Legal Document

57 United States Supreme Court Reports Lawyer’s Edition 2d Series KF101.8 U54 91 98 Reporter 2207 437 U.S. 117 EXXON CORPORATION et al., Appellants,v.GOVERNOR OF MARYLAND al. SHELL OIL COMPANY, Appellant, versus GOVERNOR CONTINENTAL COMPANY Appellants, GULF CORPORATION, ASHLAND OIL, INC., Nos. 77-10, 77-11, 77-12, 77-47 and 77-64. Argued Feb. 28, 1978. Decided June 14, Rehearing Denied Oct. 2, See 439 884, 99 232, 233. Syllabus Responding to evidence that during the 1973 petroleum shortage oil producers or refiners were favoring company-operated gasoline stations, Maryland enacted a statute prohibiting from operating retail service stations within State, requiring them extend all "voluntary allowances" (temporary price reductions granted independent dealers injured by local competitive reductions) uniformly they supply. In actions several companies challenging validity of on various grounds, trial court held invalid primarily substantive due process but Appeals reversed, upholding against contentions, inter alia, it violated Commerce Due Process Clauses conflicted with § 2(b) Clayton Act, as amended Robinson-Patman which prohibits discrimination, proviso seller can defend discrimination charge showing he charged lower in good faith meet competitor's equally low price. Held : 1. The does not violate Clause, since, regardless ultimate efficacy statute, bears reasonable relation State's legitimate purpose controlling market. Pp. 124-125. 2. divestiture provisions do Clause. 125-129. (a) That burden such falls solely interstate not, itself, establish claim again t commerce. creates no barrier dealers, nor prohibit flow goods, place added costs upon them, distinguish between in-state out-of-state Hunt Washington Apple Advertising Comm'n, 432 333, 97 2434, 53 383; Dean Milk company Madison, 340 349, 71 295, 95 L.Ed. 329, distinguished. 125-126. (b) Nor fact state regulation show impermissibly burdens commerce, even if some stop selling State because requirement elimination deprive consumers certain special services. Interstate commerce is subjected an impermissible simply otherwise valid causes business shift one supplier another. Clause protects market, particular firms, prohibitive burdensome regulations. 127-128. (c) its own force, pre-empt field marketing, but, absent relevant congressional declaration policy, specific against, burdening of, have power regulate this area. 128-129. 3. pre-empted Sherman Act. 129-134. Any hypothetical "conflict" arising possibility may require uniformity situations Act would permit localized sufficient warrant pre-emption. Pacific KF135 P2 130-131. Neither federal policy competition establishes right engage discriminatory pricing situations. Section 2(b)'s merely exception statute's broad prohibition create any new right, rather defines specific, limited defense. 131-133. While sense might anticompetitive effect there conflict Act's central "economic liberty," nevertheless sort cannot itself constitute reason for invalidating adverse were, enough invalidate States' economic be effectively destroyed. 133-134. 279 Md. 410, 370 Atlantic Reporter, 2nd 1102 372 237, affirmed. William Simon, Washington, D. C., appellants. Francis baron Burch, Atty. Gen., Thomas M. Wilson, III, Chief Asst. Baltimore, Md., appellees. Mr. Justice STEVENS delivered opinion Court. 1 A provides producer refiner products (1) operate station (2) must 2 [Amicus Curiae Information page 119 intentionally omitted] supplies.1 questions presented are whether violates either Constitution States, directly indirectly expression vigorous found 38 Statutes-at-Large 730, 49 1526.2 answered these favor statute. 237 (1977). We affirm. 