The Northern Securities Company was a short-lived
American railroad trust formed in 1901 by
E. H. Harriman, James J. Hill, J.P. Morgan
and their associates. The company controlled
the Northern Pacific Railway; Great Northern
Railway; Chicago, Burlington and Quincy Railroad;
and other associated lines. It was capitalized
at $400 million, and Hill served as president.
The company was sued in 1902 under the Sherman
Antitrust Act of 1890 by the Justice Department
under President Theodore Roosevelt, one of
the first anti-trust cases filed against corporate
interests instead of labor. The government
won its case, and the company was dissolved,
so that the three railroads again operated
independently.Hill was the president of the
Great Northern Railway and Harriman controlled
the Union Pacific Railroad, two of the largest
railroads in the U.S. Both sought control
of the Burlington to connect their roads to
the vital railroad hub of Chicago, Illinois.
Hill, who also had a minority interest in
the Northern Pacific Railway, outbid Harriman
for the Burlington, by agreeing to Burlington
President Charles Elliott Perkins's $200-a-share
price.
Together, the Great Northern and the Northern
Pacific assumed control of nearly 100 percent
of the Burlington's outstanding stock. Knowing
that the Northern Pacific controlled almost
49.3 percent of the Burlington's stock, Harriman
launched a stock raid against the Northern
Pacific. Control of the Northern Pacific would
allow him to appoint directors to the Burlington,
which could then be forced to treat Harriman's
Union Pacific favorably in business matters.
Harriman's stock raid in May 1901 led to the
"Northern Pacific Corner". Speculators had
sold shares that they did not own, and were
now desperate to purchase shares at any price-some
shares reportedly sold at $1,000. Hill, working
with J.P. Morgan, took majority control of
the Northern Pacific despite Harriman's best
efforts.
This speculation resonated throughout the
stock market and the country as a whole. The
two men, their backers, and associates agreed
to settle their differences and eliminate
ruinous competition through a monopolistic
combination. The Northern Securities Company
was formed by Hill to control the stock of
his major railroad properties. Some of Harriman's
directors were appointed as representatives
for his holdings of Northern Pacific shares.
A public outcry over the new company made
its way throughout the country, and both state
and federal officials prepared to file litigation.
On February 19, 1902, the United States Department
of Justice announced plans to file a suit
against the company. When approached by J.
P. Morgan to settle the issue in private,
President Roosevelt refused; he later remarked,
"Mr. Morgan could not help regarding me as
a big rival operator who either intended to
ruin all his interests or could be induced
to come to an agreement to ruin none." Although
Roosevelt still believed that trusts were
not always bad for society, he could not bear
to feel treated as just another rival operator.
The suit continued.The Justice Department
won the suit and the company was dissolved
according to the 1904 Supreme Court ruling
in Northern Securities Co. v. United States
case, decided five to four. The companies
were convicted under the Sherman Antitrust
Act. In the following seven years, 44 other
Federal antitrust cases turned out rulings
similar to the Northern Securities case. Included
in these break-ups were Harriman's own holdings
of the Union Pacific and Southern Pacific
railroads.
The Northern Securities case was one of the
earliest antitrust cases and provided important
legal precedents for many later cases, including
that against Major League Baseball.
In 1955 the Northern Pacific and Great Northern
renewed talks of merging. The Supreme Court
approved the merger, and as a result, the
Great Northern, Northern Pacific, Chicago
Burlington & Quincy, and the Spokane, Portland
and Seattle Railway merged on March 2, 1970,
to form the Burlington Northern Railroad.
== Notes and references ==
== 
Further reading ==
Brown, R. Blake, and Bruce A. Kimball. "When
Holmes Borrowed from Langdell: The" Ultra
Legal" Formalism and Public Policy of Northern
Securities (1904)." The American Journal of
Legal History (2001): 278-321. in JSTOR
Bryant, Keith L., Jr., Editor. Encyclopedia
of American Business History and Biography,
Railroads in the Twentieth Century. New York:
Facts on File, 1990.
Frey, Robert L., Editor. Encyclopedia of American
Business History and Biography, Railroads
in the Nineteenth Century. New York: Facts
on File, 1988.
Larry Haeg. Harriman vs. Hill: Wall Street's
Great Railroad War (2013)
Hidy, Ralph W., et al. The Great Northern
Railway, A History. (Boston: Harvard Business
School Press, 1988)
Klein, Maury. The Life and Legend of E.H.
Harriman. (University of North Carolina Press,
2000)
Martin, Albro. James J. Hill and the Opening
of the Northwest. (Oxford University Press,
1976)
Meyer, Balthasar Henry (1906). Bulletin of
the University of Wisconsin, No. 142: History
of the Northern Securities Case. Madison:
University of Wisconsin. (other link).
Prager, Robin A. "The effects of horizontal
mergers on competition: The case of the Northern
Securities Company." The RAND Journal of Economics
(1992): 123-133.
Randolph, Carman F. "Considerations on the
State Corporation in Federal and Interstate
Relations. The Northern Securities Cases."
Columbia Law Review 3.3 (1903): 168-197. in
JSTOR
Stigler, George J. "Monopoly and oligopoly
by merger." American Economic Review (1950):
23-34. in JSTOR
=== Primary sources ===
The Northern Securities Decision [1] Northern
Securities Co. v. United States at Cornell
Law School's Supreme Court Collection.
