Mr. MEADER. Mr. Chairman, might I ask one question at this point? Excuse me, Mr. Gossett, for interupting. Is there anything in the law that would prevent a motor vehicle manufacturer from being a dealer itself if it wanted to be? Mr. GOSSETT. No, sir. Mr. MEADER. In fact, I believe I recall that Firestone at one time did have stores which it owned around the country; didn't it? Mr. GOSSETT. Yes; I think it is common knowledge that General Motors owns a number of dealerships in the large metropolitan areas, and we are finding these days that in those areas we must own dealerships in order to have our products sold. The dealers find difficulty in making profits in the large metropolitan areas with keen competition, particularly down in the business area, Manhattan, N.Y., for example, most of the dealerships there are owned by the factories. Mr. MEADER. Let me ask you if Ford or General Motors did have a dealership, say, in the city of Washington, under H.R. 71, if it became law, that dealership could not engage in the financing of its own paper; could it? Mr. GOSSETT. I think that is right, sir, and also we would have, as Mr. Yntema pointed out, difficulty in financing our dealers in connection with wholesale sales. The only thing we could do would be to sell them our products on credit without any interest. We couldn't finance them in wholesale transactions, even if it were necessary in order to give the dealer an inventory, an adequate inventory. I think this is sort of comparable to the situation that would exist if we came in here and said to you: "We don't like this competition from the foreigners, it is unfair. Their labor rates are too low. We can't compete with them. Cut them out, eliminate them." That is the kind of sanctuary that the finance companies would like this committee, the Congress to build up for them. "We want to be rid of the competition of these manufacturers. They are too damned efficient." Excuse me. "They are too efficient. We want to be free to compete without being bothered with those fellows." Mr. MALETZ. Mr. Chairman? Mr. Gossett, is the automobile insurance business integral to the manufacturing business? Mr. GOSSETT. I am sorry. Would you repeat that? Mr. MALETZ. Is the automobile insurance business integral to the business of manufacturing or selling business? Mr. GOSSETT. I think it should be; yes. Mr. MALETZ. Are you familiar with the Ohio statute designed to prevent automobile dealers from acting as insurance agents? Mr. GOSSETT. Yes, I am familiar. I think there is such a statute. There are a lot of unwise laws on the books. Mr. MALETZ. What is the conceptual distinction Mr. HOLTZMAN. You say there are a lot of unwise laws. Do you think it is a wise procedure, Mr. Gossett, for a dealer not licensed to sell insurance to participate in fees or commissions as a result of the sale of an insurance policy? Mr. GOSSETT. I think he should be licensed. Mr. HOLTZMAN. Do you think it is an unwise program? Mr. GOSSETT. No, I don't. I think the dealer should be licensed. Mr. MALETZ. Is there any conceptual distinction between the Ohio statute and the pending bill? Mr. GOSSETT. I don't think I could answer that one, sir. I'd have to study that statute. I am not sufficiently familiar with it to give you a judgment on it. Mr. MALETZ. You said that this bill is unprecedented. I would like to ask you a few other questions. Are you familiar with the so-called commodities clause of the Interstate Commerce Act? Mr. GOSSETT. What clause, the commodities clause? Mr. MALETZ. Commodities clause. Mr. GOSSETT. Generally. Mr. MALETZ. Does not the commodities clause prohibit a railroad from transporting any commodity which it has manufactured, mined or produced prior to transporting? Mr. GOSSETT. Now, I think I'd have to refresh my recollection on that. Would you read the language? Mr. MALETZ. I have the provision; 49 U.S.C. 1 (8) provides as follows: It shall be unlawful for any railroad company to transport any article or commodity other than timber and the manufactured products thereof manufactured, mined, or produced by it or under its authority or which it may own in whole or in part or in which it may have an interest direct or indirect except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier. Mr. GOSSETT. Is that the Hepburn Act that you are talking about, commonly known as the Hepburn Act? Mr. MALETZ. Yes. Is it not the purpose of the commodities clause to divorce the business of transporting commodities from their manufacture or production? Mr. GOSSETT. That may well be the purpose. I think it is. I don't think it provides a precedent, however, for this bill, because this has to do with the distribution of the products of our own manufacture which we should be free to do. Mr. MALETZ. Was it the objective of the commodities clause to