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THE holding company—due to passage of the Sherman Act—was no less susceptible to legal attack than the trust form proper had been. As it happened, it was the culmination of the sugar refining industry’s consolidation which set the stage for a test of the new law’s applicability to a form of business organization other than that which the measure’s sponsors had originally had in mind. The earlier attempt by the sugar trust to extend its influence to the West Coast had led to a protracted struggle with the Hawaiian sugar king, Claus Spreckels, the latter carrying the battle to the East by erecting a modern, highly efficient refinery in Philadelphia. The nearly two years of bitter price warfare that resulted were brought to an end only after the recently organized American Sugar Refining Company succeeded in absorbing all of its Philadelphia rivals, including those which had refused to join the original combination, while simultaneously recognizing Spreckels’ suzerainty in the West. This latest merger, however, produced further public reaction, thereby forcing the federal government to bring suit against the American Sugar Refining Company for violation of the Sherman Act. The Supreme Court, when it handed down its decision in the E. C. Knight case in 1895, not only refused to annul the merger but, more important, seemed to strike down the antitrust law itself—at least insofar as it pertained to holding companies organized under the general statutes of New Jersey or of any other state to control manufacturing firms. This legal precedent, together with the subsequent court ruling in the Addyston Pipe & Steel case, was to give the judicial go-ahead to the ensuing Corporate Revolution.


As successful as consolidation of the sugar refining industry had been, unfinished business nonetheless remained. On the West Coast, Claus Spreckels and his sons continued to provide vigorous competition, while on the East Coast the various Philadelphia refineries remained formidable rivals. As long as these firms retained their independence, Henry Havemeyer and his associates could not, with certainty, expect to control the price of refined sugar throughout the United States. It was for this reason that, once the trust had overcome its legal difficulties by reorganizing as a New Jersey corporation, Havemeyer and his fellow chief officers of the new company turned to the uncompleted task of consolidating the sugar refining industry.

The Havemeyer group, by its purchase of the American Sugar Refinery of California in the spring of 1888, had made clear its intention of driving Claus Spreckels out of business, and the challenge had been taken up immediately. As soon as he learned that his chief rival on the West Coast had been acquired by the trust, Spreckels began to wage an unrelenting campaign against what he termed “the Eastern combination.” On the economic front, the price war with the American, which had been going on intermittently for nearly three years, was renewed with increasing ferocity.1 Wholesale grocers were warned that if they bought from the American they would no longer be allowed to purchase sugar from the California refinery, and Spreckels even devised a special code for his barrels to make sure that no jobber who violated this edict would go unpunished.2 On the political front, the attorney general of California was persuaded to bring suit to dissolve the American Sugar Refinery Company’s charter on the grounds that by joining the trust it had entered into an illegal partnership.3

Fearing that Spreckels was more of an adversary than the current managers of the American Sugar Refinery on the West Coast were prepared to cope with, Havemeyer dispatched Robert Oxnard to San Francisco to take control of the company there. Acting on Havemeyer’s instructions, Oxnard began immediately to make the refinery’s operations more efficient by reorganizing them along eastern lines.4 However, despite the several operating economies that he introduced, Oxnard found the competition rough going. In the person of the Hawaiian sugar king the trust had taken on a resourceful opponent, one who was not easily cowed.

For example, in line with the practice in the East, the American refinery began charging its customers the price that prevailed on the day an order for refined sugar was received—not, as had previously been the case on the West Coast, the price that prevailed on the day the refined sugar was actually delivered. Recognizing an opportunity to inflict a heavy financial blow on the trust’s affiliate, Spreckels waited until the time of year when the West Coast refineries were almost wholly dependent on Hawaii for their raw-sugar supplies. Then he began cutting the price of refined sugar.

The American was forced to follow suit, and, as it did so, it became deluged with orders—in fact, with more orders than it could fill with the stocks of raw sugar it had on hand. To make up the deficit, it had no choice but to buy raw sugar on the open market. This was the moment Spreckels had been waiting for. Through his various Island connections he had already tied up the entire supply of Hawaiian sugar cane—all except the tonnage previously contracted for by the American. Since Spreckels was the only source of additional raw sugar, the American had to pay his price or do without—and, having orders to fill, it could not do without. Exploiting his advantage to the fullest, Spreckels began forcing up the price of raw sugar until it reached 6¼ cents a pound, the same price at which the American had taken orders to deliver refined sugar.

Not wishing to continue producing sugar at a loss, the American stopped taking orders. At that point, having the market to himself, Spreckels increased the price of refined sugar to its previous level. This encouraged the American to resume taking orders for refined sugar, but no sooner had it done so than Spreckels applied the same squeeze as before. The American found itself forced either to stay out of the market completely or to sell its product at a loss. This unhappy situation continued for several months until the trust was able to tap alternative sources of raw sugar.5

As sharp as the financial blow inflicted on the American was in this particular instance, it still was not sharp enough to persuade Havemeyer and the other top officials of the trust to give up their plan to control the West Coast sugar market. Nor were they any more persuaded when Spreckels, acting through the attorney general of California, succeeded in having the American’s charter rescinded. As a precaution, the trustees had already taken the step of transferring ownership of the American refinery to the firm of Havemeyer & Elder.6 Although Spreckels, contending that this was a ruse, sought to have the plant shut down and a receiver appointed to dispose of the property, he was thwarted by the delaying legal tactics of the trust’s lawyers. In the meantime, the former American refinery continued to turn out sugar in competition with Spreckels’ California company.

Thus the struggle continued as before, with each side hoping to inflict whatever damage it could on the other. It was a battle of titans, the Hawaiian sugar king versus the Eastern Combination; and while each was able to strike a well-connected blow at the other from time to time over the next few months, neither could bring his opponent to his knees. If the trust found itself losing money as a result of the struggle, the same was true of Spreckels. The difference, however, was that while the trust could make up for the losses it suffered on the West Coast with the profits it earned in the East, Spreckels could not. This fact, as well as the greater financial resources which the trust commanded, put Spreckels at an increasing disadvantage. For example, when the three-year contract with the Hawaiian growers came up for renewal, the trust was able to outbid Spreckels, leaving him with only one-third of the Hawaiian sugar crop—that which he directly controlled.7

It was for this reason—the disadvantage of not being able to compete simultaneously on both coasts—that Spreckels had already begun to lay plans for building a refinery on the Atlantic coast, thus carrying the battle to the trust’s home grounds. Rumors of this ploy had begun to circulate early in 1888. “Yes,” said Spreckels on February 20, confirming the reports, “I shall leave next week for New York, and it is probable one or more refineries will be opened at Baltimore and at other Eastern points.”8 During the course of that trip east Spreckels testified before the House Committee on Manufactures, reaffirming his determination to build a refinery on the Atlantic coast in order to compete with the members of the trust. “I am going to start a refinery here,” he said. “When they are fighting me there [in the West] they may say, ‘We will undersell him and crush him out,’ and they may hold the sugar at 5 cents a pound [an unprofitable level]. I will come here and start a factory, so that I will get my share [of the profits] here.”9 Earlier, Spreckels had disclosed to reporters that he was prepared to spend up to $5 million to build his new refinery.10

Many persons began to see in the Hawaiian sugar king the instrument for curbing the power of the sugar trust. This attitude was especially marked among the congressmen who questioned Spreckels during his brief appearance before the House Committee on Manufactures.11 Thus it was that the man who had monopolized the sugar refining industry on the West Coast for well over a decade came to be cast in the role of defender of the eastern consumer against the exactions of the sugar trust. Recognizing the irony in this situation, some persons contended that Spreckels’ only purpose in building the refinery in the East was to force the trust to withdraw from the West, and that once this was accomplished he would abandon the project.12 Spreckels himself, however, denied this accusation. “We mean business in this matter,” he declared, “and will go right to work as soon as we have selected our site. Although it is our object to fight the sugar trust, we do not intend to expend $5 million merely for the luxury of a fight. The refinery will be a purely legitimate business venture, and will be run to make money.”13


In his search for a suitable refinery location, Spreckels first visited New York, then Baltimore.14 But it was in Philadelphia that he found a site which met all his requirements—a ten-acre parcel situated on the Delaware River, with excellent rail connections. The city of Philadelphia, anxious to attract a new enterprise that would add an estimated $40 million directly, and another $100 million indirectly, to its commerce, gladly agreed to grant Spreckels certain tax exemptions and a free water supply. On April 6, 1888, title to the property was transferred, and about a month later construction of the new refinery began.15

Although the work was pressed with great diligence, it was not until December, 1889, that the job was finally completed. In the meantime, of course, the price war on the West Coast had continued unabated. The new Philadelphia refinery, capable of melting two million pounds of raw sugar daily, was as modern and efficient as the science of sugar-making would permit. It consisted of eight separate buildings, the tallest of which was thirteen stories high. “Running on to the refining property,” the New York Times reported,

are three distinct lines of railroad, forming direct communications with every section of the country. On the river are three long wharves, each 80 feet wide and 600 feet long. Here a dozen of the largest-sized ships and steamers can load and discharge at the same time, there being ample depth of water at the lowest tide. The wharves are covered, forming immense warehouses where the raw sugar can be received and stored in bond … [and] a conveyor runs along the whole length of the dock, carrying sixty tons of sugar to the pans at a speed of eighteen feet per minute. The whole of the buildings are lighted by incandescent lights … supplied from a central station on the grounds. Automatic sprinklers for protection against fire are distributed throughout the buildings, and everything has been done to make the refinery the best equipped and most economically worked, as well as the largest in the world.

