[Federal Register Volume 61, Number 27 (Thursday, February 8, 1996)]
[Notices]
[Pages 4793-4800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2657]



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DEPARTMENT OF JUSTICE
Antitrust Division


United States of America vs. Pacific Scientific Company; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the District of Columbia In 
United States vs. Pacific Scientific Company, Civ. No. 96-0165. The 
proposed Final Judgment is subject to approval by the Court after the 
expiration of the statutory 60-day public comment period and compliance 
with the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-
(h).
    On January 30, 1996, the United States filed a Complaint seeking to 
enjoin a transaction by which Pacific Scientific agreed to acquire Met 
One, Inc. Pacific Scientific and Met One are major manufacturers of 
drinking water particle counters. The Complaint alleged that the 
proposed acquisition would substantially lessen competition in the 
manufacture and sale of drinking water particle counters in the United 
States in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18, 
and Section 1 of the Sherman Antitrust Act, 15 U.S.C. Sec. 1.
    The proposed Final Judgment orders defendant to sell all of Pacific 
Scientific's U.S. assets and rights relating to the research and 
development, manufacture and sale of Pacific Scientific's Drinking 
Water Quality Monitoring Systems, other than real property, and Met 
One's software relating to Drinking Water Quality Monitoring Systems, 
and other assets if necessary to make an economically viable competitor 
in the manufacture and sale of drinking water particle counters. The 
Stipulation effects a hold separate agreement that, in essence, 
requires Pacific Scientific to ensure that, until the divestiture 
mandated by the Final Judgment has been accomplished, Met One's 
operation will be held separate and apart from, and operated 
independently of, Pacific Scientific's assets and businesses. A 
Competitive Impact Statement filed by the United States describes the 
Complaint, the proposed Final Judgment, and remedies available to 
private litigants.
    Public comment is invited within the statutory 60-day comment 
period. Such comments, and the responses thereto, will be published in 
the Federal Register and filed with the Court. Written comments should 
be directed to Craig W. Conrath, Chief, Merger Task Force, Antitrust 
Division, Room 3700, 1401 H Street NW., Washington, D.C. 20530 (202-
307-5779). Copies of the Complaint, proposed Final Judgment and 
Competitive Impact Statement are available for inspection in Room 207 
of the U.S. Department of Justice, Antitrust Division, 325 7th Street 
NW., Washington, D.C. 20530 (telephone: (202) 514-2481), and at the 
office of the Clerk of the United States District Court for the 
District of Columbia, Third Street and Constitution Avenue NW., 
Washington, D.C. 20001.
    Copies of any of these materials may be obtained upon request and 
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court for the District of Columbia

    In the matter of: United States of America, Plaintiff vs. 
Pacific Scientific Company, a corporation; Defendant Docket No.: 96-
0165.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, as follows:
    (1) The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the District for the District of Columbia.
    (2) The parties stipulate that a Final Judgment in the form hereto 
attached 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. Sec. 16), and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on defendant and by filing that 
notice with the Court.
    (3) Pacific Scientific shall abide by and comply with the 
provisions of the proposed Final Judgment pending entry of the 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) Pacific Scientific shall prepare and deliver reports in the 
form required by the provisions of paragraph B of Section VII of the 
proposed Final Judgment commencing no later than February 29, 1996, and 
every thirty days thereafter pending entry of the Final Judgment.

[[Page 4794]]

    (5) In the event plaintiff withdraws its consent, as provided in 
paragraph 2 above, or if the proposed Final Judgment is not entered 
pursuant to this Stipulation, this Stipulation shall be of no effect 
whatever, and the making of this stipulation shall be without prejudice 
to any party in this or any other proceeding.

    Dated: January 26, 1996.

    For Plaintiff United States of America.
Craig W. Conrath,
Attorney, U.S. Department of Justice, Antitrust Division, Merger Task 
Force, 1401 H Street NW., Washington, D.C. 20005, (202) 307-5779.

    For the Defendant Pacific Scientific Company.
Donald I. Baker,
Baker & Miller, PLLC, 700 Eleventh Street, NW., Suite 615, Washington, 
D.C. 20004, (202) 637-9499, Attorney For Pacific Scientific Company.

In the United States District Court for the District of Columbia

    In the matter of: United States of America, Plaintiff v. Pacific 
Scientific Company, a corporation Defendant. Civil Action No.: 96-
0165.

