Figure 11.3
The oil industry expanded quicker than demand, causing companies to try to remove
competition. (Credit: 15299/ pixabay/ License: CC0)
Some of the competitors were larger and more powerful than others, and they sought to limit the competition
in the market by taking steps to reduce the number of smaller companies who were trying to compete with
them (Federal Trade Commission, n.d.). Some of the larger companies banded together to create business
trusts. A business trust is a trust agreement that allows businesses to maintain profits as beneficiaries, but
legal ownership and management of the company’s property is maintained through the power of trustees
(West, n.d.). These trusts allowed businesses that were members of the trust to grow larger, as they
cooperated with one another and shut out other competitors (West, n.d.).
Unfair Business Practices
Companies tried to create situations that would drive some competitors out of business while solidifying their
own share of the market. This effort resulted in mergers and consolidation practices that placed the largest
share of the industries under the control of just a few, thereby increasing their power. Since the trusts were
able to fix prices and could afford to take some losses, they would drive prices down until competitors were
forced out of business because they could not afford to operate at the lower rates (West. n.d.).
The markets began to consolidate under just a few companies because the smaller competitors continued to
go out of business. The smaller competitors could not compete with the pricing and other practices that the
trusts allowed the cooperative businesses to maintain. This design restricted free trade practices for both
businesses and consumers. The few businesses in the trust, in turn, became more powerful, thus prompting
the government to look for measures to control the situation (Federal Trade Commission, n.d.). The
government determined that laws needed to be created to prevent this form of trade restriction.
Chapter 11 Antitrust Law
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