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Business 8th Edition by Marianne Jennings
Edition 8ISBN: 978-1285428710Business 8th Edition by Marianne Jennings
Edition 8ISBN: 978-1285428710 Exercise 29
Old, Onerous, and Still on the Books: Are Dusty Consent Decrees Hobbling Corporate America? Strategies for Coping with Regulatory Constraints
As anniversaries go, October 12 was an odd one for General Electric Co. It was on that day eighty-three years ago that GE signed an agreement with the government designed to weaken the company's dominance of the lighting industry. Among other measures, the consent decree banned GE from manufacturing private label or generic lighting products and required the company to disclose its ownership of several lighting businesses that had been thought to be independent.
Today, GE and a growing number of other companies constrained by decades-old consent decrees say it's time to remove the shackles. GE is negotiating with the Justice Department's Antitrust Division to lift the order, arguing that its provisions are hindering the company's ability to compete in a global economy. "By lifting this order, we would be able to do exactly what our competitors are doing" says company spokesman John J. Betchkal.
What has suddenly spurred these challenges, after years of little or no activity? Part of the answer, say experts, is that global competition has greatly intensified over the past decade. IBM, for instance, has been hit particularly hard and has been frustrated watching competitors flourish under practices it is barred from using.
Slacking Off
Another factor has been a change in the government's attitude. It used to be almost impossible to persuade regulators and courts to abandon or modify consent decrees. But in July, the Federal Trade Commission announced that its antitrust decrees would lapse after 20 years. The agency also invited companies to seek reviews of old decrees. The average life span of the Justice Department's antitrust orders is now 10 years. Experts say regulators finally realize that some decrees can impede competition if left unchecked too long. "The problem with these decrees is that they don't learn with society" says Danie] M. Wall, an antitrust lawyer in San Francisco.
GE, for example, wants to begin offering private label lightbulbs to retailers-a business segment that global competitors such as Philips Lighting and Osram Sylvania, Inc., already have. In addition, the company wants to sell generic products to compete in the lower-priced end of the lighting market. The company won't say how much these endeavors would be worth but is concerned that rivals are profiting from its predicamen The government is weighing GE's request.
Experts estimate that more than 100 of these decades-old decrees are still controlling some corporate behavior. Most antitrust agreements entered into today are not open-ended. For example, the settlement reached recently between the government and Microsoft Corp. is due to expire in just three years.
Release?
Yet, for all the sentiment that has been expressed in favoi of updating outmoded enforcement measures, companie are encountering stiff opposition. Critics say it is because even with the passage of time and a more global marketplace, many companies still retain too much control over their industries to be freed from certain restraints. IBM is butting heads with a number of its competitors over a 1956 consent decree that, among other things, forced it to offer computer services separately from its manufacturing and sales business. It also required IBM, which had previously only leased its equipment, to sell outright its computers and equipment to competitors.
Such provisions created what are now multibillion-dollar aftermarkets composed of independent leasing and service businesses and dealers of used IBM computer equipment. The 265 independent lessors alone earn more than $15 billion. These companies argue that such revenues would plummet without the decree. "If you don't regulate IBM, it will put handcuffs on companies like ours to compete effectively And that will cause consumers to suffer," argues Philip A. Hewes, a senior vice president at ComDisco, Inc., the largest independent computer-leasing company.
Independent service organizations (ISOs) agree, arguing that the court should draw a distinction between IBM's diminished strength in manufacturing and its continued dominance of the computer-service business. "There is a superficial appeal to IBM's argument that we need to reassess things after 40 years," says Ronald S. Katz, a San Francisco lawyer who represents the TSOs. "But IBM could hobble or get rid of its competition" if the decree were to be lifted. IBM, which has said it must be free to match such competitors as Electronic Data Systems, Inc., declines to comment.
Ironic
Thus far, the Justice Department has remained silent on the IBM case, which is pending in federal court. Not so with respect to Kodak, which in May persuaded a court to overturn two consent decrees. Kodak successfully argued that it no longer possessed enough power to control prices or hinder competition. Consequently, Kodak claimed it should be allowed to sell private label film and to bundle its film and photo finishing businesses. Robert B. Bell, Kodak's antitrust counsel in Washington, says his client would have come out with a number of innovative products if it were not for the decrees from 1920 and 1954.
The government has appealed the Kodak case, arguing that the company still wields too much market control. The appeal, which is expected to be heard in January, is deemed so important that Assistant Attorney General Anne K. Bingaman is expected to make a rare court appearance to argue the case herself. That Bingaman would be battling the case so hard strikes some critics as ironic. "It's really baffling to companies to have the government fight decrees that are 80 years old when current policy allows them to expire in 10 years," says Bell.
Baffling, maybe. But the Kodak decision could affect dozens of other decrees on the books by creating a new legal standard for overturning them. That is a feat in antitrust law that has not been accomplished since 1932-the time of prohibition and the kidnapping of Charles Lindbergh Jr.
