Open Season

The beleaguered auto industry last week came under stress from a new quarter--with serious implications for its nationwide dealer-franchise setup. In a unanimous decision, the Supreme Court ruled that General Motors and three Chevrolet dealers' associations, in fighting discount-house car sales in the Los Angeles area in 1960-61, had violated the Sherman Antitrust Act in "a classic conspiracy in restraint of trade."

Wayward Dealers. The case involved an operation in which a dozen Los Angeles area Chevrolet dealers, beginning in the late '50s, sold cars to discounters who in turn sold the cars to the public. The discounters drummed up business in high-profit-margin territory, even worked from rented space in supermarkets, where they took orders for Chevrolets at prices often as much as $175 below the going rate. Local dealers' groups hired private detectives to find out which of their members were operating through the discounters, and G.M. dried up the operation by threatening to lift the wayward sellers' franchises.

When the case was first tried in a Los Angeles federal district court in 1964, G.M. won by arguing that, according to the terms of their franchises, dealers could not open "branches" without G.M.'s permission--and that, in effect, the discount operations constituted branches. Thus, G.M. reasoned, it was only enforcing a legal contract, not restraining trade.

Overturning the Los Angeles decision, the Supreme Court ruled that franchise terms were not at issue. Gen eral Motors and its dealer associations, said Justice Abe Fortas, had removed a "class of traders from the market"--an antitrust violation per se. With that decision, discounters apparently won open season on the U.S.'s 29,000 franchised dealers.

More Ammunition. On the congressional front, the safety hubbub continued. Detroit scrapped its proposal that car safety standards could best be set by the automakers themselves through a voluntary-action program. That plan had pleased no one--least of all President Johnson, who two weeks ago blasted Detroit for its "picayunish" objections to the Administration's highway-safety bill.

Speaking for the industry, Ford Vice President John Bugas told a House committee that the automen now not only "strongly endorse" the bill, but also would like to see Congress give the soon-to-be-created Secretary of Transportation the power to set up "legally binding" safety standards. At the same time, said Bugas, the Secretary should ensure Detroit and the states a part in setting safety standards, and should not make such standards mandatory without "reasonable efforts to arrive at a meeting of minds."

This file is automatically generated by a robot program, so reader's discretion is required.