Standard Oil v. United States 1911

AuthorDaniel Brannen, Richard Hanes, Elizabeth Shaw

Page 847

Plaintiff: Standard Oil of New Jersey

Defendant: United States

Plaintiff's Claim: That Standard Oil was not in violation of the Sherman Anti-trust Act by conspiring to restrain trade.

Chief Lawyer for Plaintiff: John G. Milburn

Chief Lawyer for Defendant: Frank B. Kellogg

Justices for the Court: Rufus R. Day, John Marshall Harlan I, Oliver Wendell Holmes, Charles E. Hughes, Joseph R. Lamar, Horace H. Lurton, Joseph McKenna, Willis Van Devanter, Chief Justice Edward D. White

Justices Dissenting: None

Date of Decision: May 15, 1911

Decision: Ruled in favor of the United States by affirming a lower court order that Standard Oil be broken apart.

Significance: Although supporting the break up of Standard Oil, the Court through the "rule of reason" left open the possibility that some cooperation in restraining trade among companies may be legal. The question of the government's role and power in restricting private economic activities continued into the twenty-first century with the issue of Microsoft business practices making headlines in the year 2000.

Page 848

Following the American Civil War (1861–1865), industrialization (growth of large businesses manufacturing goods) increased at a rapid pace. Construction of a national railroad system created cheaper transportation which greatly expanded markets allowing industrial productivity (ability to make more goods) to grow. As competition became more intense, companies sought ways to protect or expand profits. State laws in the late nineteenth century largely restricted economic growth through company mergers. Therefore, one of the more attractive means available for companies to expand profits was to simply collaborate (cooperate) with competitors to set prices and control production. These cooperative relationships often involved creating trusts in which a company would be created to oversee management of the cooperating companies. In 1882 Standard Oil of New Jersey became the first such trust. Trusts would fix prices and drive out new competition through price wars. Trusts in various industries, such as tobacco, beef, whiskey, and sugar, led to major concentrations of capital (money) within those trusts. Eventually, trust became a general term applied to national monopolies where only a few people controlled a major portion of the U.S. economy. Legislatures and the courts focused on protection of new businesses trying to enter markets. The freedom to contract dominated all legal considerations, not individual civil rights or consumer protection.

Standard Oil

Public concern over the practices of Standard Oil grew in the 1880s and continued to swell following passage of the Sherman Antitrust Act of 1890. The act prohibited unfair business practices designed to drive out competition but...

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