WISDOM, Circuit Judge:
This case is one of a trilogy of cases the Federal Trade Commission brought in January 1956 against (1) Atlantic Refining Company and Goodyear Tire and Rubber Company (Atlantic-Goodyear), (2) Texaco (Texas) Company and Goodrich Tire and Rubber Company (Texaco-Goodrich) and (3) Shell Oil Company and Firestone Tire and Rubber Company
As everyone who drives a car knows, service stations usually carry tires, batteries, and automobile accessories (TBA).
The same examiner heard all three cases. In each case he found that the sales commission plan was lawful
March 9, 1961, in Shell-Firestone, the Commission issued broad orders prohibiting Shell's using coercion in marketing TBA; outlawing the oil company's use of the sales commission plan with Firestone or "any other rubber company or tire manufacturer, or any other [TBA] supplier"; and outlawing the rubber company's use of the plan with Shell or any other oil company. Similar orders were issued in Atlantic-Goodyear. Goodyear Tire and Rubber Company, 58 F.T.C. 309; Firestone Tire and Rubber Company, 58 F.T.C. 309.
In Texaco-Goodrich, unlike the companion cases, the 1961 Commission reached a result the 1966 Commission described as "enigmatic":
When these cases reached the courts, the Seventh Circuit affirmed the Commission in Atlantic-Goodyear [Goodyear Tire & Rubber Co. v. Federal Trades Comm.] 1964, 331 F.2d 394; the District of Columbia Circuit reversed the Commission in Texaco-Goodrich
The parties differ widely in their understanding of Atlantic. The respondent asserts that under Atlantic, a TBA sales commission contract is unlawful per se; the petitioners assert that the Supreme Court decided Atlantic not on any generalized theory of per se illegality but on specific findings of fact supported in that case by substantial evidence. The petitioners' contention serves as the predicate for their argument that the facts here are unlike the controlling facts in Atlantic-Goodyear; the orders against Shell and Firestone should be set aside for lack of substantial evidence; in the alternative, this Court should remand the proceeding to the Commission for further consideration.
On the record before us, the difference between the two interpretations of Atlantic may be more verbalistic than real. Even assuming the correctness of the petitioners' interpretation and even admitting that there are some differences between the Atlantic-Goodyear system and the Shell-Firestone system, the controlling facts in this case are so similar to those in Atlantic that the same result should be reached in both cases. The importance, however, of judicially declaring or not declaring a new category of per se violations affecting every oil company, every TBA supplier, and every car-owner requires the Court to give careful consideration to the factual back-ground and to the conflicting contentions.
I.
A. In Atlantic-Goodyear and Shell-Firestone the Commission, using virtually identical language in the two opinions, found that the oil companies had exercised their economic power "to cause [their] dealers to purchase substantial amounts of a different class of products, TBA, as a condition to their continuance as * * * lessees and dealers". This finding, "in conjunction with their `market position and the volume of TBA affected, would bring them within the Supreme Court's ruling in Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958) and the more recent decision in Osborn v. Sinclair Refining Co., 4 Cir. 1960, 286 F.2d 832'". And, as the Commission noted, "The Court held in the Northern Pacific case that tying arrangements are per se violative of Section 1 of the Sherman Act `whenever a party has sufficient economic power with respect to the tying product to appreciably restrain free competition in the tied product' and a `not insubstantial' amount of interstate commerce is affected". The Commission looked to Osborn, a case involving an implied tie-in, for the content of the phrase "sufficient economic power". Comparing Sinclair Refining Company, the oil company in Osborn, with Shell and Atlantic, the Commission found that these two companies had "sufficient economic power" in the tying commodity — petroleum products — to bring the case within the doctrine of tying arrangements. At that point in the opinion one would have to conclude that the Commission regarded the sales commission system as a tying arrangement per se illegal
Precisely at this point in both opinions, however, the Commission broke new ground with the statement: "But we do
In view of this reasoning, the Commission's action in Texaco-Goodrich is not "enigmatic". Texas Company uses a TBA plan with Goodrich that is substantially the same as the Shell-Firestone and Atlantic-Goodyear plans. The Commission's remand of Texaco-Goodrich carries the necessary implication that the Commission did not treat the sales commission arrangement as a tying scheme and did not condemn the system as per se illegal.
