Trimming a Colossus

Near the end of every month, 100 top executives from the global empire of Harold S. Geneen, chairman and president of International Telephone & Telegraph Corp., gather in his Manhattan headquarters for one of the best-known staff meetings in the business world. In the near future, however, there could be a significant drop-off in attendance. At the behest of the Justice Department, ITT has agreed to divest itself of six important companies.

Subject to court approval, the parts to be severed are the Canteen Corp., Grinell Corp.'s fire protection division, Avis (Rent a Car) Inc., ITT-Levitt home builders, and the Hamilton and ITT life insurance companies. Geneen will have two years to dispose of the first two firms, three years for the rest. The divestiture, which ends three Justice Department lawsuits against ITT, is one of the largest trust-bustings in American corporate history. The subcompanies ITT will lose account for about $1 billion in annual sales, or about one-seventh of the conglomerate's total.

Vertical Hold. The ITT action leaves unresolved one of the most crucial ambiguities in antitrust law: Does the Clayton Act, a keystone of the nation's antitrust policy for more than five decades, apply to conglomerates? The act clearly bans major acquisitions that "substantially lessen competition." It has been applied to horizontal mergers of directly competing firms and to vertical mergers of companies that have customer-supplier relationships. But it does not specifically forbid the kind of mergers that form conglomerates: those involving firms offering apparently unrelated goods or services. The Justice Department's three suits against ITT were intended to clear up the issue by bringing it before the U.S. Supreme Court. But to avoid lengthy litigation that would delay divestiture for years, department attorneys agreed to settle the suits out of court. The legal status of conglomerate mergers remains in doubt.

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