[Federal Register Volume 73, Number 95 (Thursday, May 15, 2008)]
[Notices]
[Pages 28154-28166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-10415]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Regal Cinemas, Inc. and Consolidated Theatres 
Holdings, GP; 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 1 6(b)-(h), that a Complaint, proposed 
Final Judgment, Stipulation, and Competitive Impact Statement have been 
filed with the United States District Court for the District of 
Columbia in States of America v. Regal Cinemas, Inc. and Consolidated 
Theatres Holdings, GP, Civil Action No. 08-00746. On April 29, 2008, 
the United States filed a Complaint alleging that the proposed 
acquisition by Regal Cinemas, Inc. of Consolidated Theatres Holdings, 
GP, would violate Section 7 of the Clayton Act, 15 U.S.C. 18 by 
lessening competition for theatrical exhibition of first-run movies in 
Asheville, Charlotte, and Raleigh, North Carolina. The proposed Final 
Judgment, filed the same time as the Complaint, requires the defendants 
to divest first-run, commercial movie theatres, along with certain 
tangible and intangible assets, in those three geographic regions in 
order to proceed with the proposed $210 million transaction. A 
Competitive Impact Statement filed by the United States on April 30, 
2008 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 Suite 1010, 450 Fifth Street, NW., 
Washington, DC 20530, and at the Office of the Clerk of the United 
States District Court for the District of Columbia, Washington, DC. 
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, Suite 4000, Antitrust 
Division, Department of Justice, 450 Fifth Street, NW., Washington, DC 
20530, (telephone: 202 307-0468). At the conclusion of the sixty (60) 
day comment period, the U.S. District Court for the District of 
Columbia may enter the proposed consent decree upon finding that it 
serves the public interest.

Patricia A. Brink,
Deputy Director of Operations, Antitrust Division.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. Regal Cinemas, Inc., and 
Consolidated Theatres Holdings, GP, Defendants.

Case: 1:08-cvOQ746.
Assigned To: Leon, Richard J.
Assign. Date: 4/29/2008.
Description: Antitrust.
Filed:

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this

[[Page 28155]]

civil antitrust action to enjoin the proposed merger of Regal Cinemas, 
Inc. and Consolidated Theatres, GP, and to obtain equitable relief. 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 parts of the metropolitan areas of Charlotte, Raleigh, and 
Asheville, North Carolina. 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

    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 
and to prevent a violation of Section 7 of the Clayton Act, as amended, 
15 U.S.C. 18.
    2. One defendant operates theatres in this District; the other 
attracts patrons from and advertises in this District. In addition, 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. Defendant's activities in purchasing 
equipment, services, and supplies as well as licensing films for 
exhibitors substantially affect interstate commerce. 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, 1337(a), and 1345.
    3. Venue in this District is proper under 15 U.S.C. 22 and 28 
U.S.C. 1391(c). In addition, defendants have consented to venue and 
personal jurisdiction in this judicial district.

II. Defendants and the Proposed Merger

    4. Regal Cinemas, Inc. (``Regal'') is a Tennessee corporation with 
its headquarters in Knoxville. Regal operates more than 6,400 screens 
at approximately 540 theatres in 39 states and the District of Columbia 
under the Regal, United Artists, Edwards, and Hoyts names.
    5. Consolidated Theatres Holdings, GP, is a North Carolina 
partnership (hereinafter referred to as ``Consolidated''). Consolidated 
operates 400 screens at 28 theatres in Georgia, Maryland, North 
Carolina, South Carolina, Tennessee, and Virginia, with additional 
theatres projected to open in the next few years, including the 
Biltmore Grande 15, which is scheduled to open in Asheville, North 
Carolina in August 2008.
    6. On January 14, 2008, Regal and Consolidated signed a purchase 
and sale agreement. The deal is structured as an asset purchase, with 
Regal acquiring Consolidated for approximately $210 million.

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.
    8. Viewing movies in the theatre is a very popular pastime. Over 
1.4 billion movie tickets were sold in the United States in 2007, with 
total box office revenue exceeding $9.7 billion.
    9. Companies that operate movie theatres are called ``exhibitors.'' 
Some exhibitors own a single theatre, whereas others own a circuit of 
theatres within one or more regions of the United States. Established 
exhibitors include AMC, Carmike, and Cinemark, as well as Regal and 
Consolidated.
    10. Exhibitors set ticket prices for each theatre based on a number 
of factors, including the competitive situation facing each theatre, 
the age of the theatres, the prices of nearby, comparable theatres, the 
population demographics and density surrounding the theatre, and the 
number and type of amenities each theatre offers, such as stadium 
seating.

