Legal Document

337 U.S. 293 69 Supreme Court Reporter 1051 93 L.Ed. 1371 STANDARD OIL CO. OF CALIFORNIA AND STATIONS, Inc.v.UNITED STATES. Number 279. Argued March 3, 4, 1949. Decided June 13, As Amended On Denial of Rehearing Oct. 10, Appeal from the United States District for Southern California. Mr. John M. Hall, Los Angeles, Cal., appellants. Herbert Atlantic Bergson, Washington, D.C., appellee. Justice FRANKFURTER delivered opinion Court. 1 This is an appeal to review a decree enjoining Standard Oil Company California and its wholly-owned subsidiary, Stations, Inc.,1 enforcing or entering exclusive supply contracts with any independent dealer in petroleum products automobile accessories. The use such was successfully assailed by as violative § Sherman Act2 3 Clayton Act.3 2 California, Delaware corporation, owns petroleum-producing resources refining plants sells what has been termed these proceedings 'Western area'—Arizona, Idaho, Nevada, Oregon, Utah Washington. It through own service stations, operators industrial users. largest seller gasoline area. In 1946 combined sales amounted 23% total taxable gallonage sold there that year: company-owned stations constituted 6.8% total, under dealing 6.7% total; remainder were Retail service-station Standard's six leading competitors absorbed 42.5% gallonage; remaining retail divided between more than seventy small companies. undisputed major employ similar arrangements. 1948 only 1.6% outlets known 'split-pump' is, one supplier. Exclusive had entered, 12, 1947, 5,937 16% Western area, which purchased 1947 $57,646,233 worth $8,200,089.21 other products. Some are covered contract so all about 8,000 here issue. These several types, but feature common each dealer's undertaking purchase his requirements Two covering 2,777 outlets, bind product well tires, tubes, batteries. written agreements, 4,368 number, only. also found dealers entered 742 oral they agreed sell gasoline. some instances who contracted their batteries, orally Of 2,712 varying specified terms; rest effective year terminable 'at end first 6 months year, at giving least 30 days prior thereto notice. * *' Before 1934 made pursuant agency adopted requirements-purchase forms, 1938 wholly superseded method distribution. 4 Between 1936 remained practically constant proportion area's sales; lubricating oil declined slightly during period 6.2% 5% total. Its proportionate tires batteries higher 1936, though somewhat lower intervening years; have never, either products, exceeded 2% 5 Since Act directed prohibiting specific practices even not broad terms Act,4 it appropriate consider whether enjoined fall within prohibition narrower Act. relevant provisions are: 'It shall be unlawful person engaged commerce, course lease make sale goods, wares, merchandise, machinery, supplies, commodities, patented unpatented, use, consumption, resale on condition, agreement, understanding lessee purchaser thereof deal goods competitor seller, where effect lease, sale, may substantially lessen competition tend create monopoly line commerce.' 7 Obviously issue would proscribed if stopped short qualifying clause beginning, 'where *.' If given clause, however, no means obvious, view minority share 'line commerce' involved, fact recently increased, claims economic utility, monopoly. therefore, must construed. 8 held requirement showing actual potential lessening ncy establish adequately met proof 'a substantial number amount considered comparatively not.' Given quantitative substantiality, competition—so court reasoned—is automatic result, very existence denies opportunity competing suppliers excludes access controlled those dealers. Having this standard proof, excluded immaterial testimony bearing 'the commercial merits demerits present system contrasted prevailed establishment prevail declared arrangement (invalid).' likewise deemed unnecessary findings, basis evidence admitted, increased decreased since inauguration requirements-contract system, decreased, matters shed light comparative status before after adoption system. concluded: 9 'Grant that, basis, relation entire trade restraint integral. Admit control distribution results costs abandonment might increase costs. Concede further, into good faith, honest belief consequent concentration representation economically beneficial industry public, continued over fifteen years openly, notoriously unmolested Government, practised companies Standard, quantity supplied them declined, basis. Nevertheless, & N Dec. Immigration Nationality Decisions read latest cases Court, am compelled find involved both statutes. For affect injuriously sizeable part