[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Notices]
[Pages 8273-8275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4377]


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DEPARTMENT OF JUSTICE
Antitrust Division


U.S. v. US WEST, Inc. and Continental Cablevision, Inc.; Public 
Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
Sec. 16(c)-(h), the United States publishes below the comments received 
on the proposed final judgment in U.S. v. US WEST, Inc. and Continental 
Cablevision, Inc., Civil Action No. 96-2529 TPS, filed in the United 
States District Court for the District of Columbia, together with the 
United States' response to that comment.
    Copies of the comments and response to the comments are available 
for inspection and copying in Room 215 of the U.S. Department of 
Justice, Antitrust Division, 325 7th Street, N.W., 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. Copies 
of these materials may be obtained upon request and payment of a 
copying fee.
Constance K. Robinson,
Director of Operations.

In The United States District Court for The District of Columbia

    United States of America, Plaintiff, v. US West, Inc. and 
Continental Cablevision, Inc., Defendants.
[No. 96-2529 TPS (Antitrust)]

Comments Relating to Proposed Final Judgment and Response of The 
United States to Comments

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act (15 U.S.C. Sec. 16(b)-(h) (``APPA''), the United States of America 
hereby files the public comments it has received relating to the 
proposed Final Judgment in this civil antitrust proceeding, and herein 
responds to the public comments. The United States has carefully 
reviewed the public comments on the proposed Final Judgment and remains 
convinced that entry of the proposed Final Judgment is in the public 
interest.

I.--Background

    This action was commenced on November 5, 1996, when the United 
States filed a civil antitrust complaint under Section 15 of the 
Clayton Act, as amended, 15 U.S.C. Sec. 25, alleging that the proposed 
acquisition of Continental Cablevision, Inc. (``Continental'') by US 
WEST, Inc. (``US WEST''), would violate Section 7 of the Clayton Act, 
as amended, 15 U.S.C. Sec. 18. US WEST is the dominant provider of 
local telecommunications services, including dedicated services, within 
its telephone service area in the States of Arizona, Colorado, Idaho, 
Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, 
South Dakota, Utah, Washington, and Wyoming. At the time the 
acquisition was announced, Continental owned 20% of Teleport 
Communications Group, Inc. (``TCG''), a competitive access provider 
(``CAP'') providing dedicated services in various cities across the 
nation, including Denver, Omaha, Phoenix and Seattle. The complaint 
alleges that US WEST's acquisition of Continental's interest in TCG 
would substantially lessen competition in the sale of dedicated 
services in the areas within Denver, Omaha, Phoenix and Seattle in 
which TCG provides such services.
    Contemporaneously with filing its Complaint, the United States 
submitted a proposed Final Judgment, a Competitive Impact Statement and 
a Stipulation signed by the defendants consenting to entry of the 
proposed Final Judgment. The proposed Final Judgment orders US WEST to 
divest the TCG Common Stock by certain specified dates and contains 
other provisions designed to bar US WEST's access to highly sensitive 
TCG business information, and to treat TCG as a passive business 
investment. The Competitive Impact Statement explains the basis for the 
Complaint and the reasons why entry of the proposed Final Judgment 
would be in the public interest. In the Stipulation, the defendants and 
the United States consented to entry of the proposed Final Judgment by 
the Court after completion of the procedures required by the APPA.

II.--Compliance With the APPA

    The APPA requires a sixty-day period for the submission of public 
comments on the proposed Final Judgment, 15 U.S.C. 16(b). In this case, 
the sixty-day comment period commenced on November 18, 1996, and 
terminated on January 16, 1997. During this period, the United States 
received only one comment relating to the proposed Final Judgment.\1\ 
The United States herein responds to this comment. Upon publication of 
this comment and the following response of the United States to this 
comment in the Federal Register pursuant to 15 U.S.C. 16(d) of the 
APPA, the procedures required by the APPA prior to entry of the 
proposed Final Judgment will be completed, and the Court may enter the 
proposed Final

[[Page 8274]]

Judgment. The United States will move the Court for entry of the 
proposed Final Judgment after the public comment and this response of 
the United States have been published in the Federal Register.
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    \1\ This comment is attached hereto as Exhibit A.
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III.--Response to Public Comments