IV. Relevant Market

A. Product Market

    11. Movies are a unique form of entertainment. The experience of 
viewing a movie in a theatre is an inherently different experience from 
live entertainment (e.g., a stage production), a sporting event, or 
viewing a movie in the home (e.g, on a DVD or via pay-per-view).
    12. Typically, viewing a movie at home lacks several 
characteristics of viewing a movie in a theatre, including the size of 
screen, the sophistication of sound systems, and the social experience 
of viewing a movie with other patrons. Additionally, the most popular, 
newly released or ``first-run'' movies are not available for home 
viewing. Movies are considered to be in their ``first-run'' during the 
four to five weeks following initial 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).
    13. Reflecting the significant differences of viewing a movie in a 
theatre, ticket prices for movies are generally very different from 
prices for other forms of entertainment: Live entertainment is 
typically significantly more expensive than a movie ticket, whereas 
renting a DVD for home viewing is usually significantly cheaper than 
viewing a movie in a theatre. Going to the movies is a different 
experience from other forms of entertainment, and a small but 
significant post-acquisition increase in ticket prices, or reduction in 
discounts, for first-run commercial movies would not cause a sufficient 
number of customers to shift to other forms of entertainment to make 
such a price increase unprofitable.
    14. Reflecting the significant difference between viewing a newly 
released, first-run movie and an older sub-run movie, tickets at 
theatres exhibiting first-run movies usually cost significantly more 
than tickets at sub-run theatres. Movies exhibited at sub-run theatres 
are no longer new releases, and moviegoers generally do not regard sub-
run movies as an adequate substitute for first-run movies and a small 
but significant post-acquisition increase in ticket prices, or 
reduction in discounts, for first-run commercial movies would not cause 
a sufficient number of customers to switch to theatres exhibiting sub-
run movies to make such a price increase unprofitable.
    15. Art movies and foreign language movies are also not substitutes 
for commercial, first-run movies. Although art and foreign language 
movies appeal to some viewers of commercial movies, potential audience 
and demand conditions are quite distinct. For example, art movies tend 
to appeal more universally to mature audiences and art movie patrons 
tend to purchase fewer concessions. Exhibitors consider art theatre 
operations as distinct from the operations of theatres that exhibit 
commercial movies. Theatres that primarily exhibit art movies often 
contain auditoriums with fewer seats than theatres that primarily play 
commercial movies. Typically, art movies are released less widely than 
commercial movies. A small but significant post-acquisition increase in 
ticket prices, or reduction in discounts, for first-run commercial 
movies would not cause a sufficient number of customers to switch to 
theatres exhibiting art movies to make such a price increase 
unprofitable.
    16. Similarly, foreign language movies do not widely appeal to U.S. 
audiences. As a result, moviegoers do not regard foreign language 
movies as adequate substitutes for first-run, commercial

[[Page 28156]]

movies. A small but significant post-acquisition increase in ticket 
prices, or reduction in discounts, for first-run movies would not cause 
a sufficient number of customers to switch to theatres exhibiting 
foreign language movies to make such a price increase unprofitable.
    17. The relevant product market within which to assess the 
competitive effects of this merger is the exhibition of first-run, 
commercial movies.

B. Geographic Markets

    18. Data show that moviegoers typically are not willing to travel 
very far from their homes to attend a movie. As a result, geographic 
markets for the exhibition of first-run, commercial movies are 
relatively local.
Charlotte, North Carolina Area
    19. Regal and Consolidated account for the vast majority of first-
run movie tickets sold in southern Charlotte, North Carolina 
(``Southern Charlotte''), an area which encompasses Consolidated's 
Philips 10 theatre, Consolidated's Arboretum 12, Regal's Crown Point 12 
and Regal's Stonecrest 22 theatre. In this area, the only other 
theatres showing first-run, commercial movies are an independent five-
plex stadium theatre and the AMC Carolina Pavilion 22, a stadium 
theatre.
    20. Moviegoers who reside in Southern Charlotte are reluctant to 
travel significant distances out of that area to attend a movie except 
in unusual circumstances. A small but significant increase in the price 
of movie tickets in Southern Charlotte would not cause a sufficient 
number of moviegoers to travel out of Southern Charlotte to make the 
increase unprofitable. Southern Charlotte constitutes a relevant 
geographic market in which to assess the competitive effects of this 
merger.
Raleigh, North Carolina Area
    21. Regal and Consolidated account for the vast majority of first-
run movie tickets sold in Northern Raleigh, North Carolina (``Northern 
Raleigh''), which encompasses Regal's Brier Creek 14, Regal's North 
Hills 14, and Consolidated's Raleigh Grand. The only other theatres 
showing first-run, commercial movies in the Northern Raleigh area are 
the sloped-floor, six screen Six Forks and the 15-screen Carmike 
theatre with stadium seating.
    22. Moviegoers who reside in Northern Raleigh are reluctant to 
travel significant distances out of their area to attend a movie except 
in unusual circumstances. A small but significant increase in the price 
of movie tickets in Northern Raleigh would not cause a sufficient 
number of moviegoers to travel out of Northern Raleigh to make the 
increase unprofitable. Northern Raleigh constitutes a relevant 
geographic market in which to assess the competitive effects of this 
merger.
    23. Regal and Consolidated account for all of the first-run movie 
tickets sold in the suburb of Gamer to the south of Raleigh, North 
Carolina (``Southern Raleigh''), which encompasses Regal's Garner Towne 
Square 10 and Consolidated's White Oak 14. There are no other theatres 
showing first-run, commercial movies in Southern Raleigh.
    24. Moviegoers who reside in Southern Raleigh are reluctant to 
travel significant distances out of their area to attend a movie except 
in unusual circumstances. A small but significant increase in the price 
of movie tickets in Southern Raleigh would not cause a sufficient 
number of moviegoers to travel out of Southern Raleigh to make the 
increase unprofitable. Southern Raleigh constitutes a relevant 
geographic market in which to assess the competitive effects of this 
merger.
Asheville, North Carolina Area
    25. After the completion of Consolidated's Biltmore Grande 15 
around August 2008, Regal and Consolidated will likely account for the 
vast majority of first-run movie tickets sold in the Asheville, North 
Carolina area (``Asheville''), which encompasses the area around 
Regal's Hollywood 14 and the developing site of Consolidated's Biltmore 
Grande 15. There are only two other non-Regal theatres showing first-
run, commercial movies in Asheville--a Carmike theatre with 10 screens 
and a Fine Arts theatre with two screens.
    26. Moviegoers in Asheville are reluctant to travel significant 
distances out of that area to attend a movie except in unusual 
circumstances. A small but significant increase in the price of movie 
tickets in Asheville would not cause a sufficient number of moviegoers 
to travel out of Asheville to make the increase unprofitable. Asheville 
constitutes a relevant geographic market in which to assess the 
competitive effects of this merger.
    27. The exhibition of first-run, commercial movies in Southern 
Charlotte, Northern Raleigh, Southern Raleigh and Asheville 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

