[Federal Register Volume 64, Number 9 (Thursday, January 14, 1999)]
[Notices]
[Pages 2506-2514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-824]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. AT&T Corp. and Tele-Communications, Inc.;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16 (b) through (h), that a proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the District of Columbia in
United States v. AT&T Corporation and Tele-Communications, Inc., Civil
No. 1:98CV03170.
On December 30, 1998, the United States filed a Complaint alleging
that the proposed acquisition by AT&T Corporation of Tele-
Communications, Inc. would violate section 7 of the Clayton Act, 15
U.S.C. 18. The Complaint alleges that AT&T is the largest provider of
mobile wireless telephone services in the United States, and that Tele-
Communications, Inc. owns a 23.5 percent equity interest in the mobile
wireless telephone business of Sprint Corporation. The Complaint
further alleges that if consummated, the acquisition may substantially
lessen competition in the provision of mobile wireless telephone
services in many geographic areas throughout the United States. The
proposed Final Judgment, filed at the same time as the Complaint,
requires AT&T Corporation to divest its interest in the mobile wireless
telephone business of Sprint Corporation.
Public comment is invited within the statutory 60-day comment
period. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Donald J. Russell, Chief, Telecommunications Task Force, Antitrust
Division, Department of Justice, 1401 H St., NW, Suite 8000,
Washington, DC 20530 (telephone: (202) 514-5621).
Copies of the Complaint, Stipulation, proposed Final Judgment, and
Competitive Impact Statement are available for inspection in Room 215
of the United States Department of Justice, Antitrust Division, 325 7th
St., NW, Washington, DC 20530 (telephone (202) 514-2841) and at the
Office of the Clerk of the United States District Court for the
District of Columbia. Copies of these materials may be obtained upon
request and payment of a copying fee.
Constance K. Robinson,
Director of Operations and Merger Enforcement, Antitrust Division.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, that:
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 to this Stipulation consent that a Final Judgment in
the form attached may be filed and entered by the Court, upon the
motion of any party or the Court's own motion, at any time after
compliance with the requirements of the Antitrust Procedures and
Penalties Act (15 U.S.C. 16), 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 entry of the proposed Final
Judgment by serving notice on the 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 filing 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. 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
whatever, and the making of this Stipulation shall be without prejudice
to any party in this or any other proceeding.
For the Plaintiff:
A. Douglas Melamed,
Acting Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Deborah A. Roy,
Attorney, Telecommunications Task Force.
Donald J. Russell,
Chief, Telecommunications Task Force.
Peter A. Gray,
Attorney, Telecommunications Task Force.
U.S. Department of Justice, Antitrust Division, 1401 H Street, NW.,
Suite 8000, Washington, DC 20530, (202) 514-5636.
Dated: December 30, 1998.
[[Page 2507]]
For the Defendants:
Mark C. Rosenblum,
Vice President-Law, AT&T Corp., 295 North Maple Avenue, Room 3244J1,
Basking Ridge, New Jersey 07920.
Dated: December 28, 1998.
Kathy Fenton,
Counsel for Tele-Communications, Inc., Jones, Day, Reavis & Pogue,
Suite 700, 1450 G Street NW, Washington, DC 20005.
Dated: December 28, 1998.
Final Judgment
WHEREAS, plaintiff, the United States of America, having filed its
Complaint herein on December 30, 1998, and plaintiff and defendants, by
their respective attorneys, having 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;
And whereas, defendants have agreed to be bound by the provisions
of this Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is certain
divestiture of specific assets and the imposition of related injunctive
relief to ensure that competition is not substantially lessened;
And whereas, plaintiff requires Liberty Media Corporation to make
certain divestitures for the purpose of preventing a lessening of
competition alleged in the Complaint;
And whereas, defendants have represented to plaintiff that the
divestiture ordered herein can and will be made 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
herein;
And, 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 each of the parties hereto and the
subject matter of this action. 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. 18).
II. Definitions
As used in this Final Judgment:
A. ``TCI'' means defendant Tele-Communications, Inc., a Delaware
corporation with its headquarters in Englewood, Colorado and includes
its successors and assigns, its subsidiaries, and the directors,
officers, managers, agents and employees acting for or on behalf of
TCI, except for Liberty, its successors and assigns, its subsidiaries,
and the directors, officers, managers, agents and employees acting for
or on behalf of Liberty.
B. ``Liberty'' means Liberty Media Corporation, a Delaware
corporation, as well as the assets, liabilities and businesses
attributed to the Liberty Media Group (as defined in the AT&T/TCI
Merger Agreement) and its successors and assigns, its subsidiaries and
the directors, officers, managers, agents and employees acting for or
on behalf of Liberty.
C. ``Liberty Media Tracking Shares'' means the classes of common
stock to be issued by AT&T, referred to as ``Liberty Media Tracking
Shares'' in the AT&T/TCI Merger Agreement, and any shares of stock
issued in respect of any of the foregoing (including by way of
conversion, redemption, reclassification, distribution, merger,
combination, or other similar event).
D. ``AT&T'' means defendant AT&T Corp., a New York corporation with
its headquarters in New York, New York and includes all of its
successors and assigns, its subsidiaries, and the directors, officers,
managers, agents and employees acting for or on behalf of AT&T, except
for Liberty, its successors and assigns, its subsidiaries, and the
directors, officers, managers, agents and employees acting for or on
behalf of Liberty.
E. ``AT&T/TCI Merger Agreement'' means the Agreement and Plan of
Merger dated as of June 23, 1998, as produced to plaintiff on July 23,
1998, with respect to the AT&T/TCI Merger.
F. ``AT&T/TCI Merger'' means the merger of TCI with a subsidiary of
AT&T, as contemplated by the AT&T/TCI Merger Agreement.
G. ``AT&T Stock'' means all classes of common stock issued by AT&T,
except for Liberty Media Tracking Shares.
