Supreme Court decision
By: Edward D. White and John Marshall Harlan
Source: White, Edward D., and John Marshall Harlan. Standard Oil Co. of New Jersey v. U.S., 221 U.S. 1 (1910). Available online at http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&v... website home page: http://caselaw.lp.findlaw.com (accessed May 15, 2003).
About the Authors: Edward D. White (1845–1921) fought in the Confederate army in the Civil War. President Grover Cleveland appointed him associate justice of the U.S. Supreme Court in 1894, and President William Howard Taft elevated him to chief justice in 1911. John Marshall Harlan (1833–1911) was born in Kentucky and began his career as a lawyer and politician. He served on the Supreme Court from 1877 to 1911 and was famous for his dissenting opinions, including his lone dissent in Plessy v. Ferguson, which established the "separate but equal" racial segregation doctrine.
During the Industrial Revolution in the United States in the late 1800s, many large corporations grew into monopolies and many captains of industry were monopolists. Monopolies drove many small businesses out of the marketplace, and calls for reform were widespread. States were faced with two obstacles when they tried to regulate monopolies. First, many state legislators were heavily influenced by industrialists, who had the money to defeat legislation they did not like. Second, many of these industries were involved in interstate commerce, so state attempts to control them were struck down by the courts as violating the federal government's exclusive right toregulate interstate commerce. To address the jurisdictional question, Congress passed the 1890 Sherman Anti-Trust Act to prohibit monopolies. The act was not self-executing, though, and the federal government had to bring suit against a monopolist. The first major suit brought under the act dealt with the sugar trust, which controlled 94 percent of sugar manufacturing in the United States. In 1895, the case reached the Supreme Court, which held that the Sherman Act did not apply to the sugar trust or any other trust that was involved only in manufacturing, which the Court did not regard as "commerce."
President Theodore Roosevelt (served 1901–1909) promised to break up trusts and had success against United States Steel and the Northern Securities Company, which controlled most of the railroad traffic in the Northwest. His successor, William Howard Taft (served 1909–1913), took on International Harvester and Standard Oil—one of the world's largest companies, and, under John D. Rockefeller, one of the most ruthless. Muckraking journalists such as Ida Tarbell had exposed Rockefeller's business practices, so Standard Oil became an important target for the Taft administration.
This case had two major impacts. First, it broke up Standard Oil, creating a number of subsidiary oil companies, such as Standard Oil of Ohio. Second, the Court's ruling modified the ruling in the Northern Securities case by applying the Sherman Act only to "unreasonable" combinations. Through the remainder of the twentieth century, Congress and the courts continued to wrestle with the questions of what a monopoly is and when certain business practices constitute an unreasonable restraint of trade. To correct some of the weaknesses in the Sherman Act, Congress passed the Clayton Act and the Federal Trade Commission Act, both in 1914. The Clayton Act banned specific business practices, but only where they lessened competition. The Federal Trade Commission Act set up the Federal Trade Commission (FTC), which held hearings and issued rulings that defined unfair trade practices. President Franklin Roosevelt's (served 1933–1945) administration continued the FTC's policy of using administrative agencies to regulate competition. More recent court rulings have frequently reflected general beliefs about the role of the government in relation to business. During the 1960s, the Warren Court generally opposed any one business controlling more than a certain percentage of a given market. It tended to regard all business concentrations as suspect, seeing a need to protect the public. The Burger and Rehnquist Courts tended to apply the "rule of reason" articulated in Standard Oil. These Courts were more trusting of business (and more pro-business) and therefore allowed businesses more latitude. The dispute over what exactly constitutes a monopoly continued in the early twenty-first century as the government attempted to break up the Microsoft Corporation.
Primary Source: Standard Oil Co. of New Jersey v. U.S. [excerpt]
SYNOPSIS: White argues that the exhaustive list of monopoly practices enumerated in the Sherman Anti-Trust Act merely stated that any type of monopoly could be regulated under the act. He goes on to note that common law and the act read as a whole indicate that only monopolies that "unreasonably" restrain trade are banned. In his dissent, Harlan notes that Congress had intended to ban all monopolies that restrain trade, not just "unreasonable" ones. In his view, the majority opinion was "judicial legislation," meaning that the Supreme Court was creating law.
Chief Justice White delivered the opinion of the Court.…
As to the 1st section, the words to be interpreted are: "Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce … is hereby declared to be illegal." As there is no room for dispute that the statute was intended to formulate a rule for the regulation of interstate and foreign commerce, the question is, What was the rule which it adopted?
