Atlantic Refining v. Ftc, 381 U.S. 357 (1965)

Atlantic Refining v. Federal Trade Commission

No. 292

Argued March 30, 1965
Decided June 1, 1965 *
381 U.S. 357

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

The Atlantic Refining Co., a major producer and distributor of gasoline and oil products on the eastern seaboard, agreed with the Goodyear Tire & Rubber Co., the country’s largest manufacturer of rubber products, to sponsor the sale of the latter’s tires, batteries and accessories (TBA) to its many retail service station dealers and wholesale outlets. Atlantic was primarily responsible for promoting the sale of Goodyear products to its dealers and assisting in their resale, for which it received a commission on all sales made to the wholesalers and dealers. The Federal Trade Commission (FTC) enjoined the use of direct methods of coercion by Atlantic on its dealers in the inauguration and promotion of the plan, and Atlantic does not seek review of this aspect of the case. The FTC also found the sales commission plan illegal as a classic example of the use of economic power in one market to destroy competition in another, and prohibited both Atlantic and Goodyear from participating in such arrangements. The Court of Appeals affirmed.

Held:

1. Where Congress has empowered the FTC to determine whether the methods, acts or practices of competition are unfair, the function of the courts is to determine whether the FTC’s decision is warranted by the record and has a reasonable basis in law. Pp. 367-368.

2. The record contains substantial evidence to support the FTC’s findings. Pp. 368-369.

(a) Atlantic and its dealers did not bargain as equals, in the light of Atlantic’s leverage of short-term leases, equipment loans to dealers, control of gasoline and oil supplies, and control of dealer advertising. P. 368.

(b) Atlantic not only exercised the persuasion that resulted from its economic power, but coupled it with threats of reprisal which the FTC enjoined. P. 368.

(c) The effectiveness of Atlantic’s sponsorship of Goodyear’s products is measured by the increase in sales soon after the plan was put in operation. Pp. 368-369.

3. A violation of § 5 of the Federal Trade Commission Act consists of conduct contrary to the public policy declared in the Act, and the FTC may use as a guideline recognized violations of the antitrust laws. Pp. 369-371.

(a) The FTC found that the sales commission plan impaired competition at all three levels of the TBA industry: manufacturing, wholesaling and retailing. P. 370.

(b) The FTC was warranted in finding that the plan, which had a substantial effect on commerce, had the same effect as though Atlantic had agreed to, and did, require its dealers to buy Goodyear products. P. 370.

(c) Since the effect of the plan is similar to that of a tie-in, it is not necessary to embark on a full-scale economic analysis of competitive effect. P. 371.

(d) In view of the destructive effect on commerce of the widespread use of the sales commission plan, the FTC was justified in refusing to consider evidence of business justification for the program. P. 371.

4. The FTC’s order prohibiting each petitioner from entering into or performing any similar agreement is not unreasonable. Pp. 372-377.

(a) It is within the FTC’s authority to determine that the long existence of the plan, coupled with Atlantic’s coercion of its dealers, warranted a complete prohibition of the practice by Atlantic. Pp. 372-373.

(b) Goodyear was an active participant in carrying out the sales commission plan, and the prohibition directed against it is within the FTC’s power. Pp. 373-375.

(c) There was ample evidence, including 9 sales commission agreements with other oil companies which the FTC found to be substantially identical with the Atlantic-Goodyear contract, of Goodyear’s conduct for more than 14 years aimed at using oil company power structures to curtail competition in TBA. The FTC could conclude therefrom that such conduct required proscribing the use of the sales commission plan by Goodyear. Pp. 375-376.

(d) If Goodyear has an agreement with another company which differs from that involved herein, it may seek a reopening of the FTC’s order. P. 377.

331 F.2d 394, judgments affirmed.