Under the existing laws of the United States, it is a crime to
organize a combination of individuals or corporations into a business
aggregation in restraint of trade. It is likewise a crime for labor
men or labor unions in different States to combine for the prosecution
of certain aggressive enterprises popularly described as boycotts. Any
person convicted of engaging in either of these prohibited acts may be
fined not more than $5,000 for each offense, or imprisoned for one year
at hard labor, or both.
According to reliable estimates, there are in the neighborhood of five
hundred large trusts or combinations that daily violate this law.
There are many thousands of smaller corporations and business firms
that indulge in secret practices for which their officers may at any
time be lodged in jail. As for the national prohibition of boycotts,
labor organizations openly exist for the express purpose of conducting
them. The constitution of the most powerful labor organization in this
country, the Federation of Labor, specifically provides for engaging in
this form of industrial warfare.
The statute that outlaws these combinations of both capital and labor
is the famous Sherman Anti-trust Law. It is one of the briefest, most
pointed, and most comprehensive measures ever passed by Congress. It
contains only about seven hundred words and would fill less than a page
of this magazine. In its first three lines, without any modifications
or circumlocutions, it declares illegal "every contract, combination in
the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States or with foreign nations." The next
few lines provide the punishment, cited above, for breaking the law.
The Sherman Act does not say that "some combinations" are illegal and
criminal, but that "every" one is. It does not provide that certain
offenders may be punished, but that "every" one "shall be." It leaves
absolutely no discretion to prosecuting officers or to the courts.
Within its comprehensive folds are gathered, on the one hand, the most
commanding captains of industry and the greatest railroad magnates;
and, on the other, the most insignificant puddlers in their furnaces
and stokers on their trains.
The Sherman Act has thus established a community of interest between
labor and capital which has had important practical results. Both
capital and labor are openly evading the law. Both have many times been
haled into court, convicted of infringing this statute, and enjoined
from continuing in their illegal combinations. Both consequently find
it an irksome impediment to their present plans and ambitions. In their
active opposition to the law the two previously warring elements now
meet on common ground.
The platform of the Republican party calls for amendments which, to
all practical purposes, will seriously weaken the law, so far as its
application to corporate combinations is concerned. The Democratic
platform demands such changes as will exempt labor unions from its
operation,--which is virtually the same thing as demanding the
legalization of the boycott. At the last session of Congress the
spectacle was presented of important labor unions and great corporation
lawyers working hand in hand to this common end. Though this agitation
failed for the time being, it may safely be asserted that the repeal
or modification of the Sherman Act will continue to be a fixed article
of the policy both of large aggregations of wealth and of large
aggregations of labor. This fact makes important a study of its history
and of its practical effects upon corporate and labor organizations.
_The Sherman Law Not Rushed Through Congress_
Hardly any important legislation has been so imperfectly understood
or more persistently misrepresented. Although the law was passed only
eighteen years ago, a large number of legends have already grown up
about it. According to popular belief, the Sherman Anti-trust Act is an
imperfect piece of legislation; a measure which was drawn up hastily,
without thorough study or knowledge of the economic and social problems
which it was intended to solve. The corporations declare that it was
never intended to meet industrial conditions as they exist now: labor
leaders have repeatedly asserted that the framers of the measure never
intended that it should affect organizations of labor.
A study of the congressional debates which preceded the passage of the
Sherman Act dissipates these misconceptions. The law was not rushed
through Congress. It was seriously proposed as a carefully thought-out
attempt to check great and clearly comprehended evils. In essence those
evils did not differ from the ones which confront the American people
today. In 1890 the trust, or the industrial combination, had almost
reached its present state of development. Large aggregations of capital
had already secured a monopoly of many of the necessaries of life. The
Standard Oil Trust was then, as it is now, the most conspicuous of
these combinations, and had already attained an unpopularity almost
as great as it enjoys today; the Sugar Trust controlled practically
the whole output of refined sugar. The Steel Trust, it is true, did
not exist; but many combinations in steel products had already been
formed. Combinations on steel rails dictated prices; nails, barbed
fence wire, copper, lead, nickel, zinc, cordage, cottonseed oil,--all
these products had already been brought largely under trust control.
The Salt Trust and the Whiskey Trust had been organized. Combinations
of railroads, for the purpose of fixing charges for transportation,
had existed for twenty-five years. In 1875 Commodore Vanderbilt
called the first great meeting of railroad trunk lines at Saratoga;
and this conference adopted a "pooling" arrangement. The accumulated
railroad abuses of a generation, especially this practice of "pooling"
earnings, had led to the passage of the Interstate Commerce Act in
1887--three years before the enactment of the Sherman Law.
Other combinations, which disdained the name of trusts, but which had
already developed certain points in common with them, also flourished.
The labor union, for example, was in full flower. The Knights of
Labor, under Powderly, had passed through many triumphant years; the
Federation of Labor was firmly entrenched, and Samuel Gompers was its
President then as he is today. The unions existed then, as they do
now, to secure higher wages and greater advantages of employment for
their members; and one of their weapons then, as it is at present, was
the boycott. Organizations of farmers, which existed for a similar
purpose--the Farmers' Alliance, the National League--had also reached a
high state of development.
