The History of the Standard Oil Company

Definition

The Standard Oil Company was a major American oil company founded by John D. Rockefeller and others in 1870. It became the largest oil refinery in the world and a dominant force in the oil industry through its aggressive business practices and anti-competitive tactics, which eventually led to its breakup by the U.S. government in 1911 under the Sherman Antitrust Act.

5 Must Know Facts For Your Next Test

1. Standard Oil Company was founded in 1870 by John D. Rockefeller and several partners, and quickly became the dominant force in the U.S. oil industry.
2. The company used various anti-competitive tactics, such as price-cutting, exclusive contracts, and acquisitions, to drive out competitors and establish a near-monopoly on oil refining and distribution.
3. By 1879, Standard Oil controlled 90% of the U.S. oil refining industry, leading to public outcry over its monopolistic practices.
4. In 1911, the U.S. Supreme Court ruled that Standard Oil's business practices violated the Sherman Antitrust Act and ordered the company to be broken up into 34 separate entities.
5. The breakup of Standard Oil is considered a landmark case in the history of antitrust legislation and the regulation of large corporations in the United States.

Review Questions

• Explain how the Standard Oil Company's business practices led to its dominance in the oil industry.
  • The Standard Oil Company used a variety of anti-competitive tactics, such as price-cutting, exclusive contracts, and strategic acquisitions, to drive out its competitors and establish a near-monopoly on oil refining and distribution in the United States. By 1879, the company controlled 90% of the U.S. oil refining industry, allowing it to set prices and dictate terms to both suppliers and consumers. This monopolistic control over the market was a key factor in the company's rapid growth and dominance in the oil industry during the late 19th and early 20th centuries.
• Describe the significance of the Supreme Court's 1911 decision to break up the Standard Oil Company.
  • The Supreme Court's 1911 ruling that the Standard Oil Company's business practices violated the Sherman Antitrust Act was a landmark decision in the history of antitrust legislation and the regulation of large corporations in the United States. The court's order to break up the company into 34 separate entities was a major victory for the Progressive movement's efforts to curb the power of monopolies and trusts, and it set a precedent for the government's ability to intervene and dismantle large, anti-competitive corporations. The breakup of Standard Oil is widely regarded as a turning point in the regulation of American businesses and the promotion of a more competitive, free-market economy.
• Analyze how the rise and fall of the Standard Oil Company influenced the development of the Progressive movement and its push for antitrust legislation in the United States.
  • The dominance of the Standard Oil Company and its use of monopolistic practices to control the oil industry was a key driver of the Progressive movement's push for antitrust legislation in the late 19th and early 20th centuries. The public outcry over Standard Oil's monopolistic control and its negative impact on consumers and smaller competitors helped galvanize support for government intervention to regulate large corporations and promote competition. The Supreme Court's landmark 1911 decision to break up Standard Oil under the Sherman Antitrust Act was a major victory for the Progressives and validated their efforts to rein in the power of trusts and monopolies. This case, along with other high-profile antitrust actions, strengthened the Progressive movement's influence and contributed to the passage of additional antitrust laws, such as the Clayton Antitrust Act, that aimed to promote a more competitive and equitable business environment in the United States.

Related terms

Monopoly: An exclusive possession or control of the supply of or trade in a commodity or service.

Trust: A combination of firms or corporations formed to limit competition and control prices.

Antitrust Legislation: Laws enacted to promote competition by regulating or prohibiting monopolies and other business practices that restrict trade.