Standard Oil Co. of New Jersey v. United States | |
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Argued March 14–16, 1910 Reargued January 12–17, 1911 Decided May 15, 1911 | |
Full case name | The Standard Oil Company of New Jersey, et al. v. The United States |
Citations | 221 U.S. 1 ( more ) 31 S. Ct. 502; 55 L. Ed. 619; 1911 U.S. LEXIS 1725 |
Case history | |
Prior | United States v. Standard Oil Co. of New Jersey, 173 F. 177 (C.C.E.D. Mo. 1909) |
Holding | |
The Standard Oil Company conspired to restrain the trade and commerce in petroleum, and to monopolize the commerce in petroleum, in violation of the Sherman Act, and was split into many smaller companies. Several individuals, including John D. Rockefeller, were fined. | |
Court membership | |
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Case opinions | |
Majority | White, joined by McKenna, Holmes, Day, Lurton, Hughes, Van Devanter, Lamar |
Concur/dissent | Harlan |
Laws applied | |
Sherman Antitrust Act |
Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1910), was a case in which the Supreme Court of the United States found Standard Oil Co. of New Jersey guilty of monopolizing the petroleum industry through a series of abusive and anticompetitive actions. [1] The Court's remedy was to divide Standard Oil into several geographically separate and eventually competing firms.
By the 1880s, Standard Oil was using its large market share of 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 United States. Standard Oil 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 action was brought before the Circuit Court of Eastern District of Missouri under the Expediting Act in November 1906, and the court issued their decree of dissolution in November 1909 and their opinion in December 1909.
The main issue before the Supreme Court was whether it was within the power of 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 Antitrust Act.
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 of most of the refining capacity in the Cleveland area, then a center of oil refining, until Standard Oil controlled the refining capacity of that key production market.
By 1870, Standard Oil was producing about 10% of the United States output of refined oil. [2] This quickly increased to 20% through the elimination of the competitors in the Cleveland area.
As in the case against American Tobacco , which was decided the same day, the Court concluded that these facts were within the power of Congress to regulate under the Commerce Clause. The Court recognized that "taken literally," the term "restraint of trade" could refer to any number of normal or usual contracts that do not harm the public. The Court embarked on a lengthy exegesis of English authorities relevant to the meaning of the term "restraint of trade." Based on this review, the Court concluded that the term "restraint of trade" had come to refer to a contract that resulted in "monopoly or its consequences." The Court identified three such consequences: higher prices, reduced output, and reduced quality.
The Court concluded that a contract offended the Sherman Act only if the contract restrained trade "unduly"—that is if the contract resulted in one of the three consequences of monopoly that the Court identified. A broader meaning, the Court suggested, would ban normal and usual contracts, and would thus infringe liberty of contract. The Court endorsed the rule of reason enunciated by William Howard Taft in Addyston Pipe and Steel Company v. United States (1899), [3] written when Taft had been Chief Judge of the United States Court of Appeals for the Sixth Circuit. The Court concluded, however, that the behavior of the Standard Oil Company went beyond the limitations of this rule.
Justice John Marshall Harlan concurred in the result, but dissented against adopting a "rule of reason". It departed from precedent that the Sherman Act banned any contract that restrained trade "directly." [4] He said the following: [5] [ excessive quote ]
I concur in holding that the Standard Oil Company of New Jersey and its subsidiary companies constitute a combination in restraint of interstate commerce and that they have attempted to monopolize and have monopolized parts of such commerce,—all in violation of what is known as the anti-trust act of 1890. 26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200. The evidence in this case overwhelmingly sustained that view and led the circuit court, by its final decree, to order the dissolution of the New Jersey corporation and the discontinuance of the illegal combination between that corporation and its subsidiary companies.
