Image: Pittsburgh Coal Company rate schedules, from Harvey C. Mansfield, The Lake Cargo Coal Rate Controversy: A Study in Governmental Adjustment of a Sectional Dispute (1932).
As the antimonopoly movement confronts dominant platforms like Apple and Amazon, early antitrust legislation is getting a much-needed rereading. One important antitrust provision—the “commodities clause” of the 1906 Hepburn Act—stipulated that railroads could not haul commodities in which they had a significant business interest. As reformers, including the new head of the FTC, Lina Khan, have pointed out, the commodities clause serves as a promising precursor for current efforts to separate tech companies’ status as both platforms and producers.
Context matters, however. The chief target of the original “commodities clause” was railroad control of coal mines, and the law emerged in the wake of an aborted United Mine Workers takeover of the coal market. This history carries significant implications for the way we should think about antitrust and antimonopoly today.
In the two decades before the Hepburn Act’s enactment, two entities vied for the right to coordinate the price and distribution of coal. (The notion of “coordination” and “coordination rights” here draws on Sanjukta Paul’s work). The first—a group known as the Joint Conference of Miners and Operators of the Central Competitive Field—was the child of the United Mine Workers.The second—a group of coal-hauling railroads known as the Seaboard Coal Association—was the child of J. P. Morgan and the Pennsylvania Railroad.
Railroads and miners usually had drastically different ends in mind. Railroads coordinated the coal market to achieve two objectives—low coal prices and high coal volumes. Miners, on the other hand, looked to coordinate the coal market to achieve a high coal price that would return a living wage to miners.
The UMW as Coal Mining Coordinator
The United Mineworkers emerged out of midwestern crucible of depressed coal prices. As prices fell in the wake of the Panic of 1873, local coal mine unions slowly and painfully learned that local, uncoordinated strike activity did little to nothing to change their bargaining position. If they secured a good contract, their low-margin bosses would immediately lose their market, leading to closed mines and unemployed miners. Realizing that the only way to win a fair price for their labor was to win a fair price for their coal, the workers established an annual meeting with operators across what they termed the Central Competitive Field—a geography formed by the railroad network—that put coal from Ohio, Pennsylvania, Indiana, Illinois, and later on, West Virginia, in competition with each other.
The Joint Conference System, by setting coal prices across the entire industry, promised a solution to the problem individual unions faced. Mine operators could rely on the power of the union to set remunerative wage and price rates. In theory, a new coal mine could open up and undercut the Joint Convention-approved rate, but the operators would rely on the union to organize any new entrant into the business and force them onto the Joint Conference Price Scale.
Compared to the top-down coordination of railroads, the economic coordination of the Joint Conference—as it was heavily influenced by the UMW—emphasized democratic decisionmaking backed by a broad consensus among union and operator representatives. Early meetings in 1885 and 1886 resulted in the Joint Conference establishing rules mandating broad consensus among both union representatives and operators’ representative. Delegates were seated by “mining districts” within a state with each district represented by one miner and one operator. Mining districts such as “Indiana block,” “Hocking Valley,” and “Reynoldsville” had their wages set in the 1886 meeting.
This arrangement gave the Joint Conference system a great deal of support among mine operators—some of whom were real villains. One of its strongest early proponents was “Dollar Mark” Hanna, a Cleveland businessman who specialized in streetcar monopolies but also had significant coal mine holdings. Hanna, who would go on to fund the 1896 presidential campaign of William McKinley, hoped that he could cut out competition with renegade Pennsylvania operators through the Joint Conference system. Hanna, and many Republicans like him including McKinley himself, considered the system to be a form of arbitration that would promote industrial peace.
The fundamental antagonisms that emerged from the Joint Conference system were not class-based but rather geographical. For example, operators from Pennsylvania resented operators from Ohio who managed to set a price that would allow them to outcompete other states. The union—backed by Joint Conference operators—engaged in violent struggle against operators who refused to honor the Joint Conference scales.
In the 1890s, the antagonism between regions reached a fever pitch. A strike across the entire bituminous industry in 1894 failed to resolve them despite the participation of more than 100,000 miners. Another strike in 1897, when economic conditions were improving after the Panic of 1893, proved more successful.
The 1897 strike centered on the right to economic coordination. Ohio operators had convinced the Joint Conference that they were facing unfair competition from Pennsylvania operators in what was known as the “Lake Trade”—the shipment of coal via barges on the Great Lakes. The Ohio operators had a good case. Pennsylvania operators with close ties to an Carnegie-funded railroad that ran from Pittsburgh to Lake Erie were getting an unfair rate compared to their Ohio competitors. As a result, the recalcitrant Pennsylvania operators broke the Joint Conference Scale.
