Party Decay, Populism, and the Doctrine of “Free and Unrestricted Competition” in American Antitrust Policy, 1890–1897

Studies in American Political Development, 13 (Fall 1999), 288–336. Printed in the United States of America.

SCOTT C. JAMES UCLA

Prelude to Progressivism: Party Decay, Populism, and the Doctrine of “Free and Unrestricted Competition” in American Antitrust Policy, 1890–1897

On December 8, 1896, the Supreme Court heard arguments in United States v. Trans-Missouri Freight Association.1 The defendant was an association of 18 railroads locked in competition for traffic between the Missouri River and the Pacific Ocean. By memorandum of agreement, member railways had volun- tarily agreed to cease all price-based competition and abide by a common schedule of rates. Attorneys for the railroads maintained that the effects of ruinous competition upon solvency justified the imposition of competitive restrictions. The rates set by the association, they argued, afforded the roads a fair return on their investments, simultaneously offering the public both reasonable rates and adequate facilities. In addition, uniformity of rates facili- tated compliance with the Interstate Commerce Act’s prescription that charges be nondiscriminatory as to person and place. Suit was brought against the Trans-Missouri Freight Association for price- fixing and restricting competition in the market for railroad freight services. At issue was the meaning of Section 1 of the Sherman Antitrust Act, which declared illegal “every contract, combination in the form of a trust or otherwise, and conspiracy” in restraint of interstate trade or commerce. Railroad counsel argued that the Sherman Act merely federalized the common law governing restraint of trade and, as such, prohibited only unreasonable restraints of trade. Attorney General Judson C. Harmon denied that common law tests of reasonableness governed the application of Section 1. The Sher- man Act “stands on its own terms without reference to the Common Law,”

My thanks to Gerry Berk, Alan Dawley, Eileen McDonaugh, and Karen Orren for helpful com- ments. 1. 166 U.S. 290 (1897).

288 © 1999 Cambridge University Press ISSN 0898–588X/99 $9.50 PRELUDE TO PROGRESSIVISM 289 Harmon told the Court, “and those terms forbid all contracts, etc., in restraint of trade,” unhampered by “definitions, implied limitations or qualifications borrowed from the Common Law.” In sum, there were no grounds for excluding railroad rate associations “from the operation of the act which forbids contracts to stifle or restrain free competition.” Such a consideration could properly be addressed only to the law-making power.2 United States v. Trans-Missouri Freight Association is a watershed in the development of federal antitrust policy. In it, a divided Supreme Court found for the government and announced the rule of “free and unrestricted competition” in interstate commerce. The will of Congress was to be found in the express language of the Sherman Act, which declared every contract, combination, or conspiracy in restraint of interstate trade and commerce to be illegal. With one blow, the Trans-Missouri decision nullified the collective judgment of the lower federal courts that the Sherman Act simply federalized the common law, which had come to show considerable tolerance toward voluntary combinations to fix prices and restrict competition between natural competitors. While the courts had generally refused to enforce such agreements when members defected – thus underscoring the voluntary nature of the combination – third party challenges were rarely successful, whether private or public, unless such combinations involved staple commodities and other “necessaries of life.”3 The Supreme Court’s adoption of the per se rule against cooperative efforts to restrict competition – holding any such restraint illegal on its face, regardless of the reasonableness of the action – marked a fundamental alteration in the method of business regulation previously known at common law. This blanket prohibition against all direct restraints on competition would eventually be tempered by the “rule of reason.” Nonetheless, this per se rule would leave its historical imprint upon the evolution of Amer- ican antitrust law. The Trans-Missouri decision is further significant because it set the legal framework upon which business regulation and regulatory politics would play itself out for most of the Progressive era. Trans-Missouri greatly unset- tled the “corporate reconstruction of American capitalism.”4 It thrust federal authority into the hitherto private decision-making practices of interstate corporations and prompted the political mobilization of corporate business and its allies on behalf of a more flexible regulatory status quo. Trans-Missouri also provided an occasion for Progressive era presidents to assert a more prominent leadership role in the direction of national economic policy. Against its broad mandate of “full and unrestricted competition,” Republican presidents Theodore Roosevelt and William Howard Taft would seek to craft an executive-centered antitrust policy: one which not

2. Briefs and Records of the U.S. Supreme Court. United States v. Trans-Missouri Freight Com- pany, 166 U.S. 290. Arguments of Attorney General Judson Harmon. 3. Herbert Hovenkamp, Enterprise and American Law, 1836–1937 (Cambridge, Mass.: Har- vard University Press, 1991). Necessaries of life included such commodities as coal, gas, lumber, and milk. 4. Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1890–1916 (New York: Cambridge University Press, 1986). 290 SCOTT C. JAMES only injected greater flexibility de facto into Sherman Act enforcement, but in addition augmented presidential power through executive discretion and the development of national administrative capacity. With the aid of the newly created Bureau of Corporations, these presidents sought to devise a system of corporate supervision that would distinguish between “good” and “bad” trusts – those anticompetitive arrangements undertaken for efficiency reasons versus those of more predatory intent. Through investiga- tion, publicity and, where necessary, prosecution, executive leadership would weed out the latter and, in so doing, transform the Sherman Act into a more tractable instrument of national regulatory policy.5 Even after the Supreme Court shifted its ground in 1911 – substituting the “rule of reason” for a strict per se rule – the Trans-Missouri reading of the Sherman Act remained a popular rallying point for many agrarians and small business persons concerned with the implications of the rule of reason for their economic well-being. In particular, it became the rallying point of the Bryanite wing of the Democratic party, which would continue to press for statutory return to the Sherman Act’s Trans-Missouri interpretation well into the first administration of Woodrow Wilson.6

INSTITUTIONS, IDEAS, AND POLITICAL PROCESS IN THE SHAPING OF U.S. v. TRANS-MISSOURI Martin J. Sklar’s The Corporate Reconstruction of American Capitalism and Her- bert Hovenkamp’s Enterprise and American Law, 1836–1937 are two recent books to treat the Trans-Missouri decision and, more broadly, the evolution of federal antitrust policy in its formative years (1890–1914). To Sklar, Trans- Missouri was a coup de jure, an exercise of judicial political power on behalf of traditional economic and political values jeopardized by depression and broad-scale economic change. In this account, the Trans-Missouri decision expressed an increasingly outmoded vision of the American political economy, one in which small and independent proprietors had predominated.7 Of more immediate importance to my argument, in Sklar’s interpretation, Trans-Missouri is asserted to have shattered a prior institutional consensus – one involving Congress, the executive branch, and the lower federal courts –

5. William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Edinburgh: Edinburgh University Press, 1966), 240–41. 6. This last theme is pursued in some detail in Scott C. James, “Building a Democratic Ma- jority: The Progressive Party Vote and the Federal Trade Commission,” Studies in American Polit- ical Development 9 (1995): 331–85; and in James, Presidents, Parties, and the State: A Party System Per- spective on Democratic Regulatory Choice, 1884–1936 (New York: Cambridge University Press, 2000) forthcoming. 7. Thus, in writing for the majority, Justice Peckham “departed from traditional common law jurisprudence to reestablish the earlier small-producer version of natural liberty[.]” On the other hand, the minority opinion, written by Justice (later Chief Justice) Edward D. White, “invoked the traditional common law to vindicate new economic theory and a legal positivism suit- ed to the mature industrial capitalism of the late nineteenth and early twentieth centuries.” See Sklar, The Corporate Reconstruction of American Capitalism, 140. PRELUDE TO PROGRESSIVISM 291 on the common law meaning of the Sherman Act.8 In this account, the re- constituted Sherman Act, willfully reconstrued by a rogue Court majority, challenged the political viability of emergent corporate capitalist relations. In stark contrast to Sklar, Herbert Hovenkamp sees the Trans-Missouri decision as evidence of a paradigm shift in the mode of economic reasoning employed by the Court, a shift from classical political economy to neoclassical economics. Infused with the ideology of “free labor,” competition in classical political economy referred to the right of the citizen to pick her trade, enter into contracts, and compete actively in the economic market free from outside coercion. In classical political economy, voluntary arrangements to fix prices and restrict competition were part of a citizen’s broader right to contract. Public policy was not compromised so long as potential competitors were free to enter the market and consumers were not compelled to buy, as in the case of life’s necessities. Neoclassical economics, on the other hand, broadened the concept of coercion to include the notion of market coercion. With its heightened concern for cost/price relationships and productive and allocative efficiencies, neoclassical economics found coercion where consumers were “forced” to purchase products at prices above those otherwise set by supply and demand or “forced” not to buy at all. So understood, the modernization of economic reasoning on the Court entailed a reformulation of the concept of “competition,” and with it, a broad attack on voluntary anticompetitive arrangements.9 This article takes as its point of departure the influential arguments of Sklar and Hovenkamp on the origins and meaning of the Trans-Missouri decision. My purpose is twofold. The first is to examine the origin and meaning of the per se rule and the doctrine of “free and unrestricted competition” that it expressed. The second is to examine the process by which that doctrine came to the Supreme Court and entered into American antitrust policy in 1897. My account of the declaration of the per se rule in U.S. v. Trans-Missouri shares important points of commonality with both of the accounts sketched above. Like Hovenkamp, I understand the earlier common law on combinations as having been broadly tolerant of price-fixing and other competition-restricting arrangements. Tests of reasonableness were rarely applied to voluntary agreements among competitors to coordinate their market behavior.10 Thus understood, the Supreme Court’s embrace of the “rule of reason” in 1911 did

8. It will be recalled that the senators who drafted and sponsored the Sherman Act considered it as essentially a statutory embodi- ment, at the federal level, of common-law doctrine, and that the federal courts so construed the act from 1890 to 1897. In this period, moreover, . . . the executive branch of the federal government, as represented by the various presidents and attorneys general, who were responsible for enforcing the law, shared this view. (Sklar, The Corporate Reconstruction of American Capitalism, 339) 9. Hovenkamp, Enterprise and American Law, xxx. 10. Application of the “rule of reason” in the common law was confined to the law of contracts in restraint of trade, specifically to contracts in partial restraint of trade: restrictive covenants ancillary to a some other main purpose, such as the transfer of property or goodwill, or an agreement by a master to take someone on as an apprentice. 292 SCOTT C. JAMES not signal a return to the common law test of reasonableness; it remained an innovation upon it. Where I depart from Hovenkamp’s analysis is in his explanation for the Court’s rejection of the common law and its embrace of the per se rule. Whereas Hovenkamp’s argument operates at the level of economic ideas, mine operates at the level of political processes. In another departure from Hovenkamp, I follow Sklar in understanding the per se rule to express the values of a traditional social order under siege by an emergent corporate capitalism, not a reflection of the modernization of economic ideas among the judicial elite. But where Sklar treats Trans-Missouri as a unilateral act of judicial policy making, I see judicial acquiescence to the more political branches of government. The Trans-Missouri decision, I will argue, represented not the will- ful disregard of a stable institutional consensus on the common law meaning of the Sherman Act, but rather judicial accommodation to a long-standing contention of the U.S. Justice Department that the Sherman Act was to be read literally: prohibiting every contract in restraint of trade and requiring free and unrestricted competition in interstate commerce. In the years between 1890 and 1897, Justice Department officials in both Republican and Demo- cratic administrations asserted readings of the Sherman Act wholly at odds with that of both the congressional Republican majority that shepherded the Act to passage, and that of the federal courts that subsequently construed it. Understanding the politics of the per se rule requires that one situate the early Sherman Act in the volatile politics of the 1890s, in particular, the disorga- nization of the “third party system” and the rise of Populism as a social and political movement. As I argue, the Republican authors of the Sherman Act and the Republi- can majority that shepherded its passage sought merely to create a federal common law. Judicial construction until Trans-Missouri was consistent with this intent. But, executive officials administering the new antitrust law stood apart from this legislative-judicial consensus. Government cases argued under the Sherman Act rejected the common law meaning behind the new law, advancing the more radical claim that its provisions were to be read literally. It is my argument that the politics of party system collapse drove federal antitrust enforcement policy in the years between 1890 and 1897. This collapse was precipitated by an abrupt shift of the system’s center of gravity westward in the early 1890s, into a region of rising agrarian revolt. In this telling, reapportionment in 1890 and the addition of several new western states into the Union coincided with economic depression and the spread of Populism to force political elites to confront the sources of agrarian discontent. The movement to make illegal per se all direct restraints on competition, regardless of its status at common law, was fundamentally agrarian in origins. “Free and unrestricted competition” was not a defense of laissez-faire – im- plying government noninterference and private sector voluntarism. Rather, agrarians pushed an aggressive regulatory stance, one which would actively employ the state coercion to compel business competition in the marketplace. In pressing a per se reading of the Sherman Act in the courts, the administrations of Republican Benjamin Harrison and Democrat Grover Cleveland were each responding to agrarian demands for an end to the dominance of trusts, mo- PRELUDE TO PROGRESSIVISM 293 nopolies, and other forms of corporate predation in their daily lives. The Supreme Court’s accommodation to a literal reading of the Sherman Act capped several years of effort on the part of federal enforcement officials to prod the courts to accept “free and unrestricted competition” as the animat- ing principle of national economic policy. In sum, the transformation of federal antitrust policy in 1897 rode in on the back of a revolution in the structure of the American party system in 1896. The historical irony is that the agrarian approach to business regulation was woven into the fabric of the new political order at its inception, an order that ostensibly insulated modernizing corporate elites from effective political challenge. It would fall to political reformers in the Progressive era to sort out tensions manifested by this in- terplay of multiple and conflicting institutional orders, and to carve out a stable settlement to the turmoil engendered by this judicial acquiescence to agrarian-styled principles of business regulation.11 This article brings together histories and arguments usually pursued sepa- rately. The justification for doing so is the belief that in drawing these different areas of research together, fresh lines of inquiry will be opened for future research. But further research remains to be done to address specific matters of historical interpretation suggested here. In particular, the motivations behind the Court’s embrace of the per se rule in Trans-Missouri remain under- explained, and the evidence examined is intended to suggest the plausibility of a political explanation of judicial conversion. Similarly, while I lay out the lines of a partisan-based interpretation of the passage of the Sherman Act, a complete legislative history would take me too far afield of the central purposes of this article, to examine federal antitrust enforcement policy in its early years. This history, therefore, also remains to be written.

