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In the Public Interest


Mergers Are On The Rise, So Why Is Congress Cutting Antitrust Enforcement?
By Ralph Nader
June 2, 1999



Albert A. Foer is scratching his head these days. As president of the American Antitrust Institute, he is puzzled why Congress keeps the budgets so low for the federal cops on the anti-monopolistic, price-fixing, corporate beat. Not only do the Justice Department's Antitrust Division and the Federal Trade Commission (FTC) have the duty to stop and punish business practices that rig markets to cheat consumers, but their tiny combined budget of just over $200 million a year cannot keep up with an $8 trillion economy, plus more foreign companies violating American antitrust laws.

Yet even with their anemic resources, look at the deserved fines they bring to the U.S. Treasury. For example, Foer reports that in the first eight months of this fiscal year, the Antitrust Division has collected $913 million in criminal fines. That is nine times the division's annual budget.

The United States is in the middle of a fast-rising merger wave. The number of mergers that have to be reported under federal law to Uncle Sam rose from 1,529 in 1991 to 4,728 in 1998. And mergers of companies are getting larger all the time, not to mention the very neglected area of thousands of joint ventures between competitors such as General Motors and Toyota.

Enforcement resources are way behind the growth in GNP, which rose by 112 percent between 1977 and 1997. During the same period, the antitrust budgets actually decreased by 7 percent in constant dollars. You read about these mergers every day -- AT&T merges with the cable company TCI, giant drug companies merge, now the big oil companies are joining together, along with massive consolidations in one industry after another (automobiles, airlines, railroads, food processors, banks, health maintenance organizations).

As Bert Foer stated recently, "Health care is not sufficiently competitive. Airlines monopolize hub terminals, international cartels cost consumers dearly, price fixing and bid rigging are a continual abuse of the system. New technologies are creating persistent monopolies [like Microsoft]. Agricultural and meat-packing industries are unduly concentrated."

What does enforcing the anti-monopolistic practices have to do with your standard of living, you may ask? Well, a single antitrust case can save millions of dollars for consumers, as when the FTC blocked the Staples-Office Depot merger and, according to economists, saved consumers $200 million a year. How? Because with both those companies competing head on, they give you better prices.

Just last month the Justice Department broke up a massive nine-year international price-fixing conspiracy covering vitamin supplements that affected more than $5 billion of commerce in these products just in the United States. The lead corporate price fixer, pharmaceutical conglomerate Roche Holding A.G., pleaded guilty and paid a $500 million fine to the U.S. government.

Then there were the domestic auto companies in the '50s and '60s, led by General Motors, that were charged by the Justice Department with "product-fixing." The antitrust enforcers filed a lawsuit declaring that those companies conspired to "eliminate all competition among themselves in the research, development, manufacture and installation of motor vehicle air pollution control equipment."

Millions of Americans were breathing more toxic air because competition for cleaner cars was suppressed. The companies signed a consent decree in 1969 to avoid a trial.

So antitrust law affects health as well as the pocketbooks of Americans. In just one year -- 1964 -- the Los Angeles County Board of Supervisors reported that physicians had advised 10,000 persons to move away from their county due to the intensity of motor vehicle pollution.

If you think all this antitrust jargon is beyond comprehension but you want to understand the importance of this century-long history, you can obtain a very clear booklet, issued free by the Federal Trade Commission, titled Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws, by writing the FTC, Washington, D.C. It is also available on the Web, at www.ftc.gov/bc/compguide/index.htm.

Bert Foer would also like you to contact your member of Congress about expanding the antitrust enforcement budgets, which pay off big in dollars saved for consumers and in more competitive quality. The collected fines from the corporate culprits, who have made a tragic mockery of the free enterprise system, more than pay for the law enforcement expenses.

Specific information from Foer's nonprofit, Antitrust Institute, can be obtained by writing to 2919 Ellicott St NW, Washington, D.C. 20008, or by accessing www.antitrustinstitute.org.