This is a good example of the hybridization involved in taking the parameters of a social science paper and applying them to a history or non-social science paper. à
The U.S. Supreme Court and its Impact on the Rise of
Corporate Public Relations: 1873-1904
“The public be . What does the public care for the railroads except to get as much out of them for as small a consideration as possible. I don’t take any stock in this silly nonsense about working for anybody’s good, but our own because we are not.”
William H. Vanderbilt, railroad mogul (1882)[i]
“Corporations owe their success and even their existence to the good-will of the public; and where their views seem to clash, the corporation must either persuade the public to its view, or alter its own.”
Walter Gifford, president, AT&T (1926)[ii]
INTROS AND SUMMARIZES àAlthough William Vanderbilt always denied having used the phrase “the public be damned,” it seemed to epitomize the attitude of corporate leaders in the Gilded Age.[iii] Populists and progressives used it as a means of fostering public dissatisfaction with businesses and as a rallying cry for legislative reforms. As evidenced by Walter Gifford’s statement, forty-four years later, those progressive reforms helped facilitate a shift in the way businesses and the public viewed each other, a shift that in part led to the advent of public relations as a business policy.
Some historians have credited enterprising journalists known as muckrakers as the catalyst for the rise of public relations in the Progressive Era.[iv] The muckrakers were in their heyday, publishing exposés of big business, from approximately 1901 to 1910.[v] But clearly negative articles and books alone would not cause businessmen to suddenly feel a need to court public opinion. Farmers in the 1880s and 1890s used the press to rail against railroads and others, but that did not seem to cause a widespread change in behavior on the part of the railroads.[vi] Others have suggested that “bigness” was the factor that made public relations a necessity.[vii] Obviously corporate size was instrumental in the reformers’ push for regulation, but size alone does not account for the change in corporate policy. Karen Miller Russell and Carl Bishop have suggested that President Theodore Roosevelt and his call for greater corporate publicity, meaning essentially greater transparency, along with his trust-busting campaign in the early 1900s, may have spurred businesses to action.[viii] That suggestion has merit and needs to be further explored.
WHAT MAKES HER STUDY UNIQUE àTraditionally, public relations historians have tended to focus on individuals such as Ivy Lee and Edward Bernays and what they did rather than examining the context within which those men operated.[ix] EXPLAINS WHAT THIS PAPER DOESàThis paper considers the legal milieu business leaders found themselves in at the end of the nineteenth and beginning of the twentieth centuries for clues to why and how public relations developed as a business policy.
EXPLAINS CONTEXT àThis paper assumes that corporations engage in public relations, in part, for social legitimacy and that they seek to gain or maintain legitimacy when they believe that publics have power over them.[x] That is, they believe public opinion has implications for how they do business. Consumers have always had power over a company because they could take their business elsewhere. But with the industrial revolution came the weakening of the invisible hand of the market. As corporations grew in size, the distance—physical and psychological—between the business owners and the customers also grew. By the 1870s, customers had very little power, social, political, or economic, over corporations, which is, perhaps, why “the public be damned” statement resonated so strongly with people at the time. Concerned about labor conditions and the treatment of consumers, reformers began pushing first state legislatures and then the federal government toward greater regulation of businesses.[xi] To be successful in getting those laws passed and accepted by the courts as constitutional, reformers had to persuade legislators and justices that businesses were no longer strictly private enterprises, but served a public interest because of their size and reach.
But why did businesses wait until almost the beginning of the twentieth century to take their story to the public? Why did they not try to influence public opinion in the 1880s and 1890s when laws increasingly impacted their operations?[xii] While there were no doubt many reasons, it is argued here that for the formative decades of the nineteenth century (1880 to 1900), conservative justices on the Supreme Court helped protect businesses from the government and hence from the public.[xiii] SUMMARIZES HER RESULTS àIt was when the conservative bloc on the Court lost the majority and Roosevelt stepped up pressure on businesses that corporations became more motivated to court public opinion through public relations activities.
Literature Review NOTICE HOW SHE BRIEFLY SUMMARIZES THE LITERATURE RELATED TO HER SUBJECT à
Historians who have explored the origins of corporate public relations tend to focus on the Progressive Era because the first public relations agency, the Publicity Bureau, opened in 1900, although the focus is on individual practitioners who followed it rather than the Bureau itself. Thus, Ray E. Hiebert, Ivy Lee’s biographer, credited Lee’s Declaration of Principles in 1904 as the “starting point of modern public relations.”[xiv] Eric Goldman in his book, Two-Way Street, indicated the same thing.[xv] Edward Bernays fostered and encouraged this approach because it fit with his evolutionary development theory. Under Bernays’ approach, he was the true practitioner while Lee was but a precursor. That evolutionary approach has been perpetuated by PR theory that drew on the approach for its basis.[xvi]
Robert E. Brown has argued that public relations theory is actually a-historical because it assumes an evolutionary history that is not factually accurate. He called for greater emphasis on cultural aspects of the development of corporate public relations.[xvii] Timothy Vos suggested that the historical explanations for the rise of public relations tend to be functional; they ignore the institutional and cultural factors that led to its development in a particular way at a particular time.[xviii]
Business historians Alan Raucher, Richard Tedlow, and Roland Marchand have done a better job than public relations historians of documenting the origins of corporate public relations. These scholars suggest that size, changing management approaches, higher literacy rates, a mass media, reforming politicians, and self-preservation all played a role in the rise of corporate public relations.[xix]
Marvin Olasky, of the public relations historians, has taken an alternative view to the rise of corporate public relations.[xx] Rather than furthering democracy by providing corporations with a voice, as some claim, Olasky argued that public relations is actually anti-democratic because corporations used it as tool to maintain their monopolies. The goal was not to develop relationships with or to better serve the public, but to hoodwink the public into accepting monopolies as good for society.
THE HOLE HER PAPER IS GOING TO FILL àMissing from the histories to date is a consideration of the legal environment in which the corporate leaders found themselves prior to the Progressive Era. There is no question that the Progressive Era produced a significant and unprecedented spate of regulatory reforms affecting business operations. Those alone should have been an impetus to the development of corporate public relations because they indicated public opinion was in favor of government regulation of business. But business regulation was not necessarily a new phenomenon. What was new were the range and number of the reforms. WHY HER PAPER IS IMPORTANT àThus it is important to look at the period prior to the Progressive Era for clues to why public relations might have developed when it did.
