YES, ANTITRUST CAN STILL SAY NO There was some doubt about that for a while, but recently proposed mergers have run into unexpected opposition.
By - Craig C. Carter

(FORTUNE Magazine) – WITH REGULATORS blessing mergers galore in recent years, some observers have characterized the Reagan Administration's antitrust policies in just two words: Anything goes. But suddenly this widespread perception has blurred. Several merger proposals -- notably in the railroad, soft drink, and airline industries -- have run into trouble in Washington. It is understandable that these recent cases should be seen as representing a major shift in policy. In 1982 the Administration issued new rules governing mergers, the first revision of these important guidelines since the days of Lyndon Johnson. Among the changes: a more liberal interpretation of market concentration and a greater willingness to approve even worrisome combinations if there are no major barriers to a new competitor who might want to enter the market. The 1982 guidelines helped bring on the great merger wave of the Eighties. The apparent turn away from permissiveness in antitrust is largely an illusion. ''There hasn't been any change in merger policy,'' says a seasoned antitrust expert on Capitol Hill. ''You're seeing some clear-cut violations of the guidelines, and the law is being enforced.'' Administration officials also maintain that their antitrust policies have not really changed. The 1982 guidelines, they say, were meant to eliminate unnecessary restrictions on combinations, not do away with antitrust enforcement altogether. The opposition to some recent merger proposals, they argue, has served to clarify how far the Administration is willing to go in relaxing the standards. Says Douglas Ginsburg, the Justice Department's antitrust chief: ''Whatever the standard is, certain people will try to test it, to probe the limits and go beyond.'' A look at cases that are helping to define the limits: RAILROADS. In late July the Interstate Commerce Commission stunned the transportation industry by derailing the proposed $2.3-billion merger of the Southern Pacific and the Santa Fe. This was the first time since 1966 that the ICC turned down a major rail merger. The two railroads claimed that one or both might fail unless the merger was approved. But the ICC agreed with the Justice Department that the anticompetitive impact of a merger -- the two lines overlap between Los Angeles and El Paso, for example -- outweighed the risk that the carriers might go bankrupt. SOFT DRINKS. In June the Federal Trade Commission took the fizz out of two pending soft drink deals: PepsiCo's acquisition of Seven-Up and Coca-Cola's acquisition of Dr Pepper. Bert Rein, a Washington antitrust lawyer, offers an explanation. ''The FTC,'' he says, ''is very much influenced by politics. These two cases were highly visible, and the public perception was 'Coke and Pepsi are trying to take over the world. Aren't the antitrust laws supposed to stop this?' '' The FTC, though, also had objective numerical grounds for its naysaying. In the Reagan Administration, agencies concerned with antitrust make use of the Herfindahl index, named after the American economist Orris C. Herfindahl. The index measures the degree of concentration in an industry or market -- that is, the extent to which it is dominated by a small number of firms. On the basis of Herfindahl numbers, antitrust agencies assign an industry or market to one of three broad groupings. A merger in a ''highly concentrated'' market is likely to attract a challenge. If either soft drink deal had been completed, it would have significantly increased the concentration in a market that is already ''highly concentrated.'' If both deals had gone through, the two resulting beverage giants would have controlled about 80% of the U.S. soft drink market. AIRLINES. The Justice Department has tried to shoot down some airline mergers, but the Department of Transportation, which has the final say, has taken a friendlier view of the deals. Such divergences occur in antitrust matters. The guidelines influence all agencies that are concerned with antitrust, but they do not always interpret the guidelines the same way. In early August DOT approved a controversial merger involving Northwest and Republic. The Justice Department had argued that the two carriers, headquartered in Minneapolis-St. Paul, would be positioned to dominate the Twin Cities market. JUSTICE had reservations about the Texas Air-Eastern deal too. New York Air, a Texas Air subsidiary, is Eastern's main competitor for shuttle traffic between New York and Washington and New York and Boston. DOT is expected to give the go-ahead, now that New York Air has agreed to sell some of its takeoff and landing slots in those markets to Pan Am, a new entrant. High concentration levels could also be created in St. Louis, where TWA and Ozark want to merge, and in Denver, where United is trying to acquire troubled Frontier. Still, DOT is likely to approve these deals too. Says Alfred Kahn, who helped deregulate the airlines during the Carter Administration and who has criticized the latest merger proposals: ''DOT never met an airline merger it didn't like.''