U.S. Supreme Court Exxon Corp. v. Governor of Maryland, 437
U.S. 117 (1978) Exxon Corp. v. Governor of
Maryland No. 77-10 Argued February 28,
1978 Decided June 14, 1978 437
U.S. 117 ast|>* 437
U.S. 117 APPEAL FROM THE COURT OF APPEALS OF
MARYLAND Syllabus Responding to evidence that, during the 1973 petroleum shortage,
oil producers or refiners were favoring company-operated gasoline
stations, Maryland enacted a statute prohibiting producers or
refiners from operating retail service stations within the State,
and requiring them to extend all "voluntary allowances" (temporary
price reductions granted to independent dealers injured by local
competitive price reductions) uniformly to all stations they
supply. In actions by several oil companies challenging the
validity of the statute on various grounds, the Maryland trial
court held the statute invalid primarily on substantive due process
grounds, but the Maryland Court of Appeals reversed, upholding the
validity of the statute against contentions, inter alia, that it violated the Commerce and Due Process Clauses and
conflicted with § 2(b) of the Clayton Act, as amended by the
Robinson-Patman Act, which prohibits price discrimination, with the
proviso that a seller can price in good faith to meet a
competitor's equally low price. Held: 1. The Maryland statute does not violate the Due Process Clause,
since, regardless of the ultimate efficacy of the statute, it bears
a reasonable relation to the State's legitimate purpose in
controlling the gasoline retail market. Pp. 124-125.

															2. The divestiture provisions of the statute do not violate the
Commerce Clause. Pp. 437 U. S.
125 -129.

															(a) That the burden of such provisions falls solely on
interstate companies does not, by itself, establish a claim of
discrimination against interstate commerce. The statute creates no
barrier against interstate independent dealers, nor does it
prohibit the flow of interstate goods, place added costs upon them,
or distinguish between in-state and out-of-state companies in the
retail market. Hunt v. Washington
Apple Page 437 U. S. 118 Advertising Comm'n, 432 U. S. 333 ; and Dean Milk Co. v. Madison, 340 U.
S. 349 , distinguished. Pp. 437 U. S.
125 -126.

															(b) Nor does the fact that the burden of state regulation falls
on interstate companies show that the statute impermissibly burdens
interstate commerce, even if some refiners were to stop selling in
the State because of the divestiture requirement and even if the
elimination of company-operated stations were to deprive consumers
of certain special services. Interstate commerce is not subjected
to an impermissible burden simply because an otherwise valid
regulation causes some business to shift from one interstate
supplier to another. The Commerce Clause protects the interstate
market, not particular interstate firms, from prohibitive or
burdensome regulations. Pp. 437 U. S.
127 -128.

															(c) The Commerce Clause does not, by its own force, preempt the
field of retail gasoline marketing, but, absent a relevant
congressional declaration of policy, or a showing of a specific
discrimination against, or burdening of, interstate commerce, the
States have the power to regulate in this area. Pp. 437 U. S.
128 -129.

															3. The "voluntary allowances" requirement of the Maryland
statute is not preempted by § 2(b) of the Clayton Act, as amended
by the Robinson-Patman Act, or the Sherman Act. Pp. 437 U. S.
129 -134.

															(a) Any hypothetical "conflict" arising from the possibility
that the Maryland statute may require uniformity in some situations
in which the Robinson-Patman Act would permit localized price
discrimination is not sufficient to warrant preemption. Pp. 437 U. S.
130 -131.

															(b) Neither § 2(b) nor the federal policy favoring competition
establishes a federal right to engage in discriminatory pricing in
certain situations. Section 2(b)'s proviso is merely an exception
to that statute's broad prohibition against discriminatory pricing,
and does not create any new federal right, but rather defines a
specific, limited defense. Pp. 437 U. S.
131 -133.

															(c) While, in the sense that the Maryland statute might have an
anticompetitive effect, there is a conflict between that statute
and the Sherman Act's central policy of "economic liberty,"
nevertheless this sort of conflict cannot, by itself, constitute a
sufficient reason for invalidating the Maryland statute, for if an
adverse effect on competition were, in and of itself, enough to
invalidate a state statute, the States' power to engage in economic
regulation would be effectively destroyed. Pp. 437 U. S.
133 -134.

															279 Md. 410, 370 A.2d 1102 and 372 A.2d 237, affirmed.

															STEVENS, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, STEWART, WHITE, MARSHALL, and REHNQUIST,
JJ., Page 437 U. S. 119 joined. BLACKMUN, J., filed an opinion concurring in part and
dissenting in part, post, p. 437 U. S. 134 .
POWELL, J., took no part in the consideration or decision of the
cases.

															MR. JUSTICE STEVENS delivered the opinion of the Court.

															A Maryland statute provides that a producer or refiner of
petroleum products (1) may not operate any retail service station
within the State, and (2) must extend all "voluntary Page 437 U. S. 120 allowances" uniformly to all service stations it supplies.
[ Footnote 1 ] The questions
presented are whether the statute violates either the Commerce or
the Due Process Clause of the Constitution of the United States, or
is directly or indirectly preempted by the congressional expression
of policy favoring vigorous competition found in § 2(b) of the
Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act,
49 Stat. 1526. [ Footnote 2 ] The
Court of Appeals of Maryland answered these questions in Page 437 U. S. 121 favor of the validity of the statute. 279 Md. 410, 370 A.2d 1102
and 372 A.2d 237 (1977). We affirm. I The Maryland statute is an outgrowth of the 1973 shortage of
petroleum. In response to complaints about inequitable distribution
of gasoline among retail stations, the Governor of Maryland
directed the State Comptroller to conduct a market survey. The
results of that survey indicated that gasoline stations operated by
producers or refiners had received preferential treatment during
the period of short supply. The Comptroller therefore proposed
legislation which, according to the Court of Appeals, was "designed
to correct the inequities in the distribution and pricing of
gasoline reflected by the survey." Id. at 421, 370 A.2d at
1109. After legislative hearings and a "special veto hearing"
before the Governor, the bill was enacted and signed into law.

															Shortly before the effective date of the Act, Exxon Corp. filed
a declaratory judgment action challenging the statute in the
Circuit Court of Anne Arundel County, Md. The essential facts
alleged in the complaint are not in dispute. All of the gasoline
sold by Exxon in Maryland is transported into the State from
refineries located elsewhere. Although Exxon sells the bulk of this
gas to wholesalers and independent retailers, it also sells
directly to the consuming public through 36 company-operated
stations. [ Footnote 3 ] Exxon
uses these stations to test innovative marketing concepts or
products. [ Footnote 4 ] Focusing
primarily on the Act's requirement that it discontinue its
operation of these 36 retail stations, Exxon's complaint challenged
the Page 437 U. S. 122 validity of the statute on both constitutional and federal
statutory grounds. [ Footnote
5 ]

															During the ensuing nine months, six other oil companies
instituted comparable actions. Three of these plaintiffs, or their
subsidiaries, sell their gasoline in Maryland exclusively through
company-operated stations. [ Footnote 6 ] These refiners, using trade names such as "Red
Head" and "Scot," concentrate largely on high-volume sales with
prices consistently lower than those offered by independent
dealer-operated major brand stations. Testimony presented by these
refiners indicated that company ownership is essential to their
method of private brand, low-priced competition. They therefore
joined Exxon in its attack on the divestiture provisions of the
Maryland statute.

															The three other plaintiffs, like Exxon, sell major brands
primarily through dealer-operated stations, although they also
operate at least one retail station each. [ Footnote 7 ] They, too, challenged the statute's
divestiture provisions, but, in addition, they specially challenged
the requirement that "voluntary allowances" be extended uniformly
to all retail service stations supplied in the State. Although not
defined in the statute, the term "voluntary allowances" refers to
temporary price reductions granted by the oil companies to
independent dealers who Page 437 U. S. 123 are injured by local competitive price reductions of competing
retailers. [ Footnote 8 ] The oil
companies regard these temporary allowances as legitimate price
reductions protected by § 2(b). In advance of trial, Exxon, Shell,
and Gulf moved for a partial summary judgment declaring this
portion of the Act invalid as in conflict with § 2(b).

