Standard Oil Co. of New Jersey v. United States was a Supreme Court case that tested the strength of the Sherman Antitrust Act of 1890. The most contentious business case at the time to reach the Supreme Court saw the United States government take on the countries largest corporation (Standard Oil) and John D. Rockefeller, the countries wealthiest businessman.
The court ruled in favor of the United States and held that a business combination was illegal when it was engaged in unreasonable restraint to trade. This resulted in the breakup of Standard Oil into separate companies, all in competition with one another, effectively lowering prices.
Former attorney for the Standard Oil Company in Ohio, C.T. Dodd, skirted around existing Ohio anti-trust (or anti-competition) law by creating a new form of a trust in 1879 in order to allow the growing corporation to own stock in other corporations. While Standard Oil was the strongest corporation following these practices at the time, many industries were seeing an increase in mergers, acquisitions, and trust formations resulting in market dominance being maintained by the few and influencing many.
The Government alleged that Standard Oil did not solely benefit from the development of the new trust formation and superior business practice but from “immoral acts – rebate taking, local price-cutting” which did not evade state or federal regulation.
Arguments by Petitioner
Frank Kellogg, attorney
The argument was made that Rockefeller had obtained his monopoly through under the table deals, threats, and bribery with railroad companies in order to receive special rates that would give his companies and an unsurmountable advantage over his competitors in the regions. In response to the defense that the profits and success were a result of efficiency and superior businiess tactics, Kellogg would argue that the savings from the efficient processes were never reflected in the price of the oil and thus never handed down to the consumer. Consequently, Rockefeller and his partners continue to make extremely high profits.
Arguments by Respondent
John C. Milburn, attorney
The respondent argued that Rockefeller sought out favorable business agreements that any other business had the ability to do and never did so with the intention of driving others out of the market. Milburn also showed that consumers were not hurt in the process and that prices remained the same for decades, creating a stable market which can not be said for many of the combinations and trusts being formed at the time.
Witnesses such as Rockefeller’s business partner, Henry Flagler, would testify that there were no illegal components of the deals made with railroad companies and that other companies received the same rebates. The case was made that Rockefeller and the Standard Oil Co. made an appealing offer to the railroad companies by offering continuous and exclusive business partnerships.
On May 15,1911, Chief Justice Edward White writing for the majority, the Court ruled that Standard Oil and the listed 33 companies affiliated were participating in “restrain[t to] trade and commerce in petroleum.” After thorough examination of English contextual meaning of reasonable restraint, Chief Justice White determined that the attempt to control the free market through fixed pricing, combinations/monopolies, and seeking to eliminate competition would be classified as unreasonable and thus illegal.
Majority Opinion (White)
Concurring Opinion (Harlan)
Dissenting Opinion (author)
Full Text of Opinions
Significance / Impact
Standard Oil was ordered to be broken into 33 different companies. Those who held stock in the companies were given a percent of stock in each of the companies equal to their hold in Standard Oil. As a result, Rockefeller’s wealth nearly tripled. His pre-ruling holdings in Standard Oil was approximately 25% of the company. Rockefeller received 25% of the stock in each of the 33 companies which saw his wealth increase from $300 million to $900 million shortly after the ruling.
The business impact of the Court ordered dismantling of the oil empire underwent several changes and is representative of some of the major oil corporations in existence today.
- Standard Oil of New Jersey – renamed Exxon, now part of ExxonMobil.
- Standard Oil of New York – renamed Mobil, now part of ExxonMobil.
- Standard Oil of California – renamed Chevron
- Standard Oil of Indiana – renamed Amoco (American Oil Co.) – now part of BP.
- Continental Oil Company – now part of ConocoPhillips.
- Standard Oil of Ohio – acquired by BP in 1987.
- The Ohio Oil Company – renamed Marathon Oil Company.
- South Penn Oil Co. – renamed Pennzoil, now part of Shell.
- Chesebrough Manufacturing – now part of Unilever, this company took the by-products of the oil refining and reused them to make petroleum jelly a.k.a. vaseline.
Major Statute(s) Under Review
Important Subsequent Cases
Academic Books, Articles and Law Reviews
Spring 2016: Robert Jimison
Fall 2015: Kristeria Floyd, Casey Hall, Brianna Robinson, Ashley Thorne