THE ORIGINS OF THE FTC: CONCENTRATION, COOPERATION

THE ORIGINS OF THE FTC: CONCENTRATION,

COOPERATION, CONTROL, AND COMPETITION

Marc Winerman*

Concentration and co-operation are conditions imperatively essential

for industrial advance; but if we allow concentration and co-operation

there must be control in order to protect the people, and adequate

control is only possible through the administrative commission. Hence

concentration, co-operation, and control are the key words for a scien-

tiﬁc solution of the mighty industrial problem which now confronts

this nation.

—Theodore Roosevelt, quoting Charles Van Hise,

in accepting the 1912 Progressive Party nomination.

[Standard Oil Co. v. United States

] will be a signal for the voluntary

breaking up of all combinations in restraint of trade within the inhibi-

tion of the [Sherman Act].

—William Howard Taft, September 18, 1911.

[T]he proper role of the government is to encourage not combination,

but co-operation.

—Letter of Louis D. Brandeis, November 11, 1911.

I don’t want a smug lot of experts to sit down behind closed doors in

Washington and play providence to me.

—Woodrow Wilson, September 17, 1912.

[A]n attempt was very properly made . . . to provide tribunals which

would distinctly determine what was fair and what was unfair competi-

* Attorney, Ofﬁce of the General Counsel, Federal Trade Commission. The views

expressed herein are the author’s and do not necessarily represent the views of the

Commission or any Commissioner. The author thanks William Kovacic, James May, Bruce

Freedman, James Hurwitz, Theodore Gebhard, Hillary Greene, Robert Lande, Stephen

Calkins, Marilyn Kerst, and Tara Koslov for helpful comments. The author also acknowl-

edges the help of Elaine Sullivan, other staff of the Federal Trade Commission library,

and Tab Lewis of the National Archives.

Confession of Faith, Aug. 6, 1912 Theodore Roosevelt,17Works of Theodore

Roosevelt 254, 276 [hereinafter TRW].

221 U.S. 1 (1911).

Speech, Sept. 18, 1911, 22 Taft Addresses 51, 58 in Reel 568, William Howard Taft

Papers, Library of Congress.

Brandeis to Charles Richard Crane, Nov. 11, 1911, in 2 Letters of Louis Brandeis

511, 512 (Melvin I. Urofsky & David W. Levy eds.) [hereinafter LBL].

25 Papers of Woodrow Wilson 148, 154 (Arthur S. Link ed.) [hereinafter PWW].

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tion; and to supply the business community, not merely with lawyers

in the Department of Justice who could cry, “Stop!”, but with men in

such tribunals as the Federal Trade Commission, who could say, “Go

on,” who could warn where things were going wrong and assist instead

of check.

—Woodrow Wilson, October 5, 1916.

I. INTRODUCTION

From the Sherman Act’s passage in 1890 through the passage of the

Federal Trade Commission and Clayton Acts in 1914, antitrust was a

“movement” that inspired public agitation, not the specialized “enter-

prise” that it later became.

Yet it took nearly a decade of this formative

period to establish that the Sherman Act prevented manufacturers from

joining price-ﬁxing cartels. When Theodore Roosevelt became President

in 1901, it remained unclear if the law even applied to mergers.

Roosevelt began a second phase of the formative period. He pro-

ceeded, in part, by litigation. Northern Securities Co. v. United States,

which

dissolved a J.P. Morgan holding company, held that the Sherman Act

did reach mergers. With Roosevelt’s prompting, 1903 became the year

when antitrust was institutionalized.

On February 14, Roosevelt secured

a Bureau of Corporations, the precursor to the Federal Trade Commis-

sion.

The day the Bureau opened its doors, February 25, he secured

the ﬁrst antitrust appropriation and, with it, the seeds of the Antitrust

Division.

The formative period’s second phase entered its home stretch in 1911,

when William Howard Taft was President and Standard Oil announced

the rule of reason. It culminated in 1914, when Woodrow Wilson was

President and Congress passed the Federal Trade Commission and Clay-

ton Acts. This study examines the Presidents, advisers, and legislators,

part of a “second golden age of American politics,”

who grappled

38 PWW, supra note 5, at 336, 340–41.

Richard Hofstadter, What Happened to the Antitrust Movement?, reprinted in The Paranoid

Style in American Politics and Other Essays 188 (1965).

193 U.S. 197 (1904).

Hans B. Thorelli, The Federal Antitrust Policy: Origination of an American

Tradition 560 (1954). See also William Letwin, Law and Economic Policy in America

ch. 6 (1965; Phoenix ed. 1981) (Sherman Act matured between late 1901 and 1904).

Act of Feb. 14, 1903, ch. 552, § 6, 32 Stat. 825.

Act of Feb. 25, 1903, ch. 755, 32 Stat. 854, 903; Report of the Commissioner of

Corporations 7–8 (1904).

John Milton Cooper, Jr., Pivotal Decades xv–xvi (1990) (period second only to

that of the Founding Fathers).

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with questions of whether and how, consistent with prosperity, business

opportunity, and global competitiveness, to control corporate growth.

Roosevelt’s role remained crucial throughout these years. The cases

brought by his administration made credible a law whose premises, as

then construed, he openly disdained. In place of litigation, Roosevelt

envisioned an expanded Bureau of Corporations that would rationalize

the economy, tame rather than dissolve the trusts, and accommodate

rather than challenge both concentration and interﬁrm cooperation. All

this would take place under government auspices, and the government’s

ultimate backstop would be direct price regulation.

Other participants in the national debate were in some sense respond-

ing to Roosevelt and, after 1911, to Standard Oil. The debate posed

fundamental questions. To what extent had business grown through

efﬁciencies and to what extent through unfair competition? To the

extent growth reﬂected efﬁciencies, had businesses nonetheless become

so large as to undermine the competitive market? If so, how could the

government protect consumers and competitors? To the extent past

growth reﬂected misconduct, should it be reversed? If so, how? Should

ﬁrms be forcibly dissolved or could the market reverse past growth once

future misconduct was stopped? Should Congress reﬁne the deﬁnitions

of misconduct in the Sherman Act and, if so, what practices should it

proscribe? However precise the statutory standards, should Congress

entrust their application (in the ﬁrst instance) to courts or to an adminis-

trative agency? If Congress relied on an administrative agency, how

should the agency operate? Should it challenge conduct after-the-fact,

perhaps through administrative proceedings? Should it opine on pro-

posed conduct in advance, and should its advice provide a shield against

(at least) criminal prosecution? Various nuances and permutations were

possible in responding to these questions. Advocates might converge on

similar remedies after starting from very different premises, or diverge

on their remedial prescriptions after starting from similar premises. Many

routes led to a commission, moreover, albeit to potentially quite different

visions of a commission.

Though he was Roosevelt’s hand-picked successor, William Howard

Taft had a fundamental commitment to a judicially applied rule of

reason, and he promised dramatic deconcentration under that rule. For

Woodrow Wilson’s adviser Louis Brandeis, the benchmark was the “curse

of bigness.” Brandeis denied the efﬁciency of massive enterprise, sought

to promote smaller enterprises, and saw antitrust as key to that promo-

tion. Brandeis showed more enthusiasm than Taft, though less than

Roosevelt, for an administrative commission. Further, he focused more

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than Roosevelt, Taft, or Wilson on speciﬁc antitrust issues, such as resale

price maintenance and interlocking directorates.

Wilson himself ran against both Roosevelt (heading a third party) and

Taft (the Republican) in 1912. The candidate reached out both to the

Democrats’ traditional agrarian base, which broadly distrusted combina-

tions, as well as to business interests. Wilson approved of concentration

that resulted from efﬁciencies, but suggested that consolidations rarely

generated efﬁciencies. Although he questioned business growth, how-

ever, Wilson resisted forced dissolutions; he trusted the market to reverse

past growth if future misconduct was stopped. To stop that misconduct,

he declared that Congress should enunciate precise standards, backed by

criminal sanctions targeting both ﬁrms and individuals within those ﬁrms.

Soon after the election, though, Wilson reversed course on the dissolu-

tion question. He made more substantial reversals in 1914. The House

of Representatives had taken up his antitrust initiative and his program

for criminally enforced deﬁnitions was proving problematic. After a

meeting with Brandeis and three future Commissioners, most signiﬁ-

cantly George Rublee, Wilson then retreated from a strong “deﬁnitions”

bill (the Clayton bill) and endorsed instead a strong commission bill.

He embraced a provision, which became Section 5 of the FTC Act,

authorizing the agency to issue administrative orders proscribing “unfair

competition” (soon changed to “unfair methods of competition”).

Wil-

son did not, however, embrace Roosevelt-style regulation. As the legisla-

tive package ﬁnally emerged, the Commission could enforce both Section

5’s general prohibition and speciﬁc prohibitions that survived in the

Clayton Act. But it could neither set prices nor immunize conduct from

Sherman Act prosecutions, and Wilson even fought to require broad

judicial review of the agency’s determinations.

Because the House had passed its bill for an investigatory commission

before Wilson embraced a prosecutorial agency, the principal debate

on Section 5 occurred in the Senate. Senator’s views were wide-ranging.

Some opposed Section 5 because they preferred the status quo. Some

strong antitrust advocates continued to prefer strict statutory standards

backed by criminal sanctions; distrusting the proposed commission, they

either opposed Section 5 or at best supported it half-heartedly. Those

who afﬁrmatively embraced a commission, though, approved an agency

that could apply a ﬂexible standard that prohibited “incipient” law viola-

tions and that could reach where the Sherman Act did not.

Spokesmen for Section 5 converged from different directions. Demo-

crat Francis Newlands had earlier been open to Roosevelt-style regula-

15 U.S.C. § 45.

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2003] Origins of the FTC 5

tion, while Republican Albert Cummins had earlier expressed an agrarian

disdain for trusts. Newlands and Cummins differed in other respects,

and Henry Hollis, another Democratic spokesman for the bill, differed

from both. Newlands would have transferred all antitrust enforcement

to a commission, operating under a general standard; Hollis did not go

that far, but considered Congress’s effort to develop speciﬁcdeﬁnitions

in the Clayton bill to be fundamentally ﬂawed; Cummins deemed Section

5 merely one tool—and not the most important tool—for Congress to

direct antitrust policy. The three also approached “unfair competition”

from different, if not necessarily incompatible, perspectives. Newlands

emphasized a moral basis of the standard, although he drew support

for his moral standard from law and economics. Hollis and Cummins

focused more directly on economics; for Hollis, unfair competition was

competition that succeeded for reasons other than efﬁciency and, for

Cummins, Section 5 would protect the “competitive force.” The bill’s

advocates also differed on the subject of judicial review of agency determi-

nations. Cummins fought for narrow review, but the issue mattered less

to Newlands and even less to Hollis. (All three, moreover, accepted a

more fundamental weakness; the Commission’s sole recourse when a

respondent violated its order was, and remained until 1938, to seek

an injunction).

Part II of this article describes the industrial backdrop to the formative

period’s second phase. Part III discusses the principal judicial bench-

marks of the formative period. Part IV turns to Roosevelt, Taft, Brandeis

and Wilson, describing their differing ideas in 1912 and, for Roosevelt

and Taft, the ways they already had implemented their ideas during their

Presidencies. Part V describes Wilson’s and the Democrats’ victories in

1912, the post-election antitrust package that the President-elect secured

while still Governor of New Jersey, and his appointment of a known

trustbuster as Attorney General. Part VI explores the 1914 legislative

process that culminated with the enactment of a federal antitrust pack-

age. Finally, Part VII describes the launching of the Commission, when

Wilson emphasized assistance to business (a function not even mentioned

in the statute) rather than the investigative functions highlighted in the

House or the prosecutorial functions highlighted in the Senate, and

selected a complement of Commissioners that reﬂected distrust of law-

yers and economists alike. The Commission’s early history would soon

play out against a new backdrop, as wartime mobilization would encour-

age, and to some extent legitimate, unprecedented coordination under

government auspices. That backdrop would mold future debates over

antitrust policy, as well.

The Commission’s own powers would also be supplemented in later

decades. Nonetheless, there emerged in 1914 a Commission with a broad

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and ﬂexible mandate, wide-ranging powers, and the ability, at its best,

to respond to the needs of changing times.

II. PRELUDE: CONSOLIDATIONS AND THE MERGER WAVE

During the early twentieth century, the United States enjoyed unprece-

dented prosperity accompanied by unprecedented corporate consolida-

tion. Competition policy moved toward center stage as the country sought

to preserve the beneﬁts of the one without the costs of the other.

The roots of consolidation led back into the nineteenth century. Stan-

dard Oil controlled substantial petroleum reﬁning as early as 1880, and

the whiskey and sugar trusts were formed in 1887.

New Jersey became

the “traitor state” when it facilitated consolidations in 1889, most signiﬁ-

cantly by allowing corporations to own stock in other ﬁrms.

By 1890,

Congress was sufﬁciently concerned with the problem of “trusts”

pass the Sherman Act, forbidding in Section 1 “[e]very contract, combina-

tion in the form of trust or otherwise, or conspiracy, in restraint of trade

or commerce among the several States, or with foreign nations,” and

making it illegal in Section 2 “to monopolize, or combine or conspire

with any other person or persons, to monopolize any part of the trade

or commerce among the several States, or with foreign nations.”

States

passed antitrust laws as well, and some enforced them vigorously.

Neither federal nor state law, however, deterred a merger wave that

crested from 1898 to 1902. During those years at least 303 ﬁrms disap-

peared annually through mergers; 1,208 disappeared in 1899.

Many

consolidations simultaneously united multiple ﬁrms; 136 united ﬁve ﬁrms

Letwin, supra note 9, at 69–70.

Herbert Hovenkamp, Enterprise and American Law: 1836–1937, at 257–58 (1991);

Christopher Grandy, New Jersey Corporate Chartermongering, 1875–1929,49J. Econ. Hist.

677 (1989).

“Trust” originally meant an arrangement transferring stock in multiple corporations

to a common trustee. Hovenkamp, supra note 15, at 249–51. Various bills and laws, though,

simply deﬁned wrongful combinations as “trusts.” See, e.g., S. 1 as Amended by the Senate,

51st Cong., 1st Sess. (Mar. 25, 1890); Sess. Laws, N.J., ch. 13 (1913), reprinted in House

of Representatives Committee on the Judiciary, Laws on Trusts and Monopolies

229 (rev. ed. 1914) [hereinafter Laws].

15 U.S.C. §§ 1, 2.

James May, Antitrust Practice and Procedure in the Formative Era: The Constitutional and

Conceptual Reach of State Antitrust Law, 1880–1918, 135 U. Pa. L. Rev. 495, 498–501 (1987)

[hereinafter May, Reach].

Ralph L. Nelson, Merger Movements in American Industry, 1895–1956, at 37

(1959). Only 69 or fewer ﬁrms had disappeared annually through consolidations in the

three years before 1898. Only once did the number exceed 200 between 1903 and 1919.

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2003] Origins of the FTC 7

or more.

Consolidation piled on consolidation, as the American

Tobacco Company, for example, absorbed what once had been 250

ﬁrms.

Enterprise assumed massive scale. United States Steel, formed in

1901, was capitalized at $1.4 billion (over $25 billion in current dollars).

According to Naomi R. Lamoreaux, at least 72 consolidations led to the

formation of entities that controlled over 40 percent of an industry, and

42 to entities that controlled over 70 percent.

Finally, as highlighted

by Congressional hearings and a muckraking book that Brandeis subse-

quently wrote in 1913, a so-called “money trust” had organized consolida-

tions across multiple industries, and its representation on multiple boards

of directors was perceived to create cross-industry interconnections short

of merger.

III. EARLY SHERMAN ACT JURISPRUDENCE

A. First Phase Cases

By 1899, the Supreme Court had established that the Sherman Act

broadly prohibited price-ﬁxing cartels, but the law’s application to other

forms of interﬁrm cooperation, and more importantly its application to

business consolidations, remained in doubt.

Naomi R. Lamoreaux, The Great Merger Movement in American Business: 1895–

1904, at 1–2 (1985). Six consolidations united 5 or more ﬁrms in 1897. During the

succeeding ﬁve years, the numbers were 16, 63, 21, 19, and 17, respectively. The number

of such consolidations dropped to 5 in 1903 and 3 the following year. Id. at 2.

Control of Corporations, Persons, and Firms Engaged in Interstate Commerce, Report of the

Committee on Interstate Commerce, U.S. Senate, 62d Cong., pursuant to S. Res. 98. at 1203

[hereinafter 1911 Hearings] (Brandeis testimony). See also Thorelli, supra note 9, at 304.

See Thomas K. McCraw & Forest Reinhardt, Losing to Win: U.S. Steel’s Pricing, Investment

Decisions, and Market Share, 1901–1938, 49 J. Econ. Hist. 593, 593 (1989) (noting possible

excess capitalization of 40%); Department of Labor, Bureau of Labor Statistics, Consumer

Price Index, All Urban Consumers (May 16, 2003), available at ftp.bls.gov/pub/special.

requests/cpi/cpiai.txt (more than 18-fold increase in the CPI-U since the index began

in 1913).

Lamoreaux, supra note 20, at 2.

See Louis Brandeis, Other People’s Money and How the Bankers Use It (1913).

Important studies of the cases and thought of this period, as well as the legislative

history of the 1890 Sherman Act that these cases construed, include May, Reach, supra

note 18; James May, Antitrust in the Formative Era: Political and Economic Theory in Constitutional

and Antitrust Analysis, 1880–1918,50Ohio St. L.J. 257, 293–300 (1989) [hereinafter May,

Theory]; Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust:

The Efﬁciency Interpretation Challenged, 34 Hastings L.J. 65 (1982); Letwin, supra note 9;

Hovenkamp, supra note 15; Thorelli, supra note 9; Rudolph J.R. Peritz, Competition

Policy in America, 1880–1992: History, Rhetoric, Law (1996); Martin J. Sklar,

The Corporate Reconstruction of American Capitalism, 1890–1916 (1988); Alan

J. Meese, Liberty and Antitrust in the Formative Era,79B.U. L. Rev. 1 (1999).

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The 1895 decision in United States v. E.C. Knight Co.

seriously under-

mined antitrust enforcement. By an 8–1 margin, the Court rejected a

challenge to the sugar trust’s acquisitions of four Pennsylvania plants.

Although the trust obtained a 98 percent share of the national market,

the Court held that the Commerce Clause placed the transactions outside

federal law because they affected commerce “only incidentally and not

directly.” The trust was primarily engaged in manufacture, and “[c]om-

merce succeeds to manufacture, and is not part of it.”

Two years later, United States v. Trans-Missouri Freight Ass’n

became

the Court’s ﬁrstcasetoﬁnd a Sherman Act violation. The Court held

a railroad price-setting agreement unlawful. Speaking through Justice

Rufus Peckham, it declared that the law required “free and open competi-

tion” and forbade “all” contracts in restraint of trade.

The majority also

articulated a rationale for the Sherman Act. Discussing combinations of

manufacturers, the Court found harmful those whose “purpose . . . is to

control the production or manufacture of any particular article in the

market, and by such control dictate the price at which the article shall

be sold.”

Even if a combination lowered prices, the Court explained,

danger lay “in the power of the combination to raise it, and the result

in any event is unfortunate for the country, by depriving it of the services

of small but independent dealers . . . .” (also termed “small dealers and

worthy men”).

Antitrust thus protected both consumers and competi-

tors from economic harm and, in protecting small dealers from economic

harm, simultaneously averted social harm.

Here, at least, the Court

reﬂected a classical paradigm that, in James May’s words, deemed “oppor-

tunity, efﬁciency, competition, fair distribution, and political freedom” to

be “largely consistent” and “capable of vigorous implementation through

‘nondiscretionary’ judicial decisionmaking.”

156 U.S. 1 (1895).

Id. at 12.

166 U.S. 290 (1897).

Id. at 328, 339.

Id. at 323. The Court also described combinations of manufacturers as having, for

this purpose, “the same nature” as combinations of railroads. Id. at 324.

Id. at 323, 324.

These social and industrial effects are similar to the two meanings that David W.

Barnes detects in references to what he calls “entrepreneurial freedom”: “The ﬁrst would

protect small businesses in order to increase the freedom of individuals to be self-employed

and self-reliant and the second would protect small businesses in order to promote an

economic system that better satisﬁes consumer demands.” David W. Barnes, Nonefﬁciency

Goals in the Antitrust Law of Mergers,30Wm. & Mary L. Rev. 787, 841 (1989).

May, Theory, supra note 25, at 299 (emphasizing roots of the paradigm in both economic

and political thought). See also Hovenkamp, supra note 15 (emphasizing roots in economic

thought). Peckham here dismissed lower prices because of the threat that the combination

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However, Trans-Missouri hardly suggested a settled state of law. First,

four Justices dissented in an opinion by Justice Edward White, who would

later author the Standard Oil decision. White argued that the Sherman

Act incorporated a common law meaning of “restraint of trade,” that

the common law allowed reasonable restraints, and that agreements to ﬁx

“reasonable” rates (including defendants’ agreement) were themselves

reasonable.

Second, qualifying the assertion that the Sherman Act pro-

hibited “all” contracts in restraint of trade, the Court acknowledged a

possible exception for covenants collateral to the sale of a business.

This raised the question of whether the law would reach the actual

contract to sell a business—the core of merger activity. Third, the E.C.

Knight limits were undisturbed, since the Trans-Missouri defendants were

interstate railroads and reachable under a narrow reading of “com-

merce.” Indeed, drawing on E.C. Knight, the Court explained that a

violation resulted because the agreement’s “direct, immediate and neces-

sary effect is to put a restraint on trade or commerce as described in

the act.”

A year later, the Court further developed its directness test in three

decisions, all authored by Justice Peckham, that were delivered on the

same day. The only decision to ﬁnd a violation was another railroad

case. The 5–3 decision in United States v. Joint TrafﬁcAss’n

held unlawful

a railroad agreement whose “natural and direct” effect was to maintain

higher rates than otherwise would prevail.

Both Anderson v. United

States

and Hopkins v. United States,

in contrast, rejected challenges to

could later raise them. See Trans-Missouri Freight, 166 U.S. at 335 (prices might be lowered

to drive out rivals, “in order that rates might thereafter be advanced”). The decision

contains a more ambiguous reference to combinations that “perhaps permanently” reduce

prices by reducing “the expense inseparable from the running of many different companies

for the same purpose.” However, the Court went on to deem inevitable, if unfortunate,

the displacement of small dealers because of “great industrial changes.” Id. at 322. While

not entirely clear, the changes the Court deemed inevitable if unfortunate might include

all those based on efﬁciencies.

Id. at 343–57. White described the carrier agreement as “securing fairness in their

dealings with each other, and tending to protect the public against improper discrimination

and sudden changes in rates.” Id. at 357. See also Rudolph Peritz, The “Rule of Reason” in

Antitrust Law: Property Logic in Restraint of Competition,40Hastings L.J. 285, 316–17 (1989)

(minority position grounded in the logic of “property” and a fair return on investment,

rather than “competition”).

Trans-Missouri Freight, 166 U.S. at 329 (such contracts “might not be included within

the letter or spirit of the statute”).

Id. at 341–42.

171 U.S. 505 (1898).

Id. at 565.

171 U.S. 604 (1898).

171 U.S. 578 (1898).

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association rules that governed livestock sales in Kansas City. None of

the rules was found to control price or output directly. The Court held

that some of the rules affected commerce that was not interstate, and

those that did affect interstate commerce had an effect that was remote,

small, and unintended.

Finally, the 1899 case of United States v. Addyston Pipe & Steel Co.

held

that the Sherman Act did reach a manufacturers’ cartel. The case came

to the Court with a prescient lower court opinion by William Howard

Taft, then a Circuit Court judge. Taft followed White’s Trans-Missouri

dissent in concluding that the statute incorporated common law limits

on “restraint of trade,” but, developing the Trans-Missouri majority’s

reference to constraints collateral to sales of property, Taft offered a

more nuanced view of the common law. The common law deemed a

restraint unreasonable if its sole object was to restrain prices, he wrote.

Even if those prices were reasonable, impropriety resulted from the

“power to charge unreasonable prices.” But if an agreement had a proper

purpose to which a restraint was ancillary —for example, if it facilitated

sale of a business by limiting future competition by the seller—the

restraint was lawful so long as it was no wider than needed. Taft essentially

distinguished naked restraints that were per se violations from ancillary

restraints that would be allowed only if reasonable.

However accurate Taft’s reading of past law,

the Supreme Court did

not follow his lead. Its unanimous decision (like the circuit court’s)

limited E.C. Knight, and applied the Sherman Act to a conspiracy among

manufacturers.

However, the Court found the pool illegal because its

In Anderson, cattle purchasers agreed to do business only with members of their

exchange, which was found to do no business of its own, not to meddle with prices, and

to be open to anyone following its rules. Anderson, 171 U.S. at 614. The Court held the

agreement was lawful even if it affected interstate commerce; seeking only transaction of

business “upon a proper and fair basis,” its effect on commerce was “quite remote, not

intended and too small to be taken into account.” Id. at 618–19. In Hopkins, the Court

rejected most challenges to the practices of commission merchants on an exchange, relying

primarily on the E.C. Knight-like rationale that they were outside “interstate” commerce.

Hopkins, 171 U.S. at 597.

175 U.S. 211 (1899).

85 F. 271 at 278–79, 281–83, 293 (6th Cir. 1898).

Compare May, Theory, supra note 25, at 330 (a “brilliant effort to extract analytically

coherent tendencies from the aggregate mass of nineteenth century American common

law precedent,” despite understating toleration of nonancillary restraints), with

Hovenkamp, supra note 15, at 286–87 (historically dubious, but facilitated law’s develop-

ment), and Robert H. Bork, The Antitrust Paradox 26 (1978, 1993 ed.) (perhaps

the greatest antitrust decision ever).

The Court held that the Sherman Act reached independent manufacturers who agreed

to restrain interstate sales (even if it might not reach mergers of those same manufacturers).

Addyston Pipe, 175 U.S. at 238–41.

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“direct and immediate” effect was to destroy competition and raise prices

and, even under a directness test, it sidestepped Taft’s conclusion that

an agreement would be unlawful if it ﬁxed “reasonable” prices.

B. Second Phase Cases

After Addyston Pipe (and though the decision left open an argument

that cartels could ﬁx “reasonable prices”), the Court reached a consensus

about price ﬁxing. Antitrust advocates during the rest of the formative

period might object that enforcement against cartels was inadequate

and ineffective,

but not about the substantive standards applied when

a cartel was challenged. The Court further showed its distaste for price

ﬁxing mere weeks before Standard Oil, when it condemned the vertical

restraints of resale price maintenance in Dr. Miles Medical Co. v. John D.

Park & Sons Co.

The Court ignited a separate controversy in Loewe v.

Lawlor,

a private action for treble damages that struck not at business

but at labor. The labor movement’s subsequent efforts to secure antitrust

exemptions bore fruit in the Clayton Act, but the labor story is peripheral

to the one told in this article.

The core antitrust concerns as Roosevelt took ofﬁce, though, were

whether the law could deal with consolidations and the ﬁrms created by

past consolidations.

Consolidations implicated an owner’s right to sell

his business. With no merger case having reached the Court since E.C.

Knight, and with states unable to check corporate growth,

parties who

hesitated to cartelize may have even felt driven to “the most extreme and

complete form of consolidation”—as when the Addyston Pipe defendants

merged after they lost in court.

Id. at 238 (ﬁnding the prices unreasonable), 247 (upholding the injunction, except

as applied to purely intrastate transactions).

1911 Hearings, supra note 21, at 182 (Samuel Untermeyer declaring that the country

was “honeycombed” with secret price-ﬁxing agreements).

220 U.S. 373 (1911).

208 U.S. 274 (1908).

See infra note 335 and accompanying text.

See John Bates Clark & John Maurice Clark, The Control of Trusts 4 (1912,

1914 reprint) (the public “reconciled itself” to pooling and contracts controlling prices,

“though it did not make the payment altogether willingly. It was the appearance of

consolidations that were ﬁrmer and more complete that caused the menacing shadow of

general monopoly to deepen.”).

See Charles McCurdy, The Knight Sugar Decision of 1895 and the Modernization of American

Corporate Law, 1869–1903,53Bus. Hist. Rev. 304 (1979) (arguing that states could have

used corporate law to prevent ﬁrms from joining out-of-state holding companies, but were

unwilling to drive away business); Hovenkamp, supra note 15, at 262–64 (questioning

extent of states’ authority under corporate law).

See Federal Trade Commission, The Merger Movement: A Summary Report 8–9

(1948) (discussing Addyston Pipe); Tony Freyer, Regulating Big Business: Antitrust

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1. Northern Securities Co. v. United States.

Northern Securities found that a holding company violated the Sherman

Act by taking control of two railroads that had previously competed.

However, the Court was split. Justice John Marshall Harlan, who had

been the sole dissenter in E.C. Knight and who would again become the

sole dissenter in Standard Oil, here spoke for a plurality of four Justices,

for whom the holding company was illegal for the simple reason that it

directly eliminated competition.

But Justice David Brewer, the critical

ﬁfth vote, relied on the nature of the railroad industry to ﬁnd the

consolidation “unreasonable.”

Finally, Justices White and Peckham

(authors of the Trans-Missouri decision and dissent) now united with two

other Justices in two dissents. The ﬁrst, by White, denied federal authority

to regulate ownership of stock in state-chartered ﬁrms.

The second,

by Oliver Wendell Holmes, Jr., literally and provocatively announced

that the Sherman Act “says nothing about competition” and did not

apply to “fusions.”

In 1904, four Justices thus deemed federal antitrust

irrelevant to mergers.

2. Standard Oil v. United States

and

United States v. American Tobacco Co.

The 1911 cases were decided by a dramatically changed Court. Taft

had been President only twenty-six months, but had named four new

Justices and elevated Justice White to Chief. On May 15, 1911, White

authored the Standard Oil decision that announced the rule of reason.

Two weeks later, White wrote the American Tobacco decision that reaf-

ﬁrmed it. Each decision was joined by all save Harlan.

Standard Oil declared that the Sherman Act proscribed only those

restraints that the common law made unenforceable, that the common

law’s speciﬁcs mattered less than its “standard of reason,” and that the

in Great Britain and America, 1880–1990, at 26–35 (1992) (contrast to Britain, which

encouraged looser combinations). But see Alfred D. Chandler, Jr., The Visible Hand:

The Managerial Revolution in American Business 315–44 (1977) (vertical integration

as basis for successful mergers); Sklar, supra note 25, at 157–66 (noting large feasible

scale of American business, and intense, impersonal competition).

193 U.S. 197 (1904).

Id. at 331–32.

Id. at 363 (“under present conditions a single railroad is, if not a legal, largely a

practical, monopoly,” and defendant holding company “broadens and extends such

monopoly”).

Id. at 369–70.

Id. at 403, 410.

221 U.S. 1 (1911).

221 U.S. 106 (1911).

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standard of reason condemned practices that led to the evils Taft had

identiﬁed in Addyston Pipe: the power to ﬁx price or to limit production

(or a related deterioration in quality).

In the language of freedom of

contract, the Act limited the freedom of contract by some to protect the

contractual freedom of others. A Sherman Act analysis would consider

whether conduct undermined this broadly understood right to contract,

but not whether the Act unreasonably undermined it;

White thus aban-

doned his prior view that cartels could ﬁx reasonable prices. Applying

the rule of reason, Standard Oil held that defendant’s 90 percent market

share, obtained after forty-one years of reorganizations, acquisitions,

“unfair practices,” and “unfair methods of competition,” justiﬁed a pre-

sumption of illegality. The facts reinforced the presumption.

3. The Reaction

The Standard Oil decision had been anxiously awaited, and its signiﬁ-

cance has been compared to such cases as Roe v. Wade.

Signaling business

satisfaction with the rule of reason, stock prices rose despite the Court’s

dissolution order.

But William Jennings Bryan, three-time Democratic

Presidential nominee and spokesman for agrarian interests within the

party, declared “The Trusts Have Won.”

Five Senators, “radical Demo-

crats and Republican insurgents,” introduced bills to proscribe all con-

tracts, combinations and conspiracies in restraint of trade.

Standard Oil, 221 U.S. at 51–52, 60. See also American Tobacco, 221 U.S. at 179 (law

forbade “acts or contracts or agreements or combinations which operated to the prejudice

of the public interests by unduly restricting competition, or unduly obstructing the due

course of trade, or which, either because of their inherent nature or effect, or because

of the evident purpose of the acts, etc., injuriously restrained trade...”).

Standard Oil, 221 U.S. at 62 (“the freedom of the individual right to contract, when

not unduly or improperly exercised, was the most efﬁcient means for the prevention of

monopoly ....[F]reedom to contract was the essence of freedom from undue restraint

on the right to contract”), 69.

Id. at 42–43, 75.

Asks Court to Hurry Antitrust Decision, N.Y. Times, May 13, 1911, at 1 (describing letter

that declared business “at a standstill” as it awaited the decision); Nathan Gaskill, The

Regulation of Competition 15 (1936) (“startling conclusions aroused the country like

no decision since [Dred Scott v. Sandford, 60 U.S. 393 (1856)]”; Peritz, supra note 25, at

61 (case’s “cultural signiﬁcance” compared to Brown v. Board of Education, 347 U.S. 483

(1954), and Roe v. Wade, 410 U.S. 113 (1973)).

Business Likes Oil Decision, N.Y. Times, May 17, 1911, at 1; Decision Opens a New Era—

Carnegie, N.Y. Times, May 17, 1911, at 6.

The Commoner, May 26, 1911, at 1. Bryan asked “When did a court interpret a statute

against murder . . . on the theory that the legislature meant undue murder ...?” Id. at

2. Though White’s decision was turgid, Bryan detected in it the triumphant strains of the

“Battle Hymn of the Republic.” William Jennings Bryan, The Reason, 194 N. Am. Rev. 10,

11 ( July 1911).

