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https://en.wikipedia.org/wiki/Standard_Oil https://en.wikipedia.org/wiki/Standard_Oil "In 1904, Standard controlled 91 percent of production and 85 percent of

by iopq 10y ago

https://en.wikipedia.org/wiki/Standard_Oil https://en.wikipedia.org/wiki/Standard_Oil "In 1904, Standard controlled 91 percent of production and 85 percent of final sales. Most of its output was kerosene, of which 55 percent was exported around the world. After 1900 it did not try to force competitors out of business by underpricing them... Due to competition from other firms, their market share had gradually eroded to 70 percent by 1906 which was the year when the antitrust case was filed against Standard, and down to 64 percent by 1911 when Standard was ordered broken up" sounds like if you stop trying to compete other companies will

ruleabidinguser 10y ago
I never get the impression that people who think government intervention is good have done much research on the topic.
- ABCLAW 10y ago
  This will be a relatively quick and dirty skim over history, but I hope it does something to dispel this belief. The comment you're replying to ignores a number of salient factors. It assumes that natural market activity resulted in Standard Oil's declining market share. It certainly was a relevant factor, but the overarching history of Standard Oil will hopefully lead you to recognize that it did not act alone. The Sherman Antitrust Act was passed in 1890 but it was a toothless tiger until Roosevelt assumed the office of president in 1901. Prior to then, the main case involving the act was successful in using it against labor unions. Following 1901, litigation broke up a number of companies. This is important. Investigation at the time indicated that Standard Oil employed predatory pricing up until 1900. Following 1900, they resorted to a shell-game to obfuscate what was going on. Amongst the first wave of anti-trust litigation targets were J.P. Morgan's holdings. He was cornering the railroad and steel industries successfully, the biggest coup being the formation of US Steel in 1901. The other crown jewel in the strategy was oil, namely Standard Oil, which operated synergistically with J.P. Morgan's holdings in rail and steel. During this time, we had characters like Elbert H. Gary, CEO of US Steel, who held cross-industry dinners aimed at setting uniform pricing for steel and providing management across businesses with consolidated positions against labour organization. While it had been growing at a steady clip beforehand, Standard Oil's value began to skyrocket as of 1901 with no real change in its core business practices. The SCOTUS' exposition of the issue does a great job showing how Oil's monopoly was mediated in large part through Rail (the case also indicates that practices wrt pipelines were analogous to rail): "the bill alleged that the combination and its members obtained large preferential rates and rebates in many and devious ways over their competitors from various railroad companies, and that by means of the advantage thus obtained many, if not virtually all, competitors were forced either to become members of the combination or were driven out of business" Can't transport oil if you don't have rail cars. Can't build rail cars or rail if you can't make steel, and you can't run your trains or your steel plants without oil. In 1902, the Roosevelt directed the AG to commence litigation to break-up of the J.P. Morgan headed railroad trust - Northern Securities Company. This matter was such a high priority that the case was resolved and reported through all levels of appeal in 1904. As a side note, this is mind-bendingly fast for competition litigation, even today. With the threat of anti-trust litigation preventing outright predatory pricing and "competitive" rail back on the table steel and oil began to lose their moats. But "competitive" rail wasn't very competitive, and continued a legacy of providing obfuscated sweetheart deals to Standard. They got broken up 7 years later as a result. By the time steel's litigation hit in 1920, it had proper competition and did not get broken up.
Spooky23 10y ago
What do supposed compelled Mr. Rockefeller to choose to cease his practice of driving competing companies out of business? Some sort of personal awakening?
- adventured 10y ago
  No. They were fully conscious of their position, in terms of economic power and monopoly. The Sherman Anti-trust Act was passed in 1890. They no doubt believed they had accumulated enough of the market to sustain dominance, while the overall pie continued to expand. Rockefeller paid ransom sums for decades to buy out competitors (most of which were junk operators at best) to keep them from tanking the price of oil by dumping new strikes onto the market (a very frequent occurrence). His entire goal was oriented at market share + stability. The history of oil prices back then, was truly horrific, it was a constant boom and bust cycle that tortured most companies in the oil sector. Once Standard Oil accumulated enough of the market, including distribution (not as often talked about, they overwhelmingly controlled distribution), it could heavily control market pricing without having to own all the market. Their dominance in distribution is arguably the single most important thing they accomplished after the refining consolidation. With that gatekeeper status, they were able to demand other firms they didn't own adhere to their pricing levels, or have their distribution access cut off. In that way, they figured out how to stabilize the market pricing, without having to continue to own ~90% of the refining market.

by iopq 10y ago

ruleabidinguser 10y ago

I never get the impression that people who think government intervention is good have done much research on the topic.

