Members of regulated industries may increasingly find themselves the targets of criminal investigations by the Justice Department's antitrust division, its chief, John H. Shenefield, warns.
In a wide-ranging, year-end interview, Shenefield confirmed that the division is stepping up the use of grand juries to look into the activities of regulated industries, particularly in the transportation field.
"We perceive that there has been an awful lot of wishful thinking going on . . . that people would like to have regulators and the public at large believe that if you're a regulated company, you can just about do anything," the assistant attorney general said.
"There's a tendency for regulated carriers to use the regulatory umbrella even though they know they may be doing is well beyond the scope of regulation," he said. "If we find there is price-fixing that is not covered by the law - that is engaged in even though they be regulated companies, hoping that somehow regulation will broadly cover it - we're going to go ahead with the regular process."
Division officials confirm that there are a number of ongoing grand jury investigations in transportation, besides a major probe into the ocean shipping industry; several more did not result in any indictments and have been closed. One grand jury probe - into non-authorized price fixing of military excursion fares by Pan American World Airways, Trans World Airlines, and Lufthansa German Airlines - resulted this year in both indictments and civil complaints.
On a broad range of other topics, Shenefield, who was sworn in almost three months ago after serving as acting antitrust chief since may, indicated that he:
Hopes to be able to file a case challenging a "shared monopoly" sometime this spring. Three areas that are "clear candidates" are currently being investigated; aluminum, steel, and iron ore.
Is reviewing the division's nine-year-old case against International Business Machines Corp - now going into the second half of the third year of trial - and is "trying to speed it up" but denied a persistent rumor that the government is talking settlement with IBM.
Has begun what many believe is a long-overdue reorganization of the division. Two of the more important changes: all of the division's various activities in the transportation area have now been consolidated into one secion, and all of the division's energy activities have been put in one section. There is more to come. In a memo last month to all division employees, Shenefield told them, "change should be a constant in the Antitrust Division."
Shenefield said the division staff is currently working to develop a theory to use in a case challenging a "shared monopoly," an industry of a market that appears to perform as if dominated by a single monopolist. Whether two firms or ten are involved, if a tradition of interdependent conduct is apparent among the dominant firms, suggesting a lack of any real competition, a shared monopoly exists.
Shenefield is aware the division is in a new area, and that many are skeptical about it. "There is some question about whether the law - the law we currently have on the books - can usefully reach it," he admits. "And there is a further economic question about whether, as a general and theoretical matter, there is any relief that you can order.
If the division decides to go ahead with a shared monopoly case in the steel industry, Shenefield doesn't see any conflict with the reference price plan worked out by the Treasury steel task force, nor expect any negative pressure.
In discussing the IBM where IBM is charged with attempting to monopolize the computer market, Shenefield confirmed that he and Associate Attorney General Michael Egan have met with IBM's Washington attorney Lloyd Cutler, but Shenefield said a settlement wasn't discussed.
Shenefield suggested that IBM's strategy "is to make the case a laughingstock," blaming government ineptitude for the delay in presenting the case. But he suggested that the trial's transcript shows a great deal of the time is being taken up by IBM attorneys. The government has proposed a number of plans to IBM to get the case moving more quickly with "very uncertain results up to this point," he said.
The division's monopoly case against American Telephone & Telegraph Co. will be "quite a different matter," Shenefield said. In addition to narrowing the focus of the case, the division is trying to use materials in the public domain as much as possible. "A regulated utility is quite different from an IBM; they file thousands and thousands of pages and they can't prevent us from getting at that," he said.
In addition, the division has filed briefs and motions in a number of courts seeking to get protective orders relaxed in cases where a significant amount of documents had already been turned over, organized and indexed. "There could be a tremendous saving of time and money to the government if we could have access to that discovery," Shenefield said.