RICKY SMITH PONTIAC, INC. vs. SUBARU OF NEW ENGLAND, INC., & others. [Note 1]

GREANEY, J. Named for a constellation, [Note 2] the Subaru is a Japanese manufactured automobile which arrived on the American scene in the early 1970's. This case arises out of a dispute between members of Subaru's New England distribution chain which was precipitated by Subaru of New England's (SNE) grant, on February 1, 1978, of a motor vehicle franchise to the defendant Masabny. The plaintiff (Ricky Smith) challenged the grant as an impermissible intrusion on its "relevant market area," alleging that SNE had violated the plaintiff's franchise agreement and had committed unfair and deceptive practices in violation of G. L. c. 93B, Sections 3 and 4. SNE counterclaimed, alleging (1) that Ricky Smith had violated the franchise agreement by failing to promote Subaru's products aggressively in its immediate geographic area; and (2) that Ricky Smith had illegally conspired with other dealers in restraint of trade to prevent SNE from making new dealer appointments. After a lengthy trial without jury, a judge of the Superior Court made findings of fact and rulings of law which were, on the whole, favorable to Ricky Smith's position on the issues. The trial judge then reported the propriety of his decision on the liability

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questions to this court. [Note 3] See G. L. c. 231, Section 111, as appearing in St. 1973, c. 1114, Section 199; Mass.R.Civ.P. 64, 365 Mass. 831 (1974); McStowe v. Bornstein, 377 Mass. 804, 805 n.2 (1979).

1. Background facts found by the trial judge. SNE, a Massachusetts corporation, is the sole distributor of Subaru automobiles for the six New England States, having been appointed by Subaru's exclusive importer to the United States, Subaru of America, Inc. [Note 4] Ricky Smith, one of nearly eighty Subaru retail dealers in New England, was granted a franchise by SNE in 1970. The agreement between Ricky Smith and SNE was renewed periodically, and had been most recently extended through October of 1979. [Note 5] Ricky Smith's total investment in expanding and improving its facility for Subaru sales and service has exceeded $500,000. Prior to 1975, Midway Auto Sales, Inc. (Midway), located in Abington, Massachusetts, some 7.4 miles south of Ricky Smith, was granted a Subaru franchise by SNE. Approximately ten other Subaru franchises, awarded in the area within fifteen miles of Ricky Smith's dealership, went out of business between 1970 and 1977. By 1978, Midway was Ricky Smith's only competing Subaru dealer in the geographic area known as the "South Shore."

In 1976, Masabny wrote to SNE expressing interest in obtaining a Subaru franchise in the area of the towns of Hanover, Marshfield, or Pembroke (all located in Plymouth County). Masabny made formal application for a franchise

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on July 6, 1977. SNE, which was considering establishing a dealership in the Plymouth county area, informed Masabny that such a dealership would have to be located on Route 53 and would have to be a separate, not a dual dealership, facility. By December of 1977, SNE and Masabny had agreed on a site on Route 53 in Hanover, close to several small shopping centers and other automobile dealerships. Masabny in turn had satisfied SNE that he possessed or had access to sufficient capital and financing. A franchise agreement was executed on February 1, 1978, [Note 6] and was amended on April 10, 1978, to relocate the dealership on Route 53 about one-quarter mile away in the town of Pembroke. [Note 7] The Pembroke site, from which Masabny began conducting business on November 14, 1978, as South Shore Subaru, Inc. (South Shore), was situated approximately 10.5 miles southeast of Ricky Smith's and 7.8 miles east of Midway's dealerships. [Note 8]

Neither Ricky Smith nor Midway was notified, when Masabny's July 6, 1977, application was accepted, that SNE considered the Hanover-Pembroke area an "open point," i.e., an area deemed to have sufficient present potential for an additional or new dealership. In late December, 1977, however, before their agreement was reduced to writing,

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SNE informed Masabny that both Ricky Smith and Midway would have to be given a chance to say "no" to opening in the Hanover-Pembroke area. On January 26, 1978, at a meeting between Ricky Smith's president (Ricky Smith, Sr.) and SNE's chief executive officer (Ernest Boch), Smith was informed that SNE had decided that a new dealer was needed on Route 53 in the Hanover area. Smith was told that he could have the Route 53 dealership if he would move his Subaru franchise there and build a new and separate facility. If Smith agreed, his allocation, or "travel rate," would be fifty Subarus per month. In context, this meant an initial monthly allocation of fifty new automobiles. [Note 9] If Smith refused to move, Boch intended to put a new franchise in the area of Quincy, a large community immediately northwest of Weymouth. Moreover, absent a move, Smith's dealership would not be upgraded to the fifty automobiles per month allocation unless it built an entirely new and separate Subaru facility at its current location. In the meantime, the franchise on Route 53 would be awarded to

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someone else. [Note 10] Smith was given five days, until January 31, to make a decision. Smith contacted Boch on February 16, when he was formally advised that a new dealer had been appointed for the northern Plymouth (Route 53) area. The present action followed.

2. The statutes. General Laws c. 93B, inserted by St. 1970, c. 814, Section 1, regulates transactions among automobile manufacturers, distributors and dealers. [Note 11] Like G. L. c. 93A, the consumer protection statute which preceded it by three years, c. 93B, Section 3(a), proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices." Unlike c. 93A, however, c. 93B, Section 4, specifies with some particularity those practices that shall be "deemed" unfair or deceptive under Section 3(a). Among other means of enforcement, the statute affords injured dealers a private damages remedy which, prior to the statute's amendment by St. 1977, c. 717, permitted a claim of up to treble damages under the provisions of G. L. c. 93A, Sections 9 and 10. See Reiter Oldsmobile, Inc. v. General Motors Corp., 378 Mass. 707, 708-709 (1979). One of the acts or practices proscribed under Section 4(3)(1), prior to its amendment and the impetus behind the present action, is the improper granting of a competitive motor vehicle franchise in "the relevant market area previously granted to another franchisee." That statute also provided that such market area "be determined exclusively by equitable principles"; with the proviso that if a "manufacturer" wished to grant such a competitive franchise, then it must give notice to the existing dealer or dealers in the area and, unless there was agreement,

