FORD MOTOR CO. v. UNITED STATES ET AL.
No. 70-113
Supreme Court of the United States
March 29, 1972
Argued November 18, 1971
405 U.S. 562
Whitney North Seymour argued the cause for appellant. With him on the briefs were Eleanor M. Fox, Michael R. Goldenberg, George H. Hempstead III, and L. Homer Surbeck.
Deputy Solicitor General Friedman argued the cause for the United States. With him on the brief were Solicitor General Griswold, Assistant Attorney General McLaren, Wm. Terry Bray, Irwin A. Seibel, and William H. McManus.
Melvin Lashner filed a brief for Zenith Vinyl Fabrics Corp. as amicus curiae.
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,
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
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 Autolite violated § 7 of the Celler-Kefauver Antimerger Act
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
would 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 Fostoria 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 Autolite 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.
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. Philadelphia National Bank, 374 U. S. 321, 362-363; United States v. Penn-Olin Chemical Co., 378 U. S., at 170-171; Brown Shoe Co. v. United States, 370 U. S., at 311-323.
It is argued, however, that the acquisition had some beneficial effect in making Autolite a more vigorous and
“because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial. A value choice of such magnitude is beyond the ordinary limits of judicial competence, and in any event has been made for us already, by Congress when it enacted the amended § 7. Congress determined to preserve our traditionally competitive economy. It therefore proscribed anticompetitive mergers, the benign and the malignant alike, fully aware, we must assume, that some price might have to be paid.” 374 U. S., at 371.
Ford argues that the acquisition left the marketplace with a greater number of competitors. To be sure, after Autolite sold its New Fostoria plant to Ford, it constructed another in Decatur, Alabama, which by 1964 had 1.6% of the domestic business. Prior to the acquisition, however, there were only two major independent producers and only two significant purchasers of original equipment spark plugs. The acquisition thus aggravated an already oligopolistic market.
As we indicated in Brown Shoe Co. v. United States, 370 U. S., at 323-324:
“The primary vice of a vertical merger or other arrangement tying a customer to a supplier is that, by foreclosing the competitors of either party from a segment of the market otherwise open to them, the arrangement may act as a ‘clog on competition,’ Standard Oil Co. of California v. United States, 337 U. S. 293, 314, which ‘deprive[s] rivals of a fair opportunity to compete.’ H. R. Rep. No. 1191,
81st Cong., 1st Sess. 8. Every extended vertical arrangement by its very nature, for at least a time, denies to competitors of the supplier the opportunity to compete for part or all of the trade of the customer-party to the vertical arrangement.”
Moreover, Ford made the acquisition in order to obtain a foothold in the aftermarket. Once established, it would have every incentive to perpetuate the OE tie and thus maintain the virtually insurmountable barriers to entry to the aftermarket.
II
The main controversy here has been over the nature and degree of the relief to be afforded.
During the year following the District Court‘s finding of a § 7 violation, the parties were unable to agree upon appropriate relief. The District Court then held nine days of hearings on the remedy and, after full consideration, concluded that divestiture and other relief were necessary.
The OE tie, it held, was in many respects the key to the solution since the propensity of the mechanic in a service station or independent garage is to select as a replacement the spark plug brand that the manufacturer installed in the car. The oligopolistic structure of the spark plug manufacturing industry encourages the continuance of that system. Neither GM nor Autolite sells private-label plugs. It is obviously in the self-interest of OE plug manufacturers to discourage private-brand sales and to encourage the OE tie. There are findings that the private-brand sector of the spark plug market will grow substantially in the next decade because mass merchandisers are entering this market in force. They not only sell all brands over the counter but also have service bays where many carry only spark plugs of their own proprietary brand. It is anticipated that by 1980
“To the extent that the spark [plug] manufacturers are not owned by the auto makers, it seems clear that they will be more favorably disposed toward private brand sales and will compete more vigorously for such sales. Also, the potential entrant continues to have the chance to sell not only the private brand customer but the auto maker as well.” 315 F. Supp., at 378.
