Businessweek Archives

There's More To A Monopoly Than Market Share


Readers Report

THERE'S MORE TO A MONOPOLY THAN MARKET SHARE

"What do trustbusters want?" (Editorial, Mar. 23) harks back to simpler times when merger policy was determined solely by market shares. Now, decisions seem more complicated. What, asks BUSINESS WEEK, do today's trustbusters want?

Our answer is clear. The Justice Dept. and the Federal Trade Commission want to make sure that America's consumers get the benefits of competition: lower prices, better services, and increased innovation. We seek to determine whether a merger will lead to increased prices for consumers or substantially reduce consumer choice. If it will, we look further to see whether there are special mitigating circumstances--such as whether the merging firms will have lower costs--that will translate into consumer benefits.

Back in the 1960s and 1970s, there was a sort of "paint by the numbers" approach to merger enforcement that started and ended with market-share calculations. This standard was simple, all right, but it proved to be too simple. Why? Different industries have different market conditions and unique facts that should be considered in assessing the likely competitive effects resulting from a merger. You can't treat grocery stores like the Internet or trains like computers. In fact, a test confined to market shares could lead to challenging mergers that would actually be good for consumers.

In a bipartisan approach developed under the Reagan, Bush, and Clinton Administrations, we now use market shares as a starting point for competitive analysis, but take the analysis further to consider factors such as ease of entry and changing market conditions. The analysis is, no doubt, more complicated than exclusive reliance on market shares, but it is designed to produce more informed decisions that distinguish between the vast majority of mergers that are pro-competitive and the small number that will be bad for consumers.

Recently, Justice and the FTC have stepped in to protect Americans who buy white bread for kids' sandwiches, prescription drugs for elderly parents, and computer paper and other office supplies. We have also helped American companies that buy aluminum for making soda cans and the Defense Dept., which purchases radar systems to protect our pilots. Each and every time we do this, we apply the same test: Would consumers be hurt by the merger? By proceeding this way, we ensure that our economy remains competitive and that consumers get the benefits.

Robert Pitofsky, Chairman

Federal Trade Commission

Joel I. Klein, Assistant Deputy

Attorney General

Antitrust Div., Justice Dept.

WashingtonReturn to top

HEY, GM. WHY DO MY FRIENDS ALL DRIVE BMWs?

I read "Slip slidin' away at General Motors" (News: Analysis & Commentary, Mar. 23) with great interest. As a long-ago (more than 35 years) champion of the company, I have watched it go to pieces with regret. No other industry has the phenomenon of a large and articulate press that critiques and evaluates its products. Unfortunately, General Motors Corp. has ignored this wellspring of commentary and advice.

I can think of five BMW owners among my close friends and a broad selection of Asian and European cars among other friends and co-workers. The only remaining GM owner of my acquaintance bought a light truck, had a number of dreadful experiences with the dealer when it was new, and swears he'll never buy another. GM didn't just lose that market share, they drove it away.

Robert H. Nielsen

Seattle

A probable cause for GM's loss of market share: design. Many of the GM products are just plain boring! Over the years, I purchased three Buicks but finally gave up in disgust. They became bland, adjusted to the lowest common denominator of design.

It might prove helpful if GM executives let the design departments have some flexibility and not approve designs by committee. For starters, they might consider why the Corvette is a constant best-seller!

William L.R. Rice

Fairfax, Va.Return to top


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus