General Motors Corporation

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF GENERAL MOTORS CORPORATION, ET AL.

SET ASIDE ORDER IN REGARD TO ALLEGED VIOLATION OF THE CLAYTON AND THE FEDERAL TRADE COMMISSION ACTS Docket C-3132. Consent Order, April 11, 1984--Set Aside Order, Oct. 29, 1993 The Federal Trade Commission has set aside a 1984 consent order with General Motors Corporation, et al., (103 FTC 374), thus removing the Commission's requirement limiting the duration of the joint venture (New United Motor Manufacturing, Inc.) between General Motors Corporation and Toyota Motor Corporation to produce subcompact cars in California. The Commission concluded that changed conditions in the industry warranted reopening and setting aside the order.

ORDER GRANTING PETITION TO REOPEN AND SET ASIDE ORDER On June 28, 1993, the respondents, General Motors Corporation ("GM") and Toyota Motor Corporation ("Toyota") (hereafter thea 1 8 1 3 0 615 1738 1322 45 -1 5 1 8 1 3 1 615 1738 279 44 95.860680 respondents), together with their joint venture, New United Motor Manufacturing, Inc. ("NUMMI"),' filed a Petition To Reopen the Proceeding and To Vacate the Consent Order ("Petition"), pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. 45(b), and Section 2.51 of the Commission's Rules of Practice and Procedure, 16 CFR 2.51. In their Petition, the respondents ask the Commission to reopen he proceeding in Docket No. C-3132 and set aside the consent order issued by the Commission on April 11, 1984, in General Motors Corporation, et al., 103 FTC 374 (1984) ("order"). The Petition was placed on the public record for thirty days, pursuant to Section 2.51 of the Commission's Rules. Seventeen comments, all in favor of granting the Petition, were received. After reviewing the Petition and other relevant information, the Commission has determined to grant the Petition. The respondents have shown changed conditions of fact that eliminate the need for NUMMI, the joint venture established by GM and Toyota. is not a respondent under the Commission's order.

GENERAL MOTORS CORPORATION, ET AL. 1277 1276 Set Aside Order the order and make its continued application to the respondents inequitable and harmful to competition.

I. The Complaint and Order and the Respondents' Petition The Commission's 1984 complaint in this matter alleged that the proposed joint venture between GM and Toyota would violate Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the FTC Act, 15 U.S.C. 45, by lessening competition in the manufac-4 1 5 1 5 0 592 1131 1321 45 -1 5 1 5 1 5 1 592 1148 74 28 96.469559 tures 1 5 1 5 2 694 1140 68 36 96.314507 ands 1 5 1 5 3 791 1139 74 36 96.539062 sales 1 5 1 5 4 892 1138 43 35 96.759262 of5 1 5 1 5 5 960 1137 104 36 96.279854 small5 1 5 1 5 6 1093 1147 79 24 96.458214 news 1 5 1 5 7 1201 1134 239 36 92.636208 automobiles5 1 5 1 5 8 1472 1163 5 5 42.146629 .5 1 5 1 5 9 1510 1162 5 6 42.146629 .5 1 5 1 5 10 1548 1162 5 5 77.426163 .5 1 5 1 5 11 1583 1131 216 45 35.133316 includ[ing]5 1 5 1 5 12 1831 1160 43 6 69.214714 ..5 1 5 1 5 13 1907 1159 6 6 84.888702 .4 1 5 1 6 0 593 1189 1321 54 -1 5 1 5 1 6 1 593 1199 243 44 96.556923 subcompact,5 1 5 1 6 2 856 1202 177 40 96.927177 compact,5 1 5 1 6 3 1053 1195 68 35 96.440308 ands 1 5 1 6 4 1139 1193 247 36 96.545128 intermediates 1 5 1 6 5 1405 1192 100 35 96.992500 sized5 1 5 1 6 6 1523 1190 258 37 87.029709 automobiles in the United States and Canada. The complaint alleged, among other things, that the proposed joint venture could lessen competition (1) by expanding the output of the joint venture beyond what would reasonably be necessary to accomplish the legitimate purposes of the joint venture, and (2) by failing to provide adequate safeguards against the exchange of competitively significant information beyond the minimum reasonably necessary to accomplish the legitimate purposes of the venture. These effects, singly or in combination, allegedly would increase significantly the likelihood of noncompetitive cooperation between GM and Toyota. The Commission's order, issued with the consent of GM and Toyota, permitted them to undertake the joint venture, but limits the scope of the venture and the exchange of information between GM and Toyota and with any joint venture. The order limits the joint venture to manufacturing for, or selling to, GM not more than approximately 250,000 automobiles per year,’ except with the prior approval of the Commission, and limits the duration of the joint venture to the earlier of twelve years from the start of production or December 31, 1997.

The order limits the exchange of nonpublic information concerning prices and costs of GM or Toyota cars or parts, sales or production forecasts, and marketing plans for any product. In ? In addition, the order limits the cars made by the joint venture for GM to cars derived5 1 7 1 1 19 1828 2605 61 23 96.481339 from5 1 7 1 1 20 1901 2605 37 22 96.342575 thea 1 7 1 2 0 596 2647 1342 41 -1 5 1 7 1 2 1 596 2659 91 29 96.994576 Toyota5 1 7 1 2 2 700 2657 123 31 0.000000 Sprinter. NUMMI presently makes the Chevrolet Geo Prizm for GM. The order does not similarly limit NUMMI's production for Toyota. NUMMI makes the Corolla and a compact pickup truck for Toyota and also makes automobile parts Set Aside Order 116 F.T.C.

addition, the order limits discussions of product designs, sales or production forecasts, and the cost of products supplied by the co-venturers to those necessary5 1 3 1 3 5 1354 769 35 29 96.416725 to5 1 3 1 3 6 1419 765 234 45 96.942123 accomplish,5 1 3 1 3 7 1684 767 69 35 96.346710 ands 1 3 1 3 8 1783 768 115 45 95.929596 solely5 1 3 1 3 9 1927 769 36 34 95.929596 in4 1 3 1 4 0 640 816 1323 57 -1 5 1 3 1 4 1 640 816 213 35 96.823456 connections 1 3 1 4 2 868 817 94 41 96.794395 with,5 1 3 1 4 3 976 818 58 34 96.794395 thes 1 3 1 4 4 1048 818 195 45 96.830528 legitimate5 1 3 1 4 5 1256 831 171 36 96.865395 purposes5 1 3 1 4 6 1441 833 40 24 96.880920 or5 1 3 1 4 7 1493 822 243 48 84.299217 functioning of the joint venture. The order also contains record keeping and other requirements to help monitor the respondents’ compliance with the order.

