Appendix — Exxon Corp. v. Governor of Maryland

OCTOBER TERM, 197@ ‘

e710

om. CORPORATION anp

PHILLIPS PETROLEUM COMPANY, Appellants,

Vv.

GOVERNOR OF THE STATE OF

MARYLAND, et AL., Appellees,

No.

CONTINENTAL OIL COMPANY anv

KAYO OIL COMPANY, Appellants,

v.

GOVERNOR OF THE STATE OF

MARYLAND, eT AL., Appellees,

No.

SHELL OIL COMPANY, Appellant,

Ve

GOVERNOR OF THE STATE OF

MARYLAND, et AL., Appellees,

No.

GULF OIL CORPORATION, Appellant,

Vv.

GOVERNOR OF THE STATE OF

MARYLAND, et AL., Appellees,

No.

ASHLAND OIL, INC., COMMONWEALTH OIL

REFINING COMPANY, INC., anp PETROLEUM

MARKETING CORPORATION, Appellants,

v.

GOVERNOR OF THE STATE OF

MARYLAND, et AL., Appellees.

On APPEAL FROM THE CouRT OF APPEALS OF MARYLAND

JOINT APPENDIX TO JURISDICTIONAL STATEMENTS

(See inside cover for Counsel)

ee

Of Counsel:

BERNARD J. CAILLOUET

RicHarp P. DELANEY

Lauric J. CUSACK

Exxon Corporation

P.O. Box 60626

New Orleans, Louisiana 70160

Of Counsel:

Jerry MILLER ‘

PHiLuips PeTroLeum COMPANY

P.O. Box 31690

Amarillo, Texas 79120

Of Counsel:

A. M. Minott

Shell Oil Company

One Shell Plaza

Houston, Texas 77002

Of Counsel

ArLoe W. Mayne

Ashland Oil, Inc.

P.O. Box 391

Ashland, Kentucky 41101

Wituiam L. Marsury

Lewis A. NoonNBERG

Davip F. Turaro

Piper & MARBURY

2000 First Maryland Building

25 South Charles Street

Baltimore, Maryland 21201

Ropert L. Stern

Mayer, Brown & PLatr

231 South LaSalle Street

Chicago, Illinois 60604

Attorneys for Appellant

Exxon Corporation

J. Epwarp Davis

Danie. T. Donerrty, Jr.

WEINBERG & GREEN

40i Washington Avenue

Suite 503

Towson, Maryland 21204

Attorneys for Appellant

Phillips Petroleum Company

Wicsaur D. Preston, Jr.

STANLEY B. Ronp

WHITEFORD, TAYLOR, PRESTON,

Trima_Le & JOHNSTON

IBM Building, 100 E. Pratt Street

Baltimore, Maryland 21201

Attorneys for Continental Oil

Company and Kayo Oil Company

WILLIAM SIMON

Rosert G. ABRAMS

Mark W. PENNAK

Howrey & Simon

1730 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Attorneys for Shell Oil Company

LAWRENCE S. GREENWALD

Barry F. Rosen

Gorpon, FEInBLATT, ROTHMAN,

HorrserGcer & HOLLANDER

1200 Garrett Building

Baltimore, Maryland 21202

Attorneys for Gulf Oil Corporation

Davip GINSBURG

Frep W. DrocuLa

James E. Wesner

GinsBuRG, FeLpMAN & Bress

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Attorneys for Ashland Oil, Inc.,

Commonwealth Oil Refining

Compuny, Inc. and

Petroleum Marketing Corporation

CONTENTS OF JOINT APPENDIX

Appendix A

Opinion of the Court of Appeals of Mary-

land dated February 18, 1977 .............-..

Appendix B

Supplemental Opinion of the Court of

Appeals of Maryland dated April 13,

Ee secihlibaiiathdusnadiainiidndmuamasintiscimanenees

Appendix C

Opinion of the Circuit Court for Anne

Arundel County dated October 14, 1975

Appendix D

Opinion of the Circuit Court for Anne

Arundel County dated January 27, 1976

Appendix E

Notices of Appeal

Exxon Corporation and Phillips Petroleum

COMPANY ..00-.ccrereccsressesccccsescrerseoresresersssooess

Continental Oil Company and Kayo Oil

COTBRTEY coccrecoscrsescescscsccesecsccesosorscsscsocsecesee

Shell Oi] Company. ...........:ccccssessceeereeeeees sestiein

Gulf Oil Corporation ...........cccccccseeereeeseeeeeees

Patatamd GlR, TRC. ccccccsccccccccccsccccssocececcsscossesscese

Appendix F

Maryland Gasoline Products Marketing

Act, Md. Anno. Code, Commercial Law

Article, Section 11-301 et seq. ........::0-+

Maryland Unfair Sales Act, Md. Anno.

Code, Commercial Law Article, Section

11-401 €8 BOG. cecesecocccccccsersccscscseccccccccssorsesees

PAGE

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49a

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155a

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APPENDIX A

In the Court of Appeals of Maryland

No. 10

September Term, 1976

Governor of the State of Maryland, et al.

v.

Exxon Corporation, et al.

Argued before Murphy, C. J., and Smith, Digges, Levine

and Eldridge, JJ., and James C. Morton, Jr., and’

Ridgely P. Melvin, Jr., Associate Judges of the Court

of Special Appeals, specially assigned.

Decided February 18, 1977

ELDRIDGE, J.:

In this case we are presented with several questions

concerning the constitutionality of Chapter 854 of the

Laws of Maryland of 1974, as amended by Chapter 608

of the Laws of 1975, and codified in Maryland Code

(1957, 1972 Repl. Vol., 1976 Cum. Supp.), Art. 56, § 157E.

These chapters added the following provisions to the

Motor Fuel Inspection Law (italicized portions are those

added by Chapter 608 of the Laws of 1975):

“(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service

2a

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.

“(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

‘“(F) Every producer, refiner or wholesaler of

petroleum products shall apportion uniformly all

gasoline and special fuels to all retail service

station dealers during periods of shortages on an

equitable basis, and shall not discriminate among

the dealers in their allotments.

“(G) The Comptroller may adopt rules or

regulations defining the circumstances in which a

producer or refiner temporarily may operate a

previously dealer-operated station.

‘“(H) The Com weer may permit reasonabie

exceptions to the divestiture dates specified by this

section after considering all of the relevant facts

and reaching reasonable conclusions based upon

those facts.”

ae

3a

In addition to the authority granted in Paragraphs G

and H to promulgate rules and regulations for the

temporary operation of retail service stations by

producers and refiners, and to permit reasonable

exceptions to the specified divestiture dates, see 2

Maryland Register 228, the Comptroller has the power

generally to promulgate rules and regulations for the

administration of the Motor Fuel Inspection Law, Art.

56, §157B(a). Additionally, the Comptroller may direct

those marketing petroleum products in violation of the

Motor Fuel Inspection Law or regulations adopted

pursuant thereto to cease such violations. If the

violations should continue, the Comptroller shall refer

the matter to the Attorney General who is authorized to

apply to the circuit courts for an injunction against the

continuance of the violations, Art. 56, § 157B(b). There

are also criminal penalties for violation of the Motor

Fuel Inspection Law, Art. 56, § 157K.

Chapter 854 was signed into law on May 31, 1974,

effective July 1, 1974. On June 17, 1974, Exxon

Corporation instituted an action in the Circuit Court for

Anne Arundel County seeking a declaratory judgment

pursuant to the Maryland Uniform Declaratory Judg-

ments Act, Code (1974), § 3-401 et seg. of the Courts and

Judicial Proceedings Article, that Chapter 854 be

declared unconstitutional and invalid. Additionally,

Exxon sought injunctive relief prohibiting eni:orcement

of Ch. 854. Defendants in the action were the Governor

of Maryland, the Attorney General of Maryland, and

the Comptroller of the Treasury of Maryland.

Thereafter Continental Oil Company and its subsi-

diary Kayo Oil Company, Shell Oil Company, Gulf Oil

Corporation, Phillips Petroleum Company, Common-

wealth Oil Refining Company, Inc. and its subsidiary

Petroleum Marketing Corporation, and Ashland Oil,

Inc., filed substantially similar actions, and all actions

were consolidated for trial. The plaintiffs either directly

or through their subsidiaries are all engaged in the

direct retail marketing of petroleum products in the

state of Maryland. All, with the exception of Common-

4a

wealth and Ashland, are large multi-national, fully

integrated oil companies engaged in the production,

refining, transportation and marketing of petroleum

products. Commonwealth is a refiner dependent solely

upon foreign crude oil supplies, and markets gasoline

through its wholly owned subsidiary, Petroleum Mar-

keting Corporation. Ashland is primarily a refiner and

marketer of petroleum products, but does engage in

some limited production of crude oil.' Additionally, four

independent retail dealers of Crown Central Petroleum

Corporation were permitted to appear in support of the

Act as amici curiae.

The substance of the oil companies’ attack on the

validity of Chapter 854 is fairly represented by the

allegations in Exxon’s complaint. The Act was chal-

lenged on several grounds. Exxon alleged that the Act

did not bear a real and substantial relationship to the

health, safety, morals or welfare of the people of

Maryland and thus denied it due process of law in

violation of Art. 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution; that the Act discriminates against

and unduly burdens interstate commerce and is invalid

under the Commerce Clause, Art. 1, §8 of the United

States Constitution; that the Act constituted a taking of

its investment in retail service stations without just

compensation in violation of Art. III, §40 of the

Maryland Constitution and the just compensation

clause of the Fifth Amendment to the United States

Constitution; that the Act, in prohibiting only produc-

ers and refiners of petroleum produ ts from engaging in

the retail sale of gasoline, denied them the equal

protection of the laws in violation of Art. 23 and the

Fourteenth Amendment; and that the provisions of the

Act authorizing the Comptroller to issue rules and

regulations permitting exceptions to the divestiture

dates and allowing temporary operation of retail service

stations by producers and refiners failed to set forth

' The plaintiffs are hereafter sometimes referred to as “the

oil companies.”

5a

any standards to guide the Comptroller, and thus

constituted an unlawful delegation of legislative author-

ity in violation of Art. 8 of the Maryland Declaration of

Rights. Additionally, it was alleged that the provision

of the Act providing for equitable allocation of petro-

leum products was in conflict with the Federal Emer-

gency Petroleum Allocation Act of 1975, 15 U.S.C. 751

et seq., that the provision of the Act requiring uniform

“voluntary allowances” was in conflict with the

Robinson-Patman Act, 15 U.S.C. 13, and that, therefore,

both provisions were invalid under the Supremacy

Clause of Art. VI of the United States Constitution.

Finally, it was alleged that certain provisions of the

are void for vagueness. ,

On May 5, 1975, the circuit court, after a pre-trial

conference, entered an order prohibiting the defendants

from enforcing the provisions of Chapter 854 against

the plaintiffs while the cases were pending. Plaintiffs

were ordered not to open any new retail service stations

operated with company personnel nor to convert

existing retail service stations to direct company

operation without first notifying defendants of their

intention to do so and reasons therefor. Motions for

partial summary judgment were then filed by Exxon,

Shell and Gulf with respect to those provisions of the

Act requiring uniform “voluntary allowances” (Para-

graph D) and uniform allocation of products during

periods of shortages (Paragraph F) on the ground that

both were in conflict with federal law. The motion was

granted with respect to Paragraph D on October 14,

1975. The case then proceeded to trial on the remaining

issues.

Extensive evidence was presented at trial relating to

the nature of the retail marketing of gasoline and

petroleum products in Maryland and the alleged effect

that the Act would have on the industry. Oil company

officials, either by live testimony or by affidavits,

testified that the Act would have an adverse effect

insofar as the consumer is concerned. They testified

that by prohibiting producers and refiners from

6a

operating retail service stations, producers and refiners

would lose the necessary control over operations to

guage accurately consumer preferences for such innova-

tive features as self-service stations, car wash facilities,

and total car care service facilities offering a national

guarantee, thus allegedly depriving the consumers in

Maryland of the wide variety of automotive services

now available. They also testified that company

operated stations? serve as training centers for inde-

pendent dealers, insuring that consumers will be served

by efficient, courteous and knowledgeable personnel at

non-company operated stations. Additionally, execu-

tives of the three companies who market solely through

company operated stations asserted that their type of

low price-high volume stations could not be economi-

cally run with non-company personnel, and that, in all

probability, they would be forced to withdraw from the

Maryland market if the Act were to become effective.

Four economists, qualified as expert witnesses, also

testified on behalf of the oil companies in opposition

to the Act. In general, they believed the Act would

reduce competition and would therefore be detrimental

to the interests of the consumer. This reduction of

competition would occur because, in their view, the Act

would inhibit new competitors from entering the

market, force existing, highly aggressive independent

marketers such as Petroleum Marketing Corporation

and Commonwealth out of the market, and would also

limit the variety of auxiliary services available to

consumers by discouraging tests of innovative market-

ing techniques.

The State presented as its expert witness Dr. James

M. Patterson, a professor of Business Administration,

who is the author of two books on gasoline marketing.

2 As used 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 of a refiner or producer. It does not refer to retail

service stations operated by a company engaged only in the

marketing of petroleum products.

7a

He testified that in his opinion the Act would actually

enhance competition in gasoline marketing. Elimina-

tion of company operated stations would preserve

“intertype competition,” which he described as competi-

tion among the various types of competitors in the

marketplace such as private brand, non-integrated, and

major brand marketers. On the other hand, increased

company operation of service stations would, in his

view, enable major integrated oil companies to use

increased profits, resulting from the recent increases in

crude oil prices, to drive various “price competitors”

from the market as well as divert available gasoline

supplies from independent, unbranded marketers. Such

actions would, eventually, reduce overall competition in

gasoline marketing. Evidence was also adduced by the

State to show that several partially or fully integrated

oil companies planned either to increase the number of

company operated stations or to convert all stations to

company operations. This, the State argued, tended to

support Dr. Patterson’s opinion that the major oil

companies would seek to reduce competition among

gasoline marketers by reducing the number of competi-

tors.

Significant evidence concerning the history and

purpose of Chapter 854 was also presented. On June 13,

1973, the Governor requested that the Comptroller

conduct a study of gasoline retailing in Maryland. The

purpose of the study was to determine if the then

existing shortage of fuel was real or contrived, and also

to determine whether company owned and operated

service stations were receiving larger allocations of

gasoline than dealer operated or independent stations.

This request was motivated by the large number of

complaints received by the Governor’s office concerning

the availability of gasoline, and the fact that some

brands of gasoline appeared to be available in unlim-

ited quantities while other brands were available only

in limited quantities. On June 29, 1973, questionnaires

prepared by the Gasoline Tax Division of the Comp-

troller’s office were sent to registered gasoline service

8a

stations in the state. The results of this survey were

tabulated, and a written analysis of the survey entitled

“Results and Analysis of Service Station Dealers

Questionnaire” was submitted to the Governor on

September 6, 1973.

The results of the survey were tabulated according to

the type of service station responding to the question-

naire. Service stations were divided into four categories:

retail service stations leased to a dealer by a major oil

company; independently owned stations operated under

a major brand; unbranded stations; and company

operated stations. According to the survey, company

operated stations were “either unrestricted in their

purchases or were allocated 100% of their needs.”

Independently owned stations operated under a major

brand name, however, were characterized as the “most

abused” category, with a wide fluctuation in the

percentage allocation based upon prior year purchases.

According to the report, many were forced to close or

restrict hours of operation because of decreased product

availability. Unbranded stations and major stations

leased to dealers fared better than independently owned

stations, but both categories experienced reduced

allocations from suppliers. The report concluded that

company operated stations “were virtually unaffected

insofar as gasoline availability was concerned” while

both branded and unbranded independents experienced

“the greatest difficulty in obtaining gasoline” and the

“greatest cost per gallon increase.”

Subsequent to submission of the report to the

Governor, and after several discussions with the

Governor, the Comptroller’s office forwarded proposed

legislation to the Governor on January 7, 1974,

designed to correct the inequities in the distribution and

pricing of gasoline reflected by the survey. Bills

identical to the proposed legislation drafted by the

Comptroller’s office were introduced in both houses of

the General Assembly.

9a

The bills were then referred to the Senate Economic

Affairs Committee and the House Economic Matters

Committee, and both committees held public hearings

on the bills. Representatives of the major oil companies

appeared at both hearings in opposition to the proposed

legislation. They denied allegations that the shortage of

gasoline was contrived and that company operation of

service stations promoted inequitable product alloca-

tion, cancellation of dealer leases and control of retail

prices. The oil company representatives believed that

implementation of the legislation would decrease

competition and would therefore be detrimental to the

interests of Maryiand consumers. Proponents of the

bills also appeared at the hearings, including a

representative of the Greater Washington/Maryland

Service Station Association. He cited several recent

examples of cancellations of dealer leases and conver-

sions to company operation, as well as reduced

allocation of products to dealers, to support his

allegations that the major oil companies intended to

control and monopolize retail marketing of gasoline by

reducing and eliminating competition from independent

dealers. Furthermore, he referred to a congressional

report on the federal Petroleum Allocation Act express-

ing a similar concern over increased invoivement of

major vil companies in the retail marketing of gasoline.

See Conference Report No. 93-628, 93d Cong., 1st Sess..,

reprinted in [1973] U. S. Code Cong. & Ad. News, 2688,

2707. The Comptroller also appeared in support of the

Act, and submitted copies of his report and analysis of

the dealer questionnaires to both committees.

