Ford Motor Company v. United States Commercial Investment Trust Corporation/Dissent Black

by Hugo Black

United States Supreme Court

335 U.S. 303

Ford Motor Company  v.  United States Commercial Investment Trust Corporation

 Argued: Oct. 11, 1948. --- Decided: Nov 15, 1948

Mr. Justice BLACK, dissenting.

The Court appears to accept the argument of appellants that this consent decree must be treated as though it were a contract between private persons for purchase of an automobile. But a consent decree is not a contract. A consent decree in an antitrust proceeding like a decree entered after a contest, must be treated as a judicial determination and order made in the public interest. United States v. Swift & Co., 286 U.S. 106, 114, 115, 52 S.Ct. 460, 462, 76 L.Ed. 999. That means, I would suppose, that before the restraints in this decree are lifted, a showing a should be made that such action would not tend to generate future violations of the antitrust laws. No such showing has been made here. As I see the case, modification of the decree under the circumstances shown will aid and encourage destruction of competition contrary to law. For so far as existing effective court restraints are concerned, modification will give Ford freedom to help the appellant finance companies crush their competitors.

Even though Ford and Commercial Investment Trust Corporation (C.I.T.) made no admission of the facts charged in the original complaint, the undenied allegations of the bill were sufficient to support the decree's prohibition against future competition-destroying practices. Swift & Co. v. United States, 276 U.S. 311, 327, 48 S.Ct. 311, 315, 72 L.Ed. 587. In very brief summary, those facts, so far as relevant to the view I take, are these:

At the time the decrees were entered, Ford made and sold about 25% of all cars in the United States, Chrysler 25% and General Motors 44%. Ford and the others sell to dealers about four billion dollars' worth of cars yearly, requiring cash on delivery. The dealers then sell to retail customers. About 60% of the retail sales are on credit. Dealers not permitted to sell other makes of cars are wholly dependent upon Ford's, G.M.'s or Chrysler's favorable treatment for their business lives. The dealer agencies are for one year, but the agency contracts can be canceled on short notice and without cause. The dealers are thus economic dependents of the company whose cars they sell. While there are about 375 independent finance companies, C.I.T. and its subsidiaries, appellants here, prior to entry of this court decree, furnished about 82% of the money for Ford dealer purchases, and 70% of that furnished for Ford retail purchases. The favored companies got this major percentage of Ford car loans because Ford supplied them with offices at its factories, kept them informed of sales, gave more liberal payment terms to its dealers who dealt with C.I.T., required dealers to keep their books and records open so that Ford could prevent transactions with other finance companies, sent Ford factory representati es with C.I.T. agents to help 'persuade' dealers to do business with C.I.T., and required dealers who handled loans through others to make satisfactory explanations to Ford.

This Ford favored finance company, C.I.T., asks modification. One reason suggested for modification is that the C.I.T. group has lost a portion of Ford financing since the decree subjected them to competition with other finance companies. They complain of the decree not because it stifles competitive practice; quite the contrary, they complain because the decree infringes on C.I.T.'s monopolistic sanctuary.

In substance, the modifications requested are, (1) that Ford be permitted to acquire ownership, control, or an interest in a finance company; (2) that Ford be permitted to endorse, recommend, or advertise particular finance companies to its dealers; (3) that Ford be permitted to arrange with finance companies that its representatives go with agents of the favored company to dealers to 'influence' those dealers to negotiate loans for themselves and retail purchasers only with the favored companies. Freedom to influence dealers would appear to offer a perfect opportunity for Ford and the favored finance companies to deprive Ford dealers and retail purchasers of all benefits in the way of low interest rates and liberal loan terms the dealers and retailers might otherwise obtain from competition among the hundreds of finance companies in the country. For it is sure, if the undenied allegations of the complaint be accepted, as they should be at this stage, that the economic power of Ford over its dealers is so great that dealers who desperately need Ford cars will be helpless to resist Ford's 'influence' and 'persuasion,' whether legalistically called 'coercion' or not. Due to Ford's power, what dealer could afford to draw nice distinctions between 'persuasion' and 'coercion'? I can hardly believe that the showing of an agreement between Ford and C.I.T. to return to their old methods of 'persuasion' would fail to support a finding of unreasonable restraint of trade.