3 * outgrowth petroleum. response complaints about inequitable distribution among Governor directed Comptroller conduct market survey. results survey indicated operated had received preferential treatment period short therefore proposed legislation which, according Appeals, was "designed correct inequities reflected survey." Id., at 421, A.2d, 1109. After legislative hearings "special veto hearing" before Governor, bill signed into law. 4 Shortly effective date Exxon Corporation filed declaratory judgment action Circuit Anne Arundel County, essential facts alleged complaint dispute. All sold transported refineries located elsewhere. Although sells bulk gas wholesalers retailers, also consuming public through 36 stations.3 uses test innovative marketing concepts products.4 Focusing discontinue operation Exxon's challenged both constitutional statutory grounds.5 5 During ensuing nine months, six other instituted comparable actions. Three plaintiffs, their subsidiaries, sell exclusively stations.6 These refiners, using trade names "Red Head" "Scot," concentrate largely high-volume sales prices consistently than those offered dealer-operated major brand stations. Testimony ownership method private brand, low-priced competition. They joined attack 6 three like Exxon, brands although least each.7 They, too, provisions, addition, specially extended supplied State. defined term refers temporary who competing retailers.8 regard allowances protected 2(b). advance trial, Shell, Gulf moved partial summary declaring portion 7 motion, then focused provisions. As brought out salient characteristics follows: Approximately 3,800 over 20 different gasoline. However, produced refined Maryland, number actually affiliate relatively small, representing 5% total retailers. 8 introduced indicating has significant benefits public.9 Moreover, now elect withdraw altogether enforced. There was, however, quantity shipped affected statute.10 entire invalid, grounds. 9 rejecting refiners' attacks voluntary-allowance provision. Most pursued here;11 instead, appellants appeals claims II 10 Appellants' argument requires little discussion.12 cast doubt wisdom is, now, absolutely clear empower judiciary "to sit 'superlegislature weigh legislation' . .." Ferguson Skrupa, 726, 731, 83 1028, 1032, 93 (citation omitted). allocation eventually decrease competitiveness law Appellants argue irrational will frustrate further desired goal enhancing But, observed, rests evaluation 428, 1112, override authority legislate what injurious practices internal commercial affairs Lincoln Federal Labor Union Northwestern Iron & Metal Co., 335 525, 536, 69 251, 257, 212.13 Regardless we hesitancy concluding reject appellants' claim. III 11 ways: discriminating commerce; unduly (3) imposing controls activity essentially character amenable regulation. 12 Plainly, discriminate refiners. Since Maryland's supply flows since disparate meritless. focus arguing protect contend "create enclave .."14 support proposition, rely requirements companies. But lead, logically pra tical matter, conclusion level. 13 record shows, marketers stations.15 compete refine produce fact, barriers whatsoever dealers; absence factors fully distinguishes case been discriminated See, e. g., Comm'n., 329. For instance, noted raised cost doing and, ways, favored dealer U.S., 351-352, S.Ct., 2445-2446. No made here. longer enjoy same status advantage dealers. commerce.16 14 argue, point indicates that, requirements, supports consumer Even assume truth assertions, neither warrants finding 15 Some choose entirely share promptly replaced source consumers' switch 16 crux interfered movement goods "with natural functioning regulation." Hughes Alexandria Scrap Corp., 426 794, 806, 96 2488, 2496, 220. "will surely change structure weakening .."17 cannot, accept underlying notion methods Breard Alexandria, 341 622, 920, 1233. Hughes, It true loss high-volume, relates 17 Finally, adopt novel suggestion nationwide, gas. many legislatures considered proposals similar Maryland's,18 cumulative serious implications national operations. concern one, find pre-empts marketing. To sure, "the acts limitation without implementation." supra, 350, 2445 (citations only rarely regulation, when lack impede goods. Wabash, St. L. R. Illinois, 118 557, 4, 30 244; see Cooley Board Wardens, How. 299, 319, 996. evil perceive litigation enact differing regulations, conclude warranted. problem thus uniformity. IV 18 Phillips, voluntary direct or, more