# Fortner Enterprises, Inc. v. United States Steel Corp./Dissent Fortas

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinions White Fortas
United States Supreme Court
394 U.S. 495
Fortner Enterprises, Inc. v. United States Steel Corp.
Argued: Jan. 23, 1969. --- Decided: April 7, 1969
Mr. Justice FORTAS, with whom Mr. Justice STEWART joins, dissenting.
I share my Brother WHITE'S inability to agree with the majority in this case, and, in general, I subscribe to his opinion. I add this separate statement of the reasons for my dissent.
The facts of this case are materially different from any tying case that this Court has heretofore decided. The tying doctrine originated in situations where the seller of product. A offers it for sale only on the condition that the buyer also agree to buy product B from the seller. In International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1947), for example, the company leased its patented machines on the condition that the lessee agree to use only International's salt products in the machines. In Northern Pacific R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958), the railroad leased land from its vast holdings on condition that the lessee accept 'preferential routing' clauses compelling the lessee to ship on the railroad's lines all commodities produced or manufactured on the land unless another railroad offered more favorable terms.
Although the tying doctrine originated under the specific language of § 3 of the Clayton Act Northern Pacific was necessarily a Sherman Act case, because the Clayton Act provision applies only to 'goods, wares, merchandise, machinery, supplies, or other commodities,' and not to land. But Northern Pacific, in effect, applied the same standards to tying arrangements under the Sherman Act as under the Clayton Act, on the theory that the anticompetitive effect of a tie-in was such as to make the difference in language in the two statutes immaterial. The present case, like Northern Pacific, is also exclusively a Sherman Act proceeding. But, here, U.S. Steel is not selling or leasing land subject to an agreement that its prefabricated houses be used thereon. If these were the facts, and if U.S. Steel controlled enough land within an economically demarcated area or 'market,' however defined, the case might well be governed by Northern Pacific. But, here, U.S. Steel is not selling or providing land. It is selling prefabricated steel houses to be erected in a subdivision and it is providing financing for the land acquisition, improvement, development, and erection costs. Most of the financing is related not to the land cost but to the purchase and installation of the houses.
U.S. Steel neither owned not controlled any of the land involved in the venture. On the contrary, the building lots constituting the subdivision on which the houses were to be built were owned by another company of which the principal owner was Mr. Fortner, who owned the petitioner. Nor is U.S. Steel selling credit in any general sense. The financing which it agrees to provide is solely and entirely ancillary to its sale of houses. Under contract terms of a familiar sort in subdivision development, the credit advances are geared to progressive stages of the subdivision development and the purchase, erection, and resale of the houses.
U.S. Steel approached the petitioner seeking to sell it prefabricated steel houses to be erected on the land which Mr. Fortner's other company owned. In October 1960, after lengthy discussions, U.S. Steel offered, through its Credit Corporation, to lend petitioner about $2,000,000. This sum was to be secured by mortgages on the lots. The mortgage notes carried 6% interest, and petitioner also agreed to pay a 'Service Fee' of 1/2 of 1% of the principal amount of the notes. Provisions were made to insure that the funds would be progressively advanced and used for land acquisition (from Mr. Fortner's other company), for development and improvement of the area preparatory to construction, and for the purchase and erection of the houses themselves. Petitioner was obligated to erect on each lot a prefabricated house manufactured by U.S. Steel. Of the total of about $2,000,000 to be advanced, $1,700,000 was to be disbursed against purchase and installation of the houses from U.S. Steel and the balance for land acquisition and development.
The Court holds that this was a 'tying' agreement, and that, therefore, the extraordinarily onerous incidents of per se illegality which this Court has attached to 'tying' agreements must apply here as well.
I cannot agree. This is a sale of a single product with the incidental provision of financing. It is not a sale of one product on condition that the buyer will not deal with competitors for another product or will buy the other product exclusively from the seller.
As my Brother WHITE shows, to treat the financing of the housing development as a 'tying' product for the houses is to distort the doctrine and to depart from the reason for its existence. Such an extension of the tying doctrine entirely departs from the factual pattern which is described in § 3 of the Clayton Act and which has been the basis of this Court's extension of the doctrine to the Sherman Act and its development of the rule that such tying arrangements are illegal on a per se basis-i.e., without any showing that they constitute an unreasonable restraint of trade or trend to create a monopoly. The Court has established this rule because the kind of tying arrangement at issue in prior cases involved the use of a leverage position in the tying product-the patented machine, the copyrighted film, the unique land-to force the buyer to purchase the tied product. To apply this rule to a situation where the only 'leverage' is a lower price for the article sold or more advantageous financing or credit terms for the article sold and for ancillary costs connected with the sale is to distort the doctrine, and, indeed, to convert it into an instrument which penalizes price competition for the article that is sold.
It is, of course, not inconceivable that a case might arise where § 1 or § 2 of the Sherman Act would outlaw a combination of sale and credit on a specific showing of market power and anticompetitive effect. It is also possible that such a combination might, in some situations, constitute 'unfair methods of competition' in violation of § 5 of the Federal Trade Commission Act, or price discrimination or furnishing services on discriminatory terms, in violation of § 2 of the Clayton Act, as my Broth r WHITE suggests. The majority, however, does not rely on any such analysis of the actualities of market power or anticompetitive effect, but sweeps this kind of credit arrangement within the per se ban.
The effect of this novel extension-this distortion, as I view it-of the tying doctrine may be vast and destructive. It is common in our economy for a seller to extend financing to a distributor or franchisee to enable him to purchase and handle the seller's goods at retail, to rent retail facilities, to acquire fixtures or machinery for service to customers in connection with distribution of the seller's goods, or, as here, to prepare the land for and to acquire and erect the seller's houses for sale to the public. It is hardly conceivable, except for today's opinion of the Court, that extension of such credit as a part of a general sale transaction or distribution method could be regarded as a 'tying' of the seller's goods to the credit, so that where the businessman receiving the credit agrees to handle the seller-lender's product, the arrangement is per se unlawful merely because the amount or terms of the credit were more favorable than could be obtained from banking institutions in the area. Arrangements of this sort run throughout the economy. They frequently, and perhaps characteristically, represent an indispensable method of financing distributive and service trades, and not until today has it been held that they are tying arrangements and therefore per se unlawful. Cf. Standard Oil Co. v. United States, 337 U.S. 293, 315, 321, 69 S.Ct. 1051, 1062, 93 L.Ed. 1371 (1949) (separate opinion of Douglas, J., and dissenting opinion of Jackson, J.).
In the present case in every respect, the provision of credit for construction of the houses and other associated costs of developing the subdivision, was, from U.S. Steel's point of view, ancillary and subordinated to the sale of the houses. The Credit Corporation did not operate at a loss, but its profit was comparatively low. Provision of special financing to the prospective purchaser of prefabricated houses by the Credit Corporation was intimately and exclusively related to the end object of the sale of the houses by the Homes Division. It was not a separate item of 'sale.'
This pattern is by no means limited to the provisions of financing, nor can the impact of the majority's opinion be so limited. Almost all modern selling involves providing some ancillary services in connection with making the sale-delivery, installation, supplying fixtures, servicing, training of the customer's personnel in use of the material sold, furnishing display material and sales aids, extension of credit. Customarily indeed lmost invariably-the seller offers these ancillary services only in connection with the sale of his own products, and they are often offered without cost or at bargain rates. It is possible that in some situations, such arrangements could be used to restrain competition or might have that effect, but to condemn them out-of-hand under the 'tying' rubric, is, I suggest, to use the antitrust laws themselves as an instrument in restraint of competition.
For these reasons, I dissent.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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