Exxon Corp. v. Governor of Maryland

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 *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 *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 *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 *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 *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. Northwestern Iron & Metal Co., 335 U. S. 525, 536.13 Regardless of the ultimate economic *125efficacy of the statute, we have no hesitancy in concluding that it bears a reasonable relation to the State’s legitimate purpose in controlling the gasoline retail market, and we therefore reject appellants’ due process claim.

Ill

Appellants argue that the divestiture provisions of the Maryland statute violate the Commerce Clause in three ways: (1) by discriminating against interstate commerce; (2) by unduly burdening interstate commerce; and (3) by imposing controls on a commercial activity of such an essentially interstate character that it is not amenable to state regulation.

Plainly, the Maryland statute does not discriminate against interstate goods, nor does it favor local producers and refiners. Since Maryland’s entire gasoline supply flows in interstate commerce and since there are no local producers or refiners, such claims of disparate treatment' between interstate and local commerce would be meritless. Appellants, however, focus on the retail market, arguing that the effect of the statute is to protect in-state independent dealers from out-of-state competition. They contend that the divestiture provisions “create a protected enclave for Maryland independent dealers ... .” 14 As support for this proposition, they rely on the fact that the burden of the divestiture requirements falls solely on interstate companies. But this fact does not lead, either logically or as a practical matter, to a conclusion that the State is discriminating against interstate commerce at the retail level.

As the record shows, there are several major interstate marketers of petroleum that own and operate their own retail *126gasoline stations.15 These interstate dealers, who compete directly with the Maryland independent dealers, are not affected by the Act because they do not refine or produce gasoline. In fact, the Act creates no barriers whatsoever against interstate independent dealers; it does not prohibit the flow of interstate goods, place added costs upon them, or distinguish between in-state and out-of-state companies in the retail market. The absence of any of these factors fully distinguishes this case from those in which a State has been found to have discriminated against interstate commerce. See, e. g., Hunt v. Washington Apple Advertising Comm’n, 432 U. S. 333; Dean Milk Co. v. Madison, 340 U. S. 349. For instance, the Court in Hunt noted that the challenged state statute raised the cost of doing business for out-of-state dealers, and, in various other ways, favored the in-state dealer in the local market. 432 U. S., at 351-352. No comparable claim can be made here. While the refiners will no longer enjoy their same status in the Maryland market, in-state independent dealers will have no competitive advantage over out-of-state dealers. The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.16

*127Appellants argue, however, that this fact does show that the Maryland statute impermissibly burdens interstate commerce. They point to evidence in the record which indicates that, because of the divestiture requirements, at least three refiners will stop selling in Maryland, and which also supports their claim that the elimination of company-operated stations will deprive the consumer of certain special services. Even if we assume the truth of both assertions, neither warrants a finding that the statute impermissibly burdens interstate commerce.

Some refiners may choose to withdraw entirely from the Maryland market, but there is no reason to assume that their share of the entire supply will not be promptly replaced by other interstate refiners. The source of the consumers’ supply may switch from company-operated stations to independent dealers, but interstate commerce is not subjected to an impermissible burden simply because an otherwise valid regulation causes some business to shift from one interstate supplier to another.

The crux of appellants’ claim is that, regardless of whether the State has interfered with the movement of goods in interstate commerce, it has interfered “with the natural functioning of the interstate market either through prohibition or through burdensome regulation.” Hughes v. Alexandria Scrap Corp., 426 U. S. 794, 806. Appellants then claim that the statute “will surely change the market structure by weakening the independent refiners . ...”17 We cannot, however, accept appellants’ underlying notion that the Commerce Clause protects the particular structure or methods of operation in a retail market. See Breard v. Alexandria, 341 U. S. 622. As indicated by the Court in Hughes, the Clause protects the interstate market, not particular interstate firms, from prohib*128itive or burdensome regulations. It may be true that the consuming public will be injured by the loss of the high-volume, low-priced stations operated by the independent refiners, but again that argument relates to the wisdom of the statute, not to its burden on commerce.

Finally, we cannot adopt appellants' novel suggestion that because the economic market for petroleum products is nationwide, no State has the power to regulate the retail marketing of gas. Appellants point out that many state legislatures have either enacted or considered proposals similar to Maryland's,18 and that the cumulative effect of this sort of legislation may have serious implications for their national marketing operations. While this concern is a significant one, we do not find that the Commerce Clause, by its own force, pre-empts the field of retail gas marketing. To be sure, “the Commerce Clause acts as a limitation upon state power even without congressional implementation.'' Hunt v. Washington Apple Advertising Comm’n, supra, at 350. But this Court has only rarely held that the Commerce Clause itself pre-empts an entire field from state regulation, and then only when a lack of national uniformity would impede the flow of interstate goods. See Wabash, St. L. & P. R. Co. v. Illinois, 118 U. S. 557; see also Cooley v. Board of Wardens, 12 How. 299, 319. The evil that appellants perceive in this litigation is not that the several States will enact differing regulations, but rather that they will all conclude that divestiture provisions are warranted. The problem thus is not one of national uniformity. In the absence of a relevant congressional declaration of policy, or a showing of a specific discrimination against, or burdening *129of, interstate commerce, we cannot conclude that the States are without power to regulate in this area.