The House and Senate Committees reported favora-

bly on the bills. Both bills were amended by the

removal of a prohibition against wholesalers operating

retail service stations and by the addition of the

provision authorizing the Comptroller to adopt rules

and regulations permitting temporary operation of

stations by producers and refiners. In addition, the

Senate bill was amended so as to authorize the

Comptroller to allow reasonable exceptions to the

10a

divestiture dates specified in the bill. Both bills were

then passed during the 1974 session of the General

Assembly and submitted to the Governor for his

approval. The Governor held a special veto hearing on

the bills at which both proponents and opponents again

testified. Thereafter, the House bill was vetoed, Laws of

Maryland of 1974, pp. 3137-3138, and the Senate bill

was signed into law by the Governor, becoming

Chapter 854 of the Laws of Maryland of 1974.

At the conclusion of the trial, the circuit court filed a

decree declaring that Chapter 854 of the Laws of 1974

and Chapter 608 of the Laws of 1975 were unconstitu-

tional and void. An injunction was also filed, enjoining

the defendants from enforcing the statutes. Although

the circuit court’s holding was based primarily on the

ground that the Act violated the due process clauses,

the court also indicated that the Act was invalid for

several other reasons raised by the oil companies. The

defendants appealed from the judgment to the Court of

Special Appeals, and we issued a writ of certiorari prior

to a decision by the Court of Special Appeals.

On this appeal, the oil companies reiterate their

challenge to the Act on all of the constitutional grounds

raised below.

(1) Due Process

The oil companies’ main attack upon the statute is on

so-called “substantive due process” grounds. They

contend, as the trial court held, that the divestiture

provisions of the Act (Paragraphs B and C) are an

invalid exercise of the State’s police power in violation

of the Due Process Clause of the Fourteenth Amend-

ment and Art. 23 of the Maryland Declaration of

Rights.°

This Court has on numerous occasions in recent years

discussed the standards applicable when the constitu-

3 Art. 23 of the Maryland Declaration of Rights provides

that “[njo man ought to be. . . deprived of his life, liberty or

property, but by the judgment ‘of his peers, or by the Law of

the land.” As we pointed out last term in Westchester West

lla

tionality of economic regulatory legislation is chal-

lenged on substantive due process grounds. Westchester

West No. 2 v. Mont. Co., 276 Md. 448, 348 A.2d 856

(1975); Steuart Petroleum Co. v. Board, 276 Md. 435,

347 A.2d 854 (1975); Bowie Inn v. City of Bowie, 274 Md.

230, 335 A.2d 679 (1975); Md. St. Bd. of Barber Ex. v.

Kuhn, 270 Md. 496, 312 A.2d 216 (1973); Md. Bd. of

Pharmacy v. Sav-A-Lot, 270 Md. 102, 311 A.2d 242

(1973); Salisbury Beauty Schools v, St. Bd., 268 Md. 32,

300 A.2d 367 (1973); Potomac Sand & Gravel uv.

Governor, 266 Md. 358, 293 A.2d 421, cert. denied, 409

U.S. 1040, 93 S. Ct. 525, 34 L. Ed. 2d 490 (1972); Brooks

v. State Board, 233 Md. 98, 195 A.2d 728 (1963); Allied

American Co. v. Comm’r., 219 Md. 607, 150 A.2d 421

(1959). Recent Supreme Court decisions in this area are

North Dakota Pharmacy Bd. v. Snyder’s Stores, 414

U.S. 156, 94 S. Ct. 407, 38 L. Ed. 2d 379 (1973); Ferguson

v. Skrupa, 372 U.S. 726, 83 S. Ct. 1028, 10 L. Ed. 2d 93,

95 A.L.R.2d 1347 (1963); and Williamson v. Lee Optical

Co., 348 U.S. 483, 75 S. Ct. 461, 99 L. Ed. 563 (1955).

Last term, in Westchester West No. 2 v. Mont. Co.,

supra, 276 Md. at 454-455, in holding that a Mont-

gomery County rent control law did not violate the Due

Process Clause of the Fourteenth Amendment or Art. 23

of the Maryland Declaration of Rights, we discussed the

function of the courts in reviewing regulatory legisla-

tion alleged to be violative of the due process clauses.

We emphasized that the function of the courts in this

area is “very limited,” and went on to say (276 Md. at

455):

“Unless the exercise of the police power by the

Legislature is shown to be arbitrary, oppressive or

no Ys Mont. Co., 276 Md. 448, 465 n. 11, 348 A.2d 856, 866

“This Court has long equated Art. 23 with the Due

Process Clause of the ‘Toone Amendment. £.g.,

Bowie Inn v. City of Bowie, supra, 274 Md. at 235 n. 1; In

re Easton, 214 Ma. 176, 187, 1 133 A.2d 441 (1957); Solyuca

v. Ryan & Reilly Co., 131 Md. 265, 270, 101 A. 710 (1917);

Pub. S. Com. v. N. C. Rwy. Co., 122 , 386, 90 A.

Md. 355

105 (1914); Baltimore Belt R.R. v. Baltzell, 75 Md. 94, 99,

23 A. 74 (1891).”

12a

unreasonable, the courts will not interfere with it.

Bowie Inn v. City of Bowie, supra, 274 Md. at 236;

Salisbury Beauty Schools v. St. Bd., supra, 268 Md.

at 48. Moreover, the wisdom or expediency of a law

adopted in the exercise of the police power of a

state is not subject to judicial review, and such a

statute will not be held void if there are any

considerations relating to the public welfare by

which it can be supported. Bowie Inn v. City of

Bowie, supra, 274 Md. at 236; Sav-A-Lot, supra, 270

Md. at 106; Salisbury Beauty Schools v. St. Bd.,

supra, 268 Md. at 48.”

Judicial deference to legislative judgment is appropriate

when reviewing legislation dealing with economic

problems. In Ferguson v. Skrupa, supra, in holding

constitutional a statute permitting only attorneys to

engage in the business of debt adjustment, the Supreme

Court said (372 U.S. at 730-732, 83 S. Ct. at 1031-1032):

“We have returned to the original constitutional

proposition that courts do not substitute their

social and economic beliefs for the judgment of

legislative bodies, who are elected to pass laws. As

this Court stated in a unanimous opinion in 1941,

‘We are not concerned . . . with the wisdom, need,

or appropriateness of the legislation.’ Legislative

bodies have broad scope to experiment with

economic problems, and this Court does not sit to

‘subject the State to an intolerable supervision

hostile to the basic principles of our Government

and wholly beyond the protection which the

general clause of the Fourteenth Amendment was

intended to secure.’ It is now settled that States

‘have power to legislate against what are found to

be injurious practices in their internal commercial

and business affairs, so long as their laws do not

run afoul of some specific federal constitutional

prohibition, or of some valid federal law.’

* * ” * * -

“| We refuse to sit as a ‘superlegislature to

weigh the wisdom of legislation,’ and we emphati-

cally refuse to go back to the time when courts used

the Due Process Clause ‘to strike down state laws,

13a

regulatory of business and industrial conditions,

because ey may be unwise, improvident, or out of

harmony with a particular school of thought.’ ”

And as was said in Williamson v. Lee Optical Co.,

supra, 348 U.S. at 488, 75 S. Ct. at 464, quoted by us

recently in Steuart Petroleum Co. v. Board, supra, 276

Md. at 447, the wisdom of the Act is not for us to judge

as “filt is enough that there is an evil at hand for

correction, and that it might be thought that the

particular legislative measure was a rational way to

correct it.”

A statute enacted by the Legislature in the exercise of

the police power “is presumed to be valid and one

attacking its validity has the burden of affirmatively

and clearly establishing its invalidity.” Salisbury

Beauty Schools v. St. Bd., supra, 268 Md. at 48. While

the oil companies have presented evidence questioning

the wisdom of the Act and perhaps raising doubts as to

the efficacy of the Act in achieving its purpose of

preserving a highly competitive retail gasoline market,

they have failed to meet their burden. It has not been

demonstrated that the Act is “arbitrary” or that there

are no “considerations relating to the public welfare by

which it can be supported.” Quite to the contrary, the

history of Chapter 854 establishes that it was the

product of a careful and deliberate process involving a

study of retail marketing of gasoline products in

Maryland as well as three public hearings at which

opponents of the Act including some of those now

challenging it, were a) « to present their objections to

both the Legislature and the Governor.

The oil companies do not contend that the Legislature

may not under any circumstances limit the nature of

business which they may conduct in the state. See, e.g.,

Daniel v. Family Ins. Co., 336 U.S. 220, 69 S. Ct. 550, 93

L. Ed. 632, 10 A.L.R.2d 945 (1949); Asbury Hospital v.

Cass County, 326 U.S. 207, 66 S. Ct. 61, 90 L. Ed. 6

(1945); Brooks v. State Board, supra. Rather, the oil

companies ask us to review the evidence concerning the

l4a

possible effect of the Act and to substitute our judgment

for that of the Legislature.

In Bowie Inn v. City of Bowie, supra, we were

presented with a similar situation. There, the city

council of Bowie, in order to control a problem of

roadside litter, enacted an ordinance, after a public

hearing, requiring a deposit to be collected on ail soft

drink and malt beverage containers which would be

refunded upon return of the container. There, as here,

those challenging the ordinance cffered evidence that

the ordinance would not be effective in achieving its

stated goal, and asked the Court to decide from such

evidence that the city council acted arbitrarily and

unreasonably. We rejected this contention in light of

evidence presented to the city council that there was a

need for litter control and in view of the fact that the

means adopted by the city council could conceivably be

effective in reducing the problem of litter.

Here the Legislature was presented with evidence

that refiners and producers were favoring company

operated stations in the allocation of gasoline. The

Comptroller’s report showed that, because of the

inability to obtain adequate supplies of gasoline, some

service station dealers were forced to close. Evidence

was also presented that many dealer operated stations

were being converted to company operation. The

Legisiature could reasonably conclude that control of

the retail gasoline market by producers and refiners

would decrease competition and that the continued

existence of independent retail dealers was necessary to

preserve competition.‘ Exclusion of producers and

‘ The oil companies contend that the effect of the Act will

be to reduce competition by excluding from the market

certain aggressive competitors. The Legislature, however,

has determined that competition from producers and refiners

could ultimately result in the destruction of a competitive

retail gasoline market. In Blum v. Engelman, 190 109,

115, 57 A.2d 421 (1948), in —e the validity of the

Maryland Unfair Sales Act, this Court noted that certain

competitive practices may be harmful to the public welfare,

and that the Legislature is “free to adopt whatever economic

15a

refiners may conceivably be a reasonable means of

preserving competition and preventing monopolistic

control of gasoline marketing by a few large oil

companies. Divestiture of retail gasoline stations by

producers and refiners as a means of preserving

competition in retail gasoline marketing recently has

been recommended by at least two congressional

committees. See H. R. Rep. No. 94-1762, 94th Cong., 2d

Sess. (1976); S. Rep. No. 94-1005, 94th Cong., 2d Sess.

(1976). Indeed, in Federal Trade Comm’n v. Sun Oil Co.,

371 U.S. 505, 528, 83 S. Ct. 358, 371, 9 L. Ed. 2d 466

(1963), the Supreme Court recognized that elimination

of retail service station dealers through forward vertical

integration may be an “evil” requiring legislative

action.

The oil companies have presented evidence which

casts some doubt on the wisdom of the Act. The State’s

expert witness conceded that the Act, by excluding

certain partially integrated marketers, could in some

respects be anti-competitive, although he believed that

it would, on the whole, promote competition. However,

as discussed above, the courts may not substitute their

judgment for that of the Legislature. Especially where

reviewing legislation dealing with a serious problem in

a new and untried fashion, the courts are under a

special duty to respect the legislative judgment as to the

proper means of solving the problem. Legislation

prohibiting operation of retail service stations by

producers and refiners of petroleum has been proposed

in several states as well as in Congress but only

recently has b2en enacted by several states. See Note,

Gasoline Marketing Divestiture Statutes: A Preliminary

Constitutional and Economic Assessment, 28 Vand. L.

Rev. 1277 (1975). As of now there has been no evidence

by which to judge the effects of these statutes and

predictions as to the effects of the Act are at best

whether by reasonably be deemed to promote public welfare,

by promoting free competitio a oe statutes —- at

ae on harmful competition

peo idemith v. Mead & Co., = Md. Ma. 7 Ad

176 (1939), which upheld the Merviond’ Fair

l6a

speculative. In Bowie Inn v. City of Bowie, supra, we

commented on the importance of permitting new

legislation to be tested, as follows (274 Md. at 237-238):

“Here, invalidation of the ordinance would deprive

the City Council of Bowie and any other legislative

body contemplating such a law of any opportunity

to discover whether the ordinance will be good, bad

or indifferent in its results. The words of Mr.

Justice Frankfurter in American Federation of

Labor v. American Sash and Door Co., 335 U.S.

538, 553, 69 S. Ct. 258, 265, 93 L. Ed. 222,6 A.L.R.2d

481 (1949) (concurring opinion), are particularly

appropriate:

‘Even where the social undesirability of a

law may be convincingly urged, invalidation

of the law by a court debilitates popular

democratic government. Most laws dealinr

with economic and social problems are matt:

of trial and error. That which before t

appears to be demonstrably bad may belie

prophesy in actual operation. It may not prove

good, but it may prove innocuous. But even if a

law is found wanting on trial, it is better that

its defects should be demonstrated and re-

moved than that the law should be aborted by

judicial fiat. Such an assertion of judicial

power deflects responsibility from those on

whom in a democratic society it ultimately

rests — the people.’”’

For these reasons, we hold that the court below erred

in holding that the Act was violative of the Due Process

Clause of the Fourteenth Amendment or Art. 23 of the

Maryland Declaration of Rights.

(2) Commerce Clause

The oil companies also contend that the divestiture

provisions of the Act are invalid under the Commerce

Clause, Art. I, § 8 of the United States Constitution. The

companies argue that the purpose of the Act is to

protect local retail service station operators from

competition by those engaged in interstate commerce.

To accomplish this purpose, it is contended that the Act

17a

denies «ut-of-state competitors access to local retail

gasoline markets and thus discriminates against

interstate commerce. In support of this contention, the

oil companies rely on H. P. Hood & Sons v. DuMond,

336 U.S. 525, 69 S. Ct. 657, 98 L. Ed. 865 (1949).

The Supreme Court has on several occasions struck

down state statutes regulating the production and sale

of a commodity as violative of the Commerce Clause

where it has found that the purpose and effect of the

statute was solely to protect local economic interests by

discriminating against interstate commerce. In Bald-

win v. G.A.F. Seelig, 294 U.S. 511, 55 S. Ct. 497, 79 L.

Ed. 1032, 101 A.L.R. 55 (1935), a New York statute

establishing a minimum price to be paid out-of-state

producers of milk to be sold locally was held unconstitu-

tional. The Court found that the practical effect of the

statute was to protect local producers from competition

by excluding milk produced in other states from the

New York market. Another New York statute was held

unconstitutional in H. P. Hood & Sons v. DuMond,

supra. There the statute granted the State Commis-

sioner of Agriculture the authority to deny milk

processors a license to operate milk receiving and

processing plants if it were found that such plants

would lead to “destructive competition in a market

already adequately served.” The petitioner, a milk

processor who operated several receiving and process-

ing plants in New York for milk to be sold in

Massachusetts, was denied a license to operate a new

facility. The Court determined that a license was denied

to prevent exportation of milk from New York during a

time when there was a temporary shortage of milk in

the area in which the plant was to be located. Relying

on the principle that the states may not “advance their

own commercial interests by curtailing the movement

of articles of commerce,” the Court held that the statute

as applied violated the Commerce Clause and was

therefore unconstitutional. 366 U.S. at 535.

Similarly, in Dean Milk Co. v. Madison, 340 U.S. 349,

71 S. Ct. 295, 95 L. Ed. 329 (1951), the Court held

18a

unconstitutional a municipal ordinance which prohib-

ited the sale of pastuerized milk in the city of Madison,

Wisconsin, unless processed and bottled within a five

mile radius of the center of town and which required

that the source of supply of all milk be inspected by city

officials, but which imposed a twenty-five mile limit on

the area in which inspectors would travel. The peti-

tioner was an Illinois corporation whose milk supply

and processing plants were outside of the geographic

limitations imposed by the ordinance. While recogniz-

ing that the city had a legitimate interest in protecting

the health of its citizens by insuring that only

wholesome milk be sold within its boundaries, the Court

found that the ordinance, as in Baldwin v. G.A.F.

Seelig, supra, had the effect of excluding importation of

wholesome milk produced out of state. Thus, the

ordinance discriminated against interstate commerce

by “erecting an economic barrier protecting a major

local industry against competition from without the

state” in violation of the Commerce Clause. 340 U.S. at

354.

A feature common to all three of these regulatory

schemes was that they burdened the free flow of goods

in commerce between the states by effectively hindering

either the import or export of goods. And whether this

burden on the movement of goods be direct and

apparent on the face of the statute as in Baldwin v.