The entire plant was estimated to have cost $3 million.16

Rumors continued to persist that Spreckels intended to sell out to the trust, although the sugar king himself vigorously denied them. “No, Sir,” he declared, “I have built that factory for my boys, and they, neither, will ever go into the trust. We will fight it for blood.”17 In fact, Spreckels announced plans to double the capacity of his Philadelphia refinery to four million pounds daily.18 So far, however, the trust’s only response to this challenge had been an attempt to put the same squeeze on Spreckels in the East that he had put on it in the West, by secretly buying up all the available supplies of raw sugar. But the wily Spreckels was not to be caught in such a trap. With typical prudence he had already arranged for the purchase of all the raw sugar he would need for his refinery. In fact, he was even able to sell part of his own stock to the trust, making a $20,000 profit on the transaction.19 Unfortunately for Havemeyer and his associates, they did not have the same control over the sources of raw sugar on the East Coast that the Hawaiian sugar king had over those in the West.

Throughout that winter Spreckels worked to get his new refinery ready in time for the busy summer season. Although the first barrel of sugar was produced on December 9, 1889, it was to take several months more to test the equipment fully, making sure there were no mechanical defects. Spreckels—“stocky and strong, with a white beard and a healthy, rose-colored complexion” -personally supervised these preparations.20 His son Claus, Jr., was to be in charge of the new plant once it actually got started, but the older Spreckels wanted to be on hand for the initial shakedown period.

For this reason he had set out from San Francisco late in October, accompanied by his wife, daughter, four servants, and several aides. Traveling by private railroad car, he had been greeted like visiting royalty at nearly every major stop by reporters requesting interviews. In answer to their questions, he had reiterated his determination to go on fighting the trust. He had even hinted that he was considering the construction of a second refinery in New Orleans to challenge the trust in that territory as well.21

Now that he was in Philadelphia, working to get his refinery ready for full operations, Spreckels found himself still pursued by reporters. The refinery, he said in reply to their queries, was in “splendid condition.” He was particularly proud of the fact that the raw sugar could be unloaded from the ships and carried to the melting pans without being handled by any of the workmen. He confirmed reports that he had received several offers for the refinery, one for as much as $7 million, but he did not know whether they came from the trust. In any case, he said, he had no intention of quitting the struggle. When asked what tactics he would pursue, Spreckels said, “Why, when a man fights, he just fights, doesn’t he?” “By cutting the price?” the reporters continued. “Certainly…,” he replied. “Can you stand cutting the price as well as the trust?” Spreckels was asked. “Oh, it may cost a million dollars or so, but I can stand it. I’m in business to stay.”22

It was not surprising that reporters should have shown so much interest in Spreckels. Aside from the fact that their subject was such a colorful figure, they well understood that the opening of the refinery in Philadelphia signaled a new phase in the battle for control of the sugar refining industry.

Although the organizers of the trust had been disappointed when the two Philadelphia firms, Harrison, Frazier & Company and E. C. Knight, refused to join in the consolidation, they had not considered the defections as fatal to their scheme. The capacity of the two Philadelphia refineries, even when added to that of the one small independent firm in Boston, amounted to only 2.2 million pounds daily, or 195,000 tons of refined sugar annually. This, the promoters of the consolidation had figured, would still leave nearly 1,000,000 tons of the total eastern market to be supplied by the various members of the trust. And if the average margin between raw and refined sugar could be increased to 1¼ cents a pound, thus affording a profit of 5/8 of a cent on every pound of sugar produced, the trust would stand to clear almost $13.5 million annually—enough to pay a 25 per cent dividend on the outstanding trust certificates.23

For the most part, these expectations had been realized. In 1888 the average margin between raw and refined sugar on the East Coast had been 1.258 cents a pound.24 This high margin notwithstanding, the various members of the trust had been able to sell 987,570 tons of refined sugar.25 The following year the returns had been a little less satisfactory. The average margin had slipped to 1.207 cents a pound, while sales had fallen to 863,305 tons.26 Still, the results were not that far from the original calculations.

In setting its prices to achieve those margins, the trust had deliberately chosen to ignore its rivals in Philadelphia and Boston. During periods of peak demand, such as the summer, this created no difficulty. The market was able to absorb—at the prices set by the trust—all the sugar that both the trust and the independent refineries were capable of producing.27 It was only at other times of the year, when the demand for sugar declined, that this policy had certain untoward consequences.

The independent refineries, by shading the trust’s prices only slightly, could always be sure of selling whatever quantities of sugar they produced. Sugar being a homogeneous product traded by knowledgeable men, a difference of 1/16 of a cent in price was usually enough to give a firm all the business it desired. This meant that the trust, unless it was prepared to engage in an open price war, had to be willing to accept what remained of the market after the independent refineries had filled all the orders they could handle.

An open price war, however, was not to the trust’s liking. Its members had reached the conclusion that they stood to gain more by keeping margins high—even if this meant that the independent refineries were able to operate at full capacity while their own refineries were forced to curtail production and perhaps even shut down.28 Thus, at certain times of the year, the members of the trust found themselves supplying little more than a third of the eastern market.29 Willett & Gray’s Sugar Trade Journal, in calling attention to this pricing strategy early in 1888, noted that in January the Sugar Refineries Company had held a price “umbrella” over the independent refineries.30 “The ‘Trust,’” reported the Journal, “maintained the prices of refined throughout the month, [while] the ‘Non-Trust’ companies undersold them to the extent of their capacity.”31 Although it fell somewhat short of being a monopolist, the Sugar Refineries Company was nonetheless disposed to act like one.

Both the firms which had entered the consolidation and those which had stayed out benefited greatly from this state of affairs. The E. C. Knight company, for example, which had been on the verge of selling out to the trust in 1887 because the returns from sugar refining were so low, found itself earning a 50 per cent profit on its $1,000,000 investment,32 and Harrison, Frazier & Company enjoyed a similar prosperity. However, with the opening of the new Spreckels refinery in the spring of 1890, this prosperous state of affairs promised to come to an end.


As Spreckels himself pointed out, the new Philadelphia plant would nearly double the capacity of the independent refineries in the East.33 The trust, it seemed, had no choice but to abandon its previous pricing policy. For if it continued to set its prices without taking into consideration what its rivals in Philadelphia were doing, its share of the eastern market might well fall below 60 per cent. And if Spreckels carried out his announced intention of doubling the capacity of his new refinery, the trust’s share of the market might fall even further. As Henry Havemeyer later told the U.S. Industrial Commission, in explaining why the trust reacted so vigorously to Spreckels’ entry into the eastern market: “we did not fight [Harrison]; we could make our dividend without fighting him. But when Spreckels came in with his enormous capacity we either had to fight or make no dividend. We concluded to fight.…”34

By the end of January, 1890, the outlines of this new strategy were already beginning to emerge. Willett & Gray’s Sugar Trade Journal, noting the unusually low prices for refined products, declared: “This is due to an apparent radical change in the policy of the Sugar Trust. Last year at this season, just the same as at other times, the prices obtained gave refiners 5/8ȼ per lb. profit, but since the Spreckels refinery opened in December, the profit has been constantly lowered, and further reduction this week brings it down to within 1/8ȼ per lb., which means that the country is now getting sugar at about the same relative prices to raw sugar that they paid before the Sugar Trust was formed.” Estimating that the lower prices had resulted in consumer savings of approximately $1 million a month, the Journal added, “Mr. Spreckels deserves the thanks of the country for his enterprise and patriotism.”35

As much as the members of the consuming public might have welcomed this new element of competition in sugar refining, they were mistaken if they regarded it as signaling the re-emergence of a competitively structured industry. The competition being manifested in the early months of 1890 was oligopolistic price competition, which involved primarily two firms fully cognizant of the fact that their actions were necessarily interdependent. The competition deriving from a market structure of that type was apt to be little more than a momentary maneuvering for position, as subsequent events would demonstrate, rather than a permanent way of conducting business. Still, for the moment, the consuming public had no reason not to enjoy the unexpected windfall—so long as they did not deceive themselves as to its meaning.

As yet, Spreckels’ influence on the industry’s price level had barely begun to be felt, for his new refinery was turning out only 500–700 barrels of sugar daily. Two weeks later this figure had increased to 1,000 barrels a day, and Willett & Gray’s Sugar Trade Journal reported: “The fight between the Trust, the non-Trust and the Spreckels refineries shows increasing animosity; the refiners’ profits are now reduced to a minimum.”36 By the end of March, the new Spreckels plant was producing at full capacity, 3,000 barrels a day. The trust, matching Spreckels price, was succeeding in holding onto its former market share, but the profit from refining sugar had all but disappeared.37 The same bitter price war that had prevailed on the West Coast for two years had finally come—as Spreckels had promised it would—to the Atlantic seaboard. As Willett & Gray’s Sugar Trade Journal observed, “The power of monopoly may exist to the same extent as in 1888 and 1889, but it … has not been enforced thus far this year.”38

That year, 1890, the average margin between raw and refined sugar fell by 40 per cent—to 0.72 of a cent a pound, the lowest it had ever been except in the year 1885.39 Claus Spreckels, Jr., in later recalling this period, said, “The competition, of course, was very keen, and whenever we had an accumulation of stock we cut the price.”40 The other independent refiners, who found themselves caught in the middle of this struggle, looked on the younger Spreckels, who by then was running the Philadelphia plant himself, as a “bull in the china shop” because of his vigorous price cutting.41

These independent refiners—especially the Harrisons and E. C. Knight—were badly pressed by the decline in sugar margins. The Spreckelses could recoup at least part of their losses on the western market (the former American refinery was temporarily shut down by court order, thus giving the Spreckelses a free rein in that territory for several months).42 The trust could do the same on the Louisiana market, which it controlled almost exclusively. But the independents had to stand or fall on the business they were able to do in the one area in which they were active competitors. It was this total dependence on the eastern market which made their position so precarious.43 Still, it was a member of the trust who first tried to bring the bitter price war to an end.

