International Logistics Group, Ltd. Aargus Truck and Automotive Supply, Inc. Guardian Auto Supply, Inc. v. Chrysler Corporation

KRUPANSKY, Circuit Judge.

Plaintiffs-appellants International Logistics Group, Ltd. (ILG), Aargus Truck and Automotive Supply, Inc. (Aargus), and Guardian Auto Supply, Inc. (Guardian) have appealed from the district court’s order which granted defendant-appellee Chrysler Corporation’s (Chrysler) motions for summary judgment and directed verdict, disposing of the plaintiffs’ antitrust action against Chrysler. ILG, Aargus, and Guardian are owned and operated through stock ownership by Theodore Henke (Henke) and engaged in buying and reselling Chrysler manufactured and compatible automotive replacement parts for use in Chrysler manufactured vehicles.

This antitrust lawsuit charged Chrysler with an alleged conspiracy to restrain trade in violation of § 1 of the Sherman Act (Count I) and with the attempted monopolization of the resale of Chrysler manufactured replacement automotive parts to Chrysler franchised dealers and to the government in violation of § 2 of the Sherman Act (Count II).1

After identifying the relevant product aftermarket for replacement Chrysler automotive parts as a market supplied by Chrysler and some 2,400 other independent manufactures and/or suppliers of compatible Chrysler replacement parts, the trial court granted Chrysler’s motion for partial summary judgment on the § 2 Sherman Act claims (Count II) concluding that appellants failed to prove that Chrysler attempted to monopolize or monopolized the product market because Chrysler’s share of the identified market was limited to 20%.

On February 4, 1988, the district court granted Chrysler’s motion for a directed verdict at the close of the evidence on the *906remaining restraint of trade violations charged under § 1 of the Sherman Act, asserting that appellants had failed to prove that Chrysler’s policies imposed upon the resale of its replacement parts were designed to restrict the resale of its products, or to have an inter brand anticompeti-tive effect upon the resale of its replacement parts. On May 17, 1988, judgment was formally entered in favor of Chrysler on Count I. Appellants initiated the instant timely appeal.

Upon review of the appellant’s assignments of error, the record in its entirety, the briefs of the parties, and the arguments of counsel, this court affirms the decision of the trial court for the reasons articulated here and in Judge DeMascio’s opinion.

Appellants’ characterization of Chrysler’s marketing policies for its Power Master engines as per se violations of §§ 1 and 2 of the Sherman Antitrust Act is misplaced. The record disclosed that the implemented marketing policies were “vertical” nonprice restraints imposed by Chrysler upon its distributors’ marketing policies that were directed to competitors at different levels of competition. Although some minimal horizontal competitive effects may have resulted, the marketing policies concerning the Power Master engine were not directed toward or designed to impose restraints upon parties at the same competitive level even though Chrysler, the manufacturer, was also a distributor. Business Elec. Corp. v. Sharp Elec. Co., 485 U.S. 717, 108 S.Ct. 1515, 1522-23 & n. 4, 99 L.Ed.2d 808 (1988).

Appellants’ arguments have been rejected by current legal pronouncements addressing the subject, including the Department of Justice, which has stated in its vertical restraint guidelines:

Some companies choose total vertical integration into distribution rather than reliance on contracts with independent distributors, and, in such cases, vertical integration may well be more efficient and lead to lower prices to consumers.
Situations involving dual distribution have sometimes erroneously been characterized as horizontal, and subjected to a per se analysis, because the supplier also acts as dealer. However, the fact that a supplier also engages in distribution does not make a restraint “horizontal.” Accordingly, vertical restraints involving dual distribution will be analyzed in the same manner as other vertical restraints.

Department of Justice, Vertical Restraint Guidelines, § 2.2, 50 Fed.Reg. 6263, 6265 (1985) [hereinafter DOJ, Vertical Restraint Guidelines]. See also Ryko Mfg. Co. v. Eden Services, 823 F.2d 1215 (8th Cir.1987), cert. denied, — U.S. —, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988).

Accordingly, the vertical restraints imposed by Chrysler’s marketing policies must be judged by the criteria of a “rule of reason” analysis rather than the rubic of “per se” illegality.

Integral to a “rule of reason” analysis is a review of the evolution of the controversial marketing policies.

Interparts, a division of Chrysler, marketed the Power Master engine exclusively for the international market. In an effort to remain competitive in this market, Inter-parts sold Power Master engines for export and internationally at unit prices which were substantially below the domestic unit price of the engine. During July through September of 1981 appellants Aargus and ILG purchased Power Master engines from Chrysler’s Interparts division at overseas prices ostensibly for export and overseas resale. However, instead of exporting the engines appellants Aargus and ILG sold them to their sister corporation, appellant Guardian, a Henke corporation, which resold the engines to Chrysler dealers at prices substantially below Chrysler’s prices to its domestic dealers.

