TABLE VI.-Comparison of 1938 and 1954 price levels selected indices from survey of current business Mr. RODINO. The next witness is Mr. William Simon. Will you take the stand, please, and state your name and your affiliation, to the stenographer? You have a prepared statement? STATEMENT OF WILLIAM SIMON, COUNSEL, EMPIRE STATE PETROLEUM ASSOCIATION, INC. Mr. SIMON. Yes, sir I believe Mr. Maletz has copies of it. Mr. SIMON. Mr. Chairman and members of this distinguished committee, I am William Simon of the District of Columbia bar. I was a member of the Attorney General's National Committee To Study the Antitrust Laws. I hold the deep conviction that its conclusions are in the public interest, express a vigorous adherence to the philosophy of our antitrust laws, and that time will prove its soundness. I am here today on behalf of Empire State Petroleum Association in an endeavor to straighten out this record as to what the Supreme Court decided in the Standard Oil Co. (Indiana) case (340 U. S. 231), especially as it affects oil jobbers. Representing Empire State Petroleum Association, as an intervener in that case, I filed briefs with the Federal Trade Commission, the court of appeals, and the Supreme Court in opposition to the Commission; and I argued the case before the Supreme Court, for 12 State oil jobber associations. Mr. HARKINS. Mr. Chairman, I would like to clarify our record regarding the facts concerning this case. We have had a lot of testimony on both sides of this case, and there are some questions I would like to put to Mr. Simon now to clarify the record. Mr. RODINO. Go ahead. Mr. HARKINS. First of all, Standard Oil Company of Indiana markets in 14 States. What States are those? Mr. SIMON. I cannot tell you exactly but they are roughly the middle western area of the United States, roughly as far east as Michigan, as far west as the Dakotas and Wyoming, and as far south as Missouri and Oklahoma. Mr. HARKINS. In this marketing area does Indiana Standard distribute branded products through jobbers? Mr. SIMON. They do. Mr. HARKINS. In what localities? Mr. SIMON. I cannot tell you that except that I do know they have jobbers, they had 4 of them in Detroit, as the evidence in this case shows, and I know generally that they had other jobbers, but I cannot tell you whether it is 10 or a thousand others. Mr. HARKINS. Then you cannot answer the question as to whether the situation in Detroit is the usual marketing situation for Indiana Standard or an unusual marketing situation? Mr. SIMON. I cannot. I can only tell you that it is usual throughout the United States for gasoline to be distributed both by major oil companies selling direct to filling stations, and by jobbers, in the same area also selling the branded gasoline of major oil companies to filling stations. Which company does which in what town I cannot tell you, but it is common throughout the country for both jobbers and major oil companies to distribute to filling stations. Mr. HARKINS. I wanted to narrow it a little bit. Is it usual throughout the country for any oil company to distribute in the same locality, in the same marketing area, branded petroleum products through both jobber organizations and retail outlets? Mr. SIMON. Yes, sir. Is that the end of your question? Mr. HARKINS. No. In general, what is the jobber differential, or the jobber margin? Mr. SIMON. I do not know that there is any answer to your question, in general. I can tell you that in this case which was tried, mind you, in 1938 and 1939, at that time the jobber margin in Detroit was a cent and a half a gallon. I have seen prices in the Wall Street Journal and other papers that indicates the jobber margin now is somewhere between 212 and 3 cents, but in this record in 1938 or 1939, the evidence was that it was a cent and a half in Detroit. Mr. HARKINS. The margin was a cent and a half for jobbers in the Detroit marketing area? Mr. SIMON. I cannot tell you about all jobbers; I am telling you only what the record shows. 63478-55-pt. 3- 48 Mr. HARKINS. The four jobbers involved there got a cent and a half? Mr. SIMON. That is correct. Mr. HARKINS. Those are all the questions I have right now. Mr. SIMON. I might mention that the attorney for the National Association of Gasoline Retailers, who had intervened in the Standard Oil case that I referred to earlier to support the Commission's posi tion, also took an active part in the work of the Attorney General's committee, so that both viewpoints were represented. I am less concerned today with the merits of the Supreme Court decision than I am in trying to correct the manifest misstatements about, and distortions of, that ruling. Before we debate a legal policy, we should have the facts straight. The Supreme Court held that section 2 (b) of the Robinson-Patman Act