I. CONGRESSIONAL INTENT AND THE PASSAGE OF THE SHERMAN ACT Is it possible to establish the existence of a legislative-judicial agreement on the common law meaning of the Sherman Act prior to 1897? I believe the answer is yes; but to do so two conditions must be met empirically. First, it needs to be shown that a majority of legislators in the 51st Congress (1889–1891) understood themselves to be legislating such a meaning. At the very least, it should be shown that a majority of congressmen explicitly rejected more expansive policy objectives, such as the inclusion of restraints on competition among the activities prohibited by the antitrust law. Second, it must be shown

11. For an agrarian interpretation of American antitrust politics with remarkable historical sweep, see Elizabeth Sanders, “Industrial Concentration, Sectional Competition, and Antitrust Politics in America, 1880–1980,” Studies in American Political Development 1 (1986): 142–214; and Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–1917 (Chicago: University of Chicago Press, 1999). On the “System of 1896” as a political regime functional to emergent corporate capitalism, see Walter Dean Burnham, “The Changing Shape of the American Politi- cal Universe” and “Theory and Voting Research,” in The Current Crisis in American Politics (New York: Oxford University Press, 1982), chaps. 1–2; and Burnham, “The System of 1896: An Analy- sis,” in The Evolution of American Electoral Systems, ed. Paul Kleppner (Westport, Conn.: Greenwood Press, 1981), chap. 5. Finally, on the concept of the political universe as structured by multiple and conflicting institutional orders, see Karen Orren and Stephen Skowronek, “Institutions and Intercurrence: Theory Building in the Fullness of Time,” Nomos 28 (1996): 111–46. 294 SCOTT C. JAMES that this legislative intent was discernable and subsequently applied by the federal courts. Turning briefly to the second point, I argue in Section 3 that, from the start, the lower federal courts understood Congress to have insisted upon a common law test of reasonableness in applying the Sherman Act. The difficulty is in discerning from the legislative record an original congressional intent on behalf of a common law-based antitrust law. For despite prodigious scholarship, there remains widespread disagreement over the character of congressional goals evinced in the shaping of the Sherman Act. Indeed, the existing literature depicts a complex structure of interests, ideas, and objectives manifested by legislators in the course of these congressional deliberations.12 Fortu- nately, one can concede the presence of a wide range of individual goals and belief structures without yielding on the final question of congressional intent. For my purpose, what is critical is not the broad structure of legislative debate, but critical moments of legislative action.13 Thus, the public statements of legislative draftsmen are critical to establishing intent, and in the discussion that follows their utterances will be offered as central pieces of evidence. But, as we will also see, what legislators say and what they do can be very different, and the following analysis accords a high priority to the voting behavior of legislators in discerning congressional purpose. As we will see, it was the Republican party – as a party – which ensured that restraints on competition would not be included as a part of the explicit prohibitions sanc- tioned by the Sherman Act. In so doing, Republicans cleared a path for the federal courts to construe the new law as simply extending to interstate commercial activities a set of principles already known at common law. In what follows, I endeavor to show that Republican authors of the Sher- man Act understood their antitrust legislation as “federalizing” the common law. Moreover, on the one recorded vote available for study, House Republi- cans uniformly rejected Democratic efforts to place anticompetitive actions within the ambit of the Sherman Act. The combination of these two pieces of evidence – the floor statements of Senate Republican authors and the recorded votes of the House Republican majority – are, I believe, sufficient to war- rant the conclusion that the Republican-dominated 51st Congress sought to limit the range of offenses covered by the new law to those already known at common law. At the same time, we will observe that it was the Democratic par-

12. Some of the more important of this literature are Hans B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (Baltimore: The Johns Hopkins University Press, 1955); William Letwin, Law and Economic Policy in America; Sklar, Corporate Reconstruction, 105–17; Tony Freyer, Regulating Big Business: Antitrust in Great Britain and America, 1880–1980 (New York: Cam- bridge University Press, 1992); Rudolph J. R. Peritz, Competition Policy in America: History, Rhetoric, Law (New York: Oxford University Press, 1996). 13. Thus we can bypass an examination of the intent behind Ohio Republican John Sher- man’s original antitrust bill, since that legislation was eventually discarded by the Senate Judi- ciary Committee in favor of the provisions found in the final statute. Although the new law continued to carry Sherman’s name, its content was sufficiently out of step with Sherman’s desires that in 1903 Republican George F. Hoar would remark that the legislation was more aptly called the “anti-Sherman trust law” than the “Sherman antitrust law” because “it was passed under his [Sherman’s] vigorous protest.” Thorelli, Federal Antitrust Policy, 210 n.112. PRELUDE TO PROGRESSIVISM 295 ty which, by its voting actions, revealed its ambition for an antitrust law that would reach beyond common law wrongs to institute a regime of “free and unrestricted competition” in interstate commerce.

Authoring the Sherman Act in the Senate The intent of the Republican authors of the Sherman Act has been documented in considerable detail.14 Here it is sufficient to present some of the more definitive statements made by these legislators on behalf of their handi- work. As is well known, the Sherman Act was penned in the Senate Judiciary Committee. For this reason – and because the language of the final act was identical to that contained in the committee’s original bill – the intent of the antitrust statute is readily discerned by examining the statements of the bill’s principal author (George F. Edmunds [R-Vt.]) and its Senate floor manager (George F. Hoar [R-Mass.]). It should be said at the start that no one in Congress could predict with cer- tainty how the courts would eventually construe the purpose of the Sherman law. But Republican authors made it clear by their choice of language they sought to steer judicial interpretation toward those substantive understand- ings contained in the common law. By their use of terms such as “restraint of trade” and “monopolize,” Republican committee members were cuing the courts to look to well-settled common law principles in interpreting the application of the Sherman law. Along these lines, Edmunds explained to his fellow Senators how, in an effort to pass constitutional muster in the courts, the committee had relied on statutory “terms that were well known to the law already.”15 Similarly, in explaining Section 2, Hoar made clear his understanding that “‘monopoly’ is a technical term known to the common law[,]” one with “a clear and legal signification.”16 More broadly, Hoar indicated the Sherman Act’s fidelity to the common law in remarking: “We have affirmed the old doctrine of the common law in regard to all interstate and international commercial transactions.”17 The Senator elaborated still further: The common law in the States of the Union . . . extends over citizens and sub- jects over which the State itself has jurisdiction. Now we are dealing with an offense against interstate or international commerce, which the State can not [sic] regulate by penal enactment, and we find the United States without any common law. The great thing this bill does, except affording a remedy, is to extend the common-law principles, which protected fair competition in trade in old times in England, to international and interstate commerce in the Unit- ed States.18 Even the title of the bill suggests alterations designed to help signal the statute’s common law intent. When the original version of the antitrust bill (predating reassignment to the Judiciary Committee) was introduced by Sen-

14. See, for example, Hans B. Thorelli, The Federal Antitrust Policy; Sklar, Corporate Recon- struction, 105–17. 15. Congressional Record 51st Cong., 1st Sess., vol. 21 pt. 4, 3148. 16. Ibid., 3146. 17. Ibid., 3151. 18. Ibid. 296 SCOTT C. JAMES ator John Sherman (R-Ohio), the legislation read: “A bill to declare unlawful restraints and combinations against trade and production.” When it emerged from Judiciary, the title had been altered to read: “A bill to protect trade and commerce against unlawful restraints and monopolies.” Not only had production been placed beyond the reach of the new law, but the new placement of the word “unlawful” to qualify “restraints and monopolies” seemed to im- ply the existence of a category of lawful restraints and monopolies, one which the terms employed in the body of the bill would prompt the courts to interpret in the light of the common law.19

Removing Restraints on Competition from the Sherman Act in the House: The Republican Party and the Bland Amendment It was the congressional Democratic party which, by its voting action, com- mitted itself to an antitrust law of potentially radical effect, one that would mandate the principle of “free and unrestricted competition” in interstate commerce. The Democratic argument for this more expansive antitrust policy in essence paralleled their argument that the tariff was the mother of all trusts and free trade its only antidote. In both cases, Democrats held that unfettered commodity competition was the only nonarbitrary mechanism for determining reasonable prices and protecting the legitimate interests of small producers and consumers against predatory combines. This partisan divergence in antitrust goals was exposed in the contest over the Bland Amendment. Authored by Representative Richard Bland (D-Mo.), this amendment would have sharply curbed the latitude of the courts to construe the Sherman Act. It explicitly sought to make illegal any attempt to prevent competition in either the purchase or sale of commodities in interstate commerce or the transportation of persons or property. In an unrecorded vote, the Bland Amendment was incorporated into the House version of the Sherman Act and sent to a conference committee for reconciliation with the Senate. In its report back to the House, however, the Republican-dominated conference committee insisted that the Democratic Bland Amendment would dangerously expand the scope of the federal antitrust bill, outlawing “any agreement for relief from the effects of competition, in the two industries of transportation and merchandising, however ex-

19. Remarking on the common law intent of the Sherman Act, one contemporaneous legal observer stated: Is not the title of the act in harmony with this view? It reads: “An act to protect trade and commerce against unlawful restraints and monopolies,” not an act to protect trade and commerce against any restraint whatsoever, but an act to protect trade against unlawful restraints – that is, unreasonable ones – and it is submitted that the title of the act can be used as an aid to the construction of the body of the statute. (George Stuart Patterson, “The Case of Trans-Missouri Freight Association,” The American Law Register and Review, New Series, 36 (1897): 316, quoted in Sklar, Corporate Reconstruction, 116–17 n.62) PRELUDE TO PROGRESSIVISM 297 cessive or destructive such competition may be.”20 As Republican conferee J. W. Stewart of Vermont put it on the floor of the House: Now, there are two great forces working in human society in this country to- day, and they have been contending for mastery on one side or the other for the last two generations. Those two forces are competition and combination. They are correctives of each other, and both ought to exist. Both ought to be under restraint. Either of them, if allowed to be unrestrained, is destructive of the material interests of this country. It is just as necessary to restrict competition as it is to restrict combination, and any student of the times who has failed to see this has missed the lesson of the hour.21 The conference committee (its Democratic members dissenting) recommended changes to the Bland Amendment that effectively neutralized its effect. First, the committee sought to strike the provision prohibiting contracts and agreements to restrain competition in the purchase and sale of commodities. Second, regarding transportation combinations, the committee proposed to outlaw only those contracts and agreements “for the purpose of preventing competition . . . above what is just and reasonable.” Many Democrats worried that such vague language would grant unacceptably broad latitude to judicial construction. Subsequent floor debate on the proposed changes to the Bland Amend- ment did not always break strictly along party lines. For instance, not every Democrat argued that the Bland Amendment was a necessary addition to the Sherman Act. The most important of these was Representative Charles Cul- berson (D-Tex.), the ranking minority member of House Judiciary Commit- tee. Culberson was charged with managing the antitrust bill on the floor of the House.22 As such he spoke on behalf of the Judiciary Committee and its majority. Culberson insisted that the Bland Amendment was superfluous, stat-

20. Congressional Record 51st Cong., 1st Sess., vol. 21 pt. 6, 5950. 21. Ibid., 5956. 22. Culberson’s responsibility for managing the Sherman Act in the House is itself curious, since Republicans were the majority party in the chamber. The most likely explanation is that Re- publican leaders were worried about defections in their agrarian ranks. Indeed, the initial incorporation of the Bland Amendment into the Sherman Bill could not have occurred without Republican votes, since Democrats were in the minority. Thus, with Culberson managing the bill, Democratic opposition might be weakened, thereby forestalling a cross-party agrarian coalition in support of a more aggressive antitrust law. Hemorrhaging in the Republican ranks would be reduced (because futile) and, if not reduced, might still prove less threatening to the conserva- tively framed Sherman provisions (if Democratic opposition was effectively quelled). What motivated Culberson to accept the assignment, however, is less clear. However, it should be remembered that the Speaker of the House controlled both minority and majority committee assignments in this period. In addition, Republican Speaker Thomas Brackett Reed was nothing if not purposive in his approach to organizing the chamber. Reed did not brook opposition to party policy goals lightly, and a Democrat with policy ambitions (especially the ranking member of a powerful committee) would surely recognize that to incur the Speaker’s dis- pleasure would place an insurmountable obstacle in between himself and committee policy influence. All this notwithstanding, it should be observed that, in the end, Culberson cast his vote with other Democrats in support of the Bland Amendment, underscoring the methodological point made earlier in this section that legislative statements and legislative behavior can differ widely. 298 SCOTT C. JAMES ing confidently that its purposes were “entirely covered by the original bill.”23 Anticipating future government arguments in Trans-Missouri, Culberson claimed: It would seem that the thing to be denounced by the first clause of the amendment of the House is a contract or agreement to prevent competition in the sale or purchase of a commodity to be transported. The original bill makes every contract in restraint of trade unlawful; and therefore the proposition of the amendment is covered by the original bill, clearly and distinctly – there is no doubt about it (emphasis added).24 But when the time came for the House to vote on a motion to recede from the Bland Amendment, legislators (including Culberson) divided by party. The House voted 106 to 98, to recede from the Bland Amendment, with 124 members not voting.25 Republicans supported rescission 105 to 1, while De- mocrats opposed rescission 0 to 96.26 While the percentage of House members not voting on the Bland vote (June 12, 1890) was exceedingly high, it was not significantly different from levels of nonvoting that occurred on roll calls taken between June 9 and 17. This indicates strongly that the large number of nonvoters on the Bland vote was part of a broader pattern of absenteeism running throughout this eight-day period, and not an act of strategic absten- tion peculiar to the substance of this vote. To conclude this section, the concerted action of House Republicans ensured that restraints on competition would not be included explicitly within the purpose of the Sherman Act. Left to their own lights, the more agrarian Democratic party would insert explicitly into the Sherman Act the principle

23. Congressional Record 51st Cong., 1st sess., vol. 21 pt. 6, 5951. 24. Ibid. Culberson’s emphatic position at this juncture in the proceedings is strangely at odds with statements made earlier, when the Sherman Bill was first reported to the House. In response to repeated questioning about the reach of its provisions, Culberson was similarly emphatic that the legislation’s final meaning was a matter that would be determined in the courts: “[j]ust what contracts, what combinations in the form of trusts, or what conspiracies will be in restraint of trade or commerce mentioned in the bill will not be known until the courts have construed and interpreted this provision.” Culberson underscored the point: “I wish to be understood, Mr. Speaker, . . . that I do not know, nor can any man know, just what contracts will be em- braced by this section [Section 1] of the bill until the courts determine [the question].” Congressional Record 51st Cong., 1st sess., vol. 21 pt. 5, 4089. Culberson’s statements against the Bland Amendment are even more curious because they stand in opposition to the Texan’s well-documented hostility toward federal judicial discretion in matters involving big business. Culberson’s antagonism stemmed from the federal courts’ liberal use of the removal power to take cases involving interstate corporations out of state courts and into more friendly federal venues. From 1877 to 1896 Culberson introduced legislation in the House to narrow the removal power. On his efforts, see Tony A. Freyer, Forums of Order: The Federal Courts and Business in American History (Greenwich, Conn.: JAI Press Inc., 1979), 130–36. As already noted, while Culberson’s stated belief that the Bland Amendment was unnecessary to limit the interpretative discretion of the federal courts runs contrary to his open hostility to federal judicial discretion, his vote against receding from the Bland Amendment drew him back into line with his personal convictions. 25. Congressional Record 51st Cong., 1st Sess., vol. 21 pt. 6, 5983. 26. Republican and Democratic votes do not sum to total vote because of third party members. There were fifty-six Democrats and sixty-five Republicans who did not vote on the Bland action. PRELUDE TO PROGRESSIVISM 299 of free and unrestricted competition. The more commercial and industrial Republican party, on the other hand, rejected this position, preferring instead that the courts be guided by the rule of reasonable restraint, discernable through the common law terminology that structured the provisions of the finalized Sherman Act.

II. “FREE AND UNRESTRICTED COMPETITION”: PARTY SYSTEM DISINTEGRATION, AGRARIAN REVOLT, AND ANTITRUST REFORM In the early 1890s, roughly coincident with the passage of the Sherman Act, the center of gravity of the “third party system” lurched dramatically westward. The proximate cause of this destabilizing political dynamic was decen- nial reapportionment and the addition of several new states to the Union. In conjunction with simmering agrarian unrest and the rise of Populism, this westward shift helped to precipitate the system’s dramatic collapse in 1896. Of more immediate significance to this analysis, the politics of party system disintegration had important consequences for the evolution of federal antitrust doctrine. The revolt by western farmers against their traditional Re- publican moorings forced elites in both major parties to search for substantive concessions to extend to the agrarian vote. It was at this time that federal enforcement officers representing the Republican administration of Ben- jamin Harrison (1889–1893) began to press an agrarian interpretation of the Sherman Act in the courts. As we have seen, it was a construction wholly at odds with the congressional Republican intent. Agrarian antitrust doctrine rejected outright the practice of reasonable restraint, insisting instead on free and unrestricted competition in interstate commerce. All direct restraints, voluntary or otherwise, and regardless of status at common law, were to be considered illegal per se. This per se reading of the Sherman Act would also gain additional impetus from another unlikely source, the Democratic administration of Mugwump Grover Cleveland. In the wake of that party’s disastrous showing in the midterm elections of 1894, and with the party system collapsing in around it, Democratic Justice Department officials proceeding under the antitrust law would reinvigorate the doctrine of “free and unrestricted competition” and carry it forward to the Supreme Court in 1896. This section examines the political dynamics that prompted federal enforcement officials in both major parties to embrace a literal reading of the Sherman Act. It begins by exploring the sources of change that accelerated party system collapse in the 1890s. It then examines the forces operating upon party leaders to induce responsiveness to agrarian demands for a more aggressive antitrust law, one with the interpretive potential to hit hard at monopolies, trusts, and other forms of corporate concentration.

