The combination of sellers of commodities for the purpose of restricting competition and securing higher prices has a very ancient history. Sometimes such monopolies have been carried on in violation of the law and at other times under legal privileges granted by the state. But never before have combinations of former competitors been organized into compact business units on the scale which has prevailed during the last twenty-five or thirty years. Ever since the time of the Civil War, attempts have been made in various forms to bring together competing businesses so as to eliminate competition. These earlier combinations known as pools did not go so far as the present trusts in the consolidation of conflicting interests. They were rather temporary agreements among competing manufacturers and they were constantly being broken because some short-sighted individual of the group saw that it would be to his immediate interest to break faith with his fellows. These pooling agreements took on various forms. Sometimes the total business was divided and each manufacturer was given a percentage to handle. Again an agreement was made limiting the output of each factory. Another form of pool divided the country among the different manufacturers and assigned to each a special territory in which to sell his goods. Sometimes a selling association was formed to market the product of all of the members of the pool, or an agreement was made among the members of the pool not to sell their products below a certain price. But whatever the form of agreement it usually happened that some member or members of the pool secretly violated it.

Since the agreement was contrary to public policy, in that it was in undue restraint of trade, the courts refused to enforce its provisions. It became desirable, then, for those who would eliminate competition to find some stronger bond of union.

The Standard Oil Company in 1882, recognizing the weakness of the prevailing forms of pools, organized the Standard Oil Trust. In this form of organization the stockholders in the separate companies assigned their stock to a board of nine trustees and gave them an irrevocable power of attorney to vote the stock. In return for their original stock, the stockholders received trust certificates from the board of trustees. The dividends of the combination were divided on the basis of the trust certificates and not on that of the shares of stock in the original companies. When it was for the good of the whole group the plant of one of the companies might be shut down entirely without harming the stockholders of that company. They received dividends not of the profits of their company but of the profits of the trust as a whole. Other combinations soon adopted this form of trust organization, but it soon developed that the courts were unfriendly to it and a reorganization was necessary.

It happened that the nine trustees of the Standard Oil Trust owned a majority of the trust certificates. When the old trust was dissolved the reorganization was made in such a way that the nine individual trustees together held a majority of the stock of each of the twenty corporations into which the trust was divided. It was thus still possible for these nine individuals to direct the affairs of the twenty corporations as effectually as when they formed the board of trustees. The next stage in the trust development of the Standard Oil took place when one of these corporations, the Standard Oil Company of New Jersey, increased its stock and exchanged this stock for the stock of the other Standard Oil Companies.

The New Jersey Standard Oil Company had now become a holding corporation. The combination was more securely consolidated than ever before. This form of consolidation through the holding corporation had already been adopted by other trusts and in recent years it has been the typical form of organization.