Court Opinion

ID: 9462854
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:51:47.979559+00
Date Added: 2024-06-11T17:37:49.133859
License: Public Domain

KILKENNY, with whom BROWNING, DUNIWAY and WRIGHT, Circuit Judges,
concur in whole or in part (dissenting).
With the majority factual statement so fraught with irrelevancies and weighted *1005with factual issues decided adversely to appellant by the jury,1 it is our firm belief that a separate statement would be helpful to a full understanding of the principal issue presented. We offer this at the risk of some' repetition.
FACTS
By 1962, Sylvania’s share of the television market had déclined to approximately one or two percent. It then changed its methods in an effort to obtain a larger share of the market. Under its new policy, Sylvania abandoned distribution through wholesalers and decided to sell only to selected retailers who would promote the Sylvania brand. It is undisputed that title to the television sets passed to these retailers. This plan, by limiting the number of franchises in a given area, would reduce intrabrand competition among retailers and serve as an incentive to carry and promote its product. Sylvania called this the “elbow room policy” and believed that these methods would allow it to improve its competitive position. In fact, under this new policy, it increased its market share to 5% in 1965, and, so it claims, this increase permitted it to remain in the market. Sylvania neither restricted franchised retailers from carrying other brands, nor did it require retailers to sell only to customers who lived within a particular territory. However, it did enforce location restrictions on its retailers and prohibited them from reselling its television sets from unauthorized locations.
Continental, one of Sylvania’s largest retailers, is composed of a chain of retail stores. In 1965, it opened a new store in Sacramento, shipped sets from another store, and offered them for sale in that city in September, 1965. Sylvania concedes that it had an agreement with Continental under which it was prohibited from moving Sylvania brand merchandise to an unapproved location for resale, without Sylvania’s prior approval. Sylvania refused to franchise the new store and, beyond question, hampered Continental’s resale efforts in Sacramento. In this case, it is clear that Sylvania’s purpose was to prevent more retail intrabrand competition in Sacramento, where most of its sales were by one important retailer.
As an outgrowth of this dispute, Sylvania set in motion a series of maneuvers which seriously affected Continental’s ability to resell Sylvania’s television sets. To that time, Continental’s credit limitation with Sylvania had been $300,000.00 On September 16th, the credit limit was reduced to $50,000.00, at which time Sylvania cancelled pending orders and severed other friendly ties with Continental. About the same time, Sylvania demanded payment of accounts receivable, which had not been its practice in the past. The following October *100613th, it cancelled Continental’s franchise. On the same day, the company through which Sylvania previously extended credit to Continental sued the latter to collect accounts which were allegedly due. Sylvania then accelerated the collection of the remaining indebtedness, repossessed all of Continental’s Sylvania sets, attached its bank accounts and caused its main store and warehouse to be locked and closed. At about the same time, Sylvania notified Phil-co, another major supplier of Continental, of what it was doing.
Sylvania claims it acted for reasons unrelated to its locations policy and not in retaliation. However, it is manifest that some or all of these actions had something to do with the enforcement of the agreement to restrict locations. This follows since the jury was instructed:
“Therefore, if you find by a preponderance of the evidence that Sylvania entered into a contract, combination or conspiracy with one or more of its dealers pursuant to which Sylvania exercised dominion or control over the products sold to the dealer, after having parted with title and risk to the products, you must find any effort thereafter to restrict outlets or store locations from which its dealers resold the merchandise which they had purchased from Sylvania to be a violation of Section 1 of the Sherman Act, regardless of the reasonableness of the location restrictions.” [Emphasis supplied.]
On the basis of the evidence and the quoted instruction, the jury answered the following special interrogatory in the affirmative.
“Did Sylvania Electric Products, Inc., engage in a contract, combination or conspiracy in restraint of trade in violation of the antitrust laws with respect to location restrictions alone?”
There is no way of pinpointing the percentage of Sylvania’s subsequent behavior that the jury attributed to enforcement efforts. However, it is obvious the jury concluded that Sylvania attempted to and did restrict Continental’s business location pursuant to a contract, combination, or conspiracy in violation of the Sherman Act and to the damage of Continental.
Despite what is said on page one of the majority opinion, the district judge did not instruct the jury that Sylvania’s practice of fixing by agreement the locations from which Continental was authorized to sell Sylvania products was illegal per se under § 1 of the Sherman Act. To the contrary, it is clear that the district judge presented to the jury the issue of whether Sylvania entered into a contract, combination or conspiracy with one or more of its dealers pursuant to which it exercised dominion and control over the product sold to the dealer after having parted with title and risk to the products, to restrict the territories in which the dealers may resell the merchandise.
The paragraph from the instructions quoted above is relied upon by the majority as a statement to the jury that location clauses are per se illegal. This is one of several interrelated paragraphs in the instructions dealing with the subject of territorial or customer restrictions. Standing alone, this paragraph requires proof both of a contract, combination, or conspiracy, and of an exercise of control by Sylvania after title and risk has passed to the dealers. This and related paragraphs read together also clearly informed the jury that Sylvania would be liable only if it exercised its control to restrict the territories in which the dealers resold.1a
*1007Counsel for both Sylvania and Continental so understood the instructions. In closing arguments Continental’s counsel told the jury that Sylvania had committed a per se violation of the Sherman Act if Sylvania by conspiracy had imposed territorial or price maintenance restrictions on the resale of products purchased from Sylvania.1b Sylvania’s counsel agreed, telling the jury that it was only required to decide whether Sylvania had fixed prices or controlled territories, which would be unlawful, or had franchised by location, which would be lawful.1c
THE CONSPIRACY
It is sufficient if the arrangement or combination is put together through the coercive tactics of the manufacturer alone. Hobart Bros. Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894 (5th Cir. 1973). See also Osborn v. Sinclair Refining Co., 324 F.2d 566, 573-574 n. 13 (4th Cir. 1963), discussing United States v. Parke Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960).
ISSUE
In its simplest form, the principal issue before us is whether the district court com*1008mitted error in giving the mentioned instruction. The answer lies in the applicability of the per se rule stated in United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967), to the findings of the jury in this case.
DISCUSSION
I.
Nowhere in its elaborate opinion does the majority come to grips with the fundamental tenet of antitrust law established in Schwinn. The Schwinn Court made it absolutely clear that once a manufacturer has lost all control over the property, parting with title and risk, thereafter any effort on its part to restrict territory or persons to whom the property may be sold, whether by contract or by silent combination or understanding with the vendee, is a per se violation of Section 1 of the Sherman Act. The language of the Schwinn Court in stating the issue is of importance:
“We are here concerned with a truly vertical arrangement, raising the fundamental question of the degree to which a manufacturer may not only select the customers to whom he will sell, but also, allocate territories for resale and confine access to his product to selected, or franchised retailers. We conclude that the proper application of § 1 of the Sherman Act to this problem requires differentiation between the situation where the manufacturer parts with title, dominion, or risk with respect to the article, and where he completely retains ownership and risk of loss.” 388 U.S. at 378, 87 S.Ct. at 1865, 18 L.Ed.2d at 1260. [Emphasis supplied.]
Here, it is conceded that Sylvania parted with title to, dominion over, and risk in connection with the television sets.
Speaking to the same subject, the Schwinn Court said:
“Under the Sherman Act, it is unreasonable without more for a manufacturer to seek to restrict and confine areas or persons with whom an article may be traded after the manufacturer has parted with dominion over it. Such restraints are so obviously destructive of competition that their mere existence is enough. If the manufacturer parts with dominion over his product or transfers risk of loss to another, he may not reserve control over its destiny or the conditions of its resale.” Id. at 379, 87 S.Ct. at 1865, 18 L.Ed.2d at 1260. [Emphasis supplied.]
At this point, the Court emphasized that it was not prepared to adopt a per se rule which would prohibit vertical restrictions of territory and all franchising in instances where the manufacturer retained ownership of the goods saying that such a rule might severely hamper small enterprises resorting to reasonable methods of meeting the competition of giants and of merchandising through independent dealers. After this observation, the Court went on to say:
“But to allow this freedom where the manufacturer has parted with dominion over the goods — the usual marketing situation — would violate the ancient rule against restraints on alienation and open the door to exclusivity of outlets and limitation of territory further than prudence permits.” Id. at 380, 87 S.Ct. at 1866, 18 L.Ed.2d at 1261. [Emphasis supplied.]
Further emphasizing its ban against restraint on alienation of a product once full title had passed, the Court said:
“Where the manufacturer retains title, dominion, and risk with respect to the product and the position and function of the dealer in question are, in fact, indistinguishable from those of an agent or salesman of the manufacturer, it is only if the impact of the confinement is ‘unreasonably’ restrictive of competition that a violation of § 1 results from such confinements unencumbered by culpable price fixing.” Id. at 380, 87 S.Ct. at 1866, 18 L.Ed.2d at 1261. [Emphasis supplied.]
It is only in these limited circumstances that the “rule of reason”, so strongly urged by the majority, should be applied.
The majority suggests “that vertically imposed customer restrictions only” were involved in Schwinn and that the Court’s *1009statements with reference to territorial limitations were dicta. It is clear that the majority in Schwinn thought otherwise. We quote:
“We come, then, to the legal issues in this case. We are here confronted with challenged vertical restrictions as to territory and dealers. The source of the restrictions is the manufacturer.” Id. at 372, 87 S.Ct. at 1862, 18 L.Ed.2d at 1256. [Emphasis supplied.]
Some earlier Supreme Court decisions did not attach a rule of per se illegality to restraints on alienation in the antitrust context. The Schwinn Court has radically changed this position. Again speaking to the prohibition against restraint on alienation in a vertical relationship, the Supreme Court said at page 382, 87 S.Ct. at page 1867, 18 L.Ed.2d at page 1262.
“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.” [Emphasis supplied.]
To further clarify the breadth of the Schwinn decision, we quote from page 378, 87 S.Ct. from page 1865, 18 L.Ed.2d from page 1259:
“[U]pon remand, the decree should be revised to enjoin any limitation upon the freedom of distributors to dispose of the Schwinn products, which they have bought from Schwinn, where and to whomever they choose. The principle is, of course, equally applicable to sales to retailers, and the decree should similarly enjoin the making of any sales to retailers upon any condition, agreement or understanding limiting the retailer’s freedom as to where and to whom it will resell the products.” [Emphasis supplied.]
The Schwinn Court assumed jurisdiction and not only spoke on the subject of territorial and personal restraints against alienation, but issued a directive to the district court on the type of injunctive restraints to be placed upon Schwinn.
From the foregoing, we can arrive at no conclusion other than that any type of restraint on alienation by a manufacturer over a distributor or a retailer, be it territorial or personal, after title and dominion have passed, is a per se violation of the Act.
II.
The majority urges that the rule of per se illegality established in Schwinn should not be applied to a location restriction as utilized by Sylvania. It is forcefully argued that the location clauses here involved should be judged under what is commonly referred to as the “rule of reason,” rather than a rule of per se illegality. As we see it, the majority’s “critical and very obvious distinctions” between the restrictions in Schwinn and those of Sylvania are insignificant. The district court in the present case did not extend Schwinn to location clauses by “applying a bit of the literal language of Schwinn without reference to its context or the specific facts of that case. . . . ” The court simply took the holding of Schwinn at face value and applied it to a set of facts which it logically encompasses.
It is argued that in Schwinn a wholesaler-distributor was foreclosed from selling Schwinn products to any purchaser located outside his exclusive territory and it is thus distinguishable. But, essentially the same thing can be said of the retailer in Sylvania. Schwinn defined the territorial boundaries within which each distributor could resell. Sylvania specified the precise location from which its retailer could resell. The Schwinn distributor was prohibited from selling beyond the boundaries of his territory. The Sylvania retailer is prohibited from reselling from any location not designated by the manufacturer. Schwinn had a territorial line fixed geographically. Sylvania has a territorial line fixed by the economic limitations upon an effective marketing area. While it is true that the Sylvania territorial line may not be as clearly defined as that in Schwinn, the overall territorial restriction upon competition is just as effective.
*1010The majority’s contention that Schwinn should not be applied in this case because Sylvania imposed neither territorial nor customer restrictions is impossible to reconcile with the jury verdict and the district court’s findings of fact, which establish that the location clause operated as a territorial restraint. In its findings of fact, the district court quoted the Sylvania sales manual as follows:
The manual states, inter alia, that the “franchise contains a good profitable selling climate by creating ‘elbow room’ in a sensible territory based on market and dealer potential. ‘Same brand’ competition is eliminated.”
The district court found that “[a]lthough retail sales of Sylvania brand merchandise could be made to anyone, the sales could be made only from the store location approved by Sylvania. ... By reason of the inherent limitations respecting advertising and promotion and delivery and service of sets sold, the territory of a retail dealer for sales was, for all practical purposes, limited to a radius of 25-50 miles from a dealer’s store location.”2 It may be true in theory that, as the majority argues, “Sylvania’s dealers could sell to customers from any area.” But since none of Continental’s dealers were located within 50 miles of Sacramento, as a practical matter Continental could not sell televisions in that city. The district court further found that the conspiracy between Sylvania and Handy Andy, Sylvania’s principal Sacramento distributor, “resulted in the number of Sylvania franchises in Sacramento being reduced from seven in 1963 to three in 1965 with Handy Andy selling all of the Sylvania color TV sets sold in Sacramento and 80 percent of the black and white ones during the first six months of 1966.” The majority does not question the accuracy of any of these findings.3 The district court thus examined the impact of the Sylvania locations practice, concluding that it amounted to a territorial restriction that prevented Continental from competing in Sacramento, a market in which there was only one significant Sylvania distributor. More importantly, these findings are implicit in the jury’s verdict.
