Rewriting History: the Early Sherman Act Monopolization Cases

This paper reviews two early precedent–setting US antitrust decisions and asks a series of counter–factual questions. What if the Standard Oil Company had not been broken into 34 pieces? What if the United States Steel Corporation had been fragmented? It traces the qualitative evolution of the Standard Oil fragments, following the 1911 divestiture decision, and the corresponding history of United States Steel. It then undertakes quantitative analyses of the survivors' market share trends and the comparative productivity growth, average plant sizes, price — cost margins, and net exports for petroleum refining, blast furnaces and steel from 1899 through 1939. At first, the post–divestiture performance did not differ much between the two subject industries. However, by the 1930s, competition intensified in petroleum refining and the decline of the Standard Oil fragments' market shares came to a halt. In the steel industry, however, competition continued to be mild. A lethargic United States Steel held a price um brella over its rivals and steadily lost market share. Steel companies were ill–prepared for rising import competition during the 1960s and 1970s. The paper concludes that the 1911 break–up of Standard Oil had few deleterious short–run consequences and, by shaping a more competitive environment, it had a decidedly positive long–run effect.