Sun Electric Corporation

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IN THE MATTER OF ELECTRIC CORPORATION ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 8659. Complaint April 1965 Decision, April 14, 1966 Order dismissing a complaint against a Chicago, nl., manufacturer of automotive testing equipment, charging that it had ilegally suppressed competition in the repair of such equipment, the allegations not sustained by evidence.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act (U. , Title 15, Sec. 45) and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the corporation named in the caption here- , and more particularly described and referred to hereafter as respondent, has violated the provisions of Section 5 of said Act and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in respect thel' eto as follows: PARAGRAPH 1. Respondent, Sun Electric Corporation, is a corporation organized and existing under the laws of the State of Delaware, with its general offce and place of business located at 6323 Avondale Avenue, Chicago, Ilinois.

PAR. 2. Respondent is now and for many years has been engaged in the manufacture, distribution and sale of automotive and aircraft testing equipment, electronic equipment, and parts and accessories necessary thereto. Respondent sells automotive testing equipment manufactured by it directly to garages, service stations and others engaged in the repair of automobiles through its general offce in Chicago, Ilinois, and through numerous branch offces located in various States of the United States. Respondent is the dominant manufacturer of automotive testing equipment in the United States, and its sales of such equipment in the United States are substantial. During the period 1959-1963, respondent' sales of automotive testing equipment ranged from $5 000 000 to $7,000 000 annually.

PAR. 3. Respondent is also engaged in the repair of automotive testing equipment manufactured by it. Respondent maintains re- Complaint 69 F. T.

pair facilities at its factory located in Chicago, Ilinois, and has established and maintains approximately twenty-six factory branches located in various States of the United States. Such factory service branches are the only places operated, maintained or authorized by respondent for the repair of its automotive testing equipment.

PAR. 4. Respondent, in the course and conduct of its business as described above, is now and for many years has been engaged in commerce, as "commerce" is defined in the Federal Trade Commission Act. Respondent causes its automotive testing equipment, parts and accessories to be transported from its manufacturing plant located in Chicago, Ilinois, to users of such equipment located in various States of the United States and the District of Columbia; and causes its automotive testing equipment, parts and accessories to be transported from its manufacturing plant to its sales offces and factory service branches located in various States of the t:united States for sale to customers and to users of respondent' s equipment located in various States of the United States and the District of Columbia.

PAR. 5. Respondent, in the course and conduct of its business as described above, has been and is now in substantial competition with others in the manufacture, distribution and sale of automotive testing equipment, and, except to the extent that competition has been hindered and suppressed by virtue of the acts and practices described below, has been and is now in substantial competition with others in the repair of respondent's automotive testing equipment.

PAR. 6. Respondent, in the course and conduct of its business as described above, has refused and continues to refuse to sell parts and accessories for its automotive testing equipment to persons and firms engaged in the business of repairing automotive testing equipment. Respondent has also refused and continues to refuse to furnish to persons and firms engaged in the repair of automotive testing equipment diagrams, schematics or similar documents showing the make-up of its automotive testing equipment. PAR. 7. The effects of the acts and practices of respondent as hereinabove alleged, among others, are as follows: 1. Independent repairmen have been prevented and hindered from engaging in the business of repairing respondent' s automotive testing equipment.

2. The ability of independent repairmen to compete with res- SUN ELECTRIC CORP. 573 571 Initial Decision pondent in the repair of respondent's automotive testing equipment has been injured, lessened, prevented or destroyed. 3. Respondent has obtained, or attempted to obtain, a monopoly in the repair of its automotive testing equipment. 4. Owners and users of respondent' s automotive testing equipment have been deprived of their freedom of choice in the selection of a repair agency.

5. The ability of small businessmen, as represented by the independent repairmen referred to herein, to flourish and grow has been hirrdered, lessened or destroyed.

PAR. 8. The aforesaid acts and practices of respondent have a tendency to unduly hinder competition and have injured, hindered, suppressed, lessened or eliminated actual and potential competition in the repair of respondent's automotive testing equipment, and have created, or may tend to create, a monopoly in the repair of respondent's automotive testing equipment. Said acts and practices, therefore, are to the prejudice and injury of the public and respondent's competitors in the field of automotive testing equipment repair and constitute unfair methods of competition in commerce or unfair acts and practices in commerce within the intent and meaning of Section 5 of the Federal Trade Commission Act.

Mr. Lowell E. Miller and it!?, John Ohanian for the Commissian.

Sonnenschein, Levinson CaTlin, Nath Rosenthal Chicago Ill., for respondent.

INITIAL DECISION BY EDGAR A. BUTTLE, HEARING EXAMINER NOVEMBER 9, 1965 The complaint herein was issued by the Federal Trade Commission on April 26, 1965. Answer was filed by respondent on May 25, 1965. A prehearing conference was held in Washington , on June 29, 1965. Hearings commenced in New York City on July 14, 1965 , and concluded in Chicago, Ilinois, on July 22 1965.

The complaint charges respondent, a corporation engaged in the business of manufacturing and selling automotive testing equipment, parts and accessories, and the business of repairing automotive testing equipment manufactured by it, refuses and has refused to sell repair parts and accessories for its automotive testing equipment to persons and firms engaged in the business of Initial Decision 69 F.

repairing automotive testing equipment, and refuses and has refused to furnish to such repairmen diagrams, schematics or similar documents showing the make-up of its automotive testing equipment. It is alleged that the effects of such acts and practices among others, are to hinder and prevent automotive testing equipment repairmen from engaging in the business of repairing respondent' s automotive testing equipment; to injure, lessen prevent or destroy the ability of such repairmen to compete with respondent in the repair of its automotive testing equipment: to deprive owners and users of respondent's automotive testing equipment of their freedom of choice in the selection of a repair agency; and that respondent has obtained, or attempted to obtain a monopoly in the repair of its automotive testing equipment. FINDINGS OF FACT 1. Sun Electric Corporation, respondent herein, is a corporation organized and existing under the laws of the State of Delaware, with its general offce and place of business located at 6323 A van dale Avenue, Chicago, JIlinois.

2. Respondent, inter alia, is now and for many years has been engaged in the manufacture, distribution and sale of automotive and aircraft testing equipment, electronic equipment, and parts and accessories necessary thereto.

3. The automotive testing equipment manufactured and sold by respondent consists primarily of electronic equipment designed for the purpose of determining the operating conditions of automobile engines and automotive fuel, ignition, starting and charging systems. It is used by persons and firms, such as automobile dealer repair shops, automobile motor tune-up shops and service stations, engaged in the business of repairing and servicing automobiles.

4. Automotive testing equipment is manufactured by respondent in the United States at factories located in Chicago, Ilinois and Bellwood, Ilinois, and is sold in all areas of the United States and the District of Columbia through twenty-seven (27) sales offces located in various states of the United States and approximately two hundred and fifty (250) sales representatives located in all states of the United States. 'Admitted, Answer, par. 1; also stated to be unobjectionabJe by respondent at pac 10 of its memorandum in response to complaint counsel's " Proposed Findings, Conclusions, OJ' del' and Argument of I.aw in Support Thereof. Admitted, Answer, par. 2.

3 See ex 4 5; Tr. 123, 156.

. See Tr. 138- , 743; ex 4 , 5 , 7.

SUN ELECTRIC CORP. 575 571 Initial Decision 5. In addition to its two manufacturing plants in the Chicago Ilinois area, respondent operates two manufacturing plants in foreign countries. Respondent's automotive testing equipment is sold in foreign countries through authorized distributors located in a1l principal countries of the world. 6. Respondent additional1ly is and has been engaged in the business of repairing automotive testing equipment manufactured by it. In the conduct of such repair business, respondent operates and maintains, as part of Sun Electric Corporation, twenty-six (26) factory service branches located throughout the United States. 7. Respondent, in the course and conduct of its business of selling automotive testing equipment and repairing automotive testing equipment manufactured by it, causes its automotive testing equipment, parts and accessories to be transported from its manufacturing plant in Chicago, Ilinois, to its various sales offces and factory service branches. Respondent, in the course and conduct of its business of selling automotive testing equipment and repairing such equipment, is and has been engaged in commerce, as commerce" is defined in the Federal Trade Commission Act, 8. During the period 1960-1964, respondent's sales within the United States of automotive testing equipment manufactured by it were substantial and were as follows : Fiscal 1960- 816,169.

1961- 4 355 820.

