United States v. SBC Communications Inc. and Ameritech Corporation; Proposed Final Judgment and Competitive Impact Statement
Federal RegisterApr 29, 1999
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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil No. 99-0715]
United States v. SBC Communications Inc. and Ameritech
Corporation; Proposed Final Judgment and Competitive Impact Statement
Filed: March 23, 1999.
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 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. SBC Communications Inc. and Ameritech Corporation,
Civil No. 99-0715 (D.D.C.). The proposed Final Judgment is subject to
approval by the court after the expiration of the statutory 60-day
public comment period and compliance with the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16(b)-(h).
On March 23, 1999, the United States filed a Complaint alleging
that the proposed acquisition of Ameritech Corporation by SBC
Communications Inc. would violate Section 7 of the Clayton Act, 15
U.S.C. 18. The Complaint alleges that if this merger is consummated,
competition in the markets for wireless mobile telephone services in
seventeen areas in Illinois, Indiana and Missouri would be lessened
substantially. The areas affected include fourteen markets where SBC
and Ameritech are the two providers of cellular mobile telephone
services, including Chicago and St. Louis, and three markets where
Ameritech is one of the providers of cellular mobile telephone services
and Comcast Cellular Corporation, which SBC has entered into an
agreement to acquire, owns the other cellular telephone system. The
Complaint also alleges that competition would be lessened in the St.
Louis area because, as a result of this merger, Ameritech would not
provide local exchange and long distance telephone services bundled
with its cellular mobile telephone services, as it had planned to do in
St. Louis before agreeing to merge with SBC.
The proposed Final Judgment, filed at the same time as the
Complaint, requires SBC and Ameritech to divest one of the two
overlapping cellular telephone systems in each of the seventeen market
areas. In the areas presently served by Comcast, and in the areas in
Missouri, the Ameritech cellular systems must be divested, while in the
other SBC and Ameritech may choose which of the two systems will be
divested. The assets Ameritech planned to use to provide local exchange
and long distance telephone services together with its cellular mobile
telephone services in the St. Louis area must also be divested. The
proposed Final Judgment requires that the assets of these cellular
telephone systems be divested no later than 180 days following the
earlier of: (1) all final regulatory approvals needed for SBC and
Ameritech to consummate their merger; or (2) the consummation of the
merger of SBC and Ameritech. Before the merger can be consummated, any
assets required to be divested that have not been sold must be
transferred to a trustee, who will complete the divestiture during
whatever part of the 180-day period remains.
On April 7, 1999, SBC and Ameritech notified the Department of
Justice, pursuant to the provisions of the proposed Final Judgment,
that they have entered into an agreement to sell all of the assets of
these cellular telephone systems required to be divested to a venture
owned 93% by GTE and 7% by Georgetown Partners. This agreement is
contingent on the consummation of the merger between SBC and Ameritech.
Public comment is invited within the statutory 60-day comment
period. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Donald J. Russell, Chief, Telecommunications Task Force, Antitrust
Division, Department of Justice, 1401 H St, NW, Suite 8000, Washington,
DC 20530 (telephone: (202) 514-5621).
The Competitive Impact Statement, filed by the United States on
April 16, 1999, describes the Complaint, the proposed Final Judgment,
the alleged violations, and the remedies available to private
litigants. Copies of the Complaint, proposed Final Judgment, and
Competitive Impact Statement are available for inspection in Room 215
of the United States Department of Justice, Antitrust Division, 325 7th
St, NW, Washington DC 20530 (telephone (202) 514-2841) and at the
Office of the Clerk of the United States District Court for the
District of Columbia. Copies of these materials may be obtained upon
request and payment of a copying fee.
Constance K. Robinson,
Director of Operations and Merger Enforcement, Antitrust Division.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, as follows:
(1) The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in this Court.
(2) 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. 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 entry of the proposed Final Judgment
by serving notice thereof on defendants and by filing that notice with
the Court.
(3) Defendants shall abide by and comply with the provisions of the
proposed Final Judgment pending entry of the Final Judgment by the
Court, or until expiration of time for all appeals of any Court ruling
declining entry of the proposed 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.
(4) This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted in the Court.
