[Federal Register Volume 63, Number 244 (Monday, December 21, 1998)]
[Notices]
[Pages 70422-70431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33653]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Pearson Plc, Pearson Inc. & Viacom International 
Inc., No. 1:98CV02836 (D.D.C., filed Nov. 23, 1998); Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final 
Judgment, Stipulation and Competitive Impact Statement have been filed 
with the United States District Court for the District of Columbia in 
United States of America v. Pearson plc, Pearson Inc., and Viacom 
International Inc., No. 1:98CV02836. On November 23, 1998, the United 
States filed a Complaint alleging that the proposed sale by Viacom 
International Inc. of certain publishing businesses to Pearson Inc. and 
Pearson plc (collectively ``Pearson'') would violate Section 7 of the 
Clayton Act, as amended, 15 U.S.C Sec. 18. The proposed Final Judgment, 
filed at the same time as the Complaint, requires Pearson to divest a 
comprehensive elementary school science program and textbooks for 
thirty-two college courses. Copies of the Complaint, proposed Final 
Judgment, and Competitive Impact Statement are available for inspection 
at the Department of Justice in Washington, D.C. 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, DC.
    Public comment is invited within sixty days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Mary Jean Moltenbrey, Chief, Civil Task Force, Antitrust Division, 
Dep[artment of Justice, 325 Seventh Street, N.W., Suite 300, 
Washington, D.C. 20530 (telephone: (202) 616-5935).
Constance Robinson,
Director of Operations and Director of Merger Enforcement, Antitrust 
Division.

Stipulation and Order

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, as follows:
    A. The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the District for the District of Columbia.
    B. The parties stipulate that a Final Judgment in the form hereto 
attached may be filed and entered by the Court, upon the motion of any 
party or upon the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. Sec. 16), and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on defendants and by filing that 
notice with the Court.
    C. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment pending entry of the Final Judgment, and shall, 
from the date of the signing of this Stipulation, comply with all the 
terms and provisions of the proposed Final Judgment as though the same 
were in full force and effect as an order of the Court.
    D. Defendants will not consummate their transaction before the 
Court has signed this Stipulation and Order.
    E. Pearson shall prepare and deliver affidavits in the form 
required by the provisions of Section IX of the proposed Final Judgment 
commencing no later than twenty (20) calendar days after the filing of 
the Complaint in this action, and every thirty (30) days thereafter 
pending entry of the Final Judgment.
    F. In the event plaintiff withdraws its consent, as provided in 
paragraph B above, or if the proposed Final Judgment is not entered 
pursuant to this Stipulation, this Stipulation shall be of no effect 
whatsoever, and the making of this Stipulation shall be without 
prejudice to any party in this or any other proceeding.

    Dated: November 23, 1998.

    FOR PLAINTIFF UNITED STATES OF AMERICA:

Mary Jean Moltenbrey,
Chief, United States Department of Justice, Antitrust Division, Civil 
Task Force, 325 7th Street, N.W., Suite 300, Washington, DC 20530, 202-
616-5935.

    FOR DEFENDANT VIACOM INTERNATIONAL INC.
Wayne D. Collins,
Shearman & Sterling, 599 Lexington Avenue, New York, N.Y 10022, (212) 
848-4127.

    Attorney for Defendant Viacom International Inc.

    FOR DEFENDANTS PEARSON plc and PEARSON INC.

Robert S. Schlossberg,
Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, DC 20036-
5869, 202-467-7212.

    Attorney for Defendants Pearson plc and Pearson Inc.

SO ORDERED:
----------------------------------------------------------------------
United States District Judge

Final Judgment

    Whereas plaintiff the United States of America (hereinafter 
``United States''), has filed its Complaint herein, and defendants, by 
their respective attorneys, have consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law 
herein, and without this Final Judgment constituting any evidence 
against or an admission by any party with respect to any issue of law 
or fact herein;

[[Page 70423]]

    And Whereas, defendants have agreed to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And Whereas, prompt and certain divestiture of certain assets to 
one or more third parties to ensure that competition is substantially 
preserved is the essence of this agreement;
    And Whereas, the parties intend to require defendants to divest, as 
viable lines of business, certain assets so as to ensure, to the sole 
satisfaction of the United States, that the Acquirer will be able to 
publish and market the assets as viable lines of business for the 
purpose of maintaining the current level of competition;
    And Whereas, defendants have represented to the United States that 
the divestitures required below can and will be made as provided in 
this Final Judgment and that defendants will later raise no claims of 
hardship or difficulty as grounds for asking the Court to modify any of 
the divestiture provisions contained below;
    Now, Therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby ordered, adjudged, and 
decreed as follows:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto. The Complaint states a claim upon 
which relief may be granted against the defendants under Section 7 of 
the Clayton Act, as amended (15 U.S.C. Sec. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means the person(s) to whom Pearson shall sell the 
Divestiture Products (as defined below).
    B. ``Divestiture Products'' means all of the products identified on 
Exhibits A and B attached hereto. Each Divestiture Product includes all 
of the following:
    1. unless non-assignable, all licenses, permits and authorizations 
issued by any governmental or private organization relating to the 
Divestiture Product;
    2. unless non-assignable, all contracts, teaming arrangements, 
agreements, leases, commitments and understandings and their associated 
intangible rights pertaining to the Divestiture Product, including, but 
not limited to author permissions and other similar agreements, 
adoption and other agreements with purchasers, distribution agreements 
that relate to the Divestiture Product, vendor or supply agreements 
with respect to components of the Divestiture Product;
    3. unless non-assignable, all original and digital artwork, film 
plates, and other reproductive materials relating to the Divestiture 
Product, including, but not limited to all manuscripts and 
illustrations and any other content and any revisions or revision plans 
thereof in print or digital form;
    4. all sales support and promotional materials, advertising 
materials and production, sales and marketing files relating to the 
Divestiture Product;
    5. all existing customer lists and credit records, or similar 
records of all sales and potential sales of the Divestiture Product, 
and all other records maintained in connection with the Divestiture 
product;
    6. except as provided in definition B.7, below, and unless non-
assignable, all intangible assets relating to the Divestiture Product, 
including but not limited to all patents, copyrights and trademarks 
(registered and unregistered), common law trademark rights; licenses 
and sublicenses, contract rights, intellectual property, maskwork 
rights, technical information, know-how, trade secrets, drawings, 
blueprints, designs, design protocols, specifications for materials, 
quality assurance and control procedures; design tools; and all manuals 
and technical information relating to the Divestiture Product provided 
to employees, customers, suppliers, agents or licensees;
    7. all titles of existing products comprising the Divestiture 
Product, including, but not limited to the titles ``Discover Works,'' 
``Science Horizons,'' ``Discover the Wonder,'' and ``Destinations in 
Science,'' as applicable, but not any corporate trademarks or trade 
names of Pearson or Viacom;
    8. all research data concerning historic and current research and 
development efforts relating to the Divestiture Product; and
    9. at Acquirer's option, computers and other tangible assets used 
primarily for production of the Divestiture Product.
    Pearson shall use it best efforts to facilitate the assignment to 
the Acquirer of any of the above that Pearson presently holds or uses 
pursuant to a license or any other agreement.
    C. ``Pearson'' means defendants Pearson plc, a U.K. corporation 
with its headquarters in London, England, and Pearson, Inc., a Delaware 
corporation with its headquarters in New York, New York, and includes 
their successors and assigns, their subsidiaries, affiliates, 
directors, officers, managers, agents and employees.
    D. ``Retained Product'' means any product offered for sale or in 
development by Pearson or Viacom as of November 1, 1998, that is not a 
Divestiture Product.
    E. ``Scott Foresman Addison Wesley'' means the publishing 
activities of Addison Wesley Longman Inc. and Addison Welsey 
Educational Publishers, Inc, both wholly owned subsidiaries of Pearson 
Inc., that result in products bearing the ``Scott Foresman,'' ``Addison 
Wesley,'' ``SFAW'' or ``Scott Foresman Addison Wesley'' titles or 
imprints.
    F. ``Silver Burdett Ginn Inc.'' is a Delaware corporation with its 
headquarters in Parisippany, New Jersey, and is one hundred percent 
owned (through various subsidiaries) by Viacom.
    G. ``Viacom'' means defendant Viacom International Inc., a Delaware 
corporation with its headquarters in New York, New York, and includes 
its successors and assigns, their subsidiaries, affiliates, directors, 
officers, managers, agents and employees.

