United States v. Pearson Plc, Pearson Inc. & Viacom International Inc., No. 1:98CV02836 (D.D.C., filed Nov. 23, 1998); Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Pearson Plc, Pearson Inc. & Viacom International

Inc., No. 1:98CV02836 (D.D.C., filed Nov. 23, 1998); Proposed Final

Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 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 of America v. Pearson plc, Pearson Inc., and Viacom

International Inc., No. 1:98CV02836. On November 23, 1998, the United

States filed a Complaint alleging that the proposed sale by Viacom

International Inc. of certain publishing businesses to Pearson Inc. and

Pearson plc (collectively ``Pearson'') would violate Section 7 of the

Clayton Act, as amended, 15 U.S.C Sec. 18. The proposed Final Judgment,

filed at the same time as the Complaint, requires Pearson to divest a

comprehensive elementary school science program and textbooks for

thirty-two college courses. 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 of the

Antitrust Division, Department of Justice, 325 7th Street, N.W.,

Washington, D.C. 20530 (telephone: 202-514-2481) and at the Office of

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

Columbia, 333 Constitution Avenue, N.W., Washington, DC.

Public comment is invited within sixty days of the date of this

notice. Such comments, and responses thereto, will be published in the

Federal Register and filed with the Court. Comments should be directed

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

Dep[artment of Justice, 325 Seventh Street, N.W., Suite 300,

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

Constance Robinson,

Director of Operations and Director of Merger Enforcement, Antitrust

Division.

Stipulation and Order

It is stipulated by and between the undersigned parties, by their

respective attorneys, as follows:

A. 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 for the District of Columbia.

B. The parties stipulate 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. Sec. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

which it may do at any time before the entry of the proposed Final

Judgment by serving notice thereof on defendants and by filing that

notice with the Court.

C. Defendants shall abide by and comply with the provisions of the

proposed Final Judgment pending entry of the Final Judgment, and shall,

from the date of the signing of this Stipulation, comply with all the

terms and provisions of the proposed Final Judgment as though the same

were in full force and effect as an order of the Court.

D. Defendants will not consummate their transaction before the

Court has signed this Stipulation and Order.

E. Pearson shall prepare and deliver affidavits in the form

required by the provisions of Section IX of the proposed Final Judgment

commencing no later than twenty (20) calendar days after the filing of

the Complaint in this action, and every thirty (30) days thereafter

pending entry of the Final Judgment.

F. In the event plaintiff withdraws its consent, as provided in

paragraph B above, or if the proposed Final Judgment is not entered

pursuant to this Stipulation, this Stipulation shall be of no effect

whatsoever, and the making of this Stipulation shall be without

prejudice to any party in this or any other proceeding.

Dated: November 23, 1998.

FOR PLAINTIFF UNITED STATES OF AMERICA:

Mary Jean Moltenbrey,

Chief, United States Department of Justice, Antitrust Division, Civil

Task Force, 325 7th Street, N.W., Suite 300, Washington, DC 20530, 202-

616-5935.

FOR DEFENDANT VIACOM INTERNATIONAL INC.

Wayne D. Collins,

Shearman & Sterling, 599 Lexington Avenue, New York, N.Y 10022, (212)

848-4127.

Attorney for Defendant Viacom International Inc.

FOR DEFENDANTS PEARSON plc and PEARSON INC.

Robert S. Schlossberg,

Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, DC 20036-

5869, 202-467-7212.

Attorney for Defendants Pearson plc and Pearson Inc.

SO ORDERED:

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

United States District Judge

Final Judgment

Whereas plaintiff the United States of America (hereinafter

``United States''), has filed its Complaint herein, and defendants, by

their respective attorneys, have consented to the entry of this Final

Judgment without trial or adjudication of any issue of fact or law

herein, and without this Final Judgment constituting any evidence

against or an admission by any party with respect to any issue of law

or fact herein;

[[Page 70423]]

And Whereas, defendants have agreed to be bound by the provisions

of this Final Judgment pending its approval by the Court;

And Whereas, prompt and certain divestiture of certain assets to

one or more third parties to ensure that competition is substantially

preserved is the essence of this agreement;

And Whereas, the parties intend to require defendants to divest, as

viable lines of business, certain assets so as to ensure, to the sole

satisfaction of the United States, that the Acquirer will be able to

publish and market the assets as viable lines of business for the

purpose of maintaining the current level of competition;

And Whereas, defendants have represented to the United States that

the divestitures required below can and will be made as provided in

this Final Judgment and that defendants will later raise no claims of

hardship or difficulty as grounds for asking the Court to modify any of

the divestiture provisions contained below;

Now, Therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law herein, and upon

consent of the parties hereto, it is hereby ordered, adjudged, and

decreed as follows:

I. Jurisdiction

This Court has jurisdiction over the subject matter of this action

and over each of the parties hereto. The Complaint states a claim upon

which relief may be granted against the defendants under Section 7 of

the Clayton Act, as amended (15 U.S.C. Sec. 18).

II. Definitions

As used in this Final Judgment:

A. ``Acquirer'' means the person(s) to whom Pearson shall sell the

Divestiture Products (as defined below).

B. ``Divestiture Products'' means all of the products identified on

Exhibits A and B attached hereto. Each Divestiture Product includes all

of the following:

1. unless non-assignable, all licenses, permits and authorizations

issued by any governmental or private organization relating to the

Divestiture Product;

2. unless non-assignable, all contracts, teaming arrangements,

agreements, leases, commitments and understandings and their associated

intangible rights pertaining to the Divestiture Product, including, but

not limited to author permissions and other similar agreements,

adoption and other agreements with purchasers, distribution agreements

that relate to the Divestiture Product, vendor or supply agreements

with respect to components of the Divestiture Product;

3. unless non-assignable, all original and digital artwork, film

plates, and other reproductive materials relating to the Divestiture

Product, including, but not limited to all manuscripts and

illustrations and any other content and any revisions or revision plans

thereof in print or digital form;

4. all sales support and promotional materials, advertising

materials and production, sales and marketing files relating to the

Divestiture Product;