Schwinn did not expressly outlaw location clauses by name. It did, however, outlaw any and all territorial restrictions on resale to others. This necessarily includes all devices, the inevitable practical effect of which is to restrict a retailer’s territory. We are convinced that Sylvania-type location clauses and Schwinn-type territorial restrictions are identical in effect and are both per se illegal under the command of Schwinn.
It is a cardinal rule of antitrust law that the purpose and effect of certain conduct— not its form — governs its legality. Simpson v. Union Oil Co., 377 U.S. 13, 17, 24, 84 S.Ct. 1051, 1054, 1058, 12 L.Ed.2d 98, 102, 106 (1964), teaches that when a court is faced with a new restricting device, the effect of *1011which is substantially the same as that of a method previously condemned as illegal, the per se rule must be applied to the new device. To the same effect is Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894, 899-901 (5th Cir. 1973).4 This principle is especially applicable to Sylvania. It is sufficient if the restraint is present, in fact, whether the outgrowth of an express or an implied understanding. Hobart Brothers Co., supra, at 900; Beverage Distributors, Inc. v. Olympia Brewing Co., 440 F.2d 21, 28 (9th Cir. 1971).
Schwinn, says the majority, involved a restriction on the locations and types of vendees, while Sylvania only imposed restrictions on the permissible locations of vendors. In attempting to limit the effect of Schwinn, the majority completely overlooks the Schwinn language outlawing any type of a restraint on alienation after the passage of title and dominion. Without giving a reason, the majority, in its interpretation of Schwinn, says: “It is clear to us that ‘territory and areas’ refer to the location of vendees, rather than vendors.” There is nothing in Schwinn to suggest such a distinction. Moreover, since Sylvania’s enforcement of its location clause, coupled with hard economic facts, prevented consumers in Sacramento from buying Sylvania televisions from Continental, the present case involves a direct limitation on the location of permissible vendees.
III.
The majority’s strained emphasis upon the decree of the district court on the Schwinn remand demonstrates the futility of its search to find a ready answer to the Schwinn directive. First of all, the district court decree could not alter or change the effect of the Schwinn decision. More importantly, that the district court followed through on the Schwinn command is made clear by the following language of its judgment:
“Defendant Schwinn and the Association are each jointly and severally enjoined and restrained from, directly or indirectly, imposing, inducing, or securing any condition or any agreement or understanding that limits the freedom of any distributor or retailer of Schwinn products as to where and to whom it may resell such products, by oral or written statements or by acts of retaliation.” 291 F.Supp. 564, 565 (N.D.Ill.1968).
It is true that the remand decree allowed Schwinn to designate in its retail franchise agreements the place of business for which a franchise is issued. Obviously this provision must be read in light of the language of the entire decree and of Schwinn itself. So read, it means only that a manufacturer can specify the location at which a retailer is the manufacturer’s authorized representative and assign areas of primary responsibility, but that a manufacturer cannot impose resale restrictions forbidding retailers from selling the manufacturer’s product except where the manufacturer allows.
We feel that Justice Clark, writing for the Court, properly interpreted the overall effect of the district court judgment on the Schwinn remand in Reed Brothers, Inc. v. Monsanto Chemical, 525 F.2d 486, 494 (8th Cir. 1975). He there said: . . [A] manufacturer may properly designate geographic areas in which distributors shall be primarily responsible for distributing its products and may terminate those who do not adequately represent it or promote the sale of its products in such areas.” Citing Schwinn on remand, 291 F.Supp. 567, 568. The Reed Bros, decision fully supports our conclusion that Schwinn controls on our *1012facts. Time and time again, the Reed Bros. court echoes the Schwinn precept that once a manufacturer parts with title to and dominion over the product, it is a per se violation of the Sherman Act to restrict areas within which, or persons to whom, an article may be resold.
The majority also seeks support for its views in a provision of the decree on remand in United States v. Topco Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972). In fact, Topeo strengthened and extended the Schwinn per se rule against territorial restrictions.5 Topeo, which struck down a horizontal division of territories, explained the reason for the Schwinn per se approach
“Without the per se rules, businessmen would be left with little to aid them in predicting in any particular case what courts will find to be legal and illegal under the Sherman Act. Should Congress ultimately determine that predictability is unimportant in this area of the law, it can, of course, make per se rules in some or all cases, and leave courts to ramble through the wilds of economic theory in order to maintain a flexible approach.” Id. at 609-10 n. 10, 92 S.Ct. at 1134, 31 L.Ed.2d at 527.
The majority would downgrade Topeo by insisting that it was severely limited by the judgment on remand, which judgment was later affirmed without comment by the Supreme Court.6
Upon remand in Topeo,7 the district court in the forepart of its decision carefully followed the decision of the Supreme Court by prohibiting the defendant from any type of an arrangement which would restrict the territories within which or persons to whom any member firm might sell products procured from or through Topeo, and then went on to engage in a lot of gobbledygook, introducing what seems to be a meaningless paragraph Y with reference to locations which, in pertinent part, reads;
“V
Notwithstanding the foregoing provisions, nothing in this Final Judgment shall prevent defendant ... (2) from designating the location of the place or places of business for which a trademark license is issued, provided that defendant shall not refuse to grant a trademark license to any member or withdraw a license from any member, except any withdrawal incident to the bona fide termination of any member firm’s membership in Topeo, if such action would achieve or maintain territorial exclusivity in any member firm; . . . .” Id. at 174,391.
While the provision is loaded with ambiguity, even at its clearest it can mean no more than that Topeo could be entitled to desig*1013nate the location of the place or places of business for which a trade mark license is issued, provided that the granting of such location did not result in restricting the territories within which or the persons to whom any member firm might sell products procured from or through Topeo, in violation of the Supreme Court Topeo decision and Paragraphs I, III, and IV of the district court decision on remand.
That the attorneys for Topeo on the appeal from the judgment on remand placed no such construction on the district court judgment is made evident by the following language taken from pages 5 and 6 of their brief on appeal, to-wit:
“The district court outlined in Paragraph V the activities in which the defendant could engage without violating the court’s injunction. The government argues that Paragraph V renders the decreed relief inadequate ‘because it fails to protect against and in fact permits continuation or renewal of the collective allocation of territories among competing sellers of Topeo branded products’ (Juris. Statement, p. 5) In fact it does not. By its very terms Paragraph V forbids any of these practices if they are ‘directly or indirectly used to achieve or maintain’ the prohibited territorial restrictions. (App.C, p. XX.) If Topeo were to engage in activity having such an effect, a violation of the decree would result.” [Emphasis supplied.]
