Appendix — Atlantic Refining Co. v. Federal Trade Commission

Supreme Court brief1965

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: eee ——-F Gttee Sepreme Cust, 4S.

ie | FILED,

| Biipees GOURT. U1 ui 371988

| INTHE | JOHN F, DAVIS, CLERK

Ocroser TzRM, 1964.

THE GOODYEAR TIRE & -RUBBER COMPANY,

sicecaiuadd

_ FEDERAL TRADE COMMISSION,

one

APPENDIX TO

"PETITION FOR’ A WRIT OF CERTIORARI TO

_ THE UNITED STATES COURT OF APPEALS ©

FOR THE SEVENTH CIRCUIT.

2 +

JouNn F. SONNETT

80 Pine Street

New York, New York 10005

Attorney for Petitioner ©

Of Counsel:

CAHILL, GorDON, REINDEL & OHL

Arthur Mermin -

—_

David Ingraham

H. Richard Sahuaacher

80 Pine Street 5

New York, New York 10005

Wotre, Husparp, Voir & Osann’

1 North La Salle Street

Chicago, Illinois 60603

July 20, 1964. eae,

(| \ ‘TABLE OF CONTENTS.

lace } : ‘ues

Nie,

APPEN DIX A—Initial Decision of Hearing Examiner.

ientine B—Opinion win Order of the Commission.

Aveanves: C—Opinion of the Court of Appeals.

Avrexor D—Order of the Court of Appeals.

- APPENDIX. E—Decree of Court of Appeals.

Each°of the sees appendices is senhintaby pagitiated.

The appendices are —" by divider sheets of blue

‘paper, .. =i ‘ °

‘Filed: October 93, 1959.

UNITED STATES OF AMERICA

BEFORE

'°

‘ . Feperat Tape Commission a

/In- THE MATTER»

Tue Goopyrar Tre, &. Rupper- | oe

Company, = °°”) Docket No. 6486

and <i

“THe Artnantic ‘Rermnine Company, coke

_ CoRPORATIONS. — , RB acs son

ee oe INITIAL DECISION

By Haru: J. Kors, ‘Hearing Examiner.

[ Appearances omitted]

This proceeding is based upon an amended complaint

brought under Section 5 of the Federal Trade Commission

Act, chargitig as untawful certain contracts entered -into

between respondents The: Goodyear Tire &:Rubber Com-

pany, Ine., a wholly owned subsidiary of respondent: The

Goodyear Tire. & Rubber Cpmpany gnd the Atlantic |

Refining Company, whereby-The Goodyear Tirey& Rubber

Company, Ine., agreed to pay The Atlantic Refining Com-

: pany a sales commission on al tires, batteries and acces-

‘ sories sold by said The Goodyear Tire & Rubber Company,

Inc., to serv ice stations and other outlets ‘of The. Atlantic

Refining Cc ompany. The amended complaint further’

charned that responZent The Goodyear Tire & Rubber Com-

pany, Ine., had entered into similar contracts with certain:

t f 4 ;

‘

;

oil companies other than The Atlantic Refining Company,

and that.The Atlantic Refining Company had entered into a ._.

similar _ contract with + Firestone ‘Tire G Rubber

Company. — +

This proceeding is now before ‘the heati ing examiner for

final consideration upon the amended complaint, answers

thereto, testimony and other evidence, proposed findings of

fact and conclusions: filed by all parties and briefs in sup-

port, thereof, and reply briefs. The hearing examiner has

~ given consideration to the proposed findings of fact and con- |

clusions submitted by the parties, and théir briefs in sup-

port thereof, and all findings of fact and conclusions of law

proposed by the parties, respectively, net-hereimafter spe-

cifically found or conciadéd. are’ herewith rejected, and the

hearing. examiner having considered the record herein, and

‘being now duly adv ised in the premises, makes the following

findings of fact, conclusions drawn therefrom een order:

1. Respondent The Goodyear ep: & Rubies Company =

is # corporation organized, existing and doing business

unifer the laws of the State of Ohio with its principal office

and place of business located at 1144 Kast Market Street,

Akron, Ohio. The. Goodyear Tire &. Rubber Company is

engaged i in the manufacture and in the sale and distribution

- of rubber products including tires and inner tubes, directly

and through several wholly owned and controlled subsidi-!

aries, including The Goodyear. Tire: & Rubber Company,

Ine., w which i is primarily a marketing subsidiary.

o-.4 Kesposident The Shedveas Tire & Rubber Company,

Inc., (hereinafter sometimes referred to as ‘‘Goodyear’’)

‘is a wholly owned subsidiary corporation of The Goodyear

Tire & Rubber Company, organized under the laws of the

State of Delaware with its office and principal place of busi-.

ness located at 1144 East Market Street, Akron, Ohio. The

Goodyear Tire & Rubber Company, Inc., is engaged: in the

sale and distribution in interstate commerce of tires, inner

tubes, batteries, automotive parts and accessories which are

ifi¥

,A-3

a tothe frade sg products and will be hereinafter

so referred to.

3. Respondent The Atlantic Refining Con. <7 ( herein-

after sometimes referred to as ‘‘Atlantic’’) is a corpora-

tion organized, existing and doing business Hote the laws

‘of the State of Pennsylvania-with its principal office and

place of business located at 260,South Broad Street, Phila-

delphia, Pennsylvania. Said respondent i is engaged in the |

produétion and in th Sale and: ‘distribution in interstate

commerce’ of petroleum products, including gasoline and

dubricants sold to. petroleum wholesalers (hereinafter

‘referred tovas ‘‘distributors’’) and to service stations.

4. Respondent Atlantic markets its petroleum products

in the Middle Atlantic States (including parts of Ohio and

West Virginia), New England (not including Maine) and

the Southern Atlantic States.. This marketing territory

is divided into six marketing regions which are, in turn,

subdivided into twenty-nine districts, ‘consisting of a city

or other marketing center and the surrounding territory.

The marketing regions and districts are as folivws:

sce District

New England Providence, Rod: |

| : Springfield,. Mass. ° . >

Hartford.’ Conn.

Boston. Mass.

; New Haven, Conn. °

New York % Syracuse, N.Y:

AF /Sonthern Tier, N. Y-

/ -Albatiy, N.Y.

nc. ? =

: Rochester, N.Y. k

y Watertown, N.Y, é

od Muifalo, N.Y.

Philacel phia- Philadel phia- “Subrrban, Pa,

"New Jersey South Jersey

Newark (or North Jena) ‘©

Fastern | Reading, Pa.

» Pennsylvania * | Allentown, Pa.

Wilkes-Barre, Pa,

Harrisburg, Pa.

Williamsport, Pa.’

Wilmineton, Del.

. A-4

ind

Region” _ | District 2G,

Western - Pittsburgh, Pa.

Pennsylvania _ —-— Altoona, Pa.

P ‘ Greensburg, Pa.

' Erie, Pa. os nice

Southern _.* Charlotte, N. C.

Baltimore, Md..

Riehmond, Va.

e ._sdaeksonville, Fla.

¥ ’ Miami, Fla..

_ 5. As of April 30, 1956, there were approximately 394

‘salesmen calling on.dealers and distributors of gasoline

and lubricants, including service stations. * These salesmen

_are divided into various classifications, dependent upon the

functions which they perform as follows:

Approzi- °

: - mate ey. 2

Type _ Number Furction ;

-Promotable . . Lees

dealer salesman 133 Sells Atlantic products and_pro-

motes recommended TBA to ‘* pro-

motable dealers’’, which term in-

Te = , cludes lessee dealers and contract

dealers interested in complete serv-

ice station operation.

Dealer salesman ' 25 Sells Atlantic products and pro-

' FS. motes recommended TBA to deal-

ers not covered by _promotabie

dealer salesmen (usually in areas

of sparse distribution) or to spe-

cial greaps such as car dealers in

other wreas, — .

General salesman. 54. -Sells Atlantic. products and pro-

motes recommended TBA to deal-

ers not eovered by “ promotable

dealer salesmen or dealer sales-

men, and also sells Atlantic prod-

ucts to smaller Commercial ac:

_ counts,

Service salesman 147. — Teaches dealers and their employ-

. ees merchandising: techniques and

how to perform the services nor-

mally performed by first class serv-

ice station operators. \This.teach-

A-5

Approxi-

; mate

a 5s ae Number &. 7%, Function

ing involves, both petroleum prod-

uets and TBA. For teaching pur-

: poses. the ‘salesman uses the TBA

on-hand at fie-station._

Wholesale salesman 35° . Sells Atlantic products and pro-

motes recommended TBA to dis-

tributors and wholesale dealers.

6. All of respondent Atlantic’s salesmen are paid on a

salary basis: Promotable dealer salesmen. also receive

extra compensation based upon percentage gains in pur-

chases cf gasoline, motor oil and recommended TBA (and

also for over-all gains) by those of their assigned dealers

who have been in operation for a minimum of twelve

months. pases

7. Respondent Atlantic sels its petroleum products to

more than 5,500 retail dealers, a substantial number of

whom operate service stations (as distinguished from gro- —

cery stores, garages, and: other, like outlets), and to more

than 200 distributors who, in turn, sell said products to

more .than 2,800 retail outlets, a snhstantial number of

whom operate service stations. These retail dealers and

distributors are divided into the following .classifications :

Percentage of Total

Regional Gasoline Sales

, by Nach Customer Class—

Present 1951 vii 1955

Designation - Percent Percent J

1. .Company-operated — . nal

OR eter isle * LS | 2

_ 2. Lessee Dealer ..:............... 32, 39.1 °

3. Contract Dealer .............. 23 18.1

4. Commercia] ‘Account .... ~ 15 16.6

5. Wholesale Dealer .......... ron A * tek

6. Distributor ............ Rida ae 24.0

2. 2 eee +g ae El

ae Se 100 * 100.0 .

A-6

8. The usual form of lease entered into by respondent

Atlantic and its lessee dealers was for a term of one year,

. with automatic renewal from year to year unless written -

notice was given prior to the expiration of any’term. Rental

provided by a.y lease was usually a flat rental plus a cents-

per-gallon charge, dependent upor location of station,

financial condition of lessee and potential income. Such

lease contained provisions 1 relating to the use, maintenance ~

and general appearance of the station. In the event of

breach of any of the terms, conditions or covenants. of the

lease by the lessee, it was provided that Atlantic a a

its option, terminate the, lease.

9. On April 1, 1953, sneak Atlantic ities a

long-term dealer lease policy under which any lessee dealer

who has established a record of two years of satisfactory:

Operation became eligible for a three-year lease with rental

remaining the same during the entire period. .

10. Tiras, batteries ‘and accessories have become a

necessary and integrai part of the business operation of the |

- Atlantic dealer. He cannot profitably and syecessfully

. operate his business without the added revenue from that

portion of his business which also enables the dealer to give

complete service to his: customers. The service. station is

important ‘to TBA manufacturers as an outlet. for dis-

‘tributing to customers. It is.to the interest of The Atlantic ¢

Refining Compariy to have its dealers engaged in the sale of ,

TBA as this builds a stronger dealer organization and

increases the sale of gasoline. . "

11. “Sei to, March 1951 (except as to three districts

| in which the Sales Commission Plan was tested beginning.

in 1950) respondent Atlantic*purchased TBA for resale

either directly or indirectly to ‘Atlantic dealers. This pur-

_ chase for resale arrangement was ‘first begun in 1932 when _ -

respondent, Atlantic began the sale and distribution of tires

manufactured by the Lee Rubber & Tire Corporation. In

1937 a contract was executed with the Electric Storage Bat-

“

A-7 |

tery Company for the purchase and resale of BHxide bat-

teries in the Philadetphia region which was expanded to all

marketing regions in 1945. Accessory items were added

from time | to time, including DuPont_ polishes, Thermoid

fan belts, Ameriean. Chain and Cable Company’s weed

chains and Fram oil filters. Distribution of such products

to Atlantic dealers and distributors was made by. respond- .

ent Atlantic either ‘directly or through about forty-five

warthouses located throughout its marketing area or:

through Atlantic supply dealers who distributed such prod-

ucts to other Atlantic dealers.

12. During the period that respondent Atlantic con-

tinued on the purchase and resale plan, Atlantic service sta-

‘tions were identified as sellers of such sponsored TBA

products as Lee tires and, Exide batteries, and to some

extent of other TBA handled:

3. In 1951 aft a test of the Sales Commission Plan of

Goadyear and Firestone m three districts, Atlantic adopted

the complete Sales Commission Plan of these companies in

all-six of its marketing regions. Atlantic assigned the

soil marketing area by allocating the New York, New

Kugland and Philadelphia-New Jerset regions to Goodve ear

and the three remaining regions to Firestone.

14. The sales commission agreement entered into

between The Atlanti¢ Refining Company and The Goodyear

Tire & Rubber Company, effective March 1,.1951, provided

for the payment of commissions to Atlantie on the sales by

Goodyear of its tires, batteries and accessories to Atlantie

outlets, including service stations, distributors and con-

signees. The consideration of this agreement was the

services to be rendered by the ‘Atlantic sales organization

in promoting..the sale of Goodyear TBA products as out-

lined in said agreement. ‘This agreement provided, among

other things, for the payment-of a commission of 10 aie

cent on all sales of TBA to Atlanti¢ dealer outlets, and 714

percent on all sales of TBA to Atlantic franchise petroleum .

A-8

distributors. The Atlantic Refining Company also entered

into a ‘sinGtar sales commission agreement with The Fire-

stone Tire & Rubber Company, effective as of March 1,

1951. ; i

15.. The services which were ncilensad by The Atlantic

Refining C ompany pur suant to its contract with Goodyear

and Firestone in promoting the sale of TBA products con-

sisted principally of the following:

_ (a) Atlantic personnel, when interviewing prospective

dealers tor new or establisued service stations, advised -

them of the importance of TBA and recommended the T.BA -

products of Goodyear or Firestone, and when dealers were

selected would at times-give advance notice of station open-

ings or changes to Goodyear or Firéstone and.introduce the

new dealers to the sales representative of Goodyear or Fire-

stone, permitting such salesmen: toleotaplete any unfinished

business with the ‘outgoing dealer and enabling them te

anticipate and to move prompt in handling the require-

ments of the new dealers. . :

(b) Atlantie gave assistance to. dealers in arranging

Goodyear, or.Firestone TBA supplies; took TBA orders

from Atlantic dealers for either Goodyear or Firestone;

and recommended the’ minimum Goodyear or Firestone

inventory to be carried by the Atlantic dealer.

which the sale of TBA was discussed, in some instances with

the active participation. of Goodyear or Firestone.

(d) Atlantic operated training schools for dealers and

prospective dealers which incladed suggestions for display-.

ing and merchandising TBA. Im the discussion of .TBA,

Goodyear or Firestone products were used exclusively dur-

ing the training school course.

- e.

(e) Atlantic incorporated suggestions on merchandising

TBA-in its dealer magazines and arranged for advertising

apd promotions, which included TBA products of Goodyear

or Firestone, and participated i in promotions instituted by

either Goodyear or-Firestone.

4(f) ‘Atlantic’also conducted tire clinics jointly with the

personnel of Goodyear or Firestone which were important

in familiarizing dealers in‘ the care — repair of a

or Firestone tires.

' (g) Atlantic made TBA products available to credit -

card holders, including merchandise sold on deferred pay-

ments without carrying charge, which served to augment

the sale of Goodyear or. Fir estore TBA. |

- 16. The sales of Goodyear TBA and ‘commissions paid

- thereon under the Atlantic-Goodyear Sales Commissibn

Plan were substantial as is shown by the following tabula-

tion: :

Total — |

: ae Sales Commissions .

+ REA pant eacee ie $ 2,445,808. “$ 239,250

1952. enecencrtinnsseee , 4,075,8902 . -411,749?

Se wing 9,067,565. . 500,437

| eine a Sm 5,284,743 523,048

| aaa 5,700,121 557,599

1/566 /56....- 2-00. 3,133,905 296,988

NG cc ccvcrectiaenass $25,808,032 $2,529,065

17. The ’substantiality of the sales und commissions

under the Atlantic-Firestone TBA Sales Commission Plan

is shown by the following tabulation for the years 1951 to

1956 : ‘

- Total , ‘Total

Sales Commissions

| SNe ol $ 3,243,350 $ 299,524

68. pened 4,349,616 — 404,948

ETD ae 5,050,381 . ~ 469,784

7954... Ps ses 4,867,689 ° .452,083

55... SSCS "506,199

1/56-6/56. ne, - 2,545,798 234,317

Tot ater inene” $25,619, 770 - $2,366,855

. A-10

18. Under date of March 1, 1951, ‘Atlantic sent a form

‘ letter to all Atlantic dealers entitled at © Statement of

Atlin tic’ s TBA Policy’. This letter announced the adop-

tion of the TBA ‘Sales Commission Plan and included.

therein the statement that.‘‘Your acceptance or rejection

of the program is a matter of your, own choice’. Under

date of August 28, 1962, respondent Atlantic eldvensed 1a

similar form letter to all its dealers entitled, “A Restate-

ment of Atlantie’s TBA Policy’’. Under date of June 24,

1955, a similar letter entitled ‘No Forcing’’ was sént to

ald Atlantic dealers, and since that time has been given to |

new Atlantic- dealers. eee © .

?. ;

19. It is the contention of counsel supporting the com-

plaint that because. of the relationship, contractual and

otherwi ise, between- Atlantic and its station operators, con, —

signees and distr ibutors, the ado ition of the Sales Commis-

sion Pian of selling and promothig the sale of TBA entered

into by Atlantic with Goodyear and Firestone has a ten-

deney to lessen, restrain, prevent or eliminate competition

in the sale of TBA, and has deprived other suppliers of

TBA @f.a substaatial portion. of the TBA business of the

Atlanigic petroleum outlets. _ . ie = 5 ae

20. In support of the cliarges of the complaint, sixteort

‘former Atlantic dealers were called to testy in this pro--

t%®

ceeding. With the exception of tl ree of these dealers, they ©

testified to various forms of coerzion, adopted by Atlantic «.

salesmen in an effort to induce. them to purchase sponsored

TBA. Some of these. witnesses .testified that they had

received the so-called non-forcing letter, but that they were.

told by Atlantic salesmen that these. letters were not con-

trolling insofar as purchases of non-sponsored TBA was

concerned. The testimony'of the witnessés called to support |

the complaint pertaining to coercion is as follows :

(a) John Chambers, an Atlantic.lessee from } November

1952 to November 1954, purchased the bulk of his TBA from

the Goodyear supplier. Atlantic salesmen. were always

. r

A-11

reminding him, that when his lease expired or was canceli

Atlantic would only accept spOhsored merchandise, and tha

outside merchandise would not be accepted at all. This

_ witness also testified that it was pointed out to him on a>

number of occasions that the acceptance or rejection of the

Goodyear plan was up to the dealers.

