Source: https://www.legalcrystal.com/case/100914/simpson-vs-union-oil-co-california
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Simpson Vs Union Oil Co of California - Citation 100914 - Court Judgment | LegalCrystal
Simpson Vs. Union Oil Co. of California - Court Judgment
LegalCrystal Citation legalcrystal.com/100914
Case Number 377 U.S. 13
Respondent Union Oil Co. of California
simpson v. union oil co. of california - 377 u.s. 13 (1964) u.s. supreme court simpson v. union oil co. of california, 377 u.s. 13 (1964) simpson v. union oil co. of california no. 87 argued january 15-16, 1964 decided april 20, 1964 377 u.s. 13 certiorari to the united states court of appeals for the ninth circuit syllabus respondent oil company supplies gasoline in eight western states to numerous retailers, including petitioner, who lease outlets from respondent and enter into a "consignment" agreement under which respondent retains "title" to the gasoline until sold, pays property taxes thereon, and fixes the selling price therefor. petitioner is compensated by a minimum commission, assumes operating costs and.....
Simpson v. Union Oil Co. of California - 377 U.S. 13 (1964)
U.S. Supreme Court Simpson v. Union Oil Co. of California, 377 U.S. 13 (1964)
Held: Resale price maintenance through a coercive type of "consignment" agreement like that involved here violates the antitrust laws, causing petitioner to suffer actionable wrong or damage. Pp. 377 U. S. 14 -25.
(a) The "consignment" agreement and lease injure interstate commerce by depriving independent dealers of the exercise of free judgment whether to become consignees at all or remain consignees, and to sell at competitive prices. That the retailer can refuse to deal cannot under these circumstances immunize the supplier from the antitrust laws. P. 377 U. S. 16 .
(b) An actionable wrong results whenever the restraint of trade or monopolistic practice has an impact on the market; and it is irrelevant that the complainant is only one merchant, or that, on respondent's failure to renew his lease, another dealer may take his place. Pp. 377 U. S. 16 -17.
(c) A supplier may not use a coercive device, whether in the form of an agreement used coercively, or in any other form, to achieve resale price maintenance. United States v. Parke, Davis & Co., 362 U. S. 29 , followed. P. 377 U. S. 17 .
(d) A consignment, however lawful as a matter of private contract law, must yield to federal antitrust policy. P. 377 U. S. 18 .
(e) The antitrust laws prevent the fixing of prices through many retail outlets by the "consignment" device. United States v. General Electric Co., 272 U. S. 476 , distinguished. Pp. 377 U. S. 21 -24.
(f) Although the issue of resale price maintenance under the Sherman Act is resolved here, the case must be remanded for a hearing on the other issues, including those raised under the McGuire Act and the damages, if any, suffered. P. 377 U. S. 24 .
(g) The question is reserved whether there may be equities that would warrant only prospective application in damage suits of the rule governing price-fixing by the "consignment" device which this Court now announces. P. 377 U. S. 25 .
The retail price fixed by the company for the gasoline during the period in question was 29.9 cents per gallon; and Simpson, despite the company's demand that he adhere to the authorized price, sold it at 27.9 cents, allegedly to meet a competitive price. Solely because Simpson sold gasoline below the fixed price, Union Oil refused to renew the lease; termination of the "consignment" agreement ensued; and this suit was filed. The terms of the lease and "consignment" agreement are not in dispute, nor the method of their application in this case. The interstate character of Union Oil's business is conceded, as is the extensive use by it of the lease-consignment agreement in eight western States. [ Footnote 1 ]
There is actionable wrong whenever the restraint of trade or monopolistic practice has an impact on the market; and it matters not that the complainant may be only one merchant. See Klor's Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207 , 359 U. S. 213 ; Radiant Burners, Inc. v. Peoples Gas Co., 364 U. S. 656 , 364 U. S. 660 . As we stated in Radovich v. National Football League, 352 U. S. 445 , 352 U. S. 453 -454:
The fact that, on failure to renew a lease, another dealer takes Simpson's place and renders the same service to the public is no more an answer here than it was in Poller v. Columbia Broadcasting System, 368 U. S. 464 , 368 U. S. 473 . For Congress, not the oil distributor, is the arbiter of the public interest; and Congress has closely patrolled price-fixing, whether effected through resale price maintenance agreements or otherwise. [ Footnote 2 ] The exclusive requirements contracts struck down in Standard Oil Co. v. United States, 337 U. S. 293 , were not saved because dealers need not have agreed to them, but could have gone elsewhere. If that were a defense, a supplier could regiment thousands of otherwise competitive dealers in resale price maintenance programs merely by fear of nonrenewal of short-term leases.