The respondents ask the Commission to set aside the order in4 1 3 2 2 0 636 1108 1320 55 -1 5 1 3 2 2 1 636 1108 44 35 96.860695 its5 1 3 2 2 2 695 1109 165 46 85.651108 entirety to permit GM and Toyota to continue the joint venture. In support of the Petition, the respondents assert, among other things that in the context of what they view as fundamental changes in the market since 1984, setting aside the order's limits on the scope of the joint venture will allow the continuation of important efficiency gains that benefit competition. The respondents also assert that setting aside the order's restrictions on the output of the joint venture and on certain communications would be in the public interest, because the restrictions “are burdens imposed on no other automotive producers and therefore place NUMMI at a serious competitive disadvantage." Petition at 21. I]. Standards for Reopening and Modifying an Order Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. 45(b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent makes5 1 5 1 3 11 1927 2059 20 24 96.699669 a4 1 5 1 4 0 624 2097 1322 49 -1 5 1 5 1 4 1 624 2097 226 46 96.456612 satisfactory5 1 5 1 4 2 874 2098 163 46 96.681274 showings 1 5 1 4 3 1062 2100 72 34 96.491043 that5 1 5 1 4 4 1157 2100 165 46 96.609985 changed5 1 5 1 4 5 1345 2102 203 36 96.525330 conditions5 1 5 1 4 6 1573 2103 42 35 96.545052 of5 1 5 1 4 7 1634 2104 69 35 96.688957 laws 1 5 1 4 8 1727 2115 40 25 96.617973 or5 1 5 1 4 9 1789 2105 91 35 95.501602 fact so require. A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition. S. Rep. No. 96-500, 96th Cong., 2d Sess. 9 (1979) (significant changes or changes causing unfair disadvantage); GENERAL MOTORS CORPORATION, ET AL. 1279 1276 Set Aside Order Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4 (unpublished) ("Hart Letter"). Section 5(b) also provides that the Commission may modify an order when, although changed circumstances would not require reopening, the Commission determines that the public interest so requires. Respondents are therefore invited in petitions to reopen to show how the public interest warrants the requested modification. Hart Letter at 5; 16 CFR 2.51. In such a case, the respondent must demonstrate as a threshold matter some affirmative need to modify the order. Damon Corp., Docket No. C-2916, Letter to Joel E. Hoffman, Esq. (March 29, 1983), at 2 (unpublished) ("Damon Letter"). For example, it may be in the public interest to modify an order to4 1 3 2 11 0 582 1322 1324 50 -1 5 1 3 2 11 1 582 1327 129 35 96.440651 relieves 1 3 2 11 2 724 1338 67 34 96.440651 any5 1 3 2 11 3 805 1326 227 45 96.515572 impediments 1 3 2 11 4 1045 1331 37 29 96.997757 to5 1 3 2 11 5 1095 1325 166 35 96.404305 effective5 1 3 2 11 6 1275 1324 227 46 96.874054 competitions 1 3 2 11 7 1516 1324 71 35 96.869797 that5 1 3 2 11 8 1600 1335 81 34 96.722771 may5 1 3 2 11 9 1694 1323 107 36 96.775459 results 1 3 2 11 10 1813 1322 93 36 96.812996 from4 1 3 2 12 0 583 1380 1322 48 -1 5 1 3 2 12 1 583 1386 57 34 96.092377 thes 1 3 2 12 2 655 1386 131 34 69.966980 order. Damon Corp., Docket No. C-2916, 101 FTC 685, 692 (1983). Once such a showing of need is made, the Commission will balance the reasons favoring the requested modification against any reasons not to make the modification. Damon Letter at 2. The Commission also will consider whether the particular modification sought is appropriate to remedy the identified harm. Damon Letter at 4.

