Theodore Roosevelt: An Autobiography
Cleveland, the Government brought proceedings against the Sugar Trust,
invoking the Anti-Trust Law, to set aside the acquisition of these
corporations. The test case was on the absorption of the Knight Company.
The Supreme Court of the United States, with but one dissenting vote,
held adversely to the Government. They took the ground that the power
conferred by the Constitution to regulate and control interstate
commerce did not extend to the production or manufacture of commodities
within a State, and that nothing in the Sherman Anti-Trust Law
prohibited a corporation from acquiring all the stock of other
corporations through exchange of its stock for theirs, such exchange
not being "commerce" in the opinion of the Court, even though by such
acquisition the corporation was enabled to control the entire production
of a commodity that was a necessary of life. The effect of this decision
was not merely the absolute nullification of the Anti-Trust Law, so
far as industrial corporations were concerned, but was also in effect a
declaration that, under the Constitution, the National Government could
pass no law really effective for the destruction or control of such
combinations.
This decision left the National Government, that is, the people of the
Nation, practically helpless to deal with the large combinations of
modern business. The courts in other cases asserted the power of
the Federal Government to enforce the Anti-Trust Law so far as
transportation rates by railways engaged in interstate commerce were
concerned. But so long as the trusts were free to control the production
of commodities without interference from the General Government, they
were well content to let the transportation of commodities take care of
itself--especially as the law against rebates was at that time a dead
letter; and the Court by its decision in the Knight case had interdicted
any interference by the President or by Congress with the production of
commodities. It was on the authority of this case that practically all
the big trusts in the United States, excepting those already mentioned,
were formed. Usually they were organized as "holding" companies, each
one acquiring control of its constituent corporations by exchanging its
stock for theirs, an operation which the Supreme Court had thus decided
could not be prohibited, controlled, regulated, or even questioned by
the Federal Government.
Such was the condition of our laws when I acceded to the Presidency.
Just before my accession, a small group of financiers, desiring to
profit by the governmental impotence to which we had been reduced by the
Knight decision, had arranged to take control of practically the entire
railway system in the Northwest--possibly as the first step toward
controlling the entire railway system of the country. This control of
the Northwestern railway systems was to be effected by organizing a new
"holding" company, and exchanging its stock against the stock of the
various corporations engaged in railway transportation throughout that
vast territory, exactly as the Sugar Trust had acquired control of the
Knight company and other concerns. This company was called the Northern
Securities Company. Not long after I became President, on the advice of
the Attorney-General, Mr. Knox, and through him, I ordered proceedings
to be instituted for the dissolution of the company. As far as could be
told by their utterances at the time, among all the great lawyers in the
United States Mr. Knox was the only one who believed that this action
could be sustained. The defense was based expressly on the ground that
the Supreme Court in the Knight case had explicitly sanctioned the
formation of such a company as the Northern Securities Company. The
representatives of privilege intimated, and sometimes asserted outright,
that in directing the action to be brought I had shown a lack of respect
for the Supreme Court, which had already decided the question at issue
by a vote of eight to one. Mr. Justice White, then on the Court and
now Chief Justice, set forth the position that the two cases were in
principle identical with incontrovertible logic. In giving the views of
the dissenting minority on the action I had brought, he said:
"The parallel between the two cases [the Knight case and the Northern
Securities case] is complete. The one corporation acquired the stock
of other and competing corporations in exchange for its own. It was
conceded for the purposes of the case, that in doing so monopoly had
been brought about in the refining of sugar, that the sugar to be
produced was likely to become the subject of interstate commerce, and
indeed that part of it would certainly become so. But the power of
Congress was decided not to extend to the subject, because the ownership
of the stock in the corporations was not itself commerce."
Mr. Justice White was entirely correct in this statement. The cases were
parallel. It was necessary to reverse the Knight case in the interests
of the people against monopoly and privilege just as it had been
necessary to reverse the Dred Scott case in the interest of the people
against slavery and privilege; just as later it became necessary to
reverse the New York Bakeshop case in the interest of the people
against that form of monopolistic privilege which put human rights below
property rights where wage workers were concerned.
By a vote of five to four the Supreme Court reversed its decision in
the Knight case, and in the Northern Securities case sustained the
Government. The power to deal with industrial monopoly and suppress it
and to control and regulate combinations, of which the Knight case had
deprived the Federal Government, was thus restored to it by the Northern
Securities case. After this later decision was rendered, suits were
brought by my direction against the American Tobacco Company and the
Standard Oil Company. Both were adjudged criminal conspiracies, and
their dissolution ordered. The Knight case was finally overthrown.