    28. Exhibitors compete on multiple dimensions to attract moviegoers 
to their theatres over the theatres of their rivals. They compete over 
the quality of the viewing experience. They compete to offer the most 
sophisticated sound systems, best picture clarity, nicest seats with 
best views, and cleanest floors and lobbies for moviegoers. And, to 
gain market share, exhibitors seek to license the first-run movies that 
are likely to attract the largest numbers of moviegoers. Exhibitors 
also compete on price, knowing that if they charge too much (or do not 
offer sufficient discounted tickets for matinees, seniors, children, 
etc.), moviegoers will begin to frequent their rivals.
    29. In the geographic markets of Southern Charlotte, Northern and 
Southern Raleigh, and Asheville, Regal and Consolidated compete head-
to-head for moviegoers. These geographic markets are very concentrated 
and in each market, Regal and Consolidated are the other's most 
significant competitor given their close proximity to one another and 
to local moviegoers, and from the perspective of such moviegoers, the 
relative inferiority in terms of location, size or quality of other 
theatres in the geographic markets. Their rivalry spurs each to improve 
the quality of the viewing experience and keeps prices in check.
    30. In Southern Charlotte, the proposed merger would give the newly 
merged entity control of four of the six first-run, commercial theatres 
in that area, with 56 out of 83 total screens and a 75% share of 2007 
box office revenues, which totaled approximately $17.1 million. 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 6,058, representing an increase of roughly 
2,535 points.
    31. In Northern Raleigh, the proposed merger would give the newly 
merged entity control of three of the five first-run, commercial 
theatres in that area, with 44 of 65 total screens and 79% of 2007 box 
office revenues, which totaled approximately $11.6 million. The merger 
would yield a post-merger HHI of roughly 6,523, representing an 
increase of around 2,315 points.
    32. In Southern Raleigh, the proposed merger would give the newly 
merged entity control of the only two theatres in this area. Therefore, 
the market share of the combined entity would be 100% of screens and 
100% of 2007 box office revenues, which totaled $3.5 million. The 
merger would yield the highest post-merger HHI number possible--10,000, 
representing an increase of 3,167 points.

[[Page 28157]]

    33. In Asheville, after the completion of the Biltmore Grand 15, 
the proposed merger would give the newly merged entity control of four 
of the six first-run, commercial theatres with 41 of 53 total screens. 
As measured by total screens only (since Consolidated does not yet have 
box office revenues in Asheville), the combined entity would have a 
market share of approximately 77% in Asheville. The merger would yield 
a post-merger HHI of roughly 6,355, representing an increase of 2,777 
points.
    Today, were Regal or Consolidated to increase ticket prices in any 
of the four geographic markets at issue and the others were not to 
follow, the exhibitor that increased price would likely suffer 
financially as a substantial number of its patrons would patronize the 
other exhibitor. After the merger, the newly combined entity would re-
capture such losses, making price increases profitable that would have 
been unprofitable pre-merger. Thus, the merger is likely to lead to 
higher ticket prices for moviegoers, which could take the form of a 
higher adult evening ticket price or reduced discounting, e.g., for 
matinees, children, seniors, and students.
    35. The proposed merger would also eliminate competition between 
Regal and Consolidated over the quality of the viewing experience in 
each of the geographic markets at issue. If no longer required to 
compete, Regal and Consolidated would have reduced incentives to 
maintain, upgrade, and renovate their theatres in the relevant markets, 
to improve those theatres' amenities and services, and to license the 
highest revenue movies, thus reducing the quality of the viewing 
experience for a moviegoer.
    36. The presence of the other theatres offering first-run, 
commercial movies in certain of the relevant geographic markets would 
be insufficient to replace the competition lost due to the merger, and 
thus render unprofitable post-merger increases in ticket prices or 
decreases in quality by the newly merged entity. For various reasons, 
the other theatres in the relevant geographic markets offer less 
attractive options for the moviegoers that are served by the Regal and 
Consolidated theatres. For example, they are located further away from 
these moviegoers than are the Regal and Consolidated theatres, they are 
relatively smaller size or have fewer screens than the Regal and 
Consolidated theatres, or they offer a lower quality viewing experience 
than do the Regal and Consolidated theatres.

