Federal Trade Commission v. Sun Oil Co.
Headline: Gasoline supplier’s one-off price cut to help a single dealer is not covered by the meeting-competition defense; the Court reversed the appeals court and left nearby dealers protected from discriminatory discounts.
Holding: The Court held that Sun could not use the Robinson-Patman good-faith meeting-competition defense because the lower price it gave only one dealer matched a rival retailer’s retail cut, not an equally low price by another supplier.
- Limits suppliers’ ability to give secret discounts to individual dealers.
- Protects nearby retailers from discriminatory supplier price cuts.
- Encourages suppliers to cut prices uniformly or show supplier-level competition evidence.
Summary
Background
A large refinery-distributor (Sun) sold gasoline through independent dealers in Jacksonville. One dealer, a small station operator, lost sales when a rival retail station cut pump prices. Sun gave that one dealer a secret discount on December 27, 1955, so the dealer could lower his retail price; Sun did not give the same discount to other nearby dealers. The Federal Trade Commission found the discount to be illegal price discrimination; a court of appeals reversed on the theory Sun was meeting real competition.
Reasoning
The central question was whether a supplier can claim the statute’s good-faith “meet competition” defense when it lowers price to one buyer so that buyer can match a rival retailer’s lower retail price. The Court read the law to permit the defense only when the supplier is meeting an equally low price set by another supplier (its own competitor), not when it is simply enabling a customer to match a retail rival. Because the record showed the rival was only a retail station and there was no evidence the rival had a supplier price cut, Sun failed to meet its burden and the defense was unavailable.
Real world impact
The decision means suppliers cannot quietly give selective discounts to single dealers to counter price cutting by unaided retail rivals. Suppliers who want to respond to retail competition must either show supplier-level competition or act through broad, nondiscriminatory price changes. The ruling enforces equal treatment among a supplier’s customers and reduces a supplier’s ability to substitute its power for ordinary retail competition.
Dissents or concurrances
A separate memorandum agreed with the result but would have sent the case back for more evidence about whether the rival was integrated or had itself received a supplier price cut, saying the record might be incomplete.
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