5. all existing customer lists and credit records, or similar

records of all sales and potential sales of the Divestiture Product,

and all other records maintained in connection with the Divestiture

product;

6. except as provided in definition B.7, below, and unless non-

assignable, all intangible assets relating to the Divestiture Product,

including but not limited to all patents, copyrights and trademarks

(registered and unregistered), common law trademark rights; licenses

and sublicenses, contract rights, intellectual property, maskwork

rights, technical information, know-how, trade secrets, drawings,

blueprints, designs, design protocols, specifications for materials,

quality assurance and control procedures; design tools; and all manuals

and technical information relating to the Divestiture Product provided

to employees, customers, suppliers, agents or licensees;

7. all titles of existing products comprising the Divestiture

Product, including, but not limited to the titles ``Discover Works,''

``Science Horizons,'' ``Discover the Wonder,'' and ``Destinations in

Science,'' as applicable, but not any corporate trademarks or trade

names of Pearson or Viacom;

8. all research data concerning historic and current research and

development efforts relating to the Divestiture Product; and

9. at Acquirer's option, computers and other tangible assets used

primarily for production of the Divestiture Product.

Pearson shall use it best efforts to facilitate the assignment to

the Acquirer of any of the above that Pearson presently holds or uses

pursuant to a license or any other agreement.

C. ``Pearson'' means defendants Pearson plc, a U.K. corporation

with its headquarters in London, England, and Pearson, Inc., a Delaware

corporation with its headquarters in New York, New York, and includes

their successors and assigns, their subsidiaries, affiliates,

directors, officers, managers, agents and employees.

D. ``Retained Product'' means any product offered for sale or in

development by Pearson or Viacom as of November 1, 1998, that is not a

Divestiture Product.

E. ``Scott Foresman Addison Wesley'' means the publishing

activities of Addison Wesley Longman Inc. and Addison Welsey

Educational Publishers, Inc, both wholly owned subsidiaries of Pearson

Inc., that result in products bearing the ``Scott Foresman,'' ``Addison

Wesley,'' ``SFAW'' or ``Scott Foresman Addison Wesley'' titles or

imprints.

F. ``Silver Burdett Ginn Inc.'' is a Delaware corporation with its

headquarters in Parisippany, New Jersey, and is one hundred percent

owned (through various subsidiaries) by Viacom.

G. ``Viacom'' means defendant Viacom International Inc., a Delaware

corporation with its headquarters in New York, New York, and includes

its successors and assigns, their subsidiaries, affiliates, directors,

officers, managers, agents and employees.

III. Applicability

A. The provisions of this Final Judgment apply to the defendants,

their successors and assigns, their parents, subsidiaries, affiliates,

directors, officers, managers, agents, and employees, and all other

persons in active concert or participation with any of them who shall

have received actual notice of this Final Judgment by personal service

or otherwise.

B. Pearson, as a condition of the sale or other disposition of any

or all of the Divestiture Products, shall require the Acquirer to agree

to be bound by the provisions of this Final Judgment.

IV. Divestiture of Assets

A. Pearson is hereby ordered and directed, in accordance with the

terms of this Final Judgment, within two (2) months from the date this

Final Judgment is filed with the Court, or within ten (10) calendar

days from the date on which the sixty-day notice-and-comment period

established by 15 U.S.C. Sec. 16(b) has expired, whichever is later, to

divest one of the two Divestiture Products listed on Exhibit A 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 thirty (30) calender days.

B. Pearson is hereby ordered and directed, within five (5) months

from the date this Final Judgment is filed with the Court, or within

ten (10) calendar days from the date on which

[[Page 70424]]

the sixty-day notice-and-comment period established by 15 U.S.C.

Sec. 16(b) has expired, whichever is later, to divest all of the

Divestiture Products listed on Exhibit B. The United States, in its

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

thirty (30) calendar days.

C. Divestiture of the Divestiture Products shall be accomplished in

such a way as to satisfy the United States, in its sole discretion,

that the Divestiture Products can and will be operated by the Acquirer

as viable, ongoing businesses. Divestiture of the Divestiture Products

shall be made to an Acquirer for whom it is demonstrated to the sole

satisfaction of the United States that (1) the purchase is for the

purpose of competing effectively in the publication and sale of the

Divestiture Products and (2) the Acquirer has the managerial,

operational, and financial capability to compete effectively in the

publication and sale of the Divestiture Products. Defendants are

prohibited from entering into any agreement with the Acquirer to

license exclusively any Divestiture Product to the Defendants for sale

in the United States.

D. Pearson shall retain the right to use a Divestiture Product

listed on Exhibit A to the extent necessary to fulfill the terms of

agreements, in effect as of the date this Final Judgment is filed with

the Court, with purchasers of the product lines listed on Exhibit A.

The Acquirer of one of the Divestiture Products listed on Exhibit A

shall grant Pearson a royalty-free license to continue to use that

Divestiture Product to the extent necessary to fulfill the terms of

such existing agreements. The Acquirer of any Divestiture Product that

Pearson currently uses, in whole or in part, in any Retained Product,

shall grant Pearson a royalty-free license to continue to use the

Divestiture Product to the same extent in the production and sale of

the Retained Product.

E. In accomplishing the divestiture ordered by this Final Judgment,

the defendants shall make known, as expeditiously as possible, the

availability of the Divestiture Products. The defendants shall provide

any person making inquiry regarding a possible purchase a copy of the

Final Judgment. The defendants shall also offer to furnish to any bona

fide prospective Acquirer, subject to customary confidentiality

assurances, all reasonably necessary information regarding the

Divestiture Products, except such information subject to attorney-

client privilege or attorney work-product privilege. Defendants shall

make available such information to the United States at the same time

that such information is made available to any other person. Defendants

shall permit bona fide prospective purchasers of the Divestiture

Products to have access to personnel and to make such inspection of

physical facilities and any and all financial, operational, or other

documents and information as may be relevant to the divestiture

required by this Final judgment.

F. Defendants shall use all commercially practical means to enable

the Acquirer of one of the Divestiture Products listed on Exhibit A to

employ those personnel primarily responsible for the editorial content

of that Divestiture Product, including editors, authors, and science

experts. Defendants shall encourage and facilitate employment of such

employees by the Acquirer of one of the Divestiture Products listed on

Exhibit A, and shall remove all impediments that may deter these

employees from accepting such employment.

