International Logistics Group, Ltd. v. Chrysler Corp.

• Decision Date: 02 November 1989
• Docket Number: No. 88-1610,88-1610
• Citation: 884 F.2d 904
• Parties: , 1989-2 Trade Cases 68,744 INTERNATIONAL LOGISTICS GROUP, LTD.; Aargus Truck and Automotive Supply, Inc.; Guardian Auto Supply, Inc., Plaintiffs-Appellants, v. CHRYSLER CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 904

884 F.2d 904

58 USLW 2187, 1989-2 Trade Cases 68,744

INTERNATIONAL LOGISTICS GROUP, LTD.; Aargus Truck and Automotive Supply, Inc.; Guardian Auto Supply, Inc., Plaintiffs-Appellants, v. CHRYSLER CORPORATION, Defendant-Appellee.

No. 88-1610.

United States Court of Appeals, Sixth Circuit.

Argued March 23, 1989.

Decided Sept. 7, 1989.

Rehearing and Rehearing En Banc Denied Nov. 2, 1989.

James R. Safley (argued), Stanford Robins, Susan Rester Miles, Robins, Kaplan, Miller & Ciresi, Minneapolis, Minn., G. Reynolds Sims, Eric R. Bryen, Sims & Kaplan, Farmington Hills, Mich., for plaintiffs-appellants.

Helen R. Haynes, Pepper, Hamilton & Scheetz, Richard A. Rossman, Pepper, Hamilton & Scheetz, Detroit, Mich., Laurence Z. Shiekman (argued), Philip H. Lebowitz, Pepper, Hamilton & Scheetz, Philadelphia, Pa., Paul R. Eichbauer, Highland Park, Mich., for defendant-appellee.

Before KRUPANSKY and WELLFORD, Circuit Judges, and PECK, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

Plaintiffs-appellants International Logistics Group, Ltd. (ILG), Aargus Truck and Automotive Supply, Inc. (Aargus), and Guardian Auto Supply, Inc. (Guardian) have appealed from the district court's order which granted defendant-appellee Chrysler Corporation's (Chrysler) motions for summary judgment and directed verdict, disposing of the plaintiffs' antitrust action against Chrysler. ILG, Aargus, and Guardian are owned and operated through stock ownership by Theodore Henke (Henke) and engaged in buying and reselling Chrysler manufactured and compatible automotive replacement parts for use in Chrysler manufactured vehicles.

This antitrust lawsuit charged Chrysler with an alleged conspiracy to restrain trade in violation of Sec. 1 of the Sherman Act (Count I) and with the attempted monopolization of the resale of Chrysler manufactured replacement automotive parts to Chrysler franchised dealers and to the government in violation of Sec. 2 of the Sherman Act (Count II). ¹

After identifying the relevant product aftermarket for replacement Chrysler automotive parts as a market supplied by Chrysler and some 2,400 other independent manufactures and/or suppliers of compatible Chrysler replacement parts, the trial court granted Chrysler's motion for partial summary judgment on the Sec. 2 Sherman Act claims (Count II) concluding that appellants failed to prove that Chrysler attempted to monopolize or monopolized the product market because Chrysler's share of the identified market was limited to 20%.

On February 4, 1988, the district court granted Chrysler's motion for a directed verdict at the close of the evidence on the remaining restraint of trade violations charged under Sec. 1 of the Sherman Act, asserting that appellants had failed to prove that Chrysler's policies imposed upon the resale of its replacement parts were designed to restrict the resale of its products, or to have an inter brand anticompetitive effect upon the resale of its replacement parts. On May 17, 1988, judgment was formally entered in favor of Chrysler on Count I. Appellants initiated the instant timely appeal.

Upon review of the appellant's assignments of error, the record in its entirety, the briefs of the parties, and the arguments of counsel, this court affirms the decision of the trial court for the reasons articulated here and in Judge DeMascio's opinion.

Appellants' characterization of Chrysler's marketing policies for its Power Master engines as per se violations of Secs. 1 and 2 of the Sherman Antitrust Act is misplaced. The record disclosed that the implemented marketing policies were "vertical" nonprice restraints imposed by Chrysler upon its distributors' marketing policies that were directed to competitors at different levels of competition. Although some minimal horizontal competitive effects may have resulted, the marketing policies concerning the Power Master engine were not directed toward or designed to impose restraints upon parties at the same competitive level even though Chrysler, the manufacturer, was also a distributor. Business Elec. Corp. v. Sharp Elec. Co., 485 U.S. 717, 108 S.Ct. 1515, 1522-23 & n. 4, 99 L.Ed.2d 808 (1988).