In my judgment, the decree below should have been affirmed without qualification. But the court, while affirming the decree, directs some modifications in respect of what it characterizes as 'minor matters.' It is to be apprehended that those modifications may prove to be mischievous. In saying this, I have particularly in view the statement in the opinion that 'it does not necessarily follow because an illegal restraint of trade or an attempt to monopolize or a monopolization resulted from the combination and the transfer of the stocks of the subsidiary corporations to the New Jersey corporation that a like restraint of trade or attempt to monopolize or monopolization would necessarily arise from agreements between one or more of the subsidiary corporations after the transfer of the stock by the New Jersey corporation.' Taking this language, in connection with other parts of the opinion, the subsidiary companies are thus, in effect, informed—unwisely, I think—that although the New Jersey corporation, being and illegal combination, must go out of existence, they may join in an agreement to restrain commerce among the states if such restraint be not 'undue.'
In order that my objections to certain parts of the court's opinion may distinctly appear, I must state the circumstances under which Congress passed the anti-trust act, and trace the course of judicial decisions as to its meaning and scope. This is the more necessary because the court by its decision, when interpreted by the language of its opinion, has not only upset the long-settled interpretation of the act but has usurped the constitutional functions of the legislative branch of the government. With all due respect for the opinions of others, I feel bound to say that what the court has said may well cause some alarm for the integrity of our institutions. Let us see how the matter stands.
All who recall the condition of the country in 1890 will remember that there was everywhere, among the people generally, a deep feeling of unrest. The nation had been rid of human slavery, fortunately, as all now feel,—but the conviction was universal that the country was in real danger from another kind of slavery sought to be fastened on the American people; namely, the slavery that would result from aggregations of capital in the hands of a few individuals and corporations controlling, for their own profit and advantage exclusively, the entire business of the country, including the production and sale of the necessaries of life. Such a danger was thought to be then imminent, and all felt that it must be met firmly and by such statutory regulations as would adequately protect the people against oppression and wrong. Congress, therefore, took up the matter and gave the whole subject the fullest consideration. All agreed that the national government could not, by legislation, regulate the domestic trade carried on wholly within the several states; for power to regulate such trade remained with, because never surrendered by, the states. But, under authority expressly granted to it by the Constitution, Congress could regulate commerce among the several states and with foreign states. Its authority to regulate such commerce was and is paramount, due force being given to other provisions of the fundamental law, devised by the fathers for the safety of the government and for the protection and security of the essential rights inhering in life, liberty, and property.
Guided by these considerations, and to the end that the people, so far as interstate commerce was concerned, might not be dominated by vast combinations and monopolies, having power to advance their own selfish ends, regardless of the general interests and welfare, Congress passed the anti-trust act of 1890...
[... Harlan J quoted from United States v. Trans-Missouri Freight Association , 166 U.S. 290 (1897) and continued...]
I have made these extended extracts from the opinion of the court in the Trans-Missouri Freight Case in order to show beyond question that the point was there urged by counsel that the anti-trust act condemned only contracts, combinations, trusts, and conspiracies that were in unreasonable restraint of interstate commerce and that the court in clear and decisive language met that point. It adjudged that Congress had in unequivocal words declared that 'every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of commerce among the several states,' shall be illegal, and that no distinction, so far as interstate commerce was concerned, was to be tolerated between restraints of such commerce as were undue or unreasonable, and restraints that were due or reasonable. With full knowledge of the then condition of the country and of its business, Congress determined to meet, and did meet, the situation by an absolute, statutory prohibition of 'every contract, combination in the form of trusts or otherwise, in restraint of trade or commerce.' Still more; in response to the suggestion by able counsel that Congress intended only to strike down such contracts, combinations, and monopolies as unreasonably restrained interstate commerce, this court, in words too clear to be misunderstood, said that to so hold was 'to read into the act by way of judicial legislation, an exception not placed there by the lawmaking branch of the government.' 'This,' the court said, as we have seen, 'we cannot and ought not to do.'