_Statesmen who Framed the Sherman Law_
Nor were the framers of this law inexperienced legislators who hastily
scrambled together a measure to meet certain political exigencies. The
men chiefly responsible for the anti-trust law were John Sherman of
Ohio, George F. Edmunds of Vermont, George F. Hoar of Massachusetts,
George Gray of Delaware, and James Z. George of Mississippi. Senator
Spooner recently declared that no greater body of lawyers ever sat in
Congress; no one would venture to contend that there is any similar
group of five men in Washington today. John Sherman had served almost
continuously in Congress since 1854; he had represented Ohio in
the Senate throughout the Civil War and the reconstruction period,
displaying especial talent in dealing with questions of national
finance; and, as Secretary of the Treasury in President Hayes' cabinet,
had carried through with masterly success the resumption of specie
payments. George F. Edmunds was generally regarded as the greatest
lawyer then in the Senate. Starting his career in that body in 1866,
when Congress had to handle the intricate constitutional problems
involved in the readmission of the Southern States, he immediately
became one of an influential group of which the other members were
Sumner, Fessenden, Trumbull, and Wade, and took an important part in
framing the legislation of the reconstruction period. George F. Hoar
had, by 1890, represented Massachusetts in the Senate for thirteen
years; his great learning, his comprehensive knowledge of public
questions, his independence, his genuine devotion to the best public
interests had made him one of the most commanding figures in that body.
George Gray of Delaware, at present a judge of the United States
Circuit Court, and for many years one of the most conservative forces
in the Democratic party--the same George Gray upon whom many of Mr.
Bryan's opponents hoped to unite a few months ago as the Democratic
presidential nominee--was also recognized as one of the Senate's
greatest authorities on the Constitution. Senator George had served for
many years as chief justice of the Supreme Court of Mississippi, and
was the author and compiler of many works on law which are still widely
used.
Over the question of federal control of large combinations these five
men and their colleagues debated for nearly two years. Senator Sherman
introduced his first anti-trust act August 14, 1888; the present
statute finally became a law on July 21, 1890. During this period six
separate trust bills, all modifications of that originally introduced
by Mr. Sherman, were laid before the Senate. They were considered by
two committees--the Finance and the Judiciary--and debated at great
length in the committee of the whole. The discussions occupy one
hundred and fifty pages of the Congressional Record.
A striking illustration of the general ignorance of the circumstances
under which the Sherman Act was passed is furnished by the present
Republican platform. This declares that "the Republican party passed
the Sherman Anti-Trust Act over Democratic opposition." The records
of Congress, however, show no indications of any opposition at all,
Democratic or other. Of the five men most conspicuous in framing the
law, three were Republicans and two were Democrats. In the Senate only
one senator voted against the passage; in the House two hundred and
forty-two votes were cast in favor of the act, and not a single one was
cast against it. The whole debate was notable for its seriousness and
its dignity; one or two Democrats did suggest that a revision of the
tariff might help to curb the trusts; but that was the only partisan
note struck. Congress keenly appreciated the issues raised by the trust
problem and the necessity of taking action that would be beneficial and
permanent. Everybody realized, also, the inherent difficulties of the
situation. The debates in the Senate on this issue, far from indicating
a scrappy investigation, furnish material for a liberal education in
the constitutional questions involved in dealing with monopolies.
Senator Hoar, in preparation for the work, studied the history of
legislation concerning monopolies from the time of Zeno. One of the
sections in the bill--that providing that a successful litigant against
a trust can recover three times the damages suffered from it--Mr. Hoar
incorporated from a statute on monopolies passed in the reign of James
I.
[Illustration: SAMUEL GOMPERS, FOR TWENTY-FIVE YEARS PRESIDENT OF THE
FEDERATION OF LABOR. MR. GOMPERS DEMANDS AN AMENDMENT OF THE SHERMAN
ANTI-TRUST ACT THAT WOULD MAKE LEGAL THE INTERSTATE BOYCOTT]
_Sherman Act Intended to Apply to Labor Unions_
Of all the legends which have grown up about this law, perhaps the
most absurd is that it was never intended to apply to workingmen. "As
a matter of fact," said Samuel Gompers before the Judiciary Committee
of the House last winter, "every man who now lives and is familiar
with the legislation of the day knows that the Sherman Anti-trust Law
was never intended to include organizations of labor," Chief Justice
Fuller, in a recent decision of the United States Supreme Court, flatly
contradicts Mr. Gompers' statement. "The records of Congress show,"
says Justice Fuller, "that several efforts were made to exempt, by
legislation, organizations of farmers and laborers from the operation
of the act and that all these efforts failed," In fact, the question
of the relation of labor unions and the law occupied a conspicuous
place in the debates; it was almost as constantly in the minds of the
Senators as the question of capitalistic combinations themselves.
To meet this situation, Senator Sherman introduced an amendment
specifically excepting labor unions and agricultural associations from
the operation of his statute. Mr. Gompers, according to his remarks
before the Judiciary Committee last winter, was partly responsible for
the introduction of this amendment. Senator Edmunds opposed it on the
ground that it granted rights to labor which it withheld from capital,
and he insisted that both sides should be treated upon an exact
equality. In the following words he disposed for all time of Senator
Sherman's plea for preferential treatment of laboring men:
The fact is that this matter of capital, as it is called, of
business, and of labor, is an equation, and you cannot disturb one
side of the equation without disturbing the other. If it costs
for labor 50 per cent. more to produce a ton of iron, that 50 per
cent. more goes into what that iron must sell for, or some part of
it. I take it everybody will agree to that.
Very well. Now, if you say to one side of that equation, "You may
make the value or the price of this iron by your combination for
wages in the whole Republic or on the continent, but the man for
whom you have made the iron shall not arrange with his neighbors
as to the price they will sell it for, so as not to destroy each
other," the whole business will certainly break, because the
connection between the plant, as I will call it for short, and
the labor that works that plant, is one that no legislation and
no force in the world--and there is only one outside of the world
that can do it--can possibly separate. They cannot be divorced.
