Taking
the Anti Out of Antitrust
By
Phil Mattera, Dirt
Diggers Digest
The
early episodes of the new Ken Burns documentary on the Roosevelts showing on
PBS highlight Teddy’s role as a trust-buster, even addressing the debate
between those like TR who wanted to more strictly regulate the giant
conglomerates and those who wanted to dismantle them.
Today,
much of the “anti” seems to have gone out of antitrust, as little in the way of
either regulation or dismemberment is on the agenda. Some of the largest
players in already highly concentrated industries have no compunction about
trying to take over one another and grow larger still. They take it for granted
that such combinations will be sanctioned outright or with cosmetic changes to
make the outcomes slightly less anti-competitive.
The
latest example of one big fish seeking to swallow another is the reported pursuit by Anheuser-Busch InBev of fellow
beer leviathan SABMiller. Those who reach for a Bud or a Miller Lite may not
realize that those familiar beverages are no longer all-American products.
Its
target, London-based SABMiller, is the result of the 2002 purchase of Miller
Brewing by South African Breweries. In 2008 SABMiller created a joint venture
with Molson Coors (a 2005 marriage) called MillerCoors to sell their brands
together in the United States.
The
combination of AB InBev and SABMiller would take an already super-concentrated
industry and make competition even more of a joke. Sure, there are a few
independents left — such as Pabst, Yuengling and Boston Beer Company, maker of
Sam Adams — but they would be up against a company with more than three-quarters of the U.S.
market.
AB
InBev’s move is just the latest in a series of takeover attempts among
companies that are already effective oligopolies. In July, number two U.S.
tobacco company Reynolds American announced plans to acquire number three,
Lorillard. Dollar General, the largest deep-discount retailer, is seeking to
purchase the second-largest, Family Dollar, thereby overturning a deal to
acquire that firm by Dollar Tree, the third largest player. Earlier, Sysco announced
it would purchase rival distribution giant US Foods.
Not
every deal goes through: Rupert Murdoch’s 21st Century Fox dropped its bid for
Time Warner and Sprint abandoned its bid for T-Mobile. Comcast, one hopes, will
not succeed in its attempt to take over Time Warner Cable. But the fact that
these deals were even floated is an indication that mergers that were once
unthinkable are now considered serious possibilities.
All
this is good news for investment bankers, who have been celebrating the fact
that merger activity in the first half of 2014 was the highest in seven years
and shows no signs of abating. But it does little for the rest of us.
Increased
concentration tends to reduce employment, prop up prices, restrict consumer
choices and discourage innovation. There was a time when employees of
oligopolies had an easier time winning wage increases, but the weakening of
labor unions has largely eliminated even that limited benefit.
Such
drawbacks were known at the time of Teddy Roosevelt and became only clearer
during the following decades. Today these lessons are frequently forgotten. A
country that supposedly celebrates free competition instead bows to the desire
of large corporations to absorb their competitors and dictate terms to the
market.
J.P. Morgan’s arrogant statement “I owe the public nothing,” is echoed
every time one of these megadeals is announced.