we think we do, many feel should be factored into the calculations, and that what we are talking about, if the philosophy of the one gentleman at the FTC that I made reference to before is that it is deficient to rely upon structural analysis in the way that it has been relied upon in the past, and we are going to talk about managerial efficiency as being the predominant justification, that is a fairly dramatic change in the traditional ways that antitrust analysis has taken place.

What I am suggesting is that in this period of flux, when as you point out, the prevailing philosophy of the FTC is somewhat different than it has been in the past, whether it be resale price maintenance, deceptive advertising definitions, that maybe there is a need for the Congress to revisit some of those basic fundamental laws to make sure that the FTC is carrying out what the Congress really intended in the antitrust laws, to get out and update that so as to take into account changing circumstances?

Mr. TAUZIN. The chairman makes a good point.

Mr. PERTSCHUK. That may very well be so, Mr. Chairman.

Mr. TAUZIN. Commissioner, you in fact made that point yourself in the statement as a legitimate question-if the Congress wants to make the standards more specific, so that no administration, no matter how cavalier in its prosecutorial policies, could avoid challenging this particular joint venture, for example. We can make our laws so specific that you have no choice but to prosecute this joint venture or others like it.

Mr. PERTSCHUK. Although I think the Congressman knows how difficult it is to refine the antitrust laws. But it may very well be necessary.

Mr. TAUZIN. It is a legitimate point.

Mr. PERTSCHUK. Yes.

Mr. TAUZIN. In regards to that, the chairman has asked another question which I am not sure has been answered yet, and I would like you to get very specific in answering it for us. He has asked whether or not, this decision, this specific one regarding this particular joint venture, does this reflect the policy change in effect that we are prepared through this decision and others like it in this Nation to tolerate a greater concentration and industrial combination, in effect that indeed would call upon Congress to relook at when that is good policy, change or not.

Have we changed our policy?

Mr. PERTSCHUK. Yes.

Mr. TAUZIN. Do we want to, by this decision and others, tolerate greater concentrations and in fact, larger and larger industrial combinations?

Mr. PERTSCHUK. Whether you want to tolerate greater concentration is up to you to decide. But I believe that there is no question the policy has changed. Indeed, I believe that the custodians of antitrust policy have made it clear they are changing policies regardless of what Congress has intended.

Mr. TAUZIN. So that in fact by this decision, as pointed out by my colleague from Ohio, the board is indeed, the commission indeed made clear a very broad policy change in the country, if not emphasized it, regarding toleration, at least by the administration, of larger and larger concentrations. That does call upon perhaps this

Congress to look at whether that is indeed a good policy for the country?

Mr. PERTSCHUK. Yes.

Mr. TAUZIN. And I take it from your dissent from this agreement, this joint venture, and that of your fellow commissioners, that you think this is a bad policy for the country. Would you quickly tell me why?

Mr. PERTSCHUK. I think it will lead to reduced production, higher prices, coordination and the kinds of monopoly practices which we have been concerned about throughout the history of antistust enforcement.

I also think it will lead, because others will follow, to the export of jobs, because the other companies will be forced to essentially export the production of small cars abroad. I think that it will increase the overall trend to concentration and to a reduction of both domestic competitiveness in the United States and our competitiveness abroad.

There was a very interesting study done several years ago of the policy followed by European countries who felt that it was necessary in order to compete with the United States to designate national champions, to allow the countries in given industries to join together and concentrate and pick one company to go out and do combat abroad. The result was that domestic consumers were exploited by that domestic monopoly, and the company itself remained inefficient as a national competitor.

The Japanese have, I believe, nine vigorously competing automobile companies. That is one of the reasons why they are so good. Mr. TAUZIN. I suppose there is a counterveiling concern. That is, in some areas of economic life of a nation there is some operation which is so large and so expensive and so capital consuming that bigness is indeed very good if you are going to have efficient production. Do you recognize that, and do you still think that everyone, despite that in the automobile area that combinations of this size are damaging?

