Proposed Final Judgment and Competitive Impact Statement; United States v. General Electric Company and InnoServ Technologies, Inc.

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Final Judgment and Competitive Impact Statement; United

States v. General Electric Company and InnoServ Technologies, Inc.

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. General Electric Company and InnoServ Technologies, Inc., No.

1:98CV01744RCL (D.D.C., filed July 14, 1998). On July 14, 1998, the

United States filed a Complaint alleging that the proposed acquisition

of InnoServ by General Electric would violate Section 7 of the Clayton

Act, 15 U.S.C. 18. The proposed Final Judgment, filed the same time as

the Complaint, permits General Electric to acquire InnoServ but

requires that General Electric divest InnoServ's PREVU diagnostic

software used in the maintenance and repair of diagnostic imaging

machines (e.g., CT scanners, MRIs, x-ray machines). Copies of the

Complaint, proposed Final Judgment, and Competitive Impact Statement

are available for inspection at the Department of Justice in

Washington, D.C., in Room 215, 325 Seventh Street, N.W., and at the

Office of the Clerk of the United States District Court for the

District of Columbia, 333 Constitution Avenue, N.W., Washington, D.C.

Public comment is invited within 60 days of this notice. Such

comments, and responses thereto, will be published in the Federal

Register and filed with the Court. Comments should be directed to Mary

Jean Moltenbrey, Chief, Civil Task Force, Antitrust Division,

Department of Justice, Suite 300, 325 7th Street, N.W., Washington,

D.C. 20530 (telephone: 202/616-5935).

Constance Robinson,

Director of Operations and Merger Enforcement, Antitrust Division.

Stipulation and Order

The undersigned parties, by their respective attorneys, stipulate

that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties, and venue of this action is proper

in the District of Columbia.

2. The Court may enter and file a Final Judgment in the form hereto

attached upon the motion of any party or upon the Court's own motion at

any time after compliance with the Antitrust Procedures and Penalties

Act (15 U.S.C. 16(b)-(h)), and without further notice to any party or

other proceedings, provided that the United States has not withdrawn

its consent, which it may do at any time before the entry of the

proposed Final Judgment by serving notice on defendants and by filing

that notice with the Court.

3. The defendants agree to comply with the proposed Final Judgment

pending its approval by the Court, and shall, from the date of signing

this Stipulation, comply with all the terms and provisions of the

proposed Final Judgment as though it were in full force and effect as

an order of the Court, provided, however, that defendants shall not be

bound by the terms and provisions of the proposed Final Judgment unless

and until the closing of any transaction in which General Electric

Company directly or indirectly acquires all or any part of the assets

or stock of InnoServ Technologies, Inc.

4. If the United States withdraws its consent, or the court does

not enter the proposed Final Judgment pursuant to the terms of the

Stipulation, the time for all appeals of any Court ruling declining

entry of the Final Judgment has expired, and the Court has not

otherwise ordered continued compliance with the Final Judgment, then

the parties are released from all further obligations under this

Stipulation, and the making of this Stipulation shall be without

prejudice to any party in this or any other proceeding.

5. The parties request that the Court acknowledge the terms of this

Stipulation by entering the Order in this Stipulation and Order.

Dated: July 14, 1998.

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

Joel I. Klein,

Assistant Attorney General.

John M. Nannes,

Deputy Assistant Attorney General.

Constance K. Robinson,

Director of Operations and Merger Enforcement.

Mary Jean Moltenbrey,

Chief, Civil Task Force.

Susan L. Edelheit,

Assistant Chief, Civil Task Force.

Jon B. Jacobs, Fred E. Haynes, Joan H. Hogan, Peter J. Mucchetti,

Attorneys for the United States.

Bernard M. Hollander,

Senior Trial Attorney, Antitrust Division, United States Department of

Justice, 325 Seventh Street, NW., Suite 300, Washington, DC 20530,

(202) 514-5012.

For Defendant General Electric Company:

Richard L. Rosen,

Arnold & Porter, 555 Twelfth Street, NW., Washington, DC 20004, (202)

942-5499.

For Defendant Innoserv Technologies, Inc.:

Malcolm R. Pfunder,

Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, NW., Washington,

DC 20036, (202) 955-8227.

So ordered on this ____ day of ____________

----------------------------------------------------------------------

United States District Judge.

Final Judgment

Plaintiff, United States of America, filed its Complaint on July

14, 1998. Plaintiff and defendants, General Electric Company (``GE'')

and InnoServ Technologies, Inc. (``InnoServ''), by their attorneys,

have consented to the entry of this Final Judgment without trial or

adjudication of any issue of fact or law. This Final Judgment shall not

be evidence or admission by any party with respect to any issue of fact

or law. Defendants have agreed to be bound by the provisions of this

Final Judgment pending its approval by the Court.

The essence of this Final Judgment is the prompt and certain

divestiture through sale or licensing of certain rights or assets by

the defendants to establish a viable competitor in the sale of service

for certain models of GE diagnostic imaging equipment, in the sale of

comprehensive asset-management or multi-vendor services, or in the

licensing of advanced diagnostic software for use in any such service.

