The case
The case study is an analysis of the American Telephone and Telegraph (AT & T) Company. The latter firm had violated antitrust regulations and in particular the Sherman antitrust Act of 1890. This law prohibits trusts; it was designed to shift economic power from large corporations. (Ferlix, 2009)
The AT & T Company enjoyed a monopoly of power in provision of its products and services. It was able to achieve this by maintaining ownership of telephone components to purchasers through leases. Long distance telephone services were all under the company. Also, twenty two Bell companies were under AT & T and this meant that local telephone services could be duly controlled. Matters were made worse by the assumption that the company was indeed a natural monopoly. However, a series of antitrust cases brought forward against the company led to the erosion of these premises.
In 1956 Hush -a – phone filed a suit against the company so that it could be allowed to improve the company’s telephones through its products and the courts were in favor of Hash a phone. But perhaps the most significant antitrust case against AT & T was the US vs AT and T case in 1974. Here the US Justice Department put forward a case against the latter company under the assumption that it had violated terms of the Sherman Trust. The court ruled that AT&T had been engaging in anticompetitive behavior and that it had to be broken up. The result of the court’s decision was the splitting up of local operations firms known as Bell. Phone leasing became a thing of the past as the company had to compete with other firms in the market. In the end, the latter company lost its value in phone manufacturing by a whooping seventy percent.
Whether I agree with the decision
I agree with the position of the court because it was able to achieve the major goals of any antitrust regulation i.e. to promote competition. In the process of doing this, it is assumed that consumers will reap the benefit of getting high quality and low prices. Certain mergers tend to disregard these rules and the same may be said of AT & T through its subsidiaries. The splitting up of the company has created a scenario in which other players can get due returns on their investments by competing fairly in the telephone market. The AT & T Company symbolized those huge corporations that grow to such unprecedented levels up to the point where they have excessive market power. This firm was controlling the entire industry and consumers as well as other players were bearing the brunt of such excessive concentration of power in its hands. The Supreme Court was therefore right in making the decision that it made. (Koutsoudakis, 2008)
Whether the government should be more active in keeping markets competitive
Yes, the government should be more active in keeping markets competitive owing to the fact that that the market does possess inefficiencies that make its structure less than perfect. For instance, monopolies tend to dominate their colleagues and this places individuals at their mercy. Economists agree that the most conducive market model is the perfect competition model and the most undesirable one is the monopoly model. Antitrust regulations are designed to curb monopolistic tendencies as they attempt to work towards a model of perfect competition. The government needs to be consistent in applications of these laws. Despite some failures here and there, this does not undermine the necessity of the latter rules and regulations in curbing market domination by large companies such as AT & T and others. At the end of the day, it is consumers’ rights that are being safeguarded through such government interventions.
References
Ferlix (2009). Sherman Antitrust Act.
Koutsoudakis, A. (2008). Antitrust More than a Century After Sherman. Web.