Blocking the British

U.S. companies regularly take over large foreign concerns without much fuss. When a foreign corporation tries to take control of a big U.S. firm, however, Washington immediately starts sounding the alarm. That was the cynical conclusion drawn by many Europeans last week from the U.S. Justice Department's announcement that it would sue to prevent British Petroleum from acquiring control of Standard Oil (Ohio). In fact, much to the chagrin of the State Department, Justice lawyers appeared to be mechanically applying their strict interpretation of antitrust law to what they saw as just another merger--without appreciating that this merger was special enough to call for more delicate handling.

The subtleties of U.S. antitrust policy were largely lost on the cartel-minded Europeans, who are used to far less severe trustbusting, if any at all. Die Welt of Hamburg voiced suspicion that the U.S. market is a closed shop to Europe. In Britain, which has never refused a U.S. oil company's application to enter its markets, the reaction was especially bitter. Some members of Parliament hinted at retaliation against U.S. business in Britain. Foreign Secretary Michael Stewart protested to Secretary of State William Rogers.

Prosciutto and Melon. The disputed merger is special because British Petroleum is 49% owned by the U.S.'s staunchest foreign ally, the British government. Equally important, BP stands to benefit hugely from its oil finds on Alaska's North Slope. BP has discovered reserves estimated at an enormous 5 billion barrels, or about 25% of the total believed to lie under that barren region. Seeking marketing outlets for its crude, a BP subsidiary last March bought approximately 8,250 East Coast filling stations from Sinclair Oil.

In the British view, a merger between BP and Sohio is as logical a combination as prosciutto and melon. The North Slope strike and the Sinclair acquisition, says BP Chairman Eric Drake, left BP "with an oilfield at one end of the country, a market at the other, and Sohio in the middle." Sohio, which has some 3,500 gas stations in the Midwest, is renowned for its refining and marketing organization, but it has not had access to enough crude oil to permit expansion. So the companies .agreed to have Sohio take over BP's U.S. marketing, with BP supplying Alaskan crude and ultimately acquiring a 54% interest in Sohio for a price of about $1 billion. The ingenious deal, like BP's earlier purchase of the Sinclair stations, will not require the British company to lay out a shilling now; the price is to be financed largely out of BP's eventual revenues from the sale of Alaskan crude. The combination would create a company able to compete aggressively against oil giants like Jersey Standard, Mobil and Texaco. As London's Financial Times commented last week: "The tragedy is that [U.S.] antitrust legislation was devised to encourage competition in the U.S. Yet the manner in which it is being implemented is having the effect of deterring European companies from entering the U.S. and so bringing with them a completely fresh wind of change."

Ah, But in Ohio. Why, then, did the Justice Department object? Though Sohio is only the 18th biggest U.S. oil company, it has a dominant position in Ohio, where it controls 32% of the retail market. That position could be strengthened by the merger, because Sohio would then have access to BP's crude. Under antitrust doctrine, as interpreted by Attorney General John Mitchell and his trustbusters, a company needs only to have a big market in one geographic area--not in the whole nation--in order to qualify as a target. Richard McLaren, the chief U.S. trustbuster, says: "We are all subject to the law--U.S. companies and Britishers alike."

The Justice Department is still negotiating with Sohio and BP lawyers, and BP Chairman Drake predicts that the merger will yet go through. The companies might mollify the trustbusters by agreeing to sell off some of Sohio's stations in Ohio. If so, the trustbusters would have done better to negotiate such a deal privately, without announcing a prospective suit and roiling European sensitivities. That at least is the opinion at the Treasury and Commerce departments, where officials are desperately trying to convince Europeans that Washington is still serious about its "Invest in the U.S." campaign to help the balance of payments.

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