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General Motors Corp. v. Federal Trade Commission.

August 12, 1940

GENERAL MOTORS CORPORATION ET AL.
v.
FEDERAL TRADE COMMISSION.



Petition to Review an Order of the Federal Trade Commission.

Author: Hand

Before AUGUSTUS N. HAND and CHASE, Circuit Judges, and LEIBELL, District Judge.

AUGUSTUS N. HAND, Circuit Judge.

This is a petition by the General Motors Corporation and two of its wholly-owned subsidiaries, General Motors Sales Corporation and General Motors Acceptance Corporation, to review an order requiring them to cease and desist from the use of the socalled 6% plan in marketing automobiles manufactured by General Motors Corporation and sold on instalment to the public. At first the cars made by the latter corporation were sold by it to its five subsidiaries, Chevrolet Motor Company, Olds Motor Works, Pontiac Motor Company, Buick Motor Company and Cadillac Motor Company, and then sold by them to dealers in the various states, who in turn sold to the public. The Federal Trade Commission issued a complaint against General Motors Corporation, General Motors Acceptance Corporation and the above five subsidiaries of the former who had been selling cars to dealers who used the Acceptance Corporation's 6% plan. Shortly afterwards these five companies were dissolved and General Motors Sales Corporation took their place as a wholesale instrumentality in marketing the cars, and was then made a party to the proceeding.

The general course of business was (1) manufacture of the cars by the General Motors Corporation, (2) transfer and sale of the cars to the one of the five subsidiary companies whose name was identified with the model sold, and (3) sale by the latter to the dealers. After General Motors Sales Corporation was organized and the above five subsidiaries were dissolved, the Sales Corporation took the place of each one of the companies as transferee of title and possession and acted as selling agent for General Motors Corporation to the dealers.

In connection with the sales by the five subsidiaries and afterwards by the subsidiary Sales Corporation the socalled 6% plan was used in most cases where the purchasing public bought cars under the instalment plan. The General Motors Acceptance Corporation (hereafter referred to as GMAC) was organized by General Motors to finance retail instalment (time) sales made by dealers to retail buyers. It financed not only instalment purchases of cars but also purchases of other products in the automobile business which were manufactured by General Motors. It did this by making a contract with the dealer whereby the balance due under the instalment contract was secured by a conditional sale agreement and payments in reduction of the balance were made monthly over a series of from 6 to 18 months. In the autumn of 1935 the plan of financing the purchase of the several brands of motor vehicles on the 6% instalment payment plan was first advertised through General Motors Acceptance Corporation in the newspapers. The Commission made the following findings as to the plan here involved:

"The initial advertisement was as follows:

"GMAC

"General Motors Acceptance Corporation Reduces Time Payment Costs on New Cars

With a new 6% Plan

(Simple as A, B, C)

(A - Take Your Unpaid Balance)

(B - Add Cost of Insurance)

(C -*fn* Multiply by 6% - 12 ...


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