Research Question and Method RESEARCH QUESTION COMES OUT OF REVIEW OF LIT à
As indicated, public relations histories tend to focus on the Progressive Era. But the seeds for the field’s development were clearly planted before 1900. WHY HER PAPER IS IMPORTANT àThis paper seeks to further the process of understanding the antecedents to corporate public relations by examining the legal context in the Gilded Age.[xxi] It explores the question: How did the Supreme Court cases involving businesses potentially affect the development of corporate public relations, especially the timing of its growth? This question is important because, as Brown points out, public relations theory is not historically accurate, in part because it lacks context. The linear, evolutionary approach posited by Bernays and picked up by later theorists suggests it was the individual practitioners themselves who developed different aspects of the field, with no consideration of the cultural factors that may have played a role in how and why the profession developed as it did. Examining the legal context prior to and during the field’s rapid growth will provide greater understanding of the history of the field, and as Miller Russell and Bishop suggest, a stronger foundation for theory development.
HERE SHE BEGINS EXPLAINING HERE METHOD – WHAT SHE DID TO ANSWER QUESTION àThis paper uses traditional legal and historical methods. It examines the Supreme Court cases affecting big business under the Commerce Clause of the U.S. Constitution and those involving the states’ so-called police powers, which enable states to legislate in the public interest to protect the welfare, safety, and health of their citizens. The study begins in 1873, which is the beginning of the case law that directly affects big business and corresponds roughly to the beginning of the Second Industrial Revolution, which produced the Gilded Age. It ends in 1904 with the Court’s decision to dissolve the Northern Securities Company, a case that epitomizes the shift in attitude toward private businesses. ß EXPLAINS THE TIME PARAMETERS AND WHY A total of twenty-seven cases were found and analyzed for their potential impact on business policy and corporate public relations. ßSHE GIVES THE “N” – THIS COULD VARY WITH SUBJECT
DISCUSSES IMPORTANCE OF WHAT SHE IS STUDYING àThe Supreme Court cases are worthy of study because they are never decided in a vacuum.[xxii] The cases themselves reflect the important societal tensions of the day, and the justices bring their own ideological and philosophical background to the law. All justices are different, but it is the collection of the particular justices that gives the Court its own personality at any given time. While some legal historians have criticized the Court in the Gilded Age with being pro-business and anti-labor, that is, as one scholar put it, an “overdrawn” portrait.[xxiii] The justices were faced with unprecedented attempts to regulate business at the state and federal level. In fact, Congress had never done so until this period. “The legal categories of the past seemed—and were—inadequate to the legal issues of their present.”[xxiv] And those legal issues were a direct result of industrialization and the increasing power of large corporations.
HERE SHE BEGINS A SERIES OF SUBHEADS THAT PARSE THE HISTORY SHE IS LOOKING AT INTO DISTINCT CATEGORIES – SHE USES THESE TO DRIVE HER NARRATIVE AND TO OUTLINE/ORGANIZE HER WRITING à
The Gilded Age
Historians of technology refer to the period under consideration as the second industrial revolution.[xxv] What distinguished it from the first were in part the economies of scale and the corresponding widespread nature of the innovations. The early technological advances of the first industrial revolution tended to be localized and expensive. Later innovations improved on the early efforts, which meant wider and cheaper distribution of technology. For example, it was not until 1850 that petroleum was considered useful as a fuel source for lamps, and drilling for oil would not be a practical undertaking for another ten years. The first oil well produced 25 barrels a day, which sold for $25 per barrel. A year later, 3,000 to 4,000 barrels were being produced dialy, and the price had dropped to 10 cents a barrel.[xxvi] Steel followed a similar path with advances in refining that produced cheap steel coming after 1856. Electricity also expanded dramatically in the 1870s. As legal historian James O’Hara put it, “The United States was industrialized almost overnight.”[xxvii]
Such technological innovations required huge outlays of capital, which was raised on the national and international financial markets. Monopolies were a natural outgrowth of the technology because single businesses could not supply the coordination necessary to promote systems such as railroads, telegraphy, and electricity.[xxviii]
Governments at the state and federal levels were increasingly called upon from 1870 on to regulate these monopolies to ensure standardization of service and to protect the public because it appeared the free market no longer could. But the idea of legislating private businesses clashed with the conservative ideology of many business leaders. Conservatives at the time believed in limited government, social Darwinism, and laissez-faire capitalism, which all worked together to protect big business.[xxix] No doubt many businessmen would have agreed with William D. Guthrie’s comments in the Harvard Law Review in 1897: “If not checked, the worst forms of socialism will breed under the superstition, so rampant, that legislation is a sovereign cure-all for social ills. The danger now to be dreaded and guarded against is the despotism of the majority, wielding and abusing the power of legislation.”[xxx] This battle between conservatism and the growing populism especially in the 1880s and 1890s played itself out in part in the court of law.
The Early Period: 1873 to 1886
The concept of limited government undergirds the provisions of the Constitution. The Framers believed that individuals had a right to own and acquire private property, including reaping any benefits from the fruits of their labor, and that they should be free of government interference in the enjoyment of those rights. At the same time, however, states had the power, commonly referred to as the police power, to legislate to protect the public health, safety, and welfare of their citizens. Ensuring that states did not abuse their power was the job of the Supreme Court.[xxxi]
And by the 1870s, some business owners were concerned that states were doing just that with the growing extent and volume of social legislation. The 1873 Slaughter-House Cases were an attempt by businesses to fight back.[xxxii] The cases arose after Louisiana prohibited livestock yards and slaughterhouses within the city of New Orleans. In their place, the state created the Crescent City Live-Stock Landing and Slaughter-House Company across the Mississippi River. Butchers in the city were required to use only that slaughterhouse to kill animals and were charged a fee for the privilege of doing so. The state said the law was necessary because the slaughterhouses in the city had become a public health nuisance, a direct cause of the cholera and yellow fever outbreaks that wracked the city each summer.[xxxiii] But some of the New Orleans butchers sued the state on the basis that they had been deprived of the right to ply their trade, a right they argued they were guaranteed under the due process clause of the Fourteenth Amendment of the Constitution.[xxxiv]
After the Civil War, the Thirteenth and Fourteenth Amendments were added to protect the citizenship rights of former slaves from the legislatures of Southern states. The Fourteenth Amendment specifically provided that no state “shall deprive any person of life, liberty, or property without due process of law.” The legal phrase “due process” traditionally applied to procedural matters; that is, “the means by which policies are imposed.”[xxxv] For example, individuals are denied procedural due process rights when they were not permitted recourse to courts, to a fair trial, or to the appeals process.
