Sun Oil Company

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IN THE MATTER OF SUN OIL COMPANY ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THB FEDERAL TRADE COMMI SION ACT AND OF SEC. 2(a) OF THE CLAYTON ACT Docket ()(Jl;l. Complaint, Sept. ;:6 95C-LJecisioll, Jan. l.9S,I Order requiring a gasoline suppliel' in .J aeksonvilJe, Fla., and adjacent territory to c( asc discriminating in price by selling gasoline to a favored serv ice station customer at a lower price than it charged his competitors, entel' jng- into agTcements with him to fix and maintain the resale price for its gasolirlf, rind granting discounts or odlcr considerations for that purpose. Rut"" E. Wilson Esq. Ross D. Y01mg, h. Esq. , and John B. Clayton Esq. , for the Commission.

Leonard J. Emme,'gl.ick Esq. , of Washingion, D. Moffett F?' ye Leopold by Henry A. F"lie Esq. , of Philadelphia, Pa. Rawle Hendersun by JosC)Jh W. Henclerson Esq. , of Philadelphia, Pa. ; and OS001' , Copp, Markham Ehrlich by Cyril Copp, Esq. , of Jacksonvi!1e, Fla., for respondent. INITIAL DECISlOK BY ROSERT L. PIPER, HEARING EXAMI STATEMENT OF THE CASE On September 26, 1956, the Federal Trade Commission issued its complaint against Sun Oil Company, a corporation (hereinafter called respondent) J charging it 'vlith price discrimination in violation of Section 2 (a) of the Clayton Act (hereinafter called the Clayton Act), 15 U. C. 12 et se!). as amended by the Robinson-Patman Act, and unfair methods of competition and unfair acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act (hereinafter called the Act), 15 C. 41 et ser). Copies of said complaint together with a notice of hearing were duly servl d on respondent. The complaint alleges in substance that respondent discriminated in price by the sale of its gasoline to one dealer at prices substantially lower lhan the prices charged other dealers in the same market area, and that respondent entered into an agree- TI1ent with such dealer to fix and TI1maintain the retail price at which he sold said gasoline. Respondent appeared by counsel and filed an ans\ver admitting the corporate, commerce, competition and certain other factual allegations of the complaint, but _ 956 FEDERAL TRAm; CO !MISSION DECISIONS Findings 55 P.

denying any price discrimination in violation of the Clayton Act or any price-fixing agreement in violation of the Act. Pursuant to notice, hearings were thereafter held before the undersigned hearing examiner, duly designated by the Commission to hear this proceeding, at various times and places from February 4 1957, to December 30 1957.

Both parties were represented by counsel, participated in the hearings and afforded a full opportunity to be heard, to examine and cross-examine the witnesses, to introduce evidence pertinent to the issues, to argue orally upon the record, and to file proposed findings of fact, conclusions of law, and orders, together with reasons in support thereof. All parties filed pruposed findings of fact, conclusions of law, and orders, together with reasons in support thereof, and pursuant to leave granted presented oral argument thereon. All such findings of fact and conclusions of law proposed by parties, respectively, nut hereinafter specifically found or concluded are herewith specifically rejected. Upon the entire record in the case and from his observation of the witnesses, the undersigned makes the following: FJ!\DINGS OF FACT I. The Business of Respondent The complaint alleged, respondent admitted, and it is found that respondent is a New Jersey corporation with its principal offce and place of business located at 1608 Walnut Street, Philadelphia, Pa.

II. Interstate Commerce and Competition The complaint alleged, respondent admitted, and it is found that it is now and for several years last past has been engaged in the oflering for sale, sale, and distribution of gasoline in commerce in various States of the United States, including the City oJ Jacksonville, FJa. , and adjacent territories. In the course and conduct of such business, respondent ships or othenvise transports its gasoline in tank cars, tankers, and trucks from its different refineries, terminals and distribution points, located in various States of the Lnited States, to retail dealers located in the Jacksonville, Florida, area, and in various other states of the L:niterl States. All of such purchases by said retail dealers are and have been in the course of sllch commerce. There is llD'V 15 D. C. !i lOOi(b).

SUN OIL COMPANY 957 955 Findings and has been at a11 times mentioned herein a continuous stream of trade in commerce of said gasoline between respondent' s refineries, terminals, and distribution pohlts and said retail dealers. In the course and conduct of this business, respondent is in direct and substantial competition in commerce with other corporations, individuals and partnerships likewise engaged in the sale and distribution of gasoline.

III. The Unlawful Practices The complaint contains two counts, one alleg-ing price discrimination in violation of the Clayton Act, and the other alleging price fixing in violation of the Act, and they arc considered seriati11L A. The Price Disci"iail,ination The issue here framed is one of alleged secondary-line price discrimination, in that it is contended that respondent sold its gasoline to a particular clear1er in Jacksonville, Fla. , at prices substantially lower than respondent charged its other dealers in the same market area. Respondent' s anSVi er admitted the salc at substantially lower prices to said dealer, hut denied that such dealer was in the same market area as other dealers purchasingfrom respondent or was in competition with such other dealers and denied that the effect of such discrimination in price may be to injure, destroy, or prevent competition with sllch other deaJers, or others, or that such discrimination was in violation of Section 2 (a) of the Clayton Act.

The facts with respect to the price discrimination itself are substantially undisputed. Respondent had some 38 retail dealers in Duval County, Fla., which may for the purposes of this decision be characterized as the .J acksonville area, most of whom were in the City of ,) acksonville itself. These dealers are independent contractors ,,,ho enter into contracts ,,,ith respondent concerning the purchase of respondent's gasoline and oij, and who operate tilling stations at which respondent's products are ,advertised and sold.

During 1955, Gilbert V. McLean as such an independent contractor operated a Sun Oil filling station located at the intersection of 19th and Pearl Streets in Jacksonvile, Fla. In June of 1955, the Super Test Oil Company opened a competing station at the same intersection diagonally across from McLean s station. As established in the record, Super Test was a so-called "non- Findings 55 F.

maj or " or "independent" brand of gasoline as compared with so-called "maj or " companies or "name" brands of gasoline, of which Sun Oil is one. During most of the time from June to December of 1955, the Super Test station sold its "Regular gasoline at 26.9 cents per gallon while McLean sold his "Regular gasoline for 28.9 cents per gallon. However, on three or four occasions between June and December of 1955, the Super Test station dropped its price substantially below 26. , and as low as 21.9 on at least two occasions. Each time this occurred, Mc- Lean s sales of gasoline declined substantially. McLean complained several times to respondent about this situation, but nothing was done until December J 955. During that month the Super Test station reduced its prices several times on weekends and respondent' s salesman, Harry Harper, advised IVIcLcan that if it happened again respondent would try to do something. On December 27 , J 955, when McLean was still selling his gasoline for 28. , Super Test dropped its price from 26.9 to 24. The same day respondent g-ave McLean a price aI10wance or discount of 1.7 cents per gallon and :VIcLcan dropped his retail price to 25. , thereby reducing his margin of profit by J.3 cents per gallon, the difference between the discount and the 3-cent reduction in the retail price of his gasoline. Respondent did not give this discount or lower price to any of its other retail dealers in the Jacksonville area. Approximately seven such dealers Vi'crc in the same sales territory as IVTcLean. This sales territory was one of three in the J acksonville area established by respondent aneI consisted roughly of the north one-third of Duval County. About six of these dealers were relatively close to :\10Lean s station. This discrimination in price bebvecn 1clean and respondent' s other dealers continued until on or about February 16 1956, \\then a price war broke out in the ensure area and respondent reduced its wholesale or tankwagon price to al1 of its dealers in the area.

