The Justice Department, several consumer groups, the Federal Trade Commission and Adm. Hyman Rickover agreed yesterday on something: support for a new bill proposed by Sen. Edward M. Kennedy that would place strict limits on conglomerate mergers.
Several withnesses testified in favor of the proposed legislation at the first day of Senate Judiciary Committee hearings, but Justice Department antitrust chief John Shenefield informed the committee that his remarks in favor of the concept of the Kennedy bill represented only the view of the Justice Department, because President Carter has not yet decided on whether to support the bill.
Called The Small Business Protection Act, Kennedy's bill would prohibit the 100 largest U.S. corporations -- those with assets or revenues in excess of $2.5 billion -- from merging. Less strict limitations would be placed on mergers involving companies in the top 500.
"The antitrust division believes that this is an important, timely effort to face the high and ever increasing level of concentration of the nation's economic resources," Shenefield testified. "Accordingly the antitrust division supports limited but effective curbs on carefully defined categories of mergers, which would prevent consummation of all save those shown to be of overriding public benefit."
Shenefield said his department needed "the legal tools" offered by the proposed legislation "to deal with the problem" of the present unabated conglomerate merger wave.
Federal Trade Commission Chairman Michael Pertschuk said he supported the proposed legislation specifically citing a legislative option proposed by his staff that would allow large conglomerates to make acquisitions if they were willing to sell off viable business interests with assets comparable in size to those acquired.
Pertschuck pointed out that the number of mergers valued at $100 million or more "has increased from 41 in 1977 to 80 in 1978," a fact he said was cause for concern because of the nation's traditional distrust of "excessive concentrations of social, political or economic power."
Admiral Hyman Richover, director of the Department of Energy's division of naval reactors, said that in his 40 years of work as a government employe who had conducted business with defense contractors, "I have witnessed at first hand the emergence of the large conglomerates and their impact on the companies they have acquired."
Rickover said that based on his experience, "I conclude that many of the advantages attriguted to conglomerates have not materialized. Specifically, the advent of conglomerates has not resulted in improved management... rarely result in economies of scale... [and they] often decrease rather than enhance competition."
"Large conglomerates have, overall, been a negative influence on our economy and our society," Rickover said. "I also believe that their preoccupation with the so-called bottom line of profit and loss statements, coupled with a lust for expansion, is creating an environment where a few, high-level individuals, by controlling the vast resources of a large conglomerate, can exercise undue influence on governmet."
Consumer Federation of America, the nation's largest consumer group, had its president, Kathleen O'Reilly, testify that "if merger madness continues at its current rate, today's Fortune Five Hundred will be shriveled down to the Fortune Five in no time at all."
"It is naive to suggesd that present antitrust law and federal enforcement power are sufficient protections against the anticompetitive effects of [conglomerate] mergers," she said in endorsing Kennedy's proposal.
The White House decided on the eve of the hearings that it would withhold support for Kennedy's proposed bill which he introduced yesterday -- until certain questions raised by several agencies were addressed in the hearings.
Both the Commerce Department and the Council of Economic Advisers have opposed the legislation in private communications with the White House, administration sources have told the Los Angeles Times.