Northern Securities Co. v. U.S. Primary Source eText

Primary Source

James Hill is buried under the wreck of the Northern Securities Company merger that is blocked by the Sherman Act. Levers under the boulder read James Hill is buried under the wreck of the Northern Securities Company merger that is blocked by the Sherman Act. Levers under the boulder read "United States Circuit Court of Appeals Decree" as that court found the Sherman Act applicable in blocking the merger, before the case was appealed to the Supreme Court. COURTESY OF BOONDOCKSNET.COM. REPRODUCED BY PERMISSION. Published by Gale Cengage COURTESY OF BOONDOCKSNET.COM. REPRODUCED BY PERMISSION.

Supreme Court decision

By: John Marshall Harlan

Date: March 14, 1904

Source: Harlan, John Marshall. Northern Securities Co. v. U.S. 193 U.S. 197 (1904). Available online at (accessed November 22, 2002).

About the Author: John Marshall Harlan (1833–1911), "the Great Dissenter," was born in Kentucky. After pursuing a career as a lawyer and politician, he served on the U.S. Supreme Court from 1877 until his death. Harlan was famous for his dissenting opinions, including lone dissents in Plessy v. Ferguson and Berea College v. Kentucky. Before being appointed a Supreme Court justice, he was attorney general of Kentucky and the Republican gubernatorial candidate in Kentucky in 1871 and in 1875.


In the late 1880s, American industry rapidly expanded into the production of coal, steel, iron, and oil. With the rise of heavy industry came large, dominating conglomerates such as John D. Rockefeller's Standard Oil and Andrew Carnegie's Carnegie Steel, which grew into monopolies. These huge companies drove competitors out of business, often in ruthless ways, and their owners were known as either robber barons or captains of industry (or possibly both). Frequently, the public was not served by the lack of competition, so pressure was put upon the U.S. Congress to do something to combat monopolies. In response, Congress passed the Sherman Anti-Trust Act (1890), which outlawed all business combinations that restrain interstate commerce. Monopolies and monopolistic devices would seem to fall under this ban, yet the power of Congress reached only to interstate commerce. The reason was that the Constitution of the United States grants Congress sole power in that area. (Intrastate commerce, or commerce within a state, is regulated by the state).

The exact limitations of the Sherman Anti-Trust Act quickly became a subject of litigation. One of the first prosecutions under the Sherman Act was brought against the E.C. Knight Company, which controlled production of 98 percent of the nation's sugar. Nevertheless, the Supreme Court ruled in U.S. v. E.C. Knight Company (1895) that the Sherman Act could not be used to regulate Knight's activities. The Court held that manufacturing was different from interstate commerce, and that Knight's manufacturing operations took place in a single state. The Sherman Act was quite limited by this ruling, thereby making the act ineffective against monopolies. The situation changed in 1901, when Theodore Roosevelt became president and vowed to be a "trust-buster."

Roosevelt publicly went after trusts and monopolies, choosing the Northern Securities Company as one of his first targets.


Northern Securities was a holding company—that is, a company created to "hold" the stock and assets of other companies. Organized to control railroads owned by James Hill and E.H. Harriman, Northern Securities was clearly a railroad monopoly. When confronted with this charge, the company responded with the lawsuit Northern Securities Co. v. U.S. Northern Securities argued that it had been created by the buying and selling of securities and therefore did not engage in any commerce covered by the Sherman Act. The Supreme Court rejected this argument, ruling that if a company acted to abridge interstate commerce, it could be regulated by the Sherman Act.

Two years later, the Court followed up the Northern Securities decision with a ruling in Swift v. United States. In this case, the justices held that manufactured products could be regulated as long as the products were part of a "stream of commerce." At that time, laborers' hours and working conditions had not yet been placed under federal regulation, and a ban on child labor had been held unconstitutional. Congress had tried to ban child labor, but the Court ruled that child labor was part of production and thus came under the control of the state. Then Congress tried to tax the products of child labor, and that law was struck down as well. Congress also made halting attempts to allow workers to form unions and to prevent those unions from being hindered by anti-trust laws. These efforts were struck down as being controls over production. It was not until the 1930s that federal laws were enacted to help unions, ban child labor, and establish a maximum work week and a minimum wage. Since the 1940s, the Supreme Court has generally allowed Congress to regulate any activity that has a "substantial effect" on interstate commerce, as long as there is a "rational relationship" between the law's ends and means.

Primary Source: Northern Securities Co. v. U.S. [excerpt]

SYNOPSIS: John Marshall Harlan delivered the opinion of the Court. He first notes that the main question is whether or not the Sherman Act applies to all combinations in restraint of trade, or just the unreasonable ones. He holds that it applies to all combinations. Harlan then describes the Sherman Act as a reasonable regulation and holds that it extends to railroads. Oliver Wendell Holmes Jr. read his dissent, arguing that the Sherman Act does not apply to trusts and combinations, but only to practices that restrain trade.

