Pure Food and Drug Act relationship between federal government and private business

Approved July 2, 1890, The Sherman Anti-Trust Act was the first Federal act that outlawed monopolistic business practices.

The Sherman Anti-trust Act of 1890 was the first measure passed by the U.S. Congress to prohibit trusts. It was named for Senator John Sherman of Ohio, who was a chairman of the Senate finance committee and the Secretary of the Treasury under President Hayes.

Several states had passed similar laws, but they were limited to intrastate businesses. The Sherman Antitrust Act was based on the constitutional power of Congress to regulate interstate commerce. (For more background, see previous milestone documents: the Constitution, Gibbons v. Ogden, and the Interstate Commerce Act.)

The Sherman Anti-Trust Act passed the Senate by a vote of 51–1 on April 8, 1890, and the House by a unanimous vote of 242–0 on June 20, 1890. President Benjamin Harrison signed the bill into law on July 2, 1890.

A trust is an arrangement by which stockholders in several companies transfer their shares to a single set of trustees. In exchange, the stockholders receive a certificate entitling them to a specified share of the consolidated earnings of the jointly managed companies.

Toward the end of the 19th century, trusts come to dominate a number of major industries, destroying competition. For example, on January 2, 1882, the Standard Oil Trust was formed. Attorney Samuel Dodd of Standard Oil first had the idea of a trust. A board of trustees was set up, and all the Standard properties were placed in its hands. Every stockholder received 20 trust certificates for each share of Standard Oil stock. All the profits of the component companies were sent to the nine trustees, who determined the dividends. The nine trustees elected the directors and officers of all the component companies. This allowed Standard Oil to function as a monopoly since the nine trustees ran all the component companies.

The Sherman Anti-Trust Act authorized the federal government to institute proceedings against trusts in order to dissolve them. Any combination "in the form of trust or otherwise that was in restraint of trade or commerce among the several states, or with foreign nations" was declared illegal. Persons forming such combinations were subject to fines of $5,000 and a year in jail. Individuals and companies suffering losses because of trusts were permitted to sue in federal court for triple damages.

The act was designed to restore competition, but it was loosely worded and failed to define such critical terms as "trust," "combination," "conspiracy," and "monopoly." Five years later, the Supreme Court dismantled the act in United States v. E. C. Knight Company (1895). The Court ruled that the American Sugar Refining Company, one of the defendants in the case, had not violated the law even though the company controlled about 98% of all sugar refining in the United States. The Supreme Court reasoned that the company’s control of manufacture did not constitute a control of trade.

The E. C. Knight ruling seemed to end any government regulation of trusts. In spite of this, during President Theodore Roosevelt’s "trust busting" campaigns at the turn of the century, the Sherman Anti-Trust Act was used with considerable success. In 1904, the Supreme Court upheld the government’s suit to dissolve the Northern Securities Company in Northern Securities Co. v. United States. By 1911, President Taft had used the act against the Standard Oil Company and the American Tobacco Company. In the late 1990s, in another effort to ensure a competitive free market system, the federal government used the Sherman Anti-Trust Act, then over 100 years old, against the giant Microsoft computer software company.

While Wiley was stumping for a law, muckraking journalists such as Samuel Hopkins Adams exposed in vivid detail the hazards of the marketplace. In fact, the nauseating condition of the meat-packing industry that Upton Sinclair captured in The Jungle was the final precipitating force behind both a meat inspection law and a comprehensive food and drug law. (A poster of the 1913 movie adaptation of Sinclair's novel is pictured at right, courtesy of the Sinclair Archives, Lilly Library, Indiana University, through James Harvey Young's Pure Food: Securing the Federal Food and Drugs Act of 1906.) Since 1879, nearly 100 bills had been introduced in Congress to regulate food and drugs; on 30 June 1906 President Roosevelt signed the Food and Drugs Act, known simply as the Wiley Act, a pillar of the Progressive era.

