Source: https://openjurist.org/384/us/127
Timestamp: 2019-04-22 06:42:39+00:00

Document:
GENERAL MOTORS CORPORATION et al.
This is a civil action brought by the United States to enjoin the appellees from participating in an alleged conspiracy to restrain trade in violation of § 1 of the Sherman Act.1 The United States District Court for the Southern District of California concluded that the proof failed to establish the alleged violation, and entered judgment for the defendants. The case is here on direct appeal under § 2 of the Expediting Act, 32 Stat. 823, 15 U.S.C. § 29 (1964 ed.). We reverse.
The appellees are the General Motors Corporation, which manufactures, among other things, the Chevrolet line of cars and trucks, and three associations of Chevrolet dealers in and around Los Angeles, California.2 All of the Chevrolet dealers in the area belong to one or more of the appellee associations.
Beginning in the late 1950's, 'discount houses' engaged in retailing consumer goods in the Los Angeles area and 'referral services'3 began offering to sell new cars to the public at allegedly bargain prices. Their sources of supply were the franchised dealers. By 1960 a number of individual Chevrolet dealers, without authorization from General Motors, had developed working relationships with these establishments. A customer would enter one of these establishments and examine the literature and price lists for automobiles produced by several manufacturers. In some instances, floor models were available for inspection. Some of the establishments negotiated with the customer for a trade-in of his old car, and provided financing for his new-car purchase.
These were the principal forms of trading involved in this case, although within each there were variations,4 and there were schemes which fit neither pattern.5 By 1960 these methods for retailing new cars had reached considerable dimensions. Of the 100,000 new Chevrolets sold in the Los Angeles area in that year, some 2,000 represented discount house or referral sales. One Chevrolet dealer attributed as much as 25% of its annual sales to participation in these arrangements, while another accounted for between 400 and 525 referral sales in a single year.
Approximately a dozen of the 85 Chevrolet dealers in the Los Angeles area were furnishing cars to discounters in 1960. As the volume of these sales grew, the nonparticipating Chevrolet dealers located near one or more of the discount outlets6 began to feel the pinch. Dealers lost sales because potential customers received, or thought they would receive,7 a more attractive deal from a discounter who obtained its Chevrolets from a distant dealer. The discounters vigorously advertised Chevrolets for sale, with alluring statements as to price savings. The discounters also advertised that all Chevrolet dealers were obligated to honor the new-car warranty and to provide the free services contemplated therein; and General Motors does indeed require Chevrolet dealers to service Chevrolet cars, wherever purchased, pursuant to the new-car warranty and service agreement. Accordingly, nonparticipating dealers were increasingly called upon to service, without compensation, Chevrolets purchased through discounters. Perhaps what grated most was the demand that they 'precondition' cars so purchased—make the hopefully minor adjustments and do the body and paint work necessary to render a factory-fresh car both customer- and road-worthy.
By mid-December General Motors had formulated its response. On December 15, James M. Roche, then an executive vice president of General Motors, wrote to some of the complaining dealers. He noted that the practices to which they were objecting 'in some instances represent the establishment of a second and unauthorized sales outlet or location contrary to the provisions of the General Motors Dealers Selling Agreements.' (Emphasis supplied.) Recipients of the letter were advised that General Motors personnel proposed to discuss that matter with each of the dealers.11 O'Connor in Los Angeles was apprised of the letter's content and instructed to carry on the personal discussions referred to therein. With respect to the offending dealers, he was to work with Roy Cash, regional manager for the Chevrolet Division. Cash had been briefed on the subject in Detroit on December 14.
By mid-January General Motors had elicited from each dealer a promise not to do business with the discounters. But such agreements would require policing—a fact which had been anticipated. General Motors earlier had initiated contacts with firms capable of performing such a function. This plan, unilaterally to police the agreements, was displaced, however, in favor of a joint effort between General Motors, the three appellee associations, and a number of individual dealers.
On December 15, 1960, representatives of the three appellee associations had met and appointed a joint committee to study the situation and to keep in touch with Chevrolet's O'Connor.14 Early in 1961, the three associations agreed jointly to finance the 'shopping' of the discounters to assure that no Chevrolet dealer continued to supply them with cars. Each of the associations contributed $5,000, and a professional investigator was hired. He was instructed to try to purchase new Chevrolets from the proscribed outlets, to tape-record the transactions, if any, and to gather all the necessary documentary evidence—which the associations would then lay 'at the doorstep of Chevrolet.' These joint associational activities were both preceded and supplemented by similar 'shopping' activities by individual dealers and by appellee Losor Chevrolet Dealers Association.
