[Federal Register Volume 66, Number 9 (Friday, January 12, 2001)]
[Notices]
[Pages 2929-2939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-928]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Worldcom, Inc & Intermedia Communications, Inc.

    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, Stipulation and Competitive Impact Statement have been 
filed with the United States District court for the District of 
Columbia, Washington, D.C. in United States of America v. WorldCom. 
Inc. & Intermediate Communications, Inc. Civil Action No. 00-2789. On 
November 17, 2000, the United States filed a Complaint alleging that 
the proposed acquisition by WorldCom of the Internet backbone business 
assets of Intermedia Communications, Inc. would violate Section 7 of 
the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed the 
same time as the Complaint, requires WorldCom to divest all of 
Intermedia's assets except for Intermedia's interest in the capital 
stock of Digex, Inc. 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, Washington, DC.
    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 Russell, Chief, Telecommunications Task Force, Suite 8000, 
Antitrust Division, Department of Justice, Washington, DC 20530, 
(telephone: (202) 514-5621).

Constance K. Robinson,
Director of Operations & Merger Enforcement.

Hold Separate Stipulation and Order

    It is hereby stipulated and agreed by and between the undersigned 
parties, subject to approval and entry by the Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. Acquirer means the entity to whom defendants divest the 
Intemedia Assets.
    B. WorldCom means defendant WorldCom, Inc., a Georgia corporation 
with its headquarters in Clinton, Mississippi, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships and joint

[[Page 2930]]

ventures, and their directors, officers, managers, agents and 
employees.
    C. Intermedia means defendant Intermedia Communications, Inc., a 
Delaware Corporation with its headquarters in Tampa, Florida, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents and employees.
    D. Digex means Digex, Inc., a Delaware Corporation with its 
headquarters in Beltsville, Maryland, its successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures, and their directors, officers, managers, agents and 
employees.
    E. Capital Stock of Digex means the capital stock of Digex, 
regardless of class, owned by Intermedia.
    F. Intermedia Assets means all of assets of Intermedia, except for 
the Capital Stock of Digex, including:
    1. All tangible assets that comprise the Intermedia business, 
including research and development activities; all networking equipment 
and fixed assets, personal property, office furniture, materials, 
supplies, and other tangible property and all assets used exclusively 
in connection with the Intermedia Assets; all licenses, permits and 
authorizations issued by any governmental organization relating to the 
Intermedia Assets; all contracts, teaming arrangements, agreements, 
leases, commitments, certifications, and understandings, relating to 
the Intermedia Assets, including supply agreements, all customer lists, 
contracts, accounts, and credit records; all repair and performance 
records and all other records relating to the Intermedia Assets;
    2. All intangible assets used in the development, production, 
servicing and sale of Intermedia Assets, including, but not limited to 
all patents, licenses and sublicenses, intellectual property, 
copyrights, trademarks, trade names, service marks, service names, 
technical information, computer software and related documentation, 
know-how, trade secrets, drawings, blueprints, designs, design 
protocols, specifications for materials, specifications for parts and 
devices, safety procedures for the handling of materials and 
substances, all research data concerning historic and current research 
and development relating to the Intermedia Assets, quality assurance 
and control procedures, design tools and simulation capability, all 
manuals and technical information defendants provide to their own 
employees, customers, suppliers, agents or licensees, and all research 
data concerning historic and current research and development efforts 
relating to the Intermedia Assets, including, but not limited to 
designs of experiments, and the results of successful and unsuccessful 
designs and experiments.
    G. Merger means the proposed merger of WorldCom and Intermedia 
pursuant to the merger agreement dated September 5, 2000.

II. Objectives

    The final Judgment filed in this case is meant to ensure 
defendants' prompt divestiture of the Intermedia Assets for the purpose 
of preserving a viable competitor in the provision of Internet backbone 
and access services in order to remedy the effects that the United 
States alleges would otherwise result from WorldCom's acquisition of 
Intermedia. This Hold Separate Stipulation and Order ensures, prior to 
such divestitures, that the Intermedia Assets remain independent, 
economically viable, and ongoing business concerns that will remain 
independent and uninfluenced by WorldCom, and that competition is 
maintained during the pendency of the ordered divestitures.

III. Jurisdiction and Venue

    This Court has jurisdiction over each of the parties hereto and 
over the subject matter of this action, and venue of this action is 
proper in the United States District Court for the District of 
Columbia. The Complaint states a claim upon which relief may be granted 
against defendants under Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18.

IV. Compliance With and Entry of Final Judgment

    A. The parties stipulate that a Final Judgment in the form attached 
hereto as Exhibit A may be filed with 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 the United States has not withdrawn 
its consent, which it may do at any time before the entry of the 
proposed Final Judgment by serving notice thereof on defendants and by 
filing that notice with the Court.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment, pending the Judgment's entry 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 by the parties, comply with all the term 
and provisions of the proposed Final Judgment as though the same were 
in full force and effect as an order of the Court.
    C. Defendants shall not consummate the transaction sought to be 
enjoined by the Complaint herein before the Court has signed this Hold 
Separate Stipulation and Order.
    D. 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.
    E. In the event (1) the United States has withdrawn its consent, as 
provided in Section IV(A) above, or (2) the proposed Final Judgment is 
not entered 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.
    F. Defendants represent that the divestiture ordered in the 
proposed Final Judgment can and will be made, and that defendants will 
later raise no claim of mistake, hardship or difficulty of compliance 
as grounds for asking the Court to modify any of the provisions 
contained therein.
    G. The United States and Defendants, WorldCom and Intermedia, by 
their respective attorneys, have consented to the entry of this Hold 
Separate Stipulation and Order without trial or adjudication of any 
issue of fact or law, and without this Hold Separate Stipulation and 
Order constituting any evidence against or admission by any part 
regarding any issue of fact or law.

