WILLIAMS, District Judge.
Defendant has moved to dismiss the amended complaint on the ground that it does not state a claim upon which relief can be granted. The complaint seeks treble damages for alleged violations of Sections 1 and 2 of the Sherman Act (15 U.S.C.A. §§ 1, 2) and Section 3 of the Clayton Act (15 U.S.C.A. § 14). After the filing of a similar motion to the original complaint, plaintiffs moved to amend, and did amend, their complaint to its present form.
The plaintiffs, Robert D. Nelligan and Owen B. Nelligan, were partners carrying on a motor car business in Greenville, South Carolina under the trade name of The Nelligans. This partnership was organized in September of 1953 as successor to Bob Nelligan Motor Company (formerly Traver Motor Company), a South Carolina corporation, and was the Lincoln-Mercury dealer in the Greenville area by virtue of assignment of Dealer's Sales Agreement with consent of defendant on November 6, 1953.
The defendant is Ford Motor Company, the manufacturer of Ford, Mercury and Lincoln automobiles.
The Allegations of the Amended Complaint
The amended complaint in substance alleges that in 1947 the Lincoln-Mercury
The funds so collected were chiefly expended by L.M.D.A. in sponsoring the Ed Sullivan Show, a nationwide television program, over the Columbia Broadcasting System. This program, it is alleged, was not received in Greenville, there being no CBS outlet there at that time, although there is at the present time.
It is alleged that the purpose and effect of this alleged conspiracy was to "tie in" the sales of national advertising originating and sponsored by defendant with the sale of defendant's automobiles. It is further alleged that the purpose and effect of this was to preclude plaintiffs and other Lincoln-Mercury dealers from resorting to competitive media of advertising and this is said to be in violation of Section 3 of the Clayton Act. However, it is alleged in Paragraph XIV of the complaint that in the year 1953 plaintiffs spent $12,740.82 adverting locally, $11,510 in Dealer's Advertising Co-op advertising and $13,300 in contributions or assessments to L.M.D.A.
The amended complaint alleges then that plaintiffs early in 1954 began to protest these payments to L.M.D.A., the total amount of which ran to $60,000 since plaintiffs felt the Ed Sullivan Show did them no good, and that plaintiffs had been damaged in that sum.
There is a second cause of action which alleges that on April 13, 1954 Ford gave notice of its intention to terminate plaintiffs' Sales Agreement in accordance with its terms, and that such termination was because of plaintiffs' protest against, and unwillingness to continue, the payments to L.M.D.A. This, it is said, was in violation of the anti-trust laws and because of such termination, it is alleged plaintiffs, were damaged in the sum of $150,000.
Judgment is sought in the amount of $630,000 and for costs and a reasonable attorneys' fee.
There are two other allegations of the amended complaint which should be mentioned. It is alleged that the sales agreements entered into between Ford and its dealers, including the plaintiffs, contained provisions "which permitted defendant company to monopolize the market for cars, parts and accessories presented by the many thousands of dealers who entered into such agreements with the defendant company in violation of Section 2 of the Sherman Act". Paragraph VIII. And in Paragraph IX it is alleged that "Defendant's ability to terminate a dealership and the business of any dealer with consequent heavy financial loss to the dealer has been used as a means of coercing the plaintiff in violation of Section 1 of the Sherman Act, along with other dealers of the defendant company, into courses and methods of conducting business which they, as independent businessmen, would not pursue but for the power of the defendant company to inflict severe financial loss upon them as a result of that termination".
Discussion of Law
At the outset it would be well to state that the main and primary purpose of the Sherman Act and the Clayton Act was to protect the public from the evils arising out of monopolies and unreasonable restraints of trade in interstate commerce. Wilder Mfg. Co. v. Corn Products Refining Co., 236 U.S. 165, 35 S.Ct. 398, 59 L.Ed. 520; Glenn Coal Co. v. Dickinson Fuel Co., 4 Cir., 1934, 72 F.2d 885; Schwing Motor Co.
To recover in a private treble damage suit under the anti-trust laws, the plaintiff must allege facts from which it can be said that there has been a violation of the anti-trust laws resulting in injury to the public, and damages to the plaintiff as a result of such violation. The rule is admirably expressed by the Court of Appeals for the Fourth Circuit in Glenn Coal Co. v. Dickinson Fuel Co., supra [72 F.2d 887].
