General Motors Corp

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IN THE MATTER OF GENERAL MOTORS CORPORATION, AND GENERAL .MOTORS SALES CORPORATION COM(>LAINT. FINDINGS, .AND MODIFIED .ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 Oli' AN ACT OF CONGRESS APPRO\'ED SEPT, 26, 1914, AND OF SEC. 3 OF AN ACT OF CONGRESS APPROVED OCT. 1:5, 1914 Docket 8152. Complaint, June 15, 1931-Decision, Nov. 12, 1941 Where a corporate automobile manufacturer, products of which, including parts and accessories made through several subsidaries, constituted a substantial portion of all those made and sold in the United States, and which operated through five motorcar divisions, named to correspond with the ears made by it; and a ~ales cnrporatlon to and through which it competitively sold such autnmobile parts, etc., and which (1) supervised its dealers through a large field organization, (2) entered into agreements or "franchises" with th~m, under which dealer undertook not to sell or usc second-band parts or any not made or authorized by manufacturer, seller had right to cheek dealer's stock of parts, and dealer, if it thought such stock insufficient, was obligated to order immediately such parts as it might recommend; and (3) construed dealer's obligation to stock only "genuine parts" as covering, in addition to items for repair and replace· ment, its various accessories also-- In carrying on not as incident to their sale of automobiles, but as substantial portion of their entire busine~s. to the promotion of wltich they directed numerous activitit>s, ~;:ale of "parts" llnd acce>:sorif's, whidt included a great variety of items that·etoforc sold in competition with the iudt>pendent jobber and identical ther·ewitb, such as hall bearings, battery cables, brake linings, 110d numt>t'OUl'l others; embraced many made by illllC[)(>ndent manufacturer:! for aforesaid manufacturer, differing from said manufacturet•s' similar itetns, sold through such jobbers, only in their sale, by said sales corpor·atiun, under' its own ldentifiication, as "genuine"; aml included many others which were made by many reputable manufacturers and were of like quality and design; or which, not nece~sary to the car's mechanical operation, bad no benring upon its performance and good-will- (a) Adopted a program of acts and practices which were designed to and did intimidate and coerre its dealers and compelled them to purchase parts anrl accpssorles solely from said selling corporation, and prohibited pur· chases from outside sources except in cases of emergency when the "gen· uine" part or accessory was not available in the warehouse of rnanufac· turer in question; ami as a vart of said various acts and practices-- (1) 1\Iade Its imleterminate denier franchises a means of coercion and in· timldation through its practice of renewing or canceling such franchises at the annual mPetlngs called by the zone managers for their respective dl::~tricts, at which time eucll dealer, following personal Interviews with representatives of the potts and accessories and other d(•[Jartments, and final interview with the zone manager, as conclitiou to renewal, was required to sel'ure the ap}lroval of eath ttnd ugrPe with tmi<.l manager on hi~ prospective requirements;

GENERAL MOTORS CORP. ET AL. 59 Syllabus (2) Coerced, through threat of cancelation· implicit in aforesaid practice, dealers into the purchase of parts and accessories beyond their requirements, and, under its plan designed to limit dealer's purcha~es of parts ancl accessories to those sold by it, delivered, .in many cn:>es, nutomohilt's equipped with various nccessoriefl which he had. not ordered; shipped to him, with or without cars and without prior order therefor, accessot·ies; and, in many cases, made shipments of parts and accessories, trcatir,Jg as orders therefor, dealer's required projection of futm·e needs; {3). Made use of its monthly .parts order plan-under which dealer's last monthly order was compared with the present one-to intimidate, cor.ree and compel d~alers to buy parts and accessories ; {4) lllade use of Its monthly inspection of the dealers' stocks and establishments to eoel'(~e them into purchasing its parts and accessories only, through threatening, directly and by implication, upon discovery of parts and ac- Cessories othf'r than those supplied by it, that unless practice was discontinued, recalcitrants' contracts woultl be c:mcE'lPd; furthering such thrPat!J through arrangements for interviews with respectiye zone managers, in whom, as was known, rested vowt>r to recommend cancelation; and (5) In some cases delayed new cur shipments to dealers who had refused to handle only parts and accessories. sold by it, and ln certain cases canceled d~lers' contracts after contrm·ersy ·over use of parts and accessories, though, ostensibly, upon other grounds;

With the result that independent jobbers who, as competitors, sold the products of independent manufacturers, including numerous items identical with those sold by two corporations in question, and embracing many sold also by said corporations under their own identification as "genuine" replacement parts, and ·many others not necessary to the car's mechanical operation and having no bl'ating upon its performance or good-will, were thereafter unable to sell in ~>ubstantial quantities to dealers such parts and accessories as heaters, radios, antifreeze solutions, spark plugs, and many others·; dealers of said sales corpomtlon were intimidated, coerced and compelled to purchase accessories and supplies only from it; substantial trade was diverted to corporations in question from their competitors engag(>(] In the manufacture and interstate sale and distribution of automobile accessories and supplies; competing n.anufactnrers were deprived of a market for their products; and there was a tendency unduly to binder competition and create a monortuly in said first named corporation in automobile accessories and supplies :

neza, That such 11cts and plllctices, under the circumstances set forth, were all to the prejudice and injury of the public and said corporations' competitors, and constituted unfair methods of competition in violation of section 5 of tlJe l<'etleral Trarle Commission Act; and Where aforesaid corporatlons- (b) Entered into agreements or "franchises" with dealers handling their respec• tive Jines of automobiles, parts and accessories and sold t11eir parts o.n the condition, agr£>eowut or uuclerstnnding that the pnrehnser would not sell or use parts other than those acquired from tlwm, without limitation to parts' necessity to car's mechanical operation ancl lack of availability, In like quality and design, from other sources; With the t!'ndeney to create a monopoly in replacement parts used on said manufacturer's cars; of removing as customers of independent manufuc· 60 FEDERAL TRADE COMMIS:SION' DE.CI.S'IONS Complaint 34F.T.C.

turers and jobbers some 14,000 dealers in cars in question, and all associate dealers and selected independent garages who, under plan pushed by them. had agreed to purchase only parts supplieu by dealers of said cot·porations. estimated for one division alone as amounting to about 15,000 In 1936: Held, That such acts ann practices of ~aid corporations in selling replacement parts on the condition, agr~ment or ·under!!tanding that purchaser should not use or deal ln. those of a competitor had the effect of substantially lessening competition, tended to create a monopoly in ;>roducts in question and constituted a violation of section 3 of the Clayton Att, as amended. Before Mr. John L. Hornor and Mr. lV. W. Sheppard, trial examiners.

Mr. Everett F. Haycraft and Mr. Merle P. Lyon for the Commission.

},fr. Edward B. Wallace, Mr. Albert },[, Levert and Mr. John Thomas Smith, of New York City, for respondents. Complaint Oount 1 Pursuant to the provisions of an act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that General Motors Corporation and General :Motors Sales Corporation, hereinafter referred to as respondents, have. been and now are using unfair methods of competition in commerce as "commerce" is defined in said act, and it appearing 1p said Commission that a proceeding by it in respect thereof would be to the public interest, hereby issues its com~ plaint, stating its charges in that respect as follows: PARA.GRAPH 1. Respondent, General Motors Corporation, is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware with its general office and place of business in the city of Detroit, State of Michigan. It is now, and for more than three years last past has been, engaged in the manufacture of automobiles, automobile accessories, automobile parts, and automobile supplies, and in the sale thereof, by and through subsidiaries to automobile retail dealers located throughout the several States of the United States, the territories thereof, and in the District of Co· lumbia, causing said products when sold to be transported from the places of manufacture in various States of the United States to the pur· ·chasers thereof located in States other than the place of manufacture thereof, and there is now and has been for more than three years last past, a constant current of trade and commerce in said products between and among the various Stutes of the United States, the territories thereof, and in the District of Columbia. GENERAL MOTORS CORP. ET AL. 61 58 . Complaint The said respondent, General 1\fotors Corporation, in the sale of automobiles and automobile parts, through its said subsidiaries to automobile retail dealers, as aforesaid, has entered into and now has contracts or franchises with said automobile dealers for the resale Qf said prouucts, which said franchises constitute a major asset of said dealers. The number of automobile dealers having such franchises has constituted for more than 3 years last past, and now constitutes, a substantial proportion of all the automobile dealers in the United States.