V. Hold Separate Provisions

    A. Until the closing of the Merger contemplated by the Final 
Judgment:
    1. Intermedia shall preserve, maintain, and continue to operate the 
Intermedia Assets as an independent, ongoing, economically viable 
competitive business, with management, sales, and operations of such 
assets held entirely separate, distinct, and apart from those of 
WorldCom's operations. WorldCom shall not coordinate its production, 
marketing, or terms of sale of any products with those produced by or 
sold under any of the Intermedia Assets. Within twenty (20) days after 
the entry of the Hold Separate Stipulation and

[[Page 2931]]

Order, defendants will inform the United States of the steps defendants 
have taken to comply with this Hold Separate Stipulation and Order.
    2. Intermedia shall use all reasonable efforts to maintain and 
increase the sales and revenues of the services provided by the 
Intermedia Assets, and shall maintain at 2000 or previously approved 
levels for 2001, whichever are higher, all promotional, advertising, 
sales, technical assistance, network capacity configurations and 
expansions, marketing and merchandising support for the Intermedia 
Assets.
    3. Intermedia shall take all steps necessary to ensure that the 
Intermedia Assets are fully maintained an operable condition at no less 
than their current capacity and sales, including projected capacity 
expansions currently planned or planned prior to negotiations between 
the defendants relating to the Merger, and shall maintain and adhere to 
normal repair and maintenance schedules for the Intermedia Assets.
    4. Intermedia shall not remove, sell, lease, assign, transfer, 
pledge, or otherwise dispose of any of the Intermedia Assets.
    5. WorldCom shall not solicit to hire, or hire, any employee of any 
business that is a part of the Intermedia Assets.
    6. Defendants shall take no action that would jeopardize, delay, or 
impede the sale of the Intermedia Assets.
    B. After the closing of the Merger and until the divestiture 
required by the Final Judgment has been accomplished.
    1. Defendants shall preserve, maintain, and continue to operate the 
Intermedia Assets as an independent, ongoing, economically viable 
competitive business, with management, sales, operations of such assets 
held entirely separate, distinct, and apart from those of WorldCom's 
other operations. WorldCom shall not coordinate its production, 
marketing, or terms of sale of any products with those produced by or 
sold under any of the Intermedia Assets. Within twenty (20) days after 
the closing of the Merger, defendants will inform the United States of 
the steps defendants have taken to comply with this Hold Separate 
Stipulation and Order.
    2. Defendants shall take all steps necessary to ensure that (1) the 
Intermedia Assets will be maintained and operated as independent, 
ongoing, economically viable and active competitor in the provision of 
telecommunications services currently offered by Intermedia; (2) 
management of the Intermedia Assets will not be influenced by WorldCom 
(or Digex); and (3) the books, records, competitively sensitive sales, 
marketing and pricing information, and decision-making concerning 
provision of services by any of the Intermedia Assets will be kept 
separate and apart from WorldCom's other operations.
    3. Defendants shall use all reasonable efforts to maintain and 
increase the sales and revenues of the services provided by the 
Intermedia Assets, and shall maintain at 2000 or previously approved 
levels for 2001, whichever are higher, all promotional, advertising, 
sales, technical assistance, network capacity configurations and 
expansions, marketing and merchandising support of the Intermedia 
Assets.
    4. WorldCom shall provide sufficient working capital and lines and 
sources of credit to continue to maintain the Intermedia Assets as 
economically viable and competitive, ongoing businesses, consistent 
with the requirements of Sections V(A) and (B).
    5. WorldCom shall take all steps necessary to ensure that the 
Intermedia Assets are fully maintained in operable condition at no less 
than its current capacity and sales, including projected capacity 
expansions currently planned or planned prior to negotiations between 
the defendants relating to the Merger, and shall maintain and adhere to 
normal repair and maintenance schedules for the Intermedia Assets.
    6. Defendants shall not, except as part of a divestiture approved 
by the United States in accordance with the terms of the proposed Final 
Judgment, remove, sell, lease, assign, transfer, pledge, or otherwise 
dispose of any of the Intemedia Assets.
    7. Defendants shall maintain, in accordance with sound accounting 
principles, separate, accurate, and complete financial ledgers, books, 
and records that report on a periodic basis, such as the last business 
day of every month, consistent with past practices, the assets, 
liabilities, expenses, revenues and income of products produced, 
distributed or sold utilizing the Intermedia Assets.
    8. Defendants shall take no action that would jeopardize, delay, or 
impede the sale of the Intermedia Assets.
    9. Except in the ordinary course of business or as is otherwise 
consistent with this Hold Separate Stipulation and Order, defendants 
shall not hire, transfer, terminate, or otherwise alter the salary or 
employment agreements for any Intermedia employee who, on the date of 
defendants' signing of this Hold Separate Stipulation and Order is a 
member of Intermedia's management. Further, during the tendency of this 
Hold Separate Stipulation and Order, and consistent with the Final 
Judgment, defendant WorldCom shall not solicit to hire, or hire, any 
employee of any business that is a part of the Intermedia Assets.
    C. Defendants shall take no action that would interfere with the 
ability of any trustee appointed pursuant to the Final Judgment to 
complete the divestitures pursuant to the Final Judgment to an Acquirer 
acceptable to the United States.
    D. This Hold Separate Stipulation and Order shall remain in effect 
until consummation of the divestiture required by the proposed Final 
Judgment or until further order of the Court.

    Dated: November 17, 2000.

    Respectfully submitted;

For Plaintiff, United States of America

Charles F. Rule,
For Defendant, WorldCom, Inc.

Brad E. Mutschelknaus,
For Defendant, Intermedia Communications, Inc.

Order

    It is so ordered by the Court, this ________day of 
________________, 2000.