H. ``Sprint PCS Tracking Stock'' means, collectively, (i) the PCS
Common Stock, Series 1, (ii) the PCS Common Stock, Series 2, (iii) the
PCS Common Stock, Series 3, (iv) the shares of Sprint PCS Tracking
Stock issuable in respect of Sprint's outstanding shares of Class A
Common Stock, (v) the shares of Sprint PCS Tracking Stock issuable in
respect of any ``inter-group interest'' of the ``Sprint FON Group'' in
the ``Sprint PCS Group,'' (vi) the shares of Sprint's Series 7
Preferred Stock and warrants to purchase shares of Sprint PCS Tracking
Stock issued to TCI, Comcast Corporation (``Comcast'') and Cox
Communications, Inc. (``Cox'') in connection with the Sprint PCS
Restructuring (and the shares of Sprint PCS Tracking Stock issuable
upon any exercise or conversion thereof), (vii) any other options,
warrants or convertible securities exercisable for or convertible into
any shares of Sprint PCS Tracking Stock, and (viii) any shares of
capital stock Sprint issued in respect of any of the foregoing
(including by way of conversion, redemption, reclassification,
distribution, merger, combination, or other similar event).
I. ``Liberty's Sprint Holdings'' means the Sprint PCS Tracking
Stock acquired by TCI Ventures Group LLC and its subsidiaries in the
Sprint PCS Restructuring and in which Liberty will have a beneficial
interest after the closing of the AT&T/TCI Merger.
J. ``Sprint PCS Restructuring'' means that series of transactions
that occurred simultaneously on November 23, 1998 in which Sprint
Corporation (``Sprint'') acquired through a number of mergers all of
the outstanding partnership interests in a number of partnerships
collectively holding all of the assets and businesses known as ``Sprint
PCS'' held by affiliates of TCI, Cox, and Comcast.
K. ``Private sale'' means any sale except for sales made through
the public market.
III. Applicability
The provisions of this Final Judgment apply to each of the
defendants, its successors and assigns, its subsidiaries, directors,
officers, managers, agents, 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,
and with respect to Sections IV, V and VI of this Final Judgment, to
the trustee and his or her successors.
IV. Creation of a Trust
A. TCI is hereby ordered and directed, prior to closing of the
AT&T/TCI Merger, to assign and transfer Liberty's Sprint Holdings to a
trustee for the purpose of accomplishing a divestiture of such holdings
in accordance with the terms of this Final Judgment. The trust
agreement shall be in a form approved by the plaintiff, and its terms
shall be consistent with the terms of this Final Judgment. Defendants
shall submit a form of trust agreement to the plaintiff, who shall
communicate to defendants within ten (10) business days its approval or
disapproval of that form. The trustee shall agree to be bound by this
Final Judgment.
[[Page 2508]]
B. Prior to the closing of the AT&T/TCI Merger, TCI shall submit
the name of its nominee for trustee to the plaintiff, who within ten
(10) business days shall (i) approve the nominee as trustee, or (ii)
request additional names until a nominee for trustee proposed by
Liberty is approved by the plaintiff, with plaintiff reaching a
decision on each nominee within ten (10) business days. The trustee
shall not be a director, officer, manager, agent or employee of AT&T or
Liberty. Defendants shall not consummate the Merger until such time as
the trustee and the trust agreement have been approved by plaintiff,
and the Liberty Sprint Holdings have been transferred to the trust.
V. Divestiture of Sprint PCS Interest
A. The trustee is hereby ordered and directed, in accordance with
the terms of this Final Judgment, on or before May 23, 2002, to divest
that portion of Liberty's Sprint Holdings sufficient to cause Liberty
to own no more than 10% of the outstanding shares of Sprint PCS
Tracking Stock. On or before May 23, 2004, the trustee shall divest the
remainder of Liberty's Sprint Holdings. The number of outstanding
shares of Sprint PCS Tracking Stock for such purposes shall be
calculated on a share of Series 1 PCS Stock equivalent basis assuming
the issuance of all shares of Series 1 PCS Stock ultimately issuable in
respect of the applicable Sprint PCS Tracking Stock upon the exercise,
conversion or other issuance thereof in accordance with the terms of
such securities. Notwithstanding the provisions of this paragraph, if a
motion to terminate this Final Judgment in which plaintiff has joined
has been filed, and is pending before the Court, the trustee shall not
proceed with the divestitures provided by this paragraph until the
motion to terminate the Final Judgment has been decided by the Court.
B. After Liberty's Sprint Holdings have been transferred to the
trustee, only the trustee shall have the right to sell Liberty's Sprint
Holdings. The trustee shall have the power and authority to accomplish
the divestiture only in a manner reasonably calculated to maximize the
value of Liberty's Sprint Holdings to the holders of the Liberty Media
Tracking Shares, without regard to any costs or benefits to AT&T
(including any costs or benefits of such divestiture to AT&T that may
be directly or indirectly transferred to the holders of the Liberty
Media Tracking Shares.) However, the trustee may in accomplishing the
divestiture, take into account income or gain tax costs or benefits for
AT&T that flow to the holders of the Liberty Media Tracking Shares. The
trustee shall have the powers provided by the trust agreement and such
other powers as the Court shall deem appropriate.
C. All decisions regarding the divestiture, in whole or in part, of
Liberty's Sprint Holdings shall be made by the trustee without
discussion or consultation with AT&T, with any of the Class A Directors
of Liberty, or with any other officer, director or shareholder of
Liberty who individually owns more that 0.10% of the outstanding shares
of AT&T Stock. The trustee shall consult with the Board of Directors of
Liberty, but the Class A Directors of Liberty and any director,
officer, or shareholders of Liberty who owns more than 0.10% of the
outstanding shares of AT&T Stock shall not participate in such
consultation. The decision to divest part or all of the Liberty Sprint
Holdings shall be made by the trustee in his or her sole discretion,
except as provided for in Section V.D. of this Final Judgment. Liberty
shall not take any action to block a sale by the trustee, on any
grounds other than the trustee's malfeasance as defined in the trust
agreement. Where the trustee intends to effect a private sale of part
or all of Liberty's Sprint Holdings, the trustee shall notify Liberty
and plaintiff of that intention. Any objection by Liberty, based on the
trustee's malfeasance, must be made within ten (10) business days of
notice from the trustee of an intention to make a private sale. Subject
to Section V.G. of this Final Judgment, the trustee shall have the
power and authority to hire at the cost and expense of Liberty any
investment bankers, attorneys, or other agents reasonably necessary in
the judgment of the trustee to assist in the divestiture, and such
professionals or agents shall be solely accountable to the trustee.
