Federal Trade Commission v. Standard Oil Company

PETITIONER:Federal Trade Commission
RESPONDENT:Standard Oil Company
LOCATION:Wolverine Tube, Inc.

DOCKET NO.: 24
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 355 US 396 (1958)
ARGUED: Nov 14, 1957 / Nov 18, 1957
DECIDED: Jan 27, 1958

Facts of the case

Question

  • Oral Argument – November 14, 1957
  • Audio Transcription for Oral Argument – November 14, 1957 in Federal Trade Commission v. Standard Oil Company

    Audio Transcription for Oral Argument – November 18, 1957 in Federal Trade Commission v. Standard Oil Company

    Earl Warren:

    Number 24, Federal Trade Commission, Petitioner, versus the Standard Oil Company.

    Mr. Chaffetz, you may proceed.

    Hammond E. Chaffetz:

    Mr. Chief Justice, may it please the Court.

    On Thursday last, I’d made the point that the decision of the court below, the court’s holding, was squarely in accord with the controlling decisions of this Court.

    The Attorney General’s letter to the Senate Judiciary Committee which is appended to our brief indicates that the Department of Justice takes precisely the same view of the opinion of the court below as we do, namely, that it applied — accepted principles of law and simply conformed to the prior opinion of this Court in this very case.

    With respect to the factual conclusions of the court below, I pointed out that there are at least a half a dozen independent appraisals of the record that are incorporated in the record.

    The trial examiner, the Court of Appeals on the first appeal, the dissenting Commissioners, all of which are in accord with the conclusion, the factual conclusion reached by the Court of Appeals from which I draw the conclusion that it might — that it should be rather difficult for anybody to assert now that what the Court of Appeals did wasn’t rational and didn’t reflect a fair assessment of the record.

    There were just too many other independent examinations of the record, which came through precisely the same conclusion as the — as the lower court did.

    Now, this morning, I should like to address myself to some of the highlights of the — of the factual evidence to deal with the competitive offers, the efforts of respondent to retain these four customers.

    I shall refer to the fact that a number of customers were lost to competitors because of even lower offers and then respondent was willing to meet.

    I should talk about the practices of — of respondent’s competitors and point out that the — it isn’t true, that — that all conduct their business in the same way or even substantially the same way.

    I shall point out that the offers that were made by our competitors were not unlawful offers.

    They were on this record and this — and this posture of the case of lawful offers of competitors.

    And I shall point out that many of the competitive offers were from suppliers who sold only at one price.

    I shall have occasion to — to note that gasoline of the Standard Oil Company of Ohio, the Ohio Oil Company, Pure, Phillips, Cities Service, Aurora, a local refinery.

    Felix Frankfurter:

    Do I understand from your — am I justified in inferring from what you’ve said that your case essentially rests in supporting the decision below on a demonstration of the record that these were responsive, defensive action, do I understand that?

    Hammond E. Chaffetz:

    Precisely, Your Honor.

    And we do not contend, we do not contend even remotely that we were entitled to follow a discriminatory policy because our competitors were following the same policy.

    If that were the factual situation, I wouldn’t be here.

    Hugo L. Black:

    Would that require us to read the entire record?

    Hammond E. Chaffetz:

    I think not, Your Honor.

    Hugo L. Black:

    That would have to be voted.

    Hammond E. Chaffetz:

    Because if you reach the point where your only alternative is to examine the entire record then you fall back on Universal Camera, Pittsburgh Steamship and — and cases of that sort which indicate that where the Court of Appeals decision is rational presents a fair assessment.

    This Court doesn’t sit to conduct, to make an independent reexamination of — of the record.

    And I think there’s more than enough in this record to reassure, Your Honors, that it isn’t necessary to examine the record.

    If you look at the findings of the trial examiner, if you look at the dissenting opinion of — of Mr. — Commissioner — the Commissioner (Inaudible) and the dissenting opinion of — of Commissioner Mason and — and the other — and that is in the record to which I referred on — on Thursday.

    I feel confident that you, too, will be satisfied that the court below did make a fair assessment of — of the entire record.

    Could I ask you a question about the court?

    Hammond E. Chaffetz:

    Yes, sir.

    Did the Court of Appeals find that the — any of these prices to be (Inaudible) were in response to definite (Inaudible)

    My reading of their opinion was that they said no more than that if you had offered these prices, you would have lost the business, but I didn’t see if they made any affirmative finding on that subject.

    Hammond E. Chaffetz:

    May I answer that question this way, Mr. Justice Harlan.

    Hence, what you mean by — by response to, we contend that if we continue to give the price, our price, to these customers because of offers made to them at lower level, of lower offers made to them.

    We were doing so in response to those offers because if we would do our lower price, we would lose in this customer.

    Now, let me illustrate that concrete and it’s on the record.

    Felix Frankfurter:

    Does that mean that you moved in, in order to anticipate their moving in?

    Hammond E. Chaffetz:

    No, this is a long history.

    It’s a long history, Your Honor.

    And I will come to that.

    I’d like to deal with how we took on each of these — and what the record show because I’ll come to that — but — but for the moment the answer to Mr. Justice Harlan’s question, you have this concrete situation in the record, a competitor made an offer to two of respondent’s customer, a lower offer than the price that — that respondent would make, lower than respondent’s tank-car price.

    The offer was made to Citrin-Kolb and another jobber that Standard had at that time, Middleton.

    Middleton accepted the offer and was lost to respondent as the customer.

    Citrin-Kolb was persuaded by respondent to stay on despite the fact that the other offer was — was lower.

    Now, as I understand the argument of Commission counsel here, it is, that the — that the respondent didn’t respond to the offer that was made to Citrin-Kolb because we didn’t do anything about it.

    We simply continued to give the — the lower price.

    We contend that with lower offers like that being constantly made to our customers, we had no choice but to continue to give them a price not as low as that offered to them by our competitors and these offers were continuous through the — through the period here in question.

    Earl Warren:

    Does that inspire you on the first instance to establish this price fixing?

    Hammond E. Chaffetz:

    Not — let me answer that in this way, Mr. Chief Justice.

    The issue in the case — the issue in the case as claimed by the trial examiner in which all the parties agreed to was what the situation was after the enactment of the Robinson-Patman Act in 1936.

    But the trial examiner concerned himself with was whether after that Act became law in 1936, we had a right to keep these four jobber customers and what we have to do in order to retain them as such — as in the light of the provisions of that statute and whether we have to continue to give them, the lower price that they had received prior to the passage of the Robinson-Patman Act.

    But early history, it did come into the record and it is illuminating on the circumstances under which we did and I’d like to go right to that now, the circumstances under which we did say to go on these customers initially, even before the Robinson-Patman Act.

    Hugo L. Black:

    Do you reject the government’s question presented in the brief?

    Hammond E. Chaffetz:

    Entirely, Your Honor.

    We would say if that was the question presented, we lose.

    We — we make no argument here that we’re entitled to pursue a discriminatory policy because our competitors follow the same — it’s gone a bit farther.

    Yes, Your Honor.

    Let me say first, the record is clear that — that respondent was set up in Detroit, primarily on a tank-wagon basis so, out of their own bulk plant to tank-wagon deliveries to dealers.

    Back in 1928 was the — was the time that the first of these four customers became a jobber.

    That was Citrin-Kolb.

    They had been a retail dealer of respondent since 1922.

    Hammond E. Chaffetz:

    In 1928, Citrin-Kolb decided to become a jobber, discussed the matter with a former supplier, Paragon, wanted to know how they went about it, and they made arrangements to acquire bulk plant facilities.

    And then came to respondent and while the record isn’t — is fully detailed, as you would like.

    The only — all they’re duly emphasizing for the record is that — that they said to respondent, “We’re going to be your jobber and we’ll deal with you if you’ll deal with us as a jobber, otherwise, we’ll look — we’ll look elsewhere.

    Then — then after considerable negotiations, Citrin-Kolb became the jobber and bought at the tank-car price.

    The next situation was in 1931, that the jobber —

    Earl Warren:

    Do they continue — do they continue —

    Hammond E. Chaffetz:

    And they continued —

    Earl Warren:

    — to be retailers also?

    Hammond E. Chaffetz:

    And they — I’d like to deal with that separately.

    May I, in a moment, as that also is a very nice event, a very nice question.

    In — 1931 Stikeman organized for the first time when —

    William J. Brennan, Jr.:

    When did you say Citrin-Kolb did this?

    Hammond E. Chaffetz:

    1929.

    William J. Brennan, Jr.:

    1929.

    Hammond E. Chaffetz:

    It was a jobber in 1929, customers in 1922, retail customers.

    In 1931, the Stikeman is a new company, no customer or anybody else started to do business with Standard.

