President Reagan, arguing that American business needs greater flexibility to respond to global competition, has decided to ask Congress to overhaul the nation’s antitrust laws to ease restrictions on mergers, Administration sources said Tuesday.
According to a memorandum by Treasury Secretary James A. Baker III, chairman of the President’s Economic Policy Council, Reagan has approved a five-point legislative program recommended by his chief economic advisers to change the antitrust laws, which govern major areas of corporate activity.
The package, to be unveiled as part of the President’s 1986 legislative agenda, will include a proposal to exempt import-battered industries from antitrust restrictions on mergers. For other industries, another proposal would limit the grounds on which courts can block mergers.
Other proposed changes would severely restrict the use of treble damage awards for violations of antitrust laws, allow greater freedom to corporate directors to sit on the boards of competing companies and sharply limit the ability of American firms to file antitrust suits against foreign corporations.
Sketchy information about the proposals emerged last month after the President’s economic policy advisers presented him with their recommendations. Details of the proposals approved by the President were made available Tuesday.
Federal antitrust laws, originally passed around the turn of the century, prohibit corporations from engaging in acts that may lessen competition through mergers, acquisitions or monopolization of a market. The proposals call for the first major overhaul of the antitrust laws in more than 35 years.
Some Administration officials have argued that the antitrust restrictions on mergers may be discouraging transactions that would create stronger, more competitive firms. But critics of the Administration have charged that weak enforcement of the antitrust laws has hurt U.S. competitiveness.
The President’s proposals are likely to receive a mixed reception in Congress. House Judiciary Committee Chairman Peter W. Rodino Jr. (D-N.J.) said Tuesday that he does “not foresee the Judiciary Committee countenancing substantial change or precipitous change in the antitrust laws.”
Rodino, a frequent critic of the Administration’s antitrust policy, said, “If there is any connection between the antitrust laws and current economic policy, it would be that more vigorous competition--not less enforcement--is needed.”
On the other hand, Senate Judiciary Committee Chairman Strom Thurmond (R-S.C.) is likely to give “very careful consideration” to the Administration proposals, said his spokesman, Mark Goodin.
Thurmond “would like to see sensible antitrust reform,” Goodin added.
The package includes five specific proposals:
- The White House plans to propose a five-year exemption from the antitrust laws for mergers and acquisitions in industries that have been seriously injured by imports. This provision would give the President an additional way to help depressed industries. Under existing law, if the International Trade Commission finds that an industry has suffered serious injury from foreign imports, the President can either do nothing or can offer protection by restricting imports with tariffs or quotas.
- In a change that could affect all industries, the President is seeking amendments to the 1914 Clayton Act that would make it more difficult for courts to block mergers. The Administration has argued that the Clayton Act, one of the historic pillars of antitrust law, is outdated because it was written at a time when economic understanding was less sophisticated and “social concerns” dominated antitrust philosophy.
Under current law, a court could block a merger if it would reduce jobs in the community or hurt a competing firm. Under the President’s proposals, the courts would have to find “a significant probability” that such transactions would enable the companies to engage in anti-competitive behavior.
The courts would also have to evaluate proposed mergers and acquisitions according to the economic standards outlined in the Justice Department’s merger guidelines, for example by looking at global, rather than only local, markets and considering the possibility of foreign competition.
- Another proposal would limit antitrust penalties to reduce the incentive of private companies to harass their competitors. Now, when a company wins an antitrust case against another company, it can often collect treble damages. Under the proposed changes, treble damages could be recovered only under a very few specified conditions. This provision also would allow the government to recover treble damages.
- A fourth amendment would change the rules that limit corporate directors from serving on the boards of competing companies. The existing law prohibits such “interlocking directorships” for companies that have capital, surplus and undivided profits of $1 million or more. The Administration wants to raise that threshold to $10 million and require that each firm involved exceed that threshold before the law would apply.
- The President also has decided to propose restricting the ability of U.S. companies to sue foreign companies for alleged antitrust violations committed on foreign soil. U.S. courts would be required to dismiss such suits unless a significant argument can be made that the court has jurisdiction or that U.S. consumers would be harmed.