The Big Boys unite

[Robert Weissman <rob@essential.org>]

The Big Boys are at it again.

This month's entry in the largest-merger-ever contest is British
Petroleum's takeover of Amoco. The marriage creating a $100-billion-plus
company would be the biggest industrial combination ever.

Conventional economic theory -- the kind on which courts tend to rely in
antitrust cases -- denies that one merger can set off a chain of others.
But don't believe it.

Wall Street analysts, who try to live in the real world rather than
textbooks, assume as a matter of course that the megamerger is likely to
set off a new round of oil industry combinations, with Mobil, Chevron and
Texaco among the likely targets or acquirers. The chain-reaction theory,
incidentally, also explains the merger wave in telecommunications, banking
and other industries.

When the merger mania hits oil, it will follow a 1980s acquisition spree
(Chevron took over Gulf, BP bought Sohio, Texaco acquired Getty) and a
series of more-recently formed joint ventures that have largely escaped
antitrust scrutiny (Shell and Texaco have combined U.S. refining and
marketing operations, Mobil and BP have joined parts of their European
operations). And the oil companies have long maintained production joint
ventures in Alaska and oil-rich areas around the world.

Should anyone care? Only if lost jobs, higher prices, global warming and
corrupt politics matter.

The BP-Amoco merger alone is slated to cost 6,000 jobs, and future mergers
will drive the total far higher. These jobs are of course touted by merger
apologists as "efficiencies."

But this is not a case where labor and consumer interests are at odds.
There is almost no chance these "savings" will lead to lower prices at the
fuel pump.

To the contrary, the fact that consumers are now benefitting from low gas
prices is widely regarded as one of the underlying reasons for the
BP-Amoco nuptials. There are many reasons why gas prices are, by
historical measures, now so low, but competition among oil companies is
surely an important contributing factor. 

In the retail markets where BP and Amoco compete directly, less
competition will tend to raise prices. But even in the markets where they
do not now compete face-to-face, the lost potential competition will make
it easier for oil companies to raise consumer prices.

Corporate consolidation raises problems of a different sort, as well,
notably the concentration of political power that flows from concentrated
economic power. While no one could reasonably argue that Big Oil does not
currently wield enormous political power, competition in the industry
nonetheless works to limit the companies' political solidarity and clout.

BP, for example, has broken from the industry's tooth-and-nails opposition
to any effort to address global warming. This sort of industry division
becomes increasingly less likely as the number of competitors shrinks. 

The immediate issue is whether, post-merger, BP will maintain its
willingness at least to consider modest greenhouse gas reduction measures.
The broader concern is that a diminishing number of competitors will lead
to more lockstep, and most politically potent, industry positions on
public policy questions.

Because this is the first of what, if left unchecked, will be a series of
giant mergers in the oil industry, antitrust authorities at the Federal
Trade Commission have a unique opportunity to nip the problem in the bud.
They have not previously signed off on similar mergers, so they will not
be forced to consider the merger in the shadow of a hands-off precedent. 

On the other hand, if the antitrust enforcers let this merger sail
through, they will have a hard time justifying action when the next oil
company wedding is announced.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor.

(c) Russell Mokhiber and Robert Weissman

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