Proposed Final Judgment and Competitive Impact Statement United States v. MCI Communications Corporation and BT Forty-Eight Company ``(NewCo'')
Federal RegisterJun 27, 1994
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement United
States v. MCI Communications Corporation and BT Forty-Eight Company
``(NewCo'')
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) that a proposed Final Judgment,
Stipulation and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States v. MCI Communications Corporation and BT Forty-Eight Company
(``NewCo''), Civil Action No. 94 1317(TFH). The proposed Final Judgment
is subject to approval by the Court after the expiration of the
statutory 60-day public comment period and compliance with the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).
The Complaint alleges that the proposed sale of 20% of the voting
shares of MCI Communications Corporation (``MCI'') to British
Telecommunications plc (``BT''), and the proposed formation of a joint
venture, presently known as BT Forty-Eight Company (``NewCo''), between
MCI and BT to provide certain international telecommunications
services, would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, in the markets for international telecommunications services
between the United States and the United Kingdom and for global
seamless telecommunications services.
The proposed Final Judgment includes three categories of
substantive obligations and restrictions. First, it requires the
defendants, MCI and NewCo, to disclose certain information about the
telecommunications services that MCI and NewCo receive from BT or
provide together with BT. This ongoing disclosure is a precondition for
MCI and NewCo to provide international telecommunications services,
including enhanced telecommunications and global seamless
telecommunications services.
Second, the proposed Final Judgment prohibits MCI and NewCo from
receiving from BT certain non-public and confidential information
provided to BT by other United States telecommunications service
providers in connection with the arrangements between such United
States providers and BT to provide telecommunications services,
including both international correspondent relationships and
interconnection with BT in the United Kingdom.
Finally, the proposed Final Judgment prohibits MCI and NewCo from
providing telecommunications services or facilities to BT to enable it
to engage in the practice known as ``international simple resale'' from
the United Kingdom to the United States, which would involve bypassing
existing correspondent relationships to send BT's traffic to the United
States, until two conditions are met. First, all qualified United
States telecommunications services providers that had applied for
licenses in the United Kingdom to engage in international simple resale
on or before December 1, 1993 must have been granted such licenses.
Second, all such licensed providers must be afforded the opportunity to
interconnect with BT on standard, published and nondiscriminatory
terms.
Public comment is invited within the statutory 60-day comment
period. Such comments, and the responses thereto, will be published in
the Federal Register and filed with the Court. Comments should be
directed to Richard L. Rosen, Chief, Communications & Finance Section,
Antitrust Division, Room 8104, 555 Fourth Street, NW., Washington, DC
20001 (202-514-5621).
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection in Room 3233 of the
Antitrust Division, Department of Justice, Tenth Street and
Pennsylvania Avenue, NW., Washington, DC 20530 (202-514-2481) and at
the office of the Clerk of the United States District Court for the
District of Columbia, Third Street and Constitution Avenue, NW.,
Washington, DC 20001.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson
Director of Operations, Antitrust Division.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. MCI Communications
Corporation and BT Forty-Eight Company (``NewCo''), Defendants.
Civil Action No.-------------------------------------------------------
Filed:-----------------------------------------------------------------
Stipulation
It is stipulated and agreed by and between the undersigned parties,
by their respective attorneys, that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto and venue of this action is
proper in the District of Columbia. Defendants are hereby estopped from
contesting the entry or enforceability of the Final Judgment on the
ground that the Court lacks venue or jurisdiction over the subject
matter of the action or over any defendant. For purposes of this
stipulation defendant BT Forty-Eight Company, known as ``NewCo,'' and
any reference to NewCo herein, shall be understood to have the same
meaning as the term ``NewCo'' in the attached proposed Final Judgment.
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that plaintiff has not withdrawn its consent.
Plaintiff may withdraw its consent to entry of the Final Judgment at
any time before it is entered, by serving notice on the defendants and
by filing that notice with the Court.
3. Pending entry of the Final Judgment, defendants shall abide by
and comply with the provisions of the Final Judgment following
consummation of the Amended and Restated Investment Agreement dated
January 31, 1994 (and related agreements) or any similar arrangement
between any defendant and British Telecommunications plc (``BT''). This
obligation shall not be affected by the timing of execution of any
agreements between defendants and BT requiring BT to provide to MCI and
NewCo information needed for compliance with the requirements of
Sections II.A.1-6. Such agreements, which shall be executed prior to
the entry of the Final Judgment, shall be consistent with Sections
II.B-D of the Final Judgment and shall be provided to the Department of
Justice upon execution.
4. The agreements governing disclosure to United States
corporations, referred to in Section IV.E of the Final Judgment, will
provide that: (1) Non-public information received from the Department
of Justice is intended for use to complain or provide information to
any government authorities in the United States or the United Kingdom,
and to identify and evaluate internally any conduct that may be made
the subject of such a complaint or provision of information, but may
not be used for the sale or marketing of the corporation's services;
(2) such information may not be disclosed to persons other than
officers, directors, employees, agents, or contractors of the
corporation and to government authorities in the United States or the
United Kingdom (including, but not limited to, the Federal
Communications Commission and OFTEL); (3) all persons to whom the
information is disclosed will be advised of the limitations on use and
disclosure of the information; and (4) if unauthorized use or
disclosure occurs, the Department of Justice can revoke or otherwise
limit the corporation's further access to such information, unless the
Department decides, in its sole discretion, that revocation of access
is inappropriate. Plaintiff, in its discretion, may add further
conditions to such agreements. Any actions taken by the Department to
redress unauthorized use or disclosure will not diminish or create any
ability in NewCo or MCI to pursue separately against persons receiving
such information from the Department any legal remedies for
unauthorized use or disclosure.
5. Plaintiff and defendants are presently aware that the entities
listed in Attachment A to this Stipulation are, or based upon the best
available information appear to be, qualified United States
international telecommunications providers as defined in Section II.E
of the Final Judgment. Any other persons (including corporations or
other legal entities) that make known to the Department of Justice
before the entry of the Final Judgment that they meet the standards for
qualification under Section II.E of the Final Judgment shall be added
to Attachment A of this Stipulation if the Department concludes that
such persons are qualified United States international
telecommunications providers within the meaning of Section II.E. The
Department shall publish the names of such persons in its response to
public comments under the Antitrust Procedures and Penalties Act.
6. Six months prior to the expiration of the Final Judgment,
defendants shall inform the Department of Justice in writing whether
they will continue or discontinue the operation of NewCo beyond the
term of the Final Judgment.
7. In the event plaintiff withdraws its consent to entry of the
proposed Final Judgment or if the proposed Final Judgment is not
entered pursuant to this Stipulation, this Stipulation shall be of no
effect whatsoever and its making shall be without prejudice to any
party in this or any other proceeding, except that if the Court decides
not to enter the Final Judgment, and the defendants and British
Telecommunications plc have consummated pursuant to paragraph 3 of this
Stipulation, defendants shall abide by and comply with the terms of the
Final Judgment until the conclusion of this action, unless the parties
otherwise agree or the Court otherwise orders.
8. The Stipulation and the Final Judgment to which it relates are
for settlement purposes only and do not constitute an admission by
defendants in this or any other proceedings that Section 7 of the
Clayton Act, 15 U.S.C. Sec. 18, as amended, or any other provision of
law, has been violated.
Dated: June 10, 1994.
For Plaintiff United States of America:
Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Diane P. Wood,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations.
U.S. Department of Justice,
Antitrust Division.
Richard L. Rosen,
Chief, Communications and Finance Section.
Jonathan M. Rich,
Assistant Chief, Communications and Finance Section.
Carl Willner,
D.C. Bar #412841.
Sara J. DeSanto,
John J. Sciortino,
Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th
Street, NW., Washington, DC 20001, (202) 514-5813.
For Defendant MCI Communications Corporation: Jenner & Block.
By:
Michael H. Salbursy,
D.C. Bar #365888, 601 13th Street, NW., Washington, DC 20005,(202) 639-
6000.
Anthony C. Epstein,
D.C. Bar #250829, 601 13th Street, NW., Washington, DC 20005, (202)
639-6000.
For Defendant at Forty-Eight Company (NEWCO''): Hogan & Hartson
By:
Janet L. McDavid,
D.C. Bar #204073, 555 l3th Street, NW., Washington, DC 20004, (202)
637-8780 (direct), (202) 637-5600 (main).
David J. Saylor,
D.C. Bar #96826, 555 l3th Street, NW., Washington, D.C. 20004, (202)
637-8679 (direct), (202) 637-5600 (main).
Stipulation Approved for Filing
Done this ______ day of ____________, 1994.
----------------------------------------------------------------------
United States District Judge
Disclosure Pursuant to Rule 108(k)
Pursuant to Rule 108(k) of the Local Rules of this Court, the
following is a list of individuals entitled to be notified of the entry
of the foregoing Stipulation and of the entry of the proposed Final
Judgment.
Michael H. Salbury, Escquire, Jenner & Block, 601 13th Street,
NW.Washington, DC 20005; Counsel for Defendant MCI.
Janet L. McDavid, Esquire, Hogan & Hartson, 555 l3th Street, NW.,
Washignton, DC 20004
Jack Greenberg, Esquire, Syncordia Legal Department, Two Paces West,
Suite 1500, 2727 Paces Ferry Road, NW., Atlanta, Georgia 30339; Counsel
for Defendant BT Forty-Eight Company (``NewCo'')
Carl Willner, Esquire, Attorney, Communications & Finance Section,
Antitrust Division, U.S. Department of Justice, 555 4th Street, NW.
Washington, DC 20001; Counsel for Plaintiff the United States.
Attachment A
List of entities entities pursuant to paragraph 5 of this
Stipulation.
ACC Global Corp., including ACC Long Distance UK Ltd.
Ameritel Communications Inc., including Amera Tela Communications (UK)
Ltd.
AT&T Corporation, including AT&T (UK) Ltd.
City of London Telecommications Ltd. (COLT)
IDB Communications Group, Inc. including WorldCom International, Inc.
MFS Communications Co. Inc., including MFS Communications Ltd.
Sprint Corporation, including Sprint Holdings (UK) Ltd.
United States District Court for the District of Columbia
UNITED STATES OF AMERICA, Plaintiff, v. MCI COMMUNICATIONS
CORPORATION and BT FORTY-EIGHT COMPANY (``NewCo''), Defendants.