III. Applicability

    A. The provisions of this Final Judgment apply to the defendants, 
their successors and assigns, their parents, subsidiaries, affiliates, 
directors, officers, managers, agents, and employees, and all other 
persons in active concert or participation with any of them who shall 
have received actual notice of this Final Judgment by personal service 
or otherwise.
    B. Pearson, as a condition of the sale or other disposition of any 
or all of the Divestiture Products, shall require the Acquirer to agree 
to be bound by the provisions of this Final Judgment.

IV. Divestiture of Assets

    A. Pearson is hereby ordered and directed, in accordance with the 
terms of this Final Judgment, within two (2) months from the date this 
Final Judgment is filed with the Court, or within ten (10) calendar 
days from the date on which the sixty-day notice-and-comment period 
established by 15 U.S.C. Sec. 16(b) has expired, whichever is later, to 
divest one of the two Divestiture Products listed on Exhibit A to an 
Acquirer acceptable to the United States, in its sole discretion. The 
United States, in its sole discretion, may agree to an extension of 
this time period of up to thirty (30) calender days.
    B. Pearson is hereby ordered and directed, within five (5) months 
from the date this Final Judgment is filed with the Court, or within 
ten (10) calendar days from the date on which

[[Page 70424]]

the sixty-day notice-and-comment period established by 15 U.S.C. 
Sec. 16(b) has expired, whichever is later, to divest all of the 
Divestiture Products listed on Exhibit B. The United States, in its 
sole discretion, may agree to an extension of this time period of up to 
thirty (30) calendar days.
    C. Divestiture of the Divestiture Products shall be accomplished in 
such a way as to satisfy the United States, in its sole discretion, 
that the Divestiture Products can and will be operated by the Acquirer 
as viable, ongoing businesses. Divestiture of the Divestiture Products 
shall be made to an Acquirer for whom it is demonstrated to the sole 
satisfaction of the United States that (1) the purchase is for the 
purpose of competing effectively in the publication and sale of the 
Divestiture Products and (2) the Acquirer has the managerial, 
operational, and financial capability to compete effectively in the 
publication and sale of the Divestiture Products. Defendants are 
prohibited from entering into any agreement with the Acquirer to 
license exclusively any Divestiture Product to the Defendants for sale 
in the United States.
    D. Pearson shall retain the right to use a Divestiture Product 
listed on Exhibit A to the extent necessary to fulfill the terms of 
agreements, in effect as of the date this Final Judgment is filed with 
the Court, with purchasers of the product lines listed on Exhibit A. 
The Acquirer of one of the Divestiture Products listed on Exhibit A 
shall grant Pearson a royalty-free license to continue to use that 
Divestiture Product to the extent necessary to fulfill the terms of 
such existing agreements. The Acquirer of any Divestiture Product that 
Pearson currently uses, in whole or in part, in any Retained Product, 
shall grant Pearson a royalty-free license to continue to use the 
Divestiture Product to the same extent in the production and sale of 
the Retained Product.
    E. In accomplishing the divestiture ordered by this Final Judgment, 
the defendants shall make known, as expeditiously as possible, the 
availability of the Divestiture Products. The defendants shall provide 
any person making inquiry regarding a possible purchase a copy of the 
Final Judgment. The defendants shall also offer to furnish to any bona 
fide prospective Acquirer, subject to customary confidentiality 
assurances, all reasonably necessary information regarding the 
Divestiture Products, except such information subject to attorney-
client privilege or attorney work-product privilege. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person. Defendants 
shall permit bona fide prospective purchasers of the Divestiture 
Products to have access to personnel and to make such inspection of 
physical facilities and any and all financial, operational, or other 
documents and information as may be relevant to the divestiture 
required by this Final judgment.
    F. Defendants shall use all commercially practical means to enable 
the Acquirer of one of the Divestiture Products listed on Exhibit A to 
employ those personnel primarily responsible for the editorial content 
of that Divestiture Product, including editors, authors, and science 
experts. Defendants shall encourage and facilitate employment of such 
employees by the Acquirer of one of the Divestiture Products listed on 
Exhibit A, and shall remove all impediments that may deter these 
employees from accepting such employment.
    G. Defendants shall make available to the Acquirer of any 
Divestiture Product, as applicable, information about any Pearson or 
Viacom employee primarily responsible for the editorial content of any 
Divestiture Product listed on Exhibit B, and any Pearson or Viacom 
employee primarily responsible for the production, design, layout, sale 
or marketing of any Divestiture Product. Defendants shall not interfere 
with any negotiations by the Acquirer to employ any such employee, but 
may make counter-offers for employment.
    H. Pearson shall take all reasonable steps to accomplish quickly 
the divestitures contemplated by this Final Judgment.