ABCLAW 10y ago
This will be a relatively quick and dirty skim over history, but I hope it does something to dispel this belief. The comment you're replying to ignores a number of salient factors. It assumes that natural market activity resulted in Standard Oil's declining market share. It certainly was a relevant factor, but the overarching history of Standard Oil will hopefully lead you to recognize that it did not act alone. The Sherman Antitrust Act was passed in 1890 but it was a toothless tiger until Roosevelt assumed the office of president in 1901. Prior to then, the main case involving the act was successful in using it against labor unions. Following 1901, litigation broke up a number of companies. This is important. Investigation at the time indicated that Standard Oil employed predatory pricing up until 1900. Following 1900, they resorted to a shell-game to obfuscate what was going on. Amongst the first wave of anti-trust litigation targets were J.P. Morgan's holdings. He was cornering the railroad and steel industries successfully, the biggest coup being the formation of US Steel in 1901. The other crown jewel in the strategy was oil, namely Standard Oil, which operated synergistically with J.P. Morgan's holdings in rail and steel. During this time, we had characters like Elbert H. Gary, CEO of US Steel, who held cross-industry dinners aimed at setting uniform pricing for steel and providing management across businesses with consolidated positions against labour organization. While it had been growing at a steady clip beforehand, Standard Oil's value began to skyrocket as of 1901 with no real change in its core business practices. The SCOTUS' exposition of the issue does a great job showing how Oil's monopoly was mediated in large part through Rail (the case also indicates that practices wrt pipelines were analogous to rail): "the bill alleged that the combination and its members obtained large preferential rates and rebates in many and devious ways over their competitors from various railroad companies, and that by means of the advantage thus obtained many, if not virtually all, competitors were forced either to become members of the combination or were driven out of business" Can't transport oil if you don't have rail cars. Can't build rail cars or rail if you can't make steel, and you can't run your trains or your steel plants without oil. In 1902, the Roosevelt directed the AG to commence litigation to break-up of the J.P. Morgan headed railroad trust - Northern Securities Company. This matter was such a high priority that the case was resolved and reported through all levels of appeal in 1904. As a side note, this is mind-bendingly fast for competition litigation, even today. With the threat of anti-trust litigation preventing outright predatory pricing and "competitive" rail back on the table steel and oil began to lose their moats. But "competitive" rail wasn't very competitive, and continued a legacy of providing obfuscated sweetheart deals to Standard. They got broken up 7 years later as a result. By the time steel's litigation hit in 1920, it had proper competition and did not get broken up.

Spooky23 10y ago

What do supposed compelled Mr. Rockefeller to choose to cease his practice of driving competing companies out of business? Some sort of personal awakening?

adventured 10y ago
No. They were fully conscious of their position, in terms of economic power and monopoly. The Sherman Anti-trust Act was passed in 1890. They no doubt believed they had accumulated enough of the market to sustain dominance, while the overall pie continued to expand. Rockefeller paid ransom sums for decades to buy out competitors (most of which were junk operators at best) to keep them from tanking the price of oil by dumping new strikes onto the market (a very frequent occurrence). His entire goal was oriented at market share + stability. The history of oil prices back then, was truly horrific, it was a constant boom and bust cycle that tortured most companies in the oil sector. Once Standard Oil accumulated enough of the market, including distribution (not as often talked about, they overwhelmingly controlled distribution), it could heavily control market pricing without having to own all the market. Their dominance in distribution is arguably the single most important thing they accomplished after the refining consolidation. With that gatekeeper status, they were able to demand other firms they didn't own adhere to their pricing levels, or have their distribution access cut off. In that way, they figured out how to stabilize the market pricing, without having to continue to own ~90% of the refining market.