[Federal Register Volume 64, Number 159 (Wednesday, August 18, 1999)]
[Notices]
[Pages 44946-44958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21368]
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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil Action No. 3-99CV1398-H]
United States of America, and the State of Texas v. Aetna Inc.
and The Prudential Insurance Company of America Proposed Final Judgment
and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed
Final Judgment, Stipulation, Hold Separate Stipulation and Order, and
Competitive Impact Statement have been filed with the United States
District Court for the Northern District of Texas (Dallas Division) in
United States of America and the State of Texas v. Aetna Inc. and The
Prudential Insurance Company of America, Civil Action No. 3-99CV1398-H.
On June 21, 1999, the United States and the State of Texas filed a
Complaint to enjoin defendant Aetna's proposed acquisition of certain
health insurance-related assets of the Prudential Insurance Company of
America, an acquisition which would have violated section 7 of the
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed with the
Complaint requires Aetna to divest its interests in NYLCare Health
Plans of the Gulf Coast, Inc. and NYLCare Health Plans of the
Southwest, Inc., providers of health insurance in the Houston and
Dallas areas, respectively. Copies of the Complaint, proposed Final
Judgment, Hold Separate Stipulation and Order, and Competitive Impact
Statement are available for inspection at the Department of Justice in
Washington, DC in Suite 200, 325 Seventh Street, NW, and at the Office
of the Clerk of the United States District Court for the Northern
District of Texas (Dallas Division).
Public comment on the proposed Final Judgment is invited within 60
days of the date of this notice. Such comments, and responses thereto,
will be published in the Federal Register and filed with the Court.
Comments should be directed to Gail Krush, Chief, Healthcare Task
Force, 325 Seventh Street, NW, Room 404, Antitrust Division, Department
of Justice, Washington, DC 20530 (telephone: (202) 307-5799).
Constance Robinson,
Director of Operation & Merger Enforcement.
United States District Court for the Northern District of Texas
(Dallas Division)
[Civil Action No.: 3-99CV1398-H]
United States of America, and the State of Texas, Plaintiffs, v.
Aetna Inc., and The Prudential Insurance Company of America,
Defendants.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, as follows:
(1) This Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue is proper in this
Court.
(2) The proposed Final Judgment attached hereto may be filed and
entered by the Court, upon the motion of any party or upon the Court's
own motion, at any time after compliance with the requirements of the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16, and without
further notice to any party or other proceedings, provided that the
plaintiffs have not withdrawn their consent, which they may do at any
time before entry of the proposed Final Judgment by serving notice
thereof on all other parties and by filing that notice with the Court.
(3) Defendants shall abide by and comply with the provisions of the
proposed Final Judgment pending entry of the Final Judgment by the
Court, or until expiration of time for all appeals of any Court ruling
declining entry of the proposed Final Judgment, and shall, from the
date of the signing of this Stipulation, comply with all the terms and
provisions of the proposed Final Judgment as though the same were in
full force and effect as an order of the Court.
(4) This Stipulation shall apply with equal and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
(5) In the event the plaintiffs withdraw their consent, as provided
in paragraph (2) above, or in the event that the Court declines to
enter the proposed Final Judgment pursuant to this Stipulation, the
time has expired for all appeals of any Court ruling declining entry of
the proposed Final Judgment, and the Court has not otherwise ordered
continued compliance with the terms and provisions of the proposed
Final Judgment, then the parties are released from all further
obligations under this
[[Page 44947]]
Stipulation, and the making of this Stipulation shall be without
prejudice to any party in this or any other proceeding.
(6) Defendants represent that the divestitures ordered in the
proposed Final Judgment can and will be made, and that defendants will
later raise no claims of hardship or difficulty as grounds for asking
the Court to modify any of the divestiture provisions contained
therein.
Respectfully submitted,
Dated: June 21, 1999.
For Plaintiff, United States of America.
Paul J. O'Donnell,
Massachusetts Bar #547125, U.S. Department of Justice, Antitrust
Division, Health Care Task Force, 325 Seventh Street, NW., Suite 400,
Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.
For Plaintiff, State of Texas.
Mark Tobey,
State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust
Section, Office of the Attorney General, P.O. Box 12548, Austin, TX
78711-2548; Tel: (512) 463-2185, Facsimile: (512) 320-0975.
For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW., Washington,
DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.
For Defendant, The Prudential Insurance Company of America.
Michael L. Weiner,
New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919
Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)
451-7446.
[Civil Action No.: 3-99CV1398-H]
United States of America, and the State of Texas, Plaintiffs, v.
Aetna Inc., and the Prudential Insurance Company of America,
Defendants.
Hold Separate Stipulation and Order
It is hereby stipulated by and between the undersigned parties, by
their respective attorneys, subject to approval and entry by the Court,
that:
I. Definitions
As used in this Hold Separate Stipulation and Order:
A. ``Aetna'' means defendant Aetna Inc., a Connecticut corporation
with its headquarters and principal place of business in Hartford,
Connecticut, its successors, assigns, subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and its directors,
officers, managers, agents, and employees.
B. ``NYLCare-Gulf Coast'' means NYLCare Health Plans of the Gulf
Coast, Inc., a wholly-owned subsidiary of Aetna that operates a
licensed HMO and HMO-based POS business under that name in Houston,
Brazoria, Galveston, Austin, San Antonio, and Corpus Christi, Texas.
C. ``NYLCare-Southwest'' means NYLCare Health Plans of the
Southwest, Inc., a wholly-owned subsidiary of Aetna that operates a
licensed HMO and HMO-based POS business under that name in Dallas, Fort
Worth, and several smaller cities in North Texas, including Paris,
Tyler, Longview, and Amarillo.
D. ``Prudential'' means defendant The Prudential Insurance Company
of America, a New Jersey mutual insurance company with its principal
place of business in Newark, New Jersey, its successors, assigns,
subsidiaries, divisions, groups, affiliates, partnerships, and joint
ventures, and its directors, officers, managers, agents, and employees.
II. Objectives
A. The proposed Final Judgment filed in this case is meant to
ensure Aetna's prompt divestiture of NYLCare-Gulf Coast and NYLCare-
Southwest for the purpose of maintaining viable competitors in the sale
of HMO and HMO-based POS plans and the purchase of physician services,
and to remedy the effects that the United States and the State of Texas
allege would otherwise result from Aetna's proposed acquisition of
Prudential's health care assets.
B. This Hold Separate Stipulation and Order is intended to ensure,
prior to such divestiture, that NYLCare-Gulf Coast and NYLCare-
Southwest, which are being divested, be maintained as independent,
economically viable, ongoing business concerns, and that competition is
maintained during the pendency of the divestiture.
III. Hold Separate Provisions
Until the divestiture required by the Final Judgment has been
accomplished:
A. Aetna shall immediately begin to take all steps necessary to
preserve, maintain, and operate NYLCare-Gulf Coast and NYLCare-
Southwest as independent competitors with management, sales, service,
underwriting, administration, and operations held entirely separate,
distinct, and apart from those of Aetna. Aetna shall not coordinate the
pricing, marketing, or sale of health care services from NYLCare-Gulf
Coast and NYLCare-Southwest with the pricing, marketing, or sale of
health care services by Aetna. Within twenty-five (25) calendar days of
the filing of the Complaint in this matter, Aetna will comply and
inform plaintiffs of the steps taken to comply with this provision.
B. Aetna shall take all steps necessary to ensure that NYLCare-Gulf
Coast and NYLCare-Southwest are maintained and operated as independent,
ongoing, economically viable, and active competitors, including but not
limited to the following:
1. Aetna will appoint experienced senior management to run the
combined business of NYLCare-Gulf Coast and NYLCare-Southwest until the
divestiture required by the Final Judgment has been accomplished. These
executives may be recruited from within the existing Aetna or NYLCare
organizations, with plaintiffs' approval, subject to Section IV.C, or
from outside the company.
2. Aetna will create a separate and independent sales organization
for NYLCare-Gulf Coast and NYLCare-Southwest.
3. Aetna will create a separate and independent provider relations
organization for NYLCare-Gulf Coast and NYLCare-Southwest.
4. Aetna will create a separate and independent patient management/
quality management organization for NYLCare-Gulf Coast and NYLCare-
Southwest.
5. Aetna will create a separate and independent commercial
operations organization for the combined NYLCare-Gulf Coast and
NYLCare-Southwest.
6. Aetna will create a separate and independent network operations
organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.
7. Aetna will create a separate and independent underwriting
organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.
8. Pursuant to transition services agreements approved by
plaintiffs, subject to Section IV.C, Aetna will provide certain support
services to NYLCare-Gulf Coast and NYLCare-Southwest until the
divestiture. These services may include human resources, legal,
finance, actuarial, software and computer operations support, and other
services which are now provided to NYLCare-Gulf Coast and NYLCare-
Southwest by other Aetna companies. These transition services
agreements will contain appropriate confidentiality provisions to
ensure that Aetna employees (other than the employees performing
services under the agreements) do not receive information that Aetna is
prohibited from receiving under paragraph III.C of this Hold Separate
Stipulation and Order.
