The Reagan administration's new antitrust chief said yesterday that mergers involving large companies at times improve competition and will not be the target of blanket Justice Department policy.

In particular, Assistant Attorney General William Baxter said vertical mergers -- such as an oil company's purchase of a new pipeline network -- are unlikely to be a major focus of Justic Department activity.

"In my view, there is no such thing as a vertical 'problem'," Baxter said in testimony prepared for delivery before the House Judiciary subcommittee on monopolies and commercial law.

"If there is any major weakness in antitrust doctrine and analysis as it has been applied in recent years, it is the tendency to focus on general categories of vertical arrangements and behavior without any careful analysis of their horizontal impacts, if any," he said.

Baxter, a former Stanford University law professor, made his first appearance in an oversight setting before a congressional panel yesterday and indicated sharp differences with much of federal antitrust doctrine of recent years.

In recent years, many Democratic antitrust officials have condemned increasing economic concentration and have viewed federal antitrust action as a way to break up large enterprises. Baxter, in fact, does not even support the premise that concentration is a growing problem.

Baxter said there has been "very, very little change in aggregate concentration over the last century" and said he does "not support" studies by the Federal Trade Commission which repeatedly have suggested that economic power is increasingly in the hands of fewer and fewer companies.

Nevertheless, Baxter said he intends to vigorously prosecute cases involving "private horizontal restraints" and "cartel-type" behavior. "i will urge that responsible company officials serve jail terms in all appropriate cases, because I believe the threat of a jail term is the one truly effective deterrent to businessmen," Baxter said.

But even horizontal mergers "often have procompetitive as well as anti-competitive effects," Baxter said. Mergers that make collusion among a small number of competitors relatively easy should be "stopped or, if necessary, undone," he asserted.

The subcommittee's chairman, Rep. Peter Rodino (D-N.J.), praised Baxter for continuing to move ahead with the division's antitrust case against American Telephone & Telegraph Co. despite a request from Defense Secretary Casper Weinberger that the case be dropped. Baxter indicated, however, that he might address the Defense Department's concerns after the liability phase of the case concludes and said he had met recently with officials of that Cabinet agency to listen to their concerns about the national communications system.