Volume 85, Number 3 (March, 2012)
Article by Barak Orbach & D. Daniel Sokol
Antitrust law has been declared a failure, moribund, or possibly just a ghost from the trustbusting era. A quarter of a century ago, Thomas Hazlett declared: “Any responsible historian of American antitrust policy must conclude that, if one takes at face value the assertions that antitrust laws exist to advance competition and protect the consumer, that policy is a failure. The notorious Berkey Photo case may be the flagship of that failed policy.” Hazlett went as far as suggesting it would be “...
Antitrust and Business History
Article by Margaret C. Levenstein
What are the lessons of business history for antitrust policy? In particular, what are the lessons of business history for policies toward firms or practices that Standard Oil has come to symbolize: firms with monopoly power, firms that engage in predatory practices or vertical restraints, or more broadly, firms that just seem too big? There is an interesting and provocative literature that examines the practices and impact that such firms or practices have on consumers and competition. Several...
The “Hub-and-Spoke” Conspiracy that Created the Standard Oil Monopoly
Article by Benjamin Klein
The government’s challenge to Standard Oil’s monopoly of refining and the resulting court-ordered break up of Standard Oil one hundred years ago, was motivated to a large extent by the now discredited idea of protecting competitors rather than preserving competition. Consistent with a principal concern of the framers of the Sherman Act that large corporations often received discriminatory discounts which placed small companies at an unfair disadvantage, the government focused its case on Standar...
Rethinking the Economic Basis of the Standard Oil Refining Monopoly: Dominance Against Competing Cartels
Article by George L. Priest
The success of the Standard Oil monopoly is not well understood. Standard Oil first developed a monopoly over the refining of crude oil, though later extended its control to gathering pipelines, later still to trunk pipelines (from the western Oil Regions to East Coast ports) and, even later, expanded operations to include oil production (drilling) and retail sales at the time the Supreme Court ordered its dissolution over 100 years ago, in 1911. Though there are several journalistic exposes...
Were Standard Oil’s Rebates and Drawbacks Cost Justified?
Article by Daniel A. Crane
Standard Oil’s preferential railroad rebate structure lies at the heart of the seminal Standard Oil case, which culminated in the Supreme Court’s 1911 affirmation that Standard Oil had violated the Sherman Act and should be broken up. Beginning in 1868, Standard Oil received rebates of varying amounts from railroads for crude and refined oil shipped east over their lines. In some later years, it also received drawbacks for oil shipped by independent refiners–Standard Oil’s competitors. The rebat...
Revisiting the Revisionist History of Standard Oil
Article by Christopher R. Leslie
As the contributions to this symposium prove, the Standard Oil case continues to inform many aspects of current antitrust policy. Part of Standard Oil’s significance, however, has been lost over time. The Supreme Court condemned a range of conduct by Standard Oil as anticompetitive, including predatory pricing. Predatory pricing occurs when a firm prices its product below cost in order to drive its competitors from the market. Once enough rivals have exited the market, the predator raises price...
The Antitrust Curse of Bigness
Article by Barak Orbach & Grace Campbell Rebling
In 1882, Standard Oil’s General Solicitor invented the corporate trusts that inspired the birth of the antitrust discipline. The public aversion to trusts in the United States gave the field its enduring and uniquely American name. As the discipline matured, distrust of business size took root in cases and doctrines. Justices Louis Brandeis and William Douglas wrote the narrative into early case law and it remained embedded in the field even as economics became the antitrust methodology. Economi...
Standard Oil and U.S. Steel: Predation and Collusion in the Law of Monopolization and Mergers
Article by William H. Page
The Supreme Court’s 1911 decision in Standard Oil gave us embryonic versions of two foundational standards of liability under the Sherman Act: the rule of reason under Section 1 and the monopoly power / exclusionary conduct test under Section 2. But a case filed later in 1911, United States v. U.S. Steel Corp., shaped the understanding of Standard Oil’s standards of liability for decades. U.S. Steel, eventually decided by the Supreme Court in 1920, upheld the spectacular 1901 merger that created...
The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy
Article by D. Daniel Sokol
One understudied area of the formative period of antitrust and of Standard Oil’s conduct during this period is in the use and nature of antitrust private claims against Standard Oil. In contemporary antitrust, the ratio of private to government brought cases is ten to one. In contrast, one hundred years ago government cases constituted nearly all antitrust cases, and many of such cases were state cases. On the hundredth anniversary of the Standard Oil decision, the present Article uses a discuss...
Moving Beyond Caricature and Characterization: The Modern Rule of Reason in Practice
Article by Andrew I. Gavil
After one hundred years one might expect a rule of law to be settled. In the case of the “rule of reason,” first endorsed by the Supreme Court in its 1911 decision dissolving the Standard Oil trust, the conventional wisdom often portrays the opposite. Citing its principal early enunciation in Board of Trade of Chicago v. United States (“Chicago Board of Trade”), critics often denigrate the rule of reason variously as “unstructured,” “full-blown,” “uncertain,” “error-prone,” and costly to adminis...