C. Aetna shall take all steps necessary to ensure that the
management of NYLCare-Gulf Coast and NYLCare-Southwest will not be
influenced by Aetna except as necessary to meet
[[Page 44948]]
Aetna's obligations as described below, and that the books, records,
competitively sensitive sales, marketing and pricing information, and
decision-making associated with NYLCare-Gulf Coast and NYLCare-
Southwest will be kept separate and apart from the operations of Aetna.
Aetna's influence over NYLCare-Gulf Coast and NYLCare-Southwest shall
be limited to that necessary to carry out Aetna's obligations under
this Hold Separate Stipulation and Order, the Final Judgment, and any
applicable regulatory requirements, including all reserve or capital
requirements. Aetna may receive aggregate historical financial
information (excluding rate or pricing information) relating to
NYLCare-Gulf Coast and NYLCare-Southwest to the extent necessary to
allow Aetna to prepare financial reports, tax returns, personnel
reports, regulatory filings, and other necessary or legally required
reports.
D. Aetna shall maintain at either current levels or at the highest
levels approved during the year prior to Aetna's acquisition of
NYLCare-Gulf Coast and NYLCare-Southwest, whichever are higher,
promotional, advertising, sales, technical assistance, marketing, and
merchandising support for NYLCare-Gulf Coast and NYLCare-Southwest, but
in any event at levels sufficient to ensure that NYLCare-Gulf Coast and
NYLCare-Southwest are economically viable businesses.
E. Aetna shall provide and maintain all required reserves and
sufficient working capital to maintain NYLCare-Gulf Coast and NYLCare-
Southwest as economically viable, ongoing businesses.
F. Aetna shall provide and maintain sufficient lines and sources of
credit to maintain NYLCare-Gulf Coast and NYLCare-Southwest as
economically viable, ongoing businesses.
G. Aetna shall not take any action to consummate the proposed
acquisition of Prudential's health care business pursuant to the Asset
Transfer and Acquisition Agreement, dated as of December 9, 1998, or
any subsequent agreement between Aetna and Prudential, until such time
as the plaintiffs in their sole discretion, subject to Section IV.C,
have determined that NYLCare-Gulf Coast and NYLCare-Southwest are
independent, viable competitors and that Aetna has complied with this
Hold Separate Stipulation and Order, or until the divestitures required
by the Final Judgment are complete.
H. Aetna shall not, except in the ordinary course of business, or
as otherwise permitted under this Hold Separate Stipulation and Order,
or as part of a divestiture approved by the plaintiffs in their sole
discretion, subject to Section IV.C, remove, sell, lease, assign,
transfer, pledge as collateral for loans, or otherwise dispose of, any
asset, tangible or intangible, of NYLCare-Gulf Coast and NYLCare-
Southwest.
I. Aetna shall maintain, in accordance with sound accounting
principles, separate, true, accurate, and complete financial ledgers,
books, and records that report, on a periodic basis, such as the last
business day of every month, consistent with past practices, the
assets, liabilities, expenses, revenues, income, profit, and loss of
NYLCare-Gulf Coast and NYLCare-Southwest.
J. Until such time as NYLCare-Gulf Coast and NYLCare-Southwest are
divested, except in the ordinary course of business or as is otherwise
consistent with this Hold Separate Stipulation and Order, Aetna shall
not hire, transfer, terminate, or alter, to the detriment of any
employee, any current employment or salary agreement for any employee
who on the date of the signing of this Hold Separate Stipulation and
Order is employed at NYLCare-Gulf Coast or NYLCare-Southwest.
K. Aetna may retain an independent consultant (the ``Consultant'')
to monitor the operations of NYLCare-Gulf Coast and NYLCare-Southwest
until the divestiture(s) required by the Final Judgment has been
accomplished. The Consultant shall have no role in the management of
NYLCare-Gulf Coast and NYLCare-Southwest, but shall be given reasonable
access to files, data, reports, and other information regarding the
operations of NYLCare-Gulf Coast and NYLCare-Southwest. The
Consultant's sole responsibility will be to report at least monthly to
Aetna's Director of Internal Audit, stating the Consultant's opinion on
the question whether NYLCare-Gulf Coast and NYLCare-Southwest are being
managed in accordance with applicable law, consistent with prudent
underwriting and other industry standards, and consistent with the
fiduciary duties of its management. If the Consultant's opinion on this
question is anything other than an unqualified ``yes,'' the Consultant
shall submit a written report stating the basis for its opinion to the
Director of Internal Audit, with a copy to the plaintiffs. The
Consultant shall not transmit to Aetna any information that Aetna is
prohibited from receiving under paragraph III.C of this Hold Separate
Stipulation and Order. After receiving the Consultant's written report,
and with the consent of the plaintiffs in their sole discretion,
subject to Section IV.C, Aetna may take appropriate corrective action.
IV. Other Provisions
A. Aetna shall take no action that would interfere with the ability
of any trustee appointed pursuant to the Final Judgment to complete the
divestitures pursuant to the Final Judgment to a suitable purchaser.
B. Prudential shall take no action that would hinder or obstruct
Aetna's ability or efforts to comply with this Hold Separate
Stipulation and Order.
C. In the event plaintiffs are unable to agree on a course of
action regarding any item within their discretion in seven days, then
the United States may, in its sole discretion, act alone (or decline to
act) with respect to that course of action.
D. With the consent of the plaintiffs, in their sole discretion,
subject to Section IV.C, Aetna may exclude certain NYLCare-Gulf Coast
and NYLCare-Southwest assets from this Hold Separate Stipulation and
Order.
E. This Hold Separate Stipulation and Order shall remain in effect
until the divestitures required by the Final Judgment are complete, or
until further Order of this Court.
Respectfully submitted,
For Plaintiff, United States of America.
Paul J. O'Donnell,
Massachusetts Bar #547125, U.S. Department of Justice, Antitrust
Division, Health Care Task Force, 325 Seventh Street, NW, Suite 400,
Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.
For Plaintiff, State of Texas.
Mark Tobey,
State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust
Section, Office of the Attorney General, P.O. Box 12548, Austin, TX
78711-2548; Tel: (512) 463-2185, Facsimile (512) 320-0975.
For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington,
DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.
For Defendant, The Prudential Insurance Company of America.
Michael L. Weiner,
New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919
Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)
451-7446.
It Is So Ordered.
Dated ______, 1999.
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United States District Judge.
C. This Hold Separate Stipulation and Order shall remain in effect
until the divestitures required by the Final Judgment are complete, or
until further Order of this Court.
[[Page 44949]]
Respectfully submitted,
For Plaintiff, United States of America.
Paul J. O'Donnell,
Massachusetts Bar #547125, U.S. Department of Justice, Antitrust
Division, Health Care Task Force, 325 Seventh Street, NW, Suite 400,
Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.
For Plaintiff, State of Texas.
Mark Tobey,
State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust
Section, Office of the Attorney General, P.O. Box 12548, Austin, TX
78711-2548; Tel: (512) 463-2185, Facsimile (512) 320-0975.
For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington,
DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.
For Defendant, The Prudential Insurance Company of America.
Michael L. Weiner,
New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919
Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)
451-7446.
[Civil Action No. 3-99CV 1398-H]
United States of America, and the State of Texas, Plaintiff, v.
Aetna Inc., and The Prudential Insurance Company of America,
Defendants.
Revised Final Judgment
Whereas, plaintiffs, the United States of America and the State of
Texas, filed a Complaint in this action on June 21, 1999, and
plaintiffs and defendants, by their respective attorneys, having
consented to the entry of this Revised Final Judgment without trial or
adjudication of any issue of fact or law herein, and without this
Revised Final Judgment constituting any evidence against or an
admission by any party with respect to any issue of law or fact herein;
And whereas, defendants have agreed to be bound by the provisions
of this Revised Final Judgment pending its approval by the Court;
And whereas, plaintiffs intend to preserve competition by requiring
Aetna to divest its interests in the Houston operations of NYLCare
Health Plans of the Gulf Coast, Inc., and the Dallas operations of
NYLCare Health Plans of the Southwest, Inc., consisting of, among other
assets, approximately two hundred sixty thousand (260,000) and one
hundred sixty seven thousand (167,000) commercially insured HMO and
HMO-based POS enrollees, respectively;
And whereas, plaintiffs require defendants to make the divestitures
for the purpose of establishing a viable competitor in the development,
marketing, and sale of HMO and HMO-based POS health plans in the
Houston and Dallas areas;
And whereas, plaintiffs require defendants to make the divestitures
for the purpose of redressing the effects that the United States and
the State of Texas allege would otherwise result from Aetna's proposed
acquisition of Prudential's health care assets, including the ability
to depress physicians' reimbursement rates in Houston and Dallas, which
is likely to lead to a reduction in quantity or a degradation in the
quality of physician services provided to patients in those areas;
And whereas, defendants have represented to plaintiffs that the
divestitures ordered herein can and will be made and that defendants
will later raise no claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now, therefore, before the taking of any testimony, and without
trial or adjudication of any issue of fact or law herein, and upon
consent of the parties hereto, it is hereby ordered, adjudged, and
decreed as follows:
I. Jurisdiction
This Court has jurisdiction over each of the parties hereto and
over the subject matter of this action. The Complaint states a claim
upon which relief may be granted against defendants, as hereinafter
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C.
