The Reagan administration yesterday issued its detailed legislative proposal for a major revision of merger laws, including a limited antitrust immunity for companies in industries that have been severely injured by import competition.
The proposals face an uncertain fate in Congress, particularly in the House, where Rep. Peter Rodino (D-N.J.), chairman of the House Judiciary Committee, has already expressed skepticism.
Commerce Secretary Malcolm Baldrige, one of the advocates of the antitrust changes, said Rodino has proposed to "keep an open mind" on the administration's package. Baldrige said the legislation is needed to lock into law the policies of the Reagan administration and to reflect the increasing reality of foreign competition in American markets.
The proposal, already outlined by President Reagan, would change five basic, long-standing antitrust and merger policies in the name of removing unneeded government regulation of business.
One proposal would rewrite federal merger law contained in Section 7 of the Clayton Act, which currently forbids mergers and other ventures that "may" tend to reduce competition. Under the administration proposal, mergers would not be opposed unless there is a "significant probability" that a merger would be harmful.
In the administration's view, the revision of the Clayton Act is required recognize the economic value of many mergers. "Mergers can enhance efficiency and reduce prices to consumers," an administration fact sheet said. "They facilitate the free flow of assets to their most productive uses, thus increasing our nation's overall well-being. They also act as a check on poor management, protecting investors."
The proposal also aims at giving judges a sharper standard for deciding when mergers threaten competition.
A second proposal alters the use of triple-damage penalties in antitrust suits. Now, the federal government can only collect actual damages against defendants who violate antitrust law by overcharging the government. Under the administration's proposal, the government could collect treble damages for "the most onerous" violations, such as price fixing and bid rigging in government contracting.
The ability of private plaintiffs to collect treble damages would be changed as well. Victims of price fixing could still collect treble damages, but companies could not do so in disputes over a loss of profits. Two-thirds of all private antitrust suits are of this kind, often filed by companies to interfere with legitimate competitive practices by other companies, said Douglas H. Ginsburg, Assistant Attorney General and head of the antitrust division. "That is a real perversion of the antitrust laws," he said.
A third proposal removes current "interlocking directorate" restrictions that bar directors from serving on the boards of two or more competing corporations with profits of more than $1 million. The new legislation would raise that threshold to $10 million and offer other exemptions for smaller businesses.
A fourth bill would give courts new guidance in applying U.S. antitrust laws to the overseas actions of American companies, in order to give greater consideration to foreign antitrust policies.
The final proposal would provide a more lenient standard for assessing mergers in industries seriously hurt by foreign competition. Under current law, when the International Trade Commission finds that such an injury has occurred, the industry is eligible for protective tariffs, duties and other trade relief at the president's discretion.
The administration's proposal would give the president the additional option of offering limited antitrust immunity to companies in these industries, for up to five years. A merger or acquisition involving companies in these industries could be opposed on antitrust grounds only if there were a "significant probability" the the combined firms would have the market power to "maintain prices above competitive levels," for a significant period. According to Ginsburg, in these cases, antitrust regulators would not attempt to determine whether a merger would increase the risk of collusion or price fixing.