I wrote about Competition is Dying in America! on August 31, 2008. The merger of two multi-billion dollar companies is just another example of corporations gone wild.
No.1 drugmaker Pfizer (NYSE: PFE) is buying No. 12 Wyeth (NYSE: WYE) for $68 billion. Along with this buyout will be the elimination of an estimated 20,000 jobs and a reduction in competition.
Wyeth is a profitable company that saw its net income essentally flat between 2007 and 2008. The company has nine groups of products including Advil and Centrum. Pfizer has experienced a 90% drop in income. It is the maker of Viagra and Detrol.
So exactly how does this merger improve Pfizer’s situation? It doesn’t. The merger does not cure its Lipitor revenue losses and it does not put more new drugs into the pipe line according to industry experts.
There is no doubt about the elimination of jobs and reduced competition. The Business Pundit says, “Now you can buy your Advil, Centrum multivitamins, Preparation H, condoms, Lipitor, and Viagra from Pfizer. I can see their new logo now: We have the whole body covered.” I ask what happened to anti trust and monopoly laws?
A complete discussion of competition law is in Wikipedia. A summary of U.S. anti-trust three elements as follows:
- prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.
- banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.
- supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.
I doubt the Obama administration will limit these kinds of mergers. Lobbyists still hold sway over government. The media (newspapers, radio and television) ought to shine a beacon on these activities.
March 9, 2009
Update: more of the same M&A nonsense continue unabated. This link to another web site supports my views
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