This is a civil action to enjoin General Motors Corporation (GM)
and three associations of Chevrolet dealers in the Los Angeles area
from participating in an alleged conspiracy to restrain in
violation of § 1 of the Sherman Act by eliminating sales of new
Chevrolets through "discount houses" and "referral services." The
District Court found, among other things, that the Losor Chevrolet
Dealers Association, in the summer of 1960, complained to GM
personnel about sales to discounters; that at a Losor meeting in
November, 1960, member dealers agreed to embark on a letter-writing
campaign to enlist GM's aid; that, in December and January, GM
personnel talked to every dealer in the area and obtained promises
not to deal with discounters; that representatives of the three
dealer associations met on December 15, 1960, and created a joint
investigating committee; that the associations then undertook to
police the agreements so obtained by GM; that the associations
supplied information to GM for use in bringing wayward dealers into
line, and that the Chevrolet zone manager asked them to do so;
that, as a result, a number of dealers were induced to repurchase
cars they had sold to discounters, and agreed to refrain from
making such sales in the future; and that, by spring, 1961, sales
through discounters seem to have ended. However, the District Court
found no conspiracy in violation of the Sherman Act, holding that
each alleged conspirator acted to promote its own self-interest,
and that, in seeking to vindicate these interests, the alleged
conspirators entered into no "agreements" among themselves,
although they may have engaged in "parallel action."
this is a classic conspiracy in restraint of
trade: joint, collaborative action by dealers, associations, and GM
to eliminate a class of competitors by terminating dealings between
them and a minority of Chevrolet dealers and to deprive franchised
dealers of their freedom to deal through discounters if they so
choose. Pp. 384 U. S.
(a) The District Court's conclusion that appellees' conduct did
not amount to a conspiracy within the meaning of the Act was
Page 384 U. S. 128
not the kind of factfinding shielded from review by the "clearly
erroneous" test embodied in Rule 52(a) of the Federal Rules of
Civil Procedure, since the question involved the application of a
legal standard to undisputed facts, and since the bulk of the case
was presented to the trial judge in the form of documents,
depositions, and written statements. P. 384 U. S. 141
(b) In determining whether there has been a conspiracy or
combination under § 1 of the Sherman Act, it is of no consequence
that each party acted in its own lawful interest or whether the
franchise system is lawful or economically desirable. P.
384 U. S.
(c) Even if it were assumed that there had been no explicit
agreement among the appellees and their alleged co-conspirators,
such an agreement is not a necessary part of a Sherman Act
conspiracy -- certainly not where, as here, joint and collaborative
action was pervasive in the initiation, execution, and fulfillment
of the plan. United States v. Parke, Davis & Co.,
362 U. S. 29
362 U. S. 43
Pp. 384 U. S.
(d) The joint and interrelated activities of GM and the
co-conspirators in obtaining the agreements not to deal with
discounters and in policing such agreements cannot be described as
"unilateral" or merely "parallel." Pp. 384 U. S.
(e) The elimination, by joint collaborative action, of
businessmen from access to the market is a per se
violation of the Act. Klor's, Inc. v. Broadway-Hale Stores,
Inc., 359 U. S. 207
384 U. S.
(f) The economic motivation of those who, by concerted action,
seek to keep others from trading in the market is irrelevant. Pp.
384 U. S.
(g) Inherent in the success of the combination in this case was
a substantial restraint upon price competition, a goal unlawful
when sought to be effected by combination or
conspiracy. United States v. Parke, Davis & Co.,
P. 384 U. S.
234 F. Supp.
, reversed and remanded.
Page 384 U. S. 129
MR. JUSTICE FORTAS delivered the opinion of the Court.
This is a civil action brought by the United States to enjoin
the appellees from participating in an alleged conspiracy to
restrain trade in violation of § 1 of the Sherman Act. [Footnote 1
] The United States District
Court for the Southern District of California concluded that the
proof failed to establish the alleged violation, and entered
judgment for the defendants. The case is here on direct appeal
under § 2 of the Expediting Act, 32 Stat. 823, 15 U.S.C. § 29 (1964
ed.). We reverse.
The appellees are the General Motors Corporation, which
manufactures, among other things, the Chevrolet line of cars and
trucks, and three associations of Chevrolet dealers in and around
Los Angeles, California. [Footnote
] All of the Chevrolet dealers in the area belong to one or
more of the appellee associations.
Page 384 U. S. 130
Chevrolets are ordinarily distributed by dealers operating under
a franchise from General Motors. The dealers purchase the cars from
the manufacturer, and then retail them to the public. The
relationship between manufacturer and dealer is incorporated in a
comprehensive uniform Dealer Selling agreement. This agreement does
not restrict or define those to whom the dealer may sell. Nor are
there limitations as to the territory within which the dealer may
sell. Compare White Motor Co. v. United States,
372 U. S. 253
franchise agreement does, however, contain a clause (hereinafter
referred to as the "location clause") which prohibits a dealer from
moving to or establishing
"a new or different location, branch sales office, branch
service station, or place of business including any used car lot or
location without the prior written approval of Chevrolet."
