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STATE AND LOCAL GOVERNMENT ACTIVITY IN REGULATING COMMERCE AND INDUSTRY. Promotion of commerce and industry by the Government after the Civil War - First attempt to regulate interstate commerce -State anti-trust legislation - The Missouri law - The Illinois act Railroad commissions - The Granger movement Recent regulation of interstate commerce The Public Service Commission.

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After the close of the Civil War the policy of direct government aid in stimulating industry was generally confined to the United States as a whole. In fact, this reversal of State policy began even before the war. The untoward experiences of many States and municipalities in aiding turnpike, canal and railroad construction had much to do with this change in public sentiment, and the urgency of the great political questions that beset the country for over a decade, prior to 1861, kept men's minds in uncertainty and their thoughts on other matters than the future industrial development. Nationalism, as distinguished from the old-time Federalism, was the prime outcome of the war, and that greatly encouraged the tendency of relegating all questions of trade, commerce and industry to the central government. State rights had gone into the background, and though this mostly affected the South, all the States felt the change. Accordingly

the history of this period shows an almost complete absence of State or municipal concern for the advancement of private business interests. Abundant National aid in a protective tariff, in land grants to railroads, in expenditures for harbor and river improvements, and in other ways, was forthcoming. An era of great business and industrial prosperity followed; business became stronger than the political State. It controlled legislation in many commonwealths and its interests were advanced in many ways by special privileges, franchises and so on, which took the place of the oldtime bounties, subsidies, and State, county and municipal bond issues. But this policy finally fell very much into disfavor by the shift of public sentiment regarding corporate wealth after 1880.

It was not, however, until well toward the close of the century, when the problems arising from the concentration of capital in large corpor

ate enterprises began to loom large in the public eye, that there was any very serious attempt anywhere in the United States at legislation at all intended in restraint of methods of trade. Congress made the first move in February of 1887, by passing the first act for the regulation of interstate commerce. Soon after, individ

ual States began to take action.

In a little more than a decade 29 of the States and Territories had legislated on trusts, passing statutes defining monopoly more definitely and imposing penalties of an ultra-severe character, in order to meet existing business conditions and to prevent the enhancing of prices, the crushing of competition, and other interferences with the natural freedom of trade. To Maine belongs the distinction of enacting the first anti-trust law put upon the statute books of any State. It was passed in 1889 and was of a sweeping and drastic character. So far, however, little has been done under it. Closely following Maine, Kansas, Michigan, Missouri, Nebraska, North Carolina, Tennessee, and Texas, and the three Territories of Idaho, Montana and North Dakota also passed anti-trust laws. In 1890 Iowa, Kentucky, Louisiana and South Dakota passed similar laws and Missouri added to that already on her statute book. In the three following years, Alabama, Minnesota, New Mexico, New York, Wisconsin and California also fell into line with legislation, and later came Georgia, Indiana,

Mississippi, Ohio, Utah, Arkansas, Illinois, Oklahoma and South Carolina. The States of Washington and Wyoming put provisions against trusts into their constitutions in 1889, and Kentucky and Missouri in 1891. Ultimately Colorado, Idaho, Michigan, North Dakota, South Dakota, Texas, Connecticut, Mississippi, North Carolina, South Carolina, Tennessee and Utah legislated to the same end.

Naturally there was wide variance in the details of this legislation. In most of the States the law made it a crime for two or more persons to enter into an agreement which should prevent free competition and sale, whether such agreement be reasonable or unreasonable. Several States made it a criminal conspiracy for two or more persons to agree to regulate the quantity or price of any article to be manufactured, mined, produced or sold, whether prices be raised or lowered. In other States the attempt to monopolize any commodity by two or more persons in association was made a criminal offence. Mississippi declared in its statute that it was a criminal conspiracy for two or more persons, not simply to regulate prices, but also to settle the price of an article between themselves or between themselves and others.

As various as the definitions of what constituted the crime and the methods of judicial procedure against offenders were the penalties. These took the form of imprisonment and fining of individuals, fining of firms


and corporations, forfeiture of goods and franchises, liability for damages, and deprivation of the right to enforce contracts or collect debts. Imprisonment might be as short as thirty days or as long as ten years in the penitentiary. Georgia, Indiana, North Carolina, North Dakota, South Carolina, Tennessee and Texas went to the limit of ten years. The possible fines for individuals ranged from $50 to $5,000, Arkansas, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New York, North Dakota, Ohio, South Carolina, Tennessee and Texas naming the larger amount. In South Dakota, Montana and North Carolina a fine of $10,000 was possible. In Arkansas, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Minnesota, Nebraska, New York, North Dakota, Ohio, South Carolina, Tennessee and Texas the fines of corporations ran as high as $5,000. In Montana, South Dakota, Utah and North Carolina the guilty corporation might be mulcted to the amount of $10,000, and in Utah the fine for any offence subsequent to the third was $15,000.

To a considerable extent, this legislation was successfully contested, mostly on the ground of unconstitutionality. Because they exempted certain special industries, the first antitrust laws of Illinois, Texas, Georgia, Indiana, Louisiana, Michigan and Tennessee were thus declared by the courts to be invalid. More effectual defence for the corporations was


found in the protection afforded them in several States, notably New Jersey, Delaware and Virginia. Those States, instead of following the example of others in passing exacting laws, extended their protection by liberal corporation legislation and became in popular parlance "the home of the trusts" especially true of New Jersey. More than 90 per cent. of the large corporations which came into existence at that time were incorporated in one of these States, which had no anti-trust laws. There corporations were unmolested, and their charters and to a considerable extent their business were protected from attack in other States under the interstate commercial comity guaranteed by the Federal Constitution.