makes it a full defense to a charge of price discrimination for a seller to show that he in good faith met an equally low price of a competitor. The Federal Trade Commission had construed the "meeting competition" proviso of section 2 (b) as providing merely for a rule of evidence. It held that the proviso was inapplicable whenever a seller's price reduction to meet the lower price of a competitor injured competition. The Supreme Court reversed because, it said, the Commission's construction would completely nullify the meeting competition defense expressly provided for in the statute. The Court also found that the Commission's construction would bring the Robinson-Patman Act in direct conflict with the economic policy of competition expressed in our basic antitrust laws. As the late Mr. Justice Jackson, a former Attorney General and a former head of the Antitrust Division, said during the oral argument: The whole philosophy of the Sherman Act is go out and compete, get business, fight for it. Now, the whole philosophy we are asked to enforce here is that you really must not; you should let this business go and not meet the competition. I have difficulty in knowing where we are with this. The Court did no more-and I cannot emphasize this too stronglythan to hold that a seller could reduce his price in good faith to meet. a lower price which was available to the buyer from a competitor. And it made clear that the burden of showing good faith-that is, that the seller reasonably believed that he had to make the particular lower price to meet a competitor's lower offer-was on the seller and not on the Commission. The Court remanded the case to the Commission to make a finding of Standard's good faith. That issue is now pending on review before the Court of Appeals after the Commission found against Standard. On May 10, 1955, before this committee, Congressman Patman gave a most amazing characterization of the Supreme Court's decision. saying: Now let us suppose that I see my [political] opponent coming along the street and he is unarmed, but I have a gun. He has not attacked me in any unlawful way, but I know that he has been trying to win over some of the voters who have supported me in past elections. So I pull out my gun and start shooting at him and I hit several innocent bystanders. Let us suppose further that my opponent takes cover behind a tree, and I then make myself comfortable and begin taking some leisurely potshots at that tree. I know that as long as I keep my opponent pinned behind that tree he cannot be out winning over more of the voters. So I continue taking potshots, and every now and again I hit an innocent bystander. I hit a lot of small children, * * And then he added: These are almost precisely the things the Supreme Court told the Standard Oil Co. and the FTC [that Standard could do] in the Standard Oil (Indiana) decision. Nothing in the Supreme Court's decision remotely supports that inflammatory and distorted analogy. Standard had four Detroit customers who even the Commission agrees, and the Supreme Court especially pointed out, would have received the jobber-tank car-price whether or not Standard sold to them as jobbers. The only question was whether, to keep them as customers, Standard could meet a price that was lawfully available to them from others. The Supreme Court decision makes clear that the "good faith" defense does not permit a seller to meet an admittedly unlawful price of a competitor. Since it would have been unlawful for Mr. Patman's political opponent to go around shooting people, the 2 (b) defense could not possibly justify Mr. Patman's unlawful conduct. It would be a more apt analogy to assume that the Congressman's political opponent was winning over voters by lawful and proper campaign tactics. The Congressman would then certainly be at a serious competitive disadvantage if he were prohibited from meeting those campaign tactics. No one would want to run for public office and be denied the right to meet the lawful and proper competition for votes of his political opponent. That is more nearly what is involved here. Mr. Patman was also in error when he said the Court had not accurately interpreted the Robinson-Patman amendments.1 The original Clayton Act permitted price reductions to "meet competition." This permitted a price reduction to compete against the better service, higher reputation, increased advertising, or other competitive advantage of the competitor. What Congress did in the Robinson-Patman amendment was to narrow the meeting-competition defense to meeting only "an equally low price of a competitor." As the Supreme Court pointed out in the Standard Oil case, Congress certainly did not intend wholly to destroy the defense. Under the change made by the 1936 amendment, the seller can avail himself of the meeting-competition defense only in meeting a lower price of a specific competitor. Just last month, the Federal Trade Commission in two cases-matter of S. Edelmann & Co., Docket 5770; matter of C. E. Niehoff & Co., Docket 5768-held that section 2 (b) could not be used to justify a price reduction to meet competition generally. Mr. Patman finally said that he could not be stopped in his indiscriminate shooting until a determination of his good faith had been made. But it is inevitable in any construction of the Robinson-Patman Act or any antitrust law, which involve economic offenses not physical assaults, that the Government is not entitled to any relief until an offense is shown. 