Civil Action No.-------------------------------------------------------
Filed:-----------------------------------------------------------------
Final Judgment
Whereas, plaintiff United States of America, filed its Complaint on
June 15, 1994,
And whereas, plaintiff and defendants, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication on any issue of fact or law,
And whereas, defendants have further consented after any
consummation as defined in the Stipulation entered into by defendants
and the United States on June 10, 1994, to be bound by the provisions
of this Final Judgment pending its approval by the Court,
And whereas, plaintiff the United States believes that entry of
this Final Judgment is necessary to protect competition in United
States telecommunications and enhanced telecommunications markets,
Therefore, it is hereby ordered, adjudged, and decreed:
I
Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting to this Final Judgment. The
Complaint states a claim upon which relief may be granted against the
defendants under Section 7 of the Clayton Act, 15 U.S.C. 18, as
amended.
II
Substantive Restrictions and Obligations
A. MCI and NewCo shall not offer, supply, distribute, or otherwise
provide in the United States any telecommunications or enhanced
telecommunications service that makes use of telecommunications
services provided by BT in the United Kingdom or between the United
States and United Kingdom, unless the following information is
disclosed in the United States by MCI or Newco or such disclosure is
expressly waived, in whole or in part, by plaintiff through written
notice to defendants and the Court.
1. By NewCo, within 30 days following any agreement or change to an
agreement--The prices, terms, and conditions, including any applicable
discounts, on which telecommunications services are provided by BT to
NewCo in the United Kingdom pursuant to interconnection agreements;
2. By NewCo, within 30 days following any agreement or change to an
agreement, or the provision of service absent any specific agreement--
The prices, terms, and conditions, including any applicable discounts,
on which telecommunications services, other than those provided
pursuant to interconnection agreements made under Condition 13 of BT's
license, are provided by BT to NewCo in the United Kingdom for use by
NewCo in the supply of telecommunications or enhanced
telecommunications services between the United States and United
Kingdom, or are provided by BT in the United Kingdom in conjunction
with such NewCo services where BT is acting as the distributor for
NewCo;
3. By MCI, with respect to international switched
telecommunications or enhanced telecommunications services jointly
provided by BT and MCI on a correspondent basis between the United
States and United Kingdom, and to the extent not already disclosed
publicly pursuant to the rules and regulations of the Federal
Communications Commission, or otherwise to the corporations referred to
in Section IV.E.
(i) within 30 days following any agreement or change to an
agreement, or the provision of service absent any specific agreement,
the accounting and settlement rates and other terms and conditions for
the provisions of each such service; and
(ii) on an annual basis, for any such services for which more than
one accounting and settlement rate may be applicable (e.g., rates for
peak and off-peak service), or services with different accounting and
settlement rates which are pooled or otherwise combined for calculating
proportionate returns, if other United States international
telecommunications providers do not have or receive data sufficient to
determine whether they are receiving their appropriate share of return
traffic in each accounting rate category (e.g., the total volumes of
United States traffic to BT, and total volumes of BT traffic to the
United States, for each type of traffic with a different accounting
rate), MCI's minutes of traffic to and from BT in each accounting rate
category;
4. By NewCo, on a semiannual basis--Schedules of telecommunications
services provided by BT to NewCo in the United Kingdom for use by NewCo
in the supply of telecommunications or enhanced telecommunications
services between the United States and the United Kingdom, or provided
by BT in the United Kingdom in conjunction with such NewCo services
where BT is acting as the distributor for NewCo, showing:
(i) the types of circuits (including capacity) and
telecommunications services provided;
(ii) the actual average time intervals between order and delivery
of circuits (separately indicating average intervals for analog
circuits, digital circuits up to 2 megabits, and digital circuits 2
megabits and larger) and telecommunications services; and
(iii) the number of outages and actual average time intervals
between fault report and restoration of service for circuits
(separately indicating average intervals for analog and for digital
circuits) and telecommunications services;
but excluding the identifies of individual customers of BT, MCI, or
NewCo or the location of circuits or telecommunications services
dedicated to the use of such customers;
5. By MCI--Schedules showing:
(i) on a semiannual basis, separately for analog international
private line circuits (IPLCs) and for digital IPLCs jointly provided by
BT and MCI between the United States and the United Kingdom, the actual
average time intervals between order and delivery by BT;
(ii) on an annual basis, separately for analog IPLCs and for
digital IPLCs jointly provided by BT and MCI between the United States
and the United Kingdom, the number of outages and actual average time
intervals between fault report and restoration of service, for any
outages that occurred in the international facility, in the cablehead
or earth station outside the United States, or the network of a
telecommunications provider outside the United States, indicating
separately the number of outages and actual average time intervals to
restoration of service in each such area; and
(iii) on a semiannual basis, for circuits used to provide
international switched telecommunications services or enhanced
telecommunications services on a correspondent basis between the United
States and the United Kingdom, the average number of circuit
equivalents available to MCI during the busy hour;
6. By NewCo, within 30 days of receipt of any information described
herein--Information provided by BT to MCI or NewCo about planned and
authorized improvements or changes to BT's United Kingdom public
telecommunications system operated pursuant to its license that would
affect interconnection arrangements between BT and either NewCo or
other licensed operators, provided that if MCI receives any such
information from BT separately from NewCo, MCI shall similarly be
required to disclose such information in the same manner as NewCo.
The obligations of this Section II.A shall not extend to the
disclosure of intellectual property or other proprietary information of
the defendants or BT that has maintained as confidential by its owner,
except to the extent that it is of a type expressly required to be
disclosed herein, or is necessary for licensed operators to
interconnect with BT's United Kingdom public telecommunications system
operated pursuant to its license or for United States international
telecommunications providers to use BT's international
telecommunications or enhanced telecommunications correspondent
services.
B. MCI and NewCo, and any person who may be designated by MCI to
sit on the Board of Directors of BT, shall not receive from BT, or from
any persons designated by BT to sit on the Board of Directors of MCI,
any information that is identified as proprietary by United States
telecommunications or enhanced telecommunications service providers
(and maintained as confidential by them) and is obtained by BT from
such providers as the result of BT's provision of interconnection or
other telecommunications services to them in the United Kingdom.
C. MCI and NewCo, and any person who may be designated by MCI to
sit on the Board of Directors of BT, shall not receive from BT, or from
any persons designated by BT to sit on the Board of Directors of MCI,
any confidential, non-public information obtained as a result of BT's
correspondent relationships with other United States international
telecommunications or enhanced telecommunications service providers,
except to the extent necessary for MCI to comply with its obligations
under Section II.A.3(ii) concerning disclosure of the total volume of
traffic (but not the individual traffic volumes for other providers)
received by BT from the United States and sent by BT to the United
States that is subject to proportionate return, or under Section II.A.5
(but not including individual information on other providers).
D. MCI, and any person who may be designated by MCI to sit on the
Board of Directors of BT, shall not seek or accept from BT, or from any
persons designated by BT to sit on the Board of Directors of MCI, any
non-public information about the future prices or pricing plans of any
provider of international telecommunications services between the
United States and the United Kingdom with which MCI competes in the
provision of such services.
E. Neither MCI nor NewCo shall provide to BT any telecommunications
facilities or services to be used by BT for international simple resale
between the United Kingdom and the United States, until the following
conditions have occurred or unless such conditions are expressly waived
in whole or part by plaintiff through written notice to defendants and
the Court:
1. All qualified United States international telecommunications
providers (including their United Kingdom subsidiaries or affiliates)
that have applied for licenses in the United Kingdom that would include
the ability to provide international simple resale between the United
States and the United Kingdom on or before December 1, 1993 have been
granted licenses to provide international simple resale by the
responsible governmental authorities in the United Kingdom; and
2. All such United States international telecommunications
providers licensed to provide international simple resale in the United
Kingdom have been offered the opportunity to interconnect with BT's
telecommunications network in the United Kingdom operated pursuant to
its license, on standard, nondiscriminatory and published terms
(including the locations where interconnection is offered) and with
reasonable arrangements for any other necessary technical aspects of
interconnection, enabling them to engage in international simple resale
without limitation on the amount of traffic carried.
``Qualified United States international telecommunications providers,''
for purposes of this Section II.E, shall mean all United States
international telecommunications providers as of December 1, 1993,
except for any provider that (a) has withdrawn its license application
to provide international simple resale, (b) has been found by United
Kingdom government authorities to have failed to pursue effectively its
license application or to have failed to meet the requirements for a
license to provide international simple resale, so long as such
requirements are applicable to all persons that seek to provide
international simple resale between the United Kingdom and the United
States, (c) has, in the judgment of the plaintiff, absent any finding
by United Kingdom government authorities, failed to pursue effectively
its license application, (d) has voluntarily modified its license
application after December 1, 1993 (other than to make modifications
requested by United Kingdom government authorities) to such a
substantial extent that it is subject to additional publication and can
no longer be pursued on its original schedule; (e) has been offered a
license that would allow it to commence providing international simple
resale between the United States and the United Kingdom and has not
accepted such license; or (f) has failed, after the grant of a license,
to supply promptly an adequate statement of the necessary information
required for interconnection. A list of the entities that plaintiff the
United States and defendants presently understand to be qualified under
this Section II.E is included in the Stipulation entered into by
defendants and plaintiff on June 10, 1994.
III
Applicability and Effect
The provisions of this Final Judgment shall be binding upon
defendants, their affiliates, subsidiaries, successors and assigns,
officers, agents, servants, employees, and attorneys, and upon those
persons in active concert or participation with them who receive actual
notice of this Final Judgment by personal service or otherwise.
Defendants shall cooperate with the United States Department of Justice
in ensuring that the provisions of this Final Judgment are carried out.
Neither this Final Judgment nor any of its terms or provisions shall
constitute any evidence against, an admission by, or an estoppel
against the defendants. The effective date of this Final Judgment shall
be the date upon which it is entered.
IV
Definitions
For the purposes of this Final Judgment:
A. ``Affiliate'' and ``subsidiary'' when used in connection with
MCI, do not include NewCo and BT, when used in connection with BT do
not include NewCo and MCI, and when used in connection with NewCo do
not include BT or MCI (but do include all entities in which NewCo has
an ownership interest or which are subject to its control, or are
jointly owned and controlled by BT and MCI). Nor shall BT be deemed to
be a person in active concert or participation with NewCo or MCI for
purposes of this Final Judgment.
B. ``BT'' means British Telecommunications plc, and any entity
owned or controlled by BT, apart from NewCo and MCI. BT does not
include any MCI employees who may serve on BTs Board of Directors.
C. ``Correspondent'' means a bilaterally negotiated arrangement
between a provider of telecommunications services in the US or the UK
and a provider of telecommunications services in the other of the US or
the UK for provision of an international telecommunications or enhanced
telecommunications service, by which each party undertakes to terminate
in its country traffic originated by the other party. A service managed
by NewCo, and provided without correspondent relationships with any
other provider, shall not be deemed to constitute a correspondent
service.
