Federal Register, Volume 63 Issue 227 (Wednesday, November 25, 1998)

[Federal Register Volume 63, Number 227 (Wednesday, November 25, 1998)]
[Notices]
[Pages 65228-65244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31431]

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DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Omnipoint Corp.; United States v. 21st Century
Bidding Corp.; United States v. Mercury PCS II, L.L.C.; Proposed Final
Judgments and Competitive Impact Statements

Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed
Final Judgment, Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in each of the following civil actions: United States v.
Omnipoint Corporation, Civil Action No. 1:98CV02750; United States v.
21st Century Bidding Corp.; Civil Action No. 1:98CV02752, and United
States v. Mercury PCS II, L.L.C., Civil Action No. 1:98CV02751. The
proposed Final Judgments are subject to approval by the Court after
expiration of the statutory 60-day public comment period and compliance
with the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).
On November 10, 1998, the United States filed separate Complaints
against each defendant that allege that defendants used coded bids
during a Federal Communications Commission auction of radio spectrum
licenses for personal communications services. The Complaints further
allege that, through the use of these coded bids, defendants reached
agreements to stop bidding against one another in violation of Section
1 of the Sherman Act, 15 U.S.C. 1. The proposal Final Judgments, filed
the same time as the Complaints, prohibit defendants from entering into
anticompetitive agreements and from using coded bids in future FCC
auctions.
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. Written comments should be
directed to Roger W. Fones, Chief, Transportation, Energy, and
Agriculture Section, Antitrust Division, 325 Seventh Street, NW., Suite
500, Washington, DC 20530 (telephone: (202) 307-6351).
Copies of the Complaint, Stipulation and Order, proposed Final
Judgment, and Competitive Impact Statement are available for inspection
in Room 215 of the U.S. Department of Justice, Antitrust Division, 325
Seventh Street, NW., Washington, DC 20530 (telephone: (202) 514-2481),
and at the office of the Clerk of the United States District Court for
the District of Columbia, 333 Constitution Avenue, NW., Washington, DC
20001. Copies of any of these materials may be obtained upon request
and payment of a copying fee.
Rebecca P. Dick,
Director of Civil Non-Merger Enforcement.

Stipulation and Order

It is hereby 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 United States District Court 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 Procedure 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 defendants and by filing that
notice with the Court.
3. The defendant shall abide by and comply with the provisions of
the proposed Final Judgment pending entry of the Final Judgment by the
Court and shall, from the date of the signing of this Stipulation by
the parties, comply with all the terms and provisions of the proposed
Final Judgment as though they were in full force and effect as an order
of the Court.
4. In the event that plaintiff withdraws its consent, as provided
in paragraph 2 above, 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
proceedings.
5. The parties request that the Court acknowledge the terms of this
stipulation by entering the Order in this Stipulation and Order.

Respectfully submitted,

For Plaintiff United States of America:
Jill A. Ptacek,
J. Richard Doidge,
Attorneys, Antitrust Division, U.S. Department of Justice, 325 Seventh
Street, N.W., Washington, D.C. 20004, (202) 307-0468.
For Defendant Omnipoint Corporation:
Michael F. Brockmeyer, Esq.,
Piper & Marbury L.L.P. Charles Center South, 36 South Charles Street,
Baltimore, MD 21201-3018, (410) 576-1890.

Order

It is so ordered, this ______ day of ________, 1998.

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United States District Court Judge

Certificate of Service

I hereby certify that I have caused a copy of the foregoing
Complaint, Competitive Impact Statement and proposed Final Judgment to
be served on counsel for the defendant in this matter in the manner set
forth below:
By first class mail, postage prepaid, and by facsimile:

Michael F. Brockmeyer, Esquire, Piper & Marbury L.L.P., 36 South
Charles Street, Baltimore, MD 21201-3018
Jill Ptacek,
Antitrust Division, U.S. Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, D.C. 20530, (202) 307-6607, (202) 616-2441
(Fax).

Final Judgment

Plaintiff, United States of America, filed its Complaint on
November 10,

[[Page 65229]]

1998. Plaintiff and the Defendant, by their respective attorneys, have
consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law. This Final Judgment shall not
be evidence against or an admission by any party with respect to any
issue of fact or law. Therefore, before the taking of any testimony,
without trial or adjudication of any issue of fact or law herein, and
upon consent of the parties, it is hereby ordered, adjudged, and
decreed, as follows:

I. Jurisdiction

This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting hereto. Venue is proper in the
District of Columbia. The Complaint states a claim upon which relief
may be granted against the defendant under Section 1 of the Sherman
Act, 15 U.S.C. 1.

II. Definitions

As used herein, the term:
(A) ``Defendant'' means Omnipoint Corporation, its successors,
assigns, subsidiaries, divisions, groups, affiliates, partnerships and
joint ventures, directors, officers, managers, agents, and employees.
(B) ``Document'' means all ``writings and recordings'' as that
phrase is defined in Rule 1001(1) of the Federal Rules of Evidence.
(C) ``FCC'' means the Federal Communications Commission.
(D) ``License-identifying information'' means any number, letter,
code or description that designates a license or that links licenses.
(E) ``Person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, association, institution,
governmental unit, public trust, or other legal entity.

III. Applicability

(A) This Final Judgment applies to the Defendant, to its
successors, and assigns, and to all other persons in active concert or
participation with any of them who shall have received actual notice of
the Final Judgment by personal service or otherwise.
(B) Nothing herein contained shall suggest that any portion of this
Final Judgment is or has been created for the benefit of any third
party and nothing herein shall be construed to provide any rights to
any third party.

IV. Prohibited Conduct

The Defendant is enjoined and restrained from:
(A) Entering into any agreement with any other license applicant to
fix, establish, suppress or maintain the price for any license to be
awarded by the FCC in an auction, or to allocate any such licenses
amongst competitors, provided, however, that nothing in this provision
shall prohibit the Defendant from participating in any bidding
consortium, teaming arrangement or other joint venture authorized under
the rules and regulations of the FCC pertaining to future auctions, and
disclosed to the FCC.
(B) In the course of any auction conducted pursuant to the rules
and regulations of the FCC, offering any price to the FCC for the
lease, purchase, or right to use any FCC-awarded license, that includes
within that price any license-identifying information, unless the
inclusion of such information is required by the FCC.

V. Compliance Program

The Defendant is ordered to maintain an antitrust compliance
program, which shall include the following:
(A) Designating, within 30 days of entry of this Final Judgment, an
Antitrust Compliance Officer with responsibility for accomplishing the
antitrust compliance program and with the purpose of achieving
compliance with this Final Judgment. The Antitrust Compliance Officer
shall, on a continuing basis, supervise the review of the current and
proposed activities of the Defendant to ensure that it complies with
this Final Judgment.
(B) The Antitrust Compliance Officer shall be responsible for:
(1) Distributing within 60 days of the entry of this Final
Judgment, a copy of this Final Judgment to (a) all officers and
directors of the Defendant, and (b) to all employees who have any
responsibility for formulating, proposing, recommending, establishing,
approving, implementing or submitting the Defendant's prices in FCC-
conducted license auctions;
(2) Distributing in a timely manner a copy of this Final Judgment
to any officer, director or employee who succeeds to a position
described in Section V (B)(1);
(3) Obtaining from each present or future officer, director or
employee designated in Section V(B)(1), within 60 days of entry of this
Final Judgment or of the person's succession to a designated position,
a written certification that he or she: (1) Has read, understands, and
agrees to abide by the terms of this Final Judgment; and (2) has been
advised and understands that his or her failure to comply with this
Final Judgment may result in conviction for criminal contempt of court;
(4) Maintaining a record of persons to whom the Final Judgment has
been distributed and from whom, pursuant to Section V(B)(3), the
certification has been obtained; and
(5) Reporting to the Plaintiff any violation of the Final Judgment.

VI. Certification

Within 75 days after the entry of this Final Judgment, the
Defendant shall certify to the Plaintiff whether it has complied with
Sections V (B)(1) and (B)(3) above.

