General Motors Corporation

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IN THE MATTER OF GENERAL MOTORS CORPORATION AND AC SPARK PLUG COMPANY FJNDINGS AND ORDER IN REGARD TO THE ALLEGED VJOLATJON OF SUBSECS. (a) AND (d) OF Sees. 2 (a) AND 2 (d) AND SEC. 3 OF 'lhe CLAYTON ACT , AS AMENDED, AND m' THE FEDERAL TRADE COMMJSSJON ACT Docket 5620. Complaint, Nov. 19J,S-Dccision, July 10 , 1953 'Vhere a eorporatioll engaged since December 29 , HJ50, among other things, in the distributioll and sale of automobile, truck, tractor, and engine aeeessories, parts, alld supplies, including AO spark plugs, cables, fuel pumps, fuel pump parts, oil filters, oil filter cartridges, and oil filter elements ealt in by its wholly owned subsidiary prior to the latter's dissolution on said datewhicb (1) sold said AO products tbroughout tbe United States in suhstantial competition with others, to customers engaged, as were many of their customers, in the resale of said products at wholesale and retail; (2) supplied annually more spark plugs, oil filters, fuel pumps and speedometer cables to the original equipment field than any other manufacturer; and (3) along with Champion Spark Phi/( 00. and the Jmectrie Auto-Lite Co. made and sold about 90 percent of all spark plugs sold in the United States, and itself accounted for a substantial part of an such plugs there sold for both original equipment and replacement; and (4) sold said AC products at prices which varied as between purchasers buying for ori/(inal equipment; as between purchasers buying for original equipment and purchasers for resale or replacement; and as between purchasers, both direct and indirect, buying for resale or replacement;

In seUin/( to (1) its various direct purchasers including distributors which handled all AC products and were given a special price for handling AO spark phi/(S and oil filter eartridi'es on an exclusive basis; direct jobber accounts who stocked and sold such AO products as they found demand for; and contract accounts, in which were included automobile manufacturers, chain stores, national oil and tire companies and others, whose principal business was other than the wholesaling of automotive supplies, and wbo were sold on said basis because of their volume of purchases; and (2) its indirect purchasers in "vbich were induued indirect jobber accounts, fleet accounts add other dealers who \H're required to purchase from its distributors or wholesalers, hut at lJl'ices and on terms and conditions fixed and controlled by it, so that sales thereto were essentiaUy sales by respondent- (a) Discriminated in price during ID40 in favor of direct distributor purchaser accounts and against direct jobher and indirect accounts through schedules of prices on its spark plugs, oil filters and air cleaners which, as illustrative ranged, In the case of the plugs, from 27 1: cents and 29 rents to its li and "DA" accounts, to 31 cents to its direct jobber accounts, and to 32% cents to 37 cents 10 its indirect accounts; and from 1936 to 1941 discriminated against its direct jobher accounts through the payment to the distributors, on sales of plugs by it to a jobber at 31 cents per plug, of 10 percent or 3.1 cents per plug;

(g) , GENERAL MOTORS CORP. ET AL.

Syllabus (b) Discriminated, from 1941 unti Nov. 1, 1946, in favor of its "warehouse distributors" and a/(ainst its direct jobber accounts through seUing the former at 28 cents per plu/( wbiJe seJln/( the latter at 30 cents per plug, and through payment to said distributors, on their sales to sueb jobbers, of an additional 10 percent; through payment to said distributors on their sales to certain contract dealers, of additional compensation of 10 percent and 5 percent respectively; and throu/(h payment to them also of additional compensation of 10 percent on their sales of other AO products to sueb dealers, with no provision for additional compensation to jobbers on sales by them to such eon tract dealer accounts;

(c) Discriminated in favor of its warehouse distributors, from 1942 to Nov. 1 1946, and against indirect jobber purchasers who bought from said distributors at 31.5 cents per plug instead of the 30 cents paid by its direct jobber purchasers. through paying said distributors 10 percent on the sellng price to them of 28 cents per plug on their sa les to such indirect jobbers at 31.5 cents per plug, and thus in effect aecorded said distributors a price of 24. cents per plu/( as compared with said indirect jobbers net purchasin/( price of 31.5 cents, with contract dealers paying higher prices for AO products than the jobbers, and noneDntraet dealers paying higher prices than contract dealers;

(d) Discriminated in price under" new distribution program inaugurated Nov. , 1946, in favor of its "warehouse distributors" and against its direct and indirect jobbers through a schedule of prices Dnd arrangements under which as illustrative, price of spark plug"s to said c1distributors "vas 8 percent less than tbe jobber price of 27 cents. or 24. 8 cents, plus an additional aUowance of 12 percent on sales by said distributors to jobbers approved hy respondent, Of net, 21.(; cents, and under which "warehouse distributors" were also elip;ible for a compensation of 12 percent on their sales at jobber prices to large "jobber fleet owner" accounts, after apvroval of contracts there\with by respondent;

(e) Discriminated in favor of certain direct purchaser accounts sucb as oil and tire companies, distributor manufatturers, jobber chains, and large retail outlets sucb as Sears, Roebuck Western Auto Supply, and Montgomery Ward, which sold on a national basis, at jobber prices less 8 percent for warehouse compeusation and 5 percent as a distrihutional discount, through according them, in addition to the prices made available by respondent to warehouse distributors (namely, jobber price less 8 percent, and an additional 12 percent compensation on their sales to jobbers) an additional 7 percent discount, and thus made its nct prices to said national distributors 5 percent less than its prices to warehouse distributors on all sales except where the national distributor or warehouse distributor resold to johhers; different cus-(f) Discriminatcd further, in addition to tbe varying prices to tomer classifications, tluongh selling certain large purchasers of .AO products for re ale for rej1Jat'emcnt at prices ,which were suhstantial1y less than , Inter- tbose charged other lar/(e jJurchasers. including, in 1940 and 1941 national Harvester, sold at 22.3 cents per plug, and Alls-Chalmers, at 27. cents;

