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Monopolies and the constitution: a history of crony capitalism.

1. A BRIEF HISTORY: HOW MONOPOLIES CAME TO BE
   HATED
   A. The English Experience
      with Monopolies
      1. Darcy v. Allen
      2. The Statute of Monopolies
   B. Colonial America
II. MONOPOLIES IN THE UNITED STATES
   A. At the Founding
   B. Monopolies and the Original Federal
      Constitution
   C. The Fourteenth Amendment: A Ban
      on Class-Based Legislation
   D. Economic Liberty Cases:
      Slaughter-House, Lochner, & the
      New Deal Cases
   E. "Private" Monopolies and
      Federal Antitrust Law
III. MONOPOLIES AND STATE
     CONSTITUTIONAL LAW
   A. A Tradition Rooted in Jacksonian
      Democracy and Changes in
      Corporate Law
   B. The Adoption of
      Antimonopoly Provisions
      1. Provisions Adopted
         at the Founding
      2. The Middle to Late
         Nineteenth Century
      3. The Progressive Era
   C. The Application of State Antimonopoly
         Provisions
      1. Challenging Licensing
         Requirements
      2. Striking Down Taxes that
         Benefit Preferred Industries
      3. Challenging Monopolies for
         Doing Business with
         the Government
      4. Combating Price Controls
   D. Why Have So Few States Adopted
      Antimonopoly Provisions?
CONCLUSION


Government-conferred monopolies granted by English kings and queens plagued England in the late sixteenth and early seventeenth centuries, leading to both The Case of Monopolies and the parliamentary Statute of Monopolies. Although today the word "monopoly" generally is used to refer to the private accumulation of economic power, this is not the meaning that was originally attached to the term. The original meaning of the word "monopoly" was an exclusive grant of power from the government--in the form of a "license" or "patent" -- to work in a particular trade or to sell a specific good. The word "monopoly" comes from the Greek roots "mono," meaning "single" or "one," and "polein," meaning "to sell." (1) The Greek word "monopolion" referred to an exclusive legal right of sale issued by the government. (2) Sir Edward Coke defined monopolies in the early seventeenth century as being

   [Institution[s], or allowance[s] by the King by his [g]rant,
   [c]ommission, or otherwise to any person or persons, bodies
   politick or corporate, of or for the sole buying, selling, making,
   working, or using of any thing, whereby any person or persons,
   bodies politick or corporate, are sought to be restrained
   of any freedom[] or liberty that they had before, or
   hind[e]red in their lawful trade. (3)


Samuel Johnson's dictionaries from the eighteenth century likewise defined a monopoly as "[t]he exclusive privilege of selling any thing." (4)

The 1828 first edition of Noah Webster's An American Dictionary of the English Language defined a "monopoly" as being:

   The sole power of vending any species of goods, obtained either by
   engrossing the articles in market by purchase, or by a license
   from the government confirming this privilege. Thus the East India
   Company in Great Britain has a monopoly of the trade to the East
   Indies, granted to them by charter. Monopolies by individuals
   obtained by engrossing, are an offense prohibited by law. But a man
   has by natural right the exclusive power of vending his own produce
   or manufactures, and to retain that exclusive right is not a
   monopoly within the meaning of law. (5)


The American colonists thus shared English concerns that exclusive monopoly privileges issued by the government could impose enormous costs on the general public, and especially on consumers. (6) George Mason, Thomas Jefferson, and several Antifederalists argued in favor of including an antimonopoly clause in the federal Constitution. (7) Although no such clause was added at the federal level constitutional drafters in two states recognized the danger of monopolies and prohibited government-granted monopolies in their state constitutions, (8) More states added antimonopoly clauses to their constitutions in the first one hundred years after the federal Constitution was adopted. (9) Others prohibited monopolies using different language, including clauses that forbade the giving of exclusive privileges to one class of citizens over another, or clauses that forbade the abridging of the privileges or immunities of citizens. (10) The Framers of the Fourteenth Amendment to the federal Constitution shared this concern with what they called "class legislation," a concern that led four United States Supreme Court Justices to say that state-granted monopolies were unconstitutional in an important dissent in the Slaughter-House Cases. (11)

This objection to government-granted monopolies and to forms of caste or class legislation is not merely a part of this country's history; it is also relevant today. In a 2011 Washington Post opinion piece, George Will describes a legal challenge to the constitutionality of a monopoly granted by the state of Washington to a ferry boat company. (12) The ferry boat company has a legal monopoly on boat service to a town that can otherwise only be reached by plane. (13) The challengers to the Washington state law creating the monopoly are residents of that remote town who wish to open a competing boat service to provide an easier way to access their town. (14) But the problem of government-conferred monopolies is not unique to one town in the state of Washington, because it is now routine in many states for the government to require licenses for various industries, often for the purpose of bestowing economic favors. (15) Licensing requirements of this kind sometimes take the form of a complete prohibition (as is the case in Washington), but they may also take the form of barriers to entry that prevent or reduce competition. Many local and state governments license businesses for no legitimate health or safety reason. For example, tourist guides, funeral attendants, and florists are all sometimes required to be licensed professionals despite the evident lack of a legitimate public health or safety reason for such laws. (16)

Local public schools provide another example of a government-sponsored monopoly provider of public services. Like most monopoly providers, many public schools provide poor service to their consumers (parents and children) while diverting monopoly rents in the form of bloated salaries and benefits to the providers of education (bureaucrats and teachers' unions). (17) Polls suggest that most Americans feel strong pressure to send their children to public schools because they are taxed to pay for public schools even if they ultimately choose to send their children to private schools or to home-school them. (18) The public school monopoly is especially objectionable because it interferes with parents' control over raising and educating their own children. (19) Since the New Deal, the Supreme Court has applied the very deferential rational basis test when reviewing the constitutionality of federal and state economic regulations, including those that grant monopoly status. (20) Such laws are rarely challenged and even more rarely struck down. This is a mistake. The post-New Deal case law on economic liberties, epitomized by Williamson v. Lee Optical Co., (21) is wrongly decided, and the right to be free from class legislation, monopolies, and grants of special privilege is deeply rooted in this nation's history and traditions. (22) We therefore think this right is embodied in the Fourteenth Amendment to the U.S. Constitution and that it can only be trumped by just laws enacted for the good of the whole people. (23) We think George Will is right when he denounces government licensing schemes because they "lack[] constitutional warrant and repudiate[] the nation's foundational philosophy" and because they require entrepreneurs to "approach government on bended knee to beg it to confer upon them a right--the right to compete." (24)

As John Tomasi argues in his new book, Free Market Fairness, economic liberties are just as important to freedom as are all of the other liberties embraced by modern liberals. (25) This Article helps to spell out the legal underpinnings and history of the economic liberties that Tomasi identifies; its analysis and Tomasi's are mutually reinforcing. Tomasi defends economic liberty from the perspective of political philosophy to which we seek here to add the perspective of history and law.

