Opinion ID: 411696
Heading Depth: 3
Heading Rank: 2

Heading: Likely Beneficial Effect

Text: 20 To determine whether a vertical nonprice restraint benefits interbrand competition, courts must rely on inferences drawn from the assumed economic impact of a particular restraint given the market structure of the industry and the circumstances under which the restraint was adopted. See generally Pitofsky, The Sylvania Case: Antitrust Analysis of Non-Price Vertical Restrictions, 78 Colum. L. Rev. 1, 33 (1978). If after consideration of these factors the court concludes that a manufacturer's vertical restraint is likely to promote interbrand competition, it will generally consider the restraint reasonable. See, e.g., United States v. Arnold Schwinn Co., 388 U.S. at 381-82, 87 S.Ct. at 1866-1867; Red Diamond Supply, Inc. v. Liquid Carbonic Corp., 637 F.2d 1001, 1005 (5th Cir. 1981). 21 The Supreme Court has applied this market-structure approach in its consideration of a vertical restraint in a non-sale transaction under a rule-of-reason analysis. See Schwinn, 388 U.S. at 381-82, 87 S.Ct. at 1866-1867. The Court held the restraint reasonable because looking at the product market as a whole, the Court could not conclude that Schwinn's franchise system with respect to products as to which it retains ownership and risk constitutes an unreasonable restraint of trade. Id. at 382, 87 S.Ct. at 1867. 13 The Sylvania Court recognized that there was no justification for applying different rules to sale and non-sale transactions. 433 U.S. at 57, 97 S.Ct. at 2561. Thus the Supreme Court's rule-of-reason analysis in Schwinn, although dealing with non-sale transactions, is equally applicable to the sale transactions between Sylvania and its dealers. See Altschuler, Sylvania, Vertical Restraints and Dual Distribution, 25 Antitrust Bull. 1, 36-37 (1980). 22 The Fifth Circuit recently applied a market-structure analysis to location restrictions imposed by a manufacturer on its dealers, concluding that the vertical restraints challenged by the plaintiff in that case were likely to improve competition. Red Diamond Supply, Inc. v. Liquid Carbonic Corp., 637 F.2d 1001 (5th Cir. 1981). 14 The court found that the restraints did not affect interbrand competition because: (1) there were seven manufacturers in the industry; (2) there were ready substitutes for the products; and, (3) there was no proof of industry concentration. Id. at 1005-06. In fact, it found it likely, under the circumstances, that interbrand competition would be improved by the adoption of the restraint. Id. at 1006. 23 Applying a similar analysis to the instant case, we consider the television manufacturing industry at the time Sylvania adopted the location clause in question and at the time Sylvania enforced the restraint to prevent Continental from entering the Sacramento market to sell Sylvania television sets. 15 In both 1962 and 1965 there were other viable television manufacturers available to sell to any retailers, who wished to enter the Sacramento market, and their products were interchangeable with Sylvania's. 24 The precise restraints imposed by Sylvania and other manufacturers in the industry are also relevant to a determination of the effect Sylvania's location clause had on interbrand competition. Red Diamond, 637 F.2d at 1005-06. Sylvania did not prevent its retailers from handling competitor's products, and there is no evidence that any other manufacturer imposed such a restraint. A final consideration is that Sylvania did not adopt its distributorship arrangement at the request of other retailers. See Eiberger v. Sony Corp., 622 F.2d at 1072-73, 1077. Rather, it independently determined that the restraint was necessary for Sylvania to remain competitive in the television industry. 16 V