From 1951 through the first 10 months of 1955, terminated selling agreements are shown by the corporation as follows (VII, app. B, XVII):

These figures must be interpreted by reference to specific cases. For example, Elden E. Conrad, probably classified under voluntary terminations, testified that his zone manager gave him 10 days to sell out or the "heat would be put on him" (VII, 3423). Edgar H. Zimmer testified that he "sold out before he was fired" (VII, 3400). Nonrenewal and involuntary termination can be appealed to a dealer relations board established in 1939 as the corporation's court of last resort, to review the decisions of the divisions' general sales managers; 1 appeal was taken to the board in 1953, 9 in 1954, 7 in 1955, and 12 are pending. From 1938 through 1955, in cases actually reviewed by the board, there have been only a few reversals in favor of dealers (VIII, App. B, XVIII, XIX). At hearings before the board, only the dealer and members of his organization, without benefit of counsel, are permitted to appear and request reconsideration.

Dealers who have appeared before the board have severly criticized it as prosecutor, judge and jury. Lee C. Anderson claimed his franchise was terminated because he gave a speech in which he criticized the factory-employee discount plan (VII, 3323). Upon receipt of a nonrenewal letter, he appealed to the dealer relations board. Mr. Anderson charged that instead of investigating the basis for nonrenewal, the board asked questions such as: (1) Who wrote the speech?; (2) What's Art Summerfield (Postmaster General, United States) going to do for you now that your franchise is gone?; and (3) What assurance does General Motors have that no more speeches will be made? (VII, 3333, 3335). Mr. Anderson testified that the factory had never at any time complained about his facilities, sales standing or market penetration (VII, 3318). General Motors stated that Anderson's franchise was terminated because he was:

irrevocably committed to a complete disagreement with General Motors' policy with respect to employee discount plan *. While decisions along this line are most usually predicated on a dealer's performance record, this case provides an example where basic differences between two parties make a sound business relationship impossible. Mr. Anderson's dissatisfaction with a personnel policy of General Motors, because, in his opinion, it adversely affected his business opportunities, was the basis of General Motors' dissatisfaction with Mr. Anderson (VII, 3715).

The question is whether it is possible to obtain an impartial decision of a dealer's case on the merits from a board appointed by and accountable to the other party to the dispute. Senator Francis Case revealed the basic weakness of the system when he elicited from Mr. Curtice the information that General Motors pays the salaries of board members (VII, 3781).

It has been suggested that the council-table approach to resolving disputes between dealer and manufacturer be adopted in place of the

present appeals board. Alfred P. Sloan, Jr., Chairman, General Motors Corp., in an address at NADA's banquet in Detroit on April 27, 1938, clearly voiced the sentiment that dealer councils are preferable to unlimited control, saying:

** I believe that you (automobile dealers) have a right to be heard as to those policies upon which your business life depends. You are entitled to an organized plan that permits you to sit around the council table and, in a cooperative way, express your views as to what should be done and what should not be done. And not only that, but I believe such a procedure to be an important step forward in what I might term "democracy in industrial management."

He

Later in his address, Mr. Sloan discussed a desirable model system of relationships between manufacturer, dealer, and consumer. outlined the following constructive plan:

Therefore, the first component of our model should consist of two parts: first, a forum for discussion of policies as they affect the dealer and the manufacturer and involve the interests of the consumer and, second, ways and means for an impartial review of administrative decisions so that the right of all concerned may be broadly considered. This might be termed a "policy of equity."

Prior to the hearings, the present management had shown a reluctance to sit down around the conference table with dealer representatives for a mutual discussion of problems. Mr. Curtice said: "We have individual contracts with individual dealers" (VII, 3542). The desire to negotiate with dealers individually highlights the problem of size. General Motors facing one of its 18,000 dealers at the bargaining table is hardly an example of equal bargaining power. The corporation has recognized the need for some dealer representation. A dealer council has been established within each division for the purpose of effecting better factory-dealer relationships. M. H. Yager characterized the manufacturer's council as "a loaded deal" (VII, 3461) because its members are dealers who have been carefully screened and nominated by their own zone manager.

The staff has not attempted an evaluation of the overall selling policies of General Motors. The dealers who testified were bitterly resentful of the pressure exerted upon them by General Motors to sell automobiles, parts, and accessories. However, these dealers represent but a handful of the total General Motors dealers. Furthermore, the consequences of this volume selling to consumers, suppliers, and the ecnomy generally, may be considerably different than to the dealers.