Subsequent to Chrysler’s numerous efforts to induce Henke and his corporations to conform with Chrysler’s Power Master export program and to desist from reselling the discounted export units to Chrysler domestic dealers which Henke refused to do, Chrysler and Interparts cancelled all *907orders for Power Master engines from Henke-owned corporations.

Applying the “rule of reason” analysis to determine the existence of a § 1 Sherman Antitrust violation, a plaintiff must prove (1) that the antitrust defendant contracted, combined, or conspired; (2) that the combination or conspiracy produced adverse anticompetitive effects (3) within relevant product and geographical markets; (4) that the objects of and conduct pursuant to that contract or conspiracy were illegal; and (5) that the plaintiff was injured as a proximate result of that conspiracy. See Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802, 805 (6th Cir.1988). In the instant case, appellants have failed to satisfy the first elements of the test and, accordingly, a directed verdict on the § 1 Sherman Antitrust claim was appropriate.

To satisfy the imposed burden of proof, appellants were required to preponderate the evidence to support a conclusion that Chrysler did not act independently in formulating and implementing its Power Master marketing policies. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984); Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The record in the case at bar disclosed that the marketing policies which Chrysler attached to its Power Master engine were unilaterally formulated and uniformly implemented as to all distributors of Power Master engines with the proviso that Chrysler would reject all purchase orders from distributors who refused to comply with the marketing conditions. Current legal precedent supports the conclusion that a conspiracy may not evolve under circumstances where a dealer or distributor involuntarily complies to avoid termination of his product source.

Moreover, under the scenario of this case, there were no legal restraints against Chrysler’s unilateral acts because Chrysler needed no acquiescence from its dealers or its distributors in formulating marketing conditions for its Power Master unit which is exclusively manufactured; consequently, no basis existed which attached credibility to a conclusion of conspiracy. There can be no conspiracy “where the actor imposing the alleged restraint does not ... need the acquiescence of the other party or any quid pro quo from him.” 6 P. Areeda, Antitrust Law 111402b4, at 16 (1986).2 Department of Justice guidelines addressing vertical restraints have approved the argument that it is inappropriate to consider intraband restraints as “agreements” to conspire and manufacturers are permitted to unilaterally impose appropriate restraints without giving rise to a cognizable antitrust violation:

[I]t is inappropriate to treat intraband agreements in the same manner that other horizontal agreements are treated. Such restraints can have no effect that could not also be obtained through the unilateral action of the manufacturer of the particular brands in question.

DOJ Vertical Restraint Guidelines § 2.1, at 6265. The district court properly relied upon this principle, adopted in Barnosky Oils, Inc. v. Union Oil Co., 665 F.2d 74, 79-80 (6th Cir.1981) (where conspirator merely exercises its “unilateral power,” no antitrust “concerted action” is possible even if defendant forced others to “unwillingly acquiese” in defendant’s restraints). Accordingly, appellants have failed to prove a conspiracy and consequently failed to satisfy the first element of the Bucy-rus-Erie Rule of Reason analysis.

Appellants charged § 2 Sherman antitrust violations are equally misconceived. The trial court correctly concluded that appellants failed to sustain their burden of defining and proving the relevant product market and proving that Chrysler’s market *908share reflected monopoly power or an attempt to achieve such power. Smith v. Burns Clinic Med. Center, P. C., 779 F.2d 1173, 1176 (6th Cir.1985). Recently, the Supreme Court admonished that “[rjetail market power ... should not be assumed but rather must be proved.” Business Elec., 108 S.Ct. at 1521 n. 2. In particular, existing legal pronouncements have instructed that the relevant product market must include “those products or services that are either (1) identical to or (2) available substitutes for the defendants’ product or service.” White & White, Inc. v. American Hosp. Supply Corp., 723 F.2d 495, 500 (6th Cir.1983) (quoted in A.I. Root Co. v. Computer/Dynamics, Inc., 806 F.2d 673, 675 (6th Cir.1986)). Thus, as the district court concluded, appellants’ burden was to present evidence that no reasonable substitutes “for parts for use by Chrysler dealers” were available. See City of Cleveland v. Cleveland Elec. Illuminating Co., 538 F.Supp. 1306, 1310 (N.D.Ohio 1980) (if products have interchangeable uses, they are in the same product market).

