[Federal Register Volume 78, Number 72 (Monday, April 15, 2013)]
[Notices]
[Pages 22302-22331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08700]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. United Technologies Corporation and Goodrich
Corporation; Public Comments and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes below the Response of
Plaintiff United States to Public Comments on the proposed Final
Judgment in United States v. United Technologies Corporation and
Goodrich Corporation, Civil Action No. 1:12-cv-01230-RC, which was
filed in the United States District Court for the District of Columbia
on February 12, 2013. Copies of the two comments received by the United
States from the public were also filed with the court.
Copies of the comments, as redacted to preserve confidential
business information, and the response are available for inspection at
the Department of Justice, Antitrust Division, Antitrust Documents
Group, 450 Fifth Street, NW., Suite 1010, Washington, DC 20530
(telephone: (202) 514-2481), on the Department of Justice's Web site at
http://www.justice.gov/atr/cases/f295000/295087.pdf, and at the Office
of the Clerk of the United States District Court for the District of
Columbia. Copies of any of these materials may also be obtained upon
request and payment of a copying fee.
Patricia A. Brink,
Director of Civil Enforcement.
Response of Plaintiff United States to Public Comments on the Proposed
Final Judgment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the
United States hereby responds to the public comments
[[Page 22303]]
received regarding the Proposed Final Judgment in this case. After
careful consideration of the comments submitted, the United States
continues to believe that the Proposed Final Judgment will provide an
effective and appropriate remedy for the antitrust violations alleged
in the Complaint. The United States will move the Court for entry of
the Final Judgment after the public comments and this response have
been published in the Federal Register, pursuant to 15 U.S.C. 16(d).
I. Procedural History
The United States filed a civil antitrust Complaint on July 26,
2012, seeking to enjoin United Technologies Corporation's (``UTC'')
proposed acquisition of Goodrich Corporation (``Goodrich''). The
Complaint alleged that the proposed acquisition likely would
substantially lessen competition in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18, in the worldwide markets for the
development, manufacture, and sale of large main engine generators,
aircraft turbine engines, and engine control systems for large aircraft
turbine engines. That loss of competition likely would result in
increased prices, less favorable contractual terms, and decreased
innovation in the markets for these products.
Simultaneously with the filing of the Complaint, the United States
filed a Proposed Final Judgment, which is designed to remedy the
expected anticompetitive effects of the acquisition, and a Hold
Separate Stipulation and Order signed by the plaintiffs and the
defendants, consenting to the entry of the Proposed Final Judgment
after compliance with the requirements of the Tunney Act, 15 U.S.C. 16.
Pursuant to those requirements, the United States filed its Competitive
Impact Statement (``CIS'') with the Court on July 26, 2012; the
Proposed Final Judgment and CIS were published in the Federal Register
on August 2, 2012, see United States v. United Technologies Corp., et
al., 77 FR 46186; and summaries of the terms of the Proposed Final
Judgment and CIS, together with directions for the submission of
written comments relating to the Proposed Final Judgment, were
published in The Washington Post for seven days beginning on July 31,
2012 and ending on August 6, 2012. The sixty-day period for public
comment ended on October 5, 2012; two comments were received, as
described below and attached hereto.
II. The Investigation and the Proposed Resolution
On September 21, 2011, UTC and Goodrich entered into a purchase
agreement pursuant to which UTC would purchase all of the shares of
Goodrich, a transaction that was valued at approximately $18.4 billion.
Immediately following the announcement of the merger, the United States
Department of Justice (the ``Department'') opened an investigation into
the likely competitive effects of the transaction that spanned about
ten months. As part of this detailed investigation, the Department
issued Second Requests to the merging parties and twenty-four Civil
Investigative Demands (``CIDs'') to third parties. The Department
considered more than half a million documents submitted by the merging
parties in response the Second Requests and by third parties in
response to CIDs. The Department also took oral testimony from nine
executives of the merging parties, and conducted approximately one
hundred interviews with customers, competitors, and other market
participants. The investigative staff carefully analyzed the
information provided and thoroughly considered all of the issues
presented.