But the kind of due process the butchers’ attorney was referring to, substantive due process, “serves to limit the kinds of public policies government can pursue. . . . [it] focuses on the ends” of policies.[xxxvi] The attorney argued that by depriving these butchers of their right to practice their chosen profession, the state of Louisiana had violated their substantive due process rights. The attorney, thus, not only stretched the reach of the Fourteenth Amendment from former slaves to business owners, but expanded the definition of due process to include substantive rights.
Although the Supreme Court in the Slaughter-House Cases held that the Fourteenth Amendment had no purpose other than to protect the rights of former slaves and that to hold otherwise would violate the intent of the amendment, it was a five-four decision. The dissenters supported the idea of substantive due process. Justice Stephen J. Field noted that the Amendment protected certain rights and privileges of all citizens from abridgment by state legislation. “Clearly among these [rights] must be placed the right to pursue a lawful employment in a lawful manner,” Field wrote.[xxxvii] Field, who was a maverick and never shied from controversy, believed strongly in individualism.[xxxviii] Thus, the fact that the right to pursue one’s trade is nowhere in the Constitution did not seem to bother him. Justice Bradley went even further in his dissent, setting out the substantive due process argument. “In my view, a law which prohibits a large class of citizens from adopting a lawful employment, . . . does deprive them of liberty as well as property, without due process of law,” he wrote.[xxxix] The dissenting opinions heartened corporate attorneys who continued to argue substantive due process when states attempted to regulate businesses.
And as corporations became larger and larger, more states began imposing regulation on them. Naturally, as these large systems and corporations developed, small businesses suffered, finding themselves unable to compete. Farmers were especially vocal about what they perceived to be price gouging by railroads and grain elevators. Although historians suggest that a drought and a worldwide depression in the price of wheat contributed to farmers’ problems, railroads were an easy target.[xl] Political protests caused five Midwestern states to enact Granger Laws, which established maximum rate schedules for railroads and grain elevators. Illinois was one such state, and its law fixed the rates for elevators in Chicago, which was the Midwest’s largest rail terminus. Nine elevator companies controlled the grain activity in and out of the city. Not surprisingly, the owners of the elevators complained to the Supreme Court in Munn v. Illinois (1876) that the state had violated their substantive due process right to engage in a lawful business contrary to the Fourteenth Amendment, just as the butchers had three years earlier.[xli]
The Court, in a seven-two decision, sidestepped the substantive due process argument, holding instead that the grain warehouses in question were “affected with a public interest” and therefore could be regulated by the state under its police powers. At common law, government could regulate the rates charged by otherwise private businesses that were seen as serving the public at large. Examples were common carriers, like ferries, and certain other types of businesses, such as inns.
It was to this common law tradition that the Court turned to uphold the state law. “When, . . ., one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created,” wrote Chief Justice Waite for the majority.[xlii] Clearly, Waite continued, when the business is as large and as extensive as this one, involving seven or eight states in the West and four or five states on the East coast, it can be said to be a virtual monopoly and affected with a public interest.
Justice Field again dissented. “There is no magic in the language, . . . which can change a private business into a public one,” he wrote.[xliii] Field took issue with the majority’s interpretation of the common law. When the law talked about private property being affected with a public interest such that it ceased to be private, it was referring to “property dedicated by the owner to public uses, or to property the use of which was granted by the government or in connection with which special privileges were conferred,” he wrote.[xliv] If the majority were correct, Field continued, then no business would be safe. All commercial endeavors would be held at the mercy of legislatures, and presumably the public, because “there is hardly an enterprise or business engaging the attention and labor of any considerable portion of the community, in which the public has not an interest in the sense in which that term is used by the court in its opinion.”[xlv]
Field went on to explain how the Fourteenth Amendment applied to the case at hand. “Liberty” in the wording of the Amendment meant more than “mere freedom from physical restraint or the bounds of a prison.”[xlvi] It meant the freedom to go where one chose and to pursue one’s happiness; “that is, to pursue such callings and avocations as may be most suitable to develop his capacities, and give to them their highest enjoyment.”[xlvii]
The term property must be given a similarly broad definition, Field argued. A liberal construction did not mean that states could not regulate property. “Whatever affects the peace, good order, morals, and health of the community” comes within the police power of the state, he noted, and can be regulated to ensure that all have equal enjoyment of their property.[xlviii] The state can regulate the construction of buildings to protect neighbors, for example. But the compensation that an owner gets for the use of his property can only be regulated when “some right or privilege is conferred by the government or municipality upon the owner.”[xlix] Thus Illinois had no right to regulate the prices that grain elevators could charge. The owners were not receiving any special privileges that made their property affected with a public interest.
Although the majority in the case found the grain elevators to be affected with a public interest in part because the business affected several states, they would not go so far as to call it interstate commerce. Interstate commerce is specifically identified in the Constitution as a power of Congress. Experience under the Articles of Confederation had shown that “to promote industry and commerce at home, [the federal government] needed . . . to take over from the states the regulation of interstate commerce.”[l] Thus, Article I, section 8, of the U.S. Constitution states: “Congress shall have power to regulate commerce with foreign nations, and among the several states, . . . .” But here, the Court held that the warehouses operated solely within the state of Illinois. They may incidentally be involved in interstate commerce, Waite wrote, but “they are no more necessarily a part of commerce itself than the dray or the cart.”[li] Manufacturing was not commerce for the purposes of the Commerce Clause. Only the buying and selling and distribution of goods were.