Accordingly the decree
- enjoined Ford for 10 years from manufacturing spark plugs,
- ordered Ford for five years to purchase one-half of its total annual requirement of spark plugs from the divested plant under the “Autolite” name,
- prohibited Ford for the same period from using its own trade names on plugs,
- protected New Fostoria, the town where the Autolite plant is located, by requiring Ford to continue for 10 years its policy of selling spark plugs to its dealers at prices no less than its prevailing minimum suggested jobbers’ selling price,6
- protected employees of the New Fostoria plant by ordering Ford to condition its divestiture sale on the purchaser‘s assuming the existing wage and pension obligations and to offer employment to any employee displaced by a transfer of nonplug operations from the divested plant.7
Complete divestiture is particularly appropriate where asset or stock acquisitions violate the antitrust laws. United States v. Du Pont & Co., supra, at 328-335; United States v. Crescent Amusement Co., supra, at 189; Schine Chain Theatres v. United States, 334 U. S. 110, 128; United States v. El Paso Gas Co., 376 U. S. 651.
Divestiture is a start toward restoring the pre-acquisition situation. Ford once again will then stand as a large industry customer at the edge of the market with
The divested plant is given an incentive to provide Ford with terms which will not only satisfy the 50% requirement provided for five years by the decree but which even after that period may keep at least some of Ford‘s ongoing purchases. The divested plant is awarded at least a foothold in the lucrative aftermarket and is provided an incentive to compete aggressively for that market.
As a result of the acquisition of Autolite, the structure of the spark plug industry changed drastically, as already noted. Ford, which before the acquisition was the largest purchaser of spark plugs from the independent manufacturers, became a major manufacturer. The result was to foreclose to the remaining independent spark plug manufacturers the substantial segment of the market previously open to competitive selling and to remove the significant procompetitive effects in the concentrated spark plug market that resulted from Ford‘s position on the edge of the market as a potential entrant.
To permit Ford to retain the Autolite plant and name and to continue manufacturing spark plugs would perpetuate the anticompetitive effects of the acquisition.9
The District Court rightly concluded that only divestiture would correct the condition caused by the unlawful acquisition.
A word should be said about the other injunctive provisions. They are designed to give the divested plant an opportunity to establish its competitive position. The divested company needs time so it can obtain a foothold in the industry. The relief ordered should “cure the ill effects of the illegal conduct, and assure the public freedom from its continuance,” United States v. United States Gypsum Co., 340 U. S. 76, 88, and it necessarily must “fit the exigencies of the particular case.” International Salt Co. v. United States, 332 U. S., at 401. Moreover, “it is well settled that once the Government has successfully borne the considerable burden of establishing a violation of law, all doubts as to the remedy are to be resolved in its favor.” United States v. Du Pont & Co., 366 U. S., at 334.
Ford concedes that “[i]f New Fostoria is to survive, it must for the foreseeable future become and remain the OE supplier to Ford and secure and retain the benefits of such OE status in sales of replacement plugs.” The ancillary measures ordered by the District Court are designed to allow Autolite to re-establish itself in the OE and replacement markets and to maintain it as a viable competitor until such time as forces already at work within the marketplace weaken the OE tie. Thus Ford is prohibited for 10 years from manufacturing its own plugs.10 But in five years it can buy its plugs from any source and use its name on OE plugs.
The requirement that, for five years, Ford purchase at
It is suggested, however, that “the District Court‘s orders assured that Ford could not begin to have brand name success in the replacement market for at least 10 to 13 years.” Post, at 591. This conclusion distorts the effect of the District Court decree and the nature of the spark plug industry. Ford‘s own studies indicate that it would take five to eight years for it to develop a spark plug division internally. A major portion of this period would be devoted to the development of a viable position in the aftermarket. The five-year prohibition on the use of its own name and the 10-year limitation on its own manufacturing mesh neatly to allow Ford to establish itself in the aftermarket prior to becoming a manufacturer while, at the same time, giving Autolite the opportunity to re-establish itself by providing a market for its production. Thus, the District Court‘s decree delays for only two to five years the date on which Ford may become a manufacturer with an established share of the aftermarket. Given the normal five-to-eight-year lead time on entry through internal expansion, the District Court‘s decree does not significantly lessen Ford‘s moderating influence as a potential entrant on the edge of the market. Moreover, in light of the interim benefits this ancillary relief will have on the re-establishment of Autolite as a viable competitor and of Ford as a major purchaser, we cannot agree with the characterization of the relief as “harshly restrictive,” post, at 595, or the assertion that the decree, in any practical and significant sense, “prohibit[s] Ford from entering the market through internal expansion.” Post, at 592.