G. Defendants shall make available to the Acquirer of any

Divestiture Product, as applicable, information about any Pearson or

Viacom employee primarily responsible for the editorial content of any

Divestiture Product listed on Exhibit B, and any Pearson or Viacom

employee primarily responsible for the production, design, layout, sale

or marketing of any Divestiture Product. Defendants shall not interfere

with any negotiations by the Acquirer to employ any such employee, but

may make counter-offers for employment.

H. Pearson shall take all reasonable steps to accomplish quickly

the divestitures contemplated by this Final Judgment.

V. Appointment of Trustee

A. In the event that Pearson has not divested a Divestiture Product

within the time specified in Section IV.A or IV.B of this Final

Judgment, Pearson 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, in its sole discretion, to

effect the divestiture of the Divestiture Products. Unless the United

States otherwise consents in writing, the divestiture shall be

accomplished in such a way as to satisfy the United States that the

Divestiture Products can and will be used by the Acquirer as viable on-

going businesses. The divestiture shall be made to an Acquirer for whom

it is demonstrated to the United States' sole satisfaction that the

Acquirer has the managerial, operational, and financial capability to

compete effectively in the publication and sale of the Divestiture

Products, and that none of the terms of the divestiture agreement

interfere with the ability of the Acquirer to compete effectively in

the publication and sale of the Divestiture Products.

B. After the appointment of a trustee becomes effective, only the

trustee shall have the right to sell the Divestiture Products. The

trustee shall have the power and authority to accomplish the

divestiture at the best price then obtainable upon a 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 as the Court

shall deem appropriate. The trustee shall have the power and authority

to hire at the cost and expense of Pearson any investment bankers,

attorneys, or other agents reasonably necessary in the judgment of the

trustee to assist in the divestiture, and such professionals and agents

shall be solely accountable to the trustee. The trustee shall have the

power and authority to accomplish the divestiture at the earliest

possible time to a purchaser acceptable to the United States, and shall

have such other powers as this Court shall deem appropriate. Defendants

shall not object to a sale by the trustee on any grounds other than the

trustee's malfeasance. Any such objections by defendants must be

conveyed in writing to the United States and the trustee within (10)

days after the trustee has provided the notice required under Section

VI of this Final Judgment.

C. Pearson may select which of the two Divestiture Products listed

on Exhibit A shall be sold by the trustee, provided that the United

States determines, in its sole discretion, that the Divestiture Product

selected by Pearson has been developed and maintained at levels

sufficient to ensure its competitive viability. Pearson shall provide

the United States with information to enable the United States to make

this determination. Should the United States determine, in its sole

discretion, that the Divestiture Product selected by Pearson has not

been developed and maintained at levels sufficient to ensure its

competitive viability, the trustee shall sell the other Divestiture

Product listed on Exhibit A.

D. The trustee shall serve at the cost and expense of Pearson, 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 its services and those of

any professionals and agents retained by the trustee, all remaining

money shall be paid to Pearson and the trust shall then be

[[Page 70425]]

terminated. The compensation of such trustee and that of any

professionals and agents retained by the trustee shall be reasonable in

light of the value of the Divestiture Products and based on a fee

arrangement providing the trustee with an incentive based on the price

and terms of the divestiture and the speed with which it is

accomplished.

E. Pearson and Viacom shall use their best efforts to assist the

trustee in accomplishing the required divestiture. The trustee and any

consultants, accountants, attorneys, and other persons retained by the

trustee shall have full and complete access to the personnel, books,

records, and facilities of Pearson and Viacom, and defendants shall

develop financial or other information relevant to such assets as the

trustee may reasonably request, subject to reasonable protection for

trade secret or other confidential research, development, or commercial

information. Defendants shall take no action to interfere with or to

impede the trustee's accomplishment of the divestiture.

F. After its appointment, the trustee shall file monthly reports

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

accomplish the divestiture ordered under this Final Judgment. Such

reports shall include the name, address and telephone number of each

person who, during the preceding month, made an offer to acquire,

expressed an interest in acquiring, entered into negotiations to

acquire or was contacted about acquiring any interest in any

Divestiture Product, and shall describe in detail each contact with any

such person during that period. The trustee shall maintain full records

of all efforts made to divest the Divestiture Products.

G. If the trustee has not accomplished such divestiture within six

(6) months after its appointment, the trustee shall thereupon promptly

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

accomplish the required divestiture, (2) the reasons, in the trustee's

judgment, why the required divestiture has not been accomplished, and

(3) the trustee's recommendations; provided, however, that to the

extent such reports contain information that the trustee deems

confidential, such reports shall not be filed on 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 such orders as it shall deem

appropriate in order to carry out the purpose of the trust, which may,

if necessary, include extending the trust and the term of the trustee's

appointment by a period requested by the United States.

VI. Notification

Within two (2) business days following execution of a definitive

agreement, contingent upon compliance with the terms of this Final

Judgment, Pearson or the trustee, whichever is then responsible for

effecting the divestiture required herein, shall notify the United

States of any proposed divestiture pursuant to Section IV or V of this

Final Judgment. If the trustee is responsible, it shall similarly

notify Pearson. 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 Divestiture

Products, together with full details of the same. Within fifteen (15)

days after receipt of the notice, the United States may request

additional information from Pearson, the proposed Acquirer, or any

other third party concerning the proposed divestiture, the proposed

Acquirer, and any other potential Acquirer. Pearson or the trustee

shall furnish the additional information within fifteen (15) days of

the receipt of the request unless the parties agree otherwise. Within

thirty (30) days after receipt of the notice or within twenty (20) days

after the United States' receipt of the additional information,

whichever is later, the United States shall notify in writing Pearson

and the trustee, if there is one, stating whether it objects to the

proposed divestiture. If the United States notifies in writing Pearson

and the trustee, if there is one, that it does not object, then the

divestiture may be consummated, subject only to Pearson's limited right

to object to the sale under Section V.B of this Final Judgment. Absent

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

Acquirer, or upon objection by the United States, a divestiture

proposed under Section IV or V shall not be consummated. Upon objection

by Pearson under Section V.B, the proposed divestiture shall not be

accomplished unless approved by the Court.