VII. Plaintiff Access

(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the Plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to the defendant
made to its principal office, be permitted, subject to any legally
recognized privilege:
(1) Access during the Defendant's office hours to inspect and copy
all documents in the possession or under the control of the Defendant,
who may have counsel present, relating to any matters contained in this
Final Judgment, and
(2) Subject to the reasonable convenience of the Defendant and
without restraint or interference from it, to interview officers,
employees or agents of the Defendant, who may have counsel present,
regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to the Defendant's principal
office, the Defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section VII shall be divulged by the Plaintiff 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, 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 the
Defendant to Plaintiff, the Defendant represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil

[[Page 65230]]

Procedure, and Defendant 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 10 days' notice shall be given by
Plaintiff to the Defendant prior to divulging such material in any
legal proceeding (other than a grand jury proceeding) to which
Defendant is not a party.

VIII. Further Elements of the Final Judgment

(A) This Final Judgment shall expire ten years from the date of its
entry.
(B) Jurisdiction is retained by this Court for the purpose of
enabling the parties to this Final Judgment to apply to this Court at
any time for further orders and directions as may be necessary or
appropriate to carry out or construe this Final Judgment, to modify or
terminate any of its provisions, to enforce compliance, and to punish
violations of its provisions.
(C) Entry of this Final Judgment is in the public interest.

Dated: ________.

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United States District Judge

Competitive Impact Statement

The United States of America, 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 This Proceeding

On November 10, 1998, the United States filed a civil antitrust
complaint alleging that the defendant, Omnipoint Corporation
(``Omnipoint''), had violated Section 1 of the Sherman Act, 15 U.S.C.
Sec. 1. Omnipoint, through its affiliate Omnipoint PCS Entrepreneurs
Two, Inc., participated in an auction (the ``DEF auction'') of
broadband radio spectrum licenses for personal communication services
(``PCS'') that was conducted by the Federal Communications Commission
(``FCC'') between August 1996 and January 1997. The Complaint alleges
that during the DEF auction Omnipoint submitted bids that ended with
three-digit numerical codes to communicate with rival bidders and that,
through the use of these coded bids, Omnipoint and one of its rivals
reached an agreement to refrain from bidding against one another. As a
consequence of this agreement, the complaint alleges Omnipoint and its
competitor paid less for certain PCS licenses, resulting in a loss of
revenue to the Treasury of the United States.
On November 10, 1998, the United States and Omnipoint filed a
Stipulation and Order in which they consented to the entry of a
proposed Final Judgment that provides the relief that the United States
seeks in the Complaint. Under the proposed Final Judgment, Omnipoint
would be enjoined from submitting coded bids in future FCC auctions and
entering into any agreement related to bidding for FCC licenses that
violates Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
The United States and Omnipoint have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the Final Judgment would terminate the action, except that the Court
would retain jurisdiction to construe, modify, or enforce its
provisions and to punish violations thereof.

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

A. Background of the PCS Auctions
In 1993, Congress enacted legislation enabling the FCC to auction
licenses for radio spectrum that could be used to provide PCS. Based on
a wireless, digital technology, PCS offers an alternative to current
traditional telephone services.
The FCC designated six bands of broadband radio spectrum for PCS:
A, B, C, D, E and F. The A, B and C bands occupy 30 MHZ each, while the
D, E and F licenses are 10 MHZ each. The FCC divided the country into
51 geographic areas called Market Trading Areas (``MTAs''), which were
each allotted A and B licenses. The FCC subdivided the MTAs into 493
smaller geographic units called Basic Trading Areas (``BTAs''), which
were each allotted C, D, E, and F licenses. Each BTA was assigned a
number from 1 to 493.
The authorizing legislation required the FCC to adopt rules
ensuring competitive auctions, and the FCC considered numerous auction
formats for PCS, ultimately adopting a simultaneous, multiple-round,
open format. Under this format, numerous licenses were offered in a
single auction, staged over several rounds, with all licenses remaining
open for bidding until the auction closed. Auction participants could
observe all of the bidding activity in each round. The auction ended
only when a round passed in which no bidder submitted a bid on any
license.
To keep the auction moving forward, the FCC imposed eligibility
limits and activity rules. The FCC gave each license a population value
called ``MHZ-pops.'' Each bidder made down payments to the FCC, with
the size of the payment entitling it to bid for a certain amount of
MHZ-pops. A participant could bid on any combination of licenses as
long as the combined MHZ-pops of those licenses did not exceed the MHZ-
pops to which the bidder's down payment entitled it (eligibility).
Bidders also had to be ``active'' in each round (bid or have the high
bid from the prior round) on licenses representing a set percentage of
their MHZ-pops; otherwise, the FCC reduced their eligibility for the
next round. As the auction proceeded, the bidders had to bid an
increasing percentage of their MHZ-pops until in the final stages they
had to bid nearly all of their eligibility.
Each round in the auction began with a bid submission period during
which participants submitted bids electronically or by telephone for
any of the licenses in which they were interested. After each bid
submission period, the FCC published electronically to all bidders the
results for each license, including the name of each company bidding,
the amount of each bid, and the time each bid was submitted. The high
bidder for a license in a round became the ``standing high'' bidder for
that license with a tie going to the earliest bidder.
A bid withdrawal period then followed. During this period, bidders
were permitted to withdraw their standing high bids from any market,
subject to a withdrawal penalty specified by the FCC. The FCC then
published the results. The bid submission and withdrawal periods
comprised an auction round.
At the beginning of an auction, the FCC generally held one round
per day. As the auction progressed, the FCC increased the number of
rounds held in a single day, providing a period of time between rounds
for auction participants to analyze the bidding from the prior round
and to plan for the next round.
One goal of the FCC was to ensure the efficient allocation of
licenses, that is, that the licenses would go to the bidders who valued
them most highly. The simultaneous, multiple-round format of the PCS
auctions helped achieve this goal in several ways. It allowed bidders
to pursue different license aggregation strategies and change their
strategies as the auction proceeded. In addition, it allowed auction
participants to observe the value that other bidders placed on the
licenses and use that information to refine their own assessment of
license values. This was particularly useful

[[Page 65231]]

