[Federal Register Volume 68, Number 59 (Thursday, March 27, 2003)]
[Notices]
[Pages 14996-15004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7285]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Gemstar-TV Guide International, Inc. & TV Guide, 
Inc.

    Proposed Final Judgment and Competitive Impact Statement. Notice is 
hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 
U.S.C. sections 16(b) through (h), that a proposed Final Judgment, 
Stipulation and Order, and Competitive Impact Statement have been filed 
with the United States District Court for the District of Columbia in 
United States of America v. Gemstar-TV Guide International, Inc., Civil 
Action No. 03 CV 000198. On February 6, 2003, the United States filed a 
Complaint alleging that TV Guide, Inc. and Gemstar International Group 
Ltd. violated section 1 of the Sherman Act (15 U.S.C. 1) and section 7a 
of the Clayton Act (15 U.S.C. 18a), commonly known as the Hart-Scott-
Rodino (``HSR'') Act. The complaint alleges that, prior to the 
consummation of their merger, the Defendants entered into agreements 
not to compete, to fix prices and to allocate markets and customers, in 
violation of the Sherman Act. The complaint also alleges that the 
Defendants effectively merged their decision-making processes and 
transferred substantial control over their businesses in violation of 
the Clayton Act, which prohibits certain asset acquisitions until the 
expiration or termination of statutory waiting periods. The proposed 
Final Judgment, filed the same time as the Complaint, enjoins the 
Defendants from engaging in similar conduct and requires the Defendants 
to allow rescission of certain contracts entered into during the period 
before they consummated their merger. The proposed Final Judgment also 
requires the Defendants to pay a civil penalty of $5,676,000 to resolve 
the HSR Act violation. The civil penalty component of the proposed 
Final Judgment is not open to pubic comment. 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., on the Internet at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia, 333 Constitution Avenue, NW., Washington, 
DC 20001.
    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 James R. Wade, Chief, Litigation III Section, Antitrust Division, 
Department of Justice, 325 7th St., NW., Suite 300, Washington, DC 
20530, (telephone: (202) 616-5935).

Constance K. Robinson,
Director of Operations.

[Civil Action No. 03 0198]

Stipulation and Order

    It is hereby stipulated by and between the undersigned parties, 
through their respective counsel, as follows:
    1. The Court has jurisdiction over the subject matter of 
plaintiff's Complaint alleging defendants Gemstar-TV Guide 
International, Inc. (``GTV'') and TV Guide, Inc. (``TV Guide'') 
violated section 1 of the Sherman Act (15 U.S.C. 1) and section 7A of 
the Clayton Act (15 U.S.C. 18(a)), and over each of the parties hereto, 
and venue of this action is proper in the United States District Court 
for the District of Columbia. The defendants authorize David T. Beddow, 
Esq. of O'Melveny & Meyers LLP to accept service of all process in this 
matter on their behalf.
    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 Procedure 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 the entry of the proposed Final 
Judgment by serving notice thereof on defendants and by filing that 
notice with the Court.
    3. GTV and TV Guide shall abide by and comply with the provisions 
of 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 
by the parties, comply with all the terms and provisions of the 
proposed Final Judgment as though they 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.
    5. In the event that Plaintiff withdraws its consent, as provided 
in paragraph 2 above, or in the event that 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.
    6. The parties' execution of this Stipulation and entry of the 
Final Judgment settles, discharges, and releases any and all claims of 
the plaintiff for civil penalties against:
    (a) Defendant GTV, its directors, officers, employees, and agents, 
under Sec.  7A of the Clayton Act, 15 U.S.C. 18(a), arising from the 
acquisition of TV Guide by GTV; and
    (b) Defendant TV Guide, its directors, officers, employees and 
agents, under Sec.  7A of the Clayton Act, 15 U.S.C. 18(a), arising 
from the acquisition of TV Guide by GTV.

    Respectfully submitted, for Plaintiff United States of America.
Robert Faulkner (D.C. Bar No. 430163),
U.S. Department of Justice, Antitrust Division, Litigation III Section, 
325 7th Street, NW., Suite 300, Washington, DC 20530, Tel: (202) 514-
0259, Fax: (202) 307-9952.
    Dated: February 6, 2003.

    For Defendants Gemstar-TV Guide International, Inc. and TV 
Guide, Inc.
David T. Beddow (D.C. Bar No. 288514),
O'Melveny & Myers LLP, 555 Thirteenth Street, NW., Washington, DC 
20004-1109, Tel: (202) 383-5362, Fax: (202) 383-5414.

Order

    The Court having considered the parties' Joint Motion for Entry of 
Stipulation and Order, and upon consent of the parties.
    It is hereby ordered that defendants shall abide by and comply with 
all terms and provisions of the proposed Final Judgment pending 
compliance with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

[[Page 14997]]

Parties Entitled To Notice of Entry of Order

Counsel for the United States

    James R. Wade, Robert Faulkner, U.S. Department of Justice, 
Antitrust Division, Litigation III Section, 325 7th Street, NW., Suite 
300, Washington, DC 20530, Tel: (202) 514-0259, Fax: (202) 307-9952.

Counsel for Gemstar-TV Guide International, Inc. and TV Guide, Inc.

    David T. Beddow, Esq., O'Melveny & Myers LLP, 555 Thirteenth 
Street, NW., Washington, DC 20004-1109, Tel: (202) 383-5362, Fax: (202) 
383-5414.

Final Judgment

    Whereas, plaintiff United States of America filed its Complaint on 
February 6, 2003, alleging that defendants Gemstar-TV Guide 
International, Inc. (``GTV'') and TV Guide, Inc. (``TV Guide'') 
violated section 1 of the Sherman Act, 15 U.S.C. 1, and section 7A of 
the Clayton Act, 15 U.S.C. 18a, and plaintiff and defendants, by their 
attorneys, have consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law, and without this 
Final Judgment constituting any evidence against, or any admission by, 
any party regarding such issue of fact or law;
    And whereas, defendants agreed to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    Now therefore, before any testimony is taken, and without trial or 
adjudication of any issue of fact or law, and upon the 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 claims upon which 
relief may be granted against defendants under section 1 of the Sherman 
Act (15 U.S.C. 1) and section 7A of the Clayton Act (15 U.S.C. 18a).