Since distribution involved transportation, railroads were clearly involved in interstate commerce. In the same year, the Court upheld state regulation of railroads even if the regulation involved interstate operations because Congress had not legislated in the area, and it would not do so for another decade.[lii]
The Pro-Business Years: 1886-1897
After those two 1876 decisions, several states took advantage of the Court’s holdings to regulate railroads. By the mid-1880s, railroads were running up against different legislation in different states, such that some owners even proposed a national uniform regulatory system. At the same time, railroads stepped up their pressure on state legislatures, vigorously attacking regulations in the courts in an attempt to have the Supreme Court reverse its approval of state regulation of interstate commerce in absence of federal legislation.[liii]
In Wabash, St. Louis and Pacific Railway Co. v. Illinois (1886), the railroads challenged an Illinois law that prohibited long haul-short haul discrimination in which the railroads charged more money to haul goods a short distance than to haul the same goods a longer distance.[liv] The railroads had been charging $15 to carry goods from Peoria, Il., to New York, but $25 to carry the same goods from Gilman, Il., to New York, even though Gilman was 86 miles closer to New York than Peoria was. Since most of the route was obviously outside Illinois, the issue before the Supreme Court was whether Illinois could still regulate the leg of the trip through the state since the federal government had not legislated.
This time the conservatives on the bench won out. In striking down the Illinois law, Justice Samuel Freeman Miller for the majority wrote, “It cannot be too strongly insisted upon that the right of continuous transportation from one end of the country to the other is essential in modern times to that freedom of commerce . . . that the commerce clause was intended to secure.”[lv] States could not regulate interstate commerce, period. The effect of the decision was to invalidate most state regulation of railroads because nearly all railroads ran in two or more states, which in turn spurred Congress to enact the Interstate Commerce Act the following year.
The purpose of the Interstate Commerce Act was to ensure that railway rates were reasonable and that all shippers, localities, and commodities were given equal treatment.[lvi] A commission was established and given the power to execute the provisions of the Act. Three years later, the Sherman Anti-Trust Act was passed to control what were considered the evils of trusts.[lvii] The two acts were the first forays by Congress into business legislation.
Both the Interstate Commerce Act and the Sherman Anti-Trust Act are cited as examples of governmental regulation of businesses that existed prior to the development of corporate public relations and therefore seen as evidence that regulation did not affect the development of corporate public relations.[lviii] But the ICC and the Sherman Anti-Trust Act had rocky starts.
The concept of the corporate trust was the 1881 brainchild of Samuel L. Dodds, the legal counsel for the Standard Oil Company of New Jersey.[lix] At the time, Standard Oil had agreements with a number of companies involved in the production, refinement, and distribution of oil in different states, but that meant duplication of services and employees. Dodds suggested a solution—to “organize a Corporation for the purpose of holding Stocks of Corporations in various States”—what would become the corporate trust, what today would be considered a holding company.[lx] The stockholders of the various companies would transfer their shares to a trust made up of a few men who would then run the entire operation.[lxi]
F.J. Stimson, in the Harvard Law Review in 1887, described the advantages of this then-still-new legal device: “Now, these trusts have one legitimate advantage, the economy that arises from the united management of a large concern, owning the best inventions, buying its supplies in the lowest market, and employing the best advice and most skilled labor. Moreover, by this general system many offices and management charges in each local enterprise are dispensed with.”[lxii] But that was the only good thing Stimson had to say about trusts. “Not even amenable to the restraints of corporation law, these ‘trusts’ may realize the Satanic ambition, — infinite and irresponsible power free of check or conscience,” he wrote.[lxiii] Senator John Sherman held the same view, which is why he introduced his anti-trust legislation in 1890.[lxiv] The Act declares to be illegal “every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations.”[lxv]
The first time the Sherman Anti-Trust Act was tested came in two cases in 1895. The decisions, which were decidedly pro-business and anti-labor, enraged populists and led William Jennings Bryan to claim in his 1896 presidential campaign that the justices were out of touch with reality.[lxvi] In U.S. v. Knight, the federal government sought dissolution, under the Sherman Anti-Trust Act, of the American Sugar Refining Co., which controlled ninety percent of the country’s sugar through a handful of companies it controlled.[lxvii] The Court made a distinction between manufacturing and distribution, holding that the company’s acquisitions operated entirely within Pennsylvania; therefore, it bore no direct relation to interstate commerce and hence did not come under the federal government’s constitutional powers. The decision effectively nullified the Sherman Anti-Trust Act’s effectiveness against industrial corporations until 1904 because most monopolies and trusts tended to be organized in one state although their businesses operated nationwide. As Justice John Marshall 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.”[lxviii]
The Court did allow enforcement of the Sherman Anti-Trust Act against labor unions, however.[lxix] In 1894, the American Railway Union struck the Pullman Company in protest over a twenty percent wage cut. In support, other members of the Union refused to handle Pullman cars in operation on various railroads. The strike paralyzed rail transportation in and out of Chicago. The federal government sought an injunction against the strikers because they were obstructing the mail. The federal district court issued an injunction, which Eugene V. Debs, president of the union, and three others refused to obey.[lxx] At the resulting contempt trial, the union’s attorneys argued that the original injunction exceeded the judge’s authority. The judge in response argued that the union had violated the Sherman Anti-Trust act by conspiring to restrain trade.
When the case reached the Supreme Court in 1895, the Court took a broad interpretation of the federal government’s powers in contrast to the narrow view it took in U.S. v. Knight. Here, the Court acknowledged that “among the powers expressly given to the national government are the control of interstate commerce and the creation and management of a post office system for the nation.”[lxxi] And along with those powers is the right to prevent any unlawful and forcible interference with them. Hence the Court took a broad interpretation of federal powers to allow the restriction of union activities, but a narrow interpretation to defeat efforts to regulate businesses.
A year later, the Court did uphold the Sherman Anti-Trust Act, applying it to a railway cartel that fixed prices. Although the eighteen railroads involved argued that they were just setting reasonable rates, the Court found otherwise. It was price fixing, and such “combinations of capital” threatened to “driv[e] out of business the small dealers and worthy men whose lives have been spent therein.”[lxxii]
While the decision at first blush looks anti-business and contrary to the Court’s earlier holdings, it actually fits with the conservative justices’ ideology. They believed in laissez-faire capitalism; government should not interfere in the market unless it is necessary to ensure free competition. The question for conservatives and progressives alike was whether trusts and other combinations were thwarting free competition. Progressives believed they were. Trusts and monopolies, by their very nature, were anti-competition. Conservatives, on the other hand, believed that industrial concentration was a natural outgrowth of the economic and social conditions of the time and was in fact beneficial. They still believed in the market and its ability to self-regulate.[lxxiii] But fixing prices does not allow the market to operate. Such collusion circumvents the competitive process.
