Standard Oil Company of New Jersey et al. v. United States

“After the Ohio Supreme Court declared the trust illegal in 1892, seemingly for compliance, voluntary proceedings transferred stock held by the trust in 64 companies to the remaining 20 companies it controlled. This preserved dominion while appearing to give it up, as the stock was virtually owned by the nine trustees or their families and associates.”— Chief Justice White

p. 40

Strategy & Decision Making · Leadership & Management · Business & Entrepreneurship

DUR_ENDURING

Subterfuge maintained control post-dissolution

“The inference that no attempt to monopolize could have been intended because only a small percentage of crude oil produced was controlled by the combination is unwarranted. Substantial power over the crude product was the inevitable result of absolute control over the refined product. The monopolization of the one carried with it the power to control the other.”— Chief Justice White

p. 77

Strategy & Decision Making · Economics & Markets · Business & Entrepreneurship

DUR_ENDURING

Refining monopoly controls crude supply

“The system of marketing which was adopted divided the country into districts and the trade in each district in oil was turned over to a designated corporation within the combination and all others were excluded. Every efficient means by which competition could have been asserted was acquired, and the slow but resistless methods followed by which means of transportation were absorbed and brought under control.”— Chief Justice White

p. 77

Strategy & Decision Making · Operations & Execution · Business & Entrepreneurship

DUR_ENDURING

Geographic monopolies within overall trust

“In 1899, the Standard Oil Company of New Jersey amended its charter to allow it to hold stocks of other corporations and expanded capital from $10,000,000 to $110,000,000. Shortly after, the trust dissolved and stock of various corporations previously controlled by trustees was transferred to the New Jersey corporation, which issued $97,250,000 in common stock.”— Chief Justice White

p. 42

Business & Entrepreneurship · Strategy & Decision Making · Economics & Markets

DUR_ENDURING

Holding company replaced trust structure

“The Standard Oil Company controls the subsidiary companies and directs the management thereof so that none of the subsidiary companies competes with any other of those companies or with the Standard Company, but their trade is all managed as that of a single person. The combination divided the United States into districts and the trade in each district in oil was turned over to a designated corporation within the combination and all others were excluded.”— Chief Justice White

p. 74

Strategy & Decision Making · Operations & Execution · Business & Entrepreneurship

DUR_ENDURING

Geographic monopoly coordination

“The unification of power and control over petroleum and its products by combining in one corporation the stocks of many other corporations aggregating a vast capital gives rise, in and of itself, to the prima facie presumption of intent and purpose to dominate the industry and gain perpetual control of the movement of petroleum in the channels of interstate commerce.”— Chief Justice White

p. 75

Strategy & Decision Making · Economics & Markets · Leadership & Management

DUR_ENDURING

Combination size creates presumption of intent

“The trust agreement of 1882 vested in nine trustees the stock of forty corporations, including the Standard Oil Company of Ohio, and property previously acquired by the combination. The trustees managed and controlled all properties 'to be held for all parties in interest jointly.' This created standard oil trust certificates representing interests in the combination.”— Chief Justice White

p. 34

Business & Entrepreneurship · Strategy & Decision Making · Operations & Execution

DUR_ENDURING

Forty companies unified under nine trustees

“The very genius for commercial development and organization which was manifested from the beginning soon begot an intent and purpose to exclude others, frequently manifested by acts and dealings wholly inconsistent with advancing business by usual methods, but which necessarily involved the intent to drive others from the field and exclude them from their right to trade.”— Chief Justice White

p. 76

Psychology & Behavior · Strategy & Decision Making · Leadership & Management

DUR_ENDURING

Genius for development became exclusion

“By 1872, the combination had acquired substantially all but three or four of the thirty-five or forty oil refineries located in Cleveland, Ohio. The power thus obtained, in further execution of the intent to restrain trade and monopolize commerce, led the combination to obtain large preferential rates and rebates from railroad companies, forcing many competitors either to become members or be driven out of business.”— Chief Justice White

p. 32

Strategy & Decision Making · Economics & Markets · Operations & Execution

DUR_ENDURING

Scale advantage forced consolidation

“The remedy to be administered is two-fold in character: 1st. To forbid the doing in the future of acts like those which we have found to have been done in the past which would be violative of the statute. 2d.”— Chief Justice White