Defendants have represented to the United States that the sale required

below can and will be accomplished and that defendants will later raise

no claims of hardship or difficulty as grounds for asking the Court to

modify

[[Page 39895]]

any of the divestiture provisions contained below.

Therefore, before any testimony is taken, without trial or

adjudication of any issue of fact or law, and upon consent of the

parties, it is Ordered, Adjudged and Decreed:

I Jurisdiction

This Court has jurisdiction over the subject matter of and each of

the parties to this action. The Complaint states a claim upon which

relief may be granted against GE and InnoServ under Section 7 of the

Clayton Act, as amended, 15 U.S.C. 18.

II Definitions

As used in this Final Judgment:

(A) ``Diagnostic imaging equipment'' means equipment that produces

images of the interior of the human body used for diagnostic or

therapeutic purposes in the practice of medicine.

(B) ``GE'' means defendant General Electric Company, a New York

corporation with headquarters in Fairfield, Connecticut, its

successors, assigns, divisions, subsidiaries, and affiliates, each

other person directly or indirectly, wholly or in part, owned or

controlled by it, and each partnership or joint venture to which any of

them is a party, and its directors, officers, employees, agents,

consultants, or other persons acting for or on behalf of any of them.

(C) ``InnoServ'' means defendant InnoServ Technologies, Inc., a

California corporation with headquarters in Arlington, Texas, its

successors, assigns, divisions, subsidiaries, and affiliates, each

other person directly or indirectly, wholly or in part, owned or

controlled by it, and each partnership or joint venture to which any of

them is a party, and its directors, officers, employees, agents,

consultants, or other persons acting for or on behalf of any of them.

(D) ``PREVU diagnostic package'' means the intellectual property

and any other related assets owned by InnoServ as part of its

proprietary advanced diagnostic service, including its PREVU remote

access software, PREVU computer, and cables necessary to interface the

PREVU computer to diagnostic imaging equipment for the purpose of

performing on-site and remote diagnostics.

III Applicability

This Final Judgment applies to the defendants, and each of their

successors and assigns, subsidiaries, affiliates, directors, officers,

managers, agents, and employees, and all other persons in active

concert or participation with any of them who receive actual notice of

this Final Judgment by personal service or otherwise.

IV Sale of Prevu Diagnostic Package

(A) GE is ordered, within 180 calendar days from the date of the

filing of the Complaint in this action or five days after notice of

entry of this Final Judgment by the Court, whichever is later, to sell

InnoServ's PREVU diagnostic package to an acquirer acceptable to the

United States in its sole discretion. The United States, in its sole

discretion, may agree to an extension of this time period of up to 30

calendar days, and shall notify the Court in such circumstances. GE

agrees to use its best efforts to accomplish the sale as expeditiously

as possible.

(B) Unless the United States otherwise consents in writing, the

sale of the PREVU diagnostic package shall include the entire PREVU

diagnostic package and be accomplished in such a way as to satisfy the

United States, in its sole discretion, that the PREVU diagnostic

package can and will be utilized by the purchaser as a part of a

viable, ongoing business. The sale, whether made by GE under this

section or by a trustee under Section V, shall be made to a purchaser

that, in the United State's sole judgment: (1) has the capability and

intent of competing effectively, and (2) has the managerial,

operational, and financial capability to compete effectively, in the

sale of service for certain models of GE diagnostic imaging equipment,

in the sale of comprehensive asset-management or multi-vendor services,

or in the licensing of advanced diagnostic software for use in any such

service. Furthermore, none of the terms of any agreement between the

purchaser and GE shall give GE the ability unreasonably to raise the

purchaser's costs, to lower the purchaser's efficiency, or otherwise to

interfere in the ability of the purchaser to compete effectively.

(C) In accomplishing the sale ordered by this Final Judgment, GE

promptly shall make known, by usual and customary means, the

availability of the PREVU diagnostic package. GE shall inform any

person making inquiry regarding a possible purchase of the PREVU

diagnostic package that the package is being sold pursuant to this

Final Judgment and provide that person with a copy of this Final

Judgment. GE shall offer to furnish to all bona fide prospective

purchasers, subject to confidentiality assurances, all information and

documents relating to the PREVU diagnostic package customarily provided

in a due diligence process--including access to personnel, inspection

of the assets, and any financial, operational or other documents

relevant to the sale--except such information or documents subject to

the attorney-client or work-product privileges. GE shall make available

such information to the United States at the same time that such

information is made available to any other person.

(D) GE shall provide to the purchaser of the PREVU diagnostic

package and to the United States information relating to the personnel

who have the primary responsibility for the development, maintenance,

and distribution of the PREVU diagnostic package, and training thereon,

to enable the purchaser to make offers of employment. GE will not

interfere with any negotiations by the purchaser to employ any such

person.