‘(b) James Matthews, an Atlantic ais from 1947 .to

was told at a meeting that dealers were free to buy

rever they saw fit, but whenever salesmen called they

im differently.- At the time of the change-over from

Lee /to Goodyear, his Tee signs were_-removed from his

station; and he was told to get rid of Lee tires and Auto-

Lite batteries and handle Goodyear. Matthews testified

that he discontinued the Lee tires because he did not want

his lease-cancelled because of tion- sponsored TBA. He was

requested by Atlantic salesmen in 1953 to. sign a-mutual

cancellation, but he promised to‘follow the line’ and went

100 percent. with Goodyear. He took: ten Auto-Lite bat-

teries in trade, to which objection Was made. Atlantic also

. objected to his handling DuPont anti-freeze. Matthews left_

the station in May 1957 due to bad health.” He recalled

receiving non-forcing letter dated March 1, 1951... -

(e) Aniello L. Iacono, aq Atlantic lessee from 1952 to

- 1954, had difficulty with Parris, the authorized TBA’ sup-

plier, and began buying non-sponsored tires and batteries.

‘He was asked by Atlantic salesmen to get rid of the tires,

and batteries and when he refused, the salesman made an

taining a dirty station. His lease was not renew ed.

(d.) Isidore Jack Pollock, an. Atlantic: lessee from 1940

inspection ot his place and claimed he was nsing untrained

. personnel, improper uniform, improper display, and main-

to 1953, testified that Atlantic salesmen objected to his pur- _

because of the number of vears that Pollock had been with

’ Atlantie, and he continued to purchase Lee tires thereafter. .

- He purchased some Bowers batteries, and salesmen told

chase of a number of Lee tires at a special price, however, —

_the sales supervisor stated that this would be satisfactory

, nase ~

era erat

him he was going to have his lease cancelled. Pollock left

the station to take over’a tavern. ar Ne oe

" e) Francis J. Ballaron, an Ailantic losses a 1953 to

»1957, carried Goodyear tires and batteries’ purchased

through Miller, an authorized distributor. He kept non-

‘sponsored tires on oil rack where Atlantic would not see

them. Ballaron testified that he left the station becatise of |

pressure every month for not buying TBA where he should.

(£): James: M. Meyers, Jr., an Atlantic dealer. from 1950

to 1951, testified that he discussed non-forcing letter with

Atlantie salesmen who-told him to try buying other mer-

chancise and find out what the letter meant.

(g) Norris Stein, was an Atlantic lessee, beginning July

26, 1954. About six months later he discontinued exclusive

purchase of Firestone and was told by Atlantic salesmen

that he would not long’be an Atlantic operator. - He stated.

that he had received no-forcing letter of June 22, -1955.

G Terminated his lease for *reasons#fmot involving TBA. —

ah nee)

(hy Thomas. J. Sullivan, Jr. an Atlantic lessee from P

19538 to 1954, was told that Atlantic would like him to obtain

all his products from Firestone. He bought some Bowers

batteries and also Exide and was told by Atlantic salesman

not to sell the*batteries as thes were not as good as Fire-

stone and that he didn’t want them displayed: inthe station.

‘He removed the batteries from display. Sullivan furti.er

testified that he returned the§Exide batteries and discon-

"tinued the Bowers batteries: s he felt that. if he: rubbed |

-Atlantie the wrong way that he would be in their disfavor,

and that his lease might not be renewed. ‘He stated that the es

Atlantic repr esentative made no direct: threats, but always

left the impression that if he did not operate-the way~

Atlantic wanted him to, the chances were that his Tease Con

would not He. renewed. The Atlantic salesman ‘always

questioned him when he hought non- -sponsor ed items and

‘gave him the impression that he was expected to buy Fire-

. Stone products. . The salesman would ask him from time to

time why he did not buy Firestone, and he got te the point

A13

where he bought all items from Firestone because he was.

afraid of no lease renewal. It was put to him that he would

‘not be forced to buy Firestone products, but Atlantic more —

or less expected him to do so. Sullivan sent in cancellation.

of lease because of price controversy.

(i) John Galle, an Atlantic lessee from 1954 fo 1956,”

discussed with Atlantic salesman an offer of batteries and

tires at prices lower than Firestone, and salesman informed

him that he had signed an agreement to purchase TBA from

‘Firestone and showild not go against this agreement, and in .

addition Atlantic wonld not like to see competitive brands

to-Fireston. in.the station. He did not purchase these.

_ items, but continued to purchase Firestone tires and bat- ..

- teries. He received the non- for?ing letter on June 22, 1955,

but did not discuss it with the Atlantic salesman.

_. (j) Harry N. Hawes, ‘an Atlantic lessee beginning’ in

1945, had three suions. In the first station he‘ bought only

Firestone TBA. In the second station carried Lee tires, .

and: Atlantic salesman wanted to know what they were

‘doing there, but he continued to handle them, In the third

station he sold only Lee tires and some accessories fram.

Firestone-without much comment from Atlantic. Lease was

not renewed on the second station, and the third station

,lease was cancelled’ at’ his request. Atlantic’ salesman

refused to let the new dealer take ov er. the ine tires” and

batteries on hand. | “US

(k) Richard Brown, Atlantic lessee. from October 1955

to April 1957, because of dissatisfaction with Firestone,

began to purchase Goodrich tires. Atlantic salesman told

him that he did not like the purchase of. non- sponsored

‘_items,.as it was ‘affecting his salary.

(1) James Parag, an Atlantic. lessee from August 1, _,

1955, to March 1956, bee vane dissatisfied with Fire ‘stone and

‘began purchasing Goodyear tires and. accessories from dif-

ferent sources. W hen Atlantic salesman saw the merchan-

dise on his shelves he told him that he could not handle them,

et if he did not handle what Atlantic. handled he would

' maps 5 of the. Federal Trade Commission Act. 15 U. S.

. . 4

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, Commission's Opinion. ie eee a

5. ° UNITED STATES OF AMERICA,

pone / ‘ of 3 ake : °

"Papen Taam Commisstow. |

Y & )

Commissioners : a g “os Fs 5 ae

' “Karu W. Kinyxen; Chairman, . ans

Rosert T. Secrest, ‘are er

. SicuRD AWDERSON,. pee |

» Wi OC. Kern. a een A a

Lf ' os ' Pi

ke. THE Marrer.

a ‘

Tue Goopyran Tre & Rupper 7, Docket 6486. Cre

‘Company, a corpofation, and ~ rete,

- THE “ATLANTIC REFINING Company,

a corporation.

* OPINION OF THE COMMISSION

By Kine, Chairman :

. This proceeding is based upon an amended complaint

charging. The Goodyear Tire & Rubber Company and its

. wholly owned selling subsidiary, The Goodyear Tire & Rub-

ber Company, Inc., (hereinafter collectively. referred to as

‘*Goodyear’?) | and: The Atlantic Refining Company: with

‘acts, praetivtes and agreements constituting a violation of

C. §45 (1958). Respondents answered admitting in part

| the allegations of the complaint but denying that: Redtion 5

had gen me

The prMcipal issue framed = the pleadings i is the legal~

ity of a contract between these.respondents calling for the

pipaitaceea 5 » anderen te EA We ree ASS TL EM RR ie Sa ap CE PR MEY, ae Pe iN NLD ty EN tty a Nee SE Ste ee See S

. & o ” we. ;

Be Gee Wah ca pda ei ae Se oe sp aoe

= ° f 7 f > a!

re ; A- 14: eG a Se .

— his lease, a also because it shies affected the, sales- -

. man’s commission. ‘3 Bh. ”.. at +. p>

; (m) Jamek.R. ‘Kelly, an Atlantiaessee ‘from Sesteniber aa ale

, 1952 to March 1953, began with Firestone TBA. Later’ sold

_ whatever tires customers Winted. Atlantic salesman would ~

not let him change window valances, he was told to-leave ”

them alone to keép the, station uniform. Had some Good-

--yeat and Goodrich tires which he kept in the back room. -

felt he would get in'trouble ifthe: did xfot.

is 1, Certain amiialind d suppliers of TBA, who

were selling j in compétition with respondent: Goodyear, were

- called as witnesses in this proceeding. This testimony was

taken-in three areas—-Philadelphia, Pennsylvania, Wilming-.

Aig aware and Baltimore, -Maryland.- These parties

t ed- generally that they hackdifficulf¥ in selling TBA te

Atlantic stations and testified. specifically as to reasons ae

given by certain Aflantic ‘dealers fer not buying. or selling - *”*,

their TBA, items. This testimony as to reas given by ;

Atlantic dealers for not purchasing competitive BA was

‘ allowed under the authority of Lawlor vs. Loewe, 235 U.S...

522. This latter testimony was received not as pr oof of the

truth of the facts*recited, but for the purpose of showing

the state of mind of the dealer. This testimony, however,

is competent ‘to show that dealers did' not ptirchase a sub-

stantial amount of. competitive non-sponsored TBA becausé

of their feeling that they were required to purchase Good--,

year or Firestone. .' ) Roig

“. “99, In: the course ofvits defense in this proceeding, The

Atlantic Refining Company introduced the testimony, of:

thitty-six Atlantic dealers’ and, two ex-dealers: Substan-

; tiallyyall of these witnesses testified to selling non- sponsored

‘TBA in varying «mounts without objectign by Atlantic.

‘Most of them (testified to-having received the non-foreing

letter, issued by Atlantic similar to the letfer of March 1, |

1951,. which this record shows. was. delivered to all its ©

o sonore and prospective dealers. Nae -j

ge 2d

. ; ome ae a

; re >

AIS

23.-The hearing ,examiner recognized that present

- “dealers appearing to testify 9 were under considerable pres-

sure because they were naturally interested in not jeopar-

dizing the renewal of their lease The record as a whole

shows that there were no exclusive ers in the sense that

~. they confined themselevs entirely ta&ponsored TBA, as all .

dealers carried some non-sponsored TBA to satisfy

demands of their customers either i in-varying amounts or on

a pick-up basis. Many of the stations do not have the space

or finances to stock a complete line of tires and batteries,

but instead purchase non-sponsored as well as sponsored ©

items on, a, pick-up basis to sa fy customer demand. There

was also in some instances e ice of confusion gs to the

definition of accessories sae the dealers, as some

-ineluded as accessories items generally considered as repair

' parts, as distinguished from.accessories, and somé dealers (Si

testified tq,carrying non-sponsored items_}

fact, not Supplied by Firestone or Good¥ear. /

dealers called’maintained a high salés volume in gasoline

ch.were, ip

_ gallonage and also oil, and -Atlantic would not jeofardize

this gallonage by pressure tactics sufficient to irritate or

alienate such dealers.

- 24. Ri is clear from the record in this. proceeding that

the Atlantic dealers did not.consider the non-fgreing letter

. as, giving to them free and unhampered authority and the _

blessing. of Atlagtic to handle thatever TBA they might ©

_ see fit. Both the @ealers and the Atlantic salesmen accepted

_ this letter for what it said; namely, ‘that the dealer ‘at the

time of. the change-over ‘and prospective dealers thereafter

had. the right to select or feject the TBA wiles program

offered by Atlantic. The prospeetive dealer fwaking appli-

gation for an Atlanti¢, séation would not likely reject offhand a

the program submitted by Atlantic, and such rejeeti .

~- could yery well affect ‘his sélection as an Atlantie Joulek: .

After, a dealer selected’a TBA. program, the Atlantic sales-

" mer insisted, and saw’to. it, that the dealer hewed to the line, »

insofar as the more important items of TBA were con-

cerned. The salesman wouldehe’ ‘expected to insist upon the

: LS;

A-16 ig ue

a ee =

a? plrekaee of . sponsored TBA, as such purchases: were

reflected in the’ commission which the salesman received.

25. After giving consideration " thie testimony: of tha” ;

various witnesses appearing in this. proceeding; and giving -~~

’ consideration to. their demeanor and. credibility, it is. the

_ opinion of the Aearing examiner that the reeord in this. pro-

ceeding as‘a whole indicates that coercion and pressure

were used on a sabstantial number of dealers to induce them

- to. purchase sponsored TBA and to discotitinue the purchase

“or display of noin-sponsored items.

CONCLUSIONS | er =

a Ee The cothplaint does not charge, nor does the evidence

. introduced in this: proceeding prove, the existence of a ‘con-

spiracy between Goodyear and Atlantic to restrict and

_ restrain competition in the sale and distribution of TBA -

~produets. :

. Shore is no evidence that The Goodyear Tire & Rub-

ber praca or The Goodyear. Tire & Rubber: Company,

‘ » Inc., engaged in, or. participated i in, any of acts or practices

designed to force dealers and distributors of The Atlantic

y _ Refining. Company to purchase Goodyear TBA products..

3. Neither: the sales commissjon contract between

Atlantic and Goodyear.nor the contracts between Atlantic

and its dealers and distributors contain any clause “or pro-

vision requiring such dealérs or distributers_to purchase

only Goodyear TBA. - in

4. In making a dalled as to whether ea ~~

-by Atlantic with its dealers are used to suppress competi-

, tion, the extent to which they are in conformity with reason- ~

ae able requirements in the field of commeree in which they are .

4 used will havea direct bearing on their legality. The house-

oppressive, and the renewal and cancellation provisions of

> e 8

alt,

the leases are in: ‘conformity with those which ordinarily

appear i in many leases a6 Property:. Sa Y

. a

5. The consideration for. the” payment of commission to

Atlantic under the sales commission contract is based upon

substantial services rendered by Atlantic in promoijug the”.

sale of Goodyear TBA to Atlantic dealers and dist =

utors. J ee

6. No inference or } implication. can be drawn from the

' eontractual relationship ‘between. Atlantic and its dealers,

that the degree of control by Atlantic over its dealems is

sufficient to. force its dealers- to purchase only sporgorea

TBA.

. 7. The aliens in - this: proceeding shows that lentes

have, on occasion, been eahcelled because of TBA practices.

a otter purchase.or display of non-sponsored TBA

products. *

-§.-It-is further concluded that for the purpose of

. ‘inducing the ‘purchase of sponsored TBA by ‘Atlantic.

~ dealers,. Atlantic represéntatives did, in fact, coerce, and

- attempt to coerce, and force Atlantic dealers to purchase

- substantial quantities of Goodyear and Firestone TBA, and

Atlantic accepted the benefits of such acts and practices. |

These acts of coercion consisted of demands that dealers

discontinue the purchasing and displaying of non-spon-

sored TBA under threat of lease cancellation, non-renewal

of lease or other corrective action. Such éoercion need not -

be. 100 percent effective in order: to constitute an unfair ~ ;

‘method of competition or unfair act er practice i in violation |

of the Federal Trade Commission Act.

9. The pane of the complaint are sufficiently broad

_ to sustain an order prohibiting overt acts of coercion even

. though it be found that the contracts entered into by the

parties are not illegal.

A-18.

-10. The’Federal Trade Co iets has jurisdiction of

" - the subject matter of this proceeding and of .the —

ents, named herein,

11. The acts’ and practices of The Atlantic ‘Refining ;

Company, as herein found, which involve coercion of its

dealers are all to the prejudice of the public and have a

tendency and capacity to restrict, restrain or lessen ‘com--

‘ petition in the sale of TBA products and ‘constitute unfair

methods of compéetition-and unfair acts and practices. in

commerce within the intent: and meaning ot semened 5 of- the

’ Federal Trade: Commission Act. | eatis

° ORDER

Ir I$ ORDERED that respondent ‘The Atlantic Refining

Company, a corporation, and its officers, agents, representa-

- tives and employees, directly or through any coppormte or

. Other device, in connection with the promotion, offering for

gale, sale and distribution of. tires, inner tubes; batteries

and ‘other automotive parts, accessories_and supplies _

(hereinafter referred té as “TBA products’’), in com-

merce, as commerce is defined in the Federal Trade Com-

mission Act, do forthwith. cease and desist from, directly

or indirectly - mats

1. Inducing, er attempting to induce, the purchase

of TBA prodnets of*a particular supplier by At-

lantic dealers by threatening to cancel or to not

renew lease of dealer or to take dther retaliatory

action if said products are not purchased. _

Threatening the cancellation or--non-renewal of |

any coutract or lease if the dealer purchases or |

continues to purchase TBA preducts not spon-

gored, recommended or approved by the respond- -

ent, or the sale of, which is not promoted by the .

respondent. P

3. ‘Threatening ‘the cancellation or non-renewal of

‘ any contract or lease if the dealer displays or con-

$$$, _

. ‘tinues. to display TBA products not sponsored, o +,--

recommended .or approved by the respondent, or =~

the sale of which %s not —— by ms respond-

gmt.

ce * The performance of any acts of intimidation or.

aa coercion, either through statements, oral or, written,

made directly to, dealers or by representatives of ;

respondent, which are designed to, or have, the

purpose or effect of intimidating or, coercing

respondent’s dealers‘or other customers io pur- .

chas,TBA products seld by any désignated sup-

plier sponsored; recommended of - arrved ty

respondent.

7 we

5. Compelling, ot sienitinn to ous ‘ieahoen by

any means or method to sell and distribute only

products supplied. by a designated supplier spon-

sored, recommended or approved by respondent.

6. Preventing, or attempting to_ prevent: its dealers.

by means of threats, intimidatior or coercion, from

= handling or displaying TBA or other similar prod- _,

-* * uets which the respondent does not sponsor, rec-

ommend or agprove, or the sale of which is not

promoted by the respondent.

Ir ts FURT&ER oRDERED that the complaint be, and it is

hereby, dismissed as to. respondents Thé Goodyear Tire & »

Rubber rience = The Goodyear Tire & Rubber Com-

pany, Ine.

“a. c rae /s/ sda. J. en,

Hearing Examiner.

October .23, 1959.

————

% APPENDIX B.

OPINION AND ORDER OF THE eee?

ie __-Bhe-Opinion- begins a at page ‘B-1.

—_ Order begins at page B-67.

e \S

ide

? pureiaes by. Goodyear of a sales commission ‘fo Atlanti¢ in

‘return for sales assistance in promoting automotive tires,

» batteries, and accessories (hereinafter referred O° as.

/ “TBA”? or “TBA: products’’) of. Goodyear 1 to retail and

wholesale petroleum outlets of Atlantic. In addition, .

Atlantic is charged with having entered into a substantially

identical agreement with The Firestone Tire & Rubber -

.Company, and Goodyear is charged with having entered

‘into such agreements with a number. of oil companies other —

than “Atlantic, intluding Shell Oil Company.'. Although

Atlantic and Goddyear are tit only respondents. in the

instant case, Shetl and Firestone are joined as respondents

in a companign case, Docket 6487, and in another companion |

case, Docket 6485; The,Texas Company and The B. F. Good-

... Fich Company yaired as respondents.

