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Monopolies Without End

Rockefeller Redux

May 14, 2000|Ron Chernow | Ron Chernow is the author of "Titan: The Life of John D. Rockefeller Sr."

BROOKLYN, N.Y. — As the marathon antitrust case against Microsoft heads toward its climax, the federal government's proposal to dismember the software colossus into two companies summons up images of the trustbusters' triumph of a century ago: the 1911 breakup of John D. Rockefeller's Standard Oil.

In both cases, prosecutors tangled with the country's most formidable monopoly, which was bolstered by the immense resources and prestige of the planet's richest man. Neither Rockefeller nor Bill Gates admitted the legitimacy of the government inquiry or showed any signs of contrition in the face of sustained legal assault. Both men adopted a defiant, unrepentant stance that gratified partisans even as it ratified the darkest suspicions of detractors. And, to complete the often eerie parallel, both men proved to be notoriously evasive and impenetrable witnesses, susceptible to sudden bouts of amnesia under oath.

According to a recent Wall Street Journal poll, Gates' uncompromising stand has rallied public support in his favor. For all the reams of testimony about Microsoft's monopolistic behavior, 60% of Americans still endorse Gates as a "positive role model," and an equivalent portion back his company in the case. Whatever its merits in the court of public opinion, however, Microsoft's self-righteously assertive strategy has backfired in the court of law. Exasperated by the firm's intransigence, the Justice Department and 17 state attorneys general have now graduated in their thinking from advocating lenient "conduct" remedies to more draconian "structural" remedies--legalese for a breakup.

It may seem paradoxical that moguls who show faultless judgment in business should so sorely miscalculate in politics. This contradiction isn't uncommon, as Rockefeller's career attests. Populist critics perceived him as the malignant agent of big business, stamping out small proprietors to concentrate power in his huge enterprise. But he retained his self-image of superior morality through myriad court cases, legislative hearings and exposes in the muckraking press, not to mention 20 state antitrust actions that preceded or coincided with the main federal case filed in 1906.

Rockefeller launched Standard Oil in Cleveland in 1870, 11 years after "Col." Edwin L. Drake struck oil in nearby western Pennsylvania. While hundreds of independent drillers pumped oil at a furious rate, leading to a chronic surplus and skidding prices, Rockefeller opted for the steady profits of refining. By the late 1870s, this wunderkind of American business, still in his 30s, had imposed his mastery on nearly 90% of the world's refineries. He straddled a critical intersection of the industry, much as Gates does today with the Windows operating system. Rockefeller parlayed his refining monopoly into control of the pipelines and railroad tank cars that carried oil, making it futile for independent oilmen to try to bypass the Standard Oil monopoly.

Far from feeling villainous, Rockefeller viewed himself as the savior of an anarchic industry buffeted by boom-and-bust cycles. He was the prophet of a new order that he dubbed "cooperation" but that the trustbusters, to his dismay, labeled monopoly. That Rockefeller was a pious Baptist, with (as he believed) a God-given talent for making money, only strengthened his sense of personal virtue. His opponents, in contrast, struck him as benighted men--barefaced schemers, malcontents and blackmailers--wedded to antiquated notions of "competition." By no coincidence, Rockefeller approached his philanthropy with the same fervor as business, just as Gates would a century later. Even their charitable priorities--medicine and education--tally.

Having enlisted the Lord on his side, Rockefeller brooked no resistance to his absolute rule of the industry. If he learned through his elaborate intelligence network that independent oil had appeared in a small town, he would issue immediate orders to suppress the interlopers. A hard-driving executive, he imbued his troops with an irrepressible fighting spirit, a relentless desire to win at all costs.

Like Gates, Rockefeller was a superb businessman, filled with the moral certitude and fatal blindness of the authentic visionary. Contrary to our hackneyed view of Gilded Age monopolists, he slashed prices of oil products and improved quality to deter rivals. The bulk of his career unfolded before the 1890 Sherman Antitrust Act, and he managed, with matchless energy, to figure out every conceivable anti-competitive device. Antitrust reformers simply had to study his machinations to draw up a legal agenda.

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