ecute egregious civil disorder if it sits back until there is rioting in the streets. Further, a private suit, not the FTC's, stopped the Mobil-Marathon acquisition.

Let me turn now to some other policy considerations which I know lie at the heart of your committee's interest.

Perhaps the most difficult set of questions posed by this hearing concerns the relationship of the GM/Toyota joint venture to other national policy considerations, including employment, trade and economic growth and productivity.

It is fair to ask-is there something wrong with our antitrust laws? Are they too broad or too narrow in the factors which should be taken into account? Did the Government's policies toward the GM/Toyota joint venture go awry because there is a flaw in our antitrust laws?

My own view, after participating in antitrust decisions at the FTC since 1977, is that antitrust law, soundly applied, rarely, if ever, dictates a policy result that is at odds with other national goals.

True, antitrust rules are not broad enough to reach some economic and social problems caused by mergers and joint ventures which may need to be addressed by Government, but I do not believe our antitrust laws are plagued by blinders, forcing legal conclusions which are harmful to economic productivity and full employment.

In the case of the GM/Toyota joint venture, there are powerful arguments that such a venture which leads to GM selling subcompacts made largely in Japan, rather than building them here, is harmful to the long-run health of the American automobile industry as well as to domestic employment.

I agree with those arguments as a matter of broad economic policy. But it is not a failure of antitrust laws which may lead to that result in this case, if, in fact, that is the result, but a failure to enforce existing law. Our present antitrust framework, applied properly, would result in a challenge to the joint venture.

It is a legitimate question whether Congress wants to make antitrust standards more specific so that no administration, no matter how cavalier its prosecutorial policies, could avoid challenging this joint venture.

Similarly, it may be appropriate to enact legislation dealing with concentration in particular industries, such as the oil industry, where a hands-off administration policy-even for a limited period-may cause lasting damage, or where there may be special concerns about increases in concentration which standard antitrust rules may not reach.

In the typical case, however, the antitrust laws in existence, properly applied, will be sufficient to promote our national policy favoring competition. If competition appears to be threatened-as in the case of manufacturers ignoring the law against resale price maintenance—the problem is likely to lie with the prosecutors, not the clarity of the law.

In cases where the antitrust agencies take steps inconsistent with national trade or employment policies, the problem is not likely to be that antitrust laws are at cross-purposes with these

other policies, but that they are not enforced when enforcement would be consistent with these other policies and reinforce them.

On the other hand, I believe that no reasonable construction of current antitrust standards would lead to a challenge of a joint venture between GM and a small Japanese manufacturer which is not a significant factor in the American market.

The antitrust official would say that there is no real likelihood of harmful collusion because the Japanese firm is an insignificant player in the United States.

But the economic policymaker might complain that, like the GM/Toyota joint venture, much or most of production of the car would be abroad. It may well be that Congress should address this problem of exporting jobs, and the fact that our major domestic manufacturer prefers to raise a white flag rather than improve its own domestic operations.

But I would argue that the antitrust laws are not in any way compelling the exporting of jobs. They would only be failing to prohibit an arrangement because it did not raise antitrust concerns.

In the case of attempts by a competitor to acquire companies which verge on closing, antitrust law has evolved a failing company defense which insures that the acquisition, even if otherwise unlawful, will be allowed if it is the price for preventing the assets from becoming unproductive.

On the other hand, antitrust laws may not save a plant from closing in the case of a large conglomerate merger where the new managers do not feel the same commitment to a particular community.

Again, I would say the very real problem of a corporation's precipitously shutting down a plant which helps sustain a community, when with limited effort it can be vigorous and productive, is not a failing in antitrust law so much as the absence of any other governmental effort outside the realm of antitrust.

Even the much ballyhooed argument that antitrust law has prevented productive research joint ventures has merit only to the extent that business has not correctly understood the already very tolerant antitrust standards which apply in such cases.

Another issue which arises in applying antitrust standards is how to accommodate antitrust decisions with trade policies which limit imports. The most appropriate principle is that antitrust is neutral with regard to trade policy; that is, the antitrust agencies must consider whatever import restraints, as in the present case, may be in effect and should make realistic competitive analyses with the practical effect of these policies in mind.

In the case of the GM/Toyota joint venture, we can assume the import restraints now in effect will continue in some form, at least in the near future. Some within the Commission argued that one of the "benefits" of the joint venture was that it provides Toyota with a means of avoiding the voluntary restraint agreement.