(5) In the event plaintiff withdraws its consent, as provided in
paragraph (2) above, or in the event that the Court declines to enter
the proposed Final
[[Page 23100]]
Judgment pursuant to this Stipulation, the time has expired for all
appeals of any Court ruling declining entry of the proposed Final
Judgment, and the Court has not otherwise ordered continued compliance
with the terms and provisions of the proposed 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.
(6) Defendants represent that the divestiture ordered in the
proposed Final Judgment can and will be made, 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
therein.
Dated: March 23, 1999.
For Plaintiff United States of America.
Joel I. Klein,
Assistant Attorney General.
A. Douglas Melamed,
Principal Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Donald J. Russell,
Chief, Telecommunications Task Force.
Laury Bobbish,
Assistant Chief, Telecommunications Task Force.
Carl Willner,
D.C. Bar No. 412841.
Michael Chaleff,
Attorneys, Telecommunications Task Force.
U.S. Department of Justice, Antitrust Division, 1401 H Street, NW,
Suite 8000, Washington, DC 20530.
Date Signed: March 23, 1999.
For SBC Communications Inc.
Donald L. Flexner,
D.C. Bar No. 343269, Crowell & Moring LLP, 1001 Pennsylvania Avenue,
NW, Washington, DC 20004-2595.
Date Signed: March 17, 1999.
For Ameritech Corporation.
Richard J. Favretto,
D.C. Bar No. 156588.
Mark W. Ryan,
D.C. Bar No. 359098, Mayer, Brown & Platt, 2000 Pennsylvania Avenue NW,
Washington, DC 20006-1882.
Date Signed: March 17, 1999.
Stipulation Approved for Filing
Done this ____ day of ____, 1999
----------------------------------------------------------------------
United States District Judge
Final Judgment
Whereas, plaintiff, United States of America, filed its Complaint
on March 23, 1999:
And whereas, plaintiff and defendants, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication on any issue of fact or law;
And whereas, entry of this Final Judgment does not constitute any
evidence against or an admission by any party with respect to any issue
of law or fact;
And whereas, defendants have further consented to be bound by the
provisions of the Final Judgment pending its approval by the Court;
And whereas, plaintiff the United States believes that entry of
this Final Judgment is necessary to protect competition in markets for
mobile wireless telecommunications services in Illinois, Indiana and
Missouri;
And whereas, the essence of this Final Judgment is prompt and
certain divestiture of certain cellular wireless systems that would
otherwise be commonly owned and controlled, including their licenses
and all relevant assets of the cellular systems, and the imposition of
related injunctive relief to ensure that competition is not
substantially lessened;
And whereas, plaintiff the United States requires that defendants
make certain divestitures of such licenses and assets for the purpose
of ensuring that competition is not substantially lessened in any
relevant market for mobile wireless telecommunications services in
Illinois, Indiana or Missouri;
And whereas, defendants have represented to plaintiff that the
divestitures ordered herein can and will be made and that defendants
will not raise any claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
herein below;
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:
I
Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting to this Final Judgment. The
Complaint states a claim upon which relief may be granted against the
defendants under Section 7 of the Clayton Act, 15 U.S.C. 18, as
amended.
II
Definitions
A. Ameritech means Ameritech Corporation, a corporation with its
headquarters in Chicago, Illinois, and includes its successors and
assigns, its subsidiaries and affiliates, and its directors, officers,
managers, agents and employees acting for or on behalf of any of the
foregoing entities.
B. Cellular System Assets means, for each cellular system to be
divested under this Final Judgment, all types of assets, tangible and
intangible, used by defendants in the operation of each of the cellular
systems to be divested (including the provision of long distance
telecommunications services for wireless calls), and with respect to
the divested cellular system in the St. Louis Area (defined to mean the
St. Louis MO-IL Metropolitan Statistical Area and the Missouri 8,
Missouri 12, Missouri 18, and Missouri 19 Rural Service Areas), shall
also include those assets acquired, developed, used or intended for use
in connection with the provision of local exchange telecommunications
services and long distance telecommunications services by such system.