(E) If a sale is accomplished under this Final Judgment, GE may

retain a non-exclusive, nonassignable license (without right to

sublicense) to use the PREVU diagnostic package solely:

(1) In connection with fulfilling InnoServ service contracts in

effect on the date of GE's acquisition of InnoServ;

(2) In connection with fulfilling any service contracts resulting

from written proposals made by InnoServ to prospective customers that

are outstanding on the date of GE's acquisition of InnoServ, provided

that any such contract is entered into within 90 days of GE's

acquisition of InnoServ; and

(3) in connection with fulfilling any renewals of any service

contracts described in Section IV(E)(1) or (2), so long as the renewal

was entered into prior to any sale of the PREVU diagnostic package.

Such a license pursuant to Section IV(E)(1), (2), and (3) shall expire,

for each such contract, on the expiration date of the contract in

effect on the date that the PREVU diagnostic package is sold.

(F) Nothing in this Final Judgment shall prevent the buyer of the

PREVU diagnostic package from granting GE any non-exclusive rights to

use the PREVU diagnostic package in addition to those rights listed in

Section IV(E), but GE shall not make any such grant of additional

rights a condition of the sale.

V Appointment of Trustee

(A) If GE has not sold the PREVU diagnostic package within the time

period specified in Section IV(A), GE shall notify the United States of

that fact in writing. Upon application of the United States, the Court

shall appoint a trustee selected by the United States to effect the

sale of the PREVU diagnostic package. Until such time as a trustee has

been appointed, GE shall continue to

[[Page 39896]]

use its best efforts to accomplish the sale of the PREVU diagnostic

package.

(B)After the appointment of a trustee becomes effective, only the

trustee shall have the right to sell the PREVU diagnostic package. The

trustee shall have the power and authority to accomplish a sale at the

earliest possible time to a purchaser acceptable to the United States

at the best price and on the best terms as are then obtainable upon the

reasonable effort by the trustee, subject to the provisions of Sections

IV, V, and VI of this Final Judgment, and shall have such other powers

respecting the PREVU diagnostic package as this Court deems

appropriate. Subject to Section V(D) of this Final Judgment, the

trustee may hire at the cost and expense of GE any investment bankers,

attorneys, or other agents, who shall be solely accountable to the

trustee, reasonably necessary in the trustee's judgment to assist in

the sale.

(C) GE shall not object to a sale by the trustee on any grounds

other than the trustee's malfeasance. Any such objections by GE must be

conveyed in writing to the United States and the trustee within ten

calendar days after the trustee has provided the notice required under

Section VI.

(D) The trustee shall serve at the cost and expense of GE, on such

terms and conditions as the Court may prescribe, and shall account for

all monies derived from the sale of the assets sold by the trustee and

all costs and expenses so incurred. After approval by the Court of the

trustee's accounting, including fees for this services and those of any

professionals and agents retained by the trustee, any remaining money

shall be paid to GE, or GE shall pay to the trustee any expenses not

covered by the proceeds of the sale, and the trust shall then be

terminated. The compensation and expenses of the trustee and any

professionals and agents retained by the trustee shall be reasonable in

light of the value of the PREVU diagnostic package and based on a fee

arrangement providing the trustee with an incentive based on the price

and terms of the sale and the speed with which it is accomplished.

(E) GE shall use its best efforts to assist the trustee in

accomplishing a sale. The trustee and any consultants, accountants,

attorneys, and other persons retained by the trustee shall have full

and complete access to the personnel, books, records, and facilities

relating to the assets to be sold, and GE shall develop financial and

other information relevant to such assets customarily provided in a due

diligence process as the trustee may reasonably request, subject to

reasonable protection for trade secret or other confidential research,

development, or commercial information. GE shall take not action to

interfere with or to impede the trustee's accomplishment of a sale. GE

shall permit bona fide prospective purchasers of the assets to have

reasonable access to personnel and to make such inspection of any and

all financial, operational, or other documents and other information as

may be relevant to a sale under this Final Judgment.

(F) After its appointment, the trustee, shall file monthly reports

with the parties and the Court setting forth the trustee's efforts to

accomplish a sale or license (as provided in V(G)-(H)) under this Final

Judgment. To the extent such reports contain information that the

trustee deems confidential, such reports shall not be filed in the

public docket of the Court. Such reports shall include the name,

address, and telephone number of each person who, during the preceding

month, made an offer to acquire or license, expressed an interest in

acquiring or licensing, entered into negotiations to acquire or

license, or was contacted or made an inquiry about acquiring or

licensing, and interest in the PREVU diagnostic package, and shall

describe in detail each contact with any such person. The trustee shall

maintain full records of all efforts made to sell or license the PREVU

diagnostic package.

(G) If the trustee has not accomplished a sale of the PREVU

diagnostic package within six months after its appointment, the trustee

shall promptly file with the Court a report setting forth (i) the

trustee's efforts to accomplish a sale, (ii) the reasons, in the

trustee's judgment, why a sale has not been accomplished, and (iii) the

trustee's recommendations. To the extent such reports contain

information that the trustee deems confidential, such reports shall not

be filed in the public docket of the Court. The trustee shall at the

same time furnish such report to the parties, who shall each have the

right to be heard and to make additional recommendations consistent

with the purpose of the trust. The Court shall thereafter enter an

order either:

(1) Extending the trust and the term of the trustee's appointment

to sell the PREVU diagnostic package by a period that is reasonable in

light of the trustee's earlier efforts and any additional efforts that

the Court believes can reasonably be made to sell the PREVU diagnostic

package; or

(2) Directing the trustee to proceed with licensing the PREVU

diagnostic package pursuant to Section V(H).