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United States District Judge

Proposed Final Judgment

    Whereas, plaintiff, United States of America, filed its Complaint 
on November 17, 2000, and plaintiff and defendants, WorldCom Inc. 
(``WorldCom'') and Intermedia Communications, Inc. (``Intermedia''), by 
their respective attorneys, have consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law;
    And Whereas, this Final Judgment does not constitute any evidence 
against or admission by any party regarding any issue of fact or law;
    And Whereas, defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the defendants to 
assure that competition is not substantially lessened;
    And Whereas, plaintiff requires defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, defendants have represented to the United States that 
the divestitures required below can and will be made and that they will 
later raise no claims of hardship or difficulty as grounds for asking 
the Court to modify any of the divestiture provisions contained below;

[[Page 2932]]

    Now Therefore, before testimony is taken, and without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is Ordered, Adjudged, and Decreed:

I. Jurisdiction

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

II. Definitions

    As used in this Final Judgment:
    A. Acquirer means the entity to whom defendants divest the 
Intermedia Assets.
    B. WorldCom means defendant WorldCom, Inc., a Georgia corporation 
with its headquarters in Clinton, Mississippi, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents and employees.
    C. Intermedia means defendant Intermedia Communications, Inc., a 
Delaware Corporation with its headquarters in Tampa, Florida, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents and employees.
    D. Digex means Digex, Inc., a Delaware Corporation with its 
headquarters in Beltsville, Maryland, its successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures, and their directors, officers, managers, agents and 
employees.
    E. Capital Stock of Digex means the capital stock of Digex, 
regardless of class, owned by Intermedia.
    F. Intermedia Assets means all of assets of Intermedia, except for 
the Capital Stock of Digex, including:
    1. All tangible assets that comprise the Intermedia business, 
including research and development activities; all networking equipment 
and fixed assets, personal property, office furniture, materials, 
supplies, and other tangible property and all assets used exclusively 
in connection with the Intermedia Assets; all licenses, permits and 
authorizations issued by any governmental organization relating to the 
Intermedia Assets; all contracts, teaming arrangements, agreements, 
leases, commitments, certifications, and understandings, relating to 
the Intermedia Assets, including supply agreements; all customer lists, 
contracts, accounts, and credit records; all repair and performance 
records and all other records relating to the Intermedia Assets;
    2. All intangible assets used in the development, production, 
servicing and sale of Intermedia Assets, including, but not limited to 
all patents, licenses and sublicenses, intellectual property, 
copyrights, trademarks, trade names, service marks, service names, 
technical information, computer software and related documentation, 
know-how, trade secrets, drawings, blueprints, designs, design 
protocols, specifications for materials, specifications for parts and 
devices, safety procedures for the handling of materials and 
substances, all research data concerning historic and current research 
and development relating to the Intermedia Assets, quality assurance 
and control procedures, design tools and simulation capability, all 
manuals and technical information defendants provide to their own 
employees, customers, suppliers, agents or licensees, and all research 
data concerning historic and current research and development efforts 
relating to the Intermedia Assets, including, but not limited to 
designs of experiments, and the results of successful and unsuccessful 
designs and experiments.
    G. Merger means the proposed merger of WorldCom and Intermedia 
pursuant to the merger agreement dated September 5, 2000.

III. Applicability

    A. This Final Judgment applies to WorldCom and Intermedia, as 
defined above, and all other persons in active concert or participation 
with any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all the Intermedia Assets, that the 
purchaser agrees to be bound by the provisions of this Final Judgment, 
provided, however, that defendants need not obtain such an agreement 
from the Acquirer.

IV. Divestitures

    A. Defendants are ordered and directed, within one hundred eighty 
(180) calendar days from the closing of the Merger following the 
receipt of all required approvals by the Federal Communications 
Commission and state authorities, to divest the Intermedia Assets as an 
ongoing, viable business in a manner consistent with this Final 
Judgment to an Acquirer acceptable to the United States in its sole 
discretion. The United States, in its sole discretion, may agree to an 
extension of this time period for up to thirty (30) calendar days after 
regulatory approvals required to close the divestiture of the 
Intermedia Assets have been obtained. The United States shall notify 
the Court in the case of such an extension. Defendants agree to use 
their best efforts to divest the Intermedia Assets as expeditiously as 
possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
defendants promptly shall make known, by usual and customary means, the 
availability of the Intermedia Assets. Defendants shall inform any 
person making an inquiry regarding a possible purchase of the 
Intermedia Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Intermedia Assets customarily provided in a due 
diligence process except such information or documents subject to 
attorney-client privilege or attorney work-product privileges. 
Defendants shall make available such information to the United States 
at the same time that such information is made available to any other 
person.
    C. Defendants shall provide the Acquirer and the United States 
information relating to the personnel involved in the management of the 
Intermedia Assets and personnel engaged in the provision and selling of 
services offered by the Intermedia Assets in order to enable the 
Acquirer to make offers of employment. Defendants shall not interfere 
with any negotiations by the Acquirer to employ any Intermedia employee 
who works at, or whose primary responsibility concerns, any business 
that is part of the Intermedia Assets. Further, for a period of twelve 
(12) months following the closing of the Merger, defendants shall not 
solicit to hire, or hire, any Intermedia employee who, within six (6) 
months of the date of the sale of the business that is part of the 
Intermedia Assets that employs the individual, receives a reasonable 
offer of employment from the approved Acquirer of the Intermedia 
Assets, unless such employee is terminated or laid off by the Acquirer.
    D. Defendants shall permit prospective Acquirers of the Intermedia 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities of the Intermedia Assets any and all 
environmental, zoning, and other permit or license documents and 
information, and to make inspection of the Intermedia Assets, and have 
access to any and all financial, operational, business,

