Standard Oil: A Monopoly Breaking Laws

Standard Oil, the petroleum behemoth founded by John D. Rockefeller, was found to have violated the Sherman Antitrust Act through anticompetitive practices and the formation of a monopoly. The 1911 Supreme Court case, Standard Oil Co. of New Jersey v. United States, ruled that Standard Oil had illegally monopolised the American petroleum industry, leading to an order for the company's breakup. This landmark decision set a precedent for interpreting antitrust law, banning only unreasonable restraints on trade. Standard Oil's monopolistic actions, including underpricing and threats to suppliers doing business with competitors, resulted in higher prices, reduced output, and diminished quality, causing harm to consumers and competitors alike.

Standard Oil was found to have violated the Sherman Antitrust Act

In 1906, the federal government sued Standard Oil under the Sherman Antitrust Act, arguing that the company had used anti-competitive practices to form a monopoly. The case reached the Supreme Court in 1910, which ruled in 1911 that Standard Oil had indeed violated the Act. The Court found that Standard Oil's actions led to higher prices, reduced output, and reduced quality, which constituted a violation of the Sherman Antitrust Act.

The Supreme Court's ruling held that Standard Oil had illegally monopolized the American petroleum industry and ordered the company to break itself up. As a result, Standard Oil was split into 34 to 39 separate companies, primarily divided by region and activity. These companies became the core of the U.S. oil industry and many of them remain powerful businesses today.

The company was deemed to have formed an illegal monopoly

Standard Oil was deemed to have formed an illegal monopoly by the US Supreme Court in 1911. The company was found to have violated the Sherman Antitrust Act of 1890, which forbade "every contract, scheme, deal, or conspiracy to restrain trade".

The court case, Standard Oil Co. of New Jersey v. United States, ruled that Standard Oil had formed a monopoly and ordered the company to break itself up. The court found that Standard Oil's actions had led to higher prices, reduced output, and reduced quality, which were deemed to be the three consequences of monopoly.

Standard Oil had been formed in 1870 by John D. Rockefeller and, by 1872, it owned nearly every refinery in Cleveland and controlled roughly 25% of the American oil refining market. Under Rockefeller's direction, the company began acquiring refining companies in other cities, and by 1879 it controlled more than 90% of the market. By 1882, the company was valued at $70 million.

By the 1880s, Standard Oil was integrating backward into oil exploration and crude oil distribution and forward into retail distribution of its refined products. The company was perceived to own and control all aspects of the trade. Standard Oil allegedly used its size and clout to undercut competitors in a number of ways that were considered "anti-competitive", including underpricing and threats to suppliers and distributors who did business with Standard's competitors.

In 1906, the federal government sued Standard Oil under the Sherman Antitrust Act. The case reached the Supreme Court in 1910, and the company was ordered to break up into 34 or 39 separate entities, primarily divided by region and activity. Many of these companies later became part of the Seven Sisters, which dominated global petroleum production in the 20th century.

Standard Oil's illegal monopoly was exposed by journalist Ida M. Tarbell, who used testimony from congressional hearings, interviews with Standard Oil executives, and other sources to bring the company's shady dealings to light.

Standard Oil was split into 34-39 separate entities

Standard Oil was a corporate trust in the petroleum industry that existed from 1882 to 1911. It was founded by John D. Rockefeller in 1870 and was initially known as the Standard Oil Company (Ohio). Over the years, it expanded and reorganised, eventually becoming the Standard Oil Company (New Jersey) in 1899. This company was a holding company that controlled almost the entire petroleum market in the US.

In 1906, the federal government sued Standard Oil under the Sherman Antitrust Act, alleging that it had formed a monopoly and engaged in anticompetitive practices. The case reached the Supreme Court in 1910, which ruled in 1911 that Standard Oil had indeed violated the Sherman Antitrust Act and ordered the company to break up its holdings. This landmark ruling found that Standard Oil had illegally monopolised the American petroleum industry and restrained trade and commerce in petroleum. As a result, Standard Oil was split into 34 to 39 separate entities, primarily divided by region and activity.

The breakup of Standard Oil had a significant impact on the oil industry, with many of the new entities becoming powerful and influential companies in their own right. Two of the largest successor companies were Standard Oil of New Jersey, which eventually became Exxon, and Standard Oil of New York, which became Mobil. These two companies later merged to form ExxonMobil, which remains one of the largest oil companies in the world today. Other notable descendants of Standard Oil include Chevron, BP, Marathon Oil, and ConocoPhillips.

The breakup of Standard Oil is often cited as a pivotal moment in US antitrust law and has had a lasting impact on the country's business landscape. It set a precedent for regulating large corporations and protecting free market competition. The case also highlighted the importance of journalistic investigations, as the work of Ida Tarbell played a crucial role in exposing Standard Oil's predatory practices and bringing them to the attention of Congress and the public.

