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NYNEX Corp. V. Discon, Inc No. 96-1570 In the Supreme Court of the United States OCTOBER TERM, 1997 __________ NYNEX CORPORATION, ET AL., PETITIONERS v. DISCON, INCORPORATED, RESPONDENT __________ On Writ of Certiorari to the United States Court of Appeals for the Second Circuit __________ MOTION FOR LEAVE TO FILE BRIEF AND BRIEF FOR THE AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION AS AMICUS CURIAE SUPPORTING PETITIONERS __________ PHILLIP D. BRADY STEPHEN M. SHAPIRO MARK SLYWYNSKY ROY T. ENGLERT, JR. American Automobile Counsel of Record Manufacturers Association DONALD M. FALK 1401 H Street, N.W. MICHAEL E. LACKEY, JR. Suite 900 Mayer, Brown & Platt Washington, D.C. 20005 2000 Pennsylvania Ave., N.W. Washington, D.C. 20006 (202) 463-2000 Counsel for Amicus Curiae In the Supreme Court of the United States OCTOBER TERM, 1997 __________ No. 96-1570 NYNEX CORPORATION, ET AL., PETITIONERS v. DISCON, INCORPORATED, RESPONDENT __________ On Writ of Certiorari to the United States Court of Appeals for the Second Circuit __________ MOTION OF THE AMERICAN AUTOMOBILE MANUFACTURERS ASSOCIATION FOR LEAVE TO FILE BRIEF AS AMICUS CURIAE SUPPORTING PETITIONERS __________ Pursuant to Sup. Ct. R. 37.3, the American Automobile Manufacturers Association (“AAMA”) respectfully moves for leave to file the accompanying brief as amicus curiae in support of petitioner.1 Petitioners have consented to the filing of the brief; counsel for respondent has consented orally to the filing of this brief, but AAMA had not received written consent by the time the brief was sent to be printed. See Sup. Ct. R. 37.3(a). The American Automobile Manufacturers Association (“AAMA”) is a non-profit national trade organization. Its member companies — General Motors Corporation, Ford Motor Company, and Chrysler Corporation — are the largest automobile manufactur- ers in the United States. The AAMA has often represented its members before this Court. 1 This brief was funded entirely by the AAMA and was authored entirely by its counsel. 3 The first question presented in this case provides two important and related opportunities to clarify the antitrust laws. First, this case calls for an evaluation of the vitality and proper scope of the per se prohibition of “group boycotts.” Second, the Court can and should continue to clarify the status of vertical nonprice restraints. The AAMA wishes to present its views on these issues because they are of exceptional significance to its members. Vertical restraints — agreements between firms at different levels of distribu- tion — are important competitive tools for all manufacturers that face intense interbrand competition. Manufacturers use a variety of vertical agreements to obtain inputs with the greatest efficiency and at the lowest price. Vertical agreements are particularly important to manufacturers that, like AAMA members, distribute their products to the public through a network of independent local dealers. The AAMA addresses these issues from the perspective of the domestic automobile industry to assist the Court in its assessment of the real-world consequences of the resolution of this case. The AAMA supports its views with examples from its members’ experience competing in an industry marked by intense interbrand competition at the producer level. That experience has shown the importance of flexibility in commercial arrangements with parties at different levels of distribution. AAMA members can produce automobiles more efficiently if they are able to deal with sole-source or limited numbers of suppliers who have strong incentives to satisfy the standards of the industry. Similarly, manufacturers have pro- moted the efficient distribution of vehicles to consumers by imposing limits both on the number of authorized distributors and on their conduct. The possibility is remote that these vertical restraints could have any adverse effect on interbrand competition. By contrast, hostility to such arrangements — whether it takes the form of the per se condemnation suggested by the Second Circuit in this case, or the condemnation after cursory analysis that the government suggested in its amicus brief at the certiorari stage 4 — threatens the efficiencies resulting from exclusive or limited supply and distribution agreements. Such arrangements should continue to be subject to full rule-of-reason review, with the accompanying pre- sumption of legality. For the foregoing reasons, the motion of the AAMA to file the accompanying brief as amicus curiae in support of petitioners should be granted. Respectfully submitted. PHILLIP D. BRADY STEPHEN M. SHAPIRO MARK SLYWYNSKY ROY T. ENGLERT, JR. American Automobile Counsel of Record Manufacturers Association DONALD M. FALK 1401 H Street, N.W. MICHAEL E. LACKEY, JR. Suite 900 Mayer, Brown & Platt Washington, D.C. 20005 2000 Pennsylvania Ave., N.W. Washington, D.C. 20006 (202) 463-2000 Counsel for Amicus Curiae JUNE 1998 QUESTION PRESENTED This brief addresses the first question presented: Whether, by dealing with one supplier, a purchaser engages in a “group boycott” of the supplier’s disappointed competitors, and thus may be subjected to per se liability under Section 1 of the Sherman Act. (i) iii TABLE OF CONTENTS Page INTEREST OF THE AMICUS CURIAE .............. 