Document: 31 L.Ed.2d 492 92 S.Ct. 1142 405 U.S. 562 FORD MOTOR COMPANY, Appellant,v.UNITED STATES et al. No. 70—113. Argued Nov. 18, 1971. Decided March 29, 1972. Syllabus* In this divestiture action under § 7 of the Celler-Kefauver Anti-merger Act, Government challenged acquisition by appellant, Ford, second largest automobile manufacturer, certain assets Electric Autolite Co. (Autolite), an independent manufacturer spark plugs and other automotive parts. The included trade name, Autolite's only domestic plug plant, extensive rights to its nationwide distribution organization for batteries. brand used in replacement market (aftermarket) has historically been same as original equipment (OE) brand. independents had furnished manufacturers with OE at or below cost, seeking recoup their losses profitable aftermarket sales. which previously bought all from was purchaser that source, made 1961 purpose participating aftermarket. At about time General Motors (GM) 30% market. 15%, Champion, major independent, 50% (which declined 40% 1964, 33% 1966). District Court found industry's oligopolistic structure encouraged maintenance tie manufacturers, extent they are not owned auto makers, will compete more vigorously private sales court held violated since effect 'may be substantially lessen competition' because: (1) 'as both a prime candidate manufacture customer dominant member oligopoly,' Ford's pre-acquisition position moderating influence on companies, (2) significantly foreclosed access substantial share total industry output. After hearings, ordered plant name because structure, tie. stressed it self-interest discourage private-brand but noted changes marketing methods indicated growth sector market, which, if allowed develop without unlawful restraint, may account 17% 1980. Additionally, enjoined Ford 10 years manufacturing plugs; five buy one-half annual requirements divested 'Autolite' during prohibited using own continue policy selling dealers prices no less than prevailing minimum suggested jobbers' price. contesting divestiture, argued ownership became effective competitor against Champion GM benefits resulted acquisition. Held: 1. correctly competition business thus violate Antimerger Act; alleged beneficial effects merger did save illegality provision, United States v. Philadelphia National Bank, 374 321, 83 1715, 915. Pp. 569—571. 2. relief proper. 571—578. (a) Divestiture is necessary restore leading sources, segment open competitive selling. again plugs, pressures generated anti-competitive consequences entry eliminated. 573—575. (b) ancillary injunctive provisions give opportunity re-establish nurture forces work market-place. 575—578. 286 F.Supp. 407, 315 372, affirmed. Whitney North Seymour, New York City, appellant. Daniel M. Friedman, Washington, D.C., appellees. Mr. Justice DOUGLAS delivered opinion Court. 1 This direct appeal 2 Expediting 32 Stat. 823, amended, 15 U.S.C. judgment (286 372), holding Motor (Ford) Act1 acquiring (Autolite). country (located Fostoria, Ohio), battery present appeal2 limited portion relating ordering divest plant. also here review. * second-leading producer automobiles, Motors, Chrysler together $90% production country. Though makes parts, prior make batteries purchased those parts companies. 3 new cars, insofar concerned, conveniently referred independents, including Autolite, cost less, six cents plug, continued sell price even when costs increased threefold. sought recover where requirement each vehicle lifetime sets. By custom practice among mechanics, usually plug. See generally Hansen & Smith, Case: What Is Competition?, 29 Harv.Bus.Rev. 89 (1951). 4 anxious participate and, after various efforts relevant case, concluded participation required 'an established system recognized full line high volume service engineering experience designs, low facilities experience, capitalize car population.' 5 could such division decided course would take eight costly To long story short, acquired 1961. 6 entered field, marking AC two producers were independents—Autolite Champion. When whose one left just 1960 1964 1966. acquisition, Motors' 30%. There small important market.3 Act competition.'4 It gave reasons decision. 