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July 1, 1959


The opinion of the court was delivered by: GANEY

This is an action brought by the United States to enjoin the defendant Sun Oil Company from conducting its business allegedly in violation of § 1 of the Sherman Act, 15 U.S.C.A. § 1, and § 3 of the Clayton Act, 15 U.S.C.A. § 14.

The complaint charges that for more than a quarter of a century the defendant has been unreasonably restraining interstate commerce and substantially lessening competition in a line of commerce by excluding its competitors from access to a substantial part of the market for petroleum products and automotive accessories in its marketing area. This has been and still is being accomplished, the complaint states, by defendant's inducing and coercing independent automotive service station operators to enter and operate under contracts, supplemented by agreements and understandings, having the purpose, intent and effect of requiring them to purchase petroleum products and automotive accessories exclusively from it, and to refrain from purchasing these products from its competitors. Defendant is not charged with acting in concert with any other supplier of one or more of those products; nor does the evidence adduced show that it has done so.

 From the evidence presented to it, the court makes the following

 Findings of Facts.

 1. Defendant Sun Oil Company, hereinafter called 'Sun', is a corporation organized and existing under the laws of New Jersey. It transacts and has its principal place of business at 1608 Walnut Street, philadelphia, Pennsylvania, within the Eastern District of Pennsylvania. Sun is known to the motoring public as 'Sunoco.'

 2. Sun is engaged in the business of producing, transporting, refining and marketing crude oil and petroleum products. It obtains and purchases crude oil in the principal oil producing fields of the United States and transports it to refineries owned by it at Marcus Hook, Pa., and at Toledo, Ohio. Among the principal petroleum products manufactured at these refineries are a single grade of gasoline, sold under the name 'Blue Sunoco' (and for a time as 'Sunoco Dynafuel'), motor oil sold under the trade names 'Sunoco Mercury Made' (classified as a regular grade oil) and 'Dynalube' (classified as a premium motor oil), and other automotive lubricants. *fn1" Sun transports, distributes and sells all of these products to over 6,500 independent service station operators in the Sun marketing area. It markets its petroleum products under the trade name 'Sunoco.' In order that it gasoline may be readily identified by the public, Sun colors it blue, and uses the color scheme of blue, white and yellow on its containers, dispensing equipment, signs and advertising matter, and service stations at which its gasoline is sold. It has adopted the symbols of the diamond superimposed upon an arrow as its identifying mark.

 3. Sun also sells a full line of automotive accessories, which, with a few exceptions, it purchases or receives on consignment from other suppliers. These accessories include equipment items and replacement parts which are capable of being installed or applied on automotive vehicles at a service station without major mechanical operations, such as tires, batteries, spark plugs, oil filters, fan belts, automobile polishes, waxes, lamp bulbs, seat covers, and antifreeze preparations. For convenience they are referred to as 'TBA' or 'tires, batteries and accessories.' The line of TBA which Sun purchases from manufacturers and distributors located in various states is also transported, distributed and sold by it in interstate commerce to more than 6,500 independent service station operators in Sun's marketing area. The manufacturers which supply Sun with TBA items do not sell their products directly to Sun dealers.

 4. Some of the principal TBA products which Sun purchases for resale to its dealers include: Kelly tires, from Kelly-Springfield Tire Co., Cumberland, Maryland; Sunoco batteries, from Globe-Union Inc., Milwaukee, Wisconsin; Fram oil filters, from Fram Corporation, East Providence, Rhode Island; and Champion spark plugs, from Champion Spark Plug Company, Toledo, Ohio; Zerone and Zerex anti-freeze, from E. I. duPont deNemours & Company, Wilmington, Delaware; Westinghouse sealed beam lights and miniature lamps from Westinghouse Electric Corporation, Philadelphia, Pa.

 5. Sun itself operates approximately only forty service stations throughout its marketing area. These stations, of course, sell Sun products exclusively and only the line of TBA sponsored by Sun. The attendants at these company-owned and operated stations, which are also used for training new Sun dealers, are employees or agents of Sun.

