[Congressional Record Volume 144, Number 72 (Friday, June 5, 1998)]
[Senate]
[Pages S5684-S5685]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            COMPANY MERGERS

  Mr. DORGAN. Mr. President, I spoke 2 weeks ago on a subject that I 
care deeply about. I want to just make a couple of additional points 
about it, and that is this orgy of mergers that is occurring in America 
today. You can't wake up and take a look at the business section of any 
newspaper in the country without seeing another big megamerger 
announcement.
  I come from, I believe, the Jeffersonian side of my party and share 
very deeply the notion that the broad-based political freedoms in this 
country are nurtured by broad-based economic freedom. Broad-based 
economic freedom comes from dotting the landscape all across this 
country with individual entrepreneurs, businesses, broadly based and 
owned businesses all across this country. That represents the free 
enterprise system, people having dreams and hopes and starting a 
business and nurturing this business.
  It doesn't mean to say that big is always bad or that small is always 
beautiful. It is just to say this country works best, our free 
enterprise system works best and the market system works best when this 
is not dominated by enterprises that choke competition. We have decided 
in law a long, long while ago those that are choking down competition 
and trying to clog the arteries of the marketplace are violating

[[Page S5685]]

the law. There is precious little enforcement these days. Antitrust 
activities are kind of out of favor. But we are seeing an alarming 
growth of mergers in this country.
  As I start, let me again say not every merger is bad. I am not here 
to say that. There are times when the mergers of a couple companies 
make sense. But what is happening now is a wave of mergers that ought 
to be alarming to this country. Former Senator Hart, Phil Hart from the 
State of Michigan, did a lot of work on this issue. There is a building 
named after him here on Capitol Hill. He is probably the last person in 
Congress to talk much about merger activity and antitrust enforcement. 
It is not sexy and it does not win any friends. But it does lose 
friends.

  Let me describe what happens. This chart shows merger completions in 
the last 15 years. Take a look at the exponential growth of mergers. 
This merger mania means you have fewer enterprises. They are buying 
each other, merging, some hostile takeovers, and two become one. It is 
like getting married. You have two people that court each other; you 
have two companies that court each other and they get married. You read 
it in the paper, but you don't even know they are dating. Sometimes it 
is a forced marriage as the case with hostile takeovers.
  Here on this chart are all the marriages going on in corporate 
America--two become one. The railroad industry--we used to have a lot 
of railroads. Now we have a very few railroads. They tell us what they 
are going to haul and how they are going to haul it. If you don't like 
it, tough luck. The airline industry--we used to have a lot of airlines 
in this country. Now we have a few. They have retreated into regional 
hubs and dominate the hub and say here is where we will fly and here is 
what it will cost. If you don't like it, go buy a jet. The 
telecommunications industry--you talk about what is happening in 
telecommunications. All of these big telecommunications companies are 
looking around for suitors to find out who they can romance and who 
they can add to their collection. Pretty soon, ten companies become 
five and five become one. We have Baby Bells--they are not so baby 
anymore. Now they are getting married. So there are fewer Baby Bells 
because they are combining.
  Let me just go through a couple of other charts to describe this 
circumstance. Here we have the value of merger activity in this 
country. In 1998, $1.7 trillion. It is moving up exponentially. Those 
who say that we believe in the free enterprise system, those who say 
that the market system is critically important to the success of this 
country ought to be concerned about this.
  Let me show a chart briefly with respect to the largest mergers. I 
showed this 2 weeks ago and it has since changed because we had a 
chemical company and a pharmaceutical company that started dating and 
then they decided to announce they were getting married--Monsanto and 
American Home Products. On this chart are the 25 largest corporate U.S. 
mergers through June 2, 1998. Seventy billion, CitiCorp wants to join 
with Travelers Group. Fifty-nine billion, BankAmerica wants to join 
with National Bank.
  While I am speaking about it, the banks, they of course, are a go-go 
industry with respect to mergers. Last year, there were 599 bank 
mergers. The biggest banks are merging as quickly as you can open your 
paper these days. About 75 percent of the domestic banking assets are 
held by 100 of the largest banks. The Federal Reserve Board has a 
policy. In fact, if you are big enough, they call it ``too big to 
fail.'' If you are big enough, you are never going to be allowed to 
fail because the consequences of the failure would be too detrimental 
to the country. There used to be 11 too-big-to-fail banks. Eleven is 
now 21 because all the big banks are getting bigger. So the next merger 
you see with one of those banks, there is no risk to them. They can't 
fail. The American taxpayer has to pay the risk of a merger that turns 
sour.
  Small community banks especially understand this problem. Let me talk 
about the testimony of the president of the Independent Bankers 
Association of America. He says ``The evidence shows that increased 
concentration in banking has not benefited bank customers.'' He adds 
that ``larger banks charge higher fees, bank mergers have an adverse 
effect on consumer deposit prices, and small business lending receives 
a short shrift in a world of ever-larger banks.''
  Banks are just one area. I just stop to say that if you take a look 
at this list, it is banks, railroads, telecommunications companies, 
defense companies. Frankly, I think it is alarming. I think Congress 
ought to pay some attention to this.
  I represent a lot of farmers. Family farmers aren't merging. They are 
out there fueling up a tractor, trying to plow in seeds, hoping to get 
a crop. But when they market, they market back up through the neck of 
the bottle. If they market meat, if they are raising a cow and are 
going to market the meat from the cow. In 1980 the big four packing 
plants had 36 percent of the market. In 1994, the big four meatpacking 
plants in this country had 82 percent of the market. This means that if 
you are a farmer trying to market up through the neck of that bottle, 
the products of meat--in this case perhaps pork or beef--you are 
discovering that you are marketing up towards a monopoly. On the top 
they tell you what they will pay you for it. The same is true for the 
grain farmer.
  My point is it doesn't matter whether you are on Main Street or 
running a family farm. If you are operating in an economy in which big 
interests are clogging the marketplace arteries, you have to be 
concerned that this system doesn't work for you. Congress has a 
responsibility and there are laws on the books that would require us to 
look carefully and closely at merger proposals to see, is this in the 
best interests of the country or will this injure the marketplace? Will 
this injure the free enterprise system? In some cases, maybe not; in 
some cases, maybe it will. In those cases, Congress has a 
responsibility to act.