1 Testifying on the Patman bill, on July 10, 1935, Mr. Patman was asked a question about the bill by Mr. Walter. He answered: "I would rather Mr. Teegarden, who will follow me, would answer. *** Mr. Teegarden wrote this bill. He conferred with the officials of the Department of Justice, he conferred with the Federal Trade Commission officials, and when he gave me the bill I went over it carefully with the Legislative Drafting Service here. I went over it with officials of the Federal Trade Commission and with good lawyers here in this House, and, although we disagreed about some parts of it, we considered it a good, long step in the right direction and introduced the bill so as to present it to this committee." Again it is important to note that the burden of proving good faith is upon the seller charged with price discrimination. The only indiscriminate shooting that has followed the decision is in stating what the case decided. I am at a complete loss to understand the erroneous statements repeatedly made by Senator Kefauver, such as: The burden is upon enforcement agencies to prove the discrimination was not in "good faith”—which is almost impossible as a practical matter. He made that statement in introducing S. 11 to overturn the Standard Oil decision, and he made similar statements before this committee iast month and before the Senate Judiciary Committee this month. It is both unfair and incorrect to refer to the jobbers involved in the Standard Oil case as "favored customers" selected by Standard. Standard had nothing to do with their qualifying to buy at the tankcar, or jobber, price. The tank-car, jobber, price had become available to each before Standard ever offered it to any of them. The Supreme Court found: The distinctive characteristics of these "jobbers" are that each (1) maintain sufficient bulk storage to take delivery of gasoline in tank-car quantities (of 8,000 to 12,000 gallons) rather than in tank-wagon quantities (of 700 to 800 gallons) as is customary for service stations; (2) owns and operates tank wagons and other facilities for delivery of gasoline to service stations; (3) has an established business sufficient to insure purchases of from one to two million gallons a year; and (4) has adequate credit responsibility. Mr. HARKINS. Mr. Simon, what is the significance of the quotation marks around "jobbers"? Mr. SIMON. I assume it relates to the footnote of the Court at that point in which the Court said: Whether or not they are jobbers is not important to the decision of this case, because the fact is, they had these prices available to them, and whether the statute permitted the meeting of the prices that were offered to them was not controlled by whether they were technically jobbers or technically retailers or technically something else. Mr. HARKINS. Was there an argument before the Court that these four concerns were not, in fact, jobbers, but were rather retailers? Mr. SIMON. One of the four-let me say this, all four, without any question, bought as jobbers; that was never disputed. One of them resold only to its own retail stations. It was the operator of a chain of retail stations. One other resold in small part to his own retail stations, and in large part to other retailers, and the other two sold to retailers. The argument was made that whether or not a person is a jobber depends, not on the way he buys, but on the way he sells, and if one sells to jobbers and to retailers, he is only a jobber on that part of his business which he resells to retailers. The Court in the footnote that followed, which I have quoted, said that for the purpose of this decision that was not important, and the Court did not decide the point. When a businessman owns the facilities, and by facilities I mean what the Court referred to in the quotation, the tank wagons to make the deliveries and the bulk plant for the storage, and has the business he can buy gasoline at the tank-car, jobber, price from many suppliers competing for his business. And the fact that he may resell gasoline at retail, as almost every jobber does from time to time, does |