Record Levels
of Corporate Mergers

With the last embers of the slash-and-burn merger craze of the 1980s still glowing, the 1990s has witnessed an even more intense consolidation frenzy. Last year saw $1 trillion in mergers among U.S. companies, almost 50 percent more than the record levels of 1996.
The new mergers, like their forebearers a decade earlier, pose serious threats to society. They undermine job security, raise consumer prices, inhibit small business development, undermine the dynamism of the economy and sap the vitality of our political democracy.
Antitrust policy is the main tool available to combat excessive concentration of economic power, and the correlative centralization of political power. But the federal cops on the antitrust enforcement beat have done little more than kick back and drink coffee and eat donuts for the last decade and a half. The Clinton Justice Department and Federal Trade Commission have admittedly shown more of an interest in antitrust enforcement than their Reagan-Bush predecessors, but they have done precious little more in actually challenging mergers.
Consider the merger record of the last few years. Among others, the banking, television and telecommunication industries are undergoing a spate of mergers more substantial even than those of the previous decade.

• In banking, giants Chase Manhattan and Chemical Bank combined in 1995 to create the nation's largest bank, with more than $300 billion in assets. Multibillion dollar mergers have become the norm in recent years. Last August, NationsBank announced the biggest bank purchase ever -- the $15 billion acquisition of Barnett Banks. That record was topped in November, as First Union sought to buy up CoreStates for $17 billion.
  The result: more than 70 percent of U.S. banking assets are now controlled by the 100 largest banking organizations.
  The consequences of this industry concentration are well-known and not open to serious dispute. Decreased competition has led to: increased consumer banking rates (notice how your bank card and checking fees rise as the number of neighborhood banks shrink?); widespread bank closures; the creation of "too-big-to-fail" banks that receive de facto, free insurance from the federal government; and, perhaps most disturbingly, a credit crunch for small businesses and borrowers from poor communities.

• Television broadcasting mergers have proceeded at a dazzling pace. In over-the-air television broadcasting, Westinghouse, owner of the largest radio network, recently bought CBS. Disney, a major content provider, acquired ABC. In cable, Time Warner, which already owned the fledgling Warner broadcasting network and is the nation's second largest cable operator, bought Turner, the parent company of CNN, TBS, TNT and others.
  These types of mergers induce a narrowing of the media conversation at a time when new technologies could spark a cacophony of voices. This represents a dramatic blow against American democracy, at a time when it desperately needs an infusion of new energy, new voices and a new sense of the possibility of citizen empowerment.

• In the telephone industry, Bell Atlantic has taken over Nynex, Southwest Bell and Pacific Bell merged and now WorldCom is maneuvering to acquire MCI.
  These mergers threaten to stifle the competition that has driven down long-distance phone charges, and head off competition in local phone service before it ever starts.

Slowing merger mania will require breathing life back into the core antitrust principles that guided the country from the 1914 passage of the Clayton Act until the early 1970s. A conservative law and economics movement known as the Chicago School has blinded the federal judiciary to many of the costs of mergers, which has in turn intimidated the Clinton administration from challenging mergers.
The single best hope for revitalizing antitrust law and policy may now be the Justice Department's challenge to Microsoft. Microsoft, which controls 90 percent of the market for personal computer operating systems, is trying to leverage its dominance in that market into everything from computer browsers to on-line airplane ticket sales.
Microsoft has been so ruthless in its expansion and acquisition strategies, and so disdainful of both the Justice Department and the federal judiciary, that is has generated governmental and public support for antitrust enforcement of a kind not seen in decades.
Perhaps it has required the emergence of Bill Gates, a modern-day John D. Rockefeller, to remind the nation's judges and antitrust authorities of a century's accumulated learning of the dangers of concentrated corporate power.