Ford and General Motors Fleet Price Fixing Indictment Details

The particulars of the federal government's fleet discount price fixing case against General Motors and Ford have been disclosed in a 268-page document following a federal district judge's denial of a defense motion to suppress details.

The original indictment, handed down last May, charges the auto makers with a conspiracy to end special fleet buyer discounts. The government contends that GM and Ford conducted a three-year campaign with the National Automobile Dealers Association (NADA) and Peterson, Howell& Heather, Inc. (PH & H) of Baltimore, often termed the nation's leading automotive leasing company, in an attempt to urge Chrysler Corporation to go along with the discount-ending effort.

Pressure to end the discounts some say, came instead from the car dealers themselves, according to reports. GM and Ford, they say, eliminated their discounts to fleet customers in response to pressure from their own dealers, but Chrysler would not follow suit. Many Dealers have long been vocal in their contention that fleet buyers could ob­tain better prices from manufacturers than dealers themselves could.

The May anti-trust charges were brought only against Ford and GM, but PH&H and the NADA and an extensive listing of top automotive industry officials also were named as co-conspirators in the case.

The government claims that in 1962 Ford and GM had 84 percent of the fleet market, while Chrysler held about10 percent. These figures coincided with the percentages each of them maintained in the entire automobile market­place. Chrysler started offering fleet discounts in the early60's, the government claims, and by 1967, attained 24 percent of the fleet and leasing market, mainly at General Motor's expense.

The government's case maintains that Ford and GM began cutting their fleet and lease customer prices in 1968 to regain market percentages lost to Chrysler. With the knowledge that these two companies wanted the discounts eliminated, the NADA began an extensive campaign to help abolish them. But Chrysler refused to go along, according to the government's bill of particulars.

PH&H, it says, also had been pressing for fleet discount elimination and William Fraser, a PH&H executive acted as a mediator between Ford and GM. And in May, 1970, state and local governments began losing GM and Ford discounts through NADA pressure, the federal government contends.

In 1971, private fleet buyers' discounts were done away with for that year's Ford and GM cars, according to the government.

Previously, in July, 1970, two Chrysler dealers filed an antitrust suit against Chrysler, seeking triple damages for the use of fleet subsidies from 1963 to 1970. The dealers also filed a significant injunction against further use of such subsidies. And the NADA supported the dealers in their" case, according to the government position, as part of its campaign to eliminate the discounts.

The charges allege that just before Ford and GM stopped issuing fleet discounts, Chrysler President John J. Riccardo refused further negotiations with NADA.

GM did not intend to suppress evidence by asking that the bill of particulars not be made public, according to Ross L. Malone, GM vice president and general counsel but the company did want to defer public release of the government's contentions until a trial could be held and the auto company refutes the charges.

Ford sought to protect from injury and embarrassment the large number of persons who were not named by the grand jury and who otherwise may not have been involved in any trial, according to Wright Tisdale, Ford vice president and general counsel.

The suit also charges that the auto makers passed confidential information among themselves and laid the groundwork for mutual assistance pacts in the event of a strike against any one of them. Such mutual assistance pacts are not legal, the government says, but they were not the cause for the indictments.

If GM and Ford are convicted of the charges against them in the indictments, the auto companies could be fined up to $100,000.

A bill of particulars is not evidence but lists the contentions of government lawyers explaining their understanding of the case. During a trial the court may or may not admit into evidence what the government has listed in its bill of particulars. Also, during trial the government is limited to consideration of matters contained in the bill only.

GM and Ford already have entered pleas of not guilty to the charges. And in the months before the case goes to trial next September, the defendants may enter guilty pleas to lesser charges or the government may dismiss the suit. In 1972, 10.9 million cars and 2.6 million trucks were sold. More than one million were purchased by companies on a fleet basis, as part of a growth trend that has enabled fleet sales to rise 50 percent in the past seven years.

As the fleet market grew, there was strong competition for sales, which often were in 100 to 1,000-car lots, and manufacturers began offering discounts.

Some dealers complained that fleet sales arranged between the fleet buyer and auto manufacturer were cutting into dealership business. By 1969, fleet sales totals included more than 10 percent of new car registrations, and some thought they would account for 20 to 30 percent of the auto business by the mid-1970s unless something was done.

Chrysler does proportionately better in the fleet business than the company does in straight dealer sales. Its market share of the fleet business was 24.3 percent in 1972, about 50 percent more than its overall share of total domestic car sales. The company had 19.9 percent of the fleet market in1965.

The increase in the overall fleet business from less than 700, 000 cars in 1965 to more than one million last year has been attributed to the automotive leasing business. Fleet sales to leasing companies have almost doubled in the last seven years, as did sales to rental fleets.

On the other hand, sales to companies which use vehicles for their business and sales to governmental units showed only modest gains. Figures for the first 10 months last year show 783,668 fleet car sales, compared with about 819,000the previous year, indicating a slight dip in fleet car sales. In the government's case against Ford and GM, sales to leasing, rental, commercial and governmental customers all are considered fleet car sales.

Amid the twelve volumes of exhibits are included a large number of documents, stockholder reports, handwritten notes, calendars, market studies, speeches, news stories and internal corporate communications scaling some 70 pounds.

Tom Kleene of the Detroit Free Press analyzed some of the cost figures and reports that during the 1970 model year GM's costs for allowances to its fleet purchase accounts were estimated at $60 million in addition to another $10 million for monies indirectly supporting the programs.

The programs ranged from the basic discounts from the initial purchase price of the vehicle to the now defunct buy-back plans at the expiration of the lease on a unit.

In spite of fleet sales volume increasing from 407,000 in 1969 to 450,000 in 1970 estimates of program costs in­creased from $123 to $133 per unit.

As AF had pointed out editorially in June of 1972, a good deal of confusion and diversity of opinion still exists on fleet discounts even within the industry. Volume purchasing can stir an industry where true competition exists.