[[Page 2933]]

strategic or other documents and information customarily provided as 
part of a due diligence process.
    E. Defendants shall warrant to any Acquirer of the Intermedia 
Assets that the assets will be fully operational on the date of sale.
    F. Defendants shall not take any action, direct or indirect, that 
will impede in any way the operation, sale, or divestiture of the 
Intermedia Assets.
    G. Unless the United States otherwise consents in writing, the 
divestitures pursuant to Section IV or by trustee appointed pursuant to 
Section V of this Final Judgment shall include all Intermedia Assets 
and be accomplished in such a way as to satisfy the United States, in 
its sole discretion, that the Intermedia Assets can and will be used by 
the Acquirer as a viable, ongoing business engaged in the provision of 
Internet backbone and access services. Unless the United States 
otherwise consents in writing, the divestitures required by Section IV 
or V shall be made to a single Acquirer. If, after making a reasonable, 
good faith effort, Defendants are unable to effect a sale to a single 
Acquirer, they may submit more than one Acquirer for approval by the 
United States which, in its sole discretion, may determine whether to 
permit such a sale. The divestiture, whether pursuant to Section IV or 
Section V of this Final Judgment, shall be made to an Acquirer for whom 
it is demonstrated to the United States's sole satisfaction that: (1) 
The Acquirer has the capability and intent of competing effectively in 
the provision of Internet backbone and access services; and (2) the 
Acquirer has the managerial, operational, and financial capability to 
compete effectively in the provision of Internet backbone and access 
services. Such divestiture shall be accomplished so as to satisfy the 
United States, in its sole discretion, that none of the terms of any 
agreement between an Acquirer and defendants gives any defendant the 
ability unreasonably to raise the Acquirer's costs, lower the 
Acquirer's efficiency, or otherwise interfere in the ability of the 
Acquirer to compete effectively.
    H. Nothing herein shall be construed to provide to any person or 
entity that is not a party to this Final Judgment any rights with 
respect to its enforcement, modification or termination.

V. Appointment of Trustee

    A. In the event that defendants have not divested the Intermedia 
Assets within the time specified in Section IV(A) of this Final 
Judgment, defendants shall notify the United States of that fact in 
writing. Upon application of the United States, the Court shall appoint 
a trustee to be selected by the United States and approved by the Court 
to effect the divestiture of the Intermedia Assets.
    B. After the appointment of the trustee becomes effective, only the 
trustee shall have the right divest the Intermedia Assets. The trustee 
shall have the power and authority to accomplish the divestiture to an 
Acquirer acceptable to the United States at such price and on such 
terms as are then obtainable upon reasonable efforts of the trustee, 
subject to the provisions of Sections IV, V and VI of this Final 
Judgment, and shall have such other powers as the Court shall deem 
appropriate. Subject to Section V(D) 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, who shall be solely accountable to the trustee, reasonably 
necessary in the judgment of the trustee to assist in the divestiture. 
The trustee shall have the power and authority to accomplish the 
divestiture at the earliest possible time to an Acquirer acceptable to 
the United States, in its sole discretion, and shall have such other 
powers as this Court shall deem appropriate.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of each asset 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 any professionals 
and agents retained by the trustee shall be reasonable in light of the 
value of the divested Intermedia Assets 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, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures, 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 Intermedia Assets, and defendants shall 
develop financial and other information relevant to such business as 
the trustee may reasonably request, subject to reasonable protection 
for trade secrets or other confidential research, development or 
commercial information. Defendants shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestitures ordered under this Final 
Judgment. 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, any interest in the Intermedia Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Intermedia Assets.
    G. If the trustee has not accomplished such divestiture within six 
months after its appointment, the trustee shall file promptly with the 
Court a report setting forth (1) the trustee's efforts to accomplish 
the required divestiture, (2) the reasons, in the trustee's judgment, 
why the required divestiture has not been accomplished, and (3) the 
trustee's recommendations. 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 United States, who shall have the 
right to make additional recommendations consistent with the purpose of 
the trust. The Court thereafter shall enter such orders as it shall 
deem appropriate to carry out the purpose of the Final Judgment, which 
may, if necessary, include extending the trust and the term of the 
trustee's appointment by a period requested by the United States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendants or the

[[Page 2934]]

trustee, whichever is then responsible for effecting the divestiture, 
shall notify the United States of the proposed divestiture. If the 
trustee is responsible, it 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 who offered, or expressed an interest in or desire to 
acquire any ownership interest in the Intermedia Assets, together with 
full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from defendants, 
the proposed Acquirer, any other third party, or the trustee, if 
applicable, additional information concerning the proposed divestiture, 
the proposed Acquirer, or any other potential Acquirer. Defendants and 
the trustee shall furnish any additional information requested within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States shall provide written notice to defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice that 
it does not object, the divestiture may be consummated, subject only to 
defendants' limited right to object to the sale under Section V(C) of 
this Final Judgment. Absent written notice that the United States does 
not object to the proposed Acquirer, or upon objection by the United 
States, a divestiture proposed under Section IV or Section V shall not 
be consummated. Upon objection by defendants under Section V(C), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VII. Financing