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the matter should be submitted to "final and binding arbitration under the principles herein prescribed, for a determination of the relevant market area, the adequacy of the servicing of the area by the existing dealer or dealers and the propriety of granting of such additional dealership." [Note 12] By St. 1977, c. 717, enacted on November 7, 1977, and effective ninety days thereafter, sundry provisions of G. L. c. 93B were revised. Included among the revisions were amendments to Section 4(3)(l) which (i) made it an illegal act under Section 3(a) for a manufacturer or distributor "arbitrarily and without notice to existing franchisees" to grant a franchise to an additional franchise who would conduct his dealership "from a place of business situated within the relevant market area of an existing franchisee or franchisees"; (ii) substituted a formula definition of "relevant market area" for the "equitable principles" determination; (iii) required, prior to such a grant, sixty days' notice to franchisees within a twenty-mile radius of the proposed new location; (iv) eliminated arbitration in favor of Superior Court review of the question whether placement of the additional franchise is arbitrary; and (v) directed the court, in determining the issue of arbitrariness, to consider "all pertinent circumstances" which may include eight stated factors. In Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313 (1978) (Tober decision), the

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Supreme Judicial Court upheld the validity of Section 4(3)(l) in the 1970 version of the statute against attack on several constitutional grounds. However, no adjudication on the merits of an alleged violation of Section 4(3)(l) in either version of the statute has yet come under appellate review. [Note 13]

3. The effect of the trial judge's findings. The judge filed a sixty-page memorandum of decision which included exhaustive findings of fact and rulings of law on virtually all the governing legal questions. On several of the issues under review, the defendants contend that the trial judge erred by failing to adopt or deny their requests for findings of fact and to act upon their requests for rulings of law. Since the argument is a persistent theme on the appeal, it would be useful to clear it up at the outset.

The requirement of findings under Mass.R.Civ.P. 52(a), 365 Mass. 816 -817 (1974), "serves to (1) insure the quality of a judge's decision making process by requiring simultaneous articulation of the judge's underlying reasoning; (2) assure the parties that their claims have been fully and fairly considered; and (3) inform an appellate court of the basis on which a decision has been reached." Cormier v. Carty, 381 Mass. 234, 236 (1980). As to requests for rulings of law, "a trial judge sitting without a jury should rule on [the] requests . . . in such a manner that the requesting party can ascertain for purposes of appeal, whether the judge applied the correct principles of law in deciding the case." Petition of New Bedford Child & Family Serv. to Dispense with Consent to Adoption, 385 Mass. 482, 491 (1982), citing DiGesse v. Columbia Pontiac Co., 369 Mass. 99, 103-104

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(1975). In this case, "the thought process which led to [the judge's] decision [on liability] is fully articulated," Lynn v. Nashawaty, 12 Mass. App. Ct. 310, 315 (1981), in a memorandum which complies with the stated purposes of the rule. The judge's findings of fact, wherever contrary to the defendants' evidence or requests for findings of fact, import his rejection of their position on the factual issues. Specific action by the judge on the requested findings of fact was unnecessary. The judge's findings and conclusions also implicitly addressed the requests for rulings which were material to the case. "In these circumstances responses [by the trial judge] to requests for rulings are superfluous," Lynn v. Nashawaty, supra at 315, and his failure to pass on them is not a ground for reversal.

It is apparent from the record that the judge based his decision in major part on his perception of the credibility of the witnesses together with inferences drawn from their oral testimony and from facts contained in the documentary exhibits. We think it useful to state, at the threshold of the appeal, that "it is the trial judge who, by virtue of his first-hand view of the presentation of evidence, is in the best position to judge the weight and credibility of the evidence," New England Canteen Serv., Inc. v. Ashley, 372 Mass. 671, 675 (1977), and that we are bound by his findings of fact which are supported by the evidence, which include inferences reasonably drawn therefrom. Lawton v. Dracousis, ante 164, 169 (1982), and cases cited. With these principles in mind, we turn to the substantive questions raised by the report.

4. The plaintiff's statutory claims. The judge found as a fact that the contract between SNE and Masabny was executed on February 1, 1978, five days before the amendments to c. 93B contained in St. 1977, c. 717, became effective. He further found there was "no question that SNE desired that its contract with Masabny be executed before the effective date of [the 1977] amendments." On appeal, it is not disputed that the 1970 statute governs the rights of the parties. The judge concluded that SNE "knowingly and intentionally

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violated Section 4(3)(l) by granting a competitive franchise . . . in the relevant market area of the plaintiff, without compliance with the mandatory procedures as set out in said Section 4(3)(l), both as to the 1970 statute and as to the amended statute of 1977." He defined that area as an irregularly shaped geographic enclosure which represented the nearest two-thirds of the plaintiff's Subaru sales in the three-year period between June, 1975, and May, 1978. His memorandum based this demarcation on (1) the fact that the "plaintiff's relevant market area could not be determined in 1978 by [simply] drawing a circle around its location in Weymouth [since] the Atlantic Ocean compresses its market area to the north and east, and the low-income urban areas again compress . . . [its] market potential in the north and northwest; (2) the fact that the area "actually represents the area-trend of the plaintiff's sales for a considerable time prior to the granting of the new franchise, and the plaintiff is equitably entitled to it as a market area;" and (3) guidance afforded by "the provisions of G. L. c. 93B, Section 4(3)(l) (1977) defining relevant market area as the area within which the existing franchise made at least two-thirds of its sales within a three-year period, prior to the granting of the new franchise."

(a) The defendants first claim that the judge failed to determine the relevant market area "exclusively by equitable principles" as required by the 1970 statute, choosing rather to ignore their extensive evidence on this crucial issue in favor of a simplistic geographic tally of Ricky Smith's sales. The defendants urge that the eleven towns and one city surrounding the plaintiff's dealership (which they variously term the "normal area of operations," "area of immediate influence," and "normal market area"), equitably constituted the plaintiff's relevant market area, to which consumers would naturally turn to buy or service their Subaru automobiles. Additionally, the defendants contend that this "normal" area was not being adequately "penetrated," that the Subaru ran behind its import competition there while Ricky Smith "pumped in" sales from a more remote

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geographic area, and that Ricky Smith would not cooperate with SNE to develop its "normal" area through adequate promotion, display and advertising of Subaru products.

