In 1870, Rockefeller and a few associates, including American financier Henry M.

Flagler, incorporated the Standard Oil Company in Ohio. Rockefeller chose the
"Standard Oil" moniker as a symbol of the reliable "standards" of quality and
service that he envisioned for the nascent oil industry (Yergin, 2009). Standard
Oil prospered and began to buy out its competitors rapidly. By 1872, it controlled
nearly all the refineries in Cleveland. This provided Standard Oil with significant
leverage when negotiating with railroads for favored rates on shipments. It
acquired pipelines and terminal facilities, purchased competing refineries in other
cities, and vigorously sought to expand its markets in the US and abroad. It kept
oil prices low to stave off competitors, made its products affordable to the
average household, and to increase market penetration, it sometimes sold below
cost. The company also developed more than 300 oil-based products, from tar and
paint to petroleum jelly and chewing gum.

With continued expansion, by 1880, Standard Oil refined 90 to 95% of all oil
produced in the US. The company's vast American empire included 20,000 domestic
wells, 4,000 miles of pipeline, 5,000 tank cars, and more than 100,000 employees
(Yergin, 2009).

In 1882, these various companies were combined into the Standard Oil Trust, which
would control close to 90 % of the nation's refineries and pipelines. By design,
the Standard Oil Trust embraced a maze of legal structures, which made its workings
virtually impervious to public investigation and understanding. As journalist Ida
Tarbell wrote in her book, The History of the Standard Oil Company (1904), “You
could argue its existence from its effects, but you could not prove it.” In 1882,
the Ohio Supreme Court ordered the trust dissolved, but it effectively continued to
operate from headquarters in New Jersey.

The aggressive market practices of Standard Oil and the growing public hostility
toward monopolies—of which Standard was the best-known—prompted some industrialized
states to enact antimonopoly laws. At the national level, the Sherman Antitrust Act
was the first such law to be passed in 1890.

The Sherman Antitrust Act of 1890

”Trust,” as described in the case of Standard Oil, was commonly used to describe an
arrangement where stockholders of several companies turned over their company
shares to a single group of individuals called trustees who then administered and
controlled the affairs of the newly combined companies. Stockholders received trust
certificates entitling them to receive earnings from the trust. Today “monopoly”
has replaced “trust” as the word of choice to describe such ventures, but the two
are interchangeable.