Standard Oil: Ascent And Assessment

Standard Oil:
Ascent and Assessment

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The Benefits of History

• Better Understanding of the Past on its Own Terms
• Better Understanding of Modern Economic and Legal Issues
  • Point of comparison, contrast
  • Source of useful additional questions, perspectives to consider
• Help to Inform Modern Decision Making

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Perspectives and Insight

• Business Historians
• Legal Historians
• Intellectual Historians
• Economists
• Legal Scholars
• Other Scholars and Commentators

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Earlier Antitrust Episodes in General; Standard Oil Story in Particular

• Great deal to tell us
• “Freedom from a falsely imagined past”
• Insight into how many of our current mainstream ideas first came to be established in antitrust law

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• Simultaneously, insight into how
  1. Early antitrust thinking was not simply a less sophisticated early form of neoclassical economic thought;
  2. Variations from modern economic analysis found in earlier antitrust analysis do not simply reflect the power of “non-economic” concerns uninformed by any systematic theoretical outlook

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3. Much of early antitrust debate, legislation, lawyering, and judicial decision making was influenced by a different kind of theoretical outlook

   That embraced as a part of, and not simply alongside of, its economic analysis,

   Simultaneous concerns for

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• Individual Opportunity
• Freedom of Contract
• Efficiency
• Economic Progress and Prosperity
• Fair Distribution of Wealth and
• Political freedom;

All to be promoted through a process of largely “non-discretionary” judicial decision making

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• Obviously, a more encompassing antitrust vision
  • Contra more thorough-going modern belief in the “inevitability of tradeoffs”

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Ascent and Challenge

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• The Rise of Standard Oil
  • Origins

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• Products
• Cartel Activity and Relations with Railroads
• The Cleveland Acquisitions
• Later Acquisitions

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• The 1879 Trust      
• The 1882 Trust

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• Movement into Crude Oil Production
• Dominance in Pipe Line Transportation
• Expansion of Retail Marketing

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• Expansion of Product Offerings
• Dissolution of the 1882 Trust Under Ohio State Challenge
• Establishment of the Standard Oil Company of New Jersey as a New Jersey Holding Company

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• Standard Oil’s Position – Export Trade

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• Standard Oil’s Position – Domestic Trade

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• The Federal Antitrust Challenge

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• Filed 1906

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Position of the United States

Conspiracy to Monopolize First Formed in 1870 Continued to the Time of Suit through Three Periods 1870-1882 1882-1899 1899-Time of Suit

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Position of the United States

• Evidence Stressed
  • Acquisitions and Combination
  • Market Shares
  • Profits
  • Increases in the Prices of the Principal Products

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Position of the United States

• Other Means Used to Monopolize Commerce
  • Railroad Rate Discrimination
  • Control of pipe lines and pipe line discrimination
  • Contracts with independent refiners
  • Unfair competition ...

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Position of the United States

• Unfair competition
  • Local Price Discrimination/Predatory Pricing
  • Secret market intelligence gathering and espionage
  • Operation of secret bogus independent companies

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Position of the United States

• The Trust Agreements of 1879 and 1882 were in unreasonable restraint of trade, tended to monopoly, and were void at common law
• The corporate combination achieved through the establishment of Standard Oil of New Jersey as a holding company was void under
  • Sherman Act § 1
  • Sherman Act § 2

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Position of the United States

• Remedy

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The Case in Hindsight

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General Questions

• What was wrong and what was right about the government’s position?
• How might the case be approached differently today?

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Scholarly Perspectives

• Remedy
• Was Standard Oil a monopolist?
  • If so, what was monopolized?
• What were the Bases of Standard Oil’s Preeminence?

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• Economies of Scale or Other Efficiencies
• Mergers and Acquisitions
  • Uncoerced
  • Coerced
• Bad Acts
  • Predatory Pricing
  • Other
• Enforcement of a Railroad Cartel
• Pipe Line Dominance

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Questions and Implications