Beginning in the late 1950's, "discount houses" engaged in
retailing consumer goods in the Los Angeles area, and "referral
services" [Footnote 3
offering to sell new cars to the public at allegedly bargain
prices. Their sources of supply were the franchised dealers. By
1960, a number of individual Chevrolet dealers, without
authorization from General Motors, had developed working
relationships with these establishments. A customer would enter one
of these establishments and examine the literature and price lists
for automobiles produced by several manufacturers. In some
instances, floor models were available for inspection. Some of the
Page 384 U. S. 131
with the customer for a trade-in of his old car, and provided
financing for his new car purchase.
The relationship with the franchised dealer took various forms.
One arrangement was for the discounter to refer the customer to the
dealer. The car would then be offered to him by the dealer at a
price previously agreed upon between the dealer and the discounter.
In 1960, a typical referral agreement concerning Chevrolets
provided that the price to the customer was not to exceed $250 over
the dealer's invoiced cost. For its part in supplying, the
discounter received $50 per sale.
Another common arrangement was for the discounter itself to
negotiate the sale, the dealer's role being to furnish the car and
to transfer title to the customer at the direction of the
discounter. One dealer furnished Chevrolets under such an
arrangement, charging the discounter $85 over its invoiced cost,
with the discounter getting the best price it could from its
These were the principal forms of trading involved in this case,
although, within each, there were variations, [Footnote 4
] and there were schemes which fit
neither pattern. [Footnote
Page 384 U. S. 132
By 1960, these methods for retailing new cars had reached
considerable dimensions. Of the 100,000 new Chevrolets sold in the
Los Angeles area in that year, some 2,000 represented discount
house or referral sales. One Chevrolet dealer attributed as much as
25% of its annual sales to participation in these arrangements,
while another accounted for between 400 and 525 referral sales in a
Approximately a dozen of the 85 Chevrolet dealers in the Los
Angeles area were furnishing cars to discounters in 1960. As the
volume of these sales grew, the nonparticipating Chevrolet dealers
located near one or more of the discount outlets [Footnote 6
] began to feel the pinch. Dealers
lost sales because potential customers received, or thought they
would receive, [Footnote 7
more attractive deal from a discounter
Page 384 U. S. 133
who obtained its Chevrolets from a distant dealer. The
discounters vigorously advertised Chevrolets for sale, with
alluring statements as to price savings. The discounters also
advertised that all Chevrolet dealers were obligated to honor the
new car warranty and to provide the free services contemplated
therein; and General Motors does indeed require Chevrolet dealers
to service Chevrolet cars, wherever purchased, pursuant to the new
car warranty and service agreement. Accordingly, nonparticipating
dealers were increasingly called upon to service, without
compensation, Chevrolets purchased through discounters. Perhaps
what grated most was the demand that they "precondition" cars so
purchased -- make the hopefully minor adjustments and do the body
and paint work necessary to render a factory-fresh car both
customer- and road-worthy.
On June 28, 1960 at a regular meeting of the appellee Losor
Chevrolet Dealers Association, member dealers discussed the problem
and resolved to bring it to the attention of the Chevrolet
Division's Los Angeles zone manager, Robert O'Connor. Shortly
thereafter, a delegation from the association called upon O'Connor,
presented evidence that some dealers were doing business with the
discounters, and asked for his assistance. O'Connor promised he
would speak to the offending dealers. When no help was forthcoming,
Owen Keown, a director of Losor, took matters into his own hands.
First, he spoke to Warren Biggs and Wilbur Newman, Chevrolet
dealers who were then doing a substantial business with
discounters. According to Keown's testimony, Newman told him that
he would continue the practice "until . . . told not to by"
Chevrolet, and that, "when the Chevrolet Motor Division told him
not to do it, he
Page 384 U. S. 134
knew that they wouldn't let some other dealer carry on with it."
Keown then reported the foregoing events at the association's
annual meeting in Honolulu on November 10, 1960. The member dealers
present agreed immediately to flood General Motors and the
Chevrolet Division with letters and telegrams asking for help.
Salesmen, too, were to write. [Footnote 9
Hundreds of letters and wires descended upon Detroit -- with
telling effect. Within a week, Chevrolet's O'Connor was directed to
furnish his superiors in Detroit with "a detailed report of the
discount house operations . . . as well as what action we in the
Zone are taking to curb such sales." [Footnote 10
By mid-December, General Motors had formulated its response. On
December 15, James M. Roche, then an executive vice president of
General Motors, wrote to some of the complaining dealers. He noted
Page 384 U. S. 135
practices to which they were objecting,
"in some instances,
represent the establishment of a
second and unauthorized sales outlet or location contrary to the
provisions of the General Motors Dealers Selling Agreements."
(Emphasis supplied.) Recipients of the letter were advised that
General Motors personnel proposed to discuss that matter with each
of the dealers. [Footnote
] O'Connor in Los Angeles was apprised of the letter's
content and instructed to carry on the personal discussions
referred to therein. With respect to the offending dealers, he was
to work with Roy Cash, regional manager for the Chevrolet Division.
Cash had been briefed on the subject in Detroit on December 14.
General Motors personnel proceeded to telephone all area
dealers, both to identify those associated with the discounters and
to advise nonparticipants that General Motors had entered the
lists. The principal offenders were treated to unprecedented
individual confrontations with Cash, the regional manager. These
brief meetings were wholly successful in obtaining from each dealer
his agreement to abandon the practices in question. Some
capitulated during the course of the four- or five-minute meeting,
or immediately thereafter. [Footnote 12
] One dealer, who met not with Cash, but with
the city sales manager for
Page 384 U. S. 136
Chevrolet, put off decision for a week "to make sure that the
other dealers, or most of them, had stopped their business dealings
with discount houses." [Footnote
There is evidence that unanimity was not obtained without
reference to the ultimate power of General Motors. The testimony of
dealer Wilbur Newman was that regional manager Cash related a
story, the relevance of which was not lost upon him, that, in
handling children, "I can tell them to stop something. If they
don't do it . . . , I can knock their teeth down their
By mid-January, General Motors had elicited from each dealer a
promise not to do business with the discounters. But such
agreements would require policing -- a fact which had been
anticipated. General Motors earlier had initiated contacts with
firms capable of performing such a function. This plan unilaterally
to police the agreements was displaced, however, in favor of a
joint effort between General Motors, the three appellee
associations, and a number of individual dealers.
On December 15, 1960, representatives of the three appellee
associations had met and appointed a joint committee to study the
situation and to keep in touch with
Page 384 U. S. 137
Chevrolet's O'Connor. [Footnote 14
] Early in 1961, the three associations agreed
jointly to finance the "shopping" of the discounters to assure that
no Chevrolet dealer continued to supply them with cars. Each of the
associations contributed $5,000, and a professional investigator
was hired. He was instructed to try to purchase new Chevrolets from
the proscribed outlets, to tape-record the transactions, if any,
and to gather all the necessary documentary evidence -- which the
associations would then lay "at the doorstep of Chevrolet." These
joint associational activities were both preceded and supplemented
by similar "shopping" activities by individual dealers and by
appellee Losor Chevrolet Dealers Association.
General Motors collaborated with these policing activities.
There is evidence that zone manager O'Connor and a subordinate,
Jere Faust, actively solicited the help of individual dealers in
uncovering violations. Armed with information of such violations
obtained from the dealers or their associations, O'Connor or
members of his staff would ask the offending dealer to come in and
talk. The dealer then was confronted with the car purchased by the
"shopper," the documents of sale, and in most cases a tape
recording of the transaction. In every instance, the embarrassed
dealer repurchased the car, sometimes at a substantial loss, and
promised to stop such sales. At the direction of O'Connor or a
subordinate, the checks with which the cars were repurchased
Page 384 U. S. 138
made payable to an attorney acting jointly for the three
O'Connor testified that on no occasion did he "force" a dealer
to repurchase; he merely made the opportunity available. But one
dealer testified that, when an assistant zone manager for the
Chevrolet Division asked him to come in and talk about discount
"he specified a sum of money which I was to bring with me when I
came down and saw him. . . . I kept the appointment, and brought a
cashier's check. I knew when I came down to Los Angeles that I was
going to repurchase an automobile. . . ."
Another dealer testified that, upon being confronted with
evidence that one of his cars had been purchased through a referral
service, he not only bought it back (without questioning the
correctness of the price exacted), but also fired the employee
responsible for the transaction -- although the employee had been
commended by the Chevrolet Division a few weeks earlier as the
"number one fleet salesman" in the 11-state Pacific region.
By the spring of 1961, the campaign to eliminate the discounters
from commerce in new Chevrolet cars was a success. Sales through
the discount outlets seem to have come to a halt. Not until a
federal grand jury commenced an inquiry into the matters which we
have sketched does it appear that any Chevrolet dealer resumed its
business association with the discounters.
On these basic facts, the Government first proceeded criminally.
A federal grand jury in the Southern District of California
returned an indictment. After trial, the defendants were found not
guilty. The present civil action, filed shortly after return of the
indictment, was then brought to trial.
Page 384 U. S. 139
Both the Government and the appellees urge the importance, for
purposes of decision, of the "location clause" in the Dealer
Selling Agreement, which prohibits a franchised dealer from moving
to or establishing
"a new or different location, branch sales office, branch
service station, or place of business . . . without the prior
written approval of Chevrolet."
The appellees contend that this contractual provision is lawful,
and that it justifies their actions. They argue that General Motors
acted lawfully to prevent its dealers from violating the "location
clause," that the described arrangements with discounters
constitute the establishment of additional sales outlets in
violation of the clause, and that the individual dealers -- and
their associations -- have an interest in uniform compliance with
the franchise agreement, which interest they lawfully sought to
The Government invites us to join in the assumption, only for
purposes of this case, that the "location clause" encompasses sales
by dealers through the medium of discounters. But it urges us to
hold that, so construed, the provision is unlawful as an
unreasonable restraint of trade in violation of the Sherman Act.
We need not reach these questions concerning the meaning,
effect, or validity of the "location clause" or of any other
provision in the Dealer Selling Agreement, and we do not. We do not
decide whether the "location
Page 384 U. S. 140
clause" may be construed to prohibit a dealer, party to it, from
selling through discounters, or whether General Motors could, by
unilateral action, enforce the clause so construed. We have here a
classic conspiracy in restraint of trade: joint, collaborative
action by dealers, the appellee associations, and General Motors to
eliminate a class of competitors by terminating business dealings
between them and a minority of Chevrolet dealers and to deprive
franchised dealers of their freedom to deal through discounters if
they so choose. Against this fact of unlawful combination, the
"location clause" is of no avail. Whatever General Motors might or
might not lawfully have done to enforce individual Dealer Selling
Agreements, by action within the borders of those agreements and
the relationship which each defines, is beside the point. And,
because the action taken constitutes a combination or conspiracy,
it is not necessary to consider what might be the legitimate
interest of a dealer in securing compliance by others with the
"location clause," or the lawfulness of action a dealer might
individually take to vindicate this interest.
The District Court decided otherwise. It concluded that the
described events did not add up to a combination or conspiracy
violative of the antitrust laws. But its conclusion cannot be
squared with its own specific findings of fact. These findings
include the essentials of a conspiracy within § 1 of the Sherman
Act: that, in the summer of 1960 ,the Losor Chevrolet Dealers
Association, "through some of its dealer members," complained to
General Motors personnel about sales through discounters (Finding
34); that at a Losor meeting in November, 1960, the dealers there
present agreed to embark on a letter-writing campaign directed at
enlisting the aid of General Motors (Finding 35); that, in December
and January, General Motors personnel discussed the matter with
every Chevrolet dealer in the Los Angeles area and elicited
Page 384 U. S. 141
each a promise not to do business with the discounters (Finding
39); that representatives of the three associations of Chevrolet
dealers met on December 15, 1960, and created a joint investigating
committee (Finding 40); that the three associations then undertook
jointly to police the agreements obtained from each of the dealers
by General Motors; that the associations supplied information to
General Motors for use by it in bringing wayward dealers into line,
and that Chevrolet's O'Connor asked the associations to do so
(Findings 41 and 42); that, as a result of this collaborative
effort, a number of Chevrolet dealers were induced to repurchase
cars they had sold through discounters and to promise to abjure
such sales in future (Finding 42).
These findings by the trial judge compel the conclusion that a
conspiracy to restrain trade was proved. [Footnote 16
Page 384 U. S. 142
error of the trial court lies in its failure to apply the
correct and established standard for ascertaining the existence of
a combination or conspiracy under § 1 of the Sherman Act. See
United States v. Parke, Davis & Co., 362 U. S.
