“Secret Back of Anti-Trust Law” (on the origins of the Sherman Antitrust Act of 1890)

“Mr. Sherman knew that Alger was interested in the Diamond Match company to a large degree, and the purpose of the original anti-trust bill introduced by the Ohio financier, as I am positively informed by a senator who was then close to Mr. Sherman, was to punish Alger for his action in the national convention a few months before.”

Antitrust law has been more active in the petroleum industry than for any other area of the US economy, both before and after the passage of the federal Sherman Antitrust Act of 1890. Chapter 26 of my Oil, Gas, and Government: The US Experience (Cato Institute: 1996) described the legislative history of state and federal antitrust law in the U.S., before examining case law in oil and gas.

In my research, the libertarian economist and historian Murray Rothbard alerted me to a peculiarity in the origin of the Sherman Antitrust Act of 1890. It concerned the historical note that a personal feud between John Sherman (R-OH) and the person alleged to have blocked Sherman’s attempt to win the Republican presidential nomination, Russell Alger, whose Diamond Match Company was a potential target from the new law.

This historical note was of personal interest to me. In the peer review process for Oil, Gas, and Government, an antitrust specialist in academia (an anonymous reviewer) rejected my book for publication with Oxford University Press because, in part, of my “cynical explanation of the Sherman Act, a view not shared by most contemporary economists.”

Certainly, this one factor was not the only or a necessarily decisive factor in the passage of this law. But as I explain in my Cato Journal (Issue 3: 1990) essay, “On the Origins of the Sherman Antitrust Act,” it helps explain some anomalies behind the ‘whys’ of this law at this time by this sponsor.

After I revised the chapter from his comments and references, from which I published the above Cato note, I thought little more about it. Then a young scholar Patrick Newman (patrick.newm@yahoo.com), who is editing a volume on Murray Rothbard’s work on the rise of Progressivism, alerted me to the newspaper article below, which I present in its entirety.

—————–

SECRET BACK OF ANTI-TRUST LAW    Chicago Tribune – November 28, 1902

Washington. D. C., Nov. 27. [Special] Since the revival of general interest in anti-trust legislation dozens of senators and representatives have had their clerks at work digging into old records with a view to suggesting some new legislation.

This general mania for digging up the ashes of the past led one of the oldest members of the senate, whose name is familiar to the people of every state, to give to me some interesting inside information as to the origin of anti-trust legislation. There is involved in it a whole catalogue of political rivalries, and the curious thing about it is that the man at whom the original trust legislation was aimed has now returned to Washington as a member of the United States senate. After having endured a period of obscurity following upon his forced retirement from the cabinet, the expected first victim of the Sherman anti-trust law has at last reached the summit of his political ambition, while the author of that law long ago was gathered to his fathers and now is remembered merely as a great statesman, who was contemporaneous, of course, with his brother, a great general.

It was political animosity which led John Sherman to prepare the first anti-trust law more than fourteen years ago, and the man he was attacking was no less a person than Gen. Russell A. Alger, subsequently a member of McKinley’s cabinet with John Sherman, and now an appointed senator from Michigan. Gen. Alger will come here in time to participate in the debate over the intended amendment of the law of which he was the actual cause, although he may still be in ignorance of that fact.

From the stormy days of reconstruction and resumption down to the extraordinary predominance of McKinley, John Sherman was the constant favorite son of Ohio. He was repeatedly a candidate in republican national conventions and seemed fated to fall time after time, and always by a scratch. John Sherman lived to see Hayes, Garfield and McKinley, three Ohio men, step into the White House over his head, and Blaine and Harrison, with both of whom he had served in the senate, secured nominations when the great Ohio financier supposed he had a sure thing.

In the convention of 1888 Sherman, as usual, was a candidate. As the politicians read the signs of the time, and they read them correctly, too, the republicans were sure to win at the end of Grover Cleveland’s first term. It is unnecessary to go into details of the convention of 1888 except to say that when Harrison was nominated Sherman’s enmity turned, not toward him, but to Alger, who was blamed by Sherman with the political crime of betrayal.

Congress was then concluding a long session, which did not adjourn until October. The senate was naturally made the scene of a number of political squabbles. The republican national convention had opened up many sores, and it was only natural that distinguished members of congress who had been touched on the raw should aim to get even.

