Appendix — United States v. General Motors Corp.

Supreme Court brief1966

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———

SUPREME COURT OF THE UNITED STATES

Ocroser Term, 1965

No. 46

UNITED STATES, APPELLANT,

vs.

GENERAL MOTORS CORPORATION ET AL.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA

Volume I

INDEX

Original Print

Record from the United States District Court for the

Southern District of California, Central Division

RIN Bo a Va ei balun eeu TS a eee: 1 1

Answer of defendant General Motors Corporation... 9 9

Answer of defendants Losor Chevrolet Dealers Asso-

ciation, Dealers’ Service, Inc., and Foothill Chevrolet

SO BONOUIEMR: 5 os oi ee es 22 17

Reporter’s transcript of proceedings on motion of

plaintiff for pretrial conference, Septe:aber 23, 1963 35a 27

DINE So ioc 2 ERA ets HAE SS 35b 27

Colloquy between Court and counsel. .......... 35d 28

Appendix A to Reporter’s transcript of proceedings—

Stipulation of Facts Number Six, dated May 20,

MO acc iaoe haste < ENT ie POR RE a 37 29

Testimony of Victor O. Geretz

—Designation by Plaintiff................... 40 30

—Cross-designation by All Defendants........ 44 32

Testimony of George A. Cahhal

—Designation by Plaintiff................... 46 33

—Cross-designation by All Defendants........ 48 34

Testimony of Owen Keown

—Designation by Plaintiff................... 52 36

—Cross-designation by All Defendants........ 66 44

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 71 47

—Plaintiff’s reply designation............... 78 50

il INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Appendix A to Reporter’s transcript of proceedings—

Stipulation of Facts Number Six, dated May 20,

1964—Continued Original Print

Testimony of Chester F. Henson

—Designation by Plaintiff..................- 84 53

—Cross-designation by All Defendants........ 88 55

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 91 57

Testimony of Martin Pollard

—Designation by Plaintiff................... 96 59

—Cross-designation by All Defendants........ 99 61

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 106 65

—Reply Designation by Plaintiff............. 110 68

Testimony of Lawrence H. Averill

—Designation by Plaintiff................... 114 69

—Cross-designation by All Defendants........ 118 72

Testimony of Francis J. Bruder

—Designation by Plaintiff.................-- 136 81

—Cross-designation by All Defendants........ 146 87

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 149 89

Testimony of Warren Biggs

—Designation by Plaintiff................... 151 89

—Cross-designation by All Defendants........ 158 93

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 167 99

—Reply Designation by Plaintiff............. 169 100

Testimony of William H. Spoo, Jr.

—Designation by Plaintiff................... 171 101

—Cross-designation by All Defendants........ 178 106

Testimony of Wilbur S. Newman

—Designation by Plaintiff................... 182 107

—Cross-designation by All Defendants........ 191 112

Testimony of Gwynn Bacon

—Designation by Plaintiff................... 200 117

—Cross-designation by All Defendants........ 204 119

Testimony of R. Mitchell MeClure

—Designation by Plaintiff... ............... 207 121

Testimony of William C. Pippin

—Designation by Plaintiff. ............... 209 122

—Cross-designation by All Defendants........ 213 124

Testimony of Vernon R. Trider

—Designation by Plaintiff .................. 215 124

Testimony of Ernest F. Porter

—Designation by Plaintiff................... 221 127

—cCross-designation by All Defendants........ 229 131

INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Appendix A to Reporter’s transcript of proceedings—

Stipulation of Facts Number Six, dated May 20,

1964—Continued Original

Testimony of John N. Armour

—Designation by Plaintiff................... 232

—Cross-designation by All Defendants........ 237

Testimony of Russell De Orto

—Designation by Plaintiff.............. .... 241

—Cross-designation by All Defendants........ 246

—Additional Cross-designation by Defendants

Losor Chevrolet Dealers Association, et al. 247

Testimony of Jere Faust

—Designation by Plaintiff.................. 249

—Cross-designation by All Defendants......_. 258

Testimony of Max A. Young

—Designation by Plaintiff. .... opeeNgls te wuts 262

—Cross-designation by All Defendants........ 268

Testimony of Darrell V. Hawthorne

Designation by Plaintiff................... 279

—Cross-designation by All Defendants........ 288

Testimony of Fred M. Thompson

—Designation by Plaintiff................... 293

—Cross-designation by All Defendants........ 297

Testimony of Thomas 0. Mahon

—Designation by Plaintiff................... 299

Appendix B to Reporter’s transcript of proceedings—

Stipulation of Facts Number Seven, dated May 20,

be OOPS Gur Tee a ADEE See a ee 304

Testimony of Charles Miller

—Designation of All Defendants............. 308

—Cross-designation by Plaintiff.............. 317

Affidavit of Walter H. Furness................ 321

Testimony of Raymond Lanctot

—Designation by All Defendants............. 326

Testimony of Henry Adams

—Designation by All Defendants............. 329

Testimony of Joan Miller

—Designation by All Defendants...... ene 334

—Cross-designation by Plaintiff.............. 340

Testimony of Bernard T. Dottl

—Designation by All Defendants............ 342

Testimony of Carroll David Cone

—Designation by All Defendants............ 347

—Additional Designation by Defendants Losor

Chevrolet Dealers Association, et al....... 352

Testimony of William Howard Se'man

—Designation by All Defendants............ 353

132

135

176

183

186

187

190

192

193

iv INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Appendix B to Reporter’s transcript of proceedings—

Stipulation of Facts Number Seven, dated May 20,

1964—Continued Original Print

Testimony of Marion H. Johnson

—Designation by All Defendants............ 355 194

—Additional Designation by Defendants Losor

Chevrolet Dealers Association, et al....... 359 197

—Additional Designation by Defendaxts Losor

Chevrolet Dealers Association, ¢i al....... 363 199

Affidavit of Theodore Schonlaw................ 366 200

Affidavit of Rudolph F. Schreitmueller......... 370 202

Affidavit of Tom Carrell....................-. 403 218

Appendix C to Reporter’s transcript of proceedings—

Stipulation of Facts Number Seven, dated May 20,

1064 (Continued) ............. 0. cece eee eee eee ~~408 - 222

Affidavit of Frank C. Dykeman................ 409 222

Deposition of Frank C. Dykeman

—cross (by Mr. Blecher)................... 434 237

Reporter’s transcript of proceedings, June 17, 18, 19,

ce ge ee ere eee eee re 552 293

ApPPORTOROGS ... 2. lee eee eee 553 293

Colloquy between Court and counsel............ 556 294

Testimony of James M. Roche—direct.......... 565 296

—Cr0sS........... 755 373

Testimony of John F. Gordon—direct.......... 823 401

ves aE 847 412

Testimony of Robert M. O’Connor—direct....... 887 426

—Cross........ 1007 472

Ditiieinais enh: 22 os ss oS ire a 1075 498

Reporter’s transcript of proceedings, July 27, 1964.. 1080 500

Opening argument on behalf of the plaintiff.... 1081 500

Argument on behalf of defendant General Motors 1085 501

Puantirr’s EXHIBITS:

No. 1—Stipulation of Facts Number One, dated

January 27, 1964 (excerpts)................ 1106 503

Exhibits 2.1, 2.2, 2.3—Sample Dealer Selling

MeN i EG A FS 1127 515

Exhibits 3.1, 3.2—Sample “Terms and Con-

ditions” of Dealer Selling Agreements—

Form Nos. GSD-T-202-Chevrolet-56 and

CBD O00 i ae Se LS 1136 527

Exhibit 4.1—Definition of Los Angeles Metro-

politan Area from January 1, 1960 through

Wee TA AUG oc Se eS 1189 606

Exhibit 4.2—Definition of Los Angeles Metro-

politan Area from April 1, 1961 through

eR Rr nee rae 1190 607

INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiff's Exhibits—Continued

Exhibit 5.1—Definition of San Diego Metro-

politan Area from January 1, 1960 through

Cobra 1D a

politan Area from November 1, 1960

Original Print

1192 609

1193 610

1195 611

1196 612

1198 616

1199 617

1200 618

1201 619

1204 622

1208 627

1210 631

1211 632

1212 633

1213 634

1215 637

vi INDEX

Record from the United States District Covrt for the

Southern District of California, Central |’ vision—

Continued

Plaintiff’s Exhibits—Continued Original — Print

No. 14—Telegram to Mr. Gordon, President, Gen-

eral Motors Corp. from Jack Tresecott, Laguna

Beach, Calif., dated November 16, 1960....... 1216 639

No. 15—Telegram to Jack Gordon, President,

General Motors, from 12 Salesmen of Selman

Chevrolet, Orange, Calif., dated November 16,

Dio ea cae OS A ev ee his Hs 1218 640

No. 16—Teletype Message to L. N. Mays, Chev-

rolet, Detroit, from F. M. Thompson, Chevrolet

(Los Angeles) .... 1219 640

Volume II

No. 17—Inter-Organization Letter to R. M.

O’Connor from Fred M. Thompson, Chevrolet

City Manager, Los Angeles, dated November 17,

1960, with attachments....................5. 1220 641

No. 18—Memorandum to File (Chevrolet-Central

Office) from L. H. Averill, dated November 18,

WN as . PEFR VS hes OO TE eS 8 1223 644

No. 19—Letter to Edward Cole, General Motors,

from Stanley O. Drake, dated November 18,

BN rie diakeisee sg wach REO RFE ee EE ens 1224 645

No. 20—Handwritten letter to Mr. Cole from Jack

Stuh of Eddie Hopper Chevrolet, dated No-

womnber 16, 1000... 0.506 ecb sett eeees 1225 646

No. 21—Letter to Edward Cole from Dick Pru-

szynski, Salesman at Don Steves Chevrolet... 1227 647

No. 22—Inter-Organization letter to L. N. Mays,

Chevrolet Central Office, from R. M. O’Connor,

Los Angeles Zone Office, dated November 22,

P2555, GSS OR a ORT FER So Se en 1228 649

No. 23—Letter to Edward Cole, General Man-

ager, Chevrolet Motor Division, from Art Tay-

lor, dated November 22, 1960................ 1231 652

Nos. 25 & 26—Memo to K.E.S. (Kenneth E.

Staley, General Sales Manager, Chevrolet Motor

Division) from M.W. dated November 28, 1960,

with Plaintiff's Exhibit 26 attached—Letter to

Ed Cole from Don Steves of Don Steves Chev-

rolet dated November 22, 1960............... 1232 65

No. 27—Telegram to Jack Gordon, President,

General Motors, from Kenneth R. Field, Chev-

rolet Salesman with Cone Bros. Chevrolet, dated

Nowember 22, 21000. ........0. 05. cece ees 1234

No. 28—Telegram to Jack Gordon from W. K.

Banks, Salesman, dated November 22, 1960... 1235

INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiff's Exhibits—Continued

No. 29—Telegram to Jack Gordon from Ray Ber-

ney, Salesman, dated November 22, 1960... _..

No. 30—Telegram to Jack Gordon from Leo

Kluthe, dated November 22, 1960............

No. 31—Telegram to Jack Gordon from R. W.

Hughes, Cone Bros. Chevrolet, dated November

Diy I GENER asta ei RG Feo nc.

No. 32—Telegram to Jack Gordon from Hal

Beebe dated November 22, 1960.............

No, 33—Telegram to Jack Gordon from Al Phil-

lips, Chevrolet Salesman with Cone Bros. Chev-

rolet, dated November 22, 1960..............

No. 34—Telegram to John F. Gordon from Harsel

Snyder, Cone Bros. Chevrolet, dated November

Wy MN sck eu varie iia ea.

No. 35—Letter to John Gordon, from C. D. Cone,

President, Cone Chevrolet Company, dated No-

WONT Bs Foe a ves Se vba ek,

No. 36—Letter to E. N. Cole from C. D, Cone,

President, Cone Chevrolet Company, dated No-

WOOT Br Be og SCN CRG vo bn ethene

No. 37—Letter to Gene Staley from C. D. Cone,

President, Cone Chevrolet Company, dated No-

ass 5d chine ace aeoes,

No. 38—Letter to R. M. O’Connor from C. D.

Cone, President, Cone Chevrolet Company,

dated November 23, 1960...................

No, 39—Letter to E. N. Cole, from E. M. Cone,

Cone Brothers Chevrolet, dated November 23,

ME Ga ss ad aes bes ts ORR ek ak

No. 40—Telegram to Jack Gordon from Charles

P. Robinson, dated November 23, 1960........

No. 41—Telegram to Jack Gordon from Carroll

Cone, Jr., Salesman, dated November 23, 1960

No. 42—Inter-Organization Letter from L. N.

Mays, Assistant General Sales Manager for the

West, Chevrolet Motor Division, to H. E. Craw-

ford, dated November 25, 1960...............

No. 43—Letter to J. F. Gordon from E. L. Linde-

mann, Salesman, Harbor Chevrolet, dated No-

VU TI A a5 ea hs .

No. 44—Letter to E. N. Cole from E. L. Linde-

mann, Salesman, Harbor Chevrolet, dated No-

PO i Is Bain cite ADS cas COs £8

No. 46—Handvwritten letter to Mr. Cole from Bob

Erskine, Bob Erskine Chevrolet, dated Novem-

ber 25, 1960, with news clipping attached. _..

Original

1236

1237

1238

1239

1240

1241

1243

1244

1245

1246

1247

1248

1249

1250

1251

vii

656

657

658

659

660

661

670

672

674

viii INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiffs Exhibits—Continued Original Print

No. 48—Handwritten letter to J. F. Gordon from

James Seidlitz, Manager, Harbor Chevrolet, re-

ceived November 30, 1960................... 1256 676

No. 49—Handwritten letter to E. N. Cole from

James Seidlitz, Manager, Harbor Chevrolet,

dated November 26, 1960................... 1257 677

No. 50—Letter to E. N. Cole from Blane Peart,

dated November 27, 1960, with carbon copies to

J. F. Gordon, and K. E. Staley.............. 1258 679

No. 52—Handwritten letter to K. E. Staley from

Daniel R. MeGowan, Salesman, Harbor Chev-

rolet, dated November 27, 1960.............. 1259 680

No. 53—Handwritten letter to E. N. Cole from

Daniel R. MeGowan, Salesman, Harbor Chev-

rolet, dated November 27, 1960.............. 1261 682

No. 54—Handwritten letter to J. F. Gordon from

Omer L. Bernard, Salesman, Harbor Chevrolet,

dated November 27, 1960.................... 1262 683

No. 60—Handwritten memo to L. N. Mays from

ee, GE: 2 ee eas 1263 684

No. 61—Memo to L. N. Mays from K. E. Staley,

dated November 28, 1960.................... 1264 684

No. 62—Handwritten letter to J. F. Gordon from

Buck Pryor, Harbor Chevrolet, dated November

SRN Si pee nf a pet Eerie a a 1265 685

No. 65—Handwritten letter to J. F. Gordon from

W. E. Daley, Harbor Chevrolet, dated Novem-

Wat Te Se a Sia 5 a ees Fee hac aat tae ckess & 1267 686

No. 68—Handwritten letter to K. E. Staley from

“Corny” Cline, Salesman, Harbor Chevrolet, E

dated November 28, 1960.................. 1268 687 a

No. 69—Handwritten letter to Mr. Cole from Let- sg

ton H. Lapley, Eddie Hopper Chevrolet, un-

dated with attachment... ................. 1272 689

No. 70—Handwritten letter to Mr. Cole from G.

Dapatets, IN 5 4 e i es ne eh eeereeniys- 1273 690

No. 73—Handvwritten letter to K. E. Staley from

Phil Chauvin, Salesman, Harbor Chevrolet,

dated November 28, 1960.................... 1275 691

No. 74—Handwritten letter to E. N. Cole from

Ed Lundberg, Salesman, Harbor Chevrolet,

dated November 28, 1960................... 1276 692

No. 75—Handwritten letter to J. F. Gordon from

R. D. MeGowan, Salesman, received November

Te: FE SAI eS 1277 693

INDEX ix

Record from the United States District Court for the

4 Southern District of California, Central Division—

F Continued

Q Plaintiff's Exhibits—Continued Original Print

3 No. 76—Handwritten letter to E. N. Cole from

Ee: R. D. MeGowan, Salesman, dated November 28,

Pe Seer ae aes eS TS Shek UCTS. 1278 694

R. D. McGowan, Salesman, dated November 28,

WE We lice dacs hee bey aS 1279 695

miner WA SON os aoe ie 1280 696

Ii ee 1281 697

4 © OS ee en ee 1282 — 698

No. 83—Letter to J. F. Gordon from C. F. Hen-

3 son, President, Harbor Chevrolet, dated Novem-

ber 28, 1960 with attachment............._.. 1283 699

ber 28, 1960 with attachment............ 1286 703

28, 1960, with enclosure..................... 1290 707

arene Ty TS ee ek 1293 711

with copies of Fedeo and Gemco ads.....___. 1294 712

dated November 30,1960.................... 1298 719

dated November 30, 1960, with attachments ___ 1299 720

Wp EW ice ee ee 1300 721

bare vessn fe sne Plen mae EO ae Te ey ae 1301 723

5 rolet, dated December 2, 1960... ......._. 1302 724

x INDEX

Record from the United States District Court for the

Southern District of California, Central Division

Continued

Plaintiffs Exhibite—Continved

No, 07—-Letter to “Gentlemen” from A, P. Hof-

kina, Salea Representative, Bill Barnett Chev-

rolet, dated December 2, 1960

No, 08—Letter to “Gentlemen” from Don Teague,

Sales Representative, Bill Barnett Chevrolet,

dated December 2, 1960

No, 00-—Letter to “Gentlemen” from Byron J.

Rooker, Salea Representative, Bill Barnett

Chevrolet, dated Decsember 2, 1060

No, 100—Letter to “Gentlemen” from Larry Char

rey, Salea Representative, Bill Barnett Chev-

rolet, dated December 2, 1960

No, 101—-Letter to “Gentlemen” from Stan

Adama, Sales Representative, Bill Barnett Chev-

rolet, dated December 2, 1060

No. 102—Letter to “Gentlemen” from Casey Gal-

vin, Salea Representative, Bill Barnett Chev-

rolet, dated December 2, 1960...