O'Connor testified that on no occasion did he 'force' a dealer to repurchase; he merely made the opportunity available. But one dealer testified that when an assistant zone manager for the Chevrolet Division asked him to come in and talk about discount sales, 'he specified a sum of money which I was to bring with me when I came down and saw him. * * * I kept the appointment and brought a cashier's check. I knew when I came down to Los Angeles that I was going to repurchase an automobile * * *.' Another dealer testified that upon being confronted with evidence that one of his cars had been purchased through a referral service, he not only bought in back (without questioning the correctness of the price exacted) but also fired the employee responsible for the transaction—although the employee had been commended by the Chevrolet Division a few weeks earlier as the 'number one fleet salesman' in the 11-state Pacific region.
Both the Government and the appellees urge the importance, for purposes of decision, of the 'location clause' in the Dealer Selling Agreement which prohibits a franchised dealer from moving to or establishing 'a new or different location, branch sales office, branch service station, or place of business * * * without the prior written approval of Chevrolet.' The appellees contend that this contractual provision is lawful, and that it justifies their actions. They argue that General Motors acted lawfully to prevent its dealers from violating the 'location clause,' that the described arrangements with discounters constitute the establishment of additional sales outlets in violation of the clause, and that the individual dealers—and their associations have an interest in uniform compliance with the franchise agreement, which interest they lawfully sought to vindicate.
These factors do not justify the result reached. It is of no consequence, for purposes of determining whether there has been a combination or conspiracy under § 1 of the Sherman Act, that each party acted in its own lawful interest. Nor is it of consequence for this purpose whether the 'location clause' and franchise system are lawful or economically desirable. And although we regard as clearly erroneous and irreconcilable with its other findings the trial court's conclusory 'finding' that there had been no 'agreement' among the defendants and their alleged co-conspirators, it has long been settled that explicit agreement is not a necessary part of a Sherman Act conspiracy—certainly not where, as here, joint and collaborative action was pervasive in the initiation, execution, and fulfillment of the plan. United States v. Parke, Davis & Co., supra, at 43, 80 S.Ct. at 511; United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 722-723, 64 S.Ct. 805, 813, 88 L.Ed. 1024; Federal Trade Comm'n v. Beech-Nut Packing Co., 257 U.S. 441, 455, 42 S.Ct. 150, 155, 66 L.Ed. 307.
Nor did General Motors confine its activities to the contractual boundaries of its relationships with individual dealers. As the trial court found (Finding 39), General Motors at no time announced that it would terminate the franchise of any dealer which furnished cars to the discounters.17 The evidence indicates that it had no intention of acting in this unilateral fashion.18 On the contrary, overriding corporate policy with respect to proper dealer relations19 dissuaded General Motors from engaging in this sort of wholly unilateral conduct, the validity of which under the antitrust laws was assumed, without being decided, in Parke Davis, supra.
In Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741, the Court was confronted with the question whether 'a group of powerful businessmen may act in concert to deprive a single merchant, like Klor, of the goods he needs to compete effectively.' 359 U.S., at 210, 79 S.Ct., at 708. The allegation was that manufacturers and distributors of electrical appliances had conspired among themselves and with a major retailer, Broadway-Hale, 'either not to sell to Klor's (Broadway-Hale's next-door neighbor and competitor) or to sell to it only at discriminatory prices and highly unfavorable terms.' 359 U.S., at 209, 79 S.Ct., at 708. The Court concluded that the alleged group boycott of even a single trader violated the statute21 without regard to the reasonableness of the conduct in the circumstances. Group boycotts of a trader, said the Court, are among those 'classes of restraints which from their 'nature or character' were unduly restrictive * * *.' 359 U.S., at 211, 79 S.Ct., at 709. This was not new doctrine, for it had long been recognized that 'there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use,' and that group boycotts are of this character. Northern Pac. R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545. See also Fashion Originators' Guild of America, Inc. v. Federal Trade Comm'n, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949, and Eastern States Retail Lumber Dealers' Assn. v. United States, 234 U.S. 600, 613—614, 34 S.Ct. 951, 954—955, 58 L.Ed. 1490, neither of which involved price-fixing.