Part I of this Article discusses the history of government-licensed monopolies in seventeenth century England and the landmark events limiting the King's power to grant monopolies-The Case of Monopolies and Statute of Monopolies. Part I also discusses the spread of the English concern with government grants of monopoly to the American colonies and the role trade monopolies played in building support for the American Revolution in colonial America. Part II discusses the effort by some of the Framers of the U.S. Constitution to include an antimonopoly clause therein, an effort that ultimately failed. Part II then shows how antimonopoly ideas infused themselves into the Supreme Court's early Contracts Clause case law and the central role they played in the emergence of the Fourteenth Amendment as a ban on class-based or caste-based legislation. Part II finally discusses the connection between the various federal antitrust laws and government-granted monopolies. Part III discusses the adoption of antimonopoly clauses in state constitutions, beginning at the Founding and continuing through the early twentieth century. Part III also considers the move toward general laws governing incorporation and away from special legislative charter grants and surveys how the monopoly concept came to reflect a concern with private economic power in some states, as well as the application of state antimonopoly provisions. The Article concludes with a few parting words about the decline in concern for the protection of economic liberty in modern American constitutional law.

I. A BRIEF HISTORY: HOW MONOPOLIES CAME TO BE HATED

A. The English Experience with Monopolies The English hatred of monopolies dates back to the reigns of Queen Elizabeth I and King James I. Two principal events-one coming from the common law courts and the other coming from Parliament--highlight the strong disapproval of government monopolies that existed in early seventeenth century England. The first event is the case of Darcy v. Allen commonly known as The Case of Monopolies, which was decided in 1603. (26) In this case, a common law court reviewed a royal grant of trade privileges and struck down the grant as being void under the common law. (27) The second key event is the passage in 1624 of the Statute of Monopolies, (28) which was the result of years of pressure by the House of Commons to prohibit the King or Queen from granting the same kinds of monopoly privileges as those that had been struck down in Darcy. These two events characterize a period when intellectuals and lawyers began to truly recognize the rights of Englishmen to work for a living and to compete with each other without interference from government grants of special economic privilege. (29)

1. Darcy v. Allen

During Queen Elizabeth's very long reign she oftentimes found herself in need of more money than Parliament had allotted for her use. As a result, she sometimes tried to supplement her subsidy from Parliament by selling royal monopolies. (30) Some in Parliament criticized this practice because of the burden it imposed on subjects in addition to their preexisting tax burden. (31) A royal grant of monopoly privileges meant that subjects suffered a loss of jobs: Some people were shut out of their trades, and consumers were forced to pay higher prices because legal monopolies allowed producers to drive up the price of goods. For example, in a speech at Parliament in 1571, Robert Bell argued for reform of the royal monopoly system on that grounds that "by Licences a few only were enriched, and the multitude impoverished." (32) As Adam Smith later described in The Wealth of Nations, the punishment for violating grants of monopoly privileges was sometimes severe:

   Like the laws of Draco, these laws may be said to be all written in
   blood.... [T]he exporter of sheep, lambs or rams, was for the first
   offence to forfeit all his goods for ever, to suffer a year's
   imprisonment, and then to have his left hand cut off in a market
   town upon a market day, to be there nailed up; and for the second
   offence to be adjudged a felon, and to suffer death accordingly.
   (33)


Queen Elizabeth's response to complaints about the monopolies she was granting was, at first, entirely dismissive: "We are to let you understand, her Majesty's pleasure in that behalf that her Prerogative Royall may not be called in question for the valliditie of the letters patents." (34) But opposition to exclusive trade privileges reappeared in 1597 when Parliament petitioned Queen Elizabeth I to stop the practice of granting royal monopolies. (35) Parliament gently requested "her Highness['s] most gracious care and favour, in the repressing of sundry inconveniences and abuses practiced by Monopolies and Patents of priviledge." (36) In addition, at the end of the ninth parliament, the Speaker raised the issue of monopolies in his closing speech--a

bold move given that such speeches were customarily ceremonial in nature, not substantive, and that they typically included the presentation of Parliament's subsidy to the Queen. (37) In response, Queen Elizabeth asked Parliament to let her continue the practice, thus seeming to acknowledge that Parliament possessed the ability to regulate her prerogative power to grant monopolies--a clear weakening of her earlier position:

   [H]er Majesty hoped that her dutiful and loving Subjects
   would not take away her Prerogative, which is the chiefest
   Flower in her Garden, and the principal and head Pearl in
   her Crown and Diadem; but that they will rather leave that
   to her Disposition. And as her Majesty hath proceeded to
   Trial of them already, so she promiseth to continue, that
   they shall all be examined, to abide the Trial and true
   Touchstone of the Law. (38)


However, it became clear that Queen Elizabeth had no intention of carrying out her promise to regulate the distribution and functioning of royal monopolies, despite her apparent recognition of Parliament's power in this area. (39) Accordingly, in 1601 the topic of royal power to grant monopolies was again heavily debated in Parliament, and a draft bill to outlaw royal monopolies was introduced. (40) But before a decision was made with regard to the draft bill, Queen Elizabeth offered Parliament a compromise. Traditionally, cases regarding royal monopolies could only be heard by the Court of Star Chamber, a fortress of royal power in which the common law of England did not apply. Queen Elizabeth proposed as a compromise both to cancel some of the least popular monopolies she had granted and, more importantly, to allow new cases involving the legality of monopolies to be heard in common law courts. (41)

This compromise paved the way for the famous 1603 case of Darcy v. Allen, often called The Case of Monopolies. (42) Interestingly, Darcy did not involve a challenge to the legality of royal monopolies, but rather was brought by a monopoly-holder to protect his privilege. The suit was brought in 1602 by Edward Darcy, who claimed that Thomas Allen had infringed on his monopoly right (through a royal patent granted by Queen Elizabeth) to produce, import, and sell all trading cards in England. (43) The court ruled for Allen, finding that Darcy's royal patent was void. (44) There was no written judicial opinion of the case, (45) and the extant records suggest that the justices explained little of the reasoning supporting their judgment in open court. (46) However, Sir Edward Coke, the most famous lawyer of his day, did write up a report on Darcy v. Allen. (47) Coke's report has been so influential that, with regard to Darcy's meaning in the common law today, it effectively can be treated as the official opinion in the case. (48) Interestingly, Coke represented Darcy in the case, as Coke was the Attorney General and was bound to defend the legality of the monopoly that was being challenged there. (49) Coke's report, which was written an entire twelve years after the case was decided, (50) describes the common law court's rationale as a strong statement about the importance of open and free trade. It states that the court struck down the royal monopoly because allowing people to work in their respective trades was not only beneficial for them, but was also necessary for the well-being of the whole country:

   All trades ... which prevent idleness ... and exercise men
   and youth in labour, for the maintenance of themselves and
   their families, and for the increase of their substance, to
   serve the Queen when occasion shall require, are profitable
   for the commonwealth, and therefore the grant to the plaintiff
   to have the sole making of them is against the common
   law, and the benefit and liberty of the subject. (51)


And the financial benefits of the royal monopoly were considerable, Coke's report suggests that the case was as much a statement about the negative consequences of exclusive trade privileges as it was about the individual right to economic liberty. In fact, it was critical to have the freedom to pursue one's livelihood--"[E]very man's trade maintains his life, and therefore he ought not to be deprived or dispossessed of it, no more than of his life." (52)

Coke's report also discusses the many problems with monopolies, particularly the ways monopolies diminish wealth. First, monopolies serve only the interests of those who are granted the monopoly:

   The sole trade of any mechanical artifice, or any other monopoly,
   is not only a damage and prejudice to those who exercise the same
   trade, but also to all other subjects, for the end of all these
   monopolies is for the private gain of the patentees; and although
   provisions and cautions be added to moderate them, yet ... it is
   mere folly to think that there is any measure in mischief or
   wickedness. (53)


More specifically, Coke discusses the undesirable effects trade of privileges on people who wish to enter a trade but who are prohibited from doing so because of the exclusive right to practice the trade that a royal monopoly furnishes on another:

   [This leads] to the impoverishment of divers artificers and
   others, who before, by the labour of their hands in their art
   or trade, had maintained themselves and their families, who
   now will of necessity be constrained to live in idleness and
   beggary. (54)


Further, but perhaps secondarily in Coke's mind and for others during the era, monopolies hurt the entire public because monopolies lead to higher prices and poorer quality goods and services:

   [T]he price of the same commodity will be raised, for he who
   has the sole selling of any commodity, may and will make
   the price as he pleases.... [A]fter the monopoly [has been]
   granted, the commodity is not so good and merchantable as
   it was before: for the patentee having the sole trade, regards
   only his private benefit, and not the common wealth. (55)


It is important to note that Coke's report in The Case of Monopolies has been challenged by some scholars who accuse Coke of exaggerating the free trade stance of the common law. (56) The primary evidence that Coke's report of the case was indeed an exaggeration is the continued practice of kings and queens to issue monopoly royal patents for many years after Darcy. Queen Elizabeth died the year Darcy was decided, whereupon King James I took the throne. James I was not nearly as well-liked in Parliament as Queen Elizabeth had been, which did not bode well for his ability to receive subsidies. (57) Unlike Queen Elizabeth, King James I pursued an aggressive and costly foreign policy, and he failed to exercise fiscal conservatism in his personal finances. (58) Because of King James I's extensive military engagements, his inability to control spending, and his poor relationship with Parliament, the new king found himself increasingly using his powers to issue royal patents as a means to raise money. (59)

Because King James I continued to issue royal monopoly trade privileges, the House of Commons again pushed for adoption of a law to prohibit the King from granting monopolies. (60) Although King James resisted, some signs of change began to appear. For example, in 1610, King James issued his Book of Bounty, in which he stated that exclusive trade privileges were contrary to the common law and his own policies, that he intended to discontinue the privileges, and that he promised not to entertain any new suitors regarding monopolies. (61)

Despite the Book of Bounty, however, James continued to issue monopolies. For example, in 1614 Sir Edward Coke, who was by then the Lord Chief Justice of England struck down a guild incorporated under a royal charter. (62) The King's actions apparently came as no surprise to Parliament. As one member of Parliament quipped, "Yet, as in a Garden, clean weeded, Weeds next Year; so here, by new Patents, Proclamations." (63) As a result, King James's relationship with Parliament continued to worsen, and the King dissolved Parliament whenever there was a disagreement. (64) Not surprisingly, Parliament decided in 1614 to discontinue King James's subsidy until resolutions regarding the granting of monopolies and impositions were reached. (65)

These events after Darcy v. Allen raise a question about what we should make of Sir Edward Coke's report of the famous case. At least one scholar argues that at the time Coke published his report of Darcy v. Allen in 1615, his view on the royal patent power was no longer as controversial, and perhaps his views on the court's rationale evolved as a result of events in the twelve years between the case and his published report. (66) Further, even if Coke's report of Darcy v. Allen did exaggerate the common law's embrace of free trade principles (which cannot be known for sure as there is no official published opinion), it has been described as "exceptionally durable" and has been cited as good law for centuries in both England and the United States, including in some modern case law. (67) Sir Edward Coke's views on monopolies were also not unique to him--similar arguments were made at the same time, and even earlier, in the House of Commons. As previously mentioned, a few decades earlier, Robert Bell argued against granting monopolies in Parliament, stating that "by Licences a few only were enriched, and the multitude impoverished." (68) Even if Coke's report of the case itself was an exaggeration, Coke's rationale and reasoning became the accepted rule of the common law. As will be discussed below, it was Sir Edward Coke's report of The Case of Monopolies--and no other report--that influenced some of the Founding Fathers, the Antifederalists, and the American state governments when they adopted or amended their own constitutions. Thus, even if Coke's views were idiosyncratic or wrong about the law of England, the Framers of the United States Constitution took them as true. Founding-generation Americans might very well have believed there was an ancient English right to be free of monopolies.

2. The Statute of Monopolies

By 1614, the relationship between the King and Parliament had significantly deteriorated, an important precursor to the assertions of Parliamentary authority that helped lead to the English Civil War in the 1640's. (69) King James I abused the royal prerogative and dissolved his first two Parliaments, leading Parliament to refuse to give King James a royal subsidy. (70) Without such a subsidy, the King was forced to find other sources of revenue, turning in large part to the granting of monopoly trade privileges. In the process, however, the entire system of the granting of such privileges broke down:

   The ... system was regulatory chaos.... Patents were granted,
   routinely revoked ... and re-issued to someone else. Eventually,
   revocation became so common that patents being issued included
   language permitting revocation by vote of the Privy Council.
   Increasingly desperate for revenue, James granted broad supervisory
   control over whole industries and with it broad powers to search
   and arrest in-fringers. These powers were predictably subject to
   frequent and profound abuse by the patentees, who were commonly
   unpopular favorites of James ... further fomenting public scorn for
   both the monopolies and the monopolists. The administrative
   mechanism for controlling the patents having broken down, their use
   was completely unmanaged. The patents were economically burdensome
   and politically unpopular, but their use was so poorly administered
   that James received very little of the economic rents they
   generated. (71)


King James I called his third Parliament in 1621, a point at which the issue of royally granted monopolies was prominent on the agenda in the House of Commons. (72) The increased attention to the issue was attributed in part to a severe economic depression at that time, even though the monopolies themselves did not appear to be the primary cause of the depression. (73) The House of Commons established a Committee of Grievances, with Sir Edward Coke, by then a Member of Parliament, as chairman. (74) Coke had been fired as Lord Chief Justice of England by King James for his unwillingness to decide legal cases as the King wished. (75) He entered Parliament as a foe to the King, and, by 1621 was an outspoken critic of royally granted monopolies. A draft bill banning monopolies was quickly reported in Parliament. (76) However, the bill did not pass the House of Lords at that time, in part because of concern among the Lords that the bill would overly constrain the royal prerogative. (77) In an effort to appease the House of Commons, King James issued yet another proclamation cancelling some patents and submitting others to common law courts. (78) He also later established a committee by royal proclamation to hear and address grievances regarding monopolies. (79)

Between 1621 and 1624, debate over foreign policy consumed much of Parliament's time. (80) However, eventually a bill, which became the Statute of Monopolies passed the House of Commons with language that was largely the same as that in the 1621 bill. (81) When the bill reached the House of Lords, the Lords proposed a number of exceptions to the general prohibition on monopolies, such as for the granting of patents and for the chartering of corporations. (82) Sir Edward Coke did not ultimately object to the exception for chartering corporations, because he did not think the Statute of Monopolies applied to them. (83) Further, Parliament wanted to maintain full employment, which the guilds (also exempted from the Statute of Monopolies) and corporations were both thought to have an interest in protecting. (84) The guilds exerted an enormous amount of political power at this time. (85) As a result, during the same term that Parliament passed the Statute of Monopolies, it also passed a seemingly conflicting statute, which permitted only free members of the Cheesemongers and Tallow-chandlers guilds to purchase cheese and butter for resale in London. (86) For the Statute of Monopolies to pass the House of Lords, it also was necessary to alter the act to include exceptions for glassmaking and for alum mines. (87)

