Trust (business)

A trust in a business context refers to a specific type of legal arrangement, most commonly used in the late 19th and early 20th centuries, where multiple companies in the same industry assign their stock to a board of trustees. This board then manages the companies' operations and dictates policy for the entire group. The original stockholders receive trust certificates entitling them to a share of the trust's profits.

The primary purpose of forming a trust was to consolidate control and eliminate competition within an industry. By centralizing decision-making under a single board, trusts could fix prices, control production levels, and dominate markets. This often led to significant profits for the trust's beneficiaries but also resulted in higher prices and limited choices for consumers.

Notable examples of historical trusts include the Standard Oil Trust and the American Tobacco Trust. These organizations wielded immense economic power and were often accused of engaging in monopolistic practices.

The prevalence and perceived abuses of trusts led to significant public concern and ultimately resulted in antitrust legislation, such as the Sherman Antitrust Act of 1890 in the United States. This legislation aimed to prevent monopolies and protect competition by outlawing contracts, combinations, and conspiracies in restraint of trade.

While the traditional trust structure described above is less common today due to antitrust laws, the term "trust" can still be used loosely to refer to large, dominant companies or industries that exert significant market influence. It can also refer, more generically, to a business arrangement where one party holds assets for the benefit of another. The legal and business implications of any "trust" arrangement depend heavily on its specific structure and the applicable laws.