    The only comment received by the United States was filed by TCG. 
TCG does not object to the substantive provisions of the proposed Final 
Judgment. In particular, TCG does not object to the requirement that US 
WEST divest its interest in TCG nor to the timing or manner in which 
such divestiture must be carried out. Indeed, TCG's comments do not 
relate to either the anticompetitive consequences of the acquisition or 
the adequacy of relief provided by the proposed Final Judgment to 
remedy the antitrust violations alleged in the Complaint. The only 
objection that TCG raises with respect to the proposed Final Judgment 
relates to the provision requiring US WEST to deliver to the United 
States periodic affidavits setting forth the fact and manner of US 
WEST's efforts to comply with the divestiture provisions of the 
proposed Final Judgment. Because these affidavits are likely to contain 
sensitive business information relating to the sale or attempted sale 
of TCG Common Stock, TCG requests that the proposed Final Judgment be 
modified so as to require that such affidavits ``be submitted 
confidentially to the plaintiff and not filed in the public docket of 
the Court.'' Letter from W. Terrell Wingfield to Donald J. Russell, 
dated December 18, 1996, Exhibit A at 2.
    The United States shares TCG's concerns about the potential 
disclosure of highly confidential and sensitive business information. 
For the following reasons, however, the United States does not believe 
that a modification of the proposed Final Judgment is necessary to 
protect affidavits containing such information. First, it is not the 
standard practice of the United States to voluntarily disclose 
affidavits submitted pursuant to a consent decree. Second, there are 
only two situations in which disclosure could occur: (1) If the United 
States is ordered or otherwise finds it necessary to file such 
affidavits on the public docket in any legal proceeding; and/or (2) If 
a request is made under the Freedom of Information Act, 5 U.S.C. 552 et 
seq. (``FOIA''), and the United States determines that any such 
affidavit does not fall into one of the FOIA exemptions to disclosure.
    In the event that the United States receives an order, a subpoena 
and/or otherwise intends to use such information in any legal 
proceeding, Section IX.D of the proposed Final Judgment requires the 
United States to give the defendants ten (10) calendar days notice 
prior to divulging any material to which a claim of protection may be 
asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure 
and which the defendants have marked as being, ``Subject to claim of 
protection under Rule 26(c)(7) of the Federal Rules of Civil 
Procedure.''
    In the event that the United States determines that any such 
affidavit is not exempt from FOIA, then the United States would follow 
the procedures set forth in 28 CFR 16.7. Section 16.7 provides, in 
relevant part, that the United States:

    shall, to the extent permitted by law, provide a submitter [of 
confidential and sensitive business information] with prompt written 
notice of a Freedom of Information Act request or administrative 
appeal encompassing its business information. * * * in order to 
afford the submitter an opportunity to object to disclosure * * * 
Such written notice shall either describe the exact nature of the 
business information requested or provide copies of the records or 
portions thereof containing the business information.

16 CFR 16.7(c). Section 16.7(b) defines a submitter as ``any person or 
entity who provides business information, directly or indirectly to the 
Department.'' Absent exigent circumstances, the United States generally 
gives the submitter ten (10) calendar days notice of a request or 
intention to disclose the business information so as to allow the 
submitter sufficient time to file an objection to disclosure or 
otherwise move to protect the information. TCG has been informed of the 
foregoing protections and has authorized the United States to inform 
the Court that these protections are adequate to address TCG's 
concerns. Given these facts, the United States does not believe that a 
modification of the proposed Final Judgment is warranted in the public 
interest.