G.A.F. Seelig, supra, or indirect as in H. P. Hood & Sons

v. DuMond, supra, and Dean Milk Co. v. Madison,

supra, the Court could conclude that the purpose and

effect of the statute was primarily to protect a local

industry by discriminating against interstate com-

merce. The Maryland statute here under consideration,

however, differs in several substantial ways.

First, Chapter 854 would not in any way restrict the

free flow of petroleum products into or out of the state.

The Act merely regulates a wholly intrastate activi-

ty,the retail marketing of gasoline within the state.

Producers and refiners would still remain free to import

and sell petroleum products to wholesalers and to retail

ee

19a

service station dealers. The only restriction is that

producers and refiners may not operate retail service

stations in Maryland with their own employees but

must do so with retail service station dealers.

Second, although the oil companies contend that the

purpose of the Act was to protect local economic

interests from the competition of oil companies engaged

in interstate commerce, in view of the legislative history

of the Act we cannot agree with this contention. There

is every indication that the purpose of the statute was

to preserve competition within the retail gasoline

marketing industry in Maryland. As previously dis-

cussed, the Comptroller’s report, as well as other

evidence presented to the Legislature, indicated that

company operated stations received greater allocations

of gasoline during a period of shortage than did dealer

operated stations, forcing many dealers out of business.

Moreover, there was evidence that the oil companies

intended to increase the number of company operated

stations. The General Assembly, after considering the

activities of producers and refiners in the industry,

concluded, as have several congressional committees,

that the recent trend of increased direct operation of

service stations by producers and refiners, if allowed to

continue, could substantially decrease competition and

lead to the control of that market by a few major oil

companies. See H. R. Rep. 94-1762, 94th Cong., 2d Sess.

28 (1976); H. R. Rep. No. 1423, 84th Cong., Ist Sess. 17

(1955). Thus, the purpose was not to protect Maryland

interests from out-of-state competition.

Finally, the Act does not in effect discriminate

against out-of-state economic interests as opposed to

local interests. The Act is equally applicable to all

producers and refiners. While oil is not produced in

Maryland, and is not presently being refined in

Maryland, there are producers or refiners which are

20a

retail service stations. If a refiner were to build

refineries in Maryland, and were to engage in business

solely within Maryland, it would be prohibited by the

Act from marketing through a company operated

station. On the other hand, out-of-state and Maryland

retailers are treated the same. An out-of-state marketer

not engaged in producing or refining may continue to

market in Maryland through retail service stations

operated with company personnel.

The only Supreme Court case of which we are aware

which considers a challenge to a state divestiture

statute on Commerce Cleuse grounds is Crescent Oil

Co. uv. Mississippi, 257 U.s. 129, 42 S. Ct. 42, 66 L. Ed.

166 (1921).° There, a Mississippi statute prohibited both

out-of-state and Mississippi corporations engaged in the

manufacture of cotton seed oil or cotton seed meal from

owning or operating cotton gins. It was argued that the

statute was enacted because the legislature believed

that manufacturers of cotton seed oil or meal, if also

allowed to operate cotton gins, would depress the price

charged for ginning in order to suppress competition in

the ginning industry. The petitioner contended that the

statute imposed a direct and unconstitutional burden on

interstate commerce. The Court rejected this contention,

pointing out that the statute regulated only a manufac-

turing process conducted within the state.

In holding in Crescent Oil thai the Mississippi statute

did not violate the Commerce Clause, the Supreme

Court noted that the activity to be regulated was

intrastate manufacturing and not interstate commerce.

While we recognize that the distinction between

“manufacturing” and “commerce” is no longer the test

5 See also Paramount Pictures v. Langer, 23 F. Supp. 890,

895 (D. N.D. 1938, remanded with directions to dismiss on

grounds of mootness, 306 U.S. 619, 59 S. Ct. 641, 83 L. Ed.

1025 (1939), where a statute prohibiting the tion of

motion picture theaters in the state of North which

were owned, controlled, or man by producers or distribu-

tors of motion picture films was held not to violate either the

due process clause or the equal protection clause of the

Fourteenth Amendment or the Commerce Clause.

2la

of congressional power to regulate activities under the

Commerce Clause, Wickard v. Filburn, 317 U.S. 111, 63

S. Ct. 82, 87 L. Ed. 122 (1942), it may be of some

significance in determining a state’s authority. The fact

that Congress may regulate in this area does not

necessarily result in the loss of the state’s power to

regulate an intrastate activity which may possibly have

some effect on interstate commerce. The Supreme Court,

in Cities Service Co. v. Peerless Co., 340 U.S. 179, 186-

187, 71 S. Ct. 215, 219-220, 95 L. Ed. 190 (1950), stated:

“The Commerce Clause gives to the Congress a

power over interstate commerce which is both

paramount and broad in scope. But due regard for

state legislative functions has long required that

this power be treated as not exclusive. Cooley v.

Port Wardens, 12 How. 299 (1851). It is now well

settled that a state may regulate matters of local

concern over which federal authority has not been

exercised, even though the regulation has some

impact on interstate commerce. Parker v. Brown,

317 U.S. 341 (1943); Milk Control Board v. Eisen-

berg Farm Products, 306 U.S. 346 (1939); South

Carolina Highway Dept. v. Barnwell Bros., 303

U.S. 177 (1938). The only requirements consistently

recognized have been that the regulation not

discriminate against or place an em on

interstate commerce, that it safeguard an obvious

state interest, and that the local interest at stake

outweigh whatever national interest there might be

in the prevention of state restrictions. Nor should

we lightly translate the quiescence of federal power

into an affirmation that the national interest lies

in complete freedom from regulation. South Caro-

lina Highway Dept. v. Barnwell Bros., supra.”

See also Huron Cement Co. v. Detroit, 362 U.S. 440, 443-

444, 80 S. Ct. 813, 4 L. Ed. 2d 852, 78 A.L.R.2d 1294

(1960); Breard v. Alexandria, 341 U.S. 622, 634, 71 S. Ct.

920, 95 L. Ed. 1233, 35 A.L.R.2d 335 (1951); Panhandle

Co. v. Michigan Comm’n, 341 U.S. 329, 71 S. Ct. 777, 95

L. Ed. 993 (1951); Bowie Inn v. City of Bowie, supra, 274

Md. at 244-245.

22a

More recently, the Court has indicated that in

determining the validity of a state statute affecting

interstate commerce, a balancing of the state interest

involved in relation to the burden imposed upon

interstate commerce may sometimes be appropriate.

This “weighing test” was described in Pike v. Bruce

Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 25 L. Ed.

2d 174 (1970), as follows:

“Although the criteria for determining the

validity of state statutes affecting interstate

commerce have been variously stated, the general

rule that emerges can be phrased as follows: Where

the statute regulates evenhandedly to effectuate a

legitimate local public interest, and its effects on

interstate commerce are only incidental, it will be

upheld unless the burden imposed on such com-

merce is clearly excessive in relation to the putative

local benefits. Huron Cement Co. v. Detroit, 362

U.S. 440, 443. If a legitimate local purpose is found,

then the question becomes one of degree. And the

extent of the burden that will be tolerated will of

course depend on the nature of the local interest

involved, and on whether it could be promoted as

well with a lesser impact on interstate activities.

Occasionally the Court has candidly undertaken a

balancing approach in resolving these issues,

Southern Pacific Co. v. Arizona, 325 U.S. 761, but

more frequently it has spoken in terms of ‘direct’

and ‘indirect’ effects and burdens. See, e.g., Shafer

v. Farmers Grain Co., supra [268 U.S. 189}.”

Applying these principles, we conclude that the

divestiture provisions of the Act do not violate the

‘Commerce Clause. The Act does not discriminate

against interstate cummerce as all producers and

refiners, whether in or out of the state, are affected

‘equally. The promotion of the economic welfare is a

legitimate interest of a state, Pike v. Bruce Church, Inc.,

supra, 397 U.S. at 143; Parker v. Brown, 317 U.S. 341,

363, 63 S. Ct. 307, 87 L. Ed. 315 (1943), and it has long

been recognized that the states have the power to pass

legislation to promote competition by preventing

23a

monopclicti? activity in restraint of trade, Watson v.

Buck, 313 U.S. 387, 403-404, 61 S. Ct. 962, 85 L. Ed. 416,

136 A.L.R. 1426 (1941); Waters-Pierce Oil Co. v. Texas

(No. 1), 212 U.S. 86, 107, 29 S. Ct. 220, 53 L. Ed. 417

(1909).

The record, on the other hand, fails to establish that

the Act will, to a significant degree, burden interstate

commerce. The allegations of the oil companies that the

restrictions placed on producers and refiners will limit

the availability of products and services to those

traveling in interstate commerce is, at best, highly

speculative. Bowie Inn v. City of Bowie, supra. Most of

the producers and refiners have in the past operated

only a small percentage of the retail service stations

which they supply. The vast majority of retail service

stations in Maryland, supplying both interstate and

intrastate travelers, are operated by independent

dealers. It is true that three of the oil companies

involved in this action do market exclusively through

company operated stations,’ and officials of these

companies indicated at trial that they might be forced

to withdraw from the Maryland market if the Act were

to become effective. However, at least two of these

company witnesses on cross-examination indicated that

no firm decision had been made to withdraw if the Act

were to become effective, and that it still mizht be

possible to distribute products in Maryland both

6 For example, according to facts stipulated by the parties,

as of July 1, 1974, of the 632 stations affiliated with Exxon

Corporation in the state of Maryland, only 36 were company

operated. Similarly, only 1 of 219 stations affiliated with Gulf

Oil Corporation was company operated. Phillips Petroleum

Company, with 131 Maryland stations, operated only 13 with

company personnel. Shell Oil Company had 284 Maryland

affiliated stations, but only 1 was woe comgeny | operated. Texaco,

Incorporated, which had 307 affiliated stations in Maryland

as of J July 1, 1974, had no station operated with company

personnel.

’ Ashland Oil, Inc.; Kayo Oil Company; Petroleum Market-

ing Corporation. As of July 1, 1974, d had 19 stations

in Maryland; Kayo, 16 stations; and Petroleum Marketing

Corporation, 21 stations.

24a

through dealer operations and on the wholesale market.

It therefore appears that there will be no significant

disruption of the flow of petroleum products into the

state nor in the distribution of those products to those

in interstate commerce. We believe that the state’s

interest, as determined by the Legislature, outweighs

any slight burden which the Act may impose on

interstate commerce.

For all of the above reasons, the divestiture provi-

sions of the Maryland Act are not unconstitutional

under the Commerce Clause.

(3) Unconstitutional Taking

The trial court held that the divestiture provisions of

the Act constitute a taking of private property without

just compensation, in violation of Art. III, § 40 of the

Maryland Constitution and the just compensation

clause of the Fifth Amendment to the United States

Constitution, applicable to the states through the

Fourteenth Amendment.

For government restriction upon the use of property

to constitute a taking in the constitutional sense, so

that compensation must be paid, the restriction must be

such that it essentially deprives the owner of all

beneficial uses of his property. As this Court stated in

Baltimore City v. Borinsky, 239 Md. 611, 622, 212 A.2d

508 (1965):

“The legal principles whose application deter-

mines whether or not the restrictions imposed .

on the property involved are an unconstitutional

taking are well established. If the owner affirma-

tively demonstrates that the legislative or adminis-

trative determination deprives him of all beneficial

use of the property, the action will be held

unconstitutional. But the restrictions imposed must

be such that the property cannot be used for any

reasonable purpose. It is not — for the

property owners to show that the. . . action results

in substantial loss or hardship.”

25a -

Goldblatt v. Hempstead, 369 U.S. 590, 592, 82 S. Ct. 987,

8 L. Ed. 2d 130 (1962); United States v. Central Eureka

Mining Co., 357 U.S. 155, 168, 78 S. Ct. 1097, 1104, 2 L.

Ed. 2d 1228 (1958); Bureau of Mines v. George’s Creek,

272 Md. 143, 165, 321 A.2d 748 (1974); Rockville v.

Stone, 271 Md. 655, 663-664, 319 A.2d 536 (1974).

The Maryland Act, in prohibiting producers and

refiners from directly operating retail service stations,

clearly does not constitute a “taking” in the constitu-

tional sense. The divestiture provisions of the Act do

not deprive producers and refiners owning retail service

stations of all beneficial uses of their property, or even

of the existing and presumably most profitable use of

their property. As previously discussed, the majority of

retail service stations are now operated by dealers and

not employees. Thus the Act will have less impact, for

example, than the zoning provisions upheld in Gold-

blatt v. Hempstead, supra, or Baltimore City uv.

Borinsky, supra, which deprived the owners of the most

profitable use of the property. The relatively few service

stations directly operated by producers and refiners

may continue to be used as service stations, as

producers and refiners may lease the property to

dealers. The Maryland Act does not prohibit an oil

company from owning a retail service station or having

the station operated as a retail outlet for that com-

pany’s products. It merely requires that the station be

operated by a retail dealer rather than by company

employees.

Moreover, allowance for the temporary operation by

refiners and producers, as well as reasonable exceptions

to the divestiture dates, as provided by the Act in

Paragraphs G and H, will also lessen the impact of the

divestiture provisions on producers and refiners.

In sum, the restrictions imposed by the divestiture

provisions of the Act on the manner in which oil

companies may continue to use their property for retail

service station purposes, ie., using retail dealers

instead of employees, does not amount to a “taking” of

26a

private property in violation of the federal or state

constitutions.

(4) Equal Protection

The oil companies argue, and the trial court held, that

the divestiture provisions of the Act constitute a denial

of the equal protection of the laws in that they prohibit

only producers and refiners of petroleum products from

operating retail service stations while permitting

“wholesalers, mass merchandisers, food retailers, and

gasoline marketers”’ to operate retail service stations. It

is claimed that the classification is arbitrary and

without any rational basis.*®

The proper standard of review when economic

regulation is challenged as violating the Equal Protec-

tion Clause of the Fourteenth Amendment has been

most recently discussed by the Supreme Court in City of

New Orleans v. Dukes, ___ U.S. ___, 96 S. Ct. 2513,

2516-2517, 49 L. Ed. 2d 511 (1976):

“Unless a classification trammels fundamental

personal rights or is drawn upon inherently

Suspect distinctions such as race, religion, or

alienage, our decisions presume the constitutional-

ity of the statutory discriminations and require

* The oil companies, both at trial and on appeal, contend

that the Act os mete them of the equal protection of the laws

in violation of both the Fourteenth Amendment to the United

States Constitution and the Due Process Clause, Art. 23, of

the Maryland Declaration of Rights. The Maryland Constitu-

tion does not contain an express equal protection clause as

does the Fourteenth Amendment. The trial court’s equal

protection holding was apparently premised upon the Due

Process Clause of the Maryland laration of Rights. For

the purposes of appeal, we shall assume that the Due Process

Clause, Art. 23, embodies the concept of equal protection.

Bruce v. Dir., Chesapeake Bay Aff., 261 Md. 585, 600, 276

A.2d 200 (1971); Celanese wea v. Davis, 186 Md. 463,

471-472, 47 A.2d 379 (1946). Cf. Bolling v. Sharpe, 347 U.S.

497, 74 S. Ct. 693, 98 L. Ed. 884 (1954). We shall further

assume that the standard of review under both the Maryland

Constitution and the Equal Protection Clause of the Four-

teenth Amendment is the same where economic regulation is

challenged on equal protection grounds.

27a

only that the classification challenged be ration-

ally related to a legitimate state interest. States are

accorded wide latitude in the regulation of their

local economies under their police powers, and

rational distinctions may be made with substan-

tially less than mathematical exactitude. ... In

short, the judiciary may not sit as a superlegisla-

ture to judge the wisdom or desirability of legisla-

tive policy determinations made in areas that

neither affect fundamental rights nor proceed

along suspect lines, see, e.g., Day-Brite ew

Inc. v. Missouri, 342 U.S. 421, 423, 72 S. 405,

407, 96 L. Ed. 469 (1952), in the local economic

sphere, it is only the invidious discrimination, the

wholly arbitrary act, which cannot stand consist-

ently with the Fourteenth Amendment.”

If the classification is not purely arbitrary and has a

rational basis, the statute does not violate the Equal

Protection Clause. McGowan v. State of Maryland, 366

U.S. 420, 425-428, 81 S. Ct. 1101, 1104-1106, 6 L. Ed. 2d

393 (1961); Lindsley v. Natural Carbonic Gas Co., 220

U.S. 61, 78-79, 31 S. Ct. 337, 51 L. Ed. 369 (1911); Bowie

Inn v. City of Bowie, supra, 274 Md. at 240-241; Adm’r,

Motor Veh. Adm. v. Vogt, 267 Md. 660, 670-678, 229

A.2d 1 (1973); Brooks v. State Board, supra, 233 Md. at

“114-115. Moreover, a statutory classification will not be

held to violate the equal protection clause if there exists

any state of facts which reasonably can be conceived to

sustain it. Davidson v. Miller, 276 Md. 54, 69-70, 344

A.2d 422 (1975); Matter of Trader, 272 Md. 364, 391-392,

325 A.2d 398 (1974). |

The statutory distinction between producers and

refiners on the one hand, and other sellers of petroleum

products on the other, is not arbitrary. As discussed

previously, the Legislature determined that prohibiting

producers and refiners from operating retail service

stations was necessary to preserve competition. Further-

more, the Legislature may weil have determined that

discrimination against retail service station dealers and

in favor of company operated stations, in the distribu-

tion of petroleum products, was an evil which could be

28a

cured by preventing producers and refiners from

operating retail service stations. Thus, the classifica-

tion bears a rational relationship to the objective of the

Act of preserving ccmpetition and fairness within the

Maryland retail gasoline marketing industry. Conse-

quently, there is no merit to the oil companies’

argument that the Act denies them the equal protection

of the laws.