VII. Financing

Pearson shall not finance all or any part of any purchase made

pursuant to Sections IV or V of this Final Judgment.

VIII. Preservation of Assets

Until the divestiture required by Section IV.A and IV.B of this

Final Judgment have been accomplished:

A. Defendant shall take all steps necessary to ensure that each

Divestiture Product will be maintained and developed as an independent,

ongoing, economically viable and active competitor in its respective

line of business and that the product management for all Divestiture

Products, including the product development, marketing and pricing

information and decision-making be kept separate and apart from, and

not influenced by, Pearson's and Viacom's businesses in other products.

B. Defendants shall use all reasonable efforts to maintain and

increase sales of the Divestiture Products, and shall maintain at 1998

or previously approved levels for 1999, whichever is applicable,

development, promotional advertising, sales, marketing, and

merchandising support for the Divestiture Products.

C. Defendants shall take all steps necessary to ensure that the

Divestiture Products are fully maintained. Defendants shall not

transfer or reassign those personnel primarily responsible for the

editorial content of the Divestiture Products listed on Exhibit A,

including editors, authors, and science experts. Each of defendants'

employees whose predominant responsibility is the editorial content of

any Divestiture Product listed on Exhibit B, or the production, design,

layout, sale or marketing of any Divestiture Product shall not be

transferred or reassigned to any other of defendants' products, except

for transfer bids initiated by employees pursuant to defendants'

regular, established job posting policy, provided that defendants give

the United States and Acquirer ten (10) days' notice of such transfer.

D. Defendants shall continue to fund and develop the Divestiture

Products listed on Exhibit A as they would have been funded and

developed without their transaction until one is sold pursuant to this

Final Judgment.

E. Except as part of a divestiture approved by the United States,

in its sole discretion, defendants shall not sell any Divestiture

Products.

F. Defendants shall take no action that would jeopardize the sale

of the Divestiture Products, or that would interfere with the ability

of any Trustee to effect a sale of any Divestiture Product.

G. Defendants shall appoint a person or persons to manage the

Divestiture Products, and who shall be responsible

[[Page 70426]]

for defendants' compliance with this section.

IX. Affidavits

A. Within twenty (20) calendar days of the filing of the Complaint

in this action, and every thirty (30) calendar days thereafter until

the divestiture has been completed, whether pursuant to Section IV or V

of this Final Judgment, Pearson shall deliver to the United States an

affidavit as to the fact and manner of compliance with Section IV or V

of this Final Judgment. Each such affidavit shall include the name,

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

thirty (30) 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 all or any portion of

the Divestiture Products, 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 Pearson has taken to solicit an

Acquirer for any of the Divestiture Products and to provide required

information to prospective Acquirers, including the limitation, if any,

on such information.

B. Within twenty (20) calendar days of the filing of the Complaint

in this action, Pearson shall deliver to the United States an affidavit

that describes in reasonable detail all actions Pearson has taken and

all steps Pearson has implemented on an ongoing basis to comply with

Section VIII of this Final Judgment. The affidavit shall describe, but

not be limited to, Pearson's efforts to maintain and operate the

Divestiture Products as active competitors, maintain the management,

staffing, research and development activities, sales, marketing and

pricing of the Divestiture Products, and maintain the Divestiture

Products in operable condition at current capacity configurations.

Pearson shall deliver to the United States an affidavit describing any

changes to the efforts and actions outlined in Pearson's earlier

affidavit(s) filed pursuant to this section within fifteen (15)

calendar days after the change is implemented.

C. Until one year after a divestiture has been completed, or, if a

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

is terminated, Pearson shall preserve all records of all efforts made

to preserve and divest the Divestiture Products.

X. Compliance Inspection

For the purpose of determining or securing compliance with this

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

time to time:

A. Duly authorized representatives of the United States, including

consultants and other persons retained by the United States, shall,

upon the written request of the Assistant Attorney General in charge of

the Antitrust Division and on reasonable notice to Pearson made to its

principal offices, be permitted:

1. access during office hours to inspect and copy all books,

ledgers, accounts, correspondence, memoranda, and other records and

documents in the possession or under the control of Pearson, which may

have counsel present, relating to any matters contained in this Final

Judgment; and

2. subject to the reasonable convenience of Pearson and without

restraint or interference from it, to interview, either informally or

on the record, directors, officers, employees, and agents of Pearson,

which may have counsel present, regarding any such matters.

B. Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division made to Pearson at its principal

offices, Pearson shall submit written reports, under oath if requested,

with respect to any of the matters contained in this Final Judgment as

may be requested.

C. No informaiton nor any documents obtained by the means provided

in this Section X shall be divulged by any representative of 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

proveedings 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 Pearson

to the United States, Pearson represents and identifies in writing the

material in any such informaiton or documents for which a claim of

protection may be asserted under Rule 26(c)(7) of the Federal Rules of

Civil Procedure, and Pearson 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 the United States shall give

ten (10) days' notice to Pearson prior to divulging such material in

any legal proceeding (other than a grand jury proceeding) to which

Pearson is not a party.

XI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders and directions as may be necessary or

appropriate for the construction, implementation, or modificaiton of

any of the provisions of this Final Judgment, for the enforcement of

compliance herewith, and for the punishment of any violations hereof.

XII. Termination of Provisions

This Final Judgment will expire on the tenth anniversary of the

date of its entry.

XIII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ____________________

Court approval subject to procedures of Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16.

