[Federal Register Volume 71, Number 13 (Friday, January 20, 2006)]
[Notices]
[Pages 3327-3340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-454]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States, State of Illinois, State of New York, and 
Commonwealth of Massachusetts v. Marquee Holdings, Inc. and LCE 
Holdings, Inc.; Complaint, Proposed Final Judgment, and Competitive 
Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. section 16(b) through (h), that a Complaint, 
proposed Final Judgment, Stipulation and Competitive Impact Statement 
have been filed with the United States District Court for the Southern 
District of New York in United States of America, State of Illinois, 
State of New York, and Commonwealth of Massachusetts v. Marquee 
Holdings, Inc. and LCE Holdings, Inc., Civil Action No. 05-10722. On 
December 22, 2005, the United States filed a Complaint alleging that 
the proposed merger of Marquee Holdings, Inc. and LCE Holdings, Inc. 
would violate Section 7 of the Clayton Act, 15 U.S.C. 18 by lessening 
competition for theatrical exhibition of first-run films in five 
cities: Boston, MA, New York, NY, Chicago, IL, Dallas, TX, and Seattle, 
WA. The proposed Final Judgment, filed at the same time as the 
Complaint, requires the defendants to divest first-run, commercial 
theatres, along with certain tangible and intangible assets, in those 
five cities in order to proceed with the proposed $4 billion 
transaction. A Competitive Impact Statement filed by the United States 
on December 22, 2005 describes the Complaint, the proposed Final 
Judgment, the industry, and the remedies available to private litigants 
who may have been injured by the alleged violation.
    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 
Southern District of New York, New York, New York. Copies of these 
materials may be obtained from the Antitrust Division upon request and 
payment of the copying fee set by Department of Justice regulations.
    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 John R. Read, Chief, Litigation III Section, Antitrust Division, 
United States Department of Justice, 325 7th Street, NW., Suite 300,

[[Page 3328]]

Washington, DC 20530 (telephone: 202-307-0468). At the conclusion of 
the sixty (60) day comment period, the U.S. District Court for the 
Southern District of New York may enter the proposed consent decree 
upon finding that it serves the public interest.

J. Robert Kramer II,
Director of Operations, Antitrust Division.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the States of Illinois and 
New York, and the Commonwealth of Massachusetts, acting through their 
Attorneys General, bring this civil antitrust action to prevent the 
proposed merger of Marquee Holdings, Inc. and LCE Holdings, Inc. If the 
merger is permitted to proceed, it would combine the two leading, and 
in some cases only, operators of first-run, commercial movie theatres 
in Chicago North, Midtown Manhattan, downtown Seattle, downtown Boston, 
and north Dallas. The merger would substantially lessen competition and 
tend to create a monopoly in the theatrical exhibition of commercial, 
first-run movies in the above listed markets in violation of section 7 
of the Clayton Act, 15 U.S.C. 18.

 I. Jurisdiction and Venue

    1. This action is filed by the United States pursuant to section 15 
of the Clayton Act, as amended, 15 U.S.C. 25, to obtain equitable 
relief to prevent a violation of section 7 of the Clayton Act, as 
amended, 15 U.S.C. 18. The States of Illinois and New York, and the 
Commonwealth of Massachusetts bring this action under section 16 of the 
Clayton Act, 15 U.S.C. 26, to prevent the defendants from violating 
section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
    2. Both defendants operate theatres in this District. The 
distribution and exhibition of commercial, first-run films is a 
commercial activity that substantially affects, and is in the flow of, 
interstate trade and commerce. The defendants purchase substantial 
quantities of equipment, services, and supplies from sources located 
outside of New York. In particular, most of the distributors from whom 
the defendants license films are located outside of New York. The 
defendants also acquire funding for their New York operations from 
outside of New York. The Court has jurisdiction over the subject matter 
of this action and jurisdiction over the parties pursuant to 15 U.S.C. 
22, 25, and 26, and 28 U.S.C. 1331 and 1337.
    3. Venue in this District is proper under 15 U.S.C. 22 and 28 
U.S.C. Sec.  1391(c).

II. Defendants and the Proposed Merger

    4. Defendant Marquee Holdings, Inc. (``Marquee'') is a Delaware 
corporation with its headquarters in Kansas City, Missouri. It is the 
holding company of AMC Entertainment Inc. (``AMC''). AMC owns or 
operates 216 theatres containing 3,300 screens at locations throughout 
the United States.
    5. Defendant LCE Holdings, Inc. (``LCE'') is a Delaware corporation 
with its headquarters in New York City, New York. It is the holding 
company of Loews Cineplex Entertainment Corporation (``Loews''). Loews 
owns or operates 128 theatres containing 1,424 screens at locations 
throughout the United States. Loews operates theatres under the Loews 
Theatres, Cineplex Odeon, Star Theatres, and Magic Johnson Theatres 
brands.
     6. On June 30, 2005, Marquee and LCE entered into a merger 
agreement. Under the merger agreement, LCE would merge into Marquee and 
Loews will merge into AMC. The current shareholders of LCE would 
control 40% of the combined company's outstanding common stock while 
the current shareholders of Marquee would control 60% of the combined 
company's outstanding common stock.

 III. Background of the Movie Industry

    7. Theatrical exhibition of feature length motion picture films 
(``movies'') provides a major source of out-of-home entertainment in 
the United States. Although they vary, ticket prices for movies tend to 
be significantly less expensive than many other forms of out-of-home 
entertainment, particularly live entertainment such as sporting events 
and live theatre. Movies have retained their appeal as mass 
entertainment: Over 1.5 billion movie tickets were sold in the United 
States in 2004. Total box office revenue for 2004 exceeded $9.5 
billion.
    8. ``Exhibitors'' are companies that operate movie theatres. Some 
exhibitors own a single theatre, whereas others own a circuit of 
theatres within one or more regions of the United States. AMC and Loews 
are exhibitors and each operates one of the largest theatre circuits in 
the United States.
    9. ``Distributors'' are companies that engage in the business of 
renting and licensing movies to exhibitors. Distributors arrange for 
the promotion and marketing of films and contract with exhibitors to 
exhibit films at theatres throughout the country. Established 
distributors include Sony, Paramount, Twentieth Century Fox, Universal, 
Disney, Warner Bros., Dreamworks, Metro-Goldwyn-Meyer, and Buena Vista.
    10. Distributors negotiate with exhibitors to exhibit films. 
Exhibitors compete to obtain films to show at their theatres that they 
believe will result in high ticket sales, and distributors choose 
theatres to exhibit their films based on the quality, location, and 
grossing potential of the theatres and the particular terms offered by 
the exhibitors.
    11. Distributors license movies by ``zones'' that reflect specific 
local areas. Typically, only one theatre within a zone will play a 
particular movie. There are two types of zones: ``free zones'' (or 
``non-competitive zones'') and ``competitive zones.'' Free zones 
contain only a single theatre. Competitive zones contain two or 
sometimes more theatres competing for the exclusive license to exhibit 
a movie within the zone.
    12. The terms of the agreement pursuant to which distributors 
license films to exhibitors vary and are individually negotiated. Each 
agreement, however, typically specifies a formula pursuant to which box 
office revenues are divided between the exhibitor and the distributor. 
The agreements often provide that the exhibitor will keep a certain 
dollar amount from the box office revenues to compensate for 
``overhead,'' as well as a specified percentage of what remains after 
the overhead is deducted.
    13. Exhibitors set ticket prices for each theatre based on a number 
of factors, including the competitive situation facing each theatre, 
the prices of nearby, comparable theatres, the number and type of 
amenities each theatre offers, such as stadium seating, and the age of 
the theatre.

