^* I have been advised by the General Counsel's Office that my prepared statement of December 22, 1983 contained references to nonpublic material. While I disagree with that conclusion, I have decided to delete those portions of the statement which have been identified as containing nonpublic material in order not to delay publication and dissemination of the consent agreement, pending further resolution of the issue.

^1/ My conclusions are necessarily tentative, based on the evidence before us. My final determination would depend upon review of a full adjudicatory record.

^2/ If the parent companies are in competition, or might compete absent the joint venture, it may be assumed that neither will compete with their progeny in its line of commerce. U.S. v. Perm-Oil Chemical Co., 378 U.S. 158, 169 (1964). “Of all joint ventures, the horizontal is inherently the most anticompetitive, because it involves the formation of a joint venture in the markets in which the parents operate, under such circumstances, antitrust compliance and enforcement problems are acute: if the arrangement is allowed to operate at all, the parents, through their representatives in the joint venture, will necessarily agree on prices and output in the very market in which they themselves operate.” Brodley, “Joint Ventures and Antitrust Policy,” 95 Harvard Law Review 1523, 1552 (1982).

^3/ Toyota asserts all price increases included in the market basket are historical, rather than predicted, but because of periodic changes during the model year, it is difficult to understand how the formula would work without some discretionary judgment.

^4/ Professor Kwoka points out that the market shares in small car sales, after excluding the Japanese, is strikingly similar to the traditional market positions of the “Big Three,” with GM having 44.6%, Ford 28.3% and Chrysler 22.7% –– a market structure that was not known for vigorous price competition.

^5/ The principal constraint on Toyota's sales is the VRA. It has some flexibility, however, by diverting more of its quota to large cars. More significantly, however, Toyota has a powerful incentive to restrain GM's output and raise GM's prices. One of the ironies of the Commission's settlement is that it tries to address the central problem of competitors' collaborating to reduce output by placing a cap on the output of the joint venture.

^6/ As Mr. Roger B. Smith, Chairman of GM, told the New York Times in a recent interview, the consent agreement simply repeats what the two companies had already pledged to do in a less formal manner. “If it gives them[the FTC] some comfort and it seals the deal, then it's O.K.”, he stated. Another GM official, commenting on the consent agreement, told the Wall Street Journal, “We know the FTC needs something like that to cover themselves in the face of all the opposition.”

^7/ “The joint venture is in some respects a ‘quasi-merger,’ where cooperation between formerly independent companies often acts to benefit and spur competition. The combined capital, assets, or knowhow of two companies may facilitate entry into new markets and thereby enhance competition, or may create efficiencies or new productive capacity unachievable by either alone.” Brunswick Corp., 94 F.T.C. 1174, 1265 (1979), aff 'd and modified sub nom. Yamaha Motor Co. v. FTC, 657 F.2d 971 (8th Cir. 1981), cert, denied, 452 U.S. 915 (1982).

^*/ See, e.g., New York Times, December 21, 1983, p. Dl “If it gives them [the FTCJ some contort and seals the deal, then it's OK.” (quoting General Motors Chairman Soger Smith); Washington Post, December 21, 1983, p. Dl “The precise terms of the order . . . are likely to include no more than a written agreement to abide by three elements of the venture that have already been publicly announced. ” (According to Toyota's U.S. Counsel.)

^*/ Professor Pitofsky has observed that a market setting with numerous joint ventures raises particular antitrust concerns. Pitofsky, Joint Ventures Under the Antitrust Laws: Some Reflections on the Significance of Penn-Olin, 82 Harv. L. Rev., 1007, 1033 (1969).

^**/ U. S. Department of Justice Antitrust Guide Concerning Research Joint Ventures, 466 CCH Trade Reg. Reports, 35 (December 1, 1980); Brodley, Joint Ventures and Antitrust Policy, 95 Harv. L. Rev. 1523 (1982); Pitofsky, op.cit.

^*/ General Motors is clearly the price leader among domestic auto producers, both because it announces prices first and because its prices virtually dictate Ford and Chrysler decisions. (BC staff memo, VI, 12)

^**/ In the subcompact portion of the U.S. market which is most directly affected by this joint venture, Ford, Toyota and GM are ranked respectively first, second and third, with the following market shares: 19.10%, 16.06%, 14.41%. (BC staff memo, VI, 96).

^*/ The phrase “lockstep” pricing was first used by one of Toyota's counsel when describing to his client a probable effect of the transfer price formula. (GM 25945, quoted in Koch memo, 30)

^**/ For a more vigorous analysis of this phenomenon, see the comments of John Kwoka (Professor of Economics, George Washington University; Consultant to the F.T.C.) and Steven C. Salop (Professor of Economics, Georgetown University Law Center; Consultant to the Chrysler Corporation).

^*/ For example, Chrysler has furnished us with examples of two such contracts which it has with Mitsubishi and Volkswagen, both for the supply of automotive engines.

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

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

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

^*/ GM has characterized the learning experience as the primary goal of the joint venture; BC staff is skeptical as to its value. (BC staff memo, ZZ, 31-40, 48-52).