# Appendix — Federal Trade Commission v. Texaco Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0015%3A11 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1968 - **Citation:** 393 U.S. 223 ## Text * 18 „610 ‘7 * FDRRAL TRADE nae RESPONDENT © > 9 Tur B. F. Goonmon oer rErrrioNn 3 K | From Trane Conacaon, aero | | Petitions to elie an Order ae the Fedetel Trade Commission © Decided September 25, 1967 Before Bazeron, Chief Judge, “Wiipur K, Mriren, Senior Circuit. Judge, and Buraer, Circuit Judge. Bundzn, Circuit Judge: Eleven years after the is- suance of a complaint and sixteen years after an in- : vestigation was easy this case returns to us from Ahe investigation: was originally instituted in 1996 but, was inactive for many years. Serious ‘investigation was renewed deere PUP, ed 1561 and fram DE ARPT eS eee ay se - . 5 é — * ee ; 7 2 a | 2 5 the Federal Trade 8 for the second time; in the interim, following our prior review, the Supreme ak ‘Court remanded for furtliar consideration. See Texaco, Ino. v. F. T. C. „118 U.S. App. D. C. 366, 836 F. 2d 754 Pe slicing as An unlawful method of compe- tition prohibited by Section 5/of the Federal Trade Act, 38 Stat. 719 (1914), 15 U.S.C. § 45 (1964), the sales commissibh ‘method of ‘distributing tires, bat- teries, and accessories, called the TBA“ plan. Under 4 that plan the tire and rubber eompaties pay commis- A to the oil companies dealers. Each com- pint p one of the large tire and rubber produet Ap large oil, de. with which it GN 8 ell 7 | Firestone, and Atlantic and oodysar ? 1, e ays (1) B ackground. In 1961 the D e 1. be ee e TBA comes In both ‘Atlantio- ri and She, irestone,! the errors Lr oil companies on on sales of the tire com- ac 2 1 1 eee most’ substantia! sgree- meta challenged; akhough the ‘cimplaints also challenged ths oe eres vee cther oll 9nd fine cme — bctions. - Dag 7 BONG Ain. uta * ihne d at mon han FET He ei. lern tod 1, j * eyoally effective means. 58 F. T. C. : Only in the 196) ao „ * 3 ‘ me 1 ie 4 were ale weln bat offered no —— £ 10 doing ! „ . subm o the Commit on? Plein 78. 5 re ‘Foals ee ha a A eoneluded that Texaco were violating the Act: Supra at Bug, 336 H. 24-at 760. In the Supreme Court the : Solicitor. General, did not challenge this Court's conclusion of . disqualifying bias on the part of the Commission Chairman. With respect to the merits, a ‘majority of this, Court held that there had been a Sandeman failure of proof. Our opinion stated : 58 . 11 of commissions for. such services, e- where an bil marketing com- rotting | dealers — to coercive tactics y economic power to buy the 3 products. Neither o eee Onforences was ) wad A if 15 7 — are e „ BIR, Oo TIA n. lit. 50. "Yat, , da 4 168 tnt due wf a. , misged the complaint because of this lack of proof and because the undue Re of the administrative : i Sid. Ci eK, Ns a ry denial | 4315 7 mission in the . . the sage enc — te er Loe 02 F.. 120%, 2 7. 15 Bi 26 8 N %. et enth Circuit was asserted’ in the petition fur cdtti- orari. The writ was subsequently 8 Seely GEO In Atlantic’ Refining: Oo. v. F. TU,, 881 U. B51 it holding that the Atlantie TBA: sales bor weck later in a per tiorari in Texaco, and . nt 9 4 od , 1 Trade for ion of of 475 paw op 1 Co. *. Fedora 1 et Bey 4 Nie ait ‘deg ls, / f 4 174 1 381 U.S. "796° 658). Fran to th! nominating the pr ‘be ‘appeals from the iui 5 1962 mitting oral argument and te Fp? * it within the casa Baut 8 a ‘the A. lantic Refining Cb. case.) Order of the Federal Trade Commission Vacating Prior Decision’ and 07 aad . ! In the Matter of Phe f 1 1 oo Sie he e e e the, Han Seen the Commission’s S e * ct he Ses Gt te ert “Bates . Apa Oa, Dat F. Di i An January, 1966, the 3 od an order “and filed. an--opinion, Which is gerne L. ‘The Comenissig ddr Be N N mm dur vid ; nx. Goodrich 00. at 6455 June 18, 1986. ve ) Atlantieeompdls the ‘copchusion that, Ine Tex. chy @@eyGoedrich lan is in me relied ien: ol Atlantic; (2) by its use of the: sales commission 3 4 system, : Texaco Aas in fact exercised its economic aN power over . 15 N favor « of Ke Spon, ” «gered: rene e pete omumission, tem | 40 l. All . > As erfoti¢ous OF’ the ae e : , Jin TE Tot} 9 * W supreme e Court’ Dit required, the 17 ce am | titer the‘ onto hing ean be how only by Broo? 5 5 ‘that: Tease ebertedd dealers 10 purchase ponsbred ise and that anticompetitive effécts followed. jee’ of leer. any e overt . — and argues that this.is implicit in the remand in icht thkt this: ier iti nally, ‘Texaqo e that the administrative a 5 e tidant of the mem 4 no: 0 0 Zulllene % f Atlantic wing: 13) Lhe Atlantic arsed: Our: ilps sina 10 0 with the decision. in Atlgntic. In the Shell: Firestone case, the third TBA case decided after Atlantic, the Fifth Cireuit interpreted the Atlantio rationale as ‘based. on three: essential components, the application : of each. depending on dhe facts A eee before the oe (a) the oil: company's ‘dominant: Soonomie . power over its dealers; 8001 TE „ exercise of that pdwer over its dealers; 1 anticompetitive , ‘effects of. wins e ae bien f : 1 E Co. v. FIC. 360 F. 24 470, 47⁷ (Gth, Cir 1966), cert. denied, 385 U.S. 1002 (1967), Both the Commission and Texaco agree with this view of the . Atlantic holding and this view was essentially. adopted | ie the Sol licitor General in the Supreme Court. Our iin Atlantic, 381 U.S. at 389-90. But cf. (a) Existence of Dominant Economic Power In our prior opinion we found “no basis in the ree- ord for the Commigsion’s conclusion that Texaco has controlling economic power over its dealers; supra at 374, 336 F. 2d at 762. In Atlantic the Court viewed the question of dominant economic power not only in terms of the statistical facts used to show economic _ dependence but also in terms of specific corſtrol devices: () control over oil and gas supply; (2) control over dgalers through short. term leases, equipment leans, ete. (3) control over advertising; (4) leverage from ‘finaneial promotion ; ‘and (5) housekeeping require- ments of leases: Such device? have often been alluded to in demonstrating dominant economic power and leverage. See, e.g., Simpson v. Unton Oil Co., 377 U.S. 13 (1964) ; United States v. Loew’s, Inc., STL U.S. 38, 45 (1962). While the statistical mera 3 in the Webel here is ee the record fairly demonstrates what is a: K. .Er cbmmor acceptance, that both Texaco and oodrich aré among the giants of their respec- - tive edu and as such control large economic perenne. 8 ra new form of economic nne it will not declare that activity illegakper se. White Motor Co. v. United States, 372 U.S, 253, 281. (1963) ; see also Mr. Justice Goldberg’s. dissenting opinion ited States v. Arnold, 7) (Stewart, J. con- Schiinn'& Col, 388 US, 365, 886-86. (1 curring in part and dissenting in part). u The myriad figures present in our voluninons record sup- ‘port, a statistical. analysis which assumes dominant ¢conomic . power. Sin ar statistics have been fally discussed in the Shell “case. 360 at 479-82 & n 21-23. e din is sufficient to vote the following facts: Grood- rich. is ons ok ie largest rubber product manufacturers and its sales in 1954, one of the years on Which. the complaint is based, \Goekled 6500 million dollars. Texaco sales i in ‘the s same e ex- 7 aha but not alii of the 3 . 