B. When the TBA cases reached the circuit courts, General Counsel for the FTC took the flat position that the sales commission contract was illegal per se — as a tying arrangement and in itself.
The District of Columbia Circuit, on the other hand, held for Texaco and Goodrich. According to that court, the "keystone of the Commission's ultimate decision" was the "unwarranted assumption", for which there was "no basis in the record", that Texaco has "sufficient economic power over its dealers to compel them to handle Goodrich tires exclusively." 336 F.2d at 766.
C. As we read Atlantic, the Supreme Court approached only to the brink of holding TBA sales commission contracts per se unlawful. True enough, on the record before it, the Court might have held that the Atlantic-Goodyear distribution system, as distinguished from the bare contract, was a tacit but true tying arrangement.
"What the Commission and the Seventh Circuit did find" the Supreme Court said, "was that the central competitive characteristic was the same in both cases — the utilization of economic power in one market to curtail competition in another". (369, 85 S.Ct. 1506)
The rationale for the Atlantic decision may be broken down into three essential components,
The first need not detain us. The Court determined that "there is `warrant
Second, as is demonstrated by the success of the sales commission system, Atlantic exercised its economic power over its dealers by forcing them to sell sponsored TBA. The very purpose of the system was to exploit that power. As the Court observed: "[T]he Commission was well justified in concluding that Goodyear had in effect purchased a captive market." (375, 85 S.Ct. 1509) "It is difficult to escape the conclusion that there would have been little point in paying substantial commissions to oil companies were it not for their ability to exert power over their wholesalers and dealers * * *" (376, 85 S.Ct. 1509) Since "persuading" its dealers to buy Goodyear TBA was "a natural incident of [Atlantic's] power" (368, 85 S.Ct. 1506) proof of specific acts of overt coercion was not essential to the holding.
Atlantic did not seek review of that part of the Commission's order relating to overt acts of coercion. The Supreme Court however did not ignore the evidence of overt coercive acts. The Court noted that "utilization of economic power in one market to curtail competition in another" exists here as in tie-ins, but here "that lever was bolstered by actual threats and coercive practices". (369, 85 S.Ct. 1506) (Emphasis added.) "The long existence of the plan itself, coupled with the coercive acts practiced by Atlantic pursuant to it, warranted a decision to require more" than enjoining the use of overt coercive tactics. Atlantic's overt coercion however was simply "symptomatic of a more fundamental restraint of trade". (361, 85 S.Ct. 1502) Successful operation of the TBA commission plan did not depend on overt coercion. It did not depend on any express provision in the sales commission contract compelling Atlantic to require its dealers to purchase Goodyear's TBA. To its dealers, Atlantic's wish was Atlantic's command.
The Supreme Court's action in Texaco-Goodrich clarifies the rationale in Atlantic-Goodyear. There the Court summarily vacated the judgment upon a petition for writ of certiorari raising the question of the legality of the sales commission system in the absence of any acts of overt coercion. The petition alleged: "Texaco has sufficient economic power over its wholesale and retail petroleum distributors to cause them to purchase substantial amounts of TBA even without the use of overt coercive tactics".
Third, in determining the anti-competitive effects, the Court noted that the Commission "looked to the entire record" and concluded that "the activity of Goodyear and Atlantic impaired competition at three levels of the tires, batteries and accessories industry." The Court went into considerable detail in showing Goodyear's close cooperation with Atlantic. It was "of little consequence that Atlantic actually applied the pressure". There "was ample evidence establishing on Goodyear's part a course of conduct lasting over 14 years aimed at utilizing oil company structures to curtail competition in tires, batteries and accessories". In affirming the Commission's order against Goodyear, the Court noted that the sales commission plan "enabled Goodyear to integrate its own nationwide distribution system with the economic power possessed by Atlantic over its wholesale and retail petroleum outlets". (373, 85 S.Ct. 1508).