IV

Exxon, Phillips, Shell, and Gulf contend that the requirement that voluntary allowances be extended to all retail service stations is either in direct conflict with § 2 (b) of the Clayton Act, as amended by the Robinson-Patman Act, or, more generally, in conflict with the basic federal policy in favor of competition, which is reflected in the Sherman Act as well as § 2 (b). In rejecting these contentions, the Maryland Court of Appeals noted that the Maryland statute covered two different competitive situations.19 In the first situation a competing retailer lowers its price on its own, and the oil company gives its own retailer a price reduction to enable it to meet that lower price. In the second situation, the competing retailer’s lower price is subsidized by its supplier, and the oil company gives its own retailer a price reduction to meet the competition. The good-faith defense of § 2 (b) is clearly not available to the oil company in the first situation because the voluntary allowance would not be a response to competition from another oil company. See FTC v. Sun Oil Co., 371 U .S. 505. In the second situation the law is unsettled,20 but the *130Court of Appeals concluded that the defense would also be unavailable. The court therefore reasoned that there was no conflict between the Maryland statute and § 2 (b), since the statute did not apply to any allowance protected by federal law. In our opinion, it is not necessary to decide whether the § 2 (b) defense would apply in the second situation, for even assuming that it does, there is no conflict between the Maryland statute and the Robinson-Patman Act sufficient to require pre-emption.

Appellants’ first argument is that compliance with the Maryland statute may cause them to violate the Robinson-Patman Act. They stress the possibility that the requirement that a price reduction be made on a statewide basis may result in discrimination between customers who would otherwise receive the same price, and they describe various hypothetical situations to illustrate this point.21 But, “[i]n this as in other areas of coincident federal and state regulation, the 'teaching of this Court’s decisions . . . enjoin[s] seeking out conflicts between state and federal regulation where none clearly exists.’ Huron Cement Co. v. Detroit, 362 U. S. 440, 446.” Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35, 45. See also State v. Texaco, Inc., 14 Wis. 2d 625, 111 N. W. 2d 918 (1961). The Court in Seagram & Sons went on to say that "[a]lthough it is possible to envision circumstances under which price dis-*131criminations proscribed by the Robinson-Patman Act might be compelled by [the state statute], the existence of such potential conflicts is entirely too speculative in the present posture of this case” to warrant pre-emption. 384 U. S., at 46. That counsel of restraint applies with even greater force here. For even if we were to delve into the hypothetical situations posed by appellants, we would not be presented with a state statute that requires a violation of the Robinson-Patman Act. Instead, the alleged “conflict” here is in the possibility that the Maryland statute may require uniformity in some situations in which the Robinson-Patman Act would permit localized discrimination.22 This sort of hypothetical conflict is not sufficient to warrant pre-emption.

Appellants, however, also claim that the Robinson-Patman Act does not simply permit localized discrimination, but actually establishes a federal right to engage in discriminatory pricing in certain situations. They argue that this federal right may be found directly in § 2 (b), or, more generally, in our Nation's basic policy favoring competition as reflected in the Sherman Act as well as § 2 (b). We find neither argument persuasive.

The proviso in § 2 (b) of the Clayton Act, as amended by *132the Robinson-Patman Act, is merely an exception to that statute’s broad prohibition against discriminatory pricing. It created no new federal right; quite the contrary, it defined a specific, limited defense, and even narrowed the good-faith defense that had previously existed.23 To be sure, the defense is an important one, and the interpretation of its contours has been informed by the underlying national policy favoring competition which it reflects.24 But it is illogical to infer that by excluding certain competitive behavior from the general ban against discriminatory pricing, Congress intended to preempt the States’ power to prohibit any conduct within that exclusion. This Court is generally reluctant to infer preemption, see, e. g., De Canas v. Bica, 424 U. S. 351, 357-358, n. 5; Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U. S. 117, 127, and it would be particularly inappropriate to do so in this case because the basic purposes of the state statute and the Robinson-Patman Act are similar. Both reflect a policy choice favoring the interest in equal treatment of all customers *133over the interest in allowing sellers freedom to make selective competitive decisions.25