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Nevertheless some progress was made in the enforcement of the State laws, and under them some court decisions were rendered which added much to the distinction of American jurisprudence. The Missouri law made it a criminal conspiracy to maintain a pool, combine, agreement, confederation or understanding to regulate prices or to fix the premiums for fire insurance. Under this statute action was brought against the insurance companies doing business in the State and the case State vs. Firemen's Fund Insurance Company et al.

was carried to the State Supreme Court, where it was decided to be constitutional. Seventy-two foreign insurance companies were convicted of combining and conspiring to fix and

maintain uniform premium rates and all were forbidden to do further business in the State. In every instance, the sentence was changed to a fine of $1,000, which the companies paid and continued to do business in the State under the new law. Under the same act it was held that the National Lead Company, a holding corporation controlling between 50 and 75 per cent. of the white lead in the United States, was doing business in violation of the State law and therefore could not enforce payment for goods purchased by its customers in Missouri.

Statutes and cases under them in other States contributed much to the anti-corporation jurisprudence of this period. Under the Illinois Act the Distilling Feeding Company, a purchasing corporation formed to acquire the properties previously united in the Distillers and Cattle Feeders Trust, was compelled to surrender its charter in 1895. Under the same act the law was enforced in 1899 against a New Jersey corporation, the American Glucose Company, a constituent member of the Glucose Sugar Refining Company, which controlled more than 90 per cent. of the output of the country. In its decision the court forbade the company to sell its properties or contract with the holding company, holding it liable to the State law inasmuch as most of its business was done in Illinois, adding in the opinion:

"Citizens of Illinois cannot evade the laws of Illinois passed against trusts and combines and defy the public policy of the State, by going into

a foreign State, and chartering a corporation to do business in this State in violation of its laws. When these foreign corporations come into this State to do business they must conform to the laws and public policy of this State."

"Any combination of competing corporations for the purpose of controlling prices, or limiting production, or suppressing competition is contrary to public policy and void. It makes no difference whether the combination is effected through the instrumentality of trustees and trust certificates, or whether it is effected by creating a new corporation and converging to it all the property of the competing corporations."

The decision in this case was of special interest and importance, in being one of the earliest to set forth clearly and strongly the legal status of combinations in restraint of trade and to assert the rights of the State over foreign corporations. In these particulars it followed the decision of the Missouri courts rendered in the

insurance cases a year before.


In its report of 1900 the United States Industrial Commission viewed the legislation of the preceding ten years, explained the statutes that had been passed, and presented some of the most important decisions by the United States and State courts. Commenting upon the subject, the Commission expressed the opinion that "possibly at times the fear of a new form of business organization may have led to the extension of legal privileges of interference with private business beyond what the public welfare demands. Some of the statutes, if read literally, would seem to forbid many perfectly innocent associations among individuals; but the courts seem invariably to have assumed that


only monopoly at least virtual monopoly -was attacked and the decisions have been made accordingly."'*

State legislation seeking to restrain or control business enterprises has concerned itself more with railroads than with any other form of corporate property. When the modern transportation system began in the United States (in the third decade of the Nineteenth century), no one had any conception of the magnitude this form of modern enterprise would assume and of the abuses of power that might develop to the public injury. The only thought then was to encourage the building of railroads as rapidly as practicable so as to give the people the quickest and greatest benefits to be derived from the new transportation service, and to that end to keep the enterprises as free as possible from any restrictions that might hinder their growth. More than a century had passed before the necessity of a reversion of policy in this particular began to be realized.

Early legislation to restrain the railroads originated in the States. Primarily it took the form of taxation, the fixing and enforcing of liabilities, and the supervision or control of charges. For the most part, this legislation was desultory, hasty and unscientific. Much of it was ill-considered, and, as a whole, ineffective.

* Report of the United States Industrial Commission, vol. ii., p. 8.


After the Civil War had been brought to a close, many questions as to the relative rights of the railroads and the public pressed for solution. The first attempt to meet the situation was made in 1869 with the establishment of the Massachusetts Railroad Commission. This commission had little or no real power. It was merely supervisory and its influence, which gradually became considerable, was exercised entirely by an intelligent conservative policy of advice and direction, behind which grew up a strong supporting public opinion. In 1870 Illinois initiated a broader measure for control of railroads by establishing a State Railroad Commission vested with powers to prescribe maximum rates, prohibit discrimination, and generally to regulate the roads. In the course of time similar commissions were established in Connecticut, Iowa, Maine, Michigan, Minnesota, New Hampshire, New York, Ohio, Rhode Island, Vermont, Wisconsin, Georgia, Kansas, Kentucky, Missouri, California and other States. Some of these were patterned upon the Massachusetts idea, but most of them followed Illinois. The trend of the period was steadily toward broadening and increasing the power of the commissions. Everywhere they acquired a more positive position of authority and in some instances. notably in several Western States their assumption of power to control the transportation corporation was little short of revolutionary. A few

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