United States Supreme Court Cases & Opinions

U.S. Supreme Court

FTC v. Texaco, Inc., 393 U.S. 223 (1968)

Federal Trade Commission v. Texaco, Inc.

No. 24

Argued November 13, 1968

Decided December 16, 1968

393 U.S. 223

Syllabus

Respondent Texaco Inc., one of the country's largest petroleum companies, made an agreement with respondent Goodrich to promote the sale of Goodrich tires, batteries, and accessories (TBA) to Texaco's service station dealers. The Federal Trade Commission (FTC) in this proceeding and two related proceedings, each of which involved a major oil company and a major tire manufacturer, challenged the sales-commission arrangements as an unfair method of competition in violation of § 5 of the Federal Trade Commission Act. Relying on this Court's decision upholding invalidation of such an arrangement in one of these cases, Atlantic Refining Co. v. FTC, 381 U. S. 357 (1965), the FTC, on remand, reaffirmed its conclusion that the Texaco-Goodrich arrangement violated § 5 of the Act. The Court of Appeals reversed on the ground that the evidence did not support the FTC's conclusions. Respondents contend, inter alia, that the absence here of "overt economic practices" distinguishes this case from Atlantic.

Held:

1. The FTC's determinations of "unfair methods of competition" under § 5 of the Act are entitled to great weight. Pp. 393 U. S. 225-226.

2. Texaco, as the record clearly shows and respondents do not dispute, holds dominant economic power over its dealers. Pp. 393 U. S. 226-227.

3. The sales-commission system for marketing TBA is inherently coercive, and, despite the absence here of the kind of overtly coercive acts shown in Atlantic, Texaco exerted its dominant economic power over its dealers. Pp. 393 U. S. 228-229.

4. The FTC correctly determined that the Texaco-Goodrich arrangement adversely affected competition in marketing TBA, the TBA manufacturer having purchased the oil company's economic power and used it as a partial substitute for competitive merit in gaining a major share of the substantial TBA market. Pp. 393 U. S. 229-231.

127 U.S.App.D.C. 349, 383 F.2d 942, reversed and remanded.

Page 393 U. S. 224