We welcome you today and appreciate your appearance before the subcommittee on this most important issue. We have the prepared text of each of you, which we have all read. Without objection, they will be made a part of the record in full, and we hope you can summarize for us. Why don't we begin with you, Mr. Silbergeld. Welcome. STATEMENT OF MARK SILBERGELD, DIRECTOR, WASHINGTON OFFICE, CONSUMERS UNION, ON BEHALF OF CONSUMERS UNION AND CONSUMER FEDERATION OF AMERICA Mr. SILBERGELD. Thank you, Mr. Chairman. I will lead off. I appreciate the constraints of time, and I will try and be brief and still make my points. I know the subcommittee is extremely concerned about the jobs issue, and so I would like to start by pointing out, as Mr. Kanjorski did, that this bill would equally benefit domestic and foreign interests. It is not a jobs bill, despite the concern of the author about the jobs. It does not, and it cannot, keep the products that would be covered in the U.S. job market. It would give GM and Honda, Toyota and Ford equal rights to register and protect their designs. Jobs come from competition, not from the exclusion of competition, and the problems in the automobile industry and in our domestic economy are structural. They have to do with a lot more and a lot bigger things than simply design protection. I would like to point out a personal experience that illustrates that point well. About 5 years ago, I bought a beautiful new Ford Taurus station wagon, and not long after, and while it was still under warranty, one of the seat belts in the rear jump seat simply would no longer retract. So I went back to my Ford dealer and had them replace it with a genuine Ford part, a new seat belt made for Ford in Mexico. This bill would not change that. Indeed, I think it would be very interesting to find out from the automakers just what percentage of their components are made offshore, because our experience, when Consumers Reports looks at the automobiles it tests, is that there is no such thing as an allAmerican American car any more. The various parts may be made here, or made there; if made here, they may be made as part of a joint venture; some of the profits go back there. This bill simply cannot guarantee the jobs that the authors quite genuinely and passionately would like to guarantee, and it just is not going to happen. What it will do is increase the cost of virtually all the goods that are covered by the bill, with the few exceptions that are mentioned, in the economy by potentially enormous sums, although it is impossible for me, and I think it is impossible for anybody, to estimate by how much. Now I know that the automobile issue will be the subject of a separate hearing, but I am here today, and so I feel that I should be allowed just a moment or two to mention that. That industry has been subject to tremendous competition over the last decade in replacement parts-so-called crash or collision parts-and the result of that is dramatic. Not only does the Consumers Reports article cited in my testimony demonstrate individual pieces, replacement parts, that have come down in price against the trend of inflation as a result of com petition from independent partsmakers, but the parts that are not subject to competition have gone in exactly the opposite direction, and, as Mr. Glickman said, it is impossible to say, whatever you may say about what should be the rules with respect to intellectual property protection, that the competition does not affect the price. I would like to offer three items at this point for the record, Mr. Chairman, if I may. One is a PR news wire article of January 17 in which General Motors announces a price cut of approximately 20 percent on 674 collision parts. It specifically cites the competition from the competitive independent parts manufacturers. Now that is an example of what that competition does, and I am afraid it is an example of what would not have happened if this legislation had been in effect 10 years ago. I will offer that for the record. It is not just domestic manufacturers who have to face competition, but might not under H.R. 1790. Mr. HUGHES. What are the other items, Mr. Silbergeld? Mr. SILBERGELD. The other item is an ad in Fuel Line magazine by Nissan which also announces similar price cuts-a foreign car. That is less profits on replacement parts going back to Japan. The third is a letter to you. Honestly, I must say, Mr. Chairman, the American Farm Bureau Federation has made this generally available, their letter to you, expressing their concern with the effects of this legislation on replacement parts for farm equipment. I will offer that also, if I may. Mr. HUGHES. Have I received that letter yet? Mr. SILBERGELD. They say you have. Mr. HUGHES. Without objection, the three items will be received. [The information follows:] DETROIT, Jan. 17 /PRNewswire/ --A Feb. 1 price reduction on General Motors Gollision parts has been announced by David P. Robison, director of marketing and product programs for GM Service Parts Uperations. Collision parts are sheet metal parts such as hoods, fenders and doors, and plastic parts such as fascias and bumpers. In this pricing restructure, suggested list prices are being reduced by about 20 percent on 674 part numbers. "Some insurance companies exert considerable pressure on dealers ara body shops to use lower-cost imitation parts because the decision has already been made as to what they will pay for a repair to a given make and model vehicle. To meet our goals of customer sarvice and satisfaction, GM wants GM-vehicle owners to have the choice of using high-quality GM auto body repair parts. More competitive pricing with imitation parts should provide this choice,' added Robison. Our "GM believes venicle owners are entitled to collision replacemen: parts that are of the same high quality as the parts they are replacing," continued Robison. "Available through GM dealers, collision replacement parts meet stringent requirements for fit, rust resistance, corrosion and material composition." contour, To provide consumers with the information they need to make an informed decision when they are faced with having a vehicle repaired after an accident, GM publishes the "Auto Body Repair" consumer guide. This brochure is available from GM dealers. CONTACT: Kathy Bommarito of GM Service Parts Operations. 313-974-0194 Page 20 DC FuelLine JANUARY 1992 JANUARY 1992 Fuelline Page OUR NEW PRICING POLICY IS A BETTER WAY TO MAKE ENDS MEET. There is something extremely wrong when a an imitation part fit the way it should. The simple fact is, nothing will. So we've decided to make installing Genuine Nissan Parts a lot easier for you. By sig nificantly reducing the price of our most commonly ordered sheet metal, grille and bumper parts. Once insurance companies see that Genuine Nissan So the next time some insurance rep asks you to save B AMERICAN FARM BUREAU FEDERATION 225 TOUHY AVENUE · PARK RIDGE • ILLINOIS · 60088 • (312) 399-8700 · FAX (312) 399-5896 800 MARYLAND AVENUE S.W. SUITE 800 - WASHINGTON, D.C. · 20024 · (202) 484-3800 - FAX (202) 484-36G4 January 23, 1992 The Honorable William J. Hughes Chairman Subcommittee on Intellectual Property and Judicial Administration 207 Cannon House Office Building Washington, DC 20515 Dear Mr. Chairman: The American Farm Bureau Federation. the nation's largest farm and ranch organization, would like to register its serious concerns with H.R. 1790 and request that these comments be made a part of the January 29, 1992, hearing record. Based on the harmful effects tha: such legislation could have on the aftermarket automotive and equipment parts industries, we are concerned that the Design Innovation and Technology Act of 1991, as proposed, could have negative effects on agricultural producers. Although we understand the need to protect certain types of intellectual property, H.R. 1790 could lead to the elimination of competition in the aftermarket parts industry. With the potential to force farmers and ranchers to pay monopoly prices to manufacturers for repairs to care, pickups, trucks, tractors, stationary engines or any plece of farm machinery, such legislation could damage agriculture's financial situation. For example, during the winter months, many livestock producers devote more than one-third of their expenses to the operation and maintenance of equipment. If producers were left to obtain replacement parts from one manufacturer who exercises monopoly control, then cash flows could be disrupted and net farm incomes would suffer. We hope that the members of the Committee will look very carefully at the effects that design protection legislation may have on agriculture. We offer our assistance in fashioning legislation that affords proper protection of intellectual property rights without hurting America's farmers and ranchers. Sincerely, John C. Datt |