Neither speeches nor laws nor judgments of courts nor anything
else can change it, and therefore I say that to provide on one
side of that equation that there may be combination and on the
other side that there shall not, is contrary to the very inherent
principle upon which such business must depend. If we are to have
equality, as we ought to have, if the combination on the one side
is to be prohibited, the combination on the other side must be
prohibited, or there will be certain destruction in the end....
On the one side you say that it is a crime and on the other side
you say it is a valuable and proper under-taking. That will
not do, Mr. President. You can not get on in that way. It is
impossible to separate them; and the principle of it therefore is
that if one side, no matter which it is, is authorized to combine,
the other side must be authorized to combine, or the thing will
break and there will be universal bankruptcy. That is what it will
come to.
[Illustration: SENATOR GEORGE F. EDMUNDS, GENERALLY REGARDED AS ONE OF
THE GREATEST CONSTITUTIONAL LAWYERS OF HIS TIME. THE SHERMAN ACT, AS
IT STANDS AT PRESENT, IS VERY LARGELY HIS WORK]
Senator Edmunds' logic absolutely killed any attempt to place capital
and labor upon different footings, Instead of adopting this proposed
amendment, the Senate referred the whole question of trust legislation
to the Judiciary Committee, of which Senator Edmunds was chairman. Mr.
Edmunds and his colleagues threw into the waste basket all the pending
trust bills and their amendments and struck out on new lines. As a
consequence, Senator Edmunds became the chief author of the Sherman
Anti-Trust Law. His most active associates, were Senator Hoar and
Senator George. The one man who had practically nothing to do with the
statute as it stands to-day was Senator Sherman himself. He played
an important part in the preliminary discussion and in framing the
measures which served as a basis for this discussion; but the bill as
it was finally adopted by Congress bore little resemblance to his.
The amendment upon which he laid especial stress--that of exempting
laboring and agricultural organizations from the operation of the
Anti-trust Law--was absolutely ignored.
As finally adopted, the act did not prohibit labor unions per se or
combinations of labor unions formed to accomplish lawful ends; it
did, however, strike at certain labor union practices. That this was
the clear intention of the Senate is evident from a statement made by
Senator Edmunds in a newspaper interview as far back as 1892. "The
Sherman Law," said Mr. Edmunds, "is intended to cover and I think will
cover every form of combination that seeks in any way to interfere with
or restrain free competition, whether it be capital in the form of
trusts, combinations, railroad pools, or agreements, or labor through
the form of boycotting organizations that say a man shall not earn his
bread unless he joins this or that society. Both are wrong; both are
crimes and indictable under the Anti-trust Law."
_Unsuccessful Efforts to Destroy the Law_
For eighteen years the anti-trust statute has represented American
policy and American law in federal regulation of combinations in
restraint of trade. In that period the act has been repeatedly
assailed from many legal standpoints. It has been passed upon more
than two hundred and fifty times by the federal courts, and has been
considered fifty-five times by the United States Supreme Court. The
greatest constitutional lawyers of this generation--such men as
Edward J. Phelps, James C. Carter, John F. Dillon, and Francis Lynde
Stetson--have attempted to destroy it and have not succeeded. The
greatest railroads and corporations, on the one hand, and the largest
and most influential labor unions, on the other, have both failed in
their attempts to secure exemption from its operation.
[Illustration: JUDGE GEORGE GRAY OF DELAWARE, WHO, AS UNITED STATES
SENATOR, IN 1890, TOOK AN IMPORTANT PART IN FRAMING THE SHERMAN LAW]
The history of the Sherman Act has absolutely justified the wisdom
and integrity of the Supreme Court. Scores of times the lower courts
have decided against the government; and the most important decisions
have been those in which the Supreme Court has reversed the inferior
tribunals. The record of federal prosecutions under this law affords an
interesting insight into the attitude of the several administrations
toward trust regulation. President Harrison, under whose administration
the law was passed, accomplished little. His attorney-general brought
seven actions--four bills in equity and three criminal indictments.
Under the equity proceedings, he obtained three injunctions; the
criminal proceedings all ended in failure. One of the cases instituted
by President Harrison, however,--that against the Trans-Missouri
Freight Association,--was afterward taken to the Supreme Court by
President Cleveland's attorney-general, and resulted in securing one of
the most important decisions in the history of the law.
President Cleveland showed considerably more activity than his
predecessor. Though only eight proceedings stand to his credit,
several of them were of the greatest importance. He used the Sherman
Law in fighting the Debs cases growing out of the Pullman strike; and
in the well-known Addyston Pipe & Steel Company case he dissolved a
combination, formed by several manufacturers of gas and sewer pipe, to
monopolize the trade of most large American municipalities. President
McKinley apparently had little interest in the Sherman Law; throughout
his four and a half years only three cases were prosecuted, none of
which were of much consequence. With the administration of President
Roosevelt, however, the situation changed. Against the seven cases
instituted by Harrison, the eight by Cleveland, the three by McKinley,
stand thirty-seven started by Roosevelt. That is, he has instituted
twice as many cases as all his predecessors combined, and many of
the Roosevelt prosecutions have proved successful. Nineteen of these
thirty-seven cases have already been decided; the government has won
seventeen and lost only two.
As a result of these many proceedings and interpretations, the Sherman
Anti-trust Law is now fairly well understood. There has recently been
much complaint that the law is not sufficiently "specific"; that
business men and labor leaders are groping very much in the dark;
that it is impossible to say what this statute prohibits and what it
permits. From the judicial literature which has accumulated in the
last eighteen years, however, a fairly clear idea of its bearings
upon large enterprises, both of labor and capital, can be obtained.
