What would Teddy say?
America's great trust-busting President Theodore Roosevelt would surely be as astonished as most current observers at the hectic merger-mania now enveloping the US economy and, in particular, the pell-mell courting of Conoco Inc. by a veritable roster of corporate giants. TR, after all, had initiated the government's antitrust action that led to the breaking up of the $400 million Northern Securities Company, which had sought to gain control of two US railroads. The Republican Roosevelt also began other antitrust suits that were eventually successful.
But trusts such as TR's Northern Security foe are dwarfed by the staggering economic clout of today's blockbuster corporate aggregates. Du Pont's proposed takeover of Conoco alone reckons out at over $7 billion; Seagram's bid for Conoco is worth upwards of $3.77 billion. Meantime, Mobil, the nations's second largest company, is also chasing after Conoco with billions to spend, as is Texaco, the fourth largest US company.
Happy as all this billion-dollar courting must be for Conoco stockholders -- a category from which not a few Americans probably regret they are omitted -- some larger questions must be raised about the long-range implications for the US economy as a whole.
The sudden burst of merger activity in great measure reflects the political change that has occurred in Washington. While it may be too easy to conclude, as at least one market analyst did that "there is no way these mergers would have been made under President Carter," the bent of the new administration's antitrust policy is certainly more hospitable to mergers than was the case under its predecessor. Just this week, for example, John Shad, the new chairman of the Securities and Exchange Commission, was quoted as saying that the current takeover trend adds up to a "net economic gain by and large." Last month Attorney General William French Smith said that "bigness in business does not necessarily mean badness," and that "efficient firms should not be hobbled under the guise of antitrust enforcement."
Most modern economists, well removed from the more domestic economic battles of the Teddy Roosevelt years, would not necessarily disagree with Mr. Smith. Today's multibillion dollar firm is likely to have vigorous international competition. But at the same time, the very issues of efficiency and economic power raised at the turn of this century by Mr. Roosevelt still have validity and should be carefully addressed by federal agencies in considering mergers in the 1980s.
Mr. Smith has himself recognized this by indicating that horizontal mergers -- involving firms in the same industry -- be given close scrutiny. The matter of efficiency should be closely looked at by the Reagan administration, which, after all, is seeking to streamline the federal government. How ironic if the trend towards bigness and bureaucracy were to engulf corporate America when the federal government was itself moving in the other direction.
Also, what about the impact of heavy bank borrowing to finance the new mergers? Some economists fret that massive loan commitments will keep interest rates high and divert dollars from more productive investments.
Ultimately, of course, the most pressing issue remains that of ensuring a broad dispersion of political and economicm power in a nation as diverse as the US. Mergers? Yes where appropriate, so long as larger goals of competition, economic efficiency, and dispersal of power are maintained.