The case that I have selected International Joint Venture: General Motors and Toyota. In 1983 one, the largest joint ventures in the automotive industry took place between General Motors (GM) and Toyota. The Japanese care maker was meeting the demand for small cars in United States and its market share increased to 28% in 1980 from 18% in 1978. General Motors wanted to recover the lost business over Toyota , so it embarked on a project called “beat Toyota.” General Motors went for a joint venture to produce small cars in United States, instead of competing head to head with Toyota. This joint venture saw one the most controversial and largest antitrust investigation of its time (John E. Kwoka, 1983).
The alleged illegal issues that were highlighted in this case were that this venture would result in coordination of pricing to drive out the less competitive companies in the market. Another illegal issue alleged in the case was this joint venture used by General Motors to achieve its objectives. To study the implications of these issues and whether they were true or not, impact on the economic performance and the market was found out.
Section 2. Legal Issues in the Case
All the joint ventures and other mergers and acquisitions that take place must be brought to the attention of Federal Trade Commission (FTC) and the Department of Justice. The investigation of this joint venture by FTC was one of the most intensive and thorough antitrust investigations ever conducted at that time. The issues that were examined in this case were the anticompetitive behavior of the US car manufacturers; the effect of this joint venture; and the behavioral impact of this joint venture (John E. Kwoka, 1983).
The joint venture by General Motors and Toyota raised the legal question of anticompetitive behavior in the market between U.S car producers (White, 1971). Anticompetitive behavior is an illegal action or strategy to limit and prevent the competition in the market. This joint venture was opposed by other car manufacturers such as Ford and Chrysler as they pointed out that this would eliminate competition from the market and will poses serious obstacles for new car makers to enter into the market.
Another effect of this joint venture was seen that both the parent companies had increased degree of coordination and corporation between them. The communication levels improved between both the companies and both learned from the capabilities of each other. Therefore, these effects would again lead to anticompetitive behavior and drive out the competition from the market.
General Motors had an alternative plan which was competitively more preferable to this joint venture. The alternative plan by General Motors was called R-Car, where the car would be built by Isuzu and shipped in components to United States, and then assembled in an assembly plant. This alternative was seen as more preferable to the joint venture with Toyota as there was little risk of anticompetitive behavior had this alternative been ...
