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The Supreme Court’s 1911 decision in Standard Oil gave us embryonic versions of two foundational standards of liability under the Sherman Act: the rule of reason under Section 1 and the monopoly power/exclusionary conduct test under Section 2. But a case filed later in 1911, United States v. United States Steel Corporation, shaped the understanding of Standard Oil’s standards of liability for decades. U.S. Steel, eventually decided by the Supreme Court in 1920, upheld the 1901 merger that created "the Corporation," as U.S. Steel was known. The majority found that the efforts of the Corporation and its rivals to control prices in the famous Gary dinners had violated Section 1 of the Sherman Act when they occurred, but paradoxically insulated U.S. Steel from liability under Section 2. U.S. Steel was formed to monopolize the industry, but failed; it demonstrated its impotence by fixing prices with rivals instead of crushing them, as Standard Oil had done.
U.S. Steel’s interpretation and application of Standard Oil essentially ended governmental enforcement of section 2 until Alcoa. Economic scholars suggest that the case ratified “the most socially damaging of all mergers in U.S. history” and caused lasting harm to the American economy by making the crucial steel industry less competitive. Equally important, I argue in this essay, it harmed antitrust doctrine. In cases like Alcoa, it played a role in confusing in the law of monopolization under Section 2 of the Sherman Act. Moreover, by rendering Section 1 of the Sherman ineffective against monopolistic mergers, it contributed to the passage of Cellar-Kefauver Act’s amendment of Section 7 of the Clayton Act in 1950 and, indirectly, to the early misguided interpretations of that provision in cases like Brown Shoe and Von’s. In this essay, I will describe errors of U.S. Steel, the mistaken responses to those errors in post-New Deal antitrust, and role of competing ideologies in both. In a final Part, I argue that modern reforms should assure that both U.S. Steel’s errors and the excesses of the post-New Deal antitrust will not recur.
William H. Page, Standard Oil and U.S. Steel: Predation and Collusion in the Law of Monopolization and Mergers, 85 S. Cal. L. Rev. 101 (2012), available at http://scholarship.law.ufl.edu/facultypub/260