D. ``Defendant'' or ``defendants'' means MCI and NewCo.
E. ``Disclose,'' for purposes of II.A.1-6, means disclosure to
the United States Department of Justice Antitrust Division, which may
further disclose such information to any United States corporation that
directly or through a subsidiary or affiliate holds or has applied for
a license from either the United States Federal Communications
Commission or the United Kingdom Department of Trade and Industry to
provide international telecommunications services between the United
States and the United Kingdom. Disclosure by the Department of Justice
to any corporation described above shall be made only upon agreement by
such corporation, in the form prescribed in the Stipulation entered
into by defendants and the United States on June 10, 1994, not to
disclose any non-public information to any other person, apart from
governmental authorities in the United States or United Kingdom. Where
NewCo is required to disclose, in Section II.A, particular
telecommunications services provided, this shall include disclosure of
the identity of each of the services, and reasonable detail about each
of the services to the extent not already published elsewhere, but
shall not require disclosure of underlying facilities used to provide a
particular service that is offered on a unitary basis, except to the
extent necessary to identify the service and the means of
interconnection with the service.
F. ``Enhanced telecommunications service'' means any
telecommunications service that involves as an integral part of the
service the provision of features or capabilities that are additional
to the conveyance (including switching) of the information transmitted.
Although enhanced telecommunications services use telecommunications
services for conveyance, their additional features or capabilities do
not lose their enhanced status as a result.
G. ``Facility'' means: (i) any line, trunk, wire, cable, tube,
pipe, satellite, earth station, antenna or other means that is directly
used or designed or adapted for use in the conveyance, transmission,
origination or reception of a telecommunications or enhanced
telecommunications service; (ii) any switch, multiplexer, or other
equipment or apparatus that is directly used or designed or adapted for
use in connection with the conveyance, transmission, origination,
reception, switching, signaling, modulation, amplification, routing,
collection, storage, forwarding, transformation, translation,
conversion, delivery or other provision of any telecommunications or
enhanced telecommunications service, and (iii) any structure, conduit,
pole, or other thing in, on, by, or from which any facility as
described in (i) or (ii) is or may be installed, supported, carried or
suspended.
H. ``Interconnection,'' ``interconnect'' and ``interconnection
agreement'' mean interconnection under Condition 13 of BT's License (or
any subsequent or other condition governing interconnection that may be
imposed by United Kingdom government authorities).
I. ``International simple resale'' means the transmission through
international private or leased telecommunications facilities, or by
any other means of telecommunications in which international usage is
not measured, of international voice or data telecommunications traffic
(excluding capabilities in addition to conveyance and such switching,
processing, data storage or protocol conversion as is necessary for the
conveyance of information in real time) that is carried over the public
switched telecommunications network in both the country where it
originates and the country where it terminates.
J. ``MCI'' means MCI Communications Corporation, and any entity
owned or controlled by MCI, apart from NewCo. MCI does not include any
BT employees who may serve on MCI's Board of Directors.
K. ``NewCo'' means BT Forty-Eight Company, the joint venture of MCI
and BT to be created pursuant to the terms of the Joint Venture
Agreement entered into by MCI and BT as of August 4, 1993 (including
any subsequent modifications or amendments to such agreement),
regardless of the name under which it may subsequently do business, and
any subsidiary, affiliate, predecessor (whether the predecessor is
jointly owned by MCI and BT or separately owned by either of them),
successor, or assign of such joint venture, or any other entity jointly
owned by MCI and BT and having among its purposes substantially the
same purposes as described for NewCo in the Joint Venture Agreement.
NewCo shall not be deemed to include BT or any of its affiliates in
which NewCo does not have an ownership interest.
L. ``Telecommunications service'' means the conveyance, by
electrical, magnetic, electromagnetic, electromechanical or
electrochemical means (including fiber-optics), of information
consisting of:
--Speech, music and other sounds;
--Visual images;
--Signals serving for the impartation (whether as between persons and
persons, things and things or persons and things) of any matter,
including but not limited to data, otherwise than in the form of sounds
or visual images;
--Signals serving for the actuation or control of machinery or
apparatus; or
--Translation or conversion that does not alter the form or content of
information as received from that which is originally sent.
``Convey'' and ``conveyance'' include transmission, switching, and
receiving, and cognate expressions shall be construed accordingly. A
telecommunications service includes all facilities used in providing
such service, and the installation, maintenance, repair, adjustment,
replacement and removal of any such facilities. A service that is
considered a ``telecommunications service'' under this definition
retains that status when it is used to provide an enhanced
telecommunications service, or when used in combination with equipment,
facilities or other services.
M. ``United Kingdom'' and ``UK'' mean England, Wales, Scotland,
Northern Ireland and all territories, dependencies, or possessions of
the United Kingdom (excluding the Isle of Man) for which international
telecommunications traffic is not normally separately reported to the
United States Federal Communications Commission by United States
telecommunications carriers.
N. ``United States'' and ``US'' mean the fifty states, the District
of Columbia, and all territories, dependencies, or possessions of the
United States.
O. ``United States international telecommunications provider''
means any person or entity actually providing international
telecommunications services or enhanced telecommunications services to
users in the United States, and that is incorporated in the United
States, or that is ultimately controlled by United States persons
within the meaning of 16 CFR 801.1.
V
Visitorial and Compliance Provisions
A. MCI and NewCo each agree to maintain sufficient records and
documents to demonstrate compliance with the requirements of this Final
Judgment.
B. For the purposes of determining or securing compliance of
defendants with this Final Judgment, duly authorized representatives of
the plaintiff, upon written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, and on
a reasonable notice to the relevant defendant, shall have access
without restraint or interference to MCI and to NewCo in the United
States:
1. during their office hours to inspect and copy all records and
documents in their possession or control relating to any matters
contained in this Final Judgment; and
2. to interview or take sworn testimony from their officers,
directors, employees, trustees, or agents, who may have counsel
present, relating to any matter contained in this Final Judgment.
Provided, however, that NewCo officers and directors who are employees
of BT shall be required to produce only NewCo documents and to provide
information only concerning NewCo.
C. NewCo consents to make available to duly authorized
representatives of the plaintiff, for the purposes of determining
whether defendants have complied with the requirements of this Final
Judgment and to secure their compliance:
1. at the premises of the Antitrust Division in Washington, DC.,
within sixty days of receipt of written request by the Attorney General
or Assistant Attorney General in charge of the Antitrust Division,
records and documents in the possession or control of NewCo or any
NewCo affiliate or subsidiary, wherever located; and
2. for interviews or sworn testimony, in the United States if
requested by plaintiff but subject to their reasonable convenience,
officers, directors, employees, trustees or agents, who may have
counsel present. Provided, however, that NewCo officers and directors
who are employees of BT shall be required to produce only NewCo
documents and to provide information only concerning NewCo.
D. Upon the written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, a
defendant shall submit written reports, under oath if requested,
relating to any of the matters contained in this decree.
E. No information or documents obtained by the means provided in
this Section V shall be divulged by the plaintiff to any person other
than the United States Department of Justice, the Federal
Communications Commission, and their employees, agents and contractors,
except in the course of legal proceedings to which the United States is
a party, or for the purpose of securing compliance with this decree, or
for identifying to the United Kingdom Office of Telecommunications or
other appropriate United Kingdom regulatory agencies conduct by
defendants or BT that may violate United Kingdom law or regulations or
BT's license to operate its United Kingdom public telecommunications
system (but no documents received from defendants pursuant to this
Section V shall be disclosed to United Kingdom authorities by the
Department of Justice), or as otherwise required by law. Prior to
divulging any documents, interviews or sworn testimony obtained
pursuant to this Section V to the Federal Communications Commission,
plaintiff will obtain assurances that such materials are protected from
disclosure to third parties to the extent permitted by law.
VI
Retention of Jurisdiction
Jurisdiction is retained by this Court for the purposes of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders or directions as may be necessary or
appropriate to carry out or construe this decree, to modify or
terminate any of its provisions, to enforce compliance, and to punish
any violations of its provisions.
VII
Modification
Any party to this Final Judgment may seek modification of its
substantive terms and obligations, and other parties to the Final
Judgment shall have an opportunity to respond to such a motion. If the
motion is contested by another party, it shall only be granted if the
movant makes a clear showing that (i) a significant change in
circumstances or significant new event subsequent to the entry of the
Final Judgment requires modification of the Final Judgment to avoid
substantial harm to competition or consumers in the United States, or
to avoid substantial hardship to defendants, and (ii) the proposed
modification is (a) in the public interest, (b) suitably tailored to
the changed circumstances or new events and would not result in serious
hardship to any defendant, and (c) consistent with the purposes of the
antitrust laws of the United States and with the telecommunications
regulatory regime of the United Kingdom. Neither the absence of
specific reference to a particular event in the Final Judgment nor the
foreseeability of such an event at the time this Final Judgment was
entered, shall preclude this Court's consideration of any modification
request. This standard for obtaining contested modifications shall not
require the United States to initiate a separate antitrust action
before seeking modifications. The same standard shall apply to any
party seeking modification of this Final Judgment. If a motion to
modify this Final Judgment is not contested by any party, it shall be
granted if the proposed modification is within the reaches of the
public interest. Where modifications of the Final Judgment are sought,
the provisions of Section V of this Final Judgment may be invoked to
obtain any information or documents needed to evaluate the proposed
modification prior to decision by the Court.
VIII
Sanctions
Nothing in this Final Judgment shall prevent the United States from
seeking, or this Court from imposing, against defendants or any other
person, any relief available under any applicable provision of law.
IX
Further Provisions
A. The entry of this Final Judgment is in the public interest.
B. The substantive restrictions and obligations of this Final
Judgment shall be removed after five years have passed from the date of
entry of the Final Judgment, unless the Final Judgment has been
previously terminated.
Dated:
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United States District Judge
United States District Court for the District of Columbia
United States of America, Plaintiff, v. MCI Communications
Corporation and BT Forty-Eight Company (``NewCo''), Defendants.
Civil Action No.-------------------------------------------------------
Filed:-----------------------------------------------------------------
Competitive Impact Statement
The United States, pursuant to section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C.
16(b)-(h), files this Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I
Nature and Purpose of the Proceeding
On June 15, 1994, the United States filed a civil antitrust
complaint under Section 15 of the Clayton Act, as amended, 15 U.S.C.
