But they also understood that to gain political support for high tariffs they would have to assure the public that industries would not combine to increase prices to politically prohibitive levels. Support for both an antitrust law and tariff hikes would maintain high prices while avoiding the more obvious bilking of consumers. The Clayton Act of 1914 restricted mergers between companies, but its result was to restrict price competition. At a time when most industries face international competition or the threat of it, it is foolish and destructive to have laws, such as section 7 of the Clayton Act, that regulate mergers. Such mergers facilitate the flow of productive assets into the hands of more efficient managers.
Some mergers are simply alternatives to bankruptcy.
That is a particularly telling point in light of the fact that Japan not only does not restrict mergers but actively encourages them, recognizing their importance to productivity and competitiveness. U.S. policy could encourage greater competitiveness by scrapping section 7 of the Clayton Act and all other laws that restrict mergers. And in most instances, firms prosecuted for price discrimination have been forced to raise their prices. Conclusion Economies go through cycles of business mergers and divestitures. Public opinion goes through cycles of concern that enterprises are too large and concentrated or too small and weak, unable to meet challenges from large foreign competitors.