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EXXON CORP. ET AL. v. GOVERNOR OF MARYLAND
APPEAL FROM THE COURT OF APPEALS OF MARYLAND
No. 77-10. Argued February 28, 1978-Decided June 14, 1978*
Responding to evidence that during the 1973 petroleum shortage oil
producers or refiners were favoring company-operated gasoline stations, Maryland enacted a statute prohibiting producers or refiners from operating retail service stations within the State, and requiring them to extend all “voluntary allowances” (temporary price reductions granted to independent dealers injured by local competitive price reductions) uniformly to all stations they supply. In actions by several oil companies challenging the validity of the statute on various grounds, the Maryland trial court held the statute invalid primarily on substantive due process grounds, but the Maryland Court of Appeals reversed, upholding the validity of the statute against contentions, inter alia, that it violated the Commerce and Due Process Clauses and conflicted with 82 (b) of the Clayton Act, as amended by the Robinson-Patman Act, which prohibits price discrimination, with the proviso that a seller can defend a price discrimination charge by showing that he charged a lower price in good faith to meet a competitor's equally low price. Held:
1. The Maryland statute does not violate the Due Process Clause, since, regardless of the ultimate efficacy of the statute, it bears & reasonable relation to the State's legitimate purpose in controlling the gasoline retail market. Pp. 124–125.
2. The divestiture provisions of the statute do not violate the Commerce Clause. Pp. 125–129.
(a) That the burden of such provisions falls solely on interstate companies does not, by itself, establish a claim of discrimination against interstate commerce. The statute creates no barrier against interstate independent dealers, nor does it prohibit the flow of interstate goods, place added costs upon them, or distinguish between in-state and outof-state companies in the retail market. Hunt v. Washington Apple
*Together with No. 77–11, Shell Oil Co. v. Governor of Maryland et al.; No. 77–12, Continental Oil Co. et al. v. Governor of Maryland et al.; No. 77–47, Gulf Oil Corp. v. Governor of Maryland et al.; and No. 77-64, Ashland Oil, Inc., et al. v. Governor of Maryland et al., also on appeal from the same court.
Advertising Comm'n, 432 U. S. 333; and Dean Milk Co. v. Madison, 340
(b) Nor does the fact that the burden of state regulation falls on interstate companies show that the statute impermissibly burdens interstate commerce, even if some refiners were to stop selling in the State because of the divestiture requirement and even if the elimination of company-operated stations were to deprive consumers of certain special services. Interstate commerce is not subjected to an impermissible burden simply because an otherwise valid regulation causes some business to shift from one interstate supplier to another. The Commerce Clause protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations. Pp. 127–128.
(c) The Commerce Clause does not, by its own force, pre-empt the field of retail gasoline marketing, but, absent a relevant congressional declaration of policy, or a showing of a specific discrimination against, or burdening of, interstate commerce, the States have the power to regulate in this area. Pp. 128–129.
3. The "voluntary allowances” requirement of the Maryland statute is not pre-empted by $2 (b) of the Clayton Act, as amended by the Robinson-Patman Act, or the Sherman Act. Pp. 129-134.
(a) Any hypothetical "conflict" arising from the possibility that the Maryland statute may require uniformity in some situations in which the Robinson-Patman Act would permit localized price discrimination is not sufficient to warrant pre-emption. Pp. 130–131.
(b) Neither 8 2 (b) nor the federal policy favoring competition establishes a federal right to engage in discriminatory pricing in certain situations. Section 2 (b)'s proviso is merely an exception to that statute's broad prohibition against discriminatory pricing and does not create any new federal right, but rather defines a specific, limited defense. Pp. 131-133.
(c) While in the sense that the Maryland statute might have an anticompetitive effect there is a conflict between that statute and the Sherman Act's central policy of "economic liberty,” nevertheless this sort of conflict cannot by itself constitute a sufficient reason for invalidating the Maryland statute, for if an adverse effect on competition were, in and of itself, enough to invalidate a state statute, the States' power to engage in economic regulation would be effectively destroyed. Pp.
133–134. 279 Md. 410, 370 A, 2d 1102 and 372 A. 2d 237, affirmed.
STEVENS, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, STEWART, WHITE, MARSHALL, and REHNQUIST, JJ.,
joined. BLACKMUN, J., filed an opinion concurring in part and dissenting in part, post, p. 134. POWELL, J., took no part in the consideration or decision of the cases.
