Petition — Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc.

een

Office -Supreme Court, U.S.

fe OS Be

80-2080

JUN 1 1981

ALEXAN STEVA:

IN THE SUPREME COURT.

OF THE UNITED STATES

OCTOBER TERM, 1980

RON TONKIN GRAN TURISMO, INC.,

Petitioner,

Vv.

FIAT DISTRIBUTORS, INC., and

WAKEHOUSE MOTORS, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRICKER, ZAKOVICS & QUERIN, P.C.

1200 Wilcox Building

Portland, Oregon 97204

Telephone: (503) 226-1151

ROGER TILBURY

HAESSLER, TILBURY & PLATTEN

2626 First National Tower

Portland, Oregon 97201

Telephone: (503) 223-2626

Attorneys for Petitioner,

Ron Tonkin Gran Turismo, Inc.

May 28, 1981

ae

QUESTION PRESENTED

A prospective dealer, which has con-

cluded an agreement with a manufacturer

(subject only to formal approval at the

home office), moves into a new location

and signs a long term lease with the

blessing and strong encouragement of

the manufacturer. Just before 54 auto-

mobiles, which had been earmarked for

the dealer, are to be shipped, the

manufacturer yields to demands of an

already existing nonexclusive dealer by

granting the latter veto power over all

potential competition in a major metro-

politan center. That veto is then used

to exclude the new dealer.

Should the dealer be allowed to pre-

sent his proof to the fact-finder on the

theory that such conduct is: a violation

of the rule of reason as a restraint of

trade; and/or a concerted refusal to

deal and boycott, and thus a per se

- la -

violation of the Sherman Act?

Was the successful insistence by the

manufacturer that the prospective dealer

first surrender two lines of products

which compete with its own, before it

would ship its products, another form of

restraint of trade?

QUESTION PRESENTED ... +++ «

OPINIONS BELOW ...-c+ +--+ ee e

JURISDICTION .. + 6 © «© © © © © «@

STATUTE INVOLVED ... ++ «© © « e«

STATEMENT OF THE CASE ... «+. « «

Proceedings below . ....+.«-.

| MP Uay er ae ane ear ay Pe a ee oe ae

A manufacturer decides that

it and the public are in urgent

need of a second dealer in a

large metropolitan area because

the prices charged by its only

existing dealer are too high,

the sales volume too low and the

suburban location too remote.

Its only dealer was not ap-

pointed on an exclusive basis

and long knew that the manu-

facturer intended to appoint

additional dealers. The manu-

facturer contacts another dealer

in the area that has an out-

standing reputation and sales

ability, and successfully urges

such dealer to acquire a second

store under a long-term lease

and move its entire staff and

equipment to the new location.

The manufacturer also success-

fully demands that the dealer

i

o

uw > = = Ww WwW = @

ate t re

Surrender two other lines of

products which are competitive

with those of the manufacturer.

The new dealer gives the manu-

facturer its check for $32,493.

and 54 specific cars are set

aside for immediate shipment.

The new dealer is assured that

his appointment is a certainty

and his application is approved

by both zone and regional of-

fices. While awaiting formal

approval at the national head-

quarters of the manufacturer,

the existing dealer arrives

without an appointment and

pressures the manufacturer into

withholding the 54 cars and also

extracts a "veto" power over the

appointment of any new dealers

for an indefinite period. The

old dealer then exercises his

"yeto" to block the appointment

and the shipment of vehicles

already earmarked for the new

dealer.

REASONS FOR ALLOWING THE WRIT... . 10

A. INTRODUCTORY STATEMENT .. . 10

The petitioner should have

been given an opportunity to

present its proof that this

conduct is:

a violation of the rule of

reason as a restraint of trade;

and/or

- iii -

a concerted refusal to deal and

boycott, and thus a per se

violation of the Sherman Act.

It was error to grant summary

judgment.

B. The Court of Appeals’ decision

which approved the entry of

summary judgment under such

circumstances sharply conflicts

with the decisions of at least

three other courts of appeals. 11

C. The decision of the Court of

Appeals conflicts with this

Court's decisions in a number

of other respects ..... 18

CONCLUS ION = . ° ° 7 ° ° e ° e * . 2 2

This decision below strikes a

crippling blow at the indispens-

able first step under a free en-

terprise system and concerns an

issue of vital national import-

ance which should be decided by

this Court. et ae ax Be TA Vn 22

APPENDICES

Opinion of the 9th Circuit

Court of Appeals ee. ©: ee e../6 A-1

Order of United States District

Judge COO Br OP Ee. Gy RG Wes Fe A-54

Findings and Recommendations of

Magistrate Pe iw A A eh i ae A-55

-iv-

CITATIONS

CASES:

American Motor Inns, Inc. v.

Holiday Inns Inc., 521

F.2d 1530 (34 Caer eet ehs 6c e «4465 28

Associated Press v. U.S.,

U.S. (19 5) . . 7 7 . 7 7 19

Barry v. St. Paul Fire & Marine

Insurance Co., 555 F. 3

(Ist Cir 1977), aff'd sub nom

St. Paul Fire & Marine

Insurance Co. v. Barry,

438 U.S. 531 (1978) le RY hs et es 21

Cernuto, Inc. v. United Cabinet

Corp., Fr.

( Cie. 1979) 7 . a . * e oL5, 16, 17

Co rstone v. Griswold Sportin

eens Co., (E.D. Mich 1977),

- rade Cases 461,623... 20

corey v. Look, 641 F.2d 32,

s r. 1981) C17) AA eB . . . 21

Ford Motor Co. v. Webster's Auto

Bales, Inc., 361 F.2d 674

(lst r. 966) . . - . . - 7 7 19

Helix Milling Co. v. Terminal

Flour utits Co., 523 F.2d

1317 (9th Cir. 1975), cert.

den. 423 U.S. 1053 (1976). ... 19

International Salt Co. v. U.S.,

332 U.S. 392 (1947) . + . . 7 2. 19

Page

Klor's, Inc. v. Broadway-Hale

Stores, 359 U.S. 207 (1959) .. 20

Mannington Mills v. Congoleum

Industries, Inc., 610 F.2d 1059

(3rd Cars 1979) . + 7 . . . . o 17

Northern Pacific R Co. v. U.S.,

350,.0c8..2° (L958) « eirmte 8 0 4% 20

Poller v. Columbia Broadcasting

System, Inc., .

U.S. (1962) o . 7 . . ° 18

Quality Mercury: Inc. v. Ford

Motor Co., F.

(8th Cir. 1976), cert. den.

O90 Usb as eae «6's Oe ee (ébdy-L3, 14

Radiant Burners, Inc. v. Peoples

Gas Light & Coke Co.,

364 U.S. 656 (1961) .. . «18, 19, 20

Silver v. New York Stock Exchange,

STS. .UsWes. CSb. LeeOs 6. 6 woke #0: ec 20

U.S. v. General Motors,

U. * 66). 2k ie ee 18, 20

U.S. Vv. Griffith,

U.S. CPG) ceo 0 es 18

U.S. v. Topco Assoc.,

GUS: Demet eee Casiale.«. 0 008 8 15

Westman Commission Co. v. Hobart,

F.Supp 627.

(D. Colo. 1978) * a 7 . 7 = . . 19

MISCELLANEOUS

15 usc §1 ..

28 USC § 1254

28 USC §1291

28 USC §1331(a).

28 USC §1337 .

TEXTS:

vi -

L. Sullivan, Handbook of the Law

of Antitrust

9

) . ° 7 ° ° ° 21

11 Von Kalinowski, Antitrust Laws

& Trade Regulation TLeeels eié ec 21

RULES :

FRCP 5 6 — - . 7: °

NO.

IN THE SUPREME COURT

OF THE UNITED STATES

OCTOBER TERM, 1980

RON TONKIN GRAN TURISMO, INC.,

Petitioner,

Vv.

FIAT CISTRIBUTORS, INC., and

WAKEHOUSE MOTORS, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

oe en

Petitioner prays for a Writ of

Certiorari to review the judgment of the

United States Court of Appeals for the

Ninth Circuit filed March 2, 1981.

- 3-

OPINIONS BELOW

A copy of the opinion of the Dis-

trict Court for the District of Oregon

of December 4, 1978, granting summary

judgment to respondents, is attached as

Appendix B, infra, A-53; the earlier op-

inion by the Magistrate George Juba is

attached as Appendix C, infra, A-54.

The opinion of the Court of Appeals

for the Ninth Circuit of March 2, 1981,

affirming the judgment of the district

court is reported at 637 F.2d 1376. A

copy is attached as Appendix A, infra,

A-1.

JURISDICTION

The jurisdiction of this Court is in-

voked under 28 USC §1254(1). The juris-

diction of the Court of Appeals was based

upon 28 USC §1291, and that of district

court was based on 28 USC §§ 1331l(a) and

1337, and 15 USC §1.

- 4-

STATUTE INVOLVED

Section 1 of the Sherman Act, 15 USC

§l1, 26 Stat 209:

"Every contract, combination in the

form of trust or otherwise, or con-

spiracy, in restraint of trade or

commerce among the several States,

or with foreign nations, is declared

to be illegal."

STATEMENT OF THE CASE

Proceedings Below:

Petitioner (a Portland, Oregon, for-

eign car dealer) charges that respondents

(Fiat and Wakehouse [its only Portland

dealer]) collectively restrained trade

and engaged in a boycott by totally sup-

pressing all potential competition for

the sale of Fiat automobiles, parts,

service, and warranty work, in two of

Oregon's most populous counties.

Respondents’ motions for summary

judgment under Rule 56 FRCP were sustain-

ed by the district court which felt that

- 5 -

the facts described below did not consti-

tute a cause of action.

Petitioner appealed to the Court of

Appeals for the Ninth Circuit under 28

USC §1291. On March 2, 1981, the court

affirmed the district court.

Facts:

Portland, Oregon, is the only major

American city that has only one Fiat

dealer and no downtown Fiat dealer.

For 14 years, Fiat solicited petit-

ioner and tried to persuade him to become

its second Portland Fiat dealer. Petit-

ioner, the second Ferrari dealer on the

West Coast, and the first Honda automo-

bile dealer in the U.S., has a long, suc-

cessful history as a car dealer.

In 1972 Fiat and petitioner agreed

that petitioner would become Fiat's se-

cond Portland dealer. Just before the

agreement was to be finalized at Fiat's

highest level, petitioner lost his lease,

- 6 -

and the parties were unable to complete

the deal.

In October 1974 Fiat again solicited

petitioner to become its second Portland

dealer. Fiat's other Portland dealer, re-

spondent Wakehouse, was not an exclusive

dealer and was long aware that Fiat plan-

ned to appoint a competitor. Fiat had

decided that Wakehouse's prices were too

high, its sales volume too low, and its

suburban locations too remote. Petition-

er had for many years been one of Port-

land's highest volume car dealers, and

with Fiat's active encouragement found a

convenient downtown location with a long-

term lease.

The negotiations between Fiat and

petitioner became serious. Petitioner

completed its lengthy dealership applica-

tion; and with Fiat's knowledge and ap-

proval it signed the long-term lease,

moved its entire staff and equipment to

- 7 -

the downtown location, secured a $150,000

line of credit, and gave Fiat a $32,493

check. Meanwhile, petitioner selected

for sale and Fiat specially earmarked for

immediate shipment 54 new Fiats to be

sold by petitioner. After petitioner's

commitments were finalized, Fiat unilat-

erally determined that an additional

condition precedent would govern whether

petitioner could then’ sell Fiats--

petitioner had to relinquish its two

best selling lines, Honda and Saab.

Petitioner did so after being told by

respondent Fiat that if he did, it was

certain the franchise would be his.

Petitioner was then left with only

two very slow moving lines of automo-

biles: Alfa Romeo and Ferrari. Meanwhile,

it was committed to its new and now

too-large location, had given up its

best selling lines, and had more sales-

men and staff to pay than cars to sell.

- 8 -

After Fiat's Zone and Regional mana-

gers had approved the deal, and without

the knowledge of petitioner, Wakehouse

flew uninvited to Fiat's home office and

initiated discussions in which he expres-

sed strong disagreement with Fiat's deci-

sion to appoint petitioner as his compe-

titor, and requested that Fiat withhold

delivery of the 54 cars to petitioner.

Fiat finally capitulated to Wake-

house, but simultaneously represented to

petitioner that there would be only a

temporary “hold” on his dealership being

approved at the highest level. Fiat

later agreed to give Wakehouse a new

"veto" power which would permit him to

block any future appointment by Fiat of

1. Wakehouse at first testified that he

was unaware of fTonkin's impending

appointment until he reached Fiat's

New Jersey headquarters. However,

later he conceded this was a lie and

that he knew of the appointment be-

fore he left Oregon.

- 9 -

new dealers in the Portland area.

Wakehouse immediately used his "veto"

power to permanently block petitioner's

appointment, and Fiat went along with

Wakehouse's choice.

To reinforce its position, Wakehouse

then joined with all other Northwest area

Fiat dealers and demanded that Fiat re-

frain from appointing any new dealers in

that entire region until it was first de-

termined to their satisfaction the market

demand was not adequately met.

Petitioner later was appointed by

Fiat to sell Lancias, Fiat's second line

of automobiles. Wakehouse then exercis-

ed his "veto" power to block shipment of

the Lancias to petitioner. Fiat agreed,

and subsequently appointed Wakehouse as

an exclusive Lancia dealer for the Port-

land area.

Almost never in Fiat's history has a

dealer been approved by Zone and Regional

- 10 -

Managers and disapproved by Fiat head-

quarters.

Absent Fiat's agreement with and co-

operation in Wakehouse's attempt to

prevent plaintiff from becoming a Fiat

dealer, petitioner would today be in

healthy competition with Wakehouse.

REASONS FOR ALLOWING THE WRIT

A. Introductory statement.

The Ninth Circuit's holding strips

the antitrust laws of all meaningful

force.

If these facts do not constitute both

a restraint of trade and a collective

boycott, then the terms are little more

than vacuous phrases. It also gives a

green light to dealers, distributors, or

jobbers--regardless of size--to demand

successfully--with impunity--that no com-

petitors be appointed in their territory,

and that those who are appointed be

erased.

- 1] -

B. The Court of Appeals decision

conflicts with the decisions of other

Courts of Appeal.

The Ninth Circuit's sanction of Wake-

house's veto power has been strongly con-

demned as a restraint of trade by the

Eighth, Third, and First Circuits, as

well as by numerous district courts.”

This case has therefore created a con-

flict between the circuits.

Moreover, collective boycotts have

repeatedly been condemned as per se vio-

lations of the Sherman Act by this court.

As stated by Professor Lawrence Sull-

ivan of the University of California:

"(W]hen an existing dealer enlists the

manufacturer to choke off one of the

dealer's competitors, although the ‘a-

greement' which enables Section 1 to be

invoked is vertical, the restraint there-

by achieved is horizontal in its impact;

it is an attack by one dealer against

another."

L. Sullivan, Handbook of the Law of Anti-

trust at 429 (1977)

2. See discussion infra, pp 12 et seq.

- 12 -

In the vast majority of decisions, the

surrender by a manufacturer to its custo-

mers of the right to select their compe-

tition has been held to be a restraint

of trade. Virtually the only approved

exception is where the industry is a

dying industry, and there was no other

course open to save the customer's busi-

ness.

Fiat sales--unlike those of some dom-

estic models--are not moribund. On the

contrary, Fiat long recognized the need

for an additional dealer in the Portland

area. Wakehouse, which admitted that it

sought and: obtained Fiat's cooperation

in this endeavor, wanted to ensure a

permanent enclave. Indeed, as Wakehouse

put it, he wanted no competitors because

he knew "he had a good thing going."

Quality Mercury, Inc. v. Ford Motor

Co., 542 F.2d 466 (8th Cir 1976), cert.

den. 433 U.S. 914, (1976) held that where

Ford gave a Minneapolis Lincoln dealer

- 13 -

the discretion to determine whether any

new Lincoln dealerships should be permit-

ted in the city, the agreement between

Ford and the first dealer was a restraint

of trade in contravention of §1 of the

Sherman Act. Circuit Judge Lay observed :

"Quality's complaint alleges that

there was no valid business reason

for the denial of a new Lincoln deal-

ership in the Minneapolis area. We

find this absence, when combined with

the allegation that Prestige, a hori-

zontal competitor, could in its sole

discretion determine if the Minneapol-

is market was to be serviced by an-

other Lincoln dealership, renders

reasonable the inference of an anti-

competitive motive or effect.

“The unreasonable character of a-

greements allowing horizontal competi-

tors to exercise in effect a _ veto

power over a new franchise applica-

tion was considered in United States

v. Topco Assoc., Inc., 405 U.S. 596,

608 1872), and American Motor Inns

Inc. v. Holiday Inns, Inc. 521 F. 24

1230 (3d Cir. 1975). In the latter

case, AMI's application for a Holiday

Inn franchise at the Newark Airport

was rejected. In considering’ the

application, Holiday mailed written

notices of the application to the

three Holiday Inn franchises nearest

the airport site. These ‘radius let-

ters' were standard procedure in re-

viewing applications. The trial court

found that a negative response by an

existing franchisee was treated as a

o AQ es

veto over the application. On appeal

Judge Adams said:

‘By thus permitting its existing

franchisees to determine whether a

potential competitor would be al-

lowed to enter the Elizabeth-Newark

market, HI enabled its franchisees

already in the Elizabeth-Newark area

to divide that market between them-

selves, thus precluding further in-

trabrand competition. Such conduct

constitutes a horizontal market al-

location that is a violation of the

Sherman Act.'

* * *

", . + The purpose of the Sherman

Act is the elimination of restric-

tions on competition."

Quality Mercury, 542 F.2d at 470-72.

In American Motor Inns, Inc. v. Holi-

day Inns, Inc., supra, Judge Adams said:

"HI's action in denying AMI's appli-

cation, according to the trial court,

was not taken unilaterally, but rather

in concert with one or more of its li-

censees. If HI had acted independent-

ly in refusing AMI‘'s request, such

conduct might have been akin to the

vertical restraints in Schwinn. But

where, as here, the action in question

is ascertained by the finder of fact

to be joint or collaborative, it is

sufficient to constitute a '‘combina-

tion or conspiracy’ within the meaning

of the Sherman Act.”

American Motor Inns, 521 F.2d at 1243.

- 15 -

In U.S. v. Topco Assoc., 405 U.S. 596

(1972), a number of grocery chains

formed Topco and manufactured a line of

private-label grocery products that

member chains could then retail. Each

participating grocer was assigned a

territory in which it had the exclusive

. right to market ‘Topco’ label products.

When non-member grocers applied for per-

mission to market ‘Topco’ products, exis-

ting members with operations closest to

the applicant, or any other member within

100 miles of the applicant's stores, had

a right to object to the applicant's lic-

ensing for Topco Products. In discussing

‘Topco’ the Third Circuit said:

"The power of existing members to

lodge such an objection, the Supreme

Court said, operated as ‘a veto of

sorts’ over the approval of the appli-

cation. The Court held that these

features of the Topco plan constituted

a horizontal restraint of trade and

therefore a per se violation of sec-

tion 1 of the Sherman Act."

American Motor Inns, 521 F.2d at 1242.

In Cernuto, Inc, v. United Cabinet

- 16 =-

Corp, 595 F.2d 164 (3d Cir. 1979),

Cernuto, a discount retailer of kitchen

cabinets, acquired its cabinets’ from

manufacturer United Cabinet. United

subsequently ceased to supply cabinets,

three months after agreeing to do so.

Cernuto sued United charging that a com-

Plaint to United by one of Cernuto's

competitors had motivated United to ter-

minate its supply agreement. Summary

judgment for the defendants was reversed

on appeal by the Third Circuit, which

observed:

"When a marketing decision, although

ostensibly taken by a manuufacturer,

is in fact the result of pressure from

another customer, such a decision must

be scrutinized more closely than sole-

ly unilateral action might be. This

Court recently observed in a different

context:

‘Particularly where the refusal to

deal is not unilateral but rather is

prompted by an understanding with

“17 «

other parties, an antitrust viola-

tion may be found, either by appli-

cation of a per se rule or through

a “rule of reason" analysis.'

‘When a manufacturer acts on its

own, in pursuing its own market

strategy, it is seeking to compete

with other manufacturers by imposing

what may be defended as reasonable

vertical restraints. This wouid ap-

pear to be the rationale of the GTE

Sulvania decision. However, if the

action of a manufacturer or other

supplier is taken at the direction

of its customer, the restraint be-

comes primarily horizontal in nature

in that one customer is seeking to

suppress its competition by utiliz-

ing the power of a common supplier.

Therefore, although the termination

in such a situation is, itself, a

vertical restraint, the desired im-

pact is horizontal and on the deal-

er, not the manufacturer, level.'"

Cernuto, 595 F.2d at 167.

This same distinction was recognized

in Mannington Mills v. Congoleum Indus-

tries, Inc., 610 F.2d 1059, 1070 (3rd

Cir. 1979).