In the fall of 1890, Francis O. Matthiessen, the former head of F. O. Matthiessen & Wiechers, became concerned that the Sugar Refineries Company might not long survive if the price war with the Spreckelses continued. As a director he knew that the trust was not then earning its dividend,44 and he therefore resolved to bring the price war to an end. Since he represented only a minority among the trustees, Matthiessen first took the precaution of buying up a majority of the trust certificates on the open market. This was easier than it might otherwise have been, because the legal cloud that then hung over the trust had depressed the price of certificates, and many of the original members of the trust—including the Havemeyers—had sold their holdings. Thus armed, Matthiessen went to see the younger Spreckels in Philadelphia.45

“We might as well lay the cards on the table,” Matthiessen said. Unless an agreement to raise prices could be reached, he told Claus, Jr., the Sugar Refineries Company would be ruined. Then he asked Spreckels what it was that he wanted. “I want to have peace in the sugar business,” the latter replied. At that point Matthiessen informed his host that he had obtained absolute control of the trust, and that if he could make an arrangement to increase prices, he wanted to do so. Spreckels’ answer to this was that he wasn’t in business for his health, that he would like to make money also. “Now that I understand you,” Matthiessen said, “if I go back and raise the price, will you advance yours?” “We certainly will,” Spreckels replied. “We want to get all we can.”

The next day, a Monday, prices were advanced as promised, and, as Spreckels later testified, “considerable money was made” for the next six weeks. “Then, suddenly,” Spreckels continued, “without any warning whatsoever, the market broke, broke very severely, going back to the point where there was no profit.”

It was not until several years later that Spreckels learned what had caused the price agreement to break down. Coming upon Matthiessen by chance one day, he questioned him about the incident and was told that when Matthiessen returned to New York and informed the Havemeyers (Henry and Theodore) that he had obtained absolute control of the trust, they threatened to resign and build competing refineries if the struggle with the Spreckelses were not continued. Matthiessen remarked that, “under the circumstances, if they were to build refineries in competition with the Sugar Refineries Company, [I] would be worse off than with the single competition of the Spreckels Company,” and that for that reason he had finally given way.

A few months later, Spreckels heard the rest of the story. Mentioning the incident to the Havemeyers, he was told that they considered “it a huge joke on Mr. Matthiessen.” “They told me,” Spreckels said, “that if Mr. Matthiessen had only thought [about it he would have realized that] it would take them a couple of years to build a refinery, that they would not have built it because it would take too long.…” They had simply been bluffing, the Havemeyers admitted, hoping to force their colleague to “recede from his position.” The only reason sugar prices had been advanced, even momentarily, was to enable Matthiessen to dispose of his trust certificates for more than he had paid for them.46

The Havemeyers must have been greatly relieved by the success of their bluff, for of all the refiners who had joined in forming the trust, Matthiessen most probably was the one in the best position to challenge their hegemony. Next to the two Havemeyers themselves, he had received the greatest number of trust certificates,47 and in addition possessed a substantial fortune on the side.48 A Boston group, headed by Nash, Spalding & Company, the former sales agency for several of that city’s refineries, had tried earlier that year to gain control of the trust, but when the crucial test came—on a vote to elect an independent slate of trustees—it could muster only 60,000 of the 380,000 trust certificates voted.49 Matthiessen, however, had actually been able to acquire majority control, and only the Havemeyers’ greater nerve had enabled them to remain on top. In a test of will the Havemeyers had triumphed, and while Matthiessen faded once more into the background, they were able to continue with their plans for reorganizing the sugar trust into a New Jersey corporation. Only when this first order of business was finally accomplished in January, 1891, were they able to turn their full attention to the problem posed by competition with the Spreckelses. By that time they were prepared to try a different tack.


One day, not long after the American Sugar Refining Company was organized, Claus Spreckels, Jr., was approached by John E. Searles. The newly named secretary of the American told Spreckels he would like to see him that night, if possible, in Philadelphia. Spreckels replied that he had made plans for dinner and the theater, but finally agreed to see Searles afterward. Recalling that midnight rendezvous many years later, Spreckels said: “He [Searles] stated that they were anxious to patch up a truce, and they were willing to recede from their position on the West coast and give us that if we would sell to Mssrs. Havemeyer and himself a half interest in the Philadelphia concern. I told him I would take the thing up by telegraph with my father, which I did.…”50

On receiving his son’s wire, the elder Spreckels asked that Searles travel to the West Coast to discuss the matter with him personally. Searles suggested that they meet halfway—in New Orleans—instead, but Spreckels refused to leave San Francisco. Searles then confessed that he was under sentence for contempt of court in that city as a result of the litigation over the old American company, and so Spreckels agreed to meet him in San Diego.51

Out of that conference came an arrangement for ending the bitter price war between the two parties, an arrangement which differed somewhat from the one that Searles had proposed originally. On the West Coast a new company, Western Sugar Refining, was to be formed, with Spreckels and the American Sugar Refining Company each taking 50 per cent of its $1 million in common stock. In turn, this new company was to lease both the California (Spreckels) and the old American refineries, thus assuring a harmony of interests between the former competitors. Spreckels and the Havemeyers were each to choose two of the Western’s directors, and, to resolve any deadlock which might occur, the cashier of the Bank of California was named as the fifth member of the board. On the East Coast the Havemeyers were to be given a 45 per cent interest in the Spreckels Sugar Refining Company of Philadelphia, enough to give them a voice in the company’s affairs, but not enough to give them control.52 For this minority interest the Havemeyers paid $2.25 million (par value based on the $5 million at which the company was capitalized).53 Apparently this was as far as Spreckels was prepared to go at that time toward relinquishing ownership of the Philadelphia refinery.

Although certain of the details eventually leaked out to the public—it proved impossible, for example, to conceal the organization of the Western Sugar Refining Company54—this new working arrangement remained for the most part a secret.55 To guard against disclosure, the Havemeyers insisted that the stock in the Spreckels Philadelphia refinery be endorsed over to them personally rather than simply transferred to the American.56 By now the Havemeyers and Searles were aware of how damaging unfavorable publicity could be.

The bitter price war was thus brought to an end, but both sides found the new working arrangement a continual source of irritation. On the West Coast the strong-willed Spreckels proved a difficult man to work with. Oxnard, who had been named as one of the Western’s directors, was instructed to avoid conflict with the irascible sugar king if at all possible. As Oxnard himself later testified, “… I endeavored to impress Mr. Havemeyer’s views when I thought them correct on the Board of Directors, but in the last analysis I would defer to Mr. Spreckels.”57 Still, serious conflicts did arise. At one point, for example, Henry Havemeyer wrote to Oxnard complaining that it was folly to accumulate inventories of refined sugar as Spreckels was then doing, when the price was sure to fall in the next several months. But Spreckels apparently could not be made to accept this judgment.58

On the East Coast the friction was even greater. Joseph A. Ball, Henry Havemeyer’s special assistant, was put on the board of directors of the Spreckels company to represent the American’s interests.59 In addition, Searles himself communicated regularly with the younger Spreckels. But the latter still did pretty much as he pleased.60 As had been his custom, whenever the Philadelphia refinery began to accumulate a surplus of refined sugar, he would throw it on the market for whatever it would bring—despite the objections of Ball and Searles that this “spoiled” the market.61 In October, for instance, after Claus, Jr., had reduced the price of refined sugar in order to make a sale in Richmond, Virginia, Searles wrote young Spreckels: “This may be good business management, but I do not believe it. I think you are simply throwing away money.”62

When it became clear that the younger Spreckels had no intention of co-operating with the American—except when it suited his own purposes—Searles and Henry Havemeyer went over his head, appealing directly to his father. Pointing out that they were then deferring to the older Spreckels’ wishes on the West Coast, they insisted that he do something to bring his son into line, and Spreckels promised to speak to the young man. Angered by what he thought was an intrusion on his authority, Claus, Jr., promptly handed in his resignation. “I had a conversation with my father,” he later testified. “… The trust was complaining they could not control me, it was not to the best interest that I was managing the affairs of the company.… I finally concluded if the minority was going to rule the majority my father had no use for me in the management of the concern.…”63

Claus Spreckels, Sr., then made preparations to come east and take charge of the Philadelphia refinery himself.64 But it was clear that this was no more than a temporary expedient. The sugar king was already heavily involved elsewhere, not only with the plantation in Hawaii and the refinery in San Francisco, but also with his experiments in trying to grow beet sugar in the western United States. Because of these other commitments, he could not give the Philadelphia refinery the attention it required on a long-term basis. Unless Claus, Jr., could be persuaded to return to the family enterprises, the elder Spreckels would eventually be forced to liquidate his investments in the East.


Anticipating this possibility, the American Sugar Refining Company had already begun sounding out the elder Spreckels as to how much he would be willing to accept for his Philadelphia refinery.65 However, before anything definite came of these feelers, officials of the American wanted to be sure that they did not miss the opportunity which had presented itself for completing, at long last, the consolidation of the sugar refining industry. For they realized that the other Philadelphia firms would be more receptive to an offer if they thought Spreckels was going to continue as an active competitor.66 If they knew that he himself was about to sell out, they might well refuse to come to terms, hoping that once Spreckels’ competition had been eliminated their own businesses would again become profitable. It was for this reason that Searles conducted his negotiations with the various Philadelphia refiners in great secrecy, being careful not to let any of them know that the American already owned a minority interest in the Spreckels firm and that it was hoping to increase that interest to a majority.67

Next to Spreckels, the American’s most important rival in Philadelphia was still the firm of Harrison, Frazier & Company, which had been reorganized and incorporated as the Franklin Sugar Refining Company only the year before.68 Its head, Charles G. Harrison, was sounded out by John E. Parsons late in 1891 as to whether his firm would be willing to enter into a working arrangement with the American. Harrison, by opening up his company’s books to representatives of American and showing them the amount of business controlled by his firm, was able to convince them that it was no use trying to reach an agreement on prices or output; but he said nothing to discourage them from thinking that he and the rest of his family might be willing to sell out entirely.

