Earl Warren: Number 87, Richard S. Simpson, Petitioner, versus Union Oil of California. Mr. Lasky you may continue your argument.
Moses Lasky: Mr. Chief Justice, may it please the Court. Shortly before the adjournment yesterday, Mr. Justice White asked me some questions about the numbers of stations and summed up the figures and I affirmed them. Now to be sure that I did not misunderstand I am going to state just what the figures are. The reference to the record is pages 333 and 334. The total number of stations selling Union’s branded gasoline in California is 2,377. Of this number in 1,335 Union has some sort of possessory interest, either the fee or the master lease and of this 1,335 stations all but three are consignee stations, the lessee is a consignee. Now of the 2,377 total stations, in 1,030; slightly less than half Union has no possessory interest of any kind whatsoever. They are owned by other parties unconnected with any refinery, and of the 1,030 stations in which Union has no possessory interest, approximately 80% are also consignees, that is to say these 80% who have no landlord-tenant relationship to Union have chosen and preferred to be consignees instead of buying and selling and this reminds me again of the remarks made by the District Court in the West Coast Oil case when he summed up the situation, that this vast number indicates that they would prefer the security of a consignment system to the rough and tumble of being merchants buying and selling. Yesterday I but briefly indicated a statement that the Union Oil Company had not in fact violated the antitrust laws or any part of them in any respect whatsoever and I had submitted to the Court that the basic question there, the basic attack of the plaintiff, the petitioner, the fundamental one was his consignment in which the consignor determines the price at which the consignee is to sell the consignor’s gasoline is that price fixing, illegal price fixing agreement? And I submit it was not because one does not violate the law on determining the price at which his own property is to be sold. And I therefore submitted that cases like the Masonite case are not in point because Masonite was a horizontal conspiracy and of course we have no questions at all about the illegality of any kind of horizontal conspiracy about price, nor I submit were the resale price maintenance cases have any bearing here, holding vertical price fixing illegal because there was no sale and resale, although I also submitted that if this were a sale and a resale, the California Fair Trade Act and the McGuire Act would also legalize the transactions.
Byron R. White: (Inaudible)
Moses Lasky: If not consignment, yes Your Honor. If it were sale and resale and wasn’t in a state that had a Fair Trade Act, I don’t doubt its illegality.
Byron R. White: (Inaudible)
Moses Lasky: Yes.
Byron R. White: Whether or not the (Inaudible) California law insulates the kind of an operation you got hasn’t been determined in this record, has it?
Moses Lasky: No the Court of Appeals did not pass on it.
Byron R. White: It had never been an issue in the case.
Moses Lasky: Yes it was an issue in the case, but no court ever found it necessary to decide it. The District Court held that consignment was consignment and was legal and that there was no actionable damage and the Court of Appeals didn’t reach any of these questions of --
Byron R. White: But I'm just -- you suggest that even if this were a sale and a resale of California law and McGuire insulate it, but we couldn’t decide that here, we would have to send that back.
Moses Lasky: I think not if Your Honor please.
Byron R. White: Well we don’t know anything about -- this isn’t briefed here.
Moses Lasky: Yes it is, yes it’s briefed.
Byron R. White: But no court below has determined it.
Moses Lasky: No court below has determined it, but if I understand the law correctly when a case is before this Court, it can affirm upon any legal question that’s involved. Now all the facts upon the McGuire Act are here in the record and it was an issue in the motion for summary judgment, all the record was made and the laws, the law which the Court takes judicial notice. So unless I'm in error upon my understanding, if the judgment is correct upon any ground, it is correct and it had to be affirmed.
Byron R. White: Are the facts of the record that you have no owned station?
Moses Lasky: Yes, oh that’s in the record. Westway is a – number one on Westway there -- Westway is a subsidiary, the evidence is union has an interest in it and Westway has no stations except in Oregon and Washington and the Los Angeles area, nothing in the Fresno area. The record is clear on that also. Oh! No the record is quite complete.
