On Oct. 22, 1882, Standard Oil became a trust, to try to circumvent anti-monopoly laws.
A monopoly exists when only one firm supplies a product. Monopolies sometimes occur naturally, when there are economies of scale which prevent competition from emerging once an established firm gets to a certain size. For instance, city supply of water to homes is an example of a natural monopoly.
At other times, monopolies occur due to government regulation. AT&T was given a monopoly to operate telephone services in the United States, despite a history of competition among providers.
One of the most famous monopolies was Standard Oil, which achieved near-dominance of the oil industry through the efforts of John D. Rockefeller, who became the richest man in the world as a result of his entrepreneurial insights, innovative business practices, and relentless efforts to drive out any competition. In the course of doing this, however, Rockefeller also dramatically improved the lives of millions of Americans by providing reliable products at ever lower prices.
Today, Google in search, Facebook in social media, and other companies are often accused of acting in monopolistic ways. A generation ago, the same was said of Microsoft. Yet these companies have also made billions of people better through their innovation (and ruthless competitive drive).
- Can you imagine Serge Brin, Mark Zuckerberg, or Bill Gates offering similar defenses of their “monopolies”?
- Do you believe that the government should break up Facebook, Google, or Microsoft due to their position in their respective markets?
- If Rockefeller’s monopoly resulted in better products at lower prices for consumers, why do you think Standard Oil was eventually broken up? Was this a good thing?
- What behaviors of market-dominating companies should be regulated? Where do you think the market should be left to sort it out?
16, Oct. 2018, Standard Oil logo [Digital image]. Retrieved from <google.com>.