8 First, 'pervasive impact aftermarket,' F.Supp., 375, companies derivatively. explained reason follows: 9 'An interested firm outside twofold significance. someday go set stage noticeable deconcentration. While merely stays near edge, deterrent current competitors. Penn-Olin Chemical Co., 378 158, 84 1710, 12 775 (1964). uniquely, deminant oligopoly. Given chance have doomed oblivion defendant's grass-roots entry, destroyed soothing over prices, well useful potential real producer, regardless how began fabrication. Had taken internal-expansion route, there illegality; not, however, result necessarily commendable, simply proscribed.' 441. FTC Procter Gamble 386 568, 87 1224, 18 303; 775. 11 Second, marked 'the foreclosure ten per cent output.' 375. added: 'In into means factory Fostoria raising barriers removing existing restraints upon actions plugs. 13 'It number competitors closely parallels virtually insurmountable remain so foreseeable future. assets, particularly viewed context GM's AC, transmitting rigidity industry, reducing chances future deconcentration within market.' Ibid. 14 Consolidated Foods Corp., 380 592, 85 1220, 95; Brown Shoe States, 370 294, 82 1502, 510; E. I. Du Pont De Nemours 353 586, 77 872, 1057. We see answer conclusion letter spirit Act5 honored. 362 363, 1740—1741, 915; U.S., 170—171, S.Ct., 1716 1717; 311—323, 1516—1522. 16 argued, some making vigorous independent. But what we said supra, disposes argument. A saved 7, said, 17 'because, ultimate reckoning social economic debits credits, deemed beneficial. value choice magnitude beyond ordinary limits judicial competence, any event us already, Congress enacted amended 7. determined preserve out traditionally economy. therefore proscribed anticompetitive mergers, benign malignant alike, fully aware, must assume, might paid.' 371, 1745, 1746. argues marketplace greater sure, sold constructed another Decatur, Alabama, 1.6% business. Prior significant purchasers aggravated already 19 As 323—324, 1523: 20 'The primary vice vertical arrangement tying supplier that, foreclosing either party otherwise them, act 'clog competition,' Standard Oil California Stations 337 293, 314, 69 1051, 1062, 93 L.Ed. 1371, 'deprive(s) . rivals fair compete.' H.R.Rep.No.1191, 81st Cong., 1st Sess. 8. Every extended very nature, least time, denies part customer-party arrangement.' 21 Moreover, order obtain foothold Once established, every incentive perpetuate maintain II 22 main controversy nature degree afforded. 23 During year following Court's finding violation, parties unable agree appropriate relief. then nine days hearings remedy consideration, necessary. 24 tie, held, many respects key solution propensity mechanic station garage select installed car. encourages continuance system. Neither nor sells privatelable obviously selfinterest encourage findings grow next decade mass merchandisers entering force. They brands counter bays carry proprietary anticipated 1980 represent 25 'To (plug) seems clear favorably disposed toward Also, entrant continues maker well.' 378. Accordingly decree 26 27 purchase 28 (3) period names (4) Protected town located, requiring price,6 30 (5) protected employees condition sale purchaser's assuming wage pension obligations offer employment employee displaced transfer nonplug operations plant.7 antitrust case 'effective redress violations' 'to competition.'8 366 316, 326, 81 1243, 1250, 318. clothed 'large discretion' fit special needs individual case. International Salt 332 392, 401, 68 12, 17, 20; 608, 885; Crescent Amusement 323 173, 185, 65 254, 260, 160. Complete asset stock acquisitions laws. 328—335, 1251—1255; 189, 262; Schine Chain Theatres 334 110, 128, 947, 957, 1245; El Paso Natural Gas 376 651, 1044, 12. 33 start restoring situation. once stand large edge renewed interest securing favorable terms purchases. Since purchaser, expected existed re-created. should eliminate flowing manufacturer's through 34 given provide satisfy provided keep ongoing awarded lucrative aggressively 35 changed drastically, noted. before manufacturer. foreclose remaining remove procompetitive concentrated entrant. 36 permit retain acquisition.9 37 rightly correct caused 38 word provisions. designed establish position. company can industry. 