Overall, the impact of antitrust laws on American industry has always been a subject of heated debate. Several economists believe that some of them, for example, the Sherman Act decrease competitiveness in the market, and protect only weak and inefficient companies (Shenefield, 2001, p 88). There are opposing views on this issue, suggesting that this law minimizes the possibility of monopoly, and gives a boost to small businesses. We should show how this legislative act influenced the development of Standard Oil Company, which is now considered the largest in the United States. It is necessary to find out whether the measures, taken by the government, were legally grounded, or it was just protectionism.
In 1999, after almost 100 years of excelling in the fuel and energy business, two companies that were once dissolved merged again. In 1882, a company named Standard Oil Trust was formed; its major business was the distribution of kerosene and oil and in those days, the automobile industry was in the primary stage with motorized transportation in addition to the trains that moved by coal. The trains were the only fast way to get from place to place. Horses and carriers were the popular means of transportation even though it took quite some time to travel. In the northeast, Mr. Rockefeller formed a new company that initially delivered kerosene to homes for lamp lighting. Businesses in those days also utilized kerosene (Montague, 2001, p 55).
This period was marked by the rapid development of new technologies such as the airplane, the diesel engine, and most importantly the mass production of automobiles. The radio and the motion picture industries were also part of the growth. The level of immigration from Europe towards North America significantly increased. In 1911, the world was hosting numerous new countries at the same time that the industrial revolution was gathering speed.
In New Jersey, a company named Standard Oil was also in the same type of business. These two companies decided to become one and merge to achieve further growth. The Standard Oil Company was a new innovated company with efficient plans and excellent business operations. This growth was viewed as controversial by its competitors and as a result complaints of unfair practices started. The question arises whether these complaints were grounded or not, because occasionally competitors were just trying to hinder the progress of the leading enterprise. We can observe a very interesting paradox the Sherman Act was adopted to increase competitiveness in the market, but it had the reverse effect.
In 1882, the federal Sherman Anti-Trust Act was not effectively enforced. The Attorney General of Ohio, David Watson, sought the Standard Oil Company dissolution under the Ohio law, winning a favorable decision by the Ohio Supreme Court. Within a week, the trust dissolved itself, distributing proportionate ownership in each of its companies, and in 1899, the Standard Oil Company was the single holder of the various interests; this aspect was also publicly criticized. An adverse judgment was issued to The Standard Oil Company of New Jersey. This case appeared in front of a Chicago federal court in 1907 (Tarbell, 2003, p 71).
Standard Oil Company of New Jersey appealed to the U.S. Supreme Court, but the court, on May15, 1911, ordered the company to break up. Standard Oil Company of New Jersey dissolved 33 of its companies, one of which was Standard Oil Company of New York ( Socony) and Vacuum Oil Company. On December 1, 1911, the enterprise sold shares to the public. With all the problems it faced within the period 1822 and 1911, the corporation expanded The Sherman Act outlaws all contracts, combinations and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids and allocate to customers. The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when only one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct. The Act is violated simply when one firm’s vigorous competition and lower prices take sales from its less efficient competitors. This legislation act may lead to unwanted results, because it does not give any stimulus to compete, to improve the quality of the products and services. The case of Standard Oil is just another example, substantiating this statement because Rockefeller did not actually make any anticompetitive steps. He only tried to organize his company most effectively. Its growth was mostly due to its excellence in operations.
Thus, we can conclude that under some circumstances, the impact of antitrust laws may be rather detrimental, especially, if the policy of the government stems from protectionism, which often hinders industrial progress. The example, which we have discussed, presents sufficient evidence that the Sherman Antitrust Act was not quite applicable to the Standard Oil Company because it is primarily aimed against enterprises that intend to achieve superiority by unfair practices. While the dominance of Standard Oil was due to its excellence in this particular sphere.
Bibliography
- Gilbert Holland Montague (2001). “The Rise and Progress of the Standard Oil Company”. The Minerva Group, Inc.
- Ida M. Tarbell, Ambroise Mark Vollard, David Mark Chalmers (2003). “The History of the Standard Oil Company: Briefer Version” Courier Dover Publications
- John H. Shenefield, Irwin M. Stelzer (2001). “The antitrust laws: a primer” American Enterprise Institute.