(H) Upon entry of an order by the Court pursuant to Section V(G)(2)

directing the trustee to license the PREVU diagnostic package, or upon

the expiration of any extended period for the sale of the PREVU

diagnostic package ordered by the Court pursuant to Section V(G)(1),

the trustee shall, for one year, offer perpetual, fully paid-up (at a

reasonable royalty rate), non-exclusive licenses to the PREVU

diagnostic package to any interested service providers of diagnostic

imaging equipment. The rights granted to such licensees shall include

the perpetual right to use, copy, and sublicense the PREVU diagnostic

package and to make and copyright derivative works from it. The trustee

shall advertise the availability of such non-exclusive licenses in at

least one national general circulation newspaper and one medical

diagnostic imaging equipment trade publication, which publications

shall be approved by the United States. GE shall pay for all expenses

reasonably incurred by the trustee in its attempts to license the PREVU

diagnostic package under this section. The trustee shall promptly

notify the United States and GE of any persons who acquire a license

under this section.

(I) If the trustee sells the PREVU diagnostic package, the trust

will terminate when the trustee has fulfilled all its duties regarding

the sale. Otherwise, at the end of the one-year licensing period, the

trustee shall promptly file with the Court a report setting forth: (i)

the trustee's efforts to license the PREVU diagnostic package, (ii) the

name, address, and telephone number of each person who acquired a

license, made an offer to license, expressed an interest in licensing,

entered into negotiations to license, or was contacted or made an

inquiry about licensing, any interest in the PREVU diagnostic package,

and shall describe in detail each contact with any such person, and

(iii) the trustee's recommendations about whether the trustee's

continuing to license the PREVU diagnostic package would serve the

public interest. To the extent such reports contain information that

the trustee deems confidential, such reports shall not be filed in the

public docket of the Court. The trustee shall at the same time furnish

such report to the parties, who shall each have the right to be heard

and to make additional recommendations consistent with the purpose of

the trust. The Court shall thereafter enter an order either:

(1) Extending the trust and the term of the trustee's appointment

to license the PREVU diagnostic package by a period that is reasonable

in light of the

[[Page 39897]]

trustee's earlier efforts and any additional benefits to the public

interest that the Court believes would result from continuing attempts

to license the PREVU diagnostic package; or

(2) Terminating the trust.

VI. Notification

(A) Within two business days following execution of a definitive

agreement, contingent upon compliance with the terms of this Final

Judgment, to effect any proposed sale pursuant to Section IV or V of

this Final Judgment, GE or the trustee, whichever is then responsible

for effecting the sale required herein, shall notify the United States

of the proposed sale. If the trustee is responsible, it shall similarly

notify GE. The notice shall set forth the details of the proposed

transaction and list the name, address, and telephone number of each

person not previously identified who offered or expressed an interest

in or desire to acquire any ownership interest in the PREVU diagnostic

package, together with full details of the same.

(B) Within 15 calendar days of receipt by the United States of such

notice, the United States may request from GE, the proposed purchaser

or purchasers, any other third party, or the trustee (if applicable)

additional information concerning the proposed sale and the proposed

purchaser or purchasers, and any other potential purchaser. GE and the

trustee shall furnish any additional information requested from them

within 15 calendar days of the receipt of the request, unless the

parties shall otherwise agree.

(C) Within 30 calendar days after receipt of the notice or within

20 calendar days after the United States has been provided the

additional information requested from GE, the proposed purchaser or

purchasers, any third party, and the trustee, whichever is later, the

United States shall provide written notice to GE and the trustee, if

there is one, stating whether or not it objects to the proposed sale.

If the United States provides written notice that it does not object,

then the sale may be consummated, subject only to GE's limited right to

object to the sale under Section V(C) of this Final Judgment. Absent

written notice that the United States does not object to the proposed

purchaser or upon objection by the United States, a sale proposed under

Section IV or Section V shall not be consummated. Upon objection by GE

under Section V(C), a sale proposed under Section V shall not be

consummated unless approved by the Court.

VII. Financing

GE shall not finance all or any part of any purchase made pursuant

to Section IV or V of this Final Judgment.

VIII. Preservation of Assets

Until any sale under this Final Judgment has been accomplished:

(A) GE shall preserve the PREVU diagnostic package in its existing

condition and shall take no action with respect to the PREVU diagnostic

package to cause any deterioration in the value of, or to deter any

person from buying or licensing, the PREVU diagnostic package.

(B) GE shall continue to license, on reasonable terms, the PREVU

diagnostic package to the persons who are licensees on the date of GE's

acquisition of InnoServ.