II. Definitions

    As used in this Final Judgment:
    A. ``Agreement'' and its variants means any agreement, mutual 
understanding or mutual plan, written or unwritten.
    B. ``Competing Product'' means (i) any product, service or 
technology offered for sale, license or distribution by any defendant 
that is primarily used for the same purpose as any product, service or 
technology offered for sale, license or distribution by any other party 
to a proposed transaction with any defendant, or (ii) any product, 
service or technology offered for sale, license or distribution by any 
other party to a proposed transaction with any defendant that is 
primarily used for the same purpose as any product, service or 
technology offered for sale, license or distribution by any defendant.
    C. ``Defendants'' means Gemstar-TV Guide International, Inc. and TV 
Guide, Inc.
    D. ``Interactive Program Guide,'' or ``IPG,'' means the software 
and/or technology that allows television viewers to access and organize 
programming information on their television screens and then view a 
channel corresponding to a selected program.
    E. ``IPG Agreement'' means any agreement to provide or license 
IPGs.
    F. ``Negotiation And Interim Period'' means the period between the 
commencement of negotiations with respect to an offer to enter into an 
Agreement, and the date when negotiations are abandoned or when any 
resulting Agreement is consummated or abandoned.
    G. ``Person'' means any individual, partnership, firm, corporation, 
association or other legal or business entity.
    H. ``Pre-consummation Period'' means the period of time between the 
signing of an Agreement for a transaction that is reportable under 
section 7A of the Clayton Act and the rules, regulations and 
interpretations implementing section 7A, and the earlier of the 
expiration or termination of the waiting period under section 7A or the 
closing or abandonment of the reportable transaction.

III. Applicability

    This Final Judgment applies to Defendants, including each of their 
directors, officers, managers, agents, employees, subsidiaries, 
successors and assigns, and to all other persons in active concert or 
participation with any of them who have received actual notice of this 
Final Judgment by personal service or otherwise.

IV. Prohibited and Required Conduct

    A. When any Defendant has entered into a transaction that is 
reportable under section 7A of the Clayton Act, and the rules, 
regulations and interpretations implementing section 7A, the Defendants 
are enjoined and restrained from entering into any Agreement with any 
other party to the transaction that would, during the Pre-consummation 
Period, combine, merge, or transfer (in whole or in part) any 
operational or decision-making control over the marketing or 
distribution of any to-be-acquired product, service or technology.
    B. During the Negotiation And Interim Period of any contemplated 
Agreement to acquire any voting securities or assets, form a joint 
venture, settle litigation, or license intellectual property, with any 
person offering a Competing Product, Defendants are enjoined and 
restrained from:
    1. Entering into any Agreement with that Person to fix, raise, set, 
stabilize or otherwise establish price or output for any Competing 
Product offered during the Negotiation And Interim Period;
    2. Entering into any Agreement with that Person to delay or suspend 
during the Negotiation And Interim Period sales efforts with respect to 
any Competing Product;
    3. Entering into any Agreement with that person to allocate any 
markets or customers during the Negotiation And Interim Period with 
respect to any Competing Product; or
    4. Disclosing or seeking the disclosure of information about 
current or future prices for, information or projections relating to 
future prices of, or contract offers related to Competing Products, 
except as such disclosures may be permitted in subsection V. D., or to 
the extent that such information is publicly available at the time 
disclosure occurs.
    C. For a period of nine (9) months following the date that this 
Final Judgment is filed pursuant to 15 U.S.C 16(b), each Defendant 
shall permit the following service providers, each of which entered 
into an IPG Agreement with TV Guide between June 10, 1999, and July 12, 
2000, or their successors, to terminate, without penalty, said IPG 
Agreements:
    Cameron Communications (Carlyss, LA), Millennium Telcom, LLC 
(Keller, TX), Sweetwater Cable TV Co., Inc. (Rock Springs, WY), Coast 
Communications Co. (Ocean Shores, WA), Florida Cable, Inc. (Astor, FL), 
Pioneer Communications (Ulysses, KA), Standard Tobacco Co. (Maysville, 
KY), Pine Tree Cablevision (Wayne, PA).
    Such termination shall be at the sole option of these service 
providers, or their successors. GTV or TV Guide shall, within twenty 
(20) days of the date that this Final Judgment is filed pursuant to 15 
U.S.C. 16(b), distribute to each such service provider, or its 
successor, a letter containing the notice set forth in Exhibit A.

V. Permitted Conduct

    Nothing in this Final Judgment shall prohibit Defendants from:
    A. agreeing that a party to a transaction shall continue to operate 
in

[[Page 14998]]

the ordinary course of business during the Pre-consummation Period:
    B. agreeing that a party to a transaction forego conduct that would 
cause a material adverse change in the value of to-be acquired assets 
during the Pre-consummation Period;
    C. including a nonexclusive field of use restriction, or reaching 
an Agreement for a royalty fee, in any intellectual property license 
Agreement;
    D. before closing or abandoning a transaction, conducting or 
participating in reasonable and customary due diligence, provide 
however, that no disclosure covered by subsection IV(B)(4) shall be 
permitted unless (1) the information is reasonably related to a party's 
understanding of future earnings and prospects; and (2) the disclosure 
occurs pursuant to a non-disclosure agreement that (a) limits use of 
the information to conducting due diligence and (b) prohibits 
disclosure of any such information to any employee of the person 
receiving the information who is directly responsible for the 
marketing, pricing or sales of the Competing Product(s); or
    E. disclosing confidential business information related to 
Competing Products, subject to a protective order, in the context of 
litigation or settlement discussions.