															The Circuit Court granted the motion, and the trial then focused
on the validity of the divestiture provisions. As brought out
during the trial, the salient characteristics of the Maryland
retail gasoline market are as follows: approximately 3,800 retail
service stations in Maryland sell over 20 different brands of
gasoline. However, no petroleum products are produced or refined in
Maryland, and the number of stations actually operated by a refiner
or an affiliate is relatively small, representing about 6 of the
total number of Maryland retailers.

															The refiners introduced evidence indicating that their ownership
of retail service stations has produced significant benefits for
the consuming public. [ Footnote
9 ] Moreover, the three refiners that now market solely through
company-operated stations may elect to withdraw from the Maryland
market altogether if the statute is enforced. There was, however,
no evidence that the total quantity of petroleum products shipped
into Maryland would be affected by the statute. [ Footnote 10 ] After trial, the Circuit Court
held the entire statute invalid, primarily on substantive due
process grounds.

															The Maryland Court of Appeals reversed, rejecting all of the
refiners' attacks against both the divestiture provisions and Page 437 U. S. 124 the voluntary allowance provision. Most of those attacks are not
pursued here; [ Footnote 11 ]
instead, appellants have focused their appeals on the claims that
the Maryland statute violates the Due Process and Commerce Clauses,
and that it is in conflict with the Robinson-Patman Act. II Appellants' substantive due process argument requires little
discussion. [ Footnote 12 ]
The evidence presented by the refiners may cast some doubt on the
wisdom of the statute, but it is, by now, absolutely clear that the
Due Process Clause does not empower the judiciary "to sit as a superlegislature to weigh the wisdom of legislation'. . . ." Ferguson v. Skrupa, 372 U. S. 726 , 372 U. S. 731 (citation omitted). Responding to evidence that producers and
refiners were favoring company-operated stations in the allocation
of gasoline, and that this would eventually decrease the
competitiveness of the retail market, the State enacted a law
prohibiting producers and refiners from operating their own
stations. Appellants argue that this response is irrational, and
that it will frustrate, rather than further, the State's desired
goal of enhancing competition. But, as the Court of Appeals
observed, this argument rests simply on an evaluation of the
economic wisdom of the statute, 279 Md. at 428, 370 A.2d at 1112,
and cannot override the State's authority "to legislate against
what are found to be injurious practices in their internal
commercial and business affairs. . . ." Lincoln Federal Labor
Union v. Northwestern Iron Metal Co., 335 U.
S. 525 , 335 U. S. 536 .
[ Footnote 13 ] Regardless of
the ultimate economic Page 437 U. S. 125 efficacy of the statute, we have no hesitancy in concluding that
it bears a reasonable relation to the State's legitimate purpose in
controlling the gasoline retail market, and we therefore reject
appellants' due process claim. III Appellants argue that the divestiture provisions of the Maryland
statute violate the Commerce Clause in three ways: (1) by
discriminating against interstate commerce; (2) by unduly burdening
interstate commerce; and (3) by imposing controls on a commercial
activity of such an essentially interstate character that it is not
amenable to state regulation.

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

															As the record shows, there are several major interstate
marketers of petroleum that own and operate their own retail Page 437 U. S. 126 gasoline stations. [ Footnote
15 ] These interstate dealers, who compete directly with the
Maryland independent dealers, are not affected by the Act, because
they do not refine or produce gasoline. In fact, the Act creates no
barriers whatsoever against interstate independent dealers; it does
not prohibit the flow of interstate goods, place added costs upon
them, or distinguish between in-state and out-of-state companies in
the retail market. The absence of any of these factors fully
distinguishes this case from those in which a State has been found
to have discriminated against interstate commerce. See, e.g.,
Hunt v. Washington Apple Advertising Comm'n, 432 U.
S. 333 ; Dean Milk Co. v. Madison, 340 U.
S. 349 . For instance, the Court in Hunt noted
that the challenged state statute raised the cost of doing business
for out-of-state dealers, and, in various other ways, favored the
in-state dealer in the local market. 432 U.S. at 432 U. S.
351 -352. No comparable claim can be made here. While the
refiners will no longer enjoy their same status in the Maryland
market, in-state independent dealers will have no competitive
advantage over out-of-state dealers. The fact that the burden of a
state regulation falls on some interstate companies does not, by
itself, establish a claim of discrimination against interstate
commerce. [ Footnote 16 ] Page 437 U. S. 127 Appellants argue, however, that this fact does show that the
Maryland statute impermissibly burdens interstate commerce. They
point to evidence in the record which indicates that, because of
the divestiture requirements, at least three refiners will stop
selling in Maryland, and which also supports their claim that the
elimination of company-operated stations will deprive the consumer
of certain special services. Even if we assume the truth of both
assertions, neither warrants a finding that the statute
impermissibly burdens interstate commerce.

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

															The crux of appellants' claim is that, regardless of whether the
State has interfered with the movement of goods in interstate
commerce, it has interfered "with the natural functioning of the
interstate market either through prohibition or through burdensome
regulation." Hughes v. Alexandria Scrap Corp., 426 U. S. 794 , 426 U. S. 806 .
Appellants then claim that the statute "will surely change the
market structure by weakening the independent refiners. . . ."
[ Footnote 17 ] We cannot,
however, accept appellants' underlying notion that the Commerce
Clause protects the particular structure or methods of operation in
a retail market. See Breard v. Alexandria, 341 U.
S. 622 . As indicated by the Court in Hughes, the Clause protects the interstate market, not particular
interstate firms, from prohibitive Page 437 U. S. 128 or burdensome regulations. It may be true that the consuming
public will be injured by the loss of the high-volume, low-priced
stations operated by the independent refiners, but again that
argument relates to the wisdom of the statute, not to its burden on
commerce.

															Finally, we cannot adopt appellants' novel suggestion that,
because the economic market for petroleum products is nationwide,
no State has the power to regulate the retail marketing of gas.
Appellants point out that many state legislatures have either
enacted or considered proposals similar to Maryland's, [ Footnote 18 ] and that the cumulative
effect of this sort of legislation may have serious implications
for their national marketing operations. While this concern is a
significant one, we do not find that the Commerce Clause, by its
own force, preempts the field of retail gas marketing. To be sure,
"the Commerce Clause acts as a limitation upon state power even
without congressional implementation." Hunt v. Washington Apple
Advertising Comm'n, supra at 432 U. S. 350 .
But this Court has only rarely held that the Commerce Clause itself
preempts an entire field from state regulation, and then only when
a lack of national uniformity would impede the flow of interstate
goods. See Wabash, St. L. & P. R. Co. v. Illinois, 118 U. S. 557 ; See also Cooley v. Board of
Wardens , 12 How. 299, 53 U. S. 319 .
The evil that appellants perceive in this litigation is not that
the several States will enact differing regulations, but rather
that they will all conclude that divestiture provisions are
warranted. The problem, thus, is not one of national uniformity. In
the absence of a relevant congressional declaration of policy, or a
showing of a specific discrimination against, or burdening Page 437 U. S. 129 of, interstate commerce, we cannot conclude that the States are
without power to regulate in this area. IV Exxon, Phillips, Shell, and Gulf contend that the requirement
that voluntary allowances be extended to all retail service
stations is either in direct conflict with § 2(b) of the Clayton
Act, as amended by the Robinson-Patman Act, or, more generally, in
conflict with the basic federal policy in favor of competition,
which is reflected in the Sherman Act as well as § 2(b). In
rejecting these contentions, the Maryland Court of Appeals noted
that the Maryland statute covered two different competitive
situations. [ Footnote 19 ] In
the first situation, a competing retailer lowers its price on its
own, and the oil company gives its own retailer a price reduction
to enable it to meet that lower price. In the second situation, the
competing retailer's lower price is subsidized by its supplier, and
the oil company gives its own retailer a price reduction to meet
the competition. The good faith defense of § 2(b) is clearly not
available to the oil company in the first situation, because the
voluntary allowance would not be a response to competition from
another oil company. See FTC v. Sun Oil Co., 371 U.
S. 505 . In the second situation, the law is unsettled,
[ Footnote 20 ] but the Page 437 U. S. 130 Court of Appeals concluded that the defense would also be
unavailable. The court therefore reasoned that there was no
conflict between the Maryland statute and § 2(b), since the statute
did not apply to any allowance protected by federal law. In our
opinion, it is not necessary to decide whether the § 2(b) defense
would apply in the second situation, for even assuming that it
does, there is no conflict between the Maryland statute and the
Robinson-Patman Act sufficient to require preemption.

