United States v. Richfield Oil Corp., 6896-Y.

• Decision Date: 02 July 1951
• Docket Number: No. 6896-Y.,6896-Y.
• Citation: 99 F. Supp. 280
• Court: U.S. District Court — Southern District of California
• Parties: UNITED STATES v. RICHFIELD OIL CORP.

99 F. Supp. 280

UNITED STATES v. RICHFIELD OIL CORP.

No. 6896-Y.

United States District Court S. D. California, Central Division.

July 2, 1951.

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William C. Dixon, Sp. Asst. to Atty. Gen., Theodore M. Alexander, T. Keister Greer, Theron M. Hall, Lawrence M. Somerville, Sp. Attys., Anti-Trust Division, Department of Justice, all of Los Angeles, Cal., for plaintiff.

William J. DeMartini, Robert E. Paradise, Los Angeles, Cal., for defendant.

YANKWICH, District Judge.

This is an action instituted by the United States Government against Richfield Oil Corporation, — to be referred to as Richfield,—a corporation organized under the laws of the State of Delaware, with offices and its principal place of business in Los Angeles, California, in which the Government seeks equitable relief under Section 4 of the Act of the Congress of July 2, 1890, commonly referred to as the Sherman Anti-Trust Act¹, and under Section 15 of the Act of the Congress of October 15, 1914, as amended, commonly known as the Clayton Act.² The Government seeks to prevent and restrain violations of Section 1 of the Sherman Anti-Trust Act³ and Section 3 of the Clayton Act.⁴

I The Nature of the Controversy

Richfield is engaged in the business of acquiring and developing oil reserves and producing, transporting, refining and marketing petroleum and petroleum products therefrom in the States of California, Oregon, Washington, Nevada, Idaho, Arizona, Texas and New Mexico. No evidence was offered relating to activities in the States of Texas and New Mexico, but the pleadings alleged, and the evidence in the case showed, that, in the disposition of its products in the first six States named, Richfield availed itself of various forms of outlets which were referred to as L-O (leased-out) stations, and "dealer" stations, designated as 337 and 3-C stations. Through regional representatives, merchandisers, salesmen and others, whose relation to the company need not be gone into, the petroleum products were supplied to the operators of these stations.

Richfield also deals in automotive accessories manufactured by others, which were referred to during the trial as "sponsored products". These consist of replacement parts and articles sold and used in servicing or repairing automotive vehicles. These include tires, tubes, batteries, spark plugs, oil filters, fan belts, battery cables, lamp bulbs, fuses, windshield wiper blades, tire repair and vulcanizing kits, anti-freeze, tire chains, and similar items.

During the trial, these were referred to as "TBA". It is the assertion of the Government that the various agreements, written and oral, existing between Richfield and the operators of these three types of stations, bind them, in effect, to secure their entire requirements, both as to petroleum products and TBA, exclusively from Richfield; that they are forbidden to handle petroleum products of any other company or to handle accessories competitive with those distributed or sponsored by Richfield.

In brief, the Government claims that these contracts are an unreasonable restraint of interstate trade or commerce, in violation of Section 1 of the Sherman Act, and substantially lessen competition and tend to create a monopoly in a line of commerce, in violation of Section 3 of the Clayton Act.

Richfield has denied that there is a violation of either statute in their relations with any of the groups of dealers mentioned, either as to their petroleum products, or as to the sponsored TBA products.

II The Commerce Involved

Despite voluminous testimony, the scope of the inquiry is rather narrow. The interstate origin and nature of the commerce of both the petroleum products and TBA is established beyond dispute. The petroleum products originate in oil reserves and producing wells and bulk plants and refineries operated in California and elsewhere, the products of which move across state lines continuously to supply the various stations. Richfield has oil reserves and producing wells in certain oil fields in California. Crude oil is transported by Richfield from producing wells in California to its refineries located at Watson and Vinvale, California. At the Watson refinery crude oil is refined into gasoline and other petroleum products. Richfield owns and operates two natural gasoline plants in California. Gasoline and other petroleum products refined at the gasoline plants in California are shipped by Richfield to its refinery at Watson, California. The petroleum products refined at its refinery at Watson, California, are, in some instances, shipped by Richfield from the refinery to bulk plants located in California, Oregon, Washington, Arizona, Nevada and Idaho. Gasoline and petroleum products are stored in bulk plants, and sold and delivered from time to time to service stations located in the respective states in which the bulk plants are located. Richfield maintains pipe lines in California used by it in transporting crude oil and petroleum products between points solely in California. It maintains automotive vehicles used in making deliveries of petroleum products from bulk plants to service stations located in the respective states in which the bulk plants are located.

