[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80799-80810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32629]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States, et al. v. AMC Entertainment Holdings, Inc., et
al.; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Hold Separate Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States of America, et al. v. AMC Entertainment
Holdings, Inc., et al., Civil Action No. 1:15-cv-02181. On December 15,
2015, the United States and the State of Connecticut filed a Complaint
alleging that AMC Entertainment Holdings, Inc. proposed acquisition of
SMH Theatres, Inc. movie theatres and related assets would violate
section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final
Judgment, filed at the same time as the Complaint, requires AMC
Entertainment Holdings, Inc. to divest certain theatre assets.
Copies of the Complaint, proposed Final Judgment, Hold Separate
Stipulation and Order, and Competitive Impact Statement are available
for inspection on the Antitrust Division's Web site at http://www.justice.gov/atr and at the Office of the Clerk of the United States
District Court for the District of Columbia. 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, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's Web site,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to David C. Kully,
Chief, Litigation III Section, Antitrust Division, Department of
Justice, 450 Fifth Street NW., Suite 4000, Washington, DC 20530
(telephone: 202-305-9969).
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, Antitrust Division, 450 Fifth Street
NW., Suite 4000, Washington, DC 20530, and STATE OF CONNECTICUT,
Office of the Attorney General, 55 Elm Street, Hartford, CT 06106,
Plaintiffs, v. AMC ENTERTAINMENT HOLDINGS, INC., One AMC Way, 11500
Ash Street, Leawood, KS 64105, and SMH THEATRES, INC., 12750 Merit
Drive, Suite 800, Dallas, TX 75251, Defendants.
Civil Action No.: 1:15-cv-02181
Judge: Beryl A. Howell
Filed: 12/15/2015
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, and the State of Connecticut,
acting by and through its Office of the Attorney General, bring this
civil antitrust action to prevent the proposed acquisition by AMC
Entertainment Holdings, Inc.
[[Page 80800]]
(``AMC'') of all of the outstanding voting securities of SMH Theatres,
Inc. (``Starplex Cinemas'').
I. NATURE OF ACTION
1. AMC is a significant competitor to Starplex Cinemas in the
exhibition of first-run, commercial movies in the area in and around
East Windsor, New Jersey and in the area in and around Berlin,
Connecticut. If AMC's acquisition of Starplex Cinemas is permitted to
proceed, it would give AMC direct control of its most significant
competitor in these markets. The acquisition likely would substantially
lessen competition in the exhibition of first-run, commercial movies in
each of these markets in violation of Section 7 of the Clayton Act, 15
U.S.C. Sec. 18.
II. JURISDICTION AND VENUE
2. This action is filed by the United States pursuant to Section 15
of the Clayton Act, as amended, 15 U.S.C. Sec. 25, to obtain equitable
relief and to prevent a violation of Section 7 of the Clayton Act, as
amended, 15 U.S.C. Sec. 18.
3. The State of Connecticut brings this action under Section 16 of
the Clayton Act, 15 U.S.C. Sec. 26, to prevent the defendants from
violating Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18.
The State of Connecticut, by and through its Office of the Attorney
General, brings this action as parens patriae on behalf of the
citizens, general welfare, and economy of its state.
4. The distribution and theatrical exhibition of first-run,
commercial films is a commercial activity that substantially affects,
and is in the flow of, interstate trade and commerce. Defendants'
activities in purchasing equipment, services, and supplies as well as
licensing films for exhibition substantially affect interstate
commerce. The Court has jurisdiction over the subject matter of this
action pursuant to 15 U.S.C. Sec. 25 and 28 U.S.C. Sec. Sec. 1331,
1337(a), and 1345.
5. Defendants consent to personal jurisdiction and venue in this
district. Therefore, this Court has personal jurisdiction over each
Defendant and venue is proper under 28 U.S.C. Sec. 1391(b) and (c). In
addition, venue is proper under 15 U.S.C. Sec. 22 because one
defendant operates theatres in this District; the other transacts
business by attracting patrons from and advertising in this District.
III. DEFENDANTS AND THE PROPOSED ACQUISITION
6. Defendant AMC is a Delaware corporation with its headquarters in
Leawood, Kansas. AMC operates 349 theatres and 4,975 screens in
locations throughout the United States. Measured by number of screens
and box office revenue, AMC is the second-largest theatre circuit in
the United States.
7. Defendant Starplex Cinemas is a Texas corporation with its
headquarters in Dallas, Texas. Starplex operates 33 movie theatres with
a total of 346 screens in the United States, primarily located in small
to midsize markets.
8. On July 13, 2015, AMC and Starplex Cinemas executed a stock
purchase agreement. Under the agreement, AMC will acquire all
outstanding voting securities of Starplex Cinemas for approximately
$172 million.
IV. BACKGROUND OF THE MOVIE THEATRE INDUSTRY
9. Viewing movies in the theatre is a popular pastime. Over one
billion movie tickets were sold in the United States in 2014, with
total box office revenue reaching approximately $10 billion.
10. 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. AMC and Starplex Cinemas are exhibitors in the United States.
11. Exhibitors set ticket prices for a theatre based on a number of
factors, including the age and condition of the theatre, the number and
type of amenities the theatre offers (such as the range of snacks, food
and beverages offered, the size of its screens and quality of its sound
systems, and whether it provides stadium and/or reserved seating),
competitive pressures facing the theatre (such as the price of tickets
at nearby theatres, the age and condition of those theatres, and the
number and type of amenities they offer), and the population
demographics and density surrounding the theatre.
V. RELEVANT MARKET
A. Product Market
12. 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 or attending a sporting
event) or viewing a movie in the home (e.g., through streaming video,
on a DVD, or via pay-per-view).
13. Reflecting the significant differences of viewing a movie in a
theatre, ticket prices for movies generally differ from prices for
other forms of entertainment. For example, live entertainment is
typically significantly more expensive than a movie ticket, whereas
home viewing through streaming video, a DVD rental, or pay-per-view is
usually significantly less expensive than viewing a movie in a theatre.
14. Viewing a movie at home typically lacks several characteristics
of viewing a movie in a theatre, including the size of the screen, the
sophistication of the sound system, and the social experience of
viewing a movie with other patrons. In addition, the most popular newly
released or ``first-run'' movies are not available for home viewing at
the time they come out in theatres.
15. 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''
or ``second-run''). Moviegoers generally do not regard sub-run movies
as an adequate substitute for first-run movies. 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.
16. Art movies and foreign-language movies are also not reasonable
substitutes for commercial, first-run movies. Art movies, which include
documentaries, are sometimes referred to as independent films. Although
art and foreign-language movies appeal to some viewers of commercial
movies, art and foreign-language movies tend to have more narrow appeal
and typically attract an older audience than commercial movies.
Exhibitors consider the operation of theatres that exhibit art and
foreign-language movies to be distinct from the operation of theatres
that exhibit commercial movies.
17. The relevant product market within which to assess the
competitive effects of this acquisition is the exhibition of first-run,
commercial movies. A hypothetical monopolist controlling the exhibition
of all first-run, commercial movies would profitably impose at least a
small but significant and non-transitory increase in ticket prices.
B. Geographic Markets
18. Moviegoers typically are not willing to travel very far from
their home to attend a movie. As a result, geographic markets for the
exhibition of first-run, commercial movies are relatively local.
[[Page 80801]]
Area In and Around East Windsor, New Jersey
19. AMC and Starplex Cinemas account for the majority of the first-
run, commercial movie tickets sold in and around East Windsor, New
Jersey (``East Windsor''). The only theatres that predominantly show
first-run commercial movies in the East Windsor area are the Starplex
Town Center Plaza 10, the AMC MarketFair 10, and the AMC Hamilton 24.
The Starplex theatre is located approximately 10 miles from each of the
AMC theatres.
20. Moviegoers who reside in East Windsor are unlikely to travel
significant distances out of that area to attend a first-run,
commercial movie. A small but significant increase in the price of
tickets by a hypothetical monopolist of first-run, commercial movie
theatres in East Windsor would likely not cause a sufficient number of
moviegoers to travel out of that area to make the increase
unprofitable. East Windsor constitutes a relevant geographic market in
which to assess the competitive effects of this acquisition.
Area In and Around Berlin, Connecticut
21. AMC and Starplex Cinemas account for the majority of the first-
run, commercial movie tickets sold in and around Berlin, Connecticut
(``Berlin''). Within the Berlin area are the Starplex Berlin 12 and the
AMC Plainville 20. These two theatres are located approximately 8 miles
apart. Only three other theatres in the Berlin area also show first-
run, commercial movies.
22. Moviegoers who reside in Berlin are unlikely to travel
significant distances out of that area to attend a first-run,
commercial movie. A small but significant increase in the price of
tickets by a hypothetical monopolist of first-run, commercial movie
theatres in Berlin would likely not cause a sufficient number of
moviegoers to travel out of that area to make the increase
unprofitable. Berlin constitutes a relevant geographic market in which
to assess the competitive effects of this acquisition.
VI. COMPETITIVE EFFECTS
23. Exhibitors compete to attract moviegoers to their theatres over
the theatres of their rivals. They do that by competing on price,
knowing that if they charge too much (or do not offer sufficient
discounted tickets for matinees, seniors, students, or children)
moviegoers will begin to frequent their rivals. Exhibitors also compete
by seeking to license the first-run movies that are likely to attract
the largest numbers of moviegoers. In addition, they compete over the
quality of the viewing experience by offering moviegoers the most
sophisticated sound systems, largest screens, best picture clarity,
best seating (including stadium and reserved seating), and the broadest
variety and highest quality snacks, food, and drinks at concession
stands or caf[eacute]s in the lobby or served to moviegoers at their
seats.
24. AMC and Starplex Cinemas currently compete for moviegoers in
the East Windsor and Berlin markets. These markets are concentrated,
and in each market, AMC and Starplex Cinemas are the other's most
significant competitor, given their close proximity. Their rivalry
spurs each to improve the quality of its theatres and keeps ticket
prices in check. Theatres operated by other exhibitors offer less
attractive options for visitors to defendants' theatres because those
theatres are located farther away or are smaller in size or poorer in
quality.
25. In the relevant markets at issue, the acquisition of Starplex
Cinemas likely will result in a substantial lessening of competition.
In the East Windsor and Berlin markets, the transaction will lead to
significant increases in concentration and eliminate existing
competition between AMC and Starplex Cinemas.
26. Market concentration is often a useful indicator of the level
of competitive vigor in a market and the likely competitive effects of
a merger. The more concentrated a market, and the more a transaction
would increase that concentration, the more likely it is that the
transaction would result in reduced competition, harming consumers.
Market concentration commonly is measured by the Herfindahl-Hirschman
Index (``HHI''), as discussed in Appendix A. Markets in which the HHI
exceeds 2,500 points are considered highly concentrated, and
transactions that increase the HHI by more than 200 points in highly
concentrated markets are presumed likely to enhance market power.
27. In East Windsor, the proposed acquisition would give AMC
control of all of the first-run, commercial movie theatres, with 34 out
of 34 total screens and a 100% share of the $13 million annual box
office revenues. The acquisition would yield a post-acquisition HHI of
10,000, representing an increase of roughly 2,300 points.
28. In Berlin, the proposed acquisition would give AMC control of
three of the six first-run, commercial movie theatres, with 44 out of
79 total screens and an approximate 68% share of the $11 million annual
box office revenues. The acquisition would yield a post-acquisition HHI
of approximately 5,260, representing an increase of roughly 2,280
points.
29. Today, were one of defendants' theatres to unilaterally
increase ticket prices in East Windsor or Berlin, the exhibitor that
increased price would likely suffer financially as a substantial number
of its customers would patronize the other exhibitor. The acquisition
would eliminate this pricing constraint. Thus, the acquisition 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
for matinees, children, seniors, or students.
30. The proposed acquisition likely would also reduce competition
between AMC and Starplex Cinemas over the quality of the viewing
experience at their East Windsor or Berlin theatres. If no longer
motivated to compete, AMC and Starplex Cinemas would have reduced
incentives to maintain, upgrade, and renovate their theatres, to
improve the theatres' amenities and services, or to license the most
popular movies, thus reducing the quality of the viewing experience for
moviegoers in East Windsor and Berlin.
VII. ENTRY
31. Sufficient, timely entry that would deter or counteract the
anticompetitive effects alleged above is unlikely. Exhibitors are
reluctant to locate new first-run, commercial theatres near existing
first-run, commercial theatres unless the population density,
demographics, or the quality of existing theatres makes new entry
viable. Over the next two years, entry of new first-run, commercial
movie theatres in East Windsor or Berlin would be unlikely to defeat a
price increase by the merged firm.
VIII. VIOLATION ALLEGED
32. Plaintiffs hereby reincorporate paragraphs 1 through 28.
33. The likely effect of the proposed transaction would be to
substantially lessen competition in the relevant product and geographic
markets in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
34. The transaction would likely have the following effects, among
others: (a) the prices of tickets at first-run, commercial movie
theatres in East Windsor and Berlin would likely increase to levels
above those that would prevail absent the acquisition; and (b) the
quality of first-run, commercial theatres and the viewing experience at
those theatres would
[[Page 80802]]
likely decrease below levels that would prevail absent the acquisition.
IX. REQUESTED RELIEF
35. Plaintiffs request: (a) adjudication that the proposed
acquisition would violate Section 7 of the Clayton Act; (b) permanent
injunctive relief to prevent the consummation of the proposed
acquisition; (c) an award to each Plaintiff of its costs in this
action; and (d) such other relief as is proper.
DATED: DECEMBER 15, 2015
FOR PLAINTIFF UNITED STATES OF AMERICA
William J. Baer (D.C. Bar #324723)
Assistant Attorney General for Antitrust
Renata B. Hesse (D.C. Bar #466107)
Deputy Assistant Attorney General
Patricia A. Brink
Director of Civil Enforcement
David C. Kully (D.C. Bar #448763)
Chief, Litigation III
Ethan C. Glass (D.D.C. Bar #MI0018)
Assistant Chief, Litigation III
Lisa A. Scanlon
Assistant Chief, Litigation III
Gregg I. Malawer (D.C. Bar #481685),
Miriam R. Vishio (D.C. Bar #482282),
Trial Attorneys, Litigation III, U.S. Department of Justice,
Antitrust Division, 450 5th Street, NW, Suite 4000, Washington, D.C.
20530, Fax: (202) 514-7308, Telephone: Gregg Malawer (202) 616-5943,
Email: [email protected], Telephone: Miriam Vishio (202) 598-
8091, Email: [email protected]
DATED: DECEMBER 15, 2015
FOR PLAINTIFF STATE OF CONNECTICUT
GEORGE JEPSEN,
ATTORNEY GENERAL
By: Michael E. Cole,
Assistant Attorney General, Chief, Antitrust & Government Program
Fraud, 55 Elm Street, P.O. Box 120, Hartford, CT 06141-120, 860-808-
5040, Email: [email protected]
APPENDIX A
Herfindahl-Hirschman Index
The term ``HHI'' means the Herfindahl-Hirschman Index, a commonly
accepted measure of market concentration. The HHI is calculated by
squaring the market share of each firm competing in the relevant market
and then summing the resulting numbers. For example, for a market
consisting of four firms with shares of 30, 30, 20, and 20 percent, the
HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). The HHI takes
into account the relative size distribution of the firms in a market.
It approaches zero when a market is occupied by a large number of firms
of relatively equal size, and reaches its maximum of 10,000 points when
a market is controlled by a single firm. 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 1,500 and 2,500 points are
considered to be moderately concentrated, and markets in which the HHI
is in excess of 2,500 points are considered to be highly concentrated.
See U.S. Department of Justice & Federal Trade Commission, Horizontal
Merger Guidelines Sec. 5.3 (2010) (``Guidelines''). Transactions that
increase the HHI by more than 200 points in highly concentrated markets
presumptively raise antitrust concerns under the Guidelines. Id.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, Antitrust Division, 450 Fifth Street,
NW., Suite 4000, Washington, D.C. 20530, and STATE OF CONNECTICUT,
Office of the Attorney General, 55 Elm Street, Hartford, CT 06106,
Plaintiffs, v. AMC ENTERTAINMENT HOLDINGS, INC., One AMC Way, 11500
Ash Street, Leawood, KS 64105, and SMH THEATRES, INC., 12750 Merit
Drive, Suite 800, Dallas, TX 75251, Defendants.
