GMC's conditions were consistent with the position it had taken over the previous ten years and appear to arise out of legitimate business concerns that Arnold Pontiac's current location was too remote. GMC's behavior becomes suspicious only in light of the coercion applied by the Pittsburgh-Area Buick Dealers.
A. Cross-Motions for Summary Judgment
The standard for cross-motions for summary judgments is the same as for individual motions for summary judgment. The court handles cross-motions as if they were two distinct, independent motions. Rains v. Cascade Industries, Inc., 402 F.2d 241, 245 (3d Cir. 1968). Thus, in evaluating each motion, the court must consider the facts and inferences in the light most favorable to the non-moving party. Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977). Rule 56 (c) of the Federal Rules of Civil Procedure provides that a court shall grant summary judgment if it finds that, "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
B. Burden of Proof
In antitrust cases, there are two basic routes by which liability can be imposed. Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 99 L. Ed. 2d 808, 816, 108 S. Ct. 1515 (1988). The normal route is called the "rule of reason." Under the rule of reason, "the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition." Id. Under some circumstances, however, the court takes a shortcut and holds the conduct to be per se illegal, obviating the need to prove an unreasonable restraint on competition. Id. A court will find agreements illegal per se if their "nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality." Id. (quoting National Soc. of Professional Engineers v. United States, 435 U.S. 679, 692, 55 L. Ed. 2d 637, 98 S. Ct. 1355 (1978)).
An important distinction to make when evaluating a potentially anticompetitive agreement is whether the agreement is "vertical" or "horizontal." Id. at 820-21. Vertical agreements are those between parties at different levels of the distribution chain, such as a manufacturer and distributor. Horizontal agreements are those among parties at the same level of the distribution chain, such as an agreement among distributors. Horizontal agreements are generally per se illegal, whereas non-price vertical agreements may be subject to the rule of reason. For example, if the various distributors reach a horizontal agreement to divide the market geographically, it is a per se violation, whereas if a manufacturer and a dealer agree to an exclusive franchise, it is not a per se violation. Id.
In this case, we have elements of both horizontal agreements and vertical agreements. The agreement between the members of the Pittsburgh-Area Buick Dealers resembles a pure horizontal agreement. The agreement between GMC and the association resembles a vertical agreement. A central issue in the trial of this case, therefore, is whether this hybrid agreement is more vertical or horizontal.
An extensive review of the case law on vertical and horizontal agreements failed to uncover a case on point. Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 99 L. Ed. 2d 808, 816, 108 S. Ct. 1515 (1988), the recent Supreme Court case that GMC relies on extensively, involved a single distributor putting pressure on the manufacturer, and thus did not have the horizontal element present in this case.
After examining in detail the language used by the courts in analyzing vertical and horizontal agreements, we have concluded that the agreement among the members of the Pittsburgh-Area Buick Dealers and subsequently imposed on GMC constitutes a horizontal agreement.
The Supreme Court indicated that it would find such an arrangement horizontal in Sharp, 485 U.S. 717, 99 L. Ed. 2d at 821, n. 4, 108 S. Ct. 1515. In summarizing and adopting an argument by Robert Bork, the Court wrote, "a facially vertical restraint imposed by a manufacturer only because it has been coerced by a 'horizontal carte' agreement among his distributors is in reality a horizontal restraint. . . . [A] restraint is horizontal not because it has horizontal effects, but because it is the product of a horizontal agreement." Id. (discussing a passage from R. Bork, The Antitrust Paradox 288 (1978)). The scenario described by the Court is, of course, precisely the situation in this case.
Similarly, in Valley Liquors, Inc. v. Renfield Importers, Ltd., 678 F.2d 742 (7th Cir. 1982), the court wrote, "The motive of supplier and distributors alike could thus be described as wanting to eliminate price cutters yet there would be no per se illegality so long as the supplier was not just knuckling under to the distributors' desire for less competition." Id. at 744. Under the facts as alleged by Arnold Pontiac, GMC was "knuckling under" to pressure from the Pittsburgh-Area Buick Dealers when it did not award the dealership, and thus would be subject to per se liability under the rule in Renfield.
Finally, the Third Circuit addressed our precise dilemma in Tunis Bros. Co., Inc. v. Ford Motor Co., 763 F.2d 1482 (3d Cir. 1985). Although addressing a conspiracy that involved only one dealer, the court wrote:
In those situations where the termination of a distributor has allegedly occurred due to a conspiracy between the supplier and one or more of its distributors, the courts have been uncertain as to whether to apply the "rule of reason" or the per se rule because, [sic] such cases have both horizontal and vertical elements. . . . The dilemma has been described as follows:
The actual termination of the distributor is imposed vertically by the supplier, yet the inducement for the termination may come horizontally from the complaining competitors of the terminated distributor. Thus, although the form of such a 'mixed termination' conspiracy may be vertical, the competitive purpose and effect of the conspiracy is more similar to horizontal conspiracies that exclude competitors of the conspirators from a market.