The language of Section 5(b) plainly anticipates that the burden is on the petitioner to make a satisfactory5 1 3 3 2 9 1463 1839 165 51 93.281586 showings 1 3 3 2 10 1648 1845 13 12 85.445168 of changed conditions to obtain reopening of the order. The legislative history also makes clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified. The Commission may5 1 3 3 6 4 1075 2079 166 46 96.286819 properly5 1 3 3 6 5 1264 2079 142 34 96.891693 declines 1 3 3 6 6 1428 2085 36 28 96.520279 to5 1 3 3 6 7 1487 2088 132 35 96.520279 reopens 1 3 3 6 8 1642 2088 44 24 96.934563 an5 1 3 3 6 9 1709 2077 104 35 96.226151 orders 1 3 3 6 10 1834 2076 32 35 96.581161 if5 1 3 3 6 11 1885 2087 19 24 96.581161 a4 1 3 3 7 0 580 2131 1323 54 -1 5 1 3 3 7 1 580 2146 141 39 96.849136 requests 1 3 3 7 2 736 2140 29 34 96.849136 is5 1 3 3 7 3 781 2139 134 45 96.749855 merely5 1 3 3 7 4 931 2131 216 52 97.002434 conclusory5 1 3 3 7 5 1163 2148 40 25 96.379890 or5 1 3 3 7 6 1216 2136 193 37 96.379890 otherwise5 1 3 3 7 7 1424 2136 82 35 95.966179 fails5 1 3 3 7 8 1522 2142 36 29 95.966179 to5 1 3 3 7 9 1574 2142 53 29 95.372414 sets 1 3 3 7 10 1642 2136 93 35 95.372414 forth5 1 3 3 7 11 1751 2134 152 47 96.963379 specifica 1 3 3 8 0 580 2193 1324 49 -1 5 1 3 3 8 1 580 2198 91 35 96.895561 facts5 1 3 3 8 2 688 2197 281 45 96.654892 demonstrating5 1 3 3 8 3 986 2196 35 36 96.862656 in5 1 3 3 8 4 1037 2196 108 36 96.375648 details 1 3 3 8 5 1163 2196 57 35 96.960312 thes 1 3 3 8 6 1237 2202 123 29 96.703979 nature5 1 3 3 8 7 1375 2194 43 36 96.038834 of5 1 3 3 8 8 1444 2195 58 35 96.038834 thes 1 3 3 8 9 1519 2194 162 45 96.566994 changed5 1 3 3 8 10 1697 2193 207 36 96.736137 conditions4 1 3 3 9 0 580 2251 1324 50 -1 5 1 3 3 9 1 580 2257 69 35 96.138374 ands 1 3 3 9 2 663 2257 57 34 96.138374 thes 1 3 3 9 3 733 2266 145 25 96.916817 reasons5 1 3 3 9 4 893 2256 81 45 96.402626 why5 1 3 3 9 5 989 2256 98 34 96.752632 these5 1 3 3 9 6 1101 2254 162 45 96.627495 changed5 1 3 3 9 7 1277 2253 202 36 96.125069 conditions5 1 3 3 9 8 1493 2253 138 45 96.802322 requires 1 3 3 9 9 1645 2253 57 34 96.302025 thes 1 3 3 9 10 1716 2251 188 46 96.931236 requested4 1 3 3 10 0 580 2310 1324 47 -1 5 1 3 3 10 1 580 2314 250 35 96.519035 modifications 1 3 3 10 2 851 2313 42 36 96.579132 of5 1 3 3 10 3 910 2314 58 34 96.897934 thes 1 3 3 10 4 988 2313 133 35 70.985443 order. S. Rep. No. 96-500, 95th Cong., Ist Sess. 9-10 (1979); see also Rule 2.51(b) (requiring affidavits in support of petitions to reopen and modify). If the Commission determines that the petitioner has made the necessary showing, the 3 See also United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992) ("A decision to reopen does not necessarily entail a decision to modify the order. Reopening may occur even where the petition itself does not plead facts requiring modification."). Set Aside Order 116 F.T.C.

Commission must reopen the order to consider whether modification is required and, if so, the nature and extent of the modification. The Commission is not required to reopen the order, however, if the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission orders. See Federated Department Stores, Inc., v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality).

III. The Respondents Have Shown Changed Conditions of Fact that Require Reopening the Order, and the Restrictions on the Scope of the Joint Venture Should Be Set Aside The order limited the scope of the joint venture to preserve the incentives of GM independently to make and sell new automobiles and to prevent noncompetitive cooperation between GM and Toyota. The Commission finds that the respondents have made a satisfactory showing of changed conditions in the North American automobile market that require reopening the order. The Commission also finds that the changed conditions demonstrated by the respondents eliminate the need for the order's restrictions on the duration and the output of the joint venture.

Since 1984, when the order was issued, significant new entry and expansion in the automobile industry have occurred in North America,’ including the United States, Canada and Mexico.° Sales in the United States of subcompact, compact and midsized automobiles (the product market identified in the complaint) have grown from about 58% to more than 77% of new car sales.° In 1984, U.S. car buyers could choose among 16 subcompacts, 14 4 At the same time, new passenger car production in North America has declined from about 8.8 million units (U.S. and Canada) in 1984 to about 7.5 million (U.S., Canada and Mexico) in 1992. Automotive News, 1985 Market Data Book at 4.8 (hereafter (year) Market Data Book"); 1993 Market Data Book at 4. Total U.S. retail sales of domestic and imported cars were about 10.4 million in 1984 (1985 Market Data Book at 4) and about 9.5 million in 1992. 1993 Market Data Book at 4. 5 Although Mexico was not in the North American market identified in the complaint, since 1984, cars produced in Mexico have achieved about 10% of U.S. car sales. See 1993 Market Data Book at 4. 6 1985 Market Data Book at 22; 1993 Market Data Book at 26.4 GENERAL MOTORS CORPORATION, ET AL. 1281 1276 Set Aside Order compact and 24 midsized cars;’ in 1992, U.S. car buyers could choose among 42 subcompact, 20 compact and 37 midsized cars.® GM and Toyota each has made major investments in car production in the United States, outside the NUMMI joint venture. GM has developed new models of its existing lines of cars and introduced the Saturn line of automobiles. Toyota has built two assembly plants in North America and has introduced new vehicles (the Lexus line of automobiles, the T-100 pickup truck and a new larger Camry) to compete with GM's larger cars.

The new automobile market has become less concentrated since 1984.’ In 1984, GM was the leading maker and seller of cars in the United States, with 44.4% of passenger car sales.'° Ford (19.26%) and Chrysler (9.51%) were second and third. Toyota, the third largest motor vehicle manufacturer in the world, had 5.4% of U.S. sales. Manufacturing capacity in the United States of foreign automobile producers ("transplant" producers) consisted of two plants, a Honda facility in Ohio and a Nissan truck facility in Tennessee. Imports from countries such as Korea and Mexico were not significant.

In 1992, GM remains the leading producer and seller of automobiles in the United States, with 34.6% of sales.'' GM is 7 See 1985 Market Data Book at 12.

