Lessons from the Past - Trust Buster (1901-1909)

In 1901, US President Theodore Roosevelt began the process of dismantling the country’s sprawling monopolies, gaining the name ‘Trust Buster’. The history of this episode provides an interesting lesson about investing in companies with dominant market positions.

Robber Barons

The late 19th century was a period of rapid growth of the US economy which saw the rise of powerful corporations, such as Standard Oil and US Steel. The men who ran these giant companies, such as Andrew Carnegie, J. P. Morgan and John D. Rockefeller, were given the name ‘robber barons’ by critics because of their extreme wealth and power.


Many of these corporations, which were called ‘trusts’ because of their legal structure at the time, came to dominate their particular industries. For example, the American Sugar Refining Company controlled 98% of the US sugar market and Standard Oil 91% of the US refining market.1

When US Steel was created in 1901, it became the world’s largest company and Andrew Carnegie, who was bought-out as part of the deal, became one of the world’s richest men.2 When the company took over the Tennessee Coal, Iron and Railroad Company it would produce more than half of the steel in the US.3

Roosevelt was committed to taking on the monopoly power of the trusts, arguing he was not anti-business, nor even anti-trust, but rather anti bad-business. 

Legislation aiming to restrict the monopoly power of these companies resulted in the Sherman Anti-Trust Act of 1890. However, the political will to use the law to take on vested interests did not exist in the 1890s.


A significant wave of M&A activity in the 1890s reduced competition as the trusts swallowed up smaller competitors.4 As a result, they came under increasing public criticism. For example, The History of the Standard Oil Company written in 1904 by investigative journalist Ida Tarbell, one of the original ‘muckrakers’, was a vitriolic exposé of the dubious practices of the company.

Accusations against the companies included market manipulation, stifling competition, poor product quality and employee exploitation, going as far as violence and intimidation. The companies were clearly not operating in the interests of all stakeholders.

Trust Buster

Theodore ‘Teddy’ Roosevelt became US President after the assassination of William McKinley in 1901, and was returned to the White House by a landslide victory in the 1904 presidential election. Roosevelt was committed to taking on the monopoly power of the trusts, arguing he was not anti-business, nor even anti-trust, but rather anti bad-business.

Bonfire of the Trusts

Roosevelt used the Sherman Act to break up the trusts. His first target was Northern Securities Company, a conglomerate controlling railways across the US, which was taken to court in 1902 and dissolved by the Supreme Court in 1904. 

Next came the Beef-Trust case which was precipitated by a public storm after beef price rises in 1902.5 Other targets included the American Tobacco Company (1911), the Chicago Meat Packers (1905), Otis Elevator (1906) and Du Pont (1907).

An important and symbolic example was Standard Oil. The US federal court ruled in favour of the government in 1909, but the company appealed against its court-ordered dissolution. However, it was finally broken into 34 separate companies after an appeal was rejected by the Supreme Court in 1911.6

During Roosevelt’s presidency more than 40 antitrust suits were filed against corporations and the policy continued under his successor President Taft from 1909. In total, the Department of Justice filed 127 antitrust cases between 1904 and 1914, resulting in a significant diminution of US corporate power.7

Impact on shareholders

Antitrust investigations were negative for shareholders of targeted companies as share prices declined substantially during these years. The investigations had a dampening impact on the stock market as a whole.8 The antitrust campaign highlights how owning shares in companies with monopolistic powers at certain times can be a bad investment.

21st century monopolies

Today, US companies such as Alphabet, Amazon, Apple, Facebook and Microsoft have dominant positions in their markets. They have been criticised for swallowing up smaller rivals, minimising tax payments and poor treatment of workers, all of which could threaten their social licence to operate.9 It seems that they are emerging from the coronavirus pandemic in even stronger positions.

The EU has shown willingness to challenge some of these companies. A competition probe ruled that Alphabet’s Google had spent 10 years blocking rival online advertisers.10 As a result the EU imposed fines on Google totalling €8.2bn.11

We believe these companies may face more intensive regulation in the future and could ultimately be broken up or severely curtailed, like the early 20th century monopolies, with negative implications for shareholders. However, it may take a radical US President like Teddy Roosevelt to begin the process in the US. 

The trust busting of the early 20th century highlights the risk of owning large, monopolistic companies when their licence to operate is challenged. This is one of the reasons we do not hold positions in these kind of companies in our portfolios.

At Stewart Investors we favour management and owners who provide careful stewardship. This includes paying reasonable rates of tax, charging customers a fair price and treating the workforce well which is not always the case with monopolistic companies such as the ones broken up by Roosevelt.

Important information

This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.

We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.

About First Sentier Investors

References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group (MUFG). Our investment teams operate under the trading name of Stewart Investors which is part of the First Sentier Investors group.

We communicate and conduct business through different legal entities in different locations. This material is communicated in:

  • Australia and New Zealand by First Sentier Investors (Australia) IM Limited, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
  • European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI ref no. C182306; Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; Company no. 629188).
  • Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors and Stewart Investors are business names of First Sentier Investors (Hong Kong) Limited.
  • Singapore by First Sentier Investors (Singapore) (Company no. 196900420D) and has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) and Stewart Investors (registration number 53310114W) are business divisions of First Sentier Investors (Singapore).
  • Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611).
  • United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (FCA ref no. 143359;  Registered office: Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB; Company no. 2294743).
  • United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167).
  • In other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).

To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.