Document: 381 U.S. 357 85 S.Ct. 1498 14 L.Ed.2d 443 The ATLANTIC REFINING COMPANY, Petitioner,v.FEDERAL TRADE COMMISSION. GOODYEAR TIRE & RUBBER Petitioner, v. FEDERAL Nos. 292, 296. Argued March 30, 1965. Decided June 1, Rehearing Denied Oct. 11, See 86 18. [Syllabus from pages 357-359 intentionally omitted] Frederic L. Ballard, Jr., Philadelphia, Pa., and John F. Sonnett, New York City, for petitioners. Daniel M. Friedman, Washington, D.C., respondent. Mr. Justice CLARK delivered the opinion of Court. 1 Federal Trade Commission has found that an agreement between Atlantic Refining Company (Atlantic) Goodyear Tire Rubber (Goodyear), under which former 'sponsors' sale tires, batteries accessory TBA products latter to its wholesale outlets retail service station dealers, is unfair method competition in violation § 5 Act, 38 Stat. 719, as amended, 15 U.S.C. 45 (1964 ed.).1 Under plan sponsors on overall commission basis. responsible sales sells at own price wholesalers dealers resale; it bears all cost distribution through warehouses, stores other supply points carries a joint promotion program with Atlantic. latter, however, primarily promoting assisting them their this receives made dealers. hearing examiner, approval Court Appeals, enjoined use direct methods coercion part upon inauguration plan. does not seek review phase case. However, considered coercive practices be symptomatic more fundamental restraint trade sales-commission illegal itself 'a classic example economic power one market * destroy another market. *' 58 F.T.C. 309, 367. It prohibited participating any such arrangement.2 Similarly, forbade continuing arrangement or oil company.3 filed separate appeals. Appeals approved findings affirmed order. 'Appraising broader aspects system (used by Goodyear) tying arrangement,' agreed injured 'competition manufacturing, wholesale, levels.' 331 F.2d 394, 402. We granted certiorari, 379 943, because importance questions raised especially light holding District Columbia Circuit Texaco, Inc. Comm'n, 118 U.S.App.D.C. 366, 336 754, apparent conflict these cases. affirm judgments Appeals. I. 2 Since sought paragraphs 6 Commission's order overt acts retailers those portions are final. therefore do set out detail facts so carefully examined 3 major producer, refiner distributor by-products. Its confined 17 States along eastern seaboard.4 consists distributors who purchase gasoline lubricants large quantities operators business either lessees contract selling products. In 1955 had 2,493 lessee purchased 39.1% sales, 3,044 bought 18.1%.5 About half were operators; remainder garages, grocery sell but handle accessories. 4 largest manufacturer rubber United over $1,000,000,000 1954. distributes tubes accessories 57 warehouses located throughout country. warehouse batteries; 'Goodyear' tradenamed manufactured directly distributed Electric Auto-Lite Gould-National Batteries, also about 500 company-owned numerous independent These franchised number than 12,000, there being among petroleum jobbers. substantial non-franchised includes most customers, including stations involved here. Gasoline particularly well suited They constitute important least 1932 been distributing 1951 inaugurated plan.6 covered three regions: Philadelphia-New Jersey, State England. Goodyear-Atlantic required assist 'to fullest practicable extent perfecting credit, merchandising arrangements' Atlantic's outlets. This included announcement sponsorship followed field representative's call 'suggest maintenance adequate stocks merchandise' 'maintenance proper identification advertising' merchandise.7 was instruct salesmen urge 'vigorously' represent Goodyear, 'cooperate assist' 'efforts promote increase sale' And 'maintain dealer training programs batteries, accessories.' addition, companies organized organization meetings plans One project 'double teaming' solicitation representatives both convert together, take stock orders, furnish initial lists future quotas purchases each assigned point maintained it, warehouse, store, designated dealer. would receive outside point. 10% 7.5% paid basis master sheet prepared furnished month. list broken down show individual (except whose wholesalers). reporting technique, found, 'Atlantic may determine exact amount sponsored outlet *.' 351. furnished, time specific request Atlantic, latter's recalcitrant refused identified 'Goodyear Program.' forwarded district offices 'appropriate action.' On occasion 46 officials Goodyear. 'the entire group thereafter signed contracts advertising signs installed stations.' Id., 346—347. 7 effectiveness evidenced results. Within seven months after up 96% 98%, respectively, two areas it. 1952 $4,175,890—40% higher during last year purchase-resale Lee tires Exide batteries. By amounted $5,700,121. Total Firestone 1950 1956 $52,000,000. enormous increase, indicate, result effective policing reports enabled know exactly great majority buying. 