No, 10%—Letter to “Gentlemen” from Norm

Christofferaen, Sales Representative, Bill Bar-

nett Chevrolet, dated December 2, 1960

No. 106—Letter to Bob O'Connor from Cc. dD,

Cone, President, Cone Chevrolet Co, dated

December 6, 1960

No. 107—Letter to John Gordon from Harry M.

Oatrom and Harold Ostrom, Partners, Harry M.

Ostrom and Son Chevrolet, Montebello, Calif,

dated December 6, 1960... ....

No. 111—Letter to B, N. Cole from Owen Keown,

Owen Keown Chevrolet Company, dated De-

cember 6, 1960 ee

No, 112—Letter to BE. N, Cole trom Frank K,

Swift, Jr, Seaboard Motors, dated December 7,

1960... jivaeOne Pea bh

No. 114—Memorandam to K, B. Staley from Lb. N,

Maya, Chevrolet Central OMlce, in re Diseount

House Activities, dated December 12, 1960, with

attached “Reaume of Discount House Activi-

ties”, signed by 8. G, Gilliatt and dated De-

comber 7, 1960 0...

No. 115—Letter to “General Sales Managers, US,

Car Divisions” from H. BK, Crawford, dated

December 15, 1060

Original

18038

1304

1305

1806

107

1908

1309

1310

1312

1913

1919

Tat

T25

T26

INDBX

Record from the United States District Court for the

Southern Distriet of California, Central Division—-

Continued

Plaintiff's Exhibite-—Continued

No, 116-—Duplicate of Exhibit No, 115, with at.

tached letter to C.F. Henson, President, Harbor

Chevrolet, from J, M. Roche, Vice-President,

General Motora, dated December 15, 1960

No, 117--Lnter-Organisation letter te R. M,

O'Connor from L. H, Averill, dated December

16, 1060 , és

No, 118—Memorandum to Mr, Cash from R. D,

Land, dated December 16, 1960

No, 119-—-Letter to R, M, O'Connor from Martin

Pollard, dated December 17, 1960

No, 120—-Memorandam to R. M. Cash, Chevrolet

Regional Manager, Pacitle Coast, from L. HH,

Averill, Exeoutive Assistant to General Sales

Manager, Chevrolet, dated December 20, 1060

No, 121--Memorandum dated December 29, 1960,

to Regional and Zone Managera, subject, “Dia.

count House Operations”, with attachment:

Letter “To All Chevrolet Dealers” from K. B.

Staley, General Sales Manager, Chevrolet Motor

Division, dated December 20, 1960

No, 122-—Letter to K. E. Staley from Jack Coyle,

Jack Coyle Chevrolet, dated January 4, 1961

No, 123-—Letter to K, BE, Staley from D, C. Stach.

lor, Stack Chevrolet, dated January 4, 1961

No, 125—Letter to Jack 1, Coyle, Jack Coyle

Chevrolet, from K, BK. Staley, dated January

10, 1961

No, 126-—Letter to Gene Staley from Harry A,

Mann, Harry Mann Chevrolet, dated January

i ee

No, 127-<Inter-Organiszation letter to L. H. Ave.

rill, Central OMlee, Detroit, from R. M, O'Con-

nor, Loa Angeles, subject; “Sales to discount

houses, referrals, ete.”, dated January 17, 1061,

with copies to Mays and Cash.

No, 128-—-Letter to R, M, O'Connor from C. D,

Cone, Cone Chevrolet Co, dated January 18,

1961, with handwritten note January &, ini-

tialed MA), with attachment.

No, 129%—Letter to K. B. Staley from Allen

Gwynn, Allon Gwynn Chevrolet, dated January

21, 1961

Original

hana

126

1328

1329

1331

1832

1397

1839

140

1341

1942

1943

1346

Vriat

TAM

TAS

Teo

7él

704

TAS

xl INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued ¢

Plaintiff’s Exhibits—Continued Original Print

No. 130—Letter to K. E. Staley from Bill Bar-

nett, Bill Barnett Chevrolet, dated January 25,

PN LETTS SE Ea Tae VEE: 1347 769

No. 131—Letter to Gene Staley from C. D. Cone,

President, Cone Chevrolet Co., dated January

Th SS ae SE eee ec 1348 770

No. 132—Letter to K. E. Staley from Frank K.

Swift, Jr., Seaboard Motors, dated January 26,

PO se eco net erate Cn sabes 1349 771

No. 133—Letter to Jere C. Faust from E. N.

Hopper, President, Eddie Hopper Chevrolet,

dated January 26, 1961.................... 1350 772

No. 134—Letter to Bob O’Connor from C. D.

Cone, Cone Chevrolet Co., dated January 26,

WN cake a cd Seashiel Tha wk Phas wey te ee 1352 774

No. 135—Letter to Jim Roche, Vice-President,

General Motors, from Don Steves, Don Steves

Chevrolet, dated February 1,1961............ 1353 775

No. 136—Letter to R. M. O’Connor from Marty

Lockney, President, Guaranty Chevrolet Motors,

dated February 4, 1961..................... 1354 776

No. 138—Memo on letterhead of Losor Chevrolet

Dealers Association, signed by Evelyn G. Davis,

Wilh GEINORIINNIE Be is Se a 1355 777

No. 139—Extract from Minutes of 16th Presi-

dent’s Dealer Advisory Council, February 14,

15, and 16, 1961—Remarks by William G.

Nugent, A. E. Nugent Chevrolet, Los Angeles 1362 786

No. 140—Letter to Gene Staley from E. H. Col-

liau, Colliau Chevrolet, dated February 15, 1961 1363 787

No. 141—Handwritten memo “To Whom It May

Concern” signed by Inez Oelwein, dated Feb-

ruary 25, 1961, with attachments............ 1364 789

No. 142—Letter to Bob O’Connor from Bob Ers-

kine, Bob Erskine Chevrolet, dated March 3,

pe Reh DOE Te, Se Marae Rpt ey pea geg 1374 795

No. 143—Letter to Gene Staley from E. H. Col-

liau, Colliau Chevrolet, dated March 17, 1961.. 1375 796

No. 144—Memo to File, from L. N. Mays, Assist-

ant General Sales Manager for the West, Chev-

rolet Motor Division, dated March 27, 1961.... 1377 798

INDEX xiii

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiffs Exhibits—Continued Original = Print

No. 146—Letter te Dealers Diversified Services,

Inc. (FEDCO) from Warren Biggs, Warren

Biggs Chevrolet, dated September 30, 1959... 1379 801

No. 147—Letter to Dealers Diversified Services,

Ine. (FEDCO) from Warren Biggs, Warren

Biggs Chevrolet, dated October 13, 1960...... 1380 802

No. 149—Letter to Autoresco (Dealers Diversified

Services, Inc.—also referred to as FEDCO),

from Paul O’Sullivan, Bruder Chevrolet, dated

Qala: BE Bee as cabal ES. 1381 803

No. 151--Letter to Dealers Diversified Services,

Inc. (FEDCO) from M. Harvey, Bruder Chev-

rolet, dated September 29, 1959.............. 1382 804

No. 152—Letter to Dealers Diversified Services,

Ine. (FEDCO) from Cecil R. Glover, Bruder

Chevrolet, dated October 1, 1960............ 1383 805

No. 153—Letier to Dealers Diversified Services,

Ine. from Cecil R. Glover, General Manager,

Bruder Chevrolet, dated January 3, 1961..... 1384 806

No. 158—Letter to Jim Deupie, Dealers Diversi-

fied Services, Inc., from James M. Snow, Sales

Manager, Parkwood Chevrolet, dated May 25,

Eo SE pe Ue RES Bhs mr SPE eee eee eI 1385 807

No. 162—Letter to Dealers Diversified Services,

Ine., from G. V. Jones, Glenn Jones Chevrolet,

dated January 13, 1960, with attachments.... 13°. 809

No. 163—Letter to Joan Miller, Dealers Diversi-

fied Services, Inc. (FEDCO), from W. S. New-'

man and Bill Spoo, Citizens Chevrolet, dated

September 90, 2008... 2006. ee. 1388 813

No. 170—Letter to R. M. O’Connor from J. N.

a Armour, Business Manager, Eddie Hopper

‘4 Chevrolet, dated June 9, 1960, with postseript

“a by F. N. Hopper, President, and attachment.. 1389 815

‘s No. 171—Minutes of Meeting of Losor Chevrolet

- Dealers Association, held June 28, 1960...... 1392 818

a No. 172—Minutes of Meeting of Losor Chevrolet

8 Dealers Association, held July 26, 1960...... 1394 820

No. 173—Minutes of Meeting of Losor Chevrolet

a Dealers Association, held September 27, 1960.. 1395 821

a No. 174—Minutes of Meeting of Losor Chevrolet

‘s Dealers Association, held October 27, 1960 .. 1397 823

No. 175—Minutes of Meeting of Losor Chevrolet

Dealers Association, held November 10, 1960.. 1398 824

xiv IN DEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiff's Exhibits—Continued Original Print

No. 176—Letter to Losor Dealer Members from

Board of Directors, Losor Chevrolet Dealer's

Association, dated January 26, 1961......... 1399 825

No. 177—Minutes of Meeting of Losor Chevrolet

Dealers Association, held April f, 1961....... 1400 826

No. 178—Minutes of Directors’ Meeting of

Dealers’ Service Inc., held December 21, 1960 1401 827

No. 184—Letter to Jerry Faust from C. D. Cone,

Cone Brothers Chevrolet, dated June 22, 1960,

with attachment... 0.0.6... 0600s 1403 829

No. 185—Presentation of Discount House Activi-

ties, Distribution Policy Group Meeting, Wed-

nesday, December 21, 1960.................. 1405 833 4

No. 186—Shopping Report for Month of April :

WOME ie OR oe EL Sy ol iwaga iva ve 1426 = 841 4

No. 187—List of discount houses found to be 4

selling, or not to be selling, 1961 Chevrolets. . 1431 848

No. 189—Shopping Reports of April 6 and 7,

yi. ER Pa eee eer Eee rr rae eee 1432 849

No. 190—Statement of Russ De Orto, May 23,

SS, Sha soy OL te FEL dion 9 WR oN NS S85 a

No. 191—Report re vazicus discount houses, ete. 1435 852 4

No. 192—Report re Union Store, Montclair..... 1440 857 a

No. 193—Report re Brockway Plan plus business

card and handwritten notes................. 1443 859 .

No. 195—Letter to Glenn §, Roberts, Los Angeles, “

from E. H. Colliau, dated March 4, 1961...... 1447 862 S

No. 196—Letter to Glenn Roberts, Los Angeles,

from Bob Erskine, Bok Erskine Chevrolet,

dated March 6, 1961....... 2.02... cee e ees 1448 863

No. 197—Letter to Glenn S. Roberts, Los Angeles, a

from Robert Sorensen, Community Chevrolet, a

dated March 6, 1961... ... 6... ees 1449 864 4

No, 198—Letter to Owen Keown, President, Owen E

Keown Chevrolet, from K., E, Staley, dated .

Docetaber 16, 1000... 5. ccc eee ees ese 1450 865

No. 200—Letter to All Chevrolet Dealers from

K. E. Staley, General Sales Manager, Chevrolet a

Motors Division, dated August 1, 1960, with a

attached letter of instructions addressed to All g

Chevrolet Wholesale Personnel from K. E. Sta-

ley, dated July 29, 1960...............0005, 1455 870

INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Plaintiff's Exhibits—Continued

No, 201—lInter-Organization letter to H. E, Craw-

ford from L, N. Mays, Assistant General Sales

Manager for the West, Chevrolet Motor Divi-

sion, re Discount House Activity Pacific Coast

Region, dated January 18, 1961

No. 212—Looseleaf booklet entitled, “Prepared by

Statistical Tabulating Corporation”—contains

“print out” listing all 1960 sales of Chevrolets

by seven dealers who sold through discount

houses and referral services

Volume III

No. 287—Chart showing 1960 Chevrolet Dealer

Volume in Los Angeles metropolitan area _..

No, 290—Letter to Robert O’Connor from Phil

ie College Chevrolet, Ine., dated March

DEFENDANTS’ EXHIBITS:

A—Map of Chevrolet-Los Angeles Metropolitan

Area (expanded) showing Chevrolet dealer and

discount house locations (Stipulation of Facts

Number Three) (See Clerk’s note.)

B—Map of Chevrolet-Los Angeles Metropolitan

Area (expanded) showing Chevrolet dealer,

Ford (Ford, Mercury, Comet) dealer, Chrysler

(Plymouth, Dodge) dealer, Rambler dealer,

Studebaker dealer, and Volkswagen dealer loca-

tions (Stipulation of Facts Number Three)

Cian Cheers meen ek es aa ik

C—Listing of Chevrolet dealers and identifying

numbers for Defendants’ Exhibits A and B

(Stipulation of Facts Number Three) (Blue

Dots)

D—Listing of discount houses ard referral serv-

ices and identifying numbers for Defendants’

Exhibit A (Stipulation of Facts Number Three)

(Red Dots)

J—Tabulation from Defendants’ ‘Exhibit B by

identifying number showing each Chevrolet

dealer, Ford dealer, Chrysler dealer, Rambler

dealer, Studebaker dealer and Volkswagen

dealer located within a five mile radii of each

Chevrolet dealer indexed in Defendants’ Ex-

hibit C

1458

1813

INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Defendants’ Exhibits—Continued

AA—Stipulation of Facts Number Two, dated

May 20, 1964, with attachments—Gemco Auto

Show—Discount house ads (excerpts)...

AP-—Dealers Diversified Services, Inc. letter of

instructions to cooperating dealers—undated. .

AQ—Letter to J. H. Connell from L, N. Mays,

dated November 23, 1960. ................6..

AR—Letter to K. E. Staley from Frank Green,

dated December 2, 1960, with attached copy of

Auto Dealers Business Letter dated December

aa eee Seat Da eee ss

AS—Letter to Frank Green from J. M. Roche,

dated December 15, 1960........

AV —Inter-Organization letter to All Car Divi-

sions from J, M. Roche, dated December 28,

1960, with attached letters “To All (Cadillac,

Buick, Chevrolet, Oldsmobile and Pontiac)

Dealers”, dated December 30, 1960

AW —Inter-Organization letter to J. M. Roche

from K. E. Staley, dated December 29, 1960. .

AX—Letter to John S. Gordon from James Fahy

and Virgil Dunn, dated February 15, 1961 ...

AY—lInter-Organization letter to Lawrence Ave-

rill from A, H. Belfie, dated March 23, 1961,

with attached copy of letter to James Fahy and

Virgil Dunn, Fleet Sales Company, from A. H.

Belfie, dated March 23, 1961

AZ—Stipulation of Facts Number Three, dated

May 20, 1964, re Defendants’ Exhibits A

ins 55 SIs Fe TAT AGS Ss

BA—P-W Exhibit—Summary of Profitability in

the Service and Parts Departments in 1960 for

the 76 Los Angeles Metropolitan Area Chev-

rolet Dealers..........

BB—P-W Exhibit—Estimated ‘Reduction in ‘New

Car Volume to Eliminate all Profit for Volume

Classes of Los Angeles agceecneaead Area

Chevrolet Dealers . a

BC—P-W Exhibit—Estimated ‘Reduetion in New

Car Selling Price to Eliminate all Profit for

Volume Classes of Los Angeles Metropolitan

Area Chevrolet Dealers ....

