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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. This fact

is cause not only for alarm, but for immediate action.

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 a re attuned to

the present market structure, we can at least promote competition through en

forcement

complete enforcement -- of the existing laws and consent decrees.

I refer here to the half-ba ked settlements in the earlier IBM and AT&T suits.

How did the antitrust laws fail to ensure free and open competition in these cases ? Was it because of the government's willingness to enter into "soft" decrees, addressing only past practices but failing to look ahead to

different but equally destructive acts? Or was it due to the failure of the

government to enforce the decrees themselves? To improvidence of content

or deficiency of enforcement? We suggest for your consideration that the

answer is "both."

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 environ

ment 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 a re 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

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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,

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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.

TOTAL OP REVENUES
(in $ millions)

1976

1977 Mainframes

$ 6,583 S 7.036 Minicomputers

1.972

2.385 Peripherals & terminals

10.366

13.110 Service & software

4.722

5.414 Media & su

1.407

1.687 $25.070

$29.632 *Restaled from last year to reflect additional dala Table 2. The combined revenues of the Top 50, above, are thought to be about 95% of total U.S industry revenues. Thus this breakdown pretty well reflects what the entirc industry is doing.

Source: Datamation, June 1978.

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