The CHAIRMAN. Let me ask you another question.

GMAC finances GM cars. Ford Credit will finance Ford cars. Suppose a Chrysler finance company is established to finance Chrysler cars, and American Motors follows the chain reaction and sets up its own finance company.

If all those auto companies establish finance companies will independent finance companies be able to finance sales by these auto companies' dealers?

Mr. GOSSETT. I think there will be many finance companies and many banks that will be financing automobiles, no matter what the auto companies do.

There are thousands of banks financing the sale of automobiles and there are some very large and profitable finance companies who are doing it, and they will continue to do it. They may not make 20 percent on their money, but they will do it.

The CHAIRMAN. These facts which you are now outlining to us, you never argued before the Supreme Court, did you?

Mr. GOSSETT. We argued many things to the Supreme Court.
The CHAIRMAN. But you did not argue this, did you?

Mr. GOSSETT. I do not know. I would have to review the briefs to find out, but I am sure

The CHAIRMAN. I suggest you read the brief, and I think you will not find it.

Mr. GOSSETT. I think that Mr. Justice Black took care of all those things when we argued the case, and my recollection is that he covered that point, and I would like to read the record to see, but I am sure he did.

Mr. MALETZ. Mr. Chairman?

Mr. Gossett, we will cover the quotation from Justice Black's decision in just one moment.

Mr. HOLTZMAN. He still did not answer my question. If there has been an answer, I did not understand it.

Mr. MEADER. I think there has been a very clear answer.

Mr. HOLTZMAN. Not clear to me.

Mr. GOSSETT. I want to answer Mr. Holtzman's question.

Mr. MALETZ. In 1946, Ford Motor Co. filed a brief before the Supreme Court and, as you pointed out, Ford Motor was unsuccessful in 1946 in having removed the bar against Ford Motor's affiliation with a finance company, is that correct?

Mr. GOSSETT. Yes.

Mr. MALETZ. Was there a new proceeding before the Supreme Court in 1948, or how did the 1948 proceeding in the Supreme Court originate?

Mr. GOSSETT. That is one of the first things I did when I came to the Ford Motor Co., was to make an application so that we would have the right, since General Motors had the right, to go into the credit business.

We had no intention then of doing it, but it seemed to me inequitable for General Motors to have the right to go in the credit business, unless we had the right, and the decree of 1938 that we had made had said that if by 1945 our decree-if by 1945 the Government did not have a decree comparable to ours against General Motors, that our decree would be dissolved, and the Government had

secured a postponement of that until 1947, and they were out to secure another one, and I opposed it.

Mr. DONOHUE. And what reasons did you give to the Court, what reasons did you set forth in the brief as to why the bar should be lifted insofar as the Ford Motor Co. was concerned?

Mr. GOSSETT. Because it was unfair to the Ford Motor Co.; in substance, unfair to the Ford Motor Co. to have a different law applicable to it than was applied to General Motors.

Mr. DONOHUE. And the Supreme Court had ruled that the existence of the GMAC and the General Motor impeded competition?

Mr. GOSSETT. The Supreme Court ruling is printed, and I would like to offer that.

Mr. DONOHUE. What was the opinion of the Court?

Mr. GOSSETT. The opinion of the Court was that the Government was not entitled to an extension, that since they hadn't secured a decree against General Motors, that Ford should be put on the same basis.

Mr. MALETZ. Mr. Gossett, was the 1948 proceeding ancillary to the 1946 proceedings before the Supreme Court?

Mr. GOSSETT. That word "ancillary," I think it

Mr. MALETZ. Were there new briefs filed?

Mr. GOSSETT. In a sense it was. Yes, new briefs, new application. Mr. MALETZ. A new application?

Mr. GOSSETT. Yes.

Mr. MALETZ. Filed directly with the Supreme Court?

Mr. GOSSETT. No. It was first filed in the District Court for the Northern District of Indiana. And appealed to the Supreme Court directly, because you see under the expediting act you skip the court of appeals.

Mr. MALETZ. Yes, I understand.

So the Supreme Court in 1948 had before it the record of the 1946 proceeding and the subsequent record?

Mr. GOSSETT. I am not sure they had it before it. It was available. Mr. MALETZ. And in 1946 you took the position that

Mr. HOLTZMAN. Outside counsel took that position.

Mr. MALETZ. Outside counsel representing Ford.

Mr. HOLTZMAN. These witnesses have indicated they thought it was a wrong position, is that correct?

Mr. GOSSETT. It was an opinion that I don't agree with, didn't agree with, don't agree with, an expression of opinion.

Mr. MALETZ. In 1946 you said the ownership of a finance company by GM itself resulted in a substantial handicap to competition, isn't that correct?

Mr. GOSSETT. I refer you to the language.

Mr. MALETZ. Now was there any representation to the Supreme Court, either in 1946 or 1948, that the handicap resulted from the fact that independent sales finance companies were unwilling or unable to finance Ford Motor dealers at rates comparable with GMAC? Mr. GossETT. I don't know. I'd have to review the briefs.

Mr. MALETZ. There certainly was nothing in the 1946 brief that Ford Motor presented to the Supreme Court on that point, was there? Mr. GOSSETT. I don't know. I haven't read the brief.

Mr. MALETZ. Was there any such representation in your brief to the Supreme Court in 1948?

Mr. GOSSETT. I don't know.

Mr. HOLTZMAN. Was there any repudiation of this approach in your brief in 1948?

Mr. GOSSETT. To the extent that it was not repeated, there was. Mr. HOLTZMAN. Was there any repudiation of the 1946 philosophy of the Ford Motor Co.?

Mr. GOSSETT. There may have been. I don't know.

I will have to read the briefs.

I haven't read them for a long time.

Mr. MALETZ. Mr. Chairman?