5 in Atlantic are presen resent to some degree here. Texaco, of course, controls the supply of oil and gas to its dealers, and the relatively heavy cost of constructing © and maintaining a modern service station enables Tex- the use of loans, short-term. leases, and equipment fi- nancing. However. we agree with Judge Wisdom that . - “the: dominance of a major oil company over its deal- ers comes from the leverage inherent in the structure and economies of the petroleum distribution * ae n 800 F. 2d at 481. N (b) Exercise of Dominant Economic Power. In our earlier opinion we concluded that on the whole record there was no substantial evidence that „ ‘Texaco had exercised controlling economic power over: its dealers, as the Commission ‘had found. Similarly, after careful review of the record, we. had coneluded that there was no basis for a finding of eoereion and 5 that rend as a whole the record demonstrated the con- ceeded one and one-half billion dallas The 30000 W sta- tions which might be subject to the sales cgommission plan constituted some 16.5% of all service stations in the United ; States. Filly, from 1982 to: 1956 Goodrich ‘sales to an Texaco | "> aedounts rose from 12.7 million dollars to 18.0 million dollars. We think these not- in requirements of a Statistical. analysis of dominant economic po Iten z i 0 4 ; . ,. We should make clear, however, our view that statistics u. isse dominant economic power. The statistical record supports oe dur Gorkclinsion that the: Commission has not eet, forth with gut. 2% ficient clarity an dequnte statistical record to ein He other findings. . 8 “hg and nothing’ said- ji the Commission since the } remand alters that conclusion if We can glean ‘nothing from the 3 ‘the | Supreme Court which alters the basic rule that à find- ing of ‘coetdion is ‘the threshold requirement of a determination of exereise of dominant ‘economic i power. As the Commission has ‘noted, it did not ask a the Supreme Court te review our holding that the record did not sustatm & finding of ebereion. Hqually | true is the fact that in the ‘Atlantic case the Seventh ‘Circuit’s ‘Sustaining of the Commission findings of coercion were not appealed; But, in spite-of this lack of challenge by Atlantic and by the ‘Commission in both cases, the Supreme Court in Atlantic did not ignore record evidence of Atlantic's coergive conduct. > Indeed, that Court was well aware that the coercion was found; to. have permeated the entire Atlantic pro- Samt contaminating: even its neutral conduct..,, Commission argues that Atlantic's e ivaiggravated: the: restraint imposed by the Sales“ mmission: plan- We do not 80 read : Atlantic. - m de ‘Supreme Court ‘concluded. that the sales Gominission plan was inherently. illegal hen en- ie , tered into by. a Major oil. company, it would have had no occasion to take cognizance of the coercive Ae practices and no remand of this case would have been required. Yet the Atlantic opinion is replete with references to these practices and we cannot escape the TConclusion that the bvert coercive acts practiced by Atlantie were deemed essential to the ultimate action of the Court. Tt is surely of some significance fhiat in -almost..cvery: page of the At nic. opinion there is some such reference, ¢.g., ‘ “overt. agts, overt: coercive pressures,” *diroet and overt Ne ate, l U.S. at esac fda | ep, ae ‘ — 1 7 plas be £7 58 5 he 31: he Commission now assert that since it dic not rely upon coercion as a basis for invalidating Texaco’s. = --. sales commission agreements,’ the Supreme: Court ac: tiort vacating our judgment implies’ a total rejection of ; -Texaco’s position. The combination of Atlantic s em- phasis on overt coereion, to which we have just al- luded, the failure of the Commission to challenge our vee prior holding on this issue when sseking review ane the absence of any reference to the subject in the” | Supreme Court Per Curiam opinion on remand all tend strongly to negate the Commissions argument. Had the Commission urged on the Supreme Court a per se rule of ilgakt) stemming from mere existence of economic power, its failure to- challenge our holding on absence of coertion would be understandable. ~ We have difficulty reconciling the Commission argu- ment with the fact of a remand in this case. If the Supreme Court viewed its holding in Atlantic as treating contractual arrangements between the oil company and, its dealers in and out of themselves ass giving rise o controlling economic power, and that mere ‘salésmanship without any Coereion constituted unlawful: exercise of such power, there would have been nothing to remand, The Supreme Court could have simply reversed and reinstated the Commission’s ~ order. 5 cers * Je / 0 717i n — ö Of course we realize, as did Judge Wisdom in, Shell, that. the Company's use of its economic power through the sales commission plan to cause its dealers to day sponsored TBA even; in the absence of overt - oercionꝰ? gan constitute an unfair method of competi- tion and a violation of Section 5, Shell at 482-83 ! ſemphasis added]. The Commission also recognizes this and therefore argues that each of the ndHeoereive Präctiets; rererred to in Atlantic are present in equal degres in this case. The Commission argues that the } 2 I Id 5 j Pa ti | ~ ¢ + * seh * + 1 — * 288-808 688383 - —— — 3 a 5 eee to these 5 in Atlantic. compels a. - conelusion that even the non-coereive practices arising from the — relationship constitute the exer- eise of economic power over dealers. The Commis- sion’s contentions m be weighed against the Ex- a miner's finding that Texaco dealers, unlike those of Atlantic and Shell, we free to accept or reject spon- bored products. This view of the- Examiner may have been influenced by the circunistance that only 5 8 2 Texaco dealers testified to - facts which would sustain a finding of coercive practices and more than 5 50 present and some former dealers ‘testified to the -. ¢ontrary..- 0 an In light of all this we do not ted Atta to em- ; “elude. that the Court was condemning these practices as per se illegal. They were indicative of Atlantic’s conduct, of a character not shown in this record, of marshalling “its full economic power in a continuing campaign to force its dealers and wholesalers to. buy Goodyear products, 381 * 8. at 871. A few e will suffice: @ Sales Practices. In Atlantic, the oil company “was to instruct its salesmen to urge dealers 0 “vigorously”? represent Goodyear, and to cooperate with and assist” Goodyear in its efforts to promote, and increase the 10 sale” by Atlantic dealers of Goodyear products. . 