stock of the world. Senator Kennedy observed this after his antitrust oversight hearings in May 1977. The AT&T case, filed almost four years ago and still mired in procedural mud, seems to be going the way of the IBM case, which took over six years to come to trial. There is something seriously wrong with the antitrust laws when President Carter, who dislikes the proliferation of government commissions, sees fit to establish one for the review of antitrust laws and procedures. The protraction of the IBM and AT&T cases is, in itself, sufficient cause for concern. But the current cases represent the third time the government has brought an antitrust action against each defendant. is cause not only for alarm, but for immediate action. This fact The two earlier suits against IBM and the two earlier suits against AT&T all ended in consent decrees which were, at least in theory, intended to reduce the defendants' monopoly power. Yet the record in the now pending IBM case shows the defendant to still hold close to 70% of the relevant market, and to exert vast power over prices and the entry of other firms into the industry. Likewise, AT&T still has a stranglehold on the communications market, effectively controlling the viability of firms such as the specialized common carriers MCI, SPC, and the deceased Datran. The four consent decrees did not live up to their purpose of arresting the giants' monopoly power: witness the multitude of private antitrust actions pending against each defendant. - So what have our antitrust laws done for us? They have done little except to slap a few defendants on the wrist with the admonishment, "Don't do it again." And when the defendant repeats the offense, or embarks upon a course of conduct strikingly similar in execution and intent to the initial offense, the competitors are essentially helpless. The government either fails to bring quick relief through enforcement of the judgment, or initiates a new antitrust suit, which also fails to bring quick relief. Congress enacted the original antitrust laws in part because of its belief that a competitive economy would best ensure a prosperous economy, and that the "invisible hand" of competition would ensure that private enterprise serves society. Today small business comprises 97% of the nation's enterprises, and accounts for 55% of all private employment, 48% of the nation's business output, 43% of the GNP, and over 50% of all industrial inventions and innovations. But the trend toward increasing concentration of economic, market and political power among fewer and fewer giant institutions will wither small businesses which once flourished. This trend must be arrested. If we, as a nation, truly believe in the concept of competition, and in the benefits of a free enterprise system, we must take steps to make that system work. The legislative mandate must be clarified and the enforcement machinery modernized and streamlined. Our original antitrust laws are too vague in their intent to effectively restrain today's giant corporations. Economic conditions in the marketplace are radically different from those of the 1890's. But until the antitrust laws are attuned to the present market structure, we can at least promote competition through encomplete enforcement - of the existing laws and consent decrees. forcement - I refer here to the half-baked settlements in the earlier IBM and AT&T suits. The utility and utilization of antitrust consent decrees have been lauded by the Congress, legal commentators, the Department of Justice, and antitrust defendants. The consent decree allows the Justice Department to conserve considerable expense and valuable time. It has been estimated that on the average, two more years are required to try a case than to obtain the same or similar relief by means of a consent settlement.* This allows the Department to focus its energies on more segments of the economy and to obtain relief more quickly. The defendant also enjoys a savings of time and money, and avoids the harmful publicity often associated with a federal antitrust case. The defendant's questionable practices can be eliminated without a full-blown trial, and a defendant's competitors can reap the benefits of an enhanced competitive environment more quickly than if they had to wait out a litigated decision. Legal commentators have stated that the consent decree "is a good gauge of what the government thinks corresponds with its general antitrust policies and the enterprise feels is consistent with its economic viability in the market place. As such, the consent decree has an essential place in clarifying the existing boundaries of antitrust law."** Yet for all that has been said and written about the utility of the consent decree as an implement for antitrust enforcement, it remains a paper tiger in the battle to maintain free, open, and fair competition unless the decree is itself enforced. Because the computer and communications industries wield enormous influence on the quality of American life, they are not often thought of as comprising small business. But when most of the competitors to IBM and AT&T measure their market shares in tenths of one percent, it is clear that these * Hearings, House Judiciary Committee, Antitrust Subcommittee, "Consent Decree Program of the Department of Justice, October 21, 1957, at 14. ** Talbot S. Lindstrom and Kevin P. Tighe, 1 Antitrust Consent Decrees (1974). two industries are made up of many very small businesses in comparison to the dominant giants. In fact, according to the Commerce Department's most recent Census of Manufacturers taken in 1972, 59% of the establishments in the electronic computing equipment industry had fewer than 20 employees. And this is unfortunate. Unfortunate because in the previous 1967 Census, firms with fewer than 20 employees accounted for 79% of the total number of establishments. Concentration in the data processing industry is extremely high. The graph and figures on the following pages were prepared by Arthur D. Little, Inc., for the June, 1978 issue of Datamation magazine. It should be noted that of the hundreds of firms in the computer industry, the top 50 control 95% of the U.S. industry revenues (all relevant markets combined), the top seven control 78.5%, and IBM alone controls 49.8%. The combined revenues of all firms ranking below the top 50 are so small as to have a negligible effect on the concentration curve. Comparing IBM's revenues to that of the others in the top 50 shows IBM's enormity. Concentration in the telephone and telegraph apparatus industry is even higher. The four largest firms increased their share of the total dollar value of shipments from 90% in 1954 to 94% in 1972. Representation in this industry by firms with fewer than 20 employees grew since 1958 by only two percentage points to 46% in 1972. Both IBM and Western Electric, an AT&T subsidiary, not only ranked as the largest firm in their respective industry, but were many times the size of their nearest competitor. The small companies trying to compete with IBM and AT&T rely on the antitrust laws not just for the opportunity to grow and prosper, but to stay alive. In a recent letter to the Chairman of this Subcommittee, the Assistant Attorney General for Antitrust, John Shenefield, listed ten areas of activity he felt Fig. 1. Concentration of revenues in the dp industry's leaders remains very high. Although there are many firms which do not appear in the Top 50 list, their combined revenues probably would not bump the curve up by as much as $1 billion. Table 1. Revenues for the big seven alone were up more than $3 billion over 1976 figures. The "other 43" increased their total earnings by about half that amount. Table 2. The combined revenues of the Top 50, above, are thought to be about 95% of total US industry revenues. Thus this breakdown pretty well reflects what the entire industry is doing. Source: Datamation, June 1978. |