# Line About Wal-Mart Style Companies: Explain?

**URL:** <https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722>\
**Category:** Great Debates\
**Created:** [August 29, 2006, 10:49pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722 "2006-08-29T22:49:30Z")\
**Posts on this page:** 11\
**Page:** 5

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**Author:** ![raindog](https://avatars.discourse-cdn.com/v4/letter/r/2bfe46/32.png) [@raindog](https://boards.straightdope.com/u/raindog)\
**Post date:** [September 2, 2006, 11:04pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/81 "2006-09-02T23:04:33Z")

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[QUOTE=John Mace]  
No back at ya. First, I never said the government was corrupt. But the franchise was given, and another cable company can’t come in. You asked about government sanctioned monopolies and I gave you one. But note that they needn’t exist in this country to prove my point. I said that it’s unusual to find true monopolies that aren’t granted that status by the gov’t-- that doesn’t necessarily mean there are any. OTOH, I challenge you to name a privately operated monoply in the US. And just so we’re clear, it’s not that monopolies are illegal-- certain anti-competitive practices are illegal, but if you create a monopoly w/o using those practices, you’re legal.  
[/QUOTE]

Actually I agree with most of this.

It’s the “cozy” part that had me thinking you’re part of the conspiracy theorist contingency.

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<div class="post-metadata">

**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\
**Post date:** [September 2, 2006, 11:45pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/82 "2006-09-02T23:45:40Z")

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[QUOTE=the raindog]  
Actually I agree with most of this.

It’s the “cozy” part that had me thinking you’re part of the conspiracy theorist contingency.  
[/QUOTE]

OK. The “cozy” part was more in reference to monopolies granted in many third world countries to well cconnected family run business (like mining operations). I suppose these “public utility” monopolies granted in the US can sometimes include coziness and corruption. Right no, in San Jose the mayor is being investigated for how he handled to garbage collection contracts-- it’s a pretty big deal locally, altough I doubt it gets much press nationally.

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**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\
**Post date:** [September 3, 2006, 4:27am UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/83 "2006-09-03T04:27:57Z")

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[QUOTE=the raindog]

I think cable companies suck. I have Time Warner and I can’t stand them. I think there needs to be more competition.

[/QUOTE]

Obviously you have never experienced CableVision of New Jersey. Talk about suck.

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**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\
**Post date:** [September 3, 2006, 8:04pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/84 "2006-09-03T20:04:23Z")

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[QUOTE=the raindog]  
This isn’t true.  
[/quote]  
What’s not true about it? Let’s see:

[QUOTE=the raindog]  
John D Rockefeller was perhaps the most ruthless competitor in American business history. Rockefeller felt that unbridaled competition was not good for markets, preferring what he called “cooperation.” (read: managed markets, that as far as kerosene was concerned, would be led by Standard)  
[/quote]  
Somewhat arguable, I haven’t studied Rockerfeller in 10 years, but let’s stipulate that this is all true. Regardless, this has nothing to do with what I wrote, and, thus off-point.  
[QUOTE=the raindog]  
He often bought out competitors (and in many cases he knew the operations worth worthless, and sometimes closed them) and made them shareholders in The Trust.  
[/QUOTe]  
Fine. But, that’s a good thing, right (at least in th case of worthelss operations)? Or, do you believe that inefficient companies should be able to survive?  
[QUOTE=the raindog]  
Many of the people he bought out became very wealthy. Those who refused were often crushed by “The Standard.”  
[/quote]  
Again, this has nothing to do with my argument.  
[QUOTE=the raindog]  
Rockefeller once said of those who were driven out of business by Standard, [something like], “We proposed cooperation between us. But they said, “no” preferring competition. And they didn’t like it when they got it.”  
[/quote]  
Ok, it looks like that Standard Oil wanted cooperation or even, \>gasp\< collusion amongst the competitors. He didn’t get it, thus, they went into competition, and those lone holdouts got beat down. Fine, competition at its finest. Btw, this isn’t an example of monopoly power.