generally, basic competition, well covered two situations.19 first situation retailer lowers own, gives reduction enable second situation, retailer's subsidized supplier, good-faith defense clearly available allowance another company. SeeFTC Sun Oil 371 505, 358, 466. unsettled,20 concluded unavailable. reasoned 2(b), did apply our opinion, necessary decide assuming does, 19 compliance cause stress statewide basis result customers receive price, describe illustrate point.21 "[i]n areas coincident 'teaching Court's decisions enjoin[s] seeking conflicts where none exists.' Huron Cement Detroit, 362 440, 446, 80 813, 817, 852." Seagram Sons, Incorporated Hostetter, 384 35, 45, 86 1254, 1261, 336. Texaco, Inc., Wis.2d 625, 111 North Western 918 (1961). Sons went say [a]lthough possible envision circumstances under discriminations proscribed compelled [the statute], existence potential too speculative present posture case" 46, 1261. counsel restraint applies greater force delve posed appellants, violation Instead, here discrimination.22 This Nation's persuasive. 21 pricing. created right; quite contrary, defense, narrowed previously existed.23 important interpretation contours informed reflects.24 illogical infer excluding behavior general ban pricing, Congress intended exclusion. generally reluctant pre-emption, see, De Canas Bica, 424 351, 357-358, n. 5, 933, 937, 47 43; Merrill Lynch, Pierce, Fenner Smith Ware, 414 117, 127, 94 383, 389, 348, particularly inappropriate so purposes similar. Both reflect choice interest equal allowing sellers freedom make selective decisions.25 22 characterized to, qualification free competition,26 "undermin[es]" balance struck Acts.27 way stating effect. sense, Act—our "charter liberty." Northern 356 1, 78 514, 517, 545. Nevertheless, render destroyed.28 are, therefore, satisfied fairly construed decision Legislature 23 24 So Ordered. 25 POWELL took part consideration cases. 26 BLACKMUN, concurring dissenting part. 27 N Dec. Immigration Nationality Decisions agree Motor Fuel Inspection Law1 offend antitrust dissent Part fails condemn Md.Code Ann., Article 56, §§ 157E(b) (Supp.1977) (hereinafter referred (c)), preclude competitors retailing Maryland. businesses. protectionist justified vindicated evenhanded Sections (c), Clause.2 28 come outside Retailers serve travelers. extent retailers succeed fail businesses, wholesale affected. Cf. 329 (1951).3 scope ibid.; Minnesota Barber, 136 313, 862, 34 455 (1890).4 29 forbids repeatedly mean localities transactions actors markets. E. 350-352, 2445-2446, 383 (1977); Halliburton Well Reily, 373 64, 69-73, 1201, 1203-1205, 202 (1963); 354, 297; Best Maxwell, 311 454, 455-456, 61 334, 335, 85 275 (1940). need appear face "The clau e forthright ingenious. each duty determine attack, whatever name be, practical work commerce." Ibid. (footnote intend order maintaining free-flowing economy. demonstrated Hunt, restricts intrastate having "practical effect" operation. 2434-2445. If government demonstrate justifying inequality less alternatives interests. 353, 2446; 297. analysis purported independently identifies interests judges adequate. example, city attempted justify milk pasteurization ordinance claiming health measure. city's assertion conclusive, however: 31 "A view, professes measure, imposes limitations laid down save rare instance artlessly discloses avowed goods." 32 assessment asserted purpose, determined exactly how measures could accomplish ends. 354-356, 297-298. B 33 With background, unconstitutional becomes apparent. facial exists; given exclude class predominantly while providing protection nonintegrated overwhelmingly composed businessmen. 1974, 3,780 3,547 App. 191, 569, 755. Of 233 197 belonged out-ofstate integrated 190-191. Thirty-four immediately statute.5 firm, Crown Central Petroleum, just 189. statutorily insulated then, 99% enterprises excluded participation 95% 98% class. suffered significant. Five enterprises, Ashland Oil, BP Kayo Petroleum Marketing Southern Cooperative, nonbranded recognition. manner, operated. operations dominant According repeated testimony economics experts officers marketers—testimony discredit—such successfully day-to-day control products, hours related details. 