William Simon argued the cause for appellants in all cases. With him on the briefs for appellants in Nos. 77–10, 77–11, and 77-47 were William L. Marbury, Lewis A. Noonberg, David F. Tufaro, Robert L. Stern, J. Edward Davis, Daniel T. Doherty, Jr., Robert G. Abrams, Lawrence S. Greenwald, Bernard J. Caillouet, Richard P. Delaney, Lauric J. Cusack, Jerry Miller, and A. M. Minotti. Wilbur D. Preston, Jr., Stanley B. Rohd, Andrew K. McColpin, and Richard R. Linn filed a brief for appellants in No. 77–12. David Ginsburg, Fred W. Drogula, and James E. Wesner filed briefs for appellants in No. 77–64.
Francis B. Burch, Attorney General of Maryland, and Thomas M. Wilson III, Assistant Attorney General, argued the cause for respondents in all cases. With them on the brief were John F. Oster, Deputy Attorney General, and John A. Woodstock and Steven P. Resnick, Assistant Attorneys General.t
MR. JUSTICE STEVENS delivered the opinion of the Court.
A Maryland statute provides that a producer or refiner of petroleum products (1) may not operate any retail service station within the State, and (2) must extend all “voluntary
+Briefs of amici curiae urging reversal were filed by Eugene Gressman for Charter Oil Co. et al.; and by John S. McDaniel, Jr., and William J. Rubin for Crown Petroleum Corp.
Jerry S. Cohen filed a brief for the National Congress of Petroleum Retailers as amicus curiae urging affirmance.
Briefs of amici curiae were filed by Evelle J. Younger, Attorney General, Sanford N. Gruskin, Chief Assistant Attorney General, Warren J. Abbott, Assistant Attorney General, and Michael I. Spiegel and Linda L. Tedeschi, Deputy Attorneys General, for the State of California; by Erwin N. Griswold for Champlin Petroleum Co. et al.; and by George W. Liebmann, Robert B. Levin, and Robert G. Levy for Day Enterprises, Inc., et al.
allowances” uniformly to all service stations it supplies.' The questions presented are whether the statute violates either the Commerce or the Due Process Clause of the Constitution of the United States, or is directly or indirectly pre-empted by the congressional expression of policy favoring vigorous competition found in § 2 (b) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526. The Court of Appeals of Maryland answered these questions in
1 The pertinent provisions of the statute are as follows:
"(b) After July 1, 1974, no producer or refiner of petroleum products shall open a major brand, secondary brand or unbranded retail service station in the State of Maryland, and operate it with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation, managing a service station on a fee arrangement with the producer or refiner. The station must be operated by & retail service station dealer.
"(c) After July 1, 1975, no producer or refiner of petroleum products shall operate a major brand, secondary brand, or unbranded retail service station in the State of Maryland, with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.
"(d) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall extend all voluntary allowances uniformly to all retail service station dealers supplied.” Md. Code Ann., Art. 56, § 157E (Supp. 1977).
2“Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, 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 made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.” 15 U. S. C. & 13 (b) (1976 ed.).
favor of the validity of the statute. 279 Md. 410, 370 A. 2d 1102 and 372 A. 2d 237 (1977). We affirm.
I The Maryland statute is an outgrowth of the 1973 shortage of petroleum. In response to complaints about inequitable distribution of gasoline among retail stations, the Governor of Maryland directed the State Comptroller to conduct a market survey. The results of that survey indicated that gasoline stations operated by producers or refiners had received preferential treatment during the period of short supply. The Comptroller therefore proposed legislation which, according to the Court of Appeals, was "designed to correct the inequities in the distribution and pricing of gasoline reflected by the survey." Id., at 421, 370 A. 2d, at 1109. After legislative hearings and a "special veto hearing” before the Governor, the bill was enacted and signed into law.
Shortly before the effective date of the Act, Exxon Corp. filed a declaratory judgment action challenging the statute in the Circuit Court of Anne Arundel County, Md. The essential facts alleged in the complaint are not in dispute. All of the gasoline sold by Exxon in Maryland is transported into the State from refineries located elsewhere. Although Exxon sells the bulk of this gas to wholesalers and independent retailers, it also sells directly to the consuming public through 36 company-operated stations. Exxon uses these stations to test innovative marketing concepts or products. Focusing primarily on the Act's requirement that it discontinue its operation of these 36 retail stations, Exxon's complaint challenged the
* As used by the Court of Appeals and in this opinion, "companyoperated station” refers to a retail service station operated directly by employees of a refiner or producer of petroleum products (or a subsidiary). 279 Md., at 419 n. 2, 370 A. 2d, at 1108 n. 2.
. For instance, Exxon has used its company-operated stations to introduce such marketing ideas as partial self-service, in-bay car-wash units, and motor-oil vending machines. App. 205–209.