Plans to Make Mergers Easier

By John Greenwald

Under the tolerant gaze of the Reagan Administration, giant U.S. companies have been merging at an unprecedented rate. Now the White House wants to make it still easier for firms to consolidate. Officials last week unveiled a sweeping plan to overhaul antitrust laws that have held sway since the early part of the 20th century. "The Reagan crew is obviously determined to leave its mark on business policy," said James Maher, managing director of mergers and acquisitions at the First Boston investment-banking firm. "These ideas, if enacted, will fuel more fires in merger activity."

The proposed changes would make mergers less difficult for rivals in industries beset by imports, like steel and apparel. Among other reforms, they would ease penalties in antitrust suits brought by one company against another and would make it harder for courts to block a merger on grounds that the combined firm might eventually become a monopoly.

Administration officials said the proposals would strengthen U.S. firms in their struggle with foreign manufacturers, which are often part of vast industrial enterprises. Attorney General Edwin Meese said the changes would "bring antitrust laws into conformity with modern times" by making them "compatible with the global market." Concurred Commerce Secretary Malcolm Baldrige: "We are living in an era of intense worldwide competition, and we think American companies should merge if it is going to increase their competitiveness."

Business groups had mixed views about the proposed changes. While companies generally favor efforts to loosen antitrust restrictions, many fear that calls for broad reforms may arouse strong opposition. Some observers were particularly wary of the provision to relax laws to allow mergers of rival firms in distressed industries. Said Joe Sims, a Washington, D.C., antitrust attorney who represents large industrial companies: "It's got to be a real lightning rod. It's going to attract a lot of controversy and criticism."

Indeed, many experts doubt that mergers necessarily produce strong companies. "You don't put two turkeys together and make an eagle," said Stephen Rhoades, a Federal Reserve economist and author of a book on mergers. "I don't think there is any significant evidence that permitting more mergers in industries that are hurt will help them a bit." Marvin Kosters, an American Enterprise Institute economist, was also unimpressed: "Most industries in which we have had competitive difficulties recently are not exactly filled with a bunch of pygmy companies."

The proposals are certain to run into trouble when they reach Congress. There has been growing public concern that the merger wave has already gone too far, and that sentiment is likely to be reflected among legislators. Peter Rodino, a New Jersey Democrat and chairman of the House Judiciary Committee, predicted last week that his panel will not support "substantial or precipitous changes in the antitrust laws." The overhaul should receive a warmer greeting in the Senate, where South Carolina Republican Strom Thurmond, who heads the Judiciary Committee, plans to give it careful consideration. An aide described Thurmond as a longtime advocate of "sensible" antitrust reform. --By John Greenwald. Reported by Gisela Bolte/Washington

With reporting by Gisela Bolte/Washington