[Federal Register Volume 82, Number 225 (Friday, November 24, 2017)]
[Notices]
[Pages 55861-55878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25373]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. CenturyLink, Inc. and Level 3 Communications,
Inc.; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States of America v. CenturyLink, Inc. and Level 3 Communications,
Inc., Civil Action No. 17-cv-2028 (KBJ). On October 2, 2017, the United
States filed a Complaint alleging that CenturyLink, Inc.'s proposed
acquisition of Level 3 Communications, Inc. would violate Section 7 of
the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed at
the same time as the Complaint,
[[Page 55862]]
requires the defendants to: (1) Divest to an acquirer (or acquirers)
all of the assets used by Level 3 exclusively or primarily to support
provision of telecommunications services to enterprise and wholesale
customer locations in the Albuquerque, New Mexico, Boise, Idaho, and
Tucson, Arizona Metropolitan Statistical Areas, and (2) provide to an
acquirer an indefeasible right to use twenty-four strands of intercity
dark fiber connecting thirty specific city pairs.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's Web site at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's Web site,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Scott A. Scheele,
Chief, Telecommunications and Broadband Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW., Suite 7000, Washington, DC
20530 (telephone: 202-616-5924).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, United States Department of Justice,
Antitrust Division, 450 Fifth Street NW., Suite 7000, Washington, DC
20530, Plaintiff v. Centurylink, Inc., 100 CenturyLink Drive,
Monroe, Louisiana 71203 and Level 3 Communications, Inc., 1025
Eldorado Boulevard, Broomfield, Colorado 80021 Defendants.
Civil Action No: 1:17-cv-2028
Judge: Ketanji Brown Jackson
COMPLAINT
The United States of America brings this civil action to enjoin the
acquisition of Level 3 Communications, Inc. by CenturyLink, Inc. and to
obtain other equitable relief.
I. NATURE OF THE ACTION
1. On October 31, 2016, CenturyLink, Inc. (``CenturyLink'') and
Level 3 Communications, Inc. (``Level 3'') entered into an Agreement
and Plan of Merger whereby CenturyLink would acquire Level 3.
CenturyLink's proposed acquisition of Level 3 would consolidate two of
the largest wireline telecommunications services providers in the
United States.
2. CenturyLink and Level 3 compete to provide fiber-optic-based
connectivity and telecommunications services to enterprise and
wholesale customers. Enterprise customers (including all sizes of
businesses and institutions, such as community colleges, hospitals, and
government agencies) purchase high quality fiber-optic-based
connectivity and telecommunications services from CenturyLink and Level
3 for their own telecommunications services needs. Wholesale customers
(i.e., telecommunications carriers seeking to provide
telecommunications services to customer locations in areas where they
do not have their own wireline infrastructure) purchase local network
and building-level fiber connectivity from CenturyLink and Level 3 in
order to provide telecommunications services to their end-user
customers.
3. In three Metropolitan Statistical Areas (``MSAs'') \1\--
Albuquerque, New Mexico; Boise, Idaho; \2\ and Tucson, Arizona--
CenturyLink and Level 3 have two of the three most extensive fiber-
based metropolitan area networks. Without significant competitors to
rival their networks' scale in each of these three MSAs, CenturyLink
and Level 3 represent each other's closest competitor for many
enterprise and wholesale customers in these MSAs, including, for
example, enterprise customers with locations spread throughout an MSA.
In many buildings within each of these three MSAs, CenturyLink and
Level 3 are the only two providers, or two of only three providers,
that own a direct fiber connection to the building. In a substantial
proportion of buildings in these MSAs, though CenturyLink and Level 3
may not be connected to these buildings, they are the only two
providers with metropolitan area network fiber located close enough to
connect economically, making CenturyLink and Level 3 the best options
for customers in those buildings. The consolidation of these two
competitors thus would likely substantially lessen competition for the
provision of fiber-optic-based connectivity and telecommunications
services in these three MSAs in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18.
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\1\ An MSA is a geographical region defined by the Office of
Management and Budget for use by federal statistical agencies, such
as the Census Bureau. It is based on the concept of a core area with
a large concentrated population, plus adjacent communities having
close economic and social ties to the core. For the purposes of this
Complaint, it includes the dense central business districts in
Albuquerque, Tucson, and Boise as well as the adjacent, connected
communities.
\2\ The full name of this MSA as defined by the Office of
Management and Budget is Boise City-Nampa, Idaho.
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4. CenturyLink and Level 3 also own substantial amounts of dark
fiber connecting pairs of cities (``Intercity Dark Fiber''). Dark fiber
is fiber-optic cable that has been installed, typically in conduit in
the ground, but has not been ``lit'' by attaching optical electronic
equipment at each end. Fiber that has had such equipment attached is
called ``lit'' fiber because the equipment sends data through the fiber
in the form of light waves. Such lit fiber can rapidly transmit
thousands of terabits of data. Owners of Intercity Dark Fiber may
``light'' the fiber themselves and then use the lit fiber to sell
telecommunications services, including data transport, to customers.
But only a small handful of Intercity Dark Fiber owners, including
CenturyLink and Level 3, also sell the fiber ``dark'' and permit
customers to add their own electronic equipment and control their own
data transport. Between some city pairs, CenturyLink and Level 3 are
the only two Intercity Dark Fiber providers. Between some other city
pairs, CenturyLink and Level 3 are two of only three Intercity Dark
Fiber providers.
5. Dark fiber is a crucial input for large, sophisticated customers
that need to move substantial amounts of data between specific cities.
These customers have specialized data transport needs, including
capacity, scalability, flexibility, and security, that can be fulfilled
only by Intercity Dark Fiber. CenturyLink and Level 3 compete to sell
Intercity Dark Fiber to these customers, and this competition has led
to lower prices for and increased availability of Intercity Dark Fiber.
The consolidation of these two competitors would likely substantially
lessen competition for the sale of Intercity Dark Fiber for thirty city
pairs in the United States in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18.
II. DEFENDANTS AND THE TRANSACTION
6. CenturyLink is a Louisiana corporation headquartered in Monroe,
Louisiana. It is the third largest wireline telecommunications provider
in the United States and is the Incumbent Local Exchange Carrier
(``ILEC'') \3\ in
[[Page 55863]]
portions of 37 states. CenturyLink owns one of the most extensive
physical fiber networks in the United States, including metropolitan
area network components and direct fiber connections to numerous
commercial buildings throughout the United States, particularly where
it serves as the ILEC, as well as considerable intercity fiber
infrastructure. Over the past ten years, CenturyLink has grown by
acquiring a number of other large telecommunications providers,
including Embarq Corporation in 2009 and Qwest Communications, Inc. in
2011. As of December 31, 2016, CenturyLink owned and operated a 360,000
route-mile global network, including a 265,000 route-mile U.S. fiber
network, and generated 2016 operating revenues of $17.47 billion.
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\3\ An incumbent local exchange carrier (ILEC) is the telephone
company that was the sole provider of local exchange service (local
phone service) in a given local area prior to passage of the 1996
Telecommunications Act, which allowed for competitive local exchange
carriers (CLECs) to compete for this local service.
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7. Level 3 is a Delaware corporation headquartered in Broomfield,
Colorado. It is one of the largest wireline telecommunications
companies in the United States and operates as one of the largest
Competitive Local Exchange Carriers (``CLEC''), owning significant
local network assets comprised of metropolitan area network components
and direct fiber connections to numerous commercial buildings
throughout the United States, including within portions of
CenturyLink's ILEC territory. Level 3 operates one of the most
extensive physical fiber networks in the United States, including
sizeable intercity fiber infrastructure. Level 3 has made a number of
significant acquisitions in the past ten years, including Global
Crossing Limited in 2011 and tw telecom inc. in 2014. Level 3 owns and
operates a 200,000 route-mile global fiber network and generated $8.172
billion of operating revenues in 2016.
8. On October 31, 2016, CenturyLink and Level 3 entered into an
Agreement and Plan of Merger whereby CenturyLink will acquire Level 3
for approximately $34 billion.
III. JURISDICTION AND VENUE
9. The United States brings this action under the direction of the
Attorney General and pursuant to Section 15 of the Clayton Act, as
amended, 15 U.S.C. 25, to prevent and restrain CenturyLink and Level 3
from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
10. CenturyLink and Level 3 are engaged in, and their activities
substantially affect, interstate commerce. CenturyLink and Level 3 sell
wireline telecommunications goods and services throughout the United
States. The Court has subject-matter jurisdiction over this action and
these defendants pursuant to Section 15 of the Clayton Act, as amended,
15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
11. Defendants CenturyLink and Level 3 transact business in the
District of Columbia and have consented to venue and personal
jurisdiction in this District. Venue is proper in this District under
Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(b)(1)
and (c).
IV. BACKGROUND
12. Wireline telecommunications infrastructure is critical in
transporting the data that individuals, businesses, and other entities
transmit. Among the key components of this infrastructure are: the
fiber strands connecting an individual building to a metropolitan area
network; the fiber strands and related equipment comprising a
metropolitan area network that serve an entire city or MSA; and the
intercity fiber strands connecting cities to one another.
13. Fiber strands connecting an individual building to the
metropolitan area network serving an entire MSA are often referred to
as ``last-mile'' connections. Without a last-mile fiber connection to
the building, customers cannot send data to or receive data from any
point outside of the building. And without the metropolitan area
network to which those last-mile building fibers connect, customers
cannot communicate with other buildings in the same MSA or reach any
points beyond.
14. These fiber building connections and fiber-based metropolitan
area networks carry critical telecommunications services for enterprise
customers. They also provide a link over which wholesale providers--who
sell services to end users in buildings to which the wholesale provider
does not own direct fiber connections--can serve their own customers.
15. Each ILEC has its own territory, which can include entire MSAs
and/or portions of MSAs. The ILEC typically has the largest number of
fiber building connections in its territory. As such, CenturyLink
typically has the largest number of fiber connections to the buildings
where it is the ILEC, serving the majority of buildings that require
high-bandwidth, high-reliability telecommunications services. CLECs
like Level 3 have built fiber connections to buildings in CenturyLink's
and other ILEC's territories, giving some buildings additional fiber
connections. More recently, other entities like cable companies have
begun investing in fiber connections to buildings in certain MSAs,
though, like the CLECs, they typically have nowhere near the scale of
the ILEC.
16. In the MSAs of Albuquerque, New Mexico; Boise, Idaho; and
Tucson, Arizona, CenturyLink is the ILEC and owns the largest and most
extensive fiber-based metropolitan area network, and Level 3 owns one
of the top three largest fiber-based networks in all three MSAs. In
each of these MSAs, CenturyLink owns fiber connections to more than a
thousand buildings, while Level 3 owns connections to hundreds of
buildings. In many of these buildings, CenturyLink and Level 3 also
control the only last-mile fiber connections. Moreover, they are two of
only three significant providers with metropolitan area network fiber
nearby.
17. Intercity fiber connects a city's metropolitan area network to
other cities' metropolitan area networks. Without fiber connecting
cities' metropolitan area networks, each city would be an island, with
no way for data sent by or destined for customers in one city to reach
to or from any other city. This intercity fiber linking city pairs is
distinct from metropolitan area network fiber that links locations
within a city but does not connect outside--the only connection between
a metropolitan area network and any point beyond is intercity fiber.
CenturyLink and Level 3 are two of only a handful of companies with
robust nationwide intercity fiber networks.
18. Companies can light intercity fiber to send data across long
distances between cities. Intercity Dark Fiber providers can light the
fiber themselves, supplying and controlling the optical electronic
equipment, and then sell lit services to customers. Intercity Dark
Fiber providers can also sell the fiber dark to large, sophisticated
customers, in which case the customer purchases the right to control
the underlying fiber and then arranges for placement of optical
electronic equipment to light the fiber and manages its own traffic on
the fiber.
19. Intercity Dark Fiber can provide customers additional data
capacity, faster speeds, and more robust security and control over
their data networks. Intercity Dark Fiber sales are typically
structured as something similar to a long-term lease, known in the
industry as an Indefeasible Right of Use (``IRU''),\4\
[[Page 55864]]
with an up-front payment and some recurring fees for maintenance of the
fiber. Only a few companies in the United States sell Intercity Dark
Fiber. Most Intercity Dark Fiber providers also sell lit services,
sometimes to the same customer.
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\4\ The FCC defines an IRU, in part, as an indefeasible long-
term leasehold interest for a minimum total duration of ten years
that gives the grantee the right to access and exclusively use
specified strands of fiber or allocated bandwidth to provide a
service as determined by the grantee. An IRU confers on the grantee
substantially all of the risks and rewards of ownership.
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V. RELEVANT MARKETS
A. Fiber-Based Enterprise and Wholesale Telecommunications Services
Providing Local Connectivity to Customer Premises
20. Fiber-based enterprise and wholesale telecommunications
services providing local connectivity to customer premises constitutes
a relevant market and line of commerce under Section 7 of the Clayton
Act, 15 U.S.C. 18.
21. Customers require this product to deliver high-bandwidth, high-
reliability telecommunications services. Customers who purchase fiber-
based telecommunications services providing connectivity to their
premises will not turn to other connectivity technologies (such as
hybrid fiber-coax, copper, or fixed or mobile wireless) in sufficient
numbers to make a small but significant increase in price of fiber-
based telecommunications services unprofitable for a provider of these
fiber-based telecommunications services.
22. In some instances, the relevant telecommunications services to
individual buildings are priced and sold separately. In other
instances, including where MSA-wide price lists are used and where
customers have multiple locations throughout an MSA, sales and pricing
may be determined at the level of the MSA. Customers with multiple
building locations spread throughout an MSA may demand integrated
telecommunications services to all locations. Providers with a broad
fiber presence in an MSA may be best suited to supply such customers.
For such situations, the nature of competition may be best assessed at
the MSA level. The geographic markets relevant to these services are no
narrower than each individual building and no broader than each MSA.
23. The relevant geographic markets and sections of the country
under Section 7 of the Clayton Act, 15 U.S.C. 18, within which to
assess the competitive impact of a combination of CenturyLink and Level
3 are the MSAs of Albuquerque, New Mexico; Boise, Idaho; and Tucson,
Arizona (collectively, the ``Three MSAs'').
B. Intercity Dark Fiber
24. Intercity Dark Fiber constitutes a relevant product market and
line of commerce under Section 7 of the Clayton Act, 15 U.S.C. 18.
25. Level 3 and CenturyLink utilize their intercity fiber to sell
both lit services and Intercity Dark Fiber. Lit services generally are
sold for a certain capacity and paid for on a monthly basis. The
provider serves the customer using the provider's optical electronic
equipment, and the provider manages the traffic on the fiber. In
contrast, dark fiber is generally sold through IRUs so that the
customer can arrange for its own equipment to be placed and manage its
own traffic on the fiber. Customers who buy Intercity Dark Fiber,
including webscale companies\5\ and financial institutions, require the
properties of dark fiber for scalability, capacity, flexibility, and
security. Lit services sold by telecommunications providers cannot
match these qualities provided by Intercity Dark Fiber and are
generally much more costly than Intercity Dark Fiber for these
customers' purposes. Customers who purchase Intercity Dark Fiber will
not turn to an alternate service like lit services in the event of a
small but significant increase in the price of Intercity Dark Fiber.
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\5\ Webscale companies are those primarily engaged in the
business of providing large amounts of data to end users through
web-based services; they require facilities and infrastructure to
create, store, and then transport that data across long distances.
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26. The geographic markets relevant to this product are specific
city pairs in the United States. Intercity Dark Fiber customers
generally need to transport data between specific sources and
destinations (for example, data centers and headquarters), and
accordingly require a fiber connection between cities close to those
locations. Customers who face a small but significant increase in price
for Intercity Dark Fiber between a specific city pair typically will
not substitute different city pairs in response.
27. Further, the directness of the route between cities is critical
for purposes of reducing latency and expense. Therefore, Intercity Dark
Fiber customers generally will consider only certain routes between a
city pair to fulfill their needs. The more circuitous a route, the
longer data needs to travel, and the more latency is introduced into
the transmission. Longer routes are also more costly to operate as more
amplifier and regeneration equipment must be added to the fiber to
ensure proper transmission of the signal. Accordingly, only certain
routes between a city pair are viable substitutes for Intercity Dark
Fiber customers.
28. The relevant geographic markets and sections of the country
under Section 7 of the Clayton Act, 15 U.S.C. 18, within which to
assess the competitive impact of a combination of CenturyLink and Level
3 (collectively, the ``Thirty City Pairs'') are:
1. Atlanta-Nashville
2. Birmingham-Billingsley
3. Charlotte-Atlanta
4. Cleveland-Buffalo
5. Dallas-Memphis
6. Denver-Dallas
7. Denver-Kansas City
8. El Paso-San Antonio
9. Houston-New Orleans
10. Indianapolis-Cincinnati
11. Kansas City-St. Louis
12. Los Angeles-Las Vegas
13. Memphis-Nashville
14. Miami-Jacksonville
15. Nashville-Indianapolis
16. Orlando-Daytona Beach
17. Phoenix-El Paso
18. Portland-Salt Lake City
19. Raleigh-Charlotte
20. Richmond-Raleigh
21. Sacramento-Salt Lake City
22. Sacramento-San Francisco
23. Salt Lake City-Denver
24. San Diego-Phoenix
25. San Francisco-Los Angeles
26. Tallahassee-Jacksonville
27. Tallahassee-Tampa
28. Tampa-Miami
29. Tampa-Orlando
30. Washington, DC-Richmond
VI. ANTICOMPETITIVE EFFECTS
29. The transaction likely would substantially lessen competition
in the markets of enterprise and wholesale fiber-based local
connectivity telecommunications services in the Three MSAs.
30. Enterprise and wholesale customers in the Three MSAs who depend
on fiber-based local connectivity telecommunications services provided
by the defendants would be harmed as a result of CenturyLink's
acquisition of Level 3. In particular, in addition to wholesale
customers, in each of the Three MSAs there are a substantial number of
enterprise customers with significant high-bandwidth, high-reliability
telecommunications services needs. While some of these customers have a
single location, many others have multiple locations throughout the
metropolitan area and require telecommunications providers who can
offer fiber-based connections to all of their locations. CenturyLink
and Level 3
[[Page 55865]]
use their metropolitan area networks to compete for customers at
locations in the Three MSAs where the two companies already have
connected fiber, and to compete for opportunities at new locations
throughout the MSAs where CenturyLink and Level 3 could economically
add lines to connect to new locations.
31. In each of the Three MSAs, CenturyLink is the largest provider
of fiber connectivity and has fiber connections to over a thousand
buildings. Level 3 has fiber connections to several hundred buildings
in each of the Three MSAs, making it the second largest provider of
fiber connectivity to buildings in Albuquerque and Tucson, and one of
the top three largest in Boise. In many buildings in the Three MSAs,
CenturyLink and Level 3 control the only last-mile fiber connections.
Moreover, they are two of only three significant providers with fiber
connections to, or metropolitan area network fiber nearby, buildings in
the Three MSAs, representing a customer's best choices for this product
in many instances in the Three MSAs. Competitor metropolitan area
networks in these Three MSAs that have smaller, less robust networks
are not close substitutes for CenturyLink's and Level 3's networks.
32. CenturyLink and Level 3 compete directly against one another to
provide fiber-based enterprise and wholesale local connectivity
telecommunications services to a wide variety of customers in the Three
MSAs, including, but not limited to, small- to medium-sized enterprise
customers with one or multiple locations, large multi-regional
enterprise customers with branch locations in the Three MSAs, and
wholesale customers who resell to all types of end users. Customers
have benefitted from this competition, including by receiving lower
prices and higher quality services. The acquisition of Level 3 by
CenturyLink would represent a loss of this competition.
33. This loss of competition likely will result in increased prices
for enterprise and wholesale customers purchasing fiber-based local
connectivity telecommunications services in the Three MSAs. In each of
the Three MSAs, CenturyLink and Level 3 operate in a highly
concentrated market, representing for hundreds of buildings two of only
three, and in some cases the only two, providers with fiber
connectivity to or near customer premises. While currently these
customers can turn to Level 3 if CenturyLink raises prices, the loss of
Level 3 as a competitor would leave some customers with only one
alternative and many others with no competitive choice at all. Post-
merger, these highly concentrated markets will become significantly
more concentrated, with the parties' combined share of all last-mile
fiber building connections at approximately 90% in Albuquerque, New
Mexico; 80% in Tucson, Arizona; and 70% in Boise, Idaho. Without Level
3 as a competitive constraint in these highly concentrated markets, the
merged firm will have the incentive and ability to increase prices
above competitive levels and reduce quality of service.
34. The transaction likely would also substantially lessen
competition for Intercity Dark Fiber for the Thirty City Pairs.
Webscale and financial customers who currently rely on Level 3 and
CenturyLink to compete for Intercity Dark Fiber sales would be harmed
by this transaction. Not all telecommunications providers sell
Intercity Dark Fiber. The ability to sell Intercity Dark Fiber requires
that a provider control enough fiber for its own operations and have
enough remaining to sell the amount requested by the customer, on the
route specified by the customer, and for the length of time required by
the customer. CenturyLink and Level 3 are two of only a few providers,
and in most cases the only two providers, who have this ability and
offer to sell Intercity Dark Fiber between each of the Thirty City
Pairs. Webscale company customers typically require dark fiber across
multiple intercity routes, and they prefer dark fiber providers who can
provide them with contiguous routes, including those spanning from
coast to coast. CenturyLink and Level 3 are two of only three Intercity
Dark Fiber providers with at least one contiguous route from the west
coast to the east coast.
