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Northern Securities Company V. United States, Term Paper Example

Pages: 4

Words: 1130

Term Paper

Northern Securities Company v. United States, 193 US 197-Supreme Court 1904

Background

The United States brought this suit against Northern Securities Company, a holding company, the Great Northern Pacific Railway Corporation, Northern Pacific Railway, James Hill, William P. Clough, D. Willis James, John, S. Kennedy, J. Pierpont Morgan, Robert Bacon, George Baker, and Daniel Lamont, to enforce the provisions of the July 2, 1890 Antitrust Act, which was drafted to protect trade and commerce against unlawful restraints and monopolies, in the Circuit Court District of Minnesota, according to Google Scholar (2012).

Attorney General Knox and his assistant William Day as prosecutors, presented evidence supporting a combination of conspiracy in restraint of trade or commerce among the States or with foreign countries, and were alleging the defendants with monopolizing and attempting to monopolize any or part of this specific trade or commerce, according to Google Scholar (2012).

Issue

The critical issue surrounds the Great Northern Railway Company and its previous competitor Northern Railway Company, who both had actively competed along two separate 900 mile main lines for passenger traffic as well as freight, and along lakes and rivers using river steamers and seagoing vessels, but the latter became insolvent and had its properties passed into the hands of court appointed receiver, according to Google Scholar (2012).’

However, prior to the foreclosure and sale, the majority shareholders of Northern Pacific Railroad Company made arrangements with Great Northern Railway Company for a virtual consolidation of the two systems, but when this action was tested under the statute of Minnesota laws in Pearsall v. Great Northern Company 161 US 646, it was declared illegal by the presiding judge, according to Google Scholar (2012).

In anticipation of forming the monopoly, both companies in 1901 purchased the capital stocks of Chicago, Burlington, and Quincy Railway Companies using joint bond which were payable in 20 years at 4% per annum, so that the two companies became owners of practically all operating rail services, because they had $ 107 m of the $112 m of the capital stock in their possession (Google Scholar, 2012).

Nearing the end of 1901, under New Jersey Law, the directors of both companies agreed to form a holding company which they named Northern Securities. This newly formed company had a capital stick of $ 400, 000,000, which empower them to ensure control of voting in their favor, especially with respect to critical decisions that are their best interests (Google Scholar, 2012)

As a result of this action and activities like the acquisition of other defendant railway companies, further division of the authorized capital stock, and the conditions and perceived purpose under which the certificate of incorporation was drafted, the government took the case to court, charging that National Securities Company and the other defendants were in violation of the act of Congress as well as were jeopardizing the National Government efforts to preserve for the people the benefits of free competition among carriers engage in interstate commerce (Google Scholar, 2012).

Further, the government prosecutors allude, all transcontinental and railways system of the country may become absorbed, merged and consolidated in this new system, and the public would be at the mercy of the policies of this new holding company according to Google Scholar, 2012).

In its defense National Securities denied all the allegations of the bill, which had purported it violated the act of Congress, and that its decision was a combination of conspiracy in the restraint of trade or to monopolize commerce across States or with foreign nations.

Majority Opinion

Justice Harlan in delivering the majority opinion, state that in the courts judgment, the evidence sustained the material allegations of the bill, and revealed a violation of the Act of Congress, which stated emphatically that it was illegal for any combination of or conspiracy that were in restraint of commerce among several states and foreign nations, and so was also the forbidding of attempts to monopolize this type of commerce or any other relatable part thereof. (Google Scholar, 2012).

The judges agreed with the Circuit Court ruling that among other things that this combination by Northern Securities Company places control in the hands of one single person, will destroy every motive for competition between the two roads, engaged in interstate traffic, especially when the combination of the earnings for both are used to benefit the stockholders of both companies, cites Google Scholar (2012).

Dissenting Opinion Justice Holmes in concurrence with Chief Justice White and Justice Peckam wrote that he was unable to agree with the majority decision, and thought it useless to dissent, but chose to comply with this necessary rule. Great case the judge cite, like hard cases make bad law (Legal Information Institute, 2012).

Judges at times need the training of economists and statesmen to do their work, reports Judge Holmes, and when they interpret and apply the words of a statute , their functions mainly and academic exercise, because the directors of both companies merely used the act of July2, 1890 C 647 26 Stat 209 to form a corporation for the purpose of buying more than half the shares of each competing interstate companies, so that they end the competitiveness between them (Legal Information Institute, 2012).

There was ambivalence in the reading of the act according to Judge Holmes, in that on one hand it was read and interpreted to achieve fines and imprisonment, and in the next context it purpose was to achieve an injunction, and this whole approach borders on artificial interpreting (Legal Information Institute, 2012).

In closing the Justice cited the case United States v. E.C. Knight Co., 156 US1, 17 in mentioning that the likelihood that trade or commerce may be directly affected was not to give entitle complainants to decrees, as made in this case (Legal Information Institute, 2012)

Relevance Today

Justice Harlan in reference to the future relevance of the case, remarked that he was happy to know that only a minority of the panel of judges had adopted a different interpretation of the law, as the opposite scenario would have made eternal the “bellum omnium contra omnes” (the war of all against all), and this would disintegrate society as fast as individual atoms, according to Legal Information Institute (2012).

The Justice expanded on his closing argument by saying that had there been more dissenters, the case could have force society to undergo severe reconstructions (Legal Information Institute (2012), and this would no doubt encourage monopolistic companies to establish considerable even greater dominance on consumer behavioral patterns, as well as ensure competitors have extremely difficult playing fields to conduct their business successfully, until new laws are introduced to change the balance of power.

Works Cited

Google Scholar, (2012). Northern Securities Co. v. United States, 193 US 197-Supreme Court 1904 Retrieved from www.scholar.google.com/scholar_case?case=5844301621745561037&h/=enasvis=1&01=scholarr , on 04/15/12

Legal Information Institute (2012). Northern Securities Co. v. United States (No.277) Cornell University Law School Retrieved from www.law.cornell.edu/sopct/html/historics/USSC_CR_0193_0197_ZDI.html , on 04/15/12

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