Perkins v. Standard Oil of California

PETITIONER:Perkins
RESPONDENT:Standard Oil of California
LOCATION:Circuit Court of Somerset County

DOCKET NO.: 624
DECIDED BY: Warren Court (1969)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 395 US 642 (1969)
ARGUED: Apr 22, 1969 / Apr 23, 1969
DECIDED: Jun 16, 1969

Facts of the case

Question

  • Oral Argument – April 22, 1969
  • Audio Transcription for Oral Argument – April 22, 1969 in Perkins v. Standard Oil of California

    Audio Transcription for Oral Argument – April 23, 1969 in Perkins v. Standard Oil of California

    Earl Warren:

    Perkins versus Standard Oil Company of California.

    Mr. MacLaury, you may continue.

    Richard J. Maclaury:

    Mr. Chief Justice, may it please the Court.

    I’d like to return for a moment to the question Mr. Justice Douglas asked yesterday and the suggestion that there must have been a control by Western over Regal because of Western’s 55% stock interest in Regal and my response to Mr. Justice Douglas’ question was that although Western was in a position to control Regal, there was no evidence that there was in fact control.

    I’d like to add and answer to this morning and say that I think it will be recognized that Western as a majority stockholder in Regal had an obligation to the minority stockholders in Regal and it was Western’s obligation as a majority stockholder to honor its obligations to the minority and to see that Regal could resell its gasoline at a price that would return to Regal a normal profit.

    In other words, that the majority in Western had an obligation to refrain from dealing with Regal and controlling Regal to the point that Regal would operate at a loss.

    Now, the fact is that Western paid Signal slightly higher or approximately the same prices towards gasoline that Perkins paid Standard.

    Now, Signal owned a majority interest in Western and was obligated to treat the minority interest in Western fairly and to refrain from compelling Western to operate at a loss, or to sell at a loss to Regal.

    Beyond this, the fact of the matter was that the minority stockholders in Western were actually the controlling officers and control the operations of Western and they were in a very good position to see that their own interests were properly taken care of.

    Byron R. White:

    Well, whether there was control or not, I suppose Signal’s lower price was either passed on Western, and if it wasn’t passed on, I suppose the Perkins case gets much covered, doesn’t it.

    Richard J. Maclaury:

    It certainly does, yes.

    Byron R. White:

    But was that issue put to the jury?

    Didn’t that have to if the jury — I suppose on one theory of the case, the jury would have had to have found that it was passed on.

    Richard J. Maclaury:

    No, I do not believe so, —

    Byron R. White:

    Well, they —

    Richard J. Maclaury:

    — Your Honor.

    Byron R. White:

    — came out with the verdict of Perkins.

    Richard J. Maclaury:

    Yes, they did.

    I’d like to step back a moment and say this that the respondents asked that this question of passing on be put to the jury.

    The Court refused to do that and I might say there that on page 5 of our brief, —

    Byron R. White:

    Well, this — let me put and ask something else.

    If it was passed on a regular basis, that doesn’t really make much difference about control, does it?

    Richard J. Maclaury:

    No.

    Byron R. White:

    And if it wasn’t passed on, it doesn’t make any make difference about the petroleum.

    Richard J. Maclaury:

    I think that’s correct.

    And the fact of the matter is that there’s no dispute between petitioners and respondents as to the price that Western paid for its gasoline.

    That evidence was put in on the basis of invoices.

    The invoices of Signal oil and gas to Western and there was no conflict in it and that that evidence, that invoice evidence is summarize in the footnote at page 22 of our brief.

    And it shows that for virtually all of the time, Western paid a higher price for gasoline than Perkins.

    Byron R. White:

    But how come does Regal get off with selling at such a low price?

    Richard J. Maclaury:

    Well, that’s —

    Byron R. White:

    Does it buy its gas at a low price?

    Now, how does that operate?

    Richard J. Maclaury:

    Now, that — that I think goes to the very question in the policy question as to why Congress cut this liability off at the third level.

    Regal as established in the evidence had very large well-situated stations.

    They concentrated on the sale of gasoline.

    They concentrated on large volume stations.

    They open with the well-advertised campaign and it was Perkins own marketing experts, it wasn’t the professor, or somebody, theoretician.

    He had actually worked for years in the Portland market.