[QUOTE=the raindog]  
We take for granted that open competition is good for everyone, including consumers. Rockefeller may not have been underpricing in 1911, but he spent the prior 35 years _crushing_ competitors. By any reasonable definition of ‘monopoly’ Standard was a monopoly and wielded power like a monopoly.  
[/QUOTE]  
Again, no he didn’t. You wrote an impassioned retort, but failed to argue against my basic argument: he was losing monopoly power, regardless of what he was doing.

In the quoted article, he never once abused his monopoly position. Prices were always low. Quality did not suffer. Everything was well and good for the consumer. In order for a monpoly to keep its position, first and foremost, it has to reduce prices to the point where competitors will not enter because of lack of profit incentive. Prices under Rockerfeller droped to like $0.30/gal to like $0.059 (same article). [As economist John McGee concluded in his classic analysis of the Standard Oil case, “whatever else has been said about [it], the old Standard organization was seldom criticized for making less money when it could readily have made more” through other means.](http://www.enterstageright.com/archive/articles/0998rockefeller.htm)

If you want to argue that Standard Oil was hurting competition through unfair restraints of trade, unfair trade practices, and the like, that’s fine. You won’t get no argument from me. But these things will happen in a managed market way more than in a free market.

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**Author:** ![raindog](https://avatars.discourse-cdn.com/v4/letter/r/2bfe46/32.png) [@raindog](https://boards.straightdope.com/u/raindog)\
**Post date:** [September 3, 2006, 9:58pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/85 "2006-09-03T21:58:35Z")

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So let’s look closer at what you wrote.

Perhaps the best biogrophy of JDR was written by Ron Chernow, a gifted writer who also wrote about the Morgans, Warburgs and Alexander Hamilton. it is rich in detail, and is not a muck raking biography. It has many details, and even had the support of the Rockefeller family.

[QUOTE=mazinger\_z]  
Except that, at least for Standard Oil, when the anti-trust lawsuit began, [by 1900, it did not try to force competitors out of business by underpricing them.](http://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges.2C_anti-trust_litigation.2C_and_breakup_of_the_Standard_Oil_group); i.e. underpricing was not a component to the lawsuit.  
[/quote]

By your own cite SO controlled over 90% of production and 85% of all sales. By your own cite SO engaged in at least the following abusive practices:

(1) secret and semi-secret railroad rates;  
(2) discriminations in the open arrangement of rates;  
(3) discriminations in classification and rules of shipment;  
(4) discriminations in the treatment of private tank cars.

If you read Chernow’s account (which I have read twice as it is a fascinating read, and the best business biography I’ve ever read, followed by Chernow’s accounts of the Morgans and Warburgs) It is abundantly clear that SO did manage pricing and distribution through a sham company called Southern Improvement Company. Fron “Titan”, Chernow’s account, it says of SIC:

> [@](#):
>
> Page 136 “Under the terms of the proposed pact, the railroads would sharply raise rates for all refiners, but refiners in the SIC would receive substantial rebates–up to 50% off crude-and refined oil shipments—that their competitive edge over rivals would widen dramatically. In the most deadly innovation, the SIC members would also receive “drawbacks” on shipments made by rival refiners–that is, the railroads would give the SIC members rebates for every barrel for every barrel shipped by _other_ refiners.” (Italics Chernow’s)

> [@](#):
>
> Page 148 goes on: “Nowadays, most people imagine that American businessmen have always favored free competition…Pestered by overproduction in the early oil industry, Rockefeller tirelessly mocked those “acadmic enthusiasts” and “sentimentalists” who expected business to conform to their tidy models…Thus, Rockefeller and other industrial captains conspired to kill competitive capitalism in favor of a new monopoly capitalism.”

> [@](#):
>
> Your own wiki cite says, :"“The evidence is, in fact, absolutely conclusive that the Standard Oil Company charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher.”

The notion that SO didn’t control prices and competion directly, or indirectly through shipping arrangements is absurd. The evidence that SO forced competitors either out of business, or into collusion with them is \*overwhelming. \* I don’t think I’ve ever read any authoritive source, including the Rockefellers themselves, that disputes that Rockefeller/SO controlled the market for kerosene through various means, including pricing.