May Amend Sherman Law, N.Y. Times, May 16, 1911, at 4; S. 2158, S. 2370, S. 2374,

S. 2375, S. 2433, 62d Cong, 2d Sess. (1911), reprinted in 3 Bills and Debates in Congress

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Critics often ignored the differences between White’s 1911 rule and

the rule he advanced in 1897; his authorship of both predisposed many

to equate them.

For example, Senator Cummins wrote in 1913 that the

Sherman Act had “wisely” incorporated common law limits on restraint of

trade. Properly understood, it reached “such unreasonable restriction

of competition as impaired substantially, and to the public injury, the

freedom of trade or the freedom to trade,” but not restrictions that “left

the competitive force as an adequate protection to the people.

Cummins

equated the rule White sought in 1897 to the rule he announced in

Standard Oil, though, and said that both would allow not only “a reason-

able interference with competition . . . which did not . . . constitute a

restraint of trade,” but also a “reasonable restraint of trade,” that is, a

restraint the left the competitive force inadequately preserved.

Critics also cried “judicial legislation.” Harlan charged that his breth-

ren legislated by adopting the rule,

Cummins that they would legislate

in applying it. For Cummins, the law should allow “some, but not great

latitude for difference of opinion upon . . an inquiry.”

Standard Oil,

as he read it, would test each restraint “by the economic standard which

the individual members of the court may happen to approve,” and by

each Justice’s “individual opinion as an economist or sociologist.”

broadly, the perception was that the balance of power had shifted in

antitrust. Seven years after the Sherman Act passed, four Justices had

been willing to allow reasonable price-ﬁxing cartels. Seven years after

that, four Justices would have held that the Sherman Act had no applica-

tion to mergers. Although a bare majority had held in Northern Securities

that the law reached merger activity, seven more years had passed without

Relating to Trusts, 57th Cong., 2d Sess. to 63d Cong., 1st Sess., Inclusive, at

2411–2415. The “insurgents” included “about ten Republican Senators [who] regularly

acted together on a whole range of national issues, meeting constantly to plan strategy

in private, openly defying the party’s established leadership in public.” James Holt,

Congressional Insurgents and the Party System, 1909–1916, at 2–3 (1967). They

largely represented a rural progressivism, rooted mainly in north-central agrarian states:

Wisconsin, Minnesota, Iowa, Kansas, Nebraska, and the Dakotas. Id. at 6, 9.

See Allyn Young, The Sherman Act and the New Anti-Trust Legislation: I,23J. Pol. Econ.

201, 204 (1915) (describing “a very general impression” that “possibly even price agree-

ments were permissible, if the prices agreed upon were ‘reasonable’”).

S. Rep. No. 1326, 62d Cong., 3d Sess. 2 (1913) [hereinafter Cummins Report] (noting

that common law was “not always stated with exact accuracy”). See also id. at 8 (ﬁnessing

question of how well prior decisions had accorded with his analysis).

Id. at 7, 9.

Standard Oil, 221 U.S. at 90.

Cummins Report, supra note 69, at 8.

Id. at 10, 11. For Nathan Gaskill, this was “a Congressional declaration of war on the

Supreme Court.” Gaskill, supra note 64, at 22.

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systematic reversal of corporate growth. Now, antitrust plaintiffs seemed

to face a new hurdle.

Critics also condemned the remedies. Standard Oil and American

Tobacco shareholders each received shares in the ﬁrms’ successors.

Common ownership of the successors at least delayed the emergence

of effective competition.

The aggregate value of the oil trusts’s post-

dissolution stock soared,

so shareholders reaped a reward, while critics

like Brandeis deemed it offensive to even leave “these rich breakers of

the laws of God and of man left in undisturbed enjoyment of all their

ill-gotten wealth.”

To Roosevelt, the remedy made the Court’s “bitter

condemnation” a “farce.”

IV. ROOSEVELT, TAFT, BRANDEIS, AND WILSON

The antitrust question was central to the 1912 Presidential race

between Roosevelt and Taft, who had already shaped antitrust policy,

and Wilson, whose turn was yet to come, with Wilson adviser Louis

Brandeis adding his own voice both publicly and privately. The four

were near-contemporaries, each born between 1856 and 1858. Each was

trained in law, though Roosevelt left law school and Wilson abandoned

its practice. Each brought a voice to the antitrust debate that would

resonate through 1914 and beyond.

A. Theodore Roosevelt

Roosevelt’s antitrust policy reﬂected his broad activism. Born to wealth,

Roosevelt entered the disreputable world of New York politics after

graduating from Harvard. He was an adventurer, particularly in the face

of disappointment or tragedy.

His attainments were both scholarly and

Bureau of Corporations, Trust Laws and Unfair Competition 16–21 (1915).

A contemporary observer, for example, said that “formal dissolution was illusory as a

remedy, unless coupled with supervision which would prevent secret understandings from

taking the place of open combination ....” Henry R. Seager, The New Anti-Trust Acts,30

Pol. Sci. Q. 448, 450 (1915).

See William E. Kovacic, Designing Antitrust Remedies for Dominant Firm Misconduct,31

Conn. L. Rev. 1285, 1299 (1999) (value increased 47% in a year, and nearly quadrupled

in six years).

1911 Hearings, supra note 21, at 1163.

Confession of Faith, supra note 1, at 254, 281 (remedy produced not “one particle of

beneﬁt to the community at large;” rather, “prices went up to consumers, independent

competitors were placed in greater jeopardy than ever before, and the possessions of the

wrong-doers greatly appreciated in value”).

He retreated west at age 25 when his wife and mother both died the day after his

daughter’s birth. He would undertake an African safari when he left ofﬁce in 1909, and

charted an unexplored Brazilian river after the 1913 election.

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political,

but the man of action predominated when he organized and

led the Rough Riders in the 1898 Spanish-American War. Roosevelt’s

fame in combat catapulted him to the New York governorship in 1899

and the Vice Presidency in 1901. When William McKinley was assassinated

seven months later, Roosevelt became America’s youngest President.

The Rough Riders included both Ivy Leaguers and cowboys, and Roose-

velt as President pursued what he deemed a conservative program to

resist class division.

He took pride in using “every ounce of power there

was in the ofﬁce . . . [I]n showing the strength of, or in giving strength

to, the executive, I was establishing a precedent of value.”

1. The Skeptical Trust Buster

In antitrust, Roosevelt’s activism manifested itself in part through the

litigation that earned him the “trustbuster” sobriquet. McKinley had

brought three antitrust cases in more than four years. Roosevelt brought

forty-ﬁve in less than eight.

His 1902 challenge to Northern Securities

announced a new turn in antitrust enforcement. His target was J.P.

Morgan, who, after spearheading the U.S. Steel megamerger, had worked

with his partner George Perkins to create the Northern Securities com-

pany.

Roosevelt also challenged the meat packers’ cartel (the beef

trust), Standard Oil, the American Tobacco Company, and DuPont (the

powder trust). He secured an appropriation earmarked for antitrust

Before 1898, Roosevelt held ofﬁces as a New York City Police Commissioner, federal

Civil Service Commissioner, and Assistant Secretary of the Navy. With respect to his

scholarly attainments, compare John M. Blum, The Progressive Presidents 28 (1980)

(“a historian’s sense of the past ...anamateur authority on military and naval tactics and

strategy . . . a creditable student of the biological sciences...”) with Richard Hofstadter,

American Political Tradition 225 (1948) (“a tissue of philistine conventionalities”).

See generally Edmund Morris, The rise of Theodore Roosevelt (1979); David

Grubin & Geoffrey C. Ward, Theodore Roosevelt (PBS Home Video) (1997).

See, e.g., 1902 Annual Message to Congress, 15 Messages And Papers of the Presi-

dents (1917), 6709, 6711 [hereinafter Messages] (wise evolution a “sure safeguard against

revolution”). His response to a 1902 coal strike was revealing. His predecessors’ interven-

tions in labor disputes had all favored management. Roosevelt mediated and, when the

owners were intransigent, was prepared to seize the mines. Edmund Morris, Theodore

Rex 155–69 (2001).

Roosevelt to George Otto Trevelyan, June 19, 1908, in 6 Letters of Theodore

Roosevelt 1085, 1087 (Elting Morrison ed.) [hereinafter TRL]. John Milton Cooper

termed Roosevelt a “Dionysian artist” of power, favoring the primacy of emotion in contrast

to Wilson, an “Apollonian artist” who favored the primacy of reason. John Milton Cooper,

The Warrior and the Priest 134 (1983).

United States, Federal Antitrust Laws 71–82 (1926) [hereinafter Antitrust

Laws]. Although this source is useful to compare administrations, its raw numbers are

problematic. Parallel civil and criminal proceedings count twice, and at least two Roosevelt

cases challenged labor activity (items 39 and 40).

Letwin, supra note 9, at 184–95.

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enforcement, and created an antitrust unit within the Justice Department

in 1903.

But from the outset, Roosevelt’s cases were at least in part intended

to prove the government’s—his government’s—primacy.

In 1899, he

deemed fear of trusts “largely irrational.”

In 1900, he declared attempts

to reverse concentration not “one whit more intelligent than the medieval

bull against the comet.”

In 1901, he said that much “legislation directed

at the trusts would have been exceedingly mischievous had it not also

been entirely ineffective;” he noted the need to confront global competi-

tion, and added that “combination and concentration should be, not

prohibited, but supervised and within reasonable limits controlled.”

2. The Bureau of Corporations

The ﬁrst step in implementing a new relationship between government

and business was a 1903 “trust bill” establishing a Department of Com-

merce and Labor, and within it a Bureau of Corporations.

As a ﬁrst

step, the Bureau’s statutory authority was limited to collecting informa-

tion, using compulsory process as needed. The President could publicize

that information or base further legislative recommendations upon it.

The Bureau was soon buffeted, as William Kovacic noted with respect

to the Commission that succeeded it, by interactions with the President,

Congress, and the courts.

For example, though nothing in the law

creating the Bureau mentioned Congressional directives, its ﬁrst report,

1902 Message, 15 Messages, supra note 82, at 6712. Theodore P. Kovaleff, Introduction,

Symposium: In Commemoration of the 60th Anniversary of the Establishment of the Antitrust Division,

39 Antitrust Bull. 813, 814 (1994) (commemorating antitrust’s elevation to status as

a “division” under an Assistant Attorney General). The unit’s 5-year appropriation was

$500,000, and its average size was 5 lawyers under Roosevelt, rising to 18 under Wilson.

Temp. Nat. Econ. Comm., Investigation of Concentration of Economic Power,

Monograph No. 16, 76th Cong., 3d Sess. 23 (1940). Although U.S. Attorneys could

also bring cases, see, e.g., More Antitrust Workers, N.Y. Times, Sept. 20, 1913, at 5, and special

assistants were hired for speciﬁc cases, see, e.g., J.C. McReynolds, The New Preceptor for the

Trusts, N.Y. Times, Mar. 9, 1913, at 56, the Department handled massive litigation. The

Department’s brief to the Supreme Court in the Standard Oil case, for example, was

1071 pages.

1905 Annual Message to Congress, supra note 82, at 6973, 6975–76 (“moral effect”

of the prosecutions). See also Letwin, supra note 9, at 183 (suits a way to shock “voters

into recognizing the nature of the trust problem”).

Roosevelt to Bellamy Storer, Sept. 11, 1899, 2 TRL, supra note 83, at 1068, 1068–69.

Annual Message, Jan. 30, 1900, in 15 TRW, supra note 1, at 30, 45.

1901 Annual Message to Congress, 15 Messages, supra note 82, at 6641, 6646–48.

Morris, Rex, supra note 82, at 196, 206–07. See also 1901 Message, supra note 90, at 6649.

Act of Feb. 11, 1903, ch. 544, § 6, 32 Stat. 823.

See William E. Kovacic, The Federal Trade Commission and Congressional Oversight of

Antitrust Enforcement: A Historical Perspective,17Tulsa L.J. 587 (1982).

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a study of the meat-packing industry, was directed by a House resolution.

Deputy Commissioner of Corporations Herbert Knox Smith doubted

the legality of the resolution, and also hesitated because the Justice

Department was already investigating the industry.

After the Bureau

obtained company documents, Roosevelt in fact directed the Bureau to

share ﬁles with Department litigators. The denouement was not happy.

The Bureau’s dry report was widely criticized, and the court relied on

the information sharing to immunize individual defendants in the

litigation.

Subsequent Bureau studies were more successful. In particular, its

report on petroleum transportation found substantial rebating despite

existing anti-rebating law and recommended a legislative ﬁx that Con-

gress adopted.

The Bureau later completed a series of wide-ranging

reports, often in response to House or Senate resolutions.

3. The Bureau, “Anti-Trust” versus “Unfair Competition,”

and the 1908 Hepburn Bill

Pursuing Roosevelt’s vision of broader economic supervision, the

Bureau and the President soon recommended substantial expansion of

the agency’s authority. For Roosevelt, the Sherman Act as then construed

was “profoundly immoral,” seeking “to forbid honest men from doing

what must be done under modern business conditions . . . .”

“Afﬁrma-

tive” provisions should replace its prohibitions, and reasonable restraints

Report of the Commissioner of Corporations on the Beef Industry xviii (1905)

(resolution directing study). The FTC Act expressly provides for studies directed by Con-

gress. 15 U.S.C. § 46(d). See also 15 U.S.C. § 46a (1933 amendment requiring concurrent

resolution by both Houses).

Gerald Leinwand, A History of the United States Federal Bureau of Corpora-

tions (1903–1914) at 173–74 (1962) (unpublished Ph.D. dissertation, New York Univer-

sity) (noting that the Secretary of Commerce and Labor directed the Bureau to proceed).

The Bureau had anticipated from the ﬁrst, though, that its information might be used in

litigation. Report of the Commissioner of Corporations 35–36 (1904) (though the

Bureau’s work was “primarily” directed to investigate business conditions as basis for

“intelligent legislative action,” evidence of illegality would be given to the President).

Arthur M. Johnson, Theodore Roosevelt and the Bureau of Corporations,45Miss. Valley

Hist. Rev. 571, 580–83 (1959); United States v. Armour & Co., 142 F. 808 (N.D. Ill. 1906)

(ﬁnding Fifth Amendment immunity because defendants had provided information under

conditions amounting to compulsion); Letwin, supra note 9, at 242–44.

See Report of the Commissioner of Corporations on the Transportation of

Petroleum xxvi–xxvii (1906); Johnson, supra note 96, at 583–85.

Bureau reports included studies of the petroleum, tobacco, steel, and lumber indus-

tries, cotton exchanges, state taxation of corporations, water transportation, and water-

power development.

1907 Annual Message to Congress, 16 Messages, supra note 82, at 7070, 7074.

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should be distinguished from unreasonable.

100

The Bureau of Corpora-

tions should regulate industry as the Interstate Commerce Commission

(ICC), created in 1887 and given authority to set maximum rates during

the Roosevelt years, regulated common carriers.

101

The Bureau’s annual reports contributed to the development of

these plans. Its 1904 report distinguished “anti-trust” from “unfair-

competition” laws. The former futilely sought to maintain “a condition

of competition”; the latter accepted that combination was inevitable and

regulated “methods of competition” so that process would “be attended

by as little injustice as may be.”

102

To accomplish such regulation, Corpo-

rations Commissioner James R. Garﬁeld suggested licensing or franchis-

ing corporations in interstate commerce (and considered, but found

serious impediments to, federal incorporation).

103

The Bureau continued

to advance such proposals in later years, albeit more tentatively after

Herbert Knox Smith succeeded Garﬁeld as Commissioner.

104

These pro-

cedures, which in some variants would allow the government to deny

ﬁrms access to interstate commerce, were means that could be harnessed

to various ends. The Democrats in 1908 proposed registration as a way

to limit corporate size.

105

For the Bureau, such mechanisms were a way

to regulate, rather than dissipate, concentrated economic power.

In 1908, Roosevelt worked to develop an extensive regulatory plan

with Garﬁeld, Smith, and the National Civic Federation (an association

of business, labor, and other leaders, including the ubiquitous Morgan

partner George Perkins).

106

The Federation sought procedures dramati-

cally to lessen antitrust exposure, including a rule of reason for all

transactions and advance approval for proposed transactions submitted

100

Special Message, April 27, 1908, in 16 Messages And Papers of the Presidents (1927

ed.), at 7189, 7194 (executive oversight should replace the “occasional and necessarily

inadequate and one-sided action of the federal judiciary”); Roosevelt to Seth Low, Apr.

1, 1908, 6 TRL, supra note 83, at 986, 987.

101

Most signiﬁcantly, the 1906 Hepburn Act (different from the 1908 Hepburn Bill,

discussed infra) empowered the ICC to replace existing rates, upon complaint, with “reason-

able” maxima. See generally Ari & Olive Hoogenboom, A History of the ICC: From

Panacea to Palliative 51–52 (1976).

102

Report of the Commissioner of Corporations 40–41 (1904).

103

Id. at 46–47.

104

See Annual Report of the Commissioner of Corporations (1907) (publicity and

“prompt efﬁciency of . . . public opinion” might be an adequate substitute for licensing).

105

Their platform called for registration of corporations with a 25% market share and

a ban on those with a 50% share. Donald Bruce Johnson, Compiler, National Party

Platforms 144, 146 (1978 ed.).

106

See Sklar, supra note 25, at 205 n.35, 228–85.

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to the Bureau.

107

Roosevelt offered less carrot and more stick. The 1908

Hepburn bill provided for ﬁrms to “voluntarily” register and submit

contracts and consolidations to the Bureau.

108

The Bureau might disap-

prove a proposal (the statute did not mention approval), but even propos-

als that escaped disapproval might be challenged later; submitters,

however, would beneﬁt from a rule of reason in any subsequent chal-

lenge.

109

Perhaps most signiﬁcantly, though, existing arrangements by

registered ﬁrms would be immunized once a year had passed.

110

Despite

Roosevelt’s avowal that corporations would have “to show they have a

right to exist,”

111

the bill aroused intense opposition. Roosevelt soon

retreated.

112

4. Morgan, Perkins, and the Steel and Harvester Trusts

Roosevelt never precisely explained how his rule of reason would

distinguish good from bad. An important component may have been a

ﬁrm’s willingness to accept broad government oversight. His dealings

with Morgan’s “good” interests, which evolved through the ofﬁces of

the Commissioner of Corporations, illustrate the nature and pitfalls of

the approach.

Morgan responded to the Northern Securities case by asking Roosevelt,

in the future, to resolve problems by sending “your man” to “my man.”

113

Roosevelt demurred at the time, but their relations soon improved.

Morgan’s U.S. Steel acted differently than other trusts, in part hoping to

forestall antitrust challenge.

114

By 1905, Roosevelt reached a “gentlemen’s

107

NCF representatives wanted a “rule of reason” applied to all restraints of trade (and

that rule, like the rule in White’s Trans-Missouri dissent, likely would have allowed ﬁxing

of reasonable prices). They also sought blanket immunity for agreements submitted to

the Bureau that were not disapproved. Draft from Francis Lynde Stetson, Feb. 26, 1908,

James R. Garﬁeld collection, Library of Congress, Box 128, File 45.

108

H.R. 19745, 60th Cong., 1st Sess. (1908), reprinted in 2 Bills and Debates, supra

note 67, at 2066–68, §§ 1, 4. Roosevelt said that “every combination or agreement not

. . . approved should be treated as in violation of the law and prosecuted accordingly.”

Special Message, supra note 100, at 7193. The (effectively) mandatory submission require-

ment in some ways anticipated the premerger notiﬁcation provisions of the 1975 Hart-

Scott-Rodino Act. 15 U.S.C. § 18a.

109

H.R. 19745, supra note 108, § 1.

110

Id. § 4. If a registration was not cancelled within a year after the registration was

made, the amnesty would become effective a year after the bill became law.

111

Special Message, supra note 100, at 7193.

112

Arthur M. Johnson, Antitrust Policy in Transition, 1908: Idea and Reality,48Miss.

Valley Hist. Rev. 425, 428–33 (1961). Sklar concludes that Roosevelt quickly realized

that the bill would fail, but developed it to inﬂuence future deliberations. Sklar, supra

note 25, at 231.

113

Cooper, supra note 83, at 83; Letwin, supra note 9, at 202–04.

114

Knowing that the ﬁrm lived in a “fragile glass house,” its managers “coddled their

competitors, forbore to build a modern administrative structure for their own company,

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agreement” with U.S. Steel’s Elbert Gary at a meeting arranged by Com-

missioner Garﬁeld. The arrangement, later extended to Morgan’s Inter-

national Harvester, gave the targets a chance to correct problems without

court orders.

115

To Roosevelt the arrangement represented mutual recognition of

parallel interests, with the government predominant.

116

Still, when the

Attorney General considered suing International Harvester, Commis-

sioner Smith detected a “practical question” because Morgan interests

supported the “advanced policy of the administration.” After meeting

with Perkins and Smith, Roosevelt directed the Attorney General to see

them and not to sue without Presidential clearance.

117

The biggest ﬂashpoint, though, occurred during a 1907 ﬁnancial

panic. Lacking a central bank (Wilson would create that in 1914), Roose-

velt turned to Morgan, even giving him federal funds to deposit in banks

as needed.

118

Morgan then proposed that U.S. Steel acquire Tennessee

Coal & Iron (TC&I) from an investment ﬁrm that was teetering on

bankruptcy. Concerned about the Sherman Act, though, he secured

Roosevelt’s acquiescence. The acquisition stabilized the stock market,

and to that extent served the public well.

119

But it also served Morgan

well.

120

TC&I became a campaign issue in 1908 and 1912, the subject of

a 1909 confrontation with Congress and 1911 legislative hearings with

Roosevelt as star witness, and part of the Taft Administration’s 1911 suit

took special pains to issue informative annual reports, and often made their corporate

records public—sometimes even including their own cost data.” McCraw & Reinhardt,

supra note 22, at 618.

115

Robert H. Wiebe, The House of Morgan and the Executive,65Am. Hist. Rev. 49,

52–53 (1959).

116

Id.at55.

117

Johnson, Bureau of Corporations, supra note 96, at 589–90; Roosevelt to Charles Joseph

Bonaparte, Aug. 22, 1907, 5 TRL, supra note 83, at 763.

118

Jean Strouse, Morgan 574–97 (1999).

119

Id. at 584–88; John A. Garraty, Right-Hand Man: The Life of George W. Perkins

210–14 (1957).

120

See United States v. United States Steel Corp., 223 F. 55, 148–50 (D.N.J. 1915), aff’d,

251 U.S. 417 (1920). Strouse asserts that TC&I had been so unproﬁtable and ineptly

managed that it was excluded when U.S. Steel was formed, and that the trust’s Elbert

Gary even resisted the purchase in 1908; once the decision was made to proceed with the

acquisition, though Morgan “took care not to make it a commercial sacriﬁce.” Strouse,

supra note 118, at 584–85. McCraw and Reinhardt, supra note 22, at 604, ﬁnd that U.S.

Steel’s investment and pricing strategy consistently sought to stabilize the industry, even

to the detriment of its market share, and the acquisition consistent with this approach.

Gabriel Kolko concludes that the acquisition increased the steel trust’s reserves by 40%

and that the trust paid no more than a quarter of what TC&I was worth. Gabriel Kolko,

The Triumph of Conservativism 117 (1963).

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against U.S. Steel.

121

TC&I was an object lesson in the risks of Roosevelt’s

approach, during years when Roosevelt became further associated with

Morgan interests in the public eye through his developing ties to George

Perkins. By 1912, Perkins became Executive Chairman of Roosevelt’s

Progressive Party.

122

Roosevelt left ofﬁce in 1909. In the ﬂush of his 1904 victory, he had

pledged not to seek reelection.

123

He picked Taft to succeed him, fought

for Taft’s election, then embarked on a year-long African safari.

5. The “New Nationalism” and the 1912 Campaign

Upon Roosevelt’s return, he was disillusioned with Taft. Republicans

were split between progressive “insurgents” (like Senator Cummins) and

an “old guard,”

124

and Taft seemed increasingly beholden to the latter.

In 1912, Taft’s Administration challenged Roosevelt by its suit against

U.S. Steel, based in part on the TC&I takeover.

125

Roosevelt, in turn,

challenged Taft for their party’s nomination. After Roosevelt decisively

won the delegates selected in primaries but Taft secured the nomination,

Roosevelt mounted a challenge in the general election.

126

“We stand

at Armageddon,” he told the Progressive Party convention.

127

He then

pursued a vigorous challenge, although it soon became clear that his

121

Roosevelt to William Jennings Bryan, Sept. 8, 1908, 6 TRL, supra note 83, at 1259,

1260–61; Roosevelt to Kermit Roosevelt, Jan. 23, 1909, id. at 1480, 1481 & n.2 (reporting

that he had told Congress to press for TC&I documents only if they were ready to impeach

him); Hearings before the Committee on Investigation of United States Steel Corporation, H. Rep.

No. 12, at 1369–92 (1911) (testimony). The Taft Administration also publicized charges

about Roosevelt’s role in aborting litigation against International Harvester. Roosevelt Held

Back Trust Suit, N.Y. Times, Apr. 25, 1912, at 1; Asserts Roosevelt Did Aid the Trust, N.Y.

Times, May 18, 1912, at 2.

122

As New York Governor, Roosevelt named Perkins to a Palisades Interstate Park Com-

mission. Roosevelt to Perkins, May 18, 1900, 2 TRL, supra note 83, at 1301. In 1900,

Perkins played an intermediary role in convincing Roosevelt to accept the Vice-Presidency.

Roosevelt sought Perkins’s views on trust-related speeches. After 1910, Perkins devoted

both money and time to Roosevelt’s causes and, later, his Progressive Party, continuing

his interest in the party even after Roosevelt’s own interest waned. Garraty, supra note

119, at 83–84, 221–23, 272–352.

123

There was as yet no constitutional limit on a President’s tenure. There was a traditional

two-term limitation, but its application was somewhat unclear in Roosevelt’s case. Never

before had a President taken ofﬁce on the death of a predecessor and then won election

in his own right (although Roosevelt had served all but seven months of William McKin-

ley’s term).

124

See supra note 67.

125

Taft insisted that he did not see in advance the U.S. Steel pleadings that challenged

TC&I. George Mowry concludes that Taft deliberately avoided reviewing the documents.

George E. Mowry, The Era of Theodore Roosevelt and the Birth of Modern

America 289–90 (1958).

126

Arthur S. Link, Woodrow Wilson and the Progressive Era 14 (1954).

127

Confession of Faith, supra note 1.

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chances were slim. The Democrats’ choice of the progressive Wilson

made it unlikely that Roosevelt could draw sufﬁcient Democratic votes

to win.

128

The campaign reached a dizzying crescendo when a would-be

assassin shot Roosevelt on October 14. With a bullet lodged near his

lungs and blood staining his shirt, he delayed treatment and delivered

an extended oration.

129

Roosevelt’s “New Nationalism” included a challenge to the judiciary.

Roosevelt did not see judges as decision makers who could apply the

law without using discretion.

130

He horriﬁed conservatives and even many

of his supporters by advocating popular “recall” of state judges or, in a

more moderate variant articulated by George Rublee (the future archi-

tect of Section 5), of state court decisions that struck down laws as

violating the federal Constitution.

131

Roosevelt now deemed the Sherman Act “rural toryism,” as antiquated

as “the ﬂintlocks of Washington’s Continental.” He sought a commission

whose regulation “we should not fear, if necessary, to bring to the point

of control of monopoly prices, just as in exceptional cases railway rates

are now regulated.” Its broad mandate would protect not only consumers,

but also shareholders and workers.

132

At his most extreme, his most “statist-tending,”

133

Roosevelt pointed

approvingly to German law governing a ﬁfty-four-ﬁrm potash cartel. The

law set quantities, maximum prices, and labor conditions, all subject to

biannual judicial evaluation. Roosevelt saw a model that the United

128

Roosevelt wrote, “...Ithink it probable at present that Wilson will win....However,

win or lose, the ﬁght had to be made, and it happened that no human being could make

it except myself.” Roosevelt to Horace Planchet, Aug. 3, 1912, 7 TRL, supra note 83, at

591, 593.

129

See Leader and the Cause, Oct. 14, 1912, 17 TRW, supra note 1, at 320. A biographer

said the “speech would have made a superb dying declaration, and one cannot help

suspecting he was disappointed that the cup of martyrdom passed him by.” Cooper, supra

note 83, at 202.

130

In 1908, he wrote that “decisions of the courts on economic and social questions

depend upon their economic and social philosophy” and too often represented ” a long

outgrown philosophy, which was itself the product of primitive economic conditions.”

Special Message, supra note 100, at 7204.

131

See The Recall of Judicial Decisions, Apr. 10, 1912, 17 TRW, supra note 1, at 190. According

to John Garraty, Roosevelt’s threat to the judiciary was so serious that Taft’s antitrust

prosecutions were a “petty annoyance” in comparison. Garraty, supra note 119, at 255.

See also Gerald Gunther, Learned Hand 209–25 (1994); Marc Eric McClure, Earnest

Endeavors: The Life and Public Work of George Rublee 112 (2000) (unpublished Ph.D.

dissertation, George Washington University) (book publication forthcoming).

132

Theodore Roosevelt, The Trusts, the People, and the Square Deal, 99 Outlook 649, 653,

655, 656 (Nov. 18, 1911).

133

See Sklar, supra note 25, at 35.

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States, using the Bureau of Corporations, could adapt to manage ﬁrms

like Standard Oil and avoid corporate dissolutions.

134

Dissolutions would

merely lead to collusion among successor ﬁrms; the better answer was

to “[d]emand the right to know what they’re doing; if they’re doing

wrong, hit them; if they continue to do wrong, clap a receivership on

them, keep it on until they’re straightened out, and restore them to a

chastened ownership—ﬁne, growing concerns, but growing in the right

direction.”

135

Here, at least, he argued that “bad” trusts could be chas-

tened rather than dissolved. With proper regulation, he could even

tolerate a ﬁrm like U.S. Steel if it were an “absolute monopoly.”

136

In accepting the Progressive nomination, Roosevelt said that antitrust

“has occasionally done good, has usually accomplished nothing, has

generally left the worst conditions wholly unchanged, and has been

responsible for a considerable amount of downright and positive evil.” He

would make antitrust “genuinely . . . effective against every big concern

tending to monopoly or guilty of antisocial practices,” but also would

also use a commission to supplement (or supersede) antitrust. Protecting

America’s global competitiveness, the commission would have “complete

power to regulate and control all the great industrial concerns engaged

in interstate business.” It could stop labor, shareholder, and competitive

abuses, the latter including “the artiﬁcial raising of prices, the artiﬁcial

restriction on productivity, [and] the elimination of competition by

unfair or predatory practices.” Firms that “voluntarily” accepted its regu-

lation and obeyed its orders in good faith would be shielded from anti-

trust prosecution. The commission could also “interpret in advance, to

any honest man asking the interpretation, what he may do and what he

may not do in carrying on a legitimate business.”

137

The candidate was more popular than these ideas. Many who rallied

around him were drawn by his charisma, political viability, and other

134

Nationalism and Special Privilege, 97 Outlook 145, 147 ( Jan. 28, 1911). If a ﬁrm had

the power to “ﬁx prices of labor and commodities,” the government should regulate it

“as freely as . . . so-called natural monopolies . . . I do not believe in a system of law in

which the object of Governmental proceeding requires the dissolution of the corporation

or the conﬁscation of its property, which may be ruinous to the public as well as the

corporation. The proceeding should be, in substance, to declare any corporation an

injurious monopoly, and when that declaration shall be deﬁnitely afﬁrmed by the proper

body, . . . to subject the corporation to thoroughgoing Governmental control as to rates,

prices, and general conduct.” The supervision and control would be the same as “that

which is, and still more as that which will be, exercised by the Inter-State Commerce

Commission over our railroads.” Id. at 147.

135

Roosevelt to William Jennings Bryan, Oct. 22, 1912, 7 TRL, supra note 83, at 629, 630.

136

Id.

137

Confession of Faith, supra note 1, at 279–80.

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positions, not his plans to deal with concentration.

138

Consider Herbert

Knox Smith. Smith had grown so wary of regulation that in 1911 he

dampened Senator Newlands’s support for “positive directory powers

over industrials”

139

—yet, having remained Corporations Commissioner

under Taft, he resigned to work for Roosevelt. The antitrust issue even led

to a platform battle within Roosevelt’s own Progressive Party. Roosevelt

resisted proposed language calling for legislation to “strengthen the

Sherman law” (although he then called for such strengthening in his

acceptance speech). Party activists revised the platform after the

election.

140

Perhaps recognizing a tepid response to price regulation, Roosevelt

mufﬂed the theme. But his words were carefully measured. After the

attempted assassination, he said of government orders to set price: “I

do not want now to provide that. I fancy the commission would be so

busy for a time in enforcing laws that it would not want to concern itself

with prices.”

141

For Roosevelt, modern industry depended on efﬁciencies that ren-

dered competition, at least in some markets, obsolete. The government

should domesticate rather than limit size, and price regulation was (at

a minimum) a backstop for such domestication. Interﬁrm cooperation,

presumably including price-setting cartels, should be tolerated under

government auspices.

142

Roosevelt feared neither big business nor big

government, trusting the latter to tame the former.

138

Holt, supra note 67, at 52–53.

139

A week after Standard Oil, Smith wrote Garﬁeld that he had persuaded Newlands to

drop such power, “the really dangerous feature” of [Newlands’s] proposed commission,”

from proposed legislation. Herbert Knox Smith to James R. Garﬁeld, May 23, 1911, James

R. Garﬁeld Collection, Library of Congress, Box 120. See generally Sklar, supra note 25,

at 300–09; S. Rep. No. 597, 63d Cong., 2d Sess. 27–32 28–29 (1914) (quoting Smith’s

view that agency should only have authority to deny a “registration,” so that ﬁrm could

not identify itself as registered).