25, alleging that the proposed acquisition of a 20% equity interest in
MCI Communications Corporation (``MCI'') by British Telecommunications
plc (``BT''), and the proposed formation of a joint venture between MCI
and BT to provide international enhanced telecommunications services,
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18,
by lessening competition in the markets for international
telecommunications services between the United States and the United
Kingdom and for global seamless telecommunications services, thereby
depriving United States consumers of the benefits of competition--lower
prices and higher quality services. Defendants are MCI and BT Forty-
Eight Company, also known as NewCo, which at present is a wholly owned
subsidiary of BT and which will become the joint venture of MCI and BT
upon consummation of the agreements between them. The Complaint seeks
injunctive and other relief.
The United States and the defendants have stipulated to the entry
of a proposed Final Judgment, after compliance with the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h). Entry of the
proposed Final Judgment would terminate this action, except that the
Court would retain jurisdiction to construe, modify, and enforce the
proposed Final Judgment and to punish violations of the Judgment. The
United States and the defendants also have stipulated that the
defendants will abide by the terms of the proposed Final Judgment after
consummation of the transactions between them, pending entry of the
Final Judgment by the Court, permitting the transactions to go forward
prior to completion of the Tunney Act procedures. Should the Court
decline to enter the Final Judgment, defendants have also committed in
the stipulation to abide by its terms until the conclusion of this
action.
II
Events Giving Rise to the Alleged Violation
A. The Proposed Transactions
On August 4, 1993, MCI and BT entered into an Investment Agreement
by which BT would acquire a 20% equity stake in MCI for approximately
$4.3 billion. MCI and BT entered into an amended and restated version
of this Investment Agreement on January 31, 1994. With consummation of
this Investment Agreement and related agreements, BT would become the
single largest shareholder in MCI. In addition, BT would receive a
number of special shareholder rights, including the need for BT's
consent to various actions by MCI, access to internal MCI information,
and proportionate board representation consisting of three of the
fifteen seats on MCI's Board of Directors. MCI would gain certain
special rights with respect to BT as well, including a seat on the BT
Board of Directors.
MCI and BT have agreed that if either party competes with the other
in its ``core'' business (defined to include any telecommunications
services or equipment, with specific limited exceptions) in its
assigned territory (the ``Americas'' for MCI, and the rest of the world
for BT), it will lose all special rights, including board
membership.\1\ While the agreement does not formally prohibit BT and
MCI from competing with each other in their domestic and international
telecommunications businesses, as a practical matter it ensures that BT
will only enter the United States telecommunications markets through
its investment in MCI so long as their relationship continues. BT's
operations in the United States principally consist of Syncordia, a
wholly owned subsidiary engaged in ``global outsourcing.'' This is the
provision of various integrated international telecommunications
services and enhanced services to large users through a single source,
allowing customers to transfer responsibility for owning and managing
their corporate telecommunications networks.\2\
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\1\Pursuant to agreement with the competition authorities of the
Commission of the European Union, the restriction on MCI entering
BT's core business in its territory has been limited to a period of
five years from closing, but the duration of the restriction on BT
competing in the United States has not been limited. 1994 O.J. 94/C,
Notice re Case No. IV/34,857-BT-MCI (March 30, 1994).
\2\BT and MCI had a more significant competitive overlap in the
United States at the time that they entered into the Investment
Agreement, in the area of public data networks. BT's subsidiary
British Telecommunications North America (BTNA) owned the Tymnet
public data network, a major provider of such services, while MCI
owned 25% of Infonet, one of Tymnet's principal competitors. MCI
agreed to acquire Tymnet from BT. Before it consummated this
acquisition earlier in 1994, however, MCI sold its share in Infonet
to the other owners of Infonet.
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While they entered into the Investment Agreement, MCI and BT also
entered into a Joint Venture Agreement and other related agreements
committing them to form a joint venture, to be owned 75.1% by BT and
24.9% of MCI. This joint venture, NewCo, is incorporated in the United
Kingdom, and will have its principal place of business and most of its
employees in the United States. BT and MCI both will contribute
international telecommunications facilities to the joint venture,
including BT's Syncordia business. The stated purpose of the joint
venture is to provide international enhanced telecommunications
services to large international users, such as multinational
corporations. These services will be available from a single source and
will be consistent in quality, features and capabilities wherever
purchased. These services may include various types of data services,
messaging and video conferencing, global calling card services,
intelligent network services, certain types of satellite services and
global outsourcing such as Syncordia already offers in the United
States and other countries. Under certain circumstances, and if
permitted by regulatory authorities, the role of the joint venture may
be expanded to include other telecommunications services in addition to
enhanced ones. The venture may also expand its business operations to
other types of customers.
MCI will be the exclusive distributor of the joint venture's
services in North and South America and the Caribbean (``the
Americas''), and BT will be the joint venture's exclusive distributor
in the rest of the world. MCI and BT also have agreed to supply the
necessary services and facilities in their respective distribution
regions to enable the joint venture to operate. In addition, MCI and BT
have agreed not to compete with the joint venture anywhere in the
world. Therefore, BT and MCI will have to realize all gains from the
areas of business in which the joint venture is engaged through their
ownership interests in the joint venture and their sales of its
services, and BT generally will only be able to participate in this
market in the United States through its investments in MCI and the
joint venture.\3\
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\3\There is a limited possibility for so-called ``passive
sales,'' that is, sales by BT or MCI to a customer with no presence
in its assigned area where the customer has on its own initiative
chosen to contract with the firm outside its area, but has not been
solicited by that firm.
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B. The Parties to the Transaction and the Relevant Markets
MCI is the second largest long distance telecommunications carrier
in the United States, and in terms of traffic, the fifth largest
telecommunications carrier in the world. Its principal long distance
domestic and international competitors in the United States are AT&T
Corporation, the largest carrier, and Sprint Corporation, the third
largest carrier. BT, formerly a government-owned monopoly, is now
privately held. It is by far the largest telecommunications carrier in
the United Kingdom, and is the fourth largest telecommunications
carrier in the world in terms of traffic. BT is the dominant
telecommunications carrier in the United Kingdom, as it provides almost
all local services and had high market shares in long distance domestic
and international services. Indeed, BT has over ten times the total
sales revenues of Mercury Communications Ltd., its only substantial
competitor in long distance services. Thus, the transactions between
MCI and BT will result in vertical affiliation between the dominant
telecommunications carrier in the United Kingdom and the second largest
long distance provider in the United States.
Both MCI and BT provide international telecommunications and
enhanced telecommunications services between the United States and the
United Kingdom to individuals and businesses for the exchange of voice,
video, and data messages. MCI carries about 20% of the international
switched telecommunications traffic originating and terminating in the
United States and BT carries about 75% of the international switched
telecommunications traffic originating and terminating in the United
Kingdom. Mercury is the only other company the United Kingdom currently
permitted to provide international telecommunications services between
the United States and United Kingdom using its own telecommunications
facilities (there is also some limited resale of the services of BT and
Mercury). No other companies have been licensed in the United Kingdom
to provide international telecommunications systems.
BT has substantial market power in the provision of
telecommunications services in and to the United Kingdom, in large part
because access to its local network is necessary for all other
telephone companies that seek to provide long distance domestic and
international services. About 97% of all telecommunications traffic in
the United Kingdom terminates through BT's local network, and the great
majority of traffic also originates on BT's network. Although cable
television companies provide local telecommunications services in some
areas of the United Kingdom, today they account for an insignificant
proportion of such services, in the range of 1%, and their activities
are unlikely to diminish BT's market power during the term of the
proposed decree.\4\ Substantial replication of BT's local
telecommunications network in the United Kingdom would be prohibitively
expensive for any new entrant or existing long distance provider.
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\4\In addition to BT and the cable companies, there is one other
provider of local telecommunications services in the United Kingdom,
serving only the city of Kingston-upon-Hull where BT does not have a
local network.
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BT also controls the largest and most comprehensive long distance
domestic and international telecommunications network in the United
Kingdom, and carries about 84% of domestic switched long distance
traffic in the United Kingdom. (Mercury carries virtually all of the
rest.) Since 1991, the United Kingdom government has granted additional
licenses for domestic telecommunications systems. Those new domestic
licensees either have not yet begun commercial long distance operations
using their own facilities (some firms operate on a limited scale as
resellers using the facilities of BT or Mercury), or have not yet
achieved any substantial share of the United Kingdom market.
BT has been able to retain a dominant position in the provision of
long distance domestic and international telecommunications services in
the United Kingdom for several reasons, including its control of the
local network. BT does not provide Mercury or other competitors either
equal access or number portability. Both of these features are
generally offered to all long distance carriers by operators of the
monopoly local exchange networks in the United States, and have been
important factors in the development of domestic and international long
distance competition. Equal access would allow customers to gain access
to the long distance networks of Mercury and other competitors through
BT's network without dailing additional numbers or obtaining special
equipment that is not needed to use BT's long distanced services.
Number portability would allow customers switching from BT to Mercury
or other competitors to retain their original telephone number. The
lack of equal access and number portability places Mercury and any
other competitors who may offer long distance service at a competitive
disadvantage to BT, contributing to BT's ability to sustain its
substantial market power in the provision of long distance domestic and
international telecommunications services in the United Kingdom. These
long distance services are necessary to deliver enhanced
telecommunications and seamless global telecommunications services
internationally.
In addition, Mercury must pay BT Access Deficit Charges (``ADCs'')
in order to have traffic delivered through BT's network. ADCs are
payments made by competing carriers to BT for each minute of traffic
those carriers send through BT's network. ADCs are intended by United
Kingdom regulatory authorities to compensate BT for providing its other
local exchange services subject to price controls. These charges,
especially for international traffic, greatly exceed BT's cost of
providing interconnection to Mercury. ADCs may be imposed on new
entrants that compete with BT and interconnect with its network. The
total cost for Mercury, or any other United Kingdom competitor of BT
that is required to pay ADCs, to send international traffic through
BT's local network is several times greater than the comparable costs
paid by international long distance carriers in the United States for
interconnection with local networks.
C. The Competitive Effect of the Acquisition
The Complaint alleges that the acquisition of MCI shares by BT may
substantially lessen competition in the provision of international
telecommunications services between the United States and the United
Kingdom. BT will have increased incentives and the ability, using its
dominant position in the United Kingdom, to favor MCI and to disfavor
its United States competitors in international telecommunications
services in various ways, making competitors' offerings less attractive
in quality and price than those of MCI, and so lessening the ability of
MCI's rivals to compete effectively in these services. As a result of
this anticompetitive conduct, the price of international
telecommunications services to the United Kingdom available to United
States consumers could be increased, and the quality lessened, relative
to what United States consumers would pay and receive in a competitive
market.
International telecommunications services are generally provided
today on a ``correspondent'' basis, meaning that providers in different
countries enter into commercially negotiated bilateral agreements with
one another to complete each other's traffic. International
correspondent telecommunications services primarily consist of the
basic switched voice telephone call, which is known either as
International Direct Dial (``IDD'') or International Message Telephone
Service (``IMTS''), and International Private Line Service (``IPLS'').
