Unit 6 Monopolies In Industry

While Standard Oil did come to basically control the price of oil in the United States, it never engaged in 'predatory', or deep and unnecessary price cutting to push out it's competitors. John McGee states this about how Standard Oil accomplished this by other means: “It is correct that Standard discriminated in price, but it did so to maximize profits given the elasticities of demand of markets in which it sold. It did not use price discrimination to change those elasticities. Anyone who has relied upon price discrimination to explain Standard's dominance would do well to start looking for something else. The place to start is merger” (McGee 168). Carnegie on the other hand preferred to buy out all competitors that were in the same area of production as he was, and consolidate. Through consolidating most steel mills in the Pittsburgh/Pennsylvania area, he was able to control that particular step of the production process in the steel business, therefore maximizing his profits like Rockefeller, but in a different way. Carnegie preferred stable prices and stable business, and Harold Hotelling manages to place Carnegie's view on why he consolidated his mills as such: “This is the fact that of all the purchasers of a commodity, some buy from one seller, some from another, in spite of moderate differences of price. If the purveyor of an

Up until the 1880s, the United States economy followed the policy of laissez-faire (the idea that the government should have no involvement in the economy), and this led to competition which led to good prices of goods for the average consumer. However with the growth of many large companies that controlled the market, prices of goods raised due to the lack of competition. With consumers becoming frustrated and prices constantly rising, the government was forced to regulate the control of monopolies in the market.

Finally is the allowance of these monopolies to rise in the first place. Since there were no regulatory agencies back in the second industrial revolution, big businessmen with the idea of trimming fat in their companies could conquer any competitor by using hardball tactics of purposely

During the building of the Transcontinental Railroad, the railroads themselves created a large market for the steel and iron industries.4 The steel and oil industries were booming and corruption was rampant. Andrew Carnegie had cornered the market in the steel industry and John D. Rockefeller had cornered the oil market. Rockefeller bought up his competition after essentially putting them out of business by flooding the market with refined oil bringing down prices and profits. He was determined to pay no one a profit because he wanted it all for himself. He created a plan called vertical integration which consolidated his businesses into one by creating The Standard Oil Trust.5 These two men became known as barons and got rich beyond belief. In 1890, the Government enacted the Sherman Anti-Trust Act to prevent large firms from controlling one single industry and finally put a stop to these monopolies and trusts, 6 but it was not rigorously enforced until the 1900’s. This act was designed to restore competition and

Prior to the American Era of Industrialization, the American Civil War had just taken place that gave the Northern Economy war profits that were eventually invested into industrialization. However, the Age of Industry, in the United States, was extremely harmful to the nation, due to the fact that the idea of Social Darwinism arose, there was corruption within the government, and monopolies began arising which had a negative effect on the the economy and the working class. Monopolies, in the industrial period, had a negative impact across the nation due to the fact that monopolies made life difficult for the arising middle class, economically speaking. Document 1 illustrates perfectly how monopolies made life difficult for the working class

No wonder that only a handful of people can’t distinguish that this old man was a crock and deserves to rot in hell! With all this positive media attention, the public had been fed lies! In real life, this money hungry, greedy villain is the prime reason why the Sherman Antitrust Act was passed. Rockefeller’s dream was to monopolize the oiling industry, and he so successfully did. Because of his great empire (the Standard Oil Co.)

In 1907, an economic/political reform cartoon was printed in the Washington Post. It illustrates Teddy Roosevelt holding a rifle while attacking bad trusts. TR was also known as the “trust-buster”. This cartoon demonstrates the bad trusts are a threat to society, and the government must be more powerful than big businesses. In 1914, the Clayton Antitrust Act was developed, “ That it should be unlawful for any person engaged in commerce, in the course of such commerce , either directly or indirectly to discriminate in price..( Document E)” This document price discrimination is unlawful, and monopolies were illegal. It also infers that conflict of interest was an issue as well, and shouldn’t be allowed because it caused greater

Before 1890, a few companies completely dominated major industries. Stockholders’ trusts eliminated competition and created monopolies, which in turn hurt American consumers and the economy as a whole. However, this all changed in 1890 when Congress passed the Sherman Anti-Trust Act. It was the first regulation of American businesses, outlawing monopolies and trusts, which created a way for the government to control the economy. Congress should have passed the Sherman Anti-Trust Act because it protects consumer rights, controls the economy, and eliminates monopolistic business practices.

The government also enacted the Hepburn Act, which made shipping internationally difficult on the railroad. Despite the fact that government grants led to incompetent railroads, the Interstate Commerce Commission and Hepburn Act were put into place, which made it so Hill “could not offer rate discounts on exports traveling on the Great Northern en route to the Orient” which was helping improve the economy with increased trade. Hill and other market entrepreneurs were not corrupt or unfair when choosing to not have subsides, but rather the political entrepreneurs were corrupt and insolvent. Also, Folsom argues that John D. Rockefeller was negatively impacted by government intervention. The Sherman Act was intended “to prevent monopolies and those companies ‘in restraint of trade’. Yet Standard Oil had no monopoly and certainly was not restraining trade” . Rockefeller’s goal was not to create a monopoly but in order to keep his business succeeding he needed directors in each state. By enacting the Sherman Act, Rockefeller’s company struggled, due to competition rising. These laws essentially stopped the growth of successful businesses, such as Hill and Rockefeller, who became so successful due to no government intervention.