VI. Entry

    37. The entry of a first-run, commercial movie theatre is unlikely 
in all of the relevant markets. Exhibitors are reluctant to locate new 
theatres near existing theatres unless the population density and 
demographics make new entry viable or the existing theatres do not have 
stadium seating. That is not the case here. Over the next two years, 
the demand for more movie theatres in the areas at issue is not likely 
to support entry of a new theatre. And all of these markets have or 
will soon have theatres with stadium seating. Thus, 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 Southern Charlotte, Northern Raleigh, Southern Raleigh, or 
Asheville in response to an increase in movie ticket prices or a 
decline in theatre quality.

VII. Violation Alleged

    38. The United States hereby reincorporates paragraphs 1 through 
37.
    39. The effect of the proposed merger would be to lessen 
competition substantially in Southern Charlotte, Northern Raleigh, 
Southern Raleigh and Asheville in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    40. The transaction would likely have the following effects, among 
others: (a) Prices for first-run, commercial movie tickets would likely 
increase to levels above those that would prevail absent the merger, 
and (b) quality of theatres and the theatre viewing experience in the 
geographic area would likely decrease absent the merger.

VIII. Requested Relief

    41. 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 the 
plaintiff of its costs in this action; and (d) such other relief as is 
proper.

Dated: April 29, 2008.

    For Plaintiff United States of America.

David L. Meyer (DC Bar No. 414420), Acting Assistant Attorney 
General, Antitrust Division.
Patricia A. Brink, Deputy Director of Operations.
John R. Read, Chief, Litigation III.
Nina B. Hale, Assistant Chief, Litigation III.
Gregg I. Malawer (DC Bar No. 481685), Jennifer Wamsley (DC Bar No. 
486540), Anne Newton Mcfadden.
Attorneys for the United States, United States Department of 
Justice, Antitrust Division, 450 5th Street, NW., Suite 4000, 
Washington, DC 20530.

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.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. Regal Cinemas, Inc. and 
Consolidated Theatres Holdings, GP, Defendants.

Civil Action No:
Judge:
Filed:

Final Judgment

    Whereas, Plaintiff, United States of America filed its Complaint on 
April 29, 2008, the United States and Defendants, Regal Cinemas, Inc. 
(``Regal'') and Consolidated Theatres Holdings, GP (``Consolidated''), 
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 of certain rights or assets by the Defendants to 
assure that competition is not substantially lessened;

[[Page 28158]]

    And whereas, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the United States that 
the divestitures required below can and will be made and that 
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 he granted against Defendants under Section 7 of 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. ``Regal'' means Defendant Regal Cinemas Eric., a Tennessee 
corporation with its headquarters in Knoxville. Tennessee, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Consolidated'' means defendant Consolidated Theatres Holdings, 
GP, a North Carolina Partnership, 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 Regal or Consolidated, under the 
following names and at the following locations:

------------------------------------------------------------------------
               Theatre name                        Theatre address
------------------------------------------------------------------------
i. Crown Point 12.........................  9630 Monroe Road, Charlotte,
                                             NC 28270.
ii. Raleigh Grand 16......................  4840 Grove Barton Road,
                                             Raleigh, NC 27613.
iii. Town Square 10.......................  2600 Timber Dr., Garner, NC
                                             27529.
iv. Hollywood 14..........................  1640 Hendersonville Rd,
                                             Asheville, NC 28803.
------------------------------------------------------------------------

    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, teaming arrangements, 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 Theatre Assets;
    2. All intangible assets used in the development, production, 
servicing and sale of Theatre Assets, including, but not limited to all 
patents, licenses and sublicenses, intellectual property, technical 
information, computer software (except Defendants' proprietary 
software) and related documentation, know how, trade secrets, drawings, 
blueprints, designs, design protocols, specifications for materials, 
specifications for parts and devices, safety procedures for the 
handling of materials and substances, quality assurance and control 
procedures, design tools and simulation capability, all manuals and 
technical information Defendants provide to their own employees, 
customers, suppliers, agents or licensees, and all research data 
concerning historic and current research and development efforts 
relating to the Theatre Assets, provided, however, that this term does 
not include any right to use or interests in defendants' trademarks, 
trade names, service marks or service names, or copyrighted advertising 
materials.

III. Applicability

    A. This Final Judgment applies to Regal and Consolidated, 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. If, prior to complying with Section IV and V of this Final 
Judgment, Defendants sell or otherwise dispose of all or substantially 
all of their assets or of lesser business units that include the 
Theatre Assets, they shall require the purchaser to be bound by the 
provisions of this Final Judgment Defendants need not obtain such an 
agreement from the acquirers of the assets divested pursuant to this 
Final Judgment.

IV. Divestitures

    A. Defendants are ordered and directed, within ninety (90) calendar 
days after the filing of the Complaint in this matter, or five (5) 
calendar 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(s) acceptable to the 
United States in its sole discretion. The United States, in its sole 
discretion, may agree to one or more extensions of this time period not 
to exceed ninety (90) calendar 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 divestitures 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 Theatre Assets customarily provided in a due diligence 
process except such information or documents subject to the attorney-
client privilege or work-product doctrine. 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 Acquirers and the United States 
information relating to the personnel involved in the operation of the 
Theatre Assets to enable the Acquirers to make offers of employment. 
Defendants will not interfere with any negotiations by the Acquirers to 
employ any Defendant employee whose primary responsibility is the 
operation of the Theatre Assets.
    D. Defendants shall permit prospective Acquirers of the Theatre 
Assets to have reasonable access to personnel and to make inspections 
of