35. For the Thirty City Pairs, where competition is so highly
concentrated, the acquisition of Level 3 by CenturyLink would represent
a loss of crucial competition for customers who require Intercity Dark
Fiber. The competition between CenturyLink and Level 3 for Intercity
Dark Fiber between these city pairs has led to decreased prices and
increased availability, with each defendant being more willing to lower
price and offer more Intercity Dark Fiber, or offer Intercity Dark
Fiber at all, in response to competitive pressure from the other.
Currently, customers can turn to CenturyLink for Intercity Dark Fiber
for any of the Thirty City Pairs if Level 3 raises price or is
unwilling to sell Intercity Dark Fiber, but the loss of CenturyLink as
a competitor would leave customers with no such option, providing the
merged firm the incentive and ability to raise prices above competitive
levels.
VII. ABSENCE OF COUNTERVAILING FACTORS
36. Entry of new competitors in the relevant markets is unlikely to
prevent or remedy the proposed merger's anticompetitive effects.
37. The proposed merger would be unlikely to generate verifiable,
merger-specific efficiencies sufficient to reverse or outweigh the
anticompetitive effects that are likely to occur.
VIII. VIOLATIONS ALLEGED
38. The acquisition of Level 3 by CenturyLink likely would
substantially lessen competition in each of the relevant markets in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
39. Unless enjoined, the acquisition will likely have the following
anticompetitive effects, among others:
a. competition in the market for fiber-based enterprise and
wholesale telecommunications services providing local connectivity to
customer premises in the Three MSAs--Albuquerque, New Mexico; Boise,
Idaho; and Tucson, Arizona--would be substantially lessened;
b. prices for fiber-based enterprise and wholesale
telecommunications services providing local connectivity to customer
premises in the Three MSAs would increase and quality of service would
decline;
c. competition in the markets for Intercity Dark Fiber between each
of the Thirty City Pairs would be substantially lessened;
d. prices for Intercity Dark Fiber between each of the Thirty City
Pairs would increase; and
e. availability of Intercity Dark Fiber between each of the Thirty
City Pairs would decrease.
IX. REQUESTED RELIEF
40. The United States requests that this Court:
a. adjudge and decree CenturyLink's acquisition of Level 3 to
violate Section 7 of the Clayton Act, 15 U.S.C. 18;
b. permanently enjoin and restrain CenturyLink and Level 3 from
carrying out the Agreement and Plan of Merger dated October 31, 2016,
or from entering into or carrying out any contract, agreement, plan, or
understanding, by which CenturyLink would combine with or acquire Level
3, its capital stock, or any of its assets;
c. award the United States its costs for this action; and
d. award the United States such other and further relief as the
Court deems just and proper.
[[Page 55866]]
Dated: October 2, 2017
Respectfully submitted,
FOR PLAINTIFF UNITED STATES:
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MAKAN DELRAHIM
Assistant Attorney General
Antitrust Division
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ANDREW C. FINCH
Principal Deputy Assistant Attorney General
Antitrust Division
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DONALD G. KEMPF, JR.
Deputy Assistant Attorney General
Antitrust Division
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PATRICIA A. BRINK
Director of Civil Enforcement
Antitrust Division
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SCOTT A. SCHEELE (D.C. Bar #429061)
Chief
Telecommunications & Media Enforcement Section
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LAWRENCE M. FRANKEL (D.C. Bar #441532)
Assistant Chief
Telecommunications & Media Enforcement Section
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SCOTT REITER*
ALEXIS K BROWN-REILLY (D.C. Bar #1000424)
MAUREEN CASEY (D.C. Bar #415893)
ROBERT DRABA (D.C. Bar #496815)
CORY BRADER LEUCHTEN
KELLY SCHOOLMEESTER (D.C. Bar #1008354)
MATTHEW SIEGEL
CARL WILLNER (D.C. Bar #412841)
CATHARINE WRIGHT (D.C. Bar #1019454)
United States Department of Justice
Antitrust Division
Telecommunications & Media Enforcement Section
450 Fifth Street, N.W., Suite 7000
Washington, DC 20530
Telephone: (202) 598-8796
Facsimile: (202) 514-6381
Email: [email protected]
*LEAD ATTORNEY TO BE NOTICED
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Centurylink, Inc. and
Level 3 Communications, Inc., Defendants.
Civil Action No: 1:17-cv-2028
Judge: Ketanji Brown Jackson
[PROPOSED] FINAL JUDGMENT
WHEREAS, Plaintiff, United States of America, filed its Complaint
on October 2, 2017, the United States and defendants, CenturyLink, Inc.
and Level 3 Communications, Inc., by their respective attorneys, have
consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law, and without this Final
Judgment constituting any evidence against or admission by any party
regarding any issue of fact or law;
AND WHEREAS, defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
AND WHEREAS, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by the defendants to
assure that competition is not substantially lessened;
AND WHEREAS, the United States requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
AND WHEREAS, defendants have represented to the United States that
the divestitures required below can and will be made and that
defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the divestiture
provisions contained below;
NOW THEREFORE, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ORDERED, ADJUDGED, AND DECREED:
I. JURISDICTION
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. DEFINITIONS
As used in this Final Judgment:
A. ``Acquirer'' or ``Acquirers'' means the entity or entities to
whom defendants divest the Divestiture Assets.
B. ``CenturyLink'' means defendant CenturyLink, Inc., a Louisiana
corporation with its headquarters in Monroe, Louisiana, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Level 3'' means defendant Level 3 Communications, Inc., a
Delaware corporation with its headquarters in Broomfield, Colorado, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
D. ``Customer Premises Equipment'' means equipment located on the
customer premises side of the demarcation point with the
telecommunications service provider and used to serve one customer at
the location.
E. ``Dark Fiber'' means fiber optic strands provided without
electronic or optronic equipment.
F. ``Divestiture Assets'' means the MSA Divestiture Assets and the
Intercity Dark Fiber Assets.
G. ``Divestiture MSA'' means, separately, the MSAs of (1)
Albuquerque, New Mexico; (2) Boise City-Nampa, Idaho; and (3) Tucson,
Arizona.
H. ``Gateway Location,'' means a facility in or near an MSA where
intercity fiber terminates and connects with a Metropolitan Area
Network and/or other intercity fiber.
I. ``Intercity Dark Fiber Assets'' means IRUs for 24 strands of
Dark Fiber in the same cable, if available, or if not available in the
same cable, then in the same duct bank, on the Intercity Routes and any
Dark Fiber necessary to connect any Intercity Route with another
Intercity Route that terminates at a different Gateway Location in the
same MSA. The term ``Intercity Dark Fiber Assets'' shall be construed
as broadly as necessary to accomplish the purposes of this Final
Judgment and any IRU shall provide the following:
(1) A term of twenty-five (25) years, with two options to extend
for two (2) additional five (5) year terms (for a total of ten (10)
years), exercisable at the Acquirer's sole discretion at any time
during the initial 25-year term so long as written notice is provided
to the defendants at least ninety (90) days prior to the expiration of
the IRU term, and, for each five-year renewal term, at a price not to
exceed 20% of the fee initially paid by the Acquirer for the Intercity
Dark Fiber Assets;
(2) Subject to the approval of the United States, in its sole
discretion, customary terms and conditions, including terms regarding
respective operations and maintenance rights and obligations; fiber
quality, testing, and technical performance; access; and cooperation;
(3) The right to assign the IRU, in whole or in part, without the
consent of defendants; and
(4) All additional rights defendants have that are necessary
(including, as needed, rights to access and occupy space in defendants'
facilities) to enable the Acquirer or its assignee to provide
telecommunications services using the Intercity Dark Fiber Assets.
J. ``Intercity Routes'' means Dark Fiber connecting the endpoints
specified in Appendix B.
K. ``IRU'' means indefeasible right of use, a long-term leasehold
interest that gives the holder the exclusive right to use specified
fiber optic strands in a
[[Page 55867]]
telecommunications facility for a stated term.
L. ``Lateral Connection'' means fiber optic strands, from the
demarcation point in a building, including any equipment at the
demarcation point necessary to connect the fiber to Customer Premises
Equipment, to the point at which such fiber optic strands are spliced
with other fiber optic strands that serve multiple buildings, and any
existing related duct, conduit, or other containing or support
structure.
M. ``Majority MSA Customers'' means MSA Customers for which, as of
August 2017, Level 3's monthly recurring revenues were greater in the
Divestiture MSAs than outside the Divestiture MSAs.
N. ``Metropolitan Area Network'' means fiber optic strands that are
used to connect Lateral Connections to one another and to Gateway
Locations and any existing related duct, conduit or other containing or
support structure.
O. ``MSA'' means Metropolitan Statistical Area, as defined by the
Office of Management and Budget.
P. ``MSA Customers'' means customers who purchase
telecommunications services from Level 3 at a location within any of
the Divestiture MSAs, but shall not include the customers listed in
Appendix A.
Q. ``MSA Divestiture Assets'' means all Level 3 assets, tangible
and intangible, used exclusively or primarily to support Level 3's
provision of telecommunications services to customer locations in the
Divestiture MSAs, including, but not limited to, Lateral Connections,
Metropolitan Area Network; ownership and access rights to all ducts,
conduit, and other containing or support structure used by Level 3 to
operate or augment such Lateral Connections and Metropolitan Area
Network; and all switching, routing, amplification, co-location, or
other telecommunications equipment used in or associated with those
networks in each Divestiture MSA, up to Level 3's Gateway Location(s)
in each Divestiture MSA. The MSA Divestiture Assets shall also include
other assets used by Level 3 for its provision of telecommunications
services to customer locations in each Divestiture MSA, including, but
not limited to, all licenses, permits and authorizations related to the
MSA Divestiture Assets issued by any governmental organization to the
extent that such licenses, permits and authorizations are transferrable
and such transfer would not prevent Level 3 from providing
telecommunications services in the three Divestiture MSAs; all
contracts (except as otherwise excluded by the terms of this Final
Judgment), teaming arrangements, agreements, leases, commitments,
certifications, and understandings, including supply agreements; all
MSA Customer lists (including the name of each MSA Customer and each
Majority MSA Customer, the address of each MSA Customer location within
the Divestiture MSAs, and the address of each Majority MSA Customer
location within the Divestiture MSAs and outside the Divestiture MSAs);
all repair and performance records relating to the MSA Divestiture
Assets; and all other records relating to the MSA Divestiture Assets
reasonably required to permit the Acquirer to conduct a thorough due
diligence review of and to operate the MSA Divestiture Assets. The MSA
Divestiture Assets shall not include assets, wherever located, used
exclusively or primarily in or in support of Level 3's provision of
telecommunications services outside the Divestiture MSAs, including the
provision of telecommunications services between MSAs.