The ee ea in- substance, that the success |

enjoyed by Goodyear and. Firestone in selling to Atlantic

outlets has been purchased at the expense of competing

TBA’ suppliers at thé manufacturing and wholesale levels.

Counsel's supporting the eomplaint contend that the Atlantic-

2 _ Goodyear and Atlantic-Firestone, sales commission con-

_ tracts are unlawful because, in ‘con junction with Atlantic’s

economic pewer over its ostensibly independent wholesale

and retail petroleum outlets, these contracts operate to stifle

the free choice of Atlantic’s retail and wholesale dealers

insofar as their TBA purchases are concerned. Among

the unlawful competitive effects stemming from Atlantic’s

» sales commission contracts chagged by the complaint are

_ these: (4) That suppliers of TBA corgpeting with Goodyear

and Firestone at the wholesale leve have been foreclosed

from access to Atlantic’s retail outlets on.the same compet-

' itive.terms as have been made: available to Goodyear and .

- Firgstone; ( 2)’ That competing manufacturers of tires and

sihjigtlcamtsillbindi

‘ Other oil companies liaving sales commission ‘ arrangements

~~ with Goodyear inelde Anderson-Pritehard , Oil Corp., Ashland — ‘if

Oil and Refining .Co., The Carter Oil Co, D-X Sunray Oil Co.,

‘Quaker, State Refining Co., Richfield Oi) Co. ( accessories orilv),

The Sfamrock OW and Gas Corp., Shell Oil Co.; and, Sinclair Refin-

ing Co. _(aécessories only). . ;

ES ae Shee eS Tee More Re SMe ge Sm liar

sae e ee ¢

- |; ; :

B-3°

° other TBA sheninibece been foreclosed froin access to Atlan-

_. tie’s wholesale distributors on the same cofipetitive terms

as have been made available to Goodyear and Firestone ;

"os (3), That competition between Goodyear. atid Firestone in

selling to wholesale and retail outlets of Atlantic has been ..

destroyed ; (4). That a substantial . nuraber ~o Atlantic’s

petroléum distributors and’ service station operators have

.¢° been denied their right to act as independent businessmen -

cole in exercising-freedom of choice as to TBA products which

they may purchase. and stock for resale; and (5) Phat the.

_consuming public has been deprived of the benefits of free

7 : competition at the wholesale and retail levels insofar as.

At : TBA distribution through service station outlets under the,

sales commission plan is concernedg —

; Respondents deny these allegations and assert that their -

. sales commission contract is a ‘legitimate and competitive’ :

oe - method of. distributing TBA which benefits suppliers. of « ‘a

sa “ TBA ‘products, oil ‘companies, dealers and distributors of ¢

=", petroleum products and the éonSiming public. .

After hearfhgs éxtending from the latter part of 1956

. -into November 1958, the hearing examiner filed his initial

ert ta be decision on October 23, 1959, dismissing the complaint as to

rane. Goodyear but-holding that Atlantic, by foreing‘a subst es

tial numbers of its dealers to purchase ‘sponsored TBA

through threats of lease cancellation. or other retaliatory . °

6 ~ action, has ‘engaged in unfair methods of competition and -

; . unfair acts: and practices in.c6mmerce in'violation of See-

- tion 5 of the Federal Trade Commission Act. . He farther

held that the charges of the complaint are sufficiently broad '

to sustain an order prohibiting overt acts of coertion on the

part of Atlantic even though the sales commission contraéts

themselves are not illegal, An order was entered against .«

| Atlantic prohibiting future acts of coergion-“or intimidation. ©

> Se eae designed to foree Atlantic dealersfo } o purchasé TBA Prod-

ae _uets sponsored by Atlantic” a

Seg Both sides have appealed from the initial decision,

Counsel supporting the complaint eontend that, while the

order entered hy the heating examiner is well supported by

the eviderice of. record, it. will not be .an effective means of

~<"

spel the unlawful effects on ccnp titiin caused by the

2 spondents from continuing with their presén les ‘eomi- of

sion agreemgnt and enjoining them. ‘from tering into

i should be — from , purchasing TBA products

for. r ale to any wholesalers or retailers of . satis

_ counsel sup orting. the complaint 46 the appeal ‘prief of

Atlantic. Onal argument was d by the Conimission .on

June 23, 196)),-and the matter is now before the Commis- -:

. sion for decision. We find that Atlantic has im fact coerced __

a substantial number of its dealers to purchase substantial *

agreements in the future. ‘They alsq contend that

' ey ‘6... or for distribution i in an other 2

amounts of spdnsoged TBA through threats of lease cancel- ’

. lation’ or -othen, retaliatory action. We further find that

Atlantic has sufficient economic power over its wholesale

and retail distribntors to cause them to purchase substantial

amounts of sponsored TBA even without the use of overt

coercive tactics.

-" elude that the e ercise of this power by Atlantie through

the use'of the sales commission plan in favor of Goodyear

constitutes an unfair method of competition. ‘and an unfair oy

act or practice in commerce within the meaning of Section as

a of the Federal: Trade Commission Act. |

Criqnacramiics o OF THE ‘Sazzs Comaassion Pian 9

Motorists may purchase replacement TBA items from

several major classes of distributors. Manufacturers of

- these items, for example, Goodyear and Firestone, maintain

- either company-owned or franchised wholesale and retail

~ distribution outlets in all of the marketing areas for TBA -

products considered in the course of the hearings in this

‘ease. Gasoline seryice a constitute | a me major

‘or reasons‘set forth hereinafter, we con-

KS.

class of outlets for TBA products. Actording to a 1947

market survey relied upon by Goodyear in implementing its

sales commission program with The Shamrock Oil and Gas

Corporation * of Amarillo, Texas, motorists purchase

approximately 37 percent of .their replacement. tires and.

tubes, 44 percent’ of their replacement batteries, and, 20 ,

° percent’:of their automotive accessories from gasoline

_ ‘service stations.”

” adapted to be outlets: for the salé of TBA products to the ..

motorist consumer. They constitute a large and ‘increas-.

The complaint i in this case silaiien that ‘sgervice stations

by .the nature. of their business, are particularly well

ingly important market for TBA products.”? The » frath of ©

this allegation is conceded by* both Goodyear and‘ Atlantic,

. and Goodyear also admits that it ‘‘. . . sells TBA prodnets

directly and through wholesalers to many customers, includ- ~.

‘ing service stations who purchase for resale to, consumers

for replacement use in their automobiles.”’ -

Service station operators may purchase their requ

oe ments of ag ses two principal- sources: (ayoteal

refinery pr

their respective marketing organizations. TBA purchased.

wholesale TB dealers, representing Firestone, or Good-

year, or some. other TBA manufacturer;:or (2) Oil tom-

' panies chiefly engaged in refining and distributing petro-

leum products which also purchase TBA products from.:;

—— of. these items, for. resale along with. the

ucts such ‘oil companies distribute through

by oil companies for resale may either be branded>with a

_particilar oil company’s ‘principal. brand, . for * example,.

‘*Gulf,’’ or with a private brand controlled by an oil com- -

pany but, used exclusively for TBA Phd. not for refinery '

products, ‘for example “‘ Atlas,’? or with the, supplying man-

ufacturer’s own brand, fer example, “Tee”? (tires) or.

" all replacement passenger | tires are sold by servi

Atlantic ‘Mestimate is considerably . lower: tha

. nevertheless, clear that’ service stations account for a substantial

‘*Rxide’’ (batteries). pee ) ‘

- 21 percent of

Stations. Although

Goodyear,’s, it is

3 2 ‘Atlantic ticaiad. in 1948 that approxima

percentage Of total TBA repldcement items sold to motorists.

; | : i : ! ;

fsa Been sae poy.

B46

Yo particular term, is used in the industry to describe

the marketing technique whereby service station operators ©

purchase TBA from independent local wholesalers, but the

term ‘‘purchéise- ‘resale’? is customarily used to characterize

the marketing technique whereby oil companies purchase

and resell 1 TBA to their respective service station dealers.

The sales commission method of distributing TBA is &

hybrid deriving certain of its ‘attributes from. the first anc

other «attributes from the second of these marketing tech- -

niques. - Both the purchase-résale plan and ‘the sales com-

mission plan make-use of the: marketing facilities of mar- .

keting oil companies, but in different ways and with differ- ©

ing competitive effécts. This may be illustrated by con-

trasting the purchase- resale method of distributing TBA

used. by — prior #0 1951 with the sales commission

method ade 1 by Atlantic in — and used by the com-.

pany Since that time. By

Atlantic’s Purchase -and Resale Plan. ‘Bonietime in

1932, Atlantic commenced to purchase ‘‘Lee’’ tires from

the a Rubber and Tire. Corporation and io resell such

tires to its wholesale ‘and retail ,petroleum distribntors.

* Later, ‘in, 1937, Atlantic commenced to purchase ‘‘Exide”’ .

batteries from the Electrie Storage Battery Company

(hereinafter referred to as .“‘Exide’’) and resell such bat-

tcries, hlong witi ‘‘Lee”’ tires, to Atlantie dealers. ere--

after, Atlantic began to spa astele anil resell the foll@wing

automotive accessories :

Products \ . Supplier

DuPont polishes and EB. L du Pont de Nemours

chemicals .. and Company: |

} Se ence ilmington, Delaware |

Thermoid fan belts Thermoid Corporation

and radiator hose Trenton, New Jersey .

Fram oil filiers Fram Corporation |

: | : . Providence, Rhode Island ,

- Sehrader valves sh: Schrader, Sons

Brooklyn, New York.

- BT | ey

Products ‘ aes Supplier

Weed chains ‘American Chain and Cable

+ te ‘ . Compan¥ *

York, Pennsylvania -

Among the. duties undertaken by Atlantie i in connection

with this program were the purchasing, financing, shipping,

warehousing and selling of TBA items to its various classes

of retail and wholesale petroleum dealers. Commenting on

*; an company ’s TBA program in 1950, My. S. J. Heideman,

TBA Manager for Atlantic. commented that “We receive

a good gress margin in keeping with the duties left to us.

mbes Moreover, the overall satisfaction of Atlantic’s

dealers ‘with the Lee-Exide arrangement was evidenced by _

the results of a TBA brand preference survey under ‘taken |

by Atlantic’s Sales Research Séction in- 1948 and 1949.

More than 1,000 servi station, dealers representing seven

major oil companies, Petuaing Atlantic, located in 47 cities

from Massachusetts to Florida were interviewed.during the

course of this survey. Of the Atlantic deaJers interviewed,

-67 percent preferred Lee tires and 79 ‘percent preferred

Exide batteries over competing brand@s of ‘tires’ and batter-

ies. Eleven percent of Atlantic’s dealers stated a preference

for Goodyear tires, 4 percent for Firestone tires, and the

* . remainder announced a preference for various other. tire

brands, No preference for any particular brands .of accés-

sory items was found to exist, although ‘A definitely unsat:

isfactory supplier-dealer. relationship’’ on accessories was

observed. Sixty-sevén percent of the Aflantic dealers

contacted . indicated that -they would rather obtain their

TBA requirements ‘from several ‘sources’ rather than a

, single soutce, the principal reasons given therefor being

price advantages and the variety of brands. Of the remain-

‘ing 33 percent of Atlantic dealers, who preferred a single

source of-supply for TBA products, less than 4 gpercent

gave as a reason the fact that, the single supplier could pro-

vide them with a complete. line of TBA~better service was

given as a reason by 35 percent of the Atlantic dealers. .

~ . :

B-8 o

preferring a single source of supply, and price was given

as a reason by an additional 32 pene.

Ailantias Changeover to the. Sales Commission: Plan

Contemporaneously_ with the TBA brand preference -

survey of service station’ dealers described above, Atlantic

management was actively considering possible alternatives

to their purchase-resale arrangement with Lee. On Janu-

ary 19, 1948, exploratory letters were serit to five major.

. tire manufacturers, The Goodyear Tire & Rubber Company,

United States Rubber Company, The B. F. Goodrich Ci om-

pany, ‘The Firestone Tire & Rubber Company, and General

Tire & Rubber Company, inquiring ‘‘. . . what interest you

may have in the ae ef your tives ‘and tubés through

_ AtLantic outlets.’ The tire companies were informed ,

of Atlantic’s desire ‘‘. . . to consider your prepositions on

first line, second line, ona private brand, or as*many of

these lines as you merchandise.?’

To assist the tire companies in preparing their quota-

tions, Atlantic estinia it would require approximately

' 300,000 passenger tires and 40,000. truck tires annually,

with tube requirements approximating ‘70 percent of tire

requirements. Proposals were requested not only as to

_ principal brands of the tire companies (‘‘Ggodyear,’’ *‘Fire-

‘stone,’’ etc.) but also as to secondary brands controlled

by thése companies (‘‘Kelly-Springfield,’’ ‘‘Pisk,”’

‘‘Federal,’’? ‘Millet’? and ‘‘Hood’’) and as to private

brands.as well. Mansfield Tire and Rubber Company and

Lee. were also contacted and request »d to submit pr epoyels .

on a private brand tire.

- A detailed analysis of responses received from the

various tire cowhpanies was presented té Mr. D. T. Colley,

Vice President in.Charge of Domestic Sales of Atlantic, in

a memorandum of June 22, 1948, from the company’s TBA:

Manager,’ Mr: Heideman. This memorandum concluded

with the statement:

‘‘This presentation and ASiestiols benefits with the |

several companies has been discussed “ht length with,

— aa

12)

t . : : B-9

. . the members’ of thé T. B. A. Products Committee. It

- was their unanimous opinion that Lee.appeared to be

the best choice for our company. - To their. approval,

I would like to add my, own, since it is my opinion

after careful anatysis that the Lee franchise is -

best available at. the present time for Atlantic.’

Ina sibeoquent memorandum of August 24, 1948, Mr.”

Heideman ‘set forth several reasons why a proposed experi-

ment then under consideration involving the sale of Fire;

stone tires in one sales district of Atlantic should not be

adopted:

“It is apparent , that it would be. unreasonable

to expect - too great an: nexpansion of our present sales -

by the addition of a better known tire. As a matter

. of fact, it is our opinion. that there is a very real

possibility of a smaller market | with Firestone due to

their presently established | company stores and dis-

tributors. Volunmie purchase requirements would

leave a great number of our dealers in a poor com- _

. petitive position. | eke

‘« , neither Firestone batteries nor accessories

have the national acceptance of the lines we presently

handle ®.. [T]here is certainly an indication that

consumer acceptance of the Firestone brand. in a bat-

terion! is very limited. sig

Nev stile ss, negotiations with the tire companies con-

tinued throughout the retnainder of 1948, arid in May 1949,

Goodyear expressed its w illingness to offer a TBA program

to Atlantic. Howev er, it was Firestone which was selected

for Atlantic’s first experiiaent with the sales commission

plan. In a letter of January 10, 1950, to the Regional

- Manager of its New York Region, an Atlantic official,

_ explained: Bea af eae’,

“As you know, for the past-year we have heen’

studying T. B. A. as to its profitability to the Com-

‘pany. Our most recent findings indicate that it is

B-10

questionable whether this venture is paying us to the

degree that the effort expended warrants. ==

‘“Th our approaches to the subject, we have had

_ discussions-with various major tire manufacturers.

who, as you know, are interested in handling the

entire T..B. A. line, paying us ‘a commission.

. ae moet: ~ ae ae _

‘“‘The proposition that seems most acceptable to

us is one offered by Firestone. I will not attempt to

go into detail covering this proposition, but when

| + -you come to Philadelphia for the Regional Manager’s

Meeting next week, Mr. Heiderhann (sic) plans to sit

_« - -down with you and go over the proposition with the.

? thought in mind ‘that you will elect to have your

Region be the guinea-pig.’’ ted

> As it, turned out, however, the Firestone plan was not

introduced imto the New: York area. Instead, operations

‘under the Firestone commission plan began in Atlantic’s »

Erie, Pennsylvania, district on March 30, 1950, and in; the ,

Wilmington, Delaware, district-on April 4, 1950. » Opera-

tions under a sales commission plan’with Goodyear com- ..

_ menced on an experimental basis in Atlantie’s Newark, New *

Jersey, sales district on June 12, 1950. After these ‘pro-

grams were instituted, Atlantic’s Sales Research Section .

conducted a secret poll in July and August, 1950 among

600 of the 750 Atlantic dealers and distributors in the three

- TBAdest districts. The purpose of this poll was to deter-

Lee-Exide progr and the sales commission program. Of

the 123 dealers responding to the poll, 45 percent preferred

. the new sales commission plan, 40 percent preferred the

former Lee-Exide arrangement, and 15 percent showed no

preference for either plan. : :

In December, 1950, Atlantic contacted seven manufac-

mine the oe of Atlantic dealers as between the °

turers of batteries, including .Exide- and Gould-National, |

Batteries, Inc., ‘‘... in an attempt to discover whether they

had at present or contemplated in the future a battery

. Baul fay ee 23°

program, for direst dealer merchandising similar tosthe .

» commission plan offered by certain tire companies.”’ This -

suggests that Atlantic was considering limiting the sales

commission contracts with Firestone and Goodyear to tires

and tubes only, or perhaps to. tires, tubes and automotive

‘ actessories only, with a separate sales commission arrange

ment for batteries with a supplier who could furnish a more. -—

-widely-known battery than the ‘‘Firestone’’ and ‘‘Good- *

vear”’ brands. - (Actually, Goodyear does not manufacture

batteries, but instead purchases batteries marked with the -

“Goodyear’* label from-Eleetrie-Auto-Lite ‘Company and

Gould-National Batteries, Inc.

Favorable replies were received - from several , the.

battery manufacturers, ‘vith’ Exide satis particular

. - interest in such a program. This company’s manager for

‘automotive replacement sales responded to the Atlantic

inquiry on December 22, 1950:

“Currently all Exide automotive replacement

- battery sales to dealers are ‘made through our Whole-

sale’ Distributors, thus affording prompt delivery

through many warehouses.

“Your letter of Deceniber 15 inquires as to our.

plans for a commission“ “arrangement to be offered.

national oil accounts on direct sales to: dealers. We

- , believe that our experience with this type of ‘opera-

tion ‘in past.yvears should. be: of great value to*vou.-

Therefore, I suggest that immediately after the first:

of January you arrange for a meeting with interested

membérs of Your organization for a complete discus-

sion of the many phases of this subject.”

‘ .

Negotiations between Atlantic and Exide were never

consummated, however, and on February 14, 1951 a sales

officral of Exide reported to his superior as follows:

“Mr. S. J. Heidman (sic), .T. B. ‘A. manager of

the Atlantic Refining Company called today to ‘give

.- me advance confidential information regarding a

| decision made this morning by top management of _~

. a

yy,

B-12,

the Atlantic Refining Company regarding future

handling of T. B. A. sales to Atlantic dealers.. ~

‘‘Eiffective as quickly as the changeover can: be

made, all.T. B. A. sales to Atlantic dealers will be ©

handled on a commission arrangement.

