Retail distribution channel barriers to international trade

Antitrust Law Journal

Volumn 67, Issue 1, 1999, Pages 77-111

  Scherer, F M ^a  

^a NONE

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EID: 0033463781     PISSN: 00036056     EISSN: None     Source Type: Journal    
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References (165)

1. See FAIR TRADE COMMISSION, THE ANTIMONOPOLY ACT GUIDELINES CONCERNING DISTRIBUTION SYSTEMS AND BUSINESS PRACTICES (1991).
2. See Harry First, Antitrust Enforcement in Japan, 64 ANTITRUST L.J. 137, 173 (1995).
3. 19 U.S.C. § 2411.
4. See 100% Tariffs Set on 13 Top Models of Japanese Cars, N.Y. TIMES, May 17, 1995, at 1.
5. See Trade Fight with Japan Is Widening, N.Y. TIMES, May 19, 1995, at D1.
6. See U.S. Settles Trade Dispute, Averting Billions in Tariffs on Japanese Luxury Autos, N.Y. TIMES, June 29, 1995, at 1.
7. See, e.g., U.S. DEPARTMENT OF COMMERCE AND THE OFFICE OF THE U.S. TRADE REPRESENTATIVE, REPORT TO PRESIDENT WILLIAM JEFFERSON CLINTON OF THE INTERAGENCY ENFORCEMENT TEAM REGARDING THE U.S.-JAPAN AGREEMENT ON AUTOS AND AUTO PARTS (Aug. 12, 1998), available at 〈http://www.ita.doc.gov/industry/basic/monitor898.html〉. That fifth semi-annual monitoring report observed that U.S. and other foreign auto manufacturers were realizing diminished shares of the shrinking Japanese market for automobiles.
8. See Edward M. Graham, Kodak Reveals WTO Limits, J. COM., Dec. 11, 1997.
9. See WTO Takes Steps to Establish Working Group on Competition, 73 Antitrust & Trade Reg. Rep. (BNA) 94 (July 24, 1997).
10. See ALFRED D. CHANDLER, THE VISIBLE HAND: THE MANAGERIAL REVOLUTION IN AMERICAN BUSINESS chs. 1 & 7 (1977); MORRIS A. ADELMAN, A&P: A STUDY IN PRICE- COST BEHAVIOR AND PUBLIC POLICY (1959).
11. See ALFRED D. CHANDLER, THE VISIBLE HAND: THE MANAGERIAL REVOLUTION IN AMERICAN BUSINESS chs. 1 & 7 (1977); MORRIS A. ADELMAN, A&P: A STUDY IN PRICE-COST BEHAVIOR AND PUBLIC POLICY (1959).
12. 15 U.S.C. §§ 13-13b, 21a.
13. See Robinson-Patman: Dodo or Golden Rule? BUS. WK., Nov. 12, 1966, at 66.
14. Pub. L. No. 75-314, 50 Stat. 693 (1937).
15. See Leonard Wiener, Depression's Fair-Trade Laws May Be Retired by Congress, CHI. TRIB., Feb. 10, 1975 (citing a Consumers Union estimate). See generally Thomas R. Overstreet Jr., Resale Price Maintenance: Economic Theories and Empirical Evidence (FTC Bureau of Economics Staff Report Nov. 1983).
16. See Leonard Wiener, Depression's Fair-Trade Laws May Be Retired by Congress, CHI. TRIB., Feb. 10, 1975 (citing a Consumers Union estimate). See generally Thomas R. Overstreet Jr., Resale Price Maintenance: Economic Theories and Empirical Evidence (FTC Bureau of Economics Staff Report Nov. 1983).
17. Congestion and high parking space costs explain why many small neighborhood stores survive in New York City and some sections of other large U.S. cities. But see sources cited infra note 20.
18. However, the number of RPM agreements recorded with the German Federal Cartel Office was declining even before formal RPM agreements were effectively outlawed in 1973. See F.D. Boggis, The European Economic Community, in RESALE PRICE MAINTENANCE 181, 205-06 (Basil S. Yamey ed., 1966). Sweden altered its law to discourage RPM beginning in 1954. According to the analysis by Ulf af Trolle in the Yamey compendium, "dramatic changes in the structure of Swedish distribution" - notably, the emergence of self-service stores and low-price supermarkets -"would not have taken place" without the abolition of a rigid RPM system and new firm entry restrictions. Id. at 134. Similarly, in the United Kingdom "with the advent of the Resale Prices Act of 1964 . . . and the eventually virtual prohibition of [resale price maintenance], the way was opened for the lawful pursuit of pricing policies including price discrimination, and this contributed to the blossoming of new shopping forms and the concomitant demise of the corner shop." Ann Rosemarie Everton, Discrimination and Predation in the United Kingdom: Small Grocers and Small Bus Companies - A Decade of Domestic Competition Policy, 14 EUR. COMPETITION L. REV. 6, 7 (1993).
