Getting 'more lenient' on antitrust
There was a time, in the early days of this century and then again in the 1930s, when ''trustbusting'' was one of those political causes that triggered heated debate within the US political arena. Today, by contrast, there is relatively little public stir over federal merger policies that directly affect the organization of firms having assets in the billions of dollars and employing thousands of workers.Skip to next paragraph
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In part, this merely reflects the economic realities of the 1980s -- when US business enterprises face not just domestic competition but industrial giants from abroad. But it may also reflect an unfortunate indifference. The type of merger policy put in place within the US, after all, will to a large extent determine the very structure of American business and finance well into the next century. Precisely for such reasons, Congress should undertake a careful and detailed review of the Reagan administration's new merger policy announced this week.
''In general,'' according to assistant attorney general William Baxter, ''the new (antitrust) guidelines would have to be regarded as more lenient.'' The new guidelines, announced separately by the Justice Department and the Federal Trade Commission, replace Justice Department guidelines established back in 1968. The new guidelines in effect create slightly more areas of ''safe harbor'' for mergers than was the case under the older policy, a step, according to the administration, that merely reflects existing antitrust law.
That the US has just come through one of its most intense periods of merger activity is amply underscored by the statistics. Between 1979 and 1982 firms handed out a whopping $170 billion to gobble up other firms. Last year alone, 12 mergers were each valued at more than $1 billion.
In just the past year, moreover, the administration has terminated several major antitrust cases. Last September the FTC dropped action aganst eight big oil companies. In January the government dismissed the IBM case and settled the AT&T case. The same month the FTC dropped an action against the three largest cereal manufacturers.
To what extent does such a significant transformation of the corporate structure best serve the American public? The answer is largely unknown. Some mergers, such as those now involving financial service and banking institutions, may actually increase competition by allowing consolidated firms to provide a larger variety of services. But at the same time there are disturbing factors that deserve greater scrutiny than has hitherto been the case:
* Fewer jobs. Ironically, as firms become larger, they tend to employ fewer persons. Between 1972 and 1980, the total share of employment by the 1,300 largest corporations in the US declined from 37.3 percent to 34 percent.
* Use of resources. Studies suggest that conglomerate mergers do not necessarily promote greater productivity or inventiveness. In fact, the opposite may be true.
* Effect of prospective mergers. Some studies suggest that productivity and efficiency drop for those firms dreading an upcoming merger -- or likely to be a merger candidate.
The Senate Judiciary Committee is expected to examine the administration's new merger policy in July. The House is also expected to take up the issue. What is now needed is not just a consideration of the new merger policy by itself -- although that is necessary -- but a deeper analysis of the impact of mergers on the future well-being of US society itself. In the long run it is imperative that not only competition but inventiveness, productivity, and efficiency be preserved within the American economic setting.