Antitrust: Scourge of the Conglomerates

Richard Wellington McLaren likes to tell a story that says a great deal about his main concern as Nixon's chief trustbuster. There was an executive whose firm had been taken over by a con glomerate. Wrote the executive to a friend: "You ask me what it's like to work for a conglomerate? Well, it's just like being a mushroom. First, they keep you in the dark for months. Then they throw dung all over you. Then they can you."

Assistant Attorney General McLaren is trying mightily to dispel the dark. Since January, when he switched from lucrative private practice as a lawyer defending companies in antitrust cases, he has flailed conglomerates for evils ranging from excessive economic concentration to "human dislocation." Proud that Republicans "have historically been vigorous enforcers of antitrust," McLaren is becoming the most active—and visible—trustbuster since the days of Teddy Roosevelt; his broadsides have helped chill investor enthusiasm for multimarket companies.

Getting Out of Hand. In McLaren's view, the great "challenge and opportunity for trustbusters" lies in the area of conglomerate mergers. He charges that his Democratic predecessors, by taking the position that mergers of companies in unrelated businesses were not subject to existing antitrust law, "let the merger movement get clear out of hand." In rapid succession, he has announced actions against three big conglomerates. His trustbusters are contesting Ling-Temco-Vought's takeover of Jones & Laughlin Steel; ITT's acquisition of Canteen Corp. and Northwest Industries' attempt to buy up B. F. Goodrich. Such mergers, McLaren says, are forcing "a radical restructuring" of the economy. The restructuring that he is talking about is not based on valid economic grounds, he contends, but rather on financial considerations. He is confident that the courts will agree with him.

Undeniably, conglomerate mergers have dramatically accelerated the concentration of U.S. industrial power (see Corporations). Yet McLaren's view of them is disputed by many experts on legal grounds, and his ideas stumble on some basic contradictions. While he does not necessarily believe that "bigness is badness," he insists that in the case of conglomerates size alone is potentially anticompetitive. Therefore, he is not likely to miss an opportunity to challenge "giant acquisitions" even if no actual restraint of trade is involved. This action, he believes, would tend to retard such possible abuses of economic power as reciprocity. He fears, for example, that a huge diversified company would be tempted to "systematically use its tremendous purchasing power to make sales" by inducing suppliers to buy its own products.