If Fiat had acted alone when it decid-

ed not to ship the 54 vehicles, the situ-

ation would be different. In this case,

however, Fiat had long recognized the

- 18 -

economic need of having a second Portland

dealer and would have formalized the a-

greement and shipped the vehicles but for

its succumbing to the pressure exerted by

Wakehouse. Under these circumstances,

the resulting restraint is primarily hor-

izontal. As stated in U.S. v. Griffith,

334 U.S. 100, 107 (1948):

"It is indeed ‘unreasonable, per se,

to foreclose competitors from any

substantial market.’ International

Salt Co. v. U.S., 332 U.S. 392, 396.

The anti-trust laws are as much vi-

Olated by the prevention of competi-

tion as by its destruction. U.S. v.

Aluminum Co. of America, supra.”

C. The decision of the Court of Ap-

peals conflicts with this Court's

decisions.

In a variety of contexts this Court

and others have struck down collabora-

tive actions which prevented competitors

from entering a given market. U.S. Vv

General Motors, 384 U.S. 127, 145 (1966);

Poller _v. Columbia Broadcasting System,

Inc., 368 US 464 (1962); Radiant Burners,

= 1§ «

Inc. v. Peoples Gas Light & Coke Co., 364

U.S. 656 (1961); U.S. v. Griffith, 334

U.S. 100, 107 (1948); International Salt

Co. v. U.S., 332 U.S. 392, 396 (1947);

Associated Press v. U.S., 326 U.S. 1

(1945); Helix Milling Co. v. Terminal

Flour Mills Co., 523 F.2d 1317, 1320 (9th

Cir. 1975), cert den 423 U.S, 1053 (1976)

Ford Motor Co. v. Webster's Auto Sales,

Inc., 361 F.2d 874 (lst Cir. 1966).

In Westman Commission Co. v. Hobart,

461 F.Supp 627 (D. Colo. 1978), a manu-

facturer was induced by one of its deal-

ers not to appoint the plaintiff as a

second dealer in the Denver area. In

holding that this stated a cause of

action under the Sherman Act, Judge Kane

said:

"This is not a case, as suggested by

defendant, of a manufacturer merely

choosing not to deal with a particular

distributor or trader. Rather it is a

case of a combination of a manufactur-

er and a competitor which is possessed

of the pernicious purpose to exclude a

competitor from the market by cutting

- 20 -

off its source of supply.">

Westman, 461 F.Supp. at 636.

The collaborative action of Wakehouse

and Fiat is also a clear collective boy-

cott, having serious horizontal effects.

As such it is illegal per se, whether

4 vertical,” or mixed.

horizontal,

It is not necessary that the boycott be

entered by a large group. Here the a-

greement of two persons or entities was

sufficient to stifle all competition. Two

or more will suffice, as the precedents

3. In accord: Co rstone v. Griswold

Sporting Goods oy (E.D. Mich 1977),

1377-2 Trade Cases 461,623

4. E.g., U.S. v. General Motors Corp.,

384 US 127 (1966); Silver v. New York

Stock Exchange, 373 U.S. 341 (1963);

Radiant Burners, Inc. v. Peoples Gas

Light & Coke Co., 364 U.S. Sse (1961);

Northern Pac R Co. v. U.S., 356 U.S. 1

(1958).

5. Klor's, Inc. v. Broadway-Hale Stores,

359 U.S. 207 (1959); see also Radiant

Burners, Inc. v. peoples Gas Light &

Co e Ons U.S. .

a 3 We

6 The inference to the

make clear.

contrary in the Ninth Circuit's decision

advances form over substance and has per-

mitted economic results that contravene

the wording and intent of the statute.

The recent case of Corey v. Look, 641

F.2d 32 (lst Cir. 1981) makes this clear.

In Corey, the court held that a steam-

ship authority (which operated a parking

lot) having enlisted the aid of a city in

blocking the plaintiff from securing a

rival parking lot in the same city, was

guilty of a “concerted refusal to deal

under the antitrust laws."’

6. Sullivan, Antitrust §91, 260; 11 Von

Kalinowski, Antitrust Laws & Trade

Regulation §76.01.

7. See also Barry v. St. Paul Fire &

Marine Insurance Co., 555 F.2d 3 (1st

r , a sub nom St. Paul

Fire & Mar “ Ins Co. v. Barry, 4398

US 531 (1978).

oe 99 e

CONCLUS ION

This case presents a question of nat-

ional importance which should be resolved

by this Court.

The Ninth Circuit's decision gives

businessmen a free hand to suppress and/

or eliminate their competitors. It seri-

ously weakens the Sherman Act in an area

of vital importance to the economy in

general. If competition is worth pre-

serving--and Congress through the Sherman

Act, we submit, has already made that

choice--then the law must be applied to

preclude a non-exclusive dealer from

pressuring a manufacturer into agreeing

that potential competition should be

throttled.

There is a sharp conflict in the cir-

cuits, as shown above. Moreover, the

Ninth Circuit's decision is at cross pur-

poses with decisions of this Court, and

contravenes holdings by other courts that

- 23 -

an illegal boycott having horizontal ef-

fects may arise from a vertical relation-

ship between two conspiring participants.

The petition for a writ of certiorari

should be granted.

Respectfully submitted,

BRICKER, ZAKOVICS & QUERIN

HAESSLER, STAMER & TILBURY

Se

a Lee

By R@ger T Ibur

Attorneys for ty¥tioner

A-1

APPENDIX

Opinion of the Court of Appeals

Decided March 2, 1981

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RON TONKIN GRAN TURISMO, INC.,

Plaintiff-Appellant,

FIAT DISTRIBUTORS, INC. and

)

)

)

)

Vv. )

WAKEHOUSE MOTORS, INC., )

)

)

Defendants~Appellees.

No.

79-4003

A-2

Before: VAN DUSEN*, KILKENNEY and HUG,

Circuit Judges

KILKENNY, Circuit Judge:

Appellant, on November 26, 1975,

brought this antitrust action against

Fiat Distributors, Inc. (FDI) and Wake-

house Motors, Inc. (Wakehouse) alleging

,» violations of Sherman Act §§ 1 and 2 and

Clayton Act §3. Appellant is a dealer in

foreign cars in Portland. FDI is the

United States distributor of Fiat automo-

biles and Wakehouse is the only Fiat

dealer in the Portland area. This

action was instituted after appellant's

* The Honorable Francis L. Van Dusen,

Senior United States Circuit Judge

for the Third Circuit, sitting by

designation.

1. Since 1972 Fiat has -had multiple

dealers in nearly all metropolitan

areas. In 1972 Fiat established out-

lets in Vancouver, Washington and

Gladstone, Oregon. These dealers

are, by appellant's estimation, 8.6

and 12.2 miles from Portland's core

area.

A-3

unsuccessful attempt to become the second

Fiat dealer in the Portland area.

The case was referred to a magistrate

who found that appellant's complaint in-

cluded the following claims:

(1) monopoly; (2) attempt to monopolize;

(3) conspiracy to monopolize; (4) tying

arrangements; (5) group refusal to deal;

and (6) price fixing. Both appellees

moved for summary judgment on all issues.

On January 25, 1978, the magistrate, in

his findings and recommendations, con-

cluded that both appellees were entitled

to summary judgment on all issues. Ap-

pellant filed objections to the magis-

trate's findings and recommendations and

the district court judge, after a de

novo review, entered an order on December

4, 1978, which affirmed the magistrate's

findings and recommendations and dismis-

sed the action. This appeal followed.

We affirm.

A-4

FACTUAL AND PROCEDURAL BACKGROUND

This controversy centers upon the re-

jection of appellant's application for a

Fiat dealership. After a period of pre-

liminary discussion and preparation, ~ a

Fiat franchise application was signed on

October 18, 1974. Appellant ordered cars

and parts and gave Fiat a check for

$32,493.95. The application clearly

states that no binding agreement was cre-

ated. The application, in order to be

final, required home office approval.

2. Appellant contends that during the

application process it was induced

by FDI "(1) to move its entire opera-

tion to a new location where it took

a long-term lease at $2500 per month

(including taxes), (2) to spend a

great deal of money in renovating

the new plant, and (3) to surrender

the two fastest moving lines of ve-

hicles (Honda and Saab), neither of

which could thereafter be recaptured,

relying upon Fiat's express assurance

that if it did all these things, the

Fiats would be delivered."

Appellant's Reply Brief at 4.

A-5

Appellant's check was returned on Novem-

ber 25, 1974. The application was not

approved.

Appellant contends that the dealer-

ship arrangement would have been consum-

mated but for the intervention of Wake-

house.» After learning of appellant's

impending appointment, a representative

3. Appellant also contends that the

alleged agreement to exclude it from

the market extended beyond the simple

vertical arrangement between FDI and

Wakehouse. The agreement to block

the appointment of additional dealers

allegedly included members of the

Northwest Fiat Dealers Association.

On May 21, 1975, members of the as-

sociation sent a mailgram to FDI

which expressed grave concern as to

the appointment of additional dealers

and requested an indication of FDI's

intent with respect to areas in which

sales were lagging (Portland was one

of these areas). This mailgramn,

which seems to be the only shred of

evidence of involvement of any other

dealers, allegedly supports the claim

that there existed a wide horizontal

conspiracy to bring about a horizon-

tal division of the market or at

least the elimination of appellant

as a prospective competitor.

A-6

of Wakehouse made a trip to Fiat's na-

tional headquarters on October 21, 1974,

Appellant characterizes this visit as an

attempt on the part of Wakehouse to pro-

tect its position as the sole Fiat deal-

* er in the Portland area, and asserts that

Wakehouse’ prevailed upon Fiat to reject

the application for a new dealer. These

facts allegedly support the existence of

an agreement between FDI and Wakehouse

to exclude a competitor of Wakehouse, and

appellant maintains that this arrangement

constitutes a per se violation of the

antitrust laws.

Appellant maintains that the result

of Wakehouse's exercise of “veto" power

over the appointment of a new dealer has

not been good “for Fiat, for customers,

for competition in general, and certainly

not for Ron Tonkin Gran Turismo.” The

negative impact on competition is premis-

ed upon appellant's assertion that Wake-

A-7

house has a monopoly in the relevant pro-

duct and geographic market. The relevant

market is defined as Fiat cars, parts,

service and warranty work in the Portland

area. Appellant's definition of the

relevant market is based on its unsub-

stantiated belief that for a sizeable

number of customers only a Fiat will do.

Because Fiats, in appellant's opinion,

constitute a separate market, Wakehouse's

position as the sole dealer in the Port-

land area allows it an unrestrained power

to exact exorbitant profits in its sales

of Fiat cars, parts, service and warranty

work. Appellant continually claims that,

as a result of this alleged monopoly pos-

ition, Wakehouse's profit margins have

been excessively high

FDI contends that this litigation "is

a bold attempt by an auto dealer to mus-

cle his way into Piat's dealer organiza-

tion through abusive and meritless

A-8

1 cigation.” The evidence, in FDI's view,

indicates that FDI, at the request of a

local dealer with unsatisfactory sales,

refrained from deciding whether to ap-

point an additional dealer while the

existing dealer attempted to increase

sales. FDI explains that it gave Wake-

house two 90-day probationary periode,

ending in June, 1975, in which to in-

crease sales. The possibility of an

additional dealer was used to stimulate

Wakehouse to improve its sales efforts.

