5.4 Early Attempts at Business Regulation

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Laissez-faire economic policy during Industrialization

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The US allowed free enterprise without regulating businesses for fairness and safety, based on Social Darwinism.

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Impact of laissez-faire policy on competition

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Industries became less competitive, leading to larger businesses and the formation of trusts and monopolies.

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Purpose of Granger Laws

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To protect farmers from high rates charged by railroad companies for storing and shipping crops.

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Wabash, St. Louis, and Pacific Railway v. Illinois (1886)

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The Supreme Court ruled that states cannot regulate interstate trade, limiting state regulatory power.

Sets the stage for the national government to regulate interstate trade, which it did with the Interstate Commerce Act (1887)

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Interstate Commerce Act (1887)

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Prevented railroads from exploiting farmers with high shipping rates and allowed federal regulation of interstate trade.

Allows federal government to regulate interstate trade, but its powers are limited.

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Sherman Antitrust Act (1890)

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Authorized the federal government to dissolve trusts and monopolies. Declared illegal any combination "in the form of trust or otherwise that was in restraint of trade or commerce among the several states." Loosely worded, failing to define terms like "trust" and "monopoly."

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EC Knight v. US (1895)

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The US government tried to regulate the Sugar Trust using the Sherman Act.

The Sugar Trust was involved in manufacturing, not direct trade, so Congress had no authority to break up the trust.

Limited the effectiveness of the Sherman Act.

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Northern Securities v. US (1904) Background

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The federal government under President Theodore Roosevelt sued Northern Securities for being a monopoly in violation of the Sherman Act.

The federal government under President Theodore Roosevelt sued Northern Securities for being a monopoly in violation of the Sherman Act.

The Supreme Court decided (5-4) that Northern Securities was a monopoly.

First monopoly to be broken up in American history, setting the stage for further regulation of big business.