1962- 5 338 168.

1963- 6 228 034.44 1964- 6 875 903.

Respondent' s sales increased by more than thirty (30) per cent within this five-year period.

9. Respondent concedes it is a major manufacturer of automotive testing equipment.

10. The total dollar volume of repair work, including parts and labor, done at respondent' s service branches for the years 1963 and 1964, respectively, were as follows: See Tr. 161; ex 5.

6 Admitted, Answer, par. 3; ex 7; Tr. 146 . 743. 'Admitted, Answer, par. 4.

6 See ex 10: Tr. 127-8, 734. Battery chargers are included in the Jine of automotive test. ing eq1.dpment manufactured and sold by respondent. 'II" 173; ex 4 , 5; RX 18. Respondent sales of battery chargers, which are included in these sales figures, were; 1960-$377 817; 11)61-5381 188; 1962 $397 735; 1963-8385, 418: 1964-S295 415. Tl'. 735. ij See page 10 of respondent' s reply to complaint counsel's proposed findings; also see '11'. 427 , 4f4; ex 5 , pp. 2-13; ex 15 , pp. 134-135; ex 17, 23; Tr. 152- 15. , 427 , 462-463; ex 24; Tr. 478, 464, 346 , 372.

Initial Decision 69 F.

Fiscal 1963-$789 519.

Fiscal 1964- 703 945.26"

11. The revenue received by respondent from its business of repairing automotive testing equipment manufactured by it is substantial and constitutes an important source of revenue to Sunk 12. Sun concedes that it refuses, and has refused, to sell repair parts and accessories for its autmotive testing equipment to persons and firms engaged in the business of repairing automotive testing equipment who do not own the equipment. However, Sun does not refuse to sell such repair parts and accessories to owners of the equipment for which the part is ordered, irrespective of the occupation of the owner. For example, Sun sells repair parts to companies engaged in reconditioning automotive testing equipment as long as they own the equipment." 13. Refusal to sell repair and replacement parts to automotive testing equipment repairmen and repair shops inhibits, to a degree un established by the evidence, repairmen and repair shops from repairing automotive testing equipment manufactured by respondent. As hereinafter indicated, the inconvenience proved does not appear to be unsurmountabJe or competitively material. Respondent does not compete for repair work other than on its own equipment.

14. From its inception, Sun s method of distributing automotive testing equipment has been by direct sales to the users of the equipment, that is, the automotive service trade." 15. In that connection, Sun employs approximately 250 sales representatives located throughout the United States. The full time of these representatives is devoted to sales and promotion of Sun automotive testing equipment."

16. As part of their duties, Sun sales representatives conduct training sessions to instruct customers (and their personnel) in the use of the equipment. Because of the complexity of some of this equipment, Sun regards such training sessions as essential to achieve customer satisfaction.

17. Sun has established repair facilities at its various branches throughout the United States for several reasons evidenced: (a) The repair facilities are essential in order to achieve qual- See ex 11, ex 12.

11 See Tr. 744 745.

"See Tr. 753, 204. 256, 510. 533, 550 , 619, 692, 720. 13 See Tj' . 180; ex 8 , ex \J.

1' Amwer, par. 2; Tr. 138-139, 742-743.

' See Tr. 139, 743; ex 5 , p. 1.

Ie See Tr. 139 , 178-179; ex 5, p. 1.

SUN ELECTRIC CORP. 577 571 Initial Decision ity control of Sun s automotive testing equipment. Special expertise and training are necessary to repair such equipment. In addition, such equipment must be calibrated when it is repaired, and special calibrating equipment is required for this purpose. Sun has designed special calibration equipment, which is calibrated to standards of the United States Bureau of Standards, for its repair facilities to use in repairing Sun automotive testing equipment. Such special calibration equipment, in Sun s view, is essential for the proper repair of automotive testing equipment. (b) Sun assumes that the loyalty of a repairman is important in protecting the quality reputation of the company. Therefore Sun does not encourage repairs of Sun equipment by persons who are affliated with concerns handling competitive equipment, and who therefore owe their al1egiance to someone other than Sun. (c) Sun pioneered the one-year warranty in this field. In order to provide meaningful warranty service with the least delay to the customer, Sun deems it necessary to locate repair facilities reasonably close to the owners of the equipment. (d) In order to gain repeat sales, Sun decided to maintain customer contact after the sale and to assure customer satisfaction. As the president of Sun testified:

In the course of repairs, it sometimes becomes evident that there might be an advantage to approach the owner of the equipment and induce him to purchase new equipment. We, of course, would like to have these particular sales leads. If Sun equipment would be repaired by an organization which owes its allegiance to another brand line, the sales leads would not come to Sun Electric Company. So there is another good reason why we feel that the repairs form an important part of our marketing function. (e) The repair facilities provide a feed-back of information concerning possible weaknesses in design to engineering persor.nel for evaluation and guidance in designing and improving future models.

(f) The repair facilities are an important source of revenue to Sun, not only in helping to defray the costs of maintaining factory service branches to facilitate the handling of in-warranty repairs, but also as an independent source of businessY 18. Sun s policy is to sell repair parts and accessories to any owner of Sun equipment whether he purchased the equipment from Sun or bought it secondhand. In accordance with that policy, when a request is received for parts from someone (such as a re- 17 See Tr. 440, 826, 746-747 , 181 , 441 , 542 , 618, 711, 746-747 , 752-753 , 182, 755 , 758 , 756 744 180 744 757, 744-745, 180, 744-745. Initial Decision 69 F.

pairman) who is not an owner of Sun equipment, he is advised that Sun s policy is to sell parts to the owner of the equipment. 19. Sun does in fact sell a substantial volume of repair parts and accessories to owners of Sun automotive testing equipment. Included among the owners of Sun equipment to whom Sun sells repair parts are companies engaged in reconditioning automotive testing equipment.

20. Sun does not require that Sun personnel install the parts which are sold to owners of Sun equipment. Sun does not require that any other repair services pertaining to such equipment must be performed by Sun personnel."

21. Sun s policy with respect to the sale of repair parts and accessories, like its practice of establishing and maintaining its own repair facilities, is based partly on its desire to develop and maintain the quality reputation of the company s products. Moreover this policy is also an integral part of Sun s basic marketing policy to sell directly to the ultimate user of the product. Sun also concedes that, to the extent that repairmen could, and , compete with Sun, Sun would be aiding its competitors and cutting its own throat" by selling repair parts to such repairmen, Such competition exists only in a limited sense, however since Sun repairs only Sun automotive testing equipment and neither solicits nor performs repair services on automotive testing equipment of any other manufacturer." Sun provides "schematas guides incident ics" for its own use exclusively and "pictorials" to equipment repair.

22. Sun s "schematics " are the drawings which Sun prepares for the purpose of manufacturing its various products. Sun research and development program in its automotive division costs over $300,000 a year. Each "schematic" refiects the result of a1l of Sun s engineering and research on the particular product. The schematics contain complete information necessary to manufacture the product, and are in such detail that an existing or potential competitor would be enabled to build equipment identical to the Sun product. Sun automotive testing equipment is virtually unprotected by patents. As a result, Sun equipment is often copied and reproduced by other manufacturers. Sun considers that any disclosure of its "schematics" would be "handing on a silver platter to aJ1 existing and potential competitors the net result of our '" See Tr. 156, 753: Answer, par. 6; ex 9 , ex 27: Tr. 753-754. See RX 8. 9, 10: Tr. 200-201, 753.

10 Answer, par. 6; Tr. 754.

21 See Tr. 182, 755, 758; Answer, par. 6; Tr. 743, 180-181, 745. SUN ELECTRIC CORP. 579 571 Initial Decision Sun consi-research and engineering program. . . ," Therefore, ders its schematics to be proprietary and confidential information which they do not distribute outside of the company. 23. In contrast to Sun "schematics " Sun "pictorials" consist of a photograph of the particular unit and its internal components showing their physical location and identifying marks, a bi1 of materials or parts list, a detailed wiring diagram, and test and calibration procedures. The pictorials are prepared from certain portions of the schematics for the same product-namely, the wiring diagrall and the list of materials. The pictorials are prepared specifically for the purpose of enabling Sun personnel at Sun repair branches to repair the equipment and are complete with respect to any information that repairmen might need. These pictorials are also distributed to owners of equipment upon request and without charge. They are not, however, distributed to nonowner8.