The number of automobiles manufactured by said respondent and sold through its said subsidiaries as hereinbefore and as hereinafter described, for more than 3 years last past has .constituted, and now constitutes, a substantial proportion of all the automobiles manufactured and sold.in the United States. The total volume of automobile parts, automobile accessories, and automobile supplies sold by said respondent through its said subsidiaries as hereinbefore and as hereinafter described, has for more than 3 years last past constituted, and now constitutes, a substantial proportion of all the automobile parts, autornobile accessories and automobile supplies manufactured and sold in the United States.

In the course and conduct of its said business, as hereinbefore and as hereinafter described, said respondent, General Motors Corporation, has been for more than 3 years last past, and now is, in substantial competition in the sale of automobiles, automobile parts, automobile accessories, and automobile supplies, in commerce between and among the various States of the United States, the territories thereof, and in the District of Columbia, with other corporations and With persons, firms, and partnerships.

PAR. 2. For more than 3 years prior to October 23, 1936, or thereabouts, the sales of automobiles, parts, accessories, and supplies rnanufactured by said General Motors Corporation were made through and by subsidiary corporations, among which were Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor 'Vorks, and Cadillac Motor Car Co., at whose respective factories said General Motors Corporation manufactured the automobiles sold by such subsidiary corporations and at whose respective f~ctories said General Motors Corporation also manufactured automobile parts, accessories and supplies for use in and on automobiles sold by said General Motors Corporation through the aforesaid subsidiaries. For more than 3 years prior to October 23, 1936, respondent General Motors Corporation also sold as described in paragraph 1 hereof, automobile Parts, automobile accessories, and automobile supplies through another subsidiary, General Motors Parts Corporation, a Delaware corpora- 62 FEDERAL TRADE CO:MMTS!S'WN' DECISIONS Complaint 34F. T. C.

tion, with its principal office and place of business located in the city of D~troit, State of Michigan; and for more than 3 years prior to October 23, 1936, respondent General Motors Corporation also sold as described in paragraph 1 hereof, automobile parts, automobile accessories, and automobile supplies through said General Motors Parts Corporation, such parts, accessories, and supplies having been manufactured by other corporations subsidiary to respondent General Motors Corporation, and by persons, firms, partnerships, and corpora· tions associated and affiliated, by contractual relationship or otherwise, with said respondent General Motors Corporation or one or more of its subsidiaries.

PAR. 3. On October 23, 1936, or thereabouts, the aforesaid subsid· iaries Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor 'Vorks, Cadillac Motor Car Co., and General Motors Parts Corporation, were· dissolved and all of their assets acquired by respondent General Motors Corporation, which upon such acquisitions organized as a wholly owned and controlled subsidiary respondent General Motors Sales Corporation, a Delaware corporation with its principal office in Detroit, Mich., which since its organization on October 23, 1936, or thereabouts, has conducted and still conducts the business theretofore conducted by said Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor Works, Cadiallac Motor Car Co., and General }.fotors Parts Corporation. ' PAR, 4. In the course and conduct of their businesses hereinbefore described, said respondent General Motors Corporation and said Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor ·works, Cadillac Motor Car Co., and General Motors Parts Corporation, for more than 3 years prior to October 23, 1936, or thereabouts, by intimidation, oppression, and cgercion compelled dealers in makes of automobiles manufactured by said General Motors Corporation, against their will, to purchase accessories and supplies for use on such automobiles only from said Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor "\Vorks, Cadil· lac Motor Car Co., or General Motors Parts Corporation, or front other corporations, qr from persons, firms, or partnerships associated or affiliated with said General Motors Corporation, said Chevrolet Motor Co., Buick Motor Co., Pontiac 1\Iotor Co., Olds 1\Iotor 'Vorks, or Cadillac Motor Car Co., or said General Motors Parts Corporation. As a part of such intimidation, oppression, coercion, and compulsion, said Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor 'Vorks, and Cadillac Motor Cur Co., during said period shipped to such dealers automobiles equipped with accessories not ordered by such dealers and shipped acce~sories and snpp1ies (not GENERAL MOTORS CORP. ET AL. 63 Complaint ' attached to automobiles) not ordered by such dealers and threatened -such. dealers with cancellation of their franchises for selling such .automobiles, unless they accepted and paid for such accessories and supplies not ordered by them, and as a part of such intimidation, oppression, coercion, and compulsion, because of the refusal of certain of their dealers to accept unordered accessories and supplies, canceled their respective franchises with such dealers.. PAR. 5. Said respondent, General Motors Corporation, and its subsidiaries, General Motors Parts Corporation, Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor Works, and Cadillac Motor Car Co., by the use of the practices and methods described ·in paragraph 4 hereof, for more than 3 years prior to October 2:3, 1936, or thereabouts, diverted substantial trade from manufacturers ·of automobile accessories and automobile supplies engaged in competition with the corporations named in this paragraph, and with persons, firms, and partnerships associated or affiliated with saiCI corporations, in the sale of said products between and among the .various States and territories of the United States and the District of Columbia; and deprived said competitors of a market for the sale of said products manufactured and sold by said competitors as aforesaid; and, did substantial injury to substantial competition and tended unduly to hinder competition and to create a monopoly in General Motors Corporation in commerce, in automobile necessaries and automobile supp,lies, between and among the various Statrs and territories of the United States and in the District of Columbia. PAn. 6. In the course and conduct of their business hereinbefore described, said respondent, General Motors Corporation, and said re~pondent, General Motor Sales Corporation, since October 23, 1936, or thereabouts, by intimidation, oppre"ision, and coercion have com- Pelled deal!:!rs in makes of automobiles manufactured by said Gen· eral Motors Corporation, against their will, to purchase accessories and supplies for use on such automobiles only from said General Motors Sales Corporation or from corporations or from persons, firms and partnerships associated or affiliated with said General Motors Corporation or said General Motors Sales Corporation. As a part of such intimidation, oppression, coercion, and compulsion, said General Motors Sales Corporation, since October 23, 1936, or thereabouts, has shipped to such dealers, automobiles equipped with accessories not ordered by such dealers, and has shipped accessories and supplies (not attached to automobiles) not ordered by such dealers, and has threatened such dealers with cancellation of their fran- (:hises for selling such automobiles, unless they accepted and paid for such accessories and supplies not ordered by them, and as a part 64 FEDERAL TRADE COMMTSSI'ON' DEICI:SIIO~'"S Complaint 34F.T.C.

of such intimidation, oppression, coercion, and compulsion, because of the refusal of certain of their dealers to accept unordered accessories and supplies, have cancelled their respective franchises with such dealers.

PAR. 7. Said respondents, General Motors Corporation and General Motors Sales Corporation by the use of the practices and methods described in paragraph 6 hereof, at all times since October 23, 1936, or thereabouts, have diverted and are now diverting substantial trade from manufacturers of automobile accessories and supplies, engaged, in competition with said respondents, in the sale of said products between and among the various States and territories of the United States and i:ry the District of Columbia; and, have deprived and are now depriving said cbmpeting manufacturers of a market for the sale of said products manufactured and sold by ~aid competing manufacturers as aforesaid; and, said respondents have done and are now doing substantial injury to substantial competition, and have tended, and are now _tending, unduly, to hinder competition and to create a monopoly in General Motors Corpora.r' tion in commerce, in automobile accessories and automobile supplies, between and among the various States and territories of the United States and in the District of Columbia. PAR. 8. The above alleged acts and practices of respondents General Motors Corporation and General Motors Sales Corporation are all to the injury and prejudice of the public ~nd said respondents' competitors and constitute unfair methods of competition within the intent and meaning of section 5 of an act entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and .for other purposes," approved September 26, 1914. Oount 13 The Federal Trade Commission having reason to believe that General Motors Corporation and General Motors Sales Corporation, hereinafter called respondents, have violated and' are now violating the provisions of section 3 of the act of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914 (the Clayton Act), hereby issues this its complaint against said respondents and states its charges with respect thereto as follows, to-wit: PARAGRAPH 1. For its charges under this paragraph of this count, said Commission relies upon the matters and things set out in paragraph 1 of count 1 of this complaint to the same extent and as though the allegations of said paragraph 1 of said count 1 were set out in GENERAL MOTORS CORP. ET AL. 65 58 Complaint full herein, and said paragraph 1 of said count 1 is incorporated herein by reference and made a part of the allegations of this count. PAR. 2. For its charges under this paragraph of this count, said Commission relies upon the matters and things set out in paragraph 2 of count 1 of this complaint to the same extent and as though the allegations of said paragraph 2 of said count 1 were set out in full herein, and said paragraph 2 of said count 1 is incorporated herein by reference and made a part of the allegations of this count. PAR. 3. For its charges under this paragraph of this count, said Commission relies upon the matters and things set out in paragraph 3 of count 1 of this complaint to the same extent and as though the allegations of said paragraph 3 of said count 1 were set out in full herein, and said paragraph 3 of said count 1 is incorporated herein by reference and made a part of the allegations of this count. PAR. 4. In" the course and conduct of its business described in paragraphs 1 and 2 of count 1 of this complaint, respondent, General Motors Corporation, and the aforesaid Chevrolet J\fotor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor Works, Cadillac Motor Car Co., and General Motors Parts Corporation, in the course of commerce between and among the various States of the United States and the District of Columbia as described in said paragraphs 1 and 2 of said count 1 of this complaint, for more than 3 years prior to October 23, 1936, or thereabouts, made sales and contracts for the sale of automobile parts on the condition, agreement, and und.erstanq- · ing that the purchasers thereof should not deal in the automobile parts of a competitor or competitors of said respondent, General Motors Corporation, and the aforesaid Chevrolet :Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor \Vorks, Cadillac Motor Car Co., and General Motors Parts Corporation, the effect of which said sales and contracts for sale upon such condition, agreement, and Understanding may have been to substantially lessen competition or tend to create a monopoly in respondent General Motors Corporation, said Chevrolet Motor Co., Buick Motor Co., Pontiac Motor Co., Olds Motor 1Vorks, Cadillac Motor Car Co., and said General Motors Parts Corporation, in commerce between and among the· various States of the United States and the District of Columbia in automobile parts.

