[Federal Register Volume 76, Number 82 (Thursday, April 28, 2011)]
[Notices]
[Pages 23839-23844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10121]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Lucasfilm Ltd.; Public Comments and Response on 
Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comments 
received on the proposed Final Judgment in United States v. Lucasfilm 
Ltd., Civil Action No. 1:10-CV-02220, which was filed in the United 
States District Court for the District of Columbia on April 15, 2011, 
together with the response of the United States to the comments.
    Copies of the comments and the response are available for 
inspection at the Department of Justice Antitrust Division, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia, 333 Constitution Avenue, NW., Washington, 
DC 20001. Copies of any of these materials may be obtained upon request 
and payment of a copying fee.

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

United States of America, Plaintiff,

v.

Lucasfilm Ltd., Defendant.

Response of Plaintiff United States to Public Comments on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby responds to the public comments received 
regarding the proposed Final Judgment in this case. After careful 
consideration of the comments, the United States continues to 
believe that the proposed Final Judgment will provide an effective 
and appropriate remedy for the antitrust violations alleged in the 
Complaint. The United States will move the Court for entry of the 
proposed Final Judgment after the public comments and this response 
have been published in the Federal Register, pursuant to 15 U.S.C. 
16(d).
    The United States filed a civil antitrust complaint against 
Lucasfilm on December 21, 2010, seeking injunctive and other relief 
to remedy the likely anticompetitive effects of a three-part 
agreement between Lucasfilm and Pixar to forbid cold-calling and to 
restrict certain other employee recruiting practices. The agreement 
reduced competition for highly-skilled digital animators and other 
employees, diminished potential employment opportunities for those

[[Page 23840]]

employees, and interfered with the proper functioning of the price-
setting mechanism that would otherwise have prevailed.
    Simultaneously with the filing of the Complaint, the United 
States filed a proposed Final Judgment and Stipulation signed by the 
plaintiff and Lucasfilm, consenting to the entry of the proposed 
Final Judgment after compliance with the requirements of the Tunney 
Act, 15 U.S.C. 16.\1\ Pursuant to those requirements, the United 
States filed its Competitive Impact Statement (``CIS'') with the 
Court also on December 21, 2010; published the proposed Final 
Judgment and CIS in the Federal Register on December 28, 2010, see 
United States, et al. v. Lucasfilm Ltd., 75 FR 81651; and caused to 
be published in The Washington Post summaries of the terms of the 
proposed Final Judgment and CIS, together with directions for the 
submission of written comments relating to the proposed Final 
Judgment, for seven days beginning on December 25, 2010, and ending 
on December 31, 2010. The 60-day period for public comments ended on 
March 1, 2011; three comments were received as described below and 
attached hereto.
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    \1\ Pixar was not named as a defendant because Pixar is 
currently bound by a similar Final Judgment entered in United States 
v. Adobe Systems, Inc., No. 1:10-cv-01629 (D.D.C. entered March 17, 
2011).
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I. The Investigation and Proposed Final Judgment