As part of its investigation, the Department considered the
potential competitive effects of the merger on the markets for numerous
products and services and on a variety of customer groups. The
Department concluded, as explained more fully in the Complaint and CIS,
that the acquisition of Goodrich by UTC likely would have substantially
lessened competition in the worldwide markets for the development,
manufacture and sale of large main engine generators, aircraft turbine
engines, and engine control systems for large aircraft turbine engines.
A. Large Main Engine Generators
As explained more fully in the Complaint and CIS, the acquisition
of Goodrich by UTC likely would have lessened competition substantially
in the market for the development, manufacture, and sale of large main
engine generators, because UTC and Goodrich were the only significant
competitors for those generators. As a result of the acquisition,
customers likely would face higher prices, less favorable contractual
terms, and less innovation, in violation of Section 7 of the Clayton
Act.
The Proposed Final Judgment will preserve competition by requiring
UTC to divest the Electrical Power Divestiture Assets, i.e., all the
Goodrich assets used to design, develop, manufacture, market, service,
distribute, repair and/or sell aircraft electrical generation and
electrical distribution systems. The tangible assets to be divested
include Goodrich's facilities in Pitstone, United Kingdom, and
Twinsburg, Ohio, as well as other tangible and intangible assets such
as manufacturing equipment, fixed and personal property, contracts, and
patents, licenses, know-how, trade secrets, designs, and other
intellectual property. In addition, the Proposed Final Judgment
provides for transition services agreements and supply agreements that
will make the divestiture as seamless as possible and enhance the
ability of the acquirer of the divestiture assets to operate those
assets as a successful and competitive business.
The Proposed Final Judgment also requires that UTC divest all of
the Goodrich shares in the Aerolec joint venture between Goodrich and
Thales Avionics Electrical Systems SA. The Proposed Final Judgment
requires that the Electrical Power Divestiture Assets and Goodrich's
Aerolec shares be divested to the same acquirer. This provision ensures
that the interests of the acquirer of the Aerolec shares are aligned
with the interests of the acquirer of the Electrical Power Divestiture
Assets, which is necessary because the acquirer of the Electrical Power
Divestiture Assets will perform the majority of the work within the
Aerolec joint venture. In the view of the United States, the
divestiture of the Electrical Power Divestiture Assets and the sale of
the Goodrich shares in the Aerolec joint venture is sufficient to
remedy the anticompetitive effects in the market for large main engine
generators that were alleged in the Complaint.
B. Aircraft Turbine Engines
As described more fully in the Complaint and CIS, the acquisition
of Goodrich by UTC likely would have lessened competition substantially
in both the large aircraft turbine engine market and the small aircraft
turbine engine market.
1. Large Aircraft Turbine Engines
UTC, through its Pratt & Whitney subsidiary, and Rolls-Royce are
two of only three primary competitors for the development, manufacture,
and sale of large aircraft turbine engines. Goodrich was a partner with
Rolls-Royce in a joint venture called Aero Engine Controls (``AEC''),
from which Rolls-Royce is required to purchase the engine control
systems (``ECSs'') for most of its engines. Thus, after the acquisition
of Goodrich,
[[Page 22304]]
UTC would have been both a producer of large aircraft turbine engines
and the sole-source supplier of ECSs to one of its leading engine
competitors. In this position, UTC would have had the ability to
adversely affect the delivery and cost of the ECSs for Rolls-Royce, and
thus the competitiveness of Rolls-Royce's engines. Moreover, UTC would
have had the incentive to do so, as the potential resulting additional
engine sales for Pratt & Whitney would have produced much higher
revenues and profits for UTC than UTC would have lost from the lower
sales of ECSs to Rolls-Royce. In addition, UTC would have had access to
Rolls-Royce's competitively sensitive information, which could have
been used to advantage UTC when competing against Rolls-Royce. If UTC
were to reduce the competitiveness of Rolls-Royce as a supplier of
large aircraft turbine engines, customers would have had significantly
fewer choices, and competition thus would have been lessened
substantially.