“<7

--./-— * * wii * : *

. Both. Fiewibeiie and Goodyear had prev iously.

— ——peeri” Re sana regarding a plan whereby they

would sell tires only to the Atlantic Refining Com-

pany accounts on a commission. arrangement and-had

Agily refused such a pian . insisting that éither the

complete program or none be sold by them.”’

- TBA Manager: Heideman submitted a memorandum

entitied.‘T. B. A. Conversion: to Firestone & Goodyear

Programs”’ to Vice President Colley of Atlantic on March. €

_ 21, 1951, summarizing the changeover. to the sales commis-

sion program:

@ “On February 14th, the decision was made to

switig over to the Commission Plan of T. B. A.

marketing effective March ist. It was arranged ‘for

three regions (Philadelphia-New Jersey, New Eng-

‘land and New York) to market the program of the

Goodyear Tire and Rubber Company, and the other

three (Eastern Pennsylvania, Western Pennsylvania,

and the South) were to market the program of the

’ Firestone Tire and Rubber Company. The'split was

| of the Atlantic dealer’s T. B. A. business: ‘Although |

largely a matter of : regional selection, decided upon

lry local advantages enjoyed by the respective rubber .

companies but influenced by staff determinations to

have the ¥wo rubber companies competing in differ-

ent localities for an equal share in the development

. this move was sudden, events leading up to it were

developed in an orderly fashion over a period of :

years. st ans .

* * e . i * *

Peamensoom

ea .

os —

wae

“ee will be. interesting to_review some of. the:

advantages that we enjoy under the Commission

Plan. We are rélieved of the purchasing function ...

We do not warehouse or deliver any merchandise ; we

are not involyed in the handling of accounts, sach as

- invoicing or credit and collection work; we do not

issue catalogs pr price books nor do we have to pro-

vide point-of-sele.promotional helps. All bf these

responsibilities as well as sales training help-dre

assumed by the rubber manufaéturers. W@ assist in

merchandising task, and for this effort receive .a’

commission which varies according to ‘class

the selling job as. well as in the dealer training and |

account and type of merchandise, but has been aver» .

aging well over 9%.

'*4# | We are indeed. fortunate in having these two

companies competing againstsone another for a more

secure or favorable position with Atlantic. Westand

to gdin from this arrangement whether we ate in a

buyer’s.or seller’s market: .9< © .. |

_* . oe, "3 s- a -

_ ‘We have tried to esti ite how our 1950 actual

experience on T. B. A. would kgwé compared with the

same volume of performance if it were accomplished

under the Commission Plan. Our T. B. A. volume

excluding: the three test districts amounted to seven

and a half million dollars. Our gross profit ranging

from 20 to 30% gn the different products amounted

to approximately $1,664,000. Estimated expenges

‘chargeable to this operation total $2,071,000. This

would indicate a loss of about $407,000,’ (emphasis

added) ‘

3 Whether Atlantie’s purchase-resale program was as unprofita-

ble in reality as appeared from the accounting procedures used by

the oil company was questioned in a nfemorandum from the sales

ponegge Ag Exide to the vice-president of this company in Febru-

ary, : ae : . :

“=; €“The accounting procedure set “up by the Atlantic

* Refining Company was such that ‘expenses charged against

37. B. A. sales appeared.to‘make this operation unprofitable.

; 4 ad Foe eae Ss P

Se ee

ssl eyac , B4 Me |

“MAP I, below, shows the manner in which Atlantie’s

Marketing area was finally divided between Goodyear and. _

TABLE I ~

P * o- ;

TBA Sales Volume by Firestone and Goodyear to Atlantic ,

Accounts, and Commissions Paid Thereon, June, 1950

oer see » Through June, 1956 - | a eee

ear Firestone Sales Goodyear Firestone .-

Sales Volume ' Volume Commissions Commissioris

6-50/12-50...... ¢ 165,578. $ 458.3951 -$ 15447 ¢ “43,8941

: A. - 2,445,808 3,243,350 239,250 299,524

Aig - 4,175,890 4,349,616. 411,743 404,948

5. a, Se 0,067,565 5,050,381 500,437 469,784

ES _ 9,284,743 4,867,689 _ 923,048 452,083

de 5,700,121 .- 5,562,936 - - 557,599 506,199

1-56 /6°56..:.. 3,133,905 2,545,798 296,988 234,317

Total...” $25,973,610 $26,078,095 $2,544,519: $2,410,749

. fa} .. . . 7

_ As a result of. this and because the top management of the

Atlantie Refining Company believed that their own men

should participate only in the sales of petroleum products, -

_ it was decided edtly in 1950 to try out the Firestone and -

9 ;

Goodyear sales commission plan ,°. .

1 Includes period fram April, 1950 through Deceniber, 1950. |

Nore: ommission plan was used in only 3 of

In 1950, the’ sales ¢

- Atlantie’s 34 sales districts. The salés commission ‘plan

Was not introduced in all 34 Atlantic sales districts until

_ March 1, 195]. -

win ee

oe MAP con. eee.

THE ATLANTIC.REFINING CO. ao

- DIVISION OF MARKETING REGIONS fs

BY TBA SALES COMMISSION PLANS. —

.: QRRECEVE MARCH LISI ts!

8 * - 8

a Chrerrene ’ ° : KEY :

] pale De ofl . : ; A - :

- NGI] _ The Goodyear Tire & Rubber Co. KS

435s . :

“f_\- The Firestone Tire & Rubber Co. F-«4)

Ny -

° ee yet

wd .

Jif

“ru

whee

bora ( = :

-. % > \ Ld

- 1950 Atlan

B-16 © ;

f a4 eee E ag

In 1952, the first full year in which the sales commission

‘plan was operative in ‘all Atlantic, sales districts? combined

sales. of Goodyear and Firestone TBA to Atlanti¢ dealers

‘

and distributers amounted .to $8,525,506, and the two rub-

ber companies paid a total of $816,691 in sales commissions

to Atlantic.. The success with which Atlantic transferred

itssown former TBA sales volume under the purchase-

resale plan to Goodyear and Firestone under the sales com-

mission plan may be gauged from the fact that Atlantic’s . |

TBA splesolime in 1949; the last full year of opération.

urchase-resaleplan, amounted to $6,697,471. In

continued the purchase-resale plan in all

except-3 of its 29 sales districts, and in that year the.oil

company.’s TBA sales volume was $7,581,760,

The sales gains accruing to Goodyear and Firestone as

under the

a consequence of their sales commission contracts : with.

* Atlantic were accompanied by a corresponding loss in sales *

__ by Lee-and Exide even though both companies made vigor-

- ous efforts to retain the business ‘of Atlantic, dealers and.

distributors after Atlantic switched to the sales commission

plan. Lee opened new factory branches in Hartford, Con-

- necticut; Providence, Rhode Island; and Syracuse, New

York for this specific purpose.” All branches of Exide were

instructed to make it ‘‘their number one job’’ to solicit the .

business of Atlantic dealers and distributors. Nevertheless,

within nine months after Atiantic began sponsoring Good-

year TBA on March 1, 1951, Lee concluded that ‘‘approxi-

mately 25% of the Atlantic Refining Company business will

' be salvaged this yéar.’’ Seven months after the changeover,

‘Exide found that it-had retained all or part of the business

of 22.5 percent of the better Atlantic accounts and all or part

of the business of 24.7: pereent of the total number of Atlan. .

tie accounts. Thus, some 75 percent ef Lee-Exide sales to

' Atlantic distributors and dealers were lost within a nine- me

month period in 1951, even’ though a market -survey con;

dueged by the Atlantic Sales Research Section in 1949 had’

shown that 67 percent ‘of Atlantic dealers and distributors

preferred Lee tires and 79 percent preferred Exide bat--

teries. | od \, a

WW p 7

e © 2

naa

eet PRE AAR a ey AES a3

ark

-Atlantic i in 1950:

/ Moe eaeneem

~ Lee’s Vice “President in Charge. of Sales,.Mr. W. F.

Hinderscheid, complained bitterly . to Atlantie about the

. wholesale replacement of Lee advertising signs at Atlantic

stations with Goodyear advertising signs shortly after’ the.

sales commission plan was undertgken on a test basis ie

I was under: the i imp ession, also, where dealers

wanted to continue to hanWe Lee Tires through us |

_ it would be allright for therh to do so and we ¢ould

still have our identification/on those locations, how:

ever, I find that even though the dealers-continie to .

handle our tires their stalipns are identified with .

‘o competitive signs. For ins ance, in the Newark

' District. our identification is being taken down and

Goodyear will be erectedeven though thy dealer still ~

wants to handle Lee Tires.’

TBA = ae by Firestone and Goodyear to Atnatie out- ~

‘lets continued to grow, and’ by 1955, the last full year for

, which data are available, combined sales of the two rubber

_- companies urider their sales commission contracts with .-

Atlantic amounted to $11, 263,057. In order fully to nnder- |

‘stand the devastating competitive effects on manufacturers

and wholesalers of TBA products competing with Firestone

‘and. Goodyear which have resulted. from the latter two

a companies’ sales commissian contracts ‘with Atlantic, how-

ever, some further understanding of the functioning of the -

sales commission system is necessary.

‘

- Mechanics of the Sales Commission System Pa

Goodyear and Firestone niaintain either company-owned

or franchised: wholesale, outlets in most. of the: principal’. -

cities and in many €maller communities throughout the

‘ehtire marketing area of Atlantic Refining Company.

Atlantic markets its: petroleum products in the ‘Middle

Atlantic States , (indiuding parts of Qhio and. West

Virginia), New England (not including Maine) and the

Southern Atlantic States. “As has been shown, this market-

° a oe?

eo gihve 5. 2 4 B-18

‘of such sales to the District Sales Offices of their respective j

- companies, either Goodyear or Firestone. es

- ing territory is subdivided into six sales regions; three of —

which have been assigned to Goodyear and ‘three to Fire-

stone (See MAP I, supra.) , cee 2 areas

In cities'and towns where ‘Atlaritic retail’ stations are

located, such stations - are’ assignéd to a local Goodyear

distributor (if in Atlantic’s New England, New York ‘or

Philadelphia-New J ersey sales regions) or to a local Fire-

stone distributor (if in Atlantic’s Eastern Pennsylvania,

Western Pennsylyania or Southern’ sales regions). The

assigned TBA distributor is intended toe the supply point

frem which the Atlantic dealer will purchase a substantial

‘percentage. of his requirements of TBA. .

_ The'vast majority of Atlantic’s retail service stations

are operated by independent businessmen who either own or

-. lease their stations. . These dealers ‘not only buy and sell

Atlantic pétroleum products, but also offer TBA at their

wations, and in- addition perform various automotive ser-

vices and repairs. Atlantic maintains sales offices through-

“out its,marketing area and employs salesmen whose duty

it is to sdlicit orders for Atlantic petroleum products, from

Atlantic dealers, and to perform other functions for the.

~ i] company in its dealings with its service station operators. ~

When ‘orders for petroleum products are obtained, the’

_ salesmen cause such products to be delivered to the Atlantic .

dealers, who pay x" them at time of delivery or at ‘other

. specified times.

sales agents: for,Goodyea: or Firestone, soliciting TBA ™

e same Atlantic salesmen also act as

orders from Atlantic dealers, frequently accompanied on

* their rounds by salesmen employed by either the local Good-

year or Firestone distributors. If TBA, ordérs,are.obtained,

such ‘orders are turned in to the appropriate TBA sup-

pliers—the local distributors of either Goodyear or Fire- .

_ stone—-whip deliver the merchandise and: are paid by the.’

Atlantic dealers. The TBA suppliers, in turn, make reports

Under the terms of. the sales contracts between Good. ©

year and-Atlantic and Firestone and’ Atlantic, Atlantic is

' meh

i ' 4

Te Fa”.

three’ components of the TBA line, accounti

| eet Net “fe39 eee

entitled to a commission S sonadiar to 10 ilnia of ‘the

net sales value of all’ sponsored (i.e., Goodyear or. Fire.

tone) merchandise sold’ by Atlantiq retail ‘dealers, as cor:

deratign for the assistance giverm™by the Atlantic sales

organization in obtaining’ TBA orders from Atlantic deal-.

ers. These payments are made by Goodyear and Firestone

directly to Atlantic each month. “Atlantic i incurs no expense,

in connection with the purchasing, financing or. warehousing

of the TB-A-so supplied and has received sales commissions

-from Goodyear and Firestone.over thé years equivalent te

-more than 9 percent of the net sales value of all TBA prod-.

tuicts sold by these rubber companics to’ Atlantic dealers and | Pa

distributors.°.

Tires and tubes comprise the -most waetank. ‘of the

or about 70

4 Atlantic has some 936 WEidersie distributors, and is) entitled

to a commissibn of 714 percent on purchases of sponsored TBA by

these jobbers, compared with 10 percent | on purelases by Atlantic’ 8

_retail dealers.

5 Goodyear’s reasons for entering into its sales commission

agreement with Atlantic’ were set forth in a ‘¢Coenfidential’’ mem-

orandum of February, 1951, written by Mr. S*.A. Gaylord, Good-

year’s Manager of. Sales to oil company outlets: —

ir ‘« . As vou know we have recognized the desirability

of Atlantic distribution for many years and the ‘need’ for

more oil company distribution in, ‘the new territory now

_ assigned to us, which represents more: than 50% of: the

‘i ‘Atlantic T. B. A. sales and potential. ©

‘‘Rarly last year when supplics were ‘plentiful and signs

for the future pointed to over-production and inereased

competition, we mutually agreed on the markeiing experi«

ritories with a commitment for expanded territory if the

Goodyear Commissien Plan proved suecessful—whieh it-did. e:

“Tt is trne that even at a late date we could have with- |

drawn from our commitment to Atlantic“ however, we would

chave heen out of the acconnt for keeps and our competition

[Firestone], which placed no restrictions on moxine in,

would have the account 199 percent, ,

Haz The decision of’our Management was made a after

consideration of all factors and particularly beeanse it geve

Goodyear the ‘opportunity of entering into. a long-term rel#-

tionship with Atlantic prov iding our performance is satis-

factory.”’

ment with -Atlantie in our respective Newark District ter- ¢

‘

“percent, of total TBA sales to Atlantic outlets, with bat-

teries and accessories representing about 15. percent each.

Goodyear produces its own tires and tubes; and the more

important categories of automotive accessories, including

tire’ retread and repair materials, fan belts and radiator

hose. Batteries ma¢ked, with -the. “Goodyear” label are

purchased for resale from Electric Auto-Lite Company. and

Gould-National Batteries, Inc..,- while the following acces-

*sories are purchased by Goodyear for resale under. the

original manufacturer’s own brandg:

Accessory

Spark Plugs

Oil Filters

_ Cleaners, Polishes

‘ and Waxes

eaners, Polishes

Cleaners, Polishes

and Waxes

“Cleaners, Polishes

nd Waxes

Auto Lamps and Bulbs

Wiper Blades

Radiator Chemicals

Brand

* AC -

Purolator

du, Pont

Johnson |

Simoniz

. Mae’s

du Pent

—»

Warner

Wes: inghouse

ste

Manufacturer

AC’ Spark Plug Div

Genera: Motors Corf.

Same as above

‘Purolator Products,

Ine.

KE. I.-du Pont de

“Nemours & Co., Ine.

S. C. Johnson & Son,

Tne.

Simoniz Company

Mac’s Super Gloss, Ine.

E. I. du’ Pont de

Nemours & Co., Ine.

Warner-Patterson Co.

: Lamp Division,

Westinghouse Electric

Corp.

The Anderson Company

The sales commission method of distributing THA prod-

ucts thus affects competitive relationships among prodficers

and distributors of various, products, al! linked by but one

‘-common factor: the motor vehicle.

' As a consequence, in

order to show the net work of unlawful trade restraints and

B-21

inhibitions dancin the sales malenibians stem of dis-

tributing TBA, it is necessary first to. deser the market-

ing structure of Atlantic‘and to define the manner in which

thifs ret nec exercises control over.its wholesale and retail

_ petroleum distributors, and next to describe liow the ‘sales

commission plan. enables Goodyear to integrate such: mar- .

ket control into its own ‘system of distribution.

. DistrinuTIoN SysTeM or ATLANTIC REFINING CoMPANY

Atlantic is a major integrated producer, refiner, and

distributor of petroleum products. ‘The company was organ-

ized in 1860;.and was acquired by Standard Oil Company »

in 1874. Sine’ the dissolution of the Standard Oil Trust in

1911, Atlantic has been operated as a separate corporate

entity... In 1948, Mr. S: J. Heideman of Atlantic stated

that “Atlantic? s percentage of the national gasoline. market |

is 214% ...?; and since the oil company markets its gaso-

line along the Atlantic Coast states and in parts of Ohio

and West Virginia’ only, it may be inferred that Atlantic’s

share of gasoline sales in ity own —— area | is_sub-

stantially in exeess of 24% per ‘Sales. and operating

“reyenué of this oil company fotalled more than one- half

billion dollars in 1954. . - s

‘Atlantic markets its refinery products to three major

classés-of customers: (1) wholesale distributors; (2) retail-

ers (chiefly service Stations but including also garages,

grocery stores, restaurants with outside gasoline pumps,

ete.) ; and (3) commeréi ial aeeounts: This opinion is not

concérned with the last- “named group, which accounted for

16.6 pereent_of total gasoline. sales -by Atlantie in 1954, as:

these accounts afe customers who purchase:for their owl

consumption and not for. resale. .

