Trust (19th century)
Encyclopedia
A special trust or business trust is a business entity formed with intent to monopolize
business, to restrain trade
, or to fix prices
. Trusts gained economic power in the U.S. in the late 19th and early 20th centuries. Some, but not all, were organized as trusts in the legal sense
. They were often created when corporate leaders convinced (or coerced) the shareholders of all the companies in one industry to convey their shares to a board of trustees, in exchange for dividend-paying certificates
. The board would then manage all the companies in 'trust' for the shareholders (and minimize competition in the process). Eventually the term was used to refer to monopolies in general. In 1898, President William McKinley
launched the 'trust-busting' era when he appointed the U.S. Industrial Commission
. The report of the Commission was seized upon by Theodore Roosevelt
, who based much of his presidency on "trust-busting".
Prominent trusts included Standard Oil
, U.S. Steel
, the American Tobacco Company
and the International Mercantile Marine Company.
This kind of trust led to the term "antitrust laws" in the United States
for what the rest of the world calls "competition law
s." The pioneering United States antitrust laws, especially the Sherman Antitrust Act
and the Clayton Antitrust Act
, were initially aimed at breaking up these trusts. Libertarian
economists often claim that antitrust legislation has protectionist
roots.
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
business, to restrain trade
Restraint of trade
Restraint of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. In an old leading case of Mitchell v Reynolds Lord Smith LC said,...
, or to fix prices
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
. Trusts gained economic power in the U.S. in the late 19th and early 20th centuries. Some, but not all, were organized as trusts in the legal sense
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
. They were often created when corporate leaders convinced (or coerced) the shareholders of all the companies in one industry to convey their shares to a board of trustees, in exchange for dividend-paying certificates
Trust certificate (finance)
In finance, a trust certificate is a corporate bond backed by other securities, usually a parent corporation borrowing against securities of its subsidiaries....
. The board would then manage all the companies in 'trust' for the shareholders (and minimize competition in the process). Eventually the term was used to refer to monopolies in general. In 1898, President William McKinley
William McKinley
William McKinley, Jr. was the 25th President of the United States . He is best known for winning fiercely fought elections, while supporting the gold standard and high tariffs; he succeeded in forging a Republican coalition that for the most part dominated national politics until the 1930s...
launched the 'trust-busting' era when he appointed the U.S. Industrial Commission
Industrial Commission
The Industrial Commission was a United States government body in existence from 1898 to 1902. It was appointed by President William McKinley to investigate railroad pricing policy, industrial concentration, and the impact of immigration on labor markets, and make recommendations to the President...
. The report of the Commission was seized upon by Theodore Roosevelt
Theodore Roosevelt
Theodore "Teddy" Roosevelt was the 26th President of the United States . He is noted for his exuberant personality, range of interests and achievements, and his leadership of the Progressive Movement, as well as his "cowboy" persona and robust masculinity...
, who based much of his presidency on "trust-busting".
Prominent trusts included Standard Oil
Standard Oil
Standard Oil was a predominant American integrated oil producing, transporting, refining, and marketing company. Established in 1870 as a corporation in Ohio, it was the largest oil refiner in the world and operated as a major company trust and was one of the world's first and largest multinational...
, U.S. Steel
U.S. Steel
The United States Steel Corporation , more commonly known as U.S. Steel, is an integrated steel producer with major production operations in the United States, Canada, and Central Europe. The company is the world's tenth largest steel producer ranked by sales...
, the American Tobacco Company
American Tobacco Company
The American Tobacco Company was a tobacco company founded in 1890 by J. B. Duke through a merger between a number of U.S. tobacco manufacturers including Allen and Ginter and Goodwin & Company...
and the International Mercantile Marine Company.
This kind of trust led to the term "antitrust laws" in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
for what the rest of the world calls "competition law
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....
s." The pioneering United States antitrust laws, especially the Sherman Antitrust Act
Sherman Antitrust Act
The Sherman Antitrust Act requires the United States federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by...
and the Clayton Antitrust Act
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 , was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices...
, were initially aimed at breaking up these trusts. Libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
economists often claim that antitrust legislation has protectionist
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
roots.
See also
- CartelCartelA cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
- Investment trustInvestment trustAn Investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies....
- Trust companyTrust companyA trust company is a corporation, especially a commercial bank, organized to perform the fiduciary of trusts and agencies. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specializes in being a trustee of various kinds of...
- Antitrust law
- Massachusetts business trustMassachusetts business trustA Massachusetts business trust is a legal trust set up for the purposes of business, but not necessarily one that is operated in The Commonwealth of Massachusetts. They may also be referred to as an unincorporated business organization or UBO. Business trusts may be established under the laws of...