    He was an independent this time and he testified that he was in Portland then, and he said it wasn’t the prices of Regal that had the impact.

    The real impact of Regal was on its tremendous advertising campaign, its promotional campaign and its method of selling of a gasoline.

    Byron R. White:

    You mean it didn’t — they didn’t have lower prices?

    Richard J. Maclaury:

    No.

    Byron R. White:

    Selling prices.

    Richard J. Maclaury:

    I think we have to accept for the purpose of this record here that there was a reduction in the price in Portland of some four cents immediately after Regal came on the market.

    But Mr. Justice White, we could not attribute that four-cent reduction in the Portland market to the less than half cent advantage that Signal had over Perkins and at the very time that Regal opened, Perkins was paying a higher price, and Signal was paying a higher price than Perkins.

    Byron R. White:

    Doesn’t the record show what Regal paying for gas?

    Richard J. Maclaury:

    There is no direct evidence in this record as to what Regal was paid except the ordinary interest and I think it should be drawn that Western paid a higher price than Perkins and we can assume the Western is going to sell to Regal a loss.

    Byron R. White:

    But you’re suggesting now that it’s quite rational to — rational in terms that Regal although selling it four cents below what the price was, nevertheless, was paying the same price for gas that other people were.

    Richard J. Maclaury:

    Yes, that is what I’m suggesting and I’m suggesting also that because of Regal’s more efficient operation, Regal was probably taking a lower profit than these other marketers.

    They were probably operating on a large volume and low unit cost.

    And there also, Regal did not perform the ordinary regular services that you connect with service stations such as the lubrication and repairs and that sort of thing.

    They very efficiently concentrated on the sale of gasoline.

    That was the testimony of petitioners and witnesses.

    And I think a lot of it could be attributed to that.

    Abe Fortas:

    But if you sell gasoline, low cost per gallon, the more gasoline and that’s all you sell, the more gasoline you sell, the more money you lose, isn’t that right?

    Richard J. Maclaury:

    You’re absolutely correct, —

    Abe Fortas:

    Which is like —

    Richard J. Maclaury:

    — Mr. Justice Fortas.

    Abe Fortas:

    — ribbons, so that unless in a costume, the more ribbons you sell, the more money you lose.

    Richard J. Maclaury:

    You’re absolutely correct, of course.

    Abe Fortas:

    I wanted to ask you (Voice Overlap), the question that I asked you yesterday if I may, but I didn’t ask it well.

    I’ll try it again today.

    Let us suppose that Signal owned a 100% of Western and Western owned a 100% of Regal and let us suppose that Standard sold to Signal at a lower price than it sold the same product to Perkins, would that — and let’s assume that all they have — the statutory requirements were met about the competition, would that be a violation of 2 (a)?

    Richard J. Maclaury:

    I would have to answer that Mr. Justice Fortas in this way, without more, the answer would be no.

    I still think it would take a factual inquiry to determine whether or not there was actual direction by Signal of the decisions of Western and by Western on the decisions of Regal.

    I don’t think the inquiry of the burden would be nearly as strong or as heavy as it is in this situation.

    But of course that is not the situation that we got here.

    Abe Fortas:

    I understand but I respect the logic of your answer.

    I expect you probably have to answer it that way consistently with your position.

    Richard J. Maclaury:

    I’d like to go one step further than that.

    I believe it is the presumption in virtually every deal of the law that where there are separate entities, these separate entities make their own decisions but I recognize that whether it’s a 100% control, the burden of showing the contrary is not nearly the burden that the petitioner would have here.

    We also have this further problem which I was going to mention Mr. Justice Fortas, that where Signal is holding itself out as an independent corporation, where Western is holding itself out as an independent corporation, where Regal is holding itself out as an independent corporation.

    If there was actual price control down the line, I think there will be a serious danger of violation of the Sherman Act and I don’t think such a serious violation of the law can be lightly inferred just on the matter of this control — of stock control.

    Byron R. White:

    I just still wonder if control is very relevant.

    Richard J. Maclaury:

    Well, that brings me — I think it is relevant and I think it brings me to —

    Byron R. White:

    But if Standard’s price cut was passed on right on through, passed right on through at all levels, I wouldn’t think the lack of control would necessarily ruin Perkin’s case.

    Richard J. Maclaury:

    Well, it would here.

