purchase the assets of Schneider Company. The agreement provided, inter alia, that it was subject to (1) plaintiffs' arranging necessary financing, and (2) approval by the Cadillac and Oldsmobile divisions of GMC. Upon failure of either condition, the $20,000 deposit paid at signing was to be returned.
At some time between June 29 and July 8, the June 26, 1970 agreement along with plaintiffs' Dealer Selling Agreement applications and Source of Fund Statements, were tendered to and rejected by Salmeri.
On July 8, 1970, Schneider signed a letter of intent, addressed to Salmeri at Oldsmobile, advising of his agreement to sell the assets of Schneider Company to plaintiffs. Mogul and Levin delivered that letter on the same day to James Powers, Assistant Zone Manager. The next day, July 9, plaintiffs met with Salmeri and were advised that, because they were still the owners of the Coatesville dealership, they would not be considered for the Schneider Company dealership, although they would be considered for an Oldsmobile location in Upper Darby.
On July 31, 1970, Salmeri advised Schneider that Higgins was the preferred candidate and suggested they try to arrange a sale. Thereafter Schneider conducted negotiations and entered into agreements with Higgins. During the same period of time, however, he also entered into agreements with one Joseph Walier, and with Walier and Fred J. Sumption. On August 27 Schneider's counsel informed Mogul and Levin that if proof of GMC's approval was not submitted within ten days, the June 26, 1970 agreement would be set aside. In early September plaintiffs were finally permitted to submit an application for the Doylestown dealership, but Salmeri informed them they were not the preferred applicants for that location. Finally, on September 17, 1970, at Salmeri's direction, Schneider wrote a letter to Salmeri stating that he favored Higgins as the purchaser of the assets of Schneider Company. The terms of the agreement with Higgins were generally the same as with Mogul and Levin. Schneider would nevertheless have preferred to sell to plaintiffs but felt that, since Salmeri favored Higgins for the dealership, if he (Schneider) wanted to sell at all, he would have to sell to Higgins.
On September 10 and again on October 27, 1970, Schneider's counsel advised plaintiffs that the agreement of June 26, 1970 was null and void for failure to obtain approval of Cadillac and Oldsmobile. Having been advised by Salmeri that unless a release was obtained from Mogul and Levin, no sale would be approved, Schneider requested, and received from plaintiffs, a release before returning the $20,000 deposit. The release signed by Mogul and Levin was dated November 9, 1970, and named Schneider Company, Paul and Irma Schneider and "all other persons, firms or corporations . . .",
releasing them from all claims arising out of the agreement of June 26, 1970. Thereafter, GMC approved transfer of the franchise to Higgins and, on February 29, 1971, the Schneider Company assets were transferred to Higgins.
Plaintiffs' suit charges violations of §§ 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. Section 1 declares illegal "[every] contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States . . . .", and § 2 makes it unlawful to "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 . . . ."
Plaintiffs contend that GMC, Schneider and Schneider Company conspired to prevent plaintiffs from obtaining the franchise to operate the Doylestown dealership; that their actions constituted a concerted refusal to deal with plaintiffs; and that their conduct was either an unlawful restraint of trade or an unlawful attempt to monopolize, or an exercise of monopolistic power over, a relevant segment of the automotive market.
Section 1 Claim -- Restraint of Trade
Despite the absolute language of § 1 only contracts or combinations which "unreasonably" or "unduly" restrain trade are prohibited. Standard Oil Company v. United States, 221 U.S. 1, 55 L. Ed. 619, 31 S. Ct. 502 (1911). There are exceptions to the "rule of reason" announced in Standard Oil. Some arrangements have such an obvious effect on competition that they are conclusively presumed to be illegal, i.e., are per se violations of the Act. Such arrangements include price fixing agreements, division of markets among competitors, tying arrangements, and collective refusals to deal, or "group boycotts." See E. A. McQuade Tours, Inc. v. Consolidated Air Tour Manual Committee, 467 F.2d 178 (5th Cir. 1972), cert. denied, 409 U.S. 1109, 34 L. Ed. 2d 690, 93 S. Ct. 912 (1973).