Original

1846

1879

1880

1881

1885

1887

1905

1906

1907

1911

1917

1918

1919

1261

1293

1295

1303

1324

1325

1333

1334

INDEX : xvii

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Defendants’ Exhibits—Continued Original = Print

BD—P-W Exhibit—Median Gross Profit per New

Chevrolet Passenger Car Sold in 1960 by Los

Angeles Metropolitan Area Chevrolet Dealers

Who Sold Through Discount Houses or Referral .

vec inte PE SORES eA ea 1920 1334

BE—P-W Exhibit—Reprint from Collier’s—taken

from Hrirson, Introduction to Modern Statis-

MM 5 PE eae rink uh coco vacantes 1921 =: 1335

73 Los Angeles Metropolitan Area Chevrolet

WOM ee ee 1922 1837

BG-—P-W Exhibit—Graph: 1960 Combined Gross

Profit for Service and Parts Departments

(Based on 1960 Financial Statements ete.).... 1923- 1338

BH—P-W Exhibit—Graph: 1960 Net Miscel-

laneous Income of the Entire Dealership (Based

on 1960 Financial Statements ete.) ._.. . 2ee4 1339

BI—P-W Exhibit—Graph: 1960 Combined Vari-

able Selling Expenses for the New and Used

Car Departments (Based on 1960 Financial

Centeinnte CA) oe ee 1925 1340

vegad MEE TEE EE OEE EEE OEE ... 10% 1341

fixed Expenses of the Service and Parts Depart-

ments (Based on 1960 Financial Statements

GS i cee We a oc lee

BL—P-W Exhibit—Graph; 1960 Fixed Expenses

of the Dealership (Based on 1960 Financial

Chohenente ahh) 5620s er OS ac ee 1343

BM—P-W Exhibit—Effect of a Loss in Sales Vol-

ume upon a Los Angeles Metropolitan Area

Chevrolet Dealer of the 300 New Car Volume

GHA si Minka Masiah oe tend Ot pute cet: 1929 1345

BN—P-W Exhibit—Effect of a Loss in Sales Vol-

ume upon a Los Angeles Metropolitan Area

Chevrolet Dealer of the 400 New Car Volume

re POLE, PED FRE SNe ED a Sale eee 1930 1346

BO—P-W Exhibit—Effect of a Loss in Sales Vol-

ume upon a Los Angeles Metropolitan Area

Chevrolet Dealer of the 500 New Car Volume

GE Scr eres 1931 1347

xviii INDEX

Record from the United States District Court for the

Southern District of California, Central Division—

Continued

Defendants’ Exhibits—Continued Original = Print

BP—P-W Exhibit—Effect of a Loss in Sales Vol-

ume upon a Los Angeles Metropolitan Area

Chevrolet Dealer of the 600 New Car Volume

CD kg obs SRR CALE PURE Ee CON MAS 1932 1348

BQ—P-W Exhibit—Effect of a Loss in Sales Vol-

ume upon a Los Angeles Metropolitan Area

’ Chevrolet Dealer of the 700 New Car Volume

CN iin hing ah: yaa abe aie AUR Ree ne eee oak © Hit 1933 1349

BR—P-W Exhibit—Graph: 1960 New Retail

Passenger Car Sales Receipts (Based on 1960

Financial Statements of the 73 Los Angeles

Metropolitan Area Chevrolet Dealers)....... 1934 1351

BS—P-W Exhibit—Graph: 1960 Sales Commis-

sions on the New Cars (Based on 1960 Financial

Statements et6.)..... 0.6 cece eee e reer eee 1935 1352

BT-—P-W Exhibit—Effect of Reductions in Sell-

ing Prices of New Chevrolets upon Los Angeles

Metropolitan Area Chevrolet Dealers of Various

ee a ne rr ic 1936 1353

BU—Chevrolet Dealers in Los Angeles Metropoli-

tan Area Within 5 Miles of Each of the Dis-

count Houses and Referral Services Shown on

Defendants’ Exhibit A............0 66600005 1937 1354

BW—Distribution of Franchised Chevrolet Dealers

by New Passenger Car and Truck, Volume

Groups 1960, Chevrolet Los Angeles Metropoli-

Si NS cele eee awd oe MNS a toe 886 1938 1354

BX—Distribution of Franchised Chevrolet Dealers

by New Passenger Car and Truck Volume

Groups, 1960, Chevrolet Los Angeles Zone.... 1939 1355

BZ—Distribution of 85 Franchised Chevrolet

Dealers in the Chevrolet Los Angeles Metro-

politan Area by Number of Other Franchised

New Car Dealers Located Within a Radius of

5 Miles from Their Places of Business...... 1940 1355

CA—Chart dated March 7, 1962, prepared by

Dealer Organization & Analysis Dept. showing

National Price Class Performance of Chevrolet

and Other Makes for the Years 1922 through

MOE SOLS Fe aki ge ch «fe bv iene vere FF 1941 1357

CD—Letter to Owen Keown from K. E, Sialey,

dated December 16, 1960...............05555 1942 1359

INDEX xix

Record from the United States District Court for the

‘ Southern District of California, Central Division—

e Continued Original Print

, Reporter’s transcript of proceedings, August 24, 1964 1946a 1364

; EE SENN... Gish oA ind die v «SEs «vena 1946b =:1364

* Findings of fact and conclusions of law, September

A TE a Ta ye tee eb sighs Dake vi vlensnene. 1947 1373

: SE PE ra Ons cl wu es tins oe Wine deed sao %h or 1985 =: 1400

q Notice of entry of judgment...................... 1987 1401

“4 Notice of appeal to the Supreme Court of the United

SEE Waidh:nn cetawen abd dai ele ke de veh vnc me . 1988 1402

Order noting probable jurisdiction Fi GAO ang 1990 1403

(A SUaRAINIRIRIMIRNER eRe aeeoM ONC nd Ma

[fol. 1} [File endorsement omitted]

IN THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF CALIFORNIA,

CENTRAL DIVISION.

Civil No. 62-1208-CC

(15 U.S.C. §1)

Sherman Antitrust Act

Unirep Srares or America, Plaintiff,

GeneraL Motors Corporation; Losorn Curvroter DeaLers

Association; Deraters’ Service, Inc.; and Foornm.

Cuevrotet Deaters Association, Defendants.

Comptaint—Filed August 30, 1962

The United States of America, acting under the direction

of the Attorney General of the United States, brings this

action against the defendants named herein and complains

and_alleges as follows:

Jurisdiction and Venue

1. This complaint is filed and these proceedings are in-

stituted under Section 4 of the Act of Congress of July 2,

1890, c. 647, 26 Stat. 209 (15 U.S.C. § 4), as amended,

entitled ‘‘An Act to protect trade and commerce against

unlawful restraints and monopolies,’’ commonly known as

the Sherman Act, in order to prevent and restrain con-

tinuing violations by the defendants, as hereinafter alleged,

of Section 1 of said Act (15 U.S.C. §1).

[fol.2] 2. Each of the defendants maintains an office,

transacts business and is found within the Southern Dis-

trict of California, Central Division.

Definitions

3. As used herein:

a (a) ‘‘Chevrolet automobiles’? means all of the

various series and models of new passenger cars, sta-

tion wagons, and trucks sold by the Chevrolet Motor

Division of General Motors Corporation under trade

names including ‘‘Chevrolet,’’ ‘‘Corvair,’’ and ‘‘Cor-

vette’’;

(b) ‘‘Chevrolet Dealer’? means any person, firm, or

corporation engaged in purchasing Chevrolet auto-

mobiles from General Motors Corporation for resale

to the public pursuant to a Dealer Selling Agreement

with the Chevrolet Motor Division of General Motors

Corporation ;

of Los Angeles, Orange, Riverside, San Bernardino,

Ventura, San Diego, Imperial, San Luis Obispo, and

Santa Barbara, State of California.

iil

Defendants

4. General Motors Corporation (hereinafter General

Motors) is hereby made a defendant herein. General

Motors is a corporation organized and existing under the

laws of the State of Delaware, with principal offices in

New York, New York and Detroit, Michigan. General

Motors is the largest automobile manufacturer in the

United States.

5. Losor Chevrolet Dealers Association (hereinafter

Losor), a California corporation, is hereby made a de-

fendant herein. Losor is a trade association whose mem-

bership consists of Chevrolet dealers in Orange County

and in the southern and western portions of Los Angeles

County, State of California.

6. Dealers’ Service, Inc. (hereinafter DSI), a California

corporation, is hereby made a defendant herein. DSI is a

(fol. 3] trade association whose membership consists of

Chevrolet dealers in the city of Los Angeles and adjacent

communities in Los Angeles County, State of California.

7. Foothill Chevrolet Dealers Association (hereinafter

Foothill), a California corporation, is hereby made a de-

fendant herein. Foothill is a trade association whose mem-

bership consists of Chevrolet dealers in the northern and

eastern portions of Los Angeles County, and in Riverside

and San Bernardino Counties, State of California.

8. Whenever in this Complaint reference is made to any

act, deed, or transaction of any corporate defendant, such

allegations shall be deemed to mean that the officers, direc-

tors, avents, employees, or representatives of said corpo-

rate defendant, while engaged in the management, direc-

tion, or control of its affairs, authorized, ordered, or did

such act, deed, or transaction for and on behalf of said

corporate defendant.

Co-Conspirators

9. The officers, directors, and members of Losor, DSI,

and Foothill, certain officers and employees of such mem-

bers, certain officers and employees of General Motors,

other Chevrolet dealers in the Southern California area,

and others to the plaintiff unknown, have participated as

co-conspirators in the combination and conspiracy alleged

herein and have done acts and made statements in further-

ance thereof.

Nature of Trade and Commerce

10. Component parts of Chevrolet automobiles are pro-

duced by or for the Chevrolet Motor Division of General

Motors in plants located in various States of the United

States. These parts are shipped to various assembly plants

throughout the United States, including an assembly plant

in the Southern California area, at Van Nuys, California,

and an assembly plant at Oakland, California. While most

(fol. 4] of the Chevrolet automobiles shipped to Chevrolet

dealers in the Southern California area are assembled in

the aforesaid plants in California, a substantial number

of Chevrolet automobiles are shipped to such dealers from

assembly plants located outside of California. All such

shipments of Chevrolet automobiles are made pursuant to

orders placed by such dealers (a) after they have received

and accepted orders from customers or (b) in anticipation

of orders to be received and sales to be made.

11. Thus, Chevrolet automobiles assembled at plants

located outside of California move in interstate commerce

from such plants through Chevrolet dealers in the Southern

California area to their purchasers, and component parts

and accessories produced in plants outside of California

move in interstate commerce from such plants through the

asesmbly plants at’ Van Nuys and Oakland to Chevrolet

dealers in the Southern California area and thence to their

purchasers.

12. During the calendar year 1960, Chevrolet dealers in

the Southern California area sold Chevrolet automobiles

having a retail value of about $250,000,000.

13. For many years Chevrolet dealers in the Southern

California area customarily performed all of the functions

incident to the retail merchandising of Chevrolet automo-

biles. However, beginning in or about 1953 and continuing

to early 1961, certain Chevrolet dealers in the Southern

California area, including members of Losor, DSI, and

Foothill, entered into agreements or understandings with

certain persons, firms, and corporations, some commonly

known as discount houses and others as referral services,

pursuant to which such discount houses and referral serv-

ices, acting as independent businessmen, performed many

of the merchandising functions theretofore performed by

such Chevrolet dealers.

14. In accordance with such agreements or understand-

ings said discount houses and referral services performed

one or more of the following merchandising functions:

[fol.5] (a) referred potential customers to Chevrolet

dealers who had agreed in advance to quote such cus-

tomers prices based on specified markups over the

invoice costs of such dealers;

(b) negotiated with prospective purchasers the

terms and conditions of sale of Chevrolet automobiles;

instances purchased the used automobiles of pur-

chasers of Chevrolet automobiles;

(d) prepared purchase orders for and made deliv-

eries of Chevrolet automobiles to purchasers;

(e) secured financing for purchasers of Chevrolet

automobiles, in many instances at interest rates below

those offered by Chevrolet dealers in the Southern

California area.

15. During the aforesaid period, about 1953 to early 1961,

the number of discount houses and referral services in the

Southern California area increased rapidly. Correspond-

ingly, the number of Chevrolet automobiles sold by Chev-

rolet dealers in said area pursuant to agreements or under-

standings with discount houses and referral services in-

creased substantially. While in 1953 only a few hundred

Chevrolet automobiles were sold in the Southern California

area pursuant to agreements or understandings between

Chevrolet dealers and discount houses and referral services,

in 1960 the number had increased to over 2,000, having a

retail value of approximately $5,000,000. This increase in

sales of Chevrolet automobiles threatened to lower retail

prices of Chevrolet automobiles in the Southern California

area.

The Combination and Conspiracy

16. Beginning in or about the summer of 1960, and con-

tinuing to the date of the filing of this Complaint, the de-

fendants and co-conspirators have engaged in an unlawful

combination and conspiracy to suppress and eliminate

(fol. 6] competition in the sale and distribution of Chey-

rolet automobiles in the Southern California area, in un-

reasonable restraint of the hereinbefore described trade

and commerce in Chevrolet automobiles in violation of

Section 1 of the Act of Congress of July 2, 1890 (15 U.S.C.

§1, commonly known as the Sherman Act.

17. The aforesaid combination and conspiracy has con-

sisted of a continuing agreement, understanding, and con-

cert of action among the defendants and co-conspirators,

the substantial terms of which have been:

(a) To suppress and restrain sales of Chevrolet

automobiles by Chevrolet dealers pursuant to agree-

ments or understandings with discount houses and

referral services ;

(b) To induce and persuade Chevrolet dealers to

refrain from selling ‘\:evrolet automobiles pursuant

to agreements or understandings with discount houses

and referral services;

tifying Chevrolet dealers selling Chevrolet automobiles

pursuant to agreements or understandings with dis-

count houses or referral services;

(d) To induce and persuade Chevrolet dealers to

repurchase Chevrolet automobiles purchased by ‘‘shop-

pers’’ from such dealers.

18. During the period of time covered by this Com-

plaint and for the purpose of forming and effectuating

the aforesaid combination and conspiracy, the defendants

and co-conspirators have done those things which, as

hereinbefore alleged, they combined and conspired to do.

vil

Effects of the Combination and Conspiracy

19. The aforesaid combination and conspiracy has had,

among other things, the following effects:

(a) The right of Chevrolet dealers in the Southern

[fol. 7] California area to sell Chevrolet automobiles

pursuant to agreements or understandings with dis-

count houses and referral services has been restricted

and eliminated;

(b) Competition in the sale and distribution of

Chevrolet automobiles among Chevrolet dealers in the

Southern California area has been suppressed;

Southern California area have been deprived of the

benefit of purchasing Chevrolet automobiles in a free

and unrestricted competitive market;

(d) The right of discount houses and referral serv-

ices to participate in the sale and distribution of Chev-

rolet automobiles in the Southern California area has

been restricted and eliminated.

Vill

Prayer

Wherefore, plaintiff prays:

1. That the Court adjudge and decree that the defend-

ants, and each of them, have engaged in a egmbination

and conspiracy in unreasonable restraint of the aforesaid

trade and commerce in Chevrolet automobiles, as herein-

before alleged, in violation of Section 1 of the Sherman

Act.

2. That each of the defendants, its successors, assignees

and transferees, and the respective officers, directors,

agents, and employees thereof, and all persons acting or

claiming to act on behalf thereof, be perpetually enjoined

and restrained from continuing to carry out, directly or

indirectly, the combination and conspiracy hereinbefore

alleged, or from engaging in any other combination or

conspiracy having a similar purpose or effect, or from

adopting or following any practice, plan, program, or

device having a similar purpose or effect.

3. That General Motors, its successors, assignees, and

transferees, and its officers, directors, agents and em-

(fol. 8] ployees, and all persons acting on its behalf, be

perpetually enjoined from imposing or attempting to im-

pose any limitation or restriction on the persons or classes

of persons, including but not limited to discount houses and

referral services, with whom any dealer of General Motors

automobiles or trucks may deal.

4. That General Motors, its successors, assignees, and

transferees and its officers, director, agents and employees

and al! persons acting on its behalf be perpetually enjoined

from inducing or persuading or attempting to induce or

persuade any dealer of General Motors automobiles or

trucks to refrain from dealing with discount houses or

referral services, or with any other person or class of

persons.

5. That General Motors, its successors, assignees, and

transferees, and its officers, directors, agents and employ-

ees, and all persons acting on its behalf, be perpetually

enjoined from controlling or attempting to control the

8 |

prices at which any dealer of General Motors automobiles

or trucks may resell such automobiles or trucks.

6. That General Motors, its successors, assignees, and

transferees, and its officers, directors, agents and em-

ployees, and all persons acting on its behalf, be perpetually

enjoined from exercising or attempting to exercise any

restraint on the resale of General Motors automobiles or

trucks by any dealer.

7. That the plaintiff have such other, further, and dif-

ferent relief as to the Court may seem just and proper

in the premises.

8. That the plaintiff recover the costs of this suit.

Dated: August 30, 1962.

/s/ Maxwell M. Blecher, Attorney, Department of

Justice.

/s/ Robert F. Kennedy, Attorney General. /s/ Lee

Loevinger, Assistant Attorney General. /s/ Paul A.

Owens, /s/ Charles L. Whittinghill, Attorneys, Depart-

ment of Justice. /s/ Francis C. Whelan, United States

Attorney.

VAiGCy OR Ve BO oe COR ER twa te pre MG

(fol. 9} [File endorsement omitted]

In tae Unrrep States District Court ror THe SourHERN

District oF Catirornia, CENTRAL Division

(Title omitted]

Civil No. 62-1208-CC

ANSWER OF DeFENDANT GENERAL Motors CorPoRaTION—

Filed April 30, 1963

Defendant General Motors Corporation for answer to

plaintiff’s complaint admits, denies and alleges:

First Defense

1. Denies each and every allegation of paragraph 1 of

the complaint except admits that plaintiff invokes the

[fol. 10) jurisdiction of this court on the basis of the statu-

tory provisions referred to therein.

2. Admits the allegations of paragraph 2 of plaintiff's

complaint.

3. Denies each and every allegation of paragraph 3 of

plaintiff’s complaint except admits that plaintiff has used

the terms ‘‘Chevrolet automobiles,’’ “Chevrolet Dealer’?

and ‘‘Southern California area,’’ as defined in said para-

graph.

4. Admits the allegations of paragraph 4 of plaintiff's

complaint.

5. Admits the allegations of paragraphs 5, 6 and 7 of

plaintiff ’s complaint except alleges that it is without knowl-

edge or information sufficient to form a belief as to the

truth of the aliegations that Losor Chevrolet Dealers As-

sociation, Dealers’ Service, Inc. and Foothill Chevrolet

Deak rs Association are ‘‘trade associations.’’

6. Denies each and every allegation of paragraph 8 of

plaintiff’s complaint except admits that in plaintiff’s com-

plaint references are made to acts, deeds or transactions of

corporate defendants in the manner described in said para-

graph,

7. Denies each and every allegation of parigraph 9 of

plaintiff’s complaint.

8. Answering paragraph 10 of plaintiff’s complaint

(fol. 11] admits and alleges as follows: Coraponent parts

of Chevrolet automobiles are produced by or for the Chev-

roiet Motor Division of General Motors Corporation :

plants located in various states of the United States, in-

cluding California. These parts are shipped to various

assembly plants operated at various locations in the

United States including Van Nuys and Oakland, California.

While most of the Chevrolet automobiles shipped to Chev-

rolet dealers in the Southern California area, as defined

in plaintiff’s cormplaint, are assembled at said Van Nuys

and Oakland California assembly plants, some Chevrolet

automobiles are shipped to such dealers from assembly

plants located outside of California. Substantially all

shipments of Chevrolet automobiles are made pursuant to

orders placed by such dealers (a) after they have received

and accepted orders from customers or (b) in anticipation

of orders to be received and sales to be made.

Except as so expressly admitted and alleged, denies each

and every allegation of paragraph 10 of plaintiff’s com-

plaint.

9. Denies each and every allegation of paragraph 11

of plaintiff’s complaint.

10. Alleges that it is without knowledge or information

sufficient to form a belief as to the truth of the allegations

of paragraph 12 of plaintiff’s complaint.