V. Appointment of Trustee

    A. In the event that Pearson has not divested a Divestiture Product 
within the time specified in Section IV.A or IV.B of this Final 
Judgment, Pearson shall notify the United States of that fact in 
writing. Upon application of the United States, the Court shall appoint 
a trustee selected by the United States, in its sole discretion, to 
effect the divestiture of the Divestiture Products. Unless the United 
States otherwise consents in writing, the divestiture shall be 
accomplished in such a way as to satisfy the United States that the 
Divestiture Products can and will be used by the Acquirer as viable on-
going businesses. The divestiture shall be made to an Acquirer for whom 
it is demonstrated to the United States' sole satisfaction that the 
Acquirer has the managerial, operational, and financial capability to 
compete effectively in the publication and sale of the Divestiture 
Products, and that none of the terms of the divestiture agreement 
interfere with the ability of the Acquirer to compete effectively in 
the publication and sale of the Divestiture Products.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Products. The 
trustee shall have the power and authority to accomplish the 
divestiture at the best price then obtainable upon a reasonable effort 
by the trustee, subject to the provisions of Sections IV, V and VI of 
this Final Judgment, and shall have such other powers as the Court 
shall deem appropriate. The trustee shall have the power and authority 
to hire at the cost and expense of Pearson any investment bankers, 
attorneys, or other agents reasonably necessary in the judgment of the 
trustee to assist in the divestiture, and such professionals and agents 
shall be solely accountable to the trustee. The trustee shall have the 
power and authority to accomplish the divestiture at the earliest 
possible time to a purchaser acceptable to the United States, and shall 
have such other powers as this Court shall deem appropriate. Defendants 
shall not object to a sale by the trustee on any grounds other than the 
trustee's malfeasance. Any such objections by defendants must be 
conveyed in writing to the United States and the trustee within (10) 
days after the trustee has provided the notice required under Section 
VI of this Final Judgment.
    C. Pearson may select which of the two Divestiture Products listed 
on Exhibit A shall be sold by the trustee, provided that the United 
States determines, in its sole discretion, that the Divestiture Product 
selected by Pearson has been developed and maintained at levels 
sufficient to ensure its competitive viability. Pearson shall provide 
the United States with information to enable the United States to make 
this determination. Should the United States determine, in its sole 
discretion, that the Divestiture Product selected by Pearson has not 
been developed and maintained at levels sufficient to ensure its 
competitive viability, the trustee shall sell the other Divestiture 
Product listed on Exhibit A.
    D. The trustee shall serve at the cost and expense of Pearson, on 
such terms and conditions as the Court may prescribe, and shall account 
for all monies derived from the sale of the assets sold by the trustee 
and all costs and expenses so incurred. After approval by the Court of 
the trustee's accounting, including fees for its services and those of 
any professionals and agents retained by the trustee, all remaining 
money shall be paid to Pearson and the trust shall then be

[[Page 70425]]

terminated. The compensation of such trustee and that of any 
professionals and agents retained by the trustee shall be reasonable in 
light of the value of the Divestiture Products and based on a fee 
arrangement providing the trustee with an incentive based on the price 
and terms of the divestiture and the speed with which it is 
accomplished.
    E. Pearson and Viacom shall use their best efforts to assist the 
trustee in accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of Pearson and Viacom, and defendants shall 
develop financial or other information relevant to such assets as the 
trustee may reasonably request, subject to reasonable protection for 
trade secret or other confidential research, development, or commercial 
information. Defendants shall take no action to interfere with or to 
impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestiture ordered under this Final Judgment. Such 
reports shall include the name, address and telephone number of each 
person who, during the preceding month, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire or was contacted about acquiring any interest in any 
Divestiture Product, and shall describe in detail each contact with any 
such person during that period. The trustee shall maintain full records 
of all efforts made to divest the Divestiture Products.
    G. If the trustee has not accomplished such divestiture within six 
(6) months after its appointment, the trustee shall thereupon promptly 
file with the Court a report setting forth (1) the trustee's efforts to 
accomplish the required divestiture, (2) the reasons, in the trustee's 
judgment, why the required divestiture has not been accomplished, and 
(3) the trustee's recommendations; provided, however, that to the 
extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed on the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the parties, who shall each have the right to be heard and to make 
additional recommendations consistent with the purpose of the trust. 
The Court shall thereafter enter such orders as it shall deem 
appropriate in order to carry out the purpose of the trust, which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VI. Notification

    Within two (2) business days following execution of a definitive 
agreement, contingent upon compliance with the terms of this Final 
Judgment, Pearson or the trustee, whichever is then responsible for 
effecting the divestiture required herein, shall notify the United 
States of any proposed divestiture pursuant to Section IV or V of this 
Final Judgment. If the trustee is responsible, it shall similarly 
notify Pearson. The notice shall set forth the details of the proposed 
transaction and list the name, address, and telephone number of each 
person not previously identified who offered or expressed an interest 
in or desire to acquire any ownership interest in the Divestiture 
Products, together with full details of the same. Within fifteen (15) 
days after receipt of the notice, the United States may request 
additional information from Pearson, the proposed Acquirer, or any 
other third party concerning the proposed divestiture, the proposed 
Acquirer, and any other potential Acquirer. Pearson or the trustee 
shall furnish the additional information within fifteen (15) days of 
the receipt of the request unless the parties agree otherwise. Within 
thirty (30) days after receipt of the notice or within twenty (20) days 
after the United States' receipt of the additional information, 
whichever is later, the United States shall notify in writing Pearson 
and the trustee, if there is one, stating whether it objects to the 
proposed divestiture. If the United States notifies in writing Pearson 
and the trustee, if there is one, that it does not object, then the 
divestiture may be consummated, subject only to Pearson's limited right 
to object to the sale under Section V.B of this Final Judgment. Absent 
written notice that the United States does not object to the proposed 
Acquirer, or upon objection by the United States, a divestiture 
proposed under Section IV or V shall not be consummated. Upon objection 
by Pearson under Section V.B, the proposed divestiture shall not be 
accomplished unless approved by the Court.

VII. Financing

    Pearson shall not finance all or any part of any purchase made 
pursuant to Sections IV or V of this Final Judgment.