140

The disputed language called for “strengthening the Sherman law by prohibiting

agreements to divide territory or limit output; refusing to sell to customers who buy from

business rivals; to sell below costs in certain areas while maintaining higher prices in other

places; using the power of transportation to aid or injure special business concerns, and

other unfair trade practices.” It was rejected as “needless ampliﬁcation” by Roosevelt,

included when the platform was read at the convention, deleted from the text distributed

by the press, and “restored” in December. John Gable, The Bull Moose Years 100–03

(1978) ; Garrraty, supra note 119, at 268–70, 288; Roosevelt to Amos Pinchot, Dec. 5,

1912, 7 TRL, supra note 83, at 661, 665–68.

141

Political Talks Tire Roosevelt, N.Y. Times, Oct. 20, 1912, at 1, 2.

142

The Hepburn bill of 1908 presumably would have allowed price-setting agreements.

Roosevelt likely agreed with the “ruinous competition” argument that Justice White

accepted in Trans-Missouri Freight. See supra note 34 and accompanying text.

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6. The Legacy of 1912

Wilson won the electoral college in a landslide, with 42 percent of

the popular vote. Roosevelt ran better than Taft, receiving 27 percent

of the vote to Taft’s 23 percent.

143

The vote was inﬂuenced by factors

extraneous to competition policy, though, and may have understated

Roosevelt’s personal popularity but overstated the popularity of his eco-

nomic plans.

144

The charismatic ex-President was only ﬁfty-four in 1912, young enough

that he was exploring the uncharted River of Doubt in Brazil as Congress

geared up for the antitrust debate.

145

Though he died in January 1919,

he remained so powerful a presence that, despite his prior apostasy, he

had become a serious contender for the 1920 Republican nomination.

146

Yet despite Roosevelt’s personal popularity, most politicians, including

most Commission advocates, distanced themselves from his economic

program. Roosevelt’s calls for price-setting authority drew a practical

line, and his embrace of the most massive ﬁrms a theoretical line, that

others would not cross.

Still, there were potential convergences between Roosevelt and those

would not cross these lines. A commission could serve goals other than

Roosevelt’s, to prevent or help reverse the growth of monopoly power,

rather than to regulate its use. Substantively, many could join his call to

ban “unfair practices” (although they might differ on the speciﬁcs of

unfairness). For their own reasons, Brandeis to some extent shared

Roosevelt’s admiration of German cartels (and Roosevelt likely would

have joined Brandeis in supporting resale price maintenance), and Wil-

son shared Roosevelt’s reluctance to dissolve existing ﬁrms.

147

Conversely,

Charles Van Hise, whom Roosevelt quoted on behalf of “concentration,

co-operation and control,”

148

was prepared to presume that a ﬁrm with

a 40 percent market share unreasonably restrained trade.

149

There was

a spectrum of possibilities and, along that spectrum, there was much

143

Socialist Eugene Debs received 6%. See also supra Part V.A.

144

Roosevelt likely lost votes because of the traditional two-term limit, for example, and

his bolting from the Republicans. His vote also may have been affected by his aggressive

foreign policy.

145

Joseph S. Ornig, My Last Chance to Be A Boy: Theodore Roosevelt’s South

American Expedition of 1913–1914 (1994). Roosevelt returned in May 1914.

146

Cooper, supra note 83, at 259, 332–33. Roosevelt returned to the Republican fold

in 1916. Id. at 305–06. In 1917, he implored Wilson for a military command in World

War I. Id. at 324–35.

147

See infra text accompanying notes 212, 262.

148

See supra note 1.

149

Charles R. Van Hise, Concentration and Control 227 (1912, rev. 1914).

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in Roosevelt’s program that others could accept. The challenge (and

opportunity) for the Democrats was to adapt his ideas to their own ends,

to associate with his progressivism while distancing themselves from its

most controversial ramiﬁcations.

B. William Howard Taft

1. The Jurist as Reluctant President

Taft served before his Presidency as Solicitor General, circuit court

judge, Governor-general of the Philippines, and Secretary of War. After

his Presidency, he taught law at Yale (his alma mater) and, in 1921,

became Chief Justice. His Presidency was unsuccessful, his administrative

skills offset by political debacles.

150

He made no secret that he had not

wanted the job. Taft publicly called his 1908 candidacy a fall from the

“respectable business of trying to administer justice.”

151

He explained

his 1912 candidacy more poignantly. He responded to Roosevelt’s chal-

lenge, he said, because “[e]ven a rat in a corner will ﬁght.”

152

It was the

law and the judicial role that he loved, and his faith in the courts and

their ability to implement the Standard Oil rule of reason was the key to

his view of antitrust policy.

2. President Taft and Antitrust

Taft’s involvement with antitrust extended over four decades.

153

During

his Presidency, antitrust was emblematic of his problems. As Taft cap-

tured his own dilemma, he was “in the remarkable position of being

charged with an attempt to destroy business by enforcing the anti-trust

statute and of having set up the Supreme Court to emasculate the statute

in the interests of the trusts.”

154

As a judge, Taft’s Addyston Pipe decision contained the seeds of later

antitrust jurisprudence. In 1906, while a member of Roosevelt’s cabinet,

Taft vaguely approved of federal action, where there was a “probability

150

Robert H. Wiebe, Businessmen And Reform: A Study of the Progressive Move-

ment 68 (1963) ; Cooper, supra note 12, at 151.

151

Judith Icke Anderson, William Howard Taft: An Intimate History 111 (1981).

Both Roosevelt and Taft’s wife were more anxious to see Taft President than he was.

152

Taft in Maryland Trails Roosevelt, N.Y. Times, May 5, 1912, at 1. See generally 2 Henry

Pringle, The Life and Times of William Howard Taft 782–83 (1939).

153

He was Acting Attorney General for the government’s ﬁrst antitrust case in 1890, United

States v. Jellico Mountain Coke and Coal Co., 43 F. 898 (M.D. Tenn. 1890). He participated in

the Supreme Court’s antitrust decisions through the 1920s.

154

Taft Will Enforce Law to the Letter, N.Y. Times, Oct. 28, 1911, at 1.

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of abuse,” to “assume control, not by way of initiation and administration

but by way of effective regulation.”

155

As President, Taft pursued an active agenda of antitrust cases. His

targets included U.S. Steel, International Harvester, and the Motion

Picture Patent Company. Ending a dearth of prosecutions against trade

association rules after Hopkins and Anderson,

156

the administration chal-

lenged a rule of the Chicago Board of Trade.

157

Roosevelt had averaged

less than six “antitrust” cases per year; Taft averaged twenty.

158

Taft

brought ﬁfty-eight cases in just twenty-two months after Standard Oil.

159

More than a dutiful prosecutor, Taft called the Sherman Act “agood

law that ought to be enforced.”

160

He staunchly defended Standard Oil,

a case decided by a Court he had shaped by naming four Justices and

elevating White to Chief. After initial hesitation, Taft decided that the

rule of reason the Court announced in 1909 was more like his own

Addyston Pipe test than it was like the rule of reason White had advocated

in Trans-Missouri.

161

This rule, Taft said, incorporated a common law so

155

William Howard Taft, Four Aspects of Civic Duty 12 (1906). Taft, who declared

the topic too complex to explore at that time, explained that he still approved the “laissez

faire doctrine that the least interference by legislation with the operation of natural laws

was, in the end, the best for the public”—but only if the doctrine is not carried to “such

an extreme as really to interfere with the public welfare.” Id. at 11–12.

156

See supra text accompanying notes 39–41.

157

The rule, which required after-hour sales to be at the same price as the last pre-close

sale, was later upheld in a decision by Justice Brandeis. Board of Trade of the City of

Chicago v. United States, 246 U.S. 231 (1918).

158

See Antitrust Laws, supra note 84, at 83–105. This counts as separate cases several

parallel civil and criminal cases, and also includes at least four prosecutions of labor

activities (items 38, 41, 42, and 75).

159

Id. at 88–105 (noting 18 cases after the 1912 election); Sklar, supra note 25, at 376.

Senator James Reed had a jaded view of these numbers. “[T]here are now pending 46

cases, whereas we are told that there are over a thousand trusts and monopolies in the

United States....There ought to be 400 cases.” 51 Cong. Rec. 14,519–20 (1914). The

increased enforcement after Standard Oil might have been an attempt to prove Standard

Oil was compatible with vigorous enforcement, as William Jennings Bryan charged that the

rule of reason undermined antitrust and Roosevelt that antitrust undermined the economy.

160

Pringle, supra note 152, at 656.

161

1911 Annual Message to Congress—Part 1, Messages and Papers of the Presidents

7644, 7645–46. Taft’s early reactions to Standard Oil were captured by two headlines. On

May 16, focusing on the verdict, the New York Times called the President “please[d].”

Standard Oil Must Dissolve in a Month, Only Unreasonable Restraints of Trade Forbidden, N.Y.

Times, May 16, 1911, at 1. The next day, focusing on the rule of reason, it headlined a

different message. President Disappointed, N.Y. Times, May 17, 1911, at 1. Before Standard

Oil, White had equated the Court’s “directness” test to his own ancillary restraints test and

criticized White’s 1897 rule of reason. Special Message ( Jan. 7, 1910), 17 Messages, supra,

at 7441, 7452–54. Cf. Cline v. Frink Dairy Co., 274 U.S. 445 (1927) (Taft, C.J.) (state law

allowing ﬁxing of prices if they were reasonable—the result White advocated in 1897—

was unconstitutionally vague).

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clear that courts would need no discretion to apply it.

162

There was

neither judicial legislation in declaring the rule, nor would there be in

applying it.

Believing the law sound and clear and responding to twenty years of

“lawlessness,”

163

Taft had little sympathy for violators. He privately called

“Wall Street, as an aggregation, . . . the biggest ass that I have ever run

across.”

164

In the ﬂush of Standard Oil, Taft (unlike Roosevelt or Wilson)

embraced corporate restructuring. In September 1911, four months after

the decision, he called it a “signal for the voluntary breaking up of all

combinations in restraint of trade within the inhibition of the statute,”

and hoped it would “lead to a complete revulsion of feeling on the part

of the business men of the country and to a clear understanding by

them of the limitations that must be imposed by them upon any business

combinations made by them in the future.”

165

Taft’s speech acknowl-

edged that some consolidations produced efﬁciencies, but, in language

he may not have delivered, the printed text promised wholesale reorgani-

zations, by litigation if needed, within eighteen months.

166

President Taft also called for national incorporation, but his calls were

equivocal. In 1910, he deemed it a way to prevent harms, rather than

correct them after the fact, when correction would burden employees,

stockholders, and business conﬁdence.

167

Taft also saw federal incorpora-

tion as a way to protect business from “undue” state interference.

168

162

1911 Message, supra note 161, at 7646.

163

Taft Will Enforce Law to the Letter, supra note 154.

164

Pringle, supra note 152, at 655. As to an indicted executive, “He violated the law

and has to pay the penalty for it. That is all!” Id. at 656. Despite such comments, the only

defendants incarcerated on Taft’s watch were members of a longshoreman’s association,

each conﬁned for four hours. U.S. v. Haines (S.D. Fla. 1911), cited in Antitrust Laws,

supra note 84, at 93–94; Richard A. Posner, A Statistical Study of Antitrust Enforcement,13

J.L. Econ. 365, 391 (1970) (all Sherman Act imprisonments until the 1920s were in labor

cases, and all until the 1960s were in cases involving labor or violence).

165

Sept. 18, 1911 Speech, supra note 3, at 58–59.

166

Id. at 59. The printed text says: “if Congress shall continue needed appropriations,

every trust of any size that violates the statute will, before the end of this administration

in 1913, be brought into court to meet and acquiesce in a degree of disintegration by

which competition between its parts shall be restored and preserved under the persuasive

and restrictive inﬂuence of a permanent and continuing injunction.” However, a line

appears above this passage and a series of x’s through it. Further, no such remark appears

in a Wall Street Journal report or a New York Times report that quoted much of the speech.

Trust Decisions Defended by Taft, N.Y. Times, Sept. 19, 1911, at 5; Taft Opposed to Any Amendment

of Sherman Anti-trust Law, Wall St. J., Sept. 19, 1911, at 1.

167

1910 Special Message, supra note 161, at 7455–58. See also Sept. 18, 1911 Speech,

supra note 3, at 60 (describing federal incorporation as a way, if constitutional issues could

be resolved, to free ﬁrms from “the constant fear of prosecution”).

168

1910 Special Message, supra note 161, at 7456. See also Stanley I. Kutler, Chief Justice

Taft, National Regulation, and the Commerce Power, 51 J. Am. Hist. 651 (1965) (tracing

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However, while the grant of a corporate charter presumably would consti-

tute approval of the chartered ﬁrm’s structure, Taft rejected Roosevelt’s

plans that an agency be empowered to approve subsequent conduct in

advance.

169

Further, shortly after he proposed national incorporation,

he declared that he had merely “suggested” it, and it was not a “party

matter” because it fell outside the 1908 platform.

170

There were other indicia of Taft’s preference for judicial resolution

of disputes. The Bureau of Corporations, the framework for Roosevelt’s

regulatory plans, suffered leaner years under Taft, and for Commissioner

Smith the years were particularly lean.

171

Taft also showed his preference

for limiting administrative agencies by obtaining a Commerce Court,

created by the 1910 Mann-Elkins Act. That law generally strengthened

the ICC, but Taft insisted that it create a specialized court to hear appeals

from ICC decisions, succeeding over strenuous opposition by Senator

Cummins and others who feared that the court often would rule against

the agency. Those fears would be vindicated, and the court was abolished

in 1913.

172

Taft’s efforts on behalf of the Court showed, despite his

nominal support of national incorporation, his continued hesitancy

about administrative decision making.

3. 1912 and Beyond

Although he defeated Roosevelt for the Republican nomination, Taft

entered the general election campaign demoralized and rarely gave

speeches.

173

Also, his ambiguous support of administrative regulation

Taft’s support of broad federal powers from Addyston Pipe to decisions he authored as

Chief Justice).

169

1911 Message, supra note 161, at 7655 (consultations “would offer [a ﬁrm] as great

security against successful prosecutions . . . as would be practical or wise”).

170

Speech, Feb. 12, 1910, Presidential Addresses and State Papers of William

Howard Taft 568, 582 (1911). His private pronouncements sometimes (but not always)

evinced a lack of interest. James C. German, Jr., The Taft Administration and the Sherman

Antitrust Act, 54 Mid-America 172, 183–84 (1972).

171

Wiebe, House of Morgan, supra note 115, at 58. Wiebe concludes that the Secretary of

Commerce bypassed Smith to press investigations of Morgan’s U.S. Steel and International

Harvester, working directly with Smith’s subordinates, and that Smith “wielded no

power.” Id.

172

Shortly before the Mann-Elkins Act, the Supreme Court began to accord more defer-

ence to the ICC. See generally Robert L. Rabin, Federal Regulation in Historical Perspective,38

Stanford L. Rev. 1189, 1233–34 (noting that the “once beleaguered agency was suddenly

granted the respect it had long sought,” particularly in the pivotal case of ICC v. Illinois

Central Railroad Co., 215 U.S. 452 (1910)). With a former ICC Chairman as Chief Judge,

the Commerce Court was a brake on the ICC; it frequently reversed agency rulings, though

its own rulings often were reversed in turn by the Supreme Court. Elizabeth Sanders,

The Roots of Reform 203–09 (1999); Hoogenboom & Hoogenboom, supra note 101,

at 61, 64, 66–68.

173

See Pringle, supra note 152, at 815–42.

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now took a new twist. The Republicans gave him a platform that called

for a trade commission with enforcement authority.

174

Later years showed the extent to which Taft’s more fundamental com-

mitment was to the judicial process and not to the structural remedies

he endorsed as President.

175

Unlike progressives who distrusted Lochner-

era courts, Taft said in 1911, “I love Judges and I love courts. They are

my ideals on earth that typify what we shall meet afterward in Heaven

under a just God.”

176

He admitted in 1911 that courts were slow and

their penalties lax in antitrust cases,

177

but in a series of 1914 articles,

later collected in a book, he defended the Court’s decisions under the

rule of reason and dismissed the need for new antitrust laws.

178

Perhaps Taft’s enthusiasm for dissolution in September 1911 began

to wane when the remedial talks in American Tobacco proved problematic,

and the order issued in November drew heavy criticism.

179

By 1914, Taft

would discern in the complexities of dissolutions a reason to prefer

judicial resolution of antitrust questions; the courts’“elastic and many-

sided remedies” could “squeeze the unlawfulness out of a trust and retain

for the beneﬁt of society those features of it that great business energy

and genius have created and that can be continued entirely within the

law.”

180

Taft also shifted gears in defending United States v. Terminal

174

“In the enforcement and administration of Federal Laws governing interstate com-

merce and enterprises impressed with a public use engaged therein, there is much that

may be committed to a Federal trade commission, thus placing in the hands of an adminis-

trative board many of the functions now necessarily exercised by the courts. This will

promote promptness in the administration of the law and avoid delays and technicalities

incident to court procedure.” Johnson, Platforms, supra note 105, at 183, 184.

175

See Sklar, supra note 25, at 35 (focusing on Taft’s preference for a judicial mechanism

to associate him with “a minimalist regulatory corporate liberalism on the center-right”).

176

Taft Again Defends the Supreme Court, N.Y. Times, Oct. 7, 1911, at 6.

177

Sept. 18, 1911 Speech, supra note 3, at 59. See also Taft, Four Aspects, supra note

155, at 52–53 (antitrust defendants can “secure the most acute counsel and make every

possible point that the looseness of the present criminal procedure affords”).

178

William Howard Taft, The Anti-Trust Act and the Supreme Court (1914).

The articles appeared weekly in the New York Times between May 17 and June 14, 1914.

Taft defended the rule of reason as so clear that “any one who gives it sincere attention

can understand.” Id. at 5. He called the Court “as progressive as possible,” said those

who denied it “speak in ignorance,” and declared that Standard Oil “brought out the

condemnation of everybody of demagogic tendencies prominent in politics.” Id. at 5, 42, 94.

179

Taft defended the order, calling it the most effective for its purpose “in the history

of American law.” 1911 Annual Message, Part 1, supra note 161, at 7649. See generally id.

at 7647–51; Taft, Anti-Trust Act, supra note 178, at 118–25. However, the tobacco

dissolution proved more complex than that of Standard Oil, which had been so structured

that component entities could simply be broken off the holding company. Attorney General

George Wickersham was particularly frustrated with the process. See German, supra note

170, at 178–84.

180

Taft, Anti-trust Act, supra note 178, at 117–18.

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Railroad Ass’n of St. Louis.

181

The Court rejected his administration’s

request to dissolve a joint venture by which some railroads passing

through St. Louis controlled all Mississippi River crossings, imposing

instead a strong conduct remedy that required defendant to treat every

railroad equally. Although his administration had sought structural relief,

Taft cited the case to show how “the remedial processes of equity can

effect exactly the right result.”

182

Taft’s fundamental commitment was to enforcing the Sherman Act

under a rule of reason. As noted above, a classical paradigm assumed

that “opportunity, efﬁciency, competition, fair distribution, and political

freedom” were “largely consistent” and “capable of vigorous implementa-

tion through ‘nondiscretionary’ judicial decision making.”

183

When the

growth of large-scale corporations produced an anomaly by seeming to

create tension between efﬁciency and other values, including opportu-

nity, many politicians (far more than the economists of the day) clung

to the hope that antitrust could still accommodate all these goals without

necessitating trade-offs.

184

Roosevelt did not. He deemed large-scale busi-

ness, even to the extent of monopoly, a natural product of economic

evolution, and he embraced a new paradigm less dependent upon a

competitive market. Taft held to the old. Though he acknowledged that

modern production would increase corporate size, he thought that much

existing growth could be reversed without sacriﬁcing efﬁciency. More

fundamentally, and although he muddied the message with his half-

hearted support of national incorporation, Taft trusted the courts as

Roosevelt had not. He afﬁrmed that questions of economic concentra-

tion could be resolved by non-discretionary judicial decision making, as

courts interpreted the Sherman Act under a common law that Taft

himself had helped to explicate.

C. Louis D. Brandeis

1. People’s Attorney and President’s Adviser

As Roosevelt touted the virtues of (controlled) trusts, Louis Brandeis

was an advocate for a small-business community that could not protect

181

224 U.S. 383 (1912).

182

Taft, Anti-trust Act, supra note 178, at 101. Senator James Reed had a different

view of the case, condemning the decision for allowing the survival of a “miserable monop-

oly” whose “extortionate rates” had stiﬂed growth on the city’s western bank. 51 Cong.

Rec. 15,865 (1914).

183

May, Theory, supra note 25, at 299.

184

May points out that politicians acted like scientists who, confronting anomalous data,

seek to integrate it into their existing paradigm. Id. at 294. See also Thomas S. Kuhn, The

Structure of Scientiﬁc Revolutions ch. 6 (2d ed. 1970).

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itself from unfair practices.

185

Brandeis was born in Kentucky. His immi-

grant father was a successful small businessman, although the family

relocated to Germany for three years during an economic downturn.

Returning to America, Brandeis attended Harvard Law School, graduat-

ing ﬁrst in his class in 1877.

186

He had practiced law for thirty-ﬁve years

when he met Wilson in 1912, and his career then extended twenty-seven

more years, all but four on the Supreme Court. He began to represent

public causes in the 1890s, moving to national triumphs before the ICC

and Supreme Court after 1908.

187

Entering the antitrust debate after

Standard Oil, Brandeis helped draft legislation for progressive Republican

Robert La Follette, and testiﬁed for three days before a Senate committee

about the bill and antitrust.

188

Brandeis supported La Follette’s bid for the 1912 Republican nomina-

tion, and his subsequent endorsement of Wilson was itself newsworthy.

189

Scott James concludes that Wilson responded to Brandeis in order to

appeal to progressive supporters of La Follette and former Democratic

nominee William Jennings Bryan.

190

Whatever Wilson’s motives, he met

Brandeis for three hours on August 28, after which they held a joint

press conference.

191

They met again on September 27, after which Wilson

telegraphed Brandeis for advice on how to better “spike” the enemy

guns.

192

Brandeis spoke and wrote on Wilson’s behalf, and gave Wilson

185

Interstate Trade Commission, Hearings Before the Comm. on Interstate and Foreign Commerce,

House of Representatives, 63d Cong., 2d Sess. (1914), at 98.

186

Phillipa Strum, Louis D. Brandeis, Justice for the People 1–14 (1984).

187

His “Brandeis Brief” convinced the Supreme Court to uphold a law limiting the hours

women could work. Muller v. Oregon, 208 U.S. 412 (1908). The Court earlier had struck

down a New York law limiting bakers’ hours, see Lochner v. New York, 198 U.S. 45 (1905),

but Brandeis cited state and foreign laws, and evidence from social and economic studies,

to persuade the Court that Oregon’s law was within the state’s police power (and thus

did not unconstitutionally restrict liberty of contract). Brandeis’s reputation grew when

he joined a challenge to the Taft Administration’s conservation policy (the Ballinger-

Pinchot affair), and in 1910 convinced the ICC to deny a general railroad rate increase

on the basis that railroads could use “scientiﬁc management” to lower costs. Strum,

Justice, supra note 186, at 133–45, 160–66.

188

Brandeis to Wilson, Sept. 30, 1912, 25 PWW, supra note 5, at 289; 1911 Hearings,

supra note 21, at 1146.

189

Brandeis for Wilson, N.Y. Times, July 11, 1912, at 1.

190

See Scott James, Presidents, Parties and the State: A Party System Perspective

on Democratic Regulatory Choice, 1884–1936, at 158–59 (2000). Brandeis continued

to advise La Follette in 1913. Brandeis to La Follette, May 27, 1913, 3 LBL, supra note 4,

at 100–02. La Follette sought Brandeis as a running mate when he ran a third-party

Presidential campaign in 1924. Strum, supra note 186, at 157.

191

Gov. Wilson Agrees with Mr. Brandeis, N.Y. Times, Aug. 29, 1912, at 3 (calling Brandeis

a “lawyer-economist”).

192

Telegram, Wilson to Brandeis, Sept. 27, 1912, 25 PWW, supra note 5, at 272.

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“a tactical opening and live ammunition.”

193

Wilson adopted his rallying

cry that competition, not monopoly, should be regulated. But though

Wilson would seek Brandeis’s counsel, consider naming him Attorney

General, offer him a seat on the FTC,

194

and eventually nominate him to

the Supreme Court, Wilson never fully embraced Brandeis’s philosophy.

Brandeis had an aversion to big business that Wilson did not fully share,

and Wilson had a distrust of experts that Brandeis did not fully share.

2. Brandeis and Competition

Though Brandeis advocated smaller scale in business, he knew that

some businesses required substantial scale. He conceded in 1911 that a

ﬁrm could control “considerably more than” 10 percent of any market,

irrespective of absolute size, “with perfect safety.”

195

Yet, by supplement-

ing and interpreting the antitrust law, and creating presumptions to bias

its application, Brandeis sought to redress a balance that, to his eyes,

unduly favored large enterprise.

196

He tried to recapture, to the extent

possible, a past in which business was dominated by smaller merchants

like his father.

Brandeis backed his preference with economic arguments. “The econ-

omies of monopoly are superﬁcial and delusive,” he wrote, and “[t]he

efﬁciency of monopoly is at best temporary.”

197

The failure of some

trusts proved the inefﬁciency of all.

198

Size dulled the competitive edge,

193

Cooper, supra note 83, at 194 (“tactical opening”); Strum, supra note 186, at 199–202

(speeches, as well as articles and unsigned editorials that appeared in Colliers).

194

1929 Interview, Ray Stannard Baker collection, Library of Congress, Reel 72.

195

1911 Hearings, supra note 21, at 1175 (10% ﬁgure). Also, despite his sympathy for

small retail shops, Brandeis praised the owners of Filene’s, a large Boston department

store, as “great merchants.” Louis Brandeis, Business —A Profession 10 (1912), reprinted in

Louis Brandeis, Business—A Profession (1914) (noting, for example, the store’s pro-

gram for worker participation in management). See also Gerald Berk, Neither Markets Nor

Administration: Brandeis and the Antitrust Reforms of 1914,8Stud. Am. Pol. Dev. 24, 33–35

(1994) (noting in particular work on public utilities regulation after 1903).

196

Cf. New State Ice Co. v. Liebmann, 285 U.S. 262, 310–11 (1932) (Brandeis, J., dissent-

ing) (describing need for legislative “experimentation in the ﬁelds of social and eco-

nomic science”).

197

Louis Brandeis, Shall We Abandon the Policy of Competition? (Feb. 1912), reprinted in

Louis Brandeis, The Curse of Bigness 104, 105 (1934). See also 1911 Hearings, supra

note 21, at 1147–51; Louis D. Brandeis, The Democracy of Business, 2 Nation’s Business

31, 32 (Feb. 16, 1914) (“limit of efﬁciency is reached at a fairly early stage”); To Prevent

Discrimination in Prices and to Provide for Publicity of Prices to Dealers and the Public, Hearings

Before the Committee on Interstate and Foreign Commerce, House of Representatives, 63d Cong.,

2d and 3d Sess. 41 [hereinafter 1915 Hearings] (department stores quickly passed point

of efﬁciency).

198

1911 Hearings, supra note 21, at 1148. This aspect of Brandeis’s thought is at the

root of a critique by Thomas McCraw. Thomas McCraw, Prophets of Regulation

95–101 (1984).

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blunting innovation and resulting in inferior goods; Brandeis blamed

U.S. Steel for inadequate products that hurt America in global markets.

199

He discounted any efﬁciencies that huge ﬁrms did obtain because he

denied they led to reduced consumer prices.

200

Monopolies were artiﬁcial

and unnatural; corporate dissolutions removed “a cancer from the body

industrial.”

201

Brandeis’s concerns further extended to “social” efﬁciency.

202

believed that competition policy should encompass individuals as produc-

ers as well as consumers. Brandeis aimed another attack at the steel trust

for eighty-four-hour work weeks, and for subjecting employees to “alifeso

inhuman as to make our former Negro slavery inﬁnitely preferable . . .”

203

“[T]he ‘right to life’ guaranteed by our Constitution is now being inter-

preted according to demands of social justice and of democracy as the

right to live, and not merely to exist. In order to live men must have

the opportunity of developing their faculties; and they must live under

conditions in which their faculties may develop naturally and health-

fully.”

204

Defending resale price maintenance in 1915, he said:

The public interest is made up of a number of things. . . . [T]he

consumer . . . should get a good article at the lowest price that he

reasonably can, consistently with good quality and good business. . . .

But there is another interest that the public has,...theinterest of the

rest of the public, the dealer and his clerks and the producer and his

employees. We are all part of the public and we must ﬁnd a rule of

law that permits a business practice which is consistent with the welfare

of all the people.

205

Even more broadly, an efﬁcient ﬁrm might be “too large to be tolerated

among the people who desire to be free.”

206

Brandeis’s opposition to

199

1911 Hearings, supra note 21, at 1150–51. See also Louis Brandeis, Competition (1913),

reprinted in Brandeis, Curse, supra note 197, at 112, 118. Brandeis singled out U.S. Steel

because of its association with Roosevelt and Perkins. Perkins had testiﬁed immediately

before Brandeis in the 1911 hearings, and much of Brandeis’s testimony was a rebuttal.

200

1911 Hearings, supra note 21, at 1157.

201

Competition, supra note 199, at 116.

202

1911 Hearings, supra note 21, at 1151.

203

Louis Brandeis, Big Business and Industrial Liberty (1912), reprinted in Brandeis, Curse,

supra note 197, at 38.

204

Louis Brandeis, Efﬁciency and Social Ideals (1914), reprinted in Brandeis, Curse, supra

note 197, at 51.

205

1915 Hearings, supra note 197, at 10–11. Cf. Board of Trade of the City of Chicago

v. United States, 246 U.S. 231 (1918) (Brandeis, J.) (using multifaceted analysis to identify

beneﬁts of a trading rule found to have no appreciable effect on volume or price).

206

1911 Hearings, supra note 21, at 1174. Cf. Louis K. Liggett Co. v. Lee, 288 U.S. 517,

568 (1933) (Brandeis, J., dissenting) (targeted state tax might reﬂect not merely attempt

to preserve competition, but the view that “the chain store, by furthering the concentration

of wealth and of power and by promoting absentee ownership, is thwarting American

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concentrated economic power led to his special concern that with the

“money trust” of ﬁnanciers with wide-ranging corporate interests.

207

When asked, Brandeis had positive words for German cartels. Even

when a cartel set prices and limited output of unﬁnished goods (the

cartel at issue left manufacturers free to turn as much product into

ﬁnished goods as they chose), it left smaller enterprises “absolutely inde-

pendent as to internal management.” The cartel “leaves competition

free—that is, you have competition in production.”

208

Their shared admi-

ration for German cartels was one area where the views of Brandeis and

Roosevelt, for differing reasons, converged. Despite these words of praise,

though, Brandeis was uncertain that cartels advanced German prosperity

and, when asked if he supported horizontal agreements to divide markets

and ﬁx prices in the United States, he seemed to require more than a

“competition in production.” Brandeis in 1911 conceded only “that a

state of affairs might arise under which it might be necessary, in order

to preserve competition, to allow some kind of trade agreements.”

209

Brandeis was more enthusiastic about other types of trade agreements,

agreements that did not divide markets or set prices. He was at the

vanguard of the associational movement that would ﬂourish in the

1920s,

210

although in 1913 he called only for studies to determine when

trade agreements restrained competition reasonably, when they

restrained it unreasonably, and when they restrained it not at all.

211

Here, as elsewhere, Brandeis sought to construe, bias, or supplement

the antitrust laws in ways favorable to smaller businesses. Thus, while

lawmakers in 1914 were more inclined to proscribe conduct rather than

to legalize conduct already proscribed by law, Brandeis argued that

Congress should reverse Dr. Miles and allow resale price maintenance

(so long as the seller of trademarked goods neither controlled markets

nor made agreements with its competitors); he asserted that the practice

ideals; that it is making impossible equality of opportunity; that it is converting independent

tradesmen into clerks; and that it is sapping the resources, the vigor and the hope of the

smaller cities and towns”).

207

See supra note 24.

208

1911 Hearings, supra note 21, at 1182. Cf. John Bates Clark, The Philosophy

of Wealth 214 (1886) (railroad pools encourage “competition” by which ﬁrms strive

for efﬁciency).

209

1911 Hearings, supra note 21, at 1249–50. See also Berk, supra note 195, at 43–46.

210

See generally Robert F. Himmelberg, The Origins of the National Recovery

Administration, Business, Government and the Trade Association Issue 1921–

1933 (1976).

211

Brandeis to William Cox Redﬁeld, May 27, 1913, 3 LBL, supra note 4, at 102. See also

American Column & Lumber Co. v. United States, 257 U.S. 377, 414 (1921) (Brandeis,

J., dissenting) (plan disseminating information about completed sales should be permitted

so long as the participants were not coerced, because “the essence of restraint is power”).

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would beneﬁt not only small retailers, but consumers and manufacturers

as well.

212

To further protect smaller businesses, Brandeis proposed in

1911 to bias litigation against huge enterprise; under his proposal, a

restraint of trade would be presumed illegal when a ﬁrm controlled 40

percent of a market.

213

He also proposed to create a “bureau of industrial

research,” which would extend to smaller businesses the beneﬁts of

research and development that larger enterprises could themselves

afford.

