Busting Trusts Sensibly

AS PEOPLE BEGIN TO read more and more of the fine print on the four-year contract they signed when they elected Ronald Reagan, opposition to the harsh policies of the former film star has predictably grown. The difficulties and failures of Reaganism, however, must not be permitted to overshadow what may prove to be this administration's one outstanding success--a fair, coherent and consistent policy of antitrust prosecution.

For decades, politicians and the public alike have ignored national antitrust policy. What was once the cornerstone of the populist movement has almost entirely faded from the public agenda, probably because the issues surrounding antitrust cases today are--in historian Richard Hofstadter's words--"complex, difficult, and boring." But despite their eclipse, the modern issues of antitrust remain of unquestionable importance. And in its attempts to reform a federal policy some have described as "at war with itself," it seems that the Reagan Administration deserves praise.

The Administration took its first step in the right direction in December when it engineered a settlement with American Telephone and Telegraph (AT&T). For a quarter of a century, the giant conglomerate had been enmeshed in a legislative and judicial thicket, as a 1956 consent decree forbidding AT&T to manufacture and sell data-processing and other high-technology equipment has grown obsolete in a changing market with foreign competition.

The new settlement, which divested Ma Bell of its 22 local operating companies such as New York Telephone and Illinois Bell--the most unprofitable of Bell's substantial holdings--frees the communications giant to offer any services it chooses to whomever it wants. With its substantial capital, its Western Electric manufacturing partner and they amazingly resourceful Bell Laboratories, which may be the best research institution of its kind in the world. AT&T is now free to lead what experts predict will be a revolution in communications technology.

The Reagan Administration's performance in the AT&T case should bely the popular yet simplistic notion that the Reaganites are the unthinking rubber-stamps of big business. Even by "populist" standards, the Reagan people did an impressive job. It took considerable and skillfully-applied pressure to force AT&T out of its comfortable monopolistic position, especially since the company seemed likely to win the lawsuit it had spent an estimated $360 million and seven years defending. A few years ago, the Carter Administration had offered to drop the AT&T case if Bell sold off merely two or three operating companies and a part of its holdings in Western Electric. By contrast, the present settlement, as Charles L. Brown. AT&T's chairman, noted glumly, is "exactly what the government wanted."

BUT THE GOVERNMENT'S approach has another side, beyond the toughness and pragmatism and AT&T decision-shows. On the same day the Bell settlement was announced, the government dropped its 13-year prosecution of IBM Corp. After 2500 depositions, 66 million pages of documents, and the expenditure of hundreds of millions of dollars in government and corporate funds, the government finally decided it didn't have a case. IBM's chief attorney called the results "a complete vindication" of the corporate giant, and IBM President John R. Opel, on hearing the news of a settlement, repeated what IBM had staunchly maintained for over a decade: "Our industry is healthy and competitive, and IBM has not violated the antitrust laws."

Many believe that launching the case against IBM was the worst antitrust policy mistake the government has made. The substantial funds diverted by IBM from productive areas like research to its legal department and the years the company set back cautiously watching the government's actions helped allow substantial foreign competition to gain a foothold in one of America's most important export industries. Not till several years ago did the computer manufacturer abandon its careful stance and convinced it would win the case, plunge back into the fight by introducing new product lines and cutting prices. The Reagan Administration's courage in dropping a case that has dragged harmfully on through both Republican and Democratic administrations, should be applauded.

The hero behind the new antitrust policy is Assistant U.S. Attorney General William F. Baxter, whose reputation is growing among both liberals and conservatives. Like the Western sheriff his boss liked to portray in black-and-while movies. Baxter is aggressive, tough, and fair. In dropping the IBM case, he admitted straight forwardly that "it is perfectly clear that IBM obtained its very large market share in an entirely legal way." But one cannot charge him with being soft on big business; the AT&T settlement was entirely his doing, and his opposition recently prevented the G. Heileman Brewing Company from buying Schlitz. Perhaps more importantly, Baxter has showed his willingness to go after serious business improprieties such as price fixing not only with civil legislation, as has commonly been done, but also by pressing criminal charges.

THE SUCCESS OF THE new outlook rests on a rejection of the simplistic belief that "bigness is badness," a notion that has haunted Americans since populists like William Jennings Bryan and woodrow Wilson fired anti-business sentiment in the early part of the century. Instead, the intellectual underpinnings of Baxter's policies recall the more sophisticated views of Teddy Roosevelt, who argued that the importance of the Northern Securities Case lay not in breaking up the size of the proposed corporation but in showing that "the most powerful men in this country were held to accountability before the law."

Last month, in perhaps the clearest example of its Rooseveltian approach to trust-busting, the government decided to drop its nine-year effort to break up the three great ready-to-eat breakfast cereal manufacturers, who together control 80 percent of the market. The Federal Trade Commission had argued that there had been a "tacit understanding" between the three firms to keep prices up, but the government had been unable to prove the cereal companies had gained illegal profits, and the case remained soggy. In refraining from prosecuting successful corporations simply because they are successful--and large--the Reagan Administration has correctly decided to allow the champions of breakfast to continue producing the breakfast of champions.