(C) GE shall not, except as part of a divestiture approved by the

United States, sell any part of the PREVU diagnostic package.

(D) GE shall appoint a person or persons to oversee the PREVU

diagnostic package, and who will be responsible for GE's compliance

with this section.

IX Affidavits

(A) Within 20 calendar days of the filing of the Complaint in this

action, and every 30 calendar days thereafter until the sale has been

completed under Section IV or V, GE shall deliver to the United States

an affidavit as to the fact and manner of its compliance with Section

IV or V of this Final Judgment. Each such affidavit shall include the

name, address, and telephone number of each person who, during the

preceding 30 days, made an offer to acquire, expressed an interest in

acquiring, entered into negotiations to acquire, or was contacted or

made an inquiry about acquiring, any interest in the PREVU diagnostic

package, and shall describe in detail each contact with any such person

during that period. Each such affidavit shall also include a

description of the efforts GE has taken to solicit a purchaser for the

PREVU diagnostic package and to provide required information to

prospective purchasers including the limitations, if any, on such

information. Assuming the information set forth in the affidavit is

true and complete, any objection by the United States to information

provided by GE, including limitations on information, shall be made

within fourteen (14) days of receipt of such affidavit.

(B) Within 20 calendar days of the filing of the Complaint in this

action, GE shall deliver to the United States an affidavit that

describes in reasonable detail all actions GE has taken and all steps

GE has implemented on an ongoing basis to comply with Section VIII of

this Final Judgment. GE shall deliver to the United States an affidavit

describing any changes to the efforts and actions outlined in GE's

earlier affidavit(s) filed pursuant to this section within 15 calendar

days after the change is implemented.

(C) Until one year after a sale has been completed or, if a sale is

not completed, one year after the trust under Section V is terminated,

GE shall preserve all records of all efforts made to preserve, sell,

and license the PREVU diagnostic package.

X Compliance Inspection

(A) For the purposes of determining or securing compliance with

this Final Judgment, and subject to any legally recognized privilege,

from time to time duly authorized representatives of the United States

Department of Justice, including consultants and other persons retained

by the United States, shall, upon written request of the Assistant

Attorney General in charge of the Antitrust Division, and on reasonable

notice to GE, be permitted:

(1) Access during GE's office hours to inspect and copy all books,

ledgers, accounts, correspondence, memoranda and other records and

documents in the possession or control of GE, which may have counsel

present, relating to any matters contained in this Final Judgment; and

(2) To interview, either informally or on the record, GE's

officers, employees, or agents, who may have counsel present, regarding

such matters. The interviews shall be subject to GE's reasonable

convenience and without restraint or interference by GE.

(B) Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division, GE shall submit such written reports,

under oath if requested, relating to any of the matters contained in

this Final Judgment as may be requested.

(C) No information or documents obtained by the means provided in

this section or Section IX shall be divulged by the United States to

any person other than a duly-authorized representative of the executive

branch of the United States, except in the course of legal proceedings

to which the United States is a party (including grand jury

proceedings), or for the purpose of securing compliance with this Final

Judgment, or as otherwise required by law.

(D) If at the time information or documents are furnished by GE to

the

[[Page 39898]]

United States, GE represents and identifies in writing the material in

any such information or documents to which a claim of protection may be

asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure,

and GE marks each pertinent page of such material, ``Subject to claim

of protection under Rule 26(c)(7) of the Federal Rules of Civil

Procedure,'' then 10 calendar days notice shall be given by the United

States to GE prior to divulging such material in any legal proceeding

(other than a grand jury proceeding) to which GE is not a party.

XI Retention of Jurisdiction

This Court retains jurisdiction to enable any party to this Final

Judgment to apply to this Court at any time for further orders and

directions as may be necessary or appropriate to carry out or construe

this Final Judgment, to modify any of its provisions, to enforce

compliance, and to punish violations of its provisions.

Competitive Impact Statement

Plaintiff, the United States of America, pursuant to Section 2(b)

of the Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C.

16(b)-(h), files this Competitive Impact Statement relating to the

proposed Final Judgment submitted for entry in this civil antitrust

proceeding.

I. Nature and Purpose of the Proceeding

The United States filed a civil antitrust Complaint on July 14,

1998, alleging that General Electric Company's (``GE'') proposed

acquisition of InnoServ Technologies, Inc. (``InnoServ'') would violate

Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint alleges that

GE and InnoServ compete in servicing individual pieces of GE medical

imaging equipment and in the sale of comprehensive multi-vendor or

asset-management services (``multi-vendor service''). Multi-vendor

service involves contracting to service all or a significant portion of

a hospital's medical equipment.

The proposed combination would substantially lessen competition and

tend to create a monopoly in the markets for servicing certain models

of GE imaging equipment, especially GE CT scanners and magnetic

resonance imagers (MRIs), and in multi-Vendor service. InnoServ is an

effective competitor of GE in part because InnoServ is one of very few

companies that has developed proprietary diagnostic software for

servicing certain models of GE imaging equipment. The prayer for relief

in the Complaint seeks: (a) an adjudication that the proposed merger

would violate Section 7 of the Clayton Act; (b) a permanent injunction

preventing the transaction's consummation; (c) plaintiff's costs of

this action; and (d) such other relief as is just and proper.

