Supreme Court of the United StatesDecided May 15, 1911

Standard Oil Co. of New Jersey v. United States
Argued March 14-16, 1910

Full case name:	Standard Oil Co. of New Jersey, et al. v. United States
Citations:	221 U.S. 1
Prior history:	---
Subsequent history:	Reargued, 221 U.S. 1 (1910)

Holding The Standard Oil Compant was deemed an illegal trust under the Sherman Act, and was split into many smaller companies. Several individuals, including John D. Rockefeller, were fined. Court membership

Chief Justice Edward Douglass White

Associate Justices William R. Day, Willis Van Devanter, John Marshall Harlan, Oliver Wendell Holmes Jr., Charles E. Hughes, Joseph R. Lamar, Horace H. Lurton, Joseph McKenna

Case opinions

Majority by: White

Joined by: Day, Devanter, Holmes, Hughes, Lamar, Lurton

Concurrence in the judgment by: Harlan

Laws applied Sherman Anti-Trust Act Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911), was a case in which the Supreme Court of the United States found Standard Oil guilty of monopolizing the petroleum industry through a series of abusive and anticompetitive actions. The court's remedy was to divide Standard Oil into several competing firms.

Facts

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Over a period of decades, the Standard Oil Company of New Jersey had bought up virtually all of the oil refining companies in the United States. Initially, the growth of Standard Oil was driven by superior refining technology and consistency in the kerosene products (i.e., product standardization) that were the main use of oil in the early decades of the company's existence. The management of Standard Oil then reinvested their profits in the acquisition most of the refining capacity in the Cleveland area, then a center of oil refining, until they controlled the refining capacity of that key production market. They then used that market dominance to obtain favorable transportation rates from the railroads, putting pressure on the smaller and less organized refining capacity throughout the northeast, compelling their competition to sell out or face bankruptcy, until Standard controlled most of the refining capacity of the U.S. By the 1880s, Standard Oil was using their stranglehold on refining capacity to begin integrating backward into oil exploration and crude oil distribution and forward into retail distribution of its refined products to stores and, eventually, service stations throughout the U.S. Standard allegedly used its size and clout to undercut competitors in a number of ways that were considered "anti-competitive," including underpricing and threats to suppliers and distributors who did business with Standard's competitors. The government sought to prosecute Standard Oil under the Sherman Antitrust Act. The main issue before the Court was whether it was within the power of the Congress to prevent one company from acquiring numerous others through means that might have been considered legal in common law, but still posed a significant constraint on competition by mere virtue of their size and market power, as implied by the Anti-trust Act.

Opinion of the Court

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The Court found this was within the power of Congress under the Commerce Clause. The Court also endorsed the rule of reason enunciated by William Howard Taft in Addyston Pipe and Steel Company v. United States, 85 F. 271 (6th Cir. 1898), written when the latter had been Chief Judge of the United States Court of Appeals for the Sixth Circuit. However, the Court found that the behavior of the Standard Oil Company went beyond the limitations of this rule.

Justice John Marshall Harlan wrote a separate opinion, concurring in the result, but dissenting in the Court's adoption of the rule of reason.

External link

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Sources

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McConnell Brue: Economics, Sixteenth Edition

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