[Federal Register Volume 63, Number 236 (Wednesday, December 9, 1998)]
[Notices]
[Pages 67920-67938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32147]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. General Electric Company and InnoServ
Technologies, Inc., Civil Action No. 98-1744 (RCL)(D.D.C.); Response to
Public Comments
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that Public Comments and the
Response of the United States have been filed with the United States
District Court for the District of Columbia in United States v. General
Electric Company and InnoServ Technologies, Inc., Civil Action No. 98-
1744 (RCL)(D.D.C., filed July 14, 1998). On July 14, 1998, the United
States filed a Complaint alleging that the proposed acquisition of
InnoServ Technologies by General Electric would violate Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18. The proposed Final Judgment, filed
at the same time as the Complaint, permits General Electric to acquire
InnoServ but requires that General Electric divest InnoServ's PREVU
diagnostic software used in the maintenance and repair of diagnostic
imaging machines (e.g., CT Scanners, MRIs, x-ray machines).
Public comment was invited within the statutory 60-day comment
period. Such Comments, and the Responses thereto, are hereby published
in the Federal Register and have been filed with the Court. Copies of
the Complaint, Stipulation, proposed Final Judgment, Competitive Impact
Statement, Public Comments and the Response of the United States are
available for inspection in Room 215 of the Antitrust Division,
Department of Justice, 325 7th Street, N.W., Washington, D.C. 20530
(telephone: 202-514-2481) and at the Office of the Clerk of the United
States District Court for the District of Columbia, 333 Constitution
Avenue, N.W., Washington, D.C.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
director of Operations & Merger Enforcement, Antitrust Division.
Response To Public Comments
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (``APPA'' or ``Tunney Act''),
the United states hereby responds to the public comments received
regarding the proposed Final Judgment in this case.
I. Background
On July 14, 1998, the United States filed the Complaint in this
matter, alleging that the acquisition by General Electric Company
(``GE'') of InnoServ Technologies, Inc. (``InnoServ'') would violate
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. Simultaneously with
the filing of the Complaint, the United States filed a proposed Final
Judgment and Stipulation signed by all the parties allowing for entry
of the Final Judgment following compliance with the Tunney Act. A
Competitive Impact Statement (``CIS'') was also filed with the Court
and published in the Federal Register, along with the proposed Final
Judgment, on July 24, 1998 (see 63 FR 39894).
As explained more fully in the Complaint and CIS, GE, through its
wholly owned subsidiary, General Electric Medical Systems (``GEMS''),
is the largest manufacturer of medical imaging equipment, such as CT
scanners and magnetic resonance imagers (``MRIs''), and is the leading
service provider of GE imaging equipment. InnoServ, despite struggling
financially for the last two years, was one of the nation's largest
independent service organizations (``ISOs'') and had significant
expertise and competed with GE in servicing certain GE imaging
equipment. GE and InnoServ also competed in numerous local markets for
comprehensive multi-vendor and asset-management services (``multi-
vendor service''). GE's acquisition of InnoServ was therefore likely to
reduce competition substantially in two markets: (i) the market for
servicing certain models of GE imaging equipment on a discrete,
machine-by-machine basis; and (ii) the multi-vendor service market.
The proposed Final Judgment permits GE to acquire InnoServ, which
it did on September 16, but requires GE to divest promptly InnoServ's
proprietary diagnostic software (called ``PREVU''). Diagnostic software
is used by service engineers to calibrate, maintain, and service
imaging equipment more quickly. InnoServ is one of the very few
companies other than GE that developed its own proprietary diagnostic
software for GE imaging equipment, and the United States concluded that
it was primarily PREVU that had made InnoServ a good competitor to GE.
The 60-day period for public comments expired on September 22,
1998. As of today, the United States has received comments from two
persons--Independent Service Network International (``ISNI''), which
filed Comments and Supplemental Comments, and Star Technologies.\1\ The
United States has carefully considered the views expressed in these
comments, but nothing in these comments has altered the United States'
conclusion that the proposed Final Judgment is in the public interest.
Once these comments and this Response are published in the Federal
Register, the United States will have fully complied with the Tunney
Act and will then file a motion for entry of the proposed Final
Judgment.
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\1\ ISNI's initial Comments are attached as Appendix 1. The
declaration of Claudia Betzner, ISNI's Executive Director, was
submitted along with ISNI's initial Comments and is attached as
Appendix 2. ISNI's Supplemental Comments are attached as Appendix 3.
Star Technologies' Comment is attached as Appendix 4.
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II. Response to Public Comments
A. Initial Comment of Independent Service Network International
ISNI, a trade association of 157 maintainers of high technology
equipment, submitted two Comments. In its initial Comment, ISNI alleged
that
[[Page 67921]]
the CIS failed to comply with the APPA because it did not include
certain information that ISNI believes necessary for it to evaluate
whether entry of the proposed Final Judgment is in the public interest.
Specifically, ISNI requests: (i) A technical and economic assessment of
PREVU; (ii) a more detailed description of the relevant markets alleged
in the Complaint and the effect of the proposed Final Judgment on those
markets; (iii) information about other companies, if any, that
expressed an interest in purchasing InnoServ; and (iv) information
relating to the relationship between the settlement of this case and
the simultaneous settlement of another Antitrust Division case against
GE involving medical imaging equipment, United States v. General
Electric Co., No. CV-96-121-M-CCL (D. Mont., filed August 1, 1996) (the
``Montana case''). ISNI also challenges the United States' assertion
that there were no documents considered determinative in formulating
the proposed Final Judgment (Appendix 1, ISNI Comment at 16), and
requests that the Court order the production of numerous types of
documents that ISNI believes ``must exist'' (id. at 17-18). ISNI
requests that the Court allow it to intervene and argues that a special
master should be appointed (id. at 18-19). ``At the very least,'' ISNI
asserts, the Court should hold a hearing in which ISNI may reply to
this Response (id. at 19).
The United States responds to each of ISNI's specific requests in
detail below. In order to put ISNI's Comments in context, however, we
note initially that the essence of ISNI's concerns have nothing to do
with either GE's acquisition of InnoServ or whether GE's divestiture of
PREVU is in the public interest. Rather, ISNI's real aim is to convince
this Court that GE has market power in various medical equipment and
service markets, and that the United States should have challenged
seven other transactions by GE in these markets dating back to 1994.
(Appendix 1, ISNI Comment at 7-9). ISNI believes that the divestiture
of PREVU will not resolve these competitive concerns, and therefore
that GE should be compelled to license its own advanced diagnostic
materials to ISNI's members and other service competitors (Appendix 1,
ISNI Comment at 16).
Whether GE's prior transactions were anticompetitive, and whether
it would be procompetitive to have GE license its own software, are not
germane to an assessment of whether entry of the proposed Final
Judgment serves the public interest. The proper focus of a Tunney Act
proceeding is on the proposed final judgment, and the court should not
look beyond the complaint in the case before it ``to evaluate claims
that the government did not make and to inquire as to why they were not
made.'' United States v. Microsoft, 56 F.3d 1448, 1459 (D.C. Cir.
1995). Nor does the APPA give a court authority to impose different
terms on the parties.\2\
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\2\ A court may decline to enter a proposed final judgment
unless the parties accept certain conditions, see, e.g., United
States v. American Tel. & Tel. Co., 552 F. Supp. 131, 225 (D.D.C.
1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001
(1983), but if the parties do not agree to those conditions, the
court's only choices are to enter the final judgment the parties
proposed or leave the parties to litigate the case.
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In this case, the United States concluded that the divestiture of
PREVU would adequately remedy the antitrust violation alleged in the
Complaint because it is PREVU, not GE's software, that would otherwise
be eliminated from the market by this merger. While ISNI might believe
that more competition would be created if GE had to license its
software to INSI's members, the Tunney Act does not empower a court to
reject a proposed final judgment based on beliefs that ``other remedies
were preferable,'' Microsoft, 56 F.3d at 1460, or ``because a third
party claims it could be better treated,'' id. at 1461 n.9.
In making its public interest determination, ``the court's function
is not to determine whether the resulting array of rights and
liabilities is one that will best serve society, but only to confirm
that the resulting settlement is within the reaches of the public
interest.'' United States v. Western Elec. Co., 993 F.2d 1572, 1576
(D.C. Cir. 1992) (emphasis added, internal quotation and citation
omitted). The settlement embodied in the proposed Final Judgment is
well within the reaches of this public interest standard.
1. InnoServ's PREVU Software
ISNI's first request for additional information seeks a ``technical
and economic evaluation'' of PREVU in order to demonstrate that its
divestiture can establish a viable competitor in the relevant markets
alleged in the Complaint. Specifically, ISNI argues that the United
States must: (1) Provide a detailed description of PREVU; (ii) state
whether anyone has licensed or purchased PREVU from InnoServ; (iii)
state whether anyone has expressed an interest in licensing or
purchasing PREVU from InnoServ; (iv) state whether PREVU helps InnoServ
and potentially others to compete with GEMS and, is so, how; (v)
compare the effectiveness of PREVU and the effectiveness of GEMS'
advanced diagnostic software; and (vi) explain why it is not
anticompetitive for GEMS to retain a non-exclusive license to use PREVU
despite the fact that GE is not required to license its own advanced
diagnostic software to competing service providers. (Appendix 1, ISNI
Comment at 12).
ISNI apparently believes that it needs this information to
determine whether any potential purchaser of the PREVU package could in
fact compete effectively with GE, given that InnoServ itself was
struggling financially. ISNI asks, ``how will the divestiture of PREVU
create an effective competitor when it was not able to make InnoServ an
effective competitor?'' (id. at 11). Yet this argument is relevant not
to whether the proposed Final Judgment is in the public interest but
rather to whether the United States should have filed suit to challenge
this acquisition at all. If, as ISNI seems to fear, InnoServ was unable
to compete effectively with GE using PREVU, then GE's acquisition of
InnoServ could not have substantially reduced competition. If, as the
United States concluded, PREVU was regarded by some in the industry as
an important competitive tool and that it made InnoServ a good
alternative to GE for many customers, then the divestiture of PREVU
will restore that competition and thus remedy the antitrust violation
alleged in the Complaint.
The United States have been investigating markets for servicing
medical imaging equipment for several years, both in connection with
this transaction and in the Montana case.\3\ Based on the evidence it
has gathered in these matters, the United States determined that for
more complicated types of imaging equipment, such as CT scanners and
MRIs, diagnostic software such as GE's own software and InnoServ's
PREVU allow service engineers to service and repair equipment much more
quickly and efficiently. For that reason, ISOs that have access to
diagnostic software for servicing imaging equipment have a competitive
edge over those that do not. InnoServ was one of the very few ISOs that
had developed advanced diagnostic software designed to be used to
service GE imaging equipment. Although PREVU is not as fast or
sophisticated as GE's own diagnostic software, it made
[[Page 67922]]
InnoServ's engineers more efficient than they would have been without
any software at all. Thus, the United States concluded that PREVU gave
InnoServ a competitive advantage over other ISOs and made it an
effective competitor to GE. The United States also concluded that PREVU
was sufficiently important to InnoServ's competitiveness that GE's
divestiture of PREVU would offset to a large extent the competitive
harm flowing from the merger.
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\3\ As explained in more detail in Section II(A)(4), the Montana
case involved a challenge to restrictions GE had imposed on over 500
hospitals that had licensed its advanced diagnostic software used to
maintain GE imaging equipment. These restrictions prevented the
hospital licensees from competing with GE to service third-party
medical equipment.
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The fact that PREVU is not as sophisticated or efficient as GE's
own software does not mean that InnoServ was not an effective
competitor, that the proposed Final Judgment is not in the public
interest, or that this Court must insist that GE license its own
software. PREVU made InnoServ a closer competitor to GE than it would
have been without any diagnostic software at all. InnoServ was able to
compete with GE by, among other things, offering service at lower
prices than GE offered. The proposed Final Judgment need only address
the anticompetitive effects flowing from the merger. It does so by
requiring GE to divest PREVU, which will enable its purchaser to
compete as effectively as InnoServ did against GE.
Because the United States' conclusions concerning PREVU's
competitive significance were based on its evaluation of customer
demand for the services InnoServ offered, not a technical comparison
between PREVU and GE's software, providing the ``detailed description''
of PREVU requested by ISNI would not facilitate evaluation of the
proposed Final Judgment. To the extent ISNI seeks such a description to
enable its members to determine whether they are interested in
purchasing PREVU, they may obtain it directly from GE. The proposed
Final Judgment obligates GE to provide the kind of information about
PREVU ``customarily provided in a due diligence process'' to all bona
fide prospective purchasers. (Proposed Final Judgment para. IV(C)).
ISNI also requests information about whether others have purchased
or licensed PREVU from InnoServ, or have expressed an interest in doing
so. Prior to this transaction, InnoServ offered to license PREVU, in
conjunction with a parts contract, to hospitals and other equipment
owners wishing to service their own equipment. At least 15 InnoServ
customers elected to license PREVU in this way. Since GE's acquisition
of InnoServ, more than a dozen entities have expressed to GE some
interest in the possible purchase of PREVU pursuant to the proposed
Final Judgment. GE is currently negotiating with some of these
companies regarding such a purchase.
Finally, ISNI requests an explanation of why it is not
anticompetitive for GEMS to retain a non-exclusive license to use
PREVU. The proposed Final Judgment permits GE to retain a license to
use PREVU under very limited conditions: (i) to fulfill InnoServ
service contracts in effect on the date GE acquired InnoServ; (ii) in
connection with fulfilling any service contracts resulting from written
proposals made by InnoServ to prospective customers that were
outstanding on that date, provided that any such contract is entered
into within 90 days thereafter; and (iii) in connection with fulfilling
any renewals of any service contracts described in (i) or (ii), so long
as the renewal was entered into prior to any sale of PREVU by GE or a
trustee. (Proposed Final Judgment para. IV(E)). GE's license to use
PREVU under these limited conditions expires, for each such service
contract, on the expiration date of the contract in effect on the date
that PREVU is sold. (Id.). These provisions were included in the
proposed Final Judgment solely for the convenience of any InnoServ
customers who want to continue to have their equipment serviced with
PREVU. Requiring GE to stop using PREVU before it is divested would
deny those customers their preferred service option without promoting
competition.
2. The Relevant Markets
ISNI contends that additional information must be provided about
the relevant markets alleged in the Complaint in order to determine the
effect of the proposed Final Judgment on those markets. It requests, at
a minimum, information relating to how these markets were defined, the
structure of these markets, the number of firms competing in them, the
market share of each such firm, and an analysis of the effect of the
proposed Final Judgment on price, output, consumer choice, and product
quality (Appendix 1, ISNI Comment at 13).
The detailed information about market definition and structure that
ISNI has requested will not assist the Court in evaluating whether GE's
divestiture of PREVU will ameliorate the anticompetitive effects of its
acquisition of InnoServ. The number of firms competing in each market,
and each firm's market share, are relevant only to assessing the
competitive effects of the acquisition itself. The issue of whether the
United States should have filed a lawsuit in the first place is not
before the court in a Tunney Act proceeding. Under the proposed Final
Judgment, the acquirer of PREVU will be free to offer service
throughout the United States, and the structure of each market is
therefore not important to understanding how the proposed Final
Judgment will affect competition in that market.
