362 F.Supp. 1331 (N.D.Cal. 1972), C-52334, United States v. Standard Oil Co. of California

Docket Nº:C-52334.
Citation:362 F.Supp. 1331
Party Name:UNITED STATES of America, Plaintiff, v. STANDARD OIL COMPANY OF CALIFORNIA, Defendant.
Case Date:October 26, 1972
Court:United States District Courts, 9th Circuit, Northern District of California
 
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Page 1331

362 F.Supp. 1331 (N.D.Cal. 1972)

UNITED STATES of America, Plaintiff,

v.

STANDARD OIL COMPANY OF CALIFORNIA, Defendant.

No. C-52334.

United States District Court, N.D. California.

Oct. 26, 1972

Judgment Dec. 12, 1972.

Judgment Affirmed June 4, 1973.

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Bernard M. Hollander, Donald H. Mullins and Alan B. Pick, Antitrust Division, Dept. of Justice, Washington, D. C. and Anthony E. Desmond, Antitrust Division, Dept. of Justice, San Francisco, Cal., for plaintiff.

William E. Mussman, Thomas J. Klitgaard and Charles A. Storke, of Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CONTI, District Judge.

INTRODUCTION

The Findings of Fact and Conclusions of Law are, where appropriate, followed by reference to exhibits, transcript testimony page numbers and legal authorities.

FINDINGS OF FACT

I. 1. Jurisdiction and Venue

This is an action by the United States under Section 4 of the Sherman Act (15 U.S.C § 4) to have the court adjudge that Standard Oil Company of California (hereinafter "SoCal") has engaged, since at least 1956, in a continuing combination and conspiracy to unreasonably restrain and to monopolize the distribution and sale of petroleum products in American Samoa, and adjudge that SoCal has entered into and utilized long term requirements contracts with the primary non-governmental consumers of the major petroleum products used in Samoa (diesel fuel and aviation fuel) all in unreasonable restraint of trade, in violation of Section 3 of the Sherman Act (15 U.S.C. § 3), and to have the court enjoin the maintenance, continuation or resumption of said violations and grant mandatory relief.

2. Defendant SoCal is a corporation organized and existing under the laws of the State of Delaware with its principal offices in San Francisco, California. It transacts business and is found within the Northern District of California. [GX 1(2), (3); GX 2(9)].

3. SoCal is engaged in trade and commerce in the Territory of American Samoa and between that Territory and states or foreign nations. [GX 1(3-5)].

4. The amount of trade and commerce involved in the sale and distribution of petroleum products in American

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Samoa is substantial. [GX 1(6); Amended GX 23; Amended GX 24].

II. Description of the Defendant

5. SoCal engages in exploration, production and transportation operations with respect to crude oil, and in refining, manufacturing, marketing, shipping and research operations with respect to refined petroleum products in the United States and in certain foreign countries. [GX 1(3)].

6. SoCal has, since July 1956, been virtually the only supplier and distributor of petroleum products in the Territory of American Samoa [GX 2], where it sells diesel fuel, aviation gasoline and jet fuel, gasoline and oil products for automobiles and other petroleum products, all of which are transported to American Samoa by tanker from SoCal's refinery and plant in Hawaii. [GX 1(5); GX 14].

7. The bulk of SoCal's sales in American Samoa since 1956 has been diesel fuel sold through the two canners (Van Camp Sea Food Company and Star-Kist Foods, Inc.) for use by their foreign tuna fishing fleets and to the Government of American Samoa ("GAS") for the generation of electricity for the Territory, and aviation fuels sold to Pan American World Airways and to the United States Government for its military planes. [D-41, A, D-41 B, D-41 C, D-41 D].

III. SoCal's Course of Conduct in American Samoa.

A. The Combination or Conspiracy to Unreasonably Restrain and Monopolize Trade and Commerce.

1. SoCal's Relationship with GAS

8. From its first consideration of entry into the Samoan market, SoCal intended to establish and maintain a monopoly position there. [D 3 G (S 605 T)]

9. SoCal's petroleum products are stored in American Samoa in a tank farm owned by the Government of American Samoa, and in storage facilities at Tafuna Airport erected on GAS land, all of which storage facilities have been used, occupied and controlled by SoCal under a Permit and Agreement dated July 16, 1956, the term of which ran for 10 years from July 1, 1956, renewable at SoCal's option for four additional terms of 10 years each. [GX 1(5); GX 9(2)].

10. In the negotiations between SoCal and GAS which preceded the Department of Interior's approval of the Permit and Agreement of July, 1956, then-Governor Lowe and then-Attorney General Coleman, at SoCal's behest, failed to follow "fitting and proper" procedures: [TR 937]

10(a) Normal procedures for disposal of surplus Government property were not followed. [TR 747].