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

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
order by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter and every thirty (30) calendar days thereafter until the 
divestiture has been completed, pursuant to Section IV or Section V of 
this Final Judgment, defendants shall deliver to the United States an 
affidavit as to the fact and manner of compliance with Sections IV or V 
of this Final Judgment. Each such affidavit shall include the name, 
address, and telephone number of each person who during the preceding 
thirty days made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in the Intermedia Assets, 
and shall describe in detail each contact with any such person during 
that period. Each such affidavit shall also include a description of 
the efforts defendants have taken to solicit buyers for the Intermedia 
Assets and to provide required information to prospective Acquirers, 
including the limitations, if any, on such information. Assuming the 
information set forth in the affidavit is true and complete, any 
objection by the United States to information provided by defendants, 
including limitation on information, shall be made within fourteen (14) 
days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit which describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to preserve and maintain the Intermedia Assets and to comply with 
Section VIII of this Final Judgment. The affidavit also shall describe, 
but not be limited to, defendants' efforts to maintain and operate the 
Intermedia Assets as a viable active competitor; to maintain separate 
management, staffing, sales, marketing, and pricing the Intermedia 
Assets; and to maintain the Intermedia Assets in operable condition at 
current (and currently projected future) capacity configurations. 
Defendants shall deliver to the United States and affidavit describing 
any changes to the efforts and actions outlined in defendants' earlier 
affidavit(s) filed pursuant to this section within fifteen (15) 
calendar days after the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Intermedia Assets until one year after such 
divestiture has been completed.
    D. Defendants shall promptly inform the United States of any change 
in the management or operation of the Intermedia Assets that would 
affect the defendants' ability to fulfill their obligations under this 
Final Judgment or the Hold Separate Stipulation and Order. Such notice 
shall include a description of all the steps defendants have taken or 
will take regarding the subject of such notice.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance 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 duly authorized representatives of the United States 
Department of Justice, including consultants and other persons retained 
by the United States, shall, upon written request of a duly authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to defendants, be 
permitted:
    1. Access during office hours of defendants to inspect and copy, or 
at the option of the United States, to require defendants to provide 
copies of, all books, ledgers, accounts, correspondence, memoranda, and 
other records and documents in the possession or under the control of 
defendants, relating to any matters contained in this Final Judgment; 
and
    2. To interview, either informally or on the record, defendant's 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint of 
interference by the defendants.
    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
defendants shall submit such written reports, under oath if requested, 
relating to any of the matters contained in this Final Judgment and the 
Hold Separate Stipulation and Order as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or

[[Page 2935]]

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 the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendants mark each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any part of the Intermedia Assets 
during the term of this Final Judgment.

XII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for such further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment will 
expire upon the tenth anniversary of the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------
    Court approval subject to procedures of the Antitrust Procedures 
and Penalties Act, 15 U.S.C. Sec. 16.
----------------------------------------------------------------------
United States District Judge

Competitive Impact Statement

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

I. Nature and Purpose of the Proceeding

    On November 17, 2000, the United States filed a civil antitrust 
Complaint alleging that the proposed acquisition of Intermedia 
Communications, Inc. (``Intermedia'') by WorldCom, Inc. (``WorldCom'') 
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 
Sec. 18. The Complaint alleges that WorldCom and Intermedia are two 
leading providers of Internet backbone service. As explained below, the 
acquisition of Intermedia by WorldCom will substantially lessen 
competition in the market for Tier 1 Internet backbone services in 
violation of Section 7 of the Clayton Act.
    The request for relief in the Complaint seeks: (1) A judgment that 
the proposed acquisition would violate Section 7 of the Clayton Act; 
(2) a permanent injunction preventing WorldCom and Intermedia from 
merging; and (3) such other relief that the Court deems proper.
    Shortly before the United States filed its Complaint, the United 
States and defendants reached agreement on the terms of a proposed 
Final Judgment. The proposed Final Judgment would permit WorldCom and 
Intermedia to complete their merger, and thus enable WorldCom to 
acquire ownership of a controlling stock interest in Digex, Inc. now 
owned by Intermedia, but it would require WorldCom thereafter to divest 
all of Intermedia's businesses and assets (except for the Digex stock) 
as an integrated, ongoing concern. Subject to the possibility of 
extensions under certain limited circumstances, the divestiture must 
occur within one hundred eighty days of WorldCom's closing of the 
Intermedia transaction. The proposed Final Judgment, along with the 
Hold Separate Stipulation and Order, also contain provisions 
restricting WorldCom from interfering in the ongoing operations of 
Intermedia's business, or from participating in the management or 
governance of Intermedia, in order to minimize the risk of competitive 
harm that otherwise might arise pending completion of the divestiture.
    The United States and the defendants have stipulated that the 
proposed Final Judgment may be entered after compliance with the APPA. 
Entry of the proposed Final Judgment would terminate the 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, consistent with the proposed Final Judgment, to a number of 
requirements designed to maintain the business and assets of Intermedia 
as a fully separate, competitive business pending entry of the proposed 
Final Judgment and pending the divestiture.

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

A. The Defendants and the Proposed Transaction

    WorldCom, Inc., formerly known as MCI WorldCom, Inc., is a 
corporation organized and existing under the laws of the State of 
Georgia, with its principal place of business in Clinton, Mississippi. 
It is one of the largest global telecommunications providers. 
WorldCom's 1999 annual revenues totaled approximately $37 billion.
    WorldCom's UUNET subsidiary is by far the largest provider of 
Internet backbone services in the world, whether measured by revenues 
or Internet traffic carried. UUNET offers a wide range of retail and 
wholesale Internet backbone services, including ``dial-up'' (i.e., 
through shared modem banks) and dedicated Internet access (i.e, through 
direct connections to the customer), as well as value-added services 
such as Internet protocol virtual private networks (``IP/VPNs''), web 
site hosting, applications hosting, and Internet security services.
    Intermedia Communications, Inc. is a corporation organized and 
existing under the laws of the state of Delaware, with its principal 
place of business in Tampa, Florida. Intermedia is a broad-based, 
integrated telecommunications provider that primarily offers local and 
long distance voice and data communications solutions to business and 
government customers. In addition to its other voice and data business, 
Intermedia operates a significant nationwide Internet backbone network, 
offering a broad suite of dedicated and dial-up Internet connectivity 
services to Internet Services Providers (``ISPs''), businesses and 
government customers. In 1999, Intermedia served approximately 90,000 
business and government customers, and had consolidated revenues of 
approximately $906 million. Intermedia also owns a controlling stake--
approximately 94% of the voting securities and 62% of all outstanding 
common shares--in Digex, Inc., a publicly traded Delaware corporation 
headquarted in Beltsville, Maryland. Digex is a leading provider of 
managed web site hosting and related services. Digex's revenues during 
the last twelve months were approximately $108 million.
    On September 5, 2000, WorldCom and Intermedia entered into an 
agreement whereby WorldCom will acquire Intermedia by assuming 
Intermedia's debt and issuing its stock in exchange for the Intermedia 
shares. The transaction is valued at approximately $6 billion, which 
reflects

[[Page 2936]]

approximately $3 billion in equity and $3 billion in debt and preferred 
stock.
    On October 23, 2000, the Defendants filed an application for the 
transfer of control of various licenses issued by the FCC to Intermedia 
that are necessary for it to conduct its business. Unless and until 
their FCC application is granted, the Defendants cannot consummate the 
merger.

