How Times Have Changed in Our Nation's Antitrust Policy

How Times Have Changed—Antitrust Policy:  FTC Vs. The Procter& Gamble Company

 

On April 11, 1967, the Supreme Court of the United States ruled in favor of the FTC’s finding “that the acquisition (of Clorox) by Procter & Gamble in 1957, eliminated Procter, the most likely entrant into the liquid bleach field, as a potential competitor, was supported by the evidence.”

 

The Supreme Court’s ruling overruled that of the Sixth Circuit Court.  Divestiture of Clorox by Procter& Gamble was affirmed.

 

It is hard to believe how far antitrust legislation and the Supreme Court’s ruling on it have changed during the course of the last 50+ years.  Here was P&G being required to divest Clorox on the predicate, unproven by any evidence, that it might have entered the liquid bleach field.  The elimination of P&G as a potential competitor to Clorox, which would have been an outgrowth of the merger, was the primary factor leading to the denial of the acquisition.

 

Contrast this ruling with what is now being allowed in mergers and acquisitions.

 

Facebook acquires Instagram, a smaller growing competitor, in the very same market.  A vertical integration if there ever was one.

 

Or Google acquires Waze, an up and coming competitor in the maps and traffic management.  Or Amazon acquires Whole Foods, despite already holding a substantial on-line business in the majority of product lines which Whole Foods sells.

 

Since roughly the 1980s, antitrust policy has been anchored more or less single-mindedly on the “test” as to whether the proposed merger would have a lowering effect on the consumer prices.  That has always been one key “test,” but by no means the only one that guided anti-trust policy. 

 

The trust-busting actions taken and supported by the Supreme Court during the early part of the 20^th century, and led by the Roosevelt, Taft and Wilson administrations, were focused just as much on preventing the accumulation of concentrated economic and political power in the growing combinations of railroads, banks, steel and oil.  The potentially nefarious impact of over-concentrated political and economic power should not be ignored today.

 

I am well aware of the enormous benefits to consumers provided by corporations like Google and Facebook and Amazon.  But I am also aware of the anti-competitive impact of their acquiring companies that otherwise would have been separate competitors, providing alternative and potentially fresh innovation streams.

 

The history of antitrust law and policy has been one of alternating permissiveness and restriction.  I believe we are in a situation of gross permissiveness today.  If not reversed, I believe it carries a significant risk of long-term harm to our country.