Second, the joint venture is massive in size. If it were an independent firm, rather than merely a plant sup plying GM, it would be the seventh largest in the market, with a 3.5 percent share. 10/ Third, the venture is As the FTC staff virtually permanent in duration. conceded, "[b]luntly put, 12 years is a very long time in .11/ the automobile industry. Fourth, and of particular significance to Ford, the joint venture will facilitate GM's monopolization of the overall and large car markets. 12/ GM will obtain small cars to sell without incurring the cost or risk of competing independently, as Ford and others have done. This will permit GM to devote its total resources to the large car market which it already monopolizes, with the assistance of federal fuel economy laws which effectively require a company to sell small cars in order to sell large ones. If selling Corollas increases GM's small car sales at the expense of its competitors, GM may be able to automatically increase its large car sales while 10/ 11/ Based on the 7,095,824 unit market defined by the FTC documents p. 000253. 12/ See Attachment B, pp. 12-13, 19-25; Attachment C (A 36-253 0-84-24 restricting those of its competitors.13/ GM's Chairman Small wonder literally clapped his hands in glee," exulting: The only modern large-size cars will be III. THE FTC HAS DISREGARDED THE LAW IN ORDER TO Joint ventures are appropriately analyzed under Sections 1 and 2 of the Sherman Act as well as Section 7 of the Clayton Act, 15/ and this joint venture violates each of them. 16/ However, the majority has totally dis regarded the Sherman Act, even though the staff pointed out that most joint ventures are evaluated under Section 117/ and the Commission's "small car market definition implicitly recognizes the larger car market which GM is monopolizing in violation of Section 2. Having chosen to rely on Section 7 of the Clayton Act, and faced with a clear violation of its legal standards, the majority has offered two fanciful rationalizations for disregarding those standards. First, although 13/ GM reportedly has made application to NHTSA to count the entire joint venture production in its domestic fleet. See Detroit News, Feb. 5, 1984, Sec. D, P. 1. 14/ 15/ Automotive Industries, September, 1983, pp. 9-11. See Citizen Publishing Co. v United States, 394 U.S. joint ventures are analogous to partial mergers under Section 7,18/ the majority claims that this one is not because the remaining areas of competition between GM and Toyota will dwarf their collaborative efforts.19/ If this factual conclusion has any validity, it is only because of the enormity of the two parties compared to even a transaction of this magnitude. In effect, the majority's argument is that if the identical transaction were entered into by two smaller companies it would be subject to a different, more stringent legal standard. This is an unwarranted departure from legal standards and logic. Second, the majority declined to apply any measure the threshold inquiry under of concentration analysis - on the pretext that the structure and the small size of the venture does [sic] not appear to pose any significant structural problems." 20/ The "structure" of the transaction is an agreement by two dominant competitors in a highly concentrated market that one will market the other's car for the next 12 years. The size of the transaction involves more units per year than the U.S. sales of any non-domestic company except Toyota, Nissan and Bonda:21/ 18 19/ See, e.g., United States v. Penn-Olin Chemical Majority Statement p. 3. Under the Justice Department's current guidelines, GM is a dominant firm whose acquisition of a firm having 1 percent of more of the market should be challenged. 22/ Since in effect GM is acquiring a 250,000 unit car line from Toyota, the joint venture should be challenged even if Toyota's large market share is disregarded entirely. Even if one assumes (incorrectly) that the joint venture will merely increase the size of the small car market by 250,000 units, since they will all be marketed by the dominant seller, 23/ The concentration will increase substantially. majority consciously avoided focusing on this ominous that doing so would provide the wrong signal regarding 24/ the JV's competitive impact. The "signal' sent by the majority's analysis is that it weighs benefit to General Motors more heavily than injury to competition. The majority has abandoned the legal standards of Section 7 for an unorthodox approach, 22/ U.S. Department of Justice Merger Guidelines, June 14, 1982, para. III A.2. See Appendix D pp. 2-3. 23/ 24/ Based on the figures used by the FTC Staff, adding 250,000 units to the small car market and to GM's sales would increase GM's market share over two points, from 39.69% to 41.74%, and would increase the four-firm concentration ratio from 75.29% to 76.13%. FTC documents p. 000011 (Muris memorandum). provided by some unidentified source, 25/ of regarding the transaction as procompetitive if it benefits the IV. THE JOINT VENTURE'S ALLEGEDLY PROCOMPETITIVE A. The Joint Venture Will Not Increase the Small The first allegedly procompetitive benefit which the majority attributes to the joint venture is that it would likely increase the total number of small cars available in America. 27/ This cannot mean that the joint venture will increase the number of different types of small cars available to the public, for the majority admits that the cars to be produced will merely be versions of the existing Corolla. The majority cannot mean that the joint venture will increase the amount of small car production capacity available to serve the U.S. market, for enormous excess capacity already exists. Reportedly, neither Nissan nor Honda is using its full U.S. production capacity. Ford even has excess capacity to build Escorts; the best selling small car in the U.S. and the world.28/ GM 25/ See censored reference at PTC documents p. 000011. |