They also include certain other switched telecommunications and
enhanced telecommunications services.
``Switched'' traffic makes use of switching facilities and common
lines. Consumers typically obtain switched correspondent services from
the provider in the country where a call originates, and calls are
handed off to the provider in the other country without direct customer
involvement. IPLS consists of circuits dedicated to the use of a single
customer, and the providers of IPLS in each country typically sell
their ``half'' of the circuit to the user separately. Switched services
constitute the great majority of international telecommunications
services in terms of both traffic and revenues.
The Complaint alleges that acquiring a 20% ownership interest in
MCI will increase BT's incentive to discriminate in favor of MCI and
against other United States international carriers in the market or
markets for international telecommunications services between the
United States and the United Kingdom. BT's incentive to favor MCI is
reinforced by the provision in the Investment Agreement that subjects
BT to loss of its special rights if it competes in the Americas in the
provision of telecommunications services and equipment.
MCI could receive various forms of favorable treatment from BT with
respect to its international correspondent services between the United
States and the United Kingdom. For example, BT could favor MCI or
disfavor its competitors with respect to the prices, terms and
conditions on which international services are provided, as well as the
quality of provisioning of those services, and could provide to MCI
advance information about planned changes to its network. Such
discrimination could place other United States international carriers
at a competitive disadvantage to MCI, enabling MCI to charge more for
its services or to provide a lower quality of service than it would
otherwise be able to do without losing customers.
In addition, the Complaint alleges that BT's ownership interest in
MCI would increase BT's incentive to provide MCI confidential,
competitively sensitive information that BT obtains from other United
States carriers through their correspondent relationships with BT. In
order to use BT's correspondent switched and private line services and
to negotiate terms of use, United States international
telecommunications providers must provide BT various types of
competitively sensitive information, including private line customer
identities, service requirements, plans for the introduction of new
services, changes in existing services, and future traffic projections.
If BT were to share this information with MCI, then MCI could gain an
anticompetitive advantage over its United States competitors. Allowing
MCI access to such competitively valuable information about its
competitors would also increase the risk of collusion.
Finally, the Complaint alleges that the agreements will give BT the
increased incentive and ability to send its international switched
traffic to the United States exclusively or largely to MCI. Such
diversion of traffic could harm competition among international
telecommunications service providers in the United States, and United
States consumers, by increasing the net settlement payments that other
United States carriers must make to BT.\5\ If BT diverted all or most
of its traffic to MCI, unaffiliated United States international
carriers would lose offsetting return traffic from BT and would have to
make larger settlement payments to BT, putting them at a competitive
disadvantage in the market for United States-United Kingdom
telecommunications, and this could result in MCI charging higher
prices. The ability to divert the bulk of its traffic to an affiliated
United States carrier could also give BT an increased incentive to keep
international accounting rates above costs.\6\
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\5\The correspondent agreements governing switched services
establish an ``accounting rate'' per minute of traffic, for each
type of traffic sent over a particular international route. The
carriers in each country pay half the accounting rate (the
``settlement rate'') to their foreign correspondents for each minute
of traffic completed. Settlement payments for outgoing traffic are
offset by the settlement payments for incoming traffic. When there
is an imbalance in the amount of outgoing and incoming traffic
between carriers, the carrier with the most outgoing traffic makes a
net settlement payment to its correspondent. Today, United States
carriers accept the same proportion of the total switched traffic
from each of their correspondents in a foreign country as the
proportion of total switched traffic to the correspondent that each
of the United States carriers send. This protects each carrier from
being competitively disadvantaged by having to make large net
settlement payments that other competitors can avoid. Federal
Communications Commission policy supports this proportionate
allocation of switched traffic, although the FCC has not adopted
regulations governing proportionate allocation.
\6\Because United States carriers send substantially more
traffic to the United Kingdom than United Kingdom carriers send to
the United States, United States carriers must make large net
settlement payments to United Kingdom carriers, most of which go to
BT. Current accounting rates between the United States and the
United Kingdom are substantially above the cost of providing
service.
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D. The Competitive Effect of the Joint Venture
The Complaint also alleges that the formation of the BT-MCI joint
venture may substantially lessen competition in the market or markets
for seamless global telecommunications services provided in the United
States. BT will have increased incentives and the ability, using its
dominant position in the United Kingdom, to favor NewCo and MCI and to
disfavor their United States competitors in seamless global
telecommunications services in various ways, lessening the ability of
the competitors of MCI and NewCo to develop and offer new seamless
global services and compete effectively in these services. As a result
of this anticompetitive conduct, the quality of seamless global
telecommunications services available to United States consumers could
be lessened, and the price increased, relative to what United States
consumers would pay and receive in a competitive market.
Seamless global telecommunications services would be made available
by a single provider using an integrated international network of owned
or leased facilities, and would have the same quality, features,
characteristics, and capabilities wherever they are provided, making
them significantly superior to ordinary correspondent
telecommunications services for many customers, particularly
multinational corporations and other large users of international
telecommunications. Seamless services would permit one-stop shopping,
so that users could avoid negotiation with telecommunications network
operators in different countries, and would overcome the inadequacies
and differences in standards in various national telecommunications
systems. They could offer scale economies by comparison with private
networks individually organized by users. However, creating seamless
global networks will require a major commitment of resources and
expertise that few firms can supply.
Seamless global telecommunications services represent an emerging
market, but an important one for the evolution of international
telecommunications. Other entrants or potential entrants in this
market, in addition to BT and MCI, include AT&T's Worldsource (a non-
exclusive partnership with several foreign providers including Japan's
KDD), Unisource (an alliance of the national or principal
telecommunications providers in Switzerland, Sweden and the
Netherlands), Eunetcom (an alliance of the German and French national
telecommunications providers), Sprint, and Cable & Wireless plc (the
parent of Mercury).
By their nature, seamless global telecommunications services must
be offered on a consistent basis in all the major countries where
customers are located. Thus, nondiscriminatory access to the
telecommunications networks in these countries is essential for any
provider of these services. The United Kingdom has a crucial role in
seamless global telecommunications services because about ten percent
of all likely potential customers have their headquarters there, and
most potential customers of these services need telecommunications
services in the United Kingdom.
BT's role in the joint venture would increase its incentive to
favor the joint venture and MCI over other United States providers of
seamless global telecommunications services. Since BT could not compete
with the joint venture and only MCI could solicit customers for the
joint venture's services in the United States, where about 40 percent
of all potential customers have their headquarters, BT would depend on
MCI and NewCo for revenues from such services in the United States. It
would not have the opportunity to earn additional revenues in non-
exclusive arrangements to provide similar services with other
providers, so its incentive to use its dominant position in the United
Kingdom to place MCI and NewCo in the strongest possible position in
the United States, at the expense of competitors, would be reinforced.
BT could discriminate in favor of NewCo and MCI using its
vertically integrated position in the United Kingdom, with a virtual
monopoly in local services and a dominant position in long distance
domestic and international services, as these services will be needed
by competing providers of seamless global services to complete traffic.
Discrimination could occur in interconnection to the BT network,
provision of information about the network, and provision of the
international private circuits NewCo and its competitors would need for
their seamless global service ``platforms.'' BT could also provide
NewCo and MCI with competitively sensitive information it obtains from
seamless global service competitors who interconnect with BT's United
Kingdom network. Finally, BT could favor MCI and NewCo by sending them
on a non-correspondent basis traffic from the United Kingdom that would
otherwise be allocated proportionately. The agreements between BT and
MCI specifically provide for such use of NewCo facilities.
III.--Explanation of the Proposed Final Judgment
A. Prohibitions and Obligations
Under the provisions of the Antitrust Procedures and Penalties Act,
the proposed Final Judgment may only be entered if the Court finds that
it is in the public interest. The United States has tentatively
concluded that the proposed Final Judgment affords an adequate remedy
for the alleged violations and is in the public interest.
Section II contains the substantive restrictions and obligations.
They include transparency requirements (Section II.A), confidentiality
requirements (Sections II.B, II.C and II.D), and requirements related
to international simple resale (Section II.E). These various
requirements, in combination, will substantially diminish the risk of
abuse of BT's market power to discriminate or otherwise afford
anticompetitive advantages to MCI and NewCo.\7\ They will do so by
making discrimination easier to detect, by precluding the misuse of
confidential information obtained by BT from MCI's competitors, and by
increasing the likelihood that United States competitors of MCI and
NewCo, if licensed, will be interconnected with BT in the United
Kingdom, so that they can respond effectively to international
discrimination and diversion of BT's traffic to MCI. The object of
these substantive terms is to ensure that MCI, as the result of its
direct affiliation with BT or its position as the exclusive distributor
of NewCo services in the United States, is not advantaged over its
competitors in the United States to the detriment of competition or
consumers.
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\7\NewCo is broadly defined in Sections IV.A and IV.K to ensure
that the entire joint venture will be subject to the Final Judgment,
regardless of the forms that it may take or restructurings that may
occur.
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1. Transparency Requirements
Section II.A forbids MCI and NewCo from offering, supplying
distributing or otherwise providing any telecommunications or enhanced
telecommunications service that makes use of telecommunications
services provided by BT in the United Kingdom or between the United
States and the United Kingdom, unless MCI and NewCo disclose certain
types of information. Because these transparency requirements may be
affected by changes in regulation or other circumstances, Section II.A
provides the United States with the ability to waive these requirements
in whole or in part.
Pursuant to Section IV.E., MCI and NewCo will provide the
information to the Department of Justice, which may then disclose the
information to any United States corporation that holds or has applied
for a license, from either United States or United Kingdom authorities,
to provide international telecommunications services between the United
States and the United Kingdom. This will enable the principal
competitors of MCI and NewCo to monitor whether either of these
companies is receiving discriminatory treatment in their favor from BT,
and provide them with evidence that could be used to make a complaint
to any governmental authorities in the United States or the United
Kingdom. The term ``governmental authorities'' is used broadly and
includes independent agencies. Corporations receiving this information
from the Department of Justice would be required to sign a
confidentiality agreement with the Department, obligating them not to
disclose non-public information to any persons other than governmental
authorities. The stipulation between the defendants and the United
States describes the form of a confidentiality agreement in more
detail. This confidentiality provision was adopted to prevent to wider
dissemination of defendants' non-public business information than is
necessary to detect and prevent anticompetitive conduct.
Defendants also have stipulated to enter into agreements with BT,
prior to entry of the Final Judgment, that will ensure that they are
provided with sufficient information to comply with Section II.A. Such
agreements with BT must also be consistent with the separate
obligations on defendants, under Sections II.B-D, precluding receipt
from BT of various types of information about their competitors.