Throughout the Progressive Era, giant monopolies began to form trusts with one another to dominate the free market competition. Large businesses continued to expand, while smaller businesses were suffering or completely shut down. These monopolies aimed to create trusts in order to decrease the competition, forcing consumers to pay the prices set by only one company. This allowed monopolies to charge whatever price they desired, without any worry of competition from other competing businesses. Corrupt policies that many large businesses followed had a strong negative impact on the consumers and laborers. The public began to see business tycoons created trusts, which further put them at unease. It was especially significant to dissolve the trusts

Standard Oil was the United States’ first monopoly, and it was a rollercoaster of a ride for the company. Standard Oil started from the ground up and grew into a massive enterprise, that would eventually make John D. Rockefeller the richest man in the world. This would come at a price, the demise of Standard Oil, but multiple companies are born out of the demise of Standard Oil that become some of the largest oil companies today. Standard Oil even caused the United States of America to create a federal act to try and control monopolies from eliminating competition in unethical ways, and from becoming so powerful that they can control not just their markets, but other markets too, and from having the ability to change the price on consumers

The Sherman Anti-Trust Act of 1890 was passed to prohibit trusts, this was the first law passed by U.S. Congress to enforce this. This act was named after Senator John Sherman. Before this act was put into place, many other states had enforced laws very similar to the Sherman Anti-Trust Act. These laws were not perfect though, the large corporations had the majority of the economic power. Congress was not pleased with this, thus making the Sherman Anti-Trust Act. This act allowed Congress to regulate interstate commerce, outlawing monopolistic practices. If a person were to violate this act, he or she could be imprisoned for a year and fined five-thousand dollars. This law was successfully used to help Theodore Roosevelt during his campaign, “trust-busting”. Also, President Taft used the law to back himself up against the Standard Oil Trust and American Tobacco Company. The Standard Oil trust was when a board of nine trustees was set up to make all of the company decisions , allowing the company to run as a monopoly. The Sherman Anti-Trust Act allowed both presidents to dissolve the trusts that were creating problems. On the other hand, the Sherman Anti-Trust Act had many holes, it did not have exact wording, therefore allowing companies to still control the majority of the producing and still get away with it. The Sherman Anti-Trust Act had substantial success, but was put to rest and replaced with the Clayton Anti-Trust

Oligopolistic is a market structure which under the imperfect competition. According to Sloman & Garratt, oligopoly is only few large firms share a large portion of industry and control the market. When we hear that a term about “Big three”, “Big four” or “Big five” it can be set down as oligopolistic industry. In the oligopoly market competition, depends on the firms produce homogeneous or differentiated products and it will be categorize as homogeneous oligopoly or differentiated oligopoly. As Mcconell & Brue, 2008 stated because of the small number of firms, oligopolistic have worthy of consideration command over the prices and they have to think about their competitors conceivable reaction to their product`s price, product`s quality, advertising outlays and so on. The few large firms are interdependent but they have to always be awake of competitor`s action to maintain their firm can stand strong in the industries. Oligopolistic have a strong barriers of entry for the new competitors, which alike and dedicative by the pure monopoly. According to Jackson, Mclver & Wilson stated oligopolistic industries have a large economies of scale have to be consider for the new competitors because they must have a large amount of capital to invest heavy on the technology in the beginning, and this is the prevention of new competitors can easily enter to the industry. Furthermore, there are many industries are counted as oligopolistic for instance mining, steel, soft drinks, airlines,

In the past presidents have warned about corporations becoming too powerful and they have worked to restrict this power. Regulations put in place by past presidents have always been something that corporations have tries to get around. This was taken to the extreme during the presidency of Franklin Delano Roosevelt. Roosevelt realized that America’s economy was weak and he needed to help build the middle class back up. Roosevelt included policies in his New Deal that restricted the power of big business. Corporations did not like this and felt they needed to remove Roosevelt from office. In order to do this they would call upon U.S. Marine Corps General Smedley Butler. General Butler claimed that he and his men were used to “persuade” Mexico to allow American oil companies to operate there. He also forced Haiti and Cuba to allow National City Bank to operate there. He forced the Dominican Republic to allow American sugar companies to use their land. He forced several other countries to allow other American corporations to take resources from their land. Corporations sought out his assistance to end Roosevelt’s presidency because he wanted to bring relief to the middle class by creating more public enterprise and putting tougher regulations on corporations. They wanted General Butler to rally a group of nearly 500,000 military veterans and use them to intimidate Roosevelt into stepping down so the corporate

Monopolistic competition is a market situation in which there is a large number of sellers and large number of buyers whereas monopoly means a market situation in which there is only a single seller or supplier of goods and services in the entire market and large number of buyers. South Africa’s chocolate market is a monopolistic market situation since it has got more than one