The Reagan administration revealed yesterday it is negotiating with American Telephone & Telegraph Co. to try to settle the Justice Department's landmark antitrust suit against the Bell System.
Government sources speculated an agreement could be imminent, perhaps before the end of the month when AT&T is scheduled to rest its case in the seven-year-old suit. The Justice Department wants to break up AT&T into several smaller companies.
The current negotiations apparently have been going on for the past few weeks, but few government officials yesterday claimed to know details of the talks. Soucres said the talks were being conducted very privately, involving only a few high-ranking AT&T lawyers and William F. Baxter, the assistant attorney general in charge of the antitrust division, and two of his top aides.
Justice Department lawyers who have been trying the case in court and who were involved in previous negotiations during the Carter administration have been left out of the current round of talks.
The Justice Department disclosed the negotiations in a three-paragraph statement issued by Baxter. "It is hoped the talks may lead to the settlement of pending litigation," the statement said. However, Baxter added, "In a controversy as complex as this one is, one must not have too high a level of expectation that the commencement of negotiations will in fact lead to settlement. Nevertheless, both parties feel that the effort is worth undertaking."
Justice and AT&T officials declined to make any further comments other than what was contained in the announcement, saying any more statements could hurt the outcome of the negotiations. Both sides insisted they still were preparing to resume trial, now in Christmas recess, on Jan. 12.
Even so, some trial lawyers familiar with the case speculated that the trial plans could change quickly. "The fact that they announced the existence of talks leads me to believe they are very close to settling," one lawyer said.
Baxter's decision to try and negotiate a settlement with AT&T represents a sharp change from the position he took when he took over as the nation's top trust-buster last winter. At that time, he stopped negotiations begun by the Carter administration on the grounds the discussions did not go far enough toward breaking up AT&T. Although details of that settlement were never revealed, it reportedly would have required AT&T to get rid of at least three of its local operating companies as well as parts of its manufacturing arm, Western Electric.
In abandoning the earlier negotiations, Baxter said he intended to litigate the case "to the eyeballs." Since then, however, Baxter has run into opposition from the Departments of Commerce and Defense which have urged the president to drop the case on the ground that any break-up of AT&T would hurt the communications system the nation needs during wartime or national emergencies.
After considerable pressure from the White House, Baxter agreed to drop the case once Congress enacted pending legislation to restructure AT&T to guarantee that it competed fairly in the increasingly lucrative telecommunications industry. The legislation, which is strongly endorsed by AT&T, would require a far less dramatic restructuring of the Bell System than the government is demanding in court.
The Senate has passed such legislation. But government sources say it now appears that the House won't approve similar legislation before July, when U.S. District Court Judge Harold H. Greene has promised a verdict.
Government sources said yesterday AT&T's fear of an adverse verdict may be one reason the talks are now underway. AT&T could be subject to hundreds of millions of dollars in damage suits by competitors if it lost the case. Competitors would be able use the verdict as proof that AT&T violated the nation's antitrust laws in trying to keep other companies out of the telecommunications industry.
For that reason, sources said, Baxter has the leverage to get the kind of settlement he wants. "He's holding all the cards," said one official familiar with the settlement discussions.
Based on previous statements by Baxter, sources speculate he is pushing for a settlement that would require AT&T to get rid of some of its local operating companies and would also direct the company to share its long-distance facilities equally with its competitors.
Any settlement would have a widespread impact on both AT&T and its growing number of competitors. A settlement would end many of the uncertainties that have surrounded the future of the Bell System's structure since the case first was filed by the Ford administration in November, 1974.
With those uncertainties behind it, AT&T could begin drawing up firm plans on how to compete with many of the corporate giants entering the telecommunications field such as International Business Machines Corp., Exxon Corp., Xerox Corp. and General Electric Co.