Atlantic sold gasoline and other petroleum, products

directly to some'5,537 retail custamers . 1956, and these

direct retail dealers aecounted for 57.2 percent of total .

gasoline sales by Atlantic in 1955. Atlantic’s direct dealers

-are of two classes: (1) Lessee. dealers, who accounted for *

39.1 percent of total Atlantic gasoline sales in 1955; and

‘

B22

(2) Contract dealers, who :accounted for 18.1 percent of

gasoline,sales by Atlgntic in the same year. Shown below

in TapiE II are the numbers of lessee and contract dealers

purchasing petroleum products directly from Atlantic ‘in

each of its marketing. regions in June,’ 1956. :

*‘ TABLE II

Numbers.gf Direct Lessee and Contract Dealers of

Atlantic Refining Company in June 1956,

by Marketing Regions

Lessee : Contract

Region Dealers Dealers

New Engiawd ........,........... pide 495 .: 220

Philadelphia-New Jersey ....--..--- 481 * 640

. Bastern Pennsylvania ...........-..---- _ 480 ~— 1075

Western Pennsylvania .....:.......-.--- 317 725

I ois tswssienton panacea 399 ” aa

* Granp Tota ..........-- 2493- 3044

Lessee Dealers. The principal characteristic distitignish-

ing lessee dealers from contract dealers is that the former

do not own their own business properties, but instead lease

them'from Atlantie. Lease terms range from three months

to three year’s; most lessee-dealers operate under one-year

dJeases, however. The leasehold instrument does not require

the lessee to handle ‘Atlantic products, but does provide that -

_ the premises shall be used for the operation of a ‘‘first-class

' automotive service station retailing petroleum products

and TBA merchandise normally handled at competitivé

service station outlets.’? Rental payments by lessees are

based on specified percentages of gross monthly sales of

“all types of merchandise, including TBA. These percent-

_ ages are as follows:

0 percent a Pitch eet Meant SNE First $500 monthly

DOE hice nn DATES Tose Next $2000 monthly

“4 percent....... eee Wt Sic eens . Next $2000 monthly

3 percent............<. ReschalseenliaKaoocll Over $6500 monthly ~

B- 23°

: the time he aden his lease with “Atlantic, each

lessee-dealer is required to-sign a separate document known

as an ‘‘Eleven Point Lease Letter’’. This -letter defines .

standards of operation for Atlantic lessee-dealers. LIllus-

trative of these is fhe standard for “‘Housekeeping”?:

“1, Housekeeping—Clean, sanitary premises,

- inside’ and out.’’

- + ~e~

Other standards set forth in the ‘‘Eleven Point Lease

Letter” are ‘‘Use and Upkeep”, ‘‘Display”’; **TJumina-

tion’’, ‘‘Personnel’’, ‘‘Hours of Operation’”’ (‘‘Uniform

daily operating schedule based on buying habits of poten-

tial trade in the area’’), ‘‘Services’’, ‘‘Adequate Inven-

tory’’, ‘‘Sales Promotion”’, ‘*Prices’’, and * Accounting”’.

These standards of operation are implemented by Atlantic

not only thrqugh the surveillance of its sales force, but also

'-by the employment of ‘*Phantom Customer Inspectors’’.®

Since its adoption on April 1, 1953, the ‘‘ Eleven Point

Lease Letter’’ has been used by Atlautic to interpret and

‘enforce Paragraph Three of dealer leases which, as noted,

provides that **. . the sole purpose and use of the leased

premises shall be ‘the lawful, diligent aid businesslike oper-

ation of a.first-class automgtive service station .. .’’,. thus

the *‘Lease Letter’’ is an integral part of the lease itself.

This is shown by the regularity with which Atlantic warns

lessee-dealers in-writing that their leases will be terminated

if stated defaults ‘with respect to the provisions of the-

5 Witness John Chambers, former Atlantic a tac who

testified in support of the complaint in this proceMung, received

the foliowing letter from his former Atlantic District Sales’ Manager

on Uctober 14, 1954: :

**Dear John: ~

‘Our Phantom Customer L ispector has just reported to us that

you ree ‘eived a 299 out of a possivle SVU on a recent inspection.’

“This is the kind of job which makes us all very happy and

certainly is an em factor in running a protitable service

station.” ~

. Witness Chambers’ lease was subsequently terminated because

-he refused to go along with Atlantic’s pricing policy and becatise

he did not purchase suflicient quantities of sponsored TBA.

, one B:24

‘‘Bleven Point iain Letter’’ are a remedied within

fifteey, days."

Prior to about August 1953, Atlantic’s written agree-

ments with its lessee-dealers also included an ‘Atlantic

Franchise Agreement’, providing for their pifrchase of |

motor’‘fuels and .automotive lubricants from their oil com-|

pany lessor under stated terms and conditions.. In recent

years, only automotive <tubricants have been covered by

written purchase agreements between Atlantic and its

lessees. Never theless, the facts of record cleaily estab-

‘lish that Atlantie lessees purchase and ‘resell Atlantic

motor fuels exclusively.

Notwithstanding the economic power possessed by an

oil company as‘a consequence of being both landlord and

supplier to its lessee-dealer customers, the> powers_and

responsibilities of an oil. company’s: lessee-dealer ‘*. . .”

satisf[y] all the requirements of an independent enter-

’ prise.’? United States Rie Oil Corp., 99 F. Supp.

280, 288 (1951) aff ’d, 387 .U. S. 922 (1952): Judge ‘Yank;

wich’s comments in the Rich field ease as to the relationship

of an oil company to its lessee- dealers apply. with equal

force to the instant case:

‘‘Tmplicit ini thé contract is the lessee’s assump-

tion of ‘obligation and? responsihgity for his own-

acts upon the premises and those of his employees 1 in.

their relation to the publie, who come in contact

with them during the time of his dominion. The

7 Here, for example, is a letter dated Decunber 8, 1952 to dealer

Michael J. Clitford, Baltimore, Marvland :

’ From observations, we note, that “vour regular hours, of

ogame are such that we believe your market area is not being

. properly supplied.

‘2. We also note from observations that inventories icliateiaiel

in vour station are not ee to serve normal customer needs

without delay.’ ¥

(This dealer’s lease was terminated January 4, 1954, for non-

compliance with: the above defaults.)

lessee is not the employee of Richfield. Richfield —

B25 aes

pays him no wages wie recinmeration. He must -

carry his own workmen’s compensation. ' He is not, |

carried on their books as an employée for the pur- |

pose of social security taxes or any of the withhold-

_. ing taxes, state or federal, incidental to the employer-

4 employee relationship. Richfield is not required to.

withhold any moneys from hini for income tax pur-.

poses. Neither are they required’ to perform any °

of the duties just mentioned as to any of the employ- -

ees who may assist the lessee in the conduct of the

station or of any auxiliary repair work upon the

premises, The lessee is solely responsible for his

own conduct and that of-his employees which may.

cause damage to the persons or property of others.’’

[99 EF. Supp. at 288]

Contract Dealers. There were 3,044 contract dealers

of Atlantic as of June 1956, and of this number about 50

percent operated service stations (as distinguished from _

grocery stores, garages, and similar outlets with gasoline

pumps on the premises). Non-service station outlets gen-

erally do not purchase and resefl TBA products;, all serv-

ice station outlets, however, are regarded as potential pur-

thasers of TBA under Atlantic’s agreements with Good-

year.and Firestone. .

Although contract. dealers either.own vie own service

station properties, or lease them from parties other than -

Atlantic, these dedlers aré subject to the control of Atlantic

as a consequence of various contractual agreements between

such dealers and Atlantic. Chief among these i is an agree-"

ment having the following principal provisions:

‘1, Eaqurpment Loan. ATLANTIC, reserving the

right of addition, change, substitution, and mainte-

nance, lends to Buyer [the contract dealer] for the

purpose of storage and sale of motor fuel. purchased

solely from Ar.antic and for no other purpose,

equipment that has been installed or which AtLantic

may install, which shall-remain personalty and the

B-26

property of Artarric, and whieh Bryer shall. not —

remove, but shall repair and maintain as follows.’’

. [Hists. equipment. ] :

‘62. Sate aNd Deuivery. Provides that the con-

tract dealer shall buy a specified number of gallons

of motor fuel annually from Atlantic; that deliveries

_ will not exceed one-eighth of such gallonage monthly;

that the contract dealer ‘shall order and accept not .

less than one-twentieth of such annual gallonage in

‘* any calendar month’; and that the times, manner

and quantities of delivery shall be in accordance with "

Atlantic’s current —

The agreement further prov ides that all petroleum prod-

ucts delivered thereunder shall be paid for at prices estab-

lish® wy Atlantic: The term of-such agreenient is gen-

erally for one year, and may be terminated by either party

-at-the end of the original or any subsequent term by giving

- 60 days notice.” Upon termination, Atlantic is entitled to

* repossess any. equipment loaned to the dealer, with or with-

out legal process. If the agreement is ‘cancelled by Atlantic

because of breach by the dealer ‘he dealer must pay a fixed

sum to Atlantic as reimbursement for cost of installation

and removal of the equipment or, at its option, Atlantic

may leave the equipment in place and require the dealer

to pay a fixed sum for the value of the equipment and

improvements. Tlic equipment most - frequently loaned.

(without charge) by Atlantie to contract dealers includes

gasoline pumps, underground storage tanks, compressors,

air towers, lifts,. signs, ontside lighting and poster frames.

Both lessee-dealers and contract dealers have agree-

ments with Atlantic relating to annual purchases of speci-

- fied quantities of automotive lubricants, and to the terms

upon which credit may be extended by these dealers to the

approximately 160,000 holders of Atlantic credit cards.

Wholesale Distributors.: This class of customers pur-

chases refinery products from Atlantic for resale under the

oil company’s brand names.. Wholesale distributors main-

“ nee. Ore. .,

A ee en SD, «

oe Pigments - £ e.

B-27

~ ‘tain bulk storage tanks capable of receiving truck deliveries

of. gasoline from. Atlantic, and maintain their own delivery

equipment for transporting such gasoline from their bulk

storage tanks to retail customers, including service stations.

There were 236 wholesale distributors of Atlantic products

‘in 1956, who resold to 2,897 service stations, -as shown by

Table III:

TABLE III

Numbers of Wholesale Distributors of Atlantic Refining -

Company, and Service Stations Supplied by them

- in. June, 1956, by Marketing ee

Service.

Region. Distributors Stations

New England_...................... 8 151 —

New-Tterk———......,.____.. 39 238

Philadelphia-New Jersey .. oO - 0

_ Eastern Pennsylvania........ t 06°6hCUg OD

Western Pennsylvania........ ae 410-

Southern.+.....: ene. s 7 .- 1173

; Grand Total.............. - 236 2,897

Atlantic had wholesale distributors in each of its six

principal marketing regions in 1956, with the exception of

the Philadelphia-New Jersey region. (There were 1,121

Atlantic serv ice station outlets in the Philadelphia-New

Jersey region in 1956, but all were supplied directly-by the

oil company.) These distributors accounted for 24 percent

of total gasoline sales by Atlanti¢ in each of the years 1951

and 1954.° Eighty-seven percent of the 2,897 service sta-.

tions supplied by wholesale distributors of Atlantic in 1956

were in the Eastern Pennsylvania, Western Pennsylvania,

and Southern regions;-the remaining 13 percent were in

the New England and New York regions. -

Wholesale distributors are parties to the same type of

sales contracts for automotive fuels and lubricants with

Atlantic as are Atlantic*s contract service station dealers.

__._ Moreover, Atlantic has the power to change the source of

supply—for- service station dealers from Atlantic itself to

. = =o

o . -

: %

wholesdle distributors. During the period from A ril-1950-

to June 30, 1956, Atlantic reassigned 93 eontract service.

station dealers in the Wilmington, Delaware and Baltimore,

Maryland sales districts from itself. to particular wholesale

distributors in those districts. Atlantic’s use of the power

to expand’a wholesale distributor’s retail market by adding ©

to the number of service stations supplied by such distrib-

utor in order to induce such distributor to purchase and

resell sponsored TBA to his service station customers-was

described by witness Lingenfelser, a salesman-for Reading

- Batteries, Inc. (now the Reading Battery Division’ of the

Electric Auto-Lite Company), who testified in support of .;

the complaint: sf

Tae Issuzr or CoERction

~The complaint in this case charges that Atlantic has

caused its various classes of dealers to purchase substantial

‘quantities of Goodyear or Firestone TBA through the use

of threats to terminate either their tenure as lessees (if

lessee-dealers) or their petroleum ‘supply and equipment

loan contracts (if eontract dealers). It is conceded by coun-

sel supporting the complaint that when Atlantic adopted the

sales commission system on March 1, 1951, all its dealers

were informed by letter entitled ‘‘A Statement of Atlantic’s

TBA Policy’’ as follows: gt

‘‘Qur sules organization has been instructed to

explain dnd demonstrate to you the many advantages

of the new TBA plan.° They ‘will do so with enthu-

-siasm and conviction because they are’ confident that

it will be advantageous for you to accept it. H ow-"

ever, your acceptance or rejection of the program is

a matter of your own choice.’’ (Emphasis added.) |

go .

Aa Notwithstanding this initial statement of poliey by Atlantic,

repeated periodically thereafter in form letters sent to its

dealers, counsel supporting the complaint contend that in

practice this officially-proclaimed policy has been ignored

by Atlantic and that in fact, Atlantic dealers have been

B-29

orally ‘advised ‘ aes officials of the oil company that

their continued status as Atlantic dealers and.lessees will

be in jeopardy if they donot purchase sufficient quantities

’ of sponsored TBA. This contention is supported. by the —

testimony of former Atlantic dealers who appeared 4 Ay 3 ‘wit-

nesses and further reinforced by the testimony of witnesses

' representing many suppliers of TBA engaged in compe-

tition with Firestone and Goodyear, who testified that they

encountered difficulty in selling TBA to Atlantic dealers

because the latter group. felt that they were required to”

purchase sponsored TBA and feared reprisal by Atlantic

if they purchased non-sponsored items. Testimony of the

_ competing TBA sup; dliers as to reasons given by Atlantic |

dealers for not purchasing competitive TBA was allowed

under the authority of Lawlor v. Loewe, 235 U.S. 522 (1915)...

This testimony was received not as proof of the facts —

recited, but for the purpose of showing the state of mind of:

the Atlantic dealers. Such testimony is competent to show

that Atlantic dealers did not purchase a substantial amount

of competitive non-sponsored TBA because of their feeling

that they were required to purchase Goodyear or Firestone

TBA.

Among the former Atlantic dealers who testified in sup-

port of the gomplaint, several recounted specific instances —

in which either express or implied threats of lease cancella-

tion were made. Other ex-Atlantic dealers. testified to inci- —

dents occurring during their tenure as Atlantic lessees

which made it apparent to them that they were expected to

handle either Goodyear or Firestone TBA, and that if they

failed to- purchase sufficient quantities of such TBA, that

their reiationship with Shell might be terminated.

Typical of the former Atlantic dealers testifying in sup--

port of the complaint was witness John Chambers, who

operated an Atlantic station in the Philadelphia area from

1945 until November 28, 1954. He gave this account of the

events occurring when Atlantic changed over fromi the Lee-

Exide program to the sales commission plan in 1951: -

Q. Mr. Chambers, referring ... to the dealer:

* “ meeting when the switch-over to the Goodyear TBA

B-30

line was announced, were you given any choice as to

the brand of TBA that would be carried by Atlantic? —

*A. No, there was no choice; I mean the company said —

_ that they.were going from one product which would

be Lee and Exide, over to full Goodyear.

Thereafter, witness Chambers commenced purchasing

Goodyear ‘TBA ‘from the local Goodyear distributor to

whom he had been assigned, a Mr. Parris. From time to _

time, however, he also purchased TBA: products from other- a

suppliers i in his area. Among these were the following: |

Chester Auto Parts Waxes and other |

Chester, Pennsylvania accessories, Se a

V.J.Auto.Parts, «°° Accessories, including E

_ Sharon Hill, Pennsylvania’ ‘**Bagsleak”’, a radiator

: “sealer |

CA. Powers Recapped tires, and also

Chester, Pennsylvania . some new Goodyear tires

( . Goodyear tire distributor) _ and tubes pane, .

Ww itness Chambers testified that he was criticized by

Atlantic salesmer for: purchasing accessories from whole-

salers other than Mr. Parris, his assigned supplier: |

Q. Were any comments. ever made by Atlantic

representatives coricerning your purchases of acces-

sories from other.than Ed Parris? A. Yes.

Q. Would yéu please state some instances? <A. .

. the one. that is. Gamer in my memory right now

w was the Barsleak, . . Joe Connetly ‘was Atlantic

[salesman] at’ that tiene, and Joe would pick it up and

‘say, ‘What. are you doing with this, ’? and he would

set it back down. \

‘* . * oo \ e = *

-Q. Were any comments other than the one“

referred to made by Aflantio representatives con-

Bal

: cerning the pee of TBA from Vocal ——

other than Ed Parris?

* nil ‘ € a hin “ * : * 4°

- A. Why yes, tance: was great-criticism, shall I say, in

reference to outside O. e., et cmt merchan-

dise.. °

Q. Who anne See er

* *- * bat * *

The Witness: Why salesmen _ represented

the company. ee :

6 Which oopieayt A. Atlantic.

* e * * s * :

Q. Where did these conversations take ” place

‘between the Atlantic salesmen and you? A. Many

+ titkes over: a cup of coffee and sometimes out in the

a driveway. Q. Would it generally be a private con-

versation? A. If it was to be of that private nature,

OG css oe Senge

Q. Well, when it was accriticism, was it generally

of a private nature? A. It was ‘never done openly.

Subsequently, i in November 1954, witness Chambers was

notified that his lease-wdid not be extended beyond Decem-

ber 31, 1954. He discussed this with Mr. Parris, his TBA:

-supplier, who was also a former employer of witness”

Chambers: . :

Q. ... what was the substance of your. conversa-

tion with Mr. Parris? A. I asked, ‘‘what.in the

world happened, what could I do.’” He said, ‘Jack,

you have been turned in. by three [Atlantic] .. .

salesmen for buying outside meréhandise:’’ T said

‘Who???’ He said, ‘‘Connelly, Muldoon, and Petri-

-son’’. turned me in for buying outside merchandise.®

8 Atlantic sopra witness Chambers as an nalts re,

station operator, as is. shown. by the letter ‘to him of October 14,

1954, quoted supra, note’ 6. This: letter of commendation was °-

received by witness Chainbers just one month before he received |

yotification that his ledse would be terminated. . - ®.

~ ae . :

~, enn,

wy ~ .

nan

B-32

The ‘above testimony must be snitcane in the light of

‘ that given by Mr. Glenn L. Wetzel, President of Chester

Auto Parts, Ine., of Chester, Pennsylvania. His company

sells automotive parts, batteries and accessories (but no

Si tires) at wholesale. .Witness Wetzel gave this account of °

his eonversation with witness Chambers:

: _- Q. Do you recall any other conversations with

other Atlantic dealers or Sinclair dealers, along

similar lines? <A. Yes. John Chanibers. ~~ _

Q: .Please state the time as nearly-as you-can, the

place, and what was stated. A. I would approximate

the fime as about. 1953, pogsibly 1954. I wouldn't

know exactly any: more. But it was to the effect .

that:he had to:stop buying from me. He was told

that he was buying too much on the outside from

outside distributors, meaning V. J. Auto Parts and

myself, which were specifically named.

. * ee, sare _* oT

- 3 Q. Now.will you please state what the conversa-

_tion was? A. Jack said to me: ‘‘Glen, I am going to

have to stop buying from you. I have been warned

, that if-I don’t, I am going to be removed from: this

station. They are going. to.give me the. ax, ” And

two montlis later he got the ax.

Further testimony as to’the state of mind of witness

end

Chambers in 1952 and 1954 was given by witness Joseph |. —

@, Marabella, a partner in the firm of V..J. Auto’ Parts Com-

pany, Foleroft, Pennsylvania. Mr. Marabella testified as

follows: .

