Oreck Corporation v. Whirlpool Corporation and Sears, Roebuck & Co.

579 F.2d 126, 1978 U.S. App. LEXIS 11410

Opinions

ON REHEARING EN BANC

ROBERT P. ANDERSON, Circuit Judge:

The appellants, Whirlpool Corporation (Whirlpool) and Sears, Roebuck & Co. (Sears), appealed from a judgment entered on July 13, 1976, on a jury verdict against them and in favor of Oreck Corporation (Oreck), on two counts of a seven count complaint charging violations of § 1 of the Sherman Act, 15 U.S.C. § 1. On appeal, a divided panel of this court reversed and remanded the case for a new trial. Oreck Corp. v. Whirlpool Corp., 563 F.2d 54 (2d Cir. 1977). Appellee’s petition for a rehearing en banc was granted on December 15, 1977. The hearing of the appeal en banc was submitted on briefs by all of the parties and without further oral argument. On reconsideration we concur in the judgment of the panel majority, reverse the judgment of the district court, and remand the case for a new trial.

The material facts of this dispute have been set forth in the opinion of the panel majority and will be reviewed here only briefly. Whirlpool has been in the vacuum cleaner business since 1957 when it acquired the Birtman Electric Co. and began manufacturing vacuum cleaners for Sears, to be sold under the “Kenmore" label. Whirlpool also sought to sell vacuum cleaners under its own tradename. In August, 1963, Whirlpool entered into an agreement with Oreck, by which the latter was appointed the exclusive distributor of vacuum cleaners under the name of “Whirlpool” for an initial term of five years, with automatic extensions for one-year periods thereafter, absent six months prior notice of termination of the agreement by either party. Whirlpool gave Oreck formal notice of termination of the agreement on June 27,1968; but after further negotiations, Whirlpool and Oreck entered into a substituted contract, dated August 1, 1968, which extended Oreck’s distributorship through December 31, 1971; it did not, however, contain any provision for an extension. On May 14, 1971, Whirlpool informed Oreck that it intended to allow the sales agreement to expire according to its terms and, on December 31, 1971, Oreck’s exclusive distributorship of “Whirlpool” products ended. The instant action followed in September of 1972.

This lawsuit is based on Oreck’s claim that it was not afforded the opportunity for an additional period of time as Whirlpool’s exclusive distributor at the behest and insistence of Sears, a much larger purchaser of Whirlpool products. Accordingly, Oreck’s complaint charged both Whirlpool and Sears with engaging in a contract, combination, or conspiracy in unreasonable restraint of trade to exclude Oreck from the vacuum cleaner market in the United States and Canada.¹

At trial, Oreck’s case for liability rested principally upon the testimony of Marshall Oreck, its General Manager, and of David Oreck, its President. It was their contention that the reason for Whirlpool’s failure to renew the contract was Sears’ desire to end competition from Oreck. By way of defense and explanation of its action, Whirlpool presented the testimony of its officers who dealt with Oreck to show that, among other reasons, the contract was not renewed after December, 1971, because of Oreck’s .failure to follow the original marketing strategy contemplated by Whirlpool.²

Oreck presented no evidence that the net economic effect of the non-renewal of its contract was to restrain trade unreasonably in the vacuum cleaner industry in the United States and/or Canada.³ Nor did it show that alternative sources of supply were unavailable and that it was, therefore, excluded from competition in the vacuum cleaner business. David Oreck admitted that Oreck had been able to obtain vacuum cleaners from another manufacturer and was, at the time of trial, the world’s largest supplier of “top fill upright vacuum cleaners.”

Despite the lack of mention or reference to any evidence of an anticompetitive purpose or effect in connection with the alleged Whirlpool/Sears agreement, the trial court instructed the jury that,

“The violations alleged by plaintiff are, if you credit them, unreasonable restraints of trade ... If you find there was such an agreement [between Whirlpool and Sears “to exclude Oreck from a market in vacuum cleaners or Whirlpool vacuum cleaners anywhere ”], then you should go on to consider damages.” (Emphasis added.) .