24. The principal difference between Sun s schematics and its pictorials is that the schematics indicate how the unit and its parts are made, whereas the pictorials identify the parts and how to place them. On the other hand, the pictorial is more detailed than the schematics from a servicing standpoint. The pictorial shows voltage measurements and sign waves; in addition, the pictorials clarify polarity of component parts, what the controls are their function in the circuit, and switch positions. Automotive Testing Equipment Defined 25. Sun does not manufacture all types of "automotive testing equipment." However, Sun considers each of the products described in its catalog as "automotive testing equipment. " Complaint counsel stated that in their opinion there are certain items in CX 5 which are not automotive testing equipment, but never identified such items. Presumably, however, complaint counsel's reference was to battery chargers.

26. On the basis of both the evidence of record and the stipulations of counsel, battery chargers are properly included in the category of "automotive testing equipment. Complaint counsel represented at a prehearing conference which was held to narrow and clarify the issues, that "the hat- See Tr. 766: RX 15; Tr. 767. 766, 789, 790-791. 767, 763. :, See RX 16; Tr. 798-799, 768-769 , 796; d. RX 15; 766 , 796, 768, 796 797; AIlSWU' , par. 6; Tr. 772.

! See Tr. 769, 800.

"See ex 5; Tl'. 127 , 110, 91-92.

, Initial Decision 69 F.

tery charger. . . normally in the trade, as I understand it, is included in this field. " Subsequently, however, complaint counsel stated that he "did not consider battery chargers personal1ly as automotive testing equipment. " Nevertheless, he offered CX 10 in evidence and stipulated to its accuracy. That document, prepared by complaint counsel, sets forth sales of "Automotive Testing Equipment" by Sun and includes (as complaint counsel presumably knew when he offered it in evidence) sales of battery chargers by Sun. It was subsequently stipulated that "the total sales figures appearing upon Commission Exhibit 10 are total sales Sun Electric Corporation of automotive testing equipment within the United States." It was also stipulated that two other Commission exhibits (CX 11 and ex 12) represented "the repair work done by Sun Electric Corporation on automotive testing equipment at the places indicated." These exhibits include repairs of battery chargers. Similarly, it was stipulated that another exhibit, Commission Exhibit 13 includes a1l the repair parts for automotive testing equipment which are sold by Sun" as of June , 1965. This document contains the repair parts for Sun battery chargers.

Other evidence also shows that battery chargers are regarded as "automotive testing equipment" in the industry. For example, a catalog published by Snap-On Tools Corporation identifies battery chargers as "test equipment." Another Commission witness Mr. Mayers, testified that he repaired nothing but automotive testing equipment, that he repairea battery chargers, and that he recongized battery chargers as part of the automotive testing equipment line.

The evidence also shows that battery chargers are actual1ly used for testing purposes.

27. Complaint counsel initially took the position that Sun tachometers mounted in automobiles were automotive testing equipment. Shortly thereafter, however, complaint counsel reversed his position, and stated that such tachometers should not be included. This is in accord with the testimony of a Sun witness, who took the position that its tachometers mounted on automobiles were not automotive testing equipment, but that other tachometers manufactured by Sun are considreed as automotive testing equipment.

'0 Sce Tl'. 54- , 91-- , 127-128 , 734 , 135; ex 13; Tr. 136-137; ex 13 pp. 57 , 61, 66, ex 1. inside front cover; Tr. 405-406, 216, 458; RX 3 , 5 , 18. "See Tr. 86 , 107, 102; ex 5 , p. 21; Tr. 102. SUN ELECTRIC CORP. 581 571 Initial Decision 28. Mr. McCreery, the witness for Snap-On Tools Corporation testified that the only items that he termed testing equipment were the items contained on pages 128-135 of the Snap-On catalog. He defined testing equipment in terms of how big a sale , and not the function it performs; and he also limited his definition to "electrical testing equipment. " Nevertheless, it is clear that other jtems contained in Commission Exhibit 15 must also be regarded as automotive testing equipment: for example, wheel alignment equipment consists entirely of gauges for determining the alignment of wheels on automobiles, and constitutes "automotive testing equipment" ; battery chargers and growlers are characterized by the company itself as "test equipment" ; likewise leak testers and similar "hand tools" are probably automotive testing equipment, although not so considered by Mr. McCreery. It should also be noted that Mr. .McCreery acknowledged that each company may have a particular concept of what it regards " 28as testing equipment.

29. Mr. Potter, of Marquette Corporation, stated that the Marquette catalog did not include all types of automotive testing equipment manufactured by Marquette. Growlers are included as automotive testing equipment by Marquette, but apparently not by Snap-On Tools.'" The variability in manufacturers classification of testing equipment is uncontradicted. Relevant Markets 30. The record is completely devoid of any evidence showing any industry, or relevant market, in terms of dollar volume. Complaint counsel stated that there are no industry-wide figures available, and did not even attempt to establish what such figures might be.

31. However, the record does contain evidence as to the large number of manufacturers of automotive testing equipment. Mr. Glendon, of Sun, testified, without contradiction, that there are upwards of 200 manufacturers of automotive testing equipment in the United States.

Mr. Trent, a Commission witness, testified that he repairs auto- 8 See ex 15; Tr. 400 , 402 , 401-402; ex 15 , insiue front over": Tr. 404.,406, 402. It is aJ80 note.) that ex 15 shows other items which test various parts of automobiles. 1'111" example, a battery cell tester on page 127 is designed for various tests: whee! balancers on pages 124-125 determine whether and where a wheel is unbalanced; circuit and spark t€ste Bl'eshown on page 87; a Jenk tester is shown on page 86; a tension gauge on page 81 is said to be used fur "testing the tension of distributor poinb . . . and for a pulling test. . . ; oil pressure gauge sets on page 53 ate stated to be to "n:oveaJ insid(' troublts . spot oil leaks, pressure leaks, fauity Servo pjstons, clo!(ged screens, etc. See ex 23: T\', 462.- 463 , 490-492, 399; ef. ex 15 , p. 127. 30 See 1'1'.470.

, Initial Decision 69 F. T. motive testing equipment bearing 26 specified different brand names, and stated that "there are so many I can t be expected to answer, or write down a list. .

Mr. Donahue, a Commission witness, testified that there are many companies selling automotive testing equipment of a type similar to that sold by Allen.

Mr. Potter, a Commission witness, testified that, in addition to the companies that manufacture oscilloscope equipment there are many others that have hand-held (automotive testingJ equipment . . . too numerous to mention, " 31 32. Mr. Glendon also testified that Sun probably has thousands of competitors in the sale of automotive testing equipment; and that these competitors include intet f1Zif1 Ford Motor Company, Esso, American Oil Company, Sears Roebuck, Montgomery Ward and thousands of others.

. McCreery, a Commission witness, testified that Snap- Tools has 1100-1200 dealers who sell automotive testing equipment to the garage trade.

Mr. Potter testified that Marquette automotive testing equipment is sold to the garage and service station trade by 1500-2000 distributors.

Mr. Malik testified that there are literally thousands of companies who sell automotive testing equipment to the garage trade. 33. Mr. Donahue testified that there are about 100 repairmen of automotive testing equipment that have been authorized to repair Allen equipment.

Mr. Potter testified that there are some 50 repair depots authorized by Marquette, in addition to Marquette s 15 factory service centers.

Mr. Malik, of Sun, testified that there are so many companies engaged in repairing automotive testing equipment that a comprehensive survey is impossible.

34. The record contains no probative evidence of the volume of retail sales of any other manufacturer of automotive testing equipment. The uncorroborated summaries of sales by Snap- Allen and Marquette were admitted only for the limited purpose of showing that Sun is a major manufacturer of automotive testing equipment. In any event, those figures do not evidence the size or relative position of any concern that sells in a market which is 31 See Tr. 172, 283-287 , 427, 464.

3" See Tr. 149 , 164-166, 386 , 484 , 749-750. 33 See Tr. 437, 751.

SUN ELECTRIC CORP. 583 571 Initial Decision relevant in this case. Sales by those manufacturers are to the wholesale market; the sales of Sun are to the retail market." Moreover, the sales figures submitted by Snap-On and Marquette are inadequate to show their size or market position, since they do not include sales of a11 automotive testing equipment manufactured by the company. Marquette s figures do not even purport to be sales of automotive testing equipment, but only sales of "engine analyzing equipment. " Comparisons therefore have dubious probative weight.