    And apparently, as — as a jobber, although the record isn’t entirely clear but the point we emphasize about Stikeman is that very shortly after Stikeman became a customer of this firm, Stikeman was lost to a competitor for an even lower price, lower than Standard’s tank-car price.

    And respondent was able, a year later, to get Stikeman back again, despite the fact that the competitor’s price was even lower.

    That was the circumstance under which Stikeman became a jobber customer.

    In 1935, Wayne the third of these jobbers became a — a jobber customer of Standard under these circumstances.

    Wayne had been a retail dealer too, retail customer of Standard’s for many years, since 1931.

    In 1933, Wayne decided it wanted to become a jobber, and it went to Standard and said, “We want to buy in tank-car prices so we want to be a jobber.”

    And it wasn’t until two years later that — that Standard finally yielded and allowed Wayne to become a jobber.And now, I want to talk about the matter that the Chief Justice laid did they continue to sell at retail.

    Of considerable significance is the fact that when Wayne became a jobber, it discontinued all retail business.

    It became purely a wholesaler.

    Both had at that moment, there was no question under this case.

    It wasn’t the wholesaler who also was retailer.

    And Wayne didn’t again sell at retail until sometime in 1938 and only under circumstances where being the owner of retail properties and not having an independent lessee, from time to time, Wayne was compelled to operate the station itself at retail.

    And this was also true of Stikeman and Citrin-Kolb.

    They were wholesalers, primarily wholesalers.

    Hammond E. Chaffetz:

    As a matter of fact, after some time in 1938 up until the time of the testimony, Stikeman didn’t sell a gallon at retail.

    It just so happened it did have a situation that Wayne had after 1938 where they had to take over a station from time to time and Citrin-Kolb, likewise.

    They sold a very, very small percentage of — of gas they made — from Standard at retail.

    But having said that, I must come to the Ned’s situation, where Ned’s sold at all times all of the gas they just bought from Standard at retail.

    And that’s important because really, it’s the Ned’s situation that this case —

    Hugo L. Black:

    Ned?

    N-E-D?

    Hammond E. Chaffetz:

    Ned’s, N-E-D apostrophe S, Your Honor.

    That’s what this case is really all about.

    There’d been no case if only Stikeman, Citrin-Kolb and — and Wayne went also so far as retail sales are concerned.

    But — but Ned’s was — was a large — a retailer and — and they sold at a — entirely at — at retail and — and was a price cut and that’s — that’s — the argument of this — of this case.

    And so, I’d like to take a little more time to tell you of the history of — of Ned, the history (Inaudible)

    Ned’s has been a customer, a retailer, tank-wagon customer of respondent since 1918.

    The senior (Inaudible) founded the business and he with his five sons built up that purely, retail business.

    William J. Brennan, Jr.:

    As one or several locations?

    Hammond E. Chaffetz:

    At four locations first, then five and then six.

    It was light volume station to where they became respondent’s single, most important retailer customers in the City of Detroit.

    Beginning about 1930, they were confronted with one offer after another from a competitor who wanted their business at a lower price.

    Not a jobber price, it’s not a — not — not as a jobber, but of a substantially lower price.

    The examiner found that from 1930 to 1936, Ned’s was confronted with offers from numerous responsible suppliers at lower prices than — than respondents on gasoline of like grade and quality.

    Ned’s came to respondent finally, in 1936 and said, “You either give us a lower price, we want a cent less or else.”

    When they got — when Ned’s got no satisfaction from the manger in Detroit, he insisted on talking to the top officials of — of respondent in Chicago.

    He wrote a letter which he called an ultimatum and he said before finally breaking off, I want to talk to the — to — to your superior he said to the manager of Detroit.

    They came to Chicago and the people in Chicago — I think it’s very interesting from the standpoint of the meaning of good faith in what a seller must do before he demonstrate his — his good faith.

    The people in Chicago start to impress upon Ned’s that he’s been a customer of Standard’s for many years.

    He said, “Now, you really don’t want to leave us.

    Your father established this business.

    We have a relationship here and they worked that to the last draw.”

    But finally, sensing that Ned’s was serious and was going to leave, they gave Ned’s a half-cent a gallon off in 1936.

    And temporarily, Ned’s accepted that, but they weren’t satisfied, and the relations between Ned’s under the certain manager of — of respondent, weren’t very happy relations for the next 18 months or two years, while Ned’s is insistent that he should have a lower price.

    Hammond E. Chaffetz:

    Meanwhile, Ned’s–

    William J. Brennan, Jr.:

    That’s 1936?

    Hammond E. Chaffetz:

    That’s 1936.

    Meanwhile, Ned’s is getting offers from — from other suppliers.

    And finally in 1938, the issue was brought up again and Ned’s said, ”This time, we’re through.

    We get the tank-car price or we’re leaving you.”

    Ned’s went out and acquired bulk plant facilities on his own and it notified respondent that they were going to buy as a tank-car buyer and handle their own wholesaling function from respondent or someone else.

    Under those circumstances, respondent finally yielded and gave Ned’s the tank-car price.

    Hugo L. Black:

    Has — has Ned’s by that time acquired tank-car storage facility?

    Hammond E. Chaffetz:

    Yes, on its own.

    Ned’s went out and bought tank-car storage and came to respondent and said, “We’ve got tank-car storage.

    We’re going to buy from you on that basis or from somebody else.”

    Hugo L. Black:

    Were you at that time selling to anybody else who had that equipment on a lower rate?

    Hammond E. Chaffetz:

    At that time, in 1938, we were selling Wayne, Stikeman and — and Citrin-Kolb at the tank-car price.

    They also, having their own storage facilities and performing the entire wholesale function themselves and so, it’s yes, Your Honor.

    Now, as I said also, of course, at that time, up until that time, Wayne hadn’t sold a gallon in retail, so there was no question insofar as Stikeman and Citrin-Kolb were concerned they sold it only incidentally at retail from time to time when they had a retail station, they didn’t want to — they didn’t want it bulk.

    Now, the point I make is this.

    If Standard had a rigid policy, and a policy of selling at two prices, jobbers at the tank-car price and dealers at the — at the dealer price, whichever the customer chose, certainly in the case of Ned’s, that policy would have been pursued.

    Ned’s was the biggest customer that Standard had, the most important customer that Standard had.

    Why would there have been such reluctance on the part of respondent to — to recognize Ned’s as a jobber if — if had a policy of just — just selling to jobbers, if — if they bought on the tank-car basis.

    I think the whole history, and — and I’d say the trial examiner was — was very much impressed with that, as well as the court below.

    The court below said the whole story history of respondent’s dealings with Ned’s was inconsistent within any theory of a — of a pricing system.

    Hugo L. Black:

    Was Ned’s at that time, when you made that difference succeeding at retail with other Standard buy?

    Hammond E. Chaffetz:

    Yes, Your Honor.

    Hugo L. Black:

    In this case more than Ned’s service?

    Hammond E. Chaffetz:

    Yes, Your Honor.

    That’s true.

    Now, during this same period that we’re talking about, respondent also lost a number of customers, some of whom were already receiving Standard’s tank-car price.

    Others of who wanted the tank-car price for Standard refused to give it to them.

    Felix Frankfurter:

    What was the basis of granting or denying?

    Hammond E. Chaffetz:

    The basis of granting or denying was the policy that Standard had, which I believe is a very conservative policy and one which supports the purposes of the Act rather than — than the pieces.

    This was their policy.

    Under no circumstances, would Standard allow more than one and a half cents off of the tank-wagon price to any customer, to any tank-car or otherwise.

    Not more than one has, even though many of its competitors, allow the jobber rate two cent differential.

    As a matter of fact, the prevailing differential in the Middle West at that time was about two cents, but Standard wouldn’t go more than a half-cent below tank-wagon.

    Secondly, Standard wouldn’t give the tank-wagon price to any customer unless he performed the whole selling function, unless he incurred the capital costs and the expenses of running the wholesale operation.

    This —

    Felix Frankfurter:

    (Inaudible)

    Hammond E. Chaffetz:

    The tank-car price.

    You said tank-wagon.

    Hammond E. Chaffetz:

    I beg your pardon if I said tank-wagon price, that was at the time.

    They — they wouldn’t allow the tank-car price, the cent and a half off, unless the — unless the customer assumed that the — the function for which that price was intended and that — not a great deal because you have to invest in large bulk — storage to handle three grades of gasoline.

    We talked about only one here but there actually were — were three grades of gasoline.

    You had to own the trucks.

    You had to deliver and where you sued outside customers.

    You had to compete with others in serving the — the dealer customers.