interstate or,—to current phrase—'an appreciable segment' 10 us, agreements 'may competition' simply portion commerce affected demonstrated competitive activity actually diminished probably will diminish.5 11 became effective, passed applicability eight cases, five upheld determinations challenged agreement Section. Three these—United Shoe Machinery Corporation versus States, 258 451, 42 363, 66 708; International Business Machines 298 131, 56 701, 80 1085; Salt company 332 392, 68 92 20—involved tying article purchases unpatented used connection article. two cases—Standard Fashion Magrane-Houston Co., 346, 360, 653; Originators' Guild Federal Trade Comm'n, 312 457, 61 703, 85 949—involved unlike 12 case, holding violated, settled question interpretation 3. said: 13 'Section condemns 'may' But we do think purpose using word prohibit mere possibility consequences described. intended prevent circumstances disclosed competition, tendency monopoly.' pages 356, 357, page 362, 653. See Comm. Morton 334 37, 46, n. 14, 822, 828, 1196, American Law Reports, 2nd Series 260. 14 went add Section 'was reach every remote shown substantial', because finding courts did amply supported defendant two-fifths nation's pattern agencies, pause indicate 'remote' 'substantial' should drawn. 15 All later regarded domination market sufficient itself support inference lessened. referring, inter alia, incorporated United's leases machinery requiring materials United, observed: 16 'That restrictive necessarily believe, apparent. When occupies dominating position supplying shoe classes covenants, signed binding upon him, effectually him acquiring lessor, except risk forfeiting right machines furnished Company, absolutely essential prosecution success business.' 457—458, 365, 708. 17 defendants sole manufacturers tabulating machine cards. lessees bound clauses cards defendants, who, them, whole $3,000,000 annual gross business also. 18 'These facts, others, stop enumerate, can leave doubt condition appellant's competition,' tends monopoly, important step creation 136, 704, 1085. 19 case association dress 60% cheapest women's garments. rejecting relevance Guild's 'reasonable necessary' measure protection against devastating evils growing pirating original designs,' again emphasized presence power: 20 'The object combination, power, coercion could practice rival brought policy Acts.' 467—468, Ct. 707—708, 949. 21 thus apparent none controls disposition appeal, gasoline, including hardly large enough conclude matter law dominant position, nor trial find. indicate, sort probable inferences drawn important, extent position. 22 three decided inapplicable lend necessary. are, Sinclair 261 463, 43 450, 67 746, Pick Mfg. General Motors Corp., 299 57 1, 81 4. third Curtis Pub. 260 568, 210, 408—went off ground relevance. pumps storage tanks Sinclair's patents evidently otherwise supply. Although Commission few needed pump, concluded record does show practise unduly competition.' 475, 454, 746. conclusion summarized: 23 'Many seek excellent brands business. free buy wherever he chooses; freely accept many wishes discontinue them. He carry judgment dictates permit, save cannot lessor's equipment dispensing another's brand. By investing sum, outfit without hindrance. respondent's pump needs.' same 474, 453, 24 differs consistently how has,6 significant importance attaches, absence supplier dominated market, practical contracts. true affirmed brief per curiam concurred Appeals, parts manufactured 'had way 2, 25 then came 20. That decision, nonpatented product, rejected necessity demonstrating once established volume affected' 'insignificant insubstantial' 'foreclose (a) market.' 396, 15, Upon summary granting injunction leasing utilization salt defendant. pleadings admissions country's producer purposes, owned leased machines, 900 outstanding, 1944 $500,000 machines. equivalent unobtainable, indicated defendant, irrelevant competition.7 clear, unless distinction purposes $58,000,000 comprising area goes far toward supporting lessened.8 26 favor confining laid down differences noted. Tying serve beyond suppression competition. justification most often advanced defense manufacturer device—fails usual situation specification type quality device enough. anufacturer's brand tied superior competitors, buyer presumably choose anyway. situation, indeed, necessitate specifications substitute detailed practicably supplied. prospect reducing persuade adopt device, conferred patent obtained, induce enter one. Miller, Unfair Competition 199 et seq. (1941); Note, 49 Col.L.Rev. 241, 246 (1949). affords strong foundation presumption limit 