(5) Unlawful Delegation

The contention that Paragraphs G and H of the Act

constitute an unlawful delegation of legislative author-

ity in violation of Art. 8 of the Maryland Declaration of

Rights is also without merit. Ordinarily when legisla-

tive authority is delegated to administrative officiais,

there must be sufficient standards for the guidance of

the administrative officials. However, it has been

recognized that the complexity of modern economic

conditions may make it impossible to tailor specific

guidelines for every conceivable situation and that

latitude in granting discretion is necessary. As stated in

Pressman v. Barnes, 209 Md. 544, 555, 121 A.2d 816

(1956):

“It is recognized that it would not always be

possible for Legislature or City Council to deal

directly with the multitude of details in the

complex situations upon which it operates. . . . The

modern tendency of the courts is toward greater

liberality in permitting grants of discretion to

administrative officials in order to facilitate the

administration of the laws as the complexity of

governmental and economic conditions increases.”

See also Montgomery County v. Walsh, 274 Md. 502,

523-524, 336 A.2d 97 (1975), appeal dismissed, 424 U.S.

901, 96 S. Ct. 1091, 47 L. Ed. 2d 306 (1976). It would

obviously be impractical for the Legislature to set

specific guidelines to govern all situations where

exceptions to the divestiture dates would be reasonable

or where it would be necessary for a producer or refiner

to operate a service station on a temporary basis. This

29a

grant of authority to the Comptroller is necessary and

is constitutional.

(6) Conflict with the Federal Emergency

Petroleum Allocation Act

The trial court held that Paragraph F of the

Maryland Act conflicts with and is therefore preempted

by the Federal Emergency Petroleum Allocation Act of

1973.

Paragraph F of the Act provides that during periods

of shortages, producers, refiners and wholesalers shall

“apportion uniformly” gasoline and special fuels

(which, as defined in Art. 56, § 157A(2), includes diesel

oils) to all retail service station dealers “on an equitable

basis” and “shall noi discriminate among the dealers in

their allotments.” In view of the history of the Act, it is

clear that the Legislature by this provision intended to

prevent the inequitable distribution of petroleum

products, reflected by the Comptroller’s study, which

occurred durir periods when a particular supplier had

insufficient supplies to satisfy its dealers’ requirements.

To prevent a supplier from favoring one dealer over

another during a period when the supplier was

experiencing a shortage, the Act requires that the

available product be alloted to each dealer on the same

basis. In other words, when supplies are insufficient to

meet dealer requirements, there must be a pro rata

reduction to each dealer.

In its fundamental purpose, Paragraph F of the

Maryland Act is in harmony with the Emergency

Petroleum Allocation Act, 15 U.S.C. 751 et seg. The

federal act provides for the promulgation of regulations

for the allocation of, inter alia, refined petroleum

products. 15 U.S.C. 753. The federal act goes on to state

that the regulations, to the “maximum extent practica-

ble,” shall provide for the “equitable distribution of. . .

refined petroleum products. . . among all. . . sectors of

the petroleum industry, including ... non branded

independent marketers, [and] branded independent

marketers... . .” 15 U.S.C. 753(b)(1)(F). To achieve this ,

30a a

objective of equitable distribution, the federal act

further states that regulations should provide, where

practicable, for a pro rata reduction in allocation to

each branded and unbranded independent marketer

where there is insufficient product to supply each with

the amounts supplied in a prior corresponding base

period. 15 U.S.C. 753(c)(1)(A). As originally enacted, the

President’s authority to promulgate regulations was to

terminate on February 28, 1975. This authority has

been extended several times, and has been extended

most recently to September 30, 1981, by Pub. L. No. 94-

163, § 461 (1975).

By its express terms, the federal Emergency Petro-

leum Allocation Act preempts only such state regula-

tions of allocation of refined petroleum products which

are in actual conflict with regulations promulgated

pursuant to it. Thus, 15 U.S.C. 755(b) provides that:

“The regulation under section 753 of this title and

any order issued thereunder shall preempt any

provision of any program for the allocation of

crude oil, residual fuel oil, or any refined petroleum

product established by any State or local govern-

ment if such provision is in conflict with such

regulation or any such order.”

Therefore we need not determine whether the existence

of a comprehensive system of federal regulation

necessarily precludes state regulation, as Congress has

specifically limited the type of state regulation which is

preempted. We need only determine whether Paragraph

F of the Maryland statute conflicts with any regulation

promulgated pursuant to the Emergency Petroleum

Allocation Act.

The federal regulations promulgated pursuant to the

federal act establish a scheme of equitable petroleum

allocation. Each supplier must determine its “allocation

fraction” which is “equal to its allocable supply .. .

divided by its supply obligation ....” 10 C.F.R.

§211.10(b). This fraction is then applied to each

purchaser’s “base period volume” to determine the

3la

purchaser’s allecation. In other words, each purchaser

is allocated petroleun. products based upon the seller’s

total supplies relative to the seller’s total obligations.

Where the allocation fraction is less than one, that is,

where a supplier’s allocable supply is less than his

supply obligation for a base period, the supplier must

reduce on a pro rata basis the amounts sold to

purchasers. 10 C.F.R. §211.10(f). This scheme is

applicable to the allocation of motor gasoline, 10 C.F.R.

§ 211.107(b), as well as diesel fuel, 10 C.F.R. § 211.126(b),

and as discussed above, is entirely consistent with

Paragraph F of the state Act.

The Maryland Act requires that gasoline and special

fuels be apportioned “uniformly,” on “an equitable

basis” to all retail service station dealers during a

period of shortage.

The oil companies in arguing that Paragraph F of the

Maryland statute is in conflict with the federal

regulatory scheme, point to several factors affecting

allocations under the federal regulations which may

allow allocation on other than a “uniform” basis which

they contend is required by Paragraph F. See, e.g., 10

C.F.R. § 211.14(b), permitting a 5% reduction in monthly

allocable supply to an area within a state to meet

regional imbalances. We do not believe that the

Legislature, in requiring that petroleum products be

apportioned “uniformly,” intended that the Comptroller

could not take into account, as do the federal regula-

tions, other factors affecting allocation and distribution

of petroleum products which might result in varying

allocations to certain dealers. Although petroleum

products are to be apportioned “uniformly,” allocation

is also to be on an “equitable basis.” By thus modifying

“uniformly,” it would appear that the Legislature

contemplated that certain equitable factors might

require variations in an otherwise uniform scheme of

gasoline and special fuel allocation.

Consequently, we do not find that Paragraph F of the

Maryland statute inherently conflicts with any regula-

tion pursuant to the Emergency Petroleum Allocation

32a

Act of 1973. We find that Paragraph F is ir harmony

with the Emergency Petroleum Allocation Act which

expressly preserves the power of the states to regulate

the allocation of refined petroleum products. As the

State concedes, the Comptroller may not order alloca-

tion of petroleum products in conflict with the federal

regulations enacted pursuant to the Emergency Petro-

leum Allocation Act or promulgate regulations pursvu-

ant to Art. 56, §157B(a) which would conflict with

present or future federal regulations. Cf. Rice v. Board

of Trade of City of Chicago, 331 U.S. 247, 67 S. Ct. 1160,

91 L. Ed. 1468 (1947). However, enforcement of the

provisions in accordance with federal standards would

be proper.

(7) Conflict with the Robinson-Patman Act

Before the trial in this case commenced, the circuit

court granted a motion for partial summary judgment

filed by Exxon, Shell and Gulf regarding Paragraph D

of the Maryland Act which requires that suppliers

extend “voluntary allowances” uniformly to all retail

service station dealers supplied. The trial court held

that Paragraph D is in conflict with § 2 of the Clayton

Act, as amended by the Robinson-Patman Act, 15

U.S.C. 13, and is therefore invalid under the Supremacy

Clause, Art. VI of the United States Constitution.

Section 2(a) of the Clayton Act, as amended by the

Robinson-Patman Act, 15 U.S.C. 13(a), provides in part

that “{i}t shall be unlawful for any person ... to

discriminate in price between different purchasers of

commodities of like grade and quality . . . where the

effect of such discrimination may be substantially to

lessen competition . . . .” However, § 2(b) of the same

Act, 15 U.S.C. 13(b), provides a seller with a defense to a

charge of price discrimination “by showing that his

lower price .. . to any purchaser or purchasers was

made in good faith to meet an equally low price of a

competitor .. . .” The oil companies contend, and the

court below held, that in requiring that voluntary

allowances be extended to all retail service stations

oe caer ee

33a

within the state, the state Act deprives sellers of a

federal right to discriminate in price between purchas-

ers where necessary to meet an equally low price of a

competitor as provided by § 2(b) of the federal act.

In determining whether a conflict exists between

Paragraph D of Ch. 854 and § 2(b) of the Clayton Act,

as amended by the Robinson-Patman Act, it is

necessary both to determine the meaniig of “voluntary

allowances” as used in Paragraph D of the state statute

and to ascertain the scope of the “meeting competition”

defense in § 2(b) of the federal statute.

Turning to the meaning of “voluntary allowances” in

Paragraph D, where a term used in a statute relating to

a particular trade or industry does not have a common

usage, then the term is presumed to be used in the

commercial sense. As was said in Armco Steel v. State

Tax Comm., 221 Md. 33, 41-42, 155 A.2d 678 (1959):

“When terms in a statute are used relating to trade

or commerce, absent legislative intent to the

contrary, the terms are presumed to be used in their

trade or commercial meaning. 2 Sutherland,

Statutory Construction, § 4919 (3d ed. 1943). ...

{I}t} must be presumed that [the Legislature}

possessed at least the common knowledge about

that industry.”

See also Perdue v. St. Dep’t of Assess. & T., 264 Md. 228,

234-235, 286 A.2d 165 (1972).

The State asserts that a “ ‘voluntary allowance’ is oil

industry jargon for a rebate of a portion of the

otherwise uniform ‘tank wagon (wholesale) price’ paid

by all dealers of a particular brand for their gasoline.”

(Appellants’ brief, p. 40.) The Comptroller’s report also

defined voluntary allowances as discounts extended by

suppliers to certain dealers to enable those dealers to

meet competition. The oil companies do not disagree

with the State’s definition of “voluntary allowances.””®

* The oil companies, however, do contend that the term

“voluntary allowances” is unconstitutionally vague in that it

may refer to other types of assistance extended to dealers

such as rent relief in certain situations. For the reasons to be

34a

In fact, affidavits filed by the oil companies in support

of the motion for partial summary judgment, as well as

stipulations of facts, support the State’s position. Thus,

an affidavit filed by a Shell marketing manager states:

“Under specified market conditions, Shell grants

temporary price reductions, or ‘competitive allow-

ances,’ to its branded retail dealers. Shell’s purpose

in granting competitive allowances is to provide

competitive and equitable assistance in gasoline

prices to Shell dealers who are injured by local

competitive gasoline price reductions of competing

retailers which are subsidized by their suppliers.”

To similar effect are affidavits filed by Exxon and Gulf.

This definition of “voluntary allowances” is sup-

ported by congressional reports dealing with the retail

marketing of gasoline. The practice of granting tempor-

ary price reductions in the wholesale price to selected

dealers to “meet competition” has long been in use and

has been criticized in congressional reports as a means

of controlling price competition in small, localized

areas. In hearings before the Senate Select Committee

on Small Business investigating a gasoline price war,

one major oil company official described “voluntary

allowances” as

“a method of extending price assistance to an

individual dealer to assist him in meeting price

competition with which he is faced, to aid him in

maintaining volume, and to help him, as an

independent businessman, stay in business and

protect his investment. At the same time, because

of its application to dealers on an individual basis,

the plan tends to help localize the price disturb-

ance.” S. Rep. No. 2810, 84th Cong., 2d Sess. 19

(1956). (Emphasis supplied).

See also H.R. Rep. No. 1423, 84th Cong., lst Sess. 12-17

(1955). There, as here, the practice of granting volun-

tary allowances to dealers to enable those dealers to

discussed below, we do not find that “voluntary allowances”

as used in Paragraph D encompasses such a broad spectrum

of dealer assistance and is limited to certain price discounts.

35a

meet the price competition of other dealers was justified

by the oil companies as being permissible price

discrimination within the § 2(b) defense. S. Rep. No.

2810, 84th Cong., 2d Sess. 20.

Finally, in addition to the statements of the parties

and the congressional reports, the legislative history of

the Maryland statute confirms that the term “voluntary

allowances” as used in Paragraph D refers to the

pricing practices described by the oil companies. The

Comptroller’s report refers to the practice of temporary,

selective price reductions, and indicates that the

amount of these reductions varied considerably. The

statement of an oil company executive at the hearings

conducted by the Senate Economic Affairs Committee

and the House Economic Matters Committee on the Act

denies that price assistance is not offered on an

equitable basis and takes the position that selective,

localized price reductions are necessary and beneficial

to dealers. Consequently, it appears that Paragraph D

was intended to prevent the practice of localized price

discounts, the Legislature believing that all retail

service station dealers of the same brand should be

treated equally. This is consistent with other provisions

of the Act which are intended to eliminate discrimina-

tion against retail dealers by their suppliers.

Therefore, in view of the principle of statutory

construction that terms relating to a particular industry

are presumed to be used in their commercial sense in

the absence of any common meaning to the contrary,

and in light of industry practices and legislative

history, we construe “voluntary allowances” to mean

temporary price reductions in the wholesale price to a

retail dealer to enable the dealer to meet the lower price

of a competing retail dealer.

The oil companies do not argue that Paragraph D is

in general conflict with the Robinson-Patman Act.

Rather their contention is based solely upon the

availability of the § 2(b) defense where temporary price

reductions are granted to a dealer to enable the dealer

to meet the competition of another dealer. Such

36a

competition at the retail level would occur basically in

two situations. Either a competing retail dealer would

lower its price on its own or a competing retailer would

lower its price after receiving a reduction in the

wholesale price from its supplier. We must determine,

then, whether the § 2(b) defense would be available if a

voluntary allowance were granted to a retail dealer to

meet either one of these competitive situations.

It is settled that the § 2(b) defense is not available to a

supplier where a discriminatory price cut is granted to a

dealer to enable that dealer to respond to a competing

dealer’s price cut where the competing dealer does not

receive a price cut from its supplier. In Federal Trade

Comm'n v. Sun Oil Co., supra, 371 U.S. ai 505, 83 S. Ct.

at 358, Sun Oil Company granted a discriminatory

price reduction to one of its retail dealers to enable that

dealer to meet the lower price of a retail competitor.

There was no showing that the lower price of the retail

competitor was supported by an enabling price cut from

its own supplier, and therefore the Court assumed that

the retail competitor was unaided by its supplier. The

Court held that the § 2(b) “good faith meeting competi-

tion” defense was not available to the supplier, as that

defense applies only where the seller’s reduction in price

is made to meet “the lower price of his own competitor”

and not the lower price of his customer’s competitor. 371

U.S. at 529.

However, the Supreme Court in Federal Trade

Comm'n v. Sun Oil Co., supra, 371 U.S. at 512 n. 7, 83 S.

Ot. at 363 n. 7, specifically reserved the question of

whether the §2(b) defense is available if the seller’s

discriminatory price cut to its dealer is in response to a

price cut made by a competitor of the seller to the

competitor's dealer. There is a conflict in the lower

federal courts on this question. In Enterprise Industries

uv. Texas Company, 136 F. Supp. 420, 421 (D. Conn.

1{'55), reversed on other grounds, 240 F. 2d 457 (2d Cir.),

cert. denied, 353 U.S. 965, 77 S. Ct. 1049, 1 L. Ed. 2d 914

(1957), the court held that the § 2(b) defense is available

to a supplier only where the discriminatory price is

37a

offered to a buyer in response to an equally low price

offered to that same buyer by a competitor of the

supplier. In other words, the § 2(b) defense is available

only where the discriminatory price reduction is offered

to retain a customer in the face of a “price raid” on that

customer by a competitor of the seller. In Bargain Car

Wash, Inc. v. Standard Oil Co. (Indiana), 466 F.2d 1163,

1175 (7th Cir. 1972), on the other hand, the court held

that the defense is available if the supplier’s lower price

is offered to its dealer to meet the equally low price

offered by a competitor of the supplier to its dealer. The

court relied on the Federal Trade Commission’s most

recent interpretation of §2(b) as announced in the

Commission’s Report on Anti-Competitive Practices in

the Marketing of Gasoline, 3 Trade Reg. Rep., { 10,373

at 18,245 (1967), where the Commission reversed its

position on §2(b) and abandoned its support of the

Enterprise holding on which it had relied in Federal

Trade Comm’n v. Sun Oil Co., supra. See Note, Gasoline

Marketing and the Robinson-Patman Act, 82 Yale L. J.

1706, 1713 n. 44 (1973).

Although the question is not without doubt, based

upon the limited nature of the § 2(b) defense and the

purposes of the Robinson-Patman Act as discussed in

Federal Trade Comm’n v. Sun Oil Co., supra, and

Standard Oil Co. v. Trade Comm’n, 340 U.S. 231, 71 S.