As a result, McLean s sales of gasoline increased substantially. In Odober J 955, he sold approximately 6, 500 gallons, about the same as his sales in August and September. ln )Jovember, 1955 he sold 5 900-odd gallons, in December, 8 300-odd gallons, while in January, 1956, a:fer he reduced his price on December 27, he sold 32 JOO-odd gallons, almost four times as much as in December and five times as much as he averaged during August, September Odober, and November. McLean s daily sales during February, SUN OIL COMPANY 959 955 Findings 1956, until he went out of business on or about February 18 averaged approximately the same as January. Counsel supporting the complaint called four of the Sun dealers who were in the same sales territory in Jacksonvile, and the record establishes and it is found that they were in competition with :l1clean and adversely affected by the discriminatory price allowance granted McLean and denied them. From December , 1955 to February 16, 1956 , they did not receive the discount given ?t1clean and continued to sell their gasoline for 28. 9 cents per gallon while McLean was selling the same product for 25. cents per gallon. Respondent contends that these other Sun dealers were not in the same competitive area as lVlcLean, were not in competition with him, and therefore the granting of a lower price to McLean could not have had the effect of lessening competition or of injuring, destroying, or preventing competition with MeLean. Respondent also contends that even if such dealers were in competition with McLean, counsel supporting the complaint has failed to establish that the effect of such discrimination may be to substantially lessen competition or to injure, destroy, or prevent competition \with l\tcLean, the statutory rcquisites of Section 2 (a) of the Clayton Act.

With respect to respondent' s first contention, thc record establishes the contrary. The four dealers called as witnesses in support of the complaint were Calvin Peery, William Crabtree, Clair vVinning, and Jesse IVIcClnng. Peery s station was located at the intersection of l1tb and Main Streets, three blocks east and eight blocks south, and less than a mile from, McLean s station. There were received in evidence as Commission s Exhibit 21-A and respondent' s Exhibit 5, maps of Duval County anel Jacksonville showing- the location of tbe various Sun stations as well as the amount of traffc flow past them. Main Street, as the name connotes, is the main thoroughfare running north and south ihrough Jacksonville, and is also the route of V. S. 17 through Jacksonville. Pearl Street is a main artery running north and south paralle! with Main Street, three blocks west of it. According to Respondent' s Exhibit 5, while l\'lain Street carries the heaviest volume of traffc, Pearl Street also carries a heavy volume of traffc, approximatdy one-half as much as cdain Street but substantially in excess of the majority of streets in Jacksonville. Much of tbe traffc from tbe north and the northwest can proceerl to the downtmvn area alternatively by v;ay of either Pearl or :Main Streets, and in the process pass either or both McLean s and Findings 55 F.

Peery s stations, as well ag McClung s and Winning s stations, to be considered hereinafter.

From December 27, 1955, until the general price reduction in February, Peery, as well as the others, paid a wholesale price of 1.7 cents per gallon more than McLean . During December, 1955 Peery sold 10 900-odd gallons of gasoline, which was approximately his monthly average for the Jast six months of 1955. In January, 1956 , after the discount to, and price reduction hy, McLean, Peery s gallonage dropped to 9 300-odd gallons, a decline in excess of 1 500 gallons. In fact, on only six days during January did Peery sell as much as he averaged per day during December. Peery was informed not only by Crabtrec and Mc- Clung but by his own customers as well that McLean was selling Sun gasoline for three cents per gallon less. Peery complained to respondent about this and the discount to McLean but was advised that nothing- could be done about it. The loss of customers, as well as the geographic proximity and pattern of traffc flow, clearly demonstrate that Pcery s and McLean s stations were in competition with each other. The loss of gal1onag-e clearly demonstrates the effect of the discrin1inatory allmvance and reduced price.

McClung operated a Sun station at the intersection of 35th and Main Streets, east and north approximately one mile from Mc- Lean s station. There are eleven streets connecting lVTail1 Sired with Pearl Street between lVlcClung- s and McLean s stations. Mc- Clung testified that most of his local trade came from west of his station, which is logical because most of the area east his station is occupied by a large cemetery. McClung also testified that most local traffc originating west of him used Pearl Street in traveling downtown, which would take them past Mc- Lean s station. McClung s credibility \vas seriously impaired by what proved to be an obvious alteration of his sales records, and accordingly his testimony is not credited unless it is corroborated by the testimony of other witnesses or by est.ablished facts. As previously found, the record establishes that there is a substantial tlmv of traffc from the north and northwest which can easily choose bebveen Pearl and :Main Streets and readily pass either or both McClung s and 2\lcLea11 s stations. Independently of McClung s testimony, the record establishes that McClung was aware of the discrepancy in price occurring at 1\1clean s station that he and Crabtree called on McLean to ascertain what was occurring, and that McClung complained about the disparate SUN OIL CO'\PANY 961 955 Findings treatment to respondent, which latter fact was admitted by respondent. As with the others, respondent did nothing for McClung.

I n spite of the apparent alterations of McClung s sales record for the days in December after the price a1Jowance to :were an a careful analysis of these records reveals a substantial decline in gal1onag-e during- the first two weeks in January. McClung was in credit cliffculties with respondent and as a result thereof respondent would not sell him gasoline except for cash, McClung went out of business in the laUeI' part of January, and his operation and sales were not normal after ,January 14 1956. An examination of Commission s Exhibit 22- , McCJung s sales records for December, 1955, reveals that the last three gallonage sales figures for December 20, 30, and 31 were altered by reducing the amount of g-al1onag-e approximately 276 gallons for the three days. A casual examination of the figures reveals erasures and changes as well as the fact that whoever did so made the mistake of forgetting- to make the appropriate ehang-es in the monthly total an,l in the dollar amounts listed in the column next to the gallonage figures. The first column for December 29 shows 275 gallons with an obvious erasure of the first digit, while the second column shows corresponding receipts of $79.45, ,with an obvious erasure of another figure appearing underneath. This amount of money is approximately correct for the gallonage listed, but it is apparent that both figures have been alt.ered. However, on December 30 the gallon figure is 276 with an apparent change in the first digit, whereas the amount. received is $108. , the amount. which would have been received for 376 gallons, obviously indicating a change in the first digit from 3 to 2 or a t.ot.al reduction of 100 gallons. The same t.hing occurred on December 31: The first figure has obviously been changed from 402 to 302, whereas the clolJar amount remains unchanger1 and is the correct amount for 402 gallons. In addition, a totaling of a1J the gallons sold in Decemher appearing at t.he foot of the column exceeds by 276 gallons the actual figures appearing in the column, but is the correct total if the changed gallonages referred to above are rcst.ored to their apparent. original amounts. In spite of the foregoing discrepancies dcClnng sales records do show a substantial drop in gallonage, on an average basis, for the first two v'leeks in J an11ar)', 1956 , compared wit.h his mont.hJy sales prior t.hereto.o. , ) .

