substitute for the Chevette in the short run, and that the joint venture will hasten the termination of the Chevette line. Far from a net addition to small cars in the U.S., the joint venture is more likely to reduce small car sales in the long run by driving up prices. Consequently, even if we concede all of GM's arguments concerning the need to learn Japanese technology, the justification for the serious anticompetitive problems in the joint venture turn on the greater benefits of a venture with Toyota rather than a smaller Japanese firm. I find it exceedingly unlikely that the marginal gain of collaborating with Toyota rather than anyone else could provide this justification. Our economists argue that one major "procompetitive" benefit of the joint venture is that it allows Toyota to import cars and avoid the Voluntary Restraint Agreement import quota. One can object to the VRA, one can argue it is harmful to competition, even harmful to the auto industry in the long run. But to argue that evading it can be counted on the "procompetitive" side of the ledger is an unacceptable exercise in second-guessing other national policies. The fact is that we are likely to experience some form of import restraints for some time because of the substantial Japanese cost advantage. The idea behind the restraints is to allow our domestic industry time to develop competitive cars, the very development the joint venture allows GM to avoid by selling a car made primarily in Japan. We would be turning the policy behind the VRA totally on its head by justifying the joint venture as a way to get around it. Conclusion The American automobile industry, until the 1970's, was a complacent oligopoly. Product innovation was too sluggish, prices were too high, promotional expenses became bloated, and management and labor inefficiencies became entrenched. The development that undercut this oligopoly and started us on the painful, but ultimately beneficial, road toward competitiveness has been the imports of foreign, particularly Japanese, cars. The Voluntary Restraint Agreement began a reversal of this trend by creating a wall against further Japanese imports. This trade barrier has inevitably been a step back toward the historic American oligopoly and one that increases the power of GM to set prices for the industry. Under these circumstances, it is a fundamentally misguided decision to sanction this type of cooperative arrangement between the dominant domestic 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 policy based on crossing fingers and looking the other way. Project." In October 1981, GM embarked on a spirited "Beat Toyota In 1982 the project was placed on hold. As of today, GM has a green light to embark on this "Join Toyota" project. That may be just fine for GM and Toyota, but it's bad news for the consumer. DISSENTING STATEMENT OF COMMISSIONER PATRICIA P. BAILEY April 11, 1984 The Commission received a great number of public comments on this matter, but I agree that they produced no significant new information or analysis. That being so, I see no reason to modify my original conclusion that this combination of two powerful and direct competitors cannot be sanctioned under the antitrust laws. The management "efficiencies" which supposedly justify it are not the sort of cost savings which merit the discretionary consideration of antitrust enforcers, and the value ascribed to them is more a product of friendly guesswork than verifiable calculation. The consent order does not prevent information exchanges on numerous competitively sensitive subjects, and it embodies a formula for establishing the wholesale price for the joint venture car which is very likely to reduce retail price competition between GM and Toyota. Thus, the concerns which led me to dissent from the initial acceptance of the consent agreement in this matter remain valid, and I attach here a copy of the statement I issued at that time. DISSENTING STATEMENT OF COMMISSIONER PATRICIA P. BAILEY DECEMBER 22, 1983 The Commission majority has today voted to accept a consent agreement with the General Motors and Toyota Motor Corporation which does not cure the antitrust infirmities of their proposed joint venture. I have, therefore, dissented from that decision. I am acutely aware of the arguments favoring this joint venture. Certainly any knowledgeable observer would agree that American car companies, facing stiff foreign competition in the United States market, need to improve production techniques in order to strengthen their competitive positions into the future. The decision for this Commission, however, is whether a joint venture such as that proposed by these companies is sanctioned by the nation's antitrust laws. I do not believe by any stretch of the imagination that it is. Whether it should be is not for me That argument should be posed in another forum. to say. In any event, to claim that the consent agreement accepted today, which allows a partial combination of the first and third largest car companies in the world, solves any perceived antitrus problems with the venture, is simply, in my view, not the case. Indeed, both companies have acknowledged publicly that the consent merely restates the essential conditions of their origina |