The Specter of I, B and M

In a final flurry of activity on the last business day of the Johnson Administration in 1969, the Justice Department initiated one of the most sweeping antitrust suits since the forced breakup of Standard Oil Co. in 1911. In it, the Government charged that International Business Machines Corp. exercised such overwhelming power in the burgeoning data-processing field that genuine competition was impossible. The case has droned on fruitlessly since then; federal prosecutors have been forced to sift through 27 million documents provided by IBM in its defense. Last week, in response to a court order demanding that it spell out precisely how IBM should be punished, the Government took a time-honored legal zig and asked for the ultimate. IBM, it said, should be broken up into an unspecified number of "independent and competitively balanced entities."

That drastic proposal, which would cause one of the biggest business divestitures in U.S. history, seemed to leave nearly everyone magnificently unmoved. A total breakup of the company, scoffed IBM Chairman T. Vincent Learson, "will never happen." IBM's lawyers accused the Justice Department of attempting to complicate and stall the case further by expanding its complaint beyond the company's domestic operations to include its fast-expanding international business as well. Even investors, after an initially skittish reaction that sent the company's stock tumbling 14 points, rallied behind Wall Street's perennial darling. IBM closed the week at 387, up eight points from its Monday opening.

Caution. In fact, there is ample reason to believe that the Government is not anxious to press its case in the near future. For one thing, IBM's hierarchy is an extremely well-connected lot. Thomas Watson, son of the founder and chairman of IBM's executive committee, is an active member of the Democrats for Nixon committee, and his brother Arthur is the President's Ambassador to France. The company's general counsel, Nicholas deB. Katzenbach, happens to have been U.S. Attorney General under L.B.J. and the immediate predecessor of Ramsey Clark, who filed the suit now being fought.

Politics aside, the sheer size and complexity of IBM and the computer industry pose a formidable challenge to the Government's legal resources. One measure of the sums of money at stake in IBM: the total market value of the company's stock is about $45 billion, which is only $4 billion less than the value of all the stocks listed on the American Stock Exchange. The computer industry's enormously complicated leasing and shared-time arrangements, its huge lines of software and peripherals, its exponentially advancing technology, all make legal accountability far more difficult than in older-line industries like oil or even chemicals. Moreover, any terms for final settlement that the Justice Department offers IBM will have to take into account their possible effect on such weighty national matters as the U.S. balance of payments and world scientific leadership. As recently as three weeks ago, Justice Department Prosecutor Raymond M. Carlson candidly admitted: "We're not ready for trial."

Not that IBM's day in court will be put off indefinitely. The central contention of the Government's case--that IBM dominates a giant industry as no other U.S. company does--is practically incontestable. The Justice Department estimates that some 70% of all revenues spent in the U.S. last year on general-purpose digital computers went to IBM, v. 8.1% to Honeywell Inc., its nearest competitor. Last week's legal ploy left the Government maximum bargaining room for a later out-of-court settlement. It also may string out the litigation for several more years, forcing IBM to continue a growing policy of caution toward smaller competitors.

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