[Federal Register Volume 65, Number 250 (Thursday, December 28, 2000)]
[Notices]
[Pages 82373-82374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-33027]
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FEDERAL TRADE COMMISSION
[File No. 001-0181; Docket No. C-3991]
Computer Sciences Corporation and Mynd Corporation; Analysis To
Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before January 19, 2001.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Daniel J. Silver, FTC/H-374, 600
Pennsylvania Avenue, NW., Washington, DC 20580. (202) 326-3102.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of thirty (30) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text to
the consent agreement package can be obtained from the FTC Home Page
(for December 20, 2000), on the World Wide Web, at ``http://
www.ftc.gov/os/2000/12/index.htm.'' A paper copy can be obtained from
the FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue,
NW., Washington, DC 20580, either in person or by calling (202) 326-
3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room H-159 600 Pennsylvania Avenue, NW.,
Washington, DC 20580. Two paper copies of each comment should be filed,
and should be accompanied, if possible, by a 3\1/2\ inch diskette
containing an electronic copy of the comment. Such comments or views
will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Analysis of the Complaint and Proposed Consent Order To Aid Public
Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from Computer Sciences Corporation (``CSC'') and Mynd
Corporation (``Mynd'') (collectively ``respondents''). The Consent
Agreement is intended to resolve anticompetitive effects stemming from
CSC's proposed acquisition of the outstanding shares of Mynd. The
Consent Agreement includes a proposed Decision and Order (the
``Order'') that would require CSC to divest Mynd's claims assessment
systems business to Insurance Services Office, Incorporated (``ISO'').
Mynd develops and sells a claims assessment system known as Claims
Outcome Advisor (``COA''). The Consent Agreement also includes an Order
to Maintain Assets that requires respondents to preserve the assets
they are required to divest as a viable, competitive, and ongoing
operation until the divestiture is achieved.
The Order, if finally issued by the Commission, would settle
charges that CSC's proposed acquisition of Mynd may have substantially
lessened competition in the United States market for claims assessment
systems. The Commission has reason to believe that CSC's proposed
acquisition of Mynd would have violated section 7 of the Clayton Act
and section 5 of the Federal Trade Commission Act. The proposed
complaint, described below, relates the basis for this belief.
II. Description of the Parties and the Proposed Merger
CSC, headquartered in El Segundo, California, is a large computer-
services provider, which also sells vertical software applications in
the financial services industries. CSC's Financial Services Group
(``FSG''), headquartered in Austin, Texas, provides consulting and
support services along with application software to insurance
companies, banking, consumer finance companies, and investment
companies.
Mynd, headquartered in Columbia, South Carolina, provides
consulting and services and packaged software solutions to the
insurance and other financial services industries.
Pursuant to an agreement, CSC will make a $16 per share cash tender
offer for outstanding Mynd shares. Mynd will then become a wholly-owned
subsidiary of CSC.
III. The Proposed Complaint
According to the Commission's proposed complaint, the relevant line
of commerce in which to analyze the effects of CSC's proposed
acquisition of Mynd is the provision of claims assessment systems, and
the relevant geographic market is the United States. Claims assessment
systems are computer software and other intellectual property used by
insurance companies and others to evaluate appropriate payments for
claims for bodily injury or to evaluate return-to-work plans in workers
compensation claims. Claims assessment systems are designed to aid
claims adjusters by providing a consistent methodology for analyzing
information that an adjuster would take into account in assessing the
appropriate settlement values for claims. Mynd sells the claims
assessment system known as COA, and CSC sells the claims assessment
system known as Colossus. The proposed complaint alleges that the
market for claims assessment systems in the United States is highly
concentrated and that CSC and Mynd are the only significant competitors
in the provision of claims assessment systems. The proposed complaint
alleges that the proposed acquisition of Mynd by CSC would create a
monopoly or near monopoly in the market for claims assessment systems.
