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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
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
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
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
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.
TOTAL OP REVENUES
$ 6,583 S 7.036 Minicomputers
2.385 Peripherals & terminals
13.110 Service & software
5.414 Media & su
$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.