JDSU and SDLI merger: Better under Bush? Forget the mints...
December 15, 2000
Politics & Policy
URL for this Article:
interactive.wsj.com
Lines That Divide Markets Are Likely
To Blur Under the Bush Administration
By JOHN R. WILKE and BOB DAVIS
Staff Reporters of THE WALL STREET JOURNAL
WASHINGTON -- For regulators charged with preventing monopolies and
cartels in the U.S. economy, one issue is paramount: Where are the lines that
divide markets?
Consider the market for "intense mints." Last week, the Federal Trade
Commission threatened to stop the merger of Philip Morris Cos. and Nabisco
Holdings Corp., unless they sold off two mint brands, among other lines of
business.
The FTC had found A MARKET FOR INTENSE MINTS,
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distinct from the rest of
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the mint market.
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Such fine distinctions determine how activist antitrust regulators are, and with the
advent of a Bush administration, many people expect antitrust enforcers to be
more generous in their interpretation of those lines and less likely to stop mergers
or brand companies monopolists.
That would mark an important change from the past eight years. Consider the mint
case: Philip Morris's Altoids brand had a 62% share of that market, the FTC
found, and demanded the sale of Nabisco's Cool Blasts and Ice Breakers. The line
had been drawn narrowly around intense mints, rather than all mint candies. In the
larger market, Altoids' share wouldn't have raised antitrust flags -- and in a Bush
administration, probably wouldn't have been a problem.
"Republicans traditionally tend to argue in favor of broader markets," said Steven
Salop, a professor of economics and law at Georgetown University. But these
differences are more often seen at the margins, he adds, and in general, "there is a
more bipartisan consensus in market definition than there was in the 1980s."
One major Clinton administration case that might not have been brought under a
broader market view was the FTC's assault on the Staples Inc.-Office Depot Inc.
merger, Mr. Salop says. Even though the two companies accounted for just 5% of
the overall market for office supplies, the FTC persuaded a federal judge they
would dominate the much narrower "office superstore" market, and won the case.
The merger was dropped.
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A Busy Time for Trust Busters
The Clinton administration pursued many high-profile antitrust cases, including:
AOL-Time Warner -- The FTC approved a settlement with the companies,
opening the door for the huge cable merger to proceed.
Microsoft -- After a long court battle, the government won big in federal court; the
case is now on appeal.
WorldCom-Sprint -- The companies abandoned their deal after it was blocked in
the courts on antitrust grounds.
American Airlines -- Alleging predatory pricing, the Justice Department's case
against AMR Corp.'s American Airlines is still pending.
VISA-MasterCard -- The Justice Department case against Visa USA and
MasterCard, also pending, alleges that the companies' coziness unfairly keeps
other credit companies off the playing field.
Staples-Office Depot -- The FTC killed the proposed merger in the courts even
though the two superstores together would have controlled just 5% of total office
supply sales.
Continental-Northwest -- The Justice Department dropped its antitrust lawsuit
against Northwest's purchase of 55% of Continental's voting stock after approving
a Northwest plan to sell its majority ownership back to Continental.
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In Thursday's heavily conditioned approval of America Online Inc.'s merger with
Time Warner Inc., "the concessions demanded by a Bush administration would
have been more modest -- or the case might not have been brought at all," said Bill
Kovacic, an antitrust expert at George Washington University.
"The difference between this administration and the next is likely to be modest
in theory, but significant in process, and the way facts are evaluated in a case," said
Joe Sims, a lawyer at Jones, Day, Reavis & Pogue here who represented AOL
against the FTC.
To a great extent, antitrust enforcement depends on who ultimately is named to
significant positions at the FTC and Justice Department. At the moment, the Bush
team is so far behind schedule because of the Florida election challenge that it is
focusing strictly on senior White House staff and cabinet appointments. The naming
of regulatory-agency and sub-cabinet positions is probably weeks away.
Still, President-Elect George W. Bush's first moves in the area of antitrust and
regulatory policy suggest he will lean hard to the right.
,B>Tim Muris, a conservative former antitrust enforcer at the Federal Trade
Commission and a George Mason University law professor, is the No. 2 official at
the Bush transition office, helping craft a budget. But he is also the resident
antitrust expert on the Bush team, and will have a major role in picking the next
Justice Department antitrust chief -- if he doesn't take the post himself.
In a speech before a law group last year, Mr. Muris said a broad bipartisan
consensus had taken hold in antitrust. But he was also sharply critical of the FTC's
case against Intel Corp. and other "misguided" cases, suggesting that he would
press for changes.
He also questioned the current approach to monopolization cases, saying that
through the 1980s and early 1990s,
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only A HANDFUL of such cases were brought.
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Meanwhile, in just the first Clinton term,
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"the number exploded, with about 60
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investigations,"
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which had a "chilling effect on the winners in our competitive
marketplace."
One such case was the government's successful prosecution of Microsoft Corp.
But antitrust experts don't expect the new administration to get involved while the
case is on appeal, because it is political dynamite and Republicans are split on it. If
the appeals court rules against the government, though, the new administration
might settle the case instead of appealing to the Supreme Court.
Wendy Gramm, another Reagan administration regulator who heads up regulatory
studies at George Mason University, is soon to become the transition team's chief
of regulatory policy.
Hands-off regulators are emerging as the top candidates for antitrust and
regulatory-policy positions. Michael Powell, who is the son of likely Secretary of
State Colin Powell, is a leading candidate for either Federal Communications
Commission chairman, where he is now a commissioner, or to lead the Justice
Department antitrust division, where he served briefly as Joel Klein's chief of staff.
At the FCC, he had criticized the Democratic majority for imposing harsh
conditions on telephone companies to win regulatory approvals.
Texas Public Utilities Commissioner Pat Wood, a Bush favorite, is another
candidate for FCC chairman. He backs the current FCC tough-guy policy, but
faces opposition because he imposed tough conditions on SBC Communications
Inc. before letting it enter the Texas long-distance market. Jeff Eisenach, president
of the Progress and Freedom Foundation, a conservative think tank here and an
antiregulation firebrand, is a long-shot for the FCC slot.
Some think a Bush administration might re-think the way telecommunications
mergers are reviewed. Peter Huber, of the conservative Manhattan Institute, says
he expects the new administration to look askance at the current dual jurisdiction
of the FCC and FTC. While it might not seek legislative change, he says it could
ease administrative oversight. The FCC has enough discretion that a new
chairman could take a new tack, Mr. Huber says.
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