Byron R. White: And Union has none of its own --
Moses Lasky: That’s right it has no station operated of its own. It only has 12 in California, of which in 11 are in Los Angeles area and one in San Francisco, and Fresno is about 200 miles from each of these places, no the record is quite complete on this.
William J. Brennan, Jr.: May I ask you Mr. Lasky --
Moses Lasky: Yes Your Honor.
William J. Brennan, Jr.: If this arrangement tantamount for a sale – for resale for purposes of the antitrust law, does it necessarily follow that it comes within the sections if that’s what they are, of the California Fair Trade Act?
Moses Lasky: Oh I think so absolutely, and for this reason. If this a sale or resale then you’ve got a contract --
William J. Brennan, Jr.: Well now I say my premise was that it’s the equivalent of a sale -- the resale for purposes of federal antitrust laws. Does it follow that is for the purposes of the California Fair Trade Act?
Moses Lasky: Well I must confess I have difficulty of seeing how it can be – it is either fish or flesh and it can't be something else. It's either consignment or it’s sale and if it’s sale it seems to me it comes exactly within the terms of the Fair Trade Act that a vendor can enter into a contract with his vendee determining his price. I've always taken the position though that it's just what it says it is consignment, and that’s what I'd like to present to the Court now.
Tom C. Clark: You (Inaudible) consignment (Inaudible) don’t you?
Moses Lasky: Pardon me.
Tom C. Clark: I say with the dealers you never mentioned the fair trade, did you?
Moses Lasky: The term fair trade was never mentioned to the dealers, but this itself would is not necessary because there is nothing in either the California Act or the McGuire Act decision which used some magic term fair trade, it says all you need to do is to enter into a contract with the buyer, fixing his price and this contract does it.
Tom C. Clark: (Inaudible) while you had to give notice.
Moses Lasky: Oh yes, but to -- that’s true, we have no question about non-signers here because the question is only could we bind our consignee and every consignee has signed this agreement, so we don’t have a non-signer problem here at all if the Court please.
Tom C. Clark: On the consignment I'm not sure I have all the facts. When a man like Simpson starts out, let’s say he just leased the station and you deliver your first tank of gasoline to him, what happens then?
Moses Lasky: Nothing at all, he gets the first tank of gasoline and he does not pay for it. Then when this is exhausted in whole or in part and another truck comes up replenishes it, he accounts for what he's already sold. So he never --
Tom C. Clark: He gives you a bond or any --
Moses Lasky: No.
Tom C. Clark: Escrow on the proceeds?
Moses Lasky: The proceeds -- the agreement provides that he must keep the proceeds separate.
Tom C. Clark: But on the first tank, why he doesn’t give you any escrow (Inaudible)
Moses Lasky: No he doesn’t. Now in this particular case, a man named, the record shows this, a man name Gregorian had been the prior lessee and when Mr. Gregorian left and Mr. Simpson came in, Mr. Simpson bought Gregorian’s tools and there was a stock of tires and accessories which Union had nothing to do it, and Union bought those and sold it to Mr. Simpson on a conditional sales contract, financed him, but upon the gasoline he testified, this is in my brief at page 57 and from 311 of the record about this very episode. Did pay buy the gasoline, but not gasoline? He says no, it didn’t include gasoline because it was on consignment, so he never paid for that. Now, I submit to the Court that the consignment question has been flatly ruled on by this Court in United States versus General Electric Company in 272 U.S. 476. There General Electric some years before had been subjected to a decree, enjoining it from a conspiracy to fix resale prices and thereafter it devised a consignment scheme and as shown by the opinion of this Court, it presented the scheme to the Attorney General for his approval or disapproval and as the Court notes in the opinion, received no reply of any kind whatsoever, but it put the plan into effect and this Court held the consignment was clearly legal. Now I call attention to that because in this Union’s consignment system has also been presented to the Attorney General and has been approved. I say that because in the West Coast Oil case where we hammered out a consent decree, that consent decree specifies that every refiner on the West Coast, every refiner defendant must gave to -- both a supply agreement and a lease and says the supply agreement maybe a consignment agreement or a purchase and sale agreement and it defines a consignee in the terms of the California Civil Code as an agent, who in the