Guilds were not necessarily monopolies per se. Historically, guilds had been fraternal associations, which in this context were joined together by a shared craft or trade. (88) However, by obtaining patents or charters within the city in which they operated, the guilds often gained monopoly control over their respective crafts or trades. (89) Because English guilds held more sway with Parliament than with the Crown, the guilds sought support from Parliament to protect them from the royally granted monopolies, which sometimes conflicted with their control of a particular market. (90)

The Statute of Monopolies, as amended by the House of Lords and approved by the House of Commons in 1624, is strongly worded and broad in scope, reaching all types of royally granted monopolies. As Chancellor of New York James Kent later described the law, it was the '"Magna Charta of British Industry,' because it 'contained a noble principle, and secured to every subject unlimited freedom of action, provided he did no injury to others, nor violated statute law." (91) In Section One it provides that:

   [A]ll monopolies and all commissions, grants, licences, charters
   and letters patents heretofore made or granted, or hereafter
   to be made or granted to any person or persons, bodies
   olitic or corporate whatsoever, of or for the sole buying, selling,
   making, working or using of any thing within this realm
   or the dominion of Wales, or of any other monopolies, or of
   power, liberty or faculty, to dispense with any others, or to
   give licence or toleration to do, use, or exercise any thing
   against the tenor or purport of any law or statute ... and all
   proclamations, inhibitions, restraints, warrants of assistance,
   and all other matters and things whatsoever, any way tending
   to the instituting, erecting, strengthening, furthering, or
   countenancing of the same or any of them, are altogether contrary
   to the laws of this realm, and so are and shall be utterly void
   and of none effect, and in no wise to be put in u[s]e or execution.
   (92)


Section Two makes it clear that litigation involving monopolies was subject to trial in the common law courts. (93) Section Six of the Statute contains exceptions for invention patents, which were subject to a time limit:

   [A]ny declaration before mentioned shall not extend to any
   letters patents and grants of privilege for the term of fourteen
   years or under, hereafter to be made, of the sole working
   or making of any manner of new manufactures within
   this realm to the true and first inventor and inventors of
   such manufactures, which others at the time of making such
   letters patents and grants shall not use. (94)


Interestingly, Section Seven exempts grants of monopoly privileges by Parliament:

   [T]his act or anything therein contained shall not in any wise
   extend or be prejudicial to any grant or privilege, power, or
   authority whatsoever heretofore made, granted, allowed, or
   confirmed by any act of parliament now in force, so long as
   the same shall so continue in force. (95)


As previously mentioned, Sections Nine through Fourteen provide exceptions for corporations and specific patents. (96)

King James's response to Parliament's passage of the Statute of Monopolies was predictably negative:

   Touching my Patents in general, I am grieved that you have
   called them in and condemned them upon so short examination.
   I confess I might have passed some upon false suggestion
   and wrong information, but you are not to recall them
   before they be examined by the judges.... Therefore I advise
   you to be careful, that you have a good ground before
   you call for your patents, that you do not defraud patentees....
   I say to you when you judge of patents, hear patiently,
   say not presently, it is against the law, for patents are
   not to be judged unlawful by you. (97)


Thus, again King James questioned Parliament's authority to enact the statute, although he "begrudgingly" assented to it. (98) However, given King James's views, it is perhaps unsurprising that despite the statute's sweeping language, monopoly royal trade privileges continued to be granted well past King James I's reign (which ended with his death in 1625) and through the reign of King Charles I. (99)

Parliament continued to complain and protest against royal monopolies after the adoption of the Statute of Monopolies. For example, monopolies were one of the main issues that confronted the Long Parliament, which lasted from 1640 to 1648, (100) and one of the most famous statements criticizing royal monopolies was made at this time:

   They are a nest of wasps--a swarm of vermin which have
   overcrept the land. Like the frogs of Egypt they have gotten
   possession of our dwellings, and we have scarce a room free
   from them. They sup in our cup; they dip in our dish; they
   sit by our fire. We find them in the dye-fat, wash-bowl, and
   powdering-tub. They share with the butler in his box. They
   will not bait us a pin. We may not buy our clothes without
   their brokage. These are the leeches that have sucked the
   commonwealth so hard that it is almost hectical. (101)


Eventually, Parliament successfully cancelled some monopolies and, in 1691 abolished the Court of Star Chamber, the primary court that had enforced and protected the royally granted monopoly privileges. (102) The Statute of Monopolies came eventually to be seen as a declaration by Parliament of its authority to legislate against royally granted monopolies and as expressing Parliament's strong support for the common law courts. (103) Indeed, Parliament's exercise of power in opposing royal monopolies eventually led to the exertions of parliamentary power that culminated in the English Civil War and the Glorious Revolution of 1688, which took place just decades later. (104) The adoption of the English Bill of Rights of 1689, which ended the king's claim that he could ignore or alter statutory law, confirmed for all time Parliament's power to bind the King by making statutory law. (105)

In some sense the struggle over the Statute of Monopolies was as much a struggle over political power as it was a statement about free trade, as Section Seven of the Statute made monopolies issued by the crown illegal, but permitted such monopolies when issued by Parliament. (106) King James I may only have assented to the Statute of Monopolies because England was then at war with Spain, making the King more willing to concede power to Parliament to ensure funding for the impending war. (107) In any event, the Statute received the royal assent and so it became part of the supreme law of England.

The debate over monopolies should also be viewed in light of the efforts during the late 1620s of King James I's son, King Charles I, to tax Englishmen without parliamentary approval. (108) King Charles I's preferred way of doing so was to arrest wealthy individuals and then say he would only release them in exchange for a forced loan. (109) Outraged, Sir Edward Coke led Parliament in forcing Charles I to sign the Petition of Right, which "protested martial law, billeting, arbitrary taxation, and arbitrary imprisonment." (110) The belief of colonial Americans that they could not be taxed by an English parliament in which they were not represented in part dates back to Parliament's successful efforts in the 1620s to stop monopolies and to prevent the King from taxing his subjects without Parliament's consent. (111)

Although the Statute of Monopolies was a tremendous accomplishment from a constitutional perspective, it had some serious shortcomings because of its various exceptions and its reservation to Parliament of the power to grant monopolies. Why did the Statute pass in the form in which it did? First, members of Parliament had to make compromises for the sake of political expediency as part of the lawmaking process, which necessitated the inclusion of exceptions for politically powerful special interest groups, such as the various guilds. (112) In addition, the guilds who were leading advocates of the Statute of Monopolies because of the power it took away from the Crown, exerted a huge influence on the drafting of the Statute. (113) The guilds obviously did not support the Statute of Monopolies because it stood for free trade, but rather because the Statute would help them economically by protecting the guilds from royal monopolists. (114) Second, the theoretical underpinnings for the benefits of free trade had not yet been expounded by Adam Smith and other modern economists: England was dominated by mercantilism at the time the Statute of Monopolies was enacted. (115) Adam Smith's The Wealth of Nations--the fundamental work in classical economics--was not published until 1776, over 150 years after the Statute. (116) Britain's free trade era did not begin until the mid-nineteenth century.