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

United States District Judge

Exhibit A

1. All textbooks or other educational materials offered for sale

or provided or under development by any subsidiary or division of

Silver Burdett Ginn Inc. that refer or relate to the subject matter

of science for grades Kindergarten through six, including, but not

limited to (1) student editions; (2) teacher editions; (3)

supplemental materials, including, but not limited to workbooks,

notebooks, charts, audio, video, software, CD-ROM, Internet and

broadcast components, manipulatives and equipment, and similar

materials; (4) teacher support and staff development materials,

including, but not limited to teacher resource books, assessment

materials and answer keys, test generators, teaching guides,

overhead transparencies, lesson plans and outlines and curriculum

materials; and (5) any other materials in any form, format or media

marketed or intended to be marketed as being ancillary to the

program or to an individual title within the program. This

Divestiture Product does not include any products that are necessary

to fulfill the terms of agreements between Silver Burdett Gin Inc.

and purchasers of products relating to the subject matter of science

for grades Kindergarten through six that are in existence as of the

date this Final Judgment is filed with the Court.

or

2. All textbooks or other educational materials offered for sale

or provided or under development by any subsidiary or division of

Pearson Inc. doing business as Scott Foresman Addison Wesley that

refer or relate to the subject matter of science for grades

Kindergarten through six, including, but not limited to (1) student

editions; (2) teacher editions; (3) supplemental materials,

including, but not limited to workbooks, notebooks, charts, audio,

video, software, CD-ROM, Internet and broadcast components,

manipulatives and equipment, and similar materials; (4) teacher

support and staff development materials, including, but not limited

to teacher resource books, assessment materials and answer keys,

test

[[Page 70427]]

generators, teaching guides, overhead transparencies, lesson plans

and outlines and curriculum materials; and (5) any other materials

in any form, format or media marketed or intended to be marketed as

being ancillary to the program or to an individual title within the

program. This Divestiture Product does not include any products that

are necessary to fulfill the terms of agreements between Pearson

Inc. and purchasers of products relating to the subject matter of

science for grades Kindergarten through six that are in existence as

of the date this Final Judgment is filed with the Court.

Exhibit B

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

College course Divestiture products

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

Abstract Algebra............. Herstein, Abstract Algebra (Prentice

Hall).

Dummit/Foote, Abstract Algebra (Prentice

Hall).

Anatomy & Physiology (One Tortora, Introduction to the Human Body:

Term). The Essentials of Anatomy and Physiology

(Addison Wesley).

Anatomy & Physiology (Two Tortora/Grabowski, Principles of Anatomy

Term). and Physiology (Addison Wesley).

Art Appreciation............. Fichner-Rathus, Understanding Art

(Prentice Hall).

Circuits and Networks........ Irwin, Basic Engineering Circuit Analysis

(Prentice Hall).

Johnson/Johnson/Hilbrun/Scott, Electric

Circuit Analysis (Prentice Hall).

Thomas/Rosa, The Analysis & Design of

Linear Circuits (Prentice Hall).

Johnson/Hilbrun/Johnson/Scott, Basic

Electric Circuit Analysis (Prentice

Hall).

Classical Mythology.......... Morford/Lenardon, Classical Mythology

(Addison Wesley).

Classroom Management......... Wolfgang, Solving Discipline Problems

(Allyn & Bacon).

Cangelosi, Classroom Management

Strategies (Addison Wesley).

Edwards, Classroom Discipline &

Management (Prentice Hall).

Burden, Classroom Management & Discipline

(Addison Wesley).

Concrete Engineering......... McCormac, Design of Reinforced Concrete

(Addison Wesley).

Wang/Salmon, Reinforced Concrete Design

(Addison Wesley).

Controls Engineering......... Nise, Control Systems Engineering

(Addison Wesley).

Kuo, Automatic Control Systems (Prentice

Hall).

Environmental Economics...... Goodstein, Economics and the Environment

(Prentice Hall).

Fortran...................... Etter, Structured Fortran 77 for

Engineers and Scientists (Addison

Wesley).

Etter, Fortran 90 for Engineers (Addison

Wesley).

Human Anatomy................ Tortora, Principles of Human Anatomy

(Addison Wesley).

Human & Cultural Geography... Jordan-Bychkov/Domosh, The Human Mosaic:

A Thematic Introduction to Cultural

Geography (Addison Wesley).

Instructional Design......... Smith/Ragan, Instructional Design

(Merrill--Prentice Hall).

Kemp/Morrison/Ross, Designing Effective

Instruction (Merrill--Prentice Hall).

Rothwell/Kazanas, Mastering the

Instructional Design Process: A

Systematic Approach (Jossey-Bass

Publishers).

Intermediate Microeconomics.. Browning/Zupan, Microeconomic Theory and

Applications (Addison Wesley).

International Corporate Shapiro, Multinational Financial

Finance. Management (Prentice Hall).

Shapiro, Foundations of Multinational

Financial Management (Prentice Hall).

International Economics...... Salvatore, International Economics

(Prentice Hall).

K-12 Curriculum.............. McNeil, Curriculum: A Comprehensive

Introduction (Addison Wesley).

Manufacturing Engineering.... Groover, Fundamentals of Modern

Manufacturing (Prentice Hall).

Degarmo/Black/Kohser, Materials and

Processes in Manufacturing (Prentice

Hall).

Mathematics for Elementary Musser/Burger, Mathematics for Elementary

Teachers. Teachers (Prentice Hall).

Measurement and Assessment of Kubiszyn/Borich, Educational Testing and

Students. Measurement (Addison Wesley).

Microbiology (Non-majors).... Black, Microbiology: Principles and

Applications (Prentice Hall).

Multicultural Education...... Banks/Banks, Multicultural/Education:

Issues and Perspectives (Allyn & Bacon).

Grant/Sleeter, Turning on Learning: Five

Approaches for Multicultural Teaching

Plans for Race, Class, Gender and

Disability (Prentice Hall).

Sleeter/Grant, Making Choices for

Multicultural Education: Five Approaches

to Race, Class, and Gender (Merrill--

Prentice Hall).

Operating Systems............ Silberschatz/Galvin, Operating System

Concepts (Addison Wesley).

School Administration: Acheson/Gall, Techniques in the Clinical

Supervision. Supervision of Teachers (Addison

Wesley).

Oliva/Pawlis, Supervision for Today's

Schools (Addison Wesley).

Structural Engineering....... McCormac/Nelson, Structural Analysis: A

Classical & Matrix Approach (Addison

Wesley).

Surveying.................... McCormac, Surveying Fundamentals

(Prentice Hall).