The Proposed Final Judgment preserves competition by requiring UTC
to divest Goodrich's shares of AEC to Rolls-Royce, thus giving Rolls-
Royce complete ownership of AEC and preventing UTC from disadvantaging
Rolls-Royce in future competitions for large aircraft turbine engines.
The United States believes that the divestiture of Goodrich's AEC
shares, along with the other requirements in the Proposed Final
Judgment, is sufficient to remedy the anticompetitive effects in the
market for large aircraft turbine engines, as alleged in the Complaint.
2. Small Aircraft Turbine Engines
UTC, through its Pratt & Whitney subsidiary, is one of only a few
significant competitors in the market for the development, manufacture,
and sale of small aircraft turbine engines. Several of UTC's
competitors purchased from Goodrich the ECSs for certain of their small
aircraft turbine engines. Therefore, after the acquisition, UTC would
have been both a producer of small aircraft turbine engines and a
supplier of ECSs to its competitors. In that position, UTC would have
been able to withhold or delay delivery of ECSs to its small aircraft
turbine engine competitors, adversely affecting their competitiveness.
Moreover, UTC would have had the incentive to do so, as the potential
resulting additional engine sales for Pratt & Whitney would have
produced much higher revenues and profits for UTC than it would have
lost from the lower sales of ECSs to the other small aircraft turbine
engine manufacturers. If UTC were to reduce the competitiveness of its
competitors in the supply of large aircraft turbine engines, customers
would have had significantly fewer choices, and competition thus would
have been lessened substantially.
The Proposed Final Judgment will preserve competition by requiring
UTC to divest the Engine Control Divestiture Assets, i.e., all the
Goodrich assets that are used to design, develop, and manufacture
engine control products for small engines. The assets to be divested
include Goodrich's manufacturing facility located in West Hartford,
Connecticut, and all tangible and intangible assets used by or located
at that facility. The divested assets also include certain assets used
or located in Goodrich's Montreal facility, as well as assets related
to certain maintenance, repair and overhaul services. In addition, the
Proposed Final Judgment provides for transition services agreements and
supply agreements that will make the divestiture as seamless as
possible and enhance the ability of the acquirer of the Engine Control
Divestiture Assets to operate them as a successful and competitive
business. The United States believes that the divestiture of the Engine
Control Divestiture Assets, along with the other requirements in the
Proposed Final Judgment, is sufficient to remedy the anticompetitive
effects in the market for small aircraft turbine engines, as alleged in
the Complaint.
C. Engine Control Systems for Large Aircraft Turbine Engines
In addition to adversely affecting the competitiveness of Rolls-
Royce in the supply of large aircraft turbine engines, UTC's purchase
of Goodrich's share in AEC also likely would lessen competition
substantially in the market for ECSs for large aircraft turbine
engines. UTC and AEC are two of the only three producers of such ECSs,
and UTC's purchase of Goodrich would give UTC fifty percent ownership
of AEC, one of UTC's two main competitors. Competition would be
lessened substantially if UTC were to impede AEC's competing to provide
replacement ECSs or to form teams to supply ECSs for new engines.
Moreover, competition would be lessened substantially, if, as a result
of the acquisition, UTC and Rolls-Royce were to use AEC to combine
their ECS intellectual property and research and development results,
rather than competing independently to develop innovative and cost-
effective ECS solutions. The United States believes that the
divestiture of the Goodrich AEC shares is sufficient to remedy the
anticompetitive effects in the market for ECSs for large aircraft
turbine engines, as alleged in the Complaint.
III. Summary of Public Comments and the Responses of the United States
During the 60-day comment period, the United States received
comments from (1) Williams International and (2) Joseph C. Jefferis.
The comments are attached to this response. As explained in detail
below, after consideration of the two comments, the United States
continues to believe that the Proposed Final Judgment is in the public
interest.