The term ``MSA Divestiture Assets'' shall be construed as broadly
as necessary to accomplish the purposes of this Final Judgment and is
subject to the following:
(1) The MSA Divestiture Assets shall not include Customer Premises
Equipment in a location in a Divesture MSA currently owned by Level 3
unless and until the customer chooses the Acquirer as its supplier
pursuant to Section IV(K) for that location; and
(2) Level 3's contracts to provide telecommunications services to
customers are not included as MSA Divestiture Assets, but are subject
to the process specified in Sections IV(K) and IV(L) of this Final
Judgment.
III. APPLICABILITY
A. This Final Judgment applies to CenturyLink and Level 3, as
defined above, and all other persons in active concert or participation
with any of them who receive actual notice of this Final Judgment by
personal service or otherwise.
B. If, prior to complying with Section IV, Section V, and Section
VI of this Final Judgment, defendants sell or otherwise dispose of all
or substantially all of their assets or of lesser business units that
include the Divestiture Assets, they shall require the purchaser to be
bound by the provisions of this Final Judgment. Defendants need not
obtain such an agreement from the acquirers of the assets divested
pursuant to this Final Judgment.
IV. DIVESTITURE OF MSA DIVESTITURE ASSETS
A. Defendants are ordered and directed, within 120 calendar days
after the filing of the Complaint in this matter, or five (5) calendar
days after notice of the entry of this Final Judgment by the Court,
whichever is later, to divest the MSA Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer or Acquirers in each
Divestiture MSA and on terms acceptable to the United States, in its
sole discretion. The United States, in its sole discretion, may agree
to one or more extensions of this time period not to exceed sixty (60)
calendar days in total, and shall notify the Court in such
circumstances. If approval or consent from any government unit is
necessary with respect to divestiture of the MSA Divestiture Assets by
defendants or the Divestiture Trustee and if applications or requests
for approval or consent have been filed with the appropriate
governmental unit within five (5) calendar days after the United States
provides written notice pursuant to Section VII(E) that it does not
object to the proposed Acquirer, but an order or other dispositive
action on such applications has not been issued before the end of the
period permitted for divestiture, the period shall be extended with
respect to divestiture of those MSA Divestiture Assets for which
governmental approval or consent has not been issued until five (5)
calendar days after such approval or consent is received. Defendants
agree to use their best efforts to divest the MSA Divestiture Assets
and to seek all necessary regulatory or other approvals or consents
necessary for such divestitures as expeditiously as possible.
B. In accomplishing the divestitures ordered by this Final
Judgment, defendants promptly shall make known, by usual and customary
means, the availability of the entire MSA Divestiture Assets.
Defendants shall inform any person making an inquiry regarding a
possible purchase of the MSA Divestiture Assets that they are being
divested pursuant to this Final Judgment and provide that person with a
copy of this Final Judgment. Defendants shall offer to furnish to all
prospective Acquirers, subject to customary confidentiality assurances,
all information and documents relating to the MSA Divestiture Assets
customarily provided in a due diligence process except such information
or documents subject to the attorney-client privilege or work-product
doctrine. Defendants shall make available such
[[Page 55868]]
information to the United States at the same time that such information
is made available to any other person.
C. With respect to each Divestiture MSA, defendants shall provide
the Acquirer of MSA Divestiture Assets and the United States
information relating to the personnel whose primary responsibilities
relate to the operation of any MSA Divestiture Asset to enable the
Acquirer to make offers of employment. Defendants will not interfere
with any negotiations by the Acquirer to employ such personnel.
D. Defendants shall permit prospective Acquirers of the MSA
Divestiture Assets to have reasonable access to personnel and to make
inspections of the physical facilities of the MSA Divestiture Assets;
access to any and all environmental, zoning, title, right-of-way, and
other permit documents and information; and access to any and all
financial, operational, or other documents and information customarily
provided as part of a due diligence process.
E. Defendants shall warrant to any Acquirer(s) that the MSA
Divestiture Assets will be operational on the date of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the MSA Divestiture
Assets.
G. Subject to approval by the United States, defendants may enter
into a negotiated contract with each Acquirer of MSA Divestiture Assets
for a period of two (2) years from the closing date of the divestiture
of the MSA Divestiture Assets, under which the Acquirer would provide
to defendants all Lateral Connections and associated Metropolitan Area
Network needed to support Level 3 customers in the applicable
Divestiture MSA that choose to remain customers of defendants.
H. At the option of the Acquirer(s), defendants shall enter into a
Transition Services Agreement for any services that are reasonably
necessary for the Acquirer(s) to maintain, operate, provision, monitor,
or otherwise support the MSA Divestiture Assets, including any required
back office and information technology services, for a period of up to
twelve (12) months. The United States, in its sole discretion, may
approve one or more extensions of this agreement for a total of up to
an additional twelve (12) months. Defendants shall perform all duties
and provide all services required of defendants under the Transition
Services Agreement. The terms and conditions of any contractual
arrangement meant to satisfy this provision must be reasonably related
to market conditions. Any amendments, modifications or extensions of
the Transition Services Agreement maybe entered into only with the
approval of the United States, in its sole discretion.
I. Defendants shall use their best efforts to obtain from any third
parties that provide Level 3, on a leased or IRU basis, Lateral
Connections and Metropolitan Area Network in the Divestiture MSAs any
consent necessary to transfer, assign, or sublease to the Acquirer the
contract(s) for such Lateral Connections or Metropolitan Area Network
to the extent related to the MSA Divestiture Assets and will effectuate
the transfer, assignment, or sublease of such contract(s) to the
Acquirer. The Acquirer and defendants may enter into a commercial
services agreement to replace the service provided by any Level 3
Lateral Connections and Metropolitan Area Network in the Divestiture
MSAs currently provided to Level 3 on a leased or IRU basis (1) if,
because of withheld consent, the parties are unable to transfer,
assign, or sublease to the Acquirer any contract(s) for such Lateral
Connections or Metropolitan Area Network in the Divestiture MSAs
currently provided to Level 3 on a leased or IRU basis; or (2) at the
option of the Acquirer and subject to approval by the United States, in
its sole discretion. Defendants shall use their best efforts to obtain
from any third parties that provide Level 3 rights of way, access
rights, or any other rights to operate, expand, or extend Lateral
Connections or Metropolitan Area Network in the Divestiture MSAs any
consent necessary to transfer such rights to the Acquirer(s).
J. Defendants shall warrant to the Acquirer(s) that they are not
aware of any material defects in the environmental, zoning, title,
right-of-way, or other permits pertaining to the operation of each
asset, and that following the sale of the MSA Divestiture Assets,
defendants will not undertake, directly or indirectly, any challenges
to the environmental, zoning, title, right-of-way, or other permits
relating to the operation of the MSA Divestiture Assets.
K. For each Divestiture MSA, beginning on the closing date of the
sale of the MSA Divestiture Assets and continuing for a period of the
lesser of two (2) years from the closing date of the sale or the
expiration of an MSA Customer's contract, provided the expiration is at
least thirty (30) days after the closing date of the sale, defendants
shall
(1) release the MSA Customers from their contractual obligations
for any otherwise applicable termination fees for telecommunications
services provided by Level 3 at locations within the applicable
Divestiture MSA, in order to enable any MSA Customers, without penalty
or delay, to elect to use the Acquirer for provision of such
telecommunications services, and
(2) for any Majority MSA Customers, defendants shall release such
customers from their contractual obligations for all Level 3 services
for any otherwise applicable termination fees charged by defendants, at
all locations serviced by Level 3, even if located outside the
applicable Divestiture MSA, provided that defendants and Acquirer shall
each be required to pay half of any third-party fees associated with
the termination of delivery of telecommunications services to each
Majority MSA Customer at each terminated location outside the
Divestiture MSAs, in order to enable these customers, without penalty
imposed by defendants or delay, to elect to use the Acquirer for the
provision of such telecommunications services.
L. For a period of two (2) years following the entry of this Final
Judgment, defendants shall not initiate customer-specific
communications to solicit any MSA Customer or Majority MSA Customer to
provide any telecommunications services to locations for which such
customers have elected to use an Acquirer as its provider of
telecommunications services pursuant to the process specified in
Section IV(K) of this Final Judgment; provided however, that defendants
may (1) respond to inquiries and enter into negotiations to provide
service at these locations or other locations at the request of the
customer and (2) except for any location at which the MSA Customer has
elected to use an Acquirer as its provider of telecommunications
services pursuant to the process specified in Section IV(K), continue
to solicit business opportunities from any MSA Customer that was prior
to the entry of this Final Judgment a customer of CenturyLink in the
Divestiture MSA.
M. Within fifteen (15) business days of the date of the sale of any
MSA Divestiture Assets to an Acquirer, defendants shall communicate, in
a form approved by the United States in its sole discretion, to all MSA
Customers notifying the recipients of the divestiture and providing a
copy of this Final Judgment. Defendants shall provide the United States
a copy of this notification at least ten (10) business days before it
is sent. The notification shall specifically advise customers of the
rights provided under Sections IV(K) and IV(L) of this Final Judgment.
The
[[Page 55869]]
Acquirer shall have the option to include its own notification along
with defendants' notification.
N. Unless the United States otherwise consents in writing, the
divestitures pursuant to Section IV, or by Divestiture Trustee
appointed pursuant to Section VI, of this Final Judgment, shall include
the entire MSA Divestiture Assets and shall be accomplished in such a
way as to satisfy the United States, in its sole discretion, that the
MSA Divestiture Assets can and will be used by the Acquirer or
Acquirers as part of a viable, ongoing business providing
telecommunications services. Divestiture of the MSA Divestiture Assets
may be made to one or more Acquirers, provided that (i) all MSA
Divestiture Assets in a given Divestiture MSA are divested to a single
Acquirer unless otherwise approved by the United States, in its sole
discretion, and (ii) in each instance it is demonstrated to the sole
satisfaction of the United States that the MSA Divestiture Assets will
remain viable and the divestiture of such assets will remedy the
competitive harm alleged in the Complaint. The divestitures, whether
pursuant to Section IV or Section VI of this Final Judgment,
(1) shall be made to an Acquirer (or Acquirers) that, in the United
States' sole judgment, has the intent and capability (including the
necessary managerial, operational, technical, and financial capability)
of competing effectively in the provision of telecommunications
services; and
(2) shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between an
Acquirer (or Acquirers) and defendants give defendants the ability
unreasonably to raise the Acquirer's costs, to lower the Acquirer's
efficiency, or otherwise to interfere in the ability of the Acquirer to
compete effectively.
