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RESURRECTION OF THE ANTITRUST MOVEMENT

Economic Impact of Trusts

By 1890, the year the Sherman Antitrust Act was passed, many saw the power of large business monopolies, or trusts, as a serious problem. Encouraged by the expansion of the transportation and communication sectors, trusts had proliferated since the Civil War, resulting in a continual squeezing out of small businesses and a concentration of economic power among fewer, larger businesses. But the effects of trusts were not wholly negative. As opposed to the duplication of efforts inherent in a competitive environment, trusts provided substantial savings and allowed for higher production capacity by assuring that businesses had dependable supplies of critical parts as well as reliable transportation and financing. The savings, however, were not necessarily passed on to the stockholder, working laborers, or the consumer.

Deficiencies of the Sherman Antitrust Act

The Sherman Antitrust Act had deficiencies that were becoming evident at the turn of the century. One major problem was that the act did not define a trust or monopoly. The lack of such a definition left the interpretation of the law up to the judicial branch of the government, which resulted in some contradictory case decisions. Further, violating the Sherman Antitrust Act was only considered a misdemeanor offense, a crime whose punishment was not serious enough to deter those who saw their interests served by trusts.

The Good and the Bad

With the accession of Theodore Roosevelt into the presidency, the antitrust movement gained momentum, though Roosevelt believed it was important to distinguish between good trusts and bad trusts. To Roosevelt, good trusts benefited the public with their infusion of capital and products into the economy. Not coincidentalíy, many of the people involved with the "good" trusts were friends of Roosevelt and primary contributors to the Republican Party. Bad trusts consisted of greedy financiers interested only in profits at the general public's expense.

The Northern Securities Case

Early in his presidency Roosevelt realized that the trust situation had reached a critical point where something had to be done, lest radical reform hurt all trusts, good and bad. In 1902 Roosevelt agreed to the filing of a case against Northern Securities, a huge railroad trust consisting of the Northern Pacific, Great Northern, and Burlington Railroads. The lower court decision against the Northern Securities Company was upheld in 1904 by the Supreme Court. The outcome was met with self-righteous indignation on the part of big business, who saw this move as a violation of their right to conduct their businesses according to their wishes. The response on the part of the public was a mixture of support and relief.

Business on Trial

The Northern Securities case was an intentional warning to big business to reform their business practices or have them reformed by government intervention. Many trusts did not heed the warning. Other prosecutions against the trusts followed in the Roosevelt administration. The William Howard Taft administration also vigorously continued prosecution of the trusts in the later part of the decade. In total, during Roosevelt's term the Justice Department filed forty-five antitrust cases. At the time of the Northern Securities decision in 1904, there were 318 trusts that had consolidated more than fifty-three hundred businesses. Seven corporations held more than one-third of the working capital in the United States. A much revised business structure was taking shape by the end of the decade. There were two distinct economic business sectors by 1910: small firms competing in enterprises that did not require large capital investments and a few large corporations that controlled the capital-intensive enterprises.

Roosevelt's "Square Deal."

In an attempt to provide an equal voice to all of America's constituencies—business, labor, and the public—Roosevelt created a platform for the 1904 presidential race called the "Square Deal," a term taken from gaming. While the Square Deal advocated an even-handed, fair approach to all, it was a nonspecific platform that put forth no tangible idea, promise, or theory. The Square Deal promoted only an abstract concept of fairness and promised only conscientiousness on Roosevelt's part.

Defining the Deal

Lest every constituency think that the Square Deal meant that they would always win, Roosevelt used several public addresses first to give substance and later to clarify his meaning of the concept throughout his presidency. At a banquet in Dallas, Texas, on 5 April 1905 Roosevelt stated:

When I say I believe in a square deal I do not mean, and nobody that speaks the truth can mean, that he believes it possible to give every man the best hand. If the cards do not come to any man, or if they do come, and has not got the power to play them, that is his affair. All I mean is that there shall be no crookedness in the dealing.… All any of us can pretend to do is to come as near as our imperfect abilities will allow to securing through governmental agencies an equal opportunity for each man to show the stuff that is in him; and that must be done with no more intention of discrimination against the rich than the poor man, or against the poor man than the rich man; with the intention of safeguarding every man, rich or poor, poor or rich, in his rights, and giving him as nearly as may be a fair chance to do what powers permit him to do; always provided he does not wrong his neighbor.

In advocating fairness to all, Roosevelt managed to rally the disparate constituencies to his side in his presidential election of 1904 and throughout his term. Others saw Roosevelt's actions as contradictory, especially since he took political contributions from business, labor, and the public, but his landslide victories in presidential elections and his popularity throughout his term in office proved that his pluralistic platform worked. The hallmark of Roosevelt's success was his ability to get various constituencies to compromise.

Commission Appointed to Organize Trust Cases

Despite many successful prosecutions during his administration, Roosevelt as his presidency drew to a close thought that the thrust of the antitrust movement had become disjointed. In many court cases a trust was broken up into smaller companies that were still under the control of the original owners, thus creating a rearrangement rather than a dismantling of the trust. Roosevelt realized that the trust problem would not be permanently or satisfactorily resolved by the sequential prosecution of cases. Instead, he thought that a more organized approach was needed. To regulate business, Roosevelt specifically advocated a commission similar to the Interstate Commerce Commission but having jurisdiction over all businesses engaging in interstate commerce, not just railroads. Big business interpreted this additional governmental regulation as borderline socialism and argued for laissez-faire policies in response. Realizing that big business would invoke any means necessary to avoid regulation, Roosevelt maintained that his idea was not meant to "strangle" business but only regulate trusts and that legitimate businesses need not be concerned. Roosevelt's proposal was partially implemented in 1913 when the Departments of Commerce and Labor became separate.