Time to scrutinize mergers
CONGRESS plans to take a hard look at US government merger policy. The hearings - expected to begin in the Senate today and the House next week - should be undertaken in as detailed and as nonpolitical a manner as possible.
Further, the various committees involved should insist that whatever formal studies of US merger activity are made come from an independent and respected outside source, such as the Congressional Budget Office.
The reason for the sudden intensive congressional concern about mergers is not hard to find: a spate of merger proposals during recent months - including over $36 billion worth of planned or approved oil company mergers in the past two months alone. Some of the mergers - such as Texaco's purchase of Getty Oil Company - have already won tentative approval by the Reagan administration. Others, such as a recently proposed steel merger involving LTV Corporation and Republic Steel, have been blocked.
The administration is divided over merger policy. The Federal Trade Commission, for example, seems inclined for the moment to let mergers proceed, as in the case of its approval of the Texaco-Getty linkup. The Justice Department, by contrast, balked at the LTV-Republic merger on the grounds that such an alliance would be anticompetitive. Meantime, Commerce Secretary Malcolm Baldrige has called the Justice Department decision on LTV-Republic a ''mistake.''
Since reasonable differences clearly exist within the administration, it would seem only prudent that Congress undertake a careful review of existing and future US merger policy. It should be examined without preconceptions. Many members of the public, after all, tend to view all mergers as more or less the same. Often they are perceived as bad, per se. Yet, not all mergers are alike. In cases where the mergers would be beneficial to the companies involved (as by strengthening them to deal with overseas competition), they should be approved.
Take the current proposal by Standard Oil Company of California to acquire Gulf oil: If the proposal is approved by the government, then Standard and Gulf together would control about 10 percent of the nation's domestic gasoline marketing sales. The 10 other major oil companies would control the remaining 90 percent of the market.
The oil industry argues that it does not have the high degree of concentration found in some industries.
Among the questions that need to be asked:
* Is the oil industry in fact more concentrated than outward numbers would suggest? What about regional factors? Some companies tend to have significant market share in certain parts of the United States.
* By borrowing large amounts of capital to finance corporate takeovers, are the oil companies - and other nonoil companies contemplating mergers - diverting assets that could be better used elsewhere, such as for actual exploration? What about the conditions under which such funds should be borrowed? Should there be limitations, such as restricting loans when loan dollars are scarce and such borrowings would put a strain on the banking system? That would seem a reasonable policy, although such a situation, it might be noted, does not appear to prevail at the present time.