Among the many other decided cases to the same effect are Wilder Mfg. Co. v. Corn Products Refining Co., supra; Arthur v. Kraft-Phenix Cheese Corp., D.C., 26 F.Supp. 824; Hudson Sales Corp. v. Waldrip, 5 Cir., 1954, 211 F.2d 268, certiorari denied 348 U.S. 821, 75 S.Ct. 34, 99 L.Ed. 648; Feddersen Motors v. Ward, 10 Cir., 1950, 180 F.2d 519; Shotkin v. General Electric Co., 10 Cir., 1948, 171 F.2d 236; Schwing Motor Co. v. Hudson Sales Corp., supra; Interborough News Co. v. Curtis Publishing Co., D.C.S.D.N.Y., 127 F.Supp. 286; Riedley v. Hudson Motor Car Co., D.C. W.D.Ky., 82 F.Supp. 8.
Plaintiffs have invoked Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2 and Section 3 of the Clayton Act, 15 U.S.C.A. § 14, which it is said have been violated by the defendant to the injury of the public and the plaintiffs. If the amended complaint does not allege facts from which such can be shown, then the motion to dismiss must be granted.
Does the Amended Complaint Show a Violation of Section 3 of the Clayton Act?
Section 3 of the Clayton Act (15 U.S. C.A. § 14) reads as follows:
There is no allegation in this amended complaint that alleges the defendant sold or made a contract for sale of any of its goods, wares, merchandise, machinery, supplies or other commodities on the condition that plaintiff or anyone else should not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor of the Ford Motor Co.
The plaintiffs allege that defendant "tied" the sale of its automotive products with the sale of its advertising. Passing over for the moment the defendant's position that it is not in the advertising business and is a purchaser rather than a seller of advertising,
In Judson L. Thomson Mfg. Co. v. Federal Trade Commission, 1 Cir., 1945, 150 F.2d 952, 955, there is a good explanation of a "tying" contract within the meaning of Section 3 of the Clayton Act. The Court said:
It will be seen that a "tying" contract has two very definite essentials:
A true "tie in" sale is violative of Section 3 of the Clayton Act because it requires or has the effect of requiring the puchaser to deal exclusively with the seller. This is explained clearly at pages 137-139 of The Report of the Attorney General's National Committee to Study the Antitrust Laws (March 31, 1955) which is the latest and most authoritative text on such laws. It is summed up on page 139 as follows:
Here there is no allegation that Ford required an agreement from The Nelligans that they would not patronize any other advertising company than Ford or L.M.D.A. (assuming that Ford controlled L.M.D.A., but see below,
The amended complaint does not allege a violation of Section 3 of the Clayton Act.
Does the Complaint Allege a Violation of Section 2 of the Sherman Act?
Section 2 of the Sherman Act (15 U.S.C.A. § 2) reads as follows:
The only reference in the amended complaint to Section 2 is found in Paragraph VIII. There it is alleged:
This allegation charges Ford with monopolizing the market for Lincoln-Mercury cars, parts and accessories, but every manufacturer has a monopoly on his brand name products, and such a monopoly does not run afoul of Section 2 of the Sherman Act.
Judge Chesnut clearly expressed the rule in Arthur v. Kraft-Phenix Cheese Corp., supra [26 F.Supp. 828] where he said:
In the recent case of United States v. E. I. Du Pont De Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 1006, 100 L.Ed. 1264, decided June 11, 1956 it was held that, although Du Pont might have a monopoly in cellophane, since there were other similar competing flexible wrappings, there was no illegal monopolization within the meaning of Section 2 of the Sherman Act. The Supreme Court, speaking through Mr. Justice Reed, said:
There is no allegation that Ford or L.M.D.A. monopolizes the television advertising market, nor that Ford monopolizes the motor car business in any relevant market; only that Ford has a monopoly in the sale of the Lincoln-Mercury automobiles, parts and accessories which it manufactures and sells under its own brand or trademark. Such an allegation fails to allege a violation of Section 2 of the Sherman Act.
Does the Amended Complaint Allege a Violation of Section 1 of the Sherman Act?