Moreover, the thirteen paragraphs in the Complaint devoted to
market definition and anticompetitive effects (Complaint Paras. 9-19)
provide sufficient information for industry participants such as ISNI
to comment on the adequacy of the proposed Final Judgment. The
Complaint alleges that the sale of service for each model of medical
imaging equipment is a separate product market (id. para. 12) and that
the geographic markets are local, with the precise boundaries differing
depending on the type of equipment involved and other factors (id.
para. 17). Prior to its acquisition by GE, InnoServ engineers were
servicing approximately 13 different models of GE CT scanners and 6
models of GE MRIs, in addition to several other types of GE imaging
equipment (for example, ultrasound, cath lab, and mammography
machines). InnoServ offered service within a 100-mile radius of 36
metropolitan areas. Therefore, there are over 650 markets potentially
affected by this acquisition. To answer each of ISNI's sweeping
requests for each of these markets would be burdensome and effectively
require the United States to do much of the work it would have had to
do if it were litigating this case. One of the major benefits of
antitrust consent judgments is that they enable the government ``to
reallocate necessarily limited (enforcement) resources,'' Microsoft, 56
F.3d at 1459, a benefit that would be lost if the United States were
forced to compile and disclose this kind of information during a Tunney
Act proceeding.
3. Alternative Purchasers of InnoServ
ISNI also requests information about companies other than GE, if
any, that expressed an interest in acquiring InnoServ. Specifically, it
asks the United States to identify any such companies, to state whether
there was an appraisal conducted by a third party of the value of
InnoServ or PREVU, and to state how long InnoServ was on the market.
This information is necessary, in ISNI's view, to determine whether
there was a serious suitor of InnoServ that would have been a
preferable purchaser from the standpoint of the antitrust laws but that
lost to GE in a bidding war (Appendix 1, ISNI Comment at 14-15).
ISNI fails to explain what relevance this information could have to
an
[[Page 67923]]
evaluation of whether the proposed Final Judgment is in the public
interest. Such information could be relevant if the United States had
elected not to challenge the transaction on the grounds that the
parties had met the stringent criteria of the failing company
defense.\4\ But they did not, and the United States did not rely on
such a defense in electing to file its Complaint and agreeing to the
proposed Final Judgment. Thus, the information ISNI seeks is irrelevant
to the issue before the Court.
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\4\ Under the failing company defense, an otherwise
anticompetitive merger does not violate the antitrust laws if one
party faces the ``grave probability of business failure,'' would not
be able to reorganize successfully under Chapter 11 of the
Bankruptcy Act, has made unsuccessful good-faith efforts to elicit
reasonable alternative offers from competitively-preferable
purchasers, and absent the acquisition, the assets of the company
would exit the relevant market. United States v. Greater Buffalo
Press, Inc., 402 U.S. 549, 555 (1971); Citizen Publishing Co. v.
United States, 394 U.S. 131, 136-37 (1969); U.S. Department of
Justice and Federal Trade Commission, Horizontal Merger Guidelines
Sec. 5.1 (issued April 2, 1992), reprinted in 4 Trade Reg. Rep.
(CCH) para. 13,104 (1992) and 57 Fed. Reg. 41,552 (1992). During the
course of its investigation, the United States did review InnoServ's
finances and its attempts to sell the company, but ultimately the
decision to accept the proposed Final Judgment was not based on
issues relating to the failing firm defense.
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4. The Montana Case
The United States noted in the CIS that, ``[i]n conjunction with
this settlement, GE has also agreed to consent to all of the relief
that the government was seeking in (the Montana case).'' ISNI requests
additional information about the proposed Final Judgment reached in the
Montana case. It cites GE's press release announcing the resolution of
these two cases, in which it stated that ``[t]o obtain clearance to
complete the InnoServ transaction, G.E. Medical Systems agreed to
settle (the Montana case)'' (Appendix 1, ISNI Comment at 15). It asks
for supporting evidence or explanation of statements in the CIS that
``[t]he United States evaluated the merits of the settlement proposals
in each case independently, concluding that the proposed settlement of
this case is in the public interest for the reasons stated herein, and
that the proposed settlement of the Montana case is in the public
interest for the reasons stated in the Competitive Impact Statement
filed in that case today'' (id.). Finally, ISNI suggests that
statements in the Montana CIS demonstrate that the relief in this case
is not adequate and that the United States should have sought mandatory
licensing of GE's own diagnostic software (id. at 16).
In the Montana case, filed in 1996, the United States challenged
restrictions GE had imposed on over 500 hospitals that had licensed its
advanced diagnostic software used to maintain and repair GE imaging
equipment. These restrictions prevented hospital licensees from
competing with GE to service any kind of medical equipment--whether
manufactured by GE or another company--at other hospitals and clinics.
Because GE's software was designed to be used on specific models of GE
imaging equipment, the United States alleged that these anticompetitive
restraints were not ancillary to GE's legitimate right to protect its
intellectual property from misuse. As stated in the CIS in the Montana
case, see 63 FR 40737 (July 30, 1998), the proposed Final Judgment in
that case secures all of the relief that the United States was seeking
by requiring GE to void the restrictive provisions in its existing
licenses and commit not to impose such restrictions in the future. By
eliminating these agreements not to compete from GE's licenses, the
proposed Final Judgment in the Montana case will allow over 500
hospitals across the country to service third-party medical equipment
if they so wish.
The United States evaluated the merits of this settlement and the
Montana settlement independently and concluded that each was in the
public interest. In the Montana case, the settlement provided all of
the relief that the United States had been seeking from GE. In this
case, the United States concluded that GE's divestiture of PREVU would
adequately address the anticompetitive effects of its acquisition of
InnoServ because it ensured that the PREVU software could remain in the
marketplace. The simultaneous settlement of the two cases makes sense
because the markets affected by the anticompetitive conduct challenged
in the two cases overlap to some extent.\5\ GE had been contesting the
Montana action for more than two years. Its willingness to settle that
litigation on the government's terms--regardless of GE's public
explanation for doing so--advanced the public interest by allowing
hospitals to service third-party medical equipment. That same relief
also could help ameliorate some of the competitive effects of the
InnoServ transaction. In these circumstances, the United States and GE
agreed to settle both cases at the same time.
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\5\ The agreements challenged in the Montana case had their
greatest anticompetitive effects in more rural areas, where the
licensee hospitals were likely to be among the few, if not only,
potential competitors to GE. In contrast, InnoServ tended to compete
mostly within a 100-mile radius of larger metropolitan areas
(Complaint para. 18). Nevertheless, there was at least some overlap
in the geographic markets affected by the two cases.
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ISNI cites the Montana CIS to support its arguments that PREVU is
inferior to GE's software, that a purchaser of PREVU will not be able
to compete effectively with GE, and that the United States should have
insisted that GE license its advanced diagnostic software to ISOs such
as ISNI's members. PREVU is not as sophisticated or efficient as GE's
own software, but hat fact is irrelevant to the issue of whether the
proposed Final Judgment is in the public interest. The United States
concluded that PREVU made InnoServ a more effective alternative to GE.
The proposed Final Judgment need only address the anticompetitive
effects flowing from the merger, and it does so by requiring GE to
divest PREVU to a purchaser that, in the United States' judgment, has
the ``managerial, operational, and financial capability to compete
effectively.'' (Proposed Final Judgment para. IV(B)). Requiring GE to
license its own software might well create more competition than
existed in the market prior to the InnoServ transaction. But the relief
in this case need only address the anticompetitive effects flowing from
the merger challenged in the Complaint; it need not create more
competition than existed prior to GE's acquisition. The software that
would otherwise be eliminated from the market by this merger is PREVU,
not GE's software, so requiring GE to divest PREVU is clearly relief
that is in the public interest.
The Complaint in this case challenged GE's acquisition of InnoServ,
not its longstanding policy of not licensing its own software to ISOs.
ISNI ``would have it be otherwise, but [does not] have the power to
force the government to make that claim. And since the claim is not
made, a remedy directed to that claim is hardly appropriate.''
Microsoft, 56 F.3d at 1460.
5. There Are No ``Determinative'' Documents
ISNI characterizes as ``incredible'' the CIS's statement that there
were no determinative materials or documents within the meaning of the
APPA that were considered in formulating the proposed Final Judgment.
It argues that the Court should order the United States to produce
certain documents that ISNI believes ``must exist'': documents
providing the good-faith basis for the filing of the Complaint; third-
party analyses or evaluations of InnoServ and/or PREVU; documents
relating to the efforts of others, if any, to acquire InnoServ;
documents supporting
[[Page 67924]]
conclusory statements in the CIS regarding how the divestiture of PREVU
will increase competition; and documents comparing PREVU to GE's own
advanced diagnostic materials. (Appendix 1, ISNI Comment at 16-18).
The Tunney Act requires, in pertinent part, that the United States
make available to the public copies of the proposed Final Judgment
``and any other materials and documents which the United States
considered determinative in formulating such proposal.'' 15 U.S.C.
Sec. 16(b) (emphasis added). Thus, the United States is required to
disclose only those documents that the United States considered
determinative in its decision to settle the case on the terms set forth
in the proposed Final Judgment. Documents that were determinative in
the decision to file the case need not be disclosed. During Senate
hearings on the Tunney Act, one witness specifically urged that ``as a
condition precedent to * * * the entry of a consent decree in a civil
case * * * the Department of Justice be required to file and make a
matter of public record a detailed statement of the evidentiary facts
on which the complaint * * * was predicated.'' \6\ Congress, however,
rejected that recommendation. ISNI's broad request for the documents
providing the good-faith basis for filing the Complaint is contrary to
the plain language of the Tunney Act and its legislative history and
should be denied.
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\6\ The Antitrust Procedures and Penalties Act: Hearings on S.
783 and S. 1088 Before the Subcommittee on Antitrust and Monopoly of
the Senate Judiciary Committee, 93d Congress., 1st Sess. 26, 57
(1973) (prepared statement of Maxwell M. Blecher, attorney).
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ISNI's other requests similarly fall outside the scope of what
courts have interpreted to be determinative documents. Just last year,
the United States Court of Appeals for the District of Columbia
Circuit, in a case brought by the Antitrust Division challenging
certain portions of the American Bar Association's law school
accreditation activities, held that a third party was not entitled to a
wide range of documents in the government's files. Massachusetts School
of Law at Andover, Inc. versus United States (``MSL''), 118 F.3d 776
(D.C. Cir. 1997). In that case, the United States asserted that the
determinative documents provision referred ``only to documents, such as
reports to the government, `that individually had a significant impact
on the government's formulation of relief--i.e., on its decision to
propose or accept a particular settlement.' '' Id. at 784. The court
held that both the statutory language and the legislative history
supported this interpretation. Indeed, the court noted that during the
Senate debate on the Tunney Act, Senator Tunney himself cited a report
to the government by an outside expert analyzing the economic
consequences of proposed relief in an earlier case as exemplifying a
``determinative document.'' Id.\7\ The Court also considered a broad
disclosure requirement to be inappropriate because it would directly
interfere with the United States' ability to negotiate settlement
agreements. Id. at 784-85. Similarly, in another recent Antitrust
Division case the Second Circuit held that ``the range of materials
that are `determinative' under the Tunney Act is fairly narrow'' and
that only documents that were ``a substantial inducement to the
government to enter into the consent decree'' should be subject to
disclosure. United States versus Bleznak, et al., 153 F.3d 16, 20-21
(2d Cir. 1998).\8\
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\7\ Congress enacted the Tunney Act in response to consent
judgments entered in 1971 in three cases involving acquisitions by
International Telephone and Telegraph Corporation (``ITT''),
including that of the Hartford Fire Insurance Company. The consent
judgments permitted ITT to retain Hartford. Subsequent Congressional
hearings revealed that the Antitrust Division had employed Richard
J. Ramsden, a financial consultant, to prepare a report analyzing
the economic consequences of ITT's possible divestiture of Hartford.
Ramsden concluded that requiring ITT to divest Hartford would have
adverse consequences on ITT and on the stock market generally. Based
in part on the Ramsden Report, the United States concluded that the
need for the divestiture of Hartford was outweighed by the
divestiture's projected diverse effects on the economy. In
explaining the determinative documents provision, Senator Tunney
stated, ``I am thinking here of the so-called Ramsden memorandum
which was important in the ITT case.'' 119 Cong. Rec. 24,605 (1973).
\8\ The single case cited by INSI--United States versus Central
Contracting Co., 537 F. Supp. 571 (E.D. Va. 1982)--has not been
followed by any other court. Moreover, even that opinion recognized
that the Tunney Act ``does not require full disclosure of Justice
Department files, or grand jury files, or defendant's files, but it
does require a good faith review of all pertinent documents and
materials and a disclosure of'' those ``material and documents that
substantially contribute to the determination [by the government] to
proceed by consent decree * * *.'' Id. at 577.
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ISNI has given no reason to doubt the United States' assertion that
there are no determinative documents in this case. The United States
did not receive any expert reports concerning the effects of requiring
GE to divest PREVU, and there are no documents that constituted a
substantial inducement to the United States to enter into the proposed
Final Judgment. The decision to settle on these terms was based on an
assessment of the importance of diagnostic software generally and of
PREVU specifically, and there is no document that had a determinative
impact on that assessment.
6. The Court Should Deny ISNI's Request To Intervene and To Appoint a
Special Master
ISNI requests this Court to permit it to intervene to aid the Court
in its public interest determination (Appendix 1, ISNI Comment at 3,
18-19). In order to intervene in this case, ISNI must first file a
motion with this Court and upon each party to this action.\9\ If it
does so, the United States will respond fully to that motion. From its
informal intervention request, however, it appears that ISNI should not
be granted intervenor status.
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\9\ Fed.R.Civ.P. 24(c) states that ``[a] person desiring to
intervene shall serve a motion to intervene upon the parties as
provided in Rule 5. The motion shall state the grounds therefor and
shall be accompanied by a pleading setting forth the claim or
defense for which intervention is sought.''
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``The general rule * * * has been that private parties will not be
allowed to intervene in government antitrust litigation.'' 7C Wright,
Miller and Kane, Federal Practice and Procedure 2d Sec. 1908 at 266
(1986). In this District alone, applications for intervention have been
denied in several Tunney Act cases. United States versus The Thomson
Corp., et al., 1996-2 Trade Cas. (CCH) para.71,620, 78,386 (D.D.C.
1996); United States versus Microsoft Corp., 159 F.R.D. 318, 328
(D.D.C.), rev'd on other grounds, 56 F.3d 1448 (D.C. Cir. 1995); United
States versus Airline Tariff Publ'g Co., 1993-1 Trade Cas. (CCH)
para.70,191, at 69,894 (D.D.C. 1993); United States versus Stroh
Brewery Co., 1982-2 Trade Cas. (CCH) para.64.804, at 71,959-61 (D.D.C.
1982); United States versus American Tel. & Tel. Co., 1982-2 Trade Cas.
(CCH) para.64,726, at 71,524-26 (D.D.C. 1982).
The eligibility requirements for intervention are the same in a
Tunney Act proceeding as in any other case and are set forth in Rule 24
of the Federal Rules of Civil Procedure. 15 U.S.C. Sec. 16(f)(3)(in
making public interest determination, court may authorize
``intervention as a party pursuant to the Federal Rules of civil
Procedure''); MSL, 118 F.3d at 780 n.2 (11the Tunney Act looks entirely
to Fed.R.Civ.P.24 to supply the legal standard for intervention''). A
third party may be granted intervention either as ``of right'' under
rule 24(a) or ``permissive[ly]'' under Rule 24(b). ISNI's request does
not meet the standards under either provision.
