Anti-Trust Enforcement?

President Bush defended the huge profits of Exxon Mobil Corp. Wednesday, saying they are simply the result of the marketplace and that consumers socked with soaring energy costs should not expect price breaks.

I have been wondering for years now, stretching back into the Clinton administration, whether our government officials have been aggressive enough in enforcing our anti-trust laws, especially when it comes to mergers and acquisitions.

The Sherman Anti-Trust Act, 15 U.S.C. § 1, is the first significant federal legislation, passed in 1890, and provides starting point language for correcting distortions of the free market:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

President Theodore Roosevelt based much of his presidency on "trust-busting;" but it was President William Howard Taft who used the Act to break up the Standard Oil trust into 34 separate oil companies:

They formed the core of today's U.S. oil industry, including ExxonMobil (formerly Standard of New Jersey and Standard of New York), Conoco-Phillips (the Conoco side, which was Standard's company in the Rocky Mountain states)[now merged with Phillips 66, Texaco, and Unocal, itself a merger of Union 76 and Pure Oil], Chevron (Standard of California), Amoco and Sohio (Standard of Indiana and Standard of Ohio, respectively, now [all merged into] BP of North America), and many other smaller companies.

You may have already noticed that some of these breakup companies have re-merged or merged with other oil companies. In case you don't see the names of some of the places you used to be able to buy gasoline, you may find them in this nice history of the oil industry. You may also wonder why you see certain stations in one part of the country but not in another, and wonder if there is some market allocation scheme going on. Under the Sherman Act's enforcement procedures:

Some alleged violations of the Sherman Act are not prosecuted criminally, but rather are adjudicated in civil proceedings under a "rule of reason" standard, which examines the economic benefits and harm of allegedly anticompetitive conduct to determine whether it is, on balance, beneficial to consumer and should be permitted to continue. However, the United States Supreme Court has deemed three types of conduct so lacking in economic justification as to be "per se" illegal. The "per se" violations include price fixing, bid rigging, and market allocation schemes, and are generally prosecuted criminally by the Antitrust Division of the United States Department of Justice. The Antitrust Division has sole authority within the federal government to file criminal antitrust cases, though it shares responsibility for civil enforcement with the Federal Trade Commission.

In addition to the original Sherman Act, we now have the Hart-Scott-Rodino Antitrust Improvements Act of 1976, notably 15 U.S.C. § 18a, which provides for a pre-merger or acquisition notification and waiting period "to enable the Federal Trade Commission and the Assistant Attorney General to determine whether such acquisition may, if consummated, violate the antitrust laws."

I agree that a windfall profits tax will not lower these sticky post-Katrina gasoline prices to consumers; but, with one merger after another being approved since the big breakup, I have to wonder if the Antitrust Division and the FTC are asleep at the wheel.

UPDATE: BP annual profit hits record high 22.34 billion dollars

UPDATE:

When AT&T Chief Executive Edward E. Whitacre Jr. announced Sunday that his company would acquire BellSouth in a deal worth $67 billion, it signaled a new era for big telephony as well as the near complete undoing of the 1984 breakup of Ma Bell, with four out of seven Baby Bells soon subsumed back into the company.

[A]n analyst for Medley Global Advisors in Washington, said AT&T executives may feel some urgency to act now when the regulatory climate under the Bush administration is favorable to such industry consolidation.

UPDATE: The Price of Oil, OPEC and Our Laws; and Taxing Oil's Monopoly Profits.