The trial judge dealt fully with the defendants' evidence. He found that Subaru sales in the early 1970's had been generally low because of lack of public acceptance and mechanical and engineering problems, and that the automobile had gained popularity faster in northern than in southern New England, where its sales had run behind the Datsun and Toyota lines. Over time, Subaru business had improved for Ricky Smith, which had been ranked ninth in sales of all SNE dealerships in 1975, eighteenth in 1976, and ninth in its SNE divisional sales during 1978. In 1970, Ricky Smith had twice as many orders for new Subarus as it was able to fill. Ricky Smith had established through its Pontiac and Subaru business, "considerable good will" in the South Shore area, which included northern Plymouth County. From 1975 to 1979, Ricky Smith's geographic trend of sales was southeastward of its location; sales doubled in Plymouth County while declining in the populous area immediately north of the dealership. The judge found that the "primary reason" for this trend was the market in "bedroom towns" for a less expensive, economical second car coupled with access to public transportation in the populous area to the north. Other factors considered by the trial judge were the disparity in income between urban and suburban residents, and the increasing competition of American-made compact automobiles.

The judge, who had viewed Ricky Smith's premises, also found that the dealership displayed three Pontiac and two Subaru signs and had a prominently placed rack for Subaru literature, and that Ricky Smith's advertising expense in several area newspapers and on a number of radio stations exceeded the amount suggested by SNE. The judge stated that Ricky Smith's physical plant had "the appearance of an established dealership and an extremely efficient operation"; its service department seemed more efficient in operation and appearance than the facilities of Midway and

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Masabny, which were also viewed by the judge. The judge also found there had been no significant complaints by SNE about Ricky Smith's service to its customers. Since 1976, the judge termed Ricky Smith's level of sales competitive, and in some respects outstanding, in comparison with other Subaru dealers in New England.

The judge summarized and analyzed the defendants' principal arguments with respect to Ricky Smith's relevant market area, rejecting each one. He found that the repeated designation of "normal area of operations" (a term included in the franchise agreement but not defined therein) and "area of immediate influence," viz., the city and towns immediately surrounding the dealership, "ignores the towns where the plaintiff's dealership had actually sold a large number of Subarus, i.e., the market area of the plaintiff." He determined that, although the dealership had maintained a high rate of sales in its immediate area, particularly in Weymouth and Braintree, Ricky Smith had sold more automobiles in northern Plymouth County in 1978 than it had in the towns surrounding its location, and had a better record against compact competition in Plymouth County, especially against Datsun and Toyota, than did other New England Subaru dealers in their respective locales. Further, the record indicates that numerous criteria suggested by the defendants as determinants of Ricky Smith's relevant market area were weighed by the trial judge and incorporated into his subsidiary findings. These factors included consideration of the location of Ricky Smith's customers in recent years; the extent and nature of the market near Ricky Smith's location; the distance between the Ricky Smith and Masabny sites; demographic differences between the two geographic areas; the recent loss of Subaru dealerships in the areas encompassed by both dealerships; and a comparison of New England Subaru dealerships and competitive foreign compact representation. [Note 14]

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We are satisfied that the judge did not ignore, or summarily dismiss, the defendants' evidence which was offered to show that the plaintiff was equitably entitled to a different market area from the one chosen. We are also satisfied by the judge's choice of language in his various findings and rulings on the plaintiff's relevant market area, and by the reasoning process underlying his decision, that he sought to decide the case upon the governing "equitable principles" standard enunciated in the 1970 statute despite his reference to the existence of an independent violation of the 1977 statute.

(b) The judge's determination is also challenged as contrary to language in the Tober decision (376 Mass. at 331) [Note 15] which the defendants construe as requiring that relevant market area, under the 1970 version of c. 93B, be determined chiefly by resort to Federal antitrust principles. In their "Proposed Conclusions of Law," however, the defendants urged the judge to rule that "[a]nti-trust concepts of a relevant market area as a geographical area within which competition is to be protected against restraints and monopoly are inapposite to G. L. c. 93B, [Section] 4(3) . . . paragraph (1), prior to amendment by St. 1977, c. 717, effective February 5, 1978." Notwithstanding the fact that the trial judge may not have had the benefit of the defendants' present line of argument at trial, [Note 16] we find nothing in the antitrust authorities cited in the Tober decision, or now by the defendants, which is inimical to the judge's reasoning. See,

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e.g., United States v. Philadelphia Natl. Bank, 374 U.S. 321, 359-361 (1963); Brown Shoe Co. v. United States, 370 U.S. 294, 336-337 (1962); United States v. Connecticut Natl. Bank, 418 U.S. 656, 666-671 (1974); United States v. Kimberly-Clark Corp., 264 F.Supp. 439, 455-458 (N.D. Cal. 1967); United States v. General Dynamics Corp., 341 F.Supp. 534, 556-558 (N.D. Ill. 1972), aff'd, 415 U.S. 486 (1974); 2 Areeda & Turner, Antitrust Law, pars. 524, 534 (1978); Sullivan, Antitrust Section 19 (1977).

(c) The defendants next question the trial judge's interpretation and application of the 1977 revision of Section 4(3)(l) of c. 93B to determine relevant market area. They maintain that the judge could not look to the amended statute for guidance as to the relevant market area and, if he could, that he applied the amendments incorrectly. We think the judge's use of the 1977 statute for "guidance" is authorized by the Tober decision. In Tober, the court made the following comments on the 1970 and 1977 versions of the statute:

"The 1970 statute did not carry a definition of `relevant market area,' but the concept of a geographic market is a familiar one, explicated in Federal antitrust law (e.g., United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 360-361 [1963]; United States v. Connecticut Nat'l Bank, 362 F. Supp. 240 [D. Conn. 1973], vacated and remanded, 418 U.S. 656 [1974]; see 2 P. Areeda & D. Turner, Antitrust Law, par 524 [1978]), and the words take on further and clearer meaning when seen in relation to the purposes of the statute in which they are found and the conditions of the automotive industry known or subject to proof [footnote omitted]. The 1977 revision sets out a quite sharp definition which may somewhat sacrifice theoretical correctness to ease of practical application. Again, the 1970 statute stated in brief form the criteria for allowing or denying a new franchise, but it would not require much imagination for the decision maker to read the language as encompassing more or less the factors later enumerated in the amendatory legislation of 1977." 376 Mass. at 331-332.