Senator Hoar declared, when the bill came up for final passage, that
it enunciated no new principle of law. It made illegal "restraints of
trade" and "monopolies," but these had been for centuries unlawful in
all Anglo-Saxon countries. As far back as the reign of Henry VI. in
England, in 1436, a law was passed declaring that "all agreements in
restraint of trade are illegal and voide." This principle has ever
since been part of the law of England, and is at present part of the
common law of many States in the Union.
[Illustration: FRANCIS LYNDE STETSON, CHIEF COUNSEL FOR THE UNITED
STATES STEEL CORPORATION AND OTHER MORGAN ORGANIZATIONS. MR. STETSON
WAS ONE OF THE DRAFTERS OF LAST WINTER'S TRUST BILL. IF IT HAD BECOME
A LAW, THIS MEASURE WOULD HAVE MADE THE UNITED STATES STEEL COMPANY
PRACTICALLY IMMUNE FROM FEDERAL PROSECUTION]
In the United States itself, however,--that is, in the federal
courts--there is no common law; everything must be fixed and regulated
by statute. What the Sherman Act did was to make this common law on the
subjects of restraints and monopolies the statute law of the United
States. Under the common law of practically every State, monopolies
and restraining combinations were illegal; Congress made these illegal
when they involved inter-State trade. Under the common law boycotts
were illegal also; Congress made illegal the inter-State boycott.
Congressional action on this subject was demanded, because the larger
number of these unlawful combinations could be reached only by federal
action, inasmuch as they usually involved more than one State.
Under the rulings of the Supreme Court, combinations and conspiracies
which restrain trade and develop monopolies are those which, broadly
speaking, deprive the public of the benefits of free competition. This
act recognizes the competitive system as the one industrial ideal,
and outlaws anything that interferes with a free, unobstructed flow of
trade. A trust that gets control of the larger part of a particular
product and manipulates the output so as to prevent trade from flowing
in its natural course--that is an illegal restraint. Labor unions that
combine to divert artificially this same course of trade--as they
unquestionably do when they persuade the public not to have business
relations with particular persons or corporations against which
they have declared a boycott--also engage in an illegal restraint.
The Sherman Law aims only to protect the public against these
unnatural influences; to restore business to normal conditions. With
corporations, the final test as to whether they restrain trade or not
is whether their effect is to increase prices. If they do not increase
prices, then they do not restrain trade and consequently do not violate
the Sherman Act. The Supreme Court has insisted upon one important
modification of this principle. The effect upon prices must be
immediate and not remote. An arbitrary agreement that definitely fixes
the prices of a product is clearly illegal; an agreement which, in the
last analysis, might tend to influence prices, would not necessarily be
so.
[Illustration: SETH LOW, EX-MAYOR OF NEW YORK, WHO, AS PRESIDENT OF
THE NATIONAL CIVIC FEDERATION, ADVOCATES THE AMENDMENT OF THE SHERMAN
LAW]
_Railroads Stopped from Making Rate Agreements_
In the first ten years after the passing of the Sherman Act, the
government attacked most successfully, not the great solidified
aggregations of capital popularly known as trusts, but the more or
less loosely organized federations of corporations, formed chiefly for
the purpose of regulating and establishing prices. Trade agreements,
not monopolistic corporations, became its chief quarry. In proscribing
these agreements as illegal, the Sherman Act was found to be extremely
effective. The very first case under this law was directed against a
combination of coal-mining companies in Kentucky and Tennessee, which
existed for the express purpose of regulating output and fixing prices.
The courts promptly decided that this agreement violated the Sherman
Act. In 1892 eighteen railroads, nearly all operating west of the
Missouri River, organized what they called the Trans-Missouri Freight
Association. This association included many of the great Western roads,
companies of the magnitude of the Santa Fé, the Missouri Pacific, and
the Rock Island. Its object, as clearly stated in the articles of
association, was "mutual protection by establishing and maintaining
reasonable rates, rules, and regulations, in all freight traffic, both
through and local." In other words, it proposed to fix arbitrarily
the price of transportation throughout the enormous territory covered
by the eighteen railroads in question. The old "pooling" agreements,
which had existed for many years, had been prohibited by the Interstate
Commerce Law passed in 1887; and this Traffic Association was an
attempt to accomplish the same end--that is, stop competition among the
railroads and maintain rates--in a different way. The Supreme Court,
by a vote of five to four, decided that this agreement was prohibited
by the Sherman Anti-trust Act, because, as an attempt to fix prices,
it restrained trade. The famous Trans-Missouri decision, which settled
this case, made the Sherman Law an insurmountable bulwark against all
railroad combinations of this kind. Until this decision was finally
given in 1897, this act had not been seriously regarded; after the
Supreme Court had spoken, however, capitalists suddenly awoke to its
significance. The decision settled many important points, which will be
referred to subsequently in this article, and it changed as well the
whole policy of railroad management.
The Sherman Act has stopped, not only railroad combinations, but
similar agreements existing among manufacturers for the regulation
of prices. The case of the Addyston Pipe & Steel Company is the most
celebrated of this kind. In 1894 a large number of manufacturers
of sewer and gas pipe, the Addyston Company being one, formed a
combination to monopolize business and fix prices in thirty-six States
and Territories. All companies which were parties to the agreement
reserved the right to compete with each other outside of these
thirty-six States as fiercely as before. They significantly called the
section in which there was to be no competition "pay territory"; and
the States outside of this section were known as "free territory."