19. However, the number of RPM agreements recorded with the German Federal Cartel Office was declining even before formal RPM agreements were effectively outlawed in 1973. See F.D. Boggis, The European Economic Community, in RESALE PRICE MAINTENANCE 181, 205-06 (Basil S. Yamey ed., 1966). Sweden altered its law to discourage RPM beginning in 1954. According to the analysis by Ulf af Trolle in the Yamey compendium, "dramatic changes in the structure of Swedish distribution" - notably, the emergence of self-service stores and low-price supermarkets - "would not have taken place" without the abolition of a rigid RPM system and new firm entry restrictions. Id. at 134. Similarly, in the United Kingdom "with the advent of the Resale Prices Act of 1964 . . . and the eventually virtual prohibition of [resale price maintenance], the way was opened for the lawful pursuit of pricing policies including price discrimination, and this contributed to the blossoming of new shopping forms and the concomitant demise of the corner shop." Ann Rosemarie Everton, Discrimination and Predation in the United Kingdom: Small Grocers and Small Bus Companies - A Decade of Domestic Competition Policy, 14 EUR. COMPETITION L. REV. 6, 7 (1993).
20. See WILLIAM JAMES ADAMS, RESTRUCTURING THE FRENCH ECONOMY 220-21 (1989).
21. See id. at 224-29.
22. One thousand square meters equals 10,758 square feet, or a store 104 feet square.
23. See ADAMS, supra note 17, at 209-10. On similar efforts in Spain, see Small Family-Run Stores in Spain Are Fighting to Limit the Hypermarkets, N.Y. TIMES, Jan. 6, 1996, at 18; and in New York City, Council Vows Defeat of Giuliani's Superstore Plan, N.Y. TIMES, Dec. 11, 1996, at 11. The size thresholds debated in New York were in the range of 125,000 to 140,000 square feet.
24. See ADAMS, supra note 17, at 209-10. On similar efforts in Spain, see Small Family-Run Stores in Spain Are Fighting to Limit the Hypermarkets, N.Y. TIMES, Jan. 6, 1996, at 18; and in New York City, Council Vows Defeat of Giuliani's Superstore Plan, N.Y. TIMES, Dec. 11, 1996, at 11. The size thresholds debated in New York were in the range of 125,000 to 140,000 square feet.
25. See ADAMS, supra note 17, at 228-29. On the continuing advance of discount stores in Europe, also see Over There: Teardrops on the Shelves, BUS. WK., Feb. 12, 1996, at 6.
26. Korea has a retail distribution structure similar to Japan's. See Retailing in South Korea: Bargain Hunters, ECONOMIST, Apr. 26, 1997, at 65.
27. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
28. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
29. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
30. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
31. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
32. See JAPAN STATISTICAL YEARBOOK: 1995 at 396; STATISTICAL ABSTRACT OF THE UNITED STATES: 1993 at 775; STATISTISCHES JAHRBUCH FÜR DIE BUNDESREPUBLIK DEUTSCHLAND: 1995 at 261; U.K. CENTRAL STATISTICAL OFFICE, ANNUAL ABSTRACT OF STATISTICS: 1995 Table 11.1; STATISTISK ÅRSBOK FÖR SVERIGE: 1995 at 118. Not counted in the U.S. employment data, and, from the definitions given, presumably also excluded from the foreign data are self-employed employers. If one adds to each U.S. retail outlet with no reported employees the services of the proprietor as a single employee, the average employment count per U.S. establishment rises to 6.98. Takatoshi Ito cites a study by M. Maruyama and others showing that Japan had 14.5 retail establishments per 1,000 residents in 1982. It is unclear whether the data are completely comparable to those reported above. See TAKATOSHI ITO, THE JAPANESE ECONOMY 387 (1992).
33. See ITO, supra note 23, at 387.
34. See U.S. DEPARTMENT OF COMMERCE, U.S. BUREAU OF THE CENSUS, PUB. NO. RC87-S-4, 1987 CENSUS OF RETAIL TRADE: MISCELLANEOUS SUBJECTS 4-139(Oct. 1990).
35. See JAPAN STATISTICAL YEARBOOK: 1995, supra note 23, at 398-99.
36. See id.
37. See id.
38. See, e.g., Hidechika Kuwahara, Concentration and Productivity in the Retail Trade in Japan, 7 INT'L REV. OF RETAIL, DISTRIBUTION AND CONSUMER RESEARCH 109, 109-24 (1997).
39. See WORLD TRADE ORGANIZATION, PUB. NO. WT/DS44/R, JAPAN-MEASURES AFFECTING CONSUMER PHOTOGRAPHIC FILM AND PAPER: REPORT OF THE PANEL, ¶ 2-26-28, Mar. 31, 1998, available at 〈http://www.wto.org/wto/dispute/distab.htm〉; OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE & U.S. DEPARTMENT OF COMMERCE, ACCESS TO JAPAN'S PHOTOGRAPHIC FILM AND PAPER MARKET: REPORT ON JAPAN'S IMPLEMENTATION OF ITS WTO REPRESENTATIONS, § II, Aug. 19, 1998, available at 〈http://www.ita.doc.gov/region/ japan/mfilm2.html〉.