given that the technology used for PCS was new and bidders were
uncertain about both the costs of providing the services and the
prospective revenues. Ultimately, because the licenses were awarded to
the highest bidders, the PCS auction format allowed the marketplace to
determine the most efficient allocation of licenses.
Nothwithstanding these benefits of the auction format, the FCC
recognized the risk that ``collusive conduct by bidders prior to or
during the auction process could undermine the competitiveness of the
bidding process.'' Second Report and Order, FCC 94-61, para. 223 (Rel.
April 20, 1994). The FCC sought to mitigate the risk of collusion by
adopting rules restricting the disclosure of bidding strategies during
the auction. The FCC noted, however, that Federal antitrust laws
applied to the auctions and it would rely primarily on those laws to
deter and punish collusion in the auctions. Second Report and Order,
supra, at para. 225; Second Memorandum Opinion and Order, FCC 94-215,
para. 50 (Rel. August 15, 1994).
B. Illegal Agreement To Allocate Licenses in the DEF Auction
The auction of the D, E and F licenses for all 493 BTAs began in
August 1996. Because there were three bands being auctioned, the DEF
auction involved a total of 1479 licenses. Lasting 276 rounds, the
auction ended in January 1997.
Prior to the DEF auction, bidders analyzed which licenses (or
groups of licenses) would best enable them to provide effective and
competitive service, assessed the value they placed on those licenses,
and developed strategies to obtain the desired licenses for the lowest
possible prices. The bidders also speculated about their rivals'
business strategies and attempted to identify the key licenses for
those strategies, relying on an array of information, including
knowledge of the licenses bidders had acquired in prior auctions.
As the auction proceeded, bidders carefully observed their rivals'
actions and often adjusted their own market valuations and business
strategies, sometimes based on their assessment of their rivals'
objectives. Their rivals' bids however, did not necessarily reveal
their true objectives. An auction participant might bid for a
particular license during a particular round for a number of reasons:
It may have always wanted the license, but for strategic reasons
refrained from bidding until then; it may have changed its business
strategy and decided that it now wanted the license; it may have seen
an opportunity to acquire an undervalued license; it may have bid
simply to preserve its eligibility to bid on other licenses later in
the auction; it may have bid to raise a rival's cost to obtain the
license; or it may have bid to send a message to the standing high
bidder to refrain from bidding against it for a different license.
Thus, the purpose of a particular bid might be procompetitive or
anticompetitive.
A bidder's purpose is making a bid might, depending on the
circumstances, be ambiguous to its rivals. Where ambiguity remains, it
can be difficult to use a bid or bidding pattern alone to send clear
messages or invitations to collude. To eliminate or reduce any
ambiguity, Omnipoint sometimes placed bids during the DEF auction in
which the final three digits intentionally corresponded to the number
for a BTA (a ``BTA end code''). Knowing that other bidders could see
the bids and hence the BTA end codes, Omnipoint used the codes to
better explain the real purpose of certain bids it made--to reach an
agreement with a rival. In particular, Omnipoint used the BTA end codes
to link the bidding of licenses in two (or more) specific BTA markets,
highlight the licenses Omnipoint wanted, and convey to the competing
bidders' offers to agree with Omnipoint not to bid against each other
for the linked licenses.
Sometimes Omnipoint placed bids in one market with the BTA end code
of another market to send the message: ``I'm bidding for this license
because you bid for the one I want (indicated by the BTA code) and I'll
stop bidding in your market if you stop bidding in mine.'' Other times,
Omnipoint used the BTA end codes to tell its rival: ``If you don't stop
bidding for this license, I will bid for the one you want (indicated by
the BTA code).''
Ominipoint's use of the BTA end codes did not serve any legitimate
purpose of the auction. Omnipoint's purpose for using BTA end codes was
to send clear and unmistakable invitations to collude to rival bidders
and to reach agreements with those rivals to refrain from bidding
against each other. Such conduct was not authorized by the applicable
FCC rules and was inconsistent with the FCC's goal to encourage
competitive bidding.
Over the course of rounds 167 to 172, Omnipoint reached an
agreement with NextWave Telecom, Inc. (``NextWave'') to allocate
between them the F-band licenses for Toledo, OH (BTA #444), Salisbury,
MD (BTA #398), and Lancaster, PA (BTA #240). Omnipoint agreed to stop
bidding for the Salisbury and Lancaster-F licenses in exchange for
NextWave's agreement not to bid for the Toledo-F license. (The bidding
for the Toledo, Salisbury, and Lancaster-F licenses between rounds 167
and 172 is depicted in the table attached as Appendix A to this
Competitive Impact Statement.)
Prior to round 167, Omnipoint had the high bid in Salisbury-F and
had bid intermittently in earlier rounds for the F license in Lancaster
and Toledo. NextWave had the standing high bids for the Lancaster and
Toledo-F licenses. In round 167, NextWave placed the high bid for
Salisbury-F. Omnipoint bid for Toledo-F in round 168. NextWave won back
the Toledo license in round 169.
In round 170, Omnipoint placed bids for the Toledo, Salisbury and
Lancaster-F licenses. Omnipoint's bids for Salisbury and Lancaster
licenses ended in ``444''--the BTA number for Toledo. Omnipoint
withdrew its Salisbury and Lancaster bids that same round, only to bid
again for the two licenses in round 171, this time for lower prices
than it had bid in round 170. Ominpoint's use of the BTA end codes
established a link between the Salisbury and Lancaster-F licenses and
the Toledo-F license.
NextWave saw the BTA end codes and understood that Omnipoint
proposed to stop bidding in Salisbury and Lancaster in exchange for
NextWave ceasing to bid for the Toledo-F license. In round 171,
NextWave bid back over Omnipoint for the Salisbury and Lancaster-F
licenses. NextWave accepted Omnipoint's offer and stopped bidding for
Toledo-F even though it was willing to pay more for the Toledo-F
license than Omnipoint's standing high bid for that license. Observing
that NextWave had stopped bidding for Toledo-F, Omnipoint then stopped
bidding for Salisbury-F and Lancaster-F.
Omnipoint's purpose for using the BTA end codes was to link the
Salisbury, Lancaster and Toledo-F licenses, highlight the bids as
retaliatory, and communicate an offer to stop bidding for Salisbury and
Lancaster if NextWave stopped bidding for Toledo-F. Omnipoint believed
that the Salisbury and Lancaster licenses were important to NextWave.
The Salisbury and Lancaster licenses complemented the licenses that
NextWave was holding in the Philadelphia and Washington, D.C. areas.
As a consequence of Omnipoint's agreement with NextWave,
competition for the Toledo-F license was suppressed and the Treasury
received less revenue for the Toledo-F license. It was in NextWave's
economic self-interest to bid more for the Toledo-F license than
Omnipoint's winning bid and, but for

[[Page 65232]]

the illegal agreement, it would have done so.

III. Explanation of the Proposed Final Judgment

The provisions of the proposed Final Judgment are designed to
ensure that Omnipoint does not enter into anticompetitive agreements
when participating in future FCC auctions. The decree supplements any
prohibitions on bidding conduct set forth in the FCC's auction rules,
and the defendant may violate the decree even if its conduct does not
violate an agency statute or rule.
The proposed Final Judgment would enjoin Omnipoint from entering
into an agreement with another license applicant to fix, establish,
suppress or maintain the price of a license to be awarded by the FCC or
to allocate any such licenses among competitors (Section IV(A)). The
proposed Final Judgment would not prevent Omnipoint from entering into
any joint-venture or similar agreements regarding licenses to be
awarded by the FCC that are both disclosed to the FCC and authorized
under the FCC's rules and regulations. (Section IV(A)). However, such
bidding arrangements would still be subject to scrutiny under the
antitrust laws.
The proposed Final Judgment would also prevent Omnipoint from using
BTA end codes or any similar signaling mechanism to solicit
anticompetitive agreements in future FCC auctions. The proposed Final
Judgment would enjoin Omnipoint from submitting bids that contain
``license-identifying information'' in future FCC auctions, unless the
inclusion of such information is required by the FCC (Section IV(B)).
License-identifying information is defined as ``any number, letter,
code or description that designates a license or that links licenses.''
(Section II(D)).
The proposed Final Judgment would further require Omnipoint to
establish and maintain an antitrust compliance program (Section V). It
would also provide that the United States may obtain information from
Omnipoint concerning possible violations of the Final Judgment (Section
VII).

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 Omnipoint.
In this case, the injured person is the United States.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States and Omnipoint 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 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 days of the date of publication of this Competitive Impact
Statement in the Federal Register. The United States will evalaute 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 responses of the United States will be filed with the
Court and published in the Federal Register. Written comments should be
submitted to: Roger W. Fones, Chief, Transportation, Energy &
Agriculture Section, Antitrust Division, United States Department of
Justice, 325 Seventh Street, N.W., Suite 500, 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. The proposed
Final Judgment would expire ten (10) years from the date of its entry.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed
Final Judgment, seeking damages in this case pursuant to section 4A of
the Clayton Act, 15 U.S.C. Sec. 15a. Doing so would likely have
required a full trial on the merits against Omnipoint. In the view of
the Department of Justice, undertaking the substantial cost and the
risk associated with such a trial is not warranted, considering that
the proposed Final Judgment provides full injunctive relief for the
violations of the Sherman Act set forth in the 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 of 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 compliant 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). As the Court of Appeals for the District of
Columbia Circuit recently held, 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 (D.C. Cir. 1995).
In conducting that 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.'' \1\ Rather, 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

[[Page 65233]]

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 Case
para.61,508, at 71,980 (W.D. Mo. 1977).
---------------------------------------------------------------------------

\1\ 119 Cong. Rec. 24598 (1973); see also 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. Sec. 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. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in 1974 U.S.
C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------

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. 1981); see also, Microsoft, 56 F.3d
1448 (D.C. Cir. 1995). Precedent requires that:

[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. 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.\2\

\2\ United States v. Bechtel, 648 F.2d at 666 (internal
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); Gillette, 406 F. Supp. at 716;
see also United States v. American Cyanamid Co., 719 F.2d 558, 565
(2d Cir. 1983).
---------------------------------------------------------------------------

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).'' \3\
---------------------------------------------------------------------------

\3\ United States v. American Tel. & 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 Gillette, 406 F. Supp. at 716; United
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985).
---------------------------------------------------------------------------

VIII. Determinative Materials and 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: __________.

Respectfully submitted,
Jill A. Ptacek
J. Richard Doidge,
Attorneys, Transportation, Energy, and U.S. Department of Justice,
Antitrust Division, Transportation, Energy, and Agriculture Section,
325 7th Street, Suite 500, Washington, D.C. 20530, (202) 307-6351.

