Document: 522 U.S. 3118 S.Ct. 275139 L.Ed.2d 199 STATE OIL COMPANY, Petitioner,v.Barkat U. KHAN and Khan & Associates, Inc. No. 96-871 Supreme Court of the United States Argued Oct. 7, 1997. Decided Nov. 4, Syllabus * Respondents' agreement to lease operate a gas station obligated them buy gasoline from petitioner State Oil Company at price equal suggested retail set by Oil, less specified profit margin, required rebate any excess if they charged customers more than price, provided that decrease due sales below would reduce their margin. After fell behind in payments commenced eviction proceedings, respondents brought this suit federal court, alleging part that, preventing raising or lowering prices, had violated §1 Sherman Act. The District entered summary judgment for on claim, but Seventh Circuit reversed basis Albrecht v. Herald Co., 390 145, 152-154, 88 869, 872-73, 19 998 (1968), which held vertical maximum fixing is per se antitrust violation. Although Appeals characterized as "unsound when decided'' "inconsistent with later decisions,'' it felt constrained follow decision. Held: overruled. Pp. ___-___. (a) most claims are analyzed under "rule reason,'' court reviews number relevant factors, see, e.g., Arizona Maricopa County Medical Soc., 457 332, 342-343, 102 2466, 2472-2473, 73 48, some types restraints trade have such predictable pernicious anticompetitive effect, limited potential procompetitive benefit, deemed unlawful se, Northern Pacific R. Co. States, 356 1, 5, 78 514, 518, 2 545. A review Court's pertinent decisions assessing continuing validity rule. See, Kiefer-Stewart Joseph E. Seagram Sons, Inc., 340 211, 213, 71 259, 260-261, 95 L.Ed. 219 (maximum resale illegal se); Arnold, Schwinn 388 365, 379-380, 87 1856, 1865-1866, 18 1249 (vertical nonprice restrictions Continental T.V., GTE Sylvania 433 36, 47-49, 58-59, 97 2549, 2556-2557, 2561-2562, 53 568 (overruling Schwinn). hinted Albrecht's analytical underpinnings were substantially weakened County, supra, 348, n. 18, S.Ct., 2475, 18; 324 Liquor Corp. Duffy, 479 335, 341-342, 107 720, 723-724, 93 667 (1987); Atlantic Richfield USA Petroleum 495 328, 343, 13, 110 1884, 1890, 1894, 13 there considerable body scholarship discussing effects fixing. (b) Informed foregoing scholarship, guided general view laws' primary purpose protect interbrand competition, Business Electronics Sharp Corp., 485 717, 726, 108 1515, 1520, 99 808, condemnation practices resulting lower consumer prices disfavored, Matsushita Elec. Industrial Zenith Radio 475 574, 594, 106 1348, 1359-1360, 89 538, finds difficult maintain vertically-imposed could harm consumers competition extent necessary justify invalidation theoretical justifications its rule interfere dealer freedom, restrict dealers' ability offer essential desired services, channel distribution through large specially-advantaged dealers, disguise minimum schemes been abundantly criticized can be appropriately recognized punished reason. Not only serious imagined, other courts scholars noted fact exacerbate problems related unrestrained exercise market power monopolist-dealers. For these reasons, because irrelevant ongoing Act enforcement, see Copperweld Independence Tube 467 752, 777, 25, 104 2731, 2744-2745, 81 628, apparently no cases enforcement efforts directed solely against conduct condemned Albrecht, insufficient economic justification arguments favor elimination should require persuasive, expert testimony establishing has distorted market, retention compelled Toolson New York Yankees, 346 356, 74 78, 98 64, Flood Kuhn, 407 258, 92 2099, 32 728 (1972) unavailing. (c) does not deserve respect doctrine stare decisis. Stare decisis an inexorable command, particularly area law, where competing interest recognizing adapting changed circumstances lessons accumulated experience. National Soc. Professional Engineers 435 679, 688, 1355, 1363-1364, 55 637. Accordingly, reconsidered construing where, here, those called into question. 