[Federal Register Volume 65, Number 3 (Wednesday, January 5, 2000)]
[Notices]
[Pages 505-520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-197]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Bell Atlantic Corporation et al.; Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16(b) through (h), that a proposed
Final Judgment and Competitive Impact Statement has been filed with the
United States District Court for the District of Columbia in United
States of America v. Bell Atlantic Corporation et al., Civil Action 99-
1119 (LFO). On December 9, 1999, the United States filed a Supplemental
Complaint alleging that the proposed merger of GTE Corporation and Bell
Atlantic Corporation and the proposed partnership between Vodafone
AirTouch Plc and Bell Atlantic Corporation would lessen competition in
the markets for wireless mobile telephone services in 13 major trading
areas, and 96 metropolitan statistical areas and rural service areas in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed
Final Judgment, filed at the same time as the Supplemental Complaint,
requires defendants to divest one of their two wireless telephone
businesses in each market where these businesses overlap
geographically. The proposed Final Judgment supersedes the proposed
decree filed in May 1999 which predated Bell Atlantic Corporation's
September 1999 partnership agreement with Vodafone AirTouch Plc and
therefore related solely to the merger of Bell Atlantic Corporation and
GTE Corporation. Copies of the Complaint, proposed Final Judgment and
Competitive Impact Statement are available for inspection at the
Department of Justice in Washington, DC in Room 200, 325 Seventh
Street, NW, and at the Office of the Clerk of the United States
District Court for the District of Columbia. These materials are also
located on the Antitrust Division's web site (www.usdoj.gov/atr/
cases.html).
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Donald J. Russell, Chief, Telecommunications Task Force, Antitrust
Division, Department of Justice, 1401 H Street, NW, Room 8000,
Washington, DC 20530 (telephone: (202) 514-5621).
Constance K. Robinson,
Director of Operations.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, as follows:
(1) The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in this Court.
(2) The parties stipulate that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act, 15
U.S.C. 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 entry of the proposed Final Judgment
by serving notice thereof on defendants and by filing that notice with
the Court.
(3) Defendants shall abide by and comply with the provisions of the
proposed Final Judgment pending entry of the Final Judgment by the
Court, or until expiration of time for all appeals of any Court ruling
declining entry of the proposed 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.
(4) This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
[[Page 506]]
(5) In the event plaintiff withdraws its consent, as provided in
paragraph (2) above, or in the event that the Court declines to enter
the proposed Final Judgment pursuant to this Stipulation, the time has
expired for all appeals of any Court ruling declining entry of the
proposed Final Judgment, and the Court has not otherwise ordered
continued compliance with the terms and provisions of the proposed
Final Judgment, then the parties are released from all further
obligations under this Stipulation, and the making of this Stipulation
shall be without prejudice to any party in this or any other
proceeding.
(6) Defendants represent that the divestiture ordered in the
proposed Final Judgment 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
therein.
Dated: December 6, 1999.
For Plaintiff United States of America:
Joel I. Klein,
Assistant Attorney General.
A. Douglas Melamed,
Principal Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Donald J. Russell,
Chief, Telecommunications Task Force.
Laury Bobbish,
Assistant Chief, Telecommunications Task Force.
Hillary B. Burchuk, D.C. Bar No. 366755;
Lawrence M. Frankel; D.C. Bar No. 441532.
Susan Wittenberg; D.C. Bar No. 453692;
Attorneys, Telecommunications Task Force.
U.S. Department of Justice, Antitrust Division, 1401 H Street, N.W.,
Suite 8000, Washington, D.C. 20530, (202) 514-5621.
Date Signed: December 6, 1999.
For Bell Atlantic Corporation:
John Thorne,
D.C. Bar No. 421351, Bell Atlantic Corporation, 1320 North Courthouse
Road, Eighth Floor, Arlington, Virginia 22201, (703) 974-1600.
Date Signed: December 6, 1999.
For GTE Corporation:
Steven G. Bradbury,
D.C. Bar No. 416430, Kirkland & Ellis, 655 15th Street, N.W.,
Washington, DC 20005, (202) 879-5000.
Date Signed: December 6, 1999.
For Vodafone Airtouch PLC
Megan Pierson,
AirTouch Communications, Inc., One California Street, San Francisco, CA
94111, (415) 658-2157.
Date Signed: December 3, 1999.
Stipulation Approved for Filing.
Done this ______ day of December, 1999.
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United States District Judge
Final Judgment
Whereas, plaintiff, United States of America, filed its Motion for
Leave to File Supplemental Complaint on December 6, 1999.
And whereas, plaintiff and defendants, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication on any issue of fact or law;
And whereas, entry of this Final Judgment does not constitute any
evidence against or an admission by any party with respect to any issue
of law or fact;
And whereas, defendants have further consented to be bound by the
provisions of the Final Judgment pending its approval by the Court;
And whereas, plaintiff the United States believes that entry of
this Final Judgment is necessary to protect competition in markets for
mobile wireless telecommunications services in Alabama, Arizona,
California, Florida, Idaho, Illinois, Indiana, Montana, New Mexico,
Ohio, South Carolina, Texas, Virginia, Washington and Wisconsin.
And whereas, the essence of this Final Judgment is prompt and
certain divestiture of certain wireless businesses that would otherwise
be commonly owned and in many cases controlled, including their
licenses and all relevant assets of the wireless businesses, and the
imposition of related injunctive relief to ensure that competition is
not substantially lessened;
And whereas, plaintiff the United States requires that defendants
make certain divestitures of such licenses and assets for the purpose
of ensuring that competition is not substantially lessened in any
relevant market for mobile wireless telecommunications services in
Alabama, Arizona, California, Florida, Idaho, Illinois, Indiana,
Montana, New Mexico, Ohio, South Carolina, Texas, Virginia, Washington
and Wisconsin.
And whereas, defendants have represented to plaintiff that the
divestitures ordered herein can and will be made and that defendants
will not raise any claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
herein below;
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:
I. Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting to this Final Judgment. The
Supplemental Complaint states a claim upon which relief may be granted
against defendants under Section 7 of the Clayton Act, 15 U.S.C. 18, as
amended.
II. Definitions
A. ``Bell Atlantic'' means Bell Atlantic Corporation, a corporation
with its headquarters in New York City, New York and includes its
successors and assigns, its subsidiaries and affiliates, and the
directors, officers, managers, agents and employees acting for or on
behalf of any of the foregoing entities.
B. ``Bell Atlantic/GTE Merger'' means the merger of Bell Atlantic
and GTE, as detailed in the Agreement and Plan of Merger entered into
Bell Atlantic and GTE on July 28, 1998.
C. ``Bell Atlantic/Vodafone Partnership'' means the partnership
between Bell Atlantic and Vodafone as detailed in the U.S. Wireless
Alliance Agreement among Bell Atlantic Corporation and Vodafone
AirTouch Plc dated September 21, 1999.
D. ``GTE'' means GTE Corporation, a corporation with its
headquarters in Irving, Texas and includes its successors and assigns,
its subsidiaries and affiliates, and the directors, officers, managers,
agents and employees acting for or on behalf of any of the foregoing
entities.
E. ``Overlapping Wireless Markets'' means the following
Metropolitan Statistical Areas (``MSA''), Major Trading Areas
(``MTA''), and Rural Service Areas (``RSA'') used to define cellular
and PCS license areas by the Federal Communications Commission
(``FCC''), in which, as of the date of the filing of the Motion for
Leave to File Supplemental Complaint in this case, Bell Atlantic and
GTE held an interest in cellular and PCS businesses, and Vodafone held,
or has plans to acquire,\1\ an ownership interest in cellular and PCS
businesses which serve the following MTAs, MSAs and RSAs that
geographically overlap with the cellular and/or PCS business of another
defendant, as indicated:
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\1\ Pursuant to a July 18, 1999 purchase agreement, Vodafone
plans to acquire interests in cellular businesses from CommNet
Cellular Inc. (``CommNet'') that overlap with GTE's PCS business in
the following RSAs: Idaho 2-Idaho RSA; Montana 1-Lincoln RSA.
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I. Cellular/Cellular Overlap Areas
A. Bell Atlantic Cellular/Vodafone Cellular Overlap Areas
1. Arizona
[[Page 507]]
a. Phoenix MSA
b. Tucson MSA
c. Arizona 2-Coconino RSA
2. New Mexico
a. Albuquerque MSA
B. Bell Atlantic Cellular/GTE Cellular Overlap Areas
1. Mew Mexico
a. Las Cruces MSA
2. South Carolina
a. Greenville MSA
b. Anderson MSA
3. Texas
a. El Paso MSA
C. GTE Cellular/Vodafone Cellular Overlap Areas
1. California
a. Salinas-Monterey-Seaside MSA
b. San Diego MSA
c. San Francisco MSA
d. San Jose MSA
e. Santa Rosa-Petaluma MSA
f. Vallejo-Napa-Fairfield MSA
2. Ohio
a. Akron MSA
b. Canton MSA
c. Cleveland MSA
d. Lorain-Elyria MSA
e. Ohio 3-Ashtabula RSA
II. PCS/Cellular Overlap Areas
A. PrimeCo PCS/GTE Cellular Overlap Areas \2\
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\2\ Bell Atlantic and Vodafone, as of the date of the filing of
the Motion for Leave to File Supplemental Complaint, are partners in
PCS Prime-Co, L.P. (``PrimeCo''). PrimeCo currently operates PCS
businesses in ten MTAs, which geographically overlap with GET's
cellular businesses.