The Changing Contours of the Third Party System: New States, Reapportionment, and the Rise of Populism As noted above, there were two reasons for the party system’s westward lurch in the 1890s. The first was the addition of seven new western states into the 300 SCOTT C. JAMES Union. The second was the reapportionment of 1890. In 1889, North Dako- ta, South Dakota, Montana, and Washington were admitted to the Union; Ida- ho and Wyoming were added in 1890, along with Utah in 1896. The most immediately apparent consequence of new state inclusion was its effect on western representation in the Senate.27 The number of western senators increased by two-thirds, from eighteen to thirty-two.28 As a proportion of total seats, western representation in the Senate increased 12 percentage points, from roughly 24 to 36 percent. The gain in western representation in the Senate worked most dramatically to benefit the Republican party.29 In the 50th and 51st Congresses, Senate Republicans clung to a slim two-vote majority. By the 52nd Congress, the Re- publican majority had increased to eight, mostly as a result of the influx of new western Republicans. More significant, as Figure 1 clearly shows, the center of gravity of the Senate Republican party underwent a profound shift. In the 48th through 50th Congresses, western Republicans constituted roughly one-third of all Republicans in the Senate. By comparison, in the 51st through 53rd Congresses, western Republicans were a majority of the Senate party delegation. Indeed, Figure 1 actually understates the extent of this shift in Senate intraparty regional balances, as by the 53rd and 54th Congresses some western Republicans had already become members of the Populist party. The reapportionment of 1890 was another contributing factor to the electoral changes of the 1890s. The combination of reapportionment and new state admissions had important consequences for the structure of House representation, though the overall effect was much less dramatic than the impact of new states in the Senate. For representatives of the South and West, the combined result was an increase of twenty-four House seats, from 155 to 179, an increase of approximately 15 percent. The net gain was less dramatic – sixteen seats – as states outside the economic periphery also picked up eight new seats. But perhaps more significant psychologically, for the first time in contemporaneous memory, the South and West together could lay claim to a majority share of House seats, even if it was the barest of majorities. (179 to 178).30 While the impact of the changing structure of representation in the Sen- ate and House was significant, especially in the Senate, its effect on party cal- culations in presidential elections was especially critical. Figure 2 maps the regional shift in electoral college vote shares in the years between 1868 and

27. For purposes of discussion, this article defines “western states” to be the states of the Great Plains (West North Central), the Mountain region, and the Far Pacific. 28. From eighteen of seventy-six Senate seats in 1889 to thirty-two of ninety seats in 1892. 29. The political implications of this structural change in western representation are explored with great imagination in Charles Stewart III and Barry R. Weingast, “Stacking the Senate, Changing the Nation: Republican Rotten Boroughs, Statehood Politics, and American Political Development,” Studies in American Political Development (1992). 30. Statistics reported here are based on data found in the Statistical History of the United States from Colonial Times to the Present [prepared by the United States Bureau of the Census] (New York: Basic books, Inc., 1975), Series Y 220–71, “Apportionment of Membership in House of Repre- sentatives, by States, From Adoption of Constitution to 1970,” 1085. PRELUDE TO PROGRESSIVISM 301

Fig. 1. Growth in Size of Western Wing of the Senate Republican Party, 48th– 54th Congresses (1883–1897).

1900. It shows clearly that by the 1890s, the majority of electoral votes were safely in the hands of the South and West. Beyond these aggregates, however, Figure 3 reveals the impact of the West’s expanded political presence for the structure of internal representation within both major parties. Within the Republican party, growing western influence fueled an already tense intraparty conflict on monetary and tariff questions, in addition to the trust question. Demands of coalition management required party leaders to search for

Fig. 2. Change in Electoral College Vote Share for South and West States as a Result of Reapportionment and the Admission of New Western State. Source: U.S. Bureau of the Census. Statistical History of the United States from Colonial Times to the Present (New York: Basic Books, 1975), Series Y 84–134, 1075. 302 SCOTT C. JAMES

Fig. 3. Percentage Change in Regional Composition of Democratic and Republican National Conventions, 1868–1900. Source: Richard C. Bain, Convention Decisions and Voting Records I (Washington, D.C.: Brook- ings Institution, 1960). meaningful ways to demonstrate responsiveness. But perhaps most significant was the impact of these changes on the calculus of agrarian leaders within the Democratic party. Here, the influence of the South and West in national party counsels had long suffered from the logic of electoral college competition in the third party system.31 The outcome of presidential elections turned on

31. The following discussion is drawn from Scott C. James, Presidents, Parties and the State: A Party System Perspective on Democratic Regulatory Choice, 1884–1936 (New York: Cambridge Univer- sity Press, 2000, chap. 2. The impact of this Gilded Age electoral dynamic upon Justice Depart- ment enforcement activity in the area of African American voting rights is explored in Scott C. James and Brian L. Lawson, “The Political Economy of Voting Rights Enforcement in America’s Gilded Age: Electoral College Competition and the Federal Election Law,” American Political Science Review 93 (1999): 115–131. PRELUDE TO PROGRESSIVISM 303 the ability to capture a small handful of highly competitive states, concen- trated mostly in the industrial Northeast: Connecticut, Indiana, New Jersey, and, in particular, New York. Indeed, mathematically, it was impossible for Democrats to capture the White House without New York’s thirty-six electoral votes. Thus, the sudden expansion of the electoral system westward held forth the prospect of freeing agrarian Democrats from captivity to their northeastern brethren. Coupled with the growing rebellion against the Republican party in the West, the enhanced electoral significance of agrarian states in presidential elections rendered more realistic a Democratic strategy of stitch- ing an electoral college majority out of southern and western states. Long a bastion of Republicanism, western discontent with the Republican party and a strategy of fusion with Populists made plausible the building of an agrarian South-West coalition. One southern Democrat put it as follows in the course of the party convention that nominated William Jennings Bryan in 1896. While we look back and thank the Democracy of New York and Connecticut and New Jersey for their assistance and co-operation in the past, for the protecting aegis which they have extended over us, we have realized long since that we were but mere hewers of wood and drawers of water, tied in bondage, and all our substance being eaten out. We have turned our faces to the West, asking our brethren of those States to unite with us in restoring the government to the liberty of our fathers, of which our fathers left us. The West has responded by its representatives here. The West, however, is in doubt, while the South can deliver its electoral vote. But you must get the Republican silver men West, and the Populists in those States, to indorse your platform and your candidate, or you are beaten.32 As these passages suggest, it was the increasing importance of Western states in national party politics, in conjunction with the spread of Populism, that made Bryan’s nomination electorally defensible in a way that would have been politically inconceivable even eight years earlier. Likewise, the growing presence of the western states within Democratic councils added further fuel to the move to jettison the party’s northeastern, Mugwump strategy for a more exclusively agrarian South-West coalition. As Walter Dean Burnham aptly summarized the situation: “By the time of the Democratic convention in 1896, the northeastern party elites – who had been in control of the party nationally during the previous party era – were defeated and isolated.”33 In itself, the heightened electoral presence of the West in national politics cannot account for the collapse of the third party system. Rather, it was the intersection of this westward shift with the rising tide of Populism that sent political shock waves throughout the major parties. The effect was to ampli- fy palpably the voice of agrarian discontent within both the national government and major party counsels. The partisan balance of power in the Senate during the Republican-dominated 52nd and 54th Congresses (1891–1893,

32. Official Proceedings of the Democratic National Convention held in Chicago, Ill., July 7th, 8th, 9th, 10th and 11th, 1896. (Logansport, IN: Wilson, Humphreys & Co., 1896), 200, 207. 33. Burnham, “The System of 1896: An Analysis,” 158. 304 SCOTT C. JAMES 1895–1897) was eight seats and four seats respectively. As a result, disaffect- ed western agrarians posed a tangible threat to the policy objectives of Sen- ate Republican leaders. Indeed, in coalition with agrarian Democrats, they constituted a majority presence in the upper chamber. Populist support also ran highest in the western states, placing additional pressure on Republican state organizations to be responsive to grassroots agrarian concerns. One measure of the extent of Populist pressure on western Republican organizations is the pattern of state support for the 1892 Populist presidential candidate, James B. Weaver. While Weaver’s median vote share nationally was 7 percent, in the combined Plains, Mountain, and Pacific states his median vote share was a striking 38 percent.34 More generally, as Table 1 makes clear, Weaver’s median vote share in the northeastern states was less than 1 percent, while in the Great Plains and the Far West his median vote share was 37.8 percent and 40.3 percent, respectively. As Table 1 also demonstrates, the admittance of new western states in 1889 and 1890 mobilized particularly high levels of agrarian discontent into the party system, becoming a managerial nightmare for Republican party leaders. It is no exaggeration to say that the Republican party in the West was fight- ing for its organizational life. And one of the most salient issues facing western agrarians – whether Republican, Democrat or Populist – was the “trust question.”

The Agrarian Antitrust Movement in the States The explosion of state-level antitrust laws enacted in the years prior to the Trans-Missouri decision (1889–1896) was largely an agrarian phenomenon, a reaction by legislatures in the South and West to the inadequacies of the common law as a tool to fight the spread of corporate concentration. Likewise, the emergence of the per se rule – unqualified statutory provisions outlawing contracts or combinations in restraint of free competition – was also an agrarian phenomenon. Agrarians suffered hard under the weight of credit monopolies, railroad pools, and assorted manufacturing monopolies, many of whom, agrarians believed, owed their market dominance to the protective tariff. Agrarian antitrust thinking confronted the challenge of modern industrial organization with ideas and ideals rooted in traditional antimonopolism. Attachment to the policy of “free and unrestrained competition” itself reflect- ed the agrarian conviction that trusts and monopolies were the product of unnatural advantages rather than efficient organization and market behavior. In the Jacksonian era, monopolies were the seemingly arbitrary dispen- sations of state legislatures. The state conferred upon a privileged few the right to unilaterally set prices, regulate output and exclude competitors from the market. Such monopolies, those excluded could readily believe, were inimical to the right of free citizens to employ their labor as best they saw fit. To

34. Medians will be employed in preference to means because they offer a better measure of central tendency. Resistant to the distorting effects of large outliers, medians present a less biased measure of the average level of electoral support for populism than do means. PRELUDE TO PROGRESSIVISM 305 Table 1. Median State Vote Share of Populist Party, by Region (in 1892 Presidential Election).

Northeast ENC WNC South Far West % Vote 0.5 2.7 37.8 13.7 40.3 New States Old States % Vote 37.6 12.3 Note: South does not include Border states. With Border states, the median southern vote share is 8.5 percent. Source: Congressional Quarterly, Guide to U.S. Elections (Washington, D.C.: CQ Press, Inc., 1985), 343. most agrarians, palpably little had changed since the Jacksonian era. Fa- voritism and corruption were still thought to explain the disadvantaged market position of the farmer and the small business owner relative to the large corporation, the combine, and the monopoly.35 The first broad-based effort to remedy the growing trust problem occurred in early 1889.36 The immediate impetus behind the effort was the creation of the American Meat Company – the so-called Beef Trust – a Chicago-based combine involving the Armour, Swift, and Morris meat packing corporations. This meat packing combine sought to centralize control over both purchasing and distribution, and, from the agrarian view point, squeeze both producers and consumers of meat. As evidence, agrarians pointed both to the secular decline in the price of live cattle and the concomitant rise in the price of dressed beef. In February 1889, Kansas governor Lyman U. Humphrey proposed a regional conference of states comprising the Missis- sippi Valley. The purpose of the conference was to reach a consensus on uni- form legislation to strike at the trusts. Delegates representing at least ten states convened at the Southern Hotel in St. Louis, Missouri, to find a solu- tion to the trust problem. The states participating were Kansas, Missouri, Texas, Colorado, Nebraska, Minnesota, Iowa, Wisconsin, Indiana, and Illi- nois. The convention eventually adopted what was referred to as the “Texas measure,” a reference to the model antitrust statute introduced by Texas delegates. The Texas model statute defined a trust as “any combination of capital, skill, or acts by two or more persons, firms corporations or associations of persons.” It would also make it illegal for any trust to restrict trade, fix prices, control production, or suppress competition. According to the St. Louis Post-Dispatch, the Texas model statute was adopted “almost without op-

35. On agrarian discontent and the antimonopoly impulse, see Thorelli, Federal Antitrust Pol- icy, 58–62; Sanders, “Industrial Concentration, Sectional Competition, and Antitrust Politics in America, 1880–1980,” 151–58; This paragraph draws on Steven L. Piott, The Anti-Monopoly Per- suasion: Popular Resistance to the Rise of Big Business in the Midwest (Westport, Conn.: Greenwood Press, 1985). 36. This paragraph draws on Piott, The Anti-Monopoly Persuasion, 26–28. 306 SCOTT C. JAMES position,” with delegates requesting that it be presented to the legislatures of the various states in attendance.37 The first modern antitrust laws were adopted in 1889 in Kansas, Maine, Michigan, Missouri, Nebraska, North Carolina, Tennessee, and Texas. By 1896, twenty-one states possessed such laws, either in the form of statutes or constitutional provisions. Twenty of these explicitly outlawed contracts and combinations in restraint of free competition (Maine being the exception). Of these twenty, nineteen lay outside the industrial Northeast; the outlier being New York state. Seventeen were located in the Great Plains, the South and Border South, and the Far West – areas in which Populism had gained its strongest foothold. Broadly speaking, this early legislation conformed to the principles set forth at the St. Louis convention, abandoning long-standing common law categories and remedies for unqualified prohibitions against all manner of restrictive trade practices. Reviewing the content of this legislation, one contemporaneous scholar concluded that agrarian antitrust legislation “differ[ed] from one another in no important particulars. They agree in declaring all combinations in restraint of free competition illegal.”38 Table 2 lists the twenty states with antitrust provisions prohibiting contracts and combinations in restraint of free competition as of January, 1896. It makes clear the southern and western lineage of the per se rule. Table 3 presents the results of three separate LOGIT models employed to analyze the character- istics of states having adopted the per se rule by January 1896. The findings presented here supplement Figure 2 by presenting evidence that states with provisions prescribing the rule of “free and unrestricted competition” were more likely to be agrarian, from the South and West, and the site of significant presidential-level Populist mobilization.39

III. JUSTICE DEPARTMENT ENFORCEMENT POLICY UNDER THE SHERMAN ACT, 1890–1897

Antitrust Enforcement in the Republican Administration of Benjamin Harrison In Section 1, I concluded that there is sufficient evidence to suggest that Con- gress intended the Sherman Act to be read in light of the common law. In this

37. The St. Louis Post-Dispatch is quoted in Piott, The Anti-Monopoly Persuasion, 28. 38. J. D. Forrest, “Anti-Monopoly Legislation in the United States,” The American Journal of Sociology (1896): 420. 39. The dependent variable is coded “1” if a state has an antitrust statute or constitutional provision mandating free competition and “0” if it does not. Independent variables are specified as follows: southwest is a dummy variable which codes a state “1” if it is located in one of the following regions: West North Central, Mountain, Pacific or South. If not, the state is coded “0.” new states is coded “1” if a state was admitted to statehood between the years 1889– 1896 and “0” otherwise. The agrarian variable farmers is a continuous variable that measures the dollar value of agricultural output in a state according to figures found in the 1890 U.S. census. Finally, populism is a continuous variable that measures the size of a state’s popular vote for Peoples’ Party presidential candidate James B. Weaver in 1892. PRELUDE TO PROGRESSIVISM 307 Table 2. Twenty American States with Antitrust Provisions Prohibiting Contracts and Combinations in Restraint of Free Competition (as of January 1896).