pursuit of an independent calling will sell the gasoline to the refiner at the prices specified by the refiner. Now the record also -- this case discloses something else. That decree in it's draft was clear to me, but to be sure that there was no misunderstanding with the Department of Justice, I wrote the Department of Justice a letter before I signed the consent on behalf of Union and asked if they construed it the same way and at page 330 of this record you will find a letter addressed to me from the Department of Justice saying that the provisions of that decree against resale price maintenance, and the decree went into effect I may say lay after, less or after Mr. Simpson was out of our station, says that, that of course does not apply to the consignor fixing the price at which his consignee may sell. So unlike General Electric, Union’s plan has been before the Department of Justice, has met with no objection, and has been held to be legal. Of course that’s not binding on the Court, but it does show what a law enforcement agency thinks of the matter.
Speaker: (Inaudible)
Moses Lasky: Your Honor that letter appears at 330 of the record. Now early this year in the State of California they finally reached -- the highest courts that had the question, appellate court, the question whether exactly this kind of consignment arrangement by a refiner violated the California antitrust law which of course is the same as the Sherman Act. And in the case Shasta Douglas Oil Company versus Work, the Court held that patently it did not, because the consignee is an agent and the consignor can set his prices. It is very interesting to observe that only a few months ago, the Uniform State Law Commissioners had attempted to draft a Uniform State Antitrust Law prepared and as pointed out in my brief at page 41, that draft makes it explicit, that consignment transactions have not been included because the principle is at liberty to control the price and other terms upon which his agent may dispose of his commodities or service. And in the famous Standard Oil versus United States in 337 U.S., the Standard Stations cases, there was as I recall the statements in the opinion and in a dissenting opinion that if exclusive dealing contracts were outlawed, the companies would very likely go back to owning their own stations and selling through their wage paid employees or through consignment, either scheme of which would be legal. Now I therefore enquire how is it that the counsel for Mr. Simpson contends that consignment has suddenly become illegal. I had thought until yesterday at about five minutes before counsel finished his argument, that he was turning it upon the fact that there not one consignee but a great many. That contention would not have been a sound contention, because exactly the same argument was made to this Court in the General Electric case. In the Court’s opinion it points out how the government had argued that there were so many, such a great number of stations consignees, 401 class and 22,000 in the other and this Court said it made no difference because the distinction between agency and purchaser, be it as clear both in law and in fact that of course if you stopped to observe, the number would make no difference because economically the same result would follow if Union took over these 1,300 consignee stations and put wage paid employees in. It would then control the direct retail distribution of 1,300 stations and counsel conceded in the Court below there would be nothing illegal about that. So the illegality, if there is any, cannot come in because there is more than one station. It would have to come in because it is consignment or not, and counsel as I understood in yesterday and a reply to a question by Mr. Justice White said his contention would be the same even though there was but one consignment. Now counsel’s next point of attack if I understand him correctly is purpose, our purpose he said was to fix price. Well at the time of the case heard below in order to eliminate all issues of fact I stipulated that, that was one of our purposes not that we could control a resale price, no, but so that we could control price at which our product was sold, but that’s irrelevant and let me quote to the Court from this Court’s decision in the General Electric case again. “The plan was of course devised for the purpose of enabling the company to deal directly with consumers and purchasers and doubtless was indented to avoid selling the lamps owned by the company to jobbers or dealers and prevent sale by these middlemen to consumers at different and competing prices.” That’s the quotation from the Court. Nevertheless this Court said it made no difference, because the distinction in law and in fact between agency and sale is clear. Now at the very close of the argument