Attention is now being given to the failure of antitrust law to prevent the creation of gargantuan enterprises, but it is not recognized that a model for these enterprises was first mastered in the 1920s by the proprietors of tetraethyl lead. This presentation shows that the model, the “created dependency,” gave tetraethyl lead a form of market power that escaped antitrust enforcement.
The strategy came about by serendipity. Charles Kettering of Delco began working on developing a fuel additive in 1916, and he brought his research with him to General Motors in 1919. GM was owned in substantial part by DuPont, but it was only after Kettering's team discovered tetraethyl lead in December 1921 that GM and DuPont gave thought to its strategic significance: If motorists bought GM cars with the new high-compression-ratio engines, they could run them only on the fuel containing the additive on which GM held the patents. Thus, if GM built those cars and DuPont provided the additive, then the two could lock in irreversible demand. Moreover, if other automakers emulated the new GM cars by building their own new high-compression-ratio engines, GM and DuPont could sell lead additive to fuel those cars too, and in time to virtually every car on the road. Standard Oil of New Jersey maneuvered its way into the arrangement in 1924 using additional patents. To protect their market from false claims of competitors, they developed the “octane” standard of antiknock quality.
While the created dependency allowed a form of market power, it didn’t fall into any recognized category of antitrust violation. Even by the time it was dismembered in 1961/2 it still had not been recognized in antitrust doctrine, and it disappeared without recognition. However, some in industry noticed, and because of its success it became a model for modern enterprise.