Northeast ENC WNC South Far West New York Illinois Iowa Alabama Montana Michigan Kansas Kentucky Washington Minnesota Louisiana Wyoming Missouri Mississippi Nebraska N. Carolina N. Dakota Tennessee S. Dakota Texas Source: J. D. Forrest, “Anti-Monopoly Legislation in the United States,” American Journal of Sociology 1 (1896): 420.

Table 3. Three LOGIT Models of States with per se Rule Against Contracts and Combinations in Restraint of Free Competition in Antitrust Statutes or Constitutional Provisions (as of January 1896).

Variables Model 1 Model 2 Model 3 SOUTHWEST 3.49* — 3.14* (1.47) (1.48) NEW STATES 7.43* — 6.82* (3.22) (3.04) (LOG) FARMERS 2.72** 1.19** 3.01** (1.09) (.43) (1.12) POPULIST — 0.07** 0.05 (.03) (.04) CONSTANT 0.86 0.91 0.87 (.96) (.65) (.95) -2 log likelihood 33.82 48.15 31.84 % correctly predicted 79.55 70.45 84.09 (N) (44) (44) (44) *p Ͻ .05 **p Ͻ .01 Note: See footnote 39 for specification of dependent and independent variables. Source: (1890 state-level census data) Inter-university Consortium for Political and Social Re- search, Historical, Demographic, Economic, and Social Data: The United States, 1790–1970 [Comput- er file]. Ann Arbor, Michigan: Inter-university Consortium for Politicaland Social Research [producer and distributor], 1992; (1892 presidential electoral data) Congressional Quarterly, Guide to U.S. Elections (Washington, D.C.: CQ Press, Inc., 1985), 343. 308 SCOTT C. JAMES section, I will present evidence to show the channeling of judicial Sherman act interpretation along these prescribed lines. Early court opinions make clear that federal judges quickly converged on the use of common law understand- ings in construing federal antitrust policy. In In re Greene (1892) circuit judge Howell Jackson penned what would become the authoritative explication of the Sherman Act, at least until the Supreme Court’s Trans-Missouri decision in 1897. Speaking for the Circuit Court for the Southern District of Ohio, Jackson insisted that “when congress [sic] adopts or creates a common-law offense the courts may properly look to the common law for the true meaning and definition thereof, in the absence of a clear definition in the act creating it.” Turn- ing the discussion squarely to a consideration of the Sherman Act, Jackson echoed Republican Senator George Hoar’s own contention that its innovation upon the common law was merely procedural. He explained: The act of July 2, 1890, on which the present indictment is based, in declaring that contracts, combinations, and conspiracies in restraint of trade and commerce between the states and foreign countries were not only illegal, but should constitute criminal offenses against the United States, does a step beyond the common law, in this: that contracts in restraint of trade, while unlawful, were not misdemeanors or indictable at common law. It adopts the common law in making combinations and conspiracies in restraint of the des- ignated trade and commerce criminal offenses, and creates a new crime, in making contracts in restraint of trade misdemeanors, and indictable as such. But the act does not undertake to define what constitutes a contract, combination, or conspiracy in restraint of trade, and recourse must therefore be had to the common law for the proper definition of these general terms, and to ascertain whether the acts charged come within the statute.40 But while the more insulated federal courts were acceding to the common law purposes that informed the Sherman law, enforcement officials in the politically attuned executive branch were breaking with this legislative/judicial consensus. Western agrarian revolt against the Republican party in the early 1890s fed this interpretive shift in federal antitrust enforcement policy. This executive innovation upon the meaning of the Sherman Act cropped up in

40. In re Greene 52 F. 104, 111 (1892). In U.S. v. Trans-Missouri Freight Association (58 F. 58, 67 [1893]), Judge Sanborn, speaking for the Circuit Court majority, identified “three well-settled rules of construction” necessary to ascertain the meaning and scope of the act: (1) It must be read in the light of all general laws upon the same subject in force at the time of the passage of the act. (2) Where words have acquired a well-understood meaning by judicial interpretation, it is to be presumed that they are used in that sense in a subsequent statute, unless the contrary clearly appears. (3) Where congress creates an offense, and uses common-law terms, the courts may properly look to that body of jurisprudence for the true meaning of the terms used, and, if it is a common- law offense, for the definition of the offense if it is not clearly defined in the act adopting or creating it. As authority, Sanborn cited the following cases: U.S. v. Armstrong, 2 Curt. 4446; U.S. v. Coppersmith, 4 Fed. Rep. 198; In re Greene, 52 Fed. Rep. 104, 111; McCool v. Smith, 1 Black, 459, 469; McDonald v. Hovey, 110 U.S. 619, 62 8, 4 Sup. Ct. Rep. 142. PRELUDE TO PROGRESSIVISM 309 legal arguments advanced by United States attorneys, acting under the direction of the Attorney General.41 In construing the Sherman Act, Justice De- partment prosecutors relied upon antitrust notions found in agrarian state laws, most centrally these federal officials pressed for the rule of “free and unrestrained competition” in interstate commerce. In so doing, first the Re- publican party, and then the Democratic party, sought to rewrite national antitrust policy with an eye to solidify their electoral hold on western states. Table 4 presents evidence in support of the claim that there existed an electoral dimension to the antitrust issue. It shows that of the fifteen antitrust cases directed against business combinations and undertaken between 1890– 1896 (thirteen original proceedings and two Supreme Court cases), 87 percent (thirteen of fifteen) were argued in years marked by federal elections, with almost three-fourths of those actions (eleven of fifteen) occurring in presidential election years.42 The interpretative gulf that would drive a wedge between the executive branch and the federal courts did not arise immediately. In United States v. Jel- lico Mountain Coal and Coke Company (1890), the first indictment brought under the new federal antitrust law, Justice Department officials proceeded with caution.43 Considering Jellico a test case of the Sherman Act’s constitutional- ity, both Attorney General William H. H. Miller and Solicitor General William Howard Taft were involved more directly in the preparation and presentation of this case than in any subsequent case.44 The case raised few thorny constitutional or interpretive questions. It represented a straightforward application of common law principles to the new terrain of interstate commerce. The indictment itself was directed against a combination of Kentucky coal producers and Tennessee coal dealers for attempts to monopolize the market for coal in Nashville and restrain trade. As a part of the arrangement, coal producers agreed to refuse to sell coal to vendors who were not a party to the price-fixing arrangement, while coal dealers agreed not to purchase from coal producers outside the combination. Both actions constituted restraint of

41. Evidence of this oversight by Justice Department political elites is found in the remarks of William Howard Taft, Solicitor General under Benjamin Harrison. Taft instructed one U.S. Attorney, who had inquired about his discretion to initiate Sherman Act suits, that “specific au- thorization must be sought from the Attorney General for the institution of each case” (Thorel- li, Federal Antitrust Policy, 374). 42. Figures represent both Republican and Democratic prosecutions. While I am arguing that administration officials acceded to an agrarian interpretation of the Sherman Act for electoral reasons, it is not necessary to conclude that they sincerely sought to implement an aggressive enforcement policy premised upon this interpretation. It may well be that government officials were confident that the agrarian interpretation would be readily defeated in the courts (which it was – at least until 1897). Consistent with such a possibility, it will be recalled that it was Richard Olney who brought the E. C. Knight case for argument before the Supreme Court, even though he had no confidence in Solicitor General’s claim that production monopolies were reachable under the antitrust law. In addition, administration officials could embrace an agrarian interpretation of the law for electoral reasons and still limit its effect through minimal enforcement actions, which to a large extent they did. 43. United States v. Jellico Mountain Coal and Coke, 43 F. 898 (1890). 44. Albert H. Walker, A History of the Sherman Act (Westport, Conn.: Greenwood Press, Pub- lishers, 1980 [1910]), 63; Letwin, Law and Economic Policy in America, 106–8. 310 SCOTT C. JAMES Table 4. Federal Antitrust Prosecutions and Presidential Elections

Date First Year First Presidential Name of Case Decided Argued Election Year U.S. v. Jellico June 4, 1890 1890 (midterm)

U.S. v. Greenhut May 16, 1892 1892 yes In re Corning Jun. 11, 1892 1892 yes In re Terrell Jun. 28, 1892 1892 yes In re Greene Aug. 4, 1892 1892 yes U.S. v. Nelson Oct. 10, 1892 1892 yes Trans-Missouri Nov. 28, 1892 1892 yes

U.S. v. Patterson Feb. 28, 1983 1893 — U.S. v. E. C. Knight Jan. 30, 1984 1893 —

U.S. v. E. C. Knight* Jan. 21, 1985 1894 (midterm)

U.S. v. Joint Traffic May 28, 1896 1896 yes U.S. v. Moore Nov. 19, 1896 1896 yes U.S. v. Addyston Pipe Feb. 5, 1897 1896 yes U.S. v. Trans-Missouri* Mar. 22, 1897 1896 yes United States v. Hopkins Sep. 20, 1897 1896 yes Source: Information on the year in which a case was first argued was obtained from several sources: Albert H. Walker, A History of the Sherman Act (Westport, Conn.: Greenwood Press, [1910] 1980); Hans Thorelli, Federal Antitrust Policy (Baltimore: The Johns Hopkins University Press, 1955); William Letwin, Law and Economic Policy in America (Edinburgh: Edinburgh University Press, 1966); Moore v. United States (1898) 85 F. 465. *Supreme Court decision trade and attempt to monopolize at common law. Actions to exclude competitors from the field of competition were precisely the common law definition of monopolizing behavior. Nor, in this instance, was the question of reasonable restraint material to the court’s deliberation. Under the common law, courts had consistently held that price-fixing combinations involving staple commodities and other articles of prime necessity, such as coal, were subject to greater scrutiny than those involving nonnecessities. With the price of sta- ples it was the presence of restrictions on competition per se, not the reasonableness of that restriction, that guided the court’s judgment regarding whether a combination was in restraint of trade. In the end, the court found for the government. However, in cases subsequent to Jellico, almost all of which were initiated in the presidential election year of 1892, the Republican Justice Department began to press cases under a literal reading of the Sherman Act. In virtually PRELUDE TO PROGRESSIVISM 311 every case brought by the government during the final year of the Harrison administration, U.S. attorneys aggressively pressed for a novel reading of the antitrust law, one which insisted upon the per se illegality of efforts by natural competitors to regulate competition and fix prices between them. In United States v. Trans-Missouri Freight Association (1892), the government sought to enjoin a price-fixing arrangement between eighteen competing railroads. The Justice Department charged the combination with restraint of trade under Section 1 of the Sherman Act, for depriving the public “of such facilities, rates, and charges of freight and transportation as will be attained by free and unrestrained competition between said the several lines of railroad” (emphasis added).45 The trial court held that the provisions of the Interstate Commerce Act exempted common carriers from the provisions of the Sher- man Act. More on point, however, on appeal the federal circuit court further denied the government’s contention that “the existence of restriction upon competition [is] the standard by which the legality of these and all other contracts must be measured under the act.” Rather, the court maintained, the statute required a reasonable construction, necessitating reliance upon the common law.46 Similarly, in United States v. Nelson (1892), the government sought to enjoin an interstate combination of lumber dealers for price-fixing. Again, the court held that voluntary agreements to regulate the price of lumber did not fall within the common law definition of either restraint of trade or attempt to monopolize. Evidence for this conclusion, the court maintained, could be found in the following facts: the lumber combine did not control the entire market for lumber; they were too small to affect the market price for lumber; and they had undertaken no illegal actions to prevent entry on the part of potential competitors.47 In the Whiskey Trust cases (1892), government attorneys again sought an expansive interpretation of the Sherman Act.48 In these four cases the government brought suit against the officers of the Distilling and Cattle Feeding Company. The company was charged with attempted monopolization, a violation of Section 2 of the Sherman Act.49 It was also charged with restraint of trade under Section 1. The issue here involved exclusive dealing arrangements and vertical price fixing. The mechanism in question was a rebate offered by the liquor manufacturer to retailers who for a period of six months would agree both to purchase all their distilled spirits from the company and abide by its schedule of recommended list prices. On each count the government charged the Whiskey Trust with efforts to “prevent and counteract

45. United States v. Trans-Missouri Freight Association (1892) 53 F. 440. 46. United States v. Trans-Missouri Freight Association (1893) 58 F. 58. 47. United States v. Nelson (1892) 52 F. 646. 48. The Whiskey Trust cases are, in chronological order, United States v. Greenhut (1892) 50 F. 469; In re Terrell (1892) 51 F. 213; In re Corning (1892) 51 F. 205; and In re Greene (1892) 52 F. 104. 49. By purchasing or leasing seventy-eight hitherto competing distilleries, the Distilling and Cattle Feeding Company had managed to bring under its control approximately 75 percent of the production of distilled spirits manufactured in the United States. 312 SCOTT C. JAMES free competition in the sale of distilled spirits,” to increase the usual prices at which distilled spirits were sold, and “exact great sums of money from citizens . . . of the several states.” On each count, the courts rejected the government’s contentions. In In re Greene, the most widely cited of the four Whiskey Trust opinions, the court could find no evidence of a contract in restraint of trade as understood at common law. Nor, even assuming such a contract to be in existence, could it be presumed to unreasonably restrain trade or prejudice the interests of the public. Finally, the court held, the rebate mechanism itself did not constitute “coercion” on the part of the distillery on the dealers. It was merely an inducement to retailers to do business with the company, an inducement retailers were free to accept or to reject.50 Finally, in United States v. Patterson, the government charged the National Cash Register Company with conspiracy to restrain and monopolize trade and commerce in the market for cash registers.51 The case is interesting here in that successful prosecution did not require literal reading of the Sherman Act. Conspiracy to restrain and monopolize trade was a criminal offense at common law when violence or intimidation was employed to suppress competition and engross the market. It is all the more significant then, that the government staked out broader grounds for their action. In his opinion in Patterson, Circuit Judge Putnam drew the issue squarely, remarking: “[c]are- less or inapt construction of the statute as bearing on this case, while it may seem to create but a small divergence here, will, if followed out logically, extend into very large fields[.]” [I]f the proposition made by the United States is taken with its full force, the inevitable result will be that the federal courts will be compelled to apply this statute to all attempts to restrain commerce among the states, or commerce with foreign nations, by strikes or boycotts, and by every method of interfer- ence by way of violence or intimidation. It is not to be presumed that congress intended thus to extend the jurisdiction of the courts of the United States without very clear language. Such language I do not find in the statute. Therefore I conclude that there must be alleged in the indictment that there was a purpose to restrain trade as implied in the common-law expression, “contract in restraint of trade,” analogous to the word “monopolize” in the second section. I think this is the basis of the statute.