Wakehouse reached the targets FDI had set

and the question of appointing appellant

was dropped. FDI contends that this con-

duct by a small distributor at the behest

of a single dealer in a market dominated

by competitive brands does not violate

Section 1, and that it was entitled to

summary judgment.

It is clear that FDI has a different

conception of the relevant market. FDI

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maintains that the market is much broad-

er than simply Fiat cars. FDI asserts

that there are many competing types of

automobiles. In fact, appellant acknow-

ledges this on many occasions. FDI as-

serts that foreign cars constitute the

principal competition. Fiat's share of

the foreign car market in Portland was

between 2.48%-3.51% from 1972-1974 and

it rose to 5.2% in 1975. Its percentage

of total car registration varied from

-61%-1.87%.

In the court of the Fiat dealership

application process, Fiat allegedly in-

sisted that appellant divest itself of

two competing lines of automobiles (Honda

and Saab) before the franchise would be

granted. Appellant maintains that it

"did so relying upon Fiat's assurance

that the franchise would follow as a mat-

ter of course, but thereafter, Fiat ac-

ceded to the importuning of Wakehouse,

A-10

and declined to ship the cars and to

formally issue the Fiat franchise as it

had promised. This .. . is a violation

of Section 1 of the Sherman Act and Sec-

tion 3 of the Clayton Act because it is a

tying arrangement and therefore a per se

violation, and/or an offer of an exclus-

ive dealing arrangement on the condition

that Tonkin not use or deal in the goods

and merchandise of a competitor of Fiat,

and therefore, violates the rule of rea-

son. In either event (either as a tying

arrangement or an exclusive dealing ar-

rangement) the Sherman and Clayton Acts

have been transgressed." Appellant's

brief at 5-6.

FDI's response to this argument is

simply stated: "The baselessness of this

litigation is illustrated by GT's charge

that Fiat imposed upon it an unlawful

‘tying' or exclusive dealing arrangement,

based on a statement of a Fiat represent-

A-11

ative that he did not want Hondas and

Saabs to be sold from the same location

as Fiats." Aside from the legal obsta-

cles to appellant's assertion of a color-

able claim of an illegal tying or exclus-

ive dealing arrangement FDI notes several

factual problems: (1) appellant could

never secure permission from Honda or

Saab to sell their cars from Tonkin's SW

Morrison Street store (the location of

the prospective Fiat dealership); (2) ap-

pellant did not “surrender” Honda, but

transferred it to his Chevrolet agency;

and (3) the Saab franchise was terminated

because the distributor was understandab-

ly upset over appellant's miserable sales

per formance.

The magistrate's findings and recom-

mendations, later adopted by the district

judge after a de novo review, show that

appellant had raised many factual issues,

but concluded that they were immaterial,

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i.e, they could not prevent the appellees

from prevailing at trial. Summary judg-

ment was granted with respect to the

Sherman Act §2 counts and the propriety

of this ruling has not been questioned on

appeal. Some of the magistrate's observ-

ations with respect to those counts are,

however, relevant to the issues at hand.

The magistrate concluded that

"The relevant-product market is not

Fiats; it is cars in general. The

automobile market has always shown

high cross-elasticity of demand.

There is nothing so special about a

Fiat that a prospective purshaser

will refuse to buy a Datsun or Chev-

ette, no matter what the price of a

Fiat. Other courts have considered

and rejected allegations similar to

Tonkin's with respect to Cadillac,

Mogul v. General Motors Corp., 391

F.Supp. 1305 (E.D. Pa. 1975) aff'd.,

527 F.2d 645 (3d Cir. 1976), and

Dodge, Mt. Lebanon Motors, Inc. v.

Chrysler Corp., 263 F.Supp. 453, 461

(W.D. Pa. te68), aff'd., 417 F.2d

622 (34 Cir. 1969). Plaintiff

should not be allowed to go to trial

on its unsupported allegation that,

for ‘a sizeable number of customers

- « « foJnly a Fiat, or a Lancia,

will do.'"

A-13

The magistrate also rejected the Section

2 claims with respect to the “sub-mar-

kets", @.9., parts, largely because of

the conclusion that it would be inappro-

priate to fragment the case. Concluding

that it was the rejection of the applica-

tion for the car dealership that was

fundamentally at issue, the magistrate

refused to give extended consideration

to the so-called "“sub-markets.” The

parts claim, and presumably service and

warranty work as well, was considered to

be so intertwined with the sale of Fiat

cars that the court treated them as a

unit.

The magistrate also granted summary

judgment with respect to appellant's ty-

ing arrangement allegation. The magis-

trate cited a number of factors which

led him to conclude that appellant's al-

legation that FDI demanded that it divest

itself of its Honda and Saab dealership

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did not remotely suggest the existence of

a tying arrangement. Most simply, the

magistrate concluded that "Plaintiff sim-

ply fails to show the existence of two

separate products.”

Furthermore, the magistrate granted

summary judgment with respect to appel-

lant's refusal to deal or group boycott

claim. After drawing all inferences in

favor of appellant, the magistrate con-

cluded that FDI and Wakehouse had an a-

greement to maintain an exclusive distri-

butorship arrangement in the Portland

market. He found

"The exclusive Wakehouse dealership

excludes other Portland dealers,

including plaintiff, only from the

Fiat market, not from the automobile

market. They may freely deal in many

brands which compete with Fiat and

are substantially equivalent. Plain-

tiff's case citations concern only

situations in which large numbers of

dealers and distributors agreed to

exclude selected dealers or in which

a plaintiff was entirely excluded

from a relevant market .. .The ar-

rangement between Fiat and Wakehouse

is a proper exclusive dealership

A-15

under the antitrust laws. Wakehouse

has no power over Fiat's licensing

of other distributors other’ than

ordinary business’ leverage. Fiat

will change to another dealer or

dealers when its economic interests,

as it perceives them, so require."

Before proceeding to a discussion of

the legal issues which are raised on

appeal, it is important to emphasize one

issue that is not involved. This is

clearly not a contract action. Although

appellant, on occasion, has maintained

that FDI breached an existing contract,

we note that this is simply an antitrust

action. In fact, in a state court

action arising out of the same set of

facts the Court of Appeals of Oregon has

stated "there was no existing contract

between plaintiff and Fiat but only the

prospect of one." Ron Tonkin Gran Turis-

mo, Inc. v. Wakehouse Motors, Inc., 46

Or. App. 199, 210, 611 P.2d 658, 664

(1980) (footnote omitted), petition for

review denied, 289 Or. 373 (1980). The

A-16

court mentioned in a_ footnote’ that

"Plaintiff claims there was an existing

contract but the trial court ruled a-

gainst plaintiff on this point and

plaintiff does not appeal from this

portion of the court's ruling.” Id. 46

Or. App. at 210, n. 6, 611 P.2d at 664,

n. 6. It is clear, therefore, that we

are simply dealing with FDI's rejection

of appellant's application to become an

additional dealer in the Portland area.

ISSUES

A. Whether the grant of summary

judgment with respect to the group

boycott or refusal to deal claim was

inappropriate because of the existence

of a genuine issue of material fact.

B. Whether the grant of summary

judgment with respect to the tying or

exclusive dealing arrangement was inap-

propriate because of the existence of a

genuine issue of material fact.

A-17

DISCUSSION

A. SUMMARY JUDGMENT

FRCivP 56(c) states, in relevant

part, that "The judgment sought shall be

rendered forthwith if the pleadings, dep-

ositions, answers to interrogatories, and

admissions on file, together with the af-

fidavits, 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.” It is

settled law that

"The burden is upon the party seek-

ing the judgment to demonstrate the

absence of any material fact and

that the moving party is entitled to

judgment as a matter of law. ... In

our examination of the record, we are

required to draw all inferences in

the light most favorable to the party

opposing the motion... ." Blair

Foods, Inc. v. Ranchers Cotton O11

F. A

(Citation Omitted).

This circuit has often noted that

summary judgment is not particularly fav-

ored in antitrust litigation. E.g.,

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ia.‘

It is clear, however, that this

general reluctance does not preclude the

use of summary judgment in antitrust lit-

igation. See Aladdin Oil Co. v. Texaco,

Inc., 603 F.2d 1107, 1111 (CAS 1979).

The mere existence of an anti-trust claim

in a complaint does not render that com-

plaint immune from Rule 56. In the ab-

sence of “any significant probative evi-

dence tending to support the complaint",

4. The Supreme Court has said that

"We believe that summary procedures

should be used sparingly in complex

antitrust litigation where motive and

intent play leading roles, the proof

is largely in the hands of the alleg-

ed conspirators, and hostile witnes-

es thicken the plot. It is only when

the witnesses are present and subject

to cross-examination that their cred-

ibility and the weight to be given

their testimony can be appraised.

Trial by affidavit is no substitute

for trial by jury which so long has

been the hallmark of ‘even handed

justice.'" Poller v. Columbia Broad-

casting System, Inc., 368 U.S. 464,

473 op ee 466, 491, 7 L.Ed.2d

’

458 (1962). (Footnote omitted).

A-19

First National Bank of Arizona v. Cities

Service Co., 391 U.S. 253, 290, 88 S.Ct.

1575, 1593, 20L.Ed.2d 569, rehearing

denied, 393 U.S. 901, 89 S.Ct. 63, 21

L.Ed.2d 188 (1968), summary judgment is

appropriate.

"Indeed, the very nature of antitrust

litigation would encourage summary

disposition of such cases when per-

missible, Not only do antitrust

trials often encompass a great deal

of expensive and time consuming dis-

covery and trial work, but also, ..

- «, the statutory private antitrust

remedy of treble damages affords a

special temptation for the institu-

tion of vexatious litigation." Lupia

v. Stella D'Oro Biscuit Co., Inc.,

, cert

: A

denied, 440 U.S. 982, [99 S.Ct.

T791, 60 L.Ed.2d 242) (1979). CE.

mii-Hawati Inc. v. First Commerce

nancia Orp., ° A

In order to withstand a motion for

summary judgment it is simply not enough

to refer to disputed factual issues.

The factual issues must be material. "A

material issue is one which may affect

the outcome of the litigation." Mutual

A-20

Fund Investors, Inc. v. Putnam Manage-

ment Company, Inc., 553 F.2d 620, 624

(CA9 1977). As this court has said

"'The showing of a “genuine issue for

trial” is predicated upon the existence

of a legal theory which remains viable

under the asserted version of the facts,

and which would entitle the: party

opposing the motion (assuming his

version to be true) to a judgment as a

matter of law.'"