Civil Action No.: 1:15-cv-02181
Judge: Beryl A. Howell
Filed: 12/15/2015
COMPETITIVE IMPACT STATEMENT
Plaintiff, United States of America, pursuant to Section 2(b) of
the Antitrust Procedures and Penalties Act (``APPA'' or ``Tunney
Act''), 15 U.S.C.Sec. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
On July 13, 2015, Defendant AMC Entertainment Holdings, Inc.
(``AMC'') agreed to acquire all of the outstanding voting securities of
SMH Theatres, Inc. (``Starplex Cinemas''). AMC and Starplex Cinemas are
significant competitors in the exhibition of first-run, commercial
movies in parts of New Jersey and Connecticut. Plaintiffs filed a civil
antitrust complaint on December 15, 2015, seeking to enjoin the
proposed acquisition and to obtain equitable relief. The Complaint
alleges that the acquisition, if permitted to proceed, would give AMC
direct control of its most significant competitor in the area in and
around East Windsor, New Jersey and in the area in and around Berlin,
Connecticut. The likely effect of this acquisition would be to
substantially lessen competition in the exhibition of first-run,
commercial movies in violation of Section 7 of the Clayton Act, 15
U.S.C. Sec. 18.
At the same time the Complaint was filed, Plaintiffs also filed a
Hold Separate Stipulation and Order (``Hold Separate'') and a 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, AMC and Starplex Cinemas are required to
divest one theatre located in New Jersey and one theatre located in
Connecticut to acquirer(s) acceptable to the United States, in
consultation with the State of Connecticut.
Under the terms of the Hold Separate, Defendants will take all
steps necessary to ensure that the two theatres to be divested are
operated as competitively independent, economically viable, and ongoing
business concerns, and that competition is maintained and not
diminished during the pendency of the ordered divestitures.
Plaintiffs 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. Defendants and the Proposed Transaction
Defendant Starplex Cinemas is a Texas corporation with its
headquarters in Dallas, Texas. Starplex operates 33 movie theatres with
a total of 346 screens in 12 states throughout the United States,
primarily located in small to midsize markets. Starplex earned domestic
box office revenue of approximately $57 million in 2014.
AMC is a Delaware corporation with its headquarters in Leawood,
Kansas. It operates 349 theatres and 4,975 screens in locations
primarily throughout the United States. Measured by number of screens
and box office revenue, AMC is the second-largest theatre exhibitor in
the United States and earned domestic box office revenues of
approximately $1.8 billion in 2014.
On July 13, 2015, AMC and Starplex Cinemas executed a stock
purchase agreement under which AMC will acquire, for approximately $172
million, all of the outstanding voting securities of Starplex Cinemas.
The proposed transaction, as initially agreed to by AMC and
Starplex Cinemas
[[Page 80803]]
on July 13, 2015, would lessen competition substantially as a result of
AMC's acquisition of Starplex Cinemas. This acquisition is the subject
of the Complaint and proposed Final Judgment filed by Plaintiffs on
December 15, 2015.
B. The Competitive Effects of the Transaction on the Exhibition of
First-Run, Commercial Movies
1. The Relevant Product and Geographic Markets
The exhibition of first-run, commercial movies is a relevant
product market under Section 7 of the Clayton Act. The experience of
viewing a film in a theatre is an inherently different experience from
live entertainment (e.g., a stage production or attending a sporting
event), or viewing a movie in the home (e.g., through streaming video,
on a DVD, or via pay-per-view).
Reflecting the significant differences between viewing a movie in a
theatre and other forms of entertainment, 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 or ordering a pay-per view movie
for home viewing is usually significantly cheaper than viewing a movie
in a theatre.
Moviegoers generally do not regard theatres showing ``sub-run''
movies, art movies, or foreign language movies as adequate substitutes
for commercial, first-run movies.
The transaction substantially lessens competition in two relevant
geographic markets: the area in and around East Windsor, New Jersey
(``East Windsor'') and the area in and around Berlin, Connecticut
(``Berlin'').
East Windsor
The only theatres that predominantly show first-run commercial
movies in the East Windsor area are the Starplex Town Center Plaza 10,
the AMC MarketFair 10, and the AMC Hamilton 24. No other non-party
theatres in this area predominantly show first-run, commercial movies.
Berlin
Within the Berlin area are the Starplex Berlin 12 and the AMC
Plainville 20. These two theatres are located approximately 8 miles
apart. Three non-party theatres in this area also show first-run,
commercial movies.
The relevant markets in which to assess the competitive effects of
this transaction are the first-run, commercial theatres in East Windsor
and Berlin. A hypothetical monopolist controlling the exhibition of
first-run, commercial movies in East Windsor and Berlin would
profitably impose at least a small but significant and non-transitory
increase in ticket prices.
2. Competitive Effects in the Relevant Markets
Exhibitors that operate first-run, commercial theatres compete on
multiple dimensions. Exhibitors compete on price, knowing that if they
charge too much (or do not offer sufficient discounted tickets for
matinees, seniors, students, or children), moviegoers will begin to
frequent their rivals. Exhibitors also compete by seeking to license
the first-run movies that are likely to attract the largest numbers of
moviegoers. In addition, they compete over the quality of the viewing
experience. They compete to offer the most sophisticated sound systems,
largest screens, best picture clarity, best seating (including stadium
and reserved seating), and the broadest range and highest quality
snacks, food, and drinks at concession stands or caf[eacute]s in the
lobby or served to moviegoers at their seats.
AMC and Starplex Cinemas currently compete for moviegoers in East
Windsor and Berlin. Each of these markets is concentrated, and AMC and
Starplex Cinemas are each other's most significant competitor, given
their close proximity. Their rivalry spurs each to improve the quality
of its theatres and keeps ticket prices in check.
