Dear Editor:
You may have seen the commercial. A chartered bus is lumbering across scenic northern Vermont. It purports to be carrying Canadian senior citizens, unhappy with their own health care, down her to get some of ours. The sponsor is unfamiliar, but no genius is needed to realize that it’s a group of American corporations.
The ad responds to the well-publicized busloads of American seniors who car pool regularly to Canada to get a good deal on their prescriptions. In Canada, it seems, the government meddles deeply in health care. It not only provides the insurance itself, but also uses its massive buying power to hold down the price of drugs.
That’s what industry here fears most, government meddling. Corporations would rather compete the good old-fashioned American way, by creating monopolies. That keeps prices and profits up. In some industries, like banking, airlines and communications, this has required government deregulation. In other fields, like drugs, food and retailing, there never was regulation. Thus conniving to elevate prices needed only to slip past the sleepy Federal Trade Commission (FTC) and the drowsy Justice Department. Generally those have not been high hurdles, but traditionally they stand even lower during Republican administrations. That’s one reason corporate campaign contributions tend to favor the Grand Old Party.
The chief tool nowadays for controlling markets and prices is the merger. The deregulated airlines have done a lot of that, and now are poised for a second round. If United Airlines purchases U.S. Airways, analysts expect that two further mergers will quickly follow, thus reducing the industry from six players to three. That’s small enough to allow the reduction of competition to a mere superficial level, as we’ve already seen with auto makers.
The pharmaceutical industry is doing the same. Pfizer is swallowing Warner-Lambert, and GlaxoWellcome is teaming up with SmithKline Beacham. Obviously these firms are already the result of many earlier mergers. More are no doubt in the offing, as each giant tries to minimize the risk off actually having to compete. The fewer the firms, the easier to form gentlemen’s agreements not to blindside one another with a hot new competing product. Then they can just divvy up the existing turf and husband their true competitive spirit for afflictions where no producer is yet making a killing. For now they’ll each just parlay government research money and government patents into continuing as the nation’s most profitable industry.
But perhaps the scariest mergers are in telecommunications. We’ve mostly deregulated that too, for the sake of competition. After the Baby Bells recombined there was MCI/WorldCom, already long forgotten. Now there’s AT&T/Media One, AOL/TimeWarner, Vivendi/Seagram, and probably somebody buying up Sprint. European regulators nixed Sprint going to WorldCom, thus emboldening the Federal Communications Commission to oppose it too. But now Deutche Telekom is nosing around.
This in turn has worried some in Congress, who suddenly think we’d better be careful what kind of foreigners we allow to buy our precious industries. Not a bad idea, although we direct the World Bank to require Third World countries to let any foreigners buy theirs.
The dirty secret is that the FTC actually gets around to examining only 4 percent of all announced mergers, and opposes just 2 percent. Such as Gerber, which already controls 70 percent of the baby food market, but now wants to own Beech-Nut as well. And by the time the Justice Department goes after a Microsoft or some colluding vitamin makers, it’s already too late. To seriously protect consumers, we need serious watchdogs to nip more of these mergers and monopolies in the bud.
William A,. Collins