In approving the breadth of the order the Court relied on the fact that Goodyear had contracts with 20 oil companies in addition to Atlantic. Nine of the contracts were before the Commission; all were similar to the Atlantic-Goodyear contract. "Upon considering the destructive effect on commerce that would result from the widespread use of these contracts by major oil companies and suppliers, we conclude that the Commission was clearly justified in refusing the participants an opportunity to offset
The Court's approach in Atlantic is consistent with the broad scope of a Section 5 proceeding. Section 5 is intended to halt practices in their incipiency that may show promise of developing into violations of the Sherman and Clayton Acts and to defeat practices not specifically proscribed by those laws but contrary to the principles animating the Sherman and Clayton Acts.
The door allowing escape to the rule of reason is ajar. At this stage in the development of anti-trust law applicable to TBA distribution plans of oil companies, courts may not adopt a doctrinaire approach. Courts must look to the record, at least to the extent the Supreme Court relied on the record in Atlantic.
II.
The three essential elements on which the Supreme Court based its decision in Atlantic-Goodyear are present in Shell-Firestone.
A. First, Shell has dominant economic power over its dealers similar to Atlantic's power over its dealers. Shell too is a major integrated producer, refiner, and distributor of petroleum products. In 1955, when the record closed, Shell sold about 5 per cent of the total gasoline sold in the United States,
In 1957 Firestone, the second largest tire manufacturer in the United States, sold 17 per cent of all replacement tires sold; Goodyear, the largest manufacturer, sold 24 per cent. Shell has had sales commission arrangements with Firestone and Goodyear since 1940; written contracts since 1951.
At the time the FTC hearings were held, Shell marketed its products in 41 states and the District of Columbia through a network of 23,000 service stations.
The Supreme Court referred to three sources of an oil company's power over dealers: (1) control of the dealers' oil and gasoline supply; (2) control over dealers through short-term leases and equipment loan contracts renewable year-to-year and terminable at year's end upon ten days notice; (3) control over advertising on the premises of service stations. The first provides inherent leverage; the two others are "control devices" available to the oil company. The first two sources of power are unquestionably present in Shell-Firestone. The record is unclear as to the extent of Shell's control of advertising on the premises of its service stations although there is no doubt as to the close cooperation between Shell and Firestone in arranging the displays at Shell stations. Other sources of power are (4) the leverage when Shell finances a station or owns the site,
B. Second, the record shows that in performing its obligations to the rubber company under the sales commission agreement, Shell, like Atlantic, did indeed use its economic power over its dealers to cause them to buy sponsored TBA.
The following acts of persuasion or promotion which the Supreme Court noted in its Atlantic opinion are matched by corresponding acts of Shell in the instant case:
Firestone makes the point that what the Supreme Court said in condemnation of Goodyear cannot be said of Firestone. Here the examiner found that there was "no evidence" that Firestone "engaged in, or participated in, any acts of practices designed to force dealers and distributors
Shell contends that the Supreme Court would not have decided Atlantic as it did but for the findings showing widespread overt coercion sufficient to convince the Court that Atlantic had indeed abused its power by forcing its dealers to buy sponsored TBA. Making bad matters worse, Atlantic did not contest these findings and Goodyear called no witnesses in defense of the Atlantic-Goodyear plan. On the other hand, Shell denies the use of coercion and insists that there is no substantial evidence to support a finding of coercion; that the evidence, taken in a light most favorable to the Commission, established only isolated complaints by eleven dealers among 30,000 dealers during the relevant period of time. Shell and Firestone produced an array of witnesses, including 127 dealers, who testified in defense of their TBA plan.
It is certainly true that the Supreme Court larded and interlarded its opinion with references to Atlantic's "admitted overt coercive practices". (366, 85 S.Ct. 1498) It is also true, as we see it, that here, although the evidence seems to support the findings as to certain isolated acts of overt coercion, taking the record as a whole the evidence discloses no pattern of overt coercion. These arguments, however, bear on the issue of overt coercion; they do not bear directly on the principal issue, the Company's use of its economic power through the sales commission plan to cause its dealers to buy
Shell and Firestone contend that in structure and operation their plan is basically different from Atlantic's and Goodyear's plan. Shell, for example, emphasizes that it does not attempt to allocate TBA by geographical areas. Atlantic sponsored one TBA supplier in half of its marketing area and another TBA supplier in the other half of the area, foreclosing each from the other's territory; Shell sponsors two TBA suppliers throughout its entire marketing area. The evidence, however, shows that each Shell dealer was expected to choose between the two sponsored suppliers to the exclusion of all others. Once the dealer chose one company, the other company did not compete for any part of the dealer's business.