IV.--Standard of Review

    Pursuant to 15 U.S.C. Sec. 16(e), the proposed Modified Final 
Judgment cannot be entered unless the Court determines that it is in 
the public interest. The focus of this determination is whether the 
relief provided by the proposed Modified Final Judgment is adequate to 
remedy the antitrust violations alleged in the Complaint. United States 
v. Bechtel Corp., 648 F.2d 660, 665-66 (9th Cir.), cert. denied. 454 
U.S. 1083 (1981), quoted with approval in United States v. Microsoft 
Corp., 56 F.3d 1448, 1457-58, see also 56 F.3d at 1459-60 (D.C. Cir. 
1995). In the recent Microsoft decision by the United States Court of 
Appeals for the District of Columbia Circuit, which reversed the 
district court's refusal to enter an antitrust consent decree proposed 
by the United States, the court of appeals held that the provision in 
Section 16(e)(1) of the Tunney Act allowing the district court to 
consider ``any other considerations bearing upon the adequacy of such 
judgment,`` does not authorize extensive inquiry into the conduct of 
the case. 56 F.3d at 1458-60. The court of appeals concluded that 
``Congress did not mean for a district judge to construct his own 
hypothetical case and then evaluate the decree against that case.'' Id. 
To the contrary, ``[t]he court's authority to review the decree depends 
entirely on the government's exercising its prosecutorial discretion by 
bringing a case in the first place,'' and so the district court ``is 
only authorized to review the decree itself,'' not other matters that 
the government might have but did not pursue. Id.
    Under the public interest standard, the Court's role is limited to 
determining whether the proposed decree is within the ``zone of 
settlements'' consistent with the public interest, not whether the 
settlement diverges from the Court's view of what would best serve the 
public interest. United States v. Western Electric Co. 993 F.2d 1572, 
1576 (quoting United States v. Western Electric Co., 900 F.2d 283, 307 
(D.C. Cir. 1990)); United States v. Microsoft Corp., 56 F.3d at 1460. 
Moreover, the Court should give a request for entry of a proposed 
decree even more deference that a request by a party to an existing 
decree for approval of a modification, for in dealing with an initial 
settlement the Court is unlikely to have substantial familiarity with 
the market involved. United States v. Microsoft Corp., 56 F.3d at 1460-
61.

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

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para. 
61,508, at 71,980 (W.D. Mo. 1977). The Court may reject the agreement 
of the parties as to how the public interest is best served only if it 
has ``exceptional confidence that adverse antitrust consequence will 
result.* * *'' United States v. Western Electric Co., 993 F.2d at 1577 
(D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993), quoted with approval 
in

[[Page 8275]]

United States v. Microsoft Corp., 56 F.3d at 1460.

V.--Conclusion

    After careful consideration of the comments and for the reasons 
stated herein and in the Competitive Impact Statement, the United 
States continues to believe that the proposed Final Judgment is 
adequate to remedy the antitrust violations alleged in the Complaint. 
There has been no allegation or showing that the proposed settlement 
constitutes an abuse of the United States' discretion nor that it is 
inconsistent with the public interest. Accordingly, entry of the 
proposed Final Judgment should be deemed to be in the public interest.

    Dated: February 7, 1997.

    Respectfully submitted,
Yvette Benguerel,
Attorney, Telecommunications Task Force, U.S. Department of Justice, 
Antitrust Division, 555 4th Street, N.W., Room 8104, Washington, D.C. 
20001, (202) 514-5808.

[December 18, 1996--Via Federal Express]

Donald J. Russell, Esq.,
Chief, Telecommunications Task Force, Antitrust Division, U.S. 
Department of Justice, Room 8104, 555 4th Street, N.W., Washington, 
D.C. 20001.
Re: United States of America v. U S West Inc. and Continental 
Cablevision, Inc., United States District Court for the District of 
Columbia

