Ford Motor Co. v. United States

405 U.S. 562, 92 S. Ct. 1142, 31 L. Ed. 2d 492, 1972 U.S. LEXIS 164, 1972 Trade Cas. (CCH) 73,905
CourtSupreme Court of the United States
DecidedMarch 29, 1972
Docket70-113
StatusPublished
Cited by108 cases

This text of 405 U.S. 562 (Ford Motor Co. v. United States) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ford Motor Co. v. United States, 405 U.S. 562, 92 S. Ct. 1142, 31 L. Ed. 2d 492, 1972 U.S. LEXIS 164, 1972 Trade Cas. (CCH) 73,905 (1972).

Opinions

Mr. Justice Douglas

delivered the opinion of the Court.

This is a direct appeal under § 2 of the Expediting Act, 32 Stat. 823, as amended, 15 U. S. C. § 29, from a judgment of the District Court (286 F. Supp. 407, 315 F. Supp. 372), holding that Ford Motor Co. (Ford) violated § 7 of the Celler-Kefauver Antimerger Act1 by acquiring certain assets from Electric Autolite Co. (Autolite). The assets included the Autolite trade name, Autolite’s only [565]*565spark plug plant in this country (located at New Fostoria, Ohio), a battery plant, and extensive rights to its nationwide distribution organization for spark plugs and batteries. The present appeal2 is limited to that portion of the judgment relating to spark plugs and ordering Ford to divest the Autolite name and the spark plug plant. The ancillary injunctive provisions are also here for review.

I

Ford, the second-leading producer of automobiles, General Motors, and Chrysler together account for 90% of the automobile production in this country. Though Ford makes a substantial portion of its parts, prior to its acquisition of the assets of Autolite it did not make spark plugs or batteries but purchased those parts from independent companies.

The original equipment of new cars, insofar as spark plugs are concerned, is conveniently referred to as the OE tie. The replacement market is referred to as the aftermarket. The independents, including Autolite, furnished the auto manufacturers with OE plugs at cost or less, about six cents a plug, and they continued to sell at that price even when their costs increased threefold. The independents sought to recover their losses on OE sales by profitable sales in the aftermarket where the requirement of each vehicle during its lifetime is about five replacement plug sets. By custom and practice among mechanics, the aftermarket plug is usually the same brand as the OE plug. See generally Hansen & Smith, The Champion Case: What Is Competition?, 29 Harv. Bus. Rev. 89 (1951).

Ford was anxious to participate in this aftermarket and, after various efforts not relevant to the present case, concluded that its effective participation in the after[566]*566market required “an established distribution system with a recognized brand name, a full line of high volume service parts, engineering experience in replacement designs, low volume production facilities and experience, and the opportunity to capitalize on an established car population.”

Ford concluded it could develop such a division of its own but decided that course would take from five to eight years and be more costly than an acquisition. To make a long story short, it acquired certain assets of Autolite in 1961.

General Motors had previously entered the spark plug manufacturing field, making the AC brand. The two other major domestic producers were independents— Autolite and Champion. When Ford acquired Autolite, whose share of the domestic spark plug market was about 15%, only one major independent was left and that was Champion, whose share of the domestic market declined from just under 50% in 1960 to just under 40% in 1964 and to about 33% in 1966. At the time of the acquisition, General Motors’ market share was about 30%. There were other small manufacturers of spark plugs but they had no important share of the market.3

The District Court held that the acquisition of Auto-lite violated § 7 of the Celler-Kefauver Antimerger Act [567]*567because its effect “may be substantially to lessen competition.” 4 It gave two reasons for its decision.

First, prior to 1961 when Ford acquired Autolite it had a “pervasive impact on the aftermarket,” 315 F. Supp., at 375, in that it was a moderating influence on Champion and on other companies derivatively. It explained that reason as follows:

“An interested firm on the outside has a twofold significance. It may someday go in and set the stage for noticeable deconcentration. While it merely stays near the edge, it is a deterrent to current competitors. United States v. Penn-Olin Chemical Co., 378 U. S. 158 .. . (1964). This was Ford uniquely, as both a prime candidate to manufacture and the major customer of the dominant member of the oligopoly. Given the chance that Autolite would have been doomed to oblivion by defendant’s grassroots entry, which also would have destroyed Ford’s soothing influence over replacement prices, Ford may well have been more useful as a potential than it [568]*568would have been as a real producer, regardless how it began fabrication. Had Ford taken the internal-expansion route, there would have been no illegality; not, however, because the result necessarily would have been commendable, but simply because that course has not been proscribed.” 286 F. Supp., at 441.

See also FTC v. Procter & Gamble Co., 386 U. S. 568; United States v. Penn-Olin Chemical Co., 378 U. S. 158.

Second, the District Court found that the acquisition marked “the foreclosure of Ford as a purchaser of about ten per cent of total industry output.” 315 F. Supp., at 375. The District Court added:

“In short, Ford's entry into the spark plug market by means of the acquisition of the factory in Fos-toria and the trade name ‘Autolite’ had the effect of raising the barriers to entry into that market as well as removing one of the existing restraints upon the actions of those in the business of manufacturing spark plugs.
“It will also be noted that the number of competitors in the spark plug manufacturing industry closely parallels the number of competitors in the automobile manufacturing industry and the barriers to entry into the auto industry are virtually insurmountable at present and will remain so for the foreseeable future. Ford’s acquisition of the Auto-lite assets, particularly when viewed in the context of the original equipment (OE) tie and of GM’s ownership of AC, has the result of transmitting the rigidity of the oligopolistic structure of the automobile industry to the spark plug industry, thus reducing the chances of future deconcentration of the spark plug market by forces at work within that market.” Ibid.

[569]*569See also FTC v. Consolidated Foods Corp., 380 U. S. 592; Brown Shoe Co. v. United States, 370 U. S. 294; United States v. Du Pont & Co., 353 U. S. 586.

We see no answer to that conclusion if the letter and spirit of the Celler-Kefauver Antimerger Act5 are to be honored. See United States v.

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405 U.S. 562, 92 S. Ct. 1142, 31 L. Ed. 2d 492, 1972 U.S. LEXIS 164, 1972 Trade Cas. (CCH) 73,905, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ford-motor-co-v-united-states-scotus-1972.