11. Alleges that it is without knowledge or information

sufficient to form a belief as to the truth of the allegations

[fol. 12] of paragraph 13 of plaintiff’s complaint except

admits that for many years Chevrolet dealers in the South-

ern California area, as defined in plaintiff’s complaint,

customarily performed all of the functions incident to the

retail merchandising of Chevrolet automobiles and that in

1960 and continuing to early 1961 some Chevrolet dealers

located in said area entered into agreements or under-

standings with discount houses and referral services pur-

suant to which such discount houses and referral services

performed some merchandising functions in the sale of

some of the Chevrolets owned by such dealers.

12. Answering the allegations of paragraph 14 of plain-

tiff’s complaint admits that in accordance with the agree-

ments or understandings admitted in paragraph 11 hereof

some discount houses and referral services performed in

the sale of some of the Chevrolets owned by dealers who

were parties to such agreements or understandings, one or

more of the merchandising functions described in sub-

paragraphs (a), (b), (c) and (d) of paragraph 14 of plain-

tiff’s complaint. Alleges that in some instances said agree-

ments or understandings made or had by discount houses

or referral services with one or more Chevrolet dealers

(as well as similar agreements or understandings made or

had by said discount houses with dealers in other makes

of new automobiles) fixed or controlled the price at which

said dealer or dealers could sell his or their new auto-

mobiles to customers procured by said discount houses

or referral services and thereby said agreements or under-

standings restricted the individual dealer’s freedom to

price his new automobiles sold pursuant to said agree-

ments or understandings; that in such instances said

[fol.13] agreements or understandings restricted price

competition among competing dealers. Alleges that it is

without knowledge or information sufficient to form a be-

lief as to the truth of the allegations of subparagraph (e)

of paragraph 14 of plaintiff’s complaint. Except as ad-

mitted or alleged in this paragraph, denies each and every

allegation of paragraph 14 of plaintiff’s complaint.

13. Alleges that it is without knowledge or information

sufficient to form a belief as to the truth of the allegations

of paragraph 15 of plaintiff’s complaint.

14. Denies each and every allegation of paragraph 16 of

plaintiff’s complaint.

15. Denies each and every allegation of paragraph 17 of

plaintiff’s complaint.

16. Denies each and every allegation of paragraph 18 of

plaintiff’s complaint.

17. Denies each and every allegation of paragraph 19 of

plaintiff’s complaint.

Second Defense

18. During the period of the offense charged in the com-

plaint, the Chevrolet Motor Division of General Motors

Corporation caused Chevrolets to be marketed in the South-

ern California area, as defined in plaintiff’s complaint, by

dealers under a plan of marketing evidenced by and em-

[fol. i4] bodied in written Dealer Selling Agreements

between the Chevrolet Motor Division and each of its

eememenen a

dealers in such area. These Dealer Selling Agreements are

identical in form.

19. Each Dealer Selling Agreement assigns to the dealer

an area of primary sales responsibility but leaves the dealer

free to seil Chevrolets at any price to anyone wherever

he may live, work, or have a place of business; each re-

quires the dealer to establish a place of business at a loca-

tion or locations approved by the Chevrolet Motor Divi-

sion; and each requires the dealer to refrain from es-

tablishing another place of business or branch sales office

at any other location without the approval of the Chevrolet

Motor Division. In the Los Angeles Metropolitan Area

each dealer’s area of primary responsibility is the entire

Metropolitan Area and the Metropolitan Area Addendum

to the Dealer Selling Agreement, applicable to each Chev-

rolet dealer in the Los Angeles Metropolitan Area, pro-

vides in writing that the Chevrolet Motor Division will not

increase the number of dealers or change the location of any

dealer’s place of business without 60 days notice to each

dealer in the Metropolitan Area and an opportunity to be

heard.

20. Since the Dealer Selling Agreements require the

dealers to refrain from establishing additional places of

business or branch sales offices without approval of the

Chevrolet Motor Division, the Dealer Selling Agreements

prohibit dealers from establishing, without approval of

the Chevrolet Motor Division, the equivalent of additional

places of business or branch sales offices and from ac-

(fol. 15] complishing by indirection or subterfuge the es-

tablishment of additional places of business or branch sales

offices. For a dealer to arrange with a discount or referral

house operating a place of business at a location not ap-

proved by the Chevrolet Motor Division to have such dis-

count or referral house perform merchandising functions

in the sale of such dealer’s Chevrolets, including engaging

in the business or referring customers to such dealers,

negotiating terms and conditions of sales of such dealers’

Chevrolets to consumers and appraising and purchasing

trade-in cars on such sales is a way whereby the dealer pro-

vided for himself what was in substance and effect an addi-

tional and unauthorized place of business or branch office

without approval of the Chevrolet Motor Division.

21. Having regard to substance rather than to form, the

Dealer Selling Agreements require Chevrolet dealers to

refrain from having or performing agreements or under-

standings with discount or referral houses having places of

business at locations not approved by the Chevrolet Motor

Division whereby such houses engage in the business of re-

ferring customers to such dealers with such dealers nego-

tiating the terms of sale with the customer, or whereby

such houses negotiate the terms of sale of the Chevrolet with

the customer and whereby such dealers, upon instructions

from such houses, register title to the Chevrolet in the name

of the customer. Under either such form of transaction,

and under any combination therecf, the agreement or un-

derstanding is one in which the dealer uses discount or re-

’ ferral houses operating places of business at locations other

than the dealer’s approved location, to perform merchandis-

(fol. 16] ing services for him in the sale of his Chevrolets.

Such agreements and understanclings with discount or re-

ferral houses and their performance violate the Dealer Sel-

ling Agreements.

22. Each Dealer Selling Agreement also provides that

it is made in reliance upon the personal qualifications and

business ability of the persons who own and operate the or-.

ganization designated as the ‘‘Desiler’’; that the ‘*Dealer’’

shall perform the operating requirements of the agreement

including the sale of Chevrolets, pursuant to the selling

privilege granted to the ‘‘Dealer,’’ in a manner which will

preserve the good will of Chevrolet products; and that the

‘*Dealer’’ shall not, without consent of the Chevrolet Motor

Division, transfer to others the ‘‘Dealer’s”’ obligation to

perform the operating requirements of the agreement in-

cluding the requirement to sell the Chevrolet products in

accordance with the selling privilege granted to the

‘*dealer.’’

23. Since the Dealer Selling Agreements obligate the

‘‘Dealers’’ not to transfer to others, without consent of the

Chevrolet Motor Division, the ‘‘Dealer’s”’ obligation to per-

form the operating requirements of the agreements includ-

ing the requirement to sell Chevrolet products in accordance

with the selling privilege granted to the ‘‘dealer,’’ the

Dealer Selling Agreements prohibit dealers from arranging

with a discount or referral house, without consent of the

Chevrolet Motor Division, to have such discount or referral

house perform merchandising functions in the sale of such

dealer’s Chevrolets including engaging in the business of re-

ferring customers to such dealers, negotiating terms and

(fol. 17] conditions of sales of such dealers’ Chevrolets to

consumers and appraising and purchasing trade-in cars on

such sales.

24. The Dealer Selling Agreements require Chevrolet

dealers to refrain from having or performing agreements

or understandings with discount or referral houses where-

by such houses engage in the business of referring cus.

tomers to such dealers with such dealers negotiating the

terms of sale with the customer, or whereby such houses

negotiate the terms of sale of the Chevrolet with the cus-

tomer and whereby such dealers, upon instructions from

such houses, register title to the Chevrolet in the name of

the customer. Under either such form of transaction, and

under any combination thereof, the agreement or under-

standing is one in which the dealer transfers to discount or

referral houses the dealer’s obligation to perform the oper-

ating requirements of the Dealer Selling Agreement, in-

cluding the requirement to sell Chevrolet products in ac-

cordance with the selling privilege granted to the ‘‘Dealer.”’

Such agreements and understandings with discount or re-

ferral houses and their performance violate the said non-

transfer provisions of the Dealer Selling Agreements.

25. The provisions of the Dealer Selling Agreements de-

scribed in paragraphs 19 to 24, inclusive, of this Answer

were developed and adopted as a part of a marketing plan

which, recognizing the special nature of the product, was

designed to and does preserve the good will of Chevrolet,

provide adequate sales, automotive service and spare parts

facilities, and promote competition by Chevrolet dealers

[fol. 18] with dealers in other makes of automobiles and

by Chevrolet dealers among each other.

26. Under the Dealer Selling Agreements a dealer has the

right to sell Chevrolets at any price to anyone wherever he

may work, live or have a place of business. Under such

agreements, a Chevrolet dealer is not guaranteed or granted

any markets, territories or customers, nor is he denied or

excluded from any markets, territories or customers; there

is neither territory security, territory exclusivity nor cus-

tomer exclusivity. Each dealer is free to compete both with

other Chevrolet dealers and with dealers in other makes of

automobiles.

27. The provisions of the Dealer Selling Agreements de-

scribed in paragraphs 19 to 24, inclusive, of this Answer

are valid, do not constitute an unreasonable restraint of

competition, and do not violate Section 1 of the Sherman

Act.

28. The provisions of the Dealer Selling Agreements de-

scribed in paragraphs 19 to 24, inclusive, of this Answer

being valid:

(a) Defendant General Motors Corporation had the

right to endeavor to preserve and protect the Chevrolet

plan of marketing and to endeavor to induce and per-

suade Chevrolet dealers to cease conduct which was

violative of the Dealer Selling Agreements and in par-

ticular to cease making and performing arrangements

with discount or referral houses whereby such houses,

in places of business at locations not approved by the

[fol. 19] Chevrolet Motor Division, performed mer- .

chandising functions in the sale of such dealers’ Chev-

rolets including engaging in the business of referring

customers to such dealers; negotiating terms and con-

ditions of sales of such dealers’ Chevrolets to con-

sumers and appraising and purchasing trade-in cars

on such sales,

‘b) Defendant General Motors Corporation was

uot precluded from exercising the rights described in

sub-paragraph 28(a) hereof by the fact that Chevrolet

dealers and salesmen, whether acting individually or

on behalf of the defendant dealer associations, re-

quested that said defendants act to comply with the

intent and purpose of the Dealer Selling Agreements

and thus to preserve and protect the Chevrolet plan

of marketing,

(ec) Defendant General Motors Corporation had the

right by shopping or by accepting shopping informa-

tion from dealers and defendant dealers associations,

to ascertain which dealers were selling Chevrolets

in violation of the Dealer Selling Agreements and

to request that such dealers undo their Violations by

repurchasing shopped Chevrolets sold in violation of

said agreements,

(d) Defendant General Motors Corporation did net

engage in any combination or conspiracy in [fol. 20] un-

reasonable restraint of trade or commerce in viola- —

tion of Section 1 of the Sherman Act.

Wherefore, defendant General Motors Corporation prays

that plaintiff take nothing by its action and that judgment —

herein be entered in favor of said defendant.

Dated: April 30, 163.

O’Melveny & Myers, Homer I. Mitchell, Lawler,

Felix & Hall, Marcus Mattson, J. Phillip Nevins.

By /s/ Homer I. Mitchell, Attorneys for De-

fendant, General Motors Corporation.

PS es ee ee

Of Counsel: Aloysius F. Power, Robert A. Nitschke,

Nicholas J. Rosiello, 3044 West Grand Blvd., Detroit »,

Michigan.

{fol.21] Acknowledgment of service omitted in printing.

[fol. 22] {File endorsement omitted]

In toe Unirep States District Courr ror THE SouTHERN

District or Catirornia, CentraL Drvision

Civil No. 62-1208-CC

[Title omitted]

Answer or Derenpants Losorn Cuevroter Deaters Asso-

ciation, Deaers’ Service, Inc., and Fooram, CHEvrouer

Deaters Association—Filed April 30, 1963

Come now defendants Losor Chevrolet Dealers Asso-

ciation (hereinafter ‘‘Losor’’), Dealers’ Service, Inc. (here-

inafter ‘‘Dealers’ Service’’) and Foothill Chevrolet Deal-

ers Association (hereinafter ‘‘Foothill’’), and for answer

to the complaint on file herein, each admits, denies, and

alleges as follows:

Losor, Dealers’ Service and Foothill each alleges it is

without knowledge or information sufficient to form a belief

as to the truth of the allegations hereinafter denied “for

want of information or belief’? and denies each and all

of said allegations and places its denials thereof on that

ground.

[fol. 23] First Defense

1. Losor, Dealers’ Service and Foothill each admits

that plaintiff seeks to invoke the jurisdiction of this

court on the basis of the statutory provisions referred to

in Paragraph 1 of the complaint. Except as hereinabove

expressly admitted, Losor, Dealers’ Service and Foothill

each denies each and every allegation of Paragraph 1 of

the complaint.

2. Losor, Dealers’ Service and Foothill each admits the

allegations of Paragraph 2 of the complaint.

3. (a) Losor, Dealers’ Service and Foothill each admits

that plaintiff has used the term ‘‘Chevrolet automobiles’’

in the complaint in accordance with the definition adopted

by plaintiff in Paragraph 3(a) of the complaint. Except

as hereinabove expressly admitted, Losor, Dealers’ Serv-

ice and Foothill each denies each and every allegation of

Paragraph 3(a) of the complaint.

(b) Losor, Dealers’ Service and Foothill each admits

that plaintiff has used the term ‘‘Chevrolet Dealer’’ in the

complaint in accordance with the definition adopted by

plaintiff in Paragraph 3(b) of the complaint. Except as

hereinabove expressly admitted, Losor, Dealers’ Service

and Foothill each denies each and every allegation of

Paragraph 3(b) of the complaint.

that plaintiff has used the term ‘‘Southern California area”’

in the complaint in accordance with the definition adopted

by plaintiff in Paragraph 3(c) of the complaint. Except

{fol. 24] as hereinabove expressly admitted, Losor, Dealers’

Service and Foothill each denies each and every allegation

of Paragraph 3(c) of the complaint.

4. Losor, Dealers’ Service and Foothill each admits that

defendant General Motors Corporation (hereinatter ‘‘Gen-

eral Motors’’) is a corporation. Except as hereinabove

expressly admitted, Losor, Dealers’ Service and Foothill

each denies for want of information or belief each and every

allegation of Paragraph 4 of the complaint.

5. Losor, Dealers’ Service and Foothill each admits and

alleges that Losor is a non-profit corporation, organized

and existing under and by virtue of the laws of the State

of California, and that the membership of Losor is com-

posed of persons, firms and corporations currently party |

to a Dealer Selling Agreement with the Chevrolet Motor —

Division of General Motors and with authorized dealer- |

premises located in Orange County or Los Angeles County, 7

State of California. Except as hereinabove expressly ad- —

mitted, or alleged, Losor, Dealers’ Service and Foothill ~

each denies each and every allegation of Paragraph 5 of |

the complaint. Ee

6. Losor, Dealers’ Service and Foothill each admits and =

alleges that Dealers’ Service is a non-profit corporation, 4

organized and existing under and by virtue of the laws |

of the State of California, and, that the membership of |

Dealers’ Service is composed of persons, firms, and corpora-

tions currently party to a Dealer Selling Agreement with —

the Chevrolet Motor Division of General Motors and with |

authorized dealer-premises located in the County of Los |

Angeles, State of California. Except as hereinabove ex-

pressly admitted or alleged, Losor, Dealer’s Service and

[fol. 25] Foothill each denies each and every allegation of

Paragraph 6 of the complaint.

7. Losor, Dealers’ Service and Foothill each admits and

alleges that Foothill is a non-profit corporation organized

and existing under and by virtue of the laws of the State

of California, and that the membership of Foothill is

composed of persons, firms, and corporations currently

party to a Dealer Selling Agreement with the Chevrolet

Motor Division of General Motors and with authorized

dealer-premises located in the Counties of Los Angeles,

Riverside, or San Bernardino, State of California. Ex-

cept as hereinabove expressly admitted, or alleged, Losor,

Dealer’s Service and Foothill each denies each and every

allegation of Paragraph 7 of the complaint.

8. Losor, Dealers’ Service and Foothill each denies for

want of information or belief each and every allegation

of Paragraph 8 of the complaint.

9. Losor, Dealers’ Service and Foothill each denies each

and every allegation of Paragraph 9 of the complaint.

10. Losor, Dealers’ Service and Foothill each admits

and alleges that component parts of Chevrolet automobiles

are produced by or for the Chevrolet Motor Division of

General Motors in plants located in various States of the

United States; and, admits and alleges that these parts are

shipped to various assembly plants operated at various

locations in the United States including Van Nuys and

Oakland, California; and, admits and alleges that some

Chevrolet automobiles shipped to Chevrolet dealers in

(fol. 26] southern California are assembled in assembly

plants located in Van Nuys and Oakland, California, and

that some Chevrolet automobiles are shipped to svch éval-

ers from assembly plants located outside of California.

Except as hereinabove expressly admitted or alleged, Losor

Dealers’ Service and Foothill each denies for want of in-

formation or belief each and every allegation of Para-

graph 10 of the complaint.

11. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 11 of the complaint.

12. Losor, Dealers’ Service and Foothill each denies for

want of information or belief each and every allegation of

Paragraph 12 of the complaint.

13. Losor, Dealers’ Service and Foothill each denies

TT Ta

for want of information or belief each and every allega-

tion of Paragraph 13 of the complaint, except admits that

in 1960 and continuing to early 1961, some Chevrolet

dealers in southern California entered into agreements

or understandings with discount houses and referral serv-

ices, pursuant to which such discount houses and referral

services performed some merchandising functions in the

sale of some of the Chevrolets owned by such dealers.

14. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 14 of the complaint,

except admits that in accordance with the agreements or

understandings admitted in Paragraph 13 hereof, some dis-

count houses and referral services performed, in the sale

of some of the Chevrolets owned by dealers who were

parties to such agreements or understandings, one or

[fol. 27] more of the merchandising functions described

in sub-paragraphs (a), (b), (c) and (d) of paragraph 14

of plaintiff’s complaint; and, except denies for want of

information or belief the allegations of sub-paragraph (e)

of paragraph 14 of plaintiff’s complaint.

15. Losor, Dealers’ Service and Foothill each denies

for want of information or belief each and every allega-

tion of Paragraph 15 of the complaint.

16. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 16 of the complaint.

17. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 17 of the complaint.

18. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 18 of the complaint.

19. Losor, Dealers’ Service and Foothill each denies

each and every allegation of Paragraph 19 of the complaint.

Second Defense

20. During the period of the offense charged in the

complaint, the Chevrolet Motor Division of General Motors

(hereinafter ‘‘Chevrolet Motor Division’’) caused Chevro-

lets to be marketed in southern California by dealers under

a plan of marketing evidenced by and embodied in written

Dealer Selling Agreements, identical in form, entered into

by the Chevrolet Motor Division with each of its dealers

in such area. Each such dealer entered into its Dealer

[fol. 28] Selling Agreement with the Chevrolet Motor

Division with knowledge of and because of the Chevrolet

Marketing Plan, the reputation of the Chevrolet Motor

Division, and the customer acceptance for Chevrolet prod-

ucts.

21. Kach Dealer Selling Agreement assigns to the dealer

an area of primary sales responsibility but leaves the

dealer free to sell Chevrolets at any price to anyone wher-

ever he may live, work or have a place of business, each re-

quires the dealer to establish a place of business at a loca-

tion or locations approved by the Chevrolet Motor Divi-

sion; and each requires the dealer to refrain from es-

tablishing another place of business or branch sales office

at any other location without the approval of the Chevrolet

Motor Division. In the Los Angeles Metropolitan Area

each dealer’s area of primary responsibility is the entire

Metropolitan Area and the Metropolitan Area Addendum

to the Dealer Selling Agreement, applicable to each Chev-

rolet dealer in the Los Angeles Metropolitan Area, pro-

vides in writing that the Chevrolet Motor Division will

not increase the number of dealers or change the loca-

tion of any dealer’s place of business without 60 days notice

to each dealer in the Metropolitan Area and an opportunity

.to be heard.

22. Since the provisions of the Dealer Selling Agree-

ments require the dealers to refrain from the establish-

ment of additional places of busizess or branch sales offices

without approval of the Chevrolet Motor Division, these

agreements prohibit dealers from establishing, without

approval of the Chevrolet Motor Division, the equivalent

of additional places of business or branch sales offices

and from accomplishing by indirection or subterfuge the

establishment of additional places of business or branch

sales offices. For a dealer to arrange with a discount or

[fol. 29] referral house operating a place of business at

a location not approved by the Chevrolet Motor Division

to have such discount or referral house perform merchan-

dising functions in the sale of such dealer’s Chevrolets

including engaging in the business of referring custoniers

to such dealer, negotiating terms and conditions of sales

of such dealer’s Chevrolets to consumers and appraising

and purchasing trade-in cars on such sales is a way whereby

the dealer provided for himself what was in substance and

effect an additional and unauthorized place of business or

branch sales office without approval of the Chevrolet

Motor Division.

23. Having regard to substance rather than to form,

the Dealer Selling Agreements require Chevrolet dealers

to refrain from having or performing agreements or un-

derstandings with discount or referral houses having places

of business at locations not approved by the Chevrolet

Motor Division whereby such houses engage in the busi-

ness of referring customers to such dealers with such

dealers negotiating the terms of sale with the customer,

or whereby such houses negotiate the terms of sale of the

Chevrolet with the customer and whereby such dealers, upon

instructions from such houses, register title to the Chevro-

let in the name of the customer. Under either such form

of transaction, and under any combination thereof, the

agreement or understanding is one in which the dealer

uses discount or referral houses operating places of busi-

ness at locations other than the dealer’s approved loca-

tion, to perform merchandising services for such dealer

in the sale of his Chevrolets. Such agreements and under-

standings with discount or referral houses and their per-

formance violate the said Dealer Selling Agreements.

[fol. 30] 24. Each Dealer Selling Agreement also pro-

vides ihat it is made in reliance upon the personal qualifi-

cations and business ability of the persons who own and

operate the organization designated as the ‘*Dealer’’; that

the ‘‘Dealer’’ shall perform the operating requirements of

the agreement including the sale of Chevrolets, pursuant

to the selling privilege granted to the ‘‘Dealer’’, in a

manner which will preserve the good will of Chevrolet

products; and that the ‘‘Dealer’”’ shall not, without con-

sent of the Chevrolet Motor Division, transfer to others

the ‘‘Dealer’s’’ obligation to perform the operating re-

quirements of the agreement including the requirement to

sell the Chevrolet products in accordance with the selling

privilege granted to the ‘‘Dealer’’,

25. Since the Dealer Selling Agreements obligate the

‘‘Dealer’’ rot to transfer to others the ‘‘Dealer’s”’ obliga-

tion to perform the operating requirements of the agree-

ments including the requirement to sell Chevrolet products

in accordance with the selling privilege granted to the

‘“‘Dealer’’ without the consent of the Chevrolet Motor

Division, the Dealer Selling Agreements prohibit dealers

from arranging with a discount or referral house, without

consent of the Chevrolet Motor Division, to have such

discount or referral house perform merchandising func-

tions in the sale of such dealers’ Chevrolets including en-

gaging in the business of referring customers to such

dealers, negotiating terms and conditions of sales of such

dealers’ Chevrolets to consumers and appraising and pur-

chasing trade-in cars on such sales.

26. The non-transfer provisions of the Dealer Selling

Agreements referred to in paragraphs 24 and 25 hereof

require Chevrolet dealers to refrain from having or per-

forming agreements or understandings with discount or

referral houses whereby such houses engage in the busi-

[fol. 31] ness of referring customers to such dealers with

such dealers negotiating the terms of sale with the cus-

tomer, or whereby such houses negotiate the terms of sale

of the Chevrolet with the customer and whereby such

dealers, upon instructions from such houses, register title

to the Chevrolet in the name of the customer. Under either

such form of transaction, and under any combination

thereof, the agreement or understanding is one in which

the dealer transfers to discount or referral houses the

dealer’s obligation to perform the operating requirements

of the Dealer Selling Agreement, including the requirement

to sell Chevrolet products in accordance with the selling

privilege granted to the ‘‘Dealer’’. Such agreements and

understandings with discount or referral houses and their

performance violate the said non-transfer provisions of

the Dealer Selling Agreements.

27. The location limitation provisions of the Dealer

Selling Agreements and the requirement of said agree-

ments that the Dealer’s sales of Chevrolets be made by the

Dealer and not by someone else, were developed and

adopted as a part of a marketing plan which, recognizing

tie special nature of the product, was designed to and does

preserve, the good will of Chevrolet, provide adequate

sales, automotive service and spare parts facilities, and

promote competition by Chevrolet dealers with dealers in

other makes of automobiles and by Chevrolet dealers

among each other.

28. The Chevrolet marketing plan is based upon the

principle that there should be a carefully balanced num-

ber of dealer outlets situated at carefully selected loca-

tions and that each Dealer will have a reasonable profit

opportunity in return for his investment. The location

limitation provisions of the Dealer Selling Agreements

[fol. 32] implement this principle. Thus, said Dealer Sell-

ing Agreements are, in southern California, necessarily

and properly interrelated one to the other, particularly

in respect of the location limitations hereinabove described.

Failure of the dealers to abide by said location limitation

provisions would ‘disrupt and defeat said marketing plan,

and would diminish competition by Chevrolet dealers with

dealers in other makes of automobiles and by Chevrolet

dealers among each other.

29. The requirement of said Dealer Selling Agreements

that the Dealer’s sales of Chevrolets be made by the Dealer

and not someone else, was designed to and does assure

that responsibility for sales and service of Chevrolets will

be in the hands of properly trained and adequately fi-

nanced persons so that a high level of good will can be

established and maintained. Failure of the dealers to

abide by said provisions would disrupt and defeat said

marketing plan, and would diminish competition by Chev-

rolet dealers with dealers in other makes of automobiles and

by Chevrolet dealers among each other.

30. Under the Dealer Selling Agreements a Chevrolet

dealer has the right to sell Chevrolets at any price to anyone

wherever he may work, live or have a place of business. Hach

Chevrolet dealer under his Dealer Selling Agreement has

a location advantage agreed upon between said dealer and

the Chevrolet Motor Division, which gives said dealer a

right that other Chevrolet dealers will not establish out-

lets and locations other than at a location agreed to by

Chevrolet Motor Division under the Chevrolet Marketing

Plan. Under such agreements, a Chevrolet dealer is not

guaranteed or granted any markets, territories, or cus-

tomers, nor is he denied or excluded from any markets,

[fol. 33] territories or customers; there is neither territory

security, territory exclusivity nor customer exclusivity.

Each dealer is free to compete both with other Chevrolet

dealers and with dealers in other makes of automobiles.

31. The purpose and effect of the location limitation

provisions and of the requirement that the Dealer’s sales

of Chevrolets be made by the Dealer and not by someone

else are to-make the Chevrolet Motor Division and each of

Ce ee ee eee

its dealers strong competitors against dealers of other

makes of automobiles; and, at the same time, to preserve

the freedom of all Chevrolet dealers to compete among

themselves.

32. The location limitation provisions and the require-

ment that the Dealer’s sales of Chevrolets be made by the

Dealer and not by someone else are valid, do not constitute

an unreasonable restraint of competition and do not vio-

late Section 1 of the Sherman Act.

33. The above-mentioned location limitation provisions

and the requirement that the Dealer’s sales of Chevrolets

be made by the Dealer and not by someone else (the ‘‘non-

transfer’’ provisions) being valid:

(a) Each Chevrolet dealer in southern California has

a lawful interest in the adherence to the location

limitations of his agreement with the Chevrolet Motor

Division, by every other Chevrolet dealer;

(b) Each Chevrolet dealer in southern California has

a lawful interest in the adherence to the ‘‘non-trans-

fer’’ provisions of his agreement with the Chevrolet

Motor Division, by every other Chevrolet dealer;

[fol. 34] (c) Losor, Dealers’ Service and Foothill

each have a lawful interest in the adherence by each

Chevrolet dealer in southern California to the loca-

tion limitations of the Dealer Selling Agreements and

of the Chevrolet Marketing Plan;

(d) Losor, Dealer’s Service and Foothill each have

a lawful interest in the adherence by each Chevrolet

dealer in southern California to the ‘‘non-transfer’’

provisions of the Dealer Selling Agreements and of

the Chevrolet Marketing Plan;

(e) Losor, Dealers’ Service and Foothill each has a

lawful right: to act in behalf of its own interest as well as

on behalf of its member Chevrolet dealers’ interest:

(1) to request that the Chevrolet Motor Division

take steps to cause Chevrolet dealers to cease con-

duct which was violative of the Dealer Selling Agree-

ments, and the Chevrolet Marketing Plan; and,

(2) to ascertain which Chevrolet dealers were en-

gaging in such conduct and to advise the Chevrolet

Motor Division of the facts ascertained.

(f) Losor, Dealers’ Service and Foothill individually

or as a group, did not engage in any combination or

couspiracy in unreasonable restraint of trade or com-

merce in violation of Section 1 of the Sherman Act.

34. Losor, Dealers’ Service and Foothill each en

in activities concerned with the passage of legislation and

(fol. 35] enforcement of the California Motor Vehicle Dealer

and Salesman Licensing Laws (Cal. Veh. Code See. 11,700

et seq.; 11,800 et seq.), during the period of the offense

charged in the complaint. To the extent that any act, decd

or transaction charged in the complaint was so directed,

such conduct does not violate Section 1 of the Sherman Act.

Wherefore, defendants Losor, Dealers’ Service and Foot-

hill each prays:

1, That the Court adjudge and decree that defendants

Losor, Dealers’ Service and Foothill and each of them

have not engaged in a combination and conspiracy in

violation of Section 1 of the Sherma: Act;

2. That the complaint herein be disn‘issed; and,

3. That defendants Losor, Dealers’ {jervice and Foot-

hill and each of them have such other and further re-

lief as to the Court may seem just and proper,

Dated: April 30, 1963

Hansen & Dolle and Victor R. Hansen and Glenn 8.

Roberts. By: /s/ Victor R. Hansen, Attorneys

for defendants, Losor Chevrolet Dealers Associa-

tion, Dealers’ Service, Ine., and Foothill Chevrolet

Dealers Association.

Acknowledgement of service omitted in printing.

[fol. 35a]

[File endorsement omitted]

Ix ras Unrrep States District Court ror THe SoutTurrn

Distercr or Caurrornia, Centra Drviston

Howorasie Cuaries H. Caner, Judge Presiding

No. 62-1208-CC Civil

Unrrep Srares or America, Plaintiff,

General Morors Corporation, ET aL., Defendants.

Reporter's Transcript of Proceedings on Motion of Plaintiff

for Pretrial Conference—September 23, 1963

{fol.35b) Aprrarances:

For the Plaintiff: Robert C. Weinbaum, Maxwell M.

Blecher, Antitrust Division, Department of Justice, 1602

U.S. Post Office and Court House, Los Angeles 12, Cali-

fornia,

For Defendant General Motors: O'Melveny & Myers.

By: Homer I. Mitchell, 433 South Spring Street, Los

Angeles 13, California; and Lawler, Felix & Hall. By:

Phillip Nevins, 603 West Olympic Boulevard, Los Angeles

15, California; and Nicholas J. Rosiello.

For Defendants Losor, Foothill and Dealers’ Service,

Ine.: Glenn §, Roberts, 458 South Spring Street, Los

Angeles 13, California; and Hansen & Dolle. By: Victor

R. Hansen, 453 South Spring Street, Los Angeles 13, Cali-

fornia,

(fol. 35e] Los Angeles, California, Monday, September 23,

1963, 2:00 P.M.

The Clerk: Item No. 7 on the calendar, 62-1208-CC Civil,

United States v. General Motors Corporation, hearing

motion of plaintiff for pretrial conference.

[fol. 35d]... CoLLoquy Between Court anp CounsEL

The Court: Before you go on, maybe you ought to edu- —

(fol. 35e] cate me just a little bit, counsel. I have read —

the pleadings. Do I understand that this is a charge— _

you are asking really for a restraint of certain things that —

are being done by General Motors and their dealers, is —

that right? You are asking to restrain them?

Mr. Blecher: Yes, we are, your Honor. :

The Court: And the thing that you are claiming is that —

by arrangement of some sort General Motors is endeavor- a

ing to, supposedly to prevent their dealers from dealing —

with cut price places and so on, is that correct, is that the —

story?

Mr. Blecher: Not precisely, your Honor. It is close. —

We charge that General Motors is engaged in a conspiracy —

with the three associations, which are composed of sub- »

stantially all the Chevrolet dealers in this area, and with ©

certain of those dealers, the crux of which has been that ~

the dealers will no longer deal with discount houses or —

referral services. 4

Now, your characterization of these folks as cut price—— _

The Court: Well, it is one and the same thing, isn’t it?

Mr. Blecher: Not necessarily. We are not really con- —

cerned in this litigation with whether or not—— i

The Court: It reduces the price then by volume?

(fol. 35f] Mr. Blecher: Pardon me? e

The Court: It is reducing the price by volume, that is a

what it amounts to. 3

Mr. Blecher: That more or lese epitomizes our view, 4

yes, your Honor. Not that they sold for less, but that ©

there was an affectation of the price structure as a result ©

of this form of competition. i

We don’t care whether or not the discount houses sold 7

for more or less than the Chevrolet dealers. Unfortu- ©

nately, we got involved in the prior litigation and had a ©

big to-do about that point which is not really a part of |

our case and which we propose to eliminate, insofar as

we can, from this case.

[fol. 36] {File endorsement omitted]

(fol. 37] Appenpr A to Reporter’s TRANSCRIPT

or Proceepines—Filed June 1, 1964

In tHe Unrrep Staves Disraror Court FOR THE SOUTHERN

District or Catirornia, Centra, Division ~

Civil No. 62-1208-CC

[Title omitted]

Sriputation or Facts Numser Six

Plaintiff and each of the defendants, through their re-

spective counsel, hereby stipulate as follows:

1, That the persons whose testimony is attached hereto

in the form of ‘*designations,’’ “‘cross-designations’”’ and

(fol. 38] ‘‘reply designations” would, if called as wit-

nesses, testify to the facts set forth therein.

2. That the *‘designations,”’ “‘eross-designations,’’ and

“reply designations’? covered by this stipulation may be

offered into evidence and when received shall be deemed

to constitute a part of the Reporter’s Transcript of Pro-

ceedings herein (without the necessity of ihe Reporter

copying the same into the Reporter’s Transcript) with the

same force and effect as though the witness whose **desig-

nation,’’ ‘‘cross-designation’’ or ‘reply designaiion’’ is

received had testified in person; that the testimony so

received shall be governed by the same rules and treated

in the same manner as though the witness had testified

in person and that said *‘designations,’’ “‘cross-designa-

tions’’ and ‘‘reply designations”’ shall be referred to here-

inafter as ‘‘Appendix A to Reporter’s Transcript of Pro-

ceedings. ’’

3. That said “‘designations,’’ ‘‘cross

“reply designations”’

form taken from the

titled court, or are q

Reporter’s Transeri ‘*designa-

tions’’ and ‘‘reply d were selected by plaintiff

(fol. 39] and that said “‘eross-designations’’ were selected

by the defendants indicated.

4. It is expressly understood and agreed that:

(a) This stipulation is for the purpose of the above-

entitled case only;

(b) Plaintiff and each defendant reserves the right

to object to the receipt into evidence of any fact herein

stipulated on any ground or grounds.

Dated: May 20, 1964.

Maxwell M. Blecher, Robert C. Weinbaum. /s/ By

Maxwell M. Blecher, Attorney, Departmen‘ of

Justice. O’Melveny & Myers, Lawler, Felix &

Hall, Aloysius F. Power, Robert A. Nitschke,

Nicholas J. Rosiello, By Homer I. Mitchell. Han-

sen & Dolle, Glenn 8S. Roberts, By Victor R.

Hansen, Attorneys for Defendants.

It is so Ordered this 1 day of June, 1964.

Charles H. Carr, United States District Judge.

[fol. 40] Victor O. GrErerz

Designation by Plaintiff

My name is Victor O. Geretz. I reside at 6848 Shoup

Avenue, Canoga Park, California.

