salers are particularly well adapted. Therefore, the Subcommittee undertook a careful study of General Motors' methods and trade practices to determine whether it has increased its own share of the market, and whether the effect may be to exclude independent parts producers and wholesalers from these industries.

The automobile is a fabricated product consisting of thousands of parts. Historically, the passenger-car manufacturer was primarily an assembler, purchasing components from many manufacturers, assembling them into an automobile, and marketing the finished product through his dealership organization. As individual automobile manufacturers grew, they increasingly manufactured their own parts and components. The Ford Motor Co. extended its integration to include even basic raw materials, acquiring its own mines, railroad, and rubber plantations. It has divested itself of various operations found to be uneconomical but it produces steel and glass to this day. General Motors has emphasized the production of parts and accessories but not the raw materials required in their manufacture. It is the most integrated firm in the industry in regard to parts and accessories manufacture.

The useful life of the automobile exceeds that of many of the thousands of component parts which enter into its assembly. The replacement of wornout parts engages a gigantic industry. In 1954, the wholesale value of replacement parts and accessories sold was more than $12 billion. The industry making these products likewise manufactures the same or similar products for assembly. Therefore, each supplier of a part or accessory may produce for assembly or replacement or both. General Motors as a manufacturer of parts and accessories competes with about 2,000 independent producers vying for these markets. General Motors has a captive market for parts in its own assembly operations, and also sells parts for assembly to other automobile manufacturers. In the replacement market, it not only sells its own parts but also acts as a wholesaler for parts it normally uses in assembly but does not manufacture.

The distribution of parts and accessories, unlike that of automobiles, relies largely upon independent parts wholesalers and jobbers. The multiplicity of parts and the existence of many specialized producers mean that only through jobbers and wholesalers can a particular parts producer reach the scattered market comprising the many parts users. General Motors is a major distributor of parts and accessories. The individual car divisions distribute parts they manufacture themselves and also sell at wholesale parts made by independent producers. The AC Spark Plug division of General Motors has its own jobbers. Other General Motors divisions distribute parts through United Motors Service division, whose only function is the wholesale distribution of automotive service parts and accessories through warehouse distributors.

The market for replacement parts and accessories consists, in the main, of automobile dealers, independent garages, filling stations, and accessory stores. To some extent, this market can be fractioned into markets for the various car lines, since interchangeability of parts between competitive car lines is limited. There is apparently greater interchangeability in truck production. To the extent that parts are not interchangeable, specialized markets exist.

In 1947, there were 1,904 producers of motor vehicle parts and equipment. Since the number of manufacturers of passenger cars, trucks, and buses was limited, the great majority were producers of bodies, parts, and accessories, and specialized equipment. The replacement parts and accessories market consists of over 40,000 automobile dealers, 18,000 battery and accessory stores, nearly 200,000 filling stations, and 85,000 garages. It is difficult to measure the extent of these markets. In 1948, sales of parts and accessories by automobile dealers were about $2 billion. Garages did a repair and service business of $1 billion, but this included service charges as well as parts sales. Total sales of parts and accessories by battery and accessory stores were about $400 million and by filling stations more than $300 million. Clearly, dealers lead in the demand for parts and accessories, followed by garages.

General Motors claims that its share of the overall market for replacement parts and accessories in 1954 was 23 percent. If we consider that this market comprises not only dealers, but garages, stores, and filling stations, and that it is fractioned into markets for separate car lines, then General Motors' 23 percent is a gigantic factor in an industry occupying approximately 2,000 producers. The study was incomplete because of the complexities of the market and lack of time to study General Motors' share and how this share has changed. However, it is obvious that within this market the General Motors dealerships constitute a protected area. Thus, it is in the area of the greatest demand for parts and accessories, the automobile dealership, that the automobile manufacturer has his greatest market power. Independent manufacturers and jobbers complain that General Motors, through the dealer franchise, is able to coerce and improperly induce dealers to purchase parts and accessories from it and thereby foreclose independent producers from this market.

General Motors enters into selling agreements, popularly known as "franchises," with the dealers handling its lines of automobiles, parts, and accessories. These agreements set forth the terms and conditions under which sales of automobiles, parts, accessories, and supplies are made to the dealers. It is through this agreement and the maintenance of a large field organization that General Motors exercises supervision over its dealers.