The Return to the Common Law in the Early Administration of Grover Cleveland By the time of the Democratic party’s return to power in 1893, Republican enforcement officials’ efforts to press a per se interpretation of the Sherman

50. The court also held that the power of Congress under the Commerce Clause did not extend to manufacturing. Consequently, the Sherman Act could not be constitutionally construed to reach monopolies of production. Corporations were creatures of the state governments, and Congress was without authority “to limit and restrict the right of corporations created by the states, or the citizens of the states, in the acquisition, control, and disposition of property” (In re Greene (1892) 52 F. 104, 112–13). Jackson’s opinion anticipated that handed down by Chief Jus- tice Melvin Fuller in United States v. E. C. Knight, 156 U.S. 1 (1895). 51. United States v. Patterson, 55 F. 605 (1893). PRELUDE TO PROGRESSIVISM 313 Act had been roundly rebuffed by the lower federal courts. Significantly, in only United States v. Workingmen’s Amalgamated Council of New Orleans et al. – the first labor case brought by the federal government under the Sherman Act – did the courts incline to a more expansive reading the law.52 The annual report of the attorney general for 1893, the first under the new Democratic administration, coolly recounted the failure of previous enforcement efforts by the Justice Department. Written by Attorney General Richard Olney, himself no friend of the Sherman Act – indeed Olney had been retained as counsel for Whiskey Trust – the report sought to dispel [the] widespread impression that the aim and effort of this statute are to prohibit and prevent those aggregations of capital which are so common at the present day and which are sometimes on so large a scale as to control practically all the branches of an extensive industry.53 “It would not be useful,” Olney continued, “even if it were possible, to ascertain the precise purpose of the framers of the statute. It is sufficient to point out what small basis there is for the popular impression referred to.”54 The Attorney General’s report made clear that the new Democratic administration intended to engineer a policy shift regarding the Sherman Act. “[A]ny literal application of the provisions of the statute is out of the question,” Olney insisted. The new attorney general was satisfied that the antitrust law was of limited application; beyond its reach were interstate manufacturing monopolies and interstate railroad combinations, as well as contracts and combinations in reasonable restraint of trade. To many, Olney had so nar- rowed the scope of the Sherman Act that little remained upon which the statute might act. The attorney general sought explicitly to interpret the antitrust law through the lens of the common law. To fortify his position, Olney summarized the widely circulated opinion of Howell Jackson in In re Greene. Indeed, Jackson’s recent elevation to the Supreme Court provided additional weight to its common law-based conclusions. On its authority, Olney’s for- mulated a series of negatives on the legal reach of the Sherman Act: (1) That Congress can not [sic] limit the right of State corporations or of citizens in the acquisition, accumulation, and control of property; (2) that Con- gress can not prescribe the prices at which such property shall be sold by the owner, whether a corporation or individuals; (3) that Congress can not make criminal the intents and purposes of persons in the acquisition and control of property which the States of their residence or creation sanction; (4) that “monopoly,” as prohibited by the statute, means an exclusive right in one party, coupled with a legal restriction or restraint upon some other party which pre- vents the latter from exercising or enjoying the same right; (5) and that contracts in restraint of trade and commerce as prohibited are contracts in general restraint thereof and such as would be void at common law independent of any statute.55

52. United States v. Workingmen’s Amalgamated Council of New Orleans et al., 54 F. 994 (1893). 53. Annual Report of the Attorney General of the United States for the Year 1896 (Washington, D.C.: Government Printing Office, 1893), xxvi. 54. Ibid., xxvi. 55. Ibid., xxvii. 314 SCOTT C. JAMES Perhaps most significantly, the attorney general announced the intention of the Justice Department to treat In re Greene as controlling on all future Sher- man Act enforcement actions.56 It was an important policy statement to the restive Democratic majority in Congress, one which would radically distinguish the enforcement strategy of the new administration from its Republi- can predecessor – as “the cases popularly supposed to be covered by the statute are almost without exception obviously not within its provisions[.]”57 Olney then described the character of illegal restraint that would henceforth bring legal action by the Justice Department. In future cases, “not merely must capital be brought together and applied in large masses, but the accumulation must be made by means which impose a legal disability upon others from engaging in the same trade or industry.” Only in such cases would the government initiate proceedings under the Sherman Act. These remarks notwithstanding, the Democratic attorney general considered it imprudent to rest such a stark departure from previous policy on the authority of a lower court opinion – “however forceful and weighty.” For this reason, Olney promised “to push for immediate hearing a case involving those questions, and . . . have it advanced for argument at the present term of the Supreme Court.”58 The case selected involved the much vilified Amer- ican Sugar Company and its efforts to acquire the stocks and property of four competing sugar refineries, including the E. C. Knight Company. The acquisition would leave the American Sugar Company in control of over 80 percent of the sugar refining capacity in the United States. The E. C. Knight case had been prepared during the final months of the Harrison administration.59 From Olney’s point of view the case was ideal, both because of the questions raised (paralleling those at issue in In re Greene) and because of the speed with which it could be moved through the court system. Just as important politically, Congress had been pressing the Justice Department to move against the Sugar Trust since early in the election year of 1892. Consequently, the De- mocratic administration could appear responsive to a clear congressional demand for action.60 The bill of complaint charged the American Sugar Company with attempted monopoly of the manufacture and sale of refined sugar with intent to control the price of sugar. As Olney anticipated, the government quickly lost its case in the lower courts. Thus, he was well prepared when, on May 18, 1894, Democratic Senators inquired of Olney “whether any action has been taken in any court of the United States, either civil or criminal, to restrain or punish persons engaged in unlawful monopolies or restraints of trade.”61 In

56. Olney’s statement, once again, indicates the degree to which interpretive oversight was exercised by Justice Department political elites in Sherman Act cases. 57. Annual Report of the Attorney General, xxvii. 58. Ibid., xxvii. 59. William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Chicago: University of Chicago Press [Phoenix Edition], 1981), 121. 60. See U.S. Congress. House of Representatives. 52nd Congress, 2d sess. Report 2618; ibid. 52nd Congress, 1st sess., Miscellaneous Documents 215; and ibid. 52nd Congress, 1st sess., Executive Documents 225. 61. U.S. Congress. Senate. 53rd Congress, 2d sess., Executive Documents no. 101. PRELUDE TO PROGRESSIVISM 315 reply, Olney submitted opinions issued both by the circuit court and the court of appeals in the E. C. Knight case. As Olney summed it up, “The difficulties tending to embarrass the due execution of the statute according to its intent and purpose can not [sic] be better stated than in the opinions of the judges” involved in these cases.62 The Supreme Court decision in United States v. E. C. Knight, handed down on January 21, 1895, was the coup de grace. Writing for an 8–1 majority, Chief Justice Melvin Fuller held that a monopoly of manufacturing or production was not a monopoly of interstate commerce within the meaning of the Commerce Clause, even though interstate commerce might be incidentally effected. The power to reach such monopolies lay exclusively within the province of the states. In a letter written the day after the Supreme Court’s decision, Olney appeared genuinely satisfied with the Court’s verdict: You will have observed that the government has been defeated in the Supreme Court on the trust question. I always supposed it would be and have taken the responsibility of not prosecuting under a law I believed to be no good.63 Notwithstanding this belief in the inefficacy of the Sherman Act, the attorney general would discover its power to suppress the American Railway Union during the Pullman Strike. After E. C. Knight, however, no other nonlabor antitrust cases would be initiated during Olney’s tenure, which ended in June 1895 when he succeeded the recently deceased Walter Q. Gresham as Secre- tary of State.64 What explains the Democratic Cleveland administration’s turn to a common law reading of the Sherman Act, especially given its large agrarian con- stituency base? One possible answer is the singular lack of success by the previous Republican administration to secure a literal interpretation in the courts. In addition, Cleveland’s chief legal officer, a former corporate attorney, was clearly convinced of the impolicy of outlawing all forms of restrictive covenants among business and trading competitors. In the end, however, these explanations are not fully satisfying as an account of policy change. For, by 1895, the Democratic administration would abandon the common law and reinstate proceedings under a literal reading of the Sherman Act, infusing new life into the agrarian doctrine of “free and unrestricted competition” in the courts. Rather, the Cleveland administration’s shifting orientation toward the Sherman Act is better understood through the lens of national party politics. Historically, the agrarian base of the Democratic party found its political voice in Congress, the result of that institution’s broadly geographical basis of representation. This, as we saw earlier, was evident in the House vote to repeal the Bland Amendment to the Sherman Act. However, in presidential politics, that agrarian voice was repeatedly squelched. Democratic victory in the elec-

62. Ibid. 63. Letwin, Law and Economic Policy in America, 122. 64. Ironically, in his first annual report to Congress, Olney cited two labor cases successfully tried under the Sherman Act “as strikingly illustrating the perversion of a law from the real purpose of its authors” (see Annual Report of the Attorney General for 1893). 316 SCOTT C. JAMES toral college required the capture of key states in the industrial Northeast. As such, the candidate and policy preferences of that section achieved dispro- portionate representation within national Democratic party deliberations. The selection of New York’s Mugwump governor, Grover Cleveland, to be the party’s standard bearer in 1884, 1888, and 1892 was the clearest manifestation of this electoral constraint. The Democratic administration’s stance toward the Sherman Act upon coming to power is also consistent with the structure of electoral college competition in the third party system, as the common law reading of the Sherman Act found widespread support among large corporate interests located predominantly in the northeastern section of the country. After 1894, however, the party system that Democrats had known for so long collapsed in around them. The most obvious manifestation of this seis- mic disaster was the decisive repudiation of the party in the Northeast. In the aftermath of 1894 elections, the Democratic administration undertook its own readjustments. At the Justice Department, Olney was out and Jud- son Harmon was in. And with that change of personnel came a sudden re- radicalization of federal antitrust policy.

Party System Collapse, Divided Government, and the Re-Radicalization of Federal Antitrust Policy Federal antitrust policy witnessed a dramatic about-face in the second half of 1895. In that time period, the Cleveland administration would embrace the per se rule, and with it the doctrine of “free and unrestricted competition.” In all, the executive branch would initiate four new Sherman Act cases and re- argue a fifth before the Supreme Court. The three most important of these cases – United States v. Trans-Missouri Freight Association, United States v. Joint Traffic Association, and United States v. Addyston Pipe and Steel – would eventually lay the legal foundation for a radical assault upon the practice of reasonable restraint, providing the foundation for federal antitrust policy until the rule of reason decisions in 1911.65 This interpretative shift, both by the Democratic administration and the Court, was occasioned by three key developments, each occurring in the wake of the 1894 elections. The first was the return of divided party rule to the op- erations of the national government, as Republicans seized control of the legislature in the 54th Congress (1895–1897). Congressional Republicans would work overtime to goad the Cleveland administration in to shifting its ground on the antitrust law. The last two factors involved Cleveland appointments. The first of these was the selection of Judson C. Harmon to fill the spot of attorney general, a position rendered vacant by Olney’s reassignment to the position of secretary of state. As noted above, it was Harmon who would carry the literalist reading back into the courts. The second was the appointment

65. United States v. Trans-Missouri Freight Association (1897) 166 U.S. 290; United States v. Joint Traffic Association (1896) 76 F. 895; United States v. Addyston Pipe & Steel (1897) 78 F. 712. Round- ing out the actions initiated by the Cleveland Administration were United States v. Hopkins (1897) 82 F. 529; and Moore v. United States (1898) 85 F. 465. PRELUDE TO PROGRESSIVISM 317 of New York Democrat Rufus W. Peckham to be associate justice of the Supreme Court upon the death of Justice Howell Edmunds Jackson. It was Peckham who would write the majority opinion in United States v. Trans- Missouri, in which judicial conversion to the per se rule was first announced. There is insufficient evidence to attach a strategic policy intent to either Cleveland appointment. Moreover, as will be discussed, these appointments were at best a necessary precondition for the subsequent shift in administration policy. Nevertheless, the effects of these appointments seem reasonably clear. First, despite the pressure of congressional Republicans, it seems unlikely that Olney could ever have brought himself to argue for a literal reading of the Sherman Act before the Supreme Court. To do so would have put him at odds with everything he believed in and everything he had labored to achieve, both as attorney general and as counsel for the Whiskey Trust, regarding the common law underpinning of the antitrust law. Thus, the replacement of Olney with a more sympathetic attorney general was critical to the subsequent shift in administration policy.66 Likewise, Justice Howell was the author of the most authoritative statement on the common law meaning of the Sherman Act. Recalling that Trans-Missouri was a 5–4 decision, Cleve- land’s replacement of Howell with Peckham was pivotal to the subsequent development of the antitrust law. Peckham’s presence on the Court could have only turned a slim 4–5 majority against the government’s position into a slim majority in its favor.67 All told then, the conjunction of divided government with the appointments of Harmon and Peckham helped infuse the doctrine of “free and unrestricted competition” in interstate commerce with renewed political vitality. 1. The Elections of 1894 and Party System Dislocation. The timing of this transformation in Democratic antitrust policy followed closely on the heels of the party’s disastrous showing in the 1894 midterm elections. One measure of these elections’ devastating impact on Democratic fortunes was its effect on party representation in the House. Democrats lost over one-half the House seats they had held in the 53rd Congress, falling from 216 to 104. Outside the South, Democrats were devastated. The party was decisively repudiated in the most industrialized states of the Union, states located almost exclusively in the northeastern quadrant of the nation. While Democrats suffered losses everywhere in 1894, their losses were most significant in these states. Table 5 gives some indication of the scope of Democratic losses in the 1894 elections. In the northeastern states (New England, Midatlantic, and North East Cen-

66. Writing to President Cleveland on May 21, 1895, W. H. Merrill, chief editorial writer of the New York World, insisted that “one case successfully prosecuted against a trust would greatly help the Administration and the Democratic party” (W. H. Merrill to Grover Cleveland, in The Letters of Grover Cleveland, ed. Allan Nevins (Boston and New York: Houghton Mifflin Company, 1933), 395, 396. As it happened, Merrill’s letter was penned only a week before the death of Sec- retary of State Walter Gresham, a position the president moved to fill by appointing the conser- vative Olney to succeed Gresham, extending the now-vacant attorney general’s office to the less dogmatic Westerner Judson Harmon. 67. Treating the 1894 elections as a watershed for Democratic political strategy may also help account for the divergent interpretive positions on the Sherman Act adopted by Peckham and 318 SCOTT C. JAMES Table 5. Change in Number of Seats held by House Democratic Party (from 53rd to 54th Congresses).

Northeast ENC WNC South Far West House Democrats 53rd Congress 46 46 19 113 5 54th Congress 9 4 5 88 1 Note: South includes border states. Source: Inter-university Consortium for Political and Social Research, United States Congressional Roll Call Voting Records, 1789–1990 [Parts 1–202] [Computer file]. ICPSR ed. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [producer and distributor], 1991. tral States), Democrats lost seventy-nine of the ninety-two seats they had held in the previous election. In the Northeast proper (New England and Mid- atlantic states), Democratic seat lost was in excess of 80 percent; in the most industrialized sections of the Midwest (the East North Central states) Demo- cratic losses were in excess of 90 percent. The repudiation of the Democratic party in the industrial Northeast coincided with the spreading rebellion against the Republican party in the states of the agrarian West. While Republicans in 1894 posted large gains in the West (as they did in all regions of the country), the 1894 midterm elections also underscored the growing power of the People’s party as a protest movement against the partisan status quo. As Table 6 illustrates, Populist electoral presence in 1894 was effectively nonexistent in the Northeast, averaging 6 percent in the most industrialized states of the Midwest and between roughly 18 and 23 percent elsewhere. In itself, the Populist vote was insufficient to shake Re- publican hegemony in much of the Great Plains and far western states. But the size of the Populist vote attracted the attention of outparty leaders in the western states, most of them Democrats. Fusion held out the promise of an effective vehicle through which agrarians might realize long-standing political demands.68 As discussed earlier, the rising farmer rebellion in the West took place against the backdrop of structural changes in the electoral system: the addition of several new western states to the Union and the reapportionment of 1890. Faced with electoral repudiation in the Northeast and a sectional policy chasm that was opening up within the party itself, many Democratic leaders were drawn to the idea of an agrarian South-West coalition in presidential elections, a strategy that would lessen electoral dependence on pivotal north- another Cleveland Supreme Court appointee, Edward Douglass White (author of the minority dissent in Trans-Missouri, as well as the Court’s 1911 rule of reason decisions). White’s appointment (like Olney’s) predated the disastrous midterm elections of 1894, while Peckham’s appointment (like Harmon’s) postdated that catalytic event. 68. On the fusion of Democrats with the People’s party in 1896, see John D. Hicks, The Pop- ulist Revolt: A History of the Farmers’ Alliance and the People’s Party (Lincoln: University of Nebraska press, 1931). PRELUDE TO PROGRESSIVISM 319 Table 6. Median County-level Populist Party Cote by Region (1894 Congressional Elections).