eliminate the opportunity for a railroad to obtain preferential advantage as a shipper? Mr. GOSSETT. Yes; as I recall it, that was the purpose of it. Mr. MALETZ. And isn't the purpose of the pending bill to prevent automobile manufacturers from having preferential advantage as suppliers in financing and insurance? Mr. GOSSETT. I understand that to be the stated purpose of the bill. Mr. MALETZ. Yes. Mr. GOSSETT. And I think that the existing law is ample to protect the finance companies against any unfair competition, as I have said. I don't think this bill is necessary if there is any unfair advantage due to the relationship, as I have said. Mr. MALETZ. What I am trying to get at is what is the conceptual distinction between the commodities clause of the Interstate Commerce Act and the pending bill? Mr. GOSSETT. I am afraid that without studying that act, I can't give you a judgment. I am not prepared. I remember vaguely the Hepburn Act and the basis of it, but I want to point out that this bill (H.R. 71) would simply say today you are in the finance business and tomorrow you are out, and that is pretty rough. Mr. MALETZ. The commodities clause is pretty rough too, isn't it? Mr. GOSSETT. I don't think so. I think there was a good public purpose. I think the public was benefited. Here the public would not be. Mr. MALETZ. Isn't it correct that automobile sales finance companies, commercial banks, and small loan companies are in substantial degree regulated by the various States? Mr. GOSSETT. I understand so, yes. I don't think that installment purchase interest rates are regulated. They are exempt. Mr. MALETZ. If that is the case, I was a little curious as to Mr. GOSSETT. Insurance company rates are, of course, but the rates of interest charged on installment purchases-the term used I can't think of at the moment-but those are accepted. Mr. MALETZ. In view of the fact that these activities are now in substantial part regulated by the States, I was a little curious about a statement of yours at page 11 where you say that- Mr. Maletz seems to have overlooked the fact that the limitations on competition in each of those acts flows from an effort by the Congress to erect a regulatory scheme for an industry traditionally regulated by legislative action. Mr. GOSSETT. I have just said, I think, Mr. Maletz, that these sales are not regulated. These are what are called time sales purchases, and they are not regulated by State statutes generally. Mr. MALETZ. What about insurance sales? Mr. GOSSETT. The insurance is regulated but not the financing charges. Mr. MALETZ. So, in other words, your statement at page 11 would not be applicable to that part of H.R. 71 which would divorce the business of manufacturing automobiles from the business of insuring automobiles, is that correct? Mr. GOSSETT. Oh, no; I do not say that. Mr. MALETZ. I am just trying to follow your logic. Mr. GOSSETT. I want to draw a distinction. Even the insurance regulation statutes of the States are imposed, have been enacted, for the benefit of the public-to protect the public. They are not drawn to protect the insurance companies from the rigors of competition of the manufacturers. They are drawn for the benefit of the public. Mr. HOLTZMAN. Do dealers in New York State sell a package that is composed of insurance, too? Mr. GOSSETT. I think I should call on the finance people for that question. I think they do. I think they sell a package. Mr. LACKEY. We opened our branch, the only branch we have in New York, early this month. We have one office. It is located in the Greater New York area. Mr. HOLTZMAN. I am talking about your dealers. You have many dealers in New York. Mr. LACKEY. You are talking about dealers insuring through us? Mr. HOLTZMAN. You have many Ford dealers? Mr. LACKEY. Yes, sir. Mr. HOLTZMAN. Do they sell packages that comprise not only financing, but insurance as well? Mr. LACKEY. Typically they do, but they are normally not insurance agents. Mr. MALETZ. Are automobile dealers prohibited from being insurance agents in New York? Mr. LACKEY. I do not believe they are prohibited from being agents, but there is a rather rigorous requirement of education that, in effect, stops them from being. Mr. MEADER. Do they have to have a license? Mr. LACKEY. Yes, if they were to be an insurance agent, they would. Mr. MALETZ. Do you know of any automobile dealer in New York who also acts as an insurance agent? Mr. LACKEY. I could not hear your question. Mr. MALETZ. I beg your pardon. Are there many automobile dealers in New York who also act as insurance agents in connection with sales of their cars to purchasers! Mr. LACKEY. I cannot give you an authoritative answer on that. In my opinion, there are not. I would be surprised if there were many at all in New York State. In other States there are. Mr. MALETZ. What is the requirement of New York State law which prohibits, in effect, an automobile dealer from also engaging in the insurance business? Mr. LACKEY. I cannot answer you in detail. I am aware that there is, as I said, a rather rigorous requirement for qualifying for an insurance agency license in New York. Mr. GOSSETT. Mr. Maletz, we have on our staff Mr. HOLTZMAN. Yes, that is true. However, we are trying to find out here what happens when a dealer offers a package in New York that consists of insurance as well as finance. Mr. LACKEY. I can speak for our case. We have on file right now a request with the State Insurance Department of New York that our rates as expressed in our earlier testimony-be deviated downward 20 percent, which is the normal equivalent of a dealer commission, so that this benefit can be passed on to the customer inasmuch as it is not to be paid to any dealer agent. Mr. HOLTZMAN. In other words, you are saying now that so far as you know, there are no dealers in New York who get any commission, so to speak, from the sale of any insurance policy? Mr. LACKEY. The American Road Insurance Co. has no licensed agents in New York State that are dealers. Mr. HOLTZMAN. And you are seeking authority for this 20-percent commission to go to the purchaser of the car? Mr. LACKEY. Yes. And may I point out that we are the exception in that case. Mr. GOSSETT. Mr. Yntema brought that out, I think, in his statement. In those States-New York, Massachusetts, Ohio, and one other the reduced rates do take account of the fact that the dealer does not get a commission. Mr. HOLTZMAN. Will you proceed, please. Mr. GOSSETT. Limitations on entry into an industry are imposed by a substantial number of regulatory statutes. Such limitations always are accompanied, however, by regulation in the public interest of those who are granted a partial monopoly. Normally, the regulation extends to rates and charges, as in the case of railroads, motor carriers, and interstate water carriers, and as under the Civil Aeronautics and Natural Gas Acts. Mr. HOLTZMAN. I am sorry, we are going to have to interrupt. The bells have rung and there is an automatic rollcall. The committee will recess until tomorrow morning at 10 o'clock, and if you care to, we would be delighted to have you complete your statement, or you can submit it for the record. Mr. MEADER. I might state, Mr. Chairman, if I may, that I had sought to find out from officials of the motor vehicle companies whether the United Automobile Workers had given any consideration or thought to this legislation. I have been unsuccessful, so I have written a letter to Mr. Reuther direct, asking him whether or not he does not believe the union should take a position on this bill. Mr. GOSSETT. Mr. Meader, at this time we are like the Irishman who was on his deathbed. At this time we are about to negotiate with Mr. Reuther and we do not want to antagonize anybody and we do not want to ask him any favors. I think the head of local 600, who interested himself in this legislation 2 years ago, is still interested; that is our information. Mr. HOLTZMAN. Without objection, the letter from our colleague, Mr. Meader, will be put into the record. Also, the statements of Mr. Snodgrass, Mr. Dawson, Mr. Grindle, and Mr. Halfpenny will be included in the record. (The documents referred to appear at pp. 1141-1222.) Mr. HOLTZMAN. The committee will recess until 10 o'clock tomorrow. We will continue with you, Mr. Gossett. We expect to hear also from Thurman Arnold, Mr. Mullins, and Mr. Whiteside, Mr. Steere, and Mr. Omacht. Mr. HALFPENNY. My statement is going in the record, but Mr. Grindle's statement, who is appearing here for the Independent Garage Owners of America, has some exhibits that are part of his statement he was going to offer, and I would like permission of the Chair to have those exhibits incorporated in his statement as part of the record as given now. Mr. HOLTZMAN. Without objection it is so ordered. (The exhibits referred to will be found at pp. 1186–1221.) (Whereupon, at 4:30 p.m., the hearing was adjourned, to reconvene at 10 a.m., Friday, June 30, 1961.) CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., June 29, 1961. Mr. WALTER REUTHER, Prezident, United Automobile Workers of America, AFL-CIO, DEAR MR. REUTHER: I call your attention to H.R. 71, a copy of which is helosed, to prevent motor vehicle manufacturers from financing and insuring the sales of their products. In my opinion this legislation can have important consequences to the livelihood of the members of your union, many of whom are constituents of mine, and to the health and prosperity of the motor vehicle industry, its production and employment, and therefore, of course, have an important influence on the future economic health of the State of Michigan. |