In view of the common law and the law in this country as to restraint of trade, which we have reviewed, and the illuminating effect which that history must have under the rule to which we have referred, we think it results: …
b. That in view of the many new forms of contracts and combinations which were being evolved from existing economic conditions, it was deemed essential by an all-embracing enumeration to make sure that no form of contract or combination by which an undue restraint of [221 U.S. 1, 60] interstate or foreign commerce was brought about could save such restraint from condemnation. The statute under this view evidenced the intent not to restrain the right to make and enforce contracts, whether resulting from combinations or otherwise, which did not unduly restrain interstate or foreign commerce, but to protect that commerce from being restrained by methods, whether old or new, which would constitute an interference—that is, an undue restraint.…… And, of course, when the 2d section is thus harmonized with and made, as it was intended to be, the complement of the 1st, it becomes obvious that the criteria to be resorted to in any given case for the purpose of ascertaining whether violations of the section have been committed is the rule of reason guided by the established law and by the plain duty to enforce the prohibitions of the act, and thus the public policy which its restrictions were obviously enacted to subserve.…
… The error involved lies in assuming the matter to be decided. This is true, because, as the acts which may come under the classes stated in the 1st section and the restraint of trade to which that section applies are not specifically enumerated or defined, it is obvious that judgment must in every case be called into play in order to determine whether a particular act is embraced within the statutory classes, and whether, if the act is within such classes, its nature or effect causes it to be a restraint of trade within the intendment of the act. To hold to the contrary would require the conclusion either that every contract, act, or combination of any kind or nature, whether it operated a restraint on trade or not, was within the statute, and thus the statute would be destructive of all right to contract or agree to combine in any respect whatever as to subjects embraced in interstate trade or commerce, or, if this conclusion were not reached, then the contention would require it to be held that, as the statute did not define the things to which it related, and excluded resort to the only means by which the acts to which it relates could be ascertained—the light of reason—the enforcement of the statute was impossible because of its uncertainty. The merely generic enumeration which the statute makes of the acts to which it refers, and the absence of any definition of restraint of trade as used in the statute, leaves room for but one conclusion, which is, that it was expressly designed not to unduly limit the application of the act by precise definition, but, while clearly fixing a standard, that is, by defining the ulterior boundaries which could not be transgressed with impunity, to leave it to be determined by the light of reason, guided by the principles of law and the duty to apply and enforce the public policy embodied in the statute, in every given case whether any particular act or contract was within the contemplation of the statute.…
Our conclusion is that the decree below was right and should be affirmed, except as to the minor matters concerning which we have indicated the decree should be modified. Our order will therefore be one of affirmance, with directions, however, to modify the decree in accordance with this opinion. The court below to retain jurisdiction to the extent necessary to compel compliance in every respect with its decree.
And it is so ordered.
Mr. Justice Harlan, concurring in part and dissenting in part:
A sense of duty constrains me to express the objections which I have to certain declarations in the opinion just delivered on behalf of the court.
I concur in holding that the Standard Oil Company of New Jersey and its subsidiary companies constitute a combination in restraint of interstate commerce, and that they have attempted to monopolize and have monopolized parts of such commerce—all in violation of what is known as he anti-trust act of 1890. 26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200. The evidence in this case overwhelmingly sustained that view and led the circuit court, by its final decree, to order the dissolution of the New Jersey corporation and the discontinuance of the illegal combination between that corporation and its subsidiary companies.