Richfield owns 107 bulk plants in California, of which 23 are operated by Richfield and 84 by commission agents, from which petroleum products are distributed by Richfield and commission agents to 1577 service stations in California. It owns 35 bulk plants in Oregon, of which 2 are operated by Richfield and 33 by commission agents, from which petroleum products are distributed by Richfield and commission agents to 388 service stations in Oregon. Richfield owns 36 bulk plants in Washington, of which 4 are operated by it and 32 by commission agents, and from which bulk plants petroleum products are distributed by Richfield and commission agents to 646 service stations in Washington. Richfield owns 7 bulk plants in Nevada, all of which are operated by commission agents, and from which plants petroleum products are distributed by commission agents to 39 service stations in Nevada. Richfield owns 5 bulk plants in Idaho, all of which are operated by commission agents, from which petroleum products are distributed by commission agents to 56 service stations in Idaho. Richfield owns 22 bulk plants in Arizona, of which 2 are operated by Richfield and 20 by commission agents, from which petroleum products are distributed by Richfield and commission agents to 190 service stations in Arizona. In a few instances, petroleum products have been delivered from bulk plants in one state to service stations located in other states.

The sponsored products are manufactured at various industrial plants throughout the United States, from which they find their way first to the storerooms of the authorized Richfield distributors, and then to the shelves of the individual station operators. In some instances, these sponsored products are shipped directly to service station operators. So there is a constant flow of interstate commerce in the operations of the defendant.⁵

The competitive products, both petroleum and TBA, which were kept out of these stations as the result of the agreements, were manufactured at various places in the United States. So, in this respect also, if the practices of which the Government complains stand proved, they unquestionably affect the flow of goods and products in interstate commerce.⁶ The amount of commerce involved satisfies all the requirements of substantiality laid down by the cases.⁷ The anti-trust laws forbid practices through which competitors are "shut out of the market by a provision that limits it (a product), not in terms of quality, but in terms of a particular vendor."⁸

And, as said by the Supreme Court in another case: "The anti-trust laws are as much violated by the prevention of competition as by its destruction."⁹

Back of this is the fundamental determination embedded in the anti-trust laws to maintain our national economy free by keeping it competitive. The Supreme Court has expressed this thought very recently: "The heart of our national economic policy long has been faith in the value of competition. In the Sherman and Clayton Acts, as well as in the Robinson-Patman Act, `Congress was dealing with competition, which it sought to protect, and monopoly, which it sought to prevent.'"¹⁰

A few statistics supplied by Richfield, and culled from the record, will suffice to demonstrate readily that the commerce affected is substantial. The number of L-O stations in 1950 was 1343. The number of 337 stations was 1361. The 3-C stations numbered 261. The Government, by counting the separate written agreements, which go to make up each unit, including the painting agreements, arrives at a total of 4581. If to these are added the oral arrangements affecting the stations, we have a total of 7546 written and oral agreements.

The written contracts are approved at one of Richfield's divisional offices, of which there are three located in the States of California and Washington. The contracts come to the respective offices in those States from various other States for approval. Some of the contracts are required to be approved at the main Richfield office in Los Angeles.

The gallonage of gasoline distributed in 1950, through the L-O stations was 160,795,000, of the money value of $23,790,968.00. The gallonage of gasoline distributed through the 337 stations during the same year was 67,476,000, with a money value of $10,164,158.00. As to the 3-C stations, the gallonage was 20,385,000, and the money value $3,069,987.00. For the same year the gallonage of motor oils and greases was, as to all types of stations, 3,491,369, of the money value of $2,546,127.59. For the same year, the money value of all accessories sold to the three types of stations was $3,603,003.85. The interstate nature of the commerce involved and its...