Final Judgment

    Whereas plaintiff, United States of America (hereinafter ``United 
States'') having filed its Complaint herein, and defendant, by their 
respective attorneys, having consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law 
herein, and without this Final Judgment constituting any evidence 
against or an admission by any party with respect to any issue of law 
or fact herein;
    And whereas, defendant has agreed to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    And whereas, prompt and certain divestiture of certain assets is 
the essence of this agreement;
    And whereas, the parties intend to require defendant to divest, as 
a viable line of business, the Drinking Water Quality Monitoring Assets 
so as to ensure, to the sole satisfaction of the plaintiff, that the 
Acquirer will be able to manufacture and sell Drinking Water Quality 
Monitoring Systems as a viable, ongoing line of business;
    And whereas, defendant has represented to plaintiff that the 
divestitures required below can and will be made and that defendant 
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 the subject matter of this action 
and over each of the parties hereto. The Complaint states a claim upon 
which relief may be granted against the defendant under Section 7 of 
the Clayton Act, as amended (15 U.S.C. Sec. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Drinking Water Quality Monitoring Systems'' means water 
particle detection systems used in the evaluation of potable water, 
including but not limited to: (1) on-line systems, such as the ``Water 
Particle Counting System'' (WPCSTM), (2) portable systems, such as 
the VersaCount LVTM/LogEasyTM integrated water sample 
particle counting system, and (3) laboratory-based systems, such as 
stationary liquid batch sample particle counting systems.
    B. ``Pacific Scientific'' means defendant Pacific Scientific 
Company, a California corporation with its headquarters in Newport 
Beach, California, and includes its successors and assigns, their 
subsidiaries, affiliates, directors, officers, managers, agents and 
employees.
    C. ``Met One'' means Met One, Inc., a California corporation with 
its headquarters in Grants Pass, Oregon, and its successors and 
assigns, their subsidiaries, affiliates, directors, officers, managers, 
agents and employees.
    D. ``Drinking Water Quality Monitoring Assets'' means all of 
Pacific Scientific's U.S. assets and rights relating to the research 
and development, manufacture and sale of Pacific Scientific's Drinking 
Water Quality Monitoring Systems, other than real property, and Met 
One's software relating to Drinking Water Quality Monitoring Systems. 
Drinking Water Quality Monitoring Assets include, but are not limited 
to, all Pacific Scientific rights to patents, trade secrets, 
technology, know-how, specifications, designs, drawings, processes, 
production information, manufacturing information, testing and quality 
control data, servicing information, research materials, technical 
information, distribution information, information stored on management 
information systems (and specifications sufficient for the Acquirer to 
use such information), software specific to drinking water qualify 
monitoring systems, inventory sufficient for the Acquirer to complete 
all safety and efficacy studies, studies or tests necessary to obtain 
EPA or other governmental approvals, and all data, contractual rights, 
materials and information relating to obtaining EPA approvals and other 
government or regulatory approvals within the United States, and 
certain rights to brand or trade names (excluding the HIAC/Royco, 
Royco, Pacific Scientific, and Met-One trade names). Drinking Water 
Quality Monitoring Assets also include all Pacific Scientific customer 
lists, customer information, prospects, mailing lists, quotations and 
proposals for Drinking Water Quality Monitoring Systems and their 
applications, service contracts for Drinking Water Quality Monitoring 
Systems and their applications, advertising materials, advertising 
assistance, marketing training, and marketing assistance for Drinking 
Water Quality Monitoring Systems and their applications, and copies of 
and rights to software and technical information for Drinking Water 
Quality Monitoring Systems and their applications. Drinking Water 
Quality Monitoring Assets shall include assets sufficient, to the sole 
satisfaction of the plaintiff, to ensure that the Acquirer will be able 
to manufacture and sell Drinking Water Quality Monitoring Systems as a 
viable, ongoing line of business.
    E. ``Divestiture Assets'' means the Drinking Water Quality 
Monitoring Assets, or such lesser portion thereof as is sufficient to 
ensure, to the sole satisfaction of the plaintiff, that the Acquirer 
will be able to manufacture and sell Drinking Water Quality Monitoring 
Systems as a viable, ongoing line of business.
    F. ``Acquirer'' means the entity or entities to whom Pacific 
Scientific shall divest the Divestiture Assets.