Findings 55 F.

The record establishes and it is found that McClung s station was in the same competitive area as and in competition with McLean station.

As found above with respect to Peery and McClung, and as wi1 be found hereinafter with respect to Crabtree and Winning, the record est.ablishes injury to them by respondent' s discrimination. However, it must now be considered well setted that it is not necessary for the Commission to prove injury to competition hi a secondary-line price discrimination case because of the meaning of the statutory language where tbe effect may be to substantially lessen competition " as construed by the Supreme Court the Courts of Appeal and tbe Commission. In the recent SOT ensen case the Commission quoted with approval the holding of the Supreme Court in the Morton Salt case " no doubt the Jeading case dealing with the meaning of the effect clause in a secondaryline price discrimination as follows :

It would greatly handieap effective enforcement of the Act to require testimony to show that wh' ch we believe to be self-evident, namely, that there i's a re,)_ scnable pos.sibility" that competition may lJe arlvf'rsely affected by a practice under which manufacturers and producers sell their goods to some cmtomcrs substantially cheaper than they sell like g.oods to the competitors of these customer' S. This showingi:n tsclf is suflkienL to justify our conclusion that the Cummission s flDllings of injury to competition were adequately supported by evidence, (Emphasis added.

The dissent in Morton Salt while preferring tbe language "reaf\onabJe probability Lo reasonable possibility, nevertheless agreed that the facts therein fully warranted an inference of adverse effect on competition without any actual showing of injury. Recent decisions of tbe Courts of AppeaJ are to the same effect.

It seems self-evident that where a producer is sellng a homogeneous product, such as salt, automotive parts or gasoline where competition is extremely keen among- retailers, and ,vhere margins of profit or markups are small, a lower price to one or some of such competing retailers not only "may " but must have the efIcct of substantially lessening competition. Crabtree operated a Sun station at 58th and Main Streets, east and north approximately two and one-half miles from J1clean station. As previously found, tbe flow of traffc in either direction Sorenson Mfg. Cu-. Inc. 52 F. C- 1E , DOCJH t 6052 (HJ5G) FTC iIortol1 Salt Co. 4 V_ So 7 (1 !J4 MrJog Industry;es. 1m;. FTC. F. 2d 4.1 (C. A. H , 1956): l::dd"'01lJ Co. FTC. 2:;9 F. 2d 152 (C. A. 7 . 1956), cert. JfCn.

SUN OIL COMPANY 963 955 Findings easily could alternate between Main and Pearl Streets and readily pass either or both such stations. Crabtree s gallonage fell off substantially in January after the price allowance to McLean on December 27. Crabtree sold approximately 17,000 to 18 000 gallons per month the last four months of 1955, but in January his gallonage dropped to 14 500. About January 1 Crabtree discovered that McLean was selling Sun gasoline for three cents per gallon less and visited McLean to find out why. While Crabtree was present at McLean s station, he helped McLean pump gas and waited upon, and talked to, several of his own former customers who told him they were buying at McLean s station because of the lower price. It is diffcult to conceive of more direct evidence of both competition and effect than this. Subsequently Crabtree and McClung together visited McLean and discussed the price situation with him and ascertained that he was receiving a price allowance from respondent. Crabtree, too, complained to respondent about the price discrimination but received no assistance until the general price reduction on February 16, 1956. Winning operated a Sun station at 8028 Lem Turner Hoad approximately three and one-half miles northwest of 19th and Pearl. Lem Turner Road is a main artery from the northwest section of Jacksonville feeding directly into Pearl Street a few blocks north of McLean s station, sO that most of the traffc headed for (1owntown which passes Winning"s station \voulrl also pass McLean s. Respondent's Exhibit 5 reveals that Lem Turner Road carries a high traffc flow, approximately one-half as large as that carried by Main Street. Winning was advised of the lower price for Sun gasoline at McLean s station by Winning own customers. Winning stated that a number of his customers four of whom he identified by name and address, told him the)' could purchase the same gas for three cents less at McLean s and thereafter stopped buying from him for about one month. Winning s gallonagc did not drop substantially in ,January. However, he testified that he worked much harder and tried to improve his service in an attempt to prevent any substantial loss of business. The indired effect upon V\Tinning is demonstrated by the fact that in February, after he received the price discount for the first time when the general price war broke out, his ga1Jonage jumped from 410 ga1Jons one day to 903 the next and stayed at such levels for several months.

Findings 55 F.

As was pointed out by tbe witness Peery, tbe loss of customers to McLean also bad an effect upon the sale of other items such as oil, tires, batteries, and accessories. While respondent contends that the price differential at McLean s station could have no effect upon its other dealers because they were not in the same competitive area, which respondent would limit to a very small area adjacent to and in the immediate vicinity of 19th and Pearl Streets, in addition to the facts found, hereinbefore, one of respondent' s principal witnesses, its vice president, Willard Wright, in testifying before a Senate Small Business Subcommittee in 1955 on behalf of respondent, had this to say: Keen competition always has existed in the marketing- of gasoline in most parts of the country. Motorists are particularly price conscious ,vhen they buy soline. Americans of all income brackets own and operate automobiles. For those in the Jower hrackets gao:oline is an important item in their family budgets and they seck opportunities to reduclO the cost of that item. 1\Iorcovcr, unlike consumers of most commodities, motorists arc mobile, They can without trouble drive several blocks down the strect to another service station, if the first fails to plea.'e them, Indeed motorists will go out of their way a mile or two to save two or three cents on a gallon of gasoline. Out on the open highways, motorists sometimes drive past 10 to 20 stations bdore they stop at onc whose appearance and posted prices suit them. Naturally the sellers of gasoline respond to these characteristics of their customers. Alert service station operators keep a sharp eye on the prices of their competitms and price changes, particu1ady on the do"\vnside, are quickly Jollower!. Delay in doing so inevitably would mean a loss of business. Volume is important to the d('ah r bCCallSl' many of his operating costs arc more or less fixed, irrespective of the numlwr of gallons of gasoline he sells. Any substantial drop in volume means an increaseu unit cost of doing business. The fact that the etrect of respondent' s price discrimination may be to substantially lessen competition" was fully elucidated in a recent Federal court decision, the Enterprise case G where Judge Smith said, with respect to facts substantially similar to those herein: "The effects on gallonage of price differentials in t.he same brand and grade of gas \within an area no larger than the Greater Hartford area must be found to be substantia)." In addition to its foregoing contentions, respondent also urges that its lower price \vas given to McLean in good faith to enable respondent to meet competition, as provided in Section 2 (b) of the Clayton Act. For sevcra1 reasons this contention is without merit. " Commission s Exhibit 14l:' lIlCTjJTl8C hldllstrics, II/c. Thc Texas Campa",!. 1:J6 1-' . Supp, 4 n (t:. C, COTm. 1 SUN OIL COMPANY 965 955 Findings First and most importantly, as found by the Court in the Enterprise case supra and as clearly evidenced by the decision of the Supreme Court in the Standard Oil case ' the proviso in 2 (b) has reference to the g-ood faith meeting of competition of the seller and not the competition of the buyer, as in this case. Exactly the same contention was made and disposed of in the Enterprise case, where the Court said: ::moreover, Texas could justify discriminat.ion only by a showing that dropped its price to the other stations to meet an equally low price made available to those other stations by a competing oil company. . . . That is the competitive Jevel at which the justification is provided for defendant in the , however. The Act does not go so far as to allow discriminatory price cutting to enable a buyer?' to meet price competition, but only to enable the s(:ller to meet a lawful price of the seller competitors. The decision of the Supreme Court in the Standa?' d Oil case, supra dearly establishes that the price which a seller may in good faith meet is that offered to a customer of the seller by the seller s competitor.