    I’ll put it this way, if the ultimate seller was Western Hyway on the third level, then control makes no difference at all but even if this price differential had been passed on all the way down to Regal at the fourth level, then I say that that is beyond the purview of Robinson-Patman.

    Mr. Justice White, that brings me to the —

    Byron R. White:

    Unless you view it as a line commerce case.

    Richard J. Maclaury:

    Unless you view it as a line of commerce case as we acknowledged yesterday and that brings me to a further answer perhaps to the questions you asked yesterday and that was this question that the original language of the Clayton Act decide.

    We’re not Signal and Perkins’ competitors on the secondary level.

    I think the answer to that is that within the meaning of the language of the Robinson-Patman Act, the answer must be no.

    The first answer is that Robinson-Patman uses the word competition in its practical sense.

    That means as an endeavor by two or more persons to get the same trade from the same people at the same place at the same time.

    Now, the evidence is —

    Byron R. White:

    Perkins was competing with somebody?

    Richard J. Maclaury:

    Well, I’m certain that Perkins was competing with somebody, yes.

    Byron R. White:

    While they had lower prices than Signal as in fact making lower or less than competition and whatever market purposes he’s competing, it wouldn’t make any difference whether Perkins and Signal were competing or not.

    Richard J. Maclaury:

    Well, let me answer that — let me respond to that this way.

    Just because somewhere down the line, a purchaser of Signal gasoline may be third, fourth, fifth level down below, a purchaser of Signal gasoline somewhere confronted and competed with a purchaser of Perkins gasoline, that wouldn’t make Perkins and Signal a competitors or competitors for the purpose of this Act.

    And then that couldn’t — that wouldn’t mean that Perkins and Signal competed on the secondary level because if this was so then every non-primary line case would have to be a secondary line case.

    And clearly, this is what — it’s not what Congress meant.

    Congress recognized the realities of the market.

    It recognized the different levels.

    When Congress talked about competition with the grantor, competition with the favorite purchaser, competition with the customer of the favorite purchaser and if the argument is accepted just because somewhere way down the line, there are people who compete for the gasoline derived from these two sources, Signal and Perkins.

    Now, that means that Perkins and Signal were competing at the secondary line then this elaborate definitional language used by Congress would be entirely superfluous.

    Congress could simply have forbidden price discriminations whose effect may be “to injure, destroy or prevent competition with any person.”

    But Congress and I think wisely so refrained from going that far because —

    Abe Fortas:

    Why — How and why did Congress cut off the line of responsibility in that way on the grounds that it would not be fair to attribute a responsibility to the original supply here standing, is that right?

    Richard J. Maclaury:

    I think that is correct.

    There could be so many —

    Abe Fortas:

    Can you think of any other reason, I can’t.

    Richard J. Maclaury:

    Well, I could think there could be so many intervening factors by the time you even get to the third level that would be responsible for the —

    Abe Fortas:

    So that

    Richard J. Maclaury:

    — pricing.

    Abe Fortas:

    — one of the question you have here is whether that reasoning of the Congress applies to a case where there is majority stock ownership down the line, that is to say whether in that kind of a case where you have a line of majority stockholders that fall all the way through such as you have here.

    The reasoning of Congress applies that is to say that it would not be fair or appropriate to obtain responsibility upon the original seller here standing.

    Richard J. Maclaury:

    Now, there are just one or two other points I would like to cover before my time is up and I see I have only a few moments left and that is this.

    Petitioner asks that the jury verdict be reinstated.

    We suggest that that should not be done.

    There were many material errors the trial could have presented to the Court of Appeals which the Court of Appeals did not rule upon.

    One of them was this question of causality and that question of causality cuts across the Robinson-Patman Act standards as well as the original Clayton Act standard.

    Now, in addition there were serious and important questions concerning liability.

    There were questions concerning the fact of injury.

    There were also questions concerning the good faith meeting of competition defense.

    Some of these questions that Court of Appeals ruled on against Perkins, others it reserved the ruling but admonished that its failure to rule was not to be taken by the trial court as appellate approval.

    Now, to resolve these questions would require a review of this vast record of some 6000 pages of transcript and some 15,000 or more pages of exhibits which we suggest would more appropriately be left in the first instance to the Court of Appeals.

    I have one more point.