PAR. 5. The aforesaid acts of said respondent, General Motors Cor- Poration, and of the aforesaid Chevrolet Motor Co., Duick Motor Co., Pontiac Motor Co., Olds Motor "Works, Cadillac Motor Car Co., nnd said General Motors Parts Corporation constituted a violation of the provisions of section 3 of the hereinabove mentioned net of 466~06m--42--vol.34----~ COMMISSIOJ\~ DECISIONS66 FEDERAL TRADE Findings 34 F.T. C.

Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies and for other purposes," approved October 15, 1914 (the Clayton Act).

PAR. 6. In the course and conduct of their businesses described in paragraphs 1, 2, and 3 of count 1 of this complaint, respondent General l\lotors Corporation and respondent General Motors Sales Corporation, in the course of commerce between and among the various States of the United States and the District of Columbia, described in said paragraphs of said count, have made sales and now are making sales, and contracts for the sale, of automobile parts on the condition, agreement, and understanding that the purchasers thereof shall not deal in the automobile parts of a competitor or competitors of said respondents, the effect of which said sales and contracts for sale upon such condition, agreement, and understanding may be, or may have been, to substantially lessen competition or to tend to create a monopoly in respondents in commerce between and among the various States of the United States and in the District of Columbia in automobile parts.

PAR. 7. The aforesaid acts of said respondents, General l\Iotors Corporation and General l\fotors Sales Corporation, constitute a viol:ttion of the provisions of section 3 of the hereinabove mentioned net of Congress entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15,1914 (the Clayton Act).

RErouT, FINDINGs· As TO TIIE Facts, ANn OnnEn Pursuant to the provisions of the Federal Traue Commission Act and pursuant to the provisions of an act of Congress entitled, "An act to supplement existing laws against unlawful restraints and monopolies, and :for other purposes," approved October 15, 1914, commonly known as the Clayton .Act, the Federal Trade Commission, on June 15, 1937, issued and subsequently served its complaint in this proceeding upon the re~pondents, General l\Iotors Corporation, a corporation, and General l\Iotors Sales Corporation, a, corporation, charging them with the u,se of unfair methods of competition in commerce in violation of the provisions of said Federal Trade Commission Act, and also charging them with violation o:f the provisions of section 3 of said act of Congress entitled, "An act to supplement existing laws against unlawful restraints and monopoli<'s, and for other purposes." After the issuance of said complaint and the filing of respondents' answers thereto, testimony and other evidence in support o:f the allegatio11s of said complaint were introduced by Everett. GENERAL MOTORS CORP. ET AL, 67 tis · Findings F. Haycraft, aaol'lley for the Commission, and in opposition to the allegations of the complaint by Albert M. Levert, attorney for the respondents, before John L. Hornor and \V. JV. Sheppard, trial examiners of the Commission theretofore duly designated by it, and said testimony and other evidence were duly recorded and filed in the office of the Commission. Approximately 30,000 pages of testimony were taken before Trial Examiner John L. Hornor, including approximately 11,000 pages of Commission's case in chief. The remaining 8,000 pages of testimony were taken before Trial Examiner \V. \V. Sheppard. A report upon the entire evidence wag submitted by Trial Examiner \V. W. Sheppard without objection of counsel for the respondents. Trial Examiner John L. Hornor did not submit a report upon the evidence taken before him or join in the report upon the evidence submitted by Trial Examiner \V. \V, Sheppard. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, answers thereto, testimony and other evidence, report of Trial Examiner \V. \V. Sheppard upon the evidence, and. exceptions filed thereto by counsel for the Commission, briefs in support of the complaint and in opposition thereto, and oral arguments of counsel; and the Commission having duly considered the matter and having given detailed consideration to the testimony and other evid.ence, as '"'ell as the report of Trial Examiner \V. \V. Sheppard. upon the evidence, and exceptions filed thereto, and being now fully advised in the premises, finds that this proceeding is in tl}e interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, General Motors Corporation, is a Dela- Ware corporation, with its general office and place of business in the city of Detroit, State of Michigan, and is now, and for several years last past has been, engaged in the manufacture of automobiles under trade names of "Cadillac," "Lasalle," "Buick," "Oldsmobile," "Pontiac," and "Chevrolet," and replacement parts, accessories, and sup- Plies for said automobiles under the trade names of "Cadillac," "La- Salle," "Buick," "Oldsmobile," "Pontiac," "Chevrolet," and "G. M.," Which said products have been, since on or about October 23, 1936, sold through and by respondent Generall\Iotors Sales Corporation, a Dela- Ware corporation, to dealers located throughout the several States of the United. States, and in the District of Columbia, anti such Products, when so sold, have been, and are now being, transported and shipped from the factories of said respondent General l\Iotors 68 FEDERAL TRADE COMMISSION' DEICISIONS Findings 34F T.C;

Corporation to said dealers located in States other than the State in which said products have been, and are being manufactured. Said respondent General Motors Sales Corporation is a wholly owned subsidiary of respondent General Motors Corporation. Respondents maintain, and at all times mentioned herein, have maintained a course of trade in said automobiles, replacement parts, accessories, and supplies in commerce among and between the various States of the United States and in the District of Columbia. PAR. 2. In the course and conduct of their said business, respondents are now, and :for more than 3 years last past have been, engaged in substantial competition in the sale of automobiles, automobile parts, accessories, and supplies, with other corporations and with persons, firms, and copartnerships engaged in the sale and distribution of similar products in commerce among and between the various States of the United States, and in the District of Columbia. PAR. 3. Prior to October 23, 1936, the respondent General Motors Corporation sold its said automobiles, replacement parts, automobile accessories, and supplies manufactured as aforesaid, through and by the following subsidiary corporations, which were operated as divi~ sions of General Motors Corporation, namely, Cadillac Motor Car Co., Buick Motor Co., Olds Motor Works, Pontiac Motor Co., and Chevrolet Motor Co., and also through its subsidiary, the General Motors Parts Corporation, a Delaware corporation, with its principal office and place of business locat~d in the city of Detroit, State of Michigan.

PAR. 4. On or about November 30, 1936, the said Cadillac l\fotor Car Co., Buick Motor Co., Olds l\fotor 'Vorks, Pontiac Motor Co., Chevrolet Motor Co., and General Motors Parts Corporation were d.issolved and their assets acquired by said respondent Genero.ll\fotors Corporation, and the business o£ selling automobiles, parts, accessories, and supplies theretofore conducted by said corporations was thereafter conducted by said respondent General Motors Sales Corporation.