Meanwhile, officials of the American had begun sounding out the other, smaller refiners in Philadelphia. Henry K. Kelly, a raw-sugar broker from that city who also did business with the American, asked E. C. Knight, Sr., if he would be receptive to a merger.69 Kelly also spoke to George Bunker, the active head of the Delaware Sugar House.70 From Kelly, officials of the American learned that both the E. C. Knight and Delaware firms were interested in selling out.71

The next move came at the first annual stockholders meeting of the American Sugar Refining Company on January 13, 1892. The directors, after reporting net earnings for the year of over $5 million, asked for approval to increase the company’s capitalization by $25 million for the purpose of “acquiring other refineries.” This request was readily agreed to by the stockholders.72

Armed with this new authority, the officials of the American were ready to begin the delicate task of negotiating directly with the various independent refineries. It was Parsons who, following up his previous inquiries, went to see Charles C. Harrison.73 Their meeting took place on February 6,74 and this time Parsons’ approach was direct. “I want to come immediately to a question with you,” he said. “We have, we think, the power to increase our capital stock. We would like to buy your stock. Will you sell it?”75 Harrison’s reply was that he would have to speak with the other members of his family associated with him in the firm.

The head of the Franklin Sugar Refining Company was no less determined than ever to remain his own boss. But he was advancing in years and growing tired of the daily business routine. While still relatively young, he had thought he might like to indulge some of his other interests, especially if it should prove possible to quit sugar refining on advantageous terms. After talking with his brother Alfred and his brother-in-law, William W. Frazier, he realized that they felt the same way, even though some of the younger members of the family “were desirous of remaining in business and continuing as they had done in the past.”76 When Parsons returned three weeks later for his answer, Harrison told him that the members of his family were willing to sell out, but that the amount the American had offered to pay for the property was unsatisfactory. Two years earlier, Harrison noted, a British syndicate had tried to purchase the Franklin refinery, and at that time the members of his family had held out for $10 million.77 The American, he told Parsons, would have to meet that price now if it wished to obtain control. Parsons promptly agreed to Harrison’s terms. The owners of the Franklin refinery, it was stipulated, would receive half of the $10 million in preferred American shares and half in common shares—with an option to sell back immediately for cash as much of the common stock as they wished for thirty cents on the dollar.78

Searles, meanwhile, had been carrying on negotiations with the other independent refiners. Following Kelly’s lead, he went to see E. C. Knight, Sr., in Philadelphia and after several meetings settled on a price of $2,050,000—again half in American preferred shares and half in common stock.79 While in Philadelphia, Searles also talked with George Bunker, the active head of the Delaware Sugar House. The negotiations with Bunker followed virtually the same course as those with the other independent refiners, and after two or three meetings they agreed on a price of $472,000. In the case of the Delaware company, however, the motivation for selling out was somewhat different. As one of its stockholders later explained: “The refinery was a small one … not located favorably for the manufacture of sugar.… When, therefore, the opportunity arose by which stock in a concern which had a very risky future might be exchanged for a marketable [one], I … determined that I would sell my stock.”80

The Delaware company’s coming to terms left only Spreckels to be dealt with. Soon after the latter returned from a European trip in mid-February, Searles made an appointment to see him at his Philadelphia residence. Negotiations for control of the Spreckels refinery then began in earnest, and within three weeks Searles succeeded in persuading the sugar king to dispose of his remaining interest in the Philadelphia refinery for $5.5 million.81 On March 4, 1892, formal agreements were entered into by the American, not only with Spreckels, but with each of the other Philadelphia firms as well. Six days later, the American’s directors voted to increase the company’s stock by $25 million, half in preferred shares and half in common stock.82 Soon thereafter the new stock was formally listed on the New York exchange.

Besides the increased refining capacity that it obtained, the American Sugar Refining Company was infused with new managerial talent. Charles and Alfred Harrison promptly retired from active business life, as they had planned. So did William W. Frazier and E. C. Knight, Sr. But Mitchell and William F. Harrison remained on in the employ of the American, the former continuing to run the Franklin refinery and the latter taking charge of the Spreckels firm. Without sugar men as knowledgeable and experienced as they, the American would have found it difficult to operate the newly purchased refineries.83

Still, the most important aspect of the Philadelphia acquisitions was the control that they gave the American Sugar Refining Company over the domestic industry. For of all the sugar refineries still in operation throughout the country, there were now only three that the American did not own outright—the Revere refinery in Boston, the California refinery in San Francisco, and a recently completed refinery just outside Baltimore. And of these three, there was only one in which the American did not own a significant interest.

The refinery outside Baltimore had been built by a group of local businessmen, together with persons formerly associated with the Moller & Sierck firm in New York. Soon after it was opened in 1891, Searles had begun secretly to buy up its capital stock, offering through a local broker to purchase all outstanding shares at 50 per cent above their par value. Since the refinery had encountered certain operating difficulties, he had no trouble finding takers for his offer. By March 1, when the purchase of the Philadelphia refineries was all but complete, Searles had succeeded in obtaining two-thirds of the Baltimore Refining Company’s outstanding stock. Satisfied that this was sufficient for control, he then withdrew his purchase offer.84

The California refinery, meanwhile, remained under lease to the Western Sugar Refining Company. Although Spreckels’ was still the predominant voice in the Western’s affairs, the American continued to retain its 50 per cent interest. This was to make certain that the sale of refined sugar in the common, overlapping market along the Missouri River was carried out to the mutual interest of both parties.

Thus, only the Revere refinery in Boston was completely independent of the American. But the Revere was capable of supplying only 2 per cent of the total U.S. market, an amount hardly sufficient to affect sugar prices to any significant degree.85 Moreover, it had been forced to pledge that it would not expand beyond its current capacity.86

The acquisition of the Philadelphia refineries meant, therefore, that the American Sugar Refining Company had achieved a virtual monopoly of the sugar refining industry—that no firm then existed which could challenge its power to fix the price of refined sugar in the United States. The consolidation of the American sugar refining industry had, at long last, been completed. All that remained were the inevitable political and legal repercussions.


It was not until the latter part of March, 1892, that the acquisition of the four Philadelphia refineries became generally known. Although rumors of the sale, originating on Wall Street, began to circulate early in the month, leading to considerable speculation in the American Sugar Refining Company’s stock,87 the rumors could not at once be confirmed. As usual, officials of the American had been unavailable for comment, though Claus Spreckels, Sr., was finally persuaded to answer reporters’ questions. Asked on March 12 if he were about to join the “trust,” the Hawaiian sugar king replied: “Not while I am on top of the earth. I don’t favor trusts and never did. My refinery is now and always will be conducted independently of every other interest.”88 Two weeks later, however, when Spreckels departed for California, turning over the management of his Philadelphia refinery to officials of the American, the truth could no longer be concealed.89

Newspapers throughout the country began immediately to raise a hue and cry, pointing with alarm to the excessive economic power that the American Sugar Refining Company now commanded. “Competition being removed,” declared the St. Louis Globe-Democrat, “the ‘combine’ has producers and consumers at its mercy. It is enabled to get its raw material at a lower price than it paid when the independent refineries were in operation, and it takes the liberty to put a higher price on the finished product.”90 Said the New York Times, “Never has competition been more completely suppressed by a combination in a prominent industry.” It demanded that the American Sugar Refining Company be prosecuted under the recently enacted Sherman antitrust law.91

This hue and cry was then taken up in Congress. On April 16, 1892, Congressman Owen Scott, a Democrat from Illinois, introduced a resolution which, in effect, called on Republican Attorney General William H. Miller to explain why he had not yet brought suit against the American. It soon became apparent that the resolution, if brought to a vote in the Democratic-controlled House, would pass with strong Republican support.92 Later, speaking in behalf of his resolution, Congressman Scott remarked with more than just a trace of sarcasm: “It certainly should be the policy of the Administration which claims credit for the enactment of the antitrust law to give it a fair test. It owes it to the people of the country to protect them from the exactions of such great monopolies as the sugar trust.” Moreover, he added, “it surpasses comprehension that with all the evidence that is easily accessible, not only to the Government but to individuals, this prodigious extortioner should have been permitted for all this time to levy its tribute upon the people.”93

Scott had good reason to take the Harrison administration to task. For the truth was that neither the president nor the attorney general had been particularly zealous in his efforts to enforce the Sherman antitrust law. Given their background and sources of political support, this was not surprising. Harrison, before becoming president, had been a lawyer for various corporate interests; Miller had been his law partner. Both men owed their offices to the support of certain segments of the business community, most particularly, the high tariff manufacturers; and both men held firmly to the view that government should play only a limited role in economic affairs. Since the Republican party platform in 1888 had included an antitrust plank, Harrison had been willing to sign the Sherman bill into law. But he had done nothing to advance its passage through Congress, and once the measure received his signature, he showed no further interest in the subject. Miller, taking his cue from the president, viewed the Sherman Act as merely one of the many federal laws he was sworn to uphold.94 As a result, very little was accomplished in the field of antitrust. In the nearly two years following the passage of the Sherman Act, only one major combination—the whiskey trust—was even indicted for violating the new law’s provisions.95 And the whiskey trust, reorganized as the Distilling and Cattle Feeding Company of Illinois, would not have been indicted had it not been for the personal initiative of the U.S. district attorney in Boston.96