, 362 U. S. 44
The trial court attempted to justify its conclusion on the
following reasoning: that each defendant and alleged co-conspirator
acted to promote its own self-interest; that General Motors, as
well as the defendant associations and their members, has a lawful
interest in securing compliance with the "location clause," and in
thus protecting the franchise system of distributing automobiles
business arrangements which the court deemed lawful and proper; and
that, in seeking to vindicate these interests, the defendants and
their alleged co-conspirators entered into no "agreements" among
themselves, although they may have engaged in "parallel
These factors do not justify the result reached. It is of no
consequence, for purposes of determining whether there has been a
combination or conspiracy under § 1 of the Sherman Act, that each
party acted in its own lawful interest. Nor is it of consequence
for this purpose whether the "location clause" and franchise system
are lawful or economically desirable. And although we regard as
clearly erroneous and irreconcilable with its other findings the
trial court's conclusory "finding" that there had been no
"agreement" among the defendants and their alleged co-conspirators,
it has long been settled that explicit agreement is not a necessary
part of a Sherman
Page 384 U. S. 143
Act conspiracy -- certainly not where, as here, joint and
collaborative action was pervasive in the initiation, execution,
and fulfillment of the plan. United States v. Parke, Davis
& Co., supra,
at 362 U. S. 43
United States v. Bausch & Lomb Optical Co.,
321 U. S. 707
321 U. S.
-723; Federal Trade Comm'n v. Beech-Nut Packing
Co., 257 U. S. 441
257 U. S.
Neither individual dealers nor the associations acted
independently or separately. The dealers collaborated, through the
associations and otherwise, among themselves and with General
Motors, both to enlist the aid of General Motors and to enforce
dealers' promises to forsake the discounters. The associations
explicitly entered into a joint venture to assist General Motors in
policing the dealers' promises, and their joint proffer of aid was
accepted and utilized by General Motors.
Nor did General Motors confine its activities to the contractual
boundaries of its relationships with individual dealers. As the
trial court found (Finding 39), General Motors at no time announced
that it would terminate the franchise of any dealer which furnished
cars to the discounters. [Footnote 17
] The evidence indicates that it had no
intention of acting in this unilateral fashion. [Footnote 18
] On the contrary, overriding
corporate policy with respect to
Page 384 U. S. 144
proper dealer relations [Footnote 19
] dissuaded General Motors from engaging in
this sort of wholly unilateral conduct, the validity of which under
the antitrust laws was assumed, without being decided, in Parke
As Parke Davis
had done, General Motors sought to
elicit from all the dealers agreements, substantially interrelated
and interdependent, that none of them would do business with the
discounters. These agreements were hammered out in meetings between
nonconforming dealers and officials of General Motors' Chevrolet
Division, and in telephone conversations with other dealers. It was
acknowledged from the beginning that substantial unanimity would be
essential if the agreements were to be forthcoming. And once the
agreements were secured, General Motors both solicited and employed
the assistance of its alleged co-conspirators in helping to police
them. What resulted was a fabric interwoven by many strands of
joint action to eliminate the discounters from participation in the
market, to inhibit the free choice of franchised dealers to select
their own methods of trade, and to provide multilateral
surveillance and enforcement. This process for achieving and
enforcing the desired objective
Page 384 U. S. 145
can by no stretch of the imagination be described as
"unilateral" or merely "parallel." See Parke Davis, supra,
at 362 U. S. 46
Federal Trade Comm'n v. Beech-Nut Packing Co.,
257 U. S. 441
257 U. S. 453
United States v. Bausch & Lomb Optical Co.,
321 U. S. 707
321 U. S.
-723; Interstate Circuit, Inc. v. United
States, 306 U. S. 208
306 U. S. 226
United States v. Masonite Corp., 316 U.
, 316 U. S. 275
Turner, The Definition of Agreement Under the Sherman Act:
Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655
(1962). [Footnote 20
There can be no doubt that the effect of the combination or
conspiracy here was to restrain trade and commerce within the
meaning of the Sherman Act. Elimination, by joint collaborative
action, of discounters from access to the market is a per
violation of the Act.
In Klor's, Inc. v. Broadway-Hale Stores, Inc.,
359 U. S. 207
Court was confronted with the question whether
"a group of powerful businessmen may act in concert to deprive a
single merchant, like Klor, of the goods he needs to compete
359 U.S. at 359 U. S. 210
The allegation was that manufacturers and distributors of
electrical appliances had conspired among themselves and with a
major retailer, Broadway-Hale,
"either not to sell to Klor's (Broadway-Hale's next-door
neighbor and competitor) or to sell to it only at discriminatory
prices and highly unfavorable terms."
359 U.S. at 359 U. S. 209
The Court concluded that the alleged group boycott of even a single
trader violated the statute, [Footnote 21
] without regard to the
Page 384 U. S. 146
reasonableness of the conduct in the circumstances. Group
boycotts of a trader, said the Court, are among those "classes of
restraints which, from their "nature or character," were unduly
restrictive. . . ." 359 U.S. at 359 U. S. 211
This was not new doctrine, for it had long been recognized that
"there are certain agreements or practices which, because of
their pernicious effect on competition and lack of any redeeming
virtue, are conclusively presumed to be unreasonable, and therefore
illegal, without elaborate inquiry as to the precise harm they have
caused or the business excuse for their use,"
and that group boycotts are of this character. Northern Pac.
R. Co. v. United States, 356 U. S. 1
356 U. S. 5
See also Fashion Originators' Guild of America, Inc. v. Federal
Trade Comm'n, 312 U. S. 457
Eastern States Retail Lumber Dealers' Assn. v. United
States, 234 U. S. 600
234 U. S.
-614, neither of which involved price-fixing.
The principle of these cases is that, where businessmen concert
their actions in order to deprive others of access to merchandise
which the latter wish to sell to the public, we need not inquire
into the economic motivation underlying their conduct. See
Barber, Refusals To Deal Under the Federal Antitrust Laws, 103
U.Pa.L.Rev. 847, 872-885 (1955). Exclusion of traders from the
market by means of combination or conspiracy is so inconsistent
with the free market principles embodied in the Sherman Act that it
is not to be saved by reference to the need for preserving the
collaborators' profit margins or their system for distributing
automobiles, any more than by reference to the allegedly tortious
conduct against which a combination or conspiracy may be
Page 384 U. S. 147
-- as in Fashion Originators' Guild of America, Inc. v.
Federal Trade Comm'n, supra,
at 312 U. S.
We note, moreover, that inherent in the success of the
combination in this case was a substantial restraint upon price
competition -- a goal unlawful per se
when sought to be
effected by combination or conspiracy. E.g., United States v.
Parke, Davis & Co., 362 U. S. 29
362 U. S. 47
United States v. Socony-Vacuum Oil Co., 310 U.
, 310 U. S. 223
And the per se
rule applies even when the effect upon
prices is indirect. Simpson v. Union Oil Co., 377 U. S.
, 377 U. S. 16
Socony-Vacuum Oil Co., supra.
There is in the record ample evidence that one of the purposes
behind the concerted effort to eliminate sales of new Chevrolet
cars by discounters was to protect franchised dealers from real or
apparent price competition. The discounters advertised price
savings. See n
Some purchasers found and others believed that
discount prices were lower than those available through the
franchised dealers. Ibid.
Certainly, complaints about
price competition were prominent in the letters and telegrams with
which the individual dealers and salesmen bombarded General Motors
in November, 1960. [Footnote
] (Finding 38.) And although the District Court found to the
contrary, there is evidence in the record that General Motors
itself was not unconcerned about the effect of discount sales upon
general price levels. [Footnote
Page 384 U. S. 148
The protection of price competition from conspiratorial
restraint is an object of special solicitude under the antitrust
laws. We cannot respect that solicitude by closing our eyes to the
effect upon price competition of the removal from the market, by
combination or conspiracy, of a class of traders. Nor do we propose
to construe the Sherman Act to prohibit conspiracies to fix prices
at which competitors may sell, but to allow conspiracies or
combinations to put competitors out of business entirely.
Accordingly, we reverse and remand to the United States District
Court for the Southern District of California in order that it may
fashion appropriate equitable relief. See United States v.
Parke, Davis & Co., supra,
at 362 U. S.
It is so ordered.
The statute reads in relevant part:
"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. . .
26 Stat. 209, 15 U.S.C. § 1 (1964 ed.).
Named as co-conspirators, but not as defendants, are
"[t]he officers, directors, and members of [the three
association], certain officers and employees of such members,
certain officers and employees of General Motors, other Chevrolet
dealers in the Southern California area, and others to the
plaintiff unknown. . . ."
Since the evidence does not consistently distinguish between
"discount houses" and "referral services," based either on the
variety of goods offered to the public or on the nature of the
arrangement between the establishment and the franchised dealer
which supplied it with cars, we shall hereinafter use the term
"discounter" to embrace all such establishments.
One dealer, for example, paid its referral service one-third of
the gross profit on each sale, up to $75, there being no fixed
price at which the sale was to take place. The same dealer earlier
had paid a flat fee of $17.50 for every referral, whether or not
the sale was consummated.
At least one discount house actually purchased its cars from
cooperative dealers, then resold them to its customers. In this
situation, which in the trade is referred to as "bootlegging," the
customer does not receive a new car warranty. General Motors, while
disapproving of the practice, does not assert that it violates the
"location clause." In those arrangements against which General
Motors and the associations did direct their efforts, title to the
new car passed directly from dealer to retail customer, who thus
obtained a new car warranty and service agreement.
There must also be distinguished the ubiquitous practice of
using "bird dogs" -- informal sources who steer occasional
customers toward a particular dealer in return for relatively small
fees -- often a bottle of liquor. This practice is not only deemed
by General Motors not to violate the "location clause," but has the
corporation's endorsement as a desirable sales device.
As the District Court found, 70% of the local Chevrolet dealers
were located within five miles of one or more of the 23 discount
house or referral outlets.
There is evidence in the record that discount sales undercut the
prices at which franchised dealers were able to, or chose to,
compete. Two purchasers of Chevrolets, one on referral and the
other in a discount house "sale," testified that they had "shopped"
other dealers, but found the discount and referral prices lower.
Dealers and their salesmen complained to General Motors about sales
lost through inability to meet the discounters' price. Moreover,
the discounters advertised and actually provided auto loans at
interest rates substantially lower than those offered by G.M.A.C.,
General Motors' financing subsidiary.
There is also evidence that it was not just price itself which
induced customers to purchase Chevrolets through the discounters.
