State Oil Company v. Khan
| State Oil Co. v. Khan | ||||||
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 Supreme Court of the United States |
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| Argued October 7, 1997 Decided November 4, 1997 |
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| Full case name | State Oil Company, Petitioner v. Barkat U. Khan | |||||
| Citations | 522 U.S. 3 (more)
118 S.Ct. 275; 139 L.Ed.2d 199
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| Prior history | Certiorari to the United States Court of Appeals for the Seventh Circuit | |||||
| Holding | ||||||
| Vertical maximum price fixing should be evaluated under the rule of reason, which can effectively identify those situations in which it amounts to anticompetitive conduct. | ||||||
| Court membership | ||||||
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| Case opinions | ||||||
| Majority | O'Connor, joined by unanimous court | |||||
State Oil Co. v. Khan, 522 U.S. 3 (1997), was a decision by the United States Supreme Court, which "does not hold that all vertical maximum price fixing is per se lawful, but simply that it should be evaluated under the rule of reason, which can effectively identify those situations in which it amounts to anticompetitive conduct." It thereby overruled a previous Supreme Court decision, Albrecht v. Herald Co. (1968).
Background
The 1968 decision in Albrecht v. Herald Co. held that wholesalers could not require franchisees and retailers of their products to sell items at a certain price; advertisements regarding sales, therefore, always included the language "Available at participating retailers only."[1]
The case before the court in 1997 involved a gasoline wholesaler and Chicago service station.[1] State Oil Co. attempted to force the gasoline station owner, Barkat Khan, to sell State Oil's product at certain prices; Khan resisted and filed suit under anti-trust law.[1]
Khan won his case in the United States Court of Appeals in Chicago, presided over by Judge Richard Posner. Posner, however, mocked the Supreme Court's 1968 ruling on the matter in his decision, calling it "unsound when decided," "moth-eaten," and "increasingly wobbly" in application.[1] Posner nevertheless abided by the Supreme Court's earlier (1968) decision, saying that its decision was the law until the Court overruled its previous decision.[1]
Decision
Sandra Day O'Connor wrote the unanimous opinion for the Court, overturning the previous case. She wrote that she agreed with Posner: “Chief Judge Posner aptly described Albrecht’s infirmities.”[1] Although she noted that the Court was cautious in overturning precedents, the "great weight" of scholarly opinion had held that the Court's 1968 decision was incorrect.[1]
Further reading
- Klein, Benjamin (1999). "Distribution Restrictions Operate by Creating Dealer Profits: Explaining the Use of Maximum Resale Price Maintenance in State Oil v. Khan". Supreme Court Economic Review (Supreme Court Economic Review, Vol. 7) 7: 1–58. JSTOR 1147086.
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