p. 78

Strategy & Decision Making · Leadership & Management · History & Geopolitics

DUR_ENDURING

Two-fold remedy: prevent and dissolve

“The court below held that the acts and dealings established by the proof operated to destroy the potentiality of competition which otherwise would have existed to such an extent as to cause the transfers of stock to the New Jersey corporation and the control which resulted over the subsidiary corporations to be a combination in restraint of trade in violation of the first section of the act, but also to be an attempt to monopolize and a monopolization bringing about a perennial violation of...”— Chief Justice White

p. 74

Strategy & Decision Making · Economics & Markets

DUR_ENDURING

Destroyed potentiality of competition

“Penalties which are not authorized by law cannot be inflicted by judicial authority. The constituents of an unlawful combination should not be deprived of power to make normal and lawful contracts, but should be restrained from continuing or recreating the unlawful combination by any means whatever. A dissolution should not deprive the constituents of the right to live under the law but should compel them to obey it.”

p. 4

Philosophy & Reasoning · History & Geopolitics · Leadership & Management

DUR_ENDURING

Remedy must be proportionate

“The National Transit Company, which is owned and controlled by the Standard Oil Company, owns and controls amounts of the capital stocks of the Connecting Gas Company, Cumberland Pipe Line Company, East Ohio Gas Company, Franklin Pipe Company, and Prairie Oil and Gas Company. By 1910, the Standard Company controlled 54,616 miles of pipe lines with an investment of over $61,000,000.”

p. 17

Business & Entrepreneurship · Operations & Execution · Strategy & Decision Making

DUR_ENDURING

54,616 miles of controlled pipelines

“The court must consider the result and not inflict serious injury on the public by causing a cessation of interstate commerce in a necessary commodity. In applying remedies, the fact must not be overlooked that injury to the public by the prevention of an undue restraint on, or monopolization of trade or commerce is the foundation upon which the prohibitions rest, and that one of the fundamental purposes of the statute is to protect, not to destroy, rights of property.”— Chief Justice White

p. 78

Philosophy & Reasoning · Strategy & Decision Making · History & Geopolitics

DUR_ENDURING

Remedy must not harm public

“The combination, by the year 1870, transferred business of three separate partnerships engaged in refining crude oil to the Standard Oil Company of Ohio, members becoming stockholders proportionate to prior ownership. By 1872, the combination had acquired substantially all but three or four of the thirty-five or forty oil refineries located in Cleveland.”— Chief Justice White

p. 32

Business & Entrepreneurship · Strategy & Decision Making

DUR_ENDURING

Cleveland dominance within two years

“The Anti-trust Act contemplated and required a standard of interpretation, and it was intended that the standard of reason which had been applied at the common law should be applied in determining whether particular acts were within its prohibitions.”— Chief Justice White

p. 60

Philosophy & Reasoning · History & Geopolitics · Economics & Markets

DUR_CONTEXTUAL

Rule of reason introduced

“At common law monopolies were unlawful because of their restriction upon individual freedom of contract and their injury to the public. Contracts or acts which had a monopolistic tendency, especially those thought to unduly diminish competition and enhance prices, came to be spoken of and treated as they had been in England, as restricting the due course of trade, and therefore as being in restraint of trade.”— Chief Justice White

p. 57

History & Geopolitics · Economics & Markets · Philosophy & Reasoning

DUR_ENDURING

Common law monopoly prohibition basis

“The debates show that doubt as to whether there was a common law of the United States which governed the subject in the absence of legislation was among the influences leading to the passage of the act.”— Chief Justice White

p. 50

History & Geopolitics · Economics & Markets · Culture & Society

DUR_ENDURING

Legislative intent: counter corporate power

“In 1888 the trustees unlawfully controlled the stock and ownership of various corporations and limited partnerships engaged in such purchase and transportation, refining, selling, and shipping of oil. The Standard Oil Company of New York had $15,000,000 capital; the New Jersey corporation $3,000,000; the Ohio corporation $3,500,000; numerous other corporations aggregating vast sums were all controlled through the trust mechanism.”— Chief Justice White

p. 37

Business & Entrepreneurship · Economics & Markets · Strategy & Decision Making

DUR_CONTEXTUAL

Scale of 1888 trust holdings

“Freedom to contract is the essence of freedom from undue restraint on the right to contract. The statute evidenced the intent not to restrain the right to make and enforce contracts which did not unduly restrain interstate or foreign commerce, but to protect that commerce from being restrained by methods, whether old or new, which would constitute an interference that is an undue restraint.”— Chief Justice White

p. 60

Philosophy & Reasoning · Economics & Markets · History & Geopolitics

DUR_ENDURING

Freedom through limitation