It is true, oJ course, as respondent argues, that where one or some of its dealers are faced with ruinous price con1petition respondent must take some action or suffer the loss of such dealership and respondent' s sales thereto. Respondent would equate its dealers' competition with its own competition, but of course this is not the layv and cannot justify price discriminations injuring others. Respondent could, if it chose to, meet such competition at the dealer level by nondiscriminatory reductions in price to an dealers, or by operating its own stations and thus being in direct competition with other stations which reduce prices. Respondent's argument is essentia1Jy one of diffculties and problems claimed to have been brought about by the statute which is not for the Commission to pass upon and more properly should be directed to Congress.

The second reason negating respondent' s attempted reliance upon Section 2 (b) is that the lower price at which respondent sold its gasoline to McLean was not made in g-ood faith to enable McLean to meet his price competition. With regard to this, there is considerable evident'c in the record concerning a contention by counsel supporting the complaint that the usual and customary price differential between so-called regular Inajor gasoline and regular non-major gasoline is two cents a gallon. There is also Standard Oil Co. FTC , 340 S. 231 (1951). Findings 55 F.

considerable evidence in the record that the price differential between the two is frequently one cent a gallon. Suffce it to say that there is not suffcient reliable, probative and substantial evidence in the record to establish what, if any specific amount is the usual and customary differential between major and nonmajor regular brands of gasoline. However, the record does establish that the usual differential between MeLean station and the Super Test station across the street was two cents a gallon. McLean unequivocably testified that sucb differential did not harm him competitively, but that when the differential was greater it caused him substantial injury. The record establishes that respondent gave MeLean a 1.7-cent price allowance in order to enable him to post a price of 25. , or one cent above the price to which Super Test had cut its gasoline. In the light of McLean s undisputed testimony, it is apparent that this was more than a good faith meeting of competition, even assuming argu.endo such defense to be applicable, but was in effect a beating of competition which, of course, is not permitted by Section 2 (b) of the Clayton Act. The proviso is after all a proviso and can only justify price discriminations when made in good faith to 'iwet competition, and as such obviously cannot justify price discriminations in excess of those necessary to meet competition.

The third reason the 2 (b) defense is not applicable here is that the lower price at which respondent sold its g-gasoline to McLean \vas not made in good. faith to enable IVTcLean to meet his price competition, As is found hereinafter in Section III- , in connection with the granting- by respondent of the discount to McLean respondent and McLean entered into an agreement fixing the retail price at which McLean would resell the gasoline. Section 2 (b) provides a defense to a seller if his lower price is made in good faith" to meet an equally low price of a competitor. Numerous decisions have emphasized the fact that such a lower price must have been made in good faith and have even held in this regard that the price met must be a lawful one. It is apparent that a lower price granted as consideration for an illegal agreement to fix prices could under no circumstances ue considered as one made in good faith.

Porio Rican Tobacco Co. v. American TO/Jacco Co. 30 F. 2d 234 (C. A. 2 . 1929): Mos. , 1-..". FTC 148 F.2d 378 (C. 1945);Anhr1/,eT-B1t. , Inc. 54 F. 'I. C. 277, Dockd No. Ga:J1 (1957): Cf. Standard Oil Co. FTC :-!() l;.S. 2:11 (1951). SUN OIL COMPANY 967 955 Findings A preponderance of the reliable, probative and substantia! evidence in the entire record convinces ihe undersigned, and it is found, that respondent by engaging in the above-found acts and practices has discriminated in price between different purchasers of commodities of like grade and quality, and that the effect thereof has been, is, and may be substantially to lessen competition and to injure, destroy, and prevent competition with other retailers of respondent's gasoline, in violation of Section 2 (a) of the Clayton Act. It is further concluded and found that such price discrimination was not made in good faith to meet an equally low price of a competitor.

B. 'The Price-Fixing Agreement As previously noted, Count II of the complaint alleged that respondent and McLean entered into a combination, understanding and agreement through which they fixed and maintained the retail price at which :VI clean sold his gasoline. It is undisputed in the record that McLean \' as an independent contractor \'with sole and exclusive authority to fix the retail price at which he sold his gasoline. The same incident on December 27 , 1955 when respondent granted a discount to McLean, is also alleged as the price-fixing arrangement behveen respondent and McLean. As previously found, from August to December of ) 955, McLean complained several times to respondent about the price cutiing by the Super Test station across the street. Until December 27 each time IVIcLean complained to respondents agents, ne was advised that there was nothing they could do about it. Respondent employs salesmen \vho, among other things, call upon tne filling station operators in their territory. Prior to December 27 McLean had been contacted by salesman Elbey and Harper and also by Edward Beardsley, respondent' s district manager. The testimony of respondent's witnesses reveals that respondent had the situation at 19th and Pearl Streets under careful consideration for Sellin time. IVlcLean had made it clear that unless something was done to meet the Super Test con1petition he would be forced out of business. Beards1ey advised Maximi1ian Dietshc, respondent's rcgiona1 manager, of the situation, and Dietshe in return advised Willanl Wright, responrlent' s vice president at its home offce in Philadelphia. After consideration of the situation and examination of the facts, they were all in agreement that something would have to be done to help McLean. Findings 55 F.