Nonetheless, the negative effects of monopolies were already recognized by the early seventeenth century, (117) and monopolies were in fact limited in post-Revolutionary England relative to Tudor and early Stuart rule. (118) The limits set on monopolies both in the common law and in the Statute of Monopolies show an awareness of the costs monopolies impose. This concern with the evils of monopolies traveled with Englishmen when they crossed the Atlantic Ocean to settle the New World.

B. Colonial America

The North American colonists generally considered themselves Englishmen, and they believed that English statutes and common law rights and privileges should extend to them as they had applied to their English ancestors. (119) Their inability to vindicate these same rights and privileges was one of the many grievances expressed by the colonists around the time of the writing of the Declaration of Independence:

   [T]he respective colonies are entitled to the common law of
   England ... [and] they are entitled to the benefit of such of the
   English statutes as existed at the time of their colonization;
   and which they have, by experience, respectively found to be
   applicable to their several local and other circumstances. (120)


In practice, courts would find that English statutes applied to the colonies only if the statute so specified. (121) As for application of the common law to the colonists, matters were complicated by the fact that the colonies' interpretation of the "common law" did not always correspond to the English interpretation, and, in any event, the common law in the North American colonies varied according to local circumstances. (122) Moreover, although some language in the thirteen colonial charters suggested that the common law of England extended to the North American colonies, it is unlikely that the King's lawyers who drafted the charters meant to extend full common law rights to the colonies. (123)

The Statute of Monopolies did not state explicitly that it extended to the colonies, so it did not apply, and common law precedents were of questionable application as well. (124) As a result, the colonies enacted their own versions of the Statute of Monopolies both to grant patents for economic development purposes and to place restrictions on the issuance of patents. For example, Massachusetts's 1641 Body of Liberty provided that "[n]o monopolies shall be granted or allowed amongst us, but of such new Inventions that are profitable to the Countrie, and that for a short time." (125) Connecticut passed a similar law in 1672. (126) Compared to the Statute of Monopolies, these acts have been described as "mainly declaratory" and the text of these provisions was much less comprehensive. (127) The assembly was generally left to determine on a case-by-case basis whether to grant a patent and under what terms. (128)

It is essential to note that, if it were not for the Crown's ability to grant royal charters, the colonies themselves would not have existed. All of the original thirteen colonies were established through the grant of royal charters, by which the King established and empowered their respective governments. (129) However, it was the language in the charters that the colonists relied on as their relationship with England deteriorated. For instance, Virginia's charter of 1611-1612 established an assembly to meet four times per year to create laws "[s]o always, as the same be not contrary to our Laws and Statutes of this our Realm of England." (130) Colonial charters were similarly written in the other North American colonies. (131)

On this point, it is important to recognize the influence of Sir Edward Coke, who may be thought of as a hero for the colonists, especially the Puritans who settled in Massachusetts and Connecticut. Discussing the colonists' reliance on Coke for their understanding of the English common law, Theodore Plucknett wrote in a 1927 article that the common law was the "palladium of their civil liberties." (132) Coke proclaimed in Bonham's Case that the common law governed parliamentary acts, (133) and the colonists repeatedly relied on this declaration to argue that the colonies could use common law to oppose British regulations. (134) For example, the Massachusetts Bay Colony relied directly on Coke when King James II abrogated its original colonial charter in 1684 and attempted to consolidate all the New England colonies, along with the colonies of New York and New Jersey, in a so-called Dominion of New England. This event "provoked an outspoken claim [of] independence" and Bostonians were said to "hold forth a law book, & quote the Authority of the Lord Cook [sic] to Justifie their setting up for themselves; pleading the possession of 60 years against the right of the Crown." (135) Sir Edward Coke's name and authority were also used by James Otis in Paxton's Case, challenging the writs of assistance that provided general search warrants, often in customs cases. (136) In fact, it is fair to say that Otis's entire argument in Paxton's Case relied upon Coke and Bonham's Case! (137)

Another example of the hold that Sir Edward Coke had on the legal thinking of colonial Americans comes from the controversy over the Stamp Act of 1765. This Act taxed the colonists without their consent, which elicited the complaint that the Act "violated 'Magna Carta and the natural rights of Englishmen, and therefore[,] according to Lord Coke[,] [was] null and void.'" (138) Samuel Adams expressed a similar view when he said that "whether Lord Coke has expressly asserted it or not, ... an act of parliament made against Magna Charta in violation of its essential parts, is void." (139) As the Royal Governor of Massachusetts, Thomas Hutchinson, complained, the colonists took "advantage of a maxim they find in Lord Coke that an Act of Parliament against Magna Carta or the peculiar rights of Englishmen is ipso facto void." (140) In addition to relying on Bonham's Case, when John Adams, writing under the pseudonym "Novanglus," asserted in 1774 that Parliament had no authority over the colonies and that each was a separate realm under the king with its own independent legislature, he started his analysis with an argument from Coke's Institutes. (141)

Thus, the American colonists, relying in part on Coke, believed that all the constitutional protections afforded to Englishmen also applied to them--including the protections conferred by the Statute of Monopolies (142) and by Darcy v. Allen. (143) For example, William Penn, the founder of the Province of Pennsylvania and a proponent of the idea that the rights of Englishmen extended to those in the colonies, (144) wrote about the evil of monopolies and the harm they caused. In a section of a 1687 pamphlet called The Excellent Priviledge of Liberty & Property Being the Birth-Right of the Free-Born Subjects of England, William Penn summarized the Statute of Monopolies and Darcy v. Allen, writing: "Generally all Monopolies are against the great charter because they are against the Liberty and Freedom of the Subject, and against the Law of the Land." (145) Thus, Thomas Barnes is quite right when he says: "Do not examine too closely the extent to which Sir Edward Coke fell in behind Citizen Sam. Scores of others of our Founding Fathers had no doubt which side Lord Coke was on, and none questioned the magnitude of the aid he gave them." (146)

England's continued practice of issuing monopolies was a direct cause of the American Revolution. England enacted an extensive set of laws granting English merchants monopolies in colonial trade for a variety of markets--from manufactured goods to all kinds of raw materials. (147) Black markets arose in the colonies as a response to England's mercantilist trade policy. (148) As a result, the English mercantile laws were enforced with great intrusiveness, which in turn had grave consequences for England's relationship with the American colonies. (149) For instance, although the main point of protest in Boston over the Tea Act was taxation without representation, the Boston Tea Party was an act against the British government and the East India Company, which had a monopoly over tea importations to the colonies. (150) The havoc wreaked by the English monopoly system on England's relationship with the American colonies cannot be overstated:

   [T]he efforts of the English government, backed by English
   merchants and manufacturers, to deny to the Americans the
   right to compete in foreign markets and to secure the benefits
   of foreign competition was one of the most potent causes of
   the American Revolution. The spirit of monopoly which had
   permeated English business life for centuries and worked injury
   in so many ways now wrought irreparable harm to the
   British Empire by bringing about the loss of invaluable dominions
   and the irrevocable division of the English people. (151)


Thus, the English experience with monopolies influenced colonial America in two ways. First, some colonies adopted their own versions of the Statute of Monopolies, because the English Statute of Monopolies and common law were generally thought not to extend to the colonies. (152) Second, England's monopolistic trade laws led to protest by the colonists and eventually the American Revolution, just as King James I's monopolies had so outraged Englishmen in Parliament in the 1620s and led to the English Civil War in the 1640s. (153) In both instances, complaints were made about taxation without representation, and in both instances monopolies were in part to blame. King George III, like James I, imposed a double burden on his people by both taxing his people directly and by indirectly taxing them through the issuance of royal monopolies. The colonists were both taxed on imports and subjected to British control over foreign trade without representation in Parliament.