Antitrust relief should unfetter a market from anticompetitive conduct and “pry open to competition a
The thorough and thoughtful way the District Court considered all aspects of this case, including the nature of the relief, is commendable. The drafting of such a decree involves predictions and assumptions concerning future economic and business events. Both public and private interests are involved; and we conclude that the District Court with a single eye to the requirements of § 7 and the violation that was clearly established made a reasonable judgment on the means needed to restore and encourage the competition adversely affected by the acquisition.
Affirmed.
MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST took no part in the consideration or decision of this case.
The spark plug industry as it stood prior to Ford‘s acquisition of Autolite was hardly characterized by vigorous competition. For 25 years, the industry had consisted of AC, owned by and supplying original equipment (OE) plugs to General Motors; Champion, independent and supplying Ford; Autolite, independent and supplying Chrysler; and a number of small producers who had no OE sales and only a minuscule share of the aftermarket.1
The habit among mechanics of installing replacement plugs carrying the same brand as the automobile‘s original plugs, reinforced by the unwillingness of service stations to stock more than two or three brands,2 made possible the “OE tie,” which rendered any large-scale entry into the aftermarket virtually impossible without first obtaining a large OE customer. Moreover, price competition was minimal, both in the OE market (where any reduction in the six-cent price would immediately be matched by rivals), and in the aftermarket (where spark plugs accounted for such a small percentage of the normal tuneup charge that price differentials did not have a significant impact upon consumer choice).
The District Court found that the acquisition of Autolite‘s spark plug assets by Ford further lessened competition in the industry in two ways: it foreclosed Ford as a potential purchaser of spark plugs from independent producers, and it eliminated what the District Court found to have been Ford‘s “moderating effect” upon Champion‘s pricing policies in the aftermarket. These
In my judgment, both the finding of a § 7 violation and the remedy ordered may be better rationalized in terms of probable future trends in the spark plug market, visible at the time of the acquisition. The District Court observed that “a court cannot shut its eyes to contemporary or predictable factors conducive to change in the competitive structure.” 286 F. Supp. 407, 442. This was a proper inquiry because we have held that § 7 “requires not merely an appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive conditions in the future.” United States v. Philadelphia National Bank, 374 U. S. 321, 362.3
While the District Court did not justify the divestiture in precisely these terms, I think its prediction of future trends in the spark plug industry is an adequate basis to support the remedy ordered. THE CHIEF JUSTICE‘S opinion, post, at 591-592, is correct in its assertion that the ancillary injunctions are anticompetitive in the short run, and that the District Court took extraordinary measures to mother the divested producer for the next decade. But I cannot say that these injunctions are not reasonably calculated to establish the new Autolite producer as a viable firm and thus to restore the pre-acquisition market structure, insofar as it is now possible to do so. A divestiture decree
Though the economics of the market are such that the divestiture cannot be assured of success, it does at least have a chance of bringing increased competition to the spark plug industry. And while divestiture remedies in
MR. CHIEF JUSTICE BURGER, concurring in part and dissenting in part.
In addition to requiring divestiture of Autolite, the District Court made ancillary injunctive provisions that go far beyond any that have been cited to the Court. Ford is forbidden to manufacture spark plugs for 10 years; Ford is ordered to purchase one-half of its total annual requirement of spark plugs from the divested company under the “Autolite” name, and Ford is forbidden for the same period to use its own trade name on any spark plugs. These provisions are directed to prevent Ford from making an independent entry into the spark plug market and, in effect, to require it to subsidize Autolite for a period of time. Despite the Draconian quality of this restriction on Ford, I can find no justification in the District Court‘s findings for this
An understanding of the District Court‘s findings as to the spark plug market shows three reasons why it was in error in requiring Ford to support Autolite. First, the court did not find that the weakness of an independent Autolite‘s competitive position resulted from Ford‘s acquisition. Rather, a reading of its findings makes apparent that the precariousness of Autolite‘s expected post-divestment position results from pre-existing forces in the market. Therefore, the drastic measures employed to strengthen Autolite‘s position at Ford‘s expense cannot be justified as a remedy for any wrong done by Ford. Second, the remedy will perpetuate for a time the very evils upon which the District Court based a finding of an antitrust violation. Third, the court‘s own findings indicate that the remedy is not likely to secure Autolite‘s competitive position beyond the termination of the restrictions. Therefore, there is no assurance that the judicial remedy will have the desired impact on long-run competition in the spark plug market.