214

3. Regulatory Procedures

Although Brandeis distrusted a Roosevelt-style commission, he shared

with Roosevelt (but neither with Wilson nor with many of the Senate’s

most vocal opponents of the trusts

215

) a comfort with expert decision

making. Brandeis resisted when Senator Cummins sought, during 1911

testimony, to elicit an endorsement of a commission empowered to

approve business plans in advance. However, he then seemed primarily

concerned that an agency was not yet ready to assume the task; after an

agency had ﬁrst acquired a “large volume of information, daily added

to, in respect to each of the important industries in the country,” it

might be a “comparatively simple thing for the commission to pass quickly

upon a question as to whether a given combination is legal or illegal.”

216

Having practiced before the ICC and other agencies, Brandeis was at

ease with administrative procedures.

217

Further, Brandeis saw speciﬁcuse

212

See Brandeis to Robert La Follette, May 27, 1913 3 LBL, supra note 4, at 100, 101;

1915 Hearings, supra note 197, at 1–2, 26; McCraw, supra note 198, at 331 n.47 (citing

1912 testimony); Louis Brandeis, Competition that Kills (1913), reprinted in Brandeis, Busi-

ness, supra note 195, at 243. With the stated conditions met, Brandeis said that the market

would adequately protect consumers because manufacturers who charged too much would

lose proﬁts. Price maintenance redressed an imbalance against smaller manufacturers,

whose larger competitors could set resale prices by establishing exclusive agencies; it

protected “mom and pop” retail shops from chain store discounting; and it protected

consumers who could buy goods with an assurance of reliable quality.

213

S. 3276, 61st Cong., 1st Sess. (1911), reprinted in 3 Bills and Debates, supra note

67, at 2415, 2416. See also 1911 Hearings, supra note 21, at 1175. Standard Oil had applied

such a presumption where the defendant had a 90% market share. Standard Oil, 221 U.S.

at 33, 75.

214

1911 Hearings, supra note 21, at 1169. See also Brandeis to Franklin Knight Lane, Dec.

12, 1913, 3 LBL, supra note 4, at 218, 219.

215

See supra text accompanying notes 417–447.

216

1911 Hearings, supra note 21, at 1269–70. Brandeis had second thoughts when he

discussed non-binding “advance advice” before the FTC in 1915. He then declared that

the Commission, despite the best of intent, would inevitably be “hoodwinked” by businesses

seeking approval of a speciﬁc transaction. Statement of Louis Brandeis Before the Federal Trade

Commission at 5 (Apr. 30, 1915) (available in FTC library).

217

Also, though Brandeis very much cared about workers, he broke with unions in his

willingness to entrust them to experts who employed “scientiﬁc management.” Unions

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for a commission. A purely investigatory commission, for example, could

obtain information about when trade agreements properly “regulated”

competition, and that information could be used to determine which

agreements should be allowed. Brandeis wrote in January 1913:

The question, “Shall we regulate competition or regulate monopoly?”

assumes that there will be some regulation, and it is clear that in order

to regulate either . . . an administrative board of some kind, and with

fairly broad powers, must be created to supplement the powers of the

courts in dealing with this subject.

The only fundamental difference as between the New Party’s program

and that of its opponent relates to the economic policy to be enforced.

All other differences are differences in degree or of emphasis.

218

Because Brandeis denied that the largest ﬁrms were efﬁcient, he saw

no need to sacriﬁce other goals, including opportunity, competition,

fair distribution, and political freedom, for the sake of efﬁciency. He

continued to believe, consistent with the classical paradigm, that these

goals could be pursued in tandem.

219

Brandeis would have subordinated

efﬁciency to other goals had it been necessary, but he denied the need

would arise. However, the classical vision also encompassed a trust in

judicial decision making, an important aspect of Taft’s thought that

Brandeis did not share. Despite their opposing views on the merits of

size, Brandeis was closer to Roosevelt than to Taft (or Wilson) in his

skepticism about the courts. His views on this score would prove impor-

tant at a critical juncture in 1914.

D. Woodrow Wilson

The FTC was created to Wilson’s speciﬁcations. When he proposed

an investigatory commission in January 1914, the House adopted his

proposal. When he endorsed a prosecutorial commission in June, the

Senate bill and ﬁnal law embraced that proposal. When he later empha-

sized the agency’s assistive functions, his selection of Commissioners

reﬂected that orientation.

This section explores Wilson’s views, through the 1912 campaign, on

Presidential leadership, economics, concentration, trusts, and experts—

all of which impacted the 1914 legislation. It examines the consistency

feared that scientiﬁc management might be used to justify lower wages. Strum, supra note

186, at 165.

218

Brandeis, Competition, supra note 199, at 113. Brandeis also wrote that judicial mecha-

nisms “must be supplemented by other adequate machinery to be administered by a

federal board or commission.” Louis Brandeis, The Solution of the Trust Problem (1913),

reprinted in Brandeis, Curse, supra note 197, at 129, 130.

219

See supra text accompanying notes 183–184.

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of the core assumptions that were at the heart of his antitrust program

through January 1914: antitrust violations could and should be deﬁned

clearly; responsible individuals should be harshly punished for corporate

transgressions; and authority should be kept away from “experts.” It

explores as well his skepticism about corporate dissolutions and the

faith in potential competition on which, at least in 1912, he predicated

that skepticism.

1. Moralist, Political Scientist, and Politician

Wilson, the son and grandson of ministers, graduated from Princeton

and the University of Virginia Law School, practiced law brieﬂy, and

earned a doctorate in political science from Johns Hopkins. In 1902, he

became president of Princeton, then better known for the lineage of its

students than the education they received, and gained national renown

as an academic reformer. Wilson began to address political issues, and

emerged in 1905 as a spokesman for conservative Democrats. He was

elected governor of New Jersey in 1910 (succeeding progressive Republi-

can and future FTC Commissioner John Franklin Fort). Though nomi-

nated by a machine opposed to reform, Wilson quickly emerged as a

progressive. Capping his meteoric rise, he was President two years later.

220

Wilson was for decades, according to John Milton Cooper, America’s

ﬁnest political scientist.

221

As a scholar, Wilson admired the British system,

where a prime minister exercised power through his party in Parlia-

ment.

222

He applauded the growth in Presidential power under Roosevelt,

afﬁrming that a President should initiate legislation and lead his party.

223

When he became President himself, he would implement his theories

with remarkable success.

2. Wilson on Economics, Economists, and Experts

Wilson studied economics under Richard Ely, and analyzed the history

of American economic thought as part of a projected book that Ely

planned to co-author.

224

Since “political economy” was then ensconced

in the same departments as political science, Wilson taught the subject

220

See generally August Heckscher, Woodrow Wilson (1991).

221

Cooper, supra note 83, at 54.

222

Woodrow Wilson, Congressional Government (1885). Wilson then found Ameri-

can politics wanting because power had devolved to unaccountable Congressional com-

mittees.

223

Woodrow Wilson, Constitutional Government in The United States (1908),

reprinted in 18 PWW, supra note 5, at 69, 115 (ﬁnding admirable that the President’sofﬁce

was then anything he “has the sagacity and force to make it”).

224

4 PWW, supra note 5, at 628–29 and 631–63 (editorial note and Wilson draft). With

respect to Ely’s work, see, e.g., Thorelli, supra note 9, at 123–25, 314–15.

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as late as 1892, and he served on the ﬁrst council of the American

Economic Association.

225

He wrote John Bates Clark in 1886 that Clark’s

recent work, which included a chapter on “The Economic Role of the

Church,” had “fertilized [his] own thought.”

226

Wilson, like the young Ely, preferred a culturally based, inductive “new

school” economics in place of a deductively based classical economics.

227

He appeared unreceptive when a new deductive economics, a “neo-

classical” economics based on marginal utility theory, emerged.

228

Wil-

son’s distaste for deductive economics was part of a broader dismay at

extending scientiﬁc models, and particularly deductive models from the

physical sciences, to other disciplines.

229

Indeed, whereas Roosevelt and

Brandeis expected science to validate their (conﬂicting) views, Wilson’s

skepticism towards the social sciences had deep roots. In 1896, he saw

“a certain degeneracy” in the scientiﬁc spirit. Surveying “the work of the

noxious, intoxicating gas which has somehow got into the lungs of the

rest of us,” he would “tremble to see social reform led by men who had

breathed it: I should fear nothing better than utter destruction from a

revolution conceived and led in the scientiﬁc spirit.”

230

225

See, e.g., 5 PWW, supra note 5, at 602 (noting lectures, 1888–1891); William Diamond,

Economic Thought of Woodrow Wilson 38 n.1 (1943).

226

Wilson to John Bates Clark, Aug. 26, 1887, 5 PWW, supra note 5, at 564; Clark, supra

note 208.

227

Wilson described economics in 1891 notes as not “a science of absolute truths, but

of historical conditions and stages of development; of social conditions (from the economic

point of view) their cause and cure.” Woodrow Wilson Collection, Library of Congress,

Reel 489. Deductive economic models were like statutes and constitutions. Studying each

furnishes “crude body colors” but not the “ﬁner luminous and atmospheric effects;” a

complete economics must account for “how a man’s wife affects his trade, how his children

stiffen his prudence [and] how his prejudices condition his enterprise.” On the Study of

Politics (1886), 5 PWW, supra note 5, at 395, 403–04.

228

Alfred Marshall published his seminal work in 1890. Alfred Marshall, Principles

of Economics (1st ed. 1890). The earlier work by Clark that Wilson praised, supra text

accompanying note 226, did include explorations in marginal utility theory; however,

Diamond notes that Wilson’s praise focused exclusively on Clark’s view of morality and

reform. See Diamond, supra note 225, at 34. Aside from philosophical predispositions,

Wilson likely followed developments in economics less closely once his career advanced

sufﬁciently that he could focus on his primary interest in political science rather than a

distinctly secondary interest in “political economy.”

229

Wilson wrote that the Constitution was based on a “Newtonian” model of balanced

forces, but had proved adaptable to a proper model based on the cooperation that takes

place in organic life. Constitutional Government, supra note 223, at 104–05. See also

Woodrow Wilson, The New Freedom 18 (1913) (“Society is a living organism and must

obey the laws of life, not of mechanics; it must develop.”).

230

Princeton in the Nation’s Service, Oct. 21, 1896, 10 PWW, supra note 5, at 11, 29–30. A

draft of that speech added “[we] deem the newest theory of society the likeliest ....

[Science] has made the legislator conﬁdent that he can create and the philosopher sure

that God cannot.” Id. at 29.

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3. Wilson on Concentration and Trust: 1905–1911

Until 1905, Wilson rarely discussed such political controversies as the

treatment of trusts.

231

Then the minister’s son, emerging in national

politics as a foe of Bryan’s agrarian populism within the Democratic

party, declared, “We can’t abolish the trusts. We must moralize them.”

232

In 1907, he invoked the trio of economics, morality, and law on which

Senator Newlands, in particular, would later rely in 1914. In Wilson’s view:

Our thinkers, whether in the ﬁeld of morals or the ﬁeld of economics,

have before them nothing less than the task of translating law and

morals into the terms of modern business; and inasmuch as morals

cannot be corporate, but must be individual . . . that task in simple

terms comes to this: to ﬁnd the individual amidst modern circumstances

and bring him face to face once more with a clearly deﬁned per-

sonal responsibility.

***

The law, both civil and criminal, can clearly enough characterize transac-

tions, can clearly enough determine what their consequences shall be

to the individuals who engage in them in a responsible capacity. New

deﬁnitions in that ﬁeld are not beyond the knowledge of modern

lawyers or the skill of modern lawmakers, if they will accept the advice

of disinterested lawyers. We shall never moralize society by ﬁning or

even dissolving corporations; we shall only inconvenience it. We shall

moralize it only when we make up our minds as to what transactions

are reprehensible, and bring those transactions home to individuals

with the full penalty of the law.

233

New standards presumably would entail new constraints because “mod-

ern business has brought into use transactions novel to our older practice

and almost unknown to our present legal deﬁnitions, which are in contra-

vention both of good morals and sound business.”

234

Further, while

economic changes necessitated the reformulation of law, morality, and

notions of sound business practice, the moralist had a seat at the table

in developing that reformulation. While Wilson said that certain practices

“are to be desired in the interest alike of efﬁciency and economy,”

235

commented soon after (albeit in a sermon) that “[t]he tendency to be

231

In a rare comment, Wilson wrote in 1898 that socialists erred in thinking that it was

“competition that kills.” The killer was such “unfair competition” as the use of child labor;

the state could “equalize” competition by forbidding such practices. Woodrow Wilson,

The State 632, 635–36 (1898).

232

Speech, Feb. 27, 1905, 16 PWW, supra note 5, at 14. See also Speech, Apr. 13, 1906,

id. at 358, 361 (“[n]o doubt the great corporations have come to stay; no doubt a certain

degree of monopoly is inseparable from their size and accumulated might; but they may,

by scrutiny and regulation, be freed from the spirit of monopoly”).

233

Politics (1907), 17 PWW, supra note 5, at 309, 322–23, 325.

234

Credo, Aug. 6, 1907, 17 PWW, supra note 5, at 335, 336.

235

Law or Personal Power, Apr. 13, 1908, 18 PWW, supra note 5, at 263, 265.

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‘practical’ will not conquer the tendency to be moral . . . . The moralist

will dictate both to the lawyer and to the man of business.”

236

Whatever the roles of moralist, economist, and lawyer in developing

standards, Wilson rejected broad Roosevelt-style regulation as a means

to implement them. Wilson distinguished regulation mandating conduct

from regulation prohibiting it: the latter was “regulation of the transac-

tion” and proper, and the former “direct administrative regulation” and

socialist. The answer to “unrighteous” corporate behavior was not to

“substitute the wrong of tyranny for the wrong of private oppression,”

but—again the essential themes—to pass clear laws and punish individual

transgressors.

237

Wilson added another theme in 1910, as he asked an

audience if it wanted “big business to beneﬁcently take care of you, or

do you want to take care of yourselves? Are you wards or are you men?

. . . Are you old enough to take care of yourselves?”

238

Wilson as governor did secure “one of the most thoroughgoing [public

utilities laws] in the nation.”

239

Except for public utilities regulation,

though, the governor did little to address questions of concentration.

He drafted platform language calling for repeal of New Jersey’s notorious

corporate laws,

240

but did not actually try to change them until 1913. In

discussing trusts, Wilson continued to focus on deﬁnitions and personal

liability.

241

He attacked Taft’s prosecutions for “hav[ing] everyone guess-

ing,” since “you cannot conduct sound business upon a test of guess-

ing.”

242

And Wilson continued to oppose corporate dissolutions. He

declared in 1910 that they would “throw great undertakings out of gear,”

and, unlike Brandeis, Wilson thought shareholders to be worth protect-

236

Baccalaureate Address, June 7, 1908, id. at 323, 330–31. But see Sklar, supra note 25,

at 413 (detecting a trinity in which law and morals would “work their way in the world to

suit the naturally, perhaps preternaturally, evolving requirements of modern business:

father (economy), son (law), holy spirit (morals).”).

237

The Government and Business, Mar. 14, 1908, 18 PWW, supra note 5, at 35, 38–39,

42–43, 50. See also Clark, supra note 51, at 96 (ways in which “a trust can crush an efﬁcient

competitor” are “nearly all now well known”).

238

Speech, Nov. 4, 1910, 21 PWW, supra note 5, at 543, 551.

239

Editor’s comments, id. at 578, 580 n.4. The New Jersey commission could investigate,

evaluate corporate property, ﬁx rates, establish standards of service for electric companies,

require railroads to establish junction points and intersections with other lines, and pre-

approve issuances of stocks and bonds. Id. See also Speeches, Jan. 17, 1911, 22 PWW, supra

note 5, at 345, 349, and Feb. 28, 1911, id. at 456, 461.

240

Draft Platform, Aug. 9, 1910, 21 PWW, supra note 5, at 43, 45; supra note 15 (New

Jersey laws).

241

See, e.g., The Lawyer and the Community, Aug. 31, 1910, 21 PWW, supra note 5, at 64, 71.

242

Wilson Says Taft Disturbs Business, N.Y. Times, Oct. 12, 1911, at 18.

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ing.

243

When the Supreme Court decided Standard Oil, Wilson deemed

it wrong to “wreak vengeance by destroying the machines,” rather than

punish ﬁnanciers who took “joy rides” in corporations.

244

4. The 1912 Campaign

a. Substantive Views

Wilson’s tone changed in 1912. The Democratic platform reﬂected

the agrarian populism of William Jennings Bryan, a populism that

opposed any rule of reason,

245

and Wilson was tied to both the platform

and Bryan: the future Secretary of State had made his peace with Wilson

and thereby facilitated Wilson’s nomination, and Wilson needed the

votes of Bryan’s supporters.

246

The platform began with a then-traditional

rallying cry: “A private monopoly is indefensible and intolerable.”

247

called for laws on price discrimination, holding companies, and inter-

locking directorates (thus providing a blueprint for the Clayton Act), as

well as legislation to directly limit corporate size (a provision that John

Bates Clark singled out for particular praise). Further, it nearly

demanded reversal of the rule of reason.

248

In accepting the nomination, Wilson deemed trusts “another chapter

in the natural history of power and of ‘governing classes.’ The next

chapter will set us free again.”

249

He interwove antitrust with banking

reform, tariff reform, and labor unrest to attack a privileged few, forming

trusts and “vast confederacies . . . of banks, railways, express companies,

243

The Lawyer and the Community, supra note 241, at 71. Brandeis saw shareholders as

investors seeking to maximize their return, and deemed immoral “the idea of such persons

being innocent in the sense of not letting them take the consequences of their acts....”

1911 Hearings, supra note 21, at 1177.

244

Speech, May 17, 1911, 23 PWW, supra note 5, at 59.

245

See, e.g., supra note 66 and accompanying text.

246

Heckscher, supra note 220, at 242, 247–48, 250. See supra text accompanying note

232 (Wilson’s emergence in 1905 as a foe of Bryan).

247

See Johnson, supra note 105, at 112, 114 (1900), 130, 132 (1904), 144, 146 (1908),

168, 169 (1912) (Democratic platforms).

248

The platform provided: “We favor the declaration by law of the conditions upon

which corporations shall be permitted to engage in interstate trade, including, among

others, the prevention of holding companies, of interlocking directors, of stock watering,

of discrimination in price, and the control by any one corporation of so large a proportion

of any industry as to make it a menace to competitive conditions ....Weregret that the

Sherman anti-trust law has received a judicial construction depriving it of much of its

efﬁciency and we favor the enactment of legislation which will restore to the statute the

strength of which it has been deprived by such interpretation.” Id. at 168, 169. See also

John Bates Clark, The Parties and the Supreme Issue,73Independent 891, 894 (Oct. 17, 1912).

249

Speech Accepting the Democratic Presidential Nomination, Aug. 7, 1912, 25 PWW,

supra note 5, at 3, 11.

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insurance companies, manufacturing corporations, mining corpora-

tions, power and development companies, and all the rest of the

circle....”

250

Their efforts produced economies “[u]p to a certain point

(but only up to a certain point),” and they produced prosperity, “if

by prosperity you mean vast wealth no matter how distributed.”

251

His

automotive metaphor soon changed. Firms were no longer benign vehi-

cles in which greedy executives took joy rides, but “cars of Juggernaut”

in which no man should take a joy ride—and which no commission

should license.

252

Wilson proclaimed, “I have seen these giants close their

hands upon the workingmen of this country already, and I have seen

the blood come through their ﬁngers.”

253

Despite this strident tone, though, Wilson elsewhere modulated his

message. After promising to “set us free” from trusts, his acceptance

speech declared, in very un-Brandeis-like terms:

I am not one of those who think that competition can be established

by law against the drift of a world-wide economic tendency; neither am

I one of those who believe that business done on a grand scale by a

single organization . . . is necessarily dangerous to the liberties, even

the economic liberties, of a great people like our own, full of intelligence

and indomitable energy.

254

After Wilson met Brandeis on August 28, he took from his adviser

speciﬁc terms (“regulating competition” versus “regulating monopoly”)

and examples.

255

But Wilson had, in Neils Thorsen’s words, a “capacity

for comprehending and absorbing new ideas, new methods, and even

new areas of scholarship [that] was strikingly matched by his ability to

adapt them to his original political loyalties and dispositions.”

256

Despite

Wilson’s borrowing, the seeds of “regulating competition” (as Wilson

understood it) had been in his acceptance speech.

257

The remedies he

espoused after he met Brandeis were those he had long espoused: per-

250

Id. at 12.

251

Id. at 9, 10.

252

Speech, Sept. 2, 1912, id. at 69, 74.

253

Speech, Oct. 7, 1912, id. at 369, 373.

254

Acceptance Speech, Aug. 7, 1912, id. at 4, 11.

255

Compare Speech, Sept. 20, 1912, id. at 198, 207–08, and 1911 Hearings, supra note

21, at 1161 (Wilson’s and Brandeis’s discussions of tying clauses used by United Shoes

Machinery Co.).

256

Niels Thorsen, The Political Thought of Woodrow Wilson, 1875–1910, at

188 (1988).

257

Acceptance speech, Aug. 7, 1912, 25 PWW, supra note 5, at 4, 11 (competition

“can in large measure be revived by changing the laws and forbidding the practices that

killed it”).

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sonal penalties (a theme from which Brandeis distanced himself) and

clear laws.

258

Further, unlike Brandeis, Wilson declared himself “for big business,

and . . . against the trusts.”

259

“I am not jealous of any process of growth,

no matter how huge the result, provided the result was obtained by the

processes of growth which are processes of efﬁciency, of economy, of

intelligence, and of invention.”

260

On the other hand, he condemned

business that had not “grown big” but been “made big.”

261

He thus

seemed to assume that mergers rarely generated efﬁciencies and, by

1912, a condemnation of ﬁrms “made big” reached broadly.

However, Wilson also continued to oppose dissolution proceedings.

He hesitated to tamper directly with business structure and said that

potential competition made such tampering unnecessary.

262

Despite his

skepticism about classical economics and deductive science, Wilson

hoped to promote antitrust’s various goals in tandem, and to do so with

relatively limited government intervention; he would simply free the

“pygmies” of small business to redress market distortion, and thereby

restore a balance between opportunity (at least to the extent of disciplin-

ing market behavior), efﬁciency, competition, fair distribution, and polit-

ical freedom.

b. The Role of a Commission

A commission was, at best, peripheral to Wilson’s 1912 vision, and a

Roosevelt-style commission, which he attributed to George Perkins and

258

For example, Wilson said there had been disclosed “all the processes by which monop-

oly is established and competition prevented,” and declared himself “not desirous of

putting everyone in jail,”since “selected specimens will do.” Speech, Oct. 28, 1912, in John

Wells Davidson, Crossroads of Freedom 484, 491 (1956) ; N.Y. Times, Aug. 29, 1912,

reprinted in 25 PWW, supra note 5, at 56, 58 (Brandeis’s view).

259

Speech, Sept. 17, 1912, 25 PWW, supra note 5, at 148, 152.

260

Speech, Sept. 18, 1912, id. at 164, 168.

261

Speech, Sept. 17, 1912, id. at 148, 152. See also Speeches, Sept. 18, 1912, id. at 164,

167 (trusts will crush competitor “as long as his market is local ...,andwhen his market

becomes general then he may be taken in or bought out”) and Sept. 20, 1912, id. at

203, 206–07.

262

Wilson said: “[I]t hasn’t seemed to make much difference whether [trusts were]

dissolved . . . that is to say, nominally dissolved. But I would be perfectly willing to let

them go without dissolution; because if we can make competition fair and prevent the

giants from killing the pygmies, then I am perfectly willing to let the brains of the pygmies

compete with the brains of the giants....Trusts can’t stand competition, let me tell you.”

Speech, Sept. 26, 912, id. at 257, 265–66. Wilson did see a need in “to disentangle” and

“gently, but ﬁrmly and persistently, dissect,” a “colossal community of interest.” Wilson,

New Freedom, supra note 229, at 189. However, this passage referred to the “money trust,”

see supra note 24, “a series of boards of directors . . . more formidable than any conceivable

single combination that dare appear in the open.” Id. Wilson feared the result “when all

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U.S. Steel’s Elbert Gary, was in Wilson’s view dangerous.

263

Under that

plan, Wilson charged, monopolies would be “adopted and regulated” in

“a consummation of the partnership between monopoly and govern-

ment.” Nor would business stop at partnership. “Once the government

regulates monopoly, then monopoly will have to see to it that it regulates

the government.”

264

Consistent with his earlier skepticism of scientiﬁc models, Wilson

decried government by “a smug lot of experts.”

265

He chided the “so-

called economic experts” around whom he had spent his life.

266

“God

forbid that in a democratic country we should resign the task and give

the government over to experts. What are we for if we are to be scientiﬁ-

cally taken care of by a small number of gentlemen who are the only

men who understand the job?”

267

The antitrust violations he intended

to outlaw would not be identiﬁed by experts employing deduction.

Rather, “we have been having trials and investigations by Congress, and

we know the processes of unrestricted competition by which these men

have accomplished the setting up of their monopolies. And if we don’t

know how to stop them, then the lawyers of this country have lost their

ingenuity and their intelligence.”

268

But Wilson hedged his bets. He said on September 25: “We want to

see the law administered; we are not afraid of commissions. . . . We may

have to have special tribunals, special processes, . . . But I am absolutely

opposed to leaving it to the choice of those tribunals what the processes

of law shall be and the means of remedy.”

269

Two days later, after meeting

with Brandeis, he approved (in a particularly opaque passage) a commis-

sion that did not “exercise the power of the government through the

trusts” but was rather “the instrument of a free government, a government

free to serve the interests of the people and quickly responsive to the

opinions of the people, with no intermediaries to interpret the interests

the combinations are combined and this ﬁnal combination is not disclosed by any process

of incorporation of law, but is merely an identity of personnel, or of interest...” Id.

263

Speech, Sept. 17, 1912, 25 PWW, supra note 5, at 158, 160.

264

Speech, Sept. 2, 1912, id. at 69, 73.

265

Speech, Sept. 17, 1912, id. at 148, 154. See also id. at 151 (“beware of commissions of

experts,” who “don’t see anything except what is under their microscope, under their eye”).

266

Speech, Sept. 4, 1912, id. at 98, 103.

267

Speech, Sept. 2, 1912, id. at 69, 78.

268

Speech, Sept. 17, 1912, id. at 158, 159.

269

Speech, Sept. 25, 1912, id. at 245, 251.

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of business and to check the rise of new industries and the entrance

into the ﬁeld of initiative of the individual himself.”

270

c. The Challenge for Wilson

As a candidate, Wilson’s condemnations of trusts were modulated by

a substantial caveat. “Trusts” were bad, “big business” good. And, though

Wilson apparently saw the trust problem as widespread (since he implied

that many large enterprises were “trusts”), his 1912 program contem-

plated that antitrust, supplemented by tariff and banking reform, could

remedy the problem. Once future misconduct was deterred by clearly

deﬁning violations and personally sanctioning corporate ofﬁcers, past

misconduct could be remedied, without resort to dissolutions, as poten-

tial competitors entered the market. Fully sharing neither Roosevelt’s

conviction that size correlated to efﬁciency nor Brandeis’s conviction

that it did not, Wilson was torn, in John Morton Blum’s words, between

an “ambivalent fear at once of big business and of regulating it.”

271

d. The Challenge of Wilson

Within months, Wilson would retreat from his assertions that dissolu-

tions were unnecessary. Events of 1914 would then undermine his conﬁ-

dence that clear prohibitions were possible, or at least politically feasible.

He would ﬁnally accept a prosecutorial commission, although he to some

degree anticipated that acceptance in 1912. A challenge of explaining

these changes is that Wilson had many sides. Among his personae, he

was a shrewd politician whose periodic reorientations, however sincerely

motivated, added to his political luster and his party’s viability.

272

How-

ever, he was also a moralist for whom principled compromise depended

270

Speech, Sept. 27, 1912, Davidson, supra note 258, at 284, 286–87. See also Brandeis

to Wilson, Sept. 30, 1912, 25 PWW, supra note 5, at 289, 293 (Brandeis text noting,

“We need for the enforcement of the Sherman law and regulation of competition an

administrative Board with broad powers;” Wilson edits changing the ﬁrst words to “We

probably need”).

271

John Morton Blum, Woodrow Wilson and the Politics of Morality 20 (1956).

272

Wilson’s move leftward in 1910 had added to his viability in 1912. His modulated

progressivism of 1912 positioned the Democrats as a party of responsible reform. He

would move rightward as he completed his New Freedom package with antitrust reforms

in 1914; he had already obtained a succession of other reforms, the economy was in

recession, and he needed to quell business concerns. See infra note 334 and accompanying

text. Still later, as the 1916 election approached, Wilson lurched back to the left; he

nominated Brandeis to the Supreme Court and embraced a child labor act, a farm loan

act, and a workmen’s compensation law for federal employees, although he also courted

business by securing a tariff commission and advancing legislation, which eventually

emerged as the Webb-Pomerene Act of 1918, to permit export cartels. See Arthur

S. Link, Wilson: Confusion and Crises 1915–1916, at 319–62 (1964); Sanders, supra

note 172, at 367–86.

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on knowing and disclosing “whither you are bound”

273

—but who some-

times failed his own standard.

274

Congress’s inability to develop clear and comprehensive deﬁnitions

of antitrust violations in 1914 would deny Wilson a bearing that told

him “whither he was bound.” Did he then abandon his principles in

embracing a regulatory commission? The analysis below concludes that

his retreat was expedient and ambivalent, but not unprincipled. However,

its ambivalence would have an impact on both the framing of the 1914

legislation and, later, the makeup of the Commission.

V. THE 1912 ELECTION AND THE PRESIDENT-ELECT

A. Election Results and Party Alignment

The 1912 election was an electoral college landslide, as Wilson carried

forty of forty-eight states. The Democrats widened their House majority

(they had taken control of the chamber in 1910) to 290–127, and took

control of the Senate with a 51–44 majority.

275

But the silver lining barely

covered some clouds. Wilson received 42 percent of the popular vote,

a respectable showing in a race with a signiﬁcant third party (and a non-

trivial fourth party), but his support was under 39 percent outside the

Democrats’“Solid South.”

276

Further, the Democrats’ success depended

in part on the Republican’s ﬁssion when Roosevelt left his party. The

Democrats traditionally were the minority party,

277

and when the Republi-

273

Speech, Nov. 2, 1909, 19 PWW, supra note 5, at 471, 476–77 (address at a seminary

explaining: “The individuals who have the vigor to lead must content themselves with a

slackened pace and go only so fast as they can be followed”—although “that is not inconsis-

tent with telling the world in very plain terms whither it is bound and what the ultimate

and complete truth of the matter, as it seems to them, is. You cannot make any progress

unless you know whither you are bound.”).

274

As Governor, for example, Wilson split from the New Jersey machine. As President,

he allowed his lieutenants to reward that very machine with patronage when he needed

to strengthen his party for Congressional elections. Arthur S. Link, Woodrow Wilson and the

Democratic Party, reprinted in The Higher Realism of Woodrow Wilson 60, 69–70 (1971).

275

George B. Galloway, History of the House of Representatives 368 (2d ed.

1976); Robert C. Byrd, 4 The Senate : 1789–1989, at 418 (1994). One Senate seat was

held by Progressive Miles Poindexter, on a two-year sabbatical from the Republicans.

Eighteen seats in the House were held by third parties, mostly Progressives.

276

Roosevelt received 27% of the vote, Taft 23%, and Socialist Eugene Debs 6%. Scott

James ﬁnds that Wilson received 58% of the vote in ﬁfteen “Southern” states, and fewer

than 39% in the Northeast, the Midwest, and the South. James, supra note 190, at 135.

277

Only one other Democrat (Grover Cleveland) had been elected President since the

Civil War. Democrats had controlled the Senate for only four years in that time and,

though they had a better record in the House, the Republicans had controlled that

chamber, as well, from 1896 to 1910.

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cans reunited they in fact recovered the House, Senate, and Presidency

between 1916 and 1920.

278

Still, in 1912, the Democrats held a strong hand. Further, they rein-

forced their numerical strength with a caucus that formed a nearly united

front on Wilson’s four key initiatives in 1913 and 1914, including the

FTC and Clayton Acts.

279

Using the caucus, and seeking to build a ﬁrm

base for his party, Wilson emulated the British system he had long

admired and led the nation by leading his party.

280

With the signiﬁcant

exception of the FTC Act, the Democrats generally spurned help from

progressive Republicans and received little.

281

B. New Jersey’s Seven Sisters

In moves that presaged his Presidential plans, Wilson turned quickly

to antitrust—while still Governor of New Jersey. Stung by Roosevelt’s

attacks on the state’s laws,

282

Wilson called for new corporate and antitrust

laws on January 14, 1913. With the Presidential transition then on March

4, Wilson secured seven bills, the “Seven Sisters,” on February 19.

283

278

The Democrats’ House majority would drop from 163 to 38 in 1914, and the party

returned to minority status in 1916. See Galloway, supra note 275, at 368. Direct election

of Senators would buoy the Democrats to a 5-seat gain in 1914. See Byrd, supra note 275,

at 418; Jay S. Bybee, Ulysses at the Mast: Democracy, Federalism, and the Sirens’ Song of the

Seventeenth Amendment,91Nw. U. L. Rev. 500, 552 (1997) (prior method of electing

Senators by state legislatures generally favored Republicans). However, the Republicans

made inroads in 1916 and recovered the Senate in 1918. Wilson himself barely survived

the Republicans’ reuniﬁcation in 1916, with a 277–254 electoral college victory over former

Justice (and future Chief Justice) Charles Evan Hughes. By 1920, the Democrats lost the

Presidential vote in every state north of Virginia and every state west of Texas. Cooper,

supra note 12, at 253, 371.