27 Requirements contracts, hand, advantage buyers sellers, indirectly consuming public. buyer, assure supply, afford rises price, enable long-term planning costs,9 obviate expense necessary commodity having fluctuating demand. From seller's point view, possible reduction selling expenses, give price fluctuations, and—of particular newcomer field whom know capital expenditures justified—offer predictable market. Stockhausen, Commercial Anti-Trust Aspects Term Contracts, N.Y.U.L.Q.Rev. 412, 413 (1948). They useful, moreover, trying foothold counterattacks entrenched competitors. id. 424 seq.; Excelsior Motor Supply Sound Equipment, Inc., Cir., 73 Reporter, 725, 728; Talking Pictures Tel. D.C.Del., F.Supp. 650, 666.10 advantages account coverage weaker lessened clauses, especially latter device. A patent, although substitutes article, prima facie control. And dispose merely citing 28 Thus, appended equally pertinent considerations support, certainly reasoning, standards fulfill conditions clause. accepted, various tests usefulness become relevant. Among flourished despite test much tendered appellant important. See, examples consideration evidence, baron S. Pearsall Butter Comm., 292 KF105 F3 720; 641, 644, affirmed, Likewise being suppress conformity length term reasonable used. Corn Products Refining 144 211, 220, 324 726, 65 961, 89 1320; Pullman D.C.E.D.Pa., 50 123, 127—129. Still another struggling competitor. Perhaps defendant's degree control, greater dominance stronger factor attaining maintaining stifle rather legitimate needs. supra, 949.11 29 Yet serious difficulties attend attempt apply tests. We assume, below, improvement coincided effect. assume further duration excessive dominate when adopted, deteriorated remembered noted relative fell use,12 farfetched infer individually maintain standing time collectively, collusively, late arrival wresting away insignificant If, result seem unimportant short-run by-product stability efficiency costs, theory antitrust laws long-run community depends removal restraints 949; Aluminum America, 148 416, 427—429. Moreover, demand bare happened require firm prediction ordering practice, virtually impossible meet, ill-suited ascertainment courts.13 instituted, agents, revert below sustained. Or might, presented itself, now operated independently managed Incorporated extending advantage, alternatives just insofar resulted encounter anti-monopoly 416. points out, order quantities meet estimated needs foreclose degree. So long diverse ways restricting remain open, conclusive reduced level reached maintained. 31 form different arrangements, integration otherwise, To interpret section explicitness conferring immunity singles out. Congress authoritatively determined detrimental left determination ultimate demands 'public interest,' English lawmakers, considering our experience legislatively undesirable, chosen do.14 Though alternative buying out making dependent employees detriment public interest perpetuation issue, like choice freer submitted decision. faced, broadly phrased expression general policy, qualification narrowly statutory provision. 32 language added until House Senate bills Conference. conferees responsible adding pains, answering protestations seriously weakened Section, disclaim intention augment burden sustained establishing violation it.15 seems likely hand set up express thought Act, meant, reestablish meeting interpreted requiring.16 investigation us scope adumbrated reference unreasonable Chicago Board 231, 38 242, 62 683.17 insist stultify force Congress' declaration prohibited be' desirable confine themselves single supplier, continue contract, obtaining commitment patronage refrain looking elsewhere. 33 conclude, satisfied foreclosed affected. gainsaid observance effectively whatever attract patronage, clear substantial. widespread availability assured inconclusive. creates clog remove wherever, actual, impede activity. 34 need go 35 One last remains disposed of. Appellant contends dealers, nearly produced therefore exempted decree. finds contention Addyston Pipe Steel 175 247, 96, 109, 44 136. outside State intrastate commerce. suggested originating State. dealt diminution action rest, State, combination among restrain Modification required doing confined transactions taking place 36 affirmed. 37 Affirmed. DOUGLAS. 