Exxon Corp. v. Governor of Maryland

437 U.S. 117, 98 S. Ct. 2207, 57 L. Ed. 2d 91, 1978 U.S. LEXIS 2
Supreme Court of the United States·Decided October 2, 1978·No. 77-10·Published·Cited by 842 cases

Opinions

Mr. Justice Stevens

delivered the opinion of the Court.

A Maryland statute provides that a producer or refiner of petroleum products (1) may not operate any retail service station within the State, and (2) must extend all “voluntary [120]*120allowances” uniformly to all service stations it supplies.1 The questions presented are whether the statute violates either the Commerce or the Due Process Clause of the Constitution of the United States, or is directly or indirectly pre-empted by the congressional expression of policy favoring vigorous competition found in § 2 (b) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526.2 The Court of Appeals of Maryland answered these questions in [121]*121favor of the validity of the statute. 279 Md. 410, 370 A. 2d 1102 and 372 A. 2d 237 (1977). We affirm.

I

The Maryland statute is an outgrowth of the 1973 shortage of petroleum. In response to complaints about inequitable distribution of gasoline among retail stations, the Governor of Maryland directed the State Comptroller to conduct a market survey. The results of that survey indicated that gasoline stations operated by producers or refiners had received preferential treatment during the period of short supply. The Comptroller therefore proposed legislation which, according to the Court of Appeals, was “designed to correct the inequities in the distribution and pricing of gasoline reflected by the survey.” Id., at 421, 370 A. 2d, at 1109. After legislative hearings and a “special veto hearing” before the Governor, the bill was enacted and signed into law.

Shortly before the effective date of the Act, Exxon Corp. filed a declaratory judgment action challenging the statute in the Circuit Court of Anne Arundel County, Md. The essential facts alleged in the complaint are not in dispute. All of the gasoline sold by Exxon in Maryland is transported into the State from refineries located elsewhere. Although Exxon sells the bulk of this gas to wholesalers and independent retailers, it also sells directly to the consuming public through 36 company-operated stations.3 Exxon uses these stations to test innovative marketing concepts or products.4 Focusing primarily on the Act’s requirement that it discontinue its operation of these 36 retail stations, Exxon’s complaint challenged the [122]*122validity of the statute on both constitutional and federal statutory grounds.5

During the ensuing nine months, six other oil companies instituted comparable actions. Three of these plaintiffs, or their subsidiaries, sell their gasoline in Maryland exclusively through company-operated stations.'6 These refiners, using trade names such as "Red Head” and “Scot,” concentrate largely on high-volume sales with prices consistently lower than those offered by independent dealer-operated major brand stations. Testimony presented by these refiners indicated that company ownership is essential to their method of private brand, low-priced competition. They therefore joined Exxon in its attack on the divestiture provisions of the Maryland statute.

The three other plaintiffs, like Exxon, sell major brands primarily through dealer-operated stations, although they also operate at least one retail station each.7 They, too, challenged the statute’s divestiture provisions, but, in addition, they specially challenged the requirement that “voluntary allowances” be extended uniformly to all retail service stations supplied in the State. Although not defined in the statute, the term “voluntary allowances” refers to temporary price reductions granted by the oil companies to independent dealers who [123]*123are injured by local competitive price reductions of competing retailers.8 The oil companies regard these temporary allowances as legitimate price reductions protected by § 2 (b). In advance of trial, Exxon, Shell, and Gulf moved for a partial summary judgment declaring this portion of the Act invalid as in conflict with § 2 (b).

The Circuit Court granted the motion, and the trial then focused on the validity of the divestiture provisions. As brought out during the trial, the salient characteristics of the Maryland retail gasoline market are as follows: Approximately 3,800 retail service stations in Maryland sell over 20 different brands of gasoline. However, no petroleum products are produced or refined in Maryland, and the number of stations actually operated by a refiner or an affiliate is relatively small, representing about 5% of the total number of Maryland retailers.

The refiners introduced evidence indicating that their ownership of retail service stations has produced significant benefits for the consuming public.9 Moreover, the three refiners that now market solely through company-operated stations may elect to withdraw from the Maryland market altogether if the statute is enforced. There was, however, no evidence that the total quantity of petroleum products shipped into Maryland would be affected by the statute.10 After trial, the Circuit Court held the entire statute invalid, primarily on substantive due process grounds.

The Maryland Court of Appeals reversed, rejecting all of the refiners’ attacks against both the divestiture provisions and [124]*124the voluntary-allowance provision. Most of those attacks are not pursued here;11 instead, appellants have focused their appeals on the claims that the Maryland statute violates the Due Process and Commerce Clauses and that it is in conflict with the Robinson-Patman Act.

II

Appellants’ substantive due process argument requires little discussion.12 The evidence presented by the refiners may cast sorpe doubt on the wisdom of the statute, but it is, by now, absolutely clear that the Due Process Clause does not empower the. judiciary “to sit as a 'superlegislature to weigh the wisdom of legislation’ . . . .” Ferguson v. Skrupa, 372 U. S. 726, 731 (citation omitted). Responding to evidence that producers and refiners were favoring company-operated stations in the allocation of gasoline and that this would eventually decrease the competitiveness of the retail market, the State enacted a law prohibiting producers and refiners from operating their own stations. Appellants argue that this response is irrational and that it will frustrate rather than further the State’s desired goal of enhancing competition. But, as the Court of Appeals observed, this argument rests simply on an evaluation of the economic wisdom of the statute, 279 Md., at 428, 370 A. 2d, at 1112, and cannot override the State’s authority “to legislate against what are found to be injurious practices in their internal commercial and business affairs ....” Lincoln Federal Labor Union v.

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Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S. Ct. 2207, 57 L. Ed. 2d 91, 1978 U.S. LEXIS 2 (1978).

437 U.S. 117 (Exxon Corp. v. Governor of Maryland) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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