381 1 U. S. at 365. The Commission characterizes the evidence here as substantially identical. Vet the Ex- aminer was ‘satisfied that Texaco poliey since at least 1948 has been to permit each dealer to choose What: ever brand TBA he desires.” see 7 1 85 ———— . — 1 ee! 25 e ee deviate e e ad fee ae i Fe rer Faun Goodrich tory . Au e ing of TBA aes 8 But it should be % — double teaming ’ golicitation of Atlantic e out- lets by representatives of both convert them to Goodyear products. to call on the dealers together, orders, furnish initial price lists and project future quotas of purchases of. Good - * — * ‘ 2 5 notice to the tire companies that a new station was about to become operable—were isolated and sporadic practices, not a regular or even frequent practice as | was the case with Atiantic's operations. They ap- Peared in Atlantic in the context of an entire system designed to overtly eoerée its dealers. This is not the state of the record Before us: : (3) Dealer Policing and Credit Cards. In Atlantic the understood that we will render equal assistance to all deal- ers in setting u and maintaining his own basic TBA stock assortment * Invento e A these lines regardless of the brand of mercha i „[The Inventory Guide] is not applied whatso- that would} lied 1 krgeden te purchase ever wo! im an 8 N ro _ such brands and quantities of TBA merchandise us he 8 g : Supreme Court was confronted with evidence that Atlantic; imposed quotas on dealers and effectively policed them by the use of a reporting system: of purchases and sales of TBA. In the original appeal to this Court, the Commission contended that the ‘quota and policing system were also used by Texaco. In the appeal the, Commission has retreated from this position. As to credit eard policy, the Exam- — iner carefully distinguished the Atlantic record from the instant record and significantly found that Texaco does permit dealer to charge non aponsored TBA on its credit cards.” (4) Geographical ‘Supply Points. In Atlantic; Good- year required that Atlantic assign its dealers sk | single point of TBA supply. This. geographical divi- sion of supply points is not present in our record and, indeed, the Examiner found that as to sponsored IBA sales, ‘each ‘dealer did not by exclusively from, and was not limited to, any particular supply point ; but Was free to deal with any sche he chose. These few examples demonstrate a different set of facts between the Atlantic record and this case. On the basis of the record before us we cannot eonclude that Texaco exploited its service station market il- legally for the benefit of itself and Goodrich. In short, we do not, find that Texaco used its ‘ontrolling etio: nomie power to = its dealers to pares, spon- sored TBA. ! . — — Since 1955 Mee pactive, 10 to permit deferred pay- ment of sponsored TBA on ‘credit. us, three months is : e ee e cee six months of purchases Water $50 of more. The. Examiner x held. that this limitation of payment to sponsored TBA was altogether reaponable | tracts must result. in competitive effects: TTT (e) bees Efrecte. e 505 “Atlanti¢’s third Yequirenient for Sing a Sten the e market. d We have previot 8 f 1 . on the issue of an mpetitive e ffects, W. uch evidence was iy coming. In. our prior review of this case we ‘also found. that evidence of anticom itive. eden Was (1) Extensive economic 8 oft e com- petitive effect based on examination k. the entire TBA market is unnecessary. (2) Evidence of eeonomic justifieation or benefit to the parties concerned is immaterial. ‘ ([.) It is sufficient when the ea og affe ted a W om portion of e 8 affec ‘ This, of course, “explains the Cate e 3 that the TBA system is an “inherently anticompeti- tive” device from which “competitive injury must result.“ This is simply a renewed intimation of a per se rule in Atlantic and needs little discussion since wé have already rejected that reading: It is true, of course, that the guidelines suggested by. the Commission are referred to in the Atlantic opinion, 6.9. 381 U.S. at 370-371: But ‘it is also true, as Judge Wisdom pointed out in his ion of these guide: lines, that the Court in Atlantic looked to the full reeord for examples of anticompetitive , effects. 360 F. 2d at 483. Indeed, the Court was very clear on this point: per Sits 2 5 te The 50 tie effects’ of this program are clear on the record and render unnecessary bite | extensive economic analysis of market percent- ages O ma justifications e 2 US, ta Rind the Fifth Circuit’s caveat 61 an erlap. chern a discussion of anticompetitive. effects and the exercise of dominant economic power, we proceed to examine the record before us. As Atlantic noted, the question is whether the TBA sys- tem “impaired competition at three levels [manufac- turing, wholesaling, and retailing] of the tires, bat- teries and accessories industry,” id. at 370. And, of . course, it goes without saying that the type of com- petition at these levels interbrand and intrabrand— * is highly relevant. (a) Interbrand Competition Under the TBA. system interbrand competition manifests itself, if at all, most perceptively at the _ wholesale level. We recognize that wholesalers of competing TBA brands may well be substa Hy _° fimited in selling their products to service stations. under contract’ with major oil companies. The TBA. . system may deprive retailers of their freedom of choice as to the TBA products they may choose. Such competitive effects also reach back to the manufac- turing level. For example, to the extent that whole- salers are unable to sell their products to service out- lets, the manufacturers may suffer injury. To that 7 extent Producers distribution systems may be . (4 Sep, Klaus, „ 5 N the Salés-Commission Bytom of - | “Tires, B and .Accessories Distribution in Retrospect: 42. or A Incisive Dusent, 4 Teras L. Rev. 890, 911 (1966). = | 7 = , ritories between Goodyear 8 the 0 manufacturers involved: Firestone and Goodyear were excluded from selling to Atlantic’s: dealers in each other’s territories, 381 U.. at 370. Plowing di- “rectly from this was the further, adverse effect that Atlantic dealers could only buy at the prices desig- -, pated by supplier to whom the territory häd been allocated, ibid Finally, there: was little doubt but that , the combination of these and other practices in the Atlantic vecord, including, the resort to overt ebertion, had the drastic anticompetitive effeet of alnost com- pletely foreclosing the market to Altanic's on re. tailers and wholesalers who desired to sell brands other than sponsored products and to wholesalers and manufacturers of men a un ee desires, We have. earlier ‘noted the: fact: that the por’ before us is devoid of evidence disclosing any form of territorial division of markets on the ‘part: of the sponsored manufacturers. And we have also referred to the long standing Texaco policy that Texaco dealers are free to purchase any brand of TBA which they desire to sell. See note 12, supra. Similarly, there is no evidence that any form of price dictation oceurred. But the most significant eridence on the question of interbrand anticompetitive effects concerns the testi- mony of Texaco dealers and sponsored and gompeting suppliers, The Commission relies u ug kg apple 91 former Texaco Dae and competing to the effect that nonsponsored TBA sins be sold ae to Texaco dealers because of the dealer’ s un un e ing that they were required to purchase, sai Wored TBA. The Commission cbrroborutes this e with representative evidence tat in certain Texaco distriets the percentage of dealers who carried, spon- sored TBA ranges from 70% t0 80%. ‘This s eS ks ke a ae | : and these fgores were rejebted by the Exainiher i in ta original deèision and by the first Commissién decision: ‘The Examiner’s modification of this position, which as We noted was made with no new evidence, was affirmed Bc the séeond: Commission decision, and this Court re- _, jected: those findings on the prior appeal as unsup- ported in the record. Nothing has developed to change duk view, and indeed on remand the Commission ‘has stricken the Examiner's finding. The Commission now limits its characterization of the testimony of com- 9 suppliers to ‘a statement that practically all of the representatives of the competitors of Goodrich called as ‘witnesses testified” that they were foreclosed From thé Texaco service station market. We simply + cannot regard this as representative 755 such a con- celusion is not supported by substantial evidence, except in isl ted instances which were generally con- tradicted by overwhelming. rebuttal evidence. Nor ¢an we accept the Commission view that the rebuttal testi- ss mony is to. be discounted because witnesses are under 1 sure from Texas. A finding of pressure on itnesses before a ‘tribunal. is not one to be li ghtly\in- 5 forred- and ought not be made. without evidence of — some kind; none as wee sod est Commission on. |. this score , : : nth y fo e dere Competition + Susy i | . sini or ion, intrabrand, is ‘the | “ésult of the ‘supply point, system notell in \ C. ae" adverse anticom, etitive effects. are simi- 7560 a {Teoh . i Oty: — in interbr A i com Petition pricing, t ko oreclosure, and Full line forcing.” ; . Oe ay PEL 45 i 5 me Atlantia. ani, be Circuit, found that, f. Goodyear rio paid thet. d refuse “to. 9 1 ee ee in- | nk 80 . 