An almost identical charge was given with respect to count two, dealing with Oreck’s alleged exclusion from the Canadian market.⁴ Under such instructions, the jury could simply have found an agreement by Sears and Whirlpool to exclude Oreck from the sale of Whirlpool vacuum cleaners and, on that basis, have found them guilty (as it in fact did) of a per se violation of § 1 of the Sherman Act. Yet the very same con duct can constitute the granting of a perfectly legal exclusive distributorship or one, at least, whose legality must be judged under the rule of reason standard. Packard Motor Car Co. v. Webster Motor Car Co., 100 U.S.App.D.C. 161, 243 F.2d 418, cert. denied, 355 U.S. 822, 78 S.Ct. 29, 2 L.Ed.2d 38 (1957); see also, United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967), overruled on other grounds, Continental T.V., Inc. v. GTE Syl-vania, Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977); Quality Mercury, Inc. v. Ford Motor Co., 542 F.2d 466 (8th Cir. 1976), cert. denied sub nom. Prestige Lincoln-Mercury Inc. v. Quality Mercury, Inc., 433 U.S. 914, 97 S.Ct. 2986, 53 L.Ed.2d 1100 (1977); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970); Bay City-Abrahams Bros., Inc. v. Estee Lauder, Inc., 375 F.Supp. 1206 (S.D.N.Y.1974). On the instant reconsideration en banc, the issue is whether the per se standard, under which the trial judge charged the jury, was appropriate in light of the nature of the alleged Whirlpool/Sears agreement.

Oreck’s argument that the district court was correct in instructing the jury to apply the per se standard in this case, rests principally on two assertions: first, that Whirlpool’s decision not to renew Oreck’s distributorship was motivated by a desire to eliminate the price competition which Oreck was offering to Sears; and second, that this effort by Sears and Whirlpool to restrain competition constituted a group boycott expressly forbidden by the holdings of the United States Supreme Court in United States v. General Motors Corp., 384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966); and Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959).

With regard to the first of these points, it is undisputed that, at all times relevant, Sears was selling its “Kenmore” vacuum cleaners at prices below those charged by Oreck for comparable “Whirlpool” models. The complaint did not allege, the evidence at the trial did not show, and counsel in summation did not argue, that Whirlpool was attempting to maintain high resale prices for its products by conspiring with its distributors or that its actions toward Oreck were an effort to chastise a dealer for refusing to cooperate in a scheme to fix or maintain prices. Cf. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). The contracts entered into by Oreck and Whirlpool in 1963 and 1968 clearly stated that Oreck had the sole right to determine its selling prices.

Oreck concedes that there was no Sears/Whirlpool agreement to fix prices, but argues that the elimination of its distributorship amounted to tampering with the price structure for vacuum cleaners, equally a per se violation.⁵ See, United States v. Socony-Vaeuum Oil Co., 310 U.S. 150, 221, 60 S.Ct. 811, 84 L.Ed.2d 1129 (1940). In its brief on rehearing en banc, Oreck refers to a so-called “edge effect,” that is, that by continuing to lower its prices and thereby come closer to those of Sears, Oreck’s price operated as a ceiling against any increases by Sears. Cf. United States v. Penn-Olin Chemical Company, 378 U.S. 158 at 173-74, 84 S.Ct. 1710,12 L.Ed.2d 775 (1964); Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division [II], 75 Yale L.J. 373, 405-410 (1966). This claim is unavailing in the present posture of this case. Because of the trial judge’s incorrect instructions to the jury, it cannot be said that the issue of whether Oreck’s distributorship was allowed to lapse in order to protect Sears from price competition was fairly submitted to the jury or decided by its verdict. Rather, because the trial judge failed to instruct the jury that it must find that the purpose or the effect of these agreements was to enable Sears to raise or to maintain its prices for “Kenmore” vacuum cleaners, the jury’s verdict that Sears and Whirlpool violated § 1 of the Sherman Act is of no effect.