To intervene as of right, ISNI must show that it has ``an interest
relating to the property or transaction which is the subject of the
action and [that it] is so situated that the disposition of the action
may as a practical matter impair
[[Page 67925]]
or impede [its] ability to [protect that interest. Unless [it is]
adequately represented by existing parties.'' Fed. R. Civ. P.
24(a)(2).\10\ ISNI's primary ``interest'' in this proceeding seems to
be in using a broad public interest inquiry to obtain for its members
access to GE's advanced diagnostic software. (Appendix 1, ISNI Comment
at 7, 16, 19). But the entry of the proposed Final Judgment will not
impair or impede any interest ISNI or its members may have in obtaining
a license to GE's software both because this case related solely to
GE's acquisition of InnoServ, not its software licensing policies, see
Sections II(A)(1), (4), and because even it this case did deal with
GE's licensing policies, entry of the proposed Final Judgment would not
affirmatively set back ISNI's pursuit of that interest. See MSL, 118
F.3d at 780 (movant ``points to no case equating failure to promote an
interest with its impairment''). Nor can ISNI use an appeal to
protecting the ``public interest'' to support its request for
intervention. Private parties ``are not entitled to intervene simply to
advance their own ideas of what the public interest requires. In
federal antitrust litigation, it is the United States, not private
parties, which `must alone speak for the public interest.' '' United
States versus G. Heileman Brewing Co., 563F. Supp. 642, 648 (D. Del.
1983) (quoting Buckeye Coal & Ry. Co. versus Hocking Valley Ry. Co.,
269 U.S. 42, 49 (1925)). Therefore, ``[a] private party generally will
not be permitted to intervene in government antitrust litigation absent
some strong showing that the Government is not vigorously and
faithfully representing the public interest.'' United States versus
Haftford-Empire Co., 573 F.2d 1, 2 (6th Cir. 1973), quoted with
approval in United States versus LTV Corp., 746 F.2d 51, 54 n.7 (D.C.
Cir. 1984). thus, intervention of right in support of the public
interest is allowed, if at all, only after a showing of bad faith or
malfeasance on the part of the government. United States versus
Associated Milk Producers, Inc., 534 F.2d 113, 117 (8th Cir. 1976); G.
Heileman Brewing, 563 F. Supp. at 649. While it is not evident that
ISNI has even alleged bad faith or malfeasance, it is clear that it
neither has made nor can make this necessary showing because the United
States has acted properly and in good faith.
---------------------------------------------------------------------------
\10\ Rule 24(a)(1) provides for intervention as of right when a
statute confers an unconditional right to intervene, but the Tunney
Act does not do so. See 15 U.S.C. Sec. 16(f).
---------------------------------------------------------------------------
ISNI also fails to meet the requirements for permissive
intervention. Under Rule 24(b)(2), an applicant may intervene when its
``claim or defense and the main action have a question of law or fact
in common.'' \11\ The words ``claim or defense'' refer to ``the kinds
of claims or defenses that can be raised in courts of law as part of an
actual or impending law suit.'' Diamond v. Charles, 476 U.S. 54, 76
(1986). ISNI has made no showing that it has such a ``claim or
defense'' here. In addition, a court ``must consider whether the
intervention will unduly delay or prejudice the adjudication of the
rights of the original parties.'' Fed R. Civ. P 24(b). As Judge Greene
noted in the AT&T case, any rights granted to an intervenor in a Tunney
Act proceeding are likely to impose burdens on the judicial process:
\11\ Rule 24(b)(1) provides for intervention when a statute
confers a conditional right to intervene. The Tunney Act provides
for intervention, but expressly refers back to the Federal Rules of
Civil Procedure. 15 U.S.C. Sec. 16(f)(3); see MSL, 118 F.3d at 780
n.2.
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It could be argued that these include the right to file
counterclaims and cross-claims, to adduce witness testimony and
other evidence, and to appeal from orders of the Court. Such parties
might also be contended to have the implicit right to veto any
settlement simply by withholding their consent--a result that would
in practice void the instant settlement proposal (whatever its
substantive merit) and that would eliminate consent decrees as an
option in antitrust cases generally (since someone would always or
almost always be dissatisfied).
AT&T, 1982-2 Trade Cas. (CCH para. 64,726 at 71,525 n.7. ISNI has
already attempted to expand this Tunney Act proceeding far beyond its
proper scope by suggesting that the United States should have
challenged previous transactions by GE, by arguing that GE should be
required to license its own diagnostic software to ISNI's members, and
by requesting a wide-ranging public interest inquiry in which ``fact
gathering akin to discovery'' will take place. (Appendix 1, ISNI
Comment at 7-8, 16, 19). Therefore, there is a particularly high risk
that its intervention as a party would unnecessarily delay and
complicate this Court's public interest determination. See Thomson
Corp. 1996-2 Trade Cas. (CCH) para. 71,620, at 78,386 (D.D.C. 1996)
(court denies motion to intervene by Lexis-Nexis, which suggested
possibility of taking third-party depositions).
ISNI has also not shown why its intervention is necessary given
that it has already submitted its extensive Comments. Congress provided
the 60-day notice and comment period as a means by which interested
parties such as ISNI could express concerns about proposed antitrust
settlements in cases brought by the United States. ISNI has done so,
and its intervention will constitute an unnecessary delay. See Airline
Tariff Publ'g Co., 1993-1 Trade Cas. (CCH) para. 70,191, at 69,894
(D.D.C. 1993) (motion to intervene denied when movant's comments ``will
enable [movant] to inform the Court and all parties of the effects of
the proposed decree on its members''); Stroh Brewery Co., 1982-2 Trade
Cas. (CCH para. 64,804, at 71,960 (D.D.C. 1982) (motion to intervene
denied, in part, because movant ``fully able to express its concerns
utilizing the comment procedures of the Tunney Act'').
In a few cases, courts have permitted third parties with greater
interests than ISNI's to intervene on a very limited basis. For
example, in the case challenging the merger of The Thomson Corporation
and West Publishing Company, Hyper Law, Inc. (a small publisher) was
permitted to intervene solely for the purpose of appealing entry of the
final judgment after Judge Freidman concluded that it had
``sufficiently demonstrated that it will suffer actual, concrete,
particularized injury traceable to the entry of the Final Judgment * *
*.'' Thompson Corp., 1997-1 Trade Cas. (CCH) para. 71,735, at 79,182
(D.D.C. 1997). Similarly, the D.C. Circuit in the MSL case permitted
the Massachusetts School of Law, the plaintiff in a parallel treble-
damage action against the American Bar Association, to intervene in the
government's case solely for the purpose of appealing its claim of
entitlement in a Tunney Act proceeding to certain documents that it
might not be able to obtain through discovery in its own case, a claim
which entry of the final judgment would decisively impair. MSL, 118
F.3d at 781-82. In the Antitrust Division's case against market-makers
in NASDAQ securities, the district court permitted private plaintiffs
in parallel actions to intervene in the Tunney Act proceeding for what
the court described as ``two very limited purposes'': filing a motion
for disclosure of a single document and the underlying evidence cited
therein for use in the private litigation; and raising an objection to
a single provision of the proposed consent judgment that could have
restricted use of potential evidence. United States v. Alex. Brown &
Sons, Inc., et al., 169 F.R.D. 532, 539 (S.D.N.Y. 1996). The court
limited the role of the intervenors to ``submitting comments on the
decree, engaging in oral argument, and filing appeals.'' Id. And,
although ISNI itself was allowed to intervene in the case involving the
modification of the 1956 consent
[[Page 67926]]
judgment against IBM, its rights were limited to appealing the court's
entry of the modified order (Appendix 1, ISNI Comment at 4; Appendix 2,
Betzner Decl., Exh. C). In an earlier opinion, ISNI's attempt to
intervene in the district court proceedings ``to conduct discovery,
present evidence, introduce new issues, and otherwise influence the
pace and direction of the proceedings'' was denied. United States v.
International Business Machines Corp., 1995-2 Trade Cas. (CCH) para.
71,135, at 75,459 (S.D.N.Y. 1995).\12\
---------------------------------------------------------------------------
\12\ See also United States v. American Cyanamid Co., 556 F.
Supp. 357, 359-61 (S.D.N.Y. 1982) (permissive intervention granted
because ``time consuming and expensive discovery demands often
asserted by intervening parties will not be endured here. Applicants
seek only to preserve their right to appeal * * * and participate in
such further proceedings as this Court may direct on its own
motion''), aff'd. 719 F.2d 558 (2d Cir. 1983); United States v.
American Tel. & Tel. Co., 552 F. Supp. at 219 (in case involving the
dissolution of the world's largest corporation and the restructuring
of the telecommunications industry, third parties allowed to
intervene to appeal entry of the consent judgment, participate in
post-judgment proceedings, and appeal from order approving AT&T's
reorganization plan).
---------------------------------------------------------------------------
These cases offer no support of ISNI's broad request to intervene
in this case. ISNI has not made a showing that it will suffer injury
from the entry of the proposed Final Judgment. It is not, as far as the
United States is aware, involved in litigation against GE relating to
the issues in this case. And, in contrast to the very limited rights
afforded intervenors in the cases discussed above, ISNI apparently
foresees a virtually unlimited role for itself, which will include
engaging in ``fact gathering akin to discovery'' (Appendix 1, ISNI
Comment at 19). ISNI intervention request falls far short of the
requirements set forth in Rule 24 and should be denied.)
Finally, ISNI notes that the APPA permits a Court to appoint a
special master to aid in its public interest determination (Appendix 1,
ISNI Commend at 18-19). Under 15 U.S.C. Sec. 16(f), the Court may,
among other things, take testimony of Government officials and experts
or appoint a special master to assist it in making its public interest
determination. These procedures are discretionary, however, and the
Court need not invoke any of them unless it believes that significant
issues have been raised and that further proceedings would aid the
court in resolving those issues. See S. Rep. No. 298, 93d Cong., 1st
Sess. 6-7 (1973); H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8-9 (1974).
The appointment of a special master in government antitrust cases is
extremely rare. Indeed, the United States has been unable to locate any
case in which a court has appointed a special master to assist it
during a Tunney Act proceeding. ISNI's Comments do not raise any issues
that would justify taking this extraordinary step.
7. The Court Need Not Hold a Hearing in Making Its Public Interest
Determination
In the event the Court denies ISNI's requests for intervention and
the appointment of a special master, ISNI requests that a hearing be
held in which it can reply to the United States' Response to its
Comments. (Appendix 1, ISNI Comment at 19). The Tunney Act does not
provide third parties with a right to reply, however, and Congress
``anticipated that the trial judge will adduce the necessary
information [for making a public interest determination] through the
least complicated and least time-consuming means possible.'' S. Rep.
No. 298, 93d Cong., 1st Sess. 4 (1973). The United States believes that
a hearing is unnecessary because ISNI has already adequately expressed
its views through the public comment procedure. See G. Heileman Brewing
Co., 563 F. Supp. at 650 (court denies request for evidentiary hearing
when ``those same issues have already been raised by movants through
the APPA's third-party comment procedure); United States v. Carrols
Development Corp., 454 F. Supp. 1215, 1221-22 (N.D.N.Y. 1978) (request
for limited participation denied when ``the moving parties have set
forth their views in considerable detail in briefs and affidavits filed
with this Court as well as in written comments submitted to the
Government under the APPA''). If, however, the Court determines that a
hearing would be useful in making its public interest determination,
the United States would not object to ISNI's appearance as an amicus
curiae.
B. Supplemental Comment of ISNI
ISNI submitted a Supplemental Comment on September 16, 1998, the
day that GE issued a press release announcing that it had completed its
acquisition of InnoServ. ISNI contents that the fact that GE acquired
InnoServ before the end of the 60-day notice and comment period under
the APPA, and before the Court's approval of the proposed Final
Judgment, ``undermines and disrespects the processes of the APPA'' and
makes it more difficult for the United States to withdraw its consent
to the entry of the proposed Final Judgment. (Appendix 3, ISNI
Supplemental Comment at 2).
The vast majority of mergers challenged by the government are
resolved by consent in the form of proposed final judgments that call
for some form of divestiture. It is customary in such circumstances to
permit the parties to merge at the time that the complaint and proposed
final judgment are filed, subject to the parties' obligations under the
proposed final judgment. For example, since October 1996 in this
District alone, the United states has filed 13 cases challenging
mergers that were settled on terms requiring a divestiture or some
other relief. In each of these cases, the parties were allowed to merge
prior to the close of the comment period and entry of the final
judgment by the court. The parties in such cases understand that the
proposed final judgment is subject to public comment, that the United
States may revoke its consent at any time before the final judgment is
entered, and that the final judgment will not be entered unless a court
finds that it is in the public interest.
Parties are willing to assume this risk for legitimate business
reasons. With many mergers, time is of the essence. Parties to mergers
often designate a date certain on which either party may terminate the
agreement if the merger has not been effected. The United States
challenges numerous mergers because of competitive problems that can be
fixed through a divestiture of assets rather than an injunction against
the transaction as a whole. Often the parties to such mergers are
willing to agree to such divestitures in exchange for the right to
consummate their transaction in a timely manner. If the United States
refuse to allow such mergers to proceed until after the 60-day notice
and comment period plus any additional time the court required to make
its public interest determination, many defendants might refuse to
settle and force the government seek emergency injunctive relief from a
court.\13\
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\13\ In addition, permitting parties to merge quickly is
precompetitive because it hastens the divestiture of the
competitively important assets to a third party with the incentive
and capability of competing vigorously against the acquiring party
to the merger.
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The fact that GE might complete its acquisition of InnoServe before
the entry of the proposed Final Judgment was disclosed in the
Stipulation and Order, which was filed on the same day as the Complaint
and other court papers. The Stipulation included a paragraph requiring
the defendants to comply with the proposed Final Judgment once GE
acquired InnoServ, even if that occurred prior to the Court's approval
and entry of the judgment.\14\
[[Page 67927]]
Likewise, the proposed Final Judgment itself gives GE ``180 calendar
days from the filing of the Complaint in this action or five days after
notice of entry of this Final Judgment by the Court, whichever is
later, to sell InnoServ's PREVU diagnostic package * * *.'' (Proposed
Final Judgment para.IV(A)). Both of these provisions clearly envision
that GE might acquire InnoServ, and thus begin its efforts to sell
PREVU, before the Court's entry of the proposed Final Judgment.
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\14\ ``The defendants agree to comply with the proposed Final
Judgment pending its approval by the Court, and shall, from the date
of signing this Stipulation, comply with all the terms and
provisions of the proposed Final Judgment as though it were in full
force and effect as an order of the Court, provided, however, that
defendants shall not be bound by the terms and provisions of the
proposed Final Judgment unless and until the closing of any
transaction in which General Electric Company directly or indirectly
acquires all or any part of the assets or stock of InnoServ
Technologies, Inc.'' (Stipulation and Order para.3).