Ct. 240, 95 L. Ed. 239 (1951), we agree with the

interpretation of § 2(b) set forth in Enterprise Industries

v. Texas Company, supra. As the Court observed in

Federal Trade Comm’n v. Sun Oil Co., supra, the

purpose of the Robinson-Patman Act was “to obviate

price discrimination practices threatening independent

merchants and businessmen . . . 371 U.S. at 520, 83 S.

Ct. at 367. To accomplish this goal, the Robinson-

Patman Act amended the Clayton Act to limit the § 2(b)

defense to only those situations where the discrimina-

tory price was offered “to meet an equally low price of a

competitor.” Prior to the Robinson-Patman Act, a

defense was available where the discriminatory price

concession “was made in good faith to meet competi-

38a

tion.” The House Committee in its report on the Act,

said of this revision (H. R. Rep. No. 2287, 74 Cong., 2d

Sess. 16 (1936)):

“This proviso represents a contraction of an

exemption now contained in section 2 cf the

Clayton Act which permits discriminations with-

out limit where made in good faith to meet

competition. It should be noted that while the seller

is permitted to meet local competition, it does not

permit him to cut local prices until his competition

has first offered lower prices, and then he can go

no further than to meet those prices. If he goes

further, he must do so likewise with all his other

customers, or make himself liable to all of the

penalties of the act, including treble damages. In

other words, the proviso permits the seller to meet

the price actually previously offered by a local

competitor. It permits him to go no further.”

(Emphasis supplied.)

This, in combination with the qualified wording of the

§ 2(b) defense when compared with the more expansive

prohibition ageinst price discrimination contained in

§ 2(a), led the Supreme Court to conclude that the

defense was available only where the grantor of the

discriminatory price was responding to price competi-

tion at his own level and not that at the level of the

buyer who receives the discriminatory price. 371 U.S. at

514-515, 83 S. Ct. at 364-365.

Although the Court in Sun Oil Company did not

decide if the § 2(b) defense is available only where two

sellers are competing for the same customer, it did

observe that this is the “more normal circumstance”

where the § 2(b) defense is applicable. 371 U.S. at 526.

See, e.g., Krieger v. Texaco, Inc., 373 F. Supp. 108 (W.D.

N.Y. 1973). The purpose of the §2(b) defense was

discussed in these terms in Standard Oil Co. v. Trade

Comm’n, supra, 340 U.S. at 249-250, where the Court

stated that the § 2(b) defense is available to a seller to

prevent a “price raid” by permitting a seller “to retain a

customer by realistically meeting in good faith the price

39a

offered to that customer, without necessarily c i

the seller’s price to its other customers.” To Brawise the

§ 2(b) defense beyond this situation, allowing a supplier

selectively to reduce its price to a dealer where that

dealer faces competitive pressures from another retail

dealer aided by lawful reductions from its supplier

would frustrate the overall purpose of antitrust laws to

promote competition. Selective price discounts allow

sellers to suppress competition, especially from inde-

pendent, non-branded dealers, in a relatively small area

without offering lower prices on a more generalized

basis. The use of voluntary allowances to enable

petroleum suppliers to inhibit rather than foster

competition has been recognized in studies on the retail

marketing industry. H. R. Rep. No. 1423, 84th Cong., Ist

Sess. 12017; S. Rep. No. 2810, 84th Cong., 2d Sess

19023. As the Supreme Court said in Federal Trade

Comm’n v. Sun Oil Co., supra, 371 U.S. at 523, 83 S. Ct

at 369, “[s}o long as the wholesaler can meet challenges

to his pricing structure by wholly local and individual-

ad responses, it has no incentive to alter its overall

pricing policy.”'!° Commentators have also concluded

that to expand the § 2(b) defense to permit petroleum

suppliers to extend localized, discriminatory price cuts

to a retail dealer to enable that dealer to meet the lower

price of a competing retail dealer, which is subsidized

by a price cut by the supplier’s competitor, would be

inconsistent with the purpose and legislative history of

the Robinson-Patman Act. Note, Gasoline Marketing

and the Robinson-Patman Act, supra; The Supreme

Court, 1962 Term, 77 Harv. L. Rev. 81, 173-176 (196'3).

Consequently, we believe that the def i

available only where the Bore Brand pin iin,

is to meet the equally low price offered to the same

1° As the Court in Federal Trade ,

Oil Co., supra, 371 US at 826, 83 S. Ct. at pee eet

3 ae to selective, discriminatory price cuts, reduce

e@ prices over a wider iti 7

preclude the probable fniddante oft e ot Ben A we

eae upon which [a] violation of §2(a) is .. .

40a

buyer by a competing seller. The oil companies, by

relying on Cadigan v. Texaco, Inc., 492 F.2d 383 (9th

Cir. 1974), seem to suggest that even in this situation,

where a discriminatory price reduction is offered to a

dealer to meet an equally low price offered to that same

dealer by a competing supplier, Paragraph D of the

Maryland Act would require that the discount be

offered to all retail. service station dealers supplied.

However, we have construed “voluntary allowances” in

the state Act to mean only those price reductions

offered to retail dealers to enable the dealer to meet the

lower price of a competing retail dealer. Thus, there is

no conflict between Paragraph D and §2(b) of the

Clayton Act as amended by the Robinson-Patman Act.

Paragraph D of the state Act encompasses only the

situation where temporary price reductions are given to

a dealer to meet the lower price of a competing dealer,

and, in our view, §2(b) of the federal Act does not

extend to that situation.

Moreover, even if the Legislature were to extend the

concept of “voluntary allowances” to include the

situation where a price reduction is offered to a retail

dealer to meet the equally low price offered to that same

dealer by a competing supplier, there has been no

suggestion that such a situation occurs with any

frequency in the oil industry. Consequently, in most

situations where temporary price reductions are ex-

tended, there would be no conflict between the Mary-

land statute and the federal statute. If, however, a

conflict did arise, the Maryland statute would be

preempted only to the extent necessary to avoid the

conflict and not in its entirety as the oil companies

suggest. DeCanas v. Bica, 424 U.S. 351, 96 S. Ct. 933,

937 n. 5, 47 L. Ed. 2d 43 (1976); Kewanee Oil Company

v. Bicron Corp., 416 U.S. 470, 491-492, 94 S. Ct. 1879,

1891, 40 L. Ed. 2d 315 (1974); State v. Texaco, Inc., 14

Wis. 2d 625, 111 N.W.2d 918, 923 (1961) (concurring

opinion).

4la

As previously indicated, the contention of the oil

companies on appeal that Paragraph D is in conflict

with the Robinson-Patman Act is premised solely upon

the availability of the § 2(b) defense where voluntary

allowances are granted. Nevertheless, the trial court in

its opinion had also found that Paragraph D would

obstruct the accomplishment and execution of the

purposes of the Robinson-Patman Act. Where a state

law “ ‘stands as an obstacle to the accomplishment and

execution of the full purposes and objective of Con-

gress,” it is void under the Supremacy Clause,

Kewanee Oil Company v. Bicron Corp., supra, 416 U.S.

at 479, 94 S. Ct. at 1885, quoting Hines v. Davidowitz,

312 U.S. 52, 61 S. Ct. 299, 85 L. Ed. 851 (1941). However,

the objectives of both laws must be examined, Kewanee

Oil Company v. Bicron Corp., supra, 416 U.S. at 480, 94

S. Ct. at 1885, and, where possible, the operation of both

should be reconciled so as to avoid preemption, Merrill

Lynch, Pierce, Fenner & Smith v. Ware, 414 US. 117,

127, 94 S. Ct. 383, 389-390, 38 L. Ed. 2d 348 (1973). But it

is not necessary to attempt to reconcile Paragraph D

and the Robinson-Patman Act as the purpose and

objectives of both are the same. The purpose of the

Robinson-Patman Act was “ ‘the preservation of equal-

ity of opportunity’” by assuring “that businessmen at

the same functional level would start on equal competi-

tive footing so far as price is concerned.” Federal Trade

Comm'n v. Sun Oil Co., supra, 371 U.S. at 520, 83 S. Ct.

at 367. This is precisely the purpose of Paragraph D: to

insure that all retail service station dealers are afforded

equal treatment and to prevent discrimination among

dealers of the same supplier. Therefore, Paragraph D is

not an obstacle to the accomplishment of the same

objective.

Consequently, we hold that Paragraph D of the

Maryland Act is not invalid under the Supremacy

Clause of the United States Constitution.

(8) Void for Vagueness

The oil companies contend that several terms in the

Act, which imposes criminal sanctions for violations,

42a

are sO vague as to constitute a denial of due process of

law in violation of Art. 23 of the Maryland Declaration

of Rights and the Due Process Clause of the Fourteenth

Amendment to the United States Constitution. The

terms which are allegedly vague are: “producer or

refiner”; “voluntary allowances” and “uniformly” as

used in Paragraph D; “equipment rentals” and “uni-

formly” as used in Paragraph E; and “periods of

shortage” and “uniformly. . . on an equitable basis” as

used in Paragraph F.

The standard for determining whether a criminal

statute is void for vagueness was set forth in United

States v. Harriss, 347 U.S. 612, 617, 74 S. Ct. 808, 812, 98

L. Ed. 989 (1954):

“The constitutional requirement of definiteness

is violated by a criminal! statute that fails to give a

person of ordinary intelligence fair notice that his

contemplated conduct is forbidden by the statute.

The underlying principle is that no man shall be

held criminally responsible for conduct which he

could not reasonably understand to be proscribed.”

Connally v. General Const. Co., 269 U.S. 385, 391, 46 S.

Ct. 126, 127, 70 L. Ed. 322 (1926); Bowie Inn v. City of

Bowie, supra, 274 Md. at 239-240; Giant of Md. v. State's

Attorney, 267 Md. 501, 514-515, 298 A.2d 427, appeal

dismissed, 412 U.S. 915, 93 S. Ct. 2733, 37 L. Ed. 2d 141

(1973). Where a statute regulates commercial activity,

the standard of ordinary intelligence is one of “ordinary

commercial knowledge.” In other words, the statut

must be suffteiently definite so as to inform one

possessing “ordinary commercial knowledge” of what

conduct is prohibited. McGowan v. State of Maryland,

supra, 366 U.S. at 428, 81 S. Ct. at 1106 (holding that an

exception to the Maryland Sunday closing laws

permitting the retail sale of “ ‘merchandise essential to,

or customarily sold at, or incidental to, the operation of

bathing beaches, amusement parks et cetera” was not

unconstitutionally vague); Potomac Sand & Gravel v.

Governor, supra, 266 Md. at 379 (holding that a statute

prohibiting the dredging of sand or gravel in “marsh-

43a

lands” was not unconstitutionally vague). Where

necessary, the constitutional requirement of definite-

ness may be satisfied by a reasonable construction of

the statute by the courts. United States v. Harriss,

supra, 347 U.S. at 618, 74S. Ct. at 812; Potomac Sand &

Gravel v. Governor, supra, 266 Md. at 379.

Most of the allegedly vague provisions of the Act,

such as “voluntary allowances uniformly,” as used in

Paragraph D, and “periods of shortage,” “uniformly”

and “on an equitable basis” as used in Paragraph F,

have already been discussed. These provisions are, in

our view, sufficiently definite so as not to constitute a

denial of due process of law. Likewise, we find, as did

the trial court, that the term “producer or refiner” is not

unconstitutionally vague. A producer, as used in the

Act, is a person, firm or corporation engaged in the

production of crude oil, i.e., extracting crude oil from the

earth. A refiner is one engaged in refining crude oil.

Nor do we find that Paragraph E, which requires that

all equipment rentals be applied uniformly to all retail

service station dealers supplied, is unconstitutionally

vague. Affidavits filed by the oil companies indicated

that certain equipment supplied to retail service station

dealers is customarily included in the lease of the

station. However, certain other items such as “identifi-

cation signs and credit card imprinters” are not

included in the lease but are rented separately to each

dealer. We think that the term “equipment rentals”

refers to that equipment which, according to industry

practice, is supplied to the dealer separate from the

lease of the service station. And consistent with the

policy of the Maryland Act that all retail service station

dealers be treated equally by their supplier, Paragraph

E mandates that all dealers be charged the same rental

for like equipment.

(9) Severability

The oil companies’ final argument is that the various

provisions of Ch. 854 are not severable. Recognizing

that their substantive due process, commerce clause,

44a

unconstitutional taking and equal protection argu-

ments are directed solely at the Act’s divestiture

provisions (Paragraphs B and C), whereas Paragraphs

D and F are challenged only on Supremacy Clause

grounds, the oil companies contend that if any of these

challenges is accepted by this Court, then the entire Act

should be held invalid. (Appellees’ brief, p. 66). They

maintain that the Legislature intended the Act to be

“an integrated whole.” (/bid.) With respect to the issue

of severability, see Maryland Code (1957, 1976 Repl.

Vol.), Art. 1, §23; Blackwel! v. State, 278 Md. 466, 473-

474, 365 A.2d 545 (1976); Shell Oil Co. v. Supervisor, 276

Md. 36, 48-49, 343 A.2d 521 (1975), and cases therein

cited. However, since we have rejected all of the

challenges to the Act’s provisions made by the oil

companies in this Court, the issue of severability is not

now presented for decision.

Judgment of the Circuit Court for

Anne Arundel County reversed, and

case remanded to that court for entry

of a judgment in accordance with this

opinion.

Appellees to pay costs.

45a

APPENDIX B

In the Court of Appeals of Maryland

' No. 10

September Term, 1976

Governor of the State of Maryland, et al.

v.

Exxon Corporation, et al.

On Motions for Reconsideration and

Stay of Mandate

Before Murphy, C.J., and Smith, Digges, Levine and

Eldridge, J.J.. and James C. Morton, Jr., and

Ridgely P. Melvin, Jr., Associate Judges of the Court

of Special Appeals, specially assigned.

Decided April 13, 1977

ELDRIDGE, J.:

Appellees have all filed motions for reconsideration.

In all respects but one, the points raised have been

adequately answered by this Court’s opinion, and to

this extent the motions are denied.

The one matter raised which is not dealt with in the

Court’s opinion involves a question of statutory

46a

interpretation. In their motion for reconsideration

Commonwealth Oil Refining Company, Inc., and

Petroleum Marketing Corporation (PMC) have re-

quested that the mandate of this Court be modified to

allow the court below on remand to consider their

argument that the Maryland Act is not applicable to

PMC. In its declaration, PMC alleged that the term

“retail service station” as used in Paragraphs B and C

of the Act refers only to retail service stations offering a

“full line of automotive services to the motoring public”

and that, therefore, those provisions are not applicable

to PMC which operates “gas only” service stations. The

trial court did not rule on this issue, and since this

question was not raised on appeal, this Court did not

consider it. However, as this contention involves only a

legal issue of statutory interpretation, we shall now

consider it instead of remanding for further trial court

proceedings. See Maryland Rule 885.

Definitions applicable to the entire Motor Fuel

Inspection Law, Maryland Code (1957, 1972 Repl. Vol.,

1976 Cum. Supp.), Art. 56, §§ 157A-157M, of which the

challenged statute is a part, are found in Art. 56,

§ 157A. Section 157A(6) defines “retail service station

dealer” as “any person, firm or corporation maintain-

ing a place of business where motor vehicle fuel is sold

and delivered into the tanks of motor vehicles.” In view

of this definition of “retail service station dealer,” it is

clear that “retail service station” refers to any retail

place of business where motor vehicle fuel is sold and

delivered into the tanks of motor vehicles. The term is

not limited to those places which, in addition to selling

motor vehicle fuel, also offer automotive services.

Moreover, the purpose of Paragraphs B and C is to

preserve competition in the retail gasoline market by

eliminating what the Legislature determined to be the

destructive competition of service stations operated

directly by producers or refiners. To so limit the

definition of “retail service station” would defeat the

purpose of these provisions by allowing producers or

refiners to continue to operate retail service stations so

47a

long as those stations did not offer automotive services.

Such an interpretation of the statute was clearly not

intended by the Legislature. Therefore, we hold that

“retail service station” as used in Paragraphs B and C

includes stations such as those operated by PMC which

sell only motor vehicle fuel.

The appellees have also filed a motion to stay the

mandate of this Court. If the mandate were to be issued,

the circuit court would be required to dissolve the

injunction prohibiting appellants from enforcing the

Act. Appellees contend that dissolution of the injunc-

tion would require immediate enforcement of the

divestiture provisions of the Act by the State prior to

possible review and final disposition of this case by the

Supreme Court of the United States and would result in

irreparable injury. We do not agree that upon dissolu-

tion of the injunction, the State will be either permitted

or required to enforce the divestiture provisions imme-

diately.

The Act became effective on July 1, 1974. Under

Paragraph B, after that date no producer or refiner was

to open a retail service station operated by company

personnel. However, under Paragraph C, producers or

refiners were not prohibited from operating retail

service stations with company personnel until after

July 1, 1975. Thus, the General Assembly provided a

one year period from the effective date of the Act in

which producers or refiners could convert company

operated stations to dealer operation or otherwise divest

themselves of company operated stations. The statutory

language reflects a clear legislative intent to delay

enforcement of the divestiture provisions for one year

after the Act becomes operative. The State, interpreting

the statute in a like manner, has stated in its answer to

the motion that the one year period will be observed in

the enforcement of the Act in accordance with the

requirements of the statute. Therefore, the divestiture

provisions of Paragraph C cannot be enforced until one

year from the dissolution of the injunction in the

instant case. Consequently, issuance of our mandate

48a

will not result in immediate enforcement of the

divestiture provisions of the Act. It should also be noted

that under Paragraph H of the Act, the Comptroller

may permit reasonable exceptions to the divestiture

dates in the event that there is no ‘inal resolution of

this case prior to the one year divestiture period.