279

James, supra note 190, at 141–43. Under caucus rules, a two-thirds vote by a caucus

of the Democrats serving in the House or Senate bound all the Democrats in that chamber,

with limited exceptions, on the subsequent ﬂoor vote. Wilder H. Haines, The Congressional

Caucus of Today,9Am. Pol. Sci. Rev. 696, 696–97 (1915); George H. Haynes, The Senate

of the United States 476 (1938).

280

See supra text accompanying note 223.

281

Among non-Democratic Senators, only Republican Robert La Follette and Progressive

Miles Poindexter supported Wilson’s ﬁrst major initiative, the tariff bill. Although opposi-

tion to Taft’s tariff program had been a major dispute between progressives and Old

Guard Republicans, progressive Republicans, who had sought greater tariff reductions

under Taft, now attacked Wilson’s tariff reductions for disproportionately affecting farmers.

Holt, supra note 67, at 89–91. Wilson also had little Republican support on the banking

bill, his second major initiative. Id. at 108–12. See also infra notes 549, 563, and accompanying

text (discussing Clayton bill).

282

Governor Wilson and the Trusts, Nov. 2, 1912, 17 TRW, supra note 1, at 341. See also

supra text accompanying note 15 (New Jersey laws).

283

See Joseph F. Mahoney, Backsliding Convert: Woodrow Wilson and the Seven Sisters,18

Am. Q. 71, 73–78 (1966). The bills were Chapters 13–19 of the New Jersey Session Laws

(1913), reprinted in Laws, supra note 16, at 229–35.

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The President-elect did not turn to Brandeis, but rather to New Jersey

jurists.

284

Those jurists drew heavily on existing state laws, largely from

agrarian states with strong antitrust movements. One of the Sisters pro-

hibited most new stock acquisitions by corporations, although it allowed

corporations to retain previously acquired stock.

285

Another prohibited

intrastate price discrimination with an improper intent or effect, though

allowing price differences based on grade, quality, transportation costs

and (more unusually) quantity.

286

Yet another, seemingly a frontal attack

on both the rule of reason and the Supreme Court’s earlier “directness”

test, criminalized any agreement whose participants “directly or indirectly

preclude a free and unrestricted competition among themselves, or any

purchasers or consumers, in the sale or transportation of any article or

commodity, either by pooling, withholding from the market or selling

at a ﬁxed price, or in any manner by which the price might be affected.”

287

“Free and unrestricted competition” language was not novel; similar text

appeared in other states’ laws, and Senator John Sherman had sought

such language in the bill that ultimately bore his name.

288

The Supreme

Court had upheld such laws, while suggesting that they might be over-

broad in some applications.

289

Whatever the precedent, though, the New

Jersey language was particularly strong in rejecting any agreement by

which prices might directly or indirectly be affected, and its language

seems hard to reconcile with Wilson’s calls for clarity. And, when Wilson

prepared to turn to federal antitrust legislation, he sent the Seven Sisters

to Congressman Henry Clayton as a model.

290

C. The McReynolds Appointment

Wilson may have reconsidered his opposition to corporate dissolutions

before the 1912 election, in response to a letter written on behalf of

284

Arthur S. Link, Wilson: New Freedom 34 (1956).

285

Session Laws, N.J., ch. 18 (1913). The Sisters did not prohibit mergers through asset

acquisitions, but regulated the issuance of bonds to ﬁnance such acquisitions. Id. ch. 17.

286

Id. ch. 15. See also infra notes 324, 326, and accompanying text (discussing state price

discrimination laws).

287

Session Laws, N.J., ch. 13 (1913).

288

State laws include, for example, Kansas L. 1897, ch. 265, reprinted in Laws, supra note

16, at 122; Arizona L. 1912, ch. 73, § 1, reprinted in id. at 45, 46. Kansas law still retains

such language. Kan. Stat. Ann. § 50-112 (2001). See also SC Code Ann. § 39-3-10 (2001);

Tenn. Code Ann. § 47-25-101 (2001); Ohio Stat. § 1331.01 (2001). Sherman’s bills include

S.1 as Reported by the Senate Committee on Finance, 51st Cong., 1st Sess. ( Jan. 14, 1890).

289

Smiley v. Kansas, 196 U.S. 447, 456–57 (1905); National Cotton Oil Co. v. Texas, 197

U.S. 115 (1905).

290

Wilson to Henry Clayton, Oct. 20, 1913, 28 PWW, supra note 5, at 420.

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John Bates Clark.

291

Whenever Wilson’s views changed, though, he did

not publicly signal his retreat until he chose James McReynolds as Attor-

ney General. McReynolds had been the government’s lead attorney in

American Tobacco, but resigned to protest Taft’s acquiescence to the disso-

lution plan.

292

McReynolds soon justiﬁed his trustbuster reputation. He

proposed a graduated excise tax targeting the successor ﬁrms under

the tobacco decree (a proposal from which Wilson quickly distanced

himself), and announced his opposition to dissolutions that left successor

ﬁrms under common ownership.

293

The McReynolds appointment

showed that Wilson was now reconciled to dissolution proceedings.

294

VI. FEDERAL ANTITRUST LEGISLATION

Wilson took ofﬁce on March 4, 1913. Congress went into session on

April 7, 1913, and remained in continual session for eighteen months,

adjourning three weeks before midterm elections.

295

During that re-

markable period, the political scientist-turned-President sequentially

addressed a series of initiatives. He broke a century-old precedent by

addressing Congress personally, and he made a personal address at the

start of each initiative.

296

291

Prompted by reports of Wilson’s views, Benjamin Anderson, Jr. wrote Wilson on

behalf of himself and Clark. Clark, though Republican, had endorsed Wilson. Anderson

explained that Clark had trusted potential competition in 1901, but now thought that

nothing could “regulate” competition short of “actual competition, on a considerable scale,

and in all important markets;” only “dynamite” could break an existing trust. Anderson to

Wilson, Oct. 5, 1912, 25 PWW, supra note 5, at 420, 421. The letter said that Clark had

endorsed Wilson in the belief that Wilson would pursue effective antitrust remedies. See

Clark, supra note 248, at 894.

292

According to a press report, McReynolds had wanted a receiver appointed to sell

parts of American Tobacco’s business. When defendant’s counsel objected that a receiver’s

sale would be conﬁscation, McReynolds replied: “Since when has property illegally and

criminally acquired come to have any rights?” See, e.g., J.C. McReynolds, the New Preceptor for

the Trusts, N.Y. Times, Mar. 9, 1913, at 56. See also Link, New Freedom, supra note 284,

at 116–17 (Wilson appointed McReynolds “knowing only that he had the reputation of

a bitter foe of monopoly”).

293

To Hit Tobacco Trust by Taxing, N.Y. Times, June 4, 1913, at 1; Wilson Passed on Tobacco

Tax Plan, N.Y. Times, June 7, 1913, at 1; M’Reynolds to Ask Real Dissolutions, N.Y. Times,

Dec. 10, 1913, at 5.

294

Wilson also rebuffed U.S. Steel’s attempt, soon after he took ofﬁce, to settle the

pending case in a way that would leave the ﬁrm intact. Link, New Freedom, supra note

284, at 419. Fewer antitrust cases would in fact be initiated under Wilson than under Taft.

Taft’s last twelve months in ofﬁce had witnessed 28 new cases. Perhaps reﬂecting the time

to start new litigation or perhaps reﬂecting the weight of the litigation bequeathed by

Taft, Wilson’s ﬁrst year witnessed only 13 new cases, and his second year only 10. Antitrust

Laws, supra note 84, at 106–13.

295

James Miller Leake, Four Years of Congress,11Am. Pol. Sci. Rev. 252, 254 (1917).

296

Link, New Freedom, supra note 284, at 152–53.

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Wilson ﬁrst secured tariff reform. He called tariff protection “the soil

in which trade combinations and combinations of manufacturers most

readily grew, and most rankly;” domestic competition could be more

readily suppressed when a tariff shield limited foreign competition.

297

Then, with key input from Brandeis, he obtained a banking law that

created the Federal Reserve Board.

298

This, he said, “created a democracy

of credit,”“a currency which comes into existence in response to the

call of every man who can show a going business and a concrete basis

for extending credit to him, however obscure or prominent he may

be, however big or little his business transactions.”

299

Next he turned

to antitrust.

300

A. Wilson’s Call to Arms

Wilson announced his antitrust initiative to Congress on January 20,

1914. Quoting multiple Democratic platforms, he declared: “We are all

agreed that ‘private monopoly is indefensible and intolerable.’”

301

But

as he sometimes had softened his 1912 rhetoric, Wilson now said “[t]he

antagonism between business and government is over.”

302

Wilson

repeated his calls for individual liability (his most popular line) and for

deﬁnitions to “explicitly and item by item” describe violations with such

clarity as to “practically eliminate uncertainty, the law itself and the

penalty being made equally plain.”

303

Tracking the 1912 platform, he

proposed to address holding companies, price discrimination and inter-

locking directorates (but dropped the demand to limit corporate size).

304

Further, he proposed an investigatory and advisory agency that would

aid courts (in formulating dissolution decrees), and he particularly high-

lighted aid that it would give to business.

297

Wilson to House Speaker Oscar W. Underwood, Oct. 17, 1914, 31 PWW, supra note

5, at 168, 169.

298

Link, New Freedom, supra note 284, at 212.

299

Wilson to Underwood, supra note 297, at 171–72.

300

Signiﬁcant prior analyses of this legislative history include Lande, supra note 25, at

106–26; Eugene R. Baker & Daniel J. Baum, Section 5 of the Federal Trade Commission Act:

A Continuing Process of Redeﬁnition,7Vill. L. Rev. 517 (1962); Sanders, supra note 172,

ch. 8; James, supra note 190, ch. 3; George Rublee, The Original Plan and Early History of

the Federal Trade Commission,11Proc. Acad. Pol. Sci. 114 (1926); Gilbert Montague,

Unfair Methods of Competition,25Yale L.J. 20 (1915); Neil W. Averitt, The Meaning of “Unfair

Methods of Competition” in Section 5 of the Federal Trade Commission Act,21B.C. L. Rev.

227 (1980).

301

H.R. Doc. No. 625, 63d Cong., 2d Sess. 5 (1914). See also supra note 247 and accompany-

ing text (platforms).

302

H.R. Doc. No. 625, supra note 301, at 4.

303

Id. at 6–7; Five Trust Bills in Wilson Plan, N.Y. Times, Jan. 21, 1914, at 1.

304

H.R. Doc. No. 625, supra note 301, at 6–8. See also supra note 248 (platforms).

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And the business men of the country desire something more than

that the menace of legal process in these matters be made explicit and

intelligible. They desire the advice, the deﬁnite guidance and informa-

tion which can be supplied by an administrative body, an interstate

trade commission.

The opinion of the country would instantly approve of such a commis-

sion. It would not wish to see it empowered to make terms with monop-

oly or in any sort to assume control of business, as if the Government

made itself responsible. It demands such a commission only as an

indispensable instrument of information and publicity, as a clearing

house for the facts by which both the public mind and the managers

of great business undertakings should be guided, and as an instrumen-

tality for doing justice to business where the processes of the courts or

the natural forces of correction outside the courts are inadequate to

adjust the remedy to the wrong in a way that will meet all the equities

and circumstances of the case.

305

Indeed, Wilson so convincingly touted the proposed agency’sroleasan

aid to business that he would later have to deny that the commission

could immunize conduct from Justice Department prosecution.

306

B. The “Five Brothers” and the Legislative Hearings

1. The Participants

Although Wilson asked Chairman Henry Clayton of the House Judi-

ciary Committee to draft a uniﬁed antitrust package, both chambers

bifurcated responsibility for the legislation. Each referred a commission

bill to its Commerce Committee and provisions of the future Clayton

Act to its Judiciary Committee. Each had separate debates and two sets

of managers. The Senate Judiciary Committee even met as the full Senate

debated the commission bill.

307

There were also cross-currents within the administration. Attorney

General McReynolds, presumably fearing interference with his Justice

305

Id. at 6.

306

Wilson would note “surprise over suggestions that there was considerable confusion

as to just what the functions of the commission would be, and as to whether there would

be a conﬂict between its duties and those of the other branches of the Government.”

Trade Commission to “Smell Around,” Wilson’s Homely Phrase for Pursuit of the “Anti-trust Rat”

by the Proposed Board, N.Y. Times, Jan. 27, 1914, at 7. The confusion extended to Senator

Newlands. Newlands to Wilson, Mar. 5, 1914, 29 PWW, supra note 5, at 317, 318 (seeking

clariﬁcation). Representative Harry Covington said on May 19, as the House debate began,

that “certain big business men and their lawyers . . . began to hail the message as the

forerunner of a statute that would enable them to propose to a Government commission

their plans for exploitation . . . and obtain, perchance, that individual approval which

would mean individual immunity at a later date...” 51 Cong. Rec. 8840 (1914).

307

See Allyn A. Young, The Sherman Act and the New Anti-Trust Legislation: II,23J. Pol.

Econ. 305, 308–09 (1915), 51 Cong. Rec. 11,534 (1914).

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Department, was among those who urged delay.

308

His hostility (which

would plague the Commission after Wilson placed him on the Supreme

Court

309

) was no secret. The press soon reported that he doubted the

agency’s constitutionality.

310

Joseph E. Davies, Wilson’s Commissioner of Corporations, advocated

a commission that he expected to head. Davies, who had undergraduate

training in economics, had been a district attorney and private prac-

titioner. He moved to the national stage when he helped Wilson win

the Wisconsin primary, and then managed his western campaign.

311

1913, Davies recommended a series of proposals, including various spe-

ciﬁc prohibitions.

312

He also proposed a commission to investigate Sher-

man Act violations, conduct hearings, “prescribe such reformations as

are necessary, . . . serve notice on the offending corporation to comply

with such ﬁndings within sixty days or more,” and report non-compliance

to the Justice Department.

313

Louis Brandeis, whose sole government position at the time was as

special counsel to the ICC in a national railroad rate case, nonetheless

became an administration spokesman for antitrust legislation. In Decem-

ber 1913, he provided advice on antitrust legislation to Interior Secretary

Franklin Knight Lane (a former ICC Chairman) and Treasury Secretary

308

See Link, New Freedom, supra note 284, at 446. A potential for interference was in

language (which survived into the ﬁnal act and remains today) that authorized the commis-

sion to investigate and report on antitrust orders, perhaps second-guessing the Department.

H.R. 15613, 83d Cong., 2d Sess. (Apr. 13, 1914), § 13; 15 U.S.C. § 46(c). Representative

Covington even declared that the Commission’s investigative power would prevent Justice

Department “laxity.” 51 Cong. Rec. 8845 (1914). Another likely concern was Wilson’s

statement that the commission might propose orders in Department litigation “by indepen-

dent suggestion.” A far narrower provision survived in the ﬁnal bill, under which a court

could appoint the commission a special master to address antitrust remedies. 15 U.S.C.

§ 47. In practice, this narrow provision was used only once, by Judge Learned Hand. See

United States v. Corn Prods. Ref. Co, 234 F. 964, 1018 (S.D.N.Y. 1916).

309

McReynolds rejected the FTC’s position in whole or large part during each of the

Commission’s ﬁrst eight appearances before the Court, between 1920 and 1926. During

those years, he wrote four majority decisions in whole or large part adverse to the agency.

See, e.g., FTC v. Gratz, 253 U.S. 421 (1920); FTC v. Western Meat Co., 272 U.S. 554 (1926).

He also wrote two dissents from holdings favorable to the Commission. See, e.g., FTC v.

Beech-Nut Packing Co., 257 U.S. 441 (1922).

310

Flaw in Trade Board?, N.Y. Times, Feb. 20, 1914, at 1.

311

Elizabeth K. MacLean, Joseph E. Davies: Envoy to the Soviets 10–13 (1992). See

also Elizabeth K. MacLean, Joseph E. Davies 57–58 (1986) (unpublished Ph.D. dissertation,

University of Maryland) [hereinafter Davies].

312

For example, adopting a Brandeis proposal, he tentatively suggested that restraints

of trade be presumed illegal where a ﬁrm controlled 40% of a market. Joseph E. Davies

to Wilson, Dec. 27, 1913, 29 PWW, supra note 5, at 78, 82.

313

Id. at 84. Davies did not make explicit whether the commission order would affect

a subsequent case.

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William McAdoo.

314

He later counseled McReynolds.

315

Brandeis was the

ﬁrst witness before the House Commerce Committee, and he spoke

for the administration before the Chamber of Commerce.

316

His ICC

commitment was time-consuming and much of his work on antitrust

was accomplished by proxy,

317

but Brandeis would provide pivotal input

in the spring, and would later became a strong Commission advocate

on the Court.

318

2. The Product

With the Administration having less than a uniﬁed vision, Clayton

developed four bills of a series dubbed the “Five Brothers.” (The ﬁfth

would be the commission bill). The bills included numerous procedural

provisions, as well as substantive provisions governing price discrimina-

tion, exclusive contracts and tying clauses, interlocking directorates and

holding companies. They provided for Justice Department civil enforce-

ment, but the focus was on their criminal sanctions. In keeping with

Wilson’s philosophy of individual accountability, those sanctions could

be directed not only at ﬁrms but also at their individual directors, ofﬁcers,

or agents.

319

The bills caused substantial consternation. One would have proscribed

agreements, arrangements, or understandings whose participants

“directly or indirectly, undertake to prevent a free and unrestricted

competition among themselves or among any purchasers or consumers

in the sale, production, or transportation of any product, article, or

commodity.”

320

This “free and unrestricted competition” provision did

not refer to effects on price and was, if anything, broader than its analog

in New Jersey’s Seven Sisters. Like New Jersey’s law and many other state

laws,

321

its terms seemed to frontally attack both the Standard Oil rule of

314

See Brandeis to Lane, Dec. 12, 1913, 3 LBL, supra note 4, at 218; Brandeis to Alice

Brandeis, Dec. 5, 1913, The Family Letters of Louis Brandeis 227 (Melvin I. Urofsky

& David W. Levy eds., 2002) [hereinafter FLB] (describing meeting with McAdoo and

noting that Senator Newlands had wanted to meet with Brandeis and Davies, but Brandeis

“commuted this sentence to a luncheon with him & House members some time next

week.”).

315

See Brandeis to Alice Brandeis, Mar. 2, 1914, id. at 242 (describing his future colleague

on the Supreme Court as a “great time waster”).

316

ITC Hearings, supra note 185, at 3; Brandeis, Democracy, supra note 197, at 31.

317

See infra text accompanying notes 382–387.

318

See, e.g., FTC v. Gratz, 253 U.S. at 428 (Brandeis, J., dissenting).

319

See, e.g., No. 2—Comm. Print. Tentative Bill § 4. (The tentative bills are reprinted in 2

Earl W. Kintner, The Legislative History of the Federal Antitrust Laws and

Related Statutes 1074–80 (1978).)

320

No. 2—Comm. Print. Tentative Bill § 1.

321

See supra notes 287–288 and accompanying text.

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reason and the Court’s earlier “directness” test. Though Wilson had

invited Clayton to use the Seven Sisters as a model,

322

the Administration

soon distanced itself from the text. Brandeis told the Chamber of Com-

merce that the Brothers were “not Administration bills”;reﬂecting his

own views, he declared that Wilson sought “regulated,” not “free and

unrestricted,” competition.

323

Another source of concern was the price discrimination provision.

“Local price cutting” was among the “unfair methods of competition”

in Standard Oil; the Democrats had pledged to address the practice;

and many states already restricted in-state price differentials.

324

The new

provision would apply nationwide, though, and the devil was in its details.

What injury should be proscribed? The January bill reached differentials

intended to “injure or destroy a competitor, either of the purchaser or

of the seller;” a version reported by the House Judiciary Committee in

May backtracked to cover only those intended to cause “wrongful” injury,

but still focused on injury to “a competitor” and not competition.

325

Also, what exemptions should be allowed? Most state laws allowed price

differentials to reﬂect differences in transportation costs, grade, or qual-

ity, and a few allowed quantity discounts or expressly allowed sellers to

lower prices to meet competition.

326

The Brothers bill allowed all of

these except a defense for meeting competition,

327

although Edwin Webb

(who became Judiciary Committee Chairman when Henry Clayton

became a judge on May 25) would say that no such provision was needed

because a price reduction to meet competition would not show wrongful

322

Wilson to Henry Clayton, Oct. 20, 1913, 28 PWW, supra note 5, at 420. Clayton’s

response to the invitation was not surprising; he was “a follower of Bryan and something

of a deep-South liberal.” Dewey W. Grunthal, Jr., Southern Congressional Leaders and the New

Freedom, 1913–1917,13J. S. Hist. 4 (1947) 439, 448 (Clayton’s politics).

323

Brandeis, Democracy, supra note 197, at 31.

324

Standard Oil, 221 U.S. at 43; Johnson, Platforms, supra note 105, at 169; H.R. Rep.

No. 627, Pt. 1, 63d Cong., 2d Sess. 9 (1914); Laws, supra note 16, at 54 (Arkansas), 64

(California), 87 (Idaho), 127–28 (Kansas), 142 (Louisiana), 154–55 (Massachusetts), 168

(Michigan), 191–92 (Missouri), 205–06 (Montana), 211–12 (Nebraska), 232 (New Jersey),

256 (North Carolina) 266–67 (North Dakota), 288–89 (Oklahoma), 342–43 (Utah), 355–

56 (Wisconsin) and 359–60 (Wyoming). Arkansas, Montana, New Jersey, North Carolina,

North Dakota, Oklahoma, and Utah all passed price discrimination laws during February

and March 1913. See id. But see John S. McGee, Predatory Price Cutting: The Standard Oil

(N.J.) Case,1J.L. Econ. 137 (1958) (arguing that the case record does not establish that

Standard Oil achieved its position through predatory price cutting).

325

No. 1—Comm. Print. Tentative Bill ; H.R. 15657 as Reported by the House Committee on the

Judiciary (May 6, 1914) § 2.

326

Wyoming allowed a meeting competition defense, New Jersey allowed quantity dis-

counts, and California allowed both. See generally Laws, supra note 16.

327

See No. 1—Comm. Print. Tentative Bill. These provisions survived into the ﬁnal House

bill. H.R. 15657 as Agreed upon in the Committee of the Whole House ( June 2, 1914).

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intent.

328

The result was a potentially complex provision that threatened

to criminalize routine transactions.

In addition to problems of inclusion, there were questions of exclu-

sion. Wilson’s comprehensive “item by item” deﬁnitions never emerged.

Perhaps most glaringly, Section 7 of the Clayton Act was (and would

remain until 1950) a “holding company” provision, limited to stock

and not asset acquisitions.

329

Though the House Report reserved special

opprobrium for holding companies,

330

it remains notable that Congress

made no attempt to set standards for asset acquisitions in an antitrust

package touted as comprehensive.

331

3. The Fading Momentum

Business quickly became skeptical that the Clayton bill would lead to

clarity.

332

Smaller business, supposedly beneﬁciaries of the legislation,

came to fear that its criminal sanctions might be turned on them.

333

The

bill’s problems were further exacerbated because a recession began when

Wilson took ofﬁce and was now worsening.

334

With the bills’ progress

328

51 Cong. Rec. 9389 (1914).

329

See FTC. v. Western Meat Co., 272 U.S. 554 (1927) (Commission could not reach

asset acquisitions under Clayton Act § 7, even if acquirer ﬁrst purchased the stock of the

acquired corporation); Arrow-Hart & Hegeman Elec. Co. v. FTC, 291 U.S. 587 (1934)

(Commission could not order divestiture if it challenged a stock acquisition and, during

litigation, the companies effected an asset acquisition); FTC v. Eastman Kodak Co., 274

U.S. 619 (1927) (Commission could not order divestiture in a § 5 challenge to an asset

acquisition). The Celler-Kefauver Act of 1950 ﬁnally amended § 7 to reach asset acquisi-

tions. Act of Dec. 29, 1950, ch. 1184, 64 Stat. 1125.

330

The report denounced them as “an abomination.” H.R. Rep. No. 627, supra note

324, Pt. 1, at 17. Senator Cummins noted that a pyramid of holding companies might

allow majority owners in the top ﬁrm to leverage control over ﬁrms at the bottom, and

he observed that a holding company could manage as a unit ﬁrms that the public mistakenly

took to be competitors. 1911 Hearings, supra note 21, at 1114; 51 Cong. Rec. 14,316 (1914).

331

Senators Reed and Cummins did attempt unsuccessfully to add provisions to the

Senate bill that would limit corporate size. (Reed proposed an absolute limit and Cummins

proposed to limit ﬁrms so large as to prevent substantially competitive conditions). These

amendments would have effectively limited corporate acquisitions, but Senator Reed’s

amendment drew only 16 votes, and Senator Cummins’s amendment was defeated without

a recorded vote. See infra notes 420, 502, 534, and accompanying text.

332

H.R. Rep. No. 627, supra note 324, Pt. 3, at 1 (views of Rep. John Nelson); Gaskill,

supra note 64, at 43.

333

Rublee, Original Plan, supra note 300, at 115; Link, New Freedom, supra note 284, at

434. A Chamber of Commerce referendum, reported on July 15, overwhelmingly opposed

(among other provisions) a price discrimination law. 51 Cong. Rec. 12,737 (1914). The

vote against the price discrimination provision, endorsing the recommendation by the

committee conducting the referendum, was 531–22. (A tying clause provision was similarly

rejected, but the referendum overwhelmingly supported a relatively narrow prohibition

of interlocking directorates.)

334

Link, New Freedom, supra note 284, at 445–46 (suggesting the recession might have

become a depression had war not intervened).

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further confounded by the question of a labor exemption,

335

the New

York Times reported on March 1 that disclaimers from high quarters had

“reduced what little momentum for passage the measures had . . . .”

336

March 12, Wilson retreated from his commitment to precise deﬁnitions,

telling the press that some deﬁnitions might introduce uncertainty where

the law had become clear.

337

With elections approaching, the Chairman

of the Democratic National Committee asked Wilson to delay antitrust

legislation. Wilson declined. The matter was “debatable as a question of

political expediency,” he said, but beyond debate “as a question of party

courage and energy.”

338

C. The House Debates

1. The Clayton Bill

The House Judiciary Committee’s version of the Clayton bill included

prohibitions of price discrimination, exclusive and tying contracts, hold-

ing companies, and interlocking directorates. Violations were punishable

by criminal sanctions, which could reach corporate ofﬁcers, directors,

and agents.

339

Consistent with Wilson’s declaration that business and government

were no longer antagonists, the committee managed to derive satisfaction

from its observation that the “atmosphere of antagonism which such

legislation might ordinarily be expected to encounter has not always

been present . . . .”

340

The majority report denounced speciﬁc practices

for victimizing both competitors and consumers

341

but did not denounce

large-scale business per se. The bill’s stated intent was “to help business

and the whole people of the country who are related to or affected by

it.”

342

Three minority reports represented differing strands of opposition.

335

After Loewe v. Lawlor, 208 U.S. 274 (1908), applied the Sherman Act to labor activities,

see text accompanying notes 49–50, the labor movement sought an antitrust exception.

That campaign became part of the Clayton Act debates, and Wilson resisted the broad

an exemption that labor sought. See generally Link, New Freedom, supra note 284, at 427–33.

336

Trust Bills’ Fate Depends on Wilson, N.Y. Times, Mar. 1, 1914. at 12.

337

Press Conference, Mar. 12, 1914, 29 PWW, supra note 5, at 335. See also Press Confer-

ence, Mar. 5, 1912, id. at 313, 316 (“deﬁnition is always a risky business,” since inclusion

of some practices might imply that others were meant to be allowed under existing law).

338

Wilson to William Franklin McCoombs, Apr. 7, 1914, id. at 409.

339

H.R. 15657, 63d Cong., 2d Sess. (May 6, 1914), §§ 2, 4, 8, 9, 12.

340

H.R. Rep. No. 627, supra note 324, Pt. 1, at 7.

341

For example, price discrimination, as practiced by Standard Oil Co., the American

Tobacco Co., and “others of less notoriety,” was “manifestly unfair and unjust, not only

to competitors who are directly injured thereby but to the general public.” Id. at 8–9.

342

Id. at 7.

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One sought “a rest from further legislation,”

343

another sought Roosevelt-

style regulation,

344

and a third attacked the “so-called antitrust bill. . . .

Like a Don Quixote the committee sallied forth valiantly to overthrow

the giant monopoly, but under the pressure of political expediency it

turned aside to assail the windmills of little business.”

345

The House began debate on May 25, and on June 5 it approved the

bill in substantially the form recommended by the Committee. The

margin of victory was 277–54, with a near-unanimous Democratic vote.

346

2. A (Moderately) Expanded Bureau of Corporations

The House began debating the commission bill on May 22. That bill

was approved, by voice vote, on June 5.

347

Consistent with Wilson’s January message (as subsequently clariﬁed),

the commission bill envisioned a slightly expanded Bureau of Corpora-

tions, an investigative and “advisory” body whose advice would afford

only limited protection to its recipient. The bill’s prime innovation was

to remove the Bureau “entirely from the control of the President and

the Secretary of Commerce.”

348

It would become an independent agency

headed by multiple commissioners (no more than a bare majority from

any party) with staggered terms and relatively high pay.

349

Writing to a

senator who opposed a commission, Wilson said that business wanted

one and his proposal would “gratify them without launching out upon

a dangerous experiment.”

350

In fact, the proposed commission would

have little real power. It could investigate, issue subpoenas, demand

343

Id., Pt. 2, at 1. The report by Rep. George Graham and two others argued that business

needed to adjust itself to existing laws, as construed by the Court.

344

Id., Pt. 4, at 1–4. The report by Rep. Dick T. Morgan argued that many businesses

“have become of public consequence, . . . from a national viewpoint have become impressed

with a public use, and in the interests of the Nation should be placed under strict Federal

supervision and control.” Id.at2–3.

345

Id., Pt. 3, at 1–2 (report by Rep. John M. Nelson).

346

51 Cong. Rec. 9911 (1914). The Democrats’ vote on the Clayton bill was 218–1, 71

not voting. James, supra note 190, at 194.

347

Id. at 9910.

348

H.R. Rep. No. 533, Pt. 1 (Apr. 14, 1914), at 3. An investigation could be triggered,

though, at “the direction of the President, the Attorney General, or either House of

Congress.” H.R. 15613, 63d Cong., 2d Sess. § 10.

349

The House bill provided for 3 commissioners; the Senate for 5. Id. at § 1; H.R. 15613

as Reported by the Senate Committee on Interstate Commerce, 63d Cong., 2d Sess.

( June 13, 1914). Their pay would be $10,000, roughly $180,000 in current dollars. See

note 22, supra. That compared to salaries of $7500 for Senators, Byrd, supra note 275, at

675, and $5000 for the Commissioner of Corporations, Act of Feb. 11, 1903, ch. 544, § 6,

32 Stat. 823, but $10,000 for ICC Commissioners and $12,000 for Federal Reserve Board

members, S. Rep. 597, supra note 139, at 11 (advocating $12,000 ﬁgure for commissioners).

350

Wilson to John Sharp Williams, Jan. 27, 1914 29 PWW, supra note 5, at 184, 184–85.

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annual reports from business, provide information to the Executive, and

produce its own reports for the public or Congress.

351

It also could serve

as a master in equity to advise a court about remedies in a government

antitrust case, a potentially signiﬁcant but still advisory role.

352

Democratic spokesman Harry Covington deemed the commission’s

prime weapon “pitiless publicity,” to “make the man of devious ways an

object of reproach among his fellow men.

353

When that failed, it had

“ample powers to promote beneﬁcent legislation.”

354

Frederic Stevens,

the principal Republican spokesman for the commission bill in the

House, viewed the agency differently. For him, this bill was a stepping-

stone. In the short term, Wilson’s commission would study pressing

questions, such as the proper treatment for antitrust purposes of trade

agreements, unions, and exporters, and the beneﬁts of national incorpo-

ration. Eventually, the Republican Stevens anticipated that it would

become a Roosevelt-style commission.

355

Unlike Frederic Stevens, though, two Representatives, both of whom

were then running unsuccessfully for the Senate and both of whom later

became FTC Commissioners, proposed a stronger commission during

the ﬂoor debates.

Victor Murdock of Kansas, a journalist who came to Congress as a

Republican in 1903, now led the small Progressive Party delegation;

he would later serve seven years as a Commissioner, including four as

Chairman.

356

Mocking Covington’s promise of “pitiless publicity,”

Murdock saw only an agency that could “go hunting in the trust jungles—

with a camera . . .”.

357

He declared “the evil of the pool, the trust, the

351

H.R. 15613, 63d Cong., 2d Sess., §§ 8–11, 13. The House bill mandated reports from

corporations capitalized at more than $5 million.

352

Id. at § 12. See also note 308, supra (noting that the provision has only been used once).

353

51 Cong. Reg. 8849 (1914).

354

Id.

355

“If most of us thought that this measure would remain as it now stands, as a ﬁnality,

I have no doubt that none of us would approve it.” Id. at 8850. The commission would

study what could be done “to allow such cooperation as shall preserve the good without

encouraging the bad elements of society, . . . Negative prohibitory legislation has not

proved effective or satisfactory.” Id. at 8851–52. After § 5 had been added to the FTC Act,

Stevens opposed the Clayton bill for attempting speciﬁcally to deﬁne any unlawful practices,

rather than relying on the Commission to sets such parameters. Id. at 16,329–30

356

After his unsuccessful Senate bid, Murdock endorsed Wilson in 1916 and became a

Commissioner in 1917. He later returned to journalism. See Murdock of Kansas Comes Out

for Wilson, N.Y. Times, Oct. 23, 1916, at 8; V. Murdock Dead; Wichita Editor, 74, N.Y. Times,

July 9, 1945, at 11; Dictionary of American Biography 544 (Supp. 3) (noting that

Murdock introduced baseball slang to sports reporting).