B. Markets To Be Harmed By the Proposed Merger

    The explosive growth of the Internet over the past several years 
has transformed the American economy as well as the lifestyles of 
millions of American consumers and businesses. Indeed, the Internet is 
fast becoming as much a part of daily life as the television and the 
telephone. From a basic network that served primarily the military and 
academic institutions, the Internet has expanded into a global network 
of public and private networks which enables end users to communicate 
with each other and access large amounts of information data, and 
educational and entertainment services. These end users--individuals, 
businesses, content providers, governments, and universities--obtain 
access to the Internet either through a ``dial-up'' modem or other 
consumer Internet access connection (e.g., cable modem or digital 
subscriber line service), or through a dedicated high-speed facility 
(``dedicated access'') provided by one of thousands of ISPs. ISPs 
provide access to the Internet on a local, regional, or national basis. 
While ISPs operate their own networks of varying size, most have 
limited facilities.
    An ISP can connect any customer on its network to any of the other 
customers on its network. In order to allow its customers to 
communicate with the many end users connected to other networks, 
however, an ISP must establish direct or indirect interconnections with 
those other networks. Interconnection agreements between networks are 
voluntary and consensual in nature, and are not subject to governmental 
regulation.
    Because the Internet comprises thousands of separate networks, 
direct interconnections between each of those networks and all other 
networks would be impractical. Instead, an Internet ``backbone'' 
provider (``IBP'') aggregates the connections between these smaller 
networks into a large ``network of networks'' served by that backbone. 
These large IBP networks are able to use high-capacity long-haul 
transmission facilities to interconnect their own customers with each 
other. In addition, these IBPs can establish interconnections with 
other IBPs to provide access to the ultimate ``network of networks'' 
known generally as the Internet, in which customers of one IBP are able 
to connect with customers of another network. This hierarchical 
structure dramatically reduces the number of direct and indirect 
interconnections that have to be negotiated, created and managed. One 
impact of the hierarchical structure of the Internet is that a large 
IBP controls the physical path of access to a large base of customers.
    Physically, connectivity between networks is similar whether the 
connection is from an end user to an ISP, from an ISP to an IBP, or 
between two IBPs, in that a transmission interface between the two 
sides of each data exchange is established and packets of data are sent 
from one side of the interface to the other and processed based on a 
common standard. The precise type of infrastructure chosen and method 
of payment for the data exchange vary depending on the relative 
bargaining positions and capabilities of the parties on each side of 
the interconnection. Sometimes the transmission facilities are 
dedicated solely to data exchanges between two parties and sometimes 
there are shared access facilities for interchange, such as modem banks 
or the public interconnection facilities--the Network Access Point 
(``NAPs'') and Metropolitan Area Exchanges (``MAEs''\1\
---------------------------------------------------------------------------

    \1\ The NAPs and MAEs are public interconnection facilities 
operated private parties, through which an ISP or IBP can exchange 
traffic with another network if both chose to do so. UUNET owns and 
operates three of the largest and busiest public interconnection 
points (MAE-East, MAE-West, and MAE-Central), along with four 
smaller regional public MAEs.
---------------------------------------------------------------------------

    There are a variety of relationships at the pints of 
interconnection. Mass market customers typically pay an ISP for the 
right to connect, typically using the shared public telephone 
infrastructure, to ISP's network and through it to all the networks to 
which the ISP is connected directly or indirectly. Corporate customers 
typically pay an ISP for a dedicated connection to the ISP's network 
and to the other networks to which it is connected. Likewise, the 
relationship between an ISP and an IBP typically involves the ISP 
buying access to the IBP's own network and through it to the other IBP 
networks and, thus, to the ISPs who chose to connect first to the other 
IBPs.
    In contrast, the connectivity IBPs offer to each other is more 
variable. Some IBPs interconnect over private facilities, sharing the 
cost evenly and without regard to the balance of traffic flowing in 
each direction, but agreeing only to deliver packets addressed to users 
on their own network (and those of their customers). Such a 
relationship is often referred to as a ``private peering'' agreement. 
``Peering'' stands in stark contrast to ``transit'' agreements where 
one IBP offers another IBP interconnection on the same kinds of terms 
as it offers connectivity to other customers, i.e., the ability to 
interconnect with the transit provider's customers and the customers of 
any other network to which the IBP is connected. Intermediate 
arrangements, such as ``paid peering'' and peering only at public 
interconnection sites also occur between IBPs.\2\
---------------------------------------------------------------------------

    \2\ During the past few years, the explosive growth of the 
Internet has overwhelmed the public interconnection points. Despite 
the expansion of existing public access points and the addition of 
new public access points to accommodate this growth, the NAPs and 
MAEs remain chronically congested. Private interconnections thus 
tend to offer considerably higher quality connections between 
networks in part because the quality is not affected by the volume 
of traffic coming from or between other networks, as it would be at 
a congested public facility.
---------------------------------------------------------------------------

