Northern Securities Company
Encyclopedia
The Northern Securities Company was an important United States
railroad trust
formed in 1902 by E. H. Harriman
, James J. Hill
, J.P. Morgan, J. D. Rockefeller, and their associates. The company controlled the Northern Pacific Railway
, Great Northern Railway, Chicago, Burlington and Quincy Railroad
, and other associated lines. The company was sued in 1902 under the Sherman Antitrust Act
of 1890 by President Theodore Roosevelt
, one of the first anti-trust cases filed against corporate interests instead of labor.
Hill was the president of the Great Northern Railway and Harriman controlled the Union Pacific Railroad
, two of the largest railroads in the U.S. Both sought control of the Burlington to connect their roads to the vital railroad hub of Chicago, Illinois. Hill, who also had a minority interest the Northern Pacific Railway
, outbid Harriman for the Burlington, by agreeing to Burlington President Charles Elliott Perkins's $200-a-share price.
Together, the Great Northern and the Northern Pacific assumed control of nearly 100 percent of the Burlington's outstanding stock. Knowing that the Northern Pacific controlled almost 49.3 percent of the Burlington's stock, Harriman launched a stock raid against the Northern Pacific. Control of the Northern Pacific would allow him to appoint directors to the Burlington, which could then be forced to treat Harriman's Union Pacific favorably in business matters. Harriman's stock raid in May 1901 led to the "Northern Pacific Corner", driving shares of Northern Pacific to $2,000 per share in some trades. Hill, working with J.P. Morgan, took majority control of the Northern Pacific despite Harriman's best efforts.
This speculation resonated throughout the stock market and the country as a whole. The two men, their backers, and associates agreed to settle their differences and eliminate ruinous competition through a monopoly
combination. The Northern Securities Company was formed by Hill to control the stock of his major railroad properties. Some of Harriman's directors were appointed as representatives for his holdings of Northern Pacific shares.
A public outcry over the new company made its way throughout the country, and both state and federal officials prepared to file litigation. On February 19, 1902, the United States Department of Justice
announced plans to file a suit against the company on the behalf of President Roosevelt. When approached by J. P. Morgan to settle the issue in private, Roosevelt later remarked, "Mr. Morgan could not help regarding me as a big rival operator who either intended to ruin all his interests or could be induced to come to an agreement to ruin none." Although Roosevelt still believed that trusts were not always bad for society, he could not bear to feel treated as just another rival operator. The suit continued.
After federal prosecution, the company was dissolved according to the 1904 Supreme Court
ruling in Northern Securities Co. v. United States
case, five to four. The companies were convicted under the Sherman Antitrust Act
, overturning the previous decision of United States v. E. C. Knight Co.
In that case, the Court ruled that the Sherman Antitrust Act was insufficient in regulating that monopoly
. In the following seven years, 44 other cases turned out rulings similar to the Northern Securities case. Included in these break-ups were Harriman's own holdings of the Union Pacific and Southern Pacific railroads.
The Northern Securities case was one of the earliest antitrust cases and provided important legal precedents for many later cases, including that against Major League Baseball
.
In 1955 the Northern Pacific and Great Northern renewed talks at merger. The Supreme Court approved the merger, and as a result, the Great Northern, Northern Pacific, Burlington, and the Spokane, Portland and Seattle Railway
merged on March 2, 1970, to form the Burlington Northern Railroad
.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
railroad trust
Trust company
A trust company is a corporation, especially a commercial bank, organized to perform the fiduciary of trusts and agencies. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specializes in being a trustee of various kinds of...
formed in 1902 by E. H. Harriman
E. H. Harriman
Edward Henry Harriman was an American railroad executive.-Early years:Harriman was born in Hempstead, New York, the son of Orlando Harriman, an Episcopal clergyman, and Cornelia Neilson...
, James J. Hill
James J. Hill
James Jerome Hill , was a Canadian-American railroad executive. He was the chief executive officer of a family of lines headed by the Great Northern Railway, which served a substantial area of the Upper Midwest, the northern Great Plains, and Pacific Northwest...
, J.P. Morgan, J. D. Rockefeller, and their associates. The company controlled the Northern Pacific Railway
Northern Pacific Railway
The Northern Pacific Railway was a railway that operated in the west along the Canadian border of the United States. Construction began in 1870 and the main line opened all the way from the Great Lakes to the Pacific when former president Ulysses S. Grant drove in the final "golden spike" in...
, Great Northern Railway, Chicago, Burlington and Quincy Railroad
Chicago, Burlington and Quincy Railroad
The Chicago, Burlington and Quincy Railroad was a railroad that operated in the Midwestern United States. Commonly referred to as the Burlington or as the Q, the Burlington Route served a large area, including extensive trackage in the states of Colorado, Illinois, Iowa, Kentucky, Missouri,...
, and other associated lines. The company was sued in 1902 under the Sherman Antitrust Act
Sherman Antitrust Act
The Sherman Antitrust Act requires the United States federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by...
of 1890 by President Theodore Roosevelt
Theodore Roosevelt
Theodore "Teddy" Roosevelt was the 26th President of the United States . He is noted for his exuberant personality, range of interests and achievements, and his leadership of the Progressive Movement, as well as his "cowboy" persona and robust masculinity...
, one of the first anti-trust cases filed against corporate interests instead of labor.