D. The trustee shall not divest part or all of Liberty's Sprint
Holdings in a private sale without a premerger notification form having
been filed pursuant to the Hart-Scott-Rodino Antitrust Improvement Act
of 1976 or, if the private sale is not reportable under the Hart-Scott-
Rodina Act, without obtaining the prior written consent of the
plaintiff, which shall be granted or denied within thirty (30) calendar
days of the request for such consent.
E. Defendants shall not provide financing in connection with the
divestiture to the purchaser of any of Liberty's Sprint Holdings
required to be divested by this Final Judgment.
F. Except as provided for in Section V.C. of this Final Judgment,
defendants shall take no action to influence, interfere with or impede
the trustee's accomplishment of the divestiture of Liberty's Sprint
Holdings and Liberty shall, if requested by the trustee, use its best
efforts to assist the trustee in accomplishing the required
divestiture, provided that Liberty is not required to take any action
with respect to any of Liberty's non-Sprint PCS asset or businesses.
Subject to a customary confidentiality agreement, the trustee shall
have full and complete access to the defendants' personnel, books,
records, and facilities related to Liberty's Sprint Holdings. Subject
to a customary confidentiality agreement, the trustee shall permit
prospective purchasers of part or all of Liberty's Sprint Holdings in a
private sale to have access to any and all financial or operational
information to which the trustee has access, as may be relevant to the
divestiture required by this Final Judgment.
G. The trustee shall serve at the cost and expense of Liberty and
shall account for all monies derived from the sale of the assets sold
by the trustee and all costs and expenses so incurred. The compensation
of the trustee and of any professionals and agents retained by the
trustee shall be reasonable in light of value of the Liberty Sprint
Holdings and based on a fee arrangement set forth in the trust
agreement.
VI. Liberty Governance and Economic Interest
Until the divestitures required by the Final Judgment have been
accomplished:
A. Any economic interest arising in connection with Liberty's
Sprint Holdings, without limitation, and including but not limited to
any interest or dividends earned or net proceeds received upon the
disposition of Liberty's Sprint Holdings, shall be for the sole and
exclusive benefit of the holders of the Liberty Media Tracking Shares.
AT&T shall not engage in any transaction that transfers either directly
or indirectly the benefits of Liberty's Sprint Holdings to any other
class of AT&T shareholders or to AT&T. AT&T shall adhere to the Policy
Statement Regarding Liberty Tracking Stock Matters contained in Exhibit
D to the AT&T/TCI Merger Agreement.
B. TCI shall, on or before the consummation of the merger, (i)
amend and restate the certificate of incorporation and bylaws of
Liberty to be in substantially the form set forth in Schedule 2.1(c)(i)
of the AT&T/TCI Merger Agreement and (ii) appoint all of the Class B
Directors and the Class C Directors (as such terms are defined in
Schedule 2.1(c)(i) to the AT&T/TCI
[[Page 2509]]
Merger Agreement) of Liberty Media Corporation.
C. AT&T shall, on or before the consummation of the AT&T/TCI Merger
or promptly thereafter, form a Capital Stock Committee as described in
the Bylaw Amendment for the Capital Stock Committee set out in Exhibit
D of the AT&T/TCI Merger Agreement and agree to have the Capital Stock
Committee have the responsibilities described in Exhibit D of the AT&T/
TCI Merger Agreement.
D. The trustee shall be instructed not to vote Liberty's Sprint
Holdings for so long as they are held in the trust.
E. Liberty shall not purchase additional shares of Sprint PCS
Tracking Stock (other than in connection with the exercise of warrants
to purchase such shares or the conversion of shares of Series 7
Preferred Stock acquired in the Sprint PCS Restructuring) without the
prior written consent of the plaintiff, which shall act on any request
for such consent within thirty (30) calendar days.
F. Liberty shall not hold or acquire any interest, direct or
indirect, in AT&T's mobile wireless operations without a premerger
notification form having been filed pursuant to the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, or if the acquisition is not
reported under the Hart-Scott-Rodino Act, without obtaining the prior
written consent of the plaintiff, which shall be granted or denied
within thirty (30) calendar days of the request for such consent. This
paragraph shall not apply to any cumulative holding or acquisition by
Liberty of 1.0% or less of the outstanding shares of AT&T Stock
indirectly through the acquisition of an interest in a third party,
with such percentage to be calculated by multiplying the percentage
interest owned by Liberty in such third party by the third party's
interest in AT&T Stock (and such third party's interest being
determined in the same manner, if also held indirectly).
VII. Compliance Inspection
For the purposes of determining or securing compliance with the
Final Judgment and subject to any legally recognized privilege, from
time to time:
A. Duly authorized representatives of the plaintiff, upon written
request of the Attorney General or of the Assistant Attorney General in
charge of the Antitrust Division, and on reasonable notice to
defendants made to their principal offices, shall be permitted:
(1) Access during office hours of defendants to inspect and copy
all books, ledgers, accounts, correspondence, memoranda, and other
records and documents in the possession or under the control of
defendants, who may have counsel present, relating to matters contained
in this Final Judgment; and
(2) Subject to the reasonable convenience of defendants and without
restraint or interference from them, to interview, either informally or
on the record, officers, employers, and agents of defendants, who may
have counsel present, regarding any such matters.
B. Upon the written request of the Attorney General or of the
Assistant Attorney General in charge of the Antitrust Division, made to
defendants' principal offices, defendants shall submit such written
reports, under oath if requested, with respect to any matter contained
in this Final Judgment.