Discriminated in price between certain large retail outlets in that in .Tanuary 1947 it discontinued sellng direct to J. T. R. Motors and Montgomery Ward-thcretofon, sold plugs for resale at 27 cents less 8 jJerc' ent and 5 percent, or 23.6 rents per ping-and required said concerns thereafter to purchase AC products indirect at dealer prices, while permitting Sears, Roebuck SJ'llabus 50 F. T. C. to continue to purchase at the favored price; and discriminated further in favor of Sears in that its retail stores were allowed to purchase AC plugs from local warehouse distributors at 31.5 cents pel' plug in lots of not less than 10, while other dealers paid 41. 1 cents pel' plug in lots of ten; (h) Discrimiuated in favor of certain large rubber and oil companies and against competing distributors, jobbers, and retail outlets at various competitive levels, in that it- (1) Sold from 1941 to 1946, AC plugs to the Goodrich Rubber Co. at a flat price of 24 cents per plug for resale through its retail outlets direct to consumers, while competing jobbers and dealers were required to IJ3Y bigber prices;

(2) Discriminated from beginnin/( 1947 to Kov. 19'1R, in that AC produets were biled and shipped to the Pure Oil Co.'s field warebouses at national distributors' prices aud to its company-owned service stations, wbicb sold them at retail in competition with other dealers who purchased from jobbers at bigher prices; and in that it /(ranted said company a special price on oil fiters 3 percent less than that paid hy other national distributors; and (3) Discriminated through its easb discount practice in favor of the Goodyear Tire & Rubber Company, which resold plugs through its own retail outlets to consumers, and also had an arran/(ement with four oil companies whereby it paid them a commission of 10 percent on sales by Goodyear to service stations which handled their petroleutn products and a commission of 71/2 percent on sales to their jobber companies, and also gave its customers a rebate based on the dollar volume of purchases during a year, including AC spark plugs, and thus passed on to certain of its customers a portion of tbe preferential price it received;

With result that- (1) Its discriminations in price in favor of said warebouse distrihutors and national distributors and against direct and indirect jolJbers, who resold their products to. dealers, fleet oVv'ners, and consumers in direct competition therewith, resulted in lower' profits to sneh jobbers, loss of customers, and a lessening of their ability to compete with said favored distrihutors; (2) Its discriminations in price in favor of national distrihutors gave their warehouse brancbes and plants a substantial competitive advanta/(e in enabling them to purchase said AC products at prices substantia11r lower than those paid by competing warehouse distributors, jobbers and dealers; and (3) Its discriminations in price between its national distributor accounts gave the favored accounts a substantial competitive advantage over others; Effect of whicb various price discriminations had been and migbt he to substantially lessen, injure, destroy, and prevent competition between and among respondent' s favored customers and others: Held That such acts and practices, under the circumstances set forth, were in violation of subsec. (a) of Sec. 2 of the Clayton Act as amended: and Where said corporation, engaged as aforesaid in the sale aud distribution of its AC products- (a) Entered into and bad in effect, in and prior to 1939, more than 750 contracts with its "D" and "DA" distributor accounts which contained a provision that the distributor would bandle said products on an exc:usive basis and following the elimination of the exclusive dealing/( clause from its 1940 distributor contracts, continued its policy, though not uniformly, of requiring its distributors to band Ie said products exclusively; and &; , , , (j! GENERAL MOTOHS CORP. ET AL.

Findings (Ii) In conformity with its aforesaid policy, following the 'VorJd 'Var II period and beginninl( in 1946 when supply and demand for automotive parts began to equalize, gave preferential prices to some of its distributors on the condition or understandinl( that they would not deal in spark plugs, oil1iters, oil tilter elements, oil filter cartridg-es or fuel pumps sold by its competitors threatened distributors with cancellation of their contracts if they faned to give up competing lines, and cancelled its contracts with a number of its warebouse distributors bew use they failed to comply; Effects of which exclusive dealing contracts and policy were to uIlreasonably restrain add substantially lessen competition between it and its competitors in tbe sale aud distribution of tbe products concerned, and to substantially lessen competition in the sale rbereof by the elimination of distributors who refused to deal in its pro(lucts exclusively and wbo were the source of its supplies to many dealers:

Held That such acts and practices, u:H101" the circmnstances set forth, were in violation of Sec. 3 of tbe Clarton Act. Before lJIr. vVe!Jster Ballinger hearing examiner. llfr. L. E. Onel !T. for the Commission. , and Miller, Gorham, Wes- llfr. Henry ili. lIogan of Detroit, Mich. cott Ada.m8 of Chicago, Ill. for respondents. vVilZkie, Owen, Fam' , Galla.ghe'i Walton of New York City, for Kaiser-Frazer Corp., amicus curiae.

lit. L. A'ith1cr Greenstein and lift. Daniel S. GreenBtein of Philadelphia, Pa. , for Berlin Auto Supply Co. amicns curiae. Bea:u17wnt, Smith 63 Harris of Detroit, Mich., for Hudson Motor Car Co. amicus curiae.

Oook, Beake, lJfiUel' , Wroe1c 01'08S of Detroit, Mich., for Nash- Kelvinator Corp., amicus curiae.

Bodman, Lonr;ley, BOqle, Armstrong Dahling, of Detroit, Mich. for Packard Motor Car Co., amicus curiae.

Ritter Boesel of Toledo, Ohio, for vVillys-Overland Motors, Inc. amIcns cunae.

