refused to renew the South End distributorship because South End
was primarily engaged in selling motor oil to discount houses.
South End takes the position that any manufacturer which delays
deliveries or terminates a distributorship contract violates §§
1 and 2 of the Sherman Act if it is motivated by a desire to
maintain the price of its product, notwithstanding the fact that
it acts unilaterally and does not seek an agreement, express or
implied, to maintain prices.
The antitrust laws do not impose the sweeping obligation to
deal reflected in the theory advanced by South End. The Sherman
Act is directed toward injuries to competition occasioned by
illegal agreement or the exercise of monopoly power. Acts having
an adverse effect on an individual's business need not result in
an injury to competition. Nor do damages, of themselves, create
liability under the Sherman Act. See Ace Beer Distributors, Inc.
v. Kohn, Inc., 318 F.2d 283, 287 (6 Cir. 1963).
In order to maintain a treble damage action for refusing to
deal, plaintiff must show either (1) that the refusal is
accompanied by unlawful conduct or agreement or (2) that the
refusal is designed to create or maintain a monopoly. Absent such
a showing, a manufacturer is free to "exercise his own
independent discretion as to parties with whom he will deal" and
"may announce in advance the circumstances under which he will
refuse to sell." United States v. Colgate & Co., 250 U.S. 300,
307, 39 S.Ct. 465, 63 L.Ed. 992 (1919). See also, Times-Picayune
Pub. Co. v. United States, 345 U.S. 594, 625, 73 S.Ct. 872, 97
L.Ed. 1277 (1953).
Decisions of the Supreme Court and lower federal courts have
fully described the scope of "unlawful conduct or agreement".
There is no doubt that a refusal to deal, brought about by
agreement between competing manufacturers, or between a
manufacturer and one or more distributors, violates § 1 of
the Sherman Act. Klor's Inc. v. Broadway-Hale Stores, Inc.,
359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); A.C. Becken Co. v.
Gemex Corporation, 272 F.2d 1 (7 Cir. 1959). There is, however,
no assertion here that Texaco acted in concert either with other
manufacturers of motor oil or with other Texaco distributors who
were competitive with South End and no evidence from which such
agreement might be inferred. While plaintiff alleges that his
action is brought under § 1 of the Sherman Act, he makes no
reference to the existence of any conspiracy or agreement in his
complaint. Texaco points out that Eustace, South End's president,
indicated on deposition that the "conspiracy" was between
employees and salesmen of Texaco. Such an "agreement", if any, is
not proscribed by § 1. Nelson Radio & Supply Co., Inc. v.
Motorola, Inc., 200 F.2d 911 (5 Cir. 1952) cert. den.
345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953).
Nor does South End contend that Texaco achieved or sought any
price fixing agreement with it. Texaco salesmen never indicated
a suggested re-sale price either to South End or to its customers
and Eustace acknowledges that he never was asked to agree or
agreed with anyone as to prices. Under these circumstances, we
need not consider whether such an agreement would in fact have
restrained competition or resulted in injury to South End.
Since no agreement is alleged, the claimed violation of §
1 must arise from acts which the plaintiff believes amount to
"unlawful conduct". Unlawful conduct, however, is nothing more
than a substitute for an "express" agreement. It does not
eliminate the requirement of showing that a combination in fact
Thus, in United States v. Bausch & Lomb Optical Co.,
321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024 (1944), the Supreme Court rested
its finding that § 1 had been violated on a showing of
"acquiescence of the wholesalers coupled with [their] assistance
in effectuating [the resale price scheme]". 321 U.S. at 723, 64
S.Ct. at 813. Where a manufacturer goes beyond the mere
announcement of a policy
and a subsequent refusal to deal, employing means which effect
adherence to resale prices, he has — even absent an express
or implied agreement — put together a combination in
violation of § 1. United States v. Parke, Davis & Company,
362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). Parke Davis
rests on the determination that the manufacturer, in "policing"
its resale price system foreclosed any possibility of finding
that the acquiescence of the distributors was voluntary, thus
making the manufacturer responsible for fostering an illegal
combination. No such systematic "policing" or other coercive
action from which a combination might be inferred is alleged or
Termination of the distributorship contract does not, in
itself, supply the element of unlawful conduct. See Walker
Distributing Co. v. Lucky Lager Brewing Co., 323 F.2d 1, 8 (9
Cir. 1963). The refusal to deal must be accompanied by
other conduct, sufficient to permit the inference that an
unlawful plan exists (or is, at least, in formation). Each of the
cases cited above involves conduct extending to all distributors
in an area. We are not aware of any case in which a finding of
"unlawful conduct" rests on the isolated experiences of one
businessman. Where all of the manufacturer's alleged acts are
directed at a single distributor and other distributors in
competition with him do not experience similar difficulties,
there is no basis for inferring that the manufacturer is acting
in violation of § 1. Termination of one distributorship
cannot, in itself, injure competition, where all competing
distributors remain free from any restraints.
