STATE OIL CO. v. KHAN

Print this Page
Case Basics
Docket No. 
96-871
Petitioner 
State Oil Co.
Respondent 
Khan et al.
Opinion 
Advocates
(on behalf of the Petitioner)
(for United States, as amicus curiae, supporting Petitioner)
(for State amici curiae, supporting Respondents)
(on behalf of the Respondents)
Tags
Term:
Facts of the Case 

Barkat U. Khan and his corporation contracted with State Oil to lease and run a gas station. Under the agreement, State Oil set a maximum profit margin for gasoline and required Khan to return any excess profits to State Oil. Khan fell behind in lease payments and was evicted. Khan then sued State Oil claiming that State Oil had engaged in price fixing in violation of Section 1 of the Sherman Act, which disallows restrictions on trade. State Oil claimed that in setting profit margins, they had not prevented Kahn from setting prices and therefore were not guilty of price fixing.

On appeal, the U.S. Court of Appeals for the Seventh Circuit found in favor of Kahn based on the logic of Albrecht v. Herald Co. in which the Supreme Court ruled that some restrictions on trade, such as price-fixing, always have such negative effects coupled with such little competitive benefit that these restrictions are always unlawful.

Question 

Is the setting of maximum prices always ("per se") a violation of the Sherman Act's prohibition on price fixing?

Conclusion 
Decision: 9 votes for State Oil Co., 0 vote(s) against
Legal provision: Sherman

No. In a unanimous decision authored by Justice Sandra Day O'Connor, the Court overturned the Albrecht decision. The Court noted that antitrust cases are typically decided by weighing the costs and benefits of restrictions in each individual case instead of by per se rules as in Albrecht. Also, there was significant precedent contradicting the assertion that all trade restrictions are illegal, and there was evidence that the effects of price-fixing are not as detrimental as the Court thought at the time of Albrecht.

Cite this Page
STATE OIL CO. v. KHAN. The Oyez Project at IIT Chicago-Kent College of Law. 31 August 2014. <http://www.oyez.org/cases/1990-1999/1997/1997_96_871>.
STATE OIL CO. v. KHAN, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/1990-1999/1997/1997_96_871 (last visited August 31, 2014).
"STATE OIL CO. v. KHAN," The Oyez Project at IIT Chicago-Kent College of Law, accessed August 31, 2014, http://www.oyez.org/cases/1990-1999/1997/1997_96_871.