> [@](#):
>
> Originally Posted by **mazinger\_z** : Nonentheless, Standard Oil was already naturally losing its monopoly anyway, to Russian oil, I believe. If Rockerfeller ever had a chance to use monopoly power, he never did, as he couldn’t control prices nor prevent competition from entering. There is a growing consensus (at least amongst my econ friends) that the only monopolies that exist are the ones that the government allows.

You’re kidding, right? The largest corporation in the world, ExxonMobil, is a fraction of the “Seven Sisters”; the 7 successor companies to “The Standard.” The original seven sisters were:

> [@](#):
>
> Esso  
> Royal Dutch Shell  
> Anglo Persion Oil  
> Standard Oil New York  
> Texaco  
> Standard Oil of California  
> Gulf

Those same companies are now:

> [@](#):
>
> ExxonMobil  
> Royal Dutch Shell  
> British Petroleum (BP)  
> ChevronTexaco  
> Gulf Oil

It is mind bending to think about what kind of company would exist had The Standard not been dismantled. The revenue and profits of these successor companies, if combined, would dwarf any other company on the planet.

The statement, _“If Rockerfeller ever had a chance to use monopoly power, he never did, as he couldn’t control prices nor prevent competition from entering”_ is just amazing. The Standard Oil is the monopoly the Sherman Act was written for, and the Standard Trust is the monolpoly that all monopolies are measured against. In modern business history only AT&T comes close. (and AT&T had none of the “colorful” history and business practices of SO)

> [@](#):
>
> Originally Posted by \*\*mazinger\_z \*\*:Ok, it looks like that Standard Oil wanted cooperation or even, \>gasp\< collusion amongst the competitors. He didn’t get it, thus, they went into competition, and those lone holdouts got beat down. Fine, competition at its finest. Btw, this isn’t an example of monopoly power.

Except this wasn’t competition at it’s finest. Rockefeller was a \*brilliant \*businessman, amd a brilliant manager. In fact, one cannot read avccounts of his [business] life and not come away with at least a grudging admiration of what he accomplished. He lived in a time when many of the things we consider illegal, or abusive were not in fact illegal. It was the wild west of early American business.

But the fact remains that we was a monopolist, and wielded tremondous power as one. Competitors didn’t get driven out of business fair and square, or by “competition at it’s finest.” They were destroyed by tactics that by today’s standrds would get him indicted. Dude, he was a monopolist, and The Standard Oil Trust was the most powerful monopoly ever. And John D Rockefeller wielded that power without compunction, doubt or mercy. He was _ruthless._  
(btw, tell your brain surgeon econ friends that any _true_ monopoly can _ **only** _ exist if the government allows it. It’s called the Sherman Act)

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**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\
**Post date:** [September 4, 2006, 6:49pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/86 "2006-09-04T18:49:55Z")

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[QUOTE=the raindog]  
So let’s look closer at what you wrote.  
[/quote]  
I keep saying that, yet you seem to keep missing the point. Standard Oil did not engage in price undercutting: it didn’t lower prices to only raise them later. But, I’ll get to that in a bit…

[QUOTE=the raindog]  
Perhaps the best biogrophy of JDR was written by Ron Chernow [snip]  
[/quote]  
Do you mean the Ron Chernow with distinguished degrees from both Yale and Harvard in **English Literature**? Excuse me, if I don’t go to English professors for clarity on Economics, particularly, where one such writing is impassioned storytelling rather than analytical reasoning in a peer-reviewed academic journal (i.e. see my previously postings to John McGee.)

[QUOTE=the raindog]  
By your own cite SO controlled over 90% of production and 85% of all sales. By your own cite SO engaged in at least the following abusive practices: [snip]  
[/quote]  
Yeah, like I said, not examples of price fixing. Also, still widely used in industry today. Also, I said you get no argument from me.