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1. Jacksonville MSA
a. Jacksonville MSA
b. Florida 5-Putnam RSA
2. Miami-Fort Lauderdale MTA
a. Fort Myers MSA
b. Florida 1-Collier (B1) RSA
c. Florida 2-Glades (B1) RSA
d. Florida 3-Hardee RSA
e. Florida 11-Monroe (B2) RSA
3. Tampa-St. Petersburg-Orlando MTA
a. Tampa-St. Petersburg MSA
b. Lakeland-Winter Haven MSA
c. Sarasota MSA
d. Bradenton MSA
e. Florida 2-Glades (B1) RSA
f. Florida 3-Hardee RSA
g. Florida 4-Citrus (B1) RSA
4. New Orleans-Baton Rouge MTA
a. Mobile, AL MSA
b. Pensacola, FL MSA
5. Chicago MTA
a. Auroa-Elgin, IL MSA
b. Bloomington-Normal, IL MSA
c. Champaign-Urbana-Rantoul, IL MSA
d. Chicago, IL MSA
e. Decatur, IL MSA
f. Fort Wayne, IN MSA
g. Gary-Hammond-East Chicago, IN MSA
h. Joliet, IL MSA
i. Kankakee, IL MSA
J. Rockford, IL MSA
k. Springfield, IL MSA
l. Illinois 1-Jo Daviess RSA
m. Illinois 2-Bureau (B1) RSA
n. Illinois 2-Bureau (B3) RSA
o. Illinois 4-Adams (B1) RSA
p. Illinois 5-Mason (B2) RSA
q. Illinois 6-Montgomery RSA
r. Illinois 7-Vermilion RSA
s. Indiana 1-Newton (B1) RSA
t. Indiana 1-Newton (B2) RSA
u. Indiana 3-Huntington RSA
6. Dallas-Fort Worth MTA
a. Dallas-Fort Worth MSA
b. Austin MSA
c. Sherman-Denison MSA
d. Texas 10-Navarro (B3) RSA
e. Texas 11-Cherokee (B1) RSA
f. Texas 16-Burleson RSA
7. Houston MTA
a. Houston MSA
b. Beaumont-Port Arthur MSA
c. Galveston MSA
d. Bryan-College Station MSA
e. Victoria MSA
f. Texas 10-Navarro (B3) RSA
g. Texas 11-Cherokee (B1) RSA
h. Texas 16-Burleson RSA
i. Texas 17-Newton RSA
j. Texas 20-Wilson (B2) RSA
k. Texas 21-Chambers RSA
8. San Antonio MTA
a. San Antonio MSA
b. Texas 16-Burleson RSA
c. Texas 20-Wilson (B2) RSA
9. Richmond-Norfolk MTA
a. Norfolk-Virginia Beach-Portsmouth MSA
b. Richmond MSA
c. Newport News--Hampton MSA
d. Petersburg--Colonial Heights MSA
e. Virginia 7--Buckingham (B1) RSA
f. Virginia 8--Amelia RSA
g. Virginia 9--Greensville RSA
h. Virginia 11--Madison (B1) RSA
i. Virginia 12--Caroline (B1) RSA
j. Virginia 12--Caroline (B2) RSA
10. Milwaukee MTA
a. Wisconsin 8--Vernon RSA
B. GTE PCS/Vodafone Cellular Overlap Areas
1. Cincinnati--Dayton MTA
a. Cincinnati MSA
b. Dayton MSA
c. Hamilton/Middleton MSA
d. Springfield MSA
e. Ohio 4--Mercer RSA
f. Ohio 8--Clinton RSA
2. Seattle MTA
a. Bellingham MSA
b. Bremerton MSA
c. Olympia MSA
d. Seattle--Everett MSA
e. Tacoma MSA
f. Washington 1--Clallam RSA
g. Washington 2--Okanagan RSA
h. Washington 4--Gray's Harbor RSA
3. Spokane--Billings MTA
a. Spokane MSA
b. Idaho 1--Boundary RSA
c. Idaho 2--Idaho RSA
d. Montana 1--Lincoln RSA
e. Washington 3--Ferry RSA
F. ``Vodafone'' means Vodafone AirTouch Plc, an English public
limited company with its headquarters in Newbury, Berkshire, England,
and includes its successors and assigns, its subsidiaries and
affiliates, and the directors, officers, managers, agents and employees
acting for or on behalf of any of the foregoing entities.
G. ``Wireless System Assets'' means, for each wireless business to
be divested under this Final Judgment, all types of assets, tangible
and intangible, used by defendants in the operation of the wireless
businesses to be divested (including the provision of long distance
telecommunications services for wireless calls). ``Wireless System
Assets'' shall be construed broadly to accomplish the complete
divestitures of the entire business of one of the two wireless systems
in each of the Overlapping Wireless Markets required by this Final
Judgment and to ensure that the divested wireless businesses remain
viable, ongoing businesses. With respect to each overlap in the
Overlapping Wireless Markets created by the consummation of a
transaction between any of the defendants, the Wireless System Assets
to be divested shall be either those in which one party to the
transaction has an interest or those in which the other party to the
transaction has or will acquire an interest, but not both. These
divestitures of the Wireless System Assets in the Overlapping Wireless
Markets as defined in Section II.E shall be accomplished by: (1)
transferring to the purchaser the complete ownership and/or other
rights to the assets (other than those assets used substantially in the
operations of either defendant's overall wireless business that must be
retained to continue the existing operations of the wireless properties
defendants are not required to divest, and that either are not capable
of being divided between the divested wireless businesses and those
that are not divested or are assets that the divesting defendant and
the purchaser(s) agree shall not be divided); and (ii) granting to the
purchaser(s) an option to obtain a non-exclusive, transferable license
from defendants for a reasonable period at the election of the
purchaser to use any of the divesting defendant's assets used in the
operation of the wireless business being divested, so as to enable the
purchaser to continue to operate the divested wireless businesses
without impairment, where those assets are not subject to complete
transfer to the purchaser under (i). Assets shall include, without
limitation, all types of real and personal property, monies and
financial instruments, equipment, inventory, office furniture, fixed
assets and furnishings, supplies and materials, contracts, agreements,
leases, commitments, spectrum licenses issued by the FCC and all other
licenses, permits and authorizations, operational support systems,
customer support and billing systems, interfaces with other service
providers, business and customer records and information,
[[Page 508]]
customer lists, credit records, accounts, and historic and current
business plans, as well as any patents, licenses, sub-licenses, trade
secrets, know-how, drawings, blueprints, designs, technical and quality
specifications and protocols, quality assurance and control procedures,
manuals and other technical information defendants supply to their own
employees, customers, suppliers, agents, or licensees, and trademarks,
trade names and service marks (except for trademarks, trade names and
service marks containing ``1-800-BUY-TIME,'' ``Airbridge,''
``AirTouch,'' ``AmericaChoice,'' ``Bell Atlantic Mobile,'' ``Cellular
One,'' ``Conversation Card,'' ``DitigalChoice,'' ``EasternChoice,''
``GTE,'' ``HomeChoice,'' ``International Traveler,'' ``Megaphone,''
``MetroMobile,'' ``Mobilnet,'' ``No Regrets,'' ``Now You Can,'' ``PCS
Now,'' ``PCS Home,'' ``PCS Ultra,'' ``Portal Phone,'' ``PrimeCo,''
``Vodafone,'' ``Welcome to the United States of America,'' and
``WesternChoice'') or other intellectual property, including all
intellectual property rights under third party licenses that are
capable of being transferred to a purchaser either in their entirety,
for assets described above under (i), or through a license obtained
through or from the divesting defendant, for assets described above
under (ii). Defendants shall identify in a schedule submitted to
plaintiff and filed with the Court, as expeditiously as possible
following the filing of the Supplemental Complaint in this case and in
any event prior to any divestitures and before the approval by the
Court of this Final Judgment, any intellectual property rights under
third party licenses that are used by the wireless businesses being
divested but that defendants could not transfer to a purchaser entirely
or by license without third party consent, and the specific reasons why
such consent is necessary and how such consent would be obtained for
each asset.
1. In the event that defendants elect to divest an interest in a
PCS business in one of the PCS/Cellular Overlap Areas, defendants may
retain up to 10 MHz of broadband PCS spectrum within that PCS/Cellular
Overlap Area upon completion of the divestiture of the Wireless System
Assets.
2. In the event that defendants elect to divest an interest in a
PCS business in one of the PCS/Cellular Overlap Areas, defendants, at
least 90 calendar days prior to the consummation of the transaction
which gives rise to the overlap, may request approval from plaintiff to
partition the PCS license along Basic Trading Area (``BTA'') geographic
boundaries, or in the case of Kenosha County, Wisconsin, county
boundaries, and to retain assets in one or more specified non-
overlapping BTAs or in Kenosha County, Wisconsin. Plaintiff's approval
of the request shall be subject to a determination by plaintiff in its
sole discretion that the assets to be retained in the non-overlapping
BTAs or Kenosha County, Wisconsin, are not needed to ensure the
competitive effectiveness of the divested business in the remainder of
the MTA, and that the purchaser of the Wireless System Assets in the
remainder of the MTA will be able to operate the divested PCS business
as a fully competitive entity.
3. In a PCS/Cellular Overlap Area where a defendant holds a non-
controlling minority interest in an overlapping cellular business,
defendants, at least 90 calendar days prior to the consummation of the
transaction which gives rise to the overlap, may request approval from
plaintiff to retain both the PCS business and the non-controlling
minority interest in such overlapping cellular business. Plaintiff's
approval of the request shall be subject to a determination by
plaintiff in its sole discretion that the retention of a non-
controlling minority interest will be entirely passive and will not
significantly diminish competition.
III. Applicability and Effect
A. The provisions of this Final Judgment shall be applicable to
Bell Atlantic, GTE, and Vodafone, as defined above, the attorneys of
each of the above, and shall also be applicable to all other persons in
active concert or participation with any of the above who shall have
received actual notice of this Final Judgment by personal service or
otherwise.
B. Defendants shall require, as a condition of the sale or other
disposition to an Interim Party, which shall be defined to mean any
person other than a purchaser approved by plaintiff pursuant to Section
IV.C, of all or substantially all of their assets, or of a lesser
business unit containing the Wireless System Assets required to be
divested by this Final Judgment, that the Interim Party agrees to be
bound by the provisions of this Final Judgment, and shall also require
that any purchaser of the Wireless System Assets agree to be bound by
Section X of this Final Judgment.
IV. Divestiture of Wireless Interests
A. Defendants Bell Atlantic, Vodafone and GTE shall divest
themselves of the Wireless System Assets of one of the two wireless
businesses in each of the Overlapping Wireless Markets, including both
any direct or indirect financial ownership interests and any direct or
indirect role in management or participation in control, to a purchaser
or purchasers acceptable to plaintiff in its sole discretion, or to a
trustee designated pursuant to Section V of this Final Judgment in
accordance with the following schedule:
1. The divestiture of the Wireless System Assets for each Cellular/
Cellular Overlap Area shall occur prior to or at the same time as
consummation of the transaction that gives rise to the overlap.
2. The divestitures of the Wireless System Assets for each PCS/
Cellular Overlap Area shall occur prior to or at the same time as
consummation of the transaction that gives rise to the overlap, or June
30, 2000, whichever is later. Plaintiff may, in its sole discretion,
extend this date by up to two thirty-day periods. If one or more
divestitures have not been completed as of the date of the consummation
of the transaction that gives rise to the overlap, defendants will
submit to plaintiff a definitive Divestiture List identifying the
specific Wireless System Assets in each of the PCS/Cellular Overlap
Areas that will be divested.
B. Defendants agree to use their best efforts to accomplish the
divestitures set forth in this Final Judgment and to seek all necessary
regulatory approvals as expeditiously as possible. The divestitures
carried out under the terms of this decree shall also be conducted in
compliance with the applicable rules of the FCC, including 47 CFR 20.6
(spectrum aggregation) and 47 CFR 22.942 (cellular cross-ownership), or
any waiver of such rules or other authorization granted by the FCC.
