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involved in that litigation. If it gives that appearance, it is bad, and the whole operation ought to be thrown out.

Ms. BAILEY. I have not been in the middle of the colloquy between Congressman Lent and Commissioner Pertschuk, so let me respond just briefly.

I think one has to read the Pillsbury doctrine and be quite cautious in the context of a congressional hearing if an adjudication is taking place.

However, there have been many other cases decided on this question and there are others that more nearly fit the circumstances of this hearing where we are in an investigational stage or a precomplaint stage and not in adjudication. So that I think the danger of the proceeding in which we are engaged now being tainted by anything that has happened here this morning is very, very remote indeed. And then I will answer the chairman's question: No, I don't feel that we have been in any way badgered in a way that would cause us—that would amount to, as the cases say, “unwarranted congressional pressure" or "improper outside influence."

Mr. FLORIO. We thank you for your presence today and your cooperation. Mr. LENT. Mr. Chairman, just one last question.

There was a 4 to 1 vote of the FTC Commission. I refer to my discussion with Commissioner Bailey earlier. I did have it wrong. I want to apologize. The 4 to 1 vote, as I now have been corrected to understand, was on whether or not the Commissioners ought to come here and appear in view of the admonitions in the Pillsbury decision.

Now, my understanding is, and correct me if I am wrong, that your vote on that occasion, even though you are here today and whatever, was not to appear. Is that correct?

Mr. Florio. Would the gentleman yield so I can perhaps just in rephrasing the question-because the correspondence and the vote that took place was not a rejection on the part of the Commission to come here. Rather, it was a suggestion that the hearing be deferred or that staff be permitted to take the place of the commissioners, and it was only last night that I received communication directly from the Commission that some of the members of the Commission did not see fit to come.

So that I will certainly defer to Ms. Bailey to amplify the significance of the 4 to 1 vote. But my clear recollection, as represented to me in correspondence was that that was not a 4-to-1 vote not to appear.

Ms. Bailey. That is correct. I had a separate statement to the Commission's response, to the Chairman's invitation to testify, and I said that I did not agree with much of the legal analysis which was contained in the letter which discusses at great length the Pillsbury doctrine, but that I did agree certainly that there had been instances in the past where Agency action had been invalidated due to improper outside influence and that therefore, even though I considered the possibilities to be remote, I would join in a recommendation that we wait until the final decision was over, and instead have the staff testify at this time.

If the Chairman wished to consider that—that was my vote.
Mr. FLORIO. A final observation. The gentleman from New York.

Mr. LENT. On this question, because it appears to have been raised by Commissioner Pertschuk and others of our members about coercion and badgering, under the Pillsbury case and subsequent cases, but if you look at page 964 of the 354 Federal Reporter 2d Series, which reports the Pillsbury decision, the court says specifically on that issue:

It may be argued that such officials as members of the Federal Trade Commission are sufficiently aware of the realities of governmental not to say political life as to be able to withstand such questioning as we have outlined here. However, this court is not so sophisticated that it can slough off such a procedural due processes claim merely because the officials involved should be able to discount what is said and to disregard the force of the intrusion into the adjudicatory process.

We conclude that we can preserve the right to the litigants in a case such as this without having any adverse effect upon the legitimate exercise of the investigative power of Congress.

What we do is to preserve the integrity of the judicial aspect of the administrative process.

Now, that is right out of the case we have been talking about. They make it abundantly clear that while coercion might be present in some cases, it is not a necessary ingredient to have the proceeding tainted and, as it was in Pillsbury, thrown out, where a procedure such as this congressional hearing takes place.

I thank the gentleman.

Mr. FLORIO. We wish to again express our appreciation, take note of the fact what is pending before the FTC is not the adjudicatory procedure and thank you very much for your participation.

[Testimony resumes on p. 151.)

[The combined statement of Messrs. Miller, Douglas, and Calvoni, follows:)







before the




FEBRUARY 8, 1984

Mr. Chairman and Members of the Subcommittee: in response to the Subcommittee's invitation, the Commission majority is submitting this prepared statement describing the procedures the Commission used in its investigation of the proposed joint venture between General Motors Corporation and Toyota Motor Corporation. Indeed, we welcome the opportunity to address in writing certain contentions that these procedures were unfair or inadequate.

Concerning the merits of the proposed joint venture or the proposed relief provisionally adopted by the Commission, we have nothing to say at this time beyond our public statement of December 22, 1983. As the Subcommittee is aware, the Commission will make its final determination whether to accept the consent agreement now out for public comment after it has fully reviewed all of the public comments that may be received. That public comment period is scheduled to expire on February 27, 1984. As indicated in correspondence with Chairman Dingell and Chairman Florio, we do not believe it appropriate to discuss the substantive merits of the joint venture before our analysis of those comments has been completed and our final decision has been made.