These manufacturers dealt chiefly with municipalities, which usually
let contracts for sewer and gas pipe by public bidding. Whenever such
a contract was offered, the Addyston combination would meet secretly,
decide upon the price they would charge, and then arrange a program
of fictitious bids. They then divided the profits among themselves.
In this way they forced practically all purchasers in the sections in
which they traded to pay exorbitant prices. Indeed, the subsequent
history of this combination beautifully illustrates the practical
effect upon the public of agreements of this kind. The Addyston and
its associate members sold certain pipe in "pay territory," where
the combination was enforced, at twenty-four dollars a ton; in "free
territory," where they competed with each other, they frequently sold
identically the same product at fourteen dollars. The Supreme Court
decided that this agreement violated the Sherman Act--that it was a
combination or a conspiracy in restraint of trade. William H. Taft,
then United States Circuit Judge, wrote an opinion discussing the
merits of this dispute which has since become a legal classic. Mr. Taft
spent six months in studying the questions involved.
Nearly all such cases, however, involved merely what may be called
trade agreements. In each case there were actual attempts to fix
prices by compact, and these agreements were the only things in
common among the different corporations that became parties to them.
The several corporations preserved their independent existence; they
were not trusts in the sense in which the Standard Oil Company, the
American Sugar Refining Company, the United States Steel Company, are
trusts--that is, single corporations, producing and distributing the
greater part of some particular product. Until President Roosevelt's
administration, these trusts had, for the larger part, escaped
prosecution under the Sherman Law, the few attempts that had been made
to assail them; having ingloriously failed.
[Illustration: JOHN SHERMAN, A STATESMAN WHO SERVED THE GOVERNMENT
FOR MORE THAN FORTY YEARS, AS SENATOR, SECRETARY OF THE TREASURY, AND
SECRETARY OF STATE. BETWEEN 1888 AND 1890 HE INTRODUCED SIX SEPARATE
BILLS FOR THE REGULATION OF TRUSTS, AND OUT OF THESE GREW THE MEASURE
WHICH NOW BEARS HIS NAME]
Meanwhile, in the first twelve years after the passage of the
Anti-trust Act, and in the teeth of it, some of the largest
monopolistic corporations were formed. Many persons have maintained
that the Sherman Law, far from forestalling these corporations, has
actually precipitated them. Their point is that, since this act
clearly outlawed trade agreements among independent corporations, these
corporations, in order to get control of the situation, have been
compelled to amalgamate themselves under one ownership. The Sherman
Act made illegal, for example, rate agreements among railroads; as a
consequence, in order to control railroad policy, the owners of the
great trunk lines have purchased large blocks of stock in each other's
property--on what is popularly known as the "community of interest"
idea.
President Roosevelt, however, has succeeded in applying the Sherman
Act to the trusts, as that word is popularly understood. The famous
Northern Securities case is his greatest victory along that line. In
this instance, Mr. J. J. Hill and J. Pierpont Morgan formed a new
corporation, the Northern Securities Company, which acquired the actual
stock ownership of nine-tenths of the stock of the Northern Pacific
Railroad and three-fourths of that of the Great Northern. The Northern
Securities Company thus obtained a virtual monopoly of railroad
transportation from the Great Lakes to the Pacific Ocean in the
northern section of the United States. The Roosevelt administration,
relying solely upon the Sherman Act, destroyed this corporation. The
administration has followed up this victory by instituting suits
against the Standard Oil Company, the American Tobacco Company, and
other powerful monopolies.
[Illustration: GEORGE FRISBIE HOAR, UNITED STATES SENATOR FROM 1877 TO
1904, AND ONE OF THE AUTHORS OF THE SHERMAN ANTI-TRUST ACT]
_Labor Unions, as Such, Not Prohibited_
Meanwhile, the same law has proved an effective weapon in opposing
that other form of combination and restraint against which it was
framed,--the labor trust. Under it a new code of federal laws affecting
labor unions has developed; and to a large extent it has strengthened
the cause of legitimate labor organization. No intelligent person now
disputes the right of workingmen to organize. A few labor leaders have
publicly declared their apprehension that the Sherman Law prohibits
peaceable labor organizations; no man, however, has thus far had the
hardihood to raise this question legally; and, in the present state
of public opinion as to the rights of labor, no one is likely to.
The United States Courts, in decisions defining the scope of the
Sherman Act, have specifically stated that it does not prohibit the
ordinary peaceful activities of labor unions. Justice White, in a
decision of the Supreme Court, has declared that an agreement among
"locomotive engineers, firemen, or trainmen engaged in the service
of an inter-State railroad not to work for less than a certain named
compensation" would not be illegal. William H. Taft, in one of the most
important decisions affecting the rights of workmen under the Sherman
Act, has defined the situation in words which are now widely accepted
as a clear statement of what is not only good law but sound public
policy:
The employees of the receiver had the right to organize into or
join a labor union which would take action as to the terms of
their employment. It is a benefit to them and to the public
that laborers should unite for their common interest and for
lawful purposes. They have labor to sell. If they stand together,
they are often able, all of them, to obtain better prices for
their labor than dealing singly with rich employers, because
the necessities of the single employee may compel him to accept
any price that is offered. The accumulation of a fund for those
who feel that the wages offered are below the legitimate market
value of such labor is desirable. They have the right to appoint
officers, who shall advise them as to the course to be taken in
relations with their employers. They may unite with other unions.