Authorization by the FCC to conduct divestiture of a cellular business
in a particular manner will not modify any of the requirements of this
decree.
C. Unless plaintiff otherwise consents in writing, the divestitures
pursuant to Section IV, or by trustee appointed pursuant to Section V
of the Final Judgment, shall be accomplished by (1) divesting all of
the Wireless System Assets in any individual Overlapping Wireless
Market entirely to a single purchaser (but Wireless System Assets used
by any defendant in the operation of its cellular business in different
Overlapping Wireless Markets may be divested to different purchasers),
and (2) selling or otherwise conveying the Wireless System Assets to
the purchaser(s) in such a way as to satisfy plaintiff, in its sole
discretion, that each wireless business can and will be used by the
purchaser(s) as part of a viable,
[[Page 509]]
ongoing business engaged in the provision of wireless mobile telephone
service. The divestitures pursuant to this Final Judgment shall be made
to one or more purchasers for whom it is demonstrated to plaintiff's
sole satisfaction that (1) the purchaser has the capability and intent
of competing effectively in the provision of wireless mobile telephone
service using the Wireless System Assets, (2) the purchaser has the
managerial, operational and financial capability to compete effectively
in the provision of wireless mobile telephone service using the
Wireless System Assets, and (3) none of the terms of any agreement
between the purchaser and any of the defendants shall give defendants
the ability unreasonably (i) to raise the purchaser's costs, (ii) to
lower the purchaser's efficiency, (iii) to limit any line of business
which a purchaser may choose to pursue using the Wireless System Assets
(including, but not limited to, entry into local telecommunications
services on a resale or facilities basis or long distance
telecommunications services on a resale or facilities basis), or
otherwise to interfere with the ability of the purchaser to compete
effectively.
D. If they have not already done so, defendants shall make known
the availability of the Wireless System Assets in each of the
Overlapping Wireless Markets by usual and customary means, sufficiently
in advance of the time of consummation of any transaction which gives
rise to an overlap in an Overlapping Wireless Market, reasonably to
enable the required divestitures to be accomplished according to the
schedule outlined herein. Defendants shall inform any person making an
inquiry regarding a possible purchase of the Wireless System Assets
that the sale is being made pursuant to the requirements of this Final
Judgment, as well as the rules of the FCC, and shall provide such
person with a copy of the Final Judgment.
E. Defendants shall offer to furnish to all prospective purchasers,
subject to customary confidentiality assurances, access to personnel,
the ability to inspect the Wireless System Assets, and all information
and any financial, operational, or other documents customarily provided
as part of a due diligence process, including all information relevant
to the sale and to the areas of business in which the cellular business
has been engaged or has considered entering, except documents subject
to attorney-client or work product privileges, or third party
intellectual property that defendants are precluded by contract from
disclosing and that has been identified in a schedule pursuant to
Section II.G. Defendants shall make such information available to the
plaintiff at the same time that such information is made available to
any other person.
F. Defendants shall not interfere with any negotiations by any
purchaser to retain any employees, for Bell Atlantic and GTE who work
or have worked since July 29, 1998, and for Vodafone who work or have
worked since September 21, 1999 (other than solely on a temporary
assignment basis from another part of Bell Atlantic, Vodafone or GTE)
with, or whose principal responsibility relates to, the divested
Wireless System Assets.
G. To the extent that the wireless businesses to be divested use
intellectual property, as required to be identified by Section II.G,
that cannot be transferred or assigned without the consent of the
licensor or other third parties, defendants shall cooperate with the
purchaser(s) and trustee to seek to obtain those consents.
H. Defendants shall preserve all records of all efforts made to
preserve and divest any or all of the Wireless System Assets required
to be divested until the termination of this Final Judgment.
V. Appointment of Trustee
A. If defendants have not divested all of the Wireless System
Assets required to be divested in accordance with Section IV to a
purchaser or purchasers that have been approved by plaintiff pursuant
to Section IV.C, then:
1. Defendants that are party to a transaction that gives rise to an
overlap shall identify to plaintiff in writing the remaining Wireless
System Assets to be divested in the Overlapping Wireless Markets, and
this written notification shall also be provided to the trustee
promptly upon his or her appointment by the Court;
2. The Court shall, on application of plaintiff, appoint a trustee
selected by plaintiff, who will be responsible for (a) accomplishing a
divestiture of all Wireless System Assets transferred to the trustee
from defendants, in accordance with the terms of this Final Judgment,
to a purchaser or purchasers approved by plaintiff under Section IV.C,
and (b) exercising the responsibilities of the licensee and controlling
and operating the transferred Wireless System Assets, to ensure that
the wireless businesses remain ongoing, economically viable competitors
in the provision of mobile wireless telecommunications services in the
Overlapping Wireless Markets, until they are divested to a purchaser or
purchasers, and the trustee shall agree to be bound by this Final
Judgment.
3. Defendants shall submit a form of trust agreement (``Trust
Agreement'') to plaintiff, which must be consistent with the terms of
this Final Judgment and which must have received approval by plaintiff,
who shall communicate to defendants within ten (10) business days
approval or disapproval of that form; and
4. After obtaining any necessary approvals from the FCC for the
transfer of control of the licenses of the remaining Wireless System
Assets to the trustee, defendants shall irrevocably divest the
remaining Wireless System Assets to the trustee, who will own such
assets (or own the stock of the entity owning such assets, if
divestiture is to be effected by the creation of such an entity for
sale to purchaser(s)) and control such assets, subject to the terms of
the approved Trust Agreement.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the wireless business(es) to be
divested, which shall be done within the time periods set forth in this
Final Judgment. Those assets shall be the Wireless System Assets as
designated by defendants as set forth in Section V.A.1 for the
Overlapping Wireless Markets. In addition, notwithstanding any
provision to the contrary, plaintiff may, in its sole discretion,
require defendants to include additional assets that substantially
relate to the wireless mobile telephone business in the Wireless System
Assets to be divested if it would facilitate a prompt divestiture to an
acceptable purchaser. 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. Subject to Section V.C of this
Final Judgment, the trustee shall have the power and authority to hire
at the cost and expense of defendants any investment bankers,
attorneys, or other agents reasonably necessary in the judgment of the
trustee to assist in the divestiture and in the management of the
Wireless System Assets transferred to the trustee, and such
professionals and agents shall be accountable solely 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
plaintiff in its sole discretion, 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
[[Page 510]]
other than the trustee's malfeasance. Any such objections by the
defendants must be conveyed in writing to plaintiff and the trustee
within ten (10) days after the trustee has provided the notice required
under Section VI of this Final Judgment.
C. The trustee shall serve at the cost and expense of defendants,
on such terms and conditions as the Court may prescribe, and shall
account for all monies derived from the sale of the wireless
business(es) 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
defendants and the trust shall then be terminated. The compensation of
such trustee and of professionals and agents retained by the trustee
shall be reasonable in light of the value of the divested wireless
business(es) 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.
D. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestiture, including their best efforts to
effect all necessary regulatory approvals. 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 the wireless business(es) to be divested,
and defendants shall develop financial or other information relevant to
the business to be divested customarily provided in a due diligence
process as the trustee may reasonably request, subject to customary
confidentiality assurances. As required and limited by Sections IV.E
and F of this Final Judgment, defendants shall permit prospective
purchaser(s) of the Wireless System Assets to have reasonable access to
personnel and to make such inspection of the Wireless System Assets to
be sold and any and all financial, operational, or other documents and
other information as may be relevant to the divestiture required by
this Final Judgment.
E. After being appointed and until the divestiture of the Wireless
System Assets is complete, 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; provided,
however, that, to the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. 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 or made an
inquiry about acquiring the Wireless System Assets to be sold, 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 Wireless System Assets.
F. The Trustee shall divest the Wireless System Assets in each of
the Overlapping Wireless Markets to a purchaser or purchasers
acceptable to plaintiff in its sole discretion, as required in Section
IV.C of this Final Judgment, no later than one hundred and eighty (180)
calendar days after the Wireless System Assets are transferred to a
trustee in accordance with the schedule outlined in Section IV,
provided however, that if applications have been filed with the FCC
within the one hundred eighty day period seeking approval to assign or
transfer licenses to the purchaser(s) of the Wireless System Assets but
approval of such applications has not been granted before the end of
the one hundred eighty day period, the period shall be extended with
respect to the divestiture of those Wireless System Assets for which
final FCC approval has not been granted until five (5) days after such
approval is received.
G. If the trustee has not accomplished the divestiture of all of
the Wireless System Assets within the time specified for completion of
divestiture to a purchaser or purchasers under Section V.F of this
Final Judgment, the trustee thereupon shall file promptly with this
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 in 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 enter thereafter such orders as it deems 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 agreed to by plaintiff.
H. After defendants transfer the Wireless System Assets to the
trustee, and until those Wireless System Assets have been divested to a
purchaser or purchasers approved by plaintiff pursuant to Section IV.C,
the trustee shall have sole and complete authority to manage and
operate the Wireless System Assets and to exercise the responsibilities
of the licensee, and shall not be subject to any control or direction
by defendants. Defendants shall not retain any economic interest in the
Wireless System Assets transferred to the trustee, apart from the right
to receive the proceeds of the sale or other disposition of the
Wireless System Assets. The trustee shall operate the wireless
business(es) as a separate and independent business entity from each of
the defendants, with sole control over operations, marketing and sales.
Defendants shall not communicate with, or attempt to influence the
business decisions of, the trustee concerning the operation and
management of the wireless businesses, and shall not communicate with
the trustee concerning the divestiture of the Wireless System Assets or
take any action to influence, interfere with, or impede the trustee's
accomplishment of the divestitures required by this Final Judgment,
except that defendants may communicate with the trustee to the extent
necessary for defendants to comply with this Final Judgment and to
provide the trustee, if requested to do so, with whatever resources or
cooperation may be required to complete the divestitures of the
Wireless System Assets and to carry out the requirements of this Final
Judgment. In no event shall defendants provide to, or receive from, the
trustee or the wireless businesses under the trustee's control any non-
public or competitively sensitive marketing, sales, or pricing
information relating to their respective mobile wireless
telecommunications service businesses.
VI. Notification
A. Within two (2) business days following execution of a binding
agreement to effect, in whole or in part, any proposed divestiture
required by this Final Judgment, whichever defendant is divesting the
Wireless System Assets, or the trustee if the trustee is divesting the
Wireless System Assets, shall notify plaintiff of the proposed
divestiture. If the trustee is responsible for the divestiture, the
trustee shall similarly notify defendants. 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
[[Page 511]]
who theretofore offered to, or expressed an interest in or a desire to,
acquire any ownership interest in the Wireless System Assets that are
the subject of the binding agreement, together will full details of
same.
