It was the year of the megamerger. A record $1.6 trillion in U.S. mergers and acquisitions occurred in 1998, creating sweeping changes in industries ranging from oil to telecommunications.
Among the many corporate marriages announced last year were Exxon-Mobil, Bell Atlantic-GTE and Travelers-Citicorp. Here in Michigan, one of the year’s top stories was the Daimler-Chrysler deal. On the horizon is a proposed merger between phone companies Ameritech and SBC Communications.
So it was a great year for corporate executives receiving multimillion dollar buyout bonuses and the investment bankers who put these colossal deals together.
But what about consumers?
They should be concerned, says Robert Weissman, co-director of Essential Action, a Washington, D.C.-based nonprofit corporate accountability group founded by Ralph Nader.
"While these mergers may be good for Wall Street," contends Weissman, "they are a bad deal for everyone else. They mean less competition, higher prices, corporate downsizing, less consumer choice and concentrated economic power that gives rise to a dangerous concentration of political power."
Weissman says not all mergers are a bad deal for consumers. Sometimes it is a matter of survival. In other cases, it means smaller businesses can become more competitive.
James Packard Love, director of the Consumer Project on Technology, says: "Some mergers are good. Some are bad. It’s the government’s job to stop the bad mergers."
Critics such as Love and Weissman are concerned about the overarching attitude the U.S. government has shown toward mergers in recent years. According to one report, fewer than one in 30 proposed mergers has met any kind of federal opposition since 1990.
Of the more than 3,700 mergers of more than $15 million (the threshold for federal review) in 1997, the Federal Trade Commission stopped fewer than 10 and modified only 17, according to Love.
In other words, Washington these days seldom meets a merger it doesn’t like.
Why this is important can be found in a merger the feds did halt. When the Federal Trade Commission opposed an attempted merger between office suppliers Staples and Office Depot, it presented evidence that Staples had one set of pricing zones for stores where Office Depot was a head-to-head competitor and another set of lower prices where Office Depot offered no competition.
"The most important thing for people to understand is that mergers are political issues," says Weissman. "One of the things corporations and right-wing ideologues have done in the last two to three decades is to make antitrust issues obscure. Too obscure. There are core issues that should be subject to popular debate. We need to empower regulatory agencies to be much more aggressive."
There is one aggressive action that gives Weissman some hope, although it doesn’t have anything to do with mergers. He points to the federal antitrust suit filed against Microsoft and its billionaire founder, Bill Gates, as a positive sign.
"It’s hard to be very optimistic about this stuff right now," says Weissman. "But when you have the government taking on the world’s richest man, you can say antitrust isn’t quite dead yet."