In my judgment, the decree below should have been affirmed without qualification. But the court, while affirming the decree, directs some modifications in respect of what it characterizes as "minor matters." It is to be apprehended that those modifications may prove to be mischievous. In saying this, I have particularly in view the statement in the opinion that "it does not necessarily follow because an illegal restraint of trade or an attempt to monopolize or a monopolization resulted from the combination and the transfer of the stocks of the subsidiary corporations to the New Jersey corporation that a like restraint of trade or attempt to monopolize or monopolization would necessarily arise from agreements between one or more of the subsidiary corporations after the transfer of the stock by the New Jersey corporation." Taking this language, in connection with other parts of the opinion, the subsidiary companies are thus, in effect, informed—unwisely, I think—that although the New Jersey corporation, being an illegal combination, must go out of existence, they may join in an agreement to restrain commerce among the states if such restraint be not "undue"…
… It is now with much amplification of argument urged that the statute, in declaring illegal every combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce, does not mean what the language used therein plainly imports, but that it only means to declare illegal any such contract which is in unreasonable restraint of trade, while leaving all others unaffected by the provisions of the act; that the common-law meaning of the term "contract in restraint of trade" includes only such contracts as are in unreasonable restraint of trade; and when that term is used in the Federal statute it is not intended to include all contracts in restraint of trade, but only those which are in unreasonable restraint thereof.… By the simple use of the term "contract in restraint of trade," all contracts of that nature, whether valid or otherwise would be included, and not alone that kind of contract which was invalid and unenforceable as being in unreasonable restraint of trade. When, therefore, the body of an act pronounces as illegal every contract or combination in restraint of trade or commerce among the several states, etc., the plain and ordinary meaning of such language is not limited to that kind of contract alone which is in unreasonable restraint of trade, but all contracts are included in such language, and no exception or limitation can be added without placing in the act that which has been omitted by Congress.… If only that kind of contract which is in unreasonable restraint of trade be within the meaning of the statute, and declared therein to be illegal, it is at once apparent that the subject of what is a reasonable rate is attended with great uncertainty.… To say, therefore, that the act excludes agreements which are not in unreasonable restraint of trade, and which tend simply to keep up reasonable rates for transportation, is substantially to leave the question of reasonableness to the companies themselves.… But assuming that agree ments of this nature are not void at common law, and that the various cases cited by the learned courts below show it, the answer to the statement of their validity now is to be found in the terms of the statute under consideration.… The arguments which have been addressed to us against the inclusion of all contracts in restraint of trade, as provided for by the language of the act, have been based upon the alleged presumption that Congress notwithstanding the language of the act, could not have intended to embrace all contracts, but only such contracts as were in unreasonable restraint of trade. Under these circumstances we are, therefore, asked to hold that the act of Congress excepts contracts which are not in unreasonable restraint of trade, and which only keep rates up to a reasonable price, notwithstanding the language of the act makes no such exception. In other words, we are asked to read into the act by way of judicial legislation an exception that is not placed there by the lawmaking branch of the government, and this is to be done upon the theory that the … legislation is so clear that it cannot be supposed Congress intended the natural import of the language it used. This we cannot and ought not to do.…
… Is it to be supposed that any point escaped notice in those cases when we think of the sagacity of the justice who expressed the views of the court, or of the ability of the profound, astute lawyers who sought such an interpretation of the act as would compel the court to insert words in the statute which Congress had not put there, and the insertion of which words would amount to "judicial legislation?" Now this court is asked to do that which it has distinctly declared it could not and would not do, and has now done what it then said it could not constitutionally do. It has, by mere interpretation, modified the act of Congress, and deprived it of practical value as a defensive measure against the evils to be remedied.… In effect the court says that it will now, for the first time, bring the discussion under the "light of reason," and apply the "rule of reason" to the questions to be decided. I have the authority of this court for saying that such a course of proceeding on its part would be "judicial legislation"…
… When Congress prohibited every contract, combination, or monopoly, in restraint of commerce, it prescribed a simple, definite rule that all could understand, and which could be easily applied by everyone wishing to obey the law, and not to conduct their business in violation of law. But now, it is to be feared, we are to have, in cases without number, the constantly recurring inquiry—difficult to solve by proof—whether the particular contract, combination, or trust involved in each case is or is not an "unreasonable" or "undue" restraint of trade. Congress, in effect, said that there should be no restraint of trade, in any form, and this court solemnly adjudged many years ago that Congress meant what it thus said in clear and explicit words, and that it could not add to the words of the act. But those who condemn the action of Congress are now, in effect, informed that the courts will allow such restraint of interstate commerce as are shown not to be unreasonable or undue.…
For the reasons stated, while concurring in the general affirmance of the decree of the Circuit Court, I dissent from that part of the judgment of this court which directs the modification of the decree of the Circuit Court, as well as from those parts of the opinion which, in effect, assert authority in this court to insert words in the antitrust act which Congress did not put there, and which, being inserted, Congress is made to declare, as part of the public policy of the country, what it has not chosen to declare.
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Chernow, Ron. Titan: The Life of John D. Rockefeller, Sr. New York: Random House, 1998.
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Tarbell, Ida M. The History of the Standard Oil Company. London: William Heineman, 1912.