C. No information or documents obtained by the means provided in
this Section VII shall be divulged by a representative of the plaintiff
to any person other than a duly authorized representative of the
Executive Branch of the United States, except in the course of legal
proceedings to which the United States is a party (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
defendants to plaintiff, defendants represent and identify in writing
the material in any such information or documents to which a claim of
protection may be asserted under Rule 26(c)(7) of the Federal Rules of
Civil Procedure, and defendants mark each pertinent page of such
material ``Subject to claim to protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then ten (10) calendar days notice
shall be given by plaintiff to defendants prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
VIII. Reporting Requirement
Until the divestitures have been accomplished as provided for in
Section V. of this Final Judgment, the trustee shall file a report
every six months with the plaintiff, commencing on November 1, 1999,
setting forth the efforts to accomplish the divestitures required by
this Final Judgment.
IX. 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 or carrying out of this Final
Judgment, for the modification of any of the provisions hereof, for the
enforcement of compliance herewith, and for the punishment of any
violations hereof.
X. Termination
This Final Judgment will expire upon the tenth anniversary of its
entry.
XI. Public Interest
Entry of this Final Judgment is in the public interest.
Dated:-----------------------------------------------------------------
----------------------------------------------------------------------
United States District Judge
Competitive Impact Statement
The United States, pursuant to section 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA''), 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
The United States filed a civil antitrust complaint on December 30,
1998, alleging that the proposed merger of Tele-Communications Inc.
(``TCI'') with a wholly owned subsidiary of AT&T Corporation (``AT&T'')
would violate section 7 of the Clayton Act, 15 U.S.C. 18. Among its
other telecommunications businesses, AT&T is the largest provider of
mobile wireless telephone services in the nation. TCI, through a wholly
owned subsidiary, holds a 23.5% equity interest in the mobile wireless
telephone business of Sprint Corporation (``Sprint'') another large
provider of mobile wireless telephone services through its personal
communications services (``PCS'') subsidiary, Sprint PCS.\1\ The
complaint alleges that AT&T's acquisition of this
[[Page 2510]]
interest in one of its principal competitors may substantially lessen
competition in the sale of mobile wireless telephone services. The
prayer for relief seeks a judgment that the proposed acquisition would
violate section 7 of the Clayton Act, a 15 U.S.C. 18, and a preliminary
and permanent injunction preventing AT&T and TCI from carrying out the
proposed merger.
---------------------------------------------------------------------------
\1\ When the proposed merger with AT&T was announced, TCI
(through a subsidiary) owned 23.5% of Sprint Spectrum Holdings, Co.,
L.P. as a general partner. This partnership was restructured on
November 23, 1998, through transactions in which TCI and the other
cable partners (Cox Communications, Inc. and Comcast Corporation)
received Series 2 (Sprint) PCS tracking stock in exchange for their
partnership interests. In relinquishing their governance rights as
partners, the cable partners, including TCI, received the right to
liquidate their interests over the next few years. Their Sprint PCS
tracking stock has full voting power on issues relating to changing
the number or nature of the PCS stock, spinoffs or acquisition of
the PCS business. On all other issues TCI's shares (and those of the
other two cable partners) have only one-tenth (\1/10\) the voting
rights that shareholders of other classes of Sprint PCS stock enjoy.
The restructuring contemplates that the Sprint Corporation Board of
Directors will manage Sprint's PCS business, with TCI and the other
cable company owners of the Sprint PCS tracking stock playing a
passive or lesser role, due to their minimal voting powers on
matters relating to those issues. Sprint owns 53% of the voting
power and equity of Sprint PCS.
---------------------------------------------------------------------------
Shortly before this complaint was filed, the Department and the
defendants reached agreement on the terms of a proposed consent decree,
which requires the complete divestiture of the interest in Sprint PCS
now owned by TCI. The proposed consent decree also contains provisions,
explained below, designed to minimize any risk of competitive harm that
otherwise might arise pending completion of the divestiture. In light
of this agreement, the Department concluded that there was no
competition-based reason to seek to prohibit AT&T's merger with TCI. A
Stipulation and proposed Final Judgment embodying the settlement were
filed simultaneously with the complaint.
The United States and the defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16 (``APPA''). Entry
of the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Defendant AT&T is a New York corporation with headquarters in New
York, New York. AT&T is a provider of a wide range of
telecommunications services internationally and in the United States.
Among other things, it is the largest provider of long distance
telecommunications services in the United States, as well as the
largest provider of mobile wireless telephone services. In 1998, AT&T's
mobile wireless operations reported total revenues of approximately $5
billion.
TCI is a Delaware corporation with its headquarters in Englewood,
Colorado. TCI is the second largest cable system operator in the
nation. At the time of the proposed merger closing, TCI, through its
wholly owned subsidiary, Liberty Media Corporation, will own a partial
interest in Sprint PCS, one of the principal competitors to AT&T's
mobile wireless telephone business in a large number of markets
throughout the country. In 1998, Sprint`s PCS revenues totaled
approximately $975 million.
On June 24, 1998, AT&T and TCI entered into an agreement pursuant
to which TCI will merge with a wholly owned subsidiary of AT&T in a $48
billion transaction. Through this transaction, AT&T will acquire TCI's
cable television operations, TCI's shares of the Internet Service
Provider @Home and of Teleport Communications Group, and assume $11
billion of TCI debt. A variety of other assets now owned by
subsidiaries of TCI, including the Sprint PCS holdings, will be
transferred to Liberty Media Corp. (``Liberty'').\2\ Liberty will be a
wholly-owned subsidiary of AT&T Corp. Although the shares of Liberty
will be entirely owned by AT&T, the Class B and Class C directors of
Liberty, who will hold two-thirds (\2/3\) of the seats on the board of
directors, will be appointed prior to the merger with AT&T by the
current (TCI) Liberty media shareholders. These directors may be
removed only for cause for a defined period of time.\3\ AT&T will issue
a separate class of stock, Liberty Media Tracking Stock, the
performance of which will reflect the assets held and businesses
conducted by Liberty.\4\
---------------------------------------------------------------------------
\2\ TCI, at the time of the merger announcement, was organized
into three groups, the TCI Cable Group, the TCI Ventures Group, and
the Liberty Media Group, each group having its own TCI tracking
stock reflecting the assets owned by different sets of TCI
subsidiaries. TCI is reorganizing so that before the merger closes,
all of the TCI Cable Group and some of the TCI Ventures assets will
be in the TCI Cable Group, to be managed post-merger by AT&T's Board
of Directors. The remainder of TCI Ventures, including TCI's
international cable plant holdings, a joint satellite venture with
news Corporation Limited, an educational and training company,
partial ownership of two technology companies, and the shares of
Sprint PCS stock now held by TCI Wireline, Inc., will be merged with
the cable programming assets of Liberty Media, into Liberty Media
Corporation, a Delaware Corporation and subsidiary of TCI. Upon
consummation of the merger, each share of the Liberty Media Group
tracking stock issued by TCI can be exchanged for one share of
Liberty Media Tracking stock to be issued by AT&T.
