How Rockefeller was able to take control over the entire oil industry?

http://en.wikipedia.org/wiki/John_D._Rockefeller#Oil

John D. Rockefeller was able to take control over the entire oil industry through a series of strategic business moves and practices. Here is a step-by-step breakdown of how he accomplished this:

1. Formation of Standard Oil: In 1870, Rockefeller co-founded the Standard Oil Company, which aimed to consolidate various oil refining and distribution businesses under one organization. This consolidation allowed for greater control over production, pricing, and competition.

2. Horizontal Integration: Rockefeller employed the strategy of horizontal integration, where he acquired and merged smaller oil companies into Standard Oil. This process involved purchasing refineries, pipelines, storage facilities, and marketing channels to create a network of interconnected entities.

3. Secret Rebates: Rockefeller negotiated secret rebate deals with railroads, giving Standard Oil significant advantages in transportation costs over its competitors. These rebates allowed Standard Oil to offer lower prices and gain a competitive edge in the marketplace.

4. Control over Competitors: Rockefeller also employed aggressive tactics like predatory pricing, where he would temporarily lower prices to unsustainable levels, forcing competitors out of business. Once they shut down, he would acquire their assets and increase his control over the industry.

5. Vertical Integration: In addition to horizontal integration, Rockefeller pursued vertical integration by acquiring other companies involved in different stages of the oil production process, including drilling, refining, transportation, and marketing. This allowed him to control every aspect of the oil industry, from production to distribution.

6. Trust Formation: As Standard Oil's influence grew, Rockefeller formed various trusts, such as the Standard Oil Trust, to legally consolidate and control the operations of the different affiliated companies without violating antitrust laws.

7. Standard Oil's Dominance: By the late 19th century, Standard Oil had gained significant control over the oil industry, with estimates suggesting that it controlled around 90% of the refining capacity in the United States. This monopoly power allowed Rockefeller to dictate prices, manipulate the market, and stifle competition.

8. Legal Challenges and Dissolution: Standard Oil faced increasing scrutiny and legal challenges, leading to the landmark Supreme Court case in 1911, where the company was found to be in violation of antitrust laws. As a result, Standard Oil was ordered to be broken up into smaller, independent companies, reducing Rockefeller's control over the industry.

It's important to note that while Rockefeller achieved immense power and control over the oil industry, his tactics were highly controversial and led to the eventual implementation of antitrust laws to prevent such monopolistic control in the future.

To understand how Rockefeller was able to gain control over the entire oil industry, we need to look at the strategies and policies he employed. Here are the key steps he took:

1. Vertical Integration: Rockefeller's first step was to establish an integrated oil company called Standard Oil. He worked to control every aspect of the industry by acquiring or investing in companies involved in exploration, drilling, refining, transportation, and distribution of oil. This integrated approach allowed him to streamline operations and reduce costs, giving him a competitive advantage.

2. Secret Rebates and Discounts: Rockefeller negotiated secret deals and rebates with railroad companies for transporting his oil. These favorable rates enabled him to transport oil more cheaply than his competitors, who had to pay higher rates. This gave him a significant cost advantage, allowing him to further consolidate his control.

3. Predatory Pricing: Rockefeller used predatory pricing to drive his competitors out of business. He would drop the price of oil below the cost of production, forcing smaller companies to sell at a loss or go bankrupt. Once his competitors were weakened, he would acquire their assets at discounted prices, further strengthening his market position.

4. Horizontal Integration: Alongside vertical integration, Rockefeller also pursued horizontal integration. He aggressively acquired or merged with competing oil refineries and companies, consolidating their operations within Standard Oil. By controlling a significant portion of the market, he achieved economies of scale and effectively eliminated competition.

5. Trust Formation: In 1882, Rockefeller created a corporate structure known as a trust. Under this arrangement, the various companies that comprised Standard Oil placed their stock into a central board of trustees. This allowed Rockefeller to control multiple companies while avoiding anti-trust laws that prohibited one corporation from owning stock in another. The trust structure gave him unprecedented control and flexibility in managing his empire.

6. Political Influence: Rockefeller used his wealth and influence to build strong political connections. He made significant political contributions and actively engaged in lobbying efforts to shape regulations and policies in his favor. This allowed him to protect his monopoly and fend off attempts at government intervention.

It's important to note that Rockefeller's practices and methods faced criticism, leading to increasing public and governmental scrutiny. Eventually, the U.S. Supreme Court ordered the dissolution of Standard Oil in 1911, ruling it violated anti-trust laws. Nonetheless, Rockefeller's impact on the oil industry and his strategies for consolidation had a lasting influence.