In East Windsor and Berlin, the acquisition by AMC of Starplex
Cinemas' theatres likely will result in a substantial lessening of
competition. The transaction will lead to significant increases in
concentration and eliminate existing competition between AMC and
Starplex Cinemas.
In East Windsor, the proposed acquisition would give the newly
merged entity control of all of the first-run, commercial theatres,
with 34 out of 34 total screens and a 100% share of annual box office
revenues totaling approximately $13 million. Using a measure of market
concentration called the Herfindahl-Hirschman Index (``HHI''), as
discussed in Appendix A of the Complaint, the acquisition would yield a
post-acquisition HHI of 10,000, representing an increase of roughly
2,300 points.
In Berlin, the proposed acquisition would give the newly-merged
entity control of three of the six first-run, commercial theatres, with
44 out of 79 total screens and an approximate 68% share of annual box
office revenues totaling approximately $11 million. The acquisition
would yield a post-acquisition HHI of approximately 5,260, representing
an increase of roughly 2,280 points.
In East Windsor and Berlin today, were one of Defendants' theatres
to increase ticket prices unilaterally, the exhibitor that increased
price would likely suffer financially as a substantial number of its
customers would patronize the other exhibitor's theatre. Other theatres
are smaller than and/or farther from the parties' theatres and unlikely
to offer enough of a competitive constraint to prevent such a price
increase. After the acquisition, AMC would recapture such losses,
making price increases more profitable than they would have been pre-
acquisition. The acquisition is, therefore, likely to lead to higher
ticket prices for moviegoers, which could take the form of a higher
adult evening ticket price or reduced discounting for matinees,
children, seniors, and students.
Likewise, the proposed transaction would eliminate competition
between AMC and Starplex Cinemas over the quality of the viewing
experience at their theatres in East Windsor and Berlin. If no longer
required to compete, AMC and Starplex Cinemas would have a reduced
incentive to maintain, upgrade, and renovate their theatres, to improve
the theatres' amenities and services, and to license the most popular
movies, thus reducing the quality of the viewing experience for a
moviegoer.
The entry of a first-run, commercial theatre sufficient to deter or
counteract an increase in movie ticket prices or a decline in theatre
quality is unlikely in either East Windsor or Berlin. Exhibitors are
reluctant to locate new first-run, commercial theatres near existing
first-run, commercial theatres, unless the population density,
demographics, or the quality of existing theatres makes new entry
viable. Over the next two years, entry of any new first-run, commercial
movie theatres in East Windsor and Berlin would be unlikely to defeat a
price increase by the merged firm.
For all of these reasons, the proposed transaction would lessen
competition substantially in the exhibition of first-run, commercial
movies in the East Windsor and Berlin markets, eliminate actual and
potential competition between AMC and Starplex Cinemas, and likely
result in increased ticket prices and lower quality theatres in those
markets. The proposed transaction therefore violates Section 7 of the
Clayton Act.
[[Page 80804]]
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The divestiture requirement of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisitions in each
relevant geographic market, establishing new, independent, and
economically viable competitors. The proposed Final Judgment requires
Defendants within thirty (30) 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 one theatre in each of the relevant markets.
The theatres must be divested in such a way as to satisfy
Plaintiffs that they can and will be operated by the purchaser as
viable, ongoing businesses that can compete effectively as first-run,
commercial theatres. To that end, the proposed Final Judgment provides
the acquirer(s) of the theatres with an option to enter into a
transitional supply agreement with Defendants of up to 120 days in
length, with the possibility of one or more extensions not to exceed
six months in total, for the supply of any goods, services, support,
including software service and support, and reasonable use of the name
AMC, the name Starplex, and any registered service marks of AMC or
Starplex, for use in operating those theatres during the period of
transition. This ensures the acquirer(s) of the theatres can operate
without interruption while long-term supply agreements are arranged and
the theatres rebranded. Without the option to enter into a transitional
supply agreement, the acquirer(s) might find itself temporarily without
provisions, including concessions, necessary to operate the theatres.
Until the divestitures take place, AMC and Starplex Cinemas must
maintain the sales and marketing of the theatres, and maintain the
theatres in operable condition at current capacity configurations. In
addition, AMC and Starplex Cinemas must not transfer or reassign to
other areas within the company their employees with primary
responsibility for the operation of the theatres, except for transfer
bids initiated by employees pursuant to Defendants' regular,
established job-posting policies. 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 Defendants are unable to effect any of the divestitures required
herein due to its inability to obtain the consent of the landlord from
whom a theatre is leased, Section VI.A of the proposed Final Judgment
requires them to divest alternative theatre assets that compete
effectively with the theatres for which the landlord consent was not
obtained. These provisions will insure that any failure by Defendants
to obtain landlord consent does not thwart the relief obtained in the
proposed Final Judgment.
The proposed Final Judgment also prohibits Defendants, without
providing at least thirty (30) days notice to the United States
Department of Justice, from acquiring any other theatres in the
following counties: Hartford County, Connecticut and Mercer County, New
Jersey. These counties correspond to the relevant geographic markets in
this case. Such acquisitions could raise competitive concerns but might
be too small to be reported under the Hart-Scott-Rodino (``HSR'')
premerger notification statute.
The divestiture provisions of the proposed Final Judgment will
eliminate the anticompetitive effects of AMC's acquisition of Starplex
Cinemas.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
Sec. 16(a), the proposed Final Judgment has no prima facie effect in
any subsequent private lawsuit that may be brought against Defendants.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
Plaintiffs and Defendants have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that 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. In
addition, comments will be posted on the U.S. Department of Justice,
Antitrust Division's internet Web site and, under certain
circumstances, published in the Federal Register.
