U S V Western Electric

Summary

In 1949, the United States filed an action against Western Electric, Inc. and AT&T alleging that the companies violated the laws set forth in the Sherman Antitrust Act of 1890. Both parties, bypassing adjudication or trial, consented to a Final Judgment made by the court. The Final Judgment was agreed upon on January 24, 1956.
In 1982, the United States once again filed suit with Western Electric, Inc. and AT&T, among other defendants, alleging “monopolization of telecommunications services and equipment in violation of the Sherman Antitrust Act.” This time, the United States set forth a decree, during a court recess, in the public interest that required the divestiture of said companies, competitive restrictions on local operating companies, and for the removal of restrictions in the earlier decree set forth in the Final Judgment of the 1956 case.

The court decided to modify the old decree to temporarily restrict Western Electric, et al, from “entering the electronic publishing business where defendant could undermine competition and threaten First Amendment values.” The new decree also imbued the court with the authority to enforce these new policies sua sponte (spontaneously of their own will).

These modifications were made in the public interest and pursuant to the Antitrust Procedures and Penalties Act, U.S.C.S §§ 16 (b)-(h), also known as the Tunney Act. This judgment was decided on August 11, 1982 and resulted in the divestiture of AT&T into smaller Regional Bell Operating Companies (RBOCs).

Significance

The U.S. v. Western Electric case is a precedent setting case in antitrust legislation because it resulted in the AT&T divestiture into smaller Regional Bell Operating Companies (RBOCs). The RBOCs were not allowed to enter the long distance or manufacturing market. The 1956 decree banning AT&T from entering the information services market was lifted. Also, Western Electric became part of AT&T.

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