Bell Telephone and Western Union agree to stay out of each other's business

Background. During the 1870s, Western Union faced increased competition from the nascent telephony industry led by the Bell Telephone Company. Prior to this, Western Union had dominated the American telegraphy industry from the 1860s, having acquired major competitors in 1866 to gain a virtual monopoly. The emergence of telephony presented a new challenge to Western Union's established business model.

Resolution. Western Union initially attempted to launch a rival telephony system to compete with Bell. However, the company ultimately settled a patent lawsuit with Bell in 1879. As part of this settlement, Western Union agreed to leave the telephone business completely, effectively ending its direct competition with Bell in the telephony sector.

Context. The agreement occurred during a period of consolidation for Western Union. In 1881, financier Jay Gould orchestrated a merger of the Atlantic and Pacific Telegraph Company with Western Union, giving him a controlling share. This merger followed the 1879 settlement, which had already resolved the telephony competition.