    The proposed Final Judgment is the culmination of an 
investigation of agreements between Lucasfilm and Pixar to restrain 
employee recruiting and cold-calling practices. As part of its 
investigation, the Justice Department issued Civil Investigative 
Demands to Pixar and Lucasfilm. The Department reviewed the 
documents and other materials from them, and interviewed witnesses 
to the activity. The investigative staff carefully analyzed the 
information obtained and thoroughly considered all of the issues 
presented.
    Lucasfilm and Pixar are rival employers of digital animators. 
Beginning no later than January 2005, Lucasfilm and Pixar agreed to 
a three-part protocol that restricted recruiting of each other's 
employees. First, Lucasfilm and Pixar agreed they would not cold 
call each other's employees.\2\ Second, they agreed to notify each 
other before making an offer to an employee of the other firm. 
Third, they agreed that, when offering a position to the other 
company's employee, neither would counteroffer above the initial 
offer. The protocol covered all digital animators and other 
employees of both firms and was not limited by geography, job 
function, product group, or time period.
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    \2\ Cold calling involves communicating directly in any manner 
(including orally, in writing, telephonically, or electronically) 
with another firm's employee who has not otherwise applied for a job 
opening.
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    Lucasfilm's and Pixar's agreed-upon protocol disrupted the 
competitive market forces for employee talent. It eliminated a 
significant form of competition to attract digital animation 
employees and other employees covered by the agreement. Overall, it 
substantially diminished competition to the detriment of the 
affected employees who likely were deprived of information and 
access to better job opportunities.
    After reviewing the investigative materials, the Department 
determined that the agreement between the two firms was a naked 
restraint of trade that was per se unlawful under Section 1 of the 
Sherman Act, 15 U.S.C. 1, as alleged in the Complaint.
    The proposed Final Judgment is designed to restore competition 
for digital animators and other employees. Section IV of the 
proposed Final Judgment prohibits Lucasfilm, and others in concert 
with it who have notice of the proposed Final Judgment, from 
agreeing, or attempting to agree, with another person to refrain 
from cold calling, soliciting, recruiting, or otherwise competing 
for employees of the other person. Lucasfilm is also prohibited from 
requesting or pressuring another person to refrain from cold 
calling, soliciting, recruiting, or otherwise competing for 
employees of the other person. These provisions prohibit agreements 
not to make counteroffers and agreements to notify each other when 
making an offer to each other's employee. In Section V, the proposed 
Final Judgment states that it does not prohibit ``no direct 
solicitation provisions'' when they are reasonably necessary for, 
and thus ancillary to, legitimate procompetitive collaborations. 
Such ancillary restraints remain subject to scrutiny under the rule 
of reason, in accord with antitrust precedents. See CIS at 6-8. In 
this manner, the proposed Final Judgment prohibits anticompetitive 
conduct while preserving procompetitive collaborations.

II. Standard of Judicial Review

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a 60-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 in accordance with the 
statute, the court 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 (DC Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. InBev NV./S.A., 2009-2 Trade Cas. (CCH) ]76,736, No. 08-
1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) 
(noting that the court's review of a consent judgment is limited and 
only inquires ``into whether the government's determination that the 
proposed remedies will cure the antitrust violations alleged in the 
complaint was reasonable, and whether the mechanisms to enforce the 
Final Judgment are clear and manageable'').
    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 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 1458-62. 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); 
InBev, 2009 U.S. Dist. LEXIS 84787, at *3 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, the 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

[[Page 23841]]

(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).
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    \3\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] 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' '').
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    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). Therefore, 
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.
    In its 2004 amendments to the Tunney Act,\4\ Congress made clear 
its intent to preserve the practical benefits of utilizing consent 
decrees in antitrust enforcement, stating ``[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.\5\
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    \4\ The 2004 amendments substituted the word ``shall'' for 
``may'' when directing the courts to consider the enumerated factors 
and amended the list of factors to focus on competitive 
considerations and 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).
    \5\ 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) 
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. 93-298, 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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III. Summary of Public Comments and the United States' Response

    During the 60-day comment period, the United States received 
three comments, which are attached hereto in the Appendix to this 
Response. The United States has carefully reviewed the comments and 
has determined that the proposed Final Judgment remains in the 
public interest. We address first the one from Mr. Kent Martin and 
then together, the two from The Association of Executive Search 
Consultants (``AESC'').