    I’m talking about Citrin and Wayne and — and Stikeman that when they sold to the two of the retailer.

    You had to furnish free gobs and free pumps and cave, driveways and — and all that kind of thing.

    And this was — one and a half cent so it was all they got that what we say about that is that that the effect of this policy of standards far from showing the purpose or effect of violating the Robinson-Patman Act was to — to show that — that we were trying to conform at least with the spirit of the statute, did not give a discrimination unless it was substantially offset by a cost incurred by the —

    Hugo L. Black:

    Is any of the finding — is any the finding that you could deliver your gas to Ned’s, at a cent and a half cheaper in regards to the other —

    Hammond E. Chaffetz:

    No.

    The finding was to the contrary, Your Honor.

    We had a cost justification.

    We had a cost justification defense which — which failed and I wanted to address myself to that, too, because there was a problem in — in the record on that.

    The trial examiner did find that that function could be performed for half a cent and that was a manifest error.

    I — I might say that it would seem to me, at least, rather obvious that if you allow a cent and a half, and that’s the general fact that’s in entry or if it allowed two cents, which is what most jobbers has got below tank-wagon.

    It doesn’t make much sense to assume that — that all it costs the jobber was a half a cent, and that he kept the three times or four times as much as this cost.

    Now —

    Hugo L. Black:

    Did the Court of Appeals represent that finding?

    Hammond E. Chaffetz:

    No.

    Hammond E. Chaffetz:

    It didn’t — that was a collateral.

    It was a collateral point.

    (Voice Overlap) —

    Felix Frankfurter:

    That doesn’t bear under good faith.

    Hammond E. Chaffetz:

    It doesn’t bear on the good faith at all, really, but — but it’s — it’s simply background color, but I do want to point this out because our plans make a good deal of that fact.

    They assume this half-cent to be — to be the cost.

    Now, where the trial examiner got into error there was the competitor of ours testified that he could perform the operation for half a cent but his circumstances were entirely unlike ours or our customers.

    That was a company that sold only one grade of gasoline.

    It had a system of — of deliveries to selected stations, no less that 2000 gallons per delivery and you took it when your turn came, whereas, we and our customers, our jobber customers who sold at retail, so we —

    Felix Frankfurter:

    But if they were recovered by then is I don’t — I’m confused.

    I don’t understand what the cost defense has to bear — if you call that related to the good faith?

    Hammond E. Chaffetz:

    It doesn’t, Your Honor.

    It doesn’t, You Honor.

    Although the — the — one of the key findings — one of the key findings of the — of the — Commission majority here was just that.

    They said, “Because we failed on our cost justification defense that defeated our good faith.”

    That is one of the findings in one of the legal conclusions of — of the — but I don’t really think he does — the only thing he does, is go to the court — will understand that this one and a half cent lower price that we made wasn’t a arbitrary lower price.

    It wasn’t a matter of giving one customer full cent and a half less than another customer.

    That one and half cent was substantially offset and the two of our jobbers who testified about their cost testified that their cost fairly approximated the — the cent and a half.

    Ned’s cost might have been a little bit lower because Ned’s was fully integrated.

    Ned’s also did a lot of other business.

    Ned’s sold sporting goods and household appliances and — and things of that sort.

    Now, the testimony was — was this during this period, 1936 to 1940, the crucial period here, the testimony was that competitors were constantly trying to proselyte our jobber customers.

    The examiner repeats that testimony, reports that testimony in — in his — in his findings and the examiner was — was entirely satisfied that — that unless — through that period, we gave these because at least this, this was the minimum, cent and a half cent low where they perform the function.

    We had no hope of keeping them as customers because competitors were offering them constantly, substantially lower prices and competitors were constantly trying to take these customers away.

    Let me illustrate that point in this way, I can’t possibly try to give the — the record.

    But take the time of the filing of the complaint and the time the testimony was taken here.

    I think it is highly significant.

    But even while the testimony is being taken before the examiner and when the complaint was filed, each one of these jobbers were engaged in serious negotiations with the competitor, where the competitor was offering an even lower price than respondent was giving at the time.

    Hugo L. Black:

    Would that have been a violation of the Act?

    Hammond E. Chaffetz:

    With what?

    Hugo L. Black:

    To them, were they violating the Act of doing that?

    Hammond E. Chaffetz:

    Let me say this, Your Honor.

    First, there’s no finding here, although this Court afforded the Commission and the officers to make the finding.

    There’s no finding here that any offers by our competitors were unlawful.

    The Commission just didn’t make that finding and we’re assuming that — that these offers were unlawful.

    But to answer your question further, Mr. Justice Black, it just so happened that these offers that I have in mind that were made at the time of this — the complaint was filed, one or two — just after the complaint was filed and before the test was taken were offers by — by competitors who sold only in one price.

    They were not discriminatory prices at all.

    Let me take one of those.

    The National Refining Company, then a well-known company, in Cleveland, Ohio, that sold throughout the Middle West, in — in Michigan, but had no outlets in Detroit were seeking to set up a distribution, to set up distribution in Detroit and they went to two of our four customers, Wayne and Stikeman.

    They said, “We will give you a better quality gasoline than Standard’s at a lower price if you will do business with us.”

    Now, it so happens that the precise offer from National to these two customers postdated the complaint, came in after the complaint but the negotiations had been in progress before the date of the complaint.

    And I don’t think the day of the complaint is significant, anyway.

    This thing looks to the — looks to the future.

    As a matter of fact, the examiner ruled out that evidence initially on the grounds that it was evidence after complaint, but the Commission itself reversed the exam and held that the evidence was valid.

    During the same period, I come back to Ned’s because I — as I said, I think Ned’s is — is the key situation here.

    Ned’s —

    Earl Warren:

    Mr. Chaffetz —

    Hammond E. Chaffetz:

    Yes,sir.

    Earl Warren:

    — may I ask you one — one thing?

    Do these factual differences in your relationship with Ned’s and — and the other customers that you — those other three customers make any legal difference in you relationship with them or are — is illegal —

    Hammond E. Chaffetz:

    No.

    It’s factual.

    Earl Warren:

    — relationship for —

    Hammond E. Chaffetz:

    No.

    Earl Warren:

    — exactly the same regardless of the —

    Hammond E. Chaffetz:

    Yes, sir.

    I’m —

    Earl Warren:

    — and so we just treat them as one?

    Hammond E. Chaffetz:

    That — that — yes.

    Yes.

    Hammond E. Chaffetz:

    Except — yes.

    I — I think that’s right.

    I’m talking about the fact situation.

    I’m emphasizing the facts with respect to Ned’s because that’s the key situation.

    I think the record indicate that Ned’s is — what — what brought this case about.

    And — and so far as Ned’s is concerned, but throughout the period — throughout the period, Ned’s had offers from — from other competitors.

    I want to talk about one of those only.

    One, of Standard Ohio Company, Fleet-Wing Gasoline —

    Hugo L. Black:

    When was that offer?

    Hammond E. Chaffetz:

    That was a continuous offer.

    Ned’s was buying its Motor Oil from — from Fleet-Wing and — and they were trying to get his gasoline business and the Commission of majority recognized that that offer was — was extent down to the time of the — of the — What will they say about that offer?

    Earl Warren:

    Yes.

    Hammond E. Chaffetz:

    That Fleet-Wing Gasoline didn’t have the same public acceptance as respondent’s product.

    But I’m using this just to illustrate that point.

    This — this is comes up — oh, this — but what I have to say will cover the whole situation.

    And he said, “Fleet-Wing Gasoline didn’t have the same — but you didn’t have to worry about losing Ned’s to — to Fleet-Wing.

    He wouldn’t have bought Fleet-Wing Gasoline.

    On that, I’ll say all you have to do is read the testimony about how close Ned’s came to — to taking Fleet-Wing Gasoline and you realize that — that the Commission isn’t giving effective testimony to the realities, to — to what did take place.

    Theirs is a logical argument and not a — a factual argument.

    Let me say also that the Commission was in error — was in error.

    They misunderstood the record when they said Fleet-Wing Gasoline didn’t have the same public acceptance.

    They said it was an offbrand.

    They misread the trial examiner’s findings, where he said — where he said with respect to Fleet-Wing and several others that they — including Cleveland, were in direct and immediate competition with respondent’s product and have the same acceptance in the public mind.

    The fact of the matter is that in 1938, Standard lost another customer to Fleet-Wing Gasoline, (Inaudible) Miller, who — who did leave Standard to buy Fleet-Wing Gasoline.

    And Fleet-Wing had something like a hundred stations with their name of — and this was the Standard Oil Company of Ohio gasoline.

    This wasn’t a third-rate — a — a third rate product.