The proposed complaint also alleges that entry into the relevant
market would not be timely, likely, or sufficient to deter or offset
adverse effects of the acquisition on competition. Entry is difficult
in this market because the time expense necessary to develop software
systems such as these are great. Claims
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assessment systems involve the use of expert-system technology, which
is a set of computerized methods for exploiting information drawn from
relevant knowledge domains through rules or algorithms so as to assist
in the solution of realworld problems, such as claims assessment. Entry
is difficult in this market because of the time and expense necessary
for finding and choosing the appropriate domain information, choosing
or developing the appropriate rules or algorithms, and integrating the
expert-system technology into a computing platform that is sufficiently
robust, scalable, and stable while incorporating a domain-appropriate
user interface.
The proposed complaint alleges that CSC's proposed acquisition of
Mynd would eliminate actual, direct, and substantial competition
between CSC and Mynd. Elimination of this competition would likely
result in increased prices for claims assessment systems and reduced
innovation as a result of delayed or reduced product development.
IV. Terms of the Agreement Containing Consent Order
The proposed Order is designed to remedy the anticompetitive
effects of the acquisition in the United States market for claims
assessment systems, as alleged in the complaint, by requiring the
divestiture to ISO of Mynd's claims assessment business. The Order
would also require respondents to dismiss with prejudice all of CSC's
intellectual-property litigation claims against Neuronworks, the
original developers of COA, so as to enable Neuronworks to perform COA-
related consulting or other work in conjunction with ISO or another
acquirer. Further, the Order would require respondents to release, hold
harmless, and indemnify ISO or other acquirer from liability for any
past, current, or future claims arising out of Mynd's and Neuronworks's
acts prior to the divestiture date related to COA. The purpose of these
provisions is to allow the acquirer to compete in the market by selling
COA free from claims by CSC of intellectual property infringement. The
proposed Order would also require respondents to divest other assets
related to Mynd's claims assessment systems business, including
customer lists, contracts, intellectual property, and other intangible
assets so as to put ISO or another acquirer into a position to compete
as soon as possible following the divestiture.
ISO, based in New York City, is a leading vendor of statistical,
actuarial, and underwriting information for and about the property and
casualty insurance industry. ISO uses these statistics to develop
advisory prospective loss costs--projections of average future claim
payments and loss adjustment expenses, for various lines of insurance
and classifications of policy holders. Insurance companies use these
loss costs to develop their own independent rates for their insurance
policies. ISO also provides aggregate insurance statistics to state
regulators.
If the Commission, at the time that it accepts the proposed Order
for public comment, notifies respondents that it does not approve of
the proposed divestiture to ISO, or the manner of the divestiture, the
proposed Order provides that respondents would have three months to
divest Mynd's claims assessment business to a different Commission-
approved acquirer. If respondents did not complete the divestiture in
that period, a trustee would be appointed who, upon Commission
approval, would have the authority to divest Mynd's claims assessment
business to a Commission-approved acquirer.
The proposed Order to Maintain Assets that is also included in the
Consent Agreement requires that respondents preserve the Mynd assets
they are required to divest as a viable and competitive operation and
conduct the Mynd claims assessment business in the ordinary course of
business until those Mynd assets are transferred to the Commission-
approved acquirer.
The Consent Agreement requires respondents to provide the
Commission with an initial report setting forth in detail the manner in
which respondents will comply with the provisions relating to the
divestiture of assets. The proposed Order further requires respondents
to provide the Commission with a report of compliance with the Order
within thirty (30) days following the date the Order becomes final and
every thirty (30) days thereafter until they have complied with the
terms of the Order.
V. Opportunity for Public Comment
The proposed Order has been placed on the public record for thirty
days for receipt of comments by interested persons. Comments received
during this period will become part of the public record. After thirty
days, the Commission will again review the proposed Order and the
comments received and will decide whether it should withdraw from the
proposed Order or make it final. By accepting the proposed Order
subject to final approval, the Commission anticipates that the
competitive problems alleged in the proposed complaint will be
resolved. The purpose of this analysis is to invite public comment on
the proposed Order, including the proposed divestiture, to aid the
Commission in its determination of whether to make the proposed Order
final. This analysis is not intended to constitute an official
interpretation of the proposed Order, nor is it intended to modify the
terms of the proposed Order in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-33027 Filed 12-27-00; 8:45 am]
BILLING CODE 6750-01-M