[[Page 28159]]

the physical facilities of the Theatre 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 operational on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation. or divestitures of the Theatre Assets. At 
the option of the Acquirers, 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 discretion.
    G. Defendants shall warrant to the Acquirers 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.
    H. Unless the United States otherwise consents in writing, the 
divestitures made 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 that the Theatre Assets can 
and will be used by the Acquirers as part of a viable, ongoing business 
of first-run, commercial motion picture theatres. Divestitures 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 divestitures 
of such assets will remedy the competitive harm alleged in the 
Complaint. The divestitures, whether pursuant to Section IV or Section 
V of this Final Judgment,
    (1) Shall be made to an Acquirer(s) that, in the United States's 
sole judgment, 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, that none of the terms of any agreement between an 
Acquirer(s) 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(s) 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 divestitures 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 divestitures to an 
Acquirer(s) acceptable to the United States at such price and on such 
terms as are then obtainable upon reasonable effort by the trustee, 
subject to the provisions of Sections 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.
    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 United States 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 
divestitures and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures. 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 divestitures.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestitures ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the 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 the divestitures ordered 
under this Final Judgment 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 divestitures, (2) the 
reasons, in the trustee's judgment, why the required divestitures have 
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 which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final

[[Page 28160]]

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 divestitures required 
herein due to the inability to obtain the Landlord Consent for any of 
the Theatre Assets, Defendants shall divest alternative Theatre Assets 
that compete effectively with the theatre for which the Landlord 
Consent was not obtained. The United States shall, in its sole 
discretion, 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.
    C. If the trustee is responsible for effecting the divestitures, 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 a 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.

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 divestitures required herein, shall 
notify the United States of any proposed divestitures 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 divestitures 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(s), any other third party, or the trustee, if 
applicable, additional information concerning the proposed 
divestitures, the proposed Acquirer(s), 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(s), 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 divestitures. If the United States provides written notice 
that it does not object, the divestitures 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, a divestiture proposed under Section IV or Section V 
shall not be consummated. Upon objection by Defendants under Section 
V(C), a divestiture proposed under Section V shall not be consummated 
unless approved by the Court.

VIII. Financing

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

IX. Hold Separate

    Until the divestitures required by this Final Judgment have 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 divestitures 
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 divestitures have been completed under Sections 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 (30) calendar 
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) 
calendar 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) calendar 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 
divestitures 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, including consultants and other persons retained 
by the United States, shall, upon written request of an authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to defendants, be 
permitted:
    (1) Access during defendants' office hours to inspect and copy, or 
at the option of the United States, to require defendants to provide 
hard copy or electronic copies of all books, ledgers, accounts, 
records, data, and documents

[[Page 28161]]

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 an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
defendants shall submit written reports or response to written 
interrogatories, 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, to any person 
other than an authorized representative of the executive branch of the 
United States, except in the course of legal proceedings to which the 
United States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendants mark each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

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 Department of 
Justice, 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 
Mecklenburg County, North Carolina; Wake County, North Carolina; and 
Buncombe County, North Carolina during a ten-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 Department of Justice 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 iii Items 5 through 9 of the instructions must be 
provided only about first-run, commercial theatres. Notification shall 
be provided at least thirty (30) calendar 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 the 
Antitrust Division make a written request for additional information, 
defendants shall not consummate the proposed transaction or agreement 
until thirty (30) 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 uncertainty 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 
divested under this Final Judgment 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. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States's responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, 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.

United States District Judge.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. Regal Cinemas, Inc., and 
Consolidated Theatres Holdings, GP, Defendants.

Civil Action No: 1:08-cv-00746.
Judge: Leon, Richard J.
Filed: April 30, 2008.

Competitive Impact Statement

    Plaintiff, the United States of America (``United States''), 
pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act 
(``APPA'' or ``Tunney Act''), 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

    On January 14, 2008, Defendant Regal Cinemas, Inc. (``Regal'') 
agreed to acquire Defendant Consolidated Theatres Holdings, GP 
(``Consolidated'') for approximately $210 million. The United States 
filed a civil antitrust complaint on April 29, 2008, seeking to enjoin 
the proposed acquisition and to obtain equitable relief. The Complaint 
alleges that the acquisition, if permitted to proceed, would combine 
the two leading, and in some cases, only operators of first-run, 
commercial movie theatres in parts of the metropolitan areas of 
Charlotte, Raleigh, and Asheville, North Carolina The likely effect of 
this acquisition would be to lessen competition substantially for 
first-run commercial motion picture

[[Page 28162]]

exhibition in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    At the same time the Complaint was filed, the United States also 
filed a Hold Separate Stipulation and Order (``Hold Separate'') and 
proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the acquisition. Under the proposed Final 
Judgment, which is explained more fully below, Regal and Consolidated 
are required to divest four theatres located in Charlotte, Raleigh and 
Asheville to acquirers acceptable to the United States.
    Under the terms of the Hold Separate, Defendants will take certain 
steps to ensure that four theatres to be divested will be maintained 
and operated as economically viable and ongoing business concerns.
    The United States and 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. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Regal, a Tennessee corporation, is currently the nation's largest 
movie theatre operator. Regal operates more than 6,400 screens at 
approximately 540 theatres in 39 states and the District of Columbia 
under the Regal, United Artists, Edwards, and Hoyts names, with 
revenues of approximately $2.6 billion in 2007.
    Consolidated, a North Carolina partnership, operates 400 screens at 
28 theatres in Georgia, Maryland, North Carolina, South Carolina, 
Tennessee, and Virginia, with additional theatres projected to open in 
the next few years, including the Biltmore Grande 15 in Asheville, 
which will open about August 2008. For fiscal year 2007, Consolidated 
generated revenues of approximately $144 million.
    On January 14, 2008, Regal and Consolidated signed a purchase and 
sale agreement. The deal is structured as an asset purchase, with Regal 
acquiring Consolidated for approximately $210 million.