yesterday, Mr. Justice White asked me why we shifted, why Union shifted in 1955, and in the haste of the red light in front of me, I did not give a full answer. I mentioned McKesson & Robbins decision had some effect upon it. The story is this. There are of course advantages and disadvantages to each of the several merchandising methods available to a manufacturer, and he must make his choice, if he takes one he has some advantages and he has some disadvantages. Now another disadvantage of using middlemen, selling to them and having them resale in this business is, and this Court knows it very clearly certainly in view of the recent Sun Oil decision, the veritable host of problems and dilemmas you have under Robinson-Patman. Another is the fact that if you don’t sell through these stations as your agents, the quality of them can run down and they won’t give the proper service. Now in a Union station, they are in Union’s colors, this is where Union meets the public face-to-face, and to the public these stations are Union and Union’s reputation turns upon the kind of service it gets there and therefore the company has an interest in having something to say about those stations and of course if it sells through them and the resale it has nothing to say about them, except in a very remote kind of way. Now these disadvantages Union wanted to eliminate. They could have been eliminated by doing what Standard Oil does, put wage paid employees in, but there Union ran up against what it conceived to be another disadvantage. A wage paid employee has no stake in the community. He is not -- he has no incentive and Union felt that if it had consignees who received a commission they would have a status of businessmen in the community, they would have an incentive. Now Union’s merchandizing judgment may have been sound, may have been unsound in weighing these advantages, but it wasn’t I submit, illegal. There were advantages not only to Union, but of course there were advantages to the consignees and we come back to the fact that 80% of those who have no landlord or tenant relationship to Union still saw fit to be consignees. There are disadvantages, many disadvantages to Union. For example there was a decision rendered by an intermediate California Appellate Court last year that held Union liable for tort, personal injuries for the negligence of a consignee, because he was his agent. So it happened that the Supreme Court set aside that decision on the grounds that there was in that case no cause or relationship on the act of any defendant in the case, but this is the kind of risk we run and we take this risk and disadvantage in order to balance off the whole picture. More than that, not all the burdens which have been shifted from the dealer on to Union by virtue of the consignment arrangement, and this brings me directly to the question of whether is this consignment or is it sale. Counsel has contended it’s sale, but note this is a pure question of law, counsel has never said that he intended to prove or wanted to prove that this arrangement was something other and different than what it appeared to be on the face of the documents. He made clear from the very beginning that he was saying that on the face of the document he contended it was sale and one of the first pretrial conferences where we tried to delimit the issues, he said, “I say”, and I'm reading from 378 of the record, he says “I say there are two issues in this case on the issue of liability, number one the consignment agreement is unlawful on it’s face as a matter of law.” And this of course I would have no objection to presenting in a pretrial of partial summary judgment. The other issue he said was whether we had coerced him and I asked do you mean by coercion anymore than the fact that if you wanted our station you had to get it on the terms we offered and he says that’s all I mean, so I stipulated well those are the facts, if that’s coercion that’s coercion, which took that issue or fact out of the case.
Byron R. White: (Inaudible)
Moses Lasky: Pardon.
Byron R. White: I gather going back again on the assumption that this was a sale and a resale or equivalent thereto, you then said that now you might be in some trouble if this were a resale price maintenance fix, and assuming no insulation from California law.
Moses Lasky: Yes.
Byron R. White: But in that -- on such assumptions just there would be coercion, I mean it would violate the antitrust laws.
Moses Lasky: Oh let me state this. If this is not consignment, and if it is sale and resale, and if we don’t have the McGuire Act, I can’t see any answer to the conclusion that the agreement, the written agreement was illegal violation of the Sherman Act.
Byron R. White: And terminating his lease because he won’t live up to it is --
Moses Lasky: Not at all.