40. See WORLD TRADE ORGANIZATION, PUB. NO. WT/DS44/R, JAPAN-MEASURES AFFECTING CONSUMER PHOTOGRAPHIC FILM AND PAPER: REPORT OF THE PANEL, ¶ 2-26-28, Mar. 31, 1998, available at 〈http://www.wto.org/wto/dispute/distab.htm〉; OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE & U.S. DEPARTMENT OF COMMERCE, ACCESS TO JAPAN'S PHOTOGRAPHIC FILM AND PAPER MARKET: REPORT ON JAPAN'S IMPLEMENTATION OF ITS WTO REPRESENTATIONS, § II, Aug. 19, 1998, available at 〈http://www.ita.doc.gov/region/ japan/mfilm2.html〉.
41. ITO, supra note 23, at 385.
42. See, e.g., First, supra note 2, at 171-72; Japanese Retailing: A Matter of Convenience, ECONOMIST, Jan. 25, 1997, at 60-61 (reporting the proliferation of convenience stores carrying at least 2,000 items); The Perils of Popularity, ECONOMIST, Aug. 24, 1996, at 53 (profiling Isao Nakauchi, the founder of Japan's largest discount retailing chain).
43. See, e.g., First, supra note 2, at 171-72; Japanese Retailing: A Matter of Convenience, ECONOMIST, Jan. 25, 1997, at 60-61 (reporting the proliferation of convenience stores carrying at least 2,000 items); The Perils of Popularity, ECONOMIST, Aug. 24, 1996, at 53 (profiling Isao Nakauchi, the founder of Japan's largest discount retailing chain).
44. Mitsuo Matsushita, An International Comparison of Distribution and Trade Practices and Competition Policies 23 (1986) (draft report of an International Comparative Study Group on Distribution Structures and Trade Practices). See also F.M. SCHERER, COMPETITION POLICIES FOR AN INTEGRATED WORLD ECONOMY 74-78 (1994).
45. See ADAMS, supra note 17, at 208, 242.
46. See id. at 242 n.95 (citing Frédéric Jenny, Rapport sur la Relation Pouvant Exister entre les Pratiques de Certains Types de Distributeurs et la Pénétration Croissante de Notre Marché par les Produits Etrangers, Mar. 1984). Adams's discussion of the evidence has been supplemented through my own correspondence with Professor Jenny. See Letter from Frédéric Jenny, Le Vice-President, Conseil de la Concurrence, to Professor F.M. Scherer, Professor of Business and Government, John F. Kennedy School of Government, Harvard University (Oct. 2, 1995).
47. See David E. Sanger, Cars, Trade, Power, and the Legacy of Frustration, N.Y. TIMES, May 8, 1995, at D1 (quoting a Ford Motor Company executive: "You can build a whole plant in China for what it costs to open five new showrooms in Tokyo.").
48. In 1994, Japanese transplant car assemblers in the United States purchased approximately $17 billion in parts from U.S.-based sources. Parts exports from the United States to Japan were $3 billion; assembled motor vehicle exports amounted to less than $2 billion. See U.S. Plans to Threaten Japan with Tariffs, N.Y. TIMES, Apr. 13, 1995, at D7.
49. This paragraph is based upon Hiroko Yotsumoto, The Japanese Automobile Industry Before World War II (1995) (term paper submitted at the John F. Kennedy School of Government) (on file with author).
50. The Japanese preference for small cars continues to limit U.S. manufacturers' market opportunities. In 1994, 79.5% of all new Japanese cars (excluding mini-cars with engine displacements below 660 cubic centimeters) had displacements between 660 and 2,000 cc - a category in which the U.S. Big Three offered no models. In the above-3,000 cc category, U.S. auto makers achieved a 1994 market share estimated at 28.5%. The data are from the Japan Automobile Manufacturers Association and the Japan Automobile Importers Association and were provided by Kennedy School of Government student Schumpeter Tamada.
51. See DAVID HALBERSTAM, THE RECKONING (1986) (on the evolution of Nissan).
52. See ITO, supra note 23, at 201-02 (describing MITI's unsuccessful efforts in 1955 and 1961 to limit the number of domestic companies producing automobiles).
53. Thus, in 1996, German auto manufacturers (notably, Mercedes, BMW, and Volkswagen) imported 184,516 vehicles into Japan. Imports of U.S. Big Three vehicles totaled 78,105. U.S. DEPARTMENT OF COMMERCE, supra note 7, Table 2.
54. See, e.g., Edith Hill Updike & Kathleen Kerwin, Is Cavalier Japanese for Edsel? BUS. WK., June 24, 1996, at 39; Andrew Pollack, A Tough Sell for Detroit, N.Y. TIMES, Dec. 12, 1996, at D1; How Does GM's Saturn Sell Cars in Japan? Very Slowly, WALL ST. J., Aug. 25, 1998, at B1.
