White Motor Company v. United States/Opinion of the Court

This is a civil suit under the antitrust laws that was decided below on a motion for summary judgment. Rule 56 of the Rules of Civil Procedure at the time of the hearing below permitted summary judgment to be entered 'if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' Since that time, an amendment to Rule 56, which is included in proposed changes submitted to Congress pursuant to 28 U.S.C. § 2072, would add the following requirement:

'When a motion for summary judgment is made and supported as     provided in this rule, an adverse party may not rest upon the      mere allegations or denials of his pleading, but his      response, by affidavits or as otherwise provided in this      rule, must set forth specific facts showing that there is a      genuine issue for trial. If he does not so respond, summary     judgment, if appropriate, shall be entered against him.'

But no such requirement was present when the present case was decided; and appellant, though strenuously opposing summary judgment and demanding a trial, submitted no such affidavits. It did, however, in its brief in opposition to the motion for summary judgment, make allegations concerning factual matters which the District Court thought were properly raised and which we think were relevant to a decision on the merits.

Appellant manufactures trucks and sells them (and parts) to distributors, to dealers, and to various large users. Both the distributors and dealers sell trucks (and parts) to users. Moreover, some distributors resell trucks (and parts) to dealers, selected with appellant's consent. All of the dealers sell trucks (and parts) only to users. The principal practices charged as violations of §§ 1 and 3 of the Sherman Act, 26 Stat. 209, 15 U.S.C. §§ 1, 3, concern limitations or restrictions on the territories within which distributors or dealers may sell and limitations or restrictions on the persons or classes of persons to whom they may sell. Typical of the territorial clause is the following:

'Distributor is hereby granted the exclusive right, except as     hereinafter provided, to sell during the life of this      agreement, in the territory described below, White and      Autocar trucks purchased from Company hereunder.

'STATE OF CALIFORNIA: Territory to consist of all of Sonoma     County, south of a line starting at the western boundary, or      Pacific Coast, passing through the City of Bodega, and      extending due east to the east boundary line of Sonoma      County, with the exception of the sale of fire truck chassis      to the State of California and all political subdivisions      thereof.

'Distributor agrees to develop the aforementioned territory     to the satisfaction of Company, and not to sell any trucks purchased hereunder except in accordance with      this agreement, and not to sell such trucks except to      individuals, firms, or corporations having a place of      business and/or purchasing headquarters in said territory.'

Typical of the customer clause is the following:

'Distributor further agrees not to sell nor to authorize his     dealers to sell such trucks to any Federal or State      government or any department or political subdivision      thereof, unless the right to do so is specifically granted by      Company in writing.'

These provisions, applicable to distributors and dealers alike, are claimed by appellee to be per se violations of the Sherman Act. The District Court adopted that view and granted summary judgment accordingly. 194 F.Supp. 562. We noted probable jurisdiction. 369 U.S. 858, 82 S.Ct. 946, 8 L.Ed.2d 17. See 15 U.S.C. § 29.

Appellant, in arguing for a trial of the case on the merits, made the following representations to the District Court: the territorial clauses are necessary in order for appellant to compete with those who make other competitory kinds of trucks; appellant could theoretically have its own retail outlets throughout the country and sell to users directly; that method, however, is not feasible as it entails a costly and extensive sales organization; the only feasible method is the distributor or dealer system; for that system to be effective against the existing competition of the larger companies, a distributor or dealer must make vigorous and intensive efforts in a restricted territory, and if he is to be held responsible for energetic performance, it is fair, reasonable, and necessary that appellant protect him against invasions of his territory by other distributors or dealers of appellant; that appellant in order to obtain maximum sales in a given area must insist that its distributors and dealers concentrate on trying to take sales away from other competing truck manufacturers rather than from each other. Appellant went on to say:

'The plain fact is, as we expect to be able to show to the     satisfaction of the Court at a trial of this case on the      merits, that the outlawing of exclusive distributorships and      dealerships in specified territories would reduce competition      in the sale of motor trucks and not foster such competition.'

As to the customer clauses, appellant represented to the District Court that one of their purposes was to assure appellant 'that 'national accounts,' 'fleet accounts' and Federal and State governments and departments and political subdivisions thereof, which are classes of customers with respect to which the defendant is in especially severe competition with the manufacturers of other makes of trucks and which are likely to have a continuing volume of orders to place, shall not be deprived of their appropriate discounts on their purchases of repair parts and accessories from any distributor or dealer, with the result of becoming discontented with The White Motor Company and the treatment they receive with reference to the prices of repair parts and accessories for White trucks.'

The agreements fixing prices of parts and accessories to these customers were, according to appellant, only an adjunct to the customer restriction clauses and amounted merely to an agreement to give these classes of customers their proper discounts. 'In a way this affects the prices which these classes of customers have to pay for such parts and accessories, but it affects, as a practical matter, only spare and repair parts and accessories and it affects only the discounts to be given to these particular classes of customers. The provisions are necessary if the defendant's future sales to 'National Accounts,' 'Fleet Accounts' and Federal and State governments and departments and political subdivisions thereof, in competition with other truck manufacturers, are not to be seriously jeopardized.'