General Motors competes in the parts and accessories markets with independent jobbers, who sell the products of the independent manufacturers of parts and accessories. As a result of complaints by manufacturers and jobbers of parts and accessories that they were unable to sell to General Motors dealers, a Federal Trade Commission investigation was begun in the early 1930's. The complainants asserted that General Motors was monopolizing the parts and accessories business of its dealers. Also, General Motors dealers charged that they were not free to buy parts and accessories from local jobbers.

On June 15, 1937, the Federal Trade Commission issued a complaint against General Motors charging it with coercive practices exerted upon its dealers which restricted their right to purchase parts and accessories from independent sources. The complaint raised two issues: one in regard to accessories and supplies and the other with reference to parts. It alleged that General Motors Corp. had forced its dealers to buy accessories and supplies from General Motors, to

the exclusion of competing sellers, through the use of "intimidation, oppression, and coercion," including threats of cancellation and actual cancellations of new-car selling agreements. The complaint charged that the use of these methods to force dealers to buy accessories and supplies exclusively from General Motors constituted an unfair method of competition and a violation of section 5 of the Federal Trade Commission Act.

The second issue raised in the complaint challenged a clause contained in the new-car selling agreements of General Motors dealers everywhere except in Texas. This clause read:

Dealer agrees that he will not sell, offer for sale, or use in the repair of Chevrolet [Pontiac, Oldsmobile, Buick] motor vehicles secondhand or used parts or any part or parts not manufactured by or authorized by the Chevrolet [Pontiac, Oldsmobile, Buick] Motor division * * * (VIII, App. B, XXIV).

It was charged that this provision constituted a violation of section 3 of the Clayton Act, as an exclusive dealing arrangement which had the effect of substantially lessening competition or tending to create a monopoly in the parts used in the repair of General Motors cars.

The Subcommittee heard testimony from Donald P. MacDonald, an attorney with the Federal Trade Commission who was intimately associated with the investigation and hearings. Mr. MacDonald stated that manufacturer and jobber testimony before the Commission demonstrated that General Motors, by requiring its dealers to buy parts and accessories from their respective car divisions and prohibiting them from purchasing so-called nongenuine parts from local jobbers, had reduced the sales of independent parts and accessories manufacturers and had substantially lessened competition (VI, 2758).

Mr. MacDonald further stated that the testimony disclosed the facts, included in the Commission's findings, that much unordered merchandise was shipped by General Motors car divisions to their dealers; that on occasion dealers were threatened with cancellation of their franchises unless they accepted and paid for unordered parts and accessories, and that in some cases franchises were canceled for such refusals (VI, 2759).

The Federal Trade Commission's findings as to the facts noted that the acts and practices of General Motors were designed to and did coerce and compel its dealers to purchase parts and accessories solely from General Motors and prohibited purchases from outside sources except in cases of emergency when the so-called "genuine" part or accessory was not available.

The Commission found that as a result of these acts and practices and the above-described provision in the dealers' selling agreements, independent manufacturers and jobbers were no longer able to sell to General Motors dealers. The Federal Trade Commission concluded that the effect thereof had been to substantially lessen competition and had tended to create a monopoly.

On November 12, 1941, after more than 7 years of investigation and 4 years after issuance of the complaint, the Commission entered a cease-and-desist order against General Motors. General Motors filed an appeal with the United States Circuit Court of Appeals for the Sixth Circuit, but subsequently withdrew the appeal. The Federal Trade Commission's order was modified on June 25, 1942. General Motors filed a report of compliance on September 22, 1942, in

which it indicated that it had eliminated the objectionable provision from its selling agreement and had substituted the following:

Dealer agrees that he will not sell, offer for sale, or use in the repair of Chevrolet motor vehicles and chassis, as genuine new Chevrolet repair parts, any part or parts which are not in fact genuine new Chevrolet repair parts as defined herein (VIII, app. B, XXIV).

General Motors also reported that it had notified all of its employees of the provisions of the cease-and-desist order and had directed them to conform thereto. The Federal Trade Commission accepted the report on October 12, 1942.