The terms ``Telecommunications services'' and ``enhanced
telecommunications services'' are employed throughout the transparency
requirements as well as elsewhere in the Final Judgment.\8\
``Telecommunications services,'' as defined in the Final Judgment (see
Section IV.L), include ordinary switched voice telephony and private
circuits as well as conveyance (including transmission, switching and
receiving) of data and video information, and signaling, translation
and conversion in the network. These basic telecommunications services
are the bulk of existing telecommunications, and are licensed and
regulated to some degree in both the United States and the United
Kingdom. There are relatively few significant providers. In contrast,
``enhanced telecommunications services'' (as defined in Section IV.F),
which use telecommunications services as a foundation to provide
various advanced and intelligent applications of additional value to
users, are subject to little or no regulation in the United States and
the United Kingdom. The number of providers is often greater than for
basic telecommunications, although all such providers must have access
to the basic telecommunications services in order to do business.\9\
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\8\The definitions of ``telecommunications services'' and
``enhanced telecommunications services'' in the Final Judgment are
based on the distinction between basic services and enhanced
services recognized by the FCC, as well as similar concepts in the
United Kingdom (where ``value-added services'' is analogous to
enhanced services). The definitions do not duplicate those used by
the national regulatory authorities, which differ somewhat in
terminology, but they incorporate as much as possible the underlying
concepts, while ensuring consistent treatment within the context of
this judgment for services offered in the United States and in the
United Kingdom.
\9\If an activity is a ``telecommunications service'' as defined
in the Final Judgment, it remains so when it is offered or bundled
with enhanced services or other equipment, facilities, or services,
or if it is called a ``package of facilities'' or something other
than a telecommunications service.
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NewCo will interconnect directly with BT's United Kingdom network,
and will obtain other telecommunications services from BT, such as
international circuits, to use in the provision of seamless global
network services. NewCo's services may be distributed by BT either
alone or together with BT's own domestic services in the United
Kingdom. NewCo may have access to valuable information concerning
changes to BT's United Kingdom network that has not yet been disclosed
to other competitors.
Accordingly, NewCo is subject to four categories of disclosure
requirements. Section II.A.1 obligates it to disclose the prices, terms
and conditions, including any discounts, on which telecommunications
services are provided to NewCo pursuant to interconnection agreements.
Interconnection agreements are specific arrangements (see Section IV.H)
by which other licensed operators in the United Kingdom receive rights
to connect their systems to BT's network and have BT complete delivery
of traffic, on terms that may differ from those available to retail
customers. Although BT began to publish new interconnection agreements
last year, BT's license allows it the option to publish pricing
methodologies instead of actual prices. Section II.A.1 will compel
NewCo to disclose the actual prices BT charges it for interconnection.
Section II.A.2 imposes similar disclosure obligations on NewCo for
prices, terms and conditions, including any discounts, of any other
telecommunications services it obtains from BT. These services could
include international private circuits obtained at retail or otherwise
from BT. The disclosure requirements under this provision also apply to
the terms on which BT provides U.K. telecommunications services to
customers together with NewCo services, thus facilitating detection of
discrimination in bundling of services. To some extent these types of
information are already disclosed by BT in its retail tariffs pursuant
to United Kingdom regulation, but Section II.A.2 ensures comprehensive
transparency to prevent discrimination.
Section II.A.4 requires NewCo to provide additional information
about the specific telecommunications services that it receives from BT
to supply telecommunications or enhanced telecommunications services
between the United States and the United Kingdom, as well as the
services BT provides directly to customers in the United Kingdom as the
distributor for NewCo. NewCo is required to disclose the types of
circuits, including their capacity, and other telecommunications
services provided. NewCo also is required to disclose information
concerning the actual average times between order and delivery of
circuits and the number of outages and actual average times between
fault report and restoration for various categories of circuits. These
types of information are not otherwise disclosed under existing
regulations, and are important to the detection of various types of
discrimination. Where NewCo has to disclose particular
telecommunications services provided by BT under II.A., it is required
to identify the services and provide reasonable detail about them (if
not already published). However, if a service is sold as a unit,
separate underlying facilities need only be disclosed to the extent
necessary to identify the service and the means of interconnection.
NewCo is not required to identify individual customers or the locations
of circuits and services dedicated to particular customers.
Finally, under Section II.A.6 NewCo is required to disclose
information it or MCI receives from BT about planned and authorized
changes in BT's United Kingdom network that would affect
interconnection arrangements with any licensed operators. Should MCI
receive information separately from NewCo, it has the same disclosure
obligation. Disclosure of information of this nature is important to
ensure that NewCo, through its affiliation with BT, is not given
commercial advantages through advance notice.
MCI's relationship with BT in the provision of international
services will be less complex than NewCo's, owing to MCI's agreements
not to compete with NewCo and to suffer loss of its special rights if
it competes with BT outside the Americas for a period of five years
from closing. MCI will continue to provide international correspondent
switched and private line services together with BT. To ensure greater
transparency in MCI's dealings with BT, Section II.A contains two sets
of disclosure obligations specifically applicable to MCI.
Section II.A.3 applies to any international switched
telecommunications or enhanced telecommunications services provided by
MCI and BT on a correspondent basis between the United States and the
United Kingdom. It requires MCI to disclose both the accounting and
settlement rates, and other terms and conditions, applicable to any of
these services. When there is no specific agreement between MCI and BT
setting forth this information, MCI must state the rates, terms and
conditions on which the service is actually provided. If BT combines
types of traffic subject to different accounting rates to determine the
proportionate allocation of switched traffic to United States
providers, MCI must disclose its own minutes of traffic in each
separate accounting rate category so that the other United States
providers can determine whether they are being sent the appropriate
shares of traffic from BT, if they do not already receive data (such as
total traffic volumes in each rate category) that is sufficient to
enable them to do so. This latter obligation addresses a particular
type of possible discrimination in international services, known as
``grooming,'' by which a foreign carrier can favor particular United
States correspondents with traffic of superior value while appearing to
allocate minutes of traffic on a proportionate basis. Today some types
of information covered by Section II.A.3, such as agreed-upon
accounting rates, are supplied to the Federal Communications Commission
(``FCC'') and are published, or are provided to competitors. Where
information has already been made available in these ways, Section
II.A.3 of the Final Judgment does not require MCI to provide it to the
Department of Justice.
Section II.A.5 requires MCI to provide information about the United
States-United Kingdom international private circuits it provides
jointly with BT. MCI must disclose the actual average times between
order and delivery by BT, and the actual average time intervals between
fault report and restoration in specific areas of the international
facility and the overseas network. This information is similar to types
of information NewCo provides under Section II.A.4 and serves similar
purposes. MCI is also required, for circuits used to provide
international switched services on a correspondent basis between the
United States and the United Kingdom, to identify average numbers of
circuit equivalents available during the busy hour. The great majority
of these circuits would be with BT. None of the information disclosed
under Section II.A.5 is made public today.
Under Section II.A., MCI and NewCo are required to disclose
intellectual property or proprietary information only if it is one of
the types of information expressly required to be disclosed by any of
these transparency obligations, or if it is necessary for licensed
operators to interconnect with BT's United Kingdom network or for
United States international providers to use BT's international
facilities to complete their services. MCI and NewCo, as well as BT
indirectly, are thus protected against overly broad disclosure of such
valuable commercial information.
2. Confidentiality Requirements
Three provisions of the proposed Final Judgment, Sections II.B,
II.C and II.D, constrain the ability of MCI (including the director it
appoints to the BT board) and NewCo to receive from BT (including BT-
appointed directors on the board of MCI), various types of confidential
information that BT obtains from MCI's and NewCo's United States
competitors. Existing regulatory requirements do not adequately protect
any of this information from disclosure.
Under Section II.B MCI and NewCo will not receive information from
BT that other United States competitors identify as proprietary and
maintain as confidential, but that has been obtained by BT as the
result of its provision of interconnection or other telecommunications
services to the competitors in the United Kingdom. In order to obtain
interconnection, other licensed operators are commonly required to
provide BT with a statement of requirements containing detailed
information about their planned services and interconnection needs. As
interconnection needs change over time, BT will receive more
confidential information. BT may also learn the identities and service
needs of particular customers of its competitors who need to have
private circuits interconnected with BT. Of course, there is no
alternative to interconnection with BT because of its local monopoly
bottleneck and overall market power in the United Kingdom.
Section II.C similarly forbids MCI and NewCo from receiving
confidential, non-public information from BT that BT may obtain from
other United States competitors of MCI and NewCo through its
correspondent relationships with them. United States international
telecommunications providers have no reasonable alternative at present
to using BT for at least some of their correspondent traffic to and
from the United Kingdom. A limited exception is provided to allow MCI
to obtain certain types of aggregate information it may need to comply
with its transparency obligations under Sections II.A.3(ii) and II.A.5,
but in no circumstances may MCI use this exception to receive
individual information about other providers that is otherwise
prohibited by this section.
Finally, Section II.D. addresses a specific competitive risk in the
context of international correspondent relationships, by prohibiting
MCI from seeking or accepting from BT any non-public information about
the future prices or pricing plans of any competitor of MCI in the
provision of international telecommunications services between the
United States and United Kingdom. BT and its United States
correspondents, in the course of accounting rate negotiations, exchange
considerable information including business plans and traffic
projections. Section II.D addresses the substantial risk of violation
of Section 1 of the Sherman Act that would arise if BT were to obtain
non-public pricing information from MCI's competitors once BT becomes
MCI's single largest owner, by precluding any sharing of price
information through BT. Risks of price collusion, tacit or explicit,
are considerable in an industry with a small number of large providers
offering similar types of services.
3. International Simple Resale Requirements
The international simple resale provision of the proposed Final
Judgment, Section II.E, is directed at actions by BT, using its
dominant position in the United Kingdom, that would discriminate in
favor of MCI, including the diversion of most or all of BT's traffic
from the United Kingdom through MCI and NewCo. Such conduct could raise
prices to United States consumers or otherwise harm competition in the
United States, unless United States carriers are licensed to operate in
the United Kingdom and interconnected with BT so that they can respond
effectively to BT's conduct.
International simple resale (``ISR'') (see Section IV.I) is the
transmission through private or leased international telecommunications
facilities (or by any other international means where usage is not
measured) of voice or data traffic (excluding certain enhanced
capabilities), if that traffic is carried over the public switched
telecommunications network in both the country where it originates and
the country where it terminates. ISR avoids the correspondent system,
and traffic sent by ISR would be exempt from proportionate allocation
policies. When all providers on an international route are equally
capable of using ISR, it can lessen the risk of discriminatory
practices in switched correspondent services, and can enable United
States providers to retaliate against attempts by a foreign carrier to
use its market power to increase the settlement liabilities of
unaffiliated carriers relative to those of its United States affiliate.