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The defendants concede that this passage permitted the judge to look to the amended statute, as he in fact did, to determine whether the appointment of an additional franchise within an existing franchisee's relevant market area was arbitrary under the cognate provisions of the 1970 statute. It does not follow, however, as the defendants contend, that the Tober decision confined the judge to antitrust authorities in determining "relevant market area" or that it barred him from considering the 1977 statute's definition of that term. The Tober court gave at least equal emphasis within the quoted language to several sources besides antitrust principles, including "the purposes of the statute" (explicated in Tober at 322-323), and "conditions of the automotive industry," as helpful under the 1970 statute, for determining an objecting dealer's relevant market area. At the lengthy trial below, considerable evidence was introduced on these factors. [Note 17] We reject the defendants' attempt to construe the Tober decision as merely prohibiting, under the 1970 statute, "the award of a new franchise around the corner." And we do not read that decision to state that a judge could be guided by the 1977 revision of Section 4(3)(l) for the purpose of determining any arbitrariness in appointing an additional franchisee prior to 1977, but that he should, in the same case, blind himself to the 1977 test for the relevant market area. We hold that it was proper for the trial judge to be guided by the definition in G. L. c. 93B, Section 4(3)(l), as amended by St. 1977, c. 717, Section 3, in determining Ricky Smith's relevant market area under the 1970 statute by "equitable principles."

(d) If the judge was permitted by the Tober decision to consult the 1977 statute, it was incumbent upon him to instruct

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himself correctly on the meaning and application of that statute's definition of relevant market area. George v. Goldman, 333 Mass. 496, 497 (1956). The record indicates, however, that trial counsel for the parties mistakenly read the 1977 statute's definition of relevant market area as providing for an election between the geographical areas comprising two thirds of the plaintiff's retail sales of new automobiles and two thirds of its retail service sales. As a consequence of that error, little or no evidence on the retail service sales prong of the test for relevant market area was introduced. [Note 18] This error in statutory analysis ultimately insinuated its way into the decision, when the judge (apparently concurring in counsels' erroneous interpretation of the statute), based his resolution of the case on the premise that two thirds of sales was the major factor in deciding the plaintiff's relevant market area. In point of law, however, the 1977 act defines relevant market area in precise terms as "the more narrowly defined and circumscribed geographical area immediately surrounding its existing dealer location within which it obtained . . . at least two-thirds of (i) its retail sales of new motor vehicles . . . or (ii) its retail service sales" (emphasis supplied).

The error is understandable, since the 1977 statute's wording would perplex even the most percipient logician. Nevertheless, we are left with the virtual absence of evidence on the crucial second component of the 1977 test, and a resultant failure by the judge to consider the full effect of that part of the 1977 definition. Both are matters which may have a direct bearing on the soundness of the decision.

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We think this aspect of the case falls within "the fundamental rule that a judge sitting without a jury must properly instruct himself upon accurate principles of law to guide him in arriving at a decision in any particular case." [Note 19] George v. Goldman, 333 Mass. at 497. Cf. Kunkel v. Alger, 10 Mass. App. Ct. 76, 84 (1980). We are left, for lack of foundation in the record, with clear error. The error is compounded by the judge's improper (but superfluous) ruling that SNE conduct constituted a violation of the 1977 statute. Consequently, upon return of the case to the Superior Court, we direct the judge to receive evidence on the geographic area comprising the plaintiff's service sales between June, 1975, and May, 1978. The burden of initial production of this evidence is to be borne by the plaintiff with the defendants to have the later opportunity to rebut it. Thereafter, the judge is to amplify his subsidiary findings based on the new evidence, and after weighing that evidence together with all the other evidence in the case, he is to rule anew on the plaintiff's relevant market area under the equitable principles formulation of the 1970 statute.

This is not to say, however, that the judge is required to adopt the smaller of the two geographic areas described in the 1977 statute as the plaintiff's relevant market area. This result would follow if the 1977 statute were deemed to be retroactive. The general rule, however, is "to construe

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statutes which deal with substantive rights, rather than remedies or procedure, as operating prospectively only, unless the Legislature has stated the contrary explicitly." Austin v. Boston Univ. Hosp., 372 Mass. 654, 657 (1977), and cases cited. See Spooner v. General Acc. Fire & Life Assur. Corp., 379 Mass. 377, 379 (1979), and cases cited. The 1977 amendments are, in our opinion, principally substantive in nature. For example, a new definition of relevant market area, the core of the statutory tort, is formulated by the amended statute, and recovery of multiple damages is deleted. See Cudlassi v. MacFarland, 304 Mass. 612 (1939). Both changes are substantive in nature. We have not discovered any legislative history, and none has been brought to our attention, which indicates that the Legislature intended to make the 1977 amendments retroactive. See Murphy v. Planning Bd. of Norwell, 5 Mass. App. Ct. 393, 397 (1977). Such an intent is not stated in the statute itself, and the Tober decision is silent on the point. We have the added consideration that retroactive application might have the serious result of impairing preexisting rights embodied in the contract between the plaintiff and SNE. Gopen v. American Supply Co., 10 Mass. App. Ct. 342, 349 (1980). That agreement, for example, is expressly predicated upon the state of the law existing at the time a new dealer is appointed. See Hein-Werner Corp. v. Jackson Indus., Inc., 364 Mass. 523, 525 (1974) (expressly holding c. 93B inapplicable to contracts which antedate its enactment). We think the Legislature did not intend the 1977 amendments to apply retroactively.

