Antitrust for Global Markets
THE national governments that write antitrust laws and set rules for the modern corporation are finding themselves on the defensive in the global marketplace. The individual firm now possesses more options in responding to government policies and enforcement practices.
Public-sector departments and agencies are undercut by three factors: the internationalization of production; cross-border flows of information, money, and technology; the rise of the transnational enterprise.
Globalization has a profound impact. For antitrust, tax, and regulatory issues, for example, a firm can move some operations to another country. In a smaller world it is helpful to do business in several countries. Faced with government burdens in one nation, a firm can shift activities to other nations. It can also credibly threaten to do so in order to prevent government actions hostile to its interest.
Acquiring local firms is an important strategy for United States companies positioning themselves with the integrated European market. But the result may be an increase in industrial concentration in the EC. In 1990 alone, Emerson Electric purchased the French firm Leroy-Somer. General Electric acquired Britain's Burton Group Financial Services. American brands bought out Scotland's Whyte & Mackay Distillers, and Scott Paper purchased the Tungram Company of Germany.
To those concerned with the antitrust consequences that may flow from such activity, it is helpful to consider the remarks of a senior Monsanto official: ``Although there may be evidence to the contrary, our experience only tells us that you have to be in Europe if you want to do business in Europe.''
A word of warning. Weak governments are not the answer to improving the flow of international commerce and investment. For example, inadequate patent-protection laws may constitute an extremely effective trade barrier, even in advanced industrial nations.
It is necessary to update antitrust laws and enforcement to conform more closely to the new global marketplace. Antitrust authorities are grappling with the challenge of reshaping a government policy developed when the largest markets were either national or small.
As the pressures of world competition grow, the pressure for greater efficiency in a firm's operations takes on new weight. Mergers and other actions are likely to result in cost savings. The critical antitrust task of defining the relevant market includes locating the appropriate geographic boundaries in which the competitive battle occurs. Increasingly, this requires changing the traditional viewpoint as to the limits of the market.
In the case of key industries such as automobiles, steel, and chemicals, this global view means that what may seem to be a concentrated industry in one nation is really part of an unconcentrated larger group of worldwide competitors. Thus, conventional antitrust action may not be warranted.
For example, General Motors, Ford, and Chrysler traditionally dominated the US automobile market. At times, the big two (GM and Ford) felt constrained in raising their market shares for fear of running afoul of the antitrust authorities. At least, that was a widespread belief in American business circles.
However, the situation has changed drastically. US firms did not come close to dominating the top 20 global auto manufacturers in 1992. US manufacturers only accounted for 37 percent of global auto sales last year - and felt the foreign competition keenly.
New foreign competition means antitrust is no longer just the totality of foreign firms' imported share of the domestic market. Local firms are competing directly with larger foreign enterprises. The relevant market is increasingly the global marketplace. It is high time that antitrust policy be updated to correspond to economic reality. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHELCSPS.COM.