A. Kent Martin

    Mr. Martin is an employee in the digital film industry. He wrote 
that he believed the proposed Final Judgment would be unenforceable 
and that the firms would alter their practices and conspire in other 
ways to achieve the same result. Mr. Martin also asked that 
financial penalties be imposed, and in particular, that the 
penalties be distributed to workers in the industry. He felt this 
was necessary for the settlement to have an effective impact and to 
compensate employees industry-wide. Finally, he expressed the view 
that attempts to control wages are not limited to the Lucasfilm-
Pixar recruiting agreement but could involve other studios.
    After carefully considering Mr. Martin's comments, the United 
States believes that the proposed changes are inappropriate and 
entry of the judgment in its current form is in the public interest. 
First, the proposed Final Judgment is enforceable. As with any court 
order, the Final Judgment would be enforceable through civil and 
criminal contempt proceedings. The proposed Final Judgment gives the 
Antitrust Division the ability to investigate any possible 
violations of its terms. If the Antitrust Division learns of any 
violations, it can pursue a contempt action. In addition, Lucasfilm 
must disclose to the Antitrust Division any actual or potential 
violations of the Judgment. Lucasfilm officials must certify that 
they have read the Final Judgment and understand that violations can 
result in a civil or criminal contempt action.
    Second, the proposed Final Judgment is designed to prevent 
Lucasfilm from entering into other agreements that limit competition 
for employees. Although the complaint alleges only that Lucasfilm 
and Pixar entered into agreements to refrain from cold-calling and 
counter offering, and to notify each other before making job offers, 
Section IV of the proposed Final Judgment more broadly enjoins 
agreements regarding solicitation, cold calling, recruitment, or 
other methods of competing for employees to provide prophylactic 
protection against other activities that could interfere with 
competition for employees. Third, Mr. Martin's request for financial 
penalties is not appropriate.
    The proposed Final Judgment may not be rejected or modified 
simply because a different remedy might better serve an individual's 
interests, including individual employees. The United States 
represents the public interest. Unless the ``decree will result in 
positive injury to third parties,'' a district court ``should not 
reject an otherwise adequate remedy simply because a third party 
claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9. 
Here, the proposed Final Judgment clearly remedies the conduct 
alleged by the United States and does not result in positive injury 
to Mr. Martin or other employees in the digital animation industry.
    Finally, while Mr. Martin is of the view that others may be 
involved in similar or related conduct, this case was filed against 
Lucasfilm for conspiring with Pixar as alleged in the Complaint. 
Accordingly, the Final Judgment can only reach Lucasfilm and that 
conduct. As stated above, Pixar is already subject to a similar 
Final Judgment.\6\
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    \6\ Pixar and four other defendants are subject to the Final 
Judgment entered in United States v. Adobe Systems, Inc., No. 1:10-
cv-01629 (D.D.C. entered March 17, 2011).
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B. AESC

    AESC is a worldwide professional association of executive search 
consulting firms. Its members identify and recruit senior executive 
talent for organizations in many industries. AESC submitted two 
comments about the proposed Final Judgment dated February 25, 2011, 
and March 15, 2011. Both comments focused on Section V.A.3. which 
allows Lucasfilm to enter no-direct solicitation agreements that are 
``reasonably necessary for contracts with. * * * recruiting 
agencies.''
    AESC's first comment asked that the term ``reasonably 
necessary'' be defined in the judgment, including enumerating 
factors, such as the duration and geographic scope of the no-direct 
solicitation restraint, that a court would consider in determining 
whether the restraint was reasonably necessary to the recruiting 
engagement. AESC is concerned that without a more precise 
definition, executive search firms will not know whether their no 
direct solicitation provisions in agreements with clients violate 
the law or the proposed Final Judgment. The second comment expanded 
upon the first. AESC noted that executive search firms may gain 
exposure to proprietary details about a client's business, and it 
may be reasonably necessary for the client and executive search firm 
to agree on a narrowly-tailored no direct solicitation covenant. For 
example, they may enter a limited-duration agreement restricting the 
executive search firm from soliciting employees who work in the 
relevant office or division of the client corporation. By contrast, 
some clients may request multi-year prohibitions that cover the 
entire company. AESC expressed the concern that overly broad 
restrictions could have the effect of placing significant numbers of 
individuals off limits to recruiters and thus narrow the pool of 
accessible talent from which to draw when conducting executive 
searches. AESC feared that the proposed Final Judgment could 
encourage the use of overly broad

[[Page 23842]]