2 mE. 2d at 308. + 4 4 : : 5 é ° 8 5 , . =e . . a i : — a F . nge bering tbe point, we have. alzpady, noted that the record in, the instant cage simply,,cannot be said to reflect substantial evidenge to support a finding that. these practices exist in a measure adequate to demonstrate that the Texaco TBA contract causes : verse anticompetitive. effects. We. ee bred: “4 5 chere e bstantial ence, wi _ } lich POLST remandin, for Vene of a nticomipeti- ~“enio e and that it is enough 5 eee Portion ‘of commerce is affected. un- : ey e rationale of Atlantic. Surely there i 18 no lin i ee Obscure or. paca a remand E e us absence of, crue de e mand directs a further. inquiry for And. e find no basis for tr ing arTying a it 20 e ali 50 tra and ine uitable to bar ‘Atiantic and — 0 . 8 1 very much like Texaco in broad’ online, from uses of the sales commission plan while per hg Texaco to pontinug,, . We, agree that it Would be . deralebon of the Commis: - sion's obligations, provided that all three wers guilty of substantially equal violations of section 5. But sim- “ply because Texaco is in the same line of business does 5 08 not mean it must suffer the pain of the misdeeds-of other oil companies; this would indeed by guilt by a- sociation. We conclude that the record simply does not support a finding that Texaco violated the Act. We therefore hold that while the record shows Jexaco in- deed has dominant economic Dot, it is N defi- 40 cient’ on the crucial issues of exercise ot that power and subsequent anticompetitive elke 0 OONCLUSoNTTL he | One. course ih to us would be to yes this case once. again to the Commission to permit it to de- velop additional evidence for the record“ but the Commission and Examiner have had abundant oppor- tunity—and direct mandate—to do this in the Past and have not done so. We think the time hay now come to terminate these protracted proceedings and 5 dismiss the complaint. We recognize that the Commis- sion’s obligations and the public interesfft preserving competition are not to be lightly dealt with but the Commission has now had mope than an adequate op- portunity. to develop a record in support of its section 5 contentions over a period of fourteen years. Accord yingly, the Commission order under review is set aside and remanded to the Commission with directions to dismiss the complaint. . | Reversed end Remanded. eee eee ‘farther proceed ö ings it would have been imperative to make clear our view that the coercion aspect of the Commission order has no basis in law, or the record. Since we have twice determined there is no basis way that ‘Texaco’ overtly coerced any substantial number of dealers o n 5 e ee e ne APPENDIX 5 Nee Srares ap 1 . ba. TRADE _CoMMISSION | Commissioners: 3 | | Paul Rand Dat Chairman Philip Elman | Everette Macintyre. | n John R. Reilly FF Mary Gardiner Jones B e No. 6485 5 In the Matter of The B. F. dodrich ee and 4 The Texas Company, corporations. 7 5 OPINION OF rin COMMISSION — 725 5 By Commissioner Elman: * ies On April 15; 1968, the Gus Bain held: unlawful . as an unfair method of ooinpbtition in violation of Section 5 of the Federal Trade Commission Act* a sales ission agreement between The B. F.Good- ich Company (Goodrich) and Texaco, Ine 18 Cufexabo“). Under that agreement Goodrich’ pays - Texaco a commissio eee the sale of Good- j > (“TBA”) to ite Letall Gass dealers. By its order, the Commission enjoined Goodrich ard Texaco from carrying out their agreement and from performing | ing into sales commission: pista pitt 1 Sectio 5 provides in relsyant part: Fr yap th as en kair methods of Gonipetition. in* oommeroe, ina infair ae ee in scontmercs, are declared ~ / 5 42. any other companies. On review, the Court of Appeals fror the District of Columbia Circuit set aside the Commission's order and directed the Commission to dismiss the complaint. Texaco, Inc: v. F. T. C., 336 F. 2d 754 (D.C. Cir. 1964). On June 7, 1965, the Supreme Court granted certiorari, vacated the judg- ment of the Court of Appeals, and directed. that the case be remanded to the Commission “for further | proceedings, without the participation of Chairman Dixon, in light of Atlantic Refining Co. v. Federal Trade Comm'n, [381 U.S, 357 (1965) J.“ r Texaco, Inc., 381 U.S. 739, 740. In Atlantic, the Supreme Court upheld (1). the Commission’s decision that a sales commission agree- ment between Atlantic Refining Company and Good- year Tire & Rubber Company was an unfair method of competition, ‘atid’ (2) the Commission's order pro- hibiting Atlantie and Goodyear from carrying out their agreement and from performing or entering into any other sales commission agreements. The Commis- sion, without the participation: of Chairman Dixon and / Commissioner MacIntyre, has reviewed afresh the ene ee, Sars in tlie light of the Supreme Oourt's decision in Atlantic. We have eon- | dude, far the reasons set forth below, that the sales commission Agreement: involved here is, in its funda- mental operation and effect, indistinguishable from __ the ons held unlawful in Atlantic, and that an order FFC Court in Atlan Lene betenden eee „ ner ct ob OS Ive | i i ae ah 250 7 . ‘ 5 51 P tare per ty ast) „641671419 init » 3 i W gore T° As gee ie ge c zdbebagip WO hi ai and Atlantic requires a brief description. of the events leading to this ramand. This is one, of three companion ee | fas 2 8 q . : . — : . . 43 | ate method of — on, sales emed ön arrange ments between major rubber compatiies and 2 oil companies. In Goodyear Tire & Rabbér Co 58 P. F. O. 309, decided Mareh 9, 1961, we Commission entered an order ‘prohibiting Goqdyeat and Atlantic” From employing sales ebiniission plans On the same dap, in Firestone Tire & Rubber Co. „588 F. T. G. 371, an identical order was entered against Firestone and Pore Shell Oil Company. The Commission’s order in Good- 15 "year has been affirmed by the Supreme Court. Atlan- tio Refming Co. v. F. T. C., 381 US. 357; affirming’ F. 2d 394 (7th Cir. 1964)! An appeal from thé’ Com: ae mission’s order in Firestone is pending ‘inthe Court | ee ot Appeals for the Fifth Cirouit. „ Blad n In both Goodyear and Firestone the Oomm05 5 reasoning was identical: It upheld the hearing’ ex- aminer's finding that the oil éompaniés used overt coereive tacties to foree their dealers to Duy’ the spon- sored rubber companies’ TBA products: Büt the Com- mission specifically declined to fest its deeisionis upon a finding of coercion or to limit its orders to injaine- tions against coercive täbties. Instead, it enaanihed th oline dealers is dependent upon the gbd will of their oil company: has sufficient 6sonoiniv’ power with re- speet to its * * distributors to ease sm to pur- chase substantial quantities of sponsored TBA even without