[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Notices]
[Pages 40737-40741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20394]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. General Electric Company; Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the District of Montana,
Missoula Division, in United States v. General Electric Company, Civil
Action No. 96-121-M-CCL. Copies of the Complaint, proposed Final
Judgment, and Competitive Impact Statement are available for inspection
at the Department of Justice in Washington, DC, in Room 300, 325
Seventh Street, NW., and at the Office of the Clerk of the United
States District Court for the District of Montana, 301 South Park, Room
542, Helena, MT 59626.
The Complaint in this case, filed in August 1996, alleged that
General Electric had entered into agreements that violated Sections 1
and 2 of the Sherman Act, 15 U.S.C. 1 and 2, with hospitals in the
United States. The District Court dismissed the government's Section 2
claims, leaving for adjudication whether GE's agreements, by
restraining trade, had violated Section 1. The challenged agreements
were part of license agreements between GE and the hospitals in which
the hospitals agreed, as a condition for obtaining a license for GE's
advanced diagnostic materials for the servicing of their GE imaging
equipment (such as MRIs, CT scanners, x-ray machines, etc.), that they
would not compete with GE in servicing medical equipment for others.
The proposed Final Judgment enjoins GE from restraining, in
connection with such licenses, a licensee's right to service medical
equipment for third parties. Section IV(B) of the Final Judgment
prohibits GE from requiring
[[Page 40738]]
that a potential licensee give GE information regarding that person's
practice with regard to the provision of third-party service. Section
IV(C) enjoins GE from representing that GE has a policy or general
practice of refusing to license operating or service materials for
medical equipment, or of refusing to provide training thereon, because
an end-user offers third-party medical equipment service. Section IV(D)
prohibits GE from offering to sell or license operating or service
materials on terms that vary depending on whether the end-user has
provided, does provide, or will provide third-party medical equipment
service. Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Mary Jean Moltenbrey, Chief, Civil Task Force, Antitrust Division,
Department of Justice, Suite 300, 325 7th Street, NW., Washington, DC
20530 (telephone: 202/616-5935).
Rebecca P. Dick,
Director of Civil Non-Merger Enforcement, Antitrust Division.
Stipulation and Order
Cause No. CV-96-121-M-CCL
The undersigned parties, by their respective attorneys, stipulate
that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties, and venue of this action is proper
in the Missoula Division of the District of Montana.
2. The Court may enter and file a Final Judgment in the form
attached upon the motion of any party or upon the Court's own motion at
any time after compliance with the Antitrust Procedures and Penalties
Act (15 U.S.C. 16(b)-(h)), and without further notice to any party or
other proceedings, provided that the United States has not withdrawn
its consent, which it may do at any time before the entry of the
proposed Final Judgment by serving notice on the defendant and by
filing that notice with the Court.
3. The defendant agrees to comply with the proposed Final Judgment
pending its approval of the Court, and shall, from the date of signing
this Stipulation, comply with all the terms and provisions of the
proposed Final Judgment as though it were in full force and effect as
an order of the Court.
4. If the United States withdraws its consent, then the parties are
released from all further obligations under this Stipulation, and the
making of this Stipulation shall be without prejudice to any party in
this or any other proceeding.
5. The parties request that the Court acknowledge the terms of this
Stipulation by entering the Order in this Stipulation and Order.
Dated: ____________
Respectfully submitted,
For Plaintiff United States of America:
Joel I. Klein,
Assistant Attorney General.
A. Douglas Melamed,
Principal Deputy Assistant Attorney General.
John M. Nannes,
Deputy Assistant Attorney General.
Rebecca P. Dick,
Director of Civil Non-Merger Enforcement.
Mary Jean Moltenbrey,
Chief, Civil Task Force.
Susan L. Edelheit,
Assistant Chief, Civil Task Force.
Sherry Scheel Matteucci,
United States Attorney, District of Montana, P.O. Box 1478, Billings,
MT 59103, (406) 657-6101.
Fred E. Haynes,
John R. Read,
Jon. B. Jacobs,
Joan H. Hogan,
Peter J. Mucchetti,
Attorneys for the United States, Antitrust Division, United States
Department of Justice, 325 Seventh Street, N.W., Suite 300, Washington,
DC 20530, (202) 514-5038.
Bernard M. Hollander,
Senior Trial Attorney.