IV. Relevant Market

A. Product Market

    14. Movies are a unique form of entertainment. The experience of 
viewing a movie in a theatre is an inherently different experience from 
a live show, a sporting event, or viewing a DVD or videotape of a movie 
in the home. Typically, viewing a DVD or videotape in the home lacks 
several characteristics of viewing movies in theatres, including the 
size of screen, the sophistication of sound systems, and the social 
experience of viewing a movie with other patrons. Ticket prices for 
movies are generally very different than prices for other forms of 
entertainment: Live entertainment is typically significantly more 
expensive than a movie ticket, whereas renting a DVD or

[[Page 3329]]

videotape is usually significantly cheaper than viewing a first-run 
movie in a theatre. Because going to the movies is a different 
experience from other forms of entertainment and because movie prices 
are significantly different from other forms of entertainment, small 
but significant price increases for movie tickets generally do not 
cause a sufficient number of movie-goers to shift to other forms of 
entertainment to make the increase unprofitable.
    15. A movie is considered to be in its ``first-run'' during the 
initial weeks following its release in a given locality. If successful, 
a movie may be exhibited at other theatres after the first-run as part 
of a second or subsequent run (often called a sub-run). Tickets at 
theatres exhibiting sub-run movies usually cost significantly less than 
tickets at first-run theatres. Because the films exhibited at sub-run 
theatres are no longer new releases, most movie-goers do not regard 
sub-run films as an adequate substitute for first-run films and would 
not switch to sub-run films if the price of first-run films was 
increased by a small but significant amount.
    16. Commercial movies typically appeal to different patrons than 
other types of movies, such as art movies or foreign language movies. 
For example, art films tend to appeal more universally to mature 
audiences and art film patrons tend to purchase fewer concessions. 
Theatres that primarily exhibit art films often contain auditoriums 
with fewer seats than theatres that primarily play commercial films. 
Typically, art films are released less widely than commercial films. 
Also, exhibitors consider art theatre operations as distinct from the 
operations of theatres that exhibit commercial films. Because art 
movies appeal to different patrons and are often exhibited in different 
types of theatres than commercial theatres, most movie-goers do not 
regard art films as an adequate substitute for commercial films and 
would not switch to them if the price of commercial films was increased 
by a small, but significant amount.
    17. Similarly, foreign language films do not widely appeal to U.S. 
audiences. As a result, movie-goers do not regard foreign language 
films as adequate substitutes for commercial films and would not switch 
to them if the price of commercial films was increased by a small, but 
significant amount.
    18. Movie-goers prefer stadium seating theatres, in which each row 
of seats is set on a tier that is higher than the tier on which the row 
in front of it is set. Movie-goers will often bypass older, slope floor 
theatres to view a movie at a stadium seating theatre and are willing 
to pay more to view movies in stadium seating theatres. Exhibitors also 
view stadium seating theatres as superior to slope floor theatres. 
Exhibitors will often look to build new stadium seating theatres in 
areas where only slope floor theatres, but no stadium seating theatres, 
exist. Almost all new theatres are stadium seating theatres.
    19. From the perspective of distributors selecting locations at 
which to exhibit their movies, there is no adequate substitute for 
theatres that exhibit first-run, commercial films. Distributors seek to 
have their newly released movies exhibited widely in high-quality 
theatres. A small but significant reduction in the rental fees paid to 
distributors by exhibitors would not cause the distributors to exhibit 
their films in anything other than first-run, commercial theatres.
    20. The relevant product market within which to assess the 
competitive effects of this merger is the exhibition of first-run, 
commercial films: From the movie-goer's perspective, the market is 
first-run, commercial films and from the distributors' perspective, the 
market is first-run, commercial theatres in which to exhibit first-run, 
commercial films.

B. Geographic Markets

    21. Movie-goers typically do not want to travel very far from their 
homes to attend a movie, particularly in urban areas. Accordingly, 
geographic markets for the exhibition of first-run, commercial movies 
are predominantly local.
    22. Most movie-goers in Chicago North typically are reluctant to 
travel significant distances out of that area to attend a movie. A 
small but significant price increase for movie tickets in Chicago North 
would not cause a sufficient number of movie-goers to travel out of 
Chicago North to make the increase unprofitable. Chicago North 
constitutes a relevant geographic market in which to assess some of the 
competitive effects of this merger. AMC and Loews are the two largest 
exhibitors in Chicago North.
    23. Most movie-goers attending movies in Midtown Manhattan are 
reluctant to travel to other parts of Manhattan or off the island of 
Manhattan to view a movie. A small but significant price increase for 
movie tickets in Midtown Manhattan would not cause a sufficient number 
of movie-goers to travel to other areas of Manhattan or out of the 
borough to make the increase unprofitable. Midtown Manhattan 
constitutes a relevant geographic market in which to assess some of the 
competitive effects of this merger. AMC and Loews are the two largest 
exhibitors in Midtown Manhattan.
    24. Like movie-goers in Chicago North and Midtown Manhattan, most 
movie-goers in downtown Seattle typically are reluctant to travel 
significant distances out of downtown to attend a movie. A small but 
significant price increase for movie tickets in downtown Seattle would 
not cause a sufficient number of movie-goers to travel out of downtown 
to make the increase unprofitable. Downtown Seattle constitutes a 
relevant geographic market in which to assess some of the competitive 
effects of this merger. AMC and Loews are the two largest exhibitors in 
downtown Seattle.
    25. Most movie-goers in downtown Boston typically are reluctant to 
travel significant distances out of downtown to attend a movie. A small 
but significant price increase for movie tickets in downtown Boston 
would not cause a sufficient number of movie-goers to travel out of the 
city to make the increase unprofitable. Downtown Boston constitutes a 
relevant geographic market in which to assess some of the competitive 
effects of this merger. AMC and Loews are the only two exhibitors in 
downtown Boston.
    26. Similarly, in north Dallas, most movie-goers typically are 
reluctant to travel significant distances out of the city to attend a 
movie. A small but significant price increase for movie tickets in 
north Dallas would not cause a sufficient number of movie-goers to 
travel out of the city to make the increase unprofitable. North Dallas 
constitutes a relevant geographic market in which to assess some of the 
competitive effects of this merger. AMC and Loews are the two largest 
exhibitors in north Dallas.
    27. The exhibition of first-run films in Chicago North, Midtown 
Manhattan, downtown Seattle, downtown Boston, and north Dallas each 
constitutes a relevant market (i.e., a line of commerce and a section 
of the country) within the meaning of section 7 of the Clayton Act, 15 
U.S.C. 18.

V. Competitive Effects

A. Chicago North

    28. In Chicago North, the proposed merger would give the newly 
merged entity control of all four major first-run, commercial theatres 
with 55 screens and a 2004 box office revenue of approximately $24 
million. AMC and Loews each operate theatres in two different zones in 
Chicago North. The combined entity will control nearly 100% of the 
revenues from the two

[[Page 3330]]

zones in Chicago North and overall would have a market share of 
approximately 100%. Using a measure of market concentration called the 
Herfindahl-Hirschman Index (``HHI''), explained in Appendix A, the 
merger would yield a post-merger HHI of approximately 10,000, 
representing an increase of roughly 4,814.

B. Midtown Manhattan

    29. In Midtown Manhattan, the proposed merger would give the newly 
merged entity control of the only first-run, commercial stadium seating 
theatres along with 71 total screens and 2004 box office revenue of 
approximately $54.6 million. The combined entity would have a market 
share of approximately 88%. The merger would yield a post-merger HHI of 
roughly 7,779, representing an increase of around 3,633. In the Times 
Square zone, a zone in Midtown Manhattan, AMC and Loews operate 
theatres in the same zone. The combined entity would control 100% of 
the revenue from that film zone, the highest grossing zone in the 
United States.

C. Downtown Seattle

    30. In downtown Seattle, the proposed merger would give the newly 
merged entity control of all three first-run, commercial theatres with 
31 screens and a 2004 box office revenue of approximately $14.1 
million. The combined entity would control nearly 100% of the revenues 
from the zone in downtown Seattle and a market share of 100%. The 
merger would yield a post-merger HHI of 10,000, representing an 
increase of around 4,921.

D. Downtown Boston

    31. In downtown Boston, the proposed merger would give the newly 
merged entity control of the only first-run, commercial theatres with 
32 screens and a 2004 box office revenue of approximately $20.8 
million. The combined entity would have a market share of 100%. The 
merger would yield a post-merger HHI of 10,000, representing an 
increase of approximately 4,635.

E. North Dallas

    32. In north Dallas, the proposed merger would give the newly 
merged entity control of three of the first-run, commercial theatres 
with stadium seating, including the only two in north central Dallas. 
It would control all three commercial, first-run stadium seating 
theatres in north central Dallas once the new AMC theatre opens in 
Spring 2006. Overall, the combined entity would control five of seven 
first-run, commercial theatres with 78 screens and 2004 box office 
revenues of approximately $22 million. The combined entity would have a 
market share of approximately 78%. The merger would yield a post-merger 
HHI of roughly 6,393, representing an increase of around 2,976.