    So — so the Commission was, factually wrong there with effect of whether it did have public acceptance, but most important — I don’t guess is real.

    It isn’t a question of whether you or I believe that this gasoline was plumbable.

    It’s whether Ned’s was ready to give up respondent’s gasoline to deal with Fleet-Wing at a lower price and the record is — is just conclusive on that.

    One — one thing before I leave, that Standard’s policy, it’s very important here, the policy of not giving more than a cent and a half and refusing — it’s as our friends on the other side emphasize, “We wouldn’t even give a lower price to keep a customer” they say, which shows how rigidly we adhere to our policy.

    Hammond E. Chaffetz:

    Respect —

    Hugo L. Black:

    But it’s what the pricing system, wasn’t it?

    That — I don’t quite understand that you’re reading the issues that the government laid.

    Hammond E. Chaffetz:

    We don’t see the issues the same way, Your Honor.

    Hugo L. Black:

    What about the pricing system?

    Hammond E. Chaffetz:

    We don’t have any — we didn’t have any pricing system.

    Hugo L. Black:

    Well, did you provide that — did the evidence show or was there a finding that there was a system under the which you would give people that equipment like Ned’s to secure the (Inaudible)

    Hammond E. Chaffetz:

    No, sir.

    What we say is to hold a customer.

    To hold a customer, we — we would do that.

    Hugo L. Black:

    I understand you say that —

    Hammond E. Chaffetz:

    Yes.

    Hugo L. Black:

    But if you do it —

    Hammond E. Chaffetz:

    No.

    Hugo L. Black:

    — through the pricing system.

    Hammond E. Chaffetz:

    No, sir.

    Hugo L. Black:

    That was not based on the difference in cost but based on the fact —

    Hammond E. Chaffetz:

    No, sir.

    Hugo L. Black:

    — that certain equipment this man had.

    Hammond E. Chaffetz:

    No, no, sir.

    No, sir.

    Hugo L. Black:

    You deny —

    Hammond E. Chaffetz:

    That’s their contention.

    Hugo L. Black:

    — the record shows it.

    Hammond E. Chaffetz:

    That’s their contention.

    We deny the record shows that.

    And — and the court below addressed itself directly to that question and found to the contrary and said there was no support.

    The court below said, “We can’t find any support in the record for such a system contention,” and they said, “The history of our dealings with Ned’s belies that contention.”

    That was the court below.

    Hugo L. Black:

    That was what they found wasn’t it?

    Hammond E. Chaffetz:

    I don’t believe the Commission actually found that.

    Commission’s findings aren’t entirely satisfactory, if I may — if I may say so.

    Now, what they did say was this — what the Commission found was this.

    They said, “These offers — let me take again an illustration.

    They said, “In 1939, Citrin-Kolb had an offer from the Argo Oil Company — of gasoline of the Ohio Oil Company, and I think with (Inaudible) they say, “Obviously, that offer in 1939 couldn’t have been put in evidence.

    So, why Citrin-Kolb was recognized as a jobber in 1929?

    The offer in 1939, couldn’t have been used by us to — just to show why Citrin-Kolb was made a jobber in 1929.”

    Hugo L. Black:

    Do you dispute that?

    Hammond E. Chaffetz:

    No.

    as I — I think that was tongue-in-cheek.

    It’s so obvious, but the Commission does say that in — in so many words.

    They say this evidence must have been.

    This is what they said.

    This evidence must have been offered by respondent to show the need for continuing to give the tank-car price to Citrin-Kolb.

    But obviously, of course that’s why — several case the examiner made that entirely clear.

    But the Commission does — do say that.

    Then they go on to say, “Having reviewed these offers that we on account of this testimony, had — must have had reason to believe, or did have reason to believe that we would lose these customers if we didn’t continue to give them the lower price.

    But they said that the reason our customers were going to get the lower price was that our competitors were following the same system we were.

    They didn’t use the word “system.”

    I think that’s important too.

    Commission and its finding didn’t refer to Staley, didn’t say anything about pricing system.

    What it said was we had our method of policy and the method of policy was the one that we relied on, as I’ve said, that we wouldn’t give more.

    But they said they call that a method of policy and they said, “Our competitors had a similar policy, so it was only logical to believe that our customers would get lower prices from our competitors.”

    Earl Warren:

    Am I wrong, Mr. Chaffetz, in recollection that in an effort to show that it’s a jobber classification, was not arbitrary and represented the bona fide —

    Hammond E. Chaffetz:

    Yes, sir.

    Earl Warren:

    — scheme to transfer these — made the distributive functions to jobbers who are willing to handle them that Standard said described its pricing policy as a pricing system?

    Hammond E. Chaffetz:

    Yes.

    Earl Warren:

    Am I wrong?

    Hammond E. Chaffetz:

    Yes.

    No.

    Hammond E. Chaffetz:

    Now, that — that’s correct.

    We did it.

    We used the word “system” back in 1940, but we didn’t mean system in the Staley sense.

    We were talking about something else and I’d like to talk about our answer, too.

    I’d — I’d like to — that — that’s the next point I was coming to is just what we said in –in 1940.

    Felix Frankfurter:

    They denied —

    Hammond E. Chaffetz:

    Before —

    Felix Frankfurter:

    When asking to present a meeting with the Chief Justice question, but before you sit down, I wonder if it’d be fair to ask you this question, to address yourself with this.

    What do you regard as the vital finding of the Commission against you and what reason do you offer by the Court of Appeals shouldn’t have deferred to those findings?

    Before you sit down, if you’ll deal with that —

    Hammond E. Chaffetz:

    I’d — I’d be delighted to, Mr. Justice Frankfurter.

    First, let me just say this, and I want to come to the Chief Justice’s point but I’ll reach it this way.

    I want to make clear here that there was no system in Detroit.

    There was no price uniformity, even remotely, nothing like Cement, Staley the National Lead.

    Prices were figuratively all over the law.

    Some people sold at — at one and a half cents off of the prevailing tank-wagon, some two.

    Some required bulk plant facility, some didn’t and some just gave odd — odd prices.

    There was nothing systematic about pricing in — in Detroit.

    And so, were far removed from — from Staley.

    There was no system with respect to method.

    It wasn’t as though everybody — so, there are both dealers and jobbers, and that’s the picture that I think Commission counsel has started to — to present here, that everybody sold in the same way and they say that — that, ”Sure, we justify our lower prices because of offers from competitors and they would do likewise.”

    Well, that just isn’t so.

    I think the majority of the offers here were from competitors who didn’t sell dually, who didn’t sell to both jobbers and dealers.

    They sold only at –at one price.

    So — so, there was no system even with this industry-wise or — or generally to — no system.

    Such as I think was pictured here on — on Thursday.

    Now, how do we get to — our — our having to use the word “system” and — and I must say that this — this argument of — of the Government is the more we market in that — as I understood the argument the other day, they tell the Court that this case was disposed of when we filed our answer.

    They say in our answer, we defeated our own defense and they say that all the evidence they rely on is the evidence that we are in support of our defense and they say, “That shows that we won in good faith.”

    I just point that out to suggest that there is something rather strange about that situation.

    It’s seventeen years later — 17 years later, the Government wakes up to the fact that in 1940, we talked ourselves out of Court.

    Hammond E. Chaffetz:

    But what happened was this.

    Because of this policy that we had, that I mentioned earlier, of refusing to give this lower price, except where the customer performed the wholesaling function and stuff.

    That situation gave —

    Hugo L. Black:

    That was — that was the system, I think that you had.

    Hammond E. Chaffetz:

    You can call it a system.

    It’s a label.

    Hugo L. Black:

    Yes, that’s what I mean.

    I don’t —

    Hammond E. Chaffetz:

    You can call it — I — I shy away from the word “system” because “system” in the context here, to me means Staley.

    It means cement.

    It means the kind of thing Your Honors referred to in — in the cement decision, where you said that with that kind of a system, there was no chance of anybody ever losing a customer.

    The industry saw to it that every customer got the same price delivered at the same point with those chances.

    This is just the reverse of that.

    Hugo L. Black:

    That’s — that’s not true here that you —

    Hammond E. Chaffetz:

    That’s not just reverse —

    Hugo L. Black:

    But do you admit you saw that by admitting, do you not, that you did sell to Ned’s cheaper than you sold to other wholesaler.

    Though —

    Hammond E. Chaffetz:

    Yes.

    Hugo L. Black:

    — the people agreed to it.

    Hammond E. Chaffetz:

    Yes, sir.

    Hugo L. Black:

    And you just —

    Hammond E. Chaffetz:

    We did it — we did it —

    Hugo L. Black:

    — justified —

    Hammond E. Chaffetz:

    — we did it —

    Hugo L. Black:

    — on the ground that you had to — to meet —

    Hammond E. Chaffetz:

    We had three defenses.

