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