VIII. Preservation of Assets

    Until the divestiture required by Section IV.A and IV.B of this 
Final Judgment have been accomplished:
    A. Defendant shall take all steps necessary to ensure that each 
Divestiture Product will be maintained and developed as an independent, 
ongoing, economically viable and active competitor in its respective 
line of business and that the product management for all Divestiture 
Products, including the product development, marketing and pricing 
information and decision-making be kept separate and apart from, and 
not influenced by, Pearson's and Viacom's businesses in other products.
    B. Defendants shall use all reasonable efforts to maintain and 
increase sales of the Divestiture Products, and shall maintain at 1998 
or previously approved levels for 1999, whichever is applicable, 
development, promotional advertising, sales, marketing, and 
merchandising support for the Divestiture Products.
    C. Defendants shall take all steps necessary to ensure that the 
Divestiture Products are fully maintained. Defendants shall not 
transfer or reassign those personnel primarily responsible for the 
editorial content of the Divestiture Products listed on Exhibit A, 
including editors, authors, and science experts. Each of defendants' 
employees whose predominant responsibility is the editorial content of 
any Divestiture Product listed on Exhibit B, or the production, design, 
layout, sale or marketing of any Divestiture Product shall not be 
transferred or reassigned to any other of defendants' products, except 
for transfer bids initiated by employees pursuant to defendants' 
regular, established job posting policy, provided that defendants give 
the United States and Acquirer ten (10) days' notice of such transfer.
    D. Defendants shall continue to fund and develop the Divestiture 
Products listed on Exhibit A as they would have been funded and 
developed without their transaction until one is sold pursuant to this 
Final Judgment.
    E. Except as part of a divestiture approved by the United States, 
in its sole discretion, defendants shall not sell any Divestiture 
Products.
    F. Defendants shall take no action that would jeopardize the sale 
of the Divestiture Products, or that would interfere with the ability 
of any Trustee to effect a sale of any Divestiture Product.
    G. Defendants shall appoint a person or persons to manage the 
Divestiture Products, and who shall be responsible

[[Page 70426]]

for defendants' compliance with this section.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this action, and every thirty (30) calendar days thereafter until 
the divestiture has been completed, whether pursuant to Section IV or V 
of this Final Judgment, Pearson shall deliver to the United States an 
affidavit as to the fact and manner of compliance with Section IV or V 
of this Final Judgment. Each such affidavit shall include the name, 
address, and telephone number of each person, who, during the preceding 
thirty (30) days, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in all or any portion of 
the Divestiture Products, and shall describe in detail each contact 
with any such person during that period. Each such affidavit shall also 
include a description of the efforts Pearson has taken to solicit an 
Acquirer for any of the Divestiture Products and to provide required 
information to prospective Acquirers, including the limitation, if any, 
on such information.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this action, Pearson shall deliver to the United States an affidavit 
that describes in reasonable detail all actions Pearson has taken and 
all steps Pearson has implemented on an ongoing basis to comply with 
Section VIII of this Final Judgment. The affidavit shall describe, but 
not be limited to, Pearson's efforts to maintain and operate the 
Divestiture Products as active competitors, maintain the management, 
staffing, research and development activities, sales, marketing and 
pricing of the Divestiture Products, and maintain the Divestiture 
Products in operable condition at current capacity configurations. 
Pearson shall deliver to the United States an affidavit describing any 
changes to the efforts and actions outlined in Pearson's earlier 
affidavit(s) filed pursuant to this section within fifteen (15) 
calendar days after the change is implemented.
    C. Until one year after a divestiture has been completed, or, if a 
divestiture is not completed, one year after the trust under Section V 
is terminated, Pearson shall preserve all records of all efforts made 
to preserve and divest the Divestiture Products.

X. Compliance Inspection

    For the purpose of determining or securing compliance with this 
Final Judgment, and subject to any legally recognized privilege, from 
time to time:
    A. Duly authorized representatives of the United States, including 
consultants and other persons retained by the United States, shall, 
upon the written request of the Assistant Attorney General in charge of 
the Antitrust Division and on reasonable notice to Pearson made to its 
principal offices, be permitted:
    1. access during office hours to inspect and copy all books, 
ledgers, accounts, correspondence, memoranda, and other records and 
documents in the possession or under the control of Pearson, which may 
have counsel present, relating to any matters contained in this Final 
Judgment; and
    2. subject to the reasonable convenience of Pearson and without 
restraint or interference from it, to interview, either informally or 
on the record, directors, officers, employees, and agents of Pearson, 
which may have counsel present, regarding any such matters.
    B. Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division made to Pearson at its principal 
offices, Pearson shall submit written reports, under oath if requested, 
with respect to any of the matters contained in this Final Judgment as 
may be requested.
    C. No informaiton nor any documents obtained by the means provided 
in this Section X shall be divulged by any representative of the United 
States to any person other than a duly authorized representative of the 
Executive Branch of the United States, except in the course of legal 
proveedings to which the United States is a party (including grand jury 
proceedings), or for the purpose of securing compliance with this Final 
Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by Pearson 
to the United States, Pearson represents and identifies in writing the 
material in any such informaiton or documents for which a claim of 
protection may be asserted under Rule 26(c)(7) of the Federal Rules of 
Civil Procedure, and Pearson marks each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(7) of the 
Federal rules of Civil Procedure,'' then the United States shall give 
ten (10) days' notice to Pearson prior to divulging such material in 
any legal proceeding (other than a grand jury proceeding) to which 
Pearson is not a party.

XI. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction, implementation, or modificaiton of 
any of the provisions of this Final Judgment, for the enforcement of 
compliance herewith, and for the punishment of any violations hereof.

XII. Termination of Provisions

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

XIII. Public Interest

    Entry of this Final Judgment is in the public interest.

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

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

Exhibit A

    1. All textbooks or other educational materials offered for sale 
or provided or under development by any subsidiary or division of 
Silver Burdett Ginn Inc. that refer or relate to the subject matter 
of science for grades Kindergarten through six, including, but not 
limited to (1) student editions; (2) teacher editions; (3) 
supplemental materials, including, but not limited to workbooks, 
notebooks, charts, audio, video, software, CD-ROM, Internet and 
broadcast components, manipulatives and equipment, and similar 
materials; (4) teacher support and staff development materials, 
including, but not limited to teacher resource books, assessment 
materials and answer keys, test generators, teaching guides, 
overhead transparencies, lesson plans and outlines and curriculum 
materials; and (5) any other materials in any form, format or media 
marketed or intended to be marketed as being ancillary to the 
program or to an individual title within the program. This 
Divestiture Product does not include any products that are necessary 
to fulfill the terms of agreements between Silver Burdett Gin Inc. 
and purchasers of products relating to the subject matter of science 
for grades Kindergarten through six that are in existence as of the 
date this Final Judgment is filed with the Court.
        or
    2. All textbooks or other educational materials offered for sale 
or provided or under development by any subsidiary or division of 
Pearson Inc. doing business as Scott Foresman Addison Wesley that 
refer or relate to the subject matter of science for grades 
Kindergarten through six, including, but not limited to (1) student 
editions; (2) teacher editions; (3) supplemental materials, 
including, but not limited to workbooks, notebooks, charts, audio, 
video, software, CD-ROM, Internet and broadcast components, 
manipulatives and equipment, and similar materials; (4) teacher 
support and staff development materials, including, but not limited 
to teacher resource books, assessment materials and answer keys, 
test