  We had a circumstance with respect to airlines. For example, not too 
many years ago we had a whole raft of merger proposals go to the 
Department of Transportation. The then-Secretary of Transportation 
never met a merger she didn't love. It didn't matter what it was. 
``Just bring them up, and we'll try to merge them. We say amen, and we 
stamp `Approved.' '' The result is that we have had fewer airlines that 
retreated into regional monopolies. I think whether it is railroads, 
airlines, meatpacking plants, banks, or telecommunications companies, 
this country functions best and our market system and free enterprise 
system functions best when you have robust, aggressive competition. I 
worry very much that those who are supposed to be minding the store are 
paying precious little attention to some of these issues.
  Finally, let me say an encouraging word about one person who is 
paying some attention, and that is Joel Klein over in the Justice 
Department. I will not talk about any of the specific cases before 
them, because I am not interested in doing that. But he is someone who 
heads the Antitrust Division. I hope this Congress provides substantial 
resources so that he has the capability and the people over there to 
investigate these mergers to determine whether they are in the best 
interest of the country or whether they violate the law with respect to 
antitrust. I want those who are supposed to be the referees with 
respect to the market system to make sure that competition abounds and 
the market system works. I want Mr. Klein, head of the Antitrust 
Division at Justice, to have the resources necessary to do that, and I 
hope my colleagues agree with me.
  I am going to speak at greater length at another time. I apologize to 
the Senator from Arizona. He has been waiting. I wanted to make the 
point on mergers. I hope my colleagues on both the Republican and 
Democratic sides who have an interest in this issue and an interest in 
making certain that those mergers that are fine proceed unimpeded, but 
those that restrict and constrict and impede the market system ought to 
be looked at with a fine-tooth comb to determine whether they ought to 
be approved or rejected. I will have more to say on this at some point 
later.
  With that, I yield the floor.
  Mr. KYL addressed the Chair.
  The PRESIDING OFFICER (Mr. Enzi). The Chair recognizes the Senator 
from Arizona.




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