So price fixing among railroads was illegal and within the bounds of Congress to address. But other federal regulations involving railroads were not. In Cincinnati, New Orleans, & Texas Pacific Railway Co. v. ICC (1896), the Court denied the Interstate Commerce Commission the power to fix rates and in ICC v. Alabama Midland Railway Co. (1897) restricted its ability to investigate railways.[lxxiv] Both decisions effectively nullified the power of the Commission.
Also in 1897, the Court formally adopted the principle of substantive due process that had been raised in the Slaughter-House Cases twenty-four years earlier. The case, Allgeyer v. Louisiana, involved a Louisiana company that had arranged with the Atlantic Mutual Insurance Company, a New York-based firm, for insurance on goods it was shipping out of state.[lxxv] Atlantic Mutual was not licensed to do business in Louisiana, contrary to state law. Allgeyer was convicted for doing business with an unlicensed company. It appealed the conviction on the basis that the law infringed its right to do business with whom it pleased; that is, the law was unconstitutional because it deprived the company of its property without due process of law contrary to the Fourteenth Amendment.
Justice Rufus Wheeler Peckham wrote for the majority that the liberty contained in the Fourteenth Amendment meant “not only the right of the citizen to be free from the mere physical restraint of his person, as by incarceration, but . . . to live and work where he will; . . . to pursue any livelihood or avocation, and for that purpose to enter into all contracts which may be proper, necessary and essential to his carrying out to a successful conclusion the purposes above mentioned.”[lxxvi] In the case at hand, Atlantic Mutual had the right to enter into a contract of insurance with citizens of Louisiana, and conversely, the citizens of Louisiana had the right to enter into a contract with the insurance company. The Louisiana law that forbade such a contract was an illegal interference with its citizens’ right to contract outside the state, according to the Court.
Shifting toward Reform: 1898-1904
Substantive due process combined with the liberty of contract principle enunciated by the Court appeared to be a potent weapon for conservatives and businesses against the rising tide of Progressive reform, but change was on the horizon as can be seen in the conflicting decisions of the Court in the next few years. On the one hand, the Court continued to strike down state laws that interfered with business operations. For example, in Smyth v. Ames (1898), known as the Maximum Freight Case, the Court held that a Nebraska law setting railroad tariffs was unconstitutional because the law did not allow a fair rate of return on the property invested, a decision that pleased businessmen who thought it would insure stability in railway investments.[lxxvii] But on other hand, the Court upheld a state law that protected workers under the police powers. In Holden v. Hardy (1898), the Court upheld a Utah law limiting the number of hours miners were allowed to work on the basis that it protected the health and safety of the miners and by extension the state.[lxxviii]
The Court also began to move away from its narrow interpretation of interstate commerce for purposes of the Sherman Anti-Trust Act, originally enunciated in U.S. v. Knight (1895). In Addyston Pipe and Steel v. U.S. (1899), six companies involved in the manufacture and sale of iron pipe had formed a combination to fix prices.[lxxix] Before the Supreme Court, the companies argued that, like the Sugar Trust in U.S. v. Knight, they were involved in the manufacturing of iron pipe and therefore not conducting commerce. But this time, the Court was not about to let the pipe makers off the hook. The justices found a connection between commerce and manufacturing to bring the companies under federal jurisdiction. Justice Peckham wrote that in the Knight case, “There was no combination of agreement, in terms, regarding the future disposition of the manufactured article; nothing looking to a transaction in the nature of interstate commerce.” But in this case, “The business of defendants is carried on by obtaining particular contracts for the sale, transportation, and delivery of iron pipe of a certain description, quality, and strength.” Thus, the combination directly restrained “the purchase, sale, or exchange of the manufactured commodity among the several states.”[lxxx]
The decision gave hope to Theodore Roosevelt, and when he became president in 1901, he authorized the Justice Department to launch a series of prosecutions under the Sherman Act. The chief case was against Northern Securities Company, a railroad trust formed in 1902 by E.H. Harriman, James J. Hill, J.P. Morgan, J.D. Rockefeller, and their associates.[lxxxi] The company was created to settle a battle between Hill, who was president of the Great Northern Railway, and Harriman, who controlled the Union Pacific Railway, over the Burlington Railway, which would connect both of their roads to Chicago. By forming the new company and combining roads that had previously competed with each other, they effectively controlled the railroads of the Northwest. The issue before the Court was whether competition was destroyed when two previously competing railways were acquired by a common owner and therefore was a violation of the Sherman Act.
The Nation described the upcoming hearing before the Supreme Court in 1904 as involving issues that “go to the very foundation of our business prosperity, and reach the home of every workingman no less than that of every investor of capital.”[lxxxii] On the day of the hearing, the courtroom was filled to capacity with senators and the “plain people.” “A fair number of ladies were also to be seen. Mrs. Roosevelt, with Mrs. Knox, Mrs. Justice Holmes, Mrs. Senator Lodge, and others well known in Washington society.”[lxxxiii]
The Court, in a five-four decision, ordered the company to be dissolved, the first success against corporate interests for the federal government under the Sherman Anti-Trust Act. In the majority opinion, Justice Harlan took an expansive view of the anti-trust act, writing that it was not limited to restraints of trade that are unreasonable, “but embraces all direct restraints reasonable or unreasonable, imposed by any combination, conspiracy or monopoly upon such trade or commerce.”[lxxxiv]
By 1904, it was clear times were changing. The Elkins Act, which strengthened the ICC’s powers, had passed.[lxxxv] The Publicity Bureau and other press agencies were open. Parker and Lee were issuing their Declaration of Principles. Two years later saw the publication of Upton Sinclair’s The Jungle and the resulting passage of the Meat Inspection and Pure Food and Drug Acts.[lxxxvi] By 1910, four conservative justices were off the bench, replaced with more moderate and progressive men.[lxxxvii] Two 1911 decisions are telling in how the times had changed.
