Who Can You Antitrust?

Trust is a big issue in this year's presidential campaign.

So is antitrust.

Back in April, when Microsoft (MSFT:Nasdaq - news - boards) was convicted of antitrust violations and the Nasdaq swooned, Republicans were quick to blame the Democratic administration for the woes of Mister Softee and its lesser brethren. And with Microsoft and its technology cohort struggling again, the recriminations may begin to fly anew. (After all, Microsoft has more constituents than most Senators.)

Indeed, there is a relatively popular perception that a Republican administration would be easier on Microsoft -- and on antitrust policy generally -- than a Democratic administration.

But investors should beware. Neither the facts nor the political platforms completely support this facile formulation.

The antitrust cops in the Clinton Justice Department have been tough on Microsoft. And more recently, their propensity for driving hard bargains on divestitures has led companies such as WorldCom (WCOM:Nasdaq - news - boards) and Sprint (FON:NYSE - news - boards) to cancel their wedding plans. But while the Clinton-Gore years have been a boon to antitrust attorneys, they have also been a golden age for mergers and acquisitions.

The evidence? According to Thomson Financial Securities Data, in 1999 some 11,005 mergers worth $1.6 trillion were consummated. That's up from $625.4 billion in 1996. The number of Hart-Scott-Rodino premerger filings rose to 4,342 in 1999 from 2,617 in 1995. The number of perfectly good houses in Bridgehampton that have been bought and torn down to make custom-built weekend palaces for merger & acquisition advisers is way up. The clincher: the $1.4 billion price tag that merger maven Bruce Wasserstein wheedled out of Dresdner Bank for his firm, Wasserstein, Perella.

In fact, the Clinton Justice Department reviews only about 3% of proposed mergers. And as was the case in the Reagan and Bush administrations, the vast majority of proposed combinations has sailed through the approval process.

Would Al Gore change that? Possibly. The vice president does have more interventionist instincts than either President Clinton or George W. Bush. And, at least in his rhetoric, Gore has displayed a willingness to use the complex antitrust regime to punish corporate malefactors. On the hustings, he has accused oil companies of antitrust violations and promised farmers he will "reduce concentration in agribusiness" by enforcing antitrust laws more aggressively.

How about Bush? Back in April, the Texas governor refused official comment on the Microsoft case and pledged to "fully enforce antitrust laws to foster competition and innovation, to protect consumers, and to guard against anticompetitive conduct." Nonetheless, some analysts suggest that a Bush victory would sharply change the posture toward antitrust generally and toward Microsoft in particular.

That doesn't wash. Microsoft -- and the Microsoft case -- is neither a Republican nor a Democratic cause. After all, the presiding judge in the case, Thomas Penfield Jackson, is a Reagan appointee. And Republican icons like Robert Bork and Congressman Henry Hyde have sided with the government.

Besides, Microsoft partisans hoping for a shift in fortunes with a change in administration may prove to be as perennially disappointed as Boston Red Sox fans. Should Bush win, his Justice appointees won't settle in until late 2001. And by then, the case may have already been resolved. Neither a Gore nor a Bush administration could simply drop the case.

Like an Alan Greenspan answer to a Congressman's question, antitrust policy takes shape slowly. Over time, the accretion of data, precedents and settlements create patterns that are visible only in hindsight. Last year, the Federal Trade Commission released a study showing that companies that agreed to divestitures in the early 1990s took all sorts of actions to sandbag the prospects of agreed-to divestitures. As a result, the antitrust police are now on a divestiture warpath. To get approval for their $16 billion merger, for example, Fleet Financial Group and BankBoston had to part with 306 branch offices before they could combine to form FleetBoston Financial (FBF:NYSE - news - boards). Pfizer (PFE:NYSE - news - boards) and Warner-Lambert were forced to divest drugs to rivals before merging in June. And BP Amoco (BP:NYSE - news - boards) and Arco agreed to sell off its Alaska oilfields to Phillips Petroleum (P:NYSE - news - boards) for $7 billion.

The new posture is unlikely to change quickly regardless of who wins the election. That's because the loudest complaints about mergers these days come not from politicians, but from commercial rivals. The most vocal critic of the proposed merger between AOL (AOL:NYSE - news - boards) and Time Warner (TWX:NYSE - news - boards) isn't Ralph Nader, it's Disney (DIS:NYSE - news - boards).

Besides, Republicans have historically shown they are capable of some pretty tough antitrust enforcement activity. Theodore Roosevelt, the original trustbuster, was a Republican. And his Republican successor, William Howard Taft, oversaw far more antitrust activity than did the hyperactive Roosevelt. Indeed, the 300-pounder (Taft was so heavy he had to bring a custom-built bathtub to the White House) made the Rough Rider look like a lightweight when it came to antitrust. (Remember the 1911 bust-up of Standard Oil?)

More recently, AT&T (T:NYSE - news - boards) partisans believed the inauguration of Ronald Reagan in 1981 would bring an end to the government's long-running prosecution of Ma Bell. Instead of making nice, the Reaganites pursued Ma Bell and broke it up.

Given the spate of recent merger fiascos, investors of both parties should be hungering for aggressive merger police. Think how much better the shareholders of the old HFS would be today if the feds had forbidden Henry Silverman to merge with CUC International to create Cendant (CD:NYSE - news - boards).

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Daniel Gross (www.danielgross.com) is the author of Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance. The New York-based journalist has written about the intersection of business and politics for The Washington Post, New York magazine, The New York Times and The New York Observer. He welcomes your feedback at [e-mail].