this matter do not meet even that general description.

Staff of the Bureau of Economics conclude that the joint venture will increase industry output and is therefore procompetitive. Such a conclusion, I note, requires a rejection of GM's own estimates to the contrary. Nonetheless, I am not convinced that staff has proved this special efficiency, as distinct from private benefits to GM and Toyota. There is no doubt that GM could use a new small car in order to maintain or increase market share in the compact/ subcompact market, as well as to safeguard its large car sales by accrual of CAFE credits. However, it is highly doubtful that the GM/Toyota venture arrangement represents additional output that would not come into being without the joint venture. The best evidence on this point is GM's own predictions that the sales of the joint venture car will come largely at the expense of other GM and Toyota vehicles. The joint venture car is expected to divert sales especially from GM's Chevette and mid-size "J" car. (BE staff memo, VIII, 3-4; Kwoka memo, 51) Our economics staff finds "somewhat puzzling" that GM assumes no net increase in industry sales as a result of the joint venture, and deals with the puzzle by summarily rejecting GM's estimates and producing its own competitive supply and demand models. (BE staff memo, VIII, 5-14). I am troubled by this willingness to set aside a damaging admission, as well as by several of the assumptions underlying

17 The Corporate Average Fuel Economy ("CAFE") statute, part of the Energy Policy and Conservation Act of 1975, sets annually escalating efficiency standards for the average of each domestic car manufacturer's fleet. The law provides stiff fines for failure to meet the standard. CAFE essentially conditions the sale of a larger car on the sale of a small car. Firms need to lower their feet average and so continue selling the more profitable large cars.

the BE calculations. 16 Also, regardless of what minimal 19 output effects the joint venture may have, those same effects could be achieved in large part through alternatives. As Professor Kwoka demonstrates, absent the joint venture GM would very likely satisfy its small car needs by a variety of options, including domestic assembly of the "R" car now being produced by GM's Japanese affiliate Isuzu, and improving and retaining the Chevette. (Kwoka memo, 47-55A; Muris memo, 31). Similarly, though with less certainty, we can predict that Toyota would have to pursue U.S. manufacuturing options, absent the joint venture. (Toyota's two largest Japanese rivals, Honda and Nissan, have already taken that step.) Naturally these options are more expensive and presumably not as attractive to the companies, but from an overall industry viewpoint they are preferable to simply letting GM acquire 200,000 units of Toyota's production capacity for twelve years.

The second major 20 justification for the joint venture translates even less easily into an "efficiency" benefit. That is the claim that GM needs to have "hands-on" experience with Japanese management techniques in order to produce a cheaper car. No one denies that the Japanese have a significant cost advantage (approximately $2000) in the production of cars. However, it is not possible to isolate and quantify many of the sources of that advantage, other than differences between labor wages in the automotive industries of the U.S. and

"See critique in Koch memo, pp. 38-39, alternate calculations by Professor Kwoka at 31-35, 44-55.

1 Ironically. BE's favorite justification for the joint venture has been hamstrung by the only provision of the consent which changes the original obligations of the parties. The formerly open-ended production commitment has been capped at 200,000

cars.

10 GM has characterized the learning experience as the primary goal of the joint venture: BC staff is skeptical as to its value. (BC staff memo, II, 31-40. 48-52).

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Japan, which account for 40% of the cost advantage. (Kwoka memo, 11). GM concedes that Japanese advantage does not derive from superior products or manufacturing hardware. I must ask therefore, regardless of what value we assign to management skills, whether the fact that they differ justifies this sort of close cooperation between rivals. For example, if Ford had a 30% cost advantage over GM, attributable solely to some Ford management mystique, would the antitrust laws permit GM to learn Ford's special production techniques by jointly producing a Lincoln/Cadillac-type car? I think not

Conclusion

In summary, then, if 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? This is surely the question that potential joint venture partners will be asking themselves. In this decision, the Commission has swept another set of generally recognized antitrust law principles into the dustbin, using again the incorporeal economic rhetoric that now dominates Commission decision-making. In this case, the decision results in the blessing of a business proposal that is both breathtaking in its audacity and mindnumbing in its implications for future. joint ventures between leading U.S. firms and major foreign competitors that seek to lend a friendly helping hand.

Perhaps in uneasy recognition of the controversy this antitrust generosity would otherwise ignite, the majority has thrown Br'er Rabbit into the briar patch by penciling in a last minute consent order that the proposed joint venture partners have themselves said merely restates the main features of the private agreement already existing between them. This will fool no one who has even a passing familiarity with the real issues in this antitrust decision.

[FR Doc. 83-34507 Filed 12-27-83: 8:45 am) BILLING CODE 6750-01-M