Mr. Justice Harlan announced the affirmance of the decree of the circuit court, and delivered the following opinion: .…

The government charges that if the combination was held not to be in violation of the act of Congress, then all efforts of the national government to preserve to the people the benefits of free competition among carriers engaged in interstate commerce will be wholly unavailing, and all transcontinental lines, indeed, the entire railway systems of the country, may be absorbed, merged, and consolidated, thus placing the public at the absolute mercy of the holding corporation.…

In our judgment, the evidence fully sustains the material allegations of the bill, and shows a violation of the act of Congress, in so far as it declares illegal every combination or conspiracy in restraint of commerce among the several states and with foreign nations, and forbids attempts to monopolize such commerce or any part of it.…

Is the act to be construed as forbidding every combination or conspiracy in restraint of trade or commerce among the states or with foreign nations? Or, does it embrace only such restraints as are unreasonable in their nature? Is the motive with which a forbidden combination or conspiracy was formed at all material when it appears that the necessary tendency of the particular combination or conspiracy in question is to restrict or suppress free competition between competing railroads engaged in commerce among the states? Does the act of Congress prescribe, as a rule for interstate or international commerce, that the operation of the natural laws of competition between those engaged in such commerce shall not be restricted or interfered with by any contract, combination, or conspiracy? .…

We will not encumber this opinion by extended extracts from the former opinions of this court. It is sufficient to say that from the decisions … certain propositions are plainly deducible and embrace the present case. Those propositions are:

That although the act of Congress known as the anti-trust act has no reference to the mere manufacture or production of articles or commodities within the limits of the several states, it does embrace and declare to be illegal every contract, combination, or conspiracy, in whatever form, of whatever nature, and whoever may be parties to it, which directly or necessarily operates in restraint of trade or commerce among the several states or with foreign nations;

That the act is not limited to restraints of interstate and international trade or commerce that are unreasonable in their nature, but embraces all direct restraints imposed by any combination, conspiracy, or monopoly upon such trade or commerce;

That railroad carriers engaged in interstate or international trade or commerce are embraced by the act;

That combinations, even among private manufacturers or dealers, whereby interstate or international commerce is restrained, are equally embraced by the act;

That Congress has the power to establish rules by which interstate and international commerce shall be governed, and, by the anti-trust act, has prescribed the rule of free competition among those engaged in such commerce:

That every combination or conspiracy which would extinguish competition between otherwise competing railroads engaged in interstate trade or commerce, and which would in that way restrain such trade or commerce, is made illegal by the act;

That the natural effect of competition is to increase commerce, and an agreement whose direct effect is to prevent this play of competition restrains instead of promoting trade and commerce; That to vitiate a combination such as the act of Congress condemns, it need not be shown that the combination, in fact, results or will result, in a total suppression of trade or in a complete monopoly, but it is only essential to show that, by its necessary operation, it tends to restrain interstate or international trade or commerce or tends to create a monopoly in such trade or commerce and to deprive the public of the advantages that flow from free competition;

That the constitutional guaranty of liberty of contract does not prevent Congress from prescribing the rule of free competition for those engaged in interstate and international commerce; and,

That under its power to regulate commerce among the several states and with foreign nations, Congress had authority to enact the statute in question.…

The means employed in respect of the combinations forbidden by the anti-trust act, and which Congress deemed germane to the end to be accomplished, was to prescribe as a rule for interstate and international commerce (not for domestic commerce) that it should not be vexed by combinations, conspiracies, or monopolies which restrain commerce by destroying or restricting competition. We say that Congress has prescribed such a rule, because, in all the prior cases in this court, the antitrust act has been construed as forbidding any combination which, by its necessary operation, destroys or restricts free competition among those engaged in interstate commerce; in other words, that to destroy or restrict free competition in interstate commerce was to restrain such commerce. Now, can this court say that such a rule is prohibited by the Constitution or is not one that Congress could appropriately prescribe when exerting its power under the commerce clause of the Constitution? Whether the free operation of the normal laws of competition is a wise and wholesome rule for trade and commerce is an economic question which this court need not consider or determine. Undoubtedly, there are those who think that the general business interests and prosperity of the country will be best promoted if the rule of competition is not applied. But there are others who believe that such a rule is more necessary in these days of enormous wealth than it ever was in any former period of our history. Be all this as it may, Congress has, in effect, recognized the rule of free competition by declaring illegal every combination or conspiracy in restraint of interstate and international commerce.…

We cannot agree that Congress may strike down combinations among manufacturers and dealers in iron pipe, tiles, grates, and mantels that restrain commerce among the states in such articles, but may not strike down combinations among stockholders of competing railroad carriers, which restrain commerce as involved in the transportation of passengers and property among the several states. If private parties may not, by combination among themselves, restrain interstate and international commerce in violation of an act of Congress, much less can such restraint be tolerated when imposed or attempted to be imposed, upon commerce as carried on over public highways. Indeed, if the contentions of the defendants are sound, why may not all the railway companies in the United States, that are engaged, under state charters, in interstate and international commerce, enter into a combination such as the one here in question, and, by the device of a holding corporation, obtain the absolute control throughout the entire country of rates for passengers and freight, beyond the power of Congress to protect the public against their exactions? The argument in behalf of the defendants necessarily leads to such results, and places Congress, although invested by the people of the United States with full authority to regulate interstate and international commerce, in a condition of utter helplessness, so far as the protection of the public against such combinations is concerned.…