the use of overt: ooereive tactidgs 1 (58 F. T. C. at 364.65, 407) The Commmissien regarded vert acts of ooereioh us mere Symptoms of à more fundamental restraint of trade inherent in the sales commission itself (58 FTC. at 348, 398). Aialyaing „ the actual operation of the sales eémmission plan in the context of the economic relationship between the ol N and its * the ä con- unique degree to which the esonomic enigtenee of gas- | major oil company suppliers, and concluded that the 12 — 3 that the Saen effects of: the aan commission plan were like those of an illegal tying ar- ä | rangement-sié Presents a classic example of the use of ‘economic power in one market (here, gasoline dis- tribution) to destroy competition in another market CBA distribution)” (58 F.. 0. at 367; see 58 F-T.0. at 406) Sinee the: amount of commerce affected was, not insubstantial’, the eee were held unlawful. However, in this proceeding. buvaleing. the Good- 4 rich-Texaco sales commission plan, the Commission did not reach the same result. On the same day that it re its orders in Goodyear, and Firestone, the Com- mission held that although „Texaco has sufficient eco- nomie power over its) wholesale and retail petroleum distributors to: them to purchase substantial amounts of sponsdred TBA even without the use of overt. coercive. tactics“, the record did not contain aes “sufficient: market data to enable the Commission to assess the competitive effects. of the sales commission method of distributing TBA“. The case Was remanded to the hearing examiner for the taking of additional a evidence on that issue. B. F. Ane Co., 58 F. J. C. 1176, 1178-79, 1183. 3 This disposition was, 0 the. very 3 e Tn: Goodyear, the Commission found that the com- - petitive fleet of the sales cominission plan, like a tying arangement, was the foreclosure of the substann tial IBA marketing. outlets represented by Atlantie“s dealers. This, finding was based upon competing : wholesglers”.,testimony that they were unable to sell to Atlantig dealers who feared: that Atlantic would ook with disfavor upon their purchase of any but At- lantie- sponsored TBA products. Having made this finding, the Commission made no analysis of market N data“ other than to observe that the amount of com- 1 45 ee insubstantial” since Atlantic had sold about, 350 million, in sponsored TBA prod- ue during the period 195-1906 (58 F. T. C. at 359 - 66.) Ly Goodrich the. Commission did pot reject the hearing examiner’s.. acceptance -of the testimony of competing wholesalers regarding foxeclosure of Tex- aco outlets, which was similar to, and as substantial as, that in Goodyear. The amount of commerce af, fected. in Goodrich was considerably more substantial than that in Goodyear: ir the fivetyear period 1952-1956 Texaco sold more than 8245 million in sponsored | TBA, almost five times as much as was involved in ¢ ——. Goodyear during a six-year period. What additional „market data was required is unclear. On remand, after taking further evidence, the hear- ing examiner found that the sales commission plans had been shown to be an unfair method of competi- tion, and entered an order identical to those previously entered in Goodyear and Firestone. An appéal was again taken to the ‘Commission. By that time, the coinposition of the: Commission, had changed and only one of the Commissioners (Commissioner Anderson) who had participated, in the Commission’s earlier de- eision remained on the Commission. On this second appeal, to’ the Commission, much of the evidence, in- troduced on the remand was challenged as incompetent or immaterial. The Commission concluded. that the . —ehallenged evidence was unnecesgary to its decision, 1 and, wit with cen wine Anderson dissenting, upheld In ein Firestone the: on did consider market share dita relating to the entire far TBA, including data relating to other outlets for TBA other than service stations, and other methods of distributing TBA oth than sales commission plans. But none of this info was present in Goodyear, | 8 and so presumably this was n 8 deemed critical by: the Commissi to a finding of illegality. 4 (a 5 „ dhe elpstnt order.“ Th itd view, the legal principles | r which! the sales commission Plans were held un- lawful in Goodyear and Firestone were equally appli- : able to the Goodrich record, even without the chal- lenged evidenes' (B. F. Goodrich Oo., Docket 6485, order issued April 15, 1963). On appeal, the Court of Appeals for the District of. ‘Oolumbia Circuit réversed and ordered that the com- Plaint be distmissed.“ After holding that Chairman Dixon was ‘barred from participating in the decision of the case, the Court of Appeals went on to reject the : Commission“ 8 decision on the merits. It rejected the examiner’s finding that Texaco employed coercive tacties and then held that the Commission erred in concluding’ that . has sufficient economie power _. over its dealers, without the use of coercive tactics, to cause them to buy substantial quantities of Goodrich TBA.“ (336 F. 2d at 762.) Instead, it found that Tetaco dealers are quite free to accept or reject”’ the oil company’s “recommendation” to purchase 2 sponsored TBA products (id. at 763). 4 The fundamental premise underlying this conelu- sion’ was the Court of Appeals’ finding that there was 10 basis in this record for the Commission's conelu- Fon that Texatb as controlling economic power over its dealers” ‘and that Texaco's “contracts with [its] dealers do not give rise” to an inference that it did. (id; at 762.) In the court's view, the promotional bser vibes performed by Texaco were indistinguishable from, and no less lawful than, conventional salesman- ship to wholly independent purchasers. 23222 — i " e agree that the evidence challenged on the secend appeal to the Commigsion ig unnecessary. to our decision and have e eee eee of thie, hearing exentineg based upon it. 1 Ino. v. F. T. O., 336 F. 2d 754 4 Cir. 1964). ee This approach conflicted with that of the Court,of Appeals for the, Seyanth, Circuit, yhjch: affirmed, the ommission’s order in Goodyear: For the, Sepentn pany 's recommendations under the sales oom ifi plan was thé economic power which: the gil oH over its dealers and which derived from the . ionshi yeen them. In its view, the — power was not at all dependent upon coercive tacties. „ the xeystone to that power could be found in the lease’ and équiptnent Iba von D Goodyear Tire & Rüber Oo. v. FP.0: Cir. 1964). Hanh ant he Seventh Circuit: upheld the Oommission’ finding of soertioti: the District of Cobumbis Circuit rejected it. The evi. 747947 4 1528117 dence of coercion in Tieaoo was no less substantial than that in Atlantio-Goodyear. The different results on appeal appear attributable to two factors: (i) the Seventh Circui deferred o the bearing eraminer'e assessment of the witnesses’ credi- billy, and (2) while only a fer dealer witnessistectified to coercéve tactics and a considerably larger number of dealers calted by respondents testified to the contrary, the Seventh Cir- testimony: in light of the economic dependency of dealers upon the oll company. Review in the Supreme Court of the finding of coercion: was not sought in Atlantic. To the‘ extent respond- ants, seek 10 distinguish this cage from Atlantic on the Presence or absence of coercion, we conclude that no such factual dis- tinction exists; we do not disturb the examiner's finding’ of - coercion!’ Which as based essentially on. Dia assessment of the credibility of the witnesses, Universal Camera Corp. v. NLRB, 340 U.S. 474, 495-96. However, as we point out below, the fun- .. ‘damental issue here—the legality of ssles-commission agree: ments between major oil and major rubber companies—does not torn be!» finding of coercion; ‘and we do not rest our decision upon it. ...... ͤ 8 „ . f power Atlantic 8 7. 4 304 (7th 48 tract with their short term and cancéllation provi- siens.’” (id.) Viewed in the context of these provisions, the “service station dealer i is more of an eco- nomie derf than a busiziessman ‘free to purchase the TBA ‘of his choice.” (Ibid.) Reaching an opposite conclusion from that of the District of Columbia Cir- aenit in Texaco, the. Seventh Cireuit held (td. at 401): “ Atlantic’ s power to cause its dealers to carry either Goodyear. or Firestone TBA does not depend upon overt coercive methods: The 5 of facts surrounding the relationship between the oil company and the dealers points to one conclusion: the oil company is able to exert sufficient economic power over its dealers so that for all practical purposes they are re- quired to carry sponsored TBA. Atlantic says that its influence over its deal- ers to purchase red TBA short of force, threat, or intimidation is lawful; that it may i socom, teehee quality TBA to its dealers; and that such action serves a légitimate business — in the promotion of the sale of gasoline. ould be a- persuasive argument exce for the dealers’ economic dependency upon oil company. In that Sareea sagem = is tantamount to command. ¢ rt practi Rs 2 phisticated im dds of the — into Spo TBA are as effectual : as deere e covenants and open threats. en Court teview was sought in both Texaco gpd ‘Atlantic-Goodyear. The Commission, arguing that ‘different: dispositions of the two cases based narrow factual distinctions would be inapprop io, framed the:issue presented by both cases in iden | ae ie ee An eat ah method of competition “in “yiolation of Section 5 of the Federal Trade ‘Commission _— for a — rubber * * . * a 10 > : and a major oil company | to * into — agree- ment under which ‘the oil ome for a commission, sponsors th bf the rub- ber compatty’s products to the ‘il Tangent a. In both cases the Commission wigéd? ite bt tinea . rationale reflected by the Commission and Seventh Cireuit decisions in Goodyear: (1) Because of he gasoline dealer’s singular dependence upon, and sub- servience to, his major oil company supplier, the ol company had the power to require its dedlers to pur- chase substantial quantities of TBA without overt coercion; (2) the promotional services whieh the ‘oil ‘company was obligated to, and did, perform under the sales commission agreement constituted the exer- eise of that power for the benefit of the sponsored : TBA supplier; and (3) as a result, the. effect of ‘the: sales commission plan is, like that of a tying agree- 0 ment, foreclosing competing non-sponsoring e from the substantial market of the e en oil company’s dealers. The Supreme Court reviewed the Alinatte Goodyear case for the purpose of resolving the apparent con- flietꝰ with Texaco (881 U. S. at 363). The ‘Cotrt af- firmed the Seventh Circuit's decision, and a week later vacated the judgment of the District of Colum-. bia Circuit in Teaaco and ordered that the case be remanded to the Commission for reconsideration in light of the decision in Atlantic Bis! 7.0. v. Teraco, Inc., 381 U.8. 739). F. T. B. . Texaco, Inc., opr, eise Ne 4 WHE ot Cor tiorari to the United Supreme Court of Appeals for the Dis- triot of Columbia Cirenit, P. 25 Atlantic Refining Co. v. T. T. C., supra, Brief for the Federal Trade Commission, p. 2. a 0 * Atlantic Refining 001 v. F. T. C., mipra, Brief for Federal f Trade Commission, pp. 52-34; F. T. O. v. Teraco, Ina, supra, . e eee „ Mui lh e he: 1 . sin 5 n to he oni’ g 7 this re- Court's decision in Atlantic upon N dis- “position ot this casa: gr 0 % a) Reading its opinion against the ee Set ‘forth above, Me can, draw. only one conclusion: In up- holding the Seventh Cireuit and Commission decisions, the Supreme Court approyed thein broad rationale, a Proceeding: What light is cast by the Supreme rejected the approach taken by the Distriet of Colum- bia, Circuit in this case, and enunciated a rule w. Which | transoends the confines. of the, particular facts in- >. volved in Atlantis. In the Court’s view, while coercive ‘practions aggravate the restraint imposed by the Sales . commission Plan,. it is the oil company's power over its dealers, derived from the contractual relationship between them, and. the utilization of that power 7 through, the ‘performance of the promotional services : required by the sales commission agreement, which renders-the sales commission plan unlaw fu 2 Tha starting point for the Supfeme Corts analy- Sis, like the Seventh Girenit . is, reflected. in its em- Pfhasis upon the cih om a gonsiderable economic © | = Over; ite, denies . 3 a 4 rie re te 4 7 ahn 7. 6 [Atlantic and its dealers} simply do not ber. : (gain, ag equals,: Among the 2 of need | oy dre . ad ~ * . * * id ° * . 8 8 * . ® * * a ° . . °° | : — ad 2 . | A R 1 * * * we ae oy ities A : In this: bt et and oberdgvt merely bolstered“ the Jever which re ulted rem a Ne -econontic power: (id. nt, * r : mendations” Pra a. lee an gan ays chaser “free to accept or-reject”” hem. og ager | 5 ‘the Court netepted tlie Copia e Seventh ‘Cirenit’s chare 50 0 nit conttiet, whieh’ er eo 6 compart) to Use its power over its Genlers to-sell tis sponsored rubber companies TBA, had the same Lecentral competitive chardtteristic” as'a tying agree- ment the utilization of sebiomie power in one - market to curtail ‘eompétition in another“. (Id. at 369.) Indeed, in the Court’s view, that. tn. e : if ‘not sole purpose. Under the sales conimission plan (as the C g the oil company, without making any westen in Ae facilities or TBA invertiry;! and with . out relieving the TBA. supplier af the burden gf sales, distribution, and Service, is e eee ee ; ",Gommmissions' und gee BC sobiding!s Adebrdingly, sene the ie cision,, 7 5 the Court 6 described as follows 7 51 at ao e tes rite err The. a(Soriauiagion sine dered the coervive * Practices to be symptomatic of a more funda- mental restraint of trade and found the: sales- commission plan illegal in itself as ‘a classic „example of the use of economic power in one ; At the same i the Supreme Court dispelled the ambiguities , generated by the Commission’s first de- _ Gision in this proceeding. An assessment. of the com- petitive effects of, the sales commission plan does not require an analysis of market data’’. Since the testi- mony only confirmed what was essentially implicit in 2 between the oil company and its deal- market to destroy competition in another , Ae marke „„ „ 5 [Emphasis supplied. I ers that the oil company's sponsorship under the. - sales commission plan has the competitive effect of as foreclosing: non-sponsored TBA suppliers from access to the market represented by the oil company’s deal- 8 ers- Hfurther market analysis is unnecegsary. It is sufficient to show that a “not anaubstantial e 7 ecommerce is affected“ ‘ ee. 5 wre . c= ; 7 “Ft de ein ff thi A t (il al 10 5 0 on tend Atlantio ’ contend’ that the Commission les-commission plan, ex- . 7 ju ie ae this plan is eile to that of a On SEE fi — 8 f . t this Osean ' a bstantia? portion doch mere . r el gohn Hun . ye i 2 fata. more extensive upon the Com- n h-Tewaco to take eyi- 87 en Ade, Ke Ca: 0 ; PIU; supra, Brief of Petitioner . Atlantic Refining Com- : pany, Pp. sah sis u. 48, 85 — 5 0 here Nane for aig p tlw or economic — oo, Fin es batteries and accessories. . * . 