B. Within fifteen (15) calendar days of receipt by plaintiff of
such notice, plaintiff may request from defendants, the proposed
purchaser(s), any other third party, or the trustee (if applicable),
additional information concerning the proposed divestiture and the
proposed purchaser(s) or any other potential purchaser(s). Defendants
and the trustee shall furnish any such additional information requested
within fifteen (15) calendar days of the receipt of the request, unless
the parties shall otherwise agree. Within thirty (30) calendar days
after receipt of the notice, or within twenty (20) calendar days after
plaintiff has been provided the additional information requested from
defendants, the proposed purchaser(s), any third party, or the trustee,
whichever is later, plaintiff shall provide written notice to
defendants and the trustee, if there is one, stating whether or not
plaintiff objects to the proposed divestiture. If plaintiff provides
written notice to defendants and the trustee, if there is one, that it
does not object, then the divestiture may be consummated subject only
to defendants' limited right to object to the sale under Section V.B of
this Final Judgment. Absent written notice that plaintiff does not
object to the proposed purchaser(s) or in the event of an objection by
plaintiff, a divestiture shall not be consummated. Upon objection by a
defendant under the proviso of Section V.B, a divestiture proposed
under Section V shall not be consummated unless approved by the Court.
VII. Affidavits
A. Within twenty (20) calendar days of the filing of the Motion for
Leave to File Supplemental Complaint in this matter and every thirty
(30) calendar days thereafter until all divestitures have been
completed, defendants shall deliver to plaintiff an affidavit as to the
fact and manner of defendants' compliance with this Final Judgment.
Each such affidavit shall (i) include, inter alia, the name, address,
and telephone number of each person who, at any time after the period
covered by the last such report, 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 or all of the
Wireless System Assets required to be divested, (ii) describe in detail
each contact with any such person during that period, and (iii) include
a summary of the efforts that defendants have made to solicit a
purchaser(s) for the Wireless System Assets to be divested in the
Overlapping Wireless Markets pursuant to this Final Judgment and to
provide required information to prospective purchasers.
B. Within twenty (20) calendar days of the filing of the Motion for
Leave to File Supplemental Complaint in this matter, defendants shall
deliver to plaintiff an affidavit which describes in reasonable detail
all actions defendants have taken and all steps defendants have
implemented on an ongoing basis to preserve the Wireless System Assets
to be divested pursuant to this Final Judgment. Defendants shall
deliver to plaintiff another affidavit describing any changes to the
efforts and actions outlined in defendants' earlier affidavits filed
pursuant to Section VII.B of this Final Judgment within fifteen (15)
calendar days after the charge is implemented.
VIII. Financing
Defendants shall not finance all or any part of any purchase by an
acquirer made pursuant to Sections IV or V of this Final Judgment.
IX. Hold Separate Order
A. Until accomplishment of the divestitures of the Wireless System
Assets to purchaser(s) approved by plaintiff pursuant to Section IV.C,
each defendant shall take all steps necessary to ensure that each of
the wireless businesses that it owns or operates in the Overlapping
Wireless Markets shall continue to be operated as a separate,
independent, ongoing, economically viable and active competitor to the
other mobile wireless telecommunications providers operating in the
same license area; and that except as necessary to comply with this
Final Judgment, the operation of said wireless businesses (including
the performance of decision-making functions relating to marketing and
pricing) will be kept separate and apart from, and not influenced by,
the operation of the other wireless business, and the books, records,
and competitively sensitive sales, marketing, and pricing information
associated with said wireless businesses will be kept separate and
apart from the books, records, and competitively sensitive sales,
marketing, and pricing information associated with the other wireless
business; provided that defendants may continue to use any trademarks,
trade names or service marks used in the operation of such wireless
businesses prior to the consummation of the Bell Atlantic/GTE Merger
and/or the creation of the Bell Atlantic/Vodafone Partnership.
B. Until the Wireless System Assets in each Overlapping Wireless
Market have been divested to purchaser(s) approved by plaintiff, or
transferred to a trustee pursuant to Section V of this Final Judgment,
each defendant shall in accordance with past practices, with respect to
each wireless business that it has an ownership interest in or operates
in the Overlapping Wireless Markets;
1. Use all reasonable efforts to maintain and increase sales of
wireless mobile telephone services, and maintain and increase
promotional, advertising, sales, technical assistance, and marketing
support for the mobile telephone service sold by the wireless
businesses;
2. Take all steps necessary to ensure that each wireless business
that it has an ownership interest in or operates in the Overlapping
Wireless Markets is fully maintained in operable condition and shall
maintain and adhere to normal maintenance schedules;
3. Provide and maintain sufficient working capital and lines and
sources of credit to maintain the Wireless System Assets as viable
ongoing businesses;
4. Not remove, sell, lease, assign, transfer, pledge or otherwise
dispose of or pledge as collateral for loans, any asset of each
wireless business that it has an ownership interest in or operates in
the Overlapping Wireless Markets, other than in the ordinary course of
business, except as approved by plaintiff;
5. Maintain, in accordance with sound accounting principles,
separate, true, accurate and complete financial ledgers, books and
records that report, on a periodic basis, such as the last business day
of each month, consistent with past practices, the assets, liabilities,
expenses, revenues, income, profit and loss of each wireless business
that it has an ownership interest in or operates in the Overlapping
Wireless Markets;
6. Be prohibited from terminating, transferring, or altering to the
detriment of any employees who work with each wireless business that it
has an ownership interest in or operates in the Overlapping Wireless
Markets as of the date of consummation of the Bell Atlantic/GTE Merger
or the creation of the Bell Atlantic/Vodafone Partnership, any current
employment or salary agreements, except: (a) In the ordinary course of
business, (b) for transfer bids initiated by employees pursuant to
defendants' regular, established job posting policies, (c) for an
individual who has a written offer of employment
[[Page 512]]
from a third party for a like position, or (d) as necessary to promote
accomplishment of defendants' obligations under this Final Judgment;
and
7. Take no action that would impede in any way or jeopardize the
sale of each wireless business that it has an ownership interest in or
operates in the Overlapping Wireless Markets.
C. On or before the consummation of the Bell Atlantic/GTE Merger or
the creation of the Bell Atlantic/Vodafone Partnership, defendants
shall assign complete managerial responsibility over each wireless
business that they have an ownership interest in or operate in the
Overlapping Wireless Markets to a specified manager who shall not
participate, during the period of such responsibility, in the
management of any of defendants' other businesses.
D. Defendants shall, during the period before all Wireless System
Assets have been divested to a purchaser(s) or transferred to the
trustee pursuant to Section V of this Final Judgment, each appoint a
person or persons to oversee the Wireless System Assets owned by that
defendant, who will be responsible for defendants' compliance with the
requirements of Sections VII and IX of this Final Judgment. Such
person(s) shall not be an officer, director, manager, employee, or
agent of another defendant.
X. Compliance Inspection
For the purposes of determining or securing compliance of
defendants with this Final Judgment, or of determining whether the
Final Judgment should be modified or vacated, and subject to any
legally recognized privilege, from time to time:
A. Duly authorized representatives of the United States Department
of Justice, upon written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to the relevant defendant made to its principal
office, shall be permitted without restraint or interference from
defendants:
1. To have 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 any matters
contained in this Final Judgment; and
2. To interview, either informally or on the record, and to take
sworn testimony from the officers, directors, employees, or agents of
defendants, who may have counsel present, relating to any matters
contained in this Final Judgment.
B. Upon the written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, made to
defendants at their principal offices, defendants shall submit written
reports, under oath if requested, relating to any of the matters
contained in this Final Judgment.
C. No information or documents obtained by the means provided in
this Section X or Sections VI and VII shall be divulged by plaintiff to
any person other than a duly authorized representative of the Executive
Branch of the United States, or to the FCC (pursuant to a customary
protective order or a waiver of confidentiality by defendants), 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 as to which a claim
of protection may be asserted under Rule 26(c)(7) of the Federal Rules
of Civil Procedure, and mark each pertinent page of such material,
``Subject to claim of 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) to which
defendants are not a party.
XI. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purposes of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders or 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.
XII. Further Provisions and Termination
A. The entry of this judgment is in the public interest.
B. Unless this Court grants an extension, this Final Judgment shall
expire on the tenth anniversary of the date of its entry.
----------------------------------------------------------------------
United States District Judge
Certificate of Service
I hereby certify that copies of the foregoing Motion for Leave to
File Supplemental Complaint and Memorandum of Points and Authorities in
Support thereof were served this 6th day of December, 1999 upon the
following:
John Thorne (by hand),
Bell Atlantic Corporation, 1320 North Court House Road, Eighth Floor,
Arlington, VA 22201, Counsel for Defendant Bell Atlantic Corporation.
Steven G. Bradbury (by hand),
Kirkland & Ellis, 655 Fifteenth Street, NW, Washington, DC 20005,
Counsel for Defendant GTE Corporation.
Megan Pierson (by first class mail postage prepaid),
AirTouch Communications, Inc., One California Street, San Francisco, CA
94111, Counsel for Vodafone AirTouch Plc.
Lawrence M. Frankel,
Counsel for Plaintiff United States of America.
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 Supplemental Complaint on
December 9, 1999 alleging that: (1) The proposed acquisition of GTE
Corporation (``GTE'') by Bell Atlantic Corporation (``Bell Atlantic'')
(2) the proposed partnership between Bell Atlantic and Vodafone
AirTouch Plc (``Vodafone''); and (3) the combined effect of these two
transactions would violate Section 7 of the Clayton Act, 15 U.S.C. 18
by lessening competition in the markets for wireless mobile telephone
services in 13 major trading areas (``MTAs''), as well as 96
metropolitan statistical areas (``MSAs'') and rural service areas
(``RSAs'') in Alabama, Arizona, California, Florida, Idaho, Illinois,
Indiana, Montana, New Mexico, Ohio, South Carolina, Texas, Virginia,
Washington, and Wisconsin.\1\
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\1\ The original Complaint in this proceeding was filed on May
7, 1999, challenging the July 28, 1998, merger agreement between
Bell Atlantic and GTE (``Bell Atlantic/GTE Merger''). On September
21, 1999, Bell Atlantic and Vodafone entered into an agreement to
create a partnership (``Bell Atlantic/Vodafone Partnership'') with
the intent of combining the wireless businesses of Bell Atlantic,
Vodafone, and GTE into a national wireless network. On December 6,
1999, the United States filed a motion requesting leave to file a
Supplemental Complaint and to add Vodafone as a defendant to this
action. That motion was granted by the Court on December 9, 1999,
and the Supplemental Complaint was accepted as filed on that date.