The Commission's order, in substance, directs General Motors, in connection with the sale and distribution of automobile accessories, supplies, and similar products to cease and desist from:

1. Requiring dealers, by means of intimidation or coercion, to purchase or deal in accessories or supplies sold and distributed by General Motors or anyone designated by them;

2. Canceling, or directly or by implication threatening the cancellation of, any franchise or agreement with dealers, because of their failure to purchase or deal in General Motors' accessories or supplies;

3. Canceling, or directly or by implication threatening cancellation of, any franchise or agreement with any dealer, for purchasing or dealing in accessories or supplies not obtained from General Motors;

4. Shipping accessories or supplies without prior orders therefor, or canceling or directly or by implication threatening the cancellation of any franchise or agreement with a dealer because of failure or refusal to accept accessories or supplies shipped without prior order;

5. Refusing, or threatening to refuse, to deliver automobiles to dealers because of a failure or refusal to purchase or deal in General Motors accessories or supplies; and

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 dealers into purchasing or dealing in accessories or supplies manufactured or supplied by General Motors or anyone designated by them.

In regard to parts, the Commission order directs General Motors to cease and desist from violating the exclusive dealing section of the Clayton Act by 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 on the condition, agreement, or understanding that the dealer shall not use or sell automobile parts other than those acquired from General Motors, 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.

The effectiveness of the Commission's 1941 cease and desist order against General Motors can only be measured by its applicability and enforceability. It appears that the Commission's order fails both these tests.

The first count of the Commission's cease and desist order, prohibiting practices in violation of section 5 of the Federal Trade Commission

Act, relates to the sale and distribution of accessories and supplies. The second count of the order, prohibiting practices in violation of section 3 of the Clayton Act, relates solely to parts. Thus, application of the Commission's order requires a distinction between a part and an accessory. However, there is no clear distinction between accessories and parts, nor is there a precise definition of supplies. As noted by the Commission's findings as to the facts, the distinction between parts and accessories was confusing even to officials of General Motors. In this testimony before the Subcommittee, it appeared that this confusion among General Motors' officials even extended to Alfred P. Sloan, Jr., chairman of the board, and Harlow H. Curtice, president of General Motors. Mr. Sloan called a lamp an accessory, not a part, while Mr. Curtice said a lamp is as much a part of the car as anything else. "So it is a pretty fine line of demarcation" (VII, 3526).

Moreover, as new models of cars are developed, many items previously considered accessories become standard equipment and, as such, come within the classification of parts. General Motors' catalogs are of no help in distinguishing between parts and accessories. Articles listed in the parts' catalogs with parts' numbers include such items as radios, antifreeze, and seat covers. Some of these items are also listed in separate accessories catalogs, but even these are given parts' numbers.

It is quite clear that the difficulty of distinguishing between parts and accessories in order to determine which section of the order governs, renders ineffective the application of the Federal Trade Commission's cease and desist order against General Motors.

The ineffectiveness of the Commission's order is also apparent when it is viewed in the light of the cumbersome procedures under the Clayton Act necessary to enforce the second count of the order relating to parts.

The Commission may issue orders under section 5 of the Federal Trade Commission Act or under the Clayton Act. Orders issued pursuant to section 5 of the Federal Trade Commission Act become final in 60 days if no court review is sought, or, if review is sought, upon affirmance of the order. Under the Clayton Act, on the other hand, unless the respondent seeks court review, a Commission order can be enforced only by application to a United States court of appeals. To obtain a decree of affirmance and enforcement, the Commission must prove a violation of the order. Even then, no penalty can be imposed until a subsequent violation is established which constitutes contempt of the court's decree. This cumbersome procedure thus requires twice proving a violation of the Commission's cease and desist order, and at least three times proving conduct in violation of the Clayton Act.

Subsequent to the issuance of the 1941 cease and desist order the Commission received complaints from automobile parts jobbers and from associations of automobile parts jobbers that General Motors was violating the order. A full-scale compliance investigation was conducted. The results of this investigation are now being reviewed by the staff in preparation of a report to the Commission.

This Subcommittee, other congressional committees, and individual Members of the Congress have received numerous complaints from automobile parts jobbers, associations of automobile parts jobbers,