Rockefeller’s goal in expanding was to become more and more efficient, improving his competitive advantage with ever-lower but still-profitable prices. He knew he didn’t “control” the market and thus couldn’t get away with high prices. This truth was painfully reinforced in the early 1870s when Rockefeller foolishly agreed to join two oil-refining cartels (the South Improvement Company and the Pittsburgh Plan) designed to suppress output and drive up prices; both were quickly competed out of existence. Since a private company, unlike a government-granted monopoly, couldn’t force competitors out of the market, customers could and would go elsewhere the second they found a better deal from clever competitors.
Offering the best deal is how Standard maintained a 90% market share for two decades, from 1879 to 1899, despite strong competitive challenges and an ever-changing market. New, formidable competitors from Russia to Pennsylvania were emulating Rockefeller’s methods; pipelines became a leading form of oil transport; crude supplies appeared to be running short; and the electric light bulb emerged as a fundamental challenge to kerosene oil lamps. Rockefeller’s response was more innovation and efficiency, including millions invested in scientific research to make high-sulfur oil, plentiful but previously useless, usable.
By 1907, four years before Standard Oil’s breakup, the company’s market share had fallen to 68%, partly because the rest of the oil industry had learned a lot from Standard about oil refining and efficiency. Rockefeller had not stopped competition — he had raised the bar by creating a modern, scientific oil company before anyone else did.
In the process, he had enriched tens of millions of lives by bringing affordable illumination to homes and businesses across the country. If Standard Oil is the textbook example of the kind of company antitrust laws are supposed to punish, what does that say about antitrust laws? As Google, Apple, and other highly successful companies are targeted for antitrust prosecution, this question is as relevant today as it was a hundred years ago.
Alex Epstein is a fellow at the Ayn Rand Center for Individual Rights, focusing on business issues. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”