I am a lawyer engaged in the private practice of law

with the firm of Hertzberg and Geretz in Los Angeles.

In 1960, I bought a 1960 two-door Corvair by arranging

for the purchase through the Fedco, Inc. discount store on

Slauson Boulevard.

Prior to going to the Fedco store, I went to a Chevrolet

dealer (Nugent Chevrolet) to obtain prices on various

models of Chevrolet. Then I went to the Fedco store which

referred me to another Chevrolet dealer—Bruder Chev-

rolet. I was referred to a specific salesman at Bruder

named Mr. Adams, who gave me a price on the particular

car which I was interested in at the time. I signed a pur-

chase order for the car (a Monza model Chevrolet Cor-

vair), but never took delivery of the car because although

I was informed at that time that there would be a waiting

—-—onm rm OQ neana

period of about three weeks, I subsequently decided that

I didn’t want to wait that long.

During this interim period I stopped at Courtesy Chev-

rolet, a dealership near my Office, to check prices on the

700 series two-door Corvair. Then I went back to Bruder

(fol. 41] Chevrolet and saw the same referral salesman,

Mr. Adams, whom I informed that I no longer wanted the

Monza, but would like a price on the 700 series model. I

purchased this car from Bruder Chevrolet, going through

the same procedure with Mr. Adams that I went through

when I was originally referred to this agency by Fedco.

In addition, the automobile was financed through the Fedco

store.

When I purchased my car from Bruder Chevrolet, I

obtained a new car warranty, and subsequently I had some

major work done by Bruder uzder the warranty, which

was completed satisfactorily.

_ _ When I went to the Fedco store I didn’t know which

Chevrolet dealer I would be getting my car from. There

were no cars on display there. ‘There were no signs on

the premises indicating that the facilities were part of a

Chevrolet dealership or were affiliated with a Chevrolet

dealership. There was no literature indicating the Fedco

store was affiliated with a Chevrolet dealership. The sales

person at the Fedco store did not represent to me that he

or she was acting as a Chevrolet dealer. I did not believe

that the Fedco store was a franchised Chevrolet dealer.

Q. Were you satisfied with your transactions with

Fedco?

A. I was.

[fol. 42] Q. From your experience, do you believe there

are any advantages. in purchasing a car through a Fedco

referral service, rather than purchasing a car directly from

a Chevrolet dealer?

A. I do.

Q. What are those advantages?

A. To me the im

Q. Would the fact that you might get a lower price if

you shopped another six dealers be justification for you

to bypass Fedco, in your own mind? .

A. Not really, because I just don’t like the idea of going

in and bargaining for the car.

Q. If you were to buy another car, would you return to |

Fedco for referral? B-

A. If they could refer me for the car that I was interested ©

in, I certainly would.

{fol. 43] I didn’t, after getting this price from Bruder, |

go back to Courtesy or Nugent to see if they would meet

that price. I have heard of people shopping around among

Chevrolet dealers or other automobile dealers, put I don’t

know as a fact that Chevrolet dealers are competing with —

each other pricewise. I know that as a matter of, let’s say,

advertising or reputation, but not as a fact. I have not ©

had any experience other than this one purchase that I |

have testified about, but I am satisfied from that experience ©

that the best way for me to buy a car is through Fedco. —

Q. Well, so that really you don’t know whether it is _

better to buy a car through Fedco or to shop Chevrolet ©

dealers, do you, when it comes right down to it? .

A. Well, I know it is better for me to do it a certain way. ©

Q. And without knowing whether or not you could shop ©

Chevrolet dealers and get even a better price, you are

willing to give an opinion, are you, Mr. Geretz, that the ~

best way to buy a car is through Fedco?

A. Sir, my opinion relates to the best way for me.

{fol.44] Q. Oh—— :

A. The best way for me. I feel it is to do it the way

I did it and I think I would do it the same way again. ~

Cross-designation by All Defendants

The Fedco store on Slauson was a conglomeration of |

store buildings that were next to each other. They had

merchandise of a general nature; soft goods, appliances

of various kinds, hardware items, automobile accessories,

gardening supplies, nursery supplies, clothing, and things

like that. I don’t remember whether the Slauson store

had furniture there at that time or not. They were sort

of limited in space. Since then they have built a new

facility on La Cienega. The Fedco store is sort of a gem

eral merchandise place, in som: respects like a department

store and in other respects not. It was a place of business

where they merchandised various kinds of personal prop-

erty.

i part of their business, they had what they called a

referral service. If one was interested in buying an auto-

mobile, they would refer a member to an automobile dealer

who solda particular automobile that the member might

be interested in. They were really helping the automobile

dealer sell his automobiles, as well as helping the member.

(fol. 45] The automobile financing was handled in a dif-

ferent part of the particular store on Slauson. They had

a counter in the store, as I recall, that handled insurance

and also financing. I believe that as a member of Fedco

I could finance my automobile purchases there whether I

bought the automobile through Fedco or otherwise. One

of my privileges as a Fedco member was to buy insurance

and financing, so even though I bought the automobile

directly from Bruder, I could have gone to Fedco and

financed it if I had wanted to.

At the time of my purchase of the automobile I was

living on San Vicente Boulevard near Hauser Boulevard.

I think the closest dealer to my residence at that time was

Nugent Chevrolet. Courtesy Chevrolet is near my office.

I now live in Canoga Park and have my servicing on

major work done at Clem Ruh Chevrolet in Canoga Park.

I think it is a good idea to have the car serviced by a

dealer who handles that particular car as a new car dealer.

[fol. 46] Grorce A. CanHaL

Designation by Plaintiff

My name is George A. Cahhal. At the present time I am

office supervisor for New Departure Division of ‘General

Motors, located at 3650 South Broadway, Los Angeles. I

have been employed by the New Departure Division for

approximately ten years.

In January 1959 I had oceasion to purchase a new Chev-

rolet Impala Sport Coupe. I arranged for the purchase of

this automobile through Certi-Bond Discount Store in

Torrance. The Union Car Sales Company is located in Certi- :

Bond’s. I learned about Union Car Sales at Certi-Bond ~

from a number of people. E

I believe I talked to Mr. Chico at Certi-Bond store. I ©

told him what I wanted in the way of an automobile and :

asked him what he could do in the way of delivering one ©

to me, and he figured out what the car would cost me, how ©

much it would cost per month to pay for it and then we |

consummated the deal. I had a trade-in at that time which ©

I traded in through him. I took delivery of my Chevrolet ~

at Certi-Bond. At the time I took delivery I didn’t know ©

where the car was coming from. After I took delivery I ©

knew because they gave me the service (warranty) policy ©

{fol. 47] and I believe the name of the dealer (Ernie ©

Porter Chevrolet in Pasadena) was on the warranty. I ©

had occasion to have the car serviced under the warranty ©

at Ernie Porter Chevrolet and was treated well there and ©

they took care of the things I asked them to take care of, ©

Prior to making the purchase through the Certi-Bond ©

Store in this manner I had contacted about three or four ~

dealers in the immediate vicinity of Maywood where I was ©

living at the time. 4

I purchased a 1960 Chevrolet Corvair through Certi-Bond ©

the following year. I traded in the 1959 Impala which I had ©

purchased from Certi-Bond for the 1960 Corvair. It was |

approximately a year and a half after I purchased the 1959 ©

car that I traded it in for the 1960 car. I did not shop at |

any Chevrolet dealers prior to returning to the Certi-Bond |

Store. I took delivery of the Corvair at the Certi-Bond /

Store and received a new car warranty at that time. The ©

car came from Courtesy Chevrolet. I had it serviced under ~

the warranty at Courtesy Chevrolet and I was treated prop- ©

erly there. Z

I am satisfied with my transactions with Certi-Bond.

[fol. 48] Cross-designation by All Defendants

{fol. 49] I believe the Certi-Bond Store is like most of *

the discount stores in Southern California. It has appli-!

ances, housewares, dry goods, jewelry departments—that

type of thing. It is on the order of a conventional depart-

ment store; the same breadth of merchandise and the same

type of operation. It is really a merchandising location.

Union Car Sales had a section or a corner of the Certi-

Bond Store in Torrance, California. They had a couple of

desks and two or three file cabinets and they had brochures

on different types of automobiles including Chevrolet. They

had a sign saying ‘‘ Automobile’’ or ‘‘Car Department’’ or

something to that effect. When I bought the first car, there

were a couple of automobiles on the floor. To the best of

my knowledge there were no Chevrolets on the floor.

Def. GM Ex. K is a copy of the State of California vehicle

registration of the 1959 Impala I purchased. A copy of it

was placed on the windshield of the car. It bears my name

and my wife’s name, our address, and the model of the car

we purchased. Def. GM Ex. L is the invoice from Ernie

Porter Chevrolet covering the sale of the car to my wife

[fol.50] and me. I never saw that invoice in connection

with the transaction. Mr. Chico never disclosed to me that

Ernie Porter invoiced the car to me.

There was a delay of about eight weeks in the delivery

of this car. I waited about two weeks, I guess, at which

time I thought I should have had delivery of the car, and

I started calling Mr. Chico and asking about delivery of it.

This went on for about eight weeks, I called him at least

once a week, sometimes twice a week. He was postponing

delivery, giving me a new delivery date about when he

thought it would be in; or else he would stall me and tell

me to check back with him and he would get something

more definite on it for me. He did not tell me what was

the matter, just ‘‘delivery from the factory.’’ I wouldn’t

say those were his exact words, but I assumed it from

what he said.

Q. Did he say he had any connection with the factory?

A. No, sir, he did not, not in so many words.

Def. GM Ex. M is a copy of an invoice from Union Car

Sales to me and Mrs. Cahhal showing a Chevrolet Corvair

model 727. Def. GM Ex. N is an invoice from Courtesy

Chevrolet to my wife and I covering the same car. I

(fol. 51] haven’t seen that before.

Q. I would like to point out something to you, Mr. Cahhal,

Please. Your invoice from Union Car Sales, exclusive of

sales tax and license, as you said a moment ago, was $2140;

is that right?

A. Yes, sir.

Q. And the document just introduced into evidence by

which Courtesy Chevrolet invoiced the car to you shows a

piice, exclusive of sales tax and license, of $2384—I mean

$2083.44; is that correct?

A. That’s correct, yes, sir.

Q. So that you see a difference there of $56.56?

A. Yes, sir.

Q. You recognize that as being the amount which Certi- —

Bond or Union’Car Sales added on over and above the

price at which Courtesy Chevrolet invoiced the car to you,

do you?

A. It looks as though, yes, it does.

I did not go to Courtesy Chevrolet before going to Certi-

Bond to see if they would sell this car to me for $56.56 less.

[fol. 52] Owen Keown

Designation by Plaintiff

My name is Owen Keown. My home address is 1338

Princeton Street in Santa Monica. I have been a Chevrolet

dealer since 1927, and the name of my dealership is Owen

Keown Chevrolet Company located in Venice, California.

I am a member of the Losor Dealers Association, and was

a director in 1960. I think I was a director in 1961 as well.

On June 28, 1960, a general meeting of the Losor Dealers

Association was held (Pltf. Ex. 171, minutes of the meet-

ing).

Q. Now, do you have any recollection, Mr. Keown, of a

report represented in this minute made by Mr. Cone on the

discount houses and how to go about eliminating this men-

ace from the car business?

A. Yes.

Q. Will you tell us what he said to the best of your recol-

lection? ;

A. Well, I couldn’t tell you what he said. I don’t remem-

ber exactly what he said. I could tell -you in substance, be-

cause I was at that time a director of the Southern Cali-

[fol. 53} fornia Dealers Association. I attended the same

meeting with Mr. Cone. and the meeting was devoted to the

discount house problem, as we called it, or the evil, and at

that meeting, then we decided to have a legislative commit-

tee look into any laws that were being violated in respect to

this kind of selling and any other legal angle of it that they

could uncover, and that is in substance what Mr. Cone re-

ported to our meeting.

Q. Now you are talking are you not, sir, about a report

that Mr. Cone made or what was discussed and went on in a

meeting of the Southern California Dealers Association?

A. Yes. That is what he reported.

Q. Now, do you recail, sir, who made mention of the fact

that the Orange County dealers had expended $750.00 to

Cameron Aiken for a report?

A. No, I don’t know who said that. Somebody made it,

the remark.

Q. Do you know who Cameron Aiken is, sir?

A. He is an attorney.

Q. Was there any discussion at the meeting of June 28,

1960, among the Losor members of whether or not it would

> be best to proceed along the lines of getting legislation or

whether it was better to put the problem directly in the lap

(fol. 54] of the Chevrolet Motor Division?

A. Well, we at that meeting, if I remember, we thought

that both should be done, but our association wasn’t strong

enough and big enough to do very much from the legal stand-

point, and we thought that we would present what evidence

we could to the Chevrolet Motor Division.

Q. Well, was there a decision then made, Mr. Keown, to

aggressively pursue the attack on the discount houses by

legislative remedy?

A. No.

Q. Well what was decided in respect to the legislation at

this meeting of June 28, 1960?

A. At that particular time we felt that that was being

adequately done by the Southern California Dealers Associ. .

ation.

Q. You felt therefore there was no need for Losor to make

a separate and independent inquiry with respect to legisla-

tion. Is that right, sir?

A. That is right because Mr. Cone and I could keep them

informed as to what went on.

Q. You decided that the best course of action would be to

take this problem to the Chevrolet Motor Division. Is that

correct, sir? =

(fol.55) A. That is right.

Q. And was there a discussion among the members at —

that meeting concerning whether or not you should in fact _

take the probiem to Chevrolet? 4

A. Yes, we discussed it. ‘

Q. Now, will you tell us, as best you recall, what the 4

substance of that discussion was by the members then —

present? j

our Association agreed that the thing to do was to ask

Chevrolet to do something about this, to present the evi- 7

dence that we could accumulate and give it to Chevrolet and —

let them take the action that was necessary.

It was made as a recommendation and the members :

agreed to take certain information to Chevrolet. I don’t 4

proof to Mr. O’Connor, Zone Manager of the Chevrolet ;

Motor Division, that dealers were selling their cars through |

discount houses. We wanted to know who the dealers were

who were selling their cars through discount houses so we |

could tell Mr. O’Connor. ‘

We considered taking the problem to Chevrolet because —

the problems became aggravated suddenly because ap-|

[fol. 56] parently there were more cars being sold through

discount houses than there had been up to that time. This

was a subject of discussion among the Losor members in

June of 1960. The substance of the discussion was that the

problem was becoming aggravated, that more and more cars

were being sold through discount houses in the Orange ™

ing sold through discount houses because it affected their

business. y

Q. In what way, sir?

A. Lost sales.

Q. They were concerned about the competition created

by the discount house referral service method of mer

chandising?

A. They were.

Q. Which dealers were most concerned about this new]

form of competition?

A. All the dealers seemed to be concerned that were in

that area.

Q. In what area, sir?

A. The Orange County area.

Shortly after the June 28 Losor meeting and before

July 26, a group of us called on Mr. O’Connor at the zone

office. The persons present were pretty generally the com-

mittee named at that meeting to call on him. At this

[fol. 58] meeting each person who had evidence that cars

were being sold through discount houses presented it to

Mr. O’Connor. The meeting lasted 20 or 30 minutes. I

think this was the only matter discussed. What we wanted

to present to Mr. O’Connor was evidence of the fact that

cars were being sold through discount houses and what

dealers were doing it. The evidence I submitted to him

was ar actual order that we placed at the More discount

store for a Chevrolet. And I think there were some other

orders, documents of that kind. Mr. O’Connor said in sub-

stance that he agreed with us that the dealers should not

sell their cars in this manner, and that he would talk to

them about it. I don’t remember O’Connor saying whether

or not he was going to ask the dealers to stop selling through

discount houses and referral services, but of course that’s

what we wanted him to do.

On July 26, 1960, at a general meeting of Losor dealers

I gave a report on the meeting held with Mr. O’Connor on

the subject of discount houses (Plaintiff Bxhibit 172,

minutes of this meeting). On or about September 27, 1960,

according to Plaintiff Exhibit 173 (minutes of another

Losor meeting), I reported to a meeting of Losor dealers

that Mr. O’Connor had called on each dealer selling through

(fol. 58] discount houses and requested them to please stop

this source of supply, but I feel very positive that Mr.

O’Connor never told me that he had called upon the

dealers. This was either an error in my reporting or an

error in taking the minutes.

I had a conversation with Warren Biggs and a subse-

quent conversation with Will Newman, both of whom were

doing business with discount houses. Both of them were

operating on a referral basis, referrals from discount

houses. I asked Newman if he would continue to do so. And

he told me he would until he was told not to by the Chev-

_Tolet Motor Division. And I asked him why. And he said

if he gave that business up, which he considered extra

business over and above the normal business he did, it was

beneficial to him and profitable, that he wasn’t going to

give it up and have some other Chevrolet dealer then take

that same business that he was geeting; and when the

Chevrolet Motor Division told him not to do it, he knew that

they wouldn’t let some other dealer carry on with it. Mr.

Biggs told me that same thing when I talked to him.

In approximately early November I played golf with

Warren Biggs and Mr. O’Connor. There was also another

dealer present, It was at this golf game that I first had

[fol. 59] occasion to discuss the matter of discount house

selling with Mr. Biggs. This is the conversation Mr. Biggs

refers to in his letter of November 5th, addressed to me

(Plaintiff Exhibit 6). I was simply getting information, and

I did not attempt to persuade Mr. Biggs to discontinue

doing business with Fedco [the referral service]; but I

thought this meeting at the country club would provide

an opportunity for Mr. O’Connor to make some comment

along that line. Mr. Biggs said in front of Mr. O’Connor

that if he was asked not to do this by Chevrolet Motor

Division, that he would immediately not do it; but until

he was asked, he was going to continue, because he thought

it was pretty good business, it was extra business, he liked

it, and he was going to continue it, because if he didn’t,

some other dealer then would take that same business.

Mr. O’Connor didn’t discuss the matter with Mr. Biggs.

He was an onlooker and listener, but he made no comments

that I can remember. At that time I decided perhaps Mr.