For Defendant General Electric Company:
Richard L. Rosen,
David S. Eggert,
Kathleen A. Behan,
Arnold & Porter, 555 12th Street, N.W., Washington, DC 20004,
Dan K. Webb,
W. Gordon Dobie,
Winston & Strawn, 35 West Wacker Drive, Chicago, IL 60601,
Randy J. Cox,
Boone, Karlberg & Haddon, 300 Central Square, 201 West Main, P.O. Box
9199, Missoula, MT 59807.
So Ordered on this ____ day of ____________,
1998.______________________________
Hon. Charles C. Lovell,
United States District Judge.
Competitive Impact Statement
This Competitive Impact Statement (``CIS'') sets forth the
information necessary to enable the Court and the public to evaluate
the proposed consent judgment that the parties have filed in this case,
a Final Judgment that would terminate the litigation. The CIS, which
explains why the proposed Judgment is in the public interest, is filed
pursuant to the requirements of the Antitrust Procedures and Penalties
Act of 1974 (``APPA''), 15 U.S.C. 16. The APPA subjects proposed
consent judgments in government antitrust cases to public scrutiny and
comment, after which the Court may enter the judgment if it finds that
it is in the public interest.
I.
Nature and Purpose of the Proceedings
The United States filed the Complaint in this civil antitrust suit
on August 1, 1996. The Complaint alleged that GE has entered into
agreements with hospitals in the United States that illegally
restrained trade in violation of Section 1 of the Sherman Act, 15
U.S.C. 1, and that constituted a combination to monopolize in violation
of Section 2 of that act, 15 U.S.C. 2. The agreements alleged to be
illegal are provisions of license agreements under which the hospitals
have been granted the right to use specialized diagnostic software and
other tools and manuals developed by GE (``advanced service
materials'') on the GE medical imaging equipment owned by the
hospitals. The advanced service materials enable service personnel to
more quickly calibrate and repair the GE medical imaging equipment.
Under the agreements challenged in this case, the licensee hospitals
agreed not to compete with GE in the servicing of any medical imaging
equipment or medical equipment, in exchange for the right to use the
valuable advanced service materials.
GE is the world's leading manufacturer of medical imaging equipment
(such as magnetic resonance imagers, computed tomography scanners, and
x-ray machines) and is the leading servicer of such machines in the
United States. Hospitals with in-house service capabilities are actual
or potential competitors of GE in the servicing of medical imaging
equipment and other medical equipment. The agreements harmed
competition by foreclosing actual and potential competition from
offering service. To remedy the competitive harm done by the illegal
agreements, the Complaint asks the Court to declare the agreements to
be unlawful and to enter an injunction barring GE from enforcing or
renewing the illegal agreements.
The government and GE have reached a proposed settlement that
eliminates the need for a trial in this case. The settlement terms are
found in the parties' proposed Final Judgment. The parties have
stipulated that the Court may enter this Judgment after compliance with
the APPA, unless the government first withdraws its consent. The
Court's entry of the Judgment will terminate this civil action against
GE,
[[Page 40739]]
except that the Court will retain jurisdiction over any future
proceedings to construe, modify, or enforce the judgment, or to punish
violations of its provisions. Entry of the Judgment would not
constitute evidence against, or an admission by, any party with respect
to any issue of fact or law involved in the case and is conditioned
upon the Court's finding that its entry is in the public interest, as
provided by Section 2(e) of the APPA, 15 U.S.C. 16(e).
II.
Description of the Practices Giving Rise to the Alleged Violations
of the Antitrust Laws
GE sells a wide variety of medical imaging equipment. Hospitals,
clinics, and doctors use such equipment to create images of the body's
internal structure. Complaint at para. 4. Such equipment is essential
to the diagnosis of numerous injuries and illnesses. Id, at para. 16.
Imaging equipment, like other medical equipment, requires regular,
high-quality service. Such service ensures that the equipment functions
accurately and reliably. Id. atpara. 1. Some hospitals employ and
retain service engineers ``in house'' to service the hospital's medical
equipment. Id. at Paras. 3, 22. Other hospitals hire outside parties
such as GE to service their imaging equipment. GE services many types
of medical equipment, including equipment manufactured by other
companies. Id. at para. 20.
