PLYMOUTH DEALERS'ASS'N OF NO. CAL. v. United States

• Decision Date: 01 August 1960
• Docket Number: No. 16600.,16600.
• Citation: 279 F.2d 128
• Parties: PLYMOUTH DEALERS' ASSOCIATION OF NORTHERN CALIFORNIA, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

279 F.2d 128 (1960)

PLYMOUTH DEALERS' ASSOCIATION OF NORTHERN CALIFORNIA, Appellant, v. UNITED STATES of America, Appellee.

No. 16600.

United States Court of Appeals Ninth Circuit.

May 26, 1960.

Rehearing Denied August 1, 1960.

Harold C. Faulkner, Melvin, Faulkner, Sheehan & Wiseman, San Francisco, Cal., for appellant.

Robert A. Bicks, Acting Asst. Atty. Gen., Lyle L. Jones, Don H. Banks, Gilbert Pavlovsky, Luzerne E. Hufford, Jr., Attys., Dept. of Justice, San Francisco, Cal., for appellee.

Before POPE, BARNES and MERRILL, Circuit Judges.

BARNES, Circuit Judge.

Appellant Plymouth Dealers' Association of Northern California was charged in a one count indictment with violation of Title 15 U.S.C.A. § 1, a part of the Sherman Act.¹ Appellant was convicted by a jury, fined $5,000, and files a timely appeal. The court below had jurisdiction under Title 18 U.S.C. § 3231. This Court has jurisdiction of the appeal. Title 28 U.S.C. §§ 1291, 1294.

The indictment charged that the appellant and certain co-conspirators engaged in "a combination and conspiracy to stabilize the retail prices of Plymouth motor cars and accessories in the San Francisco Bay Area, in unreasonable restraint" of interstate commerce.

As described by appellant, "the paramount question before the Court is whether the charge above alleged in detail is sustained by the evidence in this case." Thus the first specification of error is insufficiency of the evidence as a matter of law to support the verdict.

There are two additional specifications of error. One alleged error is in instructing the jury,² and the other is the insufficiency of the evidence to establish interstate commerce. Appellant considers specifications of error one and two as one matter, as will we.

The first alleged error has been sharply defined by appellant's oral argument and brief. Appellant was charged with engaging in "a combination and conspiracy to stabilize prices." It is undisputed that appellant printed and published a price list and circulated it to its members. If such acts are sufficient to violate the law, says appellant, then this appeal has no merit. But, he argues, if this be insufficient, and if the trier of fact is to determine whether the conduct of appellant under all the circumstances existing in the case, constitutes a violation of the Sherman Act, then the jury was improperly instructed,³ and the judgment of conviction should be reversed.

Appellant urges that agreeing on a fixed uniform list price, and sending it out to a dealers' association's members cannot violate Section 1 of the Sherman Act, unless there is proof of something more — that it was adhered to; that it was utilized to fix prices; or that it did actually fix prices.

Inasmuch as automobiles are sold at their cost plus a retained gross profit, and the manufacturer's cost does not vary in the restricted market area involved, the gross profit is the only variable. If sold at the factory's suggested retail price, a 24% gross profit would result; if sold at the association's suggested retail price, a 33 1/3% gross profit would result. Thus the list price, argues appellant, was merely a device to permit the giving of larger allowances on tradeins, a "packing" that did not affect the price, and hence was no restraint of trade.

The difficulty with appellant's position is that the Supreme Court has ruled that certain acts constitute per se violation of the antitrust laws, and no explanation of why the act was done, nor what its effect might be in a particular case, is of any consequence or materiality.

This Court has reason to keep this rule of law in mind. Klor's Inc. v. Broadway-Hale Stores, Inc., 1959, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741. There the Court said:

"In the landmark case of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 31 S.Ct. 502, 55 L.Ed. 619, this court read § 1 to prohibit those classes of contracts or acts which the common law deemed to be undue restraints of trade and those which new times and economic conditions would make unreasonable. Id. 221 U.S. at pages 59-60 31 S.Ct. at pages 515-516. * * * The court recognized that there were some agreements whose validity depended on the surrounding circumstances. It emphasized, however, that there were classes of restraints which from their `nature or character\' were unduly restrictive, and hence forbidden by both common law and the statute. 221 U.S. at pages 58, 65 31 S.Ct. at page 515. As to these classes of restraints, the court noted, Congress had determined its own criteria of public harm and it was not for the courts to decide whether in an individual case injury had actually occurred. Id. 221 U.S. at pages 63-68 31 S. Ct. at pages XXX-XXX-XXX."