We also believe that the 1977 amendments were not meant by the Legislature merely to clarify the equitable principles standard in the 1970 statute. It is obvious, after side by side comparison, that the formula definition in St. 1977, c. 717, Section 3, creates a bright line test which substantively changes the equitable principles standard in the 1970 statute. Before the 1977 amendments, a judge, confronted with a case like this, would likely consider a multiplicity of factors including conditions in the industry, pertinent antitrust

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principles, the statute's purposes, the circumstances of the parties and the terms of their contract, to evolve, by way of a rule of fairness, the objecting dealer's relevant market area. Now, by virtue of the 1977 amendments, a judge analyzes hard statistical data to draw two geographic areas and, after the areas are platted, he simply chooses the smaller of the two. As was said in the Tober decision, 376 Mass. at 331-332: "The 1977 revision sets out a quite sharp definition which may somewhat sacrifice theoretical correctness to ease of practical application." We conclude, under the equitable principles test in the 1970 statute, that the judge should consider the evidence pertaining to both areas described in the 1977 definition, but that he is still free to exercise independent judgment (based on a balancing of all the equities), in selecting the geographic area to which the plaintiff is fairly entitled as his relevant market area.

(e) The defendants also claim that the trial judge erred in finding SNE's appointment of Masabny unjustified and hence arbitrary under the eight discrete criteria set forth in Section 4(3)(l) of the 1977 version of the statute, [Note 20] by requiring SNE to justify the appointment and by concluding that SNE should have assembled its information in support of the appointment prior to the grant of the Masabny franchise. The judge's principal findings on this issue are set forth in the margin. [Note 21] The judge's finding that the appointment was arbitrary

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is amply supported by the evidence he determined to be the more credible. Upon production of evidence which satisfied the judge that the appointment was arbitrary, the plaintiff had met its burden, and it thereafter became the defendants' obligation to persuade the trial judge that the appointment was proper. We see no error in the allocation of the burden of proof.

The judge could also consider the absence of careful consideration of relevant data at the time the appointment was made as evidence that the Masabny franchise was arbitrarily granted, despite SNE's assembly, after the fact, of information which tended to support its actions. Subsection 3(l) of Section 4 of the 1977 version of the statute plainly contemplates written notice to existing dealers of a manufacturer's or distributor's intent to appoint a new dealer within their relevant market area followed by discussion between the parties of the reasons which warrant the appointment. Obviously, statistical and other data which might have a bearing on a controverted appointment has to be considered at any such discussions. [Note 22] Otherwise, the statute's requirements will likely become hollow formalities and litigation will often ensue. The judge could have properly considered SNE's conduct prior to Masabny's appointment as manifesting indifference to the statute and to the impact that the new dealer would have on existing franchisees. These in turn, in the language of c. 93B, were "pertinent circumstances" in "determining whether [the] proposed appointment was arbitrary."

5. The plaintiff's contract claim. The judge also found that the Masabny appointment violated section 20.2 of the

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franchise agreement, see note 22, supra. It appears to have been common ground at the trial that in the absence of a definition of the terms "market area" and "normal area of operations" in the contract, the agreement's reference to governance by "applicable law" made c. 93B controlling of the parties' rights thereunder. [Note 23] The parties have not pressed a contrary argument on appeal, and the judge appears to have decided the case on this premise. [Note 24] In these circumstances, the plaintiff's rights under the agreement and the statute merge, and we need only review the asserted statutory violation and the plaintiff's entitlement to relief therefor.

6. The defendant SNE's counterclaims. The defendant maintains that the judge ignored uncontradicted evidence that Ricky Smith had committed a breach of sections 4.1, 9.1, 9.2, and 9.3 of the franchise agreement. These provisions require, in essence, that dealers aggressively promote the sale of Subaru products throughout their market areas. Included in the list of alleged violations were claims that Ricky Smith lacked proper signs identifying the dealership as a Subaru outlet, that it refused to participate in SNE sponsored programs to improve customer services, that it frequently failed to display Subaru automobiles on the showroom floor, that it did not adequately display Subaru promotional materials, and that its market area penetration was lower than that of other dealers; all indicia which the defendant considers reflective of a lax attitude toward sales. The judge found, however, that the "[c]omplaints about the

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plaintiff's dealership were de minimis when compared to plaintiff's sales record in 1977 and 1978, the awards bestowed on the plaintiff by . . . SNE, and the efficient operation of the plaintiff's combined facility." He ruled that there had been no material breach "of [any] of the articles or provisions of . . . the [d]ealership [a]greement [and] . . . even if the plaintiff had failed in any of its covenants with SNE, the defendant was unable to prove $1.00 of damage." The trial judge's general finding and ultimate ruling quoted above are well-supported by detailed subsidiary findings, many of which have been summarized earlier in this opinion. These subsidiary findings establish Ricky Smith as one of the more aggressive and successful dealers in Subaru's New England distribution chain and they address each of the defendants' claims of breach of contract. We can find no error, much less clear error, in the disposition of SNE's breach of contract claim.

The defendants' second counterclaim alleges that Ricky Smith conspired with other Subaru dealers, in violation of the Federal antitrust laws, to prevent SNE from granting additional competitive motor vehicle franchises in the six-State New England region. At the root of the charge is the fact that the dealership's president participated in the establishment and activities of the New England Subaru Dealers' Council, Inc. (Council). This organization sought to protect the rights of existing Subaru franchisees against perceived unlawful efforts by SNE to expand distribution of Subaru products. The defendants, however, see the Council's aims as more sinister, contending that its members have illegally combined to create de facto horizontal territorial limitations controlled by, and for the benefit of, existing franchisees. See United States v. Sealy, Inc., 388 U.S. 350 (1967); United States v. General Motors Corp., 384 U.S. 127 (1966); United States v. Topco Associates, 405 U.S. 596 (1972); Com-Tel, Inc. v. Dukane Corp., 669 F.2d 404 (6th Cir. 1982). See also G. L. c. 93, Section 2, as in effect prior to St. 1978, c. 459, Section 1; Merchants Legal Stamp Co. v. Murphy, 220 Mass. 281 (1915); Commonwealth v. McHugh,

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326 Mass. 249 (1950). Cf. Glickman, Franchising Section 4.02[2] (1981) (horizontal market restraints by franchisors). The judge found that the Council was a prototype of the sort contemplated by G. L. c. 93B, Section 10, inserted by St. 1970, c. 814, Section 1, which provides that "[e]very franchisee shall have the right of free association with other franchisees for any lawful purpose," [Note 25] that there was "no proof" that the Council had violated the antitrust laws; [Note 26] and that "there [was] no evidence that [the plaintiff] did anything in restraint of trade as far as SNE is concerned."