1 INTRODUCTION AND SUMMARY OF ARGUMENT . 1 ARGUMENT .................................... 3 I. VERTICAL ARRANGEMENTS INVOLVING A SINGLE MANUFACTURER OR CUSTOMER SHOULD NOT BE CONDEMNED PER SE AS “GROUP BOYCOTTS” .. 4 A. Two-Firm Vertical Agreements Are Not “Group Boycotts” Of Either Firm’s Competitors ................... 6 B. The Rationale Of Klor’s and General Motors Conflicts With Later Decisions Of This Court ............. 8 C. This Court Should Make Clear That Nonprice Agreements Between A Supplier and its Distributor or Customer Are Presumptively Legal ......................... 17 D. Conduct Undertaken Within The Supply And Distribution Arrangements Of A Single Manufacturer Should Be Analyzed Under The Full Rule Of Reason, Not A Trun- cated And Hostile Mode of Analysis ............ 20 iv TABLE OF CONTENTS — Continued Page II. UNCERTAINTY REGARDING “GROUP BOYCOTTS” IMPEDES PROCOMPETITIVE CONDUCT IN THE AUTOMOBILE INDUSTRY .................... 22 A. The Continuing Confusion Surrounding “Group Boycotts” Impedes The Ability Of Automobile Manufacturers To Preserve The Quality And Integrity Of Their Dealership Networks .................................. 23 B. The Confusion Surrounding “Group Boycotts” Impedes The Ability Of Automobile Manufacturers To Contract Efficiently With Suppliers .................... 25 III. FACIALLY DEFECTIVE ANTITRUST ACTIONS ARE APPROPRIATELY DISMISSED UNDER RULE 12(b)(6) ................................... 27 CONCLUSION ................................. 29 v TABLE OF AUTHORITIES Page Cases Adaptive Power Solutions, LLC v. Hughes Missile Systems Co., ___ F.3d. ___, 1998 WL 172774 (9th Cir. Apr. 15, 1998) ........................ 7 Anderson v. United States, 171 U.S. 604 (1898) ........................... 7 Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564 (3d Cir. 1986) .................... 25 Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983) .......................... 28 Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983) ..................... 7 BMI v. CBS, 441 U.S. 1 (1979) ...................... 5 Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) ........ 4, 11, 22 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) .......................... 18 Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988) ....................... passim Chicago Professional Sports Ltd. Partnership v. NBA, 95 F.3d 593 (7th Cir. 1996) .............. 15 Continental TV, Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977) ........................ passim Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984) .......................... 16 vi TABLE OF AUTHORITIES — Continued Pages Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996) ................... 28 Eastern States Retail Lumber Dealers’ Ass’n v. United States, 234 U.S. 600 (1914) ........ 6 FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986) ....................... passim FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411 (1990) ....................... 2, 5, 9 Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993) ........................... 7 Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d 9 (1st Cir. 1987) ...................... 28 Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) ............................. 8 Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211 (1951) ........................ 9, 16 Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959) ....................... passim Loewe v. Lawlor, 208 U.S. 274 (1908) ................ 7 Lovett v. General Motors Corp., 998 F.2d 575 (8th Cir. 1993), cert. denied, 510 U.S. 1113 (1994) ......................... 25 Monsanto v. Spray-Rite Service Corp., 465 U.S. 752 (1984) ................. 11, 15, 17, 21 vii TABLE OF AUTHORITIES — Continued Pages National Society of Professional Engineers v. United States, 435 U.S. 679 (1978) .............. 12 NCAA v. Board of Regents, 468 U.S. 85 (1984) ......................... 5, 20 Northwest Wholesale Stationers v. Pacific Stationery & Printing Co., 472 U.S. 284 (1985) ...................... 3, 5, 13 Parsons v. Ford Motor Co., 669 F.2d 308 (5th Cir.), cert. denied, 459 U.S. 832 (1982) .........................
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