55. See, e.g., Edith Hill Updike & Kathleen Kerwin, Is Cavalier Japanese for Edsel? BUS. WK., June 24, 1996, at 39; Andrew Pollack, A Tough Sell for Detroit, N.Y. TIMES, Dec. 12, 1996, at D1; How Does GM's Saturn Sell Cars in Japan? Very Slowly, WALL ST. J., Aug. 25, 1998, at B1.
56. See, e.g., Edith Hill Updike & Kathleen Kerwin, Is Cavalier Japanese for Edsel? BUS. WK., June 24, 1996, at 39; Andrew Pollack, A Tough Sell for Detroit, N.Y. TIMES, Dec. 12, 1996, at D1; How Does GM's Saturn Sell Cars in Japan? Very Slowly, WALL ST. J., Aug. 25, 1998, at B1.
57. Scott Latham, Schizophrenic Big Three in Japan, INSIDE/OUTSIDE JAPAN, July 1998, at 3-4.
58. See id.
59. Matsushita, supra note 33, at 6.
60. Compare Hudson Sales Corp. v. Waldrip, 211 F.2d 268 (1954) with General Motors Corp., 34 F.T.C. 58 (1941), and (on exclusive dealing in petroleum retailing), Standard Oil of Cal. v. United States, 337 U.S. 293 (1949). See also REPORT OF THE ATTORNEY GENERAL'S NATIONAL COMMITTEE TO STUDY THE ANTITRUST LAWS 141-45 (1955).
61. See, e.g, Automobile Dealer Franchise Act of 1956 (codified at 15 U.S.C. §§ 1221-1225).
62. See B.P. PASHIGIAN, THE DISTRIBUTION OF AUTOMOBILES: AN ECONOMIC ANALYSIS OF THE FRANCHISE SYSTEM (1961).
63. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
64. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
65. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
66. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
67. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
68. On the dramatic automobile "superstore" developments that gained momentum during the mid-1990s but whose long-run prognosis remains uncertain, see Revolution in the Showroom, BUS. WK., Feb. 19, 1996, at 70; Suddenly, Detroit Stops Fighting the Future, BUS. WK., Jan. 27, 1997, at 34; Hurricane Huizenga, BUS. WK., Feb. 24, 1997, at 88; Car Trouble: Auto Megadealers Are Hitting Speed Bumps, BUS. WK., May 5, 1997, at 34; and Republic Learns Cars Ain't Videos, BUS. WK., Feb. 9, 1998, at 82. On Ford's exploration of vertically integrated dealerships, see Ford Borrows a Better Idea, BUS. WK., June 8, 1998, at 42.
69. See Stanley E. Boyle, A Reorganization of the U.S. Automobile Industry, Committee Print, U.S. Senate Comm. on the Judiciary, Subcomm. on Antitrust and Monopoly 192-96 (Feb. 28, 1974).
70. See id. at 196-99.
71. See AUTOMOTIVE NEWS 1998 MARKET DATA BOOK 110 (May 27, 1998). A dealership is defined here as a single physical facility. Separate showrooms owned by a single parent may deal in different manufacturers' brands and still be deemed exclusive. Wayne Huizenga's Republic Industries, which during the 1990s became the largest U.S. auto dealership company, operated 111 dealerships in January 1998, holding 151 distinct car make franchises. Nine of the top ten multi-dealership holding companies for which complete data are available operated a total of 328 dealerships in 1998, with an average of 1.4 franchises per dealership. See id. at 113. In 1987, the ten largest new and used car retailing "enterprises" in the United States, each with total sales of $250 million or more, owned an average of 15.4 establishments per enterprise. The average number of establishments for all 41,351 reporting enterprises was 1.06 per corporate entity. See U.S. BUREAU OF THE CENSUS, ENTERPRISE STATISTICS: 1987, COMPANY SUMMARY, Pub. No. ES87-3, at 89.
72. See AUTOMOTIVE NEWS 1998 MARKET DATA BOOK 110 (May 27, 1998). A dealership is defined here as a single physical facility. Separate showrooms owned by a single parent may deal in different manufacturers' brands and still be deemed exclusive. Wayne Huizenga's Republic Industries, which during the 1990s became the largest U.S. auto dealership company, operated 111 dealerships in January 1998, holding 151 distinct car make franchises. Nine of the top ten multi-dealership holding companies for which complete data are available operated a total of 328 dealerships in 1998, with an average of 1.4 franchises per dealership. See id. at 113. In 1987, the ten largest new and used car retailing "enterprises" in the United States, each with total sales of $250 million or more, owned an average of 15.4 establishments per enterprise. The average number of establishments for all 41,351 reporting enterprises was 1.06 per corporate entity. See U.S. BUREAU OF THE CENSUS, ENTERPRISE STATISTICS: 1987, COMPANY SUMMARY, Pub. No. ES87-3, at 89.
