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Briefly Section 7 of the Clayton Act, as amended, prohibits the

acquisition of stock or other capital assets in certain lines of commerce

where to do so would "substantially lessen competition, or tend to create

a monopoly."

Section 5 of the Federal Trade Commission Act prohibits

“unfair methods of competition...and unfair or deceptive acts or practices."

The provisions of the consent order issued by the FTC, and agreed to

by and between GM and Toyota, would limit the joint venture to a twelve

year period ending no later that December 31, 1997.

It would permit the

exchange of certain information necessary to produce the Sprinter-derived

vehicles.

The consent order would prohibit certain communications of information

concerning current or future prices of automobiles and components by either

automaker; current or future sales and production forcasts; and current

or future marketing plans for products.

The Decmeber 28, 1983 publication of a notice of the proposed consent

agreement and proposed complaint in the Federal Register was an action

taken by the Commission in accordance with its regulation dealing with

consent agreements, 16 C.F.R. Section 2.34, which requires that the

Commission publish the agreement and receive and consider public comments

or views concerning the order filed by interested persons.

Under that

regulation, the Commission may withdraw its acceptance of the agreement

and take other actions, or serve its complaint and decision in disposition

of the proceeding.

Thus, at present the consent agreement is open for public comment.

Final action on

the matter could result in a withdrawal of the consent

order and possible initiation of proceedings based upon antitrust viola

tions, or the matter could be concluded by the final adoption of the

consent order.

There were dissents from two Commissioners to the propos

consent

order.

Commissioner Pertschuk concluded that "...it is a fundamentally

misguided decision to sanction this type of cooperative arrangement

between the dominant manufacturer and the leading importer.

To justify

such risks to competition we should require a substantial showing of true

procompetitive benefits.

These are not present.

The cosmetic limitations

placed on this joint venture by the consent agreement represent an antitrust

2!

policy based on crossing fingers and looking the other way."

Commissioner Bailey also dissented,

concluding

...1f this joint venture

between the world's first and third largest automobile companies does not

violate the antitrust laws, what does the Commission think will?".

It is on the basis of this pending FTC proceeding, that questions arise

regarding the possible legal effect now, during the comment process on the

consent order, of congressional hearings relating to the matter.

THE PROPOSED CONGRESSIONAL HEARING

There have already been extensive written communications between Members

of Congress and various officials at the Federal Trade Commission regarding

possible congressional hearings concerning the G.M.-Toyota joint venture, the

pending proceeding concerning the joint venture at the FTC, and other related

matters.

2) Id., at 57, 254.

On June 14, 1983, in response to an April 29, 1983 request from FTC

Chairman Miller, the General Counsel of the FTC prepared a memorandum

outlining legal issues and various precedents related to possible

31 congressional hearings on the proposed G.M. -Toyota joint venture agreement.

The memorandum made this conclusion and recommendation:

Without a sense of the specific questions or
comments that might be presented in any future
hearings, we cannot offer very precise guidance
on how the Commission might respond to Congressional
concerns. We would recommend, however, that before
any hearings are conducted, efforts be made to apprise
committee staff of the potential problems suggested
by the case law on prejudgment and Congressional
influence and to work with them to aviod questions
and comments that might jeopardize future law enforce-
ment activity.41

On December 21, 1983, the day before the Commission provisionally

accepted the proposed consent agreement and before publication on

December 28, 1983 of the Federal Register notice for public comment,

Chairman James J. Florio of the House Subcommittee on Commerce, Transporta

tion and Tourism sent a letter to FTC Chairman Miller expressing concern

about the proposed G.M. - Toyota joint venture.

Ac knowledging that "[t]he

pending decision on the legal merits of this transaction is emphatically

one for the Commission alone to make," the letter raised issues of

prejudgment by Commission staff:

It has been sugg usted that there may have been prejudgment of the issues by some FTC staff and a failure by the FTC to accord the public, including

3/ See, Memorandum entitled "Possible Congressional Hearings on Q4/ Toyota,“ dated June 14, 1983 to FTC Chairman Mill from FTC General Counsel.

4/ Id., at 1.

competitors of the parties to the proposed venture,
a full and fair opportunity to present their views.5/

The letter also raised issues concerning the effect of the joint

venture on domestic employment and concluded as follows:

All of these threatened consequences simply
heighten the importance of the Commission using
the utmost caution in reaching its decision. It
may become necessary for the Subcommittee to address
1n hearings the procedural questions raised above
and for Congress to deal in legislation with the
potential consequences of the proposed venture.
I ask that you advise me of the measures you are
taking to ensure fairness in this proceeding. I
appreciate your cooperation in this matter.6/

On December 23, 1983 following tentative approval by the FTC of the

joint venture agreement, Chairman Florio sent another letter to FTC

Chairman Miller requesting copies of virtually all documents prepared by

FTC employees and consultants with the exception of communications between

commissioners and their iomediate staffs relating to the G.M. -Toyota venture.

This request apparently has served as a basis for the FTC to make available

may of the documents in its possession relating to the proceeding to the

Subcommittee.

On January 23, 1984, Chairman Florio issued a memorandum to Members

of the Subcommittee on Commerce, Transportation and Tourism announcing a

February 8, 1984 Subcommittee hearing on "Federal policy and the automobile

5/ Letter dated December 21, 1983 from Honorable James J. Florio to

FTC Chairman Miller. Hitachment #1

6/ Id.

industry in 11ght of the recent FTC decision on the proposed GM/Toyota joint

7/

That memorandum described the background and status of the FTC pro

venture.

ceeding making these observations:

When Congressional hearings are held in proximity
administrative action, due regard should be paid to
the appropriate roles of agencies and Congress. In the
past, such situations have occasionally given
rise to assertions that the independence of
agency decision making has been compromised by
unwarranted Congressional pressure. Particular
sensitivity might arise in certain kinds of
interrogation of agency decision makers when a
Congressional hearing is held during the pendence
of a quasi-judicial proceeding.

The decision currently pending at the FTC is a
decision whether, after public comment, to accept
the consent agreement as the final resolution
of this matter. Commission rules provide that
during the comment period the Commission will
receive and consider any comments or views concerning
the order that may be filed by any interested person."
16 C.F.R. Sec. 2. 34 (1983).

Nevertheless, even in the present circumstances,
Members of the Subcommittee will want to be sensitive
to the appropriate relationship between the Commission
and the Congress. Accordingly, you and your staff may
wish to review the legal precedents on this subtect,
some of which are cited and summarized in the a tached
law review article, "Judicial Limitation of Congressional
Influence on Administrative Agencies." 173 Northwestern
University Law Review 931 (1979))8/

On January 24, 1984, Chairman Florio sent a letter to FTC Chairman

Miller inviting him to testify at a hearing of the Subcommittee on

February 8, 1984, a date prior to the scheduled close of the comment

period, February 27, 1984:

The subject of this hearing will be the Federal Trade Commission and federal policy towards the automobile industry in light of the recent Commission decision on the proposed GM/ Toyota joint venture. Topics examined will include, among others, the following:

7! See, Memorandum entitled "Hearing on the Future of the U.S. Automobile Industry in Light of the Recent FTC Decision on the Proposed GM/ Toyota Joint Venture," dated January 23, 1984 to Members of the Subcommittee on

Commerce, Transportation and Tourism from Chairman Florio. +Huchmeat #d

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