    Richard J. Maclaury:

    There has been some talked about Regal selling at a loss, Mr. Justice Fortas.

    Regal must not have sold at a loss because there was a difference between five and six cents according to Perkins’ testimony between the price that Regal sold and the price that Perkins’ single retail station in Vancouver sold.

    Now, this difference certainly could have been attributed to the less than one-half cent price differential that was granted in Signal after January.

    And again, I don’t think we can assume that Regal would sell at a loss because I don’t think that there would have — I think that the majority stockholders there in Western would have been violating their obligations to the minority to have compelled Regal to sell.

    Abe Fortas:

    Can the record show the price that Regal paid?

    Richard J. Maclaury:

    No, Your Honor.

    There was no evidence in the record of the price that Regal paid.

    Abe Fortas:

    Why is that?

    Richard J. Maclaury:

    I do not know why.

    The auditor for Regal was on the stand.

    He was also the auditor for Western.

    He testified as to what Western’s prices were for the invoices in but he was not asked any questions by the petitioner as to what Regal’s price was and certainly this was a crucial element of proof that was available to petitioner but he failed to comply.

    Abe Fortas:

    Are the invoices in the record?

    Richard J. Maclaury:

    The invoices from Signal to Western are in the record but not from Western to Regal.

    Abe Fortas:

    I see.

    Earl Warren:

    Mr. Kintner.

    Earl W. Kintner:

    It was the auditor — Mr. Chief Justice, may it please the Court.

    It was the auditor who was put on the stand by Standard and Mr. MacLaury examined him and did not ask any question with respect to the price.

    As a matter of fact, Mr. MacLaury said yesterday in his argument that the minority ownership and Western Hyway lay with the officers of Western Hyway.

    I quote you from the printed record a question to the same auditor by Mr. MacLaury with respect to the years 1955, 1956, 1957.

    What entities or what persons own the stock, a capital stock of Western Hyway Oil Company?

    Answer: In Western Hyway Oil Company, 60% of the shares were owned by Signal Oil and Gas Company and 40% was owned by three individuals who were corporate officers but he didn’t ask corporate officers of Signal or corporate officers of Western Hyway.

    Byron R. White:

    Could you just briefly tell me what your ultimate theory is here under the Robinson-Patman Act?

    Is it the line of commerce theory or is it the injuring or preventing competition with Regal?

    Earl W. Kintner:

    I think sir that that there two — there are at least two possible alternatives here for this Court.

    I believe beyond question that the Ninth Circuit was wrong with respect to the old Clayton Act.

    Byron R. White:

    Well, but what’s your theory?

    What’s your theory about that?

    How did you prove a case under Robinson-Patman Act?

    Earl W. Kintner:

    I think that the case can be proved under old Clayton Act by showing a discrimination.

    Earl W. Kintner:

    Mr. MacLaury has indicated the jury —

    Byron R. White:

    Now, discrimination between Perkins and Signal.

    Earl W. Kintner:

    Perkins and Signal, there was a —

    Byron R. White:

    And then what is the — what is the line of commerce that is injured?

    Earl W. Kintner:

    The line of commerce is a whole northwest, the petroleum marketing as our expert witness indicated.

    Byron R. White:

    You mean that’s the whole — you mean on all levels?

    Earl W. Kintner:

    Yes, sir.

    Byron R. White:

    Of wholesale or —

    Earl W. Kintner:

    The competition is down at the retail level.

    This is where the injury is felt.

    This is where the price war started.

    Byron R. White:

    (Voice Overlap) the line of commerce is the retail sale of gasoline?

    Earl W. Kintner:

    Yes Your Honor and in this instance, retail and the wholesale because Perkins had a average profit of 1.54% and Standard itself indicated that it took two cents to live.

    Byron R. White:

    Well, is there anything in the record about the characteristics of this market, the geographic market and the product market and what advantage Perkins has in it or not?

    Earl W. Kintner:

    The Perkins had 2.4% of the overall market.

    Byron R. White:

    That is in the record.

    Earl W. Kintner:

    That is in the record.

    That’s the equivalent of what Sun Oil has nationally.

    Perkins sold 8% of Standard’s gallonage in that market.

    Standard had 30% of that market.

    Perkins lost 13% of its gallonage of gasoline, 50% of its gallonage of fuel oil during the claim period and Signal gained 50% during the claim period.