Q. And did you solicit Bars Leak (si¢) business

from Mr. Chambers when he was an Atlantic lessee- é

dealer? <A. Yes sir.

: Q. And what was your expérience with respect to

the sale of Bars Leak to Mr. Chambers? A. My,

well, business relations and experience with Mr.

‘ B-33 : / ; \

Chambers had been the same as with other gentle-

men [ have mentioned, enjoying good business rela-_

“tions, good sales on Bars Leak, up until the time he

was told to remove it arom. his shelf, .

" Later, witness Marabella tried . sell Maxfficld sven

and tubes to witness Chambers_ ‘and to a Aflantic

dealer named Boos: PEO hk Pa“

_A. Well, in the latter part ots with Mr. Booz,

Elmer Booz, Wycombe Avenue and McDade Bonule-

vard in Darby, I along with a Mansfield tire repre-*

sentative went in to solicit some of Mr. Booz’s tire

_ business. He said, ‘Joe, I’d be glad to buy them on

’ -a fill-in basis, but. you know I cannot put anything in

here but Goodyear tires and Goodyear tubes.’’ And

that was the extent of the conversation: )

Q. Do you recall any other conyersations with

. Atlantic dealers along similar lines? A. Jack Cham-

bers, we solicited him the same day at his station

which was Clifton..Avenue and Chester Pike in

Sharon Hill, in his office, told us he was’ sorry to

- « waste our time but more or. less the same answer,

| that he couldn’t put anything but Goodyear in there.

Documentary evidence taken,from the files of Atlantic

reveals the vigor with.which Atlantic carried out its cam-

paign to replace Lee tires.and Exide batteries with Good-

year and Firestone TBA products. The minutes of a

meeting. of Atlantic’s Regidnal-TBA coordinators held on

October 21, 1951, reveal that as of that date, “New England

reported that approximately 98% of their accounts have

been signed on’ a Goodyear program and: that they .are

getting about 75% of the tire business they formérly

_ enjoyed from these accounts. New York reported that they

had about 96% of their accounts signed on a Goodvear

program and that they were getting about 65% of their

former tire business...’ By December 24, 1951, an Atlan-

‘ tie report showed that virtually all Atlantic dealers in.

B34

; Secdcue s assigned territory who were potential purchase:

ers of TBA had signed contracts agreeing to handle Good- .

' year products,

Accompanying the ‘campaign to sign Atlantic dealers to, *

Goodyear contracts was a drive to install Goodyear signs

and advertising materials in Atlantic stations throughout

Goodyear’s assignéd marketing areas. This is an excerpt

from a letter of July 30, 1951, from Atlantic’s TBA sales

‘manager, Mr. Heideman, to another Atlantic official :

ey asked Mr. O'Neill of the Goodyear Tire &

» Rubber Company to supply me. with a list of the

Atlantic dealers in the Philadelphia Region who

~ refused to be identified on the Goodyear Program.

Attached is a list of 46 dealers who, for reasons indi-

* cated, have refused this service. = ay:

* You will probably wish to review the respective

portions of this list with the District Managers con-

cerned. Undoubtedly, facilities for identification are

+ not the best at some of these locations, but with the .

others it is apparent that the proprietors have not |

been'sold on the Goodyear program. In such instan-—

ces, J believe that additional sales effort is called for.

In any event, would yorf be kind enough to advise me

at your, convenience what action. you have taken with

regard to this list. 9.

\ >

Mr. Heideman followed this letter up diene on August

21, 1951; with a letter to Mr. & AL Gaylord,

: enna cae

Petroleum Sales Department, of Goodyear? . Pe

; . dl | wonder if” you can furnish me pro diy with .

a- report on the progress of the Subject program. .I- *

should like to have this information broken down by —

our regional territories. As I understand it, the

- signs are heine erected by. Goodyear crews, - but the -

decals are be, erected by outside agencies. Fur-

_ thermore, .at the present time when we locate an

- Atlantie dealer who is without any Goodyear: identi-

fication er without one or the other signs or decals,

B-35

we do not know-whether an unsuccessful attempt has

: been made to complete the assignment or whether all

; or part of the. job, whatever the case may be, hed

scheduled for attention.

‘We should like to interest ourselves i in the’ cases

where an unsudcessful attempt has been made to pro-

vide the Goodyear identification. Perhaps this infor-. .

mation could be made available to us-in simplest

_ form by stating the Atlantic District areas that have

_ been covered by either sign.crews or agencies that

are applying the decals, and by supplying us a list

_ of the dealers where attempts to erect decals or signs

were unsuccessful.” Tih fia

: ‘‘T have already received a list of this type for the

Philadelphia and South Jersey areas, and this has

been referr( 4 to our District Managers for further

attention. However, I do not know if this is a partial

- or complete list of the dealers in that territory who

could not be identified with Goodyear signs.”?

_ Atlantie’s ‘‘sales. efforts’? mat with complete success,

for the entire group of. 46 recalcitrant dealers referred to

in Mr. Heideman’s letter of July 30 was thereafter sigtied

to Gqvdyear contracts and Goodyear advertising signs were

installed at their stations. The letter of complaini from’

Lee Rubber and Tire Corporation to Atlantic over the

question of removal of Lee advertising signs from Atlantic

stations has already been referred to, supra at page 15.

And on March*5, 1951, Mr. E. W. McCreery, another Lee

-vice_president, stated in an intracompany memorandum

Bb irsig to the Atlantic. sales regions assigned. to Fire-

stone: *o

~ “Tn analyzing rr a ’s reports on their ‘ealls on

Aflantic accounts and with other information. that

we have, we.are doubtful that many of thé #2 type.

- stations will stay on Lee tires. Becanse' these sta-

’ tions are leased from Atlantic, some on a month-to-

month basis, others on 90 days or longer basis, they

are not in-a position to take an independent stand

and as a result will probably find it expedient to

handle Firestone -tires.”’ -s

In our opinion, the documentary evidence in this. record

—only a fraction of which is’ referred to above—and the

testimony of the various representatives of suppliers ‘of

TRA competing with Goodyear and Firestone previously

adverted.to lend credence to the testimony of the ex-Atlan-

tie dealers who gave, evidence in support of the complaint

in this proceeding. We affirm the hearing examiner’s find-

ing that agents of Atlantic have in fact coerced a substantial

nuniber of Atlantic dealers to purchase substantial quanti- .

ties of Goodyéar and Firestone TBA, and that, Atlantic has

accepted the benefits of such. coercion in the form of sales

commissions. . ae |

Respondent Atlantic cites United States v. J. I. Case

Co., 101 F. Supp. 856 (D. ©. Minn. 1951) as authority for the

proposition that the hearing examiner erred in concluding

that Atlantic has coerced a substantial number of its dealers

in violation of Section 5 of the Federal Trade Commission

Net. This District Court opinion is commonly regarded as

a notable exception to the trend of decisions dealing with

the subject of exclusive dealing.” But we need not dwell on

the Case decision; sinee the anbjeet of coercive practices has

received careful serutiny from the Seventh Circuit and from

‘ the Supreme Court in a !yne of cases in the field of automo-—

tive financing. In United States v. General ‘Motors Corp.,

124 'F. 2d 376 (7th Cir. 1941), General Motors and its affili-

ates, General Motors Sales Corporation, General Motors_

Acceptance Corporation, and General Motors Acceptance

Corporation of Indiana, Ine:, appealed from a conviction of

criminal conspiracy in violation of the Sherman Act. The

indictment charged that these defendants had conspired te .

coerce franchised dealers of General Motors Corporation

to finance their purchases and sales of automobiles through

*Rohinsou. Providing for Orderly Marketing of Goods, 15

A. TB. A. Antitrust See. 282, 308 (1959). .

: ae 7“ . oe

General Motors Acceptance Corporation. In affirming the

criminal convictions, the court stated:

‘“‘The record leaves no doubt that the dealer body

as a whole was made acutely aware and had knowl-

edge of the set policy of the agpellants with respect

to the use of GMAC financing facilities. The fear

of cancellation or refusal to renew contracts was

great, so niuch so that the dealer was reluctant to

. refuse the terms and policies dictated by the appel-

~~ lants.’

Approying the trial judge’s instructions to the jury in

the General Motors ease, the Supreme Court stated in Ford

Motor Co. v. U nited States, 335 U.S. 303 at 316-317 (1948) :

_ Their plain effect is to draw a line between

pe préictices as cancellation of a dealer’s contract,

“+ or refusal to renew it, or discrimination in the ship-

ment of automobiles, as a means of influencing

dealers to use GMAC, all, of which als within the

common understanding of ‘coercion,’ and other

_ practices for which ‘persuasion,’ ‘exposition’ or

; ses ‘argument?’ are fair characterizations.’

We are of the opinion that the record contains ample

evidence to support the hearing examiner’s finding that

. Atlantic has coerced and forced a substantial number of its

dealers to purchase sponsored TRA. Tlowever, we regard’

these overt-acts of coercion as mere symptoms of a more

fundamental restraint of trade inherent in the sales com-

mission system itself. The more-dramatic and. immediate

impact of this system, to be sure, is upon n retail service

station dealers of Atlantic and other oil company dealers

similarly situated. Their freedom to buy and sell as inde-

pendent merchants is shown to be less complete i in practice,

.than in theory. Yet from the point.of view of the anti-.

trust laws, it is the competitive effects of the sales commis-

sion system on competitors of Goodyear and Firestone

which raise the most grave questions in this prooeeding. .

B-38 -

. We turn, “therefore, from an examination of the restric-

tive effects of the sales commission system upon service

. stations as buyers of TBA to an assessment of this system’s

impact upon -wholesale and retail distributors of TBA

_engaged in competition with wholesale and ‘retail distribu-

tors of Goodyear and Firestone. Preliminary to this

inquiry, ‘however, it will be helpful to’ have a more detailed

understanding of the manner in which the sales commission

plan enables Goodyear to integrate into its own nationwide

distribution system the economic power possessed by

Atlantic over its wholesale and retail petroleum. outlets.

Tur Sates Commission PLAN IN

Goopyrar’s System or DistErmvTIoNn

Goodyear is the largest manufacturer of rubber prod-

ucts in the United States, with net sales of more than one

billion dollars in 1954. The company has tire and tube fae-

tories located respectively in the states of Ohio, Alabama,

Michigan, California and Kansas. There are 57 Goodyear

warehouses across the land, ang Goodyear tires, tubes and -

accessories are distributed to wholesale and refail distribu-

tors through these warehouses. Batteries, because of the.

weight factor, are not warehoused by Goodyear except for

emergency needs; all Goodyear. wholesalers order: ‘‘Good-

year’? batteries directly from the factories of the two

companies which produce **Goodyear”’ batteries under 7

contract: Electric Auto- Lit e “Company and Gould-National |

Batteries, Inc.

Goodyear has approximately 500 company-owned and

operated retail’ stores throughout the United States, and

these stores also sell at wholesale. .Apart from such eom-

“pany stores, there are more than-12,000 independent fran-’

chised stores selling Goodyear products at wholesale and

retail and an unknown but very substantial number of firms

_ not franchised by Goodyear bit which purchase and resell

Goodyear merchandise in the. same manner as franchised .

Goodyear dealers. Franchised dealers are sometimes

referréd to as, ‘direct’? accounts, and non-franthised

B-39 *

dealers in Goodyear merchandise are sometimes réferred to

as ‘‘indirect’’ or ‘‘associate’’ accounts. |

All direct Goodyéar accounts, which include independen

franchised Goodyear dealers, wholesale petroleum distribu-

tors of Atlantic, and some retail petroleum dealers of Atlan-’

tic, execute a franchise agreement with the Goodyear

‘Company itself, and purchase Goodyear products from the

nearest Goodyear District Sales Office. Indirect, or asso-

ciate Goodyear dealers do not have contracts with the Good- ,

year Company and do not purchase Goodyear TBA from

. the Goodyéar District Sales Office. Instead, they usually |

execute a ‘Goodyear Associate Dealer. Agreement’? with

the particular Goodyear: wholesaler to which they are

assigned. Such.wholesaler may be either a company-owned -

- store, a franchised independent dealer of Goodyear, an

' Atlantic wholesale petroleum distributor, or an Atlantic

retail petroleum dealer. ‘Indirect, or associate, dealers

normally purchase from the wholesaler to which they have

been assigned, and normally pay higher prices for mer-

chandise than do direct dealers of Goodyear.

Most service station customers, including Atlantic

stations, are classified as indirect or associate dealers by

Goodyear, although, as noted, some Atlantic stations are

direct dealers of Goodyear.and function as supply points to

~ other Atlantic stations which are merely associate dealers.

(The term ‘‘supply point’’ is used by respondents to refer

to the local TBA supplier to which local Atlantic stations

have been assigned.) A number of Atlantic wholesale dis-

tributors of petroleum products also function as supply

points for Goodyear, and distribute TBA to the same retail

stations which the wholesale ‘distributors supply with

_ Atlantie petroleum products. A supply point, then, is a-

local wholesaler of Goodyear TBA, although it may also

be a retail dealer of Goodyear, a retail dealer of Atlantic,

or a wholesale distributor of Atlantic as well. In the three

marketing regions of Atlantic assigned to Firestone, the

same classification. of Atlantic dealers. into direct and

indirect accounts of Firestone is found as is described’

above with. respect to Goodyear, and in all other material

B-40

. respects, the sales commission plan between Atlantic and

Firestone functions in substantially the same manner as

does the sales commission plan between Atlantic and Good-

year. described herein. | : oo

An integral part of the Goodyear-Atlantic and Fire-

stone-Atlantic sales commission plans is the assignment or

allocation of each Atlantic retail outlet to a specific supply

point designated by Goodyear or Firestone. - When a new

Atlantic station is’ opened, or when a new dealer replaces

a fetiring operator, Aflantic reports to’ Goodyear (or to

_ Firesione, as the case may be) the name and address of the

new Atlantic dealer on an appropriate Goodyear (or Fire-

stone) form. The Goodyear (or Fireston&4 District Mana-

ger- then assigns this outlet to a specific supply point and

notifies the supply point and the Atlantic outlet of the

assignment which has been made. No sales commission is

paid to Atlantic unless the Atlantic outlet purchases from

the designated: supply point to which it has been assigned.

. In other words, even though an Atlantic dealer purchases

- Firestone or Goodyear TBA, €éxclusively, unless he buys

from his assigned supply point, Atlantic receives no sales

—commissier. One reason why Goodyear does not pay:a-

‘sales commission when:-TBA merchandise is purchased by

an oil company dealer from someone other than his assigned

supply point was set forth in a letter dated December 19,

1951, addressed to an official of Shell Oil Company, ‘and

" signed by the Baltimore District Manager of Goodyear:

°“T am returning to you, unsigned, two G-1209’s, -

which request that G. D. Armstrong Co., Inc., of

Laytonsville, Md.; be approved as a supplying dealer

for Laurel Park Servicenter at Laurel Park, Md., and

* Bowie Shell Service at Bowie, Md. ne

. oS? en * *

‘‘My reason for taking this attitude is the fact

_that we véry definitely, discourage our dealers from

selling Goodyear tires outside of their authorized.

‘territory, and in servicing either Laurel or Bowie, the

. Armstrong Company are out of their territory.

B-41

‘A situation of this kind, of course, presents us

rith a serious problem for, naturally, we are not in-

” d position to dictate to any good dealer exactly where

he. may sell the merchandise which he purchases

from us—all we.can do is ask that they remain within -

the boundaries which we establish. However, in the

case of oil company stations where we have already

authorized and established an ample number of

supply points, all with good service, we cannot pay

the oil company in question a commission .on mer-.

chandise delivered by a dealer who #5 operating out-

side of his territorial bounda ies.’’

- aad

Although in some cases Atlantic dealers are assigned

to more than one supply point of Goodyear, in none of

Atlantic’s marketing regions are Atlantic dealers assigned

to supply points of both rubber companies. ; For, as has

been shown, Atlantic’s sales. commission contract with

Goodyear is confined, to the company’s New England, New

York and Philadelphia-New Jersey sales regions, whereas

Atlantic’s sales ‘commission ‘contract with Firestone ‘is

operative only in the Eastern Pennsylvania, Western Penn-

sylvania and Southern sales regions of the oi! company.

A reporting technique has been established whereby

Atkaitie may determine the exact amount of sponsored

TBA -purchased by each Atlantic outlet from its assigned

supply point or points each month. As both rubber com-

panies: use substantially the same reporting procedure,

only the one used by Goodyear need be described in detail

here. > 7 ; ;

Once every month each Goodyear supply point submits

a report to the Goodyear District Sales Office for his dis-

trict, showing his sales of TBA during the past month to

each Atlantic outlet assigned to him.” The Goodyear Dis-,

? 10Qne exception is Atlantic Service stations acting as supply

* points. A 7% percent commission is paid by Goodyear to Atlantic

- on the net sales value of TBA purchases by these Atlantic supply

point dealers, and, consequently, no further commission is paid by

- Goodyear on the resale of merchandise by such Atlantic supply

point$ to other Atlantic stations supplied by them. /

- 1G J

B42. | f

trict Sales Office then compiles these reports into a master

list, showing TBA purchases by each individual. Atlantic

dealer from his -assigned supply point during the past

month, and sends.copies of this list to Atlantic and to Good-

year’s home office in Akron, Qhio. Although these forms |

provide the basis for computation of sales commission

accruing to Atlantic each month, they also afford Atlantic

a means of determining the volun of sponsored TBA pur-

chases by individual. Atlantic dealers during that time.

A different procedure is followed with respect to TBA.

purchases by wholesale istribufors of Atlantic (ineluding,

as indicated by footnote 10, supra, Atlantic retail dealers

ftinctioning as supply points). Wholesale distributors pur-

chase directly from the Goodyear or Firestone district

offices, arid then resell’ such TBA to their retail dealers.

- Some 2,897 Atlantic retail outlets were supplied by whole-

sale distributors in 1956. Atlantic receives a 742 percent

sales commission on the net sales value of all sponsored

TBA purchased by wholesale distributors, but no additional

sales commission is paid when such purchased TBA is resold

to retail dealers supplied by the whofesale distributors. _

Goodyear has sales commission contracts with a num-

ber of other marketing oil companies, and these agreements

are ih all matcrial respects identical ‘with tne Goodyear-

Atlantic contrset. Total sales by Goodyear under its sales

commission contracts with such other oil companies, includ-

ing Shell Oil Company and D-X Sunray Oil Company,

4nereased from about $16,700,000 in 1951 to about

- $36,105,000 in 1955, with sales eommissions paid thereon by ,

_ Goodyear increasing from approximately $1,600,000 in 1951

. to approximately $3,300,000 in 1959. The evidence of record

‘sn this ease shows that oil companies other than Atlantic

have employed coercive tactics ip) requiring their déalers

to purchase Goodyear TBA. Witness S. K.. Osborn, for

example, was a Sinclair dealer for 20 years, from May

1936 until] May 1956. He was also a distributor of Fire-

storie tires, and could therefore, purchase Firestone +ires

at lewer prices than Goodyear tires. He testified that he

stocked Firestone tires exclusively at his service station.

