Standard Oil Co. v. FTC

Decision Date30 July 1979
Docket NumberCiv. No. H 78-483.
Citation475 F. Supp. 1261
PartiesSTANDARD OIL COMPANY, Gulf Oil Corporation, Mobil Oil Corporation, Standard Oil Company of California, Atlantic Richfield Company, Shell Oil Company and Exxon Corporation, Plaintiffs, v. FEDERAL TRADE COMMISSION, Michael Pertschuk, Chairman, Paul Rand Dixon, Commissioner, Elizabeth Hanford Dole, Commissioner, David A. Clanton, Commissioner, Robert Pitofsky, Commissioner, and the United States of America, Defendants.
CourtU.S. District Court — Northern District of Indiana

Kirkland & Ellis, Chicago, Ill., for Standard Oil Company (Indiana).

John E. Bailey, Houston, Tex., for Gulf Oil Corporation.

Howrey & Simon, Washington, D.C., for Exxon Corporation and Shell Oil Corporation.

Singleton, Levy & Crist, Highland, Ind., Local Counsel, for all plaintiffs.

Pillsbury, Madison & Sutro, San Francisco, Cal., for Standard Oil Company (California).

Steptoe & Johnson, Washington, D.C., for Atlantic Richfield Company.

Donovan, Leisure, Newton & Irvine, Charles F. Rice, New York City, for Mobil Oil Company.

Michael N. Sohn, William A. E. Doying, Washington, D.C., for Federal Trade Commission.

Anthony J. Steinmeyer, Paul A. Gaukler, Washington, D.C., for Department of Justice.

Andrew B. Baker, Jr., Asst. U.S. Atty., Hammond, Ind., for United States of America (Local).


McNAGNY, District Judge.

Plaintiffs are seven of the eight respondents in a Federal Trade Commission ("FTC") adjudicative proceeding initiated on July 18, 1973, In the Matter of Exxon Corp., et al., Docket No. 8934 ("Dkt. 8934"). Plaintiffs challenge certain aspects of that ongoing proceeding and have brought this action to secure declaratory and injunctive relief. The Court has jurisdiction under 28 U.S.C. §§ 1331, 1337, and 1361. Venue is properly laid in this district under 28 U.S.C. § 1391(e) because plaintiff Standard Oil Company is incorporated and resides in the State of Indiana. Before the Court today are the cross motions for summary judgment tendered by plaintiffs and defendants. Both motions are granted in part and denied in part.

The reasoning of the Court is set forth below, and structured as follows. The Court will first set forth background information regarding Dkt. 8934 and then state generally the relief sought by plaintiffs in this action. After a general discussion of the reviewability of Dkt. 8934, the Court will analyze the requested relief in detail. The Court will conclude by granting to plaintiffs certain extremely narrow relief concerning their discovery in Dkt. 8934.


The Dkt. 8934 complaint, issued by the Federal Trade Commission on July 18, 1973 against the nation's eight largest petroleum companies, alleges three separate violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.1 Certain acts and practices of plaintiffs, dating back to 1950, are said: (1) to constitute a combination or agreement to monopolize refining of crude petroleum products in the relevant markets; (2) to have maintained monopoly power over the refining of crude oil into petroleum products in the relevant markets; (3) and to have restrained trade and maintained a noncompetitive market structure in the refining of crude oil into petroleum products in the relevant markets. The first two alleged violations are Sherman Act-type charges. The third alleged violation would appear to be based solely on the FTC's general power to prevent what are perceived as "unfair methods of competition."

For purposes of the complaint, the relevant geographic market encompasses the Eastern and Gulf states, part of the Mid-Continent area, and relevant submarkets. The product market is the "refining of crude oil into petroleum products."

Dkt. 8934 complaint counsel charge that an "intricate web of interrelationships" among the oil companies foster common rather than competitive interests. These interrelationships include joint ventures in crude oil production and pipeline transportation of crude oil, common ownership of plaintiffs, and indirect connections through interrelations with the financial community. Plaintiffs are said to have pursued a common course of action in refusing to sell gasoline and other refined products to independent marketers, in participating in restrictive or exclusionary exchanges and sales of gasoline and other refined products, and in entering into processing arrangements with independent refineries to avoid competition by limiting the availability of refined products to independent marketers.