A. Williams International
1. Summary of the Comment
Williams International (``Williams'') competes with UTC's Pratt &
Whitney in the development, manufacture and sale of small aircraft
turbine engines, and purchases the ECSs for some of its engines from
Goodrich. In its Comment, Williams notes that it had serious concerns
regarding the likely impact of the acquisition on both the pricing and
continued availability of the full authority digital engine control
(``FADEC'') systems of the Engine Control Divestiture Assets. Williams
states that the Proposed Final Judgment ``does appear to be a
thoughtful, good faith attempt to deal with those concerns,'' but that
``there are still a number of discrete issues that Williams
International believes the [Proposed Final Judgment] does not fully and
adequately address.'' Williams then describes ``three remaining primary
areas of concern.''
First, Williams is concerned that the Proposed Final Judgment does
not adequately protect from disclosure to either UTC or potential
acquirers the confidential information of customers of the Engine
Control Divestiture Assets, such as Williams. For example, Williams
considers Section V.A of the Hold Separate Stipulation and Order, which
requires UTC to keep competitively sensitive information of the Engine
Control Divestiture Assets separate from UTC's, to be ambiguous as to
whether it applies to customer information in the possession of the
Engine Control Divestiture Assets. Williams also notes that this
provision does not appear to apply to the sharing of information with
potential purchasers of the engine control assets.
Similarly, Williams finds ``woefully inadequate'' Section IV.B of
the Proposed Final Judgment, which requires UTC to provide to
prospective purchasers of the Engine Control Divestiture Assets,
``subject to customary confidentiality assurance, all
[[Page 22305]]
information and documents relating to [the Engine Control Divestiture
Assets] customarily provided in due diligence.'' Williams argues that
standard due diligence protections are not sufficient in this matter,
because the Proposed Final Judgment could be considered to supersede
private nondisclosure agreements.
Second, Williams takes issue with the United States having ``sole
discretion'' to accept or reject an acquirer of the Engine Control
Divestiture Assets. Williams assumes that this means that the United
States's evaluation of potential purchasers will be performed without
any input from engine manufacturers. Williams also takes issue with the
requirement that the purchaser of the assets have ``the intent and
capability * * * of competing effectively'' in engine controls,
asserting that an acquirer also should demonstrate that it is likely to
become a ``suitable long-term business partner'' to the engine
manufacturers.
Finally, Williams has concerns about the provisions in the Proposed
Final Judgment and Hold Separate Stipulation and Order designed to
protect the viability of the divested assets prior to their sale.
Williams asserts that the Proposed Final Judgment provides ``virtually
nothing'' relating to UTC's obligations to maintain the Engine Control
Divestiture Assets prior to their sale, ``particularly with respect to
personnel.'' It also argues that the provisions of the Hold Separate
Stipulation and Order are inadequate to prevent the movement of
personnel away from the divested business. Williams cites as an example
of its concerns the appointment of Curtis Reusser, former president of
Goodrich's Electronic Systems segment, to the position of president of
the Aircraft Systems business within UTC Aerospace Systems, in which
capacity he oversees portions of the acquired Goodrich business that
are not subject to divestiture. Williams claims that, during his tenure
with Goodrich, Mr. Reusser was directly involved in dealings with
Williams regarding Goodrich's performance under its contract, and with
all details of the parties' business relationship.
3. Response of the United States
Regarding Williams's concerns about the confidentiality of its
information in the possession of the Engine Control Divestiture Assets,
the United States believes that the protections of the Hold Separate
Stipulation and Order and the Proposed Final Judgment are sufficient.