															Appellants' first argument is that compliance with the Maryland
statute may cause them to violate the Robinson-Patman Act. They
stress the possibility that the requirement that a price reduction
be made on a statewide basis may result in discrimination between
customers who would otherwise receive the same price, and they
describe various hypothetical situations to illustrate this point.
[ Footnote 21 ] But,

															"[i]n this as in other areas of coincident federal and state
regulation, the 'teaching of this Court's decisions . . . enjoin[s]
seeking out conflicts between state and federal regulation where
none clearly exists.' Huron Cement Co. v. Detroit, 362 U. S.
440 , 362 U. S. 446 ." Seagram & Sons, Inc. v. Hostetter, 384 U. S.
35 , 384 U. S. 45 . See also State v. Texaco, Inc., 14 Wis.2d 625, 111 N.W.2d
918 (1961). The Court in Seagram & Sons went on to say
that,

															"[a]lthough it is possible to envision circumstances under which
price discriminations Page 437 U. S. 131 proscribed by the Robinson-Patman Act might be compelled by [the
state statute], the existence of such potential conflicts is
entirely too speculative in the present posture of this case"

															to warrant preemption. 384 U.S. at 384 U. S. 46 .
That counsel of restraint applies with even greater force here. For
even if we were to delve into the hypothetical situations posed by
appellants, we would not be presented with a state statute that
requires a violation of the Robinson-Patman Act. Instead, the
alleged "conflict" here is in the possibility that the Maryland
statute may require uniformity in some situations in which the
Robinson-Patman Act would permit localized discrimination.
[ Footnote 22 ] This sort of
hypothetical conflict is not sufficient to warrant preemption.

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

															The proviso in § 2(b) of the Clayton Act, as amended by Page 437 U. S. 132 the Robinson-Patman Act, is merely an exception to that
statute's broad prohibition against discriminatory pricing. It
created no new federal right; quite the contrary, it defined a
specific, limited defense, and even narrowed the good faith defense
that had previously existed. [ Footnote 23 ] To be sure, the defense is an important one,
and the interpretation of its contours has been informed by the
underlying national policy favoring competition which it reflects.
[ Footnote 24 ] But it is
illogical to infer that, by excluding certain competitive behavior
from the general ban against discriminatory pricing, Congress
intended to preempt the States' power to prohibit any conduct
within that exclusion. This Court is generally reluctant to infer
preemption, see, e.g., De Canas v. Bica, 424 U.
S. 351 , 424 U. S.
357 -358, n. 5; Merrill Lynch, Pierce, Fenner &
Smith v. Ware, 414 U. S. 117 , 414 U. S. 127 ,
and it would be particularly inappropriate to do so in this case,
because the basic purposes of the state statute and the
Robinson-Patman Act are similar. Both reflect a policy choice
favoring the interest in equal treatment of all customers Page 437 U. S. 133 over the interest in allowing sellers freedom to make selective
competitive decisions. [ Footnote
25 ]

															Appellants point out that the Robinson-Patman Act itself may be
characterized as an exception to, or a qualification of, the more
basic national policy favoring free competition, [ Footnote 26 ] and argue that the Maryland
statute "undermin[es]" the competitive balance that Congress struck
between the Robinson-Patman and Sherman Acts. [ Footnote 27 ] This is merely another way of
stating that the Maryland statute will have an anticompetitive
effect. In this sense, there is a conflict between the statute and
the central policy of the Sherman Act -- our "charter of economic
liberty." Northern Pacific R. Co. v. United States, 356 U. S. 1 , 356 U. S. 4 .
Nevertheless, this sort of conflict cannot itself constitute a
sufficient reason for invalidating the Maryland statute. For if an
adverse effect on competition were, in and of itself, enough to
render a state statute invalid, the States' power to engage in
economic regulation would be effectively destroyed. [ Footnote 28 ] We are, therefore, satisfied
that neither the broad implications of the Sherman Act nor the
Robinson-Patman Act can fairly Page 437 U. S. 134 be construed as a congressional decision to preempt the power of
the Maryland Legislature to enact this law.

															The judgment is affirmed. So ordered. MR. JUSTICE POWELL took no part in the consideration or decision
of these cases.

															* Together with No. 77-11, Shell Oil Co. v. Governor of
Maryland et al; No. 77-12, Continental Oil Co. et al. v.
Governor of Maryland et al.; No. 77-47, Gulf Oil Corp. v.
Governor of Maryland et al.; and No. 77-64, Ashland Oil,
Inc., et al. v. Governor of Maryland et al., also on appeal
from the same court.

															[ Footnote 1 ]

															The pertinent provisions of the statute are as follows:

															"(b) After July 1, 1974, no producer or refiner of petroleum
products shall open a major brand, secondary brand or unbranded
retail service station in the State of Maryland, and operate it
with company personnel, a subsidiary company, commissioned agent,
or under a contract with any person, firm, or corporation, managing
a service station on a fee arrangement with the producer or
refiner. The station must be operated by a retail service station
dealer."

															"(c) After July 1, 1975, no producer or refiner of petroleum
products shall operate a major brand, secondary brand, or unbranded
retail service station in the State of Maryland, with company
personnel, a subsidiary company, commissioned agent, or under a
contract with any person, firm, or corporation managing a service
station on a fee arrangement with the producer or refiner. The
station must be operated by a retail service station dealer."

															"(d) Every producer, refiner, or wholesaler of petroleum
products supplying gasoline and special fuels to retail service
station dealers shall extend all voluntary allowances uniformly to
all retail service station dealers supplied."

															Md.Code Ann., Art. 66, § 157E (Supp. 1977).

															[ Footnote 2 ]

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

															15 U.S.C. § 13(b) (1976 ed.).

															[ Footnote 3 ]

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

															[ Footnote 4 ]

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

															[ Footnote 5 ]

															Exxon presented nine arguments, both constitutional and
statutory. It contended that the statute was arbitrary and
irrational under the Due Process Clause; constituted an
unconstitutional taking of property without just compensation;
denied it, in two distinct ways, the equal protection of the laws;
constituted an unlawful delegation of legislative authority; was
unconstitutionally vague; discriminated against and burdened
interstate commerce; and was preempted by the Robinson-Patman Act
and the Federal Emergency Petroleum Allocation Act of 1973. Id. at 116.

															[ Footnote 6 ]

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

															[ Footnote 7 ]

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

															[ Footnote 8 ] See 279 Md. at 445-446, 370 A.2d at 1121-1122.

															[ Footnote 9 ] Id. at 418-420, 370 A.2d at 1107-1108.