McLean testified that on December 27 Harper contacted him and advised him that if Super Test dropped its price again respondent would try to do something. Later the same day after Super Test dropped its price, Harper returned and advised McLean that he would be given a price adjustment of 1.7 cents if he would absorb 1.3 cents himself and drop his retail price to 25. As previously found, McLean had been selling his gasoline at 28.9. His gross margin of profit or difference between wholesale and retail price had been 4.8 cents per gallon. As a result of dropping his price to 25.9 and absorbing 1. 3 of this reduction his gross margin of profit \vas reduced to 3.5 cents per gallon. The key issue is, of course, just what arrangement or understanding was reached between respondent and McLean on December 27. Respondent contends, and its offcials so testified that there was no agreement with McLean concerning his retail price and that he voluntarily and unilaterally elected to post a price of 25.9 cents and take a cut in profit of 1. 3 cents. McLean, too, testified that there was no "agreement" bet\vecn him and respondent to fix his retail price, but his testimony concerning: what v,Ias actually said and done on December 27 reveals quite dearly that there \vas an agreement entered intu betvveen respondent and McLean fixing the price at which he would sell his gasoline in consideration of being granted a price allowance or discount by respondent.

McLean testified that he was required to take a lo3-cent cut in profits in order to get the adjustment. Again, after testifying that there "\vas no "agreement" to fix his retail price at 25. 9 cents per gallon, McLean testified as follows: Q. So that was a reduction of three cents a gallon? .i. Yes, :=il'.

Q. Did :'ll' Harpel' or any rcprrsentative of the Sun Oil Company say to you that they would attempt to keep this differential of three cents? A. No, net that I l'' m(' mber".

Q. But un that pal'ticuhu time, did he say that to you A. It was 'iI/ode that. I wanted and they ,',;rat.ed that I drop my gas to that price according to Sl1pel' Test. across thf' stred, but as far as dropping it any 10we1' or raising it-- (HOllies added.

It is clear from the testimony of lVlcLcan that he was required by respondent to take a cut in profits of 1.3 cents per g-allon, i. to post a price of 25.9 cents per gaUon, in order to secure the price discount of 1. 7 cents per gallo11 from respondent. Harper SUN OIL COMPANY 969 955 Findings respondent' s agent who made this arrangement with McLean was not called as a witness, and accordingly McLean s testimony stands undisputed.

In addition to McLean s direct testimony concerning the arrangement, the factual circumstances surrounding it also lead inevitably to the conclusion that McLean did not voluntarily and unilaterally post the price of 25.9 cents, but did so as the result of an agreement with respondent in order to obtain the price assistance. It has previously been found as McLean himself testified, that he was not hurt competitively as Jong as the price diflerence between his station and the Super Test station did not exceed t\vo cents a g-allon. In addition to his testimony to that effect, undisputed statistic"tl facts in the record clearly reveal that McLean was not hurt competitively when the difference between his price and Super Test's was two cents per gallon. This is dramatidtlly ilustrated by what happened after Decem bel' 27.

When McLean cut his price to 25.9 cents on December 27, Super Test was selling its gasoline at 24. 9. On January 3, 1956, approximately one week later, Super Test dropped its price to 23. 9 ancl thereafter for substantially the entire month of January a twocent differential existed between McLean s and Super Test' s prices. Nevertheless, although the record reveals that Super Test' gallonage at 19th and Pearl had been averaging between 10 000 and 11 000 gallons per month up to December and was approximately 19 000 gallons in December, during which month Super Test cut its price several times, in January 1956, Super Test' gallonage jumped to 61,000-plus gallons and McLean s gallonage jumped approximately four or five times in excess of the preceding months. These facts make it abundantly clear that it ''i' as not necessary for ::VlcLean to reduce his price to v.riLhin one cent of Super Test in order to be competitive, inasmuch as after a price reduction his gallonage increased tremendously during a month when for aji but two days the difference in price bet wecn McLean and Super Test was two cents per gallon. If McLean had not been required to reduce his price to 25. 9 in order to receive the 1.7-cent allowance from respondent, he could have reduced his price to 26. , within two cents of Super Test' s price not have been hurt competitively, and yet retained a margin of four and one-half cents per gallon, thereby reducing his gross Findings 55 F.

profit only .3 cents per gallon. If he had done this, it is clear from the record that his competitive situation would not have been injured and he would have maintained a much more adequate margin of profit.

McLean told Crabtree and McClung when they contacted him concerning his lower prices that he was very dissatisfied with the arrangement because while he was selling a lot of gasoline he was doing a Jot of work and not making much profit. This is eorroboral.ed by the fact t.hat. alt.hough McLean substantially increased his gallonage in January and February, on or about. February 18 he gave up and went. out of business. It is apparent t.hat. if ilTcLean had retained unilat.eral control of his retaij price, he could have reduced his price to v" within two cents of Super Test, retained subst.antially al1 of his margin of profit, and substantially increased his gallonage because t.hat is exact.ly what happened during January with a reduced price and a t.wo-cent. different.ial bctYveen the stations.

It is well settled, and requires no extended discussion, that price fixing, no matter in what manner, shape, or form, ano regard- Jess of the mot.ivat.ion, is ilegal per "C. The following comment.s of the Supreme Court in the Socorqj- 11 CH1J/ln case 1 () seem appropriat.e here:

* But Ule thrust of the rule is deeper and reaches more than monopoly power. Any combination which tampers with price stnJdUH.'S is engaged in an unlawful activity. Even though the nH'lnbers of the price-fixing group were in no position to control the market, to the extent that they raised lowered, or stabilized prices they ,vauJd be directly interfering with the free play of l111rket forces, The Act places all such scncmes beyond the pale and rrott'cts t1131 vital part of our cconomy RRuinst any degree of interference, :-or is it important that t.he price('s paid by t11C combin'ltion were not fixed in the sense that they were lmiform and inflexible, Price fixing as used in the T)' enlon PoUeries case has no sl;c11 li1 lit('d nwaning, An agreement to pay OJ' charge rigid, uniform prices would be an ilegal agreement under the Sherman Act. But so would agreements 10 raise or :ower prices whatf'ver martinery for price fixing ..vas users . .. .. Hellp, IJrices are fixed within the meaning of the Ti' enlon FoUen es case if the range \within which p1.11chasps or salcs will be made is agTf'f'd upon, if the prices paid or charged arc to be at a Cf'rtain level or on ascf'nding 01' descending scales, if they are to be uniform, or if by various formulae they are related to the HHukct prices. They are fixed because o EUtd Gn3 CoqJOTuti,m :'IO(j u. s. 4:-!f; (19411): L'S. Y. ;1oC(J?y-l-nc1Inn Oil Cmn).'iln)/, a10 1 S, 1.;0 (1940): S"h1""f)7J'(!?lT nro Cai"l' CTt COT)). :Hl U. S. :j 4 (\\151): find Vi"JJini(l E'XCd8iot Mills, hie. 54 F C, 45 , lJockd ""t o, G630, Octob€r 25, 195.. 10 Footnote 9 311111'a.

SUN OIL COMPANY 971 955 Findings they are agreed upon. And the fact that, as here, they are fixed at the fair going market price is immaterial.