    Perkins was making an average of 1.54 cents a gallon, Standard’s own witnesses stated that it took 2 cents a gallon to live and if you added the discrimination which Standard gave to Signal to Perkins’ price, Perkins would have had 2.2 cents per gallon which would have given him a fighting chance of living in that market.

    Now, there’s no evidence as to the price that Regal sold in that market.

    Standard’s own executive acknowledged that Regal had a better price than Perkins and that Regal would wreck that market unless something was done to control them.

    There’s no evidence of Western’s price of course to Regal.

    Standard was in a position to supply this but didn’t do it.

    And in that connection, this Court has held with respect to the matter of —

    Byron R. White:

    But you have the burden of proof in that case, didn’t you?

    Earl W. Kintner:

    Yes, Your Honor and if I might return to this question of control, I think that we adduced a sufficient evidence from which the jury could have inferred that there was control with respect to Regal and Western by Signal.

    Hugo L. Black:

    What was that evidence?

    Earl W. Kintner:

    I beg your pardon.

    Hugo L. Black:

    What was that evidence?

    Earl W. Kintner:

    The amount of ownership and —

    Hugo L. Black:

    Besides the ownership?

    Earl W. Kintner:

    There is other evidence that Standard treated an offer made to Western Hyway for the purchase of gasoline as an offer made to Signal, its customer.

    That is in the record.

    And we think that looking at the whole evidence, the whole record, the jury could reasonably have inferred that there was control.

    Abe Fortas:

    You would agree wouldn’t you that the fact that Regal sold at a lower price than Perkins does not establish a violation of law standing alone?

    Earl W. Kintner:

    Not standing alone sir.

    Abe Fortas:

    I know.

    As I understood Mr. Justice White’s question and the same question I have in my mind, could you state as succinctly just what the theory was on which you tried this case.

    It wouldn’t just let Regal sold for a lower price than Perkins.

    What is the theory on which this case was tried?

    I was a little startled to learn that the invoices showing the prices paid by Regal are not in this record.

    But apart from that parenthetical remark, would you say — tell us just what your theory was and is on this case.

    Earl W. Kintner:

    The theory was that Standard gave a better price to Signal which resulted as it was passed down the line in a price war which spread from Portland as one would drop a pebble into a pool of water throughout the Northwest Territory, in northwest market.

    Also there is considerable proof that that Standard because of this price war gave special assistance to its retail stations which were branded stations which were competing with the Perkins stations just as Perkins stations were competing with the Regal stations.

    So that what you have here as Dr. Munn pointed out in his testimony is an examination of the whole petroleum marketing situation in the northwest and based upon his hypotheticals, he found that there was a lessening of competition, a tendency to work monopoly, and a probability of higher prices.

    Abe Fortas:

    So you would — so you suggest it makes no difference that whether Signal, Western, and Regal were or were not connected by a stock ownership makes no difference at what level the Signal stations were in terms of their remoteness from Standard.

    Earl W. Kintner:

    I think sir that under the old Clayton Act, it makes no difference with respect to a showing of injury not based upon functions.

    But —

    Abe Fortas:

    What do —

    Earl W. Kintner:

    — alternatively —

    Abe Fortas:

    — you mean when you said the old Clayton Act?

    Earl W. Kintner:

    This is the first alternative spelled out in the amended Clayton Act which is a carryover of the language, the same language used in Sections 3 and 7 which this Court has interpreted many times.

    I say under that —

    Abe Fortas:

    What part of the law are you talking about?

    Earl W. Kintner:

    I’m talking about the amended, the Robinson-Patman.

    Abe Fortas:

    Section 2 (a)?

    Earl W. Kintner:

    Section 2 (a), amendments to the Clayton Act which carried over in the amendments.

    Earl W. Kintner:

    The first alternative injured the competition and tendency toward monopoly and added the functional amendment to the Clayton Act under which I also think we have adequate evidence here in this record from which the jury could have found that the requisite injury.

    Abe Fortas:

    Your theory cuts back far behind, far underneath years and years of gloss on Section 2 (a) then.

    Earl W. Kintner:

    Section 2 (a) has been glossed at the functional level many times.

    I think it’s time this Court ruled on the first alternative and made that first alternative applicable as it has made the summarily language at or under Sections 3 and 7.

    Thank you.