The end of antitrust
In giving an unconditional green light to Whirlpool's takeover of Maytag, US antitrust authorities have basically said that no deal, whatever the market share combined, will henceforth be forced to make even minor concessions. The $1.7 billion deal between the two appliances makers will create not only the biggest company in its segment worldwide, it will also control around 70% of the US market for washer and dryers.
The merger has been under review for eight months, and most observers believed that at least some moves to fostering competition would be demanded of the new company, such as spinning off minor brands.
In discussing the decision, a Financial Times article (“Whirlpool takeover of Maytag approved,} 3/30/06) states:
It also put a spotlight on Thomas Barnett, the newly confirmed head of the antitrust division, who has gained a reputation for having approved deals during his short tenure against the recommendation of his staff. Mr Barnett said the deal would not “substantially” reduce competition, was “not likely” to harm consumer welfare and was “not likely” to give the merged entity market power in the sale of any of its products.
Not likely to give the merged entity market power? Then, Microsoft has no market power, I suppose. The idea is that at some future point, Korean and Chinese companies might possibly enter the US in a big way. This creates a new standard for antitrust, what we might call the “crystal ball” approach. Using it, it is not possible to have any antitrust rules. Let Coca Cola and Pepsico merge, Japan's Suntory might garb a big market share at some future time. Let Mars, Nestle and Hershey all join up; some Indian sweets company might be thinking of launching products in the US.
The online Antitrust Review quotes a Reuters article written before the decision:
Staff lawyers at the Justice Department's Antitrust Division have already expressed opposition to the merger Critics charge that the business-friendly Bush administration has been lax on antitrust enforcement, but the courts have also been pro-merger in two recent major cases when U.S. antitrust authorities tried to block combinations of companies with large market shares.
If the decision is a precedent, it will be hard to regulate any new merger or acquisition. Antitrust now is history in the US. [Oligopoly Watch]