[[Page 70427]]

generators, teaching guides, overhead transparencies, lesson plans 
and outlines and curriculum materials; and (5) any other materials 
in any form, format or media marketed or intended to be marketed as 
being ancillary to the program or to an individual title within the 
program. This Divestiture Product does not include any products that 
are necessary to fulfill the terms of agreements between Pearson 
Inc. and purchasers of products relating to the subject matter of 
science for grades Kindergarten through six that are in existence as 
of the date this Final Judgment is filed with the Court.

                                Exhibit B
------------------------------------------------------------------------
        College course                    Divestiture products
------------------------------------------------------------------------
Abstract Algebra.............  Herstein, Abstract Algebra (Prentice
                                Hall).
                               Dummit/Foote, Abstract Algebra (Prentice
                                Hall).
Anatomy & Physiology (One      Tortora, Introduction to the Human Body:
 Term).                         The Essentials of Anatomy and Physiology
                                (Addison Wesley).
Anatomy & Physiology (Two      Tortora/Grabowski, Principles of Anatomy
 Term).                         and Physiology (Addison Wesley).
Art Appreciation.............  Fichner-Rathus, Understanding Art
                                (Prentice Hall).
Circuits and Networks........  Irwin, Basic Engineering Circuit Analysis
                                (Prentice Hall).
                               Johnson/Johnson/Hilbrun/Scott, Electric
                                Circuit Analysis (Prentice Hall).
                               Thomas/Rosa, The Analysis & Design of
                                Linear Circuits (Prentice Hall).
                               Johnson/Hilbrun/Johnson/Scott, Basic
                                Electric Circuit Analysis (Prentice
                                Hall).
Classical Mythology..........  Morford/Lenardon, Classical Mythology
                                (Addison Wesley).
Classroom Management.........  Wolfgang, Solving Discipline Problems
                                (Allyn & Bacon).
                               Cangelosi, Classroom Management
                                Strategies (Addison Wesley).
                               Edwards, Classroom Discipline &
                                Management (Prentice Hall).
                               Burden, Classroom Management & Discipline
                                (Addison Wesley).
Concrete Engineering.........  McCormac, Design of Reinforced Concrete
                                (Addison Wesley).
                               Wang/Salmon, Reinforced Concrete Design
                                (Addison Wesley).
Controls Engineering.........  Nise, Control Systems Engineering
                                (Addison Wesley).
                               Kuo, Automatic Control Systems (Prentice
                                Hall).
Environmental Economics......  Goodstein, Economics and the Environment
                                (Prentice Hall).
Fortran......................  Etter, Structured Fortran 77 for
                                Engineers and Scientists (Addison
                                Wesley).
                               Etter, Fortran 90 for Engineers (Addison
                                Wesley).
Human Anatomy................  Tortora, Principles of Human Anatomy
                                (Addison Wesley).
Human & Cultural Geography...  Jordan-Bychkov/Domosh, The Human Mosaic:
                                A Thematic Introduction to Cultural
                                Geography (Addison Wesley).
Instructional Design.........  Smith/Ragan, Instructional Design
                                (Merrill--Prentice Hall).
                               Kemp/Morrison/Ross, Designing Effective
                                Instruction (Merrill--Prentice Hall).
                               Rothwell/Kazanas, Mastering the
                                Instructional Design Process: A
                                Systematic Approach (Jossey-Bass
                                Publishers).
Intermediate Microeconomics..  Browning/Zupan, Microeconomic Theory and
                                Applications (Addison Wesley).
International Corporate        Shapiro, Multinational Financial
 Finance.                       Management (Prentice Hall).
                               Shapiro, Foundations of Multinational
                                Financial Management (Prentice Hall).
International Economics......  Salvatore, International Economics
                                (Prentice Hall).
K-12 Curriculum..............  McNeil, Curriculum: A Comprehensive
                                Introduction (Addison Wesley).
Manufacturing Engineering....  Groover, Fundamentals of Modern
                                Manufacturing (Prentice Hall).
                               Degarmo/Black/Kohser, Materials and
                                Processes in Manufacturing (Prentice
                                Hall).
Mathematics for Elementary     Musser/Burger, Mathematics for Elementary
 Teachers.                      Teachers (Prentice Hall).
Measurement and Assessment of  Kubiszyn/Borich, Educational Testing and
 Students.                      Measurement (Addison Wesley).
Microbiology (Non-majors)....  Black, Microbiology: Principles and
                                Applications (Prentice Hall).
Multicultural Education......  Banks/Banks, Multicultural/Education:
                                Issues and Perspectives (Allyn & Bacon).
                               Grant/Sleeter, Turning on Learning: Five
                                Approaches for Multicultural Teaching
                                Plans for Race, Class, Gender and
                                Disability (Prentice Hall).
                               Sleeter/Grant, Making Choices for
                                Multicultural Education: Five Approaches
                                to Race, Class, and Gender (Merrill--
                                Prentice Hall).
Operating Systems............  Silberschatz/Galvin, Operating System
                                Concepts (Addison Wesley).
School Administration:         Acheson/Gall, Techniques in the Clinical
 Supervision.                   Supervision of Teachers (Addison
                                Wesley).
                               Oliva/Pawlis, Supervision for Today's
                                Schools (Addison Wesley).
Structural Engineering.......  McCormac/Nelson, Structural Analysis: A
                                Classical & Matrix Approach (Addison
                                Wesley).
Surveying....................  McCormac, Surveying Fundamentals
                                (Prentice Hall).
Teaching Math to Elementary    Reys/Suydam/Linquist/Smith, Helping
 Students.                      Children Learn Mathematics (Allyn &
                                Bacon).
                               Hatfield/Edwards/Bitter, Mathematics
                                Methods for elementary and Middle School
                                (Ally & Bacon).
                               Sheffield/Cruikshank, Teaching and
                                Learning Elementary and Middle School
                                Mathematics (Merrill--Prentice Hall).
                               Heddens, Today's Mathematics (Prentice
                                Hall).
Teaching Reading to Secondary  Ruddell, Teaching Content Reading &
 Students.                      Writing (Allyn & Bacon).
                               Ryder, Reading and Learning in the
                                Content Areas (Prentice Hall).
                               Cooter/Flynt, Teaching Reading in Content
                                Areas (Prentice Hall).
                               Manzo/Manzo, Content Area Literacy
                                (Merrill--Prentice Hall).
Technical Math...............  Calter, Technical Mathematics (Prentice
                                Hall).
Technical Math with Calculus.  Calter, Technical Mathematics with
                                Calculus (Prentice Hall).
Technical Writing............  Houp, Reporting Technical Information
                                (Allyn and Bacon).
------------------------------------------------------------------------