The Court ruled in Texas & NORR v. Miller (1911) that the civil liability of a railroad for the death of its employees resulting from negligence was a matter of public concern, not just a private right.[lxxxviii] Perhaps more importantly, in Standard Oil Co. of New Jersey v. United States (1911), the Court ordered Standard Oil, the first trust, dissolved after finding that it had used questionable and unlawful methods to monopolize the oil industry.[lxxxix]
Discussion ßthe Discussion and/or Conclusion – see note below
The industrial revolution produced tremendous economic, social, and cultural changes to the American landscape. One of those changes was the creation of large corporations, which in turn produced feelings of alienation between the public, as customers, employees, and small-business owners, and the owners, as investors and managers of those corporations. Farmers, perhaps feeling the alienation first, blamed their economic woes on the railroads and large corporations. They organized and elected officials sympathetic to their cause to state legislatures. Thus, the initial laws targeting unfair business practices appeared at the state level. States had always passed laws to protect the safety, health, and welfare of their citizens, but the country had been founded on the principle of limited government. States tended not to interfere in an individual’s use of property unless that use interfered with others’ enjoyment of their property.
Initially, the Supreme Court was sympathetic to the plight of the farmers and assisted the states with their efforts to regulate businesses in two ways. First, the Court held that the states had the power to legislate because the businesses were “affected with a public interest” and came within the states’ police powers. Second, the Court held that states were free to regulate even when the business indirectly impacted interstate commerce because the federal government had not done so. Despite those decisions, corporate attorneys found some solace in the dissenting opinions and continued to push back against state interference in interstate commerce. By the middle of the 1880s, they were successful. Although the federal government responded with the Interstate Commerce Act and shortly thereafter the Sherman Anti-Trust Act, enough conservatives were now on the bench to effectively nullify both acts for some time. Businesses were protected essentially from state and federal legislation. Against a state law, they would argue either that the law infringed their substantive due process right of liberty of contract or that they were engaged in interstate commerce. Against federal law, they would argue that they were operating solely within a state and were therefore outside the federal jurisdiction. The Supreme Court appeared happy to oblige.
But by the end of the nineteenth century, calls for Progressive reforms had reached greater proportion and soon would have the support of President Roosevelt. At the same time, the Court’s membership underwent a shift with the conservatives retiring from the bench, and more progressive, more moderate men, such as Oliver Wendell Holmes, Jr., came on board. And it was perhaps clear even to the conservatives that the doctrine of laissez-faire and the free market were no longer working and that government had to enact legal reforms to ensure free competition. Business leaders found themselves no longer protected by the Court and in a position where they were increasingly considered public enterprises, not private ones. Those who recognized the changing forces around them turned to another avenue to regain their legitimacy and that avenue was to court public opinion, opening the door to corporate public relations.
I like this brief summary of the discussion section from eHow.com
- Begin by summarizing and discussing the major findings of your research. Reiterate the results in a straight forward and easily understandable manner.
- Describe why the findings are important or meaningful. This is an opportunity to cover what your results mean and what they contribute to both the specific area of research and the bigger picture.
- Link your findings to other similar research. It is important to discuss how your results are either similar or different from other published research and why this might be the case.
- Discuss the limitations of your study and other explanations for the results you obtained. No study is perfect, so explain the limitations it has. There are also always other explanations for the results you obtain discuss a few potential ones here. Think like a critic.
- Lastly, discuss the future directions your research indicates. This is a great way to finish a discussion. What questions regarding your topic remain unanswered. Has your research study created new unanswered questions?
[i] “Vanderbilt in the West,” New York Times, October 9, 1882, p. 1.
[ii] Walter S. Gifford, “The Changing Character of Big Business,” World’s Work, Vol. 5, (June 1926), 166-68.
[iii] The Gilded Age runs from approximately 1865 to 1901 and is followed by the Progressive Era (1901-1917). The term was coined by Mark Twain and Charles Dudley Warner in their satirical book, The Gilded Age. Mark Twain and Charles Dudley Warner, The Gilded Age: A Tale of Today (Hartford, Conn.: American Publishing Co.; Syracuse, NY: Watson, Gill, 1874).
[iv] See for example, Eric F. Goldman, Two-Way Street: The Emergence of the Public Relations Counsel (Boston: Bellman Publishing Co., 1948); Richard S. Tedlow, Keeping the Corporate Image: Public Relations and Business, 1900-1950 (Greenwich, Conn.: JAI Press, 1979). The Progressive Era followed the Gilded Age. It is clear that public relations developed quickly in the first decade of the twentieth century. What is less clear is the impetus for that development.
[v] The most recognized of the muckrakers are Ida Tarbell (Standard Oil), Upton Sinclair, and Lincoln Steffens. Richard B. Kielbowicz and Brian Thornton, “The Media and Reform, 1900-1917,” pp. 303-318, in Wm. David Sloan, ed., The Media in America: A History, 5th ed. (Northport, AL: Vision Press, 2002), 303-318.
[vii] Roland Marchand, Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business (Berkeley: University of California Press, 1998); Alan R. Raucher, Public Relations and Business, 1900-1929 (Baltimore: Johns Hopkins Press, 1968).
[viii] Karen Miller Russell and Carl O. Bishop, “Understanding Ivy Lee’s Declaration of Principles: U.S. Newspaper and Magazine Coverage of Publicity and Press Agentry, 1865-1904,” Public Relations Review, 35(2) (2009): 91-101.
[ix] See for example, Ray Eldon Hiebert, Courtier to the Crowd: The Story of Ivy Lee and the Development of Public Relations (Ames: Iowa State University Press, 1966); Scott M. Cutlip, The Unseen Power: Public Relations, A History (Hillsdale, NJ: Lawrence Erlbaum Assoc., 1994).
[x] I adopt here the position of Bruce K. Berger who has argued that organizations practice public relations because it provides them “with dynamic and comprehensive methods and processes of intentional representation in contested sites in which information is exchanged, meaning constructed and managed, and consensus, consent, and legitimation gained or lost with others.” Bruce K. Berger, “The Halicon Affair: Public Relations and the Construction of Ideological World View,” Journal of Public Relations Research, 11(3) (999): 186.
[xi] For a discussion of the period, see Melvin I. Urofsky, Documents of American Constitutional and Legal History, Vol. II: The Age of Industrialization to the Present (New York: Alfred A. Knopf, 1989); John E. Semonche, Keeping the Faith (Lantham, MD: Rowman & Littlefield, 1998).
[xii] That is not to say that there were no attempts to influence the public prior to 1900. The Mutual Life Insurance Company had a literary bureau in 1888. The “Battle of the Currents” between George Westinghouse and Thomas A. Edison occurred in 1889. And some railroad owners gave speeches in the 1880s detailing the railroads’ position on regulation. But there does not appear to have been widespread, concentrated efforts on the part of big business. Just because some “got it” early, that does not negate the overall argument put forward here. Cutlip, The Unseen Power. Marvin Olasky, Corporate Public Relations: A New Historical Perspective (Hillsdale, NJ: Erlbaum, 1987).