One customer testified that he preferred the discount house because
he thereby avoided the haggling over price which seems an
inevitable facet of purchasing a car in the orthodox way. Others
apparently assumed, without bothering to confirm by comparison
shopping, that "discount" stores would offer lower prices. This
assumption was fed by discount house advertising which promised
"the lowest price anywhere" and "savings of hundreds of
Dealer Biggs put the same sentiments into a letter to both Keown
and Chevrolet's zone manager O'Connor, written on November 5, 1960.
The day before, in O'Connor's presence, Keown had challenged Biggs
to justify his dealings with the discounters. Biggs wrote:
"We would be most reluctant to discard an account as good as
this one without rather concrete assurance that it would not
immediately be picked up by another Chevrolet dealer."
Two weeks later, O'Connor forwarded Biggs' letter to General
Motors officials in Detroit.
In Keown's words,
"We were seeking the assistance of the higher echelon officials
of Chevrolet and General Motors in bringing about an end to the
discount house sale of Chevrolets."
O'Connor's report, dated November 22, recounted that "zone
management" had talked with the offending dealers "in an attempt to
have them desist," and that
"[o]ur Dealer Associations have formed a committee to call on
the supplying dealers and have asked them and have attempted to
persuade them to discontinue this practice."
Supported by a copy of dealer Biggs' letter, see
"many dealers will cease this type of business if they had any
assurance that the account would not be picked up by some other
dealer, immediately upon relinquishment."
Roche wrote to those dealers who had complained directly to John
Gordon, then president of General Motors. On December 29, 1960, a
virtually identical letter went out to all General Motors dealers
throughout the Nation, under the signature of the general sales
managers for the respective divisions.
One dealer testified that he abruptly terminated arrangements
long maintained with two discount houses, despite the fact that one
of these connections owed him $20,000 and the other $28,000. In the
preceding four weeks, the latter had reduced its indebtedness by
$52,000, and could reasonably have been expected to erase it
completely within a few weeks. The dealer anticipated that, upon
cancellation of the accounts, these debts would become
uncollectible. His fears were justified. The accounts were
terminated. The debts remained unpaid.
According to Francis Bruder, a dealer who had been doing
business with the discounters since 1957,
"Cash told me that he felt certain that the other dealers would
discontinue dealing with discount houses and referral services as
well. I left this meeting with the impression that every dealer who
had been doing business with a discount house or referral service
would soon quit."
This was precisely the impression General Motors had intended to
implant. As was explained in an inter-office memorandum to the
general sales manager of General Motors' Chevrolet Division,
"[All dealers were talked to] in order that every dealer with
whom the subject was discussed would know that a similar discussion
was being held with all other dealers, so that, if certain dealers
should elect to discontinue their cooperation with a discount
house, we might be able to discourage some other dealer who might
be solicited from starting the practice."
The District Court characterized this December 15 meeting as the
first between representatives of the three associations, pertaining
to the problem of discount house and referral sales. However, as we
have previously noted, n
O'Connor reported to General Motors three weeks
earlier, on November 22, that the three associations had formed a
committee which already had called upon nonconforming dealers. The
record does not enable us to resolve this factual conflict, nor is
its resolution important. On either version, the appellee
associations entered into an explicit agreement to act together to
eliminate the new mode of intrabrand competition.
The Government's complaint contains no reference to the
"location clause," and the Government concedes that its case was
tried on a conspiracy theory, the defendants injecting the
contractual issue by way of defense. Trial counsel for the
Government did advert to the clause in the District Court, but it
does not appear that he challenged its validity, as construed, in
the same sense that the Government does here. See
Transcript, pp. 9, 17-18. In light of our disposition of the case,
we have no occasion to consider whether the Government's argument
directed to the clause, as construed, is properly before us.
We note that, as in United States v. Parke, Davis &
Co., 362 U. S. 29
362 U. S. 44
the ultimate conclusion by the trial judge, that the defendants'
conduct did not constitute a combination or conspiracy in violation
of the Sherman Act, is not to be shielded by the "clearly
erroneous" test embodied in Rule 52(a) of the Federal Rules of
Civil Procedure. That Rule in part provides:
"Findings of fact shall not be set aside unless clearly
erroneous, and due regard shall be given to the opportunity of the
trial court to judge of the credibility of the witnesses."
As in Parke Davis, supra,
the question here is not one
of "fact," but consists rather of the legal standard required to be
applied to the undisputed facts of the case. See United States
v. Singer Mfg. Co., 374 U. S. 174
374 U. S. 194
n. 9; United States v. Mississippi Valley Generating Co.,
364 U. S. 520
364 U. S. 526
and cases there cited.
