The Antitrust Law and Economics of Essential Facilities in Public Utility Regulation

Abstract

1969 was a major turning point in the application and development of antitrust principles derived from the Sherman Act’s ban on monopolization and attempted monopolization.¹ In 1969 the Department of Justice began two lawsuits whose outcome deeply influenced the direction of antitrust policy concerning single-firm conduct. The first was a heralded assault on IBM’s dominance in the computer industry.² On the last day of Lyndon Johnson’s presidency, the Justice Department accused IBM of using predatory pricing, product development, and promotion tactics to suppress rival producers of mainframe computers and peripheral equipment. By the time the Antitrust Division conceded defeat in 1982, the case had devoured massive resources and had become a singular symbol of prosecutorial failure. Pre-trial discovery generated 91 million pages of documents and over 1300 depositions. The trial consumed 700 days in court, the transcript topped 104,000 pages, and the parties introduced over 17,000 exhibits. The government’s cost of bringing the suit surpassed $17 million, and IBM’s legal fees exceeded this amount severalfold (Kovacic 1989a). The IBM case, said one observer, was “the Antitrust Division’s Vietnam” (Baker 1986, 899).