United States v. Ford Motor Company, Civ. A. No. 21911.

• Decision Date: 07 July 1970
• Docket Number: Civ. A. No. 21911.
• Citation: 315 F. Supp. 372
• Parties: UNITED STATES of America, Plaintiff, v. FORD MOTOR COMPANY and The Electric Autolite Company, Defendants.
• Court: U.S. District Court — Western District of Michigan

315 F. Supp. 372

UNITED STATES of America, Plaintiff, v. FORD MOTOR COMPANY and The Electric Autolite Company, Defendants.

Civ. A. No. 21911.

United States District Court, E. D. Michigan, S. D.

July 7, 1970.

William H. McManus, Alan R. Malasky, Attys., Dept. of Justice, Washington, D. C., for the United States.

Wright Tisdale, Richard B. Darragh, Dearborn, Mich., Jerome G. Shapiro, L. Homer Surbeck, Hughes, Hubbard, Blair & Reed, New York City, George E. Brand, Jr., Butzel, Eaman, Long, Gust & Kennedy, Detroit, Mich., for Ford Motor Co.

A. Stewart Kerr, Sweeny, Dodd, Kerr, Wattles & Russell, Detroit, Mich., for the Electric Autolite Co. (Eltra Corp.)

Paul E. Gillmor, Tiffin, Ohio, amicus curiae, for Fostoria Community Industrial Association and UAW Local 533.

Fred R. Echelbarger, City Solicitor, amicus curiae, for City of Fostoria.

George A. Cooney, Jr., Detroit, Mich., amicus curiae, for City of Fostoria, Fostoria Community Industrial Association and UAW Local 533.

OPINION

FREEMAN, Chief Judge.

This is a proceeding to determine what relief should be entered in this antitrust case. In April 1961 Ford acquired, by purchase, certain assets of the Electric Autolite Company:¹ 1) a spark plug factory in Fostoria, Ohio; 2) a battery factory in Owosso, Michigan; and 3) the trade name "Autolite." Within a few days after the contract of purchase was executed, the Government requested information from Ford concerning the acquisition and in November 1961 this suit was filed. On June 10, 1968, this court held that the acquisition violated Section 7 of the Clayton Act in the spark plug and battery lines of commerce. 286 F.Supp. 407. During the next year the parties negotiated with each other in an unsuccessful attempt to agree on appropriate relief. Proposed orders of relief were then filed with the court, along with briefs. Beginning January 12, 1970, testimony was taken for nine days concerning the relief issue. Further briefs were submitted following the hearing and oral argument was heard on April 2, 1970.

I The Proposals

Basically, the Government requests complete divestiture of the assets acquired by Ford as well as a subsequently constructed battery plant in Shreveport, Louisiana. It is also proposed that Ford be prohibited from manufacturing spark plugs for ten years and that it be required to purchase a declining percentage of its spark plug needs from the operator of the divested spark plug factory (hereinafter referred to as "New Fostoria"), which spark plugs are to be labeled "Autolite."

On the other hand, Ford proposes that it be permitted to retain the facilities acquired from the Electric Autolite Company, together with the trade name "Autolite"; that Ford provide Eltra Corporation with certain machinery to increase its production capacity; and that Ford purchase 30,000,000 spark plugs per year from Eltra for ten years. In this way Ford proposes to raise Eltra's spark-plug-making capacity to about 56,000,000 plugs per year from the present production of 17,000,000 and at the same time provide Eltra with an outlet for the sale of these additional spark plugs. Finally, Ford would be enjoined from acquiring any other spark plug or battery plant for ten years and from construction in the United States of additional facilities for the manufacture of automotive batteries other than where its existing battery factories are located for five years.

It is difficult to conceive of proposals for relief that are farther apart and that share less common ground. It is in just this kind of situation where someone is most likely to be seriously injured. For this reason and because of the possibly very serious adverse consequences to the Fostoria community, which have been brought to the court's attention by counsel for Fostoria, appearing as amicus curiae, the court has proceeded most carefully and deliberately in determining what relief it will decree.

"Judges in prescribing remedies have known their own limitations. They do not ex officio have economic or political training. Their prophecies as to the economic future are not guided by unusually subtle judgment. They are not so representative as other branches of the government. The recommendations they receive from government prosecutors do not always reflect the over-all approach of even the executive branch of the government, sometimes not indeed the seasoned and fairly informed judgment of the head of the Department of Justice. Hearings in court do not usually give the remote judge as sound a feeling for the realities of a situation as other procedures do. Judicial decrees must be fitted into the framework of what a busy, and none too expert, court can supervise. Above all, no matter with what authority he is invested, with what facts and opinion he is supplied, a trial judge is only one man, and should move with caution and humility." United States v. United Shoe Machinery Corp., 110 F.Supp. 295, 347-348 (D.Mass.1953).