Teaching Math to Elementary Reys/Suydam/Linquist/Smith, Helping

Students. Children Learn Mathematics (Allyn &

Bacon).

Hatfield/Edwards/Bitter, Mathematics

Methods for elementary and Middle School

(Ally & Bacon).

Sheffield/Cruikshank, Teaching and

Learning Elementary and Middle School

Mathematics (Merrill--Prentice Hall).

Heddens, Today's Mathematics (Prentice

Hall).

Teaching Reading to Secondary Ruddell, Teaching Content Reading &

Students. Writing (Allyn & Bacon).

Ryder, Reading and Learning in the

Content Areas (Prentice Hall).

Cooter/Flynt, Teaching Reading in Content

Areas (Prentice Hall).

Manzo/Manzo, Content Area Literacy

(Merrill--Prentice Hall).

Technical Math............... Calter, Technical Mathematics (Prentice

Hall).

Technical Math with Calculus. Calter, Technical Mathematics with

Calculus (Prentice Hall).

Technical Writing............ Houp, Reporting Technical Information

(Allyn and Bacon).

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

[[Page 70428]]

Competitive Impact Statement

The United States, pursuant to Section 2(b) of the Antitrust

Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16(b)-(h),

files this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

On November 23, 1998, the United States filed a civil antitrust

Complaint alleging that the proposed acquisition by Pearson plc and its

wholly subsidiary, Pearson Inc. (collectively ``Pearson''), of certain

publishing businesses of Viacom International Inc. (``Viacom'') would

violate Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint

alleges that Pearson and Viacom, two of the nation's largest publishers

of textbooks and other educational materials, compete head-to-head in

the development, marketing, and sale of comprehensive elementary school

science programs and in the development, marketing, and sale of

textbooks used in thirty-two college courses. Unless the acquisition is

blocked, competition for these science programs and college textbooks

would be substantially lessened, leading to higher prices, a reduction

in the value of materials or service provided to teachers and students,

or lower quality. The request for relief in the Complaint seeks: (1) a

judgment that the proposed merger would violate Section 7 of the

Clayton Act; (2) a permanent injunction preventing consummation of the

merger agreement; (3) an award of costs to the plaintiff; and (4) such

other relief as the Court may deem just and proper.

Shortly before the Complaint was filed, the parties reached a

proposed settlement that permits Pearson to complete its acquisition of

Viacom's publishing businesses, 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 terms of the settlement.

The proposed Final Judgment orders Pearson to divest either its or

Viacom's existing elementary school science program, along with the

program that that party is currently developing, to an acquirer

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

time extension, Pearson must complete this divestiture within two

months of the filing of the Complaint, or within ten days of the

expiration of the sixty-day statutory notice-and-comment period that

commenced with the publication of this Competitive Impact Statement,

whichever is later. The proposed Final Judgment also orders Pearson to

divest fifty-five college textbooks so that competition in the

development, marketing, and sale of textbooks in each of the thirty-two

courses will be preserved. Pearson must complete the college textbook

divestiture within five months of the filing of the Complaint, or

within ten days of the expiration of the sixty-day statutory notice-

and-comment period, whichever is later.

If Pearson does not complete the divestitures within the

appropriate time periods, the Court, upon application of the United

States, is to appoint a trustee selected by the United States to

complete the remaining divestitures. The proposed Final Judgment also

requires Pearson and Viacom to take all steps necessary to maintain and

market the products to be divested as independent and active

competitors until the divestures mandated by the proposed Final

Judgment have been accomplished.

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 proposed Final Judgment and punish violations

thereof.

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

A. The Defendants and the Proposed Transaction

Pearson Inc. is a Delaware corporation headquarters in New York

City, that publishes textbooks and other educational materials under

such names as Addison Wesley, Scott Foresman and Harper Collins. Its

parent, Pearson plc, is an international media corporation incorporated

in the United Kingdom and based in London.

Viacom, a Delaware corporation based in New York City, publishes

textbooks and other educational materials under names including

Prentice Hall, Silver Burdett Ginn, and Allyn & Bacon. Its parent,

Viacom, Inc,. is one of the world's largest entertainment and

publishing companies and is a leading competitor in nearly every

segment of the international media marketplace.

On May 17, 1998, the defendants signed an agreement under which

Pearson would acquire educational, professional, and reference

publishing businesses from Viacom. This transaction, which would

increase concentration in already concentrated markets, precipitated

the government's suit.

B. Product Markets

1. Basal Elementary School Science Program Market

a. Description of the Market

Most elementary schools throughout the United States teach science

through comprehensive science programs known as ``basal elementary

school science programs,'' which provide organization and structure, as

well as guidance and support, in how to teach the subject. Student

textbooks and teacher's editions of the textbooks are the core of most

basal programs, but most also include other important educational

materials and services called ``ancillary'' materials, consisting of

student workbooks and notebooks, audio-visual aids such as charts and

videotapes, and materials for student science exercises and

experiments. Basal elementary school science programs also often

include services such as teacher training sessions.

School districts or individual schools desiring to purchase basal

elementary school science programs would not turn to any alternative

product in sufficient numbers to defeat a small but significant

increase in the price of these programs or a reduction in the value of

ancillary materials and services provided with them. For example, a

school seeking to purchase a basal elementary school science program

would not respond to a price increase by considering basal programs in

mathematics or reading. Nor would schools substitute any of the few

nontraditional, alternative science programs in sufficient numbers to

defeat a small but significant price increase in basal elementary

school science programs.

b. Harm or Competition as a Consequence of the Merger

Pearson and Viacom are two of only four larger publishers of basal

elementary school science programs. They have consistently led the

market, capturing a combined share of roughly fifty percent or more of

new sales over the last six years, Pearson's Discover the Wonder

program is a close substitute for Viacom's Discovery Works program.

Pearson and Viacom also compete to maintain a improve program quality.

Both are currently developing new basal elementary school science

programs that they will offer for sale throughout the United States

beginning in 1999.

Pearson and Viacom's aggressive competition has led to lower

prices, more and better ancillary materials and services, and

improvements in product

[[Page 70429]]

quality. The proposed acquisition would eliminate this competition and

would further concentrate an already highly concentrated market.