Oreck alleged that its cancellation, by agreement of Whirlpool and Sears, was a “group boycott” under the rule of Klor’s Inc. v. Broadway-Hale Stores, Inc., supra, and of United States v. General Motors Corp., supra, which treat such behavior as a per se violation of § 1 of the Sherman Act. This case, however, cannot be fitted into the category of group boycott cases. “While the boycott concept is infinitely expandable, the per se doctrine ought not to be.” Sullivan, Antitrust 256 (1977), quoted in Drayer v. Krasner, 572 F.2d 348 (2d Cir. 1978), slip op. at 1253, 1265. It is important to distinguish between “horizontal” restraints, i. e. agreements between competitors at the same level of market structure, and “vertical” restraints, i. e. combinations of persons at different levels of the market structure, such as manufacturers and distributors. See United States v. Topco Associates, 405 U.S. 596, 608, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972). Horizontal restraints alone have been characterized as “naked restraints of trade with no purpose except stifling competition,” White Motor Co. v. United States, 372 U.S. 253, 263, 83 S.Ct. 696, 702, 9 L.Ed.2d 738 (1963); and, therefore, per se violations of the Sherman Act. On the other hand, while vertical restrictions may reduce intrabrand competition by limiting the number of sellers of a particular product, competing for a given group of buyers, they also promote interbrand competition by allowing a manufacturer to achieve certain efficiencies in the distribution of its products, see Continental T.V., Inc. v. GTE Sylvania, Inc., supra, 433 U.S. at 54, 97 S.Ct. 2549. They are, therefore, to be examined under the rule of reason standard. See Handler, Changing Trends in Antitrust Doctrines: An Unprecedented Supreme Court Term — 1977, 77 Colum.L. Rev. 979 at 985-87 (1977).

In Klor’s, the Supreme Court specifically noted that “this is not a case of a manufacturer and [its] dealer agreeing to an exclusive distributorship,” 359 U.S. at 212, 79 S.Ct. at 709. The present case, involving as it does an alleged agreement between a single manufacturer and a single dealer, is, in essence, an exclusive distributorship controversy, and the “group boycott” doctrine, is, therefore, not applicable. Because Sears is a large company presumably selling a large number of vacuum cleaners does not, ipso facto, convert this case into a horizontal conspiracy warranting per se treatment.⁶ Cf. Continental T.V., Inc. v. GTE Sylvania, Inc., supra, 433 U.S. at 58 n. 28, 97 S.Ct. 2549.

Moreover, in his instructions to the jury, the trial judge failed to marshal any of the evidence presented by Whirlpool to show that its refusal to renew Oreck’s distributorship was motivated by legitimate business concerns⁷ and that its actions were consistent with the terms of the 1968 contract. It is the contractual nature of the dealings between Oreck and Whirlpool which distinguish this case from the holding of United States v. General Motors Corp., supra, relied upon by Oreck. In General Motors, the Court focused on the extra -contractual and price-fixing aspects of General Motors’ activities in eliciting from dealers in the Los Angeles area agreements, substantially interrelated and interdependent, that none of them would do business with price discounters. 384 U.S. at 144, 86 S.Ct. 1321. The Court pointed out that what resulted from the activities of General Motors 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,” id. at 144, 86 S.Ct. at 1330; and that these activities could hardly be described as “unilateral” or merely “parallel.” Id. at 145, 86 S.Ct. 1321. It was this same concerted action by businessmen to boycott other traders and thereby deprive them of access to all sources of merchandise which they wished to sell to the public, which led to the results reached in United States v. Parke, Davis & Co., supra ; and Klor’s, Inc. v. Broadway-Hale Stores, Inc., supra. Cf. Beckman v. Walter Kidde & Company, 316 F.Supp. 1321, 1327 (E.D.N.Y.1970), aff’d, 451 F.2d 593 (2d Cir. 1971), cert. denied, 408 U.S. 922, 92 S.Ct. 2488, 33 L.Ed.2d 333 (1972).

What is crucial here is to consider those actions which General Motors could have taken, but did not, to discourage the sale of cars to discounters, which the Court characterized as being “wholly unilateral conduct, the validity of which under the antitrust laws was assumed, without being decided in Parke, Davis, supra." United States v. General Motors, supra, 384 U.S. at 144, 86 S.Ct. at 1330. After describing the efforts of the Losor Chevrolet Dealers Association to enlist the aid of General Motors, the meetings between General Motors personnel and local dealers at which General Motors elicited from each dealer a promise not to do business with the discounters, and the collaboration among the dealers and with General Motors to enforce these promises, the Court went on to state,

“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. The evidence indicates that it had no intention of acting in this unilateral fashion. On the contrary, overriding corporate policy with respect to proper dealer relations 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, Davis, supra.” (Emphasis added and footnotes omitted.) 384 U.S. at 143-144, 86 S.Ct. at 1329-30.