The officers they appoint, or any other person they choose to
listen to, may advise them as to the proper course to be taken in
regard to their common employment; or if they choose to appoint
any one, he may order them on pain of expulsion from the union
peaceably to leave the employ of their employer because any of the
terms of the employment are unsatisfactory.
It is clearly indicated, therefore, what labor leaders, under the
Sherman Act, can do. They have the right to organize, to combine--that
is, to form unions; they have the right to refuse to work for wages or
terms of employment unsatisfactory to themselves--that is, to strike.
Under the Sherman Act, indeed, mere organizations of laboring men are
regarded as no more outlawed than ordinary social clubs or college
fraternities.
_How the Chicago Strike of 1894 Restrained Trade_
On the other hand, labor leaders know what, under the Sherman Act,
they can not do. They cannot enter into combinations that restrain
trade. This vital point has been settled in several important
proceedings--those involving the Chicago disturbances in 1894, and,
more recently the decision just handed down in the matter of the
Danbury Hatters. These cases so clearly show the bearing of the Sherman
Act upon illegal labor practices, that they may profitably be reviewed
here.
[Illustration: _Copyrighted by C. R. Buck_
CONGRESSMAN CHARLES E. LITTLEFIELD OF MAINE, WHOSE KEEN ANALYSIS OF
LAST WINTER'S CIVIC FEDERATION TRUST BILL WAS LARGELY RESPONSIBLE FOR
ITS DEFEAT]
In 1894 the employees of the Pullman Palace Car Company of Chicago
struck for higher wages. These employees were not railway men; they
were workmen engaged in the manufacture of railway cars. In spite
of this, about four thousand had been admitted to membership in the
American Railway Union, an organization of railroad operatives,
which, under the vigorous management of Eugene V. Debs, had acquired
a membership of 250,000, and a correspondingly great power in the
field of railroad labor. In order to help the Pullman workmen in their
struggle with the Pullman Company, the American Railway Union declared
what was in effect a boycott upon all railroads using Pullman cars.
Nearly all the larger American railroads had entered into contracts
with the Pullman Company, by which parlor and sleeping cars were to be
used on their trains. Debs now demanded that these railroads should
break their contracts, and thereby, of course, become responsible for
heavy damages to the Pullman Company. In other words, he demanded that
all American railroads cease patronizing the Pullman Company because of
its "unfair" attitude toward union labor; that is, he started a boycott
against the Pullman Company. When the railroad companies refused to
meet his demand, he ordered out all American Railway Union men employed
on these lines. He even declared war upon several of the Vanderbilt
roads, which had no Pullman sleepers, operating instead the Wagner
cars. In effect, in order that several thousand workmen in Chicago
might profitably settle their private grievances with their employers,
Debs proposed, practically to end railroad communication in the larger
part of the United States.
"The gigantic character of the conspiracy," said William H. Taft in
a well-known decision resulting from these proceedings, "staggers
the imagination. The railroads have become as necessary to the life
and health and comfort of the people of this country as are the
arteries to the human body." The larger part of our food supply,
for example, is furnished by means of the railway; the interruption
of railroad transportation for any considerable period would, among
other calamities, bring famine upon large sections of the country. In
Chicago, in Cincinnati, and in other large cities, Debs despatched his
lieutenants with orders to tie up all railroads using Pullman cars.
He gave particular instructions to interfere with freight trains,
since freight was the main source of railroad revenue. In many places
riots followed; in Chicago, strikers began wrecking trains, blowing up
bridges, burning freight yards, tearing up tracks--indeed, nearly all
the twenty-three railroads centering in that city ceased operations.
The fundamental principles of the constitution, guaranteeing the
safety of life and property, had apparently given way to lawlessness
and anarchy. In the opinion of Grover Cleveland, then President of
the United States, these proceedings constituted a "conspiracy in
restraint of trade" among the States, and as such were prohibited by
the Sherman Act. That the purpose and effect of Debs' proceedings was
to restrain trade is sufficiently clear; indeed, no more complete
restraint than the cessation of railroad communication could be
imagined. Trade in this case was not only restrained; it was entirely
stopped. That the means by which this was to be accomplished had all
the essential elements of the inter-State boycott has also been shown.
In several cities, acting under the President's instructions, United
States district attorneys obtained injunctions on the ground that the
strike leaders were violating the Sherman Act, and also interfering
with the carriage of United States mails. In Chicago Eugene V. Debs
was enjoined, and, when he disobeyed the injunction, was arrested
and afterward sentenced to six months' imprisonment. In Cincinnati
his associate, Frank W. Phelan, was likewise enjoined and likewise
imprisoned for contempt. It was his act as judge in sending Phelan to
prison for violating the Sherman Law that first made William H. Taft
a national figure. The circuit courts[J] decided, in several cases,
that the combination formed by Debs against nearly all the trunk lines
was a boycott, "a conspiracy in restraint of trade," and punished the
leaders, under the Sherman Act. William H. Taft declared that "the
combination is in the teeth of the act of July 2, 1890."
_The Danbury Hatters Attempt to "Restrain Trade"_
This boycott involved violence as an incident; the Supreme Court,
however, has recently taken still more advanced ground, and decided
that a peaceable boycott also violates the Sherman Act. In the last
fifteen years a terrific warfare has raged between the American
Federation of Labor and nearly all American manufacturers of hats.
