Antitrust Laws and Lawsuits (Progressive Era)

Antitrust laws and lawsuits against monopolistic corporations were major features of both state and national politics before World War I during the Progressive Era. Popular concern in Arkansas about corporate wrongdoing became part of third-party agrarian political agendas in the 1880s. The state’s Agricultural Wheel president, Lewis P. Featherstone, introduced an antitrust bill in the 1887 session of the Arkansas General Assembly aimed at the American Cotton Oil Trust. Antitrust measures in other states, especially in the Midwest, led the U.S. Congress to enact the Sherman Antitrust Act of 1890 to catch up with state lawmaking. However, an effective antitrust law was not adopted in Arkansas until 1899, only after agrarian concerns became shared by urban, middle-class citizens.

During the 1899 Arkansas legislative session, Elias W. Rector of Hot Springs (Garland County) introduced an antitrust bill that became Act 41. It outlawed price-fixing and targeted fire insurance companies that Rector and many other leaders felt gouged their businesses. John D. Rockefeller’s Standard Oil Company had first secretly used a trust in 1882 as a legal instrument to control multiple companies and ninety percent of the nation’s oil business. The trust soon gave way to mergers and holding companies as better ways to build giant corporations. The word “trust” as a pejorative term continued in usage to condemn any corporation dominating its field of businesses that was potentially able to fix prices, limit competition, use unfair business practices, and gain advantages through bribing politicians.

Upon passage of the Rector Antitrust Act, Attorney General Jeff Davis seized on the antitrust issue to support his gubernatorial ambitions. He filed numerous antitrust lawsuits against all major fire insurance companies and several other large corporations. In response, the fire insurance companies used a bullying tactic of intimidation by acting in concert to withdraw their business from the state. This action threatened to deprive the state’s citizens of protection against losses from fires. This outcome split support in Arkansas for antitrust, with much of the business community urging a retreat.

Potential catastrophe was avoided when the Arkansas Supreme Court in State v. Lancashire Fire Insurance Company, 66 Ark. 466 (1899) ruled against the attorney general’s interpretation of the Rector Act, and the companies returned to the state to sell policies once again. More interested in campaigning for governor than waging further litigation, Davis quickly abandoned all lawsuits. Throughout his political career, Davis used the antitrust issue, running as a champion of the common man in all matters and always pledging to put an end to monopolistic corporations, which he claimed were the greatest threats to ordinary citizens’ economic prosperity and political liberty. He seemed to wish to stop economic development if it led to giant corporations.

After winning an unprecedented third term as Arkansas’s governor, Davis could claim success when he secured from the legislature a new antitrust law, Act 1 of 1905. But, thereafter, the governor not only did not support the resulting lawsuits, but he also sought to impede them by vetoing an additional position for the attorney general’s office that might have aided litigation. Above all else, Davis was determined to prevent political opponent Attorney General Robert L. Rogers from winning the governor’s office in the election of 1906, as Davis left it for a seat in the U.S. Senate.

Despite the governor’s disparagement, Rogers achieved favorable settlements in several antitrust lawsuits, comparable to those of attorneys general of other states. Since most of these cases ended only after the election, however, Rogers gained little political advantage, could not overcome Davis’s vigorous opposition, and suffered defeat in the governor’s race. Before electioneering began, Rogers hired two lawyers, William L. Terry and William M. Lewis, to help with the antitrust work and won his first victory in Hartford Fire Insurance Company v. State, 76 Ark.303 (1905) when the Arkansas Supreme Court ruled in favor of the 1905 antitrust law. Rogers agreed to a penalty of $19,000 from Hartford rather than pursue additional litigation over the fine’s size. The legislature had appropriated only $5,000 to fund antitrust litigation, and he knew his small, poor state could not afford to fight the many legal appeals available to a wealthy national corporation. However, as in 1899, all major fire insurance companies again withdrew from the state in retaliation and to avoid any other lawsuits. They did not return until the 1907 Arkansas legislature retreated and passed Act 184, exempting the companies from the antitrust law.

