Northern Securities v. United States: Holmes' Dissent and a 1969 Merger

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In 1901 railroads were the infrastructure that every other business ran on. James J. Hill of the Great Northern, backed by J.P. Morgan, joined with the Northern Pacific to buy the Chicago, Burlington and Quincy, the line linking the Twin Cities to Chicago. When Hill refused E.H. Harriman of the Union Pacific and Southern Pacific a one-third share, Harriman secretly bought Northern Pacific stock to seize control of the buyer itself. The bidding war that followed pushed Northern Pacific shares up roughly tenfold, trapped short sellers facing margin calls at about $1,000 a share, and forced them to dump U.S. Steel and other holdings. To shield his lines from another raid, Hill formed the Northern Securities Company, a holding company that owned majority stock in all three railroads.

Farmers who had once chosen among competing lines now faced a single owner. William McKinley declined to act, but after his assassination in September 1901, Theodore Roosevelt had Assistant Attorney General Milton D. Purdy sue under the long-ignored Sherman Antitrust Act of 1890. In March 1904 the Supreme Court ruled 5 to 4, in a majority led by Justice John Marshall Harlan, that the holding company was an unlawful monopoly and ordered it dissolved. Justice Oliver Wendell Holmes Jr. dissented, warning that great cases make bad law and that buying stock was not itself a restraint of trade. In 1969, with trucks, highways and cargo planes competing for freight, the same three railroads merged into what became Burlington Northern.

• Harriman's plan was to take the Northern Pacific and so gain its half of the Burlington line without buying it directly.
• Hill and Morgan bought back their own company's stock to keep the remaining shares from Harriman.
• The Sherman Act had been on the books for over a decade but was widely seen as a paper tiger.
• The case reached the Supreme Court in December 1903 after moving through the lower courts.
• The ruling cemented Roosevelt's reputation as a trust buster.