The company's predatory practices were exposed by journalist Ida M. Tarbell

The Standard Oil Company, founded by John D. Rockefeller, was a major oil conglomerate in the early 20th century. In 1911, the US Supreme Court found the company guilty of violating the Sherman Antitrust Act through anticompetitive practices and ordered its break-up into 39 independent companies. The company's predatory practices were exposed by journalist Ida M. Tarbell, who grew up in the Pennsylvania oil region and whose father was an oil producer whose business suffered due to Rockefeller's business dealings.

Tarbell's investigation into Standard Oil was driven by a personal connection to the case. Her father, Frank Tarbell, had been an oil producer and refiner in Venango County, Pennsylvania, whose business was adversely affected by the South Improvement Company scheme—a secret agreement between the railroads and refiners led by Rockefeller in 1872. This scheme aimed to raise shipping rates for independent oil men like her father while providing discounts and rebates to members of the South Improvement Company, putting the independents out of business. Frank Tarbell actively opposed the South Improvement Company, participating in marches and even tipping over Standard Oil railroad tankers.

Tarbell's investigation into Standard Oil began in 1901 when she handed over the desk editor role at McClure's Magazine to Lincoln Steffens and embarked on a meticulous investigation with the help of an assistant, John Siddall. She delved into private archives and public documents across the country, gathering a wealth of information on Rockefeller's ascent and the methods used by Standard Oil. Tarbell's research revealed that Standard Oil had used strong-arm tactics and manipulated competitors, railroad companies, and others to achieve its corporate goals. She organised this information into a cogent history, presenting a damning portrayal of the company's business practices.

Tarbell's exposé on Standard Oil was published as a 19-part series in McClure's Magazine between November 1902 and October 1904, titled "The History of the Standard Oil Company". It exposed Rockefeller's unethical tactics and sympathetically portrayed the plight of Pennsylvania's independent oil workers. While acknowledging Rockefeller's brilliance and the flawlessness of the business structure he had created, Tarbell condemned "the open disregard of decent ethical business practices by capitalists". She concluded that Standard Oil "had never played fair, and that ruined their greatness for me".

Tarbell's work contributed to the dissolution of the Standard Oil monopoly and helped usher in several significant pieces of legislation, including the Hepburn Act of 1906, the Mann-Elkins Act, the creation of the Federal Trade Commission (FTC) in 1914, and the Clayton Antitrust Act of 1914. Her exposé on Standard Oil is considered a landmark in the history of investigative journalism and was described by historian Daniel Yergin as "the single most influential book on business ever published in the United States".

Standard Oil was a major oil conglomerate in the early 20th century

The Rise of Standard Oil

Standard Oil's history began in 1863 as an Ohio partnership formed by John D. Rockefeller with his brother William, Henry Flagler, Samuel Andrews, Oliver Burr Jennings, and Stephen V. Harkness. In 1870, Rockefeller incorporated Standard Oil in Ohio, with himself as the largest shareholder. The name "Standard Oil" was chosen to symbolise the reliable "standards" of quality and service that Rockefeller envisioned for the nascent oil industry.

The company grew rapidly by increasing sales and acquiring competing firms, often shutting down those it deemed inefficient. By the early 1870s, Standard Oil had acquired a monopoly on oil refining in the US, controlling about 25% of the market. Under Rockefeller's direction, the company expanded its reach beyond Cleveland, and by 1879, it controlled more than 90% of the market.

Business Practices and Predatory Tactics

Standard Oil's large market share allowed it to integrate backward into oil exploration and crude oil distribution and forward into retail distribution. The company was perceived to own and control all aspects of the trade. It used its size and influence to undercut competitors with tactics such as underpricing, secret transport deals, and threats to suppliers and distributors who did business with Standard's rivals.

The Sherman Antitrust Act and Legal Challenges

In 1890, the US Congress passed the Sherman Antitrust Act, a source of American anti-monopoly laws. Standard Oil quickly attracted the attention of antitrust authorities, and in 1906, the federal government sued the company under this Act. The case reached the Supreme Court in 1910, and in 1911, the Court ruled that Standard Oil had violated the Act through anticompetitive actions, forming an illegal monopoly.

The Breakup of Standard Oil

As a result of the Supreme Court ruling, Standard Oil was ordered to break up into multiple independent companies. The exact number of entities created from the breakup varies across sources, with figures ranging from 34 to 43. These companies were divided primarily by region and activity, and many of them later became part of the "Seven Sisters," who dominated global petroleum production in the 20th century.

Today, Standard Oil's influence can still be traced to several major companies, including:

• ExxonMobil (a merger of Standard Oil of New Jersey and Standard Oil of New York)
• Chevron (a rebranding of Standard Oil of California)
• BP (which acquired Standard Oil of Ohio and Amoco/Standard Oil of Indiana)
• Marathon Oil and Marathon Petroleum (descendants of The Ohio Oil Company)
• ConocoPhillips (a continuation of the Continental Oil Company)

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