We made clear in United States v. Parke, Davis & Co., 362 U. S. 29 , that a supplier may not use coercion on its retail outlets to achieve resale price maintenance. We reiterate that view, adding that it matters not what the coercive device is. United States v. Colgate, 250 U. S. 300 , as explained in Parke, Davis, 362 U.S. at 362 U. S. 37 , was a case where there was assumed to be no agreement to maintain retail prices. Here, we have such an agreement; it is used coercively, and it promises to be equally, if not more, effective in maintaining gasoline prices than were the Parke, Davis techniques in fixing monopoly prices on drugs.
Consignments perform an important function in trade and commerce, and their integrity has been recognized by many courts, including this one. See Ludvigh v. American Woolen Co., 231 U. S. 522 . Yet consignments, though useful in allocating risks between the parties and determining their rights inter se, do not necessarily control
the rights of others, whether they be creditors or sovereigns. Thus, the device has been extensively regulated by the States. 22 Am.Jur., Factors, § 8; Hartford Indemnity Co. v. Illinois, 298 U. S. 155 . Congress, too, has entered parts of the field, establishing by the Act of June 10, 1930, 46 Stat. 531, as amended, 7 U.S.C. § 499a et seq., a pervasive system of control over commission merchants dealing in perishable agricultural commodities.
One who sends a rug or a painting or other work of art to a merchant or a gallery for sale at a minimum price can, of course, hold the consignee to the bargain. A retail merchant may, indeed, have inventory on consignment, the terms of which bind the parties inter se. Yet the consignor does not always prevail over creditors in case of bankruptcy, where a recording statute or a "traders act" or a "sign statute" is in effect. 4 Collier, Bankruptcy (14th ed.), pp. 1090-1097, 1484-1486. The interests of the Government also frequently override agreements that private parties make. Here, we have an antitrust policy expressed in Acts of Congress. Accordingly, a consignment, no matter how lawful it might be as a matter of private contract law, must give way before the federal antitrust policy. Thus, a consignment is not allowed to be used as a cloak to avoid § 3 of the Clayton Act. See Standard Fashion Co. v. Magrane-Houston Co., 258 U. S. 346 , 258 U. S. 353 -356; cf. Straus v. Victor Talking Mach. Co., 243 U. S. 490 , 243 U. S. 500 -501. Nor does § 1 of the Sherman Act Tolerate agreements for retail price maintenance. See United States v. Socony-Vacuum Oil Co., 310 U. S. 150 , 310 U. S. 221 -222; United States v. Parke, Davis & Co., supra.
We are enlightened on present-day marketing methods by recent congressional investigations. In the automobile field, the price is "the manufacturer's suggested retail price," [ Footnote 3 ] not a price coercively exacted; nor do automobiles
go on consignment; they are sold. [ Footnote 4 ] Resale price maintenance of gasoline through the "consignment" device is increasing. [ Footnote 5 ] The "consignment" device in the gasoline field is used for resale price maintenance. The theory and practice of gasoline price-fixing in vogue under the "consignment" agreement has been well exposed by Congress. A Union Oil official, in recent testimony before a House Committee on Small Business, explained the price mechanism:
"Mr. RATH. Yes. We do it on this basis: you see, he is paid a commission to sell these products for us. Now, we go out into the market area and find out what the competitive major price is, what that level is, and we set our house-brand price at that. [ Footnote 6 ] "
Dealers like Simpson are independent businessmen, and they have all or most of the indicia of entrepreneurs, except for price-fixing. The risk of loss of the gasoline is on them, apart from acts of God. Their return is affected by the rise and fall in the market price, their commissions declining as retail prices drop. [ Footnote 7 ] Practically
As we have said, an owner of an article may send it to a dealer, who may, in turn, undertake to sell it only at a price determined by the owner. There is nothing illegal about that arrangement. When, however, a "consignment" device is used to cover a vast gasoline distribution system, fixing prices through many retail outlets, the antitrust laws prevent calling the "consignment" an agency, [ Footnote 8 ] for then the end result of United States v. Socony-Vacuum
Oil Co., supra, would be avoided merely by clever manipulation of words, not by differences in substance. The present, coercive "consignment" device, if successful against challenge under the antitrust laws, furnishes a wooden formula for administering prices on a vast scale. [ Footnote 9 ]
Reliance is placed on United States v. General Electric Co., 272 U. S. 476 , where a consignment arrangement was utilized to market patented articles. Union Oil correctly argues that the consignment in that case somewhat
parallels the one in the instant case. [ Footnote 10 ] The Court in the General Electric case did not restrict its ruling to patented articles; it, indeed, said that the use of the consignment device was available to the owners of articles "patented or otherwise." Id. at 272 U. S. 488 . But whatever may be said of the General Electric case on its special facts, involving patents, it is not apposite to the special facts here.
