Track record of mega mergers not so rosy
Of course companies come and go, industries restructure and it's possible T-Mobile couldn't have survived, especially in an arena of giants. Some mergers are a normal function of a healthy, dynamic market. But since the 1980s, many have yielded questionable results beyond a quick profit.
Jon Talton
Special to The Seattle Times
If AT&T consummates its merger with T-Mobile USA, it will control 43 percent of the national market. If ever there was a test for candidate Obama's pledge of tougher antitrust enforcement, this is it.
But the deal will probably go through. AT&T has bet a $3 billion breakup fee to Deutsche Telekom, parent of Bellevue-based T-Mobile, and has battalions of lobbyists at work in Washington, D.C. President Obama's attorney general is a former white-shoe corporate lawyer.
In truth, recent Democratic administrations have been as easy on mergers as their Republican counterparts. Aside from Bill Clinton's vendetta against Microsoft, he looked benignly at some of the biggest industry consolidations in history, including Hugh McColl Jr. — a big Clinton backer — turning a regional North Carolina bank into giant Bank of America.
It wasn't always that way, and raises the question: Are megamergers, particularly those that result in de-facto oligopolies and cartels, good for America?
Starting with the trustbusting Theodore Roosevelt, presidents, regulators and the courts once looked unfavorably on huge concentrations. The attitude was summed up by Justice Learned Hand in the 1945 U.S. v. Alcoa case:
"We have been speaking only of the economic reasons which forbid monopoly; but, as we have already implied, there are others, based upon the belief that great industrial consolidations are inherently undesirable, regardless of their economic results."
That attitude changed after the 1970s, as antitrust law and its intellectual underpinnings were upended by the free-market thinkers at the University of Chicago and especially legal scholar and failed Supreme Court nominee Robert Bork. Since then, antitrust law has become arcane, steeped in economic dogma and focused mostly on "consumer welfare."
Thus, while Theodore Roosevelt might have seen Wal-Mart as a proto-monopoly, its low prices keep everybody happy. Everybody, that is, except the thousands of Main Street retailers and vendors run out of business. Similarly, low prices that are an artifact of a moment in history, with globalized cheap labor and cheap oil, have protected mergers that have remade America.
Of course companies come and go, industries restructure and its possible T-Mobile couldn't have survived, especially in an arena of giants. Some mergers are a normal function of a healthy, dynamic market. But since the 1980s, many have yielded questionable results beyond a quick profit.
Banking, airlines, telecommunications, broadcasting, oil and railroads are only a few of the sectors that have become highly concentrated. For example, 18 major (Class 1) railroads operated in 1980, before deregulation, and today there are seven. Bank of America and JPMorgan Chase are made up of dozens of regional institutions, including Washington Mutual. The big banks that created such systemic risk to the economy in 2008 are even bigger today.
Outside of a few top corporate centers, the results have been devastating to most American cities. Phoenix, until recently the fifth-largest city in America (now sixth), lost all its major headquarters to mergers, and with them the high-paid jobs, the attraction of talent and capital, and the spinoff of executive expertise into startups and civic leadership. Phoenix may be America's biggest branch-office town, with the attendant low-wage jobs, but it is far from alone.
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