WASHINGTON'S CHALLENGE TO IBM

In many ways, the most successful modern American industrial enterprise is International Business Machines Corp. Its primary field, high-speed data processing, is barely 20 years old, but IBM has risen to rank among the ten biggest U.S. companies, with 1968 sales of $6.9 billion and profits of $871 million. With a reputation for excellent technology, marketing and servicing, it dominates the computer business at home and abroad. The company's smoothly aggressive and generously rewarded salesmen have captured about 74% of the U.S. market. Investors value IBM's prospects so highly that its 112.7 million shares are worth a total of $34.6 billion --far more than G.M., A.T. & T. or any other U.S. company.

Bargaining Point. IBM's future has been based on its computers and its competitive prowess. Now the future may depend on the courts. Last month the company was charged with monopolistic practices in a civil antitrust suit brought by a competitor, Control Data Corp. Two weeks ago IBM was the target of another suit, brought by a customer, Data Processing Financial & General Corp. And last week IBM was hit by the most important suit of all. The Justice Department climaxed a long investigation by bringing its own antitrust action--the biggest of the Johnson era--against the company.

In a broadly worded eight-page brief filed in Manhattan's Federal District Court, the trustbusters charged IBM with blocking competitors from "an adequate opportunity to compete." One complaint was that companies that sell only hardware or software or maintenance services could not easily win customers because IBM offered the whole package at a single price. For certain customers, such as universities, the suit continued, IBM set unreasonably low prices in order to crush competitors. The suit also charged that IBM had quashed the sales prospects of newly developed rival machines by simply announcing new products of its own--even though production was a long way off. That echoed a Control Data complaint that sales of one new computer model had suffered when IBM announced the impending development of a competing model.

The Justice Department suit asks the court to order any necessary "divorcement, divestiture or reorganization" of IBM. It is not likely that Jus tice has any intention of breaking up the company. Probably, the trustbusters will use the threat as a bargaining point in working out a consent decree at the end of a case that is likely to drag on for years. Justice mainly hopes to restrain IBM's zeal a bit so that more competition can flourish. IBM called the charges "unwarranted" and promised to "defend itself forcefully." As evidence of the "open and strongly competitive nature of the computer business," it cited the fact that more than 60 systems manufacturers and some 4,000 companies dealing in related parts have been attracted to an industry that was "virtually non-existent 20 years ago." Nevertheless, IBM Chairman Thomas Watson Jr. now has to ponder hard before moving to expand his firm's three-quarters hold on the market.

Attorney General Ramsey Clark waited for the last full business day of the Johnson Administration to file the suit. The timing allowed Clark to avoid one small embarrassment: this week former Under Secretary of State Nicholas Katzenbach, who was Clark's predecessor as Attorney General, will take over as IBM's general counsel and begin masterminding the defense for Watson. The timing also pushed the case onto the Nixon Administration, which must decide how vigorously it will press action that the outgoing administration chose to file--but not to fight.

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