Document: 371 U.S. 505 83 S.Ct. 358 9 L.Ed.2d 466 FEDERAL TRADE COMMISSION, Petitioner,v.SUN OIL COMPANY. No. 56. Argued Nov. 15, 1962. Decided Jan. 14, 1963. Robert B. Hummel, Cleveland, Ohio, for petitioner. Leonard J. Emmerglick, Washington, D.C., respondent. Mr. Justice GOLDBERG delivered the opinion of Court. 1 This case grows out a gasoline 'price war' in Jacksonville, Florida. The question presented is whether refiner-supplier charged with granting price discrimination violation § 2(a) Clayton Act,1 as amended by Robinson-Patman Act, has available to it, under 2(b) Act,2 defense that discriminatory lower was given 'in good faith meet an equally low competitor,' when shows it gave only one number its independently owned retail station customers particular region order enable reductions competing service and operated chain selling different brand gasoline. 2 Federal Trade Commission held be unavailable such circumstances. 55 F.T.C. 955. Court Appeals Fifth Circuit reversed, 294 F.2d 465, this granted certiorari, 368 984, 82 602, 7 522, review difficult important concerning scope application defense. I. 3 relevant facts are not seriously disputed. 4 Respondent, Sun Oil Company ('Sun'), New Jersey corporation major integrated refiner distributor petroleum products, including At time alleged here issue, marketed 18 States single grade sold tradename 'Sunoco.' does ordinarily sell directly motorist, but usually distributes other related products consuming public through operators who lease their stations from it.3 5 In 1955, Gilbert McLean lessee operator Sunoco gas located on corner 19th Pearl Streets He Sun's 38 dealers Jacksonville area, which divided into three sales territories; territory composed eight stations, about 11 blocks away McLean. Like almost all sellers branded gasoline, bought supplier, Sun. Notwithstanding, he was, found below, conceded here, independent contractor bore direct immediate risk profitability station. 6 Commencing operation February at 24.1 cents per gallon resold 28.9 motoring public; purchased same obtained 4.8-cent-per-gallon margin gross profit June four months after began business, Super Test Company, 65 opened diagonally across street 'regular' 26.9 gallon. It appears Test's first Jacksonville. record disclose anything more than dealer; nor indicate source 8 two-cent-per-gallon difference between represented 'normal' differential then prevailing area 'major' 'non-major' brands represents spread can obtain two types without competitive repercussions. Thus, apparently adversely affected any susbtantial degree first-posted Test. Thereafter, however, sporadically reduced station, weekends. Some cuts were advertised local newspaper posted curbside signs. For example, August 27, 21.9 following day 20.9 While these prices normally short-lived, least maintained week. On occasion each reduction McLean's declined substantially. 10 When lowering below normal two-cent differential, McLean, maintaining his gallon, protested sought relief form concession it. months, took no action, December further periodic complaint would forced business absent help Sun, told come aid event cuts. When, dropped 24.9 have post 25.9 competition. day, prive allowance or discount 1.7 accordingly cents, thus reducing prior 4.8 3.5 amount regarded minimum should earned dealers. within cent Test's, absorbed 1.3 reduction. No corresponding area. Within few days, lowered 23.9 made either until mid-February 1956, cut 22.9 time, general war developed several suppliers reductions. Notwithstanding remarkable increase him own resale price, went 18, days outbreak war.4 exact reason failure appear; clear because war. 12 During period 1956 date extended dealers, distances varying less mile (about blocks) one-half miles suffered substantial declines testified said they saw former theirs buying declared had them switched price. complained favored treatment accorded and, reductions, unsuccessfully compensating discounts themselves. Though ultimately there indication did so result 13 September filed against charging illegal amended, entry price-fixing agreement Act.5 adopted findings, conclusions proposed trial examiner affirmed initial determination violated provisions both Acts, charged. also been actual injury nonfavored virtue 27 rejected asserted Act meeting competition, another wholesale seller, 'was (McLean) * supplier' 'to competition Super-Test street.' 