 6. For sales purposes, Sun has divided its marketing area, involving eighteen states and the District of Columbia, into six regions, roughly as follows:

 (a) Middle Atlantic Region -- comprising eastern Pennsylvania, the larger portion of New Jersey, a small portion of New York, and all of Maryland, Virginia and the District of Columbia;

 (b) New York Region -- comprising practically all of New York, and small portions of Pennsylvania, New Jersey, Connecticut, Massachusetts and Vermont;

 (c) New England Region -- comprising the New England States exception those portions included in the New York Region;

 (d) Central Region -- comprising western Pennsylvania, eastern Ohio, West Virginia, and a small part of western New York;

 (e) Western Region -- comprising Michigan, eastern Indiana, western Ohio and northern Kentucky; and

 (f) Southeastern Region -- composed of portions of Florida.

 These regions are further subdivided into sixty-four districts and in some instances into branches within the district. The boundaries of a district do not necessarily follow state lines. Each district contains a district office, a warehouse or warehouses and distribution facilities.

 7. Sun's hierarchy of sales personnel in the market area is as follows:

 (a) At the top is the executive officer who is in charge of Sun's marketing organization. At present his title is vice president in charge of sales. He is assisted by a general sales manager, formerly called a coordinator of sales, who sometimes acts for the vice president in charge of sales in dealing with marketing activities;

 (b) In charge of each regional office is a regional manager who is the 'executive officer' of his region, and as such supervises Sun's marketing operations in that region. Assisting the regional manager is an assistant regional manager, a regional TBA manager and other sales personnel. Generally, company marketing policy is determined at meetings of regional managers and is put into effect by the regional managers in their respective regions through a chain of command from regional to district managers, to salesmen. Since 1939, the regional manager has been responsible for the execution of real estate leases with dealers. He is the final arbiter in determining whether Sun will do business with a dealer.

 (c) In charge of each district is a district manager who is the executive officer of his district. He is sometimes assisted by a motor products sales manager. Each district manager has authority to execute and terminate supply agreements with dealers but sometimes he is required to obtain the approval of the regional manager.

 (d) Each district has a number of motor products salesmen who regularly call on an assigned group of dealers to sell them Sun's products and sponsored TBA and to convey to them company policy. Salesmen are selected, hired, trained and discharged by the district manager with the approval of the regional manager. These salesmen receive instructions and directions principally from their respective district managers and/or district motor products sales managers at weekly sales meetings and in individual conferences with such superiors. They assist in the selecting and contacting of new dealers and sometimes participate in the cancellation of agreements with dealers. Pursuant to instructions, they relate to dealers the quota of motor oil and TBA they should purchase. In addition to their regular salary, they receive a commission if the stations assigned to them attain a certain ratio of the purchase of oil and gasoline. Sometimes their tenure of employment has been dependent in part upon the dealers maintaining such quotas.

 (e) Most of the regional offices, from time to time, also employ' Inspectors' to obtain information concerning the operation and physical condition of the stations selling Sun's products. The information sought is for the purpose of aiding Sun in determining whether the stations' sales approach their potential, and Sun's salesmen are using their best efforts to sell Sun's products and sponsored TBA.

 8. The main conduits through which petroleum products and TBA are distributed and sold to the consumer are the retail service stations located at sites adjacent to heavily traveled highways. *fn2" Suppliers maintain the bulk of the stock required for supplying the needs of the consumer because of the space limitations at service stations. The operators of the stations render a specialized service which is essential to drivers of automotive vehicles.

 9. Almost all gasoline and motor oil, and many items of TBA, are offered for sale under brand names. As a group, the consuming public has no definite knowledge of the quality of the petroleum products which it buys repeatedly in small quantities. It buys a particular branded product by reason of its preference for the brand based upon past experience, the reputation of the supplier, the honesty and good will of the dealer, or because of the convenient location of the station. Suppliers strive mightily to establish a public attachment to their individual brand. To this end Sun spends a large sum of money to advertise its products. For example, in 1954 it spent close to six million dollars on various advertising media. The name 'Sunoco' is well known to the motoring public in Sun's marketing area. 10. The principal product and big attraction at most service stations is gasoline, a virtual consumer necessity. It accounts for the largest part by far of the business of both Sun and its dealers in terms of dollars. Close to 90% of the gross intake of the average dealer is accounted for by the sale of gasoline. n3 Other products, such as motor oils, lubricants and TBA, although important, are secondary as far as drawing customers is concerned. For example, in 1949, Sun's sales were as follows: a. Gasoline $ 149,000,000 (88.7%) b. Motor oils and lubricants 9,500,000 ( 5.3%) c. TBA 9,750,000 ( 6.0%)


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