Prior to filing this suit, the parties reached a proposed

settlement that permits GE to acquire InnoServ, yet preserves

competition in the markets in which the transaction would raise

significant competitive concerns. Along with the Complaint, the parties

filed a Stipulation and proposed Final Judgment setting out the

settlement terms.

The proposed Final Judgment orders GE to divest InnoServ's

proprietary diagnostic service software and related materials, which

are collectively known as the PREVU diagnostic package, to an acquirer

acceptable to the United States. Unless the United States agrees to a

time extension, GE must complete the divestiture within 180 calendar

days after the filing of the Complaint or five days after notice of the

entry of this Final Judgment by the court, whichever is later.

If GE does not complete the divestiture within the divestiture

period, the Court, upon application of the United States, is to appoint

a trustee selected by the United States to sell the PREVU diagnostic

package. The proposed Final Judgment also requires that, until the

divestiture mandated by the Final Judgment has been accomplished, GE

must continue to license, on reasonable terms, the PREVU diagnostic

package to persons who were PREVU licensees on the date GE acquires

InnoServ.

If the trustee has not sold the PREVU diagnostic package within six

months of its appointment, it will, for one year, license the package

at a reasonable royalty rate to any service provider unless the Court

grants the trustee additional time to complete a sale. The licenses

will be perpetual, fully paid-up, and non-exclusive and include the

perpetual right to use, copy, and sublicense the package and to make

and copyright derivative works.

The plaintiff and defendants have stipulated that the court may

enter the proposed Final Judgment after compliance with the APPA. Entry

of the proposed Final Judgment would terminate this action, except that

the Court would retain jurisdiction to construe, modify, or enforce

provisions of the Final Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

GE is a New York corporation headquartered in Fairfield,

Connecticut. GE is a diversified technology, manufacturing, and

services company. In 1997, GE's total revenues exceeded $90 billion.

Its wholly owned subsidiary General Electric Medical Systems

(``GEMS''), located in Waukesha, Wisconsin, manufactures medical-

imaging equipment such as CT scanners. MRIs, X-ray units, and nuclear-

medicine cameras. GEMS is the leading servicer of GE imaging equipment

in the United States. GEMS also services imaging equipment manufactured

by other companies through GE HealthCare Services, GE's wholly owned

multi-vendor and asset-management service group.

InnoServ, a California corporation headquartered in Arlington,

Texas, is one of the nation's largest independent service organizations

(``ISOs''). InnoServ services individual pieces of medical equipment

and provides comprehensive asset management, multi-vendor maintenance

and repair, and other specialized services for radiology, cardiology,

biomedical, and laboratory equipment. For the fiscal year ending April

30, 1997, InnoServ's service revenues exceeded $37 million. It has

struggled financially for the past two years, however, losing over $1.5

million for the nine months ending January 31, 1998. In March 1998,

InnoServ publicly expressed concern about its ability to continue to

meet its working capital requirements. For some time, InnoServ has been

seeking potential buyers of the company, but only GE has made such an

offer.

On May 19, 1998, the defendants signed a merger agreement providing

that GE would acquire InnoServ's common stock for a purchase price of

$16 million. The United States filed this suit because the proposed

merger threatened to decrease competition.

B. Anticompetitive Consequences of the Proposed Transaction

Competition between original equipment manufacturers such as GE and

ISOs such as InnoServ has benefited hospitals and other owners of

medical imaging equipment by driving down the cost of servicing their

equipment. GE and InnoServ have been competitors in the market for

servicing certain models of GE imaging equipment on a discrete basis

and in the multi-vendor service market.

[[Page 39899]]

InnoServ is one of the few competitors of GE that has developed

proprietary diagnostic software for servicing certain models of GE

imaging equipment. Advanced diagnostic software enables a service

engineer to more quickly service and maintain imaging equipment. GE

also has developed and uses its own advanced diagnostic software for

servicing imaging equipment.

GE's proposed acquisition of InnoServ would eliminate InnoServ as

an independent competitor in the market for servicing certain models of

GE imaging equipment on a discrete basis and in the multi-vendor

service market. It would also give GE exclusive control over InnoServ's

advanced service software. GE does not license its own advanced

diagnostic software to competing service providers and likely would not

license PREVU to its service competitors. Because InnoServ is an

experienced service provider with access to advanced diagnostic

software, GE's proposed acquisition of InnoServ would decrease

competition and likely increase prices for imaging equipment service.

Given InnoServ's financial difficulties, however, it is not clear

whether it can continue as an independent competitor in these markets.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would promote additional competition in

servicing certain models of GE imaging equipment and in multi-vendor

service by requiring GE to divest InnoServ's proprietary diagnostic

service software and related materials to an acquirer acceptable to the

United States. These service materials, which are collectively known as

the PREVU diagnostic package, give InnoServ a competitive advantage in

servicing certain models of imaging equipment and in multi-vendor

service. Unless the United States agrees to a time extension, GE must

complete the divestiture within 180 calendar days after the filing of

the Complaint in this matter or five days after notice of the entry of

this Final Judgment by the Court, whichever is later.