V. DIVESTITURE OF INTERCITY DARK FIBER ASSETS
A. Defendants are ordered and directed, within 120 calendar days
after the closing of CenturyLink's acquisition of Level 3, or five (5)
calendar days after notice of the entry of this Final Judgment by the
Court, whichever is later, to sell the Intercity Dark Fiber Assets in a
manner consistent with this Final Judgment to an Acquirer and on terms
acceptable to the United States, in its sole discretion. The United
States, in its sole discretion, may agree to one or more extensions of
this time period not to exceed sixty (60) calendar days in total, and
shall notify the Court in such circumstances. If approval or consent
from any government unit is necessary with respect to the sale of the
Intercity Dark Fiber Assets by defendants or the Divestiture Trustee
and if applications or requests for approval or consent have been filed
with the appropriate governmental unit within five (5) calendar days
after the United States provides written notice pursuant to Section
VII(E) that it does not object to the proposed Acquirer, but an order
or other dispositive action on such applications has not been issued
before the end of the period permitted for divestiture, the period
shall be extended with respect to divestiture of those Intercity Dark
Fiber Assets for which governmental approval or consent has not been
issued until five (5) calendar days after such approval or consent is
received. Defendants agree to use their best efforts to divest the
Intercity Dark Fiber Assets and to seek all necessary regulatory or
other approvals or consents necessary for such divestitures as
expeditiously as possible.
B. In accomplishing the divestiture ordered by this Section,
defendants promptly shall make known, by usual and customary means, the
availability of the Intercity Dark Fiber Assets. Defendants shall
inform any person making inquiry regarding a possible purchase of the
Intercity Dark Fiber Assets that they are being sold pursuant to this
Final Judgment and provide that person with a copy of this Final
Judgment. Defendants shall offer to furnish to all prospective
Acquirers, subject to customary confidentiality assurances, all
information and documents relating to the Intercity Dark Fiber Assets
customarily provided in a due diligence process except such information
or documents subject to the attorney-client privilege or work-product
doctrine. Defendants shall make available such information to the
United States at the same time that such information is made available
to any other person.
C. Defendants shall permit prospective Acquirers of the Intercity
Dark Fiber Assets to have reasonable access to personnel and to such
other documents and information customarily provided as part of an IRU
transaction, including but not limited to fiber type and performance
specifications; date of fiber installation; fiber repair history; fiber
maps; route miles; gateway, interconnection, amplification, and
regeneration locations; and right-of-way type, owner, and expiration.
D. Defendants shall warrant to the Acquirer that the Intercity Dark
Fiber Assets will be available; provided, however, that the Intercity
Dark Fiber Assets may be sold prior to the completion date for
additional construction that is required to connect the Dallas to
Memphis Dark Fibers to the Memphis Gateway Location specified in
Appendix B so long as the defendants have taken all appropriate actions
to obtain such permits and approvals and to complete the construction
of the connection expeditiously thereafter. The Defendants will warrant
to the Acquirer that the Acquirer or other end user of the Dark Fiber
will be able to light each Dark Fiber pair on the Intercity Routes
using one set of electronic or optronic equipment.
E. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Intercity Dark Fiber
Assets.
F. Defendants shall warrant to the Acquirer that there are
currently no material defects in the environmental, zoning, title,
right-of-way, or other permits pertaining to the operation of the
Intercity Dark Fiber Assets, and that following the sale of the
Intercity Dark Fiber Assets, defendants will not undertake, directly or
indirectly, any challenges to the environmental, zoning, title, right-
of-way, or other permits relating to the operation of the Intercity
Dark Fiber Assets.
G. Unless the United States otherwise consents in writing, the sale
pursuant to Section V, or by Divestiture Trustee appointed pursuant to
Section VI, of this Final Judgment, shall include the entire Intercity
Dark Fiber Assets, and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the Intercity
Dark Fiber Assets can and will be used by the Acquirer as part of a
viable, ongoing telecommunications services business including the sale
of Dark Fiber IRUs to end users. Divestiture of the Intercity Dark
Fiber Assets must be made to a single Acquirer unless otherwise
approved by the United States, in its sole discretion. The sale,
whether pursuant to Section V or Section VI of this Final Judgment,
(1) shall be made to an Acquirer that, in the United States' sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) of
competing effectively in the sale of Dark Fiber IRUs to end users; and
(2) shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between an
Acquirer and defendants give defendants the ability unreasonably to
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively.
[[Page 55870]]
VI. APPOINTMENT OF DIVESTITURE TRUSTEE
A. If defendants have not divested the Divestiture Assets within
the time period specified in Section IV(A) and Section V(A), defendants
shall notify the United States of that fact in writing. Upon
application of the United States, the Court shall appoint a Divestiture
Trustee selected by the United States and approved by the Court to
effect the divestiture of the Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer(s)
acceptable to the United States at such price and on such terms as are
then obtainable upon reasonable effort by the Divestiture Trustee,
subject to the provisions of Sections IV, V, VI, and VII of this Final
Judgment, and shall have such other powers as this Court deems
appropriate. Subject to Section VI(D) of this Final Judgment, the
Divestiture Trustee may hire at the cost and expense of defendants any
investment bankers, attorneys, technical experts or other agents, who
shall be solely accountable to the Divestiture Trustee, reasonably
necessary in the Divestiture Trustee's judgment to assist in the
divestiture. Any such investment bankers, attorneys, or other agents
shall serve on such terms and conditions as the United States approves,
including confidentiality requirements and conflict of interest
certifications.
C. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by defendants must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VII.
D. The Divestiture Trustee shall serve at the cost and expense of
defendants pursuant to a written agreement, on such terms and
conditions as the United States approves, including confidentiality
requirements and conflict of interest certifications. The Divestiture
Trustee shall account for all monies derived from the sale of the
assets sold by the Divestiture Trustee and all costs and expenses so
incurred. After approval by the Court of the Divestiture Trustee's
accounting, including fees for its services yet unpaid and those of any
professionals and agents retained by the Divestiture Trustee, all
remaining money shall be paid to defendants and the trust shall then be
terminated. The compensation of the Divestiture Trustee and any
professionals and agents retained by the Divestiture Trustee shall be
reasonable in light of the value of the Divestiture Assets and based on
a fee arrangement providing the Divestiture Trustee with an incentive
based on the price and terms of the divestiture and the speed with
which it is accomplished, but timeliness is paramount. If the
Divestiture Trustee and defendants are unable to reach agreement on the
Divestiture Trustee's or any agents' or consultants' compensation or
other terms and conditions of engagement within fourteen (14) calendar
days of appointment of the Divestiture Trustee, the United States may,
in its sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee shall, within
three (3) business days of hiring any other professionals or agents,
provide written notice of such hiring and the rate of compensation to
defendants and the United States.
E. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestitures,
including their best efforts to effect all necessary regulatory or
other approvals or consents and will provide necessary representations
or warranties as appropriate, related to the sale of the Divestiture
Assets. The Divestiture Trustee and any consultants, accountants,
attorneys, technical experts, and other agents retained by the
Divestiture Trustee shall have full and complete access to the
personnel, books, records, and facilities related to the Divestiture
Assets, and defendants shall develop financial and other information
relevant to the Divestiture Assets as the Divestiture Trustee may
reasonably request, subject to reasonable protection for trade secret
or other confidential research, development, or commercial information
or any applicable privileges. Defendants shall take no action to
interfere with or to impede the Divestiture Trustee's accomplishment of
the divestiture.
F. After its appointment, the Divestiture Trustee shall file
monthly reports with the United States and, as appropriate, the Court
setting forth the Divestiture Trustee's efforts to accomplish the
divestiture ordered under this Final Judgment. To the extent such
reports contain information that the Divestiture Trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. Such reports shall include the name, address, and telephone
number of each person who, during the preceding month, made an offer to
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person. The Divestiture Trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestitures
ordered under this Final Judgment within six months after its
appointment, the Divestiture Trustee shall promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestiture has not
been accomplished, and (3) the Divestiture Trustee's recommendations.
To the extent such reports contains information that the Divestiture
Trustee deems confidential, such reports shall not be filed in the
public docket of the Court. The Divestiture Trustee shall at the same
time furnish such report to the United States which shall have the
right to make additional recommendations consistent with the purpose of
the trust. The Court thereafter shall enter such orders as it shall
deem appropriate to carry out the purpose of the Final Judgment, which
may, if necessary, include extending the trust and the term of the
Divestiture Trustee's appointment by a period requested by the United
States.
H. If the United States determines that the Divestiture Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Divestiture Trustee.
VII. NOTICE OF PROPOSED DIVESTITURE
A. Within two (2) business days following execution of a definitive
divestiture agreement, defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestiture required herein,
shall notify the United States of any proposed divestiture required by
Section IV or Section V of this Final Judgment. If the Divestiture
Trustee is responsible, it shall similarly notify defendants. The
notice shall set forth the details of the proposed divestiture and list
the name, address, and telephone number of each person not previously
identified who offered or expressed an interest in or desire to acquire
any ownership interest in the Divestiture Assets, together with full
details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such
[[Page 55871]]
notice, the United States may request from defendants, the proposed
Acquirer(s), any other third party, or the Divestiture Trustee, if
applicable, additional information concerning the proposed divestiture,
the proposed Acquirer(s), any other potential Acquirer, including, but
not limited to, the contract (or contracts) required by Section IV(F)
of this Final Judgment. Defendants and the Divestiture Trustee shall
furnish any additional information requested within fifteen (15)
calendar days of the receipt of the request, unless the United States
shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from defendants, the
proposed Acquirer(s), any third party, and the Divestiture Trustee,
whichever is later, the United States shall provide written notice to
defendants and the Divestiture Trustee, if there is one, stating
whether or not it objects to the proposed divestiture. If the United
States provides written notice that it does not object, the divestiture
may be consummated, subject only to defendants' limited right to object
to the sale under Section VI(C) of this Final Judgment. Absent written
notice that the United States does not object to the proposed
Acquirer(s) or upon objection by the United States, a divestiture
proposed under Section IV or Section V shall not be consummated. Upon
objection by defendants under Section VI(C), a divestiture proposed
under Section VI shall not be consummated unless approved by the Court.
VIII. FINANCING
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV, Section V, or Section VI of this Final
Judgment.
IX. ASSET PRESERVATION
Until the divestitures required by this Final Judgment have been
accomplished, defendants shall take all steps necessary to comply with
the Asset Preservation Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestiture
ordered by this Court.
X. AFFIDAVITS
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV, Section V, or
Section VI, defendants shall deliver to the United States an affidavit
as to the fact and manner of its compliance with Section IV, Section V,
or Section VI of this Final Judgment. Each such affidavit shall include
the name, address, and telephone number of each person who, during the
preceding thirty (30) calendar days, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person during that period. Each such affidavit
shall also include a description of the efforts defendants have taken
to solicit buyers for the Divestiture Assets, and to provide required
information to prospective Acquirers, including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by defendants, including limitation on
information, shall be made within fourteen (14) calendar days of the
receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions defendants
have taken and all steps defendants have implemented on an ongoing
basis to comply with Section IX of this Final Judgment. Defendants
shall deliver to the United States an affidavit describing any changes
to the efforts and actions outlined in defendants' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days after
the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
XI. COMPLIANCE INSPECTION
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as any Hold Separate
Stipulation and Order, or of determining whether the Final Judgment
should be modified or vacated, and subject to any legally-recognized
privilege, from time to time authorized representatives of the United
States Department of Justice, including consultants and other persons
retained by the United States, shall, upon written request of an
authorized representative of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to defendants, be
permitted:
(1) access during defendants' office hours to inspect and copy, or
at the option of the United States, to require defendants to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
defendants, relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
defendants to the United States, defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(g) of the
Federal Rules of Civil Procedure, and defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(g) of the Federal Rules of Civil Procedure,'' then the United
States shall give defendants ten (10) calendar days' notice prior to
divulging such material in any legal proceeding (other than grand jury
proceedings).