F. Consumer Effects

    33. The proposed merger would likely lessen competition 
significantly in the relevant markets by further enhancing the ability 
of the remaining theatre circuits, particularly the AMC-Loews circuit, 
to increase prices.
    (a) AMC and Loews directly compete in all the relevant geographic 
markets. The prices their theatres charge are constrained by the prices 
charged by the other; in particular, they are constrained by the risk 
that the other will not follow an attempted price increase. If AMC or 
Loews were to increase prices and the other were not to follow, the 
firm that increased price might suffer financially if a substantial 
number of its patrons decided that the increased price was unreasonable 
and opted to patronize the other circuit.
    (b) The proposed merger would eliminate this pricing constraint and 
is therefore likely to lead to higher prices for ticket buyers.
    (c) These higher prices could take the form of a higher adult 
evening ticket price or reduced discounting, e.g., for matinees, 
children, seniors, and students.
    34. The proposed merger would also eliminate non-price competition 
between AMC and Loews and is therefore likely to lead to lower quality 
theatres for movie-goers.
    (a) In order to persuade distributors to exhibit top films in their 
respective theatres that share the same zones and, more importantly, to 
attract movie-goers, AMC and Loews strive to maintain high quality 
theatres.
    (b) The loss of each other's theatres as competitors would reduce 
the incentive of AMC and Loews to maintain, upgrade, and renovate 
theatres and to improve amenities and services at theatres in the 
relevant markets, thus reducing the quality of the viewing experience 
for a movie-goer.

VI. Entry

    35. Entry by first-run, commercial theatres is difficult in the 
relevant markets. Exhibitors are often reluctant to locate new theatres 
near existing stadium theatres. Those who typically build new theatres, 
exhibitors and real estate developers, often seek to avoid building new 
theatres in the same zones with existing theatres. Also, exhibitors and 
real estate developers often seek to build new stadium theatres in 
conjunction with projects that contain other retail establishments, 
such as shops and restaurants that will be another draw for customers. 
As a result, real estate developers often look at the customer demand 
for other retail in areas in which they consider locating a theatre, 
along with the customer demand for a new theatre.
    36. Entry by first-run, commercial theatres in Chicago North is 
time-consuming and difficult and is not likely to reduce significantly 
the market strength of the combined entity in the near future. 
Suitable, available sites are scarce, real estate and construction 
costs are among the highest in the nation, and acquiring the necessary 
permits and approvals can be difficult and time-consuming. Identifying 
a site, planning the development, and constructing a theatre in Chicago 
North takes several years. No new first-run, commercial theatres with 
the capability to reduce significantly the newly merged entity's market 
power are likely to open within the next two years.
    37. In Manhattan, entry by first-run, commercial theatres, 
particularly in Midtown, is time-consuming and difficult and is not 
likely to reduce significantly the market strength of the combined 
entity in the near future. Suitable, available sites are scarce, and 
real estate and construction costs are among the highest in the nation. 
Identifying a site, planning the development, and constructing a 
theatre in Midtown Manhattan takes several years. No new first-run, 
commercial theatres with the capability to reduce significantly the 
newly merged entity's market power are likely to open within the next 
two years.
    38. Entry by first-run, commercial theatres in downtown Seattle is 
time-consuming and difficult and is not likely to reduce significantly 
the market strength of the combined entity in the near future. 
Suitable, available sites are scarce and acquiring the necessary 
permits and approvals for the construction of new theatres can be 
difficult and time-consuming. No new first-run, commercial theatres 
with the capability to reduce significantly the newly merged entity's 
market power are likely to open within the next two years.
    39. Entry by first-run, commercial theatres in downtown Boston is 
time-consuming and difficult and is not likely to reduce significantly 
the market strength of the combined entity in the near future. 
Suitable, available sites are scarce and necessary permits and 
approvals for the construction of new

[[Page 3331]]

theatres can be difficult and time-consuming. No new first-run, 
commercial theatres with the capability to reduce significantly the 
newly merged entity's market power are likely to open within the next 
two years.
    40. Entry by first-run, commercial theatres in north Dallas is 
difficult and is not likely to reduce significantly the market strength 
of the combined entity in the near future. Suitable, available sites 
are scarce in north central Dallas, where the combined entity's market 
strength would be the strongest, and no new first-run, commercial 
theatres with the capability to reduce significantly the newly merged 
entity's market power are likely to open within the next two years.

VII. Violation Alleged

    41. The United States and plaintiff states hereby reincorporate 1 
through 40.
    42. On June 30, 2005, Marquee and LCE entered into a merger 
agreement. Under the merger agreement, LCE intends to merge into 
Marquee and Loews intends to merge into AMC.
    43. The effect of the proposed merger would be to lessen 
competition substantially in interstate trade and commerce for first-
run, commercial theatres in which to exhibit first-run, commercial 
films in Chicago North, Midtown Manhattan, downtown Seattle, downtown 
Boston, and north Dallas in violation of section 7 of the Clayton Act, 
15 U.S.C. 18.
    44. The transaction would likely have the following effects, among 
others:
    (a) Competition for first-run, commercial theatres in which to 
exhibit first-run, commercial films in numerous geographic markets 
would be eliminated or substantially lessened; and
    (b) Prices for first-run, commercial film tickets would likely 
increase to levels above those that would prevail absent the merger.

VIII. Requested Relief

    45. The plaintiffs request: (a) Adjudication that the proposed 
merger would violate section 7 of the Clayton Act; (b) permanent 
injunctive relief to prevent the consummation of the proposed merger 
and to prevent the defendants from entering into or carrying out any 
agreement, understanding or plan, the effect of which would be to 
combine the businesses or assets of defendants; (c) an award of each 
plaintiff of its costs in this action; and (d) such other relief as is 
proper.

For Plaintiff United States of America

    Dated: December 20, 2005.

Thomas O. Barnett (TB 1317),

Acting Assistant Attorney General, Antitrust Division.

J. Robert Kramer II (RK 3921),

Director of Operations.

John R. Read (JR 8964),

Chief, Litigation III.

Nina B. Hale (NH 7828),

Assistant Chief, Litigation III.

William H. Jones II (WJ 2563),

Allen P. Grunes (AG 4775),

Gregg I. Malawer (GM 6467),

Avery W. Gardiner (AG 2011),

Joan Hogan (JH 5666),

Attorneys for the United States, United States Department of 
Justice, Antitrust Division, Litigation III, 325 7th Street, NW., 
Suite 300, Washington, DC 20530.

Bernard M. Hollander (BH 0818),

Senior Trial Attorney.

For Plaintiff State of New York

Eliot Spitzer,

Attorney General.

By: Jay L. Himes (JH 7714),

Chief, Antitrust Bureau.

Richard E. Grimm (RG 6891),

Assistant Attorney General, Antitrust Bureau, Office of the Attorney 
General, 120 Broadway, Room 26C62, New York, New York 10271-0332. 
Tel: (212) 416-8282, (212) 416-8280. Fax: (212) 416-6015.

For Plaintiff State of Illinois

Lisa Madigan,

Attorney General.

By: Robert W. Pratt (RP 7924),

Chief, Antitrust Bureau, Office of the Attorney General, State of 
Illinois, 100 West Randolph Street, 13th Floor, Chicago, Illinois 
60601. (312) 814-3722.

Kavita Puri,

Assistant Attorney General, of Counsel.

For Plaintiff State of Massachusetts

Thomas F. Reilly,

Attorney General.

By: Mary Freely (MF 1359),

Jeffrey Shapiro (JS 5521),

Assistant Attorney General, Office of the Attorney General of 
Massachusetts, One Ashburton Place, 19th Floor, Boston, MA 02108. 
(617) 727-2200 ext. 2985.

