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The Great Northern Railway photo by Kerry Raymond

Top 10 Facts about Breakup of Northern Securities (1902鈥�04)

The Northern Securities Company was a short-lived American railroad trust formed in 1901 by E. H. Harriman, James J. Hill, J.P. Morgan and their associates.

The company controlled the Northern Pacific Railway, Great Northern Railway, Chicago, Burlington and Quincy Railroad, and other associated lines. It was capitalized at $400 million, and Hill served as president.

The company was sued in 1902 under the Sherman Antitrust Act of 1890 by the Justice Department under President Theodore Roosevelt.

The following are the Top 10 Facts about Breakup of Northern Securities (1902-04)

1.The Northern Securities Company was a trust formed in 1902

Edward H. Harriman founder of Northern securities company photo by unknown photographer

This was trust formed in 1902 by E. H. Harriman, James Hill, J. P. Morgan, and John D. Rockefeller. That owned and operated several of the major railways in the United States.

Before this the company was created, Hill, who was in control of the Great Northern Railway, and Harriman, who owned the Northern Pacific Railway, battled to gain control of the Burlington line that would allow each of their rails accesses to Chicago, Illinois.

2. The break up of Northern Securities marked a major victory for the antitrust movement

The breaking up of the Northern Securities company was a case heard by the U.S. Supreme Court in 1903. The Court ruled 5-4 against the stockholders of the Great Northern and Northern Pacific railroad companies, which had essentially formed a monopoly and to dissolve the Northern Securities Company.

The case was an example of Roosevelt’s trust-busting procedures, prosecuting under the Sherman Antitrust Act (1890), and it marked a major victory for the antitrust movement.

3. President Theodore Roosevelt instructed his Justice Department to break up the Northern Securities company

U.S. President, Theodore Roosevelt. photo by Pach bros

In 1902, the company was sued under the Sherman Antitrust Act of 1890 by the Justice Department under President Theodore Roosevelt.

The case worked its way up to the Supreme Court. The justices ruled 5-4 in favor of the federal government. Roosevelt鈥檚 action had ignored the advice of leading conservatives in the Republican Party and demonstrated his independence from party elders. It also increased his popular support and helped in his election campaign in 1904.

4. The legal case of Northern Securities was also a political issue

President Roosevelt was labeled a progressive, a politician who believed the government needed to provide a counter-weight to the power of private businesses. Some of his political opponents argued that the government had no business interfering with business, and that in fact privately owned businesses were a necessary check on government power.

This fundamental argument over the role of government and private property was carried out in the Northern Securities. The two sides argued over the relative powers of the federal government and the state governments (which were often sympathetic to big businesses to gain an advantage over other states in attracting jobs) to regulate corporations, and the issue of who owned stock in corporations.

5. The company was sued in 1902 under the Sherman Antitrust Act of 1890

The Sherman Anti-trust Act of 1890 was the first measure passed by the U.S. Congress to prohibit trusts. The Northern Securities company was was one of the first antitrust cases filed against corporate interests instead of labor. The government won its case, and the company was dissolved, so that the three railroads again operated independently.

6.The Northern Securities was ruled to dissolve to monopoly

Railway_Age_Great_Northern_Pacific_Locomotive_1914 photo  by Anonymous 

Northern Securities Company had been organized in November 1901 by banker J. P. Morgan and railroad owner James J. Hill. Their main goal was to acquire stock in two railroads, the Northern Pacific and the Great Northern.

Both companies ran trains across the northern part of the United States, from the East to the West. The government believed that a collaboration of such powerful companies violated the Sherman Antitrust Act because it discouraged competition and went against the purpose of the Sherman Antitrust Act.

In return, the owners of Northern Securities Company claimed that the federal government had no right under the U.S. Constitution to regulate the purchase of stocks in a company to state governments. The court ordered the company to be separated by selling the railroads it had acquired. Because the railroads, had a substantial effect over a large area of the north, it was considered interstate and can be regulated by the government.

7. Roosevelt became to be known as the “Trustbuster

U.S. President, Theodore Roosevelt. photo by Pach bros 

Roosevelt who was a Republican confronted the bitter struggle between management and labor head-on. He became known as the great 鈥渢rust buster鈥� for his strenuous efforts to break up industrial combinations under the Sherman Antitrust Act.

He was also a dedicated conservationist, setting aside some 200 million acres for national forests, reserves and wildlife refuges during his presidency.

8.The decision of breaking up Northern Securities strengthened the power of the Sherman Anti-Trust Act

Since it helped broadened the interpretation of the Constitution鈥檚 Commerce Clause. The purpose of the Sherman Act is to limit the use of monopolies, which hinder competition between companies.

Prior to this ruling, which occurred under the presidency of Theodore Roosevelt, many politicians were hesitant to enforce this law. The Northern Securities Co. v. the United States decision was the first significant application of this Act.

9.Theodore Roosevelt was the first politician to strictly enforce the Sherman Anti-Trust Act

U.S. President, Theodore Roosevelt. photo by Pach bros 

After this decision on enforcement of Sherman Antitrust act. several other cases appeared before the Supreme Court that was similar in circumstances. The Northern Securities case formed a precedent, and these cases were given similar rulings.

10. The Northern Pacific and Great Northern renewed talks of merging

Though Hill was forced to disband his holding company and manage each railroad independently. The Northern Pacific; the Great Northern; and the Chicago, Burlington and Quincy companies renewed talks of merging in 1955 .
The Supreme Court approved the merger, and as a result, the Great Northern, Northern Pacific, Chicago Burlington & Quincy, and the Spokane, Portland and Seattle Railway merged on March 2, 1970, to form the Burlington Northern Railroad.