrust Policy: The Origination of an American Tradition (1955).
Robert M. Crunden
See also Federal Trade Commission; Muckrakers; Roosevelt, Theodore; Taft, William Howard; Wilson, Woodrow.