We deeply appreciate Chairman Florio's sensitivity to our concerns about appearing in person while the matter is still pending.

The Commission's investigation of the proposed joint venture between GM and Toyota was thorough and complete in every respect. The staff utilized every investigative tool and procedural safeguard at its disposal under provisions of the Federal Trade Commission Act and the Hart-Scott-Rodino Amendments to the Clayton Act in order to acquire all relevant information and data necessary to complete its investigation. All relevant areas of competitive concern were addressed in the course of the investigation and in reaching a recommendation on the matter. The staff memoranda to the Commission and the consultants reports on this matter, all 1,385 pages of which have been previously submitted to the Subcommittee, demonstrate the depth and thoroughness of the investigatory record compiled in this investigation. As the Subcommittee knows, expurgated public versions of those memoranda have been placed on the public record to permit commenters to have access to as much information about the proposed joint venture and the Commission's analysis as our governing statutes and rules permit.

As further testament to the exhaustive nature of the Commission's investigation, our records reflect that, as of January 31st of this year, over 20,000 hours of professional staff time -- not including time spent on the matter by Commissioners and their immediate staffs have been devoted to this investigation.

The most straightforward way to address concerns about the adequacy and fairness of the Commission's procedures may be simply to describe the investigation in detail. Highlighting the degree of interaction between the staff and the Commission, and between the many interested third parties and the staff and Commissioners, will demonstrate that allegations our procedures were inadequate or unfair are totally unfounded.

The investigation began shortly after the first press reports about talks of a possible joint venture between GM and Toyota appeared in the spring of 1982. At that time, as we subsequently learned, the companies had barely begun their negotiations. The Commission and the Department of Justice agreed, pursuant to our established liaison procedures, that the FTC would conduct the federal government's antitrust review of the proposed joint venture. A formal investigation was opened on September 13, 1982.

The investigative staff's first steps were to identify the possible issues presented, analyze the law that might be applicable, and update the information, data, and expertise accumulated in the industry-wide investigation of the automobile industry the Commission conducted several years ago (1976 to 1981). Staff of the Bureau of Competition also retained an expert consultant, Dr. John Kwoka of George Washington University, to assist in the matter. In addition, the Bureau of Economics retained Dr. Carl Shapiro of Princeton University as an expert economic consultant.

The attorneys and economists then obtained the views of the other American automobile manufacturers on the proposed joint venture. Chrysler Corporation was the first company visited. In November, 1982, six Commission attorneys and economists spent an entire day with senior Chrysler executives in Detroit to hear their views about the state of the industry and the effect of the proposed joint venture. The following day, this procedure was repeated with senior executives of Ford. Both Chrysler and Ford submitted documents to the Commission staff at those early meetings, and Ford's legal staff also submitted a detailed legal brief alleging that the proposed joint venture was illegal. Later in the investigation, the staff also had similar meetings in Detroit with senior executives of Volkswagen of America and in Washington with representatives of American Motors Corporation.

There was very little information available about the venture when the staff first met with Chrysler and Ford in the Fall of 1982. Nonetheless, when the venture was officially announced on February 17, 1983, the understanding of the venture's details these industry officials expressed to the staff proved to be essentially accurate. After the Memorandum of Understanding between GM and Toyota was finally signed, attorneys for GM and Toyota met with the commission's investigating staff on February 25, 1983, to give an initial briefing on the outlines of the joint venture and provide a copy of the Memorandum of Understanding :

On March 1, 1983, the staff briefed the Commissioners, providing a status report on the joint venture negotiations and an outline of the investigational plan. We would like to underscore the following point regarding staff meetings with the Commission. At no time during this initial meeting and briefing, to the best of our knowledge, nor at any other time, did the Commission or any Commissioner instruct the staff to reach any particular conclusion or make any particular recommendation. Neither, to our knowledge, did the Commission nor any Commissioner ever attempt to intimidate any member of the staff into reaching any particular result. The staff, of course, is frequently given directions by the Commission in the conduct of our law enforcement investigations. Further, Commissioners often ask questions of the staff concerning issues raised in specific matters, and the staff routinely furnishes investigative information to Commissioners upon request. This matter is notable, however, in that the Commission gave its staff but a single direction from the very outset: that the staff investigation must be thorough and fair, and must provide the maximum opportunity to all interested parties to provide their views and their information, consistent with the Commission's statutory procedures and obligations.

Requests for voluntary submission of documents were sent to GM and Toyota on March 28, 1983. On March 31, 1983, the Commission authorized the use of compulsory process, and the investigation was converted from an initial phase" investigation

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