The General Motors Dealer Selling Agreement provided that a dealer’s franchise could be terminated if the dealer attempted to establish a second and unauthorized sales outlet or location. Without deciding the question, the Court indicated that had General Motors considered that the conduct of a dealer selling to price discounters violated the terms of the Dealer Selling Agreement, it could lawfully have terminated the franchise. The Court nowhere suggests that action by General Motors in accordance with this contract would have been any less unilateral, or any less lawful, because it was taken in response to complaints by competing dealers. Cf. Federal Trade Commission v. Raymond Bros.-Clark Company, 263 U.S. 565 (1924). Unlike General Motors, the parties in this case introduced no proof that Whirlpool took any action that was not in accord with the terms of its 1968 contract. Whirlpool contends that Oreck was fully aware that its distributorship would cease in December, 1971, regardless of whether or not its efforts to compete against Sears and other vacuum cleaner dealers were successful. The principle that unilateral refusals to deal do not per se suppress competition is not altered by the fact that the cut-off distributor has been a “successful dealer” or that its business is damaged. See Bay City-Abrahams Bros., Inc. v. Estee Lauder, Inc., supra; Top-All Varieties, Inc. v. Hallmark Cards, Inc., 301 F.Supp. 703 (S.D.N.Y.1969).

And yet, the trial court made no attempt to balance its charge on the effect of the alleged Whirlpool/Sears conspiracy with a reference to the evidence introduced at trial that Whirlpool’s decision not to renew Oreck’s distributorship was an exercise of its contractual rights. It has always been the prerogative of a manufacturer to decide with whom it will deal. See United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465 (1919). Any alleged inducements by Sears to Whirlpool to allow the contract with Oreck to expire may have amounted to tortious interference; but, without some further showing that from this course of conduct there was an anticompetitive effect in the vacuum cleaner industry as a whole, it is inconsistent with the sanctity of contractual arrangements to allow the antitrust laws to inject a provision into the agreement which would require Whirlpool to renew Oreck’s distributorship for as long as it is able to compete successfully with Sears. In this case, therefore, something more than an agreement between Whirlpool and Sears to eliminate Oreck must be shown. The agreement becomes violative of § 1 of the Sherman Act only if it is anticompetitive in purpose or effect — in sum, it must be tested by the rule of reason. Without any consideration of the anticompetitive purpose or effect, arbitrarily seeking to protect Oreck simply because Whirl pool refused to renew a contract with Oreck which had terminated by its own terms, even though this refusal was in whole or in part, due to persuasion by Sears, disregards the well established rule that “the antitrust laws . . . were enacted for ‘the protection of competition, not competitors t ft

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). (Emphasis in original.)

The judgment of the district court, based as it is on a finding of liability on the part of Whirlpool and Sears, is reversed and the case is remanded for a new trial. In so doing, we express no opinion as to the correctness of those portions of the trial court’s instructions dealing with the formulation of damages.

Footnotes

1

. At no time in the course of this litigation has Oreck alleged that either its 1963 or its 1968 contract with Whirlpool in and of itself violated § 1 of the Sherman Act. Neither was alleged to be an agreement which attempted to fix prices or eliminate resale price competition, nor did it attempt to impose unreasonable geographical or customer restraints on Oreck’s ability to compete.

2

. According to their testimony, it was Whirlpool’s intention that Oreck’s distributorship would serve as an avenue to the sale of “Whirlpool” vacuum cleaners to department stores and other special retail accounts. There was further testimony that by 1965, Oreck had abandoned this marketing strategy and had resorted to sales to janitorial supply houses, and that Oreck further departed from Whirlpool’s original plan by adopting, in 1967, a technique for making sales of “Whirlpool” machines through direct mail orders. It was undisputed that by 1970, mail order sales comprised over 90% of Oreck’s business.

3

. David Oreck testified that the vacuum cleaner industry is a large one and that during 1971, when Oreck sold 78,203 vacuum cleaners, consumers purchased about 7.8 million cleaners. Oreck, therefore, had no more than a 1% market share at the time of the completion of its exclusive distributorship for Whirlpool. Moreover, there was, at all relevant times; an abundance of vacuum cleaners available.-,in the marketplace which were reasonably-, interchangeable with those manufactured by -Whirlpool.

4

. Count 2 of the complaint charged that Whirlpool and Sears unlawfully conspired to exclude Oreck from the vacuum cleaner market in Canada. (Counts 3 through 7 were dismissed.) At trial, Oreck contended that Whirlpool’s refusal to grant its request that Whirlpool procure Canadian Standards Association approval for the “Whirlpool” vacuum cleaners it desired to sell in Canada, provided substantial evidence of the unlawful conspiracy to remove Oreck’s competition against Sears, selling its “Kenmore” machines through its subsidiary, Simpson-Sears Ltd., the sole distributor of Whirlpool-made products in Canada.

