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Mergers: ominous or not?
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June 16, 1998: 5:44 p.m. ET
Greenspan, Klein differ on antitrust laws, say consolidation needs scrutiny
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NEW YORK (CNNfn) - Wall Street's merger wave drew scrutiny from Congress Tuesday as the nation's top antitrust watchdog pointedly disagreed with the world's most powerful central banker.
With four of the five biggest deals of all time in play already this year, U.S. lawmakers have begun a fact-finding mission to mull whether existing antitrust laws go far enough.
Federal Reserve Chairman Alan Greenspan questioned whether federal regulators should exercise a "higher degree of humility" and not interfere with monopolies that maintain dominance through cost efficiencies and low prices.
"By the measure of what benefits consumers, such enterprises should not be discouraged," Greenspan said during testimony before the Senate Judiciary Committee.
But the remarks by the nation's central banker drew opposition from Justice Department antitrust chief Joel Klein, who told reporters that "humility is not a prescription for abdicating responsibilities."
"I hope when he sets the discount rate he exercises a great deal of humility," Klein said following the hearings.
Most officials said they believe antitrust laws on the books are sufficient, but there are signs that the current merger wave, which some said is the country's fifth, does provoke warning signals.
As of Monday, a total of $794.7 billion in mergers have been planned this year, according to research firm Securities Data Co. That's already close to the record of $910 billion in deals done during all of 1997.
"This nation has always viewed concentrations of power, whether in government or the private sector, as a threat to individual political freedoms," Greenspan said.
"The acceleration of megamergers in recent months across a broad range of industries has once again stirred these latent concerns."
But Greenspan, ever the free-market champion, said the U.S. economy may now be more able to cope with the consolidation, and the merger fury hasn't rattled industry too much.
"The effects of the present merger wave are yet to be determined," Greenspan said. "But, unless a relationship between bigness and market concentration can be more firmly rooted in anti-competitive behavior, bigness, per se, does not appear to be an issue for national economic policy."
The remarks came just a few weeks after Assistant Attorney General Klein filed an antitrust lawsuit against Microsoft Corp. The Justice Department also is investigating a planned $37 billion deal between telecommunications companies WorldCom Inc. and MCI Communications Inc.
In a call for tougher rules, Klein said most mergers can't be stopped up under the current regulatory climate, even though some of those should be blocked.
"While most mergers either are competitively neutral or beneficial for competition and consumers, there can be no doubt that there are some anti-competitive mergers proposed that would endanger choice, innovation and low prices, and these mergers should and must be prevented," he said in prepared remarks.
Klein said in the last two years Justice found 15 mergers in the radio market that would be harmful to competition.
"One example of an industry where there has been significant consolidation following deregulation is radio," he said. "Many of these mergers did not raise significant antitrust problems, but a not insignificant number did cause us concern."
Also appearing before the committee were Federal Trade Commission Chairman Robert Pitofsky, whose office unveiled an antitrust suit against chip maker Intel Corp. on June 5, and Janet Yellen, head of President Clinton's Council of Economic Advisors.
-- from staff and wire reports
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