It Won’t Take Eight Years


Close your eyes and come back in time with me. It’s 1974. Bell bottom jeans are your statement in fashion. Float-like-a-butterfly, sting-like-a-bee Muhammad Ali had just defeated George Foreman (the man, not the grill) in a historic boxing match. President Nixon just resigned in disgrace. It’s a wild, albeit somewhat tumultuous time.    

While all this was happening something waslurking in the shadows of business that would change corporate history forever. This giant in the background of most everyone’s life was telecommunications company American Telephone & Telegraph…better known as AT&T.   

From 1885 to 1974, this behemoth held the keys as the kingdom of connectivity. Its dominion spanned far and wide, from the towering skyscrapers of New York to the sun-soaked streets of Silicon Valley. Like all tales of power, this one had its twists and turns, leading to a courtroom showdown that would reshape the landscape of the communication industry.   

The courtroom became the stage for an epic clashon the purpose and application of antitrust law. The heart of the matter lay in AT&T’s massive size and pervasive control over both communication distribution (the physical network infrastructure) and the service flowing through it. Dominance of both the communication infrastructure and related service represented a level of competitive power that many believed discouraged competitors, elevated prices, and enabled AT&T to cut off any challenger at the knees.   

AT&T controlled the pricing. AT&T controlled theaccess. AT&T controlled the technology. Fledgling competitors vociferously complained that AT&T could (and did) shut them out by denying use of the distribution infrastructure and strategically lowering its prices, then raising them once a new competitor was broken and gone.  

This was the very basis of the suit that drew AT&Tinto court. The lawsuit alleged that AT&T diverted profits from its subsidiary (Western Electric) that produced and leased the phones everyone used in their offices and homes to subsidize the cost of its nationwide telephone service. AT&T typically required customers to lease rather than purchase these phones.  

This level of vertical control enabled AT&T tokeep costs so low no fledgling competitor could compete. That, along with other practices and AT&T’s sheer size and market dominance, was enough for the Department of Justice to take action, and the judicial floodgates were opened.   

An eight-year battle ensued from when theDepartment of Justice filed their case in 1974 until the resolution in 1982. To make an incredibly long and complex story short, the courts decided that AT&T’s market dominance, and the way it took advantage of it, was so substantial that it was to be dismantled. The market, allegedly stagnant under AT&T’s rule, was predicted to come alive with innovation, energy, and new competition. Prices were to drop, services would improve, and consumers would rejoice at newfound communication products and service choices. This verdict would echo through the corridors of corporate history.   

Did AT&T take advantage of its market dominance, or was it taken advantage of by fledging competitors who resented its success and complained to a liberal-minded DOJ (Department of Justice)? Opinions vary, and this has been a frequently held and fascinating debate over the years. Regardless of your opinion, the tale of the AT&T breakup is a cautionary legend, a reminder that even the mightiest of giants can be brought to heel in the name of either jealousy or fair play. Is Google next?  

“History never repeats itself, but it does often rhyme.” – Mark Twain   


There is a possible shadow anew, a different, allegedly market dominant and price influencing figure under attack, this one in my industry, real estate. It is the National Association of Realtors (or, the NAR) for its alleged anti-trust activities centered on propping up U.S. real estate commissions.    

Two class-action lawsuits (asking for billionsin damages) have been filed, and the first one is currently being tried in a Kansas City courtroom against the NAR, its 500 or so affiliated MLSs, and several large national real estate firms. What hangs in the balance is the amount of commission U.S. homesellers will pay and the income real estate agents will earn.  

In a nutshell, the plaintiffs allege that NAR and itsaffiliated MLSs around the country developed rules that required listing agents to offer buyer agents a commission that was paid by their seller, and that this typically doubled the amount of commission sellers paid to sell their home.    

The plaintiffs also allege that sellers who tried to negotiate commission down were told that this would mean buyer agents would have to be offered less too, which would reduce the number of showings and harm the sale of the property. So, sellers succumbed and paid the higher commission.   

On October 15, 2023, The Wall Street Journal wrote an article in support of the plaintiffs’ claims against the real estate industry, saying: “We’re no fans of most antitrust suits, but the evidence is strong that Realtors’ practices are classic antitrust violations that harm consumers. The Realtors may own the U.S. Congress, but perhaps independent courts won’t be so intimidated.” The Department of Justice is also investigating the real estate industry for anti-competitive activity. 

Many (both inside and outside real estate) predict that the plaintiffs will win, sellers’ commissions will be cut in half, the NAR and MLSs dominance in the industry will be disabled, and a surge of new companies, new services, and new fee structures will emerge.    

How long will it take for real estate to be disrupted? Unlike the AT&T breakup, most predict it won’t take eight years.