Standard Oil Company v. United States 221 U.S. 1 (1911) United States v. American Tobacco Company 211 U.S. 106 (1911)

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STANDARD OIL COMPANY v. UNITED STATES 221 U.S. 1 (1911) UNITED STATES v. AMERICAN TOBACCO COMPANY 211 U.S. 106 (1911)

John D. Rockefeller, owner of the nation's first, largest, and richest trust and controller of the nation's oil business, scorned his competitors and contemned the law. His disregard for the sherman antitrust act helped earn him, in 1909, a dissolution order which the trust appealed to the Supreme Court. Rockefeller thereby provided Chief Justice edward d. white with the occasion to celebrate the conversion of a majority of the Court to his viewpoint, enabling him to write the rule of reason into antitrust law. After nearly fifteen years of effort, White had managed to enlarge judicial discretion in antitrust cases, even though the oil trust did not urge the doctrine upon the Court; indeed, it was unnecessary to the case's disposition.

Chief Justice White, leading an 8–1 Court, ruled that only an "unreasonable" contract or combination in restraint of trade would violate the law. White had effectively amended the law to insert his test: section 1 of the Sherman Act would henceforth be interpreted as if it said, "Every unreasonable contract, combination … or conspiracy in restraint of trade … is hereby declared to be illegal."

Standard Oil, however, lost the case. The record, said White, showed clearly and convincingly that this trust was unreasonable. Systematic attempts to exclude or crush rivals and the trust's astounding success demonstrated the violation beyond any doubt.

Justice john marshall harlan concurred in the result but dissented from the Court's announcement of the rule of reason. Harlan observed that Congress had refused to amend the act to incorporate the rule of reason, and he lashed out at the majority's "judicial legislation," predicting that the new policy would produce chaos. His call echoed in Congress where Democratic pressure grew to write the rule of reason out of the Sherman Act. That pressure would eventually find partial release in supplementary antitrust legislation, passage of the clayton act in 1914. The rule of reason prevailed, however, although the Court applied a double standard. When massive business combinations such as United States Steel Corporation, United Shoe Machinery Company, and International Harvester came before the Court, they were found to have acted reasonably, restraints of trade notwithstanding. In antitrust action against labor unions, however, the Court ignored that rule.

In the companion American Tobacco case, Chief Justice White attempted to mitigate a too vigorous federal antitrust policy by ordering reorganization, not dissolution, of the Tobacco Trust. He thereby heartened business interests by showing solicitousness for property rights and a stable economy.

David Gordon
(1986)