Page:Calnetics Corp. v. Volkswagen of America, Inc. (532 F.2d 674).pdf/21

 effect of the ban with respect to competition for the sale of automobiles, and (4) the anticompetitive effect of the ban with respect to competition for the sale of automobile air conditioners.

A special word is in order insofar as the district court may, on remand, contemplate reimposition of a ban on importation by VW of Porsche automobiles equipped with factory-installed air conditioning. Porsche was not a party to the proceedings below. It is an independent German corporation unrelated by ownership to any party in these proceedings. Its only connection to VW is that VW imports the Porsche product—a luxury sports car—into the United States. Elementary fairness requires that Porsche be given a chance to be heard before its importation agreement with VW is, in effect, partially voided by judicial decree.

VW and Subsidiary urge that the 10-year ban on domestic manufacture and assembly of automobile air conditioners which the district court placed on VW was unsupported by any factual conclusions or analysis.

Calnetics does not directly counter this argument in its responsive brief and reply.

The district court stated that the ban was necessary in light of the “near vacuum [of demand, presumably] created by the acquisition * * *.” The ban was further justified as assisting in “the maintenance of a competitive market” and “stabiliz[ing] competition * * *” in the aftermath of divestiture. 353 F.Supp. at 1221.

The ban on internal expansion was intended as a supplement to divestiture relief—presumably aimed at “maintaining the divested company as a viable competitor in the marketplace without the aid of the protective practices of a parent who is its sole customer.” 353 F.Supp. at 1221. Because divestiture is not an available remedy, there is scant basis for imposition of a ban on internal expansion on remand. The district court should, if the issue arises, reconsider the advisability of a ban on internal expansion in light of alternative injunctive remedies and the unavailability of divestiture.

The district court permanently enjoined VW and its wholly owned distributors from satisfying more than 50% of their air-conditioning equipment needs from the output of the divested firm. While the propriety of this particular quota is moot because of the unavailability of divestiture, we deal with the arguments relating to the 50% quota in order to guide the district court should it consider imposing a similar permanent quota on remand.

The United States virtually concedes in its amicus brief that the perpetual purchase restriction was error. Calnetics seeks to defend the restriction as necessary to insure that VW will not continue to buy all of its requirements from the purchaser of the divested firm. Calnetics argues that the 50% quota creates an open market for the competitors of the divested firm.

The 50% quota, however, creates the antithesis of an open market. As the district court inadvertently acknowledged, the effect of the quota is to displace the competitive forces of the marketplace and transform a segment of the automobile air-conditioning equipment business into a regulated industry. See 353 F.Supp. at 1223 (“The Court must therefore fashion some flexible standard by which the business needs of a buyer can be compatible with the needs of the various possible suppliers in this market.”)). [sic] It is inconceivable that such a quota would serve the goals of the antitrust laws, which are designed to preserve competition, not particular competitors.

IV.&emsp;ATTORNEYS’ FEES and COSTS.

A.&emsp;Attorneys’ Fees.

The district court awarded Calnetics attorneys’ fees because it had acted “in