Mr. Donahue testified that Allen is the world's leading' manufacturer of automotive testing servicing equipment: that no other manufacturer has as complete a line as Allen; that Ford anu Lincoln- Mercury have equipped about 90;7 of their new car dealers with the Allen engine analyzer; and that a1! of the companies are stronger in one area than another.

:'ll'. Potter testified that Marquette claims to be the industry number one in the battery charger line.

35. The record does not contain any probative evidence showing the degree of concentration in any relevant market \Vll.lout evidence of total size of an industry, or the number of concems and their relative market position, including the position of Sun in the industry, the degree of concentration cannot be determined. To the extent that any evidence on the subject was adduced, the record strongly suggests a lack of concentration (whatever market is conj ectured to be relevant) .

36. Similarly, no finding can be made as to Sun s position in any relevant market without evidence of the size of the market. 37. The parties do agree, however, that Sun is engaged in substantial competition with others in the manufacture, distribution sale and repair of automotive testing equipment. A vailability of Repair Parts 38. Approximately 90;7 of the repair parts for Sun automotive testing equipment are available from other sources. Mr. Glendon testified that it was his understanding that 80% to 90 rc or 95 ro of the parts that go into Sun equipment, with the exception of Sun meters, can be purchased from an electrical supply distributor.

In this regard, it is noted that complaint counsel took the position that comparative data, "relating the wholesale sales to Sun s retail sales, was irrelevant to the case. (TJ.' . 448, 486.

See Tr. 399-407 , 462-463, 489-492: ex 24; Tr. 453 , 427 , 451, 428--29, 490. Ji Complaint. par. 5; Answer, par. 5.

Initial Decision 69 F.

Mr. :rvcCreery of Snap-On Tools testified that many of the component parts are standard units that can be purchased from any electronic supply company.

Mr. Turner admitted that "there is a good share of parts that can be purchased locally from supply houses. Mr. Bender admitted that resistors and condensors used in the repair of Sun equipment are standard items, Mr. Weston testified that approximately 90'1 of the parts used in the repair of Sun equipment can be secured elsewhere. He testified, for example, that in the SS 60 scope, one of the most sophisticated units of automotive testing equipment made by Sun only eight of the 284 parts in the unit could not be readily purchased from other sources: and of these eight parts, seven (all except the transformer) could be fabricated if a replacement were necessary.

39. Parts are available from various other sources, in addition to electronic supply houses:

(a) Some parts are obtained from the manufacturer that supplies Sun with the part.

(b) Parts obtained from other manufacturers of automotive testing equipment can be substituted in Sun equipment. (c) Parts are obtained through the owner of Sun equipment or by using the letterhead of an owner.

(d) Case parts can be fabricated, 40. The only parts not generally available from other sources are meters, transformers and two lead terminations. Less than 10'1 of al1 repair jobs require the use of these parts. Moreover defective meters can be repaired and need not be replaced in every instance; there might be a replacement on the market for a transformer; and the unique lead terminations are only two out of several hundred leads used on Sun equipment. 41. In 1963 Sun reduced its prices on repair parts for its automotive testing equipment by approximately 25'1,. The purpose of this reduction was to make Sun s prices competitive; that is, to bring them in Jine with prices available to the public from other suppliers of equivalent parts,'" This is also indicative of the competitive market in which Sun finds itself. 31 See Tr. IR3, . . 512 , 701 , 805; RX 15 , 16 , 17 for jd.; Tr. 805. '8 See Tl' . 254 , 549 , 256-257 , 550 , 714-715 , 80, 39 See '11"807 810-812; d. '11" 531 , 805, 819. '0 See '11'. 760-761.

, , , SUN ELECTRIC CORP. 585 571 Initial Decision Necessity For and Availability of Schematics and Pictorials 42. Schematics or pictorials are not always essential in order to repair automotive testing equipment, although they do simplify and expedite such repairs.

Mr. Mayers, a Commission witness, testified that you can make repairs without the use of schematics but it is the long way around. . .

Mr. Trent, a Commission witness, testified that he has been able to make repairs to Sun equipment without the use of pictorials or schematics, at a cost in time; that he could make the repairs if he got the parts, but it would take longer without the schematics or pictorials.

Mr. McCreery, a Commission witness, testified that schematics were not necessary in order to make repairs to testing equipment and that the values of components are not necessary. Although Mr. Turner, a Commission witness, testified that a schematic is "very necessary to know what the different parts are, where they belong, and the capacity of them " he also testified that until the latter part of 1964 he was able to repair Sun equipment without schematics or pictorials. Mr. Bender, a Commission witness, testified that schematics make it easier is the main thing." Anyone with time can trace out a print and repair the equipment.

43. The lack of requests to other manufacturers for schematics also demonstrates that they are not necessary to repair automotive testing equipment. Mr. McCreery testified that, to the best of his knowledge, Snap-On Tools has never been requested to provide a schematic to an independent repairman, and they evidently have never done so. Mr. Donahue, also a Commission witness similarly testified that Allen has never had a request for a schematic from a repairmanY 44. The comparable repair guide issued by Sun-which it calls a "pictorial" -contains the information Commission witnesses suggested was necessary to make repairs in that it also contains calibration procedures and voltage measurements and sign waves. Sun s "pictorial" is more detailed and contains more information " 43than an equivalent Marquette "schematic. 45. Sun "pictorials" can be obtained by any "independent" ren See Tr. 225, 265, 267 , 389-393 , 514 , 521, 703. .! See Tr. .194 . 441.

'3 See Finding 23 supra; Tr. 206-207 , 262-263 514 , 524 '189- 390 , 439-440, 459, 481 , 703; RX 16; Tr. 799, 800; RX 6, 16; Tr. 800-803. Initial Decision 69 F.

pairman from the owner of the equipment. No witness testified that he was unable to obtain a "pictorial" in this manner. Effect of Sun s Policy on Independent Repairmen 46. Many of the so-called independent repairmen represent one or more manufacturers of competitive automotive testing equip- " 45ment as their "authorized service representative. 47. The principal portion of the business of these repairmen comes through jobbers, who sell other brands of automotive testing equipment in direct competition with Sun. Mr. Trent testified that he obtains his business through approximately 20 distributors of automotive testing equipment who sell their products to garages, service stations, and truck fleets. Mr. Ury testified that he repairs automotive testing equipment for the jobbers" and for customers to whom he has sold automotive testing equipment.

Mr. Turner testified that 9070 of his business is with jobbers and that he rents part of his building to an Allen factory representative and does repair work for the customers of that representative.

48. Many of the repairmen testified that they also sell competitive brands of automotive testing equipment themselves. Mr. Mayers testified that his sales of new automotive testing equipment-principally Allen equipment omprise 25% of his entire business. He also testified that he takes in Sun equipment as trade-ins on new Allen equipment. The remaining 7570 of his business is in repairs.

Mr. Trent testified that he sells equipment on occasion, but that it is not his practice because that would put him in competition with his customers and affect his repair business. Mr. Shapiro testified that he sells automotive electrical equipment to garages, service stations, automobile dealers, and industrial outfits.

Mr. Ury testified that he sells automotive testing equipment of many different brands.

Mr. Myers testified that he sells Allen and Marquette equipment.

"See Tl'. 772.

The only possible exception, M!' . Shapiro, testified that he repairs numerous makes of automotive testing equipment (Tr. 292) but did not specifically state that he is an " authorized service representative " of those manufacturers. (Tr. 291-293. ) Mayers, Tr. 204; Trent, Tr. 252-253: 1:ry, Tr. 294: Tut')'er, 1'1' 507: Scherrer, 1'1'. .'i34: Myers, 1'1'. 541-544: Alpert, 1'r. 617-618: Bender, 1'1' 690; Foulk, 1'1'. 710- 711. 4a See 1'1'. 252-253 294 526, 525.

"See 1'1'. 214 , 222, 206 , 279 , 291, 3IQ-3IQA, 565-666. SUN ELECTRIC CORP. 587 571 Initial Decision 49. So-caned "independent" repairmen do repair Sun automotive testing equipment to an undetermined extent. Mr. Trent testified that he repairs Sun timing lights and tachdwen testers.

Mr. Ury testified that other companies engage in repairing Sun automotive testing equipment, that A TECO is the principal one in the New York metropolitan area, and that ATE CO has been able to repair an Sun equipment sent to them. Mr. Myers testified that he repairs some Sun automotive testing equipment.