    Hugo L. Black:

    — low price.

    Hammond E. Chaffetz:

    We had three defenses originally, Your Honor.

    Hugo L. Black:

    But that’s the one that’s narrowed to now.

    Hammond E. Chaffetz:

    That’s right.

    Hammond E. Chaffetz:

    That’s the one (Inaudible)

    Hugo L. Black:

    (Voice Overlap) —

    Hammond E. Chaffetz:

    — that’s right.

    But — but the Government preferred to rely on a different defense that we raised in 1940, and that’s where this argument — other argument — we — we asserted in our answer three defenses.

    One of them was cost justification.

    Because we made them take over the functions, there was obviously an area of — of cost justification.

    Secondly, because we were so careful in classifying our customers, jobbers on the one hand and dealers on the hand, we have the defense of — of functional classification of customers and that was the defense that we asserted and we said, “That because these were honest-to-goodness jobbers and were recognized in the industry and in all other industries.

    There wasn’t only two.

    We said jobbers of well-known all over because we were careful to distinguish between jobbers on the one hand and preferred to lose customers rather that to give a jobber price to a man, unless, he was a jobber.

    We said that gave us a defense of — of functional classification of customer.

    The examiner found on that, only, it didn’t sustain out of fancy, found on — on that — only that what we did was arbitrary, as — as the Commission claim.

    But we didn’t say that that was our only defense.

    We have that defense.

    We have cost justification and we have the principal defense, of meeting competition.

    And in our answer, if you read our whole answer, which I think you have to do if you could read the defense that isn’t theirs here which is appended to the Government’s brief.

    In our brief, we appended the — our allegations, our Government’s with respect to meeting competition in good faith, and — and the whole story as later was proved in the record was — was pointed out as to why we gave the lower price, only as we said in individual emphasis in order to keep a customer.

    That was our defense in 1940.

    We haven’t changed our position when — when I ordered except that we are not now not pressing these other two defenses here.

    The only question before this Court is — is on this one defense that we heard in 1940.

    Hugo L. Black:

    Why — I don’t quite understand you.

    I understand that you defended them and you still say that you had this factor, whatever you want to call it, under which you classified as jobbers, people whom they say are not going to try these jobbers, in the general sense.

    And that you sold to those people at a lower price than you sold to your other customers —

    Hammond E. Chaffetz:

    Let me put it this way, Mr. Justice Black.

    What we did was this, and what we said at that time, in our answer, if you read that whole answer, it says that we refuse to give the lower price to anybody except to meet competition in good faith and even then — even then we wouldn’t do it unless the man was bona fide a jobber.

    That was a — this — this a lower price to — to the jobber or recognition of the jobber was a maximum kind of thing, not a minimum kind of thing.

    It wasn’t a systematic thing.

    It was a systematic thing we have had many jobbers.

    We did that selling to jobbers as we sell to dealers.

    We dealt with each of these customers as an individual situation and in doing so, in dealing with them as an individual situation, we did three things.

    We were careful to be sure that we only gave them the price that we had to give to this competition.

    Hammond E. Chaffetz:

    Secondly, we wanted to reserve a price justification defense by refusing to give them this lower price, unless, they had offsetting cost.

    And thirdly, we wanted to also reserve the customer classification defense that we were only giving a jobber price to — to a jobber.

    What I say is we went beyond, far beyond what Section 2 (b) required.

    We tried to preserve additional defenses, but it was not, Your Honors, and I want to emphasize this.

    There was in a situation where we just had two crises and anybody who was a jobber got the jobber first, anybody who would do would do that that was not a system.

    Hugo L. Black:

    (Voice Overlap) I’m trying to get just what the issues between — what they say is, as I understand it, the argument if there’s some findings at all that the evidence there is that you had this system or this — this method, whether you followed it, to their a reference to everybody or just followed to the reference of a certain one is that you had to subtract nothing and that the other people picked up your method and competed with you on the basis of your method as given to these people they call jobbers, the same kind of price lower (Voice Overlap) —

    Hammond E. Chaffetz:

    Let me — let me say this, Your Honor.

    There is not — there’s no evidence in the record that anybody else in any other company had the same policy we did.

    This conservative policy of ours of refusing to sell except where they — they had their own bulk plant, so there’s no evidence that any other competitor had that policy.

    The evidence as to what competitors did is a generalized kind of evidence.

    They sold to jobbers, some sold to dealers and jobbers.

    No indication as to whether — whether they like we gave a maximum, cent and a half, the evidence is to the contrary.

    Some of them gave two cents.

    No evidence that they like we insisted that the jobber have bulk plant facilities.

    Several of our customers were lost to competitors who gave them the one and a half cent price even though they didn’t have bulk plant facility.

    Hugo L. Black:

    Is there any evidence of whether Ned’s sold cheaper?

    Hammond E. Chaffetz:

    Yes, there is —

    Hugo L. Black:

    Is that on account of the discounts you gave him —

    Hammond E. Chaffetz:

    Well —

    Hugo L. Black:

    — as his competitors did and the retail vendors?

    Hammond E. Chaffetz:

    That is the finding, I must say that.

    Hugo L. Black:

    (Voice Overlap) —

    Hammond E. Chaffetz:

    The finding that Ned’s is sold cheaper, but I think that’s the first case.

    That was —

    Hugo L. Black:

    So that unless you have a — is that what you claim —

    Hammond E. Chaffetz:

    That’s right.

    Hugo L. Black:

    — you did it in good faith to meet competitor’s price within whatever meaning that you had, you have no defense doesn’t it?

    Hammond E. Chaffetz:

    We’re relying here solely on the defense.

    We have to convince this Court that the lower court was correct in finding as a fact — in finding as a fact that we departed from our otherwise uniform tank-wagon price, only where we had to, to keep a customer.

    That — that’s all this case is about and — and my time is about up.

    Hammond E. Chaffetz:

    I want to say this in conclusion, which I think is — that it is significant here.

    The question that brought the case here, the certiorari question, was the question which Justice Black just has — did post, whether we are entitled to continue to give a discriminatory price because our competitors were giving a similar discriminatory price.

    I say that question isn’t in the record.

    It isn’t raised by the opinion below.

    The opinion below says that there — that question isn’t here, the record is — is to the conflict.

    Not only that but the petition for certiorari refer to the three companion cases, which said would be governed by this case.

    Those companion cases were shortly after dismissed even — dismissed on a motion — on a motion of staff council, the Commissioner had been pending for two years before petition for certiorari was filed here and the dismissal was shortly after the — the grant for certiorari here.

    So part of the effect to this case on the companion case is concerned sorry I’m just about to have — and they also said that there were other cases pending in the court below involving systematic pricing and this case would have a direct impact on those cases.

    It just so happens that those cases, the automotive parts case which are now here, didn’t involve the issue of this case and I say that assuredly because counsel on neither side nor the Court itself had any occasion to mention this case in those cases.

    Those cases were not affected, didn’t involve the issue here.

    I think the issue here is — is a narrow issue, the one that Mr. Justice Black just — just gave, the factual issue.

    Did we, on traditional ground, (Inaudible) question of law.

    Traditional ground, did we come within Staley?

    The language stated where it said did you have reasonable cause to believe you had to give the lower price to the competitors.

    Now, I say is that the Court examined that question and — and came down with — with firm, factual conclusion, which is supported by a whole series of other appraisals in the record, all — all to the same effect.

    On the Universal Camera — on the Universal Camera and Pittsburgh Steamship and all of those other case I can’t imagine this Court is going to undertake a new review of that pure factual question.

    Thank you very much, Your Honor.

    Earl Warren:

    Have you — if — do you feel you’ve answered to Justice Frankfurter’s question?

    Felix Frankfurter:

    Let me put it to you in a sentence.

    Hammond E. Chaffetz:

    I’m sorry.

    Felix Frankfurter:

    What are the crucial ground on which the Commission decided against you and to which the Court of Appeals did not refer?

    Hammond E. Chaffetz:

    I — I had thought that I’d answer the question.

    Let me summarize in a sentence, too, this way.

    As I say, the Commission’s findings are not satisfactory.

    You can’t parse them that — that easily.

    But I have a different understanding of them now after hearing the argument here than I had when we were —

    Felix Frankfurter:

    But they did (Inaudible) against it.

    Hammond E. Chaffetz:

    Yes.

    They decided — here’s — here’s what they said.

    Recognizing that this evidence of offers, as they say, probably was — was shown to demonstrate that we had to give these lower prices in order to keep the customers.