Mr. PERTSCHUK. Well, first of all efficiencies of scale, which you are talking about, are a very important part of the consideration of antitrust enforcement. They are important for industrial policy, they are recognized by competition policy. However, I don't think anyone has suggested that GM and Toyota have not achieved sufficient size to achieve all possible economies of scale. That is not an issue here. The companies are talking about other kinds of benefits than simple size. They are talking about learning secrets of production.

Mr. TAUZIN. Specifically, will GM likely learn anything from Toyota they cannot learn now?

Mr. PERTSCHUK. Very little in my judgment, very little.

Mr. TAUZIN. One last specific question regarding this particular hearing, this particular problem. Has the FTC been satisfied that it is receiving documents on a timely basis necessary for you to make a proper adjudication in this matter?

Ms. BAILEY. Yes.

Mr. TAUZIN. Are you satisfied?

Mr. PERTSCHUK. There were long negotiations. But of course the time rested on their side. We wouldn't approve it until they produced the documents, so I think that there is no complaint really. Mr. TAUZIN. Is the Commission properly empowered with the authority to get documents in a timely fashion?

Mr. PERTSCHUK. In the case of mergers and joint ventures, yes, because the burden rests on the company to satisfy the commission, yes sir.

Mr. TAUZIN. Thank you, Mr. Chairman.

Mr. FLORIO. The gentleman from New Mexico, Mr. Richardson. Mr. RICHARDSON. Thank you, Mr. Chairman.

In a letter I received from former Senator Culver, who represents Toyota, it is mentioned that the FTC's investigation, in its own words, was one of the most expensive, thorough antitrust reviews ever undertaken; the investigation was conducted by a score of attorneys and economists, the Bureau of Competition, the Bureau of Economics. The FTC deposed, interviewed, obtained documents, from every automobile company in the United States and reviewed testimony from auto industry experts.

Commissioner Bailey, I notice in your dissenting statement that you were surprised, the staff had not analyzed some possible alternatives on the pricing formula. Now, my question is twofold. Do you concur with the view of the FTC that this was a thorough investigation and if not, can you cite other examples of work the staff should have done, but did not?

I wonder how the process of the staffing works when you conduct an investigation. Is the decision based on a consensus among the commissioners, is it the chairman who makes the main decision? Ms. BAILEY. In general, as a result of reorganization plan No. 4, the administration of the agency is under the direction of the chairman on a day to day basis.

When the staff is in the process of an investigation of this kind, in this particular instance, given the nature of the matter, the staff came on more than one occasion to the commissioners to discuss what they were doing and seeking agreement for next steps. So as a matter of proceeding, and the way the staff conducted the investigation, I have absolutely no doubt or no quarrel with the way it was done.

My criticism-what I suggested about the transfer price formula was this: The staff had access to at least one alternative formula, which was provided by a consultant to the Chrysler Corp. That was part of our record, of our files. And by the way, I don't mean to suggest that I endorse that formula. My criticism was that in drawing up and negotiating the consent agreement between General Motors and Toyota which was then recommended to the commission, there was apparently no discussion of any alternate way to price the vehicle. And one of the problems that I see with the venture is the exchange of price information through the pricing formula. And there may have been-there was at least one-but there may be other alternative ways that it could be done that would be less anticompetitive.

Mr. RICHARDSON. And you do feel this was a critical question that should have been examined?

Ms. BAILEY. Oh, yes indeed, I do.

Mr. RICHARDSON. Now, based on what you say, are there other instances where staff work was not complete in your judgment?

Ms. BAILEY. No, I don't believe so. I don't believe so. The question of information exchange, and the point that I made in my statement earlier, my written statement, the problem of information change to me is a critical problem, but I do not believe, and one of the reasons that I don't think this venture should go forward is that I do not believe there is any way in the context of a consent agreement to prevent the kind of information exchange that will be damaging to the competitive health of the industry.

Mr. RICHARDSON. Mr. Pertschuk, would you concur with Ms. Bailey on the staff work?

Mr. PERTSCHUK. Yes.

Mr. RICHARDSON. It is your view that the staff work was complete, was thorough, that the investigation was exhaustive, was, as the release said, the most exhaustive in the history of antitrust review.