Mr. Bender testified that he does minor repairs of Sun automotive testing equipment where parts are not required. Mr. Foulk repairs Sun equipment where it takes a standard industrial part which can be substituted. He has also obtained parts for Sun equipment through the owner of the equipment, and repaired the equipment in that manner.

50. There also appears to be some question whether persons engaged in the repair of automotive testing equipment would solicit repairs of Sun equipment even if they were able to obtain parts and pictoriaJs from Sun, unless they were also able to purchase the parts at a discount.

Mr. Turner, for example, testified that he did not solicit-and in fact turned down-repairs of Sun equipment, even during the period that he was able to get Sun parts, because they could only be purchased by him at list price. Profit in the repair business according to Mr. Turner, depends upon being able to make a profit on the sale of parts, which he could not make since he bought the parts at retail.

. Ury also testified that he would be interested in repairing Sun equipment only if he could get a discount on the parts and a wiring diagram. The evidence is clear, however, that the unavailability of repair parts and pictorials to nonowners of Sun s automotive testing equipment creates an inconvenience for independent repairmen. Such inconvenience, however, has not been shown by substantial evidence to be materially inhibitive of competition, or injurious thereto.

SUN OWNERS FREE CHOICE 51. Complaint counsel caned as witnesses three persons to testify concerning their experiences as owners or users of Sun auto- 48 See Tr. 254 , 296, 305- 306, 546, 692, 718-719, 7l4 715. See Tr. 509 , 516-517, 561-562 , 303.

Initial Decision 69 F.

motive testing equipment. The testimony of these three witnesses lends no support whatever to the allegation of the complaint that owners are deprived of freedom of choice in the selection of a repair agency, aside from the conceded policy of the respondent which does not materially encumber free choice. 52. Among the foregoing witnesses Mr. Shirk is the service manager of one division of a Volkswagen dealership in Milwaukee. Mr. Shirk does not own the equipment about which he testified and did not testify on behalf of the owner, his employer. The crux of his testimony is that he has left a machine valued at $885 "setting against the wall" because it would cost $60 to have the unit repaired by Sun. But he also testified that he had never tried to have the unit repaired by anyone else.

53. Mr. Besasie, also not an owner of Sun automotive testing equipment at the present time testified that at one time he bought a used Sun motor tester, which included a battery charger unit and that he sent the battery charger to Sun for repairs. Prior to sending the battery charger to Sun, he called two other concerns " 51who said "they don t care to repair them. 54. Mr. Langlois is the only witness caned by complaint counsel who testified that he currently owns Sun automotive testing equipment. He testified that an independent repair firm has repaired Sun equipment for him. His testimony was simply that he decided that he wanted to deal with Mr. Turner, and did. There is no testimony that Mr. Langlois has been deprived of a free choice: on the contrary, he exercised his free choice and sent the equipment to Turner. In addition, he has exercised his free choice by repairing Sun equipment himself whenever he can, and in that connection he has purchased numerous repair parts from Sun. CONCLC'SIONS The crux of the theory of complaint counsels' case is concisely, clearly, and well stated at pages 33-35 of their reply to respondent' s Proposed Findings of Fact, Conclusions of Law and Brief. It is as follows :

The evidence in this record shows that respondent has established a substantial monopoly in the service and repair of Sun brand automotive testing equipment throughout the un ted States. Respondent's monopoly ,vas established through the imposition of unreasonable trade restraints on both 50 See Tr. 675, 669-670, 672 , 671.

:;1 See Tr. 643-646.

See Tr. 594-595 , 599, 601; RX 8 , 9 , 10. SUN ELECTRIC CORP. 589 571 Initial Decision independent repairmen engaged in the repair of automotive testing equipment of all types and brands and, in addition, upon owners of Sun brand automotive testing equipment who have been deprived of any cho:ce in selecting a repair facility, and have been forced to send their defective equipment to the respondent for repair. The unreasonable restraints estab lished by the respondent were created by respondent's refusal to sell repair parts and to provide pictorials io independent repairmen. Without respondent' s exclusionary practices, independent repairmen \vould be able to service and repair Sun brand automotive testing equipment and to compete with the respondent in this line of commerce. Owners and users of Sun brand equipment would be free to select a repair facility of their choice on the basis of a competitive market considering cost, service, convenience, etc. Counsel supporting the complaint believe that the factual and legal issues in the present matter are analogous to those in FedM' ul TTade Commission Motion Pictu.re Adver.tising Service Co. , Inc., 334 U.S. 392 (1952). While that case relates to the use of long-term exclusive dealing contracts to restrain competition and impose a monopoly and the present case relates to a refusal to deal, which forecloses competition by independent repairmen and compels ownerq of Sun brand automotive testing equipment to send their equipment to the respondent for service and repair, the same legal considerations are applicable to both cases. In the cited case the Supreme Court said: The vice of the exclusive contract in this particular fic1d is in its tendency to restrain competition and to develop a monopoly in violation of the Sherman Act, And when the Sherman Act is involved the crucial fact is the impact of the particular practice on competition not the label that it carries. See United States v. Masonite Corp. 316 U, S. 265, 280 , 62 S. Ct. 1070 , 1078, 86 L. Ed. 1461.

The Commission found in the present case that respondent' s exclusive contracts unreasonably restrain competition and tend to monopoly. Those find ings are supported by substantial evidence. This is not a situation where by the nature of the market there is room for newcomers, irrespective of the existing restrictive practices. The number of outlets for the films is quite limited. And due to the exclusive contracts, respondent and the three other major companies have foreclosed to competitors 75% of all available outlets for this business throughout the United States. It is, we think, plain from the Commission s findings that a device which has sewed up a market so tightly for thc benefit of a fc"\v falls within the prohibitions of the Sherman Act and is therefore an " unfair method of competition" within the meaning of 95 of the Federal Trade Commission Act.

, . . The precise impact of a particular practice on the trade is for the Commission, not the courts, to determine. The point where a method of competition becomes "unfair" within the meaning of the Act "\vi1 oftcn turn on the exigencies of a particular situation, trade practices, or the practical requirements of the business in question.

Initial Decision 69 F.

The "Unfair methods of competition, which are condemned by 5 (a) of the Act, are not confined to those that were ilegal at common law or that were condemned by the Sherman Act, 15 U. A. 9(: 1- , 15 note. Federal Trade Commissi,on v. Keppel ETO" 291 U. S. 304 , 54 S. Ct. 423, 78 L. Ed. 814. Congress advisedly left the concept flexible to be defined with particularity by the myriad of cases from the field of business. Id., 291 U,S. at pages 310-312, 54 S. Ct. at pages 425-426. It is also clear that the Federal Trade Commission Act was designed to supplement and bolster the Sherman Act and the Clayton Act, see Federal Trade Commission v. Beechnut Co. , 257 S. 441, 453 , 42 S. Ct, 150 , 154, 66 L. Ed. 307-to stop in their incipiency acts and practices which, when full blown, would violate those Acts, see Fashion Originators ' Guild v. Federal Trade CO?n?nission 312 U. S. 457 , 463 466, 61 S. Ct. 703 , 706, 707, 85 L. Ed. 949, as well as to condemn as 'unfair method of competition ' existing violations of them. See Federal Trade Commission v. Cement Institute 333 U. S. 683, 691 , 68 S. Ct. 793, 798, 92 L. Ed. 1009.

The diffculty with the foregoing "Conclusion" reached by complaint counsel is they assume to begin with that proof of monopoly power has been established. If this were so, the potentiality of monopolization might possibly result in the imposition of a competitive effect, even from a minor restraint such as inconvenience relating to a small segment of the over-all automotive testing equipment repair market. The evidence adduced with regard to the alleged restraint here is not only barren of proof by implication or otherwise that a monopoly was established by respondent' s restraint, but it is also barren of proof that the restraint, if any, standing alone was of such materiality as to justify a conclusion that competitive injury or monopolization could conceivably result therefrom.

The case involves a naked unilateral refusal to sell, as enunciated by Sun s policy, without more. It is not alleged that respondent has conspired or combined with anyone, or acted other than unilaterally, in refusing to sell its parts and accessories to persons other than its customers.

Nor is there any issue concerning any alleged refusal to deal with price cutters. Nor is it alleged that Sun has refused to deal with one member of a class while discriminatorily continuing to engage in business with other members of the class; Sun has simply limited its market to only one class of customer-namely, the users of its equipment.