    Hammond E. Chaffetz:

    They say “That doesn’t overwhelm us because they said you had a — a policy and your — your competitors had a — a similar policy and they were bound to get the — the lower prices.”

    And — and that they said is only the background, only the background for their real decision and curiously enough, the real grounds of the Court — of the Commission’s findings haven’t been mentioned here yet.

    With that background, they said, “Because, of course, we — we could expect that our customers would get lower prices from competitors because do they followed the same practice as we did.

    They said, “In those circumstances — in those circumstances, we should have looked around and had we looked around, we would have discovered that our lower prices were bound to cause injury to competition.”

    And that they said proves bad faith and they also said that we should have had reason to believe that our lower prices couldn’t be cost-justified and that shows bad faith.

    It — it was things of that sort and when we argued before the Commission and we went to the court below, those stood in our mind as the real ground, a legal ground of the Commission’s decision against it.

    Felix Frankfurter:

    I’m going to ask Mr. —

    Hammond E. Chaffetz:

    Yes.

    Felix Frankfurter:

    — Pollock the same question.

    Do I infer from what you just said that the Commission held in effect that you had a generalized system which in and of itself was violated of the Act?

    Hammond E. Chaffetz:

    They weren’t even as precise as that.

    They — they use the same word.

    They said, “We had a policy or method and our competitors likewise had a similar policy.”

    But they were very careful to avoid pinning it down to just what our competitors had and did.

    Did our competitors have the same policy we did?

    Did they sell to both the jobbers and — and dealers that — that we did.

    And that comes up, Mr. Justice, in this way, if I may have just 30 — a second more.

    We were assured here that if we do lose these customers, it will only be temporary and that the Commission will promptly proceed against our competitors who they say have the same policy and practice, but nowhere do they tell us what they will do about Fleet-Wing, Argo, National Refining — these whole series — whole series of — of competitors who sell only in one price, whose price isn’t even discriminatory apart from the question whether or not it could be cost justified —

    Felix Frankfurter:

    We couldn’t sit here and make —

    Hammond E. Chaffetz:

    — or was lawful and insult —

    Felix Frankfurter:

    We couldn’t sit here and pursue a prophecy whether or not you have customers anyhow.

    I don’t think that that’s an issue.

    Hammond E. Chaffetz:

    Well, the point is —

    Felix Frankfurter:

    I’m try to —

    Hammond E. Chaffetz:

    — the point is they say that they’re going to treat our customers the same as — as they treat us and they’re going to stop everybody from doing it.

    But they overlooked the fact that you don’t stop everybody from doing it unless everybody is doing the same thing we do and the record doesn’t show that.

    The record shows the contrary, and they’re vague on that, Mr. Justice Black, in their finding, the findings are very vague.

    It’s generalized language.

    There is no finding that the practice was uniform or — or that extensive answer.

    Hugo L. Black:

    You have mentioned one thing that found (Inaudible) it seems rather important to me in connection with the answers.

    Hugo L. Black:

    As I understand it, the Commission has found that you used the classification of a jobber —

    Hammond E. Chaffetz:

    That’s right.

    Hugo L. Black:

    — that was not a true classification.

    You called him a jobber when he wasn’t a jobber.

    He was competing with retailers who were retailing and they say that from that, you can find that it was not good faith that he’s been (Inaudible) for you to reduce that price, you didn’t say anything about it.

    You never did say anything about it.

    You didn’t tell your other customers.

    You didn’t tell anybody that you were doing — classifying this man as a jobber or not to correct it is illegal.

    You — you put it on that basis rather than to meet prices of competitors —

    Hammond E. Chaffetz:

    But —

    Hugo L. Black:

    — and you put it right and right or wrong —

    Hammond E. Chaffetz:

    With the permission —

    Hugo L. Black:

    — and when that happens on that basis (Inaudible)

    Hammond E. Chaffetz:

    No.

    With the permission of the Chief Justice, I’d like to answer that question in just one sentence.

    Had we done what the Commission suggested we ought to do, we would have been in bad faith?

    Had we, because we gave this lower price to Ned’s, offered the same price to all other similarly situated, then we’d had no good faith defense because we had no evidence that we had another customer whom in order to retain him as a customer, we had to give this lower price to.

    We didn’t rely on the customer classification on the theory that we were offering the same price to everybody similarly situated.

    Had we done so, we wouldn’t have been here today.

    We’d have lost this case a long time ago.

    Hugo L. Black:

    But one couldn’t have found that that infers if that was your reason, even though you say none.

    If you have a — which seemed on its face to be plausible, you’d classify them as a jobber, you gave him a special rate for that.

    Would they — would they infer from that you’re — go get your cover-up (Voice Overlap) —

    Hammond E. Chaffetz:

    Well, the record is so — or the –or the other way.

    Here — here’s the situation.

    First, we set this up in our answer, “Is it conceivable?”

    Is it conceivable that we set this up in our answer if it defeated that — the Staley case you know was before the Commission at that time, the Cement complaint had been filed in 1937.

    This isn’t new.

    But we didn’t set up a pricing system in our own defense at that time.

    We thought that we were in good faith to this extent and I think today on this record before this Court, it demonstrates, rather negative I should say.

    Hammond E. Chaffetz:

    I think we would not have been in good faith if we gave this same price to everybody who came along and — and asked for it, who also had a bulk plant facility.

    Hugo L. Black:

    Who was similarly situated.

    Hammond E. Chaffetz:

    Who was similarly situated.

    We would not have been in good faith.

    We would have forfeited our defense that we’re relying on here today.

    We can only use that defense and only give that lower price to the particular customer to whom we had to give that customer in order to retain it as a customer.

    I’m very sorry to — I’m over my time, Mr. Chief Justice.

    Thank you for your valuable time.

    Earl Warren:

    Mr. Pollock?

    Earl E. Pollock:

    Mr. Chief Justice, may it please the Court.

    One of the real difficulties in clarifying the issue before the Court in this case is the ease with which Standard has repeatedly shifted its position during the course of this proceeding.

    In the court below, for example, Standard did not attack the finding, the factual findings of the Commission.

    The Standard said in its brief, the issue before the Court is whether the Commission may reject petitioner’s meeting competition defense in defiance of these judicial directors and in spite of its own factual findings that established petitioner’s good faith as a matter of law.

    Again, on page 6 of their brief, and these briefs had been filed with the Court, Standard says, “The controlling facts are not in dispute.”

    Standard thereupon asked for reversal on the basis of the Commission’s own findings.

    The court below agreed with Standards as to what the question was that was presented.

    The court below said, “We are confronted here only with a question of law, not a question of fact.”

    We are not limited,” the Court said, “by the admonitions in this Court — in this Court’s decisions in Staley and other decisions about interfering unduly with the — the administrator process.”

    The Court said, “We’re dealing here only with the question of law and the correctness of the Commission’s legal decision depends solely on the correctness of its legal reason.”

    That is what happened in the court below.

    Now, it is true that toward the end of its opinion, the Court, and what I think was only a matter of obiter dictum said — it did — said — make a statement on what — what Standard now says is the gist of the entire decision below and on the basis of that statement, it now comes to this Court and for the first time, says that this Court should defer to the decision below of the Court of Appeals because it would be improper to undertake the de novo appraisal of the record in the same way that the court below did.

    We submit that the only question is one of law and that Standard at this late date cannot undertake to attack the findings of fact by the Commission, even apart from the question of whether, as Mr. Justice Frankfurter pointed out, the Court of Appeals would have been obliged to defer to those factual findings.

    Hugo L. Black:

    Would you state succinctly what you consider the question of law to be?

    Earl E. Pollock:

    Question of law that I believe is presented here is, of course, generally whether Standard has proved, carried its burden of proving it’s good faith, but more specifically —

    Felix Frankfurter:

    That to him is a question of fact, isn’t it?

    At least in fact (Voice Overlap) —

    Earl E. Pollock:

    Not according to the court below.

    Felix Frankfurter:

    What?

    Earl E. Pollock:

    The court below said that it was a question of law.

    The facts were not in dispute.

    Felix Frankfurter:

    Well, I — I know, but —

    Earl E. Pollock:

    It’s — naturally, you can’t get away from the facts because —

    Felix Frankfurter:

    All right.

    Earl E. Pollock:

    — law in fact aren’t —

    Felix Frankfurter:

    This isn’t just an abstract question of law, is it —

    Earl E. Pollock:

    That’s right.

    We always have to go back to the — to the factual basis for — for the question —

    Felix Frankfurter:

    On this situation.

    Earl E. Pollock:

    — of law.

    That’s right.

    The question is whether or not a seller — which has a discriminatory price policy, whether or not that seller can continue to discriminate, pursuant to and accordance with that policy and still be said to be in good faith.