14 Considering supplier-retailer reasoning: first, 'conduit' marketing therefore practical matter, really gasoline; second, much threat continued existence customer offer realistic expect concluded entitled, circumstances, 'assert (§ 2(b)) faith.' F.2d, 481. overturn Commission's finding resulted 15 potitioned writ certiorari holding 2(b), circumstances record; reversal findings entered purpose undercut, meet, 16 issue before entitled avail itself 'lower price' competitor.' If unavailable, Act; respondent dispute requisite elements otherwise shown. 17 As indicated, assumed, commentators case,6 support conclusion, therefore, comes us, availability determined assumption engaged solely operations; similarly, since evidence supply we assume beneficiary enabling supplier.7 precise heretofore resolved reported judicial decision (other case) considering District supporting view Commission. Enterprise Industries, Inc., v. Texas Co., 136 F.Supp. 420, reversed grounds, Cir., 240 457, cert. denied, 353 965, 77 1049, 914. past taken contrary urged present position. II. 19 context conflicting contentions must considered framed language statute itself. Section makes unlawful 'any person discriminate purchasers commodities like quality where effect may substantially lessen tend create monopoly line commerce, injure, destroy, prevent grants knowingly receives benefit discrimination, them.'8 Of course applicability depends upon involvement interstate commerce. noted, challenge actions prohibitions 2(a); statutorily anticompetitive effects. 20 contains proviso permitting seller rebut prima facie 'showing furnishing services facilities purchaser competitor, furnished competitor.'9 referred 'good competition' burden bringing himself exculpating provision interpreted afford absolute charge violating 2(a), notwithstanding prohibited effect, Standard Co. Comm., 340 231, 71 240, 95 L.Ed. 239. 21 Reading words 'their customary meaning,' Schwegmann Bros. Calvert Distillers Corp., 341 384, 388, 745, 747, 1035, phrase 'equally competitor' seem refer competitor grants, buyer receives, cut. (In case, mean refinersupplier, dealer.) Were something intended Congress, expected explicit recitation as, intent give broader expressly effected prohibition discriminations inter alia, (in Sun) knowing recipient thereof McLean) 'with them.' Congress demonstrated immediately preceding knew how expand applicable concept beyond sole level reasonable conclude clarity expression if thereunder similarly broadly read encompass, urged, set offending seller's purchaser's competitor. There appearing face invoke omission broad meaning explicitly provided inclusion inference quite contrary. 22 fact permits competitor's low' suggestive interpretation limits situations response rather customer. Linguistically practically, little sense talk, wholesaler's competitors. will invariably higher supplier's price; even those instances so, cannot suggested wholesaler reduce discriminatorily level. Such economically unrealistic, strains use. Moreover, see what appropriately cognizable interest might thought serving enacting productive anomalous result. 23 Recognizing incongruity interpretation, having need go far, argues merely protected lowers sufficiently allow dealer, turn, offer. But too extends apparent meaning; section implication comprehends two-stage separate economic units levels distribution measure setting price.10 24 Enough demonstrate reading usual strongly suggests, though inexorably compel, narrower consonant overall rationality statutory consistency purpose, effects compatible legislative history reality. We now turn consideration factors. III. 25 Prior passage 1936 allowed demonstration 'made competition.' Stat. 730. Because Congress' growing concern exemption overly inhibit concentration fostered part unwarranted favoritism shown large buyers, particularly chains threatening smaller merchants, passed strengthen discrimination. See, e.g., H.R.Rep.No.2287, 74th Cong., 2d Sess. 6; Rowe, Price Discrimination Under (1962), pp. 3—24. Not eliminate certain weaknesses, legitimatizing 'meet limited protect 26 House Committee, report bill, newly worded proviso: 'This contraction contained limit noted while permitted permit offered prices, prices. goes further, do likewise customers, make liable penalties act, treble damages. words, actually previously further.' H.R.Rep.No. 2287, 16. (Emphasis supplied.) 28 congressional materials suggests limiting is, course, conclusive directed specific problem presented. Neither briefs arguments parties amici pointed guide resolution us. nothing contradict deem ordinary specifically intended; guides adopt. IV. 29 fundamental purposes antitrust laws guidance impressive recited history. 