73. See WALTER HENRY NELSON, SMALL WONDER: THE AMAZING STORY OF VOLKSWAGEN 173-74 (1967), from which much of this account is drawn.
74. FRANK ROWSOME, JR., THINK SMALL: THE STORY OF THOSE VOLKSWAGEN ADS 46 (1970).
75. NELSON, supra note 54, at 191.
76. Id. at 195-96.
77. See id. For an extraordinarily detailed study of the profitability of U.S. Volkswagen dealers, see VEIKKO LEIVO, INFLUENCE OF THE LOCATION AND SIZE OF THE AUTOMOBILE DEALERSHIP UPON ITS PROFITABILITY (1967).
78. See NELSON, supra note 54, at 213, 215, 307; LAWRENCE J. WHITE, THE AUTOMOBILE INDUSTRY SINCE 1945 at 295-304 (1971).
79. See NELSON, supra note 54, at 205-07. Nelson quotes VW Chairman Heinz Nordhoff as suggesting that his U.S. representatives "go after people who had no automobile franchises at all, because so many of the best dealers had been taken on by Detroit."
80. United States v. Volkswagen of Am., Inc., 1960 Trade Cas. (CCH) ¶ 69,643 (D.N.J. 1960). But see Reliable Volkswagen Sales & Serv. Co. v. Volkswagen of Am. Inc., 1960 Trade Cas. (CCH) ¶ 69,644 (D.N.J. 1960) (decision in a parallel private suit, in which Volkswagen's termination of a dealer who also sold a competing brand was sustained).
81. United States v. Volkswagen of Am., Inc., 1962 Trade Cas. (CCH) ¶ 70,256 (D.N.J. 1962).
82. See NELSON, supra note 54, at 209.
83. HALBERSTAM, supra note 40, especially chapters 16, 24, and 25.
84. Id. at 420.
85. Id. at 422.
86. Id.
87. Id. at 422, 435.
88. Id. at 423.
89. Id. at 424.
90. Id. at 425.
91. Id. at 442.
92. Id. at 293.
93. See Andrew Pollack, Number of Parts to Be Bought Is Unclear, N.Y. TIMES, June 29, 1995, at D6 (reporting that the June 1995 trade agreement between the United States and Japan did not, as the United States had hoped, include quotas for the purchase of U.S. made auto parts by Japanese repair companies); Editorial, A Good, if Oversold, Trade Deal, N.Y. TIMES, June 29, 1995, at A20 (noting that the June 1995 U.S.-Japan trade agreement "commits the Japanese Government to take specific steps to overcome pressure on dealers by Japanese manufacturers to carry only Japanese models").
94. See Andrew Pollack, Number of Parts to Be Bought Is Unclear, N.Y. TIMES, June 29, 1995, at D6 (reporting that the June 1995 trade agreement between the United States and Japan did not, as the United States had hoped, include quotas for the purchase of U.S. made auto parts by Japanese repair companies); Editorial, A Good, if Oversold, Trade Deal, N.Y. TIMES, June 29, 1995, at A20 (noting that the June 1995 U.S.-Japan trade agreement "commits the Japanese Government to take specific steps to overcome pressure on dealers by Japanese manufacturers to carry only Japanese models").
95. For another view, see James A. Levinsohn, Car Wars: Trying to Make Sense of U.S.-Japan Trade Frictions in the Automobile and Automobile Parts Markets, National Bureau of Economic Research Working Paper No. 5349 (Nov. 1995).
96. See OECD, GLOBALIZATION OF INDUSTRIAL ACTIVITIES: FOUR CASE STUDIES 43 (1992); see also WHITE, supra note 59, at 86.
97. On the earlier incentives for vertical integration, see Robert Crandall, Vertical Integration and the Market for Repair Parts in the United States Automobile Industry, 35 J. INDUS. ECON. 212, 212-34 (July 1968). See also infra note 81.
98. See JAMES P. WOMACK ET AL., THE MACHINE THAT CHANGED THE WORLD chs. 4 & 6 (1990).
99. See Dana Corp. v. Eaton Corp. No. C85-7210 (N.D. Ohio filed 1985). I was (briefly) a consultant for Dana.
100. For historical surveys, see U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust and Monopoly, Staff Report, A Study of the Antitrust Laws (1956); 1 SIMON N. WHITNEY, ANTITRUST POLICIES: AMERICAN EXPERIENCE IN TWENTY INDUSTRIES ch. 8 (1958).
101. For historical surveys, see U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust and Monopoly, Staff Report, A Study of the Antitrust Laws (1956); 1 SIMON N. WHITNEY, ANTITRUST POLICIES: AMERICAN EXPERIENCE IN TWENTY INDUSTRIES ch. 8 (1958).
102. Once consumers purchase an automobile, they are locked into a continuing stream of replacement parts purchases. See F.M. SCHERER, INDUSTRY STRUCTURE, STRATEGY, AND PUBLIC POLICY 308-12 (1996).