PPIs ee RRS

.*)

B-43 ; ee °

until: 1948, at which time he was given a notice of lease can-

cellation: | . , ;

A. It was a few days after I got the lease can-

cellation. I was disturbed about it, and I wanted to

find out what it was all about. I called up the com-

pany and finally got an interview with Mr. Weller, .

and Mr. McCauley [Sinclair officials]... I asked

them why I was getting a lease cancellation. They

told me that I wasn’t doing the right things by them,

_ that Goodyear tires, batteries and accessories were

just as/much Sinclair products, just as.important to

the company, as Betholine gas, Sinclair Gas, what- .

ever they weré marketing, and Opaline oil. And I

promised to go along with their wishes. ‘I gave

them an order for Goodyear merchandise. In a few

days I had a new lease. _ aa e i ee:

Q. You say you gave them an order for Good-

year TBA merchandise. Do you recall the approxi-

mate amount of the order? A. A thousand or more

dollars worth.” pees. ;

In order to keep his service station lease, therefore,

this Firestone distributor was placed in the. anomalous

position of having to purchase Goodyear TBA, a competing

brand, in order to maintain his status as lessee of a Sinclair

service station. ete ;

Another former:lessee-gealer, witness M acMasters, who

operated a Sinclair station from 1944 until 1954, testified

that he purchased Bowers batteries for resale at his station

up to sometime in 1947 or 1948. At that time he was sum-

moned to a conference with top-level Sinclair personnel at

“the oil company’s offices : -

A. We went into a conference room, some sort of

conference room that had quite a large table. They

11 In Osborn v. Sinclair Refining Co., F.2d... (4th (ir.

1960), the Court of Appeals held that the facts recited above by

witness Osborn constituted an unlawful tying contract violative

of Section 1 of the Sherman Act. :

[Since the writing of the Commission’s opinion the Osborn case

has been reported as follows: 286 F.. 2d 832 (4th Cir, 1960), cert.

denied, 366 U. S. 963 (1961).] , ie

ras , /

in * Budd

put me on one side of the@able, and the other three .

down the other side. |

So, to make the conversation short, Mr. McCauley

was in a hurry and he said, ‘‘ We will make this brief,

Mac. You are not buying batteries from us.’*-

~'L said, ‘‘No, Mae, Lcan’t buy batteries from you.

I owe an allegiance to Bowers becau

and I promised them if they would help me so I could

remain in business satisfactorily, that I would see

that they maintained and kept the business. ”’ .

And his almost exact words were, ‘‘We.don’t give

a good God damn who you think you owe, you are>

going to buy our [Goodyear] bafteries or else.”’

And that was the end of the meeting.”’

Many other ad rantages acerue to Goodyear, and Fire-

stone as well, as a consequence of their sales commission

’ contracts with oil companies. A prime advantage is partici-

pation with each, oil company’s sales force in a number of

joint merchandising programs. This advantage commences

with the selection of persons to operate newly-opened

service stations or to replace outgoing dealers in previously- ~

operated stations. A continuing responsibility of Atlantic

salesmen is to help newly-recruitéed dealers get established.

Through ‘these salesmen, the local Goodyéar or Firestone

supply points are notified of the names and addresses of

new dealers before they a:tually take over operation of their

‘stations and, as a result, vefore local competitors of Good-

year and Firestone in any community become aware of a

new dealer’s identity.. This policy was implemented by a

memorandum of ,Apfil 25, 1952, by Atlantie’s TBA Mana-

eer Heideman to Atlantie personnel :

‘Station. Openings. We ask that you instruct

your Districts to establish, as a regular practice,

automatic and advance notice to the Goodyear Dis-

“ triet Office, of the openings of any new stations, or of

change in proprietorship at any dealer location. Such

. 9 EN

they took care .

of me during the war.and immedia ely after the war,.

° atl B-45 |

notice will be mutually beneficial to both Goodyear

and ourselves. ‘It will enable Goodyear to complete

any unfinished business with the outgoing dealer and,

further, will enable them to anticipate and te move

promptly. in handling the new dealer’s require-

ments.”’ ;

The importance of advance notification is indicated by

the fact that the initial stocking order of TBA costs approxis

mately $1,000—for ‘large stations the amount may be much\ °

greater, And Atlantic’s turnover of dealers is high. During \ -

1955, 720 lessees of Atlantic ceased operation and had to be \

replaced, representing a turnover of about 29 percent of the \

oil company’s total number of lessee-dealers in that year.

Moreover, during the period March 1950°to June 1956, 389 —

new Atlantic stations commehced operations. Frequently ~

these new or replacement. dealers have recently completed

. Atlantic training schools in which Goodyear and Firestone

TBA were used in demonstrations, and have already formed

‘biases in favor of one or the other. brand. . However, the

new dealer has no choice as to which of the two brands he

will purchase and: display—if his station is located in the

thrée¢.Sales Regions of the company in which Goodyear is

sponsored, then he must take Goodyear TBA, and if his.

station is located in the three Sales Regions of Atlantic

assigned to Firestone, then he must take the Firestone

program. ra si . ed

Numerous other examples of joi Merchandising pro-—

grams fayorable to the rubber com] nies having sales com-

mission agreements with Atlantie cbuld be cited. Although °

Atlantic officials stated in an intra- -ompany memorandum

shortly before the inception ofthe sdles cummission pro--

gram that ‘‘Practically all sales promotional expense [will

be] assumed ‘by. supplier {Goodyear],’’ Atlantic, aggres-

sively assists in carrying out*the Goodyear program in .

various ways. For example, Atlantic salesmen obtain TBA’

orders from dealers and send them to loeal Goodyear sup--

ply. points, recommend ‘minimum Goodyear TBA inven-

im Oy FE oe

B-46 x

tories to dealers, coordinate special Goodyear promotional

_ programs with radio, television, and other forms of adver-

_ credit card facilities are also available to motorists wishing

to purchase Goodyear TBA products from Atlantic stations.

Without doubt, however, te most effective joint merchan-

dising tactic is dual solicitation, or ‘‘double-teaming.’’ This.

refers to the practice of an Atlantic salesman accompanying

a Goodvear or Firestone salesman in galls upon service

station operators to urge them to purchase sponsored 'T'BA.

Goodyear’s heavy reliance upon double-teaming to con-

vert Atlantic dealers from the Lée-Exide program to Good-

year TBA was set forth in a ‘‘Confidential’’ memorandum

of February 27; 1951, from Mr. S. A. Gaylord, manager of

the rubber company ’s gales commission programs with oil

companies, to-Goodyear District Managers located within -

he three Atlantic Sales Regions assigned to Goodyear:

‘

‘You have been advised of the Sales Organization —

Meetings [between Goodyear and Atlantic sales per- -

sonnel]. Mr. MeConky [Goodyear Northeast. Divi-

- sion Manager] will keynote for his Division. He

will welcome the opportunity and pledge strong sup-

port and cooperation. No doubt he will stress the

_Ampottance of Atlantic and Goodyear personnel get-

ting acquainted and teaming up together when pre-

' senting the Goodyear franchise to Atlantic dealers.

Because the Atlant. salesman has the ‘in’, but can- |

not be expected to know the Goodyear story at the

start, so by team work the Goodyear Sales Repre-

sentative will make the presentation and also assist

in training the Atlantic Representative.

_Two purposes will be accomplished by this team-_

ing activity—first the. Atlantic salesman will- learn |

the basic details of our Franchise Presentation and,

secondly—our’ Goodyear salesman will be very fav- |

orably introduced to the account through the sales

influence of the Atlantic Representative, also bring

. up this point with your men.”’

a nie Pile Me, wi wy

—

B-47

z Thereafter, on August 7, 1951, a Goodyear official wrote

to Atlantic’s TBA Manager, Mr. Heideman: a

‘Having reviewed your letter of July 30th, I am

pleased to outline. below for your’ consideration, steps

that I suggest be followed in the handling of/a new

~ Atlantic Dealer on the Goodyear T. B. A. Program:

4, Arrange for double team contact by the Good-

year and Atlantic salesman.’ yy . | :

Nine additional steps were outlined in this letter of

August 7, the fifth being to ‘‘Take stock order (Tires, Bat-'

teries and Accessories)?” atid the sixth being to ‘‘Furnish

initial price lists, tires, batteries and accessories.”’ Good-

year thus appeared confident that-the presence of an Atlan-

tic salesman together with the Goodyear. represtntative

price before obtaining an initial order for TBA from Atlan- -

tic dealers. — e vied

_ Similar confidence in the efficacy of double-teaming

activity: was expressed in a memorandum setting. forth

action to be taken to introduce the sales commission plar—-—

to Atlantic outlets: in the three Sales Regions assigned to

Firestone : : ~-

| “«¢Double-teaming activity with Firestone and oil

company salesmen is then scheduled in order to sell

the oil company.’s. dealers on the Commission Plan.”’

Atlantic’s Vice President, Mr. D. T. Colley, inaugurated

_ the sales commission program on March 1, 1991, with the

following letter to’the oil company ’s sales foree:

— Tam sure that the new TB. A. program which

‘we have carefully selected has so many advantages ~

that it will not-be difficult to convince Atlantic dealers

and distributors of its superior merit. This job is

‘-- to be done with the use of all the sales equipment.

_ and knowledge that we, or our suppliers, have at our |

_ respective commands. [ expect the results of our

* salesmanship to be highly ‘successful.

f ‘.

mn?

Bas ear eS

“You can appreciate the fact that under no ¢ir-

cumstances are ovr dealers to be made to feel that

. they must buy this new program just begause they

‘are Atlantic dealers. The sales you make must be

made on the merits of the program and your ability

to sell the dealer on its advantages to him: Ang

evidence that coercion or misrépresentation “were

used in securing acceptance would be most embar-

rassing to our company. This program is a challenge

~—.-to your sales ability. I anr confident that, you will do

a fine a job. we emphasis added) .

; Thicss envtations reflect the belief of Gecteber and

; Firestone, as well as Atlantic,-that the presence- of an

Atlantic salesman is the almost indispensable. ingredient

needed to, insure the success of the two rubber companies

-in selling their TBA products to ‘Atlantic‘dealers under the

. sales commission plan. “Perhaps one reason for this i is that

the annual evaluation by -Atlantie salesmen of their’ respec-

tive lessee-dealers carries substantial weight with District

Managers of Atlantic when the latter group make decisions

as. .to extensions of dealers’ leases for another «year.

Although respondent Atlantic has made vigorous efforts to

create a record image of the typical Atlantic lessee-dealer

as a stoutly independent businessman, able to close up shop’ 2

as an Atlantic lessee on Saturday night and reopen down the

street in a Sinclair or an Esso station the following Monday

morning, the record as a whole sug ygests that this is a

romanticized picture of a small businessman who is, more

often than not, in a woefully weak bargaining Position vis-a-

vis his oil company lessor,- ;

The typical lessee-dealer’s.dependence upon_his lessor-

supplier is explained by the following facts: Tlie cost of

-construeting an average Atlantic service station is about

$50,000. Few fnen who become service station operators

have this amount of money—many have as little as $1,000,

and very few have as: much as $15,000. Most marketing oil

companies, therefore, build a substantial portion of their

own stations and lease them to operators. The lessee-

dealer uses his own capital to purchase an ‘initial inventory

_B-49 7 ° i F . <

of petroleum products, TBA, and tools and for other

expenses incurred? in commencing operations. It is fre-

-quently necessary for incoming dealers to borrow several .

_thousand dollars from Atlantic in order to purchase these

‘initial stocks of goods. Nor is the income of the typical

lessee-dealey sufficient to enable him eventually to puréhase

his own station. Although an exceptional dealer with an

unusually high-gallonage station may earn as much as

$20,000 per year, the average-annual net income of Atlantic

dealers is in the range of 6 to 10 thousand dollars. But «.

‘no matter how long an operator may remain as lessee, und

no matter how much he strives to establish goodwill i in his"

community, the time may come when his lease is not

renewed—for any one of a number of reasons or for no

reason at all’ except that-the lessor would prefer to. have

someone else operate that particular station.

_ Many of the control devices available to Atlantic i in its

‘ relationship with lessee-dealers are also applicable to con-

tract dealers. Many of the latter are indebted to Atlantic, —

and most of them lease storage tanks, gasoline pumps ‘and

‘other equipment from their oil« “company supplier. These

equipment leases specify that such equipment may. not be

‘used for storage or sale of petroleum pr oducts purchased

from any supplier other than Atlantic. And serious incori-

veniences would be caused for any eontract dealer whose

petroleum supply contract with Atlantic was not renewed

from year to year.

Service station operators are understandably suscep-

tible to the urgings and recommendations of their oil com-

pany suppliers and lessors in the matter of TBA. The.

' Goodyear salesman encounters less bttver resistance on te.

part of such a customer when an oil company salesman is .

standing nearby adding his endorsement to the sales pre-

sentation of the Goodyear representative, The technique

of dual solicitation ( ‘doublet

microcosm the competitive effects of the sales commission

‘method of distributing TBA when introduced throvighout’

the entire marketing area of a major. oil company. It is to

these macrocosmic effects that we now turn.

‘

vaming’’) thus symbolizes in °

1 2

B-50 =.

Competitive Errects or THE Sates Comission PLAN AT

THE MANUFACTURING, WHOLESALE AND Retain LEvELs.

A glance at Map I, supra, suffices to show that compe-

tition between Firestone and Goodyear in selling to, Atlantic

oil company accounts has heen wrecked by the operation of

the sales commission system.’ But other evidence of record

-is available in abundance to illustrate the same, point. The

_ following is an exchange of correspondence between Atlan-

tic and Goodyear concerning Republic Oil Company, .a

wholesale distributor of Atlantic _Products in Pittsburgh,

Pennsylvania. (Atlantic’’ W estern - Pennsylvania sales

region,.it will be recalled, is assigned to Firestone.)

On August 2, 1951, Mr. E. C. Sauter, District Manager

of Goodyear in Pittsburgh, addressed the following letter

to Mr. F. W. McConky, Jr., Manager of Goodyear’s North-

east Division: —

‘*Republic Oil Co..

‘‘This is a.Pittsburgh concern who are acting as

* distributor of Atlantic products in parts of Penn-

' sylvania and Northern West Virginia.

‘‘The retail division of this company operates

about seventy: -five (75) service stations. They have

never gone intoa TBA program and at present have

no tire hook-ups. They are in process, however, of

trving to get a deal with.one of the major tire com-

panies and would like to entertain a proposition from

Goodyear whereby we would sell their stations direct

er through supp!ving dealers at a price which would

be in line with exch outlet’s volume with an override

to the oil company. *

12 Many service station operators and TRA dealers use the term

‘override commigsion”’ or ‘‘overriding commission’’ in referring

to payments by ‘a TBA manufacturer to an oil company such as

those made by Goodyear and Firestone to Atlantic. However, as

respondents and their witnesses usually use the term ‘‘sales com-

mission’’ to refer to such ‘pay ments, we are using ‘‘sales commis-

sion’’ in this opinion.

: B-51 . ~2 “Sa

“Possibly we‘could use this additional distribu-

tion in the Pittsburgh area, particularly on passen-

ger tires and tubes, so if you are interested possibly

we should take the matter up with Petroleum Sales

for their comments. '

Thereafter, on Awgust 3,.1951, the matter was referred |

by Mr. MeConky to a. S. A. Gaylord of Goodyear in

Akron: ve

a ‘*The sgtachea from Eddie. Sauter regarding

Republic Oil and the possibility of their handling.

our. products is a matter, in my opinion, for Akron

decision, inasmuch as they [meaning Republic oil]

are distributors of Atlantic products.

‘‘T don’t want to spend any time lining up with’

these people if for example Atlantic-Philadelphia

would prefer they handle Firestone, since this is the.

‘ tire being handled by Atlantie in that area.

“Of course, I am not acquainted with. the influ-

ence Atlantic might be able to bring to bear in fore-

ing these people to a decision as to the-line of tires

° that they—Atlantic—would like them to handlie.

‘*At any rate, will yon explore this from a man-

agement standpoint and advise so we can proceed

according to Atlantic’s desires.’’

On August 9, 1951, Mr. Gaylord addressed the f ollowing

letter to Atlantic’s TBA Manager, Mr. Heideman: ’

‘Mr. Sauter, our District Manager at Pittsburgh,

and Mr. McConky, advises that subject account is

considering marketing. T.B.A. products and have

invited us to submit a pr oposal,

‘*Before taking any action in the matter we felt

that we should take the matter up with you for

further guidanee and your good couns¢] iri the

matter.

‘Will appreciate hearing from you on this as

“soon as possible.’’ 8

. B-52

On August 14, 1951, MrHeideman’ replied to Mr. Gay-

‘lord under the heading ‘‘Republic Oil Company”’: -

‘‘Your not. of August 9th has been received. Any

_ overtures on your..company’s part to the subject

_ could upset’ negotiations that we have underway at

present. It was thoughtful of you to consult us and ,

needless to say we appreciate it as we will also appre-

ciate your rejection of the invitation.’’ (emphasis

added. )

Not only has competition ’between Goodyear and Fire-

stone been eliminated as a result of these companies’ sales

commission contracts with Atlantic, but even within Atlan-

tie’s sales regions assigned to Goodyear, competition among

Goodyear wholesalers for the busines’ of Atlantic, accounts

has been eliminated through the assignment of each Atlan-

tie account to a designated supply point. There are 1,155

independent franchised.Goodyear dealers in the Atlantic

marketing territories ‘assigned to. Goodyear, but only ‘128

of these dealers, or 11 percent, are supply points for Atlan-

tic dealers. The remainder, representing 89 percent of all

~Goodyear dealers in the three Atlantic sales regions, are:

substantially foreclosed from access to Atlantic accounts.

Nor is this anticompetitive allocation of customers by

Goodyear among its wholesale distributors confined to

sales commission coutracts with Goodyear, and‘as shown

-by Table IV, below, only a minute fraction of the total

number of Goodyear dealers in any of these oil companies’

marketing areas have been nominated as supply points for

loeal oil company outlets : : a

Sai | gree

| ee ; TABLEIV ee

———-~~ Goodyear Dealers Acting as’ Supply. Points for Oil Company

Outlets Compared with Total Number of Goodyear Dealers

in, Each Oil Company’s Marketing Area

_, of Goodyear Goodyear.

