Atlantic Refining Company v. Federal Trade Commission Goodyear Tire Rubber Company v. Federal Trade Commission

Decision Date01 June 1965
Docket NumberNos. 292,296,s. 292
Citation381 U.S. 357,14 L.Ed.2d 443,85 S.Ct. 1498
PartiesThe ATLANTIC REFINING COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION. The GOODYEAR TIRE & RUBBER COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION
CourtU.S. Supreme Court

See 86 S.Ct. 18.

[Syllabus from pages 357-359 intentionally omitted] Frederic L. Ballard, Jr., Philadelphia, Pa., and John F. Sonnett, New York City, for petitioners.

Daniel M. Friedman, Washington, D.C., for respondent.

Mr. Justice CLARK delivered the opinion of the Court.

The Federal Trade Commission has found that an agreement between the Atlantic Refining Company (Atlantic) and the Goodyear Tire & Rubber Company (Goodyear), under which the former 'sponsors' the sale of the tires, batteries and accessory TBA products of the latter to its wholesale outlets and its retail service station dealers, is an unfair method of competition in violation of § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. § 45 (1964 ed.).1 Under the plan Atlantic sponsors the sale of Goodyear products to its wholesale and retail outlets on an overall commission basis. Goodyear is responsible for its sales and sells at its own price to Atlantic wholesalers and dealers for resale; it bears all of the cost of distribution through its warehouses, stores and other supply points and carries on a joint sales promotion program with Atlantic. The lat- ter, however, is primarily responsible for promoting the sale of Goodyear products to its dealers and assisting them in their resale; for this it receives a commission on all sales made to its wholesalers and dealers. The hearing examiner, with the approval of the Commission and the Court of Appeals, enjoined the use of direct methods of coercion on the part of Atlantic upon its dealers in the inauguration and promotion of the plan. Atlantic does not seek review of this phase of the case. However, the Commission considered the coercive practices to be symptomatic of a more fundamental restraint of trade and found the sales-commission plan illegal in itself as 'a classic example of the use of economic power in one market * * * to destroy competition in another market. * * *' 58 F.T.C. 309, 367. It prohibited Atlantic from participating in any such commission arrangement.2 Similarly, it forbade Goodyear from continuing the arrangement with Atlantic or any other oil company.3 Goodyear and Atlantic filed separate appeals. The Court of Appeals approved the findings of the Commission and affirmed its order. 'Ap- praising the broader aspects of the system (used by Atlantic and Goodyear) as a tying arrangement,' it agreed with the Commission that it injured 'competition in the distribution of TBA at the manufacturing, wholesale, and retail levels.' 331 F.2d 394, 402. We granted certiorari, 379 U.S. 943, because of the importance of the questions raised and especially in light of the holding of the Court of Appeals for the District of Columbia Circuit in Texaco, Inc. v. Federal Trade Comm'n, 118 U.S.App.D.C. 366, 336 F.2d 754, which is in apparent conflict with these cases. We affirm the judgments of the Court of Appeals.

I.

Since Atlantic has not sought review of paragraphs 5 and 6 of the Commission's order as to its use of overt acts of coercion on its wholesalers and retailers those portions of the order are final. We therefore do not set out in detail all of the facts which are so carefully examined in the opinion of the Court of Appeals.

Atlantic is a major producer, refiner and distributor of oil and its by-products. Its market is confined to portions of 17 States along the eastern seaboard.4 Its distribution system consists of wholesale distributors who purchase gasoline and lubricants in large quantities and retail service station operators who do business either as lessees of Atlantic or as contract dealers selling its products. In 1955 Atlantic had 2,493 lessee dealers, who purchased 39.1% of its gasoline sales, and 3,044 contract dealers, who bought 18.1%. 5 About half of the contract dealers were service station operators; the remainder were operators of garages, grocery stores and other outlets which sell gasoline but do not handle tires, batteries and accessories.

Goodyear is the largest manufacturer of rubber products in the United States with sales of over $1,000,000,000 in 1954. It distributes tires, tubes and accessories through 57 warehouses located throughout the country. It does not warehouse batteries; 'Goodyear' batteries are tradenamed by it but manufactured and directly distributed to Goodyear outlets by the Electric Auto-Lite Company and Gould-National Batteries, Inc. Goodyear also sells its products at wholesale and retail through about 500 company-owned stores and through numerous independent dealers. These independent franchised dealers number more than 12,000, there being among them a number of Atlantic wholesale petroleum distributors and retail petroleum jobbers. Goodyear has also had a substantial number of non-franchised dealers which includes most service station customers, including the Atlantic stations involved here.