PAR. 5. Respondent General Motors Corporation, since November 30, 1936, has conducted its operations through five motorcar divisions, namely, Chevrolet Motor Division, Pontiac :Motor Division, Olds Motor 'Vorks Divisi.on, Buick Motor Division, and Cadillac Motor Car Division. Said respondent General Motors Corporation sells the automobiles, replacement parts, accessories, and supplies manufactured by it in its various divisions to General Motors Sales Corporation. Respondent General Motors Sales Corporation is also divided into motorcar divisions corresponding to the various manu· facturing divisions o£ respondent General Motors Corporation. GENERAL MOTORS CORP. ET AL. 69 tis · · Findings PAn. 6 Respondent General Motors Sales Corporation, in the sale of automobiles, parts, accessories, and supplies to automobile dealers, maintains its principal or central office in the General Motors Building, city of Detroit, State of Michigan, and maintains regional and zone offices throughout the several States of the United States and employs parts and accessories salesmen, who contact dealers handling cars manufactured by the respondent General Motors Corporation. In this respect said respondent General Motors Sales Corporation operates through separate divisions for each respective make of car sold by it.

· PAR. 7 Dealers who are selected by the respondent General Motors Sales Corporation are required to meet certain !'\tandards, particularly of a financial nature, dependent upon the locality of the dealer and the territory granted. In addition, said respondent maintains a degree of supervision over such dealers, for which purpose a large field organization is maintained. This field organization m~y be illustrated by the Chevrolet organization as of June 30, 1937, which is typical. The general sales manager was at the head of the Chev- ·rolet Division of General Motors Sales Corporation, and under him Were two assistant general sales managers: Under these were 9 regional managers, each of "·hom was in charge of a region comprising 3 or more States. Under each regional mannger were approximately 47 zone managers, each in charge of a zone compri~ing a part of one ox· more States. Under each zone manager were. field representatives 'or district managers, each of whom was assigned to a specific territory, 'usually a county or other small subdivision. These field representatives made frequent calls on dealers, inquired as to business and economic conditions, offered advice and suggestions, made periodic audits, collected data, and, in general, obtained detailed information concerning dealers' business operations. The distribution of parts and accessories in the respective regions above described was super- \rised by regional parts and accessories managers. Each zone in turn had a parts and accessories manager, who supervised the distribution of parts and accessories to Chevrolet dealers located in their respective zones. 'Vorking under these zone parts and accessories ·managers were 146 zone parts and accessories salesmen contacting the Chevrolet dealers at regular intervals, usually monthly, promoting .the sale of parts and accessories to Chevrolet dealers. · -PAR. 8. General instructions are issued in the form of bulletins, circulars, and manuals by parts and accessories managers of the respective divisions of the respondent Generall\fotors Sal<'s Corpora- .tion to their respective zone officials, and through them and by them to salesmen for the respective divisions, as to the methods and practices COMl\fl'~:Slon DE'Cl'S'IONS70 FEDERAL TRADE Fin <lings 34F.T.C.

to be ~mployed by said salesmen in the sale of said replacement parts, accessories, and supplies solu to the respective dealers located throughout the United States. In alldition, oral instructions are given to salesmen by these respective division and .zone officials at meetings of said officials and salesmen held from time to time at central, regional, and zone offices.

PAR. 9. One of the most important duties imposed upon the replacement parts and accessories salesmen employed by respondent General Motors Sales Corporation is to see that the respective dealers handle and keep in stock only "genuine" General :Motors parts and accessories, \Which, in practice, means to the dealer, a part or accessory manufactured by or at the instance of General Motors Corporation and sold and distributed by the various divisions of General Motors Sales Corporation. These parts and accessories are identified by either the division trade-mark, the General Motors trade-mark, or sealed parts packag-es bearing General Motors identification. In practice, as indicated by accessory catalogs and accessory order pads, the term "accessory" is used to include all items other· than parts, and covers various items which might otherwise be considered as supplies, such as cleaner, polishing cloth, dressing, polish, etc. PAR. 10. There are several subsidiaries of General Motors Corporation engaged in the manufacture of parts and accessories. Among these are Delco-Remy Corporation, New Departure Manufacturing Company, A. C. Spark Plug Co., Packard Electric Co., Delco Prod- ·Ucts Corporation, and Delco Appliance Corporation. The parts and accessories manufactured by these several subsidiaries are sold and distributed by the respondent General Motors Sales Corporation to General :Motors dealers. In addition, there was organized a wholly owned subsidiary of General :Motors Corporation known us United Motors Service, Inc., which is also engaged in the sale and distribution of parts and accessories, manufactured by these various subsidiaries, through and by means of distributors and jobbers located throughout the United States. It is estimated that there are approximately 3,000 jobbers of United :Motors Service, Inc., handling either all or part of United Motors Service line .. There are certain items of the United Motors Srrvice line, manufactured by subsidiaries of General Motors Corporation, which are not handled by some of the divisions of the General :Motors Sales Corporation. As to such items, the dealer is supplied either direct by the United l\Iotors Service, Inc., or permitted to purchase such items from authorized jobbers of United Motors Service, Inc. The United Motors Service, Inc., does not carry the entire line of General Motors parts, but, instead, GE~ERAL MOTORS CORP. ET AL. 71 58 Findings confines itself chiefly to ttccessories manufactured by the various subsidiaries of General Motors Corporation. 1Vhile there is evidence ]n the rl'cord that some dealers have from time to time purchased certain items from jobbers of the United Motors Service, Inc., this practice is not encouraged, and even jobbers of the United 1\Iotors Service line have had difficuity in selling parts and accessories to General 1\fotors dealers. Furthermore, objections have been made, from time to time, by replacement parts and accessories salesmen of respondent General Motors Sales Corporation, particularly in the Chevrolet Division, to dealers using and stocking accessories and supplies purchased from authorized United Motors Service dealers for the alleged reason that such items did not constitute "genuine" parts or accessories.

PAR. 11. For the purpose of increasing the sale of parts, the respondent General Motors Sales Corporation induces its dealers to become wholesalers or distributors of "genuine" parts among various garages in the vicinity where the dealer is located." The dealer selects several representative garages, designated as "Selected Independents," who have no car sales agreements with any other automobile manufacturer and who will agree to use only "genuine" parts in the repair of General Motors cars. Such selected. independent garages are then issued discount cards entitling them to purchase parts from the dealer at a discount of 25 percent, and, in addition, such garages are loaned a "Genuine Parts" sign and furnished other service of an informative and advertising nature by the division zone office. The nature of this arrangement and the allowance of this discount to independent dealers appears in Pontiac's District :Managers Training Course, in which it is stated as follows:

Many dealers do not appreciate that Pontiac's net prices on competitive parts are much lowi'r in almqst evt>ry instance than the jobber's parts. To grunt these long !liscounts Pontiac must insist that dealers purchase all of their llarts from Pontiac.

PAR. 12. In order to promote the sale of parts, a distinction has been made between "fast-moving" and "slow-moving" parts. For example, in its "Operating l\Ianual" for the "genuine parts" department for the year 1934, issued by the Chevrolet l\Iotor Co., it was estimated that there were approximately 15,500 parts listed in Chevrolet master Parts catalogs, of "which only 841 parts, or approximately 6 percent, come within the .classification of "fast-moving parts." Since the "fast-moving" parts are the only ones which can be profitably stocked and handled., it is recommended by respondent General l\Iotors Sales Corporation that the dealer stock only such "fast-moving" parts and 72 FEDERAL TRADE CO~ITs:sion DEICISIION'S Findings 341r. T. c. carry a very limited supply of the "slow-moving" part::;. For the purpose of facilitating the stocking and handling of the "fast-moving" parts a "balanced parts stock plan" has been developed, which consists of steel bins and a supply of parts which have been carefully selected by the parts department. The dealer, in addition, carries a monthly parts inventory control record and orders parts each month as his supply is depleted.

PAR. 13. A plan somewhat similar to the balanced parts system is used in connection with accessories, except that the dealer, instead of carrying an inventory control record, follows an accessories projection system, which is operated in the same manner as used by the dealer in ordering new cars, whereby each month the dealer estimates the quantity of accesf:iories he will sell during the next 30 days. Such estimates or projections are usually made with the sales representative and are based upon the estimated quantity of accessories in proportion to the sale of new cars.

