[Federal Register Volume 59, Number 150 (Friday, August 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19133]
[[Page Unknown]]
[Federal Register: August 5, 1994]
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FEDERAL TRADE COMMISSION
[File No. 941 0059]
Adobe Systems Incorporated, et al., Proposed Consent Agreement
With Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
require, among other things, two software firms to divest Aldus
Corporation's FreeHand professional-illustration software and name to
Altsys Corporation within six months after the merger takes place. In
addition, for ten years, it would require the respondents to obtain
Commission approval before acquiring any stock or other interest in any
firm engaged in the development or sale of professional-illustration
software for the Macintosh or Power Macintosh.
DATES: Comments must be received on or before October 4, 1994.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:Mary Lou Steptoe, FTC/H-374,
Washington, D.C. 20580. (202) 326-2556.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given
that the following consent agreement containing a consent order to
divest, having been filed with and accepted, subject to final approval,
by the Commission, has been placed on the public record for a period of
sixty (60) days. Public comment is invited. Such comments or views will
be considered by the Commission and will be available for inspection
and copying at its principal office in accordance with
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
In the Matter of Adobe Systems Incorporated a corporation, and
Aldus Corporation a corporation.
Agreement Containing Consent Order
The Federal Trade Commission (``Commission'') having initiated an
investigation of the proposed acquisition by Adobe Systems Incorporated
(``Adobe'') of the stock of Aldus Corporation (``Aldus''), and it now
appearing that Adobe and Aldus, hereinafter sometimes referred to as
``proposed respondents'' are willing to enter into an Agreement
Containing Consent Order (``Agreement'') to divest certain assets, and
to provide for certain other relief,
It Is Hereby Agreed by and between Adobe, By its duly authorized
officers and its attorneys, Aldus, by its duly authorized officers and
its attorneys, and counsel for the Commission that:
1. Proposed respondent Adobe is a corporation organized, existing,
and doing business under and by virtue of the laws of the State of
California, with its office and principal place of business located at
1585 Charleston Road, Mountain View, California, 94039.
2. Proposed respondent Aldus is a corporation organized, existing,
and doing business under and by virtue of the laws of the State of
Washington, with its office and principal place of business located at
411 First Avenue South, Seattle, Washington, 98104.
3. Proposed respondents admit all the jurisdictional facts set
forth in the draft of Complaint here attached.
4. Proposed respondents waive:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the Order entered pursuant to this Agreement;
and
(d) Any claim under the Equal Access to Justice Act.
5. This Agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
Agreement is accepted by the Commission it, together with the draft of
Complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this Agreement and so notify the proposed respondents, in which
event it will take such action as it may consider appropriate, or issue
and serve its Complaint (in such form as the circumstances may require)
and decision is disposition of the proceeding.
6. This Agreement is for settlement purposes only and does not
constitute an admission by proposed respondents that the law has been
violated as alleged in the draft of Complaint here attached, or that
the facts as alleged in the draft Complaint, other than jurisdictional
facts, are true.
7. This Agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to proposed
respondents: (1) Issue its Complaint corresponding in form and
substance with the draft of Complaint here attached and its decision
containing the following Order to divest and cease and desist in
disposition of the proceeding; and (2) make information public with
respect thereto. When so entered, the Order shall have the same force
and effect and may be altered, modified, or set aside in the same
manner and within the same time provided by statute for other orders.
The Order shall become final upon service. Delivery by the United
States Postal Service of the Complaint and decision containing the
agreed to Order to proposed respondents' addresses as stated in this
Agreement shall constitute service. Proposed respondents waive any
right they may have to any other manner of service. The Complaint may
be used in construing the terms of the Order, and no agreement,
understanding, representation, or interpretation not contained in the
Order or the Agreement may be used to vary or contradict the terms of
the Order.
8. Proposed respondents have read the proposed Complaint and Order
contemplated hereby. They understand that once the Order has been
issued, they will be required to file one or more compliance reports
showing they have fully complied with the Order. Proposed respondents
further understand that they may be liable for civil penalties in the
amount provided by law for each violation of the Order after it becomes
final.
Order
I
It is ordered, that, as used in this Order, the following
definitions shall apply:
A. ``Adobe'' means Adobe Systems Incorporated, its predecessors,
divisions, subsidiaries, groups and affiliates that it controls, and
their respective directors, officers, employees, agents and
representatives, and their respective successors and assigns.
B. ``Aldus'' means Aldus Corporation, its predecessors, divisions,
subsidiaries, groups and affiliates that it controls, and their
respective directors, officers, employees, agents and representatives,
and their respective successors and assigns.
C. ``Respondents'' means Adobe and Aldus.
D. ``Altsys'' means Altsys Corporation, a Texas corporation located
at 269 West Renner Parkway, Richardson, Texas, 75080-9604.
E. ``Professional Illustration Software'' means a complete path-
based illustration program native to Apple Macintosh or Power Macintosh
computers, targeted to meet the needs of professional customers whose
function is to create graphics for internal and external clients to be
used in publications printed on a printing press, and excludes Computer
Aided Design (CAD) and 3D programs.
