The opinion of the court was delivered by: MACMAHON
These actions by two independent gasoline retailers involve price-fixing claims against defendant Amerada Hess Corporation ("Hess"), an independent gasoline marketer, for the period June 1971 through September 1973, in the area of Albany, New York. Each of the plaintiffs, Vermont International Petroleum Co., Inc. ("VIP") and Petrol Oil Corporation ("Petrol"), operated several gasoline service stations in the Albany area from 1971 or earlier until mid-1973, when they went out of business.
In March and July 1975, plaintiffs brought these actions against Hess and several other independent oil companies, alleging a price-fixing conspiracy in violation of Sherman Act § 1
and seeking treble damages, injunctive relief, and attorneys' fees and costs under Clayton Act §§ 4 and 16.
During extensive discovery and other pre-trial proceedings, the claims against all defendants except Hess were settled and dismissed, the scope of the controversy was narrowed, and the claims for injunctive relief were dropped.
The cases were tried together before us, from June 26 to July 20, 1979, on the issues of both liability and damages. Plaintiffs' theory upon the trial was that:
(1) Hess conspired with other independent gasoline marketers Kayo Oil Co. ("Kayo"), Gibbs Oil Co. ("Gibbs"), Gasland, Inc. ("Gasland"), Ashland Oil, Inc. ("Ashland") and four of its subsidiaries and with an industry organization, the Society of Independent Gasoline Marketers of America ("SIGMA"), to stabilize retail gasoline prices in the Albany area at artificially high levels;
(2) wholesale prices charged by Hess and its coconspirators to their dealers and other purchasers were pegged to the retail prices, with the result that wholesale prices also became stabilized; and
(3) plaintiffs, as wholesale purchasers from Ashland, Gibbs, Gasland, and others, were thus overcharged and injured during the period June 1971 to September 1973 (the "conspiracy period").
After these actions were commenced, but before trial, on June 1, 1976, a grand jury in the United States District Court for the District of Maryland indicted Hess, Ashland, Kayo, other independent oil companies, and SIGMA for a violation of Sherman Act § 1, alleging a conspiracy to fix retail gasoline prices during the period 1967-1974 in the District of Columbia and six "Middle Atlantic" states New York, New Jersey, Pennsylvania, Maryland, Delaware, and Virginia. A jury found Hess, Ashland, Kayo, and SIGMA guilty on August 30, 1977, and the judgments of conviction were affirmed on December 26, 1979.
Plaintiffs do not appear to rely on the judgment of conviction against Hess as prima facie evidence of Hess' participation in the conspiracy alleged here.
In any event, we decline to give that judgment such effect because the conspiracy alleged here differs from that charged in the criminal case since it covers a smaller geographic area and time period. Thus, we cannot say with confidence that the jury found that the criminal conspiracy covered the Albany area from June 1971 to September 1973. Moreover, the conspiracy alleged here is not identical to the criminal conspiracy for it has two members Gibbs and Gasland who were not charged in the criminal case.
However, upon the trial, we did receive in evidence testimony given at the criminal trial because the witnesses were uncooperative and beyond the subpoena power of the court. Plaintiffs also presented deposition testimony of some witnesses who were beyond the subpoena power. Denied the advantage of observing the demeanor of these witnesses, we were unable fully to appraise their credibility. Moreover, some of the testimony from the criminal trial was patently inadmissible. Other such testimony was entitled to little, if any, weight because of leading and vague questions and conclusory and general answers. Nonetheless, based on such evidence as we received, we now make our findings of fact and conclusions of law.
Plaintiff VIP, a Vermont corporation, sold gasoline to the public at retail gasoline stations from June 1971 to June 1973, when it went out of business and into bankruptcy proceedings. While in business, VIP operated 7 stations in Vermont and 12 in New York. Seven of the New York stations were within a 100-mile radius of Albany. Five of these were located within the "Tri-City" or "Albany area," consisting of Albany, Troy, Schenectady, and their environs within a 50-mile radius of Albany.
VIP purchased almost all of its gasoline from wholesalers at the Port of Albany and shipped it to its stations through independent truckers. During most of the conspiracy period (June 1971 to September 1973), VIP purchased most of its gasoline either directly from Gibbs or from Gibbs' wholly-owned subsidiaries, Astroline Petroleum Corp. ("Astroline") and Terminal Oil Co. of Vermont ("Terminal"). However, during part of 1972, from June until late October, VIP bought most of its requirements from Ashland. In addition, VIP bought small amounts from Gasland and from other companies not alleged to be conspirators, such as Bray and Sousa. VIP brought no gasoline from Hess.
Plaintiff Petrol, a New York corporation, sold gasoline to the public at retail gasoline stations from January 1969 until September 1973, when it sold its assets to Gasland and dissolved. Petrol operated 10 stations in the Albany area.
Petrol purchased its gasoline from wholesalers at the Port of Albany. During the period from 1971 to 1973, Petrol bought most of its gasoline from Gasland and its predecessor, successor, and affiliate corporations, Gastown and Good Hope Industries. Petrol also purchased from Ashland, Gibbs and its Astroline subsidiary, Bray, Sousa, Coastal States Marketing, Inc., Tenneco, and others. Petrol purchased no gasoline from Hess.
