Trade Association Mergers
Monday, November 14, 2005; 11:00 AM
Trade associations along K Street are feeling the urge to merge as two big trade groups may soon combine and others are likely down the road.
Washington Post business columnist Jeffrey Birnbaum was online Monday, Nov. 14 at 11 a.m. ET to discuss the topic and answer your questions and comments.
His K Street Confidential column that focuses on the intersection between government and business appears every other Monday in the Washington Post business section.
A transcript follows.
Jeffrey Birnbaum: Hello everyone. I'm Jeff Birnbaum. Thanks for visiting and asking questions. Please ask as many as you'd like, on any subject related to official Washington. I hope we can have some fun.
I write a column and features here at the Washington Post and have been around in Washington for a long time. I've written for the Wall Street Journal, Time and Fortune and am a longtime political contributor with Fox News Channel. So, if you'd like, feel free to toss in a question or two about a variety of matters.
Today, my column, K Street Confidential, is about mergers among trade associations. So, let's begin!
Houston, Tex.: Why have you stopped appearing on Special Report with Brit Hume? Fox used to have differing opinions, now every syndicated opportunist represents the mouth piece of the Bush Administration. There is no fair and balance report on Fox anymore and the public is aware of this. I also noticed that Juan Williams not appearing because Brit could not stand Juan's opinion since it did not support the Bush's policies. Fox is losing a lot of viewers. Why put 4 people with same opinion on the same show. It will be better to just have Brit be the Judge and Jury for his program.
Jeffrey Birnbaum: Thank you for your question. I am still, proudly, a Fox News contributor and a member in good standing of Brit Hume's "Fox All Stars." I'm sure I'll be on Brit's panel soon. The main folks on the panel, Fred, Mara and Mort have been there very consistently lately, not leaving much room for the others in the rotation. Not to worry, though. We'll all be back. Please don't ascribe any conspiracy theories to who's on and who's not. Brit is an excellent journalist and is not trying to slant his panel in the way you suggest. Thank you for watching and stick with us, please!
Kingstowne, Va.: Shouldn't trade association mergers be viewed as a good thing if they are performing duplicative efforts? It would save the industry time, money, and lobbying efforts to have one widget association instead of two, don't you agree?
Jeffrey Birnbaum: Yes, trade association mergers make good sense when there's an overlap of members and of interests. They are slow to happen, however, largely because their staffs become very entrenched and, like any organization, dig in against major change. But change is inevitable, especially when dollars and cents are involved. Corporations, especially during times that aren't booming, like now, insist on saving money where they can. Association dues is one of those places.
Washington, D.C.: Will having less, but more streamlined, trade associations make them more effective in their lobbying efforts? or will less associations making noise hamper their efforts?
Jeffrey Birnbaum: It should.
If there are three lobbyists from two organizations demanding time with members of Congress, their staffs and decision makers in the executive branch, that isn't efficient at all.
Especially if they are all asking for the same thing, which would often be the case for overlapping associations in the same industry.
Lawmakers, however, might wish to have duplication, at least when it comes to political action committee donations. For people seeking reelection, the more money the better, of course.
Alexandria Va: How much does corporate cost cutting affect association mergers? Do the green eyeshades guys at XYZ Corp look at the ledger and say, "Why do we belong to two associations that essentially perform the same function?"
Jeffrey Birnbaum: Cost cutting is central to the trend. Why should a company foot the bill for two million-dollar associations when one would do? Two sets of lobbyists, two sets of public relations people, two sets of computer experts, two sets of researchers and two CEOs. Why do that!
The CEOs in particular can get very expensive.
There often are two sets of ourside consultants, too.
That's a lot of duplication in an era where cost-cutting at the corporate level is very much in vogue.
As one lobbyist wrote to me this morning, it's surprising that more associations aren't folded into each other given the amount of superfluous activity there often is in the trade group world.
Arlington, Va.: What other mergers do you see coming in the near future?
Jeffrey Birnbaum: I don't know for sure. I have written that there are too many high tech lobbying groups in town. But so far their corporate members haven't balked.
Still, if I were to look at an industry that is very, very, very thoroughly represented in DC, tech would be one of them. That also makes it a prime target for mergers.
Then again, a lot of groups, and I'm not just talking about tech here, dislike each other so much that they must be all but forced into a combination.