It must be remembered that Ford neither promised, nor is it required by this court's action, to refrain from using its overpowering influence to 'persuade' its dealers in the same old way. Ford and C.I.T. rely here on no showing of an intent to abide by the antitrust law; they rely on the literal language of what they treat as a contract with government prosecutors. But government officers have no power, by contract or otherwise, to permit violations of the law, even should they attempt to do so, which in this case I do not think they did. Had General Motors been acquitted on the criminal charge of violating the antitrust laws, there would be merit in the contention of Ford that government officers should not insist on continuance of this injunction against Ford. General Motors was not acquitted, but was convicted under an indictment alleging the same type of economic pressure practices enjoined by this consent decree. And the trial judge charged the jury that they had 'a right to find these Defendants guilty' if they found that the Government had 'proved the acts beyond all reasonable doubt that are averred in this indictment.' True the court charged the jury that acts of mere 'persuasion' were not enough, and that General Motors must have used its power 'as a club to coerce.' And the court explained dictionary differences in the abstract between 'persuasion' and 'coercion.' But the jury was considering a concrete set of facts in which the language used by General Motors, in the abstract, might only amount to 'persuasion,' while the language plus General Motor's economic power might amount to 'coercion.' And the jury's verdict of guilty, viewed in the light of the court's charge, means to me that the persuasion plus economic power charged and proved in the General Motors case, which were in substance the identical acts and practices charged and enjoined in this case, showed use of 'a club to coerce' in violatio of the antitrust laws. I therefore agree with the finding of the District Court here in denying Ford's motion modify, namely that the agreements, acts, and practices such as here enjoined constituted a proper basis for the general verdict of guilty in the General Motors case. Consequently, I think that the Government has fairly met the consent decree's condition with reference to the conviction of General Motors.

Nor do I believe that in the present state of the record this Court should lift the ban against Ford's acquisition of or affiliation with a finance company. The law prohibits acquisition by one corporation of the whole or any part of the stock of 'another corporation * * * where the effect of such acquisition may be * * * to restrain * * * commerce in any section or community, or tend to create a monopoly of any line of commerce.' 38 Stat. 731, 732, 15 U.S.C. § 18, 15 U.S.C.A. § 18. There can be no doubt that affiliation between Ford and a certain group of finance companies will lessen the opportunity of other finance companies to compete for the automobile loan contracts both of dealers and retail purchasers. And where the volume of business as here involves 25% of all automobile sales (and eventually probably in excess of 90%) the tendency to monopoly is aggravated.

Ford relies upon allegations made in its motion to modify, to the effect that it will be competitively injured if denied an opportunity to affiliate with a finance company and to 'persuade' its dealers to borrow from that company alone, so long as General Motors is allowed to 'persuade' its dealers to borrow from a General Motors affiliate or subsidiary. But Ford has not proposed to the Court any legally allowable plan for affiliation, nor has it shown the Court that continuance of the decree will cause it to suffer a competitive disadvantage in the sale of cars. Failure of proof in these two respects was held an adequate ground for denying a motion of Chrysler Corporation to amend a decree precisely like this one. Chrysler Corp. v. United States, 316 U.S. 556, 564, 62 S.Ct. 1146, 1150, 86 L.Ed. 1668. We should take the same action in this case where the District Court specifically has found that Ford had failed to prove that continuance of the decree would subject Ford to a competitive disadvantage. Moreover, it is difficult to imagine how Ford could be suffering a competitive disadvantage in the sale of cars in today's famished car market. So far as this record shows, Ford would not lose the sale of a single car by leaving this decree as it is. And Ford does not rely on a desire to make a profit, secret or open, out of loans its dealers must obtain to pay Ford, or loans retail purchasers must get to pay dealers. If Ford professed a desire to make loans as a finance company in open competition with other finance companies, that would be one thing. It is quite another to ask a court of equity to lift its ban in order that Ford may dictate loan terms for dealers and retail purchasers after Ford has sold the cars in the market. The only competitive disadvantage that this record reveals is that from which Ford dealers, Ford retail purchasers, and independent loan agencies will suffer when the modification of this decree gives Ford and C.I.T. the green light.

Furthermore, the Court's action here means that the Chrysler decree must be modified without the showing this Court required in the Chrysler case. And it means that future destruction of competition in automobile financing by Ford, Chrysler, and General Motors has the tacit approval of this Court. For if Ford should after today 'affiliate' with C.I.T., or renew its 'persuasion' of dealers, could it be expected that this Court would thereafter hold these other companies legally responsible, even if it should be thought that today's permitted conduct ran afoul of the anti-trust law? Is it conceivable that if Ford now 'affiliates' with C.I.T., Ford's 'vested interest,' acquired with this Court's tacit approval, would be aken from Ford by a federal court?

Much talk about refined distinctions in the court's charge in the General Motors case cannot create doubts as to the effect of the decision today. The result will be destruction of competition in automobile financing. Hereafter dealers and retail purchasers cannot depend on competition to keep interest rates at a fair level. Their sole hope for low interest rates and loans on liberal terms will be the spontaneous generosity of Ford, General Motors, and Chrysler. It may be that monopoly in automobile loans is a good thing, but the anti-trust laws assume that competition is better.

I would affirm this judgment.

Mr. Justice RUTLEDGE concurs in this dissent.

Mr. Justice DOUGLAS joins in this opinion insofar as it protests against lifting the ban on Ford's acquisition of or affiliation with a finance company.

Notes