The 1963 and 1968 agreements between Whirlpool and Oreck both specifically stated that Whirlpool was appointing Oreck its exclusive distributor of certain “Whirlpool” products “for the United States- of America and its possessions.” The parties agree that this provision placed no restriction on the territory in which Oreck might sell goods purchased from Whirlpool. Whirlpool concedes that it refused to obtain Canadian Standards Association approval for the cleaners that Oreck was seeking to market in Canada, but argues that such approval was not a prerequisite to selling in Canada and that, in any event, Oreck sold vacuum cleaners in Canada during the period of its distributorship.

On this count, the trial judge instructed the jury that,

“Arrangements . . . restricting the territory in which a product may be resold are unreasonable restraints of trade in and of themselves . . . You need not determine whether such arrangements are reasonable, or whether they have an impact upon the marketplace, nor need you be concerned with the business or supposed economic justification for such arrangements . . . .”

In light of the decision of the United States Supreme Court in Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), this instruction was incorrect. Efforts by a manufacturer to restrict the territory in which a distributor of its products operates are to be examined under the rule of reason standard. See Eastern Scientific Co. v. Wild Heerbrugg Instruments, Inc., 572 F.2d 883 (1st Cir. 1978).

It is undisputed that Whirlpool was not required to obtain Canadian Standards Association approval for its vacuum cleaners as requested by Oreck. That its refusal to do so may have been based on an agreement with its existing Canadian distributor does not, of itself, create a violation of the antitrust laws. It must further be found that this agreement was anti-competitive in purpose or effect. See Continental T.V., Inc. v. GTE Sylvania, Inc., supra; Quality Mercury, Inc. v. Ford Motor Co., 542 F.2d 466 (8th Cir. 1976), cert. denied sub nom. Prestige Lincoln-Mercury, Inc. v. Quality Mercury, Inc., 433 U.S. 914, 97 S.Ct. 2986, 53 L.Ed.2d 1100 (1977); Packard Motor Car Co. v. Webster Motor Car Co., 100 U.S.App.D.C. 161, 243 F.2d 418, cert. denied, 355 U.S. 822, 78 S.Ct. 29, 2 L.Ed.2d 38 (1957); Schwing Motor Co. v. Hudson Sales Corp., 138 F.Supp. 899 (D.Md.), aff’d, 239 F.2d 176 (4th Cir. 1956), cert. denied, 355 U.S. 823, 78 S.Ct. 30, 2 L.Ed.2d 38 (1957).

The trial judge’s failure to instruct the jury on this point was plain error. Moreover, it inevitably prejudiced the jury’s consideration of the first count even though the matter of sales in the Canadian market was set out in the second count. In the evidence, in the arguments, and in the district court’s charge, this incident was used as an example of the claimed unlawful activity by Whirlpool and Sears to keep Oreck from selling more vacuum cleaners and to destroy Oreck’s competitive activities. Throughout the trial, Whirlpool’s refusal to procure Canadian Standards Association approval for the vacuum cleaners Oreck desired to sell in Canada was characterized as a major part of the alleged Whirlpool/Sears conspiracy to violate the antitrust laws.

5

. Oreck introduced no evidence at trial to show that the purpose of Whirlpool’s refusal to renew Oreck’s distributorship was to give Sears the power to maintain the prices of its “Kenmore” machines at an artificially high level. Cf. United States v. Socony-Vacmim Oil Co., 310 U.S. 150, 224-26 n. 59, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). Neither did Oreck submit evidence to show that Whirlpool machines had a sufficient share of the vacuum cleaner market to permit any of its dealers to exploit a dealer monopoly without feeling the pinch of interbrand competition. See the Supreme Court, 1976 Term, 91 Harv.L.Rev. 70, 237 n. 57 (1977). It appears from the record that there was effective competition in the vacuum cleaner business at the manufacturer level. When interbrand competition exists, it provides a significant check on the exploitation of intrabrand market power because of the ability of consumers to substitute a different brand of the same product. See Continental T.V., Inc. v. GTE Sylvania, Inc., supra, at 52 n. 19. In order to prove a violation of § 1 of the Sherman Act, Oreck would have had to show that Whirlpool’s agreement with Sears to eliminate Oreck’s competition either promoted a Whirlpool monopoly in the vacuum cleaner industry, see Quality Mercury, Inc. v. Ford Motor Co., supra, at 470; Fieischmann Distilling Corp. v. Distillers Co. Ltd., 395 F.Supp. 221 (S.D.N.Y. 1975); or gave Sears a market position from which it could raise retail prices even in the face of interbrand competition. See, ABA Antitrust Section, Monograph No. 2, Vertical Restrictions Limiting Intrabrand Competition (1977), at 93 n. 380. The Whirlpool/Sears agreement should, therefore, have been examined under the rule of reason standard.