agreements. Accordingly, AESC asked that the Judgment be modified to 
state:
    All no direct solicitation provisions that relate to agreements 
with recruiting agencies described in Section 5.A.3 shall be 
narrowly tailored such that the scope of the no direct solicitation 
provision bears a reasonable relationship to the scope of the 
recruiting engagement, including with respect to geographic reach, 
duration, and the number of personnel and business units affected.
    After carefully considering AESC's comments, the United States 
has determined that the proposed modification is inappropriate, and 
entry of the proposed Final Judgment in its current form is in the 
public interest.
    As explained in the CIS, naked agreements among horizontal 
competitors to restrain cold calling and recruiting of employees are 
per se unlawful. But agreements, even among horizontal competitors, 
that are ancillary to a legitimate procompetitive venture may be 
lawful. Such agreements are evaluated under the rule of reason, 
which balances a restraint's procompetitive benefits against its 
anticompetitive effects.
    A determination of whether a restraint is ancillary to a 
legitimate collaboration depends on whether it is ``reasonably 
necessary'' to achieve the procompetitive benefits of the 
collaboration. The ``reasonably necessary'' standard is well 
understood in the antitrust case law.\7\ The cases demonstrate that 
the determination of whether the conduct at issue meets the standard 
is made based on the facts of each individual case. It is not 
possible to identify every factor a court may choose to consider in 
every situation in every industry. Rather, the standard is flexible 
and allows the court discretion to protect legitimate restraints on 
competition while prohibiting those that are unlawful. The courts 
must consider each situation's individual facts and determine 
whether the agreement is ``reasonably necessary'' for the 
collaboration.\8\
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    \7\ See generally Department of Justice, Antitrust Division, and 
Federal Trade Commission, Antitrust Guidelines for Collaborations 
among Competitors Sec.  1.2 (2000) (``Collaboration Guidelines''). 
See also Major League Baseball v. Salvino, 542 F.3d 290, 339 (2d 
Cir. 2008) (Sotomayor, J., concurring) (``a per se or quick look 
approach may apply * * * where a particular restraint is not 
reasonably necessary to achieve any of the efficiency-enhancing 
benefits of a joint venture and serves only as a naked restraint 
against competition.''); Dagher v. Saudi Refining, Inc., 369 F.3d 
1108, 1121 (9th Cir. 2004), rev 'd on other grounds sub nom. Texaco 
v. Dagher, 547 U.S. 1, 8 (2006); Rothery Storage & Van Co. v. Atlas 
Van Lines, Inc., 792 F.2d 210, 227 (DC Cir. 1986); In re Polygram 
Holdings., Inc., 2003 WL 21770765 (F.T.C. 2003) (parties must prove 
that the restraint was ``reasonably necessary'' to permit them to 
achieve particular alleged efficiency), aff'd, Polygram Holdings, 
Inc. v. F.T.C., 416 F.3d 29 (DC Cir. 2005).
    \8\ See, e.g., Freeman v. San Diego Ass'n of Realtors, 322 F.3d 
1133 (9th Cir. 2003) (agreeing on a fixed fee was not reasonably 
necessary for a shared multi-state listing database because it was 
not a ``necessary consequence'' of the MLS' activities; 
organizations had shared databases in past without fixing fees); 
Salvino, 542 F.3d at 337 (Sotomayor, J., concurring) (Major League 
Baseball teams created a formal joint venture to exclusively 
license, and share profits for, team trademarks, resulting in 
``decreased transaction costs, lower enforcement and monitoring 
costs, and the ability to one-stop shop. * * * '' Such benefits 
``could not exist without the * * * agreements.''); Blackburn v. 
Sweeney, 53 F.3d 825 (7th Cir. 1995) (Agreement between former law 
partners to ban advertising in certain areas was an illegal 
horizontal market allocation and not an ancillary restraint. It was 
not reasonably necessary to partnership dissolution agreement, as 
the agreement was of unlimited duration and the firms had split 
before the agreement was written); Rothery, Storage & Van Co., 792 
F.2d at 227 (court determined that national moving network in which 
the participants shared physical resources, scheduling, training, 
and advertising resources, could forbid contractors from free riding 
by using its equipment, uniforms, and trucks for business they were 
conducting on their own); Addamax v. Open Software Found., 152 F.3d 
48 (1st Cir. 1998) (computer manufacturers formed nonprofit joint 
research and development venture to develop operating system; 
agreement on price to be paid for security software that was used by 
joint venture was ancillary to effort to develop a new system).
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    In the CIS, the United States identified several facts that 
caused it to conclude that the Lucasfilm-Pixar agreement was not 
properly ancillary to any legitimate procompetitive collaboration 
between them. Indeed, the agreement was not tied to any specific 
collaboration. In addition, the agreement extended to all employees 
at the firms and was not limited by geography, job function, product 
group, or time period. See CIS at 7-8.
    The factors identified by AESC certainly appear to be relevant 
to assessing the reasonable necessity of a non-solicitation. They 
are similar to the factors identified in the United States' CIS. 
However, to enumerate a list of factors courts must consider in 
determining reasonable necessity is both impractical and 
unnecessary. Moreover, the agreements AESC is concerned about-
agreements between clients and executive search firms-are vertical 
in nature. They are not horizontal agreements between competitors, 
like the Lucasfilm-Pixar agreement. Vertical agreements are judged 
under the rule of reason where the court weighs the potential 
anticompetitive effects of the activity and its alleged 
procompetitive virtues.
    For these reasons, the United States believes that the 
modification proposed by AESC is inappropriate. The public interest 
is well served by entering the Final Judgment as proposed.