Exhibit A; Definition of HHI and Calculations for Market

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted 
measure of market concentration. It is calculated by squaring the 
market share of each firm competing in the market and then summing the 
resulting numbers. For example, for a market consisting of four firms 
with shares of thirty, thirty, twenty and twenty percent, the HHI is 
2600 (302 + 302 + 202 + 202 
= 2600). The HHI takes into account the relative size and distribution 
of the firms in a market and approaches zero when a market consists of 
a large number of firms of relatively equal size. The HHI increases 
both as the number of firms in the market decreases and as the 
disparity in size between those firms increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated, and those in which the HHI is 
in excess of 1800 points are considered to be concentrated. 
Transactions that increase the HHI by more than 100 points in 
concentrated markets presumptively raise antitrust concerns under the 
Merger Guidelines. See Merger Guidelines Sec.  1.51.

Final Judgment

    Whereas, plaintiffs, United States of America, the State of 
Illinois, the State of New York, and the Commonwealth of Massachusetts 
filed their Complaint on December 22, 2005, plaintiffs and defendants, 
Marquee Holdings, Inc. (``AMC'') and LCE Holdings, Inc. (``Loews''), 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 
without this Final Judgment constituting 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[s] of certain rights or assets by the defendants to 
assure that competition is not substantially lessened;
    And Whereas, plaintiffs require defendants to make certain 
divestiture[s] for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, defendants have represented to the United States that 
the divestiture[s] required below can and will be made and that 
defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained below;
    Now Therefore, before any testimony is taken, 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

[[Page 3332]]

the Clayton Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
whom defendants divest the Theatre Assets.
    B. ``AMC'' means defendant Marquee Holdings, Inc., a Delaware 
corporation with its headquarters in Kansas City, Missouri, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Loews'' means defendant LCE Holdings, Inc., a Delaware 
corporation with its headquarters in New York City, New York, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Landlord Consent'' means any contractual approval or consent 
that the landlord or owner of one or more of the Theatre Assets, or the 
property on which one or more of the Theatre Assets is situated, must 
grant prior to the transfer of one of the Theatre Assets to an 
Acquirer.
    E. ``Theatre Assets'' means the first-run, commercial motion 
picture theatre businesses operated by AMC or Loews, under the 
following names and at the following locations:

------------------------------------------------------------------------
               Theatre name                        Theatre address
------------------------------------------------------------------------
i. City North 14..........................  2600 N. Western Ave.
                                             Chicago, IL.
ii. Webster Place 11......................  1471 W. Webster Avenue
                                             Chicago, IL.
iii. E-Walk 13............................  247 W. 42nd St. New York,
                                             NY.
iv. Meridian 16...........................  1501 7th Ave. Seattle, WA.
v. Fenway 13..............................  201 Brookline Ave. Boston,
                                             MA.
vi. Keystone Park 16......................  13933 N. Central Expressway
                                             Dallas, TX.
------------------------------------------------------------------------

    The term ``Theatre Assets'' includes:
    1. All tangible assets that comprise the first-run, commercial 
motion picture theatre business including all equipment, fixed assets 
and fixtures, personal property, inventory, office furniture, 
materials, supplies, and other tangible property and all assets used in 
connection with the Theatre Assets; all licenses, permits and 
authorizations issued by any governmental organization relating to the 
Theatre Assets; all contracts, agreements, leases, commitments, 
certifications, and understandings, relating to the Theatre Assets, 
including supply agreements; all customer lists, contracts, accounts, 
and credit records; all repair and performance records and all other 
records relating to the Theater Assets;
    2. All intangible assets used in the development, production, 
servicing and sale of Theatre Assets, including, but not limited to all 
licenses and sublicenses, intellectual property, technical information, 
computer software (except defendants' proprietary software) and related 
documentation, know-how, drawings, blueprints, designs, specifications 
for materials, specifications for parts and devices, quality assurance 
and control procedures, all technical manuals and information 
defendants provide to their own employees, customers, suppliers, agents 
or licensees, and all research data relating to the Theatre Assets. 
Provided however, that this term does not include (a) any right to use 
or interest in defendants' copyrights, trademarks, trade names, service 
marks or service names, or (b) assets that the defendants do not own 
and are not legally able to transfer.

III. Applicability

    A. This Final Judgment applies to AMC and Loews, 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 of their assets or of lesser 
business units that include the Theatre 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[s].

IV. Divestitures

    A. Defendants are ordered and directed, within 120 calendar days 
after the filing of the Complaint in this matter, of five (5) days 
after notice of the entry of this Final Judgment by the Court, 
whichever is later, to divest the Theatre Assets in a manner consistent 
with this Final Judgment to an Acquirer acceptable to the United States 
in its sole discretion after consultation with the State of Illinois, 
State of New York, and Commonwealth of Massachusetts, as appropriate. 
The United States, in its sole discretion, may agree to one or more 
extensions of this time period not to exceed 60 days in total, and 
shall notify the Court in such circumstances, Defendants agree to use 
their best efforts to divest the Theatre Assets as expeditiously as 
possible.
    B. In accomplishing the divestiture[s] ordered by this Final 
Judgment, defendants promptly shall make known, by usual and customary 
means, the availability of the Theatre Assets. Defendants shall inform 
any person making inquiry regarding a possible purchase of the Theatre 
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 Theater Assets customarily provided in a due diligence 
process except such information or documents subject to the attorney-
client or 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[s] and the United States 
information relating to the personnel involved in the operation of the 
Theatre Assets to enable the Acquirer[s] to make offers of employment. 
Defendants will not interfere with any negotiations by the Acquirer[s] 
to employ any defendant employee whose primary responsibility is the 
operation of the Theater Assets.
    D. Defendants shall permit prospective Acquirers of the Theatre 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities of the Theater Assets; access to any and all 
environmental, zoning, and other permit documents and information; and 
access to any and all financial, operational, or other documents and 
information customarily provided as part of a due diligence process.
    E. Defendants shall warrant to all Acquirers of the Theatre Assets 
that each asset will be operated on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture[s] of the Theatre Assets.
    G. At the option of the Acquirer[s], defendants shall enter into an 
agreement for products and services, such as computer support services, 
that are reasonably necessary for the Acquirer[s] to effectively 
operate the Theatre Assets during a transition period. The terms and 
conditions of any contractual arrangements meant to satisfy this 
provision must be commercially reasonable for those products and 
services for which the agreement is entered and shall remain in effect 
for no more than three months, absent approval of the United States, in 
its sole

[[Page 3333]]

discretion, after consultation with the State of Illinois, State of New 
York, and Commonwealth of Massachusetts, as appropriate.
    H. Defendants shall warrant to the Acquirer[s] of the Theatre 
Assets that there are no material defects in the environmental, zoning 
or other permits pertaining to the operation of each asset, and that 
following the sale of the Theatre Assets, defendants will not 
undertake, directly or indirectly, any challenges to the environmental, 
zoning, or other permits relating to the operation of the Theatre 
Assets.
    I. Unless the United States otherwise consents in writing, the 
divestiture[s] pursuant to section IV, or by trustee appointed pursuant 
to section V, of this Final Judgment, shall include the entire Theatre 
Assets, and shall be accomplished in such a way as to satisfy the 
United States, in its sole discretion (after consultation with the 
State of Illinois, State of New York, and Commonwealth of 
Massachusetts, as appropriate) that the Theatre Assets can and will be 
used by the Acquirer[s] as part of a viable, ongoing business of first-
run, commercial motion picture theatres. Divestiture[s] of the Theatre 
Assets may be made to one or more Acquirers, provided that in each 
instance it is demonstrated to the sole satisfaction of the United 
States that the Theatre Assets will remain viable and the 
divestiture[s] of such assets will remedy the competitive harm alleged 
in the Complaint. The divestiture[s], whether pursuant to section IV or 
section V of this Final Judgment,

    (1) shall be made to an Acquirer (or Acquirers) that, in the 
United State's sole judgment (after consultation with the State of 
Illinois, State of New York, and Commonwealth of Massachusetts, as 
appropriate), has the intent and capability (including the necessary 
managerial, operational, technical and financial capability) of 
competing effectively in the business of first-run, commercial 
motion picture theatres; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion (after consultation with the State of Illinois, 
State of New York, and Commonwealth of Massachusetts, as 
appropriate), that none of the terms of any agreement between an 
Acquirer (or Acquirers) and defendants give defendants the ability 
unreasonably to raise the Acquirer's costs, to lower the Acquirer's 
efficiency, or otherwise to interfere in the ability of the Acquirer 
to compete effectively.