Successful entry into the basal elementary school science program

market is difficult, time consuming, and costly. A publisher would need

to assemble an editorial and sales staff to develop, test, and market

the new program, and would need to overcome schools' reluctance to

purchase an elementary school science program from a firm lacking an

established reputation as an experienced and reliable science

publisher. Additionally, the science market is less attractive to new

entrants because elementary school science funding is neither as large

nor as reliable as it is for core subjects like math and reading.

The Complaint alleges that the transaction would likely have the

following effects:

a. actual and future competition between Pearson and Viacom would

be eliminated;

b. competition generally in the market for basal elementary school

science programs would likely be substantially lessened;

c. prices for basal elementary school science programs would likely

increase or the value of ancillary materials or services would likely

decline; and

d. competition in the development and improvement of basal

elementary school science programs would likely be substantially

lessened.

2. College Textbook Markets

a. Description of the Markets

College professors generally select a textbook to serve as the

primary teaching material for their course. Textbooks provide the core

written material for a course, serve as the foundation for the

professor's overall lesson plan, and set forth the framework for class

discussions. Although it is the professor that chooses the textbook,

students purchase the textbooks, usually from a college bookstore.

Publishers often attempt to induce a professor to select their

textbooks by offering free ancillary educational materials such as a

teacher's edition of the textbook, audio-visual teaching tools, and

copies of the textbook for teaching assistants. Publishers also

sometimes offer textbooks to students as part of discounted packages

that include further ancillary educational materials such as CD-ROMs

and study guides.

The Complaint identified thirty-two college courses in which

Pearson and Viacom were among the leading competitors in the provision

of textbooks and related educational materials. These courses primarily

fell within the disciplines of biological sciences, engineering,

economics, teachers' education, mathematics and computer science. In

each of these courses, textbooks are used as the primary teaching

materials. A small but significant increase in the price of a textbook

for a college course--or a small but significant decrease in the value

of the ancillary materials provided with the textbook--would not cause

a significant number of professors or students to switch to any

alternative products. Used textbooks also cannot defeat an increase in

price of new textbooks or a decrease in the supply of ancillaries

provided with them. The supply of used textbooks is limited, and

professors usually require use of the newest edition of a textbook,

which is generally revised every three to four years.

b. Harm to Competition as a Consequence of the Merger

In each of the thirty-two college textbook markets identified in

the Complaint, Pearson and Viacom compete vigorously by offering

textbooks that are close substitutes. Together, they account for a

major share of new textbook sales, and face significant competition

from only a small number of other publishers.

Competition between Pearson and Viacom has resulted in lower

prices, more and better ancillary materials for professors and

students, and improved product quality. The proposed acquisition would

eliminate this competition, give Pearson the ability to raise the price

or reduce the value of materials, and would further concentrate these

already highly concentrated markets.

In each of the thirty-two college textbook markets, there is

unlikely to be timely entry by any company offering textbooks and

ancillary materials that would be sufficient to defeat an

anticompetitive increase in price or decrease in ancillary materials.

Successful entry involves a costly and time-consuming process in which

a publisher must locate an author qualified to write a new textbook,

and assemble an editorial staff to edit and develop the textbook. In

addition, it must have numerous professors to review the textbook and a

large sales staff to market it. Entry is also impeded by the difficulty

of challenging the reputation of successful incumbent textbooks.

The Complaint alleges that the transaction would likely have the

following effects:

a. actual and future competition between Pearson and Viacom would

be eliminated;

b. competition generally in the markets for the sale of textbooks

and ancillary materials for each of the college courses identified in

the Complaint would likely be substantially lessened;

c. prices for textbooks and ancillary materials for each of the

college courses identified in the Complaint would likely increase or

the value of ancillary materials would likely decline; and

d. competition in the development and improvement of college

textbooks and ancillary materials in each of the college courses

identified in the Complaint would likely be substantially lessened.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment is designed to eliminate the

anticompetitive effects of Pearson's proposed acquisition of publishing

businesses from Viacom.

The proposed Final Judgment requires divestiture of either

Pearson's or Viacom's basal elementary school science program to an

acquirer acceptable to the United States within two months after the

filing of the proposed Final Judgment in this matter, or within ten

days after the expiration of the sixty-day statutory notice-and-comment

period that commenced with the publication of this Competitive Impact

Statement in the Federal Register, whichever is later. This divestiture

includes all textbooks or other educational materials offered for sale

or provided or under development that refer or relate to the subject

matter of science for elementary school grades, including, but not

limited to (1) student editions; (2) teacher editions; (3) supplemental

materials, including but not limited to workbooks, notebooks, charts,

audio, video, software, CD-ROM, Internet and broadcast components,

manipulatives and equipment, and similar materials; (4) teacher support

and staff development materials, including, but not limited to teacher

resource books, assessment materials and answer keys, test generators,

teaching guides, overhead transparencies, lesson plans and outlines and

curriculum materials; and (5) any other materials in any form, format

or media marketed or intended to be marketed as being ancillary to the

program or to an individual title within the program.

Pearson also must divest the fifty-five college textbooks

identified on Exhibit B to the proposed Final Judgment. That

[[Page 70430]]

exhibit specifies the one or more textbooks in each course that must be

divested to ensure that each college textbook market suffers no

reduction in competition. The college textbook divestitures must be

completed within five months after the filing of the proposed Final

Judgment in this matter, or within ten days after the expiration of the

sixty-day statutory notice-and-comment period, whichever is later.

Until the divestitures takes place, Pearson is required to develop and

maintain its and Viacom's products as independent ongoing,

economically, viable, and active competitors, and to continue to fund

their development, promotional advertising, sales, marketing,

merchandising, and support.

If Pearson fails to make the required divestitures within the

applicable time periods, the Court will appoint a trustee selected by

the United States to effect the divestitures. Pearson may select which

basal elementary school science program the trustee will divest, so

long as that program has been developed and maintained at a level

sufficient to ensure its competitive viability. If the United States

determines, in its sole discretion, that Pearson has not adequately

developed and maintained that program's competitive viability, the

trustee will sell the other program.