Gasoline service stations are particularly well suited to sell tires, batteries and accessories. They constitute a large and important market for those products. Since at least 1932 Atlantic has been distributing such products to its dealers. In 1951 it inaugurated the sales-commission plan. 6 Its contract with Goodyear covered three regions: Philadelphia-New Jersey, New York State and New England.

The Goodyear-Atlantic agreement required Atlantic to assist Goodyear 'to the fullest practicable extent in perfecting sales, credit, and merchandising arrangements' with all of Atlantic's outlets. This included announcement to its dealers of its sponsorship of Goodyear products followed by a field representative's call to 'suggest * * * the maintenance of adequate stocks of merchandise' and 'maintenance of proper identification and advertising' of such merchandise.7 Atlantic was to instruct its salesmen to urge dealers to 'vigorously' represent Goodyear, and to 'cooperate with and assist' Goodyear in its 'efforts to promote and increase the sale' by Atlantic dealers of Goodyear products. And it was to 'maintain adequate dealer training programs in the sale of tires, batteries, and accessories.' In addition, the companies organized joint sales organization meetings at which plans were made for perfecting the sales plan. One project was a 'double teaming' solicitation of Atlantic outlets by representatives of both companies to convert them to Goodyear products. They were to call on the dealers together, take stock orders, furnish initial price lists and project future quotas of purchases of Goodyear products. Goodyear also required that each Atlantic dealer be assigned to a supply point maintained by it, such as a warehouse, Goodyear store, independent dealer or designated Atlantic distributor or retail dealer. Atlantic would not receive any commission on purchases made outside of an assigned supply point. Its commission of 10% on sales to Atlantic dealers and 7.5% on sales to its wholesalers was paid on the basis of a master sheet prepared by Goodyear and furnished Atlantic each month. This list was broken down so as to show the individual purchases of each dealer (except those whose supply points for Goodyear products were Atlantic wholesalers). Under this reporting technique, the Commission found, 'Atlantic may determine the exact amount of sponsored TBA purchased by each Atlantic outlet * * *.' 58 F.T.C. 309, 351. Goodyear also furnished, this time at the specific request of Atlantic, a list of the latter's recalcitrant dealers who refused to be identified with the 'Goodyear Program.' These lists Atlantic forwarded to its district offices for 'appropriate action.' On one occasion a list of 46 such dealers was furnished Atlantic officials by Goodyear. The Commission found that 'the entire group * * * was thereafter signed to Goodyear contracts and Goodyear advertising signs were installed at their stations.' Id., at 346—347.

The effectiveness of the program is evidenced by the results. Within seven months after the agreement Goodyear had signed up 96% and 98%, respectively, of Atlantic's dealers in two of the three areas assigned to it. In 1952 the sale of Goodyear products to Atlantic dealers was $4,175,890—40% higher than Atlantic's sales during the last year of its purchase-resale plan with Lee tires and Exide batteries. By 1955 these sales of Goodyear products amounted to $5,700,121. Total sales of Goodyear and Firestone products from June 1950 to June 1956 were over $52,000,000. This enormous increase, the findings indicate, was the result of the effective policing of the plan. The reports of sales by Goodyear to Atlantic enabled it to know exactly the amount of Goodyear products the great majority of its dealers were buying.

The Commission stressed the evidence showing that 'Atlantic dealers have been orally advised by sales officials of the oil company that their continued status as Atlantic dealers and lessees will be in jeopardy if they do not purchase sufficient quantities of sponsored' tires, batteries and accessories. Id., at 342. Indeed, some dealers lost their leases after being reported for not complying with the Goodyear sales program. But we need not detail this feature of the case since Atlantic has conceded the point by not perfecting an appeal thereon.

II.

Section 5 of the Federal Trade Commission Act declares '(u)nfair methods of competition in commerce, and unfair * * * acts or practices in commerce * * * unlawful.' In a broad delegation of power it employers the Commission, in the first instance, to determine whether a method of competition or the act or practice complained of is unfair. The Congress intentionally left development of the term 'unfair' to the Commission rather than attempting to define 'the many...

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