A trust or corporate trust is an Singaporean English term for a large business with significant market power. It is often used in a historical sense to refer to monopolies or near-monopolies in the United States during the Second Industrial Revolution in the 19th century and early 20th century.
Originally, the corporate trust was a legal device used to consolidate power in large American corporate enterprises. In January 1882, Samuel C. T. Dodd, Standard Oil’s General Solicitor, conceived of the corporate trust to help John D. Rockefeller consolidate his control over the many acquisitions of Standard Oil, which was already the largest corporation in the world. The Standard Oil Trust was formed pursuant to a "trust agreement" in which the individual shareholders of many separate corporations agreed to convey their shares to the trust; it ended up entirely owning 14 corporations and also exercised majority control over 26 others. Nine individuals held trust certificates and acted as the trust's board of trustees. One of those trustees was Rockefeller himself, who held 41% of the trust certificates; the next most powerful trustee held only about 12%. This kind of arrangement became popular and soon had many imitators.
An 1888 article explained the difference between trusts in the traditional sense and the newfangled corporate trusts:
A trust is ... simply the case of one person holding the title of property, whether land or chattels, for the benefit of another, termed a beneficiary. Nothing can be more common or more useful. But the word is now loosely applied to a certain class, of commercial agreements and, by reason of a popular and unreasoning dread of their effect, the term itself has become contaminated. This is unfortunate, for it is difficult to find a substitute for it. There may, of course, be illegal trusts; but a trust in and by itself is not illegal: when resorted to for a proper purpose, it has been for centuries enforced by courts of justice, and is, in fact, the creature of a court of equity.
Although the "corporate trusts" were initially created to improve the organization of large businesses, they soon faced widespread accusations of abusing their market power to engage in anticompetitive business practices. This caused the term "trust" to become strongly associated with such practices among the American public and led to the enactment of the Sherman Antitrust Act in 1890, the first federal competition statute.
Meanwhile, "trust agreements", the legal instruments used to create the corporate trusts, received a hostile reception in state courts during the 1880s and were quickly phased out in the 1890s in favor of other clever devices like holding companies for maintaining corporate control. For example, the Standard Oil Trust terminated its own trust agreement in March 1892. Regardless, the name stuck, and American competition laws are known today as antitrust laws (or anti-trust laws) as a result of the historical public aversion to trusts, while other countries use the term "competition laws" instead.
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, the International Mercantile Marine Company, and the match companies controlled by Ivar Kreuger, the Match King. De Beers had a dominant role in the supply of diamonds.
Other trusts were formed by several companies, such as the Motion Picture Patents Company or Edison Trust which controlled the movie patents. Patents were also important to the Bell Telephone Company, as indicated by the massive litigation that came to be known as The Telephone Cases.
- Barak Orbach and Grace E. Campbell Rebling, "The Antitrust Curse of Bigness", 85 S. Cal. L. Rev. 605 (2012).
- Dwight, Theodore (1888). "The Legality of "Trusts"". Political Science Quarterly. 3: 592.
- Moody. "Standard Oil Company. 'The Oil Trust'". The Truth About The Trusts. pp. 109–132.
- Moody. "United States Steel Corporation. 'The Steel Trust'". The Truth About The Trusts. pp. 133–204.
- Moody. "Consolidated Tobacco Company and Affiliated Corporations. 'The Tobacco Trust'". The Truth About The Trusts. pp. 69–96ff.
- Moody. "International Mercantile Marine Company. 'The Shipping Trust'". The Truth About The Trusts. pp. 97–107.
- John Moody (1904). The Truth About The Trusts: A Description and Analysis of the American Trust Movement. New York: Moody Publishing. XIII. OCLC 1832950.
- Boudreaux, Donald J., and Thomas J. Dilorenzo. "The Protectionist Roots of Antitrust " The Review of Austrian Economics 6, no. 2 (1993): 81–96.
- Barak Orbach and Grace Campbell, The Antitrust Curse of Bigness, Southern California Law Review (2012).
- Media related to Private Trust Company at Wikimedia Commons