\3\ See Schedule 2.1(c)(i) of the AT&T/TCI Merger Agreement,
dated June 23, 1998.
\4\ See Exhibit D of the AT&T/TCI Merger Agreement, dated June
23, 1998.
---------------------------------------------------------------------------
B. Mobile Wireless Telephone Services
The complaint alleges that the proposed merger may substantially
lessen competition in the provision of mobile wireless telephone
services in a number of cities throughout the United States.
Mobile wireless telephone services permit users to make and receive
telephone calls, using radio transmissions, while traveling by car or
by other means. The mobility afforded by these services is a valuable
feature to consumers. In order to provide this capability, wireless
carriers must deploy an extensive network of switches and radio
transmitters and receivers. Prior to 1995, mobile wireless telephone
services were provided primarily by two licensed cellular carriers in
each geographic area. AT&T owned cellular licenses in a large number of
areas throughout the country. In 1995, the Federal Communications
Commissions (``FCC'') allocated (and subsequently issued licenses for)
additional spectrum for PCS providers, which include mobile wireless
telephone services comparable to those offered by cellular carriers. In
addition, in 1996 Nextel Communications, Inc. (``Nextel'') began to
offer mobile wireless telephone services comparable to that offered by
cellular and PCS carriers, bundled with dispatch services, using
spectrum that had been allocated for the provision of specialized
mobile radio (``SMR'') services.
In most major metropolitan markets today, there are two cellular
license holders, each of which is authorized to use 25 MHZ of spectrum,
up to three PCS licensees each authorized to use 30 MHZ of spectrum, up
to three PCS licensees each authorized to use 10 MHZ of spectrum, and
one carrier, Nextel, that uses SMR spectrum. There is substantial
variation among different geographic areas, however, in terms of the
number of independent firms that are currently offering mobile wireless
telephone services, the time frame in which additional firms are
expected to enter the market using the PCS licenses described above,
and the scope of geographic coverage that the various carriers can
offer, in light of the fact that their networks have not yet been fully
built. Most of the relevant geographic markets have between four and
six carriers providing mobile wireless telephone services for consumers
and business, including the two incumbent cellular providers and
Nextel. The emergence of PCS providers has generally resulted in lower
rates and/or higher quality services in those areas in which they have
constructed their networks. Measured by current subscribers and
revenues, however, the two cellular carriers still control a large
share of the market, with a collective share of 80% or more in many
markets.
There is significant differentiation among the mobile wireless
telephone services offered by different carriers. Carriers use a
variety of different technologies, offer a variety of service and
pricing plans, and offer a variety of product bundles which combine
[[Page 2511]]
wireless telephone service with other services (such as paging and
messaging services) and/or with a variety of wireless telephone
handsets. For a significant segment of customers, the services offered
by AT&T and Sprint PCS appear to be particularly close substitutes. In
contrast to other mobile wireless telephone service providers that
offer services only on a local or regional basis on their own
facilities, both AT&T and Sprint PCS have licenses and facilities in
most large metropolitan areas and in many smaller metropolitan areas
throughout the country. In addition, AT&T and Sprint are two of the
largest providers of long distance telecommunications, as well as a
wide range of other telecommunications services, and therefore have a
high degree of brand recognition. For customers who travel frequently,
and therefore use their mobile phones frequently outside their home
metropolitan areas, the broad geographic coverage provided by AT&T and
Sprint is an important competitive advantage. Customers of other
wireless carriers which have local or regional networks may be able to
place and receive calls outside of their ``home'' areas, but when they
do so, they typically incur significant ``roaming'' charges assessed by
the carrier whose wireless network is being used. Both AT&T and Sprint
have attempted to exploit this advantage by, among other things,
offering a single-rate national plan.\5\
---------------------------------------------------------------------------
\5\ ``Single Rate'' refers to plans that involve a flat per
minute usage charge, regardless of the location at which the call
originates or terminates. These plans usually require the purchase
of a minimum number of minutes per month.
---------------------------------------------------------------------------
C. Anticompetitive Consequences of the Proposed Merger
The complaint alleges that AT&T's proposed merger with TCI, which
would result in AT&T's acquisition of TCI's interest in Sprint PCS, may
substantially lessen competition in the provision of mobile wireless
telephone services in the metropolitan areas of New York City; Los
Angeles; Dallas-Fort Worth; San Francisco-Oakland-San Jose; Miami-Ft.
Lauderdale; Minneapolis-St. Paul; Seattle; Pittsburgh; Denver;
Portland, OR; Sacramento; Salt Lake City; Las Vegas; and at least 18
other metropolitan markets. In each of these markets, AT&T is one of
two licensed cellular service providers, and Sprint PCS provides mobile
wireless telephone services pursuant to a PCS license. AT&T is the
largest or second largest provider of mobile wireless telephone
services in these markets, which are highly concentrated.\6\
---------------------------------------------------------------------------
\6\ The Department of Justice utilizes the Herfindahl-Hirschman
Index (``HHI'') as a measure of market concentration. The HHI is
calculated by summing the squares of the market shares of every firm
in the relevant market. A market with an HHI level greater than
1,800 is considered highly concentrated. Department of Justice
Federal Trade Commission Horizontal Merger Guidelines Sec. 1.5
(April 2, 1992, revised April 8, 1997). Here, most if not all of the
relevant markets have pre-merger HHIs well over 2500.
