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SUPREME COURT OF THE UNITED STATES

Syllabus

STANDARD OIL CO. v. FEDERAL TRADE COMMISSION

340 U.S. 231

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT.

No. 1. Argued January 9-10, 1950; Reargued, October 9, 1950 -- Decided January 8, 1951

The Federal Trade Commission ordered petitioner to cease and desist from selling gasoline to four comparatively large "jobber" customers in Detroit at a lower price than it sold like gasoline to many comparatively smaller service station customers in the same area. 43 F. T. C. 56. The Court of Appeals ordered enforcement of the order with a slight modification. 173 F.2d 210. This Court granted certiorari. 338 U.S. 865.

Reversed and remanded, p. 251.

1. Under 2 (b) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U. S. C. 13 (b), petitioner was justified in selling gasoline in interstate commerce to four comparatively large "jobber" customers in Detroit at 1 1/2 cents per gallon less than it sold like gasoline to many comparatively small service station customers in the same area, if the lower price to the "jobbers" was made to retain each of them as a customer and in good faith to meet a lawful and equally low price of a competitor -- even though the effect of such price discrimination was to injure, destroy or prevent competition. Pp. 233-251.

(a) The amendments made by the Robinson-Patman Act restricted the scope of the defense now provided by 2 (b) to a price reduction made to meet in good faith a lawful and equally low price of a competitor; but they did not deprive this defense of its character as an absolute defense nor condition it upon the absence of any resulting injury to competition. Pp. 240-251.

(b) This conclusion is consistent with Corn Products Refining Co. v. Federal Trade Commission, 324 U.S. 726, and Federal Trade Commission v. Staley Mfg. Co., 324 U.S. 746. Pp. 243-246.

(c) There has been a widespread understanding that, under the Robinson- Patman Act, it is a complete defense to a charge of price discrimination for the seller to show that its price differential has been made in good faith to meet a lawful and equally low price of a competitor; and this Court sees no reason to depart now from that interpretation. Pp. 246-250.

(d) Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor. P. 249.

(e) In a case where a seller sustains the burden of proof placed upon it to establish its defense under 2 (b), this Court finds no reason to destroy that defense indirectly, merely because it also appears that the beneficiaries of the seller's price reductions may derive a competitive advantage from them or may, in the natural course of events, reduce their own resale prices to their customers. P. 250.

(f) This Court rejects a construction of the proviso of 2 (b) which would make the defense afforded thereby dependent upon the conclusion which the Commission might reach in weighing the potentially injurious effect of a seller's price reduction upon competition at all lower levels against its beneficial effect in permitting the seller to meet competition at its own level. P. 251.

2. Petitioner obtains gasoline from fields in Kansas, Oklahoma, Texas and Wyoming, refines it in Indiana, and distributes it in 14 middle western states. Gasoline sold by it in the Detroit area is carried by tankers on the Great Lakes from Indiana to petitioner's marine terminal at River Rouge, Mich. Enough is accumulated there during each navigation season so that a winter's supply is available from the terminal. It remains there or in nearby bulk storage stations for varying periods. While there, the gasoline is owned by petitioner and en route from its refinery in Indiana to its market in Michigan. Although the gasoline is not brought to River Rouge pursuant to orders already taken, the demands of the Michigan territory are fairly constant, and the demands of petitioner's customers can be estimated accurately. Gasoline sold to customers in Detroit is taken from that at the terminal.

Held:

Such sales are in interstate commerce within the meaning of 1 and 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U. S. C. 12, 13, and are not deprived of their interstate character by such temporary storage of the gasoline in the Detroit area. Pp. 236-238.

3. The Federal Trade Commission instituted proceedings to challenge the right of petitioner, under 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U. S. C. 13, to sell gasoline in interstate commerce to four comparatively large "jobber" customers in Detroit at 1 1/2 cents per gallon less than it sold like gasoline to many comparatively small service station customers in the same area. Petitioner presented evidence tending to prove that its lower price to each "jobber" was made in order to retain that "jobber" as a customer and in good faith to meet an equally low price of one or more competitors. The Commission held as a matter of law that such evidence was not material, and it made no finding of fact on this question. It found that the effect of such price discriminations was to injure, destroy and prevent competition; and it ordered petitioner to cease and desist from making such a price differential.

Held:

The Commission should have made a finding as to whether or not petitioner's price reduction was made in good faith to meet an equally low price of a competitor within the meaning of 2 (b) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U. S. C. 13 (b). Pp. 233-251.

173 F.2d 210, reversed.

Mr. Justice Burton delivered the opinion of the Court.


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