``Cellular System Assets'' shall be construed broadly to accomplish the
complete divestitures of the entire business of one of the two cellular
systems in each of the Overlapping Cellular Markets required by this
Final Judgment and to ensure that the divested cellular systems remain
viable, ongoing businesses. In the Overlapping Cellular Markets in the
St. Louis Area, and in the Comcast Overlapping Cellular Markets
(defined as the Joliet, IL, Aurora-Elgin, IL, and Kankakee, IL
Metropolitan Statistical Areas), the Cellular System Assets to be
divested shall be those currently owned and used by Ameritech. In the
remaining Overlapping Cellular Markets, the Cellular System Assets to
be divested shall be either those currently owned and used by Ameritech
or those currently owned and used by SBC, but not both. These
divestitures of the Cellular System Assets as defined in this Section
II.B shall be accomplished by: (i) transferring to the purchaser the
complete ownership and/or other rights to the assets (other than those
assets used substantially in the operations of either defendant's
overall cellular business that must be retained to continue the
existing operations of the cellular properties defendants are not
required to divest, and that either are not capable of being divided
between the divested cellular systems and those that are not divested
or are assets that the divesting defendant and the purchaser(s) agree
shall not be divided); and (ii) granting to the purchaser an option to
obtain a non-exclusive, transferable license from defendants for
[[Page 23101]]
a reasonable period at the election of the purchaser to use any of the
divesting defendant's assets used in the operation of the cellular
system being divested, so as to enable the purchaser to continue to
operate the divested cellular systems without impairment, where those
assets are not subject to complete transfer to the purchaser under (i).
The assets acquired, developed, used or intended for use in connection
with the provision of local exchange telecommunications services and
long distance telecommunications services by the cellular system in the
St. Louis Area are all subject to complete transfer of ownership and/or
other rights under (i). Assets shall include, without limitation, all
types of real and personal property, monies and financial instruments,
equipment, inventory, office furniture, fixed assets and furnishings,
supplies and materials, contracts, agreements, leases, commitments,
spectrum licenses issued by the Federal Communications Commission
(``FCC'') and all other licenses, permits and authorizations,
operational support systems, customer support and billing systems,
interfaces with other service providers, business and customer records
and information, customer lists, credit records, accounts, and historic
and current business plans, as well as any patents, licenses, sub-
licenses, trade secrets, know-how, drawings, blueprints, designs,
technical and quality specifications and protocols, quality assurance
and control procedures, manuals and other technical information
defendants supply to their own employees, customers, suppliers, agents,
or licensees, and trademarks, trade names and service marks (except for
trademarks, trade names and service marks containing ``SBC,''
``Southwestern Bell,'' ``Ameritech,'' or ``Cellular One'') or other
intellectual property, including all intellectual property rights under
third party licenses that are capable of being transferred to a
purchaser either in their entirety, for assets described above under
(i), or through a license obtained through or from the divesting
defendant, for assets described above under (ii). Defendants shall
identify in a schedule submitted to plaintiff and filed with the Court,
as expeditiously as possible following the filing of the Complaint in
this case and in any event prior to any divestitures and before the
approval by the Court of this Final Judgment, any intellectual property
rights under third party licenses that are used by the cellular systems
being divested but that defendants could not transfer to a purchaser
entirely or by license without third party consent, and the specific
reasons why such consent is necessary and how such consent would be
obtained for each asset.
C. Overlapping Cellular Markets means the following Metropolitan
Statistical Areas and Rural Service Areas used to define cellular
license areas by the FCC, in which Ameritech and SBC each held
ownership interests in one of the cellular wireless licenses issued by
the FCC as of the date of the filing of the Complaint in this action,
or in which Comcast Cellular Corporation (which SBC has entered into an
agreement to acquire as of January 19, 1999) and Ameritech each held
ownership interests in one of the cellular wireless licenses issued by
the FCC as of the date of the filing of the Complaint in this action:
Metropolitan Statistical Areas Served by SBC and Ameritech
Chicago, IL
St. Louis, MO-IL
Gary-Hammond-East Chicago, IN
Springifeld, IL
Champaign-Urbana-Rantoul, IL
Bloomington-Normal, IL
Decatur, IL
Rural Service Areas Served by SBC and Ameritech
Illinois 2--Bureau
Illinois 5--Mason
Illinois 6--Montgomery
Missouri 8--Callaway
Missouri 12--Maries
Missouri 18--Perry
Missouri 19--Stoddard
Metropolitan Statistical Areas Served by Comcast and Ameritech
Joliet, IL
Aurora-Elgin, IL
Kankakee, IL (Comcast 10.07% interest)
D. SBC means SBC Communications Inc., a corporation with its
headquarters in San Antonio, Texas, and includes its successors and
assigns, its subsidiaries and affiliates, and its directors, officers,
managers, agents and employees acting for or on behalf of any of the
foregoing entities.