---------------------------------------------------------------------------
The proposed merger may affect the incentives that govern AT&T's
competitive behavior (relating to either pricing or service quality) in
these markets. When a firm makes pricing decisions (or decisions on
potential investments to improve service quality) it weighs two effects
that its decision may produce. A higher price (or reduced investment in
service quality) will generate greater revenues from those customers
who continue to purchase services from the firm. But a higher price (or
reduced service quality) also is likely to cause some portion of
current or potential new customers to purchase services from a
competitor, thereby reducing the firm's revenues. Weighing these two
countervailing factors, firms attempt to choose the price (or service
quality) level that will maximize their profits.
A firm that acquires a full or partial equity interest in a
competitor--as AT&T proposes to do here--will face a different
calculation of its profit-maximizing price (or service quality) after
such an acquisition. After the acquisition, some portion of the
customers who would turn to a competitor in response to a price
increase (or decline in service quality) would likely purchase services
from the firm being acquired; thus, the revenue generated by those
customers' purchases will continue to be earned indirectly (through the
competitor that has been acquired) by the firm raising its price (or
lowering its service quality). Thus an acquisition can cause an
individual firm, acting unilaterally, to raise its price more than it
would have otherwise (or invest less in service quality than it would
have otherwise) because its profit-maximizing price will be higher (or
service quality lower) as a result of the acquisition. These adverse
effects are greater to the extent that the service offered by the
acquired firm is a particularly close substitute for the service
offered by the acquiring firm. Under those conditions, a larger share
of the customers who switch service providers as a result of a price
increase (or reduction in quality) will switch to the acquired firm.\7\
---------------------------------------------------------------------------
\7\ Another factor that affects the magnitude of the potential
price effects is the size of the equity interest that has been
acquired. If a 100% equity interest has been acquired, the acquiring
firm will recapture 100% of the revenue earned by the acquired firm
from customers who switch as a result of the price increase. If a
20% equity interest has been acquired, only 20% of that revenue
would be recaptured. Thus, all other things equal, acquisition of a
larger equity interest in the acquired firm will generate larger
adverse price effects than would the acquisition of a smaller
interest.
---------------------------------------------------------------------------
In light of the high level of concentration in mobile wireless
telephone services markets, and the fact that AT&T and Sprint PCS
services appear to be close substitutes for one another for a
significant segment of customers, the Department was concerned that the
acquisition of a substantial portion of the equity of Sprint PCS by
AT&T could reduce AT&T's incentive to compete aggressively in those
areas in which Sprint PCS is a significant rival and thereby lead to
higher prices or reduced service quality for mobile wireless telephone
services.\8\
---------------------------------------------------------------------------
\8\ Acquisitions of shares with significant voting rights may
raise additional competitive concerns, beyond those described here
in connection with acquisitions of equity interests. An acquisition
of voting rights may allow the acquiring firm to exert control or
influence over the competitive behavior of the acquired firm in ways
that reduce competition. These concerns are not present in this
case. Sprint will retain a majority of the voting power (53%) of the
Sprint PCS shares and the voting rights conferred by TCI's Sprint
PCS investment are insignificant. Furthermore, Section VI.D. of the
proposed Final Judgment will prohibit the trustee from even voting
those shares during the pre-divestiture period. The Department also
considered whether the proposed acquisition would distort the
incentives of Sprint PCS to compete in this market and concluded
that this was not a significant risk. The defendants will be under a
court order to divest the Sprint PCS stock. Thus, there is no
prospect that AT&T will ultimately control Sprint PCS and no reason
to believe that Sprint PCS's incentives to compete with AT&T during
the pre-divestiture period will be diminished.
---------------------------------------------------------------------------
It appears unlikely that, in the immediate future, entry into the
relevant markets will be sufficient to mitigate this competitive harm.
For at least the next two years, the only potential entrants will be
firms using the spectrum already allocated for PCS by the FCC. While
the FCC may eventually allocate additional spectrum which could be used
to provide mobile wireless telephone services, it is unlikely that such
spectrum could be allocated and licensed, and that licensees could
construct their networks and begin offering service, within the next
two years. Additional entry within the next two years may come from
firms using the spectrum that the FCC has already allocated for PCS.
However, in
[[Page 2512]]
that time frame, it appears unlikely that a firm could acquire a
sufficient number of PCS licenses and construct its networks so as to
be able to offer geographic coverage comparable to AT&T's and Sprint
PCS's nearly nationwide footprint.
For these reasons, the Department concluded that the merger as
proposed may substantially lessen competition, in violation of section
7 of the Clayton Act, in the provision of mobile wireless telephone
services in those markets where AT&T is one of two cellular licensees
and where Sprint PCS also provides mobile wireless telephone
services.\9\
---------------------------------------------------------------------------
\9\ AT&T also offers mobile wireless telephone services in other
geographic areas, using PCS licenses. AT&T's market share in those
markets, which it has only recently entered, is considerably smaller
than its share in markets where AT&T has a cellular license. The
Department has reached no judgment as to the competitive effects of
the proposed merger in those markets. To the extent that the merger
might produce anticompetitive effects in those markets, however, the
divestiture requirements in the proposed Final Judgment would
provide an effective remedy.
---------------------------------------------------------------------------
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment will preserve competition in the sale
of mobile wireless services in the relevant geographic markets by
requiring the defendants to execute a complete divestiture of the
Sprint PCS stock. This divestiture will eliminate the change in market
structure caused by the merger; after this divestiture, AT&T would be
unable to recapture any of the revenues that might be diverted from
AT&T to Sprint PCS as a result of an increase in the price of AT&T's
mobile wireless telephone services.
In merger cases in which the Department seeks a divestitute remedy,
the Department requires completion of the divestiture within the
shortest time period reasonable under the circumstances. In this case,
the proposed Final Judgment requires that Liberty's holdings of Sprint
PCS be reduced to 10% or less of the outstanding Sprint PCS stock by
May 2002, approximately three years from the expected date of entry of
the decree, and that the holding be divested completely by May 2004,
approximately five years from the expected entry of the decree.