O’Connor didn’t have the authority to tell Mr. Biggs to

give up this business.

A good majority of Losor members attended the annual

meeting in Honolulu on November 10, 1960 (Plaintiff Ex-

hibit 175, minutes of this meeting). At this meeting there

(fol. 60] was discussion concerning the writing or wiring

of letters or telegrams to Mr. Gordon, president of General

Motors, Mr. Cole, general manager of Chevrolet Motor

Division at that time, and Mr. Staley about the discount

house situation. I reported to the Association my meeting

with Mr. Biggs and Mr. O’Connor, and I stated that I had

concluded that O’Connor did not have the authority or per-

mission to stop the dealers from this activity which we

thought should be stopped, this method of selling cars, and

suggested that we write to these people, telling them of our

problems and asking for their help. And the dealers

present as a group agreed that they would each one do

that individually. And some of them volunteered that they

would have their salesmen also write letters because they

claimed that their salesmen were being affected. The sales-

men were losing sales, losing income, due to the fact that

cars were being sold through discount houses.

We hoped that Mr. O’Connor woula be instructed or

otherwise authorized to bring about an ene to discount

house selling of Chevrolet automobiles in the Southern

California area as the result of these letters and telegrams.

We were seeking the assistance of the higher echelon of-

ficials of Chevrolet and General Motors in bringing about

[fol. 61] an end to the discount house sale of Chevrolets.

On December 15, 1960, I attended a meeting of the di-

rectors of all three Chevrolet dealer groups at Perino’s

Restaurant. It think that Mr. Pollard called the meeting.

The problem of cars being sold through discount houses

was discussed almost exclusively at this meeting. Mr.

Pollard explained that he was chairman because Foothill

Dealer Association was paying the luncheon bill. And in

substance he explained that we were there to discuss the

problem of dealers selling cars through discount houses and

then he called upon the various dealers in the room to ex-

press their opinions as to whether dealers should engage

in this kind of practice. And as I remember, there was no

opposition to the general feeling that the dealers were not

ethical who sold their cars in that manner. Both Mr. New-

man and Mr. Biggs took a position in substance or effect

opposed to discount house selling. I believed that they

were both doing business with Fedco [a referral service }

at that time, and it was common knowledge among the

dealers that this was the case. At this joint meeting of

directors I don’t think the Chevrolet dealer selling agree-

ment was a topic of discussion.

Q. Now, what happened after all the dealer’s views were

(fol. 62] solicited on this matter?

A. Then after everybody had expressed their opinion

Mr. Pollard suggested that he thought the better way to

proceed was to have a general committee composed of

members of the officers of the 3 groups to work together to

see what they could do almost as we had done through

Losor, to search out any legal ways that we could stop it,

to find out if they were violating any laws, to see if there

were any laws that we could maybe have passed in Sacra-

mento to protect us and to do such other research as they

could to find out all they could about this particular

problem.

Q. To do whatever they could to see that it ended, in other

words?

A. Yes,

A committee was in fact appointed.

On December 28, 1960, I attended a meeting of the Losor

dealers at which time a report was given to the membership

on what happened at the December 15th meeting of the

directors of the three dealer associations. I made part

of the report. :

Subsequent to that time I received a letter from Mr.

Staley dated December 16, 1960 (Plaintiff Exhibit 198),

(fol. 63] I got a telephone call from Mr. Hawthorne, one of

the city managers for the Los Angeles Zone, who works

under Mr. O’Connor’s supervision. Hawthorne asked me

if I sold ears to discount houses, and I told him no. He

said, ‘‘Well, I have very little to talk to you about then,

because I just want to talk to those dealers who do.’? He

said, ‘‘I am supposed to ask you not to if you were.’’

Hawthorne told me in substance that he had been in-

structed to call dealers and find out whether or not they

were selling through discount houses. I think at our subse-

quent Losor meetings we discussed the fact that eventually

somebody had called the dealers and asked them not to

sell to discount houses. And we were quite pleased about it.

I was a member of the Losor Board of Directors which

approved a letter to the membership of Losor (Plaintiff

Exhibit 176) asking the membership to express their ap-

preciation for the fine job Chevrolet had done in stopping

the sale of cars through discount houses. We thought at

the time that they had stopped it, that General Motors

had responded to our request and had helped eliminate

the sale of Chevrolets through discount houses. We formed

this opinion from conversations with other dealers, and

the fact that Mr. Hawthorne had called me, and I suvpose

[fol. 64] their representatives had called them. I don’t

remember that anybody said that they had stopped, but

when we got the word from the city managers, each of

| epytencpemamarmenceanen

us on the phone, that they were calling all the dealers and

ask the offending dealers to stop, that is what we had been

asking for.

The Losor Board of Directors authorized the purchase

of a Chevrolet car through a discount house. I think it

was a telephone conference meeting. We authorized funds

for the purpose of buying a Chevrolet through a discount

house because by that time we had heard that cars were

still being sold through discount houses. So we wanted

to present this evidence to Chevrolet. Miss Evelyn Davis

from the Losor office went to a discount house; I think it

was Gemco. The car was paid for, I am pretty sure. It

was paid for with Losor funds. Mr. Henson, and I think

Mr. Marion Johnson took the evidence to the zone office.

Sometime around February 1961 I attended a meeting

at Brower’s Restaurant of the committee which was ap-

peinted by Mr. Pollard on December 15th. After that

time I discussed with Mr. Henson whether or not Losor

should contribute money that might be used for the pur-

[fol. 65] chase of other cars. Our board of directors au-

thorized them to continue with this. It was understood

at that time those cars were to be purchased that informa-

tion concerning the purchases would be turned over to the

Chevrolet zone office here in Los Angeles.

Prior to a general membership meeting of Losor on

April 6, 1961, the Losor Board of Directors voted $5,000

to the trustee account of Glenn Roberts for the purpose

of buying cars and ultimately turning over the data so

secured to General Motors. The purpose was to continue

what we had been doing. We decided we would have a

fund that could be used for the purchase of cars and the

investigation to find out if this was still going on through

discount houses, and just how they did it. The money was

appropriated to Mr. Roberts with the understanding that

the information so secured was to be delivered to the

Chevrolet Motor Division zone office in Los Angeles. At

about the time Losor approved the $5,000 to Mr. Roberts,

the other associations agreed that they would each give

$5,000 for this purpose. I was at the meeting when the

Dealers’ Service and Foothill representatives said in effect

that they would contribute to the fund the same way Losor

did. It was understood at that meeting that the information

[fol. 66] disclosed as a result using these combined funds

would be made available to General Motors as it had in

the past.

Cross-designation by All Defendants

In setting up a dealership and in getting a Chevrolet

contract, we agree as dealers to sell and display our cars

and, in addition, to furnish a service department, adequate

to handle the volume of business that may be in the particu-

lar area in which we are doing business. But the service

department of a Chevrolet dealership is not a profitable de-

partment. Generally it is the opposite, it is a losing depart-

ment. In my own particular case in years past I have had

losses in my service department up to $3500 per month.

In the year 1960 and ’61, I cut those losses down to $1,000

per month, in round figures. The service department thus

has to be maintained by the sale of other Chevrolet prod-

ucts, new cars and trucks and parts. We subsidize the

service department.

We all recognize the fact that if we didn’t have a service

department that we could make more money, and we could

sell cars at a less cost. The service department is an ex-

pense to us. Chevrolet recognizes that the reputation of

their product, the good name they have established through

(fol. 67] their manufacturing of a car, depends on the way

it is serviced. An automobile is not like a piano or some

other piece of furniture that you look at. It is something

that you use every day on the highway, and it has to have

continual service, at least periodic service, if it is going

to function right. The present-day automobile is a very

complex car. It no longer can be repaired by bailing wire

and a monkey wrench and a pair of pliers. It takes an in-

vestment in equipment and machinery that costs hundreds

and hundreds of dollars for a dealer to properly service

the cars that he gets to deliver to the public.

In 1960 Owen Keown Chevrolet sold on the average of

50 or 60 new Chevrolets per month. I think that is a pretty

small dealership. We had about 60 employes and more than

half of them were employed in the service department;

that’s including the service salesmen, the service manager,

the file clerk, the mechanics, wash men, get-ready men, and

so forth. The get-ready men are the ones that get the new

ears ready for delivery. We service the cars after the

factory sends them to us. During 1960 we kept a stock of

parts and accessories, in dollar terms, of approximately

$60,000.

(fol. 68] Some time around July 1960 I sent one of my

salesmen to More’s Inc., a discount store in West Los Ange-

les. He placed an order for a Chevrolet and put a deposit on

it. He reported back to me that the automobile referral serv-

ice had an office in the building and there was a man there

who discussed the purchase of the car with him. Mr. Reed,

my salesman, asked where he was going to get this car

and was told that it would be through Warren Biggs

Chevrolet. Mr. Reed had the impression, he told me, that

the man at More was working for Warren Biggs. He

didn’t tell me whether or not the man at the discount store

told him that.

I objected to Mr. Biggs selling a car through More Inc.,

because if they continued to sell cars through discount

houses and more discount houses of that type move in my

area, I wouldn’t be able to be in business very long, and

I want to stay in business. If there were very many of

them established in my area, and they would sell as many

as 10 or 15 cars a month and would deprive me from selling

that many per month, I wouldn’t even break even. The mar-

gin of profit in the Chevrolet operation is just too small to

stand that.

So when this matter of dealers selling through discount

houses got to be quite an extensive business, we realized

(fol. 69] that sooner or later it would affect all of us, because

if it was going to be done in Orange County, in certain

areas, in large numbers, then there would be nothing to

prevent a house of that kind, a discount house, to come into

my area—there may be several of them—and all of them

sell Chevrolets, and those Chevrolets would be furnished

by dealers far away who were not interested in the service,

or interested in the welfare of the customer; all they want

to do is make a sale.

As far back as July 1960 Mr. O’Connor said be would

talk to the dealers about their selling Chevrolets through

discount houses. He told us that he didn’t think the dealers

should sell their cars in that manner, but Mr. O’Connor

never told me that he had called upon them. I never did

get an answer from him on that. And from that time on

every time I would see Mr. O’Connor he would say that

he hadn’t had an opportunity to talk to the dealers yet.

I thought the golf game would be a golden opportunity

for him to talk to a dealer in my presence. But Mr. O’Con-

nor didn’t discuss the matter with Mr. Biggs. He was an on-

looker and listener, but he made no comments that I can

remember. I decided perhaps that Mr. O’Connor didn’t have

the authority to tell Mr. Biggs not to sell cars in that

[fol. 70] manner and I thought maybe I shouldn’t em-

barrass him any further.

The purchase of the new Chevrolet by Evelyn Davis

at Schonlaw Chevrolet through Gemco was made in order

to convince Mr. O’Connor that Chevrolets were actually

being sold through discount houses at that time. It was

not done pursuant to his request, and, as far as I know,

it was done without his knowledge. The Losor Board of

Directors decided that after the evidence was submitted to

the Zone Office, one of the dealers in Losor would resell

the automobile.

We had Mrs. Davis make a tape recording of the trans-

action for evidence as to the kind of conversation that was

used in the sale of this car. We thought that if we had a

good recording, we could present that also to the Zone.

I think it was rather jumbled and not very good—lI don’t

remember hearing it myself.

Mr. Henson later told the Board that when they took

the evidence of the purchase of this automobile in to Mr.

O’Connor, they were very surprised to find that Mr. O’Con-

nor already knew about the purchase of this automobile.

A bird dog is an entirely different thing than a discount

{fol. 71] house. The term ‘‘bird dog’’ has a certain mean-

ing in the language of the automobile industry. In the

dealer’s area where he does business, the salesmen get

acquainted with service station operators, people who work

in plants and in any location, stores or any place else, and

they cultivate his acquaintance and ask him if he will tell

him about anybody that wants to buy an automobile; and

then, when he buys the automobile, the salesman will give

him a portion of his commission. Now, that is called

bird dogging, and it has been a very prevalent part of this

business. That is an individual matter between the sales-

man out working his territory and trying to create con-

tacts who will tell him where he might sell a car, and if they

tell him, he rewards him by paying him a certain amount.

It can be any amount, five or ten dollars or a bottle of

liquor. He is a bird dog for the salesman.

Additional Cross-designation by Defendants Losor Chevro-

let Dealers Association, Dealers’ Service, Inc., and Foot-

hill Chevrolet Dealers Association

There was no discussion at the Losor meeting in Honolulu

[Nov. 10, 1960] concerning what the content of the letters

we wrote to Detroit were to be. That was left to each in-

dividual dealer. We left it to each individual dealer to ex-

press his own opinions.

{fol. 72] At the December 28, 1960 Losor meeting I re-

ported to the membership that the directors of the three

associations had met at Perino’s on December 15th, and the

meeting was conducted by Mr. Martin Pollard, and that Mr.

Pollard called on each dealer to express his views relative to

the dealer selling cars through discount houses.

I also reported what Mr. Newman had said at that time

at that meeting. I told them that after that discussion, that

Mr. Pollard appointed a committee to further investigate

this matter of discount houses, and what they might come

up with legally, that we might use to combat it, either

through the violation of licensing laws or any other laws of

the State that we could uncover. I made a full report of that

meeting, and then I think the other members of the board of

directors substantiated my statements.

At no time was there any agreement among the members

of the Losor Chevrolet Dealers Association that they would

not do business with discount houses and referral services.

To the contrary—at one meeting I remember that some

dealer made the suggestion that we refuse to trade with

dealers who sold cars through discount houses, and he was

immediately shouted down and they said we cannot possibly

(fol. 73] do this. There never was any agreement of that

kind at any time.

The dealcr associations, Losor and Foothill and Dealers’

Service are each separate entities or corporations. They

are in no way a subsidiary of or part of General Motors.

The most important purpose of our associations is desig-

nated by the name we call them by,—‘ trading associa-

tions.’’ Back before we formed our Losor group, for in-

stance, it was necessary for dealers to trade with each other

by individually calling the dealers whom we thought might

find a particular car. It was impossible, even at that time

when we didn’t have so many automobiles and so many op-

tions, to keep all in stock at one time. There was tremen-

dous inconvenience as well as expense to have to go down

the list of dealers and call them individually to find out if

they had a particular car in stock. So we as dealers in dis-

cussing this problem with each other decided to form an as-

sociation, and it was for the purpose of trading cars.

We thought of we could pay a nominal fund into an asso-

ciation and have an office set up where we had girls that

worked for us, we could call that trading center, which we

called our Trading Bureau, and ask the gir! to find or locate

[fol. 74] a particular car that we needed. As time went on

that has become more and more important because of the

tremendous number of models we have, the tremendous

number of options and colors, and it would be physically

impossible for a dealer, even the largest dealer, to carry all

those cars in stock. We trade with each other and that is the

primary purpose of our organization. We pay into our as-

sociation a fee of so much per car to pay the expenses of our

association office and the salaries of the girls. Now, after

that was established, then we found it convenient to do other

things. We have in recent years, when Chevrolet has put

on a campaign, for instance, that has cost the dealers so

much to put on a selling campaign, our association, rather

than the dealers, have paid that amount so that the cost

would be borne by all dealers.

When we first organized this association, our Losor Asso-

ciation also attempted to do some advertising to create pub-

lic acceptance and to advertise our dealers. We have roughly

from 30 to 34 dealers in our dealer association, and we

spent some of the funds that we collected from dealers to

pay for advertising in various ways. That went on for a

number of years and it was quite unsatisfactory, because

our group in Losor was advertising entirely independent of

[fol. 75] what the city dealers were advertising and the

Foothill dealers. The three associations met in 1955 and we

decided to form another corporation, solely for the purpose

of advertising. That is L.F.D., and we contribute to that.

“‘L,.F.D.’’ is the first letter in each of the three associations.

L.F.D. sponsors sports announcements and football and

baseball games. L.F.D. retains an advertising agency and

pays them a fee, and they place the advertising for us. A

board that is selected by the dealers reviews in advance

these advertising matters that they are going to use, whether

it is spot announcements, and what the announcements say,

or if it is a program for baseball or football or basketball,

why, it is presented to that board and they epprove it.

Our purpose has been to correct some of the feelings

against Chevrolet dealers and perhaps to give us a better

image in the public eye. From time to time we also sponsor

newscasts, such as the Jack Latham show, Big News, Clete

Roberts, Baxter Ward, and George Putnam. We also have

sponsored some public service programs, such as Airborne

Alert, and Special Report, the X-15. We also discuss com-

mon prvbdlems in the industry in our meetings. There are

many things that we discuss.

The directors of L.F.D. are made up of members from

[fol. 76] the three associations.

With reference to the dealers who sold through discount

houses and those that were known to the association as

having done so, or continued to do so, there was no pressure

placed on them, and no disciplinary action taken by the

association against these members. Our purpose was not

to take action; our purpose was to gather information.

We wanted to find out all we could as to how these cars

were sold. We didn’t deny any of the dealer members the

service of the trading bureau because they happened to. be

selling through discount houses and we didn’t threaten to.

We never made any threats. We didn’t even make any

request of any dealer not to sell. We were very careful

not to. The cordial relationships between the members of

the associations continued on through this entire period of

the problem of discount houses. Our functions we carried

on just the same as we always did. We carried on our

regular business, with the addition of investigations we

made of the activities that were going on through the dis-

count houses.

The activity of the associations—engaging in obtaining

information—was done for the purpose of submitting it

to General Motors, and also for the purpose of possible

(fol. 77] legislation. That was our sole purpose in doing

it. We had no other purpose than to present to Chevrolet

what we could find out through our investigation as to how

it was done, and to have positive proof that it was being

done. It wasn’t our place to enforce anything or cause any

dealer not to sell. That information was transmitted to

Chevrolet for their action, and we assumed that Chevrolet

would have the right to take such action. If they didn’t

they would tell us. They never did tell us that they didn’t

have the right to.

In the year 1960, we did not know whether the discount

houses and referral services in Southern California held

dealers licenses from the Department of Motor Vehicles

in the State of California. We tried to find this out through

investigation.