Issues
a. Why are the older decrees still in effect?
b. Why do the companies feel the decrees should be lifted?
c. What updates can you find on the companies and their decrees?
As anniversaries go, October 12 was an odd one for General Electric Co. It was on that day eighty-three years ago that GE signed an agreement with the government designed to weaken the company's dominance of the lighting industry. Among other measures, the consent decree banned GE from manufacturing private label or generic lighting products and required the company to disclose its ownership of several lighting businesses that had been thought to be independent.
Today, GE and a growing number of other companies constrained by decades-old consent decrees say it's time to remove the shackles. GE is negotiating with the Justice Department's Antitrust Division to lift the order, arguing that its provisions are hindering the company's ability to compete in a global economy. "By lifting this order, we would be able to do exactly what our competitors are doing" says company spokesman John J. Betchkal.
What has suddenly spurred these challenges, after years of little or no activity? Part of the answer, say experts, is that global competition has greatly intensified over the past decade. IBM, for instance, has been hit particularly hard and has been frustrated watching competitors flourish under practices it is barred from using.
Slacking Off
Another factor has been a change in the government's attitude. It used to be almost impossible to persuade regulators and courts to abandon or modify consent decrees. But in July, the Federal Trade Commission announced that its antitrust decrees would lapse after 20 years. The agency also invited companies to seek reviews of old decrees. The average life span of the Justice Department's antitrust orders is now 10 years. Experts say regulators finally realize that some decrees can impede competition if left unchecked too long. "The problem with these decrees is that they don't learn with society" says Danie] M. Wall, an antitrust lawyer in San Francisco.
GE, for example, wants to begin offering private label lightbulbs to retailers-a business segment that global competitors such as Philips Lighting and Osram Sylvania, Inc., already have. In addition, the company wants to sell generic products to compete in the lower-priced end of the lighting market. The company won't say how much these endeavors would be worth but is concerned that rivals are profiting from its predicamen The government is weighing GE's request.
Experts estimate that more than 100 of these decades-old decrees are still controlling some corporate behavior. Most antitrust agreements entered into today are not open-ended. For example, the settlement reached recently between the government and Microsoft Corp. is due to expire in just three years.
Release?
Yet, for all the sentiment that has been expressed in favoi of updating outmoded enforcement measures, companie are encountering stiff opposition. Critics say it is because even with the passage of time and a more global marketplace, many companies still retain too much control over their industries to be freed from certain restraints. IBM is butting heads with a number of its competitors over a 1956 consent decree that, among other things, forced it to offer computer services separately from its manufacturing and sales business. It also required IBM, which had previously only leased its equipment, to sell outright its computers and equipment to competitors.
Such provisions created what are now multibillion-dollar aftermarkets composed of independent leasing and service businesses and dealers of used IBM computer equipment. The 265 independent lessors alone earn more than $15 billion. These companies argue that such revenues would plummet without the decree. "If you don't regulate IBM, it will put handcuffs on companies like ours to compete effectively And that will cause consumers to suffer," argues Philip A. Hewes, a senior vice president at ComDisco, Inc., the largest independent computer-leasing company.
Independent service organizations (ISOs) agree, arguing that the court should draw a distinction between IBM's diminished strength in manufacturing and its continued dominance of the computer-service business. "There is a superficial appeal to IBM's argument that we need to reassess things after 40 years," says Ronald S. Katz, a San Francisco lawyer who represents the TSOs. "But IBM could hobble or get rid of its competition" if the decree were to be lifted. IBM, which has said it must be free to match such competitors as Electronic Data Systems, Inc., declines to comment.
Ironic
Thus far, the Justice Department has remained silent on the IBM case, which is pending in federal court. Not so with respect to Kodak, which in May persuaded a court to overturn two consent decrees. Kodak successfully argued that it no longer possessed enough power to control prices or hinder competition. Consequently, Kodak claimed it should be allowed to sell private label film and to bundle its film and photo finishing businesses. Robert B. Bell, Kodak's antitrust counsel in Washington, says his client would have come out with a number of innovative products if it were not for the decrees from 1920 and 1954.
The government has appealed the Kodak case, arguing that the company still wields too much market control. The appeal, which is expected to be heard in January, is deemed so important that Assistant Attorney General Anne K. Bingaman is expected to make a rare court appearance to argue the case herself. That Bingaman would be battling the case so hard strikes some critics as ironic. "It's really baffling to companies to have the government fight decrees that are 80 years old when current policy allows them to expire in 10 years," says Bell.
Baffling, maybe. But the Kodak decision could affect dozens of other decrees on the books by creating a new legal standard for overturning them. That is a feat in antitrust law that has not been accomplished since 1932-the time of prohibition and the kidnapping of Charles Lindbergh Jr.
Issues
a. Why are the older decrees still in effect?
b. Why do the companies feel the decrees should be lifted?
c. What updates can you find on the companies and their decrees?
Explanation
Verified
Verified
a) The big players in the market have to...
Business 8th Edition by Marianne Jennings
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