If GE does not complete the divestiture within the divestiture

period, the Court, upon application of the United States, is to appoint

a trustee selected by the United States to sell the assets. The

proposed Final Judgment also requires that, until the divestiture

mandated by the Final Judgment has been accomplished, GE must continue

to license, on reasonable terms, the PREVU diagnostic package to

persons who were PREVU licensees on the date GE acquires InnoServ.

If the trustee has not accomplished the divestiture within six

months after its appointment, the trustee shall promptly file with the

Court a report setting forth (1) the trustee's efforts to accomplish

the sale, (2) the reasons, in the trustee's judgment, why the sale has

not been accomplished, and (3) the trustee's recommendations. At the

same time, the trustee will furnish such report to the plaintiff and

defendants, who will each have the right to be heard and to make

additional recommendations.

The Court will then either give the trustee additional time to

accomplish a sale, depending on the trustee's earlier efforts and any

additional efforts that the Court believes can reasonably be made to

the accomplish the sale, or direct the trustee, for one year, to

license the PREVU diagnostic package at a reasonable royalty rate to

any service provider. The licenses will be perpetual, fully paid-up,

and non-exclusive and include the perpetual right to use, copy, and

sublicense the package and to make and copyright derivative works.

At the end of the one-year licensing period, the trustee shall

promptly file with the Court a report setting forth: (1) the trustee's

efforts to license the PREVU diagnostic package and (2) the trustee's

recommendations as to whether the trustee's continuing to license the

PREVU diagnostic package would serve the public interest. The trustee

shall at the same time furnish such report to the parties, who shall

each have the right to be heard and to make additional recommendations.

The Court will then either: (1) have the trustee continue to license

the PREVU diagnostic package for a period that is reasonable in light

of the trustee's earlier efforts and any additional benefits to the

public interest that would result from continuing attempts to license

the package, or (2) terminate the trust.

If a trustee is appointed, the proposed Final Judgment provides

that GE will pay all reasonable costs and expenses of the trustee and

any professionals and agents retained by the trustee. After

appointment, the trustee will file monthly reports with the parties and

the Court, setting forth the trustee's efforts to divest or license the

PREVU diagnostic package as ordered under the proposed Final Judgment.

The divestiture of the PREVU diagnostic package will allow one or

more third parties to use the software, which in turn will enable them

to service more efficiently certain models of imaging equipment and

better compete in the markets for servicing individual pieces of

imaging equipment and providing multi-vendor service. In addition to

using the package in its service business, a buyer of PREVU could

resell or license PREVU to other parties. Similarly, PREVU licensees

could also use the package for servicing imaging equipment and/or

sublicense PREVU to other parties. Both a buyer and licensees would be

free to make and copyright derivative works. The ability to improve

upon PREVU will encourage investment in developing advanced service

software, which would further improve an entity's ability to compete

with GE.

In conjunction with this settlement, GE has also agreed to consent

to all of the relief that the Government was seeking in another case,

United States v. General Electric Company, No. CV-96-121-M-CCL (D.

Mont. Filed Aug. 1, 1996) (hereinafter ``Montana case''). The

settlement of the Montana case should help to alleviate some of the

competitive concerns raised by this transaction, by eliminating

agreements that prevented numerous hospitals around the country from

competing with GE in some of the markets affected by this transaction.

The United States considered whether obtaining full relief in the

Montana case, by itself, would be a sufficient remedy for this case,

abut concluded that the Montana settlement would not fully address the

competitive problems raised by the InnoServ transaction. The United

States therefore required GE to divest PREVU in addition to settling

the Montana litigation. The United States evaluated the merits of the

settlement proposals in each case independently, concluding that the

proposed settlement of this case is in the public interest for the

reasons stated herein, and that the proposed settlement of the Montana

case is in the public interest for reasons stated in the Competitive

Impact Statement filed in that case today.

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 that the person has suffered, as well as costs and

reasonable attorneys' fees. Entry of the proposed Final Judgment will

neither impair nor assist the bringing of any private antitrust damage

action. Under the provisions of Section 5(a) of the Clayton Act, 15

U.S.C. 16(a), the proposed Final Judgment has no prima facie effect in

any subsequent private lawsuit that may be brought against defendants.

[[Page 39900]]

V. Procedures Available for Modification of the Proposed Final Judgment

The parties have stipulated that the Court may enter the proposed

Final Judgment after compliance with the APPA, provided that the United

States has not withdrawn its consent. The APPA conditions that entry

upon the Court's prior determination that the proposed Final Judgment

is in the public interest.