The American Federation has a membership variously estimated at from
1,500,000 to 2,000,000, including workmen in practically every State
and Territory. It is, as its name implies, a central association
organized for the purpose of bringing into one effective machine all
the local labor organizations scattered throughout the country. It
is an association of associations, and, as indicating its national
scope, has its headquarters in Washington. It keeps constantly in touch
with its membership through its monthly publication, the American
Federationist, as well as through the many journals of the unions
with which it is affiliated. It regularly employs nearly one thousand
agents who continually push the interests of its members in the larger
part of the United States and Canada. Mr. Samuel Gompers constantly
uses this organization for the prosecution of inter-State boycotts.
In his petition to intervene in the Danbury Hatters case, Mr. Gompers
stated, over his own signature, that "the constitution of said American
Federation of Labor makes special provision for the prosecution of
boycotts, so-called, when instituted by a constituent or affiliated
organization." In a public speech on May 1, 1908, Mr. Gompers declared
that the Supreme Court might "as well dissolve and destroy the
organization of labor as to enforce these decisions"--that is, the
decisions against boycotts. Obviously, the Federation of Labor has an
advantageous organization for work of this kind. A local union, with
membership extending not beyond the limits of a town or State, could
make little headway against a manufacturer against whose goods it had
declared a boycott, inasmuch as his trade usually extends over a large
area. The American Federation of Labor, however, by embracing the local
unions' cause can make the boycott effective in practically every part
of the country. In the last twelve years, Mr. Gompers' organization has
declared four hundred and eight boycotts.
In particular, it has prosecuted with considerable success boycotts
against the manufacturers of fur hats. About ten years ago, Mr.
Gompers, working with the United Hatters of North America, inaugurated
an elaborate program to compel all such manufacturers to unionize their
shops. By using their well-known methods, they have brought to terms
seventy out of the eighty-two manufacturers in this country. The firm
of D. L. Loewe & Co. of Danbury, Connecticut, however, had persistently
refused to comply with these demands. Mr. Loewe was not a large
manufacturer; he had, however, built up a prosperous business, and,
though he had never shown any hostility to union labor, had insisted on
maintaining an open shop. In 1901 the United Hatters' Union practically
ordered him to discharge his non-union men and unionize his factory.
Mr. Loewe again refused to do this, and a strike immediately followed.
Mr. Loewe, however, promptly engaged new non-union men, and soon his
factory was running as busily and as profitably as before.
Mr. Gompers then brought the whole machinery of his organization to
bear upon this recalcitrant hatter. On July 25, 1902, the Federation of
Labor and the United Hatters declared a boycott against his products.
They denounced this concern in their several publications as "unfair,"
and notified nearly all the wholesale and retail hat dealers throughout
the United States that they must not handle the Loewe goods, under
pain of being boycotted themselves. It is said that their agents kept
espionage, in Danbury, over all freight consignments from the Loewe
factory, and thus obtained a fairly complete list of their customers;
committees of labor men in many cities waited upon these customers,
and, in several instances, persuaded them to drop the Loewe hats. Some
firms who refused to obey this dictation were themselves boycotted;
and, in San Francisco, Philadelphia, Baltimore, and Richmond, the
boycott was pursued with particular virulence. The Federation went so
far as to grant a special dispensation to its members to purchase hats
made by other non-union labor, rather than patronize the Loewe brand.
Mr. Loewe, though he suffered enormous loss as a result of these
proceedings, pluckily kept up the fight. Under the Sherman Law, an
aggrieved citizen is authorized to bring private suit against persons
engaged in a conspiracy to restrain his trade, and, if he successfully
maintains his case, may recover three-fold damages. Mr. Loewe quietly
went to work and had made an inventory of all property-holders actively
engaged in boycotting his goods. He then brought suits for $340,000
damages against a large number of labor men, filing in the District
Court 240 separate attachments. The Supreme Court of the United States
made short work of this case. Chief Justice Fuller, who wrote the
decision, declared that "the combination described in the declaration
is a combination 'in restraint of trade or commerce among the several
States' in the sense in which these words are used in the act, and the
action can be maintained accordingly." An interesting feature of the
case is that the decision of the Supreme Court was unanimous. In nearly
all the other proceedings involving the Sherman Law--the Trans-Missouri
case, the Northern Securities--the government has won by a bare
majority; every member of the Supreme bench, however, at once concluded
that Mr. Gompers' activities against the firm of D. L. Loewe & Co.
restrained inter-State trade, and thus violated the Sherman Law.
Thus, in eighteen years, the Sherman Act has proved an effective weapon
against the two forms of trust and conspiracy with which the public
is most familiar--combinations of capitalists to restrain inter-State
trade and arbitrarily fix prices, and combinations of labor unions
organized for the prosecution of inter-State boycotts. It strikes
impartially the Northern Securities Company and the American Federation
of Labor; it does not discriminate between the activities of Mr. J.
Pierpont Morgan and of Mr. Samuel Gompers. At the last session of
Congress, the two forces which it opposes bent all their energies to
destroy this law; in all probability they will renew and redouble their
efforts this winter.
_National Civic Federation Attempts to Amend the Law_
For many years the National Civic Federation has been collecting data
bearing upon the trust and labor problem. In 1899 it held a trust
conference; and again, in October, 1907, it called a large meeting
at Chicago for the consideration of the trust situation. Delegates
appointed by the governors of forty-two States and representatives of
more than ninety commercial, agricultural, and labor organizations
contributed to these discussions. Referring to these Chicago
proceedings, Mr. Theodore Marburg, one of the participants, said
before the Judiciary Committee in Washington last winter: "Mr. Nicholas
Murray Butler sounded the note of attack upon the Sherman Anti-trust
Law.... I take it that the gentlemen will agree with me that it was
a dominant note of that conference." As a result, a bill radically
amending the Sherman Anti-trust Act was introduced in Congress at the
last session. Its most active sponsors in Washington were Seth Low,
president of the National Civic Federation, Professor Jeremiah W. Jenks
of Cornell, and Samuel Gompers, president of the Federation of Labor.