The Court makes two critical errors in order to avoid the effect of this reasoning. It rejects the factfinding by the District Court in order to uphold its remedial order; and it repeats that court‘s error by discussing the assistance necessary to restore Autolite to the status quo ante without ever delineating that prior state of affairs or indicating how Ford, by acquiring Autolite and holding it for a number of years, had undermined its ability to reassume its former independent competitive position.
The District Court made extensive findings on the nature of the spark plug market. Some of these findings appear in the Court‘s opinion, but some factors that
Beyond doubt, the spark plug market has been overwhelmingly dominated by three manufacturers for a long period: AC, owned by General Motors, which had about 30% of the market in 1961; Champion, which had supplied Ford since 1910 and had approximately 50% of the market in 1961; and Autolite, which had supplied Chrysler since 1941 and had 15% of the market in 1961. Together these three companies had over 95% of the total market in 1961.
The reason for the continued domination of the market by the three big plug manufacturers is the pervasive feature of the plug market known as the “OE (original equipment) tie.” This denominates the phenomenon that mechanics who replace spark plugs in a car engine have tended, almost exclusively, to use the brand of plug installed by the auto builder as original equipment. Though not required by spark plug technology, mechanics have followed this practice because of a strong desire to avoid any chance of injuring an engine by putting a mismatched plug into it. Further, because plugs are low-profit items, those who install them tend to carry an inventory of a small number of brands. Most carry only two and some carry three brands, and they choose the brands installed by the big auto manufacturers as original equipment. Thus, it takes a position as supplier to a large auto maker to gain recognition in the spark plug replacement market. The Government conceded in the District Court, for instance, that American Motors, with 5% of the auto market, would not be able to create market acceptance for an independent brand of plug by installing it as original equipment in its cars.
Because of the competitive importance of having their plugs installed as original equipment by one of the three
The strength of the OE tie is demonstrated by the inability of well-known auto supply manufacturers to gain a significant share of the spark plug market in the absence of an OE tie. As the District Court found, no company without the OE tie
“ever surpassed the 2% level. Several have come and gone. Firestone Tire and Rubber Company merchandised ‘Firestone’ replacements for 35 years before it gave up in 1964. Although it owned some 800 accessory stores and successfully wholesaled other items to more than 50,000 shops and filling stations, it could not surmount the patent discrimination against brands not blessed with Detroit‘s approbation. Goodyear Tire and Rubber Company quit in only three years. Globe Union, a fabricator which had barely 1% of the nation‘s shipments, withdrew in 1960.” 286 F. Supp. 407, 434-435.
Two small manufacturers survive, producing plugs for private-label brands. Thus “Atlas” plugs, sponsored by
An independent entry into the plug market by Ford, with the expected substitution of its own plugs as original equipment in its cars, would have necessarily deprived one of the two significant independent plug producers of its OE status. The District Court found that, because of the importance of the OE tie, the plug producer deprived of this support would most likely have lost any significant position in the market.1 Autolite, with only 15% of the market before the acquisition, would certainly have lost any significant position in the market if an independent entry by Ford had led Chrysler to shift its patronage from Autolite to Champion. The District Court asserted that a Champion without OE status would have had some chance of maintaining a significant market position because of its size, although it gave no reason for thinking Champion‘s size immunized it from dependence on OE status. Before 1961, Champion had just under 50% of the market. As a result of Champion‘s move to Chrysler in 1961, its position in the market dropped to 33% by 1966. The District Court found no basis for predicting which of the two big independents would have won such a competition for continued OE status.
