Federal Trade Commission v. Sun Oil Company

PETITIONER: Federal Trade Commission
RESPONDENT: Sun Oil Company
LOCATION: Beaumont Mills

DOCKET NO.: 56
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 371 US 505 (1963)
ARGUED: Nov 15, 1962
DECIDED: Jan 14, 1963

Facts of the case

Question

Media for Federal Trade Commission v. Sun Oil Company

Audio Transcription for Oral Argument - November 15, 1962 in Federal Trade Commission v. Sun Oil Company

Earl Warren:

Number 56, Federal Trade Commission, petitioner, versus Sun Oil Company.

Mr. Hummel.

Robert B. Hummel:

Mr. Chief Justice, Associate Justices, may it please the Court.

This case is here on writ of certiorari to the Court of Appeals for the Fifth Circuit.

The judgment of the Court of Appeals set aside an order, cease and desist order, of the Federal Trade Commission.

The issue is, under Section 2 (a) of the Clayton Act as amended by the Robinson-Patman Act, is a violation to discriminate among customers where the effect may be to tend to create a monopoly, to tend to eliminate competition, or to injure competition.

Here, the question is, does the Section 2 (b) proviso to the Section 2 (a) violation which I have just related which exempts such a discrimination, having the proscribed defect, where the discrimination is made “to meet an equally low price of a competitor” apply to a special price made to aid a customer, meet his competitor’s price.

In brief, the pertinent facts here are, the Commission found that the respondent, Sun Oil Company, have violated Section 2 (a) of the Act by giving price concessions to one Gilbert McLean, an operator of a retail service station in Jacksonville, Florida, which was not given to other Sun stations in the area.

The examiner and the Commission found that this caused competitive injury to other stations, and specifically to the operators of four other Sun stations located in the immediate area within less than a mile to three-and-a-half miles away.

The finding of competitive injury which was made by the examiner and confirmed by the Commission was not appealed.

What was appealed arose out of the fact that the price, the lower price given to McLean was given because he was losing business to a cut rate station across the street, a Super Test station.

It was claimed that this was a price made to meet an equally low price of a competitor within the meaning of the proviso to Section 2 (b).

The Court of Appeals held that this was within the meaning of the proviso, overruling the Trade Commission’s finding that it was not, and we’re here to contest that ruling.

I propose to discuss the issues in the following fashion.

First, I will discuss the statute as applied to just the limited facts which I have related and then I will propose to discuss the statute as applied in the economic setting and in the light of all the facts of this case.

Turning to the statute on the limited facts, the Robinson-Patman Act was designed to assure equality of opportunity among customers, and by that means, to promote the health in small business and of the free enterprise system.

Thus, the House Report which we quote in our brief at page 27, states at page 8, the existing law has in practice been too restrictive in requiring a showing of general injury to competitive conditions in the line of commerce concerned, whereas, the more immediately important concern is an injury to the competitor victimized by the discrimination. Only through such injury, in fact, can the larger general injury result.

It was pursuant to this philosophy that the Robinson-Patman Act was enacted, and to this extent, the proviso is an exemption or an exception to the major purpose of the Act for the Act reflects Congress’ judgment that the way to promote competition in this area is to assure that so far as possible, there will be equality of opportunity among the customers of a particular seller.

The Act itself reflects dissatisfaction basically with the scope of the old “meeting competition” defense which had been in the Clayton Act.

And to that extent, if I should use the expression meeting competition, it seems to me that I am not properly stating the content of the Section 2 (b) proviso, although I admit that it’s easy to slip into this expression.

We have reviewed the history of the Act detailed and at length in our brief and it is reviewed at considerable length in the decision of this Court in the Standard Oil decision in 340 U.S.

That decision reflected the judgment of this Court that the Section 2 (b) proviso was a defense, an absolute defense, three justices dissenting on the ground that it was a fact -- a factor which the Commission could take into consideration, but need not accept as an absolute defense.

This Court decided that it was an absolute defense, but the Court concluded, I refer now to the majority opinion at the conclusion of its opinion, that the proviso to Section 2 (b) is understandable as “continuing in effect a defense which is equally absolute but more limited in scope than that which existed under Section 2 of the original Clayton Act.”

Now from this, we make just the simple point that the Section 2 (b) proviso was meant to limit the scope of the so-called meeting competition defense.

It was added as a limited exemption to the main purpose of the Robinson-Patman Act.

Now here, we are not arguing that the words to meet an equally low price of a competitor need be construed narrowly.

We are simply arguing that they be construed in accordance with natural, normal usage.

In natural, normal everyday English, reference to a competitor means ordinarily someone who is at the same functional level, a manufacturer against the manufacturer, a wholesaler against the wholesaler, a retailer against the retailer.

I don’t intend to dwell on this point too long, but it seems to me a point that we have not hitherto given sufficient attention.

In normal usage, the corner jeweler selling Elgin watches for example is not a competitor of the Bulova Watch Company nor is the butcher who sells Swift & Company meats ordinarily considered a competitor of the Armor company.