Northeast ENC WNC South Far West Populist Vote 0.8 4.2 14.9 14.6 22.5 Note: South does not include border states. With border states, the median southern vote share is 4.4 percent. Source: Clubb, Jerome M., William H. Flanigan, and Nancy H. Zingale. Electoral Data for Counties in the United States: Presidential and Congressional Races, 1840–1972 [Computer file]. Compiled by Jerome M. Clubb, University of Michigan, William H. Flanigan, University of Minnesota, and Nancy H. Zingale, College of St. Thomas. ICPSR ed. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [producer and distributor], 1986. eastern states with policy preferences that were increasingly unpalatable to the party’s agrarian constituencies. In this context, fusion was a potent vehicle for harnessing the western protest vote and turning it to Democratic ad- vantage. The fusion candidacy of William Jennings Bryan in 1896 was the eventual culmination of this Democratic rejection of the industrial Northeast and its embrace of an agrarian South-West coalition. But movement in this direction started earlier, and its footprints are discernable in the transformation of Democratic antitrust policy. 2. Divided Government, National Party Competition, and Antitrust Enforcement Pol- icy. The political importance of federal antitrust enforcement policy was brought home to the embattled Democratic administration by congressional pressure, specifically, the prodding of the now Republican-dominated Senate Interstate Commerce Committee. As was typical of nineteenth-century Con- gresses, an extended recess attended the end of the 53rd Congress and the beginning of the 54th (roughly April 1895 through November 1895). In the summer of that long hiatus, Republicans took aggressive steps to embarrass the Democratic administration and position themselves for the upcoming presidential election in 1896. In particular, they sought to capitalize politically on the recently announced formation of the Joint Traffic Association, a New York based rate-fixing cartel involving thirty-two competing railroads. In a series of written exchanges, Republican William E. Chandler, a ranking member of the Senate Interstate Commerce Committee and former chair of the Republican National Committee, sought to goad the chair of the Interstate Commerce Commission (ICC), Democrat William R. Morrison, and the new Democratic attorney general, Judson Harmon, to take action against the railroad cartel. For different reasons, neither Morrison nor Harmon were disposed to move. The ICC, for one, had long endorsed rate associations. Beyond the reach of the antipooling provision of Interstate Commerce Act, these organizations were considered a critical tool in the ICC’s mission to secure just and reasonable transportation rates. To Morrison, rate associations were the most effective means available to prevent rate wars and their attendant evils: fluctuating and discriminatory charges and preferential treatment. The at- 320 SCOTT C. JAMES torney general, on the other hand, believed himself hamstrung by the rulings of the lower courts in Trans-Missouri, the facts of which were almost identical to those surrounding the Joint Traffic Association.69 In the midst of appeal- ing Trans-Missouri to the Supreme Court, the attorney general felt confident that officials for Joint Traffic had brought its activities into conformity with the law as it presently stood. In a series of letters to Morrison, Harmon, and ultimately to President Cleveland – letters that were simultaneously released to the press to maximize their political impact – Chandler attempted to capitalize on executive branch inaction. Chandler assailed the Joint Traffic As- sociation as “the greatest association of capital which America, perhaps the world, has ever known,” and inquired into the steps being taken to ensure that its activities were in accord “with the statutes of the United States against pooling and trusts.”70 The Republican senator berated Morrison for drag- ging his feet, while Harmon was chastised for his assumption that the railroad cartel “is a successful violation of the criminal laws of the United States.”71 “It remains to be seen,” Chandler wrote Morrison, “whether the several agencies invoked will speak and act against the illegal combination and stop it in its inception, or will by silence and inaction encourage and assist its impregnable consummation.”72 By December 1895 Harmon and Morrison had jointly concluded that continued Republican pressure required a positive administration response, regardless of their better judgment. With this, the ICC formally requested that the Justice Department proceed against the Joint Traffic Association for violations under the Sherman Act. As Harmon had predicted, the railroad cartel was promptly vindicated in the lower courts. Before the year’s end, the Jus- tice Department would also bring suit against the Addyston Pipe and Steel company, the Kansas City Livestock Exchange, and an association of Salt Lake City coal dealers. Only with the Supreme Court’s decision in Trans-Missouri announced in late March 1897, almost three weeks after the end of the Cleve- land administration, would the fruit of Harmon’s renewed antitrust efforts begin to materialize. This later period, however, lies outside the scope of this article.

IV. UNITED STATES v. TRANS-MISSOURI FREIGHT ASSOCIATION This final section examines government arguments put forth in United States v. Trans-Missouri Freight Association, both in the lower courts and in the Supreme Court. Trans-Missouri is a seminal episode in the development of federal antitrust policy. In it, the Supreme Court first held all restraints on competition per se illegal under the Sherman Act. The analysis below suggests that government arguments in Trans-Missouri, both Republican and Demo-

69. Leon Burr Richardson, William E. Chandler: Republican (New York: Dodd, Mead & Com- pany, 1940), 497. 70. Letter from William E. Chandler to William R. Morrison, August 17, 1895, in U.S. Con- gress, Senate, 54th Congress, 1st sess., Executive Documents no. 39, 6. 71. Letwin, Law and Economic Policy in the United States, 133. 72. Letter from William E. Chandler to William R. Morrison, August 31, 1895, in U.S. Con- gress, Senate, 54th Congress, 1st sess., Executive Documents no. 39, 9. PRELUDE TO PROGRESSIVISM 321 cratic, shared not only a common policy goal – government enforced competition – but a similar rhetorical stance as well. Informed by the ideology of “free labor” or “industrial liberty” – a critical component in the American liberal republican tradition – this stance resonated deeply with western antimonopolists under siege from large industrial giants and business combines. It was a stance that received further elaboration in the opinion of Justice Ru- fus Peckham, when in 1897 the principle of “free and unrestricted competition” was officially read into federal antitrust policy. As well, this section attempts to situate the Trans-Missouri case in the broader context of both Kansas state and national party politics. Central to the evolution of this case was an ongoing process of party competition for the western farm vote, which, with the spread of Populism, was quickly detaching itself from the Republican party. Indeed, in the early 1890s, the Kansas Republican party was on the verge of displacement by a combination of Populist and fusionist political forces. The 1892 national elections were in the offing – elections which the People’s party would contest at all levels of office. In this context, the Har- rison administration’s decision to proceed against the Trans-Missouri combine was politically potent, taking aim at one of the era’s most prominent symbols of monopolistic oppression, the railroads. Similarly, as we have seen, the decision to carry the Trans-Missouri case to the Supreme Court in 1896 was part of a broader shift in antitrust policy by the Cleveland administration. With traditional party alignments in collapse, the decision to initiate a new round of Sher- man Act proceedings and to revive the agrarian doctrine of “free and unrestricted competition” was a direct appeal by Democrats to western antimonopolists rapidly shedding their traditional partisan moorings.

Kansas Populism and the Political Origins of U.S. v. Trans-Missouri Kansas was a center of agrarian unrest in the 1880s and 1890s. The farmer revolt in that state, as elsewhere, struck out broadly against the three great “monopolies” of the period: money, land, and transportation. As one student of the antitrust movement characterized its spread: The intensity of the popular response to monopoly seemed to relate directly to the drastic increase in the number of industrial combinations formed after 1887. . . . Where only six industrial consolidations had taken place during the entire period from 1860–1886, eight occurred in the year 1887 alone. By 1890 the number of trusts had soared to forty-two.73 In Kansas, the rise of the Farmer’s Alliance and, subsequently, the People’s party threatened to end Republican party dominance in that state. Most Kansas Republican leaders recognized that fact, and “they rushed to stem the flight of farmers by embracing economic reform,” such as free coinage of silver, national banking reform, and lower railroad freight rates.74

73. Piott, The Anti-Monopoly Persuasion, 19. 74. Jeffrey Ostler, Prairie Populism: The Fate of Agrarian Radicalism in Kansas, Nebraska, and Iowa, 1880–1892 (Lawrence: University of Kansas Press, 1993), 125–26. At the 1890 Kansas Re- publican State Convention, one party leader warned that “‘a slight mistake might end the old republican party.’ The ‘old ship is leaking badly,’ he declared, ‘and men are wanted at the pumps who can work them successfully’” (ibid., 125). 322 SCOTT C. JAMES In 1889, in response to growing political pressure, the Kansas legislature passed its first antitrust law: “An act to declare unlawful trusts and combinations in restraint of trade and production, and to provide penalties therefore.” The Kansas statute was one of the first of a wave of modern antitrust laws that quickly spread across the agrarian South and West. At bottom, it sought to remove impediments to “full and free competition” in the statewide market for goods and services. Section 1 of the Kansas law read: That all arrangements, contracts, agreements, trusts, or combinations between persons or corporations, made with a view or which tend to prevent full and free competition in the importation, transportation, or sale of articles imported into the state, or in the product, manufacture, or sale of articles of domestic growth or product of domestic raw material, or the loan or use of money, or to fix attorney’s or doctor’s fees, and all arrangements, contracts, agreements, trusts or combinations between persons or corporations designed or which tend to advance, reduce, or control the process or the cost to the producer or to the consumer of any such products or articles, or to control the cost or rate of insurance, or which tend to advance or control the rate of interest for the loan or use of money to the borrower, or any other service, are hereby declared to be against public policy, unlawful, and void.75 Section 3 made violations a misdemeanor punishable by a fine of not less than one hundred dollars and not more than one thousand dollars, imprisonment of not less than thirty days and not more than six months, or some combination of both, at the discretion of the court. It was in this political context that the Harrison administration brought suit in Kansas district court against the Trans-Missouri Freight Association for violation of the Sherman Act. Trans-Missouri was a rate association comprised of eighteen railroad companies in competition for business between the Mis- souri River and the West Coast; it was charged with price-fixing.76 In both tri-

75. The Kansas antitrust statute of 1889 was similar in most respects to the first antitrust bill introduced by Senator John Sherman of Ohio on August 14, 1888 (50th Cong., 1st sess., S. 3445). That bill also declared: That all arrangements, contracts, agreements, trusts, or combinations between persons or corporations made with a view, or which tend to prevent full and free competition in the production, manufacture, or sale of articles of domestic growth or production, or of the sale of articles imported into the United States, and all arrangements, contracts, agreements, trusts, or combinations between persons or corporations designed, or which tend, to advance the cost to the consumer of any such articles, are hereby declared to be against public policy, unlawful, and void. The Sherman bill was abandoned by the Senate Judiciary Committee in favor of its own handi- work (the final “Sherman” law). 76. The bill of complaint against the rate association read, in part: And your orator further avers that on or about the fifteenth day of March, 1889, the defendants not being content with the usual rates and prices for which they and others were accustomed to move, carry and transport property, freight and commodities in the trade and commerce aforesaid and in their said business and occupation, but contriving and intending unjustly and oppres- PRELUDE TO PROGRESSIVISM 323 al and appellate phases, the administration’s case was prepared by United States Attorney Joseph W. Ady, a Harrison appointee and prominent Kansas Republican, active in state politics.77 But legal action proceeded under the direction of Harrison’s Attorney General, William H. H. Miller.78 In his initial pretrial formulations, Ady had proposed to proceed upon a common law reading of the Sherman Act. The common law had long prohibited price fixing and monopolization of commodities considered “necessaries of life” and services affected with a public interest. The fixing of freight rates, Ady believed, fell within this category of common law prohibitions.79 However, in the end, Ady pressed a broader reading of the Sherman Act, arguing that the

sively to increase and augment the said rates and prices and to counteract the effect of free competition on the facilities and price of transportation, and to establish and maintain arbitrary rates, and to prevent any one of said defendants from reducing such arbitrary rates, and thereby exact and procure great sums of money . . . did combine, conspire, confederate and unlawfully agree together, and did then and there enter into a written contract, combination, agreement and compact known as a memorandum of agreement of the Trans-Missouri Freight Association, which was signed by each of the said above named defendants [emphasis added]. 77. Indeed, in 1892, in the aftermath of the Trans-Missouri proceedings, Ady’s popularity was such that his name would be placed in nomination for the Senate by state Republicans. Ady would lose the nomination struggle to John Martin, the Democratic-Populist nominee and un- successfully petition the U.S. Senate to investigate Martin’s appointment for procedural irregu- larities. See, Peter H. Argersinger, Populism and Politics: William Alfred Peffer and the People’s Party (Lexington: The University Press of Kentucky, 1974), 151–58; and U.S. Congress, Senate, 53rd Congress, Special Session, Miscellaneous Documents, no. 37, “Memorial of Joseph W. Ady.” 78. On January 7, 1891 Ady wrote the Attorney General, acknowledging receipt of your letter of December 24, directing me to file the bill heretofore prepared and submitted to you in case of United States v. The Trans-Missouri Freight Association, and I have the honor to say that I filed the same on the 6th instant and process has been issued for defendants who may be served in this State. (Joseph W. Ady, U.S. Attorney, Kansas, to William H. Miller, At- torney General, January 7, 1891, General Records of the De- partment of Justice, Record Group 60, National Archive and Records Administration) 79. “To determine what combinations and associations are intended to be prohibited by that act it should, of course, be read in the light of the common law.” (Joseph W. Ady, U.S. Attorney, Kansas, to William H. Miller, Attorney General, December 16, 1891, General Records of the Department of Justice, Record Group 60, National Archive and Records Administration). In the same letter, Ady advanced several “propositions” to the attorney general, each of which he believed exposed the illegality of combination’s articles of association: First, It [sic] suppresses competition in a business the nature of which is public and of vast importance to the people at large. Second, [the railroads that comprise the combination are] practically banding themselves together and saying: we will not work for less than a stipulated price and neither shall any of our members work for a less price. This has always been criminal. A man may charge his own price for his own services, but when several persons band themselves together and say that one of their own number shall not work for less rate, it exceeds the power of any individual or any number of individuals. 324 SCOTT C. JAMES intent of the antitrust law was to “enlarge . . . the rule of the common law,” and thus “to restrain and prevent combinations to control prices in trade or commerce between the States.” Only Congress had the authority to regulate interstate commerce, Ady insisted. And having declared in favor of free competition, “no state, municipality, corporation, individual or combination of individuals” might legally “restrain, hinder or retard it.”80 This was precisely the railroad combine’s crime, as Ady detailed. By memorandum of agreement, it had attempted “to remove the whole subject of fixing freight rates . . . out of the realm of competition” and confer that power to a committee of interested parties “on which the public has no voice.” “The principle of free competition necessarily inheres in our free institutions,” Ady told the court, “the parent of our unexampled development and prosperity.” Yet, the freight association would supplant the natural and salutary effects of supply and demand with a self-interested body empowered to regulate prices arbitrarily.81 Ady located his argument squarely within the American liberal republican tradition. In particular, he drew upon the discourse of “free labor” with roots extending back to the antebellum antimonopoly and abolition movements, a discourse broadened by the experience of Civil War and the ideology of “industrial liberty” central to the evolution of the Fourteenth Amendment. At stake, as Ady drew it, was the right of every American citizen to be free from subordination to arbitrary rule, whether that be in the form of public or private forms of tyranny and injustice. “Hatred, uncompromising and inveterate hatred, for tyrant and task-master, is the dominant passion of the Saxon race,” Ady averred. “It is at all times and in all countries jealous of monarchs and hostile to monopolies.” The central issue was industrial freedom, the right of each citizen both to enter the occupation of his choice and to make all decisions for successful operation of that business, free from external coercion, public or private.82

