Opinion ID: 103352
Heading Depth: 2
Heading Rank: 2

Heading: the mid-continent buying program in operation.

Text: No specific term for the buying program was decided upon, beyond the first month. But it was started with the hope of its continuance from month to month. And in fact it did go on for over a year, as we shall see. The concerted action under this program took the following form: The Tank Car Stabilization Committee had A.V. Bourque, Secretary of the Western Petroleum Refiners' Association, [23] make a monthly survey, showing the amount of distress gasoline which each independent refiner would have during the month. From March 1935 through February 1936 that Committee met once a month. At these meetings the surveys showing the amount and location of distress gasoline were presented and discussed. They usually revealed that from 600 to 800 tank cars of distress gasoline would become available during the month. Each member of the Committee present would indicate how much his company would buy and from whom. Those companies which were not represented at the meetings were approached by the Mechanical Sub-Committee; word was gotten to them as to the amount of gasoline that it was felt they could take in that month. Also, as we have stated, the Mechanical Sub-Committee would endeavor to find purchasers for any new distress gasoline which appeared between the meetings of the Tank Car Stabilization Committee. It would report such new surpluses to Bourque. The functions of the Mechanical Sub-Committee were apparently not restricted merely to dissemination of information to the buyers. One of its members testified that he urged the majors to buy more distress gasoline. Throughout, persuasion was apparently used to the end that all distress gasoline would be taken by the majors and so kept from the tank car markets. As the program progressed, most of the major companies continued to buy from the same dancing partners with whom they had started. One of the tasks of the Mechanical Sub-Committee was to keep itself informed as to the current prices of gasoline and to use its persuasion and influence to see to it that the majors paid a fair going market price and did not chisel on the small refiners. It did so. At its meetings during the spring of 1935 the question of the fair going market price was discussed. For example, Jacobi, a member of the Sub-Committee, testified that at the meeting of March 14, 1935, the subcommittee . . . arrived at what we thought was a fair market price for the week following, viz. 3 3/4¢ and 4 3/4 ¢. [24] Jacobi termed these prices arrived at by the Sub-Committee as the recommended prices. He made it a practice of recommending these prices to the major companies with which he communicated. According to his testimony, those recommendations were represented by him to be not the Sub-Committee's but his own idea. McDowell testified that he never made any such price recommendations but if asked would tell the purchasing companies what his own company was paying for gasoline. [25] Up to June 7, 1935, price recommendations were made five or seven times, each time the recommended prices constituting a price advance of 1/8 ¢ or 1/4¢ over the previous recommendation. No more price recommendations were made in 1935. In January 1936 there was an advance in the price of crude oil. The members of the Sub-Committee discussed the price situation and concluded that an advance of 1/2¢ a gallon of gasoline purchased under the program should be made. Jacobi made that recommendation to the companies on his list. We shall discuss later the effect of this buying program on the market. The major companies regularly reported to Bourque, the trade association representative of the Mid-Continent independent refiners, the volume of their purchases under the program and the prices paid. Representatives of one of the corporate respondents repeatedly characterized its purchases under the program as quotas, obligations, or allocations. They spoke of one of its dancing partners under the buying program as one of the babies placed in our lap last spring when this thing was inaugurated. And they stated that we don't have much choice as to whose material we are to take, when we purchase outside third grade gasoline in connection with the Buying Program Committee's operations. On such purchases, we have refineries `assigned' to us. This was doubtless laymen's, not lawyers', language. As we have said, there does not appear to have been any binding commitment to purchase; the plan was wholly voluntary; there is nothing in the record to indicate that a participant would be penalized for failure to cooperate. But though the arrangement was informal, it was nonetheless effective, as we shall see. And, as stated by the Circuit Court of Appeals, there did appear to be at least a moral obligation to purchase the amounts specified at the fair market prices recommended. That alone would seem to explain why some of the major companies cancelled or declined to enter into profitable deals for the exchange of gasoline with other companies in order to participate in this buying program. Respondent Skelly Oil Co. apparently lost at least some of its pipe-line transportation profit of 3/16¢ a gallon on every car of gasoline purchased by it in the buying program. And both that company and respondent Wadhams Oil Co. continued to make purchases of gasoline under the program although they were unable then to dispose of it. Up to June 1935, the expenses incurred by the members of the Mechanical Sub-Committee were charged to and paid by the Planning and Coordination Committee of the Code of Fair Competition for the Petroleum Industry. On May 27, 1935, this Court held in Schechter Poultry Corp. v. United States, 295 U.S. 495, that the code-making authority conferred by the National Industrial Recovery Act was an unconstitutional delegation of legislative power. Shortly thereafter the Tank Car Stabilization Committee held a meeting to discuss their future course of action. It was decided that the buying program should continue. Accordingly, that Committee continued to meet each month through February 1936. The procedure at these meetings was essentially the same as at the earlier ones. Gradually the buying program worked almost automatically, as contacts between buyer and seller became well established. The Mechanical Sub-Committee met at irregular intervals until December 1935. Thereafter it conducted its work on the telephone.