RJel'ORT , FINDINGS AS TO THE FACTS, AX OIWER Pursuant to the provisions or the Federal Trade Commission Act and to an Act of Congress entitled "An Act to supplement existing laws against unlawful rcstraints ane! monopolies, and for other purposes " approved October 15, 1914 (Chtyton Act), as Rmended by an Act of Congress approved ,June 19, 1936 (Robinson-Patman Act), the Federal Tracie Commission on November 17, 1948, issued and subsequently served its complaint in this proceeding upon the respondents named in the caption hereof, charging them in Count I thereof with violation of subsection (a) oJ Seetion :2 of the Clayton Ad, RS amended; in Count II thereof with violation of subsection (d) of Section 2 of the Clayton Act, as amended; in Count III thereor with FEDERAL TRADE COM.\IISSION DECISIONS Findings 50 Ii' . '1'. C. violation of Section 3 of the Clayton Act; and in Count IV thereof with violation of Section 5 of the Federal Trade Commission Act. After the issuance of said complaint and the filing of respondents answers thereto, testimony and other evidence in support of and opposition to the allegations of the complaint were introduced before a hearing examiner of the Commission theretofore duly designated by it, and such testimony and other evidence were duly recorded and filed in the offce of the Commission. Thereafter, this proceeding regularly came on for final consideration by the Commission upon the complaint, answers thereto, testimony and other evidence, recommended decision of the hearing examiner and exceptions thereto written briefs of counsel supporting the complaint, counsel for respondents, and counsel for Kaiser-Frazer Corporation, Hudson Motor Car Company, Nash-Kelvinator Corporation, Packard Motor Car Company, and vVilys-Overland Motors, Inc., as amici curiae, and oral argument of opposing counsel; and the Commission, having duly considered the matter and having entered its order disposing of the exceptions to the recommended decision of the hearing examiner, and being now fully advised in the premises, Jinds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent General Motors Corporation is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal offce and place of business located in Detroit, Michigan. Sllid respondent is now and for many years past has been, engaged in the manufacture, distribution, and sale 01', among other things, internal combustion engines; trucks; automobiles; and automobile, truck, tractor, and engine accessories, parts, and supplies, including spark plugs, cables, fuel pump parts, oil filters, oil fiter cartridges, and oil filter elements. Respondent AC Spark Plug Company was, until December 29 1950 a corporation organized, existing, and doing business under and by virtue of the laws 01' the State of Michigan, with its principal offce and place of business located in Flint, Michigan. Said respondent was engaged in the distribution and sale of automobile, truck, tractor and engine accessories, parts, and supplies, including spark plugs cables, fuel pumps, fuel pump parts, oil filters, oil filter cartridges and oil filter elements, such products being hereinafter collectively referred to as "AC products. Said respondent was a wholly owned subsidiary of respondent General Motors Corporation, and said AC products were manufactured by General J'1motors Corporation. Under GENERAL MOTORS CORP. ET AL.

Findings date of December 29, 1950, respondent AC Spark Plug Company was dissolved in accordance with the laws of the State of Michigan. Respondent Gener'll Motors Corporation, as successor to respondent AC practices, andSpark Plug Company, was responsible for the acts, policies shown by the record to have been engaged in by the now dissolved AC Spark Plug Company, and said respondent General Motors Corporation has conceded that any order which the Commission could lawfully enter against respondent AC Spark Plug Company on the record herein may be lawfully entered against respondent General Motors Corporation (AC Spark Plug Division). The complaint herein will, therefore, be dismissed as to respondent AC Spark Plug Company, and as hereinafter used the term "respondent" does not include said AC Spark Plug Company.

PAR. 2. Respondent General Motors Corporation transports said AC products, or causes same to be transported, for sale and distribution from the places where said products are manufactured or stored to its customers and purchasers thereof located in other and different States of the United States and in the District of Columbia; and there is, and has been at 'lll times mentioned herein, a continuous cur rent of trade and commerce in said products between the States where respondent' s factories and warehouses are located and the various other States of the United States. Said AC products are sold by respondent General Motors Corporation for use, consumption, and resale within the United States and the District of Columbia. PAR. 3. Respondent General Motors Corporation distributes and sells said AC products throughout the United States in the same territories and places as, and in substantial competition with, other persons and corporations engaged in the manufacture, distribution, and sale of similar products. Customers of respondent purchasing AC products for resale, and many of their customers, are competitively engaged in the resale of such products at wholesale and retail in the various territories and places where said customers, respectively, carryon their businesses. For the past several years, respondent General Motors Corporation has annually supplied more spark plugs, oil filters, fuel pumps, and speedometer cables to the original equipment vehicles asfield (that is, for nse by manufacturers of engines and original equipment) than any other manufacturer of these products. Respondent, Champion Spark Plug Company, and The Electric Auto- Lite Company are the three largest manufacturers of spark plugs in the United States, and although there are approximately 40 manufacturers or assemblers of spark plugs in the United States, these three companies manufacture and sell approximately 90 percent of all the spark plugs sold in the United States. Respondent manufadures Findings 50 F. T. C.