With Topeo making this concession, it is easy to understand why the Supreme Court affirmed without comment.
Early this year the Fifth Circuit in Copper Liquor, Inc. v. Adolph Coors Co., 506 F.2d 934 (5th Cir. 1975), commenting on Topeo and Schwinn said:
“Notwithstanding, Standard Oil Co. v. United States, 1911, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 Topco and Schwinn, read together, suggest that at this point we must accept the fact that the Court has set its face against both horizontal and vertical territorial restrictions, with the possible exception of vertically imposed restrictions by ‘new entrants’ and ‘failing companies’ briefly mentioned in Schwinn.” Id. at 943.
We are not persuaded by the majority’s exhaustive analysis of Copper Liquor. No matter how it is digested, it reaffirms the Schwinn dogma that the Supreme Court has “set its face against both horizontal and vertical territorial restrictions, with the possible exception of vertically imposed restrictions by ‘new entrants’ and ‘failing companies.’ ” Sylvania is neither a “failing company” nor a newcomer seeking to break into the television business.
As recently as November 15, 1975, the Fifth Circuit in Eastex Aviation, Inc. v. The Sperry & Hutchison Co., 522 F.2d 1299, reaffirmed its position that where a manufacturer sells products to distributors subject to territorial restrictions on resale, there is a per se violation of the Sherman Antitrust Act and that it is unreasonable, without more, for a manufacturer to seek to restrict and confine areas of persons with whom an article may be traded after the manufacturer has parted with dominion over the article.
IV.
The majority conveniently confuses and integrates location clauses and exclusive dealerships, claiming them to be so interdependent as to make exclusive dealerships useless without resale-type location clauses as an enforcement option. The two are clearly distinguishable. In an exclusive dealership, the distributor, dealer, or franchisee obtains a manufacturer’s self-imposed promise not to contract with another distributor in the general area. A location clause with a restraint on alienation deals with the manufacturer’s control over the place from which a distributor, dealer, or franchisee may resell a product. Schwinn expressly ordains the exclusive dealership to be an acceptable practice, as do cases on which the majority relies, for example, Bushie v. Stenocord Corp., 460 F.2d 116 (9th Cir. 1972), and Joseph E. Seagram & Sons v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970). Neither *1014Seagram & Sons nor Bushie extend approval to location clauses, such as those under scrutiny. They deal solely with exclusive dealerships. It is one thing for a manufacturer to restrict its own behavior. It is quite another to try to restrict that of an independent business entity.
It is generally agreed that the utility of exclusive dealerships resides in the ability to manipulate the density of sales outlets. The grant of an exclusive dealership is but a promise by the manufacturer not to sell to other nearby distributors. This serves as the stimulus for active product marketing by dealers. However, under Schwinn, if a manufacturer uses the grant to prevent the dealer from reselling goods in which the dealer has full title and dominion, he is employing a prohibited restraint on alienation. Just because the courts have approved exclusive dealerships, such as involved in Seagram & Sons and Bushie, does not mean that manufacturers can employ a location clause to place a restraint on alienation in order to limit the territories in which their distributors can resell. We agree with the commentator who described as “fallacious” the “contention that the location clause is lawful as long as the manufacturer lawfully can grant exclusive franchises. These two types of restrictions are vastly different in terms of market impact. By an exclusive franchise agreement, a manufacturer voluntarily restricts itself. However, when the manufacturer imposes resale restrictions it exercises control over one of the most crucial competitive decisions which any truly independent tradesman must make — where and to whom he will sell his wares. To claim that granting an exclusive franchise is a lawful restraint on alienation on the manufacturer’s part and to deny any analytical difference to restraints on alienation imposed on members of the next economic level is legal nonsense.” Schmitt, supra, note 2 at 907-OS.
The majority argues that applying a rule of per se illegality to location clauses renders the exclusive distributorship tool useless because it turns a dealer franchised somewhere into a dealer franchised everywhere. This argument is similar to the majority’s contention that if a manufacturer has the right to designate the location where a franchise is valid, “then the manufacturer must have the power to enforce these rights if a franchisee violates his location clause agreement.” According to the majority, the distinction between the right to approve locations and the right to limit the freedom of a distributor as to where it may sell is “artificial” or “spurious.”
The majority commits the same mistakes with respect to both the right to franchise by location and the right to grant exclusive dealerships. Neither device is rendered useless by permitting Continental to sell Sylvania televisions in Sacramento. Sylvania can insure that its products are effectively marketed by granting exclusive distributorships, thereby limiting itself, and by assigning spaced locations and areas of primary responsibility, thereby imposing obligations on its dealers. But Schwinn bars territorial and customer restrictions on resale. Thus, once Sylvania’s legitimate interest in full distribution of its products is satisfied, it has no right to prevent Continental from selling in Sacramento. An analogous distinction was made in Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., supra. The court stated that the manufacturer, Hobart,
“. . . could refuse to deal with Gilliland, but that right did not give Hobart immunity so that it could use an illegal territorial restraint.” Id. at 900.
The court in Fontana Aviation, Inc. v. Beech Aircraft Corp., 432 F.2d 1080, 1085 (7th Cir. 1970), said that if this right is accompanied by an unlawful agreement “or conceived in market control,” then the right “transgresses” the antitrust laws. Similarly, in the present case, Sylvania’s right to grant exclusive distributorships, to approve locations, and to assign areas of primary responsibility does not give it immunity to impose territorial restraints on resale. Arguments to the contrary amount to nothing more than veiled attacks on Schwinn.
*1015V.
Although location clauses operate to severely reduce or eliminate intrabrand competition, the majority argues that the consequence of such clauses is improved inter-brand competition, a desirable end under the Sherman Act. That this reasoning, from an antitrust policy viewpoint, is fallacious is demonstrated by the following language in Topeo:
“Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete — to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster. Implicit in such freedom is the notion that it cannot be foreclosed with respect to one sector of the economy because certain private citizens or groups believe that such foreclosure might promote greater competition in a more important sector of the economy. Cf. United States v. Philadelphia National Bank, 374 U.S. 321, 371, 83 S.Ct. 1715, 1745, 10 L.Ed.2d 915, 949 (1963).
“The District Court determined that by limiting the freedom of its individual members to compete with each other, Topeo was doing a greater good fostering competition between members and other large supermarket chains. But, the fallacy in this is that Topeo has no authority under the Sherman Act to determine the respective values of competition in various sectors of the economy. On the contrary, the Sherman Act gives to each Topeo member and to each prospective member the right to ascertain for itself whether or not competition with other supermarket chains is more desirable than competition in the sale of Topcobrand products. Without territorial restrictions, Topeo members may indeed ‘[cut] each other’s throats.’