Still, in the Harrison administration’s behalf it must be pointed out that Congress, after passing the Sherman Act, then failed to provide any funds for its enforcement. (On the other hand, the Harrison administration had not asked for additional funds.) Moreover, the Sherman Act was a difficult law to enforce, calling on the government, as it did, to venture into previously unexplored fields of law, fields in which competence in economic as well as legal matters was essential. Faced with these formidable obstacles, the attorney general was disposed to act with circumspection. “The law is new, and its enforcement not free from difficulty,” he had written to one of his district attorneys. “It is, of course, desirable to proceed with caution.”97

But caution, at least with respect to the sugar combination, was no longer possible. Now that the American Sugar Refining Company’s purchase of the four Philadelphia refineries was generally known, the failure of the Harrison administration to take action was threatening to become an issue in the upcoming presidential campaign. His hand forced by the Democrats, Miller ordered the district attorney in Philadelphia, Ellery P. Ingham, to bring suit against the American Sugar Refining Company and its alleged fellow conspirators.98

On May 2, 1892, just as the House of Representatives was preparing to vote unanimously in favor of the Scott resolution, a bill of equity was filed in the U.S. district court in Philadelphia, asking that the defendants, E. C. Knight et al., be enjoined from carrying out their proposed merger. The government’s complaint charged “that the American Sugar Refining Company, which may be considered as the principal defendant, has monopolized the manufacture of refined sugar, and also the interstate commerce therein, within the United States; and that the other defendants have combined, conspired, &c., with it for this purpose.”99

The Harrison administration, having weathered the immediate political storm, appeared to be in no particular hurry to bring the case to trial—a fact which the New York Times and other newspapers complained of bitterly.100 But then, after the Republicans lost the November election, there were no further political repercussions to fear. As was the attorney general’s custom, he left the matter to the district attorney to prosecute as he saw fit.

Toward the end of July, each of the defendants had filed separate answers to the government’s complaint, in effect denying the charge that they had engaged in a conspiracy to monopolize the manufacture of refined sugar.101 Then, early in October, a special examiner appointed by the Philadelphia court had begun taking testimony. Aside from eliciting some of the details of how the four Philadelphia firms had been acquired, this testimony brought out the fact that, in agreeing to sell out to the American, none of the major parties connected with the four refineries had been required to promise not to re-enter the business of sugar refining at some later date. These pretrial proceedings had continued in a desultory manner through election day and on into February when suddenly they were brought to an abrupt halt. Searles, the first official of the American called to testify, refused to answer any questions pertaining to the period before 1891 when the sugar trust proper was still in existence, and though Ingham asked the federal district court judge sitting in the case to compel Searles to answer, the judge declined to do so. Discouraged by this hostile ruling, Ingham was reluctant to proceed further until he had had a chance to consult with the new, incoming attorney general.102 Thus the suit against E. C. Knight et al. became one of several such actions under the Sherman Act left up in the air when the Democrats, under Grover Cleveland, assumed office in the spring of 1893.


In his inaugural address, the new president spoke out forcefully on the subject of antitrust. Calling attention to the “existence of immense aggregations of kindred enterprises and combinations of business interests formed for the purpose of limiting production and fixing prices,” Cleveland declared: “These aggregations and combinations frequently constitute conspiracies against the interests of the people.… To the extent that they can be reached and restrained by Federal power, the General Government should relieve our citizens from their interferences and exactions.”103 But as it turned out, the key words in this statement were “to the extent that they can be reached by Federal power.”

To give his cabinet geographical balance, Cleveland chose as his attorney general a Boston lawyer, Richard Olney, whom he had met only once before and then only briefly.104 Olney’s strong, forceful personality and deep, probing intellect were soon to make him one of the dominant figures in the Cleveland administration. But those, such as Joseph Pulitzer, editor of the New York World, who wished to see the antitrust laws enforced more vigorously had good reason to oppose the appointment. As a noted corporate lawyer, Olney had been part of the counsel that successfully defended the Distilling and Cattle Feeding Company against the government’s antitrust suit. Like many of the distinguished members of the bar, he felt that the Sherman Act had only a limited application, that it had been enacted to deal only with the problem of trusts proper, and that it could not be used to prosecute corporations duly chartered by one of the states.105 As Olney subsequently declared in his first annual report as attorney general, “the cases popularly supposed to be covered by the statute are almost without exception not within its provisions, since to make them applicable not merely must capital be brought together and applied in large masses, but the accumulation must be made by means which impose a legal disability upon others from engaging in the same trade or industry.”106 In other words, it was not enough that virtually all the firms in an industry, having joined together in an industrial combination, were legally prevented from ever again acting as independent producers. To fall within the provisions of the Sherman Act, as Olney saw it, it was also necessary that new firms be legally barred from entering the industry. Clearly, the great majority of industrial combinations, especially those formed under the corporate laws of the various states, did not meet that requirement.

In setting forth this narrow interpretation of the law, one which all but vitiated the Sherman Act, Olney was merely echoing the view of Judge Howell B. Jackson, one of the jurists in the whiskey-trust prosecutions who, after enunciating the doctrine, had been elevated to the Supreme Court by President Harrison.107 Still, Olney was aware that others would interpret the Sherman Act differently. “I have, therefore, deemed it my duty,” he said, “to push for immediate hearing a case involving these questions, and unless prevented by some unforeseen obstacle, shall endeavor to have it advanced for argument at the present term of the Supreme Court.”108 That case was United States v. E. C. Knight et al.

On January 19, 1894, nearly two years after the purchase of the Philadelphia refineries, U.S. District Attorney Ellery P. Ingham opened the government’s case against the American Sugar Refining Company and its fellow defendants before Judge William Butler of the district court in Philadelphia.109 No further evidence had been taken since Searles’ refusal to answer certain questions the year before, and the government, in its civil suit, still sought to prevent the merger from being completed. Of course, the E. C. Knight plant had long since been incorporated into the larger Franklin refinery, while the Delaware Sugar House had been absorbed by the Spreckels company.

On January 30, Judge Butler announced his decision.110 The government’s suit was dismissed, on the face of it because no attempt to monopolize interstate commerce had been revealed. “The contracts and acts of the defendants,” Butler declared in his written opinion, “relate exclusively to the acquisition of sugar refineries and the business of sugar refining, in Pennsylvania. They have no reference and bear no relation to commerce between the states.…” Conceding that a monopoly in sugar refining might exist, Butler nonetheless rejected the government’s contention that this necessarily demonstrated that a monopoly in commerce also existed. “The most that can be said is that it tends to such a result; that it might possibly enable the defendants to secure it, should they desire to do so.” But that, Butler quickly added, had not happened. “At present,” he said, “the defendants neither have, nor have attempted to secure, such commercial monopoly. As before stated, if they have a monopoly, it is in refineries and refining alone—over which the plaintiff has no jurisdiction.”111

Although Butler based his decision on the narrow grounds that manufacturing was separate and distinct from commerce, it was clear that he had been greatly influenced by the view which Justice Jackson had expressed earlier, in the whiskey trust prosecution. “… The question is not new,” Butler said, in turning to the basic issue of the powers granted the federal government under the Sherman Act. “It was fully considered in a case which arose under the statute … and the opinion of [Judge] Jackson (now of the supreme court) is so clear and satisfactory that I am restrained from quoting what he says only by the desire to be brief.”112

As soon as Butler’s decision was made known, Attorney General Olney announced that the government would appeal. “The Administration intends to prosecute this case with vigor,” he said, “for the purpose of getting the highest judicial determination of the legality and binding effect of the antitrust law.”113 The Circuit Court of Appeals, in rendering its own decision on March 26, 1894, upheld Butler on every point, including his flattering reference to Justice Jackson’s earlier opinion.114 Both sides then prepared for the final test, an appeal to the U.S. Supreme Court.


Before that test could take place, however, officials of the American Sugar Refining Company suddenly found themselves the center of another controversy, this one involving charges that they had used improper influence to secure favorable tariff legislation. “Shameful pledges,” “Trust now holds the whip,” “Speculative Senators enrich themselves,” and “Cleveland et al. to the bar,” declared the headlines in the Philadelphia Press on May 14. An accompanying story told of a meeting on a private yacht between representatives of the American Sugar Refining Company and the Democratic presidential candidate in 1892, of large campaign contributions coming just in time to rescue several doubtful states, of administration officials intervening to push through the Senate Finance Committee a tariff schedule acceptable to the “trust,” and of U.S. senators speculating wildly in sugar stocks. The next day this story was reprinted in the New York Sun, causing a stir in Washington where the Senate was in the midst of debate over the tariff.115

These newspaper accounts, as a subsequent Senate investigation brought out, were greatly exaggerated.116 The Democrats had been elected in 1892 largely on their promise to reform the tariff. But in order to reduce the duties on manufactured goods, as the Democrats proposed, it had been necessary to find some other source of government revenue. It was only natural, in this situation, that the Democrats should have turned to a tariff on imported raw sugar. Such a tariff had been at the heart of the federal revenue system since the beginning of the Republic. It had finally been eliminated in 1890, but only so the Republicans could justify increasing the duties on manufactured goods. Thus it was with a certain sense of poetic justice that the Democratic members of the Senate Finance Committee decided to re-establish the tariff on imported raw sugar, setting the rates at 40 per cent ad valorem and thus making it possible to reduce or eliminate the duties on other manufactured goods.

