Town Sound & Custom Tops v. Chrysler Motor Corp.

• Decision Date: 03 July 1990
• Docket Number: Civ. A. No. 88-0083.
• Parties: TOWN SOUND AND CUSTOM TOPS, INC., Suburban Auto Sound & Communications, Inc., Northeast Electronics, Inc. and Dominion Radio Supply, Inc., on Behalf of Themselves and all others Similarly Situated v. CHRYSLER MOTOR CORP.
• Court: U.S. District Court — Eastern District of Pennsylvania

743 F. Supp. 353

TOWN SOUND AND CUSTOM TOPS, INC., Suburban Auto Sound & Communications, Inc., Northeast Electronics, Inc. and Dominion Radio Supply, Inc., on Behalf of Themselves and all others Similarly Situated v. CHRYSLER MOTOR CORP.

Civ. A. No. 88-0083.

United States District Court, E.D. Pennsylvania.

July 3, 1990.

Donald B. Lewis, Philadelphia, Pa., Dickstein Shapiro & Morin, Washington, D.C., for plaintiffs.

Arthur Makadon, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., Joseph Angland, Dewey Ballantine Bushby Palmer & Wood, New York City, pro hac vice, Gerald M. Rosberg, Dewey Ballantine Bushby Palmer & Wood, Washington, D.C., pro hac vice, Lewis H. Goldfarb, Chrysler Motors, Detroit, Mich., pro hac vice, for defendant.

MEMORANDUM AND ORDER

DuBOIS, District Judge.

Plaintiffs brought this proposed antitrust class action against the defendant, Chrysler Motors Corp. ("Chrysler"), asserting claims under Section 1 of the Sherman Act, 15 U.S.C. § 1¹, and Section 3 of the Clayton Act, 15 U.S.C. § 14². The Court has jurisdiction over the suit under 15 U.S.C. § 15 and 28 U.S.C. § 1337.

Plaintiffs allege that Chrysler has created an unlawful tying arrangement through its sale of car radios and cassette players—i.e. automotive sound equipment — as a standard feature on its vehicles. Plaintiffs seek to enjoin Chrysler from continuing to make such sales and to recover damages from Chrysler as a result of past sales.

Presently before the Court is Chrysler's Motion for Summary Judgment. For the reasons set forth below, the Court will grant the Motion.

I. BACKGROUND

Plaintiffs are four independent corporations which distribute and install automotive sound equipment. Plaintiffs sell automotive sound equipment to automobile dealers for installation either by the dealer or by the plaintiffs. Plaintiffs also sell automotive sound equipment directly to consumers through retail outlets operated by the plaintiffs and through distribution to independent retailers.

Defendant Chrysler is a corporation which manufactures and sells motor vehicles. Chrysler manufactures many of the components of its vehicles, including automotive sound equipment. Chrysler also purchases automotive sound equipment from independent suppliers. Chrysler sells its vehicles to consumers through a network of retail dealers located throughout the United States.

Chrysler does not dispute plaintiffs' allegations regarding Chrysler's sale of automotive sound equipment as a standard feature.³ Between 1983 and the present, Chrysler has steadily increased the number of its vehicles sold with automotive sound equipment as a standard feature. At present, Chrysler sells approximately 97 percent of its vehicles with automotive sound equipment as a standard feature. See Complaint ¶¶ 34-41

In their proposed class action, plaintiffs seek to represent all distributors and installers of automotive sound equipment who compete or have competed against Chrysler since January 1, 1984, for the sale and installation of automotive sound equipment in Chrysler vehicles. See Complaint ¶¶ 8-15.

II. STANDARD FOR SUMMARY JUDGMENT

The Federal Rules of Civil Procedure provide that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. Rule 56(c).

When a motion for summary judgment is made, the adverse party "may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. Rule 56(e). If the adverse party fails to set forth such material facts, summary judgment shall be entered against the party. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986); see also Equimark Comm. Fin. Co. v. C.I.T. Fin. Serv. Corp., 812 F.2d 141 (3rd Cir.1987).

Plaintiffs argue that summary judgment is inappropriate in complex antitrust suits. The Court disagrees. Although summary judgment should be used sparingly in complex antitrust suits, see Poller v. Columbia Broadcasting Systems, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962), it is appropriate in such suits where trial would merely result in delay and expense. See, e.g., A.I. Root Co. v. Computer/Dynamics, Inc., 615 F.Supp. 727 (N.D. Ohio 1985), aff'd 806 F.2d 673 (6th Cir. 1986); Harold Friedman, Inc. v. Kroger Co., 581 F.2d 1068, 1080 (3rd Cir.1978); Tripoli Co. v. Wella Corp., 425 F.2d 932, 935 (3rd Cir.1970), cert. denied, 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62 (1970) cited in Chuy v. Philadelphia Eagles, 407 F.Supp. 717, 721 (E.D.Pa.1976).