But, we have never found this possibility sufficient to warrant condoning horizontal restraints of trade.” 405 U.S. at 610-11, 92 S.Ct. at 1135, 31 L.Ed.2d at 527. [Emphasis supplied.]
Though a horizontal restraint case, Topeo stands for the rule that restricted intrabrand competition cannot be justified by alleged interbrand competitive gain. This rule not only causes the majority rationale to fail, but it provides an excellent economic justification for the Schwinn per se rule, the preservation and encouragement of intrabrand competition, as a desirable end in itself. Under the Schwinn per se rule, small business, free enterprise, and the free market are all necessary beneficiaries.
VI.
A few words about the majority’s cases.
The exclusive dealership cases, including Hawaiian Oke and Bushie, have already been distinguished. Great weight is placed on White Motor Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963), a case in which the Supreme Court declined to apply a per se rule to vertical restrictions, somewhat similar to those in Schwinn. In White, the Court simply said it was not yet ready to apply the rule. That the White Court- did not refuse to apply the per se rule or reach the plateau attributed to it by Justice Stewart in his Schwinn dissent is made manifest by the following pertinent language:
“We do not know enough of the economic and business stuff out of which these arrangements emerge to be certain. . We need to know more than we do about the actual impact of these arrangements on competition to decide whether they have such a ‘pernicious effect on competition and lack any redeeming virtue’ . . . and thereafter should be classified as per se violations of the Sherman Act.” Id. at 263, 83 S.Ct. at 702, 9 L.Ed.2d at 746.8
*1016Justice Stewart’s outrage at the breadth of the Schwinn decision is capsulized in his expression, “No previous antitrust decision of this Court justifies its action. Instead, it completely repudiates the only case in point, White Motor.” 388 U.S. at 388-89, 87 S.Ct. at 1870, 18 L.Ed.2d at 1266. That the fundamental core of the Schwinn per se rule is the residence of title and risk is clearly established by Justice Stewart’s dissent in which he can find no valid ground on which to apply the rule of reason to a principal-agent relationship and not apply the same rule to the relationship of vendorvendee. The Justice’s focus on the sales/agency dichotomy certainly demonstrates his view on the essence of the Schwinn decision. The consent decree on the remand of White Motor, United States v. White Motor Co., 1964 Trade Cas. ¶ 71,-195 (N.D.Ohio), eliminating territorial and customer restraints from the franchised contract gives us considerable insight to the company’s interpretation of the Supreme Court’s decision.
The majority argues that the employment of the Schwinn per se rule on the facts of the present case would be wholly inconsistent with United States v. General Motors Corp., 384 U.S. 127, 65 S.Ct. 357, 89 L.Ed. 311 (1966). The Schwinn Court pointed out that General Motors was, first of all, a horizontal restraint case. More than that, in General Motors the dealers initiated the restraint, unlike the manufacturers in Schwinn and Sylvania and, finally, General Motors and other majority citations are highly suspect due to their age.
A case which is not old and on which the majority heavily relies is Salco Corp. v. General Motors Corp., 517 F.2d 567 (10th Cir. 1975).9 Although involving a franchise with a location clause, the authority of the decision on our point is fatally weakened by the failure of the court to recognize the Schwinn prohibition on resale, or even make known that such a prohibition was part and parcel of the Schwinn dogma. The only mention of Schwinn is in connection with the well known tenet that a manufacturer of a product for which equivalent brands are readily available in the market may select his customers and for this purpose may franchise certain dealers to whom, alone, he will sell his goods. No one disputes that rule. Boro Hall Corp. v. General Motors Corp., 124 F.2d 822 (2d Cir. 1942), cited in Saleo, is a relatively ancient case decided long before Schwinn. Additionally, the case is not in point. There the record clearly shows that there was no restriction on the used car dealer preventing the sale of automobiles outside the “zone of influence.” For that matter, the dealer was notified that he could even establish a location outside of his zone of influence as long as it was not “unduly prejudicial to the interests of other dealers.” This is a far cry *1017from the concrete mold in which Sylvania attempted to place Continental.
The force of Boro Hall and Saleo is further undermined by a recent exhaustive study of distribution practices in the automobile industry. Schmitt, supra, n. 2.10 The author of the study concludes that “[i]n the context of automobile dealerships, the location clause constitutes a flat territorial prohibition. Any other conclusion would be a gross distortion of the hard economic facts.” Id. at 904. He further concludes that the location clause is a device through which “the automobile manufacturers effectively have achieved control over intrabrand competition,” which has no economic justification, and which “merely substitutes the manufacturers’ decisions for those which a dealer should make on the basis of the dictates of the market.” Id. at 905-06.
Finally, some comment should be made on the majority’s quotation from an address by a Deputy Assistant Attorney General in the Antitrust Division. The quotation in the majority opinion is: “And only last year, a spokesman for the Antitrust Division stated that locations clauses ‘are not illegal standing by themselves’ since ‘[t]hey reflect the manufacturer’s legitimate interest in having his goods distributed efficiently through a particular area.’ ” The context from which the quotation of Mr. Clear-water was taken is as follows:
“‘Location’ and ‘primary responsibility’ clauses — under which a seller designates the specific location of his purchaser-customer, or the geographic area in which the purchaser-customer is primarily responsible for the sale of the seller’s products — are not illegal standing by themselves. They reflect the manufacturer’s legitimate interest in having his goods distributed efficiently throughout a particular area. The purchaser-customer, however, is not restricted from selling elsewhere once the interests of the manufacturer are satisfied. Reading between the lines, however, in those instances in which such clauses are in fact used as a means to impose a territorial restriction on sales, the Department would, of couse, consider them illegal.” (Clearwater, Franchising and the Antitrust Laws, May 16, 1974). [Emphasis supplied.]
Since, as both the jury and the district court found, the location clauses involved in this case were used by Sylvania to impose a territorial restriction on sales, “the Department would, of course, consider them illegal.”
VII.
Initially, Sylvania urged that it was entitled to an instruction on the “failing company” rule stated in Citizens Publishing Co. v. United States, 394 U.S. 131, 89 S.Ct. 927, 22 L.Ed.2d 148 (1969). The majority does not now press for an application of that rule. This is understandable. The evidence offered by Sylvania shows that by 1965 it had made a remarkable recovery from its unstable position in the early sixties. We agree with the trial judge that there was insufficient evidence to submit this issue to the jury.
CONCLUSION
A close analysis and study of the majority opinion reveals that it is patterned after and closely follows Justice Stewart’s lengthy and exhaustive dissent in Schwinn. When viewed in broad perspective, the majority holds that Schwinn is bad law and that we should adopt the Stewart approach. We decline to join in an opinion which, we believe, would sub silentio overrule a decision of the Supreme Court.
In urging affirmance, we do not go beyond the jury’s verdict that Sylvania enforced its location agreement to create an illegal territorial restraint restricting the locations from which Continental could sell its products. We do not need to decide *1018whether a location clause, without more, creates a per se violation of the Sherman Act.
WE WOULD AFFIRM.

