Standard Oil and the immorality of Anti-Trust
Background
Standard oil was an oil company that was created in Ohio and first incorporated as Standard Oil of Ohio in 1870. The company was created as a partnership between these individuals:
a.. John D. Rockefeller
b.. William Rockefeller
c.. Henry Flagler
d.. Samuel Andrews
e.. Stephen V. Harkness
The company grew out of Ohio, eventually controlling over 90% of the Oil refining in the United States. Only two years after its incorporation, Standard purchased most of the oil companies in Ohio. During this expansion, Rockefeller employed many tactics in growing his company, some of which allegedly gave him an "unfair" advantage over his competitors. In this article, I will review the claims against Rockefeller's so-called monopoly, and I will present an argument on how Rockefeller never overstepped his ethical boundaries.
The Complaints
1.)When Rockefeller purchased most of his competitor oil companies, he either shut them down for being too inefficient or incorporated them into Standard Oil. This annoyed small businesses because Rockefeller was able to achieve larger economies of scale and save costs in the production of kerosene.
2.)Rockefeller also improved his efficiency by making deals with railroad companies to ship a certain amount a day for a discounted rate. This further infuriated the small businesses who could not keep up with the growth of the oil giant. In one deal in 1868, Rockefeller secured a 71% discount with the Lake Shore Railroad by agreeing to ship 60 carloads of oil daily.
Justifications
1.)When Rockefeller purchased competitors, he used no form of coercion on them. Competitors reached mutual agreements with Rockefeller to exchange their company for a certain amount of Rockefeller's accumulated wealth. If a company did not believe it was profitable to stay in the market, it would concede its holdings to Rockefeller for monetary gain. In no way did this damage the ability of other oil companies to compete, except that it made it harder to achieve the low prices set by Standard Oil's massive operation.
2.) Deals with railroad companies were simply another mutual agreement secured by Rockefeller. The railroads had an incentive to cut prices for those who could supply a steady amount of business. A major component of the complaint against Rockefeller in this respect was that the deals were secret or semi-secret. This bit of information should be disregarded as trivial in a legal context. The Railroads, by keeping their deals secret, could only hurt themselves by keeping potential customers in the dark about special rates. While knowledge of those special rates would help other clients, a company should be allowed to give business to whomever it wants on whatever terms it sets. Not letting competitors use their system for the same rate was simply the terms which the railroad set with other clients.
Conclusions
From 1865 to 1870, the price of Standard Kerosene decreased from 58 cents to 26 cents. This price change greatly benefited the American consumer and led to the creation of a formidable competitor in the Oil industry. Standard jumped into the market and continued increasing the efficiency of kerosene production through greater economies of scale and successful business practices. One example of efficiencies achieved by Standard Oil was how Standard didn't dump gasoline into rivers like their competitors, instead using it for powering their machines. Standard also achieved efficiency by finding uses for waste products, with Standard becoming the first synthetic competitor for beeswax.
In Conclusion, The Supreme Court's decision to break up Standard Oil in 1911 was a horrible blunder perpetrated by the government of the United States. It punished a perfectly ethical business practice under the Sherman Antitrust act of 1890, which is in itself an immoral piece of legislation.