'cure ill illegal conduct, assure public freedom continuance,' Gypsum 340 76, 88, 71 160, 169, 95 89, 'fit exigencies particular case.' 17. 'it settled successfully borne considerable burden establishing violation law, doubts resolved favor.' 334, 1254. 39 concedes '(i)f survive, become secure status plugs.' measures allow itself markets viable until weaken Thus plugs.10 source use 40 cannot bearing name. view importance permitted initial five-year period, tendency impose enterprise strong competitor. prohibition permissible deceives confuses public.11 unfair temporary ban 41 years, half label assured while struggles re-established effective, 42 suggested, orders begin success years.' Post, 591. distorts studies indicate internally. devoted development 10-year limitation mesh neatly becoming while, giving reestablish providing production. Thus, delays date normal five-to-eight-year lead internal expansion, does light interim re-establishment characterization 'harshly restrictive,' post, 595, assertion decree, practical sense, 'prohibit(s) expansion.' 592. 43 Antitrust unfetter conduct 'pry closed defendants' restraints.' elimination lowers barrier C. Kaysen D. Turner, Policy—An Economic Legal Analysis 116 (1959). Forces now bring deconcentrated onerous nurtured end.12 44 thorough thoughtful way considered aspects relief, commendable. drafting involves predictions assumptions concerning events. Both interests involved; concude single eye clearly reasonable needed adversely affected 45 Affirmed. 46 POWELL REHNQUIST took consideration decision 47 STEWART, concurring result. 48 stood hardly characterized competition. For consisted supplying Motors; Ford; dependent Chrysler; who minuscule aftermarket.1 habit mechanics installing carrying automobile's reinforced unwillingness stations three brands,2 possible 'OE tie,' rendered large-scale impossible first obtaining customer. minimal, (where reduction six-cent immediately matched rivals), accounted percentage tuneup charge differentials consumer choice). 49 further lessened ways: producers, eliminated 'moderating effect' Champion's pricing policies These standing alone basis concluding but, THE CHIEF JUSTICE demonstrates his dissenting 591—592, preacquisition focused. For, court's injunctions, neither entrant, takes place. 50 my judgment, better rationalized probable trends visible observed 'a shut eyes contemporary predictable factors conducive change structure.' 442. proper inquiry 'requires appraisal immediate competition, prediction conditions future.' 362, 1741, 915.3 51 service-centers operated eventually loosen tight oligopoly fostered. nevertheless system, capacity. Even threat being stranded, mention realization, suppliers sellers, these sellers undermine customer, policies; sufficient effectively indefinitely postponing day produce measurable 52 justify precisely terms, I think adequate support ordered. JUSTICE's opinion, injunctions short run, extraordinary mother decade. say reasonably calculated do so. automatically quo ante, assume. Company, question here, recreated assume owner require 53 economics success, bringing And remedies cases enjoyed spectacular past, uniformly unsuccessful meeting goals Act. Elzinga, Law: Pyrrhic Victories, J.Law Econ. (1969). 54 Chief BURGER, part. 55 addition far cited forbidden years; directed prevent effect, subsidize time. Despite Draconian qualify restriction find justification remedy. dissent broad sweep remedial decree. remand 56 An understanding shows why error Autolite. weakness Rather, reading apparent precariousness post-divestment results pre-existing Therefore, drastic employed strengthen expense justified wrong done Ford. evils based violation. Third, likely termination restrictions. assurance desired long-run 57 critical errors avoid reasoning. rejects factfinding uphold order; repeats discussing assistance ante ever delineating state affairs indicating undermined ability reassume former 58 Some appear seem crucial me omitted adequately forth. Therefore sketch risk repetition. 