Pure Food and Drug Act relationship between federal government and private business

This act, which the Bureau of Chemistry was charged to administer, prohibited the interstate transport of unlawful food and drugs under penalty of seizure of the questionable products and/or prosecution of the responsible parties. The basis of the law rested on the regulation of product labeling rather than pre-market approval. Drugs, defined in accordance with the standards of strength, quality, and purity in the United States Pharmacopoeia and the National Formulary, could not be sold in any other condition unless the specific variations from the applicable standards were plainly stated on the label. Foods were not defined according to analogous standards, but the law prohibited the addition of any ingredients that would substitute for the food, conceal damage, pose a health hazard, or constitute a filthy or decomposed substance. Interpretations of the food provisions in the law led to many, sometimes protracted, court battles. If the manufacturer opted to list the weight or measure of a food, this had to be done accurately. Also, the food or drug label could not be false or misleading in any particular, and the presence and amount of eleven dangerous ingredients, including alcohol, heroin, and cocaine, had to be listed.

The bureau's regulatory emphasis under Wiley centered on foods, which he believed posed a greater public health problem than adulterated or misbranded drugs. Wiley generally held a dim view of chemical additives to foods, championing an approach that considered most to be unnecessary adulterants. On this he clashed often with Secretary of Agriculture James Wilson, and on occasion President Roosevelt himself had to decide government policy on food regulation. Wiley's personal administrative authority under the act was diluted early on when Wilson created a Board of Food and Drug Inspection in 1907 to establish agency policy in enforcing the law. Similarly, the creation of the Referee Board of Consulting Scientific Experts in the following year to advise the department on safety issues associated with food additives undercut Wiley's scientific authority. The bureau had been developing informal standards for many foods in collaboration with outside experts since 1903, an activity that continued after the 1906 act. However, courts differed on the role these informal standards could play in cases. Separate laws established standards for some specific foods, such as apples and butter, as well as for canned foods.

Pure Food and Drug Act relationship between federal government and private business

Burton J. Howard, chief of the Bureau of Chemistry's microchemical laboratory, is shown in the right foreground in this photo from the 1920s. Howard developed a quantitative method to detect mold in ketchup that proved to be indispensable in establishing food adulteration in court.

After Wiley's resignation in 1912, the bureau devoted more effort to drug regulation, with some emphasis on the so-called patent medicines. While the law was much clearer about drug standards than standards for foods, misbranding was the source of considerable controversy in the regulation of drugs. A year earlier the Supreme Court ruled that the law did not--contrary to the government's interpretation--apply to false therapeutic claims. An amendment in the year of Wiley's resignation attempted to correct the language of the law. But it put the bureau in the difficult position of attempting to prove in court that manufacturers of drugs labeled with false therapeutic claims intended to defraud consumers. The bureau lost several cases against egregious products, but seizures of misbranded and adulterated drugs nevertheless increased in the 1920s and 1930s.

Next: The 1938 Food, Drug, and Cosmetic Act

Which of the following is an example of the changing relationship between the federal government and private business 15b?

The relationship between the federal government and private business has been characterized by a growing role of the government in regulating private business including the passage of anti-trust acts, the Interstate Commerce Act, and various legislative acts, including the Pure Food and Drug Act and the Family and ...

Why did businesses support the Pure Food and Drug Act quizlet?

Why did businesses support the Pure Food and Drug Act? They understood that greater public confidence in the quality of the products helped their sales. By 1912, the Socialist Party: had elected scores of local officials.

What were the costs and benefits of the Pure Food and Drug Act?

The benefit of the act was that consumers could trust that they would not become sick from the food they bought and that the ingredients on the label were accurate. The main cost is that companies raised the prices of their goods.

What was the significance of the Pure Food and Drug Act of 1906 quizlet?

The Pure Food and Drug Act of 1906 prohibited the sale of misbranded or adulterated food and drugs in interstate commerce and laid a foundation for the nation's first consumer protection agency, the Food and Drug Administration (FDA).