Standard Oil Co. v. FTC
340 U.S. 231 (1951)

Annotate this Case

U.S. Supreme Court

Standard Oil Co. v. FTC, 340 U.S. 231 (1951)

Standard Oil Co. v. Federal Trade Commission

No. 1

Argued January 9-10, 1950

Reargued October 9, 1950

Decided January 8, 1951

340 U.S. 231

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

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 l/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. 340 U. S. 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. 340 U. S. 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. 340 U. S. 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. 340 U. S. 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. 340 U. S. 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

Page 340 U. S. 232

derive a competitive advantage from them or may, in the natural course of events, reduce their own resale prices to their customers. P. 340 U. S. 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. 340 U. S. 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. 340 U. S. 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

Page 340 U. S. 233

finding as tp 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. 340 U. S. 233-251.

173 F.2d 210 reversed.

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. 340 U. S. 251.

MR. JUSTICE BURTON delivered the opinion of the Court.

In this case, the Federal Trade Commission challenged the right of the Standard Oil Company, under the Robinson-Patman

Page 340 U. S. 234

Act, [Footnote 1] to sell gasoline to four comparatively large "jobber" customers in Detroit at a less price per gallon than it sold like gasoline to many comparatively small service station customers in the same area. The company's defenses were that (1) the sales involved were not in interstate commerce, and (2) its lower price to the jobbers was justified because made to retain them as customers and in good faith to meet an equally low price of a competitor. [Footnote 2] The Commission, with one member dissenting, ordered the company to cease and desist from making such a price differential. 43 F.T.C. 56. The Court of Appeals slightly modified the order and required its enforcement as modified. 173 F.2d 210. We granted certiorari on petition of the company because the case presents an important issue under the Robinson-Patman Act which has not been settled by this Court. 338 U.S. 865. The case was argued at our October Term, 1949, and reargued at this term. 339 U.S. 975.

For the reasons hereinafter stated, we agree with the court below that the sales were made in interstate commerce, but we agree with petitioner that, under the Act, the lower price to the jobbers was justified if it was made to retain each of them as a customer and in good faith to meet an equally low price of a competitor.

I

. FACTS

Reserving for separate consideration the facts determining the issue of interstate commerce, the other material

Page 340 U. S. 235

facts are summarized here on the basis of the Commission's findings. The sales described are those of Red Crown gasoline, because those sales raise all of the material issues and constitute about 90% of petitioner's sales in the Detroit area.

Since the effective date of the Robinson-Patman Act, June 19, 1936, petitioner has sold its Red Crown gasoline to its "jobber" customers at its tank-car prices. Those prices have been 1 1/2

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