'On principle, there is no reason whatsoever why a     manufacturer should not have one distributor who is limited      to selling to one class of customers and another distributor      who is limited to selling to another class of customers or      why a distributor should not be limited to one class of      customers and the manufacturer reserve the right to sell to      another class of customers. There are many circumstances     under which there could be no possible objection to limiting      the class of customers to which distributors or dealers      resell goods, and there are many reasons why it would be      reasonable and for the public interest that distributors or      dealers should be limited to reselling to certain classes of      customers.

'In the instant case, it is both reasonable and necessary     that the distributors (except for sales to approved dealers)      and direct dealers and dealers be limited to selling to the      purchasing public, in order that they may be compelled to      develop properly the full potential of sales of White trucks      in their respective territories, and to assure The White      Motor Company that the persons selling White trucks to the      purchasing public shall be fair and honest, to the end of      increasing and perpetuating sales of White trucks in      competition with other makes of trucks; and it is reasonable      and necessary that The White Motor Company reserve to itself      the exclusive right to sell White trucks to Federal and State      governments or any department or political subdivision      thereof rather than to sell such trucks to such governments      or departments or political subdivisions thereof through      distributors or dealers, and The White Motor Company should      have a perfect right so to do.

'Therefore, based both on the decisions of the Federal Courts     and on principle, the limitations on the classes of customers      to whom distributors or dealers may sell White trucks are not      only not illegal per se, as the plaintiff must prove to      succeed on its motion for summary judgment, but these      limitations have proper purposes and effects and are fair and      reasonable and not violative of the antitrust laws as being      in unreasonable restraint of competition or trade and      commerce.'

In this Court appellant defends the customer clauses on the ground that 'the only sure way to make certain that something really important is done right, is to do it for oneself. The size of the orders, the technicalities of bidding and delivery, and other factors all play a part in this decision.'

Summary judgments have a place in the antitrust field, as elsewhere, though, as we warned in Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458, they are not appropriate 'where motive and intent play leading roles.' Some of the law in this area is so well developed that where, as here, the gist of the case turns on documentary evidence, the rule at times can be divined without a trial.

Where the sale of an unpatented product is tied to a patented article, that is a per se violation since it is a bald effort to enlarge the monopoly of the patent beyond its terms. Mercoid Corp. v. Minneapolis Honeywell Regulator Co., 320 U.S. 680, 684, 64 S.Ct. 278, 280, 88 L.Ed. 396; International Salt Co. v. United States, 332 U.S. 392, 395-396, 68 S.Ct. 12, 14-15, 92 L.Ed. 20. And see Ethyl Gasoline Corp. v. United States, 309 U.S. 436. 60 S.Ct. 618, 84 L.Ed. 852. If competitors agree to divide markets, they run afoul of the antitrust laws. Timken Roller Bearing Co. v. United States, 341 U.S. 593, 71 S.Ct. 971, 95 L.Ed. 1199. Group boycotts are another example of a per se violation. Fashion Originators' Guild of America v. Federal Trade Comm., 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949; Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741. Price-fixing arrangements, both vertical (United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505; Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502) and horizontal (United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129; Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219), have also been held to be per se violations of the antitrust laws; and a trial to show their nature, extent, and degree is no longer necessary.

As already stated, there was price fixing here and that part of the injunction issued by the District Court is not now challenged. In any price-fixing case restrictive practices ancillary to the price-fixing scheme are also quite properly restrained. Such was United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024, where price fixing was 'an integral part of the whole distribution system' (Id., 720, 64 S.Ct. 812) including customer restrictions. No such finding was made in this case; and whether or not the facts would permit one we do not stop to inquire.

Appellant apparently maintained two types of price-fixing agreements. Under the first, a distributor was allowed to appoint dealers under him, but each distributor had to agree with appellant that he would charge the dealers the same price for trucks that appellant charged its direct dealers. The agreement affected only five percent of the trucks sold by appellant. And there were no price-fixing provisions pertaining to truck sales to ultimate purchasers. The other price-fixing arrangement required all distributors and dealers to give 'national accounts,' 'fleet accounts,' and governmental agencies the same discount on parts and accessories as White gave them. No figures are given, but it was assumed by the District Court that the amount of commerce involved under this agreement was relatively small. Without more detailed findings we therefore cannot say that the case is governed by United States v. Bausch & Lomb Optical Co., supra.

We are asked to extend the holding in Timken Roller Bearing Co. v. United States, supra (which banned horizontal arrangements among competitors to divide territory), to a vertical arrangement by one manufacturer restricting the territory of his distributors or dealers. We intimate no view one way or the other on the legality of such an arrangement, for we believe that the applicable rule of law should be designed after a trial.

