Some of the most widely quoted passages from Socony follow: Any combination which tampers with price structures is engaged in an unlawful activity.

It has no more allowed genuine or fancied competitive abuses as a legal justification for such schemes than it has the good intentions of the members of the combination.

[5]Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.

In State Oil Co. v. Khan,[9] and then Leegin Creative Leather Products, Inc. v. PSKS, Inc.,[10] the Supreme Court held that vertical price fixing (for example, agreed upon between manufacturers and retailers of their products) is no longer to be considered a per se violation of the Sherman Act, but should be evaluated under a rule of reason.

[11] In the 1920s and 1930s, the US oil industry had two principal components: (1) the so-called majors, "large vertically integrated companies that operated at every level of production and distribution," such as Socony, Standard of Indiana, Continental Oil, Gulf, Shell, and Phillips, that extracted oil, refined it into gasoline, and sold it to consumers through their stations; and (2) so-called independents, smaller firms that were not vertically integrated: independent refiners, wholesalers (so-called jobbers), and retail stations.

In addition to distributing gasoline through their vertically integrated organizations, the majors distributed to independent jobbers under long-term contracts[12] at a price based on the current spot-market price (for example, 2 cents above spot market),[b] which fluctuated in response to the volume being put on the market by the independent refiners.

[13] In the 1920s, oil production had surged "as the automobile replaced the horse and buggy as the common person's means of transportation."

[14] "[T]o stem the overproduction and consequent price decline that followed the development of the vast East Texas oilfield, discovered in October 1930," states established regulatory programs with production quotas.

Although hot oil represented only about 5% of the market, its existence significantly depressed both the wholesale and retail prices of gasoline.

"[20] Despite the downfall of the NIRA, the majors continued to operate the dancing partner program to stabilize oil prices on a voluntary basis.

Although the majors accomplished their goal of price stabilization by decreasing the amount of gasoline placed on the market, the reduced volume caused some independent jobbers to complain.

They sold to retailers at approximately 31⁄2 cents per gallon over the spot-market wholesale price that jobbers paid refiners.

[21] In December 1936, the United States filed a grand jury's indictment in Madison, Wisconsin, charging that 27 corporations and 56 individuals "formulated and carried into effect an unlawful conspiracy to fix prices of gasoline."

The conspiracy, as executed, "enabled these major companies, through the concerted purchase of a very small percentage of the total available gasoline for distribution in the Standard of Indiana territory, to raise the price to controlled levels and thereby unreasonably and unlawfully to profit on the sale of their own products.

[26] These facts, the court of appeals said, made the case dissimilar to United States v. Trenton Potteries Co.,[27] in which price fixing had been held illegal per se.

"[30] The depressed state of the industry "affords justification for the action of the defendants in treating surplus gasoline as an evil of the industry and in making a concerted effort to eliminate the same with a view of stabilizing the market, even though an increase in price might result; provided, of course, the program, either as planned or executed, did not go so far as to constitute an unreasonable restraint by unduly suppressing or interfering with fair competition.

"[33] Justice Douglas dismissed the defendants' evidence that the government had urged them to form a cartel before the NIRA was held unconstitutional.

"So far as cause and effect are concerned it is sufficient in this type of case if the buying programs of the combination resulted in a price rise and market stability which but for them would not have happened.

In the latter part of the 20th century, the Supreme Court began to qualify the absoluteness of various per se rules that it had previously declared—for example, allocations of territories,[43] concerted refusals to deal,[44] and tie-ins.

"[51] The Court said that "as a practical matter it was impossible for the many individual copyright owners to negotiate with and license the users and to detect unauthorized uses.

As generally used in the antitrust field, "price fixing" is a shorthand way of describing certain categories of business behavior to which the per se rule has been held applicable.

The Court of Appeals' literal approach does not alone establish that this particular practice is one of those types or that it is "plainly anticompetitive" and very likely without "redeeming virtue."

Thus, it is necessary to characterize the challenged conduct as falling within or without that category of behavior to which we apply the label "per se price fixing."

[54] Justice White concluded that the courts should evaluate the proffered justification (economic necessity) because: [W]e cannot agree that it should automatically be declared illegal in all of its many manifestations.

● An aspect of the Socony case not discussed in the opinions is analyzed in Professor Andrew Verstein's recent article on the manipulation of benchmarks.

● Another commentator, viewing developments subsequent to Socony, asserts that since that time "the Supreme Court has taken an increasingly nuanced approach to horizontal price fixing": Because application of the per se rule is appropriate only where restraints undoubtedly will impede competition, cases in which there was not clear and unambiguous horizontal price fixing have prompted the Court to err on the side of caution and delve deeper before condemning the challenged arrangements.

[59]● Michael Boudin criticized the Court's use of the metaphor of "the central nervous system of the economy" to describe competitive pricing, in footnote 59 of Socony.

In each, the proper functioning of the signaling system can be viewed as vital to the entity and disruptions as threatening (neurological disease, misallocation of resources).

[61]He agreed that the use of this metaphor was "a fine piece of handiwork," both as dramatic literary rhetoric ("The image of tampering with the central nervous system provokes a sense of discomfort and unease that is doubly effective because it is felt rather than understood.

But Justice Douglas was concerned with pricing in a capitalist or free enterprise system, a regime of many individual decisionmaking units, interdependent but without a common source of authority.