MONOPOLIES (ISSUE)

The American Civil War (1861–1865) made it possible for men of varying degrees of ability to become wealthy overnight. During the postwar decades these new fortunes were used for the exploitation of natural resources and for industrial development. Men such as Andrew Carnegie (1835–1919) and John D. Rockefeller (1839–1937) became folk heroes, although in Rockefeller's case, there were also many who feared and despised him. Few laws regulated competition and few taxes were levied on their profits. In time some of these men exerted considerable influence on their state legislatures and on their senators. Even the philosophy of the age was tailored to their needs. Social Darwinism applied the biological concept of survival of the fittest to human society and decreed the successful businessman the fittest of all. Eventually, the Progressive movement confronted some of the more unsavory practices of the business elite and the corrupt politics of the time. The first faint indication that a change in conditions might be close at hand came in 1887 with the passage of the Interstate Commerce Act followed a few years later by the Sherman Antitrust Act in 1890.

Even in a period when business predominated there were certain activities that alarmed the public. The financial manipulations of Rockefeller, for example, indirectly affected the lives of millions who came to fear his company while admiring his personal life. Rockefeller's Standard Oil Company was the first trust or monopoly. It effectively controlled the petroleum refining industry by 1879. Other large combinations followed suit, so that by 1890 large companies controlled the production of such products as whiskey, sugar, and lead, and dominated the nation's railroads. The combinations used their size to exploit markets to the fullest.

In 1889 Kansas became the first state to enact antitrust legislation and the regulatory effort spread across the South and West. Within a year at least 14 other states and territories had enacted similar laws. Pressure mounted for the federal government to take action since individual states were powerless in dealing with the greatest offenders, the trusts and monopolies which were interstate in scope. Both major political parties incorporated antitrust planks in their platforms for 1888, but neither rushed to submit appropriate legislation at the next congressional session. Many Senators may have preferred to ignore the matter, but they were forced to act because of the public clamor and the gentle prodding of President Benjamin Harrison (1889–1893). The result was the passage of the Sherman Antitrust Act in 1890.

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 what a trust or monopoly was. The lack of such a definition left the interpretation of the law up to the judicial branch of the government, and the result was confusion and contradictory court cases. Moreover violation of the Sherman Antitrust Act was only considered a misdemeanor, an offense for which punishment was not serious enough to deter those who saw their interests served by monopolies.

With the accession of Theodore Roosevelt (1933–1945) into the presidency the antitrust movement gained momentum, even 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, while bad trusts consisted of greedy financiers interested only in profits at the general public's expense. Early in his presidency Roosevelt realized that the monopoly situation had reached a critical point and that something had to be done. In 1902 Roosevelt's administration brought suit against the giants of the railroad industry and the "Beef Trust."

The Supreme Court ordered dissolution of the Morgan-Hill-Harriman railroad holding company in the Northern Securities Case (1904), and in the case of Swift and Company vs. United States (1905), the Supreme Court enjoined the "Beef Trust" from engaging in collusive price fixing activities. In 1906 and 1907 Roosevelt had the Justice Department bring suit against the American Tobacco Company, the E.I. Du Pont Chemical Corporation, the New Haven Railroad, and the Standard Oil Company. The Supreme Court ordered the dissolution of the American Tobacco (1910) and Standard Oil (1911) companies. Between 1890 and 1905 the Department of Justice brought 24 antitrust suits while the Roosevelt administration brought suit against 54 companies. The administration of President William Howard Taft (1909–1913) later prosecuted 90 antitrust cases.