320, 357, 370-371, 449-451, 503-504, 529-530; Joint Jurisdictional Statements 102a seq. Only volume achieved satisfactory profits cents gallon below branded Dealer precludes illegality vertical fixing. Code KF62 (1976 ed.); White 253, 696, 738 (1963). Therefore, forbid operations, abandon altogether. 100, 455, 519; 103a seq.6 marketers, precluded entering 35 contains companies, Gulf, firms. importantly, mentioned previous paragraph, Richard T. Harvin, manager eastern region, annually return 15% company's investment—a profit $700,000 1974. 316. shared sections majors recognition acceptance outlets company-controlled standards. 316, 647, 668-669. Their ability monitor preferences reactions diminished. 315, 649, 669. And opportunity experimentation techniques curtailed. 316-317, 647-649, short, appellant cease property valued $10 million, inflict hardship Similar imposed Indeed, restricting compete, perhaps improves position insulating ts answers case, conceded businessman [by] reducing dominance vertically market." 33; id., 51, 54, 104, 128, 132, 145, 147. At expert said protecting 613. foundation continue enter deny opportunities almost businesses.7 37 proved distinction On Court, carry burden. asserts terms desire maintain retailing. laudable goal, accepted analysis, mere justification Milk. Here, ignores half responsibility; attempt why preserved banning meager First, nothing competitors—less efficient businessmen—from legal illegitimate economy hardly flourish insist handle product exclusion firms political clout challenge influence businessmen leaders.8 Each encouraged "legislate estimate interests, importance advantages disadvantages view." Judge Story, Commentaries 259 (4th ed. 1873), quoted Haw. Hawai‘i KFH45 A2 Hood Du Mond, 336 533, 657, 662, 865 (1949). also, Federalist, 7, 11, (Hamilton), Number 42 (Madison). countenance parochialism. 39 Second, limit integration. suggests integration already occurred inhibited dominated constituting 90% high competitive.9 shown existing company-owned required (c). legitimacy future integration, (b), suspect exemption wholesalers, surprisingly, businesses able legislature.10 supra. 40 Third, appears concerned unfair predatory examples misconduct answers. 33-34, 54-55, 81-83, 109-111, 133-134, 148-149. concerns proof burdened engaged misconduct. Furthermore, prohibited Emergency Allocation 1973, 87 628, 751 Energy Policy Conservation 461, 89 955, 760g Law, 157E(f) (Supp.1977); Antitrust Md.Com.Law Ann. 11-201 (1975); Unfair Sales 11-401 (1975). Less legislation, leasing owned prevent evils arise shortterm leases. Gasoline Products 11-304(g) (Supp.1977).11 41 sum, vague preserving toward met inherent arguments decision,12 appellees remove taint 43 offers responses provisions.13 says Ante, Carolina apples marketed closed containers bear " 'no grade applicable standard.' 2437. Commission contended provision display superior apple grading marks. strike growers. growers employed Department Agriculture system.14 Despite universal declared single segment apples, namely system. regard, identical distinguishable from, Hunt. gasoline, namely, 44 naively foster future, insulate identifying most potent segments business, permitting remain. shows permits case. bans powerful boundaries. insulates forced 199 Pantry Pride, Fisca, Hi-Way, Midway Effective thereby emasculated—no doubt, ingenious discrimination. stated outset, clause ingenious." 335. 45 contends, subpart primary argument, "raised here." 126. Once seen group fallacy appears. subject far exceeds increased deprived use altogether—a lacks comparability effects severe. 46 citation: proposition incomplete; demonstrating prove significant, numerous competitors, fall businessmen, resulting disparity exists. persuasively contrary. contentions convincing opinion. restricted. 431, 1102, 1114 supposedly distinguished involved begin with, drawn basically irrelevant. effected wholesaling transport ists once arrives. 