III. Applicability

    A. The provisions of this Final Judgment apply to the defendant, 
its successors and assigns, their subsidiaries, affiliates, directors, 
officers, managers, agents, and employees, and all other persons in 
active concert or participation with any of them who shall have 
received actual notice of this Final Judgment by personal service or 
otherwise.
    B. Pacific Scientific shall require, as a condition of the sale or 
other disposition of all or substantially all of the Divestiture Assets 
other than as provided in this Final Judgment, that the acquiring party 
or parties agree to be 

[[Page 4795]]
bound by the provisions of this Final Judgment.

IV. Requirement to Hold Separate

    Prior to the divestiture contemplated by this Final Judgment:
    A. Pacific Scientific shall preserve, hold, and continue to operate 
the business of Pacific Scientific and the business of Met One as 
ongoing businesses, with their assets, management, and operations 
separate, distinct, and apart from one another. Pacific Scientific 
shall use all reasonable efforts to maintain the business of Pacific 
Scientific and the business of Met One as viable and active 
competitors.
    There shall be no exchange between Pacific Scientific or Met One of 
any confidential business information (other than accounting 
information required in the ordinary course of business) or any 
technology or know-how.
    B. Pacific Scientific shall not, without the consent of the United 
States, sell, lease, assign, transfer, or otherwise dispose of, or 
pledge as collateral for loans (except such loans and credit facilities 
as are currently outstanding or replacements or substitutes therefor) 
the Divestiture Assets or any business assets of Met One, except that 
any such asset that is replaced in the ordinary course of business with 
a newly purchased asset may be sold or otherwise disposed of, provided 
the newly purchased asset is identified as a replacement for an asset 
to be divested.
    C. In its efforts to preserve and maintain the business of Pacific 
Scientific and the business of Met One as viable and active 
competitors, the obligations of Pacific Scientific shall include, but 
are not limited to: preserving all equipment, all rights to brand or 
trade names, patents, trade secrets, technology, know-how, 
specifications, designs, drawings, processes, production information, 
manufacturing information, testing and quality control data, servicing 
information, research materials, technical information, distribution 
information, customer lists, information stored on management 
information systems (and specifications sufficient for the Acquirer to 
use such information), software specific to Pacific Scientific's or Met 
One's divestiture assets, inventory sufficient for the Acquirer to 
complete all safety and efficacy studies, studies or tests necessary to 
obtain EPA or other governmental approvals, and all data, contractual 
rights, materials and information relating to obtaining EPA approvals 
and other government or regulatory approvals within the United States. 
These obligations do not preclude sales in the ordinary course of 
business.
    D. Pacific Scientific shall provide and maintain sufficient working 
capital to maintain the Divestiture Assets business and the business of 
Met One as viable, ongoing businesses.
    E. Pacific Scientific shall provide and maintain sufficient lines 
and sources of credit to maintain the Divestiture Assets business and 
the business of Met One as viable, ongoing businesses.
    F. Pacific Scientific shall preserve the business assets of Pacific 
Scientific and Met One in a state of repair equal to their state of 
repair as of the date of Pacific Scientific's acquisition of Met One.
    G. Pacific Scientific shall maintain on behalf of the businesses of 
Pacific Scientific and Met One in accordance with sound accounting 
practice, separate, true and complete financial ledgers, books and 
records reporting the profit and loss and liabilities of the businesses 
on a monthly and quarterly basis.
    H. Pacific Scientific shall refrain from terminating or reducing 
any current employment, salary, or benefit agreements for any 
management, engineering, or other technical personnel employed by Met 
One or by Pacific Scientific in connection with the Divestiture Assets 
business of Pacific Scientific, except in the ordinary course of 
business, without the prior approval of the United States.
    I. Pacific Scientific shall refrain from taking any action that 
would have the effect of reducing the scope or level of competition 
between the businesses of Pacific Scientific and Met One without the 
prior approval of the United States.
    J. Pacific Scientific shall refrain from taking any action that 
would jeopardize its ability to divest the Divestiture Assets as a 
viable ongoing line of business.
    K. When an agreement has been reached for the sale of the 
Divestiture Assets that is satisfactory to the plaintiff in its sole 
discretion, Pacific Scientific may be released from the restrictions of 
this Part IV once the divestiture sale has been consummated, in the 
sole discretion of the plaintiff. Such release shall become effective 
when plaintiff so notifies the Court.