Mr. Gossett, you made reference to questioning during the course of the Supreme Court argument by Mr. Justice Black, is that right? Mr. GOSSETT. Yes.

Mr. MALETZ. Isn't it a fact that Mr. Justice Black in his dissenting opinion stated, and I quote from 325 of 335 U.S. and

Mr. DONOHUE. What page of the brief?

Mr. MALETZ. 325 of the Supreme Court opinion:

For it is sure, if the undenied allegations of the complaint be accepted, as they should be at this stage, that the economic power of Ford over its dealers is so great that dealers who desperately need Ford cars will be helpless to resist Ford's "influence" and "persuasion," whether legalistically called coercion or not. Due to Ford's power, what dealer could afford to draw nice distinctions between "persuasion" and "coercion"?

Now, is that a correct reading, sir?

Mr. GOSSETT. Yes.

Mr. MALETZ. Mr. Justice Black dissented from the majority on the basis that in his judgment the bar against Ford Motor's affiliation with a finance company should not be removed, is that correct?

Mr. GOSSETT. He did, and I would like to add that is a dissenting opinion.

Who knows, that may be the majority view now, and if that is a sound proposition, then let's have it argued in the courts of law of this land by the Department of Justice, who is there for that purpose, and if it is not a sound proposition, then let's don't have legislation based upon it, because the kind of evidence, sir, that we have had in these hearings is not the kind of evidence on which the kind of drastic legislation that is here suggested should be promulgated and put into effect.

Mr. YNTEMA. Mr. Chairman, may I correct the record in one respect.

Congressman Holtzman referred to these witnesses as saying the brief of the Ford Motor Co., in 1946 was incorrect. My testimony is to the effect I don't know whether or not it was incorrect in 1946. I know that it is not true as a description of the situation today.

Mr. HOLTZMAN. Can you tell us of anything that might have transpired between 1946, 1948, and today that would change the picture? Mr. YNTEMA. I can't give you the history because I do not know the situation in 1946. That was before I was in the business. We do now have a consent decree.

Mr. MEADER. The consent decree was entered in 1952.

Mr. YNTEMA. We do now have a consent decree that I know about. This stringently requires that we do not engage in unfair competition, and we observe the spirit and the letter of that. That I do know.

73326 0-61-pt. 2--11

Mr. GOSSETT. And another thing, Mr. Chairman, is that dealers day-in-court bill-you are an expert on that, sir-that was for the purpose of protecting the dealer against coercion by the factory, and that was enacted in 1956, and we had extensive hearings before this committee, and the legislation-I would like to offer a copy of that bill to show that we are now in a position as a result of that legislation where the dealer has the right to present to a jury in his own hometown any claim he has of coercion or pressure by the factory.

The CHAIRMAN. Do those restrictions apply to the sales finance companies?

Mr. GOSSETT. It applies to any threat or coercion by the factory.
The CHAIRMAN. As against the automobile dealer.

Mr. GOSSETT. By the automobile dealer.

Now, it has been said here that a dealer feels under compulsion because of the interrelationship between the finance company and the factory. And what power have we over the dealer except to terminate his franchise if he doesn't do what we want him to? I suppose that is the theory.

Now, under this bill, if we make any sort of threat to the dealer or suggest to him that we are going to take action against him for anything he does, he has a right to his day in court before a jury in his own hometown, and I suggest that that is one of the things that changed the situation from 1946.

The CHAIRMAN. At this point, the Auto Dealers Day-in-Court Act will be offered for the record, together with the report of this Judiciary Committee.

The report clearly indicates the nature of the coercion that was exacted on auto dealers by manufacturers. As a result of that coercion the Congress was persuaded, to pass the bill. (The documents referred to are as follows:)

PUBLIC LAW 1026-84тH CONGRESS

Chapter 1038-2d Session

S. 3879

AN ACT

To supplement the antitrust laws of the United States, in order to balance the power now heavily weighted in favor of automobile manufacturers, by enabling franchise automobile dealers to bring suit in the district courts of the United States to recover damages sustained by reason of the failure of automobile manufacturers to act in good faith in complying with the terms of franchises or in terminating or not renewing franchises with their dealers

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That as used in this Act

(a) The term "automobile manufacturer" shall mean any person, partnership, corporation, association, or other form of business enterprise engaged in the manufacturing or assembling of passenger cars, trucks, or station wagons, including any person, partnership, or corporation which acts for and is under the control of such manufacturer or assembler in connection with the distribution of said automotive vehicles.

(b) The term "franchise" shall mean the written agreement or contract between any automobile manufacturer engaged in commerce and any automobile dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract.

(c) The term "automobile dealer" shall mean any person, partnership, corporation, association, or other form of business enterprise resident in the United States or in any Territory thereof or in the District of Columbia operating under

the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons.

(d) The term "commerce" shall mean commerce among the several States of the United States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or among the Territories or between any Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation.

(e) The term “good faith” shall mean the duty to each party to any franchise, and all officers, employees, or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party: Provided, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith.

Sec. 2. An automobile dealer may bring suit against any automobile manufacturer engaged in commerce, in any district court of the United States in the district in which said manufacturer resides, or is found, or has an agent, without respect to the amount in controversy, and shall recover the damages by him sustained and the cost of suit by reason of the failure of said automobile manufacturer from and after the passage of this Act to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer; Provided, That in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.

SEC. 3. Any action brought pursuant to this Act shall be forever barred unless commenced within three years after the cause of action shall have accrued.

SEC. 4. No provision of this Act shall repeal, modify, or supersede, directly or indirectly, any provision of the antitrust laws of the United States.

SEC. 5. This Act shall not invalidate any provision of the laws of any State except insofar as there is a direct conflict between an express provision of this Act and an express provision of State law which can not be reconciled. Approved August 8, 1956.