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LEGISLATION AND SUPREME COURT RULINGS

A Decade of Regulatory Change

The years from 1900 through 1909 stand in sharp contrast to the post-Civil War years, when the legislative and judicial branches were uncritical in their support of business efforts to rebuild the country's economic infrastructure. The first decade of the twentieth century saw an extraordinary amount of landmark legislation and Supreme Court rulings aimed at regulating business practices, involving such areas as antitrust laws, fiscal policy, labor disputes, and consumer goods.

Legislation

The legislation passed in the decade that affected business included nine important acts, the earliest of which was the Gold Standard Act (1900). Passed by Congress as a means of developing an efficient national currency, the act established national banks, with capital resources of at least $25,000, in towns of fewer than three thousand inhabitants to finance agrarian demands. The act also included provisions for gold redemptions for monies, the creation of a gold reserve, and bond sale authorization for reserve maintenance. By creating a more efficient, stable national currency, the act was critical to the United States in its expanding role in international finance and commerce.

Regulating the Railroads

The Elkins Act (1903) was drafted to regulate interstate commerce activities and specifically targeted at the railroads as a result of antitrust investigations. The law strengthened the 1887 Interstate Commerce Act and expressly prohibited railroads from deviating from their published rates, a provision designed to prevent the rebating that had become popular in the industry. The act held railroad officials as well as shippers responsible for any infractions. It established the Federal Bureau of Corporations to carry out investigations as a part of the Department of Commerce and Labor. The first major test of the law came with the Supreme Court ruling in Armour Packing Company v. United States (1908).

Speeding Suits

The Expedition Act (1903) appropriated $500,000 to facilitate the processing of federal anti-trust suits, gave antitrust cases precedence over other pending court cases, and allowed appeals to be taken directly to the Supreme Court. This act favored President Theodore Roosevelt's trust-busting stance by moving antitrust cases quickly through the court system.

Guaranteeing Foods

Considered the first federal consumer protection law, the Heyburn Bill (1906) regulated the producers and sellers of food. Specific prohibitions were included against selling diseased, contaminated, or decomposed meats and other foods. The act, supported by the American Medical Association as important to the health and welfare of Americans, also required truth in labeling.

Righting Rates

The Hepburn Act (1906), also called the Railway Rate Regulation Act, broadened the powers of the Interstate Commerce Commission (ICC) by over-hauling the Interstate Commerce Act of 1887. The act enabled the ICC to fight the railroad trusts and investigate questionable policies in the industry. The bill's largest impact was allowing the ICC to regulate railroad rates.

Inspecting Meats

In response to the Neill-Reynolds report on conditions in the meatpacking industry, Congress passed the Meat Inspection Act (1906), which required federal inspection of all meat involved in interstate and foreign commerce. Like the Heyburn Bill, this act was considered vital to the health and welfare of the public.

Foods and Drugs

The Pure Food and Drug Act (1906) prohibited the mislabeling or adulteration of food involved in interstate and foreign commerce. The Department of Agriculture was given authority to administer the act. The Meat Inspection Act and the Pure Food and Drug Act were together the strongest regulations Congress had ever imposed on the food industry.

Correcting Deficiencies

Passed to correct deficiencies in the banking system revealed by the financial panic of 1907, the Aldrich-Vreeland Act (1908) authorized banks to issue bonds based on securities other than federal bonds but imposed a 10 percent tax on those notes. In order to study the banking and currency system of the United States as well as foreign countries, Congress also established a National Monetary Commission.

Tariffs

The Payne-Aldrich Tariff Act (1909) was passed by Congress and signed by President William Howard Taft in keeping with his campaign promise to reduce tariffs instituted by the Dingley Tariff of 1897. However, it was controversial because tariffs were reduced only on some items (such as hides, which helped the shoe industry), maintained on many items (such as iron and steel), and raised on other goods (such as silk and cotton). The act contained 850 amendments, most of which represented increases.

Supreme Court Rulings

The earliest of the important Supreme Court decisions affecting business in the decade was Atkin v. Kansas (1903). In this case the Supreme Court ruled that a Kansas law establishing an eight-hour workday for construction workers engaged in public works is lawful and not a violation of "freedom of contract" provided by the Constitution. This ruling distinguished public-sector and private-sector work, which was further ruled on in the 1905 case of Lochner v. New York.

Applying the Antitrust Act

In the case of Northern Securities v. United States (1904) the Court ruled in a 5-4 decision that the Northern Securities Company—the merger of the Northern Pacific, Great Northern, and Burlington Railroads—violated the Sherman Antitrust Act of 1890. The Court ordered the dissolution of the trust. The case represented a cornerstone for the trustbusting stance of the Roosevelt administration in protecting citizens against the power of the trusts. Justice Oliver Wendell Holmes in his first dissent argued that too loose of an interpretation of the Sherman Antitrust Act could encourage government interference in almost any "part of the conduct of life."

Workday Length

In Lochner v. New York (1905) the Court ruled 5-4 that the state's limitation on the maximum number of hours an employee can work is a violation of the Fourteenth Amendment, which grants the freedom to make contracts. The suit resulted from a Utica bakery owner's breaking a New York law that had limited the working hours of employees to sixty hours in one week or ten hours per day. Justice Holmes wrote a searing dissent in the case that centered on the word liberty. Holmes claimed that when the word is used to prevent the state from limiting hours to protect health, then its meaning "is perverted." Holmes further noted that "a constitution is not intended to embody a particular economic theory, whether of paternalism … or of laissez-faire."

Compelling Testimony

In Hale v. Henkel (1906) the Court ruled that employees called as witnesses in anti-trust cases can be forced to testify and produce evidence against their employers. The decision strengthened the antitrust stance of the Roosevelt administration.

Stifling Unions

The case of Adair v. United States (1908) originated when railroad official William Adair fired an employee who belonged to a union. Finding Adair within his rights, the Court ruled that a portion of the Erdman Act of 1898 was a violation of the "freedom of contract" under the constitution. The focus of the case was the section of the law that outlawed "yellow-dog contracts," which as a condition of employment forced employees to agree not to join a union. Building on the Lochner decision, the Court similarly upheld the right of the employer to set conditions upon labor, dealing another blow to organized labor.

Antitrust Applied to Labor

In Loewe v. Lawlor (1908), also known as the Danbury Hatters case, a unanimous Court ruled that a nationwide boycott by the United Hatters of North America in support of workers protesting labor practices in Danbury, Connecticut, at D. E. Loewe and Company constituted a restraint of trade under the Sherman Antitrust Act. The court held that combinations of labor were not different from combinations of business management.

Protecting Women Workers

In Muller v. Oregon (1908) a unanimous Court ruled that a provision that limits the maximum number of hours that women can work to ten hours a day is constitutional. Reversing the Court's stance established in Lochner for male employees, the ruling was based on what the Court saw as the inherent inequality of women and the necessity for women to be protected by men.

Applying the Elkins Act

The case of Armour Packing Company v. United States (1908) provided the first test of the Elkins Act (1903), which gave the ICC the power to conduct railroad rate investigations. The ruling of the Court was critical to strengthening the regulation of the railroad industry.