Court Opinion

ID: 9448462
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:36:41.944769+00
Date Added: 2024-06-11T17:31:26.599770
License: Public Domain

BURGER, Circuit Judge
(concurring in part and dissenting in part).
I cannot agree with the majority that because Nutrilite has exclusive dealing contracts with 80,000 sales people across the nation, many of them part time, that, there has been a foreclosure of competition in a substantial share of the line c-f commerce affected. Moreover I suggest that the conclusion of the majority represents a drastic and major extension of the *542force and effect of Sec. 3 of the Clayton Act beyond any prior decisions of the Supreme Court. We need not always await Supreme Court action but where the consequence of an extension or enlargement of a Supreme Court doctrine is so immediate and far reaching and so oppressive on an established mode of business I think we ought to let that Court speak first.
First, I find it oppressively arbitrary to carve out from the entire retail sales market of multi-vitamin and mineral food supplements that relatively minor sector constituted of door-to-door (or direct) sales, and to assess Nutrilite’s competitive impact on the total, relative to other companies, on the basis of a 1958 statistic that in the “direct sale market” it “controlled” 61.5% of the retail outlets, in the sense that 61.5% is roughly three-fifths of the persons who sold door-to-door. In the entire retail market for such nutritional supplements, that is all points or places where a consumer can readily buy them, including fixed outlets such as pharmacies, drug and department stores, food and supermarkets, industrial sales and variety stores, and by mail order, Nutrilite controls only 8.6% of the retail outlets. The Supreme Court has said that the “area of effective competition in the known line of commerce must be charted by careful selection of the market area in which the seller operates, and to which the purchaser can practically turn for supplies. * * * ” Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5 L. Ed.2d 580 (1961). (Emphasis added.) There is nothing to demonstrate that the consuming public cannot “practically turn for supplies” of this item to the fixed retail outlets which are readily available to all consumers, at least as easily as they can purchase from door-to-door salesmen. For this reason I am unable to see how the “line of commerce” affected by Nutrilite’s exclusive contracts with its salespeople can reasonably be limited to the door-to-door market. I would therefore evaluate the Nutrilite undertaking on the basis of its control of the total of all the readily available sources which is 8.6%, not 61.5% of the market affected.
However, in either case, I think the majority is incorrect in finding foreclosure of competition “in a substantial share of the line of commerce affected.” The peculiar and potentially universal attraction of the product here involved, considered together with the minimal investment or training necessary to market it, compels me to conclude that the Standard Oil and Dictograph eases relied on by the majority are not controlling. To enter the door-to-door distribution of these products one needs no more than time, a willingness to push doorbells and a pair of stout shoes.
In the Standard Oil case the Court dealt with a situation in which the retail outlets were gasoline stations which are very expensive to establish. The establishment of expensive additional outlets by potential competitors would have been economically infeasible in view of the natural limit on the consumer demand for the product in any particular area where the outlet was situated and immobile. Similarly, in the Dictograph case the retail marketing of hearing aids required the establishment and maintenance of costly retail outlets as well as a considerable degree of specialized salesman training in the art of accommodating individual customer needs, servicing facilities, etc. Moreover, the Dictograph consumer market was limited to only that sector of the public willing to acknowledge a hearing impairment. Additionally in both the Standard Oil and Dictograph cases the retailers under exclusive contract were presumably in the particular narrow line of commerce on a full time basis.
Comparing the characteristics of the Standard Oil and Dictograph type busi*543nesses with those of Nutrilite, marked distinctions at once emerge which in my view establish that there is no foreclosure of competition in a substantial share of the affected line of commerce. Nutrilite products, as I have suggested, can be sold, literally, by anyone who can walk, talk and carry a supply of merchandise after reading a sales manual. Indeed they can be distributed by the ubiquitous vending machine. The capital overhead for a person desiring to sell the product is so small as to be inconsequential. Inventory requirements are very limited. The business of selling can be and usually is carried on part time, day or night. And the measure of the market — the consuming public likely to buy Nutrilite or similar products — is determined by the latest census.
All these factors facilitate entry into the retail market by an almost unlimited number of door-to-door distributors, so that the fact that Nutrilite recently had 80,000 or more persons under exclusive contract is relatively meaningless. The potential door-to-door entrepreneurs include retired men and women, school teachers, housewives, college students, and “moonlighters” who want to earn extra money. This conclusion is strengthened if I am correct in believing that the relevant “line of commerce” includes, as it must in common sense, the numerous fixed retail outlets for these vitamin supplements which I have mentioned. I conclude therefore that Nutrilite’s operation is sufficiently different from those which have previously confronted the courts as to invalidate a determination, based on percentage of the current market, that its contracts “may * * * substantially lessen competition.” I would reverse the Commission on this point. As to the restrictive two year provision and Nutrilite’s use of the consent decree, I am in accord with the majority.