293 Opinion of the Court. intervening years; they have never, as to either of these products, exceeded 2% of the total sales in the Western area. Since § 3 of the Clayton Act was directed to prohibiting specific practices even though not covered by the broad terms of the Sherman Act, it is appropriate to consider first whether the enjoined contracts fall within the prohibition of the narrower Act. The relevant provisions of 3 are: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States. . . on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods... of a competitor or competitors of the... seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce." Obviously the contracts here at issue would be proscribed if § 3 stopped short of the qualifying clause beginning, "where the effect of such lease, sale, or contract After the Clayton Bill, H. R. 15657, 63d Cong., 2d Sess., had passed the House, the Senate struck § 4, the section prohibiting tying clauses and requirements contracts, on the ground that such practices were subject to condemnation by the Federal Trade Commission under the then pending Trade Commission Bill. In support of a motion to reconsider this vote, Senator Reed of Missouri argued that the Trade Commission would be unlikely to outlaw agreements of a type held by this Court, in Henry v. A. B. Dick Co., 224 U. S. 1, not to be in violation of the Sherman Act. See 51 Cong. Rec. 14088, 14090-92. The motion was agreed to. Id. at 14223. 337 U.S. Opinion of the Court. for sale If effect is to be given that clause, however, it is by no means obvious, in view of Standard's minority share of the "line of commerce" involved, of the fact that that share has not recently increased, and of the claims of these contracts to economic utility, that the effect of the contracts may be to lessen competition or tend to create a monopoly. It is the qualifying clause, therefore, which must be construed. The District Court held that the requirement of showing an actual or potential lessening of competition or a tendency to establish monopoly was adequately met by proof that the contracts covered "a substantial number of outlets and a substantial amount of products, whether considered comparatively or not." 78 F. Supp. at 875. Given such quantitative substantiality, the substantial lessening of competition-so the court reasoned-is an automatic result, for the very existence of such contracts denies dealers opportunity to deal in the products of competing suppliers and excludes suppliers from access to the outlets controlled by those dealers. Having adopted this standard of proof, the court excluded as immaterial testimony bearing on "the economic merits or demerits of the present system as contrasted with a system which prevailed prior to its establishment and which would prevail if the court declared the present arrangement [invalid]." The court likewise deemed it unnecessary to make findings, on the basis of evidence that was admitted, whether the number of Standard's competitors had increased or decreased since the inauguration of the requirementscontract system, whether the number of their dealers had increased or decreased, and as to other matters which would have shed light on the comparative status of Standard and its competitors before and after the adoption of that system. The court concluded: "Grant that, on a comparative basis, and in relation to the entire trade in these products in the area, 293 Opinion of the Court. the restraint is not integral. Admit also that control of distribution results in lessening of costs and that its abandonment might increase costs. . . . Concede further, that the arrangement was entered into in good faith, with the honest belief that control of distribution and consequent concentration of representation were economically beneficial to the in-, dustry and to the public, that they have continued for over fifteen years openly, notoriously and unmolested by the Government, and have been practiced by other major oil companies competing with Standard, that the number of Standard outlets so controlled may have decreased, and the quantity of products supplied to them may have declined, on a comparative basis. Nevertheless, as I read the latest cases of the Supreme Court, I am compelled to find the practices here involved to be violative of both statutes. For they affect injuriously a sizeable part of interstate commerce, or, to use the current phrase,-'an appreciable segment' of interstate commerce." The issue before us, therefore, is whether the requirement of showing that the effect of the agreements "may be to substantially lessen competition" may be met simply by proof that a substantial portion of commerce is affected or whether it must also be demonstrated that competitive activity has actually diminished or probably will diminish.5 5 It is clear, of course, that the "line of commerce" affected need not be nationwide, at least where the purchasers cannot, as a practical matter, turn to suppliers outside their own area. Although the effect on competition will be quantitatively the same if a given volume of the industry's business is assumed to be covered, whether or not the affected sources of supply are those of the industry as a whole or only those of a particular region, a purely quantitative measure of this effect is inadequate because the narrower the area of competition, the greater the comparative effect on the area's competitors. Since Opinion of the Court. 337 U.S. Since the Clayton Act became effective, this Court has passed on the applicability of § 3 in eight cases, in five of which it upheld determinations that the challenged agreement was violative of that Section. Three of theseUnited Shoe Machinery Corp. v. United States, 258 U. S. 451; International Business Machines Corp. v. United States, 298 U. S. 131; International Salt Co. v. United States, 332 U. S. 392-involved contracts tying to the use of a patented article all purchases of an unpatented product used in connection with the patented article. The other two cases Standard Fashion Co. v. MagraneHouston Co., 258 U. S. 346; Fashion Originators' Guild v. Federal Trade Comm'n, 312 U. S. 457-involved requirements contracts not unlike those here in issue. The Standard Fashion case, the first of the five holding that the Act had been violated, settled one question of interpretation of § 3. The Court said: "Section 3 condemns sales or agreements where the effect of such sale or contract of sale 'may' be to substantially lessen competition or tend to create monopoly. . . . But we do not think that the purpose in using the word 'may' was to prohibit the mere possibility of the consequences described. It was intended to prevent such agreements as would under the circumstances disclosed probably lessen competition, or create an actual tendency to monopoly." 258 U. S. at 356-57. See also Federal Trade Comm'n v. Morton Salt Co., 334 U. S. 37, 46, n. 14. it is the preservation of competition which is at stake, the significant proportion of coverage is that within the area of effective competition. Cf. Indiana Farmer's Guide Publishing Co. v. Prairie Farmer Publishing Co., 293 U. S. 268, 279; United States v. Yellow Cab Co., 332 U. S. 218, 226. The criteria of substantiality deemed relevant in cases involving a nationwide market are thus also relevant in measuring the effect of Standard's requirements contracts in the seven-state Western area. 293 Opinion of the Court. The Court went on to add that the fact that the Section "was not intended to reach every remote lessening of competition is shown in the requirement that such lessening must be substantial," but because it deemed the finding of two lower courts that the contracts in question did substantially lessen competition and tend to create monopoly amply supported by evidence that the defendant controlled two-fifths of the nation's pattern agencies, it did not pause to indicate where the line between a "remote" and a "substantial" lessening should be drawn. All but one of the later cases also regarded domination of the market as sufficient in itself to support the inference that competition had been or probably would be lessened. In the United Shoe Machinery case, referring, inter alia, to the clause incorporated in all United's leases of patented machinery requiring the use by the lessee of materials supplied by United, the Court observed: "That such restrictive and tying agreements must necessarily lessen competition and tend to monopoly is, we believe, . apparent. When it is consid-. ered that the United Company occupies a dominating position in supplying shoe machinery of the classes involved, these covenants signed by the lessee and binding upon him effectually prevent him from acquiring the machinery of a competitor of the lessor except at the risk of forfeiting the right to use the machines furnished by the United Company which may be absolutely essential to the prosecution and success of his business." 258 U. S. at 457-58. In the International Business Machines case, the defendants were the sole manufacturers of a patented tabulating machine requiring the use of unpatented cards. The lessees of the machines were bound by tying clauses to use in them only the cards supplied by the defendants, |