While it has been found above that there is direct evidence of the price-fixing agreement, it is setted Jaw that such an agreement also may be proven by circumstantial evidence, J 1 as also found above. It further has been held by the Supreme Court that business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. In addition to denying that it had engaged in price fixing, respondent contends that even if it had it was not in violation of the Act because of the amendment of Section 5 by the McGuire Act authorizing pursuant to State laws fair trade agreements prescribing- minimum or stipulated prices for the resale of branded products. The short answer to this contention is that the Florida Fair Trade Act \vas helel unconstitutional as to non signers by the Supreme Court of Florida ." This decision, as well as numerous others, makes it clear that the McGuire Act amendment refers only to written agreements or contracts for fair trade prices, and, of course, there was no written agreement here. In addition, the Supreme Court in the McKesson-Robbins case H held that a corporation which both manufacturers and wholesales a product cannot, under the :viller-Tydings or the McGuire Acts, enter into fair trade agreements with wholesalers because in effect such agreements \vould be between competitors and hence in violation of Section 5(a) (5) of the Act. Respondent itself operates certain filling- stations knmvn as company stations and accordingly if there were any fair trade agreement, it would be in violation of Section 5 (a) (5) of the Act and no defense a price-fixing agreement.

A preponderance of the reliable, probative and substantial evidence in the entire record convinces the undersig-ned, and accordingly it is found. that respondent and McLean entered into maintained and carried out a planned common course of action agreement, combination, or understanding to fix and maintain 11 United States MaltstcT8 .1.0$71. V. FTC. 152 F.2d H2 (C.A. 7 , 1845): Mill, ,I he C1I!I"" Crln Insti t1t1c FTC 152 F.2d 478 (C.A. 7 , 1946): Fo?'l. H011'nnl Puper Co. FTC 15G Y. 2U f'9f1 (e. A. 7 , 1946); Allied l'ajJcr Mills v. FTC 168 F. 2.d 600 (C. A. 7 , 1948); TTir!nU!c COII/w l. &, Cable Co. FTC 168 F.2d 175 (C. A. 7, 1943), :dl' , 336 U. S. 95G: anu Nat,:(mn/ Lend Co. FTC 227 F.2d sn (C. A. 7 , 19.

12fnle!'state Ci1.Cldt, Inc. 306 U. S. 20B (B38): and TiLealH: E"tCTJ;'- '''s, Irlc. I'a, rammmt 346 U. S, 537 (19f4).

13 Miles Laboratories, Irlc. Eckcrd 73 So. 2d 680 (Fla. Sup Ct. 1\)54). S. v. McJ(cs,"on Robbin.. , Inc. 351 U. S. 305 (1955). 972 FEDERAL TRADE COMMJSSION DECISIONS Order 55 F. T.

the retail price at which McLean was to selI gasoline, ali to the prejudice and injury of the pub:ic, respondent' s competitors, and McLean s competitors, which constitutes an unfair method of competition and an unfair act and practice in commerce within the intent and meaning of Section 5 of the Act. CONCLUSIONS OF LAW 1. Respondent is engaged in commerce, and engaged in the above-found acts and practices in the course and conduct of its business in commerce, as "commerce" is defined in the Act and the Clayton Act.

2. The effect of the acts and practices of respondent hereinabove found in Section lii-A may be and has been to substan tially lessen competition, and to injure, destroy, and prevent competition with the recipient of respondent' s discrin1ination such acts and practices constituting a violation of Section 2 (a) of the Clayton Act.

:1. The acts and practices of respondent hereinabove found in Section IJI-B are all to the prejudice and injury of the public and competition, and constilute unfair methods of competition and unfair acts and practices in commerce \within the intent and meaning of the Act.

4. As a result thereof, subf'tantial injury haf' been done to competition in commerce.

5. This proceeding is in the public interest, and an order to cease and desist the above-found acts anrl practices should issue against respondent.

ORDER It is onleyed That respondent Sun Oil Company, a corporation, its officers, directors, agents, representatives or employees, directly or through any corporate.e or other device, in connection with the offering for sale, 2a1e or clistributiun of it.s products in commerce, as "commerce" is defined in the Act and the Clayton Act, ,10 foribwith cease and desist from: A. Discriminating in price by selling such products of like grarle and quality to any purchaser at net prices lower than t.hose granted other purch:1sers who in fact compete with the favored purchaser in ihe resale or distribution of respondent s products; B. Entering into, continuing, cooperating in, or carrying out, SUN OIL COMPANY 973 955 Opinion or attempting so to do, any planned common course of action understanding, agreement, combination, or conspiracy with any person or persons not parties hereto, to attempt to, or to estab- Jish, tix, adopt, maintain, or adhere to, by any means or method prices at which said product is to be resold; C. Granting any discounts, rebates, price reductions or other form of consideration for the purpose, or with the effect, of tixing or maintaining the prices at which said product is to be resold. P1' ovided, IWlue1.:er That nothing herein contained shall be construed to limit or othenvise affect any resale price maintenance contracts which respondent may enter into in conformity with Section 5 of the Act as amended by the lcGuire Act (Public Law 542 , chapter 745 , 82d Cong. , 2d Sess., approved July 14 1952) .

OPINION OF THE COMMISSION By GWYN1\E, Chairman:

In Count I, complaint charges respondent '',ith a violation of Section 2 (a) of the amended Clayton Act in the sale of gasoline to one customer at prices substantially lower than prices charged competing- customers, with resulting injury. In Count II , respondent is charged with a violation of Section 5 of the Federal Trade Commission Act by conspiring with sllch favoreu customer to fix and maintain the retail price at which such customer sold gasoline at his filling station. The hearing examiner found against respondent on both counts and entered his order accordingly. Respondent has appealed.

Count I Respondent is engaged, among other things, in the sale and delivery by tank wagon of gasoline to independent tilling station operators. The alleged favored customer and co-conspirator, Gilbert B. McLean, during 1955 and part of 1956, operated a filling station under contract with respondent at the intersection 01' 19th and PearJ Streets, Jacksonville, Florida. 1n June, 1955, the Super-Test Oil Company, selling a nonmajol' or private brand of gasoline (as distinguished from the gasoline sold by McLean under the brand of a major supplier), opened a 11€\V service station across the street from that operated by McLean. From its opening until December, 1955, the price usually posted by Super-Test for Opinion 55 F.

its regular gasoline was 26.99 per gallon, although on occasion its price was lower and even as low as 21.9 ! per gaBon. The competition of this new station in selling its gasoline at substantially reduced prices caused injury to McLean who was selling at 28.99 per gallon, and he appealed to respondent for help. On December 27 , 1955 , Super-Test dropped its price to 24.99 per gallon. Respondent then agreed to give McLean a discount of 1.79 per gallon on tank wagon price and McLean dropped his price to 25.99. Respondent did not give a similar allowance to any other retail dealer in the Jacksonvile area. This difference in price continued until February 16, 1956, when a major price war involving various other companies broke out in Jacksonvile and all dealers of respondent were given a price which was the same for all.