ISR between the United States and the United Kingdom can lawfully
occur only when the telecommunications regulatory authorities of both
countries find generally that equivalency exists between them in
policies relating to open entry and non-discrimination. However, that
equivalency finding will not be sufficient for all United States
providers to begin offering ISR to the United Kingdom, because in the
United Kingdom each provider of international simple resale services
must also be individually licensed. To provide ISR, a firm must have
the ability to use international facilities and interconnections to the
domestic networks at both ends of the international route.
Section II.E prohibits MCI and NewCo from providing any
telecommunications facilities or services to be used by BT for
international simple resale between the United Kingdom and the United
States, until (1) All qualified United States international
telecommunications providers that applied by December 1, 1993 for
United Kingdom licenses that would allow them to provide ISR have been
granted ISR licenses,\10\ and (2) all such licensed United States
providers have been offered the opportunity to interconnect with BT's
United Kingdom network on standard, nondiscriminatory and published
terms, with reasonable arrangements for any other necessary technical
aspects of interconnection. This provision does not compel or direct
the grant of any licenses, which is the prerogative of the United
Kingdom government. It ensures, however, that any delays in licensing
competing United States providers, or delays on BT's part in
interconnecting such licensed providers in the United Kingdom, will not
be used to anticompetitive effect by MCI, NewCo and BT.\11\
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\10\Some of these applicants may have also applied for other
types of licenses from United Kingdom authorities. The Final
Judgment requires only the grant of international simple resale
authority.
\11\Section II.E., by providing objective criteria for
determining which United States international telecommunications
providers are qualified, ensures that no individual United States
carrier can misuse its United Kingdom ISR license application to
delay BT's ability to provide ISR.
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The December 1, 1993 cutoff date for qualified providers included
all qualified United States applicants who sought to provide
international simple resale service before NewCo's own license
application was filed in the United Kingdom. Plaintiff and defendants
have sought to identify, by stipulation, the United States
international telecommunications providers that they presently
understand to be qualified under Section II.E.\12\ Any other persons,
however, may notify the Department before entry of the Final Judgment
that they believe they are also qualified within the meaning of Section
II.E. If plaintiff concludes that any such additional persons are
qualified they will be added to the stipulated list.
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\12\The stipulated list presently includes: ACC Global Corp.,
including ACC Long Distance UK Ltd.; Ameritel Communications Inc.,
including Amera Tela Communications (UK) Ltd.; AT&T Corporation,
including AT&T (UK) Ltd.; City of London Telecommunications Ltd.
(COLT); IDB Communications Group, Inc., including WorldCom
International, Inc.; MFS Communications Inc., including MFS
Communications Ltd.; and Sprint Corporation, including Sprint
Holdings (UK) Ltd. Some of these firms have already received United
Kingdom international simple resale licenses.
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Section II.E. does not affect the ability of the FCC, and United
Kingdom authorities, to determine when general conditions warrant
authorizing international simple resale or other forms of resale
between the United States and the United Kingdom.
4. Modifications
Section VII, the modifications provision, affords the means of
expanding, altering or reducing the substantive terms of the Final
Judgment, and is essential to the protection of competition.
Modifications that are not contested by any party to the Final Judgment
are reviewed under a ``public interest'' test. See, e.g, United States
v. Western Electric Co., 993 F.2d 1572, 1576-77 (D.C. Cir. 983).
Where a proposed modification is contested by any party to the
Final Judgment, the Court must determine both whether modification is
required, and whether the particular modification proposed is
appropriate. The United States is able to seek changes to the
substantive terms and obligations of the Final Judgment from the Court,
including additional requirements to prevent receipt of discriminatory
treatment by defendants, in order to avoid substantial harm to
competition or consumers in the United States. The defendants are able
to seek modifications removing obligations of the Final Judgment in
order to avoid substantial hardship to themselves. In either case, the
party seeking modifications must make a clear showing that modification
is required, based on a significant change in circumstances or a
significant new event subsequent to the entry of the Final Judgment.
Such a change in circumstances or an event subsequent to the entry of
judgment need not have been unforeseen, nor need it have been referred
to in the Final Judgment. The parties recognize that discrimination of
a significant nature involving BT and defendants, subsequent to the
entry of the Final Judgment, could constitute such a new event. Before
concluding that discrimination against any particular competitor of MCI
or NewCo required seeking a modification of the Final Judgment to
protect competition or consumers, the Department of Justice would
ordinarily inquire at the outset whether the injured competitor had
availed itself of existing regulatory remedies, if any, in the United
Kingdom as well as the United States, and what relief had been provided
or action taken, if any, by the telecommunications regulatory agencies.
If the Court concludes that any party has met its burden of showing
that the Final Judgment should be modified over the opposition of
another party, it would then be empowered to grant any particular
modification that meets three criteria. The modification must be (i) in
the public interest, (ii) suitably tailored to the changed
circumstances or new event that gave rise to its adoption, and must not
result in serious hardship to any defendant, and (iii) consistent with
the purposes of the antitrust laws of the United States, and the
telecommunications regulatory regime of the United Kingdom. This
standard protects against overbroad modifications, and recognizes that
mere inconvenience or some hardship to a defendant will not preclude a
modification, but only ``serious'' hardship. The loss of opportunity to
profit from anticompetitive conduct is not a ``serious'' hardship
within the meaning of this standard. Any proposed modification, to be
consistent with the antitrust laws, must not be of an anticompetitive
character, and must protect competition or consumers in the United
States. Modifications must also be consistent with the system of
regulation of telecommunications in the United Kingdom.
Section VII permits the United States, where any party has sought
modifications of the Final Judgment, to invoke any of the visitorial
provisions contained in Section V of the Final Judgment in order to
obtain from defendants any information or documents needed to evaluate
the proposed modification prior to decision by the Court.
5. Visitorial and Compliance Requirements
Section V of the Final Judgment allows the Department of Justice to
monitor defendants' compliance by several means. Section V.A obliges
defendants to maintain records and documents sufficient to show their
compliance with the Final Judgment's requirements. Sections V.B and V.C
enable the United States to gain access to inspect and copy the records
and documents of defendants, and also to have access to their personnel
for interviews or to take sworn testimony. Section V.B covers access to
MCI, as well as to NewCo's operations in the United States. To avoid
difficulties that might arise in applying that visitorial procedure to
discovery directed at foreign operations of NewCo, Section V.C.
provides that NewCo documents and personnel, wherever located
(including abroad), would be produced by NewCo in the United States,
within sixty days of request in the case of documents, and subject to
the reasonable convenience of the persons involved in the case of
requests for interviews or sworn testimony. Section V.D permits the
United States also to require any defendant to submit written reports
relating to any matters contained in the Final Judgment. Finally,
Section V.E supplies confidentiality protections for information and
documents furnished by defendants to the United States under the other
provisions of Section V. It permits the Department of Justice to share
information and documents with the Federal Communications Commission
(subject to confidentiality protections), and to share information with
the Office of Telecommunications (``OFTEL''), the United Kingdom
telecommunications regulator.
6. Term of Years
Section IX.B of the proposed Final Judgment specifies that the
substantive restrictions and obligations of the Final Judgment shall
expire five years after the entry of the judgment. Five years is an
appropriate duration for the substantive provisions because the joint
venture is expected by BT and MCI to last a minimum of five years and
has been planned on that basis. In addition, MCI can enter BT's
assigned territory outside the Americas to compete with BT five years
after closing without losing its special rights in BT. The parties have
committed by separate stipulation to notify the Department whether they
will continue the joint venture six months before the expiration of the
Final Judgment's substantive requirements, giving the United States an
opportunity to decide whether it is necessary to take further action to
protect competition. The international telecommunications markets,
including the market or markets for international telecommunications
services between the United States and the United Kingdom and the
emerging market or markets for seamless global telecommunications
services, may evolve rapidly during the next five years, in part due to
the transactions under consideration in this case and the Final
Judgment. Under these circumstances, the United States does not
consider it necessary to impose a lengthier duration on the substantive
provisions of the proposed Final Judgment.
B. Effects of the Proposed Final Judgment on Competition
The transactions between BT and MCI represent the first opportunity
the Department of Justice has had to consider the competitive
consequences of the acquisition of a substantial interest in a major
United States international telecommunications provider by a foreign
telecommunications provider with market power in its home market. The
formation of an exclusive international joint venture between such
firms to provide a wide range of enhanced telecommunications services
presents additional competitive issues.
The BT-MCI joint venture may enable the parties to offer services
that they would not otherwise provide. But the BT-MCI transactions also
pose substantial risks to competition in the United States, owing to
BT's vertically integrated virtual monopoly in local services and its
dominant position in long distance domestic and international services
in the United Kingdom, which when combined with MCI's competitive long
distance services would give rise to increased incentives for BT's
market power to be used to favor MCI and NewCo and disadvantage
competitors in the United States. In other circumstances involving
vertical integration between large monopoly providers of local exchange
telecommunications services and competitive long distance providers in
the United States, the Department of Justice has obtained various forms
of relief under the antitrust laws to protect competition. See, e.g.,
United States v. American Telephone and Telegraph Co., 552 F. Supp. 131
(D.D.C. 1982), aff'd mem. sub nom. Maryland v. United States, 460 U.S.
1001 (1983); United States v. GTE Corp., 603 F. Supp. 730 (D.D.C.
1984). While the relief proposed here is not the same as in those
cases, it serves a similar competitive purpose, taking into account the
particular circumstances and risks associated with the transactions
between MCI and BT. These include the unique practices and
relationships between carriers in the provision of international
telecommunications services, the continued existence of MCI as a
separate entity following these transactions, and the involvement of a
foreign telecommunications provider subject to a distinct regulatory
regime overseas.
The United States believes that the relief proposed here, including
both the substantive restrictions and obligations and the ability of
the Court to modify the Final Judgment to respond to additional
competitive problems, will substantially benefit competition. The
ability of MCI and NewCo to realize anticompetitive advantages in the
United States will be substantially constrained.
Entry of the proposed Final Judgment will allow the transactions
between BT and MCI to proceed, and any benefits from them to be
realized by consumers. At the same time, it will provide United States
competitors with increased means to detect discrimination, protect them
against misuse of their confidential business information, and enable
them to respond to BT's provision of international simple resale
through MCI and NewCo with services of their own to the United Kingdom
that could bypass BT's international switched correspondent services
and alleviate the risks of anticompetitive conduct involving MCI and
NewCo. It will also provide the United States with a mechanism to
modify the Final Judgment, in response to post-judgment changed
circumstances or other events, without having to initiate separate
antitrust litigation. This opportunity to impose additional
restrictions on defendants to protect competition and consumers in the
United States will ensure against any possibility that the other
substantive provisions of the Final Judgment and existing regulatory
requirements may prove insufficient to protect competition. Thus, the
modification provision will serve as an additional important deterrent
to anticompetitive behavior.