															[ Footnote 10 ]

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

															[ Footnote 11 ] See n 5, supra. [ Footnote 12 ]

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

															[ Footnote 13 ]

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

															[ Footnote 14 ]

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

															[ Footnote 15 ]

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

															[ Footnote 16 ]

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

															[ Footnote 17 ]

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

															[ Footnote 18 ]

															California, Delaware, the District of Columbia, and Florida have
adopted laws restricting refiners' operation of service stations.
Similar proposals have been before the legislatures of 32 other
jurisdictions. See Brief for Appellants in No. 77-10, p.
45 nn. 21 and 22; Brief for the State of California as Amicus
Curiae. [ Footnote 19 ]

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

															[ Footnote 20 ]

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

															[ Footnote 21 ]

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

															[ Footnote 22 ]

															Thus, appellants' claim that the statute will create
secondary-line liability is premised on the possibility that price
differentials may arise between stations located in Maryland and
those in neighboring States. With respect to this claim, it is
sufficient to note that, although the Maryland statute may affect
the business decision of whether or not to reduce prices, it does
not create any irreconcilable conflict with the Robinson-Patman
Act. The statute may require that a voluntary allowance that could
legally have been confined to the Baltimore area be extended to
Salisbury. We may then assume, arguendo, that the
Robinson-Patman Act could require a further extension of the
allowance into the neighboring State. The possible scope of the
voluntary allowance may, therefore, have an impact on the company's
decision on whether or not to meet the competition in Baltimore,
but the state statute does not in any way require discriminatory
prices. See also n 20, supra. [ Footnote 23 ]

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

															[ Footnote 24 ]

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

															"The heart of our national economic policy long has been faith
in the value of competition. In the Sherman and Clayton Acts, as
well as in the Robinson-Patman Act, 'Congress was dealing with
competition, which it sought to protect, and monopoly, which it
sought to prevent.' Staley Mfg. Co. v. Federal Trade
Comm'n, 135 F.2d 453, 455. We need not now reconcile, in its
entirety, the economic theory which underlies the Robinson-Patman
Act with that of the Sherman and Clayton Acts. It is enough to say
that Congress did not seek by the Robinson-Patman Act either to
abolish competition or so radically to curtail it that a seller
would have no substantial right of self-defense against a price
raid by a competitor." Standard Oil Co., supra at 340 U. S.
248 -249 (footnote omitted).

															[ Footnote 25 ]

															Just as the political and economic stimulus for the
Robinson-Patman Act was the perceived need to protect independent
retail stores from "chain stores," see U.S. Department of
Justice, Report on the Robinson-Patman Act 114-124 (1977), so too
the Maryland statute was prompted by the perceived need to protect
independent retail service station dealers from the vertically
integrated oil companies. 279 Md. at 422, 370 A.2d at 1109.

															[ Footnote 26 ]

															Indeed, many have argued that the Robinson-Patman Act is
fundamentally anticompetitive, and undermines the purposes of the
Sherman Act. See generally U.S. Department of Justice
Report, supra. [ Footnote 27 ]

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

															[ Footnote 28 ]

															Appellants argue that Maryland has actually regulated beyond its
boundaries, pointing to the possibility that they may have to
extend voluntary allowances into neighboring States in order to
avoid liability under the Robinson-Patman Act. See nn. 21 and | 21 and S. 117fn22|>22, supra. But this alleged extraterritorial effect arises from the
Robinson-Patman Act, not the Maryland statute.

															MR. JUSTICE BLACKMUN, concurring in part and dissenting in
part.

															Although I agree that the Maryland Motor Fuel Inspection Law
[ Footnote 2/1 ] does not offend
substantive due process or federal antitrust Page 437 U. S. 135 policy, I dissent from 437 U. S. The
divestiture provisions, Md.Code Ann., Art. 56, §§ 157E(b) and (c)
(Supp. 1977) (hereinafter referred to as §§ (b) and (c)), preclude
out-of-state competitors from retailing gasoline within Maryland.
The effect is to protect in-state retail service station dealers
from the competition of the out-of-state businesses. This
protectionist discrimination is not justified by any legitimate
state interest that cannot be vindicated by more evenhanded
regulation. Sections (b) and (c), therefore, violate the Commerce
Clause. [ Footnote 2/2 ] I In Maryland, the retail marketing of gasoline is interstate
commerce, for all petroleum products come from outside the State.
Retailers serve interstate travelers. To the extent that particular
retailers succeed or fail in their businesses, the interstate
wholesale market for petroleum products is affected. Cf. Dean
Milk Co. v. Madison, 340 U. S. 349 (1951). [ Footnote 2/3 ] The Page 437 U. S. 136 regulation of retail gasoline sales is therefore within the
scope of the Commerce Clause. See ibid.; Minnesota v.
Barber, 136 U. S. 313 (1890). [ Footnote 2/4 ] A The Commerce Clause forbids discrimination against interstate
commerce, which repeatedly has been held to mean that States and
localities may not discriminate against the transactions of
out-of-state actors in interstate markets. E.g., Hunt v.
Washington Apple Advertising Comm'n, 432 U.
S. 333 , 432 U. S.
350 -352 (1977); Halliburton Oil Well Co. v.
Reily, 373 U. S. 64 , 373 U. S. 69 -73
(1963); Dean Milk Co. v. Madison, 340 U.S. at 340 U. S. 354 ; Best & Co. v. Maxwell, 311 U.
S. 454 , 311 U. S.
455 -456 (1940). The discrimination need not appear on
the face of the state or local regulation.

															"The commerce clause forbids discrimination, whether forthright
or ingenious. In each case, it is our duty to determine whether the
statute under attack, whatever its name may be, will in its
practical operation, work discrimination against interstate
commerce." Ibid. (footnote omitted). The state or local authority
need not intend to discriminate in order to offend the policy of
maintaining a free-flowing national economy. As demonstrated in Hunt, a statute that, on its face, restricts both
intrastate and interstate transactions may violate the Clause by
having the "practical effect" of discriminating in its operation.
432 U.S. at 432 U. S.
350 -352.

															If discrimination results from a statute, the burden falls upon
the state or local government to demonstrate legitimate local
benefits justifying the inequality, and to show that less
discriminatory alternatives cannot protect the local interests. Page 437 U. S. 137 Id. at 432 U. S. 353 ; Dean Milk Co. v. Madison, 340 U.S. at 340 U. S. 354 .
This Court does not merely accept without analysis purported local
interests. Instead, it independently identifies the character of
the interests and judges for itself whether alternatives will be
adequate. For example, in Dean Milk, the city attempted to
justify a milk pasteurization ordinance by claiming it to be a
necessary health measure. The city's assertion was not conclusive,
however:

															"A different view, that the ordinance is valid simply because it
professes to be a health measure, would mean that the Commerce
Clause, of itself, imposes no limitations on state action other
than those laid down by the Due Process Clause, save for the rare
instance where a state artlessly discloses an avowed purpose to
discriminate against interstate goods." Ibid. In an independent assessment of the asserted
purpose, the Court determined exactly how the ordinance protected
public health and then concluded that other measures could
accomplish the same ends. Id. at 340 U. S.
354 -356. The city's public health purpose therefore did
not justify the discrimination, and the ordinance violated the
Commerce Clause. B With this background, the unconstitutional discrimination in the
Maryland statute becomes apparent. No facial inequality exists;
§§(b) and (c) preclude all refiners and producers from marketing
gasoline at the retail level. But given the structure of the retail
gasoline market in Maryland, the effect of §§ (b) and (c) is to
exclude a class of predominantly out-of-state gasoline retailers
while providing protection from competition to a class of
nonintegrated retailers that is overwhelmingly composed of local
businessmen. In 1974, of the 3,780 gasoline service stations in the
State, 3,547 were operated by nonintegrated local retail dealers.
App. 191, 569, 755. Of the 233 company-operated stations, 197
belonged to out-of-state Page 437 U. S. 138 integrated producers or refiners. Id. at 190-191.
Thirty-four were operated by nonintegrated companies that would not
have been affected immediately by the Maryland statute. [ Footnote 2/5 ] Ibid. The only
in-state integrated petroleum firm, Crown Central Petroleum, Inc.,
operated just two service stations. Id. at 189. Of the
class of stations statutorily insulated from the competition of the
out-of-state integrated firms, then, more than 99% were operated by
local business interests. Of the class of enterprises excluded
entirely from participation in the retail gasoline market, 95% were
out-of-state firms, operating 98% of the stations in the class. Ibid. The discrimination suffered by the out-of-state integrated
producers and refiners is significant. Five of the excluded
enterprises, Ashland Oil, Inc., BP Oil, Inc., Kayo Oil Co.,
Petroleum Marketing Corp., and Southern States Cooperative, Inc.,
market nonbranded gasoline through price competition, rather than
through brand recognition. Of the 98 stations marketing gasoline in
this manner, all but 6 are company operated. The company operations
result from the dominant fact of price competition marketing.
According to repeated testimony from petroleum economics experts
and officers of price marketers -- testimony that the trial court
did not discredit -- such nonbranded stations can compete
successfully only if they have day-to-day control of the retail
price of their products, the hours of operation of their stations,
and related business details. App. 320, 357, 370-371, 4451,
503-504, Page 437 U. S. 139 517, 529-530; Joint App. to Jurisdictional Statements 102a et seq. Only with such control can sufficient sales volume
be achieved to produce satisfactory profits at prices two to three
cents a gallon below those of the major branded stations. Dealer
operation of stations precludes such control because of the
illegality of vertical price-fixing. See, e.g., 15 U.S.C.
§ 1 (1976 ed.); White Motor Co. v. United States, 372 U. S. 253 (1963). Therefore, because §§ (b) and (c) forbid company
operations, these out-of-state competitors will have to abandon the
Maryland retail market altogether. App. 100, 357-358, 455, 519;
Joint App. to Jurisdictional Statements 103a et seq. [ Footnote 2/6 ] For the same reason
32 other out-of-state national nonbranded integrated marketers, who
operate their own stations without dealers, will be precluded from
entering the Maryland retail gasoline market.

															The record also contains testimony that the discrimination will
burden the operations of major branded companies, such as
appellants Exxon, Phillips, Shell, and Gulf, all of which are
out-of-state firms. Most importantly, §§ (b) and (c) will preclude
these companies, as well as those mentioned in the previous
paragraph, from competing directly for the profits of retail
marketing. According to Richard T. Harvin, retail sales manager for
Exxon's eastern marketing region, Exxon's company-operated stations
in Maryland annually return 15% of the company's investment -- a
profit of $700,000 in 1974. App. 316. Sections (b) and (c) will
force this return to be shared with the local dealers. In addition,
the ban of the sections will preclude the majors from enhancing
brand recognition and consumer acceptance through retail outlets
with company-controlled standards. Id. at 316, 320, 647,
668-669. Their ability directly to monitor consumer preferences
and Page 437 U. S. 140 reactions will be diminished. Id. at 315, 649, 669. And
their opportunity for experimentation with retail marketing
techniques will be curtailed. Id. at 316-317, 647-649,
669. In short, the divestiture provisions, which will require the
appellant majors to cease operation of property valued at more than
$10 million, will inflict significant economic hardship on
Maryland's major brand companies, all of which are out-of-state
firms.

															Similar hardship is not imposed upon the local service station
dealers by the divestiture provisions. Indeed, rather than
restricting their ability to compete, the Maryland Act effectively,
and perhaps intentionally, improves their competitive position by
insulating them from competition by out-of-state integrated
producers and refiners. In its answers to the various complaints in
this case, the State repeatedly conceded that the Act was intended
to protect

															"the retail dealer as an independent businessman [by] reducing
the control and dominance of the vertically integrated petroleum
producer and refiner in the retail market." Id. at 33; see id. at 51, 54, 104, 128, 132,
145, 147. At trial, the State's expert said that the legislation
would have the effect of protecting the local dealers against the
out-of-state competition. Id. at 613. In short, the
foundation of the discrimination in this case is that the local
dealers may continue to enter retail transactions and to compete
for retail profits while the statute will deny similar
opportunities to the class composed almost entirely of out-of-state
businesses. [ Footnote 2/7 ] Page 437 U. S. 141 With discrimination proved against interstate commerce, the
burden falls upon the State to justify the distinction with
legitimate state interests that cannot be vindicated with more
evenhanded regulation. On the record before the Court, the State
fails to carry its burden. It asserts only in general terms a
desire to maintain competition in gasoline retailing. Although this
is a laudable goal, it cannot be accepted without further analysis,
just as the Court could not accept the mere assertion of a public
health justification in Dean Milk. Here, the State ignores
the second half of its responsibility; it does not even attempt to
demonstrate why competition cannot be preserved without banning the
out-of-state interests from the retail market.

															The State's showing may be so meager because any legitimate
interest in competition can be vindicated with more evenhanded
regulation. First, to the extent that the State's interest in
competition is nothing more than a desire to protect particular
competitors -- less efficient local businessmen -- from the legal
competition of more efficient out-of-state firms, the interest is
illegitimate under the Commerce Clause. A national economy would
hardly flourish if each State could effectively insist that local
nonintegrated dealers handle product retailing to the exclusion of
out-of-state integrated firms that would not have sufficient local
political clout to challenge the influence of local businessmen
with their local government leaders. [ Footnote 2/8 ] Each State would be encouraged to

															"legislate according Page 437 U. S. 142 to its estimate of its own interests, the importance of its own
products, and the local advantages or disadvantages of its position
in a political or commercial view."

															J. Story, Commentaries on the Constitution of the United States
§ 259 (4th ed. 1873), quoted in H. P. Hood & Sons v. Du
Mond, 336 U. S. 525 , 336 U. S. 533 (1949). See also e.g., The Federalist, Nos. 7, 11, 12
(Hamilton), No. 42 (Madison). The Commerce Clause simply does not
countenance such parochialism.

															Second, a legitimate concern of the State could be to limit the
economic power of vertical integration. But nothing in the record
suggests that the vertical integration that has Page 437 U. S. 143 already occurred in the Maryland petroleum market has inhibited
competition. Indeed, the trial court found that the retail market,
dominated by 3,547 dealer outlets constituting more than 90% of the
State's service stations, is highly competitive. [ Footnote 2/9 ] Therefore, the State has shown no
need for the divestiture of existing company-owned stations
required by § (c). The legitimacy of any concern about future
integration, which could support the discrimination of § (b), is
suspect because of the exemption granted wholesalers, which, not
surprisingly, are local businesses able to influence the state
legislature. [ Footnote 2/10 ] See 437
U.S. 117 fn2/7|>n. 7, supra. Page 437 U. S. 144 Third, the State appears to be concerned about unfair
competitive behavior such as predatory pricing or inequitable
allocation of petroleum products by the integrated firms. These are
the only examples of specific misconduct asserted in the State's
answers. App. 334, 555, 81-83, 109-111, 133-134, 148-149. But none
of the concerns support the discrimination in §§ (b) and (c). There
is no proof in the record that any significant portion of the class
of out-of-state firms burdened by the divestiture sections has
engaged in such misconduct. Furthermore, predatory pricing and
unfair allocation already have been prohibited by both state and
federal law. See, e.g., Emergency Petroleum Allocation Act
of 1973, 87 Stat. 628, 15 U.S.C. § 751 et seq. (1976 ed.);
Energy Policy and Conservation Act, § 461, 89 Stat. 955, 15 U.S.C.
§ 760g (1976 ed.); Maryland Motor Fuel Inspection Law, Md.Code
Ann., Art. 6, § 157E(f) (Supp. 1977); Maryland Antitrust Act,
Md.Com.Law Code Ann. § 11-201 et seq. (1975); Maryland
Unfair Sales Act, Md.Com.Law Code Ann. § 11-401 et seq. (1975). Less discriminatory legislation, which would regulate the
leasing of all service stations, not just those owned by the
out-of-state integrated producers and refiners, could prevent
whatever evils arise from short-term Page 437 U. S. 145 leases. Cf. Maryland Gasoline Products Marketing Act,
Md.Com.Law Code Ann. § 11-304(g) (Supp. 1977). [ Footnote 2/11 ]