48 ground Appeals. There, invalidated 7.21 General Ordinances Madison (1949), outlawed sale pasteurized five miles city. section legally block restrictions bring violating 7.21. restricted, chose deal pasteurizers. Similarly, restricted replace operations.15 legislature preserve 1114. fell trap confines proffered justifications irrelevant where, here, scheme. intent passed alternatives. erroneously failed 50 resurrected outdated strictures 432, 1114-1115, citing Crescent Mississippi, 257 129, 42, 66 166 (1921). cotton gins manufacturing explained beginning years intervening development application litigation. nn. accompanying text, Contract 51 saves distinctions unconstitutionality. argues [n]o nexus opposed inheres production refining petroleum." Brief Appellees 23. statement abstract, incorrect reality, geological formation known, Maryland; refining, geology, matter actual exist f discriminates factual circumstances. unconstitutional. Under circumstances, fair legislators enactment economically disruptive legislation. disruption felt tend processes responsive problems created. never passed. visited One assumptions systems unresponsive constituents; units expected act constituents' interests.16 vindication self-interest unfairly disrupting 52 above, Parts I-B II-B, Appeals' contention Appellees' fares better court's varies kind 54 brings mind well-known words Cardozo: 55 "To give entrance [protectionism] invite speedy end solidarity. framed dominion philosophy parochial range. theory peoples states sink swim together, long run prosperity salvation union division." Baldwin G. KF105 F3 Seelig, 294 511, 523, 497, 500, 79 1032 (1935). 56 Today, heed Justice's admonition. prevails. reverse pertinent "(b) July pet oleum shall open secondary unbranded personnel, subsidiary company, commissioned agent, contract person, corporation, managing fee arrangement refiner. dealer. "(c) 1975, corporation "(d) Every producer, refiner, wholesaler supplying fuels supplied." Md.Ann.Code, 157E (Supp.1977). "Upon being made, hearing section, services facilities furnished, rebutting prima-facie person unless affirmatively shown, authorized issue terminating discrimination: Provided, herein contained his furnishing purchaser purchasers competitor, furnished competitor." 13(b) ed.). used "company-operated station" employees (or subsidiary). 419 1108 introduce ideas self-service, in-bay car-wash units, motor-oil vending machines. 205-209. presen ed arguments, statutory. arbitrary Clause; constituted taking compensation; denied it, distinct laws; unlawful delegation authority; unconstitutionally vague; 1973. 14-16. plaintiffs Continental (and Co.), Commonwealth Refining Corp.), Phillips Shell 445-446, 1121-1122. 418-420, 1107-1108. "would restrict state." assertion, certainly permissible inference evidence, thereof, Reply ief 77-64, Page 7. rested claim, subsidiary, press worth noting means statutes. date, courts difficulty sustaining statutes attack. Paramount Pictures, Langer, F.Supp. 890 (ND 1938), dismissed moot, 306 619, 59 641, 1025; Comment, Practices "Meeting Competition" Md.L.Rev. 323, 27. interstate, nonrefining nonproducing, Sears, Roebuck Hudson Pride has, recently acquired refinery. 17. larger share, smaller market—as 347, 2443 Milk, 297—the impact relative proportions indeed, demonstrable much refiner-operated California, Delaware, District Columbia, Florida adopted laws jurisdictions. 22; California Amicus Curiae. third situation—a buyer seller. encompassed allowances." 452, 1125. left question 512, 363 reached conflicting results. Compare Enterprise Industries Texas 420 (Conn.1955), rev'd 240 457 (CA2 1957), cert. denied, 353 965, 77 1049, 914, Bargain Car Wash, Standard (Indiana), 466 1163 (CA7 1972). allowance" expose primary-line secondary-line liability 2(a) respect liability, pose hypothesis responds Baltimore. throughout though confined competitor Salisbury, reduction. injury flowing uniform actionable discrimin tion. Rowe, Price Discrimination (1962). Thus, premised differentials neighboring States. note affect reduce prices, irreconcilable Baltimore area Salisbury. assume, arguendo, extension may, prices. 