Bushie v. Stenocord Corporation, 460 F.2d

116, 119 (CA9 1972). :

B. GROUP BOYCOTT OR CONCERTED REFUSAL

TO DEAL.

[1] Section 1 of the Sherman Act

proscribed "Every contract, combination

* e e« OF conspiracy, in restraint of

trade.” 15 U.S.C. § 1. In order for a

restraint to run afoul of the antitrust

laws, however, it must be “unreasonable.”

Certain conduct has been held to be un-

A-21

reasonable per se, i.e., once a court has

identified such conduct it is foreclosed

from undertaking an inquiry into its rea-

sonableness. Per se treatment is war-

ranted, in certain areas because "there

are certain 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 with-

out elaborate inquiry as to the precise

harm they have caused or the business

excuse for their use." Northern Pacific

Railway Co. v. United States, 356 U.S.

1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545

(1958). The Court has emphasized that

any “departure from the rule of reason

standard must be based upon demonstrable

economic effect rather than .. . upon

formalistic line drawing." Continental

T. V., Inc. v. GTE Sylvania, Inc., 433

U.S. 36, 58-9, 97 S.Ct. 2549, 2561-62,

A-22

53 L.Bd.2d 568 (1977).

One type of activity that is common-

ly cited as being per se illegal is the

group boycott or concerted refusal to

deal. Appellant relies on Klor’s v.

Broadway-Hale Stores, Inc., 359 U.S.

207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959),

and its progeny for the proposition that

the instant case fits within the “group

boycott” rationale. In Klor's, Broadway-

Hale, a chain of department stores, oper-

ated one of its stores next door to

Klor's retail store. The two stores com-

peted in the sale of radios, televisions,

refrigerators and other household appli-

ances. Broadway-Hale, apparently dis-

turbed by Klor's price-cutting tactics,

approached ten national manufacturers and

their distributors and prevailed upon

them to either not sell to Klor's or sell

to it only at disciminatory prices and on.

highly unfavorable terms. Klor's brought

A-23

an action claiming that this concerted

refusal to deal constituted an illegal

group boycott. The defendants moved for

summary judgment, arguing that there was

no public injury because there were hun-

dreds of other appliance retailers, some

within blocks of Klor's who sold compet-

ing brands of appliances, including

those the defendants refused to sell to

Klor's. The Supreme Court concluded

that a group boycott of this nature

would always be condemned, regardless of

any adverse effect on competition.

"Group Boycotts, or concerted refus-

als by traders to deal with other

traders, have long been held to be

in the forbidden category. They have

not been saved by allegations that

they were reasonable in the specific

circumstances ... . Even when they

operated to lower prices or temporar-

ily to stimulate competition they

were banned.” Id. at 212, 79 S.Ct.

at 709. (Footnote omitted).

The Court noted that it was not faced

with "a case of a single trader refusing

to deal with another, nor even of a manu-

A-24

facturer and a dealer agreeing to an ex-

Clusive distributorship. Alleged in [the

Klor's] complaint is a wide combination

consisting of manufacturers, distribu-

tors and a retailer.” Id. at 212-3, 79

S.Ct. at 709-710. "(Footnote omitted,

emphasis added) .>

Klor's has often been criticized, not

so much because of the result reached,

but because the Court failed to articu-

late with any degree of precision a def-

inition of “group boycott” or to offer

5. United States _v. General Motors

Cor ef U. 7 ’ Ss. Ce ’

L.Ed.2d 415 (1966), relied upon by ap-

pellant, is like Klor's, in that it

involved a wide ranging conspiracy and

did not offer any precise definition

of those group boycotts which warrant

application of the r se rule. Also,

General Motors is typically viewed as

a he horizontal conspiracy. ae

e.g., Sylvania, supra, at 58, n. ’

$7°38.ce at 2561, n. 28. We need not

poeeey rg the continuing validity of

eneral Motors. See generally Posner,

e Rule of Reason and the Economic

Approach; Reflections on the Sylvania

Decision, 45 U.Chi.L.Rev. L LST Ty

A-25

an explanation for why all concerted re-

fusals to deal warranted per se treat-

ment. See. e.g., Bauer, Per Se Illegali-

ty of Concerted Refusals to Deal: A Rule

Ripe for Reexamination, 79 Colum.L.Rev.

685 (1979); Rahl, Per Se Rules and Boy-

cotts Under the Sherman Act: Some Re-

flections on the Klor's Case, 45 Va.L.

Rev. 1165 (1959). In fact, one commenta-

tor, after examining the Supreme Court's

discussion in Klor's and considering the

feasibility of articulating a workable

definition of group boycotts, concluded

that "It seems even more clear that any

comprehensible per se rule for boycotts

is . . .« out of the question.” Rahl,

supra, at 173. “Indeed, there is more

confusion about the scope and operation

of the per se rule against group boycotts

than in reference to any other aspect of

the per se doctrine." Sullivan, Handbook

of the Law of Antitrust, §83 at 229-30 (1977).

— ~AM26

The term "group boycott” can be ap-

plied to divergent types of concerted

activity, not all of which necessarily

have a pernicious effect on competition

or lack any redeeming virtue. The simp-

le use of labels cannot suffice, because

this would create the possibility that

reasonable concerted activity would be

proscribed. See Worthen Bank & Trust Co.

v. National Bankamericard Inc., 485 F.2d

119, 125 (CA8 1973), cert. denied, 415

U.S. 918, 94 S.Ct. 1417, 39 L.Ed.2d 473

(1974). The broad language of Klor's and

General Motors is not helpful in resolv-

ing this case.

Two recent Second Circuit decisions

are instructive. In Oreck Corporation v.

Whirlpool Corporation, 579 F.2d 126 (CA2

1978) (en banc), cert. denied, 439 U.S.

946, 99 S.Ct. 340, 58 L.Ed.2d 338, re-

hearing denied, 439 U.S. 1104, 99 S.Ct.

883, 59 L.Ed.2d 65 (1979), Oreck charged

A-27

Whirlpool and Sears with engaging in a

conspiracy in unreasonable restraint of

trade to exclude Oreck from the vacuum

Cleaner market. Oreck had been the ex-

Clusive distributor of vacuum cleaners

under the "Whirlpool" name. Whirlpool

also had manufactured vacuum cleaners

for resale by Sears under the “Kenmore"

label. The conspiracy was based on

Oreck's allegation that Whirlpool did not

extend Oreck's exclusive distributorship

at the behest and insistence of Sears, a

much larger purchaser of Whirlpool pro-

ducts. Under the jury instruction given,

"the jury could simply have found an a-

greement by Sears and Whirlpool to ex-

clude Oreck from the sale of Whirlpool

vacuum cleaners and, on that basis, have

found them guilty (as it in fact did) of

a per se violation of §1 of the Sherman

Act." Id. at 129. The jury was not re-

quired to find the existence of an anti-

A-28

competitive purpose or effect.

The Second Circuit found that an in-

struction on a per se theory was inappro-

priate. The court stated

"It is important to distinguish be-

tween ‘horizontal’ restraints, i.e.,

agreements between competitors at the

same level of market structure, and

‘vertical’ restraints, i.e. combina-

tions of persons at different levels

of the market structure, such as man-

ufacturers and distributors. . .

Horizontal restraints alone have been

characterized as ‘naked restraints of

trade with no purpose except stifling

competition,’. . . and, therefore, per

se violations of the Sherman Act. On

the other hand, while vertical re-

strictions may reduce intrabrand com-

petition by limiting the number of

sellers of a particular product, com-

peting for a given group of buyers,

they also promote interbrand competi-

tion by allowing a manufacturer to

achieve certain efficiencies in the

distribution of its products ...

They are, therefore, to be examined

under the rule of reason standard."

Id. at 131 (Citations omitted).

6.

The rule of reason provides a more

discriminating way of differentiating

true exclusive dealerships from two-

firm vertical combinations to exclude

a distributor from supply ... ‘Per

se rules of illegality are appropri-

ate only when they relate to conduct

A-29

Because the restraint involved was char-

acterized as vertical, the court expres-

sed a reluctance to use the per se rule

because to do so would interfere with the

because to do so would interfere with

the business decisions of a manufacturer

without any assurance that the purposes

of

by.

the Sherman Act would be served there-

"It has always been the prerogative

of a manufacturer to decide with

whom it will deal. See United

States v. Colgate & Co., 250 U.S.

300, 39 S.Ct. 465 [63 L.Ed. 992]

(1919). Any alleged inducements

by Sears to Whirlpool to allow the

contract with Oreck to expire may

Ftn. 6 (cont'd)

that is manifestly anticompetitive.'

Continental T. V., Inc. v. GTE Sylvan-

la, Inc., supra (433 U.S.) at is, 50,

97 S.Ct. 2 , 2558 [53 L.Ed.2d 568];

and where the conduct involved is an

agreement between a single manufactur-

er and a single distributor which re-

sults in a sole distributorship for

the manufacturer's products, a careful

inquiry into the business justifica-

tions for the agreement is required."

Oreck, supra, at 131-2, n. 6.

A-30

have amounted to tortious interfer-

ence; but, without some further

showing that from this course of

conduct there was an anticompeti-

tive effect in the vacuum cleaner

industry as a whole, it is incon-

sistent with the sanctity of con-

tractual arrangements to allow the

antitrust laws to inject a pro-

vision into the agreement which

would require Whirlpool to renew

Oreck's distributorship for as long

as it is able to compete success-

fully with Sears. In this case,

therefore, something more than an

agreement between Whirlpool and

Sears to eliminate Oreck must be

shown. The agreement becomes viol-

ative of §1 of the Sherman Act only

if it is anticompetitive in purpose

or effect--in sum, it must ie test-

ed by the rule of reason. Without

any consideration of the anticompe-

titive purpose or effect, arbitrar-

ily seeking to protect Oreck simply

because Whirlpool refused to renew

a contract with Oreck which had

terminated by its own terms, even

though this refusal was in whole or

in part, due to persuasion by

Sears, disregards the well estab-

lished rule that ‘the antitrust

laws .. . were enacted for "the

protection of competition, not

competitors i I . at 133-4.

In Borger v. Yamaha _ International

Corporation, 625 F.2d 390 (CA2 1980), a

case with facts much like those in the

instant case, the Second Circuit again

A-31

refused to apply the per se rule to ac-

tivity which could conceivably be labeled

as a "concerted refusal to deal." Yamaha,

a United States importer of various con-

sumer products, including high fidelity

audio equipment, distributes its audio

products through franchised dealers in a

limited distribution system. After some

preliminary negotiations, it appeared

that Borger would become a franchised

dealer in Manhattan. Prior to consumma-

tion of the franchise agreement, Yamaha

contacted two existing Yamaha dealers in

Manhattan and discussed Borger's appoint-

ment as a dealer. The two dealers ex-

pressed a negative reaction to the ap-

pointment and Yamaha subsequently de-

cided not to grant Borger the dealership.

