Business Notes TAKEOVERS

The '90s have spawned their first backlash movement against the merger mania of the '80s. Advocates of tough new antitakeover laws that are sprouting from Massachusetts to South Dakota claim that the legislation will prevent outsiders from looting local firms and throwing residents out of work. Critics are concerned that the rules will entrench inefficient corporate managers and drive investors elsewhere.

The antitakeover trend got a big boost last week when the U.S. Supreme Court, in clearing the way for California to challenge the merger of two major supermarket chains, ruled unanimously that states can sue to prevent or undo anticompetitive mergers. "The court decision is a blockbuster," says Robert Litan, a senior fellow at the Brookings Institution. "There are 50 loose cannons out there, 50 attorneys general who can now stop a merger."

The most explosive example of how far states may go to repel raiders came two weeks ago, when Pennsylvania Governor Robert Casey signed into law the toughest antitakeover statute in the U.S. The sweeping measure requires an investor who holds 20% or more of a company's shares for less than two years to forfeit any profit on shares sold within 18 months of a failed takeover bid. The law would discourage takeover artists from launching a raid to drive up the price of a target company's stock and then selling out at a profit.