Appellants' arguments have been rejected by current legal pronouncements addressing the subject, including the Department of Justice, which has stated in its vertical restraint guidelines:

Some companies choose total vertical integration into distribution rather than reliance on contracts with independent distributors, and, in such cases, vertical integration may well be more efficient and lead to lower prices to consumers.

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Situations involving dual distribution have sometimes erroneously been characterized as horizontal, and subjected to a per se analysis, because the supplier also acts as dealer. However, the fact that a supplier also engages in distribution does not make a restraint "horizontal." Accordingly, vertical restraints involving dual distribution will be analyzed in the same manner as other vertical restraints.

Department of Justice, Vertical Restraint Guidelines, Sec. 2.2, 50 Fed.Reg. 6263, 6265 (1985) [hereinafter DOJ, Vertical Restraint Guidelines]. See also Ryko Mfg. Co. v. Eden Services, 823 F.2d 1215 (8th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988).

Accordingly, the vertical restraints imposed by Chrysler's marketing policies must be judged by the criteria of a "rule of reason" analysis rather than the rubic of "per se" illegality.

Integral to a "rule of reason" analysis is a review of the evolution of the controversial marketing policies.

Interparts, a division of Chrysler, marketed the Power Master engine exclusively for the international market. In an effort to remain competitive in this market, Interparts sold Power Master engines for export and internationally at unit prices which were substantially below the domestic unit price of the engine. During July through September of 1981 appellants Aargus and ILG purchased Power Master engines from Chrysler's Interparts division at overseas prices ostensibly for export and overseas resale. However, instead of exporting the engines appellants Aargus and ILG sold them to their sister corporation, appellant Guardian, a Henke corporation, which resold the engines to Chrysler dealers at prices substantially below Chrysler's prices to its domestic dealers.

Subsequent to Chrysler's numerous efforts to induce Henke and his corporations to conform with Chrysler's Power Master export program and to desist from reselling the discounted export units to Chrysler domestic dealers which Henke refused to do, Chrysler and Interparts cancelled all orders for Power Master engines from Henke-owned corporations.

Applying the "rule of reason" analysis to determine the existence of a Sec. 1 Sherman Antitrust violation, a plaintiff must prove (1) that the antitrust defendant contracted, combined, or conspired; (2) that the combination or conspiracy produced adverse anticompetitive effects (3) within relevant product and geographical markets; (4) that the objects of and conduct pursuant to that contract or conspiracy were illegal; and (5) that the plaintiff was injured as a proximate result of that conspiracy. See Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802, 805 (6th Cir.1988). In the instant case, appellants have failed to satisfy the first elements of the test and, accordingly, a directed verdict on the Sec. 1 Sherman Antitrust claim was appropriate.

To satisfy the imposed burden of proof, appellants were required to preponderate the evidence to support a conclusion that Chrysler did not act independently in formulating and implementing its Power Master marketing policies. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984); Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The record in the case at bar disclosed that the marketing policies which Chrysler attached to its Power Master engine were unilaterally formulated and uniformly implemented as to all distributors of Power Master engines with the proviso that Chrysler would reject all purchase orders from distributors who refused to comply with the marketing conditions. Current legal precedent supports the conclusion that a conspiracy may not evolve under circumstances where a dealer or distributor involuntarily complies to avoid termination of his product source.

Moreover, under the scenario of this case, there were no legal restraints against Chrysler's unilateral acts because Chrysler needed no acquiescence from its dealers or its distributors in formulating marketing conditions for its Power Master unit which is exclusively manufactured; consequently, no basis existed which attached credibility to a conclusion of conspiracy. There can be no conspiracy "where the actor imposing the alleged restraint does not ... need the acquiescence of the other party or any quid pro quo from him." 6 P. Areeda, Antitrust Law p 1402b4, at 16 (1986). ² Department of Justice guidelines addressing vertical restraints have approved the argument that it is inappropriate to consider intraband restraints as "agreements" to conspire and manufacturers are permitted to unilaterally impose appropriate restraints without giving rise to a cognizable antitrust violation:

[I]t is inappropriate to treat intraband agreements in the same manner that other horizontal agreements are treated. Such restraints can have no effect that could not also be obtained through the unilateral action of the manufacturer of the particular brands in question.

DOJ Vertical Restraint Guidelines Sec. 2.1, at 6265. The district court properly relied upon this principle, adopted in Barnosky Oils, Inc. v. Union Oil Co., 665 F.2d 74, 79-80 (6th Cir.1981) (where conspirator merely exercises its "unilateral power," no antitrust "concerted action" is possible even if defendant forced others to ...