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to be representative of the means by which antitrust enforcement helps to

aid small business.

The first two items on his list were US v. IBM and

US v. AT&T. Mr. Shenefield commented, "In industries such as data processing and communications, where technological change is rapid and opportunities for entrepreneurial gain are many, we see a strong prophylactic value in prosecuting very large cases for the benefit both of American consumers and what today may be very small competitors."

Mr. Shenefield concedes that the conclusion of the IBM litigation may be several years off, and, as an observer of the AT&T litigation, I conclude

that even the beginning of trial in that case may be several years off.

But until

effective relief is ultimately fashioned, what will become of today's "very small competitors" in the computer and communications industries? Some firms may find it necessary to bring their own antitrust actions. Several firms already have. Unfortunately, by the time the monopolist has done enough damage to give the smaller companies a demonstrable cause of action under Sherman $2, they often lack the financial resources to prevail against the legions of lawyers hired by the monopolist. Some may find it impossible to bring their own suits their annual revenues are many times less than the Antitrust Division's annual

budget, and are literally dwarfed by the annual revenues of their competitors

IBM and AT&T. But all find their business interests substantial and their

needs immediate.

These firms are not without hope, however, They can find some

solace in consent decree judgments entered in previous rounds of US v. IBM

and US v. AT&T. The effect of a consent decree was described long ago in the investigation of the Temporary National Economic Committee:

The instrument has a sweep which no process of law could ever
impart. It can go beyond sheer prohibition; it can attempt to shape

remedies to the requirements of industrial order. If the demand
is for adjustment within an intricate scheme of trade practices,
at least it supplies the instrument. It can reach beyond the persons
in legal combat to comprehend all the parties to the industry. It
can accord some protection to weaker groups and safeguard to some
extent the rights of the public. It can, unlike a decree emerging
from litigation, take into account the potential consequences of
its terms.

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The Antitrust Subcommittee of the House Judiciary Committee also

recog

nized a distinguishing public interest feature of the consent decree, commenting

that a consent decree often establishes the standard of conduct of an entire

industry, and that firms which are not parties to the decree are often directly

affected, in their competitive relationships, by the terms of the decree, **

Additionally, the Congress established unequivocally by the Antitrust

Procedures and Penalties Act of 1974*** the existence of a strong competitive

interest in consent decrees by outlining procedures for all interested parties

to be heard before a consent decree is entered by the court.

It is with this competitive interest in mind, we submit, that complaints

of consent decree violations and enforcement of consent decree provisions

should be approached.

THE IBM CONSENT DECREE AND THE COMPUTER INDUSTRY

In Antitrust Consent Decrees, Lindstrom and Tighe analyzed all of the Justice

De pa rtment consent decrees and categorized them by industry. In the Business

Machines Industry, which included computers, there were as of 1974 six

* Hamilton and Till, Antitrust in Action, TNEC Monograph No. 16, 76th Cong. 2d Sess. 88 (1940).

** Report of the Antitrust Subcommittee, House Judiciary Committee, 86th Cong. 1 st Sess., Consent Decree Program of the Department of Justice, 3 (1959) (hereinafter cited as 1959 Report)

*** 15 U.S.C. $1 et seq. (Supp. 1975)

consent decrees. Of the six, two dealt with data processing. Both of these

involved IBM.

It was noted earlier that consent decrees often establish the standard of

conduct of an entire industry. This was and is the case with the computer industry relative to the 1956 Consent Decree. The IBM Consent Decree allowed for the growth of service bureaus, third party leasing companies, third pa rty maintenance companies, software houses, and peripheral equipment manufacturers. I use the term "allowed for the growth of" advisedly, for the decree could no: ensure the growth of such young, start-up companies without enforcement. And I am unhappy to report that the standard of industry conduct established by the decree is not one of free and open competition.

This is evidenced by the various requests to the Department of Justice

by small firms to enforce the decree. Details of only a few of the many specific complaints to the Justice Department follow. The tables below

indicate the relative size of the organizations involved in these complaints.

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* United States v. International Business Machines Corp., Equity No. 66-215 (SDNY)

(iiled March 26, 1932; entered January 25, 1936) (tabulating cards and machines) United States v. International Business Machines Corp., Equity No. 72-344 (SDNY) Tiled January 21, 1952; entered January 25, 1956) (tabulating cards and machines)

** Source: 1 Standard & Poor's Register (1978) (except CCIA figures)

*** Figures from CCIA calculations

36 -474 0 - 79 - 2

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Applied Data Research (ADR) is based in Princeton, New Jersey, and

specializes in software packages. It currently markets ten such packages and has consistently received praise from within the industry for the quality of

its software products,

In October 1972 and again in July 1976, ADR wrote to the Department of

ustice requesting enforcement of the IBM 1956 Consent Decree with respect to

software marketing. ADR called for a competitive software environment to be created as quickly as possible, and suggested enforcement of the decree as

a means to this end,

ADR relied on Section XV(b) of the Decree which states:

IBM is hereby enjoined and restrained from conditioning the sale
or lease of any standard tabulating or electronic data processing
machine (which shall include any machine unit on a separate base
even if in normal use it is mechanically or electrically connected
with another such machine unit) upon the purchase or lease of any
other standard tabulating or electronic data processing machine.

ADR also relied on the Decree's definition of EDP machine in Section II(f):

"Electronic data processing machine" shall mean a machine or device
and attachments therefor used primarily in or with an electronic
data processing system.

ADR pointed out to the Justice Department that the Supreme Court** and the Court

of Customs and Patent Appeals*** have expressed the indication that a computer

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DOJ Fiscal 1976 Budget Request to Congress. The Enforcement Section currently has 38 employees and a budget of $1,033,000.

** Dann v. Johnston, 425 U.S. 219 (1976).

***

In re Prater, 415 F. 2d 1393 (1969) (footnote 29).

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