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Antitrust – the Modern Day Trust Buster Advancing Fair Competition

What is antitrust?  It is one of the least understood areas of the law. The name itself conjures up the question: why would anyone be “anti” – or against – trust? Trust is generally a good thing. We like to trust that ones’ word is to be counted on. We want to trust our friends, families, and elected officials. We set up trusts to secure our children’s financial futures or to benefit worthy charities.

But to understand the meaning of the word “antitrust,” we have to look to the late nineteenth and early twentieth centuries when there was a colossal wave of industrialization across the United States. Large corporations developed within many industries, such as the railroads and the oil industry. Then, when the already-sizeable corporations began to merge with or acquire their competitors, the result was even larger companies with little or no competition. These massive combined corporations were commonly called “trusts”.

One example of such a trust was Standard Oil, the very first trust. For over two decades, Standard Oil used exclusionary practices, predatory refining prices, and the passage of laws designed to exclude any competitors. In essence, John D. Rockefeller, the head of the trust, offered his competitors two choices: join us, or be destroyed. The tactics and economic devastation caused by the Standard Oil Trust were described in detail in the Oil War of 1872—an exposé written by American journalist Ida Tarbell (whose own father had been an oil man facing ruinous annihilation by the trust because he was not able to fairly compete with the trust).

The first federal antitrust law, the Sherman Act, was enacted in 1890 (fun fact: Ohio Senator John Sherman, native son of Lancaster, Ohio, was the principal author of the Act). Shortly after the Sherman Act was passed, Ohio’s then-Attorney General David K. Watson filed suit against Standard Oil (headquartered in Cleveland at the time) in the Ohio Supreme Court. Attorney General Watson was successful before the Court, which ordered the breakup of the trust. However, Standard Oil refused to comply with the Court’s decision and merely picked up and moved its headquarters to New York.

But, then-President Theodore (Teddy) Roosevelt capitalized on the fame of Ms. Tarbell’s articles on Standard Oil to fervently prosecute the trust. Ida Tarbell is an example how important an average citizen can be in assisting law enforcement agencies in uncovering illegal antitrust behavior. If you have a tip on potential antitrust conduct – please visit our Antitrust Bid-Rigging Web Tip Form.

President Roosevelt created the Bureau of Corporations (now the FTC) and the United States Justice Department filed a 170-page complaint against Standard Oil. Ultimately the United States Supreme Court found that Standard Oil was exactly the sort of trust that the Sherman Act was designed to make illegal. Standard Oil, the largest trust of the day and the largest private firm in the world at the time, was broken up into 34 separate companies. Thus, the trust was busted. Or, in other words, the Sherman Act behaved as designed; the antitrust law was a tool to prevent trusts from using their monopoly power to injure the average American.  

Put simply, antitrust is pro-competition. It ensures fair and competitive markets. And most importantly, it protects consumers. And that’s why we investigate and enforce the antitrust laws against industries that may present a monopoly, or those who collude with others to raise prices. (See What We Investigate).