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Moreover, contrary to ISNI's assertion, GE's acquisition of
InnoServ on September 16 does not make it more difficult for the United
States to withdraw its consent to the proposed Final Judgment. Nor does
it preclude this Court from evaluating whether entry of the proposed
Final Judgment is in the public interest or declining to enter the
order if it believes the settlement is unacceptable. By consummating
its acquisition of InnoServ, GE has assumed the risk that the United
States might withdraw its consent and proceed to trial or that this
Court may decline to enter the proposed Final Judgment.\15\
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\15\ The relief ISNI apparently prefers--the mandatory licensing
of GE's diagnostic software to ISOs--also has nothing to do with the
fact that GE has already acquired InnoServ. For the reasons stated
above, the United States does not believe that this is an
appropriate remedy for this acquisition. But if GE ultimately agreed
to license it owns software, or was ordered to do so by this Court
after a trial in this case, the fact that it has already acquired
InnoServ would not make that licensing any more difficult.
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C. Comment of Star Technologies
Star Technologies (``Star'') of Potomac, Maryland also submitted a
Comment expressing concerns about the potential sale or license of
InnoServ's PREVU software. Star manufacturers array processors used in
conjunction with certain models of GE's CT scanners. Star has also
developed diagnostic software, called Star Maintenance Software
(``SMS''), for testing its array processors and has licensed SMS to
numerous customers for their own internal use. Although InnoServ is a
customer of Star for the repair of certain circuit boards, Star does
not believe that InnoServ has licensed SMS in the past. Based on recent
discussions with InnoServ, however, Star believes that PREVU
incorporates, or in some way, uses SMS. Star is therefore interested in
identifying any purchasers or licensees of PREVU so that it can seek to
enforce its intellectual property rights by requiring any such buyer or
licensee to sign a SMS license. (Appendix 4, Star Technologies Comment
at 1-2).
The United States has informed Star that GE, since its September 16
acquisition of InnoServ, is the current owner of PREVU. It has also
advised GE of Star's claim of potential infringement. This dispute
properly is between Star and GE, and the proposed Final Judgment does
not affect the rights of anyone involved in this dispute. In any sale
of assets, the seller discloses all such liens and claims against the
assets being sold, and GE will presumably do so when selling PREVU. So,
too, will the trustee, in selling or licensing PREVU, if GE fails to
sell PREVU within the time prescribed by the proposed Final Judgment.
The proposed Final Judgment does not affect Star's intellectual
property rights in any way, and does not affect Star's ability to
locate the owner or licensees of PREVU any more than if InnoServ has
decided to sell PREVU on its own.
III. Legal Standard Governing the Court's Public Interest
Determination
Pursuant to the APPA, the United States is submitting these public
comments and this Response to the Federal Register for publication. 15
U.S.C. Sec. 16(d). Upon their publication, the United States will have
fully complied with the APPA and will file a motion requesting that
this Court enter the proposed Final Judgment. After receiving that
motion, the Court must determine whether entry of the proposed Final
Judgment ``is in the public interest.'' 15 U.S.C. 16(e). In doing so,
as our motion for entry of the proposed Final Judgment will explain,
the Court must apply a deferential standard and should withhold its
approval only under very limited conditions. In the MSL case, the D.C.
Circuit stated that ``constitutional questions would be raised if
courts were to subject the government's exercise of its prosecutorial
discretion to non-deferential review,'' and stated that a court should
withhold approval of a proposed final judgment ``only if any of the
terms appear ambiguous, if the enforcement mechanism is inadequate, if
third parties will be positively injured, or if the decree otherwise
makes `a mockery of judicial power.' '' MSL, 118 F.3d at 783, quoting
Microsoft, 56 F.3d at 1462. As Judge Greene observed in the AT&T case:
If courts acting under the Tunney Act disapproved proposed
consent decrees merely because they did not contain the exact relief
which the court would have imposed after a finding of liability,
defendants would have no incentive to consent to judgment and this
element of compromise would be destroyed. The consent decree would
thus as a practical matter be eliminated as an antitrust enforcement
tool, despite Congress' directive that it be preserved.
AT&T, 552 F. Supp. at 151. As this Response makes clear, the relief
mandated by the proposed Final Judgment is well within the reaches of
this public interest standard.
IV. Conclusion
After careful consideration of these public comments, the United
States has concluded that entry of the proposed Final Judgment will
provide an effective and appropriate remedy for the antitrust violation
alleged in the Complaint, and is therefore in the public interest. Once
these comments and this Response are published in the Federal Register,
the United States will move the Court to enter the proposed Final
Judgment.
Dated: November 17, 1998.
Respectfully submitted,
Jon B. Jacobs (D.C. Bar #412249)
Fred E. Haynes (D.C. Bar #165654)
Joan H. Hogan (D.C. Bar #451240)
Peter J. Mucchetti
Attorneys for the United States.
Bernard M. Hollander,
Senior Trial Attorney.
Antitrust Division, U.S. Department of justice, 325 Seventh Street,
N.W., Suite 300, Washington DC 20530, (202) 514)-5012.
Appendix 1
United States of America, Department of Justice, Antitrust
Division, 325 7th Street, NW, Suite 300, Washington, DC. 20530,
Plaintiff, v. General Electric Company, 3135 Easton Turnpike,
Fairfield, Connecticut 06431, and InnoServ Technologies, Inc., 320
Westway, Suite 530, Arlington, Texas 76018, Defendants. Case Number
1:98CV01744. Judge: Royce C. Lamberth.
Public Comment of Independent Service Network International
Pursuant to 15 U.S.C. Sec. 16(b),(d)
Pursuant to 15 U.S.C. Sec. 16(b),(d), of the Antitrust Procedures
and Penalty Acts (``APPA'') Independent Service Network International
(``ISNI''), a trade association of 157 maintainers of high technology
equipment, including medical equipment of the type at issue in this
matter,\1\ submits this public
[[Page 67928]]
comment to the Competitive Impact Statement (``CIS'') published in the
Federal Register at 63 FR 39894.
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\1\ InnoServ Technologies, Inc., one of the defendants in the
above-captioned case, is a member of ISNI, but, because of conflict
of interest considerations, has not been informed of or consulted
about this public comment. Similarly, this comment is not intended
to express any views of Serviscope, an ISNI member acquired by GEMS
in August, 1998. See attached Declaration of Claudia Betzner, para
6.
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I. Introduction
The CIS does not comply with the APPA because it does not provide
the Court or the public with sufficient information to evaluate this
consent decree. Information necessary for that evaluation includes the
following:
1. A technical and economic evaluation of the key component of this
settlement--InnoServ's PREVU advanced diagnostic package (``PREVU'')--
to demonstrate that it can accomplish what the parties call ``the
essence'' of this final judgment, i.e., ``* * * to establish a viable
competitor in the sale of service for certain models of G.E. diagnostic
imaging equipment * * *'' 63 FR at 39894.
2. To define and describe the markets in which this ``essence'' of
the consent decree is to be accomplished.
3. To provide information on other companies, if any, that
expressed an interest in purchasing InnoServ and that would present
less competitive problems than General Electric Medical Systems
(``GEMS'') as an acquirer.
4. To describe and provide, pursuant to APPA Secs. (b) and (c),
materials and documents which the United States considered
determinative in formulating the consent decree so that there can be
meaningful public comment (the assertion in the CIS that there are no
such materials or documents is, as a District Court stated in a similar
case, ``incredible,'' U.S. v. Central Contracting Co., Inc., 537 F.
Supp. 571, 576 (1982)).
5. The relationship, if any, between this settlement and United
States v. General Electric Co., No. CV-96-121-M-CCL (D. Mont. filed
August 1, 1996) (``Montana Case''), which GEMS stated it settled in
order ``to obtain clearance to complete the InnoServ acquisition * *
*'' See, Betzner Decl., Exhibit A.
Without the above information, it is not possible for the Court to
make its public interest determination pursuant to Sec. (e) of the APPA
nor is it possible for the public to make meaningful comments on the
CIS.
A public interest determination is particularly important in this
case because it involves the cost of healthcare, a subject important to
all Americans, because GEMS has a high market share in the relevant
markets, which it has extended through recent aggressive transactions
unopposed by the Government; and because there is no evidence that
there is any legitimate reason for GEMS to acquire one of its few
competitors, a company less than 1% its size. Therefore, pursuant to
APPA Sec. (f) and based on the showing detailed below, ISNI
respectfully requests that the Court authorize ISNI to intervene as a
party pursuant to the Federal Rules of Civil Procedure and that the
Court appoint a special master to preside over the gathering of the
information necessary to evaluate this CIS.
II. ISNI and Its Interest in This Proceeding
ISNI, an association of 157 independent service organizations,
i.e., organizations servicing equipment manufactured by others (see
Betzner Decl., Exhibit B for a list of members), is a nonprofit
corporation incorporated in the District of Columbia. In competition
with the service organizations of manufacturers, the members of ISNI
service various types of high-technology equipment, including medical
equipment of the type that is the subject of the CIS. ISNI's members
account for over $1.5 billion in commerce.
The purpose of ISNI for the past fourteen years has been to promote
and maintain a closer union and organization of independent service
organizations. Specifically, ISNI develops educational methods to
increase awareness about independent service organizations and studies
economic and legal problems confronting them. ISNI also serves as a
clearing house for information and data relating to its members'
businesses and ISNI promotes better relations among providers,
distributors and manufacturers of supplies and services.
ISNI has participated in various legal proceedings on behalf of its
members. For example, ISNI, then known as Computer Service Network
International, filed a friend-of-the-court brief which was cited by the
United States Supreme Court in its landmark antitrust decision
concerning service aftermarkets, Eastman Kodak Co. v. Image Technical
Services, Inc., et al., 504 U.S. 451, 462 n.6 (1992). Also, pursuant to
the order of Chief Judge Thomas P. Griesa of the Southern District of
New York (Betzner Decl., Exhibit C), ISNI has been granted the right to
intervene for purposes of appeal in the proceeding concerning the
termination of the IBM consent decree, United States of America v.
International Business Machines Corporation, 52 CIV. 72-344 (TPG),
currently pending the U.S. Court of Appeals for the Second Circuit.
ISNI has filed a brief in that proceeding.
In his order, Judge Griesa found that ``ISNI has a legitimate
interest in appealing from the May ruling, and it is in the public
interest to allow ISNI to appeal'' (Id. at 2). Similarly, it is in the
public interest for ISNI to intervene in this proceeding because a
dwindling number of its members compete with GEMS in the markets
alleged by the Justice Department in the complaint in this matter. The
reasons that the number is dwindling are that GEMS has a large market
share; it has aggressively extended that market share through the
transactions described below, unopposed by the U.S. government; and its
advanced diagnostics are an essential facility necessary to compete in
the relevant markets.
The reasons that it is in the public interest for ISNI to intervene
in this matter are cogently set forth in the Government's complaint in
this matter (Betzner Decl., Exhibit J):
Paragraph 3: ``If G.E. acquires InnoServ, G.E. will increase its
already high share in the markets for servicing certain models of
G.E. imaging equipment on a discrete basis, particularly several
models of CT scanners and MRI's, and it will eliminate an effective
competitor in these markets. It will also substantially reduce
competition in multi-vendor service markets. Unless blocked, this
acquisition likely will result in higher prices for imaging
equipment, maintenance and service.''
Paragraph 20: ``In many of these markets, InnoServ is one of the
few ISOs that has specialized in servicing G.E. imaging equipment *
* * the competition between G.E. and InnoServ in these markets has
resulted in significant price reductions for consumers. G.E.'s
acquisition of the InnoServ would eliminate this competition and
increase G.E.'s already high share in the markets for servicing
certain models of G.E. imaging equipment, particularly several
models of CT scanners and MRIs. It would also substantially reduce
competition in multi-vendor service markets.''
Paragraph 21: ``Successfully entry into the relative markets is
difficult, time-consuming and costly. In general, customers prefer
to purchase service from existing, reputable firms in the industry.
Therefore, new entrants often find it difficult to enter on a scale
necessary to succeed financially.''
Paragraph 23: ``G.E.'s proposed acquisition of InnoServ is
likely to lessen competition substantially and tend to create a
monopoly in interstate trading commerce in violation of Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18.''
Paragraph 24: ``The transaction likely will have the following
effects among others:
a. Actual and future competition between G.E. and InnoServ will
be eliminated in the markets for servicing certain models of G.E.
imaging equipment under discrete, machine-by-machine basis in
numerous local markets throughout the United States;
[[Page 67929]]
b. Competition generally in the markets for servicing certain
models of G.E. imaging equipment on a discrete, machine-by-machine
basis in numerous local markets throughout the United States will be
lessened substantially;
c. Actual and future competition between G.E. and InnoServ will
be eliminated in the markets for multi-vendor service in numerous
local markets throughout the United States; and
d. Competition generally in the markets for multi-vendor service
in numerous local markets throughout the United States will be
lessened substantially.''
Despite these pernicious effects, the government has consented to
this acquisition based essentially on the divestiture of PREVU.
However, the parties have not provided this Court or the public with
the fundamental information necessary to evaluate this settlement.
ISNI, because of the expertise of its members and counsel, can aid the
Court in obtaining and evaluating this information; ISNI respectfully
requests that the Court grant ISNI the opportunity to do so pursuant to
APPA Sec. (f).
III. GEMS' Monopoly and Its Successful Efforts To Maintain and
Extent It
According to its own press release, ``G.E. Medical Systems, based
in Milwaukee, WIS., is a $4.5 billion global provider of medical
diagnostic imaging systems, services and solutions with 16,000
employees worldwide.'' (Betzner Decl., Exhibit A.) As indicated by the
quotations from the Government's complaint in Section II above, GEMS
has a monopoly market share in the markets alleged by the government in
its complaint: (1) servicing certain models of G.E. imaging equipment
on a discrete machine-by-machine basis in numerous local markets
throughout the United States, and (2) multi-vendor service in numerous
local markets throughout the United States.
What is more alarming is that G.E. has extended and maintained this
monopolistic market share by a number of aggressive transactions in
recent years unopposed by the U.S. government:
August, 1994: strategic alliance with Advanced NMR
Systems, Inc., regarding very high field magnetic resonance systems.
(Betzner Decl., Exhibit D.)
June, 1995: five-year agreement with Columbia/HCA
Healthcare Corp. covering the service of all diagnostic imaging
equipment in the hospital chain, which at that time consisted of 320
hospitals. (Id., Exhibit E.)
February, 1996; acquisition of National Medical
Diagnostics, Inc., which at the time of acquisition provided medical
equipment maintenance services to 220 hospitals in 23 states. (Id.,
Exhibit F.)
August, 1996: acquisition of Specialty Underwriters, a
seller of maintenance insurance to the healthcare industry, and
Maintenance Management, which provides service for medical equipment.
(Id., Exhibit G.)
August, 1997: investment of $5.1 million in Advanced NMR
Systems, Inc., an extension of the August 1994 alliance described
above. (Id., Exhibit H.)
December, 1997: five-year marketing pact with INPHACT, a
provider of on-line radiology services for radiologists (Id., Exhibit
I.)
August, 1998: acquired Serviscope, a medical equipment
maintenance and asset management company that was one of the few
potential candidates to compete with GEMS to acquire Innoserv. (Id., at
para 6.)
