|7.9 The 1890 Sherman Antitrust Act|
|Congress passed this act in 1890, and this is the source of
all American anti monopoly laws. The law forbids every contract, scheme, deal, conspiracy
to restrain trade. It also forbids conspirations to secure monopoly of a given industry.
The ideas were new and had to wait before they could achieve some efficiency. The Standard
reorganized once more, in a holding in the Standard Oil Company (New Jersey)
which now coordinated the whole machine, that is 70 companies and 23 refineries
controlling 84% of the crude oil refined in the US in 1899. Ten years later, international
competition (from Canada, Peru, Rumania, Poland, India or Russian) and the struggle of the
independents lowered this percentage to 14 %. Theodore Roosevelt committed himself
in 1901 and during both of his mandates to a strong war against monopolies, launching the
federal government in 1906 in a lawsuit against the Standard because of discriminatory
practices on the market, abuse of power and excessive control on the American oil
7.10 Dismantling of the Standard Oil
In 1911, the Supreme Court finds the Standard Oil in violation of the 1890 Sherman Antitrust Act because of excessive restrictions to trade, and in particular its practice of buying out the small independent refiners or that of lowering the price in a given region to force bankruptcy of competitors. The court ordered the Standard Oil Company (New Jersey) to dismantle 33 of its most important affiliates, giving the stocks to its own shareholders and not to a new trust. From these offspring will come Exxon, Mobil, Chevron, American, Esso (that is SO).
This is a landmark ruling in the economic history of the USA, and is the basis for a new doctrine in American antitrust policy, called the rule of reason (because of the famous unreasonable restraints to trade mentioned in the Sherman Antitrust Act. Need for more solid juridical basis led to the Clayton Antitrust Act in 1914, which explicitly condemns commercial practices like price discrimination, exclusive commercial relations, the buying out of competitors and the incestuous boards.
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