Byron R. White: Well that’s the issue --
Moses Lasky: That was the point I wished to submit yesterday. Sure we could then be prosecuted by the Attorney General criminally. We would be subject to a suit in equity by the Attorney General to enjoin us from continuing the progress.
Byron R. White: Yes.
Moses Lasky: But I tell the difference --
Byron R. White: This fellow is still you would argue had his eyes wide open, went into it himself, he could have breached the contract any time and make the same arguments you do with the consignment.
Moses Lasky: Exactly so. The identical argument I made yesterday. The argument I made yesterday went off on the assumption arguendo that the whole consignment arrangement was an illegal violation of the law and I did that upon the assumption that you’d call it a purchase and sale, because I can’t conceive how otherwise it could be illegal. That was the whole brunt of my argument yesterday if the Court pleases and that is the position the Court of Appeals took. They said assuming arguendo illegality, nevertheless the failure to get a new lease was not the result of that consignment agreement. It was that Union exercise it’s judgment when then tenure expired not to give them a new statements property
Arthur J. Goldberg: (Inaudible)
Moses Lasky: Yes Your Honor.
Arthur J. Goldberg: (Inaudible)
Moses Lasky: Not doubt about it, I stipulated it to that, in order to remove that from an issue of fact, there is no doubt about it. Then what do we have, we have a case where a man refuses to clearly on a course of conduct which it would be illegal to bind him to by agreement. This is the assumption, but I thought the Parke-Davis case certainly held so much that acting not in conspiracy with anybody else you could refuse to deal with a man even for that reason, and there’s a host of cases that have so held because the refusal to give him a new lease is still our unilateral decision. Now in a conspiracy case it isn’t the decision of the man who cuts them off, his decision becomes the decision of a group of conspirators, but absent conspiracy, absent monopoly, I submit that that is the law, that you can refuse to enter into future business relations with a man even though your reason for doing so is his refusal to go along with an illegal course of conduct.
Arthur J. Goldberg: (Inaudible)
Moses Lasky: I submit not, I think clearly of course a man could not in the first instance come in and say I want that lease and you’ve got to give it to me because your refusal is based upon my refusal to be a consignee. But as I submitted yesterday he now enters into the agreement and then the day after he says I enter into it he breaches it and by this welshing upon the deal, even though the deal is illegal he gives himself some kind of tenure beyond the scope of state law which otherwise he did not have. Now this is certainly a curious logical result. It comes back -- yes Your Honor.
William J. Brennan, Jr.: (Inaudible) Parke-Davis, that fact now that a refusal to deal because purchaser wouldn’t violate the antitrust laws, is that right?
Moses Lasky: Your Honor wrote that opinion and you know better than I what you had in mind, but I certainly so read it. I understand Parke-Davis to do this. The question there was whether there was a conduct, this was a suit by the United States, no question of whether it caused damage, the sole question was legality or illegality of conduct. And I thought that what the Court did is to draw a line of demarcation and said that if you announce a policy that you expect that you -- price policy among other things, that you expect your dealers to follow and they don’t follow it and you cut them off, that’s unilateral conduct and does not violate the law. If you go beyond it, the facts may be the basis of inferring a conspiracy.
William J. Brennan, Jr.: Yes, but I thought you were arguing this on the premise here as to the people with the deal would be, because he refused to sign an agreement which concededly would violate the antitrust law.
Moses Lasky: Yes Your Honor.
William J. Brennan, Jr.: Have you thought Parke-Davis at that point?
Moses Lasky: I certainly did, I certainly did.
William J. Brennan, Jr.: I’m surprised.