All I know is that more are coming--or should be coming.
If you have any suggestions, please let me know. Send it in as another question if you wish.
Woodley Park, D.C.: Have you heard anything about the lobbying efforts of the electronics industry and environmental community to enact a national law governing the recycling of computers and electronics? I read about this in some computer magizine. It seems interesting because the electronics industry is asking for additional federal regulation.
Apparently they are trying to get ahead of states that are passing their own strict e-waste laws.
Jeffrey Birnbaum: Speaking of tech lobbying . . .
I had heard whispers about this but don't know the details. I'll take a look.
It isn't unusual for industries that normally oppose regulation to seek a federal preemption of states--if the states are about to whack them hard.
Some people see a moral contradiction in such an action. And so do I.
But I also see pragmatic, amoral Washington at work. You just can't make this stuff up!
There are no end to stories in the capital city.
Please, by the way, don't hesitate to send me story ideas, either on this chat or via my column's e-mail,
Grand Rapids, Mich.: Are other trade associations rumored to be considering mergers? I'm familiar with at least three major national telecom associations that appear to duplicate considerable activities--United States Telecom Association, National Telephone Cooperative Association, and the Organization to Promote and Advance Small Telecom Companies. How does the media decide who gets covered when more than one group is speaking for overlapping memberships?
Jeffrey Birnbaum: I haven't heard about mergers in telecom. I will check, though, now that you mention it.
My guess is that the issues that those companies face in DC are so large and expensive that the industry would more than tolerate overlap. The more help that they can muster, the better.
The big lobbying fight in the future between cable and telephones and satellites will be huge and have important consequences for us all.
Where there's a lot of activity, mergers don't normally occur. Quiet times allow for the reflection and disruption that consolidations often bring.
Silver Spring, Md.: How do these mergers affect the personnel at the associations? Do they result in mass layoffs, or do they have the opposite effect?
Jeffrey Birnbaum: If mergers go as planned, I'm sad to say that people lose their jobs. Like corporate mergers, one of the reasons that they happen is to save money for the investors.
In the case of associations, the investors are the companies that pay dues. If they can cut expenses, which often means cuts jobs, they'll do it.
It is remarkable that Washington trade groups haven't been as much impacted by that kind of downsizing. Corporate America has put its employees through the ringer and in the capital we get a fraction of the dislocation.
Or so it seems.
Lawrence, Kans.: Jeff: You write -- "The number of trade and professional groups has increased... to about 86,000. But John H. Graham IV, president of the American Society of Association Executives, said that he believes the increase has come among professional societies -- for doctors, scientists and the like -- and not in industry trade associations, where shrinkage is the norm." So, how will these 2 trends affect lobbying in DC?
Jeffrey Birnbaum: Professional societies are growing because it costs less for them to put information out to their increasingly specialized members.
The Internet is responsible for this. The expense of putting up a Web site that is useful to a specialist, say a doctor, is small. But the value to the specialist can be very large, given the rapid pace of change in the sciences these day.
That's why we see proliferating professional societies. They can use the information and it's easy to get the information to them.
Not so with industry groups. They provide elaborate services to members that require conventions, seminars and the like. They also have expensive lobbying operations.
As industries consolidate, so do their associations. That, at least, has been the trend.
Wheaton, Md: Why do so many associations seem obsessed with hiring a "big name" as their CEO? Obviously they think a former pol will give them access, but so often it seems that associations hire defeated Congressman. The end result, of course, is that the CEO continues to act as though he is a Congressman, and is completely out-of-touch with the issues facing the industry he is supposed to represent. Defeated Congressmen are a dime a dozen these days. So why do associations value them over, say, someone who has worked in the industry for decades and knows the issues backwards and forwards?
Jeffrey Birnbaum: You raise a very large topic.
Members of Congress have not made very good lobbyists, generally, because they don't like asking for favors. They are used to being asked.
Not all former members are able to transition from being the person in power to being the person seeking power.
That problem goes double when a lawmaker takes on the responsiblity of running a trade association.
He or she must ask for favors and also be a first-rate organizer. He or she must also be submissive to corporate chietains who are the real bosses of the group.
Those two extra skills are often lacking in former members of Congress--both the ability to organize and to bow and scrape.
In other words, it is the rare former lawmaker who also can be a first rate association CEO. That's one reason that so few of them are.