Moreover, the trial court's customary opportunity to evaluate
the demeanor and thus the credibility of the witnesses, which is
the rationale behind Rule 52(a) (see United States v. Oregon
State Med. Soc., 343 U. S. 326
343 U. S.
-332), plays only a restricted role here. This was
essentially a "paper case." It did not unfold by the testimony of
"live" witnesses. Of the 38 witnesses who gave testimony, only
three appeared in person. The testimony of the other 35 witnesses
was submitted either by affidavit, by deposition, or in the form of
an agreed-upon narrative of testimony given in the earlier criminal
proceeding before another judge. A vast number of documents were
also introduced, and bear on the question for decision.
In any event, we resort to the record not to contradict the
trial court's findings of fact, as distinguished from its
conclusory "findings," but to supplement the court's factual
findings and to assist us in determining whether they support the
court's ultimate legal conclusion that there was no conspiracy.
The December letters to all dealers said only that, "[i]n
effect, in some instances," the arrangements in question might
violate the unauthorized location clause of the Dealer Selling
Agreement. No dealer was told, either by letter or in person, that
its conduct violated the franchise agreement, and no dealer was
warned that continuance of discount house or referral sales would
result in termination of its franchise. Zone manager O'Connor did
not regard his instructions from Detroit as authorizing him to go
that far, and he was of the view that "the general letter [to all
dealers] didn't suggest any such thing."
We refer to this without considering whether General Motors
could lawfully have taken such action.
James Roche testified, "It is not (General Motors') practice to
threaten dealers with termination of their franchise." Good dealers
and dealer locations, he said, are hard to come by. In many
dealerships, General Motors itself has invested substantial funds.
Therefore, said Roche,
"we would not want our people to go in and wave the franchise
agreement, selling agreement, and threaten the dealer with
termination in the event he didn't agree, after following -- after
reading a letter he was violating our agreement and should change
his practice. Instead, we expected that this would be handled on a
sound, calm, sensible business-like approach."
There are also statutory inhibitions on the right of an
automobile manufacturer to terminate dealer franchises.
Act of Aug. 8, 1956, c. 1038, § 2, 70 Stat. 1125, 15
U.S.C. § 1222 (1964 ed.); Kessler & Stern, Competition,
Contract, and Vertical Integration, 69 Yale L.J. 1, 103-114
Compare Klein v. American Luggage Works, Inc.,
787 (C.A.3d Cir. 1963), and Graham v. Triangle Publications,
Inc., 233 F.
(D.C.E.D.Pa. 1964), aff'd per curiam,
F.2d 775 (C.A.3d Cir. 1965), discussed in Fulda, Individual
Refusals to Deal: When Does Single-Firm Conduct Become Vertical
Restraint? 30 Law & Contemp.Prob. 590, 592-597 (1965).
The complaint in Klor's
charged a violation of § 2 of
the Sherman Act, as well as of § 1. In the present case, the
Government did not charge the appellees under § 2, which provides
"Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a misdemeanor. . .
15 U.S.C. § 2 (1964 ed.).
Evidence on this subject was admitted solely for the purpose of
showing the dealers' state of mind, rather than to prove the
existence of actual price-cutting by the discounters. But the
collaborators' state of mind is of significance here.
In an inter-office memorandum, circulated among General Motors
officials immediately prior to formulation of corporate policy
the discounters, it was stated that
"It would appear that one of the real hazards of condoning this
type of operation is that discounted prices are freely quoted to a
large portion of the public."
Moreover, we note that some discounters advertised that they
would finance new car purchases at an interest rate of 5 1/2%, a
rate substantially lower than that available at franchised
Chevrolet dealers through G.M.A.C., a subsidiary of General Motors
Corporation. See n
Finally, it is conceded that General Motors is
intensely concerned that each of its dealers has an adequate
"profit opportunity" (see
Finding 17), a concern which
necessarily involves consideration of the price realized by
MR. JUSTICE HARLAN, concurring in the result.
Although I consider that United States v. Parke, Davis &
Co., 362 U. S. 29
represents basically unsound antitrust doctrine, see
dissenting opinion, 362 U.S. at 362 U. S. 49
see no escape from the conclusion that it controls this case.
held that a manufacturer cannot maintain
resale prices by refusing to sell to those who do not follow his
suggested prices if the refusal is attended by concerted action
with his customers, even though he may unilaterally so conduct
himself. See United States v. Colgate & Co.,
250 U. S. 300
Although Parke Davis
related to alleged price-fixing, I
have been unable to discern any tenable reason for differentiating
it from a case involving, as here, alleged boycotting. The
conclusion that Parke Davis
governs the present case is
therefore unavoidable, given the undisputed evidence that General
Motors acted in concert with its dealers in enforcing the location
clause. In my opinion, however, General Motors is not precluded
from enforcing the location clause by unilateral action, and I find
nothing in the Court's opinion to the contrary.
On this basis, I concur in the judgment of the Court.