The miners resorted to their best tool—striking at non-compliant mines. The non-compliant mines northeast of Pittsburgh responded by firing and evicting the union miners, who moved into tents nearby their former homes. They named the tent city Camp Determination. Mother Jones gave speeches. As the company hired new labor to take their place, they led incursions into the mine housing where they regularly succeeded in convincing the newly hired miners to drop their picks. After almost a year of struggle, they forced an agreement on the allocation of the Lake Trade on the recalcitrant Pennsylvania operators, restoring the Joint Conference scale.
The Labor Injunction as Pro-Trust Mechanism
One central aspect of the 1897 strike would prove inauspicious. The rogue operators in Pennsylvania secured several court injunctions against the union with the hope of shutting down Camp Determination. In central Pennsylvania, however, a deep tradition of pro-worker local politics meant that sheriffs almost never enforced anti-worker court orders. Camp Determination was not routed, and the Lake Trade operators were brought to heel.
The Joint Conference’s success hinged on UMW’s ability to exercise authority over all corners of the coal market. Even with the tentative failure of labor injunctions in Central Pennsylvania, the most important non-union field was in West Virginia. There, railroads held an iron grip over operators who in turn, held an iron grip over local sheriffs. If Pennsylvania sheriffs would not enforce labor injunctions, West Virginia sheriffs would.
Because the state’s coal fields represented an existential threat to the Joint Conference, labor struggles in West Virginia were extremely violent. Local politicians readily called in militias to defeat striking miners under orders from federal courts. UMW poured money, resources, and weapons into the state to shore up their national power.
Railroads as Coal Mining Coordinators and the “Commodities Clause”
The relationship between the labor injunction and competition policy has mostly been told in terms of “exception”: as the gradual creation of a space for labor unions to coordinate a labor market without threat of antitrust action. The Joint Conference and UMW represents another story. The UMW did not simply seek to fix wages; it sought to coordinate the production and distribution of coal. The labor injunction prevented it from doing so.
As the use of the labor injunction in West Virginia undermined the UMW’s efforts, railroads’ strength increased. Exerting their own form of control over the coal industry, railroads had various tools at their disposal. Some instituted a requirement that all operators along their line sell their goods through their coal agencies, which would price and market the coal along the line. In West Virginia, the Norfolk and Western leveraged their large pools of capital and promises of economic development to accrue large tracts of coal reserves from poor people, towns, and counties, eventually coming to own 300,000 acres of coal land. More than a third of all the coal hauled by the N&W came from operators who paid royalties to the railroad.
The railroads formed anticompetitive agreements among themselves as well. By the 1890s, most of the railroads that hauled coal from the Central Appalachian basin to the east coast were part of the J.P. Morgan system of interlocking corporate directorates. Together, the Morgan roads formed the Seaboard Coal Association, which adjusted rates as a means of controlling competition. Railroads coordinated coal shipments by selectively allocating coal cars to select mines.
Operators were appalled by the railroads’ behavior and turned to legislators for relief. Beginning on the state level, operators convinced state legislators to enact laws banning railroads from having an interest in the commodities that they hauled. The efforts resulted in the federal Hepburn Act in 1906, which issued an outright ban on these practices.
Railroads immediately fought the statute in court. And the courts obliged and narrowly construed the meaning of the law, ruling that so long as the business connection between the railroad and the coal company was sufficiently distant, federal courts ruled, the Hepburn Act did not apply. One application of the newly-construed law was that the Hepburn Act did not affect Norfolk and Western’s land holdings. So long as they did not discriminate against operators seeking to transport coal, they could double dip from royalties and freight revenues forever.
The courts had decided: the railroads, not the UMW, would coordinate the coal mines.
Operators, who were the chief beneficiaries of antitrust regulations, were never particularly interested in the wellbeing of coal miners. They simply saw in the UMW a convenient force that might help them achieve their goal of a healthy profit margin. This is what they wanted out of antitrust regulation as well. They did not want a free market in coal, whatever that could have meant; rather, they wanted power to be able to force a more beneficial arrangement on the railroads. The effect of the narrow antitrust rulings was not to reallocate coordination rights, which remained squarely with the railroad. Rather, it simply ensured that independent mine operators got their fair share.
Miners saw no benefits of the antitrust regulations. Their former allies, the operators, had used the federal government to force the railroads to play nice and all but abandoned them in the process. There are UMW ghosts in the antitrust statutes from the early 20th century, and today’s antimonopoly movement would do well to listen to them.