    An IBP's willingness to peer privately with another IBP typically 
depends in large part on the relative volumes of traffic the IBPs would 
send to or receive from one another. A small number of IBPs have such 
large networks of customers that they have the ability to ensure that 
they always receive interconnection with other IBPs that are on terms 
at least as favorable to themselves as to the other side of the 
interconnection and the ability to ensure as much as possible any 
desired level of quality for the interconnection. These large IBPs 
(``Tier 1 IBPs'') typically connect with each other through private, 
unpaid peering connections. In contrast, smaller IBPs are frequently 
customers--either transit customers of Tier 1 IBPs or paid peering 
customers--or have lower quality interconnection because they peer only 
at public interconnection points. These arrangements for connectivity 
between IBPs are, in effect, resold as a bundle when an IBP offers to 
provide general Internet connectivity (i.e., the kind of arrangement 
typically sold by an IBP to its dedicated access customers), and the 
terms of these IBP-interconnection arrangements are important 
determinants of an IBP's ability to compete for sales of the bundled 
product. IBPs with less traffic that must purchase a significant amount 
of their connectivity to other IBPs operate at a substantial cost 
disadvantage compared

[[Page 2937]]

to Tier 1 IBPs, which tend to rely exclusively on peering.
    Tier 1 IBPs also have significant competitive advantages compared 
to lower tier IBPs in terms of their ability to provide higher-quality 
general Internet connectivity service. A customer purchasing general 
Internet connectivity from a Tier 1 IBP will more often be exchanging 
data efficiently over direct and private interconnections than would be 
the case for the same customer purchasing general Internet connectivity 
from a lower-tier IBP that has to rely more on indirect transit service 
or on the inferior and congested public interconnection points.
    Because of these differences, the provision of Tier 1 backbone 
services is distinguished from that provided by other IBPs for 
customers seeking general Internet connectivity. For connectivity 
limited to the specific network (and customers) of a Tier 1 IBP, 
connectivity to a different IBP is not an effective substitute.
    A relevant product market affected by this transaction is the 
provision of Internet connectivity by Tier 1 IBPs. Because providing 
customers with Tier 1 IBP connectivity in the United States requires 
domestic operations, such customers are unlikely to turn to any foreign 
providers that lack these domestic operations in response to a small 
but significant nontransitory increase in price.

C. Anticompetitive Consequences of the Merger

    WorldCom's wholly owned subsidiary, UUNET, is by far the largest 
Tier 1 IBP by any relevant measure and is already approaching a 
dominant position in the Internet backbone market. Based upon a study 
conducted by the Department of Justice in February 2000, UUNET's share 
of all Internet traffic sent to or received from the customers of the 
15 largest Internet backbones in the United States was about 37%, more 
than twice the share of the next-largest Tier 1 IBP, Sprint. Although 
far smaller than UUNET, Intermedia is also a significant provider of 
Internet backbone to dedicated Internet access customers. The 15 
largest backbones represent approximately 95% of all U.S. dedicated 
Internet access revenues.
    As is true in network industries generally, the value of Internet 
access to end users becomes greater as more and more end users can 
easily be reached through the Internet. The benefit that one end user 
derives from being able to communicate effectively with additional 
users is known as a ``network externality.'' Under some conditions, 
this network externality creates strong incentives for IBPs to 
negotiate efficient interconnection arrangements between one another. 
By doing so, each IBP can improve the quality and minimize the cost of 
the services it offers to its own customers.
    When two IBPs are comparable in size, they are likely to be in 
position of rough parity with one another in negotiating 
interconnection arrangements. A substantial size disparity between 
IBPs, however, may alter the bargaining leverage between those IBPs. In 
this context, the smaller IBP may suffer greater harm than the larger 
IBP from a failure to achieve interconnection, since that failure would 
adversely affect the cost and quality of a larger proportion of the 
communications of the smaller IBP's customers than of the 
communications of the larger IBP's customers. In an extreme case, when 
a IBP grows to a point at which it controls a substantial share of the 
total Internet end user base and its size greatly exceeds that of any 
other network, the dominant IBP may be able to ``tip'' the market. By 
degrading the quality or increasing the price of interconnection with 
smaller networks it can obtain advantages in attracting customers to 
its network. Customers will recognize that they can communicate more 
effectively with a larger number of other end users if they are on the 
largest network, and this effect feeds upon itself and becomes more 
powerful as larger numbers of customers choose the largest network. 
Faced with a reduction of quality or an increase in the cost of 
interconnection with the dominant IBP, rivals may be unable to compete 
on a long-term basis and may exit the market. If rivals decide to pass 
on these costs, users of connectivity will respond by selecting the 
dominant network as their provider. Once this occurs, restoring the 
market to a competitive state could require extraordinary means, 
including some form of government regulation.
    Given UUNet's current position in the IBP market, a significant 
increase in UUNet's size relative to other IBPs would create an 
unacceptable risk of anticompetitive behavior. UUNet might be able to 
charge higher prices for interconnection to another IBP, convert non-
paying IBPs to paying IBPs, avoid giving better prices to small IBPs, 
or lower the quality of interconnection to the smaller IBPs, increasing 
the likelihood of a ``tipping'' of the Internet backbone market towards 
monopoly.
    Entry into the Tier 1 Internet backbone services market would not 
be timely, likely, or sufficient to remedy the proposed merger's likely 
anticompetitive harm. Entry barriers are already high, and the proposed 
transaction will raise barriers to entry even higher. Entry sufficient 
to offer a significant competitive constraint on the provision of 
connectivity by Tier 1 IBPs requires substantial time and enormous sums 
of capital to build a network of sufficient size and capacity to 
attract the relevant base of customers, and to attract and retain the 
scarce, highly skilled technical personnel required for its operations. 
Through this transaction, UUNET/Intermedia would enhance its ability to 
control and inhibit successful entry by refusing to interconnect with 
new entrants or by limiting those connections in order to control the 
growth of its rivals. By degrading the quality of interconnection and 
raising its rivals' costs, UUNET/Intermedia would further prevent entry 
and expansion by other IBPs. Moreover, through its control of public 
interconnection facilities (e.g., MAE-East, MAE-West) and its refusal 
to upgrade these facilities, UUNET would be able to limit opportunities 
for existing rivals and new entrants to build their traffic volumes 
through public peering.
    For these reasons, the United States concluded that the WorldCom/
Intermedia merger as proposed may substantially lessen competition in 
violation of Section 7 of the Clayton Act, in the market for the 
provision of Internet connectivity by Tier 1 IBPs.