Standard Oil as Lochner’s Trojan Horse
Article by Alan J. Meese
Few decisions are as maligned as Lochner v. New York, which struck down a law setting maximum hours for bakers. Innumerable critics assert that Lochner was a paradigmatic example of judicial activism, whereby laissez-faire judges imposed their personal policy preferences under the guise of judicial review. According to this widely shared view, both Lochner and its progeny improperly read the “liberty” of the Fourteenth and Fifth Amendments to include “liberty of contract,” which the Court then p...
Remedies for Monopolization from Standard Oil to Microsoft and Intel: The Changing Nature of Monopoly Law from Elimination of Market Power to Regulation of Its Use
Article by Peter C. Carstensen
Academic commentators have, over the years, lamented the failure of monopoly remedies to achieve effective relief. For some, the failure highlighted the foolishness of the law interfering with market structures and conduct, while for others it was evidence of the failure of the courts and law enforcers to act with sufficient boldness and courage. Both lines of critics focus on the options chosen and by implication assume that a better option would have existed if only those enforcing the law had...
The Long Shadow of Standard Oil: Policy, Petroleum, and Politics at the Federal Trade Commission
Article by Timothy J. Murris & Bilal K. Sayyed
We seek both to acknowledge and to begin to explain the FTC’s recent success in this industry, as this success provides a useful model for other agencies, including the DOJ’s working group, which often must consider how to address political interest in their law enforcement decisions. We focus on three areas of intense political interest in which the FTC has avoided implementing what we think are extreme and unnecessary suggestions from congressional and local enforcement officials: (1) merger e...
Isn’t This Where We Came in?: An Examination of the Turbulent History and Divergent Economics Underlying Section 36(b) of the Investment Company Act of 1940 and a Proposal to Finally Put the Law to Use
Note by John Baumann
It is easier to invest in the stock market now than it has ever been. With the proliferation of the Internet, online investing websites have nearly obliterated the need for stockbrokers and have given individuals the ability to invest in whatever they chooseâ€”for around seven dollars per trade, a person can own a share of almost any publicly traded company. While this is certainly a step forward for the world of investing, it does not come without risk. Relying solely on personal research and i...
Arizona’s S.B. 1070 and Federal Preemption of State and Local Immigration Laws: A Case for a More Cooperative and Streamlined Approach to Judicial Review of Subnational Immigration Laws
Note by Jennifer R. Phillips
Early in the morning of July 15, 2010, protestors began to assemble outside the Sandra Day O’Connor U.S. Courthouse on the sun-baked streets of downtown Phoenix. Nearly 400 individuals gathered, armed with megaphones, sunscreen, and a firm sense of resolve, to demonstrate their support or, more likely, opposition to Arizona’s immigration law known as S.B. 1070. Senate Bill 1070, the Support Our Law Enforcement and Safe Neighborhoods Act, was signed into law by Arizona Governor Janice Brewer o...
What Would Predatory Pricing Be Without John McGee? A Reply to Professor Leslie
Postscript (Response) by Joshua D. Wright
In his 2012 article, Revisiting the Revisionist History of Standard Oil, Christopher Leslie takes issue with John McGee’s work on predatory pricing and its influence on antitrust law and scholarship. Leslie claims McGee’s analysis was methodologically flawed, ideologically motivated, but ultimately successful in “distorting” predatory pricing law by persuading courts to adopt a standard too permissive of anticompetitive predation. Holding aside the specific methodological critique of McGee’s ana...
Determining the Optimal Antitrust Standard: How to Think About Per Se Versus Rule of Reason
Postscript (Response) by Abraham L. Wickelgren
Andrew I. Gavil presents a thoughtful and illuminating portrait of the evolution of the rule of reason in United States antitrust law since Standard Oil. While the rule of reason, as initially embodied in Standard Oil Co. v. United States and Board of Trade of Chicago v. United States (“Chicago Board of Trade”), may have once been an invitation to make any and all arguments about the competitive nature of a given restraint, Gavil rightly points out that this is no longer the case. As currently e...
Tarring the Trust: The Political Economy of Standard Oil
Postscript (Response) by Michael Reksulak & William F. Shughart II
It has been well established in the economics literature that the antitrust laws have been used strategically to undermine the competitive market process, whether the alleged abuses were based in fact or not. It should, then, come as no surprise that the origins of one of the most famous decisions in antitrust jurisprudence, the 1911 judgment by the Supreme Court against Standard Oil, can be traced back to an alliance of rivals that had seen their business interests hurt by John D. Rockefeller,...
Occupy Wall Street and Antitrust
Postscript (Response) by Maurice E. Stucke
Even its more stalwart defenders are concerned that capitalism is in crisis. Alan Greenspan conceded a “flaw” in his free-market beliefs. The Financial Times, in 2012, invited Arundhati Roy and Occupy Wall Street to share a dialogue with high-level officials and leading economists over the crisis in capitalism. The crisis in capitalism might have come as a shock to some, but not to many middle- and lower-income households. Well before 2008, middle-class Americans saw little gains in income, d...
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