6

. Oreck seeks to distinguish the line of cases upholding the legality of agreements by which a manufacturer substitutes one exclusive distributor for another or terminates a distributor in order to afford another exclusive selling rights, see, e. g., Quality Mercury, Inc. v. Ford Motor Co., supra; Elder-Beerman Stores Corp. v. Federated Dept. Stores, Inc., 459 F.2d 138 (6th Cir. 1972); Alpha Distributing Co. of Calif. v. Jack Daniel Distillery, 454 F.2d 442 (9th Cir. 1972), cert. denied, 419 U.S. 842, 95 S.Ct. 74, 42 L.Ed.2d 70 (1974); Packard Motor Car Co. v. Webster Motor Car Co., supra; on the ground that Sears did not replace Oreck as the distributor of “Whirlpool” vacuum cleaners; and, therefore, competition of both an interbrand and intrabrand nature was eliminated.

While it is true that, because of its unique facts, this case does not fit exactly into the dealer substitution line of cases, appellee’s argument does not persuade us that it therefore comes within the rule of per se illegality. It may be argued that there were alternative sources of supply available to Oreck and that the net effect of Whirlpool’s decision to allow Oreck’s distributorship to lapse was to add an interbrand competitor to Whirlpool-made machines in the upright vacuum cleaner market. Moreover, it appears from the record that, while Sears sold several models of Whirlpool-made vacuum cleaners under its “Kenmore” label, Oreck was allowed to market only one model under the terms of the 1968 agreement, thereby reducing the potential for intrabrand competition in Whirlpool-made machines. In the absence of a showing of an anticompetitive purpose or effect, the fact that Sears may have asked to be made the sole distributor of a certain line of products (in this case, Whirlpool-made vacuum cleaners), does not render Whirlpool’s subsequent action in refusing to renew Oreck’s distributorship illegal. Cf. Federal Trade Commission v. Raymond Bros.-Clark Co., 263 U.S. 565, 44 S.Ct. 162, 68 L.Ed. 448 (1924); Packard Motor Car Co. v. Webster Motor Car Co., supra.

The rule of reason provides a more discriminating way of differentiating true exclusive dealerships from two-firm vertical combinations to exclude a distributor from supply. Although Oreck asserts that Whirlpool’s refusal to renew its distributorship was against Whirlpool’s own economic interests, the trial court’s instructions to the jury, under the per se rule, did not require the jury to balance the anticom-petitive evils and pro-competitive virtues of the alleged vertical Sears/Whirlpool agreement, as would have been done under the rule of reason. See Continental T.V., Inc. v. GTE Sylvania, Inc., supra, 433 U.S. at 57 n. 27, 97 S.Ct. 2549; Handler, Changing Trends in Antitrust Doctrines: An Unprecedented Supreme Court Term — 1977, 77 Colum.L.Rev. 979 at 983 (1977). “Per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive,” Continental T.V., Inc. v. GTE Sylvania, Inc., supra, at 49-50, 97 S.Ct. 2549, 2558; and where the conduct involved is an agreement between a single manufacturer and a single distributor which results in a sole distributorship for the manufacturer’s products, a careful inquiry into the business justifications for the agreement ■ is required.

7

. The evidence presented at trial by both parties revealed several instances of Oreck’s alleged disregard for the terms of its contract, e. g., refusal to modify advertising campaigns in accordance with Whirlpool’s wishes, sales to private label customers, and failure to abide by the original marketing strategy of distribution to major retail accounts; any one of which could have justified Whirlpool’s refusal to renew Oreck’s distributorship. In addition, the 1968 contract itself contained no provision for renewal.