Windup for Two Supersuits

The Justice Department ends its antitrust cases with A T & T and IBM

They were two of the biggest, most complex and costliest corporate legal actions ever brought by the U.S. Government. Rightly or wrongly, they came to symbolize the relentless meddling that businessmen everywhere had learned to fear most from Washington. Then last week, after years of litigation and without any fanfare or warning, the twin legal dramas came suddenly to an end.

In Washington, Assistant Attorney General William Baxter, who nine months earlier had declared his intention to "litigate it to the eyeballs," announced that the Justice Department had reached an out-of-court settlement with A T & T. That ended the Government's seven-year antitrust pursuit of the world's largest corporation (1980 revenues: $51.7 billion). Under the agreement, Ma Bell—as the giant communications company is popularly known—will divest nearly two-thirds of its total assets by spinning off 22 local operating companies. But at the same time, it will retain its long-distance services and be able to enter new fields of data processing and telecommunications.

Later that same day, in New York, another Justice Department official appeared before a Federal District Court judge to declare that the Government was abandoning its 13-year effort to break up International Business Machines, the world's largest and most powerful computer-manufacturing company (1980 revenues: $26.2 billion). Said Baxter in Washington of the IBM suit: "The case is without merit and should be dismissed."

The two announcements come at a time of intensifying ferment in both industries, and the inevitable effect will be to spur even more competition, change and upheaval. For years, IBM and AT&T have warily circled each other, sensing that each is dominant in a market that holds enormous promise for the other. Since the '60s, the once distinct worlds of data processing and communications have increasingly fused together into a vast new megamarket. Computers a continent apart communicate with each other over telephone lines and via satellite transmissions. Meanwhile, the elaborate multibillion-dollar telephone networks that make such communications possible have grown dependent on computers to function.

At a minimum, the Justice Department's actions will now encourage the two corporate titans to battle each other directly for a share of the valuable and explosively growing business. The settlements will also spur increased competition among companies already jockeying for position within various telecommunications and information-processing markets. Recently, for example, AT&T asked permission from the Federal Communications Commission to set up a long-awaited coast-to-coast network of video-screen teleconferencing centers. These will use computer and telecommunications technology to enable businessmen to confer with colleagues and clients in distant cities.

Politically, the announcements amounted to a strong reaffirmation of the Reagan Administration's approach to antitrust policy. They made it clearer than ever that large corporations no longer need fear the wrath of Washington simply because of their size.