U. S. v. ITT—Incompetence, Irrelevance and Confusion
| Author | Stanley E. Boyle |
| Published date | 01 June 1974 |
| Date | 01 June 1974 |
| DOI | http://doi.org/10.1177/0003603X7401900209 |
| Subject Matter | Article |
U. S. v,
In-INCOMPETENCE.
IRRELEVANCE
AND CONFUSION
by
STANLEY
E.
BoYLE""
It
is
fair
to
say
that
with the exception of the price fixing
cases of the late 1950's involving General Electric, Westing-
house,
and
most other
large
manufacturers of electrical
trans-
mission
and
distribution equipment, no
antitrust
prosecution
of the
past
20
years
has
obtained so much news coverage as
that
initiated against
ITT
by the
Department
of Justice.
It
has
had
one positive aspect:
it
has served to focus public at-
tention and concern upon the economic
and
political power
and
activities of such
giant
corporations. Unfortunately, the
inept handling of the case has had two negative effects: (1)
the controversy
has
eschewed any
rational
analysis of the
basic economic issues involved in the case;
and
(2) the set-
tlement accepted
and
the methods by which
it
was reached has
probably tended to reduce even
further
the esteem which anti-
trust
has in the minds of the general public.
In
effect, the
approach used
and
the settlement reached have reduced a
positive force
for
the efficient operation of
our
market society
into a symbol of political corruption.
Two economic
and
political issues (aside from corruption)
are
currently before the public as a result of the case.
First,
many
are
concerned with the political significance of the ac-
cumulation of economic power by
ITT
or
any
other large
company upon the society as a whole.
Four
decades ago, Berle
and Means! indicated
that
political power was a logical and,
""
Professor of Economics, Virginia Polytechnic
Institute
and
State
University.
AUTHOR'S
NOTE:
My
thanks
to Professor Thomas
Hogarty
for
his
helpful comments on
this
paper.
Errors
in fact
and
presentation are
the responsibility of
the
author.
1A. A. Berle
and
G. C. Means, The Modern Corporation and
Private Property, Macmillan (1933).
327
328
THE
ANTITRUST
BULLETIN
in fact, an inevitable result of the accumulation of such eco-
nomic power. We have seen,
and
we continue to see, the politi-
cal
and
economic results of this kind of accumulation in numer-
ous industries.
For
example, U.S. automobile producers have
adopted an
attitude
bordering on outright defiance of govern-
mentally-established pollution controls,"
Large
refiners of
petroleum products have been able to exercise enough lever-
age upon legislators to inhibit the
entry
of foreign
(and
lower
priced) petroleum, thereby maintaining high domestic prices
and
profits. The political consequences of the accumulation
of such economic power
are
difficult, if not impossible, to
measure,
and
will
not be attempted in this paper,"
The second issue, and one which is ostensibly
at
the root of
the
current
(1972)
ITT
controversy,
has
to do with the cumu-
lative economic impact of
ITT's
merger activity which
has
occurred since about 1960.
It
is this second aspect of
ITT's
growth which is dealt with here.
It
is the contention of this
paper
that
the political and
economic consequences of the settlement arrangements which
have been noted so extensively in the public
press
are
adirect
consequence of the method of approach adopted
by
the De-
partment
of
Justice
in this case.
It
is suggested
that
the "rec-
iprocity" issue which was
at
the
heart
of
the
Government's
case ignores
an
alternative
and
more rational approach to at-
tacking the
mergers
consummated by
ITT
since 1960. This
alternative approach
(as
aseries of complementary mergers)
would have yielded economic
and
legal results more inimical
to the public interest.
2U. S. v. Automobile Manufacturers Association, Inc., General
Motors Corporation, Ford Motor Company, Chrysler Corporation, and
American Motors Corporation, Civil Action Number 69-75 (C.D. Cal.
1969).
SJohn
J.
Siegfried, "The Association of Political Influences
With
Firm
and
Industry
Size and Market
Structure:
Empirical Evidence"
(unpublished dissertation), University of Wisconsin, 1972.
tr.
S. V.
ITT
329
I.
THE
DECREES
The substantive provisions of the three judgments agreed
upon in the
ITT
case
are
reviewed briefly below to remind the
reader
of the general provisions of the settlement of the Gov-
ernment's case.
Three judgments were entered on September 24,
1971.4-
Judgments were accepted in U. S. v.
ITT,
et al., in Civil Action
Number 13,319, Civil Action Number 13,320
and
Civil Action
Number 69 C 924. The judgment in American Canteen (69 C
924) is in substance a
rather
simple one.
Paragraph
4A reads,
"ITT
is ordered
and
directed to divest, within two (2)
years
from the date of
entry
of this final judgment, all of
its
inter-
ests, direct and indirect, in Canteen."
Paragraph
Bindicates
that
this divestiture should not be made as a
part
of
any
other
divestiture ordered in the accompanying judgments unless
approved, of course, by the Department of Justice.
In
Civil Action Number 13,319,
ITT
is required "within
two (2) years from the date of
entry
of this final judgment,
to divest all of its interests, direct
and
indirect, in Hajoca,
...
and
the fire protection division of Grinnell Corporation."
In
the
last
of this
trio
of judgments, Civil Action Number
13,320,
"ITT
is ordered
and
directed to divest within three (3)
years from the date of
entry
of this final judgment (1) all of
its interests, direct
and
indirect, in Levitt, Avis, and Hamilton
Life, or (2) in the alternative, all of
its
interests, direct and
indirect, in
Hartford."
It
will be shown
that
these divestitures had almost no
effect upon the economic operation
and
strength
of
ITT
and
that, insofar as they
purport
to bring about relief, they con-
stitute economic window-dressing.
4- United States v.
ITT,
et al., 306 Fed. Supp. 766. The District
Court decision was handed down in the U.S. District Court (Conn.)
in October 1969.
That
case involved an effort by the Government to
enjoin
ITT
from consummation of the IT']' acquisitions of
Hartford
and
Grinnell.
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