The Justice Department has retreated from a strong antitrust stand against the Arab boycott of Israel following complaints by big business and the Commerce and State departments.
In what is viewed as a victory by multinational business interests, it appears now that Justice may defer to Commerce - and what Justice has called a weaker set of regulations - in judging the conduct of firms doing business in the Middle East.
The shift in position is buried in a footnote in a brief the Justice Department filed last week in its antitrust suit against the Bechtel Corp., one of the world's largest construction firms.
The case is considered significant because it is the department's first antiboycott case, and other firms are watching it for signals about how to do business in Middle East boycott countries.
The United States has about $20 billion in trade with those countries last year, and imports one-fifth of its oil from them, according to figures cited in a U.S. Chamber of Commerce brief in the Bechtel case.
The San Francisco-based Bechtel was accused in January 1976 of illegally participating in the boycott by acting as a third party "gatekeeper" to ensure that blacklisted U.S. suppliers were denied access to Arab markets.
Bechtel and Justice agreed to a settlement a year later. But the company - which has millions of dollars of contracts in the Middle East - has since tried to back out of the agreement, saying an antiboycott law passed in the interim should take precedence.
Other business groups, including the Business Roundtable and U.S. Chamber of Commerce, joined the outcry after Justice issued what seemed to be a sweeping policy statement about the importance of the Bechtel settlement in court papers filed in the case in March.
"We take this opportunity to emphasize both to the commentators and the public that the decree reflects the present enforcement policy of the Antitrust Division with respect to boycott-related activities," the department said.
"Thus, the decree, rather than the 1977 amendments and ensuing rules, constitutes the controlling factor in determining whether conduct runs afoul of the antitrust laws."
In what clearly seemed to be a reference to guidelines for future cases, Justice added that sticking to the Bechtel settlement was "especially important" because it was "a case of first impression in an area bereft of meaningful precedents."
That same document outlined several instances in which Justice attorneys said the proposed Bechtel agreement was more stringent that the antiboycott regulations written by the Commerce Department.
Commerce and State joined the alarmed members of the international business community. "We were concerned about what seemed to be conflicting signals on how the game (Middle East trade) was going to be played," one State official said. "Justice seemed to be saying, 'Pay no attention to the Commerce regs. We may sue you anyway.'"
Stanley J. Marcuss, deputy assistant secretary of commerce for industry and trade, said his department also was sympathetic to the concerns expressed by business groups.
When Justice filed its latest brief in the case, it continued to insist that Bechtel be held to the agreement was retracted in a footnote. And the series of differences between the Commerce regulations and the proposed Bechtel settlement all but disappeared.
The footnote said that "in hind-sight," the policy statement "may be subject to misinterpretation." The Bechtel settlement applied to that case only, the note said. It would be inappropriate to conclude that conduct prohibited by a Bechtel final decree would be a basis for future antitrust prosecutions, it added.
"They're backing down as far as they can because they're afraid we'll be able to get out of the settlement," said Lee Loevenger, Bechtel's attorney in Washington.
"There's no question we pulled back," Associate Attorney General Michael J. Egan said in a recent interview. "The footnote is intended to indicate to businessmen that while not in every case will we defer to Commerce, we will certainly give considerable heed to their enforcement program."
There have been no deals made with Commerce, though, about future policy, Egan added.
Douglas E. Rosenthal, the lead Justice attorney in the case, preferred to call the shift a "change of tone." "We decided we didn't have to justify our enforcement policy to get the Bechtel decree entered," he said.
Rosenthal said Justice had not given in to pressure from business group lobbyists. "In light of further investigation we found we probably were wrong" about some of the issues raised in the March filing, he said.
He and other Justice officials said that the earlier court position about the stringency and importance of the Bechtel decree may have been too sweeping because it was a response to members of Congress and Jewish groups who had critized it as too lenient.
In the aftermath of the criticisms from business groups, Rosenthal said, "we were pushed to being more careful by the vehemence of the comments."
William E. Swope, director of operations at the Antitrust Division, said the earlier department position "was not artufully drafted," despite what seemed to be a deliberate effort to make a policy statement.
Swope acknowledge that the Justice Department had outlined differences between the Bechtel settlement and the Commerce regulations in the March papers, which are referred to now only as "Purported" differences. The differences, he said, were "perhaps unduly highlighted" in the earlier document.
Justice's future role in boucott enforcement hasn't been determined yet, Swope said. He did point out that Commerce had specific congressional authority in the area and that "duplication of resources doesn't make much sense."