XII. NO REACQUISITION
Except as provided in this Final Judgment, absent written approval
by the United States, in its sole discretion, defendants may not
reacquire or lease back any part of the Divestiture Assets during the
term of this Final Judgment.
XIII. RETENTION OF JURISDICTION
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or
[[Page 55872]]
construe this Final Judgment, to modify any of its provisions, to
enforce compliance, and to punish violations of its provisions.
XIV. EXPIRATION OF FINAL JUDGMENT
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XV. PUBLIC INTEREST DETERMINATION
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
-----------------------------------------------------------------------
United States District Judge
APPENDIX A
The following customers serviced in the Divestiture MSAs,
identified for confidentiality purposes by Level 3's customer
identification code, are excluded from the definition of MSA
Customers and are not subject to the procedures outlined in Section
IV(K) and (L) of this Final Judgment:
1. 1-8UM5C, Tucson, AZ
2. 2-LOTDXB, Albuquerque, NM
3. 2-79C52T, Boise, ID 83716
4. 1-5JXJ4, Albuquerque, NM
5. 2-TRJJST, Boise, ID
APPENDIX B
------------------------------------------------------------------------
Origin gateway Termination gateway
Route location address location address
------------------------------------------------------------------------
Atlanta to Nashville........ 55 Marietta St. NW., 460 Metroplex Dr.,
Atlanta, GA 30303. Nashville, TN
37211.
Birmingham to Billingsley... 2001 Park Pl., 4521 Chilton Rd.,
Birmingham, AL Billingsley, AL
35203. 36006.
Charlotte to Atlanta........ 731 E Trade St., 55 Marietta St. NW.,
Charlotte, NC 28202. Atlanta, GA 30303.
Cleveland to Buffalo........ 1501 Euclid Ave., 1090 Harlem Rd.,
Cleveland, OH 44115. Buffalo, NY 14227.
Dallas to Memphis........... 1950 N Stemmons 715 S Danny Thomas
Fwy., Dallas, TX Blvd., Memphis, TN
75207. 38126.
Denver to Dallas............ 23751 E 6th Ave., 1950 N Stemmons
Aurora, CO 80018. Fwy., Dallas, TX
75207.
Denver to Kansas City....... 23751 E 6th Ave., 711 E 19th St.,
Aurora, CO 80018. Kansas City, MO
64108.
El Paso to San Antonio...... 201 E Main St., El 231 Rotary St., San
Paso, TX 79901. Antonio, TX 78202.
Houston to New Orleans...... 11947 N Fwy., 1340 Poydras St.,
Houston, TX 77060. New Orleans, LA
70112.
Indianapolis to Cincinnati.. 550 Kentucky Ave., 607 Evans St.,
Indianapolis, IN Cincinnati, OH
46225. 45204.
Kansas City to St Louis..... 711 E 19th St., 11755 Dunlap
Kansas City, MO Industrial Dr.,
64108. Maryland Heights,
MO 63043.
Los Angeles to Las Vegas.... 624 S Grand Ave., 4275 E Sahara Ave.,
Los Angeles, CA Las Vegas, NV
90017. 89104.
Memphis to Nashville........ 715 S Danny Thomas 460 Metroplex Dr.,
Blvd., Memphis, TN Nashville, TN
38126. 37211.
Miami to Jacksonville....... 36 NE 2nd St., 421 W Church St.,
Miami, FL 33132. Jacksonville, FL
32202.
Nashville to Indianapolis... 460 Metroplex Dr., 550 Kentucky Ave.,
Nashville, TN 37211. Indianapolis, IN
46225.
Orlando to Daytona Beach.... 121 Weber St., 500 W International
Orlando, FL 32803. Speedway Blvd.,
Daytona Beach, FL
32114.
Phoenix to El Paso.......... 429 S 6th Dr., 201 E Main St., El
Phoenix, AZ 85003. Paso, TX 79901.
Portland to Salt Lake City.. 707 SW Washington 572 Delong St., Salt
St., Portland, OR Lake City, UT
97205. 84104.
Raleigh to Charlotte........ 115 N Harrington 731 E Trade St.,
St., Raleigh, NC Charlotte, NC
27603. 28202.
Richmond to Raleigh......... 4233 Carolina Ave., 115 N Harrington
Richmond, VA 23222. St., Raleigh, NC
27603.
Sacramento to Salt Lake City 770 L St., 572 Delong St., Salt
Sacramento, CA Lake City, UT
95814. 84104.
Sacramento to San Francisco. 770 L St., 200 Paul Ave., San
Sacramento, CA Francisco, CA
95814. 94124.
Salt Lake City to Denver.... 572 Delong St., Salt 23751 E 6th Ave.,
Lake City, UT 84104. Aurora, CO 80018.
San Diego to Phoenix........ 4216 University 429 S 6th Dr.,
Ave., San Diego, CA Phoenix, AZ 85003.
92105.
San Francisco to Los Angeles 200 Paul Ave., San 624 S Grand Ave.,
Francisco, CA 94124. Los Angeles, CA
90017.
Tallahassee to Jacksonville. 601 Stone Valley 421 W Church St.,
Way, Tallahassee, Jacksonville, FL
FL 32310. 32202.
Tallahassee to Tampa........ 601 Stone Valley 5908A Hampton Oaks
Way, Tallahassee, Pkwy., Tampa, FL
FL 32310. 33610.
Tampa to Miami.............. 5908A Hampton Oaks 36 NE 2nd St.,
Pkwy., Tampa, FL Miami, FL 33132.
33610.
Tampa to Orlando............ 5908A Hampton Oaks 121 Weber St.,
Pkwy., Tampa, FL Orlando, FL 32803.
33610.
Washington, DC to Richmond.. 1500 Eckington Pl. 4233 Carolina Ave.,
NE., Washington DC Richmond, VA 23222.
20002.
------------------------------------------------------------------------
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Centurylink, Inc., and
Level 3 Communications, Inc. Defendants.
Civil Action No. 17-cv-2028
Judge: Ketanji Brown Jackson
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America, pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act (``APPA'' or ``Tunney Act''), 15
U.S.C. 16(b)-(h), files this Competitive Impact Statement relating to
the proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
Defendant CenturyLink, Inc. and defendant Level 3 Communications,
Inc. entered into an agreement, dated October 31, 2016, pursuant to
which CenturyLink would acquire Level 3. The United States filed a
civil antitrust Complaint on October 2, 2017, seeking to enjoin the
proposed acquisition. The Complaint alleges that the likely effect of
this acquisition would be a substantial lessening of competition in the
markets for: (1) the provision of fiber-based enterprise and wholesale
telecommunications services providing local connectivity to customer
premises in the Albuquerque, New Mexico; Boise, Idaho \6\; and Tucson,
Arizona
[[Page 55873]]
Metropolitan Statistical Areas \7\ (the ``Divestiture MSAs''), and (2)
the sale of dark fiber connecting the endpoints specified in Appendix B
of the proposed Final Judgment (the ``Intercity Routes''), all in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18. As a result of
this loss of competition, prices for fiber-based enterprise and
wholesale telecommunications services providing local connectivity to
customer premises in the Divestiture MSAs would likely increase and
quality of service would likely decrease, and prices for dark fiber on
the Intercity Routes would likely increase and availability would
likely decrease.
---------------------------------------------------------------------------
\6\ The full name of this MSA as defined by the Office of
Management and Budget is Boise City-Nampa, Idaho.
\7\ An MSA is a geographical region defined by the Office of
Management and Budget for use by federal statistical agencies, such
as the Census Bureau. It is based on the concept of a core urban
area with a large concentrated population, plus adjacent communities
having close economic and social ties to the core.
---------------------------------------------------------------------------
At the same time the Complaint was filed, the United States also
filed an Asset Preservation Stipulation and Order and a proposed Final
Judgment, which are designed to eliminate the anticompetitive effects
of the acquisition. Under the proposed Final Judgment, which is
explained more fully below, defendants are required: (1) to divest to
an acquirer (or acquirers) all the assets used by Level 3 exclusively
or primarily to support provision of telecommunications services to
enterprise and wholesale customer locations in Albuquerque, Boise, and
Tucson (the ``MSA Divestiture Assets''), and (2) to enter into
indefeasible right of use (``IRU'') agreements with an acquirer for
twenty-four strands of dark fiber on the Intercity Routes as well as
dark fiber necessary to connect those strands with certain other routes
(the ``Intercity Dark Fiber Assets'').
Under the terms of the Asset Preservation Stipulation and Order,
defendants will take steps to ensure that the MSA Divestiture Assets
are operated as ongoing, economically viable competitive assets and
remain uninfluenced by the consummation of the acquisition, and that
competition is maintained during the pendency of the ordered
divestiture. Subject to the approval of the United States, defendants
shall appoint a person or persons to oversee the MSA Divestiture
Assets. This person shall have complete, independent managerial
responsibility for the MSA Divestiture Assets. Defendants will also
preserve, maintain and take all actions necessary to be able to
effectuate the sale of the Intercity Dark Fiber Assets.
The United States and defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION
A. The Defendants and the Proposed Transaction
Defendant CenturyLink is a Louisiana corporation headquartered in
Monroe, Louisiana. It is the third-largest wireline telecommunications
company in the United States and the incumbent Local Exchange Carrier
(``ILEC'') \8\ in portions of 37 states. CenturyLink also has one of
the most extensive physical fiber networks in the United States,
including considerable intercity fiber infrastructure. As of December
31, 2016, CenturyLink owned and operated a 360,000 route-mile global
network, including a 265,000-route-mile U.S. fiber network, and
generated 2016 operating revenues of $17.47 billion.
---------------------------------------------------------------------------
\8\ An incumbent local exchange carrier (ILEC) is the telephone
company that was the sole provider of local exchange service (local
phone service) in a given local area prior to passage of the 1996
Telecommunications Act, which allowed for competitive local exchange
carriers (CLECs) to compete for this local service.
---------------------------------------------------------------------------
Defendant Level 3 is a Delaware corporation headquartered in
Broomfield, Colorado. It is one of the largest wireline
telecommunications companies in the United States and owns significant
local network assets, comprised of metropolitan area network components
and direct fiber connections to numerous commercial buildings
throughout the United States, including within portions of
CenturyLink's ILEC territory. Level 3 also operates one of the most
extensive physical fiber networks in the United States, including
sizeable intercity fiber infrastructure. Level 3 owns and operates
200,000 route-miles of global fiber and generated $8.17 billion of
operating revenue in 2016.