Moses Lasky: Well to that I can only reply if Your Honor please, I think the bar would be surprised to learn that Parke-Davis does not so hold, because you have granted. In this case you do not have to look at a lot of external circumstances to infer the existence of an agreement as you did in Parke-Davis. Here the agreement is expressed, explicit and in writing. That agreement is either legal because it’s consignment and because the McGuire Act protects it or it is illegal. This we don’t have any difficulties on this. If it is illegal, why doesn’t then vendor still have the right to say this is my real property, the estate that the gentlemen has, has expired, why do I have to give him a further tenure and the only answer would be, well because you have violated the law up to now. There is an additional penalty that you must now give this gentlemen, a conditional tenure that the state law does not entitle him to. Now if that is the law --
Byron R. White: (Inaudible) law you probably would have had a lease renewal?
Moses Lasky: Yes. For the purposes of this case I stipulated that the one -- the reason he did not have his lease renewed was that he had violated that agreement. Now I said there were other reasons and the trial court says, well why don’t simplify it, don’t you just rely on the one string to your bow and I did, that’s the state of the record before this Court. We did everything in our power to get this thing into a posture of a clean set of questions of law.
Speaker: (Inaudible)
Moses Lasky: Yes, Your Honor.
Hugo L. Black: (Inaudible) I suppose why did you have to wait on your argument until the lease expired, why didn’t you just cancel it?
Moses Lasky: We had no right under the lease to cancel it. It was a one year lease, absolute with the right in the lessee to cancel on 30 days notice, but no right in us to cancel. So we couldn’t do it.
Hugo L. Black: If you had had a right to cancel it in the contract, your argument would define a cancellation, the same as it does failure to renew it, is it not?
Moses Lasky: Well, I am inclined to think the logic of my argument would say so.
Speaker: (Inaudible)
Moses Lasky: It is not of course the situation in this case. We have no right to cancel. We made no effort to cancel. We waited till the normal term expired.
Speaker: (Inaudible) consignment in the record, they are part and parcel of the same (Inaudible)
Moses Lasky: They were signed concurrently. They are two different arguments, they were signed concurrently. The consignment provision agreement provides that it’ll run for a year and thereafter until cancelled and will also terminate whenever the lease should terminate.
Speaker: Getting that is something (Inaudible) Parke-Davis. Are you in a position because in addition to refusing to deal you cancel the lease or --
Moses Lasky: I think we are in a much better position.
Speaker: Why do you refuse to renew?
Moses Lasky: I think we are in a much better position. I think it’s always been said there is a basic right to a manufacturer that he doesn’t have to sell to anybody. Now even if, if that rule is eroded, if erosion has set in on that, I think it’s quite a different proposition to say that you’ve got to lease real property to a man, to give him a tenure. Now if Mr. Simpson owned his own service station, and we declined to deal with him further, then we’d have a pretty close to a Parke-Davis situation. But he didn’t own his service station and the question is can he get a lease and tenure of real property from us and I think that is an enormous jump from any distance that any court has yet seen fit to go on the erosion away of the old Colgate doctrine. Well the light is on so I submit that the judgment should be affirmed. Thank you.
Maxwell Keith: May it please the Court. I think the key phrase before the Court is in restraint of trade. I think it is clear throughout the decided decisions of this Court that the central question is purpose and effect, regardless of the form that is used, and this is to carry out congressional purpose that any form, any scheme, any device that restrains trade and cripples the liberty of individuals, is contrary to congressional statute. The purpose here was not to arrive at some form of business relationship in order to give the dealers all that Union could. The purpose is in the record, it was to control prices in a price war situation. The original thought here was that when the price war broke and ended that the consignment relationship would be ended and the dealers will be put back on purchase and sale. Later this was changed to make consignment a means to control prices, because the price war market was never -- had never ended and price wars continued throughout this period of time because of economic reasons.
