Driving Innovation with Antitrust

By: Giovanna Masarotto (ProMarket)

Innovation is akin to a blessing beyond human control, yet in the realm of policymaking, its impact can be influenced. Examining the computer industry reveals instances where antitrust measures have effectively fostered innovation. This article delves into the antitrust enforcement actions taken against major players like AT&T, IBM, Microsoft, and Intel, and how they catalyzed innovation in computer hardware and software.

AT&T’s case stands out in the annals of U.S. antitrust, particularly its landmark 1982 decision mandating the breakup of the telecommunications giant. However, the story of AT&T’s antitrust saga is nuanced and profound, significantly shaping today’s computer economy. AT&T’s ownership of Bell Labs, renowned as an “idea factory,” birthed numerous Nobel Prize-winning inventions. Notably, the 1947 invention of the transistor by Bell Labs scientists William Shockley, John Bardeen, and Walter Brattain marked the advent of the digital era, permeating modern digital devices.

While this history is well-documented, the swift adoption of the transistor is less remembered—a realm where antitrust played a pivotal role. AT&T, facing antitrust scrutiny in the mid-20th century, agreed to a consent decree in 1956 following a Department of Justice investigation. Among its provisions was the requirement for AT&T to grant non-exclusive licenses for its patents, including the transistor, to all applicants. This compelled sharing of groundbreaking technology facilitated its rapid integration into various industries.

Economists like Peter Grindley and David Teece have lauded this remedy, citing it as a catalyst for economic growth and innovation. Intel’s co-founder Gordon Moore echoed this sentiment, recognizing the decree’s significance for the semiconductor industry. Notably, AT&T’s acceptance of the compulsory license remedy was a means to resolve the DOJ’s antitrust probe initiated in 1949—a testament to the collaborative nature of consent decrees, often shaped by input from investigated parties who have inadvertently shaped the market accused of monopolization.

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