Antitrust law has been declared a failure, moribund, or possibly just a ghost from the trustbusting era. A quarter of a century ago, Thomas Hazlett declared: “Any responsible historian of American antitrust policy must conclude that, if one takes at face value the assertions that antitrust laws exist to advance competition and protect the consumer, that policy is a failure. The notorious Berkey Photo case may be the flagship of that failed policy.” Hazlett went as far as suggesting it would be “most effective . . . to consider federal enforcement of the antitrust laws to be a per se restraint of trade.” Robert Crandall and Clifford Winston examined the question: “Should the United States pursue a vigorous antitrust policy?” They found “little empirical evidence that past interventions have provided much direct benefit to consumers or significantly deterred anticompetitive behavior.” Other scholars examined whether antitrust was still alive. Yet, recently some stressed that antitrust is not dead, but while “at one time [it] was skewed toward over-enforcement, . . . today if there is any bias it is in the opposite direction.” Statistical figures indicate that, since the 1970s, the volume of civil antitrust litigation is low compared to prior decades. For these reasons and others, Jonathan Baker tried to provide “evidence of the necessity and success of antitrust enforcement.” The Supreme Court, however, voiced skepticism about antitrust litigation. In the fall of 2007, Antitrust therefore posed the question for a special issue: The End of Antitrust As We Know It?

What are the lessons of business history for antitrust policy? In particular, what are the lessons of business history for policies toward firms or practices that Standard Oil has come to symbolize: firms with monopoly power, firms that engage in predatory practices or vertical restraints, or more broadly, firms that just seem too big? There is an interesting and provocative literature that examines the practices and impact that such firms or practices have on consumers and competition. Several of the papers in this volume address the question of whether Standard Oil itself harmed consumers or competition. This discussion is active, after a century, in part because it gets to the underlying question of whether firms ever engage in predatory practices or whether such practices can in fact harm consumers.

The government’s challenge to Standard Oil’s monopoly of refining and the resulting court-ordered break up of Standard Oil one hundred years ago, was motivated to a large extent by the now discredited idea of protecting competitors rather than preserving competition. Consistent with a principal concern of the framers of the Sherman Act that large corporations often received discriminatory discounts which placed small companies at an unfair disadvantage, the government focused its case on Standard Oil’s use of its dominant position to obtain preferential railroad rebates that forced rival refiners to either agree to be acquired by Standard Oil or to go out of business.

While it is now nearly universally accepted that Standard Oil’s preferential railroad rates were a crucial factor in Standard Oil’s growth and dominance of refining in the 1870s, Michael Reksulak and William Shughart have recently advocated a procompetitive view of Standard Oil’s rate discounts. Relying on Ron Chernow’s conclusion that the railroads achieved significant cost savings by transporting Standard Oil’s large shipments, Reksulak and Shughart argue that Standard Oil’s rate rebates were merely the way the railroads shared with Standard Oil the transportation efficiencies associated with handling Standard Oil shipments as part of the normal competitive process.

The success of the Standard Oil monopoly is not well understood. Standard Oil first developed a monopoly over the refining of crude oil, though later extended its control to gathering pipelines, later still to trunk pipelines (from the western Oil Regions to East Coast ports) and, even later, expanded operations to include oil production (drilling) and retail sales at the time the Supreme Court ordered its dissolution over 100 years ago, in 1911.

Though there are several journalistic exposes of Standard Oil–including Henry Demarest Lloyd and Ida Tarbell, as well as business histories–none are fully explanatory. The currently dominant theory of Standard Oil’s success is by Elizabeth Granitz and Benjamin Klein who assert that Standard Oil was chosen by oil shippers, the railroads, to police a railroad cartel. According to Granitz and Klein, the railroads split with Standard Oil the profits from cartelization of the crude and refined oil industry.

Standard Oil’s preferential railroad rebate structure lies at the heart of the seminal Standard Oil case, which culminated in the Supreme Court’s 1911 affirmation that Standard Oil had violated the Sherman Act and should be broken up. Beginning in 1868, Standard Oil received rebates of varying amounts from railroads for crude and refined oil shipped east over their lines. In some later years, it also received drawbacks for oil shipped by independent refiners–Standard Oil’s competitors. The rebates and drawbacks gave Standard Oil a competitive advantage over their rivals and accounted for a large part of the reason that John D. Rockefeller obtained such dominance in oil refining and distribution.

The muckraking journalist Ida Tarbell made Standard Oil’s discriminatory rebates a central feature of her crusade against the Rockefeller interests. The government also made the rebates a central point of its case, and the Supreme Court affirmed their illegality. Thereafter, the Interstate Commerce Commission effectively ended the legality of such rebates as a regulatory matter.

From the beginning, however, pro-Standard Oil voices have argued that, far from exhibiting a rapacious strategy to destroy rivals, the rebates and drawbacks were simply a reflection of Standard Oil’s superior efficiency.

