Continental T. V., Inc. v. GTE Sylvania Inc.

PETITIONER: Continental T. V., Inc., et al.
RESPONDENT: GTE Sylvania Inc.
LOCATION: James R. Browning Courthouse

DOCKET NO.: 76-15
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 433 US 36 (1977)
ARGUED: Feb 28, 1977
DECIDED: Jun 23, 1977
GRANTED: Oct 18, 1976

ADVOCATES:
Glenn E. Miller - for petitioners
M. Laurence Popofsky - for respondent

Facts of the case

In 1962, GTE Sylvania Incorporated (Sylvania) enacted a plan that limited the number of franchises in any given geographical area to which they would sell televisions. Three years later, Sylvania franchised a San Francisco area company, Young Brothers, which was located only one mile from one of their existing franchises, Continental T.V., Inc. (Continental). Continental protested that the Young Brothers franchise violated Sylvania’s new location restrictions. When Sylvania ignored their protests, Continental tried to acquire more Sylvania televisions to sell in a new retail location in Sacramento. Sylvania already had retailers near Continental’s new Sacramento location and declined to supply them with more televisions, so Continental withheld payments they owed Sylvania under an existing franchise agreement.

Continental sued in district court and alleged that Sylvania’s franchise agreements, which placed location-based restrictions on the sale of their products, violated the Sherman Anti-Trust Act (Sherman Act). A jury found that Sylvania’s location restrictions violated the per se rule established in United States v. Arnold, Schwinn, & Co. that prohibited manufacturers from “restrict[ing] and confin[ing] areas or persons with whom an article may be traded after the manufacturer has parted with dominion over it.” Sylvania appealed to the U.S. Court of Appeals for the Ninth Circuit, which declined to apply the per se rule. Instead, the appellate court distinguished this case from Schwinn, applied a reasonableness rule, and held that Sylvania’s restrictions “had less potential for competitive harm than” other invalidated restrictions.

Question

Is a per se rule barring a manufacturer from restricting the locations where retailers can sell the manufacturer’s products the appropriate rule to evaluate location restrictions?

Media for Continental T. V., Inc. v. GTE Sylvania Inc.

Audio Transcription for Opinion Announcement - June 23, 1977 in Continental T. V., Inc. v. GTE Sylvania Inc.

Warren E. Burger:

The judgment and opinion in 76-15, Continental T.V. against -- against GTE Sylvania, Incorporated will be announced by Mr. Justice Powell.

Lewis F. Powell, Jr.:

The respondent, Sylvania Incorporated, manufactures and sells television sets.

In an effort to increase its declining sales, Sylvania adopted a franchise plan to sell directly to a more select group of franchise with retailers.

It limited the number of franchise.

Franchise is granted to any given area and required each franchisee to sell its Sylvania products only from locations at which it was franchised.

A dispute arose between Sylvania and one of the holders of the franchise, Continental T.V. in the litigation that followed, Continental contended that Sylvania had violated Section 1 of the Sherman Act by prohibiting the sale of Sylvania's TVs from other than specified locations.

In a case -- in case that was here in 1967, United States against Schwinn, this Court annunciated a per se rule of liability when manufacturers imposed certain vertical restrictions on wholesalers and retailers of its products.

The District Court in this case thought that the Schwinn per se rule was applicable and instructed the jury accordingly, a large verdict was rendered against Sylvania.

On appeal, the Court of Appeals for the Ninth Circuit reversed finding a basis for the distinguishing the Schwinn rule.

Although, we think no adequate basis for a distinction exists, we have reexamined the decision in Schwinn and conclude today that it should be overruled.

The per se rule of illegality adopted for the first time in that case was a departure from antitrust principles generally applicable.

Restrictions similar to those used by Sylvania are widely employed in our free market economy.

The weight of scholarly and judicial authority supports their economic usefulness.

Accordingly, we affirmed the judgment of the Court of Appeals that we do so on different grounds.

Mr. Justice White filed an opinion concurring in the result.

Mr. Justice Brennan has filed a dissenting opinion in which Mr. Justice Marshall has joined.

Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Warren E. Burger:

Thank you, Mr. Justice Powell.