United States v. Socony-Vacuum Oil Co.

310 U.S. 150 (1940)

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Nature of the Case

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Facts

In 1926 a period of production of crude oil was such that the quantities seriously affected crude oil and gasoline markets throughout the United States. It drove the price of oil down to levels below the cost of production from pumping and stripper wells. Once abandoned, subsurface changes make it difficult or impossible to bring those wells back into production. Such wells constitute about 40% of the country's known oil reserves. State proration laws were violated with impunity. Market prices for this hot oil drove prices down. In the spring of 1933 conditions were acute. The wholesale market was below the cost of manufacture. Ds made an agreement for the purchase 'from independent refiners in spot transactions of large quantities of gasoline in the East Texas and Mid-Continent fields at uniform, high, and at times progressively increased prices.' Ds represented 83 percent of all oil sold. The alleged conspiracy is not to be found in any formal contract or agreement. The agreement assigned independent refiners to each purchaser and once spot gasoline became available from the refinery, the assigned buyer would purchase it at market pricing. This stabilized the price of gasoline and Ds charged more at retail. Such purchases amounted to more than 50% of all gasoline produced by those independent refiners. The minimum price for spot purchases was established and that grew over time. P alleged a violation of the Sherman Act for unlawful concerted price fixing. The court charged the jury that it was a violation of the Sherman Act for a group of individuals or corporations to act together to raise the prices to be charged for the commodity which they manufactured where they controlled a substantial part of the interstate trade and commerce in that commodity. The court stated that where the members of a combination had the power to raise prices and acted together for that purpose, the combination was illegal; and that it was immaterial how reasonable or unreasonable those prices were or to what extent they had been affected by the combination. It further charged that if such illegal combination existed, it did not matter that there may also have been other factors which contributed to the raising of the prices. The jury found Ds guilty, and the court of appeals reversed. The Circuit Court of Appeals held the jury charge to be reversible error since it was based upon the theory that such a combination was illegal per se. The Supreme Court granted certiorari.