59 Beyond doubt, overwhelmingly dominated period: 1961; supplied 1910 approximately 1941 15% Together 95% 60 domination big pervasive feature known (original equipment) tie.' denominates phenomenon replace engine tended, almost exclusively, builder equipment. technology, followed desire injuring putting mismatched it. Further, low-profit items, install them tend inventory brands. Most brands, choose gain recognition conceded Court, instance, American 5% able create acceptance cars. 61 Because having willing installation cost. longstanding cents, one-third producing Such below-cost gives competing sets lifespan automobile. partially responsible semipermanent relations between manufacturers: profit run afford belowcost 62 strength demonstrated inability well-known supply absence found, 63 'ever surpassed 2% level. Several come gone. Firestone Tire Rubber Company merchandised replacements up 1964. Although 800 accessory stores wholesaled items 50,000 shops filling stations, surmount patent discrimination blessed Detroit's approbation. Goodyear quit years. Globe Union, fabricator barely 1% nation's shipments, withdrew 1960.' 434—435. 64 Two private-label 'Atlas' sponsored 1.4% market; 'Prestolite' Sears, Roebuck's 'Allstate' 1.2%; Montgomery Ward's 'Riverside' 0.6% substitution deprived status. most lost market.1 certainly led shift patronage asserted maintaining size, although thinking size immunized dependence Before 1961, move dropped predicting won 66 substituted manufacturers. expectation base ground typically enters ologopolistic rather i.e., pro-competitive increase Here exchanged another. noting paradoxical fact, 'Ford fabrication.'2 67 Not relied grounds exercised 'moderating' determining theacquisition 'foreclosed' With respect itself, several findings. fixed-production words, turning manufactures. reduce profit. system: received regional offices, personnel list warehousers jobbers. All still liberty deal anyone wish. Each old visited individually consented, resigned defendant (Ford). Within few months, enter ignition contracts. However, previous (distributors products). mid-1966, accounts totaled 156, 104 pledged bloc committed both. net traceable semblance accuracy first-layer middlemen ..' 422. 70 difficulties mentioned one:3 fairly price, jobbers meet, difficulty independently handling want demand cut out, pushing generally. facts Judge 'there rising wind profoundly it.' 377. On testimony executive labels, highly speculative observation beginning field counter, building bays. witness predicted 4.4% 10% He oil resulting (the market's) eventual increasing customers need identification.' 72 separate remedies, stated law; purpose, limit 73 'free (within market) restraint imposed natural course.' 74 violators return ante. Paramount Pictures, Inc., 131, 152—153, 915, 926—927, 1260 (1948); Reynolds Metals FTC, 114 U.S.App.D.C. 2, 309 F.2d 223 (1962) (Burger, J.). Applying general provision instant situation, stated: 75 wishes note finds remedy, affirmatively 'break violations Section court. such, 7.' 76 (Autolite) position.' label. licensed twofold. prevented name; (with company's plugs) brand-name years.4 warranted factfindings, succeed allowing 78 unrelated ending Indeed, respects. actually undercuts possibility sidelines expansion prohibiting therefore, wipes duration restriction, undo Divestment free expansion. Yet forecloses 79 above problems minor justifiable returning overcoming harm accomplished issue majority confused. aid position, weakness. never reached whether anything attributed Instead, proceeded prescription 80 injure 12.5% 19%. trademark company. Nor short-term contracts distributed cars public. Almost concurrent 1966 tripled From below, appears nothing channels. injury squeezed relates fact shorn Chrysler. inconclusive. voluntarily chose divestment: relationship refuse renew precarious continually totally positions factor faced serious posed simple lived entity: decline drastically. Today's errs states, 571, 'key solution' problem. indeed created constitute justifying overcome question, burdening restrictive order. drawn trial unlikely end restricted period. survival suggestion niche labels unpersuasive. certainty outlets person do, survival. labels. them. helpful. One completely monopolize uncompetitive unlikely. likelihood producing, useless final analysis seeing entity, contemplating equitable restrict purposes fear situation form preserving precedence realities today's affirmance harshly provisions.5 BLACKMUN, 86 concur Part approves agree; enjoining entirely just, equitable, stringency strikes confiscatory punitive. 