E. SBC/Ameritech Merger means the merger of SBC and Ameritech, as
detailed in the Agreement and Plan of Merger entered into by SBC and
Ameritech on May 10, 1998, for which defendants have filed a
notification pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act on July 20, 1998.
III
Applicability and Effect
A. The provisions of this Final Judgment shall be applicable to
each of the defendants, its affiliates, subsidiaries, successors, and
assigns, and its directors, officers, managers, agents, employees,
attorneys, and shall also be applicable to 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. Defendants shall require, as a condition of the sale or other
disposition to an Interim Party, which shall be defined to mean any
person other than a purchaser approved by the plaintiff pursuant to
Section IV.C, of all or substantially all of their assets, or of a
lesser business unit containing the Cellular System Assets required to
be divested by this Final Judgment, that the Interim Party agrees to be
bound by the provisions of this Final Judgment, and shall also require
that any purchaser of the Cellular System Assets agree to be bound by
Section X of this Final Judgment.
IV
Divestiture of Cellular Interests
A. Defendants Ameritech and SBC shall divest themselves, at or
before the time of consummation of the SBC/Ameritech Merger, of the
Cellular System Assets as defined above in each of the Overlapping
Cellular Markets, including both any direct or indirect financial
ownership interests and any direct or indirect role in management or
participation in control, to a purchaser or purchasers acceptable to
plaintiff in its sole discretion, or to a trustee designated pursuant
to Section V of this Final Judgment. Divestiture of the Cellular System
Assets in each of the Overlapping Cellular Markets to a purchaser or
purchasers acceptable to plaintiff in its sole discretion, as required
in Section IV.C of this Final Judgment, shall occur no later than one
hundred eighty (180) calendar days after the earlier of the following
events: (i) issuance of all final authorizations by the FCC and state
regulatory commissions that are necessary preconditions to the
consummation of the SBC/Ameritech Merger, or (ii) the consummation of
the SBC/Ameritech Merger; provided, however, that if applications have
been filed with the FCC within the one hundred eighty day period
seeking approval to assign or transfer licenses to the purchaser(s) of
the Cellular System Assets but approval of such applications has not
been granted before the end of the one hundred eighty day period, the
period shall be extended with respect to the divestiture of those
Cellular System Assets for which final FCC approval has
[[Page 23102]]
not been granted until five (5) days after such approval is received.
B. Defendants agree to use their best efforts to accomplish the
divestitures set forth in this Final Judgment (i) as expeditiously as
possible, including obtaining all necessary regulatory approvals, and
(ii) to a purchaser or purchasers at or before consummation of the SBC/
Ameritech Merger. The divestitures carried out under the terms of this
decree shall also be conducted in compliance with the applicable rules
of the FCC, including 47 CFR 20.6 (spectrum aggregation) and 47 CFR
22.942 (cellular cross-ownership). Authorization by the FCC to conduct
divestiture of a cellular system in a particular manner will not modify
any of the requirements of this decree.
C. Unless plaintiff otherwise consents in writing, the divestitures
pursuant to Section IV, or by trustee appointed pursuant to Section V
of the Final Judgment, shall be accomplished by (1) divesting all of
the Cellular System Assets in any individual Overlapping Cellular
Market entirely to a single purchaser (but Cellular System Assets in
different Overlapping Cellular Markets may be divested to different
purchasers), and (2) selling or otherwise conveying the Cellular System
Assets to the purchaser(s) in such a way as to satisfy plaintiff, in
its sole discretion, that each cellular system can and will be used by
the purchaser(s) as part of a viable, ongoing business engaged in the
provision of cellular mobile telephone service. The divestitures
pursuant to this Final Judgment shall be made to a purchaser(s) for
whom it is demonstrated to plaintiff's sole satisfaction that (1)
purchaser(s) has the capability and intent of competing effectively in
the provision of cellular mobile telephone service using the Cellular
System Assets, (2) the purchaser(s) has the managerial, operational and
financial capability to compete effectively in the provision of
cellular mobile telephone service using the Cellular System Assets, (3)
with respect to the purchaser of the Cellular System Assets in the St.
