X
VTC Refuses Change
In Enforcement Policy On Textile Mergers
By HAL TAYLOR
WASHINGTON. Rejecting strong industry opposi- tion, the Federal Trade Commission said Monday it would not change its textile merger enforcement policy.
The merger guidelines, which were first proposed last November, were reaffirmed by a 3-1 vote.
Backing the action were Chairman Paul Rand Dixon and Commissioners Philip Elman and James M. Nicholson. Commissioner Mary Gardiner Jones voted against the guidelines. Commissioner J. Everette MacIntyre filed a separate statement opposing part of the guides.
A spokesman for the American Textile Manufacturers Institute said it "is disappointed in the FTC decision.”
"We don't believe the commission has any justification for singling out our industry," the spokesman declared.
He said there was no concentration in the industry, which is made up of more than 7,000 mills. He said that the largest firm, Burlington Industries, accounts for only 8 per cent of the market and the second, J. P. Stevens, has less than 5 per cent. He added that Burlington had sales of $1.6 billion in 1968 and J. P. Stevens had sales of $963 million while total industry sales were $21 billion.
The FTC said it was affirming the guidelines because they would affect only six firms in the industry. The firms, the FTC said, have had satisfactory profit rates in recent
3. Any vertical merger either
into the
supplying market or forward into a pur- chasing market, where particu- lar acquisition or series of acqui- sitions may involve a market share of 10 per cent or more of the relevant market or where the acquisiti n or series of ac- quisitions may tend to signifi- cantly raise harriers to entry in either market or to disadvantage. existing non-integrated or par- tially integrated firms in either' market by denying them fair ac- cess 10 sources of supply or markets.
years and have the capacity to backward expand by internal means.
Investor confidence in these firms is reflected in their rela- tively high price-earnings ratios and their ability to obtain long term debt in the capital market,” the FTC said. It added:
"The commission's policy state- ment for the textile mill prod- ucts industry represents a direc- tion to the commission's staff as to the types of mergers which should be given high priority in investigating possible violations of Section 7 of the Clayton Act, as amended."
The guidelines set the follow-- ing criteria for the kind of
*
mergers that should be studied.
1. Any merger between textile mill product firms where the combined sales or assets of the firms exceeds $300 million and the sales or assets of the smaller firm in the merger exceeds - $10 million.
2. Any horizontal merger in a textile mill product submarket where the combined firms rank among the top four or have a combined market share of 5 per cent or more of any submarket in which the four largest firms account for 35 per cent or more of the market.
4. Any acquisition of a textile mill product firm with sales_or assets of $100 million or more, and ranking among the four largest producers of a textile mill product, by a non-textile mill product firm with sales or assets in excess of $250 million and with a substantial market posi- tion in another industry. A sub- stantial market position is de- fined as being one of the top four sellers of a product or serv- ice in which the four largest companies account for 40 per cent or more of the market.
The FTC said It had carefully
*
considered the objections raised by the representatives of the tex- tile industry during a meeting in January.
"The group, the American Textile Manufacturers Institute, asserted that they may be handi- capped if not, given free, rein to. engage in produet extension mergers until. They are able to match the size and segze of the operations of Burington, the iiï- dustry leader," the FTC reported.
The commission majority re- jected that position. It said its policy on textile mill product mergers was based on critical recent developments in that in- dustry. "During the past two de- cades the textile mill product in-. dustry has been one of the most merger prone of American in- dustries, a development that has significantly changed the in- dustry's market structure. The large number of horizontal, vertical and product extension mergers undertaken primarily by the leading firms has increased concentration substantially not only in the industry as a whole, but also in particular textile
markets."
Commissioner Jones, in her dis-* senting statement, said "The guidelines make it almost in- possible for the smaller industry;; members, whose assets may ex-.. ceed $10 million but who never- theless may be confronted with the necessity of exiting from the Industry, to sell their assets to five of the most likely acquirers in the textile mill products in- dustry, as well as to large con- glomerate firms. Nor does the commission realistically grapple · with the industry's claims that
the growing dollar sales gap be- tween Burlington and the rest of the industry will be en- couraged by preventing smaller firms from growing faster than Burlington via the merger route. It is inconceivable that the esti- mated growth to $1.14 billion by 1976 of what in 1967 was a sales gap of $570 million between Bur- lington and the second firm in the industry will not widen Bur- lington's over-all advantage in competition with those below it."
She added, "While there is some evidence that these firms' growth and profit rates are such that they can get access to the capital market, no where is there any indication as to whether these firms can get such financ- ing on the same advantageous terms, which Burlington can. We do not know-and our staff has not told us--whether these firms have to pay more for capital than Burlington, which would not be surprising in light of the fact tat large firms usually can ob fain capital more cheaply than smaller ones."
DAILY
NEWS
KECORO
19/3/6-1