Antitrust: Attacking the Giants

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Attorney General John Mitchell has gone much farther than any of his pre decessors toward promoting the proposition that bigness in business is intrinsically bad. In June he warned that the Government "may very well" chal lenge any merger between two of the largest 200 U.S. companies. Last week Mitchell proved to be as good as his word. His trustbusters announced that they will file suit to block the planned merger of Harold Geneen's International Telephone & Telegraph, the biggest and one of the best-managed conglomerates, with Hartford Fire Insurance Co. The merger would rank among the largest in U.S. history, creating a combine with total assets of $6 billion. ITT Chair man Geneen told shareholders last week that "whatever the guise, by imaginary and strained legal theories, what we are experiencing is an attack on 'bigness' as such."

Mitchell is alarmed by what he calls the "super-concentration" of U.S. in dustry. The 200 largest companies, he notes, now control 58% of manufacturing assets, up from 48% in 1948.

Giant companies, he insists, are not necessarily as efficient or as imaginative in research as medium-size ones.

Doctrine of Potentiality. On the theory that Mitchell intends to stop all mergers among the top 200 companies, Government officials have been building a rationale that would justify the break ing of almost any large conglomerate merger. One argument is based on the doctrine that "potential competition" is restrained if a large company uses the acquisition route to enter an industry that it could have gone into on its own. This could easily apply to the ITT-Hartford case; ITT already owns a life insurance company, and presumably could have expanded its operations into Hartford's field of property and liability coverage. Theoretically, the doctrine could apply to practically any big merger, since the very largest companies have the financial resources to enter almost any industry that they really want to.

Another important reason to attack conglomerate mergers, Mitchell argues, is the potential danger of reciprocity arrangements. Under such deals, Company A tells Company B that it must buy products from one of A's divisions if it wants to keep on selling supplies to other A divisions. Justice almost certainly will contend that acquisition of Hartford Fire would give ITT a chance to force its suppliers to buy Hartford's insurance. In an earlier suit, the department contended that ITT's proposed acquisition of Canteen Corp. would enable it to force suppliers to install Canteen's vending machines. In that case, ITT protested that it has long enforced a policy against reciprocity. The courts have not clearly ruled whether the potential of reciprocity is enough to invalidate a merger.