V. Divestiture of Assets

    A. Pacific Scientific is hereby ordered and directed, within 30 
days of the date this Order is entered, to divest the Divestiture 
Assets. Plaintiff, in its sole discretion, may agree to an extension of 
this time period, and shall notify the Court in such circumstances.
    B. Divestiture of the Divestiture Assets under Section V.A shall be 
accomplished in such a way as to satisfy the United States that the 
Divestiture Assets can and will be operated by the Acquirer as a 
viable, ongoing line of business.
    Divestiture of the Divestiture Assets under Section V.A shall be 
made to a purchaser for whom it is demonstrated to the sole 
satisfaction of the United States that (1) the purchase is for the 
purpose of competing effectively in the manufacture and sale of 
Drinking Water Quality Monitoring Systems, and (2) the Acquirer has the 
managerial, operational, and financial capability to compete 
effectively in the manufacture and sale of Drinking Water Quality 
Monitoring Systems.
    C. Pacific Scientific shall take all reasonable steps to accomplish 
quickly the divestitures contemplated by this Final Judgment.
    D. Pacific Scientific agrees that, if it fails to divest the 
Divestiture Assets within the time specified in Section V.A, it shall 
not oppose nor contest in any way a civil contempt penalty of not more 
than $100,000 as may be recommended and moved for by the United States. 
Pacific Scientific further agrees that, if it fails to divest the 
Divestiture Assets within the time specified in Section V.A, it shall 
not oppose nor contest in any way civil contempt penalties of not more 
than $10,000 per day, for each day after the date the United States 
moves for the appointment of a trustee pursuant to Section VI.A until 
the date it consents to appointment of a trustee pursuant to Section 
VI, as may be recommended and moved for by the United States.

VI. Appointment of Trustee

    A. In the event that Pacific Scientific has not divested the 
Divestiture Assets within 30 days of the date this Order is entered, 
the Court shall, on application of the United States, appoint a trustee 
selected by the United States to effect the divestiture of the 
Divestiture Assets. Unless plaintiff otherwise consents in writing, the 
divestiture shall be accomplished in such a way as to satisfy 
plaintiff, in its sole discretion, that the Divestiture Assets can and 
will be used by the Acquirer as a viable on-going line of business. The 
Divestiture shall be made to an Acquirer for whom it is demonstrated to 
plaintiff's sole satisfaction that the Acquirer has the managerial, 
operational, and financial capability to compete effectively, and that 
none of the terms of the divestiture agreement interfere with the 
ability of the purchaser to compete effectively.

[[Page 4796]]

    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture at the best price then obtainable upon a reasonable effort 
by the trustee, subject to the provisions of Section VII of this Final 
Judgment, and shall have such other powers as the Court shall deem 
appropriate. The trustee shall have the power and authority to hire at 
the cost and expense of defendant any investment bankers, attorneys, or 
other agents reasonably necessary in the judgment of the trustee to 
assist in the divestiture, and such professionals and agents shall be 
solely accountable to the trustee. The trustee shall have the power and 
authority to accomplish the divestiture at the earliest possible time 
to a purchaser acceptable to plaintiff, and shall have such other 
powers as this Court shall deem appropriate. Defendant shall not object 
to a sale by the trustee on any grounds other than the trustee's 
malfeasance, or on the grounds that the sale is contrary to the express 
terms of this Final Judgment. Any such objections by defendant must be 
conveyed in writing to plaintiff and the trustee within ten (10) days 
after the trustee has provided the notice required under Section VII.
    C. The trustee shall serve at the cost and expense of Pacific 
Scientific, 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 Pacific Scientific and 
the trust shall then be terminated. The compensation of such trustee 
and that of any professionals and agents retained by the trustee shall 
be reasonable in light of the value of the Divestiture Assets and based 
on a fee arrangement providing the trustee with an incentive based on 
the price and terms of the divestiture and the speed with which it is 
accomplished.
    D. Pacific Scientific shall use its best efforts to assist the 
trustee in accomplishing the required divestiture. 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 Pacific Scientific and Met One, and 
defendant shall develop financial or other information relevant to such 
assets as the trustee may reasonably request, subject to reasonable 
protection for trade secret or other confidential research, 
development, or commercial information. Defendant shall take no action 
to interfere with or to impede the trustee's accomplishment of the 
divestiture.
    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 divestiture ordered under this Final Judgment. If the 
trustee has not accomplished such divestiture within six (6) months 
after its appointment, the trustee shall thereupon promptly file with 
the Court a report setting forth (1) the trustee's efforts to 
accomplish the required divestiture, (2) the reasons, in the trustee's 
judgment, why the required divestiture has not been accomplished, and 
(3) the trustee's recommendations. 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 thereafter enter 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 United 
States.
    F. The Acquirer shall not, without the prior written consent of the 
United States, sell any of the acquired assets to, or combine any of 
the acquired assets with those of, Pacific Scientific during the life 
of this decree. Furthermore, the Acquirer shall notify plaintiff 45 
days in advance of any proposed sale of all or substantially all of the 
assets, or control over those assets, acquired pursuant to this Final 
Judgment.