IV. Compliance

    A. GTV shall maintain an antitrust compliance program which shall 
include designating, within thirty (30) days of entry of this order, an 
Antitrust Compliance Officer with responsibility for achieving 
compliance with this Final Judgment. The Antitrust Compliance Officer 
shall, or a continuing basis, supervise the review of current and 
proposed activities to ensure compliance with this Final Judgment. The 
Antitrust Compliance Officer shall be responsible for accomplishing the 
following activities:
    (1) distributing within forty-five (45) days of entry of this Final 
Judgment, a copy of this Final Judgment to each current officer and 
director, and each employee, agent or other person who has 
responsibility for or authority over mergers and acquisitions;
    (2) distributing in a timely manner a copy of this Final Judgment 
to any officer, director, employee or agent who succeeds to a position 
described in Section VI(A)(1);
    (3) obtaining within sixty (60) days from the entry of this Final 
Judgment, and annually thereafter, and retaining for the duration of 
this Final Judgment, a written certification from each person 
designated in Sections VI(A)(1) & (2) that he or she: (a) Has received, 
read, understands, and agrees to abide by the terms of this Final 
Judgment; (b) understands that failure to comply with this Final 
Judgment may result in conviction for criminal contempt of court; and 
(c) is not aware of any violation of the Final Judgment; and
    (4) providing a copy of this Final Judgment to each merger partner 
before the initial exchange of a letter of intent, definitive agreement 
or other agreement of merger.
    B. Within sixty (60) days of entry of this Final Judgment, GTV 
shall certify to Plaintiff that it has (1) designated an Antitrust 
Compliance Officer, specifying his or her name, business address and 
telephone number; and (2) distributed the Final Judgment in accordance 
with Section VI(A)(1).
    C. For the term of this Final Judgment, on or before its 
anniversary date, GTV shall file with Plaintiff an annual statement as 
to the fact and manner of its compliance with the provisions of 
Sections IV and VI.
    D. If any GTV director or officer or the Antitrust Compliance 
Officer learns of any violation of this Final Judgment, GTV shall 
within three (3) business days take appropriate action to terminate or 
modify the activity so as to assure compliance with this Final 
Judgment, and shall notify the Plaintiff of any such violation within 
ten (10) business days.

VII. Plaintiff's Access and Inspection

    A. For the purpose of determining or securing compliance with this 
Final Judgment, and subject to any legally recognized privilege, duly 
authorized representatives of the United States Department of Justice 
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 GTV, be permitted: (1) Access during GTV's office 
hours to inspect and copy or at Plaintiff's option, to require GTV to 
provide copies of all records and documents in its possession or 
control relating to any matters contained in this Final Judgment; and
    (2) to interview, either informally or on the record, GTV's 
directors, officers, employees, agents or other persons, who may have 
their individual counsel present, relating to any matters contained in 
this Final Judgment. The interviews shall be subject to the reasonable 
convenience of the interviewee and without restraint or interference by 
GTV.
    B. Upon written request of a duly authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, GTV 
shall submit written reports, under oath if requested, relating to any 
of the matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the Plaintiff 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 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 GTV to 
Plaintiff, GTV represents and identifies 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 GTV marks each pertinent page of such material, ``Subject to claim 
of protection under Rule 26(c)(7) of the Federal Rules of Civil 
Procedure,'' then the United States shall give ten (10) calendar days' 
notice prior to divulging such material in any legal proceeding (other 
than a grand jury proceeding) to which GTV is not a party.

VIII. Civil Penalty

    Judgment is hereby entered in this matter in favor of Plaintiff, 
United States of America, and against defendants, GTV and TV Guide, 
and, pursuant to section 7A(g)(1) of the Clayton Act, 15 U.S.C. 
18a(g)(1), the Debt Collection Improvement Act of 1996, Pub. L. 104-
134, 31001(s) (amending the Federal Civil Penalties Inflation 
Adjustment Act of 1990, 28 U.S.C. 2461), and Federal Trade Commission 
Rule 1.98, 16 CFR Sec.  1.98, 61 FR 54549 (Oct. 21. 1996), defendants 
are hereby ordered jointly and severally to pay a civil penalty in the 
amount of five million, six hundred and seventy-six thousand United 
States dollars (U.S. $5,676,000). Payment shall be made by wire 
transfer of funds to the United States Treasury through the Treasury 
Financial Communications System or by cashier's check made payable to 
the Treasurer of the United States and delivered to Chief, FOIA Unit, 
Antitrust Division. Department of Justice, Liberty Place, 325 7th 
Street, NW., Suite 200, Washington, DC 20530. Defendants shall pay the 
full amount of the civil penalties within thirty (30) days of the entry 
of this Final Judgment. In the event of a default in payment, a 
reasonable interest rate shall accrue thereon from the date of default 
to the date of payment. The portion of the Final Judgment requiring the 
payment of civil penalties for violation of section

[[Page 14999]]

7A of the Clayton Act is not subject to the Antitrust Procedures and 
Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h)).

IX. 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 or terminate any of its provisions, to 
enforce compliance, and to punish any violations of its provisions.

X. Expiration of Final Judgment

    Unless extended by this Court, this Final Judgment shall expire ten 
years from the date of its entry.

XI. Costs

    Each party shall bear its own costs of this action.

XII. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Exhibit A

Notification of Available Option to Rescind Certain Contracts

    Gemstar-TV Guide, International Inc. and TV Guide, Inc. (``TV 
Guide'') (collectively ``Gemstar'') have consented to the entry of the 
attached proposed Final Judgment to resolve a civil suit brought by the 
Antitrust Division of the Department of Justice. Under the proposed 
Final Judgment, Gemstar is required to permit your company to 
terminate, without penalty, the IPG agreement your company entered into 
with TV Guide between June 10, 1999 and July 12, 2000. Your company has 
the sole option to terminate its agreement with Gemstar so long as it 
makes its election no later than nine calendar months after February 6, 
2003, which is the date that the proposed Final Judgment was filed with 
the Court. Please note that your option to terminate begins immediately 
and does not require final entry of the proposed Final Judgment.
    You may exercise this option to terminate the contract by sending a 
letter to that effect to Gemstar at the following address:
    Stephen H. Kay, Esq., General Counsel, Gemstar-TV Guide 
International, Inc., 135 North Los Robles Avenue, Suite 800, Pasadena, 
CA 91101.
    Please contact Stephen H. Kay, Esq. at Gemstar 626-792-5700 if you 
need more information.

[Civil Action No. 03 CV 000198, Filed: March 19, 2003]

Competitive Impact Statement

    The United States, pursuant to the Antitrust Process and Penalties 
Act (``APPA''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement to set forth the information necessary to enable the Court 
and the public to evaluate the proposed Final Judgment that would 
terminate this civil antitrust proceeding.\1\
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    \1\ On February 6, 2003, the United States filed a civil 
Complaint, a Stipulation and Order, a proposed Final Judgment, and a 
Momorandum Regarding Procedures for Entering Judgments. As set forth 
in the Memorandum, the proposed Final Judgment would settle this 
case pursuant to the APPA, which applies to civil antitrust cases 
brought and settled by the United States. The APPA requires that the 
United States file a competitive impact statement in such 
proceedings. 15 U.S.C. 16(b).
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I. Nature and Purpose of This Proceeding