[[Page 70428]]

Competitive Impact Statement

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

I. Nature and Purpose of the Proceeding

    On November 23, 1998, the United States filed a civil antitrust 
Complaint alleging that the proposed acquisition by Pearson plc and its 
wholly subsidiary, Pearson Inc. (collectively ``Pearson''), of certain 
publishing businesses of Viacom International Inc. (``Viacom'') would 
violate Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint 
alleges that Pearson and Viacom, two of the nation's largest publishers 
of textbooks and other educational materials, compete head-to-head in 
the development, marketing, and sale of comprehensive elementary school 
science programs and in the development, marketing, and sale of 
textbooks used in thirty-two college courses. Unless the acquisition is 
blocked, competition for these science programs and college textbooks 
would be substantially lessened, leading to higher prices, a reduction 
in the value of materials or service provided to teachers and students, 
or lower quality. The request for relief in the Complaint seeks: (1) a 
judgment that the proposed merger would violate Section 7 of the 
Clayton Act; (2) a permanent injunction preventing consummation of the 
merger agreement; (3) an award of costs to the plaintiff; and (4) such 
other relief as the Court may deem just and proper.
    Shortly before the Complaint was filed, the parties reached a 
proposed settlement that permits Pearson to complete its acquisition of 
Viacom's publishing businesses, yet preserves competition in the 
markets in which the transaction would raise significant competitive 
concerns. Along with the Complaint, the parties filed a Stipulation and 
proposed Final Judgment setting out the terms of the settlement.
    The proposed Final Judgment orders Pearson to divest either its or 
Viacom's existing elementary school science program, along with the 
program that that party is currently developing, to an acquirer 
acceptable to the United States. Unless the United States agrees to a 
time extension, Pearson must complete this divestiture within two 
months of the filing of the Complaint, or within ten days of the 
expiration of the sixty-day statutory notice-and-comment period that 
commenced with the publication of this Competitive Impact Statement, 
whichever is later. The proposed Final Judgment also orders Pearson to 
divest fifty-five college textbooks so that competition in the 
development, marketing, and sale of textbooks in each of the thirty-two 
courses will be preserved. Pearson must complete the college textbook 
divestiture within five months of the filing of the Complaint, or 
within ten days of the expiration of the sixty-day statutory notice-
and-comment period, whichever is later.
    If Pearson does not complete the divestitures within the 
appropriate time periods, the Court, upon application of the United 
States, is to appoint a trustee selected by the United States to 
complete the remaining divestitures. The proposed Final Judgment also 
requires Pearson and Viacom to take all steps necessary to maintain and 
market the products to be divested as independent and active 
competitors until the divestures mandated by the proposed Final 
Judgment have been accomplished.
    The plaintiff and defendants have stipulated that the Court may 
enter the proposed Final Judgment after compliance with the APPA. Entry 
of the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce 
provisions of the proposed Final Judgment and punish violations 
thereof.

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

A. The Defendants and the Proposed Transaction

    Pearson Inc. is a Delaware corporation headquarters in New York 
City, that publishes textbooks and other educational materials under 
such names as Addison Wesley, Scott Foresman and Harper Collins. Its 
parent, Pearson plc, is an international media corporation incorporated 
in the United Kingdom and based in London.
    Viacom, a Delaware corporation based in New York City, publishes 
textbooks and other educational materials under names including 
Prentice Hall, Silver Burdett Ginn, and Allyn & Bacon. Its parent, 
Viacom, Inc,. is one of the world's largest entertainment and 
publishing companies and is a leading competitor in nearly every 
segment of the international media marketplace.
    On May 17, 1998, the defendants signed an agreement under which 
Pearson would acquire educational, professional, and reference 
publishing businesses from Viacom. This transaction, which would 
increase concentration in already concentrated markets, precipitated 
the government's suit.

B. Product Markets

1. Basal Elementary School Science Program Market
a. Description of the Market
    Most elementary schools throughout the United States teach science 
through comprehensive science programs known as ``basal elementary 
school science programs,'' which provide organization and structure, as 
well as guidance and support, in how to teach the subject. Student 
textbooks and teacher's editions of the textbooks are the core of most 
basal programs, but most also include other important educational 
materials and services called ``ancillary'' materials, consisting of 
student workbooks and notebooks, audio-visual aids such as charts and 
videotapes, and materials for student science exercises and 
experiments. Basal elementary school science programs also often 
include services such as teacher training sessions.
    School districts or individual schools desiring to purchase basal 
elementary school science programs would not turn to any alternative 
product in sufficient numbers to defeat a small but significant 
increase in the price of these programs or a reduction in the value of 
ancillary materials and services provided with them. For example, a 
school seeking to purchase a basal elementary school science program 
would not respond to a price increase by considering basal programs in 
mathematics or reading. Nor would schools substitute any of the few 
nontraditional, alternative science programs in sufficient numbers to 
defeat a small but significant price increase in basal elementary 
school science programs.
b. Harm or Competition as a Consequence of the Merger
    Pearson and Viacom are two of only four larger publishers of basal 
elementary school science programs. They have consistently led the 
market, capturing a combined share of roughly fifty percent or more of 
new sales over the last six years, Pearson's Discover the Wonder 
program is a close substitute for Viacom's Discovery Works program. 
Pearson and Viacom also compete to maintain a improve program quality. 
Both are currently developing new basal elementary school science 
programs that they will offer for sale throughout the United States 
beginning in 1999.
    Pearson and Viacom's aggressive competition has led to lower 
prices, more and better ancillary materials and services, and 
improvements in product

[[Page 70429]]

quality. The proposed acquisition would eliminate this competition and 
would further concentrate an already highly concentrated market.
    Successful entry into the basal elementary school science program 
market is difficult, time consuming, and costly. A publisher would need 
to assemble an editorial and sales staff to develop, test, and market 
the new program, and would need to overcome schools' reluctance to 
purchase an elementary school science program from a firm lacking an 
established reputation as an experienced and reliable science 
publisher. Additionally, the science market is less attractive to new 
entrants because elementary school science funding is neither as large 
nor as reliable as it is for core subjects like math and reading.
    The Complaint alleges that the transaction would likely have the 
following effects:
    a. actual and future competition between Pearson and Viacom would 
be eliminated;
    b. competition generally in the market for basal elementary school 
science programs would likely be substantially lessened;
    c. prices for basal elementary school science programs would likely 
increase or the value of ancillary materials or services would likely 
decline; and
    d. competition in the development and improvement of basal 
elementary school science programs would likely be substantially 
lessened.

