Standard Oil Co. of New Jersey v. United States, 221 U.S. 1; 31 S. Ct. 502; 55 L. Ed. 619 (1910)
Facts—John D. Rockefeller and associates were convicted of violating the Sher- man Antitrust Act. The specific charge of violation involved a combining of the stocks of a number of companies in the hands of Standard Oil of New Jersey. The decree of the lower court enjoined the company from voting the stocks or exerting control over the various subsidiary companies, some thirty-seven in number. These companies, in turn, were ordered not to pay dividends to Standard Oil Co. of New Jersey or to cooperate in any way in making effective the combination. With this background the case went to the Supreme Court.
Question—Did this combination of oil companies violate the Sherman Antitrust Act?
Decision—Yes.
Reasons—C.J. White (9–0). This was a combination that would result in the control of interstate and foreign commerce by this group rather than the only one authorized to do so, the Congress of the United States. Hence this was an illegal operation, and it had to be abolished. The Court proceeded to set forth what has come to be known as the “rule of reason.” This, briefly, simply provides that the restraint of trade outlawed by the Sherman Act is not to apply to every contract or combination in restraint of trade, but only to those that do so unreasonably. “Undoubtedly, the words ‘to monopolize’ and ‘monopolize,’ as used in the section, reach every act bringing about the prohibited results. The ambiguity, if any, is involved in determining what is intended by monopolize. But this ambiguity is readily dispelled in the light of the previous history of the law of restraint of trade to which we have referred and the indication which it gives of the practical evolution by which monopoly and the acts which produce the same result as monopoly, that is, an undue restraint of the course of trade, all came to be spoken of as, and to be indeed synonymous with, restraint of trade. It becomes obvious that the criteria to be resorted to in any given case for the purpose of ascertaining whether violations of the section have been committed is the rule of reason guided by the established law and by the plain duty to enforce the prohibitions of the act, and thus the public policy which its restrictions were obviously enacted to observe.”
Note—The “rule of reason” in Standard Oil came to mean only monopolies on restraints of trade that were “unreasonably” so. This doctrine, added to the view that manufacturing trusts were not involved in interstate commerce, greatly weakened the Sherman Act. Congress reinforced it in 1914 with the Clayton Act and the Federal Trade Commission Act. See Northern Securities (1904).