568. Because widely since inception, views underlying eroded precedent, much decision salvage. Neal 516 284, 295, 116 763, 769, 133 709. In overruling hold all lawful, simply evaluated reason, effectively identify situations amounts conduct. question whether entitled recover damages light reviewed first instance. F.3d 1358, vacated remanded. O'CONNOR, J., delivered opinion unanimous Court. 1 John Baumgartner argued Petitioner. Joel I. Klein amicus curiae. 3 Anthony S. Divincenzo Respondents. 4 Pamela J. Harbour 5 Justice O'CONNOR 6 Under Act, 26 Stat. 209, amended, 15 U.S.C. §1, " [e]very contract, combination . , conspiracy, restraint trade'' illegal. violation statute. case, we asked reconsider subsequent We conclude 7 Respondents, Barkat his corporation, petitioner, Company, convenience store owned Oil. obtain station's supply margin 3.25 cents gallon. agreement, charge amount sold customers, was higher Oil's rebated Respondents sell cents-per-gallon 8 About year after began operating station, payments. then gave notice intent terminate state proceeding evict respondents. At request, appointed receiver station. operated several months without being subject respondents' According respondents, obtained overall gallon regular-grade premium grades. 9 sued Illinois, engaged prices. complaint, different based grades gasoline, same way had, thereby achieving increased profits. responded did actually prevent setting substance, allege laws claim optimal. 10 found allegations complaint establish sort "manifestly implications effect competition'' prohibition App. 43-44. Subsequently, ruling cross-motions judgment, concluded failed demonstrate injury competition. Pet. Cert. 37a. shown difference pricing sales; nor provisions affected market. Id., 37a, 40a. claim. 11 reversed. 1358 (1996). between indeed fix making "worthless'' exceed 1360. reviewing legal aspects fixing, scheme supra. decisions'' Court, F.3d, 1363. 109 333 (1990) (ARCO), suffered able adjust 12 granted certiorari consider two questions, constitutes 519 ---- (1997). II terms, prohibits every "in trade,'' long Congress intended outlaw unreasonable restraints. 48 (1982) (citing Joint Traffic Assn., 171 505, 43 259 (1898)). As consequence, according finder must decide questioned practice imposes taking account variety including specific information about business, condition before imposed, restraint's history, nature, effect. U.S., 2472, Board Trade Chicago 246 231, 238, 38 242, 243-244, 62 683 (1918)). 14 Some restraints, however, se. 545 (1958). Per treatment appropriate [o]nce experience particular kind enables predict confidence reason will condemn it.'' 344, 2473; also Broadcast Music, Columbia Broadcasting System, 441 19, 33, 1551, 1562 60 (1979). Thus, expressed reluctance adopt rules regard "restraints imposed context business relationships impact certain immediately obvious.'' FTC Indiana Federation Dentists, 476 447, 458-459, 2009, 2018, 90 445 (1986). leading up beyond our assessment established Albrecht. Beginning Dr. Miles D. Park Sons 220 373, 31 376, 502 (1911), illegality agreements manufacturers suppliers distributors. By 1940, broadly declared combinations "formed raising, depressing, pegging, stabilizing commodity interstate foreign commerce'' Socony-Vacuum 310 150, 223, 811, 844, 84 1129 (1940). affiliated liquor distillers limit retailers (1951), noting "no cripple freedom traders restrain accordance own judgment.'' 260. 16 cases, attention turned arrangements dealers matters price. White Motor 372 253, 83 696, 738 (1963), considered manufacturer's assignment exclusive territories distributors dealers. determined too little known competitive limitations warrant treating unlawful. 263, 702. Four years later, (1967), status upon transfer title goods distributor, supplier's imposition territorial distributor "so obviously destructive constitute 379, 1865-1866. Schwinn, acknowledged restrictions, conferral rights franchises, benefits allowing smaller enterprises compete, might avert integration process. drew line, permitting control product marketing once dominion over passed 380, 1866. 