Borger brought an action against

Yamaha and its dealers alleging two

violations of Section 1 of the Sherman

Act, a group boycott and a conspiracy to

A-32

fix prices. Borger also alleged breach

of contract and promissory estoppel, but

the district judge refused to submit

these counts to the jury. The jury re-

turned a verdict in favor of Borger.

The Second Circuit reversed and remanded

because of errors in the instructions

similar to those which existed in Oreck.

The district court judge had instruc-

ted the jury that because “there was no

evidence to support a finding of horizon-

tal combination or contract, the question

for the jury was whether Yamaha had en-

tered into a vertical combination with

one or both of the dealers with whom it

consulted prior to rejecting Borger's

application." Id. at 394 (emphasis add-

ed). The jury was instructed on a rule

of reason theory. The instructions,

however, stated that a finding of il-

legality would be justified if Yamaha

had the sole purpose of protecting

A-33

either or both of the existing dealers

from competition. The Second Circuit,

relying on Oreck, stated "In the instant

case, the jury was instructed to find

Yamaha liable solely on the basis of a

purpose to restrict intrabrand compe-

tition, without any finding of either a

purpose or effect related to interbrand

competition. This was céveraibin error."

Id. at 397. We find that the logic used

by the Second Circuit is sound.

In both Oreck and Borger the verti-

cal-horizontal distinction was crucial

to the determination of whether to apply

a per se or a rule of reason analysis.

The importance of this distinction has

been recognized in this circuit as well.

We said, in Gough v. Rossmoor Corpora-

tion, 585 F.2d 381 (CA 9 1978), cert

denied, 440 U.S. 936, 99 S.Ct. 1280,

59 L.Ed.2d 494 (1979), that

A-34

"In all cases so far holding such

restraints to be per se unreason-

able, there has been some horizon-

tal concert of action taken against

the victims of the restraint. In

Mutual Fund Investors v. Putnam

Management Co., supra, this court

rejected the contention that the

refusal to deal there under fire

constituted a per se illegal group

boycott, stating ‘At issue is an

alleged conspiracy among vertically

integrated organizations, and a-

greements among them are not rc

se illegal.’ 553 F.2d at 626.

Td. at 387. (Footnote omitted).

The vertical-horizontal distinction

is not always dispositive. In Cernuto,

Inc. v. United Cabinet Corp., 595 F.2d

164 (CA3 1979), the court was faced with

the termination, by a manufacturer of

kitchen cabinets, of one of its custom-

ers, a discount house, at the behest of

another customer, a retailer, allegedly

because of price considerations. On

appeal from a grant of summary judgment

for the defendants, the court considered

whether a per se rule could have been

applied to the challenged conduct. ’

A-35

The court asserted that Sylvania did

not necessarily mean that any restraint

which could be characterized as vertical

could not be analyzed under a per se

approach.

"When a manufacturer acts on its

own, in pursuing its own market

strategy, it is seeking to compete

with other manufacturers by impos

ing what may be defended as reason-

able vertical restraints. This

would appear to be the rationale

of the GTE Sylvania decision. How-

ever, if the action of the manu-

facturer or other supplier is taken

at the direction of its customer,

the restraint becomes. primarily

horizontal in nature in that one

customer is seeking to suppress

its competition by utilizing the

power of a common supplier. There-

fore, although the termination in

such a situation is, itself, a ver-

tical restraint, the desired impact

is horizontal and on the dealer,

not the manufacturer, level.” Id.

at 168.

7.

The court mentioned that a ‘rule

of reason’ analysis would not be

available to the plaintiff because

the necessary anticompetitive ef-

fects as to a particular product in

a relevant market could not be prov-

en. Cernuto, supra, at 165 and n. l.

A-36

The court emphasized that the motiva-

ting factor in the alleged conspiracy was

price, i.e., the conspiracy sought to

protect the existing retailer from the

price competition of a discounter. Oreck

was distinguished because, in addition to

a lack of proof that price control was

the likely purpose of the Whirlpool-Sears

agreement, Whirlpool had done no more

than refuse to renew a contract while the

manufacturer in this case had breached

a two year agreement after only three

months. In Cernuto, therefore, there

was clearly less of a likelihood that

the manufacturer's decision could be

considered an element of its own mar-

keting strategy. In conclusion, the

court stated that

"If Cernuto can prove at trial

that United, Lappin and Famous

conspired to protect Famous from

price competition by Cernuto, and

that United and Lappin terminated

Cernuto at Famous' request and in

pursuit of a price related end,

A-37

then it can prevail on a price-

fixing theory notwithstanding its

failure to show any impact on com-

petition involving kitchen cabinet

sales in Western Pennsylvania."

Id. at 170.

While allowing the possibility that

plaintiff's theory could be disproved,

the court, because of the procedural pos-

ture (appeal from a grant of a motion for

summary judgment), assumed the facts were

as plaintiff had stated.

{2} It seems, therefore, that a

characterization of a restraint as verti-

cal or horizontal is not necessarily de-

terminative of the analysis--either per

se or rule of reason--to be applied. In

fact, it has been noted by one commenta-

tor that

"A number of decisions involving

concerted refusals to deal have

turned upon the relationship be-

tween the boycotting parties; that

is, whether the agreement could be

characterized as at least partially

horizontal or as solely vertical.

This distinction has only limited

utility. When considered apart

from the purpose and the effect of

A-38

the agreement, it can lead to unde-

Sirable results." Bauer, supra,

at 712.

We have recognized, in Joseph E. Seagram

& Sons, Inc. v. Hawaiian Oke & Liquors,

Ltd., 416 F.2d 71 (CA 9 1969), cert. den-

ied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.

Ed.2d 755, rehearing denied, 397 U.S.

1003, 90 S.Ct. 1113, 25 UL.Ed.2d 415

(1970), that the presence of a horizontal

element does not require the use of a per

se rule. Hawaiian Oke indicates that an

inquiry must be made to determine whether

there exists an anticompetitive purpose

or effect. And it must be emphasized

8. In deciding whether to apply a per

se rule the courts examine the na-

ure, history, purpose and probable

effect of the restraint. This rather

extensive inquiry is appropriate,

although at least one commentator

concluded that the benefits of such

a per se rule are illusory.

"A boycott rule which is not geared

to a cogent test of effect on com-

petition is thus completely unman-

ageable. Even with such a test, it

A-39

Ftn. 8, cont.

seems very doubtful that efforts to

call it per se would serve any use-

ful purpose. A boycott is a gener-

al method of doing business and

lacks the specificy of price-fixing

or territorial division which are

practices that lend themselves more

immediately to per se treatment.

Price-fixing lays its hand obvious-

ly and directly upon the primary

mechanism of competition. Division

of territory is an out and out a-

greement not to compete. But a

boycott must be connected up with

competition before it can be con-

demned with assurance. The con-

necting up process, of course, is

the very exercise of ‘reason' which

a per se rule seeks to obviate. .

- « Surely .. . the boycott rule

can[{not] be said to contribute very

much to certainty at this point.

Nor .. . [fis it] likely to save

much time and effort in administra-

tration and trial . ...- [ijt

would seem that nearly as much time

will be consumed in ascertaining

whether the transaction fits the

category as would be consumed with-

out any rule, and substantially the

same economic ground will have been

covered." Rahl, supra, at 1172-73.

We believe that despite the appar-

ent lack of ease in application there

is some benefit to the use of a rc

se rule in the concerted refusal to

deal context. Professor Bauer has

advocated a modified per se rule.

A-40

trust laws. Sylvania, supra, at 52, Nn.

19, 97 S.Ct. at 2558 n. 19.

{3} Although FDI contends that its

actions were solely unilateral, we as-

sume, because on review of a grant of a

motion for summary judgment we draw all

Ftn. 8, cont.

"Courts should apply a per se rule

to group boycotts only when two

conditions are met: first, the

conduct must be intended to coerce

or exclude other entrepreneurs;

second, the conduct must be likely

to have anticompetitive effects.

A third factor--the defendant's

market power--may bear on the pur-

pose of a concerted refusal to

deal and its likely effect; courts

should be less disposed to apply

the per se rule where the defend-

ant's share of the market is small.

Unless both of these conditions

are met, the court should apply

the rule of reason." Bauer,

supra, at 705.

It seems apparent that an inquiry

of this nature is somewhat less

elaborate than that required under

the rule of reason and that it

properly focuses attention on the

relevant inquiry, i.e., the probable

effect on competition.

A-41

reasonable inferences in favor of the

non-moving party, that FDI and Wakehouse

9

acted jointly.°. This concert of action

9. There is no allegation that there

exists another conspirator at the

distributor level. There is no as-

sertion that FDI has sought to pre-

clude alternative sources of supply.

Appellant maintains, seemingly as an

afterthought, that, in addition to

the vertical component, there exists

a wide ranging horizontal conspiracy

including all the Fiat dealers in

the Northwest. The only evidence

which allegedly supports the exist-

ence of this conspiracy is the May

21, 1975 mailgram. The magistrate,

in his discussion of the group refus-

al to deal claim, did not even men-

tion the possibility that the decis-

ion not to grant appellant a Fiat

dealership went beyond the one-to-one

arrangement between FDI and Wakehouse

We agree with the magistrate's impli-

cit conclusion that there does not

exist "significant probative evidence’

to support the existence of a wide

ranging conspiracy. We note that

there is no indication that the other

Fiat dealers played any role in the

decision to return appellant's check

or to grant Wakehouse the two proba-

tionary periods in which to increase

sales. The mailgram was sent after

these events occurred. There is no

indication that the other dealers had

any effect on the decision not to

appoint appellant. There is also no

A-42

indication that there was any hori-

zontal market division or dealer

cartelization. Professor Posner

noted, in suggesting an approach to

restricted distribution cases which

attempts to isolate and condemn only

restrictions imposed nominally by

the manufacturer but which are in

fact desired for monopolistic pur-

poses by dealers using the manufac-

turer as their enforcement agent,

that

"Under this test, many cases would

be dismissed simply on a _ showing

that the dealers' share of the

relevant market was too small to

give them the power to collude ef-

fectively. If American Motors has

two percent of the U.S. automobile

market and its dealers sell only

American Motors cars, it is incon-

ceivable that the purpose of giving

American Motors dealers exclusive

territories is to cartelize the

distribution of automobiles.

While it is true that, in princi-

ple, some (very few) consumers may

so prefer American Motors to com-

peting brands of automobiles that

the dealers in those cars face as

a group a down-ward-sloping demand

curve, the slope is too close to

being horizontal for courts’ to

worry about dealer collusion.”

