STATEMENT OF AMERICAN MOTORS Introduction American Motors Corporation ("AMC") submits this statement regarding the joint venture between General Motors Corporation ("GM") and Toyota Motor Corporation ("Toyota") announced on February 17, 1983, and tentatively approved by the Federal Trade Commission on December 23, 1983. AMC submits that the proposed joint venture will: As a result, the joint venture will limit the choices available to American consumers; increase the market power of GM, the industry's dominant factor; and undermine the position of GM's smaller competitors. This is particularly true with regard to GM's domestic competitors, such as Chrysler and AMC, whose sales are concentrated in the small car market. Moreover, unlike other joint ventures, this arrangement will not produce any of the procompetitive effects associated with research, product development, or entry of a new competitor into the market. Both parties to the venture are already market leaders and the joint venture product has already been developed and is ready for sale now. .. Federal Trade Commission Consideration The means by which the Federal Trade Commission ("Commission") reviewed and tentatively approved the joint venture were highly unsatisfactory. First, the Commission's investigation was conducted under a cover of secrecy, and the public was not afforded access to information upon which the Commission relied upon in approving the venture, much of which remains secret to this day. Second, the analysis the Commission employed in approving the joint venture is inconsistent with its stated guidelines. The Commission's Statement on Horizontal Mergers emphasizes that a host of market share and non-market share factors must be considered to determine whether a transaction reduces competition. Federal Trade Commission Statement on Horizontal Mergers, 42 Antitrust & Trade Reg. Rep. No. 1069 (Special Supp.) at S-12-S-14. The Statement does allow efficiency gains, if any, to be considered as a countervailing factor, but it strongly implies that such consideration is "limited to measurable operating efficiencies, such as production or plant economies of scale" and clearly states that "the party or parties raising this issue must provide the Commission with substantial evidence that the resulting cost savings could not have been obtained without the merger and clearly outweigh any increase in market power." Id. at S-14. The analysis the Commission employed in approving the joint venture bears little resemblance to the guidelines described above. On the contrary, after describing the venture, the Commission lists the purported procompetitive benefits that result from it all of which are conjec tural - and then emphasizes the importance of allowing GM to learn management skills from Toyota. None of the "efficiencies" cited by the Commission falls into the category of "measurable operating efficiencies, such as production or plant economies of scale." The Commission then treats the anticompetitive aspects of the venture as an afterthought, and concludes that those concerns are adequately addressed by a consent agreement which merely restates the agreement between the parties. Not only does the Commission's approach conflict with its own guidelines, but it is flatly inconsistent with Congressional intent and Supreme Court precedent, for the Supreme Court has stated that "[p]ossible economies cannot be used as a defense to illegality. Congress was aware that some mergers which lessen competition also result in economies but it struck the balance in favor of protecting FTC v. Proctor & Gamble Co., 386 U.S. 568, competition." 589 (1967) (citation omitted). See also United States v. Philadelphia National Bank, 374 U.S. 321, 371 (1963). Analysis of the GM/Toyota joint venture should properly focus on whether it will reduce competition between GM and Toyota and whether it will increase GM's dominance of the automobile industry. Accordingly, we next describe the competitive milieu in which the venture will operate and proceed to analyze its anticompetitive consequences. The Subcommittee is familiar with the details of the joint venture; those facts need not be repeated here. However, it is crucial to understand (1) the industry segment in which the joint venture will compete, (2) the competitive positions of GM and Toyota, and (3) the purpose of the joint venture to appreciate fully what its consequences will be. A. The Market The joint venture is intended to compete in the standard subcompact segment of the industry. This is the 36-253 0-84--23 largest segment of the passenger car market and accounted for sales of approximately 1,894,000 units in 1982 and 1,877,000 units in 1983. Standard subcompact cars are usually between 155 and 170 inches in overall length and have a base sticker price between $4,900 and $5,900. They are typically aimed at younger purchasers with lower incomes who do not require a family car and cannot afford more expensive models. Standard subcompact cars are often "first car purchases" for their buyers. As such, they are crucial in molding consumer attitudes towards a manufacturer and in developing consumer loyalties over the long term. For this reason, the ability to compete in the sale of larger cars which are often bought as replacements for smaller "first cars" depends in large part on success in this segment of the market. - Standard subcompact cars are also important in the overall marketing of automobiles because they serve as "price leaders" for the industry, i.e., they establish the lowest price at which a manufacturer is prepared to offer a model to the public. As such, they play a central role in establishing the manufacturer's reputation for baseline product quality and value among first-time car buyers, younger buyers, and buyers of second cars. Accordingly, the perceived quality and price of standard subcompact offerings largely determine the manufacturer's ability to attract |