Nevertheless, the mounting protests of dealers of all makes of cars from all sections of the country to the terms of the inequitable franchise center attention upon abuses resulting from great disparity of economic power. Dealer resentment is widespread and is not limited to the witnesses who testified. Senator A. S. Mike Monroney telegraphed Senator O'Mahoney reporting replies to questionnaires from 8,276 General Motors dealers. Of this number, 6,047 indicated they felt a need for congressional study or Federal legislation; only 869 felt there was no such need. According to 4,069 of those dealers, pressure from factories to take more cars than needed was one of the primary causes of bootlegging (VIII, 3897).

It seems clear that some effort should be made to equalize the balance of power now heavily weighted in the manufacturer's favor. General Motors strongly expressed its views, during the hearings, that operations under the present franchise system needs no revision, that

the factory must have exclusive authority over dealer terminations, and that its own dealer review board procedure guarantees the dealer complete justice. Testimony relating to General Motors' treatment of dealer appeals-referred to as "private government"-indicates that, by its very nature, a company-sponsored and company-dominated dealer review board is wholly unsatisfactory in resolving dealer griev

ances.

Enlightened management among automobile manufacturers could forestall much of the dealer criticism by bold steps to revise the franchise. George Romney, president of American Motors, indicated the type of industrial statesmanship needed. Shortly after the General Motors hearings, in a letter to the National Automobile Dealers Association, he proposed a broad program for dealer relief, involving elected dealer councils, periodic review with dealer councils of the sales franchise to make it fair, early consideration of a joint company-dealer appeal board, realistic measures to eliminate bootlegging and unsound inventory accumulation, and consideration of an annual profit-sharing plan with dealers. The independents, feeling more acutely the pinch of competition, are apparently more sensitive to dealer needs than the Big Three.

Reference was made during the hearings to proposals for submitting certain types of disputes to an impartial board for arbitration. Such a board might consist of factory, dealer, and public representatives. Alternatively, it was suggested that the Interstate Commerce Commission should have jurisdiction to review decisions of the General Motors dealer appeals board in order to assure nonpartisanship (VII, 3782). Such an approach has the merit of securing impartial settlement of these dealer problems, but may be more cumbersome and costly than the situation justifies.

Various States have enacted laws under the State police powers licensing both car manufacturers and dealers. Some of these laws provide for revocation of the manufacturer's license for unfair cancellation of a dealer's franchise, unfair threats to cancel, unfair nonrenewal, coercion to take unordered goods, etc. Some statutes provide criminal penalties. The type of statute enacted by Wisconsin has been adopted by many other States. In 1955 Colorado enacted one of the most sweeping statutes in this field, amending its 1953 license law. In addition to requiring manufacturer-dealer licensing, as does the Wisconsin statute, the Colorado act provides that in any case where a manufatcurer or his representative cancels or fails to renew any contract or franchise with a dealer, the cancellation or nonrenewal shall not become effective until and unless a court order shall have been entered. Pending the issuance of such a court order, an injunction may be obtained to halt the cancellation. The law also provides for recovery of treble damages from the manufacturer. General Motors recently petitioned for a three-judge Federal court to hear its suit attacking the constitutionality of this law.

Despite the vigorous assertions of General Motors officials at the hearings that dealers were treated fairly and no revision of the franchise was needed, the corporation announced in the early part of this year important changes in the selling agreement. The charges made at the public hearings before the Subcommittee by both former and current dealers indicated the manifest discontent among Gen

eral Motors dealers and caused the company to undertake its own study resulting in the drastic revision of the franchise which the hearings showed were long overdue.

The drafting of the new franchise has not yet been completed for submission to the dealers. However, Mr. Curtice, in testímony before Senator Monroney's Subcommitee on Automobile Marketing Practices of the Interstate and Foreign Commerce Committee of the Senate, stated that for all practical purposes the revised selling agreement became effective March 1, 1956. Mr. Curtice stated he considered many of the changes revolutionary.

General Motors announced that a revised franchise would be offered the dealers with the following choices as to duration: (1) 5-year agreement cancellable by GM only for cause; (2) 1-year agreement cancellable by GM only for cause; and (3) indefinite term agreement cancellable by GM without cause on 90 days' notice.

