384 U.S. 127 (1966), 46, United States v. General Motors Corp.

Docket Nº:No. 46
Citation:384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415
Party Name:United States v. General Motors Corp.
Case Date:April 28, 1966
Court:United States Supreme Court
 
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384 U.S. 127 (1966)

86 S.Ct. 1321, 16 L.Ed.2d 415

United States

v.

General Motors Corp.

No. 46

United States Supreme Court

April 28, 1966

Argued December 9, 1965

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF CALIFORNIA

Syllabus

This is a civil action to enjoin General Motors Corporation (GM) and three associations of Chevrolet dealers in the Los Angeles area from participating in an alleged conspiracy to restrain in violation of § 1 of the Sherman Act by eliminating sales of new Chevrolets through "discount houses" and "referral services." The District Court found, among other things, that the Losor Chevrolet Dealers Association, in the summer of 1960, complained to GM personnel about sales to discounters; that at a Losor meeting in November, 1960, member dealers agreed to embark on a letter-writing campaign to enlist GM's aid; that, in December and January, GM personnel talked to every dealer in the area and obtained promises not to deal with discounters; that representatives of the three dealer associations met on December 15, 1960, and created a joint investigating committee; that the associations then undertook to police the agreements so obtained by GM; that the associations supplied information to GM for use in bringing wayward dealers into line, and that the Chevrolet zone manager asked them to do so; that, as a result, a number of dealers were induced to repurchase cars they had sold to discounters, and agreed to refrain from making such sales in the future; and that, by spring, 1961, sales through discounters seem to have ended. However, the District Court found no conspiracy in violation of the Sherman Act, holding that each alleged conspirator acted to promote its own self-interest, and that, in seeking to vindicate these interests, the alleged conspirators entered into no "agreements" among themselves, although they may have engaged in "parallel action."

Held: this is a classic conspiracy in restraint of trade: joint, collaborative action by dealers, associations, and GM to eliminate a class of competitors by terminating dealings between them and a minority of Chevrolet dealers and to deprive franchised dealers of their freedom to deal through discounters if they so choose. Pp. 138-148.

(a) The District Court's conclusion that appellees' conduct did not amount to a conspiracy within the meaning of the Act was

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not the kind of factfinding shielded from review by the "clearly erroneous" test embodied in Rule 52(a) of the Federal Rules of Civil Procedure, since the question involved the application of a legal standard to undisputed facts, and since the bulk of the case was presented to the trial judge in the form of documents, depositions, and written statements. P. 141, n. 16.

(b) In determining whether there has been a conspiracy or combination under § 1 of the Sherman Act, it is of no consequence that each party acted in its own lawful interest or whether the franchise system is lawful or economically desirable. P. 142.

(c) Even if it were assumed that there had been no explicit agreement among the appellees and their alleged co-conspirators, such an agreement is not a necessary part of a Sherman Act conspiracy -- certainly not where, as here, joint and collaborative action was pervasive in the initiation, execution, and fulfillment of the plan. United States v. Parke, Davis & Co., 362 U.S. 29, 43. Pp. 142-143.

(d) The joint and interrelated activities of GM and the co-conspirators in obtaining the agreements not to deal with discounters and in policing such agreements cannot be described as "unilateral" or merely "parallel." Pp. 144-145.

(e) The elimination, by joint collaborative action, of businessmen from access to the market is a per se violation of the Act. Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207. Pp. 145-146.

(f) The economic motivation of those who, by concerted action, seek to keep others from trading in the market is irrelevant. Pp. 146-147.

(g) Inherent in the success of the combination in this case was a substantial restraint upon price competition, a goal unlawful per se when sought to be effected by combination or conspiracy. United States v. Parke, Davis & Co., supra. P. 147.

234 F.Supp. 85, reversed and remanded.

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FORTAS, J., lead opinion

MR. JUSTICE FORTAS delivered the opinion of the Court.