This unacceptable argument amounts to an affirmative rejection of established trade policy by elevating conduct which evades the policy to an antitrust defense.

It is appropriate that we maintain a concrete set of policies and principles that we label "antitrust." Doing so provides guidance to

business and the legal community, and court decisions can take place within an established framework.

Congress, however, may quite properly choose to expand the issues to be addressed by government in evaluating business arrangements such as mergers and joint ventures.

For example, we have argued before that Congress should enact legislation dealing with conglomerate mergers on productivity grounds as well as on the grounds that undue concentrations of economic power are detrimental to our economic and political wellbeing.

There is also clearly a problem of wasting corporate resources in attempting to generate healthy quarterly balance sheets by concentrating on strategic acquisitions and in preserving management egos in battling hostile takeovers.

Finally, there is an unmistakable drain on productivity from major corporations using capital resources to buy companies that they are not particularly good at managing rather than investing to improve plant and equipment in their own industry.

Each of these issues deserves serious attention and probably legislative initiatives, but Congress should address them with the clear recognition that it is setting policy outside the traditional analytical framework of antitrust law, which concentrates on promoting competition within particular markets.

Antitrust has been given a bum rap. There is almost no evidence that enforcing the antitrust laws has been or would be inconsistent with a healthy economy, international competitiveness, and full employment, and there is plenty of evidence that shows vigorous competition is good for our economic health.

The current administration has given us the worst of both worlds, however. On the one hand, antitrust enforcement has dwindled, an "anything goes" climate has encouraged massive acquisitions, and traditional antitrust standards have been attacked by the antitrust enforcers themselves.

At the same time, this administration has done nothing to propose or encourage constructive approaches to the problems of business combinations which fall outside of traditional antitrust concerns.

I address this in my prepared testimony, questions relating to the disclosure of information by the Commission, and I submit the rest of my statement for the record.

[Testimony resumes on p. 58.]

[The statement of Mr. Pertschuk follows:]

TESTIMONY OF COMMISSIONER MICHAEL PERTSCHUK BEFORE SUBCOMMITTEE ON COMMERCE, TRANSPORTATION, AND TOURISM, HOUSE COMMITTEE ON ENERGY AND COMMERCE

HEARINGS ON GM/TOYOTA JOINT VENTURE

FEBRUARY 8, 1984

Mr. Chairman, I disagree with those critics who have charged that the Commission's decision to bless the GM/Toyota joint venture is impeached by improper process, staff intimidation or conflict of interest. To the best of my knowledge, the three member Commission majority proceeded entirely properly in reaching its decision.

But this decision is impeached. It is impeached by the bad law, bad economics, and bad policy which undergird it.

The Commission has also done the public a disservice by inviting public scrutiny and comment on this most crucial of decisions while simultaneously withholding from public scrutiny key information in staff analyses which lie at its foundation. It is for these reasons that these hearings are not only timely and proper but essential to the critical analysis and shaping of antitrust and related economic national policies.

Appropriateness of the Hearing

The Reagan appointees on the Commission, all of whom voted not to challenge the joint venture, take the position that this hearing threatens to violate legal prohibitions on Congressional interference with Commission decision-making. I disagree. The legal standard governing Congressional inquiries about Commission enforcement decisions when a matter is not in formal trial

proceedings is simply that the Commission must make its own

decision rather than be coerced into a particular decision by Congressional intimidation. 1/ In this case, Chairman Florio has expressly stated that he has no intention of coercing the

Commission. He simply wants the Commission to explain how it came to a particular decision. I can assure you that the Commissioners who appear today will decide this matter based upon the information available to us, not Congressional pressure. Consequently, there is no possibility of violating the applicable legal standard unless it is assumed the Commission and Congress will act improperly and in a way contrary to their expressed intent.

I know your committee is concerned that the Commission under this administration has drifted too far toward undue secrecy. True, it is sometimes uncomfortable to share with the public the dirty linen of our decision-making. We can point rhetorically to

the possibility of Congressional pressure, or competitive disadvantage to companies we have investigated, or the "chilling" of communications within the Commission. But the law, as it should, narrowly constricts what we cannot reveal, and gives us wide discretion to share what goes on inside the Commission with the outside world. In my view, this Commission has too frequently exercised its discretion to hide things from the public rather than explain what we do, for better or worse.

1/ See, SEC v. Wheeling-Pittsburg Steel, 648 F. 2d 118 (3d Cir. 1981).

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