Mr. Curtice stated that the new franchise would contain fair and objective tests for evaluating sales performance. Highly objectionable phrases such as "to the satisfaction of the dealers," etc., are to be eliminated, the net result being, according to the corporation, full mutuality of obligation in the contract. The proposed changes are numerous and affect many of the important phases of the factorydealer relationship.

Basic revisions are proposed with reference to succession of qualified persons, continuation of dealership, participation by widow, liquidation in event of death, protection of premises in event of termination or nonrenewal, repurchase of parts, obsolescence allowance, allowance for models when new models are announced, warranties, factory advertising contribution, etc.

Because of the severe criticism leveled at the corporation's dealer relations board, an impartial arbiter or umpire, selected on the basis of special qualification and experience, will be engaged to supersede the board and adjudicate appeals. Counsel for dealers may be present at such appeals. The corporation announced that a new office, that of executive vice president in charge of dealer relations, was being created, to which Mr. Ivan Wiles, formerly general manager of the Buick division was elected, for the purpose of insuring that dealers would have a direct line of communication to the top management of the company.

While the franchise is not yet available for careful examination, it would seem that General Motors is making a genuine effort to remedy many of the more flagrant defects in the franchise. The quick response by the corporation to the dealers' expressed dissatisfaction with the franchise is heartening. It remains to be seen whether the revised selling agreement achieves all the needed reforms.

Approximately 30 bills have been introduced in the present session of the Congress dealing with a vast number of problems in the automobile industry. Some of these bills involve taxes, highways, protection of public under new-car warranties, and regulation of motor vehicles on the highways. Others deal more particularly with the problems of automobile marketing such as bootlegging, territorial security, phantom freight, coercion of dealers to take unwanted merchandise, freedom of choice to conduct business, and cancellation of franchises for reasons not specifically defined in the franchise. It

was not the purpose of this subcommittee to appraise all the different marketing practices to which these bills are directed.

The study by the Subcommittee of the relationship between General Motors and its dealers was concerned primarily with the consequence of General Motors' vast power vis-a-vis the dealer. The inequitable franchise was found to be the instrument by which the superior strength of the factory was manifested to the detriment of the dealer. Therefore, the Subcommittee sought to determine what course should be adopted to remedy the evident imbalance of power and to secure substantial justice for all. While some type of Federal legislation is believed to be necessary, it was felt that care should be taken to tailor the solution to the problem.

Legislation which would subject the industry to undue regulation, or require constant scrutiny by the Department of Justice or Federal Trade Commission of all the terms of dealer franchises, or make criminal conduct which cannot easily be defined goes far beyond what the situation requires. As clearly demonstrated at the hearings, there is real need to guarantee by law the right of a dealer to bring suit in court when the manufacturer has arbitrarily and without good faith terminated or refused to renew the franchise. General Motors asserts that its new franchise will be a valid bilateral contract whose provisions are enforceable at law by either party. However, the history of the automobile franchise has proved the dealer cannot afford to be dependent upon the whim of the factory to enforce his rights.

The proposal for an impartial umpire to supersede the dealer relations board, however laudable, is still untried and of questionable value. Furthermore, there appears to be no protection for the dealer who chooses, wisely or unwisely, to operate under the indefinite term contract cancellable without cause. More important, the franchise is apparently silent on the rights of dealers to renew at the expiration of the term. The investment of the dealer in both capital and long years of service requires protection from arbitrary and abusive action by the factory in refusing to renew. Only legislation which permits courts to review such conduct will insure the dealers' rights. It is felt that the threat of court review will act as a deterrent on the factory in engaging in various coercive practices.

The complete lack of mutuality in the franchises of the other automobile manufacturers further heightens the need for such legislation. Since the factories assert they do not terminate or refuse to renew except for valid reasons and after carefully considering the equities of the dealer, there would seem to be no reason for their opposing this legislation. While such a bill is not a panacea for all dealer problems, it seeks in the simplest way to equalize the power between factory and dealer by enabling the dealer to secure impartial settlement of his basic grievance.

10. AUTOMOTIVE PARTS AND ACCESSORIES

There has been growing concern in recent years over General Motors' expansion into the production and distribution of automobile parts and accessories. The concentration dictated by economies of production and technology in the passenger-car business apparently is not required by the nature of the parts and accessories industry, to which the talents and capabilities of small manufacturers and whole