IV. Conclusion

    After carefully reviewing the public comments, the United States 
has determined that the proposed Final Judgment, as drafted, 
provides an effective and appropriate remedy for the antitrust 
violations alleged in the Complaint, and is therefore in the public 
interest. The United States will move this Court to enter the 
proposed Final Judgment after the comments and this response are 
published in the Federal Register.

Dated: April 15, 2011.

    Respectfully submitted,

Adam T. Severt,
Ryan S. Struve (DC Bar 495406),
Jessica N. Butler-Arkow (DC Bar 430022),
H. Joseph Pinto III,
Anthony D. Scicchitano,
Trial Attorneys.

U.S. Department of Justice, Antitrust Division, Networks and 
Technology Section, 450 Fifth Street, NW., Suite 7100, Washington, 
DC 20530. Telephone: (202) 307-6200. Facsimile: (202) 616-8544. 
[email protected].

From: Kent Martin,
Sent: Wednesday, February 16, 2011 9:22 pm,
To: ATR-Antitrust--Internet; Severt, Adam T,
Subject: United States of America vs. LucasFilm LTD.


    Greetings Department of Justice,
    As a member of the digital film community some of my co-workers 
made me aware of the case being brought against LucasFilm and the 
proposed settlement. After reading the proposed settlement I was 
rather disappointed. If I may oversimplify the proposal, simply 
giving a directive to stop the practice or practices being 
questioned is unenforceable. The Human Resources and Recruiting 
staffs will continue to operate as they have for many years. 
Attempts to control wages is not limited to the agreement uncovered 
between Pixar and LucasFilm. The major players in the LA area, 
including The Walt Disney Company, DreamWorks Animation, and Sony 
Pictures Imageworks all engage, in one form or another, in practices 
intended to limit wages as employees move between studios. And 
moving between studios is becoming ever more common as many studios 
are executing layoffs to minimize their full time staff and will 
rely on what effectively become temporary staff to complete the 
work.
    Lowering or controlling wages is all about saving money. Any 
settlement to this case that does not involve financial penalties 
will fall short of having any effective impact. But how would 
financial penalties, if any be disbursed? To union pension plans? 
Not all studios are union. Payments to only those employees 
affected? In some way the entire industry has been affected, except 
for the few that seem to have secured lifetime positions at some 
outrageous hourly rate. Some form of payment to employees of the 
companies involved during the time period the practices were 
determined to have been in effect? Maybe. That would be a start.
    A very good mess indeed. So a slap on the wrist will be 
administered, and I will watch my hourly rate continue to plummet as 
wage control techniques continue on.
    Thought I would submit a few comments on this matter, even 
though it is shortly before the deadline. I am hoping that many more 
of my colleagues have taken the time to submit even a short comment 
on the matter.

    Thank You for your time.

Kent Martin,
Digital Film employee for over 15 years.

The Association of Executive Search Consultants' Comments on the 
Proposed Final Judgment Between the Department of Justice and Lucasfilm

    The Association of Executive Search Consultants (``AESC'') 
respectfully submits these comments to the Proposed Final

[[Page 23843]]