Sec. 18).
II. Definitions
As used in this Revised Final Judgment:
A. ``Aetna'' means Aetna, Inc., a Connecticut corporation with its
headquarters and principal place of business in Hartford, Connecticut,
its successors, assigns, subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and its directors, officers, managers,
agents, and employees.
B. ``Dallas'' means the entire service area of NYLCare-Southwest
including, but not limited to, the following Texas counties: Collin,
Dallas, Denton, Ellis, Grayson, Henderson, Hood, Hunt, Johnson,
Kaufman, Parker, Rockwall, and Tarrant.
C. ``Excluded Assets'' means those businesses of NYLCare-Gulf Coast
and NYLCare-Southwest that need not be divested, which consist of: (1)
All Medicare HMO plans; (2) commercial HMO and HMO-based POS accounts
not located in Houston or Dallas; (3) provider network rental
arrangements for PPO plans; and (4) administrative services contracts
with self-funded plans.
D. ``Houston'' means the following Texas counties: Brazoria,
Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and
Waller.
E. ``NYCare-Gulf Coast'' means NYLCare Health Plans of the Gulf
Coast, Inc., a wholly owned subsidiary of Aetna that operates a
licensed HMO and HMO-based POS business under that name in Central and
Southeastern Texas, excepting the Excluded Assets, and includes:
1. All tangible assets necessary to compete in the sale or
administration of HMO and HMO-based POS plans; all personal property,
inventory, office furniture, fixed assets and fixtures, materials,
supplies, facilities, and other tangible property or improvements used
in the sale or administration of HMO and HMO-based POS plans, all
licenses, permits, and authorizations issued by any governmental
organization relating to HMO and HMO-based POS plans; contracts or
agreements for coverage of approximately two hundred sixty thousand
(260,000) commercially insured HMO and HMO-based POS plan enrollees;
all other contracts, agreements, leases, commitments, and
understandings pertaining to HMO and HMO-based POS plans; all contracts
with accounts located in Houston, all customer lists and credit
records; and all other records maintained in connection with the sale
and administration of HMO and HMO-based POS plans in Houston or Dallas;
2. All intangible assets relating to the sale or administration of
HMO and HMO-based POS plans, including but not limited to any licenses
and sublicenses, intellectual property, technical information, know-
how, trade secrets, programs, and all manuals and technical information
provided to employees, customers, suppliers, agents, or licenses.
F. ``NYLCare-Southwest'' means NYLCare Health Plans of the
Southwest, Inc., a wholly owned subsidiary of Aetna that operates a
licensed HMO and HMO-based POS business under that name in Dallas, Fort
Worth, and several smaller cities in North Texas, including Paris,
Tyler, Longview and Amarillo, excepting the Excluded Assets, and
includes:
1. All tangible assets necessary to compete in the sale or
administration of HMO and HMO-based POS plans; all personal property,
inventory, office furniture, fixed assets and fixtures, materials,
supplies, facilities, and other tangible property or improvements used
in the sale or administration of HMO
[[Page 44950]]
and HMO-based POS plans; all licenses, permits, and authorizations
issued by any governmental organization relating to HMO and HMO-based
POS plans; contracts or agreements for coverage of approximately one
hundred sixty seven thousand (167,000) commercially insured HMO and
HMO-based POS plan enrollees; all other contracts, agreements, leases,
commitments, and understandings pertaining to HMO and HMO-based POS
plans; all contracts with accounts located in Dallas; all customer
lists and credit records,; and all other records maintained in
connection with the sale and administration of HMO and HMO-based POS
plans in Dallas or Houston;
2. All intangible assets relating to the sale or administration of
HMO and HMO-based POS plans, including but not limited to any licenses
and sublicenses, intellectual property, technical information, know-
how, trade secrets, programs, and all manuals and technical information
provided to employees, customers, suppliers, agents, or licenses.
G. ``Prudential'' means The Prudential Insurance Company of
America, a New Jersey mutual insurance company with its principal place
of business in Newark, New Jersey, its successors, assigns,
subsidiaries, divisions, groups, affiliates, partnerships and joint
ventures, and directors, officers, managers, agents, and employees.
III. Applicability
A. The provisions of this Revised Final Judgment apply to Aetna and
Prudential and to all other persons in active concert or participation
with any of them who shall have received actual notice of this Revised
Final Judgment by personal service or otherwise.
B. Aetna shall require, as a condition of the sale or other
disposition of NYLCare-Gulf Coast and NYLCare-Southwest, that the
acquirer agree to be bound by the provisions of this Revised Final
Judgment.
IV. Divestiture
A. Aetna is hereby ordered and directed in accordance with the
terms of this Revised Final Judgment to divest its interests in
NYLCare-Gulf Coast and NYLCare-Southwest, excepting only the Excluded
Assets, to an acquirer(s) acceptable to the plaintiffs, in their sole
discretion, subject to Section XII.
B. Aetna is obligated to cause NYLCare-Gulf Coast and NYLCare-
Southwest to maintain contracts or agreements for coverage of
approximately two hundred sixty thousand (260,000) commercially insured
HMO and HMO-based POS plan enrollees in Houston and contracts or
agreements for coverage of approximately one hunded sixty seven
thousand (167,000) commerically insured HMO and HMO-based POS plan
enrollees in Dallas through the date of signing the definitive purchase
and sale agreement(s) for the divestiture of the two NYLCare entities.
Aetna may include related PPO business as a part of the sale of the
NYLCare entities, and the actual number of such PPO enrollees as of the
date of signing of the definitive purchase and sale agreement(s) of the
divestiture of the NYLCare entities will be taken into account in
determining Aetna's compliance with the membership targets described
herein.
C. Aetna shall use its best efforts to accomplish the divestitures
as expeditiously as possible and will accelerate the timetable for
executing the definitive purchase and sale agreement(s) for the
divestiture of the NYLCare entities to a target date of October 1,
1999. In any event, Aetna shall execute definitive purchase and sale
agreement(s) and shall file all required applications for regulatory
approval within one-hundred and twenty (120) calendar days after June
21, 1999. Aetna shall complete the divestitures within five (5)
business days after it receives all necessary regulatory approvals for
divestiture of NYLCare-Gulf Coast and NYLCare-Southwest and the
acquisition of Prudential, or five (5) business days after notice of
the entry of this Revised Final Judgment by the Court, whichever is
later.
D. The plaintiffs, in their sole discretion, subject to Section
XII, may extend the time period for any divestitures for an additional
period of time not to exceed sixty (60) calendar days. If a further
extension is required to obtain necessary regulatory approvals, the
plaintiffs, in their sole discretion, subject to Section XII, may grant
the time necessary to obtain such approvals.
E. In accomplishing the divestitures ordered by this Revised Final
Judgment, Aetna promptly shall make known, by usual and customary
means, the availability for purchase of NYLCare-Gulf Coast and NYLCare-
Southwest. Aetna shall inform any person making an inquiry regarding a
possible purchase that the sale is being made pursuant to this Revised
Final Judgment and shall provide such person with a copy of this
Revised Final Judgment. Aetna shall also offer to furnish to all
prospective purchasers, subject to reasonable confidentiality
assurances, all information regarding NYLCare-Gulf Coast and NYLCare-
Southwest customarily provided in a due diligence process, except
information subject to the attorney-client privilege or the attorney
work-product privilege. Aetna shall make available such non-privileged
information to the United States and the State of Texas at the same
time that such information is made available to prospective purchasers.
F. Aetna shall permit prospective purchasers to have reasonable
access to all NYLCare-Gulf Coast's and NYLCare-Southwest personnel,
physical facilities, and any and all financial, operational or other
documents and information customarily provided as part of a due
diligence process.
G. Aetna shall not take any action that will impede in any way the
operation of NYLCare-Gulf Coast and NYLCare-Southwest; shall
immediately cease all actions directed at the integration of NYLCare-
Gulf Coast and NYLCare-Southwest into Aetna.
H. Aetna shall take all steps necessary to ensure that NYLCare-Gulf
Coast and NYLCare-Southwest are maintained and operated as independent,
on-going, economically viable, and active competitors until completion
of the divestitures ordered by this Revised Final Judgment, including
but not limited to the following:
1. Aetna will appoint experienced senior management to run the
combined business of NYLCare-Gulf Coast and NYLCare-Southwest. These
executives may be recruited from within the existing Aetna or NYLCare
organizations, with plaintiff's approval, subject to Section XII, or
from outside the company.
2. Aetna will create a separate and independent sales organization
for NYLCare-Gulf Coast and NYLCare-Southwest.
3. Aetna will create a separate and independent provider relations
organization for NYLCare-Gulf Coast and NYLCare-Southwest.
4. Aetna will create a separate and independent management/quality
management organization for NYLCare-Gulf Coast and NYLCare-Southwest.