Paragraph V.A of the Hold Separate Stipulation and Order requires UTC
to operate the Engine Control Divestiture Assets so that the
``management, sales, and operations * * * are held entirely separate,
distinct, and apart from those of UTC's other operations.'' This
paragraph also specifically requires that sensitive information
relating to these products be ``kept separate and apart from other UTC
operations.'' To assert that customer information will be accessible by
UTC despite these provisions would require a strained interpretation
contrary to the plain language of the Hold Separate Stipulation and
Order.\1\
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\1\ In virtually every lawsuit in which it agrees to a
divestiture remedy to resolve the competitive harm from a proposed
acquisition, the United States enters into a Hold Separate
Stipulation and Order with the merging parties. The language of
Paragraph V.A of the Hold Separate Stipulation and Order is
routinely included in such documents. The United States is unaware
of other instances in which customers of a divested business have
expressed similar concerns.
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As for Williams's assertion that its confidential information might
not be properly protected against discovery by potential acquirers of
the divestiture assets, the United States sees no reason to provide
additional protection for this type of information. In most
acquisitions, the purchaser undertakes a ``due diligence''
investigation to confirm the value of the business that is being
purchased. This investigation necessarily involves information that is
confidential, possibly including information relating to the acquired
company's customers.\2\ Potential acquirers who wish to review such
information generally are required to hold such information
confidential, often signing nondisclosure agreements that bar
dissemination or use of the information. Williams provides no reason to
believe that such information is at greater risk of disclosure or
improper use here than in any other asset sale. The additional degree
of protection apparently sought by Williams would make the divestiture
process unnecessarily burdensome, possibly deterring potential
acquirers and thus thwarting the central goal of the Proposed Final
Judgment, which is expeditious divestiture to a suitable purchaser.\3\
Williams also provides no support for its concern that the ``scrutiny
of the DOJ'' will somehow lead to reduced confidentiality protections,
or for its view that the Proposed Final Judgment might be held to
``take precedence over private non-disclosure agreements.'' Nothing in
either the Proposed Final Judgment or the Hold Separate Stipulation and
Order suggests any such counterintuitive outcome. If anything, fear of
the ``scrutiny of the DOJ''--and surely that of this court--will lead
to more protection of confidential information rather than less.
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\2\ In fact, Paragraph IV.B of the Proposed Final Judgment
requires the defendants to disclose such information as is
``customarily provided in a due diligence process,'' in part to help
ensure that the assets are sold to an acquirer that will maintain
them as a competitive force in the market. However, the information
so provided is ``subject to customary confidentiality assurances.''
\3\ In its Comment, Williams notes that ``[t]he DOJ may respond
that requiring customary confidentiality assurances pursuant to the
due diligence process is no different than what would generally
apply in the case of any private contractor of Williams
International being sold to a prospective buyer, and that this level
of protection in the [Proposed Final Judgment] should be
sufficient.'' Williams Comment, p.6. That is precisely the case.
Williams provides no justification for burdening the divestiture
process by giving this information additional protection not
typically provided in due diligence investigations.
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Williams need have no concern about the scope of the review
undertaken by the United States. While the United States has sole
discretion to decide whether a divestiture to a particular proposed
acquirer meets the objectives of the Proposed Final Judgment, the
United States's evaluation includes consideration of information from
numerous sources, including affected customers. Information gathered by
the United States during its investigation of UTC's proposed
acquisition of Goodrich, including conversations with dozens of
customers, is taken into account in this evaluation, and new interviews
with customers also are undertaken. The United States also considers
the financial resources and business plans of the proposed acquirer, to
ensure that the divested assets will be maintained as a long-term
competitive force in the market. This is no mere cursory review.
Indeed, after a thorough evaluation of documentary information,
responses to questions, and information provided by potentially
affected customers, the United States rejected the first acquirer
proposed by the defendants for the Engine Control Divestiture Assets.
Finally, the United States disagrees with Williams's assertion that
the Proposed Final Judgment and Hold Separate Stipulation and Order do
not adequately protect the viability of the assets pending their sale.
