Opinion ID: 328803
Heading Depth: 2
Heading Rank: 1

Heading: Exclusive Dealerships

Text: 25 Plaintiff asserts that any one of three theories sustain his cause of action attacking Hearst's system of exclusive dealerships: (1) Hearst's different treatment of street and home-delivery dealers has the economic effect of excluding home-delivery dealers from the street-delivery market and is a per se violation of section 1 of the Sherman Act, 15 U.S.C. § 1; (2) that Hearst's scheme of distribution was ancillary to a price-fixing conspiracy and thus was a per se violation of 15 U.S.C. § 1; and (3) Hearst's system was an unreasonable restraint on trade even if it was not a per se or an ancillary per se violation. Since a district court may grant judgment on the pleadings only if it clearly appears that the party is entitled to judgment, 2A J. Moore, Federal Practice P 12.1542 (9th Cir. 1972) (standard for review of summary judgment in antitrust case), the cou42 (9th Cir. 1972) (standard for review of summary judgment in antitrust case), the court must be reversed if any of these grounds is valid.
26 Appellant's argument here is that it is per se illegal for a manufacturer to charge a lower price and give other benefits to one set of distributors and to deny those benefits to another set of distributors because the economic realities of such an arrangement are as if Hearst had expressly prohibited the home-delivery dealer from selling in the street-delivery market. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967), established that a manufacturer could not prevent a distributor or retailer of his product from selling that product to whomever he wished once the manufacturer yielded ownership to the distributor or retailer. Id. at 378, 87 S.Ct. 1856. On the facts as pleaded there is no allegation of any Hearst overt limitations on plaintiff's ability to sell in the street-delivery market. Plaintiff does not allege receiving any threats as a result of his overtures at entering the street-delivery market. Schwinn did, however, expressly permit a manufacturer to sell his product to a dealer on an exclusive basis within a designated geographic area. Id. at 376, 87 S.Ct. 1856. That is, the manufacturer was allowed to sell to one dealer and that dealer alone per geographic section as long as the manufacturer took no steps to ensure that the dealers confined their sales to the geographic area or a certain set of customers. On the facts as alleged Hearst's arrangement is more reasonably analyzed as two sets of overlapping exclusive dealership systems rather than a set of constraints on one system to prevent it from competing with the other. Hearst is marketing, in effect, a home-delivered newspaper and a street-delivered newspaper. Such a system by itself does not restrain the alienability of the product Blankenship purchased which was the evil Schwinn opposed. In effect, Blankenship has been denied a street-dealership, an option permitted Hearst by Schwinn. Plaintiff did not present a case for a per se violation. 1 B. Ancillary Per Se Illegality 27 Plaintiff argues that there should not have been judgment on the pleadings because the distribution scheme could be condemned as ancillary to the price-fixing. Schwinn, supra at 375, 87 S.Ct. 1856; United States v. White Motor Co., 372 U.S. 253, 260, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963). In Schwinn the Court at several points indicated that an exclusive arrangement was subject to attack if it was part of a system of price-fixing. 388 U.S. at 373, 375, 381, 87 S.Ct. 1856. Indeed, the Court suggested that an exclusive dealer system might be attacked even if the alleged price-fixing amounted to something less than actual price-fixing. Id. at 373, 87 S.Ct. 1856. 28 In his verified complaint Blankenship had alleged (T)hat at all material times Hearst has sold the Los Angeles Herald-Examiner to Los Angeles Herald-Examiner street sale dealers (who sell the Herald-Examiner within Blankenship's area) at prices below the price at which Hearst has sold the Los Angeles Herald-Examiner to Blankenship. As a result of said economic disadvantages, Blankenship is prevented from selling the Herald-Examiner on streets and through retail outlets. Blankenship also alleged other acts of economic discrimination by Hearst against him and in favor of street sale dealers. 29 In United States v. Arnold, Schwinn & Co., 388 U.S. 365, 382, 87 S.Ct. 1856, 1867, 18 L.Ed.2d 1249 (1967), the Court pointed out that: 30 Once the manufacturer has parted with title and risk, he has parted with dominion over the product, and his effort thereafter to restrict territory or persons to whom the product may be transferred whether by explicit agreement or by silent combination or understanding with his vendee is a per se violation of § 1 of the Sherman Act. 31 It would seem clear that the plaintiff might well be able to adduce evidence which would tend to show that by selling to street sale dealers within his territory at a lower price than to him, Hearst foreclosed Blankenship economically from competing with street sale dealers. According to the facts as they might have been developed this could well have been a customer restriction ancillary to price-fixing under Schwinn and the cases following Schwinn. It was error for the district court to deny plaintiff an opportunity to prove that Hearst's distribution system was ancillary to price-fixing. C. Unreasonable Restraint of Trade 32 The district court was also in error in dismissing the second cause of action of the complaint, because it is possible that plaintiff could have demonstrated the unreasonableness of the restraint on trade imposed by the exclusive dealership arrangement for street sellers. In Anderson v. American Automobile Association, 454 F.2d 1240, 1242 (9th Cir. 1972), this court stated: 33 If under any reasonable construction of the evidence and any acceptable theory of law Anderson could be entitled to prevail, a summary judgment against him cannot be sustained. 34 One possible theory, as suggested by the Schwinn opinion could be that the exclusive dealership for street sales was unreasonable in view of possible limited inter-brand newspaper competition. 2 Another could be that it was unreasonable in light of some or all of the factors detailed in Chicago Board of Trade v. United States, 246 U.S. 231, 238-39, 38 S.Ct. 242, 62 L.Ed. 683 (1918). Finally, it might have been unreasonable for the reasons stated in consideration of ancillary per se illegality under Section B, supra. 35 Hearst was not clearly entitled to judgment on the pleadings as a matter of law on plaintiff's attack on the distribution system.