How US gives thumbs up - or down - on mergers
Industry leaders and analysts are puzzled over antitrust policy in Washington. Why, they ask, did the Federal Trade Commission recently flash the green light for the Texaco takeover of Getty Oil (both are financially strong companies), whereas the Justice Department put a stop sign in front of LTV Corporation's Jones & Laughlin Steel when it tried to merge with Republic Steel (they are two financially troubled companies)?Skip to next paragraph
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Just how does an acquisition or merger decision get made in Washington? Are there inconsistencies?
When the combination of two large corporations reaches a certain size threshold, they have to submit identical files with the Federal Trade Commission and the Justice Department. The two departments look over the case and then decide between them which will take it.
That decision usually depends on which department has the most experience in the industry. The specialty at the FTC is petroleum and health care. The antitrust division of the Justice Department is more expert in communications, steel, railroads, and beer. Companies have no choice as to which department they get. And if an unfavorable decision is made, companies cannot turn around and try their luck with the other body. Also, the FTC never handles criminal antitrust cases - cases of blatant price fixing, for instance. That is reviewed by Justice.
Insiders at the FTC and the Justice Department say both groups follow basically the same guidelines. An FTC staff member who asked not to be named says, however, that ''Justice (guidelines) contain more specific criteria in terms of (market share) numbers, while the commission's don't contain those numbers. We don't say whether a certain market share (that would result from a merger) is automatically legal or illegal. We just say, 'Here is the analysis we go through and the factors we think are important.' ''
The decision by the antitrust division to block the LTV/Republic merger had a lot to do with that specific point - market share - and nothing to do with inconsistent policy, the antitrust division asserts. Had the antitrust division handled the Texaco-Getty case, it also would have approved the merger, even using its own evaluation method.