The burden of proving an illegal combination or conspiracy in restraint of trade falls on the defendants. Such proof need not be explicit or formal, Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939); American Tobacco Co. v. United States, 328 U.S. 781 (1946); United States v. General Motors Corp., supra at 142-143, and may be satisfied by circumstantial evidence of business behavior from which the fact finder can infer illegal agreement or activity. See Theatre Enterprises, Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540 (1954); Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704 (1969). It is clear, however, that a mere showing of close relations or frequent meetings between alleged conspirators will not sustain the burden absent evidence that the close ties led to an illegal agreement. See Oreck Corp. v. Whirlpool Corp., 639 F.2d 75, 79 (2d Cir. 1980), cert. denied, 454 U.S. 1083 (1981). Likewise, an association of automobile dealers handling the same line make, formed for

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the purposes of processing mutual grievances against their common franchisor, and safeguarding market areas defined and entrusted to the dealers by State statute, does not violate the antitrust laws absent proof of an illegal combination or evidence that illegal means were used to accomplish otherwise lawful ends.

Despite the defendants' attribution of improper motives to the Council's projects, we find nothing in the record which persuades us that the judge's findings are clearly erroneous. In essence, the Council's members pooled resources to gather information about SNE's business practices, to obtain legal counsel for advice on practical ways to correct those difficulties, and to support (by financial assistance and the offer of relevant documentary evidence and oral testimony) litigation brought by members against SNE for claimed violations of State and Federal automobile dealer protection statutes. The Council's activities appear to have been prudently counselled and to have stayed within the confines of antitrust laws. [Note 27]

7. The plaintiff's remedies. Although the trial judge reserved the entry of a final judgment embodying damages and other relief pending resolution of the reported question, he declared SNE's agreement with South Shore void, directed South Shore to cease operations within sixty days, and ordered SNE not to terminate its franchise agreement with Ricky Smith pending appeal. In addition, he ruled that Ricky Smith would recover $638 in damages for each new Subaru motor vehicle sold by South Shore in the area where the two competing dealerships' relevant market areas intersected

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and overlapped. [Note 28] Most, if not all, of the evidence on damages has already been introduced. The parties have fully briefed the issues pertaining to relief. In view of the considerable amount of time and money already spent on the case, and the parties' estimates of additional time needed to complete the trial, we think it will further the efficient administration of justice if the issues germane to the plaintiff's entitlement to relief are addressed.

(a) Pursuant to directions discussed in part 4(d) of this opinion, evidence is to be received on the geographic area of retail service sales described in subsection (3) (l) of Section 4 of c. 93B, as appearing in St. 1977, c. 717, Section 3. That "area" may prove to be smaller than the "retail sales area" therein described upon which the present determination of the plaintiff's relevant market area rests in major part. Consequently, South Shore's dealership may lie outside the perimeter of the plaintiff's relevant market area. If that proves to be so, and if the judge decides that the area of retail service sales should be Ricky Smith's relevant market area for purposes

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of this case (keeping in mind, as previously discussed, that he is not compelled so to find), then a violation of the statute or franchise agreement has not been shown and final judgment should be entered for the defendants.

(b) Assuming, however, that a statutory violation remains, the judge has the power pursuant to G. L. c. 93B, Section 13, [Note 29] inserted by St. 1970, c. 814, Section 1, to void the SNE-Masabny agreement for a Pembroke dealership. [Note 30] We see nothing in SNE's terse argument (propounded without benefit of helpful citation) which would deny the judge that power.

(c) Ricky Smith would also be entitled to damages. Proof of damages in these cases typically involves a two-step process: first, showing of a causal connection between the defendants' actions and a violation of c. 93B, including proof of some actual injury to the plaintiff's business, and second, once such causal connection is established, quantification of the amount of damage suffered. See Ford Motor Co. v.

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Webster's Auto Sales, Inc., 361 F. 2d 874, 883-886 (1st Cir. 1966) (damages for antitrust violations). See also Eastern Fireproofing Co. v. United States Gypsum Co., 50 F.R.D. 140, 143-144 (D. Mass. 1970).

Proof of the fact of damages required by the first step would be satisfied by "proof of some damage flowing from the [defendant's] unlawful [act]; inquiry beyond this minimum point goes only to the amount and not the fact of damage." Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9 (1969). See Brunswick Corp. v. Pueblo Bowl-o-Mat, Inc., 429 U.S. 477 (1977); J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557 (1981). See also Derry v. Flitner, 118 Mass. 131, 134 (1875); John Hetherington & Sons v. William Firth Co., 210 Mass. 8, 21-22 (1911); Hall v. Paine, 224 Mass. 62, 64-65, 69 (1916); Bond Pharmacy, Inc. v. Cambridge, 338 Mass. 488, 493 (1959); Carlo Bianchi & Co. v. Builders' Equip. & Supplies Co., 347 Mass. 636, 646 (1964); Restatement (Second) of Torts Section 433B(1) comment b (1965). There was competent expert evidence based on Ricky Smith's patterns of past sales, estimates of the dealership's future sales, and Masabny's projected sales, that Masabny's appointment would significantly reduce the plaintiff's sales of new Subaru vehicles in fiscal years 1979 and 1980. For example, it was estimated that the plaintiff would lose sales of eighty-four units in fiscal 1979 or about fifteen percent of its total Subaru sales. This projection was confirmed in part by Masabny's actual sales of Subarus within the plaintiff's relevant market area between its start of operations on November 14, 1978, and commencement of trial on March 8, 1979. [Note 31] There was further testimony that the loss of business would reduce Ricky

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Smith's over-all rate of profit, and that such a reduction would likely have a negative impact upon the dealership's ability to obtain operating capital and floor plan financing, and its ability to comply with other obligations.

