INDUSTRY TAKEOVERS INVITE MORE SCRUTINY

Comments Email Print

A surprising aspect of the consolidation affecting the plastics industry is that the fervent merger activity does not seem to concern many people, particularly enforcers of antitrust law.

This is nearly astonishing given the obvious danger of trying to dance with elephants.

The plastics industry is not alone in its consolidation, of course. Industries ranging from banking to telecommunications have undergone a similar metamorphosis. It is the means by which companies obtain greater market share and dominance, which equates to increased profit and shareholder value.

Left unchecked, the process can be sinister in its effect on industries and the consumer. That is why antitrust legislation originally was enacted and vigorously enforced for many years. A more laissez-faire philosophy is the present government approach, however, which defenders justify as the result of ``global competition.''

Today, in a number of plastics industry segments, a handful of companies have purchased competitors and come to dominate the marketplace. Whether in vinyl building products, composites or packaging, growth is fueled by consuming other companies.

For example, in 1995, Tenneco Packaging moved to the top spot in Plastics News' thermoformers ranking by buying Mobil's Plastics Division for $1.3 billion. Last August, it further enhanced its position by taking over Amoco Foam Products Co. of Smyrna, Ga. And earlier this year, Deerfield, Ill.-based Tenneco announced a deal to acquire the plastic packaging division of NV Koninklijke KNP BT of Amsterdam, the Netherlands.

Tenneco the thermoformer now is nearly four times larger than major competitors like Sweetheart Cup Co. The size difference is even more pronounced when Tenneco is compared with its numerous independent packaging competitors.

The problem is that nobody of influence seems to be asking the questions that should be asked. How do such mergers support or hurt competition? How does the industry or consumer benefit?

Not every corporate merger is bad. Unfortunately, the meager enforcement of checks and balances doesn't subject enough corporate unions and their accrued marketplace power to adequate outside examination. Industry and the consumers it serves would be better off with a more diligent approach to antitrust concerns.