17 decided following Term, involved newspaper publisher who independent carriers adherence newspapers public. Influenced Socony-Vacuum, Kiefer-Stewart, newspapers. 872-874. [m]aximum may consequences many situations,'' nonetheless "substituting perhaps erroneous seller forces market.'' 152, 873. animated fear allow discriminate services afford schemes. 152-153, rejected notion (both record case abstract) "granted territories, ceiling public gouging monopoly territories.'' 153, 873-874. vigorous dissent, Harlan asserted majority erred equating 156-168, 874-881 (Harlan, dissenting). pointed out rule, proper inquiry "not dictation ever illegal, always illegal.'' 165-166, 880. He faulted conclusively listing "certain unfortunate cases,'' even evidence publisher's counteracted potentially actions 165, 879-880. Stewart dissented, asserting properly viewed promoting protected who, "the person home delivery city's daily morning newspaper,'' "a monopolist within territory.'' 168, 881 (Stewart, 20 Nine (1977), overruled rejecting application restrictions. principle decisis, explained need clarification law justified reconsideration Schwinn: 21 "Since announcement, controversy confusion, both scholarly journals courts. great weight critical decision, confronted analogous sought reach. view, past bear commercial importance.'' 2556-2557 (footnotes omitted). 22 historical Schwinn's came four refused endorse similar neither "sudden change position,'' referred accepted requirements violations forth 51-52, 2558-2559. works supporting utility See id., 54-57, 2559-2561 (citing, Posner, Antitrust Policy Court: An Analysis Restricted Distribution, Horizontal Merger Potential Competition Decisions, 75 Colum.L.Rev. 282 (1975); Preston, Restrictive Distribution Arrangements: Economic Public Standards, 30 Law Contemp. Prob. 506 (1965)). "departure standard demonstrable rather formalistic line drawing,'' course "to return governed prior Schwinn.'' Sylvania, 2562. 23 declined comment issue "involve[d] significantly questions analysis policy.'' 51, 2558, 18. Subsequent Sylvania. generally defensible horizontal And 723-24, (1987), "recognize possibility single manufacturer wholesaler stimulate reduces intrabrand competition.'' 24 Most recently, ARCO, (1990), although squarely disfavor signaled statement "assume, arguendo, correctly vertical, rule.'' 1889, 5. More significantly, specifically "may effects,'' wake [t]he evident decided, 1968.'' commentators identifying including, P. Areeda H. Hovenkamp, ¶340.30b, p. 378, (1988 Supp.); Blair Harrison, Rethinking Injury, 42 Vand. L.Rev. 1539, 1553 (1989); Easterbrook, Maximum Price Fixing, Chi. 886, 887-890 (1981)). B 25 informed decisions, well Our 1520-1521, 808 (1988). "Low prices,'' explained, "benefit regardless how set, so above predatory levels, do threaten 340, 1892. interpretation incorporates "especially costly'' "cutting order increase often very essence 1360, 538 So informed, find invalidation. Chief Judge Posner wrote case: 27 "As unless supplier monopsonist he cannot squeeze margins level; attempt just drive arms supplier. might, exploiting position [S]uppose encourage spaced sufficiently far apart among (or given each territory); suppose further Union 76 distinctive popular brand give least modicum power. Then want place fully. It disinterested malice, self-interest. resold, volume sold, snared dealer.'' 1362. 28 Bork, Paradox 281-282 (1978) ("There could, course, anticonsumer [the type Albrecht], one suspects paper legitimate keeping subscriber down circulation maximize revenues advertising''). 29 recognize presented But criticism premises abounds. grounded freedom. 872-873. response, commentator out, ban name "dealer freedom' prompted integrate forward distribution, thus eliminating trader whom professed solicitude.'' Areeda, Law, ¶1635, 395 (1989). example, industry rise litigation publishers. ¶729.7, pp. 599-614 (1996 Supp.). concern low services. conduct, driving away seem likely consumers, unlikely matter judgment. Lopatka, Stephen Breyer Modern Antitrust: Snug Fit, 40 Bull. (1995); Lang, ARCO: Resale Fixing Moves Toward Rule Reason, 44 1007, 1034 (1991). addition, unclear, limiting excluding 905-908. Further, viability inefficient consequence necessarily harmful consumers. 