Shell points to certain facts peculiar to Atlantic-Goodyear showing beyond a doubt that Atlantic forced Goodyear TBA on unwilling dealers. In late 1950 Atlantic switched from a purchaser-resale plan of selling Lee tires and Exide batteries to a sales commission plan of sponsoring Goodyear and Firestone TBA. Before making this switch, Atlantic conducted a survey of its dealers: 67 per cent preferred Lee tires, 76 per cent preferred Exide batteries over competing brands; only 11 per cent preferred Goodyear tires and 4 per cent Firestone tires. Within nine months after the switch, Lee and Exide lost 75 per cent of their Atlantic business. Shell, on the other hand, adopted its sales commission plan in 1940, has not changed its system, has not shifted TBA suppliers, and contends that there is no evidence that the wishes of Shell dealers were ignored. Undoubtedly, Atlantic's switch of suppliers shows that company's economic dominance over its dealers and the use of that power to promote sponsored TBA — to say nothing of anti-competitive effects. No such striking example of abuse of power by an oil company can be found in the Shell-Firestone record. But that does not detract from the less spectacular but solid evidence supporting the Commission's finding that Shell used its economic dominance to cause a substantial number of its dealers to purchase sponsored TBA.
C. Third, the anti-competitive effects of the Shell-Firestone system are comparable with those the Commission found in evaluating the Atlantic-Goodyear system. (There is necessarily an overlap between this subsection and the preceding subsection of this opinion.)
In Atlantic, by recognizing the effect of the sales commission plan as "similar to that of a tie-in", the Supreme Court simplified the problem of proving market foreclosure. "Extensive ["full-scale"] economic analysis of the competitive effect" based on "examining the entire market in tires, batteries and accessories" was unnecessary. Evidence of "economic justification" or "economic benefit" to the parties was immaterial. It was "enough that the Commission found that a not insubstantial portion of commerce" was affected. Nevertheless, in summarizing its position the Court looked to the record. "The short of it" was that Atlantic, with Goodyear's aid, had "marshaled its full economic power in a continuing campaign to force its dealers" to buy Goodyear TBA. "`The anticompetitive effects' were clear on the record."
In Atlantic the Court found that the effect on commerce was not insubstantial where Firestone and Goodyear sales with Atlantic outlets exceeded $11,000,000 in 1955 and $50,000,000 in six years. The comparable figures here are much greater. In 1957 Firestone and Goodyear sales with Shell outlets amounted to $47,000,000; in eight years the sales reached $290,000,000. In 1957 Firestone sales were $6,190,000 to Atlantic's dealers; $21,000,000 to Shell's dealers; $91,300,000 to dealers of all 16 contracting oil companies.
Before this Court the Commission lists certain "highlights of anti-competitive effects".
As in Atlantic, competition was impaired at three levels. (a) Wholesalers and manufacturers of competing brands were foreclosed from Shell's market. Even Firestone dealers who were not authorized supply points were cut off from Shell's outlets. (b) Firestone and Goodyear were excluded from competing with each other after a dealer had selected his supplier.
Neither party has convincing figures on the relative success of the sales commission plan in terms of the amount of Shell business Firestone captured. Shell contends that its direct dealers bought no more than one-third of their TBA from sponsored outlets in 1954 and that this fact alone shows that Shell did not coerce its dealers or cause them to buy sponsored TBA. Shell's statistical method has deep holes in it.