With each of these transactions, GEMS got stronger both absolutely
and also relative to its much smaller ISO competitors. Innoserv, with
revenues of $37 million a year, is described in the CIS as ``* * * one
of the nation's largest independent service organizations (`ISOs'),''
63 FR at 39898. That a $37 million a year company was considered of the
largest competitors of a company 120 times its size in itself
illustrates the weakness of GEMS' competitors.
Nonetheless, an ISO like Innoserv does provide customers with an
alternative. This alternative keeps GEMS from having a 100% monopoly
and also helps to keep prices down to a certain extent.
Eliminating that little spark of competition was the only logical
motivation for GEMS to acquire InnoServ. This acquisition makes no
sense except to eliminate one of the last vestiges of national
competition for the service of GEMS imaging equipment. The fact that
GEMS has since acquired one of the other remaining competitors--
Serviscope--demonstrates that GEMS' goal is the lack of any meaningful
service competition.
IV. Non-compliance With the APPA
Section (b)(3) of the APPA requires the CIS to recite ``an
explanation of the proposal for a consent judgment, including an
explanation of * * * relief to be obtained thereby, and the anticipated
effects on competition of such relief,'' and Sec. (e) requires this
Court to determine that the entry of such judgment is in the public
interest by considering ``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.'' As demonstrated below,
the information required by Sec. (b) has not been provided in the
Competitive Impact Statement, and that fact disables the ISNI and other
members of the public from making a ``meaningful public comment'' on
its (APPA Sec. (c)) and disables this Court from making its public
interest determination pursuant to APPA Sec. (e).
The following fundamental information is missing from the CIS: a
technical and economic assessment of PREVU; a description of the
markets involved in the settlement and the effect of the settlement on
those markets; information about other firms, if any, that expressed
interest in purchasing InnoServ; and information about the relationship
of the simultaneous consent decree between the same two parties
concerning a litigation in Montana that also involves GEMS' advanced
diagnostics. The significance of the non-provision of these items of
information will be discussed below.
A. The CIS Provides Nothing but Speculation About the Acknowledged
Keystone of This Consent Decree, PREVU
The proposed stipulated final judgment of this litigation states
that ``The essence of this Final Judgment is the prompt and certain
divestiture through sale or licensing of certain rights or assets by
the defendants to establish a viable competitor in the sale of service
for certain models of G.E. diagnostic imaging equipment, and the sale
of comprehensive asset-management or multi-vendor services, or in the
licensing of advanced diagnostic software for use in any such
service.'' 63 FR at 39894 (emphasis added). These ``rights or assets''
are PREVU, which is defined at 63 FR 39895.
But the CIS does not make a showing--or even try to make a
showing--that PREVU can establish a viable competitor. One of the few
things that the CIS says about PREVU is the conclusory statement that
PREVU gives ``* * * InnoServ a competitive advantage in servicing
certain models of imaging equipment and in multi-vendor service.'' Id.
at 39898, and that ``InnoServ is an effective competitor of G.E. in
part because InnoServ is one of the very few companies that has
developed proprietary diagnostic software for servicing certain models
of G.E. imaging equipment.'' (Id. at 39898). But this information about
so-called
[[Page 67930]]
effective competition is contradicted by other information in the CIS:
[InnoServ] has struggled financially for the past two years * * *
losing over $1.5 million for the nine months ending January 31,
1998. In March 1998, InnoServ publicly expressed concern about its
ability to continue to meet its working capital requirements.
This fact alone indicates that InnoServ is not providing effective
competition to GEMS and that PREVU is not helping it to do so. It makes
a significant difference in the antitrust analysis whether InnoServ is
an effective or a struggling competitor. if it is effective, why is it
losing money? If it is struggling, how will the divestiture of PREVU
create an effective competitor when it was not able to make InnoServ an
effective competitor? The contradictory statements on this subject in
the CIS disable public commentators and the court from making this
critical analysis.
The only other information about PREVU in the Competitive Impact
Statement is as conclusory as that presented above. ``The divestiture
of the PREVU diagnostic package will allow one or more third parties to
use the software, which in turn will enable them to service more
efficiently certain models of imaging equipment and better compete in
the markets for servicing individual pieces of imaging equipment and
providing multi-vendor service.'' Id. at 39899. There is absolutely no
evidence supporting these conclusions. The reader of the CIS does not
know whether any entity has ever asked to license or purchase PREVU.
Similarly, the reader of the CIS cannot know if or, if so, why, use of
PREVU will enable these unnamed ``third parties'' ``* * * to service
more efficiently certain models of imaging equipment * * *.'' Id.
The CIS goes on to say, in a completely speculative manner, that
``in addition to using the package in its service business, a buyer of
PREVU could resell or license PREVU to other parties.'' Id. Again, the
reader of the CIS does not know the names of any potential ``other
parties'' to whom the unnamed ``third parties'' buying PREVU could
resell or license PREVU.
The CIS adds. ``The ability to improve upon PREVU * * * would
further improve an entity's ability to compete with G.E.'' Id. Without
having told the reader of the CIS in any detail what PREVU is, it is
impossible to know whether it will improve anyone's ability to compete
with GEMS or, a fortiori, ``further improve'' such ability.
At a minimum, the following information is needed for the public
and the Court to evaluate this consent decree:
1. A detailed description of PREVU.
2. Whether anyone has licensed or purchased PREVU from InnoServ;
3. Whether anyone has expressed an interest to license or purchase
PREVU from InnoServ;
4. Whether PREVU helps InnoServ and potentially others to compete
with GEMS and, if so, how;
5. A comparison between the effectiveness of PREVU and the
effectiveness of GEMS' advanced diagnostics;
6. Why it is not anticompetitive for GEMS to retain a non-exlusive
non-assignable license to use PREVU (Id. at 39895) even though GEMS
does not, and is not being required to, license its own advanced
diagnostic software to competing service providers.
The CIS itself indicates doubt as to the value of PREVU by
providing for the appointment of a trustee to sell PREVU if it is not
sold within approximately 180 days. Advanced diagnostics allegedly
capable of creating a viable competitor would not be on the market that
long.
B. The CIS Does Not Provide Adequate Information About the Markets
Involved and the Effect of the Consent Decree on Those Markets
The U.S. Supreme Court has held that anticompetitive restraints
have to be considered ``in light of the competitive situation in `the
product market as a whole' '', Continental T.V., Inc. v. GTE Sylvania,
Inc., 433 U.S. 36, 45 (1977), and that ``an antitrust policy divorced
from market considerations would lack any objective benchmarks.'' Id.
at 53, n. 21. At a minimum, such an analysis requires a definition of
the relevant markets; the structure of such markets, including such
factors as the number of firms and their respective market shares; and
an analysis of the effect of the restraint and of the consent decree on
price, output, consumer choice, and product quality.
As detailed below, none of this information appears in any useful
way in the CIS.
The Government alleges the following markets in its Complaint
(Betzner Decl., Exhibit J):
1. The markets for servicing certain models of G.E. imaging
equipment on a discrete machine-by-machine basis in numerous local
markets throughout the United States; and
2. the markets for multi-vendor service in numerous local markets
throughout the United States.
See Complaint at paragraphs 2, 3, 12, 14, 16, 17, 19, and 24.
However, nowhere have these markets been defined in the CIS.
Similarly, the complaint is bereft of information about market
structure, in particular the number of firms in the alleged markets
with their respective market shares. Indeed, no competitors in these
markets are named except InnoServ and GEMS, and no markets shares are
given.
Without market definitions and without a description of the
structure of the market, it is impossible to describe the anticipated
effects on competition of the consent decree as required by APPA
Sec. (b)(3). Without such information, the following assertion in the
CIS is purely conclusory with no evidence at all backing it up: ``The
proposed Final Judgment would promote additional competition in
servicing certain models of G.E. imaging equipment and in multi-vendor
service by requiring G.E. to divest InnoServ's proprietary diagnostic
service software and related materials to an acquirer acceptable to the
United States.'' 63 FR at 39898. The combination of the total lack of
market information with the total lack of substantive information about
PREVU stymies public commenters like ISNI from providing meaningful
comment and disables this Court completely from making the public
interest determination required by APPA Sec. e.
C. The CIS Does Not Provide Information About Other Companies
Interested in Purchasing Innoserv
Given (1) the power, alleged in the Complaint, of GEMS to affect
the market, (2) GEMS' size, (3) GEMS' recent transactions increasing
that size and power (see Section II above), and (4) the low price of
InnoServ ($16 million--see 63 FR at 39898) relative to GEMS' size, it
is not surprising that GEMS has made the first offer for InnoServ. What
the CIS does not state, however, is (1) what other companies, if any,
expressed interest in InnoServ; (2) whether there was, as is likely,
some appraisal done by a third party like an investment bank of the
worth of InnoServ and/or PREVU, or (3) how long InnoServ was on the
market. This information is essential for the court to make its public
interest determination because, given the facts listed at the beginning
of this paragraph, there may have been a serious suitor of InnoServ
that would have had a much less anticompetitive effect than GEMS but
that would not complete in a bidding war with GEMS. Indeed, it is
difficult to imagine an acquiring company with more of an anti-
competitive effect than GEMS.
[[Page 67931]]
D. The CIS Does Not Provide Adequate Information on the Related Montana
Consent Decree
According to the CIS, ``In conjunction with this settlement, GE has
also agreed to consent to all of the relief that the government was
seeking in another case, United States v. General Electric Company, No.
CV-96-121-M-CCL (D.Mont. filed Aug. 1, 1996),'' 63 FR at 39899. GEMS
states this fact more emphatically in its press release about the
Innoserv consent decree:
To obtain clearance to complete the Innoserv acquisition, G.E.
Medical Systems agreed to settle a civil lawsuit filed in Montana by
the Antitrust Division of the Department of Justice. That lawsuit
was filed in 1996 and challenged a G.E. Medical Systems practice
under which health-care providers who were also in the business of
performing third-party medical equipment service were not eligible
to license G.E.'s proprietary advanced service materials, Betzner
Decl., Exhibit A, emphasis added.
Even though the Montana consent decree involves GEMS' advanced
diagnostics, the CIS gives no supporting evidence or explanation of the
following assertions at CIS 39899: ``The United States evaluated the
merits of the settlement proposals in each case independently,
concluding that the proposed settlement of this case is in the public
interest for the reasons stated herein, and that the proposed
settlement of the Montana case is in the public interest for reasons
stated in the Competitive Impact Statement filed in that case today.''
This dearth of evidence or explanation is problematic for public
commenters like ISNI and for the Court because of the following
assertion in the Montana CIS, 63 FR 40737, 40738: ``GE has developed
advanced service materials [diagnostics like PREVU] that enable service
engineers to service certain GE imaging equipment much more quickly
than otherwise possible.'' ``Otherwise possible,'' of course, includes
servicing with PREVU. Because of that fact the ``essence'' of the
Innoserv Final Judgment, i.e., ``to establish a viable competitor'' to
GEMS service, 63 FR 39894, does not appear to be possible because, by
the U.S. Government's own cryptic evaluation, PREVU is inferior to the
advanced service materials of GEMS.
The only way to accomplish this ``essence'' appears to be to
require the licensing of GEMS' advanced diagnostics to competitors.
Mandatory licensing of the intellectual property of a monopolist was
used as a remedy in the Kodak case (Image Technical Services, Inc. v.
Eastman Kodak Co., 125 F.3d 1195, 1226, 1227 (9th Cir. 1997)) after a
jury verdict. Such a remedy is a fortiori, appropriate here where GEMS
seeks to extend its monopoly by a Government-approved and Court-
approved acquisition.
The Government appears to have the remedy backwards in this case:
it appears that the divestiture of PREVU will accomplish nothing
whereas the mandatory licensing of GEMS advanced diagnostics could
establish a viable competitor, which is the alleged ``essence'' of this
consent decree.
E. The CIS Asserts, Incredibly, That There Were NO Materials Which the
United States Considered Determinative in Formulating the Consent
Decree
APPA Sec. (b) requires the United States to publish with the CIS
``* * * any other materials and documents which the United States
considered determinative in formulating such proposal * * *.'' The CIS
at 39900 states, incredibly, that ``there are not determinative
materials or documents within the meaning of the APPA that were
considered by the plaintiff in formulating the proposed Final
Judgment.''
This Court can take judicial notice that antitrust cases are among
the most complex, document-intensive cases in the Federal Courts. This
Court should respond in the same way as another District Court Judge
responded to the same incredible claim: with incredulity and with an
order to produce documents required by law. U.S. v. Central Contracting
Co., Inc., 537 F. Supp. 571, 575, 577 (E.D. Va. 1982):
The Act [APPA] clearly does not require a full airing of Justice
Department files, but the Court cannot countenance plaintiff's claim
that though Congress enacted sunshine legislation the courts may
blandly (and blindly) accept government certification in case after
case that no documents or materials, by themselves or in the
aggregate, led to a determination by the government that it should
enter into a consent decree.
* * * * *
This does not require full disclosure of Justice Department files *
* * or defendant's files, but it does require a good faith review of
all pertinent documents and materials and a disclosure of those
which meet the above [APPA] criterium.
Although no entity but the Government can know what these documents
are, they should include at least the following:
--those documents providing the good-faith basis for the Government to
file its complaint;
--third-party analyses or evaluations of Innoserv and/or PREVU;
--documents relating to the efforts of others, if any, to acquire
Innoserv;
--documents supporting the conclusory statements in the CIS about how
the divestiture of PREVU will increase competition; and,
--documents comparing PREVU and the advanced service materials of GEMS
litigated in the Montana case.
These documents or documents like them must exist or else there is no
reasoned basis for the consent decree. If they do not exist, then the
Antitrust Division is not acting in a professional, competent manner.
V. This Court Should Authorize ISNI To Intervene and Should Appoint
a Special Master
APPA Sec. (f) authorizes this Court to ``appoint a special master
and such outside consultants or expert witnesses as the court may deem
appropriate'' and to ``authorize full or limited participation in
proceeding before the court by interested persons or agencies,
including * * * intervention as a party pursuant to the Federal Rules
of Civil Procedure. * * *'' The defects of the CIS described above
amply justify such an appointment and such an authorization.
If the Government had unfettered prosecutorial discretion to settle
antitrust cases, the APPA would not exist. Yet the Government is
endowing itself with such unfettered discretion by not providing in the
CIS information necessary for this Court to make its required public
interest determination and for the public to meaningfully comment on
the CIS.
Whatever the reason for this non-compliance with the APPA, the
Court cannot permit it. Because the Government and GEMS have not
complied with the law although they clearly had the knowledge and the
resources to do so, it is appropriate for the Court to use the APPA
provisions that permit compliance with the APPA to occur.
As mentioned in Sec. II above, the ISNI has the interest, expertise
and the experience to aid the Court and to aid a special master
appointed by the Court. A special master would be an efficient use of
the Court's resources because fact gathering akin to discovery will be
involved. The gathering and marshalling of facts will place this matter
in the position in which it should have been when the CIS was filed. At
that point the Court should be in a position to make its public
interest determination or to order further proceedings.
At the very least, the Court should order a hearing before making
its public interest determination and should permit the ISNI to
participate in that hearing. Otherwise, the Government's
[[Page 67932]]
response to this comment will go unanswered, and there is no reason to
believe that the quality of that response will be any better than the
quality of the CIS.
VI. Conclusion
By keeping the public and the Court ignorant of information
required by the APPA, the Government is endowing itself with the
unfettered prosecutorial discretion contrary to the very purpose of the
APPA. ISNI respectfully requests this Court to uphold both the letter
and the spirit of that statute in this important sector of the economy
affecting the healthcare costs of literally every American.