Rogers’s second success was a prosecution of the International Harvester Company, the fourth-largest corporation in the United States. In 1902, it was created by the merger of most of the country’s makers of agricultural implements. It replaced five separate companies previously competing in Arkansas. Rogers’s legal team employed the same legal logic the U.S. Supreme Court had embraced in its 1904 Northern Securities case that ruled against the merger of three railroads. That case reinvigorated the Sherman Antitrust Act. There followed numerous antitrust prosecutions under the administrations of Presidents Theodore Roosevelt and William Howard Taft to break apart monopolistic corporations into smaller competing companies. These lawsuits drew attention at the time, and in historical accounts they tend to overshadow the much larger number of state-initiated prosecutions like those of Rogers.

Using a pretrial “discovery” provision of Arkansas’s antitrust law, Rogers and other lawyers went to Chicago in April 1906 to seek court-ordered testimony from International Harvester leaders, including Cyrus H. McCormick Jr. They hoped to achieve results like those of Missouri’s attorney general Herbert S. Hadley, who only months before had deposed Standard Oil officials in New York City. There, he had brought revelations to light such as the company’s heretofore secret ownership of the Waters-Pierce Oil Company that dominated sales in the south-central United States, including Missouri, Arkansas, Texas, and Louisiana. Rogers subsequently filed suit against Waters-Pierce but left office before it could be resolved. In the Harvester case, officials refused to attend the Chicago discovery hearings. Rather, their lawyers proposed a settlement in which Harvester would plead guilty to one charge of violating Arkansas’s antitrust law, pledge to modify that illegal business practice, and pay a fine of $20,000 plus $5,000 in court costs. As with the Hartford case, Rogers accepted this settlement rather than pursue more litigation. Like the fire insurance companies, Harvester withdrew its offices and sales from Arkansas to Memphis, Tennessee, and did not return to the state until the 1913 Arkansas legislature amended the antitrust law in Act 161 to forestall more lawsuits.

Rogers had the greatest legal success in suing the Hammond Meatpacking Company, which Rogers chose as a proxy in place of larger meatpackers. Muckraking journalists at the time were pillorying meatpackers as the “Beef Trust,” the “largest trust in the world.” Meatpacking firms did indeed dominate more of this business than Rockefeller had oil production and sales. The larger meatpackers, like the Armour Company, had meat market stores in several Arkansas cities competing with local tradesmen. Ultimately, the litigation of this case, Hammond Packing Co. v. Arkansas, 212 U.S. 322 (1909), would win the U.S. Supreme Court’s approval of Arkansas’s antitrust law. The case went all the way to that high court because meatpacker leader J. Ogden Armour, like McCormick, refused to appear in the Chicago “discovery” hearing. Meatpacker lawyers told Rogers they would appeal the case while acquiescing to a guilty verdict in Arkansas’s courts with a fine of $10,000.

After proceedings were finished in Arkansas’s court and the Hammond Company appealed to the U.S. Supreme Court, the attorney general’s friend Lewis N. Rhoton, prosecuting attorney for the Sixth Judicial District (Pulaski and Perry counties), replaced Rogers, whose term of office as the state’s lead attorney had ended. Rhoton had participated in several earlier cases, including one against Waters-Pierce Oil Company, and would initiate suits himself, including against the “Typewriter Trust” of Remington and Smith typewriter companies, as well as a new prosecution of fire insurance companies. Although Arkansas’s new attorney general’s name would appear in a pro forma manner as the state’s chief legal officer in the Hammond case, William F. Kirby had no interest and left antitrust prosecutions to Rhoton. In fact, the 1905 antitrust law specifically authorized district prosecutors to undertake lawsuits on their own. At the U.S. Supreme Court hearing, James Stevenson assisted Rhoton, who also used Francis Guy Fulk, son of a prominent Little Rock family and a graduate of the George Washington Law School, to write the state’s Hammond brief.

