Tampa Electric Company v. Nashville Coal Company, No. 87

CourtUnited States Supreme Court
Writing for the CourtCLARK
Citation365 U.S. 320,81 S.Ct. 623,5 L.Ed.2d 580
PartiesTAMPA ELECTRIC COMPANY, Petitioner, v. NASHVILLE COAL COMPANY et al
Decision Date27 February 1961
Docket NumberNo. 87

365 U.S. 320
81 S.Ct. 623
5 L.Ed.2d 580
TAMPA ELECTRIC COMPANY, Petitioner,

v.

NASHVILLE COAL COMPANY et al.

No. 87.
Argued Dec. 15, 1960.
Decided Feb. 27, 1961.

Page 321

Mr. William C. Chanler, New York City, for petitioner.

Mr. Abe Fortas, Washington, D.C., for respondents.

Mr. Justice CLARK delivered the opinion of the Court.

We granted certiorari to review a declaratory judgment holding illegal under § 3 of the Clayton Act1 a requirements contract between the parties providing for the purchase by petitioner of all the coal it would require as boiler fuel at its Gannon Station in Tampa, Florida, over a 20-year period. 363 U.S. 836, 80 S.Ct. 1612, 4 L.Ed.2d 1723. Both the District court, 168 F.Supp. 456, and the Court of Appeals, 276 F.2d 766, Judge Weick dissenting, agreed with respondents that the contract fell within the proscription of § 3 and therefore was illegal and unenforceable. We cannot agree that the contract suffers the claimed anti-trust illegality2 and, therefore, do not find it necessary to

Page 322

consider respondents' additional argument that such illegality is a defense to the action and a bar to enforceability.

Petitioner Tampa Electric Company is a public utility located in Tampa, Florida. It produces and sells electric energy to a service area, including the city, extending from Tampa Bay eastward 60 miles to the center of the State, and some 30 miles in width. As of 1954 petitioner operated two electrical generating plants comprising a total of 11 individual generating units, all of which consumed oil in their burners. In 1955 Tampa Electric decided to expand its facilities by the construction of an additional generating plant to be comprised ultimately of six generating units, and to be known as the 'Francis J. Gannon Station.' Although every electrical generating plant in peninsular Florida burned oil at that time, Tampa Electric decided to try coal as boiler fuel in the first two units constructed at the Gannon Station. Accordingly, it contracted with the respondents3 to furnish the expected coal requirements for the units. The agreement, dated May 23, 1955, embraced Tampa Electric's 'total requirements of fuel * * * for the operation of its first two units to be installed at the Gannon Station * * * not less than 225,000 tons of coal per unit per year,' for a period of 20 years. The contract further provided that 'if during the first 10 years of the term * * * the Buyer constructs additional units (at Gannon) in which coal is used as the fuel, it shall give the Seller notice thereof two years prior to the completion of such unit or units and upon completion of same the fuel requirements thereof shall be added to this contract.' It was understood and agreed, however, that 'the Buyer has the option to be exercised two years prior

Page 323

to completion of said unit or units of determining whether coal or some other fuel shall be used in same.' Tampa Electric had the further option of reducing, up to 15%, the amount of its coal purchases covered by the contract after giving six months' notice of an intention to use as fuel a by-product of any of its local customers. The minimum price was set at $6.40 per ton delivered, subject to an escalation clause based on labor cost and other factors. Deliveries were originally expected to begin in March 1957, for the first unit, and for the second unit at the completion of its construction.

In April 1957, soon before the first coal was actually to be delivered and after Tampa Electric, in order to equip its first two Gannon units for the use of coal, had expended some $3,000,000 more than the cost of constructing oil-burning units, and after respondents had expended approximately $7,500,000 readying themselves to perform the contract, the latter advised petitioner that the contract was illegal under the antitrust laws, would therefore not be performed, and no coal would be delivered. This turn of events required Tampa Electric to look elsewhere for its coal requirements. The first unit at Gannon began operating August 1, 1957, using coal purchased on a temporary basis, but on December 23, 1957, a purchase order contract for the total coal requirements of the Gannon Station was made with Love and Amos Coal Company. It was for an indefinite period cancellable on 12 months' notice by either party, or immediately upon tender of performance by respondents under the contract sued upon here. The maximun price was $8.80 per ton, depending upon the freight rate. In its purchase order to the Love and Amos Company, Tampa estimated that its requirements at the Gannon Station would be 350,000 tons in 1958; 700,000 tons in 1959 and 1960; 1,000,000 tons in 1961; and would increase thereafter, as required, to 'about 2,250,000 tons per year.' The second unit at Gannon

Page 324

Station commenced operation 14 months after the first, i.e., October 1958. Construction of a third unit, the coal for which was to have been provided under the original contract, was also begun.

