Ford Motor Company v. United States

PETITIONER: Ford Motor Company
RESPONDENT: United States
LOCATION: Odessa Junior College

DOCKET NO.: 70-113
DECIDED BY: Burger Court (1972-1975)
LOWER COURT:

CITATION: 405 US 562 (1972)
ARGUED: Nov 18, 1971
DECIDED: Mar 29, 1972

ADVOCATES:
Daniel M. Friedman - for appellees
Whitney North Seymour - for appellant

Facts of the case

Question

Media for Ford Motor Company v. United States

Audio Transcription for Oral Argument - November 18, 1971 in Ford Motor Company v. United States

Warren E. Burger:

We will hear arguments next in Number 113, Ford Motor Company against the United States.

Mr. Seymour, you may proceed whenever you are ready.

Whitney North Seymour:

May it please the Court.

I am going to try to reserve a few minutes for reply.

This is a direct appeal from the judgment of the District Court in Detroit holding that the acquisition in 1961 by Ford Motor Company of the spark plug business and the name of the Autolite Company to enable Ford to supply its own needs for original installation of spark plugs and also to supply replacement plugs to others and the acquisition occurred after Ford had been the customer of Champion, a leading company in the business for 50 years.

The Court held that the acquisition violated Section 7 of the Clayton Act.

He directed divestiture and then ended seven other extraordinary injunctions.

First, he enjoined Ford from going into the business of making spark plugs by internal entry for 10 years.

The judgment enjoined Ford from making any plugs under its own name for five years, not marketing any plugs under its own name for five years and required Ford to buy half its requirements for five years from the purchaser of the divested -- the portion divested.

When the case was tried, batteries were also involved, but they dropped out and they are not now involved, that matter having been satisfactory disposed of.

Ford challenges the decision of the District Court as to the violation and submits that even if there was a violation, divestiture in this case was not the best remedy because other remedies which I will mention were better and challenges all the extraordinary injunctions with particular weight on the injunction against the internal entry and the injunction against the use of the Ford name which it regards as definitely anticompetitive.

Now, I think it is important to understand the nature of this industry because as in other cases, the impact of Section 7 depends on the nature of the industry in a particular situation involved.

General Motors has made its own spark plugs since 1909.

In that year, it acquired the then Champion spark plug business and had since marketed its spark plug under the name of AC, under the letters AC and at the time of the acquisition, General Motors had 30% of the spark plug market.

When I say the spark plug market, I am talking for the most part about the, not the original installations but the market, in the so-called after-market, the replacement plugs, that is where the large amount of the plug business is done.

Champion went back into the spark plug business after selling to General Motors and has supplied or had at the time of that acquisition, supplied Ford for 50 years.

And in 1936, Autolite came into the business and began to supply Chrysler and Champion got 50% of the business, it had 50% of the business at the time of the acquisition, that is General Motors 30, Champion 50, and Autolite about 15, and the balance of few percent was sort of -- were spread among small manufactures mostly in the private brand market.

Now, the private brand market is the market served by such companies as Sears, Roebuck, and Montgomery Ward and other mass merchandisers and some of the oil companies who market spark plugs under their own trade names.

In 1960 to 1961, in those years, Chrysler got very concerned, I mean, Autolite got very concerned because it saw signs that Chrysler might be getting ready to go into the spark plug business itself and that might leave it with an expensive plant which the Court described, below described as a potential albatross if it could not do something about it.

And so it came to Ford and offered to sell the spark plug business to Ford and the Autolite name for spark plugs and other uses.

And they worked out a deal under which Ford brought this assets including the battery assets which are no longer involved for a total of $28 million and Autolite became Eltra.

So that there was a new company with a name of Eltra created which carried on the portion of the business not sold by Autolite to Ford and Eltra has built a spark plug plant in Alabama and is in the business of supplying spark plugs largely for the private brand market.

Ford, in connection with the sale agreed to buy 12 million plugs from Eltra over a period of two years and also to provide it with certain ceramic parts and thereupon Ford was in the business under the Autolite name.

Champion became Chrysler’s supplier and took part of -- a large part of the year to change over from Champion plugs to Autolite plugs and worked out the technical difficulties involved and also to begin the process of improving the distribution systems and it took about the same for Chrysler to get started with its new supplier, Champion.

At the time of the acquisition or just before the acquisition, Ford had some 14% of the spark plug business and after the acquisition, Ford's percentage gradually came up and Champion’s went down and General Motor’s remained about the same, although it has gone up a little bit.

Warren E. Burger:

What was the Champion figure?

Whitney North Seymour:

The Champion figure originally was 50% at the time of the acquisition.

Warren E. Burger:

In 1961?

Whitney North Seymour:

Yes, 1960-1961, just before the acquisition and Ford’s was 30 and Autolite was about 15.

And when Ford came in, the Autolite business began to go up so that by -- about 19 -- in the late 1960s, Ford’s business was up to about 19% and Champion’s business had come down from 50 to about 40 and General Motors had remained about the same, perhaps gone up a little bit.