[xiii] There is some debate among legal historians over whether the Court protected big business in this period. Some take the position that the justices’ conservatism and laissez-faire economic beliefs influenced their decisions. See for example, Wallace Mendelson, “John Marshall and the Sugar Trust: A Reply to Professor Gillman,” Political Research Quarterly, 49(2) (1996): 405-413; Arnold M. Paul, Conservative Crisis and the Rule of Law: Attitudes of Bar and Bench, 1887-1895 (Ithaca, NY: Cornell University Press, 1960). Others suggest that the overall record of the Court during the time must be considered, which shows a more complicated picture. See for example, Howard Gillman, “More on the Origins of the Fuller Court’s Jurisprudence: Reexamining the Scope of Federal Power over Commerce and Manufacturing in Ninteenth-Century Constitutional Law,” Political Research Quarterly, 49(2) (1996): 415-437; John E. Semonche, Charting the Future: The Supreme Court Responds to a Changing Society, 1890-1920 (Westport, Conn.: Greenwood Press, 1978). In considering only cases in this period that affected big business, however, it would appear that the Court’s decisions were more favorable to corporations than to the government. Whether that occurred because the justices were partial to big business or because they were dealing with legal precedents that no longer fit the economic reality is outside the scope of this paper.
[xiv] Ray E. Hiebert, “Ivy Lee and the Development of Press Relations,” Public Relations Journal 21 (March 1965), 8-10. See also, Hiebert, Courtier to the Crowd.
[xv] Goldman, Two-Way Street.
[xvi] Larry Tye, The Father of Spin: Edward L. Bernays and the Birth of Public Relations (New York: 1998). James Grunig and Todd Hunt based their initial excellence theory of public relations on Bernays’ approach. Their four models of practice (press agentry, public information, asymmetrical communication, and symmetrical communication) echo Bernays’ outline of the historical developments of the field. James E. Grunig and Todd Hunt, Managing Public Relations (New York: Holt, Rinehart & Winston, 1984).
[xvii] Robert E. Brown, “Myth of Symmetry: Public Relations as Cultural Styles,” Public Relations Review, 32 (2006): 206-212.
[xviii] Tim P. Vos, “Explaining the Origins of Public Relations: Functionalist, Institutional, and Cultural Logics of Historical Explanation,” presented at the ICA national conference, Montreal, QC, May 2008.
[xix] Raucher, Public Relations and Business; Tedlow, Keeping the Corporate Image; Marchand, Creating the Corporate Soul.
[xx] Olasky, Corporate Public Relations.
[xxi] While public relations histories have tended to begin in 1900 and move forward, at least one recent work looks at the concept of public relations in the Gilded Age. See Miller & Bishop, “Understanding Ivy Lee’s Declaration of Principles.”
[xxii] James O’Hara, “The Gilded Age and the Supreme Court: An Overview,” Journal of Supreme Court History, 33(2) (July 2008): 123-133.
[xxiii] Ibid., 132.
[xxiv] Ibid., 133.
[xxv] See for example, J.D. Bernal, Science and Industry in the Nineteenth Century (Bloomington: Indiana University Press, 1970); Judith G. Coffin and Robert C. Stacey, Western Civilization, Vol. II (London: W.W. Norton & Company, 2008).
[xxvi] Ida Tarbell, The History of the Standard Oil Company (New York: Macmillan Company, 1925). Tarbell’s exposé of the Standard Oil Company was first published as a nineteen part series in McClure’s between November 1902 and October 1904.
[xxvii] O’Hara, 124.
[xxviii] For a discussion of the use of financial markets and corruption by railroads, see Richard White, “Information, Markets, and Corruption: Transcontinental Railroads in the Gilded Age,” The Journal of American History, 90(1) (2003): 19-43.
[xxix] Mendelson, “John Marshall and the Sugar Trust.” Darwin’s The Descent of Man appeared in 1871 and the concept of social Darwinism spread through American thought. Edward A. Purcell, Jr., The Crisis of Democratic Theory: Scientific Naturalism & the Problem of Value (Lexington: University of Kentucky Press, 1973.
[xxx] William D. Guthrie, “Constitutionality of the Sherman Anti-Trust Act of 1890,” Harvard Law Review, 11(2) (1897): 94, quoting Judge Dillon’s Yale Lectures on English and American Laws and Jurisprudence, p. 204.
[xxxi] Craig R. Ducat and Harold W. Chase, Constitutional Interpretation, 5th ed. (St. Paul: West Publishing Co., 1992).
[xxxii] Butchers’ Benevolent Ass’n v. Crescent City Livestock Landing & Slaughterhouse Co., 83 U.S. (16 Wall.) 36, 21 L. Ed. 394 (1873) (Slaughter-House Cases).
[xxxiii] Michael A. Ross, “Melancholy Justice: Samuel Freeman Miller and the Supreme Court during the Gilded Age,” Journal of Supreme Court History, 33(2) (2008): 134-148.
[xxxiv] The butchers were not actually deprived of the right to be butchers; they were merely inconvenienced. At least one legal historian has suggested that the case was more about race rights than outraged butchers. The Louisiana legislature was bi-racial, which did not sit well with some white businessmen in New Orleans. The butchers’ white attorney deliberately brought the lawsuit to embarrass the legislature and “put it in its place.” He also deliberately sought to invoke the protections of the Fourteenth Amendment for white businessmen. Justice Miller, who had risen from humble roots to become a medical doctor and then a lawyer, was a defender of the rights of former slaves. He saw the slaughterhouse law as a practical health measure and did not buy the attorney’s claim that he was simply defending property rights. For a discussion of Justice Miller and the case, see Ibid.
[xxxv] Ducat and Chase, Constitutional Interpretation, 515.
[xxxvii] Slaughter-House Cases, 97.
[xxxviii] For a discussion of Justice Field, see Paul Kens, Justice Stephen Field: Shaping Liberty from the Gold Rush to the Gilded Age (Lawrence: University Press of Kansas, 1997); Carl Brent Swisher, Stephen J. Field: Craftsman of the Law (Hamden, Conn.: Archer Books, 1963).
