In 1978, the Justice Department sued Occidental Petroleum Corp. to block what later turned out to be an unsuccessful $1 billion bid to takeover Mead Corp. The Justice Department argued that the proposed merger would have violated the antitrust laws because it could have allowed Occidental to monopolize the market for several products, including carbonless copy paper and sodium chlorate.
Twelve years earlier, the government persuaded the Supreme Court to order a divestiture of two grocery chains located in Los Angeles. Although the sales of both stores at the time of the merger represented only 7 1/2 percent of the market and there were more than 100 grocery chains in the area, the Supreme Court agreed with the Justice Department that the merger represented a dangerously unhealthy trend in the grocery business to concentrate power in the hands of fewer and fewer companies.
These mergers and a wide variety of others that ran into government opposition in the past decade probably would be allowed under the new merger guidelines announced Monday by the Justice Department and Federal Trade Commission, antitrust experts said yesterday.
Although they still are trying to digest the Justice Department's detailed changes in the 14-year-old merger guidelines, most antitrust lawyers and financial analysts agreed with Assistant Attorney General William F. Baxter that they represent a more permissive attitude toward mergers.
Yet at the same time, almost all of them said that they do not expect a rash of new mergers as a result of the policy changes. "I don't think it is going to have a significant impact one way or another on the acquisition market," commented David Kay, managing director of Drexel Burnham Lambert.
For one thing, many antitrust experts noted that the economy--which still is struggling under high interest rates and stagnant sales--is not conducive to large mergers.
But more important, according to Kay and other analysts, the policy changes represent a codification of antitrust positions taken by Baxter when he took over the antitrust division more than a year ago.
At that time, Baxter and his boss, Attorney General William French Smith, made it clear that "bigness is not badness" and that mergers challenged in the past largely because of size would be allowed now--so long as they do not threaten to reduce competition in a given market.
"I think the signals he gave then opened up the gates . . . I don't think the guidelines will be viewed as a more significant change than those speeches," Kay said.
In fact, given Baxter's earlier statements, several antitrust lawyers said they were surprised that the guidelines set out by Baxter weren't more lenient.
"When Baxter first came in, he gave the business community the idea that all mergers are go; but his guidelines make it clear that there are some cases that will clearly be challenged," said one top antitrust lawyer, who declined to be named.
FTC Chairman James C. Miller III agreed, saying "I thought the guidelines would have been a little looser" when he unveiled his agency's own guidelines.
Among other things, lawyers point out that the guidelines take a tougher line on acquisitions by large companies, saying that the Justice Department more than likely would challenge a merger between a firm that has a 35 percent share of the market and a company with a one percent share.
Additionally, the Justice Department had made it more difficult for some companies to defend proposed mergers on grounds that they would create greater efficiencies or keep companies from going bankrupt.
Even so, Kay noted that the guidelines clearly represent "less opposition from Washington than heretofore." As a result, attorney Robert Pitofsky predicted that, in the long run--after the economy picks up, "deals that might not have been attempted might now be."
Yet, Pitofsky, a former FTC commissioner, and other lawyers say that, in many respects, the guidelines, which are full of mathematical formulas and caveats, create more confusion than answers.
"They are so terribly complicated . . . that I wonder whether businessmen will have much solace one way or the other in a close case in trying to decide whether the department is going to sue," Pitofsky said.
"I think these guidelines will tend to be more difficult to use" than the earlier rules, added Stephen Axinn, an attorney with Skadden Arps Slate Meagher & Flom in New York.
Even so, one thing was clear to antitrust lawyers. Given the large number of mathematical formulas and statistics needed to justify a merger, more economists will be needed in antitrust enforcement.
"The big winners here are the economic consultants," said former Justice Department attorney Joe Sims.