103. See General Motors Corp., 34 F.T.C. 58 (1941).
104. Id. at 86.
105. See U.S. Senate, supra note 80, at 101.
106. See Champion Spark Plug Co., 50 F.T.C. 30 (1953); see also General Motors Corp., 50 F.T.C. 54 (1953) (regarding AC spark plugs) and Electric Auto-Lite Co., 50 F.T.C. 73 (1953) (two parallel cases). In its preoccupation with protecting competing distributors from one another, the FTC condemned price discrimination on sales to different distributors but let stand the much greater differentiation of prices on original equipment, as distinguished from replacement part, uses.
107. As a Senate staff report concluded in 1956, "The effectiveness of the [Federal Trade] Commission's 1941 cease and desist order against General Motors can only be measured by its applicability and enforceability. It appears that the Commission's order fails both these tests." U.S. Senate, supra note 80, at 101.
108. See General Motors Corp., 99 F.T.C. 464 (1982).
109. There are three alternative sources of competition for crash part supplies: junk yards, "chop shops" that steal cars to order for their parts, and a quite new phenomenon -factories that take contour measurements of the part to be imitated and program numerically controlled milling machines to fabricate relatively inexpensive part-stamping dies. The auto manufacturers have advertised aggressively that parts from this last source are inferior to their original equipment parts. It is unclear whether they have taken more active steps to discourage their franchised dealers from using them. Such parts, often produced outside the United States, are now used extensively by independent body shops.
110. As FTC chief economist in 1975, I visited a General Motors body parts warehouse at an early stage in the case for an inspection of order-filling facilities and procedures. I saw little evidence that major changes would be required to accommodate pickups by IBSs.
111. General Motors, 99 F.T.C. at 610.
112. See Privatizing Protection: Japanese Market Barriers in Consumer Photographic Film and Consumer Photographic Paper, memorandum prepared by Dewey Ballantine (May 1995).
113. See Rewriting History: Kodak's Revisionist Account of the Japanese Consumer Photographic Market, memorandum prepared by Willkie Farr & Gallagher (July 31, 1995).
114. See Privatizing Protection, supra note 91, at 1.
115. See Rewriting History, supra note 92, at 156. Fuji's brief notes that Kodak's share of sales in Japan has fluctuated between 9% and 13% in recent years. See id.
116. Id. at 18-19.
117. See Privatizing Protection, supra note 91, at 5.
118. See id. at 151.
119. See id. at 5. On the extraordinary role of secondary wholesalers in Japan more generally, see Kuwahara, supra note 29, at 111.
120. See Privatizing Protection, supra note 91, at 130, 146. In its second-round reply brief, Fuji reported survey evidence showing that although Kodak film was not available in the majority of smaller outlets, such outlets accounted for only a modest fraction - approximately one-fourth - of total film sales in Japan. Kodak film was available in more than 92% of the Tokyo stores, 66% of the Osaka and Kyoto stores, and 51% of the provincial city stores selling 2,000 or more rolls of film per year. See Fujifilm's Rebuttal Regarding the Alleged "Distribution Bottleneck," Memorandum Prepared by Willkie Farr & Gallagher at 2, 34 (Dec. 21, 1995).
121. See Rewriting History, supra note 92, at 89, 159.
122. Cf. note 99 supra, discussing a similar pattern of Kodak penetration in Japanese stores.
123. The definitive literature survey is William T. Robinson et al., First-Mover Advantages from Pioneering New Markets: A Survey of Empirical Evidence, 9 REV. INDUS. ORG. 1 (Feb. 1994).
124. See Ronald S. Bond & David F. Lean, Sales, Promotion, and Product Differentiation in Two Prescription Drug Markets (Federal Trade Commission Staff Report 1977); Robert D. Buzzell & Paul W. Farris, Marketing Costs in Consumer Goods Industries, in STRATEGY + STRUCTURE = PERFORMANCE 122-45 (Hans J. Thorelli ed., 1977).
125. See Ronald S. Bond & David F. Lean, Sales, Promotion, and Product Differentiation in Two Prescription Drug Markets (Federal Trade Commission Staff Report 1977); Robert D. Buzzell & Paul W. Farris, Marketing Costs in Consumer Goods Industries, in STRATEGY + STRUCTURE = PERFORMANCE 122-45 (Hans J. Thorelli ed., 1977).
126. See Richard Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982).
127. See Fred Mannering & Clifford Winston, Brand Loyalty and the Decline of American Automobile Firms, BROOKINGS PAPERS ON ECONOMIC ACTIVITY: MICROECONOMICS 67-103 (1991).
128. See Privatizing Protection, supra note 91, at 63.
129. This phenomenon was first demonstrated empirically by Bond and Lean. See Bond & Lean, supra note 103.
130. According to Rewriting History, supra note 92, at 191, Kodak responded in Japan to Fuji's innovation with its own disposable product, but only after a lag of two years.