The McQuade court analyzed the cases applying the per se rule to collective refusals to deal and placed them in three categories, those involving (1) "horizontal combinations among traders at one level of distribution, whose purpose was to exclude direct competitors from the market", citing, e.g., Eastern States Retail Lumber Dealers Assoc. v. United States, 234 U.S. 600, 58 L. Ed. 1490, 34 S. Ct. 951 (1914), and Associated Press v. United States, 326 U.S. 1, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945); (2) "vertical combinations among traders at different marketing levels, designed to exclude from the market direct competitors of some members of the combination", citing, e.g., Klor's, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 3 L. Ed. 2d 741, 79 S. Ct. 705 (1959) and Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 5 L. Ed. 2d 358, 81 S. Ct. 365 (1961); and (3) "combinations designed to influence coercively the trade practices of boycott victims, rather than to eliminate them as competitors", citing, e.g., Fashion Originators Guild of America v. Federal Trade Comm'n, 312 U.S. 457, 85 L. Ed. 949, 61 S. Ct. 703 (1941). The court in McQuade then went on to state, 467 F.2d at 187:
"In all of these cases, the touchstone of per se illegality has been the purpose and effect of the arrangement in question. Where exclusionary or coercive conduct has been present, the arrangements have been viewed as 'naked restraints of trade,' and have fallen victim to the per se rule. On the other hand, where these elements have been missing, the per se rule has not been applied to collective refusals to deal. See, e.g., Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 9th Cir. 1969, 416 F.2d 71, cert. denied 396 U.S. 1062, 90 S. Ct. 752, 24 L. Ed. 2d 755 (1970) . . .. We conclude that resort to the per se rule is justified only when the presence of exclusionary or coercive conduct warrants the view that the arrangement in question is a 'naked restraint of trade.' Absent these factors, the rule of reason must be followed in determining the legality of the arrangement."
It is at once apparent that the instant case falls into none of the categories of cases listed in McQuade as concerted refusals to deal which have been held to be per se violations. It seems to fit instead into the "rule of reason" category, of which Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 24 L. Ed. 2d 755, 90 S. Ct. 752 (1970), is an outstanding and often cited example. In Seagram, plaintiff Hawaiian Oke was the sole distributor of several of the products manufactured and sold by defendants Seagram & Sons, Inc. and Barton Distillery Company. There was evidence that it was desirable to market the Seagram and Barton products in combination. Defendant McKesson and Robbins, Inc., which was also in the distributing business, solicited both Seagram and Barton for, and obtained from them, the distribution rights previously enjoyed by Hawaiian Oke. Judgment was entered on the jury's verdict in favor of Hawaiian Oke. The Court of Appeals reversed with directions to dismiss the action, ruling that there was no per se violation and that, in the absence of evidence of some forbidden or anti-competitive motive, there was no evidence to support a finding of any unreasonable restraint of trade in defendants' conduct toward Hawaiian Oke.
The principal holding of Seagram was summarized thus by the Court of Appeals for the Third Circuit in Ark Dental Supply Company v. Cavitron Corporation, 461 F.2d 1093, 1094 (3d Cir. 1972):
"In a thorough and well-researched opinion, the court, speaking through Judge Duniway, held that it is indisputable that a single manufacturer or seller can ordinarily stop doing business with A and transfer his business to B and that such a transfer is valid even though B may have solicited the transfer and even though the seller and B may have agreed prior to the seller's termination of A."
The principle was reiterated by the Ninth Circuit in Ricchetti v. Meister Brau, Inc., 431 F.2d 1211, 1214 (9th Cir. 1970), cert. denied, 401 U.S. 939, 28 L. Ed. 2d 219, 91 S. Ct. 934 (1971):
"It is well established that a manufacturer or producer has the right to deal with whom he pleases and to select his customers at will, so long as there is no resultant effect which is violative of the antitrust laws. Thus, a manufacturer may discontinue a relationship, or refuse to open a new relationship for business reasons which are sufficient to the manufacturer, and adverse effect on the business of the distributor is immaterial in the absence of any arrangement restraining trade or competition. United States v. Arnold Schwinn & Co., 388 U.S. 365, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969); Scanlan v. Anheuser-Busch, Inc., 388 F.2d 918, 921 (9th Cir. 1968); Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283, 286-287 (6th Cir. 1963); Timken Roller Bearing Co. v. Federal Trade Commission, 299 F.2d 839 (6th Cir. 1962), cert. denied, 371 U.S. 861, 83 S. Ct. 118, 9 L. Ed. 2d 99 (1962); House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867 (2d Cir. 1962)." (Emphasis added)