Don't give up on antitrust
"Merger-mania" is suddenly the name of the game on Wall Street, posing profound questions for the giant US economy. The roster of firms either announcing mergers or seeking to fold other companies into their expanding empires already reads like a Who's Who of the business community. "I've never seen so many mergers as I've seen lately" is how one official of Oppenheimer & Co. describes the trend in an article in the financial section of today's Monitor. "And we're going to see a lot more," he says.
That there would be a major shift in federal antitrust policy under the new and basically probusiness Reagan administration was expected by most financial analysts. What is somewhat startling, however, is the intensity of the rush to merge, in great part impelled by current economic conditions. A high prime rate (at 20 percent), plus continuing (though lower) inflation, make it easier for cash-rich firms to expand into new ventures by acquiring existing businesses than by starting up competitors anew.
Attorney General William French Smith last week said that "bigness in business does not necessarily mean badness." Mr. Smith took aim at traditional antitrust law in stating that "efficient firms should not be hobbled under the guise of antitrust enforcement."
Surely there is some validity in Mr. Smith's analysis. Only a few years ago voices were heard urging a breakup of General Motors Corporation, based on the assumption that GM was too powerful and too big within the US auto industry. But, as recent events have confirmed, GM's competition, and indeed the competition of other US car makers, is not just domestic but international.
But taking global conditions into account does not mean that the federal government should pull back from ensuring a vigorous enforcement of antitrust laws. Examples of such anticompetitive behavior include price- fixing and rigging of contract bids. Further, many economists insist that there is a real question about the extent to which horizontal mergers -- mergers of companies in the same industry -- genuinely benefit the public.
In sending Mr. Reagan to Washington last November voters in part were expressing their unease about the increasing scope of "big government" and its influence in the lives of ordinary Americans. Opinion polls have repeatedly indicated similar concerns about other forms of bigness, including the business community and big labor.
Mr. Smith, and the administration, should be given recognition for seeking a clearer meaning of what is or is not anticompetitive behavior in today's world economy. At the same time the administration needs to ensure that genuine competition and diversity are maintained. This entails a vigorous and responsible enforcement of antitrust laws by the federal government, which after all has traditionally been the "policeman" of the market place.
