Opinion ID: 103352
Heading Depth: 1
Heading Rank: 1

Heading: The Indictment.

Text: The indictment was returned in December 1936 in the United States District Court for the Western District of Wisconsin. It charges that certain major oil companies, [4] selling gasoline in the Mid-Western area [5] (which includes the Western District of Wisconsin), (1) combined and conspired together for the purpose of artificially raising and fixing the tank car prices of gasoline in the spot markets in the East Texas [6] and Mid-Continent [7] fields; (2) have artificially raised and fixed said spot market tank car prices of gasoline and have maintained said prices at artificially high and non-competitive levels, and at levels agreed upon among them and have thereby intentionally increased and fixed the tank car prices of gasoline contracted to be sold and sold in interstate commerce as aforesaid in the Mid-Western area; (3) have arbitrarily, by reason of the provisions of the prevailing form of jobber contracts which made the price to the jobber dependent on the average spot market price, exacted large sums of money from thousands of jobbers with whom they have had such contracts in said Mid-Western area; and (4) in turn have intentionally raised the general level of retail prices prevailing in said Mid-Western area. The manner and means of effectuating such conspiracy are alleged in substance as follows: Defendants, from February 1935 to December 1936 have knowingly and unlawfully engaged and participated in two concerted gasoline buying programs for the purchase from independent refiners in spot transactions of large quantities of gasoline in the East Texas and Mid-Continent fields at uniform, high, and at times progressively increased prices. The East Texas buying program is alleged to have embraced purchases of gasoline in spot transactions from most of the independent refiners in the East Texas field, who were members of the East Texas Refiners' Marketing Association, formed in February 1935 with the knowledge and approval of some of the defendants for the purpose of selling and facilitating the sale of gasoline to defendant major oil companies. It is alleged that arrangements were made and carried out for allotting orders for gasoline received from defendants among the members of that association; and that such purchases amounted to more than 50% of all gasoline produced by those independent refiners. The Mid-Continent buying program is alleged to have included large and increased purchases of gasoline by defendants from independent refiners located in the Mid-Continent fields pursuant to allotments among themselves. Those purchases, it is charged, were made from independent refiners who were assigned to certain of the defendants at monthly meetings of a group representing defendants. It is alleged that the purchases in this buying program amounted to nearly 50% of all gasoline sold by those independents. As respects both the East Texas and the Mid-Continent buying programs, it is alleged that the purchases of gasoline were in excess of the amounts which defendants would have purchased but for those programs; that at the instance of certain defendants these independent refiners curtailed their production of gasoline. The independent refiners selling in these programs were named as co-conspirators, but not as defendants. Certain market journals  Chicago Journal of Commerce, Platt's Oilgram, National Petroleum News  were made defendants. [8] Their participation in the conspiracy is alleged as follows: that they have been the chief agencies and instrumentalities through which the wrongfully raised prices have affected the prices paid by jobbers, retail dealers, and consumers for gasoline in the Mid-Western area, that they knowingly published and circulated as such price quotations the wrongfully and artificially raised and fixed prices for gasoline paid by defendants in these buying programs, while representing the price quotations published by them to be gasoline prices prevailing in spot sales to jobbers in tank car lots and while knowing and intending them to be relied on as such by jobbers and to be made the basis of prices to jobbers. Jurisdiction and venue in the Western District of Wisconsin are alleged as follows: that most of defendant major oil companies have sold large quantities of gasoline in tank car lots to jobbers in that district at the artificially raised and fixed and non-competitive prices; that they have solicited and taken contracts and orders for gasoline in that district; and that they have required retail dealers and consumers therein to pay artificially increased prices for gasoline pursuant to the conspiracy. The methods of marketing and selling gasoline in the Mid-Western area are set forth in the indictment in some detail. Since we hereafter develop the facts concerning them, it will suffice at this point to summarize them briefly. Each defendant major oil company owns, operates or leases retail service stations in this area. It supplies those stations, as well as independent retail stations, with gasoline from its bulk storage plants. All but one sell large quantities of gasoline to jobbers in tank car lots under term contracts. In this area these jobbers exceed 4,000 in number and distribute about 50% of all gasoline distributed to retail service stations therein, the bulk of the jobbers' purchases being made from the defendant companies. The price to the jobbers under those contracts with defendant companies is made dependent on the spot market price, pursuant to a formula hereinafter discussed. And the spot market tank car prices of gasoline directly and substantially influence the retail prices in the area. In sum, it is alleged that defendants by raising and fixing the tank car prices of gasoline in these spot markets could and did increase the tank car prices and the retail prices of gasoline sold in the Mid-Western area. The vulnerability of these spot markets to that type of manipulation or stabilization is emphasized by the allegation that spot market prices published in the journals were the result of spot sales made chiefly by independent refiners of a relatively small amount of the gasoline sold in that area  virtually all gasoline sold in tank car quantities in spot market transactions in the Mid-Western area being sold by independent refiners, such sales amounting to less than 5% of all gasoline marketed therein. So much for the indictment.