Further, no issue of monopoly is presented here. Complaint counsel has not even defined a relevant market in which any monopoly might exist.

Whatever relevant market might conceivably be drawn in this SUN ELECTRIC CORP 591 571 Initial Decision case, there is completely lacking any evidence with respect to monopolization. There is no evidence of the size of any industry, except that there are upwards of 200 manufacturers of automotive testing equipment in the United States and thousands of distributors sellng such equipment." There is no relevant evidence of the size of any concerns in any industry (except Sun). There is no evidence of the degree of concentration of any industry. There is no evidence of Sun s position in any industry. The record does not "reveal even the most basic information concerning the structure of the industry. Ruml Gas Service Inc. 59 C. 912 , 918 (1961) ; cf U.S. v. Chc,"'les Pfizer Co. , Inc., 1965 Trade Cases, par. 71 , 445 (E.D. N.

The allegation of the complaint that Sun is the "dominant" manufacturer of automotive testing equipment is not supported by the evidence. Moreover, the allegation of "dominance" is not an allegation of monopoly power. As pointed out in Bailey s Bakety, Ltd. v. Continental Baking Company, 235 F. Supp. 705, 718 (D. Hawaii 1964) : "The possession of monopoly power is something other than the status in a market of a dominant firm. The dominant firm may have neither the power to exclude competitors, nor the power to fix prices.

In the instant case, there is no evidence whatever that Sun has the power to exclude competition in any market or to control prices in any market. Indeed, the complaint itself expressly acknowledges that there is " substantial competition" in the manufacture, distribution and saJe of automotive testing equipment. Nor is there any evidence of any intent to monopolize any market. As the Supreme Court said in Times Picayune Publi.hing 3 See Tr. 172, 149. In addition, there are probably thousands of concerns engaged in the repair of automotive testing equipment. Allen Electric alone has approximately 100 authorizea repah' agencies (Tl'. 437), and Marquette has 50 authorized service depots in addition to its uwn factory service centers (Tr. 479-480). But there is no evidence of the size of any market in terms of doll;!!" volume.

,I The sales figures of Allen, Marquette, and Snap. On prove nothing. First, the testimony in respect thereto showed that there is a complete lack of consistency and certainty as to what is or is not automotive testing equipment: in espect to both Snap-On and Marquette the sales figures do not even include sales of all PJ'oducts considered by the company itself to be test equipment (Tr. 339- 407, 4C,2- 489-492). Yfarquette s figures do not purport to be their sales of automotive testing equipment, but only sales of " engine analyzing equipment" (CX 24). Secondly, the figures do not show sales in the same market as that in which Sun sells: all three of those companies sell at wholesale to distributors whereas Sun sells exclusively at retail to the users of the equipment. Third:y, the amounts of their wholesale sales (at substantial discounts from list) an not related to the amounts of Sun s retail sales (at list) and cannot be compared. Indeed, complaint counsel stated that such comparative data would be irrelevant (Tr. 448 , 486), Finally, the sales data is of no relevance except for purposes of comparison with total industry sales, and no such comparative data was presented, SE'e Complaint, paj', 5.

Initial Decision 69 F. T. Compcmy v. United States 345 U. S. 594, 626 (1953) : "An insuffcient showing of specific intent vitiates this part of the government case. . . . A specific intent to destroy competition or build monopoly is essential to guilt for the mere attempt now charged. Complaint counsel has taken the position that the ilegality of Sun s policy can be established by simply proving the refusal to sell and showing that it has some effect on independent repairment. At the prehearing conference, during the discussion of Sun s policy of selling only to owners of its equipment, the following colloquy took place:

HEARING EXAMINER BUTTLE: And this is the only market they are willing to seek insofar as their repair parts are concerned. In other words, you have to have their testing equipment to get the repair parts. Mr. Pollock says that this is perfectly proper. There is nothing ilegal about it. And you say t is ilegal for them to restrict the market in this respect insofar as that issue is concerned. Is that your position? Mr. Miler: Because of the effects, yes, sir. . . The Alleged Effects Have Not Been P1'ved Reiterating complaint counsel' s position, the crucial factual issues, aside from unproved monopolization, are (1) whether the effect of the policy has been to preclude independent repairmen from repairing Sun s automotive testing equipment, and (2) whether the effect has been to deprive the owners of Sun equipment of a freedom of choice as to repairmen that they wish to utilize.

As to the first issue, complaint counsel has failed to prove its allegation that independent repairmen have been precluded from repairing Sun equipment, and the evidence is directly to the contrary.

Some independent repairmen still repair all types of Sun equipment; others repair some but not all types. Parts needed for the repair of Sun equipment can be and are obtained from various sources: the owner of the equipment can procure the part from Sun for the repairman; some repairmen have obtained parts by using the letterhead of an owner; equivalent parts from other manufacturers of automotive testing equipment can be substituted; parts can be obtained from the source from which Sun procures the part; parts can be obtained from electronic supply houses; and certain parts can be fabricated. M See '11'. ). 13.

'"' See '11'.

See '1)' , 296 , 305-306, 254 , 546, 692; Answer, par 6; RX 8 , 9 , 10; Tr. 182-184 , 254 , 2. 391, 512 536 , .'49-550 , 559-560 , 714--715, 804-819. SUN ELECTRIC CORP. 593 571 Initial Decision The record is equally clear that Sun s policy of refusing to distribute its "pictorial" to independent repairmen has not precluded them from repairing Sun equipment. .The pictorials can be obtained from or through an owner of Sun equipment. :'moreover Sun equipment can be and is repaired without the pictorials; pictorials are not necessary but simply expedite the tracing of the problem.

In addition, one of the Commission s own witnesses testified that he did not solicit repairs of Sun equipment even when he was purchasing parts from Sun. Repairmen are interested in repairing Sun equipment only if the parts can be purchased from Sun at a discount and only if the parts can be stocked, since without the profit on parts, and considering the time necessary to send for and get the parts, the repairs are not profitable, In short, the repairman s objection is not inability, but inconvenience. The testimony is that it is possible to repair Sun equipment, but not profitable. Because of Sun s policy, the independent repairman must exert a minimal extra effort to obtain parts for and locate problems in Sun equipment. But this does not demonstrate that Sun s policy is unlawful. Sun is not obligated to change its traditional marketing methods just for the purpose of making it more convenient for its competitors to compete with Sun.

As to the second issue, the owners of Sun equipment are free to select whomever they choose to repair their equipment. There is no dispute that owners of Sun equipment may and do purchase rcpair parts and accessories from Sun. Sun imposes no requirement that the parts and accessories sold to owners must be installed by Sun personnel, or that any other repair services must be performed by Sun personnel. The owner may install the parts himself or he may have them installed by anyone he chooses. Moreover, as previously observed, independent repairmen can obtain parts for the repair of Sun equipment from various sources, and they can and do repair Sun equipment. Thus, even without availing themselves of the opportunity to purchase parts from Sun, owners can send theil' equipment to independent repairmen for repair if the repairman wil acccpt the work. Again however, the problem is not that repairmen are unable to repair See Tr. 265, 521, 703, cr. 389. Mr. Bender testified that schematics "make it easier is the main thing " (Tr. 703).

6Q See Tr. 509 , 517 , 303, 701, 717-718. 61 See Answer, par. 6; RX 8, 9, 10; Tr. 10-11, 754. Initial Decision 69 F.

Sun equipment; they simply "don t care to repair them " since it is less convenient and less profitable to repair Sun equipment if they have to get the parts from another source than Sun. But this does not establish that owners are deprived of freedom of choice.

The position taken by complaint counsel is that Sun should be deprived of its right to sell to whomever it chooses so that independent repairmen may have a right to buy from whomever they choose; that Sun should be deprived of its freedom of choice as to the customers to whom it wil sei1 parts so that a customer can have a freedom of choice as to the person from whom it wil buy parts.

Complaint counsel' s position ignores the fact that a lawful activity is not made unlawful merely because its effect is to make competition inconvenient or more diffcult. Nor does such an effect convert the exercise of a fundamental right-the right to select one s customers, the right to determine one s method of distribu-tion-into an unfair method of competition. It would indeed be a revolutionary concept if, as complaint counsel suggest, a private businessman loses his right to select his own customers merely because some potential customer is inconvenienced or otherwise "injured" by the refusal to sell. For example, no doubt an automobile dealer sei1ing Ramblers might be "injured" in the sense of losing potential profit-if he were denied a Chevrolet franchise by General Motors. But it certainly does not foi1ow that GM's denial to him of a Chevrolet franchise is unlawful.