357

51 Cong. Rec. 8973 (1914).

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holding company, and the merger” to be the same,

358

and denounced

“money overlords” who “plundered the public estate, fed upon the sub-

stance of labor, taxed the people, polluted the public service,” and

“perverted the benefactions of the principle of cooperation [and] preyed

upon human life itself....”

359

His answer, the Progressive Party’s legisla-

tion, was drafted by a committee that included former Corporations

Commissioners Garﬁeld and Smith.

360

It would be endorsed by Roosevelt,

and reﬂected a version of Roosevelt’s regulatory program that empha-

sized a continuing role for antitrust.

361

Murdock’s bill would empower

a commission to issue orders against certain speciﬁc practices and other

forms of “unfair or oppressive competition.”

362

As under the 1914 version

of Section 5, the agency could obtain injunctions for violations of these

orders.

363

Not merely anticipating Section 5, though, the Progressive

legislation would have required the commission to trace the source

whenever “substantially monopolistic power” existed to determine prices.

If that source was “artiﬁcial” (a product of unfair or oppressive conduct),

the commission would use its power to prohibit unfair or oppressive

practices and thereby “terminate” the monopolistic power.

364

If the

source was “natural,” the bill provided that the commission should “most

effectively and promptly terminate such monopolistic power, while at

the same time safeguarding property rights and business efﬁciency.”

365

This might require, Murdock explained, “the separation of one factor

of the business, establishing either its independence or its subjection to

the obligation of public service” (that is, obligations like those imposed

on railroads).

366

Murdock himself apparently doubted that such remedies

358

Id. at 8976.

359

Id. at 8973.

360

Donald Richberg, My Hero 52–54, 56 (1954). The amendment was originally

introduced as a series of bills. H.R. 9299, 9300, 9301, 63d Cong., 1st Sess. (1913), reprinted

in 3 Bills and Debates, supra note 67, at 3172–78.

361

Colonel Assails Wilson Policies, N.Y. Times, July 1, 1914, at 2. See generally supra notes

139–140 (Progressive Party disputes).

362

Murdock explained, “The courts have deﬁned, in great variation and elaboration,

numerous business dealings as ‘unfair competition.’ There is that in the common sense

of fairness and right dealing which indicates plainly the distinction between close bargain-

ing and oppression—between ‘pufﬁng’ of goods and fraudulent misrepresentation. The

developing moral sense in the community adds constantly to the number of outlawed

business practices.” 51 Cong. Rec. at 8979 (1914).

363

Violations of orders under the FTC Act were not made punishable by civil penalties

until the Wheeler-Lea Act. Act of Mar. 21, 1938, ch. 49, § 3, 52 Stat. 111.

364

51 Cong. Rec. 8979 (1914).

365

Id. at 9051.

366

Id. at 8980. (Murdock also said that the commission could divide a business into

two or more competing companies, although it is unclear how that could have been

accomplished for a natural monopoly). Id.

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would often be needed,

367

but the bill’s expansive deﬁnition of “natural

bases” for monopolistic power left open the possibility of wider use.

368

In any event, fewer than one in six Representatives even voted on his

amendment, and it failed, 14–49.

369

Democrat Raymond Stevens, who brieﬂy became a Commissioner in

1933,

370

then introduced his own amendment to authorize the commis-

sion to prohibit “unfair or oppressive methods of competition.” It was

ruled out of order.

371

By then, though, Murdock, Stevens, Brandeis, and

George Rublee had held a critical meeting with Wilson—and Murdock,

at least, was convinced that Wilson would support the Stevens proposal

when the bill reached the Senate.

372

D. George Rublee and Wilson’s New Direction

The Senate version of the commission bill, introduced on June 13,

included a proscription of “unfair competition” and authority for the

commission to issue orders to stop “unfair methods of competition.”

Soon after, the Senate version of the Clayton bill would substitute admin-

istrative enforcement of that bill’s speciﬁc prohibitions for the criminal

enforcement in the House bill.

What prompted Wilson’s change of heart? In part, perceived necessity.

His 1912 campaign had trumpeted “regulated competition,” and he

wanted an antitrust package before November—and preferably with time

367

Murdock was a “rugged individualist, and therein he differed from many of his

Insurgent colleagues who welcomed the trend toward collectivism in government.” Ken-

neth W. Heckler, Insurgency: Personalities and Politics of the Taft Era 37 (1940).

See also Government Control of Meat-Packing Industry, Hearings Before the Comm. on Interstate

and Foreign Commerce of the House of Representatives, 65th Cong., 3d Sess. 2378–79 (1919)

(Murdock’s testimony as a Commissioner on behalf of a recommendation to license meat-

packers, in which he approved the remedy only because “the conditions ....compelus

to take that step, because we are moving economically in some new, strange, rather

forbidding ﬁelds, and individually I am anxious that we proceed with caution.”).

368

“Natural bases” included control of natural resources, control of terminal and trans-

portation facilities, control of ﬁnancial resources, and “[a]ny other economic condition

inherent in the character of the industry, including, among other such conditions, patent

rights.” 51 Cong. Rec. 9051 (1914).

369

Id. at 8980, 9055.

370

After his unsuccessful Senate bid, Stevens became special counsel to the FTC from

1915–1917. He later worked for the Government of Siam (Thailand), even serving on

that country’s Supreme Court. He was brieﬂy a Commissioner during a break in his service

to Siam. Stevens subsequently became a member of the Tariff Commission, resigned to

work for Franklin Roosevelt’s court-packing plan, and was soon reappointed to the Tariff

Commission as Chairman. 31 Cyclopedia of American Biography 365 (1944); Hum-

phreys Ousted from Trade Board, N.Y. Times, Oct. 8, 1933, at 24.

371

51 Cong. Rec. 9059–60 (1914).

372

Id. at 9061 (“lively suspicion” that Senate bill would include the amendment).

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for Democrats to campaign.

373

The Clayton bill was proving unsatisfac-

tory. The economy was deteriorating. An augmented commission, deﬁn-

ing standards through orders that had, at most, indirect punitive

signiﬁcance, offered a palatable quick ﬁx.

This commission might appeal to Roosevelt supporters, both those who

preferred Roosevelt’s own regulatory approach and those who viewed

antitrust more favorably. Roosevelt himself was back from Brazil and

agitating for progressive reform. When Senator Henry Hollis asked Wil-

son to defer antitrust legislation, Wilson replied on June 2 that they

could afford not “the least hesitation or lack of courage on this point

which is going to be the point of attack during the campaign, as Mr.

Roosevelt has kindly apprised us.”

374

One way to draw progressive voters

was to adopt a part of the Progressive Party program reﬂected in the

Murdock bill.

375

A commission also held appeal to the business constituency that Wilson

had courted in January—and was continuing to court, in June 1914,

when he selected controversial nominees to the new Federal Reserve

Board.

376

Many businessmen supported a commission, often hoping for

a business-friendly agency that might (despite Wilson’s disclaimers)

approve contracts and agreements in advance.

377

While the business

community had many components,

378

Wilson might appeal broadly to

that community by strengthening the commission bill and weakening a

worrisome Clayton bill.

The immediate impetus for Section 5, though, came from Rublee.

Rublee had been a brilliant dilettante. He graduated from Harvard

College and Law School, taught at the Law School, and worked on

the creation of U.S. Steel. He then became independently wealthy and

periodically relocated to Europe for extended leisure or study.

379

Rublee

373

See, e.g., Pass Trust Bills by July 1, The Plan, N.Y. Times, May 5, 1914, at 12 (noting

Wilson’s hope for adjournment by July 1, although others expected the session to run

through July).

374

Wilson to Henry French Hollis, June 2, 1914, 30 PWW, supra note 5, at 134.

375

Scott James argues that the principal appeal of what James called a “Progressive Party

commission” was its attraction to Roosevelt voters. James, supra note 190, at 176–78, 183.

376

Wilson’s nominees included businessman Thomas Jones and Wall Street banker Paul

R. Warburg. Democratic opposition from Senators like James Reed proved so strong that

Jones withdrew, apparently at Wilson’s behest, and Wilson lashed out at members of his

own party on July 20. Wilson stood by Warburg and the Senate conﬁrmed him on August

7, as it turned to the Clayton bill. Link, New Freedom, supra note 284, at 450–57.

377

Link, New Freedom, supra note 284, at 435.

378

See Wiebe, supra note 150.

379

McClure, supra note 131, chs. 1–3. Rublee and his wife received $40,000 (approxi-

mately $750,000 in current dollars) from her father, and made fortuitous investments. Id.

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was a “knight errant” who became energized when he was caught up

in the progressive movement in 1910.

380

After he assisted Brandeis in

progressive causes, Rublee was brought into Roosevelt’scampasan

adviser by two college friends: Herbert Croly (who coined the phrase

“New Nationalism” and later founded the New Republic) and Learned

Hand.

381

Rublee contacted Brandeis seeking more unpaid “public work” in

September 1913.

382

Brandeis anticipated time-consuming ICC hearings,

which would lead him to begrudge “the time which trusts & kindred

legislation are taking.”

383

He did not seem troubled by Rublee’s ties to

Roosevelt. Roosevelt partisans did not necessarily share their candidate’s

hostility to the Sherman Act

384

; Rublee himself appears to have accepted

the statute’s goals,

385

although his views are obscured by his tendency to

tailor his presentation to his audience.

386

In any event, Brandeis decided

at 64–66. The Rublee’s social acquaintances included the Wilsons. See Ellen Axxon Wilson

to Wilson, Oct. 20, 1913, 28 PWW, supra note 5, at 391, 392 (Wilson’s wife dined with

Rublees despite her “ﬁerce indignation” over Juliet Rublee’s bad behavior).

380

McClure, supra note 131, at 144 (quoting Dean Acheson).

381

Id. at chs. 4–5.

382

See Brandeis to Norman Hapgood, Sept. 30, 1913, 3 LBL, supra note 4, at 183.

383

Brandeis to Alfred Brandeis, Feb. 22, 1914, 3 LBL, supra note 4, at 246. See also ITC

Hearings, supra note 185, at 3 (apologizing for not scrutinizing the bill about which he

testiﬁed); note 314, supra.

384

See supra notes 138–140. Brandeis’s own 1912 campaign writings on Wilson’s behalf

were published, as articles and unsigned editorials, by Collier’s editor Norman Hapgood—

who had supported Roosevelt during the primaries. Gunther, supra note 131, at 228–29;

Strum, supra note 186, at 201–02.

385

Rublee wrote Hand that he agreed with all the Supreme Court’s decisions prohibiting

conduct under the Sherman Act. Rublee to Hand, May 8, 1914, Learned Hand Collection,

Harvard Law School, box 107, folder 2. (The letter was apparently misdated; it refers in

the past tense to a meeting with Wilson that took place on May 21). Although this appears

an overstatement in light of Rublee’s efforts to legalize resale price maintenance, see 51

Cong. Rec. 14,786–89 (1914), it likely does suggest some afﬁnity for antitrust. Further,

Rublee, Hand, and Herbert Croly earlier had worked on a proposed Progressive Party

platform. A typed text, perhaps prepared by Rublee, said that “The Sherman Act was

passed to establish such control and to prevent the exploitation of the consumer by

monopolies and oppressive combinations. Its purpose is beneﬁcial and it should be pre-

served, . . .” The typed text then objects to the way the act was implemented, but not to

its goal: “but control cannot be successful which only operates after the event and by

means of litigation. Besides, it is a just complaint that capital cannot know in advance the

limits of lawful cooperation and combination.” Progressive Party platform drafts, folder

6, Progressive Party Archives, Harvard University. (One of the authors crossed out the

latter text and substituted language more critical of the Sherman Act).

386

For example, to Wilson, Rublee described a commission as a way to regulate competi-

tion and not monopoly, fulﬁlling the President’s campaign promises. George Rublee,

Memorandum Concerning Section 5 of the Bill to Create a Federal Trade Commission,

Wilson Papers, Lib. Cong., File 60, Reel 208. To Hand, he wrote that his goal was to “put[]

over the [Progressive Party] idea of giving the Trade Commission power to prevent unfair

competition,” and to “kill the nonsense in the other bills.” Rublee to Hand, May 31, 1914,

Hand Papers, supra note 385, box 107, folder 2, quoted in McLure, supra note 131, at 158.

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to take advantage of his friend’s skills.

387

He asked Rublee to assist on

antitrust legislation.

Perhaps disingenuously, Rublee claimed to focus on a regulatory

agency only when he saw the Clayton bill’sdeﬁciencies.

388

He drafted

the bill introduced by Raymond Stevens, a friend to both himself and

Brandeis,

389

and sought Section 5 as a substitute for, not a supplement

to, the substantive provisions of the Clayton Act.

390

He tried to interest

McReynolds in the bill, but the Attorney General discouraged him.

391

Commissioner of Corporations Davies was cool to the proposal despite

his past support for a prosecutorial commission (support likely unknown

to Rublee).

392

Having failed to win over subordinates, Rublee said that

he arranged through Stevens to meet with Wilson himself; that he ﬁrst

alerted Brandeis to his efforts on behalf of a prosecutorial commission

when he invited Brandeis to the meeting; and that Brandeis reserved

the right to object to the proposal—but was then so impressed by Rublee

that he joined Rublee in persuading Wilson to support Section 5.

393

Rublee’s recollections are imprecise in speciﬁcs,

394

and he may have

overestimated Brandeis’s initial resistance to a prosecutorial agency.

395

387

A biographer sums Rublee up thus: “When aroused by the opportunity to affect a

meaningful change, Rublee’s unyielding determination led him to heroic efforts and

allowed him to hazard unconventional, even daring methods to win a contest. Combined

with his inﬂuential relations on Wall Street, his association with leading journalists and

publishers and with progressive members of both the major political parties, Rublee was

a resourceful and resilient competitor who did not shrink from openly or surreptitiously

challenging industrial magnates, senators and even presidents for control of public policy.

His ability to survive such contests was often the result of thoughtful strategy and quiet

inﬂuence.” McClure, supra note 131, at 4–5. Hand wrote, “I should not want to have to

cooperate with [Rublee] in matters about which he felt strongly. I should be submerged

by a stronger will, and a kind of concentration of purpose, which I have never experienced

in another.” Hand to Felix Frankfurter, Jan. 10, 1916, Hand Papers, supra note 385, box

104, folder 5.

388

Original Plan, supra note 300, at 115–16.

389

Rublee had persuaded the New Hampshire Progressives not to challenge Stevens’s

Democratic candidacy in 1912. McClure, supra note 131, at 130. After the election, Brandeis

wrote the House Majority Leader to recommend Stevens’s advancement. Brandeis to Oscar

Underwood, May 10, 1913, Brandeis Papers (Louisville collection), reel 32.

390

Original Plan, supra note 300, at 116.

391

George Rublee, The Reminiscences of George Rublee 109, Columbia University Oral

History Project (1972; transcribing interviews conducted in 1950–1951).

392

Id. at 110 (deeming Davies “timid”). See also supra note 313 and accompanying text

(Davies’s earlier efforts).

393

Rublee, Reminiscences, supra note 391, at 111–15.

394

Rublee was over 80 when he gave his Columbia reminiscences. For example, Rublee’s

account that he obtained the meeting through Stevens, a ﬁrst-term Congressman, is at

best an oversimpliﬁcation; at a minimum, a letter from Norman Hapgood, by then editor

of Harpers, smoothed his path. Norman Hapgood to Wilson, Apr. 21, 1914, 29 PWW, supra

note 5, at 481.

395

See supra text accompanying notes 216–218.

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Still, Rublee was the driving force behind the Commission’s prosecutor-

ial authority, and he clearly made an effective presentation when he ﬁrst

met with Wilson and Brandeis on May 21.

396

Brandeis was troubled by

the state of the antitrust legislation by the time of the meeting,

397

and

was apparently persuaded at the meeting that Section 5 held more prom-

ise than any other program for which he could hope.

398

Wilson himself

was soon offering speciﬁcs to justify retreating from his earlier calls for

speciﬁcally deﬁned antitrust violations.

399

396

See supra note 372 and accompanying text (Murdock’s remark that Wilson likely

would support a prosecutorial commission). Further, Senator Hollis wrote Wilson between

the ﬁrst meeting, which he did not attend, and the second, which he did attend. Wilson

answered that Brandeis, Rublee, and Stevens had shown him how to address the “only

really debatable” part of the Clayton bill. Wilson to Hollis, May 30, 1914, 30 PWW, supra

note 5, at 134.

397

Brandeis called the Clayton bill “very bad legislation.” Brandeis to Alice Brandeis,

June 10, 1914, FLB, supra note 314, at 252, 253. Likely speciﬁcs include the following.

First, he openly criticized the bill’s interlocking directorate provision. Having recently

written a muckraking book about the so-called “money trust,” see supra note 24 and

accompanying text, Brandeis wanted to condemn interlocking directorships not only

among horizontal competitors (which the Clayton bill did), but also among ﬁrms in a

buyer-seller relation (which the bill addressed only when one of the ﬁrms was a bank or

common carrier). See Trust Legislation, Hearings Before the Committee on the Judiciary, House

of Representatives, 63d Cong., 2d Sess. 679–82 (1914); Brandeis to James McReynolds, Feb.

22, 1914, 3 LBL, supra note 4, at 246. Second, the bill’s price discrimination provision

allowed quantity discounts. See supra note 327. Discounts for large buyers were anathema

to Brandeis. (Though he sought to legalize resale price maintenance, he would have

denied protection when manufacturers offered quantity discounts. Brandeis to Rublee,

Nov. 18, 1913, 3 LBL, supra note 4, at 216.) Third, Brandeis may have shared the growing

fears of small business that criminal sanctions for violating the Clayton Act could be turned

on them. See supra note 333. Brandeis might also have been frustrated that the bill failed

to legalize price maintenance.

398

Brandeis detected in Wilson an “apparent lack of courage in some industrial lines,”

although he deemed it “a fault of the mind and not of the heart.” Brandeis to Alice

Brandeis, May 21, 1914, FLB, supra note 314, at 248. Thomas McCraw calls Brandeis’s

reliance on Rublee, leading to Brandeis’s support of § 5, an “abdication.” McCraw, supra

note 198, at 122. But several factors vitiate McCraw’s criticism. First, Brandeis’s inability

to secure modiﬁcation of the interlocking directorship provision, see supra note 397,

undermines any assumption that he could have changed speciﬁc provisions of the Clayton

bill by more active efforts. Second, Brandeis had earlier recognized value in a trade

commission. See supra notes 215–219 and accompanying text. Perhaps he hoped by 1912

that a strong commission might advance his campaigns for resale price maintenance and

limited trade agreements. Third, Rublee apparently did sympathize with antitrust, see supra

note 385, and also supported Brandeis’s campaign for resale price maintenance. See 51

Cong. Rec. 14,789 (1914). Finally, general rate hearings were matters of national import,

see, e.g., Brandeis Files His Brief, N.Y. Times, Jan. 3, 1911, at 4, and Brandeis had committed

months before to serve the ICC as special counsel. Brandeis to James Harlan, Aug. 21,

1913, 3 LBL, supra note 4, at 163.

399

In March, Wilson had begun to retreat publicly from speciﬁcally deﬁning antitrust

violations. See supra note 337 and accompanying text. In July, he gave the example of

exclusive agency arrangements, arguing that such arrangements might have little impact

on competition in urban markets, but shut out competition in rural districts where there

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Once he gained Wilson’s sympathies, Rublee apparently worked to

line up congressional support, and then met with Wilson and Brandeis

again (with Senator Hollis but not Victor Murdock now in attendance)

on June 10.

400

He articulated a justiﬁcation for Section 5 in a memo sent

to Wilson on July 10.

401

That memo became the basis for a ﬂoor speech

by Senator Hollis on July 15, and, through Hollis, a signiﬁcantpartof

the FTC Act’s legislative history.

402

Rublee asserted that he wrote the

conference report, and he apparently wrote Covington’s remarks about

judicial review during the later debates.

403

The July 10 memo explained that the last election had settled that

the trust problem would be solved by regulating competition rather than

monopoly, and that Section 5 was directed to that end.

404

Rublee justiﬁed

use of an unfair competition standard to further that end by fusing

economics and morals in a passage that could have come from a 1912

Wilson speech.

[T]he only effective means of building up and maintaining monopoly,

where there is no control of a natural resource, or of transportation,

is the use of unfair competition.

Fair competition is competition which is successful through superior

efﬁciency. Competition is unfair when it resorts to methods which shut

out competitors who, by reason of their efﬁciency, might otherwise be

able to continue in business and prosper. Without the use of unfair

methods no corporation can grow beyond the limits imposed upon it

by the necessity of being as efﬁcient as any competitor. The mere size

of a corporation which maintains its position solely through superior

efﬁciency is ordinarily no menace to the public interest.

405

But, despite Wilson’s prior assumptions, speciﬁcdeﬁnitions could not

encapsulate all wrongful practices. The list would be long and soon

incomplete. “Unfairness” would depend on industry-speciﬁc facts, which

would change over time. Deﬁnitions would necessarily use, as the Clayton

were a limited number of potential agents. Press Conference, July 9, 1914, 50 PWW, supra

note 5, at 508.

400

In a misdated letter that was written between the two meetings, see supra note 385,

Rublee wrote Hand that his approach was backed by Wilson, a majority of the Senate

Commerce Committee, and House Commerce Committee Chairman Covington (although,

consistent with observations by others, see infra note 473, Rublee said success was delayed

by Senator Newlands’s incompetence.). See also Plan to Strengthen Trade Board, N.Y. Times,

June 12, 1914, at 7.

401

Rublee, Memorandum, supra note 386.

402

51 Cong. Rec. 12,141–49 (1914) (Hollis speech).

403

Rublee to Brandeis, Oct. 6, 1914, quoted in Link, New Freedom, supra note 284, at

441; infra note 557. His efforts drew both praise and denunciations. 51 Cong. Rec. 11,299,

11,537–38, 14,786–89 (1914).

404

Rublee, Memorandum, supra note 386, at 6.

405

Id. at 3.

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bill showed, “language which would present very difﬁcult problems of

construction to the Courts.”

406

A general prohibition like the Sherman Act’s was preferable, but the

Sherman Act itself might not reach “the mere use of an unfair method,

without more, by a corporation of no conspicuous size.” Even if it did, the

Justice Department focused on large cases, and “[c]ountless competitors

succumb before relief is obtained.” The Department “deals with monop-

oly as an established fact;” a commission could relieve it “of a load of

burdensome work which it is not well ﬁtted to perform.” Further, as

Rublee explained it, “unfair competition” was a meaningful standard.

He provided the theoretical underpinning that the term denoted compe-

tition succeeding for reasons other than efﬁciency, and also pointed to

the term’s use in Standard Oil, the Seven Sisters, other state laws, and

cases that construed those laws.

407

Perhaps most importantly, by emphasizing constraints on the agency’s

authority, Rublee implicitly addressed Wilson’s concerns about empower-

ing a “smug lot of experts.”

408

The commission would have only limited

authority to determine that conduct was unlawful; under the Stevens bill

(and the 1914 Act), its orders would lack force until “enforced” by a

court. Likewise, the commission would be restrained in ﬁnding that

conduct was lawful. A Sherman Act violation was independent of a

Section 5 violation, he argued, so the commission could not immunize

conduct from prosecution under the existing statute.

409

E. The Commission Bill in the Senate

Most House members were likely unmindful of Wilson’s change of

heart when they approved an antitrust package on June 5. However,

Section 5 surfaced publicly when the Senate Commerce Committee

reported its commission bill on June 13.

410

In addition to powers provided

in the House bill, Section 5 now proscribed unfair competition, and

authorized the commission to issue orders prohibiting “unfair methods

of competition.”

Section 5 became the focus of the subsequent debate on the commis-

sion bill, submerging any concerns with such matters as interﬁrm cooper-

406

Id. at 7–11.

407

Id. at 3–6, 17–20. See also supra text accompanying note 63 (use of term in Standard Oil ).

408

See supra text accompanying note 265.

409

Rublee, Memorandum, supra note 386, at 12 (court would enforce FTC order only if

it was “just”), 22.

410

A letter from Hollis suggests that he was lining up Committee members until the last

minute. Henry French Hollis to Wilson, June 13, 1914, 30 PWW, supra note 5, at 181.

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ation. The new section drew varying responses, even (perhaps especially)

among proponents of strong antitrust enforcement. Elizabeth Sanders

has analyzed patterns of support from different parts of the country,

with Senators from “core” manufacturing states tending to prefer no

new legislation (or, if legislation were inevitable, a commission that could

pre-approve business plans); those from “periphery” agricultural states

tending to prefer a strengthened Sherman Act; and those from “diverse”

states (including Nevada and Iowa, homes to Newlands and Cummins)

most likely to favor a trade commission that would conduct a more

calibrated analysis of competition problems.

411

The analysis below focuses

primarily on individual, sometimes idiosyncratic, Senators. The ﬁrst part

brieﬂy explores several opponents and reluctant supporters of the bill.

The parts that follow focus on Section 5’s principal supporters, Senators

Newlands, Cummins, and Hollis, examining both their substantial com-

monalities and their divergences.

1. Surveying the Landscape: Six Senators

Most of Section 5’s opponents criticized the broad discretion they

understood the statute to convey. However, following Henry Lippitt,

Republican of Rhode Island, some would concede at least limited utility

for the agency if it could shield business activities, providing protection

akin to that which the National Civic Federation had sought in 1908

and Roosevelt had embraced (to different degrees) in 1908 and 1912.

412

The idea had a substantial business constituency,

413

and Lippitt unsuccess-

fully proposed a limited shield, under which the commission could immu-

nize submitters from criminal prosecution.

414

Section 5 also drew opposition or half-hearted support from antitrust

proponents, primarily from agricultural states, who distrusted the pro-

posed agency. The Democrats among these, in particular, were associated

411

Sanders, supra note 172, at 1, 22, 25, 278–83. Sanders deemed Nevada and Iowa

diverse because they were in economically interdependent “trading areas” for San Francisco

and Chicago.

412

See notes 105–112, 137, and accompanying text.

413

A Chamber of Commerce Committee (on which Rublee served) had conducted a

referendum of member organizations to determine their views on a trade commission,

posing seven questions and making speciﬁc recommendations. Most of its recommenda-

tions (e.g., that there be a commission, and that it reach all ﬁrms except common carriers

that were engaged in interstate commerce) were approved by margins of 4–1 or higher.

The only recommendation that failed (303–308) was one that opposed agency authority

to advise in advance whether conduct violated the law. Referendum on an Interstate Trade

Commission, Nation’s Business, June 18, 1914, at 5.

414

51 Cong. Rec. 13,217–19 (1914). The amendment was defeated, 18–47. Id. at 13,307.

Lippitt was the ideal Senator to promote what Sanders called a “core constituency”

approach. Rhode Island led the country in per capita value added. See Sanders, supra

note 172, at 22.

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with the views of William Jennings Bryan, who was now Secretary of

State.

415

Bryanite interests were well-represented in the Senate, where

less populous states had a disproportionate voice. Their votes made

them, in Sanders’ term, “the foot soldiers that saw reform through the

legislature,” although, in the commission bill and elsewhere, Senators

from agrarian states often settled for less than they had hoped.

416

Consider James Reed, Democrat of Missouri, a maverick who infuriated

Wilson.

417

Reed denounced wealthy men scheming “to rob entire commu-

nities, to crush great business concerns, to bankrupt States, to put out

the ﬁres in the furnaces of a hundred factories, and in the end to pilfer

and ﬁlch with monopoly’s cruel ﬁngers from the pockets of the poor

and the needy.”

418

His most lasting contribution to the 1914 debates was

an amendment that made it easier to challenge holding companies under

Section 7 of the Clayton Act, changing a prohibition on mergers whose

effect “is” to substantially lessen competition to one prohibiting mergers

whose effect “may be” to have such impact.

419

He also proposed to ban

corporations from interstate commerce if they were capitalized at more

than $100 million; to set minimum antitrust ﬁnes at 10 percent of defen-

dant’s assets (taken ﬁrst from interests of responsible ofﬁcers, directors,

and agents); and to authorize states to bring Sherman Act cases in the

name of the United States when the Attorney General did not.

420

Reed

criticized Section 5 as vague and its procedures as weak, and he hesitated

to support the commission bill but ultimately did so.

421

However, he

415

See supra text accompanying notes 66, 245. Bryan would resign in 1915, protesting

Wilson’s policies towards Germany.

416

Sanders, supra note 172, at 4.

417

Reed worked against Wilson’s appointments to the Federal Reserve Board in the

midst of the antitrust debates. See supra note 376; Wilson to Cleveland Hoadley Dodge,

July 19, 1914, 30 PWW, supra note 5, at 288 (Reed and other Democratic Senators who

opposed the nominations acted with “malevolent ardour”). After Reed later broke with

Wilson in the battle for the League of Nations, Wilson would denounce him as “a discredit

to the party to which he pretends to belong.” Reed ran for President rather than seek

reelection in 1928. Dictionary of American Biography (Supp. 3) 621, 622.

418

51 Cong. Rec. 15,861 (1914) (Clayton Act debate). See also supra note 159 (Reed on

antitrust enforcement), 182 (Reed on Terminal Railroad Ass’n case).

419

51 Cong. Rec. 14,464 (1914).

420

Id. at 14,526–28. These amendments failed 16–36, 13–36, and 21–39.

421

When he decided to vote for the Senate bill at the end of the debate, Reed said he

did so in the hope that it would be improved by the House-Senate conference. Id. at

13,313. (He did not actually cast his intended vote, though, out of deference to a “pair”

with a Republican opponent of the bill who was absent. Id. at 13,318). He later expressed

disgust that the conference version did not fulﬁll his expectations: “Who ever heard of

creating a commission to determine, ﬁrst, whether a man has been guilty of committing

burglary, then to order him to stop, then to give him a right to appeal to a court, and in

the end if he be defeated to solemnly adjudge that he must now stop?” Id. at 14,790,

14,802. See also infra note 454 (efforts to deﬁne “unfair competition”).

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voted against the conference version of the Clayton bill, after ﬁrst moving

to recommit it to a second conference that he hoped would produce

legislation more to his liking.

422

The direct substitution of administrative

enforcement for the bill’s criminal sanctions particularly offended Reed,

because it would take “the sword from the hand of justice . . . and supinely

turn the monopolists over to a commission that can not even issue a

civil decree that it can itself enforce.”

423

Harry Lane, Democrat of Oregon, attacked the “[u]nmuzzled crimi-

nals who are engaged in robbing other and better people.”

424

He was

outraged for the “hundreds of thousands and millions of people” who

were being “robbed” as they were “compelled to accept arbitrarily ﬁxed

and unjustly low prices for products of their toil, while . . . compelled

to pay arbitrarily ﬁxed and unjustly high prices for what they consume.”

425

He supported the three unsuccessful Reed efforts described above, and

himself proposed a ten percent informant’s fee in antitrust cases.

426

Lane thought a commission “illogical” and “unworkable,”

427

but ﬁnally

supported the commission (though not the Clayton) bill. He explained

that the commission bill would “no doubt pass with all its indirection

and lack of virility, and I, among others, who hoped for better things

along these lines, will be compelled to vote for it. May God have mercy

on our souls.”

428

John Sharp Williams, Democrat of Mississippi,

429

earlier had intro-

duced bills to make it unlawful to “stiﬂe fair competition,” to provide

up to ﬁve years in jail for individuals who broke the law “with intent to

defraud or to create a monopoly or unfairly to stiﬂe competition,” and

(with a states’ rights twist) to require ﬁrms in interstate commerce to

422

51 Cong. Rec. 16,152 (1914) (bill should be returned to conference with instruction

to restore criminal sanctions); 16,170 (unsuccessful motion to recommit followed by Reed’s

opposition to the ﬁnal bill).

423

Id. at 14,227.

424

Id. at 13,223.

425

Id.

426

See supra note 420 and accompanying text (Reed amendments); 51 Cong. Rec.

14,591–97. Lane’s amendment, which failed, 14–38, would have provided a reward of

10% of the ﬁnes and penalties recovered in an antitrust case to the ﬁrst person who

furnished evidence of the violation.

427

51 Cong. Rec. 11,541 (1914).

428

Id. at 13,222 (1914). See also id. at 16,166 (Clayton Act offered no effective relief

against “enormous combinations, who are literally rotting this country, rotting its govern-

ment, rotting its citizenship”).

429

Williams’s efforts are discussed in George Cullom Davis, Jr., The Federal Trade

Commission: Promise and Practice in Regulating Business, 1900–1927, at 118–22 (1969)

(unpublished Ph.D. dissertation, University of Illinois), and Sanders, supra note 172, at

278–79, 286.

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incorporate in the state where they had their chief ofﬁce.

430

Williams

supported Senator Reed’s amendment to exclude ﬁrms capitalized at

more than $100 million from interstate commerce.

431

But he lobbied

Wilson against any commission in January 1914.

432

Privately, he wrote on

July 27 that the commission bill “thoroughly disgusted” him, but “I believe

in team play . . . . I have quit as far as this bill is concerned and shall

stay quit for fear lest I do more harm if I open my mouth than by keeping

it shut.”

433

Publicly, he defended the program vigorously but generically,

announcing that the Democrats would “destroy what is plutocratic,

exploitative, and industrially tyrannical.”

434

Williams voted for the com-

mission bill, as did most Southern Democratic Senators.

435

He also voted

for the Clayton bill, but ﬁrst showed his displeasure by supporting Reed’s

motion to recommit it.

436

Moses Clapp, Republican of Minnesota and an insurgent like Cum-

mins, had headed the Commerce Committee before Newlands. He dis-

liked a commission for the Wilsonian (and agrarian) reason that he

feared the inﬂuence business would exert over it.