and sells a substantial portion of all the spark plugs sold in the United States for both original equipment and replaccment. In recent years approximately 98 percent of all automobiles manufactured in the United States have been equipped with respondent's AC fuel pumps. PAR. 4. Respondent General Motors Corporation has sold its said AC products to vehicle and engine manufacturers for use by such manufacturers as original equipment in vehicles and engines manufactured by them. Respondent has also sold said AC products to such manufacturers and others for resale for reph.cement of original equipment. The prices at which respondent has sold its said AC products of like grade and quality have varied as between (1) purchasers buying such products for original equipment; (2) purchasers buying such products for original equipment and purchasers buying such products for resale or replacement; and (3) purchasers, both direct and indirect, buying such products for resale or replacement. PAR. 5. In the sale of AC products for original equipment on engines and vehicles, respondent has charged varying prices for products of like grade and quality. For example, respondent has sold spark plugs to automobile and other manufacturers for original equipment cat prices ranging from 6 cents per plug to 15 cents per plug or more. As of February 1, 1949, a.after the issuance or the complaint herein Tespondent' s 6-cent price on spark plugs was increased to 10 cents, and respondent' s customers who had been purchasing at the 6-cent price discoutinued purchasing such plugs from respondent. The hearing examiner in his recommended decision found that respondent' s price differentials between customers purchasing for original equipment resulted in injury to those customers who paid the higher prices. The hearing examiner did not state what evidence in the record he relied upon in making this finding. However, in a footnote to said finding, he stated that "While the difference in the cost of plugs in a single engine amounted to but a few cents, the profits accruing from yearly volume purchases were substantial." The Commission, upon consideration of the entire record, is of the opinion that the allegations in the complaint as to the results of respondent' s price differentials between customers purchasing AC products for original equipment are not sustained by the evidence, and that therefore, such allegations should be dismissed. PAR. G. From 1936 to 1949 respondent sold spark plugs to automobile and other manufacturers for original equipment at prices substantially less than those charged for spark plugs of like grade and quality sold said automobile and other manufacturers and others for resale for replacement of original equipment. For example, during this period respondent' s prices on spark plugs sold to automobile and GENERAL MOTORS CORP. ET AL.

1-'indings other manufacturers for original equipment ranged from 6 cents per plug, which price was below respondent's cost of manufacture, to 15 cents per plug, while respondent's prices on spark plugs sold to said automobile and other manufacturers and to certain other direct purchasers for resale for replacement was 24 cents pel' plug or more. It is alleged in Count I of the complaint herein that respondent' practice of selling its spark plugs for original equipment below its cost of manufacture places upon the purchasers of spark plugs for replacement the injurious, unfair, and oppressive burden of paying a higher price than the price paid by others, so as to earry the loss incurred by respomleut in the sale of original equipment plugs at 6 cents per plug, and that the effect of price differentials between purchasers buyiug for original equipment aud purchasers buying for resale is and may be substantially to lessen competition or tend to create a monopoly in the line of commerce in which respondent is engaged or to injure, destroy, or prevent competition with respondent in the manufacture, distribution, and sale of spark plugs. The hearing examiner in his recommended decision found that the aforesaid allegations are sustained by the evidence, and his recommended order would prohibit alj such price differences except those which make only due allowance for difterences in the cost of manufacture, sale, or delivery resulting froni the diiIering methods or quantities in which such products are to such purchasers sold or delivered.

In the opinion of the Commission, the hearing examiner s findings with respect to the competitive injury resulting from respondent' lower (and below cost) price on original equipment spark plugs than on replacement sptlrk plugs is not supported by or in accordance with the greater weight of the reliable, probative, and substantial evidence in the record. The spark plugs purchased by vehicle and engine manufacturers for use as original equipment become an integral part of the engine in which they are used. N one of such spark plugs are resold by such manufacturers for replacement purposes. The buyers paying the aforesaid diferent prices do not compete in the resale of the spark plugs. It is contended that as tc result of the below cost price on original equipment spark plugs, it is necessary for the respondent to reconp its losses on original equipment business by charging higher prices for replacement spark plugs. It is also contended that as a result of the lower prices on original equipment spark plugs smaller manufacturers are not only precluded from sellng their spark plugs for original equipment, but are also placed at a substantial disadvantage in competing with respondent in the sale oj' replacement spark plugs.

Findings 50 F.

The adoption and use of a particular spark plug by a well-known vehicle manufacturer increases the demand for that particular plug for replacement purposes. However, despite the fact that substantially all the spark plugs used as original equipment are supplied by respondent, Champion Spark Plug Company, and The Electric Auto- Lite Company, the record does not disclose any undue mortality rate on the part of smaller spark plug manufacturers which can be attributed to respondent's lower price on original equipment spark plugs than on replacement plugs.

There is testimony in the record to the effect that some competitors of the respondent have been unable to sell their spark plugs to vehicle manufacturers because such competitors have been either unable or unwilling to sell at the prices charged by respondent and its two principal competitors in the original equipment field. However, the record as a whole does not, in the opinion of the Commission, sustain the allegations of the complaint as to the competitive injury resulting from respondent's lower price on original equipment spark plugs than on replacement spark plugs, and such allegations should, therefore, be dismissed.

PAR. 7. In the course and conduct of its aforesaid business, respondent has, since June 19, 1936, sold AC products for replacement of original equipment at prices which varied subst,mtially as between (1) purchasers buying directly from respondent; (2) purchasers buying indirectly from respondent; and (3) purchasers buying directly and purchasers buying indirectly from respondent. Prior to 1941, respondent classified certain of the accounts to whom it sold AC products directly as " and A-4" accounts. D and DA accounts were distributors handling all AC product.s and who were given a special price in return -for handling AC spark plugs and AC oil fiter cartridges on an exclusive basis and performing certain other designated services. J account.s were jobbers who stocked and sold such AC products as they found demand -for and in the quantity consistent with the demand. Respondent' contracts with .J accounts did not contain a provision requiring that AC spark plugs and AC oil fiter cartridges be handled on an exclusive basis. A- , A- , and A-4 accounts were those concerns who were also sold on a contnlct basis (except fleet owners) because of the volume of their purchases, but. whose principal business was other than the wholesaling of automotive supplies. These classifications included automobile manufacturers, chain stores, national oil and tire companies, and others. Other dealers in AC products were required to purchase, and did purchase, their requirements from distributors or wholesalers who purchased directly from respondent. However, the _ ( ( GENERAL MOTORS CORP. ET AL.

