Bush to Relax Antitrust Law, Sources Claim

Top Bush Administration officials plan to propose a significant relaxation of antitrust law that would make it easier for rival U.S. companies to manufacture products jointly, according to Administration sources.

The proposal is based on the theory--disputed by some experts--that by operating factories jointly, American companies would perform better against foreign competition, especially in capital-intensive, high-technology industries such as robotics, semiconductors and high-definition TV.

Officials in the Commerce and Justice departments are spearheading the proposal, and only a few details remain to be debated by senior policy-makers, the sources said. “There is a consensus” on the approach, one official said.

The proposal’s backers hope that it will strongly encourage American companies to band together in manufacturing consortia similar to U.S. Memories, the fledgling association of companies that is being formed to jointly produce the computer-memory chips known as DRAMs. Proponents contend that if high-tech companies are allowed to pool resources, they will be able to share the high start-up costs and the risk of questionable returns that are more easily absorbed by larger competitors overseas.

The proposal would fall far short of an open invitation for companies to join forces in violation of current antitrust laws, which are aimed at preventing competing firms from monopolizing markets and rigging prices. Companies seeking to form manufacturing consortia would be required to notify the Justice Department, which could block corporate alliances that it believed to be harmful to competition--just as it does now.

But one of the key provisions in the proposal would ease the fears that many executives reportedly have about joining consortia. The provision would eliminate the chances that a consortium’s member firms could face civil suits for treble damages under the antitrust laws.

At least five bills to encourage manufacturing consortia already have been introduced in Congress, and the Administration proposal is motivated partly by a desire to spur passage of such a law and to shape its final form. Atty. Gen. Dick Thornburgh has long indicated that he favors permitting joint manufacturing agreements, but it has not been clear up to now if and how the Administration would want the law to be changed.

The proposal is expected to be greeted warmly on Capitol Hill, where fears are widespread that U.S. industry is falling behind that in Japan and other industrial countries. It is also likely to win support from industry; last month eight trade associations, including the National Assn. of Manufacturers, formed a coalition to support joint manufacturing initiatives.

But the idea has its critics. Opponents contend that U.S. companies perform best when they are on their own and that creating consortia could make American industry stodgy.

“Decreasing competition (in the United States) will not create strong international businesses,” said Rep. Mike Synar (D-Okla.) a member of the House Judiciary Committee. “There is no evidence that the alleged decline in the competitiveness of American business can be traced to the antitrust laws.”

Others voice concern that the creation of big consortia could make life extremely difficult for small, innovative firms in the same industries that are not consortium members. “Why would any venture capitalist want to put his money behind a start-up in any technology” in which a consortium was a major player?, asked David Coelho, founder of two Silicon Valley companies, in recent congressional testimony.

Officials cautioned that their decision is not final. “There is no Administration position yet on the legislation,” said James F. Rill, assistant attorney general in charge of the Justice Department’s antitrust division.

But other officials said that after much informal discussion, senior policy-makers have reached agreement on the thrust of the proposal. Among them are Thornburgh; Michael J. Boskin, chairman of the Council of Economic Advisers, and Commerce Secretary Robert A. Mosbacher. The proposal has been delayed only because of a bureaucratic turf battle over how the interagency process should advance the proposal, sources said.

The consensus proposal is more modest than one that had been backed by some Commerce officials, who favored a process in which the Commerce and Justice departments would grant certifications to consortia making them virtually exempt from antitrust penalties. Opponents within the Administration objected that the certification process could be a first step toward a federal “industrial policy”.