Significance: During the continuing debate over federal regulation of business, the ruling in this case expanded the scope of the Sherman Antitrust Act (1890). The Supreme Court ruled that the federal government could dissolve a company regardless of the adverse effects on the business community. This decision was overturned in 1911 in Standard Oil Company v. United States, which ruled that the government had to demonstrate that businesses unreasonably restrained trade before using the Sherman Antitrust Act to shut them down.
Background: In the late 1800s, two major railroads, the Northern Pacific Railroad and the Great Northern Railroad, competed to provide rail transportation across the United States. When Northern Pacific experienced financial trouble, it arranged to sell a majority of stock to Great Northern. This merger created the Northern Securities Company. In 1901 Northern Securities gained control of the Chicago, Burlington, & Quincy Railroad. The federal government used the Sherman Antitrust Act to dissolve the Northern Securities Company because the company was limiting free competition. The government argued that a monopoly of railroad transportation would hurt Americans. The Northern Securities Company appealed the dissolution, arguing that it was beyond the power of Congress and that it would adversely affect the economy.
Decision: This case was argued on December 14­15, 1903, and decided on March 14, 1904, by a vote of 5 to 4. Justice John Harlan spoke for the Court. Justices Edward White and Oliver Wendell Holmes dissented. The majority opinion argued that it could not concern itself with the potential effects on the economy of dissolving a company. If the federal government believed that a monopoly existed that restrained interstate commerce, then the government had the authority to dissolve the company.
Excerpt from the Opinion of the Court: “Many suggestions were made in argument based upon the thought that the anti-trust act would, in the end, prove to be mischievous in its consequences. Disaster to business and wide-spread financial ruin, it has been intimated, will follow the execution of its provisions. . . . But even if the court shared the gloomy forebodings in which the defendants indulge, it could not refuse to respect the action of the legislative branch of the government if what it has done is within the limits of its constitutional power. . . . This court has no function to supervise such legislation from the standpoint of wisdom or policy. We need only say that Congress has authority to declare, . . . that the freedom of interstate and international commerce shall not be obstructed or disturbed by any combination, conspiracy, or monopoly that will restrain such commerce, by preventing the free operation of competition among interstate carriers engaged in the transportation of passengers and freight.”