    The Commission’s view on the other hand is that a seller to be in good faith must first of all undertake to establish a nondiscriminatory price scale.

    Your opponent on the definition that you’ve given, your opponent says that you agreed beyond that proposition —

    Earl E. Pollock:

    That’s right.

    That isn’t the question.

    Earl E. Pollock:

    That’s right.

    Standard has completely abandoned the argument which it made below.

    The argument which it said was the principal argument below.

    It now has confessed error on the court below and it ceases on this one sense.

    In the opinion below, it says that this constitutes the crux of the decision below and I’d like to examine that sentence.

    Well, I think I can show quite readily, Mr. Justice Harlan, that it is completely unsupported by the record.

    This sentence was this.

    It appear —

    Hugo L. Black:

    Before you do that, do you — in answering the question, I want — I’m sorry to interrupt — you said they had a discriminatory system, if he does, what was that?

    Earl E. Pollock:

    I think it’s best set forth in its — by its — key officials during — during the hearing and also in its answer.

    Let me illustrate if I can.

    Felix Frankfurter:

    Would you mind deriving it from a finding by the Commission as to what that system was?

    Earl E. Pollock:

    Yes, surely.

    The Commission in paragraph —

    Felix Frankfurter:

    If you told me I’ve got a commission.

    Earl E. Pollock:

    In paragraph 14 of its findings.

    What page is that?

    Earl E. Pollock:

    All right, let’s start with paragraph 13 at page 5383.

    Commissioner pointed out that respondent’s method of pricing its gasoline in the Detroit area is to sell its customers generally at what is designated in the oil industry as the tank-wagon price and to sell to a much more limited — limited number of purchasers at a tank-car price.

    The latter being one and a half cents per gallon lower than the former.

    The tank-car price is also generally referred to as the jobber price although the granting of such price is not based upon any consideration of a method of resale by the purchaser.

    For example, Ned’s is classified as a jobber, even though it had no wholesale sale and so on.

    It merely constituted a chain of service stations, but Standard said, “Well, you are a jobber and we will give you a jobber price.”

    The Commission goes on —

    Earl Warren:

    Ned’s did not sell to — to other retailers at all and just to his own chain?

    Earl E. Pollock:

    That’s right.

    Exclusively through his own chain and that this was — this was called a jobber and — and this Court’s Ruberoid decision, the Court made perfectly clear that sellers can’t use ambiguous labels to cover up preferential discount.

    It’s the content that matters.

    It’s the competition that mattered, not the fact of what you call it.

    Otherwise the Robinson-Patman Act would be a dead letter by just assigning a — a high-sounding label to a particular group of customers that you want to favor.

    Now, going on here, the respondent Standard for granting the tank-car price is that a purchaser make annual purchases of from one to two million gallons of gasoline, have storage facilities and have a credit rating satisfactory to assure payment.

    Now, let me now illustrate how this works.

    Felix Frankfurter:

    May I — may I ask you to this — there’s one more point?

    Earl E. Pollock:

    Surely Mr. Justice.

    Felix Frankfurter:

    Did the Commission find that classifying between a tank-car and a tank — is then it sells from illegal classification?

    Earl E. Pollock:

    Oh, no.

    It — it depends entirely, first of all, whether there is proof of competitive injury.

    That’s out of the case.

    That’s established now.

    And also, it depends on whether or not the discount can be cost-justified, the overwhelming evidence here.

    Felix Frankfurter:

    But the fact of the cost-justification is a — is — is a classification on this record and the findings of the Commission of some customers of Standard as tank-car customers and others as tank — what’s the other one?

    Wagon customer.

    Earl E. Pollock:

    Wagon.

    Felix Frankfurter:

    Is that classification in and of itself as spurious and therefore, an illegal classification.

    Earl E. Pollock:

    Oh, yes.

    Earl E. Pollock:

    The Commission found that that was a —

    Felix Frankfurter:

    But nobody (Voice Overlap) —

    Earl E. Pollock:

    It was an arbitrary classification.

    That was arbitrary classification.

    Felix Frankfurter:

    So that nobody could get a tank-car price anyhow.

    Is that it?

    That’s all — and that’s what it has to mean to mean anything.

    Earl E. Pollock:

    Oh but — let me rephrase that, Mr. Justice.

    Commission filed was an arbitrary classification because these jobbers do not sell exclusively at wholesale.

    In fact, an outlet like Ned’s sold exclusively at retail, said it’s an arbitrary classification to say, “We will call you a jobber even though you have a service station right across the street from Jim Smith,” who sells under a million gallons a year.

    We — we charge him the tank-wagon price because he doesn’t have a big enough volume.

    But this station across the way, that’s one of — that’s part of a chain and we give them the tank-car price because they sell a lot of gasoline for us.

    In this respect, it’s just like cumulative discount which was involved in the Morton Salt case and which this Court unanimously condemned, even in the separate opinion of Mr. Justice Jackson.

    It’s that kind of classification, which is invalid, apart — as long — unless these other defenses can be made out.

    Felix Frankfurter:

    Then you can — then you say the whole of Ed — Ned’s — is it Ed or Ned’s?

    The whole —

    Earl E. Pollock:

    Ned’s.

    Felix Frankfurter:

    The whole Ned’s story is — is irrelevant.

    It’s a red herring.

    Is that it?

    The whole Ned’s story because no matter how true — it doesn’t make any difference, he couldn’t be — he couldn’t be classified as a tank-car seller.

    Earl E. Pollock:

    As a tank-wagon.

    Felix Frankfurter:

    A tank —

    Earl E. Pollock:

    He couldn’t be classified as a tank-wagon customer.

    Felix Frankfurter:

    But he couldn’t —

    Earl E. Pollock:

    Either that he was classified as a tank-car customer, Your Honor.

    Felix Frankfurter:

    And it can’t be — he couldn’t be classified.

    Nobody could be classified as tank-car seller.

    Earl E. Pollock:

    I —

    Felix Frankfurter:

    I just want to understand what you — what — what you’re saying.

    Felix Frankfurter:

    Is that right?

    Nobody could be classified as a tank —

    Earl E. Pollock:

    Well, four customers were.

    Four —

    Felix Frankfurter:

    Do you say that —

    Earl E. Pollock:

    That’s — that’s the whole basis of this case.

    Felix Frankfurter:

    The whole (Inaudible) that that classification is in inherent, too.

    Earl E. Pollock:

    That’s right.

    Felix Frankfurter:

    Illegal.

    Earl E. Pollock:

    That’s right.

    Felix Frankfurter:

    All right.

    Earl E. Pollock:

    That’s right.

    Now, let — let me — let me illustrate this, but I kind of think it will make it a good deal, more concrete than the case has been so far.

    Unfortunately, it’s been discussed too much so on an abstract level.

    Let’s assume that we have here in Detroit a busy intersection at the corner of Maine and Broad Street.

    At one corner is the station owned by Jim Smith.

    He — he owns the station and he operates himself.

    He sells 200,000 gallons of gas a year.

    Down the block is another Standard station.

    This station is part of a chain, which also — which is owned by a so-called jobber.

    This jobber gets this price not because of an — of a competitive offer made by another company but rather because he has sufficient gallonage.

    He has — his buys at least a million gallons a year from Standard Oil.

    Now, Jim Smith, on the other hand, pays the tank-wagon price as distinguished from the tank-car.

    Now, he has a margin of three and three-tenths cent on each gallon of gas.

    His competitor right down the block is selling the same product, has a margin of 4.8.

    He goes to Standard.

    He says, “Look, I can’t compete with them if — if they — when they cut two cents off their price, I can’t make my overhead because they have a — a much bigger margin to play with.”

    He says, “Look, I’ll go and buy bulk storage facilities.

    It’s — they’re readily available.

    Will you then give me this tank-car price?”

    Earl E. Pollock:

    And Standard says, “No.

    We will not because you do not have — do not buy one, two million gallons a year.”

    Suppose then that Jim Smith says — goes back a second time and he says, “Now look, it doesn’t cost you anymore money to — to send your transport truck to my bulk plant than it does to my competitor’s bulk plant.

    Yet you give him a 30% greater margin on his — on his sales on his retail sales in direct competition with me.

    Jim Smith says, “Well, how did the five other filling station operators, just like myself, non-jobbers so-called.

    How did the — if we all get together and buy on a group basis because altogether, we buy from you at least a million gallons a year.

    Again, they go to Standard and Standard says, “Sorry, it is our definite policy and practice that we will not permit this kind of discount to being accorded to anyone of our customers except the customer that singly buys a million gallons a year.

    And that is what we’re talking about here.

    It’s that time of continuous regular discrimination, not only for years, but for decades.