GE has developed advanced service materials that enable service
engineers to service certain GE imaging equipment much more quickly
than otherwise possible. Id. at para. 27. GE makes the advanced service
materials available to hospitals with in-house service groups. Such
hospitals may be actual or potential competitors to GE in servicing
other health care providers' medical equipment. Id. at Paras. 3, 23,
31.
To gain access to GE's advanced service materials, however,
hospitals licensing GE's advanced service materials have had to agree
not to compete with GE in servicing third-parties' medical imaging
equipment or other medical equipment. The specific terms of this
agreement changed somewhat over time. The 1988 to 1992 version of the
license agreement for the advanced service materials restricted the
hospital licensee from servicing any other person's medical imaging
equipment; the 1992 to 1996 version was broader, restricting the
licensee from servicing any other person's medical equipment (which
would include non-imaging medical equipment); and the 1996 to present
version--adopted in the face of the government's investigation--is
narrower, restricting the licensee from servicing any other person's GE
diagnostic imaging equipment that is of the same type (i.e., modality)
as the model(s) for which the hospital has licensed advanced service
materials from GE. More than 500 potentially competing hospitals have
agreed to these restrictions. Id. at Paras. 32, 33, 35.
The non-compete agreements are not ancillary to any legitimate
business interest that GE had in licensing advanced service materials
particularly since they were not reasonably necessary to prevent the
hospitals from using the advanced service materials on third-party
equipment, in a manner not authorized by the license agreements. As a
result of software security procedures adopted by GE, the advanced
service materials will only work on the specific GE machine to which
the license agreement relates. Furthermore, the advanced service
materials are model specific, i.e., the advanced service materials for
one model of GE imaging equipment cannot be used on another model, even
if the two models are of the same ``modality'' (e.g., if both are GE CT
scanners), and cannot be used on other manufacturers' equipment. Id. at
para. 30. Given the machine and model-specific nature of the software,
the restrictions imposed by the license agreements on third-party
service are unrelated to any legitimate interest GE has in preventing
the unauthorized use of its software. Id. at para. 8.
By exacting a commitment from hospitals not to provide any outside
service in competition with GE in exchange for the advanced service
materials, the complaint alleged that GE has harmed competition for the
service of medical equipment. Id. at Paras. 38-41. Hospitals have been
forced to abandon their efforts to provide medical equipment service to
other nearby health care facilities, id. at Paras. 31, 39, and other
hospitals have, consequently, paid supra-competitive prices for
equipment service and purchased less service than they otherwise would
have paid. Id. at Paras. 40, 43.
GE's license restrictions have also reduced competition in the sale
of medical imaging equipment. Health care facilities need prompt and
affordable repairs for their imaging equipment. Because of the cost and
delays of travel, proximity to a service provider is an important
consideration when a hospital is considering the purchase of medical
imaging equipment. Hospitals are reluctant to purchase a piece of
imaging equipment unless someone near their facility can service it.
Id. at Paras. 17, 19.
Because manufacturers cannot economically place their own service
engineers in areas where they do not have a large installed base, they
need someone else in those areas who is qualified to service their
equipment. Id. at para. 19. Hospitals with in-house service departments
could provide such service for a given manufacturer's equipment. Id. at
Paras. 3, 39. But, because GE exacted agreements from hospitals not to
provide third-party service, the complaint alleged that GE has
disadvantaged its equipment manufacturing competitors. Id. at para. 44.
As a result, GE has restrained health care facilities in Montana and
similar areas from purchasing imaging equipment from manufacturers
other than GE, even though the equipment may have better suited the
facilities' needs. Id. at Paras. 42, 45.
In addition to alleging that GE's license agreements violated
Section 1 for the reasons set forth above, the complaint alleged that
the license agreements for advanced service materials between GE and
the hospitals constituted a combination between GE and the hospitals
that had the specific intent of excluding competition in violation of
Section 2 of the Sherman Act. Id. at para. 47. Shortly after the
complaint was filed, GE moved to dismiss both the Section 1 and Section
2 claims. The Court denied GE's motion as to the government's Section 1
claims; however, the Court dismissed the Section 2 claims because the
complaint did not allege that the hospitals shared GE's intent to
monopolize the service markets for medical equipment. Thus, only the
Section 1 claims remain in the case. The proposed settlement resolves
those claims.