Respondent first challenges the suffciency of the evidence to support the findings of the hearing examiner as to Count J in the following particulars:

1. That the respondent discriminated in price between customers who were competitors within the meaning of the statute. 2. That the difference in price was of sllch a character as to create a probability of substantially lessening competition. Considerable evidence was introrluced on these propositions. It is reviewed at some length in the initial decision and will not be repeated here. Generally, it consists of: 1. Figures shelving increase or decrease in the gallonage of certain affected stations.

2. Evidence as to the loss of specific customers. 3. Geographic details as to location of stations and streets and highways and other facts which might influence buying habits of eu stomers.

On the subject of gallonage, the hearing examiner found that :\1clean s sales of gasoline \were as follows: G,tllmll jJCT ""Qllth August, September and October 1955-- 500 November 1955 900 December 1955 n 8 300 January 1956 - 100 , v\"hen McLean quit business Daily sales until February 1956 averaged approximately the same as January. The sales of Calvin Peery, who so1ct respondent' s gasoline at SUN OIL COMPANY 975 955 Opinion 28.90, and whose sattion was less than a miJe from McLean were as follows:

Gallons per month December 1955 900 (which was approximately his monthly average for the last six months of 1955) January J 300 s g;gasoline at 28.91 and Jesse McClung,956also sellng respondent'- 9 whose station was about a miJe distant from McLean, also, according' to the hearing examiner, sold a substantially lesser amount of gasoline on an average basis for the first two weeks of January 1956, than he did in the previous month. Willam Crabtree s Sun Station, about 2'1" miles from Mc- Lean, sold about 17 000 to 18,000 gallons per month during the last four months of 1955 and 14 500 in January, 1956. Clair Winning, operating a Sun station about 3 V miles from McLean, did not lose gallonage in January. After February , 1956 , when he received the general price reduction previously referred to, his g-allonag-e increased from 410 gallons on one day to 903.

As against these figures, respondent introduced figures from the Florida Tax reports indicating a decrease in total gasoline sales in Duval County (roug-hly the same as ,J acksonvile) from December 1955, to ,January 1956 , of 87Q. Respondent's appeal ,dso calls attention to other evidence. For example, McClungfaulty records (for which the hearing examiner made due allowance in evaluating; his testimony) ; the fact that Peery did not keep his station open on Sundays in January 1956 (a fact also true of December, 1955) ; Crabtree s working at the post offce (although-h his station was operating- as usual). These circumstances have all been considered but we believe they do not explain the changes in g-allonage f,gures as previously pointed out.

Secondly, all the station operators above named were caHed as witnesses and gave instances of loss of specifc customers. For example, Crabtree saw some of his former customers buying gas at McLean s station and heard from them that it was because of the cheaper price. Winning identified four customers by name and address who abandoned him because of the cheaper price at McLean s. Furthermore, some of these station operators testified that they complained to respondent that they were losing- business Opinion 55 F.

because of this discriminatory pricing and asked for a reduction in price similar to that given :\1clean. The situation disclosed by the record is similar to that considered by the Commission and the courts on several occasions. See, for example Federai Trade Commission v. Mm.ton Salt Company (1948) 334 U. S. 37; In the Matte?' of Sorensen Manufacturing Company (1956), Docket No. 6052. Here, we have a number of small independent retailers selling an identical product at. t.he same price and under subst.antlally the same conditions. All ,,,ere operating at a small margin of profit and in an area ,,,hieh 'vas a reservoir of potential customers who, because of the geographic situation, had easy access to that dealer \vho offered an advantage in price or in services rendered. When such a situat.ion is shown to exist., t.together wit.h proof that one competitor received a discount from a common suppEer, an inference of injury to the others may reasonably be drawn from that fact. Even \vhere other evidence showing injury is presented, this inference may be considered ill addition to other proof. The question involved has to do wit.h t.he inference which may properly be drawn from admitted or proven facts and not wit.h the burden of proof. Alt.hough Sfmmel II. Moss, Inc. Ferleml Tmde Commission (1945), 148 F. 2d 378 , Is often cited to the contrary, the weight of authority is t.o lhe effect that counsel supporting the complaint has t.be burden of proof t.o est.ablish t.he necessary injury. See In the MeLlte? of Genem! Foods COTpomtion (1954), 50 Federal Trade Commission Decisions 885.

In spit.e of certain st.at.ement.s made in t.he initial decision, the hearing examiner stated: As found above with respect to Peery and lVcC1ung and as will be found hereinafter with respect t.o Crabtree and Winning, the record establishes injury to them by respondent' s discrimination.

We agree with t.his finding.

The respondent. next argues that. the bearing); examiner erred in falling t.o find that. t.he respondent bad established in fact and as a matter of law the defense of good faith meeting of competition within the proviso of Section 2 (b) of t.be amended Clayton Act, which provides:

Provi ded, however That nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was Sun OIL COMPA 977 955 Opinion made in good faith to meet an equally low price of a competitor, or the services or facilities fnrnisJjerl by a cOnlJwtitor. The discount given by respondent to McLean was not made to meet a Jower price made to the latter by another supplier. It was given to enable MeLean to meet the competition of the Super-Test station across the street. Respondent would justify broadeningthe proviso of Section 2 (b) to cover this situation on the theory that respondent and its dealer l\lcLean were, in fact, competing as a unit "with other channels of competition. As pointed out by the hearing e aminer, this argument goes beyond the plain wording of the proviso which has reference to the good faith meeting- of competition of the seller, rather than that of the buyer. This construction of the proviso was upheld in Ent21' p1'ise Industries, Inc. v. The Teems Company (1955), J36 F. Supp. 420 (reversed on another ground). Count II Prior to December 27 , J955 , when Super-Test cut its price Y1clean did not make any reduction. However, on several occasions, he talked to representatives of respondent and was advised they could do nothing about it. It does appear, however that its offcials \were giving consideration to the matter. On December 27 , 1955 , Super-Test dropped its price to 24.9( On that same day, Harry Harper, a salesman for respondent, called at the :\lcLean station and advised l\1clean that he would get a reduction of 1.7 f per gallon.

Direct evidence as to what was said on this occasion is found in the testimony of lVIeLean . There is some conflict in this testimony. The hearing examiner concluded that Harper advised :l1c- Lean "that he would be given a price adjustment of 1.70 per g-aJlon if he would absorb 1.B4 himsclf and drop his retail price to 25.

The hearing examiner had the opportunity to observe the witnesses as they testified. His conclusions as to the weight to be r,iven their various statements should be given proper consideration by the Commission. Universal CU'lwra CorporaUon v. Va.tional Labor Relations Eoanl 340 U. S. 474; Folds v. Federal Trade Commission (1951) 187 F. 2d 658. There are other facts in the record that support the hearing examiner s conclusion. For example, it appears that in order to compete with Super-Test, McLean needed only a 2c margin which, of course, would have given him a larger margin of profit. , .

Opinion 55 F.

Crabtree and McClung both testified that McLean indicated dissatisfaction with the arrangement with respondent and that Mc- Lean told them that he was selling a lot of gas, doing a lot of work, but not making much profit. On or about February 18 1956, l\fcLean went out of business.