Accordingly, we do not find that issuance of the

mandate will result in irreparable injury to the parties.

The motion for stay of mandate is denied.

Motions Denied.

49a

APPENDIX C

MEMORANDUM

In the Circuit Court for Anne Arundel County

Equity Nos. 22,069, 22,091, 22,216, 22,461, 22,502,

22,551 and 22,562

Exxon Corporation, et al.,

Plaintiffs,

v.

Marvin Mandel, Governor, et al.,

Defendants.

Paragraph D of Chapter 854 of acts of 1974 provides:

“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.”

Plaintiffs have moved for partial summary judgment,

claiming that the provisions of paragraph D are illegal.

Assuming without deciding that the term “voluntary

allowances” includes a price reduction to selected

dealers, the court believes that there are no substantial

facts in dispute on the question of the legal effect of

paragraph D, and consequently it is appropriate that

the plaintiffs’ motion for summary judgment be

entertained by the court to the end that this trial be

expedited as much as possible.

It is established and stipulated that Plaintiff movants

are producers and refiners of petroleum products, and

50a

offer goods and services at retail and wholesale levels

in Maryland.

All gasoline and allied petroleum products sold by

movants to dealers in Maryland is transported into the

State in a continuous flow of interstate commerce from

refineries located outside the boundaries of the State.

Under specified market conditions, movants have,

and presently do grant temporary price reductions or

competitive price allowances to their branded retail

dealers within certain geographic areas in Maryland

without extending such allowances on a state-wide

basis.

Literal enforcement of paragraph D in matters of

price allowances would place the plaintiffs in jeopardy

of violation of the Robinson-Patman Act passed by the

* Congress of the United States in 1936 in an attempt to

foster fair competition in interstate commerce. Particu-

lar exposure of risk would take place in areas where

compliance with paragraph D would necessarily im-

pinge upon gasoline sales in neighboring states or the

District of Columbia.

Where, as in Maryland, gasoline is neither produced

nor refined, it has been held that sales in commerce are

effected when a dealer is sold gasoline which had been

refined by the supplier in a state other than the one in

which the sales were made. Standard Oil Co. v. F.T.C.,

340 U.S. 231; Bargain Car Wash v. Standard Oil Co.,

466 F.2d 1163. Moreover, paragraph D would have the

effect of depriving the plaintiffs in Maryland of the

absolute defense afforded them by sub-section 2(b) of 15

U.S. Code §§13-13B. 2la (1952) when plaintiffs are

alleged to have discriminated in price between different

purchasers of commodities of like grade and quality.

While it seems clear to the court that Robinson-

Patman does not completely preempt the field of

gasoline marketing within the several states of the

United States, paragraph D of the Maryland Act would

unquestionably have the effect of repealing the 2(b)

defense in Maryland, and at the same time impose upon

5la

the plaintiffs the risk of conflict with federal policy

which has been held to be prohibited to the states as

early as 1819 in McCulloch v. Maryland, 17 U.S. 316.

“The court has bestowed on this subject its most

deliberate consideration. The result is a conviction

that the states have no power, by taxation or

otherwise, to retard, impede, burden, or in any

manner control the operations of the constitutional

laws enacted by Con to carry into execution

the powers vested in the general government. This

is, we think the unavoidable consequence of that

supremacy which the Constitution has declared.”

McCulloch, supra.

As late as June of 1975 in Connell Const. Co. v.

Plumbers and Steamfitters Local, 43 Law Week 4657,

the Supreme Court reiterated that federal law preempts

state remedies that interfere with federal policy,

especially where substantial risk of conflict exists.

This court finds that the risk of conflict in attempted

compliance by the plaintiffs with paragraph D is all

apparent, and that this paragraph, would of necessity,

foster the lack of lawful competition within the State to

the detriment of the consumer. It therefore finds that in

obstructing the accomplishment and execution of the

full purposes and objectives of an Act of Congress of the

United States paragraph D is invalid under the

preemption doctrine. Hines v. Davidowitz, 312 U.S. 52.

The Plaintiffs’ motion for partial summary judgment

is therefore granted this 14th day of October 1975.

E. MACKALL CHILDs,

Judge.

53a

APPENDIX D

MEMORANDUM OF OPINION

In the Circuit Court for Anne Arundel County

Equity Nos. 22,069, 22,091, 22,216, 22,461, 22,502,

22,551 and 22,562

Exxon Corporation, et al.,

Plaintiffs,

v

Marvin Mandel, Governor, et al.,

Defendants.

This litigation was commenced when Exxon Corpora-

tion (“Exxon”’) filed suit against defendants on June 17,

1974 alleging the unconstitutionality of Chapter 854 of

the Laws of Maryland of 1974. Plaintiffs Continental

Oil Company and Kayo Oil Company (“Kayo”) and

Shell Oil Company (“Shell”) subsequently filed similar

suits on June 28th and September 3rd, 1974, respec-

tively. Plaintiffs Gulf Oil Corporation (“Gulf”), Phillips

Petroleum Company (“Phillips”), Petroleum Marketing

Corporation and Commonwealth Oil Refining Com-

pany, Inc. (“Petroleum Marketing”) and Ashland Oil,

Inc. (“Ashland”) filed bills of complaint on January 23,

1975, February 14, 1975, March 19, 1975 and March 26,

1975, respectively. All of these suits are consolidated for

purposes of the trial of this case.

On May 5, 1975 (on July 24, 1975 for Petroleum

Marketing), the Court entered an order prohibiting

defendants from enforcing against plaintiffs the provi-

sions of Chapter 854 while the instant case is pending

54a

and at the same time prohibiting plaintiffs, while the

instant case is pending, from opening and operat‘ng

service stations with company personnel, personnel of a

subsidiary company or a commissioned agent without

first notifying the defendants of their intention to do so.

Motions for partial summary judgment with respect

to paragraphs D and F of Chapter 854 were filed by

Shell and Exxon on May 29, 1975 and by Gulf on June

19, 1975. Thereafter, as a result of the deposition of

John K. Coleman, Chief of the Gasoline Tax Division of

tiie Comptroller's office, taken by plaintiffs on July 23,

1975, plaintiffs Continental, Shell, Gulf, Phillips and

Ashland filed a joint motion for partial summary

judgment as to paragraphs B and C of the statute on

August 10, 1975.

After extensive briefing and argument on the motion

in open court the undersigned granted the motion for

partial summary judgment and ruled that paragraph of

Chapter 854 unconstitutionally impinged upon the

provisions of the Robinson-Patman Act and especially

precluded plaintiffs from availing themselves with the

absolute defense afforded under 2(b) of 15 U.S. Code

§§ 13-13B, 21a (1952) in the events plaintiffs are alleged

to have discriminated in price between different

purchasers of commodities of like grade and quality.

Argument and decision as to paragraph F was

deferred pending action by the United States Congress

in terminating or extending the Federal Emergency

Petroleum Allocation Act of 1973.

Plaintiffs continue to seek a declaratory judgment

that Chapter 854 of the Laws of Maryland of 1974,

amending Article 56, § 157E of the Annotated Code of

Maryland (as amended at the 1975 Session of the

General Assembly by Chapter 608 of the Laws of

Maryland of 1975 effective July 1, 1975) (“the Act”), is

unconstitutional and invalid, and a permanent injunc-

tion prohibiting the defendants from enforcing the

provisions of the Act against the plaintiffs. All

plaintiffs, except Exxon and Petroleum Marketing, (by

55a

their joint motion for partial summary judgment filed

on August 10, 1975) seek a declaratory judgment that

paragraphs B and C of the Act are not applicable to

them or in the alternative are unconstitutionally vague.

The Maryland Act adds the following provisions to

Article 56, § 157E (the italic portions are those added by

Chapter 608):

(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 rors | 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 yn get commissioned

agent, or under a contract with any person, firm, or

corporation managing a service station on a Po

arrangement with the producer or refiner. The

yo must be operated by a retail service station

ealer.

(D) watages A og pane refiner, or wholesaler of

troleum products supplying —_— and special

els to retail service station ers shall extend

all voluntary allowances uniformly to all retail

service station dealers supplied.

(E) Every producer, refiner, or wholesaler of

leum ucts supp gasoline and special

els to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

(F) Every producer, refiner or wholesaler of

petroleum ucts shall apportion uniformly all

gasoline and s fuels to all retail service

station dealers during periods of shortages on an

56a

equitable basis, and shall not discriminate among

the dealers in their allotments.

(G) The Comptroller may adopt rules or regula-

tions defining the circumstances in which a

producer or refiner temporarily may operate a

previously dealer-operated station.

(H) The Comptroller may permit reasonable

exceptions to the divestiture dates specified by this

section after considering all of the relevant facts

and reaching reasonable conclusions besed upon

those facts.

THE PLAINTIFFS

(As Stipulated Among Counsel)

EXXON

Exxon Company, U.S.A., a division of Exxon

Corporation (hereinafter referred to as “Exxon”) was

formed effective January 1, 1973, and operates the

business interests formerly operated by Humble Oil &

Refining Company.

Exxon is a company involved in exploration for and

production of crude oil and natural gas and in the

refining, transporting and marketing, at both the

wholesale and retail levels, of a wide range of petroleum

products.

Insofar as petroleum products are concerned, opera-

tions by Exxon in Maryland are limited to distribution

and marketing.

Exxon has no crude oil production or petroleum

refineries in Maryland. Consequently, purchasers of

Exxon branded gasoline in the State of Maryland have

all of their gasoline supplied from outside the state.

Gasoline sold under the Exxon brand in the State of

Maryland normally comes from Exxon’s refineries at

Baytown, Texas, and Baton Rouge, Louisiana. The

crude oil refined at these two refineries comes from both

domestic and foreign sources. Crude oil refined at

Baytown normally comes from Texas, Alabama,

Florida, and foreign sources. Crude oil refined at Baton

57a

Rouge normally comes from Texas, Louisiana, Missis-

sippi, Alabama, Florida and foreign sources.

Gasoline produced at these two refineries 1s trans-

ported to two primary terminals which supply custo-

mers in Maryland. These primary terminals are located

in Fairfax, Virginia and Baltimore, Maryland. The

gasoline is normally brought to the Fairfax terminal by

common carrier pipeline, the Plantation Pipeline

System, from the Baton Rouge refinery. In 1973,

approximately 118,500,000 gallons of gasoline we

supplied to Maryland customers from this terminal.

This terminal also supplies gasoline to customers in

Virginia and Washington, D. C. The Baltimore terminal

is normally supplied from the Baytown refinery by

tanker. In 1973 approximately 210,000,000 gallons of

gasoline were supplied to Maryland customers from this

terminal. This terminal also supplies gasoline to

customers in Pennsylvania, Virginia and West Vir-

ginia.

Exxon maintains one secondary terminal in Mary-

land, at Salisbury. The secondary terminals at Easton

and Hagerstown have been closed since Exxon filed its

Bill of Complaint. The Salisbury terminal is supplied by

barge or tank truck from the Baltimore terminal. In

addition, a terminal at Norfolk, Virginia has on

occasion supplied Exxon brand gasoline for portions of

the lower Chesapeake Bay area of Maryland. The

Easton, Hagerstown, Salisbury, and Norfolk terminals

accounted for approximately 29,000,000 additional

gallons of gasoline to Maryland customers in 1973.

The majority of Exxon brand motor oil sold in

Maryland comes from the Baytown and Baton Rouge

refineries where the base stock is made. It is shipped by

tanker to Bayonne, New Jersey, where it is blended into

motor oil with additives, which are made at Bayonne. It

is then barged to the Baltimore plant where it is canned

and trucked to customers. The vast majority of greases

sold in Maryland at Exxon company-operated stores

and at various Exxon dealer service stations come from

Exxon’s plant in Pittsburgh, Pennsylvania.

58a

Antifreeze, spark plugs, tires, batteries and accesso-

ries sold at company-operated stations and at various

Exxon dealer stations in Maryland are manufactured

by other companies at various places outside the State

of Maryland and Shipped into Maryland by truck and

rail.

Exxon operates four stations in Maryland selling

gasoline under the Alert brand. These stations are

supplied by refineries, other than those of Exxon,

located outside the State of Maryland. Prior to June 4,

1974 the product was acquired primarily from Crown

Petroleum Corporation. Since then, the Alert stations

have been primarily supplied by BP Oil Corporation.

Exxon does not engage in any producing of motor

vehicle fuels in the State of Maryland.

As of December 31, 1973 Exxon branded gasoline was

sold at approximately 25,400 retail outlets located in

forty-five states and the District of Columbia.

Exxon began marketing operations in Maryland in

1916. Exxon sells substantial quantities of gasoline and

other petroleum products and other goods and services

at the retail level both in local markets in Maryland

and also to persons, such as interstate travelers,

common carriers, airlines, and the shipping industry,

operating exclusively in interstate commerce in Mary-

land.

As of July 1, 1974, Exxon had 36 company-operated

stations in Maryland, representing approximately 6.7%

of the 532 direct served! Exxon branded service stations

in Maryland. This represents a decline from 57

company-operated stations in Maryland as of December

31, 1971 or approximately 9.2% of the 620 service

' Those service stations operated by independent dealers or

by company personnel which receive their product directly

from Exxon, as distinguished from those stations which are

supplied by companies which purchased Exxon brand

gasoline and resold it. The latter companies are generally

known as resellers.

59a

stations at that time.? As of December 31, 1973, Exxon

had 356 stations operated by lessee dealers in Mary-

land. As of December 31, 1974, Exxon had 326 stations

operated by lessee dealers in Maryland. At the end of

1973, Exxon had approximately 140 contract dealers in

Maryland At the end of 1974, Exxon had approxi-

mately 133 contract dealers in Maryland.

Exxon currently has 30 branded resellers in Mary-

land. It has no direct knowledge of the exact number of

Exxon branded outlets through which the resellers sell

their products or to the extent to which other products

and services are offered by those facilities.

Exxon markets its products nationally and in

Maryland through a full range of retail facilities. In

Maryland, Exxon had 11 Car-Care Centers (one of

which is combined with a car wash facility), one full

self-service station, one turnpike station, and four

limited service stations selling gasoline under the Alert

brand. The remainder of the 532 direct served Exxon

branded service stations in Maryland as of December

31, 1973 are conventional facilities.®

The Car Care Centers in Maryland have from 7 to 12

bays as compared with 2 to 4 bays of the typical

conventional service station and the cost of investment

is substantially higher. They are specifically equipped

and manned for repair and maintenance work. Their

service work capability usually includes alignment and

front-end repairs, brake work, exhaust system work,

2 Exxon has traditi meant i sentee peoat ily

through Ade mer yer Ae and wholesalers ra than

through company operations. As of December 31, 1973,

Exxon operated with company personnel 933 service stations

nationwide. These stations represent approximately 3.7% of

the approximately 25,400 Exxon il outlets. This repre-

sents a decline from the 2,731 company-operated service

stations as of December 31, 1971 or 9.7% of the then

approximately 28,100 Exxon retail outlets.

8 As of July 1, 1974, Exxon had 123 major service centers

nationwide which te under the logo Exxon Car-Care

Center and had 74 full self-service stations nationwide.

60a

tune-up, shock absorber and universal joint replace-

ment, airconditioning service and repair, cooling and

heater system service and repair, fuel system work,

igniti6n work, and power train-transmission service. In

addition to these maintenance and repair services, the

Car-Care Center provides the consumer with a full line

of tires, batteries, and automobile accessories. The Car-

Care Center concept was developed by Exxon to

participate in the expanding market for automobile

repair and services. The repair services provided at

those Centers are guaranteed at any Car-Care Center in

the nation, not just the one which issues the warranty.

The following is a list of specialized equipment found

at a “Car Care Center”:

Start-a-Car Unit.

Fuel pump tester.

Bearing press package-17 ton.

Wheel-puller package including drivers, etc.

Brake Shop-combination.

Acetylene gas welding unit.

ARC welding unit.

Custom wheel adapter kit to handle all cars.

Grand Prix adapter for ETC-10.

Wheel bearing packer.

Parts cleaner-air operated.

. Power washer package complete.

. Jacks-lifting package.

Screw type stand 64” to 83” height 500 lob.

rating — used for lifting.

15. Brake stool.

16,. Air r tester.

At PCV valve tester.

