Major Cases in Anti-Trust Law By Bobby Oler

Where it all began…

Any discussion of key antitrust cases begins with Standard Oil Co. of New Jersey v. United States. By the late 1890s, the company had reduced the price of kerosene down to as low as six cents per gallon.

The secret to their success? They were cutting deals with transportation companies to reduce part of the manufacturing cost. Their competitors did not have the necessary leverage to compete with kerosene prices that low. As a result, Standard Oil began buying up refineries across the country, and quickly began monopolizing.

Standard Oil had been a thorn in the government’s side for years. By 1904, Standard Oil controlled 85 percent of oil sales in the United States. After the Sherman Antitrust Act was put into effect in 1890, the federal government finally had the strength to take Standard Oil to court. The act compels the Department of Justice to stop monopolization.

In 1906, the Department of Justice cited four illegal business practices: Secret and semi-secret railroad rates, discriminations in the open arrangement of rates, discriminations in classification and rules of shipment, and discriminations in the treatment of private tank cars.

The case made its way all the way up to the Supreme Court, where lower rulings against Standard Oil were upheld. The Court initially struggled with the term “restraint of trade” in the Act, but decided that it meant restraint of practices that resulted in, “monopoly or its consequences.” Standard Oil was broken up into several smaller companies, and one of them went on to become what is now Exxon.

Some Analysis

What’s ironic about the case is that most consumers benefitted from Standard Oil’s monopoly because the prices were so low. This is necessary for any monopoly, at least for a short time: in order to drive competition out of business, your product must be superior and cheaper. Not only that, but Standard Oil was known for paying workers more than the market wage at the time, and for safer working conditions than other refineries. But this could all have changed if the government had not intervened. If the monopoly continued to grow unchecked, Standard Oil could have raised its prices once it was sure there would be no more competition.

Contemporary Cases

Perhaps the most famous antitrust case in modern times is United States v. Microsoft. The case revolved around whether Microsoft was creating a monopoly in web browsers on its Windows operating system by including Internet Explorer and making it difficult to remove. The main competition at the time was Netscape, and video evidence was used in court to try to prove that installing Netscape was a hassle, insinuating that most users would just stick with Internet Explorer as opposed to looking for competitors. In 1998, the Department of Justice took them to court.

After a lengthy trial, which included several clumsily made videos from Microsoft detailing Windows’ supposed need to have internet explorer installed to function properly, the court found that Microsoft did have a monopoly on web browsers. The solution was to split Microsoft up into two companies: a software developer and an operating system developer. But in 2000, the traditionally anti-regulation District of Columbia Court of Appeals overturned the original ruling. They cited the judge being interviewed while the case was still in deliberation as a breach of conduct and threw it out. Instead of Microsoft being split up into two companies, they reached a settlement with the Department of Justice in November 2001. They agreed to provide third party developers with their application programming interfaces – the framework needed to build software – and install a three-man oversight committee to ensure compliance.

Sources:

US v Microsoft Findings of Fact

http://www.webcitation.org/query?id=1298665666970544

Background on antitrust cases

http://reason.com/archives/2001/11/01/antitrusts-greatest-hits

Standard Oil v United States Case Text

http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=CASE&court=US&vol=221&page=1

The Trust problem in the United States (Page 75)

http://www.questia.com/PM.qst?a=o&d=6026575

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