Plaintiffs are also charged with participating in restrictive or exclusionary transfers of crude among themselves, with having adhered to a system of posted prices to maintain an artificially high level of crude prices, and with accommodating the needs of each other in the transportation of crude through their ownership and control of transporting facilities.2

The effect of these alleged practices is said to have been to increase barriers to entry by keeping profits at the refining level artificially low and limiting the supply of crude oil available to independent refiners and potential entrants. According to complaint counsel, the acts and practices of plaintiffs have foreclosed actual and potential competition at all levels of the petroleum industry, have distorted the normal response of supply and demand for refined products, and have caused profits and returns on investment substantially in excess of those that would have been earned in a competitively structured market.3

In its contemplated relief, complaint counsel proposes that plaintiffs be divested of 40 percent to 60 percent of their refinery capacity, and that 10 to 13 new firms be established. To insure that the new refining companies would have access to major pipelines, complaint counsel further contemplates divestiture of those pipelines typically owned by the refinery, as well as the transfer to the new companies of fractional ownership shares in connecting joint venture pipelines.4

The plaintiffs have denied most of the complaint's allegations and have answered that "all of the acts . . . charged are the sole responsibility of the United States Government."5

To be sure, Dkt. 8934 is an adjudication of some moment:

No antitrust case in the history of American Jurisprudence approaches the potential impact of this proceeding. The Commission has challenged the modus vivendi of the largest American industry; complaint counsel have proposed relief that would restructure eight of the largest sixteen companies in the country and three of the largest five. Not even the historic Standard Oil case in 1911 rivals the importance or the size of this proceeding. That case dealt with the oil industry in its embryonic stage.6

Complaint counsel proposed, very early in the proceeding, that they be allowed three "waves" of discovery, in the fashion of the procedures suggested by the Manual for Complex Litigation.7 During the first wave, selected employees and officers of plaintiffs were deposed on non-substantive aspects of the oil companies' organization and record-keeping. The second wave will consist of document production. During the third wave of discovery complaint counsel will depose employees and officials of the oil companies pertaining to substantive matters. The first wave of discovery by complaint counsel began in January of 1974. More than 63 oil company employees were interviewed or deposed. The second wave of discovery by complaint counsel is now under way as a result of subpoenas issued by the Administrative Law Judge on January 12, 1978,8 as modified by an order dated September 8, 1978.9 Plaintiffs projected that compliance with the subpoena would require the search of over 400 million pages of documents and would require over 1500 man-years of effort at an expense in excess of $40 million, exclusive of the costs in time and money associated with disruption of other businesses which would necessarily result.

Although the motion practice of plaintiffs has been extensive,10 and many collateral judicial actions have been initiated,11 the oil companies have not as yet "been allowed substantial discovery on the Commission or on third parties."12 It has been estimated that Dkt. 8934 will not be heard by the Administrative Law Judge until the mid-1980's, and that the ultimate conclusion of the proceedings may not be reached until well into the 1990's, or, perhaps, until the year 2000.13


The oil companies say they are entitled to the following declarations of their constitutional and statutory rights "and of Defendants' violations thereof:"14

a. That Plaintiffs have a constitutional and legal right to have Docket 8934 conducted as an adjudicative proceeding in accordance with Part 3 of FTC's Rules of Practice and Procedure, and not as an investigative search for a presently unknown case.
b. That Plaintiffs have a constitutional and legal right to receive advance notice of Defendant Federal Trade Commission's intention to obtain Plaintiffs' business records from other governmental agencies or other Federal Trade Commission officials not involved in Docket 8934, for use by Defendants in Docket 8934.
c. That Plaintiffs have a constitutional and legal right to have Defendants preserve records relating to the issues set forth in the Order Stating Issues, entered by the Administrative Law Judge in Docket 8934 on January 9, 1976, pending the granting of specific discovery requests addressed to Defendants by Plaintiffs in Docket 8934.
d. That each Plaintiff has a constitutional and legal right to a statement of the specific unfair acts or practices or unfair methods of competition being prosecuted against it in Docket 8934.
e. That Plaintiffs have a constitutional and legal right to disclosure of any evidence in Defendants' possession supporting the charges being prosecuted against any Plaintiff in Docket 8934 f. That Plaintiffs

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