PAR. 14. The respondent" General 1\Iotors Sales Corporation enters into agreements popularly known as "franchises" with automobile dealers handling its respective lines of automobiles, parts, and accessories, which said agreements set forth the terms and conditions under which sales of automobiles, parts, and accessories are made to the respective dealers. Under these agreements or franchises, respondent General Motors Sales Corporation grants to the dealers the right to sell motor vehicles, chassis, parts, and accessories in certain defined territory described in an appendix thereto which is made a part of the franchise or agreement. The dealers accept these franchises and agree to make all sales in accordance therewith. In the appendix to said franchise agreements (except those with dealers located in the State of Texas) the following clause is set forth with respect to the sale of "genuine new Chevrolet parts": Dealer agrees that he wlll not sell, offer for sale, or use, In the repair o! Chevrolet motor vehicles and chassis, second-hand or used ports, or any part or parts not manufactured by or authorized by the Cllevrolet Motor Division, General Motors Sales Corporation.

A similar clause likewise appears in the franchise agreements executed by the other divisions of General Motors Sales Corporation, namelyt Pontiac, Oldsmobile, and Buick.

PAn. 15. In the appendix to the agreement between respondent Generall\Iotors Sales Corporation and their respective dealers located in the State of Texas, a clause differing from that appearing in its usual contracts is set forth with re!;pect to the sale of "genuine new parts," GENERAL MOTORS CORP. ET AL. 73 58 Findings of which the following statement appearing in the contract of the Chevrolet Motor Division is an example:

Dealer agrees that be will not sell, offer for sale, or use, In the repair of Chevrolet motor vehicles and chassis, as genuine new Chevrolet parts, any part or parts not manufactured by or outhorized by the Chevrolet Motor Company. PAR. 16. The agreements or franchises entered into between General Motors Sales Corporation through its various divisions and its respective dealers contain no date of termination but provide that the contract can be canceled by the General Motor Sales Corporation by giving three months' written notice and the payment of certain damages to. cover loss of rent for the premises. The dealer may cancel the contract by giving 1 month's written notice of intention to terminate. P .AR. 17. In addition to the clauses above described, the agreements or franchises entered. into between respondent General Motors Sales Corporation and its respective dealers contain ~he following clause with respect to inspection of repair part stocks of the dealers: Seller shall have the right at nny reasonable time In business hours to inspect and check over dealer's stock of r0pnir and replacement parts, and if, in selier's Judgment, a sufficient quantity of IJUrts for repair and replacement purposes are not then In dealer's stock, dealer hereby agrees to immediately order such parts as may be recommended by seller.

P .AR. 18. In the enforcement of the above provisions of the contract with respect to dealers' selling and using only "genuine" parts and With respect to checking dealers' repair and replacement p~rts, it was customary for representati vee of respondent General Motors Sales . Corporation to consider the obligation to purchase only "genuine" parts as extending to and covering various accessories sold by said respondent. Such representatives, in soliciting business from dealers and in checking dealers' supplies to determine necessity of purchasing additional items, have led the dealers to believe that under the terms and conditions of the agreement or franchise the dealer was required to purchase accessories, as well as repair and replacement parts, and, as a result, dealers did purchase accessories, as well as parts, because of such belief, P .AR. 19. The distinction between parts and accessories has been some- What confusing even to the o!licials of respondents' various divisions. For example, D. M. Smarr, a witness called by the respondents, stated that he had been in the employ of General Motors Corporation for approximately 19 or 20 years and was supervisor of parts pricing and eompiling of parts sales statistics, and determined the parts necessary FEDERAL TRADE COMMTS:SION DE!ClSIIONS74 Findings 34F.T.C.

to be serviced. by Chevrolet to give complete service coverage on Chevrolet cars. In his testimony this witness stated: We were a long time finding out what we were going to call parts and what we were going to call accessories. We finally licked that by letting one fellow take care of them all. • • • Sorry to say that was me. I was obliged to put a part numbet· on them. So, if it was an accessory I put a number on it and if it was not an accessory I wouldn't put the number on . . PAn. 20. As new models of cars were developed, many items previ~ ously considered as accessories became standard equipment and, as such, came within the classification of parts. There are, consequently, a large number of so-called p;llts which have no connection with the mechanical operation of the automobile, many of which were formerly. accessories and became parts iolely because of their inclusion in stand~ ard equipment. For example, such items as the following appear in parts catalogs issued by the respondent GPneral l\Iotors Sales Corpo~ ration: floor mati, rear-view mirrors, ornamental radiator caps, ash receivers, windshield wipers, sunshades, sun visors, arm rests, etc. The following items, considered at one time as accessories, became parts of the Chevrolet car between the years 1025 and 193G: bumpers, wire wheels, thermostats, wit}d wings, trunks, spring covers, rearview mirrors, gasoline gaug0s, safety glass, air cleaners, metal tire covers, sun visors, vacuum windshield wipers, pedal pads, shock ab~ sorbers, arm rests, stop lights, heat indicators, tire locks, and ash receivers.

PAn. 21. The sale of parts and accessories is not incidental to the sale of automobiles or the maintaining of the good will toward the . automobiles manufactured and sold by the respondents, but, instead, constitutes a substantial portion of the business transacted by the respondents. The Chevrolet Motor Division distributed to its various zone managers and. salesmen, a manual entitled, "Distribution of Automotive Replacement Parts Yesterday and Today," which appears in the record as Commission's Exhibit No. 111. In this manual it was estimated that in 193G there were ten competitors to one Chevrolet dealer engaged in the sale and distribution of parts and. access~ ories but that by reason of promotional activities adopted by the Chevrolet Division, these competitive odds were overcon1e, and, dur~ ing the year 193G, the Chevrolet Division was successful in obtaining 38.5 percent of the estimated. potential parts business. As stated in this exhibit, "Chevrolet Motor Division has spent more money than any other manufacturer in the industry, in the development of servke, parts, and. accessories sales for Chevrolet dealers." 'GENERAL MOTORS CORP. ET AL. 75 Findings PAR. 22. 'With reference to accessories, the above exhibit contains the following statements:

For example • • • Jobbers formerly sold to Automobile Dealers in mixed carload lots • • •.

• Automobile Bumpers, • l\lotor Meters, • Demountable Rims, • Locking Steering 'Wheels, • Door and Transmission Locks, anl 1\IANY OTHER ITEMS.

And in ref'ent years • "'· • CAll DEALERS • • • have concentrntetl on the sale of other Accessories in order to obtain needed Gross Profits * * •. With The lle~ult * * "' that the Johbf'rs quid:ly lost the bulk of this business • "' •. because "' * • THEY COULD NOT DEAL IN CUSTOM BUILT ACCESSORIES FOH. EXAMPLE the jobbers never had a chance to get the CAll RADIO BUSINESS The Car Dealers hold this business because most new car accessories are bought by our customers at the time they purchase their new cars from the Dealers.

PAn. 23. Various activities of a promotional nature have· been adopted by respondent General Motors Sales Corporation for the Purpose of stimulating the sale of parts and accessories, among which are the following, which have been listed in the above exhibit .No. 111:

(1) Ammal review, inventory, check-up, and training meeting for dealers and their parts managers.

(2) Parts managers tro.ining course.

(3) Monthly group meetings.

(4) Independent gnragemen's meeting, conducted by Chevrolet dealers and assisted by Chevrolet field personnel. (5) Parts mart maga:t:ine for dealers' parts managers. . ( 6) Chevrolet dealer's news, featuring training and promotional Ideas applying to parts and service activities. (7) Monthly film service on parts and accessories retail merch:mdisin..,.t::>' (8) l\lonthly store arrangement and trim service. (9) The establishment of 145 parts and accessories representatives to assist dealers in the balancing of their parts and accessories stocks, 76 FEDERAL TRADE COMMISSION' DE'CIS'IONS Findings 34F.T.0,' who are. trained to promote parts and accessories retail salea .for dealers to move merchandise from their shelves in accordance with: agreed monthly programs set up by the zone offices. (10) :Monthly inventory control pads supplied to dealers. (11) Additional 3 percent discount and free freight on certain parts and accessories monthly orders.

(12) Lot net prices on 388 highly competitive items to meet competition.

(13) Parts packaging program in which 1500 items are distributed in sales-producing containers.

( 1~) The establishment o£ the broadest and most effective parts distributing system in the industry. ' (15) Fifteen thousand selected independent garages signed up for wholesale discount and supplied with parts list material, without cost to them. .-- (16) Independent garage bin at special price. (17) Parts advertising in national trade magazines. (18) Government parts contract "provides mandatory pur(!hases o£ genuine Chevrolet parts".

(19) Radio service.

(20) Modern parts store program designed for the merchandising of parts and accessories.

(21) Accessories display service.

(22) Special merchandise displays, such as individual counter cards, etc.