[QUOTE=the raindog]  
If you read Chernow’s account  
[/quote]  
What is this? The all-Chernow praise post? Go open a MPSIMS thread (though, it might be better suited under Cafe Society, being a work of fiction and all :))

[QUOTE=the raindog]  
It is abundantly clear that SO did manage pricing and distribution through a sham company called Southern Improvement Company. Fron “Titan”, Chernow’s account, it says of SIC: [snip]  
[/quote]  
Oh, do you mean this SIC, whose charter was repealed by the state of Pennsylvania? The very same SIC that [shipped no oil](http://en.wikipedia.org/wiki/Standard_Oil) or [conducted a single transaction](http://www.pbs.org/wgbh/amex/rockefellers/peopleevents/e_south.html). Wow, way that Rockerfeller, I am blinded by his brilliance.

[QUOTE=the raindog]  
The notion that SO didn’t control prices and competion directly, or indirectly through shipping arrangements is absurd.  
[/quote]  
Well, to be fair, I was talking about the price of oil, but go ahead and insert what you have to to make your best argument.  
[QUOTE=the raindog]  
The evidence that SO forced competitors either out of business, or into collusion with them is \*overwhelming. \*  
[/quote]  
Impassioned italics don’t make a good argument, even if used in brevity.  
[QUOTE=the raindog]  
I don’t think I’ve ever read any authoritive source, including the Rockefellers themselves, that disputes that Rockefeller/SO controlled the market for kerosene through various means, including pricing.  
[/quote]  
You should expand your reading list. Try reading Journals of Economics and economic textbooks to enlighten yourself on what it means to be a monopoly.

To requote earlier numbers which were so generously not refuted (and re-quoted with actual source):

> [@Professor Armentano](#):
>
> Between 1870 and 1885 the price of refined kerosene dropped from 26 cents to 8 cents per gallon. In the same period, the Standard Oil Company reduced the [refining] costs per gallon from almost 3 cents in 1870 to .452 cents in 1885. Clearly, the firm was relatively efficient, and its efficiency was being translated to the consumer in the form of lower prices for a much improved product, and to the firm in the form of additional profits. D. T. Armentano, The Myths of Antitrust: Economic Theory and Legal Cases (New Rochelle, N.Y.: Arlington House, 1972)

Did prices rise then? No, in fact:

> [@Armentano](#):
>
> That story continued for the remainder of the century, with the price of kerosene to the consumer falling to 5.91 cents per gallon in 1897. Armentano concludes from the record that “at the very pinnacle of Standard’s industry ‘control,’ the costs and the prices for refined oil reached their lowest levels in the history of the petroleum industry.”

This historical analysis backs up Professor John McGee’s journal article which stated:

> [@John McGee](#):
>
> Judging from the Record, Standard Oil did not use predatory price discrimination to drive out competing refiners, nor did its pricing practice have that effect. Whereas there may be a very few cases in which retail kerosene peddlers or dealers went out of business after or during price cutting, there is no real proof that Standard’s pricing policies were responsible. I am convinced that Standard did not systematically, if ever, use local price cutting in retailing, or anywhere else, to reduce competition.

[QUOTE=the raindog]  
You’re kidding, right? The largest corporation in the world, ExxonMobil, is a fraction of the “Seven Sisters”; the 7 successor companies to “The Standard.” The original seven sisters were:  
[/quote]  
Uh yeah, it was losing its market share. The rest of this quote doesn’t challenge that statement, so I won’t bother respondingto any of it. The wiki article says that it fell to 64% ownership of market share. Great use of monopoly power there!

[QUOTE=the raindog]  
The statement, _“If Rockerfeller ever had a chance to use monopoly power, he never did, as he couldn’t control prices nor prevent competition from entering”_ is just amazing. The Standard Oil is the monopoly the Sherman Act was written for, and the Standard Trust is the monolpoly that all monopolies are measured against. In modern business history only AT&T comes close. (and AT&T had none of the “colorful” history and business practices of SO)  
[/quote]  
Excellent lack of anaylsis! Please be more conclusory next time. Btw, if he was such a monopoly power, how did he let his market share fall to 64%? The first ruling against Standard Oil was in 1909, objectionable practices stopped in 1900. It appealed and continued to operate as before, until SCOTUS broker it up for good in 1911, which at that time market share had dwindled to 64% (apparently it was Texaco giving it a run for its money).

