conglomerates. A commission headed by University of Chicago Law School Dean Philip Neal criticized conglomerate mergers but concluded that nothing in any law then on the books prohibited them. The Neal Commission recommended new legislation that would bar companies with more than $ 500 million in revenue, or more than $ 350 million in assets, from acquiring leading firms in unrelated industries. That idea was later taken up by Massachusetts Senator Edward Kennedy, but the proposed law was never enacted.
In 1970, the District Court for Connecticut found for ITT in its attempt to acquire Grinnell, a plumbing and foundry business and also the number one US manufacturer of fire protection systems. The ruling read in part,“ The Court declines the government’ s invitation to indulge in an expanded reading of the statutory language and holds the statute means just what it says.” The explanation of the court’ s decision went on to say,“ It proscribes only those mergers the effect of which‘ may be substantially to lessen competition.’” This ruling indicated that changes to existing antitrust authority would have to come through new legislation rather than the courts.
With no such congressional action materializing, the antitrust authorities tried to go after conglomerates by pushing a theory of reciprocity. This was the idea that conglomerates would illegally induce their owned companies to buy and sell from one another on preferential terms rather than in competitive markets. The antitrust crusaders did not get very far with that argument, but they were undeterred in their battle against conglomerates. Sometimes they erected such a formidable wall of litigation that they succeeded in inducing a conglomerate to back off from a major proposed acquisition. This form of legal obstruction was especially effective if the conglomerate was simultaneously struggling with sluggish earnings and an excessive debt load.
Republican Richard Nixon won the presidency in 1968 on a pro-business platform, yet his administration launched an aggressive effort to block conglomerate mergers. This underscored the fact that opposition to conglomerates came from both the political left and the right. Leaders of the business establishment saw the new-form corporations as a threat to their own power.
3M headquarters in Minnesota( top) and Honeywell headquarters in North Carolina( bottom). They are currently the only two companies in the S & P 500 classified as industrial conglomerates.
The Aftermath of the Conglomerate Era
Sobel dates the end of the conglomerate era— although not of conglomerates— to the 1970 bankruptcy of Penn Central Transportation Company. Penn Central had come into being through a railroad merger and subsequently diversified into a range of activities that included ownership of the Waldorf Astoria Hotel. The company’ s collapse cast unwelcome light on dubious financial reporting practices that it, along with other prominent conglomerates, had employed.
Meanwhile, the great bull market of the 1960s, immortalized as the go-go years, was ending with the biggest stock market decline since 1929 – 1933. The Dow Jones Industrial Average plummeted by 37 % between December 1968 and May 1971 and the conglomerates’ high-flying stocks fared much worse. Gulf & Western, for example, dropped by 85 %. The game of using an overvalued stock as acquisition currency was over.
Increasingly, stock investors focused on the fact that the conglomerates had not delivered on the promise of making two plus two equal five. Quite the opposite;
Acroterion Quintin Soloviev
26 FINANCIAL HISTORY | Winter 2026 | www. MoAF. org