    On February 6, 2003, the United States filed a four-count Complaint 
against Gemstar-TV Guide International, Inc. (``GTV'') and its 
subsidiary TV Guide, Inc. (``TV Guide'') related to the conduct of 
GTV's predecessor Gemstar International Group, Ltd. (``Gemstar'') and 
TV Guide before July 2000, when Gemstar and TV Guide were competitors 
in the provision of interactive program guides, or ``IPGs,'' to cable, 
satellite and other multi-channel subscription television service 
providers (``service providers'').
    The Complaint alleges that the Defendants entered into various 
agreements to fix prices and to allocate markets and customers, and 
that they began jointly conducting their IPG business, eliminating 
competition between them in violation of section 1 of the Sherman Act. 
15 U.S.C. 1. Specifically, the Complaint alleges that, in June 1999, as 
Gemstar and TV Guide began the negotiations that would ultimately 
result in a merger agreement, they agreed that they would ``slow roll'' 
(i.e., delay on-going contract negotiations with) certain customers. 
Upon agreeing to merge in October 1999, Gemstar and TV Guide also 
agreed that Gemstar would phase out its IPG marketing operations to 
service providers and that they would allocate specific customers 
between them. Additionally, Gemstar and TV Guide agreed on the prices 
and material terms that TV Guide would offer to service providers 
before consummating the proposed merger.
    The Complaint also alleges that the Defendants violated section 7A 
of the Clayton Act, 15 U.S.C. 18a, which requires certain acquiring and 
acquired parties to file pre-acquisition Notification and Report Forms 
with the Department of Justice (``DOJ'') and the Federal Trade 
Commission (``FTC'') and to observe a statutorily mandated waiting 
period before consummating the acquisition. The fundamental purpose of 
the waiting period is to prevent the merging parties from combining 
during the pendency of an antitrust review and to maintain their 
identity as separate and independent actors.
    In October 1999, Gemstar and TV Guide executed a merger agreement 
that required the filing of the Notification and Report Forms under 
section 7A of the Clayton Act. Rather then wait for the expiration of 
the statutory waiting period, however, Gemstar and TV Guide merged most 
of their IPG decision-making processes, transferred control over 
important assets, and acted jointly on numerous business decisions.
    The Complaint seeks an adjudication that the Defendants' agreements 
violate section 1 of the Sherman Act, such other relief as the Court 
deems appropriate, and a civil penalty for violation of section 7A of 
the Clayton Act.
    The United States and the Defendants have reached a proposed 
settlement that eliminates the need for a trial in this case. The 
proposed Final Judgment remedies the Sherman Act violations by 
enjoining the Defendants from reaching similar anticompetitive 
agreements with competitors. The proposed Final Judgment also provides 
that customers that signed IPG agreements with TV Guide between June 
10, 1999, and July 12, 2000, may elect to terminate their contracts 
within nine months of filing of this proposed Final Judgment.
    To resolve the Clayton Act violation, the proposed Final Judgment 
prohibits the Defendants, during the period between executing an 
agreement subject to section 7A and the expiration of the statutory 
waiting period, from entering into any agreement with the other 
contracting parties to combine, merge, or transfer, in whole or in 
part, any operational or decision-making control over the marketing or 
distribution of any to-be-acquired product, service, or technology. In 
addition, GTV has agreed to pay a civil penalty of $5,676,000, which is 
the maximum civil penalty available to address the section 7A 
violation.
    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered into after compliance with the 
APPA, unless the United States first withdraws its consent. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or

[[Page 15000]]

enforce the provisions of the proposed Final Judgment and punish 
violations thereof. Entry of this judgment would not constitute 
evidence against, or an admission by, any party with respect to any 
issue of fact or law involved in the case and is conditioned upon the 
Court's finding that entry is in the public interest.

II. Description of the Events Giving Rise to the Alleged Violations of 
the Antitrust Laws

A. The Defendants and Their Merger

    GTV is a Delaware corporation with its principal place of business 
in Pasadena, California. GTV is, as was its predecessor Gemstar, an 
international media and communications company that, among other 
things, develops, markets, and support interactive program guides 
(``IPGs'') and IPG technology to providers of multi-channel 
subscription television services (``service providers'') as well as to 
manufacturers of consumer electronics (``CE'') hardware, such as 
televisions and video cassette recorders. An IPG is a software 
application that allows television viewers to display and sort program 
listings on the TV screen.
    TV Guide is a Delaware corporation with its principal place of 
business in Tulsa, Oklahoma. TV Guide is a leading provider of IPGs to 
service providers. In addition to its sales of IPGs, TV Guide offers 
several other television guidance products, including the TV Guide 
magazine.
    In Spring 1999, Gemstar and TV Guide were negotiating a settlement 
of pending patent infringement and antitrust litigation. By June 1999, 
settlement discussions focused on the possible formation of a joint 
venture through which Gemstar and TV Guide would jointly market IPGs to 
service providers. By early August, the parties found that they could 
not reach final agreement on the proposed joint venture. By August 12, 
1999, negotiations between Gemstar and TV Guide had shifted to the 
possibility of merging or entering into a cross-license agreement.
    On October 4, 1999, Gemstar and TV Guide announced an agreement to 
merge, pursuant to which Gemstar would acquire substantially all of the 
outstanding TV Guide stock and the two companies would form a new 
entity. They also entered into an optional agreement to cross-license 
their patents (the ``Back-Up Cross License''). The Back-Up Cross 
License would take effect only if the merger failed to close by a 
certain date and if TV Guide, at its sole option, elected to trigger 
the agreement.
    Gemstar and TV Guide filed the pre-acquisition Notification and 
Report forms required by section 7A of the Clayton Act in November 
1999. After reviewing the parties' filings, the DOJ opened an 
investigation into the competitive effects of the proposed transaction. 
The mandatory statutory waiting period expired on June 19, 2000, 
although the parties voluntarily extended the time for the DOJ to 
conduct its investigation.
    The DOJ ultimately did not file a Complaint seeking to enjoin the 
merger, and the parties consummated their agreement to merge on or 
about July 12, 2000. TV Guide is now a wholly owned subsidiary of GTV.