VII. Notification

    A. Pacific Scientific or the trustee, whichever is then responsible 
for effecting the divestiture required herein, shall notify plaintiff 
of any proposed divestiture required by Section V or VI of this Final 
Judgment. If the trustee is responsible, it shall similarly notify 
Pacific Scientific. 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 or expressed an 
interest or desire to acquire any ownership interest in the Divestiture 
Assets, together with full details of the same. Within fifteen (15) 
days after receipt of the notice, plaintiff may request additional 
information concerning the proposed divestiture, the proposed 
purchaser, and any other potential purchaser. Pacific Scientific or the 
trustee shall furnish the additional information within fifteen (15) 
days of the receipt of the request. Within thirty (30) days after 
receipt of the notice or within fifteen (15) days after receipt of the 
additional information, whichever is later, the United States shall 
notify in writing Pacific Scientific and the trustee, if there is one, 
if it objects to the proposed divestiture. If the United States fails 
to object within the period specified, or if the United States notifies 
in writing Pacific Scientific and the trustee, if there is one, that it 
does not object, then the divestiture may be consummated, subject only 
to Pacific Scientific's limited right to object to the sale under 
Section VI.B. Upon objection by the United States or by Pacific 
Scientific under Section VI.B, the proposed divestiture shall not be 
accomplished unless approved by the Court.
    B. Thirty (30) days from the date when this Order becomes final, 
and every thirty (30) days thereafter until the divestiture has been 
completed or a trustee is appointed, Pacific Scientific shall deliver 
to plaintiff a written report as to the fact and manner of compliance 
with Section V of this Final Judgment. Each such report shall include, 
for each person who during the preceding thirty (30) days made an 
offer, expressed an interest or desire to acquire, entered into 
negotiations to acquire, or made an inquiry about acquiring any 
ownership interest in the Divestiture Assets or any of them, the name, 
address, and telephone number that person and a detailed description of 
each contact with that person during that period. Pacific Scientific 
shall maintain full records of all efforts made to divest all or any 
portion of the Divestiture Assets.

VIII. Financing

    Pacific Scientific shall not finance all or any part of any 
purchase made pursuant to Sections V or VI of this Final Judgment 
without the prior written consent of the United States.

IX. Compliance Inspection

    For the purpose of determining or securing compliance with this 
Final Judgment, and subject to any legally recognized privilege, from 
time to time:
    A. Duly authorized representatives of the United States, including 
consultants and other persons retained by the plaintiff, shall, upon 
the written request of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to Pacific Scientific made 
to its principal offices, be permitted:
    1. access during office hours to inspect and copy all books, 
ledgers, accounts, correspondence, memoranda, 

[[Page 4797]]
and other records and documents in the possession or under the control 
of defendant, which may have counsel present, relating to any matters 
contained in this Final Judgment; and
    2. subject to the reasonable convenience of Pacific Scientific and 
without restraint or interference from them, to interview Pacific 
Scientific directors, officers, employees, and agents, who may have 
counsel present, regarding any such matters.
    B. Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division, made to Pacific Scientific at its 
principal offices, Pacific Scientific shall submit written reports, 
under oath if requested, with respect to any of the matters contained 
in this Final Judgment as may be requested.
    C. No information nor any documents obtained by the means provided 
in this Section IX shall be divulged by any representative of the 
United States to any person other than a duly authorized representative 
of the Executive Branch of the United States, except in the course of 
legal proceedings to which the United States is a party (including 
grand jury proceedings), or for the purpose of securing compliance with 
this Final Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by Pacific 
Scientific to plaintiff, Pacific Scientific 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 Pacific Scientific 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 plaintiff 
shall give ten (10) days notice to Pacific Scientific prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding) to which Pacific Scientific is not a party.

X. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this 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, implementation, or modification of 
any of the provisions of this Final Judgment, for the enforcement of 
compliance herewith, and for the punishment of any violations hereof.

XI. Termination

    This Final Judgment will expire on the tenth anniversary of the 
date of its entry.

XII. Public Interest

    Entry of this Final Judgment is in the public interest.