B. The Competitive Effects of the Transaction on the Exhibition of 
First-Run, Commercial Movies

    The Complaint alleges that the theatrical exhibition of first-run, 
commercial films in each of Southern Charlotte, Northern and Southern 
Raleigh, and Asheville, North Carolina constitutes a line of commerce 
and a relevant market for antitrust purposes.
1. The Relevant Product and Geographic Markets
    The Complaint alleges that the relevant product market within which 
to assess the competitive effects of this merger is the exhibition of 
first-run, commercial movies. According to the Complaint, the 
experience of viewing a film in a theatre is an inherently different 
experience from other forms of entertainment, such as a live show, a 
sporting event, or viewing a movie in the home (e.g., on a DVD or via 
pay-per-view). Reflecting the significant differences of viewing a 
movie in a theatre, ticket prices for movies are generally very 
different from prices for other forms of entertainment: Live 
entertainment is typically significantly more expensive than a movie 
ticket, whereas renting a DVD for home viewing is usually significantly 
cheaper than viewing a movie in a theatre. The Complaint also alleges 
that a small but significant post-acquisition increase in ticket 
prices, or reduction in discounts, for first-run commercial movies 
would not cause a sufficient number of customers to shift to other 
forms of entertainment to make such a price increase unprofitable.
    The Complaint alleges that moviegoers generally do not regard sub-
run movies, art movies, or foreign language movies as an adequate 
substitute for first-run movies and would not switch to sub-run movies, 
art movies, or foreign language movies if the price of viewing first-
run movies was increased by a small but significant amount. Although 
sub-run, art and foreign language movies appeal to some viewers of 
commercial movies, potential audience and demand conditions are quite 
distinct. Exhibitors consider sub-run, art, and foreign language 
theatre operations as distinct from the operations of theatres that 
exhibit commercial movies. A small but significant post-acquisition 
increase in ticket prices, or reduction in discounts, for first-run 
commercial movies would not cause a sufficient number of customers to 
switch to theatres exhibiting sub-run, art, or foreign language movies 
to make such a price increase unprofitable. The Complaint alleges that 
the relevant geographic markets in which to measure the competitive 
effects of this merger are the parts of metropolitan areas identified 
as Southern Charlotte, Northern Raleigh, Southern Raleigh and 
Asheville. According to the Complaint, the Southern Charlotte area 
encompasses Consolidated's Philips Place 10 theatre, Consolidated's 
Arboretum 12, Regal's Crown Point 12 and Regal's Stonecrest 22 theatre. 
In this area, the only other theatres showing first-run, commercial 
movies are an independent five-plex stadium theatre and the AMC 
Carolina Pavilion 22, a stadium theatre.
    The Northern Raleigh area encompasses Regal's Brier Creek 14, 
Regal's North Hills 14, and Consolidated's Raleigh Grand. The only 
other theatres showing first-run, commercial movies in the Northern 
Raleigh area are the sloped-floor, six screen Six Forks and the 15-
screen Carmike theatre with stadium seating.
    The Southern Raleigh area consists of the suburb of Garner to the 
south of Raleigh and encompasses Regal's Garner Towne Square 10 and 
Consolidated's White Oak 14. There are no other theatres showing first-
run, commercial movies in Southern Raleigh.
    The Asheville area encompasses Regal's Hollywood 14 and the 
developing site of Consolidated's Biltmore Grande 15, which is 
scheduled to open in August of 2008. There are only two other non-Regal 
theatres showing first-run, commercial movies in Asheville--a Carmike 
theatre with 10 screens and a Fine Arts theatre with two screens.
    According to the Complaint, moviegoers who reside in each of these 
areas are reluctant to travel significant distances out of that area to 
attend a movie except in unusual circumstances and would not do so in 
sufficient numbers to make a small but significant price increase 
unprofitable. As a consequence, each of these areas is a relevant 
geographic market in which to assess the competitive effects of the 
merger.
2. Competitive Effects in the Relevant Markets
    The Complaint alleges that companies that operate first-run, 
commercial movie theatres (known as exhibitors) compete on multiple 
dimensions. They compete over the quality of the viewing experience. 
They compete to offer the most sophisticated sound systems, best 
picture clarity, nicest seats with best views, and cleanest floors and 
lobbies for moviegoers. Exhibitors also seek to license the first-run 
movies that are likely to attract the largest numbers of moviegoers. 
Exhibitors also compete on price,\1\ knowing that if they charge too

[[Page 28163]]

much (or do not offer sufficient discounted tickets for matinees, 
seniors, children, etc.), moviegoers will choose to view movies at 
rival theatres.
---------------------------------------------------------------------------

