552 F.Supp. 131 (D.D.C. 1982), Civ. A. 74-1698, United States v. American Tel. and Tel. Co.

Docket NºCiv. A. 74-1698
Citation552 F.Supp. 131
Party NameUnited States v. American Tel. and Tel. Co.
Case DateAugust 11, 1982
CourtUnited States District Courts, United States District Court (Columbia)

Page 131

552 F.Supp. 131 (D.D.C. 1982)

UNITED STATES of America, Plaintiff,

v.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY; Western Electric Company, Inc.; and Bell Telephone Laboratories, Inc., Defendants.

UNITED STATES of America, Plaintiff,

v.

WESTERN ELECTRIC COMPANY, INC., and American Telephone and Telegraph Company, Defendants.

UNITED STATES of America, Plaintiff,

v.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY, et al., Defendants.

Civ. A. Nos. 74-1698, 82-0192.

Misc. No. 82-0025(PI).

United States District Court, District of Columbia.

Aug. 11, 1982

Modification of Final Judgment Aug. 24, 1982.

Page 132

[Copyrighted Material Omitted]

Page 133

[Copyrighted Material Omitted]

Page 134

Ronald G. Carr, James P. Denvir, U.S. Dept. of Justice, Antitrust Div., Washington, D.C., for plaintiff.

Howard J. Trienens, Sidley & Austin, Washington, D.C., for defendants.

The following were designated by Judge Greene to argue on behalf of interested persons at a non-evidentiary hearing regarding the proposed consent decree held on June 29-30, 1982:

Deborah A. Dupont, Nat. Ass'n of Regulatory Utility Com'rs, Washington, D.C., for Nat. Ass'n of Regulatory Utility Com'rs.

Carl D. Lawson, Albert Halprin, Federal Communications Com'n, Washington, D.C., for Federal Communications Com'n.

Jeffrey H. Olson, Citizens Communications Center, Georgetown University Law Center, Washington, D.C., for Black Citizens for a Fair Media, et al.

Philip J. Mause, Kadison, Pfaelzer, Woodard, Quinn & Rossi, Washington, D.C., for Public Service Com'n of Wis., et al.

Charles O. Monk, II, Baltimore, Md., for State of Maryland, et al.

J. Roger Wollenberg, Wilmer, Cutler & Pickering, Washington, D.C., for Southern Pacific Communications Corp.

Harry M. Shooshan, III, Shooshan & Jackson, Washington, D.C., for Geller, et al.

Malcolm R. Pfunder, Hamel, Park, McCabe & Saunders, Washington, D.C., for Tandy Corp.

John M. Dempsey, Lansing, Mich., for State of Michigan, et al.

Jack Shreve, Tallahassee, Fla., for Nat. Ass'n of State Utility Consumer Advocates.

William E. Willis, Sullivan & Cromwell, New York City, for Satellite Business Systems.

Stanley R. Jones, Jackson, Jones & Price, Tustin, Cal., for San/Bar, et al.

Herbert E. Marks, Wilkinson, Cragun & Barker, Washington, D.C., for Independent Data Communications Manufacturers.

Richard E. Wiley, Kirkland & Ellis, Washington, D.C., for American Newspaper Publishers Association, et al.

Jay E. Ricks, Hogan & Hartson, Washington, D.C., for Nat. Cable Television Ass'n, et al.

John E. Bryson, San Francisco, Cal., for California Public Utilities Commission, et al.

Page 135

OPINION

HAROLD H. GREENE, District Judge.

These actions are before the Court 1 for a determination whether a consent decree proposed by the parties is in the "public interest" 2 and should therefore be entered as the Court's judgment. Over six hundred comments from interested persons, many of them objecting to various aspects of the proposal, have been received, and the Court has considered briefs submitted by the parties and others, and it has heard extensive oral argument. This opinion discusses the principal questions raised by these interested persons, and it embodies the Court's decision on the appropriateness of the proposed decree under the Tunney Act's public interest standard.

The opinion is divided into twelve parts. Part I relates the history of the litigation and the terms of the proposed decree. The next two sections contain analyses of two underlying legal issues--the standard of review to be applied by the Court under the Tunney Act (Part II) and the relationship between the decree and state regulation (Part III). The following section (Part IV) considers the question whether the divestiture of the local Operating Companies is in the public interest. Two sections discuss the removal of restrictions from AT & T--Section V as a general matter, and Section VI in the context of the provision of information and of electronic publishing services. The next two sections directly relate to the Operating Companies: Section VII considers whether the proposed limitations on Operating Company activities are in the public interest and Section VIII whether the decree makes adequate provision for access by intercity carriers to Operating Company networks. Part IX discusses the issues arising from the division of assets between AT & T and the Operating Companies; Part X considers special issues and provisions; and Part XI deals with problems of implementation and enforcement. Part XII contains the Court's summary and conclusion.