II. MONOPOLIES IN THE UNITED STATES

A. At the Founding

The evils of the English monopolies and their impact on the American colonists guaranteed that the right to be free from monopolies would merit attention during the drafting and ratifying of the federal Constitution. Several of the Founders themselves, as well as the Antifederalists and the state ratifying conventions, took the position that the United States Constitution should have an antimonopoly clause. (154)

George Mason and Thomas Jefferson led the way in urging that the new U.S. Constitution contain an antimonopoly clause. (155) Mason's concern about the evils of monopoly coupled with the grants of power to Congress in the Commerce Clause and the Necessary and Proper Clause partly explains his refusal to sign the proposed Constitution after the Philadelphia Convention. (156) Mason was concerned that the Commerce Clause and the Necessary and Proper Clause might be used to regulate navigation in favor of the northern and eastern states by granting monopolies in trade:

   By requiring only a Majority to make all commercial and
   navigation Laws, the five Southern States (whose Produce
   and Circumstances are totally different from that of the eight
   Northern and Eastern States) will be ruined; for such rigid
   and premature Regulations may be made, as will enable the
   Merchants of the Northern and Eastern States not only to demand
   an exorbitant Freight, but to monopolize the Purchase
   of the Commodities at their own Price, for many years: to the
   great Injury of the landed Interest, and Impoverishment of the
   People: and the Danger is the greater, as the Gain on one Side
   will be in Proportion to the Loss on the other....

   Under their own Construction of the general Clause... the
   Congress may grant Monopolies in Trade and Commerce.... (157)


George Mason's concern was not exactly far-fetched given that the English colonial government had misused its powers over trade in precisely this way. (158) Indeed, the English abuse of power is similar to the federal government's abuses of power in the nineteenth century--after 1861, the newly ascendant Republican Party protected northern manufacturing interests to the disadvantage of the South with a policy of extremely high protectionist tariffs. (159)

Thomas Jefferson also hated monopolies and believed that they should be constitutionally banned. (160) In a letter to James Madison, complaining about the lack of a Bill of Rights in the proposed Constitution, Jefferson put the principle of freedom from government monopolies on par with all of the other rights now enshrined in the Bill of Rights, such as the freedom of the press and of religion:

   I will now add what I do not like. First the omission of a bill
   of rights providing clearly and without the aid of sophisms
   for freedom of religion, freedom of the press, protection
   against standing armies, restriction against monopolies, the
   eternal and unremitting force of the habeas corpus laws, and
   trials by jury.... Let me add that a bill of rights is what the
   people are entitled to against every government on earth,
   general or particular, and what no just government should
   refuse, or rest on inference. (161)


Specifically on the issue of monopolies, Jefferson later wrote:

   [It] is better to ... abolish ... Monopolies, in all cases, than
   not to do it in any.... [Slaying there shall be no monopolies
   lessens the incitements to ingenuity ... but the benefit even
   of limited monopolies is too doubtful to be opposed to that
   of their general suppression. (162)


In response, Madison argued that monopolies should be allowed in the limited circumstances where they were beneficial, and that it was thus necessary not to have an outright prohibition against them:

   With regard to Monopolies, they are justly classed among the
   greatest nuisances in Government. But is it clear that as
   encouragements to literary works and ingenious discoveries, they
   are not too valuable to be wholly renounced? Would it not suffice
   to reserve in all cases a right to the public to abolish the
   privilege at a price to be specified in the grant of it? (163)


In fact, Madison proposed during the Philadelphia convention to give the federal government the power to grant "charters of incorporation." (164) However, this proposal was voted down because, as Rufus King of Massachusetts argued, it might lead to "mercantile monopolies," as had happened in England before the American Revolution. (165) George Mason also objected to giving Congress the power to grant charters of incorporation, arguing that this power would lead to "monopolies of every sort." (166)

Jefferson refused to give in after reviewing a draft of the Bill of Rights, and he wrote to Madison again saying that he would have liked to have seen the following provision added to the Bill of Rights:

   Art. 9. Monopolies may be allowed to persons for their own
   productions in literature and their own inventions in the arts for
   a term not exceeding--years but for no longer term and for no other
   purpose. (167)


Jefferson did not say what he meant by the word "monopoly," but Samuel Johnson's dictionary at the time defined the term as "the exclusive privilege of selling any thing." (168)

Interestingly, Jefferson also opposed the creation of the federal Post Office (169)--perhaps the most venerable monopoly in American history. Jefferson wrote to James Madison that he thought the newly created Post Office was "a source of boundless patronage to the executive" and would provide

   [J]ob[s] to members of Congress & their friends, and a bottomless
   abyss of public money. You will begin by only appropriating the
   surplus of the post office revenues; but the other revenues will
   soon be called into their aid, and it will be a scene of eternal
   scramble among the members, who can get the most money wasted in
   their State; and they will always get most who are meanest. (170)


As will be discussed in more depth below, Jefferson's opposition to the postal monopoly was shared by Lysander Spooner, the radical political reformer and abolitionist who challenged the federal postal monopoly in the mid-nineteenth century by creating a direct competitor, the American Letter Mail Company. (171)

Jefferson was not the only Framer to express concern about the Constitution and grants of monopoly privilege; the Antifederalists also spoke out about the evils and dangers of monopoly. The most outspoken of the Antifederalists on this topic was Agrippa. (172) Looking to Europe's experience with monopolies in trade, Agrippa recognized that the main threat to competition in most countries did not come from the market, but, rather, from the government itself:

   In most countries of Europe, trade has been confined by exclusive
   charters. Exclusive companies are, in trade, pretty much like an
   aristocracy in government, and produce nearly as bad effects....
   [I]n the British islands all these circumstances together have not
   prevented them from being injured by the monopolies created there.
   Individuals have been enriched, but the country at large had been
   hurt ... because they consequentially defeat the trade of the
   out-ports, and are also injurious to the general commerce, by
   enhancing prices and destroying that rivalship which is the great
   stimulus to industry. (173)


Other Antifederalists voiced the same concerns about monopolies. "A Son of Liberty" feared that "monopolies in trade, [would be] granted to the favorites of government, by which the spirit of adventure will be destroyed, and the citizens subjected to the extortion of those companies who will have an exclusive right, to engross the different branches of commerce." (174) The Federal Farmer, likewise wrote that "[a]s monopolies in trade perhaps, can in no case be useful, it might not be amiss to provide expressly against them." (175)

Agrippa called for strong restraints on the ability of the federal government to grant monopolies in the new Constitution, recognizing that the "unlimited power over trade, domestic as well as foreign, is another power that will more probably be applied to a bad than to a good purpose." (176) Echoing Adam Smith, whose book, The Wealth of Nations, was fittingly first published in 1776, Agrippa argued:

   The freedom that every man, whether his capital is large or
   small, enjoys of entering into any branch that pleases him,
   rouses a spirit of industry and exertion, that is friendly to
   commerce. It prevents that stagnation of business which
   generally precedes public commotions. Nothing ought to be
   done to restrain this spirit. (177)


Six states wanted to include provisions banning monopolies and grants of special privilege in the U.S. Constitution: New Hampshire, Massachusetts, New York, North Carolina, Virginia, and Rhode Island. (178) Massachusetts's proposal on February 6, 1788, was that the Constitution be amended to state "[t]hat Congress erect no company with exclusive advantages of commerce." (179) New Hampshire and North Carolina proposed similar amendments. (180) New York recommended "[t]hat the congress do not grant monopolies or erect any Company with exclusive Advantages of Commerce." (181) Rhode Island's belated ratification of the Constitution in 1790 recommended the same language as New York, although it was too late to have an influence. (182) Virginia's proposal was "[t]hat no man or set of men are entitled to separate or exclusive public emoluments or privileges from the community, but in consideration of public services, which not being descendible, neither ought the offices of magistrate, legislator, or judge, or any other public office, to be hereditary." (183) All of these proposed antimonopoly amendments to the Constitution came from the state ratifying conventions, but since the task of writing the federal Bill of Rights in response to the requests for amendments from the States fell to newly elected Congressman James Madison, an antimonopoly clause was omitted from the federal Bill of Rights. (184) Madison was stubborn, persistent, and successful in keeping an antimonopoly clause out of the Founders' Constitution! This omission is remarkable since even Alexander Hamilton, a notorious proponent of a strong central government and of mercantilism, acknowledged the pressure from the States for an antimonopoly clause. As Hamilton said regarding the constitutionality of a national bank:

   It is remarkable that the State conventions, who had proposed
   amendments in relation to this point, have most, if not
   all of them, expressed themselves nearly thus: Congress shall not
   grant monopolies, nor erect any company with exclusive advantages
   of commerce! Thus, at the same time, expressing their sense, that
   the power to erect trading companies or corporations was inherent
   in Congress, and objecting to it no further than as to the grant of
   exclusive privileges. (185)


Interestingly, only one of the states that sought a federal antimonopoly clause (North Carolina) actually banned monopolies in its own state constitution. (186) The scarcity of state bans suggests that there was greater concern about monopoly abuses at the federal level than at the state level. This fact makes some sense when we remember that colonial America had been confronted with English monopolies backed by a powerful central government. (187) It must also be noted that, in drafting their own state constitutions, the States focused more on the structures of state government than on producing state bills of rights. (188) Only seven states had separate state bills of rights at the Founding, while four others included some protection of rights within their constitutions. (189)

Of course, no ban on monopolies made its way into the federal Constitution or Bill of Rights. This is probably in large part due to Madison's view that representational government at the federal level would prevent a repeat of the English experience with monopolies:

   Is there not also infinitely less danger in this abuse in our
   Governments than in most others? Monopolies are sacrifices
   of the many to the few. Where the power is in the few it is
   natural for them to sacrifice the many to their own partialities
   and corruptions. Where the power as with us is in the
   many not in the few the danger cannot be very great that the
   few will be thus favored. It is much more to be dreaded that
   the few will be unnecessarily sacrificed to the many. (190)


Madison made it clear elsewhere that the right to be free of monopolies was of vital importance. (191) He expressed his recognition of the importance of the right of individuals to earn a living in their trade when he proclaimed:

   That is not a just government, nor is property secure under
   it, where arbitrary restrictions, exemptions, and monopolies
   deny to part of its citizens that free use of their faculties, and
   free choice of their occupations, which not only constitute
   their property in the general sense of the word; but are the
   means of acquiring property strictly so called. (192)


B. Monopolies and the Original Federal Constitution

There are two provisions in the federal Constitution that relate closely to the English history with monopolies. First, the Patent and Copyright Clause in Article 1, Section 8 provides that "Congress shall have the Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (193) As discussed above, Thomas Jefferson criticized the inclusion of this clause in his correspondence with James Madison. (194) Just as the Statute of Monopolies in 1624 explicitly left some monopolies in place, (195) so too did the Framers of the U.S. Constitution allow for monopolies in the form of copyrights and patents for new writings and inventions so as to promote industry and creativity. (196)

The other provision in the original Constitution that was relevant to the monopoly issue was the Privileges and Immunities Clause of Article IV, Section 2, which states that "[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." (197) Similar privileges and immunities clauses had also been included in many of the colonial charters and in the Articles of Confederation, which was in some respects America's first constitution. (198) It is clear from an early draft of the Articles of Confederation that the "privileges" and "immunities" that the Articles of Confederation protected were the traditional rights that the American people had always possessed as Englishmen. This early draft of the Articles provided that "It]he Inhabitants of each Colony shall henceforth always have the same Rights, Liberties, Privileges, Immunities and Advantages in the other Colonies, which the said Inhabitants now have...." (199) Of course, those traditional rights of Englishmen included the right to be free from monopolies, (200) so this right was conferred on Americans through the Articles of Confederation, and it informs the original meaning of the Privileges and Immunities Clause of Article IV.

This interpretation of the Article IV Privileges and Immunities clause as banning monopolies was recognized in the years following the adoption of the Federal Constitution. While riding circuit in 1823, Justice Washington explained the meaning of the Privileges and Immunities Clause of Article IV in Corfield v. Coryell. (201) Corfield involved a challenge to a New Jersey law forbidding nonresidents from gathering oysters and clams. (202) Although Justice Washington upheld the law, he explained that the Privileges and Immunities Clause protected a large number of fundamental rights:

   We feel no hesitation in confining these expressions to those
   privileges and immunities which are, in their nature, fundamental;
   which belong, of right, to the citizens of all free governments;
   and which have, at all times, been enjoyed by the citizens of the
   several states which compose this Union, from the time of their
   becoming free, independent, and sovereign. What these fundamental
   principles are, it would perhaps be more tedious than difficult to
   enumerate. They may, however, be all comprehended under the
   following general heads: Protection by the government; the
   enjoyment of life and liberty, with the right to acquire and
   possess property of every kind, and to pursue and obtain happiness
   and safety; subject nevertheless to such restraints as the
   government may justly prescribe for the general good of the whole.
   The right of a citizen of one state to pass through, or to reside
   in any other state, for purposes of trade, agriculture,
   professional pursuits, or otherwise; to claim the benefit of the
   writ of habeas corpus; to institute and maintain actions of any
   kind in the courts of the state; to take, hold and dispose of
   property, either real or personal; and an exemption from higher
   taxes or impositions than are paid by the other citizens of the
   state; may be mentioned as some of the particular privileges and
   immunities of citizens, which are clearly embraced by the general
   description of privileges deemed to be fundamental: to which may be
   added, the elective franchise, as regulated and established by the
   laws or constitution of the state in which it is to be exercised.
   These, and many others which might be mentioned, are, strictly
   speaking, privileges and immunities, and the enjoyment of them by
   the citizens of each state, in every other state, was manifestly
   calculated (to use the expressions of the preamble of the
   corresponding provision in the old articles of confederation) 'the
   better to secure and perpetuate mutual friendship and intercourse
   among the people of the different states of the Union.' (203)


Justice Washington's dictum seems to recognize federal constitutional protection for broad economic rights, including the right to choose a trade or profession. As we will discuss shortly, Justice Washington's definition of privileges and immunities strongly influenced the drafters of the Privileges or Immunities Clause of the Fourteenth Amendment, (204) and later the Justices of the U.S. Supreme Court in their landmark decision in the Slaughter-House Cases, (205) which interpreted that clause.

