## Facts

- Standard Oil Company of California, through its subsidiary Standard Stations, sold gasoline and related products in a seven-state Western area, both through company-operated stations and independent dealers.
- Standard used “requirements contracts” and similar exclusive-dealing arrangements with independent service-station dealers, requiring dealers to buy all (or a stated minimum share) of their needs from Standard.
- The contracts were commonly tied to business advantages such as the use of Standard’s brand, equipment, or other support.
- By 1947, these contracts covered about $58 million in gross business, roughly 6.7–6.8% of total gasoline and related-product sales in the defined seven-state market.
- The United States alleged the arrangements violated § 3 of the Clayton Act by potentially substantially lessening competition or tending to create a monopoly.
- The district court found a § 3 violation and enjoined Standard from entering into or enforcing the exclusive-supply requirements contracts with independent dealers.
- Standard appealed directly to the Supreme Court.

## Issues

1. Whether Standard’s exclusive requirements contracts, covering about 6.7% of the relevant market, violated § 3 of the Clayton Act because their effect “may be to substantially lessen competition” or tend to create a monopoly.
2. Whether the contracts fell outside § 3 because many sales to California dealers involved products produced in California, allegedly limiting any interstate-commerce connection.

## Decision

- The Supreme Court affirmed the injunction against Standard.
- The Court held that § 3 is satisfied where exclusive dealing forecloses competition in a substantial share of the relevant line of commerce; proof of actual price increases or present competitive decline was not required.
- The Court concluded the quantified foreclosure shown by the government was substantial for § 3 purposes.
- The Court held the arrangements substantially affected interstate commerce because they restricted dealers from purchasing from out-of-state suppliers as well as local suppliers.

## Legal Principles

- Clayton Act § 3 reaches incipient competitive harms; the government need not prove actual market-wide price or output effects if the challenged exclusive dealing may substantially lessen competition.
- Exclusive requirements contracts violate § 3 when they foreclose competitors from access to a substantial share of the relevant outlets in the line of commerce.
- Substantiality under § 3 may be shown through quantitative foreclosure evidence, without a contract-by-contract showing of realized harm.
- The interstate-commerce element is met when exclusive dealing significantly constrains opportunities for out-of-state suppliers and thereby lessens competition in interstate as well as intrastate trade.

## Conclusion

The Court upheld an injunction against Standard’s exclusive requirements contracts, holding that § 3 of the Clayton Act prohibits exclusive dealing that forecloses a substantial share of the relevant market and that such arrangements may be regulated federally when they substantially affect interstate commerce.


Standard Oil Co. of Cal. v. United States, 337 U.S. 293 (1949)