8 See 1993 Market Data Book at 26. The top selling cars in the United States in 1992 were (1) Ford Taurus, (2) Honda Accord, (3) Toyota Camry, (4) Ford Escort, (5) Honda Civic, (6) Chevrolet Lumina, (7) Chevrolet Cavalier, (8) Pontiac Grand Am, (9) Ford Tempo, (10) Saturn, (11) Toyota Corolla, (12) Chevrolet Corsica-Beretta, (13) Nissan Sentra, (14) Buick LeSabre and (15) Cadillac Deville. /d. at 21. ? According to the respondents, based on 1983 and 1992 unit sales, the Herfindahl-Hirschmann Index ("HHI") for car manufacturing has declined from 2455 to 1959 for the United States and from 2,363 to 1,859 for North America. Petition at 5. The amount of the decline in the HHI between 1983 and 1992 (about 500 points) is greater than the increase that would have resulted from a full merger between GM and Toyota in 1983 (about 480 points). Although the HHI has declined to 1959, the respondents’ figures show that it remains above 1800, the level at which the 1992 Horizontal Merger Guidelines, reprinted in 4 Trade Reg. Rep. (CCH) paragraphs 13, 104, at Section 1.5, define a market as highly concentrated. 10 GM had 43% of North American automobile sales in 1984. Glassman & Cronin. Economic Justifications for Authorizing Unrestricted Production of Automobiles by NUMMI 8-9 (June 29, 1993), submitted in support of respondents’ Petition. 5 1 10 1 1 2 685 2587 70 24 96.437668 GM's5 1 10 1 1 3 766 2588 67 23 96.437668 shares 1 10 1 1 4 844 2587 28 24 96.834137 of5 1 10 1 1 5 881 2588 74 23 96.675705 North5 1 10 1 1 6 967 2589 126 22 96.722893 Americans 1 10 1 1 7 1105 2596 39 16 96.855232 cars 1 10 1 1 8 1154 2590 61 22 96.809715 sales5 1 10 1 1 9 1228 2596 48 17 96.920914 was5 1 10 1 1 10 1288 2590 82 23 96.743912 33.4%5 1 10 1 1 11 1383 2590 21 23 96.743912 in5 1 10 1 1 12 1421 2590 66 24 96.657410 1992.5 1 10 1 1 13 1510 2590 22 23 96.791389 In5 1 10 1 1 14 1549 2590 67 25 75.036163 1984,5 1 10 1 1 15 1627 2590 50 24 96.891083 GM5 1 10 1 1 16 1690 2592 120 28 96.857300 produced5 1 10 1 1 17 1820 2599 51 15 96.831543 cars5 1 10 1 1 18 1883 2592 22 22 96.615807 in5 1 10 1 1 19 1917 2592 30 22 96.718330 242 1 11 0 0 0 605 2628 1342 73 -1 3 1 11 1 0 0 605 2628 1342 73 -1 4 1 11 1 1 0 607 2628 1340 34 -1 5 1 11 1 1 1 607 2628 106 25 96.902657 facilities5 1 11 1 1 2 724 2629 22 24 96.290176 in5 1 11 1 1 3 757 2630 37 23 96.290176 thes 1 11 1 1 4 805 2630 86 23 96.686966 United5 1 11 1 1 5 902 2630 75 23 96.815872 States5 1 11 1 1 6 988 2631 44 22 96.948647 ands 1 11 1 1 7 1042 2631 106 26 96.552582 Canada;5 1 11 1 1 8 1160 2631 21 23 96.239822 in5 1 11 1 1 9 1198 2631 67 25 95.467789 1992,5 1 11 1 1 10 1277 2632 50 23 95.914207 GM5 1 11 1 1 11 1339 2632 45 23 96.832199 had5 1 11 1 1 12 1401 2632 23 24 70.175545 185 1 11 1 1 13 1437 2633 76 29 96.914894 plants5 1 11 1 1 14 1525 2632 21 23 96.781921 in5 1 11 1 1 15 1559 2633 37 23 96.395470 thes 1 11 1 1 16 1609 2633 85 23 96.971893 United5 1 11 1 1 17 1706 2633 77 23 97.002296 States5 1 11 1 1 18 1794 2634 44 22 96.786163 ands 1 11 1 1 19 1850 2634 97 23 96.082802 Canada4 1 11 1 2 0 605 2668 1078 33 -1 5 1 11 1 2 1 605 2668 44 23 96.788193 ands 1 11 1 2 2 660 2675 45 16 96.102425 ones 1 11 1 2 3 717 2668 21 23 96.102425 in5 1 11 1 2 4 751 2669 105 23 96.421516 Mexico.5 1 11 1 2 5 876 2669 50 23 96.523621 GM5 1 11 1 2 6 937 2674 97 25 96.523621 expects5 1 11 1 2 7 1046 2674 23 18 96.866867 to5 1 11 1 2 8 1079 2671 66 22 96.779160 closes 1 11 1 2 9 1156 2671 130 23 96.891518 additional5 1 11 1 2 10 1299 2671 76 30 96.965485 plants5 1 11 1 2 11 1387 2671 29 30 96.965485 by5 1 11 1 2 12 1432 2671 66 24 91.622864 1996.5 1 11 1 2 13 1519 2671 99 24 96.833168 Petitions 1 11 1 2 14 1630 2677 21 18 96.530479 at5 1 11 1 2 15 1662 2672 21 23 95.643936 5. Set Aside Order 116 F.T.C.

followed by Ford (21.6%), Honda/Acura (9.4%), Toyota/Lexus (9.3%), Chrysler (8.3%), Nissan/Infiniti (5%) and VW/Audi (1.1%)."? In 1992, 12 Japanese and 2 European transplant car assembly plants operated in North America (including Mexico)."° The transplant assembly plants operated by Japanese car manufacturers, either directly or through joint ventures, during the period from 1982 through 1989, have added more than 2.5 million units of production capacity in North America. Hyundai, a Korean car manufacturer, sold more than 1.2 million cars in North America between 1986 and 1992 and in 1989 opened a plant in Quebec with a capacity of 100,000 vehicles.'* The transplant operations for the most part emphasize smaller cars, and their presence in North America ensures that their ability to expand sales is not limited by export restrictions.'° Imports from other countries, including Korea, Mexico and Brazil, amounted to 412,471 cars in 1992.'° Honda, Toyota and Nissan have expanded into new market niches by marketing Acura, Lexus and Infiniti cars in the luxury segment of the market.

A number of joint ventures and other cooperative arrangements between automobile manufacturers have been formed since 1984. Ford and Mazda formed Auto Alliance International, Inc., a joint venture that assembles small cars (Ford Probe, Mazda MX6 and Mazda 626) in a plant in Flat Rock, Michigan.'’ Ford and Mazda also cooperate in other areas. For example, Ford makes the Mazda Navajo sport-utility vehicle, which competes with Ford's Explorer, 2 The transplant assembly plants in the United States accounted for 25% of 1992 U.S. car production. 1993 Market Data Book at 12.

13 In addition, BMW and Mercedes Benz recently have announced plans to build plants in the United States, with a combined announced capacity of 120,000 cars. Petition at 5. * Petition at 4 and Tab 10.

1S In 1984, when the order was issued, voluntary restraint agreements ("VRA") limited the number of cars that could be imported from Japan for sale in the United States. The VRAs expired in 1985. Since 1985, the government of Japan has implemented voluntary export restraints ("VER"). In recent years, the number of cars exported from Japan to the United States consistently has fallen below the VER limits. See 1993 Market Data Book at 4. © Petition, Tab II.

75 1 12 1 1 2 687 2669 59 23 96.275864 Ford5 1 12 1 1 3 758 2669 40 23 96.275864 has5 1 12 1 1 4 810 2676 12 16 96.571266 a5 1 12 1 1 5 832 2669 58 23 96.822449 25%5 1 12 1 1 6 901 2669 80 29 96.286591 equity5 1 12 1 1 7 994 2669 93 23 96.593979 interests 1 12 1 1 8 1099 2670 21 22 96.918518 in5 1 12 1 1 9 1132 2670 95 23 96.563156 Mazda.5 1 12 1 1 10 1248 2670 99 23 96.740135 Petitions 1 12 1 1 11 1358 2675 22 18 96.052704 at5 1 12 1 1 12 1391 2671 21 23 96.052704 6. GENERAL MOTORS CORPORATION, ET AL. 1283 1276 Set Aside Order and Mazda and Ford collaborated on the development of Ford's subcompact Escort.'® Ford recently formed a cooperatives 1 3 1 2 8 1795 667 155 34 93.195702 associa-4 1 3 1 3 0 629 725 1323 46 -1 5 1 3 1 3 1 629 726 92 35 83.695961 tion with Nissan, Japan's second largest automobile producer (after Toyota), to produce Mercury Villager and Nissan Quest minivans at Ford's plant in Avon Lake, Ohio."”

In 1985, Chrysler and Mitsubishi Motors Corporation established Diamond-Star Motors to produce cars.’? Although Chrysler sold its interest in Diamond-Star to Mitsubishi in 1991,”! the two companies continue jointly to develop models produced by Diamond-Star. Chrysler distributes Japanese-made Mitsubishi vehicles in the United States, and Chrysler and Mitsubishi collaborate in design, engineering and manufacturing technology and know-how. Subaru and Isuzu” have established a North American assembly joint venture, Subaru-Isuzu Automotive, Inc. ("SIAI"). SIAT has a plant in Lafayette, Indiana, with an annual capacity of about 169,000 units.”* GM and Suzuki™ are partners in a joint venture called CAMI Automotive, Inc. CAMI's plant in Ontario, Canada, with an annual capacity of 205,000 cars, makes Chevrolet Geo Tracker and Metro vehicles for GM.”

Since the inception of NUMMI, GM has continued to make small cars (the J car (Chevrolet Cavalier and Pontiac Sunbird)) and has added two families of compact cars to its fleet (the N car 18 Petition, Tab 12 ("How Ford and Mazda Shared the Driver's Seat,” Business Week, March 26, 1990, at 94).

19 Petition, Tab 13 (A. Harmon, A5 1 7 1 1 8 1132 2064 51 23 96.421005 Vans 1 7 1 1 9 1194 2064 135 30 96.421005 Vanguard;5 1 7 1 1 10 1340 2064 67 26 96.757072 Ford,5 1 7 1 1 11 1417 2063 86 23 96.101852 Nissan5 1 7 1 1 12 1514 2062 134 24 96.830986 Overcome5 1 7 1 1 13 1657 2063 102 23 96.463539 Distrust5 1 7 1 1 14 1768 2063 35 23 96.989563 To5 1 7 1 1 15 1813 2062 70 24 97.006096 Builds 1 7 1 1 16 1893 2061 71 24 96.761551 Their2 1 8 0 0 0 621 2106 881 31 -1 3 1 8 1 0 0 621 2106 881 31 -1 4 1 8 1 1 0 621 2106 881 31 -1 5 1 8 1 1 1 621 2107 59 23 96.597534 Firsts 1 8 1 1 2 690 2106 101 24 96.541306 Vehicles 1 8 1 1 3 801 2106 138 31 88.570129 Together, Los Angeles Times, July 20, 1992, at Dl). 0 Diamond-Star began making small cars in the U.S. in 1988. In 1991, it was making the Mitsubishi Eclipse and Mirage, the Plymouth Laser, and the Eagle Talon and Summit at its Normal, Illinois plant. Petition, Tab 14 ("Chrysler, Mitsubishi Motors Agree to Major Restructuring of Diamond-Star Joint Venture," PR Newswire, October 29, 1991). 21 Chrysler has a 5.9% equity interest in Mitsubishi. 22 GM owns a 38% equity interest in Isuzu. Petition, Tab 7 (Rogers Affidavit). 23 In 1992, SIAI produced 57,623 Subaru Legacy sedans and station wagons. The plant also produces Isuzu pickup trucks and sport-utility vehicles. Petition at 7. 24 GM owns a 5.3% equity interest in Suzuki. Petition, Tab 7 (Rogers Affidavit). °5 Petition, Tab 7 (Rogers Affidavit). In 1992, CAMI produced 96.404 small cars, the Geo Metro and the Suzuki Swift. 1993 Market Data Book at 10. Set Aside Order 116 F.T.C.

