Actually, the FCC first approved one system. Then, the promoter of another, filed all kinds of legal protests and managed to hold it back for nearly 5 years. And by that time, the window for AM stereo had slammed shut since about 75% of music format listening had gone to FM.
Correct. For completeness, I should have added that the FCC first approved the system marketed by Magnavox in April 1980. The commission backtracked on that in July 1980, which is lightning speed for government agency.
Then in 1983, in the face of the lawsuits you mention, the FCC ruled that any of five systems (Magnavox, Kahn, Motorola, Belar, and Harris) could be used in the US.
I remember some people saying that AM Stereo sounded very good. Can we say that the whole AM Stereo attempt was a big government boon-doggle?
The AM stereo attempt was arguably too late, even if the 1980 ruling had stuck.
Leonard Kahn, owner of the Kahn AM stereo system, continued to shower his competitors in lawsuits throughout the 1980s. Kahn separately tried to claim at the FTC that Motorola was exercising monopoly power, and claim with the FCC that Motorola's system was non-compliant with AM broadcast standards, and with the US Patent Office that his patents were infringed by other systems. None of his claims were substantiated.
The receiver market responded to the uncertainty by creating expensive "universal" receivers. Radio & Records reported that the first such universal receiver was sold for $415 in 1984. I'm sure it was a slow seller that price. Source:
https://www.worldradiohistory.com/Archive-All-Music/Archive-RandR/1980s/1983/RR-1983-04-15.pdf
But a few years later, the number of AM stereo receivers on the market dwindled, as consumers didn't see the advantage of buying an AM stereo model.
Broadcasters responded to the dilemma by doing nothing. It is estimated that 85% to 90% of broadcasters never implemented AM stereo of any sort. Source:
https://files.eric.ed.gov/fulltext/ED313723.pdf