UW President Charles Richard Van Hise and American Antitrust Law, 1890-1914

Van Hise’s College Yearbook Photo in Madison (1879)

Written by Jay Gelhard

Edited by Sandy Chen

An engineer by training, professor by profession, chairman of the New York Board of Arbitration, and President of the University of Wisconsin, Charles Richard Van Hise was a public intellectual. Reacting to the expansion of corporations during the Progressive Era, Van Hise suspended his work as a geologist to undertake a comprehensive study of the concentration of corporations in the post-Civil War Era, often termed the Gilded Age. Upon his election as President of Wisconsin in 1903, he supported a progressive economics department, which was then headed by two influential economists, Richard T. Ely and John R. Commons. An important piece of legislation during the Gilded Age was the Sherman Antitrust Act (1890), which sought to prevent the formation of large monopolies that harmed consumers. Van Hise’s conviction that the university should benefit all the citizens of the state and nation–a belief expressed in the Wisconsin Idea, a term which he coined–led him to hope that the Wisconsin department of economics, under the direction of Ely and Commons, could provide a solution to the growing power of corporations during the Gilded Age. 

Unlike many progressive economists of the nineteenth century, Van Hise, Ely, and Commons did not explicitly reject the idea of monopolies. Van Hise in particular gave a clear exposition of his unique antitrust philosophy in a speech at the New York Economic Club in 1914. “It has been admitted, it has been agreed, that concentration up to a certain point is necessary in order to give efficiency (VanHise, 1912).” Van Hise believed that some industries could gain economic efficiencies through scale, and that those efficiencies directly benefited consumers (Phillips-Sawyer, 2023, pp. 659-702). In essence, for Van Hise, corporate monopolies only posed a problem insofar as they either harmed consumers or gained too much political power. In a talk given together with Supreme Court nominee Louis Brandeis, Van Hise criticized the Sherman Act of 1890 for being overly broad and unable to prosecute the kinds of monopolies he found to be problematic: “[T]he trap of the Sherman Act has never caught a fox for 20 years, and only smells in one or two places of a tail or leg (VanHise, 1912).” Fundamentally, the Sherman Act forbade any firm or combination of firms from monopolizing any part of trade or from restricting interstate commerce (Sherman Antitrust Act, 1890). For Van Hise, not only was the total prohibition of monopolies too broad, because some monopolies were beneficial to consumers, but also the restriction solely against interstate commerce was too narrow because it led to some monopolies avoiding prosecution. For example, in the case: United States v. E. C. Knight Co. (1895), one firm had total market share of sugar refining, but avoided a break-up by the Fuller Court, because it solely produced in the state of New York. 

Van Hise would codify his antitrust jurisprudence into an advanced study of monopolization after the Civil War in Concentration and Control (1912). Van Hise reiterated his support for monopolies which benefited consumers. Van Hise, along with Ely and Commons, argued that public utilities, such as energy companies, were “natural monopolies” that should not be prosecuted under the Sherman Act (VanHise, 1921, p.173). Still, Van Hise passionately argued for the breakup of the American Tobacco Company (VanHise, 1921, p.142) and Standard Oil (p.175) because their market share resulted in price discrimination and price gouging which hurt the consumer. In essence, consumer protection was the fundamental test in antitrust application for Van Hise (VanHise, 1921, p.178). This standard would later influence the Chicago School of economics in the 1980s, particularly jurists Richard A. Posner and Robert H. Bork. While Bork would abandon Van Hise’s progressive philosophy, he agreed with Van Hise that the primary purpose of antitrust law was consumer protection (Bork, 1966). Judge Posner, the most cited legal scholar of all time, was also influenced by Van Hise, Ely, and Commons. Citing work from economist Selig Perleman, a student of Van Hise and Commons, Posner argued that the sole purpose of antitrust law was to increase efficiency for consumers (Posner, 1984, pp.988-1011).

Van Hise driving then Governor Woodrow Wilson on Park Street (1912)

Van Hise and Theodore Roosevelt (1914)

References

(1890, July 2). The motivation for preventing monopolies from restricting

interstate trade was the Interstate Commerce Clause of the Constitution. Sherman Antitrust Act 15 U.S.C. §§ 1-7. See 1 U.S.C  § 8, Clause 3.  

Bork, R. H. (1966). Legislative Intent and the Policy of the Sherman Act. The Journal of Law

and Economics, 9(1). 

Phillips-Sawyer, Laura (2023). Restructuring American Antitrust Law: Institutionalist Economics

and the Antitrust Labor Immunity, 1890-1940s.The University of Chicago Law Review, 90(2), 659-702.

Posner, R. A. (1984). Some Economics of Labor Law. University of Chicago Law Review, 51,

988-1011. See Perlman, S. (1922). A History of Trade Unionism in the United States. Kelley, p.147. 

Van Hise, C. R. (1921). Concentration and Control: A Solution to the Trust Problem in the

United States. Macmillan.

Van Hise, C. R. and Brandeis, L. D. (1912). The Regulation of Competition Versus The

Regulation of Monopoly. The Economic Club of New York First Dinner of the Season.