Texaco's termination of the South End distributorship does not
evidence an intent either to (a) fix the price at which motor oil
is resold in discount houses; (b) fix the price at which
distributors make sales to discount houses; or (c) restrict or
foreclose the supply of motor oil to the discount house trade. As
noted earlier, South End admits that it competed for discount
house business with other Texaco distributors. These distributors
made sales to discount houses while South End operated as a
Texaco distributor and, admittedly, made discount house sales in
even greater quantities after South End lost its distributorship.
None of these distributors were terminated nor does the record
suggest that they have experienced any difficulties in purchasing
from the defendant. While these facts might suggest the existence
of an agreement between Texaco and South End's competitors, cf.
Girardi v. Gates Rubber Company Sales Division, 325 F.2d 196,
203-204 (9 Cir. 1963), plaintiff does not make such a claim,
either in its complaint, in the briefs filed on the instant
motion, or in the course of two lengthy depositions.
The record consistently supports Texaco's claim that South End
failed to live up to its contractual responsibilities as a full
line dealer and had continual financial difficulties which, as
plaintiff admits, were a result of its inadequate capitalization.
Under these circumstances, the Court may not deny a well
supported motion for summary judgment on the mere possibility
that an illegal agreement — neither mentioned by the
plaintiff nor supported by any facts in a lengthy record —
could theoretically have existed.
There is, therefore, no showing of either a pre-existing
conspiracy or a conspiracy in formation which might suggest that
Texaco's refusal to deal was "accompanied by unlawful conduct or
agreement". What remains is South End's allegation that, on
numerous occasions during the term of the distributorship, and at
the time of termination, various Texaco salesmen and executives
advised plaintiff inter alia that he was "selling in the
wrong channels" and at the wrong prices and that Texaco was not
pleased to find that its motor oils were being widely advertised
at discount prices. For the reasons already stated, we cannot
conclude that these "informational" statements, admittedly not
directed toward securing any agreement, fall outside the bounds
of lawful activity sanctioned by the Supreme Court in Colgate.
Such unilateral action cannot, of itself,
supply the element of "unlawful conduct" required to make a
refusal to deal a violation of § 1. Cf. House of Materials, Inc.
v. Simplicity Pattern Co., 298 F.2d 867, 870 (2 Cir. 1962).
Plaintiff does refer to three or four specific "incidents"
where Texaco representatives allegedly approached Eustace and
inquired if he sold to certain discount houses. In one instance
he was asked to speak to one of his customers and request the
removal of a large sign advertising the discount price; on
another he allegedly was asked and agreed not to make sales to a
certain outlet (which South End had never sold to nor, evidently,
had ever considered selling to). Assuming, arguendo, that
possible antitrust violations inhere in these incidents,
plaintiff admits that none of them caused him to change his
selling practices nor effected any changes in the practices of
his customers. There is, therefore, no basis for claiming any
injury as a result of these occurrences. Texaco points out that,
in any event, these allegations refer to acts occurring more than
four years before the date of the instant complaint and are
therefore barred by the statute of limitations, § 4b of the
Clayton Act, 15 U.S.C. § 15b.
