By 1900, John D. Rockefeller was worth $200 million. He would hit $1 billion in 1913. Actually, Rockefeller stopped going to his Standard Oil office in 1897 to play golf. He also began giving away his money in earnest, $530 million by the time of his death in 1937.

Like all successful tycoons, the Rockster (sorry, as I write this it's gorgeous outside and I wouldn't mind being on the golf course myself) was a stickler for detail, probably best exemplified by the following anecdote.

It seems John D. was observing the production line one day when he counted the number of drops of solder being used to seal finished cans of oil, making the suggestion that 39 drops be used instead of 40. With 38 drops the cans leaked, but with 39 they were perfect, and several thousand dollars were saved.

Last week we discussed some of the bigger picture issues which allowed Rockefeller to monopolize the oil industry. But here is what the old man had to say, himself, in testimony given in 1899. His words could apply to any monopoly case, yesterday or today.

"I ascribe the success of the Standard to its consistent policy to make the volume of its business large through the merits and cheapness of its products. It has spared no expense in finding, securing, and utilizing the best and cheapest methods of manufacture. It has sought for the best superintendents and workmen and paid the best wages. It has not hesitated to sacrifice old machinery and old plants for new and better ones. It has placed its manufactories at the points where they could supply markets at the least expense. It has not only sought markets for its principal products, but for all possible by- products…It has not hesitated to invest millions of dollars in methods of cheapening the gathering and distribution of oil by pipe lines, special cars, tank steamers and tank wagons. It has erected tank stations at every important railroad station to cheapen the storage and delivery of its products. It has spared no expense in forcing its products into the markets of the world among people civilized and uncivilized. It has had faith in American oil, and has brought together millions of money for the purpose of making it what it is, and holding its markets against the competition of Russia and all the many countries which are…competitors against American oil."

Left unsaid was the fact that Standard exploited its position to obtain rebates from the railroads on published freight rates, something his competitors could not achieve.

As we covered in our initial articles on the Sherman Antitrust Act, Theodore Roosevelt had become President upon the assassination of William McKinley in 1901. T.R. quickly gained a reputation as a trustbuster, instituting more antitrust prosecutions than his predecessors, combined, but he was not against big business. Rather he wanted to reaffirm federal authority once and for all, then go back to a laissez-faire policy of benign regulation.

But there's no doubt Roosevelt could be difficult to deal with. J.P. Morgan once observed upon hearing that T.R. was going on a big game hunt, "I hope the first lion he meets does his duty."

In 1903 Congress formed the Department of Commerce and Labor, including the Bureau of Corporations. The latter had no direct regulatory powers, but it did have a mandate to study and report on the activities of interstate corporations. Its findings could lead to antitrust suits, but its purpose was rather to help corporations correct malpractices and thus avoid lawsuits. Mammoth companies like U.S. Steel and International Harvester worked closely with the Bureau, but others held back. Standard Oil refused to turn over any records and this proved costly on the road to its breakup in 1911.

Historian Paul Johnson has the following take on Rockefeller's monopoly.

"The story of Standard seems to illustrate the argument, now better understood than it was then, that temporary monopolies may benefit the public interest. The per-barrel cost of refined oil at a plant with a 500-barrel daily throughput was $0.06 gallon. With a 1,500-barrel throughput it fell to $0.03 a gallon…In the first big phase of expansion, Rockefeller's company was able to reduce the retail price of kerosene, used by every household in the U.S. by 70%."

But Johnson adds that what worried Americans in this era was "fear of size, something new in America, where bigness and scale had hitherto been seen as unmitigated benefits. It was inherent in much of the regulation from the 1880s onwards, by state and eventually by federal governments, and it drove on the muckraking journalism. If the reformers were asked what they hated most about Standard Oil, they replied: 'It's size.' There was no answer to that criticism."

In 1906, at the behest of Roosevelt, the Justice Department filed suit, charging that Standard engaged in monopoly practices by attempting to control trading and commerce in petroleum and its by-products, thus setting the stage for the first titanic battle between government and big business.

A decision was handed down against the company by a Missouri circuit court in 1909. Shades of Microsoft and Bill Gates, John D. Rockefeller himself testified in a "well-rehearsed performance but to no avail." [Charles Geisst]. The court ordered the breakup of the trust. Standard immediately appealed to the Supreme Court but lost.

Next week the conclusion of the case against Standard Oil, complete with exciting opinions from the Justices themselves.

Note: Attention baseball fans, in 1907 District Judge Kenesaw Mountain Landis (the future first commissioner of baseball…1920) assessed a fine of $29.2 million against Standard Oil for accepting railroad freight rebates, but the sentence was set aside by a higher court.

Sources:
"Monopolies in America," Charles Geisst
"The Pursuit of Wealth," Robert Sobel
"A History of the American People," Paul Johnson
"America," George Brown Tindall and David Shi
"The Growth of the American Republic, Vol. II," Morison, Commager, Leuchtenburg

Brian Trumbore