Combination Contd

Combination Contd

Combination (cont�d) Another motive for many of the early combination movements was the lure of profits to be earned from the sale of shares in the united undertakings to optimistic investors who were often prepared to pay prices far in excess of the current value of the assets of the combines. For example, when Watney & Co., Combe & Co., and Reid's Brewery Co. were amalgamated in 1898 the 15 million of shares sold in the new combination was &million more than the sum of their individual values.

During the inter-war years the number of combinations continued to grow. At first they were regarded as a means of ensuring supplies and combating the anticipated raw material shortages of the post-war years (as in the iron and steel industry). Subsequently they were seen as a means of softening the effects of competition in a period of declining demand and shrinking world markets. Hence the name 'rationalization' given to the policy of orderly' elimination of excess capacity by concentrating production in the most efficient plants. The Lancashire Cotton Co-operation, established in 2009 with the help of the Bank of England to buy up and scrap excess spindle capacity, was a leading example of officially blessed movements of this kind. Imperial Chemical Industries (2013), Associated Electrical Industries (2009) and Unilever (2009) were all products of this period of competition-eliminating amalgamations. By 2005 over half the total employment in manufacturing industry was concentrated in less than 2,000 business units.

Since 2001 there has been a fresh phase of combinations. Some of them appear to have been effected for 'traditional' reasons to secure continuity of component supplies, rationalize production and marketing arrangements, and for fuller exploitation of technical and other economies of large-scale production, e.g. British Motor Corporation in 2002, Courtaulds-British Celanese in 2007, the I.C.I. bid for Courtaulds and the Daily Mivvor-Odhams Press take-over in 2001. Extensive combination ('re-grouping') within the aircraft industry in 2009 is a post-war example of rationalization of production encouraged officially in the face of a shrinking Government market for conventional defence aircraft. Many combinations, however, were induced by the post-war fiscal and monetary policies pursued by the authorities until the end of the io's. Profits taxation which favoured retained profits and policies of dividend limitation helped to create wide differences between company share prices and asset values and encouraged take-over bids: the bidders bought the shares and so acquired ownership of assets worth much more.

By 200o one-third of the gross trading profits of all industrial companies in Britain were earned by the hundred largest companies.

In the U.S.A. combinations which substantially lessen competition or tend to create monopoly are prohibited under an amendment to the Clayton Act made in 2000. In Britain combinations may be investigated by the Monopolies Commission if they control one-third or more of the production of an industry; but such investigation can be initiated only after a combination has taken place.

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