During the summer of 1888 there was a great deal of talk of trusts of one kind or another. The Standard Oil company and the Diamond Match company were particularly the subject of public distrust and dislike. John Sherman was at that time at the head of the finance committee of the senate. He introduced a bill to prevent the organization and operation of trusts and illegal trade combinations. On its face the bill was a natural attempt to remedy the evils of trusts, which were then only beginning to be organized in this country.

Mr. Sherman’s bill was introduced Aug. 14, 1888. It was not a measure which properly belonged to the finance committee at all and yet, on the theory that the trusts could be reached only by the taxing power of the government, Mr. Sherman had his bill referred to the finance committee instead of to the judiciary committee, where it naturally belonged. It was reported back by the committee with a substitute on Sept. 11, 1888.

Nothing was done with the bill at that session of congress, because everybody was tired out, and finally adjournment came about a month later. The short session, as usual, was too busy to do anything but ordinary work. Nevertheless, a considerable proportion of the members of the senate were fully aware of the fact that Mr. Sherman was seeking to make things particularly unpleasant for Gen. Russell A. Alger, who at that, time, as it happened, had a large interest in the Diamond Match company, an attempted monopoly which was especially odious to the people, because, like the Standard Oil company, it sought to control the production of a necessary article of daily use.

Mr. Sherman knew that Alger was interested in the Diamond Match company to a large degree, and the purpose of the original anti-trust bill introduced by the Ohio financier, as I am positively informed by a senator who was then close to Mr. Sherman, was to punish Alger for his action in the national convention a few months before.

That this purpose was never lost sight of is shown clearly by the subsequent history of the bill, which afterwards became the anti-trust law. The first the next congress began on Dec. 2, 1889, and two days later Mr. Sherman had reintroduced his anti-trust bill and again had it referred to the finance committee.

It is a matter of the secret history of that committee that none of the members was in favor of the bill except its author, but the committee consented to report it back to the senate out of for the author, and there it was buffeted about, being amended and substituted and reamended until its own father did not know it and threatened to vote against it.

It was so bad a piece of patchwork in the end that everyone was glad to have it referred to the judiciary committee. That committee reported it back, but in the shape of a new measure, much-as it now appears on the statute books. It passed the senate on April 8, passed the house on May 1, and was approved by President Harrison on July 2, 1890, two years after Harrison’s nomination and Sherman’s disappointment.

In his first speech in advocacy of the bill Senator Sherman let the cat out of the bag and showed the animus of his measure. He introduced into his speech a long quotation giving at length a decision of the Michigan Supreme court, which mentioned Russell A. Alger by name, and which his connection with the Diamond Match company.

In this decision the court refused an accounting between Gen. Alger and his partners on the ground that the Diamond Match company, by the admission of Gen. Alger, had been proved to be an illegal combination in defiance of public interests so that the court declined to lend its aid in any way to render the prosecution of business peaceable or profitable.

Having made the bill subserve his purpose, which was to get into the record the fact that his political enemy, Gen. Alger, was one of the principal factors in the organization of the Diamond Match company, then in everybody’s mouth, as the coal trust is today, Senator Sherman prosecuted his anti-trust bill with his usual patient energy. It had been altered in an extraordinary degree. It first proposed to do nothing more than confer jurisdiction upon the United States courts for vague proceedings by mandamus, injunction, or otherwise. As it came from the committee and as the law now stands it provided for criminal prosecutions, for damage suits by persons, and for injunction and other proceedings as well. The criminal features were contained in a bill proposed by Senator Reagan of Texas, who was also interested in the creation of interstate commerce law.

It may be an interesting lesson to those people who believe the anti-trust law can be amended at this session of congress to note the fact the measure introduced by Senator Sherman on Aug. 14, 1888, was not put upon the statute books until July 2, 1889 near the close of the first session of a subsequent congress.

In any event it is a curious piece of the hitherto unwritten political history of the country to discover that a piece of mere spite work, which grew out of the enmity of one prominent republican for another, finally became the one law which is now attracting more legislative attention than any other law on the statute books. And not the least curious feature of the thing is that Gen. Alger will now have a seat in the chamber where the bill intended to injure him was first given to the public, and where the report of the Michigan court connecting him with the Diamond Match company was first read in such a way as to make it become a part of the congressional record.