Thus, an independent entry by Ford would not likely have increased the number of significant competitors in the spark plug market. Rather, it would simply have substituted Ford for one of the two significant independent manufacturers. The result of this expectation
Not finding that Ford‘s entry by acquisition had deprived the spark plug market of any pro-competitive effect of an independent entry, the District Court relied on two other grounds for finding a violation of the antitrust laws. First, it concluded that as a potential entrant on the edge of the market which was also a major purchaser in the market, Ford exercised a “moderating” influence on the market; the second basis for determining the acquisition illegal was the finding that the acqui-
With respect to Autolite itself, the District Court made several relevant findings. First, it found that Autolite is a fixed-production plant. In other words, it can be profitable only turning out approximately the number of plugs it now manufactures. It could not, for instance, reduce its production by half and sell that at a profit. Second, it made extensive findings with respect to Autolite‘s distribution system:
“Ford received six regional offices, personnel and a list of Electric Autolite‘s warehousers and jobbers. All of these have been and still are at liberty to deal with anyone they wish. Each old direct account had to be visited individually and, if it consented, be re-signed by defendant [Ford]. Within a few months, 52 did enter into new ignition contracts. However, 50 of these for the previous year had also been ... [distributors of other Ford products]. By mid-1966, direct accounts totaled 156, of which 104 in 1960 had been pledged to neither Ford nor Autolite. The same bloc of 50 had been committed to both. The net increase traceable with any semblance of accuracy to the acquisition is two first-layer middlemen ....” 286 F. Supp., at 422.
As to difficulties that a divested Autolite might have in establishing an independent distribution system, the District Court mentioned only one:3 if Ford were to offer its own plugs to its car dealers at a fairly low price, one which independent jobbers could not meet, Autolite
There is another set of relevant facts found by the District Court. The District Judge found that “there is a rising wind of new forces in the spark plug market which may profoundly change it.” 315 F. Supp. 372, 377. On the basis of the testimony of an executive of one of the producers of plugs for private labels, the court found that the private-brand sector would grow during the next 10 years. This highly speculative observation of the District Court was based on a finding that the mass merchandisers are beginning to enter the plug marketing field in force. Not only do the mass merchandisers market private-brand plugs over the counter, but they are also building service bays. And in these bays many carry only their own proprietary brand of spark plugs. This witness predicted that the mass merchandisers would increase their share of the aftermarket from 4.4% to 10% by 1980. He further predicted that oil companies would enter the replacement market, resulting in a total of 17% of the replacement market being supplied by private-label plugs by 1980. The court concluded that these forces “may well lead to [the market‘s] eventual deconcentration by increasing the number of potential customers for a new entrant into the plug manufacturing business and reducing the need for original equipment identification.” 315 F. Supp., at 378.
In its separate opinion on remedies, the District Court correctly stated the relevant law; the purpose, and limit of antitrust remedies, is to
“free these forces [within the market] from the unlawful restraint imposed upon them so that they
may run their natural course.” 315 F. Supp., at 377.
The violators may not be required to do more than return the market to the status quo ante. See United States v. Paramount Pictures, Inc., 334 U. S. 131, 152-153 (1948); Reynolds Metals Co. v. FTC, 114 U. S. App. D. C. 2, 309 F. 2d 223 (1962) (Burger, J.). Applying this general provision to the instant situation, the District Court correctly stated:
“The court wishes to note here that although it finds that divestiture is the only effective remedy, it does not agree with the Government that the remedy should be affirmatively designed to ‘break the OE tie.’ The remedy is designed to correct the violations of Section 7 found by the court. The OE tie, as such, does not violate Section 7.” 315 F. Supp., at 378.
The District Court then concluded that, in addition to divestiture of the Autolite plant and trade name, certain injunctive provisions were required “to give [Autolite] an opportunity to establish its competitive position.” Ibid. It therefore ordered that Ford be prohibited from manufacturing spark plugs for a period of 10 years. It further ordered that for a period of five years Ford would be required to purchase one-half of its total annual needs of spark plugs from Autolite, bearing the Autolite label. For this five-year period Ford was also ordered not to use or market a spark plug under a trade name owned by or licensed to it. The effect of these orders was twofold. They assured Autolite of a purchaser for a large part of its production for five years. And they prevented Ford from immediately entering the competition for a share of the aftermarket with a plug under its own name; it could not even label a plug under its own name for five years and could not manufacture its own plug for 10 years.