' (23) Cash prizes to memb~rs of dealers' organizations for unusual selling records and performance.

PAR. 24. In the course of its dealings with dealers, the respondent Generall\fotors Sales Corporation adopted acts and practices which were designed to, and did, intimidate such dealers, and which coerced' and compelled them to purchase parts and accessories solely from the respondent General Motors Sales Corporation and prohibited purchases from outside sources except in cases of emergency when the "genuine" part or accessory was not available in General 1\Io-' tors' warehouse. There are approximately 14,000 General Motors dealerships, exclusive of associate dealers, located throughout the country, the status of each of which is determined by a franchise· agreement which is subject to annual renewal and to cancelation on very short notice, without cai.1se. Although every dealer is an' independent businessman, the supervision and control exercised by General Motors Sales Corporation over his business operations is almost as complete as if the dealer were an agent in all respects.- Every dealer acquires a substantial investment in buildings, cars, GENERAL MOTORS CORP, ET AL. ·77 Findings parts, and accessories, and builds up goodwill in a community. ·Consequently, a canceled dealership leaves the respondents with one -"less retail outlet, which can be readily replaced, but leaves the disfranchised dealer without a business and burdened with his sub- :· stantial investment, in the liquidation of which he is likely to sustain a heavy loss.

PAn. 23. Although the original franchise or agreement made with the dealer runs for an indefinite period of time, it is customary to , renew such contracts the latter part of each year for the ensuing ·year. In this connection it is customary for the zone manager to call meetings of the dealers in each of the districts, at which all :dealers o.ttend. After a sales talk, usually by the zone manager, , the dealers present are required to attend a series of personal inter- .· views with representatives of various departments of General Mo· . tors Sales Corporation, such aa the parts and accessories depart- . ments, with a final interview with the zone manager, at which time the requirements for the coming year are reviewed, as arrived at . in interviews with the various departments, including the parts and :accessories department. The dealer is required to secure the approval of each of these representatives and to agree with the zone manager on the subject of car requirements before the franchise agreement is renewed. Such arrangement carries with it an implied threat of cancelation unless satisfactory arrangements are made _·with the parts and accessories mlmagers, as well as the zone man- , ager, and, to this extent, a number of dealers have been coerced _ into the purchase of parts and accessories over and above their requirements because of such implied threat of cancelation of the contract.

PAR. 26. As a further means of coercion and compulsion in order to , prevent dealers from purchasing parts and accessories from outside sources, the respondent General Motors Sales Corporation ha~, in many cases, delivered automobiles equipped with various accessories · which were not ordered by the dealer, and has shipped accessories to the dealers, with or without cars, without prior order therefor. In . addition thereto, it was customary for said respondent to require the . dealers to project future requirements in parts and accessories, and in many cases the said respondent thereafter treated such projections , . as orders and inade shipments thereon. The entire plan was so .designed as to prevent a dealer from making any purchases from jobbers or other manufacturers and to eliminate <1.ll parts and accessories , other than those sold and distributed by the respondent General :· lfotors Sales Corporation.

78 FEDERAL TRADE CO!-:IMTSS10N DE'CIE.'IO"K'S Findings 34 F. T. C. PAR. 27. The following statements which appear in Pontiac's District Managers Training Course are examples of instructions given to district managers by the respondent General Motors Sales Corporation to force the purchase of accessories by dealers: Check over t11e dt>aler's copy of first two current months dealer shipping specifications against last groups agreed upon last month's projection. Then If dt>aler has failed to specify as agreed upon, try ami sell him ou stepping up his group orders on the last shipping specifications (due In zone on 5th of current month) to balance his original order with you. ·when dealers fail to order the "C" and "\V" groups on their specification sheets as agreed upon, cat• distributon; should nutomalicall;y include these groups on the dealers' specifications, up to the percentage originally agreed upon by tile dealer and diMrict manager. (The "C" and "\V" r:roups referred to In the above quotation appear previously in said training course as "Group C, electric· clocjl:" ttnd "Group \V, ash receiver, cigar lighter, visor nmity mirror, gear shift bail.") PAR. 28. Among the forms of intimidation and coercion used by the respondent General Motors Sales Corporation to compel dealers to buy parts and accessories from said respondent are the monthly parts order plan, the monthly inspection of bins, accessories, and establishments of dealers, and inspection of dealers' stock of repair and replacement parts under term~ of the franchis~ agreement authorizing representative of said respondent to make such inspection and authorizing such representative to require the purchase of additional parts as may be considered necessary, which have enabled the said respondent to coerce dealers into. purchasing respondent's parts and accessories and to prohibit purchases from outside sources. The requirement that only "genuine" parts be handled by the dealer and the use of identifying tags and markers permit and enable the representatives of said respondent, when checking the dealers' parts, to object to the presence in dealers' supply room o£ various materiab not fur~ nished and supplied by said respondent.

The real purpose of such inspections and the use of monthly parts order plan is typified by Commission's exhibit 59, which is District Managers Training Course and consists of instruction to district managers on parts and accessories. It contains a program of operation of a plan between district managers and their dealers "in developing the greatest potential volume and profit on parts and accessories for their dealers and for Pontiac." In this exhibit there appears the following illustration of methods to be used in soliciting the dealers' monthly parts orders and to get the dealers to send in their orders on due dates:

Checking the dealer's purchases. On each dealer contact, check the last monthly order pad with the present one to see dealer is ordering his parts on 6!Hlay basis. Check bls parts bins to see if any outside purchases are being made, and why. Cover outside purchases invoices with parts man and see that future purchases of outside material do not inclmle any parts or accessories suvvlied by rontlac.

GENERAL MOTORS CORP. ET AL. 79 58 Findings PAR. 29. In eases where inspections have been made by representatives of the respondent, and parts and accessories other than those supplied by the respondents were found on the dealer's premises, threats have been made, both directly and by implication, that unless the practice on the part of the dealer was discontinued and only parts and accessories supplied by the respondent General Motors Sales Corporation carried in stock, the dealer's contract would be canceled. Such implied threats were further made by the representative or district manager arranging for an interview with the zone manager for the purpose of discussing the dealer's practices, the dealer knowing that the zone manager has the power to.reeommend the cancelation of his contract. In some cases where a dealer has refused to handle only parts ·and accessories sold and distributed by the respondent General Motors Sales Corporation, there has been a delay in a shipment of new cars to such dealers. The:'re is also in the record evidence of cancelation of certain contracts after a controversy over the use of parts and accessories has occurred, but which cancelations were obtensibly based upon other:'r grounds.

PAR. 30. The volume of sales of "genuine" Chevrolet parts to Chevrolet dealers by the Chevrolet Division of General Motors Corporation and the Chevrolet Motor Car Co. Division of General Motors Sales Corporation for the years 1929 through 193G was as follows: 1029 -------~------------ $35,383,264 HJ33 --------------------- $17,347,625 1930 _____________________ 31,114,662 1934------~-------------- 22,934,544 1031_____________________ 24, 818, 527 1035 --------------------- 26, 089, 779 1932 --------------------- 18, 064, G09 1936 --------------------- 33, OG5, 912 The volume of sales of "genuine" _Chevrolet accessories to Chevrolet dealers by the Chevrolet Division of General Motors Corporation and the Chevrolet Motor Car Co. Division of General Motors Sales Corporation for the years 1929 through 193G was as follows: 1929 ---------------------- $8, 078, 065 1033 ------.---------------- $8, 335, 90!) 1930 --------------------- 7, 656, 581 1934 ---------------------- 10, 28!), 902 1931 ---------------------- 9, 37G, 246 193J ---------------------- 13, 901, 277 1932 ---------------------- G, 171, 4G3 1936 --------------------- 25, 811, 532 PAR. 31. The volume of sales of "genuine" Pontiac parts to Pontil~C dealers by the Pontiac Motor Division of General l\lotors Corporation and the Pontiac Division of Generall\Iotors Sales Corporation for the years 1932 through the first 6 months of 1937 was as follows: 1!)32 ---------T------------ $1, 502, lGG 1!)3:1 ---------------------- $1, 967, 130 1933 ---------------------- 1, 274, 576 193G ---------------------- 2, 882, 983 1fl34 -------~--------------- 1, Gri7, 160 1937 (first 6months) ------- 1, 821,333 The volume of sales of "genuine" Pontiac accessories to Pontiac dealers by the Pontiac Motor Division of General l\lotors Corpora- DE~CIS'IO"N'S80 FEDERAL TRADE COMMISSION' Findings 84F.T.C.