Furthermore, of the antitrust suits which have been summarily dismissed, several involve alleged tying violations. See, e.g., Robert's Waikiki U-Drive, Inc. v. Budget Rent-A-Car Systems, Inc., 491 F.Supp. 1199 (D.Hawaii 1980), aff'd 732 F.2d 1403 (9th Cir.1984); Tominaga v. Shepherd, 682 F.Supp. 1489 (C.D.Cal.1988); and Klo-zik Co. v. General Motors Corp., 677 F.Supp. 499 (E.D.Tex.1987).

III. DISCUSSION

A tying arrangement is defined as "an agreement by a party to sell one product the tying product but only on the condition that the buyer also purchases a different (or tied) product." Northern Pacific R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). The antitrust laws do not prohibit all tying arrangements. Only those tying arrangements which are anticompetitive in defined markets are unlawful. In order to determine whether a tying arrangement is unlawful, courts have relied on the per se rule and the rule of reason. See Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984) (5-4 majority reaffirmed use of both standards in tying cases). Under the per se rule, a tying arrangement is presumed unlawful — without inquiry into the effects in the market—if the seller has market power over the tying product. Absent a per se violation, a tying arrangement may be found unlawful under the rule of reason. The rule of reason requires proof of an actual unreasonable restraint of trade in the market for the tied product. Accordingly, in deciding the Motion for Summary Judgment, the Court will consider Chrysler's sales practice under each of these standards.

A. Per Se Rule

In order to establish a tying arrangement as per se unlawful, the plaintiff must prove the following three elements: (1) the tie links two separate products with distinct markets; (2) the tie affects a not insubstantial amount of interstate commerce; and (3) the seller has market power over the tying product. See generally Jefferson Parish 466 U.S. at 13-22, 104 S.Ct. at 1558-64; see also Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792 ("Grappone") (1st Cir.1988).

For purposes of this Motion, the parties agree that Chrysler is selling separate products in separate markets and that Chrysler's sale of automotive sound equipment affects a not insubstantial amount of interstate commerce. That leaves for determination the question whether there is any evidence that Chrysler has market power over the tying product. Chrysler contends that it has no such market power in any plausibly defined market, and the Court agrees.

1. The Tying Product Market

In order to determine whether Chrysler has market power over the tying product, it is essential to define the tying product market. See, e.g. Drs. Steuer & Latham, P.A. v. National Medical Enterprises 672 F.Supp. 1489 (D.S.C.1987). The product market has been defined in antitrust cases not involving tying arrangements as the "areas of effective competition" within which a seller operates. Standard Oil Co. of California v. United States, 337 U.S. 293, 299 n. 5, 69 S.Ct. 1051, 1055 n. 5, 93 L.Ed. 1371 (1949). Specifically, a product market is "composed of products that have reasonable interchangeability for the purposes for which they are produced — price, use and qualities considered." United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 1012, 100 L.Ed. 1264 (1956); Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962); see also SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056, 1063 (3d Cir.), cert. denied, 439 U.S. 838, 99 S.Ct. 123, 58 L.Ed.2d 134 (1978). These same principles of market definition have been relied on by courts when defining product markets for purposes of a tying analysis. See, e.g. Allen-Myland, Inc. v. IBM Corp., 693 F.Supp. 262 (E.D.Pa.1988) (court rejected plaintiffs' proposed tying product market limited to IBM's own product line); see also A.I. Root Co. v. Computer/Dynamics, Inc. 806 F.2d 673 (6th Cir.1986) (same); Will v. Comprehensive Accounting Corp. 776 F.2d 665 (7th Cir.1985) (same); Hudson's Bay Co. v. American Legend Cooperative 651 F.Supp. 819 (D.N.J.1986) (same).

Chrysler argues that the tying product market is all automobile manufacturers which compete with Chrysler for the sale of automobiles in the United States. In support of its market definition, Chrysler has provided the Court with uncontroverted affidavits demonstrating that Chrysler automobiles are reasonably interchangeable with, and compete against, the automobiles produced by other manufacturers. Chrysler's submissions on that issue are not directly addressed or contested by plaintiffs⁴ and may be summarized as follows:

First, consumers perceive Chrysler automobiles as reasonably interchangeable with other automobile makes. Market studies submitted by Chrysler state that prospective new buyers commonly compare Chrysler's...