    We’ve talked on Thursday about the age of this proceeding as true enough that 17 years old, five of that was — was involved in judicial review proceedings, even the — when the case was here before.

    Two and a half years in the Court of Appeals and two years in this Court went back.Standard, I think, is itself responsible for what — delay of two years for failing to immediately file a petition for review.

    But wholly apart from that, if anyone has any just claim about the delay involved in this proceeding, it’s — it is this group of 358 filling station operators who have been suffering the kind of injury which is involved here for longer than 17 years and they will continue to suffer it for another 17 years or even longer unless the Commission’s order is reinstated.

    Apart from the 2 (b) defense, this is a classic — a classic Robinson-Patman Act case.

    Felix Frankfurter:

    Mr. Pollock, may I ask you?

    And the slightest notion was the answer.

    May I ask you whether it would be violated with Robinson-Patman, to differentiate between a jobber, doing a jobber’s business with — in all its ramifications of independent jobber’s business, and five or six, a number of retailers engaging in as it were a cooperative scheme merely for wholesale value.

    Earl E. Pollock:

    The Commission in there is — certainly in this case, and in no other case that we’re aware of has ever said that there’s anything wrong with the functional discount to a wholesaler.

    In this case, these jobbers can continue to have the —

    Felix Frankfurter:

    They must have function of discount to show that their price justification is wholly — which would not exist if the — if the retailers got together and formed a purchasing agency?

    Earl E. Pollock:

    Well, if I understand your — your question —

    Felix Frankfurter:

    Right.

    Earl E. Pollock:

    — Your Honor as far as the functional discount is concerned, the question of cost savings doesn’t present itself.

    Felix Frankfurter:

    They will.

    That’s what I thought.

    Earl E. Pollock:

    There’s — then the Commission’s order in this case does not prevent the Standard from continuing in this jobber differential on bona fide jobber sales.

    For example, Citrin —

    Felix Frankfurter:

    What — and what constitutes a bona fide jobber’s sale?

    Earl E. Pollock:

    It depends on the manner of use.

    If, for example, Ned’s sold exclusively at retail, it can’t be called a jobber or a wholesaler except by a flight of fancy.

    As far as this Court’s Ruberoid decision is concerned, that company is a retailer.

    Earl E. Pollock:

    It’s in direct competition with all of these so-called non-jobbers and as far as it is concerned, it is entitled to no greater differential than a differential whether it makes due allowance or cost savings.

    For example, let’s — let’s see just what Standard could have done in this case to have been in good faith, when the Robinson-Patman Act was passed.

    Suppose Standard thereupon said to its four jobber customers, and I want to emphasize that none of these four jobbers was ever accorded this tank-car price in response to a competitive offer.

    As to three of them, there is no evidence, no evidence.

    Mr. Chaffetz on Thursday referred to Commissioner (Inaudible) opinion as containing this evidence when I asked him for such evidence.

    You will find, if you will look at Commissioner (Inaudible) opinion, not a single reference to a single competitive offer that was made to these three jobbers prior to the time they were granted the tank-car price.

    In fact, Commissioner (Inaudible) opinion is quite different from Standard’s present position.

    Commissioner (Inaudible) recognized this policy, but said that they had the right to continue it because everyone else in the industry was doing it and because there were certain offers after they had been accorded the tank-car price.

    Felix Frankfurter:

    From your point of — your argument wouldn’t make any difference whether it was before or after, is that right?

    Earl E. Pollock:

    I think that’s right because when the Robinson-Patman Act was passed, a seller could not daily go along its way without taking cognizance of this legislative Act.

    Congress expected some kind of results.

    Now, what could Standard have done suppose Standard had said to its jobber customers, “Look, we have to comply with this Act.

    What we’re going to do now is we’re going to continue the jobber discount deal on all of you wholesale sales, from the sales that these jobbers, some of the jobbers make to other retailers.

    And on — as to the gasoline which you sell at retail, we’ll give you a half cent off because that reflects cost savings.”

    Now, in that situation, we would have a nondiscriminatory price scale.

    Let’s suppose then that the situation arose in which Ned’s or some other customer came to Standard and said, “Look, the Texas Company or Gulf or over here is — is tempting me with a very attractive offer.”

    Now, in that event, we would have an individual competitive situation and a — the basis for a departure from a nondiscriminatory price scale.

    But we don’t have that in this case.

    We don’t have that in this case.

    Standard did nothing when the Robinson-Patman Act became law.

    It just went along as the Commission said relying on the proposition that it couldn’t be touched as long as its competitors were using the same discriminatory policy.

    Felix Frankfurter:

    Can I ask you one more question?

    Mr. Chaffetz indicated that this case really centers around the axis of the case of Ned’s, or whatever the phrase was.

    Now, suppose only Ned’s were in the case, would the record show that seduction was — the process of seduction had began against Ned’s and this is a response to that attempted seduction.Would that be within or without this?

    Earl E. Pollock:

    If we had a situation in which —

    Felix Frankfurter:

    Just forget the other three.

    Earl E. Pollock:

    If we — yes.

    We had a situation which Standard was — would have made some kind of bona fide effort to sell on — at a — on a nondiscriminatory basis and then the Ned’s situation came up.

    I think that it might very well be a good face up.

    For example, the Commission apparently recognized that the half cent reduction to Ned’s and that’s what Mr. Chaffetz was talking about at some length that this half cent reduction was not — an illegal discrimination because there seemed to be in that situation a basis for saying that Standard was departing from its customary price scale.

    Earl E. Pollock:

    But as to all of these other discriminations, Standard merely applied this dual price formula year after year after year.

    Felix Frankfurter:

    What I meant is on — on your statement, would the whole thing fall or could Ned’s be — could the Ned’s discrimination so-called survive?

    Earl E. Pollock:

    I think, had that situation existed, we — we would then be confronted with the problem of how long could Ned’s have — have enjoyed this — this discrimination.

    I think we have to operate on the assumption by that — that by that time, these other companies, such as Texas, would have been preceded against so that this illegal offer would have been withdrawn.

    Felix Frankfurter:

    Do you — do you — would Mr. Chaffetz’s statement both accurate and well-balanced in the picture he gave us of how they held out against Ned’s in a kind of a yield instead of accurate conveyance.

    I don’t mean to say he wouldn’t be otherwise if —

    Earl E. Pollock:

    I would say —

    Felix Frankfurter:

    — it purposely (Voice Overlap) —

    Earl E. Pollock:

    I would — I would be obliged to say — I would be obliged to say it is inaccurate.

    Felix Frankfurter:

    Inaccurate.

    Earl E. Pollock:

    For example, in the discussion with the — Mr. Chaffetz talked about this great tug of war with Red Indian, the Fleet-Wing Gasoline.

    The president of Red Indian was put on the stand and he was asked, “Well, how do you think your — your brand compares with this — with Standard Oil?”

    And he said, “Oh, I — it — it isn’t anywhere.

    It’s — it doesn’t have any of or —

    Felix Frankfurter:

    But if Ned’s told the court —

    Earl E. Pollock:

    — we’re nearly in public acceptance of those brands”

    Felix Frankfurter:

    — but isn’t he right in saying what you and I, certainly I might (Inaudible) what was it?

    The Red Wing.

    That was the Fleet-Wing.

    Earl E. Pollock:

    Fleet-Wing, which was sold by Red Indian.

    Felix Frankfurter:

    Not very — not a very magnetic name, but that’s — I never heard of it.

    But if he thought he could get away with Red Wing sales to — to you and the rest of the people who drive up to get some gas, wouldn’t that be sufficient?

    If he thought that — that he could —

    Earl E. Pollock:

    If we —

    Felix Frankfurter:

    — replace Standard with Red Wing —

    Earl E. Pollock:

    Yes, I —

    Felix Frankfurter:

    (Voice Overlap) —

    Earl E. Pollock:

    I — I think it might be.

    It — it could well have been but on this evidence, and we’ve — we’ve —

    Felix Frankfurter:

    That’s what I’m asking you.

    Earl E. Pollock:

    On this evidence, the Commission examined the situation.

    It said there was no cause or relationship between this kind of offer and this, and I can’t imagine —

    Felix Frankfurter:

    Not the system, but as to Ned’s.

    Earl E. Pollock:

    That’s right.

    Conceivably, in that situation, there might have been a 2 (b) defense.

    We — we happen to think that the 2 (b) defense has — has a great deal of merit.

    Now, speaking on behalf of Department of Justice and not on the part of both, the Commission and the Department of Justice, but I do want to emphasize that the 2 (b) defense cannot be interpreted so broadly as Standard would have this Court interpret that, so as to nullify the very purpose of a Robinson-Patman Act.