Written comments should be submitted to: David C. Kully, Chief,
Litigation III, Antitrust Division, 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
Plaintiffs considered, as an alternative to the proposed Final
Judgment, a full trial on the merits against Defendants. Plaintiffs
could have continued the litigation and sought preliminary and
permanent injunctions against AMC's acquisition of Starplex Cinemas.
Plaintiffs are satisfied, however, that the divestiture of assets
described in the proposed Final Judgment will preserve competition for
the exhibition of first-run, commercial movies in East Windsor and
Berlin. Thus, the proposed Final Judgment would achieve all or
substantially all of the relief Plaintiffs 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. Sec. 16(e)(1). In
[[Page 80805]]
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 theadequacy 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. Sec. 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, U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014)
explaining that the ``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V/S.A., No. 08-1965 (JR), 2009-2
Trade Cas. (CCH) ] 76,736, 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 mechanism to enforce
the final judgment are clear and manageable.'') \1\
---------------------------------------------------------------------------
\1\ 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.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 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 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) (quoting
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).\2\ 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 U.S. Airways, 38 F. Supp. 3d at 75 (noting
that a court should not reject the proposed remedies because it
believes others are preferable); 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 State's prediction as
to the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case).
---------------------------------------------------------------------------
\2\ 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''').
---------------------------------------------------------------------------
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 U.S.
Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the
government to grant concessions in the negotiation process for
settlements (citing Microsoft, 56 F.3d at 1461)); 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; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged in
the complaint against those the court believes could have, or even
should have, been alleged''). 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. Microsoft, 56
F.3d at 1459-60. As this Court 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
[[Page 80806]]
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. Sec. 16(e)(2); see also U.S. Airways, 38 F.
Supp. 3d at 76 (indicating that a court is not required to hold an
evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act). 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
Sen. 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. A court can make its public interest
determination based on the competitive impact statement and response to
public comments alone. U.S. Airways, 38 F. Supp. 3d at 76.\3\
---------------------------------------------------------------------------
\3\ 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., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (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, 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.'').
---------------------------------------------------------------------------
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: December 15, 2015
Respectfully submitted,
GREGG I. MALAWER (D.C. Bar #481685),
MIRIAM R. VISHIO (D.C. Bar # 482282),
U.S. Department of Justice, Antitrust Division, 450 5th Street, NW,
Suite 4000, Washington, DC 20530, Phone: Gregg Malawer (202) 616-
5943, Phone: Miriam Vishio (202) 598-8091 Fax: (202) 514-7308, E-
mail: [email protected], E-mail: [email protected],
Attorneys for Plaintiff the United States
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, and STATE OF CONNECTICUT, Plaintiffs, v.
AMC ENTERTAINMENT HOLDINGS, INC. and SMH THEATRES, INC., Defendants.
Civil Action No.: 1:15-cv-02181
Judge: Beryl A. Howell
Filed: 12/15/2015
[PROPOSED] FINAL JUDGMENT
WHEREAS, Plaintiffs United States of America and the State of
Connecticut filed their Complaint on December 15, 2015, the Plaintiffs
and Defendants, AMC Entertainment Holdings, Inc. (``AMC''), and SMH
Theatres, Inc., (``Starplex Cinemas''), 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;
AND WHEREAS, Plaintiffs require Defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
AND WHEREAS, Defendants have represented to Plaintiffs 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 be 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
which Defendants divest the Divestiture Assets.
B. ``AMC'' means AMC Entertainment Holdings, Inc., a Delaware
corporation with its headquarters in Leawood, Kansas, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Starplex Cinemas'' means Starplex Cinemas, Inc., a Texas
Corporation with its headquarters in Dallas, Texas, its successors and
assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
D. ``Divestiture Assets'' means the following theatre assets:
------------------------------------------------------------------------
Theatre Address
------------------------------------------------------------------------
1. Starplex Town Center Plaza 10....... 319 Route 130 North, East
Windsor, NJ 08520.
2. Starplex Berlin 12.................. 19 Frontage Rd, Berlin, CT
06037.
------------------------------------------------------------------------
The term ``Divestiture Assets'' also includes:
1. All tangible assets that comprise the business of operating
theatres that exhibit first-run, commercial movies, including, but not
limited to real property and improvements, research and development
activities, 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
Divestiture Assets; all licenses, permits, and authorizations issued by
any governmental organization relating to the Divestiture Assets; all
contracts (including management contracts), teaming
[[Page 80807]]
arrangements, agreements, leases, commitments, certifications, and
understandings relating to the Divestiture Assets, including supply
agreements (provided however, that supply agreements that apply to all
of each Defendant's theatres may be excluded from the Divestiture
Assets, subject to the transitional agreement provisions specified in
Section IV (E)); all customer lists (including loyalty club data at the
option of the Acquirer(s), copies of which may be retained by
Defendants at their option), contracts, accounts, and credit records
relating to the Divestiture Assets; all repair and performance records
and all other records relating to the Divestiture Assets; and
2. All intangible assets relating to the operation of the
Divestiture Assets, including, but not limited to all patents, licenses
and sublicenses, intellectual property, copyrights, trademarks, trade
names, service marks, service names, (provided however, that the name
Starplex, and any registered service marks of Starplex may be excluded
from the Divestiture Assets, subject to the transitional agreement
provisions specified in Section IV(E)), technical information, computer
software and related documentation (provided however, that Defendants'
proprietary software may be excluded from the Divestiture Assets,
subject to the transitional agreement provisions specified in Section
IV(E)), know-how and trade secrets, drawings, blueprints, designs,
design protocols, specifications for materials, specifications for
parts and devices, safety procedures for the handling of materials and
substances, all research data concerning historic and current research
and development, quality assurance and control procedures, design tools
and simulation capability, all manuals and technical information
Starplex Cinemas provides to their own employees, customers, suppliers,
agents, or licensees (except for the employee manuals that Starplex
provides to all its employees), and all research data concerning
historic and current research and development.
