[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