5. Aetna will create a separate and independent commercial
operations organization for the combined NYLCare-Gulf Coast and
NYLCare-Southwest.
6. Aetna will create a separate and independent commercial
operations organization for the combined NYLCare-Gulf Coast and
NYLCare-Southwest.
7. Aetna will create a separate and independent underwriting
organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.
8. Pursuant to transition services agreements approved by
plaintiffs, subject to Section XII, Aetna will
[[Page 44951]]
provide certain support services to NYLCare-Gulf Coast and NYLCare-
Southwest. These services may include human resources, legal, finance,
actuarial, software and computer operations support, and other services
which are now provided to NYLCare-Gulf Coast and NYLCare-Southwest by
other Aetna companies. These transition services agreements will
contain appropriate confidentiality provisions to ensure that Aetna
employees (other than the employees performing services under the
agreements) do not receive information that Aetna is prohibited from
receiving under Section III.E of the Revised Hold Separate Stipulation
and Order entered earlier.
9. Aetna will provide any additional transitional services
requested by the management of NYLCare-Gulf Coast and/or NYLCare-
Southwest in order to maintain the membership targets described in
Section IV.B. Such additional services may include, but not be limited
to, funding of service quality guarantees, subject to the approval of
the plaintiffs in their sole discretion, pursuant to Section XII.
10. Aetna will fund an incentive pool of at least $500,000, which
will be available to management of the NYLCare entities if they meet
the membership targets described in Section IV.B as of the closing date
for the sale of the NYLCare entities.
I. Aetna shall not take any action to consummate the proposed
acquisition of Prudential's heath care business pursuant to the Asset
Transfer and Acquisition Agreement, date as of December 9, 1998, or any
subsequent agreement between Aetna and Prudential, until such time as
plaintiffs, to their sole satisfaction, subject to Section XII, have
determined that NYLCare-Gulf Coast and NYLCare-Southwest are
independent, viable competitors, that Aetna has complied with the terms
of the Revised Hold Separate Stipulation and Order entered previously,
or until the divestitures required by this Revised Final Judgment are
complete.
J. Aetna shall request that the NYLCare entities provide the
plaintiffs with bi-weekly reports on total membership of the entities
until the divestitures required by this Revised Final Judgment are
complete.
K. Unless the plaintiffs, in their sole discretion, subject to
Section XII, consent in writing, the divestitures pursuant to Section
IV (or by trustee appointed pursuant to Section V) shall include the
entire NYLCare-Gulf Coast and NYLCare-Southwest businesses, excepting
only the Excluded Assets, operated pursuant to the Revised Hold
Separate Stipulation and Order entered previously in this proceeding,
and shall be accomplished by selling or otherwise conveying NYLCare-
Gulf Coast and NYLCare-Southwest to a purchaser(s) in such a way as to
satisfy the plaintiffs in their sole discretion, subject to Section
XII, that NYLCare-Gulf Coast and NYLCare-Southwest can and will be used
by the purchaser(s) as part of a viable, ongoing business engaged in
the sale of HMO and HMO-based POS plans. These divestitures may be made
to one or more purchasers provided that in each instance it is
demonstrated to the sole satisfaction of the plaintiffs, subject to
Section XII, that the acquirer(s) will remain viable competitors. The
divestitures, whether pursuant to Section IV or Section V, shall be
made to a purchaser(s) for whom it is demonstrated to the plaintiffs'
sole satisfaction, subject to Section XII: (1) Has the capability and
intent of competing effectively in the sale of HMO and HMO-based POS
plans in Dallas and Houston; (2) has the managerial, operational, and
financial capability to compete effectively in the sale of HMO and HMO-
based POS plans in Houston and Dallas; and (3) is not restrained
through any agreement with Aetna or otherwise in its ability to compete
effectively in the sale of HMO and HMO-based POS plans in Dallas and
Houston.
L. For a period of one year from the date of the completion of the
divestiture, Aetna shall not hire or solicit to hire any individual
who, on the date of the divestiture, was an employee of NYLCare-Gulf
Coast and NYLCare-Southwest, unless such individual has (1) a written
offer of employment from a third party for a like position, or (2) a
written notice from the acquirer of NYLCare-Gulf Coast or NYLCare-
Southwest, stating that the company does not intend to continue to
employ the individual in a like position.
V. Appointment of Trustee
A. In the event that Aetna has not divested NYLCare-Gulf Coast and
NYLCare-Southwest within the time specified in Section IV, the Court
shall appoint, on application of the plaintiffs, a trustee selected by
the plaintiffs in their sole discretion, subject to Section XII, to
effect the required divestitures.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell NYLCare-Gulf Coast and NYLCare-
Southwest, as described in Sections II.E and II.F. The trustee shall
have the power and authority to accomplish the divestitures at the best
price then obtainable upon a reasonable effort by the trustee, subject
to the provisions of Sections IV and VI, and shall have such other
powers as the Court shall deem appropriate. Subject to Section V.C, the
trustee shall have the power and authority to hire, at the cost and
expense of Aetna, any investment bankers, attorneys, or other agents
reasonably necessary in the judgment of the trustee to assist in the
divestitures, and such professionals and agents shall be accountable
solely to the trustee. The trustee shall have the power and authority
to accomplish the divestitures at the earliest possible time to a
purchaser acceptable to the plaintiffs in their sole discretion,
subject to Section XII, shall have the power and authority to require
Aetna to sell NYLCare's PPO business in Houston and Dallas if the
plaintiffs, in the exercise of their sole discretion, subject to
Section XII, determine that such a sale is necessary for the
preservation of competition, and shall have such other power and
authority at this Court shall deem appropriate. Aetna shall not object
to a sale by the trustee on any grounds other than the trustee's
malfeasance. Any such objections by Aetna must be conveyed in writing
to the plaintiffs and the trustee within ten (10) calendar days after
the trustee has provided the notice required under Section VI.
C. The trustee shall serve at the cost and expense of Aetna, on
such terms and conditions as the Court may prescribe, and shall account
for all monies derived from the sale of the assets sold by the trustee
and all costs and expenses so incurred. After approval by the Court of
the trustee's accounting, including fees for its services and those of
any professionals and agents retained by the trustee, all remaining
money shall be paid to Aetna and the trust shall then be terminated.
The compensation of such trustee and of any professionals and agents
retained by the trustee shall be reasonable in light of the value of
the divested business and based on a fee arrangement providing the
trustee with an incentive based on the price and terms of the
divestitures and the speed with which they are accomplished.
D. Aetna shall use its best efforts to assist the trustee in
accomplishing the required divestitures, including best efforts to
effect all necessary regulatory approvals. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the businesses to be divested, and Aetna
shall develop financial or other information relevant to the business
to be divested customarily provided in a due diligence
[[Page 44952]]
process as the trustee may reasonably request, subject to customary
confidentiality assurances. Aetna shall permit prospective purchasers
of NYLCare-Gulf Coast and NYLCare-Southwest to have reasonable access
to personnel and to make such inspection of physical facilities and any
and all financial, operational or other documents and other information
as may be relevant to the divestitures required by this Revised Final
Judgment.
E. After its appointment, the trustee shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish the divestitures ordered under this Revised Final Judgment,
provided, however, that to the extent such reports contain information
that the trustee deems confidential, such reports may be filed under
seal for in camera review. 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 business to be divested, and shall
describe in detail each contact with any such person during that
period. The trustee shall maintain full records of all efforts made to
divest the businesses to be divested.
F. If the trustee has not accomplished such divestitures within six
(6) months after its appointment, the trustee thereupon shall file
promptly with the Court a report setting forth: (1) The trustee's
efforts to accomplish the required divestitures; (2) the reasons, in
the trustee's judgment, why the required divestitures have not been
accomplished; and (3) the trustee's recommendations; provided, however,
that to the extent such reports contain information that the trustee
deems confidential, such reports may be filed under seal for in camera
review. The trustee shall at the same time furnish such report to the
parties, who shall each have the right to be heard and to make
additional recommendations consistent with the purpose of the trust.
The Court shall enter thereafter such orders as it shall deem
appropriate in order to carry out the purpose of the trust which may,
if necessary, include extending the trust and the term of the trustee's
appointment by a period requested by the plaintiffs, subject to Section
XII.