As Williams notes, the Hold Separate Stipulation and Order contains
provisions requiring the defendants to maintain the viability of the
assets. Paragraph V.D requires defendants to use ``all reasonable
efforts to maintain and increase the sales and revenues of all products
produced by or sold by'' the Engine Control Divestiture Assets, as well
as maintaining promotional, sales, technical assistance,
[[Page 22306]]
and other forms of support for the business. Paragraph V.E requires UTC
to provide sufficient working capital and lines and sources of credit
to maintain the Engine Control Divestiture Assets as an economically
viable and competitive, ongoing business. Paragraph V.F requires UTC to
take ``all steps necessary to ensure that the [Engine Control
Divestiture Assets] are fully maintained in operable condition at no
less than current capacity and sales.'' The requirements of the Hold
Separate Stipulation and Order are sufficient to mandate a level of
support from UTC for the Engine Control Divestiture Assets, without
being so detailed that the operation of the assets is encumbered rather
than maintained at its former level of independence.
As for the concern about the retention of employees of the Engine
Control Divestiture Assets, the provisions of the Hold Separate
Stipulation and Order are designed to prevent UTC from stripping
valuable employees from the Engine Control Divestiture Assets by
transferring them, or soliciting or encouraging them to move, within
UTC. Section V.J of the Hold Separate Stipulation and Order bars the
defendants from transferring or reassigning individuals who have
``primary responsibility'' for the products produced by the assets to
be divested. The interests and desires of individual employees must be
respected, however, and they cannot be forced to remain with the Engine
Control Divestiture Assets against their will.
In the specific case of Mr. Reusser, the United States was aware of
the plan for his transfer during the negotiation of the Proposed Final
Judgment. Although Mr. Reusser supervised the Goodrich organization
responsible for products produced by the Engine Control Divestiture
Assets, he was also responsible for other Goodrich divisions producing
a wide range of products not at issue in this case, such as sensors,
integrated systems, and intelligence, surveillance and reconnaissance
systems.\4\ Therefore, the products of the divestiture assets were not
Mr. Reusser's ``primary responsibility'' as that term is used in
Section V.J of the Hold Separate Stipulation and Order, and his
transfer thus is not prohibited.
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\4\ Williams also complains that Alan Oak, the Vice President
and General Manager of GPECS, has left the company. Mr. Oak has
retired, and the United States does not believe it would be
reasonable to require UTC to persuade Mr. Oak not to do so.
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B. Joseph C. Jefferis
1. Summary of the Comment
Mr. Joseph C. Jefferis identifies himself as a ``former Goodrich
Corporation Risk and Control Specialist with Sarbanes-Oxley
responsibilities,'' who served in that capacity from September 2003 to
June 2007, when he was ``terminated.'' He states that he filed for
whistleblower status with the U.S. Department of Labor in August 2006.
In his comment, Mr. Jefferis recounts several incidents that he
says he raised with the Department of Labor relating to Goodrich's
conduct, including allegations relating to the Foreign Corrupt
Practices Act, insider trading, price-fixing and collusion, and
accounting irregularities. One allegation that appears to be of
particular interest to Mr. Jefferis relates to a ``Community Action
Alert'' and ``a series of dormant alternative fuel cell patents.'' Mr.
Jefferis expresses concern that ``dormant patent information I obtained
during the secretive `Community Action Alert' scheme that [a Goodrich
representative] engaged me in was given to United Technologies
unbeknownst to Goodrich Corporation shareholders and the positive
outcome of the scientific studies of the patent information I provided
resulted in the favorable terms of the merger agreement.'' He further
alleges that various financial institutions might have been misled
about certain licenses in approving financing for the acquisition, and
appears to state that the acquisition of Goodrich by UTC will create a
monopoly ``around this technology.'' Mr. Jefferis summarizes his
allegations as follows:
It is my worry and concern that a combined Goodrich Corporation and
United Technologies poses significant risks to national security
given their history of export compliance violations, the unresolved
export compliance issues I raised, the corporate espionage I may
have engaged in, the bizarre handling of my reporting accounting
concerns to the external audit firm, the perjury of [the Goodrich
representative], the secrecy surrounding the Community Action Alert
patents, and now the `reinvention' using the prior art information.