II Spark Plugs

While familiarity with the court's opinion on merits is assumed, it is appropriate to restate the two reasons why the acquisition was found to substantially lessen competition in the spark plug line of commerce. First, the court held that prior to entry into the spark plug market in 1961, Ford had a pervasive impact on the aftermarket in that it "moderated all of Champion's replacement-sales policies directly and, given the oligopolistic structure in which Champion was the keystone, must have touched those of the others derivatively." 286 F.Supp. at 437.

"An interested firm on the outside has a twofold significance. It may someday go in and set the stage for noticeable deconcentration. While it merely stays near the edge, it is a deterrent to current competitors. United States v. Penn-Olin Chemical Co., 378 U.S. 158, 84 S.Ct. 1710, 12 L.Ed.2d 775 * * * (1964). This was Ford uniquely, as both a prime candidate to manufacture and the major customer of the dominant member of the oligopoly. Given the chance that Autolite would have been doomed to oblivion by defendant's grass-roots entry, which also would have destroyed Ford's soothing influence over replacement prices, Ford may well have been more useful as a potential than it would have been as a real producer, regardless how it began fabrication." Id., at 441.

See FTC v. Procter & Gamble Co., 386 U.S. 568, 87 S.Ct. 1224, 18 L.Ed.2d 303, (1967), and United States v. El Paso Natural Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12 L.Ed.2d 12 (1964).

The second ground for finding a violation of Section 7 was the foreclosure of Ford as a purchaser of about ten per cent of total industry output. 286 F. Supp. at 441. Thus, companies presently making spark plugs and those who might desire to enter in the future are hurt by this reduction in their possible sales.

In short, Ford's entry into the spark plug market by means of the acquisition of the factory in Fostoria and the trade name "Autolite" had the effect of raising the barriers to entry into that market as well as removing one of the existing restraints upon the actions of those in the business of manufacturing spark plugs.

It will also be noted that the number of competitors in the spark plug manufacturing industry closely parallels the number of competitors in the automobile manufacturing industry and the barriers to entry into the auto industry are virtually insurmountable at present and will remain so for the foreseeable future. Ford's acquisition of the Autolite assets, particularly when viewed in the context of the original equipment (OE) tie and of GM's ownership of AC, has the result of transmitting the rigidity of the oligopolistic structure of the automobile industry to the spark plug industry, thus reducing the chances of future deconcentration of the spark plug market by forces at work within that market.

The relief granted must be designed to eradicate the tendencies of the acquisition to substantially lessen competition in the context of the present market and economic conditions. United States v. Continental Can Co., 378 U.S. 441, 461, 84 S.Ct. 1738, 12 L.Ed.2d 953 (1964); United States v. E. I. DuPont De Nemours & Co., 366 U.S. 316, 325-326, 81 S.Ct. 1243, 6 L.Ed.2d 318 (1961); and United States v. Crescent Amusement Co., 323 U.S. 173, 188, 65 S.Ct. 254, 89 L.Ed. 160 (1944).

"The protection of the public interest is the purpose of the statute and it is served when a violation of the statute has been found and the relief effectively pries open to competition a market that has been closed by defendant's illegal restraints." United States v. Aluminum Company of America, N.D.N.Y., April 27, 1966, CCH Trade Cases 1967, ¶ 71, 980.

To this end divestiture has been described as "the most important of antitrust remedies. It is simple, relatively easy to administer, and sure. It should always be in the forefront of a court's mind when a violation of § 7 has been found." United States v. E. I. DuPont De Nemours & Company, supra, 366 U. S. at pp. 330-331, 81 S.Ct. at pp. 1252-1253.

In its discussion of general considerations concerning "that most drastic, but most effective, of antitrust remedies" the Supreme Court, in DuPont, reiterated the criteria to be applied in determining the relief to be granted in an antitrust case:

"In United States v. American Tobacco Co., 221 U.S. 106, 185, 31 S.Ct. 632, 55 L.Ed. 663 (1911), we said:

`In considering the subject * * * three dominant influences must guide our action: 1. The duty of giving complete and efficacious effect to the prohibitions of the statute; 2, the accomplishing of this result with as little injury as possible to the interest of the general public; and, 3, a proper regard for the vast interests of private property which may have become vested in many persons as a result of the acquisition. * * *" Id., at 327-328, 81 S.Ct., at 1251.

The Court also stated:

"If the Court concludes that other measures will not be effective to redress a violation, and that

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