[xxxix] Slaughter-House Cases, 101.
[xl] Urofsky, Documents of American Constitutional and Legal History.
[xli] Munn v. Illinois, 94 U.S. 113.
[xlii] Ibid., 126. In 1892, the Court reaffirmed its decision in Munn, holding in Budd v. State of New York, that a maximum rate of charges for grain elevators in the city of Buffalo was valid because the grain elevators were affected with a public interest. Budd v. N.Y., 12 Sup. Ct. Rep. 648.
[xliii] Ibid., 138.
[xlv] Ibid., 141.
[xlvi] Ibid., 142.
[xlviii] Ibid, 145.
[xlix] Ibid, 146.
[l] Carl Brent Swisher, American Constitutional Development, 2nd ed. Little, Brown, & Co., 1954, p. 27.
[li] Munn v. Illinois, 135.
[lii] Welton v. Missouri, 91 U.S. 275 (1876).
[liii] Urofsky, Documents of American Constitutional and Legal History.
[liv] Wabash, St. Louis & Pacific Railway v. Illinois, 118 U.S. 557 (1886). In the same year, the Court refused to hear argument on the question whether the protections of the Fourteenth Amendment extended to corporations. The justices apparently all agreed that they do. Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886).
[lv] Wabash, St. Louis & Pacific Railway v. Illinois, 572-573.
[lvi] Interstate Commerce Act of 1887, 24 Stat. 379 [49 U.S.C.A. §1 et. seq.].
[lvii] Sherman Anti-Trust Act, formally known as the Act of July 2, 1890, ch. 647, 26 Stat. 209. Rudolph J.R. Perlitz, “The Sherman Anti-Trust Act of 1890,” pp. 30-37, in Historians on America: Decisions that Made a Difference, ed. Paul Malamud (Washington, DC: U.S. Dept. of State, 2008).
[lviii] Karen Miller Russell, “Public Relations, 1900-Present,” pp. 423-440, in Media in America, 5th ed., ed. Wm. David Sloan (Northport, AL: Vision Press, 2002.
[lix] Letter, Samuel C.T. Dodd to H.M. Flagler, undated, ca July 1881. Dodd was Standard Oil’s solicitor and J.D. Rockefeller’s own attorney.
[lx] S.C.T. Dodd, “Ten Years of the Standard Oil Trust,” Forum, May 1892, 300. For a defense of the trust form, see S.C.T. Dodd, “The Present Legal Status of Trusts,” Harvard Law Review, 7(3) (1893): 157-169. For a defense of monopolies, see William F. Dana, “‘Monopoly’ Under the National Anti-Trust Act,” Harvard Law Review, 7(6) (1894): 338-355.
[lxi] By 1889, the Trust had acquired companies responsible for all aspects of the oil industry. It was a vast, vertically integrated corporation.
[lxii] F.J. Stimson, “Trusts,” Harvard Law Review, 1(3) (1887): 134.
[lxiii] Ibid., 132.
[lxiv] Perlitz, “The Sherman Anti-Trust Act.”
[lxv] Sec. 1, Sherman Anti-Trust Act.
[lxvi] Urofsky, Documents of American Constitutional and Legal History.
[lxvii] U.S. v. Knight, 156 U.S. 1 (1895).
[lxviii] Ibid., 43.
[lxix] In re Debs, 158 U.S. 564 (1895).
[lxx] It was while he was in prison on this contempt charge that Eugene Debs turned to socialism.
[lxxi] In re Debs, 158 U.S. 564 (1895).
[lxxii] U.S. v. Trans-Missouri Freight Association, 166 U.S. 290, 323 (1896).
[lxxiii] Perlitz, “The Sherman Anti-Trust Act.”
[lxxiv] Cincinnati, N.O. & Texas Pacific Railway Co. v. I.C.C., 162 U.S. 184 (1896); I.C.C. v. Alabama Midland Railway Co., 168 U.S. 144 (1897).
[lxxv] Allgeyer v. Louisiana, 165 U.S. 578 (1897).
[lxxvi] Ibid., 589. Peckham, Justice David Brewer, who was Justice Field’s nephew, and Chief Justice Fuller formed the conservative nucleus between 1895 and 1900. See William M. Wiecek, “Justice David J. Brewer and ‘the Constitution in Exile,’” Journal of Supreme Court History, 33(2) (2008): 170-185; Linda Przybyszewski, “Judicial Conservatism and Protestant Faith: The Case of Justice David J. Brewer,” The Journal of American History, 91(2) (2004): 471-96.
[lxxvii] Smyth v. Ames, 171 U.S. 361 (1898). “Maximum Rate Decision,” New York Times, 9 March 1898.
[lxxviii] Holden v. Hardy, 169 U.S. 366 (1898).
[lxxix] Addyston Pipe & Steel Co. v. U.S., 175 U.S. 211 (1899).
[lxxx] Ibid., 242.
[lxxxi] Northern Securities Co. v. U.S., 193 U.S. 197 (1904).
[lxxxii] “The Hearing in the Northern Securities Case,” The Nation, 77 (2008) Dec. 24, 1903, 499.
[lxxxiv] Ibid., 198. The decision was met with criticism because Justice Harlan’s language appeared to go too far. It appeared to make illegal any and all combinations. For contemporaneous discussion about the decision, see Victor Morawetz, “The Anti-Trust Act and the Merger Case,” Harvard Law Review, 17(8) (1904): 533-542; “The Merger Decision,” The Nation, 78 (2020) March 17, 1904, 204.
[lxxxv] Elkins Act, ch. 708, 32 Stat. 847, enacted February 1903.
[lxxxvi] Upton Sinclair, The Jungle (published by Upton Sinclair, 1906); Pure Food and Drug Act, 34 Stat. 768, enacted June 30, 1906; Meat Inspection Act, 34 Stat. 674.
[lxxxvii] Chief Justice Melville Weston Fuller, and Justices Rufus Wheeler Peckham, David Josiah Brewer, and Edward Douglas White were all off the bench.
[lxxxviii] Texas & N.O.R.R. v. Miller, 221 U.S. 408 (1911).
[lxxxix] Standard Oil Co. of New Jersey v. U.S., 221 U.S. 1 (1911). The dissolution resulted in 34 separate and distinct companies. The two strongest were Standard Oil Company of New York (Socony) and Mobil.