FTC Proposes Guidelines for Making Some Mergers Easier

The Federal Trade Commission, conceding that antitrust law had some catching up to do with the workings of the real economy, on Monday proposed guidelines that would make it easier for companies to justify mergers on the basis of cost savings passed on to consumers.

At the same time, the commission proposed to block mergers of high-tech companies that don’t sell competing products now but might do so in the future.

The proposals are part of a 300-page staff report that FTC Chairman Robert Pitofsky hopes will be the basis of a new set of merger guidelines for the FTC and its sister agency, the Justice Department antitrust division.

They come at a time when the pace of corporate consolidation is at an all-time high--9,000 transactions in 1995, valued at $4,568 billion.

“It is not enough for regulatory agencies to simply enforce the laws entrusted to them,” Pitofsky said. “It is equally important to decide whether the laws we are enforcing are up-to-date at a time when vast changes in global trade and the pace of technology rivalry have changed the very nature of competition.”

Legal experts on Monday said the FTC staff report does not propose any revolutionary changes in antitrust law, but codifies evolutionary changes that have been ongoing for more than a decade.

“This is mostly emphasis and nuance rather than any dramatic turn in the law,” said Malcolm Pfunder, an antitrust lawyer in the Washington office of Gibson, Dunn & Crutcher.

In the most significant section, the FTC’s report notes that under a 30-year-old precedent in a case brought against Procter & Gamble Co., the Supreme Court ruled that companies could not justify mergers that might lessen competition merely on the grounds that they might also result in lower prices to consumers.

But the FTC staff said that in the economy of the 1990s, there might be times when a merger of two firms might create a marketing or research powerhouse that intensifies industry competition rather than lessens it.

The FTC’s staff recommendations now go to the Justice Department, where a spokesman said they are still being reviewed.

While corporate lawyers Monday welcomed the FTC’s newfound receptivity to efficiency, they were more skeptical about the commission’s desire to block mergers between firms whose only competition is that their research labs are working to solve the same problem.