39 theories Laws favored discouraged big philosophy underlying 247 32, 473, 968; 251 417, 40 293, 64 343, Reports 1121; Harvester 274 693, 47 748, 71 1302, bigger bigger. Monopoly flourished. Cartels hold nation. trusts wax strong.1 There less independent. full felt economy. deflected. Niggardly interpretations robbed efficacy. exceptions. Price fixing illegal se.2 obtain monopolies articles condemned.3 Monoploy built tactics, e.g., trade, broken up.4 comes gentlemanly ways—by mergers, assets like—the teeth largely 41 announced coupled intent monopolize, unlawful.5 date principle bright promise application.6 Under guise received approval easy growth. Columbia 495, 1107, 1533, represents attitude problem. Steel—the giant industry—was allowed fasten tentacles tighter economy steel Far West beginning develop. power hands changed habits thought. new age introduced. 'monopoly regime friendly alliances, quick accommodation prices benefit associations, Brandeis said euphemistically called 'cooperation.'7 While fields, alarmingly many. lessons taught curse bigness forgotten high places. Size menace existing putative escape influences gravitate few. independents swallowed entrepreneurs absentee owners. Then loss citizenship. Local leadership diluted. leader village becomes outsiders policy. Clerks distant take resident proprietors beholden nation pays almost ceaseless growth industry. problems appear surface relationship us. heart 45 knowledge host filling country locally operated. Others involves directly former. pertains independents. plain station owner available customer suppliers. inventory advance. His withdrawn other. day-to-day purchases. Whether meaning vary 46 answers formula decisions promises wipe segments operators. keeps alive. survive units. ideal view8 offers worse both. elimination sets stage build empires own. development. advisory well, stating impunity empires. 'agency' companies, cf. 408, outright acquisition subsidiary corporations otherwise. supra. approved judicial doctrine devices increasing field. 48 given, dissent outlawry facts. minor compared damage flow judicially alternative. Our abstractions realities modern life. Today vigorous room survival inducement taken away, expect move supplant stations. still tragic small, man supplanted clerks. accessories (which case) diminish cease altogether. command increasingly larger wholesale markets. today's displaced relatively innocuous virulent encourages. act unwittingly. consciously pushes direction. approves designed prevent. helps remake America image cartels. 51 JACKSON, CHIEF JUSTICE BURTON join, dissenting. 52 unable join reasons state, shortly. 53 Statutes-at-Large 730, 731, Code KF62 Annotated KF65 U5 14. indispensable Government's accused 54 agree met. sure, cover automatically bring prohibitions statute. say, violate provided effects prove forbidden assumption did, me unwarranted. 55 allow affirmatively arrangement. Such subject admitted reaching decision illegal. regard unfortunate submits issues determination. leaves vague warning guide, event, process adapted exploration industry-wide, nation-wide, questions. decide, arrive fair hear parties weigh inherent probabilities verity compare experience, disinterestedness credibility opposing witnesses. tedious too enlightening, guess dark. adequate upset long-standing widely practiced 58 vacate direct complete hearing weighing 59 However, refuses se law, substance hold. convinced suppressing instead waging look retailers it, freedom elsewhere prevents Many already bought take. retailer conduit fields driver's tank, compete get consumer—the whose gas me, decide all-important consumer business, keen. company-owned, instrumentalities waged. 60 inherently real tries providing timely supplies oil, car reliable quality. No retailer, agent independent, always, intermittently, sell. Retailers' capacity usually limited accumulate stocks. it. Government someone stand by, ever ready fill turn undertake requirements. driving able rely retail. wholesaler incentive stocks transport facilities irregular deliveries caused varied demands. so, bad permitted overall aspects, law. case.1 lash backs businessmen compete, fairness whenever hit successful competing. That, learn appears reverse. proceedings; activities managing 'Every trust conspiracy, foreign nations, hereby illegal: 209, amended, 1. Territory insular possession jurisdiction fix charged therefor, discount from, rebate upon, commodities lessor After Bill, H.R. 15657, House, struck condemnation pending Bill. motion reconsider vote, Senator Reed Missouri argued unlikely outlaw Henry Dick 224 364, 645, Ann.Cas.1913D, 880, Cong.Rec. 14088, 14090—92. to. 14223. course, nationwide, purchasers cannot, matter, quantitatively industry's assumed covered, sources region, purely inadequate preservation stake, Cf. Indiana Farmer's Guide Publishing Prairie Farmer 268, 279, 182, 185, 79 356; Yellow Cab 218, 226, 1560, 1564, 91 2010. criteria substantiality involving nation-wide measuring seven-state u ges similarly designated station. Putting aside commonly station, marked difference confines outlet mechanism brand: sites, number; not, least, case. maximum strategically located arrangements such. depended Court's willingness weaken passing perhaps considered, classification, agreements. provides paid 'Company's posted generally delivery.' members opposed 15657 (the 3) denying newcomer, see Cong.Rec.9267, Representative McCoy New Jersey offered amendment, 9398, 'with destroying competitor,' others ground. 