. In passing on whether or not to grant an injunction on the appellant’s practices, the district court entered elaborate findings of fact which are in direct contradiction to many of the statements in the majority opinion. For example, footnote 30 of the majority opinion states that “[t]he elbow room policy was never used by Sylvania severely to restrict intrabrand competition or to divide markets. No dealer had a veto power over the entry of other dealers into his area, and locations were authorized by Sylvania solely on the basis of market expandability.” However, in its 16th finding of fact the district court concluded that “the action of Sylvania [reducing Continental’s credit line, cancelling Continental’s orders, and cutting off all communication with Continental, among other things] was taken pursuant to the contract, combination or conspiracy alleged by Continental and was part and parcel thereof and at the instance of Sylvania’s co-conspirator Handy Andy; and as a result thereof Continental was prevented from selling its Sylvania brand products in its store in Sacramento.” The district court also found that on September 7, 1965, Sylvania’s area sales manager advised Continental’s principal operating officer “that due to prior ‘commitments’ which Sylvania had with Handy Andy, it was impossible for Sylvania to franchise Continental in Sacramento.” Needless to say, the findings of the district court are implicit in and grow out of the jury’s general verdict and its affirmative response to the previously maintained special interrogatory-

. The pertinent instructions read:
“So too, concerted action in the form of dividing territories in which a dealer may resell merchandise purchased from the manufacturer without resale price maintenance constitutes a violation of the antitrust laws. That is to say, where a manufacturer, by means of a contract, combination or conspiracy, restricts the territories within which a dealer may resell merchandise purchased from the manufacturer, such a restriction is unlawful regardless of whether or not that restriction is good business practice from the manufacturer’s point of view and is likely to assure adequate volume of profits. Any agreement, combination or conspiracy by *1007which a manufacturer interferes with the ordinary and usual forces of competition to restrict the territories within which dealers may resell merchandise which they have purchased from the manufacturer or to keep one dealer from competing for customers or sales in a territory or area served by another dealer also constitutes a violation of the antitrust laws, whether or not the territories resulting seem reasonable or unreasonable.
“Therefore, if you find by a preponderance of the evidence that Sylvania entered into a contract, combination or conspiracy with one or more of its dealers pursuant to which Sylvania exercised dominion or control over the products sold to the dealer, after having parted with title and risk to the products, you must find any effort thereafter to restrict outlets or store locations from which its dealers resold the merchandise which they had purchased from Sylvania to be a violation of Section 1 of the Sherman Act, regardless of the reasonableness of the location restrictions.
“On the other hand, on this question of territorial or customer restrictions, you are instructed that a manufacturer, such as Sylvania, has a right, acting alone and independently for its own business interests, to select its customers, and for this purpose, the manufacturer may grant an exclusive ‘franchise’ to certain dealers to whom, alone, he will sell his products. Also, it is lawful for the manufacturer to designate the location or locations of the place or places of business for which said dealer or dealers are franchised. It is also lawful for the manufacturer to decline or refuse to grant a dealer’s request for a franchise at different or additional locations.” [Tr. 3446-48]

