Standard Oil Co. of New Jersey v. United States (1911) is a U.S. Supreme Court case holding that Standard Oil Company, a major oil conglomerate in the early 20th century, violated the Sherman Antitrust Act through anticompetitive actions, i.e. forming a monopoly, and ordered that the company be geographically split. Find the full opinion here.
The Standard Oil Company of New Jersey was, in fact, a holding company which the Rockefeller family held. The Rockefeller family organized their oil empire by creating such holding companies in many of the jurisdictions in which they operated. In total, the Rockefeller family and their holding companies controlled almost the entire petroleum market in the U.S. To further the Rockefeller’s control over the petroleum market, the Standard Oil Company of New Jersey had acquired nearly all of the oil refining companies in the United States. The United States brought suit against the Standard Oil Company of New Jersey, alleging that it violated the Sherman Antitrust Act because its acquisitions were an undue restraint of trade.
The Court first ruled that Congress had the power to pass the Sherman Antitrust Act under the Commerce Clause of the Constitution. It then ruled that “restraint of trade” included monopolistic behavior, and only unduly restrained trade if it led to one of the three possible consequences: higher prices, reduced output, and reduced quality. Balancing antitrust protections with principles of freedom of contract, the Court ruled that a company’s potentially monopolistic actions could only be illegal if it led to one of those three consequences. In this case, however, the Court found that Standard Oil of New Jersey’s actions led to these consequences and therefore violated the Sherman Antitrust Act.
[Last updated in April of 2021 by the Wex Definitions Team]