This is a civil action brought by the United States to enjoin the appellees from participating in an alleged conspiracy to restrain trade in violation of § 1 of the Sherman Act.1 The United States District Court for the Southern District of California concluded that the proof failed to establish the alleged violation, and entered judgment for the defendants. The case is here on direct appeal under § 2 of the Expediting Act, 32 Stat. 823, 15 U.S.C. § 29 (1964 ed.). We reverse.

I

The appellees are the General Motors Corporation, which manufactures, among other things, the Chevrolet line of cars and trucks, and three associations of Chevrolet dealers in and around Los Angeles, California.2 All of the Chevrolet dealers in the area belong to one or more of the appellee associations.

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Chevrolets are ordinarily distributed by dealers operating under a franchise from General Motors. The dealers purchase the cars from the manufacturer, and then retail them to the public. The relationship between manufacturer and dealer is incorporated in a comprehensive uniform Dealer Selling agreement. This agreement does not restrict or define those to whom the dealer may sell. Nor are there limitations as to the territory within which the dealer may sell. Compare White Motor Co. v. United States, 372 U.S. 253. The franchise agreement does, however, contain a clause (hereinafter referred to as the "location clause") which prohibits a dealer from moving to or establishing

a new or different location, branch sales office, branch service station, or place [86 S.Ct. 1323] of business including any used car lot or location without the prior written approval of Chevrolet.

Beginning in the late 1950's, "discount houses" engaged in retailing consumer goods in the Los Angeles area, and "referral services"3 began offering to sell new cars to the public at allegedly bargain prices. Their sources of supply were the franchised dealers. By 1960, a number of individual Chevrolet dealers, without authorization from General Motors, had developed working relationships with these establishments. A customer would enter one of these establishments and examine the literature and price lists for automobiles produced by several manufacturers. In some instances, floor models were available for inspection. Some of the establishments negotiated

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with the customer for a trade-in of his old car, and provided financing for his new car purchase.

The relationship with the franchised dealer took various forms. One arrangement was for the discounter to refer the customer to the dealer. The car would then be offered to him by the dealer at a price previously agreed upon between the dealer and the discounter. In 1960, a typical referral agreement concerning Chevrolets provided that the price to the customer was not to exceed $250 over the dealer's invoiced cost. For its part in supplying, the discounter received $50 per sale.

Another common arrangement was for the discounter itself to negotiate the sale, the dealer's role being to furnish the car and to transfer title to the customer at the direction of the discounter. One dealer furnished Chevrolets under such an arrangement, charging the discounter $85 over its invoiced cost, with the discounter getting the best price it could from its customer.

These were the principal forms of trading involved in this case, although, within each, there were variations,4 and there were schemes which fit neither pattern.5

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By 1960, these methods for retailing new cars had reached considerable dimensions. Of the 100,000 new Chevrolets sold in the Los Angeles area in that year, some 2,000 represented discount house or referral sales. One Chevrolet dealer attributed as much as 25% of its annual sales to participation in these arrangements, while another accounted for between 400 and 525 referral sales in a single year.

Approximately a dozen of the 85 Chevrolet dealers in the Los Angeles area were furnishing cars to discounters in [86 S.Ct. 1324] 1960. As the volume of these sales grew, the nonparticipating Chevrolet dealers located near one or more of the discount outlets6 began to feel the pinch. Dealers lost sales because potential customers received, or thought they would receive,7 a more attractive deal from a discounter

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who obtained its Chevrolets from a distant dealer. The discounters vigorously advertised Chevrolets for sale, with alluring statements as to price savings. The discounters also advertised that all Chevrolet dealers were obligated to honor the new car warranty and to provide the free services contemplated therein; and General Motors does indeed require Chevrolet dealers to service Chevrolet cars, wherever purchased, pursuant to the new car warranty and service agreement. Accordingly, nonparticipating dealers were increasingly called upon to service, without compensation, Chevrolets purchased through discounters. Perhaps what grated most was the demand that they "precondition" cars so purchased -- make the hopefully minor adjustments and do the body and paint work necessary to render a factory-fresh car both customer- and road-worthy.

On June 28, 1960 at a regular meeting of the appellee Losor Chevrolet Dealers Association, member dealers discussed the problem and resolved to bring it to the attention of the Chevrolet Division's Los...

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