Posner, supra, at 17 (Footnote

omitted).

A-43

does not, however, mean that appellant's

version of the facts justify the applica-

tion of a per se rule. The use of a per

se rule could only be justified if, draw-

ing all reasonable inferences in favor of

appellant, the challenged conduct clearly

had, or was likely to have, a pernicious

effect on competition and lacked any re-

deeming virtue. We cannot say that this

is the case and, consequently,. find that

the rule of per se illegality has no

role in our disposition of the case.

[4] Appellant seems to argue that

the per se rule should be applied because

the challenged conduct was’ undertaken

with the purpose of allowing Wakehouse to

continue to extract monopoly profits.

This theory is based on appellant's view

that Fiat cars constitute the relevant

product market. The magistrate concluded

that the relevant product market was cars

in general. The lower court concluded

A-44

that appellant "should not be allowed to

go to trial on its unsupported allegation

that, for ‘a sizeable number of customers

e « efOlnly a Piat . «6 «, wail Go.*”

We agree with this assessment. Appellant

has not presented significant probative

evidence which contradicts the assertion

that the product market involved is char-

acterized by vigorous inter-brand compe-

tition, 1°

There has been no suggestion

that the failure to increase intrabrand

competition for a product with a very

small share of the market had any effect

whatsoever on interbrand competition.

10. On the facts of this case we agree

with the magistrate's determination

not to treat the subsidiary markets--

parts, service and warranty-~-as sep-

arate from the market for cars. We

note that the dispute is over the re-

jection of the application for a Fiat

dealership, which includes, in addi-

tion to the retail sale of cars, the

parts and service work. There is no

indication that these were treated

separately in the application process

and we refuse to do so for purposes

of our analysis.

A-45

[5] Fiat's insignificant market

power in a market characterized by vigor-

ous interbrand competition is important

to our analysis. We note, at the outset,

that the antitrust laws are primarily

concerned with interbrand competition.

This is true because the existence of

interbrand competition “provides a sig-

nificant check on the exploitation of

intrabrand market power because of the

ability of consumers to substitute a

different brand of the same product.”

Sylvania, supra, 433 U.S. at 52, n. 19,

97 S.Ct. at 2558 nn. 19. The market

conditions make it evident that appel-

lant's contention that the challenged

conduct was undertaken solely to allow

Wakehouse to continue to reap monopoly

profits is simply unfounded. There is

no significant probative evidence which

supports that proposition. In fact, ap-

pellant seems to recognize that an im-

A-46

portant factor in FDI's decision to post-

pone its decision to appoint an addition-

al dealer was its desire to stimulate

Wakehouse's sales, i.e., its desire to

promote interbrand competition. The de-

sired increase in Wakehouse's sales con-

vinced FDI that it was not in its econom-

ic interests to appoint appellant as an

additional dealer. It is clear, there-

fore, that the failure to increase intra-

brand competition was not necessarily

pernicious. The courts have recognized

the benefit to encouraging the promotion

of interbrand competition which occurs

by allowing a business to distribute its

products in a particular fashion. Syl-

vania, supra, 433 U.S. at 54, 97 S.Ct.

at 2559.

[6] Businessmen may, within certain

limits, decide to deal with whom they

wish. Our conclusion, or a plaintiff's,

that a defendant exercised poor business

A-47

judgment, that a defendant treated some-

one unfairly, or that a potential competi-

tor has been injured does not mean that

the antitrust laws have been violated.

The cases discussed above indicate that

the courts are reluctant to interfere

with a company's business decision to

distribute its products in a particular

fashion. We do not expect businesses to

be run in an altruistic fashion, but,

particularly when there is vigorous

interbrand competition, “the interests

of the manufacturer and the consumer

with regard to product distribution coin-

cide." 92 Harv.L.Rev.1160, 1164 (1979).

It is in the interests of FDI to see to

it that its product is distributed in an

efficient fashion. The economic inter-

ests of FDI dictate that it seek to im-

prove sales. It is clear that the de-

sire to stimulate sales was a factor

in FDI's decision not to appoint an

A-48

11 Appellant seems

additional dealer.

to recognize this, but it continues to

attach talismanic significance to the

existence of an additional competitor.

The antitrust laws are concerned with

competition and we must recognize that

FDI's decision not to appoint an ad-

ditional dealer in an effort to expand

its small share of the market had the

potential to benefit competition. +2

Accordingly, we cannot say that the use

of a per se rule would be justified.

There is assuredly no "significant proba-

tive evidence” which would indicate that

the challenged conduct had, or was likely

ll. This militates against the

position that FDI succumbed to the

economic pressure of a small dealer

in order to allow that dealer to

restrict sales in its effort to

extract monopoly profits.

ie & 7 It is not sufficient for appellant

to assert that a viable legal theory

is stated because of an abstract les-

sening of intrabrand competition.

A-49

to have, a pernicious effect on competi-

tion or lacked any redeeming virtue.

Therefore, the rule of reason is the ap-

propriate analysis. This analytical

framework provides a more discriminating

tool by which to evaluate the competitive

significance of the challenged conduct.

Ftn. 12, cont. See Aladdin Oil, supra,

at 1116. This is not sufficient to

make out a r se violation of the

Sherman Act. is is not a case in-

volving the termination of an exist-

ing dealer as discipline for price-

cutting tactics. See Cernuto, supra,

at 170; Bauer, supra, at 715. This

case, as appellant conceded, does

not involve what may very well be

considered to be a naked restraint

on competition. FDI simply decided

to increase its small percentage of

the Portland market through its ex-

isting distributional scheme. Appel-

lant admits that FDI was attempting

to increase its sales through Wake-

house, but alleges that the failure

to increase intrabrand competition

precludes our recognition of the

increase in interbrand competition

as a “redeeming virtue". As our

discussion makes plain, we simply

disagree with this reading of the

relevant case law.

A-50

{7] There is a greater reluctance to

uphold a grant of summary judgment when

the rule of reason is the appropriate

standard. Harold Friedman, Inc. vv.

Thorofare Markets, Inc., 587 F.2d 127,

141, n. 51 (CA3 1978); 92 Harv. L.Rev.

1160, 1167-9 (1979). This court once

commented, however, that because there

was no tenable per se boycott theory

"appellants must evince a substantially

adverse effect on competition in the

relevant market to support a viable

legal theory. Appellants point to the

alleged injury to their businesses, but

fail to provide any evidence that the

‘effect upon competition in the market-

place is substantially adverse.'" Mutual

Fund, supra, at 627. Appellant's case

suffers from the same deficiencies noted

in Mutual Fund.

[8] We hold that the grant of the

motion for summary judgment was proper.

A-51

Primarily because of the market structure

and Fiat's small percentage of that mar-

ket, the decision not to appoint an ad-

ditional dealer cannot be said to be so

plainly anticompetitive as to justify

resort to a per se rule. The rule of

reason is, therefore, the appropriate

standard. And even under that standard

appellant cannot withstand a motion for

summary judgment. Appellant has simply

failed to evince "significant probative

evidence” of a substantially adverse

effect on competition.

C. TYING OR EXCLUSIVE DEALING

ARRANGEMENT

[9] The magistrate rejected appel-

lant's tying arrangement claim, noting

that "Plaintiff simply fails to show the

existence of two separate products." We

agree, Appellant had simply miscon-

strued the case law concerning tying

arrangements. The challenged conduct

A-52

bears absolutely no relation to a tying

arrangement.

A charitable reading of appellant's

allegations indicate that what is being

objected to is an offer to enter into an

exclusive dealing arrangement. There was

no executed transaction.->

14

Although

there are numerous reasons which

13. In fact, appellant's objection is

not so much to the alleged exclusive

dealing arrangement as it is to FDI's

refusal to enter into the arrange-

ment, Thus, it is clear that it is

the decision not to appoint an addi-

tional dealer which is the basis of

appellant's claim. The "sacrifices"

allegedly made by appellant during

the application process would be

more relevant to proving the exist-

ence of a dealership agreement on a

promissory estoppel theory. As we

have noted, the contract’ issues

already resolved against appellant

in the state court are not befcre us.

14. For example, there is no indication

that an exclusive dealing arrangement

such as that described by appellant

would have any, much less a substan-

tial, effect on competition. See

Brattleboro Auto Sales Inc. VW.

Subaru of New England, inc., 633

A-52a-

support the propriety of the grant of

summary judgment on the issue, it suf-

fices to say that Section 3 of the

Clayton Act has no application in the

absence of an executed agreement.

McElhenney Co. v. Western Auto Supply

Co., 269 F.2d 332 (CA4 1959); Leo J,

Meyberg Co. v. Eureka Williams Corp.,

215 F.2d 100 (CA9 1954), cert. denied,

348 U.S. 875, 75 8.Ct. 113, 99 L.Ed.

689; Nelson Radio & Supply Co. v.

Motorola, 200 F.2d 911 (CAS 1952), cert.

denied, 345 U.S. 925, 73 S.Ct. 783, 97

L.Ed. 1356 (1953).

CONCLUSION

The decision of the district court

to grant summary judgment in favor of

appellees was appropriate and,

therefore, we affirm.

IT IS SO ORDERED.

A-53

UNITED STATES DISTRICT COURT,

FOR THE DISTRICT OF OREGON

RON TONKIN GRAN TURISMO, INC.,

Civil No

75-1102

Plaintiff,

Vv.

FIAT DISTRIBUTORS, INC., and

)

)

)

)

)

) ORDER

)

WAKEHOUSE MOTORS, INC., )

)

)

Defendants.

Plaintiff has filed objections to the

findings and recommendation of the Magis-

trate. I have made a de novo review of

those portions of the findings and recom-

mendation to which objection has been

made and affirm the Magistrate's find-

ings and recommendation.

This action will be dismissed.

Dated: December 4, 1978.

I

nite tates District Judge

A-54

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

RON TONKIN GRAN TURISMO, INC.,

Plaintiff, Civil

75-1102

)

)

)

)

Vv. )

)

FIAT DISTRIBUTORS, INC., and )

WAKEHOUSE MOTORS, INC., )

)

Defendants. )

FINDINGS AND RECOMMENDATION

Plaintiff Tonkin, a Portland dealer

in foreign cars alleges various anti-

trust violations by defendant Fiat, the

United States auto distributorship,

wholly owned by its international parent,

and defendant Wakehouse, another Portland

car dealer. Tonkin's complaint, liberal-

ly construed, includes the following

Sherman and Clayton Act claims: (1) mono-

poly; (2) attempt to monopolize; (3) con-

spiracy to monopolize; (4) tying arrange-

ment; (5) group refusal to deal; and (6)

A-55

price fixing. Both defendants have

moved for summary judgment on all issues.

