States than all other producers combined; General Motors has also been the leading producer of trucks since 1936. Its position in the bus field has advanced continuously while there has been a gradual exist of competing firms. In 1955 General Motors produced in excess of 80 percent of intercity and city buses.

In the production of locomotives General Motors' market share is of comparable importance to its position in the bus field. Its percentage share of units delivered to railroads in the first 8 months of 1955 was 76 percent, including all the passenger locomotives, and 83 percent of the freight diesel locomotives according to its own statistics. Only in the diesel switcher did other firms have significant market shares.

General Motors holds significant shares of the markets for many household appliances, including refrigerators, ranges, washers, food freezers, and many other products. As late as 1936 the refrigerator was the only major appliance sold by General Motors, and many of its products in this field have been introduced since the war. It has recently designed entire kitchens, internally wired and plumbed, for installation as complete units by builders. Its position in the housing industry is assured. In addition to kitchen appliances, it also manufactures air-conditioning, heating, and water systems.

General Motors' 17 parts and accessories divisions produce and distribute a broad array of parts and accessories used in the automotive, aviation, and marine industries. It is claimed by General Motors that its share of the automotive replacement parts and accessories industry is 23 percent. There is reason to believe that this share has been rising. The remainder of the market is supplied by upwards of 2,000 producers, and General Motors is without doubt the largest producer in the industry.

A firm whose gross sales total $12 billion, whose assets exceed $5 billion, and whose profits after taxes exceed a billion dollars, cannot help but have considerable effect upon our economy. Any investment program it undertakes or any significant change in its sales or labor force is bound to have important repercussions. It cannot act without some realization of its effects. In short, in whatever industry it operates, regardless of market proportions, General Motors presents the problem of size.

After the Subcommittee's early announcement that it would seek to determine what the national antitrust policy should be with respect to bigness, the staff initiated preliminary inquiries seeking to obtain information from various sources, both governmental and private, concerning the larger corporations. While abundant information was publicly available on many such companies, it was discovered that none of the Government agencies have made any comprehensive economic study of the General Motors Corp. in recent years.

Industries dominated by one or a few large companies pose many difficult competitive problems. The officials in charge of the 2 Government agencies which enforce the antitrust laws expressed their concern over the structure of the automobile industry, in which 3 companies produce about 95 percent of the total output. They felt that this high degree of concentration was the basic problem confronting the industry. General Motors posed especially difficult problems, not only because of its relative market position, but also because of its absolute size.

The automobile industry is not typical of those industries dominated by a few companies, which have been described as oligopolistic. Similarly, General Motors does not appear to be typical of companies which tower over an industry. Despite the high degree of concentration which exists, the automobile industry is generally considered to be highly competitive. The Federal Trade Commission reached that conclusion in its 1939 Report on the Motor Vehicle Industry. Various witnesses who appeared before the Subcommittee emphatically expressed their belief that the industry is still intensely competitive. Since the automobile industry does not appear to follow the competitive (or noncompetitive) pattern of other industries dominated by the few, it presents certain unique problems. But, whether or not General Motors represents a typical example of the phenomena of bigness and concentration of economic power, the Subcommittee believed that a thorough study of a corporation which has such tremendous impact on the American economy was in order. Despite its great size, the corporation has the reputation of being well-managed and efficiently run. It made impressive contributions to the Nation's war effort. Its influence has generally been regarded as highly beneficial, and it occupies a distinctive place in the public mind.

Nevertheless, the Subcommittee believed there would be great value in a study to determine whether the tremendous power of the corporation, and the manner in which it is exercised, best served the public interest. Accordingly, a study was initiated of the automobile industry in general, as an example of an industry characterized by a high degree of concentration, and of the General Motors Corp. in particular, as an example of bigness.

The Federal Trade Commission, and the Antitrust Division of the Department of Justice, presently have under review specific activities of General Motors in particular fields. To date, neither agency has undertaken to study the company's total impact on the economy as a whole to determine whether it has exceeded the size which results in the greatest public benefits or whether the economy would be better served by its dismemberment or by limitations upon its further growth.