Appellants point out that the Robinson-Patman Act itself may be characterized as an exception to, or a qualification of, the more basic national policy favoring free competition,26 and argue that the Maryland statute “undermin[es]” the competitive balance that Congress struck between the Robinson-Patman and Sherman Acts.27 This is merely another way of stating that the Maryland statute will have an anticompetitive effect. In this sense, there is a conflict between the statute and the central policy of the Sherman Act — our “charter of economic liberty.” Northern Pacific R. Co. v. United States, 356 U. S. 1, 4. Nevertheless, this sort of conflict cannot itself constitute a sufficient reason for invalidating the Maryland statute. For if an adverse effect on competition were, in and of itself, enough to render a state statute invalid, the States’ power to engage in economic regulation would be effectively destroyed.28 We are, therefore, satisfied that neither the broad implications of the Sherman Act nor the Robinson-Patman Act can fairly *134be construed as a congressional decision to pre-empt the power of the Maryland Legislature to enact this law.

The judgment is affirmed.

So ordered.

Mr. Justice Powell took no part in the consideration or decision of these cases.

The pertinent provisions of the statute are as follows:

“(b) After July 1, 1974, no producer or refiner of petroleum products shall open a major brand, secondary brand or unbranded retail service station in the State of Maryland, and operate it with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation, managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.
“(c) After July 1, 1975, no producer or refiner of petroleum products shall operate a major brand, secondary brand, or unbranded retail service station in the State of Maryland, with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.
“(d) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall extend all voluntary allowances uniformly to all retail service station dealers supplied.” Md. Code Ann., Art. 56, § 157E (Supp. 1977).

“Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-faeie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.” 15 U. S. C. § 13 (b) (1976 ed.).

As used by the Court of Appeals and in this opinion, “company-operated station” refers to a retail service station operated directly by employees of a refiner or producer of petroleum products (or a subsidiary). 279 Md., at 419 n. 2, 370 A. 2d, at 1108 n. 2.

For instance, Exxon has used its company-operated stations to introduce such marketing ideas as partial self-service, in-bay car-wash units, and motor-oil vending machines. App. 205-209.

Exxon presented nine arguments, both constitutional and statutory. It contended that the statute was arbitrary and irrational under the Due Process Clause; constituted an unconstitutional taking of property without just compensation; denied it, in two distinct ways, the equal protection of the laws; constituted an unlawful delegation of legislative authority; was unconstitutionally vague; discriminated against and burdened interstate commerce; and was pre-empted by the Robinson-Patman Act and the Federal Emergency Petroleum Allocation Act of 1973. Id,., at T4-16.

These plaintiffs are Continental Oil Co. (and its subsidiary Kayo Oil Co.), Commonwealth Oil Refining Co. (and its subsidiary Petroleum Marketing Corp.), and Ashland Oil Co.

These plaintiffs are Phillips Petroleum Co., Shell Oil Co., and Gulf Oil Corp.

See 279 Md., at 445-446, 370 A. 2d, at 1321-1122.

Id., at 418-420, 370 A. 2d, at 1107-1108.

The Court of Appeals stated that the statute “would not in any way restrict the free flow of petroleum products into or out of the state.” Id., at 431, 370 A. 2d, at 1114. While the evidence in the record does not directly support this assertion, it is certainly a permissible inference to be drawn from the evidence, or lack thereof, presented by the appellants. See Reply Brief for Appellants in No. 77-64, p. 7.

See n. 5, supra.

Indeed, although the Circuit Court’s decision rested primarily on the substantive due process claim, only appellants Continental Oil and its subsidiary, Kayo Oil, press that claim here.

It is worth noting that divestiture is by no means a novel method of economic regulation, and is found in both federal and state statutes. To date, the courts have had little difficulty sustaining suoh statutes against a substantive due process attack. See, e. g., Paramount Pictures, *125Inc. v. Longer, 23 F. Supp. 890 (ND 1938), dismissed as moot, 306 U. S. 619; see generally Comment, Gasoline Marketing Practices and “Meeting Competition” under the Robinson-Patman Act, 37 Md. L. Rev. 323, 329 n. 44 (1977).

Brief for Appellants in No. 77-10, p. 27.

For instance, as of July 1, 1974, such interstate, nonrefining or non-producing, companies as Sears, Roebuck & Co., Hudson Oil Co., and Pantry Pride operated retail gas stations in Maryland. App. 190-191. Hudson has, however, recently acquired a refinery. See Brief for Appellants in No. 77-10, p. 33 n. 17.