Mr. PERTSCHUK. Yes, it was complete. I think some of the economic opinions by some of the economic staff were slightly bizarre, but it was complete.

One of the things that was very important for us, and critical to my ability to address this, was the fact that the commission retained an economic consultant to the Bureau of Competition, John Coca, who is a leading automobile industrial organization economist. His analysis of the papers was extremely helpful and he concluded that the joint venture should be challenged. We were also aided by a memorandum from one of the senior competition attorneys who also dissented from the view of his colleagues.

Mr. RICHARDSON. Some say the GM/Toyota deal is going to cost America jobs. The joint venture, other say, will create jobs. When the FTC makes a decision on this type of venture, how heavily do you weigh the impact on the labor force such a venture might have?

Is a decision like this a priority decision when you make a judgment? If you have a scale of five and you have several determinants, where does this fit into your final opinion?

Mr. PERTSCHUK. Well, fortunately we didn't have to reach that decision because the evidence showed that the high likelihood that General Motors was prepared to go ahead with the joint venture with an alternative partner, and the job consequences would have been virtually the same.

There is a doctrine in the antitrust laws, just to answer your question, which applies if, in a merger case, there is a threat of a company closing down, and the workers losing jobs. That is a specific reason for overriding the antitrust concerns to allow a merger to go forward.

So in that case, it is the overriding concern.
Mr. RICHARDSON. Thank you, Mr. Chairman.
Mr. FLORIO. Thank you very much.

Let me raise one last point to Ms. Bailey. I thought I heard you make reference to the rulemaking process and sort of almost an analogy to what might be taking place-that is to say, the effect of the joint venture at hand may very well be a definition of practices

that are going to occur in the whole industry as a result of this joint venture.

I thought I heard you say something about being comparable to a rulemaking. Might it be, if we were starting all over, that a rulemaking process would be a more appropriate way of dealing with what is permissible in this type of thing?

Ms. BAILEY. I don't think I think that, Mr. Chairman. You are quite correct that I referred in my statement at the time the preliminary decision was made-because we are dealing here with the industry giants, it would be unthinkable, I should think, that the Commission would at some time in the future fail to sanction a similar kind of combination between smaller competitors.

So that, in that sense, a decision for these two members of the industry would signal the same kind of decision for other members of the industry.

So, in that sense, it is like rulemaking. But I think that I would not agree that rulemaking on this sort of subject is the appropriate way to deal with it. I think rather the kind of considerations I know the committee is undertaking, the questions about whether the law should be more specific, or whether it should be rethought, is probably a more appropriate forum.

I also said in my statement that I have made the decision that was for me to make. I believe that this joint venture cannot pass muster under the current antitrust laws, but I also said that whether it should nevertheless be permitted as a matter of industrial policy was simply a question that would have to be addressed in another forum.

So I think a reevaluation may be appropriate, and I think that is more appropriate than a rulemaking at the Commission.

Mr. FLORIO. Let me express the subcommittee's appreciation for your participation this morning. It has been extremely helpful.

Before dismissing you, I would just note in the memorandum that the members of the minority submitted, one of the key tests that they talk about in terms of the concern that the CRS had, it seems unlikely the questions asked here would cause problems, unless the questions were of a badgering nature-does anyone feel that they were badgered here this morning, and does anyone have any difficulties with the process that was followed here-and I want this for the record-that anything inappropriate was put forward to unduly influence your decisionmaking responsibilities? Mr. PERTSCHUK. No.

Mr. LENT. Mr. Chairman, I think we ought to read the rest of that sentence where they indicate that any statement by a commission which evidences bias or prejudgment, whether invited by a question or volunteered, may have repercussions under the Pillsbury doctrine.

Mr. FLORIO. I would ask for your response to the extended question.

Mr. LENT. Coercion is not a necessary ingredient. If you read the Pillsbury decision, they make that point. You are very strongwilled commissioners not subject to badgering or any other sort of coercion. They might walk out of here and their mind may be simon pure. Nevertheless, it violates the due process of the parties