But despite Rockefeller’s clear business advantages, no immediate withdrawal of less efficient producers took place. Rockefeller set out to be the most efficient refiner, and his firm even earned additional money by selling the byproducts of refining that other producers threw away. Volatile prices meant that such profits were not always realized, however. The source of the problem, as Rockefeller saw it, was the proliferation of refineries, which were cheap to build and could yield high profits, mostly from the production of kerosene to illuminate homes.
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Rockefeller, pictured here in 1885, saw the potential for profit in oil refining and used this opening to build an industrial empire. To solve this problem, Rockefeller set about finding the means to tame the market, reduce competition, and make even greater profits. He saw that the problem for the industry was “ruinous competition,” a situation created when all producers lowered their prices to underbid the competition but then were wrecked when they could not even cover their costs. Rockefeller was the more entrepreneurial of the partners, and after Clark left the firm, Rockefeller seized the opportunity to grow Standard Oil into a major company. Thus, by 1866, oil refining had become the major source of revenue for Rockefeller and Clark. It was relatively inexpensive to get into oil refining, and it was clearly profitable. Cleveland was one of several cities that had become prime locations for the building of refineries because they were linked to the Pennsylvania oil regions by rail. The firm had been handling consignments of both crude and refined oil, and both partners had become aware of the significant markup in price that producers set during the processing of oil. Then, in 1863, Rockefeller began diversifying into the emerging sector of petroleum refining. With the outbreak of the Civil War, the fortunes of Rockefeller and Clark’s company were transformed as it moved into the business of selling farm goods to the Union army and became extraordinarily profitable. Rockefeller was working as a commission merchant, selling grain, hay, and other agricultural goods in partnership with an immigrant Englishman named Maurice Clark. The story of oil in the United States begins in rural Pennsylvania in 1859, when an itinerant worker, Edwin Drake, adapted salt-well drilling techniques to tease oil out of the ground. Quite obviously the business community does likewise, because in spite of our so-called ‘tough’ decisions, merger activity has increased in each year I have been at the Commission.Use this Narrative after the Chapter 10 Introductory Essay: 1898-1919 to help students understand the growth of trusts and progressive attitudes towards them. Chairman Paul Rand Dixon observed that “We do not start with the assumption that all conglomerate mergers are illegal.” “On the contrary,” he said, “we take the view that the great majority are legal. “Antitrust policy,” he said in rebuttal to Hart's remarks, “is too important to be turned into a children's crusade against sin and iniquity.” F.T.C. Turner, head of the Antitrust Division, said he saw no immediate need for drastic antitrust measures. Speaking in the same forum, Assistant Attorney General Donald F. Hart, addressing the antitrust section of the American Bar Association in Washington on April 14, 1966, asserted that the Federal Trade Commission and the Antitrust Division of the Justice Department had shown little concern about “the greatest merger tide in history.” He added that the federal government might end up presiding over a non-competitive economy. Hart (D Mich.), chairman of the antitrust and monopoly subcommittee of the Senate Judiciary Committee, recently predicted that 200 corporations would own 75 per cent of the country's manufacturing assets within a decade unless the government took preventive action. The total for 1966 appears certain to exceed 2,000.Īs was the case in past periods of intense merger activity, government officials are beginning to express fear that concentration will destroy competition. According to the Federal Trade Commission, 1,893 mergers were consummated in 1965, as compared with 1,797 in 1964 and 1,479 in 1963. The current economic boom, now more than five years old, has provided fresh proof of the axiom that prosperity breeds business mergers. New Trend Toward Conglomerate Mergers Sharp Increase in Merger Activity in Good Times Business Concentration and Antitrust Laws