Third, Such [sic] an association gives to the associates un- limited power ‘to oppress individuals by unjustly subjecting them to the power of the confederates. It leaves to the shipper no choice but to pay the arbitrary rate fixed by the association. Fourth, By [sic] the terms of this agreement, common carriers which have their charter and franchises from the public for the performance of a public duty, abrogate and revoke their pow- ers and duties which makes it incumbent upon the officers of each particular company to fix rates and charges for services per- formed. 80. This same rationale – the plenary and exclusive power of Congress to regulate interstate commerce – had been used by the Court in 1886 to strike down all state-level railroad regulation affecting interstate commerce. In 1895, the Court applied this logic in support of government efforts to break the strike of the fledgling American Railway Union. Wabash, St. Louis & Pacific Railway Co. v. Illinois, 118 U.S. 557; In re Debs 158 U.S. 564 (1895). 81. Arguments of Joseph W. Ady, U.S. District Attorney, Kansas; United States v. Trans-Missouri Freight Association, 58 F. 58 (1893), Briefs and Records for the Circuit Court of Appeals, Eighth District, National Archives-Central Plains Region, Kansas City, Missouri. 82. Ibid. PRELUDE TO PROGRESSIVISM 325 Freedom – civil, religious, and industrial freedom – these three, are the foundation stones of American liberty. The right of every citizen to employ his capital and his energy in whatever industrial enterprise he will, unmolested and unrestrained by any authority or power, except as provided by public laws enacted by his authorized representatives, is just as sacred as any other right secured by our constitution.83 In Ady’s judgment, the only effective defense against “the greed and ra- pacity of monopolies” was unrestrained competition. The decline in railroad rates enjoyed by shippers over the previous years was the result not of “the voluntary action of the traffic man, but has been forced by the irresistible pressure of competition.” “It is a gift,” Ady continued, “not of a wise and gener- ous legislator or rate-maker, but of natural laws.” One could not assume that the purposes of a railroad association were benign. But even assuming it so, the Republican prosecutor argued, no organization possessed the technical competence to calculate “reasonable” rates or prices objectively. Citing French political economist Charles Coquelin, Ady insisted that it was impossible to compute production costs with any exactness. The seller or the producer might be able to itemize expenses incurred, but the relation of those expenses to actual cost remained a mystery. In Coquelin’s words: If it were necessary to determine in an official manner the cost price of only one of the products which are daily offered for sale in the market, a pretty thing it would be to see all the officers of the various governments at work! In vain would they assemble for this purpose the wisest statisticians, the most ex- pert merchants, the most skilled manufacturers, and the ablest administrators. In vain would they add to this a reinforcement of economists. All these lights united could not accomplish such a task.84 However, where an army of experts must necessarily fail at the task of calcu- lating reasonable prices, even for a single commodity of service, the natural law of supply and demand could achieve for the entire market. But what all the science of such a council could not do for a single product, competition does, without an effort, for the millions of products in circula- tion. It does it so well, according to principles so sure, and with a precision so infallible, that there is not anywhere, where competition exerts its full power, a single product which sells regularly for either more or less than it really cost from the time of its first formation to its entire completion.85 In sum, Ady concluded, “[t]he industrial development of this country has fully persuaded its people that the principle of free and unrestrained competition is the ‘sun and providence of the industrial world,’ around which all of their progress revolves.” In Ady’s view, “the almost united voice of the judiciary” maintained that free and unrestricted competition was “a necessary concomitant of a free government, aiding in the development of free institutions as naturally, as certainly, as monopolies do in the development of monarchies and aristocracies.”86

83. Ibid. 84. Ibid. 85. Ibid. 86. Ibid. 326 SCOTT C. JAMES Trans-Missouri in the Supreme Court 1. Arguments of Attorney General Judson Harmon. In November 1892, the federal trial court in Kansas found for the railroads; in early 1893, the circuit court of appeals upheld that verdict. There the case laid dormant for the next three years until resuscitated by Grover Cleveland’s newly appointed attorney general, Judson Harmon. Before the Court, attorneys for the now-defunct Trans-Missouri Freight As- sociation continued to urge a common law reading of the Sherman Act. In previous Sherman Act cases, they noted, the lower courts had consistently held that where “terms which are known to the common law are used in a federal statute, those terms are to be given the same meaning that they received at common law[.]” In addition, the railroads maintained that the language of the statute’s title – “An act to protect trade and commerce from against unlawful restraints and monopolies” – implied a category of lawful restraints, clearly those traditionally held reasonable at common law. Third, railroad attorneys maintained the impolicy of a per se construction of the Sherman Act. The requirement of “free and unrestricted competition” was an invitation to cutthroat competition and, ultimately, to the financial ruin of the railroads. Congress, they maintained, could never have intended such an irrational public policy.87 If it be conceded that the railroads have a responsibility to charge reasonable rates, the railroads argued, it must follow that they have a right to enter into contracts to maintain rates at reasonable levels. Surely, the railroads argued, Congress could not have intended the Sherman Act to work to the destruction of an industry by outlawing arrangements to fix charges in themselves fair and reasonable. In written arguments, Attorney General Harmon countered that the terms of the Sherman Act were “as broad as the language affords.” “Every contract and combination, in form of a trust or otherwise . . . is declared to be illegal

87. The Court succinctly summarized the economic arguments advanced by the railroads: They again draw attention to the fact of the peculiar nature of railroad property. When a railroad is once built, it is said, it must be kept in operation. It must transport property, when necessary in order to keep its business, at the smallest price, and for the nar- rowest profit, or even for no profit, provided running expenses can be paid, rather than not to do the work; that railroad property cannot be altered for use for any other purpose, at least without such loss as may fairly be called destructive; that competition, while perhaps right and proper in other business, simply leads in railroad business to financial ruin and insolvency, and to the operation of the roads by receivers in the interest of its creditors, instead of in that of its owners and the public; that a contest between a receiver of an insolvent corporation and one which is still solvent tends to ruin the latter company, while being of no benefit to the former; that a receiver is only bound to pay operating expenses so he can compete with the solvent company, and oblige it to come down to prices incompatible with any profit for the work done, and until run overtakes it, to the destruction of innocent stockholders, and the impairment of the public interest. (United States v. Trans-Missouri Freight Association, 166 U.S. 290 [1897]) PRELUDE TO PROGRESSIVISM 327 when it is in restraint of trade or commerce among the several States, etc.” [emphasis in original]. Harmon relied heavily on his authority as the government’s highest legal officer and chief interpreter of the nation’s laws. The attorney general insisted that the intent of the Sherman Act was found in its express language, a language “forbid[ding] all contracts, etc., in restraint of commerce among the States.” The act was to be “taken as it reads, and not subject to definitions or implied limitations or qualifications borrowed from the Common Law.”88 This position led Harmon to reject the contention of the railroads that the federal antitrust law prohibited only those arrangements in unreasonable restraint of trade. There was no qualification in its text and no justification could be made for “excluding from the operation of the act any contract of the class which its language fairly and accurately describes, whether the restraint be great or small, reasonable or unreasonable[.]”89 The reference to “unlawful” restraints of trade and monopolies in the Act’s title referred to those “made unlawful by the act itself, not those found unreasonable at common law.” Therefore, the courts were under no duty to inquire into the reasonableness or justifiability of a particular restraint; all were condemned by the Act. “[C]ompetition is the life of commerce as well as trade,” Harmon contended, and “the prevention of competition, entire or partial, is a restraint” prohibited by law: The language is broad, sweeping, and unqualified by reference or otherwise. It forbids every contract which in any manner or to any extent is “in restraint of trade or commerce” among the States. There is no escape, therefore, from the conclusion that the intention of Congress was to keep trade and commerce . . . absolutely free from all the artificial restraints which are created by contract or combination of every kind and form.90 Railroad attorneys, supported by a battery of railroad experts, had maintained that ruinous competition was bad public policy because it could be pos- itively “hurtful to trade and commerce.” Harmon conceded the possibility. Nevertheless, he insisted that this was a public policy matter and as such was the sole preserve of the Congress. To Harmon, the language of the Act and the near unanimous support it received in Congress was proof that “Congress,

88. Briefs and Records of the U.S. Supreme Court. United States v. Trans-Missouri Freight Com- pany, 166 U.S. 290. Arguments of the Attorney General Judson Harmon. 89. Said Harmon: “The title of an act can never prevail against its express language.” While the title might legitimately be referred to in cases of “doubt and uncertainty,” the meaning of the Sherman Act was unambiguous: The language is broad, sweeping, and unqualified by reference or otherwise. It forbids every contract which in any manner or to any extent is ‘in restraint of trade or commerce’ among the States. There is no escape, therefore, from the conclusion that the intention of Congress was to keep trade and commerce among the States free from all the artificial restraints which are created by contract or combination of every kind and form. (United States v. Trans-Missouri, Arguments of the Attorney Gen- eral Judson Harmon). 90. Ibid. 328 SCOTT C. JAMES acting for the people, did not think so.” “It evidently believed that competition is the life of commerce as well as trade, and therefore imposed on the courts no duty of inquiry as to reasonableness or justifiability, but condemned all restraints.”91 Harmon cited with approval key passages in the dissenting opinion of Judge Oliver Shiras, Jr., in the lower appeals phase. Shiras’s arguments were largely extensions of those made by the Republican prosecutor Ady. Through Shiras, Harmon insisted that the rule of “free and unrestricted competition” was a crucial community safeguard against the potential for arbitrary and un- just prices.” In the judge’s words, “The reasonable rates which the community is entitled to enjoy are those which result from free and unrestricted competition.” To do otherwise would place “the welfare of the community in subjection to the interests” of the railroads. In my judgment, the community is absolutely entitled to the protection against unfair rates which is afforded by free and unrestrained competition between the companies engaged in the transportation business of the country, and any contract or combination which is intended to restrict competition in this particular is inimical to the public welfare, and is therefore illegal.92 Harmon also referred the Court to the contention of both Shiras and Ady that there could be no nonarbitrary standard of reasonableness in railroad rates absent that established by unrestrained competition. Even if such a standard were discoverable, it would fall to shippers to prove the unreasonableness of railroad rates in court. The expense, expertise, and time involved would, in Harmon’s view, leave the shipper “wholly without a remedy.” The difficulties that would necessarily be encountered by any citizen in establishing the reasonableness of a particular rate charged him are such as to ren- der a remedy by that method of no value, and hence it is that at all times the citizen is entitled to the protection afforded him by absolutely free competition between railway companies. A contract or combination which tends to deprive the citizen of the protection thus afforded him is contrary to public policy.93 2. Arguments of Supreme Court Justice Rufus W. Peckham. On March 22, 1897, the Supreme Court handed down its decision in United States v. Trans-Missouri Freight Association.94 By a 5–4 margin, the Court majority conceded the government’s main contention that the Sherman Act’s prohibitions on restraint of trade were unqualified. The rule enunciated by Congress in passing the antitrust law, the tribunal determined, was “free and unrestricted competition” in interstate commerce. Any restraint on trade and commerce would henceforth be deemed illegal per se – that is, on its face – requiring no inquiry into the reasonableness of the restraint.95 The Court’s newest member, Rufus W. Peckham, spoke for the majority in Trans-Missouri. Though a national Democratic appointee, Peckham was cer-

91. Ibid. 92. Ibid. 93. Ibid. 94. United States v. Trans-Missouri Freight Association (1897) 166 U.S. 290. 95. In subsequent decisions, the Court would modify this to all direct restraints on competition. This adjustment did little to halt the movement of business persons and their allies to over- PRELUDE TO PROGRESSIVISM 329 Table 7. County-Level Farm Vote for Rufus W. Peckham as 1886 Democratic Candidate for Seat on New York State Court of Appeals (Controlling for Democratic Vote in Other Selected Statewide Races).

Variables Number of Farms (Per Capita) Ϫ44.677** Ϫ40.227** Ϫ31.405* (18.232) (12.884) (14.388) Cleveland Vote (1882 Gubernatorial 0.746*** — — Election) (.085) Cleveland Vote (1884 Presidential — 1.022*** — Election) (.065) David B. Hill Vote (1885 — — 1.015*** Gubernatorial Election) (.083) Constant 6.143 Ϫ0.056 Ϫ0.535 (5.642) (3.532) (4.532) Adjusted R2 .72 .86 .84 (N ϭ 58); ***p Ͻ .001, **p Ͻ .01, *p Ͻ .05. Note: Robust standard errors in parentheses. Data Sources: (County-level electoral data for 1884 presidential election) Clubb, Jerome M., William H. Flanigan, and Nancy H. Zingale, Electoral Data for Counties in the United States: Presi- dential and Congressional Races, 1840–1972 [Computer file]. Compiled by Jerome M. Clubb, Uni- versity of Michigan, William H. Flanigan, University of Minnesota, and Nancy H. Zingale, Col- lege of St. Thomas. ICPSR ed. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [producer and distributor], 1986; (County-level electoral data for 1882 and 1885 New York State gubernatorial elections)Tribune Almanac and Political Register; (1880 county-level farm data) Inter-university Consortium for Political and Social Research. Historical, Demographic, Eco- nomic, And Social Data: The United States, 1790–1970 [Computer file]. Ann Arbor, Mich.: Inter- university Consortium for Political and Social Research [producer and distributor], 1992.

tainly no stalking horse for radical agrarianism. Indeed, in his home state of New York, Peckham seems to have been less popular electorally among farmers than Democrats generally. In 1886, for example, Peckham successfully won a seat on the prestigious New York Court of Appeals in a statewide election. But while Peckham generally faired well with Democratic voters, he suffered heavier than normal losses in those counties containing a large number of farms per capita. Of course, the New York farm vote in the 1880s was heavily Republican to begin with. But, as the regression coefficients in Table 7 indicate, Peckham’s poor showing in farm counties not only outpaced more conventional Democratic candidates – such as David B. Hill in his victorious 1885 gubernatorial contest – but Mugwump candidates such as Democrat Grover Cleveland (as evidenced in both his successful 1882 gubernatorial turn the post-Trans-Missouri interpretation of the Sherman Act. On this movement, see Sklar, The Corporate Reconstruction of American Capitalism. 330 SCOTT C. JAMES race and in his equally successful presidential contest two years later). In sum, it seems unlikely that one can account for the position Peckham staked out in Trans-Missouri in terms of a natural empathy for the problems of the Amer- ican farmer. But neither was Peckham a stalking horse for Stephen J. Field in Trans- Missouri, and it is equally unilluminating to squeeze his opinion into the con- ceptual framework of “laissez-faire constitutionalism.” Unlike his decisions in Allgeyer v. Louisiana and Lochner v. New York, Peckham’s arguments here simply do not square with laissez-faire constitutionalism’s scepticism toward legislative power and its positive political objective “to separate the public and private sectors into fixed and inviolable spheres.”96 Rather, the Trans-Missouri ruling was explicitly deferential to Congress’s inferred intent to inaugurate a coercive public regime of enforced competition in interstate commerce. By its decision, the Court would thrust the federal government deep into the regulation of what hitherto had been a world of private-sector decision making guided by strictly business-related criteria. Nor can Trans-Missouri be seen as a blow struck on behalf of “liberty of contract,” another of laissez-faire constitutionalism’s cardinal principles. By minimizing government intrusion in the marketplace, the common law reading of the Sherman Act simultaneously maximized the discretion of business persons to enter into cooperative arrangements to advance their mutual self-interest. As we have seen, arrangements to restrict price-based competition between natural competitors were broadly tolerated under a common law reading of the Sherman Act, so long as potential competitors were freely allowed to enter the market. In the end, Trans-Missouri’s departure from the tenets of “laissez-faire constitutionalism” is perhaps nowhere better illustrated than by the fact that Peckham’s fellow Supreme Court Justice, Stephen J. Field – the acknowledged “pioneer and prophet” of laissez-faire constitutional jurisprudence – lined up with those on the Court who dissented from the logic of the majority opinion.97 Although Peckham was no agrarian sympathizer, his opinion in Trans- Missouri was nonetheless remarkably similar in content and objective to that expressed by western antimonopolists, even if he drew his understanding of the national economic crisis from the competitive challenges facing traditional small business in his home state of New York.98 Thus Peckham used the occasion of Trans-Missouri to throw down the gauntlet on behalf of small, independent proprietors and against the economic and social ravages being