E. ``Landlord Consent'' means any contractual approval or consent
that the landlord or owner of one or more of the Divestiture Assets, or
of the property on which one or more of the Divestiture Assets is
situated, must grant prior to the transfer of one of the Divestiture
Assets to an Acquirer.
III. APPLICABILITY
A. This Final Judgment applies to AMC and Starplex Cinemas, 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 Sections 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
Divestiture 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 Acquirer(s) of the assets divested pursuant to this
Final Judgment.
IV. DIVESTITURES
A. Defendants are ordered and directed, within thirty (30) calendar
days after the filing of the Complaint in this matter to divest the
Divestiture Assets in a manner consistent with this Final Judgment to
one or more Acquirer(s) acceptable to the United States in its sole
discretion (after consultation with the State of Connecticut, as
appropriate). The United States, in its sole discretion, may agree to
one or more extensions of this time period, not to exceed thirty (30)
calendar days in total, and shall notify the Court in such
circumstances. Defendants agree to use their best efforts to divest the
Divestiture 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 Divestiture Assets. Defendants shall
inform any person making an inquiry regarding a possible purchase of
the Divestiture 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 Divestiture 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
Plaintiffs at the same time that such information is made available to
any other person.
C. Defendants shall provide the Acquirer(s) and the United States
information relating to the personnel involved in the operation and
management of the applicable Divestiture Assets to enable the
Acquirer(s) to make offers of employment. Defendants shall not
interfere with any negotiations by the Acquirer(s) to employ or
contract with any employee of any Defendant whose primary
responsibility relates to the operation or management of the applicable
Divestiture Assets being sold by the Acquirer(s).
D. Defendants shall permit prospective Acquirer(s) of the
Divestiture Assets to have reasonable access to personnel and to make
inspections of the physical facilities of the Divestiture 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. In connection with the divestiture of the Divestiture Assets
pursuant to Section IV, or by a trustee appointed pursuant to Section
V, of this Final Judgment, at the option of the Acquirer(s), Defendants
shall enter into a transitional supply, service, support, and use
agreement (``transitional agreement''), of up to 120 days in length,
for the supply of any goods, services, support, including software
service and support, and reasonable use of the name AMC, the name
Starplex, and any registered service marks of AMC or Starplex, that the
Acquirer(s) request for the operation of the Divestiture Assets during
the period covered by the transitional agreement. At the request of the
Acquirer(s), the United States in its sole discretion (after
consultation with the State of Connecticut, as appropriate), may agree
to one or more extensions of this time period not to exceed six (6)
months in total. The terms and conditions of the transitional agreement
must be acceptable to the United States in its sole discretion (after
consultation with the State of Connecticut, as appropriate). The
transitional agreement shall be deemed incorporated into this Final
Judgment and a failure by Defendants to comply with any of the terms or
conditions of the transitional agreement shall constitute a failure to
comply with this Final Judgment.
F. Defendants shall warrant to the Acquirer(s) of the Divestiture
Assets that each asset will be operational on the date of sale.
G. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestitures of the Divestiture Assets.
H. Defendants shall warrant to the Acquirer(s) that there are no
material defects in the environmental, zoning, or other permits
pertaining to the operation of the Divestiture Assets. Following the
sale of the Divestiture Assets, Defendants will not undertake, directly
or indirectly, any challenges to the environmental, zoning, or other
[[Page 80808]]
permits relating to the operation of the Divestiture Assets.
I. Unless the United States otherwise consents in writing, the
divestitures made pursuant to Section IV, and/or by a trustee appointed
pursuant to Section V of this Final Judgment, shall include the entire
Divestiture Assets and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion (after consultation
with the State of Connecticut, as appropriate) that the Divestiture
Assets can and will be used by the Acquirer(s) as part of a viable,
ongoing business of operating theatres that exhibit first-run,
commercial movies. Divestiture of the Divestiture 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 (after
consultation with the State of Connecticut, as appropriate) that the
Divestiture Assets will remain viable and the divestiture 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 Acquirers that, in the United States' sole
judgment (after consultation with the State of Connecticut, as
appropriate) have the intent and capability (including the necessary
managerial, operational, technical, and financial capability) of
competing effectively in the business of theatres exhibiting first-run,
commercial movies; and
(2) shall be accomplished so as to satisfy the United States, in
its sole discretion (after consultation with the State of Connecticut,
as appropriate) that none of the terms of any agreement between
Acquirers and Defendants gives Defendants the ability unreasonably to
raise the Acquirers' costs, to lower the Acquirers' efficiency, or
otherwise to interfere in the ability of any Acquirer to compete
effectively.
V. APPOINTMENT OF TRUSTEE
A. If Defendants have not divested the Divestiture Assets within
the time period specified in Section IV(A), Defendants shall notify the
United States of that fact in writing, specifically identifying the
Divestiture Assets that have not been divested. 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
Divestiture Assets.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestitures to Acquirer(s) acceptable to the United States (after
consultation with the State of Connecticut, as appropriate) 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 and reasonably necessary in the trustee's
judgment to assist in the divestiture(s). Any such investment bankers,
attorneys, or other agents shall serve on such terms and conditions as
the United States approves, including confidentiality requirements and
conflict of interest certifications.