2. College Textbook Markets

a. Description of the Markets
    College professors generally select a textbook to serve as the 
primary teaching material for their course. Textbooks provide the core 
written material for a course, serve as the foundation for the 
professor's overall lesson plan, and set forth the framework for class 
discussions. Although it is the professor that chooses the textbook, 
students purchase the textbooks, usually from a college bookstore.
    Publishers often attempt to induce a professor to select their 
textbooks by offering free ancillary educational materials such as a 
teacher's edition of the textbook, audio-visual teaching tools, and 
copies of the textbook for teaching assistants. Publishers also 
sometimes offer textbooks to students as part of discounted packages 
that include further ancillary educational materials such as CD-ROMs 
and study guides.
    The Complaint identified thirty-two college courses in which 
Pearson and Viacom were among the leading competitors in the provision 
of textbooks and related educational materials. These courses primarily 
fell within the disciplines of biological sciences, engineering, 
economics, teachers' education, mathematics and computer science. In 
each of these courses, textbooks are used as the primary teaching 
materials. A small but significant increase in the price of a textbook 
for a college course--or a small but significant decrease in the value 
of the ancillary materials provided with the textbook--would not cause 
a significant number of professors or students to switch to any 
alternative products. Used textbooks also cannot defeat an increase in 
price of new textbooks or a decrease in the supply of ancillaries 
provided with them. The supply of used textbooks is limited, and 
professors usually require use of the newest edition of a textbook, 
which is generally revised every three to four years.
b. Harm to Competition as a Consequence of the Merger
    In each of the thirty-two college textbook markets identified in 
the Complaint, Pearson and Viacom compete vigorously by offering 
textbooks that are close substitutes. Together, they account for a 
major share of new textbook sales, and face significant competition 
from only a small number of other publishers.
    Competition between Pearson and Viacom has resulted in lower 
prices, more and better ancillary materials for professors and 
students, and improved product quality. The proposed acquisition would 
eliminate this competition, give Pearson the ability to raise the price 
or reduce the value of materials, and would further concentrate these 
already highly concentrated markets.
    In each of the thirty-two college textbook markets, there is 
unlikely to be timely entry by any company offering textbooks and 
ancillary materials that would be sufficient to defeat an 
anticompetitive increase in price or decrease in ancillary materials. 
Successful entry involves a costly and time-consuming process in which 
a publisher must locate an author qualified to write a new textbook, 
and assemble an editorial staff to edit and develop the textbook. In 
addition, it must have numerous professors to review the textbook and a 
large sales staff to market it. Entry is also impeded by the difficulty 
of challenging the reputation of successful incumbent textbooks.
    The Complaint alleges that the transaction would likely have the 
following effects:
    a. actual and future competition between Pearson and Viacom would 
be eliminated;
    b. competition generally in the markets for the sale of textbooks 
and ancillary materials for each of the college courses identified in 
the Complaint would likely be substantially lessened;
    c. prices for textbooks and ancillary materials for each of the 
college courses identified in the Complaint would likely increase or 
the value of ancillary materials would likely decline; and
    d. competition in the development and improvement of college 
textbooks and ancillary materials in each of the college courses 
identified in the Complaint would likely be substantially lessened.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment is designed to eliminate the 
anticompetitive effects of Pearson's proposed acquisition of publishing 
businesses from Viacom.
    The proposed Final Judgment requires divestiture of either 
Pearson's or Viacom's basal elementary school science program to an 
acquirer acceptable to the United States within two months after the 
filing of the proposed Final Judgment in this matter, or within ten 
days after the expiration of the sixty-day statutory notice-and-comment 
period that commenced with the publication of this Competitive Impact 
Statement in the Federal Register, whichever is later. This divestiture 
includes all textbooks or other educational materials offered for sale 
or provided or under development that refer or relate to the subject 
matter of science for elementary school grades, including, but not 
limited to (1) student editions; (2) teacher editions; (3) supplemental 
materials, including but not limited to workbooks, notebooks, charts, 
audio, video, software, CD-ROM, Internet and broadcast components, 
manipulatives and equipment, and similar materials; (4) teacher support 
and staff development materials, including, but not limited to teacher 
resource books, assessment materials and answer keys, test generators, 
teaching guides, overhead transparencies, lesson plans and outlines and 
curriculum materials; and (5) any other materials in any form, format 
or media marketed or intended to be marketed as being ancillary to the 
program or to an individual title within the program.
    Pearson also must divest the fifty-five college textbooks 
identified on Exhibit B to the proposed Final Judgment. That

[[Page 70430]]