Arthur J. Goldberg: (Inaudible) California Fair Trade Law --
Maxwell Keith: The effect is clear. There is a document in the record explaining how this plan was to work. Under statutory scheme you have to have uniform prices. Under this consignment arrangement Union Oil wanted to control prices at individual service stations without regard to a uniform price, which is a requirement of statutory scheme and of course as this Court pointed out in McKesson & Robbins either you follow the statutory scheme or you’re in per se violation of the Act. Now 256, it says we are going to end zoning pricing and we are going to where you find it necessary to partially meet, cut price activity in the part of our major competition the retail price maybe set for any service station handling our products under our consignment agreement at $0.01 per gallon over the price of house-brand gas of a major competitor that is posted at the major station inside of our service station. In other words, pricing is to be based upon what can been seen by a representative of United Oil Company as he tours the area and that is going to be a different price, then he cannot, then the service stations that he cannot see, in other words you might have a distance of five blocks and you have various prices. Now of course this is beyond the scope of any fair trade scheme.
William J. Brennan, Jr.: How do you answer Mr. Lasky’s article assuming this is a (Inaudible), based on the California Fair Trade Act and the McGuire Act, how do you answer that argument?
Maxwell Keith: That fair trade under statutory a scheme is limited to a uniform price, that is established for the trade. In other words, when you enter into fair trade program you tell the dealer we have a fair trade price and this is to be followed and the expectation is that every other dealer is going to charge that same price. Now they have an inside price program. In other words, prices are going to vary within a few blocks of each other. Now this is beyond, as I understand a fair trade, beyond statutory purpose.
Byron R. White: In Fresno?
Maxwell Keith: Yes in Fresno, we’ll find maybe 15 different prices in Fresno in a price war situation in the city. We have that all documented.
Byron R. White: And this is characteristic in fair trade laws, that unless you get the protection you asked for (Inaudible) people you are not bound legal?
Maxwell Keith: No, under -- if they had a fair trade program, virtually every dealer in Fresno will be charging the same price. The statutory scheme is a uniform price designed to protect the trademark. In other words, we -- the argument for fair trade and the statutory -- and the sanction of it by the courts is that as a trademark owner, we don’t want to have various prices, we don’t want to have the public think in terms of other than what price we establish, so that they have a uniform price to the public.
Byron R. White: (Inaudible) whether or not this system is or isn’t protected by the Californian regulation?
Maxwell Keith: No I would urge that McKesson & Robbins would preclude that because the answer, record 91 says we went off fair trade, we were on fair trade and then we went off, and they use consignment as the way of fixing price. Now if you don’t have one single dealer in the state knowing about fair trade, you cannot have a fair trade statute as a protection, as I understand the McKesson & Robbins decision.
Speaker: (Inaudible)
Maxwell Keith: The GE case of course is not the last word in consignment. The last word is Masonite from this Court and the last word is the Atlantic Refining Company case from the Federal Trade Commission.
Speaker: (Inaudible) if this question of consignment is going to be reexamined it ought to be done in a government case not a private (Inaudible)
Maxwell Keith: Well I -- of course I.
Speaker: I was wondering whether you have to go further, you have to get away from (Inaudible)
Maxwell Keith: Well if the government did attack consignment, then it has now established in two cases, the Atlantic Refining case and the Sun Oil case that consignment cannot be used as to means to control prices in a price war situation. So that the government has gone into this area and has ruled against the basic argument here, the consignment is some sort of a magic wand that protects price fixing.
Speaker: (Inaudible)
Maxwell Keith: No. There’s another Sun Oil case Your Honor, the Federal Trade Commission versus Sun Oil which was decided by the Federal Trade Commission in May of 1963 and there it has held that under Masonite when we have an obvious scheme to control prices. The facade of consignment is not going to protect the oil companies, that they have to really effectuate a true consignment situation which was not favorable -- was not before them.
Speaker: Well we have decided (Inaudible)
Maxwell Keith: Pardon me.