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
pursuant to a written agreement, on such terms and conditions as the
United States approves, including confidentiality requirements and
conflict of interest certifications. The trustee shall account for all
monies derived from the sale of the applicable Divestiture Assets and
all costs and expenses so incurred. After approval by the Court of the
trustee's accounting, including fees for its services yet unpaid 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 Divestiture Assets subject to sale by the trustee and
based on a fee arrangement providing the trustee with an incentive
based on the price and terms of the divestitures and the speed with
which they are accomplished, but timeliness is paramount. If the
trustee and Defendants are unable to reach agreement on the trustee's
or any agents' or consultants' compensation or other terms and
conditions of engagement within 14 calendar days of appointment of the
trustee, the United States may, in its sole discretion (after
consultation with the State of Connecticut, as appropriate), take
appropriate action, including making a recommendation to the Court. The
trustee shall, within three (3) business days of hiring any other
professionals or agents, provide written notice of such hiring and the
rate of compensation to Defendants and the United States.
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 assets and business to be divested, and
Defendants shall develop financial and other information relevant to
such assets and business as the trustee may reasonably request, subject
to reasonable protection for trade secret or other confidential
research, development, or commercial information or any applicable
privileges. 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 parties 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 Divestiture 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 Divestiture Assets.
G. If the trustee has not accomplished the divestitures ordered
under this Final Judgment within six (6) months after its appointment,
the trustee shall promptly file with the Court a report setting forth
(1) the trustee's efforts to accomplish the required divestitures, (2)
the reasons, in the trustee's judgment, why the required divestitures
have not been accomplished, and (3) the trustee's recommendations. 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
[[Page 80809]]
shall deem appropriate to carry out the purpose of the Final Judgment,
which may, if necessary, include extending the trust and the term of
the trustee's appointment by a period requested by the United States.
H. If the United States determines that the trustee has ceased to
act or failed to act diligently or in a reasonably cost-effective
manner, it may recommend the Court appoint a substitute trustee.
VI. LANDLORD CONSENT
A. If Defendants are unable to effect any of the divestitures
required herein due to the inability to obtain the Landlord Consent for
any of the Divestiture Assets, Defendants shall divest alternative
theatre assets that compete effectively with the theatre or theatres
for which the Landlord Consent was not obtained. The United States
shall, in its sole discretion (after consultation with the State of
Connecticut, as appropriate) determine whether such theatre assets
compete effectively with the theatres for which Landlord Consent was
not obtained.
B. Within five (5) business days following a determination that
Landlord Consent cannot be obtained for any of the Divestiture Assets,
Defendants shall notify the United States, and Defendants shall propose
an alternative divestiture pursuant to Section VI(A). The United States
(after consultation with the State of Connecticut, as appropriate)
shall have then ten (10) business days in which to determine whether
such theatre assets are a suitable alternative pursuant to Section
VI(A). If Defendants' selection is deemed not to be a suitable
alternative, the United States shall in its sole discretion (after
consultation with the State of Connecticut, as appropriate) select
alternative theatre assets to be divested from among those theatre(s)
that the United States has determined, in its sole discretion, compete
effectively with the theatre(s) for which Landlord Consent was not
obtained.
C. If a trustee is responsible for effecting divestiture of the
Divestiture Assets, it shall notify the United States and Defendants
within five (5) business days following a determination that Landlord
Consent cannot be obtained for one or more of the Divestiture Assets.
Defendants shall thereafter have five (5) business days to propose an
alternative divestiture pursuant to Section VI(A). The United States
(after consultation with the State of Connecticut, as appropriate)
shall then have ten (10) business days to determine whether the
proposed theatre assets are a suitable competitive alternative pursuant
to Section VI(A). If Defendants' selection is deemed not to be a
suitable competitive alternative, the United States shall in its sole
discretion (after consultation with the State of Connecticut, as
appropriate) select alternative theatre assets to be divested from
among those theatre(s) that the United States has determined, in its
sole discretion, compete effectively with the theatre(s) for which
Landlord Consent was not obtained.
VII. NOTICE OF PROPOSED DIVESTITURES
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the trustee, whoever is then
responsible for effecting the divestitures required herein, shall
notify the United States and, as appropriate, the State of Connecticut,
of any proposed divestitures required by Sections IV, V, or VI 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
Divestiture 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, in its sole discretion (after
consultation with the State of Connecticut, as appropriate) 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(s). Defendants and the trustee shall furnish any
additional information requested to the United States within fifteen
(15) calendar days of receipt of the request, unless the parties
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 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 the 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, V, or VI,
Defendants shall deliver to the United States an affidavit as to the
fact and manner of its compliance with Sections IV, V, or VI 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 Divestiture
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
and complete the sale of the Divestiture Assets, and to provide
required information to prospective Acquirers, including the
limitations, if any, on such information. Assuming the information set
forth in the affidavit is true and complete, any objection by the
United States to information provided by Defendants, including
limitations on information, shall be made within fourteen (14) calendar
days of receipt of each 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 taken and all
steps implemented on an
[[Page 80810]]
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 their 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 Divestiture 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 any related orders such as any Hold Separate
Stipulation and Order, or of determining whether the Final Judgment
should be modified or vacated, and subject to any legally recognized
privilege, from time to time 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 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 responses 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, or an authorized representative of the State of Connecticut, as
appropriate, 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)(1)(G) 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)(1)(G) 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. NO REACQUISITION
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XIII. 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.
XIV. EXPIRATION OF FINAL JUDGMENT
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XV. 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' 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: __________, 2015
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
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United States District Judge
[FR Doc. 2015-32629 Filed 12-24-15; 8:45 am]
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