															In sum, the State has asserted before this Court only a vague
interest in preserving competition in its retail gasoline market.
It has not shown why its interest cannot be vindicated by
legislation less discriminatory toward out-of-state retailers. It
therefore has not met its burden to justify the discrimination
inherent in §§ (b) and (c), and they violate the Commerce
Clause. II The arguments of the Court's opinion, the Maryland Court of
Appeals decision, [ Footnote 2/12 ]
and appellees do not remove the unconstitutional taint from the
discrimination inherent in §§ (b) and (c). A The Court offers essentially three responses to the
discrimination in the retail gasoline market imposed by the
divestiture provisions. [ Footnote
2/13 ] First, the Court says that the discrimination Page 437 U. S. 146 against the class of out-of-state producers and refiners does
not violate the Commerce Clause, because the State has not imposed
similar discrimination against other out-of-state retailers. Ante at 437 U. S.
125 -126. This is said to distinguish the present case
from Hunt v. Washington Apple Advertising Comm'n. In fact,
however, the unconstitutional discrimination in Hunt was
not against all out-of-state interests. North Carolina had enacted
a statute requiring that apples marketed in closed containers
within the State bear " no grade other than the applicable U.S.
grade or standard.'" 432 U.S. at 432 U. S. 335 .
The Commission contended that the provision discriminated against
interstate commerce because it prohibited the display of superior
Washington State apple grading marks. The Court did not strike down
the provision because it discriminated against the marketing
techniques of all out-of-state growers. The provision imposed no
discrimination on growers from States that employed only the United
States Department of Agriculture grading system. [ Footnote 2/14 ] Despite this Page 437 U. S.
147 lack of universal discrimination, the Court declared the
provision unconstitutional because it discriminated against a
single segment of out-of-state marketers of apples, namely, the
Washington State growers who employed the superior grading system.
In this regard, the Maryland divestiture provisions are identical
to, not distinguishable from, the North Carolina statute in Hunt. Here, the discrimination has been imposed against a
segment of the out-of-state retailers of gasoline, namely, those
who also refine or produce petroleum. To accept the argument of the Court, that is, that
discrimination must be universal to offend the Commerce Clause,
naively will foster protectionist discrimination against interstate
commerce. In the future, States will be able to insulate in-state
interests from competition by identifying the most potent segments
of out-of-state business, banning them, and permitting less
effective out-of-state actors to remain. The record shows that the
Court permits Maryland to effect just such discrimination in this
case. The State bans the most powerful out-of-state firms from
retailing gasoline within its boundaries. It then insulates the
forced divestiture of 199 service stations from constitutional
attack by permitting out-of-state firms such as Pantry Pride,
Fisca, Hi-Way, and Midway to continue to operate 34 gasoline
stations. Effective out-of-state competition is thereby emasculated
-- no doubt, an ingenious discrimination. But, as stated at the
outset, "the commerce clause forbids discrimination, whether
forthright or ingenious." Best & Co. v. Maxwell, 311
U.S. at 311 U. S.
455 .

															Second, the Court contends, as a subpart of its primary
argument, that the discrimination in Hunt "raised the cost of doing business for out-of-state dealers,
and, in various other ways, favored the in-state dealer in the
local market. 432 U.S. at 432 U. S. 351 -352. No
comparable claim can be made here." Ante at 437 U. S. 126 .
Once it is seen that the discrimination in Hunt raised the
cost of doing business for only one group of the out-of-state
marketers of apples, the fallacy of the Court's Page 437 U. S. 148 argument appears. In fact, here the burden imposed upon the
class of out-of-state retailers subject to the discrimination of §§
(b) and (c) far exceeds the burdens in Hunt. In Hunt, the statute merely increased costs and deprived the
Washington growers of the competitive advantages of the use of
their grading system. Here, the statute bans the refiners and
producers from the retail market altogether -- a burden that lacks
comparability with the effects in Hunt only because it is
more severe.

															Third, the Court asserts without citation:

															"The fact that the burden of a state regulation falls on some
interstate companies does not, by itself, establish a claim of
discrimination against interstate commerce." Ante at 437 U. S. 126 .
This proposition is correct only to the extent that it is
incomplete; it does not apply to the facts present here. It is true
that merely demonstrating a burden on some out-of-state actors does
not prove unconstitutional discrimination. But when the burden is
significant, when it falls on the most numerous and effective group
of out-of-state competitors, when a similar burden does not fall on
the class of protected in-state businessmen, and when the State
cannot justify the resulting disparity by showing that its
legislative interests cannot be vindicated by more evenhanded
regulation, unconstitutional discrimination exists. The facts of
this litigation demonstrate such discrimination, and the Court does
not argue persuasively to the contrary. B The contentions of the Maryland Court of Appeals, which also
found no violation of the Commerce Clause, are no more convincing
than the arguments of the Court's opinion. First, the Court of
Appeals reasoned that §§ (b) and (c) did not discriminate against
the class of out-of-state refiners and producers, because the
wholesale flow of petroleum products into the State was not
restricted. 279 Md. 410, 431, 370 A.2d 1102, 1114 (1977). This
supposedly distinguished the present Page 437 U. S. 149 facts from those of Dean Milk Co. v. Madison, which
involved unconstitutional discrimination against interstate
commerce. To begin with, however, the distinction drawn by the
Court of Appeals is basically irrelevant. The Maryland statute has
not effected discrimination with regard to the wholesaling or
interstate transport of petroleum. The discrimination exists with
regard to retailing. The fact that gasoline will continue to flow
into the State does not permit the State to deny out-of-state firms
the opportunity to retail it once it arrives.

															Furthermore, Dean Milk cannot be distinguished on the
ground asserted by the Court of Appeals. There, this Court
invalidated § 7.21 of the General Ordinances of the city of Madison
(1949), which outlawed the local sale of milk not pasteurized
within five miles of the city. The section did not legally or
effectively block the flow of out-of-state milk into Madison to any
greater extent than the restrictions on sales of gasoline by
out-of-state companies block the flow of gasoline here. In Dean
Milk, out-of-state producers could bring their milk to
Madison, have it pasteurized in Madison, and sell it in Madison
without violating § 7.21. If the flow of milk were at all
restricted, it was merely because the out-of-state producers chose
not to deal with the Madison pasteurizers. Similarly, the flow of
gasoline into Maryland may be restricted if the out-of-state
producers and refiners choose not to supply the dealers who replace
the company-owned operations. [ Footnote 2/15 ]

															Second, the Court of Appeals said the Maryland legislation did
not offend the Commerce Clause, because the legislature intended to
preserve competition, not to discriminate against interstate
commerce. 279 Md. at 431, 370 A.2d at 1114. Page 437 U. S. 150 With this argument, the court fell into the same trap that
confines the State's proffered justifications for the
discrimination of §§ (b) and (c). To begin with, the fact that no
discrimination was intended is irrelevant where, as here,
discriminatory effects result from the statutory scheme.
Furthermore, the fact that the legislature might have had a
laudable intent when it passed the law cannot, by itself, justify
the divestiture provisions. The State must also show that its
interests cannot be vindicated by less discriminatory alternatives.
The Court of Appeals erroneously failed to require such a showing
from the appellees.