Speaker: This Court has decided (Inaudible)
Maxwell Keith: This Court has not held -- has not had a gasoline stations consignment program before. However, in Masonite it said that the form that is used is not determinative, that Masonite you will assume that there was a valid agency relationship, creditor-agency relationship and that the essential question is one of purpose and effect and that if the scheme or the device restrains interstate trade and commerce under congressional statute, that the scheme must be stricken. Now I submit that what Union Oil here is trying to do is get the best of all possible worlds. It is trying to have independent businessmen and control their prices as though they were their employees and yet it is not willing to treat them as employees and respond to state legislation with respect to employees, workmen compensation, unemployment insurance, social security and of course the federal NLRB statutes would interfere if these were agents. So it’s trying to get the best and I submit that under the Sherman Act, if these agents or these dealers are independent businessmen by a lease of Union Oil’s own creation, and that you cannot lease on condition that prices be fixed.
William J. Brennan, Jr.: (Inaudible) Parke-Davis, assuming that (Inaudible)
Maxwell Keith: Of course I have argued yesterday that the crux of this case is the means that are used, that you cannot utilize a short-term lease, plan to use a short-term lease as a means of controlling prices and this is a kind of a means that the Court stated in Parke-Davis could not be used, this not simple refusal to sell supplies. This is a destruction of a business that has been built-up by hard work and many hours of work each day.
Speaker: (Inaudible)
Maxwell Keith: The Fourth Circuit has answered that in the Osborn case, that you cannot use refusal to deal to form an arrangement of the type that is forbidden by the Sherman Act, that is price fixing, exclusive dealing and tie-in.
Speaker: Even though it’s unilateral?
Maxwell Keith: Even though it’s unilateral, you cannot use this unilateral refusal deal to establish the type or a kind of restraint that is traditionally prohibited by Sherman Act litigation.
Speaker: Would you think Colgate, the old Colgate doctrine is going down the drain?
Maxwell Keith: No I think that the courts --
Speaker: This must be under your view –
Maxwell Keith: No it’s a question of unlawful purpose. Now if the Court is faced with an unlawful purpose then Colgate cannot be used as defense and I would point out to the Court that before circuit in Osborn pointed out that, that Colgate is a defense usually in a conspiracy case and it is not to be used as a defense when you are talking about damages which flow from an illegal restraint or you talk about the use of the refusal to deal to perpetuate in unlawful kinds of conduct.
Speaker: (Inaudible)
Maxwell Keith: Your Honor I submitted to the Court statements and summary judgment claiming there was a conspiracy, that the effect of this arrangement was to establish a combination between the dealers and Union Oil Company and the Court at record 350 acknowledges this, he said I did interject object conspiracy in for the record. I think this is the question of legal words. You have a scheme here. The effect of the scheme, the legal contemplation is a combination between the dealers and Union Oil Company to fix noncompetitive prices, of course that is effect. But as I read Dr. Miles I understood the Court to say that the system of contracts, written contracts which bind parties to charge a supplier’s price was beyond the power of the supplier and that it was basing it as a matter of voidness to common law and under the Sherman Act, and that in effect the company was creating a combination, I urge this to the Court below --
Speaker: (Inaudible)
Maxwell Keith: I urge that to the Court below, yes sir.
William J. Brennan, Jr.: That is only one agreement (Inaudible) as a unilateral arrangement between Union and Simpson, that was the part from the relations with other dealers (Inaudible)
Maxwell Keith: My main bow was the Richfield Oil case that you cannot use lease cancellation as a means of perpetuating price control.
Byron R. White: (Inaudible)
Maxwell Keith: That is the inference from record 256 and all of these policy letters which show that the consignment prices are to be based upon what competition charges, either Standard Stations or major, now this is not off brand competition this is major competition. So that the prices will vary depending upon what Standard Station charges and Standard Station charges various prices within the single zone or a single city. So there was no attempt here, as you read these policy letters, I’ve cited those references in my reply brief at page 16, that’s 251.
Earl Warren: Page 16?
Maxwell Keith: 256 yes Your Honor, so that there isn’t any attempt to follow any statutory scheme of a single uniform prices here.
Earl Warren: Very well.