Trust (monopoly)

A trust or corporate trust is an American 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 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.

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