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  • Microsoft Report

  •   Leading Up to Microsoft

    Tuesday, May 19, 1998; Page A12

    Since passage of the Sherman Act in 1890, the federal government has brought broad antitrust actions against many of the country's largest corporations, with varied success. The Sherman Act and the subsequent Clayton antitrust statutes make it a crime to "monopolize or attempt to monopolize" or enter into combinations that might "substantially ... lessen competition." But the ambiguity of those simple proscriptions has given the courts wide latitude in interpreting the laws over the years. Here are the major cases and the year each was decided:

    Northern Securities Co. (1904). The Supreme Court ruled that consolidation of two railroads serving different markets was, nonetheless, illegal on its face, in part because it involved businesses that were essential to other industries. The essential facilities doctrine is now also a facet of the Microsoft case.

    Standard Oil of N.J. (1911). The Supreme Court ordered the breakup of John D. Rockefeller's infamous trust, which controlled 90 percent of the market for refined oil products, particularly kerosene. The court found that Rockefeller had used "unnatural methods," maintained his monopoly by coercing railroads to give him preferential shipping rates, engaged in selected predatory pricing to drive competitors out of business, and spied on rivals. Thirty-four separate entitities were created by the breakup, including the corporate ancestors to present-day Exxon, Mobil, Chevron and Amoco.

    American Tobacco Co. (1911). The tobacco trust controlled 95 percent of the cigarette market following the purchase of 30 competitors. The Supreme Court found that the company had maintained its monopoly through predatory pricing and exclusive contracts with wholesalers -- issues similar to those in the suit against Microsoft. Present-day Reynolds, Liggett & Myers and P. Lorillard were all created out of the court-ordered breakup.

    United States Steel Co. (1920). Formed from 180 separate entitites, U.S. Steel controlled more than 80 percent of the domestic steel market when the government first sued in 1911. By the time trial began, however, the company's market share had been cut to 40 percent. And although its executives were found to have met regularly with rivals who often followed its lead in raising and lowering prices, the Supreme Court ruled that the collusion did not constitute price fixing. As a result of the decision, the government brought no major antitrust cases for more than a decade.

    Aluminum Co. of America (1945). A federal appeals court in New York ruled that while the company had legally gained control of 90 percent of the market through ingenuity and efficient production methods, Alcoa had foreclosed potential competition by creating excess capacity and holding its prices and profits at low levels. Although the company was required to sell off several plants, the tough precedent set in the case was subsequently overturned by Supreme Court decisions.

    Paramount Pictures Inc. (1948). Paramount and four other studios were found to have limited competition in the movie business by distributing their films exclusively to their own chains of movie theaters. Although the Supreme Court forced the studios to divest their theaters, such unions and alliances have been allowed again recently.

    E.I. du Pont de Nemours Co. (1957). The Supreme Court ruled that DuPont had used its 23 percent stake in General Motors to lock in guaranteed sales of its paints and fabrics to the world's largest automaker in an illegal restraint of trade. DuPont subsequently sold its GM shares.

    Arnold Schwinn & Co. (1967). The Supreme Court ruled that virtually all attempts by the then-dominant manufacturer to dictate how its bicycles were sold and resold by wholesalers and retailers were, on their face, illegal. The precedent was largely overturned a decade later in a private antitrust suit brought by GTE-Sylvania.

    International Business Machines Corp. (1982). After a 15-year legal battle, the Reagan Justice Department dropped its case against the dominant computer company, which had originally been accused of trying to maintain illegally its monopoly by bundling products and using its control over computing standards to exclude potential rivals. The Microsoft case raises many of the same issues.

    American Telephone & Telegraph Co. (1982). The Justice Department accused the company of using its legal monopoly in the local telephone market to prevent competition in the long-distance and telephone equipment markets. After an eight-year legal battle, AT&T agreed to spin off local phone service to seven regional phone monopolies.

    © Copyright 1998 The Washington Post Company

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