8 stressed evidence showing have orally advised company continued status will jeopardy if they sufficient sponsored' 342. Indeed, some lost leases reported complying program. But we need feature case since conceded appeal thereon. II. 9 Section Act declares '(u)nfair commerce, commerce unlawful.' broad delegation employers Commission, first instance, whether act practice complained unfair. Congress left development term 'unfair' rather attempting define many variable prevail S.Rep.No. 592, 63d Cong., 2d Sess., 13. As conference report stated, could best prevented 'through action administrative body practical men able apply rule enacted particular situations, eradicate evils risk interfering legitimate operations.' H.R.Conf.Rep. No. 1142, 19. thus divining no limit ingenuity legal gymnastics displayed much foresight. Comm'n Cement Institute, 333 683, 693, 68 793, 799, 92 L.Ed. 1010 (1948). Where provided agency initially statutory situation, our function limited determining decision 'has 'warrant record' reasonable law.' National Labor Relations Board Hearst Publications, Inc., 322 111, 131, 64 851, 861, 88 1170 (1944). While final word courts, necessarily 'we give weight conclusion supra, 720, 812. III. 10 Certainly Substantial supports notwithstanding contention mutually dependent other, simply bargain equals. Among sources leverage hands lease equipment loan cancellation short-term provisions. Only Term described implications arrangements Simpson Union Oil Co. Cal., 377 13, 84 1051, 12 98 (1964), repeat discussion must remembered controlled additional source leverage, Loew's, 371 38, 45, 83 97, 102, 11 (1962), extensive control premises Furthermore, abundant instances aid only exerted persuasion natural incident power, coupled threats reprisal now properly concluded bundle commission. manner carried out. note impressive undeniable success within short inception. 1951, gone into effect, enjoyed signing despite fact 1946—1949 survey shown 67% preferred 76% With background mind, consider 'reasonable law' ultimate constituted competition. IV. 13 At outset stress what find present recognize arrangement. tie Nor expressly require neither understand held scheme. What did central competitive characteristic same cases—the utilization curtail another. Here lever bolstered actual practices. cases hold, necessary proceedings discover conduct 'runs counter public policy declared the' Act. Fashion Originators' Guild America 312 457, 463, 61 703, 706, 949 (1941). necessity, intended be, standard substance. doing so, guideline recognized violations antitrust laws was, believe, entirely appropriate. long assume proportions violations. Motion Picture Advertising Service Co., 344 392, 73 361, 363, 97 426 (1953). When bear characteristics becomes suspect, look applying guidance. Although relied here, rejected mechanical application law arrangements. Rather looked record activity impaired levels industry. manufacturers competing brands, even authorized points, foreclosed obvious excluded other's territories. Both effects flowed itself. plight equally clear. compete free several effectively brands respect International Salt States, 332 12, 20 (1947), where salt buy lower prices. Goodyear's price. Thus warranted finding effect though done so. beyond question insubstantial. $500,000 annually. alone exceeded $11,000,000 $50,000,000 six years, 5,500 affected. 16 contend should far analysis plan, examining just similar tie-in, unnecessary embark full-scale effect. think enough insubstantial portion n. 4, 102 (1962); (1947). can say erred refusing justification provide economical assuring efficient product device permits suppliers accessories, sew markets. Upon considering destructive widespread suppliers, conclude clearly justified participants opportunity offset benefit themselves. Northern Pacific R. 356 6—7, 78 514, 518, 519, 545 (1958). 18 encouragement assistance, marshaled full campaign force anticompetitive clear render percentages justifications unlawful. V. 19 turn matter relief. said, forbids participation supplier whereby anything value connection marketer. prohibits effecting 'or marketing company,' pays company. 1. argument arbitrary goes too far. disallows says, reinstitution old less distribution. position flows language receipt marketer 'other Company.' merits purchaseresale before pass them. believe broad. 5(b) empowers issue cease-and-desist against anyone using commerce. enjoin tacties insufficient. conclusion. existence itself, practiced pursuant more. decided uproot complete prohibition; otherwise enjoy freedom condemns. matters ambit authority. 21 2. hold Commission. integrate (into) nationwide possessed outlets.' F.T.C., 348. dedicated considerable role carrying Thus, although company's toward outlaw restricted solely examination activity. Rather, deciding relief entered appropriately propensity harnessing utilizing power. Because relevance inquiry here detail. 22 silent inactive partner implementation sit back passively accept whatever benefits might accrue contract. striking aspect program, view, degree petitioners worked together achieve program's success. A representative put very neatly when he said: 'After years courtship wed. welcome wholeheartedly merger.' 