On October 31, 2016, CenturyLink and Level 3 entered into an
Agreement and Plan of Merger whereby CenturyLink will acquire Level 3
for approximately $34 billion.
B. Anticompetitive Effects of the Proposed Transaction
Wireline telecommunications infrastructure is critical in
transporting the data that individuals, businesses, and other entities
transmit. Among the key components of this infrastructure are: the
fiber strands connecting an individual building to a metropolitan area
network (often referred to as the last-mile connection); the fiber
strands and related equipment comprising a metropolitan area network
that serve an entire city or MSA; and the intercity fiber strands
connecting cities to one another.
(1) Fiber-Based Enterprise and Wholesale Telecommunications Services
Providing Local Connectivity to Customer Premises in the Divestiture
MSAs
Enterprise and wholesale customers \9\ of all sizes rely on last-
mile connections to link their premises to a larger metropolitan area
network and to all points beyond. In the Divestiture MSAs, defendants
have two of the three largest fiber-based metropolitan area networks
and own among the largest number of last-mile connections of any
telecommunications providers.
---------------------------------------------------------------------------
\9\ Enterprise customers are broadly defined here to include
businesses of varying sizes and institutional customers such as
community colleges, hospitals and government agencies. Wholesale
customers are, typically, telecommunications carriers seeking to
reach customer locations in areas where they do not have wireline
infrastructure.
---------------------------------------------------------------------------
CenturyLink has the largest number of last-mile connections in each
of the Divestiture MSAs, serving the majority of buildings that require
high-bandwidth, high-reliability telecommunications services. In each
of the Divestiture MSAs, CenturyLink owns fiber connections to more
than a thousand buildings. Level 3 has fiber connections to several
hundred buildings in each of the Divestiture MSAs, making it one of the
three largest fiber-based networks in each of the Divestiture MSAs. In
many buildings in the Divestiture MSAs, CenturyLink and Level 3 control
the only last-mile fiber connections and are the only available choices
for customers in those buildings. In other buildings in the Divestiture
MSAs, CenturyLink and Level 3 are two of only three significant
providers, making them two of only three available choices. And even
where CenturyLink and Level 3 do not presently have fiber connections,
they still may be the best alternative for a substantial number of
buildings because they are the only two providers with metropolitan
area network fiber located close enough to connect economically.
Some customers within the Divestiture MSAs have multiple locations
throughout an individual MSA. These multi-location customers often
prefer to buy telecommunications services for all of their locations
within
[[Page 55874]]
the MSA from a single provider. Defendants CenturyLink and Level 3 both
have an extensive fiber footprint in each of the Divestiture MSAs. As a
result, CenturyLink and Level 3 are often each other's closest
competitors for these multi-location customers.
Currently, CenturyLink and Level 3 compete head-to-head to provide
these last-mile fiber-based telecommunications services to single and
multi-location customers in the Divestiture MSAs. Customers benefit
from this competition through lower prices and higher quality service.
CenturyLink's acquisition of Level 3 likely would result in a loss of
this competition, leading to increased prices and decreased service
quality for such last-mile connections.
(2) Intercity Dark Fiber
CenturyLink and Level 3 both own substantial networks of fiber-
optic cable connecting cities throughout the United States. By placing
electronic equipment on either end of the fiber, fiber owners can
``light'' the fiber and use it to transmit large volumes of data
between cities. Fiber owners who light the cable can then charge
customers to transport data over the fiber (a product called lit
services). Customers who purchase lit services typically buy a certain
amount of data capacity between two specified endpoints, pay on a
monthly basis, and rely on the fiber provider to manage their data
traffic.
Fiber owners can also sell dark fiber, where customers purchase
rights to the underlying fibers, provide their own electronic equipment
to light the fiber, and manage their own networks. Dark fiber is
generally sold through IRUs--a type of long-term lease--which allow the
customer to arrange for its own equipment to be placed on the fiber,
but permits the grantor to retain responsibility for maintaining the
fiber and dealing with outages or cuts. Customers who buy intercity
dark fiber using IRUs, such as webscale companies \10\ and financial
institutions, require dark fiber's scalability, capacity, flexibility,
and security.
---------------------------------------------------------------------------
\10\ Webscale companies are those primarily engaged in the
business of providing large amounts of data to end users through
web-based services; they require facilities and infrastructure to
create, store, and then transport that data across long distances.
---------------------------------------------------------------------------
CenturyLink and Level 3 are two of only a handful of companies with
robust nationwide intercity fiber networks, and two of only a few
companies in the United States that sell intercity dark fiber. On many
of the Intercity Routes, CenturyLink and Level 3 are the only two, or
two of only three, providers who sell intercity dark fiber. In
addition, customers typically require dark fiber across multiple routes
and prefer dark fiber providers who can provide them with contiguous
routes, including those spanning from coast to coast. CenturyLink and
Level 3 are two of only three intercity dark fiber providers with at
least one contiguous route connecting the West Coast to the East Coast.
Competition between CenturyLink and Level 3 has led to lower prices
for and increased availability of intercity dark fiber. This
acquisition will eliminate that competition, likely resulting in
increased prices and decreased availability.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The divestitures required by the proposed Final Judgment will
eliminate the anticipated anticompetitive effects of the acquisition in
the markets for: (1) The provision of fiber-based enterprise and
wholesale telecommunications services providing local connectivity to
customer premises in the Divestiture MSAs, and (2) the sale of dark
fiber on the Intercity Routes, by establishing independent and
economically viable competitors in each of these markets. The proposed
Final Judgment requires defendants, within 120 days after the filing of
the Complaint, or five days after notice of the entry of the Final
Judgment by the Court, whichever is later, to:
(1) divest the MSA Divestiture Assets to a single acquirer in each
Divestiture MSA (while each MSA network may not have more than one
acquirer, each of the MSAs may have a different acquirer), on terms
acceptable to the United States, and
(2) sell the Intercity Dark Fiber Assets to a single acquirer on
terms acceptable to the United States.
Both the MSA Divestiture Assets and the Intercity Dark Fiber Assets
are attractive assets that should draw suitable acquirers with
sufficient expertise to accomplish the divestitures expeditiously.
Prompt divestitures are important both to minimize customer uncertainty
and to maintain the pre-merger competitiveness of the markets in
question. Although the United States expects the divestitures to be
completed within the 120-day period, in order to preserve flexibility
to address unanticipated circumstances the United States may, in its
sole discretion, agree to one or more extensions of this time period
not to exceed sixty calendar days in total, and shall notify the Court
in such circumstances.
The divestitures shall be made to an acquirer (or acquirers) that,
in the United States' sole judgment, has the intent and capability
(including the necessary managerial, operational, technical, and
financial capability) to compete effectively in the provision of the
relevant telecommunications services in the Divestiture MSAs or the
sale of intercity dark fiber.
A. MSA Divestiture Assets
With regard to the Divestiture MSAs, the United States is requiring
the divestiture of Level 3's entire fiber-based metropolitan area
network, including all its last-mile connections. This will encompass
all assets, tangible and intangible, used exclusively or primarily to
support Level 3's provision of fiber-based telecommunications services
to customer locations in the Divestiture MSAs, including, but not
limited to, assets such as metropolitan fiber switching and routing
equipment, building laterals, ownership interests in and access rights
to all conduits, duets and other containing and supporting structures,
and repair and performance records.
The MSA Divestiture Assets shall also include other assets used by
Level 3 for its provision of telecommunications services to customer
locations in each Divestiture MSA, including, but not limited to, all
licenses, permits and authorizations related to the MSA Divestiture
Assets issued by any governmental organization to the extent that such
licenses, permits and authorizations are transferrable and such
transfer would not prevent Level 3 from providing telecommunications
services in the three Divestiture MSAs; all contracts (except as
otherwise excluded by the terms of this Final Judgment), teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, including supply agreements; customer lists and
addresses; all repair and performance records relating to the MSA
Divestiture Assets; and all other records relating to the MSA
Divestiture Assets reasonably required to permit the Acquirer to
conduct a thorough due diligence review of and to operate the MSA
Divestiture Assets. The MSA Divestiture Assets shall not include
assets, wherever located, used exclusively or primarily in or in
support of Level 3's provision of telecommunications services outside
the Divestiture MSAs, including the provision of telecommunications
services between MSAs.
Based on its investigation of the proposed transaction, the United
States believes that the divestiture of the entirety of Level 3's
telecommunications networks in each of the Divestiture MSAs will
effectively replace the
[[Page 55875]]
competition that will be lost through this acquisition. Selling the MSA
Divestiture Assets as an ongoing competitive business in each
Divestiture MSA will provide the acquirer(s) with the ability and
incentive to continue to invest in and expand the acquired business,
replicating as closely as possible the competitive conditions in each
of the Divestiture MSAs prior to the merger. The particular nature of
the competitive problem--including a potential substantial lessening of
competition for last-mile services in a large number of commercial
buildings throughout each of the Divestiture MSAs--was such that a
divestiture of fiber only to certain buildings would be insufficient to
remedy the competitive problem and re-create a viable competitor;
rather, a divestiture of the network assets throughout each MSA was
appropriate in these circumstances.
The United States believes that having the acquirer operate as a
completely separate competitive entity as quickly as possible is the
most effective competitive outcome and expects that an acquirer with
telecommunications experience will be able to do so within one year.
However, in order to avoid unnecessary disruptions while the acquirer
is setting up its business, at the option of the acquirer(s),
defendants are also required to enter into a Transition Services
Agreement for any services that are reasonably necessary for the
acquirer(s) to maintain, operate, provision, monitor, or otherwise
support the MSA Divestiture Assets, including any required back office
and information technology services. This agreement will last for no
more than twelve (12) months, although the United States may approve
one or more extensions for a period of up to an additional twelve (12)
months.
In addition, subject to certain conditions, upon closing of the
divestiture sale in each of the Divestiture MSAs, defendants, for a
period of two years or the expiration of the customer's contract
(whichever is shorter), will release Level 3's customers with service
locations in that MSA from their contractual obligations for those
locations, including otherwise applicable termination fees, to enable
the customers to select the acquirer as their telecommunications
services provider. Each Level 3 customer who has locations in multiple
MSAs will similarly be released from its contracts (including at its
locations outside of the Divestiture MSAs) to allow it to switch to the
acquirer, if the monthly recurring revenue Level 3 earns from that
customer is greater within the Divestiture MSAs than from the aggregate
of all locations outside those MSAs. Within fifteen business days of a
divestiture in a Divestiture MSA, defendants will notify all MSA
customers of the divestiture and of their options under the proposed
Final Judgment. The acquirer will have the option to include its own
customer notification with that of the defendants.
In requiring that customers be released from their contracts rather
than requiring that customer contracts be divested along with the other
assets, the United States is balancing the competitive benefits of the
divestiture against the potential imposition of burdens on customers.