  Dated:---------------------------------------------------------------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16

----------------------------------------------------------------------
United States District Judge

United States District Court for the District of Columbia

    In the matter of: United States of America, Plaintiff, v. 
Pacific Scientific Company, Defendant. Case Number 1:96CV00165. 
Judge: James Robertson. Deck Type: Antitrust. Date Stamp: 01/30/96.

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16(b)-(h), 
files this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    The United States filed a civil antitrust Complaint on January 30, 
1996, alleging that the proposed acquisition of all of the outstanding 
shares of Met One, Inc. (``Met One'') by Pacific Scientific Company 
(``Pacific Scientific'') would violate Section 7 of the Clayton Act, 15 
U.S.C. Sec. 18, and Section 1 of the Sherman Antitrust Act, 15 U.S.C. 
Sec. 1. Pacific Scientific and Met One are the nation's two leading 
manufacturers of drinking water particle counters.
    The Complaint alleges that the combination of these major 
competitors would substantially lessen competition in the manufacture 
and sale of drinking water particle counters in the United States. The 
prayer for relief seeks: (1) a judgment that the proposed acquisition 
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 
Sec. 18, and Section 1 of the Sherman Antitrust Act, 15 U.S.C. Sec. 1; 
and (2) a preliminary and permanent injunction preventing Pacific 
Scientific and Met One from carrying out the proposed merger, or any 
similar agreement, understanding or plan.
    Shortly before that suit was filed, a proposed settlement was 
reached that would permit Pacific Scientific to complete its 
acquisition of Met One's stock, yet preserve competition in the market 
in which the transaction would raise significant competitive concerns. 
A Stipulation and a proposed Final Judgment embodying the proposed 
settlement were filed as well.
    The Stipulation effects a hold separate agreement that, in essence, 
requires Pacific Scientific to ensure that, until the divestiture 
mandated by the Final Judgment has been accomplished, Met One's 
operations will be held separate and apart from, and operated 
independently of, Pacific Scientific's assets and businesses.
    The proposed Final Judgment orders defendant to sell all of Pacific 
Scientific's U.S. assets and rights relating to the research and 
development, manufacture and sale of Pacific Scientific's Drinking 
Water Quality Monitoring Systems, other than real property, and Met 
One's software relating to Drinking Water Quality Monitoring Systems, 
and other assets if necessary, to make an economically viable 
competitor in the manufacture and sale of drinking water particle 
counters.
    The United States and Pacific Scientific have stipulated that the 
proposed Final Judgment may be entered after compliance with the APPA. 
Entry of the proposed Final Judgment would terminate this action, 
except that the Court would retain jurisdiction to construe, modify, or 
enforce the provisions of the proposed Final Judgment and to punish 
violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendant and the Proposed Transaction

    Defendant Pacific Scientific Company is a California corporation 
with its headquarters in Newport Beach, California. Pacific Scientific 
Company reported annual sales in 1994 of approximately $234,700,000. 
HIAC/ROYCO, the division of Pacific Scientific that manufactures and 
sells drinking water particle counters, reported 1994 sales of 
$13,011,000, of which $1,270,000 came from drinking water particle 
counter sales.
    Met One, Inc. is a California corporation with its headquarters in 
Grants Pass, Oregon. Met One reported net sales in 1994 of 
approximately $11,800,000, of which approximately $1,180,000 came from 
drinking water particle counter sales. Louis J. Petralli, Jr. is the 
majority and controlling owner of Met One.
    Pacific Scientific proposes to acquire all outstanding stock of Met 
One for Pacific Scientific stock, and merge Met One into a newly 
created acquisition subsidiary.

B. The Drinking Water Particle Counter Market

    Drinking water particle counters are devices sold largely to 
municipalities for the purpose of protecting against contamination of 
public drinking water 

[[Page 4798]]
supplies. The drinking water particle counters made and sold by 
defendant are capable of detecting particles the size of potentially 
deadly microorganisms that may exist in public drinking water supplies. 
Drinking water particle counters such as those made by defendant 
generally include four components: a sensor, which directs a laser beam 
from a laser diode through the water being tested; a sampler, which 
provides a means to transport a sample of the water in which the 
particles are being counted undisturbed through the sensor; a counter, 
which sorts the signals from the sensor by voltage and assigns a 
particle size to the signals; and software, which translates data into 
a readable format.
    Because drinking water particle counters are able to detect 
potentially harmful contaminants in public drinking water with greater 
sensitivity and efficiency than other technologies, such as 
turbiditymeters and microscopes, municipalities purchase them to 
satisfy their concerns for the purity and safety of their drinking 
water. For example, in 1993, 28 people in Milwaukee died as a result of 
drinking water contamination by one such microorganism--
Cryptosporidium. At the time of that tragedy, Milwaukee had installed 
turbiditymeters but had not installed drinking water particle counters. 
Since 1993, Milwaukee has installed drinking water particle 
counters.\1\

