State Oil Company v. Khan

522 U.S. 3 (1997)

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Nature of the Case

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Facts

P and D entered into an agreement to lease and operate a gas station and convenience store owned by D. P would obtain the station's gasoline supply from D at a price equal to a suggested retail price set by D, less a margin of 3.25 cents per gallon. Under the agreement, P could charge any amount for gasoline sold to the station's customers, but if the price charged was higher than D's suggested retail price, the excess was to be rebated to D. P could sell gasoline for less than D's suggested retail price, but any such decrease would reduce their 3.25 cents-per-gallon margin. P fell behind in lease payments. D then gave notice of its intent to terminate the agreement and commenced a state court proceeding to evict. A receiver operated the station for several months without being subject to the price restraints in the agreement. The receiver obtained an overall profit margin in excess of 3.25 cents per gallon by lowering the price of regular-grade gasoline and raising the price of premium grades. P sued D alleging in part that D had engaged in price fixing in violation of § 1 of the Sherman Act. The District Court found that the allegations in the complaint did not state a per se violation of the Sherman Act because they did not establish the sort of 'manifestly anticompetitive implications or pernicious effect on competition' that would justify per se prohibition of D's conduct. The Court of Appeals reversed, concluding that the pricing scheme was a per se antitrust violation under Albrecht v. Herald Co. The Supreme Court granted certiorari.