This decision, however, drew a strong protest from the two Democratic senators from Louisiana. An ad valorem tariff, they argued, would be difficult to enforce, for there was no way of knowing for certain what prices importers paid for raw sugar. Fraud was unavoidable, they said, with the result that the sugar-cane growers in their state would fail to receive adequate protection.117 Since the Democrats controlled the Senate by only two votes, the support of both Louisiana senators was essential for passage of any tariff reform bill. Bowing to political necessity, the Democratic members of the Senate Finance Committee amended the tariff on raw sugar to read one cent a pound for all grades instead of 40 per cent ad valorem.118

In the meantime, Searles and Henry Havemeyer had been in Washington lobbying for retention of at least half of the ½-cent-a-pound protection the sugar refining segment of the industry then enjoyed. But as soon as they learned of the change that had been made in the schedule for imported raw sugar, they turned their attention to what they considered the much greater threat to the American Sugar Refining Company’s interests. For the 1-cent-a-pound, across-the-board duty on raw sugar, being a specific tariff, discriminated against the lower grades of imported raw sugar. And it was precisely these lower grades which the American Sugar Refining Company could most advantageously process. If the choice had been theirs alone, Searles and Havemeyer would have preferred no tariff at all on imported raw sugar, for the resulting lower prices led to increased consumption. But since some sort of tariff seemed unavoidable, Searles and Havemeyer were determined that it be levied on an ad valorem basis so that the various grades would be taxed according to their value.119

Largely as a result of Searles and Havemeyer’s unrelenting opposition, the Democratic members of the Senate Finance Committee agreed to change the tariff on imported raw sugar once more, this time to duties which, though specific, nonetheless varied according to the value of the different grades. These duties ranged from 1.0 cent a pound for sugars testing 80° purity to 1.26 cents a pound for sugars testing 98° purity. But Searles and Havemeyer still were not placated. The 0.26-cent spread in duties was not sufficient to produce true ad valorem rates. Moreover, since the price of raw sugar was bound to vary over time, these specific duties would inevitably depart even further from the principle of ad valorem rates. And so, at Searles and Havemeyer’s insistence, the tariff on imported raw sugar was changed one more time—back to the original 40 per cent ad valorem duties.120

It seemed strange that Searles and Havemeyer had been able to wield such great influence. As to the source of that influence, the article in the Philadelphia Press which had touched off the Senate investigation offered one suggestion. “Upon one occasion, some time in February,” the article related,

when the Finance Committee, or the Democratic members of it, were in informal session, there came into the room, unexpectedly…, none other than the Secretary of the Treasury, [John G.] Carlisle.… He said: “Gentlemen, there is one thing I am bound to say to you as earnestly and impressively as I can do it, and I speak to you as a Democrat to Democrats. No party or the representatives of no party can afford to ignore honorable obligations. I want to say to you that there seems to be a danger that this is going to be done. Gentlemen associated with the sugar-refining interests (I may tell you what perhaps you do not know) subscribed to the campaign fund of the Democrat party in 1892 a very large sum of money. They contributed several hundred thousand dollars, and at a time when money was urgently needed. I tell you that it would be wrong, it would be infamous, after having accepted that important contribution, given at a time when it was imperatively needed, for the Democratic party now to turn around and strike down the men who gave it. It must not be done. I trust that you will prepare an amendment to the bill which will be reasonable and in some measure satisfactory to those interests.121

It is difficult to say how much weight should be given to this account. Its author, Elisha Edwards, later admitted that it was based primarily on second-hand information and conjecture. Those alleged to have been present at the meeting with the secretary of the treasury all denied that any such confrontation had taken place, and many other details of the Press account were clearly shown to be false.122

Still, the fact remained that Searles and Havemeyer had prevailed over the powerful opposition of the two Democratic senators from Louisiana. Later, during the floor debate over the tariff bill, those two senators gave their version of what had occurred within the Senate Finance Committee. Searles and Havemeyer, they said, controlled enough Democratic votes in the Senate to prevent any tariff bill to which they were opposed from becoming law. And so, in the interest of party unity—to enable the Democrats to redeem their election pledge—the two Louisiana senators had finally acceded to Searles and Havemeyer’s position.123

Havemeyer, of course, stoutly maintained that in lobbying for ad valorem rates he and Searles had merely sought to protect a legitimate business interest. And it was true that in this instance the public welfare had not been affected in any substantial way. The conflict was really between groups within the industry, not between the industry and the public. In that sense it was a throwback to the controversy which had raged twenty-five years earlier over specific versus ad valorem duties.124 Moreover, on the important issue of tariff protection for the sugar refining industry (to be distinguished from the issue of how the tariff on raw sugar should be levied), Havemeyer and Searles were noticeably less successful. The amount of protection for the refining industry was reduced from ½ to 1/8 of a cent a pound, a decline of 75 per cent.125

Nonetheless, the whole train of events, including the confirmed reports of Searles and Havemeyer at one end of the capitol building, the Louisiana senators at the other end, and members of the Senate Finance Committee shuttling back and forth trying to work out some compromise acceptable to both sides, seemed to confirm the fears of many Americans that the nation was evolving from a system of democracy toward a system of plutocracy. The impression was not improved by the disclosure that during the period of behind-the-scenes maneuvering a number of senators had profited handsomely from speculating in American Sugar Refining stock.126 And so this incident became one of a series of events that was to lead eventually to the political reaction known as the Progressive movement.

The American Sugar Refining Company’s alleged bribery of U.S. senators brought renewed demands in Congress that the corporation be prosecuted under the antitrust laws, especially after Havemeyer himself, in testifying before the special committee appointed to investigate the charges, openly acknowledged that the American had been formed to control the price of refined sugar throughout the United States.127 Quite properly, however, these charges seemed to have little effect on the Supreme Court, which was then about to take up the E. C. Knight case.


The Supreme Court, after hearing oral arguments during October, 1894, handed down its decision in January of the following year. Chief Justice Melville W. Fuller, speaking for all of his fellow justices except one, declared that Congress had the right to prohibit monopoly in commerce but not monopoly in manufacture. “Doubtless the power to control the manufacture of a given thing involves in a certain sense the control of its disposition,” the chief justice wrote in his majority opinion, “but this is a secondary and not the primary sense; and although the exercise of that power may result in bringing the operation of commerce into play, it does not control it, and affects it only incidentally and indirectly.” He then added, “Commerce succeeds to manufacture, and is not a part of it.”128 The federal government might regulate the first, according to Fuller, but not the second. Thus the Supreme Court upheld in full the decision of the two lower courts.

Some persons have criticized Ingham and the attorney general for their failure to make a better case for the fact that refined sugar was an article of interstate commerce.129 Whatever the merits of this criticism,130 it is quite beside the point. The disposition of the Supreme Court at this time was such that probably no amount of evidence could have convinced the majority to rule other than the way it did. This was a court deeply committed to preserving state powers, as the subsequent income tax and racial segregation decisions were to prove even more conclusively. The ruling in the E. C. Knight case was merely part of a larger pattern.131 The truth of this can be seen in Justice John M. Harlan’s lengthy, clearly reasoned dissent, for Harlan had no trouble seeing where interstate commerce had been directly affected. “In my judgment,” he said, in what was eventually to become the line of argument adopted by the Supreme Court in interpreting the Sherman Act:

the citizens of the several States composing the Union are entitled, of right, to buy goods in the State where they are manufactured, or in any other State, without being confronted by an illegal combination whose business extends throughout the country.… Whatever improperly obstructs the free course of interstate intercourse and trade, as involved in the buying and selling of articles to be carried from one State to another, may be reached by Congress, under its authority to regulate commerce among the States. The exercise of that authority so as to make trade among the States, in all recognized articles of commerce, absolutely free from unreasonable or illegal restrictions imposed by combinations, is justified by an express grant of power to Congress and would redound to the welfare of the whole country. I am unable to perceive that any such result would imperil the autonomy of the States, especially as that result cannot be attained through the action of any one State.132

The majority, in handing down its decision in the Knight case, had not expressly endorsed Justice Jackson’s earlier view of the Sherman Act. As is the court’s custom, it preferred to decide the case on narrower grounds. But the immediate effect was the same as if the Supreme Court had endorsed that interpretation. As Harlan noted in his dissent, “While the opinion of the court in this case does not declare the act of 1890 to be unconstitutional, it defeats the main object for which it was passed.”133

No one was more conscious of this fact than Henry O. Havemeyer. Testifying before a joint New York legislative committee two years after the Supreme Court’s decision, Havemeyer retorted sharply when the committee’s counsel referred to the American Sugar Refining Company as a monopoly. “Well, fortunately,” Havemeyer said, “the term ‘monopoly’ has been decided by the Supreme Court, and under that decision there can be no monopoly in the sugar business; they have held that there can be no monopoly without restrictions. I do not care to put my personal judgment against that of the Court on this particular word. We do not restrict anybody from going into business; so that we may control ninety-nine per cent and yet not be a monopoly.”134

By its decision in the E. C. Knight case, the Supreme Court had declared that a combination in manufacturing which took the form of a corporation duly chartered by one of the states was beyond the jurisdiction of federal authority. In so doing, it had given this device for consolidating an industry implicit legal sanction, for a corporation duly chartered by one of the states was also beyond the jurisdiction of all other states. In effect, what the Supreme Court had done was to chart the path that, for the next nine years, industrial consolidations could safely follow.

This became even clearer after the Supreme Court’s ruling in the Addyston Pipe & Steel case, for in that decision the Court held that all cartel-type devices were illegal under the Sherman Act.135 This principle of law left consolidation under a single corporation—generally a holding company chartered by the state of New Jersey—as the only legal recourse for businessmen confronted by falling demand and large overhead costs, except the recourse of continuing to absorb heavy losses.

