"Monopolistic Coercion"

"I make no attack upon size in business, but where size is produced by the ruthless destruction of competitors and the ruthless concentration of economic control which affects the lives of millions of our people, it is idle to contend that the Government can be blind to such a condition or that the people will forever tolerate it. . . ."

These sentiments, which would leave many a businessman cold, when enunciated by U. S. Senate Majority Leader Alben W. Barkley in Chicago last week before the annual American Finance Conference were greeted with thunderous applause. For the American Finance Conference is the trade association of independent automobile financing companies and currently it is in a tremendous stew over what it calls the ''monopolistic coercion" practiced by the four big financing companies owned or tied up with automobile companies.

Some 60% of all U. S. passenger automobiles are sold at retail on deferred payments which are financed by discount companies. In 1925 there were 1,500 of such independent companies. Today there are only 500 because the business has been more & more dominated by General Motors Acceptance Corp., Commercial Credit Co. (Chrysler), Commercial Investment Trust (Nash, Hudson, Auburn, Studebaker), and C. I. T.'s subsidiary, Universal Credit Corp. (Ford). Last year these four handled 75% of all new car financing, 65% of the used car and 80% of the wholesale.

According to the independents, the growth of these four firms is largely due to pressure from the manufacturer on the dealer. Said retiring A. F. C. President David B. Cassat at last week's convention: "The ways in which coercion is practiced by these factories are in some cases subtle and hidden and in others they are brutally frank. . . . When and if a dealer fails to accede ... it is generally insinuated to him that if he did business with a certain finance company, perhaps he would get more prompt delivery. . . . Sometimes a direct threat of cancellation of his franchise is used. . . ."

Formed four years ago, the A. F. C. has lobbied successfully in 18 States for laws against these alleged practices. In answer to A. F. C. demands, the U. S. Department of Justice made a nine-month investigation this year, began presenting evidence to a special Federal Grand Jury in Milwaukee last September. The jury is still in session, but A. F. C. members last week were unanimously confident of victory under the Sherman Anti-Trust Law. Said new A. F. C. President Owen Lewis Coon: "I can see the breaking of monopoly ahead in this business, and I can see the breaking up of the business into smaller units, and there may once again be 1,500 independent finance companies."

Of more immediate interest to the general public than this internecine war is a subject upon which all U. S. automobile finance companies are currently agreed-- that credit for automobile installment buying should be tightened. In the early 1920's automobile finance companies were the entrepreneurs in what has since become a major U. S. trend to installment buying. Following in the footsteps of the successful car financers, products of almost every kind and description are now sold on installment. This year an estimated $5,000,000,000 worth of goods will be bought on installment. To conservative economists this vast expansion and its simultaneous easing of credit--to point of no down payments and up to five years to pay--has begun to look like a tremendously top-heavy inflation which might well play the same lead in the next depression that over-extended Wall Street credit played in the last.

Last November the American Finance Conference took note of this sentiment and also of the fact that automobile financing credit had eased from its one-time 33 1/3% down and twelve monthly installments to 25% down and 30 monthly installments. Mindful of their leadership in the field of installment sales, the car financers agreed to pull in their skirts. Last week with the U. S. suddenly immersed in a business recession, car financers had every reason to be pleased that they had already curtailed car credit back to 33 1/4% down and 18 monthly installments.

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