May 15, 1911 | Supreme Court Orders Standard Oil Company to Be Broken Up - The New York ...
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`May 15, 1911 | Supreme Court Orders
`Standard Oil to Be Broken Up
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`By The Learning Network May 15, 2012 4:02 am
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`On May 15, 1911, the Supreme Court ordered the dissolution of Standard Oil
`Company, ruling it was in violation of the Sherman Antitrust Act.
`
`The Ohio businessman John D. Rockefeller entered the oil industry in the 1860s
`and in 1870, and founded Standard Oil with some other business partners. Mr.
`Rockefeller expanded Standard Oil by buying its competitors and using its size to
`receive benefits not available to smaller companies, like, for example, discount rates
`from railroads.
`
`In 1882, Mr. Rockefeller joined with his partners to create the Standard Oil
`Trust, which controlled a large number of companies that allowed Standard to control
`refining, distribution, marketing and other aspects of the oil industry. Standard
`eventually gained control of nearly 90 percent of the country’s oil production.
`
`Standard’s domination of the oil industry came under criticism from both the
`public and the government. In 1890, Congress passed the Sherman Antitrust Act in
`an attempt to restrain the power of trusts, banning “every contract, combination in
`the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”
`Standard lost a Sherman-related lawsuit in Ohio in 1892, but it was later able to
`incorporate in New Jersey as a holding company.
`
`In the early 1900s, after Mr. Rockefeller had retired from Standard, the
`muckraking journalist Ida Tarbell published a series of articles in McClure’s
`magazine. The series portrayed Mr. Rockefeller and Standard Oil as ruthless and
`immoral, and the articles contributed to public outrage against Standard.
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`May 15, 1911 | Supreme Court Orders Standard Oil Company to Be Broken Up - The New York ...
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`The Department of Justice filed a federal antitrust lawsuit against Standard in
`1909, contending that the company restrained trade through its preferential deals
`with railroads, its control of pipelines and by engaging in unfair practices like price-
`cutting to drive smaller competitors out of business.
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`The Supreme Court ruled against Standard “on the ground that it is a
`combination in unreasonable restraint of inter-State commerce,” The New York
`Times explained, adding that the court “thus definitely reads the word ‘unreasonable’
`into the law.” The ruling, that only “unreasonable” restraint of trade constitutes a
`monopoly, was received by antitrust advocates as a narrow decision that favored the
`trusts. The Times reported that “the opinion prevailed that the decision was distinctly
`favorable to ‘big business.’”
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`The court’s decision forced Standard to break into 34 independent companies
`spread across the country and abroad. Many of these companies have since split,
`folded or merged; today, the primary descendents of Standard include ExxonMobil,
`Chevron and ConocoPhillips.
`
`Connect to Today:
`
`In April 2012, the Justice Department filed an antitrust lawsuit against Apple
`and a group of book publishers, saying they colluded to fix e-book prices. Their plan
`was created in large part because they feared Amazon, which was selling e-books at
`below cost, was gaining monopolistic control of the market. Several of the publishers
`have agreed to settle the case.
`
`The case has raised questions over what constitutes competition and whether the
`anticompetitive practices of Apple and the book publishers could be justified to
`ensure that Amazon would have competition. Scott Turow, president of the Authors
`Guild, argued in a letter that the lawsuit was “on the verge of killing real competition
`in order to save the appearance of competition.”
`
`In a Times Op-Ed, Eduardo Porter argued that, “Absent any collusion, Apple’s
`entry into the e-book market would be the kind of competitive challenge we should
`welcome in the digital world.” However, as the piece also argues, price-fixing cannot
`be allowed and the scheme would cost consumers. “More important, perhaps, this
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`May 15, 1911 | Supreme Court Orders Standard Oil Company to Be Broken Up - The New York ...
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`behavior could arrest the development of innovative platforms to sell digital goods on
`the Web.”
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`In your opinion, how has competition, or “antitrust,” law changed since the days
`of John D. Rockefeller? Does it make a difference if the product at stake is a natural
`resource, like petroleum, or digital technology? Why or why not? What resolution do
`you think would be fair to all stakeholders involved in the case of the burgeoning
`e-book market — consumers, authors, retailers and tech industry alike? Why?
`
`Learn more about what happened in history on May 15»
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