Louis Area, if such Cellular System Assets are divested to the
purchaser by Ameritech rather than by the trustee, the purchaser has
the capability of competing effectively in the provision of local
exchange telecommunications services and long distance
telecommunications services in the St. Louis Area, and (4) none of the
terms of any agreement between the purchaser(s) and either of the
defendants shall give defendants the ability unreasonably (i) to raise
the purchaser(s) costs, (ii) to lower the purchaser(s)'s efficiency,
(iii) to limit any line of business which a purchaser(s) may choose to
pursue using the Cellular System Assets (including, but not limited, to
entry into local telecommunications services on a resale or facilities
basis or long distance telecommunications services on a resale or
facilities basis), or otherwise to interfere with the ability of the
purchaser(s) to compete effectively.
D. If they have not already done so, defendants shall make known
the availability of the Cellular System Assets in each of the
Overlapping Cellular Markets by usual and customary means, sufficiently
in advance of the time of consummation of the SBC/Ameritech Merger
reasonably to enable the required divestitures to be carried out at or
before the consummation of the SBC/Ameritech Merger. Defendants shall
inform any person making an inquiry regarding a possible purchase of
the Cellular System Assets that the sale is being made pursuant to the
requirements of this Final Judgment, as well as the rules of the FCC,
and shall provide such person with a copy of the Final Judgment.
E. Defendants shall offer to furnish to all prospective purchasers,
subject to customary confidentiality assurances, access to personnel,
the ability to inspect the Cellular System Assets, and all information
and any financial, operational, or other documents customarily provided
as part of a due diligence process, including all information relevant
to the sale and to the areas of business in which the cellular system
has been engaged or has considered entering, except documents subject
to attorney-client or work product privileges, or third party
intellectual property that defendants are precluded by contract from
disclosing and that has been identified in a schedule pursuant to
Section II.B. Defendants shall make such information available to the
plaintiff at the same time that such information is made available to
any other person.
F. Defendants shall not interfere with any negotiations by any
purchaser to retain any employees who work or have worked since May 11,
1998 (other than solely on a temporary assignment basis from another
part of Ameritech or SBC) with, or whose principal responsibility
relates to, the divested Cellular System Assets.
G. To the extent that the cellular systems to be divested use
intellectual property, as required to be identified by Section II.B,
that cannot be transferred or assigned without the consent of the
licensor or other third parties, defendants shall cooperate with the
purchaser(s) and trustee to seek to obtain those consents.
H. Defendants shall preserve all records of all efforts made to
preserve and divest any or all of the Cellular System Assets required
to be divested until the termination of this Final Judgment.
V
Appointment of Trustee
A. If, at or before the consummation of the SBC/Ameritech Merger,
the defendants have not divested all of the Cellular System Assets
required to be divested to a purchaser or purchasers that have been
approved by plaintiff pursuant to Section IV.C, then, before defendants
consummate the SBC/Ameritech Merger:
1. Defendants shall notify plaintiff in writing whether the
remaining Cellular System Assets to be divested in the Overlapping
Cellular Markets, other than those in the St. Louis Area (the St.
Louis, MO-IL Metropolitan Statistical Area and the Missouri 8, Missouri
12, Missouri 18, and Missouri 19 Rural Service Areas), and the Comcast
Overlapping Cellular Markets (the Joliet, IL, Aurora-Elgin, IL, and
Kankakee, IL Metropolitan Statistical Areas), shall be those currently
owned and used by Ameritech, or those currently owned and used by SBC
(in the St. Louis Area and the Comcast Overlapping Cellular Markets,
the divested Cellular System Assets must be those owned by Ameritech),
and this written notification shall also be provided to the trustee
promptly upon his or her appointment by the Court;
2. The Court shall, on application of plaintiff, appoint a trustee
selected by the plaintiff, who will be responsible for (a)
accomplishing a divestiture of all Cellular System Assets transferred
to the trustee from defendants, in accordance with the terms of this
Final Judgment, to a purchaser or purchaser(s) approved by the
plaintiff under Section IV.C, and (b) exercising the responsibilities
of the licensee and controlling and operating the transferred Cellular
System Assets, to ensure that the cellular systems remains ongoing,
economically viable competitors in the provision of cellular mobile
wireless telecommunications services in the Overlapping Cellular
Markets, until they are divested to a purchaser or purchasers, and the
trustee shall agree to be bound by this Final Judgment;
3. Defendants shall submit a form of trust agreement (``Trust
Agreement'') to the plaintiff, which must be consistent with the terms
of this Final Judgment and which must have received approval
[[Page 23103]]
by the plaintiff, who shall communicate to defendants within ten (10)