While it is true that, on motion for sum-

mary judgment, all factual inferences

should be drawn in favor of the party

moved against, plaintiff in this case

must make some showing of "significant

probative evidence" tending to support

his claim in order to avoid summary

judgment. First National Bank v. Cities

Service, 391 U.S. 253, 290, reh. denied

393 U.S. 901 (1968). Even in antitrust,

where complex factual issues concerning

intent and economic effects often arise,

one opposing summary judgment must point

to material issues of fact which could

prevent the moving party from prevailing

1 Plaintiff's half-hearted claim

that Fiat's international parent may

have conspired with certain Arab con-

cerns to destroy Tonkin's business be-

cause Tonkin is Jewish is not supported

by any factual allegations.

A-56

at trial. Tonkin raises many factual is-

sues in its brief; none of them is

material.”

(1) Monopoly. Tonkin charges that

both Fiat and Wakehouse have monopolized

trade in violation of section 2 of the

Sherman Act. There is no dispute that

Wakehouse sells the only Piats in the

City of Portland nor that Fiat is the

only distributor of Fiats for’ the

Portland market. It is also admitted by

all parties that Portland constitutes

the relevant geographic market for these

purposes. Tonkin's problem is with the

relevant product market. He contends

that Fiat cars are a product market in

themselves, and that defendants there-

2. The “issues of fact" surrounding

the existence or not of a contract be-

tween Fiat and Tonkin, the intent of

Wakehouse and Fiat, and the potential

quality of Tonkin as a Fiat dealer are

simply not material.

A-57

fore control 100% of the relevant market,

thus have monopolized that market.

The relevant-product market is not

Fiats; it is cars in general. The auto-

mobile market has always shown high

cross-elasticity of demand. There is

nothing so special about a Fiat that a

prospective purchaser will refuse to buy

a Datsun or Chevette, no matter what the

price of a Fiat. Other courts have con-

sidered and rejected allegations similar

to Tonkin's with respect to Cadillac,

Mogul v. General Motors Corp., 391 F.

Supp. 1305 (E.D. Pa. 1975), Aff'd 527

F.2d 645 (3d Cir. 1976), and Dodge, Mt

Lebanon Motors, Inc. v. Chrysler Corp.,

283 F. Supp. 453, 461 (W.D. Pa. 1968),

aff'd 417 F.2d 622 (3d Cir. 1969).

Plaintiff should not be allowed to go to

trial on its unsupported allegation

that, for "a sizeable number of custom-

ers . . . foJnly a Fiat, or a Lancia,

A-58

will do." Plaintiff's Response to De-

fendants' Motions for Summary Judgment

at 93.

Defendants’ share of the relevant

product market thus falls far short of

that necessary to establish monopoly.

Plaintiff nowhere maintains that defend-

ants' share of the automobile market ap-

proaches the 60% threshold stated in

United States v. Aluminum Co of

America, 148 F.2d 416 (2d Cir. 1945).

Both defendants are therefore entitled

to summary judgment on the issue of

monopolization. >

(2) Attempt to Monopolize. Plain-

tiff argues that Fiat and Wakehouse have

3. Plaintiff's claim that Wakehouse

and Fiat have monopolized Fiat parts

cannot be sustained without extending

the Sherman Act's prohibitions to every

exclusive or sole parts dealership. To

choose to buy a car is to choose to buy

canbe for that car wherever they may be

ound,

A-59

attempted to monopolize trade, in viola-

tion of section 2 of the Sherman Act.

Plaintiff's memorandum does not make

clear what facts are relied upon in sup-

port of this claim, but it is more than

fair to plaintiff to assume that defend-

ants are charged with attempting to mon-

opolize either the trade in Fiats or

that in cars in general. In either

case, defendants must prevail.

Plaintiff points out the Ninth

Circuit holding in Lessig v. Tidewater

Oil Co., 327 F.2d 459, 474 (9th Cir.)

cert. den'd, 377 U.S. 993 (1964), to the

effect that an antitrust plaintiff need

establish only the specific intent of a

defendant to monopolize trade; the rele-

vant market need not be described.

Since specific intent is an issue of

fact in this case, plaintiff thus hopes

to evade summary judgment. This hope is

ill-grounded for three reasons.

A-60

First, the Supreme Court held in 1965

that some appraisal of the relevant mar-

ket is necessary to a claim of attempted

monopoly. Walker Process Equipment, Inc.

v. Food Machinery & Chemical Corp., 382

U.S. 172, 177 (1965).

Second, the Ninth Circuit has, since

Lessig almost uniformly insisted on proof

of something beyond specific intent to

show attempted monopolization. This add-

ed element has been characterized as

proof of market power in the defendant

or predatory practices by the defendant.

Moore v. Matthews, 550 F.2d 1207, 1219

(9th Cir. 1977); Pacific Coast Agricul-

tural Export Ass'n v. Sunkist Growers,

Inc., 526 F.2d 1196, 1205 (9th Cir.

1976); Knutson v. Daily Review, Inc.,

5468 F.24 795, 814 (9th Cir. 1976)

(citing cases). As above, plaintiff

cannot show sufficient market power in

the relevant market. There is no

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allegation or factual support of any

charge of predatory practices.

Lastly, and most important, the rea-

son for the rule in Lessig simply does

not apply here. The holding in Lessig

that nothing more than specific intent

need be demonstrated rested on a close

reading of Swift & Co. v. United States,

196 U.S. 375, 396 (1905) which led the

Lessig court to conclude that the danger-

ous probability of actual monopolization

to which proof of market power is rele-

vant may be inferred from the specific

intent to monopolize alone. Lessig,

supra, at 474 n. 46. The problem this

poses for plaintiff is that, no matter

what it can show in the way of specific

intent to monopolize, there can be no

danger of actual illegal monopoliza-

‘tion. Wakehouse and Fiat already have

100% of the Portland Fiat market which,

as above, is not a monopoly such as

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violates the Sherman Act. Plaintiff does

not allege that either defendant seeks to

capture further shares of markets’ in

other makes of automobiles. Plaintiff

alleges only that Wakehouse and Fiat have

sought to maintain their control of the

Portland Fiat market. In short, since

the object of defendants’ attempts is not

actionable, neither is the attempt. This

reasoning applies equally to plaintiff's

identical claims regarding Lancia.

Both defendants should therefore be

granted summary judgment on the issue of

attempted monopolization.

(3) Conspiracy to Monopolize. The

rationales set out immediately above in-

dicate the same result on plaintiff's

conspiracy allegations. While conspiracy

includes the doing of lawful acts by un-

lawful means, plaintiff claims only that

defendants conspired to reach unlawful

results; namely, monopoly, not that their

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means were unlawful. Summary judgment

should therefore be granted to defendants

on the claim of conspiracy to monopolize.

(4) Tying Arrangement. Tonkin main-

tains that Fiat told him it would grant

him a Fiat dealership only if he ended

his dealings with Saab and Honda, whose

cars he had been selling. This, says

Tonkin, violates section 3 of the Clayton

Act, 15 U.S.C. § 14, and section 1 of

the Sherman Act, because it ties the Fiat

distributorship to the termination of the

Saab and Honda distributorship.

This is an exclusive franchise, not a

tying arrangement. An illegal tying ar-

rangement violates the antitrust laws by

requiring that a product buyer purchase

from a seller not only the product he

wants (the tying product), but also an-

other product (the tied product). The

seller's market power in the tying

product allows him to foist upon the

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buyer the unwanted tied product. It is

thus essential that there be two separate

products, one tying, one tied. Moore v.

Matthews, 550 F.2d 1207, 1215 (9th Cir.

1977); Siegel v. Chicken Delight, 448

F.2d 43, 47 (9th Cir. 1971), wert. den'd,

405 U.S. 955 (1972).

The issue here is not whether nega-

tive tying arrangements violate the law.

Clearly, they do. Plaintiff simply fails

to show the existence of two separate

products. Fiat's requirement was that

Tonkin not buy cars from Saab or Honda

if it was to buy cars from Fiat. There

is no tied product.

Further, to prevail on a tying claim,

plaintiff must show that defendant had

market power in the tying product suffi-

cient to exert abusive pressure in the

market for the tied product. Moore v.

Matthews, supra at 1215. As already

discussed, defendants have no appreciable

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power in the relevant market.

Finally, even assuming Saab and Honda

(or their absence) can somehow be con-

strued as a tied product, neither of the

defendants has any economic interest

whatever in either of them. Thus, plain-

tiff lacks another element needed to

build a claim against per se illegal

tying arrangements. Moore v. Matthews,

Supra at 1216, citing Venzie Corp. v.

United States Mineral Products Co., Inc.,

521 F.2d 1309, 1317 (3rd Cir. 1975).

Fiat and Wakehouse are therefore en-

titled to summary judgment on plaintiff's

tying claim.

(5) Group Refusal to Deal. Fiat

and Wakehouse have an _ understanding

(given all inferences favorable to plain-

tiff) that Wakehouse shall be the sole

Portland distributor of /Fiats and

Lancias.

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Wakehouse is an exclusive outlet. Plain-

tiff alleges that the refusal of Fiat to

sell cars to Tonkin because of Fiat's

understanding with Wakehouse constitutes

a group refusal to deal per se illegal

under section 1 of the Sherman Act as an

agreement in restraint of trade.

Such a one-to-one relationship is

neither per se illegal nor unreasonable

under a rule of reason analysis. A nat-

ional distributor may assign its retail

outlets exclusive areas of operation

without running afoul of the antitrust

statutes where other brands are available

in the market. United States v. Arnold

Schwinn & Co., 388 U.S. 365, 376 (1967).

The exclusive Wakehouse dealership ex-

cludes other Portland dealers, including

plaintiff, only from the Fiat market,

not from the automobile market. They

may freely deal in the many brands which

compete with Fiat and are substantially

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equivalent. Plaintiff's case citations

concern only situations in which large

numbers of dealers and distributors a-

greed to exclude selected dealers or in

which a plaintiff was entirely excluded

from a relevant market, e.g., Helix Mil-

ling Co. v. Terminal Flour Mills Co.,

523 F.2d 1317 (9th Cir. 1975) (plaintiff

completely shut out of Northwest flour

milling).

The arrangement between Fiat and

Wakehouse is a proper exclusive dealer-

ship under the antitrust laws. Wakehouse

has no power over Fiat's licensing of

other distributors other than ordinary

business leverage. Fiat will change to

another dealer or dealers when its econ-

omic interests, as it perceives them, so

require.

Summary judgment should therefore be

granted on the issue of refusal to deal.

(6) Price fixing. Plaintiff alleges

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price fixing in its complaint but neither

further addresses the issue in its memo-

randum nor offers any factual allegations

to support such a charge.

Summary judgment is therefore appro-

priate on the issue of price fixing.

Dated this 25 day of January, 1978.

/s/ GEORGE E. JUBA

United States Magistrate