Findings prices and terms and conditions applicable to such indirect purchasers were fixed and controlled by respondent. Representatives of respondent personally solicited the business of such indirect accounts and sales to such accounts were essentially sales by respondent. The prices at which respondent sold certain of its AC products to purchasers in the different classifications described above during the year 1940 are shown below:

D and DA and J and Item A-4 Indirect accounts accounts accounts aCCOn n ts AC Spark Plngs_ . 27 $0. $032 to . 37.AC on Filters (Type No. I) - $4. 50 to $5 40. AC Oil Filter Elements (Type No. 8-11)-- . fi9 1087 to $1.05.AC Air Cleanscrs- - ----------- 1.80 1. 80 1. 94 $2. 22 to $2 70. From 1936 to 1941, respondent' s distributors (D and DA accounts) guaranteed the accounts of certain of respondent's jobber customers and received from respondent an amount equal to 10 percent of the jobbers' purchasing price. For example, on sales of AC spark plugs by respondent to a jobber at 31 cents per plug, a distributor received 1 cents per plug. As a result of such payments, respondent's price discriminations in favor of its distribut.ors and against it.s other customers were actually greater t.han is indicated by the prices appearing in t.he above tabulat.ion.

From 1941 unt.il November 1, 1946, respondent. sold AC spark plugs t.o purchasers classified by it as "Warehouse Dist.ribut.ors VVD" at 28 cents per plug. During t.he same period, respondent sold t.o purchasers classified by it as "Jobbers ) at 30 cents per plug. On sales by IVarehouse Distributors to these .Jobbers respondent paid the Warehouse Distributors addit.ional compensation of 10 percent of the selling price. On sales of spark plugs by IVarehouse Distributors to certain contract dealers (those classified by respondent as "SP-33" and "SP-36") respondent paid the Warehouse Distributors additional compensation or 10 percent and 5 percent, respectively. I\TarehoLise Distributors also received additional compensation of 10 percent on sales by them of other AC products to contract dealers. .J ob ers received no additional compensation on their sales to these contract dealer accounts.

From 1912 to November 1, 1946, some of respondent's jobbers purchased AC spark plugs out of IVarehouse distributors' stocks at :n. cents pel' plug (5 percent increase over the 30 cents per plug paid by jobbers purchasing direct). On sales to these indirect jobbers, Warehouse Distributors received a compensation of 10 percent or the selling price, and their net purchase price was, therefore, 28 cents less 3. ; ) _ : .. Findings 50 F.

cents, or 24.85 cents pel' plug, as compared with the indirect jobbers net purchasing price of 31.5 cents per plug, a difference of 6. 5 cents per plug. Contract dealers purchased AC products at prices higher than those paid by jobbers, and noncontract dealers purchased AC products at prices higher than those paid by contract dealers. As of N ovembel' 1, 1946, respondent inaugurated a new distribution program under which "Warehouse Distributors could purchase AC products at jobbe. ' prices less 8 percent. On sales to jobbers approved by respondent, ,Varehollse Distributors received an additional compensation of 12 percent of the jobbe.r price. Respondent' prices to ,Varehouse Distributors and jobbers durilJg a m ljor portion of the year 1947 on a number of diflerent AC products are shown in the tabulation following:

WDprice W D invoice on sales price (job- to jobbers Item Jobher ber s price (iohhcr price less 8 per- price less cent) 8 percent and 12 percent) $0. 248 $0. 216AC Spack Plugs " --2AC 011 Filters (Type No. 8-1 C) -- - 1 4. . G3 " 54AC Oil Filter Elements (Type C-IO)- --AC Fuel )Jumps (Type No. 40: 4. 00 AC Fuel J)ump Hcpair Kits (Type Xo. H.- l) -- 90 . ----u- .AC Speedometer Cahles (Typi' No. 601)-- 315 AC Air Cleansers (Type Ko. U07)_ 08 I L 81 .- .--- 2 From 1938 until November 1, 1946, respondent had an arrangement whereby owners or operators of fleets of vehicles or engines could purchase AC spark plugs, oil filters, fuel pumps, and other AC products at varying prices depending upon the number of vehicles or engines operated. For example, operators of from 10 to 49 vehicles or engines could purchase AC spark plugs from distributors or jobbers at 41 cents pel' ping. Operators of from 50 to 199 vehicles or engines could purchase from distributors or jobbers at 37 cents per plug, and operators of 200 or more vehicles or engines could purchase from dist.ributors or jobbers at 34 cents per plug. Fleet owners entitled to the 37- cent or 34-cent price were required to enter into a cont.ract with respondent before they could purchase at those prices. A ftCI' November 1 , 1946, large fleet accounts were designated by respondent as " J oboeI' Fleet Owner" accounts and were Plcrmitted to purchase AC products fron! ,Varehonse Distributors at jobber prices. Like jobber accounts, cont racts with large fleet o\Vl1ers were subject to the approval of respondent before ,Yarehouse Distributors were eligible Jor a compensation of 12 percent on their sales to ,J obber Fleet Owner accounts.

, .

GE?mRAL MOTOHS CORP. ET AL.

Findings At the same time that respondent was selling AC products to warehouse Distributors at jobber prices less 8 percent, with an additional 12 percent compensation to the Warehouse Distributors on their sales to Jobbers, respondent sol(l AC products of like grade and quality direct to certain accounts, such as oil and tire companies, distributormanufacturers, and jobber chains, which sell on a national basis, at jobber prices less 8 percent for warehouse compensation and 5 pen ent as a distributional discount. On sales to jobbers, these national distributors received an additional 7 percent discount. After .July 16 1947, the aforesaid discounts of 8 percent and 5 percent were deducted from the amount of each billing at the time the billing was made. Respondent' s net prices to national distributors were, therefore, 5 percent less tlmn its net prices to ' Warehouse Distributors on all sales except where the national distributor or warehouse Distributor resold to jobbers.