B. Competition in the Relevant Product Markets

    A relevant product market defines the boundaries within which 
competition meaningfully exists. In this instance, one relevant product 
market consists of the provision of IPGs to service providers for use 
in providing digital cable and satellite television services in the 
United States. Service providers offer their subscribers multi-channel 
packages of television programming. The adoption of digital 
transmission allowed these providers to offer hundreds of programming 
options. Service providers considered an IPG--which allows the viewer 
to sort through these options--a navigational tool for which there was 
no realistic substitute.
    Another relevant market is the market for providing IPGs to cable 
television service providers with systems committed to the GI/Motorola 
digital technology platform. In this context, a ``platform'' consists 
of hardware installed at various points in the cable television system, 
including digital set-top boxes deployed in television viewers' homes. 
Once a service provider has committed a system to a particular 
platform, it can only use IPGs that are compatible with the chosen 
platform on that system.
    The relevant geographic market is the United States, given the need 
for close technical cooperation and support between IPG providers and 
U.S.-based set-top box manufacturers, service providers, and software 
companies.
    Gemstar and TV Guide were direct competitors in these markets. 
Indeed, during the relevant 1999-2000 period, Gemstar and TV Guide were 
the only two established providers of IPG technology and services 
compatible with the GI/Motorola digital platform.

C. Illegal Sherman Act Agreements

1. The ``Slow Roll'' Agreement
    In late Spring 1999, Gemstar was in the final phases of negotiating 
a long-term IPG agreement with Cox Communications, Inc. (``Cox''), a 
large service provider. TV Guide was also vying for Cox's business, 
having sent a draft IPG contract proposal to Cox in April. Similarly, 
both Gemstar and TV Guide were competing to sign Charter 
Communications, Inc. (``Charter'') to a long-term IPG deal.
    On June 10, 1999, Peter C. Boyland III, then President and Chief 
Operating Officer of TV Guide, met with Henry Yuen, then Chief 
Executive Officer of Gemstar, to discuss the possibility that the two 
firms could settle their litigation by forming a joint venture that 
would market their IPG products and services. in a contemporaneous 
memorandum summarizing the June 10 meeting, Mr. Boylan stated that Dr. 
Yuen and Mr. Boylan had ``both acknowledged the need to slow roll 
Charter and Cox.'' What he meant was to cease or suspend competing for 
these customers' business until Gemstar and TV Guide could act jointly. 
Three days later, Dr. Yuen backed away from a draft contract with Cox, 
and thereafter ceased negotiating with Cox and Charter. TV Guide also 
stopped competing for their business during the joint venture 
discussions.
2. Market and Customer Allocation Agreements
    At almost the same time that Gemstar and TV Guide announced their 
agreement to merge, they reached a broad agreement that Gemstar would 
phase out its marketing operations in the relevant markets in order to 
focus on sales and licensing of IPGs to consumer electronics (``CE'') 
firms while TV Guide negotiated IPG agreements with most service 
providers. Pursuant to this agreement, Gemstar stopped actively 
marketing its IPG to service providers, except for certain very small 
systems that used technology platforms that were different from those 
used by traditional cable and satellite television service providers. 
TV Guide had not previously sought to compete for this business and had 
not adapted its IPG to the platforms used by these companies.
    Gemstar and TV Guide also agreed to allocate specific customers 
between them, reaching understandings as to whether TV Guide or Gemstar 
would approach and negotiate with particular customers during the 
period between the merger agreement and the consummation of the merger 
(the ``interim period''). Specifically, Gemstar and TV Guide agreed 
that TV Guide

[[Page 15001]]

would negotiate with most service providers during the interim period.
3. Agreements to Fix Prices and Material Terms to Service Providers
    Gemstar and TV Guide also agreed on the prices and terms that they 
would offer to most service providers during the interim period. To 
effectuate this agreement, they shared detailed and specific 
information about offers and counter-offers to service providers and 
kept each other apprised of individual contacts with customers. TV 
Guide provided Gemstar with its ``rate card,'' which included both 
rates and non-price terms, and, on at least two occasions, TV Guide 
provided Gemstar with full drafts of proposed IPG contracts before they 
were sent to service providers. On at least two occasions, Gemstar sent 
to TV Guide red-lined comments on TV Guide's draft IPG contracts. In 
the course of maintaining regular contact with Gemstar, TV Guide blind-
copied or forwarded to Gemstar electronic correspondence between TV 
Guide and service providers related to negotiations for IPG agreements.
    As a result of this agreement, the prices and terms that TV Guide 
offered during the interim period substantially differed from offers it 
had made prior to June 1999, when it began coordinating with Gemstar. 
During this period eight service providers entered into IPG agreements 
with TV Guide under prices and terms that conformed to the illegal 
agreement.

C. Pre-Merger Acquisition of Assets

    Though their agreements and other actions, Gemstar and TV Guide, in 
effect, merged their IPG decision-making processes, and each acquired 
substantial operational and decision-making control over important 
assets of the other, before the expiration of the statutory waiting 
period prescribed by Section 7A of the Clayton Act. Gemstar, for 
example, gained review and veto authority over TV Guide's IPG contract 
offers, converted TV Guide into its agent in various respects, and 
gained substantial influence over TV Guide's separate IPG advertising 
business. TV Guide, for its part, acquired substantial amounts of 
control over Gemstar's business of providing IPGs to service providers, 
including Gemstar's business opportunities and customer relationships. 
In addition, the parties shared confidential business information and 
made joint decisions regarding various business opportunities.

E. The Defendants' Conduct Violates Antitrust Laws

1. Sherman Act Violations
    Section 1 of the Sherman Act prohibits any ``contract, combination 
or conspiracy'' in ``restraint of trade.'' In the context of a merger, 
Section 1 requires competitors that have agreed to merge to maintain 
their status as independent economic entities throughout the pre-
consummation period, i.e., until they can be legally combined. Here, 
the Complaint alleges three specific anticompetitive agreements that 
violated Section 1--to cease competing for customers, to allocate 
markets and customers, and to fix prices and terms. These agreements 
eliminated competition and foreclosed the possibility that customers 
could have obtained lower prices and secured better contract terms 
during the time before the merger could be legally consummated. Stand-
alone agreements to fix prices, allocate markets or customers, or 
otherwise cease competition have long been condemned as per se 
violations of Section 1 of the Sherman Act. Given their harmful effect 
on competition and lack of any redeeming virtue, they are conclusively 
presumed to be unreasonable, without the need for an elaborate inquiry 
into the harm actually caused or to any potential business 
justifications for their use.
    Here, the Antitrust Division concluded that no special 
circumstances justified the Defendants' conduct or removed it from the 
per se illegal category. The ``slow roll'' agreement, the market and 
customer allocations, and the fixing of prices and terms were not 
reasonably necessary to effectuate their merger agreement or the Back-
Up Cross License Agreement, and thus were not ancillary to a legitimate 
business transaction. None of the restraints settled, or were 
reasonably ancillary to settling, the pending litigation. Similarly, 
the fact that many of the agreements were reached after the Defendants 
had agreed to merge did not change the character of the illegal 
restraints. The extensive coordination on prices and terms to be 
offered, whether in long-term contracts or otherwise, was not justified 
as necessary to protect any legitimate interest that Gemstar may have 
had in preserving TV Guide's business, or in preventing a material 
change in TV Guide's conduct that might adversely affect the value of 
the to-be-acquired business.
    The Defendants' illegal agreements had the effect of lessening or 
eliminating competition between Gemstar and TV Guide in the provision 
of IPG technology and services in violation of Section 1 of the Sherman 
Act and denied customers the benefits of that competition. During the 
period when those agreements were in effect, some service providers 
signed long-term IPG contracts based on the fixed prices and terms. 
Moreover, but for the illegal agreements, some service providers may 
have signed long- or short-term IPG agreements on better prices and 
terms than the Defendants had agreed to offer.
2. Clayton Act Section 7A Violation
    Section 7 of the Clayton Act is the principal statute used by the 
antitrust agencies to challenge anticompetitive mergers and 
acquisitions. It provides in pertinent part:

No person shall acquire, directly or indirectly, the whole or any 
part of the stock or other share capital and no person subject to 
the jurisdiction of the Federal Trade Commission shall acquire the 
whole or any part of the assets of one or more persons engaged in 
commerce or in any activity affecting commerce, where in any line of 
commerce or in any activity affecting commerce in any section of the 
country, the effect of such acquisition, of such stocks or assets, 
or of the use of such stock by the voting or granting of proxies or 
otherwise, may be substantially to lessen competition, or to tend to 
create a monopoly.\2\
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    \2\ 15 U.S.C. 18.

    Prior to the enactment of section 7A of the Clayton Act, the DOJ 
and FTC often were forced to investigate anticompetitive acquisitions 
that had already been consummated without public notice. In those 
situations, the agencies' only recourse was to sue to unwind the 
parties' merger. The combined entity had the incentive to delay 
litigation so that years elapsed before adjudication and attempted 
relief. During this extended time consumers were harmed by the 
reduction in competition between the acquiring and acquired firms and, 
if the court ultimately found that the merger was illegal, effective 
relief was often impossible to achieve.
    Congress enacted section 7A as a measure to strengthen and improve 
antitrust enforcement by giving the enforcement agencies an opportunity 
to investigate certain large acquisitions before they are consummated. 
In particular, section 7A prohibits certain acquiring parties from 
consummating the acquisition before a prescribed waiting period expires 
or is terminated.\3\

[[Page 15002]]

The parties are required to remain separate during the statutory 
waiting period and to preserve their status as independent economic 
actors during the antitrust investigation. The legislative history of 
section 7A underscores Congress' desire that competition existing 
before the merger should be maintained to the extent possible pending 
review by the antitrust enforcement agencies and the court.
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    \3\ Section 7A requires that ``no person shall acquire, directly 
or indirectly, any voting securities or assets of person'' exceeding 
certain thresholds until both have made premerger notification 
filings and the post-filing waiting period has expired. 15 U.S.C. 
18a(a). At the time of the Defendants' conduct, the post filing 
waiting period was either 30 days after filing or if the enforcement 
agency requested additional information, 20 days after the parties 
complied with the enforcement agency's request. 15 U.S.C. 18a(b). 
The enforcement agency may grant early termination of the waiting 
period, 15 U.S.C. 18a(b)(2), and often does so when a merger poses 
no competitive problems.
---------------------------------------------------------------------------

    The Complaint alleges that the Defendants violated section 7A by, 
in effect, merging their IPG decision-making and by giving Gemstar 
significant control over TV Guide's IPG business before the expiration 
of the statutory waiting period, thus accomplishing a defacto 
acquisition of assets under section 7A. Whether a de facto acquisition 
has occurred depends on the facts of each particular case. Courts have 
recognized that the execution of an acquisition agreement, combined 
with the assumption of significant operational or decision-making 
influence over the to-be-acquired business, can amount to an 
``acquisition'' under section 7 of the Clayton Act, even if the parties 
have not formally consummated the transaction. Similarly, once parties 
have entered into an executory agreement subject to section 7A's 
requirements, they may not effectuate the acquisition by, for example, 
merging their operations or otherwise transferring significant 
operational, management or decision-making control over the to-be-
acquired assets. In other words, once section 7A is triggered, parties 
to a merger agreement must, at a minimum, avoid combining prematurely 
in a way that would constitute an acquisition under section 7.\4\
---------------------------------------------------------------------------

    \4\ This conclusion accords with the FTC regulations, which 
define an ``acquiring person'' as one who will ``hold'' voting 
securities or assets directly or indirectly through third parties. 
16 CFR 801.2(a). ``Hold'' is further defined to mean ``beneficial 
ownership,'' 16 CFR 801.1(c). In its ``Statement of Basis and 
Purpose'' (``SBP''), 43 FR 33450 (July 31, 1978), which accompanied 
the regulations, the FTC stated that the existence of ``beneficial 
ownership'' was to be determined ``in the context of particular 
cases'' with respect to the person enjoying the ``indicia of 
beneficial ownership.'' Id. at 33459. The execution of a reportable 
agreement, combined with the assumption of significant influence 
over the to-be-acquired securities or assets, transfers sufficient 
``indicia of beneficial ownership'' to amount to ``holding'' the 
securities or assets under the regulations. See William J. Baer, 
Report from the [FTC] Bureau of Competition (April 15, 1999) (``In 
the jargon of [section 7A], signing the contract transfers some 
indicia of beneficial ownership. By itself, that transfer is 
entirely lawful. But the transfer of additional indicia of ownership 
during the waiting period--such as assuming control through 
management contracts, integrating operations, joint decision making, 
or transferring confidential business information for purposes other 
than due diligence inquiries--are inconsistent with the purposes of 
[section 7A] and will constitute a violation.'')
---------------------------------------------------------------------------

    Such premature combination of operations and assets significantly 
undermines the statutory scheme, which is designed to give the 
antitrust agencies the opportunity to conduct an investigation before 
the parties have combined their operations or acquired significant 
assets. It can contaminate the antitrust agencies' investigation by, 
among other things, providing a skewed picture of the competitive 
landscape and making it difficult or impossible to obtain meaningful 
relief should the antitrust agencies successfully enjoin a transaction.