[QUOTE=the raindog]  
But the fact remains that we was a monopolist, and wielded tremondous power as one. Competitors didn’t get driven out of business fair and square, or by “competition at it’s finest.” They were destroyed by tactics that by today’s standrds would get him indicted. Dude, he was a monopolist, and The Standard Oil Trust was the most powerful monopoly ever. And John D Rockefeller wielded that power without compunction, doubt or mercy. He was _ruthless._  
[/quote]  
Again, he did not enjoy monopoly power. Try using some evidence to support your claims. He did not price gouge, he did not recoup market position, and he lost market share, three major things that a monopoly does as I have previously quoted above. Dude, if you want to argue coersion, physical threat, blackmail, fine, I won’t argue as I don’t read about rich people ((just their economics). These tactics are useable by monopolists and non-monopolists alike. But, to say that they are a monopoly, coercive or not, is refuted by economic analysis.

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<div class="post-metadata">

**Author:** ![D\_Odds](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/d_odds/32/2882_2.png) [@D\_Odds](https://boards.straightdope.com/u/D_Odds)\
**Post date:** [September 7, 2006, 1:23pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/87 "2006-09-07T13:23:30Z")

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[QUOTE=msmith537]  
Obviously you have never experienced CableVision of New Jersey. Talk about suck.  
[/QUOTE]

Comparing Time Warner to Cablevision is like comparing Satan to Lucifer.

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**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\
**Post date:** [September 7, 2006, 4:51pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/88 "2006-09-07T16:51:54Z")

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Let’s cut through the minutia of the SO monopoly. Can we all agree that SO used all kinds of unfair tactics that would be illegal today to drive competitors out of business…but that those tactics did NOT include deliberately selling oil below cost, waiting for its competitors to go bankrupt trying to match that price, then jacking up the prices once its competitors were bankrupt.

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<div class="post-metadata">

**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\
**Post date:** [September 10, 2006, 1:47am UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/89 "2006-09-10T01:47:54Z")

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[QUOTE=Lemur866]  
Let’s cut through the minutia of the SO monopoly. Can we all agree that SO used all kinds of unfair tactics that would be illegal today to drive competitors out of business…but that those tactics did NOT include deliberately selling oil below cost, waiting for its competitors to go bankrupt trying to match that price, then jacking up the prices once its competitors were bankrupt.  
[/QUOTE]

[http://members.tripod.com/copy\_bilderberg/whatafel.htm](http://members.tripod.com/copy_bilderberg/whatafel.htm) He undercut. and more. Tarbill exposed him.

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**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\
**Post date:** [September 10, 2006, 4:32am UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/90 "2006-09-10T04:32:34Z")

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Standard Oil had a “monopoly” on the refining of oil in that brief period in which American oil production was limited to Pennsylvania and Ohio. Once Spindletop and Tulsa went online in the first decade of the new century, their marketshare dropped quite a bit. The 1911 ruling was a Godsend to Rockefeller, as it allowed him\* to divide his organization up into individual operational units focusing on their core competencies. The SC ruling didn’t mention a thing about _ownership_, so that Rockefeller now owned X% each of 40+ companies, rather than X% of just one Trust. Within 20 years his holdings made him America’s first billionaire.

As my grandfather liked to say, he cried all the way to the bank. 😉

\*Not really him but his successors.

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<div class="post-metadata">

**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\
**Post date:** [September 13, 2006, 10:26pm UTC](https://boards.straightdope.com/t/line-about-wal-mart-style-companies-explain/370722/91 "2006-09-13T22:26:07Z")

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[QUOTE=gonzomax]  
[http://members.tripod.com/copy\_bilderberg/whatafel.htm](http://members.tripod.com/copy_bilderberg/whatafel.htm) He undercut. and more. Tarbill exposed him.  
[/QUOTE]  
I was going to let this go, because your style of debating leaves something to be desired **xtisme** and **Renob** have called you in on it. However, let me just say that sound evidence should be little more than some rant on a free web site, _ **without any analysis** _ by the author or the poster. Btw, Ida Tarbell’s dad tried to compete against Standard Oil and got his ass kicked. I think Ida has a little more than a bit of bias. Try to come up with something that refutes economic analysis, something more than your gut instincts, because that just don’t cut it in GD.

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