I

Preliminary Considerations

A. History of the Litigation

On January 14, 1949, the government filed an action in the District Court for the District of New Jersey against the Western Electric Company, Inc. 3 and the American Telephone and Telegraph Company, Inc. (Civil Action No. 17-49). 4 The complaint alleged that the defendants had monopolized and conspired to restrain trade in the manufacture, distribution, sale, and installation of telephones, telephone apparatus, equipment, materials, and supplies, inviolation

Page 136

of sections 1, 2, and 3 of the Sherman Act, 15 U.S.C. §§ 1, 2, and 3. 5 The relief sought included the divestiture by AT & T of its stock ownership in Western Electric; termination of exclusive relationships between AT & T and Western Electric; divestiture by Western Electric of its fifty percent interest in Bell Telephone Laboratories; 6 separation of telephone manufacturing from the provision of telephone service; and the compulsory licensing of patents owned by AT & T on a non-discriminatory basis.

The court record reveals little activity in the case between the date of the filing of the complaint in 1949 and the entry of a consent decree in 1956. Except for the notation that an answer was filed in April, 1949, there are no record entries until the Fall of 1951 when the government filed and the court ordered compliance with several discovery requests. Following the discovery order, there is another two-year gap, and it is not until April 27, 1953, that another record entry is found. This entry indicates that defendants were given two additional months to complete their compliance with the government's 1951 discovery requests. The next reference is to the transcript of a hearing held on January 24, 1956, during which the consent decree was approved as being in the public interest. See pp. 137-138 infra.

The gaps in the court record are partly filled by a report of a committee of the United States House of Representatives 7 which conducted an intensive investigation of the circumstances surrounding the entry of the consent decree. Report of the Antitrust Subcommittee of the House Committee on the Judiciary on the Consent Decree Program of the Department of Justice, 86th Cong., 1st Sess., January 30, 1959 (Committee Print) [hereinafter Subcommittee Report]. That report reveals that the parties were quite active between the time of the filing of the government's discovery requests in 1951 and the signing of the consent decree in 1956.

As early as February 28, 1952, the president of Bell Laboratories, Dr. M.J. Kelly, met with Secretary of Defense Robert A. Lovett and other members of the Department of Defense to enlist their help in persuading the Justice Department to suspend prosecution of the action 8 until the end of the Korean War, 9 a suspension the Attorney General refused to grant. 10

AT & T continued its attempts to end the litigation as soon as the Eisenhower Administration took office. Its executives and lawyers met with officials of the Departments of Defense and Justice throughout the first six months of 1953. Subcommittee Report at 51-52. These efforts culminated in a meeting on June 27, 1953, during a judicial conference held at White Sulphur

Page 137

Springs, West Virginia, between T.B. Price, AT & T's general counsel, and Attorney General Herbert Brownell. According to a memorandum prepared by Price following this meeting, Attorney General Brownell said that he believed that "a way ought to be found to get rid of the case," and that AT & T "could readily find practices that [they] might agree to have enjoined with no real injury to [their] business." Memorandum of T.B. Price (March 3, 1954) reprinted in Subcommittee Report at 53-54. 11

Shortly after this meeting, AT & T again urged the Defense Department "to intercede with the Justice Department to have the case settled on a basis that would not require divorcement of Western." Subcommittee Report at 55. To that end, Secretary of Defense Charles E. Wilson had a letter hand-carried to Attorney General Brownell urging him to end the litigation without divesting Western Electric. The rationale stated for this position was that the severance of Western Electric would "effectively disintegrate the coordinated organization which is fundamental to the successful carrying forward of these critical defense projects," and would "be contrary to the vital interests of the Nation." Subcommittee Report at 56. The Wilson letter was actually prepared by AT & T. 12

Periodic negotiations between AT & T and the government continued through 1954 and 1955, and by early December, 1955, the government and AT & T had reached an agreement. 13

The consent decree which was the product of this process included neither the divestiture of Western Electric 14 nor any of

Page 138

the other structural relief originally requested by the government. Instead, an injunction was issued which precluded AT & T from engaging in any business other than the provision of common carrier communications services; precluded Western Electric from manufacturing equipment other than that used by the Bell System; and required the defendants to license their patents to all applicants upon the payment of appropriate royalties.

Despite the substantial differences between...

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