The antimonopoly principle was also evident early in our federal constitutional history in the Supreme Court's Contracts Clause case law. Nineteenth-century Contracts Clause cases, like Trustees of Dartmouth College v. Woodward (206) in 1819 and Charles River Bridge v. Warren Bridge (207) in 1837, reflect concerns about monopoly. In Woodward, the Marshall Court held that Dartmouth College's corporate charter, which was granted by King George III in 1769, was a private contract between two parties and was protected by the Contracts Clause in Article I, Section 10. (208) Thus, although the state argued that the charter was in fact a license to do business that the state could subsequently alter, (209) the Supreme Court held that the New Hampshire legislature could not alter the corporation's charter by changing the identity of the corporation's trustees, because doing so impaired a private contract among private individuals. (210) The Woodward case was thus crucial in empowering private corporations, because once corporations were created, the state could not subsequently take away their corporate charter rights. (211) The reasoning of the Court's opinion applied to for-profit corporations, as well as to non-profit corporations like Dartmouth College, (212) and made it clear that while the English government could revoke corporate "monopoly" powers, (213) the State governments in the United States could not do so without running afoul of the Contracts Clause. (214) This holding greatly empowered U.S. corporations and contributed substantially to U.S. economic growth in the nineteenth century. (215) Once corporations were no longer viewed as the monopoly recipients of special governmental grants of privilege, they were able to play a "rapidly growing part in the economy." (216)

In 1837, the Taney Court modified and limited the Woodward decision in Charles River Bridge v. Warren Bridge. (217) Massachusetts had contracted in 1785 with the Charles River Bridge Company to build and maintain a toll bridge across the Charles River and, in 1792, the state legislature extended the charter grant to the Charles River Bridge Company from forty to seventy years. (218) The population in Boston grew extremely rapidly, and in 1828 the state legislature changed its mind about the seventy-year charter and allowed another company to build a competing bridge nearby--the Warren Bridge. (219) This new bridge would initially charge a fee but would eventually become free for travelers to use. (220) Once the Warren Bridge became free to use, the value of the Charles River Bridge, its owners alleged, would be destroyed. (221) The Charles River Bridge Company sued, arguing that the Contracts Clause protected its corporate charter monopoly. (222) The company argued that the state of Massachusetts could not breach its contract with the Charles River Bridge Company that gave the latter exclusive rights to operate a toll bridge over the Charles River by allowing another company to manage a competing free bridge. (223)

Chief Justice Roger B. Taney, a Jacksonian, held that in cases in which a corporation has an agreement with the government for exclusive monopoly-like privileges, the terms of the agreement should be construed as narrowly as possible, because monopolies were disfavored as a matter of both constitutional history and public policy. (224) Chief Justice Taney held that the charter merely granted the Charles River Bridge Company the right to build a bridge but not necessarily the exclusive privilege of maintaining the only bridge across the river. (225) This view would undoubtedly have surprised the original builders of the Charles River Bridge had they known as much back in 1785 when the bridge was built. Chief Justice Taney was particularly concerned that upholding the charter as a grant of exclusive privilege would promote monopoly, which he viewed as contrary to English law and to American law by adoption:

   Borrowing, as we have done, our system of jurisprudence from the
   English law; and having adopted, in every other case, civil and
   criminal, its rules for the construction of statutes; is there any
   thing in our local situation, or in the nature of our political
   institutions, which should lead us to depart from the principle
   where corporations are concerned? ... We think not; and it would
   present a singular spectacle, if, while the courts in England are
   restraining, within the strictest limits, the spirit of monopoly,
   and exclusive privileges in nature of monopolies, and confining
   corporations to the privileges plainly given to them in their
   charter; the courts of this country should be found enlarging these
   privileges by implication; and construing a statute more
   unfavourably to the public, and to the rights of community, than
   would be done in a like case in an English court of justice. (226)


Chief Justice Taney explained that if the charter given to the Charles River Bridge company were construed broadly as a grant of an exclusive privilege to operate a bridge for seventy years, it would become difficult for courts to draw a line as to how far that right should extend. (227) For example, charters for turnpike roads were by 1837 facing competition from charters issued to newly created railroads. (228) If turnpike charters were interpreted broadly by the courts, then the holders of turnpike charters might use their old charters to prevent technological change by challenging the competing railroad charters. (229) As Stanley Kutler explains in his book on the Charles River Bridge case, the Charles River Bridge Company was viewed as a monopoly "imposed upon the communities because of special legal privileges." (230) Jacksonians, like Chief Justice Taney, were ardently opposed to government grants of monopoly and special privileges to the powerful and wealthy (231)--a phenomenon that Americans today call "crony capitalism."

Justice Joseph Story, the closest ally of then-deceased Chief Justice John Marshall, concurred in the decision in the Woodward case but wrote a scathing dissent in Charles River Bridge. He argued that the Charles River Bridge Company's exclusive privilege should be protected by the Contracts Clause. (232) Despite his association with the Democratic-Republican Party, Justice Story was greatly influenced by Alexander Hamilton and Chief Justice John Marshall, and thus believed that private property rights should be strongly protected and that commerce should be promoted. He saw the Charles River Bridge case not as a defeat for crony capitalism, but as a violation of private property rights. (233) Justice Story was opposed to Jacksonian democracy because he feared that popular majorities would invade the private property rights of the wealthy and would hurt private businesses. The tension between the views of Justices Taney and Story--the protection of corporate property rights granted by the state versus an aversion to special laws and monopoly privileges--helped to shape the debate over the Fourteenth Amendment in the three decades after the Charles River Bridge case was decided.

Importantly, the Charles River Bridge case had an "immediate and widespread impact at the state level." (234) As Stanley Kutler notes in his book about the case, it "opened the floodgates and courts now directly confronted and denied exaggerated implied claims of vested rights. The state court reports for the next two decades are replete with cases implementing the Charles River Bridge doctrine." (235) For example, in Mohawk Bridge Co. v. Utica & Schenectady Rail Road Co., (236) a New York court applied Charles River Bridge's rule of strict construction to hold that a bridge proprietor's charter did not prohibit competition from a ferry. (237) Similarly, in Tuckahoe Canal Co. v. Tuckahoe & James River Rail Road Co., (238) the Supreme Court of Appeals of Virginia held that a canal company's charter did not give the canal company an exclusive right of way, and that a railroad company could construct bridges that would compete with the canal. (239) Fearing the tendency of holders of special privileges to claim more exclusive rights than had originally been intended, the court noted that "monopoly is very ingenious in extending its rights and enlarging its pretensions." (240)
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Title Annotation:I. A Brief History: How Monopolies Came to Be Hated through II. Monopolies in the United States B. Monopolies and the Original Federal Constitution, p. 983-1023
Author:Calabresi, Steven G.; Leibowitz, Larissa C.
Publication:Harvard Journal of Law & Public Policy
Date:Jun 22, 2013
Words:11709
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