In addition to the varying prices at which respondent has sold AC products for resale Ol' replacement of purchasers in the different customer classifications as described hereinabove, respondent has also sold AC products for resale or replacement to certain large purchasers at prices substantially less than those charged other large purchasers. For example, respondent sold AC spark plugs to International I-Iarvester Company and to Allis-Chalmers Company for resale for replacement. Tn 1940 and 1941 , J'respondent' s price to International Harvester Company was 22.3 cents per plug, while at the same time respondent's price to Allis- Chalmers Company was 27.5 cents per plug. Certain large retail outlets, such as Sears, Roebuck & Company, vVestem Auto Supply Company, Marshall's U. S. Auto Supply, Montgomery ward J. & R. .Motors, and others, were classified by respondent as warehouse Distributors until August 25 , 1946; as Direct Jobbers until X ovember 1, 1946; and as .J obber Chains after the latter date, Respondent's price after November 1 , 1946, to accounts classified by it as Jobber Chains was the jobber price less 8 percent and 5 percellt. AC spark plugs, for example, were sold to such concerns for resale through their own retail outlets at 27 cents less 8 percent and 5 percent, or 23. 6 cents per plug. In .January 1947 respondent discontinued selling direct to J. & R. l\fotors and Montgomery ward, and thereafter those concerns were required to purchase AC products indirect at dealer prices. Sears, Roeb1J k & Comp:my was permitted to continue to purchase at the favored price. Also, Sears' retail stores were allowed to purchase AC spark plugs from local warehouse Distributors at the local jobber s price of 31.5 cents per plug in lots of not less than 10 plugs. Other dealers in AC spark plugs paid 41 cents per plug in lots of ten. 40344:J-57-- Findings 50 F.

The B. F. Goodrich Hubber Company purchased AC spark plugs from respondent at a fiat price of 24 cents per plug from 1941 to 1946 and rcsold such plugs through its own retail outlets direct to consumers. At the same time, competitors of Goodrich, jobbers and dealers, were required to pay higher prices for the AC spark plugs tJ1ey purchased.

The Pure Oil Company purchased AC spark plugs from respondent on a national distributor s basis from the beginning of 1947 until November 1948. AC products were billed and shipped to Pure Oil Company s i-field warehouses at national distributor s prices and the Pure Oil Company operated company-owned service stations which sold these AC products at retail in competition with other dealers who purchased from jobbers at higher prices. Respondent granted the Pure Oil Company a special price on oil filters, which price was 3 percent less than the price paid by other national distributors. The Goodyear Tire & l rubber Company purchased AC spark plugs from respondent on a national distributor s basis less 2 percent cash discount at the time of billing. Competitors of Goodyear who purchased on the same basis were allowed a discount of 2 percent for cash payment within the discount period, the discount being deducted from the remittance instead of from the face of the invoice. Goodyear Tire & Hubber Company resold some of the AC spark plugs so purchased through its own retail outlets to consumers. Goodyear had an arrangement with Shell Oil Company, Sinclair Refining Company, Richfield Oil Company, and Sherwood Brothers whereby Goodyear paid these companies a commission of 10 percent on sales by Goodyear to service stations which handled the petroleum products of those oil companies, and a commission of 7% percent on sales to jobber customers of those oil companies. Goodyear also had a bonus plan under which it gave its customers a rebate based on the dollar volume of purchases during a year. AC spark plugs were included in determining the volume of purchases. A portion of the preferential price received by Goodyear 011 its purchases of AC spark plugs was thus passed on to certain of its customers.

PAR. 8. Dil' ect jobbers who purchased AC products directly from respondent, as well as jobbers who purchased such products indirectly, resold such products to dealers, fleet owners, and consumers in direct competition with 1Varehouse Distributors and national distributors who purchased AC products directly from respondent at prices less than those paid by said jobbers. The record clearly establishes that respondent's price di il'erentials to competing customers were substantial.

Respondent' s discrimination in price in favor of Warehouse Distributors and national distributors and against jobbers, both direct GE:NRAL MOTORS CORP. ET AL.

Findings and indirect, have resulted in lower profits to the jobbers, loss of customers, and a lessening of their ability to compete with warehouse Distributors and national distributors in the resa.le of respondent' AC products.

Respondent' s discriminations in price in favor of nationftl distributors have given the national distributors a substantial competitive advantage over IVarehouse Distributors, jobbers, and dea.lers in the resale of AU products. vVarehouses, branches, and plftnts of national distributors have been able to purchase AC products at prices substantially less than those paid by their competitors, namely, warehouse Distrihutors, jobbers, and deftlers. For example, in November 1947 the national distributor s profit on sales of fuel pumps to jobbers was 19.6 percent and on sales to one of the dealer classifications the profit was 38.8 percent. At the same time, the profit to jobbers sales of fuel pumps to the same dealer classification was 30 percent. s profit was 19.Similarly, on AU oil fiters the national distributor percent on sales to jobbers and 43.2 percent on sales to dealers. the same time the profit to jobbers on sales of AU oil filters to dealers was 35 percent.

Respondent's discriminations in price as between its national distributor itccounts have given the accounts receiving the lower prices a substantiftl competitive advantage over the accounts paying the 11higher prices.

The effect of the price discriminations described in Paragraph 7 has been and may be to substantially lessen, injure, destroy, and prevent competition between and among respondent' s customers receiving the benefits of said discriminations and respondent' s customers who do not receive the benefits of such discriminations. PAR. 9. Respondent alleges in its answer to the complaint that any differences in prices to diflerent accounts which it may have allowed were not discriminatory but were established in good faith to meet the equally low prices of competitors and/or the services a,nd facilities furnished by competitors, as well as to make allowances for differences in the cost of manufacture, sale, or delivery resulting from the different methods or quantities in which AC products were sold and delivered to such difierent accounts.