III.
Explanation of the Proposed Consent Judgment
The proposed Final Judgment sets forth the conduct that GE is
prohibited from engaging in, certain conduct that GE may engage in
without violating the Judgment, the compliance program that GE must
follow, and the procedures available to the government to determine and
secure compliance with the Final Judgment.
A. Prohibited Conduct
Section IV(a) of the Final Judgment prohibits GE from entering into
or enforcing any agreement in conjunction with the licensing of
advanced service materials or related training whereby (a) the end-user
represents that it has not,
[[Page 40740]]
does not, or will not perform third-party medical equipment service or
(b) the end-user is prevented or restrained from providing third-party
service. The Judgment defines third-party service to mean the service
of any medical equipment in the United States not owned, leased, or
operated by the party performing the service. Section IV(B) prohibits
GE from requiring that a potential licensee give GE information
regarding that person's current or prospective practice with regard to
the provision of third-party service. Section IV(C) enjoins GE from
stating publicly or to any end-user of medical equipment that GE has a
policy or general practice of refusing to license advanced service
materials for medical equipment, or of refusing to provide training
thereon, because an end-user offers third-party medical equipment
service. Section IV(D) prohibits GE from offering to sell or license
advanced service materials to end-user of medical equipment on terms
that vary depending on whether the end-user has provided, does provide,
or will provide third-party medical equipment service.
B. Limiting Conditions
Section V of the Final Judgment sets forth certain conduct that the
Judgment does not prohibit. Section V clarifies that the Judgment does
not prohibit GE from refusing to license its advanced service materials
to independent service organizations or to any other person who is not
an end-user of GE medical equipment. The Final Judgment also does not
limit GE's pricing discretion as long as its pricing does not otherwise
violate the Judgment. Section V also makes clear that the Final
Judgment does not prohibit GE from using site-specific or equipment-
specific licensing of its advanced service materials or from limiting
the use of the licensed materials to an end-user's full-time employees.
The Final Judgment also does not prohibit GE from implementing security
procedures intended to prevent the misappropriation or unauthorized use
of its advanced service materials.
The limiting conditions are consistent with the relief sought in
the Complaint. The Complaint alleged that GE has used its advanced
service materials to induce hospitals with in-house service capability
to agree not to compete with GE in the servicing of medical equipment.
The Complaint did not allege that GE's refusal to license its
intellectual property to any or all persons who might seek such
licenses violated the antitrust laws, and the Final Judgment is silent
as to that conduct.
C. Defendant's Compliance Program
Section VI of the proposed Final Judgment requires GE to distribute
copies of the Judgment to certain employees and to provide notice of
the change in its licensing policy to the licensees of its advanced
service materials. Within seventy-five (75) days of its entry, GE must
certify that it has distributed all such materials. Finally, under
Section VIII of the proposed Final Judgment, GE will make its records
and personnel available to the Justice Department upon reasonable
notice in order to determine or secure its compliance with the
Judgment.
D. Scope of the Proposed Final Judgment
The proposed Final Judgment expressly provides in Section II that
its provisions apply to GE, its officers, directors, agents, employees,
successors, and assigns, and to all other persons in active concert or
participation with any of them who have received actual notice of the
terms of the Judgment. Section IX provides that the proposed Final
Judgment will expire on the tenth anniversary of its entry.
E. Effect of the Proposed Final Judgment on Competition
Health care providers in the United States spend more than $3
billion a year for medical equipment service. The Department's lawsuit
sought to ensure access for these consumers to a wider choice of
medical-equipment service providers across the country by preventing GE
from using its advanced service materials to induce hospitals to agree
not to compete with GE in the provision of third-party service on
medical equipment. The proposed Final Judgment achieves this goal. It
should enable some hospitals with in-house service capability to
initiate or expand third-party service to other users of medical
equipment, thereby increasing actual and potential competition in the
markets for medical equipment service.
Entry of the Judgment should also increase the number of local
service providers that are available to act as service providers for
medical equipment manufacturers who lack a sufficient installed base in
an area to support one of their own field service engineers. By making
such manufacturer's equipment more competitive from a service
perspective, the Judgment should lead to increased competition among
manufacturers of medical equipment to the benefit of purchasers of such
equipment.
IV.