Defendant Hess, a Delaware corporation with its principal place of business in New York and with offices in New Jersey, is an "independent" gasoline marketer which sells gasoline to the public through retail gasoline stations under the "Hess" brand name in most states along the eastern seaboard. During the period 1968-1974, Hess sold gasoline through 103 Hess stations in New York, 16 of which were located in the Albany area.
B. The alleged co-conspirators of Hess.
Gibbs, a Massachusetts corporation, was an independent marketer of gasoline during the conspiracy period. Gibbs supplied gasoline at wholesale to both VIP and Petrol through itself and its wholly-owned subsidiaries, Astroline and Terminal. In addition, Gibbs sold gasoline to the public at retail gasoline stations. It marketed "Tulsa" brand gasoline at 6 such stations in the Albany area.
Gasland, as well as its predecessor, successor, and affiliate corporations, such as Gastown and Good Hope Industries, was an independent marketer of gasoline during the conspiracy period. It supplied gasoline at wholesale to VIP and Petrol. In addition, Gasland sold gasoline to the public at 230 retail gasoline stations in the State of New York, 8 of which were located in the Albany area at some time during the conspiracy period.
Ashland, a Kentucky corporation, was an independent marketer of gasoline during the conspiracy period. It supplied VIP, Petrol, and other independents at wholesale. In addition, during the conspiracy period Ashland supplied four wholly-owned subsidiaries and alleged co-conspirators Bi-Lo Stations, Inc. ("Bi-Lo"), Hi-Fy Gasoline Stations, Inc. ("Hi-Fy"), Payless Stations, Inc. ("Payless"), and Southern Oil Co. of New York ("Southern") which sold gasoline to the public at retail gasoline stations in the State of New York under the respective brand names "Bi-Lo," "Hi-Fy," "Payless," and "Rotary." During the conspiracy period, there were two Rotary stations and one Payless station in the Albany area.
Kayo, a Delaware corporation having its principal place of business in Tennessee, was an independent marketer of gasoline during the conspiracy period. It sold gasoline to the public under the "Kayo" brand name through 24 gasoline stations in the State of New York, at least 5 of which were located in the Albany area during the conspiracy period. Kayo did not supply VIP or Petrol.
SIGMA was an organization of the independent gasoline marketers industry. It was located in St. Louis during the conspiracy period. Its members during that period included Hess, Gibbs, Southern, Payless, and others. Kayo was a member for 1 1/2 years. Gasland was not a member.
The gasoline involved here originated outside New York and entered the state either at the Port of Albany or at other ports and was barged to Albany. Some of this gasoline was purchased at the Port of Albany by plaintiffs and others and resold at gasoline stations in the Albany area and elsewhere in New York. Some was resold by VIP at gasoline stations in Vermont. We thus conclude that the gasoline was in interstate commerce and that the activities of all the parties had a substantial effect on interstate commerce.
D. The retail gasoline market in the Albany area.
As we have stated, the Albany area consists of Albany, Troy, Schenectady, and their environs within a 50-mile radius of Albany, New York.
In the Albany area, as throughout New York, gasoline was sold to the public at retail gasoline stations of two types, those supplied by so-called "major" oil companies, such as Mobil, Texaco, and Shell, and those supplied by "independents," such as Hess and Ashland. During the conspiracy period, the majors accounted for about 78% of all gasoline sales in New York, and the independents for the remainder.
Though the testimony was less than clear and in some cases nonexistent as to who set the retail price at a given station, we conclude that two methods were in use by both the majors and the independents. The supplier directly set the retail price if the supplier owned the station and employed the operator. In such a case, the operator did not purchase gasoline from the supplier and retail it to the public. Instead, the operator simply received a supply from the supplier and sold it directly to the public at the price set by his employer. The operator was paid by the supplier on a commission basis. This pricing system was used by Gasland.
A second method was the system of suggested retail prices coupled with "voluntary allowances." Under this system, the supplier sold gasoline to an operator or dealer at a "tank wagon" or wholesale price, and then suggested to the dealer a retail price to be charged to the public. This system was used by Hess and others.
Though in theory a dealer could charge whatever price he wished under this method, in practice Hess dealers almost always charged the retail price suggested by Hess. One reason for this was that Hess had the right to cancel a dealership, thus giving Hess dealers a strong incentive to do what was suggested.
Moreover, a supplier using the suggested retail price method could affect retail price by instituting or withdrawing a "voluntary allowance," also known as a "temporary voluntary allowance," "TVA," or "allowance." A voluntary allowance was simply a reduction in the tank wagon price which had the effect of lowering a dealer's cost of gasoline. Hess, for example, could normally effect the lowering of the retail price at a given Hess station by giving the dealer a voluntary allowance and simultaneously suggesting a lower retail price. Conversely, Hess could raise the retail price by withdrawing the allowance and suggesting a higher retail price. As a practical matter, then, a supplier using the indirect suggested retail price system had substantially as much control over its dealers' retail prices as did a supplier who set price directly.
Although at the wholesale level there was only one market for independents in the Albany area that at the terminals at the Port of Albany at the retail level there were several markets that were often as small as a street corner or a stretch on a highway. Thus, although a retailer often bought gasoline from one supplier at a single price at the Port of Albany, he often resold it to the public at several different prices in the Albany area. For example, at various times during the conspiracy period, one Petrol station in the ...