“Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most states have antitrust laws, and so does the federal government. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for inferior products and services.”
So wrote Ronald Reagan’s chief antitrust enforcer, Charles F. Rule, Assistant Attorney General in 1987. But for 12 years under Reagan and Bush, the antitrust laws were ridiculed, unenforced and treated as if they were a barrier to competition instead of the reverse. Except for a few price-fixing and bid rigging cases mostly involving small fry companies, the Reaganites refused to apply the antitrust laws during the largest merger and acquisition wave in American history.
Starting in 1981 when the Antitrust chief Baxter declared that as long as there were two companies left in any industry (tires, automobiles, steel, etc.) he would not be worried, the Sherman antitrust law of 1890, passed by Republicans, and the Clayton antitrust law of 1914, were placed in a deep freeze.
Vertical mergers, horizontal mergers, conglomerate mergers between large corporations went on a rampage. Reaganites approved 24 out of 24 airline mergers, leading to the greatest concentration, indebtedness and irrational pricing in airlines history. Now the remaining airlines are demanding various kinds of welfare from Uncle Sam and you know who will pay for that handout package.
Now comes Bill Clinton, ex-law professor and state attorney general, who probably knows more about the antitrust laws than any other President in modern times. He chooses Anne Bingaman, a plaintiff’s antitrust lawyer, to be the new chief of the Justice Department’s Antitrust Division. She is known to be a strong believer in antitrust enforcement. And not a moment too soon.
Since Clinton took office in January, a wave of mergers between hospitals, HMO’s and other health care companies is accelerating in anticipation of the White House’s forthcoming managed competition proposal. The telecommunications — cable industries are experiencing faster merger activity. US West, the telephone company, has struck a joint deal with Time Warner and other similar joint ventures followed.
A few days ago, QVC announced its coming purchase of Home Shopping Network. That deal locks up in one company over 95% of the television home shopping industry. To date, no peep from the Justice Department.
Two decades ago, these companies would not have even thought of such combinations. They would have been inviting a government antitrust action. But U.S. industry and commerce knew that when the Justice Department, in the early Eighties, approved the joint production venture in California between General Motors and Toyota — two direct competitors — that the green light was on.
Companies that are uncomfortable with technological change in their products form joint ventures with their competitors allegedly to pool their research and development capabilities for faster progress. The U.S. auto companies have turned this maneuver for collusive stagnation into an institutional way of operation, complete with taxpayer subsidies from the U.S. Department of Transportation.
To restore the historic role of these laws against monopolization, anticompetitive practices, price-fixing and product-fixing, Anne Bingaman needs to advance an antitrust agenda. She can do this by bringing key cases in the mergers area, examine the rash of joint ventures and other collusive deals, and investigate the role of trade associations in freezing technical standards and therefore product choice.
Together with several citizen groups, I have asked the Justice Department to investigate the American Forest and Paper Association and member paper companies for possible violations stemming from their unified position on what should constitute the recycled content of printing and writing papers.
The paper industry is working to block the Clinton Administration from buying post consumer content recycled paper for government use. If the paper industry can keep such paper from being produced in sufficient quantity, then the government won’t be able to buy it.
To succeed in her duties, Ms. Bingaman needs to inform a broader public about the antitrust laws through well-prepared addresses on distinct antitrust subjects before small business groups, journalism conferences, consumer associations and labor gatherings. She needs to inform a new generation of journalists about antitrust. And she needs to bring in dozens of new layers and economists to replace the Reaganite “Chicago School” idealogues, especially among the economists, who serve to obstruct enforcement of the antitrust laws.
If she does her job well, you’ll be saving money in the marketplace, small business will be able to compete better and more innovative technologies from cars to accessible information systems will be forthcoming.