As the Commission stated in Doubleday Co. 50 F. C. 263 266 (1953) :

The question for decision is whether this competitive situation results from practices which are violative of law. Competitive disadvantage, in and of itself, does not necessarily create ilegality. The fact that the retail bookseller has lost sales to a book club or cannot successfully compete with a book club for the patronage of certain types of readers is of no legal consequence unless this result springs from some improper and unfair act on the part of respondent. " The mere fact that a given method of competition makes it difficult for competitors to do business successfully is not of itself suffcient to brand the method of competition as unlawful and unfair. Federal Trade Commission v. Paramount Famous-Laskey Corp. , (C, A. 2 1932), 57 F. 2d 152 157.

This principle is particularly appropriate when the allegedly unfair act consists merely of declining to sell to one s competitors. a2 See Tr. 646.

SUN ELECTRIC CORP. 595 571 Initial Decision A decision directly in point is Chamber of Commerce of Minneap" olis v. 13 F.2d 673 (8th Cir. 1926). That case involved the refusal of the Chamber of Commerce to furnish its market quotations to competitors. The court held that the Commission s order, which required the furnishing of market quotations to the competitors, was invalid because the refusal was not shown to be an unfair method of competition. The court went on to say: "

It would be a strange situation, logically or legally, where one could be compelled to furnish its own property to a competitor to be used as a major weapon of its own destruction. . . . Competition is by no means legally free from proper restraint, and it is beyond all reason to require anyone to furnish the means of his own destruction to another who is bent upon accomplishing such destruction.

Similarly, in C. v. Sinclair Refining Co. 261 U. S. 463 475-476 (1923), the Supreme Court stated: The powers of the Commission are limited by the statutes. It has no gen. era! authority to compel competition to a common level, to interfere with ordinary business methods or to prescribe arbitrary standards for those engaged in the conflict for advantage called competition. The great purpose of both statutes was to advance public interest by securing fair opportunity for the play of the contending forces ordinarily engendered by an honest desire for gain. And to this end it is essential that those who adventure their time, skil and capital should have large freedom of action in the conduct of their own affairs.

Complaint counsel' s "public utility" concept" of free enterprise as applied to the facts of this case, has no support in law. We have not yet reached the stage where the selection of a trads customers is made for him by the government." (either directly or indirectly), GTeat Atlantic Pacific Tea Co. v. Cream of Wheat Co. 227 Fed. 46, 48 (2d Cir. 1915) ,"' unless the exercised business policy at issue is (1) reflective of an ilegal monopolistic tendency, (2) discriminatory and injuriously affects competition (3) inherently unconscionable or (4) otherwise violative of public policy. See also C. v. Raymond. Brothers-Clark Co., 263 J See P. 687.

M See p. 688.

M Requiring the doing of business in an enlarged or universal market. M In that case, the defendant refused to sell its products to retailers or consumers, and ilold exclusively to wholcsalers. The court said (p. 47): "There is nothing unusual about such a course of business, and certainly it is no offense against common law, statutes, public policy, or good morals for a trader to confine his sales to persons who wm buy from him in large quantities. " Sun, by comparison, refuses to sell to wholesalers and retailers and sells exclusively to consumers. This is obviously no more offensive than the policy approved in the Cream of Wheat case, . . );

Initial Decision 69 F.

S. 565 (1924); Timken RolleT Bearing Company v. , 299 2d 839 (6th Cir. 1962), ceTt. denied 371 U. S. 861 (1962); Naifeh v. Rowson A,'t Metal Works 218 F.2d 202 (10th Cir.1954) ; Nelson Radio Supply Co. v. Motorola 200 F.2d 911 (5th Cir. 1952) ; Chicago Seating Co. v. S. KaTpen Bros. 177 F. 2d 863 866 (7th Cir. 1949) ; Brosious v. Pepsi-Cola Co. 155 F.2d 99 (3d Cir. 1946) ; 1VIennen Company v. C. 288 Fed. 744, 780 (2d Cir. 1923), ceTt. denied 262 U. S. 759 (1923): Journal of Commerce Publishing Co v. T,-ibune Co. 286 Fed. 111 (7th Cir. 1922). Numerous cases have recognized the right of a private business to select its customers without governmental interference. The right to select one s customers existed at common law 67 is recognized by statute " and is Jimited only if the selection is concerted or monopolistic.

In Times-Picayune Publishing Company v. United States, 345 S. 594, 625 (1953), the Supreme Court stated: Refusals to sell, without more, do Dot violate the law. Though group boycotts, Or concerted refusals to deal, clearly run afoul of S 1 . . . different criteria have long applied to qualify the rights of an individual seller. And in Smith End Oil Company v. Texaco Inc. 237 F. Supp. 650 653 (N.D. Il. 1965), the court said: 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 15 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 wil deal" and "may announce jn advance the circumstances under which he wil refuse to sell" Sun s marketing philosophy of dealing directly with the user is motivated in part, by Sun s desire to protect its reputation for quality, and in part to protect its limited market. Sun s reputation suffers when Sun equipment is repaired by persons unfamiliar with the equipment or unqualified to repair due to lack of proper 61 Green v. Victor Tal/cng Mach. Co., 24 F. 2d 3'18 (2d Ch'. 1928). Cf. Dart Drug Corporation v. Part"e . Davia Company, 221 F. Supp. 948, 949 (D. D.C. 1963) (" At common law !lny m!lnufacturcl' or trader had a right to deal or refuse to deal with anyone that he chose unless indeed he was eng!lged in a public calling. . GHat At/antic Pacific Tea Cu. v. Cream 0 1 Wheat Co. 227 Fed. 46, 49 (2d Cir. 1915) (" Before the Sherman Act it was the law that a trader might reject the offer of a proposing buyer for any reason that appealed to him. . . . Keither the Sherman Act, nor any decision of the Supreme COU1. construil1g the same, nor the Clayton Act, has changed the law in this particular. OSection 2(a) of the Clayton Act (15 D. C. 13(a) states: " (NJothing herein contained shall prevent pe)'sons engaged in selling goods, wa)' , or merchandise in commerce from selecting their own customers in Lana fide transactions and not in restraint of trade. SUN ELECTRIC CORP. 597 571 Initial Decision equipment or training, or unconcerned with the reputation of the company, A somewhat analogous problem was presented in Pick Manufacturing Co. v. General Motion Corporation 80 F.2d 641 (7th Cir. 1935), aff' 299 U.S. 3 (1936). There the court held that a requirement that GM dealers use "genuine" GM repair parts exclusively did not violate section 3 of the Clayton Act. The court held that such a requirement is "entirely appropriate and legitimate. . . and is proper and reasonable in the furtherance and protection of its business." Defective and insuffcient repairs causing unsatisfactory operation, result in blame to the manufacturer and loss of sales. "The preservation of the good will of the public is directly involved.

Refusals to sell in order to protect the quality reputation of the product have also been expressly approved in Coca-Cola Co. v. G. Butler Sons 229 Fed. 224 (E. D. Ark. 1916) Brosious Pepsi-Cola Co. 155 F.2d 99 (3d Cir. 1946) ; and G. D. Searle & Co. v. Institutional DTUg Distributors 151 F. Supp. 715 (S. Cal. 1957).

Furthermore, according to the complaint, n independent repairmen are engaged in "substantial competition " with Sun. Thus under complaint counsel's "public utility" theory, Sun would be required to sell to its competitors the materials for competing against Sun. Through such sales, Sun would be "cutting its own throat. As the court said in Cham bet of Commerce of Minneapolis v. F.T. 13 F. 2d 673, 688 (8th Cir. 1926) : "It would be a strange situation, logically and legally, where one would be compelled to furnish its own property to a competitor to be used as a major weapon of its own destruction.

There is also substantial evidence in this case to the effect that the so-called "independent repairman" is not always independent. Witnesses testifying herein, engaged in the business of repairing automotive testing equipment, indicated they were the "authorized service representative " for one or more manufacturers products competitive with Sun products. Furthermore, the principal portion of the business of these repairmen comes through jobbers who sell automotive testing equipment in competition with See Tr. 182, 753, 756.