Goodyear and Firestone are chiefly manufacturers and sellers of tires and tubes. Almost 80 per cent of the sponsored TBA sales by both companies constituted sales of tires and tubes. These companies purchased batteries and many other accessories from other companies and sell them under their own brand name in order to have a complete line of TBA to offer to any service station. In 1957 Firestone and Goodyear were responsible for selling 41 per cent of the replacement tires in the country. This market share is particularly impressive when we recognize that Sears, Roebuck & Co. (All State) and Montgomery Ward & Co. (Riverside) together sold another 11 per cent of the national market. Against these figures, Shell's contention that Firestone and Goodyear supplied
Indeed, it is not even necessary to show open or veiled threats of cancellation to mark the sales commission plan as anti-competitive. While Shell may not punish dealers for failure to purchase sponsored TBA, there are many ways in which Shell may help its dealers over the course of a long term relationship. It may extend payment periods, extend credit, renew leases without rental increases. All of these are reasons for a dealer to curry favor with Shell. At the very least, Shell's economic position inclines a dealer to purchase sponsored TBA when it costs him no more to do so. But even this intervention into the process of competitive choice has been prohibited. Northern Pac. R. Co. v. United States, supra. As long as Shell's goodwill is worth having, its dealers will purchase sponsored TBA, at least when it costs them no more to do so. Competition in TBA is thus displaced; sales are, in some part, determined not by the market but by oil company favor purchased by Firestone.
III.
Taking the record as a whole, we reach the following conclusions.
A. Nothing in the record or in Atlantic suggests that the case should be remanded to the Commission.
B. We are not impressed by the evidence showing overt coercion. The Commission introduced testimony of eleven ex-Shell dealers purportedly coerced by Shell. All of these dealers mentioned threats of some type but in no instance was a dealer's lease cancelled or was renewal refused; in no instance was a lease rental increased because of recalcitrance in buying sponsored TBA. None of these eleven dealers bought his entire TBA requirements from a sponsored source. The testimony of these eleven witnesses, supplemented by such documentary evidence as was adduced, was not enough to show a pattern or practice of overt coercion throughout Shell's nationwide network of dealers. When we reflect that the Commission had over 10,000 active dealers and over 20,000 former dealers to draw from in producing evidence, we conclude that the record evidence of overt coercion slims to invisibility — even after making allowances for the difficulties in finding dealers, past or present, willing to testify against Shell.
Shell produced thirty-two former Shell dealers and ninety-five present dealers to testify that their purchase of TBA was wholly free and uncoerced. Shell bolstered this evidence with testimony of seventeen competing suppliers who said that they had no problem selling to Shell dealers; testimony showing a Shell policy to encourage initiative and independence of the part of its dealers; documents indicating that Shell's official TBA policy, known to dealers, was based on the dealers' freedom to purchase any TBA. It is true that the examiner discredited Shell's witnesses or minimized the effect of their testimony. It is not our province to substitute our judgment for his in this matter. Nevertheless, his failure to mention the mass of countervailing evidence, when taken with the slimness of the evidence upon which he did rely, leaves us with the definite conviction that the record, when taken as a whole, does not support the finding of fact that overt coercion of dealers to buy from sponsored TBA outlets was a prevailing Shell business practice.
C. The lack of testimony showing overt coercion and the affirmative testimony
The relationship of a major oil company to its service station dealer goes beyond the bigness-littleness antithesis that exists in innumerable contract negotiations and in the operations of a modern, large business.
The per se doctrine has a charm all its own in antitrust litigation. When a per se rule is applicable in a given situation, businessmen know where they stand. Lawyers, for the government or for private clients, are saved the necessity of building a record bulging with complicated facts, statistical analyses, market data and other formidable economics material. Here, with the proper authorization, the incantation of two words would enable the Court to sweep most of nine volumes of record under the rug. We hold, however, that in the circumstances this case presents the Supreme Court has not yet authorized that incantation.
In the light of Atlantic but based on the record as a whole, we conclude that substantial evidence supports the Commission's basic findings. Within the factual context of this case, Shell (a) had dominant power over its dealers and (b) exerted that power through natural leverage and through control devices in carrying out its TBA sales commission plan, (c) causing adverse competitive effects on a not insubstantial portion of the TBA market. The Shell-Firestone sales commission system is inherently coercive upon its dealers and innately anticompetitive in its effect. Its precise harm is hard to measure. But here the Commission has shown enough harm, existent and potential, to require the Court to condemn the Shell-Firestone TBA sales commission plan as an unfair method of competition under Section 5 of the Federal Trade Commission Act.