The APPA provides a period of at least sixty (60) days preceding

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

proposed Final Judgment. Any person who wishes to comment should do so

within sixty (60) days of the date of publication of this Competitive

Impact Statement in the Federal Register. The United States will give

all comments due consideration and respond to each of them. The United

States remains free to withdraw its consent to the proposed Final

Judgment at any time prior to entry. The comments and responses will be

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Mary Jean Moltenbrey,

Chief, Civil Task Force, Antitrust Division, United States Department

of Justice, 325 7th Street, N.W., Suite 300, Washington, DC 20530.

The proposed Final Judgment provides that the Court retains

jurisdiction over this action and that the parties may apply to the

Court for any order necessary or appropriate for the modification,

interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed

Final Judgment, a full trial on the merits of its Complaint to enjoin

GE's acquisition of InnoServ. The United States is satisfied, however,

that the divestiture of the PREVU diagnostic package will promote

competition in the relevant markets, particularly given that InnoServ's

poor financial condition threatens its ability to continue operations.

Incurring the substantial costs and uncertainty of a full trial on the

merits of the Complaint is therefore unnecessary.

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

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States be subject to a sixty (60) day

comment period, after which the Court shall determine whether entry of

the proposed Final Judgment ``is in the public interest.'' In making

that determination, the Court 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.\1\

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\1\ 15 U.S.C. 16(e).

The United States Court of Appeals for the D.C. Circuit has held

that this statute permits a court to consider, among other things, the

relationship between the remedy secured and the specific allegations

set forth in the government's complaint, whether the decree is

sufficiently clear, whether enforcement mechanisms are sufficient, and

whether the decree may positively harm third parties.\2\ In conducting

this inquiry, ``[t]he Court is nowhere compelled to go to trial or to

engage in extended proceedings which might have the effect of vitiating

the benefits of prompt and less costly settlement through the consent

decree process.'' \3\ Rather,

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\2\ See United States v. Microsoft, 56 F.3d 1448, 1461-62 (D.C.

Cir. 1995).

\3\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette

Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''

determination can be made properly on the basis of the Competitive

Impact Statement and Response to Comments filed pursuant to the

APPA. Although the APPA authorizes the use of additional procedures,

15 U.S.C. Sec. 16(f), those procedures are discretionary. A court

need not invoke any of them unless it believes that the comments

have raised significant issues and that further proceedings would

aid the court in resolving those issues. See H.R. Rep. 93-1463, 93rd

Cong., 2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.

[A]bsent a showing of corrupt failure of the government to

discharge its duty, the Court, in making its public interest

finding, should * * * carefully consider the explanations of the

government in the competitive impact statement and its responses to

comments in order to determine whether those explanations are

reasonable under the circumstances.\4\

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\4\ United States v. Mid-America Dairymen, Inc., 1977-1 Trade

Cas. para. 61,508, at 71,980 (W.D. Mo. 1977).

Accordingly, with respect to the adequacy of the relief secured by

the decree, a court should not engage ``in an unrestricted evaluation

of what relief would best serve the public.'' \5\ Precedent requires

that:

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\5\ United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir.

1988), citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th

Cir. 1981); see also Microsoft, 56 F.3d at 1460-62.

The balancing of competing social and political interests

affected by a proposed antitrust consent decree must be left, in the

first instance, to the discretion of the Attorney General.

[citations omitted] 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.'' [citations omitted] More

elaborate requirements might undermine the effectiveness of

antitrust enforcement by consent decree.\6\

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\6\ Bechtel, 648 F.2d at 666; see BNS, 858 F.2d at 463; United

States v. National Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D.

Cal. 1978); Gillette, 406 F. Supp. at 716. See also Microsoft, 56

F.3d at 1461 (whether ``the remedies [obtained in the decree are] so

inconsonant with the allegations charged as to fall outside of the

`reaches of the public interest' '') (citations omitted).

The proposed Final Judgment, therefore, should not be reviewed

under a standard of whether it is certain to eliminate every

anticompetitive effect of a particular practice or whether it mandates

certainty of free competition in the future. Court approval of a final

judgment requires a standard more flexible and less strict than the

standard required for a finding of liability. ``[A] proposed decree

must be approved even if it falls short of the remedy the court would

impose of its own, as long as it falls within the range of

acceptability or is `within the reaches of public interest.' '' \7\

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\7\ United States v. American Tel. and Tel. Co., 552 F. Supp.

131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,

460 U.S. 1001 (1983), quoting Gillette Co., 406 F. Supp. at 716

(citations omitted); United States v. Alcan Aluminum, Ltd., 605 F.

Supp. 619, 622 (W.D. Ky. 1985).

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VIII. Determinative Documents

There are not determinative materials or documents within the

meaning of the APPA that were considered by the plaintiff in

formulating the proposed Final Judgment.

Dated: July 14, 1998.

Respectfully submitted,

Jon B. Jacobs,

Fred E. Haynes,

Joan H. Hogan,

Peter J. Mucchetti,

Attorneys for the United States, Antitrust Division, United States

Department of Justice, 325 Seventh Street, N.W., Suite 300, Washington,

DC 20539, (202) 514-5012.

[FR Doc. 98-19857 Filed 7-23-98; 8:45 am]

BILLING CODE 4410-11-M