    \1\ An example of such price competition occurred in 2006 in 
Southern Raleigh when Consolidated opened the White Oak 14, a 
stadium theatre. Regal's Towne Square theatre in Southern Raleigh is 
an older sloped-floor theatre located approximately five miles away. 
After the White Oak 14 opened, the Towne Square theatre decreased 
its adult admission price substantially.
---------------------------------------------------------------------------

    According to the Complaint, the proposed merger is likely to lead 
to higher ticket prices for moviegoers in each of the relevant markets. 
The merger would also reduce the newly merged entity's incentives to 
maintain, upgrade, and renovate its theatres in the relevant markets, 
to improve its theatres' amenities and services, and to license the 
highest revenues movies, thus reducing the quality of the viewing 
experience. The Complaint alleges these outcomes are likely because, in 
each of the relevant markets, Regal and Consolidated are each other's 
most significant competitor, given their close proximity to one another 
and to moviegoers.
    In Southern Charlotte, the proposed merger would give the newly 
merged entity control of four of the six first-run, commercial theatres 
in that area, with 56 out of 83 total screens and a 75% share of 2007 
box office revenues, which totaled approximately $17.1 million. Using a 
measure of market concentration called the Herfmdahl-Hirschman Index 
(``HHI''), explained in Appendix A, the merger would yield a post-
merger HHI of approximately 6058, representing an increase of roughly 
2535 points.
    In Northern Raleigh, the proposed merger would give the newly 
merged entity control of three of the five first-run, commercial 
theatres in that area, with 44 of 65 total screens and 79% of 2007 box 
office revenues, which totaled approximately $11.6 million. The merger 
would yield a post-merger HHI of roughly 6523, representing an increase 
of around 2315 points.
    In Southern Raleigh, the proposed merger would give the newly 
merged entity control of the only two theatres in this area. Therefore, 
the market share of the combined entity would be 100% of screens and 
100% of 2007 box office revenues, which totaled $3.5 million. The 
merger would yield the highest post-merger HHI number possible, 10,000, 
representing an increase of 3167 points.
    In Asheville, after the completion of the Biltmore Grand 15, the 
proposed merger would give the newly merged entity control of four of 
the six first-run, commercial theatres with 41 of 53 total screens. As 
measured by total screens only (since Consolidated does not yet have 
box office revenues in Asheville), the combined entity would have a 
market share of approximately 77% in Asheville. The merger would yield 
a post-merger HHI of roughly 6,355, representing an increase of 2,777 
points.
    In each of these markets today, were Regal or Consolidated to 
increase ticket prices and the other were not to follow, the exhibitor 
that increased price would likely suffer financially as a substantial 
number of its patrons would patronize the other exhibitor's theatre. 
After the merger, the newly combined entity would re-capture such 
losses, making price increases profitable that would have been 
unprofitable pre-merger. Likewise, the proposed merger would also 
eliminate competition between Regal and Consolidated over the quality 
of the viewing experience at their theatres in each of the geographic 
markets at issue.
    The Complaint explains that the presence of the other theatres 
offering first-run, commercial movies in certain of the relevant 
geographic markets would be insufficient to replace the competition 
lost due to the merger, and thus render unprofitable post-merger 
increases in ticket prices or decreases in quality by the newly merged 
entity. For various reasons, the other theatres in the relevant 
geographic markets offer less attractive options for the moviegoers 
that are served by the Regal and Consolidated theatres. For example, 
they are located further away from these moviegoers than are the Regal 
and Consolidated theatres, they are a relatively smaller size or have 
fewer screens than the Regal and Consolidated theatres, or they offer a 
lower quality a viewing experience than do the Regal and Consolidated 
theatres.
    Finally, the Complaint alleges that the entry of a first-run, 
commercial movie theatre in response to an increase in movie ticket 
prices or a decline in theatre quality is unlikely in all of the 
relevant markets. Exhibitors are reluctant to locate new theatres near 
existing theatres unless the population density and demographics makes 
new entry viable or the existing theatres do not have stadium seating. 
That is not the case in any of the relevant markets. Over the next two 
years, the demand for more movie theatres in the areas at issue is not 
likely to support entry of a new theatre. And all of these markets have 
or will soon have theatres with stadium seating.
    For all of these reasons, the United States has concluded that the 
proposed transaction would lessen competition substantially in the 
exhibition of first-run, commercial films in Southern Charlotte, 
Northern and Southern Raleigh, and Asheville, eliminate actual and 
potential competition between Regal and Consolidated, and likely result 
in increased ticket prices and lower quality theatres in those markets. 
The proposed merger therefore violates of Section 7 of the Clayton Act.