(Pontiac Grand Am, Oldsmobile Achieva and Buick Skylark) and the L car (Chevrolet Corsica and Beretta). GM produced more than 9 million" Y," L and N cars in the United States between 1985 and 1992, which is more than ten times the number of cars that NUMMI produced for GM during the same period. Petition at 14-15. In 1985, GM created the Saturn Corporation, which began making cars in 1990. The Saturn plant in Spring Hill, Tennessee, currently makes 240,000 cars annually, and GM plans to increase production to more than 300,000 units by the end of 1993.° In addition, in the last six years, Toyota has built two plants in North America, in Georgetown, Kentucky and Cambridge, Ontario, Canada. After completion of an expansion at the Georgetown plant, Toyota will have a North American capacity of 500,000 vehicles annually.”’ The changes in the industry that are described above are changed circumstances that eliminate the need for the order's limitations on the output and the duration of the joint venture. Entry and expansion in the automobile market in North America, although costly and time-consuming, have occurred on a significant scale. In the face of such entry and expansion, the joint venture is unlikely to create or facilitate the exercise of market power.”* In addition, the development by GM of the Saturn line of cars is a significant change that eliminates the concern that the establishment of NUMMI would deter independent development and production of small cars in North America by GM. GM's substantial investment in Saturn, the increasing presence of transplant operations and the substantial increase in small car models available to consumers since 1984 all 26 Although the Commission has at times looked skeptically at certain evidence of post-acquisition exculpatory conduct that is within the control of the respondent, see, e.g., B.F. Goodrich, 110 FTC 207, 340-42 (1988), GM's substantial investment in Saturn Corp., both in terms of dollars (more than $2 billion in the Tennessee plant and. a similar amount in marketing the Saturn line) and good will, and Saturn's success in the market suggest that GM is unlikely to abandon the Satum line in favor of output from NUMMI. In 1992. only two years after beginning production, the Saturn line of cars accounted for almost 8% of GM's total sales.

y 2” Petition, Tab 8 (Yasuda affidavit).

28 See 1992 Horizontal Merger Guidelines Section 3.0; Genstar Limited, 104 FTC 264. (1984) (order modified on showing of expansion and entry in the relevant market that eliminated need for order restriction); cf. Louisiana-Pacific Corp., 112 FTC 547, 559 (1989) (no claim of changes in structural characteristics of market, such as ease of entry, that might obviate need for remedy provided by order). GENERAL MOTORS CORPORATION, ET AL. 1285 1276 Set Aside Order suggest that the basis for the concern reflected in the complaint and order about diminished competition in the small car market has been eliminated. There appears to be no continuing need for the order's restrictions on the duration and scope of the joint venture, and continuing the restrictions in the context of the changed conditions may hinder the ability of the joint venture to respond to consumer demand.

The Commission has determined that the changes in the industry are significant changes that eliminate the need for the order's limitations on the output and the duration of the joint venture. Accordingly, the order should be reopened and paragraphs II and III of the order should be set aside.

In addition to the changed conditions of fact that have eliminated the need for the order's limitations, GM and Toyota also assert significant efficiencies that have been realized and that will continue to be realized if the order is set aside and the joint venture is not terminated.” The record appears to show that NUMMI may be one of the more efficient assembly plants in the United States.°° GM states that it is continuing to reap thebenefits of gaining first-hand experience with an efficient production system.*' Moreover, the parties assert that permitting NUMMI to continue its operations beyond 1996 will facilitate GM's efforts to reduce costs and give GM continued access to small cars, consistent with the recognition that NUMMI benefits GM by enabling it to obtain a low-cost The respondents state that NUMM1 is a successful project of comparative labor/management relations that facilitates GM's efforts to learn the Toyota Production System, supplies the market with more than 300,000 high quality, low cost vehicles annually and diffuses trade frictions. Petition at 8-12. Because the Petition is granted on the ground of changed conditions of fact, the Commission need not address the question whether the public interest justifies the requested relief, including any efficiencies. °° Petition, Tab | (Convis Affidavit) (describing NUMMT's efficiency efforts). See Petition at 9 (referring to studies by industry authorities, management experts and academicians that show NUMMI's efforts to improve efficiency); Petition, Tab 16 at 97 (case study of NUMMI appearing in the February 1993, Harvard Business Review concluding, in part, that NUMMI “has succeeded in employing an innovative form of ... time-and-motion regimentation on the factory floor not only to create world-class productivity and quality but also to increase worker motivation and satisfaction.”). 31 Petition, Tab 6 (Mutchler Affidavit) (GM initially adopted a5 1 7 1 1 11 1462 2572 140 29 92.528481 piece-meals 1 7 1 1 12 1612 2573 118 29 96.815247 approach5 1 7 1 1 13 1740 2577 23 19 96.954651 to5 1 7 1 1 14 1774 2573 37 23 96.940903 thes 1 7 1 1 15 1822 2572 104 30 96.940903 learning4 1 7 1 2 0 586 2610 1339 34 -1 5 1 7 1 2 1 586 2610 115 28 84.235741 process; in 1989-90, however, GM began5 1 7 1 2 7 1166 2617 23 18 96.576843 to5 1 7 1 2 8 1200 2613 143 23 96.576843 understands 1 7 1 2 9 1354 2614 47 22 96.963341 that5 1 7 1 2 10 1411 2614 58 23 96.819519 each5 1 7 1 2 11 1480 2614 103 23 96.609833 elements 1 7 1 2 12 1594 2614 28 24 97.004417 of5 1 7 1 2 13 1630 2615 38 23 96.370064 thes 1 7 1 2 14 1679 2615 93 29 96.483986 Toyota5 1 7 1 2 15 1783 2615 142 23 96.308945 Production4 1 7 1 3 0 585 2647 1340 37 -1 5 1 7 1 3 1 585 2647 92 30 96.721588 Systems 1 7 1 3 2 687 2649 18 22 96.024902 is5 1 7 1 3 3 714 2656 27 15 95.649368 an5 1 7 1 3 4 751 2650 109 22 93.810890 essentials 1 7 1 3 5 871 2654 48 25 94.556923 parts 1 7 1 3 6 929 2651 23 21 96.048065 of5 1 7 1 3 7 967 2650 33 22 93.275185 thes 1 7 1 3 8 1009 2650 116 27 74.823845 whole.). See Petition at 11 (GM states that it is5 1 7 1 3 18 1645 2654 45 22 95.099068 still5 1 7 1 3 19 1701 2654 38 23 95.812881 thes 1 7 1 3 20 1749 2654 55 29 95.812881 high5 1 7 1 3 21 1813 2658 51 19 93.278793 costs 1 7 1 3 22 1873 2661 52 23 93.223999 pro-4 1 7 1 4 0 583 2687 368 29 -1 5 1 7 1 4 1 583 2687 72 23 96.284821 ducers 1 7 1 4 2 674 2688 21 22 95.915565 in5 1 7 1 4 3 706 2688 74 23 96.380310 North5 1 7 1 4 4 793 2689 111 22 92.813995 Americas 1 7 1 4 5 916 2689 35 27 71.742500 .). Set Aside Order 116 F.T.C.