. Continental’s counsel said:
“Ladies and Gentlemen, there are also types of antitrust cases, which this is, which are so pernicious, the policies are so pernicious to competition, so anti-competitive in their impact on our economy that the law states there is no possible way to justify them. And, ladies and gentlemen, the two restrictions involved in this case are such marketing, distribution restrictions: Territorial restrictions and price maintenance restrictions are what lawyers and courts call per se violations of the act if they are enforced by contract, combination or conspiracy.
“So despite what Mr. Popofsky told you in his opening argument, despite what Prof. Preston testified to on the stand, the facts are that it is only necessary in this case to find, number one, that Sylvania had a policy by which it restricted the territory in which and/or customers to which Continental could sell Sylvania products after it had purchased them from Sylvania.
“As a part of that distribution policy, Sylvania maintained minimum prices and enforced those minimum prices.” [Tr. 3338]

. Sylvania’s counsel said:
“You will not be asked, as counsel pointed out, to make any decision about the reasonableness of the distribution practice or whether or not competition is or is not being bettered or furthered.
“You will be asked only to decide what is the true character of the Sylvania practice. Was it the character that Continental suggests? Did it really involve price-fixing on the one hand and control over territories on the other, or did it, as we suggest, involve no more than a franchise by location practice?
“If it is the latter we contend the instructions make it lawful. So you will be asked only to identify the character of the practice.” [Tr. 3378]