The principle of these cases is that where businessmen concert their actions in order to deprive others of access to merchandise which the latter wish to sell to the public, we need not inquire into the economic motivation underlying their conduct. See Barber, Refusals To Deal Under the Federal Antitrust Laws, 103 U.Pa.L.Rev. 847, 872—885 (1955). Exclusion of traders from the market by means of combination or conspiracy is so inconsistent with the free-market principles embodied in the Sherman Act that it is not to be saved by reference to the need for preserving the collaborators' profit margins or their system for distributing automobiles, any more than by reference to the allegedly tortious conduct against which a combination or conspiracy may be directed—as in Fashion Originators' Guild of America, Inc. v. Federal Trade Comm'n, supra, 312 U.S., at 468, 61 S.Ct., at 708.
We note, moreover, that inherent in the success of the combination in this case was a substantial restraint upon price competition—a goal unlawful per se when sought to be effected by combination or conspiracy. E.g., United States v. Parke, Davis & Co., 362 U.S. 29, 47, 80 S.Ct. 503, 513; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223, 60 S.Ct. 811, 844, 84 L.Ed. 1129. And the per se rule applies even when the effect upon prices is indirect. Simpson v. Union Oil Co., 377 U.S. 13, 16—22, 84 S.Ct. 1051, 1057, 12 L.Ed.2d 98; Socony-Vacuum Oil Co., supra.
Accordingly, we reverse and remand to the United States District Court for the Southern District of California in order that it may fashion appropriate equitable relief. See United States v. Parke, Davis & Co., supra, 362 U.S., at 47—48, 80 S.Ct., at 513—514. It is so ordered.
The statute reads in relevant part: 'Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. * * *' 26 Stat. 209, 15 U.S.C. § 1 (1964 ed.).
There must also be distinguished the ubiquitous practice of using 'bird dogs'—informal sources who steer occasional customers toward a particular dealer, in return for relatively small fees often a bottle of liquor. This practice is not only deemed by General Motors not to violate the 'location clause,' but has the corporation's endorsement as a desirable sales device.
The Government's complaint contains no reference to the 'location clause,' and the Government concedes that its case was tried on a conspiracy theory, the defendants injecting the contractual issue by way of defense. Trial counsel for the Government did advert to the clause in the District Court, but it does not appear that he challenged its validity, as construed, in the same sense that the Government does here. See Trial Transcript, pp. 9, 17—18. In light of our disposition of the case, we have no occasion to consider whether the Government's argument directed to the clause, as construed, is properly before us.
We note that, as in United States v. Parke, Davis & Co., 362 U.S. 29, 44—45, 80 S.Ct. 503, 511—512, 4 L.Ed.2d 505, the ultimate conclusion by the trial judge, that the defendants' conduct did not constitute a combination or conspiracy in violation of the Sherman Act, is not to be shielded by the 'clearly erroneous' test embodied in Rule 52(a) of the Federal Rules of Civil Procedure. That Rule in part provides: 'Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.' As in Parke Davis, supra, the question here is not one of 'fact,' but consists rather of the legal standard required to be applied to the undisputed facts of the case. See United States v. Singer Mfg. Co., 374 U.S. 174, 194, n. 9, 83 S.Ct. 1773, 1783; 10 L.Ed.2d 823; United States v. Mississippi Valley Generating Co., 364 U.S. 520, 526, 81 S.Ct. 294, 297, 5 L.Ed.2d 268, and cases there cited.
Moreover, the trial court's customary opportunity to evaluate the demeanor and thus the credibility of the witnesses, which is the rationale behind Rule 52(a) (see United States v. Oregon State Med. Soc., 343 U.S. 326, 331—332, 72 S.Ct. 690, 694—695, 96 L.Ed. 978), plays only a restricted role here. This was essentially a 'paper case.' It did not unfold by the testimony of 'live' witnesses. Of the 38 witnesses who gave testimony, only three appeared in person. The testimony of the other 35 witnesses was submitted either by affidavit, by deposition, or in the form of an agreed-upon narrative of testimony given in the earlier criminal proceeding before another judge. A vast number of documents were also introduced, and bear on the question for decision.
There are also statutory inhibitions on the right of an automobile manufacturer to terminate dealer franchises. See Act of Aug. 8, 1956, c. 1038, § 2, 70 Stat. 1125, 15 U.S.C. § 1222 (1964 ed.); Kessler & Stern, Competition, Contract, and Vertical Integration, 69 Yale L.J. 1, 103—114 (1959).
The complaint in Klor's charged a violation of § 2 of the Sherman Act, as well as of § 1. In the present case, the Government did not charge the appellees under § 2, which provides that 'Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor * * *.' 15 U.S.C. § 2 (1964 ed.).

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