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

United States Supreme Court
433 U.S. 36 (1977)


Facts

GTE Sylvania Inc. (Sylvania) (defendant) manufactured television sets that were distributed to retailers for sale to consumers. Facing declining sales and a smaller market share, Sylvania established a new franchise plan in which Sylvania stopped selling its products to wholesalers and started selling its products to smaller retailers to be resold under franchise licenses instead. Under a franchise agreement, a retailer could resell Sylvania products only from authorized locations. Sylvania hoped that the franchise plan would reduce competition among franchised retailers and incentivize retailers to be more aggressive and competent in order to maintain their franchises. The plan was successful, and Sylvania saw its market share rise significantly. In 1965, Sylvania offered a new franchise to Young Brothers, an established television retailer. Continental T.V., Inc. (Continental) (plaintiff), was another television retailer that maintained a Sylvania franchise very close to the Young Brothers location. After Sylvania ignored Continental’s protests regarding the Young Brothers location, Continental canceled a large order from Sylvania and placed a new order with one of Sylvania’s competitors. The relationship between Continental and Sylvania continued to deteriorate, and Continental eventually withheld payments owed to Sylvania after Sylvania significantly reduced Continental’s credit line. Sylvania subsequently canceled Continental’s credit line, and Continental’s creditor brought an action seeking recovery. Continental made a counterclaim against Sylvania, arguing that the franchise plan violated antitrust law. The jury returned a verdict for Continental on the antitrust claim, and Sylvania appealed a jury instruction that a vertical restraint was a per se antitrust violation. The court of appeals reversed the verdict, finding that the franchise agreement was not a per se violation of antitrust law. Continental appealed the decision.

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Holding and Reasoning (Powell, J.)

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