															Third, the Court of Appeals resurrected the outdated notion that
retailing is merely local activity not subject to the strictures of
the Commerce Clause. 279 Md. at 432, 370 A.2d at 1114-1115, citing Crescent Oil Co. v. Mississippi, 257 U.
S. 129 (1921). In Crescent Oil, the Court said
that the operation of cotton gins was local manufacturing, rather
than interstate commerce. As explained at the beginning of 437 U. S. however, the interstate character of the retail gasoline market and
57 years of intervening constitutional and economic development
prevent the application of Crescent Oil to the facts of
this litigation. See nn. 437
U.S. 117 fn2/3|>3 and 437
U.S. 117 fn2/4|>4, and accompanying text, supra. C Finally, nothing in the argument of the appellees saves the
distinctions in §§ (b) and (c) from the taint of
unconstitutionality. First, the State argues that discrimination
against interstate commerce has not occurred, because "[n]o nexus
between interstate as opposed to local interests inheres in the
production or refining of petroleum." Brief for Appellees 23.
Although this statement might be correct in the abstract, it is
incorrect in reality, given the structure of the Maryland petroleum
market. Due to geological formation as so far known, no petroleum
is produced in Maryland; due to the economics of production and
refining, as well as to the geology, Page 437 U. S. 151 no petroleum is refined in Maryland. As a matter of actual fact,
then, an inherent nexus does exist between the out-of-state status
of producers and refiners and the distribution and retailing of
gasoline in Maryland. The Commerce Clause does not forbid only
legislation that discriminates under all factual circumstances. It
forbids discrimination in effect against interstate commerce on the
specific facts of each case. If production or refining of gasoline
occurred in Maryland, §§ (b) and (c) might not be unconstitutional.
Under those different circumstances, however, the producers and
refiners would have a fair opportunity to influence their local
legislators, and thereby to prevent the enactment of economically
disruptive legislation. Under those circumstances, the economic
disruption would be felt directly in Maryland, which would tend to
make the local political processes responsive to the problems
thereby created. Under those circumstances, §§ (b) and (c) might
never have been passed. In this case, however, the economic
disruption of the sections is visited upon out-of-state economic
interests, and not upon in-state businesses. One of the basic
assumptions of the Commerce Clause is that local political systems
will tend to be unresponsive to problems not felt by local
constituents; instead, local political units are expected to act in
their constituents' interests. [ Footnote 2/16 ] One of the basic purposes of the Clause,
therefore, is to prevent the vindication of such self-interest from
unfairly burdening out-of-state concerns, and thereby disrupting
the national economy. Page 437 U. S. 152 Second, appellees argue, as did the Court of Appeals, that §§
(b) and (c) do not discriminate impermissibly, because the Maryland
Legislature passed them with the intent to preserve competition. As
explained above, however, the mere assertion of a laudable purpose
does not carry the State's burden to justify the discriminatory
effects of the statute. See Parts 437 U.
S. S. 148|>II-B, supra. Third, appellees rely upon the Court of Appeals' contention that
unconstitutional discrimination against interstate commerce can be
found only where the flow of interstate goods is curtailed.
Appellees' assertion fares no better than did the court's, because
the appellees fail to show how the effect on the flow of interstate
goods varies in kind between this case and Dean Milk. See 437 U. S. supra. III The Court's decision brings to mind the well known words of Mr.
Justice Cardozo:

															"To give entrance to [protectionism] would be to invite a speedy
end of our national solidarity. The Constitution was framed under
the dominion of a political philosophy less parochial in range. It
was framed upon the theory that the peoples of the several states
must sink or swim together, and that, in the long run, prosperity
and salvation are in union, and not division." Baldwin v. G. A. F. Seelig, Inc., 294 U.
S. 511 , 294 U. S. 523 (1935). Today, the Court fails to heed the Justice's admonition.
The parochial political philosophy of the Maryland Legislature
thereby prevails. I would reverse the judgment of the Maryland
Court of Appeals.

															[ Footnote 2/1 ]

															The presently challenged portions of the law were enacted four
years ago, and amended once since then. 1974 Md.Laws, ch. 854; 1975
Md.Laws, ch. 608. The statute is now codified as Md.Code Ann., Art.
56, § 157E (Supp. 1977), and reads:

															"(a) For the purpose of this law all gasoline and special fuels
sold or offered or exposed for sale shall be subject to inspection
and analysis as hereinafter provided. . . ."

															"(b) After July 1, 1974, no producer or refiner of petroleum
products shall open a major brand, secondary brand or unbranded
retail service station in the State of Maryland, and operate it
with company personnel, a subsidiary company, commissioned agent,
or under a contract with any person, firm, or corporation, managing
a service station on a fee arrangement with the producer or
refiner. The station must be operated by a retail service station
dealer."

															"(c) After July 1, 1975, no producer or refiner of petroleum
products shall operate a major brand, secondary brand, or unbranded
retail service station in the State of Maryland, with company
personnel, a subsidiary company, commissioned agent, or under a
contract with any person, firm, or corporation managing a service
station on a fee arrangement with the producer or refiner. The
station must be operated by a retail service station dealer."

															"(d) Every producer, refiner, or wholesaler of petroleum
products supplying gasoline and special fuels to retail service
station dealers shall extend all voluntary allowances uniformly to
all retail service station dealers supplied."

															"(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."

															[ Footnote 2/2 ]

															U.S.Const., Art. I, § 8, cl.3:

															"The Congress shall have Power . . ."

															"To regulate Commerce with foreign Nations, and among the
several States, and with the Indian Tribes."

															[ Footnote 2/3 ]

															The inherent effect of local regulation of retail sales on
interstate commerce is well illustrated by Dean Milk. The
city of Madison forbade the sale of pasteurized milk unless
pasteurization occurred at a plant located within five miles of the
center of the city. General Ordinances of the City of Madison §
7.21 (1949). Even though only local sale was prohibited, the Court
considered the ordinance to be a regulation of interstate
commerce.

															[ Footnote 2/4 ] Cf. Best & Co. v. Maxwell, 311 U.
S. 454 (1940) (holding that taxation of local retailing
was within the reach of the Commerce Clause); United States v.
Frankfort Distilleries, Inc., 324 U.
S. 293 (1945) (holding that retailing was interstate
commerce within the scope of the Sherman Act). See
generally Note, Gasoline Marketing Divestiture Statutes: A
Preliminary Constitutional and Economic Assessment, 28 Vand.L.Rev.
1277, 1303 (1975).

															[ Footnote 2/5 ]

															In 1974, Fisca Oil Co., Giant Food, Inc., Hi-Way Oil, Inc.,
Homes Oil Co., Hudson Oil Co., Midway Petroleum, National Oil Co.,
Pantry Pride, Savon Gas Stations, and Sears, Roebuck & Co.
operated gasoline stations in Maryland. Because none of these
organizations produced or refined petroleum at that time, the
statute would not have restricted their operations. It should be
noted, however, that the statute will reach any of these firms
deciding to integrate backwards from retailing to refining or
producing. After this suit was filed, Hudson Oil Co. acquired a
refinery, and thus became another out-of-state business subject to
the ban of §§ (b) and (c). App. 518-519.

															[ Footnote 2/6 ]

															The sections will force Ashland to divest 17 stations in which
it has invested $2,381,385. Id. at 257, 258-259. Petroleum
Marketing has 21 stations valued at $2,043,710. Id. at
656.

															[ Footnote 2/7 ]

															Another indication of the discrimination against out-of-state
business was the amendment of the original legislative proposal to
exempt wholesalers of gasoline from the divestiture requirements.
The author of the proposal intended to ban retailing by wholesalers
and "not to discriminate against one class as to another." Id. at 568. On cross-examination, he was asked why the
exemption was enacted. He replied:

															"It was up to the General Assembly to make that decision.
Apparently the wholesalers were represented at the testimony in the
hearings. . . . I did hear at a later date that they wanted to be
exempt from it because some of the wholesalers, being local
jobbers, had no investment or financial activity or engagement with
the producer-refiner, so they wanted to plea upon the mercy of the
committee, so to speak. . . ."

															" * * * *" "Q. You have no information then as to why the Legislature of
Maryland chose to make that discrimination?"

															"A. Not other than hearsay as to the general data that these men
were local businessmen, had no definite tie in with the refinery. .
. ." Id. at 568-569.

															[ Footnote 2/8 ]

															There is support in the record for the inference that the
Maryland Legislature passed the divestiture provisions in response
to the pleas of local gasoline dealers for protection against the
competition of both the price marketers and the major oil
companies. For example, the executive director of the Greater
Washington/Maryland Service Station Association, which represents
almost 700 local Maryland dealers, testified before the Economic
Matters Committee of the Maryland Senate:

															"I would like to begin by telling you gentlemen that these are
desperate days for service station dealers. . . ."