Judgment between the Department of Justice (``DOJ'') and Lucasfilm. 
In summary, the AESC is supportive of the Proposed Final Judgment 
with one exception: Section V.A. of the Proposed Final Judgment 
lacks sufficient clarity with respect to the circumstances under 
which ``no direct solicitation'' provisions are permitted in the 
context of ``contracts with * * * recruiting agencies,'' and 
specifically what factors should be considered in determining 
whether such provisions are ``reasonably necessary.'' AESC therefore 
respectfully requests that DOJ, prior to entry of the Proposed Final 
Judgment, supplement the language of the judgment to communicate 
clearer guidance both to recruiting agencies and to the firms that 
engage such agencies to perform employee and executive search 
functions.
    The AESC is the worldwide professional association for retained 
executive search consulting firms. An offshoot of management 
consulting, retained. executive search consulting has played a major 
role in the identification and recruitment of senior executive 
talent for organizations in a wide variety of industries and 
countries. The success of executive search consulting is such that 
the profession has grown to become a global industry with revenues 
in excess of $10 billion. Today, the AESC is widely recognized as 
the standard bearer for the executive search industry and represents 
member firms in seventy (70) countries around the world, employing 
more than 6,000 search professionals. It is estimated that AESC 
member firms are retained by clients to conduct approximately 50,000 
senior executive searches every year.
    The AESC is concerned that ambiguity in the Proposed Final 
Judgment creates uncertainty regarding the extent to which ``no 
direct solicitation'' provisions are permitted in executive search 
contracts. Section V.A. of the Proposed Final Judgment expressly 
permits ``no direct solicitation'' provisions that are ``reasonably 
necessary for contracts with * * * recruiting agencies.'' However, 
the judgment fails to define the term ``reasonably necessary.'' Nor 
does the government's Competitive Impact Statement identify the 
factors that are relevant to determining whether a ``no direct 
solicitation'' covenant in an agreement with a recruiting or 
executive search agency would comply with Federal antitrust law. 
This ambiguity will make it difficult for executive search firms to 
ensure that they are complying with the terms of the judgment in any 
future contracts with Lucasfilm. More broadly, to the extent the 
judgment reflects Dal's current legal positions and antitrust 
enforcement policies, the lack of clarity on this issue could 
complicate the ability of executive search firms to ensure that 
their contractual practices comply with Federal antitrust law.
    Accordingly, the AESC respectfully requests that DOJ modify the 
Proposed Final Judgment to provide further guidance regarding the 
circumstances under which ``no direct solicitation'' provisions in 
client engagement agreements may be deemed ``reasonably necessary.'' 
For example, in the context of a recruiting engagement involving a 
single position in a discrete geographic area, would a ``no direct 
solicitation'' provision that is unlimited in geographic scope or 
duration be considered ``reasonably necessary''? If not, because of 
the breadth of the restriction in relation to the limited nature of 
the search, what factors should be considered in narrowing the scope 
of the ``no direct solicitation'' provision? Likewise, would a ``no 
direct solicitation'' provision that broadly prohibits an executive 
search firm from contacting any employee at a large, diversified 
company be considered ``reasonably necessary'' where the firm was 
engaged only to fill positions in a single division or product 
group? Again, to the extent that such a provision would deemed 
overly broad and thus not ``reasonably necessary,'' what principles 
should be considered in developing a more narrowly tailored 
restriction?
    Questions such as these underscore the practical challenge that 
executive search firms will face in conforming their contractual 
practices to the terms of the Proposed Final Judgment, absent 
further guidance. The AESC therefore urges DOJ to give attention to 
this issue, and, in order to assure that ``the decree is 
sufficiently clear'' to be ``in the public interest,'' Competitive 
Impact Statement Sec.  VIII, make appropriate revisions to the 
language of the judgment to ensure that it better equips the 
executive search industry with information needed for continued 
legal compliance in this area.

    Respectfully,

Peter M. Felix, CBE,
President, Association of Executive Search Consultants.

March 15, 2011.

James J. Tierney, Esq.,
Chief, Networks & Technology Enforcement Section, Antitrust 
Division, United States Department of Justice, 450 Fifth Street, NW, 
Suite 7100, Washington, D.C. 20530.

