UNIVERSITY OF PETROLEUM AND ENERGY STUDIES COLLEGE OF LEGAL STUDIES, DHERADUN

Assignment-I

Rockefeller & Standard Oil Case & Sherman Antitrust Act

IN THE PARTIAL FULFILMENT OF CONTINUOUS EVALUATION OF COMPETETION LAW

SUBMITTED TO: Prof. K.P. Sampath Kumar Industry Fellow

SUBMITTED BY: Kunal Singh BA.LLB (Hons) R450209038 (9th Semester)

Issues: 1. Whether a federal antitrust lawsuit filed by the Department of Justice against Standard Oil Company is violating Sherman Anti-trust Act or not? 2. Whether the contention raised by Department of justice was against Rockefeller and Standard Oil Company was valid or not? Rules: 1. Yes, standard oil company is violating Sherman Anti-Trust Act because it rebates, preferences, and other prejudiced practices in favour of the grouping by railroad companies; self-control and monopolization by control of pipe lines, and iniquitous practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to hold back competition; and surveillance of the business of competitors, the operation of spurious independent companies, and payment of rebates on oil, with the like objective." 2. Yes, the contentions of department of justice was valid against Standard oil co. as the government recognized four unlawful patterns: (1) Secret and semi-secret railroad rates; (2) Discriminations in the open arrangement of rates; (3) Discriminations in classification and rules of shipment; (4) Discriminations in the treatment of private tank cars. The government alleged: "The evidence is, in fact, completely beyond question that the Standard Oil Company charges altogether unnecessary prices where it meets no competition, and above all where there is little probability of competitors entering the field, and that, on the other hand, where competition is on the go, it often cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are typically somewhat higher." Application/ Analysis: The government's challenge to Standard Oil's monopoly of refining and the resulting courtordered 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 Standard Oil's use of its dominant position to obtain preferential railroad rebates that forced rival refiners to either agree to be acquired by Standard Oil or to go out of business. While it is now nearly universally accepted that Standard Oil's preferential railroad rates were a crucial factor in Standard Oil's growth and dominance of refining in the 1870s, Michael Reksulak and William Shughart have recently advocated a procompetitive view of Standard Oil's rate discounts. Relying on Ron Chernow's conclusion that the railroads achieved significant cost savings by transporting Standard Oil's large shipments, Reksulak and Shughart argue that Standard Oil's rate rebates were merely the way the railroads shared with Standard Oil the transportation efficiencies associated with handling Standard Oil shipments as part of the normal competitive process. Conclusion: Standard Oil Co. lost the case, but White, for the majority, managed to revise the language of the Sherman Act such that only "unreasonable" contracts and combinations in restraint of trade would violate the law. Heretofore, the Act made all contracts and combinations in restraint of trade into law violations. In this case, the evidence shows that the Standard Oil trust was unreasonable.