Id. at 272 U. S. 489 . Congress in establishing the patent system included 35 U.S.C. § 154, which provides, in part:
Adams v. Burke, 17 Wall. 453, 84 U. S. 456 . Long prior to the General Electric case, price-fixing in the marketing of patented articles had been condoned ( Bement & Sons v. National Harrow Co., 186 U. S. 70 ), provided it did not extend to sales by purchasers of the patented articles. Adams v. Burke, supra; Ethyl Gasoline Corp. v. United States, 309 U. S. 436 .
The patent laws which give a 17-year monopoly on "making, using, or selling the invention" are in pari materia with the antitrust laws, and modify them pro tanto. That was the ratio decidendi of the General Electric case. See 272 U.S. at 272 U. S. 485 . We decline the invitation to extend it.
To allow Union Oil to achieve price-fixing in this vast distribution system through this "consignment" device would be to make legality for antitrust purposes turn on clever draftsmanship. We refuse to let a matter so vital to a competitive system rest on such easy manipulation. Cf. United States v. Masonite Corp., 316 U. S. 265 , 316 U. S. 280 .
See the McGuire Act, 66 Stat. 631, 15 U.S.C. § 45; the Miller-Tydings Act, 50 Stat. 693, 15 U.S.C. § 1; United States v. Socony-Vacuum Oil Co., 310 U. S. 150 .
The basic agreement in force during most of the period when Simpson was a consignee provided that his commission was 1 1/2˘ per gallon more than the amount by which the price at which the company "authorized" him to sell exceeded a posted "tank wagon" price applicable to those gallons. However, if the "authorized" price fell below a posted "minimum retail" price, the commission was reduced by 50% of the difference between "minimum retail" and "authorized" retail. In no event could the commission be less than 5.95˘ for regular and 5.75˘ for ethyl.
We do not necessarily disagree with the Court that "resale price maintenance through the present, coercive type of "consignment" agreement is illegal under the antitrust laws, and that petitioner suffered actionable wrong or damage." We think, however, that the Court should not decide that question, either as to fact or law, on the record upon which this summary judgment was entered. Since the decision may be expected to affect consignment agreements in many businesses, including outstanding agreements that may have been entered into in reliance upon United States v. General Electric, 272 U. S. 476 , the Court ought not pronounce that judgment without the benefit of a trial of the question whether this is a "coercive type of "consignment" agreement," and without affording interested parties, including the Antitrust Division of the Department of Justice, an opportunity to express their views. We therefore agree with MR. JUSTICE STEWART, and would vacate the judgment of the Court of Appeals and remand this case to the District Court for a plenary trial of all the issues.
trial on the merits. Poller v. Columbia Broadcasting System, 368 U. S. 464 . But I think that, upon remand, there should be a full trial of all the issues in this litigation, because I completely disagree with the Court that whenever a bona fide consignor, employing numerous agents, sets the price at which his property is to be sold, "the antitrust laws prevent calling the consignment' an agency," and transform the consignment into a sale. In the present posture of this case, such a determination, overruling as it does a doctrine which has stood unquestioned for almost 40 years, is unwarranted, unnecessary and premature.
In United States v. General Electric, 272 U. S. 476 , this Court held that a bona fide consignment agreement of this kind does not violate the Sherman Act. The Court today concedes that "the consignment in that case somewhat parallels the one in the instant case." The fact of the matter is, so far as the record now before us discloses, the two agreements are virtually indistinguishable. [ Footnote 2/1 ] Instead of expressly overruling General Electric,
that case that bona fide consignment agreements do not violate the antitrust laws, "however comprehensive as a mass or whole in their effect. . . ." Id. at 272 U. S. 488 . In addition to the unambiguous statement in Chief Justice Taft's opinion for a unanimous Court that
272 U.S. at 272 U. S. 488 , the Court, throughout that portion of its opinion dealing with the validity of General Electric's consignment agreements, gave no information whatsoever that its conclusion would have differed in any respect if the consigned article had been unpatented. Quite the contrary, the General Electric Court, assessing the validity of these agreements, addressed itself to but one question:
272 U.S. at 272 U. S. 483 -484.
To answer that question, the Court examined the operative provisions of the consignment agreement to determine whether the agreement created a valid agency or whether, in fact, title effectively passed to the so-called consignee. Id. at 272 U. S. 483 -488. If the latter were the case, the price-fixing requirement would have made the agreement nothing more than a resale price maintenance scheme, unlawful under the antitrust laws, cf. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 , regardless of whether or not the article sold was patented. Similarly, if the agreement created a bona fide agency, the consignment would be valid under the antitrust laws, again regardless of whether or not the article consigned were patented.