Bigness is not an evil per se. But, as the Supreme Court said in United States v. Griffith (334 U. S. 100 (1948)), "size is, of course, an earmark of monopoly power." The role of giant corporations in shaping the form of our economic system, even molding social and political attitudes, has long been of concern to students of American economic life. Some believe that the public interest is best served by a large number of small businesses engaging in active competition and acting as a brake on big company power. These persons feel that the law should encourage small business even though in some cases the immediate consequences may be uneconomical.

Perhaps the failure of the antitrust enforcement agencies to undertake a comprehensive study of General Motors rests upon the belief that the problems posed by the sheer size of such a corporation lie beyond the scope of existing antitrust statutes. It has been asserted, with some justification, that the antitrust laws are inadequate to cope with the problems of bigness and concentration of economic power. When monopoly power has been acquired by big corporations through predatory practices, the law may readily be applied to remedy the

situation. But, where corporations increase their dominant position in a given market through means which are not in and of themselves wrongful, but nevertheless reduce the effectiveness of competition, the laws have been less successful. This failure of the law, whether attributed to legislative intent, to judicial interpretation or to inadequate understanding, would properly cause enforcement agencies to hesitate to engage all or a substantial portion of available manpower for several years on a project which might in the end prove fruitless. Doubts as to the scope of the law in this important area indicate the need for Congressional study.

Even under a clear declaration of legislative policy the Federal Trade Commission and the Antitrust Division may well be reluctant to undertake, on their limited budgets, the comprehensive research and investigation which a study of the big corporation entails. Under present law, these agencies are geared to conducting litigation, and the effectiveness of their enforcement programs is measured in terms of actions brought, cases won and lost. This scoreboard approach to antitrust enforcement results in assignment of the greater part of the staffs and resources to run-of-the-mill violations, and only a small part to more complicated long-term study in the areas where our free competitive enterprise is most seriously endangered. The prospect of major economic studies is very dim, as long as the agencies operate on their present meager budgets. This inadequacy further emphasizes the need for congressional inquiry.

The Subcommitte at the outset of its case study, was faced with a major problem of selection. Obviously, time and budgetary limitations would not permit even a cursory review of every phase of General Motors far-flung and widely variegated activities. The process of selection was guided by consideration of the study's objectives, and of the most promising available sources of information.

The Subcommittee sought to ascertain: (1) To what extent the present size of General Motors is attributable to superior efficiency and competitive skill, and to what extent to such factors as mergers and acquisitions, vertical integration, questionable trade practices, huge advertising outlays, great financial resources, and other factors not necessarily related to skill or efficiency; (2) to what extent the present size of General Motors is dictated by demands of optimum efficiency based upon industry requirements of technology, production or distribution; (3) whether true economic efficiency would be impaired if any of the company's present operations were separated from the rest; (4) in what manner, if any, the great power inherent in the size of General Motors carries with it the opportunity for abuse, and whether it has actually been abused; and (5) whether, in the absence of abuse of power, the very magnitude of the corporation results in suppression of competition.

The first question required an appraisal of the extent to which the merger route had contributed to the advancement of General Motors. Examination of this question also represented a logical extension of the Subcommittee's earlier intensive study of mergers generally. The staff learned that in 1953 General Motors had acquired Euclid Road Machinery Co., a corporation manufacturing off-theroad earth-moving machinery. This acquisition marked General Motors' entry into a new field.

Inquiry into the methods by which General Motors has attained its present position also led the Subcommittee to examine antitrust suits brought against the company in the past. These suits were studied to determine whether any of the practices and agreements there involved, or their cumulative effect, had played a significant role in the company's development. The Subcommittee was also concerned with the equally important question whether the decrees entered in these cases were adequate to eradicate the anticompetitive effects of the practices and agreements found objectionable, and whether any advantages derived therefrom by General Motors were of such a nature they could not be dissipated by court action. Furthermore, certain suits (e. g., the recent action involving Du Pont and United States Rubber Co.) yielded information and documents casting light on General Motors' early history and the thinking of its principal officers.