18. Compression tester.

19. Head gasket leak detector.

20. Mechanics stethoscope.

CHART ON

—_ — —

ones

—

>

6la

21. Inspection mirror.

22. Brake Analyzer-dynamic.

23. Static front end alignment.

24. Alignment lift.

25. Headlight tester.

THE Chart in Appendix A identifies the initial

investment by Exxon in all of Exxon’s existing

company-operated stations in Maryland based upon

dollar values at the time of the original investment by

Exxon, broken down according to land, building and

equipment. The total investment amounts to

$10,059,700.00

The following tables shows the volume of gasoline in

thousands of gallons sold through Exxon branded

stations in Maryland in 1973:

Company % of Non-Company % of

Total Operated Total Operated® Total _

344,921.9 54,190.0 15.7% 290,731.99 94.3%

The following table shows the volume of motor oil,

tires, and batteries sold through direct served Exxon

brand stations in Maryland during 1973:

Company % of Non-Company % of

Total Operated Total Operated Total

Motor Oil

(gallons) 1,184,100 157,600 13.3% 1,026,500 86.7%

Tires

(units) 85,891 11,831 13.8% 74,060 86.2%

Batteries

(units) 27,850 4,378 15.7% 23,472 84.3%

* Includes 25,280,000 gallons sold by Exxon to resellers in

Maryland in 1973.

5 These figures reflect only wholesale sales by Exxon tS

non-company operated stations. The dealers at these stations

purchase additional quantities of these products from other

sources and sell them at retail.

62a

In 1973 Exxon had retail sales at company-operated

stations of $928,450 in house brand accessories, and

$690,860 in other accessories and had labor revenue of

$1,256,801. This is in comparison with, wholesale sales

by Exxon of house brand accessories to non-company

operated stations of $1,110,905. Figures for other

accessories and labor revenue at non-company-operated

stations are not available to Exxon.

There is presently in force a contract between Exxon

Corporation and the Maryland Transportation Author-

ity dated November 15, 1973 for the operation of a

gasoline service station at the turnpike facility at the

Maryland House located on the John F. Kennedy

Memorial Highway. The contract is for a period of five

years with a right of renewal for an additional five

years. The contract contains the following provisions,

among others, concerning the operation of the facility:

a. Exxon agrees to operate the service station in

a highly efficient manner, and to conduct its

operations in accordance with the highest stand-

ards of management for service stations, to the end

that the public may be served in the best possible

manner and that public esteem may be won for

Exxon, its service and products, and for John F.

Kennedy Memorial Highway.

b. Prices charged for goods and services sold at

the service station shall be no higher than, and the

quality thereof shall be at least equal to, the prices

and quality prevailing at service stations in the

same general vicinity which are owned and

operated by oil companies.

c. Exxon shall supply free service at least equal

to such service supplied by service stations in the

_ general vicinity which are owned and operated by

\ oil companies.

d. Exxon is to operate the service station 24

hours a day every day of the week. Ample

provision is to be made by Exxon for speedy and

Corrs handling of patronage during all hours.

}

peumemren ©

* 63a

e. Exxon shall have a sufficient number of

trained and uniformed attendants on duty at all

times to conduct properly the business of a gasoline

service station. Ail employees of Exxon working on

the premises must be thoroughly familiar with the

location of interchanges in order to direct motorists

intelligently, and they must know the emergency

services, including doctors, hospitals, and ambu-

lances, available in the general vicinity of the

service area.

f. Exxon is to furnish roadside service for

disabled vehicles, including two modern service

trucks of good appearance and in first class

mechanical condition available 24 hours a day on

standby service. Exxon shall perform its duties in

such manner as to jurnish adequate call service to

highway patrons within 20 minutes from the time

Exxon is notified. The equipment operators must at

all times be courteous and present a clean and neat

appearance. They shall obey and res all rules

and regulations of the Authority. The Operator

shall encourage each equipment operator to obtain

a certificate of completion of the standard 22-hour

Red Cross first-aid training course when and if

practical and shall permit operators to attend such

course during regular working hours without

deduction from such operator’s pay, when and if

arrangements can be made for such training.

The following is a list of innovative marketing

concepts of products testified at stations operated by

Exxon in Maryland and elsewhere, with an explanation

of each concept or product.

1. Partial self service. Several years ago Exxon

tested self-service operation at one island in a

number. |. npany-operated stations in different

markets. ’ experiment lasted for some two or

three ye>.. Wher in [—xxon’s cpinion, it was

found to be success: i] and the techniques ade-

quately patie s. gan Exxon encouraged dealers to

consider partial self-service where legal and suita-

ble in order to enable them to compete for a broader

spectrum of customers. Exxon made the program

-

64a

available to dealers vpon request at no cost.

Exxon's cost was approximately $750 per station.

Among the problems and issues dealt with during

this experiment were the following: a) the type of

equipment and collection system which is most

convenient and acceptable to the motorist; b) the

most effective means of communicating to the

motorist as he enters the station that one island is

self-service and the other is full service; c) special

problems which arise in the operation; d) whether

credit cards should be accepted at the self-service

island; e) the number of customers who convert

from full service to self-service. In Exxon’s opinion

the resolution of these kinds of issues could only be

accurately obtained by close control of operating

procedures and monitoring of the results, best

performed at company-operated stations.

2. Valucenter advertising and promotion. The

valucenter concept of cooperative advertising and

sales promotion was tested at Car Care Centers

and after, in Exxon’s opinion, proving successful,

was expanded to include dealers who wished to

participate.

3. Manning guidelines. During the gasoline

shortage in 1973, new manpower productivity

guidelines were developed at direct operated

stations and were passed on to dealers, as counsel-

ing guidelines, oe the sales representatives.

These guidelines would, in Exxon’s opinion, assist

a dealer in controlling his largest expense —

manpower — during the time of shorter hours and

fewer days and, at the same time, help to maximize

customer convenience.

_ 4, Certification of mechanics. The National

Automotive Institute for Service Excellence

(NAISE) and automobile manufacturers decided to

certify mechanics through their organization as

being competent for repairing automobiles. In-

itially, this yan owes would have included only

mechanics of automobile dealers. As a result of

being in the Car-Care Center business, Exxon, with

the help of the American Petroleum Institute, was

able to get NAISE to expand the program to

65a

include service station mechanics. Further,

through the experience of its Car-Care Center

mechanics taking the test of certification, Exxon

was able to advise its dealers of the kinds of

training needed prior to ing the tests and also

was successful a ne e certification of

mechanics by N broken down into about

eight categories of expertise rather than having

only one category of Mechanic.

5. Automotive exhaust emission. As a result of

operating Car-Care Centers, Exxon became inter-

ested in testing various manufacturers’ equipment

which is designed to test the exhaust emissions of

automobiles. In Exxon’s opinion some of the

equipment was found to be reasonably acceptable

Others were found to have problems. With the help

of a research division of Exxon, the Company was

able to develop reasonable equipment and proce-

dures for tes exhaust emissions. Subsequently,

the State of New Jersey required automobiles

licensed in that state to be inspected and adjusted

to a minimum level of exhaust emissions. As a

result of Exxon’s work in its company~«o ted

stations, Exxon was able to qualify qui all

such stations in New Jersey and many of its

cealers to the extent that they were licensed by the

State of New Jersey to conduct these tests and

make necessary adjustments to the customer's car.

With about 15% of the service stations in New

Jersey, Exxon had better than 50% of those

licensed by the State to test exhaust emissions.

6. In-bay car wash units. A number of in-bay

units were tested at company-operated stations. As

a result Exxon was able to advise its dealers as to

which pieces of equipment to avoid and which to

use and at the same time de a set o

oes oe es which were available to

7. Add-on air conditioners and tape decks.

Exxon tested the sale of .

66a

degree of expertise needed to actively compete with

specialty stores in these items made them non-

profitable. As a consequence, Exxon advised its

dealers to avoid these items of merchandise.

8. Exact cash or credit card after dark. Due to

the high incidence of robberies at service stations,

the company tested a procedure of accepting only

cash in the exact amount of the purchase or credit

cards for sales made after dark. This program

subsequently was offered to Exxon dealers, and the

incidence of robberies at stations which adopted

this practice has declined significantly.

9. Automotive repair and diagnostic equipment.

The company tested various types of repair and

diagnostic equipment at Car-Care Centers and

planned to recommend types of equipment and

procedures to its dealers. Automobile diagnosis at

the time of this test was, in Exxon’s opinion, a

popular item in the marketplace. The dynamome-

ter, a loaded mode diagnostic equipment device,

was very expensive and difficult to utilize profita-

bly. Consequently, the company dropped this kind

of equipment at company-operated stores and did

not recommend to its dealers to participate in this

effort. Exxon has tested idle mode diagnostic

a and is currently preparing to test

muffler diagnostic equipment. Various types of

automotive repair equipment have also been tesied

at company-operated stations, including, for exam-

ple, those for front-end alignment.

10. Motor oil vending machines. Motor oil

vending machines were tested at full self-service

company-operated service stations. The negative

sadiie m the test led Exxon to advise dealers

not to invest in machine.

Exxon recognizes certain geographic areas in Mary-

land and surrounding states wherein it identifies

competitive markets for the sale of its products. Within

such “trading areas” it does, in order to meet competi-

tion from other suppliers, temporarily reduce its

wholesale price or grant temporary allowances to its

67a

dealers or resellers without making price reductions or

allowances throughout the State.

The normal business practice of Exxon is not to

extend temporary allowances, price adjustments or rent

relief “uniformly to all retail service station dealers

supplied” either within the State of Maryland or

nationwide.

Some of Exxon’s trading areas cover geographic

areas which cross the boundaries of the State of

Maryland into adjoining jurisdictions, including, for

example, the District of Columbia and West Virginia.

Exxon is not aware of any violations of law by Exxon

in the use of any voluntary allowances in the State of

Maryland.

It has on occasion granted to its lessee dealers in

Maryland rental abatements or rental modifications for

various reasons.

When Exxon leases a service station facility to a

dealer, such Exxon owned equipment as pumps, tanks,

lifts, lights and air compressors are included in the

lease agreement and the lease rental. Other items of

Exxon owned equipment, such as identification signs

= credit card imprinters, are separately rented to the

er.

An investigation was conducted on January 29 and

30, 1974 by auditors of the Gasoline Tax Division of the

Comptroller's Office, Early W. Bates and Charles C.

Downs, to determine whether the allocation of gasoline

by Exxon to some 30 stations selected at random by the

auditors was fair and equitable. These auditors con-

ducted a subsequent investigation on February 19 and

20, 1974 to review the allocation to Exxon’s company-

operated stations. The conclusion reached by the

auditors upon the completion of their investigations

was that Exxon was allocating its supply to dealers

properly vis-a-vis its company-operated stations.

68a

CONTINENTAL OIL COMPANY

KAYO OIL COMPANY

The Continental Oil Company (hereinafter referred to

as “Continental”) is a Delaware corporation which was

formed effective October 8, 1920. The duration of its

charter is perpetual. The stock of Continental is

publicly held and traded. Its principal offices are

located in Houston, Texas, Stamford, Connecticut and

Ponce City, Oklahoma.

It is a company involved in exploration for and

production of crude oil and natural gas and in the

refining, transportation of crude oil and natural gas

and in the refining, transportation and marketing, at

both the wholesale and retail levels, of a wide range of

petroleum products.

Continental does not produce or refine petroleum

products or motor vehicle fuels in Maryland, nor does it

have any independent service station dealers in

Maryland. It does not sell branded “Conoco” gasoline

here.

The petroleum products which Continental brings

into the State of Maryland are refined by it at its

Westlake, Louisiana refinery. The petroleum products

are then transported through the Colonial Pipeline to

Continental's Baltimore Terminal. Continental’s pro-

ducts (gasoline and distillates) are sold to purchasers

doing business in Maryland as well as to purchasers

located in states other than Maryland, such as

Pennsylvania, Virginia and the District of Columbia.

With respect to the purchasers doing business outside of

the State of Maryland, a substantial part of the volume

is delivered by Continental by its own trucks or

common carriers engaged in interstate commerce.

The petroleum products distributed by Continental

within the State of Maryland are received from the

Colonial Pipeline, in that no other significant volume of

petroleum products are received from any other trans-

portation sources. The petroleum products sold in

Maryland through the filling stations operated by Kayo

69a

Oil Company and the petroleum products sold to

Continental’s wholesale customers at its Baltimore

terminal, through the Onco Division of Continental Oil

Company, receive no additives at Continental’s Balti-

more terminal of the Colonial Pipeline. The only

additives that are «ded to Continental's product are

pipeline corrosion and oxidation inhibitors which are

added at Continental’s Louisiana refinery, prior to

transportation through the Colonial Pipeline into the

State of Maryland.

As of June 30, 1975, Continental employed 225

persons in its marketing operations in Maryland. Its

total payroll in the State of Maryland for the years 1971

through 1974 was, for each year, as follows:

1971 — $3,350,000.00

1972 -- $2,650,000.00

1973 — $2,610,000.00

1974 — $3,136,000.00

ae ae to —- purchasers from its

, leum

distributed to Kayo Oil socom Pg se A pacman

of petroleum products for the years 1970 through th

first seven months of 1975: .

1970 — 12,457,000 gals.

1971 — 14,573,000 gals.

1972 — 13,207,000 gals.

1973 — 13,214,000 gals.

1974 — 15,706,000 gals.

1975 — 9,903,000 gals.

(7 mos.)

Continental owns 100% of the capital stock of the

Kayo Oil Company (hereinafter referred to as “Kayo”)

which is a Delaware corporation formed effective April

29, 1965. The duration of its charter is perpetual. Its

principal and only office is located in Chattanooga,

Tennessee.

70a

Keyo is a gasoline marketing company and, there-

tore, has neither producing or refining capacity in

Maryland or elsewhere nor has it terminals or bulk

plants. It is a large private brand retail marketer of

gasoline.

Kayo has 80 supervisory districts and each district is

under the supervision of a manager. The manager has

no staff and no separate or private office. He works out

of one of the gasoline stations located within his

district. Kayo has 16 area managers (the area manager

supervises approximately 5 districts). The area manag-

ers have no staff working for them and also operate out

of gasoline stations located within the area. Most, if not

all, of Kayo'’s management have worked their way up to

supervisory positions through promotions within the

organization.

Kayo qualified to do business in the State of

Maryland on January 10, 1964. It presently operates 14

filling stations in Maryland. There are six Kayo

stations in Baltimore City and eight filling stations

located in various other counties in Maryland.

Kayo obtains all of its gasoline which it sells at its

retail outlets in Maryland from Continental. The

gasoline is distributed to Kayo by Continental from

Continental's Baltimore terminal, by means of Contin-

ental’s trucks and common carriers, after the same has

been shipped to the Baltimore terminal through the

Colonia! Pipeline.

Its Maryland stations were either built by it or were

stations purchased and structurally modified to con-

form to the Kayo system of retail marketing. Kayo’s

investments in its existing company owned and

operated stations in Maryland is as follows, as of June

30, 1975 — $676,525.00. Maryland sales of gallons of

gasoline in 1972 were 14,964,980; in 1973, 15,952,928; in

1974, 13,396,566; and during the first half of 1975,

6,550,868.

The comparative sales by Continental to its whole-

sale purchasers from its Baltimore terminal and the

Tla

total number of gallons of gasoline sold by Kayo

stations in Maryland are set forth in the following

table:

Continental Sales Kayo Sales to

Year to Wholesalers the Public

1972 13,207,000 gals. 14,964,980 gals.

1973 13,214,000 gals. 15,952,928 gals.

1974 15,706,000 gals. 13,396,566 gals.

As of June 30, 1975, Kayo employed 85 persons in its

marketing operations in Maryland. Its total payroll in

the State of Maryland for the years 1971 through 1974

was, for each year, as follows:

1971 — $500,000.00

1972 — $568,000.00

1973 — $405,000.00

1974 — $310,079.00

SHELL OIL COMPANY

Shell Oil Company (hereinafter referred to as “Shell’’)

is a corporation organized and existing under the laws

of the State of Delaware with its principal offices at

One Shell Plaza, Houston, Texas. It was incorporated

on February 8, 1922.

Shell is a company also involved in exploration for

and the production of crude oil and natural gas and in

the refining of crude oil, and the transportation and

marketing, at both the wholesale and retail level, of a

wide range of petroleum products. Shell-branded gaso-

line is sold at approximately 8,900 direct served retail

outlets located in 40 states and the District of Columbia.

Shell has no crude oil production or petroleum

refineries in Maryland. Consequently, purchasers of

Shell-branded gasoline in the State of Maryland have

all of their gasoline supplied from outside the State.

Gasoline sold under the Shell brand in this state

primarily comes from Shell’s refineries at Deer Park,

72a

Texas and Norco, Louisiana. The crude oil refined at

these two refineries comes from both domestic and

foreign sources. Domestic crude oil refined at Deer Park

primarily comes from Texas and Louisiana. Domestic

crude oil refined at Norco primarily comes from

Louisiana.

Gasoline produced at Deer Park, Texas and Norco,

Louisiana refineries is transported to two terminals

which supply customers in Maryland. These terminals

are located in Springfield, Virginia and Wagner's Point,

Maryland. The gasoline is normally brought to the

Springfield terminal by common carrier pipeline and to

the Wagner’s Point terminal by tanker.

The majority of Shell brand motor oil sold in

Maryland comes from the Deer Park and Norco

refineries where the base stock is made.

Shell does not believe that it is engaged in producing,

blending or compounding motor vehicle fuels in the

State of Maryland. Prior to distribution from Shell's

Springfield, Virginia and Wagner’s Point, Maryland

terminals, additives are injected into gasoline and, in

those rare instances when the product quality does not

meet specifications, some premium gasoline is added.

