Softer US line on corporate marriages isn't so sudden
The Reagan administration says it won't automatically condemn corporate bigness. But that does not mean the legal environment for merging companies has suddenly changed.
"Anybody who thinks this is open season on antitrust law is wrong," says Donald Turner, an assistant attorney general during the Johnson administration.
And other expects claim the Reagan administration's softer line is nothing startling, but reflects what the courts have been saying about mergers for years.
Corporate romance, like Great Britain's royal wedding, has become fashionable news. Conoco, eyes aflutter, plays coy for numerous handsome suitors. Gulf Oil collects $5 billion, preens its hair, and goes looking for a spouse. Some days it all sounds like Wall Street's version of "Seven Brides for Seven Brothers."
Is this some kind of blind nuptial mania?
Probably not. Experts say that with today's economy, mergers have become an attractive form of investment.
"Perhaps the most important motivation for many recent mergers is the advantage to the acquiring corporation of . . . buying assets at a lower cost than that of new construction," writes Dr. George Benston, an economics professor, in an American Enterprise Institute report.
Some lawyers have suggested that the administration's soft words about antitrust have encouraged some corporate suitors who might otherwise have elected to stay single.
"We must recognize that bigness in business does not necessarily mean badness ," Attorney General William French Smith said at a meeting of the District of Columbia Bar.
That statement sent supporters of vigorous antitrust enforcement into a swoon. But the Justice Department's antitrust head, William Baxter, later indicated the administration will still look askance at horizontal mergers, involving two companies in the same industry.
"If they think we're generally soft on mergers, that they can slip significant horizontal aspects past us, they're going to be in for a big surprise," Mr. Baxter was quoted as saying in the Wall Street Journal.
In the end, will the Reagan approach to antitrust enforcement differ sharply from that of previous administrations?
"I don't think [the difference] will be massive," says Mr. Turner, who served as assistant attorney general for antitrust from 1965 to 1968. "There are going to be some incremental changes."
Turner believes the guidelines for horizontal mergers may be loosened a bit. As for unrelated conglomerate mergers, where "bigness" in absolute terms becomes the prime issue, he says the new administration won't make much difference, because "the law is already conservatively interpreted."
The executive branch, through the Justice Department and Federal Trade Commission (FTC), shapes antitrust enforcement by choosing companies to sue. But the framework of the law is built by the judiciary.
"Antitrust law is not on the books, it's in the court decisions," a professor who specializes in the subject says.
Supreme Court justices have long wondered whether size alone is illegal. In 1904, considering a railroad merger, Justice Oliver Wendell holmes dissented along those lines -- causing Teddy Roosevelt's famous comment that he "could carve out of a banana a judge with more backbone."
And over the past few years courts have been looking with more favor on corporate romance.
Experts say the issue of economic power has become less important. This position is articulated by former Solicitor General Robert Bork, who has written that concentrated industries behave the same as unconcentrated ones. Mr. Bork says larger companies have lower costs and are more efficient, thus benefiting the consumer. Big ism beautiful.
William Baxter has publicly praised large corporations for their efficiency. In America's corporate board rooms, did this statement send romance-starved hearts palpitating?
"Baxter is just saying what the trend has been," says Dr. Yale Brozen of the University of Chicago.
Pointing to such Supreme Court cases as the 1977 GTE Sylvania decision, Dr. Brozen says the courts have been paying less attention to the concentration of industries since the 1970s.
But there are still plenty of critics who believe there is something inherently untrustworthy about large corporations.
Michael Pertschuk, a commissioner of the FTC, has said that "antitrust is about the quality of life in a democracy, about the allocation not merely of resources but of power."
Critics like Mr. Pertschuk fear that concentrated companies can unduly influence political processes and force unwanted change on otherwise free markets, a position first expounded by Circuit Judge Learned Hand in the famous 1945 Alcoa decision.
"This populist notion has no place in antitrust law," counters Donald Turner. "You can't make antitrust an all-purpose social vehicle."
Senate liberals, led by Edward M. Kennedy (D) of Massachusetts and Howard M. Metzenbaum (D) of Ohio, have already spoken out sharply against the administration's antitrust rhetoric. Sen. Strom Thurmond (R) of South Carolina has indicated the Judiciary Committee will hold hearings on Conoco's proposed nuptials. But any congressional moves on the issue are unlikely to occur before the sc heduled August recess.