359 U.S. at page 211, 79 S.Ct. at pages 708-709 (Footnotes omitted.)

While there may be some question as to whether certain acts do or do not constitute per se violations, there can be no question but that fixing prices is one of the three⁴ most readily recognized and generally acknowledged per se violations of Section 1 of the Sherman Act.

The basis for the conclusive presumption rationale of the Standard Oil Co. case is clearly stated in United States v. Trenton Potteries, 1927, 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700.⁵ In a passage described as "often quoted" the Court said:

"It does not follow that agreements to fix or maintain prices are reasonable restraints and therefore permitted by the statute, merely because the prices themselves are reasonable. Reasonableness is not a concept of definite and unchanging content. Its meaning necessarily varies in the different fields of the law, because it is used as a convenient summary of the dominant considerations which control in the application of legal doctrines. Our view of what is a reasonable restraint of commerce is controlled by the recognized purpose of the Sherman Law itself. Whether this type of restraint is reasonable or not must be judged in part at least in the light of its effect on competition, for, whatever difference of opinion there may be among economists as to the social and economic desirability of an unrestrained competitive system, it cannot be doubted that the Sherman Law and the judicial decisions interpreting it are based upon the assumption that the public interest is best protected from the evils of monopoly and price control by the maintenance of competition. * * * "The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The reasonable price fixed today may through economic and business changes become the unreasonable price of to-morrow. Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be in themselves unreasonable or unlawful restraints, without the necessity of minute inquiry whether a particular price is reasonable or unreasonable as fixed and without placing on the government in enforcing the Sherman Law the burden of ascertaining from day to day whether it has become unreasonable through the mere variation of economic conditions. Moreover, in the absence of express legislation requiring it, we should hesitate to adopt a construction making the difference between legal and illegal conduct in the field of business relations depend upon so uncertain a test as whether prices are reasonable — a determination which can be satisfactorily made only after a complete survey of our economic organization and a choice between rival philosophies."

273 U.S. at pages 396-398, 47 S.Ct. at page 379.

Further, once the agreement to fix a price is made, it is conclusively presumed that a conspiracy to restrain trade exists, and it is "immaterial whether the agreements were ever actually carried out, whether the purpose of the conspiracy was accomplished in whole or in part, or whether an effort was made to carry the object of the conspiracy into effect." United States v. Trenton Potteries, supra, 273 U.S. at page 402, 47 S.Ct. at page 381.

When the term "fix prices" is used, that term is used in its larger sense. A combination or conspiracy formed for the purpose and with the effect of raising, depressing, fixing, pegging or stabilizing the price of a commodity in interstate commerce is unreasonable per se under the Sherman Act. Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 1951, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219; United States v. Socony-Vacuum Oil Co., 1940, 310 U.S. 150, 223, 60 S.Ct. 811, 84 L.Ed. 1129. The test is not what the actual effect is on prices, but whether such agreements interfere with "the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment." Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, supra, 340 U.S. at page 213, 71 S.Ct. at page 260. The competition between the Plymouth dealers and the fact that the dealers used the fixed uniform list price in most instances only as a starting point, is of no consequence. It was an agreed starting point; it had been agreed upon between competitors; it was in some instances in the record respected and followed;⁶ it had to do with, and had its effect upon, price.

The fact that there existed competition of other kinds between the various Plymouth dealers, or that they cut prices in bidding against each other, is irrelevant. This point is touched upon in the recent case of United States v. American Smelting and Refining Company, D.C.S.D.N.Y. 1960, 182 F.Supp. 834. CCH Trade Reg. Rep. ¶ 69,675.⁷

Nor does the fact that a plan entered into by competitors to control prices, and having an effect thereon, did not ultimately succeed in accomplishing what the parties anticipated, absolve them from their violation of the law.

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