F. ``FreeHand'' means the Professional Illustration Software
program marketed and solid by Aldus under the name ``Aldus FreeHand''
pursuant to a Software License Agreement with Altsys dated as of July
20, 1987, as amended (the ``License''); Aldus source code incorporated
in FreeHand (for use in FreeHand); the name ``FreeHand'' (but not the
name ``Aldus''); the FreeHand customer names and addresses together
with FreeHand specific information in the Aldus database (but not the
underlying database application software); and all marketing,
advertising, training and technical support information and materials
for FreeHand.
G. ``Illustrator'' means the Professional Illustration Software
program marketed and sold by Adobe under the name ``Illustrator.''
H. ``Altsys Agreement'' means the July 11, 1994, agreement between
Aldus and Altsys, attached as Confidential Appendix A hereto.
I. ``Acquisition'' means the stock acquisition of Aldus by Adobe.
J. ``Commission'' means the Federal Trade Commission.
II
It is further ordered, that, pending divestiture of FreeHand,
Respondents shall take such action as is necessary to maintain the
viability and marketability of FreeHand and shall not cause or permit
the destruction, removal from the market, wasting, deterioration or
impairment of FreeHand. Pending divestiture of FreeHand, employees of
Respondents involved in the development, marketing, or sale of
Illustrator or FreeHand shall not be involved in the development,
marketing or sale of the other product; and employees of Respondents
involved in the development, marketing or sale of Illustrator or
FreeHand shall not receive or have access to or the use of any
``material confidential information'' not in the public domain, with
respect to the other product except as such information would be
available to those employees in the normal course of business if the
Acquisition had not taken place. (``Material confidential
information,'' as used herein, means competitively sensitive or
proprietary information not independently known from sources other than
those employees involved in the development, marketing, or sale of
FreeHand or Illustrator.)
III
It is further ordered, that within six (6) months after the
Acquisition is consummated Respondents shall absolutely and in good
faith divest FreeHand to Altsys in accordance with the Altsys
agreement. Adobe and Aldus shall comply with all the terms of the
Altsys Agreement, except that the License shall be terminated no later
than six (6) months after the Acquisition. The purpose of the
divestiture is to ensure the continuation of FreeHand as an ongoing
viable Professional Illustration Software program, to maintain FreeHand
as an independent competitor in the Professional Illustration Software
business, and to remedy the lessening of competition resulting from the
Acquisition as alleged in the Commission's Complaint.
IV
It is further ordered, that, within sixty (60) days after the date
this Order becomes final and every sixty (60) days thereafter until
Respondents have fully complied with the provisions of Paragraphs II
and III of this Order, Respondents shall submit to the Commission a
verified written report setting forth in detail the manner and form in
which they intend to comply, are complying, or have complied with those
provisions. Respondents shall include in their compliance reports,
among other things that are required from time to time, a full
description of the efforts being made to comply with Paragraphs II and
III of this Order.
V
It is further ordered, that for a period of ten (10) years from the
date on which this Order becomes final, Respondents shall not, without
the prior approval of the Commission, directly or indirectly, through
subsidiaries, partnerships, or otherwise:
A. Acquire any stock, share capital, equity or other interest in
any concern, corporate or noncorporate, then engaged in the development
or sale of Professional Illustration Software, provided, however, that
an acquisition of such stock, share capital, equity or other interest
will be exempt from the requirements of this paragraph if it is solely
for the purpose of investment and Respondents will hold no more than
one percent of the shares of any class of security traded on a national
securities exchange or authorized to be quoted in an interdealer
quotation system of a national securities association registered with
the United States Securities and Exchange Commission; or
B. Acquire any Professional Illustration Software or acquire or
enter into any exclusive license to Professional Illustration Software;
Provided, however, that such an acquisition will be exempt from the
requirements of this paragraph if the purchase price is less than
$2,000,000 (two million dollars).
VI
It is further ordered, that, for a period of ten (10) years from
the date this order becomes final, unless Respondents are required to
seek prior approval from the Commission pursuant to Paragraph V,
Respondents shall not, without providing advance written notification
to the Commission, directly or indirectly, through subsidiaries,
partnerships, or otherwise, acquire any Professional Illustration
Software or any exclusive license to Professional Illustration
Software;
Said notification shall be given on the Notification and Report
Form set forth in the Appendix to Part 803 of Title 16 of the Code of
Federal Regulations as amended (hereinafter referred to as ``the
Notification''). Respondents shall provide to the Commission at least
ten days prior to acquiring any such interest (hereinafter referred to
as the ``first waiting period''), both the Notification and
supplemental information either in Respondents' possession or
reasonably available to Respondents. Such supplemental information
shall include a copy of the proposed acquisition agreement; the names
of the principal representatives of each Respondent and of the firm
Respondents desire to acquire who negotiated the acquisition agreement;
and any management or strategic plans discussing the proposed
acquisition. If, within the first waiting period, representatives of
the Commission make a written request for additional information,
Respondents shall not consummate the acquisition until twenty days
after submitting such additional information. Early termination of the
waiting periods in this paragraph may be requested and, where
appropriate, granted in the same manner as is applicable under the
requirements and provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 15 U.S.C. 18a.