V. Appointment of Trustee

    A. If defendants have not divested the Theatre Assets within the 
time period specified in section IV(A), defendants shall notify the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United States 
and approved by the Court to effect the divestiture[s] of the Theatre 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Theatre Assets. The trustee 
shall have the power and authority to accomplish the divestiture[s] to 
an Acquirer[s] acceptable to the United States (after consultation with 
the State of Illinois, State of New York, and Commonwealth of 
Massachusetts, as appropriate) at such price and on such terms as are 
then obtainable upon reasonable effort by the trustee, subject to the 
provision of section, IV, V, VI, and VII of this Final Judgment, and 
shall have such other powers as this Court deems appropriate. Subject 
to section V(D) of this Final Judgment, the trustee may 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 trustee's judgment to assist in the 
divestiture[s].
    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 VII.
    D. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the Court approves, and shall account 
for all monies derived from the sale of the assets 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 the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Theatre Assets and based on a fee arrangement providing 
the trustee with an incentive based on the price and terms of the 
divestiture[s] 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 divestiture[s]. 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 business to be divested, and defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret 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[s].
    F. After its appointment, the trustee shall file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestiture[s] 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 Theatre 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 Theatre Assets.
    G. If the trustee has not accomplished such divestiture[s] within 
six months after its appointment, the trustee shall promptly file with 
the Court a report setting forth (1) the trustee's efforts to 
accomplish the required divestiture[s], (2) the reasons, in the 
trustee's judgment, why the required divestiture[s] 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 
and, as appropriate, the State of Illinois, State of New York, and 
Commonwealth of Massachusetts 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 purposes 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. Landlord Consent

    A. If defendants are unable to effect the divestiture[s] required 
herein due to the inability to obtain the Landlord Consent for any of 
the Theatre Assets, defendants shall divest alternative Theatre Assets 
that complete effectively with the theatre for which Landlord Consent 
was not obtained. The United

[[Page 3334]]

States shall in its sole discretion (after consultation with the State 
of Illinois, State of New York, and Commonwealth of Massachusetts, as 
appropriate), determine whether such theatre competes effectively with 
the theatre for which landlord consent was not obtained.
    B. Within five (5) business days following a determination that 
Landlord Consent cannot be obtained for one of the Theatre Assets, 
defendants shall notify the United States and propose an alternative 
divestiture pursuant to section VI(A). The United States shall have 
then ten (10) business days in which to determine whether such theatre 
is a suitable alternative pursuant to section VI(A). If the defendants' 
selection is deemed not to be a suitable alternative, the United States 
shall in its sole discretion select the theatre to be divested (after 
consultation with the State of Illinois, State of New York, and 
Commonwealth of Massachusetts, as appropriate).
    C. If the trustee is responsible for effecting the divestiture[s], 
it shall notify both the United States and the defendants within five 
(5) business days following a determination that Landlord Consent can 
not be obtained for one of the Theatre Assets. Defendants shall 
thereafter have five (5) business days to propose an alternative 
divestiture pursuant to section VI(a). The United States shall have 
then ten (10) business days in which to determine whether such theatre 
is suitable alternative pursuant to section VI(a). If the defendants' 
selection is deemed not to be a suitable competitive alternative, the 
United States shall in its sole discretion select the theatre to be 
divested (after consultation with the State of Illinois, State of New 
York, and Commonwealth of Massachusetts, as appropriate).

VII. Notice of Proposed Divestitures

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendants or the trustee, whichever is then 
responsible for effecting the divestiture[s] required herein, shall 
notify the United States and, as appropriate, the State of Illinois, 
State of New York, and Commonwealth of Massachusetts of any proposed 
divestiture[s] required by sections IV or V of this Final Judgment. If 
the trustee is responsible, it shall similarly notify defendants. The 
notice shall set forth the details of the proposed divestiture[s] 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 Theatre 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 or Acquirers, any other third party, or the 
trustee if applicable additional information concerning the proposed 
divestiture[s], the proposed Acquirer or Acquirers, and 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 or Acquirers, 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[s]. If the United States provides 
written notice that it does not object, the divestiture[s] 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[s] or 
upon objection by the United States, the divestiture[s] proposed under 
section IV or section V shall not be consummated. Upon objection by 
defendants under section V(C), the divestiture[s] proposed under 
section V shall not be consummated unless approved by the Court.

VIII. Financing

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

IX. Hold Separate

    Until the divestiture[s] 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[s] ordered by this Court.

X. 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[s] has/have been completed under section IV or V, 
defendants shall deliver to the United States an affidavit as to the 
fact and manner of its compliance with section 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 Theatre 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 Theatre Assets, and to provide 
required information to prospective purchasers, 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 that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with section IX of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) days after the 
change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Theatre Assets until one year after such 
divestiture[s] has/have been completed.

XI. 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, the State of Illinois, State of New York, or 
Commonwealth of Massachusetts, including consultants and other persons 
retained by either of them, shall, upon written request of a duly 
authorized representative of the Assistant Attorney General in charge 
of Antitrust Division, the Attorney General for Illinois, Attorney 
General for New York, or Attorney General for Massachusetts, and on 
reasonable notice to defendants, be permitted.

    (1) Access during defendants' office hours to inspect and copy, 
or at plantiff's option, to require defendants provide copies of, 
all

[[Page 3335]]

books, ledgers, accounts, records and documents in the possession, 
custody, or control of defendants, relating to any matters contained 
in this Final Judgment; and
    (2) To interview, either informally or on the record, 
defendants' 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 or interference by defendants.

    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, the 
Attorney General of Illinois, Attorney General for New York, or 
Attorney General for Massachusetts, defendants 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 United States, the State of 
Illinois, State of New York, or Commonwealth of Massachusetts, to any 
person other than an authorized representative of the executive branch 
of the United States, or of each state government, except in the course 
of legal proceedings to which at least one of the plaintiffs is a party 
(including grand jury proceedings), or for the purpose of securing 
compliance with this Final Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the plaintiffs, 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 plaintiffs shall give 
defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

XII. Notification

    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
defendants, without providing advance notification to the United 
States, shall not directly or indirectly acquire any assets of or any 
interest, including any financial, security, loan, equity or management 
interest, in the business of first-run, commercial theatres in Cook 
County, Illinois; New York County, New York (Manhattan); King County, 
Washington; Suffolk County, Massachusetts; and Dallas County, Texas 
during a 10-year period. This notification requirement shall apply only 
to the acquisition of any assets or any interest in the business of 
first-run, commercial motion picture theatres at the time of the 
acquisition and shall not be construed to require notification of 
acquisition of interest in new theatre developments or of assets not 
being operated as first-run commercial motion picture theatre 
businesses, provided, that this notification requirement shall apply to 
first-run, commercial theatres under construction at the time of the 
entering of this Final Judgment.
    Such notification shall be provided to the United States in the 
same format as, and per the instructions relating to the Notification 
and Report Form set forth in the Appendix to part 803 of Title 16 of 
the Code of Federal Regulations as amended, except that the information 
requested in Items 5 through 9 of the instructions must be provided 
only about first-run, commercial theatres. Notification shall be 
provided at least thirty (30) days prior to acquiring any such 
interest, and shall include, beyond what may be required by the 
applicable instructions, the names of the principal representatives of 
the parties to the agreement who negotiated the agreement, and any 
management or strategic plans discussing the proposed transaction. If 
within the 30-day period after notification, representatives of require 
make a written request for additional information, defendants shall not 
consummate the proposed transaction or agreement until twenty (20) days 
after submitting all such additional information. Early termination of 
the waiting periods in this paragraph may be requested and, where 
appropriate, granted in the same manner as is applicable under the 
requirements and provisions of the HSR Act and rules promulgated 
thereunder. This section shall be broadly construed and any ambiguity 
or uncertainly regarding the filing of notice under this Section shall 
be resolved in favor of filing notice.

XIII. No Reacquisition

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

XIV. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for 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.

XV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten years from the date of its entry.

XVI. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Date: ----------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

Respectfully submitted,

-----------------------------------------------------------------------
United States District Judge.

For Plaintiff United States of America

    Dated: December 20, 2005.

