## Facts

- The United States sued AT&T and related Bell System entities in 1974, alleging monopolization and attempted monopolization in telecommunications markets in violation of Sherman Act § 2.
- AT&T operated a vertically integrated system that included long-distance service, local exchange companies (Bell Operating Companies), equipment manufacturing (Western Electric), and research/standards functions (Bell Labs).
- The government alleged AT&T leveraged control over local exchange “bottleneck” facilities to disadvantage rivals needing interconnection for long-distance and other services.
- The government also alleged discriminatory practices and cross-subsidization enabled AT&T to foreclose competition in long-distance and equipment markets.
- While litigation was proceeding toward trial, the parties negotiated a proposed consent decree providing for major structural reorganization, including divestiture of AT&T’s local exchange companies.
- The court conducted review under the Antitrust Procedures and Penalties Act (Tunney Act), including extensive public comments and a non-evidentiary hearing with participation by regulators, competitors, and consumer groups.
- The court entered the consent decree as a Modification of Final Judgment (MFJ) on August 11, 1982, and issued a further modification order on August 24, 1982.

## Issues

1. Whether the proposed consent decree, including divestiture of local exchange companies and line-of-business restrictions, was “in the public interest” under the Tunney Act.
2. Whether structural divestiture was an appropriate remedy, as compared to conduct-based restrictions, to prevent continuation or recurrence of the alleged anticompetitive conduct.
3. Whether limiting the divested local exchange companies from entering specified competitive lines of business was justified to prevent renewed leveraging of local access control.

## Decision

- The court approved and entered the consent decree (MFJ), with modifications, finding it fell within the range of the public interest under the Tunney Act.
- The court accepted divestiture of the local exchange operating companies as the central remedy to eliminate incentives and ability to discriminate via control of local access.
- The court upheld line-of-business restrictions on the divested entities (and their regional holding companies), limiting them largely to local exchange and exchange-access functions.
- The decree reorganized the Bell System by separating local exchange operations into independent regional companies while leaving AT&T with long-distance and equipment-related operations (including Western Electric and Bell Labs).
- The Supreme Court later affirmed the judgment per curiam in a related proceeding.

## Legal Principles

- In Tunney Act review, a court determines whether a proposed antitrust consent judgment is within the reaches of the public interest, not whether it is the optimal remedy.
- A consent decree may be approved if it reasonably addresses the violations alleged and provides relief adequate to prevent continuation or recurrence of the challenged conduct; the court does not conduct a full merits trial.
- Structural relief, including divestiture, is an available and often favored antitrust remedy where vertical integration and control of essential access create persistent incentives and opportunities for discrimination that are difficult to police through conduct rules.
- Line-of-business restrictions may be imposed on entities controlling local exchange access to reduce the risk of leveraging that control into adjacent competitive markets.

## Conclusion

The court approved a negotiated antitrust consent decree requiring AT&T to divest its local operating companies and imposing line-of-business limits on the divested entities, concluding the settlement reasonably addressed the alleged monopoly leverage and satisfied the Tunney Act public-interest standard.


United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131 (D.D.C. 1982)