An Outline of the Defects of the Sherman Law


An Outline of the Defects of the Sherman Law


Graham, Samuel Jordan, 1859-1951




1914 January 6


Samuel J. Graham outlines a plan for arbitration commission.


Wilson Papers, Library of Congress, Library of Congress, Washington, District of Columbia


Wilson, Woodrow, 1856-1924--Correspondence




The DEFECTS of the SHERMAN LAW are chiefly two:

1. Uncertainty regarding its meaning and application.

2. Inadequacy of its remedial and penalty provisions.
These defects may be remedied in two ways:

A. In a COMPREHENSIVE way; or,

Take all the bills introduced and, by careful comparison and elimination, frame a law that would embody the valuable features proposed and such additional features as might be needed to give the country a comprehensive and intelligible commercial code, with a proper tribunal or commission to administer it.
If time permitted, this would be the better way, but it is not the quick way to give the country relief from the uncertainties under which industry and commerce are laboring.THE QUICK WAY

.(A) Strengthen the remedial and penalty features of the Sherman Law, and

(B) Provide a COMMISSION to which men, anxious to obey the law, may appeal for prompt interpretations of the law.
These two steps would practically remove the debatable area about the Sherman Law by settling all questions when enterprises are initiated, instead of disturbing or destroying them when in successful operation.
In short, the Commission would answer authoritatively the thousands of inquiries now addressed by anxious and lawabiding men to the Department of Justice, and which the Department has no authority to answer. The Commission might consist of seven men appointed by the President for terms of nine years two or three to go out at the end of each three years.
The President should be expressly authorized, in his discretion, to appoint at least four laymen members. A commission of four laymen and three lawyers would achieve far better results than a commission composed entirely of lawyers.
With the commission should be filed

:1. Articles, plans and complete details of operations of associations and combinations of ALL CLASSES, laborers, farmers, employers, capitalists; and representatives of commission should have free access to meetings of same.

2. All facts regarding purchase or proposed purchase or absorption of a competitors plant or business, or any interest therein; and commission should have power to inquire into same.With all facts before it, the Commission would be in a position to detect immediately the development of

(A) COMBINATIONS in restraint of trade;

(B) MONOPOLIES,and check same by the exercise of the following powers:

(1) Power to approve and disapprove plans of combinations or associations, and projects of purchase or absorption.

(2) Power to forbid any act or practice not in accord with the letter and the spirit of the law.

(3) Power to order the dissolution of any association or combination acting contrary to law.

(4) Power to forbid the making, or order the rescission of, any agreement in furtherance of a combination in restraint of trade or a monopoly

.(5) Power to call upon the Department of Justice to institute proper proceedings against recalcitrant parties, and, in this connection, a provision of law casting the burden of proof upon any party who contests in court any finding of the Commission.
Such a commission would relieve the mind of every man who honestly desires to obey the law; it would provide a way of learning at the outset what he could and could not do; at the same time, it would leave the courts open to him if he thought the Commission wrong it its rulings, but the burden of proof would rest on him.
There can be no doubt in the minds of farseeing men that a Commission of some kind is coming. The Sherman Law cannot be administered without a commission similar to the InterState Commerce Commission. The courts can enforce the Sherman Law as a destructive, a penal statute, but they cannot administer it as a constructive law; they cannot help men who want to obey it, and they cannot handle the properties of those who have not obeyed it witness the inadequate attempts already made where the courts have tried to reorganize properties the law compelled them to segregate.

The Sherman Law should be made more drastic in at least two respects and these two would probably suffice.1. Make the finding of illegality by a court conclusive in all other proceedings and especially as between the illegal combination or monopoly and any party damaged, so that such third party would be obliged simply to prove his damages and recover threefold under the existing provision of the Sherman Law.2. Make fines proportionate to the magnitude of the business and the number of transactions involved.
If there are to be prison sentences they should attach to only certain clearly defined acts of a highly reprehensible character. A prison sentence should not attach to any act, the criminal character of which is not clear in public opinion. The fatal defect of the penal section of the Sherman Law is, it is indefinite and may cover acts and agreements not commonly considered either criminal or reprehensible, when done by individuals and small concerns. Juries do not like to convict men for doing what they, the jurymen, have always done in the conduct of their own business. Courts do not like to convict men for doing what every judge knows are timehonored practices of cutthroat competition.
Times are changing and many of these various practices must go, but if they are to be punished as criminal, each must be so plainly defined there can be no debate about what the law means. To make all agreements in restraint of trade criminal is to abandon to the courts the real task of making the law, since the law on its face is virtually meaningless; in attempting to cover everything it covers nothing except in so far as the courts in case after case, over many years, define what acts are in restraint of trade.
The bills already introduced already recognize this fundamental defect in the law, but instead of remedying it by limiting its application to a few acts, the reprehensible character of which is recognized generally, they try to enumerate all the practices commonly charged against large corporations, quite overlooking the fact that most of the acts enumerated are everyday practices in the conduct of smaller business. These proposed laws, by attempting too much, would accomplish nothing except start the country on another twenty years of uncertainty and litigation.Unless Congress is prepared to attack the prioblem cooly and without prejudice and from a comprehensive code, the best thing to do at once is to do the two things suggested:A. Establish a tribunal to administer the Sherman Law;B. Extend the remedial and penal features of the law.

To completely fulfill the pledges of the Democratic platform, three provisions may be added to the Sherman Law.1. Against interlocking directors.2. Against overcapitalization.3. Against discrimination in prices to crush competitors.But the first two of these provisions should be part of a Federal Incorporation law.
The third should be part of a comprehensive Commercial Code. Unless very carefully drawn this third provisions may be used to defeat the purpose of the Sherman Law, the very spirit of which is, unfettered freedom in making such prices as the individual pleases.As names for the proposed tribunal the following occurred to me:

Interstate Trade Arbitration Board.
Interstate Trade Submission Board.
Interstate Trade Adjustment Commission.

Original Format





Graham, Samuel Jordan, 1859-1951, “An Outline of the Defects of the Sherman Law,” 1914 January 6, WWP18270, First Year Wilson Papers, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.