The proposed Final Judgment provides that defendants will pay all

costs and expenses of the trustee. After the trustee's appointment

becomes effective, the trustee will file monthly reports with the

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

accomplish divestiture. At the end of six months, if the divestiture

has not been accomplished, the trustee and the parties will have the

opportunity to make recommendations to the Court, which shall enter

such orders as appropriate in order to carry out the purpose of the

trust, including extending the trust and the term of the trustee's

appointment.

The proposed Final Judgment takes steps to ensure that the

acquirers of the divested products will be viable and effective

competitors. The United States must be satisfied that the acquiring

parties have the ability and intention to publish and market the

divested products as viable, ongoing businesses. The proposed Final

Judgment also directs Pearson to use all commercially practical means

to enable the acquirer of the basal elementary school science program

to hire the personnel primarily responsible for the program's editorial

content, including editors, authors, and science experts, and to

encourage and facilitate their employment by the acquirer. Prior to

divestiture, Pearson also may not transfer any of these employees to

new positions within the company. The proposed Final Judgment also

requires that Pearson provide acquirers with information about the

employees responsible for the editorial content of the college

textbooks to be divested, and about the employees primarily responsible

for the production, design, layout, sale or marketing of all of the

divested products. The proposed Final Judgment forbids Pearson and

Viacom from interfering with any acquirer's employment negotiations

with those employees, and from transferring some of these employees--

those spending the predominant portion of their time on a divestiture

product--to new positions prior to the divestitures.

The proposed Final Judgment requires sale of all the tangible and

intangible assets that make up each divestiture product. It expressly

defines each divestiture product to include all associated intellectual

property, licenses, contracts, artwork, promotional and advertising

materials, customer lists, and research data. The intellectual property

specifically includes the titles of all existing products to be

acquired, but not trademarks or trade names that refer to Pearson or

Viacom. Exhibit A of the proposed Final Judgment identifies in detail

the specific items (including student editions, teacher editions, and

ancillary materials) that are included within the basal elementary

school science program that Pearson must divest. It provides, however,

that Pearson may continue to use the divested basal elementary school

science program to the extent necessary to fulfill its or Viacom's

obligations under existing contracts with purchasers. These obligations

consist mainly of the provision of replacement copies of consumable

workbooks or lost or damaged textbooks. The proposed Final Judgment

requires that the acquirer grant Pearson a royalty-free license so that

it may continue to use the divested basal elementary school science

program for this limited purpose.

The proposed Final Judgment is thus designed to maintain the

present level of competition in the market for basal elementary school

science programs and in the thirty-two college textbook markets

identified in the Complaint by replacing the competitor eliminated as a

result of the merger with one or more that is equally effective. It

accomplishes this goal by requiring prompt divestitures so that the

acquirer has adequate time to participate in the significant upcoming

sales opportunities in schools and colleges, by providing the acquirer

with an opportunity to employ the personnel that are critical to the

success of the divested products, and by requiring divestiture of all

tangible and intangible assets that make up each of those products.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorneys' fees. Entry of the proposed Final Judgment will neither

impair nor assist the bringing of any private antitrust damage action.

Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.

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

any subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final

Judgment

The United States and defendants have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the United States has not

withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

The APPA provides a period of at least sixty 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 days of the date of publication of this Competitive Impact

Statement in the Federal Register. The United States will evaluate and

respond to the comments. 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

comments and the response of the United States will be filed with the

Court and published in the Federal Register.

Written comments should be submitted to: Mary Jean Moltenbrey,

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

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

The proposed Final Judgment provides that the Court retains

[[Page 70431]]

jurisdiction over this action, and the parties may apply to the Court

for any order necessary or appropriate for the modification,

interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed

Final Judgment, a full trial on the merits against Pearson and Viacom.

The United States is satisfied that the divestiture of the assets

specified in the proposed Final Judgment will facilitate continued

viable competition in the market for basal elementary school science

programs and in the thirty-two markets for college textbooks identified

in the Complaint. The United States is satisfied that the proposed

relief will prevent the merger from having anticompetitive effects in

these markets. The divestitures required by the proposed Final Judgment

will preserve the structure of the markets that existed prior to the

merger and will preserve the existence of independent competitors.

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-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. Sec. 16(e).

As the Court of Appeals for the District of Columbia Circuit held,

the APPA 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. See United States

v. Microsoft, 56 F.3d 1448 (D.C. Cir. 1995).

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.''\1\ Rather,

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

\1\ 119 Cong. Rec. 24598 (1973). See also 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. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974) U.S.

Code Cong. & Ad. News 6535, 6538.

absent a showing of corrupt failure of the government to discharge

its duty, the Court, in making its public interest finding, should .

. . carefully consider the explanations of the government in the

competitive impact statement and its responses to comments in order

to determine whether those explanations are reasonable under the

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

circumstances.

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 may not ``engage in an unrestricted evaluation of

what relief would best serve the public.'' United States v. BNS, Inc.,

858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel

Corp., 648 F.2d 660, 666 (9th Cir.), 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.\2\

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

\2\ United States v. Bechtel, 648 F.2d at 666 (internal

citations omitted) (emphasis added); see United States v. BNS, Inc.,

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 United States v. American Cyanamid Co., 719 F.2d 558, 565

(2d Cir. 1983).

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

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

acceptability or is `within the reaches of public interest.' (citations

omitted).'' \3\

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

\3\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131,

150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460

U.S. 1001 (1983), quoting Gillette, 406 F. Supp. at 716; United

States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky.

1985).

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

VIII. Determinative Documents

There are no determinative materials or documents within the

meaning of the APPA that were considered by the United States in

formulating the proposed Final Judgment.

FOR PLAINTIFF UNITED STATES OF AMERICA

Dated: December 10, 1998.

Respectfully submitted,

John W. Poole (D.C. Bar #34136)

Senior Trial Attorney, U.S. Department of Justice, Antitrust Division,

Civil Task Force, 325 Seventh Street, N.W., Suite 300, Washington, DC

20530, Telephone: (202) 616-5943, Facsimile: (202) 307-9952.

[FR Doc. 98-33653 Filed 12-18-98; 8:45 am]

BILLING CODE 4410-11-M