Chapter VI ECONOMIC STUDIES AND EVIDENCE Some of the Commission's most important instruments of consumer protection and antimonopoly action are the economic reporting of facts coupled with well-reasoned economic analysis. It is not enough for the Commission to simply put out the fires of illegality. As the legislative history of the Federal Trade Commission clearly establishes, it was the congressional intent that the economic factfinding and reporting functions of the Commission should be used as one of the principal means of curbing monopoly power. Important work in the area of economic studies and evidence during the fiscal year are set forth in this chapter. Economic Studies and Reports During the year the Commission issued its annual reports on Current Trends in Merger Activity, 1969, and on Larger Mergers in Manufacturing and Mining, 1958–69. These reports indicate a recordbreaking total of mergers for 1969: 4,550 firms disappeared through acquisition, 16 percent more than the total for 1968. (See table 1.) Acquisitions by manufacturing companies continued to represent the largest single segment of the total, accounting for about 57 percent of all acquisitions recorded. Merger activity, however, grew more rapidly in other sectors of the economy. The most spectacular growth occurred in services. In 1969, more than 1,000 acquisitions were recorded in this sector, up 48 percent from the preceding year and more than triple the rate for 1967. As merger activity attained the record levels of recent years, its impact spread to embrace all major sectors of the economy. The pattern of mergers within manufacturing and mining was similar to previous years. Most manufacturing and mining firms were acquired by other manufacturers, and the greatest number of acquisitions were made by firms classified in the electrical and nonelectrical machinery, chemical, and food industries. The trend to TABLE 1.-Number of mergers and acquisitions recorded, by industry of acquiring company, 1960–69 1 Broad industrial classification of acquiring company in full acquisitions only. 2 Revised. 3 Preliminary. 4 Acquisitions of other independent companies, subsidiaries of 5 Wholesale and retail trade combined. 6"Others" consists mainly of companies engaged in insurance, warehousing and storage, commercial farming, contract construction, 7 Acquisitions involving 50 percent or less of the assets or stock of SOURCES: Moody's Industrials (semiweekly), Standard Corporation Bureau of Economics, Federal Trade Commission. ward a greater degree of variety in mergers accelerated last year. Of all acquisitions of manufacturing and mining companies in 1969, 19 percent were made by firms in other economic sectors. The corresponding figures for earlier years were 16 percent in 1968, 12 percent in 1967, and only 8 percent in 1960. During the year, the Bureau completed and published Economic Report on Corporate Mergers, a comprehensive study of conglomerate mergers. The report includes an analysis of various aspects of the current merger movement, its general causes and motivations, its dimensions and structural characteristics, and its impact on competition and the centralization of economic power. It also describes the effect of the merger movement on the geographic centralization of corporate control. The report makes recommendations regarding future merger enforcement policy, suggests certain administrative and legislative steps designed to reduce financial and tax incentives for merger, recommends legislation to strengthen the rules against interlocking directorates and makes recommendations for improvement of public corporate reporting. In unprecedented fashion, the current merger movement has centralized and consolidated corporate control and decisionmaking among a relatively few vast companies. By the end of 1968, the 200 largest industrial corporations controlled over 60 percent of the total assets held by all manufacturing corporations. (See fig. 1.) The share of manufacturing assets held by the 100 largest cororations in 1968 was greater than the share of manufacturing assets held by the 200 largest corporations in 1950, the year Congress enacted the Celler-Kefauver amendment to section 7 of the Clayton Act. The 200 largest manufacturing corporations in 1968 controlled a share of assets equal to that held by the 1,000 largest In 1941. The current merger movement has played a key role in this procss of centralization. The report, which deals primarily with develpments in the industrial sector, indicates that since World War II, ractically all of the increases in the share of industrial assets held y the 200 largest corporations were directly attributable to mergrs. Indeed, without merger activity on the part of the largest ›rporations, aggregate concentration might well have declined durg the past decade. Merger activity has registered progressive ineases since the early 1950's and has reached record levels in the Figure 1 CHANGE IN CONCENTRATION OF CORPORATE MANUFACTURING ASSETS 1960's. Acquired manufacturing and mining assets averaged about $5 billion annually during 1965 and 1966, rose to $10 billion ir 1967, and to $15 billion in 1968. (See fig. 2.) Early in 1969 ac quisitions reached an annual rate of over $20 billion. Although merger activity declined in the second and third quarters of 1969. for the first 9 months of the year the rate of acquisitions was nearly 6 percent above that of the corresponding period of 1968. These developments in manufacturing are part of a broader picture of concentration and centralization in the American economy. Firms engaged in retail distribution, insurance, broadcasting, news papers, and the utilities have also been caught up in this movement. Many railroads have not only merged with one another in recent years, but have increasingly created holding companies as vehicles for expanding into manufacturing and other sectors of the economy. Banks have created one-bank holding corporations for the purpose of enlarging the scope of their operations beyond their tra ditional areas of activity. Large petroleum companies have not only consummated a long series of mergers within various branches of |