131. See id. at 188-90.
132. See id. at 57.
133. See Privatizing Protection, supra note 91, at 63.
134. See F.M. SCHERER, INTERNATIONAL HIGH-TECHNOLOGY COMPETITION 77 (1992).
135. See Rewriting History, supra note 92, at 179.
136. Privatizing Protection, supra note 91, at 105-06 & 124-30; Rewriting History, supra note 92, at 168-72.
137. Privatizing Protection, supra note 91, at 105-06 & 124-30; Rewriting History, supra note 92, at 168-72.
138. See Rewriting History, supra note 92, at 13.
139. On similar "signaling quality through price" strategies in automobiles and beer, see SCHERER, INDUSTRY STRUCTURE, STRATEGY, AND PUBLIC POLICY, supra note 81, at 302-03, 400-03.
140. See Kodak of Japan to Halve Price, N.Y. TIMES, Aug. 24, 1995, at D8.
141. See Fuji Builds a Brand as Rival Fumes About Price, N.Y. TIMES, Dec. 11, 1997, at D10.
142. See id.; A Dark Kodak Moment, BUS. WK., Aug. 4, 1997, at 30-31.
143. See Fuji Builds a Brand, supra note 118.
144. Compare Privatizing Protection, supra note 91, at 68, with Rewriting History, supra note 92, at 180-82.
145. Compare Privatizing Protection, supra note 91, at 68, with Rewriting History, supra note 92, at 180-82.
146. For a first-hand account of the merger negotiations by the person Kodak assigned in 1984 to become president of its Japanese operations, see ALBERT L. SIEG, THE TOKYO CHRONICLES: AN AMERICAN GAIJIN REVEALS THE HIDDEN TRUTHS OF JAPANESE LIFE AND BUSINESS 101-08 (1995).
147. See Rewriting History, supra note 92, at 182-83 (quoting Albert Sieg from a Look magazine interview). The Sieg statement was quoted also at paragraph 5.12 of the WTO panel's statement of relevant facts. See WTO, supra note 30.
148. Compare Privatizing Protection, supra note 91, at 93, 116-18, with Rewriting History, supra note 92, at 9-10, 37, 67-69, 175-84.
149. Compare Privatizing Protection, supra note 91, at 93, 116-18, with Rewriting History, supra note 92, at 9-10, 37, 67-69, 175-84.
150. See Privatizing Protection, supra note 91, at 118.
151. See SIEG, supra note 122, at xi-xii, xviii.
152. See id. at 140-42. Mr. Sieg explains, "Because we had sold through third-party distributors for the past forty years, we never got the kind of firsthand feedback that was essential to satisfying our customers - feedback like the kind that Hatano-san offered us at the New Year party." Id.
153. See id.
154. It is unclear whether the referral decision was taken to demonstrate U.S. support for the WTO's authority, as some commentators speculated, or whether (my own interpretation, shared by colleagues) it was an attempt to avoid or delay a controversial decision that might affect the 1996 presidential election. Compare Washington Will Let WTO Decide Fuji Photo Case, INT'L HERALD TRIB., June 14, 1996, at 13, with Harry First, The Intersection of Trade and Antitrust Remedies, ANTITRUST, Fall 1997, at 19-21. Brief consultations were held on July 11, 1996, but when they failed to resolve the dispute, the United States requested a dispute resolution panel on September 20, 1996.
155. It is unclear whether the referral decision was taken to demonstrate U.S. support for the WTO's authority, as some commentators speculated, or whether (my own interpretation, shared by colleagues) it was an attempt to avoid or delay a controversial decision that might affect the 1996 presidential election. Compare Washington Will Let WTO Decide Fuji Photo Case, INT'L HERALD TRIB., June 14, 1996, at 13, with Harry First, The Intersection of Trade and Antitrust Remedies, ANTITRUST, Fall 1997, at 19-21. Brief consultations were held on July 11, 1996, but when they failed to resolve the dispute, the United States requested a dispute resolution panel on September 20, 1996.
156. See WTO, supra note 30. The WTO panel's summary of facts recounts in Section II the early history of Japanese Government actions underlying Kodak's "nullification and impairment" charge. The basic philosophy guiding those actions reflected the once-prevalent Japanese view that free market processes were intrinsically disorderly and prone toward excessive competition. See, e.g., id. ¶¶ 2.9, 2.14. Compare 1 MONOPOLY AND COMPETITION POLICY xiii (F.M. Scherer ed., 1993) with the contributions to that volume of Kojiro Niino and Ryutaro Komiya reprinted at 178-95.
157. See WTO, supra note 30. The panel comprised officials from Brazil, New Zealand, and Switzerland.
158. See Press Release of the Office of the U.S. Trade Representative, USTR and Department of Commerce Announce Next Steps on Improving Access to the Japanese Market for Film (Feb. 3, 1998), available at 〈http://www.ustr.gov/releases/1998/02/98-10.pdf〉. The United States compiled Japan's WTO representations and forwarded them to the Government of Japan with a statement that the United States considered the representations to be "commitments" of the Japanese Government. See id.
