State Oil Co. v. Khan

522 U.S. 3 (1997)

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State Oil Co. v. Khan

United States Supreme Court
522 U.S. 3 (1997)

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Facts

State Oil Company (State Oil) (defendant) owned a gas station that was leased to Barkat Khan (plaintiff). Under the terms of the lease, Khan would purchase gasoline from State Oil at a suggested price, minus a difference of $0.0325 per gallon. Khan was then free to charge customers any price for gas, but any surplus amount over State Oil’s suggested price was to be returned to State Oil in the form of a rebate. After a year of operation, Khan fell behind on the lease payments, and State Oil started an eviction process against Khan. A court-appointed receiver operated the gas station at State Oil’s request, and the gas station enjoyed a larger profit margin by charging more for premium gas without being held accountable to the price restraints in Khan’s lease. Khan responded by bringing a suit against State Oil, alleging that State Oil’s pricing policy constituted price fixing and a per se antitrust violation under the Sherman Act. By relying on Albrecht v. Herald Co., 390 U.S. 145 (1968), which held that vertical maximum price-fixing arrangements constituted per se antitrust violations, the court of appeals held in favor of Khan. State Oil appealed the decision.

Rule of Law

Issue

Holding and Reasoning (O’Connor, J.)

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