Appendix A
[Bids for Lancaster-F, Salisbury-F, and Toledo-F in rounds 167 through 172]
----------------------------------------------------------------------------------------------------------------
Round Lancaster-F (BTA #240) Salisbury-F (BTA #398) Toledo-F (BTA #444)
----------------------------------------------------------------------------------------------------------------
166.................................. [Standing high bidder [Standing high bidder [Standing high bidder
as of round 47-- as of round 11-- as of round 146--
NextWave]. Omnipoint]. NextWave].
167.................................. ....................... NextWave 51,000....... .......................
168.................................. ....................... ....................... Omnipoint 1,251,015.
169.................................. ....................... ....................... NextWave 1,377,001.
170.................................. Omnipoint 513,444..... Omnipoint 67,444...... Omnipoint 1,515,002.
Omnipoint Withdrawal.. Omnipoint Withdrawal.. .......................
171.................................. NextWave 514,000...... NextWave 68,000....... .......................
Omnipoint 512,444..... Omnipoint 66,444...... .......................
172 and thereafter................... No further bids........ No further bids........ No further bids.
----------------------------------------------------------------------------------------------------------------

Stipulation and Order

It is hereby 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 United States District Court 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 Procedure and Penalties Act (15
U.S.C. Sec. 16), and without further notice to any party or other
proceeding, 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 defendants and by filing that
notice with the Court.
3. The defendant shall abide by and comply with the provisions of
the proposed Final Judgment pending entry of the Final Judgment by the
Court and shall, from the date of the signing of this Stipulation by
the parties, comply with all the terms and provisions of the proposed
Final Judgment as though they were in full force and effect as an order
of the Court.
4. In the event that plaintiff withdraws its consent, as provided
in paragraph 2 above, 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.

Respectfully submitted,

For Plaintiff United States of America:
Jill A. Ptacek
J. Richard Doidge,
Attorneys, Antitrust Division, U.S. Department of Justice, 325 Seventh
Street, N.W., Washington, D.C. 20004, (202) 307-0468.

For Defendant Mercury PCS II, L.L.C.:
Charles A. James, Esq.,
Jones, Day, Reavis & Pogue,
Metropolitan Square, 1450 G Street, N.W., Washington, D.C. 20005, (202)
879-3675.

Order

It is so ordered, this ______ day of ________, 1998.

----------------------------------------------------------------------
United States District Court Judge

[[Page 65234]]

Certificate of Service

Charles A. James, Esquire, Jones, Day, Reavis & Pogue, Metropolitan
Square, 1450 G Street, Washington, D.C. 20005
Jill Ptacek,
Antitrust Division, U.S. Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, D.C. 20530, (202) 307-6607, (202) 616-2441
(Fax).

Final Judgment

Plaintiff, United States of America, filed its Complaint on
November 10, 1998. Plaintiff and the Defendant, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication of any issue of fact or law. This Final Judgment
shall not be evidence against or an admission by any party with respect
to any issue of fact or law. Therefore, before the taking of any
testimony, without trial or adjudication of any issue of fact or law
herein, and upon consent of the parties, it is hereby ordered,
adjudged, and decreed, as follows:

I. Jurisdiction

This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting hereto. Venue is proper in the
District of Columbia. The Complaint states a claim upon which relief
may be granted against the Defendant under Section 1 of the Sherman
Act, 15 U.S.C. Sec. 1.

II. Definitions

As used herein, the term:
(A) ``Defendant'' means Mercury PCS II, L.L.C., its successors,
assigns, subsidiaries, divisions, groups, affiliates, partnerships and
joint ventures, directors, officers, managers, agents, and employees.
(B) ``Document'' means all ``writings and recordings'' as that
phrase is defined in Rule 1001(1) of the Federal Rules of Evidence.
(C) ``FCC'' means the Federal Communications Commission.
(D) ``License-identifying information'' means any number, letter,
code or description that designates or identifies a license or that
links licenses.
(E) ``Person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, association, institution,
governmental unit, public trust, or other legal entity.

III. Applicability

IV. Prohibited Conduct

V. Compliance Program

The Defendant is ordered to maintain an antitrust compliance
program, which shall include the following:
(A) Designating, within 30 days of entry of this Final Judgment, an
Antitrust Compliance Officer with responsibility for accomplishing the
antitrust compliance program and with the purpose of achieving
compliance with this Final Judgment. The Antitrust Compliance Officer
shall, on a continuing basis, supervise the review of the current and
proposed activities of the Defendant to ensure that it complies with
this Final Judgment.
(B) The Antitrust Compliance Officer shall be responsible for:
(1) Distributing within 60 days of the entry of this Final
Judgment, a copy of this Final Judgment to (a) all officers and
directors of the Defendant; and (b) to all employees who have any
responsibility for formulating, proposing, recommending, establishing,
approving, implementing or submitting the Defendant's prices in FCC-
conducted license auctions;
(2) Distributing in a timely manner a copy of this Final Judgment
to any officer, director or employee who succeeds to a position
described in Section V(B)(1);
(3) Obtaining from each present or future officer, director or
employee designated in Section V(B)(1), within 60 days of entry of this
Final Judgment or of the person's succession to a designated position,
a written certification that he or she: (1) has read, understands, and
agrees to abide by the terms of this Final Judgment; and (2) has been
advised and understands that his or her failure to comply with this
Final Judgment may result in conviction for criminal contempt of court;
(4) Maintaining a record of persons to whom the Final Judgment has
been distributed and from whom, pursuant to Section VI(B)(3), the
certification has been obtained; and
(5) Reporting to the Plaintiff any violation of the Final Judgment.

VI. Certification

Within 75 days after the entry of this Final Judgment, the
Defendant shall certify to the Plaintiff whether it has complied with
Sections V(B)(1) and (B)(3) above.

VII. Plaintiff Access

[[Page 65235]]

Judgment as may be reasonably requested, subject to any legally
recognized privilege.
(C) No information or documents obtained by the means provided in
Section VII shall be divulged by the Plaintiff 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, 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 the
Defendant to Plaintiff, the Defendant represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and Defendant 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 10 days' notice shall be
given by Plaintiff to the Defendant prior to divulging such material in
any legal proceeding (other than a grand jury proceeding) to which
Defendant is not a party.

VIII. Further Elements of the Final Judgment

Dated: ________.

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

Competitive Impact Statement

I. Nature and Purpose of This Proceeding

On November 10, 1998, the United States filed a civil antitrust
complaint alleging that the defendant, Mercury PCS II, L.L.C.
(``Mercury''), had violated Section 1 of the Sherman Act, 15 U.S.C.
Sec. 1. Mercury participated in an auction (the ``DEF auction'') of
broadband radio spectrum licenses for personal communications service
(``PCS'') that was conducted by the Federal Communications Commission
(``FCC'') between August 1996 and January 1997. The Complaint alleges
that during the DEF auction Mercury submitted bids that ended with
three-digit numerical codes to communicate with rival bidders and that,
through the use of these coded bids, Mercury and one of its rivals
reached an agreement to refrain from bidding against one another. As a
consequence of this agreement, the complaint alleges Mercury and its
competitor paid less for certain PCS licenses, resulting in a loss of
revenue of the Treasury of the United States.
On November 10, 1998, the United States and Mercury filed a
Stipulation and Order in which they consented to the entry of a
proposed Final Judgment that provides the relief that the United States
seeks in the Complaint. Under the proposed Final Judgment, Mercury
would be enjoined from submitting coded bids in future FCC auctions and
entering into any agreement related to bidding for FCC licenses that
violates Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
The United States and Mercury have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the Final Judgment would terminate the action, except that the Court
would retain jurisdiction to construe, modify, or enforce its
provisions and to punish violations thereof.