437

However, he advo-

cated a prohibition on unfair competition to be enforced by the Justice

Department and private litigants in treble damage actions.

438

He later

430

See, e.g., S. 4747, 62d Cong., 2d Sess. (1912), reprinted in 3 Bills and Debates, supra

note 67, at 2423. See also 1911 Hearings, supra note 21, at 2503–34 (Williams’s testimony).

The chartering state would have a “sovereign right” to allow “evil” within its own borders,

but not beyond. Id. at 2507.

431

51 Cong. Rec. 14,527 (1914).

432

See Wilson to John Sharp Williams, Jan. 23, 1914, 29 PWW, supra note 5, at 184

(Wilson’s response).

433

John Sharp Williams to Robert R. Reed, July 29, 1914, John Sharp Williams Papers,

Lib. Cong., Box 7.

434

51 Cong. Rec. 11,175 (1914) (characterizing program as “constructively conser-

vative”).

435

Most of the 22 Senators from the former confederate states, the Solid South, supported

the commission bill. (Fourteen voted for the Senate version; 7 cast no vote, but 6 of

those supported the conference bill; and one opposed the Senate bill but supported the

conference bill). While there was a Southern progressive tradition, see Dewey W. Grantham,

The Contours of Southern Progressivism,86Am. Hist. Rev. 1035 (1981), it is unclear how

many of these Senators were persuaded by the commission’s merits and how many voted

out of party loyalty, caucus unity (see supra note 279), or to protect the national party so

they could keep the prerogatives of Senate control. (Southern Democrats chaired three-

fourths of the 28 Senate committees. Lewis L. Gould, Reform and Regulation: Ameri-

can Politics, 1900–1916, at 151 (1978)).

436

Of the 25 Senators who voted for the motion to recommit (including Williams, Reed,

Lane, Moses Clapp, and William Borah), only Williams then voted for the ﬁnal bill. See

51 Cong. Rec. 16,170 (1914).

437

See id. at 13,063.

438

Id. at 13,065. See also id. at 13,050 (complaining party should have a right of appeal

if commission did not issue an order).

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proposed to create a private treble damage action for conduct declared

unfair by the commission,

439

and he voted for the commission bill because

a commission-enforced prohibition was better than none.

440

William Borah, Republican of Idaho, despised “the unnatural, irregu-

lar and illegal combinations which are the result, not of legitimate and

natural growth and development, but monsters born of deceit, fraud,

overreaching, overcapitalization, and criminal combinations.”

441

Borah

had been a Roosevelt partisan at the 1912 Republican convention and

had ﬂirted with Roosevelt-style regulation.

442

By 1914, though, he criti-

cized Section 5 because, whatever Congress’s intent, the agency would

succumb to “propaganda” about the risk of disturbing business, and

then “regulate” monopoly and “somewhat modify its extortions.”

443

commission could only “dull the edge of our activities and our desire

to destroy monopoly,” and Borah opposed both the commission and

Clayton bills, in the latter case objecting to the lodging of enforcement

authority in the commission.

444

The commission bill attempted to “kill

cancer with cologne water.”

445

Unusually for a strong foe of “monopoly,”

Borah now followed Taft in defending the Supreme Court. Standard Oil

and American Tobacco had stopped the formation of new monopolies,

Borah declared.

446

Once public opinion stirred up by Standard Oil “settled

down,” it was now “known that [the Court] had really condemned every

conceivable form of monopoly against which the people have ever

complained . . . .”

447

James May has observed that legislators who embraced classical eco-

nomics, which saw no tensions between the multiple goals of antitrust,

439

Id. at 13,113–14. The amendment failed, 18–41. Id. at 13,150.

440

Id. at 13,301.

441

Id. at 11,233 (also decrying a “property class, living in luxury and power, and another

class, . . . literally living upon the crumbs which fall from the rich man’s table”).

442

For Borah’s support of Roosevelt, see Marian C. McKenna, Borah 118–21 (1961).

(Borah declined to follow Roosevelt out of the party. Id. at 125–26.) Borah had spoken

of Roosevelt-style regulation with approval in 1911. In the aftermath of Standard Oil and

American Tobacco, Borah had supported a resolution directing the government to institute

criminal prosecutions against the defendants for the stated reason that an effort should

be made fully to enforce the Sherman Act, even though he then expressed skepticism

about the Act, declaring that, “we have indeed passed from the age of competition to the

age of regulation and control.” 47 Cong. Rec. 3218 (1911).

443

51 Cong. Rec. 15,947 (1914). See also id. at 11,186 (bill would mark “the beginning

of the time when the business of the country will be regulated and controlled through

bureaus and commissions, and . . . when the question of competition will be eliminated

entirely”).

444

Id. at 11,233, 15,986.

445

Id. at 15,956.

446

Id.

447

Id. at 15,983.

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might devote disproportionate attention to speciﬁc concerns, and stand

silent on possible tradeoffs, without “necessarily indicat[ing] a desire to

protect only one part of the natural system while leaving aside or sharply

subordinating the rest.”

448

Save for Lippitt, all the Senators discussed

above may well have been among those who implicitly or explicitly

accepted the substance of the classical vision, which saw “monopolies”

as abnormal constraints, and antitrust, in removing those constraints,

as simultaneously promoting opportunity, efﬁciency, competition, fair

distribution, and political freedom.

2. The Commission’s Advocates: Overview

Like some opponents of Section 5, its principal supporters criticized

twenty-four years of experience under the Sherman Act. Whether the

fault was intrinsic to the statute, or lay with courts or prosecutors, the

law had not stopped corporate abuse, and it had neither prevented nor

reversed the merger wave.

449

The bill’s advocates disclaimed an intent

to change the Sherman Act or undermine Justice Department enforce-

ment.

450

They saw merit in the law’s approach of proscribing conduct

in general terms

451

(although they diverged as to whether speciﬁc prohibi-

tions were appropriate as well). But they wanted a new agency that would

prosecute if the Department faltered, enforcing a ﬂexible new standard

that could reach where the Sherman Act might not. Newlands said

Section 5 would “check monopoly in the embryo,” Cummins that it

would “seize the offender before his ravages have gone to the length

necessary in order to bring him within the law that we already have,”

and Hollis that it would reach “the mere use of an unfair method, without

more, by a corporation of no conspicuous size.”

452

The bill’s spokesmen also shared a common legislative imperative.

“Unfair competition” and related terms had some common currency,

453

but opponents charged that Section 5 was so vague it unconstitutionally

delegated legislative authority. Even many supporters backed an effort

448

May, Theory, supra note 25, at 299. May particularly associated such views with refer-

ences to supracompetitive pricing as “theft,”“robbery,” and “extortion,” id. at 291, as

appeared in numerous statements quoted above. See also supra text accompanying notes

183–184.

449

See, e.g., 51 Cong. Rec. 12,030–31 (1914) (Newlands).

450

Id. at 11,529 (Cummins), 12,623 (Newlands).

451

See, e.g., id. at 12,024 (Newlands); 12,146–47 (Hollis); 11,455–56 (Cummins’s refer-

ence to unfair competition’s “myriad” forms).

452

Id. at 12,030 (Newlands); 12,146 (Hollis) (using language of the Rublee memo);

11,455 (Cummins).

453

See supra text accompanying notes 63, 95, 102, 231, 324.

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2003] Origins of the FTC 75

by Senator Reed to deﬁne the term.

454

Although advocates did not argue

that every application of the term was clear (if it were, why have an

expert commission?), and although part of their justiﬁcation was that

laws already included terms like “reasonable rates” or “unreasonable

time,”

455

they endeavored to show that Section 5’s standard itself was

clear, with meaningful guides to its application.

Thus, they pointed to economic bases for the term. Hollis, using

Rublee’s language, said “unfair competition” was competition by which

ﬁrms grew for reasons other than efﬁciency.

456

Reference was made to

a recent article by future FTC economist William Stevens, which declared,

“fair competition in an economic sense signiﬁes a competition of eco-

nomic or productive efﬁciency.”

457

Section 5 advocates also pointed to two ﬁelds of law. The ﬁrst was

antitrust. Standard Oil had used “unfair competition” to describe some

abuses with which the trust was charged; courts had issued injunctions

that prohibited speciﬁc practices and other forms of “unfair competi-

tion;” and the term appeared in state laws, albeit generally price discrimi-

nation laws.

458

Even when courts gave no speciﬁc content to the term,

its use in court orders was evidence that the term had content.

459

The

454

Reed repeatedly criticized § 5 and repeatedly was challenged to improve it. See, e.g.,

51 Cong. Rec. 12,938 (1914). He eventually proposed to deﬁne unfair competition as

“those acts, devices, concealments, threats, coercions, deceits, frauds, dishonest practices,

false representations, slanders of business, and all other acts or devices, whether of like

nature to those herein enumerated or not, done or used with the intent or calculated to

destroy or unreasonably hinder the business of another or prevent another from engaging

in business, or to restrain trade or to create a monopoly;” the effort failed, 30–32. Id. at

13,234, 13,235. He then proposed a second amendment changing the ﬁnal clause to read

“done or used with the intent, or the effect of which is to destroy or unreasonably hinder

the business of another or prevent another from engaging in business.” That effort failed,

29–33, with afﬁrmative votes coming from 12 Democrats and 5 Republicans who eventually

voted for the Senate bill. See id. at 13,312, 13,314.

455

See, e.g., id. at 11,388–89 (Cummins).

456

Id. at 12,146.

457

William S. Stevens, Unfair Competition,29Pol. Sci. Q. 282 ( June 1914). See also

William S. Stevens, Unfair Competition,29Pol. Sci. Q. 460 (Sept. 1914); 51 Cong. Rec.

11,230–31, 12,145, 16,329 (1914) (quoted by Sen. Joseph Robinson, Sen. Hollis, and Rep.

Frederic Stevens). The article lent a professional imprimatur to a list of eleven species of

unfair competition, including local price cutting (which Stevens thought too dangerous to

allow), bogus “independent” concerns, “ﬁghting brands” (e.g., low-priced brands, secretly

made by manufacturers of high-priced brands, brought into a market to repel new entry),

and tying arrangements. Stevens was blunt: “If there be a sound basis for competition, it

lies in the preservation of the economically efﬁcient and the destruction of the inefﬁcient.”

See also id. at 11,300 (critique by Sen. Borah).

458

See supra text accompanying note 63 (Standard Oil ); 51 Cong. Rec. 11,228–31; 12,142–

45; 12,219–20; 12,997–99 (1914) (discussions of antitrust decrees and state laws).

459

See, e.g., id. at 11,452 (1914) (Cummins’s remark).

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second ﬁeld was business torts. There, “unfair competition” once had

been limited to a practice whereby a seller, perhaps by naming a product

similarly to that of a better-known competitor, sought to “palm off”

goods. Section 5 advocates declared that the Act was not so narrow.

460

Some courts had broadened the offense to reach other business torts,

and the bill’s advocates cited Harry Nims’s treatise on “unfair competi-

tion,” whose premise was that the term now reached more broadly.

461

The bill’s spokesmen shared these substantial points of agreement.

Further, in their very reliance on an expert agency, they tended to break

from the faith of those, like Taft and Borah, who trusted the courts to

construe a ﬂexible antitrust standard. At the same time, there were

signiﬁcant differences in emphasis, at the least, among the bill’s spokes-

men, as acknowledged by Cummins and criticized by Senator (later

Justice) George Sutherland.

462

It is to the concerns of Newlands, Hollis,

and Cummins that the discussion now turns.

3. Francis Newlands

a. A Senator and His Commission

Francis Newlands of Nevada, the Democratic Chairman of the Com-

merce Committee, had arrived in the House in 1893, moved to the

Senate in 1903, and served there until he died in 1917.

463

Anticipating

Roosevelt’s call for a Bureau of Corporations, he had advocated adminis-

trative scrutiny of business in 1899.

464

He had worked with George Perkins

and others in 1911, contemplating a commission with broad licensing

authority. While he had then settled on a more modest proposal under

which a commission would award a seal of approval to ﬁrms not guilty

of “unfair methods of competition,” he had declared himself agnostic

about whether the future lay in preserving competition or in Roosevelt’s

460

Id. at 12,142–45, 12,211 (Hollis and Newlands).

461

See, e.g., Harry D. Nims, Law of Unfair Business competition (1st ed. 1909)

(citing abuse of trade secrets, conﬁdential business relations, unfair interference with

contracts, libel and slander of merchandise, trade names, business credit, and reputation);

51 Cong. Rec. 11,228 (1914) (quoting Nims). See also Bureau of Corporations, Trust

Laws and Unfair Competition (1915). Cf. Restatement (Third) of Unfair Competi-

tion xi (1995); International News Serv. v. Associated Press, 248 U.S. 215 (1918) (“unfair

competition” in transmitting reports taken from Associated Press).

462

51 Cong. Rec. 11,103, 12,980–84 (1914). Sutherland, who argued in 1914 that the

proposed Commission was unconstitutional, later wrote the seminal decision rejecting a

challenge to that very constitutionality. Humphrey’s Executor v. United States, 295 U.S.

602 (1935).

463

See Albert W. Atwood, Francis G. Newlands, A Builder of the Nation (1969).

464

1 Public Papers of Francis Newlands 395 (1932) (Sept. 20, 1899 speech).

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2003] Origins of the FTC 77

program to regulate monopoly.

465

Indeed, while Newlands spoke out

squarely for Wilson’s approach in 1914, the Senator might then have

felt bound to Wilson by party unity (and by his dependence on the

President to secure the commission that he had long sought). Thus,

Newlands might still have harbored doubts about whether Wilson or

Roosevelt was on the right track.

Newlands’s exemplar was the ICC, an agency under the oversight of

his Commerce Committee. He deemed the ICC “a tribunal second in

importance only to the Supreme Court,” and credited it with making

“transportation a science.”

466

He also justiﬁed his conﬁdence in agency

decision making by pointing to administrative procedures, speciﬁcally

the guarantees of a hearing and of judicial review.

467

Newlands’s personal

preference would have been to transfer all antitrust enforcement to a

commission from a changing, politicized Justice Department,

468

but he

was a pragmatist. His immediate goal was to establish some sort of com-

mission and start a regulatory process that could later expand.

b. Substantive Goals and Unfair Competition

Whatever personal doubts he may have harbored, Newlands promised

in 1914 that the proposed commission would “destroy” monopoly, “check

monopoly in the embryo,” and secure “pygmies” against “giants.”

469

His

committee report declared monopoly to be “intolerable, unscientiﬁc,

and abnormal,”

470

and he said the commission would halt abuses that

had sufﬁcient import “between the parties and with reference to the

public interest.”

471

Newlands sometimes seemed reconciled to growth

that resulted from past abuse,

472

but he anticipated that the commission

would prevent similar abuse in the future.

465

Davis, supra note 429, at 72 (Perkins input); 51 Cong. Rec. 11,094 (1914) (quoting

Newlands’s 1911 opposition “at present” to agency authority to set prices, and declaring

it “too early to say” whether Roosevelt’s approach would or should prevail). See generally

Davis, supra note 429, ch. 4 (documenting Newlands’s efforts from 1911 to 1914). See also

supra note 139 (Herbert Knox Smith’s role in turning Newlands away from “positive”

regulation).

466

Cummins Report, supra note 69, at 20.

467

51 Cong. Rec. 11,108 (1914).

468

See, e.g., id. at 11,234–35; see also id. at 14,274 (applauding Senate action, later reversed

in conference, to delete price discrimination and tying clause provisions from the Clayton

bill and leave enforcement to the commission under § 5).

469

Id. at 12,030, 12,867, 12,939.

470

S. Rep. No. 597, supra note 139, at 10.

471

51 Cong. Rec. 11,109 (1914).

472

Newlands said in 1913 that the results of prior abuse were “so interwoven with the

general business of the country as to make men tremble at their disruption.” Cummins

Report, supra note 69, at 19 (quoting his own remark on Jan. 11, 1911). He may have

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The agency would proceed under its unfair competition authority.

Newlands did not seem to ponder deeply on the term,

473

and explained

that he initially spoke little on the matter because he “did not think it

required much discussion.”

474

His intuitive understanding was grounded

in morality. Unfair competition encompassed practices “against good

morals in trade and that tend to give competitors unfair advantage and

dishonest advantage.”

475

Certain practices “shock the universal con-

science of mankind.”

476

The moral element appeared in his expectation

that the commission would challenge deceptive advertising claims.

477

While Newlands’s benchmark was morality, though, he equated morality

to legal and economic authority, particularly as the debate advanced

and others cited speciﬁc authorities (largely supplied by Rublee) in

defending Section 5.

478

Before the debate ended, Newlands found “the

very meaning of ‘stiﬂing competition by unfair methods’” in economics

and the law, and he declared that “unfair competition” in its “legal

signiﬁcance is the same as the economic signiﬁcance.”

479

trembled himself. Compare 51 Cong. Rec. 11,109 (1914) (“Either you have to break up

these great combinations of capital, . . . or you must adopt some social machinery which

will protect the individual from oppression and wrong”) with id. at 12,866 (bill tended to

destroy and not maintain monopoly).

473

Several commentators disparaged Newlands. Brandeis called him “the despair of

mankind” and attributed his shortcomings to senility. Brandeis to Alice Brandeis, June 6,

1914, FLB, supra note 314, at 250, 251. Rublee’s views were harsh. See supra note 400. John

Sharp Williams, a political foe within his own party, compared Newlands’s thought to a

hummingbird’s movements, never alighting in one place for long. Williams letter, supra

note 433. These comments seem generally consistent with Newlands’s comments during

the debate. He spent little time discussing speciﬁc cases, appending a written analysis of

the cases but declining to discuss it so that he need not “weary” the Senate. 51 Cong.

Rec. at 11,084 (1914). On the other hand, when a member of the Commerce Committee

repeated Cummins’s argument that equated White’s Trans-Missouri dissent to the Standard

Oil decision, see supra text accompanying note 70, Newlands did perceptively argue that

Standard Oil in fact reﬂected the common law that Cummins criticized the Court for

rejecting. 50 Cong. Rec. 482–83 (1913).

474

51 Cong. Rec. 11,107 (1914).

475

Id. at 11,084. See also id. at 11,109 (society’s interest in “the maintenance of good

morals”).

476

Id. at 12,980. See also id. at 11,108 (“You can not take a body of ﬁve men, intelligent

men, composed as this body will be of lawyers, economists, publicists, and men experienced

in industry, who will not be able to determine justly whether the practice is contrary to

good morals or not.”).

477

Id. at 11,109. Newlands predicted that future growth would be fueled not by amalgam-

ation but by “the devices of deceit and of cunning and of fraud.” Id. at 12,939.

478

Newlands showed hesitation at ﬁrst, when he said that the words “have a legal signiﬁ-

cance, and . . . if they have not Congress can give them a legal signiﬁcance,” and “I imagine

that possibly there would be remedies for all those things either at law or in equity.” Id.

at 11,084, 11,113.

479

Id. at 12,211, 12,220 (1914). See also id. at 12,024.

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2003] Origins of the FTC 79

Newlands also defended Section 5’s clarity, perhaps tempted to over-

state that clarity because it faced constitutional attack. “I think almost

every well-regulated mind can determine it, particularly where you get

together ﬁve men of capacity and learning and experience .... I see

no difﬁculty about such an organization determining what is fair and

what is unfair . . . in such a way as to satisfy the universal judgment of

mankind . . . .”

480

If the standard was so clear, though, why have a commission at all?

First, though an “unfair competition” standard was clear, Newlands con-

ceded that its application to speciﬁc practices was not always clear. Some

practices were “on the borderland between fair and unfair.”

481

Second,

the commission would bring cases and vindicate rights that “the individ-

ual, because of his poverty or of his insigniﬁcance, is often unable

to assert against these great organized powers.”

482

Finally, Newlands’s

committee report brought out a point that tended to get submerged as

the Senate focused on Section 5: the commission would combine non-

adjudicative with adjudicative functions, and in its judicial role could

draw on expertise acquired elsewhere.

483

Newlands’sconﬁdence reposed in the agency itself, its ability to inter-

pret a standard that Newlands himself had trouble articulating. Although

there is reason to question the depth of his commitment to the “regula-

tion of competition” as opposed to the “regulation of monopoly,” his

stated position in 1914 was similar to that of Brandeis. He wanted to

stop “abnormal” growth but, unlike such Senators as Reed or Borah, he

trusted a commission to further that goal.

4. Henry Hollis

Henry Hollis, the ﬁrst Democratic Senator from New Hampshire since

1852,

484

served a single term. Hollis apparently interjected himself into

the process of developing antitrust legislation after Rublee’s and Bran-

deis’s ﬁrst meeting with the President, became part of the subsequent

efforts to win over the Commerce Committee (of which he was not even

a member), and attended the second meeting that Rublee and Brandeis

480

Id. at 12,980.

481

Id. at 13,149.

482

Id. at 12,030.

483

S. Rep. No. 597, supra note 139, at 9.

484

Congressional Digest, 63d Cong., 2d Sess. 63 (May 1914).

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held with Wilson.

485

He then became a spokesman for the commission

bill.

Much of what Hollis said came, often verbatim, from Rublee. He

adopted Rublee’s argument that a general unfairness standard was pref-

erable to the speciﬁcdeﬁnitions attempted in the Clayton bill. He

repeated as well Rublee’s view that fair competition was “competition

which is successful through superior efﬁciency,” and adopted Rublee’s

and Wilson’s dichotomy that business success was either the product of

a ﬁrm’sefﬁciency (and good) or its misbehavior (and bad).

486

Hollis

also observed, in his own words, that unfair competition would not be

discerned exclusively from economic sources; rather, the commission

would look to court decisions and to “dictionaries or other authorities,”

and the law of unfair competition would develop through precedents

as did other areas of law.

487

Hollis appeared to share Newlands’s essential

faith in the workings of a commission. He seemed indifferent to the

standard for court review of commission determinations, presumably

because he expected those determinations to be supported so convinc-

ingly that the standard of review would matter little.

488

Adopting the Rublee memo’s most evocative phrase, Hollis con-

demned those who competed unfairly as “pirates of business,” the sort

of language, frequently used by Senators like Reed, Lane and Borah,

that suggested an opprobrium and moral content extending beyond the

mere absence of efﬁciency.

489

Further, Hollis took one more step, which

Rublee had not. He declared, “when you have all the monopoly out of

the way the little fellows are there to do business.”

490

His terminology

suggests that Hollis (like Brandeis and like Wilson in 1912) assumed

that unfairness underlay much corporate growth, and that once unfair-

ness was eliminated, those left to compete would be “little fellows.”

Perhaps Hollis followed Brandeis in discounting the efﬁciency of massive

ﬁrms, and assuming that markets constrained to operate fairly would be

markets of relatively small competitors. As with Newlands, though, Hollis

broke with Senators like Reed and Borah in trusting a commission to

further his goal.

485

See supra notes 374, 400, 410, and accompanying text; Congressional Digest, supra

note 484, at 174 (not a member of Commerce Committee).

486

51 Cong. Rec. 12,146–47 (1914). See also supra text accompanying notes 404–409.

487

51 Cong. Rec. at 11,178–79 (1914).

488

Id. at 11,179 (describing as “extremist” the position that commission orders “be made

absolutely binding unless the court should think there is bad faith or that the commission

had not used its honest judgment”).

489

Id. at 12,147.

490

Id. at 12,146.

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5. Albert Baird Cummins

Albert Cummins, Republican of Iowa, gained local fame in litigation

against a barbed wire trust. He became governor in 1901, reached the

Senate in 1908, and sought the Republican Presidential nomination

(along with Roosevelt and Taft) in 1912.

491

He remained a progressive

through most of Wilson’s ﬁrst term.

492

However, like most of the insur-

gents, he voted more closely with his fellow Republicans after Wilson

became President.

493

As reﬂected in part by his opposition to Brandeis’s

nomination to the Supreme Court, he had drifted to the right (as he

made another Presidential bid) by 1916.

494

As Commerce Committee

Chairman in 1920, Cummins pressed for railroad legislation that “dif-

fered sharply from Progressive-era regulatory practices.”

495

He served six

years as President Pro Tem of the Senate and became a staunch ally of

Calvin Coolidge. Cummins died in 1926, shortly after he was defeated

by a progressive in a primary challenge.

496

In 1914, Cummins served on both the Judiciary Committee that pre-

pared the Clayton bill and the Commerce Committee that prepared the

commission bill. The Democrats tightly controlled the former bill, as

they had other Wilson initiatives, but things proved different on the

491

Elbert W. Harrington, A Survey of the Political Ideas of Alfred Baird Cummins,39Iowa

J. Hist. Pol. 339 (1941).

492

Howard Allen examined Senate votes from 1911 through 1916. Howard W. Allen,

Geography and Politics: Voting on Reform Issues in the United States Senate, 1911–1916,27J.S.

Hist. 216 (1961). He ﬁrst analyzed ﬁnal votes on 12 issues. However, the results were

distorted by the small number of votes and by Democratic caucus unity; half the Democrats

scored over 90% “reform” voting records. Allen then examined every roll-call vote for the

covered years and identiﬁed 135 as “reform votes” that were not decided on essentially

party-line votes. (These included 53 votes that concerned trusts). When applied to Republi-

cans, who were not bound by caucus unity, the second scale has a close correlation to

ﬁnal votes on the antitrust bills. See infra notes 541, 549. Cummins rated 60% on Allen’s

ﬁrst (ﬁnal vote) scale and 80% on the second scale. (Newlands ranked 93% and 58%;

Hollis 100% and 65%.)

493

Jerome M. Clubb & Howard W. Allen, Party Loyalty in the Progressive Years: The Senate,

1909–1915 (1967), 29 J. Pol. 567, 578 n.13, 580 n.15 (in the Congress that sat from 1909

to 1911, Cummins voted with the Republican majority only 34% of the time; in the

Congress that sat from 1913 to 1915—and passed the FTC Act—he voted with the Republi-

can majority 80% of the time).

494

See Holt, supra note 67, at 155–58, 166 (discussing Cummins in 1916 and after).

Cummins was joined in his opposition to the nomination by 21 Republicans and one

Democrat—Francis Newlands. Alpheus Thomas Mason, Brandeis: A Free Man’s Life

501, 504 (1946).

495

Harrington, supra note 491, at 370–75; Hoogenboom & Hoogenboom, supra note

101, at 92–94. The bill dealt with the industry after it operated under federal control

during World War I. Cummins proposed, among other things, compulsory mergers of

weak railroads with strong.

496

Cummins’ Life One of Battle, N.Y. Times, July 31, 1926, at 8.

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Commerce Committee.

497

Although Democrats initially rebuffed Cum-

mins, by March 7 The New York Times reported his role as “a curious

instance of the dominant Republican member of a committee bending

his efforts to induce the Democrats to go further than they wish in the

direction of trust control.”

498

On July 6, Newlands described Cummins

to Wilson as “clear, just and temperate” in his presentation—although

Cummins had just published an article (“The President’sInﬂuence a

Menace”) denouncing Wilson’s legislative efforts.

499

Cummins also may

have spoken for many of the eleven other Republicans, mostly insurgents

and mostly Midwestern, who supported the bill.

500

a. Cummins’s Pre-1914 Program

If Newlands’s earlier pronouncements suggested that he was open to

a Roosevelt-style commission, Cummins’s views were more in line with

a typical agrarian’s. In 1913, Cummins supported a special tax rate for

corporations that controlled more than one-fourth of a national market,

explaining it would target “the accumulation of so much dishonest

wealth.”

501

Cummins offered several proposals to address the trust problem. He

would establish a commission, give its determinations the same effect in

a subsequent proceeding “as though made by Congress,” and authorize

it to enforce a ban to exclude from interstate commerce a ﬁrm that was

so large that its “capital destroys or prevents substantially competitive

conditions.”

502

His commission would also enforce prohibitions of below-

497

See Holt, supra note 67, at 112 (commission bill was the only New Freedom initiative

that Republican insurgents helped frame—and the only one that a majority of them sup-

ported).

498

Wants Trade Board Stronger, N.Y. Times, Mar. 17, 1914, at 2; Francis Newlands to

Wilson, Feb. 16, 1914, 29 PWW, supra note 5, at 227 (Cummins and Clapp “withdrew from

the committee”).

499

78 The Independent 350 ( June 1, 1914); Newlands to Wilson, 30 PWW, supra note

5, at 266.

500

Although the insurgents hardly held uniform views, see, e.g., supra notes 437–447 and

accompanying text, they tended to vote together during the debates on the FTC Act. On

Cummins’s amendment to narrow judicial review of commission orders, see infra notes

510–517 and accompanying text, 10 of the 33 afﬁrmative votes came from the 12 Republi-

cans who supported the Senate version of the commission bill. (The other two did not

vote). See 51 Fed. Reg. 13,109 (1914) (vote on narrow review). When Cummins sought a

strong prohibition in the FTC bill against holding companies, 8 of his 16 votes came

from those Republicans, with 4 not voting (although one subsequently opposed a similar

amendment to the Clayton Act). See id. at 12,993, 14,476. See also id. at 13,319 (ﬁnal vote

on the Senate version of the Commission bill, against which the votes on amendments

were compared); supra note 67 (deﬁnition of insurgents).

501

50 Cong. Rec. 4283 (1913).

502

S. 1730, 63d Cong., 1st Sess. (1913), 3 Bills and Debates, supra note 67, at 3112–14.

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cost pricing and excess capitalization.

503

Still other prohibitions would

be enforced by courts. Where businesses were “competitive” or “of the

same general character,” he would forbid both interlocking directorships

and ownership by a single person or corporation (unless voting rights

were not exercised) of more than 10 percent of the stock in each.

504

would ban all shareholding by corporations.

505

However, Cummins drew

the line at Roosevelt-style regulation, opposing government approval of

prices and, by extension, approval of trade agreements that (he assumed)

would entail review of prices they set.

506

b. Cummins and a Commission

Unlike Newlands, Cummins did not suggest that the Commission

should be the sole antitrust enforcer.

507

Further, unlike Newlands, he

had no objection to supplementing the Sherman Act and Section 5 with

more speciﬁc statutory prohibitions (although Cummins objected to the

actual deﬁnitions in the Clayton bill).

508

For Cummins, Commission

enforcement of Section 5 was simply one way to effectuate antitrust

policy under the “power of Congress” and the “eye of the people.”

509

On one Section 5 matter, moreover, Cummins was far more aggressive

than Newlands or Hollis. The question was judicial review, and the

struggle extended through the Senate debates and into the conference.

The ﬁnal version of the 1914 Act would require courts to treat commis-

sion factual ﬁndings as conclusive “if supported by evidence”

510

; it would

be silent on the degree of deference to be accorded to ﬁndings of

law (including ﬁndings that a given practice was an “unfair method

of competition”). The latter ﬁndings would receive, as Representative

Covington observed, “the respect due to those of an expert body.”

511

503

Id.

504

S. 1617, 63d Cong., 1st Sess. (1913), 3 Bills and Debates, supra note 67, at 3110–12.

505

Id.

506

See, e.g., 1911 Hearings, supra note 21, at 187, 195.

507

See, e.g., 51 Cong. Rec. 14,228, 14,253 (1914) (role for criminal law when violation

sufﬁciently clear).

508

Id. at 14,228 (Clayton bill’s price discrimination, holding company and interlocking

directorate provisions would create “a refuge for lawbreakers and monopolists”); 14,253

(bill’s tying clause provision might reach conduct that should be lawful); 14,263 (would

not object to criminal enforcement of a price discrimination provision, along with Commis-

sion enforcement).

509

Id. at 11,236, 13,047 (1914).

510

The standard of review established in 1914 remains in force today. 15 U.S.C. § 45.

511

51 Cong. Rec. 14,932 (1914) (quoting Charles Prouty, formerly a member of the

ICC). See also, e.g., id. at 12,147 (Hollis); FTC v. R.F. Keppel Bros., Inc., 291 U.S. 304, 314

(1934). Cummins was prescient in his concern that courts would soon rein in the agency,

although it is unclear if the agency would have fared much better, at least initially, under

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Cummins had sought more. “[W]hen we enlist in a man’s war we ought

to carry a man’s weapons. . . ,” and an FTC order should thus have “all

the effect . . . that we can constitutionally give it.”

512

The Supreme Court

was starting to accord increased deference to the ICC,

513

and Cummins

proposed that the law require that courts extend the same level of

deference to the FTC. The Commerce Committee, with Newlands acqui-

escing for pragmatic reasons, disagreed. It supported a proposal by

Senator Atlee Pomerene that addressed only the agency’s factual ﬁnd-

ings, making them “prima facie evidence of the fact stated therein.”

514

The precise meaning of this standard was not entirely clear,

515

but Pomer-

ene’s intent was different from Cummins’s.

516

When the Senate had to

choose between them, apparently acting without clear guidance from

Wilson, Cummins prevailed with bipartisan support.

517

c. Unfair competition and the substance of antitrust

As discussed previously, Cummins wrote in 1913 that the Sherman Act

was intended to reach restraints that failed to leave “the competitive

force as an adequate protection to the people,” but a Standard Oil anal-

ysis would instead test each restraint “by the economic standard which

narrow review. (In FTC v. Gratz, 253 U.S. 421 (1920), for example, the Court held that

the challenged practices fell squarely outside § 5; no amount of deference would have

saved the agency.)

512

51 Cong. Rec. 13,004, 13,045 (1914). Under questioning by Newlands, Cummins

agreed that “narrow” review would allow a court to reverse the commission “if the facts

were such as not, in the judgment of the court, to constitute unfair competition,” but he

likely meant, as he said elsewhere, that a court could reverse the commission “if the

facts established . . . clearly, unmistakably show that these facts do not constitute unfair

competition.” Id. at 13,007, 13,046.

513

The ICC was then 27 years old, its organic statute had been strengthened three times

in 11 years, and the Court was coming to terms with its regulatory power. See supra note 172.

