Standard Oil Co. v. United States (Standard Stations)

Standard Oil Co. v. United States, 337 U.S. 293 (1949), also often referred to as the Standard Stations case, was a landmark antitrust case decided by the Supreme Court of the United States concerning exclusive dealing arrangements and their legality under Section 3 of the Clayton Act.

The case involved Standard Oil Company of California (Standard Stations) and its contracts with independent service stations in seven western states. These contracts required the stations to purchase all of their gasoline and other petroleum products from Standard Stations. The government argued that these exclusive dealing contracts constituted an unlawful restraint of trade.

The Supreme Court, in a 5-4 decision, ruled against Standard Stations. The Court held that the exclusive dealing arrangements were illegal because they foreclosed a substantial share of the relevant market without requiring proof of actual, demonstrable harm to competition. The Court applied a quantitative substantiality test, finding that Standard Stations' exclusive contracts covered a significant percentage of the gasoline market in the relevant geographic area (approximately 6.7% of retail gasoline sales in the seven-state area) and were therefore presumptively illegal.

The decision established an important precedent for evaluating the legality of exclusive dealing contracts under antitrust law. While the Court did not require a showing of actual harm to competition, it emphasized the importance of market share and the degree to which competitors were foreclosed from accessing the market. Later antitrust jurisprudence moved away from the strict quantitative substantiality test applied in Standard Stations and toward a more flexible rule of reason analysis that considers a broader range of factors, including the pro-competitive justifications for the exclusive dealing arrangement. However, the case remains a significant example of how exclusive dealing arrangements can be challenged under antitrust law, particularly when a large market share is involved.