20 November 1974: the US government launches an antitrust suit against AT&T

On this day in 1974, the US government launch an antitrust suit against AT&T to break its stranglehold on the American telephone network.

The American Telephone and Telegraph Company (AT&T) was set up in 1885 to create a private national telephone service in the US. Rapid growth, plus its acquisition of all major rivals, gave AT&T a monopoly over long-distance telephone calls. It also controlled many local phone companies.

As a result, in 1913, regulators launched an antitrust (competition) suit. To avoid breakup or intervention, AT&T settled out of court. The Kingsbury Commitment saw AT&T continue in return for allowing local firms to connect to the national network.

While the deal slowed AT&T's expansion, it did not stop it. By the 1920s, AT&T had bought out all but three of the independent firms. By 1934, the government gave up trying to introduce competition, and imposed direct price regulation via the Federal Communications Commission.

However, the agreement started to break down in the late 1960s. A number of rival firms, who tried to take advantage of the agreement allowing them to connect to the national network, were either refused service or quoted artificially high prices.

So in 1974, the government launched another antitrust suit, seeking to break up AT&T. AT&T argued that its monopoly allowed consumers to take advantage of economies of scale. The long-running dispute wasn't settled until 1984. AT&T sold all its local services, which split into seven companies ("Baby Bells") and retained its national service and various subsidiaries.

AT&T was bought by South Western Bell Corp (one of its "Baby Bells") for $16bn in 2005. The merged firm, still known as AT&T, today has a market cap of $200bn.

Recommended

How the UK can help solve the semiconductor shortage
UK Economy

How the UK can help solve the semiconductor shortage

The EU’s plan to build a semiconductor manufacturing industry will fail, but the UK should take advantage of that, says Matthew Lynn
26 Sep 2021
The charts that matter: China upsets cryptocurrency markets
Global Economy

The charts that matter: China upsets cryptocurrency markets

Bitcoin slid again this week after China declared all cryptocurrency transactions illegal. Here’s what’s happened to the charts that matter most to th…
25 Sep 2021
How to cut your energy bill this winter
Personal finance

How to cut your energy bill this winter

Gas and electricity prices have risen by more than 250% so far this year. And they’re likely to go higher still Saloni Sardana looks at what can you …
24 Sep 2021
Cryptocurrency roundup: China’s crackdown intensifies
Bitcoin & crypto

Cryptocurrency roundup: China’s crackdown intensifies

Most major cryptocurrencies suffered falls this week as China cracked down even harder, while the Evergrande crisis rattled global markets, including …
24 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021