20, original established absolute seller's "in ." history FTC, 231, 247-249, 240, 248-249, 239. holding substantive, procedural explained: heart value Acts, 'Congress dealing sought protect, monopoly, prevent.' Staley Mfg. Trade 135 453, 455. reconcile, entirety, underlies Acts. seek abolish radically curtail substantial self-defense raid 249 Just stimulus perceived stores "chain stores," Justice, Report 114-124 (1977), prompted 422, argued fundamentally undermines Report, 80. regulated beyond boundaries, pointing avoid 22, extraterritorial arises presently portions four ago then. 1974 Md.Laws, ch. 854; 1975 608. codified (Supp.1977), reads: "(a) exposed inspection hereinafter provided. secondar supplied. "(e) equipment rentals "(f) apportion periods shortages equitable basis, allotments." U.S.Const., I, 8, cl. 3: Power foreign Nations, Indian Tribes." illustrated forbade plant center City prohibited, (1940) (holding taxation reach Clause); Frankfort Distilleries, 324 293, 65 661, 951 (1945) Act). Note, Divestiture Statutes: Preliminary Constitutional Economic Assessment, Vand.L.Rev. 1277, 1303 Fisca Giant Food, Hi-Way Homes National Savon Gas Stations, Because organizations time, should noted, thes deciding integrate backwards producing. suit filed, refinery became 518-519. divest invested $2,381,385. 258-259. $2,043,710. 656. Another indication amendment proposal exempt requirements. author "not another." 568. cross-examination asked enacted. He replied: "It up Assembly decision. Apparently represented hearings. hear later wanted jobbers investment financial engagement producer-refiner plea mercy committee speak "Q. You information discrimination? Not hearsay data men definite tie 568-569. pleas executive director Greater Washington/Maryland Service Station Association, represents 700 testified Matters Committee Senate: "I telling you gentlemen desperate days "Now beset critical squeeze landlord-supplier shrinking tire, battery accessory faced problem. "That sinister threat complete takeover retail-marketing convert "Our industry grown borders country American multinational one. "Are let octopus loose unrestricted small devour them? sincerely hope not. today back-bone business. "We asking you, us giant take away very livelihood children's greed profits. Please stations." 755, 756, 761. From stipulated parties, found: "Retail highly industry. location facilities, comparatively capital mobility time purchasing interchangeability consumer, visibility information, choices brands, offered." 99a. continuing nature provided "demonstrated real object attained selected[;] inversely welfare." 131a-132a. entered findings divestiture: "Apart restraining harmful industry, han large. proven detrimental caused company-owned-and-operated curbed anti-trust laws. finds preponderance thirty-two producer-refiners ever prohibited. benefit. "Noteworthy draft included selling. final eliminated sole reason, Coleman, requested act. initially, benefited exemption. "In hundred eighty-five pounds pleadings, motions, briefs, exhibits depositions court, concrete classes operators singled promote welfare citizens Rather, apparent designed benefit merchants detriment Statement 130a-131a (emphasis supplied). states: "(g) Distributor unreasonably withhold consents distributor consent assignment, transfer, sale, renewal agreement. address ended process, Declaration Rights, notes true, observation inflicted infra. Footnote ante, 126-127, narrow view consists transactions—of buying By focusing limits handlers complex economy, after impose participants. cites prerequisite establishing holding. cases upheld discrimination; Regarding 2443, discusses $10,000 amount-in-controversy 1331. infra, presents Growers Carolina. Six apart USDA 2444. Madison. unsettle profitably 504-505, 509, 531. Given experience Articles Confederation, assumption unreasonable Congress. pursuit constituents nearly wrecked catastrophic wars reprisals home Hartman, Taxation (1953), citing,

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