Antitrust Law: The Great Northern Railway
Introduction
One of the wonders of the free market is that there are no restrictions when it comes to buying and selling products and services. However, this advantage comes at a cost as well. Due to total freedom, people and companies are theoretically free to impose whatever prices they dictate for the goods they sell, without regard to the welfare of their customers. This is exactly what happens in monopolies, wherein only one company holds the control of a certain commodity or service. Monopolies are usually seen as bad because they do not adhere to the laws of supply and demand, do not check for quality control within the commodities they offer, and have the greatest potential for inflation (Amadeo, 2015).
In order to prevent such events from happening, competition within markets is encouraged. Competition regulates the economic activity in general. Usually, the high prices imposed are motivated mainly by self-interest. However, if a competitor can offer a lower price, customers will naturally by gravitated to those. Competition, then, ensures that the companies will offer the lowest prices while getting the most profits as possible. This, in turn, guarantees that the market will be fair for all parties involved, as it connotes lower prices, higher quality commodities, a wider range of choices, among others.
This is the essence of antitrust laws—they impose laws on markets in order to ensure that the competition going on is within acceptable limits. To be more specific, antitrust laws prohibit any practices that can be regarded as unlawful in order to protect the markets and the customers involved. Antitrust laws have been proven effective to control and improve a myriad of situations, one being the Great Northern Railways in America.
Antitrust Laws in America
As seen above, antitrust laws rely on government intervention in order to see to it that competition is as fair as possible. All in all, antitrust assures that the economy will be fair to both the markets and the consumers alike.
Antitrust and the Great Northern Railways
As mentioned earlier, one of the companies that were improved by these antitrust laws was the Great Northern Railways. The company was built by James Jerome Hill, also known as the “Empire Builder”, and was created in September 1889 from previous railways. Hill foresaw the train system is a catalyst for economic development in the region. He replaced the previous wood system of the former railways to coal to improve efficiency, and replaced the iron rails with steel ones. In addition, he allowed immigrants from countries such as Norway and Sweden to ride his trains for $10 provided that they settle on the land where the train was moving. In order for these settlers to live there permanently, he called upon agricultural experts to help those regarding farming matters. In short, he also contributed not only to the company’s success but also to the populations as well. In doing so, he increased the agricultural products, in which his trains would subsequently carry (“Biography: James J. Hill”, n.d.).
The Great Northern Railway was controlled by the Northern Security Company in 1901. During these times, there has been an economic battle between the rich people in acquiring the railroad in Chicago which led to the financial instability of United States. The traffic between Chicago and the Northwest Region has been monopolized and it could be problematic for the nation. In this case, President Roosevelt devised a way to solve this problem. Their method was to implement an antitrust law and bring lawsuit to the Northern Security Company (Northern Securities Company: The Great Railroad Trust, n.d.).
Another thing that improved the company was the existence of a competition. E. E. Harriman, the owner of Union Pacific, is as scrupulous as him in managing trains. As a result, they are often neck-to-neck in the railroad business. This motivated both parties to improve their services which led to better railroads in general. Later on, both companies fought over the control of Burlington Company and eventually they established the Northern Securities Company, a trust company. However, it was dissolved by the Sherman Act mentioned earlier on grounds that it might lead on monopolistic control on all railroads in the country (“Northern Securities Company: The Greater Railroad Trust”, n.d.). As it turns out, the dissolution of this trust company led to the Great Northern Railways being improved further due to competition.
Conclusion
Antitrust laws serve to maintain fair competition in the market by imposing restrictions on unlawful practices and acts that might restrict or hinder the flow of competition. In general, antitrust laws can improve companies and the market as a whole. For example, the Great Northern Railway might have not improved the way it is now had the Northern Securities Company had not been dissolved by the Sherman Act, an antitrust law.
References
Amadeo, K. (2015, July 2). Monopoly: 4 Reasons It's Bad, and Its History. About.com. Retrieved from http://useconomy.about.com/od/glossary/g/monopoly.htm
James J. Hill. (n.d.). American Experience. Retrieved from http://www.pbs.org/wgbh/americanexperience/features/biography/streamliners-hill/
Northern Securities Company: The Great Railroad Trust. (n.d.). United States History. Retrieved from http://www.u-s-history.com/pages/h950.html
The Antitrust Laws. (n.d.). Federal Trade Commission. Retrieved from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
