Commentary: Megamergers: What's The Big Picture?

When news broke of Citicorp's merger with Travelers Group Inc., President Clinton's first question was: What are we going to say about all these deals? His National Economic Council director, Gene Sperling, had a ready answer: Steer clear of commenting on specific mergers--but launch a sweeping review of concentration and competition in the American economy. "This merger wave is a major economic trend," Sperling says. "Those of us in the policy world should be looking at it in a broad way, rather than trying to intervene in the enforcement process."

Wish them luck. Since January, more than $650 billion in megadeals have been announced--from banking to autos to telecom. That places questions about competition squarely at the center of economic policy: Have America's corporate giants bulked up enough to compete on a global stage? Are big companies such as Microsoft Corp. and SBC Communications Inc. smothering potential competition in industries vital to the New Economy? These are issues that ultimately have enormous economic and political impact, and they deserve the scrutiny of the White House.

Keeping that big-think outlook, however, won't be easy when the public is reeling from Megamerger-of-the-Week syndrome. Already, politicians have seized on the chance to score points while--in theory--they debate the dangers of market concentration. Witness how Senators Slade Gorton (R-Wash.) and Orrin G. Hatch (R-Utah) openly lobbied on behalf of home-state software interests--Microsoft and Novell Inc., respectively--during Senate hearings on the software industry. And as the NEC works on the study, it will inevitably be heavily lobbied by both labor and business interests.

The NEC is starting on the right foot. Sperling spent the first two weeks of May huddling with White House lawyers to forge rules that let the Justice Dept. advise the NEC without compromising its independent enforcement role. And the Cabinet-level review, set to begin after Memorial Day, will look beyond antitrust and mergers to other structural issues, such as access to capital or regulation, that could stifle competition.

WEEKEND WORK. While the Administration works out broad principles, Clinton could act immediately on one front: beefing up the budget for antitrust enforcement at Justice and the Federal Trade Commission. Swamped with merger reviews, trustbusters are working nights and weekends just to keep up. That leaves few resources for investigating anticompetitive practices. Both agencies need more money so they can go toe-to-toe with corporate litigators in the courts.

Consolidation is a key feature of today's business--and is likely to be for years to come. President Clinton should deal with that trend by making sure current laws are being enforced--and then giving some hard thought to whether new laws are needed to guide the New Economy.

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