The defendants point to evidence that Ricky Smith's actual sales of Subarus between November, 1978, and March, 1979, indicated projected total sales of ninety-seven more units than the total sold in 1978. They contend that the working hypotheses relied upon by the plaintiff's experts are refuted by the sales figures for fiscal 1979, and that Masabny's appointment, in fact, increased Ricky Smith's sales. As a corollary, the defendants suggest that any sales which the plaintiff might lose were due not to competition by Masabny but to the plaintiff's general lack of industriousness.

The arguments fail to take into account two simple propositions, both sustainable on the evidence: that had Masabny not been appointed, the plaintiff probably would have sold more units than it had in fact sold in the relevant four-month period, and that those additional sales would have comprised most or all of the units sold by Masabny. Common sense suggests that the placement of a competing automobile dealership within the market area of an existing dealer should normally have some direct negative economic impact on the existing dealer in terms of lost sales and diminished profits. There was also evidence of Ricky Smith's inventories, "travel rate" (see note 9, supra) in 1978 and 1979, and SNE's vehicle allocation policies during the same periods, which tended to corroborate the plaintiff's contention that it had, and would, suffer financial harm as a result of Masabny's appointment. On evidence which is to a large degree contradictory, we cannot say that the judge's finding that injury had in fact occurred is clearly wrong.

We turn then to the quantification factor. The $638 sum per motor vehicle chosen by the trial judge as the measure of damages represented the total of the plaintiff's average net profit on the sale of each new Subaru ($403), and the average

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net profit on the sale of the motor vehicle traded by the new vehicle's purchaser ($235). This figure was based upon testimony of the plaintiff's president, the dealership's accountant, and experts from Arthur D. Little, Inc., who had acted in the past as consultants to the automobile industry. The oral testimony of these witnesses was supported by the dealership's income and expense statements and documentary exhibits reflecting its actual sales performance during relevant periods. Somewhat oversimplified, the determination of net profits was reached by calculations which: (i) considered the dealership's new and used car departments and its parts and service department as a single economic entity; [Note 32] (ii) used the dealership's 1978 sales figures as the base year for considering net profits; (iii) allocated 32.5 percent of profit and expense to the Subaru portion of the dealership; [Note 33] (iv) determined the gross sales profit on the sale of new Subaru vehicles and the sale of the used motor vehicle usually received in trade; [Note 34] (v) deducted from that profit variable selling expenses such as salesmen's commissions, vehicle delivery expenses, the cost of policy work on vehicles and legal costs; and (vi) made no further deduction for fixed overhead on the theory that overhead would not have changed if the vehicles sold by Masabny had been sold by the plaintiff. [Note 35]

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The trial judge's assessment of $638 per car for lost net profits constitutes implicit acceptance of the foregoing damages analysis and agreement with Ricky Smith's contention that its fixed expenses would not have increased had the dealership sold additional vehicles.

We first state some general principles on damages. Recovery of profits lost to a plaintiff is, of course, a recognized recovery in business tort cases. The prevailing rule is that damages for such profits must be reduced by any direct expenses that would have been incurred in making the lost sales, but fixed overhead expenses need not be deducted unless they were, or would have been, changed by the receipt of the lost business. See Roblin Hope Indus., Inc. v. J.A. Sullivan Corp. (No. 2), 11 Mass. App. Ct. 76, 78-80 (1980) (collecting and discussing the authorities in the context of a labor and materials subcontract on a public project). The reasons behind the rule are analyzed in Vitex Mfg. Corp. v. Caribtex Corp., 377 F.2d 795, 797-799 (3d Cir. 1967), and Buono Sales, Inc. v. Chrysler Motors Corp., 449 F.2d 715, 719-720 (3d Cir. 1971). See also Dunn, Recovery of Damages for Lost Profits Sections 6.1 through 6.9 (2d ed. 1981). By these standards the plaintiff was entitled to recoup damages in the form of net profits which would put it "in as good a position as if" it had not been wrongfully deprived by the defendants of the opportunity to sell more vehicles in its relevant market area. See John Hetherington & Sons v. William Firth Co., 210 Mass. at 21.

The plaintiff was not required to prove its lost profits with mathematical precision. Under our cases, an element of uncertainty is permitted in calculating damages and an award of damages can stand on less than substantial evidence. This is particularly the case in business torts, where the critical focus is on the wrongfulness of the defendant's conduct. See Chief Justice Rugg's opinion in Randall v. Peerless Motor Car Co., 212 Mass. 352 (1912). See also BBF, Inc. v. Germanium Power Devices Corp., 13 Mass. App. Ct. 166, 177 (1982), and cases cited. See also, Agoos Leather Cos. v. American & Foreign Ins. Co., 342 Mass. 603,

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607-610 (1961); Curtiss-Wright Corp. v. Edel-Brown Tool & Die Co., 381 Mass. 1, 9-10 (1980). The plaintiff furnished sufficient information concerning its sales and earnings records to permit accurate computation of damages. That conclusion is not undermined by the fact that its projections were based in large part upon 1978 income and expense records. See and compare Galvin v. Nutting-Pillman Amusement Co., 284 Mass. 314, 315 (1933); Food Specialties, Inc. v. John C. Dowd, Inc., 339 Mass. 735, 747-748 (1959).

The defendants do not appear to quarrel with these principles, or with the plaintiff's deduction of "variable expenses" from gross profits. They contend, however, that the plaintiff purposely omitted a considerable amount of "semi-fixed" costs which normally would be used to reduce gross profits. [Note 36] They submit that these costs would have had to increase if the plaintiff were to sell eighty-four or more units in 1979. The defendants also maintain that an increase in sales would result in a corresponding increase in "fixed" costs (overhead) which should have been deducted. Citing Cecil Corley Motor Co. v. General Motors Corp., 380 F. Supp. 819, 853-858 (M.D. Tenn. 1974), the defendants urge that their damages analysis considered and made proper deductions for fixed and semi-fixed expenses based on the plaintiff's anticipated 1979 sales, and that the lower net profit figure per vehicle reached by their witnesses should have been accepted in place of the plaintiff's estimate.