30 Relying small businessman, policy supports pricecutting discriminatory, action designed preserve resources bar survival duration. profit, relative inability function pays factors present-day wholly dependent receipt aid—in reduction—from supplier. Whatever accuracy, assertions ignore operators—the nearby McLean—who vitally interested struggle moved respond making concessions These hurt, challenged Their appreciably perhaps attrition attributable thereby enabled drop able identify who, retaining preference shifted patronage 31 asserted, response, harm competitors consequence very pervasive essence our policies. context: 32 'In economy avoid some law not, free enterprise system cannot, guarantee businessmen loss. That lose money bankrupt necessarily injured.' H.R.Rep.No.1422, 81st 1st 5—6. 33 mere recognition sometimes by-product beginning, end, analysis. someone hurt—to pursue pricing will, compete McLean; allowances, injure McLeans world. alternative inevitable; courses protection stations. See 526—527, infra. Even basis predilections choice hand, operators, other, balance comparative individual instance; foreclosed favor equality treatment. objects Act. basic insure injured practices. To sure, s exception operative incidence damage purchasers, supra, but, precisely damage, become simply hurt him. enough, immunize could largely nullify 2(a). 34 Similarly, retailer applicable. While, generating cause amendments reaction believed predatory uses mass purchasing power stores, neither situation generally obviate practices merchants businessmen, presumably whatever source. Committee 'guiding ideal' proposing 'the preservation opportunity far possible usefully employed production *.' 6. short, assure, extent reasonably practicable, functional start equal footing concerned. 35 An example helpful. Assume store grocery reduces, widely staple food product. Is supposed justifying, product outlet, offering outlets stores? assuming second predatorily seek answer Congress. 36 Stripped appeal arising attempting preserve, chain, instant present, think, crucial variation given. 37 argument posed 'small' 'big' put approve followed persuasive. approval assumed—a conclusion11—it write pass distinction posited strength vis-a -vis price-cutting inapposite warrant. prohibits generally, subject defenses based size. Competitive ability size properly contexts, standard statute. Limiting invocation comports, objectives preserving benefits 39 supplier intervene grant unaided discourage promote So long cutter receive 'break' lawful superior merit efficiency. bring often bear narrowly deprive resourceful fruits efficiency convert retailers unequal contest combination hardly element fair justification 2(b). Restriction responds competitor—another supplier—maintains equities. Fairness demands less. discern insulate pressures generated retailers, authorize suppliers, created level, protect, discriminatorily, expense customers. 40 argued, deny right impair flexibility rigidity, antithesis think case. produce localized temporary flexibility, inevitably encourages maintenance long-range generalized rigidity protects. challenges structure individualized responses, incentive alter policy. 'spot enterprising seeking initiate own. reasoning oligopolistic environment oil industry.12 41 pit greater Test, which, record, efficient merchandiser, 'independent' meaningful companies, one. V. 42 Respondent First, asserts completely ignores realities vending business. essence, that, practically viewed, minor, nonintegrated, jobber exclusively level.13 All says, final product—gasoline—to consumer, threatens retailer's pump whose stations' success failure. contended retailer.14 43 real sense, every goods sells could, goods. sure conception mind established certainly, special industry. perceive convincing reasons rationally confining thrust respondent's narrow enough preclude effective emasculation Only differences distinguish many outlets, numerous distinction, any, slight. theory inherent limitations acceptance return 'meeting superseded. 44 prolong aggravate destructive wars periodically reoccur Whether contention best side. warfare caused factors, industry overcapacity propensity refiners engage so-called 'dual marketing' utilize idle facilities, unbranded jobbers, S.Rep.No.2810, 84th 16—19. mitigate forces wars. unclear prolongs shortens war's (It here.) logical sides none Extensive discussion various serve useful purpose. study concludes canvassing contentions: 'one certain.' De Chazeau Kahn, Integration Competition Petroleum Industry (1959), 481; id., 477 483; 19—23. 