566, recognizes internally place occupied long, area longer achieve development. deny property right little litigation. syallabus constitutes prepared Reporter Decisions convenience reader. Detroit Timber Lumber 200 337, 282, 287, 499. provides part: 'No corporation engaged commerce shall acquire, directly indirectly, whole capital subject jurisdiction Federal Trade Commission acquire commerce, section country, monopoly.' 731, 1125, 18. June 403 903, 91 2204, 679. retained Eltra Corp. 1962 Prestolite. Others Atlas, Jersey, business, Riverside, Ward 0.6%. Court: 'Most marketers ELTRA Battery Ceramic Corporation, stature Big Three.' 435. words told Congress: 'Under Sherman creates monopoly attempt monopolize. Imminent concern acquires another, perceived enterprise. grows series acquisitions, accretions power minute difficult test .' S.Rep.No.1775, 2d 5; U.S.Code Cong. Service 1950, pp. 4293, 4297. Committee defined be' concept probability conveyed element statute seeks arrest retraints incipiency full-fledged violative actuality incompatible effort supplement reaching incipient Id., 6; p. 4298. Congressman Celler testifying bill 1950 amendment Clayton said: '(T)he worth Nation; less. That strengthens bolsters dwarfs belittles Nation.' Hearing H.R. 988 seq. Subcommittee House Judiciary, Sess., serv. 10, 14—15 (1949). Senator Kefauver spoke vein: '(I)f our democracy going survive basic materials resources available fellow wants 'Charts statistics show concentration, corporations purchasing competitors, unless trend halted industries America controlled very, group corporations. 'We point great industries. evil quite apparent. people lose freedom, political freedom. 'When destiny land central office somewhere, something reaches stage, statism sort another; whichever be, equally bad asesmble Without it, franchised challenge protecting 'violators ante,' 590, statement law. 1260, sustained regulating motion picture licenses clearances related (1962), concerned enforcement powers Commission, 4, 25, empower Attorney General, institute proceedings equity restrain afforded statutes restration turn back clock. 'necessary offensive statute,' 607, 885, 1057 (emphasis added), continuance.' added). '(I)t novel, absurd, interpretation anti-trust hold combination formed (has) acquire,—namely, suppressing proceeding execute formed, possession acquired, exercise Northern Securities 193 197, 357, 436 465, marketplace. prohibition, step restoration is, moreover, itself. constitutionally (cf. Howe Scale 1886 Wyckoff, Seamans Benedict, 198 118, 609, 972; Meyer, 139 540, 625, 247; Tropiano, 418 1069, 1076 (CA2 1969)), construed right. assumption, accept advanced patents levers objectives E.g., Besser Mft. 343 444, 448—449, 838, 841, 96 1063; Morton G. S. Suppiger 314 488, 402, 363. Here, hindering re-entry mark detrimental weapon serve harmful injurious purpose. If becomes tool circumvent unbridled dictates kept bounds. legal allocating world markets, fixing restricting unfailing device destroy vestige inhibition Act.' Timken Roller Bearing 284, 316 (ND Ohio 1949), aff'd, 341 593, 971, 1199 implements congressional favor atomized reflected Act: 'But fail recognize Congress' promote protection viable, small, locally businesses. appreciated occasional higher fragmented markets. considerations decentralization. decision.' 344, 1534, 510. roughly According survey, 11% metropolitan stocked larger AC. argument addressed quotes Bank proposition arguments merger's irrelevant rests principally decreased. development, smaller share, attributable vigor. Of course, spread life road producer's equipment—probably result, relies factual contrary developments arise enable 1960, projected yet ready niche. slighting findings, STEWART bear earlier moribund. overlooks discussed unlikelihood versus offices 1960. solicitude health, sent whatever brought in. evaluation, 577, restrictions gaining equipment: months plus populations centers motivated assuring divestiture. illustrates unsoundness kind 29. factually complicated like this, immeasurably aided screening process Appeals Limited expediting cases, discretion review

Category: 7