10(b) Despite the fact that Standard-Vacuum (hereinafter "Stanvac",) which had previously supplied petroleum to Samoa, had asked to be and had been assured that it would be considered as a lessee of the tank farm, SoCal was permitted to formulate the conditions under which Stanvac would be permitted to make an offer, and was permitted to begin direct negotiations with the Attorney General of Samoa prior to the expiration of the time within which Stanvac was to respond. [GX 254, pp. 1-2; TR 752].

10(c) Stanvac's cabled offer of a capital investment was higher than SoCal's initial offer. Lowe and Coleman reported the terms of Stanvac's offer to SoCal and permitted it to alter the terms of its proposal "to give the Governor evidence to show that [its] offer was higher than Stanvac's offer". [GX 254, p. 3; TR 755].

10(d) Although its cabled offer appeared preferable to SoCal's in several other respects, Stanvac was not granted the one month

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extension which it requested to receive an engineer's report then enroute and to finalize its offer. [D-3 Q; TR 753-759].

10(e) The agreement negotiated with SoCal was for a maximum term of 50 years, while Stanvac had suggested a maximum term of only 20 years. [GX 254, p. 2].

10(f) The agreement negotiated with SoCal contained a maximum annual rental of $17,500, while Stanvac had suggested a rental based on volume with no maximum. [GX 254, p. 2].

10(g) Governor Lowe informed the Interior Department that SoCal's offer was better than Stanvac's, without revealing that SoCal had been given special treatment by being allowed to increase its initial bid. [D-3 Q].

11. Had Adolf Edward, Jr., Interior's Associate Solicitor for Territories, who was responsible for reviewing the proposed agreement between SoCal and GAS, been aware of the irregularities in the negotiation procedures used in Samoa, he would not have approved of them. [TR 935-937, TR 941-942].

12. The Permit and Agreement of July, 1956, between GAS and SoCal was cancelled by Governor H. Rex Lee on the advice of Interior officials including the Assistant Solicitor on August 11, 1961, "to the extent that it is provided in Article I that such permit will be construed as a lease should the title to the property involved pass from the United States to the Government of American Samoa." [TR 181-184; GX 241, GX 241 A, GX 241 B, GX 242].

13. Said cancellation was never rescinded nor was any lease with SoCal ever signed by Governor Lee. [TR 188].

14. Because said cancellation was never rescinded, nor any lease with SoCal subsequently signed, the Permit and Agreement of July, 1956, between GAS and SoCal did not ripen into a lease agreement as would have occurred had said cancellation not been made. [GX 257, GX 243, GX 244, GX 245, GX 245 A & B].

15. No formulation of prices to be charged in American Samoa by SoCal is contained in the Permit and Agreement of July, 1956. The only such formulation is contained in a unilateral letter from SoCal to GAS which is not incorporated or referred to in said Permit and Agreement, and which bases Samoan prices upon the level of domestic posted prices in Richmond, California, over 4,500 miles away. [D-3-0].

16. The only provision in the Permit and Agreement of July, 1956, providing for escalation of the maximum annual rental of $17,500 for use of GAS' storage facilities, ties any such escalation to the price of crude oil in Richmond, California, and bears no relationship to volume usage of the facilities which has increased markedly since 1956, while crude oil prices in Richmond, California, remained relatively stable. [GX 9; TR 925].

17. Each year since the fiscal year July 1, 1962-June 30, 1963, SoCal's usage of GAS' storage facilities has exceeded the volume which requires a maximum rental payment, but because of the maximum rental provision in the Permit and Agreement of July, 1956, only $17,500 has been paid to GAS by SoCal. [GX 10a].

18. Normal rental for a comparable bulk storage plant would be closer to $100,000 per year than $17,500 per year. [TR 2603, TR 2605-6].

19. In 1961, the Permit and Agreement of July, 1956, was used by SoCal in furtherance of its aforesaid continuing combination and conspiracy, to dissuade Shell Oil Company of New Zealand from constructing or leasing storage and fueling facilities at Tafuna Airport in American Samoa, with the effect of permitting SoCal to maintain its monopoly in American Samoa: [TX 253, GX 253 A-D]; TR 783-798, TR 963-966].

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19(a) In about February, 1961, SoCal refused to work out an arrangement with Shell to allow Shell to supply TEAL (now Air New Zealand) with aviation fuel at Tafuna Airport. [GX 253 AA].

19(b) When Shell sought to construct its own storage and pumping facility at Tafuna Airport, then-Governor Coleman took the position, after consultation with SoCal, that SoCal had the "exclusive right to install fueling equipment and to service all aircraft using the field." [GX 253].

19(c) Shell never entered the aviation fuel market in Samoa except by arrangement with SoCal. [TR 791-792; GX 37, GX 38].

19(d) Because of the high price of aviation fuel supplied to Air New Zealand at Tafuna Airport, Air New Zealand no longer uplifts aviation fuel at that point, but instead fuels...

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