No Guidelines in Sight

These days the Government seldom loses an antitrust case in the Supreme Court. And last week the trustbusters won big. In a unanimous decision, the court agreed with the Federal Trade Commission's contention that the ten year-old Procter & Gamble-Clorox Chemical merger violated the Clayton Antitrust Act and should be dissolved.

P. & G. was understandably disappointed, and so was the rest of the business community. Noting that the P. & G.-Clorox link seemed neither vertical (between suppliers and customers) nor horizontal (between competitors), businessmen had hoped that either way the decision went, it would mark the first clear-cut application of antitrust law to a conglomerate merger (between companies in unrelated fields). And court-devised guidelines were anxiously awaited, for conglomerate unions today account for 70% of mergers.

A Washday Merger. Justice Douglas, who wrote the opinion, seemed reluctant to set any guidelines. "It does not particularly aid analysis," he wrote, "to talk of this merger in conventional terms, namely, horizontal or vertical or conglomerate." Noting that bleach complements Procter's other washday products, Douglas decided: "This merger may most appropriately be described as a 'product-extension' merger."

Having thus sidestepped the particular problems of conglomerates, Douglas proceeded to spell out his agreement with the FTC charge that the merger "may substantially lessen competition or tend to create a monopoly in the production and sale of household liquid bleaches." P. & G., he noted, was the nation's leading sales promoter in 1957 --and it still is, spending $245 million on advertising and promotion annually. When it bought Clorox, it was latching onto the leading producer of bleach, which controlled 48.8% of the market.

By applying its "huge assets and advertising advantages," contended Douglas, P. & G. could dissuade new companies from entering the bleach business, to say nothing of intimidating those already in the industry. As a P. & G. subsidiary, Clorox would be in a perfect financial position to wage price wars against competitors. Since P. & G. could have developed its own bleach, it seemed clear to Douglas that it had bought Clorox instead, "to capture a more commanding share of the market."

High Time. Justice Harlan agreed with the order, but also shared the business community's disappointment. It was high time, said Harlan in a concurring opinion, for the court to "at least embark upon the formulation of standards for the application of Section 7 of the Clayton Act to mergers which are neither horizontal nor vertical and which previously have not been considered in depth by this court."

Until those standards are laid down, though, Douglas' vague decision allows both Justice and the FTC time and latitude to study the snowballing conglomerate phenomenon. Clearly the court has not ordered a wholesale trustbusting attack. Nor has it gone out of its way to deter the application of antitrust law to conglomerate mergers.

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