VI. Notification
Within two (2) business days following execution of a definitive
agreement, contingent upon compliance with the terms of this Revised
Final Judgment, to effect, in whole or in part, any proposed
divestitures pursuant to Section IV or Section V, Aetna or the trustee,
whichever is then responsible for effecting the divestitures, shall
notify the United States and the State of Texas of the proposed
divestitures. If the trustee is responsible, it shall similarly notify
Aetna. The notice shall set forth the details of the proposed
transaction and list the name, address, and telephone number of each
person not previously identified who offered to, or expressed an
interest in or a desire to, acquire any ownership interest in the
businesses to be divested that is the subject of the binding contract,
together with full details of same. Within ten (10) calendar days of
their receipt of such notice, the United States or the State of Texas
may request from Aetna, the trustee, the proposed purchaser, or any
other third party additional information concerning the proposed
divestitures and the proposed purchaser. Aetna and the trustee shall
furnish any additional information requested from them within ten (10)
calendar days of the receipt of the request, unless the parties shall
otherwise agree. Within thirty (30) calender days after receipt of the
notice or within twenty (20) calender days after the plaintiffs have
been provided the additional information requested from Aetna, the
trustee, the proposed purchaser, and any third party, whichever is
later, the plaintiffs, in their sole discretion, subject to Section
XII, shall provide written notice to Aetna and the trustee, if there is
one, stating whether it objects to the proposed divestitures. If the
plaintiffs provide written notice to Aetna and the trustee that they do
not object, then the divestitures may be consummated, subject only to
Aetna's limited right to object to the sale under Section V.B. Absent
written notice that the plaintiffs do not object to the proposed
purchaser or upon objection by the plaintiffs, such divestitures
proposed under Section IV or Section V may not be consummated. Upon
objection by Aetna under Section V.B, a divestiture proposed under
Section V shall not be consummated unless approved by the Court.
VII. Affidavits
A. Within twenty-five (25) calendar days of the June 21, 1999
filing of the original Hold Separate Order and Stipulation in this
matter and every thirty (30) calendar days thereafter until the
divestitures have been completed, whether pursuant to Section IV or
Section V, Aetna shall deliver to the United States and the State of
Texas an affidavit as to the fact and manner of compliance with Section
IV or Section V. Each such affidavit shall include, inter alia, the
name, address, and telephone number of each person who, at any time
after the period covered by the last such report, 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 business to be divested, 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 that Aetna
has made to solicit a buyer for NYLCare-Gulf Coast and NYLCare-
Southwest and to provide required information to prospective purchasers
including the limitations, if any, on such information.
B. Within twenty-five (25) calendar days of the June 21, 1999
filing of the original Hold Separate Order and Stipulation in this
matter. Aetna shall deliver to the United States and the State of Texas
an affidavit that describes in detail all actions Aetna has taken and
all steps Aetna has implemented on an on-going basis to preserve
NYLCare-Gulf Coast and NYLCare-Southwest pursuant to Section VIII and
the Revised Hold Separate Stipulation and Order previously entered by
this Court. The affidavit also shall describe, but not be limited to,
Aetna's efforts to maintain and operate NYLCare-Gulf Coast and NYLCare-
Southwest as active competitors, and the plans and timetable for
Aetna's integration of Prudential's healthcare assets. Aetna shall
deliver to the United States and the State of Texas an affidavit
describing any changes to the efforts and actions outlined in Aetna's
earlier affidavit(s) filed pursuant to this Section VII.B within
fifteen (15) calendar days after such change is implemented.
C. Until one year after the divestitures required by this Revised
Final Judgment have been completed, Aetna shall preserve all records of
all efforts made to preserve the businesses to be divested and effect
the divestitures.
VIII. Hold Separate Order
Until the divestitures required by this Revised Final Judgment have
been accomplished, Aetna shall take all steps necessary to comply with
Section IV and the Revised Hold Separate Stipulation and Order entered
by this Court, to preserve the assets of NYLCare-Gulf Coast and
NYLCare-Southwest, and to ensure that NYLCare-Gulf Coast and NYLCare-
Southwest remain viable competitors in the sale of HMO and HMO-based
POS plans in Dallas and Houston. Defendants shall take no action that
would jeopardize the
[[Page 44953]]
divestitures of NYLCare-Gulf Coast and NYLCare-Southwest.
IX. Financing
Aetna is ordered and directed not to finance all or any part of any
purchase by an acquirer(s) made pursuant to Section IV or Section V.
X. Compliance Inspection
For the purpose of determining or securing compliance with this
Revised Final Judgment or for determining whether this Revised Final
Judgment should be modified or terminated, and subject to any legally
recognized privilege, from time to time:
A. Duly authorized representatives of the United States Department
of Justice, upon written request of the Attorney General of the United
States or the Assistant Attorney General in charge of the Antitrust
Division, or the State of Texas, upon written request by the Texas
Attorney General, and on reasonable notice to Aetna made to its
principal offices, shall be permitted:
1. Access during Aetna's office hours to inspect and copy all
books, ledgers, accounts, correspondence, memoranda, and other records
and documents, including computerized records, in the possession or
under the control of Aetna, which may have counsel present, relating to
any matters contained in this Revised Final Judgment and the Revised
Hold Separate Stipulation and Order;
2. Subject to the reasonable convenience of Aetna and without
restraint or interference from it, to interview, either informally or
on the record, its officers, employees, and agents, who may have
counsel present, regarding any such matters.
B. Upon the written request of the Attorney General of the United
States, the Assistant Attorney General in charge of the Antitrust
Division, or the Attorney General of the State of Texas, made to
Aetna's principal offices, Aetna shall submit such written reports,
under oath if required, with respect to any matter contained in this
Revised Final Judgment and the Revised Hold Separate Stipulation and
Order entered earlier by this Court.
C. No information or documents obtained by the means provided in
Section VII or Section X shall be divulged by any representative of the
plaintiffs to any person other than a duly authorized representative of
the Executive Branch of the United States or of the State of Texas,
except in the course of legal proceedings to which the United States or
the State of Texas is a party (including grand jury proceedings), or
for the purpose of securing compliance with this Revised Final
Judgment, or as otherwise required by law.
D. If at any time Aetna furnishes to the United States or the State
of Texas information or documents, Aetna represents and identifies in
writing the material in any such information or documents for which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and Aetna marks each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then the United States or the State
of Texas shall give ten (10) calendar days' notice to Aetna prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding) to which Aetna is not a party.
XI. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling
any of the parties to this Revised Final Judgment to apply to this
Court at any time for such further orders and directions as may be
necessary or appropriate for the construction or carrying out of this
Revised Final Judgment, for the modification of any of the provisions
hereof, for the enforcement of compliance herewith, and for the
punishment of any violation hereof.
XII. Miscellaneous
In the event plaintiffs are unable to agree on a course of action
regarding Sections IV.A, IV.D, IV.H, IV.I, IV.K, V.A, V.B, V.F, and VI
in seven days, then the United States may, in its sole discretion, act
alone (or decline to act) with respect to the course of action.
XIII. Termination
Unless this Court grants an extension, this Revised Final Judgment
will expire on the tenth anniversary of the date of its entry.
XIV. Public Interest
Entry of this Revised Final Judgment is in the public interest.
Dated ______, 1999.
----------------------------------------------------------------------
United States District Judge.
[Civil Action No.: 3-99CV1398-H]
United States of America, and the State of Texas, Plaintiffs, v.
Aetna Inc., and The Prudential Insurance Company of America,
Defendants.
Revised Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act (``APPA''), 15 U.S.C 16(b)-(h), the United States submits this
Competitive Impact Statement to assist the Court in assessing the
proposed Revised Final Judgment submitted for entry in this civil
antitrust proceeding.
I. Nature and Purpose of This Proceeding
The United States filed a civil antitrust Complaint under Section
15 of the Clayton Act, 15 U.S.C. 25, on June 21, 1999, alleging that
the proposed acquisition by Aetna Inc. (``Aetna'') of The Prudential
Insurance Company of America's (``Prudential'') health care business
would violate Section 7 of the Clayton Act (``Section 7''), 15 U.S.C.
18. The State of Texas, by and through its Attorney General, is co-
plaintiff with the United States in this action.
The Complaint alleges that Aetna and Prudential compete head-to-
head in the sale of health maintenance organization (``HMO'') and HMO-
based point-of-service (``HMO-POS'') health plans in Houston and
Dallas, Texas; that such competition has benefited consumers by keeping
prices low and quality high; and that the proposed acquisition would
end such competition and give Aetna sufficient market power to increase
prices or reduce quality in the sale of HMO and HMO-POS plans in these
geographic areas (Complaint para. 26.) The Complaint also alleges that
the acquisition would enable Aetna to unduly depress physicians'
reimbursement rates in Houston and Dallas, resulting in a reduction of
quantity or a degradation in quality of physicians' services in these
area. (Complaint para. 33.)
When the Complaint was filed, the plaintiffs also filed a proposed
settlement that would permit Aetna to complete its acquisition of
Prudential but would require divestitures of certain assets sufficient
to preserve competition in the sale of HMO and HMO-POS plans and the
purchase of physicians' services in Houston and Dallas. This settlement
consisted of a proposed Final Judgment, Hold Separate Stipulation and
Order, and Stipulation. To further clarify certain aspects of the
proposed Final Judgment, on August 4, 1999, the parties made a joint
motion to the Court for entry of a Revised Hold Separate Stipulation
and Order, as well as a joint motion to file a Revised Final Judgment
and Revised Stipulation.
The proposed Revised Final Judgment requires Aetna to divest its
interests in the Houston-area commercial HMO and HMO-POS businesses of
NYLCare Health Plans of the Gulf Coast, Inc. (``NYLCare-Gulf Coast''),
a previously acquired health plan serving Houston and other areas in
south and central Texas, and the commercial HMO and
[[Page 44954]]
HMO-POS businesses of NYLCare Health Plans of the Southwest, Inc.