The first four numbered paragraphs of the Commission's orders against Shell and Firestone deal with the sales commission contract and the sales commission system. Those portions of the Commission's orders are affirmed and will be enforced. Since we have found that the record fails to support the Commission's finding that Shell overtly coerced any substantial number of dealers or that there was any pattern of overt coercion
FootNotes
There is a spirited difference between the parties as to whether the commission represents compensatory payments or a windfall. One ancient intra-company letter dating from 1947 suggests that the payments were "almost all net profit". In 1956 Shell received about $3.6 million in commissions from Firestone and Goodyear. If indeed this sum represented "almost all net profit" it was a healthy profit for a company that allegedly entered the TBA jungle only to insure its market position in the sale of gasoline and other petroleum products. However, uncontradicted evidence of Shell's promotional costs in 1956 demonstrates that the commission payments were no windfall. Shell's promotional activities in 1956 cost $3.2 million, leaving it with a mere $400,000 profit from TBA, a negligible sum considering the magnitude of its petroleum enterprises. Shell estimated the costs as follows:
Credit costs for the use of
credit cards and deferred
payment plan $ 500,000
Maintenance, repairs, and
depreciation or displays
and promotional equipment 600,000
Promotion and advertising 2,225,000
__________
Total $3,325,000
Strangely, this accounting does not even include the cost of personnel involved in TBA promotion. This cost was estimated at $1,875,000 for 1956 and would have raised Shell's TBA costs to $5,260,000, or $1,600,000 in excess of its commission revenue. There is of course no way of knowing in dollar and cents the extent to which Shell's TBA program promoted its sales of gasoline. Shell was satisfied with its program; at any rate, it preferred that program to any other.
The gasoline market is a rough-tough competitive struggle pitting a few giants struggling against each other and against a large number of pigmy producers. In this context the purchase-resale and the sales commission programs work in opposite directions. To enter into a purchase-resale program, an oil company must have resources large enough to finance an extensive TBA inventory. It must also have sales and distributive facilities for marketing these products. And, of course, the oil company must have an established reputation for quality, if it seeks to market TBA under a private label. As a result, the small companies prefer the less burdensome sales commission plans; the giants, notably Standard Oil, are capable of purchasing and reselling a complete line of TBA under their own brand names. In Atlantic the Supreme Court expressly refrained from passing on the merits of the purchase-resale plan.
The amicus curiae brief of Champlin Oil & Refining Co. (concurred in by Ashland Oil & Refining Company, Continental Oil Company, Jenney Manufacturing Company, Inc., Leonard Refineries, Inc., Shell Oil Company, South Penn Oil Company, and Sunray D-X Oil Company makes the point that "virtually every marketing oil company in the United States provides a TBA program for the benefit of its marketing outlets". Champlin and other small or relatively small companies use the sales commission plan because it enables them to provide the necessary TBA program without having to invest in a large TBA inventory. Champlin avows that a per se approach to the problem will force it to use the purchase-resale system, make unnecessary demands on its capital, and place it at a disadvantage in competing with large oil companies having a nationwide system of distribution.
Mr. Justice Goldberg, in his dissent in Atlantic, said: "In short, the Commission opinions in this and the related cases are bathed in confusion and leave unanswered a number of questions necessarily involved in the decision of these cases. Are TBA sales-commission plans only unfair methods of competition if the oil company has used coercive tactics on its dealers? If they are illegal without past or present evidence of coercion, are they illegal for oil companies which do not have the same relation with their dealers as Atlantic has with its dealers? Are they illegal for oil companies which do not have the same market position as Atlantic? Has the Commission drawn a distinction between sales commission and purchase-resale TBA promotion plans, condemning the former but approving the latter? If it has, is there a rational basis, consistent with the policies of § 5, for such a distinction? All of these questions appear to me to be inadequately answered by the Commission's opinion. * * * Moreover, if in these and the related cases the Commission is laying down the broad rule that all sales-commission TBA promotion arrangements in the oil industry are per se unfair methods of competition, such a rule has neither been clearly articulated nor supported with adequate economic analysis."