III. Explanation of the proposed Final Judgment

    The proposed Final Judgment contains equitable relief designed to 
prevent future violations of section 1 of the Sherman Act and section 
7A of the Clayton Act, addresses the effects of the Defendants' 
conduct, and secures a monetary civil penalty for Gemstar's and TV 
Guide's violation of section 7A. The proposed Final Judgment sets forth 
required and prohibited conduct, a compliance program the Defendants 
must follow, and procedures available to the United States to determine 
and ensure compliance with the Final Judgment. Section IX provides that 
these conditions will expire ten years after the entry of the Final 
Judgment.

A. Prohibited Conduct

    Section IV(A) of the proposed Final Judgment is designed to prevent 
future Clayton Act violations of the sort alleged in the Complaint. 
During the ``pre-consummation period''--after executing an agreement 
subject to the reporting requirements of section 7A and until the 
expiration of the statutory waiting period--the Defendants are 
prohibited from entering into any agreement with the other contracting 
parties to combine, merge, or transfer, in whole or in part, any 
operational or decision-making control over the marketing or 
distribution of any to-be-acquired product, service, or technology. 
This injunction applies to all transactions subject to the reporting 
requirements of section 7A, regardless of the particular products 
involved or whether the other party to the transaction competes with 
the Defendants. The injunction also applies to partial assumptions of 
control over the marketing or distribution of any to-be-acquired asset.
    Section IV(B) is designed to prevent future violations of Sherman 
Act. In enjoins the Defendants from entering into various agreements 
with competitors between the beginning of negotiations until the 
consummation or abandonment of certain specified types of transactions. 
Specifically, this provision covers any agreement between the 
Defendants and any firm offering a competing product to acquire assets 
or securities, form a joint venture, settle litigation, or license 
intellectual property. During this period, the Defendants may not reach 
agreements with the other party affecting price or output, allocating 
markets or customers, or eliminating or delaying competition. Section 
IV(B) also enjoins the Defendants from disclosing, or seeking the 
disclosure of, competitively sensitive information during this period.
    In addition, Section IV(C) of the proposed Final Judgment requires 
GTV to permit specified service providers, those that signed IPG 
agreements conforming to the agreed-upon prices and terms during the 
period between June 10, 1999, and July 12, 2000, the option to 
terminate, without penalty, those agreements. The decision to terminate 
those agreements rests solely with the service provider.

B. Permitted Conduct

    Section V of the proposed Final Judgment identifies certain 
agreements and conduct that are permitted by the Judgment. Sections 
V(A) and V(B) ensure that the decree will not be interpreted to forbid 
certain ``conduct-of-business'' covenants that are typically found in 
merger agreements. Section V(A) permits the use of agreements 
obligating the to-be-acquired person generally to operate its business 
in the ordinary course of business consistent with past practices. 
Section V(B) permits the use of ``material adverse change'' provisions, 
which give the acquiring person certain rights to prevent material 
changes in the way a to-be-acquired firm conducts its business. These 
are customary provisions found in most merger agreements and are 
intended to protect the value of the transaction and prevent a to-be-
acquired person from wasting assets.
    Section V(D) recognizes a narrow exception to the prohibition on 
the exchange of competitively sensitive information. As a general rule, 
competitors should not obtain prospective customer-specific price

[[Page 15003]]

information prior to the consummation of the transaction. Access to 
such information raises significant antitrust risks, as it could be 
used to enter into an illegal agreement that would be harmful to 
competition if the transaction is subsequently abandoned. 
Notwithstanding, there may be situations during the due diligence 
process in which an acquiring person may need information regarding 
pending contacts to value the business properly. Section IV(D) of the 
proposed Final Judgment permits GTV to obtain such information, subject 
to appropriate limitations and confidentiality undertakings.

C. Compliance

    Sections VI and VII of the proposed Final Judgment set forth 
various compliance procedures. Section VI sets up an affirmative 
compliance program directed toward ensuring GTV's compliance with the 
limitations imposed by the proposed Final Judgment. The compliance 
program includes the designation of a compliance officer who is 
required to distribute a copy of the Final Judgment to each present and 
succeeding director, officer, employee, and agent with the 
responsibility for mergers and acquisitions, brief each such person 
regarding compliance with the Final Judgment, and obtain a 
certification from each such person that he or she has received a copy 
of the Final Judgment and understand his or her obligations under the 
judgment. In addition, the compliance officer must provide a copy of 
the Final Judgment to a merger partner before the initial exchange of a 
letter of intent, definitive agreement or other agreement of merger. 
Section VI of the proposed Final Judgment further requires the 
compliance officer to certify to the United States that GTV is in 
compliance and to report any violations of the Final Judgment.
    To facilitate monitoring GTV's compliance with the Final Judgment, 
Section VII grants DOJ access, upon reasonable notice, to GTV's records 
and documents relating to matters contained in the Final Judgment. GTV 
must also make its personnel available for interviews or depositions 
regarding such matters. In addition, GTV must, upon request, prepare 
written reports relating to matters contained in the Final Judgment.
    These provisions are adequate to prevent recurrence of the type of 
illegal conduct alleged in the Complaint. The proposed Final Judgment 
should ensure that, in future transactions, GTV will not enter into 
agreements to limit competition during the pre-consummation period. 
Consequently, customers will receive the benefits of free and open 
competition.

D. Civil Penalties \5\

    Under section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18a(g)(1), any 
person who fails to comply with the Act shall be liable to the United 
States for a civil penalty of not more than $11,000 for each day during 
which such person is in violation of the Act.\6\ Both Gemstar and TV 
Guide were in violation of section 7A from the first full day following 
execution of the merger agreement until the expiration of the statutory 
waiting period. The Defendants have agreed to pay, within thirty days 
of the entry of the proposed Final Judgment, civil penalties reflecting 
$11,000 per day per Defendant (or $5,676,000). This is the maximum 
civil penalty the Court could impose on the Defendants at trial.
---------------------------------------------------------------------------

