International Business Law

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International Business Law

International Business Law

Example 2

Consumer Perception of Telecommunication Mergers

AMERICAN Telephone and Telegraph (AT&T) finds its origins back to founder Alexander Graham Bell's creation of the phone in 1875. As a subsidiary of American Bell, AT&T began to manage long-distance services in 1884. Within four years, AT&T had become the parent company in a two-for-one swap. Financial wizard J. P. Morgan took over the company in 1907. Morgan decided that AT&T would grow through acquisition, and AT&T developed a reputation as a “ruthless, grinding, oppressive monopoly.” AT&T resisted efforts to curtail its progress for the next 70 years. (Oyer, 2003)

By 1888, both the Democratic and Republican party platforms called for antitrust legislation, and the U.S. Congress complied with the Sherman Antitrust Act in 1890. Beginning with the presidency of Theodore Roosevelt, the U.S. government was determined to bring an end to the anticompetitive actions of large trusts. The federal government began to keep a watchful eye on AT&T after a 1909 merger with Western Union. The following year, the Interstate Commerce Commission (ICC) was given regulatory responsibility for telephone services. In 1911, Standard Oil and the American Tobacco Company were broken into smaller divisions. Even though AT&T had given up its controlling interest in Western Union, in 1913 the government filed an antitrust suit against AT&T. (Lindeman, 1980)

Pitfalls that consumer face

While preventing AT&T from expanding into other fields, the FCC supported the expansion efforts of other companies, even when it meant using AT&T's technology and equipment. For example, in 1968, the FCC forced AT&T to allow Carter Electronics Corporation of Texas to plug the Carterfone into the AT&T telephone system. The following year, Microwave Communications, Inc. (MCI) was allowed to develop its point-to-point microwave line and to sell private-line services to both individuals and businesses, and the government required local companies to provide links for MCI's long-distance service. MCI then began to lobby the federal government to end AT&T's monopoly. In 1974, as AT&T was attempting to comply with Computer Inquiry II, the Department of Justice filed a new antitrust suit, charging the company with monopoly and conspiracy to monopolize telecommunication services and products. (Leonard, 1997)

The suit reached the trial stage in 1981 despite two separate attempts by AT&T to settle out of court. Also in 1981, a federal court awarded triple damages to MCI that totaled $1.8 billion, charging AT&T with engaging in anticompetitive practices. Not satisfied, MCI announced that it was suing AT&T for an additional $3 billion. Two decades later, along with other long-distance carriers, AT&T sued MCI, which was in the midst of bankruptcy proceedings, claiming that MCI had routed long-distance calls through Canada, forcing AT&T to pay local phone companies for the costs of transmitting calls. (Colbert, 2001)

Deregulation was the order of the day in the 1980s, and the United States government finally succeeded in doing what it had begun decades before. At noon on January 8, 1982, William Baxter, the assistant attorney general for antitrust, and Charles ...
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