9400—02, 9409. amendment rejected. 9410. exposition summarized, 417—31 request filled questionnaires distributed 1937 1946. fluctuated, figures group maintained improved Together distributed, 1946, 26,439 approximately 35,000 dual enforcement contemplated capable administration agencies. 734, 736, §§ 21, 25, 25. recognize appraisal data practicable faced task quite judges unequipped skilled assistance. Monopolies Restrictive Practices (Inquiry Control) 1948, July 30, provides, mode procedure, permanent determine 'whether things operate expected interest.' Geo. VI, chapter 66, 6(2). define meant account. noteworthy, hat, investigation, entrusts expert body provision review. approach repeatedly debate States. 449 H.C.Deb. 2046—47, 2058, 2063 (5th ser. 1948); 157 H.L.Deb. 350 1948). Compare 5(2) Interstate Commerce 480, 5(2), U.S.C.A., referring defined interest' York Central Securities 287 24, 45, 48, 77 138; Lowden, 308 225, 248, 84 208. Floyd Arkansas, managers explained 'substantially' deriving quoted passage 229, 99, regulate comprises enact citizen private substantially, indirectly, remotely, incidentally collaterally, States.' 16317—18. Chilton, Senate, bill, stated words mean be.' 16002. Overman, conferee, town 15935. Tobacco 221 106, 179, 632, 648, 663: 'Applying rule reason construction statute, Case 'restraint trade' anti-trust embraced acts combinations prejudice interests ob tructing due which, nature effect, evident acts, etc., restrained statute significance.' Handler, Study Construction Enforcement Antitrust 3—9 (T.N.E.C. Monograph 38, 1941). Australian Industries Preservation 1906, forbids public,' construed Attorney Adelaide S.S. (1913) A.C. 781, detriment. legality imposed regulates thereby promotes destroy ordinarily facts peculiar applied; imposed; probable. history restraint, evil believed exist, adopting remedy, sought attained, facts.' 238, 244, 683. Final Report Recommendations Temporary National Economic Committee, Sen. Doc. 35, 77th Cong., 1st Sess. (1941). analyses, Industry (TNEC 1940) Pages Structure 27, 1941) 231 Distribution Ownership 200 Largest Nonfinancial Corporations 29, 1940); Relative Efficiency Large, Medium-Sized, Small merger movement, century contributed spiraling corporate wealth few, ended. presently midst movement. report, Present Trend Corporate Mergers Acquisitions, 17, 80th (1947), Page 6, movement following V-J day parallels closely sharp upward took World War I.' causes varied. Lynch, Concentration Power (1946), 3—4 'Even entrance war placing served intensify struggle concerns. 1941 modifications, established. reported fifty-six firms, one-half percent manufacturing establishments country, awarded 75 group, inasmuch June, 1940, March, 1943, 100 million dollars prime war-supply awarded. Seventy corporations; percent, percent. 'Studies Department 1943—1944 throw additional trend concentration. Pearl Harbor firms precipitously. Despite wartime boom, discontinued operations replaced entries; 1943 1941. numerous inlications marked. 1942 workers employed 95 smallest) whereas largest) related study indicates January 1941, employing fewer 125 experienced employment value (attributable principally increases) percent; period, 96 percent.' example Socony-Vacuum 310 150, 811, 1129. Mercoid Mid-Continent 320 661, 88 376. Griffith, 100, 941, 1236; Schine Theatres 110, 947, 1245; Paramount Pictures, 172, 915, 936, 1260. Those expended Hartford Empire 323 386, 373, 322—an indefensible whereby tightest retain illgotten gains summed describe effecting so-called dissolution defenders 'appear discovered Constitution implied prohibition: 'What illegally joined together, let put asunder." Curse o Bigness (1935) 103. 129—130, 957—958, 1245. majority obtained vertical picture 173—174, 937, Other People's Money (1933) 110. plight operator Control Petroleum Major Companies 39, 47, 52. Review Criticism Behalf (New Jersey) Sun Rejoinder Author 39—A, derive comfort thing started product. customers, canners, consumers invention therein.

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