2. Response of the United States
The Proposed Final Judgment is designed to remedy the competitive
concerns raised by the acquisition of Goodrich by UTC, as alleged in
the Complaint. Most of Mr. Jefferis's complaints do not relate to the
likely competitive effect of the acquisition. Mr. Jefferis may be
concerned, in part, about a possible monopoly in a certain fuel cell
technology. Even so, the United States found no evidence that the
acquisition of Goodrich by UTC would have an anticompetitive effect in
fuel cells; therefore, the Complaint contains no such allegation. Mr.
Jefferis's complaint is thus beyond the purview of this proceeding.
IV. Standard of Judicial Review
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty-day comment
period, after which the court shall determine whether entry of the
Proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e)(1). In making that determination in accordance with the statute,
the court is required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative
remedies actually considered, whether its terms are ambiguous, and
any other competitive considerations bearing upon the adequacy of
such judgment that the court deems necessary to a determination of
whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A)-(B). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ]76,736, No. 08-1965 (JR), 2009 U.S.
Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the
court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanisms to enforce the Final
Judgment are clear and manageable'').
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA, a court considers, among other
things, the relationship between the remedy secured and the specific
allegations set forth in the government's complaint,
[[Page 22307]]
whether the decree is sufficiently clear, whether enforcement
mechanisms are sufficient, and whether the decree may positively harm
third parties. See Microsoft, 56 F.3d at 1458-62. With respect to the
adequacy of the relief secured by the decree, a court may not ``engage
in an unrestricted evaluation of what relief would best serve the
public.'' United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988)
(citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.
1981)); see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa,
Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist.
LEXIS 84787, at *3. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\5\
In determining whether a proposed settlement is in the public interest,
the court ``must accord deference to the government's predictions about
the efficacy of its remedies, and may not require that the remedies
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d
at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts
to be ``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer-Daniels-Midland Co.,
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant
due respect to the United States' prediction as to the effect of
proposed remedies, its perception of the market structure, and its
views of the nature of the case).
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\5\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '').
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Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.''' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). Therefore, the United States ``need only
provide a factual basis for concluding that the settlements are
reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 489
F. Supp. 2d at 17.
In its 2004 amendments to the Tunney Act,\6\ Congress made clear
its intent to preserve the practical benefits of utilizing consent
decrees in antitrust enforcement, stating ``[n]othing in this section
shall be construed to require the court to conduct an evidentiary
hearing or to require the court to permit anyone to intervene.'' 15
U.S.C. 16(e)(2). The language wrote into the statute what Congress
intended when it enacted the Tunney Act in 1974, as Senator Tunney
explained: ``[t]he court is nowhere compelled to go to trial or to
engage in extended proceedings which might have the effect of vitiating
the benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator
Tunney). Rather, the procedure for the public-interest determination is
left to the discretion of the court, with the recognition that the
court's ``scope of review remains sharply proscribed by precedent and
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d
at 11.\7\
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\6\ The 2004 amendments substituted the word ``shall'' for
``may'' when directing the courts to consider the enumerated factors
and amended the list of factors to focus on competitive
considerations and address potentially ambiguous judgment terms.
Compare 15 U.S.C. 16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see
also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
\7\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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IV. Conclusion
The United States continues to believe that the Proposed Final
Judgment, as drafted, provides an effective and appropriate remedy for
the antitrust violations alleged in the Complaint and that the Proposed
Final Judgment therefore is in the public interest.
The United States will move this Court to enter the Proposed Final
Judgment after the comments and this response are published in the
Federal Register.
Dated: February 12, 2013.
Respectfully submitted.
Kevin C. Quin, Esquire,
United States Department of Justice, Antitrust Division, Litigation
II Section, 450 5th Street NW., Suite 8700, Washington, DC 20530,
Phone: (202) 307-0922, Fax: (202) 514-9033, [email protected].
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[FR Doc. 2013-08700 Filed 4-12-13; 8:45 am]
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