These facts lend support to the view that in posting his price McLean was complying with an agreement, rather than acting as a free agent.

Secondly, Harry Harper V-lag not called as a witness nor was any reason given for failure to do so. That this is a circumstance to be considered is well setted. Runkle v. Bu.rnham (1894) 153 S. 216; Local 167 Inte,' national B?'thcrhood of Teamste1' United States (1934) 291 U. S. 293. Itobert H. Gravette Jr. , an examiner for the Federal Trade Commission, testified as to a conversation he had with McLean in which the latter told of a telephone conversation on December , 1955, with someone representing respondent, who said: If you lower the price of gasoline in your station by 3/" we will give you a promotional allowance of 1.71' per gallon; that McLean reported he agreed and reduced his price accordingly. It is not disputed that respondent knew of McLean s competitive problem and did give him a 1. 7( reduction and that McLean thereafter reduced his price. The question to he determined is whether that reduetion (either expressly or by implication) was conditioned on the posting of a certain price by :\1clean. It is well known that conspiracies are often not capable of proof by direct testimony and may be inferred from the things actually done and from the circumstances. BCCU,8Ch Machine Tuo/. Company v. Ahcm'inum Company (1834) 72 F. 2d 23G , 15 C. 1043, et seq.

The situation here is somewhat similar to that in Eastern States Lumbe?' Associa. tion v. United Stal. es (1914) 234 U. S. 600 , involving a conspiracy to violate the Sherman Act. There it was shown that members of a retail lumber dealers association c01leded information about wholesalers who also sold direct tu consumers-a practice in disfavor with retail dealers. The names of such wholesalers "were made available to al1 members of the association. There \vas no direct proof of any agreement among retailers to refrain from dealing with these wholesalers. The court held that, nevertheless, such agreement would be inferred. Here, there is direct testimony as to the agreement. The conclu- SUN OIL COMPANY 979 955 Opinion sion that it amounted to a price fixing agreement is substantially supported by the circumstances as shown in the record. Respondent also contends that even if an agreement were made as to price, it was, nevertheless, legal under the McGuire Act which permits agreements between a seller and a buyer prescribing minimum or stipulated resale prices under certain condiiions when such agreements are lawful under any statute, law or policy in effect in the jurisdiction in which such resale is to be made. In Liqu01' Sto;' v. Continental Distilling COl'pomt'on (Fla. 1949), 40 So. 2d 37, the Supreme Court of Florida declined to enforte the resale agreement on the ground that it was arbitrary and unreasonable and contrary to the public policy announced by the Florida Constitution and statutes. In Miles Laboratories Inc. v. Eckenl (1954), 73 So. 2(1 680, after the adoption of the McGuire Act, the Court arrived at the same conclusion. Although both of these cases had to do with "nonsigners " the decisions were not put on that ground. (For comment on these decisions see note in 19 ALR 2d 1139 , and Slwkespeal'e Company v. Lippman s Tool Shop Sp01ting Goods Company (Mich. 1952), 54 K. 2d 268. ) In Sunbeam Corporation v. M"sle1' of Miami (1955), 225 F . 2(1 191 , the Federal Circuit Court of Appeals for the Fifth Circuit, in commenting on the " strong and consistent declarations of the Florida Supreme Court to the effect that the public policy of Florida is opposed to price maintenance" had this to say:

We think it may well be that Fail' Trade contracts are unenforceable in Florida even between the parties; however, it \\'ollJd seem that this is unnecessary in our decision here and "\ve do not decide that question. That case also involved nonsigners.

The McGuire Act covers agreements "prescribing rninimum or stipulated prices. " In this respect, it differs from the Miler- Tydings Act which has to do only with minimum prices for resale. Each statute immunizes certain agreements from attuck under the Sherman Act but only to the extent that such agreements are lawful in the jurisdiction where the resale is to take place. The Florida Fair Trade: statute provides that a contract relating to the sale or resale of a commodity may lawfully contain a provision "that the buyer will not resell such commodity at Jess than the minimum price stipulated by the seller." Thus, the authority granted in regard to resale contracts is more limited than that contained in the McGuire Act.

Opinion 55 F.

Prior to the adoption of the Florida Fair Trade statute, price fixing was illegal in Florida and the contract under consideration here would clearly have been contrary to law. Even though the statute he considered to be Constitutional and enforceable as to parties to the agreement, it affords exemption from the general laws against price fixing only to the extent provided in the Act that is, as to the establishment of a minimum price for resale. It does not give a buyer and a seller a free hand to make what contract they wish as to agreed price and thus virtually repeal the general policy of Florida against price fixing. The agreement between respondent anrl McLean was not for the purpose of establishing a minimum resale price. On the contrary, it was a contract under which the parties jointly agreed to share the loss of prods incident to selling gasoline at a lower price. It was obviously not made with the Florida Fair Trade Act in mind. Nor can it derive any protection from it. Consequently, the condition laid down in the McGuire Act which is necessary for immunity from Sherman Act attack has not been met and the Act is not available to respondent. United Stales v. So can!! lvlobile Oil Company!! (1957), 157 F. Supp 202, cited hy respondent, is not in conDict with the conclusion herein. In that case, the Court pointed out that under lVlassaehusetts law, a wholesaler or distributor has an absolute right to designate the terms of resale and that a producer of a trademarked article, which is of a class in open competition, may fix the price at which the retailer may sell. Consequently, the condition necessary for the IVlcGuire Act to become effective is found to exist. In Florida, the opposite is trm,. The hearing examiner also found that respondent operates some company" filling stations in competition with its retailers and that, under United States v. klcKesson and Robbins Cumpany, Inc. (1955) 351 );. 8. 305, the agreement between respondent and McLean would not be within the protected area afforded by the McGuire Act.

\Ve agree \with the conclusion of the hearing examiner that the defenses based on the Florida Fair Trade Act or the IcGuire Act have not been established.

inally, respondent claims that "the cx,aminer s cease and desist order is unwarrantedly broad ancl punitive. Similar objections have been mrc1e many times and rejected by the courts. In Near1jland Baking Cmnpuny v. Federa T?' ade Commissiun (1957) 243 F. 2d 716; Pedeml Tmde CU'/u'/ission SUN OIL COMPANY 981 955 Order National Lead Company (1957) 352 U. S. 419; Moog Industries Inc. v. Federal Trade Commission (1956), 238 F. 2d 43. The findings and order of the hearing examiner are adopted as the findings and order of the Commission. Respondent' s appeal is denied, and it is directed that an order issue accordingly. FINAL ORDER This matter having been heard by tbe Commission upon the appeal of the respondent from the initial decision of the hearing examiner and upon the briefs filed in support of and in opposition to the appeal and ora! argument of counsel; and The Commission having rendered its decision denying the appeal and adopting the findings, conclusions and order contained in the initial decision:

It is ordered That respondent Sun Oil Company shah, within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setting forth h1 detail the manner and form in which it has complied with the order to cease and desist contained in the aforesaid initial decision. , ).

Decision 55 F.