These time periods for divestiture are significantly longer than
the Department ordinarily would accept. The Department believes they
are appropriate in this case, however, because of concerns that a more
rapid divestiture might harm competition by adversely affecting
Sprint's ability to raise capital to complete the build out of its
wireless network. Sprint anticipates that it will have near-term needs
for a substantial amount of capital, both debt and equity, in order to
purchase and deploy additional infrastructure for its wireless network.
A complete divestiture in the time period required by the Department in
the typical case (e.g., six months) potentially could adversely affect
the value of new stock that would be issued by Sprint, thereby
increasing its cost of raising additional capital and potentially
delaying or limiting the completion of Sprint's wireless network
construction efforts.\10\
---------------------------------------------------------------------------
\10\ Sprint has also expressed concerns that if AT&T were to
control the divestiture of Sprint PCS stock, it could strategically
time the sale of those shares so as to exacerbate, rather than
mitigate, any possible adverse effect on the value of Sprint PCS
stock that might be issued by Sprint. Unlike the usual divestitures
in consent decrees entered into by the Department, the acquiring
firm here (AT&T) will not be permitted a period of time to
accomplish the divestiture; rather, it will go immediately to a
trustee who will effect the sale of the stock.
---------------------------------------------------------------------------
Sprint's wireless business has recently been restructured through
transactions in which TCI's former partnership interest in the business
was converted to TCI's current holding of Sprint PCS stock. In
connection with that restructuring, Sprint, TCI, and others negotiated
contractual limitations on the ability of TCI to sell its Sprint PCS
shares during the period in which Sprint would be seeking to raise
capital for its build out. The proposed Final Judgment will not
interfere in any way with TCI's compliance with its contractual
obligations pursuant to the Sprint PCS restructuring.
The terms of the proposed Final Judgment reflect a balancing of the
potential harm to competition that might arise from a divestiture that
proceeds either too slowly or too rapidly. By permitting the
divestiture of the Sprint PCS shares to be accomplished by a trustee
over a period of five years, the proposed Final Judgment should
minimize the risk of any potential adverse effect on Sprint's build out
of its wireless network. The anticompetitive effects that could arise
from the ownership of a substantial interest in Sprint's PCS business
by a subsidiary of AT&T are addressed by the requirement that a major
portion of the Sprint PCS holding be divested within three years, and
that there be a complete divestiture within five years. In addition,
other supplementary provisions in the Final Judgment, described below,
are designed to reduce the risk that AT&T's partial ownership of Sprint
PCS would create anticompetitive incentives during the interim period
before the completion of the required divestitures.
Section VI.A. of the proposed Final Judgment requires all economic
benefits of the Sprint PCS Holding to inure exclusively to the benefit
of the holders of Liberty Media Tracking Shares, and forbids AT&T from
engaging in any transaction that would directly or indirectly transfer
such benefits to AT&T or to any other class of AT&T shareholders. It
also requires AT&T to adhere to the Policy Statement Regarding Liberty
Tracking Stock Matters that is an exhibit to its merger agreement.
Section VI.B. requires TCI to complete the amendment of the Liberty
certificate of incorporation and bylaws, contemplated by its merger
agreement with AT&T, and to appoint the Class B and Class C Directors
of Liberty, prior to the consummation of the merger. Section VI.C.
requires AT&T to form the Capital Stock Committee contemplated by its
merger agreement. The Policy Statement, the amendment of Liberty's
certificate of incorporation and bylaws, and the Capital Stock
Committee are integral parts of the framework establishing the
governance arrangements for Liberty, and controlling certain financial
relationships between and among the various classes of stock issued by
AT&T Corp., including the Liberty Media Tracking Stock. Section VI.F.
of the proposed Final Judgment is also intended to ensure substantial
separation between Liberty's Sprint PCS holding and AT&T's wireless
business, by restricting Liberty's ability to acquire any interest in
AT&T's wireless business.
Collectively, these provisions are meant to promote a ``hold
separate'' relationship between AT&T and its Sprint PCS holdings during
the pre-divestiture period, (i) reducing the risk that Liberty will be
operated for the benefit of holders of other classes at AT&T stock
(including those other shareholders who will collectively own and
control AT&T's wireless business), rather than for the benefit of the
Liberty Tracking Stock shareholders, and (ii) reducing the risk that
AT&T could recapture any of the revenues that might be diverted to
Sprint PCS as a result of an AT&T price increase, because the holders
of the Liberty Media tracking stock, rather than the shareholders of
AT&T's wireless business, would be the beneficiaries to the extent that
AT&T customers switch to Sprint PCS.
As a general matter, the Department does not believe that decree
restrictions dealing with corporate governance arrangements and the
separation of economic interests among different
[[Page 2513]]
components of a single corporate enterprise are an appropriate remedy
for the anticompetitive effects that might arise from mergers and
acquisitions. Such restrictions will have limited efficacy as a long-
term protection against anticompetitive effects, and may require
ongoing oversight of the conduct of a corporation's internal affairs
that neither the Department nor a Court is well-suited to perform on an
ongoing basis. The proposed settlement of this case adopts such
provisions only because of the unique factors that are present here,
and only as an interim measure designated to mitigate any
anticompetitive incentives that could otherwise arise during the
unusually lengthy period permitted for complete divestiture.
Sections IV and V of the proposed Final Judgment set forth the
process and substantive requirements for the complete divestiture of
the Sprint PCS Holding, a divestiture that will cure the potential
anticompetitive effects of the AT&T/TCI merger. Prior to the closing of
the merger, TCI is required to establish a trust, appoint a trustee,
and transfer the Sprint PCS Holding to the trust. TCI must secure the
Department's approval of both the terms of the trust agreement and the
appointment of the trustee nominated by TCI. The trustee will have the
obligation and the sole responsibility for executing the divestiture of
the Sprint PCS Holding.\11\ The trustee is required, by Section V.B.,
to exercise this responsibility in a manner reasonably calculated to
maximize the value of the Sprint PCS Holding to the holders of Liberty
Media Tracking Shares. The trustee is prohibited from considering
possible costs or benefits of a sale to AT&T (Section V.B.), from
consulting with AT&T, with any Liberty director appointed by AT&T, or
with any Liberty director, officer, or shareholder who owns a
substantial interest in AT&T, concerning the sale of the Sprint PCS
stock (Section V.C.). The trustee will, however, consult with the Class
B and Class C directors of Liberty, who will be appointed by TCI prior
to the completion of the merger. The trustee is also prohibited from
voting the Sprint PCS shares.