(``NYLCare-Southwest''), a previously acquired health plan serving the
Dallas area. If Aetna does not complete the divestitures within the
time frame established in the proposed Revised Final Judgment, a
trustee appointed by the Court will be empowered to sell NYLCare-Gulf
Coast and NYLCare-Southwest. If the assets are not sold within six (6)
months after the appointment of the trustee, the Court shall enter such
orders as it shall deem appropriate to carry out the purpose of the
trust. (Revised Final Judgment para. V.A., F.)
The Revised Hold Separate Stipulation and Order ensure that
NYLCare-Gulf Coast and NYLCare-Southwest function as independent,
economically viable, ongoing business concerns and that competition is
maintained prior to the divestitures. It requires Aetna to immediately
take steps to preserve, maintain, and operate NYLCare-Gulf Coast and
NYLCare-Southwest as independent competitors until the completion of
the divestitures ordered by the Revised Final Judgment, with
management, sales, service, underwriting, administration, and
operations held entirely separate, distinct, and apart from those of
Aetna. In addition, Aetna is obligated to cause NYLCare-Gulf Coast and
NYLCare-Southwest to maintain contracts or agreements for coverage of
approximately two hundred sixty thousand (260,000) commercially insured
HMO and HMO-based POS plan enrollees in Houston and contracts or
agreements for coverage of approximately one hundred sixty seven
thousand (167,000) commercially insured HMO and HMO-based POS plan
enrollees in Dallas through the date of signing the definitive purchase
and sale agreement(s) for the divestiture of the two NYLCare entities.
Until the plaintiffs, in their sole discretion, determine the NYLCare-
Gulf Coast and NYLCare-Southwest can function as effective competitors,
Aetna may not take any action to consummate the proposed acquisition of
Prudential. (Revised Final Judgment para. IV,I.)
The United States, the State of Texas, and the defendants have
stipulated that the proposed Revised Final Judgment may be entered
after compliance with the APPA. Entry of the proposed Revised Final
Judgment would terminate this action, except that the Court would
retain jurisdiction to construe, modify, or enforce the provisions of
the proposed Revised Final Judgment and to punish violations thereof.
II. The Alleged Violations
A. The Defendants
Aetna is a Connecticut corporation providing health and retirement
benefits and financial services with its principal place of business in
Hartford, Connecticut. Through its wholly owned subsidiary, Aetna U.S.
Healthcare, Aetna offers an array of health insurance products,
including indemnity (``fee-for-service''), preferred provider
organization (``PPO''), POS, and HMO plans. Aetna also purchases
physicians' services for its health plan members, which it offers to
members through Aetna's health plans. In 1998, Aetna U.S. Healthcare
reported revenues of over $14 billion and was the largest health
insurance company in the country, providing health care benefits to
approximately 15.8 million people in 50 states and the District of
Columbia.
Prudential is a New Jersey mutual life insurance company with its
principal place of business in Newark, New Jersey. Like Aetna,
Prudential offers indemnity, PPO, POS, and HMO plans and also buys
physicians' services, which it offers to its enrollees through
Prudential's health plans. In 1998, Prudential HealthCare reported
total revenues of approximately $7.5 billion and was the nation's ninth
largest health insurance company, serving approximately 4.9 million
health insurance beneficiaries in 28 states and the District of
Columbia.
B. Description of the Events Giving Rise to the Alleged Violations
Aetna and Aetna Life Insurance Company, a wholly owned subsidiary
of Aetna, entered into an Asset Transfer and Acquisition Agreement
(``Agreement'') dated December 9, 1998, with Prudential and PRUCO,
Inc., a wholly owned subsidiary of Prudential. Under the terms of the
Agreement, Aetna would acquire substantially all of Prudential's assets
related to issuing, selling, and administering group medical, dental
indemnity, and managed care plans, including HMO and HMO-POS plans. The
purchase price stated in the Agreement is $1 billion, consisting of
$465 million in cash, $500 million in three-year promissory notes, $15
million in cash payable under a Coinsurance Agreement, and $20 million
in cash to be paid under a Risk-Sharing Agreement.
C. Anticompetitive Effects of the Proposed Acquisition
1. The Sale of HMO and HMO-POS Plans
Aetna's proposed acquisition of Prudential would be likely to
substantially lessen competition in the sale of HMO and HMO-POS plans
in Houston and Dallas, Texas, in violation of Section 7.
a. Product Market
Managed care companies, such as Aetna and Prudential, contract with
employers and other group purchasers to provide health insurance
services or to administer health care coverage to employees and other
group members. There are a variety of managed care products available
to employers and other group purchasers which provide health care
services at an agreed-upon rate, subject to certain utilization review
and management requirements. These products, which include HMO, PPO,
and POS plans, have become increasingly popular options for employers,
largely because of the managed care companies' ability to obtain
competitive rates from health care providers and to control utilization
of health care services.
As the Complaint alleges, HMO and HMO-POS products differ from PPO
or indemnity plans in terms of benefit design, cost, and other factors.
(Complaint para. 15.) For example, HMOs provide superior preventative
care benefits, but they place limits on treatment options and generally
require use of a primary care physician ``gatekeeper.'' PPO plans,
which do not require enrollees to go through a ``gatekeeper'' and do
not emphasize preventative care, are generally more expensive than
HMOs. POS plans can be based on either an HMO or PPO network and fall
between HMO and PPO plans in terms of access and cost. That is, POS
plans offer patients more flexibility at a higher cost relative to
HMOs. In general, then, PPOs and indemnity options are more expensive,
provide better benefits with respect to coverage when ill, and allow
greater access to providers. In contrast, HMO and HMO-based POS options
are generally less expensive, provide better benefits with respect to
health maintenance or preventaive care, place greater limits on
treatment, and restrict access to providers. (Id.)
Not only do these plans in fact differ by cost and benefit
configuration, they are perceived as different by purchasers; neither
employers nor employees view PPO plans as adequate substitutes for HMO
or HMO-POS plans. Instead, they
[[Page 44955]]
view them as distinct products, meeting different needs and appealing
to different types of enrollees. Indeed, enrollees who leave an HMO
disproportionately select another HMO (or HMO-POS), not a PPO, for
their next health care benefit plan. (Complaint para. 17.)
Moreover, analyses of the data obtained from the parties and from
other plans strongly indicate that consumers--employers and employees--
view HMO and HMO-POS plans as distinct from other health plans and that
PPO or indemnity plans are not thought to be ready substitutes for HMO
and HMO-POS plans. These analyses demonstrate that the elasticity of
demand for HMO and HMO-POS plans is sufficiently low that a small but
significant price increase for all HMO and HMO-POS plans would be
profitable because consumers would not shift to PPO and indemnity plans
in sufficient numbers to render such an increase unprofitable.
Together with consistent evidence from numerous witnesses
interviewed, these analyses support the conclusion that HMO and HMO-POS
plans constitute the relevant product for analysis of the proposed
transaction. (Complaint para. 18.)
b. Geographic Markets
Virtually all managed care companies establish provider networks in
the areas where employees work and live, and they compete on the basis
of these local provider networks. The relevant geographic markets in
which HMO and HMO-POS plans compete are thus generally no larger than
the local areas within which HMO and HMO-POS enrollees demand access to
providers. More specifically, a small but significant increase in the
price of HMO and HMO-POS plans would not cause a sufficient number of
customers to switch to health plans outside of these regions to make
such a price increase unprofitable. For this reason, the Department's
analysis focused on MSAs in and around Houston and Dallas as the
relevant geographic markets. (Complaint para. 20.)
c. Competitive Effects
Aetna and Prudential are among each other's principal competitors
in the sale of HMO and HMO-POS plans in Houston and Dallas, and
employers currently view them as close substitutes based on product
design and quality. Maintaining Prudential as a competitor to Aetna in
Houston and Dallas has become particularly important since Aetna's 1998
acquisition of NYLCare, a transaction that propelled Aetna's HMO and
HMO-POS market share from 13% to 44% in Houston and from 11% to 26% in
Dallas. (Complaint para. 22.) The proposed acquisition of Prudential
would further enhance Aetna's position by eliminating competition
between the two companies, giving Aetna market shares of 63% in Houston
and 42% in Dallas. (Id.)
As the Complaint alleges, potential or current competitors will not
be able to constrain Aetna's exercise of its post-merger market power
in the defined geographic markets. (Complaint para. 25). Effective new
entry for a HMO or HMO-POS plan in Houston or Dallas typically takes
two to three years and costs approximately $50 million. (Complaint
para. 23.) In such an environment, de novo entry is unlikely to defeat
a price increase over the short term. (Id.) Furthermore, companies
currently offering PPO or indemnity plans are unlikely to shift their
resources to provide HMO or HMO-POS plans in Houston or Dallas in the
event of a small but significant price increase. A number of managed
care providers have stated during interviews that such a shift would be
difficult, expensive, and time consuming, and that they would not enter
the HMO or HMO-POS markets even if Aetna were to raise its prices a
``small but significant amount.'' (Merger Guidelines para. 1.11.)