2 7 21 3 8 . ‘ mission plan, and the . of h plan in foreclosing - noncsp IBA supplierz from the Atlantic service station market. Atlantic "was the first: case before the Court involving a chal- enge to the, sales commission plan; it presented for 3 mee review Commission decision whose r iorale would ee render unlawful the sales commission plans selves, W e wig? ait major 7 a i: . stuff ous of which — — emerge“, so as to determine Swhether they are. naked restraints: of trade with. no purpose except stifling 8 competition” and whether they may be too dangerous = to sanction (White Motor Co. v. United States, 372 U.S. 28, 263). But, like the Commission, the Court looked upon the dramatic aspects of Atlantico = ~. “symptomatic”? of a broader Problem... Haying x amined, as reflected by the record in . the _ dangers presented hy sales n Plans Tessentially anticompetitive character, 2 he — demwonstrakio bf the abuses. Phich may. attend their. | “nse, the Court, concluded. mofe generally that the sales commission plan itself, amountls] ito Dari that permits suppliers at tixes, batteries. iad Serre = sories, through the use of oil; m L e a effectively, sev up large markets, se Se “Set night ato font ee 37). ensequentiy, . he: Oqurt’s wltix at eoneern.was : «Bak limited. to the-aales com on plan. nga Atlantia, but wag e the ructire effect — eon eee een . ee widespread — . 3 1 ‘ - : ° * & ) ‘ | 4 5 - : 5 - +>: ~ 4 * „ 2 “(tld l Wee Lale Gb hmiksdet f ‘contracts iy mager tl cofäpties und [TBA] supphers (bid. : The is concern ift Atlantic with the Anger Presented by the “widespread use” of the shles ‘com: mirszon plans b nin jor oi and TBA Suppliers is espe: | dialty ‘significant: Atlantic was not, as the Cojirt was Vell aware, an isclatsd eise. In Teraco, n which 4 ion for certiorzIi was pe. at the time of the Cotirt’s: détision in ‘Atlantic? the record showed that ‘entéred into sales commissien plans with three of thé leading rubber ‘companies Goodrich; Firestone and’ under an agreetmefit instituted about the time this proceeding began, U.S: Rubber Company. Goodrich / de der bade commilsion plans with Contitiental Oi ~ Company: and of tit oil companies as well. The Fire- ae | stone and Goodyear- Atlantic cases show that both , _ « G@dodyear’ and Firestone have sales commission plans with Shell: and ‘Atlantic; ‘that in addition, Goodyear has sales commission plans with Sinclair Refining Company, Richfeld Oil Company, and a number of other oi e leg; aud that Firestone, in addition Bon plan with Texaco, has sales ts With Union Oil Company, . 0 station dealer ‘tle Arrected by these Ale Bitsion plans bortstittite a vast markét for eee ee eee 2 — — — | ob ge p ane major ol ages gie, 2. 5 . constitutes in itself m acute fer 2oinpetitinin, It was in this Gonteaxt! that e — ͤ— Rasta invotedd there; concluded that genérally the ue ot the sales plan by tnigor ol companite alld. major „ re economic advantages, | * 34 188 . i mach by nat the = Court did, as by: what it seid, hig Courts armee of’ the ‘Commission’s order prohibifing outright” the use of Sales: commission plaris By Atlantic and Gbod- fear not unhy between theingelves' but with other com- Panies had ‘brosid vompétitive consetuonces ie both the TBA and petroleum markets. If the Court’d:dovision - were to be read as limiting the Commission’ in its evaluation of other sales commission plans to the specific. factual circumstances irrvolved in ‘Atlantic, one major oil and one major rubber company Would be prohibited: not only” from further engaging in coercive. tactic, but from, using a sales commission plan which its 2 competitors 18573 ill be free tons. bog, „For e the provent time, it ene, J ° - . a y 50 2 3 * — stantial commissions tor the = of TBA peer 7 i do its service stations. Atlantic, a major oil company but substantially smaller than Texaco, is barred from the same.economic opportunity, no matter how -seru- pulously it might refrain from ¢oércive tactics in: the future. phar saneeneio Kine Ae dosebtnctani pate: lope eon Sales agreements. stressed by the Court +. 0 ‘Atlantic also render Texaco dealers economically ~, subservient; to, and. dependent upon, Texaco; and its sales commission plans require Texaco to perform the same kind of Vigorous. promotional campaign’ de- ’. geribed in Atlantic. To bar only Atlantie and Good- oe year from the use of the sales commission plan would ° thus not only ereate a harmful ,ompétitive imbalance „en the: leading armes of the tao: industries, ft 75 would be arbitrary and inequitable. 2 25 The Supreme Court was informed of the harmfül \ and anemalo consequence: of-a rule confined to the particular facts of Atlantic.” We find nothing ‘which - would would permit us to read the Court’s’ opinion, or its 7 8 Tha’ Government in its Petition for certioras} in Pens, told the Court: Sven if the cases [Atlantic and Texaco] could be dis- 11 nap’ on: nals: Doata, Aion quality Af xitrensteet; ‘would uatic ei r ce r - -easentinlly the same ice ‘their 3 a Th foe mga fo wing V 7 F. ö Le, 81 US,., ai (Petition for A Writ ‘ot — etd 111558 i 7 Gar * fas tom “bite —9 2 N ene 6h x iss! in e Wen 11 8 of Wilt. ide t tuedsiow » r Company, p. 34. ae: 1 * 5 Set onder u thi sans — rennt 1 f ‘an nis Nn rite eo i eee . ot £8 N , reais * An onr view the Supreme ‘Court’s decition in Ke | lantio compels the conclusion that 1 the pxaco-Good- sant wi mt mpetition and that Tergeo Goodrich ould be prölüäbited, is ‘ Atlantic and ‘Goodyear, m performing or ¢ ring into 0 other sales e e ‘The Court 2 ben us Ut ft i. 2 ber 188 ff Fear, Texaco had approximately six times am many Contract. aud, lese dealers as Atlantic. “Moreover, as we have noted, in Atlantic the total sales to Atlantie dealers of Goodyear and Firestone — products for the six-year perit June 1950-June 1956 amounted to about $50 m ion sold almost 860 million in T8 products to Texaco — * Ie etiam (pe e an a C station). nae Shab | J either owned or lensed. diere end; in tum. ed by: if ‘0 the f ee e . to as D. stations) ‘is * bim from someotie othet 5 eae 1 10 1 15 "3 . dealert in the year 1086 alone. In the five-year’ period 1952-1956, the of the sponsored Goodrich and Firestone TBA Ter. oo mounted to e r 10 e tf, eta dealers, is no tha 9 ti t „ who cons mae 42 5 station TRA outlets short term 5 5 — renewable on a 1 hai al ee t year’s end upon ten days ties of either a eee the same dad et general “ho War e requirements con- 2 pie ar eee, 7 ean ! a 8 cancella- ° “Contract dealers”, who own "hel stations or lease them “from hind partie, 1 . 