William H. Jones II (WJ 2563),

Allen P. Grunes (AG 475),

Gregg I. Malawer (GM 6467),

Avery W. Gardiner (AG 2011),

Joan Hogan (JH 5666),

Attorneys.

Bernard M. Hollander (BH 0818),

Senior Trial Attorney, U.S. Department of Justice, Antitrust 
Division, Litigation III Section, 325 Seventh Street, NW., Suite 
300, Washington, DC 20530. Tel: (202) 514-0230. Fax: (202) 307-9952.

For Plaintiff State of New York

Eliot Spitzer,

Attorney General.

By: Jay L. Himes (JH 7714),

Chief, Antitrust Bureau.

Richard E. Grimm (RG 6891),

Assistant Attorney General, Antitrust Bureau, Office of the Attorney 
General, 120 Broadway, room 26C62, New York, New York 10271-0332. 
Tel: (212) 416-8282, (212) 416-8280. Fax: (212) 416-6015.

For Plaintiff State of Illinois

Lisa Madigan,

Attorney General.

By: Robert W. Pratt (RP 7924),

Chief, Antitrust Bureau, Office of the Attorney General, State of 
Illinois, 100 West Randolph Street, 13th Floor, Chicago, Illinois 
60601. (312) 814-3722.

Kavita Puri,

Assistant Attorney General, of Counsel.

For Plaintiff Comonwealth of Massachusetts

Thomas F. Reilly,

Attorney General.

By: Jeffrey S. Shapiro (JS 5521),

Mary B. Freeley (MF 1359),

Assistant Attorney General, Office of the Attorney General, 
Commonwealth of Massachusetts, One Ashburton Place, Boston, MA 
02108. (617) 727-2200.

[[Page 3336]]

For Defendant AMC

Ilene K. Gotts,

Damian Didden,

Wachell, Lipton, Rosen & Katz,

51 West 52nd Street, New York, NY 10019, Tel: (212) 403-1113. Fax: 
(212) 403-2113.

For Defendant Loews

Deborah L. Feinstein,

Arnold & Porter,

555 Twelfth Street, NW., Washington, DC 20004. Tel: (202) 942-5015. 
Fax: (202) 942-5999.

William H. Jones II (WJ 2563),

United States Department of Justice, Antitrust Division, 325 7th 
Street, NW., Suite 300, Washington, DC 20530. (202) 514-0230. 
Attorney for Plaintiff United States of America.

Competitive Impact Statement

    Plaintiff, the United States of America, pursuant to section 2(b) 
of the Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 
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

    Plaintiffs the United States, the State of Illinois, the State of 
New York, and the Commonwealth of Massachusetts filed a civil antitrust 
Complaint on December --, 2005, alleging that a proposed merger of 
Marquee Holdings, Inc. (``AMC'') and LCE Holdings, Inc. (``Loews'') 
would violate section 7 of the Clayton Act, 15 U.S.C 18. The Complaint 
alleges that AMC and Loews both operate motion picture theatres 
throughout the United States, and that they each operate first-run, 
commercial motion picture theatres in Chicago North, Midtown Manhattan, 
downtown Seattle, downtown Boston, and north Dallas. The merger would 
combine the two leading theatre circuits in the above listed markets 
and give the newly merged firm a dominant position in those localities: 
In Chicago North the newly merged firm would have a 100% market share 
(by revenue); in Midtown Manhattan, the newly merged firm would have a 
88% market share (by revenue); in downtown Seattle the newly merged 
firm would have a 100% market share (by revenue); in downtown Boston, 
the newly merged firm would have a 100% market share (by revenue); and 
in north Dallas the newly merged firm would have a 78% market share (by 
revenue). As a result, the combination would substantially lessen 
competition and tend to create a monopoly in the markets for theatrical 
exhibition of first-run, commercial films in the above listed local 
markets.
    The prayer for relief seeks: (a) An adjudication that the proposed 
merger described in the Complaint would violate section 7 of the 
Clayton Act; (b) permanent injunctive relief preventing the 
consummation of the transaction; (c) an award to each plaintiff of the 
costs of this action; and (d) such other relief as is proper.
    Shortly before this suit was filed, a proposed settlement was 
reached that permits AMC to complete its merger with Loews, yet 
preserves competition in the markets in which the transactions would 
raise significant competitive concerns. A Stipulation and proposed 
Final Judgment embodying the settlement were filed at the same time the 
Complaint was filed.
    The proposed Final Judgment, which is explained more fully below, 
requires AMC and Loews to divest one theatre to acquirers acceptable to 
the United States in each of the listed markets, except Chicago, where 
it orders AMC and Loews to divest two theatres. Unless the United 
States grants a time extension, the divestitures must be completed 
within sixty (60) calendar days after the filing of the Complaint in 
this matter or five (5) days after notice of the entry of this Final 
Judgment by the Court, whichever is later.
    If the divestitures are not completed within the divestiture 
period, the Court, upon application of the United States, is to appoint 
a trustee selected by the United States to sell the assets. The 
proposed Final Judgment also requires that, until the divestitures 
mandated by the Final Judgment have been accomplished, the defendants 
must maintain and operate the six theatres to be divested as active 
competitors, maintain the management, staffing, sales, and marketing of 
the theatres, and maintain the theatres in operable condition at 
current capacity configurations. Further, the proposed Final Judgment 
requires defendants to give the United States prior notice regarding 
future motion picture theatre acquisitions in Cook County, Illinois; 
New York County, New York (Manhattan); King County, Washington; Suffolk 
County, Massachusetts; and Dallas County, Texas.
    The plaintiffs 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 this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. The Alleged Violations

A. The Defendants

    Marquee Holdings, Inc. is a Delaware corporation with its 
headquarters in Kansas City, Missouri. It is the holding company of AMC 
Entertainment Inc. AMC owns or operates 216 theatres containing 3,300 
screens at locations throughout the United States. AMC had revenues of 
approximately $1.8 billion during 2004. JP Morgan Partners and Apollo 
Management LP are the controlling shareholders of AMC.
    LCE Holdings, Inc. is a Delaware corporation with its headquarters 
in New York City, New York. It is the holding company of Loews Cineplex 
Entertainment Corporation. Loews owns or operates 128 theatres 
containing 1,424 screens at locations throughout the United States. 
Loews operates theatres under the Loews Theatres, Cineplex Odeon, Star 
Theatres, and Magic Johnson Theatres brands. Loews had revenues of 
approximately $1 billion during 2004. Bain Capital Partners, Carlyle 
Group, and Spectrum Equity Investors are the controlling shareholders 
of Loews.

B. Description of the Events Giving Rise to the Alleged Violations

    On June 30, 2005, Marquee and LCE entered into a merger agreement. 
Under the merger agreement, LCE would merge into Marquee and Loews 
would merge into AMC. The current shareholders of LCE would control 40% 
of the combined company's outstanding common stock while the current 
shareholders of Marquee would control 60% of the combined company's 
outstanding common stock. The merger is a $4.1 billion transaction.
    AMC and Loews compete in the theatrical exhibition of first-run, 
commercial films in Chicago North, Midtown Manhattan, downtown Seattle, 
downtown Boston, and north Dallas; they compete to attract movie-goers 
to their theatres and the exclusive right to show films in Chicago 
North, Midtown Manhattan, and downtown Seattle. The proposed merger, 
and the threatened loss of competition that would be caused by it, 
precipitated the government's suit.

