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MONSTER MERGER MANIA

by Michael Hammerschlag

West Hawaii Today July ‘96

 

The proposed $50 billion AT+T/Southwestern Bell merger is the latest in a frenzy of mergers and buyouts that has even the market-worshipping Wall St. Journal wondering "if this is what was meant by deregulation". In '96 there were $660 billion of mergers- over 10,000- one every 52 minutes, 24/hrs a day, 32 over $3 billion. In '95 there were $453 billion and 9123 mergers, only 51 of which were challengedby the FTC and Justice Dept., compared to under $200 billion in the early 90's. '97 is running at another record pace: $750 billion of mergers. British Telecom buys MCI ($25 bil), Bell Atlantic buys NYNEX ($24 bil), Boeing buys McDonnel/Douglas ($14.5 b), Stanley Morgan buys Dean/Witter ($10.2 bil), Nations Bank buys Boatman ($10 b), Hilton buys ITT/Sheraton, CSX railroad buys Conrail ($9.4 b), Aetna buys US Healthcare ($8.2 b), Bank One buys First USA ($7.3 bil), Lockheed/Martin buys Loral Aviation ($7 b). The insatiable SBC just bought PacTel a few weeks ago ($17 b)- now it wants AT+T, a company 3 times bigger, making a colossus almost as big as AT+T when it was broken up in '84, and leaving only 4 "Baby" Bells. Recent mergers have created the largest entertainment company (Disney+ABC-Cap Cities), the biggest bank (Chase+Chemical-Manufactures Hanover), the biggest Dept. store (Macy's+Federated), and a huge hospital chain (Columbia/HCA+Healthcare/Healthtrust-which is looking at Hawaii purchases).

 

Where are the anti-trust people-the FTC and Justice Dept.-in this orgy of mating?? "We tolerate mergers of companies with much larger market share (20-35%) than we used to (10%)", says antitrust expert Warren Grimes. Ralph Nader is disgusted, "Enforcement has become a bad joke: as long as there are 2 companies left in the field, that's OK". In Cal. that's the case in banking: only Bank of America and Wells Fargo are left. Wells Fargo only beat First Bank for the prize of First Interstate Bank by promising to fire 50% more Interstate workers and close 400 branches. "The more blood, the more Wall St. likes it", says pithy Newsweek editor Alan Sloan. Virtually the only notable mergers the Feds have stopped in the last 2 years are the Microsoft/Intuit, Staples/Office Max, and RiteAid/Revco drugstore deals.

 

Some mergers have sound reasons- say Boeing and McDonnel/Douglas- the companies complement each other; others are forced by competitive pressures (from other monsters), changing markets, new technology, deregulation; but many mergers are due to the ever-rising stock market and the subsequent jump in stock prices that enriches stockholders in both companies.

 

The press's lame cheerleading is shameful--again and again you hear mergers are good for the economy, improve efficiency, benefit stockholders, and are forced by changing conditions. Untold are the obscene amounts executives and top shareholders (often one and the same) make while 40-80% of the target company's workers are "downsized", the crushing load of debt they must pay (30% premium above stock valuation), or the monopolistic concentration of power and money. Microsoft just bought Web-TV and all one heard was blather about the advantages of consolidating elements of the superhighway, but Web-TV makes computers unnecessary, which makes Microsoft's software unsellable. Microsoft's instinct is to bury Web-TV (and I haven't seen a single Web-TV ad since the takeover). Since most newspapers are owned by 3-4 megacorps themselves, they tread very lightly.

 

The plethora of mergers in the news/entertainment business is deeply disturbing. Rupert Murdoch's News Corp. owns Fox TV Network, TV Guide, 20th Century Fox, New York Post, London Times, Harper/Collins publishing, and just bought Pat Robertson's cable network. Time/Warner owns CNN, Warner Brothers, Time Publishing, TNT, Turner Broadcasting. Westinghouse bought CBS and Infinity Radio. "The insidious thing is that these media companies are... remarkably total in what they control", says a screenwriter and USC professor. Disney controls production of TV and film (9 prime-time series and many movies), distribution (ABC, ESPN, Disney Channel, some of A+E and Lifetime), advertising outlets (Kansas City Star, Ft. Worth Star), and marketing (huge theme parks, syndication, toys, videos, T-shirts)- which influences how all the others are done.

 

It's called vertical integration- the primary feature of the 1890's monopolies that lead to anti-trust legislation. Corporate pressure on the news operation was evident in TV interviews where Michael Eisner and Thomas Murphy (Cap Cities) snidely bullied Cokie Roberts and Charles Gibson about their views on the merger. The careless buying and selling of TV networks deeply offends my adolescent sense of the order of things, they were networks, after all, containing entire worlds of entertainment and news, not soap. The lines between promotion and news will fade further.

 

Hawaii doesn't need mergers- power here is already concentrated in fewer hands than any other state. Bishop Estate, the largest "charity" in the country, controls $10 billion and 367,000 acres, an endowment bigger than Harvard and Yale combined, yet educates only 3000 full-time schoolkids with it's $300 million-odd annual earnings, though that's their only reason for existing. Their political muscle cows even the IRS, who have described them as a "group that has so much clout that no one stops them". AMFAC, Matson, Parker Ranch, the US military, have virtually feudal power in Hawaii. Hawaii is on the main international shipping routes – there’s no reason for gasoline to cost 70-85% more than on the mainland..

 

The Feds need to tighten up and actually apply anti-trust laws, or the few companies remaining will be able to dictate price, availability, and our very patterns of thought as news and entertainment become homogenized and predictable- the promotional packaging taking up most of the space, and every decision ultimately being made on the basis of marketing.... not quality or integrity. That process is screamingly obvious in today's films, dumbed down to a 6 year old's level and stuffed down our throats. Senator Sherman's (author of 1890 Antitrust Law) words still resonate: "A nation that would not submit to an emperor should not submit to an autocrat of trade."

 

2 weeks after this article, the governor ordered a massive investigation of the Bishop Estate; in ’97 commenced investigation of a 10 year alleged plot to fix gas prices- 10’s of billions dollars worth.