On February 23, 1909, U.S. Supreme Court Justice Edward Douglass White wrote an opinion upholding the constitutionality of Arkansas’s 1905 antitrust law in every respect. White’s most important ruling supported the provision that a state could compel testimony of officials and examination of company books in a pretrial court-ordered discovery process. A company’s refusal or failure to respond might result in a default judgment against the corporation. The Hammond decision was an important precedent that ended, at least legally, the common practice of corporations refusing to participate in discovery in order to defeat antitrust proceedings. Having helped with a financial settlement of the Hammond case for a total of $25,000, and likely facing additional lawsuits, Armour sold its stores in Little Rock (Pulaski County), Fort Smith (Sebastian County), Hot Springs, Pine Bluff (Jefferson County), and Texarkana (Miller County) and withdrew from the state. The Swift Meatpacking Company soon followed.

Claiming to have written Arkansas’s antitrust law, Senator Jeff Davis sought to take credit for the Hammond victory, doing so, perhaps, to make up for his failure to persuade the U.S. Senate to pass his antitrust bill. Davis had hoped to become a national leader on the antitrust issue. But he received more attention for his speechifying antics than for the substance of his proposal. He died the year before the U.S. Congress adopted new measures in 1914—the Federal Trade Commission and the Clayton Antitrust Act—with which to regulate monopolistic corporations.

In Arkansas, other prosecuting attorneys and attorneys general followed Rogers and Rhoton in pursuit of corporate wrongdoing. Prosecuting Attorney Robert E. Jeffrey, of the Third Judicial District (Independence, Jackson, and Stone counties), secured the state’s single largest antitrust financial settlement after he sued the Waters-Pierce Oil Company for a fine of $45,000 in September 1909. Attorney General Hal L. Halbrook and Prosecuting Attorney John Arbuckle, of the Fifteenth Judicial District (Crawford, Franklin, and Logan counties), together successfully sued five cotton seed oil companies for more than $6,000 each in 1911–1912. Responding to decades of farmers’ complaints, Attorney General William L. Moose had larger plans in 1913 to address monopolization by many of the state’s interlocked cotton seed oil companies. However, in State v. Arkansas Cotton Oil Company, 116 Ark. 74 (1914), the Arkansas Supreme Court ruled that the dissolution of this company, which had sold its numerous mills to other corporations, upon notice of Moose’s suit, abated legal action against it. This decision suggested the means whereby other companies could escape liability under the antitrust law and put an end to Moore’s plans. At the same time, the Arkansas legislature in Act 161 of 1913 amended the 1905 antitrust law to limit its coverage only to companies in illegal combinations within the state, effectively restricting suits against most large interstate corporations.

Arkansas’s experience with state-initiated antitrust lawsuits had produced successful settlements like those in other states. The various antitrust financial settlements, from 1906 to 1912, had supplied much needed support to the state’s common school fund that was distributed to local schools, as the 1905 law required. However, the negative consequences of trying to hold large corporations to account seemed too severe, especially to the state’s urban citizens and business leaders. The withdrawal from the state of numerous companies to avoid or to retaliate for antitrust lawsuits created hardships, depriving governments of revenues, citizens of places of employment as well as higher costs for products and services, and discouraged outside capital investments in the state. Arkansas’s experience, like that of other individual states taking antitrust actions, had shown that in most instances only the national government had sufficient financing and legal authority to deal with large monopolistic corporations operating in multiple states.

For additional information:
Piott, Steven L. The Anti-Monopoly Persuasion: Popular Resistance to the Rise of Big Business in the Midwest. Westport, CT: Greenwood Press, 1985.

Willis, James F. “Antitrust in Arkansas Politics during the Progressive Era.” Arkansas Historical Quarterly 80 (Winter 2021): 436–467.

James F. Willis
Little Rock, Arkansas