domestic subcompact economy car.” Thus, NUMMI's benefits may well continue beyond 1996. Extending NUMMI will permit the continuance of any efficiency gains that benefit competition in the relevant markets.

IV. The Order's Restrictions on Communications Also Should Be Set Aside Having determined to reopen the order on the ground of changed conditions of fact and to set aside the order's restrictions on the duration and output of the joint venture, we next consider whether the remaining provisions of the order should be retained. The order's limitations on the exchange of certain nonpublic information among GM, Toyota and NUMMI addressed the concern, alleged in the complaint, that the joint venture might facilitate noncompetitive cooperation between GM and Toyota. The respondents claim that the restrictions of the order impede the ability of the joint venture to do business. They also claim that communications between participants in other automobile industry cooperative ventures created since the order was issued are not similarly restricted and that, as a result, GM, Toyota and NUMMI are unable to communicate as do their competitors.

The provisions of the order were designed to restrict communications that might facilitate noncompetitive cooperation between GM and Toyota, while permitting communications necessary to accomplish the legitimate purposes and functioning of the joint venture. The respondents have shown that, in some circumstances, the specific limitations of the order impede the ability of the respondents and the joint venture to engage in legitimate activity. For example, the respondents have shown that the limitation on the exchange of information concerning the prices of component parts supplied to the joint venture prevents the joint venture from obtaining savings that may result from combining its market search activity with Toyota's, and from realizing cost savings to be “ Petition at 2, 11 (GM will be able to continue to obtain from NUMMI what it characterizes as a “high quality, low cost sedan -- the Prizm -- that is the flagship of the Geo distribution network"). GENERAL MOTORS CORPORATION, ET AL. 1287 1276 Set Aside Order generated by combining its purchases with Toyota's.** The provision of the order that bars GM from discussing marketing plans with Toyota or NUMMI allegedly has hindered the ability of the parties to realize market opportunities and increased their costs. For example, the respondents state that because GM was unable to tell NUMMI about a potential sale of cars in the fleet market, GM was unable to persuade NUMMI to make a price concession that might have resulted in a transaction beneficial to all of the parties. On another occasion, according to the respondents, as a result of GM's perceived inability under the order to tell the joint venture about GM's plans to re-badge the Nova as the Geo Prizm, NUMMI wastefully spent funds on tooling that was specific to Nova and that later had to be scrapped.™* The respondents have shown that in the context of significant changed conditions in the industry, the restrictions in the order on business communications may increase the costs of the joint venture and hinder the ability of the respondents and the joint venture to respond to competitive conditions. At the same time, the communications that are limited by the order are not per se unlawful, and setting aside these provisions of the order will not excuse the respondents from compliance with laws that prohibit collusive activity in restraint of trade. See General Railway Signal., 108 FTC 181 (1986) (modifying order). The Commission has concluded that in the context of the changed conditions in the industry, paragraphs IV and V of the order should be set aside to permit the respondents and NUMMI to engage in communications ancillary to and reasonably necessary for the operation of the joint venture.* Accordingly, it is ordered, That this matter be and it hereby is reopened and that the Commission's order in Docket C-3132, issued on April 11, 1984, be and it hereby is set aside, as of the effective date of this order.

33 Petition at 16-17 4 Petition at 17-19; Kimura Affidavit: Rogers Affidavit. The recordkeeping requirements of the order are intended to assist the Commission in monitoring the respondents’ compliance with the order's restrictions on the exchange of information. If the order's restrictions on communications are set aside, the recordkeeping and other compliance requirements of the order (paragraphs VI through IX) also should be set aside. Concurring Statement 116 F.T.C.

CONCURRING STATEMENT OF COMIMISSIONER MARY L. AZCUENAGA I concur in the decision of the Commission to reopen and set aside the order in this matter on the ground of changed conditions in the automobile industry that eliminate the need for the order. I do not endorse as relevant to this decision the purported efficiency gains from NUMM1I alleged by GM and Toyota. See Order at 9-10. GM and Toyota have asserted efficiencies that may or may not be realized in the future, if the respondents decide to continue their joint venture.' I hope that the asserted efficiencies will be realized and that NUMMI will indeed benefit competition, but these are not independent reasons for reopening and setting aside the order. Nor would it matter, in the context of determining whether the order should be reopened, if NUMMI were inefficient. If the projected efficiencies of the joint venture were not sufficient to forestall imposition of the order in the first place, how could the failure fully to achieve those efficiencies’ or even their continuation justify setting the order aside? The order of the Commission is not premised on the efficiency (or inefficiency) of the joint venture but rather on concerns, described in the complaint, about the potential effects on competition of noncompetitive cooperation between GM and Toyota. When we are persuaded that changed conditions of fact in the market have eliminated that concern, our task is done, and we need not speculate, in the context of a petition to reopen, about the parties’ predictions of potential efficiencies.