Obviously, Chrysler’s sales to its dealers must be immediately excluded from the definition of relevant product market in the instant case. Chrysler could have unilaterally required its franchised dealers to purchase their parts exclusively from Chrysler. Thus the dealer market existed at Chrysler’s option. Chrysler could not be charged with restraining trade in this market. See Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797 F.2d 370, 376 (7th Cir.1986), cert. denied, 480 U.S. 934, 107 S.Ct. 1574, 94 L.Ed.2d 765 (where a monopolist permits competition to exist and later refuses to allow competition, no antitrust liability is generated). Moreover, a manufacturer cannot be charged with antitrust violations if it monopolizes its own brand, e.g., monopolization of Power Master engines or Chrysler manufactured parts. A manufacturer is entitled to the benefits of maintaining a “monopoly” over products which it has developed and produced. Indeed, if manufacturers were denied a monopoly over their own unique products, the incentives for innovation and development of beneficial products would be stifled. Accordingly, Chrysler committed no § 2 Sherman Act violation when it implemented its marketing programs for its Power Master engines or its own manufactured parts. Monopolization of a single brand is not an antitrust violation. See Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 489 (5th Cir.1984) (absent exceptional market conditions, one brand in market of numerous brands cannot constitute relevant product market); Dunn & Mavis, Inc. v. Nu-Car Driveaway, Inc., 691 F.2d 241, 244-45 (6th Cir.1982) (Chrysler products are not relevant market); Westman Comm’n Co. v. Hobart Int'l, Inc., 796 F.2d 1216, 1228 (10th Cir.1986). As the Department of Justice noted:

[AJpplication of this market definition procedure normally will lead the Department to include more than a single brand of a product in the market. In most cases, there is significant competition among competing brands of a product, and defining a product market to correspond to a single brand of a product would yield unrealistic answers to the Department’s economic analysis.

DOJ Vertical Restraint Guidelines § 6.1, at 6272.

For the reasons hereinbefore discussed and those articulated by the trial court, appellants’ antitrust charges anchored in Chrysler’s edict to dealers and distributors that it would terminate all sales of Power Master engines and Chrysler manufactured parts to its dealers and/or distributors who entered competitive bids with it for the sale of Chrysler manufactured parts to the government do not rise to the level of cognizable § 1 and § 2 Sherman antitrust action.

This court finds no merit in appellants’ effort to declare the government, as a purchaser of Chrysler manufactured replacement parts, a separate geographic market which was monopolized or was attempted to be monopolized by Chrysler through its sales policies in violation of § 2 of the Sherman Antitrust Act.

*909The record reflected that the government’s specifications incorporated into its invitation to bid for replacement vehicle parts embraced Chrysler manufactured and Chrysler compatible parts. Absent a government imposed distinction between Chrysler manufactured replacement parts and Chrysler compatible replacement parts, albeit the government represents a purchaser of magnitude, it is without unique characteristics that would support its consideration as a separate geographic market. Here again, appellants have failed to support their charges with proof of sufficient weight to give credibility to their assertions. See City of Cleveland v. Cleveland Elec. Illuminating Co., 538 F.Supp. 1306, 1310 (N.D.Ohio 1980).

The government is but a single purchaser within the overall market. As the Fifth Circuit recently noted:

Jayco asks us to limit arbitrarily the geographic market to a single purchaser, a limitation that, because of Savin’s large share of the government’s business, would allow Jayco to assume what it must prove. As a matter of common sense a single purchaser of a product cannot generally be considered a relevant market, lest we wish to clothe each and every sale with an antitrust suit.

Jayco Systems, Inc. v. Savin Business Mach. Corp., 777 F.2d 306, 320 (5th Cir.1985), cert. denied, 479 U.S. 816, 107 S.Ct. 73, 93 L.Ed.2d 30 (1986) (footnote omitted). Likewise, the Seventh Circuit has decided that the loss of contracts with a single government purchaser is not cognizable as an antitrust injury. In Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 558 (7th Cir.1980), the court decided as follows:

[T]here must be some allegation of a harmful effect on a more generalized market than TV A. See George R. Whitten, Jr. [v.] & Paddock Pool Builders, Inc., supra, 508 F.2d [547] at 562 [1st Cir.1974]. Otherwise the mere fact that one party bid successfully against another party for a contract would be equivalent to an anticompetitive effect and would raise the specter of an antitrust action being used as a remedy for any tortious conduct during the course of the competition. This would be contrary to the repeated view of the Supreme Court that the antitrust laws do “not purport to afford remedies for all torts committed by or against persons engaged in interstate commerce.” Hunt v. Crumboch, 325 U.S. 821, 826, 65 S.Ct. 1545, 1548, 89 L.Ed. 1954 (1945).

This court has considered appellants’ remaining assignments of error and concludes that they are without merit. Accordingly, the opinion of the district court is AFFIRMED in its entirety.

. Chrysler replacement parts are parts which are actually manufactured by Chrysler or by its licensees from Chrysler dies and fixtures. For purposes of this opinion, all such parts shall be referred to as "Chrysler manufactured parts.”

. See Beach v. Viking Sewing Mach. Co., 784 F.2d 746, 750 (6th Cir.1986) (no concerted activity existed where manufacturer merely enforced "uniform policy” which it unilaterally formulated). See also Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575, 1580 (11th Cir.1988) (where manufacturer had independent motivation for terminating plaintiff distributor and did not contact competitor of plaintiff until after it had reached its decision, no antitrust conspiracy was alleged); Culberson, Inc. v. Interstate Elec. Co., 821 F.2d 1092, 1094 (5th Cir.1987) (no conspiracy existed where manufacturer formulated policy before it had contacts with dealers).