IV
Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorney's fees.
Entry of the proposed Final Judgment will neither impair nor assist the
bringing of such actions. Under the provisions of Section 5(a) of the
Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima
facie effect in any subsequent private lawsuits that may be brought
against defendants in this matter.
In addition, persons affected by unreasonable discrimination on the
part of MCI, in violation of 47 U.S.C. 202, may complain to the Federal
Communications Commission as provided by 47 U.S.C. 208, for such relief
as is available under the Communications Act and the Commission's
regulations, or bring suit for damages pursuant to 47 U.S.C. 206.
Persons affected by an undue preference or undue discrimination on the
part of BT in violation of Condition 17 of BT's license, or other
violation of BT's license, in favor of MCI or NewCo, may complain to
the United Kingdom Office of Telecommunications for such relief as
OFTEL is authorized to provide under the United Kingdom
Telecommunications Act and BT's license. Entry of the proposed Final
Judgment will not impair the bringing of such complaints and actions,
and indeed will likely facilitate the effective detection and
prevention of anticompetitive conduct through existing regulatory
mechanisms.
V
Procedures Available for Modification of the Proposed Final Judgment
As provided by the Antitrust Procedures and Penalties Act, any
person believing that the proposed Final Judgment should be modified
may submit written comments to Richard L. Rosen, Chief, Communications
and Finance Section, U.S. Department of Justice, Antitrust Division,
555 Fourth Street, N.W., Room 8104, Washington, D.C. 20001, within the
60-day period provided by the Act. These comments and the Department's
responses, will be filed with the Court and published in the Federal
Register. All comments will be given due consideration by the
Department of Justice, which remains free to withdraw its consent to
the proposed Judgment at any time prior to entry. 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 to carry out or construe the Final Judgment, to modify or
terminate any of its provisions, to enforce compliance, and to punish
any violations of its provisions. Modifications of the Final Judgment
may be sought by the United States or by the defendants under the
standards described therein.
VI
Alternatives to the Proposed Final Judgment
As an alternative to the proposed Final Judgment, the United States
considered litigation to seek an injunction to prevent the proposed
transactions between BT and MCI. The United States rejected that
alternative because the relief in the proposed Final Judgment, together
with existing regulatory safeguards in the United States and the United
Kingdom, should provide protection against significant anticompetitive
effects on competition.
In formulating the proposed Final Judgment, the United States also
considered the extent to which the regulatory regime in the United
Kingdom and the FCC have mechanisms currently in place to address
anticompetitive conduct, including discrimination, by providers of
international telecommunications services. The United States considered
including in the Final Judgment specific nondiscrimination conditions,
enforceable through contempt sanctions, to deter discrimination by BT
in favor of MCI and NewCo. It concluded that the other provisions of
the Final Judgment, existing regulatory requirements and enforcement
practices in the United States and the United Kingdom, and the ability
of the United States to seek modifications of the Final Judgment, are
sufficient to protect competition.
The United States was not prepared to rely on existing regulation
alone to prevent harm to competition and consumers in the United
States. While the United Kingdom regulatory authorities share with the
United States a generally procompetitive approach to telecommunications
policy, protection of competition and consumers in the United States is
not the primary goal of United Kingdom regulators. There are a number
of important telecommunications regulatory issues that remain unsettled
in the United Kingdom, and some policies specifically limiting
competition remain in effect, such as the duopoly on international
facilities-based competition. Historic experience and the present state
of competition in the United States and the United Kingdom were also
taken into account in determining that this relief was needed.
Because, however, the telecommunications regulatory regime in the
United Kingdom now embodies or is developing important competitive
policies and safeguards, the United States concluded that it is
possible to protect competition adequately in these circumstances
without placing specific antidiscrimination prohibitions in the
proposed Final Judgment or prohibiting the MCI-BT transactions,
altogether, as would likely have been necessary otherwise. The
procompetitive direction of United Kingdom telecommunications
regulation is evidenced by the ending of the BT-Mercury domestic
duopoly policy in 1991, and by the more recent licensing of additional
facilities-based domestic competitors to BT and Mercury and the grant
of several international simple resale licenses to, among others,
United States firms. OFTEL, the principal U.K. telecommunications
regulatory authority, has issued a statement on interconnection and
accounting separation setting forth policies and targets for making a
wider variety of interconnection arrangements with BT available to
competitors, and creating greater transparency in the relationship
between BT's own network and retail operations. OFTEL is seeking to
improve its regulatory oversight of BT and promote greater competition
in other respects as well. In sum, the United Kingdom
telecommunications regulatory regime has taken steps to promote and
foster competition that have not yet occurred in most of the world, and
it was appropriate for the United States to take these developments
into account in not requiring more extensive relief to be included in
the proposed Final Judgment.
The United States also considered issues of international comity in
shaping the proposed Final Judgment. Consistently with its longstanding
enforcement policy, the United States sought in the substantive
provisions of the Final Judgment to avoid situations that could give
rise to international conflicts between sovereign governments and their
agencies. The substantive requirements imposed on MCI and NewCo have
been tailored so as to avoid direct United States involvement in BT's
operation of its telecommunications network in the United Kingdom on an
ongoing basis, minimizing the potential for conflict with United
Kingdom authorities.
VII
Standard of Review Under the Tunney Act for the Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States are 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.'' In making that
determination, the court may consider:
(1) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) the impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e) (emphasis added). The courts have recognized that the
term ``public interest'' ``take[s] meaning from the purposes of the
regulatory legislation.'' NAACP v. Federal Power Comm'n, 425 U.S. 662,
669 (1976); United States v. American Cynamid Co., 719 F.2d 558, 565
(2d Cir. 1983), cert. denied, 465 U.S. 1101 (1984). Since the purpose
of the antitrust laws is to ``preserv[e] free and unfettered
competition as the rule of trade,'' Northern Pacific Railway Co. v.
United States, 356 U.S. 1, 4 (1958), the focus of the ``public
interest'' inquiry under the Tunney Act is whether the proposed final
judgment would serve the public interest in free and unfettered
competition. United States v. Waste Management, Inc., 1985-2 Trade Cas.
66,651, at 63,046 (D.D.C. 1985). In conducting this inquiry, ``the
Court is nowhere compelled to go to trial or to engage in extended
proceedings which might have the effect of vitiating the benefits of
prompt and less costly settlement through the consent decree
process.''\13\ Rather,
\13\119 Cong. Rec. 24598 (1973). See United States v. Gillette
Col., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''
determination can be made properly on the basis of the Competitive
Impact Statement and Response to Comments filed pursuant to the
APPA. Although the APPA authorizes the use of additional procedures,
15 U.S.C. 16(f), those procedures are discretionary. A court need
not invoke any of them unless it believes that the comments have
raised significant issues and that further proceedings would aid the
court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong.
2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News 6535,
6538.
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Absent a showing of corrupt failure of the government to
discharge its duty, the Court, in making the public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
reasonable under the circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. 61,508,
at 71,980 (W.D. Mo. 1977).
It is also unnecessary for the district court to ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.), cert.
denied, 454 U.S. 1083 (1981). Precedent requires that
[T]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is 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.\14\
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\14\United States v. Bechtel, 648 F.2d at 666 (quoting United
States v. Gillette Co., 406 F. Supp. at 716). See United States v.
BNS, Inc., 858 F.2d 456, 463 (9th Cir. 1988); United States v.
National Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D. Cal. 1978);
see also United States v. American Cyanamid Co., 719 F.2d at 565.
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A proposed consent decree is an agreement between the parties
which is reached after exhaustive negotiations and discussions.
Parties do not hastily and thoughtlessly stipulate to a decree
because, in doing so, they waive their right to litigate the issues
involved in the case and thus save themselves the time, expense, and
inevitable risk of litigation. Naturally, the agreement reached
normally embodies a compromise; in exchange for the saving of cost
and the elimination of risk, the parties each give up something they
might have won had they proceeded with the litigation.
United States v. Armour & Co., 402 U.S. 673, 681 (1971).
The proposed consent decree, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a merger or whether it mandates certainty of
free competition in the future. The court may reject the agreement of
the parties as to how the public interest is best served only if has
``exceptional confidence that adverse antitrust consequences will
result * * *'' United States v. Western Electric Co., 993 F.2d 1572,
1577 (D.C. Cir. 1993).
Court approval of a final judgment requires a standard more
flexible and less strict than the standard required for a finding of
liability. ``[A] proposed decree must be approved even if it falls
short of the remedy the court would impose on its own, as long as it
falls within the range of acceptability or is `within the reaches of
public interest.'''\15\ Under the public interest standard, the court's
role is limited to determining whether the proposed decree is within
the ``zone of settlements'' consistent with the public interest, not
whether the settlement diverges from the court's view of what would
best serve the public interest. United States v. Western Electric Co.,
993 F.2d at 1576 (quoting United States v. Western Electric Co., 900
F.2d 283, 307 (D.C. Cir. 1990)).
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\15\United States v. American Tel. and Tel Co., 552 F. Supp.
131, 150 (D.D.C.), aff'd sub nom. Maryland v. United States, 460
U.S. 1001 (1982) (quoting United States v. Gillette Co., 406 F.
Supp. at 716); United States v. Alcan Aluminum, Ltd., 605 F. Supp.
619, 622 (W.D. Ky 1985).
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VIII
Determinative Materials and Documents
No documents were determinative in the formulation of the proposed
Final Judgment. Consequently, the United States has not attached any
such documents to the proposed Final Judgment.
Dated: June 15, 1994.
Anne K. Bingaman,
Assistant Attorney General.
Steven C. Sunshine,
Deputy Assistant Attorney General.
Diane P. Wood,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director, Office of Operations, Antitrust Division, U.S. Department of
Justice, Washington, D.C. 20530.
Richard L. Rosen,
Chief, Communications & Finance Section.
Jonathan M. Rich,
Assistant Chief, Communications & Finance Section.
Carl Willner,
Sara J. DeSanto,
John J. Sciortino,
Attorneys, Communications & Finance Section, Antitrust Division, U.S.
Department of Justice, 555 Fourth Street, N.W., Washington, D.C. 20001,
(202) 514-5813.
[FR Doc. 94-15453 Filed 6-24-94; 8:45 am]
BILLING CODE 4410-01-M
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.