    \5\ The United States does not believe that the payment of civil 
penalties under section 7A is subject to the APPA, and courts in 
this district have consistently entered consent judgments for civil 
penalties under section 7A without employing APPA procedures. See, 
e.g., United States v. Hearst Trust, et al., 2001-2 Trade Cases ] 
73,451 (D.D.C.); United States v. Input/Output, et al., 1999-1 Trade 
Cas. (CCH) ] 72,528 (D.D.C.); United States v. Blackstone Capital 
Partners II Merchant Banking Fund, et al., 1999-1 Trade Cas. (CCH) ] 
72,585 (D.D.C.); United States v. Mahle GMBH, et al., 1997-2 Trade 
Cas. (CCH) ] 71,868 (D.D.C.); United States v. Figgie Int'l, Inc., 
1997-1 Trade Cas. (CCH) ] 71,766 (D.D.C.); United States v. 
Foodmaker, Inc., 1996-2 Trade Cas. (CCH) ] 71,555 (D.D.C.); United 
States v. Titan Wheel International, Inc., 1996-1 Trade Cas. (CCH) ] 
71,406 (D.D.C.); United States v. Automatic Data Processing, Inc., 
1996-1 Trade Case. (CCH) ] 71,361 (D.D.C.); United States v. Trump, 
1988-1 Trade Cas. (CCH) ] 67,968 (D.D.C.). Thus, in consent 
settlements seeking both equitable relief and civil penalties, 
courts have not required use of APPA procedures with respect to the 
civil penalty component of the proposed final judgment. See United 
States v. ARA Services, Inc., 1979-2 Trade Cas. (CCH) ] 62,861 (E.D. 
Mo.). Consequently, the civil penalties component of the proposed 
Final Judgment is not open to public comment. The other provisions 
of the proposed Final Judgment, including the equitable relief to 
resolve the alleged violations of section 7A, are covered by the 
APPA and subject to comment.
    \6\ Id.; see also Pub. L. 104-134 Sec.  31001(s) (Debt 
Collection Improvement Act of 1996); 16 CFR 1.98 (increasing maximum 
penalty to $11,000 per day).
---------------------------------------------------------------------------

V. Remedies Available to 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 district court to recover 
three times the damages the person has suffered, as well as the costs 
of bringing a lawsuit and reasonable attorneys fees. Entry of the 
proposed Final Judgment will neither impair nor assist the bringing of 
any private antitrust damage action. Under the provisions of section 
5(a) of the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment 
has no effect as prima facie evidence in any subsequent private lawsuit 
that may be brought against Defendants.

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 this Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry of the decree upon 
this Court's determination that the injunction portion of 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 Sherman Act injunction contained in the 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 comments. All 
comments will be given due consideration by the DOJ, which remains free 
to withdraw its consent to the proposed Final Judgment at any time 
prior to entry. The comments and the response of the United States will 
be filed with this Court and published in the Federal Register. Written 
comments should be submitted to: James R. Wade, Chief, Litigation III, 
United States Department of Justice, Antitrust Division, 325 7th St., 
NW., Suite 300, Washington, DC 20530.
    The proposed Final Judgment provides that this Court retains 
jurisdiction over this action, and the parties may apply to this Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VII. Alternatives to the Proposed Final Judgment

    As an alternative to the proposed Final Judgment, the United States 
considered a full trial on the merits against the Defendants. The 
United States is satisfied, however, that the proposed injunctive 
relief and payment of civil penalties are sufficient to address the 
harm alleged in the Complaint.

[[Page 15004]]

VIII. Standard of Review under the APPA for Proposed Final Judgment

    The APPA requires that injunctions of anticompetitive conduct 
contained in 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 on 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 the determination of the 
issues at trial.

    15 U.S.C. 16(e). As the Court of Appeals for the District of 
Columbia has held, the APPA permits a court to consider, among other 
things, the relationship between the remedy secured and the specific 
allegations set forth in the Government's Complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See United 
States v.  Microsoft, 56 F.3d 1448-62 (D.C. Cir. 1995).
    In conducting this inquiry, ``the Court is nowhere compelled to go 
to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree proceedings.\7\ Rather,
---------------------------------------------------------------------------

    \7\ United States v. Gillette Co., 406 F.Supp. 713, 715 (D. 
Mass. 1975) citing 119 Cong. Rec. 24598 (1973). 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, these procedures are discretionary. 15 U.S.C. 16(f). 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. No. 93-
1463, 93rd Cong. 2d Sess. 8-9 (1974), reprinted in 1974 U.S.C.C.A.N. 
6535, 6538-9.

absent a showing of corrupt failure of the government to discharge 
its duty, the Court in making its public interest findings, 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.\8\
---------------------------------------------------------------------------

    \8\ United States v. Mid-America Dairymen, Inc. 1977-1 Trade 
Cas. (CCD ] 61,508, 71980 (W.D. Mo. 1977); see also United States v. 
Loew's Inc., 783 F.Supp. 211, 214 (S.D.N.Y. 1992); United States v. 
Columbia Artists Mgmt., Inc., 662 F.Supp. 865, 870 (S.D.N.Y. 1987).

    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, 462-63 (9th Cir. 1988) quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir), cert. denied, 454 U.S. 1083 (1981); 
---------------------------------------------------------------------------
see also Micosoft, 56 F.3d at 1458. Precedent requires that

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is 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.\9\

    \9\ United States v. Bechtel Corp., 648 F.2d at 666 (citations 
omitted) (emphasis added); see United States v. BNS, Inc., 858 F.2d 
at 463; United States v. National Broadcasting Co., 449 F.Supp. 
1127, 1142-3 (C.D. Cal. 1978) United States v. Gillette Co., 406 
F.Supp. at 716. See also United States v. American Cyanamid Co., 719 
F.2d 558, 565 (2d Cir. 1983).

    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. A ``proposed decree must 
be approved even if it falls short of the remedy the court would impose 
on its own, as long as it falls within the range of acceptability or is 
`within the reaches of public interest.' ''\10\
---------------------------------------------------------------------------

    \10\ Gillette, 406 F.Supp. at 716; See also United States v. 
Alcan Aluminum Ltd., 605 F.Supp. 619, 622 (W.D. Ky. 1985); United 
States v. Carrols Dev. Corp., 454 F.Supp. 1215, 1222 (N.D.N.Y. 
1978).
---------------------------------------------------------------------------

    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States 
alleges 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 the ``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.

IX. 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.

    Dated: March 19, 2003.

    Respectfully Submitted,
Robert P. Faulkner (D.C. Bar No. 430163), Erika L. Meyers (D.C. Bar No. 
465452), Thomas H. Liddle, Scott A. Scheele (D.C. Bar No. 429061),
Attorneys, U.S. Department of Justice, Antitrust Division, Litigation 
III Section, 325 7th Street, NW., Ste. 300, Washington, DC 50530, 202/
514-0259.
[FR Doc. 03-7285 Filed 3-26-03; 8:45 am]
BILLING CODE 4410-11-M