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 widespread financial ruin, it has been intimated, will follow the execution of its provisions. Such predictions were made in all the cases heretofore arising under that act. But they have not been verified. It is the history of monopolies in this country and in England that predictions of ruin are habitually made by them when it is attempted, by legislation, to restrain their operations and to protect the public against their exactions. In this, as in former cases, they seek shelter behind the reserved rights of the states and even behind the constitutional guaranty of liberty of contract. But this court has heretofore adjudged that the act of Congress did not touch the rights of the states, and that liberty of contract did not involve a right to deprive the public of the advantages of free competition in trade and commerce. Liberty of contract does not imply liberty in a corporation or individuals to defy the national will, when legally expressed. Nor does the enforcement of a legal enactment of Congress infringe, in any proper sense, the general inherent right of every one to acquire and hold property. That right, like all other rights, must be exercised in subordination to the law.…

It was said in argument that the circumstances under which the Northern Securities Company obtained the stock of the constituent companies imported simply an investment in the stock of other corporations, a purchase of that stock; which investment or purchase, it is contended, was not forbidden by the charter of the company, and could not be made illegal by any act of Congress. This view is wholly fallacious, and does not comport with the actual transaction. There was no actual investment, in any substantial sense, by the Northern Securities Company in the stock of the two constituent companies. If it was, in form, such a Transaction, it was not, in fact, one of that kind. However that company may have acquired for itself any stock in the Great Northern and Northern Pacific Railway Companies, no matter how it obtained the means to do so, all the stock it held or acquired in the constituent companies was acquired and held to be used in suppressing competition between those companies. It came into existence only for that purpose.…

We will now inquire as to the nature and extent of the relief granted to the government by the decree below.…

Guided by these long-established rules of construction, it is manifest that if the antitrust act is held not to embrace a case such as is now before us, the plain intention of the legislative branch of the government will be defeated. If Congress has not, by the words used in the act, described this and like cases, it would, we apprehend, be impossible to find words that would describe them.…


Mr. Justice Holmes, with whom concurred the Chief Justice, Mr. Justice White, and Mr. Justice Peckham, dissenting: .…

Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.…

A partnership is not a contract or combination in restraint of trade between the partners unless the well known words are to be given a new meaning, invented for the purposes of this act. It is true that the suppression of competition was referred to in United States v. Trans–Missouri Freight … but, as I have said, that was in connection with a contract with a stranger to the defendant's business,—a true contract in restraint of trade. To suppress competition in that way in [sic] one thing; to suppress it by fusion is another. The law, I repeat, says nothing about competition, and only prevents its suppression by contracts or combinations in restraint of trade, and such contracts or combinations derive their character as restraining trade from other features than the suppression of competition alone… For, again I repeat, if the restraint on the freedom of the members of a combination, caused by their entering into partnership, is a restraint of trade, every such combination, as well the small as the great, is within the act.

In view of my interpretation of the statute I do not go further into the question of the power of Congress. That has been dealt with by my brother White and I concur, in the main, with his views. I am happy to know that only a minority of my brethren adopt an interpretation of the law which, in my opinion, would make eternal the bellum omnium contra omnes and disintegrate society so far as it could into individual atoms. If that were its intent I should regard calling such a law a regulation of commerce as a mere pretense. It would be an attempt to reconstruct society. I am not concerned with the wisdom of such an attempt, but I believe that Congress was not intrusted by the Constitution with the power to make it, and I am deeply persuaded that it has not tried.

I am authorized to say that the Chief Justice, Mr. Justice White, and Mr. Justice Peckham concur in this dissent.

Further Resources


Apple, R.W. "The Case of the Monopolistic Railroadmen: Northern Securities Co. et al. v. U.S., 193 U.S. 197." In Quarrels that Have Shaped the Constitution. John Arthur Garraty, ed. New York: Harper & Row, 1987, 175–192.

Mercer, Lloyd J. E.H. Harriman, Master Railroader. Boston: Twayne, 1985.

Meyer, Balthasar Henry. A History of the Northern Securities Case. New York, Da Capo Press, 1976.

Rosenberry, Walter. The Political and Economic Significance of the Northern Securities Company. Undergraduate thesis, Harvard College, 1953.

Spence, James A. A History of the Northern Securities Company. Master's Thesis, University of Missouri-Kansas City, 1969.

White, G. Edward. Justice Oliver Wendell Holmes: Law and the Inner Self. New York: Oxford University Press, 1993.

Yarbrough, Tinsley E. Judicial Enigma: The First Justice Harlan. New York: Oxford University Press, 1995.


"The Northern Securities Case." Available online at ; website home page: (accessed January 9, 2003).