Possession of patent rights on the article allegedly consigned has no legal significance to an inquiry directed to ascertaining whether the burdens, risks, and rights of ownership actually remain with the principal or have passed to his agent. Nor is the power of a consignor to fix the prices at which his consignee sells augmented in any respect by the possession of a patent on the goods so consigned. It is not by virtue of a patent monopoly that a bona fide consignor may control the price at which his consignee sells; his control over price flows from the simple fact that the owner of goods, so long as he remains the owner, has the unquestioned right to determine the price at which he will sell them. [ Footnote 2/2 ]
It is clear, therefore, that the Court today overrules General Electric. It does so even though the validity of that decision was not challenged in the briefs or in oral argument in this case. I should have thought that a decision of such impact and magnitude could properly be reached only after careful consideration of all relevant considerations, and preferably by a full Court. [ Footnote 2/3 ] Today's upsetting decision carries with it the most severe consequences to a large sector of the private economy. We cannot be blind to the fact that commercial arrangements throughout our economy are shaped in reliance upon this Court's decisions elaborating the reach of the antitrust
If the record now before us actually required reexamination of the General Electric case, I think that, in view of the serious considerations which I have mentioned, we should set this case for reargument and invite the Justice Department to express its views. [ Footnote 2/4 ] But the fact is that, in the present posture of this case, this broad issue need not be decided. The record upon which the District Court entered its summary judgment is wholly inadequate to support a realistic assessment of the actual nature and effect of the so-called "lease and consignment" agreement here involved. As the Court of Appeals pointed out,
After a trial on the merits it may be determined that the scheme here involved, although on its face a bona fide lease and consignment agreement, was, in actual operation and effect, a system of resale price maintenance. [ Footnote 2/5 ] Or the District Court, after a trial, might find that, despite the formal provisions of the lease and consignment agreement, there actually existed here some coercive arrangement otherwise violative of the antitrust laws. In either event, the question of the petitioner's damages would then become an issue to be determined. Only if all these issues, and perhaps others, were resolved in favor of the respondent would there be presented the question of the continuing validity of the General Electric doctrine. Consequently, reexamination of that case should certainly await another day.
The Court implies that the terms of this agreement providing that the consignee must carry personal liability and property damage insurance; that the consignee is responsible for losses of consigned gasoline incurred in the ordinary course of events; and that the consignee must pay his own costs of operation, are inconsistent with a valid consignment agreement. But such provisions are common to consignment agreements. They merely illustrate the well recognized fact that these retail gasoline dealers are both independent businessmen and agents. A consignee is commonly defined as one who, "in the pursuit of an independent calling," is engaged by another as his agent to sell property. See, e.g., Calif.Civil Code § 2026. Consequently, it is not at all surprising for a consignment agreement to provide both that a consignee bear the expenses of conducting his own business and that he be responsible for loss or damage to the goods occurring in the ordinary course of business. The Court in General Electric explicitly found such provisions unobjectionable, 272 U.S. at 272 U. S. 484 -485, and further observed that a provision placing the burden of risk of loss or damage to goods on the consignee "is only a reasonable provision to secure [the consignee's] careful handling of the goods entrusted to him." Id. at 272 U. S. 484 . Nor is the requirement that Simpson carry property damage and personal liability insurance of significance. Such a provision serves the reasonable purpose of protecting the consignor from responsibility (which might be imputed by virtue of the agency relationship) for liabilities incurred by Simpson arising out of or in connection with Simpson's business.
The Department's views are not known, because they have not been sought. Indeed, had they been sought, there is a substantial possibility, in light of the Department's recognition and tacit validation of consignment selling under the 1959 consent decree entered against the large West Coast oil companies, United States v. Standard Oil Co. of California, 1959 Trade Cases Ś 69,399, p. 75,522 et seq., that the Government would have taken the position that the rule of General Electric should be left undisturbed.