C. Anticompetitive Consequences of the Proposed Transaction

    The Complaint alleges that the theatrical exhibition of first-run, 
commercial films in Chicago North, Midtown Manhattan, downtown Seattle, 
downtown Boston, and north Dallas each constitutes a line of commerce 
and section of the country, or relevant market, for antitrust purposes. 
First-run,

[[Page 3337]]

commercial films differ significantly from other forms of 
entertainment. The experience of viewing a film in a theatre is an 
inherently different experience from a live show, a sporting event, or 
viewing a DVD or videotape in the home. Ticket prices for first-run, 
commercial films are also generally very different than for other forms 
of entertainment. A small but significant increase in the price of 
tickets for first-run films would not cause a sufficient shift to other 
forms of entertainment so as to make the increase unprofitable.
    Movie-goers typically do not want to travel very far from their 
homes to attend a movie. From a moviegoer's standpoint, theatres 
outside Chicago North, Midtown Manhattan, downtown Seattle, downtown 
Boston, and north Dallas are not acceptable substitutes for theatres 
within those areas. A small but significant increase in the price of 
tickets for first-run films in those areas would not cause a sufficient 
shift to theatres outside those areas to make the increase 
unprofitable.
    From a distributor's standpoint, there is no alternative to 
screening its first-run, commercial films in first-run, commercial 
theatres. From the distributor standpoint as well, a small but 
significant decrease in prices (i.e., a decrease in film rental fees) 
would not cause a sufficient shift by distributors to other locations 
outside of these markets to make the decrease unprofitable to 
exhibitors.
    The Complaint alleges that the merger of AMC and Loews would lessen 
competition substantially and tend to create a monopoly in the markets 
for exhibition of first-run, commercial films in the relevant markets. 
The proposed transaction would create further market concentration in 
already concentrated markets, and the merged firm would control a 
majority of box office revenues and the majority of first-run, 
commercial theatres in those markets. In Chicago North, the merged firm 
would control all four first-run, commercial theatres with a market 
share position of 100%, as measured by box office revenues. Prior to 
the merger, AMC had the highest market share in Chicago North, with 60% 
of box office revenues. In Midtown Manhattan, the merged firm would 
control the only first-run theatres with stadium seating,\1\ with a 
market share position of approximately 88% of box office revenues. 
Prior to the merger, Loews had the highest market share in Midtown 
Manhattan, with 54% of box office revenues. In downtown Seattle, the 
merged firm would control all three first-run, commercial theatres and 
with a market share position of 100% of box office revenues. Prior to 
the merger, AMC had the highest market share in downtown Seattle, with 
approximately 56% of box office revenues. In downtown Boston, the 
merged firm would control both first-run, commercial theatres, with a 
market share position of 100%. Prior to the merger, Loews had the 
highest market share in downtown Boston, with approximately 64% of box 
office revenues. In north Dallas, the merged firm would control three 
of four stadium seating theatres, including the only two in north 
central Dallas, and five of the seven first-run, commercial theatres. 
The merged firm would enjoy a market share position of approximately 
78%. Prior to the merger, AMC had the highest market share in north 
Dallas, with approximately 43% of box office revenues.
---------------------------------------------------------------------------

    \1\ Stadium seating theatres are theatres in which each row of 
seats is set on a tier that is higher than the tier on which the row 
in front of it is set. Moviegoers prefer stadium seating theatres 
over sloped floor theatres and are willing to pay more to view 
movies in stadium seating theatres. Exhibitors also view stadium 
seating theatres as superior to, and more competitively significant 
than, sloped floor theatres. For example, exhibitors are more likely 
to build new theatres in areas where the existing theatres are 
sloped floor than in areas where the existing theatres are stadium 
seating. Almost all newly constructed theatres are stadium theatres.
---------------------------------------------------------------------------

    According to the Herfindahl-Hirschman Index (``HHI''), a widely-
used measure of market concentration defined and explained in Exhibit 
A, the merged firm's post-transaction HHI in Chicago North would be 
10,000, representing an increase of 4,814 points. In Midtown Manhattan 
the merged firm's post-transaction HHI would be 7,779, representing an 
increase of 3,633 points. In downtown Seattle, the merged firm's post-
transaction share would be 10,000, representing an increase of 4,921 
points. In downtown Boston, the merged firm's HHI would be 10,000, an 
increase of 4,635. In north Dallas, the merged firm's HHI would be 
6,393, an increase of 2,976. These substantial increases in 
concentration would likely lead the merged firm to raise ticket prices.
    Distributors license movies by film ``zones'' that reflect specific 
local areas. Generally, only one theatre within a zone will play a 
particular movie. There are two types of zones: ``free zones'' (or 
``non-competitive zones'') and ``competitive zones.'' Free zones 
contain only a single theatre. Competitive zones contain two or 
sometimes more theatres competing for the exclusive license to exhibit 
a movie within the zone. The merger would convert four film zones in 
which AMC and Loews compete with each other for exclusive licenses to 
exhibit movies into zones in which there would be little or no such 
competition. In the Times Square zone in Midtown Manhattan, the merged 
firm would control all of the first-run, commercial theatres. 
Similarly, the merged firm would control all three first-run, 
commercial theatres in the film zone in downtown Seattle. In Chicago, 
the merged firm would control two adjacent film zones as a result of 
the transaction.
    The proposed Final Judgment would leave the merged firm in control 
of only one film zone in Chicago North. Moviegoers will not be harmed 
by the merged firm's control of a film zone in Chicago North, as 
Chicago movie-goers tend to view theatres in an adjoining film zone as 
good substitutes, and the theatres tend to draw customers from 
overlapping areas. The proposed Final Judgment will preserve the 
premerger competitive situation in which movie-goers have two 
competitive exhibitors from which to choose, with each exhibitor 
operating both a stadium seating theatre and a slope floor theatre.
    By reducing non-price competition, the merger would also likely 
lead to lower quality theatres by reducing the incentive to maintain, 
upgrade and renovate theatres in Chicago North, Midtown Manhattan, 
downtown Seattle, downtown Boston, and north Dallas. Theatres compete 
on quality and other non-price factors such as sound systems, 
maintenance and cleanliness, and seat quality. Theatres also compete on 
quality through the number and range of showtimes. The merger would 
lessen the incentives that AMC and Loews have to maintain the quality, 
or potentially upgrade, their theatres in Chicago North, Midtown 
Manhattan, downtown Seattle, downtown Boston, and north Dallas. As a 
result, the merger will have the likely effect of reducing the quality 
of the viewing experience for movie-goers in these markets. It also may 
allow the merged entity to reduce the number of shows as there no 
longer would be competitive pressure to continue early and late shows.
    New entry into the Chicago North, Midtown Manhattan, downtown 
Seattle, downtown Boston and north Dallas markets for exhibition of 
first-run, commercial films would be highly unlikely to eliminate the 
anticompetitive effects of this transaction. Entry is difficult in 
these markets because available, suitable land is scarce and new 
entrants are often reluctant to enter in areas where existing stadium 
theatres are located. With the exception of the theatre in north 
Dallas, all of the theatre assets to

[[Page 3338]]

be divested are located in densely-built downtown or central city areas 
that are characterized by significant regulatory barriers to entry. In 
north Dallas, the theatre to be divested is located in an area north of 
downtown in north central Dallas. That area of Dallas has been 
substantially built out and generally lacks the amount of land that a 
large scale retail development that contains a theatre would 
require.\2\ No new first-run, commercial theatres with the capability 
to reduce significantly the newly merged entity's market power are 
likely to open within the next two years in any of the markets.
---------------------------------------------------------------------------

    \2\ In recent years, most new theatres are built as part of 
broader commercial developments that include other retail 
establishments. The new commercial developments that include 
theatres are often malls, shopping centers, or so-called lifestyle 
centers. As a result, the land required for a new theatre would also 
need to contain space for other elements of the commercial 
development as well.
---------------------------------------------------------------------------