23 Examples close cooperation numerous. turnover dealerships, new openings year. selection persons man stations, notified actually began operations, allowing Atlantic-Goodyear teams prospective dealer, get orders local competitors condition acceptance line. used demonstration schools discussions often conducted 24 Moreover, gave remove replace own. sent action'; recalled soon fell inclination benefit. 25 technique revealing. Through supplied information sua sponte insofar shows. Ostensibly commissions due makes suspect compiled—wholly commission-payment purposes. potential channeling pressures obvious. alongside admitted potent ensuring 26 tactic dual so-called 'double-teaming.' heavily urged letter manager. appeared confident presence salesman higgling haggling obtaining dealers.' 355. (Emphasis original.) confidence justified, observed, annual evaluation managers extensions, understandably susceptible nearby looking shoulders. concluding 'captive market.' 27 preceding relationships companies. December 1964 agreements Nine instant 'in material respects identical contract.' 352. similarly actively 'selling promotion' There Shell, Sinclair Sherwood Bros., agreements. indication three-year leases. four existing subtle pressures. 28 complains plans. Commissions's restrict activities hand, transgressor. structure further objection claim exert companies' little consequence applied pressure. For teamwork that, blinders on, ignorant difficult escape paying ability dealers—an adequately demonstrated record. allowance overriding off handsomely. various rose $16,700,000 $36,000,000 29 course, 'wide discretion choice remedy deemed cope unlawful Jacob Siegel 327 608, 611, 66 ,S.Ct. 758, 760, 90 888 (1946). limits authority bars repetitions parties. Henry Broch 368 360, 364, 82 431, 433, 353 (1962). ample establishing course lasting aimed structures forbidding completely. 30 prohibit making record, involve advantage. offered differing mentioned circumstances event reopening today. reopen modify times. placed instance shape deal interfere relation violation. Ruberoid 343 470, 473, 72 800, 803, 96 1081 (1952). cannot unreasonable affirmed. 31 Affirmed. 32 STEWART, whom HARLAN joins, dissenting. 33 That enjoining engaging 'coercive conduct' designed compel Atlantic- correct. coerced exclusive handling goods threatening franchises. Not threats; nearly universal shift products, coming shortly expressed preference indicate change wrought something simple persuasion. evidence, reasonably imposed relationship depended absence contractual terms protests 'official' choice. 34 granting validly engaged amounting lead me supportable. essence, exchange responsibility deliveries Goodyear's, undertook engage support effort. adopted previously employed unsatisfactory. warehoused them, sold principal advantage accruing adoption dispense maintaining storage facilities. systems, financial interest and, appears, incentive maximize dealers' 35 reason distinctive capacity gravamen proved. core cancel franchises indulging variety related practices, thereby raising barriers segment represented easily line 36 Indeed derive means distribution: 37 cause without tactics written oral agreements, independently sponsoring Atlantic.'* Therefore, based premise confers coerce exclude foundation. Insofar exclusion resulted franchise tactics, directed afford 39 merely variant category 5. candid deny aggressive salesmanship apt meet ordinary scrupulous obedience accorded prohibiting coercion. Given disparity resources desire maintain cordian inevitable themselves, nothing size strength, prevailing leases, dire consequences attendant cancellation, established certain gasoline—all contribute corresponding 40 understood measure prevent taking step total once contribution capacity, seem conceivable justification, foundation law, assumes proscribes competition, complementary processor enjoying undefined vis-a -vis his distributors. So distributorships tend resold manufacturer, indeed him. 41 I allow block expansion enterprise items. five apart, unfairness claimed All concede exclusionary pressure, exists, derives imbalance parties, To charge punish inevitably flowing grave distortion statute, imposing massive unjustifiable entrepreneurial action. Henceforth, concerns smaller stand vulnerable add already warrant words reflects, 42 short, employing An statute; fact. Baseless inflicts significant undeserved damage Unjustifiable corporate enterprise, ultimately public, sanctioned invocation abstractions regarding deference owed expert tribunals devising remedial measures. avoid errors inhere judicial courts—errors which, serving purpose, impose senseless private sector economy. 43 reasons reverse judgment approving prohibition likewise aside riven defects, addition entering know, never techniques exercise 44 GOLDBERG, vacate below remand my view forth clarity completeness, reviewed. Cf. Chicago, M., St. P. P.R. 294 499, 511, 55 462, 467, 79 1023; Phelps Dodge Corp. Board, 313 177, 197, 845, 853, 1271; Burlington Truck Lines 156, 239, 207; Metropolitan Life Ins. 380 438, 1061, 951. dispute purchasing sales-commission-sponsored TBA. agree participated Ante, 373—375. difficulty affirming ordered cease cure recurrence. 