    \1\ Turbiditymeters are not part of the relevant market. 
Turbidity is an optical measurement of solid contamination suspended 
as particles in a fluid. Turbiditymeters have significantly 
different attributes than drinking water particle counters. For 
example, turbiditymeters cannot detect small quantities of 
microorganisms such as Cryptosporidium, as particle counters can. 
And, unlike drinking water particle counters, turbiditymeters do not 
provide exact data for the size and number of particles in a given 
medium. Municipalities do not consider turbiditymeters to be 
substitutes for drinking water particle counters.
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    Municipalities generally purchase drinking water particle counters 
through formal bid procedures. Although price is an important factor, 
municipalities also consider quality, reliability, service, and the 
reputation of the qualifying firms. Municipalities routinely request 
from each firm as part of that firm's bid package a list of references 
from past successful bids. Municipalities also routinely invite 
drinking water particle counter competitors to demonstrate the 
capabilities of their respective devices prior to the municipality's 
determination of the bid winner.

C. Competition Between Pacific Scientific and Met One

    Pacific Scientific and Met One compete directly in the manufacture 
and sale of drinking water particle counters. Pacific Scientific's 
Water Particle Counting System and Met One's on-line particle counting 
systems are regarded by municipalities as close substitutes, for they 
offer similar functionality, performance and features.
    Pacific Scientific and Met One recognize the rivalry between their 
products in the relevant geographic market. Each firm has engaged in 
comparative selling techniques and competitive pricing strategies 
against the other firm in order to increase the likelihood of 
successful sales. Through these activities, Pacific Scientific and Met 
One have each operated as a significant competitive constraint on the 
other's prices and have each provided impetus for technological 
improvements in the other's systems. For example, when Met One was 
awarded the 1994 contract for particle counters provided to the City of 
San Francisco, Pacific Scientific wrote the city reminding it that 
Pacific Scientific rather than Met One was the low bidder. In its 
letter, Pacific Scientific also provided the city a detailed comparison 
of the Pacific Scientific product versus the Met One product. It has 
been common practice for municipalities to conduct side by side 
evaluations or demonstrations of the Pacific Scientific and Met One 
drinking water particle counters in considering the merits of each 
product's software and hardware capabilities.

D. Anticompetitive Consequences of the Acquisition

    The Complaint alleges that the acquisition of Met One, Inc. by 
Pacific Scientific Company would reduce substantially or eliminate 
competition in the drinking water particle counter market in the United 
States and decrease incentives to maintain high levels of quality and 
service and to keep prices low.
    Specifically, the Complaint alleges that the acquisition would 
increase concentration significantly in what is already a highly 
concentrated market.\2\

    \2\ The Herfindahl-Hirschman Index (``HHI'') is a widely-used 
measure of market concentration. Following the acquisition, the 
appropriate post-merger HHI, calculated from 1994 dollar sales, 
would be 4842, an increase of 2108 from the premeger HHI.
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    After the acquisition, the combined Pacific Scientific/Met One 
entity would dominate the drinking water particle counter market. Based 
on 1994 sales, the market share of the combined entity would be 65% of 
drinking water particle counters sold in the United States.
    The complaint also alleges that entry into the market by a new firm 
selling drinking water particle counters would not likely be either 
timely or sufficient to prevent the harm to competition caused by 
Pacific Scientific's acquisition of Met One.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment would preserve competition in the 
manufacture and sale of drinking water particle counters in the United 
States. Within 30 days after entry of the Final Judgment, defendant 
will divest certain of Pacific Scientific's U.S. assets and rights 
relating to the research and development, manufacture and sale of 
Pacific Scientific's Drinking Water Quality Monitoring Systems, other 
than real property, and Met One's software relating to Drinking Water 
Quality Monitoring Systems, and other assets if necessary, to create an 
economically viable new competitor in the manufacture and sale of 
drinking water particle counters (in general, the ``Divestiture 
Assets'').
    The proposed Final Judgment provides for the imposition of civil 
contempt penalties as an additional incentive for defendant to carry 
out the prompt divestiture of the Divestiture Assets and maintain 
competition in the drinking water particle counter market.
    If defendant fails to divest the Divestiture Assets within 30 days 
after entry of the Final Judgment, the Court, upon application by the 
United States, shall appoint a trustee nominated by the United States 
to effect the divestiture of the Divestiture Assets. If a trustee is 
appointed, the proposed Final Judgment provides that Pacific Scientific 
will pay all costs and expenses of the trustee. The proposed Final 
Judgment also provides that the compensation of the trustee and of any 
professionals and agents retained by the trustee shall be both 
reasonable in light of the value of the Divestiture Assets and based on 
a fee arrangement providing the trustee with an incentive based on the 
price and terms of the divestiture and the speed with which it is 
accomplished. After appointment, the trustee will file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestiture ordered under the proposed Final Judgment. 
If the trustee has not accomplished the divestiture within six (6) 
months after its appointment, the trustee shall promptly file with the 
Court a report setting forth (1) the trustee's efforts to accomplish 
the required divestiture, (2) 

