State Oil Co v Khan OCTOBER TERM 1997 Syllabus STATE OIL CO v KHAN ET AL CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT No 96 871 Argued October 7 1997 Decided November 4 1997 Respondents agreement to lease and operate a gas station obligated them to buy gasoline from petitioner State Oil Company at a price equal to a suggested retail price set by State Oil less a specified profit margin required them to rebate any excess to State Oil if they charged customers more than the suggested price and provided that any decrease due to sales below the suggested price would reduce their margin Mter they fell behind in their lease payments and State Oil commenced eviction proceedings respondents brought this suit in federal court alleging in part that by preventing them from raising or lowering retail gas prices State Oil had violated 1 of the Sherman Act The District Court entered summary judgment for State Oil on this claim but the Seventh Circuit reversed on the basis of Albrecht v Herald Co 390 U S 145 152 154 in which this Court held that vertical maximum price fixing is a per se antitrust violation Although the Court of Appeals characterized Albrecht as unsound when decided and inconsistent with later decisions it felt constrained to follow that decision Held Albrecht is overruled Pp 10 22 a Although most antitrust claims are analyzed under a rule of reason under which the court reviews a number of relevant factors see e g Arizona v Maricopa County Medical Soc 457 U S 332 342 343 some types of restraints on trade have such predictable and pernicious anticompetitive effect and such limited potential for procompetitive benefit that they are deemed unlawful per se see e g Northern Pacific R Co v United States 356 U S 1 5 A review of this Court s pertinent decisions is relevant in assessing the continuing validity of the Albrecht per se rule See e g Kiefer Stewart Co v Joseph E Seagram Sons Inc 340 U S 211 213 maximum resale price fixing illegal per se United States v Arnold Schwinn Co 388 U S 365 379380 vertical nonprice restrictions illegal per se Continental T v Inc v GTE Sylvania Inc 433 U S 36 47 49 58 59 overruling Schwinn A number of this Court s later decisions have hinted that Albrecht s analytical underpinnings were substantially weakened by GTE Sylvania see e g Maricopa County supra at 348 n 18 324 Liquor Corp v Duffy 479 U S 335 341 342 Atlantic Richfield Co v USA Petroleum Co 495 U S 328 335 n 5 343 n 13 and there is a consid 4 Syllabus erable body of scholarship discussing the procompetitive effects of vertical maximum price fixing pp 10 15 b Informed by the foregoing decisions and scholarship and guided by the general view that the antitrust laws primary purpose is to protect interbrand competition see e g Business Electronics Corp v Sharp Electronics Corp 485 U S 717 726 and that condemnation of practices resulting in lower consumer prices is disfavored Matsushita Elec Industrial Co v Zenith Radio Corp 475 U S 574 594 this Court finds it difficult to maintain that vertically imposed maximum prices could harm consumers or competition to the extent necessary to justify their per se invalidation Albrecht s theoretical justifications for its per se rule that vertical maximum price fixing could interfere with dealer freedom restrict dealers ability to offer consumers essential or desired services channel distribution through large or specially advantaged dealers or disguise minimum price fixing schemeshave been abundantly criticized and can be appropriately recognized and punished under the rule of reason Not only are they less serious than the Albrecht Court imagined but other courts and antitrust scholars have noted that the per se rule could in fact exacerbate problems related to the unrestrained exercise of market power by monopolist dealers For these reasons and because Albrecht is irrelevant to ongoing Sherman Act enforcement see Copperweld Corp v Independence Tube Corp 467 U S 752 777 and n 25 and there are apparently no cases in which enforcement efforts have been directed solely against the conduct condemned in Albrecht there is insufficient economic justification for the per se rule Respondents arguments in favor of the rule that its elimination should require persuasive expert testimony establishing that it has distorted the market and that its retention is compelled by Toolson v New York Yankees Inc 346 U S 356 and Flood v Kuhn 407 U S 258 are unavailing Pp 15 19 c Albrecht does not deserve continuing respect under the doctrine of stare decisis Stare decisis is not an inexorable command particularly in the area of antitrust law where there is a competing interest in recognizing and adapting to changed circumstances and the lessons of accumulated experience See e g National Soc of Professional Engineers v United States 435 U S 679 688 Accordingly this Court has reconsidered its decisions construing the Sherman Act where as here the theoretical underpinnings of those decisions are called into serious question See e g GTE Sylvania supra Because Albrecht has been widely criticized since its inception and the views underlying it have been eroded by this Court s precedent there is not much of that decision to salvage See e g Neal v United States 516 U S 284 295 In 5 overruling Albrecht the Court does not hold that all vertical maximum price fixing is per se lawful but simply that it should be evaluated under the rule of reason which can effectively identify those situations in which it amounts to anticompetitive conduct The question whether respondents are entitled to recover damages in light of this Court s overruling of Albrecht should be reviewed by the Court of Appeals in the first instance Pp 20 22 93 F 3d 1358 vacated and remanded O CONNOR J delivered the opinion for a unanimous Court John Baumgartner argued the cause for petitioner With him on the briefs was Paul Kalin ich Acting Assistant Attorney General Klein argued the cause for the United States et al as amici curiae urging reversal With him on the brief were Acting Solicitor General Dellinger Deputy Solicitor General Wallace Deputy Assistant Attorney General Melamed Edward C DuMont Catherine G O Sullivan and David Seidman Anthony S DiVincenzo argued the cause and filed a brief for respondents Pamela Jones Harbour Deputy Attorney General of New York argued the cause for the state parties as amici curiae urging affirmance With her on the brief were Dennis C Vacco Attorney General of
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