Sherman Antitrust Act

Businessman John D. Rockefeller established Standard Oil Company in 1870 in Cleveland, Ohio. At that time Standard Oil refined less than 4 percent of oil in the United States. More than 250 competitors also refined oil. Rockefeller entered into agreements with other oil companies to pool transportation of their oil to receive very cheap railroad transport rates. Only those who agreed to cooperate received the cheap rates. By 1873 through these various agreements Rockefeller managed to control 80 percent of the oil refining in Cleveland, which represented about one-third of the country's total refining ability.

By 1880 Standard Oil controlled most U.S. refineries. In 1882 the approximately forty companies that had entered into agreements with Standard Oil reorganized into Standard Oil Trust, the first large trust in America. The shareholders of those companies turned their shares over to nine individuals or trustees (hence the name trust) who ran all operations. In return shareholders received "trust certificates." The trustees paid out earnings to the holders of the trust certificates.

Later in 1882 the Ohio courts dissolved the huge oil trust but Standard merely reestablished in New Jersey, a state allowing trusts. When Congress passed the Sherman Antitrust Act in 1890, Standard again reformed calling itself a holding company, which again was allowable in New Jersey and allowed the firm to avoid the term "trust." By 1900 Standard Oil controlled 90 percent of U.S. oil refinery business and the Rockefeller family had become enormously wealthy.

In 1911 the U.S. Supreme Court in Standard Oil of New Jersey v. United States found Standard in violation of the Sherman Antitrust Act. The Court ordered the breakup of Standard Oil into smaller companies. The names of those companies included American Standard, Chevron, Esso, Exxon, and Mobil. Competition among the smaller oil companies resumed.