This is the first case involving a territorial restriction in a vertical arrangement; and we know too little of the actual impact of both that restriction and the one respecting customers to reach a conclusion on the bare bones of the documentary evidence before us.

Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 62, 31 S.Ct. 502, 516, 55 L.Ed. 619, read into the Sherman Act the 'rule of reason.' That 'rule of reason' normally requires an ascertainment of the facts peculiar to the particular business. As stated in Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 244, 62 L.Ed. 683:

'Every agreement concerning trade, every regulation of trade,     restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is     such as merely regulates and perhaps thereby promotes      competition or whether it is such as may suppress or even      destroy competition. To determine that question the court     must ordinarily consider the facts peculiar to the business      to which the restraint is applied; its condition before and      after the restraint was imposed; the nature of the restraint      and its effect, actual or probable. The history of the     restraint, the evil believed to exist, the reason for      adopting the particular remedy, the purpose or end sought to      be attained, are all relevant facts. This is not because a     good intention will save an otherwise objectionable regulation or the      reverse; but because knowledge of intent may help the court      to interpret facts and to predict consequences.'

We recently reviewed per se violations of the antitrust laws in Northern Pac. R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545. That category of antitrust violations is made up of 'agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.' Id., p. 5, 78 S.Ct., p. 518. Tying arrangements or agreements by a party 'to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier' (Id., pp. 5-6, 78 S.Ct., p. 518) may fall in that category, though not necessarily so.

'They are unreasonable in and of themselves whenever a party     has sufficient economic power with respect to the tying      product to appreciably restrain free competition in the      market for the tied product and a 'not insubstantial' amount      of interstate commerce is affected. * *  * Of course where the      seller has no control or dominance over the tying product so      that it does not represent an effectual weapon to pressure      buyers into taking the tied item any restraint of trade      attributable to such tying arrangements would obviously be      insignificant at most. As a simple example, if one of a dozen     food stores in a community were to refuse to sell flour      unless the buyer also took sugar it would hardly tend to      restrain competition in sugar if its competitors were ready      and able to sell flour by itself.' Id., pp. 6-7, 78 S.Ct., p.      518.

We recently noted the importance of the nature of the tying arrangement in its factual setting:

'Thus, unless the tying device is employed by a small company     in an attempt to break into a market, cf. Harley-Davidson     Motor Co., 50 F.T.C. 1047, 1066, the use of a tying device      can rarely be harmonized with the strictures of the antitrust      laws, which are intended primarily to preserve and stimulate      competition.' Brown Shoe Co. v. United States, 370 U.S. 294,      330, 82 S.Ct. 1502, 1526, 8 L.Ed.2d 510.

Horizontal territorial limitations, like '(g)roup boycotts, or concerted refusals by traders to deal with other traders' (Klor's, Inc. v. Broadway-Hale Stores, Inc., supra, 212 of 359 U.S., 709 of 79 S.Ct.), are naked restraints of trade with no purpose except stifling of competition. A vertical territorial limitation may or may not have that purpose or effect. We do not know enough of the economic and business stuff out of which these arrangements emerge to be certain. They may be too dangerous to sanction or they may be allowable protections against aggressive competitors or the only practicable means a small company has for breaking into or staying in business (cf. Brown Shoe, supra, at 330 of 370 U.S., 82 S.Ct. at 1526, 1527; United States v. Jerrold Electronics Corp., D.C., 187 F.Supp. 545, 560-561, aff'd, 365 U.S. 567, 81 S.Ct. 755, 5 L.Ed.2d 806) and within the 'rule of reason.' We need to know more than we do about the actual impact of these arrangements on competition to decide whether thay have such a 'pernicious effect on competition and lack * *  * any redeeming virtue' (Northern Pac. R. Co. v. United States, supra, p. 5 of 356 U.S., 78 S.Ct. p. 518) and therefore should be classified as per se violations of the Sherman Act.

There is an analogy from the merger field that leads us to conclude that a trial should be had. A merger that would otherwise offend the antitrust laws because of a substantial lessening of competition has been given immunity where the acquired company was a failing one. See International Shoe Co. v. Federal Trade Commission, 280 U.S. 291, 302-303, 50 S.Ct. 89, 92-93, 74 L.Ed. 431. But in such a case, as in cases involving the question whether a particular merger will tend 'substantially to lessen competition' (Brown Shoe Co. v. United States, supra, pp. 328-329 of 370 U.S., 82 S.Ct. pp. 1525-1526), a trial rather than the use of the summary judgment is normally necessary. United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176.

We conclude that the summary judgment, apart from the price-fixing phase of the case, was improperly employed in this suit. Apart from price fixing, we do not intimate any view on the merits. We only hold that the legality of the territorial and customer limitations should be determined only after a trial.

Reversed.

Mr. Justice WHITE took no part in the consideration or decision of this case.