888 their pumps and other equipment from Texaco. Both lessee, pi ma Hs yt thir gasoline pursuant ) to an ‘‘Agreement of remy Rasen, sein Ta mum i Tre en eben tr ph e e pene ° on a year-to-year ‘basis, terminable at year's pari po and Sn Ww 5 * . ae : . ‘ ‘ * PA. : 50 55 * of ways, that Texaco, Whose 1 the. dealer sonst court, has a strong interest in, their purehase of Ale sponsored: TBA, products, ldo’ eee, begins-its campaign, on, behalf of the sponsored products: Texaco personnel, when interviewing. a Even before the: desler thas ton orp Fase Pro: spective dealers for mew ar established, serries Stations; adviaed. den of, the, importance of, TBA, - recommending the TBA products of Goodrich and a 5 ; Onee the dealer. is selected, and before. he. a his station, Texaco frequently informs Good- ae : rich and Firestone of the proepective.opening. of his ; station, affording Goodrich and Firestone a bead . start over competitors: in the initiation of their awn sales campaign on behalf of their products. There after, Texaco, often with the direct assistance and partieipation of the rubber companies, maintains a continuous campaign designed te induce the dealer to pureliase. the sponsored TBA P produstä. Dealer meetings and training courses designed to, educate the dealer in the. use of \TBA, produsts Utilize; the products of the sponsored | companies. companies. Texaco par- ttieipates in the. sponsored? companies, SO and cpeeial sales, promotional and advertiging campaigns. - Texaco: publications sent to its daalers carry, dis- plays of the sponsored TBA produets. And, ee most effective of all, saree a Salesman. e ] carries the message in ate wi the dealers. In this regard, it ig important: remem- ee ee e 5 Dinyolved: in pushing sponsored ) 8 ; also play a eritinal role in the, annual dealer e ations and in the eee dealer a, lease and contractual, relations: with Peraga 458 40 be'xenewed. At the sante time, Perseo, in mak. * ing N evaluate these EOE mr A 0 00 . ä * — anees in » part byt their sucess in selling sponsored TBA products. * Frequently, both the Texaco and. ‘abil! company Noe " gallesmen call upon the dealer together (double tem-. 8 ing ). The Supreme Court in Atlantic noted the . _hetently coercive effect of that device, pointing out ote that since “the annual dealer evaluation by Atlantie salesmen carried substantial weight when the · distriet gers decided upon annual lease extensions dealers were understandably susceptible to the cheouragement of, Goodyear salesmen when Atlantie „men were nearby looking over thgfr shoulders.” (381 U.S. at 375.) And, as in. Atlantic, each. dealer ö. per- formance as a purchaser of sponsored TRA is also ~ fully disclosed. bythe reports furnished, by“ the spön- sored rubber companies to Texaco of, the amount of sponsored TBA purchased: by each’ dealer. As the ree- ond indicates, Texaco, in assessing the economic su- dess of service stations, was vitally ee with the amount of sponsored TBA sold by its Aealers. Here, as in Atlantic, there was substantial testi- > mony by non:sponsored TBA suppliers : e 50 that, as a result of Texago’s vigorous sales campaign to its dealers, many Texaco dealers were 88 left with the impression that Texaco would look. with = * disfavor upon their purchase of non- sponsored TBA f products and that they were required to purchase the sponsored TBA, As a result, these non-sponsored sup- : _ Pliers were vnable to gain to these Texaco serv- | ies station outlets. In sum the Suprenie Hourt's char- eee - “abteriegtion ‘of the operation of the commission Plan in Atlantic is equally applieablé: here. Texaco, | With Goodrich's s “encouragement and assistance, has 5 its full economic power in a eomfinwing xa campaign to foree its dealers and Men antes’ ata’ fs e N (id. - 805 f & te + * k * 6 ¥ * 1 7 | on ee 85 ps fous . ,. 88 5 ‘ : Sa vipassana acetic uns Gare ae Nabe Un . — thi 'Gdee ‘id Alani: "But as wé read Atlantic none of these distinctions is in terial“ As alreddy demonstrated, under Atlantic’ it ia the oil company's pqwer over itz Gealers, ‘and ‘the ex! ercise-of that ‘power: ‘thifough the pefTormanee of the promotional services required by the galés commis ony agreement, and not coercive tactics, which condenins ' the sales commission plan. And While, urtlike Atlantic, the sales commission plang involved here did not al- locate territories between the sponsored TBA sup- pliers, the gravest danger to competition Presented. ü by the sales commission ‘plans ‘here as if in’ Atl tis i in their capacity for hindering eopetition between sponsored and non-spohsored | BA suppliers. A de. vice. which may enhanee the posi or of two or three : leading TBA»supplierg vis-a-vis: smaHer competitors 0 N eannot be ‘defended on the ground that it still leaves 5 these few firms free to “compete” with one anothpr ©. for aceess to the Texaco service station market. an - ‘Respondents also argue that, ‘unlike: ‘Atlantic, thet: is here no showing that Texaco’s promotional cam- paign was effective. Thus, they contend that the sta- tistics ow) that only ‘about 30% of Texaco’s dealers pure ‘sponsored TBA products. This figure, how . aver; is derived by considering the number of Texaco dealem purchasing onsored TBA in proportion to the total number of ‘and contract dealers. In fact, however, as respondent Sees, itself, points _'. out; many contract dealers do handle, and are not ae appropriate outlets: for, TBA products. Sinee more than half of the total number of Texaco dealers’ are — epe en e dealers, the ‘actual success ae f it The BOF Goodrich: Company, In rief of Counsel e the tet | — — de March 98,1960, p98." 8 Se — e * a N * 0 * . - “e .’ ponsiderable. indeed, But, under Atlantic, proof ofi she actual effectiveness of the sales commission plan is unnecessary, The Court’s, ultimate concern was with a the cumulative. danger presented hy the “widespread use“ of the plans, rather. than the, Relative effective, a — of particular plans, ‘Moreover, the, Court viewed i the sales commission plan When used by a major oi company as having the same competitive characteris- ties as a tying agreement. As in the case of a tying agrnement the, fact that, the sales commission plan. has. nat fully, achieved. its purpose, or that nonsponzored suppliers ean overcome the unfair competitive advan tage which the sales commission gives the.sponsored supplier, is no defense. Of. International. Salt Co. v. United States, 332 U. S, 292, 397; Northern Pacific.R. C. v. United States, U.S; 1, 12; Osborn v. fin- clair Refining Co., 286 F. 2d 832, 838 (4th Cir. 1960), gent, denied 366 U.S. 963. 5 . é Th essence, respondents urge, upon us the rationale . 5 . of Columbia Cireuit's opinion that | despite the, economic. dependence of the Texaco, dealer a e Dernco, Texacd’s. vigorous promotional activities sales commission plan are nothing more the, “recommendations” of & salesman toe pur: * „E the Seventh Cireuit 's decision in Atlantic, the, Sa Preme, std en Wat b. IV. $f, „ e aueh thnthorders agatnst both ‘Texaco'xind: Gd. ) rich, identical With the orders against Atlantic and — whieh were affirrged: by the: Supreme Court, we fete ents here. „Ternco. shquld clearly be en- Hermine any sales commissi en As to dee Uke ee 3 re gion. plans: with five other oil companies: Continental, bai a ©. ‘The e a shall, within sixty (60) days after | service upon them of this order, file with the Com- mission a report in writing setting forth in detail the manner and form of their compliance with this order. “ApryDTx e e a sel | Unten stag Court of pes ; e FOR THE DISTRICTOF Sor ber, Sera ‘Tent, 1067 No. 20 08 Ss | Tex Tue, ‘Pertwonen * „ v. From, Thine Oeser tr lo, seen THE B. . GO⁰ο o-. ComPany, PETITIONER N v. Pana Tape CoMMIBSION; RESPONDENT g (Utdted States Court of Appeals for the District of. Columbia Circuit ; filed September 25, 1967; Nathan J. th Paulson; clerk). ., a On Petitions to Review an ‘Order of the Federal oe Trade Commission. * | Before: Bazelon, Chief Judge, Wilbur K. Miller, Senior e ales and Burr Cireuit Judge. : e , ; 4 ‘ 0 * / 7 4 / . [- ye { © o 44 7 ad g pe ; — i * * “ye 7 . fe 4 — Nae * / * / of — 7 * 1A. . J , 1 : 6.8, GOVERNMENT PRINTING OFTICE: % --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0015%3A11. Public record. Not legal advice.