Northern Securities Co. v. United States 193 U.S. 197 (1904)

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NORTHERN SECURITIES CO. v. UNITED STATES 193 U.S. 197 (1904)

A bare majority of the Supreme Court, in a broad construction of congressional power under the commerce clause, upheld the constitutionality of the sherman anti-trust act as applied to holding companies. The Court thus extended the scope of the Sherman Act to companies not directly engaged in such commerce which nevertheless controlled interstate commerce.

The formation in 1901 of the Northern Securities Company, a holding company comprising both the Hill-Morgan and the Harriman interests, united parallel competing lines. In March 1902, the government filed an equity suit to dissolve the company. The question was clear: was a holding company, whose subsidiaries' operations were its only connection with interstate commerce, exempt from the Sherman Act? The Court split 5–4 but without a majority opinion.

justice john marshall harlan, for the plurality, followed united states v. trans-missouri freight association (1897) and other cases, arguing that the Sherman Act established competition as a test for interstate commerce. Harlan declared that a combination need not be directly in commerce to restrain it: intent to restrain or potential for restraint was all that was needed, and here potential restraint could be found in the reduction of competition resulting from the holding company's formation. Harlan refused to interpret the statute using the rule of reason. He also broadly construed the commerce clause, curtly dismissing defense allegations that the injunction violated state sovereignty and the tenth amendment. Justice david j. brewer concurred only in Harlan's result. Abandoning his earlier opinions, Brewer now embraced the rule of reason but concluded that even under that rule the Northern Securities Company clearly constituted an unlawful restraint of trade.

justices edward d. white and oliver wendell holmes each wrote dissents. The former followed the definition of interstate commerce in united states v. e. c. knight company (1895), stressing that stock ownership did not place the defendants within the scope of the Sherman Act. Holmes's first written dissent on the Supreme Court emphasized a common law reading of the statute. He believed that the holding company device was neither a combination nor a contract in restraint of trade. Holmes asserted that this case so nearly resembled Knight as to require no deviation from that opinion.

Counted by theodore roosevelt "one of the greatest achievements of my administration because it emphasized the fact that the most powerful men in this country were held to accountability before the law," this decision's importance lay both in Harlan's insistence on the supremacy of federal law and in the reinvigoration of a law that business had hoped the Court rendered ineffectual in Knight.

David Gordon
(1986)

Bibliography

Appel, R. W., Jr. 1975 The Case of the Monopolistic Railroadman. In John A. Garraty, ed., Quarrels That Have Shaped the Constitution. New York: Harper & Row.

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