III. Explanation of the Proposed Final Judgment

A. Divestiture Requirement

    The proposed Final Judgment will preserve competition in the market 
for the provision of Internet connectivity by Tier 1 IBPs by limiting 
UUNET's increase in its control over Internet traffic. Section IV of 
the proposed Final Judgment requires WorldCom, within one hundred 
eighty (180) calendar days from the closing of WorldCom's underlying 
acquisition of Intermedia, to divest all of the Intermedia assets, 
except for the voting interest in Digex, as an ongoing, viable business 
to an acquirer acceptable to the United States. Thus, although the 
proposed Final Judgment permits WorldCom to retain Intermedia's 
interest in Digex, it prohibits UUNET from acquiring Intermedia's 
Internet backbone connectivity network, business, customer 
relationships and traffic.
    Through the sale of Intermedia assets, the proposed Final 
Judgment's prohibitions will help to prevent UUNET from increasing its 
level of customer traffic relative to other Tier 1

[[Page 2938]]

IBPs and thus will help to preserve competition. Absent these 
prohibitions, the likely result of a combined WorldCom and Intermedia 
would be higher prices and lower output than there otherwise would be 
for connectivity to Tier 1 IBPs. As discussed above, Digex is primarily 
provider of managed web-hosting services.
    Intermedia and Digex currently operate as independent companies 
with virtually no shared employees. Intermedia has a controlling voting 
interest in Digex which it will transfer to WorldCom. The entity that 
currently constitutes Intermedia, which includes the Internet backbone 
provider business, will be divested as a whole. The proposed Final 
Judgment, along with the Hold Separate Stipulation and proposed Order, 
ensures that the Intermedia assets and businesses are maintained wholly 
separate from WorldCom pending both the closing of the WorldCom-
Intermedia merger and the divestiture of Intermedia to a qualified 
buyer. Section XI of the proposed Final Judgment prohibits WorldCom 
from reacquiring any part of the divested Intermedia assets during the 
ten year term of the decree. In the Event that WorldCom has not 
completed the divestiture within the specified time period, including 
possible extension pursuant to Section IV(A), Section V provides for 
the appointment of a trustee who shall have the power and authority to 
accomplish the divestiture.

B. Other Decree Provisions

    In order to monitor and ensure compliance with the Final Judgment, 
Section IX requires periodic affidavits on the fact and manner of 
defendants' compliance with divestiture and the Final Judgment. Section 
X gives the United States various rights, including the ability to 
inspect the defendant's records, to conduct interviews and to take 
sworn testimony of the defendant's 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.
    The Court retains jurisdictions under Section XII, and Section XIII 
provides that the proposed Final Judgment will expire on the tenth 
anniversary of the date of its entry, unless extended by the Court.

IV. Remedies Available to Potential Private Litigants

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

V. Procedures Available for Modification of the Proposed Final 
Judgment

    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (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, United States Department of Justice, 
Antitrust Division, 1401 H Street, NW., Suite 8000, Washington, DC 
20530.
    The proposed Final Judgment provides in Section XII 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 
WorldCom/Intermedia merger and a full trial on the merits. The United 
States is satisfied, however, that the divestiture of Intermedia as an 
ongoing business and other relief contained in the proposed Final 
Judgment will preserve competition in the market for the provision of 
Internet connectivity by Tier 1 IBPs. This proposed Final Judgment will 
also avoid the substantial costs and uncertainty of a full trial on the 
merits on 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 Intermedia is sold 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 
considerations bearing upon the adequacy of judgment;
    (2) the impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. Sec. 16(e) (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

[[Page 2939]]

less costly settlement through the consent decree process.'' \3\ 
Rather,
---------------------------------------------------------------------------

    \3\ 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. Sec. 16(f), those procedures are 
discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues and that 
further proceedings would aid the court in resolving those issues. 
See H.R. Rep. 93-1463, 93d Cong. 2d Sess. 8-9 (1974), reprinted in 
U.S.C.C.A.N 6535, 6538.

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

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Case. (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.\4\
---------------------------------------------------------------------------

    \4\ 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); Gillettee, 406 F. Supp. At 716. See 
also Microsoft, 56 F.3d at 1461 (whether ``the remedies [obtained in 
the decree are] so inconsonant with the allegations charged as to 
fall outside of the `reaches of the public interest' '').

    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.' '' 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 prosecutional 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 not 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 State 
has not attached any such materials to proposed Final Judgment.

Dated: December 21, 2000.

    Respectfully submitted,
Donald J. Russell,
Chief.

A. Douglas Melamed,
Acting Assistant Attorney General.

Constance K. Robinson,
Director of Operations and Merger Enforcement.

David F. Smutny (DC Bar No. 435714),
J. Parker Erkmann,
Lorenzo McRae II,
Trial Attorneys, U.S. Department of Justice, Antitrust Division.

Telecommunications Task Force, 1401 H. Street, N.W., Suite 8000, 
Washington, D.C. 20530 (202) 514-5621.

Certificate of Service

    I hereby certify that copies of the foregoing Competitive Impact 
Statement was served, as indicated below, this 21st day of December, 
2000 upon each of the parties listed below:

Charles F. Rule, Esq. (BY HAND), Covington & Burling, 1201 Pennsylvania 
Avenue, N.W., Washington, DC 20004-2401, (202) 662-5119, Counsel for 
WorldCom, Inc.

Brad E. Mutschelknaus, Esq. (BY HAND), Kelley Drye & Warren, LLP, 1200 
19th Street, N.W., Suite 500, Washington, DC 20036, (202) 955-9600, 
Counsel for Intermedia Communications, Inc.

David F. Smutny,
Counsel for Plaintiff.
[FR Doc. 01-928 Filed 1-11-01; 8:45 am]
BILLING CODE 4410-11-M