    On behalf of Teleport Communications Group Inc. (TCG), and in 
accordance with the provisions of 15 U.S.C. Sec. 16(d), we hereby 
submit the following comments in connection with the matter of 
United States of America v. U S West Inc. and Continental 
Cablevision Inc. TCG seeks an amendment to the Final Judgment 
providing that the Affidavits submitted pursuant to Section VII will 
be submitted confidentially and not be filed in the public docket of 
the Court. The undersigned has been in communication with Robert J. 
Sachs, counsel for Continental, and has been advised that they do 
not oppose this request.
    The proposed Final Judgment provides, inter alia, that U S West 
use its best efforts to divest the approximately 11% interest of TCG 
held by Continental as expeditiously as possible. The proposed Final 
Judgment further provides that U S West divest a portion of its 
interest in TCG sufficient to cause it to own less than 10% by June 
30, 1997, and divest any remaining portion of the TCG interest by 
December 31, 1998. The divestiture must be made to a purchaser or 
purchasers in a manner that ``shall not injure TCG.''
    The proposed Final Judgment orders U S West to deliver periodic 
Affidavits to the plaintiff setting forth its efforts in connection 
with the ordered divestiture. Said Affidavits are to include such 
information as the names of potential purchasers contacted or 
expressing interest, and describe ``in detail each contact.'' These 
Affidavits could be subject to public disclosure unless they are 
submitted confidentially pursuant to an Order of this Court.
    TCG is a publicly traded company with approximately 30 million 
shares traded on the NASDAQ National Market. TCG is concerned that 
information concerning efforts to sell a major block of the 
company's stock could have a significant adverse impact on the 
market for TCG stock. Traders may engage in speculative activity 
based on information contained in these Affidavits causing 
significant volatility in TCG's stock price. As a result, premature 
disclosure of U S West's activities could significantly disrupt the 
market for TCG's securities. Further, the information contained in 
these Affidavits is subject to being available selectively to 
certain investors and not others, thereby possibly requiring TCG to 
fully disseminate such information so as to be in full compliance 
with securities laws.
    Additionally, there may be a chilling effect on some of the 
prospective purchasers of U S West's interest in TCG if the 
possibility exists that an inquiry or expression of interest is 
subject to being publicly disclosed. Such prospective purchasers may 
not even want their interests made public, much less risk a ``public 
negotiation'' for TCG. This may have the effect of reducing the 
universe of prospective purchasers, some of whom may be best suited 
to insure the continued viability of TCG. Furthermore, public 
disclosure of the negotiations may jeopardize or render unavailable 
any exemption under federal and state securities law upon which the 
parties intend to rely. This would cause additional expense and may 
complicate or even terminate negotiations.
    TCG proposes that the required Affidavits be submitted 
confidentially to the plaintiff and not filed in the public docket 
of the Court. In the event the divestiture is not accomplished in 
the time frame set out in the Final Judgment, a Trustee is appointed 
to effect the divestiture. Although the Trustee is similarly 
required to submit monthly status reports, such reports are 
specifically to be submitted confidentially. It appears the failure 
of the proposed Final Judgment to contain similar confidentiality 
protection was an oversight by the parties, and a similar 
restriction should be imposed upon the pre-Trustee status reports as 
well.
    TCG believes the overriding principle in the Final Judgment is 
to force a divestiture of U S West's interest in TCG in a fashion 
that is not injurious to TCG and that could not lessen competition. 
However, information contained in the status Affidavits could impact 
TCG's financial well-being pending the disposition. If there is any 
possibility that such an outcome may occur, it is in the best 
interest of the public to support TCG's request and maintain the 
confidentiality of such information.
    TCG further submits that existing federal securities laws 
provide an appropriate framework for the public disclosure of the 
disposition of U S West's holdings in TCG. Because U S West will be 
subject to the public reporting obligations under both Section 13 
and 16 of the Securities Exchange Act of 1934 with respect to its 
TCG stock, U S West is already required to make public filings as to 
changes in its TCG stock holdings when it enters into binding 
agreements to dispose of such stock. TCG believes that the public 
disclosure mandated by these securities laws provides the best and 
most orderly mechanism for the public disclosure of changes in U S 
West's holdings.
    In conclusion, TCG asserts that its request is consistent with 
the underlying premise of the proposed Order--to cause a divestiture 
of U S West's holdings in TCG in a manner that is not injurious to 
TCG. In light of the fact that the request is not contested by 
Continental, we request the United States concur and submit such 
request to the Court.
        Sincerely,
W. Terrell Wingfield, Jr.,
Vice President and General Counsel.

Service List

C. Loring Jetton, Jr., Wilmer, Cutler & Pickering, 2445 M Street, 
NW., Washington, DC 20037.
John McGrew, Wilkie Farr & Gallagher, Three Lafayette Center, 1155 
21st Street, NW., Washington, DC 20036-3384.
W. Terrell Wingfield, Jr., Vice President and General Counsel, 
Teleport Communications Group, 429 Ridge Road, Dayton, NJ 08810.
Sean C. Lindsay, U.S. West, Inc., 7800 East Orchard Road, Suite 490, 
P.O. Box 6508, Englewood, CO 80155-6508.
Robert J. Sachs, Senior Vice President, Corporate and Legal Affairs, 
Continental Cablevision, Inc., The Pilot House, Lewis Wharf, Boston, 
MA 02110.

Certificate of Service

    I, Tracy Varghese, hereby certify under penalty of perjury that 
I am not a party to this action, that I am not less than 18 years of 
age, and that I have on this day caused the Comments Relating to 
Proposed Final Judgment and Response of the United States to 
Comments to be served on defendants, intervenors, and other 
interested persons by mailing a copy, postage prepaid, to each of 
the individuals and organizations on the attached service list.

February 7, 1997.
Tracy Varghese.
[FR Doc. 97-4377 Filed 2-21-97; 8:45 am]
BILLING CODE 4410-11-M