Federal Trade Commission v. Sinclair Refining Co Same v. Standard Oil Co Same v. Gulf Refining Co Same v. Maloney Oil Mfg Co

• Citation: 261 U.S. 463,43 S.Ct. 450,67 L.Ed. 746
• Decision Date: 09 April 1923
• Docket Number: 637,638,Nos. 213,639,s. 213
• Parties: FEDERAL TRADE COMMISSION v. SINCLAIR REFINING CO. SAME v. STANDARD OIL CO. (New Jersey). SAME v. GULF REFINING CO. SAME v. MALONEY OIL & MFG. CO
• Court: United States Supreme Court

261 U.S. 463

43 S.Ct. 450

67 L.Ed. 746

FEDERAL TRADE COMMISSION

v SINCLAIR REFINING CO.

SAME

v. STANDARD OIL CO. (New Jersey).

SAME

v. GULF REFINING CO.

SAME

v. MALONEY OIL & MFG. CO.

Nos. 213, 637, 638, 639.

Argued March 8 and 9, 1923.

Decided April 9, 1923.

The Attorney General, and Messrs. Adrien F. Busick and Eugene W. Burr, both of Washington, D. C., for petitioner.

Mr. Roy T. Osborn, of Chicago, Ill., for respondent Sinclair Refining Co.

Mr. C. D. Chamberlin, of Cleveland, Ohio, for respondent Maloney Oil & Mfg. Co.

Mr. R. T. Batts, of Pittsburgh, Pa., for respondent Gulf Refining Co.

Mr. J. H. Hayes, of New York Ciry, for respondent Standard Oil Co. (New Jersey).

Mr. Justice McREYNOLDS delivered the opinion of the Court.

In separate proceedings against 30 or more refiners and wholesalers, the Federal Trade Commission condemned and ordered them to abandon the practice of leasing underground tanks with pumps to retail dealers at nominal prices and upon condition that the equipment should be used only with gasoline supplied by the lessor. Four of these orders were held invalid by the Circuit Courts of Appeals for the Third and Seventh Circuits in the above entitled causes (Sinclair Refining Co. v. Federal Trade Commission, 276 Fed. 686; Standard Oil Co. v. Federal Trade Commission, 282 Fed. 81), and like ones have been set aside by the Circuit Courts of Appeals for the Second and Sixth Circuits (Standard Oil Co. v. Federal Trade Commission, 273 Fed. 478, 17 A. L. R. 389; Canfield Oil Co. v. Federal Trade Commission, 274 Fed. 571). The proceedings, essential facts, and points of law disclosed by the four records now before us are so similar that it will suffice to consider No. 213 as typical of all.

July 18, 1919, the commission issued a complaint charging that respondent, Sinclair Refining Company, was purchasing and selling refined oil and gasoline and leasing and loaning storage tanks and pumps as part of interstate commerce in competition with numerous other concerns similarly engaged, and that it was violating both the Federal Trade Commission Act (38 Stat. 717 [Comp. St. §§ 8836a-8836k]), and the Clayton Act (38 Stat. 730 [Comp. St. §§ 8835a-8835p]).

The particular facts relied on to show violation of the Federal Trade Commission Act are thus alleged:

'Paragraph 3. That respondent in the conduct of its business, as aforesaid, with the effect of stifling and suppressing competition in the sale of the aforesaid products, and in the sale, leasing, or loaning of the aforesaid devices and other equipments for storing and handling the same, and with the effect of injuring competitors who sell such products and devices, has within the four years last past sold, leased, or loaned, and now sells, leases, or loans, the said devices and their equipment for prices or considerations which do not represent reasonable returns on the investments in such devices and their equipments; that many such sales, leases, or loans of the aforesaid devices are made at prices below the cost of producing and vending the same; that many of such contracts for the lease or loan of such devices and their equipments provide or are entered into with the understanding that the lessee or borrower shall not place in such devices, or use in connection with such devices and their equipments, any refined oil or gasoline of a competitor; that only a small proportion of the dealers in gasoline and refined oil under such agreements and understandings deal also in similar products of respondent's competitors, and that only a small proportion of such dealers require or use more than a single pump outfit in the conduct of their aid business; that there are numerous competitors in the sale of such products, who are unable to enter into such lease agreements or understandings because of the large amount of investment required to carry out such lease agreements as a competitive method of selling refined oil and gasoline; that there are numerous other competitors of respondent engaged in the manufacture and sale of said devices and their equipments, who do not deal in refined oil and gasoline, and therefore do not sell or lease said devices and their equipments for a nominal consideration on a condition or understanding that their products only are to be used therein; that the said numerous competitors who were unable to enter into such lease agreements or understandings, as aforesaid, have lost numerous customers in the sale of refined oil and gasoline to respondent, because of the business practices of respondent hereinbefore set forth; that the said numerous other competitors of respondent who manufacture and sell said devices and their equipments, but do not sell refined oil and gasoline as aforesaid, have lost numerous customers and prospective customers for the purchase of their devices and equipments, because of the said business practices of respondent, as hereinbefore set forth.'

