United States v. American Telephone & Telegraph Co.

American Telephone & Telegraph Company (AT&T) (defendant) was an interexchange-service provider. AT&T owned the Bell Operating Companies (the operating companies), which provided local telephone services; Western Electric, which made telephones and related hardware; and Bell Labs, which conducted research. These companies often worked in conjunction. Bell Labs and Western Electric set technical standards across the telephone-services market. Western Electric supplied the operating companies with much of their necessary hardware, often counseling the operating companies about the equipment they needed to meet the standards that Bell Labs and Western Electric set. The operating companies, under pressure from AT&T, often purchased equipment from Western Electric despite other companies in the telephone-hardware market selling equivalent equipment at lower prices or before Western Electric had manufactured the needed products. The United States government (plaintiff) brought suit under § 2 of the Sherman Act, alleging that AT&T foreclosed competition in the telephone-equipment market. The government also alleged that AT&T foreclosed competition in the interexchange market by exerting control over local telephone facilities and by cross-subsidizing certain of its markets with its monopolistic local telephone services. After the district court denied AT&T’s motion to dismiss, the parties reached a consent decree that they presented to the court for approval.