159. See JFTC Finds No Anticompetitive Impact by Fuji in Photo Film and Paper Market, 73 Antitrust & Trade Reg. Rep. (BNA) 134 (July 31, 1997). The first monitoring report issued by the United States Trade Representative in August 1998 observed from on-site surveys that since 1995, the availability of foreign film had declined slightly in traditional photo supplies specialty stores while it doubled in "non-traditional" outlets, such as supermarkets, department stores, and other large retail outlets. The report also indicated that the prices for Kodak film were significantly less than the prices of Fuji film in non-traditional stores, but that only a slight price differential was found in the traditional photo outlets. See ACCESS TO JAPAN'S PHOTOGRAPHIC FILM AND PAPER MARKET, supra note 30.
160. See JFTC Finds No Anticompetitive Impact by Fuji in Photo Film and Paper Market, 73 Antitrust & Trade Reg. Rep. (BNA) 134 (July 31, 1997). The first monitoring report issued by the United States Trade Representative in August 1998 observed from on-site surveys that since 1995, the availability of foreign film had declined slightly in traditional photo supplies specialty stores while it doubled in "non-traditional" outlets, such as supermarkets, department stores, and other large retail outlets. The report also indicated that the prices for Kodak film were significantly less than the prices of Fuji film in non-traditional stores, but that only a slight price differential was found in the traditional photo outlets. See ACCESS TO JAPAN'S PHOTOGRAPHIC FILM AND PAPER MARKET, supra note 30.
161. See COMPETITION POLICIES FOR AN INTEGRATED WORLD ECONOMY, supra note 33, ch. 5.
162. See F.M. Scherer, The Economics of Vertical Restraints, 52 ANTITRUST L.J. 687, 706 (1983). For diverse views on the economics and on U.S. law, see Michael L. Katz, Vertical Contractual Relations, in 1 HANDBOOK OF INDUSTRIAL ORGANIZATION 655 (Richard Schmalensee & Robert D. Willig eds., 1989); Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REV. 1 (1977); U.S. Department of Justice Vertical Restraints Guidelines (1985), reprinted in 48 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.) (rescinded in 1993); National Association of Attorneys General Vertical Restraints Guidelines (1995), reprinted in 68 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.); Warren S. Grimes, Spiff, Polish, and Consumer Demand Quality: Vertical Price Restraints Revisited, 80 CAL. L. REV. 817 (1992).
163. See F.M. Scherer, The Economics of Vertical Restraints, 52 ANTITRUST L.J. 687, 706 (1983). For diverse views on the economics and on U.S. law, see Michael L. Katz, Vertical Contractual Relations, in 1 HANDBOOK OF INDUSTRIAL ORGANIZATION 655 (Richard Schmalensee & Robert D. Willig eds., 1989); Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REV. 1 (1977); U.S. Department of Justice Vertical Restraints Guidelines (1985), reprinted in 48 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.) (rescinded in 1993); National Association of Attorneys General Vertical Restraints Guidelines (1995), reprinted in 68 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.); Warren S. Grimes, Spiff, Polish, and Consumer Demand Quality: Vertical Price Restraints Revisited, 80 CAL. L. REV. 817 (1992).
164. See F.M. Scherer, The Economics of Vertical Restraints, 52 ANTITRUST L.J. 687, 706 (1983). For diverse views on the economics and on U.S. law, see Michael L. Katz, Vertical Contractual Relations, in 1 HANDBOOK OF INDUSTRIAL ORGANIZATION 655 (Richard Schmalensee & Robert D. Willig eds., 1989); Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REV. 1 (1977); U.S. Department of Justice Vertical Restraints Guidelines (1985), reprinted in 48 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.) (rescinded in 1993); National Association of Attorneys General Vertical Restraints Guidelines (1995), reprinted in 68 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.); Warren S. Grimes, Spiff, Polish, and Consumer Demand Quality: Vertical Price Restraints Revisited, 80 CAL. L. REV. 817 (1992).
165. See F.M. Scherer, The Economics of Vertical Restraints, 52 ANTITRUST L.J. 687, 706 (1983). For diverse views on the economics and on U.S. law, see Michael L. Katz, Vertical Contractual Relations, in 1 HANDBOOK OF INDUSTRIAL ORGANIZATION 655 (Richard Schmalensee & Robert D. Willig eds., 1989); Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REV. 1 (1977); U.S. Department of Justice Vertical Restraints Guidelines (1985), reprinted in 48 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.) (rescinded in 1993); National Association of Attorneys General Vertical Restraints Guidelines (1995), reprinted in 68 Antitrust & Trade Reg. Rep. (BNA) (Spec. Supp.); Warren S. Grimes, Spiff, Polish, and Consumer Demand Quality: Vertical Price Restraints Revisited, 80 CAL. L. REV. 817 (1992).