Respectfully submitted,
Dated: September 15, 1998.
Ronald S. Katz,
Esq. General Counsel, ISNI, Coudert Brothers, 4 Embarcadero Center.
Ste. 3300, San Francisco CA 94111, Telephone 415-986-1300.
Appendix 2
United States of America, Department of Justice, Antitrust
Division, 325 7th Street N.W., Suite 300, Washington, D.C. 20530,
Plaintiff, v. General Electric Company, 3135 Easton Turnpike,
Fairfield, Connecticut 06431, and InnoServ Technologies, Inc., 320
Westway, Suite 530, Arlington, Texas 76018, Defendants. Case Number
1.98CV01744. Judge: Royce C. Lamberth.
Declaration of Claudia Betzner in Support of Public Comment of
Independent Service Network International Pursuant to 15 U.S.C.
Sec. 16(b), (d)
1. I, Claudia Betzner, am the Executive Director of the Independent
Service Network International (`ISNI''), a trade association of 157
maintainers of high technology equipment, including medical equipment
of the type at issue in this matter. Independent service organizations
service equipment manufactured by others.
2. ISNI is a nonprofit corporation incorporated in the District of
Columbia. Its members compete with the service divisions of
manufacturers like General Electric Medical Systems (``GEMS'').
3. ISNI has participated in various legal proceedings on behalf of
its members, including Eastman Kodak Co. versus Image Technical
Services, Inc., et al., 504 U.S. 451, 462 and United States of America
versus International Business Machines Corporation, 52 CIV. 72-344
(TPG), Second Circuit, U.S. Court of Appeals (pending).
4. InnoServ is a current member of ISNI but has not been consulted
about or advised of this public comment.
5. Serviscope is a member of ISNI but ISNI has been informed by
Serviscope that it was acquired by GEMS in late August of 1998.
6. Attached hereto as Exhibit A is a true and correct copy of a
press release from GEMS generated by a computer search.
7. Attached hereto as Exhibit B is a true and correct copy of a
database listing of all current members of ISNI.
8. Attached hereto as Exhibit C is a true and correct copy of an
Order issued by Chief Judge Thomas P. Griesa, Southern District of New
York, in the case United States of America versus International
Business Machines Corporation, 52 CIV 72-344 (TPG).
9. I have generated a computerized database search for articles on
GEMS' acquisitions. That search has generated true and correct copies
of the articles which appear as Exhibits D through I of this
declaration.
17. Attached hereto as Exihibit J is a true and correct copy of the
Complaint in this matter.
I declare under penalty of perjury that the foregoing is true and
correct.
Executed this 12th day of September, 1998, at Atlanta, Georgia.
Claudia Betzner,
Executive Director, ISN International.
Exhibit A
Level 1-1 of 28 Stories
Copyright 1998 PR Newswire Association, Inc., PR Newswire
July 14, 1998, Tuesday.
Section: Financial News
Distribution: To Business Editor
Length: 514 words
Headline: GE Medical System Receives Clearance to Acquire InnoServ
Technologies
Dateline: Milwaukee, July 14
Body: GE Medical System announced today that it has received
Department of Justice clearance to complete its acquisition of
InnoServ Technologies, Inc. (Nasdaq: ISER), a provider of asset
management, repair and maintenance programs for imaging, biomedical
and laboratory equipment to health-care providers.
``InnoServ is an important addition to GE Medical Systems that
will enhance our capability to provide multi-vendor service
solutions to help health-care providers become more productive,''
said Jeffery R. Immelt, GE Medical Systems' president and CEO.
``InnoServ brings dedicated and talented service personnel to
our GE team as well as enhance GE's circuit board repair and X-Ray
tube reloading capabilities--all of which will help us to be a
better partner for our multi-vendor service customers,'' Mr. Immelt
said.
To obtain clearance to complete the InnoServ acquisition, GE
Medical Systems agreed to settle a civil lawsuit filed in Montana by
the Antitrust Division of the Department of Justice. That lawsuit
was filed in 1996 and challenged a GE Medical Systems paractice
under which health-care providers who were also in the business of
performing third-party medical service were not eligible to license
GE's proprietary advanced service materials.
Under the revised policy announced today, health-care providers
will be eligible to lincense GE Medical Systems' advanced service
materials for use by their own employees to service their own GE
medical imaging equipment, without regard to the scope of their
third-party service activities.
Under both the challenged eligibility standards and the revised
policy, GE will require that its customers not use GE proprietary
information when they provide service to third parties.
The settlement strongly affirms GEMS' right to control key
aspects of its intellectual property licensing: e.g., whether and
what to license; which customers would receive licenses; what to
charge for a license; and what restrictions to place on the use of
licensed materials to protect against misues.
Under the settlement, there are no findings on admissions of any
miscoduct by GE and GE is not liable for any damages, financial
penalities or other monetary payment.
GE Medicare Systems also agreed to divest InnoServ' PREVU
diaguostic service materals following completion of the InnoServ
acquisition.
``The settlement agreement recognizes GE's fundamental right to
protect its intellectual property from misues. The Department of
Justice agree with that goal. GE's goal has always been the same: to
allow customers to compete in the service field as they see fit but
to ensure that they do not use GE's proprietary software to do so,''
Mr. Immelt said.
The InnoServ operations acquired by GE currently employ about
220 people, including more than 120 field engineers.
GE Medical Systems, based in Milwaukee, Wis., is a $4.5 billion
global provider of medical diagnostic imaging systems, services and
solutions with 16,000 employees worldwide.
Source: GE Medical Systems
Contact: Charles Young, Manager of Global Public Relations of GE
Medical Systems, 414-544-3530, pager 888-864-3332,
charles.youngmed.ge.com
Language: English
Load-Date: July 15, 1998
Exhibit B
Contact Company
AAI Engineering Support, Inc. Hunt Valley, MD
Access Corporation, Cincinnati, OH
Accram, Inc., Phoenix, AZ
Advanced Vio-Med Electronics, Slidell, LA
Advanced Technology Lab., Bothell, WA
Allina Ces, Roseville, MN
AM Services Operation, Santa Ana, CA
AMCOR, Fairfield, NJ
American Teleprocessing Corp., Houston, TX
AMSCO International, Erie, PA
Arand Corporation, Spring City, PA
[[Page 67933]]
ASI Copier & Fax Solutions, Dallas, TX
Authorized Technical Services, Oakland, CA
B.C. Tel Sys Support, Burnaby, BC
Baldwin, Cleveland, OH
Bay State Anesthesia Service, North Andover, MA
Beckmen Coulter, Fulton, CA
Bio Medic Inc., Crestwood, IL
Bio-Medical Equipment Service, Lousville, KY
Biomedical Concepts, Inc., Mandeville, LA
Biomedical Eqpt Spec Inc., Sioux City, IA
BioTechnical Services, San Diego, CA
BMC Solutions, Inc., Kennesaw, GA
Brains II, Inc., Markham, ON
C. Hoelzle Associates, Irvine, CA
Centura, Inc., Cleveland, OH
CIC Warrentek, College Station, TX
COHR, Chatsworth, CA
Comdisco Healthcare Group, Inc., Rosemont, IL
Comdoc Inc., Uniontown, OH
Compuquip, Inc., Miami, FL
Computer Maintenance Interntl, Falls Church, VA
Computer Maintenance Corp., College Park, GA
Computer Mtnce of the Triad, Winston Salem, NC
Computer Products & Services, Boca Raton, FL
Copy Systems, Inc., Frederick, MD
CopyTech Business Systems, Inc., Harrison, OH
CPO, Limited, Santa Clara, CA
Crystal Computer, Winchester, MA
CT Solutions, Inc., Fairfield, CA
Ctronics, Stockton, CA
Cyber Resources, Mountainside, NJ
D.F. Blumberg Associates, Inc., Ft. Washington, PA
Data Exchange Corp., Camarillo, CA
Data General Corp., Westboro, MA
Dataprep (Malaysia) SDN.BHD
Deccaid Services, Inc., Deer Park, NY
DecisionOne, Menomonee Falls, WI
DecisionOne Corp Canada, Markham, ON
Dependable X-Ray Inc., Antioch, IL
Diagnostic Parts Exchange, Tallahassee, FL
Digidyne Inc., Lachine, Quebec
Digital Document Solutions, Orange, CT
Digital ES, Inc., Oklahoma City, OK
Docusource, Van Nuys, CA
DXR Imaging, Oakland, CA
EAD Systems Corp., Holbrook, MA
Edwards Business Machines, Inc., Bethlehem, PA
ESSC, Canada, Concord, ON
Express Copy & Tech, Indianapolis, IN
G.E. Walker, Inc., Tampa, FL
Galaxy Computer, St. Paul, MN
Garrett Med-Tech, Inc., Aurora, CO
GEAC Computers, Markham
Genicom Corp., Chantilly, VA
Getronics Service, 1092 AB Amsterdam
Graphic Corporation, Birmingham, AL
Great Eastern Technology, Cambridge, MA
GTE Services, Needham, MA
Hahn & Company, Portland, OR
Halifax Engineering, Inc., Alexandria, VA
HealthTech Pub. Co. Inc., E. Providence, RI
Hospital Shared Services, Denver, CO
BE Digital, Cerritos, CA
IET Intelligent Electronics, Burlington, MA
Imaging Diagnostics, Inc., Goodlettsville, TN
Imtek Office Solution, Inc., Pasadena, MD
Innoserv Technologies, Inc., Arlington, TX
Integration Technologies Gp., Inc., Falls Church, VA
International Bandwidth Services, San Juan Capistrano, CA
J&S Medical Assoc., Natick, MA
Kennsco, Inc., Plymouth, MN
Kinetic Biomedical, Erie, PA
Labcare Services, Sacramento, CA
LFC Capital, Inc., Chicago, IL
Lockhead Martin Comm Sys & Srv., Dearborn, MI
Maintech, Wallington, NJ
Maintenance Alternatives Corp., Petalund, CA
Maintenance Plus Inc., Roselle Park, NJ
Mararthan Services, Inc., Westlake Village, CA
Marcon Services Ltd., Wichita, KS
Matlock Medical Imaging, Inc., Durham, NC
Medelex, Inc., Sunnyvale, CA
Medical Imaging Service, Inc., Jefferson, LA
Medical Imaging Technologies Svcs., Inc., Ettalong Beach NSW
Medical Systems Engineering, San Francisco, CA
MEDTRON Inc., Free Port, NY
MTI Technology, Anaheim, CA
National Customer Engineering, San Diego, CA
National MD, Cleveland, OH
Nationwide Technologies, Inc., Lake Forest, IL
New England Systems, Inc., Middlebury, CT
Nexor System Service OY, Helsinki
North American Imaging, Camarillo, CA
Northrup Grumman GSS, Bohemia, NY
Novare Services, Inc., Cincinatti, OH
OneSource Services, Inc., Cleveland, OH
Picker, Lincolnshire, IL
Precision Medtech Services, Inc., Jessup, MD
Preferred CT Services, Palo Alto, CA
Preferred Diagnostic Equipment, Riverside, CA
Professional Copy Systems, Salt Lake City, UT
Qr Systems, Inc., San Antonio, TX
R.P. Kincheloe Company, Dallas, TX
Radiology Services, Inc., Georgetown, MA
Radiology Services of P.R., Cidra, Puerto Rico
Recognition Service Div., Irving, TX
Red Lion Medical Safety, Newark, DE
Remedpar, Goodlettesville, TN
Reprographic Systems, Inc., Urbandale, IA
Revacomp, Inc., Houston, TX
RPI Inc., Chatsworth, CA
S.O.M.A. Inc., Philadelphia, PA
Safety Anesthesia Eqpt Srvs Inc., Flora Park, NY
Safety Anesthesia Equipment Sv., Floral Park
Scantron FPD, Omaha, NE
Service Results Technology, Markham, ON
Service Technologies Inc., Atlanta, GA
Serviscope Corporation, Wallingford, CT
Shields Business Solutions, Cinnaminson, NJ
SMS System Maintenance Svcs, Inc., Littleton, MA
SoftTech Solutions, Waterford, MI
Southeast Imaging Systems, Inc., Apopka, FL
Sunton Industries, Inc., Hollywood, FL
Technical Duplicator Services, Inc., Anaheim, CA
Technical Dynamics, Annandale, VA
Technical Equipment Services, Inc. San Diago, CA
Tecspec, Inc., San Diego, CA
Telos Corporation, Bountiful, UT
The Exchange Corp., Atlanta, GA
The Thomas Group, Anaheim, CA
Thijssen Field Service B.V., Veenedaal
Toshiba America Medical, Tustin, CA
U.S. Computer Group, Farmingdale, NY
U.S. Medical, Cincinnati, OH
Unisys Canada, ON
Universal Financial, Elmhurst, IL
Vanstar, Atlanta, GA
Vision Medical Services, Ontario, CA
Vitronics, Inc., Eatontown, NJ
World Data Products, Minnetonta, MN
X-Tech Systems, Goleta, CA
Xerographic Copier Services, Inc., San Antonio, TX
Xeographic Corporation, Atlanta, GA
Exhibit C
United States District Court, Southern District of New York
United States of America, Plaintiff, against International
Business Machines Corporation, Defendant. 52 Civ. 72-344 (TPG).
Order
On May 1, 1997 this Court approved an agreement between plaintiff
and defendant providing for the termination of the remaining provisions
of a 1956
[[Page 67934]]
consent decree in stages, with the final provisions ending in the year
2002.
Independent Service Network International (``ISNI'') moves to
intervene for purposes of appeal. The motion is granted.
ISNI is an organization of computer repair companies. Part of the
business of these companies is to compete with IBM for the repair of
IBM computers. At an earlier stage in the litigation, Judge Schwartz of
this Court denied ISNI's motion to intervene. United States v.
International Business Machines Corp., No. 72-344, 1995 WL 366383
(S.D.N.Y. June 19, 1995). Later, when the termination agreement had
been arrived at and was before the Court for approval, the undersigned,
to whom the case had been reassigned, permitted ISNI to appear as
amicus curiae. ISNI thereafter filed papers objecting to the
termination agreement, and presented argument at the hearing. The
Court's opinion of May 1 dealt in substantial part with ISNI's
contentions. Although the Court rejected these contentions, they surely
deserved the attention of the Court.
ISNI has a legitimate interest in appealing from the May ruling,
and it is in the public interest to allow ISNI to appeal. Under these
circumstances the Court has discretion to allow ISNI to intervene under
Fed. R. Civ. P. 24(b)(2). See United States v. American Cyanamid Co.,
556 F. Supp. 357, 361 (S.D.N.Y. 1982), aff'd, 719 F.2d 558 (2d Cir.
1983).
Accordingly, the Court directs that ISNI is permitted to intervene.
This is solely for the purpose of appealing the May 1 ruling. ISNI will
be denominated an ``Objector.'' There is no need to amend the caption
of the case.
So Ordered.
Dated: New York, New York, June 26, 1997.
Thomas P. Griesa,
U.S.D.J.
Exhibit D
343rd Story of Level 2 Printed in Full Format
Copyright 1994 Business Wire, Inc., Business Wire
August 2, 1994, Tuesday.