514

51 Cong. Rec. 11,108, 13,066, 13,316 (1914) (Newlands’s initial preference for narrow

review, his later acquiescence in broader review to parallel the review he understood the

Clayton Act would provide, and his assertion that he was reverting to narrow review—

albeit one where that in his view would leave the court to determine “whether the facts

stated in the order constituted the offense of unfair competition”—when he learned that

his information about the Clayton bill was wrong).

515

Cummins said it would reduce the commission to an “open door for reaching the

court.” Id. at 13,004. Newlands argued that the Pomerene and Cummins proposals might

differ little in practice. Id. at 13,066.

516

Pomerene said, “I object to getting ﬁve men together, calling them a commission,

accepting in good faith the fact that they are thereby clothed with omniscience, and

allowing them to create all of this new growth of the common law or to extend it into

new ﬁelds which heretofore have not been covered.” Id. at 12,874.

517

The vote was 33–25. Democrats supported Cummins 20–16, Republicans 13–9. The

uncertainty about Wilson’s position is shown by the fact that Wilson’s Corporations Commis-

sioner, Joseph E. Davies, later wrote a brief supporting Cummins. See infra note 552.

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the individual members of the court may happen to approve,” by each

Justice’s “opinion as an economist or sociologist.”

518

The prohibition on “unfair competition,” which for Cummins was a

somewhat narrow term that did not reach (for example) merger activ-

ity,

519

was similarly intended to preserve the competitive force. Section

5 would stop the kind of competition “which has for its object the

destruction of competition. There is no unfair competition that is consis-

tent with the endurance of any competition.”

520

Competing unfairly was

like using brass knuckles in a ﬁght.

521

Like Newlands, Cummins some-

times emphasized the clarity of both the standard and its application,

522

but elsewhere emphasized the need for a rule of reason: “[e]verything

must be determined by the rule of reason.”

523

His organizing principle

was that “prices shall be determined by honest competition among those

who are engaged in commerce.”

524

For Cummins, a Section 5 analysis would require consultation of a

wide range of converging sources, both legal and non-legal.

525

Cummins

waslessconﬁdent than Newlands in the reliability of morality as a guide.

On the one hand, to Cummins’s way of thinking, the United States was

(then) virtually alone in adopting a policy of competition. Antitrust laws

518

See supra text accompanying notes 69–70.

519

In Cummins’s view, holding companies “destroy competition entirely”and interlock-

ing directorates “suppress” competition, but neither was “unfair competition.” 51 Cong.

Rec. at 11,103 (1914). (Newlands disagreed. Id. at 11,106). Cummins wanted a commission

to address these threats to competition, but thought that the commission would require

authority (which he sought to provide) beyond § 5. See id. at 12,987, 12,993, 13,112–13.

520

Id. at 11,385.

521

Id. at 11,448.

522

Id. at 12,917 (any businessman could identify “a particular act as fair or unfair

competition”), 12,913 (denying that a court or commission in a § 5 case would be “at

liberty . . . to use its own peculiar economic or social opinions with regard to the character

of the conduct under examination”).

523

Id. at 12,914.

524

Id. at 12,920.

525

See id. at 12,873 (1914) (no “difference between the technical meaning of unfair

competition, as that meaning may be derived from the decisions of the courts, and the

so-called popular meaning”), 13,048 (board would “consult the decisions of the courts,

the learning of the time, the custom of merchants, the habits of trade, the writings of

studious and thoughtful men, all of which go to make up our understanding of the words

‘unfair competition.’”), 12,653 (“Our language is not made up by the courts ....‘Unfair

competition’ means what the people who use the English language commonly believe

that those words mean. . . . Business men are just as potent in determining what unfair

competition means as are the courts; the writers who make our literature, after observing

the affairs of men, are just as inﬂuential in determining the meaning of unfair competition

as are the courts.”).

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might thus be violated by practices that other countries might tolerate

or even encourage, and that might be undertaken “without any sense

of moral wrong, without any consciousness of moral turpitude.”

526

the other hand, a moral concept, the “civilized sense of mankind,”

was a benchmark to identify “unfair competition.”

527

A seemingly moral

concept also appeared reﬂected in his explanation of why Section 5

reached a “palming off” offense. Although Cummins did not think that

Section 5 would apply if a railroad terminal diverted business by misrepre-

senting its competitor’s facilities, he asserted that, “If one goes into a

store and desires a thing and through a misrepresentation . . . he takes

another thing he is injured, and the people generally are injured if the

same thing is practiced on them, without regard to the price, without

regard to the quality, of the goods involved.”

528

Cummins also saw sheer size as a competitive problem. He acknowl-

edged that “some kinds of business must be carried on in large units,”

and seemed reconciled by 1914 to markets with only two competitors.

529

But when U.S. Steel controlled over half a market and its competitors

were all smaller producers, those competitors existed at its sufferance.

“Size means power; and whenever you reach the power that the United

States Steel Corporation has, you have already touched monopolistic

power; you have touched the power to suppress real, substantial

competition. . . . The company does it merely because it is so big.”

530

The proper rule should be “fair, reasonable competition, independence

to the individual, and dissociation among the corporations.”

531

Though

business should beneﬁt from economies and efﬁciencies, “[w]hatever

those economies and efﬁciencies may be, they must, however, stop short

of one thing, that is, the power to rule that ﬁeld of commerce which

they attempt to occupy.”

532

Cummins had said in 1911 that what needed

to be promoted was “[f]air competition among business institutions of

526

Id. at 11,379–80. Although mergers were not within Cummins’sdeﬁnition of “unfair

competition,” for example, Cummins highlighted the difﬁculties of determining when

businesses are competitive for purposes of a merger analysis. He also asked how a court

would decide if a merger of 6 ﬁrms in a ﬁeld of 12 violated the Sherman Act. Id. at 11,380.

527

Id. at 11,104.

528

Id. at 11,106. Cummins’s explanation for why the railroad’s misrepresentation differed

from the soap manufacturer’s was less than satisfactory. The latter, but not the former,

was “tinctured with unfairness to the public.” Id. at 11,105.

529

Id. at 11,455–56. The previous year, he had declared that no ﬁrm should have more

than 25% of a national market. 50 Cong. Rec. 4283 (1913).

530

51 Cong. Rec. 11,457 (1914).

531

Id. at 11,455.

532

Id. at 11,456.

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substantially equal advantages.”

533

In 1914, he again proposed to ban

ﬁrms so large as to prevent substantially competitive conditions.

534

Even an economic analysis, then, had to balance the beneﬁts of efﬁ-

ciencies against the harms attendant to size. Although Section 5’s “unfair-

ness must be tinctured with unfairness to the public; not merely

unfairness to the rival or competitor,”

535

the preservation of smaller

enterprises was integral to protecting the competitive force. Further,

despite his critique of Standard Oil for incorporating “sociological” views,

Cummins had explained in 1911 that antitrust would not only prevent

unduly high consumer prices (and thus “secure that distribution of

wealth which arises or comes about from fair and decent rivalry”). It

would also address “another object of danger”:the“sociological one—

the desirability of having as many men as possible who are their own

masters, rather than having a few masters and a good many employees

. . . . building up and maintaining the manhood and character necessary

to sustain a nation like ours.”

536

Cummins thus echoed Justice Peckham’s

concern about “small dealers and worthy men” and Brandeis’ views of

the goals of antitrust.

537

Indeed, he declared:

[T]he people . . . have long ago reached a conclusion—and I think it

is practically a unanimous opinion—that we must do something to

preserve free, fair competition in the business life of the United States;

that we must do something to preserve the independence of the man

as distinguished from the power of the corporation; that we must do

something to perpetuate the individual initiative.

We often go wrong, I believe, in assuming that because a great corpo-

ration, a vast aggregation of wealth, can produce a given commodity

more cheaply than can a smaller concern, therefore it is for the welfare

and the interest of the people of the country that the commodity should

be produced at the lower cost. I do not accept that article of economic

faith. I think we can pursue cheapness at altogether too high a price,

if it involves the surrender of the individual, the subjugation of a great

mass of people to a single master mind.

538

533

1911 Hearings, supra note 21, at 524. Cf. 51 Cong. Rec. 11,456 (1914) (need for

“competent and efﬁcient competitors”).

534

51 Cong. Rec. 14,543 (1914). The amendment was defeated without a recorded

vote. Id.

535

Id. at 11,105.

536

1911 Hearings, supra note 21, at 1584. See also id. at 1110 (while consumers were

“chieﬂy interested in getting a good article at a fair price,” they were also “interested in

another indirect way, namely, the trying to have the business of this country carried on

so that independent men shall be in business whose characters will be developed by the

responsibility which they must bear”).

537

See supra text accompanying notes 31, 185–214.

538

51 Cong. Rec. 12,742 (1914). See also id. at 11,379 (need to protect “individualism

in business, individualism in society, individualism in every ﬁeld in which energy and

initiative are required”).

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Despite Cummins’s emphasis on competition as a regulator of prices,

then, even “cheapness” might be suspect—and not merely because large

ﬁrms might manipulate the market and ultimately deny consumers the

beneﬁts of efﬁciencies, but also due to social harms attendant to indus-

trial concentration.

539

6. The Commission’s Advocates: Summary

Just as Roosevelt and his opponents could converge in support of

speciﬁc programs, the Commission’s principal advocates converged in

their support of Section 5. Newlands had at least ﬂirted with Roosevelt-

style regulation and the attendant embrace of large-scale business in

1911, and the sincerity of his later rejection of such regulation is subject

to question. Cummins, in contrast, shared the distrust of concentrated

wealth reﬂected by other agrarian Senators, as well as by Louis Brandeis.

Yet they converged, along with Hollis, in supporting a prosecutorial

commission that would enforce a prohibition on unfair competition.

Further, although Newlands emphasized a moral dimension to unfair-

ness, Hollis an economic dimension, and Cummins an economic vision

with a social component, they also converged in seeing Section 5 as a

way to stop incipient Sherman Act violations or, more broadly, unde-

served growth.

7. Senate Passage of the Commission Bill

On August 5, the Senate passed the commission bill, 53–16, and sent it

to conference. Voting under a caucus resolution,

540

forty-one Democrats

supported the bill, two opposed it, and ten cast no vote. Twelve of the

more progressive Republicans supported the bill, fourteen Republicans

opposed it, and sixteen cast no vote.

541

F. The Clayton Bill in the Senate

The Senate them turned to the Clayton bill. Since Congress now

contemplated that the commission would be an enforcement agency,

539

Cummins did assert that an unfair competition analysis would not depend on “such

broad” sociological and industrial conditions and consequences as would a restraint of

trade analysis. Id. at 12,915. However, he did not thereby preclude more limited consider-

ation of those conditions in analyzing unfair competition, and his understanding of unfair

competition, as noted above, did not include merger activity. See supra note 519.

540

See supra note 279.

541

Under Howard Allen’s second scale for measuring “reform” votes, see supra note 492,

the Republicans who voted for the Senate commission bill scored 58% or above; the 13

who were rated and voted no scored 51% or less.

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the central questions became what substantive provisions, if any, to retain

in the Clayton bill, and how any retained provisions should be enforced.

542

The Judiciary Committee ﬁrst removed all the substantive provisions

from the Clayton bill,

543

as Wilson had perhaps intended. Had that action

stood, price discrimination, the creation of holding companies, and

other affected conduct might still have been challenged under the Sher-

man Act to the extent they violated that law; otherwise a federal challenge

could have rested only on the FTC Act. But the Committee reversed

course before it reported the bill to the full Senate. It restored all the

substantive provisions of the Clayton Act, but substituted administrative

enforcement of Clayton Act provisions by the FTC (or the ICC in the

case of common carriers

544

) for criminal enforcement. The bill did create

new criminal liability for corporate ofﬁcers, defendants, and agents, who

could be sanctioned for their ﬁrms’ violations of the Sherman Act.

However, the substantive provisions of the Clayton Act itself could only

be enforced by Justice Department civil proceedings (a possibility often

ignored during the debate) or by administrative proceedings. This was

the change that most aroused the ire of Senators Reed and Borah.

545

Then, when the bill reached the Senate ﬂoor, the Committee recom-

mended an intermediate approach. At its behest, the Senate voted to

retain, with provisions for civil and administrative enforcement, prohibi-

tions on holding companies and interlocking directorates. The other

substantive provisions were deleted.

546

Thus the matter stood early in

the Senate debate, although a limited tying clause provision would be

restored in the Senate and most of the deleted provisions would be

restored, in some form, in conference.

542

Much of the debate also turned on the labor exemption. As noted before, that

exemption is beyond the scope of this study.

543

See 51 Cong. Rec. 14,089 (1914).

544

Before the bill became law, the Conference Committee also made the Federal Reserve

Board the enforcement authority against banks. Act of Oct. 15, 1914, ch. 323, § 11, 38

Stat. 730 (codiﬁed as amended at 15 U.S.C. § 21). For purposes of this discussion, reference

to enforcement by “the commission” should be understood to include enforcement by

any of these agencies.

545

See supra text accompanying notes 417–423, 441–447; S. Rep. No. 698, 63d Cong., 2d

Sess. 43–44, 47–49 ( July 22, 1914) (explaining that “experimental stage of this legislation”

warranted substitution of administrative for criminal enforcement). While FTC Act viola-

tions became subject to civil penalties in 1938, see supra note 363, the Clayton Act made

no such provision until 1959. Act of July 23, 1959, Pub. L. 86-107, § 1, 73 Stat. 243 (codiﬁed

as amended at 15 U.S.C. § 21(l)).

546

51 Cong. Rec. 13,848–49 (1914). The Senate also deleted a provision forbidding

mine owners from arbitrarily refusing to sell to a responsible buyer; that provision was

never restored.

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Other changes were made as well, some narrowing a prohibition and

some broadening one. For example, the House’s price discrimination

language had express exemptions for price differentials that reﬂected

different transportation costs, quality, grade, and quantity. The provision

recommended by the Senate Committee (before it was deleted entirely)

added a meeting competition defense, as well as provision for differences

in selling costs.

547

While this language arguably weakened the bill, the

holding company provision came to the Senate with a prohibition on

acquisitions whose effect “is to eliminate or substantially lessen competi-

tion;” after multiple changes on the Senate ﬂoor, it reached more widely,

prohibiting acquisitions whose effect “may be to lessen competition.”

548

The bill passed on September 2 by a vote of 46–16. The thirty-eight

Democrats who voted all supported the bill. Only seven Republicans and

the Senate’s lone Progressive joined them in that support.

549

G. The Conference Bills

1. The Federal Trade Commission Act

But for Section 5, the House and Senate versions of the commission

bill differed little. The House, with some encouragement from Wilson,

550

acquiesced in the critical addition of Section 5, subject to two changes.

The ﬁrst change, largely cosmetic, was to use “unfair methods of competi-

tion” to describe both the conduct that violated the law and the conduct

the Commission could prohibit; thus, it was made clear that Section 5

was not limited to “palming off” offenses.

551

The second revisited the standard for judicial review. The issue split

the conferees and, on August 20, Corporations Commissioner Davies

ﬁled a brief supporting a narrow standard of review.

552

Perhaps because

547

H.R. 15657 as Reported by the Senate Committee on the Judiciary, 63d Cong., 2d Sess. § 2

( July 22, 1914).

548

See 51 Cong. Rec. 14,463–64 (1914).

549

Id. at 14,610. On Howard Allen’s second scale, see supra note 492, the rated Republicans

who voted for the Senate bill scored 60% or higher. With one exception—Senator Borah—

the 15 rated Republicans who voted against the bill scored 58% or less.

550

For example, Wilson discouraged Charles Culberson, Chairman of the Senate Judi-

ciary Committee, from seeking to deﬁne “unfair competition;” according to Wilson, the

term maintained “elasticity without real indeﬁniteness.” Wilson to Culberson, July 30,

1914, 30 PWW, supra note 5, at 320.

551

Senator Hollis had proposed this change earlier. 51 Cong. Rec. 12,145 (1914). The

Senate version of the commission bill had proscribed “unfair competition,” although it

had authorized the Commission to issue orders to stop “unfair methods of competition.”

552

Brief by the Bureau of Corporations Relative to Section 5 of the Bill (H.R. 15613) to Create

a Federal Trade Commission, 63d Cong., 2d Sess. (Aug. 20, 1914). When power to determine

whether a law has been complied with is delegated to an administrative ofﬁcer, the brief

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of personal and international crises then absorbing Wilson,

553

Davies did

not solicit the President’s advance input; he did, however, send Wilson

a memo urging his position the next day.

554

Anticipating later Rublee-

Davies disputes on the Commission, though, Rublee submitted his own

brief on August 25, arguing that Cummins’s amendment neither could

nor did accomplish what Cummins sought.

555

Rublee argued for “broad

review,” or, at least, broad review of agency determinations that a practice

was unfair.

556

Wilson sided with Rublee, and intervened to “convert”

Newlands.

557

Since Rublee’s view was in tune with Wilson’s distrust of

experts, Wilson’s alignment with Rublee was hardly surprising. The ﬁnal

bill, as noted above, required deference to Commission ﬁndings of fact

but was silent on deference to ﬁndings of law, and those ﬁndings received,

as Representative Covington observed, “the respect due to those of an

expert body.”

558

Thus, Wilson’s last intervention in the legislative process

was to broaden judicial oversight of the Commission, and to limit the

potential impact of the “smug experts” he had earlier denounced.

After brief debate, the conference bill passed the Senate 43–5. The

Democrats were united, 34–0. Eight Democrats who had not voted on

the Senate bill supported the ﬁnal bill (as did one of the two Democratic

Senators who had opposed the Senate bill).

559

The House passed the

said, “the courts have declared (a) that the ﬁndings of fact by such ofﬁcer or body are

ﬁnal, (b) that the decision of a mixed question of law and fact is ﬁnal unless the question

of law may readily be separated from the question of fact, and (c) that a decision of a

question of law, unless clearly wrong, will not be set aside.” Id. at 17.

553

Wilson’s wife died on August 6, and European governments began to declare war

on each other on July 28. Link, New Freedom, supra note 284, at 461–62; Arthur S.

Link, Wilson: The Struggle for Neutrality 3–4 (1960). Wilson had virtually no staff

working on legislation, see Marshall E. Dimock, Woodrow Wilson as Legislative Leader, 19

J. Pol. 3, 13 (1957), so his personal withdrawal from the legislative process was tantamount

to withdrawal by the White House. Perhaps Davies decided to approach Wilson on August

21 because the press reported that Wilson had met with Covington, and was thus again

addressing the antitrust package. Press Conference, 30 PWW, supra note 5, Aug. 20, 1914,

at 404.

554

Davies to Wilson, Aug. 21, 1914, 30 PWW, supra note 5, at 427.

555

Brief by George Rublee Relative to the Court Review in the Bill (H.R. 15613) to Create a Federal

Trade Commission, 63d Cong., 2d Sess. (Aug. 25, 1914). Rublee argued Congress could not

constitutionally limit court review of commission ﬁndings within the narrow conﬁnes that

Cummins sought, and that, properly applied to commission proceedings, the ICC standard

that Cummins proposed to incorporate would itself lead to broad review.

556

Id. at 5.

557

See Wilson to Harry Covington, Aug. 27, 1914, 30 PWW, supra note 5, at 454, 455.

Rublee’s brief was the basis for Covington’s remarks on judicial review during the ﬁnal

debate. 51 Cong. Rec. 14,931–33 (1914).

558

See infra note 511.

559

See 51 Cong. Rec. 14,803 (1914). Eight Republicans voted for the ﬁnal bill, including

seven of the twelve who had supported the Senate bill (the other ﬁve failed to vote), and

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act without a recorded vote,

560

and the bill became law on Septem-

ber 26.

2. The Clayton Act

The Senate and House versions of the Clayton bill differed in many

respects, and the conference bill emerged with multiple compromises

and changes. Thus, the conference restored a price discrimination provi-

sion, retaining most of the exemptions in the bill reported to the Senate

but replacing the test of intent to wrongfully injure a competitor with

a test of whether a differential’s “effect . . . may be to substantially lessen

competition or tend to create a monopoly in any line of commerce.”

561

The holding company provision reﬂected a compromise between the

stronger Senate provision and the weaker House provision.

562

Still, the

Senate change that was perceived to be most important survived. The

conference accepted the Senate’s replacement of criminal with adminis-

trative enforcement, leaving intact the Justice Department’s civil enforce-

ment authority (and allowing the Department to challenge the same

practice under both the Sherman and Clayton Acts). The result, almost

inadvertently, was dual jurisdiction under the Clayton Act.

The conference version proved controversial in the Senate. The debate

extended over seven days before the bill passed, 35–24, on October 5.

The margin was far narrower than the 46–16 vote that sent the bill

to conference. Three Democrats (including Lane and Reed) and four

Republicans (including Clapp) reversed prior support, registering their

disappointment that the bill was not further strengthened in confer-

ence.

563

Three days later, the House approved the conference version

of the Clayton bill, 245–52.

564

The bill became law on October 17.

one who had previously opposed it. Progressive Senator Miles Poindexter, who failed to

vote on the Senate bill, voted for the conference bill.

560

Id. at 14,943.

561

Act of Oct. 15, 1914, supra note 544, § 2. See also supra text accompanying notes

324–328, 547. One exemption in the reported bill, allowing price differences for different

selling costs, was not in the ﬁnal bill.

562

The House version forbade acquisitions whose effect “is to eliminate or substantially

lessen competition” in a relevant market. The Senate version applied when that effect

“may be to lessen competition.” The conference bill used the Senate language, but with

the word “substantially” reinserted. Further, the House and Senate bill also had another

clause, forbidding holding companies that “create a monopoly in any line of [trade or

commerce].” The Conference Committee instead applied where the transaction’s effect

was “to restrain . . . commerce in any section or community, or tend to create a monopoly

of any line of commerce.” See H.R. 15657 with Senate Amendments Numbered, 63d Cong., 2d

Sess. at 9 (Sept. 3, 1914); Act of Oct. 15, 1914, supra note 544, § 7.

563

See 51 Cong. Rec. 16,170 (1914).

564

Id. at 16,344.

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2003] Origins of the FTC 93

VII. A ROCKY START

A. Wilson’s Plans for the Commission

While Section 5 enforcement authority was the most debated part of

the FTC Act, the agency’s mandate extended well beyond litigation. The

Commission’s information-gathering and reporting functions survived

from the House bill. Wilson, for his part, highlighted assistance to busi-

ness, a function not even mentioned in the Act, as he had highlighted

such assistance in his January 1914 speech.

565

In 1916, Wilson would

make grandiose, if expressly ambiguous, claims for the Commission. Its

“[p]owers of guidance and accommodation . . . have relieved business-

men of unfounded fears and set them on the road of hopeful and

conﬁdent enterprise.”

566

“It is hard to describe the functions of [the]

Commission. All I can say is that it has transformed the Government of

the United States from being an antagonist of business into being a

friend of business.”

567

He compared, as well, the Commission’s helpful

men to the Justice Department’s litigious attorneys.

568

B. The First Wilson Commission

Wilson’s most immediate impact would come from his selection of

Commissioners. The Commission’s broad but mixed mandate would

have challenged the best complement of Commissioners in the best of

times. The Commission would not, however, start in the best of times.

World War I would temporarily result in virtual abandonment of anti-

trust. The exigencies of wartime mobilization drove the country to

embrace broad economic regulation under the lead of Bernard Baruch’s

War Industries Board and Herbert Hoover’s Food Administration.

569

The

Commission itself would struggle to ﬁnd a role, and would largely serve

as a cost-ﬁnding agency for the government.

570

565

See supra text accompanying note 306.

566

Speech accepting the Democratic Nomination, Sept. 2, 1916, 38 PWW, supra note 5,

at 126.

567

Address, Sept. 25, 1916, 38 PWW, supra note 5, at 261, 265.

568

See supra text accompanying note 6. At the same time, Commissioners were quoting

from Wilson’s January 1914 speech about the Commission’s role in offering guidance to

industry. See Edward Hurley, Some Business Problems of Today, Dec. 1, 1915, and William

Harris, The Work of the Federal Trade Commission, Apr. 4, 1916, FTC General Records, Box

146, National Archives.

569

See, e.g., Robert D. Cuff, The War Industries Board: Business-Government

Relations During World War I (1973); Robert A. Himmelberg, The War Industries Board

and the Antitrust Question in November 1918,52J. Am. Hist. 59, 60 (1965).

570

W.H.S. Stevens, What Has the Federal Trade Commission Accomplished,15Am. Econ. Rev.

625, 636–37 (1925).

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Nor were Wilson’s initial selections the best complement of Commis-

sioners. When Brandeis declined an appointment,

571

the Commission

lost the chance to gain the instant stature that the ICC had obtained in

1887 when its initial Commissioners included Thomas M. Cooley, a

distinguished law professor, former Chief Justice of the Michigan

Supreme Court, and author of some of the most signiﬁcant treatises

of the nineteenth century. Most signiﬁcantly, as the contrast between

Commission men and Justice Department lawyers shows, the President

had not shaken his distrust of attorneys.

572

Nor did economists fare better.

Wilson dismissed those “tedious persons,”

573

and, though he appointed

some to other agencies, he named none to the Commission.

574

Wilson’s

selections were driven in part by geographic diversity,

575

and at least one

primarily by patronage.

Wilson’s favored selection (as shown by his receipt of the longest term)

was Corporations Commissioner Joseph E. Davies. Although Davies’s

appointment was widely expected,

576

his credentials were hardly those

of a Cooley or Brandeis; he had been a district attorney and built a

private practice before joining Wilson’s campaign. The other lawyer was

Rublee. Rublee was nominated to the short three-year seat and, although

his efforts to secure Section 5 showed him legally and politically astute,

he, too, lacked a national reputation.

Among the non-lawyers, Edward N. Hurley received a six-year term.

Hurley was a self-made man, an elementary school drop-out who built

successful businesses.

577

He had played an intermediary role in recruiting

571

1929 Interview, supra note 194.

572

When Huston Thompson, whom Wilson had invited to identify a government position

that interested him, approached Wilson about a Commission seat in 1917, Thompson felt

compelled to ease Wilson’s “fear at placing lawyers on the several Commissions because

they as a rule immediately tie their hands or powers up in technical legal limitations.”

Thompson explained that he was not that sort of lawyer—but Wilson conﬁrmed that he

in fact would not put a third lawyer on the commission. Thompson to Wilson, Jan. 15,

1917, 40 PWW, supra note 5, at 490; Wilson to Thompson, Jan. 16, 1917, id. at 493.

573

Speech, Sept. 27, 1912, Davidson, supra note 258, at 284, 291.

574

Wilson placed Frank W. Taussig of Harvard on the Tariff Commission and Winthrop

Daniels of Princeton on the ICC. For the Commerce Board, N.Y. Times, Jan. 31, 1914, at 10;

Professor Taussig Accepts, N.Y. Times, Jan. 7, 1917, at 3.

575

As late as the 1950s, geographic diversity factored signiﬁcantly even in Supreme Court

appointments. Thomas R. Marshall, Symbolic Versus Policy Representation on the U.S. Supreme

Court,55J. Pol. 140, 141 (1993).

576

See, e.g., President Holds Up Trade Commission, N.Y. Times, Dec. 29, 1914, at 4.

577

Hurley organized the pneumatic tool industry in America in 1896, retired to raise

livestock in 1902, and became president of a bank and re-entered business in 1906,

manufacturing (and, according to the National Cyclopaedia of American Biography, helping

to invent) the electric washing machine. 40 National Cyclopaedia of American Biogra-

phy 8–9 (1955).

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2003] Origins of the FTC 95

Wilson for the 1910 gubernatorial race, and had studied South American

banking and credit on Wilson’s behalf.

578

Will Parry had held a succession

of signiﬁcant local posts in northwestern politics, business and journal-

ism.

579

Davies located Parry because Wilson wanted a Progressive West

Coast businessman for the agency.

580

Finally, William J. Harris had been

in the insurance business and president of a bank. After he ran Wilson’s

Georgia campaign, Wilson had named him Director of the Census in

1913.

581

After a tumultuous period in which personal animosities led to a coup

d’etat against Chairman Davies, all ﬁve Commissioners were soon gone.

582

Because of his efforts in Raymond Stevens’s 1914 Senate campaign,

Rublee was never conﬁrmed; he served as a recess appointee and left in

sixteen months.

583

Hurley returned to the private sector in 1917, although

he later become Chairman of the United States Shipping Board and

President of the Emergency Fleet Corporation.

584

Parry’s health deterio-

rated, apparently from overwork, and he died on April 21, 1917.

585

Harris

resigned to run for the Senate in 1918, won, and served there until he

578

Wilson to John Maynard Harlan, June 11, 1910, 20 PWW, supra note 5, at 519; Edward

Nash Hurley, The Bridge to France (1927).

579

Parry had been president of the Seattle City Council, the Seattle and Lake Washington

Water Company, and the Seattle Chamber of Commerce. He had managed a ﬁrm that

built a battleship and (fulﬁlling Senator Newlands’s vision that the Commission include

publicists) had been a journalist and editor. 18 National Cyclopaedia of American

Biography 116–17 (1922).

580

MacLean, Davies, supra note 311, at 57–58.

581

Trade Commission Named by President, N.Y. Times, Feb. 23, 1915. at 1, 3. In 1929,

Brandeis dismissed Harris as “small caliber, with no grasp of the real problems.” 1929

Interview, supra note 194.

582

From 1914 until 1950, the Commissioners chose a Chairman from among the agency’s

members. At the ﬁrst meeting, Davies secured a vote naming him Chairman “so long as

he was a member of the Commission.” Commission Minute, Mar. 16, 1915. By 1916,

Rublee, Hurley, and Harris joined to remove Davies from the Chairmanship, and passed

it to Hurley. See Commission Minute, May 31, 1916.

583

Rublee tried unsuccessfully to persuade the New Hampshire Progressive Party not to

run a Senate candidate in the race. When Rublee failed, he focused his energies on

attacking the Republican incumbent, Jacob Gallinger. Gallinger won, though, and invoked

the doctrine of Senatorial courtesy to block Rublee’s conﬁrmation. McClure, Earnest

Endeavors, supra note 131, at 171–85. Rublee’s career after he left the Commission

included appointments under Presidents Wilson, Calvin Coolidge, Herbert Hoover, and

Franklin Roosevelt, one of which led to a highly regarded 1938 effort to assist German

Jews, and private practice with Covington, Burling, Rublee, Acheson, and Shorb.

584

Hurley, supra note 578.

585

When he returned to Seattle for a vacation, Parry was “betrayed” by a friend to the

newspapers. Once word got out that the “West Coast Commissioner” was available in

Seattle, he was so beset by petitioners there that he fell back into a “rut” of ten-hour

workdays. Parry Letter to Commissioners, FTC General Records, Box 38, File 8117-1,

National Archives.

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died in 1932.

586

Davies also resigned to run for the Senate in 1918, but

he lost.

587

VI. CONCLUSION

The candidates, advisers, and legislators who debated competition

policy in the wake of Standard Oil confronted the reality of unprece-

dented business growth. That growth challenged classical assumptions

that business efﬁciency was compatible with opportunity, competition,

fair distribution, and political freedom, and that all could be secured

by non-discretionary antitrust adjudication. Participants in the debate,

lacking any roadmap from countries that had previously responded to

such growth with competition-based policies, debated how much of the

traditional model could and should be retained. They also considered

alternatives that were largely untested in the United States (although

some would soon be tested under the spur of war), including govern-

ment-business cooperation, government encouragement of interﬁrm

cooperation, and direct government regulation.

The legislative resolution of 1914 was a milestone in competition policy

and the start—but only the start—of the Commission’s story. In 1938,

the Wheeler-Lea Act would expand the Commission’s Section 5 authority

to encompass “unfair or deceptive acts or practices” as well as “unfair

methods of competition”; additionally, it would subject violations of

Commission orders to civil penalties.

588

Later legislation would modify

the speciﬁc prohibitions of the Clayton Act, as when the Celler-Kefauver

Act of 1950 expanded Section 7 to reach asset acquisitions, and the

Hart-Scott-Rodino Act of 1975 added Section 7A to require premerger

ﬁlings.

589

Numerous special statutes would expand the Commission’s

powers, beginning with the 1918 Webb-Pomerene Act.

590

Even the Com-

mission’s internal organization would be changed, as Reorganization

Plan No. 8 of 1950

591

would authorize the President to select the Chair-

man from among the Commissioners and would make that Chairman

the executive and administrative head of the agency.

586

24 National Cyclopedia of American Biography 266.

587

Davies returned to private practice, and later became Ambassador to Russia under

Franklin Roosevelt.

588

Act of Mar. 21, 1938, ch. 49, § 3, 52 Stat. 111.

589

Act of Dec. 29, 1950, ch. 1184, 64 Stat. 1125 (codiﬁed as amended at 15 U.S.C. § 18).

590

That law authorized the Commission to receive certain ﬁlings from export trade

associations organized under the Act, investigate association activities that might adversely

affect domestic competition, advise businesses of adjustments the agency deemed necessary

to comply with the law; and recommend law enforcement to the Attorney General in

appropriate cases.

591

15 Fed. Reg. 3175 (1950).

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Still, much of the 1914 framework has remained intact. Then, as

now, the Commission could issue orders to prohibit unfair methods of

competition. Then, as now, its general statutory mandate was supple-

mented by enforcement authority over speciﬁcally deﬁned law violations,

initially those under the Clayton Act. Most importantly, then, as now,

the agency combined formal powers to investigate (those emphasized

in the House debate), formal powers to prosecute (those emphasized

in the Senate debate), and informal authority to educate and work with

business to facilitate compliance with the law (those emphasized by

Wilson). These authorities would provide fertile ground for the agency

to grow and adapt as it addressed changing times and, at its best, to

shape its broad mandate to the needs of those times.

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