Moreover, after a thorough consideration of the record, the
Court concludes that the only reasonable explanation of these
incidents is that they were unconnected, isolated occurrences,
bearing no relation to the difficulties which South End later
experienced with regard to delayed deliveries or the termination
of its distributorship. The record shows that contemporaneous
with these "incidents", Texaco was doing its utmost to assist
plaintiff in its business and repeatedly indicated that it was
willing to sell plaintiff all the motor oil he could use, knowing
full well that it would be resold through discount outlets.
Thus these "incidents" do not require any modification of the
conclusion already expressed, i.e., that the record does not
disclose any course of conduct by Texaco which would permit South
End to recover the treble damages it seeks. In particular, the
record leaves no doubt that all parties understood that the
delays in accepting South End's orders for motor oil were
occasioned by the action of Texaco's Credit Department resulting
from the fact that South End was continually indebted to Texaco
in amounts ranging between $15,000 and $28,000. On a few
occasions, delivery was delayed because motor oil was in short
supply, given the needs of other distributors to whom Texaco was
also contractually bound.
For the reasons stated above, we conclude the facts alleged by
South End, assuming their accuracy, do not, when viewed in
conjunction with the admissions in plaintiff's depositions, state
a cause of action under § 1 of the Sherman Act.
The Alleged Violation of the Sherman Act, § 2
Plaintiff's claim under § 2 of the Sherman Act is apparently
based on the contention that Texaco is attempting to monopolize
the market for Texaco motor oils, in that competition between
Texaco's retail service stations and South End's discount house
customers is foreclosed by the termination of South End's
distributorship. This allegation is without basis in law or fact.
As a factual matter, plaintiff admits that other Texaco
distributors were selling to discount houses before and are now
selling Texaco motor oils to discount outlets in even greater
quantities. This negates any inference that Texaco is engaged in
an attempt to protect its higher priced retail service station
outlets. Moreover, South End now competes with the Texaco
distributors, selling its own brand of motor oil. Termination of
the distributorship contract thus in fact increased competition
by opening up a new outlet for competitive products. See House of
Materials v. Simplicity Pattern Company, supra, 298 F.2d at 871.
As a legal proposition, plaintiff's monopolization argument
cannot be sustained. The product market cannot be restricted in
the manner in which South
End suggests, particularly in light of Eustace's testimony that
all premium motor oils are comparable and competitive. Where
commodities are competitive and reasonably interchangeable, the
relevant market cannot be confined to the products of one
manufacturer. United States v. E.I. Du Pont De Nemours & Company,
351 U.S. 377, 393, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). Even if
the product market could be limited simply to Texaco motor oils,
plaintiff could not show an injury to competition. The only claim
is that South End was excluded from the market, in particular the
discount houses to which it had been making sales. Inasmuch as
other Texaco distributors admittedly compete freely for the same
trade and make sales to other discount houses as well, no injury
to competition can be found, even with respect to Texaco motor
oils. Under the Colgate doctrine, Texaco, acting unilaterally,
could lawfully terminate all distributors who sold to discount
houses and refuse to make direct sales as well. Such action
would, as noted above, increase competition in motor oils so long
as the market — taken as a whole — was freely competitive. South
End admits that it is and no evidence to the contrary has been
In summary, the record before the Court discloses the
1. Texaco did not discriminate in the prices which it charged
plaintiff and competing distributors.
2. After termination of plaintiff's distributorship, Texaco
offered to sell plaintiff at the same discount as large scale
consumers who were not full line distributors but, in fact, no
sales at such discounts were made.
3. Texaco did not refuse to deal with plaintiff and has not
refused to deal with other distributors because they sold to
discount houses which in turn sold oil and other Texaco products
at lower prices than Texaco service stations.
4. Texaco never sought any resale price agreement from
plaintiff or other distributors, nor did it seek to fix resale
prices by any other action.
5. Plaintiff's distributorship was terminated by Texaco because
of plaintiff's failure to live up to its contractual obligations
as a full line distributor and its continued inability to pay for
its purchases without requiring the extension of credit in
unusually large amounts.
In the light of the foregoing, defendant's motion for summary
judgment is granted without costs. An appropriate order will
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