Finally, managed care companies that presently offer HMO or HMO-POS
plans in Houston and Dallas are unlikely to be able to expand or
reposition themselves sufficiently to restrain anticompetitive behavior
by Aetna in either area following the transaction. (Complaint para.
24.) Not only would these companies face some of the costs and
difficulties of a new entrant, they would be unable to contend
successfully with Aetna's advantages in national reputation, quality
accreditation, product array, and provider network (Id.) It is
therefore unlikely that either new entry or expansion by competitors
could counteract a post-merger price increase. (Complaint para. 25.)
For all of these reasons, the proposed transaction would enable the
merged entity to increase prices or reduce the quality of HMO and HMO-
POS plans available to consumers in these areas, in violation of
Section 7.
2. The Purchase of Physicians' Services
As alleged in the Complaint, Aetna's acquisition of Prudential will
also consolidate its purchasing power over physicians' services in
Houston and Dallas, enabling the merged entity to unduly reduce the
rates paid for those services. 5
a. Product Market
Physician's services are those medical services provided and sold
by physicians, and the only purchasers are individual patients or the
commercial and government health insurers that purchase their services
on behalf of individual patients. (Complaint para. 27.) As a result,
physicians cannot seek other purchasers in the event of a small but
significant decrease in the prices paid by these buyers. (Id.) Nor will
such a price decrease cause physicians to stop providing their services
or shift towards other activities in numbers sufficient to make such a
price reduction unprofitable. (Id.) Physicians' services thus
constitute the relevant product market within which to assess the
likely effect of Aetna's acquisition of Prudential. (Id.)
b. Geographic Markets
The geographic markets for the purchase and sale of physicians'
services are localized. In Houston and Dallas, as elsewhere, patients
seeking medical care generally prefer to have access to treatment close
to where they work or live. As a result, commercial and government
health insurers--the primary purchasers of physicians' services--seek
to have in their provider networks physicians whose offices are
convenient to where their enrollees work or live. (Complaint para. 19.)
Consequently, physicians could not shift their services towards
purchasers outside of these areas in numbers sufficient to make a price
paid to physicians practicing in Houston or Dallas.
Furthermore, an established physician who has invested time and
expense in building a practice in Houston or Dallas (or any other
locale) would incur considerable costs in moving his or her practice to
a new geographic area, including the substantial costs of building new
relationships with hospitals, other physicians, employees, and patients
in the new area. (Complaint para. 28.) For these reasons, a small but
significant decrease in the prices paid to physicians practicing in
Houston or Dallas would not cause physicians to relocate their
practices in numbers sufficient to make such a price reduction
unprofitable. (Complaint para. 29).
For all of these reasons, the MSAs in and around Houston and Dallas
constitute the relevant geographic markets. (Id.; Merger Guidelines
para. 1.21.)
c. Competitive Effects
In Houston and Dallas, as elsewhere, the contract terms a physician
can
[[Page 44956]]
obtain from a managed care company such as Aetna or Prudential depend
on the physician's ability to terminate, or to credibly threaten to
terminate, his or her relationship if the company demands unfavorable
contract terms. (Complaint para. 30). Since physician's services,
unlike certain tangible products, cannot be stored until the physician
finds a more acceptable buyer, failing to replace lost business
expeditiously imposes an irrevocable loss of revenue upon a physician.
Consequently, a physician's ability to terminate, or credibly threaten
to terminate, a provider relationship depends on his or her ability to
make up that lost business promptly. (Id.)
Physicians, however, generally have only a limited ability to
encourage patients to switch health care plans or providers. (Complaint
para. 31.) To retain a patient after terminating a plan requires the
physician to convince the patient either to switch to another employer-
sponsored plan in which the physician participates (which might not be
an option) or to pay considerably higher out-of-pocket costs, either in
the form of increased copayments for use of an out-of-network physician
(if allowed) or by absorbing the total cost of the physicians' services
as unreimbursed medical expenses. As a result, a physician who
discontinues his or her relationship with Aetna could expect to lose a
significant share of his or her Aetna patients.
A physician's ability to replace, in a timely manner, such lost
business is significantly diminished when a large number of patients
need to be replaced. (Complaint para. 32.) Because of Aetna's all
products clause''--which requires a physician to participate in all of
Aetna's health plans if he or she participates in any Aetna plan--a
physician would lose patients from all Aetna plans if he or she rejects
the rates or other terms of any one Aetna plan. Thus, the cost of
replacing Aetna patients will be greater when Aetna plans collectively
account for a larger share of a physician's total revenue.
Furthermore, the ability to replace a given number of Aetna
patients is diminished when a physician's non-Aetna sources of patients
are more limited. Consequently, the cost of replacing Aetna patients
will be greater the larger Aetna's share of all patients in a locality.
Aetna's proposed acquisition of Prudential, following its recent
acquisition of NYLCare, will give it control over both a large share of
the revenue of a substantial number of physicians in Houston and Dallas
and a large share of all patients in those areas. (Complaint para. 33.)
In light of the limited ability of physicians to encourage patient
switching, a significantly larger number of physicians' in Houston and
Dallas would be unable to reject Aetna's demands for more adverse
contract terms if Aetna were allowed to acquire Prudential. (Id.) The
proposed acquisition thus would give Aetna the ability to unduly
depress physician reimbursement rates in Houston and Dallas, likely
leading to a reduction in quantity or degradation in the quality of
physicians' services. (Id.; see also Merger Guidelines para. 0.1.)
III. Explanation of the Proposed Revised Final Judgment
The proposed Revised Final Judgment orders and directs Aetna to
divest its interests in the Houston operations of NYLCare-Gulf Coast
and the Dallas operations of NYLCare-Southwest, consisting of, among
other assets, approximately 260,000 and 167,000 commercially insured
HMO and HMO-POS enrollees in Houston and Dallas, respectively. 6
(Revised Final Judgment para. II.E, F.)
The provisions of the proposed Revised Final Judgment are designed
to eliminate the two anticompetitive effects of the proposed
acquisition. First, the divestitures will preserve competition and
protect consumers from higher prices for HMO and HMO-POS plans by
establishing a new, independent, and economically viable competitor--or
by significantly strengthening the existing competitors--in the
development, marketing, and sale of HMO and HMO-POS plans in the
Houston and Dallas areas. Second, the divestitures will prevent the
consolidation of purchasing power over physicians' services in Houston
and Dallas and thereby deny Aetna the ability to unduly depress
physician reimbursement rates.
In order to meet these two objectives, the proposed Revised Final
Jugdment requires that Aetna promptly make NYLCare-Gulf Coast and
NYLCare-Southwest available for purchase. (Revised Final Judgment para.
IV.A.) Aetna must give all prospective purchasers reasonable access to
all NYLCare-Gulf Coast's and NYLCare-Southwest's personnel, physical
facilities, and any and all financial, operational, or other documents
and information customarily provided as part of a due diligence
process. (Revised Final Judgment para. IV.F.) At the same time, Aetna
must immediately cease all actions directed at the integration of
NYLCare-Gulf Coast and NYLCare-Southwest into Aetna and must take all
steps necessary to ensure that NYLCare-Gulf Coast and NYLCare-Southwest
are maintained and operated as independent, on-going, economically
viable, and active competitors until completion of the divestitures
ordered by the Revised Final Judgment. (Revised Final Judgment para.
IV.G, H.) Such steps must include the appointment of experienced senior
management to run NYLCare-Gulf Coast and NYLCare-Southwest until the
divestitures required by the Final Judgment have been accomplished, as
well as the creation of a separate and independent sales organization,
provider relations organization, patient management/quality management
organization, commercial operations organization, network operations
organization, and underwriting organization. (Revised Final Judgment
para. IV.H.1-7.) To maintain the viability of the NYLCare entities,
Aetna is also required to provide certain support services (i.e.,
legal, financial, actuarial, software, and computer operations support)
to NYLCare-Gulf Coast and NYLCare-Southwest until the divestitures are
completed. (Revised Final Judgment para. IV.H.8, 9.)
Aetna is obligated to cause NYLCare-Gulf Coast and NYLCare-
Southwest to maintain contracts or agreements for coverage of
approximately two hundred sixty thousand (260,000) commercially insured
HMO and HMO-based POS plan enrollees in Houston and contracts or
agreements for coverage of approximately one hundred sixty-seven
thousand (167,000) commercially insured HMO and HMO-based POS plan
enrollees in Dallas through the date of signing the definitive purchase
and sale agreement for the divestitures of the two NYLCare entities.
(Revised Final Judgment para. IV.B.) Aetna is required to use its best
efforts to accomplish the divestiture as expeditiously as possible and
will accelerate the timetable for executing the definitive purchase and
sale agreement(s) for the divestiture of the NYLCare entities to a
target date of October 1, 1999. (Revised Final Judgment para. IV.C.) In
addition, Aetna will request that the NYLCare entities provide bi-
weekly reports on total enrollment to the plaintiffs until the
divestitures are complete. (Revised Final Judgment para. IV.J.) Aetna
will also fund an incentive pool of at least $500,000, which will be
available to the management of the NYLCare entities if they meet the
membership targets described above as of the closing date for the sale
of the entities. (Revised Final Judgment para. IV.H.10.)