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[[Page 513]]
Shortly before the Supplemental Complaint was filed, the United
States and defendants reached agreement on the terms of a revised
proposed Final Judgment. The revised proposed Final Judgment \2\
requires Bell Atlantic, Vodafone, or GTE to divest wireless assets in
96 markets. These overlapping markets include: (1) 58 MSAs and RSAs
where GTE owns in whole or in part a cellular mobile telephone services
business that overlaps part of one of the 10 MTAs where Bell Atlantic
and Vodafone provide personal communications services through PCS
PrimeCo, L.P. (``PrimeCo''), a business half owned by Bell Atlantic and
half owned by Vodafone; (2) four MSAs where Bell Atlantic and GTE own
in whole or in part competing cellular mobile wireless telephone
businesses; (3) three MSAs and one RSA where Bell Atlantic and Vodafone
own in whole or in part competing cellular mobile wireless telephone
businesses; (4) ten MSAs and one RSA where Vodafone and GTE own in
whole or part competing cellular mobile wireless telephone businesses;
and (5) ten MSAs and nine RSAs where Vodafone owns, or will own, in
whole or part, a cellular mobile wireless telephone business that
competes with GTE wireless PCS telephone business that overlaps all or
part of the area. These 96 overlap areas are collectively identified in
the Supplemental Complaint as the ``Overlapping Wireless Markets.''
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\2\ The original proposed Final Judgment required either Bell
Atlantic or GTE to divest its wireless telephone business in those
markets where the two companies' business overlap. The revised Final
Judgment essentially includes those areas, as well as the areas
where Vodafone's wireless telephone businesses overlap with a
competing businesses owned either by Bell Atlantic or GTE.
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In each of the Overlapping Wireless Markets, defendants can choose
which wireless business to divest. The proposed Final Judgment also
contains provisions, explained below, designed to minimize any risk of
competitive harm that otherwise might arise pending completion of the
divestiture. The proposed Final Judgment and a Stipulation by plaintiff
and defendants consenting to its entry were filed simultaneously with
the Supplemental Complaint.
The United States and 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. The United States and defendants have also stipulated that
defendants will comply with the terms of the proposed Final Judgment
from the date of signing of the Stipulation, pending entry of the Final
Judgment by the Court. Should the Court decline to enter the Final
Judgment, defendants have also committed to continue to abide by its
requirements until the expiration of time for any appeals of such
ruling.
III. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Bell Atlantic is one of the remaining five Regional Bell Operating
Companies (``RBOCs'') created in 1984 by the consent decree settling
the United States' antitrust case against American Telephone &
Telegraph Co. GTE is the largest non-RBOC local telephone operating
company in the United States. Vodafone is the world's largest mobile
telecommunications company, and the third largest wireless mobile
telephone service provider in the United States. Bell Atlantic and GTE
each provide local exchange services in distinct regions, as well as
wireless mobile telephone services, including cellular mobile telephone
services and PCS, both within and outside of their local exchange
service regions. Bell Atlantic is a 50/50 partner with Vodafone in
PrimeCo, a firm that provides wireless mobile telephone services in
many areas of the country.
Bell Atlantic, with headquarters in New York City, New York, is the
second largest RBOC in the United States, with approximately 42 million
total local telephone access lines. In 1998, Bell Atlantic had revenues
in excess of $31 billion. Bell Atlantic provides local telephone
services to retail customers in Connecticut, Delaware, the District of
Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey,
New York, Pennsylvania, Rhode Island, Vermont, Virginia, and West
Virginia, as well as cellular mobile telephone services in those
states. Bell Atlantic also provides cellar mobile telephone services in
some areas outside its local exchange service region, including areas
within the states of Arizona, Georgia, North Carolina, New Mexico,
South Carolina, and Texas. Through its partnership with Vodafone in
PrimeCo, Bell Atlantic also provides wireless services in the States of
Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa,
Louisiana, Michigan, Minnesota, Mississippi, New Mexico, North
Carolina, Ohio, Oklahoma, Texas, Virginia, and Wisconsin. Bell Atlantic
is the nation's fourth largest wireless mobile telephone service
provider, with about 7.5 million proportionate subscribers \3\
nationwide.
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\3\ ``Proportionate subscribers'' refers to the number of
subscribers in a firm's wireless mobile telephone systems discounted
by the firm's ownership interest in each system. For instance, a
firm with a 100% ownership interest in a wireless business with
100,000 subscribers would have 100,000 proportionate subscribers,
but a firm with a 25% interest in a system with 100,000 subscribers
would be attributed 25,000 proportionate subscribers for that
system.
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GTE, with headquarters in Irving, Texas, is the a largest non-RBOC
local telephone company in the United States, with over 23 million
total local telephone access lines. In 1998, GTE had revenues in excess
of $25 billion. GTE provides local telephone service to retail
customers in Alabama, Alaska, Arizona, Arkansas, California, Florida,
Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota,
Missouri, Nebraska, Nevada, New Mexico, North Carolina, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, Texas, Virginia, Washington, and
Wisconsin, and it also provides wireless mobile telephone service in 17
states. GTE is the nation's fifth largest wireless mobile telephone
service provider, with about 6.9 million proportionate subscribers
nationwide.
Vodafone, with its headquarters in Newbury, Berkshire, England, has
mobile operations in 23 countries in five continents, with more than 19
million proportionate customers outside of the United States. Within
the United States, Vodafone serves 9.1 million cellular mobile
telephone and PCS customers in 24 states and 22 of the top 30 U.S.
markets. Vodafone entered into an agreement on July 19, 1999 to acquire
certain cellular mobile telephone business from CommNet (``Vodafone/
CommNet Merger'') for $1.36 billion, which would make Vodafone a
provider of cellular mobile telephones services in an additional 11
midwestern and western states. The acquisition of CommNet's cellular
business would add about 360,000 subscribers to Vodafone's total number
of wireless subscribers nationwide.
On July 28, 1998, Bell Atlantic and GTE entered into a merger
agreement whereby the two firms would merge in a transaction valued at
approximately $53 billion at the time of the agreement. If this
transaction is consummated, the combined total of Bell Atlantic's and
GTE's wireless mobile telephone service
[[Page 514]]
subscribers, absent divestitures, would exceed 14 million.
On September 21, 1999, Bell Atlantic and Vodafone entered into an
agreement to create a new wireless partnership that will combine the
approximately $70 billion worth of wireless assets of Bell Atlantic,
Vodafone, and GTE. The new wireless partnership will be the largest
wireless business in the United States, serving over 23 million
customers in 49 of the top 50 U.S. wireless markets and boasting a
footprint covering 90% of the U.S. population.
B. Wireless Mobile Telephone Services
Wireless mobile 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 this service is a valuable
feature to consumers, and cellular and other wireless mobile telephone
services are commonly priced at a substantial premium above landline
services. In order to provide this capability, wireless carriers must
deploy an extensive network of switches and radio transmitters and
receivers, and interconnect this network with the networks of local and
long distance landline carriers, and with the networks of other
wireless carriers. Current annual revenues from the sale of wireless
mobile telephone services total approximately $37 billion in the United
States.
Initially, wireless mobile telephone services were provided
principally by two cellular systems in each MSA and RSA license area.
Cellular licenses were awarded by the Federal Communications Commission
(``FCC'') beginning in the early 1980s for each MSA and RSA.\4\ A
provider of Specialized Mobile Radio (``SMR'') services typically was
also authorized to operate with some additional spectrum in these
areas, including the Overlapping Wireless Markets.
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\4\ 25 MHZ of spectrum was allocated to each cellular system in
an MSA or RSA. MSAs are the 306 urbanized areas in the United
States, defined by the federal government, and used by the FCC to
define the license areas for urban cellular systems. RSAs are the
428 areas defined by the FCC used to define the license areas for
rural cellular systems outside of MSAs.
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In 1995, the FCC allocated (and subsequently issued licenses for)
additional spectrum for the provision of PCS, a type of wireless
telephone service that includes wireless mobile telephone services
comparable to those offered by cellular carriers. In 1996, one SMR
spectrum licensee began to use its SMR spectrum to offer wireless
mobile telephone services, comparable to that offered by cellular and
PCS providers and bundled with dispatch services, in a number of areas
including some of the Overlapping Wireless Markets. While the areas for
which PCS providers are licensed (MTAs and basic trading areas
(``BTAs'')) differ somewhat from the cellular MSAs and RSAs, they
generally overlap with them. In many areas, including most of the
Overlapping Wireless Markets, not all of the PCS license holders have
started to offer services or even begun to construct the facilities
necessary to begin offering service. The PCS providers have tended to
enter in the largest cities first, entering in smaller markets only
later and not on as wide a scale. Moreover, even in those areas where
one or more PCS providers have constructed their networks and have
started to offer service, including the Overlapping Wireless Markets,
the incumbent cellular providers, such as Bell Atlantic, Vodafone and
GTE, still typically have substantially larger market shares than the
new entrants.
