Standard Oil
John D. Rockefeller's oil monopoly, which controlled 90 percent of American refining and was broken up in 1911 into the ancestors of today's oil majors.
John D. Rockefeller started with one refinery in Cleveland in 1863 and a conviction that the oil business was ruinous because it was chaotic. Wells boomed and busted, refiners undercut each other into bankruptcy, and nobody made durable money. His answer was to end the competition. By the early 1880s Standard Oil controlled roughly 90 percent of American refining capacity, and it did so without owning a single well worth mentioning at the start.
How the machine worked
The famous instrument was the railroad rebate. Standard shipped enormous, predictable volumes, so it could demand secret discounts off published freight rates, and then something more aggressive: drawbacks, under which the railroads paid Standard a cut of the higher rate charged to its competitors. A rival paying full freight was funding the company destroying it. Rockefeller then offered those rivals a choice, sell to Standard on his terms or compete against a firm with structurally lower costs, and most sold. The 1872 South Improvement Company scheme, exposed before it could operate, made the method public and made him permanently notorious.
The less lurid explanation matters too. Standard was genuinely efficient. It built its own barrels, pipelines, and tank cars, hired chemists to squeeze saleable products out of what others burned off as waste, and drove the price of kerosene down far enough to light the homes of ordinary people who had previously gone to bed at dark. Both things are true: the monopoly overcharged where it could and still delivered a cheaper product than the chaos it replaced.
The trust, and the word
The company also invented a legal form. State law barred a corporation from owning stock in corporations elsewhere, so in 1882 Standard's lawyers had shareholders of dozens of separate companies hand their shares to nine trustees who voted them as a bloc. That device, the trust, gave central control without a legal merger, and it was copied so widely across sugar, whiskey, tobacco, and steel that antitrust is still the American word for competition law. Ohio's courts unwound the trust in 1892; Standard reassembled itself as a New Jersey holding company in 1899, which was the same monopoly wearing a different coat.
What finally moved the politics was journalism. Ida Tarbell, whose father had been ruined as an independent oil man, published a nineteen-part investigation in McClure's between 1902 and 1904 that documented the rebates, the drawbacks, and the espionage against competitors in detail no one could dismiss. It remains the model for what investigative reporting can do to a company.
Broken up, and richer
On May 15, 1911, the Supreme Court ordered Standard Oil dissolved under the Sherman Act, splitting it into 34 separate companies. The decision also announced the rule of reason, holding that only unreasonable restraints of trade are illegal, which softened antitrust law for decades afterward.
The breakup did not impoverish anyone. Shareholders received stock in all 34 successors, the pieces were worth far more apart than together, and Rockefeller's fortune roughly tripled in the following two years. Theodore Roosevelt noted acidly that Wall Street's prayer had become a plea for another dissolution. The successors became the industry: Jersey Standard grew into Exxon, Standard of New York into Mobil, Standard of California into Chevron, Standard of Indiana into Amoco, and several of them into the Seven Sisters that ran world oil until the 1970s. Exxon and Mobil merged again in 1999, and no court objected.
That is the case study every antitrust argument returns to, whether the subject is oil, railroads, or search engines: a monopoly can be efficient and predatory at once, breaking one up may enrich its owner, and the pieces have a way of finding each other again.