The E. C. Knight case came at a most propitious moment. The American economy was just emerging from the Depression of 1893, while the stock market was at last beginning to recover from the shock it suffered when the National Cordage Company failed. This coincidence of events helped to launch the first and more spectacular phase of the American Corporate Revolution; it was a time marked by consolidations in one major industry after another and lasted until the so-called Rich Man’s Panic of 1907. The unprecedented wave of merger activity, which has never since been equaled, was to radically transform the rest of American industry in much the same way that the sugar refining industry had already been transformed. And the Supreme Court’s decisions in the E. C. Knight and Addyston Pipe & Steel cases, together with the earlier state-court rulings in regard to trusts proper, established the legal milieu in which that revolution would be carried out.136

In periods of peak demand, as represented by curve D1, quantity Q1 was supplied to the market at price P1 Of this quantity, Qa represented the amount supplied by the independent refineries and Q1—Qa the amount supplied by the members of the trust. When, during a period of slackening sales the demand curve shifted to D2, the price necessarily fell to P2 if the trust was to continue producing at full capacity. Rather than have this happen, the trust preferred to reduce its output to Q2–Qa, thus enabling the price to remain at P1. At the same time, the independent refineries continued to produce Qa as before. Because of the change that had taken place in its cost curve (see pp. 110ff. above), the trust was able to produce Q2–Qa at the same, or perhaps even lower, average variable costs that were required for production of Q1–Qa.

1 New York Times, February 7, 1888.

2 William W. Cordray, “Claus Spreckels of California,” p. 90.

3 See pp. 140–41 above.

4 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 3134, 3546. Oxnard had been idle since the closing of his own refinery soon after the trust’s formation.

5 New York Times, August 9, 1888. It was usually possible to obtain raw sugar from the Dutch East Indies within six weeks.

6 Willett & Gray’s Weekly Statistical Sugar Trade Journal, February 20, 1890.

7 Cordray, “Claus Spreckels of California,” p. 83. The custom was for the Hawaiian sugar growers to contract to sell their crop for three years at a time. Traditional hostility to Spreckels also explains why the trust was able to take over the major portion of the Hawaiian sugar crop. See pp. 90ff., 251–53, and 268–71.

8 New York Times, February 21, 1888.

9 U.S. House Committee on Manufactures, Report on Trusts, p. 181. Later, when the refinery was completed, Spreckels explained: “It was a move I had to make, and since I made it I am afraid of no man, company or association in the refining business. Before I had it, opposition was at work on me at both ends of the line, as it were, in the East and West, but as matters now are I am better prepared than ever to take care of myself” (New York Times, April 25, 1889).

10 New York Times, March 5, 1888.

11 U.S. House Committee on Manufactures, Report on Trusts, pp. 180ff.

12 New York Times, March 24 and 27, 1888.

13 Ibid., March 5, 1888.

14 Ibid., March 31, 1888.

15 Ibid., March 5 and 7 and May 22, 1888; Lexow committee investigation, 1897, p. 403.

16 New York Times, May 22, 1888, and December 10, 1889.

17 Ibid., September 8, 1889.

18 Ibid., December 10, 1889.

19 Ibid., November 28, 1889.

20 Ibid., December 10, 1889, and February 12, 1890.

21 Ibid., October 20 and November 24, 1889.

22 Ibid., February 12, 1890.

23 Calculations similar to these were spelled out in the March 15, 1888, issue of Willett & Gray’s Weekly Statistical Sugar Trade Journal. The only difference is that the Willett & Gray calculations were based on the national market instead of on the eastern market alone.

24 See Appendix D of this volume.

25 Willett & Gray’s Weekly Statistical Sugar Trade Journal (Supplement), November 3, 1890.

26 Ibid.

27 To a certain extent, by closing down the marginal refineries and by taking into account the capacity of the independent firms, the trust had already adjusted its capacity to the expected market.

28 This situation is depicted in the following diagram:

29 Willett & Gray’s Weekly Statistical Sugar Trade Journal, August 15, 1889.

30 Ibid., February 9, 1888.

31 Ibid., February 2, 1888.

32 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 6324–25; United States v. E. C. Knight et al.: Brief for the United States, pp. 20–21.

33 New York Times, June 9, 1888.

34 U.S. Industrial Commission, Reports, 1, pt. 2: 108.

35 Willett & Gray’s Weekly Statistical Sugar Trade Journal, January 30, 1890.

36 Ibid., February 13, 1890.

37 Ibid., February 20, March 27, and July 31, 1890.

38 Ibid., April 3, 1890. Claus Spreckels, Jr., later complained of refinery machinery being sabotaged and of employees being bribed to disrupt operations (Hardwick committee investigation, 1911, pp. 2220–23, 2353–54). The charges, however, were never substantiated, and such actions would have been out of keeping with Havemeyer’s character. But Spreckels’ complaint illustrates the bitterness of the competition.

39 See Appendix D of this volume.

40 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 6086.

41 United States v. E. C. Knight et al.: Transcript of Record, pp. 126–27.

42 Willett & Gray’s Weekly Statistical Sugar Trade Journal, February 20 and June 12, 1890.

43 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 6324–25.

44 Willett & Gray’s Weekly Statistical Sugar Trade Journal (Supplement), November 3, 1890.

45 The incident was related by Claus Spreckels, Jr., in United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 5978–83.

46 Ibid.

47 See Chapter 4, note 53.

48 New York Times, March 10, 1901.

49 Railway & Corporate Law Journal, 8 (July 12, 1890): 39; New York Times, October 31, 1890.

50 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 5985–86.

51 Ibid.

52 See the testimony of Oxnard, ibid., pp. 3567ff., and the testimony of Spreckles, Jr., ibid., pp. 5986ff.; see also Willett & Gray’s Weekly Statistical Sugar Trade Journal, July 16, 1891.

53 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 6083–84.

54 See, for example, Willett & Gray’s Weekly Statistical Sugar Trade Journal, July 16, 1891. Rumors of the arrangement were published in the New York Times on March 31 and April 1 and 4, 1891, but that newspaper lacked the authoritativeness of Willett & Gray’s Journal, and its rumors had often proved wrong on other occasions.

55 Willett & Gray’s Sugar Trade Journal strongly suspected a working agreement between Spreckels and the American in the East, although it could not be sure. On August 27, 1891, it noted, “Rumors persistently repeated of the sale of the Spreckels, or of its absorption into the American Sugar Refining Company, are beyond the facts, but a working arrangement exists between the two corporations which is satisfactory to each and more advantageous to the American Sugar Refining Company than its ownership might prove to be at the present time.” A week later it cited as proof of the “harmony among refiners” a 1/16-of-a-cent rise in the price of refined sugar despite an anticipated fall in demand. Aside from Willett & Gray’s comments, however, no other journal showed signs of suspecting a working agreement between Spreckels and the American.

56 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 5986.

57 Ibid., pp. 3721–22.

58 Henry Havemeyer to Oxnard, July 13, 1891, reprinted in ibid., pp. 3570–71.

59 Ibid., p. 6004.

60 Ibid., pp. 5992–96.

61 Ibid., p. 6086. Willett & Gray’s Sugar Trade Journal, noting that an oversupply of refined sugar had resulted in soft prices, reported on August 6, 1891, that “the attempt of one or two refiners to dispose of this surplus by a slight underselling of competitors had led suddenly to a general underselling all around, and a collapse of the good and satisfactory situation of the refined market, throwing it into demoralization, with prices at as low a point as they have touched since free sugar came into operation [i.e., since enactment of the McKinley Tariff the year before].” A week later the Journal reported: “One notable fact seems to have been brought out by the recent course of the refined sugar market, and that is, that whenever the Spreckels refinery have [sic] accumulated a large surplus of production, the other Philadelphia refiners must stand aside until it is disposed of at a cut of 1/16ȼ under the market, or else suffer the consequences of a sharp decline in prices. The American Sugar Refining Company therefore appears to be a supporter of the Spreckels Company, although evidently under some peculiar arrangement which is very difficult to explain intelligently.” On several other occasions that fall, the Journal recorded similar price cuttings by the Spreckels refinery (ibid., October 22 and 29 and November 19, 1891).

62 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 5997.

63 Ibid., p. 5999. The break between father and son was actually part of a much larger family conflict arising out of the elder Spreckels’ attempts to dominate and obtain complete obedience from his children. See Cordray, “Claus Spreckels of California,” passim.

64 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 6010.

65 United States v. E. C. Knight et al.: Transcript of Record, p. 161.

66 See, for example, the testimony of Charles C. Harrison in regard to Spreckels’ character as a competitor, ibid., p. 133.

67 Even after the other Philadelphia refiners had sold out to the American, they were not told of the American’s previous interest in the Spreckels firm. Charles C. Harrison, for example, who later testified in the E. C. Knight case, apparently was unaware of that fact (ibid., pp. 121ff). Actually, the information seems not to have been disclosed until the dissolution suit in 1912.

68 Willett & Gray’s Weekly Statistical Sugar Trade Journal, February 20, 1890.

69 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 7444–49.

70 Ibid. This had originally been a molasses factory, but in 1890, when the new sugar tariff made it no longer possible to produce molasses at a profit, the company had switched to the production of sugar, just in time to take advantage of the high prices resulting from the formation of the trust. Like the other sugar firms, however, it had been losing money ever since the completion of the Spreckels refinery in Philadelphia (United States v. E. C. Knight et al.: Transcript of Record, pp. 141–42).

71 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 7444–49.

72 Willett & Gray’s Weekly Statistical Sugar Trade Journal, January 14, 1892; New York Times, January 14, 1892.

73 United States v. E. C. Knight et al.: Transcript of Record, pp. 124–25. Later, during the 1912 dissolution suit, Harrison testified that it was Searles who next approached him (United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 5940–41). Harrison was apparently unaware that he was contradicting his previous testimony. The earlier version has been accepted because it was given when events were much more recent in Harrison’s mind.

74 United States v. E. C. Knight et al.: Transcript of Record, p. 94.

75 Ibid., pp. 124–25.

76 Ibid.

77 Ibid., pp. 131–33.

78 Ibid., p. 125; United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 5942.

79 United States v. E. C. Knight et al.: Transcript of Record, pp. 102, 159–60.

80 Ibid., p. 141; United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 6123–24; Lexow committee investigation, 1897, p. 671.

