The government believes monopolies to be bad. Over the last 100 years, there hav

Question

The government believes monopolies to be bad. Over the last 100 years, there have been two major break-ups: AT&T and Standard Oil.

Select one of these two companies to research, or research and select a different company. You can use these resources to help you get started in your search:

How were they broken-up?

And what has happened to those smaller companies?

Company

Reason for break up

Broken into (companies)

Result of the break up today?

Remember to cite your sources!

Company

Reason for break up

Broken into (companies)

Result of the break up today?

Explanation / Answer

Monopolies came to the United States with the colonial administration. The large-scale public works needed to make the New World hospitable to Old World immigrants required large companies to carry them out. These companies were granted exclusive contracts for these works by the colonial administrators. Even after the American Revolution, many of these colonial holdovers still functioned due to the contracts and land they held.

Monopoly is the extreme case in capitalism. It is characterized by a lack of competition, which can mean higher prices and inferior products. However, the great economic power that monopolies hold has also had positive consequences for the U.S. Read on to take a look at some of the most notorious monopolies, their effects on the economy and the government's response to their rise to power.

Standard Oil- THE COMPANY
The oil industry was prone to a natural monopoly because of the rarity of the deposits. Rockefeller and his partners took advantage of both the rarity of oil and the revenue produced from it to set up a monopoly without the help of the banks. The business practices and questionable tactics that Rockefeller used to create Standard Oil would make the Enron crowd blush, but the finished product was not near as damaging to the economy or the environment as the industry was before Rockefeller monopolized it.

The astonishing success of Standard Oil encouraged others to follow the Rockefeller business model, particularly in the booming final decades of the 19th century. Trusts were established in close to 200 industries, although most never came close to Standard Oil in size or profitability. Among the largest were railroads, coal, steel, sugar, tobacco and meatpacking.

REASON FOR the break up

This trend went far from unnoticed by the general public. In fact, it led to widespread disgust and revulsion, not only among the many people who had their businesses or jobs wiped out by the ruthless predatory tactics of the trusts, but also by countless others who were affected by the increased costs and reduced levels of service that often resulted from the elimination of competition.

The monopolization of the economy also became a major topic for the print media, which helped to create a widespread awareness not only of the effects of this consolidation but also of the techniques that were being used to attain it, including the extensive use of fraud, political corruption and physical violence.In spite of the outraged public sentiment, it took the government a long time to take effective measures to deal with the abusive tactics by Standard Oil and other monopolies

Sherman's Hammer
Responding to a large public outcry to check the price fixing abuses of these monopolies, the Sherman Antitrust Act was passed in 1890. This act banned trusts and monopolistic combinations that lessened or otherwise hampered interstate and international trade. The act acted like a hammer for the government, giving it the power to shatter big companies into smaller pieces to suit its own needs.

Despite this act's passage in 1890, the next 50 years saw the formation of many domestic monopolies. During this same period, the antitrust legislation was used to attack several monopolies with varying levels of success. The general trend with the use of the act seemed to have been to make a distinction between good monopolies and bad monopolies as seen by the government.

The Sherman Antitrust Act, in contrast, was based on the constitutional power of Congress to regulate interstate commerce. It was passed by an overwhelming vote of 51-1 in the Senate and a unanimous vote of 242-0 in the House, and it was signed into law by President Benjamin Harrison.

The government identified four illegal 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 said that Standard raised prices to its monopolistic customers but lowered them to hurt competitors, often disguising its illegal actions by using bogus supposedly independent companies it controlled

Subsequently, in 1892 the Ohio Supreme Court declared the Standard Oil Trust to be an illegal monopoly and ordered its dissolution.

On May 15, 1911, the US Supreme Court upheld the lower court judgment and declared the Standard Oil group to be an "unreasonable" monopoly under the Sherman Antitrust Act, Section II. It ordered Standard to break up into 90 independent companies with different boards of directors, the biggest two of the companies were Standard Oil of New Jersey (which became Exxon) and Standard Oil of New York (which became Mobil)

                                             BROKEN INTO COMPANIES                                        

The successor companies from Standard Oil's breakup form the core of today's US oil industry. (Several of these companies were considered among the Seven Sisters who dominated the industry worldwide for much of the 20th century.) They include:

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