. Compare Professor Schmitt’s descriptions of the effects of the location clause employed by automobile manufacturers:
The location clause inherently limits the dealer’s ability to reach customers outside his marketing segment. The size of this segment varies according to the shopping habits of customers, traffic connections and population density. Even though a dealer is free to sell to customers wherever they may be located, the location clause secured market segmentation which effectively allows the manufacturer to control the degree of intrabrand competition. The location clause factually restricts the dealer’s business activities directly in terms of territorial freedom and indirectly in terms of freedom of customer choice.
Schmitt, Antitrust & Distribution Problems in Tight Oligopolies — A Case Study of the Automobile Industry, 24 Hastings L.J. 849, 903-04 (1973).

. The only finding of the district court questioned by the majority is the finding that Sylvania requested Maguire to sue Continental on its outstanding notes as a part of Sylvania’s attempt to prevent Continental from selling Sylvania products in Sacramento. We do not agree that this finding is “in conflict with the finding of the jury that Maguire and Sylvania were not involved in any contract, combination, or conspiracy to enforce the location restriction.” Majority Opinion, footnote 7. The jury’s conclusion that Maguire was not part of the conspiracy to impose resale restrictions on Continental is consistent with a finding that Sylvania used Maguire in carrying out the conspiracy between Sylvania and Handy Andy found explicitly by the trial judge and by implication by the jury as well.

. In Hobart Bros. Co. v. Malcolm T. Gilliland, Inc., supra, the manufacturer, Hobart, used an area of primary responsibility clause to limit the territory in which Gilliland would sell Hobart’s products. Since Hobart not only manufactured but also sold on the same level as its dealers, the effect of the restriction was a horizontal division of markets eliminating competition between Hobart and its dealers. The court concluded that “[s]uch an arrangement must be treated as it operated in practice rather than ‘as arranged by skillful drafting.’ Cf. Simpson v. Union Oil Co., 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98 (1964).” Id. 471 F.2d at 899. See Reed Bros., Inc. v. Monsanto Co., 525 F.2d 486, 489, 490, 494 (8th Cir. 1975); Interphoto Corp. v. Minolta Corp., 417 F.2d 621, 622 (2d Cir. 1969).

. See Copper Liquor, Inc. v. Adolph Coors Co., 506 F.2d 934, 941-43 (5th Cir. 1975).

. United States v. Topco Associates, Inc., supra.

. United States v. Topco Associates, Inc., 1973-1 Trade Cases, ¶ 74,391 (N.D.Ill.).
I
[Territories; Restrictions ]
The defendant and its member firms have engaged in a combination and conspiracy in unreasonable restraint of interstate trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) by restricting the territories within which or the customers to whom the member firms may sell Topeo brand products.
* * * * * *
III
[Bylaws; Rules]
Defendant is ordered and directed, within 210 days from the entry of the Final Judgment, to amend its bylaws, Membership and Licensing Agreements, resolutions, rules and regulations to eliminate therefrom any provisions which in any way limits or restricts the territories within which or the persons to whom any member firm may sell Topeo brand products.
IV
[Agreements ]
Defendant is enjoined and restrained from adopting any bylaw, resolution, rule or regulation and from maintaining, adhering to, entering into or enforcing any contract, agreement, arrangement, understanding, plan or program in which Topeo limits or restricts the territories within which or the persons to whom any member firm may sell products procured from or through Topeo.

. The majority cites Justice Brennan’s concurring opinion in White Motor as supporting the lawfulness of area of primary responsibility covenants, which the majority defines as agree*1016ments “obligating a distributor to concentrate his sole efforts in a specified geographical area. . The thrust of the provisions approved by Justice Brennan, however, was “only that the dealer must adequately represent the manufacturer in the assigned area, not that he must stay out of other areas.” 372 U.S. at 271-72, n. 12, 83 S.Ct. at 706, 9 L.Ed.2d at 751.

. It is mentioned in the body of our dissent that Saleo failed to recognize or even mention the Schwinn prohibition on resale. To demonstrate that this restriction is now fully recognized in the later 10th Circuit case of World of Sleep v. Stearns & Foster Company, 525 F.2d 40 (1975) we quote:
“The Schwinn case played a dominant role in the trial of the instant case, and the trial judge attempted to tailor his instructions to fit the teaching of that case. In Schwinn, it was held that where a manufacturer, such as Stearns in the instant case, sells his product to a distributor, such as World of Sleep, and in connection with such sale ‘firmly and resolutely’ subjects the distributor to territorial restrictions upon resale, whether by ‘explicit agreement or silent combination or understanding with his vendee,’ a per se violation of the Sherman Act results.” Id. at 44.
******
“Schwinn also stands for the proposition that where a manufacturer does not sell his product to a dealer, but on the contrary retains title, dominion and risk with respect to the product, and the position of the dealer is akin to that of an agent or salesman of the manufacturer, a territorial limitation on such type of a dealer is violative of the Sherman Act only if the impact of such limitation is ‘unreasonably’ restrictive of competition. . . Id. at 45.

. After reviewing Schwinn and several other relevant authorities, the author states that
to dust off the old Boro Hall decision and add that the location clause was not rendered unlawful in United States v. General Motors Corp. thereby concluding that “the Schwinn decision does nothing to change pri- or law on the subject” is questionable at best.