C. Anticompetitive Consequences of the Proposed Acquisition
Bell Atlantic, Vodafone and GTE, or firms in which they have an
interest, are or will be competing providers of wireless mobile
telephone services in 96 cellular license areas in 15 states. These
areas are referred to in the Supplemental Complaint as follows:
I. Cellular/Cellular Overlap Areas
A. Bell Atlantic Cellular/Vodafone Cellular Overlap Areas
1. Arizona
a. Phoenix MSA
b. Tucson MSA
c. Arizona 2--Coconino RSA
2. New Mexico
a. Albuquerque MSA
B. Bell Atlantic Cellular/GTE Cellular Overlap Areas
1. New Mexico
a. Las Cruces MSA
2. South Carolina
a. Greenville MSA
b. Anderson MSA
3. Texas
a. El Paso MSA
C. GTE Cellular/Vodafone Cellular Overlap Areas
1. California
a. Salinas-Monterey-seaside MSA
b. San Diego MSA
c. San Francisco MSA
d. San Jose MSA
e. Santa Rosa-Petaluma MSA
f. Vallejo-Napa-Fairfield MSA
2. Ohio
a. Akron MSA
b. Canton MSA
c. Cleveland MSA
d. Lorain-Elyria MSA
e. Ohio 3--Ashtabula RSA
II. PCS/Cellular Overlap Areas
A. PrimeCo PCS/GTE Cellular Overlap Areas
1. Jacksonville MTA
a. Jacksonville MSA
b. Florida 5--Putnam RSA
2. Miami-Fort Lauderdale MTA
a. Fort Myers MSA
b. Florida 1--Collier (B1) RSA
c. Florida 2--Glades (B1) RSA
d. Florida 3--Hardee RSA
e. Florida 11--Monroe (B2) RSA
3. Tampa-St. Petersburg-Orlando MTA
a. Tampa-St. Petersburg MSA
b. Lakeland-Winter Haven MSA
c. Sarasota MSA
d. Brandenton MSA
e. Florida 2--Glades (B1) RSA
f. Florida 3--Hardee RSA
g. Florida 4--Citrus (B1) RSA
4. New Orleans-Baton Rouge MTA
a. Mobile, AL MSA
b. Pensacola, FL MSA
5. Chicago MTA
a. Aurora-Elgin, IL MSA
b. Bloomington-Normal, IL MSA
c. Champaign-Urbana-Rantoul, IL MSA
d. Chicago, IL MSA
e. Decatur, IL MSA
f. Fort Wayne, IN MSA
g. Gary-Hammond-East Chicago, IN MSA
h. Joliet, IL MSA
i. Kankakee, IL MSA
j. Rockford, IL MSA
k. Springfield, IL MSA
l. Illinois 1--Jo Daviess RSA
m. Illinois 2--Bureau (B1) RSA
n. Illinois 2--Bureau (B3) RSA
o. Illinois 4--Adams (B1) RSA
p. Illinois 5--Mason (B2) RSA
q. Illinois 6--Montgomery RSA
r. Illinois 7--Vermilion RSA
s. Indiana 1--Newton (B1) RSA
t. Indiana 1--Newton (B2) RSA
u. Indiana 3--Huntington RSA
6. Dallas-Fort Worth MTA
a. Dallas-Fort Worth MSA
b. Austin MSA
c. Sherman-Denison MSA
d. Texas 10--Navarro (B3) RSA
e. Texas 11--Cherokee (B1) RSA
f. Texas 16--Burleson RSA
7. Houston MTA
a. Houston MSA
b. Beaumont-Port Arthur MSA
c. Galveston MSA
d. Bryan-College Station MSA
e. Victoria MSA
f. Texas 10--Navarro (B3) RSA
g. Texas 11--Cherokee (B1) RSA
h. Texas 16--Burleson RSA
i. Texas 17--Newton RSA
j. Texas 20--Wilson (B2) RSA
k. Texas 21--Chambers RSA
8. San Antonio MTA
a. San Antonio MSA
b. Texas 16--Burleson RSA
c. Texas 20--Wilson (B2) RSA
9. Richmond-Norfolk MTA
a. Norfolk-Virginia Beach-Portsmouth MSA
b. Richmond MSA
c. Newport News-Hampton MSA
d. Petersburg-Colonial Heights MSA
e. Virginia 7--Buckingham (B1) RSA
f. Virginia 8--Amelia RSA
g. Virginia 9--Greensville RSA
h. Virginia 11--Madison (B1) RSA
[[Page 515]]
i. Virginia 12--Caroline (B1) RSA
j. Virginia 12--Caroline (B2) RSA
10. Milwaukee MTA
a. Wisconsin 8--Vernon RSA
B. GTE PCS/Vodafone Cellular Overlap Areas
1. Cincinnati-Dayton MTA
a. Cincinnati MSA
b. Dayton MSA
c. Hamilton/Middleton MSA
d. Springfield MSA
e. Ohio 4- Mercer RSA
f. Ohio 8--Clinton RSA
2. Seattle MTA
a. Bellingham MSA
b. Bremerton MSA
c. Olympia MSA
d. Seattle-Everett MSA
e. Tacoma MSA
f. Washington 1--Clallam RSA
g. Washington 2--Okanagan RSA
h. Washington 4--Gray's Harbor RSA
3. Spokeane-Billings MTA
a. Spokane MSA
b. Idaho 1--Boundary RSA
c. Idaho 2--Idaho RSA
d. Montana 1--Lincoln RSA
e. Washington 3--Ferry RSA
In the Overlapping Wireless Markets, the population potentially
addressable by wireless mobile telephone systems exceeds 57 million.
Bell Atlantic, Vodafone, and GTE are direct competitors in wireless
mobile telephone services in the Cellular/Cellular Overlap Areas. The
cellular businesses owned in whole or in part by Bell Atlantic and GTE,
Bell Atlantic and Vodafone, or GTE and Vodafone are the two largest
providers of cellular mobile telephone services, and the two primary
providers of all wireless mobile telephone services, in the Cellular/
Cellular Overlap Areas. Moreover in the PCS/Cellular Overlap Areas,
PrimeCo or GTE offer, or will soon offer, PCS wireless mobile telephone
service, while either GTE, Vodafone, or CommNet owns all or part of a
business offering cellular mobile telephone service. Thus, PrimeCo and
GTE, GTE and Vodafone, and GTE and CommNet are among each other's most
significant competitors in wireless mobile telephone services in the
PCS/Cellular Overlap Areas. In each of the PCS/Cellular Overlap Areas,
the GTE, Vodafone, or CommNet cellular business has one of the two
largest market shares in the provision of wireless mobile telephone
services while PrimeCo and GTE as one of a small number of new PCS
entrants in these markets.
Therefore, the Bell Atlantic/GTE Merger and the Bell Atlantic/
Vodafone Partnership would significantly increase the level of
concentration among firms providing wireless mobile telephone services
in each of the Overlapping Wireless Markets. A high level of
concentration in the provision of wireless mobile telephone services
already exists in each of the Overlapping Wireless Markets. In the
Cellular/Cellular Overlap Areas, Bell Atlantic, Vodafone, and GET's
individual market shares in the provision of wireless mobile telephone
services, if measured on the basis of the number of subscribers,
exceeds 35% and their combined market share ranges between 75-95%. As
measured by the Herfindahl-Hirschman Index (``HHI''), which is commonly
employed by the Department of Justice in merger analysis and is
explained in more detail in Appendix A to the Supplemental Complaint,
concentration in these markets is already in excess of 2800, well above
the 1800 threshold at which the Department normally considers a market
to be highly concentrated. After the consummation of these
transactions, the HHI in these markets will be in excess of 5500.
There is also already a high level of consentration in the
provision of wireless mobile telephone services in the PCS/Cellular
Overlap Areas. In virtually all, the individual share of the two
cellular carriers--one of which is GTE, Vodafone, or CommNet--is the
ranger of 30-40% and the combined market share of PrimeCo's PCS and
GTE's cellular business, or the GTE PCS and Vodafone cellular business,
is generally in the 35-50% range, resulting in an HHI over 2000. In
almost all of these markets, PrimeCo or GTE is one of the very few PCS
firms that have begun to vigorously compete against, and take share
away from, the two dominant cellular firms, one of which is, or will
be, owned, in whole or part, by GTE or Vodafone. The competition
between PrimeCo and GTE PCS businesses, and between GTE and Vodafone or
CommNet cellular businesses, created by PrimeCo's or Vodafone's entry
into markets that were previously in effective duopoly, has resulted in
lower prices and higher equality in these markets than would otherwise
have existed absent such competition.
If GTE and Bell Atlantic merge and Bell Atlantic and Vodafone form
their partnership, the Overlapping Wireless Markets will become
significantly more concentrated, and the competition between the
defendants in wireless mobile telephone services in these markets will
be eliminated. As a result of their loss of competition in these
markets, there will be an increased likelihood both of unilateral
actions by the combined firm to increase prices, diminish the quality
or quantity of service provided, or refrain from making investments in
network improvements, and of coordinated interaction among the limited
number of remaining competitors that could lead to similar
anticompetitive results. Therefore, the likely effect of the Bell
Atlantic/GTE Merger and the Bell Atlantic/Vodafone Partnership on the
provisions of wireless mobile telephone services in the Overlapping
Wireless Markets is that prices would increase, and the quality or
quantity of service together with incentives to improve network
facilities would decrease.
It is unlikely that entry within the next two years into wireless
mobile telephone services in the Overlapping Wireless Markets would be
sufficient to mitigate the competitive harm resulting from the
consummation of these two transactions.
For these reasons, the United States concluded that Bell Atlantic/
GTE Merger and the Bell Atlantic/Vodafone Partnership as proposed may
substantially lessen competition, in violation of Section 7 of the
Clayton Act, in the provision of wireless mobile telephone services
within the Overlapping Wireless Markets.
III. Explanation of the Proposed Final Judgment
A. The Divestiture Requirement
The proposed Final Judgment will preserve competition in the sale
of mobile wireless telephone services in each of the Overlapping
Wireless Markets by requiring defendants to divest one of their two
wireless telephone businesses in each of the overlapping Wireless
Markets. This divestiture will eliminate the change in market structure
caused by the merger.
The divestiture requirements of the proposed Final Judgment, as
stated in Sections IV.A and II.G, direct defendants to divest one of
their wireless telephone businesses (to be selected by defendants) in
each of the Overlapping Wireless Markets. Section IV.C permits
different wireless businesses in separate Overlapping Wireless Markets
to be divested to different purchasers, but requires that, for any
individual wireless business, the Wireless System Assets be divested
entirely to a single purchaser, unless the United States otherwise
consents in writing.
The proposed Final Judgment's divestiture provisions are intended
to accomplish the ``complete divestiture of the entire business of one
of the two wireless systems in each of the Overlapping Wireless
Markets,'' as Section II.G states. Section II.G also specifies in
detail the types of assets to be divested, which collectively are
described throughout the consent decree
[[Page 516]]
as ``Wireless System Assets,'' and addresses some special circumstances
concerning the divestiture of those assets. In all of the Overlapping
Wireless Markets, Wireless System Assets means all types of assets,
tangible and intangible, used by defendants in the operation of each of
the wireless businesses to be divested, including the provision of long
distance telecommunications service for wireless calls. Section II.G
enumerates in detail, without limitation, particular types of assets
covered by the divestiture requirement.
For the most part, the divesting defendant is required to transfer
to the purchaser the complete ownership and/or other rights to the
Wireless System Assets. However, the merged firm will retain a number
of other wireless businesses in areas that do not overlap, and prior to
the merger each defendant may have had certain assets that were used
substantially in the operations of its overall wireless business and
that must be retained to some extent to continue the existing
operations of the wireless businesses not being divested. Section II.G
permits special divestiture arrangements for such assets if they are
not capable of being divided between the divested and retained wireless
businesses, or if the divesting defendant and the purchaser agree not
to divide them. For these assets, the divestiture requirement is
satisfied if the divesting defendant grants to the purchaser, at the
election of the purchaser, an option to obtain a non-exclusive,
transferable license for a reasonable period to use the assets in the
operation of the wireless business being divested, so as to enable the
purchaser to continue to operate the divested wireless businesses
without impairment.