To show violation of the Clayton Act the complaint alleged:

'Paragraph 3. That the respondent, for four years last past, in the conduct of its business as aforesaid, has leased and made contracts for the lease, and is now leasing and making contracts for the lease, of said devices and their equipments to be used within the United States, and has fixed and is now fixing the price charged therefor on the condition, agreement, or understanding that the lessees thereof shall not purchase or deal in the products of a competitor or competitors of respondent, and that the effect of such leases or contracts for lease, and conditions, agreements, or understandings, may be and is to substantially lessen competition and tend to create a monopoly in the territories and localities where such contracts are operative.'

Respondent answered and evidence was taken. In October, 1919, the commission announced its report, findings, and conclusions, the substance of which follows:

'1. That the respondent is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Maine, with its principal business office located at the city of Chicago, in the state of Illinois, and is now and has been engaged in the business of purchasing and selling refined oil and gasoline, hereinafter referred to as products, and is largely engaged in refining crude petroleum, and that it is now and has been since January 25, 1917, in connection with the aformentioned business, engaged in the leasing and loaning, but not in the manufacture, of oil pumps, storage tanks, and containers and their equipment, hereinafter referred to as devices, in various states of the United States, but not in the District of Columbia, in competition with numerous other persons, firms, corporations, and copartnerships similarly engaged; that prior to the 25th day of January, 1917, the corporate name of respondent was the Cudahy Refining Company.

'2. That the respondent, in the conduct of its business, as aforesaid, and as hereinafter more particularly described extensively refines petroleum and its products and purchases refined oil and gasoline, all hereinafter referred to as 'products,' and also purchases all pumps, storage tanks, or containers, hereinafter referred to as 'devices,' the said devices being used to contain said products, the said products and devices then being handled and stored in the various states of the United States and transported in interstate commerce; that the aforesaid products are sold and the aforesaid devices are leased or loaned by respondent to various persons, firms, corporations, and copartnerships; that in the conduct of its business of purchasing and selling such products, and selling, leasing or loaning such devices, the same are constantly moved from one state to another by respondent, and there is conducted by respondent a constant current of trade in such products and devices between various states of the United States; that there are numerous competitors of respondent, who, in the conduct of their business in competition with respondent, purchase similar products and purchase and manufacture similar devices, the said devices being used to contain said products, the said products and devices then being handled and stored in the various states of the United States and transported in interstate commerce; that the aforesaid products are sold, and the aforesaid devices sold, leased, or loaned, by such competitor of respondent to various persons, firms, corporations, and copartnerships; that in the conduct of their business, as aforesaid, competitors of respondent constantly move such products and devices from one state to another, and there is conducted by said competitors a constant current of trade in such products and devices between the various states of the United States; that respondent has conducted its said business in a similar manner to that above described since January 25, 1917.

'3. That respondent now leases and loans, and has for the period of its business existence leased and loaned devices and equipment for storing and handling its products, and that the monetary considerations received by respondent do not represent reasonable returns upon the investment in such devices and equipment; and also that such leases and loans of said devices and equipment are made for monetary considerations below the cost of purchasing and vending the same, when the business of leasing or loaning said devices and equipment and the returns received thereon are considered separate and apart from the general business and sales policy of the respondent; that respondent's form of contract with the users of such devices and equipment provides in substance that the devices and equipment shall be used for the sole purpose of storing and handling gasoline supplied by respondent, and that the uniform contract used by respondent for leasing such devices and equipment is in form, tenor, and substance as follows: [The ordinary form of contract ...