— Justice John Marshall Harlan
The Standard Oil case resulted in the breakup of Standard Oil into 43 separate companies. Many of these have since recombined; the largest present direct descendants of Standard Oil are ExxonMobil (Standard Oil of New Jersey and Standard Oil of New York) and Chevron (Standard Oil of California). Some Standard Oil descendants merged into other companies, particularly BP, which acquired/merged with Standard Oil of Ohio and Amoco. [6] [7] [8] [9]
While some scholars have agreed with Justice Harlan's characterization of prior case law, others have agreed with William Howard Taft, who concluded that despite its different verbal formulation, Standard Oil's "rule of reason" was entirely consistent with prior case law.[ citation needed ]
Standard Oil Company, Inc., was an American oil production, transportation, refining, and marketing company that operated from 1870 to 1911. At its height, Standard Oil was the largest petroleum company in the world, and its success made its cofounder and chairman, John D. Rockefeller, among the wealthiest Americans of all time and among the richest people in modern history. Its history as one of the world's first and largest multinational corporations ended in 1911, when the U.S. Supreme Court ruled that it was an illegal monopoly.
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author.
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses in order to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
United States v. E. C. Knight Co., 156 U.S. 1 (1895), also known as the "Sugar Trust Case," was a United States Supreme Court antitrust case that severely limited the federal government's power to pursue antitrust actions under the Sherman Antitrust Act. In Chief Justice Melville Fuller's majority opinion, the Court held that the US Congress could not regulate manufacturing and thus gave state governments the sole power to take legal action against manufacturing monopolies. The case has never been overruled, but in Swift & Co. v. United States and subsequent cases, the Court has held that Congress can regulate manufacturing when it affects interstate commerce.
The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal per se, other actions, such as possession of a monopoly, must be analyzed under the rule of reason and are only considered illegal when their effect is to unreasonablyrestrain trade. William Howard Taft, then Chief Judge of the Sixth Circuit Court of Appeals, first developed the doctrine in a ruling on Addyston Pipe and Steel Co. v. United States, which was affirmed in 1899 by the Supreme Court. The doctrine also played a major role in the 1911 Supreme Court case Standard Oil Company of New Jersey v. United States.
Addyston Pipe and Steel Co. v. United States, 175 U.S. 211 (1899), was a United States Supreme Court case in which the Court held that for a restraint of trade to be lawful, it must be ancillary to the main purpose of a lawful contract. A naked restraint on trade is unlawful; it is not a defense that the restraint is reasonable.
A trust or corporate trust is a large grouping of business interests with significant market power, which may be embodied as a corporation or as a group of corporations that cooperate with one another in various ways. These ways can include constituting a trade association, owning stock in one another, constituting a corporate group, or combinations thereof. The term trust is often used in a historical sense to refer to monopolies or near-monopolies in the United States during the Second Industrial Revolution in the 19th century and early 20th century. The use of corporate trusts during this period is the historical reason for the name "antitrust law".
The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, is a United States federal law that exempts the business of insurance from most federal regulation, including federal antitrust laws to a limited extent. The 79th Congress passed the McCarran–Ferguson Act in 1945 after the Supreme Court ruled in United States v. South-Eastern Underwriters Association that the federal government could regulate insurance companies under the authority of the Commerce Clause in the U.S. Constitution and that the federal antitrust laws applied to the insurance industry.
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of Mitchel v Reynolds (1711) Lord Smith LC said,
it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion.
Loewe v. Lawlor, 208 U.S. 274 (1908), also referred to as the Danbury Hatters' Case, is a United States Supreme Court case in United States labor law concerning the application of antitrust laws to labor unions. The Court's decision effectively outlawed the secondary boycott as a violation of the Sherman Antitrust Act, despite union arguments that their actions affected only intrastate commerce. It was also decided that individual unionists could be held personally liable for damages incurred by the activities of their union.
United States v. American Tobacco Company, 221 U.S. 106 (1911), was a decision by the United States Supreme Court, which held that the combination in this case is one in restraint of trade and an attempt to monopolize the business of tobacco in interstate commerce within the prohibitions of the Sherman Antitrust Act of 1890. As a result, the American Tobacco Company was split into four competitors.