907; 60. Finally, reflected used 873-874, remain mask pricing, believe concerns articulated L.Rev., 901-904; Pitofsky, Defense Discounters: No-Frills Case Se Against Vertical Geo. L.J. 1487, 1490, (1983). injuries cited therein Indeed, manufacturers. Caribe BMW, Bayerische Motoren Werke Aktiengesellschaft, 745, 753 (C.A.1 1994) (Breyer, C. J.); ¶1636a, 395; G. Mathewson Winter, Exchange 13-14 (1985). Other deleterious because, now likelihood increased. 890, 20; 13. intend suggest possess sufficient exploit situation. Such uncommon. Electronics, 727, 2, 1521, 2; 54, 2559-2560. Nor inevitably context. 33 reconsidering rationale substantial received, That accept assumptions relevance 2745, 628 (1984). Moreover, parties amici curiae encompassed 34 argue "persuasive, Brief 7. Their reasoning ignores itself relied hypothetical dire predictions borne though appear fashioned get around circumstances, not, it, rule's elimination, lacks adequate justification. 2561-2562. 35 reliance 64 (1953) (per curiam), (1972), similarly misplaced, clearly inapposite, having exemption professional baseball, described "an aberration rest[ing] recognition acceptance baseball's unique characteristics needs,'' 282, 2112. infer meaning reacted legislatively event, history various legislative proposals regarding seems support denounce free seek protection embodied Marketing Practices 322, §2801 et seq. reasons noted, remedy dispute come form affecting entire marketplace. C 36 Despite what aptly "infirmities, [and] increasingly wobbly, moth-eaten foundations,'' 1363, remains deserves correct applying despite disagreement prerogative alone overrule precedents. 37 approach utmost caution. reflects policy important applicable settled right.''' Agostini Felton, 521 ----, 117 1997, 2016, 138 391 (1997) (quoting Burnet Coronado Gas 285 393, 406, 52 443, 815 (1932) (Brandeis, dissenting)). "is preferred promotes evenhanded, predictable, consistent development principles, fosters judicial contributes actual perceived integrity process.'' Payne Tennessee, 501 827, 111 2597, 2609, 115 720 This involving statutory interpretation, Illinois Brick 431 736, 2061, 2069-2070, 707 acme property contract rights, Payne, 828, 2609-2611. Both arguably case. [s]tare command.'' Ibid. interest, well-represented presumption changes left force "expected shape statute's broad mandate drawing common-law tradition.'' 637 (1978). term "restraint "invokes common itself, merely static content assigned 1890.'' 732, 1523-1524; 53, 21, 2559, 21; McNally 483 350, 372-373, 2875, 2888-2889, 292 (1987) (Stevens, 2744-2745; 2556-2557; Tigner Texas, 141, 147, 879, 881-882, 1124 39 "lightly assume realities earlier changed, perceptions error,'' "different sorts agreements'' varying times circumstances,'' [i]t make sense create trade' chronologically schizoid statute, reason' evolves new wisdom, forever fixed was.'' 731-732, 1524. Just confusion'' "great weight'' criticism, 47-48, inception. With 709 (1996); Patterson McLean Credit Union, 491 164, 173, 2363, 2370-2371, 105 132 Rodriguez de Quijas Shearson/ American Express, 490 477, 480-481, 1917, 1919-1920, 526 time, undertake requires considering ""the distributional economy today.''' 392, 1872 concurring dissenting part)). 336, 6, another "confronted unadulterated maximum-price-fixing arrangement.'' Now confront directly, conceptual foundations gravely weakened. 41 lawful. Instead, like laws, rule-of-reason There district judge right applicable, loses,'' 1362, consideration premised therefore vacate remand proceedings opinion. ordered. syllabus prepared Reporter Decisions reader. Detroit Timber Lumber 200 321, 337, 287, 50 499.

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