The recent increase in the number of larger conglomorate mergers may upset the existing political balance of power in the United States, and give more political influence to huge private enterprises, the chairman of the chairman of the Federal Trade Commission warned yesterday.
Pointing out that a record 24 mergers valued at more than $100 million were announced during the first quarter of this year, Michael Pertschuk said such merges "present a direct challenge to the balance of institutional power because there is no limit to the size a firm can achieve through such mergers."
Pertschuk said there is a fear that "these hugh private enterprises, which are among the most tightly controlled organizations in our society, will increase their power at the expense of smaller and less organized groups, and the individuals."
Speaking to a antitrust seminar sponsored by Time Inc. here, Pertschuk said the "danger posed" by the trend to larger and larger firms "is encroachment upon the viability of bedrock institutions: a free market, a responsive political system, a pluralistic society."
Corporations are becoming so big and powerful, Pertshuk claimed, that neither shareholders nor consumers can offset their growing influence.
The FTC, along with Senate Judiciary Chairman Edward M. Kennedy (D-Mass.) and Justice Department antitrust head John H. Shenefield, has been pushing legislation aimed at limiting or prohibiting certain large mergers, particularly those that don't offer any apparent economies or advantages to the public.
But the FTC proposal has gone even further than either Kennedy and Shenefield, who are willing to allow certain large mergers if competitive advantages can be shown. The FTC has proposed an outright ban on mergers involving any of the top 200 industrial companies and any other company with sales or assets in excess of $100 million.*tIn comments made at a second talk later in the day to the Society of American Business and Economic Writers, Pertschuk acknowledged that "there is a role for certain conglomerate mergers in disciplining ineffective managements." But he added "there is little evidence of public benefit" in most of today's mergers, which he said involve "mostly healthy firms."
Pertschuk said his proposed legislation, known as the "cap-and-spin-off" approach "does not absolutely forbid any merger." He pointed out the larger firms wishing to merge could sell off existing subsidiaries to compensate for any purchase. CAPTION: Picture, FTC Chairman Michael Pertschuk: sees direct challange to the balance of power. By Margaret Thomas-The Washington Post