The vicious doctrine it embodied no longer remains as an obstacle to
obstruct the pathway of justice when it assails monopoly. Messrs.
Knox, Moody, and Bonaparte, who successively occupied the position of
Attorney-General under me, were profound lawyers and fearless and
able men; and they completely established the newer and more wholesome
doctrine under which the Federal Government may now deal with
monopolistic combinations and conspiracies.
The decisions rendered in these various cases brought under my direction
constitute the entire authority upon which any action must rest that
seeks through the exercise of national power to curb monopolistic
control. The men who organized and directed the Northern Securities
Company were also the controlling forces in the Steel Corporation, which
has since been prosecuted under the act. The proceedings against the
Sugar Trust for corruption in connection with the New York Custom House
are sufficiently interesting to be considered separately.
From the standpoint of giving complete control to the National
Government over big corporations engaged in inter-State business, it
would be impossible to over-estimate the importance of the Northern
Securities decision and of the decisions afterwards rendered in line
with it in connection with the other trusts whose dissolution was
ordered. The success of the Northern Securities case definitely
established the power of the Government to deal with all great
corporations. Without this success the National Government must have
remained in the impotence to which it had been reduced by the Knight
decision as regards the most important of its internal functions. But
our success in establishing the power of the National Government to curb
monopolies did not establish the right method of exercising that
power. We had gained the power. We had not devised the proper method of
exercising it.
Monopolies can, although in rather cumbrous fashion, be broken up by
law suits. Great business combinations, however, cannot possibly be made
useful instead of noxious industrial agencies merely by law suits, and
especially by law suits supposed to be carried on for their destruction
and not for their control and regulation. I at once began to urge upon
Congress the need of laws supplementing the Anti-Trust Law--for this law
struck at all big business, good and bad, alike, and as the event
proved was very inefficient in checking bad big business, and yet was
a constant threat against decent business men. I strongly urged the
inauguration of a system of thoroughgoing and drastic Governmental
regulation and control over all big business combinations engaged in
inter-State industry.
Here I was able to accomplish only a small part of what I desired to
accomplish. I was opposed both by the foolish radicals who desired to
break up all big business, with the impossible ideal of returning to
mid-nineteenth century industrial conditions; and also by the great
privileged interests themselves, who used these ordinarily--but
sometimes not entirely--well-meaning "stool pigeon progressives" to
further their own cause. The worst representatives of big business
encouraged the outcry for the total abolition of big business, because
they knew that they could not be hurt in this way, and that such an
outcry distracted the attention of the public from the really efficient
method of controlling and supervising them, in just but masterly
fashion, which was advocated by the sane representatives of reform.
However, we succeeded in making a good beginning by securing the passage
of a law creating the Department of Commerce and Labor, and with it the
erection of the Bureau of Corporations. The first head of the Department
of Commerce and Labor was Mr. Cortelyou, later Secretary of the
Treasury. He was succeeded by Mr. Oscar Straus. The first head of
the Bureau of Corporations was Mr. Garfield, who was succeeded by Mr.
Herbert Knox Smith. No four better public servants from the standpoint
of the people as a whole could have been found.
The Standard Oil Company took the lead in opposing all this legislation.
This was natural, for it had been the worst offender in the amassing of
enormous fortunes by improper methods of all kinds, at the expense of
business rivals and of the public, including the corruption of public
servants. If any man thinks this condemnation extreme, I refer him to
the language officially used by the Supreme Court of the nation in its
decision against the Standard Oil Company. Through their counsel, and
by direct telegrams and letters to Senators and Congressmen from various
heads of the Standard Oil organization, they did their best to kill the
bill providing for the Bureau of Corporations. I got hold of one or two
of these telegrams and letters, however, and promptly published them;
and, as generally happens in such a case, the men who were all-powerful
as long as they could work in secret and behind closed doors became
powerless as soon as they were forced into the open. The bill went
through without further difficulty.
The true way of dealing with monopoly is to prevent it by administrative
action before it grows so powerful that even when courts condemn it they
shrink from destroying it. The Supreme Court in the Tobacco and Standard
Oil cases, for instance, used very vigorous language in condemning these
trusts; but the net result of the decision was of positive advantage to
the wrongdoers, and this has tended to bring the whole body of our law
into disrepute in quarters where it is of the very highest importance
that the law be held in respect and even in reverence. My effort was to
secure the creation of a Federal Commission which should neither excuse
nor tolerate monopoly, but prevent it when possible and uproot it