The record indicates that the total consumption of coal in peninsular Florida, as of 1958, aside from Gannon Station, was approximately 700,000 tons annually. It further shows that there were some 700 coal suppliers in the producing area where respondents operated, and that Tampa Electric's anticipated maximum requirements at Gannon Station, i.e., 2,250 tons annually, would approximate 1% of the total coal of the same type produced and marketed from respondents' producing area.

Petitioner brought this suit in the District Court pursuant to 28 U.S.C. § 2201, 28 U.S.C.A. § 2201, for a declaration that its contract with respondents was valid, and for enforcement according to its terms. In addition to its Clayton Act defense, respondents contended that the contract violated both §§ 1 and 2 of the Sherman Act which, it claimed, likewise precluded its enforcement. The District Court, however, granted respondents' motion for summary judgment on the sole ground that the undisputed facts, recited above, showed the contract to be a violation of § 3 of the Clayton Act. The Court of Appeals agreed. Neither court found it necessary to consider the applicability of the Sherman Act.

Decisions of District Court and Court of Appeals.

Both courts admitted that the contract 'does not expressly contain the 'condition" (276 F.2d 771) that Tampa Electric would not use or deal in the coal of respondents' competitors. Nonetheless, they reasoned, the 'total requirements' provision had the same practical effect, for it prevented Tampa Electric for a period of 20 years from buying coal from any other source for use at that station. Each court cast aside as 'irrelevant' arguments citing the

Page 325

use of oil as boiler fuel be Tampa Electric at its other stations, and by other utilities in peninsular Florida, because oil was not in fact used at Gannon Station, and the possibility of exercise by Tampa Electric of the option reserved to it to build oil-burning units at Gannon was too remote. Found to be equally remote was the possibility of Tampa's conversion of existing oil-burning units at its other stations to the use of coal which would not be covered by the contract with respondents. It followed, both courts found, that the 'line of commerce' (168 F.Supp. 460) on which the restraint was to be tested was coal—not boiler fuels. Both courts compared the estimated coal tonnage as to which the contract pre-empted competition for 20 years, namely, 1,000,000 tons a year by 1961, with the previous annual consumption of peninsular Florida, 700,000 tons. Emphasizing that fact as well as the contract value of the coal covered by the 20-year term, i.e., $128,000,000, they held that such volume was not 'insignificant or insubstantial' and that the effect of the contract would 'be to substantially lessen competition,' in violation of the Act. Both courts were of the opinion that in view of the executory nature of the contract, judicial enforcement of any portion of it could not be granted without directing a violation of the Act itself, and enforcement was, therefore, denied.4

In the almost half century since Congress adopted the Clayton Act, this Court has been called upon 10 times,5 including the present, to pass upon questions arising under § 3. Standard Fashion Co. v. Magrane-Houston Co., 1922, 258 U.S. 346, at page 356, 42 S.Ct. 360, at page 362, 66 L.Ed. 653, the first of the cases, held that

Page 326

the Act 'sought to reach the agreements embraced within its sphere in their incipiency, and in the section under consideration to determine their legality by specific tests of its own * * *.' In sum, it was declared, § 3 condemned sales or agreements 'where the effect of such sale or contract * * * would under the circumstances disclosed probably lessen competition, or create an actual tendency to monopoly.' 258 U.S. at pages 356—357, 42 S.Ct. at page 362. This was not to say, the Court emphasized, that the Act was intended to reach every 'remote lessening' of competition only those which were substantial—but the Court did not draw the line where 'remote' ended and 'substantial' began. There in evidence, however, was the fact that the activities of two-fifths of the Nation's 52,000 pattern agencies were affected by the challenged device. Then, one week later, followed United Shoe Machinery Corp. v. United States, 1922, 258 U.S. 451, 42 S.Ct. 363, 66 L.Ed. 708, which held that even though a contract does 'not contain specific agreements not to use the (goods) of a competitor,' if 'the practical effect * * * is to prevent such use,' it comes within the condition of the section as to exclusivity. 258 U.S. at page 457, 42 S.Ct. at page 365. The Court also held, as it had in Standard Fashion, supra, that a finding of domination of the relevant market by the lessor or seller was sufficient to support the inference that competition had or would be substantially lessened by the contracts...