VII
One year from the date this Order becomes final, annually for the
next nine (9) years, and at other times as the Commission may require,
Respondents shall file with the Commission verified written reports
setting forth in detail the manner and form in which they have complied
and are complying with Paragraphs V and VI of this Order.
VIII
It is further ordered, that, for the purposes of determining or
securing compliance with this Order, and subject to any legally
recognized privilege, upon written request and on reasonable notice to
Respondents, Respondents shall permit any duly authorized
representatives of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy all books, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or under
the control of Respondents relating to any matters contained in this
Order; and
B. Upon five (5) days notice to Respondents, and without restraint
or interference from Respondents, to interview officers or employees of
Respondents, who may have counsel present, regarding such matters.
IX
It is further ordered, that each Respondent shall notify the
Commission at least thirty (30) days prior to any proposed change in
such Respondent, such as dissolution, assignment, sale resulting in the
emergence of a successor, or the creation or dissolution of
subsidiaries or any other change that may affect compliance obligations
arising out of this Order.
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order from Adobe
Systems, Inc., (``Adobe'') and Aldus Corporation (``Aldus'')
(collectively, the ``Respondents'') in resolution of antitrust concerns
arising from Adobe's proposed acquisition of Aldus (the
``Acquisition'').
The proposed Consent Order (Order) has been placed on the public
record for sixty (60) days for reception of comments by interested
persons. Comments received during this period will become part of the
public record. After sixty (60) days, the Commission will again review
the Agreement and the comments received and will decide whether it
should withdraw from the Agreement or make final the Agreement's
proposed Order.
Respondents Adobe and Aldus, which market, respectively, Adobe
Illustrator and Aldus FreeHand, are direct and substantial competitors
with respect to professional illustration software.
The Commission has reason to believe that Adobe's acquisition of
Aldus would substantially lessen competition in violation of Section 7
of the Clayton Act, as amended, 15 U.S.C. Sec. 18 and Section 5 of the
FTC Act, as amended, 15 U.S.C. Sec. 45. The proposed Order if issued by
the Commission, would settle the allegations of the Complaint.
The proposed complaint in this matter alleges that Adobe
Illustrator and Aldus FreeHand are the only illustration software
programs which offer features and performance characteristics enabling
graphics professionals efficiently and reliably to create and print
high-quality illustrations. It alleges that the proposed acquisition
would result in a monopoly in the market for professional illustration
software for use on Apple Macintosh and Power Macintosh computers. It
further alleges that even if the relevant market is broadened to
include the development and sale of all illustration software for use
on Apple Macintosh and Power Macintosh computers, or is broadened even
further to include the development and sale of illustration software
for use on IBM-compatible computers with the Windows operating
environment, the relevant market is highly concentrated and Adobe and
Aldus have a combined share of more than 35% of sales. The products in
the broader markets are differentiated and a significant share of sales
in the broader markets is accounted for by customers who regard
Illustrator and FreeHand as their first and second choices.
The complaint further alleges that entry into the market for
professional illustration software would not be timely, likely, or
sufficient in its magnitude, character, and scope to deter or
counteract anticompetitive effects of the Acquisition because
developing a professional illustration program is difficult and time
consuming, and marketing a technically comparable or even an improved
illustration program would be difficult and time consuming because of
network externalities associated with Illustrator's and FreeHand's
extensive installed user bases. Repositioning of other programs to
compete with Illustrator and FreeHand would also be difficult, time
consuming and unlikely.
The complaint alleges that the Acquisition, by combining
Illustrator and FreeHand, may substantially lessen competition or tend
to create a monopoly in the development and sale of professional
illustration software.
Under the terms of the proposed Order, the Respondents must divest
FreeHand to Altsys Corporation, along with Aldus source code
incorporated in FreeHand; the name ``FreeHand;'' the FreeHand customer
names and addresses together with FreeHand specific information in the
Aldus database; and marketing, advertising, training and technical
support information and materials for FreeHand.
The Order requires the Respondents to effect the divestiture of
FreeHand within six (6) months after the Acquisition is consummated.
The Order requires that prior to divesting FreeHand the Respondents
shall take all necessary actions to maintain the viability and
marketability of FreeHand.
The proposed Order would also prohibit the Respondents, for a
period of ten (10) years from the date the proposed Order becomes
final, from acquiring, without the prior approval of the Commission,
any stock, share capital, equity or other interest in any concern
engaged in the development or sale of professional illustration
software native to the Macintosh or Power Macintosh; or any such
professional illustration software or any exclusive license to such
professional illustration software, the purchase price of which is $2
million or more.
It is anticipated that the proposed Order would resolve the
competitive problems alleged in the Complaint. The purpose of this
analysis is to facilitate public comment on the proposed Order, and it
is not intended to constitute an official interpretation of the
agreement and proposed Order or to modify in any way their terms.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 94-19133 Filed 8-4-94; 8:45 am]
BILLING CODE 6750-01-M