The definition of Wireless System Assets in Section II.G contains
special provisions relating to intellectual property. One addresses
intellectual property rights that defendants may have under third-party
licenses that could not be transferred to a purchaser entirely or by
license without the consent of the third-party licensor. If any such
assets are used by the wireless businesses being divested, defendants
must identify them in a schedule submitted to plaintiff and filed with
the Court as expeditiously as possible following the filing of the
Supplemental Complaint, and in any event, prior to any divestiture and
before the Court approves the proposed Final Judgment. Defendants must
explain the necessary consents and how a consent would be obtained for
each asset. This proviso is not intended to afford defendants any
opportunity to withhold intellectual property rights over which they
have any control, which could impair the ability of a purchaser to use
the divested wireless business to compete effectively. It relates only
to intellectual property assets that defendants have no power to
transfer themselves, and defendants must do all that is possible to
transfer the entire business of the divested wireless businesses. To
make this clear, Section IV.G obligates defendants to cooperate with
any purchaser as well as a trustee, if any, to seek to obtain the
necessary third-party consents, if any assets require such consents
before they may be transferred to a purchaser.
Another proviso relates to certain specific trademarks, trade names
and service marks. Section II.G, defining the Wireless System Assets to
be divested, generally requires the divestiture of trademarks, trade
names and service marks, with the 25 specified exceptions which contain
names under which defendants' retained wireless businesses, or their
corporate parents or affiliates, do business. Such trademarks, trade
names and service marks, like other assets, are either to be divested
in their entirety, except for marks and names that must be retained to
continue the existing operations of defendants' remaining wireless
properties and that are not capable of being divided (or that the
divesting defendant and purchaser agree not to divide), which are to be
made available to the purchaser through a non-exclusive, transferable
license.
Under limited circumstances, defendants are allowed to retain
specified portions of the Wireless System Assets in the Overlapping
Wireless Markets. First, Section II.G.1 provides that if defendants
elect to divest an interest in a PCS business in one of the PCS/
Cellular Overlap Areas, defendants may retain up to 10 MHZ of broadband
PCS spectrum within that PCS/Cellular Overlap Area upon completion of
the divestiture of the Wireless System Assets. In this instance,
defendants will still otherwise be required to divest the entire PCS
business, including 20 MHZ of broadband PCS spectrum, to ensure that
the market structure does not change as a result of the merger and that
the divested business will be able to compete as effectively under new
ownership as under its current ownership.
Second, in the event that defendants elect to divest an interest in
a PCS business in one of the PCS/Cellular Overlap Areas, Section II.G.2
of the Final Judgment allows defendants to request approval from
plaintiff to partition the PCS license along BTA geographic boundaries,
or county boundaries in the Case of Kenosha County, Wisconsin, and
retain assets in one or more specified non-overlapping BTAs or in
Kenosha County. Plaintiff's approval of the request shall be subject to
a determination by plaintiff in its sole discretion that the assets to
be retained in the non-overlapping BTAs or Kenosha County are not
needed to assure the competitive effectiveness of the divested business
in the remainder of the MTA, and that the purchaser of the Wireless
System Assets in the remainder of the MTA will be able to operate the
divested PCS business as a fully competitive entity. Section II.G.2
requires defendants to seek this approval at least 90 calendar days
prior to the consummation of the transaction which gives rise to the
overlap.
Finally, Section II.G.3 allows defendants, with approval from
plaintiff, to retain both the PCS business and the non-controlling
minority interest in an overlapping cellular business in a PCS/Cellular
Overlap Area. Plaintiff's approval of the request shall be subject to a
determination by plaintiff in its sole discretion that the retention of
a non-controlling minority interest will be entirely passive and will
not significantly diminish competition. GTE has a number of non-
controlling minority interests in cellular businesses, ranging from 2%
to 40%, in the Overlapping Wireless Markets. To be permitted to retain
a minority cellular interest, defendants will be required to
demonstrate that the interest they wish to keep is entirely passive,
such that they receive no competitively sensitive information about the
competing cellular business and have no input into the business
decisions of the competing cellular provider that could have
anticompetitive consequences. Plaintiff, in its sole discretion, will
determine that the retention of the non-controlling minority interest
will not significantly diminish competition before approval will be
granted for the merged firm to retain a minority interest. Section
II.G.3 requires defendants to seek this approval at least 90 calendar
days prior to the consummation of the transaction which gives rise to
the overlap.
Section IV contains other provisions to facilitate divestiture,
including notification of the availability of the Wireless System
Assets for purchase in Section IV.D, access to information about the
Wireless System Assets in Section IV.E, and preservation of records in
Section IV.H. In addition, to ensure that a purchaser will be able to
operate the divested wireless business without impairment, Section IV.F
prohibits defendants from interfering with a purchaser's negotiations
to retain
[[Page 517]]
any employees who work or have worked with the Wireless System Assets
since the date of the announcement of the merger of partnership, or
whose principal responsibility relates to the Wireless System Assets.
B. Timing of Divestiture
In antitrust cases involving mergers in which the United States
seeks a divestiture remedy, it requires completion of the divestiture
within the shortest time period reasonable under the circumstances. The
proposed Final Judgment in this case requires, in section IV.A, the
divestiture of the Wireless System Assets in the Overlapping Wireless
Markets on a strict schedule, but provides defendants with some
flexibility in recognition of the special timing issues involved in a
divestiture of this size and complexity.
Under Section IV.A, defendants must divest the Wireless System
Assets of one of the two wireless businesses in the Cellular/Cellular
Overlap Areas on or before consummation of the transaction that gives
rise to the overlap. The divestitures of the Wireless System Assets for
each PCS/Cellular Overlap Area shall occur prior to or at the same time
as consummation of the transaction that gives rise to the overlap, or
June 30, 2000, whichever is later. Plaintiff may, in its sole
discretion, extend this date by up to two thirty-day periods. If one or
more divestitures have not been completed as of the date of the
consummation of the transaction that gives rise to the overlap,
defendants will submit to plaintiff Divestiture List identifying the
specific Wireless System Assets in each of the PCS/Cellular Overlap
Areas that will be divested.
The divestiture timing provisions of the proposed Final Judgment
will ensure that the divestitures are carried out in a timely manner,
and at the same time will permit the parties an adequate opportunity to
accomplish the divestitures through a fair and orderly process. Even if
all Wireless System Assets have not been divested upon consummation of
the transaction that gives rise to the overlap, there will be no
adverse impact on competition given the short duration of the period of
common ownership and the detailed requirements of the Hold Separate
Order contained in Section IX of the Final Judgment.
Section IV. B of the proposed Final Judgment requires that, in
carrying out the divestitures, defendants comply with all of the
applicable rules of the FCC, or any waiver of such rules or other
authorization granted by the FCC. These rules include 47 CFR 20.6
(spectrum aggregation) and 47 CFR 22.942 (cellular cross-ownership)\5\
These FCC requires may add to, but cannot subtract from or impair, the
requirements of the proposed Final Judgment, since Section IV.B
specifies that authorization by the FCC to conduct divestiture of a
wireless business in a particular manner will not modify any of the
requirements of the degree. The provisions of the proposed Final
Judgment have been designed to avoid any conflict with the FCC's rules.
---------------------------------------------------------------------------
\5\ The FCC's spectrum aggregation rules, in 47 CFR 20.6, do not
permit a licensee to have an attributable interest in more than 45
MHZ of spectrum licensed for cellular, PCS or SMR with significant
overlap in any geographic area. The FCC will attribute an interest
if it is controlling, or if in most cases it is 20% or more of the
equity, outstanding stock or voting stock of the licensee. The FCC's
cellular cross-ownership rules, in 47 CFR 22.942, also prohibit a
licensee or any person controlling a licensee from having a direct
or indirect ownership interest of more than 5% in both cellular
systems in an overlapping cellular geographic service area, unless
such interests pose ``no substantial threat to competition.''
---------------------------------------------------------------------------
C. Use of a Trustee Subsequent to Consummation of the Acquisition
The proposed Final Judgment provides in Section IV.A that
defendants must divest the Wireless System Assets in each of the
Overlapping Wireless Markets in accordance with the schedule contained
therein, either to purchasers acceptable to plaintiff in its sole
discretion, or to a trustee designated pursuant to Section V of the
Final Judgment. As part of this divestiture, defendants must relinquish
any direct or indirect financial ownership interests and any direct or
indirect role in management or participation in control. If a trustee
is appointed pursuant to Section V of the proposed Final Judgment, the
trustee will then own and control the systems until they are sold to a
final purchasers, subject to safeguards to prevent defendants from
influencing their operation.
Section V details the requirements for the establishment of the
trust, the selection and compensation of the trustee, the
responsibilities of the trustee in connection with divestiture and
operation of the Wireless System Assets, and the termination of the
trust. If defendants have not divested all of their Wireless System
Assets in the Overlapping Wireless Markets to approved purchasers in
accordance with Section IV.A, Section V. A requires: (1) defendants to
identify the Wireless System Assets in each Overlapping Wireless Market
to be divested; (2) the Court to appoint a trustee, which shall be
selected by the United States; (3) defendants to submit a form of Trust
Agreement consistent with the terms of the Final Judgment, and which
form agreement must have received approval by the United States; and
(4) defendants, after receiving FCC approval for the license transfers,
to divest irrevocably the unsold Wireless System Assets to the trustee.
The trustee will then have the obligation and the sole
responsibility for the divestiture of any transferred Wireless System
Assets. Under Section V.B, the trustee has the authority to accomplish
divestitures at the earliest possible time and ``at the best price then
obtainable upon a reasonable effort by the trustee.'' In addition,
notwithstanding any provision to the contrary, plaintiff may, in its
sole discretion, require defendants to include additional assets that
substantially relate to the wireless mobile telephone business in the
Wireless System Assets to be divested if it would facilitate a prompt
divestiture to an acceptable purchaser. This provision allows
plaintiff, in its discretion, to require defendants to divest
additional Wireless System Assets that substantially relate to the
wireless mobile telephone business to ensure that the trustee can
promptly locate and divest to a purchaser acceptable to plaintiff.
Defendants are not entitled to object to divestiture based on the
adequacy of the price the trustee obtains or any other grounds, unless
the trustee's conduct amounts to malfeasance. The terms of the
trustee's compensation, under Section V.C, will provide incentives
based on the price and terms of the divestiture and the speed with
which it is accomplished. As provided by Section V.B and V.C.,
defendants will pay the compensation and expenses of the trustee, and
of any investment bankers, attorneys or other agents that the trustee
finds reasonably necessary to assist in the divestiture and the
management of the Wireless System Assets.