Since all the questions are concerned with problems centering around size, the Subcommittee turned its attention to those fields where General Motors occupies a dominant market position, particularly those industries in which it does in excess of 70 percent of the total business. Public attention has been directed recently to the field of diesel locomotives, where it is generally known that General Motors has made amazing strides and where some long-established, well-known companies have been experiencing grave difficulties. Public announcements before the Subcommittee by responsible Government officials indicated that General Motors occupies a commanding position in the manufacture of motorbuses. Previous antitrust cases, both criminal and civil, involving General Motors, National City Lines, and others, also suggested the possibility of further inquiry in this field. The consequences of the Government's antitrust action against General Motors in the financing field suggested an additional area for exploration. It was known that antitrust action against the three principal automobile producers resulted in the complete separation of financial interests of Ford and Chrysler from the finance companies with which they had been affiliated, while General Motors Corp. had not been required to divest itself of its wholly owned subsidiary, General Motors Acceptance Corp.

In connection with the questions concerning the effect on competition of the power resulting from General Motors' size, the Subcommittee gave careful consideration to complaints registered by various persons, either directly with this or other committees of the Congress, or in trade publications or other journals. In previous hearings before the Subcommittee, representatives of the automotive parts industry had complained, on behalf of independent jobbers and manufacturers, of various practices and policies of the General Motors Corp. General Motors is more highly integrated than any other automobile manufacturer and plays a far larger role in the automotive parts industry than other producers. Therefore, inquiry into the extent to which General Motors obtained competitive advantages because of its role in the production and distribution of automotive parts appeared perti

nent.

The relation between automobile manufacturers and their franchise dealers has been receiving a great deal of public attention within the past few years. Other committees of the Congress have held hearings on bills introduced by dealer associations designed to curb the practice

of "bootlegging." Persons testifying at such hearings charged that overproduction and factory forcing of new cars upon dealers were responsible for this practice. As economic pressures against dealers mounted, they became more vocal in expressing their belief that bootlegging was the result of unusual pressure brought by the manufacturers upon dealers to sell more cars. They charged that this resulted in unwanted merchandise moving into bootleg channels to relieve franchise dealers' inventories. They alleged that dealers could not refuse to accept cars for fear of cancellation or nonrenewal of their franchise.

Extensive data were obtained from General Motors and from various other sources. The Subcommittee is still receiving information from General Motors. Before this study is finally completed, the information already furnished and the data to be supplied will have to be carefully analyzed for inclusion in the Subcommittee's final report. The present staff report will deal largely with the information revealed at the hearings. While final answers must await the completion of the study, the hearings to date have borne fruit in that they focused public attention upon certain pressing problems. These hearings have had the healthy effect of exposing to congressional scrutiny the internal affairs of a corporation charged with a high degree of public interest.

2. SUMMARY

This study of many aspects of General Motors leads to the conclusion that the structure and financial strength of the corporation increased the certainty of success in any new field the corporation entered. Its financial resources are such that the capital barrier to entry faced by most business today is nonexistent for General Motors. Because of the integrated character of the corporation, and because of the dealer franchise system, much of the corporation's activities are sheltered from meeting the test of the market.

A defense of the giant corporation has been that broad stock ownership assures a community of interest between the corporation and the country. General Motors has in excess of one-half million stockholders. However, General Motors' ownership is highly concentrated. The 15 major stockholders own one-third of the entire outstanding common stock of the corporation.

One of the most striking characteristics of the General Motors operation is the extremely high profits earned by the company. In 1955, profits before taxes represented a return of 65 percent on capital invested or net worth. After allowances for taxes, profits in that period were 48 percent more than in 1954 and equal to a return of about 31 percent on investment. Earnings of the other two major automobile producers have also been favorable but not as high as those of General Motors. By comparison the rate of return after taxes for American manufacturing firms as a whole last year was approximately 12 percent, while for those firms with assets of $100 million or more, the average rate of return was less than 15 percent.

The company apparently believes that despite these profits price reductions on its products beyond those already made are not justified either in the form of lower selling prices or upgrading of quality at existing prices. Officials of the company indicated that its pricing policies are based upon long range planning designed to yield an