Hill was the president of the Great Northern Railway and Harriman controlled the Union Pacific Railroad
Union Pacific Railroad
The Union Pacific Railroad , headquartered in Omaha, Nebraska, is the largest railroad network in the United States. James R. Young is president, CEO and Chairman....
, two of the largest railroads in the U.S. Both sought control of the Burlington to connect their roads to the vital railroad hub of Chicago, Illinois. Hill, who also had a minority interest the Northern Pacific Railway
Northern Pacific Railway
The Northern Pacific Railway was a railway that operated in the west along the Canadian border of the United States. Construction began in 1870 and the main line opened all the way from the Great Lakes to the Pacific when former president Ulysses S. Grant drove in the final "golden spike" in...
, outbid Harriman for the Burlington, by agreeing to Burlington President Charles Elliott Perkins's $200-a-share price.
Together, the Great Northern and the Northern Pacific assumed control of nearly 100 percent of the Burlington's outstanding stock. Knowing that the Northern Pacific controlled almost 49.3 percent of the Burlington's stock, Harriman launched a stock raid against the Northern Pacific. Control of the Northern Pacific would allow him to appoint directors to the Burlington, which could then be forced to treat Harriman's Union Pacific favorably in business matters. Harriman's stock raid in May 1901 led to the "Northern Pacific Corner", driving shares of Northern Pacific to $2,000 per share in some trades. Hill, working with J.P. Morgan, took majority control of the Northern Pacific despite Harriman's best efforts.
This speculation resonated throughout the stock market and the country as a whole. The two men, their backers, and associates agreed to settle their differences and eliminate ruinous competition through a monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
combination. The Northern Securities Company was formed by Hill to control the stock of his major railroad properties. Some of Harriman's directors were appointed as representatives for his holdings of Northern Pacific shares.
A public outcry over the new company made its way throughout the country, and both state and federal officials prepared to file litigation. On February 19, 1902, the United States Department of Justice
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
announced plans to file a suit against the company on the behalf of President Roosevelt. When approached by J. P. Morgan to settle the issue in private, Roosevelt later remarked, "Mr. Morgan could not help regarding me as a big rival operator who either intended to ruin all his interests or could be induced to come to an agreement to ruin none." Although Roosevelt still believed that trusts were not always bad for society, he could not bear to feel treated as just another rival operator. The suit continued.
After federal prosecution, the company was dissolved according to the 1904 Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
ruling in Northern Securities Co. v. United States
Northern Securities Co. v. United States
Northern Securities Co. v. United States, 193 U.S. 197 , was an important ruling by the U.S. Supreme Court. The Court ruled 5 to 4 against the stockholders of the Great Northern and Northern Pacific railroad companies, who had essentially formed a monopoly, and to dissolve the Northern Securities...
case, five to four. The companies were convicted under the Sherman Antitrust Act
Sherman Antitrust Act
The Sherman Antitrust Act requires the United States federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by...
, overturning the previous decision of United States v. E. C. Knight Co.
United States v. E. C. Knight Co.
United States v. E. C. Knight Co., 156 U.S. 1 , also known as the "Sugar Trust Case,'" was a United States Supreme Court case that limited the government's power to control monopolies...
In that case, the Court ruled that the Sherman Antitrust Act was insufficient in regulating that monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
. In the following seven years, 44 other cases turned out rulings similar to the Northern Securities case. Included in these break-ups were Harriman's own holdings of the Union Pacific and Southern Pacific railroads.
The Northern Securities case was one of the earliest antitrust cases and provided important legal precedents for many later cases, including that against Major League Baseball
Major League Baseball
Major League Baseball is the highest level of professional baseball in the United States and Canada, consisting of teams that play in the National League and the American League...
.
In 1955 the Northern Pacific and Great Northern renewed talks at merger. The Supreme Court approved the merger, and as a result, the Great Northern, Northern Pacific, Burlington, and the Spokane, Portland and Seattle Railway
Spokane, Portland and Seattle Railway
The Spokane, Portland and Seattle Railway was a United States-based railroad incorporated in 1905. It was a joint venture by the Great Northern Railway and the Northern Pacific Railway to build a railroad along the north bank of the Columbia River....
merged on March 2, 1970, to form the Burlington Northern Railroad
Burlington Northern Railroad
The Burlington Northern Railroad was a United States-based railroad company formed from a merger of four major U.S. railroads. Burlington Northern operated between 1970 and 1996....
.
Further reading
- The Northern Securities Decision http://www.law.cornell.edu/supct/html/historics/USSC_CR_0193_0197_ZS.html Northern Securities Co. v. United States at Cornell Law School's Supreme Court Collection.
- Bryant, Keith L., Jr., Editor. Encyclopedia of American Business History and Biography, Railroads in the Twentieth Century. New York: Facts on File, 1990.
- Frey, Robert L., Editor. Encyclopedia of American Business History and Biography, Railroads in the Nineteenth Century. New York: Facts on File, 1988.
- Hidy, Ralph W., et al. The Great Northern Railway, A History. Boston [Mass.]: Harvard Business School Press, 1988.
- Klein, Maury. The Life and Legend of E.H. Harriman. Chapel Hill [N.C.]: University of North Carolina Press, 2000.
- Martin, Albro. James J. Hill and the Opening of the Northwest. New York: Oxford University Press, 1976.