Supreme Court Dismisses U.S. Steel Antitrust Case, Ruling Size Alone Not Illegal - Enforcement Ends Until 1945

The U.S. Supreme Court, in a 4-3 decision written by Justice Joseph McKenna, dismissed the government’s antitrust case against U.S. Steel Corporation, the world’s first billion-dollar company created through J.P. Morgan’s 1901 merger. The Court ruled: “We must adhere to the law, and the law does not make mere size an offense, or the existence of unexerted power an offense.” Despite finding that U.S. Steel’s famous “Gary dinners”—price-fixing meetings held by chairman Elbert Henry Gary with steel producers from 1907-1911—violated Section 1 of the Sherman Act, the Court paradoxically ruled this insulated U.S. Steel from Section 2 monopolization liability. The majority reasoned that U.S. Steel “was formed to monopolize the industry, but failed; it demonstrated its impotence by fixing prices with rivals instead of crushing them, as Standard Oil had done.” The Court accepted that illegal practices had been “abandoned as futile months before this suit was begun.” Justice Day’s dissent, joined by Justices Pitney and Clarke, argued that “this record seems to me to leave no fair room for a doubt that the defendants…were formed in violation of the Sherman Act” and that “for many years this unlawful organization exerted its power to control and maintain prices by pools, associations, trade meetings, and as the result of discussion and agreements at the so-called ‘Gary Dinners.’” The ruling’s interpretation of Standard Oil’s “rule of reason” essentially ended governmental enforcement of Section 2 monopolization until the 1945 Alcoa case—a 25-year enforcement vacuum. The decision immediately triggered a new merger movement in steel and other American industries that lasted two decades, entrenching corporate consolidation.