United States v. Standard Oil Co.
| Decision Date | 28 June 1948 |
| Docket Number | Civ. No. 6159-Y. |
| Citation | 78 F. Supp. 850 |
| Court | U.S. District Court — Southern District of California |
| Parties | UNITED STATES v. STANDARD OIL CO. OF CALIFORNIA et al. |
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William C. Dixon, Sp. Asst. to the Atty. Gen., W. Alan Thody, Sp. Asst. to the Atty. Gen., Lawrence W. Somerville, Sp. Atty., Anti-Trust Division, of San Francisco, Cal., Edwin U. Driscoll, Sp. Atty., Anti-Trust Division, of Los Angeles, Cal., Tom C. Clark, Atty. Gen., and James M. Carter, U. S. Atty., of Los Angeles, Cal., for plaintiff.
Lawler, Felix & Hall and John M. Hall, all of Los Angeles, Cal., Pillsbury, Madison & Sutro and Everett A. Mathews, all of San Francisco, Cal., for defendants.
By this suit in equity, the Government seeks a decree adjudging that certain practices engaged in by the defendants and certain contracts entered into by them, unreasonably restrain interstate trade and commerce in violation of Section 1 of the Sherman Anti-Trust Act1, and substantially lessen competition and tend to create a monopoly in a line of commerce, in violation of Section 3 of the Clayton Act.2 The Government asks us to declare the exclusive supply provisions in the contracts and the practices flowing from them to be void and of no effect.
In addition, we are asked to enjoin the defendants, in perpetuity, from entering into or enforcing any contract, agreement, or understanding, express or implied, with any independent service station operator or garage operator, or from inducing or compelling, or attempting to induce or compel, any such person from entering into any contract, agreement or understanding, which has any of the following requirements:
(a) That the Independent Service Station Operator or Garage Operator shall secure all his requirements of petroleum products from defendant Standard, or shall not handle the petroleum products of any other company;
(b) That the Independent Service Station Operator, or Garage Operator shall secure all his requirements of any one or more types of automobile accessories from or through defendants Standard and Standard Stations, Inc., or will not handle accessories competitive with those distributed or sponsored by defendants, Standard and Standard Stations, Inc.
(c) That the sale of any petroleum product or automotive accessories to any Independent Service Station Operator, or Garage Operator shall be conditional on the sale of other petroleum products or automotive accessories.
The action was instituted on January 2, 1947. Many proceedings have taken place before the trial and an extensive file has been built up. However, as a case of this character must be determined on the basis of facts existing at the time of the trial, it is not necessary to give a detailed analysis of the pleadings in the case or of all the proceedings before the court.
What precedes is sufficient for the purpose of the discussion to follow.
The Proved Facts.
Notwithstanding the lengthy trial and the large number of exhibits introduced, the issues in the case are rather narrow, as will appear further on in the opinion when we expound the legal principles which control the case.
There is, therefore, no need to review elaborately the facts proved. A brief summary will suffice.
The defendant Standard Oil Company of California is a Delaware corporation with its principal California office at San Francisco, California. It is engaged in the business of producing, transporting, refining and marketing petroleum and petroleum products, principally in the states of California, Oregon, Washington, Arizona, Nevada, New Mexico, Idaho and Utah.
The defendant Standard Stations, Incorporated, is a corporation organized under the laws of Delaware with its principal California office at San Francisco. It is a wholly-owned subsidiary of Standard Oil Company of California, and is engaged in the business of managing service stations in the seven states just mentioned. The number of these stations is 1063.
As the issues have been narrowed by the proof, no further reference need be made to stations so operated, which have been referred to in the evidence as "employe operated stations." The Government does not question (indeed, it could not) the right of the Standard Oil Company of California to operate its own stations and sell therein any product it manufactures or distributes. Hence when we refer to "Standard" in what follows, it will be understood that the reference is to Standard Oil Company of California, the parent company, actually engaged in what, for brevity, we shall call "the oil business".
The evidence in the cases shows that, as of March 12, 1947, Standard, in addition to the company operated service stations, had 7,145 contractual arrangements with 5,197 stations in the area. The relationship of Standard to these stations was governed by the five types of agreement entered into with the operators of the stations. They were:
(1) "Dealer Agreements," of which there were 1,656, containing the following clause:
"1. Standard Oil Company of California, a corporation hereinafter called `Company' agrees to sell to ______ hereinafter called `Dealer', and Dealer agrees to buy from Company, all of Dealer's requirements of petroleum products used or sold or bought to be used or sold by Dealer at ______. The petroleum products to meet Dealer's requirements hereunder shall be those brands of gasoline, lubricating oils, and other petroleum products sold by Company to its dealers generally in Dealer's vicinity.
(2) "Distributor Agreements", of which there were 556, having the following provisions:
(3) "Petroleum Products and Equipment Agreements", of which there were 912, carrying this clause:
(4) "Dealer Agreement TBA", of which there were 2,221, having this clause:
(5) "Sublease Agreements", of which there were 1,800, containing the following clause:
The choice of the type of agreement was the dealer's. And the agreements were terminable by him on six months' notice. Each of these agreements contained provisions which, both by the language used and the limitations of liability, stressed the character of the agreement as seeking to establish the dealer as an independent contractor. Dealer Agreements (Class I) contained the most elaborate provisions. They are here given in full:
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