III. Explanation of the Proposed Final Judgment

    The divestiture requirement of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisitions in Southern 
Charlotte, Northern and Southern Raleigh, and Asheville by establishing 
new, independent, and economically viable competitors. The proposed 
Final Judgment requires Regal and Consolidated, within ninety (90) 
calendar days after the filing of the Complaint, or five (5) days after 
the notice of the entry of the Final Judgment by the court, whichever 
is later, to divest, as viable ongoing businesses, a total of four 
theatres in three metropolitan areas: Crown Point 12 (Southern 
Charlotte); the Raleigh Grand 16 (Northern Raleigh); Town Square 10 
(Southern Raleigh); and Hollywood 14 (Asheville). Sale of these 
theatres will thus preserve existing competition between the 
defendants' theatres that are or would have been each others' most 
significant competitor in the theatrical exhibition of first-run films 
in Southern Charlotte, Northern and Southern Raleigh, and Asheville. 
The assets must be divested in such a way as to satisfy the United 
States in its sole discretion that the theatres can and will be 
operated by the purchaser as viable, ongoing businesses that can 
compete effectively as first-run commercial theatres. Defendants must 
use their best efforts to accomplish the divestiture quickly and shall 
cooperate with prospective purchasers. Until the divestitures take 
place, Regal and Consolidated must maintain the sales and marketing of 
the theatres, and maintain the theatres in operable condition at 
current capacity configurations. Until the divestitures take place, 
Regal and Consolidated must not transfer or reassign to other areas 
within the company their employees with primary responsibility for the 
operation of the Theatre Assets, except for transfer bids initiated by 
employees pursuant to Defendants' regular, established job posting 
policy.
    In the event that Defendants do not accomplish the divestitures 
within the periods prescribed in the proposed Final Judgment, the Final 
Judgment provides that the Court will appoint a trustee selected by the 
United States to effect the divestitures. If a trustee is

[[Page 28164]]

appointed, the proposed Final Judgment provides that Regal and 
Consolidated will pay all costs and expenses of the trustee. The 
trustee's commission will be structured so as to provide an incentive 
for the trustee based on the price obtained and the speed with which 
the divestitures are accomplished. After his or her appointment becomes 
effective, the trustee will file monthly reports with the Court and the 
United States, setting forth his or her efforts to accomplish the 
divestiture. At the end of six (6) months, if the divestitures have not 
been accomplished, the trustee and the United States will make 
recommendations to the Court, which shall enter such orders as 
appropriate, in order to carry out the purpose of the trust, including 
extending the trust or the term of the trustee's appointment.
    If 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 Defendants to propose an alternative 
theatre to be divested. The United States shall determine whether the 
theatre offered competes effectively with the theatre that could not be 
divested due to a failure to obtain landlord consent. This provision 
will insure that any failure by Defendants to obtain landlord consent 
by Defendants does not thwart the relief obtained in the proposed Final 
Judgment.
    The proposed Final Judgment also prohibits Defendants from 
acquiring any other theatres in Mecklenburg County, North Carolina; 
Wake County, North Carolina; and Buncombe County, North Carolina 
without providing at least thirty (30) days notice to the United States 
Department of Justice. Such acquisitions could raise competitive 
concerns but might be too small to be reported 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 
attorney's fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
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

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court and 
published in the Federal Register.
    Written comments should be submitted to: John R. Read, Chief, 
Antitrust Division/Litigation III, United States Department of Justice, 
450 5th Street, NW., Suite 4000, 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

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against Regal's merger with 
Consolidated. The United States 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 by the United 
States. Thus, the proposed Final Judgment would achieve all or 
substantially all of the relief the United States would have obtained 
through litigation, but avoids the time, expense, and uncertainty of a 
full trial on the merits of the Complaint.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the court, in accordance with the statute as amended in 2004, is 
required to consider:
    (A) The competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, 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). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.C. 2007) 
(assessing public interest standard under the Tunney Act).\2\
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    \2\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review.
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the

[[Page 28165]]

government's complaint, whether the decree is sufficiently clear, 
whether enforcement mechanisms are sufficient, and whether the decree 
may positively harm third parties. See Microsoft, 56 F.3d at 145862. 
With respect to the adequacy of the relief secured by the decree, a 
court may not ``engage in an unrestricted evaluation of what relief 
would best serve the public.'' United States v. BNS, Inc., 858 F.2d 
456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648 
F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; 
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001). 
---------------------------------------------------------------------------
Courts have held that:

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

    Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\ 
In determining whether a proposed settlement is in the public interest, 
a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not require 
that the remedies perfectly match the alleged violations.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 
(noting the need for courts to be ``deferential to the government's 
predictions as to the effect of the proposed remedies''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 
(noting that the court should grant due respect to the United States' 
prediction as to the effect of proposed remedies, its perception of the 
market structure, and its views of the nature of the case).
---------------------------------------------------------------------------

    \3\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the IAPPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (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''').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[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. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    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. As this Court recently confirmed in SBC Communications, 
courts ``cannot look beyond the complaint in making the public interest 
determination unless the complaint is drafted so narrowly as to make a 
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing 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). The language wrote into the statute 
what Congress intended when it enacted the Tunney Act in 1974, as 
Senator Tunney explained: ``[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.'' 119 Cong. Rec. 24,598 (1973) (statement 
of Senator Tunney). Rather, the procedure for the public interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11.\4\
---------------------------------------------------------------------------

    \4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) 
section 61,508, at 71,980 (W.D. Mo. 1977) (``Absent 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.''); S. Rep. No. 93298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
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VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: April 30, 2008.

Respectfully submitted,

Gregg I. Malawer (DC Bar No. 481685), Jennifer A. Warnsley (DC Bar 
No. 486540), Anne Newton McFadden, U.S. Department of Justice 
Antitrust, Division 450 S Street, NW., Suite 4000, Washington, DC 
20530, (202) 514-0230, Attorneys 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

[[Page 28166]]

concentrated markets presumptively raise antitrust concerns under the 
Merger Guidelines. See Merger Guidelines 1.51.

 [FR Doc. E8-10415 Filed 5-14-08; 8:45 am]
BILLING CODE 4410-11-M