53, 11. 47 opinion, appear rest 'as mere symptoms inherent itself.' added.) Apparently believed inherently plans, others. propriety judged 'solely grounds invoked agency,' Securities Exchange Chenery Corp., 194, 196, 67 1575, 1577, 91 1995. supra; 168, 239. 48 basis, supported conclusions, clarity, possible. seen analyzed read conjunction 49 operates determination economically subservient founded lease-franchise one-year enabling terminate end borrow money inventories. Atlantic.' 364—365. 50 Though apparently then ones determined following companies: (1) (2) has, past, 352—353. case, Texaco B. Goodrich FTC, 754 (C.A.D.C.Cir.). Company, 371, Firestone, 51 'that describes '* producer products' operating revenue 'totalled billion dollars' 1954, 2,800 states Seaboard. Approximately 81 percent accounted approximately 8,300 364. stated sufficiently make dealerships desirable unique therefore, induce Atlantic-sponsored Yet, while relying distinction small precluded And, discussed above, cases, regardless 52 amicus brief behalf asserts, explored. Despite fact, how factors are. again unambiguous point, indicates per se tire enter Yet whole rests situation. conclude, factual determinations, general applicable supportive reviewing court perform function. 53 Finally, draw promotion. alternative sponsor prior owned supplemented acted subdistributors changed announced produce saving capital costs, plus improvement company—rather company—performs Also, uses (both independent) purpose. motorist customers. occasionally accompanies explain day-to-day salesman. 54 excepted injunction exception mae staff condemned enjoined. answer irrational condemn systems attempt distinguish difference concerning essential (by company) (here, distribution) (TBA distribution).' bases, crucial handled summary fashion, analysis. discuss discriminates favor larger argued earnestly investment presently Gulf Esso method. switched costs unduly onerous. Solicitor General, argue rational purchase- resale really failing fails account recommendation, quite persuasive purchase-resale. ignores distinguished earlier General Motors 58, condemning coercion, Motors' inducing automotive parts ground distinguishing whereas current state promotions, least, yet ambiguity opinion. 56 opinions bathed confusion leave unanswered Are dealers? If past Atlantic? Has drawn latter? consistent policies 5, distinction? inadequately answered mean imply answers be. entrusted primary answering recognized, 'We duty ours right wrong.' 467. 'The process vindicated exercise.' 853. 'exercises given Congress, 'disclose order' 'give (properly) exercised empowered it." 443, 1064. 167—169, 245, 246. Administrative sustained 'its explication inadequate, Erie Resistor 373 221, 236, 1139, 1149, 308. laying industry articulated nor White Motor 372 253, 696, 738, reversed developed liability regard economics 'This involving territorial restriction vertical arrangement; impact respecting customers reach bare bones documentary us.' U.S., 261, 701. 59 Similarly us upsetting long-established prevalent affecting industry, large, parties analyses complicated problems presented. integrity congressional scheme violated courts' industry-wide meaning bases unclear inadequate. 60 rule-making case-by-case approach decision-making area, preferable approach. Elman, Comment, Rulemaking Procedures FTC's Enforcement Merger Law, Harv.L.Rev. 385 (1964). choose proceed field, others, adjudication. 201—202, 1579, 1580, 1995; California Lo-Vaca Gathering 486, 489, 357. Whichever chooses use, seems formulate takes consideration, situation members affected rule. failure precludes can, Congress. provides pertinent part: '(a) Unfair '(6) persons, partnerships, corporations '(b) Whenever shall person, partnership, corporation proceeding thereof serve complaint stating charges containing notice day place therein fixed thirty days said complaint. (this Act), writing served requiring desist practice. After expiration allowed filing petition review, duly time, hearing, alter, modify, aside, part, issued section, whenever conditions from: '1. Entering operation contract, combination, express implied, and/or wholesaler retailer Company; '2. Accepting receiving distributor, wholesaler, vendor acting agent sponsoring, recommending, urging, inducing, indirectly, products; '3. Using device, as, to, programs, meetings, discussions, identification, credit cards, loans, sponsor, recommend, urge, induce, '4. Employing inspecting, reporting, surveillance manner, specified brand '5. Intimidating coercing intimidate '6. Preventing (petroleum) reselling, merchandising, displaying choice.' 369—370. implied contributes company; Paying, allowing, offering pay, grant allow, (other) Reporting individually groups, company.' 370—371. 1948 36.7% States. share 6.8%; national 2.5%. revenues exceeding $500,000,000 Lessee party Prior resell wholesalers. 1951. marketed Eastern Pennsylvania, Western Pennsylvania Southern regions territory, placement erected displays. permitted sings displays

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