    For all of these reasons, plaintiff has concluded that the proposed 
transaction would lessen competition substantially in the exhibition of 
first-run, commercial films in Chicago North, Midtown Manhattan, 
downtown Seattle, downtown Boston, and north Dallas, eliminate actual 
and potential competition between AMC and Loews, and likely result in 
increased ticket prices and lower quality theatres in those markets. 
The proposed merger therefore violates section 7 of the Clayton Act.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment would preserve existing competition in 
the theatrical exhibition of first-run films in Chicago North, Midtown 
Manhattan, downtown Seattle, downtown Boston, and north Dallas. It 
requires the divestiture of a total of six theatres in the five 
markets: Webster Place 11 (Chicago North); City North 14 (Chicago 
North); E-Walk 13 (Midtown Manhattan); Meridian 16 (downtown Seattle; 
Fenway 13 (downtown Boston); and Keystone Park 16 (north Dallas). The 
divestitures will preserve choices for movie-goers and distributors. 
The divestitures will make it less likely that ticket prices will 
increase, theatre quality will decline, the number of theatres to which 
movie studios distribute their movies will decline, or movies will be 
distributed to lower quality theatres in the listed markets as a result 
of the transaction.
    Unless the United States grants an extension of time, the 
divestitures must be completed within 120 calendar days after the 
filing of the Complaint in this matter or five (5) days after notice of 
the entry of this Final Judgment by the Court, whichever is later. 
Until the divestitures take place, AMC and Loews must maintain and 
operate the six theatres to be divested as active competitors, maintain 
the management, staffing, sales, and marketing of the theatres, and 
maintain the theatres in operable condition at current capacity 
configurations.
    The divestitures must be to a purchaser or purchasers acceptable to 
the United States in its sole discretion, after consultation with the 
States of Illinois and New York, and the Commonwealth of Massachusetts 
as appropriate. Unless the United States otherwise consents in writing, 
the divestitures shall include all the assets of the theatres to be 
divested, and shall be accomplished in such a way as to satisfy the 
United States that such assets can and will be used as viable, ongoing 
first-run theatres.
    If defendants fail to divest these theatres within the time periods 
specified in the Final Judgment, the Court, upon application of the 
United States, is to appoint a trustee nominated by the United States 
to effect the divestitures. If a trustee is appointed, the proposed 
Final Judgment provides that AMC and Loews will pay all costs and 
expenses of the trustee and any professionals and agents retained by 
the trustee. Under section V(d) of the proposed Final Judgment, the 
compensation paid to the trustee and any persons retained by the 
trustee shall be both reasonable in light of the value of the theatres 
remaining to be divested, and based on a fee arrangement providing the 
trustee with an incentive based on the price and terms of the 
divestitures and the speed with which they are accomplished. Timeliness 
is paramount. After appointment, the trustee will file monthly reports 
with the parties and the Court, setting forth the trustee's efforts to 
accomplish the divestitures ordered under the proposed Final Judgment. 
Section V(g) of the proposed Final Judgment provides that if the 
trustee has not accomplished the divestitures within six (6) months 
after its appointment, the trustee shall promptly file with the Court a 
report setting forth (1) the trustee's efforts to accomplish the 
required divestitures, (2) the reasons, in the trustee's judgment, why 
the required divestitures have not been accomplished and (3) the 
trustee's recommendations. At the same time the trustee will furnish 
such report to the plaintiffs and defendants, who will each have the 
right to be heard and to make additional recommendations.
    If the defendants or trustee are not able to obtain a landlord's 
consent to sell one of the theatres to be divested, section VI of the 
proposed Final Judgment permits the defendants to select an alternative 
theatre that competes effectively with the theatre for which landlord 
consent was not obtained to divest. The United States, in its sole 
discretion, after consultation with the States of Illinois and New York 
and Commonwealth of Massachusetts as appropriate, shall determine 
whether the theatres offered are actually competing with those that 
could not be divested due to a failure to obtain landlord consent. This 
provision will ensure that any failure by the defendants to obtain 
landlord consent by the defendants does not thwart the relief obtained 
in the proposed Final Judgment.
    The proposed Final Judgment also prohibits the defendants from 
acquiring any other theatres in Cook County, Illinois; New York County, 
New York (Manhattan); King County, Washington; Suffolk County, 
Massachusetts; and Dallas County, Texas without providing at least 
thirty (30) days' notice to the U.S. Department of Justice. Such 
acquisitions could raise competitive concerns but might be too small to 
be reported otherwise under the Hart-Scott-Rodino (``HSR'') premerger 
notification statute.

IV. Remedies Available to Potential Private Litigants

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

V. Procedures Available for Modification of the Proposed Final Judgment

    Plaintiffs 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 plaintiff 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

[[Page 3339]]

Judgment within which any person may submit to plaintiff 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. All comments received during this period will be considered 
by the Department of Justice, which remains free to withdraw its 
consent to the proposed Final Judgment at any time prior to the Court's 
entry judgment. The comments and the response of plaintiff will be 
filed with the Court and published in the Federal Register.
    Written comments should be submitted to: John R. Read, Chief, 
Litigation III, Antitrust Division, United States Department of 
Justice, 325 7th Street, NW., Suite 300, Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    Plaintiff considered, as an alternative to the proposed Final 
Judgment, a full trial on the merits against defendants. Plaintiff 
could have continued the litigation and sought preliminary and 
permanent injunctions against AMC's merger with Loews. Plaintiff is 
satisfied, however, that the divestiture of assets and other relief 
described in the proposed Final Judgment will preserve competition for 
the exhibition of first-run, commercial films in the relevant markets 
identified in the Complaint.

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 shall consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered and any other 
considerations bearing upon the adequacy of such judgment;
    (B) The impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. 16(e)(1)(A) & (B). As the United States Court of Appeals for 
the DC 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 (DC Cir. 1995).
    ``Nothing in this section shall be construed to require the court 
to conduct an evidentiary hearing or to require the court to permit 
anyone to intervene.'' 15 U.S.C. 16(e)(2). Thus, in conducting this 
inquiry, ``[t]he Court is nowhere compelled to go to trial or to engage 
in extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' \3\ Rather,

    \3\ 119 Cong. Rec. 24598 (1973) (statement of Senator Tunney). 
See United States v. Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 
1975). A ``public interest'' determination can be made properly on 
the basis of the Competitive Impact Statement and Response to 
Comments filed pursuant to the APPA. Although the APPA authorizes 
the use of additional procedures, 15 U.S.C. 16(f), those procedures 
are discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues and that 
further proceedings would aid the court in resolving those issues. 
See H.R. Rep. 93-1463, 93rd 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 Diarymen, Inc., 1977-1 Trade Cas. ]61,508 
at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also Microsoft, 56 F.3d at 1460-62. Precedent requires 
that:

    The balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\4\

    \4\ Cf. BNS, 858 F.2d at 464; 858 F.2d at 464 (holding that the 
court's ``ultimate authority under the [APPA] is limited to 
approving or disapproving the consent decree''); Gillette, 406 F. 
Supp. at 716 (noting that, in this way, the court is constrained to 
``look at the overall picture not hypercritically, nor with a 
microscope, but with an artist's reducing glass''); see generally 
Microsoft, 56 F.3d at 1461 (discussing 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' 
'').
---------------------------------------------------------------------------

Bechtel, 648 F.2d at 666 (citations omitted) (emphasis added).
    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. and Tel. Co.,  552 F. Supp. 131, 151 (D.D.C. 
1982), aff'd. sub nom. Maryland v. United States, 460 U.S. 1001 (1983); 
quoting Gillette Co., 406 F. Supp. at 716 (citations omitted); United 
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985).
    Moreover, the Court's role under the APPA 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. Because 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 did not pursue. Id. 
at 1459-60.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the

[[Page 3340]]

plaintiff in formulating the proposed Final Judgment.

    Dated: December 20, 2005.

    Respectfully submitted,

William H. Jones II (WJ 2563),

Allen P. Grunes (AG 4775),

Gregg I. Malawer (GM 6467),

Avery W. Gardiner (AG 2011),

Joan Hogan (JH 5666),

U.S. Department of Justice, Antitrust Division, 325 7th Street, NW., 
Suite 300, Washington, DC 20530. (202) 514-0230. Attorneys for 
Plaintiff the United States.

Bernard Hollander (BH 0818),

Senior Trial Attorney, U.S. Department of Justice, Antitrust 
Division, 325 7th Street, NW., Suite 300, Washington, DC 20530. 
Attorney for Plaintiff the United States.

Exhibit A Definition of HHI and Calculations for Market

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted 
measure of market concentration. It is calculated by squaring the 
market share of each firm competing in the market and then summing the 
resulting numbers. For example, for a market consisting of four firms 
with shares of thirty, thirty, twenty and twenty percent, the HHI is 
2600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2600). The HHI takes into account 
the relative size and distribution of the firms in a market and 
approaches zero when a market consists of a large number of firms of 
relatively equal size. The HHI increases both as the number of firms in 
the market decreases and as the disparity in size between those firms 
increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated, and those in which the HHI is 
in excess of 1800 points are considered to be concentrated. 
Transactions that increase the HHI by more than 100 points in 
concentrated markets presumptively raise antitrust concerns under the 
Merger Guidelines. See Merger Guidelines Sec.  1.51.

[FR Doc. 06-454 Filed 1-19-06; 8:45 am]
BILLING CODE 4410-11-M