Despite many successful prosecutions during his administration Roosevelt realized that the trust problem would not be resolved by judicial review and that a more organized approach was needed. To regulate business Roosevelt specifically advocated a commission similar to the Interstate Commerce Commission, one that had jurisdiction over all businesses engaging in interstate commerce, not just railroads. Big business interpreted this additional governmental regulation as borderline socialism and in response argued for laissez-faire policies. 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 were separated. On October 15, 1914, Congress passed and President Woodrow Wilson (1913–1921) signed the Clayton Antitrust Act which was designed to strengthen the Sherman Antitrust Act of 1890 by fully codifying specific illegal antitrust activities. The Clayton Act forbade a corporation from purchasing stock in a competitive firm, outlawed contracts based on the condition that the purchaser would do no business with the seller's competitors, and made interlocking stockholdings and directorates illegal. It also contained provisions designed to make corporate officers personally responsible for antitrust violations. The Clayton Act also declared that labor unions were not conspiracies in restraint of trade, thus exempting them from provisions of the bill. This pleased Samuel Gompers, the head of the American Federation of Labor (AFL) so much that he called it "labor's Magna Carta." To carry out and enforce the Clayton Act and the Sherman Act, Congress created the Federal Trade Commission in a related measure.

The Clayton Act proved to be an enduring piece of legislation, and it has been strengthened a number of times since its passage. Just after its passage, however, the antitrust movement began to fade away. Late in 1914 Wilson stated that he believed federal regulation had gone far enough. The president viewed the Clayton Act as the concluding act in the antitrust movement.

The large corporations did not suffer as much from regulation as might be thought. In many ways, the regulatory authority that the government imposed on business made it more difficult for new companies to break into competition with the big companies. Thus, the main thing that they feared and that they formed monopolies to avoid—"ruinous competition"—was killed in its crib by the very regulation that was passed to put a collar on the monopolies.

Many historians have contended that although the antitrust movement reached a natural decline, World War I (1914–1918) further undermined it. War mobilization required coordinated efforts from the leaders of many industries. Economic concentration and collusive efforts were necessary and accepted for the war effort. Some economic historians contend that the Clayton Act actually promoted economic concentration. The Clayton Act clarified illegal actions, thereby helping to eliminate some monopolistic activities, but in so doing it allowed business combinations and trusts to engage in collusive activities not specifically prohibited. By codifying illegal behavior, some historians believe that Congress tacitly sanctioned other collusive activities designed to reduce chaotic competition and ensure stability. Large corporations such as General Motors and the Du Pont Chemical Company grew much larger just immediately after the Clayton Act and especially during the war effort.

Desire for further antitrust reform was rekindled when the Robinson-Patman Act of 1936 and the Miller-Tydings Act of 1937 both supplemented the Clayton Act by attempting to protect small business from wholesalers that practiced price discrimination and by establishing "fair trade" price floors on numerous items. In 1938, Congress created the Temporary National Economic Committee to hold hearings on the issue of antitrust. Attorney General Thurman Arnold reinvigorated federal antitrust prosecution. Arnold brought a number of antitrust suits, notably against General Electric and the Aluminum Company of America. Like the earlier antitrust effort of the Progressive Era, this campaign lost its strength and direction as a result of foreign policy concerns and economic mobilization for a war effort.

There were some important antitrust cases after World War II (1939–1945) as well. In 1945 the Aluminum Company of America was found to be in violation of the Sherman Antitrust Act. In 1948 the federal government forced a number of major U.S. film studios to divest themselves of studio-owned theaters. In 1961 the Supreme Court ordered the Du Pont Company to divest itself of its holdings in General Motors Company. In 1967 the Federal Communications Commission ordered the American Telephone and Telegraph Company (AT&T) to lower its rates. In 1982 after eight years of battling a private antitrust suit in federal court AT&T agreed to be broken up, and a number of rival long-distance communication companies came in to challenge AT&T's control over the market.

In 1950 the Celler-Kefauver Act extended the Clayton Act by tightening prohibitions on business mergers that lessen competition and lead to monopoly. In 1976 Congress passed the Hart-Scott-Rodino Act or Concentrated Industries Act. This was a mild reform law that attempted to strengthen provisions of existing antitrust laws. Monopolistic behavior clearly remained a factor of U.S. economic life while federal prosecution of anti-competitive mergers and acquisitions became rare.

MONOPOLIES (ISSUE)

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