Re: Proposed Final Judgment in US. v. Lucasfilm

    Dear Mr. Tierney:
    The Association of Executive Search Consultants (``AESC'') 
recently filed public comments concerning DOJ's proposed consent 
decree in the Lucasfilm matter. In its public comments, the AESC 
outlined practical scenarios in which a broad no direct solicitation 
provision in an executive search contract might not be ``reasonably 
necessary.'' The AESC urged DOJ to consider adding language to the 
proposed Final Judgment identifying guideposts for tailoring overly 
broad non-solicitation provisions to more appropriately track the 
scope of a recruiting or executive search engagement. As the AESC 
noted, absent further clarification it may be difficult for 
executive search firms to ensure compliance with the standards of 
conduct outlined by the proposed Lucasfilm consent decree. In 
addition, the AESC believes there are policy issues that should be 
of some concern to DOJ, issues that could effectively be addressed 
through relatively minor revisions to the language of the proposed 
Final Judgment.
    When a corporation engages an outside consultant to perform an 
executive search, the consultant may learn a great deal about the 
office or business in question, including its internal structure, 
personnel, reporting relationships, and compensation practices. Such 
knowledge can be very useful to the outside consultant and can aid 
the process of identifying and recruiting talented, well-placed 
executives, leading to better and more rapid results for the client. 
Where an executive search firm, in the course of its work, gains 
exposure to proprietary details about an aspect of a client's 
business, it is understandable that the client would desire to 
ensure that such knowledge is not used for the benefit of the search 
firm's other clients. Thus, to facilitate executive search 
engagements, it may be ``reasonably necessary'' for the client and 
search firm to agree upon a narrowly tailored non-solicitation 
covenant. An example would be a covenant of limited duration 
restricting the search firm from contacting, for recruiting 
purposes, individuals who work within the relevant office or 
division of the client corporation.
    But as noted in the examples highlighted by our public comments, 
executive search clients can demand much broader non-solicitation 
terms. For instance, a large multinational corporate client could 
demand a multi-year contractual ban on solicitations extending 
across the client's entire global enterprise, even where the search 
that is the subject of the retention agreement is limited to a 
single position or a discrete business unit.
    Where a client negotiates for and receives an overly broad non-
solicitation covenant in a contract with an executive search firm, 
this alone likely would not raise antitrust concerns. Indeed, absent 
collusion, even pervasive use of overly broad non-solicitation terms 
in retention agreements with leading executive search firms likely 
would not rise to the level of an antitrust violation. Yet 
agreements containing such terms, if widespread within a given 
industry, do pose an arguable threat to competition, inasmuch as 
they tend to place significant numbers of talented individuals off 
limits from employment opportunities. If a corporation can broadly 
place its personnel off limits to top executive search firms, this 
serves to insulate the corporation from normal marketplace 
pressures, which in the words of the Lucasfilm Competitive Impact 
Statement could interfere with ``the proper functioning of the 
price-setting mechanism.''
    Although inclusion of overbroad non-solicitation provisions in 
vertical retention agreements between executive search consultants 
and their corporate clients is not a matter of acute antitrust 
sensitivity, given the potential competition-reducing effect of such 
provisions presumably DOJ would not wish to encourage the use of 
such provisions. Yet as currently worded the proposed Final Judgment 
may do just that. The proposed Final Judgment addresses this subject 
under the heading of ``Conduct Not Prohibited.'' This, combined with 
the fact that the term ``reasonably related'' is nowhere defined or 
clarified, could be interpreted to suggest that no direct 
solicitation provisions, no matter how broadly defined, are unlikely 
to pose legal concerns as long as they bear some relation to the 
recruiting or consulting engagement.

[[Page 23844]]

    With relatively minor language revisions, DOJ could send a more 
constructive message, counseling in favor of some restraint in this 
area. What is missing from the proposed Final Judgment is simply 
some indication of the factors that would be relevant to consider in 
assessing the ``reasonable necessity'' of a non-solicitation 
restraint--factors such as:
     the nature and scope of the recruiting engagement;
     the extent to which the search consultant is given 
access to proprietary details about the client's business;
     the breadth of the proposed non-solicitation restraint 
in relation to the scope of the recruiting engagement and any 
proprietary information conveyed by the client in the course of 
facilitating the engagement; and
     the duration and geographic scope of the proposed non-
solicitation restraint in relation to the scope of the recruiting 
engagement.
    The AESC would therefore propose that DOJ consider adding this 
language as a new Section V.B. to the proposed Final Judgment, with 
the current Section V.B. being re-designated as Section V.C., etc.:
    B. All no direct solicitation provisions that relate to 
agreements with recruiting agencies described in Section 5.A.3 shall 
be narrowly tailored such that the scope of the no direct 
solicitation provision bears a reasonable relationship to the scope 
of the recruiting engagement, including with respect to geographic 
reach, duration, and the number of personnel and business units 
affected.
    Inclusion of additional language as simple and straightforward 
as this would establish a useful reference for executive search 
consultants and their clients when entering into non-solicitation 
terms. This would help to ensure against overly broad contractual 
restrictions that have the effect of placing significant numbers of 
individuals off limits to recruiters, thus expanding the pool of 
accessible talent from which to draw when conducting executive 
searches. The chief beneficiary of such a trend would be individual 
corporate executives and employees whose range of opportunities 
would be enhanced. This outcome is entirely in keeping with the 
policies that motivated the DOJ's action in the Lucasfilm matter, 
and we hope that you will give serious consideration to revising the 
proposed Final Judgment accordingly.

    Sincerely,

Peter M. Felix,
President, Association of Executive Search Consultants.

[FR Doc. 2011-10121 Filed 4-27-11; 8:45 am]
BILLING CODE 4410-11-M