81 United States v. E. C. Knight et al.: Transcript of Record, p. 161; Lexow committee investigation, 1897, p. 671. The American agreed to turn over $10 million of its own securities for the outstanding stock of the Spreckels company, the latter having a par value of $5 million. Spreckels, as the holder of a 55 per cent interest in the firm, therefore received $5.5 million. The remainder went to Searles and the Havemeyers as owners of the minority interest.

82 United States v. E. C. Knight et al.: Brief for the United States, pp. 14–15; Lexow committee investigation, 1897, p. 671.

83 United States v. E. C. Knight et al.: Transcript of Record, pp. 90–91, 95; United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, pp. 5946–47.

84 United States v. E. C. Knight et al.: Transcript of Record, p. 163; United States v. E. C. Knight et al.: Brief for the United States, pp. 20–21. The Baltimore refinery was subsequently damaged by fire, and although it was rebuilt, it never opened again; see pp. 285–86 below.

85 United States v. E. C. Knight et al.: Brief for the United States, pp. 14–15.

86 See p. 80 above. Interestingly, the Revere, through the brokerage firm of Nash, Spalding & Company, which handled all purchases and sales for it, was the largest minority holder of American Sugar Refining stock. However, the Revere had no influence whatsoever on the American’s management.

87 It was rumored among American Sugar Refining Company employees that Havemeyer himself profited handsomely from the speculation. This information comes from Ernest P. Lorfonfont, of the American’s Legal Department.

88 New York Times, March 13, 1892.

89 Ibid., March 29 and 30, 1892.

90 Quoted in ibid., April 15, 1892.

91 Ibid., April 13, 1892.

92 U.S., Congress, House of Representatives, Congressional Record, 52d Cong., 1st sess., 1892, 23, pt. 4: 3366, 3927–29.

93 Ibid., p. 3928.

94 Hans B. Thorelli, The Federal Anti-Trust Policy, pp. 371–73.

95 Aside from the case against the whiskey trust, the only antitrust actions taken under the Harrison administration prior to March, 1892, were a suit to enjoin a cartel-like arrangement among certain coal mining companies in Kentucky and Tennessee (United States v. Jellico Mountain Coal Co., 43 Fed. Rep. 898; 46 Fed. Rep. 432); a criminal action against a combination of lumber dealers in Wisconsin, Minnesota, Iowa, and Missouri (U.S. v. Nelson et al., 52 Fed. Rep. 646); a criminal action against the American Bobbin, Spool Company (the so-called bobbin trust); and a similar action against the oleomargarine trust. The latter two, like the case against the whiskey trust (see note 96) were never brought to trial. See Albert W. Walker, History of the Sherman Act, pp. 63–72; Thorelli, Federal Anti-Trust Policy, p. 376.

96 Thorelli, Federal Anti-Trust Policy, pp. 376–78. The case against the whiskey trust was eventually thrown out of court because of a faulty indictment. This result reflected not only the haphazard manner in which the case was prepared but also the temper of the courts at the time toward antitrust prosecutions.

97 Miller to Frank D. Allen, February 11, 1892, in Department of Justice (JD) File No. 8247, quoted in Thorelli, Federal Anti-Trust Policy, p. 375.

98 Matilda Gresham, Life of Walter Q. Gresham, 2:651; Ingham to the Attorney General, March 27, 1893, in JD File No. 8247.

99 United States v. E. C. Knight et al.: Brief for the United States, pp. 3–4; House of Representatives, Congressional Record, 52d Cong., 1st sess., 23, pt. 4:3926. The resolution was actually passed two days later on May 4.

100 New York Times, July 19 and November 25 and 26, 1892. There is some evidence that political influence may have been brought to bear to prevent the case from proceeding further. On May 19, 1892, Henry Havemeyer wrote to Charles C. Harrison: “I hear of nothing adverse to our interest from Washington, but am not easy in my mind on the subject. I was informed that if the Pennsylvania road and Mr. Johnson were to use their influence, Mr. McPherson would consider their version of it very thoroughly.” John R. McPherson, the senior senator from New Jersey and one of the most influential Democrats in Congress, was later one of those who made a substantial profit on speculation in American Sugar Refining stock as a result of inside information (see p. 184 below).

101 New York Times, July 29 and August 2 and 6, 1892.

102 Ingham to the Attorney General, March 27, 1893; United States v. E. C. Knight et al.: Transcript of Record, p. 155.

103 Albert E. Bergh, ed., Addresses, State Papers and Letters of Grover Cleveland, p. 350.

104 Thorelli, Federal Anti-Trust Policy, p. 383.

105 Ibid.; Henry James, Richard Olney and His Public Service; Allan Nevins, Grover Cleveland, pp. 512–13.

106 U.S., Attorney General, Annual Report, 1893, p. xxvii.

107 In re Greene, 52 Fed. Rep. 104; Thorelli, Federal Anti-Trust Policy, p. 385.

108 U.S., Attorney General, Annual Report, 1893, p. xxvii.

109 New York Times, January 20, 1894.

110 Ibid., January 31, 1894.

111 United States v. E. C. Knight et al., 60 Fed. Rep. 309 (1894).

112 Ibid., p. 310.

113 New York Times, February 1, 1894.

114 United States v. E. C. Knight et al., 60 Fed. Rep. 934 (1894).

115 The Philadelphia Press article was reprinted in U.S. Senate Committee to Investigate Attempts at Bribery, Report, pp. 77–84.

116 Ibid. The supposed meeting between Cleveland and representatives of the American Sugar Refining Company, for example, was clearly shown never to have taken place.

117 See the testimony of Searles, ibid., p. 369. In lieu of tariff protection, Louisiana’s sugar-cane growers had been made eligible, under the McKinley Tariff of 1890, to receive bounties designed to offset their higher costs in comparison with Cuban sugar growers. Since the Louisiana producers accounted for less than a third of the sugar consumed in the United States, this, from a consumer’s point of view, was a much less costly way of providing the Louisiana sugar growers with protection. The bounties, however, had been enacted over the opposition of the Louisianians, who considered them a much less certain form of protection than a tariff.

118 Nevins, Grover Cleveland, pp. 572–76; speeches of Senators Newton C. Blanchard and Donelson Coffery, Democrats of Louisiana, U.S., Congress, Senate, Congressional Record, 53d Cong., 2d sess., 1894, 26, pt. 8:7745–48, 7823–27.

119 See the testimony of Searles and Havemeyer, U.S. Senate Committee to Investigate Attempts at Bribery, Report, pp. 311–54, 357–66, 368–404.

120 Speech of Senator Coffery, Senate, Congressional Record, 53d Cong., 2d sess., 1894, 26, pt. 8: 7824–25; U.S. Senate Committee to Investigate Attempts at Bribery, Report, pp. 378–79.

121 U.S. Senate Committee to Investigate Attempts at Bribery, Report, pp. 80–81.

122 Ibid., especially the testimony of Edwards, pp. 85–113.

123 Speeches of Senators Blanchard and Coffery, Senate, Congressional Record, 53d Cong., 2d sess., 1894, 26, pt. 8:7745–48, 7823–27.

124 See pp. 55ff.

125 United States v. American Sugar Refining Co. et al., pretrial testimony, 1912, p. 195; for the specific statutes, see p. 97, note 11, above.

126 U.S. Senate Committee to Investigate Attempts at Bribery, Report, passim.

127 See the resolution passed by the U.S. Senate, May 18, 1894, in JD File No. 8247.

128 United States v. E. C. Knight et al., 156 U.S. 12 (1895).

129 See William Howard Taft, The Anti-Trust Law and the Supreme Court, p. 59; Nevins, Grover Cleveland, p. 722; Henry D. Lloyd, letter to the editor, New York Post, March 3, 1903, quoted in Thorelli, Federal Anti-Trust Policy, p. 387.

130 In its brief the government did seek to deal with the question of whether sugar was an article of interstate commerce by pointing out that the nature of the business required the movement of sixty pounds of sugar every second in interstate commerce “to satisfy the wants of consumers within those States which do not produce it.” The brief then added “that inasmuch as refined sugar necessarily looks mainly to interstate commerce for means to enable it to fulfill its function as necessary American food, it is—so long as upon the market and undistributed among the various States—a subject-matter of interstate commerce so far as to render its monopoly at any time in part a monopoly thereof” (United States v. E. C. Knight et al.: Brief for the United States, pp. 3–4). The question of how diligently the case was prosecuted nonetheless remains an open one. Olney, for example, seemed relieved that the Supreme Court had ruled as it did. “You will observe,” he wrote to a friend, “that the government has been defeated in the Supreme Court on the trust question. I always supposed it would be, and have taken the responsibility of not prosecuting under a law I believed to be no good—much to the rage of the New York World” (Olney to A.M.S., Olney Papers, quoted in Nevins, Grover Cleveland, p. 671). Olney subsequently used what influence he had in the Cleveland administration to persuade the president that the Sherman Act was unenforceable (Nevins, Grover Cleveland, p. 723).

131 Charles Warren, The Supreme Court in United States History, 2: passim.

132 United States v. E. C. Knight et al., 156 U.S. 37 (1895).

133 Ibid., pp. 24, 42.

134 Lexow committee investigation, 1897, p. 115.

135 United States v. Addyston Pipe & Steel Co., 175 U.S. 211 (1899). In this decision the Supreme Court held that a market-sharing agreement among manufacturers of sanitary pipes was a violation of the Sherman Act.

136 The important role played by the courts in determining the direction in which the American economic system has evolved was stressed by John R. Commons in his book Legal Foundations of Capitalism.

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