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

A. Background of the PCS Auctions
In 1993, Congress enacted legislation enabling the FCC to auction
licenses for radio spectrum that could be used to provide PCS. Based on
a wireless, digital technology, PCS offers an alternative to current
traditional telephone services.
The FCC designated six bands of broadband radio spectrum for PCS:
A, B, C, D, E and F. The A, B and C bands occupy 30 MHZ each, while the
D, E and F licenses are 10 MHZ each. The FCC divided the country into
51 geographic areas called Market Trading Areas (``MTAs''), which were
each allotted A and B licenses. The FCC subdivided the MTAs into 493
smaller geographic units called Basic Trading Areas (``BTAs''), which
were each allotted C, D, E, and F licenses. Each BTA was assigned a
number from 1 to 493.
The authorizing legislation required the FCC to adopt rules
ensuring competitive auctions, and the FCC considered numerous auction
formats for PCS, ultimately adopting a simultaneous, multiple-round,
open format. Under this format, numerous licenses were offered in a
single auction, staged over several rounds, with all licenses remaining
open for bidding until the auction closed. Auction participants could
observe all of the bidding activity in each round. The auction ended
only when a round passed in which no bidder submitted a bid on any
license.
To keep the auction moving forward, the FCC imposed eligibility
limits and activity rules. The FCC gave each license a population value
called ``MHZ-pops.'' Each bidder made down payments to the FCC, with
the size of the payment entitling it to bid for a certain amount of
MHZ-pops. A participant could bid on any combination of licenses as
long as the combined MHZ-pops of those licenses did not exceed the MHZ-
pops to which the bidder's down payment entitled it (eligibility).
Bidders also had to be ``active'' in each round (bid or have the high
bid from the prior round) on licenses representing a set percentage of
their MHZ-pops; otherwise, the FCC reduced their eligibility for the
next round. As the auction proceeded, the bidders had to bid an
increasing percentage of their MHZ-pops until in the final stages they
had to bid nearly all of their eligibility.
Each round in the auction began with a bid submission period during
which participants submitted bids electronically or by telephone for
any of the licenses in which they were interested. After each bid
submission period, the FCC published electronically to all bidders the
results for each license, including the name of each company bidding,
the amount of each bid, and the time each bid was submitted. The high
bidder for a license in a round became the ``standing high'' bidder for
the license with a tie going to the earliest bidder.
A bid withdrawal period then followed. During this period, bidders
were permitted to withdraw their standing high bids from any market,
subject to a withdrawal penalty specified by the FCC. The FCC then
published the results. The bid submission and withdrawal periods
comprised an auction round.
At the beginning of an auction, the FCC generally held one round
per day. As the auction progressed, the FCC

[[Page 65236]]

increased the number of rounds held in a single day, providing a period
of time between rounds for auction participants to analyze the bidding
from the prior round and to plan for the next round.
One goal of the FCC was to ensure the efficient allocation of
licenses, that is, that the licenses would go to the bidders who valued
them most highly. The simultaneous, multiple-round format of the PCS
auctions helped achieve this goal in several ways. It allowed bidders
to pursue different license aggregation strategies and change their
strategies as the auction proceeded. In addition, it allowed auction
participants to observe the value that other bidders placed on the
licenses and use that information to refine their own assessment of
license values. This was particularly useful given that the technology
used for PCS was new and bidders were uncertain about both the costs of
providing the services and the prospective revenues. Ultimately,
because the licenses were awarded to the highest bidders, the PCS
auction format allowed the marketplace to determine the most efficient
allocation of licenses.
Notwithstanding these benefits of the auction format, the FCC
recognized the risk that ``collusive conduct by bidders prior to or
during the auction process could undermine the competitiveness of the
bidding process.'' Second Report and Order, FCC 94-61, para. 223 (Rel.
April 20, 1994). The FCC sought to mitigate the risk of collusion by
adopting rules restricting the disclosure of bidding strategies during
the auction. The FCC noted, however, that Federal antitrust laws
applied to the auctions and it would rely primarily on those laws to
deter and punish collusion in the auctions. Second Report and Order ,
supra at para. 225; Second Memorandum Opinion and Order, FCC 94-215,
para. 50 (Rel. August 15, 1994).
B. Illegal Agreement To Allocate Licenses in the DEF Auction
The auction of the D, E and F licenses for all 493 BTAs began in
August 1996. Because there were three bands being auctioned, the DEF
auction involved a total of 1479 licenses. Lasting 276 rounds, the
auction ended in January 1997.
Prior to the DEF auction, bidders analyzed which licenses (or
groups of licenses) would best enable them to provide effective and
competitive service, assessed the value they placed on those licenses,
and developed strategies to obtain the desired licenses for the lowest
possible prices. The bidders also speculated about their rivals'
business strategies and attempted to identify the key licenses for
those strategies, relying on an array of information, including
knowledge of the licenses bidders had acquired in prior auctions.
As the auction proceeded, bidders carefully observed their rivals'
actions and often adjusted their own market valuations and business
strategies, sometimes based on their assessment of their rivals'
objectives. Their rivals' bids, however, did not necessarily reveal
their true objectives. An auction participant might bid for a
particular license during a particular round for a number of reasons:
It may have always wanted the license, but for strategic reasons
refrained from bidding until then; it may have changed its business
strategy and decided that it now wanted the license; it may have seen
an opportunity to acquire an undervalued license; it may have bid
simply to preserve its eligibility to bid on other licenses later in
the auction; it may have bid to raise a rival's cost to obtain the
license; or it may have bid to send a message to the standing high
bidder to refrain from bidding against it for a different license.
Thus, the purpose of a particular bid might be procompetitive or
anticompetitive.
A bidder's purpose in making a bid might, depending on the
circumstances, be ambiguous to its rivals. Where ambiguity remains, it
can be difficult to use a bid or bidding pattern alone to send clear
messages or invitations to collude. To eliminate or reduce any
ambiguity, Mercury sometimes placed bids during the DEF auction in
which the final three digits intentionally corresponded to the number
for a BTA (a ``BTA end code''). Knowing that other bidders could see
the bids and hence the BTA end codes, Mercury used the codes to better
explain the real purpose of certain bids it made--to reach an agreement
with a rival. In particular, Mercury used the BTA end codes to link the
bidding of licenses in two (or more) specific BTA markets, highlight
the licenses Mercury wanted, and convey to the competing bidders offers
to agree with Mercury not to bid against each other for the linked
licenses.
Sometimes Mercury placed bids in one market with the BTA end code
of another market to send the message: ``I'm bidding for this license
because you bid for the one I want (indicated by the BTA code) and I'll
stop bidding in your market if you stop bidding in mine.'' Other times,
Mercury used the BTA end codes to tell its rival: ``If you don't stop
bidding for this license, I will bid for the one you want (indicated by
the BTA code).''
Mercury's use of the BTA end codes did not serve any legitimate
purpose of the auction. Mercury's purpose for using BTA end codes was
to send clear and unmistakable invitations to collude to rival bidders
and to reach agreements with those rivals to refrain from bidding
against each other. Such conduct was not authorized by the applicable
FCC rules and was inconsistent with the FCC's goal to encourage
competitive bidding.
Over the course of rounds 117 to 127, Mercury reached an agreement
with High Plains Wireless, L.P. (``High Plains'') to allocate between
them the F-band licenses for Amarillo (BTA 013) and Lubbock (BTA #264).
Mercury agreed to stop bidding for the Amarillo-F license in exchange
for High Plains' agreement not to bid for the Lubbock-F license. (The
bidding for the Lubbock-F and Amarillo-F licenses between rounds 114
and 127 is depicted in the table attached as appendix A to this
Competitive Impact Statement.)
Prior to round 114, High Plains, Mercury and a third bidder were
bidding for the Lubbock-F license. After the third bidder failed to bid
for Lubbock-F in rounds 114 through 116, Mercury sought to strike an
agreement with the only remaining active bidder on the license--High
Plains. In round 117, Mercury attached the Amarillo BTA end code
(``013'') to its bid for the Lubbock-F license. By using the BTA end
code in round 117, Mercury intended to communicate to High Plains that
the bidding for these two licenses was linked and that Mercury would
begin bidding for Amarillo-F if High Plains did not stop bidding for
Lubbock-F.
Mercury believed that Amarillo was an important license for High
Plains. High Plains had placed bids for the Amarillo license in the C
auction and had been the standing high bidder for the Amarillo-F
license since round 68.
After High Plains continued to bid for Lubbock-F, Mercury placed a
bid in round 121 for the Amarillo-F license that ended with the Lubbock
BTA end-code (``264''). Mercury's purpose for using the BTA end code
was to link the two licenses, highlight the bid as retaliatory, and
communicate an offer to stop bidding for Amarillo-F if High Plains
stopped bidding for Lubbock-F. Mercury repeated its offer in subsequent
rounds by ending its bids in Lubbock-F and Amarillo-F with BTA end
codes. In round 128, High Plains accepted Mercury's offer and stopped
bidding for Lubbock-F, even though High Plains had been willing to pay
more for the Lubbock-F license. (Lying on the southern border of the
Amarillo BTA, the Lubbock BTA presented a natural expansion territory
for High Plains.)