Well-known men who had participated in the conference that preceded
the framing of the bill were E. H. Gary, chairman of the Board of the
United States Steel Corporation, Henry L. Higginson, Isaac N. Seligman,
and James Speyer and August Belmont, bankers. Francis Lynde Stetson,
chief counsel for the United States Steel Corporation and other Morgan
corporations, and Victor Morawetz, counsel for the Santa Fé Railroad,
wrote the drafts. This latter fact was publicly stated by Mr. Low and
Mr. Jenks in the course of the hearings before the Judiciary Committee.
The authorship of the bill was early brought out in the following
colloquy between Congressman Charles E. Littlefield and Mr. Low:
MR. LITTLEFIELD: Right there, Mr. Low, if there is no objection,
who are the people that actually participated in the preparation
of the bill? Who are the men who actually drew it?
MR. LOW: We conferred with Judge Gary, of the United States Steel
Corporation.
MR. LITTLEFIELD: E. H. Gary, president of their board of directors?
MR. LOW: E. H. Gary. The lawyers actually engaged in the drafting
of the bill were Mr. Stetson----
MR. LITTLEFIELD: That is, Francis Lynde Stetson?
MR. LOW: Francis Lynde Stetson; and Mr. Morawetz.
MR. LITTLEFIELD: Victor Morawetz?
MR. LOW: Victor Morawetz.
At another time, Mr. Low described Mr. Stetson and Mr. Morawetz as
"the drafters" of the bill. Herbert Knox Smith, commissioner of
corporations, also had a hand in framing the measure. President
Roosevelt openly indorsed it and sent in an emergency message urging,
among other things, its passage. Extensive hearings, extending through
several months, were held before the Judiciary Committee. Many
representatives of capital and labor appeared in favor of the measure.
Although Congressman Littlefield, who presided over these hearings,
many times expressed his wish to examine Mr. Stetson and Mr. Morawetz,
these gentlemen never appeared. Although Mr. Low promised that they
would submit a brief, explaining several disputed legal points, they
never did so. The burden of discussing the many intricate legal points
that constantly arose rested entirely upon the shoulders of Mr. Low and
Professor Jenks, neither of whom had had any legal training. Through
the efforts of Congressman Littlefield, James A. Emery, counsel for
the National Association for Industrial Defense, and Daniel Davenport,
counsel for the Anti-Boycott Association, the proposed law was
defeated, but the proceedings are of great interest and importance
as illustrating the changes desired by both labor and capital in the
present anti-trust law.
_Gompers Asks that the Boycott be Legalized_
Mr. Gompers' demands were entirely simple and direct. He wished labor
unions entirely exempted from the operations of the Sherman Act. That
law, if properly respected and enforced, would practically put an end
to Mr. Gompers' occupation. Referring lately in a public speech to
the effect of a recent court decision against inter-State boycotts,
Mr. Gompers quoted, as applicable to his own organization, Shylock's
speech in "The Merchant of Venice," "You might as well take from
me my life as take from me the means whereby I live." Mr. Gompers'
chief interest in the Civic Federation bill, therefore, was a clause
which specifically declared that the Anti-trust Act should not be so
interpreted "as to interfere with or restrict any right of employees
to strike for any cause or to combine or to contract with each
other or with employers for the purpose of peaceably obtaining from
employers satisfactory terms of their labor or satisfactory conditions
of employment." Mr. Low and Mr. Jenks denied that this language
legalized the boycott; Congressman Littlefield, however, and many other
opponents of the measure, emphatically asserted that it did. Such
sweeping concessions as "_to strike for any cause_" and "_to combine
or to contract with each other or with employers for the purpose
of peaceably obtaining from employers satisfactory terms_," it was
maintained, clearly authorized such boycotts as that prosecuted against
the Danbury Hatters. That proceeding, it was pointed out, was entirely
peaceable--there was no law-breaking, no rioting, no bloodshed. It
would also legalize, it was said, many of those arrangements between
labor unions and employers--by which employers' associations contract
to employ only members of certain labor unions, the latter, on their
part, contracting to work only for certain employers--which were
brought to such perfection by the late Sam Parks. Mr. Gompers demanded
that, if the clause in question did not authorize boycotts, another
should be substituted which did; to make the case sure, therefore, he
proposed an amendment which did so in no uncertain tone. The following
extract from the record clearly defines Mr. Gompers' position:
MR. LITTLEFIELD: Now, Mr. Gompers, a word. Would this amendment
you suggest, if it became a law, authorize the prosecution of such
a boycott as was attempted in the Danbury Hatters' case, which was
in violation of the Sherman Anti-trust Law? Is that the purpose?
MR. GOMPERS: One of the purposes; yes, sir. That case was brought
under the Sherman Anti-trust Law.
MR. LITTLEFIELD: Yes. And the purpose of the amendment you have
offered is to relieve you from the operation of the Sherman
Anti-trust Law as construed by the court in that case?
MR. GOMPERS: Yes, sir.
MR. LITTLEFIELD: And to authorize that kind of an inter-State
boycott?
MR. GOMPERS: Yes, sir.
MR. LITTLEFIELD: Do you, as the representative of organized labor,
favor the boycott, both as an inter-State and a local proposition?
MR. GOMPERS: I do, sir.
MR. LITTLEFIELD: And your organization stands for that?