[[Page 4799]]
the reasons, in the trustee's judgment, why the required divestiture 
has not been accomplished, and (3) the trustee's recommendations. At 
the same time the trustee will furnish such report to the parties, who 
will each have the right to be heard and to make additional 
recommendations consistent with the purpose of the trust.
    The proposed Final Judgment requires that Pacific Scientific and 
Met One be maintained separate and apart as independent entities prior 
to the divestiture contemplated by the Final Judgment.

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 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
Sec. 16(a), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against defendant.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and the defendant have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. 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 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: Craig W. Conrath, Chief, 
Merger Task Force, Antitrust Division, United States Department of 
Justice, 1401 H Street NW., Suite 3700, Washington, D.C. 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits of its Complaint against 
Pacific Scientific. The United States is satisfied, however, that the 
divestiture of the assets and other relief contained in the proposed 
Final Judgment will preserve viable competition in the manufacture and 
sale of drinking water particle counters that would otherwise be 
adversely affected by the acquisition. Thus, the proposed Final 
Judgment would achieve the relief the government would have obtained 
through litigation, but avoids the time, expense and uncertainty of a 
full trial on the merits of the government's Complaint.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 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 or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (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 trial.

15 U.S.C. Sec. 16(e) (emphasis added). As the United States Court of 
Appeals for the D.C. Circuit recently 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 
government'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, 56 
F.3d 1448, 1461-62 (D.C. Cir. 1995).
    In conducting this inquiry, ``the 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.'' \3\ Rather,

    \3\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. 16(f), those procedures are discretionary. A court need 
not invoke any of them unless it believes that the comments have 
raised significant issues and that further proceedings would aid the 
court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong. 
2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News 6535, 
6538.

    Absent a showing of corrupt failure of the government to 
discharge its duty, the Court, in making its public interest 
finding, should * * * carefully consider the explanations of the 
government in the competitive impact statement and its responses to 
comments in order to determine whether those explanations are 
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reasonable under the circumstances.

United States v. Mid-America 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) quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also Microsoft, 56 F.3d at 1460-62. Precedent 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.\4\

    \4\ United States v. Bechtel, 648 F.2d at 666 (citations 
omitted) (emphasis added); see United States v. BNS, Inc., 858 F.2d 
at 463; United States v. National Broadcasting Co., 449 F. Supp. 
1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 406 F. 
Supp. at 716. See also Microsoft, 56 F.3d at 1461 (whether ``the 
remedies [obtained in the decree are] so inconsonant with the 
allegations charged as to fall outside of the 'reaches of the public 
interest.' '') (citations omitted).


[[Page 4800]]

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    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of 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.' (citations 
omitted).''\5\

    \5\ United States v. American Tel. and Tel Co., 552 F. Supp. 
131, 150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 
460 U.S. 1001 (1983), quoting United States v. Gillette Co., supra, 
406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. 
Supp. 619, 622 (W.D. Ky. 1985).
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VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    Dated: January 30, 1996.

    Respectfully submitted,
John W. Van Lonkhuyzen,
Alexander Y. Thomas,
Trial Attorneys, U.S. Department of Justice, Antitrust Division, Merger 
Task Force, 1401 H Street, NW., Suite 3700, Washington, DC 20530, (202) 
307-6355.
[FR Doc. 96-2657 Filed 2-7-96; 8:45 am]
BILLING CODE 4410-01-M