---------------------------------------------------------------------------
\11\ The Sprint PCS shares may be sold either in the public
markets or in a private sale negotiated with an identified buyer.
With respect to a private sale, the proposed Final Judgment requires
prior notice to the Department, so that the Department can ensure
that such a sale would not raise competitive concerns. There is no
such requirement with respect to sales in the public market, where
there is no means of determining in advance who the buyer would be.
---------------------------------------------------------------------------
By requiring the trustee to act solely in the interests of the
Liberty Media Tracking Stock shareholders, the proposed Final Judgment
seeks to minimize any possibility that the divestiture would be carried
out in a manner designed to provide anticompetitive benefits to AT&T's
wireless business.
Collectively, these provisions of the proposed Final Judgment are
meant to provide a structural remedy (i.e., complete divestiture) for
the anticompetitive effects that might otherwise result from the
acquisition; to minimize the risk that this strucural remedy might
adversely affect competition by impairing Sprint's ability to raise
capital to complete its wireless build out (by affording a reasonable
period of time in which to complete the divestiture); and to minimize
the possibility of interim competitive harm during the period prior to
completion of the divestiture.
In order to ensure compliance with the Final Judgment, Section VII
authorizes plaintiff to conduct an inspection of the defendant's
records. Plaintiff may copy any records under the control of the
defendant, interview officers, employees and agents of the defendant,
and request that the defendant submit written reports. The inspection
is subject to any legally recognized privilege. All information
obtained by plaintiff under section VII will be held as confidential
except in the course of legal proceedings to which the United States is
a party, or for purposes of securing compliance with the Final
Judgment, or as otherwise required by law.
Section IX of the proposed Final Judgment provides that the Court
will retain jurisdiction over this action, and permits the parties to
apply to the Court for any order necessary or appropriate for the
modification of the Final Judgment. In the Department's view, a
complete legal and economic separation between AT&T's wireless business
and the Sprint PCS Holdings would constitute a material change in
circumstances that would justify termination of the divestiture
obligation. Section IX also provides for the Court's continuing
jurisdiction to interpret or enforce the Final Judgment.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The plaintiff 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 (60) 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 (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The United States will
evaluate and respond to the comments. All comments will be given due
consideration by the Department of Justice, which remains free to
withdraw its consent to the proposed Final Judgment at any time prior
to entry. The comments and the response of the United States will be
filed with the Court and published in the Federal Register.
Written comments should be submitted to: Donald J. Russell, Chief,
Telecommunications Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, NW, Suite 8000, Washington, DC
20530.
VI. Alternatives to the Proposed Final Judgment
The plaintiff considered, as an alternative to the proposed Final
Judgment, action to block consummation of the merger. The plaintiff is
satisfied, however, that the divestiture of the Sprint PCS Tracking
Stock and other relief contained in the proposed Final Judgment will
preserve competition in the provision of mobile wireless telephone
services, and that there is no competition-related reason to seek to
block the merger.
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 (60) day
comment period, after
[[Page 2514]]
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. 16(e) (emphasis added). As the United States Court of Appeals
for the D.C. Circuit recently held, this statute permits a court to
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. See United States v. Microsoft, 56 F.3d
1448, 1461-62 (D.C. Cir. 1995).
In conducting this inquiry, ``[t]he Court is 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.'' \12\ Rather,
\12\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''
determination can be made properly on the basis of the Competitive
Impact Statement and Response to Comments filed pursuant to the
APPA. Although the APPA authorizes the use of additional procedures,
15 U.S.C. 16(f), those procedures are discretionary. A court need
not invoke any of them unless it believes that the comments have
raised significant issues and that further proceedings would aid the
court in resolving those issues. See H.R. Rep. 93-1463, 93d Cong. 2d
Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.
[a]bsent 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. (CCH)
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) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981)); see also Microsoft, 56 F.3d at 1460-62. Precedent requires
that
the 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.\13\
\13\ Bechtel, 648 F.2d at 666 (emphasis added); see BNS, 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 Microsoft, 56 F.3d at 1461 (whether ``the remedies
(obtained in the decree are) so inconsonant with the allegations
charged as to fall outside of the `reaches of the public interest'
'').
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.' '' \14\
---------------------------------------------------------------------------
\14\ United States v. American Tel. and Tel. Co., 552 F. Supp.
131, 151 (D.D.C. 1982), aff'd sub nom., Maryland v. United States,
460 U.S. 1001 (1983) (quoting Gillette Co., 406 F. Supp. at 716);
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.
Respectfully submitted,
Donald J. Russell,
Chief, Telecommunications Task Force, U.S. Department of Justice,
Antitrust Division, 1401 H Street, NW, Suite 8000, Washington, DC
20530, (202) 514-5621.
Dated: December 30, 1998.
Certificate of Service
I hereby certify that copies of the foregoing Plaintiff's
Competitive Impact Statement were served by hand and/or first-class
U.S. mail, postage prepaid, this 30th day of December, 1998 upon
each of the parties listed below:
Betsy Brady, Esq (by hand), Vice President-Federal Government Affairs,
Suite 1000, 1120 20th Street, NW, Washington, DC 20036, (Counsel for
AT&T Corp.).
Kathy Fenton (by hand), Jones, Day, Reavis and Pogue, Suite 700, 1450 G
Street, NW, Washington, DC 20005, (Counsel for Tele-Communications,
Inc.).
Peter A. Gray,
Counsel for Plaintiff.
[FR Doc. 99-824 Filed 1-13-99; 8:45 am]
BILLING CODE 4410-11-M