															" * * * *" "Now beset by the critical gasoline supply situation, the
squeeze by his landlord-supplier and the shrinking service and
tire, battery and accessory market, the dealer is now faced with an
even more serious problem."

															"That is the sinister threat of the major oil companies to
complete their takeover of the retail-marketing of gasoline, not
just to be in competition with their own branded dealers, but to
squeeze them out and convert their stations to company
operation."

															" * * * *" "Our oil industry has grown beyond the borders of our country to
where its American character has been replaced by a multinational
one."

															"Are the legislators of Maryland now about to let this octopus
loose and unrestricted in the state of Maryland, among our small
businessmen to devour them? We sincerely hope not."

															"The men that you see here today are the back-bone of American
small business. . . ."

															"We are here today asking you, our own legislators, to protect
us from an economic giant who would take away our very livelihood
and our children's future in its greed for greater profits. Please
give us the protection we need to save our stations." Id. at 755, 756, 761.

															[ Footnote 2/9 ]

															From the facts stipulated by the parties, the trial court
found:

															"Retail petroleum marketing in the State of Maryland is and has
been a highly competitive industry. This is a result of the number
and location of available facilities, the comparatively small
capital costs for entering the business, the mobility of the
purchaser at the time of purchasing the products, the relative
interchangeability of one competitor's products with another in the
mind of the consumer, the visibility of price information, and the
many choices the consumer has in terms of prices, brands, and
services offered."

															Joint App. to Jurisdictional Statements 99a. The continuing
competitive nature of the Maryland gasoline market provided one
basis for the trial court's holding that the State had not

															"demonstrated a real and substantial relation to the object
sought to be attained by the means selected[;] the evidence
presented before it indicates that the statute is inversely related
to the public welfare." Id. at 131a-132a. The trial court therefore considered
the statute unconstitutional.

															[ Footnote 2/10 ]

															The trial court entered several findings about the integration
of the oil companies and the need for divestiture:

															"Apart from restraining free competition, it was shown that
divestiture would be harmful to competition in the industry, and
would primarily serve to protect the independent dealers rather
than the public at large. There was no proven detrimental effect
upon the retail market caused by company-owned-and-operated
stations which could not be curbed by federal and state antitrust
laws."

															" * * * *" "The court also finds from the preponderance of the evidence
that the law will preclude all of some thirty-two producer-refiners
not now in the State from ever entering the competitive market in
Maryland, and vertical integration will be prohibited. Neither
effect is in the public interest, since competition is essentially
for consumer benefit."

															"Noteworthy also is the fact that the original draft of the law
included wholesalers in the prohibition against retail selling. The
final draft of the law eliminated wholesalers, for the sole reason,
according to Mr. Coleman, that the wholesalers requested their
elimination from the act. There is no evidence whatsoever relative
to why wholesalers should have been included initially, nor how the
general public benefited from their exemption."

															"In all the more than one hundred eighty-five pounds of
pleadings, motions, briefs, exhibits and depositions before this
court, there is no concrete evidence that the act was justified as
to the classes of operators singled out to be affected in order to
promote the general welfare of the citizens of the State. Rather, it is apparent that the entire bill is designed to
benefit one class of merchants to the detriment of
another. " Id. at 130a-131a (emphasis supplied).

															[ Footnote 2/11 ]

															This statute states:

															"(g) Distributor may not unreasonably withhold certain
consents . . . The distributor may not unreasonably withhold
his consent to any assignment, transfer, sale, or renewal of a
marketing agreement. . . ."

															[ Footnote 2/12 ]

															279 Md. 410, 370 A.2d 1102 and 372 A.2d 237 (1977). The trial
court, the Circuit Court for Anne Arundel County, Md. did not
address the question whether §§ (b) and (c) unconstitutionally
discriminated against interstate commerce. It held that the statute
offended substantive due process, in violation of the Maryland
Declaration of Rights, Art. 23.

															[ Footnote 2/13 ]

															The Court also notes that §§ (b) and (c) do not discriminate
against interstate goods, and do not favor local producers and
refiners. While true, the observation is irrelevant, because it
does not address the discrimination inflicted upon retail marketing
in the State. Cf. 437 U. S. infra. Footnote 16 of the Court's opinion, ante at 437 U. S.
126 -127, suggests that unconstitutional discrimination
does not exist unless there is an effect on the quantity of
out-of-state goods entering a State. This is too narrow a view of
the Commerce Clause. First, interstate commerce consists of far
more than mere production of goods. It also consists of
transactions -- of repeated buying and selling of both goods and
services. By focusing exclusively on the quantity of goods, the
Court limits the protection of the Clause to producers and handlers
of goods before they enter a discriminating State. In our complex
national economy, commercial transactions continue after the goods
enter a State. The Court today permits a State to impose
protectionist discrimination upon these later transactions to the
detriment of out-of-state participants. Second, the Court cites no
case in which this Court has held that a burden on the flow of
goods is a prerequisite to establishing a case of unconstitutional
discrimination against interstate commerce. Neither Hunt nor Dean Milk contains such a holding. In both of those
cases, the Court upheld the claims of discrimination; in neither
did it say that a burden on the wholesale flow of goods was a
necessary part of its holding. Regarding Hunt, the Court
cites to 432 U.S. at 432 U. S. 347 ,
which discusses only whether the appellants had met the $10,000
amount in controversy requirement of 28 U.S.C. § 1331. As explained
in 437 U. S. infra this case presents a threat to the flow of gasoline
in Maryland identical to the threat to the flow of milk in Dean
Milk [ Footnote 2/14 ]

															Growers from 13 States marketed apples in North Carolina. Six of
the States did not have state grading systems apart from the USDA
regulations. 432 U.S. at 432 U. S.
349 .

															[ Footnote 2/15 ]

															In fact, the disruption of the flow of gasoline in this case
could be greater than the disruption of the flow of milk in
Madison. The record supports the proposition that the ban on
company operations may so unsettle the wholesale and refining
enterprises of the independent price marketers that they will not
be able profitably to supply gasoline to the stations of
nonintegrated retailers in Maryland. App. 504-505, 509, 531.

															[ Footnote 2/16 ]

															Given the Nation's experience under the Articles of
Confederation, the assumption is not an unreasonable one. At that
time, authority to regulate commerce rested with the States, rather
than with Congress. The pursuit by each State of the particular
interests of its economy and constituents nearly wrecked the
national economy. "The almost catastrophic results from this sort
of situation were harmful commercial wars and reprisals at home
among the States. . . ." P. Hartman, State Taxation of Interstate
Commerce 2 (1953), citing, e.g., The Federalist, Nos. 7,
11, 22 (Hamilton), No. 42 (Madison).

Summary:
Here is a summary of the case:

Exxon Corp. v. Governor of Maryland (1978) concerned a Maryland statute that prohibited oil producers or refiners from operating retail service stations within the state and required them to offer temporary price reductions to all stations they supplied. Several oil companies challenged the statute, arguing it violated the Due Process and Commerce Clauses and conflicted with the Clayton Act.

The Supreme Court upheld the Maryland statute, finding it did not violate the Due Process Clause as it was reasonably related to the state's legitimate interest in controlling the gasoline retail market. Regarding the Commerce Clause, the Court held that the statute did not create a barrier to interstate commerce, even though its burden fell solely on interstate companies. The Court emphasized that the Commerce Clause protects the interstate market, not particular firms, and that interstate commerce includes transactions, not just the movement of goods.

The Court also addressed the Clayton Act, concluding that the Maryland statute did not conflict with it, as the Act prohibits price discrimination, which was not at issue in this case. Thus, the Court affirmed the Maryland Court of Appeals' decision, upholding the validity of the statute.