tion and the Pontiac Division of General Motors Sales Corporation for the years Hl32 through the first 6 months of 1937 was as follows : 1932 ---------------------- $172, 5GG 193a --------------------- $1, 7GO, SQO 1933 ---------------------- 486, 040 1!l36 ---------------------- 3, 511, 081 193-L-------------------- 1, 040, 1!30 1937 (first G months)------ 3, 047, 638 PAR. 32. The volume of sales of "genuine" Oldsmobile parts to Oldsmobile dealers by the Olds Motor Works Division of General Motors Corporation and the Oldsmobile Division of General Motors 'Sales Corporation for the'years 1034 through the first 6 months of HJ37 . was as follows:

193-! ---------------------- $i, 448, 377 1936 ---------------------- $3, 047, 432 193:i ---------------------- 1, 926, 28;) 1037 (first 6 months)------ 1, 558,050 The volume of' sales of "genuine" Oldsmobile accessories to Oldsmobile dealers by the Olds Motor Works Division of General Motors Corporation and the Oldsmobile Division of General Motors Sales Corporation for the years 1934 through the first 6 months of Hl37 was as follows :

193i ---------------------- $1, 110, 2C5 11:36 ---------------------- $5, 001, 18:> 103;) ---------------------- 3, 338, 106 1937 (first 6 months)------ 3, 9Hl, 724 PAR. 33. The volume of sales of "genuine" Buick parts to Buick dealers by the Buick Motor Co. Division of General Motors Corporation and the Buick Division of General Motors Sales Corporation for the years 1929 through 1936 was as follows: 1929 -----------------------$7,912,855 1033 ---------------------$3,346,279 1930 ·--------------------- 7,470,731 1034 ---------------------- 2,9G9,342 1931 ------·--------------- 6,860,228 1935 ---------------------- 2,652,016 1932 ----------------------, 4,726,936 1!}36 _______ i _________ ......_ ___ 3.,130,068 The volume of sales of "genuine" Buick accessories to Buick dealers by the Buick Motor Co. Division of General Motors Corporation and the Buick Division of General Motors Sales Corporation for the years 1930 through 1936 was as follows: 1930 ------------------------$4,141,034 193-! ---------------------$1,081, 6-!3 1931 ------------------------ 3,711,783 1935 ---------------------- 1,004,28!> 1932 ----------------------- 1,781,103 1U36 ---------------------- 5,455,43!} 1033 ----------------------- 1,035,879 PAR. 34. One of the· classes of competitors to General Motors Sales Corporation in the parts and accessories field is the independent jobber. Prior to 1930 the number of independent jobbers was estimated at approximately 6,000. These jobbers supplied merchandise to independent garages and car dealers and assisted them with technical knowledge and mechanical facilities. They formerly GENERAL MOTOHS CORP. ET AL, 81 Findings ' handled supplies, tools, equipment, specialties, accessories, and a ':fair line of replacement parts. During the depression years com- . J?etitidn in the manufacture of automobiles forced car manufacturers ·to include, as standard equipment, many items which were formerly ·sold as accessories. As car manufacturers began to include acces- , sories as standard. equipment, the independent jobbers had to find Ways and means of replacing this lost business and during tho • 'depi·ession years 1930-1933 substantially increased their sales in tools, service equipment, and replacement parts. In order to do this, many jobbers opened and established a number of branches located near their customers, enabling them to intensify their merchandising ·activities in concentrated areas and ~o give better service· to their parts customers.

PAn. 35. The independent jobbers sell the products of independent replacement part manubcturers, some of whom manufacture for ·the car manufacturer, including respondent General Motors Corporation,· as follows: Ball bearings, battery cables, brake linings, clutch . <.lisks and facings, coils, cylinder-head gaskets, fan belts, head lamps, radio hose, king pin replacement units, lamp bulbs, muiHers, piston 'lings, piston pins, pistons and piston-pin assemblies, spark plugs, spark plug wire sets, valve springs, and many other items. PAn. 3G.' Many of such items which are manufactured by inde- , Pendent manufacturers for General Motors Corporation and used by G.cneral M<:>tors Sales Corporation as "genuine" replacement parts . a.re identical in quality and design with those sold by these same ~anufacturers to independent jobbers, the only difference between l. such parts and those sold by General Motors as "genuine" parts being the stamp placed bn th.e outside of the package by the manufacturer ''Who packages such parts for General Motors Sales Corporation. Other replacement parts handled by independent jobbers as ~ell as Ge:rreral l\'{motors Sales Corporation which are identical, are AC spark Plugs, Stromberg and Carter carburetors, piston rings, hydraulic .brakes, wheels, and the B:::Jrg-'Varner clutch. There are also many reputable manufacturers who manufacture parts of like quality and ~lesign to those parts manufactured by General Motors Corporation or sold by General Motors Sales Corporation. PAn, '37. Subsequent to 1933, independent jobbers handling · replacement parts and accessories for Genernll\Iotors cars have been Unable to sell such merchandise in substantial quantities to General Motors dealers for use on General 1\Iotors cars, being told by parts l'lien of such dealers that they are supposed to buy only "genuine" Parts and accessories in packages that bear G£>neral 1\Iotors trade- 46G::J06m-42-vol. 34-6 82 FEDERAL TRADE COMMT.s:sion' DE'·ClSIIONS Findings 34 F. T. C.

mark and are recommended for General Motors cars. Parts and accessories which independent jobbers have been unable to sell to General Motors dealers for the reasons specified above, are heaters, radios, anti-freeze solutions, spark plugs (both AC and Champion), cylinder-head gaskets, manifold gaskets, brake linings, cigar lighters, brake fluid, pistons, piston rings, valves, bearings, ignition parts, • gear-shift balls, batteries, ignition cables, spark-plug wires, carburetors, carburetor parts; chemicals and polishes, axles, radiator cleaners, fan belts, clutches, and gears. · PAR. 38. 1Vhen a General Motors dealer sells a car to a purchaser, there goes with such cur a warranty or guaranty by the General Motors · Corporation warranting such motor vehicle, including original equipment placed thereon by the manufacturer, except tires, to be :free :from defects in material or workmanship, under normal use and service. The obligation under this wananty is limited to making good at its :factory any part or parts within 90 days after delivery of such vehicle to the original purchaser, or before such vehicle has been driven 4,000 miles, whichever event shall first occur. This warranty does not apply to cars which have been repaired or altered ·outside of an authorized General Motors service station, which, in the judgment of the manufacturer, affects its stability and reliability, or which car has been subjected to misuse, negligence, or accident. The respondents have introduced evidence to the effect that in order to maintain the good will of its various divisions and protect its guaranty it is necessary to maintain supervision over the parts used and sold by its individual dealers. However, all o£ the parts which come within the restrictive provision of the contract, set out in paragraph 14 hereof, are not necessary to the mechanical operation of the car, and the performance, or lack of performance, o£ such parts would have no bearing upon either the warranty issued or the good will of the division of General l\fotors selling a· car. Furthermore, there are a large number of parts which are supplied by manufacturers to job'\Jers which are identical in material and con- ' !'itruction with parts furnished by these same manufacturers to General Motors Corporation.

