While publicly attacking Standard Oil and other trusts, President Theodore Roosevelt did not favor breaking them up. He preferred only to stop their anti-competitive abuses. On November 18, , the U. The suit was filed under the Sherman Antitrust Act of Under this federal law, "Every contract, or combination, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. The Standard Oil trial took place in before a Missouri federal court.
More than witnesses testified. The government produced evidence that the Standard Oil Trust had secured illegal railroad discounts, blocked competitors from using oil pipelines, spied on other companies, and bribed elected officials.
Moreover, the government showed that from Standard's kerosene prices increased 46 percent, giving enormous profits to the monopoly. Although Rockefeller was technically president of Standard Oil, he had retired from active management in But he remained the single largest stockholder. Rockefeller testified that Standard Oil achieved its position because its combination of cooperating companies was more efficient and produced a better product than its rivals.
When cross-examined on how Standard Oil grew so dominant, the year-old Rockefeller frequently stated that he could not remember. Attorneys for Standard Oil contended that the large combination of companies making up the trust had developed naturally and actually saved the industry from destructive price wars.
They also argued that since Standard Oil was a manufacturing business, it was exempt from the Sherman Act, which only addressed interstate commerce. Both the trial judge and a unanimous federal appeals court agreed that Standard Oil was a monopoly violating the Sherman Antitrust Act.
They also supported the government's recommendation that the trust should be dissolved into independent competing companies. Standard Oil then appealed to the U. Supreme Court. On May 15, , the Supreme Court unanimously upheld the federal appeals court and ruled that the Standard Oil Trust was a monopoly that illegally restrained trade. All but one justice, however, went on to hold that only monopolies that restrained trade in "unreasonable" ways were illegal.
Although it found that Standard Oil did, in fact, act unreasonably, the Supreme Court's use of the "rule of reason" made it more difficult for government to prosecute other monopolies.
United States ]. The Supreme Court justices concluded that to restore competition in the oil industry, the Standard Oil Trust would have to be broken into independent companies. But the government permitted Standard Oil stockholders to each receive fractional shares in all 34 companies that were formed. This meant that each of these companies had exactly the same stockholder owners. These companies were then supposed to compete with one another.
In reality, the companies had little real incentive to do this and acted together in setting prices for a decade or more. Following new petroleum discoveries in the United States and abroad, independent oil companies finally brought real competition to the industry.
When the Supreme Court broke up the Standard Oil Trust in , electric lights were rapidly replacing kerosene lamps. But the gasoline-driven automobile was just beginning to appear. Gasoline, up to that time a useless byproduct of oil refining, made the companies formed from the trust wealthier than they had ever been. In retirement, Rockefeller made a science of philanthropy. The American Nation. A History of the United States Since The pattern of fierce competition leading to combination and monopoly is well illustrated by the history of the petroleum industry.
Irresistible pressures pushed the refiners into a brutal struggle to dominate the business. Production of crude oil, subject to the uncertainties of prospecting and drilling, fluctuated constantly and without regard for need. In general, output surged far ahead of demand.
By the s the chief oil refining centers were Cleveland, Pittsburgh, Baltimore, and the Newark City area. Of these, Cleveland was the fastest growing, chiefly because the New York Central and Erie railroads competed fiercely for its oil trade and Erie Canal offered an alternative route. Rockefeller, emerged as the giant among the refiners. Rockefeller exploited every possible technical advance and employed fair means and foul to persuade competitors either to sell out or to join forces.
By he controlled 90 percent of the nation's oil refining capacity along with a network of oil pipelines and large reserves of petroleum in the ground.
After his family eventually took root in Cleveland Ohio, Rockefeller received an unusually good education for his time, and found work as a commission house clerk at the age of Early on, Rockefeller keenly understood ways of managing risk.
While he knew oil speculators could potentially reap huge profits if they hit a deposit, he also knew that they faced substantial financial loss, if they failed in that effort. For this reason, he strategically narrowed his focus to the refining business, where profits were smaller but more stable.
And through robust research and development , he discovered ways to exploit the traditionally discarded oil by-products, by using them to create lubricants, paints, and other useful items. Rockefeller saw the cutthroat competition in the oil industry as a ruinous influence and began methodically stamping it out.
By , his company, Standard Oil of Ohio, was enjoying major profits, which he used to buy out competitors. While Rockefeller's offers were usually readily accepted, he had ways of persuading holdouts, that included the following measures:.
Vexed by the inconsistent support of competing rail companies, Rockefeller backed the creation of the South Improvement Company, in a strategic effort to improve his company's transport costs. He also agreed to help this company buy up all the railroads in return for bulk rebates , however competitors in both rail and oil eventually lobbied the government to curb such monopolistic behavior.
After his failure to reorganize the rail industry, Rockefeller decided to restructure his sprawling empire.
He and his partners innovated a first-of-its-kind trust, where they swapped their individual holdings for shares in the trust. Rockefeller now wielded centralized control and veto power on all of the corporate boards within his conglomerate.
The immediate benefits included even lower costs, lower kerosene prices and standardization across the industry. Rockefeller's company now had the assets and wherewithal to build pipelines and other infrastructure, on a scale that was previously unthinkable.
Standard Oil also employed chemists who developed ways of increasing the types and quality of combustible fuels and created methods of converting waste into usable substances. The petroleum coming out of the ground was being refined into various products, such as diesel fuel, varnish, and hair gel. As the new products became cheaper to produce, the company increased its global economy of scale. Standard Oil had its hands in many ancillary industries, such as iron, copper, steel and coal, but it also grew its presence in more unexpected areas, such as general stores.
February 21, Kansas Congressman P. Campbell petitions against Standard Oil. January 31, President Roosevelt publicly states an attack on Standard Oil and law-defying rich citizens. Back to top. Hosted by Springshare.
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