For example, Level 3 service contracts in the Divestiture MSAs may
include a combination of basic connectivity services and other value-
added services, such as services that prioritize routing across a
customer's network. The value-added services that an acquirer chooses
to offer may differ somewhat from the value-added services offered by
Level 3. Thus, divesting customer contracts in specific circumstances
would either impose a burden on the customer to accept a different
value-added service package than the one they initially bargained for,
or would impose a burden on the acquirer to replicate the exact
services in Level 3's customer contracts. Requiring that customers be
released from their contracts for a defined period of time will,
however, allow the acquirer to compete for all customers in each of the
Divestiture MSAs immediately upon completion of the divestiture.
For a period of two years, defendants are also prohibited from
initiating customer-specific communications to solicit any customers
who have switched service to the acquirer(s), but can respond to
inquiries from the customer or enter into negotiations with the
customer at the customer's request. This strikes a balance between
enabling an acquirer to establish its business while at the same time
generally giving customers at least two meaningful alternatives. The
provisions of the proposed Final Judgment allowing customers with
locations in the Divestiture MSAs to switch their service to the
acquirer(s) free of contractual penalties should, in these
circumstances, be sufficient to provide the acquirer(s) with adequate
business opportunities and revenue streams while at the same time
maximizing customer choice and avoiding customer disruption.
Subject to the United States' approval, defendants may negotiate
with each acquirer of MSA Divestiture Assets to lease back from that
acquirer for a period of two years all lateral connections and
metropolitan area network needed for defendants to support Level 3
customers that choose to remain customers of defendants. This will
allow defendants to continue to provide service without interruption,
at least until the defendants have time to transition those customers
to its own facilities or make other arrangements.
B. Intercity Dark Fiber Assets
Under the proposed Final Judgment, defendants are also required to
sell, to a single acquirer, IRUs for twenty-four strands of dark fiber
on each of the Intercity Routes. The proposed Final Judgment requires
that the Intercity Dark Fiber Assets be divested to a single acquirer
because intercity dark fiber customers find it more efficient to deal
with one fiber owner than to piece together networks from multiple
owners. In addition, divesting all the Intercity Dark Fiber Assets to a
single acquirer is most likely to result in the creation of a viable,
competitive dark fiber provider, thereby replicating the pre-merger
competitive market conditions. Twenty-four fiber strands will be
sufficient to allow the acquirer to compete with the combined company
on the overlap routes.
Defendants are also required to include all the associated rights
necessary for the acquirer to resell the dark fiber to end users and to
permit the acquirer, or any of its assignees, to light the fiber and
use it to provide telecommunications services. The IRUs will have a
term of twenty-five years with two five-year renewal options, giving
the acquirer the option to control the fiber for up to thirty-five
years.\11\ The conveyance of intercity dark fiber via a long-term IRU
is typical industry practice. This structure ensures that the grantee
can use the fiber as it sees fit, but the fiber grantor remains
responsible for handling the complexities of ownership, such as
maintaining rights-of-way and repairing fiber cuts. The twenty-five
year terms is also consistent with the industry practice, as purchasers
of intercity dark fiber typically seek IRUs in the range of 10-30
years. If, however, new technologies emerge or the market shifts, the
acquirer will have the flexibility to end its lease after 25 years if
it no longer sees value in keeping these IRUs.
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\11\ These extensions will be at a price not to exceed 20% of
the initial IRU fee. This provision ensures that defendants will not
be able to charge exorbitant fees to discourage the acquirer from
renewing.
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Defendants are also required to provide a contiguous network of
fiber by ensuring that fiber on all of the Intercity
[[Page 55876]]
Routes sharing an endpoint connect with one another or, where they do
not connect, by constructing a connection to link them. Connecting the
fibers together into one network is important because it will provide
the acquirer with more attractive inventory, and, importantly, will
provide a cross-country route appealing to intercity dark fiber
customers that demand a path to carry their data between the dense
population areas on the coasts.
The proposed Final Judgment ensures that the Intercity Dark Fiber
Assets include all of the rights necessary for the acquirer both to
resell the fiber to end users and to allow those end users to be able
to light the fiber themselves. Although the Division expects the
acquirer to sell some of the Intercity Dark Fiber Assets as dark fiber
to end users, the acquirer also may want to sell lit services in
conjunction with the dark fiber or use some of the fiber strands to
support its own telecommunications infrastructure. This is permissible
under the proposed Final Judgment; because sellers of dark fiber
frequently sell such fiber in conjunction with lit services, the
ability to use the Intercity Dark Fiber Assets to provide both lit
services and dark fiber should help ensure that the acquirer will be an
effective, viable competitor on the Intercity Routes. The acquirer
must, however, have the intention and experience necessary to ensure
that the divestiture of the Intercity Dark Fiber Assets will replace
competition in the market for intercity dark fiber lost through the
acquisition.
* * * * *
In the event that defendants do not accomplish the divestitures
within the period prescribed in the proposed Final Judgment, the
proposed Final Judgment provides that the Court will appoint a trustee
selected by the United States and approved by the Court to effect the
divestiture. If a trustee is appointed, the proposed Final Judgment
provides that defendants will pay all costs and expenses of the
trustee. The trustee's commission will be structured so as to provide
an incentive for the trustee based on the price obtained and the speed
with which the divestiture is accomplished. After his or her
appointment becomes effective, the trustee will file monthly reports
with the United States and, as appropriate, the Court setting forth his
or her efforts to accomplish the divestiture. At the end of six months,
if the divestiture has not been accomplished, the trustee and the
United States will make recommendations to the Court, which shall enter
such orders as it deems appropriate, in order to carry out the purpose
of the Final Judgment, including extending the trust or the term of the
trustee's appointment.
The divestiture provisions of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in all of the
markets discussed above.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against defendants.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
The United States and defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court. In
addition, comments will be posted on the U.S. Department of Justice,
Antitrust Division's Web site and, under certain circumstances,
published in the Federal Register.
Written comments should be submitted to:
Scott A. Scheele, Chief, Telecommunications and Broadband Section,
Antitrust Division, United States Department of Justice, 450 Fifth
Street NW., Suite 7000, Washington, DC 20530, [email protected].
The proposed Final Judgment provides that the Court retains
jurisdiction over this action and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against defendants. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against CenturyLink's acquisition
of Level 3. The United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
preserve competition in the markets for: (1) The provision of fiber-
based enterprise and wholesale telecommunications services providing
local connectivity to customer premises in the Divestiture MSAs, and
(2) the sale of dark fiber on the Intercity Routes, as identified by
the United States. Thus, the proposed Final Judgment would achieve all
or substantially all of the relief the United States would have
obtained through litigation, but avoids the time, expense, and
uncertainty of a full trial on the merits of the Complaint.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by 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,
the Court, in accordance with the statute as amended in 2004, 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
[[Page 55877]]
(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 United States
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 United States v. U.S. Airways
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the court has
broad discretion as to the adequacy of the relief at issue); United
States v. InBev N.V./S.A., 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 mechanism to enforce the final judgment are clear and
manageable''); 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).\12\
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\12\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
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).
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As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other
factors, the relationship between the remedy secured and the specific
allegations set forth in the United States' complaint, 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; United States v. Iron Mountain,
Inc., 217 F. Supp. 3d 146, 151-52 (D.D.C. 2016) (considering the
decree's clarity, sufficiency of compliance mechanisms, and third-party
impact). 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) (quoting United States v. Bechtel Corp.,
648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at
1460-62; InBev, 2009 U.S. Dist. LEXIS 84787, at *3; United States v.
Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001). 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).\13\ In
determining whether a proposed settlement is in the public interest, a
district 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''); Iron Mountain, 217 F. Supp. 3d
at 151 (noting that a court should not reject the proposed remedies
because it believes others are preferable); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A district
court must accord due respect to the government's 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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\13\ 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 U.S.
Airways, 38 F. Supp. 3d at 75 (``[R]oom must be made for the government
to grant concessions in the negotiation process for settlements.''
(quoting SBC Commc'ns, 489 F. Supp. 2d at 15)); 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). To meet this standard, 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.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (``[A] court must simply determine `whether there
is a factual foundation for the government's decisions such that its
conclusions regarding the proposed settlements are reasonable.'''
(quoting SBC Commc'ns, 489 F. Supp. 2d at 15-16)); InBev, 2009 U.S.
Dist. LEXIS 84787, at *20 (``[T]he `public interest' is not to be
measured by comparing the violations alleged in the complaint against
those the court believes could have, or even should have, been
alleged.''). Because the ``court's authority to review the decree
depends entirely on the government's exercising its prosecutorial
discretion by bringing a case in the first place,'' it follows that
``the court is only authorized to review the decree itself,'' and not
to ``effectively redraft the complaint'' to inquire into other matters
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60.
As this Court confirmed in SBC Communications, courts ``cannot look
beyond the complaint in making the public interest determination unless
the complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[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); see also
[[Page 55878]]
U.S. Airways, 38 F. Supp. 3d at 76 (``[A] court is not required to hold
an evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act.''). 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
Sen. 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.\14\ ``A court can make its public
interest determination based on the competitive impact statement and
response to public comments alone.'' U.S. Airways, 38 F. Supp. 3d at
76.
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\14\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (``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., No. 73-CV-681-W-1, 1977 U.S. Dist. LEXIS
15858, at *22 (W.D. Mo. May 17, 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, 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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VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: November 14, 2017.
Respectfully,
Scott Reiter, Trial Attorney, United States Department of
Justice, Antitrust Division, Telecommunications and Broadband
Section.
450 Fifth Street, NW., Suite 7000, Washington, DC 20530,
Telephone: (202) 598-8796, Facsimile: (202) 514-6381, Email:
[email protected].
CERTIFICATE OF SERVICE
I, Scott Reiter, hereby certify that on November 14, 2017, I caused
copies of the foregoing Competitive Impact Statement to be served upon
defendants CenturyLink, Inc. and Level 3 Communications, Inc. through
the ECF system and by mailing the documents electronically to the duly
authorized legal representatives of the defendants, as follows:
Counsel for CenturyLink, Inc.
Ilene Knable Gotts, Wachtell, Lipton, Rosen & Katz, 51 West 52nd
Street, New York, NY 10019, Phone: 212-403-1247, [email protected].
Counsel for Level 3 Communication, Inc.
J. Bruce McDonald, Jones Day, 717 Texas Avenue, Houston, TX 77002,
Phone: 832-239-3822, [email protected].
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Scott Reiter,
Trial Attorney,
U.S. Department of Justice,
Antitrust Division, Telecommunications and Broadband Section,
450 Fifth St. NW., Suite 7000,
Washington, DC 20530,
Phone: 202-598-8796,
Fax: 202-514-6381,
Email: [email protected].
[FR Doc. 2017-25373 Filed 11-22-17; 8:45 am]
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