Finally, Aetna may offer PPO related business as part of the sale
of the NYLCare entities. (Revised Final Judgment IV.B.) The actual
number of such PPO enrollees as of the signing date of the definitive
purchase and sale
[[Page 44957]]
agreement for the divestitures of the NYLCare entities will be taken
into account in determining compliance with the membership targets
described in Section IV.B of the proposed Revised Final Judgment. (Id.)
This last provision in no way lessens Aetna's obligation to divest
itself of all of the assets of NYLCare-Gulf Coast and NYLCare-
Southwest, excepting only the Excluded Assets.
The proposed Revised Final Judgment prohibits Aetna from taking any
action to consummate the proposed acquisition until such time as
plaintiffs, in their sole discretion, are satisfied that NYLCare-Gulf
Coast and NYLCare-Southwest are independent and viable competitors and
that Aetna has complied with the terms of the Revised Hold Separate
Stipulation and Order or until the divestitures required by this
Revised Final Judgment are completed. (Revised Final Judgment para.
IV.I.) The divestitures must be accomplished by selling or conveying
NYLCare-Gulf Coast and NYLCare-Southwest to a purchaser(s) in such a
way as to satisfy the plaintiffs, in their sole discretion, that the
entities conveyed can and will be used by the purchaser(s) as part of a
viable, ongoing business engaged in the sale of HMO and HMO-POS plans
in Houston and Dallas. (Revised Final Judgment para. IV.K.) The
divestitures may be made to one or more purchasers provided that in
each instance it is demonstrated, to the sole satisfaction of the
plaintiffs, that the acquirer(s) will remain viable competitors. (Id.)
The divestitures must be made to a purchaser(s) which is shown, to the
plaintiffs' sole satisfaction, to have (1) the capability and intent of
competing effectively in the sale of HMO and HMO-POS plans in Houston
and Dallas, (2) the managerial, operational, and financial capability
to complete effectively in the sale of HMO and HMO-POS plans in Houston
and Dallas, and (3) no limitation, through any agreement with Aetna or
otherwise, in its ability to compete effectively in the sale of HMO and
HMO-POS plans in Houston and Dallas. (Id.)
Aetna must file all required applications for regulatory approval
of the divestitures within one-hundred twenty (120) calender days after
June 21, 1999, the date on which the original proposed Final Judgment
was filed, and must complete the divestitures within five (5) business
days after it receives all necessary regulatory approvals, or five (5)
business days after the notice of the entry of this Revised Final
Judgment by the Court, whichever is later. (Revised Final Judgment
para. IV.C.) The plaintiffs may extend the time period for the
divestitures by no more than sixty (60) calendar days and may, in their
sole discretion, grant any further time extension needed by Aetna to
obtain regulatory approval of the divestitures. (Revised Final Judgment
para. IV.D.)
If Aetna cannot accomplish these divestitures within the above-
described period, the proposed Revised Final Judgment provides that,
upon application by the plaintiffs, the Court will appoint a trustee to
effect the divestitures. (Revised Final Judgment para. V.A.) After the
trustee's appointment becomes effective, the trustee will file monthly
reports with the parties and the Court, setting forth the trustee's
efforts to accomplish the divestitures. (Revised Final Judgment para.
V.E.) If the trustee has not accomplished such divestitures within six
(6) months after its appointment, the trustee and the parties will make
recommendations to the Court, which shall enter such orders as it deems
appropriate to carry out the purpose of the trust, including, if
necessary, extending the trust and the term of the trustee's
appointment by a period requested by the plaintiffs. (Revised Final
Judgment para. V.F.)
The proposed Revised Final Judgment also requires Aetna to deliver
affidavits to plaintiffs as to the fact and manner of its compliance
with the Revised Final Judgment within twenty-five (25) calendar days
of the Court's June 21, 1999 entry of the original Hold Separate Order
and Stipulation, and every thirty (30) calendar days thereafter, until
divestitures have been completed, (Revised Final Judgment para. VII.A.)
Aetna must also submit, within twenty-five (25) calendar days of the
Court's entry of the original Hold Separate Order and Stipulation, an
affidavit that describes in detail all actions Aetna has taken and all
steps Aetna has implemented on an on-going basis to preserve NYLCare-
Gulf Coast and NYLCare-Southwest, describing Aetna's efforts to
maintain and operate NYLCare-Gulf Coast and NYLCare-Southwest as active
competitors, and the plans and timetable for Aetna's integration of
Prudential's health care assets. (Revised Final Judgment para. VII.B.)
The relief sought has been tailored to safeguard Houston and Dallas
consumers from an increase in price or a reduction in quality of HMO
and HMO-POS products. The relief sought also ensures that physicians in
these markets will be protected from an undue depression of
reimbursement rates, which could have led to a reduction in the
quantity or a degradation in the quality of physicians' services.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act (15 U.S.C. Sec. 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
attorney's fees. Entry of the proposed Revised 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. Sec. 16(a)), entry of the proposed Revised Final Judgment has no
prima facie effect in any subsequent private lawsuit that may be
brought against Aetna or Prudential.
V. Procedures Available for Modification of the Proposed Revised
Final Judgment
The parties have stipulated that the proposed Revised Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the plaintiffs have not withdrawn
their consent. The APPA conditions entry upon the Court's determination
that the proposed Revised Final Judgment is in the public interest.
The APPA provides a period of at least sixty (60) days preceding
the effect date of the proposed Revised Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Revised Final Judgment. Any person should comment within sixty
(60) days of the date this Competitive Impact Statement is published in
the Federal Register. The United States will evaluate and respond to
the comments. All comments will be given due consideration by the
Department of Justice, which remains free to withdraw its consent to
the proposed Revised Final Judgment at any time prior to entry. The
comments and the response of the United States will be filed with the
Court and published in the Federal Register.
Written comments should be submitted to: Gail Kursh, Chief, Health
Care Task Force, Antitrust Division, U.S. Department of Justice, 325
Seventh St., N.W., Suite 400, Washington, D.C. 20530. The proposed
Revised Final Judgment provides that the Court will retain jurisdiction
over this action and that the parties may apply to the Court for any
order necessary or appropriate for the modification, interpretation, or
enforcement of the Revised Final Judgment.
[[Page 44958]]
VI. Alternatives to the Proposed Revised Final Judgment
The Department considered, as an alternative to the proposed
Revised Final Judgment, a full trial on the merits of the Complaint
against the defendants. The Department is satisfied, however, that the
divestitures of the assets and other relief contained in the proposed
Revised Final Judgment will preserve viable competition in the sale of
HMO and HMO-POS products and in the purchase of physicians' services in
Houston and Dallas, Texas that otherwise would be affected adversely by
the acquisition. Thus, the proposed Revised Final Judgment would
achieve the relief the Department 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 Proposed Revised Final
Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the Court shall determined whether entry of
the proposed Revised Final Judgment ``is in the public interest.'' In
making that determination, the Court may consider:
(1) 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, and any other
considerations bearing upon the adequacy of such judgment; [and]
(2) the impact of entry of such judgment 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 trail.
As the United States Court of Appeals for the District of Columbia
Circuit has held, this statute permits a court to consider, among other
things, the relationship between the remedy secured and the specific
allegations set forth in the plaintiff's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See United
States v. Microsoft Corp., 56 F.3d 1448, 1461-62 (D.C. Cir. 1995). In
conducting this inquiry, ``[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.'' 7 Rather,
[a]bsent 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.
United States v. MidAmerica Dairymen, Inc., 1977-1 Trade Cas. para.
61,508 at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d. 456, 462 (9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th cir. 1981)); see also Microsoft,, 56
F.3d. at 1460-62.
The law requires that the 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.8
A proposed final judgment, therefore, need not eliminate every
anticompetitive effect of a particular practice, nor guarantee free
competition in the future. Court approval of a final judgment requires
a standard more flexible and less strict than the standard required for
a finding of liability: ``[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.' ''9
The proposed Revised Final Judgment here offers strong and
effective relief that fully addresses the competitive harm posed by the
proposed transaction.
VIII. Determinative Documents
There are no determinative materials or documents of the type
described in Section 2(b) of the APPA, 15 U.S.C. Sec. 16(b), that were
considered by the United States in formulating the proposed Revised
Final Judgment. Consequently, none are filed herewith.
Dated: August 3, 1999.
Respectfully submitted,
Paul J. O'Donnell
John B. Arnett, Sr.
Steven Brodsky
Deborah A. Brown
Claudia H. Dulmage
Dionne C. Lomax
FredericK S. Young,
Attorneys, U.S. Department of Justice, Antitrust Division, Health Care
Task Force, 325 Seventh St., N.W., Suite 400, Washington, D.C. 20530,
Tel: (206) 616-5933, Facsimile: (202) 514-1517.
[FR Doc. 99-21368 Filed 8-17-99; 8:45 am]
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