The trusteeship mechanism has been used by the FCC, in a variety of
contexts, to provide a short period of time in which to complete a sale
of a spectrum licensee that must be divested, while permitting the
broader merger or acquisition that necessitates the divestiture to go
forward. In this context, the critical feature of the trusteeship
arrangement is that the trustee will not only have responsibility for
sale of the Wireless System Assets, but will also be the authorized
holder of the wireless license, with full responsibility for the
operations, marketing and sales of the wireless business to be
divested, and will not be subject to any control or direction by
defendants. Defendants will no longer
[[Page 518]]
have any role in the ownership, operation or management of the Wireless
System Assets to be divested following consummation of their merger, as
provided by Section V.H, other than the right to receive the proceeds
of the sale, and certain obligations to provide cooperation to the
trustee in order to complete the divestiture, as indicated in Section
V.D. Under V.E., the trustee also has monthly reporting obligations
concerning the efforts made to divest the Wireless System Assets.
Defendants are precluded under Section V.H from communicating with the
trustee, or seeking to influence the trustee, concerning the
divestiture or the operation and management of the wireless businesses
transferred, apart from the limited communications necessary to carry
out the Final Judgment and to provide the trustee with the necessary
resources and cooperation to complete the divestitures. Defendants and
the trustee are subject to an absolute prohibition on exchanging any
non-public or competitively sensitive marketing, sales or pricing
information relating to either of the wireless businesses in the
Overlapping Wireless Markets. These safeguards will protect against any
competitive harm that could arise from coordinated behavior or
information sharing between the two wireless businesses during the
limited period while sale of the Wireless System Assets is not yet
complete, and ensure that the trusteeship arrangement is consistent
with the FCC's rules.
Section V.F. requires the trustee to divest the Wireless System
Assets to a purchaser or purchasers acceptable to the plaintiff no
later than 180 days after the assets are transferred to the trustee.
However, since the FCC's approval is required for the transfer of the
wireless licenses to a purchaser, Section V.F provides that if
applications for transfer of a wireless license have been filed by the
FCC within the 180-day period, but the FCC has not granted approval
before the end of that time, the period for divestiture of the specific
Wireless System Assets covered by the license that cannot yet be
transferred shall be extended until five days after the FCC's approval
is received. This extension is to be applied only to the individual
wireless license affected by the delay in approval of the license
transfer and does not entitle defendants to delay the divestiture of
any other Wireless System Assets for which license transfer approval
has been granted.
D. Criteria for the United States' Approval of Purchasers
Under the proposed Final Judgment, the United States plays an
important role in the approval of purchasers for each of the divested
wireless businesses by ensuring that the purchasers chosen by
defendants or the trustee are adequate from a competitive viewpoint.
Section IV.A specifies that the United States' approval or rejection of
a purchaser is at its sole discretion, but also enumerates certain
criteria that the United States will apply in making the approval
decision.
In the case of any divestiture by defendants or the trustee, it is
important to ensure that the ongoing wireless businesses go to
purchasers with the capability and intent to operate them as effective
competitors in the lines of business they already serve, and that there
are no conditions restricting competition in the terms of the sale.
Specifically, Section IV.C of the proposed Final Judgment requires that
the divestitures of Wireless System Assets be made to a purchaser or
purchasers for whom it is demonstrated to plaintiff's sole satisfaction
that: (1) The purchaser(s) has the capability and intent to compete
effectively in the provision of wireless mobile telephone service using
the Wireless System Assets; (2) the purchaser(s) has the managerial,
operational and financial capability to compete effectively in the
provision of wireless mobile telephone service using the Wireless
System Assets; and (3) none of the terms of any agreement between the
purchaser(s) and either of defendants shall give defendants the ability
unreasonably (i) to raise the purchaser(s)'s costs, (ii) to lower the
purchaser(s)'s efficiency, (iii) to limit any line of business which a
purchaser(s) may choose to pursue using the Wireless System Assets, or
otherwise to interfere with the ability of the purchaser(s) to compete
effectively. All of these criteria must be satisfied whether the
divestiture is accomplished by defendants or the trustee.
E. Other Provisions of the Decree
Section III specifies the persons to whom the Final Judgment is
applicable, and provides for the Final Judgment to be applicable to
certain interim Parties to whom defendants might transfer the Wireless
System Assets, other than purchasers approved by the United States.
Section VI obliges defendants, or the trustee if applicable, to
notify the United States of any planned divestiture of Wireless System
Assets within two business days of executing a binding agreement with a
purchaser. This section enables the United States to obtain information
to evaluate the chosen purchaser as well as other prospective
purchasers who expressed interest and establishes a procedure for the
United States to notify defendants and the trustee whether it objects
to a divestiture. The United States' notification of its lack of
objection is necessary for a divestiture to proceed. This section also
provides for an objection by defendants to a sale by the trustee under
the limited situation of alleged malfeasance, but in that case it is
possible for the Court to approve a sale over defendants' objection.
Section VII establishes affidavit requirements for defendants to
report to the United States on their compliance with the proposed Final
Judgment, their activities in seeking to divest the Wireless System
Assets prior to consummating the transaction that gives rise to the
overlap, and their actions to preserve the Wireless System Assets to be
divested.
Section VIII prohibits defendants from financing all or any part of
a purchase made by an acquirer of the Wireless System Assets, whether
the divestiture is carried out by defendants or by the trustee.
Section IX, the Hold Separate Order, contains important
requirements concerning the operation of the wireless businesses before
divestiture is complete, and the preservation of the Wireless System
Assets as a viable, ongoing business. The obligations of Section IX.A
fall on each defendant and both wireless businesses in any Overlapping
Wireless Market to ensure that such wireless businesses continue to be
operated as separate, independent, ongoing, economically viable and
active competitors to the other wireless mobile telecommunications
providers in the same area. Section IX.A requires separation of the
operations of the two wireless businesses and their books, records and
competitively sensitive information. The requirements of Section IX.A
serve to ensure that defendants maintain their two wireless businesses
in the Overlapping Wireless Markets as fully separate competitors prior
to consummating their merger, notwithstanding their expectations that
the merger will take place. The requirements also reinforce the
provisions of Section V.H concerning the separation of defendants and
the trustee after the merger is consummated but white Wireless System
Assets are still awaiting sale.
Section IX.B requires the defendant whose assets will be divested
(or both, if it has not yet been decided which
[[Page 519]]
system will be divested in a particular market) to take certain
specified steps to preserve the assets in accordance with past
practices. These steps include maintaining and increasing sales,
maintaining the assets in operable condition, providing sufficient
credit and working capital, not selling the assets (except with
approval of plaintiff), not terminating, transferring or reassigning
employees who work with the assets (with certain limited exceptions),
and not taking any actions to impede or jeopardize the sale of the
assets. Section IX.D obliges each defendant, during the period while
they still control Wireless System Assets, to appoint persons not
affiliated with the other defendant to oversee the Wireless System
Assets to be divested and to be responsible for compliance with the
Final Judgment.
In order to ensure compliance with the Final Judgment, Section X
gives the United States various rights, including the ability to
inspect defendants' records, to conduct interviews and take sworn
testimony of defendants' officers, directors, employees and agents, and
to require defendants to submit written reports. These rights are
subject to legally recognized privileges, and any information the
United States obtains using these powers is protected by specified
confidentiality obligations, which permit sharing of information with
the FCC under a customary protective order issued by that agency or a
waiver of confidentiality. Under Section III.B, purchasers of the
Wireless System Assets must also agree to give the United States
similar access to information.
The Court retains jurisdiction under Section XI, and Section XII
provides that the proposed Final Judgment will expire on the tenth
anniversary of the date of its entry, unless extended by the Court.
Although the required divestitures will be accomplished in a
considerably shorter time, defendants are also precluded from
reacquiring the divested properties within the term of the decree.
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 that 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 proposal 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
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 United States, which remains free to withdraw its
consent to the proposed Final Judgment at any time prior to entry. The
comments and the responses of the United States will be filed with the
Court and published in the Federal Register.
Written comments should be submitted to: Donald J. Russell, Chief,
Telecommunications Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, N.W., Suite 8000, Washington,
D.C. 20530.
The proposed Final Judgment provides, in Section XI, that the Court
retains jurisdiction over this action, and the parties may apply to the
Court for any order necessary or appropriate to carry out or construe
the Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish any violations of its provisions.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, seeking an injunction to block consummation of the Bell
Atlantic/GTE Merger and Bell Atlantic/Vodafone Partnership and a full
trial on the merits. The United States is satisfied, however, that the
divestiture of Wireless System Assets and other relief contained in the
proposed Final Judgment will preserve competition in the provision of
wireless mobile telephone services in the Overlapping Wireless Markets.
This proposed Final Judgment will also avoid the substantial costs and
uncertainty of a full trial on the merits of the violations alleged in
the complaint. Therefore, the United States believes that there is no
reason under the antitrust laws to proceed with further litigation if
the divestitures of the Wireless System Assets are carried out in the
manner required by the proposed Final Judgment.
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 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
consideration 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 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.'' \6\ Rather,
\6\ 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 the 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.
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[[Page 520]]
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest filing, 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
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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. 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.\7\
\7\ 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' '').
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The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' United
States v. American Tel. & 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).
Moreover, the court's role under the Tunney Act is limited to
reviewing the remedy in relationship to the violations that the United
States has alleged in its complaint, and does not authorize the court
to ``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Since ``[t]he court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that the court ``is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States might have but did
not pursue. Id.
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. Consequently, the United
States has not attached any such materials to the proposed Final
Judgment.
Dated: December 22, 1999.
Respectfully submitted,
Joel I. Klein,
Assistant Attorney General.
A. Douglas Melamed,
Principal Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Donald J. Russell,
Chief, Telecommunications Task Force.
Laury E. Bobbish,
Assistant Chief, Telecommunications Task Force.
Hillary B. Burchuk,
D.C. Bar #366755.
Lawrence M. Frankel,
D.C. Bar #441532.
Susan Wittenberg,
D.C. Bar #453692.
Trial Attorneys, U.S. Department of Justice, Antitrust Division,
Telecommunications Task Force, 1401 H Street, N.W., Suite 8000,
Washington, DC 20530, (202) 514-5621.
Certificate of Service
I hereby certify that copies of the foregoing Plaintiff United
States' Competitive Impact Statement, were served via U.S. Mail, first
class postage prepaid, on this 22nd day of December, 1999 upon each of
the parties listed below:
John Thorne,
Bell Atlantic Corporation, 1320 North Court House Road, Eighth Floor,
Arlington, VA 22201, Counsel for Bell Atlantic Corporation.
Steven G. Bardbury, Kirkland & Ellis, 655 Fifteenth Street, N.W.,
Washington, DC 20005, Counsel for GTE Corporation.
Megan Pierson,
AirTouch Communications, Inc., One California Street, San Francisco, CA
94111, Counsel for Vodafone AirTouch Plc.
Lawrence M. Frankel,
Counsel for Plaintiff.
[FR Doc. 00-197 Filed 1-4-00; 8:45 am]
BILLING CODE 4410-11-M