[[Page 65237]]

Observing that High Plains had stopped bidding for Lubbock-F, Mercury
stopped bidding for Amarillo-F.
As a consequence of Mercury's agreement with High Plains,
competition for the Lubbock-F license was suppressed and the Treasury
received less revenue for the Lubbock-F license. It was in High Plains'
economic self-interest to bid more for the Lubbock-F license than
Mercury's winning bid and, but for the illegal agreement, it would have
done so.

III. Explanation of the Proposed Final Judgment

The provisions of the proposed Final Judgment are designed to
ensure that Mercury does not enter into anticompetitive agreements when
participating in future FCC auctions. The decree supplements any
prohibitions on bidding conduct set forth in the FCC's auction rules,
and the defendant may violate the decree even if its conduct does not
violate an agency statute or rule.
The proposed Final Judgment would enjoin Mercury from entering into
an agreement with another license applicant to fix, establish, suppress
or maintain the price of a license to be awarded by the FCC or to
allocate any such licenses among competitors (Section IV(A)). The
proposed Final Judgment would not prevent Mercury from entering into
any joint-venture or similar agreements regarding licenses to be
awarded by the FCC that are both disclosed to the FCC and authorized
under the FCC's rules and regulations. (Section IV(A)). However, such
bidding arrangements would still be subject to scrutiny under the
antitrust laws.
The proposed Final Judgment would also prevent Mercury from using
BTA end codes or any similar signaling mechanism to solicit
anticompetitive agreements in future FCC auctions. The proposed Final
Judgment would enjoin Mercury from submitting bids that contain
``license-identifying information'' in future FCC auctions, unless the
inclusion of such information is required by the FCC (Section IV(B)).
License-identifying information is defined as ``any number, letter,
code or description that designates or identifies a license or that
links licenses.'' (Section II(D)).
The proposed Final Judgment would further require Mercury to
establish and maintain an antitrust compliance program (Section V). It
would also provide that the United States may obtain information from
Mercury concerning possible violations of the Final Judgment (Section
VII).

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 Mercury. In
this case, the injured person is the United States.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States and Mercury has 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 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 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 responses of the United States will be filed with the
Court and published in the Federal Register. Written comments should be
submitted to: Roger W. Fones, Chief, Transportation, Energy &
Agriculture Section, Antitrust Division, United States Department of
Justice, 325 Seventh Street, N.W., Suite 500, 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. The proposed
Final Judgment would expire ten (10) years from the date of its entry.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed
Final Judgment, seeking damages in this case pursuant to Section 4A of
the Clayton Act, 15 U.S.C. Sec. 15a. Doing so would likely have
required a full trial on the merits against Mercury. In the view of the
Department of Justice, such a trial would involve substantial cost and
the risk associated with such a trial is not warranted, considering
that the proposed Final Judgment provides full injunctive relief for
the violations of the Sherman Act set forth in the Complaint.

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

(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). As the Court of Appeals for the District of
Columbia Circuit recently held, 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 (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.'' \1\ Rather, absent a showing of

[[Page 65238]]

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 Case. para.61,508, at 71,980
(W.D. Mo. 1977).
---------------------------------------------------------------------------

\1\ 119 Cong. Rec. 24598 (1973); see also 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. Sec. 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. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in 1974
U.S.C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------

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. 1981): s ee also, Microsoft, 56
F.3d 1448 (D.C. Cir 1995). Precedent requires that

\2\ United States v.Bechtel, 648 F.2d at 666 (internal 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); Gillette, 406, F.Supp. at 716; see also
United States v. American Cyanamid Co., 719 F.2d 558, 565 (2d Cir.
1983).
---------------------------------------------------------------------------

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 its 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).'' \3\
---------------------------------------------------------------------------

\3\ United States v. American Tel. & 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 Gillette, 406 F. Supp. at 716; United
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985).
---------------------------------------------------------------------------

VIII. Determinative Materials and 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: November 10, 1998.

Respectfully submitted,
Jill A. Ptacek,
J. Richard Doidge,
Attorneys, U.S. Department of Justice, Antitrust Division,
Transportation, Energy, and Agriculture Section, 325 7th Street NW.,
Suite 500, Washington, DC 20530, (202) 307-6351.

Appendix A
[Bids for Lubbock-F and Amarillo-F in Rounds 114 through 127]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Round Lubbock-F (BTA #264) Amarillo-F (BTA #013)
--------------------------------------------------------------------------------------------------------------------------------------------------------
114...................................... High Plains 1,033,105..... [Standing high bidder as of round 68--High Plains].
Mercury, 1,032,003.........
115...................................... Mercury 1,136,000......... ................................................................................
116...................................... High Plains 1,250,100..... ................................................................................
117...................................... Mercury 1,375,013......... ................................................................................
118...................................... High Plains 1,513,100..... ................................................................................
119...................................... Mercury 1,664,000......... ................................................................................
120...................................... High Plains 1,830,101..... ................................................................................
121...................................... ......................... Mercury 1,615,264.
122...................................... ......................... High Plains 1,777,101.
123...................................... Mercury 1,922,013......... ................................................................................
124...................................... High Plains 2,114,100..... ................................................................................
125...................................... ......................... Mercury 1,866,264.
126...................................... ......................... High Plains 2,053,100.
127...................................... Mercury 2,326,013......... ................................................................................
Round 128 (and thereafter)............... High Plains Never Bids Mercury Never Bids Again.
Again.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Stipulation and Order

[[Page 65239]]

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.

Respectfully submitted,

For Plaintiff, United States of America:
Jill A. Ptacek
J. Richard Doidge,
Attorneys, Antitrust Division, U.S. Department of Justice, 325 Seventh
Street, N.W., Washington, D.C. 20004, (202) 307-0468.

For Defendant, 21st Century Bidding Corp.:
Timothy J. O'Rourke, Esq.,
Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Suite
800, Washington, D.C. 20036, (202) 776-2716.

Order

It is so ordered, this ______ day of ________, 1998.

----------------------------------------------------------------------
United States District Court Judge

Certificate of Service

Timothy J. O'Rourke, Esquire, Dow, Lohnes & Albertson, 1200 New
Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036-6802.
Jill Ptacek,
Antitrust Division, U.S. Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, D.C. 20530, (202) 307-6607, (202) 616-2441
(Fax).

Final Judgment

I. Jurisdiction

This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting hereto. Venue is proper in the
District of Columbia. The Complaint states a claim upon which relief
may be granted against the Defendant under Section 1 of the Sherman
Act, 15 U.S.C. Sec. 1.

II. Definitions

As used herein, the term:
(A) ``Defendant'' means 21st Century Bidding Corporation, its
successors, assigns, subsidiaries, divisions, groups affiliates,
partnerships and joint ventures, directors, officers, managers, agents,
and employees.
(B) ``Document'' means all ``writings and recordings'' as that
phrase is defined in Rule 1001(1) of the Federal Rules of Evidence.
(C) ``FCC'' means the Federal Communications Commission.
(D) ``License-identifying information'' means any number, letter,
code or description that designates or identifies a license or that
links licenses.
(E) ``Person'' means any natural person, corporation, firm,
company, sole proprietorship, partnership, association, institution,
governmental unit, public trust, or other legal entity.

III. Applicability

IV. Prohibited Conduct

V. Compliance Program

The Defendant is ordered to maintain an antitrust compliance
program, which shall include the following:
(A) Designating, within 30 days of entry of this Final Judgment, an
Antitrust Compliance Officer with responsibility for accomplishing the
antitrust compliance program and with the purpose of achieving
compliance with this Final Judgment. The Antitrust Compliance Officer
shall, on a continuing basis, supervise the review of the current and
proposed activities of the Defendant to ensure that it complies with
this Final Judgment.
(B) The Antitrust Compliance Officer shall be responsible for:
(1) Distributing within 60 days of the entry of this Final
Judgment, a copy of this Final Judgment to (a) all officers and
directors of the Defendant; and (b) to all employees who have any
responsibility for formulating, proposing, recommending, establishing,
approving, implementing or submitting the Defendant's prices in FCC-
conducted license auctions;
(2) Distributing in a timely manner a copy of this Final Judgment
to any officer, director or employee who succeeds to a position
described in Section V(B)(1);
(3) Obtaining from each present or future officer, director or
employee designated in Section V(B)(1), within 60 days of entry of this
Final Judgment or of the person's succession to a designated position,
a written certification that he or she: (1) has read, understands, and
agrees to abide by the terms of this Final Judgment; and (2) has been
advised and understands that his or her failure to comply with this
Final Judgment may result in conviction for criminal contempt of court;
(4) Maintaining a record of persons to whom the Final Judgment has
been distributed and from whom, pursuant to Section VI(B)(3), the
certification has been obtained; and
(5) Reporting to the Plaintiff any violation of the Final Judgment.

