## Facts

- Great Northern Railway Co. and Northern Pacific Railway Co. operated competing, substantially parallel interstate rail lines from the Great Lakes/Mississippi region to the Pacific Northwest.
- In 1901, associated interests created Northern Securities Co., a New Jersey holding company, to consolidate control of Great Northern, Northern Pacific, and Chicago, Burlington & Quincy.
- Through a stock-exchange arrangement, Northern Securities acquired more than nine-tenths of Northern Pacific’s stock and more than three-fourths of Great Northern’s stock.
- Former railroad stockholders received Northern Securities shares in exchange, concentrating voting power and practical control of both railroads in the holding company.
- The United States, through the Attorney General under the Sherman Act, sought to stop Northern Securities from using its stock ownership to control the competing railroads.

## Issues

1. Whether organizing and operating a holding company to acquire controlling stock interests in competing interstate railroads constitutes a “combination … in restraint of trade or commerce among the several States” under the Sherman Act.
2. Whether Congress, under the Commerce Clause, may apply the Sherman Act to a stock-holding structure that suppresses competition between interstate carriers.
3. Whether the United States may obtain equitable relief after the stock transfers have been consummated, based on continuing ownership and potential exercise of control.

## Decision

- The Supreme Court affirmed the decree against Northern Securities by a 5–4 vote.
- The Court held that the holding-company arrangement was an unlawful combination in restraint of interstate commerce within the Sherman Act.
- The Court approved injunctive relief preventing Northern Securities from voting the railroad shares or otherwise exercising control over Great Northern and Northern Pacific.
- The Court also approved relief barring the railroads from paying dividends on stock held by Northern Securities.
- Justice Brewer concurred in the judgment on narrower reasoning; Justices White and Holmes dissented (Holmes separately).

## Legal Principles

- The Sherman Act reaches combinations that, in practical effect, unite competing interstate carriers under common control and thereby suppress competition, even when implemented through stock ownership rather than explicit operating or rate agreements.
- Courts should not construe the Sherman Act so narrowly that arrangements plainly functioning to restrain interstate commerce fall outside the statute, notwithstanding the Act’s criminal provisions.
- Section 4 authorizes the United States to sue in equity to prevent and restrain violations; ongoing ownership and the capacity to exercise control may constitute a continuing violation subject to injunction.
- Congress may regulate and restrain combinations that substantially affect interstate commerce, including structural devices that effectively merge competitors engaged in interstate transportation.

## Conclusion

The Court treated Northern Securities’ stock-holding structure as a functional consolidation of competing interstate railroads and held it an unlawful Sherman Act restraint, sustaining broad equitable power to prevent the continued exercise of unified control that suppresses interstate competition.


N. Sec. Co. v. United States, 193 U.S. 197 (1904)