The Commission s determination that the allegfttions of the complaint with respect to the injury to competition resulting from respondent' s price differences between (1) customers purchasing AU spark plugs for original equipment and (2) customers purchasing AU spark plugs for original equipment and cllstomers purchasing such spark plugs for resale or replacement are not sustained makes it unnecessary to determine whether respondent's ftforesftid defenses to these price difIerentia.ls are sustained by the record. Findings 50 F. T. C. The evidence in the record does not establish that respondent' s price for resaledifferentials as between customers purchasing AC products for replacement as described in Paragraph 7 hereof were made in good faith to meet equally low prices of competitors or the services and facilities furnished by competitors, or that such price differentials were justified by differences in the cost of manufacture, sale, or delivery resulting from the dillerent methods or quantities in which AC products were sold and delivered to such customers. PAR. 10. In and prior to 19;')9 respondent entered into ami had in effect more than 750 contracts with distributors who were classified by respondent as "D" and "DA" accounts, which contained a provision that the distributors would handle designated AC products on an exclusive basis. Agreements entered into by respondent with such distributors in 1939 contained the following provision: It is undcrstood alll a/(rced that this agreement is entered into by the AC Spnrk PIng COllpany in consideration of the Djstributor handling AC Plugs AO Oil Fil er Hcne\Yfll Cartridges, and AU Oil Filters on nil exclusive basis (Coi1m. Ex. 168, p. 22) The exclusive dealing clause was eliminated from respondent' s 1940 distributor s contracts. However, respondent's policy of requiring its distributors to handle AC products exclusively was continued, although such policy has not been uniformly adhered to. In 1940 respondent announced in a "Statement of Policy" to all its distributors do notthat "These distributors ED and DA accountsJ, therefore, carry competitive products either for wholesale or retail distribution " " "" a,nd "Should an AC Distributor at any time feel it to this decision istheir best interest to handle a competing product, accepted by the AC Spark Plug Company; and another concern will be sought to act as an AC Distributor * From 1941 until the end of IV orld vear II the demand for AC products greatly exceeded production and respondent was unable to meet the demands of its customers. During that period respondent made little or no attempt to enforce its policy of exclusive dealing. In 1946, when the supply and demand for automotive parts began to eqnalize, respondent in conformity with its aforesaid policy gave preferential prices to some of its distributors on the condition or understanding that said purchasers would not deal in spark plugs oil filters, oil filter elements, oil fiter cartridges, or fuel pnmps sold s distributors W110by competitors of respondent. Sornc of respondent' desired to stock competing lines of products were threatened with cancellation of their contracts if they hired to give up competing lines or products, and some distributors ceased handling competitive lines although they carried out all the functions of the distributors and purclmsed in the quantities entitling them to respondent's IVare- GENERAL MOTORS CORP. ET AL. UOJ Findings house Distributor s contract. For example, one witness testified that respondent' s regional manager "would call my attention to the fact that we could not carry a Champion line if we were an AC distributor." Another witness testified that he was told by respondent' assistant regional manager "that they would not tolerate me to sell another spark plug alongside of that if I did, they would cancel my contract. This same witness also testified that he was told respondent' s agent that "vVe don t allow anyone that sells AC spark plugs on a vVD to carry another line of merchandise with us, and we win give you just so long to get rid of the merchandise." A regional manager for respondent testified that he had an "understanding" with this Warehouse Distributor and that he had occasion to remind this Varehouse Distributor of the "nice gentlemen s agreement" which the lVarehouse Distributor had with the respondent regarding exclusive dealing. Another witness testified that he was told by one of respondent' s salesmen in 1948, in reference to the handling of a competitor s plug, "in no uncertain terms that that was very much against the regulations and that we had better dispose of them, which we did.

Respondent canceled its contracts with a number of its \Varehouse Distributors because such warehouse Distributors failed to comply with respondent's request to cease handling competing products. The evidence in the record clearly establishes that respondent' s distributors, except those who were exempted from respondent' s exclusive dealing policy, generally understood that they were prohibited from dealing in or handling competing products. The complaint herein does not allege, and the record does not show that respondent has enforced its aforesaid exclusive dealing policy against all its distributors. It appears that respondent permitted a number of its distributors to deal in competitive products because (1) the distributor s volume of business was so large that respondent could not enforce its policy, (2) the distributor was located in a strategic territory, or (3) respondent was unable to furnish a complete line. It also appears that some of respondent' s distributors did not deal in competing products because of their own preference rather than because of any understanding with, or coercion by, respondent. The fact remains, however, that respondent has made contracts for sale and has sold AC products to distributors on the conch. tion, agreement, or understanding that said distributors shall not deal in products manufactured or sold by a competitor of respondent. The effects of respondent' s exclusive dealing contracts and policy have been to unreasonably restrain and substantially lessen competition between respondent and its competitors in the sale and distribution of spark plugs, oil filters, fuel pumps, speedometer cables, and FEDERAL TRADE COMlV1ISSION DECISIONS Findings 50 F. T. C.related items, and to substantially lessen competition in the sale of respondent' s products by the elimination of some of respondent' distributors who refused to deal in respondent' s products exclusively and who were the source of supply of respondent' s products to many dealers.

PAR. 11. Count II of the complaint herein charges respondent with violation of subsection (d) of Section 2 of the Clayton Act, as amended. With respect to such charge the hearing examiner found in substance that from June 19, 1936, to 1941 respondent' s distributors guaranteed the accounts of certain of respondent's jobber customers, and that for such service respondent paid its distributors amount equal to 10 percent of the dollar value of the purchases of AG products by the guaranteed account. The distributors and the jobbers whose accounts were guaranteed by the distributors were in competition in the resale of AC products. This practice was discontinued at the end of 1940.