VI. Certification

Within 75 days after the entry of this Final Judgment, the
Defendant shall certify to the Plaintiff whether it has complied with
Sections V (B)(1) and (B) (3) above.

[[Page 65240]]

VII. Plaintiff Access

(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the Plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to the Defendant
made to its principal office, be permitted, subject to any legally
recognized privilege:
(1) Access during the Defendant's office hours to inspect and copy
all documents in the possession or under the control of the Defendant,
who may have counsel present, relating to any matters contained in this
Final Judgment; and
(2) Subject to the reasonable convenience of the Defendant and
without restraint or interference from it, to interview officers,
employees or agents of the Defendant, who may have counsel present,
regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to the Defendant's principal
office, the Defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section VII shall be divulged by the Plaintiff 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, 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 the
Defendant to Plaintiff, the Defendant represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and Defendant 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 10 days' notice shall be
given by Plaintiff to the Defendant prior to divulging such material in
any legal proceeding (other than a grand jury proceeding) to which
Defendant is not a party.

VIII. Further Elements of the Final Judgment

Dated: __________.

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

Competitive Impact Statement

The United States of America, pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 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 This Proceeding

On November 10, 1998, the United States filed a civil antitrust
complaint alleging that the defendant, 21st Century Bidding Corp.
(``21st Century''), had violated Section 1 of the Sherman Act, 15
U.S.C. 1. 21st Century participated in an auction (the ``DEF auction'')
of broadband radio spectrum licenses for personal communication
services (``PCS'') that was conducted by the Federal Communications
Commission (``FCC'') between August 1996 and January 1997. The
Complaint alleges that during the DEF auction 21st Century submitted
bids that ended with three-digit numerical codes to communicate with
rival bidders and that, through the use of these coded bids, 21st
Century and one of its rivals reached an agreement to refrain from
bidding against one another. As a consequence of this agreement, the
complaint alleges 21st Century and its competitor paid less for certain
PCS licenses, resulting in a loss of revenue to the Treasury of the
United States.
On November 10, 1998, the United States and 21st Century filed a
Stipulation and Order in which they consented to the entry of a
proposed Final Judgment that provides the relief that the United States
seeks in the Complaint. Under the proposed Final Judgment, 21st Century
would be enjoined from submitting coded bids in future FCC auctions and
entering into any agreement related to bidding for FCC licenses that
violates Section 1 of the Sherman Act, 15 U.S.C. 1.
The United States and 21st Century have stipulated that the
proposed Final Judgment may be entered after compliance with the APPA.
Entry of the Final Judgment would terminate the action, except that the
Court would retain jurisdiction to construe, modify, or enforce its
provisions and to punish violations thereof.

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

[[Page 65241]]

round. As the auction proceeded, the bidders had to bid an increasing
percentage of their MHZ-pops until in the final stages they had to bid
nearly all of their eligibility.
Each round in the auction began with a bid submission period during
which participants submitted bids electronically or by telephone for
any of the licenses in which they were interested. After each bid
submission period, the FCC published electronically to all bidders the
results for each license, including the name of each company bidding,
the amount of each bid, and the time each bid was submitted. The high
bidder for a license in a round became the ``standing high'' bidder for
that license with a tie going to the earliest bidder.
A bidder withdrawal period then followed. During this period,
bidders were permitted to withdraw their standing high bids from any
market, subject to a withdrawal penalty specified by the FCC. The FCC
then published the results. The bid submission and withdrawal periods
comprised an auction round.
At the beginning of an auction, the FCC generally held one round
per day. As the auction progressed, the FCC increased the number of
rounds held in a single day, providing a period of time between rounds
for auction participants to analyze the bidding from the prior round
and to plan for the next round.
One goal of the FCC was to ensure the efficient allocation of
licenses, that is, that the licenses would go to the bidders who valued
them most highly. The simultaneous, multiple-round format of the PCS
auctions helped achieve this goal in several ways. It allowed bidders
to pursue different license aggregation strategies and change their
strategies as the auction proceeded. In addition, it allowed auction
participants to observe the value that other bidders placed on the
licenses and use that information to refine their own assessment of
license values. This was particularly useful given that the technology
used for PCS was new and bidders were uncertain about both the costs of
providing the services and the prospective revenues. Ultimately,
because the licenses were awarded to the highest bidders, the PCS
auction format allowed the marketplace to determine the most efficient
allocation of licenses.
Notwithstanding these benefits of the auction format, the FCC
recognized the risk that ``collusive conduct by bidders prior to or
during the auction process could undermine the competitiveness of the
bidding process.'' Second Report and Order, FCC 94-61, para. 223 (Rel.
April 20, 1994). The FCC sought to mitigate the risk of collusion by
adopting rules restricting the disclosure of bidding strategies during
the auction. The FCC noted, however, that Federal antitrust laws
applied to the auctions and it would rely primarily on those laws to
deter and punish collusion in the auctions. Second Report and Order,
supra at para. 225; Second Memorandum Opinion and Order, FCC 94-215,
para. 50 (Rel. August 15, 1994).
B. Illegal Agreement To Allocate Licenses in the DEF Auction
The auction of the D, E and F licenses for all 493 BTAs began in
August 1996. Because there were three bands being auctioned, the DEF
auction involved a total of 1,479 licenses. Lasting 276 rounds, the
auction ended in January 1997.
Prior to the DEF auction, bidders analyzed which licenses (or
groups of licenses) would best enable them to provide effective and
competitive service, assessed the value they placed on those licenses,
and developed strategies to obtain the desired licenses for the lowest
possible prices. The bidders also speculated about their rivals'
business strategies and attempted to identify the key licenses for
those strategies, relying on an array of information, including
knowledge of the licenses bidders had acquired in prior auctions.
As the auction proceeded, bidders carefully observed their rivals'
actions and often adjusted their own market valuations and business
strategies, sometimes based on their assessment of their rivals'
objectives. Their rivals' bids, however, did not necessarily reveal
their true objectives. An auction participant might bid for a
particular license during a particular round for a number of reasons:
it may have always wanted the license, but for strategic reasons
refrained from bidding until then; it may have changed its business
strategy and decided that it now wanted the license; it may have seen
an opportunity to acquire an undervalued license; it may have bid
simply to preserve its eligibility to bid on other licenses later in
the auction; it may have bid to raise a rival's cost to obtain the
license; or it may have bid to send a message to the standing high
bidder to refrain from bidding against it for a different license.
Thus, the purpose of a particular bid might be procompetitive or
anticompetitive.
A bidder's purpose in making a bid might, depending on the
circumstances, be ambiguous to its rival. Where ambiguity remains, it
can be difficult to use a bid or bidding pattern alone to send clear
messages or invitations to collude. To eliminate or reduce any
ambiguity, 21st Century sometimes placed bids during the DEF auction in
which the final three digits intentionally corresponded to the number
for a BTA (a ``BTA end code''). Knowing that other bidders could see
the bids and hence the BTA end codes, 21st Century used the codes to
better explain the real purpose of certain bids it made--to reach an
agreement with a rival. In particular, 21st Century used the BTA end
codes to link the bidding of licenses in two (or more) specific BTA
markets, highlight the license 21st Century wanted, and convey to the
competing bidders offers to agree with 21st Century not to bid against
each other for the linked licenses. By placing bids in one market with
the BTA end code of another market, 21st Century sent the message:
``I'm bidding for this license because you bid for the one I want
(indicated by the BTA code) and I'll stop bidding in your market if you
stop bidding in mine.''
21st Century's use of the BTA end codes did not serve any
legitimate purpose of the auction. 21st Century's purpose for using BTA
end codes was to send clear and unmistakable invitations to collude to
rival bidders and to reach agreements with those rivals to refrain from
bidding against each other. Such conduct was not authorized by the
applicable FCC rules and was inconsistent with the FCC's goal to
encourage competitive bidding.
Over the course of rounds 120 to 125, 21st Century reached an
agreement with Mercury PCS II, L.L.C. (``Mercury'') to allocate between
them the F-band licenses for Indianapolis (BTA #204), Baton Rouge (BTA
#32), and Biloxi (BTA #42). 21st Century agreed to stop bidding for the
Baton Rouge and Biloxi-F licenses in exchange for Mercury's agreement
not to bid for the Indianapolis-F license. (The bidding for the Baton
Rouge, Biloxi and Indianapolis-F between rounds 120 and 125 is depicted
in the table attached as Appendix A to this Competitive Impact
Statement.)
Prior to round 120, 21st Century had been bidding for the
Indianapolis-F license and had been the high bidder on that license
since round 85. On the other hand, Mercury had been bidding
consistently for the Baton Rouge and Biloxi-F licenses and was standing
high bidder for both licenses. 21st Century had never bid for licenses
in Baton Rouge or Biloxi; Mercury had never bid in Indianapolis.
In round 120, Mercury bid for the first time for the Indianapolis-F
license. After 21st Century bid back in round 121, Mercury again bid
for Indianapolis-