Duplex Printing Press Co. v. Deering, 254 U.S. 443 (1921), is a United States Supreme Court case which examined the labor provisions of the Clayton Antitrust Act and reaffirmed the prior ruling in Loewe v. Lawlor that a secondary boycott was an illegal restraint on trade. The decision authorized courts to issue injunctions to block this practice, and any other tactics used by labor unions that were deemed unlawful restraints on trade.
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), was a U.S. Supreme Court decision. It stated that lawyers engage in "trade or commerce" and hence ended the legal profession's exemption from antitrust laws.
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), is a major US antitrust law case decided by the Supreme Court concerning the Pittsburgh firm Copperweld Corporation and the Chicago firm Independence Tube. It held that a parent company is incapable of conspiring with its wholly owned subsidiary for purposes of Section 1 of the Sherman Act because they cannot be considered separate economic entities.
The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.
United States v. Terminal Railroad Association, 224 U.S. 383 (1912), is the first case in which the United States Supreme Court held it a violation of the antitrust laws to refuse to a competitor access to a facility necessary for entering or remaining in the market. In this case a combination of firms was carrying out the restrictive practice, rather than a single firm, which made the conduct susceptible to challenge under section 1 of the Sherman Act rather than under the heightened standard of section 2 of that act. Even so, the case was brought under both sections.
United States v. Motion Picture Patents Co., 225 F. 800, was a civil antitrust prosecution overlapping to some extent with the issues in the decision in the Supreme Court's Motion Picture Patents case. After the trial court found that the defendants violated §§ 1 and 2 of the Sherman Act by establishing control over "trade in films, cameras, projecting machines, and other accessories of the motion picture business," by their patent licensing practices and other conduct, they appealed to the Supreme Court. After the Supreme Court's 1917 decision in Motion Picture Patents Co. v. Universal Film Manufacturing Co., however, the parties dismissed the appeal by stipulation in 1918 that the decision had made the defendants' appeal futile.
United States v. Krasnov, 143 F. Supp. 184, was a 1956 district court patent–antitrust decision that the United States Supreme Court affirmed per curiam without opinion. The district court granted the Government's summary judgment motion because it concluded:
That the defendants in combination controlled the market and had the ability to and did drive competitors from the business of manufacturing knitted fabric slip covers is abundantly clear from the record. That the defendants in combination fixed and maintained prices is likewise crystal clear. That the defendants in combination and cross-licensing created a situation in the industry which, particularly by agreement for joint action respecting the patents, effectively hindered newcomers in the field, is also established beyond peradventure of doubt. That the harassing suits against competitors, previously discussed in some detail, were designed as and were actually only harassing suits is clear from an examination of the correspondence between the parties and the Court feels that such conclusion in inescapable from an objective analysis of the documents. All of these actions taken in concert constitute a clear violation of the Sherman Anti-Trust Act and the Government has established to the satisfaction of the Court that the combination and conspiracy above referred to represents an unreasonable restraint of trade and commerce among the several states of the United States in the manufacture and sale of ready-made furniture slip covers, is unlawful, and in violation of Section 1 of the Sherman Anti-Trust Act. Further, the Government, in the opinion of the Court, has effectively demonstrated that the defendants combined and conspired not only to restrain trade unreasonably but also to monopolize trade and commerce among the several states of the United States in the manufacture and sale of ready-made furniture slip covers, in direct violation of Section 2 of the Sherman Anti-Trust Act. The Court also feels that by documentary proof the Government has established that the defendants have used patent rights unlawfully in instituting, effectuating and maintaining the aforesaid combination and conspiracy which likewise constitutes a clear violation of the Sherman Anti-Trust Act.
California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972), was a landmark decision of the US Supreme Court involving the right to make petitions to the government. The right to petition is enshrined in the First Amendment to the United States Constitution as: "Congress shall make no law...abridging...the right of the people...to petition the Government for a redress of grievances." This case involved an accusation that one group of companies was using state and federal regulatory actions to eliminate competitors. The Supreme Court ruled that the right to petition is integral to the legal system but using lawful means to achieve unlawful restraint of trade is not protected.
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