Ali of the petroleum products sold by Shell at retail to

the public in the State of Maryland are transported into

the State of Maryland in interstate commerce. It

markets its products nationally through the full range

of retail facilities. As of June 30, 1975, Shell operated

180 tunnel car wash stations, 135 self-serve stations, 15

gasoline-only stations, 4 self-repair stations and 50

conventional full-service stations nationwide.

Shell has traditionally marketed its gasoline through

independent retailers and wholesalers rather than

through company operations. As of June 30, 1975, Shell

operated with company personnel 384 service stations

nationwide, representing approximately 4.3 percent of

the approximately 8,900 Shell direct-served retail

outlets.

73a

As of June 30, 1974, Shell had 1 company-operated

facility in the State of Maryland, representing approxi-

mately 0.5 percent of all directly operated facilities in

Maryland at which Shell-branded petroleum products

were sold.

Shell’s one company-operated Maryland facility is a

conventional full-service station. Shell’s initial invest-

ment in that station, based upon dollar values at the

time of original investment, was $49,285 for improve-

ments, $36,630 for equipment and $12,800 for the 1973

ground lease rental payments; the lease for that

property extends through 1988.

As of June 30, 1974, Shell had 196 stations operated

by independent lessee dealers in Maryland. Shell

currentiy has 7 branded jobbers in Maryland.

The following table shows the number of company-

operated and direct-served dealer operated facilities in

the State of Maryland selling Shell branded products

for the years 1971 through the first six months of 1974:

PERIOD AS OF

12/31/71 12/31/72 +=: 12/31/73 ~—_—~6 /30/74

Company Operated 0 0 1 1

Dealer Operated* 203 206 206 196

* This includes dealer facilities which are either leased

from Shell or another or owned by the dealer.

The following table shows the volume of gasoline in

thousands of gallons sold through Shell branded direct-

served facilities in the State of Maryland in 1973:

Company % of Non-Company % of

Total Operated § Total © Operated _ Total

148,266,866 1,477,639 1% 146,789,227 99%

74a

The following table shows the volume of gasoline in

thousands of gallons sold through Shell branded direct-

served facilities in the State of Maryland in the first six

months of 1974:

Company % of §Non-Company % of

Total Operated Total Operated Total

68,558,649 793,104 1.2% 67,765,545 98.8%

The following table shows the volume of tires and

batteries sold through Shell branded direct-served

facilities in the State of Maryland in 1973:

Company % of Non-Company % of

Total Operated Total Operated* Total

Tires

(units) 29,279 155 0.5% 29,125 99.5%

Batteries

(units) 10,329 25 0.2% 10,304 99.8%

* These figures reflect only wholesale sales by Shell to non-

company operated stations. The dealers at these stations

may purchase additional quantities of these products from

other sources and sell them at retail.

In 1973 Shell’s company-operated station had retail

sales of $11,044 in house brand tires, batteries and

accessories. This 0.6% of the wholesale sales by Shell of

house brand tires, batteries and accessories to non-

company operated stations.

In the first six months of 1974, Shell’s company-

operated station had retail sales of $7,968 in house

brand tires, batteries and accessories. This is 0.7% of

the wholesale sales by Shell of house brand tires,

batteries and accessories to non-company operated

stations.

The hours of operation at Shell’s company-operated

station have been as follows:

Date Hours of Operation

3/1/73-12/15/73 24

12/15/73-1/15/74 18 (6 a.m. - 12 p.m.)

1/15/74-5/1/74 12 (6 a.m. - 6 p.m.)

(closed Sundays)

5/1/74 15 (6 a.m. - 9 p.m.)

(open Sundays)

75a

Though Shell has only one company-operated station

in Maryland, the following is a list and explanation of

innovative marketing concepts and products tested

nationally at Shell company-operated stations:

Full self-service — This type of retail outlet allows the

consumer to perform all required services, including the

dispensing of automotive gasoline.

Gasoline only — In this type of outlet, the consumer

is offered, by an attendant, only gasoline and other

pump island services.

Tunnel car-wash — This denotes an outlet that offers

specialized equipment for washing an automobile.

Although such equipment may be found in both dealer

and company-operated stations due to the large capital

investment required.

Self-repair — This type of outlet, which is currently

being evaluated by Shell, offers the consumer, in

addition to gasoline, all the necessary tools and

facilities to repair his own automobile. The customer

rents a service bay at a per hour cost and he has use of

all tools and instruction manuals. There is also a

technician on duty.

Mini-mart — This type of outlet, which is currently

being evaluated by Shell, would offer the consumer, in

addition to some or all of the traditional services and

products, various non-petroleum related products to

satisfy his needs.

Motor lab — This type of outlet was based on the

viability of certain diagnostic and repair equipment.

After thorough testing and evaluation, it was deter-

mined that such equipment did not meet marketing

needs and standards.

Express oil changer — Through an Express vacuum-

stick which removes used automobile oil, the express oil

changer allows the customer to perform an inexpensive,

clean and fast oil change.

Computerized gasoline pump — This allows a

customer to fulfill gasoline, motor oil and car wash and

76a

wax needs at all times and without delay. The pump

accepts either cash or credit card for the products and

services selected.

Piljer-proof oil merchandiser — This is a display

stand with the capacity to hold 48 quarts of motor oil.

Vue to its locking mechanism, it dispenses with the

necessity of securing the merchandise when the station

closes and thus allows for continuous display of the

product. It also contains a protected area for a credit

card imprinter and a light weight oil can disposal unit.

Autosense — This computer oriented device identifies

all automobile repair needs. It improves productivity by

releasing mechanics for repairs and eliminates the

possibility of human error.

Shell gasoline and motor oil is constantly being

tested and evaluated.

Shell recognizes certain geographic areas in Mary-

land and surrounding states wherein it identifies

competitive markets for the sale of its products. Within

such “trading areas” it has, in order to meet the equally

low price of a competitor of Shell, temporarily reduced

its wholesale price or granted temporary allowances to

its dealers or jobbers without making a general price

reduction or allowance throughout the State.

The normal business practice of Shell is not to extend

temporary allowances, price adjustments or rent relief

“uniformly to all retail service station dealers supplied”’

either within the State of Maryland, or nationwide.

Shell has on occasion granted to its lessee dealers in

Maryland rental abatements or rental modifications.

When Shell leases a service station facility to a

dealer, the Shell-owned equipment at the station is

included in the lease agreement.

From January 1974 to September 1, 1975, the sale of

gasoline in Maryland and in the United States was

regulated by the federal government pursuant to the

Emergency Petroleum Allocation Act of 1973 and the

regulations issued thereunder.

T7a

GULF OIL CORPORATION

Gulf Oil Corporation (hereinafter referred to as

“Gulf’), a Pennsylvania corporation, is involved in

exploration for and production of crude oil and natural

gas and in refining, transporting and marketing, at

both the wholesale and retail levels, of a wide range of

petroleum products. Gulf-branded gasoline is sold at

approximately 18,430 retail outlets throughout the

United States. Gulf also has interests in coal, atomic

energy and other resources which could become energy

producing in the future.

Gulf has done business in Maryland for more than 40

years, and is the third leading supplier of gasoline in

Maryland, selling to dealers, wholesalers, the public,

and others approximately 9% of all the gasoline sold in

Maryland. All of the gasoline sold by Gulf in Maryland

is transported into the state from refineries located

beyond the borders of the state.

In 1936 Gulf opened its first modern service stations

in the Baltimore area. Prior to that time, Gulf had some

bulk plants in Maryland and operated on a limited

basis at the wholesale and retail levels in the state. At

the present, however, insofar as petroleum products are

concerned, operations by Gulf in Maryland are limited

to storage, distribution and marketing. It does not

produce or refine motor vehicle fuels in the State of

Maryland. Purchasers of Gulf branded gasoline in

Maryland have all of their gasoline supplied from and

refined out of state. Gulf-refined products reach the

Maryland market as follows:

a. Gasoline from Port Arthur, Texas, and Alliance,

Louisiana, enters the State of Maryland via the

Colonial Pipeline. Gasoline from Philadelphia, Pennsy]-

vania, enters the State of Maryland either by barge or

truck.

b. Three Gulf terminals serve customers in Mary-

land. These are located at Baltimore and Salisbury,

Maryland, and Fairfax, Virginia. The Baltimore and

Fairfax terminals are supplied by the Colonial Pipeline.

78a

The Salisbury terminal is supplied via barge from

Philadelphia. Customers in Maryland are also served

by bulk plants in various parts of Maryland and one

bulk plant in Delta, Pennsylvania. Some of these bulk

plants are supplied by truck from the various terminals;

oth, s are supplied directly by barge from Philadelphia.

c. All motor oils sold in Maryland originate from the

Philadelphia refinery, and are shipped by truck to

terminals and bulk plants in Maryland, Fairfax,

Virginia and Delta, Pennsylvania.

d. All greases are packaged by the Port Arthur

refinery and shipped via tanker to Philadelphia, and

thereafter by truck to terminals and bulk plants.

In rare instances, upon notification from the State of

Maryland that Gulf's product is not in compliance with

state-required specifications, Gulf mixes different

grades or types of gasoline in order to bring the product

into compliance. For example, Gulf may add premium

gasoline to regular grade gasoline with too low an

octane rating. The product would then be sold as

regular gasoline. Also, ii the lead content of a small

volume of low-leaded gasoline is too high, it may be

added to a large volume of low-leaded gasoline, so that

the lead content of the resulting product is within

specifications.

In 1974, 87,768,000 gallons of gasoline were sold by

Gulf service stations in Maryland; in 1973, 82,983,000

gallons of gasoline were sold by Gulf service stations in

Maryland.

Gasoline from out-of-state refineries is transported to

Gulf's terminals in Baltimore and Salisbury and to bulk

plants in various parts of Maryland from which retail

gasoline outlets in Maryland and elsewhere are sup-

plied. Some Maryland retail outlets are supplied from

out-of-state terminals or bulk plants. Based upon

August 1975 crude runs, which are typical, all of the

Gulf gasoline sold in Maryland is refined at either

Gulfs Port Arthur, Texas, refinery, its Alliance,

Louisiana, refinery or its Philadelphia, Pennsylvania,

79a

refinery. More than half of the crude oil processed at

Gulf's Alliance and Port Arthur refineries is of domestic

origin, with the balance imported from Nigeria or from

Cabinda, West Africa. All of the crude processed at

Gulf's Philadelphia refinery is imported frozn Venezu-

ela, Nigeria and Cabinda, West Africa.

Tires, batteries and accessories sold at Gulf retail

outlets, both company-operated and dealer operated, are

manufactured by companies other than Gulf in various

places outside of the State of Maryland and shipped

into Maryland in interstate commerce.

The consumer in Maryland is served by various kinds

of Gulf retail gasoline outlets. These include 1 major

service center, 2 drive-through car wash facilities, 8

stations having in-bay car wash facilities, 101 merchan-

disable service stations (i.e. full service) 3 full and 12

partial self service stations. The balance of the Gulf

retail outlets in Maryland consists of country grocery

stores (Ma and Pa) with gasoline pumps, small garages

and other diversified businesses with gasoline pumps,

these being the facilities that, in Gulf's opinion, fill the

needs of the communities in which they are located.

Gulf’s position is that it can best serve consumers and

itself by using different types of retail gasoline outlets

and marketing methods, and the company has in fact,

where possible, varied its marketing methods in

response to market conditions.

Since approximately 1952 Gulf has marketed its

gasoline primarily through independent retailers and

wholesalers rather than through company operations.

As of September, 1975, there were approximately 218

independent dealer stations in Maryland buying Gulf

leased stations from Gulf and 109 own their own

stations or lease them from parties other than Gulf.

There is one company-operated Gulf station in Mary-

land. If it is permitted to continue to own

retail service stations in Maryland, Gulf anticipates

owning and operating approximately 22 retail gasoline

80a

outlets within the next five years.® It has refrained from

commencing ownership and operation of these stations’

pending this litigation.

Gulf's experience with company-operated service

stations shows that under certain circumstances,

company operation is a more efficient mode of direct

marketing of gasoline by Gulf. Through direct company

operations, Gulf can control hours of operation and

service and may respond quickly to price changes in the

market. In the opinion of Gulf's management direct

company operations can result in significantly lower

selling costs per gallon of gasoline than a traditional

dealer-operated station. These reductions in selling

costs might be passed on to the consumer in the form of

lower gasoline prices.

The ability to m orket through company-operated

stations allows Gulf to experiment with innovative,

competitive marketing techniques. Such outlets repres-

ent an alternative marketing technique, rather than an

exclusive mode of marketing. However, in certain

circumstances, company-operated stations represent the

most desirable and efficient retail technique, from the

standpoint of Gulf.

From Gulf’s viewpoint, other possible advantages of

company-operated stations are:

a. High standards of service and cleanliness.

b. High standards of design; generally attractive

appearances.

c. Longer hours of operation to serve the public.

d. Fast “no frills” sales, for that portion of the

public which desires them.

* Nineteen of the 22 are presen > operated by lessee

dealers; two are temporarily closed and under reconstruction;

and one is already company owned and operated. As to the

19 lessee dealers, f's policy and intention are to attempt to

negotiate a buyout of their operations. Any lessee dealers

who decline to sell may remain in business as usual.

' Except for one station owned and operated since prior to

the commencement of this litigation.

8la

Company-operated stations can be used for testing

new market techniques. For example, Gulf first tested

its “Tire Hut” discount auto, home and garden outlets

at company-operated stations outside of Maryland.

In Gulf’s opinion Gulf company-operated stations are

able to quickly and effectively respond to changing

market conditions. During times of shortage, Gulf's

control over its company-operated stations would

permit Gulf to coordinate hours of operation in order to

attempt to lessen the hardship on motorists.

In Gulf's management's opinion the divorcement of

Gulf’s company-operated station will diminish its value.

Furthermore, the provisions of the Maryland Act which

prohibit Gulf from operating retail service stations in

Maryland will preclude the conversion of any Gulf

properties in Maryland to company owned and operated

service stations.

Gulf's investment in its existing company-operated

station in Maryland is as follows:

Land $78,510.00

Building 53,424.00

Equipment 33,977.00

TOTAL $165,911.00

The granting of price differentials and allowances

has been a normal business practice of Gulf.

Gulf stations in Maryland serve a market composed

of consumers operating both in interstate and intras-

tate commerce. A sampling of consumers in interstate

commerce includes: truckers — Chemical Leaman,

Carolina Freight, Eastern Express, Johnson Motor

Lines and O’Boyle Tank Lines; railroads — The Chessie

System, Penn Central Railroad and Southern Railway

System; airlines — Eastern, BOAC, Braniff, TWA,

Northwest Orient and National. Maryland borders

several jurisdictions — Delaware, Pennsylvania, West

Virginia and the District of Columbia. Maryland falls

within the Washington-New York-Boston corridor and

82a

lies between the major metropolitan areas of Washing-

ton, D.C. and Wilmington-Philadelphia.

Gulf recognizes certain competitive trading areas in

Maryland and surrounding states wherein it identifies

competitive markets for the sale of its products. Within

such trading areas it has, in order to meet competition

from other suppliers, granted temporary competitive

allowances to its dealers or resellers without granting

such allowances throughout the state.

Some of Gulf's trading areas cover geographic areas

which cross the boundaries of the State of Maryland

into adjoining jurisdictions, including the District of

Columbia, Virginia, Delaware, Pennsylvania and West

Virginia.

The normal business practice of Gulf has never

included any program whereby it extended temporary

competitive allowances “uniformly to all retail service

station dealers supplied” either within the State of

Maryland or nationwide. Gulf is not aware of any

violations of law by Gulf in the use of any such

allowances in the State of Maryland.

When Gulf leases a service station facility to a dealer,

such Gulf-owned equipment as pumps, tanks, lifts,

lights and air compressors are included in the lease

agreement and the lease rental. Other items of Gulf-

owned equipment, such as identification signs and

credit card imprinters, are separately rented to the

dealer. Gulf does not apportion the rental for a fully

equipped service station between the equipment in-

cluded in the lease and the real estate.

Gulf has on occasion granted to its lessee dealers in

Maryland rental abatements or modifications for

various reasons.

PHILLIPS PETROLEUM COMPANY

Phillips Petroleum Company, hereinafter referred to

as (“Phillips”) is an integrated petroleum company

based in Bartlesville, Oklahoma. It is engaged in

production, refining, processing and marketing of

‘ 3a

petroleum products of all varieties and various deriva-

tives of petroleum. It has six domestic crude oil

refineries, all of which are located west of the Missis-

sippi River, two in Texas, one in Kansas, one in Utah,

one in Montana and one in California. A subsidiary,

Puerto Rico Core, Inc., owns and operates a petrochemi-

cal manufacturing plant in Puerto Rico that uses

— feedstocks but produces some gasoline as a by-

product.

The crude oil production of Phillips is mainly in the

Mid-Continent region of the United States. There is, of

course, some production from foreign sources. This

company engages in no crude oil production and has no

petroleum refineries within the State of Maryland. All

Phillips-branded refined petroleum products available

at Phillips-branded stations in Maryland are supplied

from outside the State. Insofar as Phillips’ operations in

Maryland related to refined petroleum products are

concerned, Phillips is only a supplier and a marketer.

Phillips does lease segregated bulk storage tanks for

refined products at the Amerada-Hess terminal in

Baltimore.

Phillips was incorporated in the State of Delaware in

1917. At one time it

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