PAR. 39. The number of automobiles manufactured by the respond- Pnt General Motors Corporation and sold through its subsidiary, respondent General l\fotors Sales Corporation, has constituted, ancl now constitutes, a substantial portion of all the automobiles mann· factured and sold in the United States. The General Motors car~ in operation constitute approximately 36 percent of all cars an{l trucks in operation. For the year 1936 there was a total of 25,378,6511 GE:\ERAL MOTORS CORP. ET AL. 83 58 Fil:uljngs cars and trucks in operation in the United States. Of this number, there were 1,129,779 Buicks, 702,671 Oldsmobiles, 1,013,857 Pontiacs, and 6,455,872 Chevrolets, or a total of 9,302,179 General Motors cars, exclusive of Cadillac, in operation in the United States. The total volume of automobile parts and automobile accessories and supplie,_.; sold by the respondent General l\Iotors Corporation through its . ·subsidiary, respondent Genel'lll Motors Sales Corporation, has constituted, and now constitutes, a substantial proportion of all tlw automobile parts and automobile accessories and supplies manufactured and sold in the United. States. For example, during the year 1936, the respondent Generall\Iotors Sales Corporation sold $42,117,- 295 in parts and $39,8G!:>,243 in accessories and supplies, exclusiw . <>f parts and accessories sold by the Cadillac Division and exclusive of parts and accessories sold by the United Motors Service, Inc. Such sales constitute a substantial portion of the sales of parts and accessories in the United States, and, when limited to parts anJ accessories for General Motors automobiles, constitute a substantia) portion of the parts and accessories sold and used on Generull\Iotors automobiles. . PAR. 40. The use by thj respondent General Motors Sales Corporation a;£ the acts and practices hereinabove described, has had, a.nd now has, the capacity and· tendency to, and does, intimidate General Motors dealers and coerce and compel them to purchase accessories and supplies only from the respondent General Motors Sales Corporation, with the result that substantial trade has been ~liverted to the respond.ents from their competitors who are engaged In the manufacture and in the sale und distribution of automobile . accessories and supplies in commerce among and between the various States of the United States and in the District of Columbia; and has deprived, and is now depriving, said competing manufacturers <>f a market for the sale of said products manufactured and sold by said competing manufacturers, as aforesai<l; and has had, and now has, a tendency to unduly hinder competition and to create a. lnonopoly in General Motors Corporation in commerce in automobile . accessories and supplies between and among the various States of .. the United States, and in the District of Columbia. PAn, 41. The Commission further finds that the use by the respond- ~nts of the acts and practices hereinabove described, of selling parts on the condition, agreement, or understanding that the purchaser thereof shall not sell or use parts of a competitor, has had, and now has, the effect of substantially lessening competition; and has had, and now has, a tendency to create a monopoly in replacement COMMIS~SION DECISIONS84 FEDERAL TRADE Modlfied Order 34F.T.C.

parts used on General Motors .cars. By means of the provision in the contract that General Motors dealers will not sell, offer for salet or use, parts not manufactured by or authorized by the General Motors Sales Corporation, practically all dealers in General Motors cars, to the number of approximately 14,COO, have been removed as customers and prospective customers of independent manufacturers and jobbers; and there have likewise been removed as customers and prospective customers of such manufacturers and jobbers, all associate dealers and selected independent garages who have agreed to purchase only parts supplied by General Motors dealers, and which garages are estimated as being approximately 15,000 for the Chevrolet Division alone in the year 1936.

PAR. 42. On the completion of the testimony taken in this case~ the respondents made a motion before the trial examiner to strike the testimony of certain witnesses. This motion was sustained in part and the testimony of certain witnesses stricken from the record. An appeal from this ruling of the trial examiner was taken by the attorney for the Commission and is now pending before the Cor..I· mission. The testimony stricken by the trial.examiner on this mol.io~ is more or less cumulative and not necessary to the decision in this case, and it is, accordingly, not necessary for the Commissi.r'n _to pass upon this motion or consider this testimony in making 1ts findings.

CONCLUSION The aforesaid acts and practices of the respondents as herein found, are all to the prejudice and injury of the public and of said respondents' competitors, and constitute unfair methods of compe~it~on within the intent and meaning of the Federal Trade Commissioll Act; and the acts and practices of the respondents in selling replac~­ ment parts on the condition, agreement, or understanding that t 8 purchaser thereof shall not use or deal in replacement parts of ~ competitor, has the effect of substantially lessening competition aP 1 a tendency to create a monopoly in replacement parts used on Gener~ Motors cars, and constitutes a violation of section 3 of the act of ~ te Congress of the United States entitled, "An Act to supplement eslS; ing laws against unlawful restraints and monopolies, and for other purposes," commonly known as the Clayton Act. liODIFlED ORDER TO CEASE AND DESIST 'l This proceeding' having' been heard by the Federal Trade Commis· · o o 1 re· sion upon the complaint of the Commission the answers of t 1e · . 0 rnor spon d ents, testimony and other evidence taken' before J olm L. II 1 . Order published as modified by Commission on J'une 2~, 1942. GENERAL MOTORS CORP. ET AL. 85 58 Modified Order und W. tV. Sheppard, trial examiners of the Commission theretofore duly designated by it., in support of the allegations of the complaint and in opposition thereto, report of Trial Examiner \V. \V. Sheppard Upon the evidence and exceptions filed thereto, briefs filed in support of the complaint and in opposition thereto, and oral arguments of counsel; and the Commission having made its findings as to the facts and its conclusion that said respondents have violated the provisions Qf the Federal Trade Commission Act and have violated the provisions of that certain act of the Congress of the United States entitled, "An Act to supplement existing laws against unlawful restraints and I :monopolies, and for other purposes," approved October 15, 1914, com- I ~only known as the Clayton Act, and the Commission having issued I lts order herein to cease and desist on November 12, 1941, and the I respondent having filed with the Commission on June 11, 1942, its request for modification of said order: It is ordered, That tlle respondents, Generall\Iotors Corporation, a I ·corporation, and General Motors Sales Corporation, a corporation, I I a~d their respective officers, agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of automobile accessories, II automobile supplies, and other similar products in commerce as "com- ) tn.~rce'' is defined in the Federal Trade Commission Act, do forth- I I "'1th cease and desist from :

(1) Requiring automobile dealers in connection with contracts or franchises or selling agreements with said automobile dealers for the sa.Ie of new motor vehicles, by means of intimidation or coercion, to Purchase or deal in accessories or supplies sold and distributed by the respondents, or by any one designated by them, for use in and on autolllobiles sold by the respondents.

. (2) Canceling, or directly or by implication threatening the can- Cellation of, any co1;1tract or franchise or selling agreement with auto- ~obile retail dealers for the sale of new motor vehicles, because of . e failure or refusal of such dealers to purchase or deal in accesso- ~~es or supplies for use in and on automobiles manufactured or sold by e respondents, sold and distributed by the respondents, or by any Qne d · es1gnated by the respondents. /3). Canceling, or directly or by implication threatening the cance lation of, any contract or franchise or selling a~rreemcnt with a~to~obile retail dealers for the sale of .uew motor vehicles, for pur- ~~s~ng or dealing in accessories or supplies for use in and on autof hiles sold by the I'('spondents, not obtained from respondents or to:rn. other sources designated by the respondents. s Shipping accessories or supplies for use in and on automobiles 0?> d by ~he respondents without prior orders therefor, or canceling, C0~IMISSION DE'CISIOXS86 FEDERAL TRADE Modified Order 34 F. T. C. or directly or by implication threatening the cancellation of any automobile retail dealer contract or franchise or selling agreement for the sale of new motor vehicles, because of a failure or refusal to accept accessories or supplies for use in and on automobiles sold by the respondents shipped without prior order.

( 5) Refusing or threatening to refuse, to deliver automobiles to automobile retail dealers in connection with contracts or franchises with said automobile retail dealers for the sale of new motor vehicles because of a failure or refusal of such dealers to purchase or deal in accessories or supplies for use in and on automobiles sold and distributed by the respondents, or by any one designated by them. (6) The use of any system or practice, plan, or method of doing business, for the purpose, or having the effect, of coercing or intimidating automobile retail rlealers who have contracts or selling agreements or franchises of the r£>spondents for the sale of new motor vehicles into purchasing or dealing in accessories or supplies manufactured or supplied by the respondents, or by any one designated by them, for use in and on automobiles sold by the respondents. It is further ordered, That the respondents, General Motors Corporation, a corporation, and General Motors Sales Corporation, a corporation, and their respective officers, agents, representatives, and employees, directly or through any corporate or other device, in connection with any franchise or agreement for the sale of automobiles or in connection with the sale, or making of any contract for thesale of, automobile parts in commerce as "commerce'' is defined in that· act of Congress entitled, "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914, commonly known as the Clayton Act, do forthwith cease and desist from:

Entering into, enforcing, or continuing in operation or effect, any franchise or agreement for the sale of automobiles, or any contract for the sale of, or selling, automobile parts in connection with contracts or franchises or selling agrrements with automobile retail dealers for the sale of new automobiles on the condition, agreement, or understanding that the purchasers thereof shall not use or sell automobile parts other than those acquired from the respondents, unless such condition, agreement, or understanding be limited to automobile parts necessary to the mechanical operation of an automobile, and which are not available, in like quality and design, from other sources of supply.

It is furtlwr ordered, That the respondents shall, within 30 days after this modified order beco~es final, file with the Commission n. report in writing, setting forth in detail the manner and form in which they have complied with this modified order. UNITED BUYERS CORP. ET AL. 87 Syllabus