At the December 15 meeting Mr. Pollard appointed a

committee. The purpose of the committee was to try to

find out all we could about this matter. They were told

to find out what violations, if any, might be going on, and

what laws might be violated, State or licensing laws. Get

any other information that they could. I don’t remember

specifically the instructions, but that’s generally as I re-

member it.

[fol. 78] Plaintiff’s Reply Designation

Q. Let’s suppose I bring a Chevrolet in to your place

of business and the motor is hardly running and your

mechanic tells me it needs a motor overhaul; what happens

then, Mr. Keown? I say, ‘‘Go ahead and fix it up.’’

A. Then the service salesman writes up an order at your

request and states what you want done on that automobile.

And then the order is given to the dispatch office and it

goes to the mechanic who is supposed to do that work.

And he does it and it goes back and is billed out to you.

Q. I get a bill at the end?

A. You get a bill.

Q. The bill has a distinction usually between parts and

labor?

A. Yes, it does.

Q. When my engine is going to be overhauled, I get a

lot of parts put in there, don’t I?

A. Yes.

Q. And it is the same thing if I have a transmission

fixed, there are parts and there is labor?

A. That’s right..

Q. If I want a new set of valves put in, I have some

(fol. 79] parts and some labor?

* ~ A. Yes.

Q. Practically everything I have done on the car involves

parts and labor?

A. That’s right..

Q. And you bill me separately, you show me at the end

how much parts you use and how much labor is involved ;

is that right, sir?

A. That is correct.

Q. How is that reflected on your accounting records as

part of your income or loss from service?

A. The parts department is not the service department.

The loss from the service department is only from the

service.

Q. The loss on service reflects only the labor, does it not?

A. The operation of the service department, yes.

Q. The operation of what you call the service depart-

ment as a bookkeeping matter means only labor, does it

not, sir?

A. Yes, sir, that’s what the service department is, is

the labor on cars.

Q. That’s what you think it is, but actually you are

putting in parts and labor, aren’t you?

(fol. 80] A. That is the parts department that handles

parts.

Q. That’s what you consider a parts department, but I

am saying when I come in to buy a car, I pay you for parts

and labor, don’t I—when I get my car fixed?

A. You do if there are parts used. Sometimes there is

only labor.

Q. But most of the time there are parts used?

A. Yes. But many times there is only labor, too.

Q. But more substantial repairs involve parts, don’t

they?

A. Yes, substantial repairs.

Q. There are some 2,000 moving parts, and when some-

thing goes wrong with the car, some of those 2,000 parts

have to be replaced or repaired; is that right?

A. Yes, sir, I agree.

Q. Most of the time if you have any substantial amount

of work done you are getting both parts and labor?

A. Yes, for a substantial job you would.

Q. All right. I would like to show you the 1960 financial

[fol. 81] statement of Owen Keown Chevrolet. I think you

told us that you sustain a loss in your service department

of $1,000 a month; is that right, sir?

A. Yes.

Q. That would be about $12,000 a year?

A. Yes.

Q. I invite your attention to page 3, to the caption ‘‘De-

partmental Income and Expense,’’ under column C, Serv-

ice Department, and this appears to reflect a loss of $3,-

473.10 for the year ending December 1960; is that right ?

A. That’s true.

Q. That would be about $300 a month loss rather than

$1,000; is that right, Mr. Keown?

A. Yes.

Q. I would like to invite your attention to the column

headed ‘‘Parts and Accessories Account,’’ and invite your

attention to the fact that you reflect a profit there of $17,820

for the year ending 1960; is that right?

A. That is correct.

Q. That is really part of the same operation, when you

fix a car up you put in parts and you put in labor, is it not?

A. That’s right.

[fol. 82] Q. If we put the two of these together, your parts

and labor and accessories, that is the entire service opera-

tion of your dealership, it would reflect a profit of over

$14,000, isn’t that right?

A. That is not right.

Q. Why is that not right?

A. Because you have completely forgotten this column

headed ‘‘ Administrative’’. Now, up until just a few years

ago the administration was divided up and prorated between

departments, but the Chevrolet Motor Division wanted us

to have this changed so that none of this administration was

put in these departments. We now have to allocate them

to find out what our actual profit or loss is in those de-

partments, and we divide them up.

So you have to take the cost of administration and apply

the formula that they let us use to find out how much more

we have lost in the service department. Because those

departments have to pay for administration, too.

Q. They give you a formula, then, to break this ap-

proximately $31,000 figure down?

A. Yes.

Q. What is that formula?

A. About 31 per cent, I think, is labor.

[fol. 83] Q. 31 per cent——

A. For the service department.

Q. How much for parts and accessories?

A. I don’t remember.

Q. Se if we took about $10,000 or $11,000 off of that

$15,000, we would still have a plus figure rather than a

minus figure.

A. I was talking about the service department when I

talked to you; not about the parts department.

Q. You told us you lost on your service. You are con-

sidering only the labor?

A. That’s right, service department.

Q. You are not considering the fact when you repair a

car you put in parts, as well as labor, and on the parts you

reflect a net profit before deducting for administrative ex-

pense?

A. I was talking about the service department. I said

that loss had to be made up by the other departments in

the business. And the parts department is one of them.

Q. And do you make it up, in fact, in part, in repairing

cars?

A. We make it up by selling cars, too.

[fol. 84] Cuester F. Henson

Designation by Plaintiff

My name is Chester F. Henson. I reside at 4475 Cerritos

Avenue, Long Beach. I have been a Chevrolet dealer since

1950. The name of my agency is Harbor Chevrolet Cor-

poration, located in Long Beach. I have been a member of

the defendant Losor Dealers Association since 1950, was

elected president in November 1960, and was a director in

1961 and 1962.

In late January or early February 1961 the Losor Board

of Directors made a decision to purchase a car through a

discount house or referral service. As far as I know, there

hadn’t been any absolute proof, such as the physical automo-

bile itself presented to Chevrolet, that it could be purchased

through a discount house. It was the belief of the board

that cars were still being made available through discount

houses and referral services.

The Board of Directors authorized Miss Evelyn Davis,

our secretary at Losor, to purchase a car. She borrowed

a tape recorder and went to the Gemco store near Anaheim

and put a $100 deposit on a new Chevrolet; Losor furnished

the funds for the deposit. Miss Davis went back to Gemco

[fol. 85] on a second occasion to purchase the car. She

asked Mr. Johnson, an employee of Harbor Chevrolet, to

accompany her. I think this was at some time after she had

placed a deposit on the car. They went back to make the

purchase with a cashier’s check made out to Gemco for the

car, which I believe Gemco refused. I believe Mr. Johnson

had purchased the check from the Bank of America a few

days before they went back to Gemco. The Losor check to

the Bank of America is dated February 16, 1961. Gemco

was a membership discount house, and Miss Davis used the

membership card of a person named Palmer, and Mr. John-

son might have passed himself off as Mr. Palmer. I be-

lieve the papers that came with the car that was purchased

were made out to the Palmers. I think they took delivery

of that car at Schonlaw Chevrolet in Los Angeles, and the

car was driven back to Harbor Chevrolet. (See Pitf. Exs.

138 and 183) I am sure we probably called the Zone and told

them that we had the car and wanted to bring it up. Subse-

quently, Mr. Johnson and I took the car and papers to the

Zone. Mr. O’Connor said to leave the papers and keys with

him, and we told him the car was in the parking lot. Eddie

Hopper, another Losor dealer from Garden Grove, was also

present. He, too, had purchased a car, but his shopping was

(fol. 86] not pursuant to the board of directors’ meeting.

It was on his own.

I brought the car down there for proof that the car had

been purchased because I brought papers to him once before

when I had purchased a car at another discount house and it

didn’t seem that that had much of an impression on him.

I thought the car would have more impact on him. I thought

if he could see the physical automobile that he couldn’t deny

that this was going on.

Russell DeOrto was hired by the three defendant dealer

associations to do some shopping at the discount houses. I

told DeOrto his duties were to shop only for Chevrolets be-

ing sold through discount houses, and to make purchases

through discount houses. He was to make a tape recording

of the conversations and transactions wherever possible, so

we could have it to play to the officials of Chevrolet. DeOrto

was not told that the evidence he was gathering would be

taken to Chevrolet.

I then told DeOrto I’d have to call him later to see if the

deal could be firmed up because I didn’t have authority to

spend $1000 per month. The money was coming from the

three associations. I contacted my Losor board of directors

(fol. 87] and got their approval, and notified the presidents

of the other associations so they could get approval from

their boards. Which they did. There was a mutual under-

standing that it would be a venture paid for equally by the

three associations. DeOrto was hired on a monthly basis

and was told to continue to shop until told to stop. I told

DeOrto of a couple of discount houses to shop, and then,

of course, the other dealers supplied other discount houses

in their areas they would like to have shopped. The evi-

dence obtained would be laid at the doorstep of Chevrolet.

O’Connor knew we were doing this after the first one, and he

didn’t discourage me from doing it. It was necessary to

make a number of shopping transactions to find out the

scope and location of all this type of merchandising, and

it was necessary to identify the dealership that furnished

the car.

Around March 22, 1961, Mr. Glenn Roberts was employed

to direct the activities of DeOrto, as Losor had served notice

on the other two associations that it would not carry the bur-

den of the investigation itself, and we thought it only fair

that they share in the direction of this activity.

[fol. 88] Cross-designation by All Defendants

Shortly after June 28, 1960, in order to get proof to take

to Mr. O’Connor that cars could be purchased through

unauthorized outlets, I sent one of my salesmen to Cal

Stores to make a deposit on a new Chevrolet. The order

was written there. He went to Cal Stores and told them

he wanted to buy a new Chevrolet. I think it was an Impala.

They did some dickering and an order was written up there.

Cal Stores have a little enclosure there with a desk and tele-

phone and some literature. I turned the order over to

Mr. O’Connor. We were not gathering this evidence in

response to a request from Mr. O’Connor, and I don’t think

he knew that we were gathering it.

I was of the opinion that the discount house automobile

concessions were unauthorized sales outlets created through

some sort of an association with Chevrolet dealers that was

a violation of our Selling Agreement, because I had personal

experience with that selling agreement and was requested to

close a location that was just outside of my zone of in-

fluence and I thought, by George, if this applies to one

Chevrolet dealer, it applies to all of them.

I didn’t think there was any such thing in the General

(fol. 89] Motors Corporation or Chevrolet Motor Division

that meant that there was a set of double standards set up

for dealers operating under the same Selling Agreement.

In June 1960, when a group of dealers who were members

of Losor visited Mr. O’Connor and presented evidence re-

garding discount house selling of new Chevrolets, we were

undertaking to submit proof that this was indeed going on

—the retailing of new Chevrolet automobiles through an

unauthorized location. We just didn’t think that they

thought it was taking place or that it was very prevalent

or whether it was hearsay or gossip or whatnot. We took

the attitude that we must submit proof to prove it was

going on.

_ When we gave him the papers, he said that he would

have these people contacted. He didn’t say that he would

do it himself. He didn’t tell us when he would do it. He

didn’t tell us what he would say to them. As a matter of

fact, he was pretty vague about the whole thing.

I didn’t learn that he ever did have the dealers con-

tacted. I heard that he was going to have it done but I

never heard that he did. We tried to find out if he did

but I think we got the same kind of vague runaround that

[fol. 90] had been happening all along.

In the November 1960 meeting of Losor, I think Mr.

Keown reported that there wasn’t any progress being

made and I think that is the reason it was suggested that

dealers write to Detroit. It was felt necessary to go beyond

the zone’s authority because there didn’t seem to be much

action otherwise. It looked like we were going to have to

appeal to somebody to get something started on this propo-

sition.

I wanted to show Mr. O’Connor the car purchased at

Schonlaw Chevrolet through Gemco to prove to him that

they were still violating their franchise. One of the deal-

ers in Losor was to take the car and re-sell it—that was

our original plan for getting the money back that we had

laid out. In fact, the Board instructed Mrs. Davis to buy

an eight-cylinder Impala sports model because it would

be an easier car to sell.

When we went to Mr. O’Connor’s office with our evidence,

we were quite surprised to find out that the Zone already

knew about the purchase that we had made and which was

quite a surprise to Mr. Johnson and myself. Mr. O’Connor

was well acquainted with the deal before we got there with

it. He asked where the car was, and we said on the roof.

{fol. 91] I didn’t ask him what he was going to do, but it

was my understanding or impression that the supplying

dealer, Schonlaw, had called him and wanted to buy the car

back. Mr. Schonlaw could have called him before or after

the date I went to see O’Connor.

Additional Cross-designation by Defendants Losor Chev-

rolet Dealers Association, Dealers’ Service, Inc., and

Foothill Chevrolet Dealers Association

I was present at a Losor meeting on June 28, 1960, at the

Captain’s Inn in Long Beach. I remember being named to a

committee that was to take proof to Mr. O’Connor at the

Zone Office that cars could be purchased through unau-

thorized outlets, and also we classified them as illegal out-

lets. We endeavored to obtain proof and evidence that this

practice was being carried on. I, for one, classified them

as illegal outlets for this reason: That anyone assisting

in the sale of an automobile or anyone that sells an auto-

mobile must be licensed to the dealer for which he works

and no other dealer.—l had no information as to the li-

censing of these people on June 28, 1960.

I attended a meeting at Perino’s on December 15, 1960.

It was attended by members of the boards of directors of

the three defendant associations. I believe Mr. Pollard

(fol. 92] asked us to meet. He didn’t tell us the subject

of the meeting—just requested us to meet. It was pretty

much a diversified, garbled-up meeting. They talked about

legislation, they talked about discount houses, they talked

about various and sundry subjects; they talked about our

licensing laws, our bonding laws, and perhaps it might be

well if we would do something about maybe acquiring new

cooperation from the D.M.V., or perhaps even new legisla-

tion would help. There was quite an argument-about the

Icz"slation. I remember that. Mr. Shammas, one of those

present, went on at quite some length about not wanting

any more legislation, that he felt that the automobile

dealer already had enough legislation—natio ally and

statewide. 1

We thought that presenting the actual proof of purchase

to the General Motors organization would prove to them

that their action of asking dealers not to sell through un-

authorized outlets—prove to them it was still going on. We

were in hopes that it would bring them alive and create

some action.

We decided to ire DeOrto because we could not at

Losor continue to spare our secretary to go out and shop

for autonichiies, and neither could I afford to have one

of my employees spending his time to gather the evidence

[fol. 93] that we felt that we needed to present to Chevro-

let. Therefore I informed the board of directors that as

far as I was concerned, we could no longér do this. We

bought the one car. Therefore it was suggested that we

hire somebody more professionally inclined in that line

outside of our own employees. Consequently, Mr. Eddie

Hopper, who was a Chevrolet dealer at Garden Grove at

the time, called me and informed me that this man Russell

DeOrto was in a business called, I believe, Efficiency Re-

search, that he would like to send him over to see me for

an interview, because my directors had asked me to check

into the possibility of getting an auditing company or

someone to carry out this investigation. I asked Mr. Hop-

per to send Mr. DeOrto over to my dealership. He told

me to judge for myself whether Mr. DéOrto was qualified

for the job. He told me the line of business the man was

in, which at this particular point I don’t remember, 7 think

some sort of sales research. When he arrived there i talked

to him in the presence of Mr. Johnson, and he said that he

could do this type of work, and he would be very glad to.

I didn’t tell DeOrto how long the job was going to last

because I thought it would continue until we had proper

enough evidence to submit to Chevrolet and perhaps take

(fol. 94] other action through licensing that might turn up.

We didn’t know what would turn up, we didn’t know

whether these people were licensed or not, we didn’t know

if they had an automobile dealer’s license, and we were

concerned as to whether they had a license that would per-

mit them to sell Chevrolets for some of the Chevrolet

dealers.

None of the three defendant associations sell auto-

mobiles. That is not the function of the Avsociation.

The Associations have Chevrolet dealershins as their

members—it is a series of dealerships. Our Dealer Selling

Agreement is a printed form. Eech of the dealers signs

a similar contract that has the provision against opening

an additional outlet. While there could be variation in the

length of time the contracts run, they are otherwise sub-

stantially identical contracts. When I sign, my contracts,

I rely on the fact that the other dealers are taking on the

same obligation as I am.

General Motors does not give any direction to any of the

associations as to actions they should take. General

Motors does not attend Association meetings.

[fol.95] To my knowledge, at no time did I or any mem-

ber of our Association, or the other two Associations, ever

use any pressure or coercion on any dealer to refrain

from selling through discount houses.

[fol. 96] Martin Poiiarp

Designation by Plaintiff

I am an automobile dealer. I have a financial interest

in the following dealerships: Pollard-Ravenscroft Chevro-

let, Van Nuys; Rancho Chevrolet, Reseda; Pioneer Olds-

mobile, North Hollywood; Century Oldsmobile, Van Nuys;

Casa de Cadillac, Sherman Oaks. I formerly owned Martin

Pollard Company, a Chevrolet dealership in North Holly-

wood (now Montgomery Chevrolet) and part of the Pollard-

Carroll Company, a Chevrolet dealership in San Fernando.

I have been a Chevrolet dealer for about 40 years. T was

president of defendant Foothill Chevrolet Dealers Associ-

ation from 1940 through 1961, and now am honorary presi-

dent of that group.

I presided at a luncheon meeting at Perino’s restaurant

on December 15, 1960. The meeting was attended by officers

and directors of Losor Chevrolet Dealers Association,

Dealers’ Service, Inc. and Foothill Chevrolet Dealers Asso-

ciation. I recall the following persons from the following

associations were present at the meeting: Robert Erskine,

Kd Colliau, Roger Sorenson, Glenn Roberts, and George

(Cap) Reade, Jr. (all of Foothill) ; Chester Henson, Owen

Keown, and ‘‘Red’’ Cone (all of Losor); Warren Biggs,

Wilbur Newman, and Nicholas Shammas (all of DSI).

[fol.97] Q. Who called that meeting, sir?

A. Well, I don’t know whether I can answer that. I will

have to tell you how it came about. I was called by Mr.

Henson of the Losor dealers and he said they wished to get

together with the other d

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