The Senate Antitrust Subcommittee is considering hearings on Standard Oil of California's proposed bid for Amax Inc., and the Federal Trade Commission has meanwhile stepped up an ongoing investigation into the multibillion dollar merger of the two large energy companies it was learned yesterday.
The hearings and investigation could clarify the scope of current antitrust legislation, whether it bars very large mergers on the basis of size, and how far oil companies can go in acquiring other natural resource companies.
Socal, the country's fourth largest oil company, already has more than 20 percent of the shares of Amax, a diversified natural resources firm which owns the country's third largest coal company, and recently offered to purchase the remaining shares for cash and preferred stock.
Amax directors rejected the offer saying it would "raise serious and substantial antitrust questions."
David Boies, chief counsel and staff director of the Senate Judiciary Subcommittee on Antitrust and Monopoly, said the panel was "in the process of conducting a preliminary investigation into the merger and predicted that "a hearing is very likely."
A spokesman for Amax, meanwhile, confirmed that the FTC has accelerated its own investigation into the possible acquisition. The probe was initiated when Socal first acquired its 20 percent stake in Amax three years ago and was never terminated.
"The FTC has contacted Amax, and is taking testimony from us in a non-public hearing," the spokesman said, adding the company "is cooperating fully in the investigation." He said it represented a continuation of the earlier probe, and that the FTC was interested in the antitrust implications of the recent Socal proposal and "in any further acquisition of Amax shares by Socal."
A Socal spokesman said his company has not recently been contacted by the FTC in this regard.
H. J. Haynes, chairman of the San Francisco based oil giant, said "there are no antitrust restraints today, any more than there were three years ago when, with the full support of the Amax management and board, Socal invested equity capital in Amax to acquire a 20 percent interest."
He noted that the FTC "at that time made an extensive investigation into the operations of the two companies and interposed no objections," and added that "our counsel has thoroughly concluded that it would not violate the antimerger laws in any respect."
But subcommittee counsel Boise said that the preliminary investigation has already uncovered "some potentially very serious antitrust problems."
One, he said, related to "the possible loss of actual or potential competimerger," meaning it does not involve ular." Boise said Socal was contending that this was "a pure conglomerate merger" meaning it does not involve any competitive problems.
He added that "even if this were a conglomerate merger, it would raise substantial antitrust problems," because of the size of the companies involved. Socal last year had sales of $20.9 billion and earnings of $2 billion, Amax had sales of 1.3 billion and earned $69 million in 1977.
While "it is not clear" whether current antitrust laws prohibit mergers on the basis of size alone, said Boise. "I think it would be subject to challenge, though i don't know how the courts would rule."
He said the Cellar-Kefauver amendment to the antitrust laws "indicate quite strongly that Congress was not only concerned with horizontal and vertical mergers, but with any mergers that increased concentration in the economy as a whole. And there is a good argument to be made that existing law reaches conglomerate mergers where size has such an impact."