Distribution: Business Editors/Medical Writers
Length: 356 words
Headline: ANMR and GE Medical Systems expand alliance to include
very high field Magnetic Resonance Systems
Dateline: Wilmington, Mass.
Body:
August 2, 1994--Advanced NMR Systems Inc. (NASDAQ NM:ANMR)
announced Tuesday that it had concluded an agreement that expands
its strategic alliance with GE Medical Systems (GEMS).
Under the agreement ANMR will be the system integrator of very
high field (3T and 4T) Magnetic Resonance Systems based on the GEMS
Signa MR product. In addition to system integration, ANMR will also
supply any special order design and manufacturing capability. The
agreement covers a 3-year period through June 30, 1997.
Under the agreement, 3T and 4T MR Systems will be made available
to research institutions as investigational devices for research
purposes. Revenues from this agreement will contribute to satisfying
the GEMS obligation under the 1993 contract covering the ANMR
InstaScan product (currently marketed by GEMS as SR-100). GEMS
exclusivity on the InstaScan product will expire at the end of 1994.
The companies further announced that they were continuing
discussions on a series of other collaborations which could result
in additional agreements.
``There have been inquiries from research sites requesting that
we provide a very high field MR research system based on the Signa
product with the option of adding the InstaScan EPI system. This
eventuality was anticipated in the original agreement. It is a great
example of two organizations, each with added value, working
together,'' said Paul J. Mirabella, general manager, Global MR
Business for GEMS.
Jack Nelson, chairman and chief executive officer of ANMR, said,
``Our expanded alliance with GEMS allows us to provide the most
sophisticated technology to the world's most prestigious research
centers. This agreement recognizes our wish to exclusively
manufacture higher field systems for GEMS while releasing ANMR to
market InstaScan systems and/or retrofits via multiple OEM
agreements after December 31, 1994.''
Contact: South Coast Communications, Joseph Allen, 714/252-8440
or Advanced NMR Systems, Shareholders Relations, 201/592-8838.
Language: English.
Load-Date: August 3, 1994.
Exhibit E
320th Story of Level 2 Printed in Full Format
Copyright 1995 Information Access Company, a Thomson Corporation
Company, IAC (SM) Newsletter Database (TM), The Business Word, Inc.,
Hospital Materials Management
June, 1995.
Section: No. 6, Vol. 20; ISSN: 0888-3068
Lenght: 182 words
Headline: Columbia/HCA Signs Five-Year Deal With GE Medical Systems
Body:
Columbia/HCA Healthcare Corp., Nashville, Tenn., signed a five-
year agreement with General Electric Medical Systems, Waukesha,
Wis., that covers the sales, service and utilization of all
diagnostic imaging equipment in the 320-hospital chain. The deal may
signal future partnerships between hospitals and equipment
companies.
The contract also gives GE responsiblity for providing Columbia/
HCA with recommendations on new equipment purchases. Columbia/HCA
will provide GE with information on when and why equipment needs to
be replaced for every piece of equipment the system owns.
It is extremely difficult to place a dollar value on the
contract, and no one can say how it will affect the 200 to 250
independent service vendors that worked on Columbia/HCA's equipment
prior to the agreement. Another question, not yet answered, is
whether GE and Columbia will take the agreement beyond imaging
equipment to other areas in the chain.
If the concept takes hold, the industry will likely see more
manufacturers enter not this double role.
Copyright 1995 The Business Word, Inc.
Language: English
IAC-ACC-NO: 2805689 ND
Load-Date: October 25, 1995
Exhibit F
1st Story of Level 1 Printed in Full Format
Copyright 1996 Plain Dealer Publishing Co., The Plain Dealer
February 21, 1996 Wednesday, Final/All.
Section: Business; Pg. 2C
Length: 271 words
Headline: Medical Maintenance Firm Gains Scope With Purchase
Byline: By Marcus Gleisser; Plain Dealer Reporter
Body:
GE Medical Systems of Milwaukee acquired National Medical
Diagnostics Inc. of Warrensville Heights yesterday.
With this move, GE grows from specializing in the maintenance of
diagnostic equipment to the broader area of handling a wide variety
of high-tech medical equipment.
National Medical was owned by group of venture capital investors
including KeyCorp., Morgenthaler, Primus, PNC Bank of Pittsburgh,
and Canaan Venture Partners of New Canaan, Conn.
It will become a wholly owned subsidiary of GE Medical,
retaining its name, location and employee structure, said Ray
Dalton, National MD chief executive.
``We expect to grow substantially as a result of this move and
will be adding more jobs here,'' Dalton said.
Both parties declined to give the dollar value of the
transaction.
National Medical began serving a single hospital in the Denver
area four years ago. It took off wildly, said Dalton, until now it
provides maintenance and repair services to some 220 hospitals in 23
states.
From a first engineering-service contract worth $250,000 the
Cleveland company has grown to more than $22 million in annual
revenues and more than 200 employees.
For a fixed price, the company provides maintenance, repair,
testing, calibration and other services for a hospital's entire
array of medical equipment, including X-ray machines, life-support
systems, CT scanners, computers and related telecommunications
equipment.
In many cases, the company replaces the need for separate
service contracts involving many different outside vendors. The one-
stop maintenance often saves hospitals a considerable amount.
Language: English
Load-Date: February 22, 1996
[[Page 67935]]
Exhibit G
227th Story of Level 2 Printed in Full Format
Copyright 1996 Medical Data International, Inc., Medical Industry Today
August 27, 1996, Tuesday.
Section: Mergers & Acquisitions
Length: 303 words
Headline: GE Medical Systems Acquires Assets of Two Companies
Body:
GE MEDICAL SYSTEMS (Milwaukee, WI), a business of General
Electric Company, has agreed to acquire the U.S. healthcare assets
of Specialty Underwriters (SU) and Maintenance Management (MMC), GE
Medical Systems announced in a release Monday.
Terms of the agreement were not disclosed.
Specialty Underwriters, a private firm based in Oak Creek, WI,
was founded in 1982. It sells equipment maintenance insurance to
healthcare and other industries. Maintenance Management provides on-
site maintenance services for hospitals' and clinics' medical and
office equipment.
``The acquisition of Specialty Underwriters' healthcare
operations will help bolster GE Medical Systems' efforts in the
multivendor service business. Our multivendor service offerings
provide healthcare providers with a more efficient solution for
managing and servicing hundreds and often thousands of pieces of
clinical and biomedical equipment across their departments,'' said
Tom Dunham, vice president and general manager of GE Medical
Systems-Americas Service. ``As a one-stop-shop alternative, we
reduce customers' overall maintenance costs while ensuring
consistent, high quality.''
Said Michael H. Polaski, founder and president of Specialty
Underwriters and Maintenance Management, ``The healthcare portion of
our business has been very successful and should thrive as part of
GE Medical Systems, whose entire focus is healthcare solutions.
After the sale, we will continue to apply the successful formula we
developed with SU and MMC to maintenance activities in other
industries. Capital from this transaction will enable us to
accelerate our plans to develop new products and enter new
markets.''
GE Medical Systems is a leading provider of diagnostic imaging
systems and related services.
Contact: Laurie Bernardy (414/544-3530)
Language: English
Load-Date: September 02, 1997
Exhibit H
1st Story of Level 1 Printed in Full Format
Copyright 1997 Business Wire, Inc., Business Wire
August 19, 1997, Tuesday.
Distribution: Health/Medical Writers or Business Editors
Length: 356 words
Headline: GE Medical Systems Invests $5.1 Million for Acquisition of
Securities of Advanced NMR Systems, Inc. and Advanced NMR Systems,
Inc.'s 3T and 4T Whole Body Imaging Business
Dateline: Wilmington, Mass.
Body:
19, 1997--Advanced NMR Systems Inc. (NASDAQ:ANMR) and GE Medical
Systems jointly announced today that GE has invested $5.1 million of
the acquisition of $2.7 million of ANMR preferred stock, convertible
at $0.233 per share, and for the acquisition of ANMR's 3-tesla and
4-tesla whole body magnetic resonance imaging business. The
companies had previously collaborated in the development of these
systems. GE Medical Systems will continue to develop, manufacture,
sell and service the 3T and 4T whole body imaging systems, and will
also acquire ANMR's business of servicing 1.5T systems.
In announcing the transaction, Jeffrey R. Immelt, president and
chief executive officer of GE Medical Systems, said, ``GE Medical
Systems is excited about assuming sole responsibility for this 3T
and 4T whole body imaging business, and we are committed to
providing products and service to the developing market in 3T and 4T
whole body imaging systems. We are also pleased with the opportunity
to build upon our strategic relationship by becoming an ANMR
shareholder.''
Jack Nelson, chairman and chief executive officer of Advanced
NMR Systems Inc. said, ``This transaction further strengthens our
balance sheet and positions us to concentrate on our future growth
following our proposed merger with Advanced Mammography Systems. We
are delighted to have GE as a significant investor in the company.''
Advanced NMR Systems Inc. and Advanced Mammography Systems Inc.
(NASDAQ:MAMO) have executed a definitive agreement to merge.
Advanced NMR Systems Inc. is awaiting SEC clearance of proxy
material and a related registration statement for subsequent
approval of shareholders for the merger.
Contact: Advanced NMR Systems Inc., Beverly Tkaczenko, 800/476-
0569 or GE Medical Systems, Charles Young, 414/544-3530.
Language: English
Load-Date: August 20, 1997
Exhibit I
82nd Story of Level 2 Printed in Full Format
Copyright 1997 Business Wire, Inc., Business Wire
December 1, 1997, Monday.
Distribution: Business Editors, Health/Medical Writers
Length: 549 words
Headline: GE Medical Systems and INPHACT Form Strategic Alliance;
Five-Year Joint Marketing Pact Could Generate $100 Million In
Revenues
Dateline: Nashville, Tenn.
Body:
Dec. 1, 1997--General Electric Medical Systems, the world's
leading manufacturer of diagnostic imaging equipment, and INPHACT, a
Nashville-based provider of on-line radiology services for
radiologists and health care facilities, have forged a give-year
``Strategic Alliance,'' The national agreement designates GE as an
INPHACT preferred vendor and establishes joint marketing efforts
that could generate more than $100 million in GE equipment and
INPHACT service revenues during the contract period. INPHACT, which
currently serves radiologists and health care facilities in seven
states, will receive preferred purchase and service options on GE
equipment for new client installations or upgrades for its existing
clients. GE will help to jointly market INPHACT's 24/7 on-call image
interpretation service, digital image transmission & archiving and
physicians' practice management services to its current and new
physician and facility clients, and INPHACT will help to jointly
market GE's Integrated Imaging Services (``IIS'') for networking
(PACS) products and services. ``INPHACT has developed leading-edge
services that can help radiologists and health care facilities
deliver radiology services more efficiently and cost effectively,''
said Tony Lombardo, General Manager of Sales for GE IIS. ``INPHACT
has made our integrated imaging solutions (IIS) products and
services an important element in its service platform, which results
in reduction of duplicate studies, elimination of lost files,
decreased maintenance costs and faster diagnoses for its clients,''
``GE has already played an integral part in helping INPHACT develop
our state-of-the-art on-line radiology services,'' said Jeffrey A.
Landman, M.D., chairman and chief executive officer of INPHACT.
``GE's ongoing commitment to INPHACT and our clients assures that we
will continue to be at the forefront of helping radiologists and
health care facilities provide more in-depth service while reducing
their costs.'' Founded in 1996, INPHACT (www.inphact.com) is a
privately-held provider of on-line radiology and practice management
services that currently serves radiologists and health care
facilities in seven states. Earlier this year, the company
introduced the Virtual Partner program, which offers a unique blend
of 24/7 on-call image interpretation, practice management and equity
partnership to radiologists. INPHACT also offers health care
facilities 24-hour consulting, system design, digital image
transmission and archival services. GE Medical Systems (GEMS), a
business of General Electric Company, develops and produces
diagnostic imaging equipment in several modalities, including X-ray,
Mammography, Magnetic Resonance, Computed Tomography, Ultrasound,
Nuclear Medicine Imaging and PET. GEMS also provides a variety of
services--from networking to biomedical equipment maintenance. GE
Medical Systems has annual sales of approximately $4 billion and
employs more than 15,000 people worldwide.
Contact: Katcher Vaughn & Bailey Communications, Roy Vaughn,
Lisa Achilles, 615/248-8202.
Today's News On The Net--Business Wire's full file on the
Internet, with Hyperlinks to your home page.
URL: http://www.businesswire.com
Language: English
Load-Date: December 2, 1997
[[Page 67936]]
Exhibit J
United States District Court for the District of Columbia
United States of America, Department of Justice, Antitrust
Division, 325 7th Street, N.W., Suite 300, Washington, D.C. 20530,
Plaintiff, v. General Electric Company, 3135 Easton Turnpike,
Fairfield, Connecticut 06431, and InnoServ Technologies, Inc., 320
Westway, Suite 530, Arlington, Texas 76018, Defendants. Case Number
1:98CV01744. Judge: Royce C. Lamberth. Deck Type: Antitrust. Date
Stamp: 07/14/98.
Complaint
The United States of America, acting under direction of the
Attorney General of the United States, brings this civil action to
obtain equitable relief against defendants and alleges as follows:
1. The United States brings this antitrust case to block the
proposed acquisition of InnoServ Technologies, Inc. (``InnoServ'') by
General Electric Company (``GE''). GE is the largest manufacturer of
medical imaging equipment, such as CT scanners and magnetic resonance
imagers (MRIs), and is the leading service provider of GE imaging
equipment. InnoServ is one of the nation's largest independent service
organizations (``ISOs'') and has significant expertise and capabilities
and competes with GE in servicing certain GE imaging equipment. GE and
InnoServ also compete in numerous local markets for comprehensive
multi-vendor and asset-management services (``multi-vendor service''),
in which they contract to provide services relating to some or all of a
hospital's capital equipment--including imaging and non-imaging medical
equipment--regardless of manufacturer. The competition between GE and
InnoServ in these markets has reduced prices significantly for imaging
equipment service.
2. To help service its imaging equipment, GE has developed advanced
diagnostic software that it uses to calibrate, maintain, and service
more quickly a particular model of imaging equipment. InnoServ is one
of very few companies that has developed its own proprietary diagnostic
software (called ``PREVU'') for servicing certain GE imaging equipment.
Although it is not as sophisticated or efficient as GE's own software,
PREVU has made InnoServ an effective competitor to GE in the markets
for servicing certain models of GE imaging equipment on a discrete,
machine-by-machine basis, as well as in markets for providing multi-
vendor service to hospitals that own GE equipment.
3. If GE acquires InnoServ, GE will increase its already high share
in the markets for servicing certain models of GE imaging equipment on
a discrete basis, particularly several models of CT scanners and MRIs,
and it will eliminate an effective competitor in these markets. It will
also substantially reduce competition in multi-vendor service markets.
Unless blocked, this acquisition likely will result in higher prices
for imaging equipment maintenance and service.
I. Jurisdiction and Venue
4. The United States files this action under Section 15 of the
Clayton Act, as amended, 15 U.S.C. Sec. 25, to prevent and restrain the
defendants from violating Section 7 of the Clayton Act, as amended, 15
U.S.C. Sec. 18.
5. Both GE and InnoServ service medical imaging equipment in
interstate commerce, and the operations of their medical equipment
service businesses affect and are in the flow of interstate commerce.