If the effect of a state regulation is to cause local goods to constitute a larger share, and goods with an out-of-state source to constitute a smaller share, of the total sales in the market — as in Hunt, 432 U. S., at 347, and Dean Milk, 340 U. S., at 354 — the regulation may have a discriminatory effect on interstate commerce. But the Maryland statute has no impact on the relative proportions of local and out-of-state goods sold in Maryland and, indeed, no demonstrable effect whatsoever on the interstate flow of goods. The sales by independent retailers are just as much a part of *127its flow of interstate commerce as the sales made by the refiner-operated stations.

Reply Brief for Appellants in No. 77-64, p. 7.

California, Delaware, the District of Columbia, and Florida have adopted laws restricting refiners' operation of service stations. Similar proposals have been before the legislatures of 32 other jurisdictions. See Brief for Appellants in No. 77-10, p. 45 nn. 21 and 22; Brief for the State of California as Amicus Curiae.

The Court of Appeals also noted that there is a third competitive situation — a discriminatory price reduction made to meet an equally low price offered to the same buyer by a competing seller. In the lower court’s view, this situation clearly fell within the § 2 (b) defense, but was not encompassed by the term “voluntary allowances.” 279 Md., at 452, 370 A. 2d, at 1125.

The Court left the question open in Sun Oil, 371 U. S., at 512 n. 7, and the lower courts have reached conflicting results. Compare Enterprise Industries v. Texas Co., 136 F. Supp. 420 (Conn. 1955), rev’d on other grounds, 240 F. 2d 457 (CA2 1957), cert. denied, 353 U. S. 965, with Bargain Car Wash, Inc. v. Standard Oil Co. (Indiana), 466 F. 2d 1163 (CA7 1972).

Appellants argue that compliance with the “voluntary allowance” provision may expose them to both primary-line and secondary-line liability under § 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act. With respect to primary-line liability, they pose the hypothesis of a seller who responds to a competitor’s lower price in Baltimore. Under the statute, he must lower his prices throughout the State, even though the competitive market justifying that price is confined to Baltimore. Appellants then argue that a competitor operating only in Salisbury, Md., may be injured by this price reduction. But an injury flowing from a uniform price reduction is not actionable under the Robinson-Patman Act, which only prohibits price discrimination. See F. Rowe, Price Discrimination Under the Robinson-Patman Act 93 (1962).

Thus, appellants’ claim that the statute will create secondary-line liability is premised on the possibility that price differentials may arise between stations located in Maryland and those in neighboring States. With respect to this claim, it is sufficient to note that, although the Maryland statute may affect the business decision of whether or not to reduce prices, it does not create any irreconcilable conflict with the Robinson-Patman Act. The statute may require that a voluntary allowance that could legally have been confined to the Baltimore area be extended to Salisbury. We may then assume, arguendo, that the Robinson-Patman Act could require a further extension of the allowance into the neighboring State. The possible scope of the voluntary allowance may, therefore, have an impact on the company’s decision on whether or not to meet the competition in Baltimore, but the state statute does not in any way require discriminatory prices. See also n. 20, supra.

Section 2 of the original Clayton Act, 38 Stat. 730, established an absolute defense for a seller’s reductions in price made “in good faith to meet competition . . . .” The legislative history of the Robinson-Patman Act shows that § 2 (b) was intended to limit that broad defense. See Standard Oil Co. v. FTC, 340 U. S. 231, 247-249, n. 14.

In holding that § 2 (b) created a substantive, rather than merely a procedural, defense, the Court explained:

“The heart of our national economic policy long has been faith in the value of competition. In the Sherman and Clayton Acts, as well as in the Robinson-Patman Act, 'Congress was dealing with competition, which it sought to protect, and monopoly, which it sought to prevent.’ Staley Mfg. Co. v. Federal Trade Comm’n, 135 F. 2d 453, 455. We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts. It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor.” Standard Oil Co., supra, at 248-249 (footnote omitted).

Just as the political and economic stimulus for the Robinson-Patman Act was the perceived need to protect independent retail stores from “chain stores,” see U. S. Department of Justice, Report on the Robinson-Patman Act ll-L-124 (1977), so too the Maryland statute was prompted by the perceived need to protect independent retail service station dealers from the vertically integrated oil companies. 279 Md., at 422, 370 A. 2d, at 1109.

Indeed, many have argued that the Robinson-Patman Act is fundamentally anticompetitive and undermines the purposes of the Sherman Act. See generally U. S. Department of Justice Report, supra.

Brief for Appellants in No. 77-10, p. 80.

Appellants argue that Maryland has actually regulated beyond its boundaries, pointing to the possibility that they may have to extend voluntary allowances into neighboring States in order to avoid liability under the Robinson-Patman Act. See nn. 21 and 22, supra. But this alleged extra-territorial effect arises from the Robinson-Patman Act, not the Maryland statute.