[[Page 65242]]

F. In round 123, 21st Century placed bids for the Baton Rouge and
Biloxi-F licenses and attached the Indianapolis BTA end code (``204'')
to these bids. 21st Century's purpose for using the BTA end codes was
to link the Baton Rouge, Biloxi and Indianapolis-F licenses, highlight
the bids as retaliatory, and communicate an offer to stop bidding for
Baton Rouge and Biloxi if Mercury stopped bidding for Indianapolis-F.
21st Century believed that the Baton Rouge and Biloxi licenses were
important to Mercury. Mercury had been bidding persistently for these
licenses since the start of the auction. In addition, Mercury held a
number of licenses from the C block in the vicinity and the Baton Rouge
and Biloxi-F licenses were contiguous to several other geographic
markets where Mercury was the standing high bidder for the F licenses.
Mercury saw the BTA end code and understood that 21st Century
proposed to stop bidding for Baton Rouge and Biloxi in exchange for
Mercury ceasing to bid for the Indianapolis-F license. In round 124,
Mercury bid back over 21st Century for the Baton Rouge and Biloxi-F
licenses, attaching the Indianapolis BTA end code to its bids.
Mercury's use of the Indianapolis BTA end code in round 124 confirmed
that it understood the link between the three licenses. Mercury
accepted 21st Century's offer and stopped bidding for Indianapolis-F
even though it was willing to pay more for the Indianapolis-F license.
Observing that Mercury had stopped bidding for Indianapolis-F, 21st
Century stopped bidding for the Baton Rouge and Biloxi-F licenses.
As a consequence of 21st Century's agreement with Mercury,
competition for the Indianapolis-F license was suppressed and the
Treasury received less revenue for the Indianapolis-F license. It was
Mercury's economic self-interest to bid more for the Indianapolis-F
license than 21st Century's winning bid and, but for the illegal
agreement, it would have done so.

III. Explanation of the Proposed Final Judgment

The provisions of the proposed Final Judgment are designed to
ensure that 21st Century does not enter into anticompetitive agreements
when participating in future FCC auctions. The decree supplements any
prohibitions on bidding conduct set forth in the FCC's auction rules,
and the defendant may violate the decree even if its conduct does not
violate an agency statute or rule.
The proposed Final Judgment would enjoin 21st Century from entering
into an agreement with another license applicant to fix, establish,
suppress or maintain the price of a license to be awarded by the FCC or
to allocate any such licenses among competitors (Section IV(A)). The
proposed Final Judgment would not prevent 21st Century from entering
into any joint-venture or similar agreements regarding licenses to be
awarded by the FCC that are both disclosed to the FCC and authorized
under the FCC's rules and regulations (Section IV(A)). However, such
bidding arrangements would still be subject to scrutiny under the
antitrust laws.
The proposed Final Judgment would also prevent 21st Century from
using BTA end codes or any similar signaling mechanism to solicit
anticompetitive agreements in future FCC auctions. The proposed Final
Judgment would enjoin 21st Century from submitting bids that contain
``license-identifying information'' in future FCC auctions, unless the
inclusion of such information is required by the FCC (Section IV(B)).
License-identifying information is defined as ``any number, letter,
code, or description that designates or identifies a license or that
links licenses.'' (Section II (D)).
The proposed Final Judgment would further require 21st Century to
establish and maintain an antitrust compliance program (Section V). It
would also provide that the United States may obtain information from
21st Century concerning possible violations of the Final Judgment
(Section VII).

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 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 59(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against 21st Century. In
this case, the injured person is the United States.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States and 21st Century 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 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 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 responses of the United States will be filed with the
Court and published in the Federal Register. Written comments should be
submitted to: Roger W. Fones, Chief, Transportation, Energy &
Agriculture Section, Antitrust Division, United States Department of
Justice, 325 Seventh Street, N.W., Suite 500, 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. The proposed
Final Judgment would expire ten (10) years from the date of its entry.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed
Final Judgment, seeking damages in this case pursuant to Section 4A of
the Clayton Act, 15 U.S.C. 5a. Doing so would likely have required a
full trial on the merits against 21st Century. In the view of the
Department of Justice, undertaking the substantial cost and the risk
associated with such a trial is not warranted, considering that the
proposed Final Judgment provides full injunctive relief for the
violations of the Sherman Act set forth in the Complaint.

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

[[Page 65243]]

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. 16(e). As the Court of Appeals for the District of Columbia
Circuit recently held, 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 (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.'' \1\ Rather, 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 Case. para. 61,508, at 71,980
(W.D. Mo. 1977).
---------------------------------------------------------------------------

\1\ 119 Cong. Rec. 24598 (1973), See also 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. 93-1463,
93rd Cong., 2d Sess. 8-9, reprinted in 1974 U.S.C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------

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. 1981), see also, Microsoft, 56 F.3d
1448 (D.C. Cir. 1995). Precedent requires that

\2\ United States v. Bechtel, 648 F.2d at 666 (internal
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) Gillette, 406 F. Supp. at 716,
see also United States v. American Cyanamid Co., 719 F.2d 558, 565
(2d Cir. 1983).
---------------------------------------------------------------------------

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.'' \3\
---------------------------------------------------------------------------

\3\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131,
150 (D.D.C. 1982), affid sub nom. Maryland v. United States, 460
U.S. 1001 (1983), quoting Gillette, 406 F. Supp. at 716, United
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985).
---------------------------------------------------------------------------

VIII. Determinative Materials and 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.

For Plaintiff United States of America.

Dated: November 10, 1998.

Respectfully submitted,
Jill A. Ptacek,
J. Richard Doidge,
Attorneys, U.S. Department of Justice, Antitrust Division,
Transportation, Energy, and Agriculture Section, 325 7th Street, Suite
500, Washington, D.C. 20530, (202) 307-6351.

Appendix A
[Bids for Baton Rouge-F, Biloxi-F, and Indianapolis-F in rounds 120 through 125]
----------------------------------------------------------------------------------------------------------------
Baton Rouge-F (BTA Indianapolis-F (BTA
Round #032) Biloxi-F (BTA #042) #204)
----------------------------------------------------------------------------------------------------------------
119.................................. [Standing high bidder [Standing high bidder [Standing high bidder
as of round 69-- as of round 96-- as of round 85--21st
Mercury]. Mercury]. Century].
120.................................. ....................... ....................... Mercury 2,582,000.
121.................................. ....................... ....................... 21st Cent. 2,850,021.
122.................................. ....................... ....................... Mercury 3,135,123.
123.................................. 21st Cent. 3,990,204.. 21st Cent. 1,650,204.. .......................
124.................................. Mercury 4,389,204..... Mercury 1,815,204..... .......................
125.................................. ....................... ....................... 21st Cent. 3,300,545.
126 and thereafter................... No further bids........ No further bids........ No further bids.
----------------------------------------------------------------------------------------------------------------

[[Page 65244]]

[FR Doc. 98-31431 Filed 11-24-98; 8:45 am]
BILLING CODE 4410-11-M