# Appendix — Atlantic Refining Co. v. Federal Trade Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386411_0175%3A07 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1965 - **Citation:** 381 U.S. 357 ## Text m y : ay : . , # r " ae YES : eee ——-F Gttee Sepreme Cust, 4S. ie | FILED, | Biipees GOURT. U1 ui 371988 | INTHE | JOHN F, DAVIS, CLERK © Supreme Court of the Wutted States Ocroser TzRM, 1964. THE GOODYEAR TIRE & -RUBBER COMPANY, sicecaiuadd v. _ 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 ey 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» of Tue Goopyrar Tre, &. Rupper- | oe Company, = °°”) Docket No. 6486 and 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. ad * . 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 . ye 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 . te \ 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. (c) Atlantic frequently conducted dealer meetings at 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 . _ / ie 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 7 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~ ow 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 , 4 _ : . . . 4 . - - / " . ° sé — a . A *B-1 > ° . th ° é ¢ ——— s “ahs . rs : 4 - , 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 a 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- © il keeping provisions of the leases are-not unreasonable or oppressive, and the renewal and cancellation provisions of = > e 8 Fa & % 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. oO 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. _ bo 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- $$$, _ cS . ‘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. we 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. 3 e \S 4 ide a ? 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 ~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. f 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 t Products ‘ aes Supplier Weed chains ‘American Chain and Cable + te ‘ . Compan¥ * « e 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. . a ~ . : 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 _& fy o * . 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. “ Peamensoom ea . os — Bi 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 \ 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. ~ i 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”. re 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- ¢ ‘ e- a3 * . s , “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 Oil Filters _ Cleaners, Polishes ‘ and Waxes eaners, Polishes Cleaners, Polishes and Waxes “Cleaners, Polishes nd Waxes Auto Lamps and Bulbs Wiper Blades Radiator Chemicals Radiator Chemicals Brand AC * 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 © New. York ....0...-------eeeeceeeccneeecereee - $3 , 263 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 © WR otras ence Stes SE a Next $2000 monthly DOE hice nn DATES Tose Next $2000 monthly “4 percent....... eee Wt Sic eens . Next $2000 monthly 3 percent............ 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 . G 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- z “ 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? 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- a . im Oy FE oe B-46 x tories to dealers, coordinate special Goodyear promotional _ programs with radio, television, and other forms of adver- tising by the Atlantic-company and its dealers, and assist © dealers in arranging Goodyear TBA displays. Atlantic © _ 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 would render unneéessary any higgling or haggling over © 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 a am _B-49 7 ° i F . -~ | —" ars ¥ Goodyear Supply Points in Atlantic’s Philadelphia- Suburban Sales District and Atlantic Dealers © 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 cs 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. , an * 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. ty —- O > 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 . Sherman Act ‘‘. ... whenever a par ‘~ has sufficient eco- © ”" [* This case now is reported’ at 286 F. 24 832 (4th Cir. 1960), ‘cert. denied, 366 U. §..963 (1961).] om . 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386411_0175%3A07. Public record. Not legal advice.