As the contributions to this symposium prove, the Standard Oil case continues to inform many aspects of current antitrust policy. Part of Standard Oil’s significance, however, has been lost over time. The Supreme Court condemned a range of conduct by Standard Oil as anticompetitive, including predatory pricing. Predatory pricing occurs when a firm prices its product below cost in order to drive its competitors from the market. Once enough rivals have exited the market, the predator raises price and earns a stream of monopoly profits.

In the decades following the opinion, the conventional wisdom held that Standard Oil had engaged in predatory pricing. The Standard Oil opinion stood for the proposition that using predatory pricing to acquire or maintain a monopoly violates Section 2 of the Sherman Act. The opinion did not define the contours of predatory pricing, neither explicitly saying that a predatory price is a price below cost nor specifying what measure of cost courts should use. Nevertheless, the opinion laid the groundwork for future federal courts to address these questions and to provide more structure to the predatory pricing cause of action.

In 1882, Standard Oil’s General Solicitor invented the corporate trusts that inspired the birth of the antitrust discipline. The public aversion to trusts in the United States gave the field its enduring and uniquely American name. As the discipline matured, distrust of business size took root in cases and doctrines. Justices Louis Brandeis and William Douglas wrote the narrative into early case law and it remained embedded in the field even as economics became the antitrust methodology. Economics merely transformed the fear from a concern about absolute size to one of relative size (market shares). While size should be an irrelevant consideration in antitrust analysis, it still mistakenly serves as a driving force behind the law. This Article studies how the fear of bigness–of absolute or relative size–has shaped and confused analytical perceptions of antitrust, established and sustained no-fault monopolization theories, and contributed to various doctrinal oddities. The American discipline might owe its birth to the fear of size, but this fear has been a burden and a curse on the development of sound antitrust policies.

The Supreme Court’s 1911 decision in Standard Oil gave us embryonic versions of two foundational standards of liability under the Sherman Act: the rule of reason under Section 1 and the monopoly power / exclusionary conduct test under Section 2. But a case filed later in 1911, United States v. U.S. Steel Corp., shaped the understanding of Standard Oil’s standards of liability for decades. U.S. Steel, eventually decided by the Supreme Court in 1920, upheld the spectacular 1901 merger that created the Corporation, as U.S. Steel was known. The majority found that the efforts of the Corporation and its rivals to control prices in the famous Gary dinners had violated Section 1 when they occurred, but paradoxically insulated U.S. Steel from liability under Section 2. U.S. Steel was formed to monopolize the industry but failed; it demonstrated its impotence by fixing prices with rivals instead of crushing them, as Standard Oil had done.

One understudied area of the formative period of antitrust and of Standard Oil’s conduct during this period is in the use and nature of antitrust private claims against Standard Oil. In contemporary antitrust, the ratio of private to government brought cases is ten to one. In contrast, one hundred years ago government cases constituted nearly all antitrust cases, and many of such cases were state cases. On the hundredth anniversary of the Standard Oil decision, the present Article uses a discussion of the antitrust private actions against Standard Oil prior to the company’s court-ordered break up in 1911 as a starting point for a broader discussion about the interaction between public and private rights of action in antitrust in the modern era. Traditionally, government will bring antitrust cases to offset competitive distortions in the market either because private plaintiffs do not bring the right kinds of antitrust cases or because private actors lack the resources of government to bring good cases. This Article suggests circumstances in which government not only does not correct but also actually creates the market distortion by bringing a nonmeritorious case that aids the firm’s competitors rather than a case that helps consumers. In identifying this behavior, this Article combines two strands of literature–the strategic use of antitrust by private actors on the one hand and a public choice based economic theory of regulation on the other.

After one hundred years one might expect a rule of law to be settled. In the case of the “rule of reason,” first endorsed by the Supreme Court in its 1911 decision dissolving the Standard Oil trust, the conventional wisdom often portrays the opposite. Citing its principal early enunciation in Board of Trade of Chicago v. United States (“Chicago Board of Trade”), critics often denigrate the rule of reason variously as “unstructured,” “full-blown,” “uncertain,” “error-prone,” and costly to administer in all its forms. In a metaphor first applied by Judge Taft in his earlier United States v. Addyston Pipe & Steel Co. decision, application of the rule of reason has been likened to “set[ting] sail on a sea of doubt.”

That criticism of the rule of reason is dated and exaggerated. The rule of reason has evolved considerably since Standard Oil and Chicago Board of Trade, largely due to the Court’s own march away from per se rules and undemanding burdens of proof. As that march began in the late 1970s, the Court moved to add contemporary economic content to the broad principles articulated in Chicago Board of Trade. In formative cases like Continental T.V., Inc. v. GTE Sylvania Inc.; National Society of Professional Engineers v. United States (“NSPE”); Broadcast Music, Inc. v. CBS (“BMI”); and NCAA v. Board of Regents of the University of Oklahoma, the modern era’s rule of reason was honed to focus on specific, core economic concepts, especially anticompetitive effect and efficiency.