GM and Toyota, in their business judgment, would prefer to continue their joint venture beyond the twelve years provided in the order, because they believe that it will be profitable. To accept this reason as a basis for reopening and setting aside the order would The order having been set aside, GM and Toyota will be at liberty at any time (as they were at liberty while the order was in effect) to discontinue their joint venture. The alleged formidable4 1 6 1 3 0 616 2510 1340 31 -1 5 1 6 1 3 1 616 2511 142 30 96.664261 regulatory,5 1 6 1 3 2 772 2515 37 18 96.689972 tax5 1 6 1 3 3 823 2511 45 22 96.484932 ands 1 6 1 3 4 883 2511 117 30 96.449959 logistical5 1 6 1 3 5 1014 2511 184 29 96.704414 disadvantages5 1 6 1 3 6 1212 2515 23 18 96.704414 to5 1 6 1 3 7 1248 2510 122 30 96.850311 operating5 1 6 1 3 8 1384 2518 28 15 96.628342 an5 1 6 1 3 9 1426 2515 55 18 96.728622 auto5 1 6 1 3 10 1495 2511 64 29 96.401764 plants 1 6 1 3 11 1573 2510 22 23 96.413841 in5 1 6 1 3 12 1609 2510 152 27 72.074554 California,”5 1 6 1 3 13 1786 2511 37 22 95.489746 thes 1 6 1 3 14 1837 2511 119 23 82.718437 inherent difficulties in assembling vehicles” in the 30-year-old plant, the cost of required improvements to NUMMI's plant (expected to exceed $500 million), Petition at 13, and the fact that NUMMI has5 1 6 1 5 17 1916 2595 39 18 96.851280 nota 1 6 1 6 0 616 2627 1207 31 -1 5 1 6 1 6 1 616 2629 58 22 96.930244 been5 1 6 1 6 2 685 2628 154 30 96.501602 consistently5 1 6 1 6 3 859 2628 147 30 75.610359 profitable. Kimura Affidavit at I, may provide incentives for doing so. “ See Jennings Affidavit at 4; Mutchler Affidavit at 2. GENERAL MOTORS CORPORATION, ET AL. 1289 1276 Concurring Statement relegate the decision whether to reopen final orders of the Commission to the business preferences of the respondent. The Commission has rejected this argument in the past, see Louisiana-Pacific Corp., 112 FTC 547, 569 (1989) (rejecting as a basis for reopening the order the argument that retaining rather than divesting a profitable plant would enhance the respondent's ability to compete), and it should continue to do so.

I fully concur in the decision to reopen and set aside the order on the ground of changed conditions of fact. CONCURRING STATEMENT OF COMMISSIONER DEBORAH K. OWEN When the Commission accepted the consent order in this matter in 1984, it was generally recognized as a landmark effort to balance our dual responsibilities of vigorously enforcing the competition laws, while refraining from unnecessarily interfering with legitimate business activities. In light of marked changes in circumstances since that time, I believe that the Commission's determination to vacate the order today follows in the tradition of its original decision, and I strongly endorse it.

The Merger Guidelines recognize that the larger5 1 5 2 1 8 1685 1748 185 34 85.676765 universe of combinations are either5 1 5 2 2 4 1158 1808 270 45 96.148697 competitively5 1 5 2 2 5 1462 1806 192 35 96.371422 beneficial5 1 5 2 2 6 1687 1817 40 23 95.901711 or5 1 5 2 2 7 1759 1806 166 34 92.875824 neutral. Section 0.1.’ As part of their Petition for reopening, the parties have presented an impressive array of information about the positive contributions of NUMMI, including assorted efficiencies that have resulted from the joint venture. While the Order (at 9-10 n.29) notes that [b]ecause5 1 5 2 7 3 928 2100 58 35 96.601326 thes 1 5 2 7 4 1007 2100 152 34 96.489761 Petitions 1 5 2 7 5 1180 2099 30 35 96.546829 is5 1 5 2 7 6 1231 2099 147 45 96.546829 granted5 1 5 2 7 7 1399 2109 46 25 96.636620 on5 1 5 2 7 8 1467 2098 57 35 96.422058 thes 1 5 2 7 9 1546 2097 138 46 96.193703 grounds 1 5 2 7 10 1705 2097 42 35 96.702774 of5 1 5 2 7 11 1764 2096 164 45 96.369095 changed4 1 5 2 8 0 607 2156 1319 44 -1 5 1 5 2 8 1 607 2159 202 35 95.986961 conditions5 1 5 2 8 2 836 2158 42 36 96.770798 of5 1 5 2 8 3 901 2158 82 41 95.836815 fact,5 1 5 2 8 4 1012 2158 58 35 95.836815 thes 1 5 2 8 5 1096 2157 248 36 95.086479 Commissions 1 5 2 8 6 1372 2157 90 34 96.871857 needs 1 5 2 8 7 1489 2162 61 29 96.169708 not5 1 5 2 8 8 1576 2156 146 35 92.576118 address5 1 5 2 8 9 1752 2184 5 6 57.233486 .5 1 5 2 8 10 1788 2184 5 6 57.233486 .5 1 5 2 8 11 1824 2184 5 6 84.871994 .5 1 5 2 8 12 1858 2166 68 34 96.399513 any4 1 5 2 9 0 607 2215 1319 45 -1 5 1 5 2 9 1 607 2217 251 41 94.191887 efficiencies, the Commission nonetheless proceeds to comment on this issue. Order at 9-10. Without meaning to disparage the parties’ assertions in this regard, because of the basis for our decision, it is not necessary for the Commission, in my judgment, to evaluate, much less opine on, the existence, extent and effect of such efficiencies as part of this endeavor. Engaging in dicta is not without peril.

U.S. Dept. of Justice and Federal Trade Commission Horizontal Merger Guidelines, reprinted in 4 Trade Reg. Rep.(CCH) paragraph 13 ,104. Modifying Order 116 F.T.C,