The Commission is of the opinion that the aforesaid payments by respondent to its distributors were in fact reductions in the prices paid respondent by such distributors as hereinabove found. Under the circumstances, Count II of the complaint should be dismissed. In Count IV of the complaint herein respondent is charged with having violated Section 5 of the Federal Trade Commission Act by agreeing with and compelling distributors of and dealers in AC products to maintain the various prices fixed by respondent for the resale of AC products.

Subsequent to the completion of the hearings herein the Federal Trade Commission Act was amended with respect to certain contracts and agreements which establish minimum or stipulated resale prices (Public Law No. 542, approved July 14, 1952-the McGuire Act). This amendment had the effect of making legal certain of the acts and practices which it is contended the respondent has engaged in, in connection with the fixing and maintaining of resale prices. For example, it is contended that respondent' s agreements with its distributors which fixed the exact prices at which the distributors were to resell spark plugs were illegal because the .Miller-Tydings Act, which permits the fixing of minimum resale prices under certain circumstances does not permit the fixing of exact resale prices. The aforesaid Mc- Guire Act has the eflect of permitting, under certain circumstances contracts or agreements which prescribed stipulated, or exact, prices as well as minimum prices. Certain of the respondent's acts and practices which may have been illegal at the time they were committed may not, therefore, be illegal under the existing law. Under these circumstances, an order to cease and desist such practices would be inappropriate. Furthermore, the complaint herein, having been issued GENERAL MOTORS CORP. ET AL.

Order prior to the enactment of the aforesaid McGuire Act, may not have suffciently informed the respondent as to its acts and practices in connection with the fixing and maintaining of resale prices challenged therein.

upon consideration of all the foregoing and the further fact that the order to cease and desist which is being entered herewith pursuant to the charge in Count I of the complaint will be effective in preventing respondent from fixing and maintaining discriminatory prices as between its direct and indirect customers who compete with each other in the resale of respondent's AC products, the Commission is of the opinion that Count IV of the complaint should be dismissed. CONCLUSION The acts and practices of the respondent as herinabove found in Paragraphs 7 , and 9 are in violation of subsection (a) of Section 2 of the Clayton Act, as amended, and the acts and practices of the respondent as hereinabove found in Paragraph 10 are in violation of Section 3 of the Clayton Act.

Commissioners Howrey and Carretta not participating for the reason that oral argument on the merits was heard prior to their appointment to the Commission.

ORDER TO CEASE AND DESIST This proceeding loaving been heard by the Federal Trade Commission upon the complaint of the Commission, answers of the respondents, testimony and other evidence in support of and in opposition to the allegations of said complaint taken before a hearing examiner of the Commission theretofore duly designated by it, recommended decision of the hearing examiner and exceptions thereto, briefs of counsel supporting the complaint, counsel for respondents, and counsel for Kaiser-Frazer Corporation, Hudson Motor Car Company, Nash-Kelvinator Corporation, Packard Motor Car Company, and Willys- Overland Motors, Inc., as amici curiae, and oral argument of opposing counsel; and the Commission having issued its order disposing of thc exceptions to the recommended decision of the hearing examiner and having made its findings as to the facts and its conclusion that respondent General Motors Corporation has violated the provisions of subsection (a) of Section 2 of the Clayton Act, as amended, and Section 3 of said Clayton Act: It is ordered That respondent General Motors Corporation, a corporation, and its offcers, representatives, agents, and employees, directly or through any corporate or other device, in or in connection with the sale, for replacement purposes, of spark plugs, oil fiters, oil Order 50 F.

filter cartridges, oil filter elements, fuel pumps, fuel pump part kits speedometer cables, and rehrted automotive parts and accessories in commerce, as "commerce" is defined in the Clayton Act, do forthwith cease and desist from:

(a) Discriminating, directly or indirectly, in the price of said products of like grade and quality:

1. By selling to any direct purchaser at net prices higher than the net prices charged any other direct purchaser who in fact competes in the resalo and distribution of said products with tho purchaser paying the higher price.

2. By selling to any indirect purchaser at net prices higher than the net prices charged any other direct or indirect purchaser who in fact competes in the resale and distribution of said products with the purchaser paying the higher price.

(b) Selling or making any contract or agreement for sale of said products on the condition, agreement, or understanding that the purchaser shall not use or deal in or seIl the products of II competitor or competitors of the respondent.

(c) Enforcing in any manner or continuing in operation or effect any condition, agreement, or understanding, in or in connection with any existing contract or agreement for sale of said products, which condition, agrcement, or understanding is to the effect that the purchaser shall not use or deal in or sell the products of a competitor or competitors of the respondent.

(d) Granting any rebate or fixing any price to any purchaser of said products on the condition, agreement, or understanding that such purchaser shall not use or deal in the products of a competitor or competitors of the respondent.

It is further ordered That the allegations in Count I of the complaint relating to respondent's price differences between (1) purchasers buying for original equipment and (2) purchasers buying for original equipment and purchasers buying for resale for replacement and the allegations in Counts II and IV of the complaint, be, and they hereby are, dismissed.

It is furtlwr ordered That the complaint be, and it hereby is, dismissed as to respondent AC Spark PIng Company. It is further ordered That the respondent General Motors Corporation shall, within sixty (GO) days after service upon it of this order file with the Commission a report, in writing, setting forth ill detail the manner and form in which it has complied with this order. Commissioners l-owrey and Carretia not participating for the reason that oral argument on the merits was heard prior to their appointment to the Commission.

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THE ELECTRIC AUTO-Ll.l-' Syllabus