Remedies Available to Potential Private Plaintiffs
After entry to the proposed Final Judgment, any person who has been
harmed by the alleged violation will retain the same right to sue for
monetary damages and any other legal and equitable remedies that such
person had before its entry. A person may not use the Judgment,
however, as prima facie evidence in any subsequent private litigation,
pursuant to Section 5(a) of the Clayton Act, 15 U.S.C. 16(a).
V.
Procedures Available for Modification of the Proposed Judgment
The parties have stipulated that the Court may enter the proposed
Final Judgment after compliance with the APPA, provided that the United
States has not withdrawn its consent. The APPA conditions that entry
upon the Court's finding that the proposed Final Judgment is in the
public interest. 15 U.S.C. 16(e). Any person who wishes to comment on
the proposed Judgment may, for a sixty-day period subsequent to the
publishing of this document in the Federal Register, submit written
comments. All such comments must be addressed to the United States
Department of Justice, Antitrust Division, Attention: Ms. Mary Jean
Moltenbrey, 325 Seventh Street, N.W., Suite 300, Washington, D.C.
20530. The government will evaluate all comments submitted to determine
whether any reason exists for the withdrawal of its consent to the
proposed Final Judgment. The government will file any such comments and
its response to them with the Court and also publish them in the
Federal Register.
The proposed Final Judgment provides that the Court will retain
jurisdiction over this action in order to permit any of the parties to
apply for such orders as may be necessary or appropriate to construe or
modify the judgment, to enforce compliance with it, or to punish any
violations of its provisions.
VI.
Alternative to the Proposed Judgment
The government's alternative to the proposed final judgment is a
trial on the merits. Because the government considers the final
judgment to remedy fully the anticompetitive effects of GE's
agreements, not to compete, it does not believe that a trial would
result in any further relief.
[[Page 40741]]
VII.
Standard of Review Under the APPA for the Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the government be subject to a sixty-day comment
period, after which the Court determines whether entry of the proposed
Final Judgment ``is in the public interest.'' In making this
determination, the Court may consider:
(1) the competitive impact of the 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 the judgment;
(2) the impact of entry of the judgment upon the public generally
and upon 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. 16(e).
The Court of Appeals for the D.C. Circuit has held that the APPA
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,
``[t]he Court is no where 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.'' 119 Cong. Rec. 24598 (1973); See United States v.
Gillette Co., 406 F. Sup. 713, 715 (D. Mass. 1975.) A ``public
interest'' determination can be made properly on the basis of the
competitive impact statement and the government's response to the
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 (1974), reprinted in U.S.C.C.A.N.
6535, 6538.
The Court of Appeals for this Circuit has held that a district
court judge, in making the public interest determination, should not
engage ``in an unrestricted evaluation of what relief would best serve
the public.'' Rather
[t]he 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. See United States
v. National Broadcasting Co., 449 F. Supp. 1127 (C.D. Cal. 1978). 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.'' Id. At
1143 (quoting United States v. Gillette Co., 406 F.Supp. 713, 716 (D.
Mass. 1975)). More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
United States v. Bechtel Corporation, 648 F.2d 660, 666 (9th Cir.
1981).
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitve effect of a particular practice. 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.' '' United
States v. American Tel. and Tel. Co., 552 F. Supp. 131, 151 (D.D.C.
1982), aff'd. sub. nom. Maryland v. United States, 460 U.S. 1001
(1983), (quoting Gillette Co., 406 F. Supp. at 716 (citations
omitted)); United States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622
(W.D. Ky. 1985).
VIII.
Determinative Materials and Documents
The APPA requires that the government file with the Court any
documents that the government considers to have been determinative in
formulating the proposed Final Judgment. 15 U.S.C. 16(b); see
Massachusetts School of Law v. United States, 118 F.3d 776, 784-85
(D.C. Cir. 1997). The government considered no materials or documents
determinative in formulating the proposed Final Judgment. It therefore
files no such documents.
Date: July 13, 1998.
Antitrust Division, Department of Justice.
Fred E. Haynes
John R. Read
Jon B. Jacobs
Joan H. Hogan
Peter J. Mucchetti,
Civil Task Force, 325 Seventh Street, N.W., Suite 300, Washington, D.C.
20530, (202) 514-0230.
[FR Doc. 98-20394 Filed 7-29-98; 8:45 am]
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