exhibit specifies the one or more textbooks in each course that must be 
divested to ensure that each college textbook market suffers no 
reduction in competition. The college textbook divestitures must be 
completed within five months after the filing of the proposed Final 
Judgment in this matter, or within ten days after the expiration of the 
sixty-day statutory notice-and-comment period, whichever is later. 
Until the divestitures takes place, Pearson is required to develop and 
maintain its and Viacom's products as independent ongoing, 
economically, viable, and active competitors, and to continue to fund 
their development, promotional advertising, sales, marketing, 
merchandising, and support.
    If Pearson fails to make the required divestitures within the 
applicable time periods, the Court will appoint a trustee selected by 
the United States to effect the divestitures. Pearson may select which 
basal elementary school science program the trustee will divest, so 
long as that program has been developed and maintained at a level 
sufficient to ensure its competitive viability. If the United States 
determines, in its sole discretion, that Pearson has not adequately 
developed and maintained that program's competitive viability, the 
trustee will sell the other program.
    The proposed Final Judgment provides that defendants will pay all 
costs and expenses of the trustee. After the trustee's appointment 
becomes effective, the trustee will file monthly reports with the 
parties and the Court, setting forth the trustee's efforts to 
accomplish divestiture. At the end of six months, if the divestiture 
has not been accomplished, the trustee and the parties will have the 
opportunity to make recommendations to the Court, which shall enter 
such orders as appropriate in order to carry out the purpose of the 
trust, including extending the trust and the term of the trustee's 
appointment.
    The proposed Final Judgment takes steps to ensure that the 
acquirers of the divested products will be viable and effective 
competitors. The United States must be satisfied that the acquiring 
parties have the ability and intention to publish and market the 
divested products as viable, ongoing businesses. The proposed Final 
Judgment also directs Pearson to use all commercially practical means 
to enable the acquirer of the basal elementary school science program 
to hire the personnel primarily responsible for the program's editorial 
content, including editors, authors, and science experts, and to 
encourage and facilitate their employment by the acquirer. Prior to 
divestiture, Pearson also may not transfer any of these employees to 
new positions within the company. The proposed Final Judgment also 
requires that Pearson provide acquirers with information about the 
employees responsible for the editorial content of the college 
textbooks to be divested, and about the employees primarily responsible 
for the production, design, layout, sale or marketing of all of the 
divested products. The proposed Final Judgment forbids Pearson and 
Viacom from interfering with any acquirer's employment negotiations 
with those employees, and from transferring some of these employees--
those spending the predominant portion of their time on a divestiture 
product--to new positions prior to the divestitures.
    The proposed Final Judgment requires sale of all the tangible and 
intangible assets that make up each divestiture product. It expressly 
defines each divestiture product to include all associated intellectual 
property, licenses, contracts, artwork, promotional and advertising 
materials, customer lists, and research data. The intellectual property 
specifically includes the titles of all existing products to be 
acquired, but not trademarks or trade names that refer to Pearson or 
Viacom. Exhibit A of the proposed Final Judgment identifies in detail 
the specific items (including student editions, teacher editions, and 
ancillary materials) that are included within the basal elementary 
school science program that Pearson must divest. It provides, however, 
that Pearson may continue to use the divested basal elementary school 
science program to the extent necessary to fulfill its or Viacom's 
obligations under existing contracts with purchasers. These obligations 
consist mainly of the provision of replacement copies of consumable 
workbooks or lost or damaged textbooks. The proposed Final Judgment 
requires that the acquirer grant Pearson a royalty-free license so that 
it may continue to use the divested basal elementary school science 
program for this limited purpose.
    The proposed Final Judgment is thus designed to maintain the 
present level of competition in the market for basal elementary school 
science programs and in the thirty-two college textbook markets 
identified in the Complaint by replacing the competitor eliminated as a 
result of the merger with one or more that is equally effective. It 
accomplishes this goal by requiring prompt divestitures so that the 
acquirer has adequate time to participate in the significant upcoming 
sales opportunities in schools and colleges, by providing the acquirer 
with an opportunity to employ the personnel that are critical to the 
success of the divested products, and by requiring divestiture of all 
tangible and intangible assets that make up each of those products.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
Sec. 16(a), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final 
Judgment

    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wishes to comment should do so within 
sixty days of the date of publication of this Competitive Impact 
Statement in the Federal Register. The United States will evaluate and 
respond to the comments. All comments will be given due consideration 
by the Department of Justice, which remains free to withdraw its 
consent to the proposed Judgment at any time prior to entry. The 
comments and the response of the United States will be filed with the 
Court and published in the Federal Register.
    Written comments should be submitted to: Mary Jean Moltenbrey, 
Chief, Civil Task Force, Antitrust Division, United States Department 
of Justice, 325 Seventh Street, N.W., Suite 300, Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains

[[Page 70431]]

jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Pearson and Viacom. 
The United States is satisfied that the divestiture of the assets 
specified in the proposed Final Judgment will facilitate continued 
viable competition in the market for basal elementary school science 
programs and in the thirty-two markets for college textbooks identified 
in the Complaint. The United States is satisfied that the proposed 
relief will prevent the merger from having anticompetitive effects in 
these markets. The divestitures required by the proposed Final Judgment 
will preserve the structure of the markets that existed prior to the 
merger and will preserve the existence of independent competitors.

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

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' In making that 
determination, the court may consider--

    (1) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) the impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. Sec. 16(e).
    As the Court of Appeals for the District of Columbia Circuit held, 
the APPA permits a court to consider, among other things, the 
relationship between the remedy secured and the specific allegations 
set forth in the government's complaint, whether the decree is 
sufficiently clear, whether enforcement mechanisms are sufficient, and 
whether the decree may positively harm third parties. See United States 
v. Microsoft, 56 F.3d 1448 (D.C. Cir. 1995).
    In conducting this inquiry, ``the Court is nowhere compelled to go 
to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree process.''\1\ Rather,
---------------------------------------------------------------------------

    \1\ 119 Cong. Rec. 24598 (1973). See also United States v. 
Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public 
interest'' determination can be made properly on the basis of the 
Competitive Impact Statement and Response to Comments filed pursuant 
to the APPA. Although the APPA authorizes the use of additional 
procedures, 15 U.S.C. Sec. 16(f), those procedures are 
discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues and that 
further proceedings would aid the court in resolving those issues. 
See H.R. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974) U.S. 
Code Cong. & Ad. News 6535, 6538.

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

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para. 
61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert, denied, 454 U.S. 1083 
(1981). Precedent requires that

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\2\
---------------------------------------------------------------------------

    \2\ United States v. Bechtel, 648 F.2d at 666 (internal 
citations omitted) (emphasis added); see United States v. BNS, Inc., 
858 F.2d at 463; United States v. National Broadcasting Co., 449 F. 
Supp. 1127, 1143 (C.D. Cal. 1978); Gillette, 406 F. Supp. at 716. 
See also United States v. American Cyanamid Co., 719 F.2d 558, 565 
(2d Cir. 1983).
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    The proposed Final judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.' (citations 
omitted).'' \3\
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    \3\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 
150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 
U.S. 1001 (1983), quoting Gillette, 406 F. Supp. at 716; United 
States v.  Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985).
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VIII. Determinative Documents

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

FOR PLAINTIFF UNITED STATES OF AMERICA

    Dated: December 10, 1998.
Respectfully submitted,
John W. Poole (D.C. Bar #34136)
Senior Trial Attorney, U.S. Department of Justice, Antitrust Division, 
Civil Task Force, 325 Seventh Street, N.W., Suite 300, Washington, DC 
20530, Telephone: (202) 616-5943, Facsimile: (202) 307-9952.
[FR Doc. 98-33653 Filed 12-18-98; 8:45 am]
BILLING CODE 4410-11-M