Standard Oil is invoked across The Bob Zadek Show as the canonical American example of a large corporation whose treatment by antitrust law the host and his guests regard as unjustified. The company is discussed less as a historical subject in its own right than as the leading case in a broader argument about monopoly, competition and the Sherman Act. Bob Zadek returns to it repeatedly, pairing it with railroads, Microsoft, AT&T and Amazon.
Rockefeller and the price record
Bob Zadek’s central claim about Standard Oil is economic rather than legal. He states that popular mythology holds that when Rockefeller built Standard Oil—which he declines to call a monopoly, describing it instead as a very large corporation with substantial control over oil and petroleum products—prices had never been lower, and that what Rockefeller did was constantly lower prices. On this account the victims of the large entity were other competitors who could not compete with Rockefeller, and Zadek argues that nothing in the Constitution makes it government’s role to protect people who cannot compete on the merit and therefore seek government help to rig the competition Randall G. Holcombe on Liberty in Peril (2019).
The same passage was broadcast in an earlier episode with the same guest, Randall Holcombe, where Zadek made the identical point and extended it to Amazon, asking whether Amazon is a monopoly and whether it should be attacked, while noting that Amazon and other big tech companies provide either a free or a ridiculously inexpensive product to consumers [[episodes/john_marini_on__unmasking_the_administrative_state|John Marini on Unmasking the Administrative State (2019)]]. In that version Zadek described the trust-busting approach of the end of the nineteenth century as wrongheaded. Holcombe agreed and traced the outlook to the Progressive Era and to the idea that part of government’s role in looking out for people’s economic well-being is to protect most people from the economic power of powerful individuals.
The antitrust case as a waste of time
Ryan Young of the Competitive Enterprise Institute, appearing on the show for a discussion of antitrust regulation, argued that it is impossible to make the case that antitrust enforcement has improved the marketplace, and used Standard Oil as his first example. He said the Standard Oil case centered on a company that was continually cutting its prices and increasing its supply, making its product more available to consumers and cheaper at the same time Antitrust 101 with Ryan Young (2019). Young added that while the case was going on there was a major shift in the oil market: the electric light was displacing the gas lamp, and Standard Oil had made its name providing fuel for kerosene lamps. That market, he said, was killed by Thomas Edison, and Standard Oil was starting to see its market share decline along with it. Then the automobile emerged and there was rising demand for gasoline, so Standard Oil had to innovate and change its policy to supply what consumers wanted. Young’s conclusion was that Standard Oil had to adapt to consumers, not the other way around, and that the antitrust case was frankly a waste of time.
In the same conversation Young grouped Standard Oil with the IBM case of the 1960s, which lasted about thirteen years before the government dropped it because the technological issue had become obsolete, and with the Microsoft case of the late 1990s, which concerned the inclusion of a free browser in Windows and ended in a settlement that was neither a victory nor a defeat for either side. Asked by Zadek about AT&T and Bell Labs, Young distinguished that case, saying Bell Labs and AT&T were a government-supported monopoly, the only kind of monopoly that can endure, so the government was right to break it up but wrong to have protected it in the first place.
Monopoly, the Sherman Act and the definition problem
Zadek introduces Standard Oil as the poster child, along with the railroads, for what he calls robber baron-ness. He draws a distinction between the two: the railroads became monopolies because the government made them monopolies and protected them in many ways, whereas Standard Oil became a monopoly, if it was one, by dint of the cleverness of its business model, with Rockefeller and others simply growing because they were good at what they did Antitrust 101 with Ryan Young (2019).
That distinction frames the show’s recurring complaint about the Sherman Act of 1890. Zadek notes that the word monopoly is in the statute and that enforcers are told to use the statute to beat down monopolies without much guidance as to what that means. Young observes that the Sherman Act is two pages long and does not define what it means by monopoly, a source of confusion 130 years later. He offers the economists’ definition—a company powerful enough to lower its supply and raise its prices, making its product harder to get and more expensive, which harms consumers—and then notes that economists are not in charge of antitrust policy; judges decide cases under the Rule of Reason standard, using whatever definition they find reasonable, with no bright-line standard and resulting uncertainty for companies.
Zadek presses the point with a hypothetical: is a company a monopoly if it can take anti-competitive steps but never does? Young answers that the question has never been definitively answered and has been answered differently in different cases, usually based on past actions, though there is an antitrust term, incipiency, for conditions that might in the future permit monopoly, invoked rarely but especially in the 1950s and 1960s. Zadek compares this to a federal criminal statute arresting people for a higher than average likelihood of committing a crime, and asks whether antitrust law’s treatment of the mere power to do a bad act is as he describes it.
The relevant market
In a later episode Zadek recalls being taught in high school and college that Standard Oil and the banks and the railroads all had monopolies, that monopoly was per se bad, and that government existed to attack and tear apart monopolies because they gave private businesses power over marketplaces, letting them keep out competition and charge high prices for junky goods Why Trustbusting Big Tech is a Bad Idea (2020). He asks Young whether antitrust is focused directly on monopoly or on bigness per se. Young replies that the law is incoherent on that, and that true monopolies as most people define them are very rare in economic history, with about the only examples being ones supported by government, whether the East India Trading Company or AT&T more recently; markets, he says, do not sustain monopolies long term.
Zadek then raises the problem of identifying the market: define it broadly enough and no company has a monopoly, define it narrowly enough and many do. Young calls this the relevant market fallacy and illustrates it with the merger of Sirius and XM, which the government sought to block on the ground that the two companies would monopolize satellite radio. Young argues the relevant market was much bigger—terrestrial radio, streaming services like Spotify, audiobooks, CDs—and that a decade later the media marketplace remained diverse and healthy with no deleterious effects on competition.
Across episodes: the same argument, restated
The excerpts show no development in the treatment of Standard Oil across episodes; the same claims recur. Zadek’s account of Rockefeller constantly lowering prices and of competitors as the only victims appears in near-identical form in the Holcombe episode and in the Marini episode, and the argument that the Standard Oil case was a waste of time is made by Ryan Young in the 2019 antitrust episode and restated by him in the 2020 episode on trustbusting Big Tech. What changes is the modern referent: the Holcombe and Marini exchanges attach the argument to Amazon, while the Young episodes attach it to Microsoft, AT&T, Sirius and XM.
What the sources do not cover
The excerpts do not describe the legal proceedings against Standard Oil, the statute or amendment on which the case turned, or the outcome of the case. They give no founding date for the company, no figures for its market share, and no account of its corporate structure or the states in which it operated. The only dates the sources supply are the Sherman Act’s passage in 1890 and the decades in which the IBM and Microsoft cases ran.