This Court has subject matter jurisdiction over the action and the
parties pursuant to Section 12 of the Clayton Act, 15 U.S.C. Sec. 22,
and 28 U.S.C. Secs. 1331 and 1337.
6. The defendants transact business and are found within the
District of Columbia. Venue is proper in this District under 15 U.S.C.
Sec. 22 and 28 U.S.C. Sec. 1391(c).
II. The Defendants
7. GE is a New York corporation headquartered in Fairfield,
Connecticut. GE is a diversified technology, manufacturing, and
services company. In 1997, GE's total revenues exceeded $90 billion.
Its wholly owned subsidiary, General Electric Medical Systems
(``GEMS''), located in Waukesha, Wisconsin, manufactures medical
imaging equipment such as CT scanners, MRIs, x-ray equipment, and
nuclear-medicine cameras. GEMS is the leading service provider of
imaging equipment manufactured by GE. Since 1994, GEMS has also
serviced imaging equipment manufactured by other companies through GE
HealthCare Services, its multi-vendor service group.
8. InnoServ is a California corporation headquartered in Arlington,
Texas. InnoServ provides various forms of multi-vendor service to
radiology, cardiology, biomedical, and laboratory departments of
hospitals and other healthcare providers. In fiscal year 1997,
InnoServ's total service revenues exceeded $37 million.
III. Trade and Commerce
A. Relevant Product Markets
1. Service of GE Imaging Equipment on a Discrete Basis
9. Hospitals, physicians, and other health care providers use
various types (sometimes referred to as ``modalities'') of medical
imaging equipment, such as CT scanners, MRIs, and nuclear cameras, to
create images of the body's internal structure. Each modality of
imaging equipment employs different technologies and generally is not
interchangeable with any other. For example, an MRI is better suited
than a CT scanner for imaging soft tissue, and a CT scanner can
disclose a tumor that less sophisticated x-ray equipment cannot detect.
10. GE is the largest manufacturer of imaging equipment and sells
various modalities of such equipment throughout the United States. For
each modality, GE often has sold multiple models, particularly as it
improves upon the equipment. Since 1987, GE has sold at least the
following CT scanner models: the CT Max; the 9800/Quick; the 9800
Hilight Advantage; and the Hispeed Advantage.
11. Imaging equipment requires regular service, including
preventive maintenance, general repairs, and emergency service. Health
care providers spend over $3 billion each year to service and repair
imaging equipment.
12. The sale of service for each model of imaging equipment is a
separate product market. A hospital or clinic that owns a GE 9800/Quick
CT scanner requiring service does not have any reasonable substitute to
purchasing service for that equipment. Purchasing service for another
piece of imaging equipment--for example, an ultrasound machine, which
is used for very different kinds of medical diagnoses--is not a
alternative. If faced with a small but significant increase in the
price of servicing the GE 9800/Quick, most hospitals would not forego
purchasing service for that model. The same is true for other models of
GE imaging equipment.
13. Historically, after the warranty on a piece of GE imaging
equipment has expired, hospitals and other owners of the equipment have
entered into discrete contracts with a service provider for that
equipment. GE and InnoServ compete to sigh such discrete service
contracts for several different models of GE imaging equipment. If
faced with a small but significant increase in the price of servicing a
GE 9800/Quick CT scanner, most hospitals
[[Page 67937]]
preferring discrete service contracts would not switch to a multi-
vendor service contract covering all of their imaging equipment. The
same is true for other models of GE imaging equipment.
14. The service for certain models of GE imaging equipment on a
discrete, machine-by-machine basis is a line of commerce and a relevant
product market within the meaning of the Clayton Act.
2. Multi-vendor Service
15. In recent years, rather than have numerous discrete service
contracts with several different equipment manufacturers or ISOs, some
hospitals have chosen to contract with a single provider to service
most or all of the hospital's equipment. Such multi-vendor service
contracts may include service for all of a hospital's imaging
equipment--regardless of manufacturer, modality, or model. They may
also include service for all of the hospital's non-imaging medical
equipment, such as biomedical and laboratory equipment. In some cases,
hospitals also contract with a single entity for all of the hospital's
capital equipment needs, including advice on capital equipment
replacement decisions (``asset management''). Corporations owning a
large number of individual hospitals, in particular, find this ``one-
stop shopping'' approach an efficient method of purchasing service for
their imaging (and often non-imaging) equipment. Both GE and InnoServ
compete with one another and with other service providers to obtain
such multi-vendor and asset management (defined herein as ``multi-
vendor service'') contracts. Hospitals preferring to purchase multi-
vendor service do not have reasonable alternatives to such contracts.
If faced with a small but significant increase in the price of multi-
vendor service, most of those hospitals would not switch to purchasing
service on a discrete basis.
16. Multi-vendor service is a line of commerce and a relevant
product market within the meaning of the Clayton Act.
B. Relevant Geographic Markets
17. The geographic markets for imaging equipment service are local,
with the precise contours of those markets differing depending on the
type of equipment involved and other factors. Hospitals strongly prefer
to contract with nearby service providers, where such providers are
qualified and able to service the equipment involved. In general,
service providers located closer to the hospital customer can respond
to service emergencies more quickly, thereby minimizing the amount of
time during which the hospital's imaging equipment is not working. A
hospital can lose substantial revenue if its imaging equipment is
broken; in some cases, patients may need to be transferred to other
health care facilities due to equipment failure. Therefore, given the
importance of timely service, service providers located relatively far
away from a hospital are at a substantial disadvantage in competing to
service that hospital. If faced with a small but significant increase
in the price of service from its local service provider, most hospitals
would not switch to using a service provider located relatively far
away.
18. GE offers both service contracts for discrete pieces of GE
imaging equipment and multi-vendor service contracts throughout the
United States. InnoServ offers similar services within a radius of
about 100 miles of several large metropolitan areas.
19. Each local area in which GE and InnoServ are both sufficiently
close to a hospital customer to provide timely imaging equipment
service is a section of the country and a relevant geographic market
within the meaning of the Clayton Act.
C. Anticompetitive Effect and Entry
20. GE and InnoServ compete in numerous local markets for servicing
certain models of GE imaging equipment on a discrete basis and for
multi-vendor service. In many of these markets, InnoServ is one of the
few ISOs that has specialized in servicing GE imaging equipment.
Moreover, GE and Innoserv were among the first service providers to
offer comprehensive multi-vendor service; each signed a contract to
provide such service to a large customer in 1995. Particularly because
InnoServ is one of very few companies that has developed its own
proprietary diagnostic software for GE imaging equipment, consumers in
both discrete service markets and multi-vendor service markets view
InnoServ service as a good substitute for GE service. The competition
between GE and InnoServ in these markets has resulted in significant
price reductions for consumers. GE's acquisition of InnoServ would
eliminate this competition and increase GE's already high share in the
markets for servicing certain models of GE imaging equipment,
particularly several models of CT scanners and MRIs. It would also
substantially reduce competition in multi-vendor service markets.
21. Successful entry into the relevant markets is difficult, time
consuming, and costly. In general, customers prefer to purchase service
from existing, reputable firms in the industry. Therefore, new entrants
often find it difficult to enter on a scale necessary to succeed
financially.
IV. Violation Alleged
22. On May 19, 1998, GE and InnoServ signed an Agreement and Plan
of Merger under which GE intends to acquire the common stock of
InnoServ for a purchase price of $16 million.
23. GE's proposed acquisition of InnoServ is likely to lessen
competition substantially and tend to create a monopoly in interstate
trade and commerce in violation of Section 7 of the Clayton Act, 15
U.S.C. Sec. 18.
24. The transaction likely will have the following effects, among
others:
a. Actual and future competition between GE and InnoServ will be
eliminated in the markets for servicing certain models of GE imaging
equipment on a discrete, machine-by-machine basis in numerous local
markets throughout the United States;
b. Competition generally in the markets for servicing certain
models of GE imaging equipment on a discrete, machine-by-machine basis
in numerous local markets throughout the United States will be lessened
substantially;
c. Actual and future competition between GE and InnoServ will be
eliminated in the markets for multi-vendor service in numerous local
markets throughout the United States; and
d. Competition generally in the markets for multi-vendor service in
numerous local markets throughout the United States will be lessened
substantially.
V. Requested Relief
The United States requests:
1. That the proposed acquisition by GE of InnoServ be adjudged to
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18;
2. That GE and InnoServ be permanently enjoined from carrying out
GE's intended acquisition of the common stock of InnoServ as expressed
in the Agreement and Plan of Merger dated May 19, 1998, and from
carrying out any agreement, understanding, or plan, the effect of which
would be to combine the businesses or assets of GE and InnoServ;
3. That the United States be awarded its costs of this action; and
4. That the United States have such other relief as the Court may
deem just and proper.
[[Page 67938]]
Dated: July 14, 1998.
Joel I. Klein,
Assistant Attorney General.
John M. Nannes,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Respectfully submitted,
Jon B. Jacobs (D.C. Bar #412249), Fred E. Haynes (D.C. Bar #165654),
Joan H. Hogan (D.C. Bar #451240), Peter J. Mucchetti,
Attorneys, Antitrust Division, 325 7th Street, N.W., Suite 300,
Washington, D.C. 20530, (202) 514-5012.
M.J. Moltenbrey,
Chief, Civil Task Force.
Susan L. Edelheit,
Assistant Chief, Civil Task Force.
Appendix 3
United States District Court for the District of Columbia
United States of America, Department of Justice, Antitrust
Division, 325 7th Street, N.W., Suite 300, Washington, D.C. 20530,
Plaintiff, v. General Electric Company, 3135 Easton Turnpike,
Fairfield, Connecticut 06431, and InnoServ Technologies, Inc., 320
Westway, Suite 530, Arlington, Texas 76018, Defendants. Case Number
1:98CV01744. Judge: Royce C. Lamberth.
Supplemental Public Comment of Independent Service Network
International Pursuant to 15 U.S.C. Sec. 16(b),(d)
Because of an event that occurred after Independent Service Network
International (``ISNI'') submitted its public comment yesterday. ISNI
submits this short supplemental comment pursuant to the Antitrust
Procedures and Penalty Act (``APPA''), 15 U.S.C. Sec. 16(b), (d). The
new event, which occurred today, is GE Medical Systems' (``GEMS'')
issuance of the attached news release stating that ``* * * it has
completed its acquisition of InnoServ Technologies, Inc * * *.''
This press release completely undermines and disrespects the
processes of the APPA for several reasons. First, it makes a sham of
the public comment period if the very act that the Government's
complaint challenged occurs during that period.
Second, one of the purposes of the public comment period is to
provide the United States with more information. Based on this
information, the United States has the right to withdraw its consent
from the decree, 63 FR 39894. The fact that the defendants have
presented the United States with a fait accompli has the obvious
purpose of making the withdrawal of consent more difficult.
Finally, this Court, not the parties, has the final authority to
approve the proposed consent decree. For GEMS to say that it has
``completed'' its acquisition of InnoServ Technologies ignores that
salient fact.
Dated: September 16, 1998.
Respectfully submitted,
Ronald S. Katz, Esq.,
General Counsel, ISNI, Coudert Brothers, 4 Embarcadero Center, Ste.
3300, San Francisco, CA 94111, Telephone: 415-986-1300.
Appendix 4
Star Technologies
Via Facsimile and First Class Mail
(202) 307-9952
September 16, 1998.
Ms. Mary Jean Moltenbrey,
Chief, Civil Task Force, Antitrust Division, U.S. Department of
Justice, 325 Seventh Street, N.W., Suite 300, Washington, DC 20530
Dear Ms. Moltenbrey: This letter is in response to the request
for public comments on the proposed settlement of the government's
action blocking the acquisition of InnoServ Technologies, Inc. by
General Electric Co. In accordance with the proposed settlement, GE
is required to sell InnoServ's PREVU software to a third party
approved by the Justice Department. The software's buyer could then
use PREVU in its service business, or resell or license PREVU to
other parties. Because Star Technologies believes that PREVU either
contains software developed by it or that portions of PREVU were
derived from such software, approval of the sale of PREVU must
address the assignment of transfer of Star's underlying software.
By way of background, Star Technologies was founded in 1981 as a
manufacturer of array processors, which are devices used in
conjunction with general-purpose computers to accelerate the
processing of large amounts of numerical data. While the earliest
applications for Star's array processors were in oil exploration,
other applications included molecular modeling, and signal and
imaging processing. Beginning in 1984, Star began selling its array
processors to General Electric Medical Systems for use in GE's CT
scanners. Independently from its business relationship with GE,
which constituted a substantial amount of Star's business for
several years, Star developed various versions of diagnostic
software for testing its array processors. The version of software
of concern now is known as ``Star Maintenance Software'' or ``SMS.''
Although developed primarily for internal use, Star has licensed SMS
to numerous customers solely for their own internal use.
Among the customers to whom Star licensed SMS were several firms
that perform third-party maintenance on GE's CT scanners. They use
SMS to diagnose only the array processor elements designed and
manufactured by Star that are a component of the GE CT scanners.
While InnoServ is currently a customer of Star's for the repair of
circuit boards used in Star's array processors. InnoServ has not
licensed SMS from Star.
In recent discussions with Mr. Philip Cannon, Star's Vice
President of Technology, Ms. Cathy Donovan, InnoServ's Manager of
Technical Support, acknowledged that PREVU uses Star's diagnostic
software, and also expressed her belief that such use was
appropriately licensed by Star. Assuming that SMS was validly
licensed from Star, any acquirer of PREVU would still need Star's
consent to transfer or assign that license since SMS is an integral
part of PREVU. Absent a valid existing license, the acquirer of
PREVU must obtain a new license from Star for the SMS portion of the
PREVU system.
With respect to the licensing of SMS, Star is willing to support
the appointed trustee in establishing with a prospective acquirer of
PREVU an appropriate license for the use of Star's diagnostic
software. In any event, Star wishes to be apprised of attempts to
sell the PREVU software so that it can ensure that its intellectual
property is protected from misuse. If you have any questions or
desire additional information in this regard, please contact the
undersigned at (301) 315-0240.
Sincerely,
Star Technologies, Inc.
R.W. Tschippert,
Director of Contracts.
Certificate of Service
This certifies that on November 17, 1998, I caused copies of the
foregoing Response to Public Comments to be served as indicated upon
the parties to this action and courtesy copies to be served as
indicated upon each commenter:
By Hand
Richard L. Rosen, Esquire,
Arnold & Porter, 555 12th Street, Washington, D.C. 2004, Counsel for
General Electric Company.
Malcolm R. Pfunder, Esquire,
Gibson, Dunn & Crutcher, LLP, 1050 Connecticut Ave., N.W., Washington,
D.C. 20036, Counsel for Innoserv Technologies, Inc.
By Facsimile (Without Appendices) and First-Class Mail
Robert Compton,
Star Technologies, 1151 Seven Locks Road, Building A, Potomac, MD
20854, (301) 315-0260 (facsimile).
Ronald S. Katz, Esquire,
Coudert Brothers, 4 Embarcadero Center, Suite 3300, San Francisco, CA
94111, Counsel for Independent Service Network International, (415)
986-0320 (facsimile).
Jon B. Jacobs
[FR Doc. 98-32147 Filed 12-8-98; 8:45 am]
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