70 See a1 o the recent decision by the Commission in ClJfvel Corpomtion Docket 8574 (July 19, 1965). A requirement in a franchise 8!'reement p1'ohibiting the sale of non-Carvel products was held to be nncilJary to Carvel's purpose of protecting the company s good wil and trademark image.

n Complaint, par. 5.

72 See Tr. 180.

);

Initial Decision 69 F. Sun. In addition, most of the witnesses also sell competitive testing equipment themselves. Thus, the loyalty of these repairmen is to manufacturers other than Sun; their interest is in promoting the saJe of testing equipment manufactured by others. In the circumstances, it is scarcely surprising that Sun does not choose to have its equipment repaired by the agents and representatives of such other manufacturers.

The reasonableness of such a position has been pointed out in a number of cases. In Deltown Foods, Inc, v. TTopicana Products Inc. 219 F. Supp. 887 (S. D. N. Y. 1963), defendants discontinued using plaintiff as a distributor for defendant's orange juice when plaintiff began packaging and selling its own brand of orange juice. In upholding the refusal to sell, the court pointed out "the damage plaintiffs could do to defendants' product by treating it as second best " and accepted defendants' argument that it would be business suicide" if they continued to sell their orange juice to a distributor who had become a competitor. See, also, Blue Bell Co. Frontier Refining Co. 213 F. 2d 354, 358-359 (loth Cir. 1954) ("a mere declination to sell to competitors or to supply retail outlets in a competitive market is not ilegal" Journal of Commerce Pub. Co. v. Tribune Co. 286 Fed. 111 , 112 (7th Cir. 1922) ; Andnw JC1' gens Co. v. Woodbu,' y, Inc. 271 Fed. 43 , 44 (D. Del. 1920) ; Camfield Mfg. Co. v. McGraw Electric Co. 70 F. Supp. 477, 481 (D. Del. 1947).

With regard to the charge that Sun has refused "to furnish to persons and firms engaged in the repair of automotive testing equipment diagrams, schematics or similar documents showing the make-up of its automotive testing equipment," the evidence is that Sun does not sell any such "diagrams, schematics or similar documents" to anyone. Further more, Sun does not give its schematics to anyone; these consist of manufacturing drawings which Sun regards as highly confidential. Furthermore, Sun does distribute its so-called "pictorials" (which are prepared for use by Sun repair branches) to owners of Sun equipment upon request and without charge. Such a "pictorial" contains a detailed wiring diagram and guide for repair of the particular item of equipment. The ilegality of this policy is not apparent. As heretofore stated, although complaint counsel urge that the factual and legal issues in this case are analogous to "the use of T3 See Tr. 204 , 252, 294, 507, 534 , 542-544, 617 618, 690 , 710-711, 253 , 294 , 526 , 214. 279. 291 , 3IO-31M. 565-566.

7i See Complaint, par, 6; Tr. 763-768, 770-771; Answer, par. 6; Tr. 772. SUN ELECTRIC CORP. 599 571 Initial Decision long term exclusive dealing contracts to restrain competition and impose a monopoly," they overlook the fact that the acts and policies of the respondent are unilateral and that evidence of monopoly, probable monopolization from the alleged restraint or even an intent to monopolize, is absent. It is therefore not apparent to the hearing examiner that the facts in the case of Fedeml Trade Commission v. Motion Picture Advertising Service Co., Inc., 334 S. 392 (1952) are analogous as complaint counsel contend. SUMMARY CONCLUSIONS 1. Sun Electric Corporation is engaged in commerce, as "commerce" is defined in the Federal Trade Commission Act. 2. Counsel supporting the complaint have the burden of proving the allegations of the complaint. (Rules of Practice, section 14 (a). ) The burden has not been met.

3. No monopoly or attempt to monopolize any market has been proved. The record does not reveal even the most basic information concerning the structure of any relevant market. Respondent is engaged in substantial competition with others in the manufacture, distribution and sale of automotive testing equipment and to the extent that Sun repairs automotive testing equipment, is engaged in competition with others in the repair thereof. 4. Respondent's refusal to sell repair parts and supplies, and to furnish "pictorials, " to persons other than owners of respondent' equipment, according to the evidence, is unilateral in nature and without any established intent to monopolize any market. 5. Absent proof of conspiracy or monopolization, respondent has the right to select the class of customers to whom it wi1 sell and to refuse to sell to persons who are not owners of respondent' s equipment. F.T. C. v. Raymond Brothers-Clark Co., 263 S. 565 (1924) ; Timken Roller Bearing Company v. C. 299 2d 839 (6th Cir. 1962), cert. denied 371 U. S. 816 (1962) ; Gnat Atlantic Pacific Tea Co. v. Cream of Wheat Co. 227 Fed. 46 (2d Cir. 1915); South End Oil Compa:"y v. Texaco, Inc. 237 F. v. Ili- Supp. 650 (N. D. Il1. 1965) ; Best Advertising Corporation nois Bell Telephone Company, 229 F. Supp, 275 (S.D. 111. 1964), aff' d. 339 F.2d 1009 (7th Cir. 1965).

6. Subject to the foregoing, the effect on competitors of the exercise of this right by respondent does not create ilegality. Doubleday Co. 50 C. 263 (1953); Chamber of Commerce of Minneapolis v. 13 F.2d 673 (8th Cir. 1926). 7. Respondent, under the facts evidenced in this case, is not re- Order 69 F. T.

quired to further justify its refusal to sell to persons other than the owners of equipment. Journ"l of Commerce Pub. Co. v. T,.ibune Co. 286 Fed. 111 (7th Cir. (1922) ; G1'e"t Atlantic P"cific Te" Co. v. C,.e"m of Whe"t Co. 227 Fed. 46 (2d Cir. 1915). 8. Moreover, as evidenced herein, Sun s refusal is based in part on recognized reasonable grounds to protect the quality reputation of its products, and to avoid "cutting its own throat" competitively. Pick Mfg. Co. v. Geneml Moto?'s Corp. 80 F.2d 641 (7th Cir . 1935), "fJ'd 299 U. S. 3 (1936); Deltown Foods, Inc. T,' opic"n" P,.oducts, Inc. 219 F. Supp. 887 (S.D. N.Y. 1963). 9. Respondent's policy, as evidenced herein, with respect to the distribution of schematics and pictorials is not an unfair trade practice. Respondent is not required to disclose its trade secrets contained in its schematics, or to furnish pictorials to its competitors to guide them in competing with respondent. 10. Respondent's traditional method of marketing, as evidenced herein, is not an unfair method of competition, or an unfair act or practice in violation of section 5 of the Federal Trade Commission Act. Accordingly, it is ORDER Ordered That the complaint is herein and hereby dismissed. ORDER DISMISSING COMPLAINT This matter is before the Commission on the appeal of counsel supporting the complaint from the hearing examiner s initial decision dismissing the complaint.

The complaint charges respondent, a manufacturer of automotive testing equipment, with refusing to sell parts and accessories for such equipment to persons engaged in the business of repairing automotive testing equipment and with refusing to furnish to such persons diagrams, schematics or similar documents showing the make-up of its equipment, and further charges that the effect of this practice has been to injure the ability of independent repairmen to compete with respondent in repairing respondent' s automotive testing equipment and generally to injure, suppress or eliminate actual and potential competition in the repair of such equipment. The hearing examiner has filed an initial decision dismissing the complaint, finding that the allegations concerning the effects of respondent' s refusal to deal have not been sustained by the evidence, and further finding that the evidence does not estab- BROADWAY-HALE STORES , INC. 601 571 Complaint lish that respondent has obtained, or attempted to obtain, a monopoly in any market.

The Commission has reviewed the evidence and considered the arguments of the parties and has concluded that the hearing examiner s findings and conclusions of fact are correct and that dismissal of the complaint is proper. The Commission, however, does not consider the initial decision appropriate in all respects to dispose of this matter and has determined that it should be modifed by striking therefrom certain conclusions of law. It is ordered That the appeal of counsel supporting the complaint be, and it hereby is, denied.

It is further ordered That the initial decision be modified by striking therefrom conclusions of law beginning on page 594 with the words "The position taken by complaint counsel" and ending on page 600 with the words "section 5 of the Federal Trade Commission Act, It is furth", Q1'dered That the initial decision, as modified by this OJ;der, be, and it hereby is, adopted as the decision of. the Commission.

It is further ordered That the complaint be, and it hereby is dismissed.

Commissioner MacIntyre not concurring.