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592 practice notes
  • Greensboro Lumber Co. v. Georgia Power Co., Civ. A. No. C84-2022A.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • August 29, 1986
    ...rejecting an antitrust challenge to a utility's 20-year all-requirements contracts, the Court in Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 334, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961), reasoned as At least in the case of public utilities the assurance of a steady and ample supply o......
  • New York Citizens Committee On Cable TV v. Manhattan Cable TV, Inc., No. 86 Civ. 0859 (RWS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • December 18, 1986
    ...geographic market is defined simply as the geographic area where competition occurs. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 627, 5 L.Ed.2d 580 (1961). The purpose of ascertaining that market is to determine the extent to which prospective competitors ......
  • United States v. Microsoft Corporation, Civil Action No. 98-1232 (TPJ) (D. D.C. 9/14/1998), Civil Action No. 98-1232 (TPJ).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 14, 1998
    ...courts generally determine whether a "substantial share of the relevant market" is foreclosed. See Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 328-29 (1961). Once foreclosure of a sufficient percentage is found, courts consider the agreements' actual impact on competition (as oppos......
  • Pontius v. Children's Hosp., Civ. A. No. 78-987.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 30, 1982
    ...competition that the defendant encounters when it offers the designated product for sale. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 331-33, 81 S.Ct. 623, 630-31, 5 L.Ed.2d 580 (1961). The area of effective competition is the territory within which the buyer has, or in the ......
  • Request a trial to view additional results
575 cases
  • Greensboro Lumber Co. v. Georgia Power Co., Civ. A. No. C84-2022A.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • August 29, 1986
    ...rejecting an antitrust challenge to a utility's 20-year all-requirements contracts, the Court in Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 334, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961), reasoned as At least in the case of public utilities the assurance of a steady and ample supply o......
  • New York Citizens Committee On Cable TV v. Manhattan Cable TV, Inc., No. 86 Civ. 0859 (RWS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • December 18, 1986
    ...geographic market is defined simply as the geographic area where competition occurs. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 627, 5 L.Ed.2d 580 (1961). The purpose of ascertaining that market is to determine the extent to which prospective competitors ......
  • United States v. Microsoft Corporation, Civil Action No. 98-1232 (TPJ) (D. D.C. 9/14/1998), Civil Action No. 98-1232 (TPJ).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 14, 1998
    ...courts generally determine whether a "substantial share of the relevant market" is foreclosed. See Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 328-29 (1961). Once foreclosure of a sufficient percentage is found, courts consider the agreements' actual impact on competition (as oppos......
  • Pontius v. Children's Hosp., Civ. A. No. 78-987.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • December 30, 1982
    ...competition that the defendant encounters when it offers the designated product for sale. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 331-33, 81 S.Ct. 623, 630-31, 5 L.Ed.2d 580 (1961). The area of effective competition is the territory within which the buyer has, or in the ......
  • Request a trial to view additional results
12 books & journal articles
  • PROBABILITY, PRESUMPTIONS AND EVIDENTIARY BURDENS IN ANTITRUST ANALYSIS: REVITALIZING THE RULE OF REASON FOR EXCLUSIONARY CONDUCT.
    • United States
    • June 1, 2020
    ...Act, 15 U.S.C. [section] 14 (2018), also prohibits a variety of exclusionary practices. See, e.g., Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 325-29 (1961) (discussing the scope and standards for applying Section (6) Jonathan B. Baker, Exclusion as a Core Competition Concern, 78 A......
  • United States Law and the Proposed Code of Conduct on the Transfer of Technology
    • United States
    • Antitrust Bulletin Nbr. 23-4, December 1978
    • December 1, 1978
    ...on the extent to whichcompetitors of the favored supplier are foreclosed from themarket. See, e.g., Tampa ElectricCo.v. Nashville Coal Co.,365 U.S. 320, 329(1961);FTC v. Brown Shoe Co., 384 U.S.316(1966).TYINGARRANGEMENTS(a) The Sherman, Clayton, and Federal Trade CommissionActs all apply t......
  • Excluding Competition without Monopoly Power: The Use of Tying Arrangements to Exploit Market Failure
    • United States
    • Antitrust Bulletin Nbr. 36-2, June 1991
    • June 1, 1991
    ...the machines (i.e., the generators) tothe buyer.lOSR. POSNER, ECONOMIC ANALYSIS OFLAw§1.2,pp.11-15 (3d ed.1986).106 332 U.S. 391, 394.107 365 U.S. 320 (1960).lOS Id. at Tying arrangements: 491Acontractual agreement whereby a buyer commits himself tobuyanyamount from the seller reduces compe......
  • Recovering the Moral Economy Foundations of the Sherman Act.
    • United States
    • Yale Law Journal Vol. 131 Nbr. 1, October 2021
    • October 1, 2021
    ...equivalent terms, suppressed competition in the manufacturer's or wholesaler's market as well. Cf. Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320 (1961) (holding that the exclusive-dealing arrangement did not violate Section 3 of the Clayton Act, 15 U.S.C. [section] 14 (2018), since pe......
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