Section 1 of the Sherman Act (15 U.S. C.A. § 1) makes unlawful a conspiracy
Only undue or unreasonable restraints are prohibited. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619; United States v. Columbia Steel Co., 334 U.S. 495, 68 S.Ct. 1107, 92 L.Ed. 1533; Miller Motors, Inc., v. Ford Motor Company, 4 Cir., 1958, 252 F.2d 441.
Plaintiffs contend that Ford, in conspiracy with L.M.D.A., compelled The Nelligans, along with other Lincoln-Mercury dealers, to contribute to L.M.D.A. $25 a car for the purpose of adverting Lincoln-Mercury cars on the Ed Sullivan Show, that this prevented The Nelligans and other dealers from resorting to competitive media of advertising and that thus there was an unreasonable restraint of interstate trade in advertising.
I do not agree. The allegations of the amended complaint do not show any unreasonable restraint of interstate commerce in advertising. The allegations of Paragraph XIV of the amended complaint show beyond any question that plaintiffs were not foreclosed from competitive media of advertising.
There is no good reason advanced as to why Ford should seek to exclude its dealers from any additional advertising media. Even if it be conceded, as plaintiffs argue, that Ford Motor Company is in the advertising business, it must also be conceded that its principal business is the manufacture and sale of its motor cars. Paragraph II of the amended complaint. Its only real connection with the advertising business is to promote the sale of such cars. Paragraph X of the amended complaint.
Miller Motors, Inc., v. Ford Motor Company, supra is directly in point. There the Court of Appeals for this Circuit, speaking through Judge Sobeloff, said on the reasonableness of the L.M. D.A. arrangement there complained of as being violative of Section 1 of the Sherman Act:
There was no unreasonable restraint in Miller Motors, nor is there one here.
Quoting again from the Miller case:
So it is here, and there is no unreasonable restraint of trade in violation of Section 1 of the Sherman Act alleged.
The Court of Appeals held in the Miller case that Section 1 of the Sherman Act had not been violated also because no conspiracy to violate the Act was shown. The Court said:
Firmly ingrained in anti-trust law is that before a plaintiff may recover in a treble damage suit, he must show public injury. Alexander Milburn Co. v. Union Carbide & Carbon Co., 4 Cir., 1926, 15 F.2d 678; Glenn Coal Co. v. Dickinson Fuel Co., 4 Cir., 1934, 72 F.2d 885; Arthur v. Kraft-Phenix Cheese Corp., D.C., 26 F.Supp. 824; Schwing Motor Co. v. Hudson Sales Corp., D.C., 138 F.Supp. 899, affirmed and opinion adopted by Court of Appeals as its own, 4 Cir., 1956, 239 F.2d 176; Hudson Sales Corp. v. Waldrip, 5 Cir., 1954, 211 F.2d 268, certiorari denied 348 U.S. 821, 75 S.Ct. 34, 99 L.Ed. 648.
The Court of Appeals in the Miller case gave the absence of public injury in the alleged acts of Ford in connection with L.M.D.A. as still another reason for denying plaintiff relief in Miller Motors. The opinion states:
There is still another reason why the amended complaint should be dismissed. To recover in a treble damage suit, the plaintiff must not only show violation of the anti-trust laws and public injury, but he must also show that the acts of defendant which constitute an alleged violation of the anti-trust laws likewise directly damaged plaintiff in his private business. Conference of Studio Unions v. Leow's, Inc., 9 Cir., 1951, 193 F.2d 51, certiorari denied 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687.
Judge Sobeloff expressed the rule clearly in Miller Motors where he said:
And in applying the rule to that case where the same contention was made as here, the Fourth Circuit said:
If plaintiff were to contend that any alleged price increases were absorbed by the plaintiff, then, of course, the public is unaffected, and in a private treble damage suit there must be a concurrence of public and private injury. Glenn Coal Co. v. Dickinson Fuel Co., supra.
Plaintiffs rely upon United States v. General Motors Corp., 7 Cir., 1941, 121 F.2d 376.
Judge Sobeloff clearly distinguished the General Motors case from Miller Motors Inc., v. Ford Motor Company, when he said:
This is likewise sufficient to point out why the General Motors case is not applicable here.
I conclude that the amended complaint does not allege any violation of Sections 1 and 2 of the Sherman Act or Section 3 of the Clayton Act. It does not state a claim upon which relief can be granted under the anti-trust laws.
The motion to dismiss the amended complaint is hereby granted.