In 1955 Shell's direct outlets and their relative importance as purchasers of gasoline were as follows:
"C" "L" "DL" "OD" Total
Number of stations 999 3910 1922 3231 10,062
Percentage of the total for
direct dealers 9.9 38.8 19.1 32.2 100.0
Percentage of gasoline sold
to direct dealers (1.9 billion
gallons) 14.7 46.7 20.2 18.4 100.00
The picture of Shell's distributive system is completed by adding sales to 847 jobbers who supply, among others, about 13,000 retail gasoline stations, and the sales made by Shell in its few wholly owned and operated retail outlets. In 1955 Shell's sales to jobbers amounted to around 1.04 billion gallons; direct retail sales amounted to around 5 million gallons.
Total sales of tires and tubes from service stations in 1954 were $290,620,000. This volume was sold by 124,548 service stations. In that the Census Bureau listed some 182,000 service stations in 1954, it is indicated that about 57,500 service stations sold no tires and tubes in 1954. Of those that did sell them, the average sales per station was $2,333 in 1954.
In this same year service stations sold $355,202,000 in batteries and accessories. In this case 135,791 stations handled these items indicating that more than 46,000 did not. For the stations which handled batteries and accessories, the average sales per station was $2,616.
Shell adds the figure of $2,333 to $2,616, the sum of which is $4,949. This is purported to be total TBA sales per station. That is, of course, a bastard figure in that its components come from arithmetic divisions which were made with different divisors. Even if it were possible to assume that all stations handling tires and tubes also handled batteries and accessories, this figure would still be a false one. Nevertheless, Shell braves along and divides this figure into the figure representing the average gasoline gallonage per service station in 1954 (137,972 gallons). This division brings it a purported national TBA sales per 1,000 gallons of gasoline of $35.87. By comparing $35.87 with $11.97, Shell is happily able to assert that Firestone and Goodyear supplied 1/3 of the Shell service station market.
Two errors cast doubt on the Shell statistical analysis. Even if we were to close our eyes to the manner in which the average total TBA sales were compiled, the fact remains that the national figures involved only service stations which carried TBA! There is no telling from the statistics offered how many of the stations carried tires alone, how many carried only batteries and accessories, and how many carried a full line of TBA. The figure of $35.87 serves no useful purpose.
If total sales of tires and tubes were added to total sales of batteries and accessories, the total for 1954 would be $645,822,000. Using Shell's figures for the total amount of gasoline sold by service stations in 1954 (25,176,029,000 gallons), we could divide the gallonage total into the TBA volume amount in order to get a nationwide dollar per 1,000 gallon figure, not taking into account the fact that some stations sold no TBA (irrelevant for this analysis unless it can be shown that Shell stations are more likely to handle TBA than non-Shell stations — a fact which is certainly likely but never shown). The resulting figure is $25.65.
The figure would possibly be comparable to the $11.97 figure for sponsored TBA were it not for Shell's second basic error. In establishing the sponsored figure, Shell used its total sales to service stations and jobbers. There is no question that much of the gasoline sold to jobbers is not ultimately sold at service stations but is sold to motor fleet owners, airlines, and other direct purchasers. The $11.97 figure is therefore too low for service stations, but there is no evidence in the massive record to indicate just how low it is.
In summary, we can gain very little positive knowledge from Shell's laborious statistical analyses.
At the same time, the Commission offers 3.4 per cent as Shell's sponsored TBA shares in the national service station TBA market. Although there is some indication that some sponsored TBA is sold to non-service station outlets, the division of Shell's sponsored sales volume into the national service station TBA volume would appear to be a warranted statistical method were it not for the fact that the Commission chose to use figures from the year 1947! It thus attempts to compare a percentage from 1947 with one from 1954; the TBA market saw such revolutionary changes during this period that it is impossible to determine the distortion which results from this comparison.
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