96. Charles W. McCurdy, “Justice Field and the Jurisprudence of Government-Business Relations: Some Parameters of Laissez-Faire Constitutionalism, 1863–1897,” Journal of American History 61 (1975): 973. 97. McCurdy, “Justice Field and the Jurisprudence of Government-Business Relations,” 971. 98. Owen M. Fiss writes that Peckham brought to the Supreme Court a “fear of the rapa- cious tendencies of ‘combinations of capital,’” sensibilities largely born of the economic tumult that marked the industrialization process in New York state (Troubled Beginnings of the Modern State, 1888–1910 [New York: Macmillan Publishing Company, 1993] p. 118). It will be recalled from Table 2 that in 1896 New York was the only eastern state with an antitrust law mandating free and unrestricted competition in the marketplace, suggesting the political power of small business interests in that state. In this way, Peckham could have been in step with some of the goals of Western antimonopolism, even if it was for experientially different reasons. PRELUDE TO PROGRESSIVISM 331 heaped upon them by an emergent corporate capitalism. In so doing, Peck- ham leaned heavily on the ideology of “industrial liberty.” Taking aim against justifications for business combinations and contractual restraints grounded in the twin logic of productive efficiency and consumer welfare, the Supreme Court Justice insisted that trade or commerce under those circumstances may . . . be badly and unfortu- nately restrained by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves to their altered surroundings.99 “Mere reduction in the price of the commodity dealt in,” Peckham continued, “might be dearly paid for by the ruin of such a class and the absorption of control over one commodity by an all-powerful combination of capital.”100 Like the Kansas Republican Ady before him, Peckham maintained that the issue was ultimately one concerning economic power, pure and simple. In particular, it was the potential to use that market power in an arbitrary and coercive fashion that concerned Peckham. The social consequences for traditional economic groups were both obvious and frightening: In this light it is not material that the price of an article may be lowered. It is in the power of the combination to raise it, and the result in any event is un- fortunate for the country, by depriving it of the services of a large number of small but independent dealers, who were familiar with the business, and who had spent their lives in it, and who supported themselves and their families from the small profits realized therein. Whether they be able to find other av- enues to earn their livelihood is not so material, because it is not for the real prosperity of any country that such changes should occur which result in trans- ferring an independent business man, the head of his establishment, small though it might be, into a mere servant or agent of a corporation for selling the commodities which he once manufactured or dealt in; having no voice in shaping the business policy of the company, and bound to obey orders issued by others. Nor is it for the substantial interests of the country that any one commodity should be within the sole power and subject to the sole will of one powerful combination of capital.101 Like the Attorney General Harmon, Peckham drew directly upon arguments contained in the dissenting arguments of Kansas district judge Oliver Shiras. Shiras sought specifically to confront concerns about the deleterious consequences of unrestrained competition for the economic well-being of the community. In turn, Peckham put these arguments to work to buttress the rationale behind a new policy of “free and unrestricted competition,” and thereby justify the soundness of a policy premised on a literal reading of the Sherman Act: Competition, free and unrestricted, is the general rule which governs all the ordinary business pursuits and transactions of life. Evils, as well as benefits, result therefrom. In the fierce heat of competition, the stronger competitor may

99. United States v. Trans-Missouri Freight Association (1897) 166 U.S. 290, 323. 100. Ibid. 101. Ibid., 324. 332 SCOTT C. JAMES crush out the weaker; fluctuations in prices may be caused that result in wreck and disaster; yet, balancing the benefits as against the evils, the law of competition remains as a controlling element in the business world. That free and unrestricted competition in the matter of railroad charges may be productive of evils does not militate against the fact that such is the law now governing the subject. No law can be enacted nor system be devised for the control of human affairs that in its enforcement does not produce some evil results, no matter how beneficial its general purpose may be. There are benefits and there are evils which result from the operation of the law of free competition between railway companies. The time may come when the companies will be relieved from the operation of this law, but they cannot, by combination and agreements among themselves, bring about this change.102 The Court also deferred to government arguments regarding the proper rules of statutory construction. First, it denied the claim of the railroads (and implicitly the collective judgment of the lower courts) that the phrase “unlawful restraints and monopolies” in the Sherman Act’s title implied a reference to common law distinctions between lawful and unlawful – reasonable and unreasonable – restraints of trade. Rather, the meaning of the title was to be interpreted by reference to “those restraints and monopolies which are made unlawful in the body of the statute.” And by “the plain and ordinary meaning” of the statutory language, every contract or combination, whether reasonable or unreasonable at common law, was declared to be illegal per se. To find otherwise would be an act of “judicial legislation,” inserting into the act that which Congress omitted.103 Finally, on the issue of whether the railroad had a fundamental right to enter into arrangements to protect rate structures in themselves fair and reasonable, the Court took up the thorny question of determining reasonableness. Peckham queried: “What is a proper standard by which to judge the fact of reasonable rates?” To answer simply “a sum sufficient to afford the share- holder a fair and reasonable profit upon his investment” was merely to beg the question: “[W]hat is a fair and reasonable profit?” To Peckham’s way of thinking, there was no nonarbitrary answer to these questions. In practice, such questions would be left to the companies themselves to decide. And even assuming such a standard could be found, the burden to the individual shipper in time and money of having to prove unreasonableness, not to mention the bad feelings necessarily engendered with the road, would result in most shippers declining to prosecute. In addition, as Peckham observed, neither the public nor the experts were in agreement on the deleterious effects of competition on the uniformity of railroad rates or the financial solvency of the railroads themselves. [I]t must be remembered that these results are by no means admitted with unanimity; on the contrary, they are earnestly and warmly denied on the part of the public and by those who assume to defend its interests both in and out

102. Ibid., 337 103. Ibid., 327–28. Peckham conceded that restraints ancillary to contracts involving the transfer of property and goodwill, long recognized as reasonable restraints at common law, “might not be included within the letter or spirit of the statute in question” (329). PRELUDE TO PROGRESSIVISM 333 of congress [sic]. Competition, they urge, is a necessity for the purpose of se- curing in the end just and proper rates.104 For all of these reasons, only the rule of “free and unrestricted competition” could provide a neural, nonarbitrary standard by which to determine the reasonableness of railroad rates. As the Court concluded: [W]hen the lawmaking power speaks upon a particular subject, over which it has constitutional power to legislate, public policy in such a case is what the statute enacts. If the law prohibit any contract or combination in restraint of trade or commerce, a contract or combination made in violation of such law is void, whatever may have been theretofore decided by the courts to have been the public policy of the country on that subject.105

EPILOGUE: AGRARIAN ANTITRUST LAW IN THE PROGRESSIVE ERA This article has set about to establish the agrarian origins of the doctrine of “free and unrestricted competition.” In addition, through a focus on the politics of party system degeneration, it has sought to explain the incorporation of this doctrine into the fabric of federal antitrust policy. In the 1890s, Re- publican and Democratic party leaders were pressed to respond to the un- raveling of their traditional coalitions as a consequence of economic change, depression, and structural change to the electoral system. The reapportionment of 1890 and the incorporation of several new western states into the union mingled with the explosive Populist revolt to shake normal electoral politics off its axis and force a restructuring of party alignments and political conflict. It was too much for a regime premised on increasingly tenuous Civ- il War identities, and in 1896 it collapsed, giving way to a new and more clearly sectional party order. While the political events examined in this paper are important in their own right, they are significant additionally because the agrarian regulatory principles enunciated in Trans-Missouri became the lightning rod around which much of the politics of Progressive era business regulation was galvanized. In- deed, at the heart of Progressive era regulatory politics lies a paradox. Against the westward lurch charted in this article, the “System of 1896” decisively redi- rected the electoral center of gravity back toward the country’s industrial Northeast. So entrenched was this new Republican regime that scholars such as Walter Dean Burnham credit party system change with effectively insulat- ing modernizing capitalists from the political pressures of an insurgent economic periphery.106 However, even as business influence reached its zenith in national politics, federal antitrust law continued to radiate the values of an agrarian-styled political economy. As Martin J. Sklar has most recently shown, the inflexible prohibition against the practice of reasonable restraint shook the foundations of the emerging corporate capitalist order and framed the terms of national political debate for the following fifteen years. The remarks of E. Henry Lacombe, circuit court judge for the Southern Dis-

104. United States v. Trans-Missouri Freight Association (1897) 166 U.S. 290, 333. 105. Ibid., 341. 106. See footnote 11 for citations. 334 SCOTT C. JAMES trict of New York, capture the unsettling implications of the antitrust law for the corporate community. With evident dissatisfaction, Lacombe wrote in 1908 that the Sherman Act since Trans-Missouri was to be “construed as prohibiting any contract or combination whose direct effect is to prevent the free play of competition, and thus tend to deprive the country of the services of any number of independent dealers however small.”107 With similar frustra- tion, Theodore Roosevelt observed in 1906 that, it was “a public evil to have on the statute books [an antitrust] law incapable of full enforcement because both judges and juries realize that its full enforcement would destroy the business of the country.” Rather than prohibit all combinations as the Sherman Act insisted, Roosevelt recommended to Congress a more flexible system of business “control and supervision.”108 It would fall to political elites in the Progressive era to find a workable settlement to the political turmoil engendered by judicial conversion to agrarian regulatory principles. While Progressive era Republicans Theodore Roo- sevelt and William Howard Taft rejected the substance of the reformulated antitrust law, they did not possess the same option as the new regime’s first president, William McKinley. After the Court reaffirmed its position in the Joint Traffic and Addyston Pipe & Steel decisions, McKinley simply declined to bring new actions under the Sherman Act.109 Bowing to mounting public pressure, Theodore Roosevelt renewed the application of the antitrust law. But he did so selectively, smuggling the test of reasonableness back into the law in a manner that substituted his own policy judgment for that of the court. Despite his hostility to the Sherman Act, Taft was much more aggressive than Roosevelt in enforcing its provisions. While a number of reasons lay behind his actions, chief among them was his intention to force a final showdown with Congress over the substance of the antitrust law by ratcheting upward public demand for statutory revision.110 Even the Supreme Court’s subsequent relaxation of the per se rule in 1911 did not put an end to the influence of agrarian antitrust doctrine in national politics.111 Rather, the “rule of reason” fanned the flames of agrarian discontent with the antitrust law and precipitated calls to reinstate the rule of

107. United States v. American Tobacco (1908), 164 F. 700, 701. 108. Theodore Roosevelt, “Sixth Annual Message,” in A Compilation of the Messages and Pa- pers of the Presidents, ed. James D. Richardson (Washington, D.C.: Bureau of National Literature, 1911), 7421, 7420. 109. 171 U.S. 505; 175 U.S. 211 110. Sklar, Corporate Reconstruction of American Capitalism, 368–69. In addition, a more vigorous enforcement policy squared with Taft’s conception of the president’s constitutional obliga- tion “to take care that the laws are faithfully executed.” Equally important, Taft was sure that “prosecutions under the Sherman Act could go much farther than they had under Roosevelt against improper corporate practices and unwarranted combinations without restoring the old competitive regime or endangering the new corporate order” (Ibid). 111. The claims made in this paragraph receive a more extensive treatment in Scott C. James, “Building a Democratic Majority: The Progressive Vote and the Federal Trade Commis- sion,” Studies in American Political Development 9 (1995): 331–85; and James, Presidents, Parties, and the State: A Party System Perspective on Democratic Regulatory Choice, 1884–1936 (New York: Cam- bridge University Press, 2000 [forthcoming]), chap. 3. PRELUDE TO PROGRESSIVISM 335 “free and unrestricted competition,” this time through the medium of an explicit congressional statute. This was particularly true within the Democratic party. In numerous forums, the Democratic party’s titular leader, William Jen- nings Bryan, called upon Congress at once “[to] declare by specific legislation that any attempt at restraint of trade should be considered unreasonable.”112 Only such action, Bryan maintained, “would repair the damage that the supreme court [sic] has done to the antitrust laws.” The 1912 Democrat- ic platform continued the call to restore to the Sherman Act by legislative means “the efficiency” deprived it by judicial construction.113 Likewise, the initial round of legislation produced by Woodrow Wilson and the Democrat- ic party in early 1914 – the so-called “Five Brothers” – contained in it “a Sher- man law redefinition bill,” the explicit purpose of which was to make illegal any business arrangement which “directly or indirectly, [prevented] a free and unrestricted competition among themselves or among any purchasers or consumers in the sale, production, or transportation of any product, article, or commodity.”114 As suggested in the introduction to this article, the doctrine of “free and unrestricted competition” also provided a context for the extension of executive power in the Progressive era. It was Theodore Roosevelt who saw this potential most clearly. Utilizing the Bureau of Corporations, a strategic use of the prosecutorial process, and a willingness to reach “extralegal understand- ings with corporate executives,” Roosevelt was able to expand greatly presidential influence over the substance of antitrust policy.115 The Bureau of Corporations was particularly critical to Roosevelt’s vision of presidential leadership. An instrument of executive policy, the bureau reported directly to the president, making public its findings “only upon the president’s approval and subject to the president’s censorship.”116 Roosevelt used the bureau to investigate corporate practices, orchestrate public opinion, and draft regulatory legislation for Congress’s consideration. Its combined effect was to augment Roosevelt’s leverage over the behavior of large corporations and to give those corporations an incentive to take seriously presidential concerns. Armed with the power to examine papers and subpoena witnesses, the Bureau of Corporations gave Roosevelt a technical capability to distinguish between reasonable and unreasonable combinations – in Roosevelt’s more moralistic vernacular, “to discriminate between those combinations which do good and those combinations which do evil.”117 It allowed Roosevelt to implement the antitrust law selectively, targeting only those corporate arrangements and practices he deemed contrary to the public interest. In this way,

112. The Commoner, January 12, 1912, 2. 113. National Party Platforms, 1840–1960, compiled by Kirk H. Porter and Donald Bruce Johnson (Urbana: The University of Illinois Press, 1961). 114. The provisions of the Sherman law definitions bill are reproduced in the New York Times, January 23, 1914, 3. 115. Robert H. Wiebe, “The House of Morgan and the Executive, 1905–1913.” American Historical Review 65 (1959): 49–60. 116. Sklar, The Corporate Reconstruction of American Capitalism, 185. 117. Theodore Roosevelt, “Sixth Annual Message,” 7421. 336 SCOTT C. JAMES Roosevelt could appear responsive to public demand for dismantling the trusts without deranging what he took to be the historically inevitable path of the American economy, toward increasing corporate concentration. Finally, as I have tried to suggest, the agrarian embrace of market competition as a master regulatory principle should not be mistaken for a nostalgic commitment to laissez-faire. Rather, it shared with progressive advocates of regulation a strong willingness to use government coercion to bring business practices into line with public norms. Rather than allow the market to determine the appropriate mix of cooperation and competition by private arrangement, agrarian-styled regulation called forth a government mandated regime of enforced competition, one which envisioned clear limits on economic concentration and the use of private property. Where sponsors of the competitive regime differed most clearly from progressive advocates of regulation was in their unwillingness to cede discretionary power to either private or gov- ernmental authorities. As admirers of Alexander Hamilton, progressive reformers have generally been enthusiastic about the use of administrative power.118 By comparison, agrarians turned to competitive forces as the arbiter of market fortunes precisely because its operation did not depend upon potentially corrupt and always self-interested human judgments. It squared more fully with the ideal of a government of laws and not men, of equality of treatment before the law. The competitive market might be a harsh and unfor- giving environment, one productive of pronounced economic dislocations. But it was impersonal in its operation. As such, it was incapable of arbitrary discrimination – of conferring unearned privileges upon allies and favorites – the very definition of a corrupt and aristocratic government. In an era in which charges of private greed and public corruption were rife, the search for a neutral regulatory mechanism to structure the market behavior of business was wholly understandable, even laudable – yet perhaps naïve, for such a regime would still need to rely upon a legion of politically and ideological- ly motivated officials to enforce and adjudicate its precepts. As the actions of McKinley, Roosevelt, and Taft made abundantly clear, the inability to control the instruments of implementation cost agrarians dearly, and doomed the doctrine of “free and unrestricted competition” to a fitful and largely ineffi- cacious existence.

118. The classic study of efforts by progressive reformers to construct a national administrative state is Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York: Cambridge University Press, 1982).