United States v. General Motors Corporation

216 F. Supp. 362, 1963 U.S. Dist. LEXIS 9879, 1963 Trade Cas. (CCH) 70,704
CourtDistrict Court, S.D. California
DecidedMarch 14, 1963
Docket30,132-Cr.
StatusPublished

This text of 216 F. Supp. 362 (United States v. General Motors Corporation) is published on Counsel Stack Legal Research, covering District Court, S.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. General Motors Corporation, 216 F. Supp. 362, 1963 U.S. Dist. LEXIS 9879, 1963 Trade Cas. (CCH) 70,704 (S.D. Cal. 1963).

Opinion

THURMOND CLARKE, District Judge.

This case began one and one-half years ago when the Grand Jury returned a two-count indictment charging defendants with violations of the antitrust laws. The second count was dismissed by order of this court, dated January 17,1962. On November 20th of last year, this trial began. Now, almost four months later, there are before us over 600 exhibits and over 6,000 pages of recorded testimony. The Government has rested its case and the defense has moved for judgment of acquittal.

The defendants in this criminal proceeding are General Motors Corporation, three associations of Chevrolet dealers (Losor, Foothill and Dealers’ Service, Inc.) and four individuals (Staley, Mays, Cash and O’Connor) who are officials of General Motors Corporation. They are charged in Count One, the only remaining Count of the indictment, with violation of Section 1 of the Sherman Act. Specifically, defendants are charged with having conspired to suppress sales of Chevrolet automobiles by Chevrolet dealers through discount houses and referral services by inducing the dealers to terminate selling agreements with the discount houses and referral services. Also in Count One, defendants are charged with having utilized “shoppers” in order to discover dealers who were selling through discount houses or referral services and with having induced such dealers to repurchase Chevrolets sold by them to “shoppers.”

That defendants did engage in the activity charged is not in dispute. In dispute is the question of whether the activity with which the defendants are charged amounted to an unreasonable restraint of trade. If the agreement to persuade dealers to refrain from selling Chevrolet automobiles through discount houses and referral services was a reasonable restraint of trade, there has been no violation of Section 1 of the Sherman Act. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1910).

By deciding to prosecute these defendants under criminal law, the Government has accepted a difficult burden of proof. For conviction, the Government had to produce evidence that the defendants were guilty beyond a reasonable doubt. In order to get its case to a jury and thereby escape a judgment of acquittal, the Government had to produce evidence which, taken in the light most favorable to the Government, could convince a reasonable juror that the defendants were guilty as charged beyond a reasonable doubt. Curley v. United States, 81 U.S.App.D.C. 389, 160 F.2d 229 (1947). The Government has failed to sustain this burden.

The Government has attempted to pin the label of “boycott” onto the activity described in Count One of the indictment. A boycott is a per se violation of the antitrust laws for which there can be no justification. It consists of a “concerted refusal to deal.” Klor’s, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959). The Government’s argument is not well taken for the reasons stated in Boro Hall Corporation v. General Motors Corporation, 37 F.Supp. 999 (S.D.N.Y.1941); 124 F.2d 822 (2d Cir., 1942); rehearing denied 130 F.2d 196 (2d Cir., 1942); cert. den. 317 U.S. 695, 63 S.Ct. 436, 87 L.Ed. 556 (1943).

The Government has attempted to show that the decision of the dealers *365 to terminate their relations with the discount houses was the result of irresistible economic pressure exerted by defendants. There is no evidence in the record that could convince a reasonable juror beyond a reasonable doubt that ecomonic pressure and not self-interest precipitated the decision of the dealers. Indeed, termination of discount house operations was encumbent upon the dealers, under the provision of the franchise contract which prohibits a dealer from establishing a second location, without the consent of General Motors. That the defendants did not stress the contractual clause at every opportunity does not mean that defendants put little stock in it. On the contrary, the record is replete with testimony that General Motors, through its officials, tries to reason and confer with its dealers as partners and not as antagonists. Similarly, there is nothing to show that the Dealers Associations did any more than to try to point out what was thought to be in the best interests of the dealers.

The shopping activity and the repurchase of the Chevrolets by the dealers who sold to the shoppers was perfectly legitimate activity and is justified under the doctrine of Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961).

Finally, no reasonable juror could find beyond a reasonable doubt that termination of sales through discount houses unreasonably lessened and restrained competition. The record shows that dealers do compete in their pricing of new cars. The record further discloses that General Motors Corporation reasonably believes that franchise dealers are better representatives of the Corporation than discount houses for the reason that discount houses and referral services have no special or continuing interest in the well being of General Motors, offer no service facilities, and operate entirely free of any control by General Motors.

In conclusion, the court wishes to add a few general remarks. The Government has argued that this criminal prosecution in no way represents an attack on the franchised dealer method of selling automobiles. I cannot agree.

In applying the antitrust laws, it seems to me that a balance must be struck. The interest of the consumer in a freely competitive market must be protected. But, at the same time, industry has rights which also must be respected. In part, business has, or should have, the right to merchandise a product in a manner that the particular manufacturer determines to be the most feasible and the most competitive. Indeed, I believe that the best way to further the interest of the consumer is to allow business, large and small, to avail itself of the free enterprise system with as little Government interference as possible. This court feels, therefore, that its decision protects both the interests of the public and the interests of business.

Mr. Mitchell, in his argument two days ago, quoted Justice Holmes, a great jurist whose ideas were often first spoken in dissent before finally gaining ascendancy in the policy and law of this nation. Mr. Mitchell was referring to Justice Holmes’s dissenting opinion in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, at page 411, 31 S.Ct. 376, at page 386, 55 L.Ed. 502 where Justice Holmes said: “I think that, at least, it is safe to say that the most enlightened judicial policy is to let people manage their own business in their own way, unless the ground for interference is very clear.” This seems a wise policy that might profitably be applied to the instant case.

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Related

Dr. Miles Medical Co. v. John D. Park & Sons Co.
220 U.S. 373 (Supreme Court, 1911)
Board of Trade of Chicago v. United States
246 U.S. 231 (Supreme Court, 1918)
United States v. American Trucking Associations
310 U.S. 534 (Supreme Court, 1940)
White Motor Co. v. United States
372 U.S. 253 (Supreme Court, 1963)
Boro Hall Corporation v. General Motors Corporation
130 F.2d 196 (Second Circuit, 1942)
Boro Hall Corporation v. General Motors Corporation
124 F.2d 822 (Second Circuit, 1942)
Curley v. United States
160 F.2d 229 (D.C. Circuit, 1947)
Boro Hall Corporation v. General Motors Corporation
37 F. Supp. 999 (S.D. New York, 1941)

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Bluebook (online)
216 F. Supp. 362, 1963 U.S. Dist. LEXIS 9879, 1963 Trade Cas. (CCH) 70,704, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-general-motors-corporation-casd-1963.