45 urges unfairly retailer, alone insufferable entire This, erroneously poses twofold—aid unlawfully reduction, all—and misconceives alternatives. 46 Preliminarily, recognized dealing reduces thereupon shifting supplier; circumstance available. 47 deal—in aid—Sun, wholesaler, uniformly non-discriminatorily probable grounded. recognizes, must, choice, possibility deemed necessity extend unwarrantedly wide geographic nationwide. asserts, required seeks draw, dealer proximity illegally discriminated against. continuum, require market indefinitely absurd results nationwide measures impact. appraising courts appraisals facts. Invocation mechanical word formulas substitute adequate probative analysis.15 cases indicate, carefully drawn submarkets proper impact among purchasers.16 48 Alternatively, owned, operate leasing, merchandising, advertising policies opportunities 49 Rejecting actions17 alternatives,18 realistically open change nature effecting sort forward vertical integration, detriment merchants—the operators—whom protect. active pursuit involving elimination evil involved; policy, us here. interpreting phrased constitutional provision, enactment exceptions. Compare Cal. Stations United States, 337 293, 311—312, 69 1051, 1060, 1061, 93 1371. 50 event, integration inevitable feasible alternative. yet occurred discerned sound persuasive rejecting ownership stations; believe incentives persist. 51 Having consciously chosen claim inject interference favors others. 52 consistent amendments, contemplates met competitor; set, anyone, 2(b),19 good-faith fail. Accordingly, judgment 53 Reversed. 54 Separate memorandum HARLAN, STEWART joins. I agree conclusion reached failed 56 However, instead reversing remand introduction evidence. ante, p. 512, note 7, 'if appeared supplier-retailer, received supplier—presumably Sun.' true proof establishing rests responsibility gaps record. extremely singularly opaque elusive 57 If, acknowledges, know integrated, foreclose development proceeding. far-reaching importance administration disposition leave unanswered questions resolved. complete additional questions, litigants injustice refusing made. Commission, trouble up area,* definitive answers perplexing problems. 730, 1526, U.S.C. 13(a), U.S.C.A. 13(a). 13(b), 13(b). total approximately 6,980 domestic 1954, year violation, thirteenth largest companies. H.R.Rep. 1423, 23. Among industrial corporations types, ranked forty-fourth assets, thirty-sixth net profits, thirty-eighth sales. S.Rep. 2810, 7. July November monthly gallons varied high 7,400 (July) 5,900 (November). 1955; 8,300 gallons. His January jumped over 32,000 rate discontinued month opening, just 5,000 station; thereafter 10,700 (September) slightly 19,000 (December). regular exceeded 61,000 67,000 gallons, respectively. 719, 111, 45, 45. Note, 62 Col.L.Rev. 171 (1962); 1962 Duke L.J. 300; 75 Harv.L.Rev. 429 (1961). otherwise, i.e., herein express intimate opinion. provides extensive part: 'That shall indirectly, quality, purchases involved use, consumption, Territory Columbia insular possession place jurisdiction full text: 'Upon being made, hearing section, furnished, rebutting prima-facie showing unless affirmatively shown, authorized terminating discrimination: Provided, A contends difficult, impossible, sensibly section's reference 'services facilities' subsequent appropriate enactments, interesting Senate Select Small Business, reporting war, enforce 'all discrimination,' stopped 'its incipiency,' 'not rather, retailers.' 28—29. H.R.Rep.No.1423, Sess.; U. Chi.L.Rev. 355, 365—366 (1962). win jobbers similar exist preferred locations. offer' analysis, Obviously, attempted responsible setting, problems agreements. Cf. American F.T.C.Dkt.No.8183, CCH Reg.Rep. 15,961 (June 1962) (dissenting Commissioner Elman). Nothing say case—involving 'secondary-line' buyers—is inconsistent Comm. Anheuser-Busch, 363 536, 80 1267, 1385, 'primary-line' 'discrimination' 'difference non-competing legality illegality likely sellers. Since attempt 'feathered' diminishes reaches center practice. fashioned manner might, obviated negated improperly sharply 'feathering' gradations gradation all, consequently fall ban outright Insofar But, definition, acted secondary inhibition utilization essentially undue restraint willing, able, posture find unnecessary prerequisite indicated letters written Director Bureau Investigation position today. Hearings Distribution Problems Subcommittee 459—463, 852—853 (1955).

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