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The defects in the proof found by the United States District Court judge in the Cecil Corley case are summarized on page 858 of that decision. [Note 37] This authority was brought to the judge's attention by the defendants' memorandum on damages. The judge implicitly found that Ricky Smith's proof was not flawed by the difficulties that beset the plaintiff in Cecil Corley. We have carefully compared this case with Cecil Corley and agree with the judge's implicit determination that that authority is inapposite.

The judge appears to have accepted Ricky Smith's net profits analysis presented by its president (at 387-396 of the record and in exhibits 18D, 40 and 47), as explained and corroborated by the testimony of the company's accountant, and the Arthur D. Little experts. At the same time, he rejected the defendants' evidence of damages, or accorded it little weight. The testimony on both sides was complicated and contradictory. The judge was entitled to consider that some of the assumptions made by SNE's witnesses to reduce damages were discredited in cross-examination, and that the same witnesses grudgingly accepted several of the plaintiff's assumptions as accurate. The judge's implicit finding that the opinion evidence of damages introduced by the plaintiff was the more intelligible and persuasive of the conflicting presentations is a finding well within a trial judge's

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field of competence. See Neal v. Jefferson, 212 Mass. 517, 518, 524 (1912); Nelson Theatre Co. v. Nelson, 216 Mass. 30, 35-36 (1913); Matsushita Elec. Corp. of America v. Sonus Corp., 362 Mass. 246, 263-265 (1972); and discussion on the role of experts in computing lost profits in Dunn, Recovery of Lost Profits, supra in Section 9.2.

We are troubled, however, by one aspect of Ricky Smith's proof. The plaintiff's president seems to have assumed (without directly so stating) that the dealership could sell considerably more Subarus without incurring additional "semi-fixed" expenses. [Note 38] Implicit here is the further assumption that the existing sales and clerical staff would not have to be increased and that other so called "semi-fixed" expenses would remain constant.

On the one hand, added sales of about seven to ten units a month could well be within the dealership's existing capabilities. On the other hand, the defendants argue with some force that the increase in projected sales is sizeable enough to cause a measurable increase in several categories of semi-fixed expenses. We think the point should be clarified below. The plaintiff is to present specific evidence on why these costs would not increase and require deduction along with the variable expenses. The defendants will have the opportunity to establish the contrary. The judge's findings on the issue will, of course, be entitled to a large measure of respect on any further review of the case.

(d) The trial judge implicitly rejected the plaintiff's claim for additional loss profits from the parts and service business generated by new car sales. He may have done so on the basis of testimony by the plaintiff's president which the judge could have construed as relating profits from the parts

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and service shop to the maintenance or reduction of fixed expenses. [Note 39] The plaintiff urges that net profits from parts and service are related to the whole damages picture and constitute measurable losses proximately flowing from SNE's violation of c. 93B, that these profits were not used to offset other expenses, and that the judge misinterpreted or misapplied the evidence on the issue. The defendants contend that profits from parts and service were in fact used to offset expected increases in fixed or semi-fixed costs, that to award them would lead to a double recovery, and, even assuming that the plaintiff would be entitled to some recovery for these items, that their amount was not accurately quantified.

We also cannot decide this question on the present record. The parties' dispute over profits for parts and service was lost in their more intense controversy over net profits from new and used car sales. The issue is logically related to, and may have some bearing on, the problem discussed above. We shall leave the issue for further consideration and amplification consistent with the directions set forth in 7 (c) above.

(e) We disagree with the judge's express ruling that Ricky Smith's damages should be limited to profits lost as a result of Masabny's sales in the so called "B" area, as opposed to those lost through sales made in the plaintiff's entire relevant market area. In so ruling, the judge may have focused on portions of testimony by the plaintiff's experts which

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used projections of sales in the "B" area as a factor in calculating damages. In our view, this testimony was not intended to confine the plaintiff's damages to the "B" area. The 1970 version of 93B (in Section 4[3][l]) prohibited the arbitrary appointment of a competing franchise in the relevant market area of an objecting dealer, and (in Section 12) permitted a dealer so injured to recover "damages as provided in sections nine and ten of . . . chapter ninety-three A." Neither provision purports to qualify the amount of recoverable damages by reference to the distribution or location of sales among the competing dealers' market areas. We think the statute's purpose of curbing unfair and coercive practices in the automotive industry (see the Tober decision, 376 Mass. at 319) can best be effectuated by following the settled principles that unfair competitors should not be allowed to profit by their wrongful conduct and that those injured by such wrongful conduct should recapture full compensation for the loss or injury they have suffered. See Jet Spray Cooler Inc. v. Crampton, 377 Mass. 159, 169-170 (1979). By so doing, violators of the statute will be deterred from engaging in conduct similar to SNE's in the future. We specifically reject the defendants' argument that this construction of the statute will have a "profound anticompetitive effect." As stated in the Tober decision (at 323) the statute will work "sometimes to protect established dealers from new competition . . . but as an incident in pursuit of an ultimately procompetitive goal."

(f) As mentioned above, Section 12 of the 1970 version of 93B allowed recovery of damages in accordance with Sections 9 and 10 of G. L. c. 93A, as then in effect. [Note 40] The plaintiff's complaint seeks multiple damages under Section 9 of G. L. c. 93A,

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but it has not argued its entitlement to such damages on appeal. [Note 41] In view of the completeness of the record and the parties' briefing of all the apparent damages issues, it appears that that particular claim has now been abandoned. [Note 42]

(g) If possible, final assessment of damages should await South Shore's cessation of operations in Pembroke. The necessary computations at that juncture can be simply made without resort to complicated predictions. [Note 43]

(h) On the issue of damages, we shall expect the judge, when his courtroom work is completed, to make findings of fact and rulings of law in a manner as thorough as the extensive findings and rulings made on the liability issues. His present memorandum indicates considerable industry and scholarship. Our task has been made easier as a result.

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We have dealt with the reported question and stated our views on the remedies issues. The case is remanded to the Superior Court for further proceedings not inconsistent with this opinion.

So ordered.