: * Dealers in Supply

j Name of Oil Company Marketing Area Points

Ashland -& Subsidiaries........ . 2,887 87

da SiR i RE ‘oe oo ee

D-X Sunray. .....\.....~:......... - OFZ. 162

Quaker State 2.220000... — 482 14

PN eee ee 1,691 ete

Shamrock -...:.............. ee 7a 25

ES cere cee es 10,756 679

NS ct eo ae 10,963 10

Atlantic ........ RES Se rie “A155. 128

The extent‘to which competition among Goodyear’s own .

dealers at the wholesale level has been shattered by the

operation of the sales commission, plan may be inferred

from the data in Taste IV. In Shpll’s marketing area, for

example, there are’10,756 Goodyear dealers; yet only 679

of these dealers have been appointed as supply points to

Shell stations. In the marketing territory of D-X Sunray

Oil Company there are 6,772 Goodyear dealers, but .only

162 have been granted the privilege of becoming a supply

point. And in Atlantic’s New England, New York, and

1,155 Goodyear distributors. have been named as supply

points. , ere! aie. :

To illustrate the elimination of competition among TBA . °

wholesale dealers caused by the sales commission plan,

evidence adduced in the course of hearings in Atlantic’s

Philadelphia-Suburban Sales District (one of several sales

districts comprising Atlantic’s Philadelphia-New Jersey

Sales Region) may be considered. As of June 30,1956, there .

were 226 lessee dealers and 291 contract dealers of Atlantic

B54

in this district. These dealers, were assigned to three Good-

year company stores and six independent franchised Good-

year Gistributere 3 in i Philadelphia metropolitan area as

follows: | :

o>-~

| —" ars ¥

Goodyear Supply Points in Atlantic’s Philadelphia-

Assigned to ) them, ° 1956 ;

No. Lessee .1955.Total~ _—No. Contract

- Supply Points Deaiers* Sales ‘Dealers*

Goodyear District: ...... $ 43,845 Bead 6

Office . :

Harvey W. George .... 239,906 45 ; 49

Fh ID Socpenniensceecninnes 300,723: .° . 52 } 42

BE. F. Miller .................. | 239,900 39 : 19

Frank Hagan .............. 130,682 _ (34 dealers) \.--

' Ellwood E. Kiesev...... 420,788 - 40 ; 116

Edward Parris ............ 160,100 - (6l-dealers) ~- **

Goodyear Store ........... ' None I eee

- { kenkintown) pee

Goodyear Store .......... None’ § 1

(Norristown) ,

$1,535,944

* Includes some, duplication due to 11 lessee dealers and 5

contract dealers having two alternate sources of supply.

_ ** Né-breakdown is available as to the rumbers of lessee and

contract dealers, respectively, supplied by these-two supply points.

Mr. Hagan was supply point to a total of 54 lessee and‘ contract

dealers of Atlantic, and Mr. Parris to a total of 61 lessee and con-

tract dealers of the oil company.

Witness Elmer H. Booz, for example, an Atlantic lessee

dealer from 1952 until 1956, testified. that Mr. Edward

Parris was the designated Goodyear TBA supply point for

dealers in his ‘area. He stated that although he could have

purchased Goodyear tires from other dealers at lower prices °

than from Mr. Parris, that he nevertheless obtained about

85 percent of his TBA requirement’s from Mr. Parris. One

B-55 Papen:

competing Goodyear dealer offered tives to Mr. jin ata

discount ‘from list price of 10 percent plus 5 percent, plus —

2 percent whereas Mr. Parris gave only a 10 porous dis-

count, plus 2 percent discount for cash.

As to competing brands of tires, Mr. Booz testified. that

he could make more profit on’ several such brands than

he could on Goodyear tires. Lee tires were available at

a discount from list price of 10 plus 10 plus 10 percent,

plus 2 percent for cash. Moreover, the witness stated that

he could never resé!l Goodyear tires at list price because

‘‘there is always someone from the Goodyear company or

somebody else that is going to knock you down on it:’’

_ Witness Francis J. Balloran commenced operating an

Atluatic station in 1953 and was a contract dealer for

Atlamtic at the time he testified in this proceeding: He

stated that after becoming an Atlantic dealer he purchased

Goodyear TBA from his es ee Mr. E. F.

a (Table V, supra) :

Q. Now, you stated that the iis ear TBA was

furnished by Mr. Miller? A. That’s right.

Q. Why did you buy your Goodyear TBA from

Mr. Miller? A. Well, that was the setup by* the

- Atlantic Refining Company when I first operated the

business,

Q. Was it a matter of your own choice? A. No,

sir,

. . » * - * * e

-Q. Did you want to purchase TBA from Mr.

Miller? A. Not truthfully, no.

Q. Why didn’t you? A. Half the time when y you

‘called up you couldn’t get it. Half the time you

called up he didn’t have it. If he did, you had to

13° When Atlantic was considering adopting the Goodyear TBA

program an intracompany memorandum recognized. that Atlantic

dealers would face ‘‘: . .a maximum amount of competition from

established dealers and company stores, because it is reported that

every county, marketing town and shopping center now has a Geow

year store or distributor.”

B-56 |

‘send a man with a truck and waste an hour and: a

half to go pick it up and bring it back.

Q. Could you havé purchased Goodyear tries ‘at

a cheaper price in the area? A. Yes, sir.

gs Q. What was the name of the supplier? A. Hires

and Becher.

Witness Balloran also ‘testified that he occasionally —

purchased brands of tires other than Goodyear, but did not

display them openly*:

Q. Did you purchase U.S. tives from Harris and

- Leonard? A. That’s right.

Q. Were such tires advertised, U. S. ‘tires?

A . A.. Not out of my place they weren’t.

_. Q. Where ‘didvow ‘keep such tires? A. Back on

» the raeks, back on the: as #ack8 where they couldn’t

be seen.

Q. Seen by whom? A. Any of the Atlantic men

that came in there, the bésses. ,

* aes 7 + * oe

Q. Did: you purchase Lee tires?’ A. Yes, sir. |

Q. And where did you keep aiocs A. On the

racks, sir . a

Nineteen Sine representing eleven TBA wholesale

suppliers in the Piiladelphia-Suburban District’engaged in

competition with one or more of the six Goodyear supply

points. named in Table V, supra, ‘testified in support of the

complaint. Without exception, these witnesses gave evi-

dence that they were able to sell little or no TBA ‘produets

to Atlantic dealers in their areas, and that such Atlantic

dealers had stated that they. must. purchase their TBA’

“needs from: one or more of the designated Goodyear supply

points listed in Table V. -

Witness Michael T. Lanza, partner. in the Philadelphia |

firm of Lanza, Tire. Service, stated that his company sells

Goodyear and Firestone tires and tubes, as well as other

brands, and also Exide batteries. He further stated that

"BT

there are from 45 to 60 Atlantic service stations in his

sales area,sand that all such. stations stock arid advertise

Goodyear tires and batteries. Witness Lanza identified

‘Messrs. Fred Glenn and Harvey George as Goodyear TBA

suppliers to Atlantic service stations@im the North Phila-

delphia marketing area of Lanza Tire Service. :

Witness Glenn L. Wetzel, President of Chester Auto

Parts, Inc., of Chester, Pa., testified that his company sells

Willard batteries, Dayton Rubber Co. fan belts and radi-

ator hose, AC, Purolator and Fram oil filters, and a wide

assortment ‘of automotive Gvaxes, polishes and cleaners in.

competition with other sellers of TBA in his company’s

marketing area, including Mr. Edward Parris., Witness

Wetzel stated that it is ‘‘rather futile’’ to attempt to sell

automotive batteries to Atlantic dealers, and ‘‘very_ diffi-

cult’’ to sell automotive accessories to them. On cross-ex-

amination he was asked this question : :

nen One Eine Q. Did I understand you to.:say that you don’t

sell any TBA items to Atlantic stations now? A.

' Selling and buying are two different categories,

They buy from me one or two filters to carry them

_ ‘over until Ed Parris can deliver them-a case. They

“buy six or eight cans of merchandise to carry. them

"over until Ed Parris ean deliver a case or two cases or

.. five cases, whatever the deal may-be.

Witness Myer Duboff is an outside salesman for Lan-

caster Auto Supply Company of Philadelphia. This firm

competes with Goodyear dealers Frank Hagan, E. F. Miller

and Ellwood Kieser, supra, Taste V. Witness Duboff testi-.

fied that he had solicited the business of about. 55 Atlantic

statfons in his area, all of which advertise Goodyear pro-

“ducts “‘. . . right dowri the line.’’ He stated that he had

been told by ‘a number of Atlantic dealers that they were

unable.to buy TBA items from him because they ‘‘must buy

from the company.’’ On cross-examination ie Was queried *

, ' as to statements made to him by one ‘Atlantic dealer:

_ Q. You mentioned ,one person, Mr. I. Mann, of

Haverford and Brookhaven Road? A. That is right.

—-

> a

. bd — 8

eee “B58 oy

Q. As having’ said something to you about inabil> &,

ity to buy from you. I am not clear as to what he.

said. A. Do you want me to state what he said to

me. He said to me. ‘‘I can’t buy from you.’’

_Q. Had he been buying from you? A. He was.

buying odds and ends and every time Fk come ir to

sell him, he would have to hide things, you would

“think it was the Gestapo” or something.. I would go.

in to see him and talk to him and he would say

“Mike, I can’t buy from you,’’ and T said *“Why

not,’’ and he says ‘‘They know what IT am doing,”?

and I didn’t think that was right.

_ Many other examples of such testimony could be cited,

not only by former Atlantic dealers and by TBA suppliers

from the Philadelphia area, butt from other marketing areas

of Atlantic as well. These facts are clear: Atlantic has

allocated three of its six marketing regions ‘to Firestone

and the other three to Goodyear. Firestone’s sales to

Atlantic outlets amounted to $5,562,936 in 1955, the last full

year for which data are available, and in. the same year

the rubber company paid commissions amounting ~ to ;

$506,199 to Atlantic. Goodyear?’s sale Atlantic outlets

amounted to $5,700,121 in 1955 and its sales commission

payments to the oil company totalled $557,559.

We find tha! Atlantic has used its power as a major

wholesale and retail distributor of gasoline and as a lessor

of numerous valuable retail gasoline distribution facilities

to cause its dealers to purchase very substantial amounts

of a different class of products, TBA. This finding, in

‘ conjunction with Atlantie’s market pbsition and the volume

of TBA affected, would appear toring this case within

the Supreme Court’s ruling in Northern Pac. Ry, Co: v.

United States, 356 U. S. 1 (1958) and the more recent

decision by the Fourth Cirenit in Osborn v. Sinclair Refin-

ingCo., - F. 2d . (4th Cir. 1960). [*].

‘The Court held in the Northern Pacific ease that tying

arrangements are per se violative of Section 1 of the .

”" [* This case now is reported’ at 286 F. 24 832 (4th Cir. 1960),

‘cert. denied, 366 U. §..963 (1961).]

B-59

‘nomie power with respect to the tying product to appre-

ciably restrain free competition in the tied product. and a

‘not ‘insubstantial’ amount of interstate commerce is

affected’’ (356 U.S. at 6). The content of the phrase ‘‘suffi-

cient: economic power’ with respect to the tying product |

was defined by the Fourth Circuit recently in the Osborn _

case. a ames ee

Osborn was a lessee of Sinclair Refining Company‘from |

1936 to 1948, at which time his lease was terminated and a

new, lease entered into which was continued: until May ~

1956, when it was finally eancelled>by Sinclair. During the

+ years of Osborn’s tenure as a Sinclair dealer, the oil com-

_ » pany or its subsidiary, Sherwood Eros., Inc., was party to

a sales commission contract with Goodyear in/all’ material

_ respects identical to the Goodyear-Atlantic and the Fire-

Stone-Atlantic arrangements in the instant case. Osborn

‘filed suit for treble damages under the Sherman ‘Act,

claiming that the sale of Goodyear TBto Sinclair dealers

-in Maryland was in furtherance of an illegal restraint:

of trade. On appeal, the court held that Sinclair had gone

bevond mere salesmanship in inducing its dealers to carry

substantial quantities of Goodyear TBA if they wished to”

continue selling Sinclair gasoline under ‘their lease and

sales agreements with Sinclair.!* As phrased by the court,

‘quoting its own earlier decision in McElhenny v. Western °

Auto Supply Co., 268 F. 2d 332, 338 (4th Cir. 1959) 4

_ “Probably nothing is more firmly settled in our

antitrust jurisprudence than that an illegal coritract

may be inferred from all the circumstances, ”’

Aceording to the, court, Sinclair had violated Section 1 :

of the Sherman Act through a series of im plied tie-in agree-

“ments with its dealeys in Maryland. Moreover, the court -

did not regard it as significant that Sinclair had not

"4 Sinclair did not have asales commission plan in effect throngh-

out its entire marketing area, but only in Maryland and. to. some.

extent, in adjacent states.. £286] F. 2d [832] at [834]. Oshorn,

_ plaintiff in the case diser:ssed above, testified in the instant proceed-

ing as a witness in support of the-complaint. . :

te BOO. & - re,

eae MN

". pequired its dealers . to purchase. all theit¥ requirements of .

TBA from Goodyear : Sais

Fe insist. -upénh - ‘sacl exclusivity in a. tie-in-

_ ‘would-be ‘inconsistent with the trend of decisions in

' this grea. If ‘a substantial amount of commerce. is.

restricted by such. arrangements, thé standard for —

_Hlegality would seem to have. yen. met.” °.

es to the requirement: of ‘sufficient sie ‘power’”’

in the tying commodity—Sinclair’s position in the petro-_—

leum retail market—the court found that in 1956, Sinclair -

7 rad oygrated about 300 out of some 2300 retail seryice

stations Faryland and that those stations had soid about

10 percent of fle total sale of gasoline i in the same state in

that year. This was held to afford Sinclair sufficient eco-

nomic power in the gasolihe market appreciably to restrain

commerce in TBY; No one questioned the finding¢fnt

Goodyear TBA purchased by Sinclair dealers in Maryland —

comprised a substantial amount of commerce. Accordingly;

the implied tie-in. agreéments: between Sinclair and its

‘dealers were held to” constitute a per se violation: of the

‘Sherman Aet. - ‘ee

Here we find ‘that Atlantic, which describes itself es

‘*.’. . & large prodicer and distributor of.petroleum’ prod-

nets’? whose operating revenue ‘‘totalled more than one

half billion dellars’? in'1954, distributes gasolifie directly to

more than 5,500 retail service stations and through whole-

sale distribntors to more than 2;800 additional service -

stations in.17 states along the Atlantic Seaboard. Appr Oxi-

~ mately 81 pereent of Atlantic’s total sales of gasoline in

1955 were acéounted — approximately 8 300 retail

service stations.

But we do not rest bur decision ona eesti Sivolioa>

tion of. the rule of the Northern Pacific and Osborn cases.

_ The4ssue here is the legality of respondents’ use of a par-

' ticular method of ‘distr ibuting TBA products. Atlantic has

‘sufficient economnic power with respect to its wholesale and

retail petroleum distributors to cause thém to -purchase’

< ;

% ” *

B6l *

substantial quantities of sponsoréd BA éven without the

use of overt coeréive tactics or of written or oral tying

agreements, and this power is a fact existing independently

of the particular méthod.of distributing.or sponsoring TBA |

used by Atlantic. Determination of illegality. in this context

requires an evaluation of competitive effects resulting from

the sales commission method of) digeibating TBA.used by

_ these respondents.

The reeord of this case conctlafeply establishes, i in our

minds, that the sales commission contracts between Atlantic

and Goodyear and Atlantic and Firestone have unlawfully -~

injared competition i in the distribution of TBA at the manu-

- facturing, wholesale and retail levels. Firestone de ers are

foreclosed from Atlantic ‘outlets in regiop

- Goodyear, and: Goodyear dealers are forec sag from Atlan-

tic outlets in regions assigned to Fir ‘Even witign

regions assigned to. Géodyear? or to * aaa only those’

Goodyear or Firestone dealers fortunate enough to be nomi-

. nated as‘‘supply points’’ have any prospect of sales to

Atlantic dealers. Wholesale TBA dealers representing —

ther tire manufacturers, for example United State rey

Company, ‘Lee Rubber and Tire Corporation, and Mansfield

tires to Atlantic serie station dealers, except upon an

occasional ‘* pick-up’! basis when a‘motorist demands.a tire

brand other than the locally-qqoupered offering available at -

the station. * ° al

Battery inseeatiehanante and certain accessory suppliers

are, if possible, even more severely @isadvantaged by the

* Tire and Rubber see testified ta, their inability to sell,

o Aah

sales commission system fhan are tire companies competing” wie

with Firestone and Goodyear: Local wholesale distributors

of Exide, Wétlard, Bowers and other brands of batteries

testified to their inability fo.séll batteries to AtlantitStations __

. except upon a pick-up basis. ‘Phe most shecking feature of

the'sales commission system as to hatteriés, however, is the -

fact that the sales commissionaontracts with Atlantie eriable

- Goodyear ‘and Wiredlone. to extlude their own suppliers of

batteriés from the wholesale and retail markets represented

‘by Atlantic service station outlets. .For the ev idence of

’ ©

4 .

a Ve Se ee ¥

record.indicates tliat Goodyear and Firestone both refused / >:

to execute sales agreements relating only to tires and tubes, “ied

_ but insisted that it include all TBA items sold by them or .

none, An analogews situation exists as t in accessory

products, for example, ‘‘Mac’s’’ brand df polishes, waxes,

and cleaners. =

Moreover, as one of the chief dineisiiaitinlesi of the sales

- (commission plan is that it strengthens wholesale distributors

*» of Goodyear and Firestone by pre-empting for their benefit -

- a substantial segment of all of the various lé¢al wholesale

=, TBA markcts ih Atlantic’s marketing area, the sales com-

° mission system ‘stands as a bar to the expansion by smaller

TBA manufacturers of their own distributive organizations..

As. respondents concede, a substantial proportion of all

‘replacernént TBA items sold to motérists are accounted for —_

by service stations and: ‘service stations, . . . constitute a

large and increasingly important market”? for TBA prod-

ucts. Thus, the competitive dislocations engendered by the

‘Sales commission plan at the wholesale level entend back-

ward to the manufacturing level. ;

Finally, the unfair competitive advantages ‘resulting

from the sales commission plan are not confined to the

manufacturing and wholesale levels—they extend forward

to the retail level aswell. Many of the wholesalers who

testified in this proceeding also sell at retail, directly to

motorists. To the extent, therefore, that suppliers of TBA .-

competing with distributors of Goodyear and Firestone at

the wholesale level are weakened by the operation ey

sales commission system, the dealers are also weakened at

the retail level, in instances where they are engaged i in retail

__ as well as wholesale operations.

ys Counsel for Atlantic contend, however, that“no competi-

tive consequences attend the sales co

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