Government settles with ATT, drops IBM case


WASHINGTON -- The Justice Department Friday dropped two of the largest antitrust cases in history -- separate lawsuits that tried to break up American Telephone & Telegraph Co. and International Business Machines Corp.

The government and AT&T announced settlement of a 7-year-old suit seeking to dismantle the world's largest company. The agreement calls for AT&T to divest itself of its 22 local Bell Telephone operating companies within 18 months.


These facilities are used by customers to complete local calls or gain access to long-distance or international networks. Under the settlement, Bell was allowed to keep its research arm, Bell Laboratories, and its equipment manufacturing branch, Western Electric Co.

Several hours later, the department announced it was dropping its 13-year-old IBM case, filed in the last days of the Johnson administration, with an admission the suit is 'without merit and should be dismissed.'

Trading of AT&T stock was halted on the stock exchange at 10:42 a.m. EST in anticipation of the settlement. IBM did not open for trading Friday.

Last June, the government and IBM rested their cases in a federal courtroom in New York, ending a trial on the government's attempt to break up IBM.

In its suit, the government charged IBM with monopolizing the general-purpose computer and peripheral products market and sought to have some sort of divestiture of IBM operations.

Months ago, Assistant Attorney General William Baxter, in charge of the Justice Department's antitrust division, described the IBM case as a 'perfect example of a case where there were too many theories, the theories were not sharply defined.'

Friday, Baxter said the government decided to drop its suit against IBM after an extensive review of the case. He said the study persuaded him the cost of continuing the case would be much higher than the government's likelihood of success and the potential benefits to be obtained.

It has cost the government $13.6 million for the IBM case. The computer giant had no immediate figure on its cost.

The announcements ended months of study by the Justice Department on the future of the cases. It also was a sign of the administration's antitrust policy.

Last March, Baxter told a news conference he intended to litigate the AT&T case 'to the eyeballs.'

But in the intervening months, Baxter said he would consider dropping the case if appropriate legislation on the telecommunications industry passed through Congress.

Serious negotiations resumed in the AT&T case late last month, according to Baxter, and resulted in the settlement calling for the Bell System to divest its local operating companies such as New York Bell Telephone Co.

AT&T Chairman Charles L. Brown said the agreement was a 'historic decision.'

'The step we are taking today is all the more timely, in our view, not only because of the general consensus on telecommunications policy but also because there is simply too much risk in proceeding toward yet another kind of judgment in an antitrust case,' Brown said.

Since the case was filed in 1974, AT&T has spent $360 million defending itself. The government has spent about $15 million.

When asked how the new arrangement would affect customer phone bills, Brown said 'competition will bring prices in line with costs.'

A Bell spokesman said later that means the cost could go up or down, depending on the circumstances of the various operating companies.

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