Infamous Antitrust Cases
Provided by HG.org
Capitalist nations such as the United States recognize the advantages of free competition. Some landmark cases had direct consequences on antitrust regulation. Some of the most infamous antitrust cases are discussed below.
AT&T is the longest standing telecommunications company in the United States. Although many smaller companies alleged that AT&T was monopolizing the market, the company enjoyed this unfettered status for many years. However, that began to change in 1974 after the Attorney General filed suit against the company. It would take seven years and four Attorney Generals later before there was a settlement of the case. AT&T agreed to be broken into seven different companies that would each be responsible for serving a different region of the country. Over time, five of these companies merged into AT&T incorporated while the other two are currently Verizon and Qwest.
This case has made additional questions to arise as to the viability of antitrust enforcement. For many years, the company was considered a “natural” monopoly. Other cases have since come forward, often using the “natural” monopoly defense. For example, the Aluminum Company of America emerged. It was the only producer of aluminum in the country and secured patents for this purpose. It started to take steps to protect this status, such as acquiring exclusive rights to certain mines in the country and acquiring land rights to build and operate hydroelectric facilities. Because the company owned the materials and the only locations where refinement could occur, any other companies that attempted to enter the aluminum industry would be ineffective.
The company created subsidiary companies throughout the United States and Canada. The Department of Justice filed suit against Alcoa, which also took seven years until a decision was reached. Judge Learned Hand discussed the condemning of monopolies. He emphasized that it was relevant whether a company secured monopoly status through a granted patent or whether the company provided a public benefit. However, the judge found that Alcoa had taken steps to try to restrict trade and enter into a monopoly. Today, Alcoa acquired Reynolds, a competitor. This case and AT&T show that even with a claim of a “natural” monopoly, the Department of Justice may still pursue efforts to break up the company if there are anti-competitive practices and steps to crowd out the market.
Kodak is one of the biggest names in the camera and film business. At some points, Kodak had 96 percent of the market in the United States. Over the years, Kodak has been the target of many antitrust claims and lawsuits against federal parties and private parties. One of the most significant cases was filed by the United States government in 1921. This case resulted in a consent decree in which Kodak agreed not to sell private-label film and would only sell its own film.
Kodak also agreed to a consent decree in 1954 with the United States government. This suit was filed shortly after Kodak created its colored film. The company was the only manufacturer and seller of the colored film and the only company that understood how to process this film. Kodak implemented this advantage into its business strategy by charging customers a fee to send the film, process it and deliver it. The company was required to license the coloring process to third parties. The decrees remained in effect until 1994 when a court terminated them due to changing international economic conditions.
The United States government went after Standard Oil due to alleged antitrust violations under the Sherman Act. The United States Supreme Court applied the Sherman Act and upheld it, establishing precedent for future cases to be prosecuted under this act. This case may have also helped contribute to the drafting and creation of the Clayton Anti-Trust Act. Many legal experts consider this new law to be much more comprehensive than the Sherman Act, as well as a marked improvement and refinement of the previous act.
The result had a dramatic effect on the American oil industry because it caused a major company that had realized major profits to be broken up into 34 separate companies. These companies would then become competitors. ExxonMobil is one of today’s companies that has its origins in Standard Oil. Over the years, Standard Oil broke into several different companies, and ExxonMobile merged with several of these to become one of the most profitable companies in the world.
Many antitrust cases look to these three infamous cases as precedent or as influence when making current decisions regarding monopoly and anti-competitive strategies.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.