In my view these drastic remedial provisions are not warranted by the court‘s findings as to the grounds on which Ford‘s acquisition violated the antitrust laws. Further, in light of the District Court‘s own factfindings, these remedies will have short run anticompetitive impact and they give no assurance that they will succeed in allowing Autolite to establish its competitive position.
The remedial provisions are unrelated to restoring the status quo ante with respect to the two violations found by the District Court, the ending of Ford‘s status as a potential entrant with a moderating influence on the market and the foreclosure of a significant part of the plug market. Indeed, the remedies may well be anticompetitive in both respects. First, the District Court‘s order actually undercuts the moderating influence of Ford‘s position on the edge of the market. It is the
The above problems might be minor if the District Court‘s remedy were justifiable in terms of returning Autolite to the status quo ante by overcoming some harm to its ability to compete accomplished by Ford‘s acquisition. But on this issue the District Court opinion and the majority of this Court are confused. Although the District Court asserted that Autolite needed the aid of its injunctive remedies to establish its competitive position, the court made no findings in its remedy opinion as to the source of Autolite‘s competitive weakness. Therefore it never reached the issue whether the source of weakness had anything to do with the violations attributed to Ford. Instead, the court‘s opinion proceeded from the recognition of competitive problems immediately to the prescription of a remedy.
In fact, a fair reading of the findings of the District Court shows that the acquisition did not injure Autolite‘s competitive position. Autolite‘s OE status was continued and its share of the aftermarket was increased from 12.5% to 19%. Thus, its trademark is at least as strong now as when Ford acquired the company. Nor
The findings of the District Court indicate that Autolite‘s precarious position did not result from its acquisition by Ford. Prior to the acquisition both Champion and Autolite were in a continually precarious position in that their continued large share of the market was totally dependent on their positions as OE suppliers to auto manufacturers. The very factor that assured that they faced no serious competition in the short run also assured that in the long run their own position was dependent on their relationship with a large auto manufacturer. Thus, the threat to Autolite posed by a simple divestiture is the same threat it had lived with between 1941 and 1961 as an independent entity: it might be left without any OE supply relationship with a major auto manufacturer, and therefore its market position based on this relationship might decline drastically.
Further, the only conclusion to be drawn from the trial findings is that the remedy is unlikely to result in a secure market position for Autolite at the end of the restricted period. Once again it will be dependent for its survival on whether it can maintain an OE supply status. The District Court‘s suggestion that Autolite can find a niche supplying private-brand labels is unpersuasive. It cannot be predicted with any certainty that these sales outlets will grow to the extent predicted by one person in that line of the business. Further, even if they do, this is no assurance of Autolite‘s survival. There are already several companies in the business of producing plugs for private labels. Autolite will have to compete with them. The results will not be helpful. One possibility is that Autolite would completely monopolize the private-brand market to the extent of about 17% of the replacement market. This is as uncompetitive as it is unlikely. The more reasonable likelihood is that Autolite might be able to gain a position producing, for instance, 5% of the replacement market plugs. But this would be useless because the District Court‘s findings make clear that Autolite‘s fixed-production plant cannot supply such a small share of the market at a profit.
In the final analysis it appears to me that the District Court, seeing the immediate precariousness of Autolite‘s
MR. JUSTICE BLACKMUN, concurring in part and dissenting in part.
I concur in Part I of the Court‘s opinion and in that portion of Part II that approves divestiture as part of the remedy. I cannot agree, however, that prohibiting Ford from using its own name or its trade name on any spark plugs for five years and enjoining it entirely from manufacturing plugs for 10 years is just, equitable, or necessary. Instead, the stringency of those remedial provisions strikes me as confiscatory and punitive. The Court‘s opinion, ante, at 566, recognizes that Ford could develop its own spark plug division internally and place itself in the same position General Motors has occupied for so long, but that this would take from five to eight years. The restraint on Ford‘s entering the spark plug area is thus for a period longer than it would take Ford to achieve a position in the market through internal development. And to deny it the use of its own name is to deny it a property right that has little to do with this litigation.