proposed joint venture with Toyota will assist GM in main taining this position and thwart competitive efforts by other manufacturers. Conclusion GM has long been the dominant factor in the American automobile business, an industry in which there are only five domestic manufacturers. If deconcentration is ever to be achieved in this market, it will come about only if GM is prevented from entering agreements with other manufacturers that have the effect of weakening smaller competitors and preventing them from establishing a market position from which they can challenge GM. It is these companies alone that offer the prospect of significant new competition in the automobile business. GM should not be permitted to extinguish that prospect by entering into anticompetitive agreements, such as the proposed joint venture with Toyota, that reinforce its dominant market position. February 8, 1983 AMERICAN MOTORS CORPORATION February 27, 1984 FTC/S Office of the Secretary Washington, D.C. 20580 Comment of Ford Motor Company With Respect to The proper role of the Federal Trade Commission (FTC) is to enforce the law. It is not to apply 'contemporary economic theory' to the extent it may be distinct from [legal] precedent, and to fail to apply the standard framework of analysis. 1/ And it is not to target certain competitors for favored treatment to facilitate their domination of the market. Yet the FTC majority has discarded the law and ignored competitive reality in an inexplicable solicitude for General Motors. If GM faces a dilemma in the small car market, 2/ it is one of its own making. If GM has no modern, competitive small cars of its own, it is because it consciously chose not to develop them, preferring to 1/ 2/ United States v American Cyanamid Co., 719 F.2d 558 at 567 (2d Cir. 1983). See PTC documents p. 000019 (Muris Memorandum). devote its resources to the large car market which it already monopolizes. If it cannot import all the Japanese cars it wants, it is because of the continuation of import restraints which it successfully assisted in urging in the first place. It is not incumbent upon the FTC to cure these self-inflicted wounds in order to assure GM's maintenance and expansion of its dominant market position. The proposed joint venture benefits no one but GM and Toyota. It benefits GM by providing it with a small car to sell, while blunting serious competition from Toyota, without the investment necessary to compete independently. It benefits Toyota by limiting competition from GM and by providing a politically expedient means to avoid producing cars in the United States on its own. The American public does not benefit, but is injured. The joint venture transfers much of GM's small car sourcing to Japan, keeps Toyota from coming to the U.S., and results in the dominant competitor from each country selling the same basic high volume small car instead of competing independently. The joint venture injures Ford and other competitors, who have invested billions in the United States to compete independently in the small car market, by facilitating GM's expansion of its monopoly position. By the time the joint venture has ended, GM's Chairman predicts that GM will sell over 60 percent of the cars in the U.S. "mostly because I don't see anybody that is going to invest the money to produce the larger-size cars that .3/ That result, if it materializes, will we're doing. come in large part from GM's unlawful combination with Success or failure in the automobile business Toyota. should be based upon free and independent competition in the market place, not upon monopolistic or anticompetitive horizontal combinations, or upon changing the legal rules in the middle of the game. II. THE JOINT VENTURE IS INHERENTLY ANTICOMPETITIVE The essence of the joint venture is that GM and Toyota, each of which can compete on its own, have agreed instead that GM will market high volumes of Toyota's basic car model for the next twelve years; two or three normal model cycles.1/ As models change, Toyota will assist GM in maintaining the similarity between the two companies' versions.5/ GM expects its version of the car, 3/ Ward's Auto World, November, 1983, p. 30. 4/ 5/ See 48 Fed. Reg. p. 57256; FTC documents p. 000280. Historically, the Corolla has been Toyota's principal model. GM will sell 250,000 joint venture Corollas per year -- more than any 1983 model Chevrolet or import model. In addition, GM can potentially obtain unlimited additional Corollas from Toyota assembly plants in Japan. See 48 Ped. Reg. at 57249. See 48 Fed. Reg. p. 57248. essentially the existing Toyota Corolla, to replace sales of its current Chevette and "J" cars. 6/ The joint venture's adverse effect on competition will be substantial. First, the parties have immense The relevant market delineated by the FTC market power. 10 the sale of small cars (subcompact, compact and intermediate) in the United States and Canada already highly concentrated. - is General Motors so dominates this market that its 40 percent share exceeds those of the number 2, 3 and 4 companies combined.8/ Toyota, with an 8 percent share, is the largest importer and fourth largest seller. The FTC staff found that GM's prices "virtually dictate those of other U.S. companies and that just as clearly, Toyota's prices determine those of Japanese importers.9/ 6/ 48 Fed. Reg. 57257. See also, FTC documents p. 000269. 1/ The anticompetitive effects of the joint venture are discussed at length in earlier submissions by Ford to the FTC, which we are including as attachments to this comment. See, e.g. Attachment A (Preliminary Analysis by Professor Joseph Brodley, March 3, 1983) pp. 1-12; Attachment B (Ford's Supplemental Legal Analysis, September 19, 1983) pp. 1-25; Attachment D (Ford's Responses to Questions by Commissioner Calvani, December 19, 1983) pp. 1-5, 7-9. 8/ Based on the FTC's figures. See FTC documents p. 000998. 9/ FTC documents pp. 000198, 200. (Bureau of |