It's a relatively recently trend to put politicians in those highly visible roles. We now have a cluster of former governors running associations, such as the National Association of Manufacturers and the American Trucking Associations.
I haven't yet come to any conclusion about how well or how badly these and other former government officials do in such senior positions.
Maybe you have an opinion worth sharing on the subject. Please write in!
Fairfax County, Va.: As a 10-year veteran of five different associations, I can attest that cost-cutting does occur when business turns sour for the group's member companies. I have been laid off from one association that later went on to merge with another, and I survived six (!) rounds of layoffs in the span of a year at another association that was facing heavy new regulations on their ability to do business. Association jobs aren't sinecures.
Jeffrey Birnbaum: Thank you for the note. Yes, times can be tough for trade associations that represent industries that are contracting.
Industries that also have narrow profit margins, such as trucking, also can be hard to keep a trade association for.
Associations tend to last, however, in a way that the underlying industry doesn't. Companies find that Washington is a high-yield investment, even if their own business isn't doing so well.
Chris, New York, NY: Is there any talk in Washington that business has overreached and the next cycle will be one of consumer and citizen backlash?
Jeffrey Birnbaum: Yes, there's a lot of talk on that subject.
It came up again in a big way last week when the CEOs of five oil companies testified on Capitol Hill. A lot of people are asking if President Bush and the Republicans are too close to Big Oil, especially now that their profits zoomed and prices for consumers increased.
In general, the Bush administration has been among the friendliest in modern times to corporate America. A lot of companies have set up shop here thinking they can take advantage of the situation and get something for themselves and/or their industry.
For many companies, that's worked. We've seen five tax cut bills in the first four years of George W. Bush.
But that gravy train may being coming to an end. Republicans in Congress are fighting among themselves over budget cutbacks and Bush doesn't seem to have much control over them now that his poll ratings are falling.
Nonetheless, the election of 2006 could well answer your question better than I can. If consumer advocates and critics of Bush's business policy win office, then voters will show their displeasure with Bush's policies on business in his first term.
I warn, however, that the mid-term elections are a year from now. And a year is an eternity in politics. What we are thinking is important now may not even be on voters' minds in November 200-==let along in 2008!
Fairfax, Va.: What is your take on fellow Fox News contributor Bill O'Reilly's recent comments about San Francisco? This does not seem like the type of rhetoric that an upstanding news agency should in any way condone by their continued lack of comment.
Jeffrey Birnbaum: Sadly, I don't know what Bill said about San Francisco. But just because we both work for Fox News doesn't mean we agree on everything. In fact, Fox has a wide collection of opinions, which is one reason it's so well watched.
Washington, D.C.: Can you think of a legitimate reason the National Rural Electric Coop Association still exists in any form whatsoever? And didn't they even move to expensive new headquarters recently to boot?
Jeffrey Birnbaum: I will check into the headquarters, to be sure. Thanks! The question is better asked about the underlying federal program that the assocaition represents. Is it necessary anymore. I heave read (andc written) stories that suggest that it isn't as much anymore.
Max Boot, AEI: Just what is your political philosophy? Because you seem to be a Democrat, but you often make sense, so that can't be right.
Seriously, why did Howard Dean duck a mano a mano debate with Ken Mehlman on Meet the Press last Sunday? Why isn't the media, other than the Washington Times, covering Dean's failure to condemn racist remarks made by Maryland Democrats against Michael Steele? Dean, after all, got in big trouble for his "Confederate flag" comments during teh primaries. Lastly, are the Democrats experiencing fund-raising problems, or have they improved their financial position, like Dean claims? He says that they have paid operatives in 38 states -- on track for 50 by year's end -- but wasn't part of the problem in 2004 that Democrats had paid operatives but Republicans had friends and neighbors who got out thr vote? I thought Dean would have learned from losing the primaries in part because his stipended orange-hatted crazies disturbed the Iowa townies.
Jeffrey Birnbaum: I will take this as a compliment, Max. The answer is yes, Dean is very much on the minds of reporters such as myself, and of the Washington Post, that put a critical story about his fundraising on its front page on Saturday. Cheers!
Jeffrey Birnbaum: Thank you for your questions. I really enjoyed this chat. Let's do it again soon! And please keep reading K Street Confidential!
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