business days approval or disapproval of that form; and
4. After obtaining any necessary approval from the FCC for the
transfer of control of the licenses of the remaining cellular systems
to the trustee, defendants shall irrevocably divest the remaining
Cellular System Assets to the trustee, who will own such assets (or own
the stock of the entity such assets, if divestiture is to be effected
by the creation of such an entity for sale to purchaser(s)) and control
such assets, subject to the terms of the approved Trust Agreement.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the cellular system(s) to be
divested, which shall be done within the time periods set forth in this
Final Judgment. Those assets shall be the Cellular System Assets for
the Ameritech cellular operations in the St. Louis Area (the St. Louis
MO-IL Metropolitan Statistical Area and the Missiouri 8, Missouri 12,
Missouri 18, and Missouri 19 Rural Service Areas) and the Comcast
Overlapping Cellular Markets (the Joliet, IL, Aurora-Elgin, IL, and
Kankakee, IL Metropolitan Statistical Areas) and the Cellular System
Assets as designated by defendants prior to the consummation of the
SBC/Ameritech Merger as set forth in Section V.A.1 for the remaining
Overlapping Cellular Markets. 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. Subject to
Section V.C of this Final Judgment, the trustee shall have the power
and authority to hire at the cost and expense of defendants any
investment bankers, attorneys, or other agents reasonably necessary in
the judgment of the trustee to assist in the divestiture and in the
management of the Cellular System Assets transferred to the trustee,
and such professionals and agents shall be accountable solely 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 plaintiff in its sole discretion, and shall have such other
powers as this Court shall deem appropriate. The defendants shall not
object to a sale by the trustee on any grounds other than the trustee's
malfeasance. Any such objections by the defendants must be conveyed in
writing to plaintiff and the trustee within ten (10) days after the
trustee has provided the notice required under Section VI of this Final
Judgment.
C. The trustee shall serve at the cost and expense of the
defendants, on such terms and conditions as the Court may prescribe,
and shall account for all monies derived from the sale of the cellular
system(s) 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 defendants and the
trust shall then be terminated. The compensation of such trustee and of
professionals and agents retained by the trustee shall be reasonable in
light of the value of the divested cellular system(s) 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.
D. The defendants shall use their best efforts to assist the
trustee in accomplishing the required divestiture, including their best
efforts to effect all necessary regulatory approvals. 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 facilties of the cellular system(s) to be divested,
and the defendants shall develop financial or other information
relevant to the business to be divested customarily provided in a due
diligence process as the trustee may reasonably request, subject to
customary confidentiality assurances. As required and limited by
Sections IV.E and F of this Final Judgment, the defendants shall permit
prospective purchaser(s) of the cellular system(s) to have reasonable
access to personnel and to make such inspection of the Cellular System
Assets to be sold and any and all financial, operational, or other
documents and other information as may be relevant to the divestiture
required by this Final Judgment.
E. After being appointed and until the divestiture of the Cellular
System Assets is complete, 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; provided,
however, that, to the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring the Cellular System Assets to be sold, 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 Cellular System Assets.
F. If the trustee has not accomplished the divestiture of all of
the Cellular System Assets within the time specified for completion of
divestiture to a purchaser or purchaser(s) under Section IV.A of this
Final Judgment, the trustee thereupon shall file promptly with this
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 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 enter thereafter such orders as it deems 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 agreed to by the plaintiff.
G. After defendants transfer the Cellular System Assets to the
trustee, and until those Cellular System Assets have been divested to a
purchaser or purchaser(s) approved by plaintiff pursuant to Section
IV.C, the trustee shall have sole and complete authority to manage and
operate the Cellular System Assets and to exercise the responsibilities
of the licensee, and shall not be subject to any control or direction
by defendants. Defendants shall not retain any economic interest in the
Cellular System Assets transferred to the trustee, apart from the right
to receive the proceeds of the sale or other disposition of the
Cellular System Assets. The trustee shall operate the cellular
system(s) as a separate and independent business entity from SBC or
Ameritech, with sole control over operations, marketing and sales. SBC
and Ameritech shall not communicate with, or attempt to influence the
business decisions of, the trustee concerning the operation and
management of the cellular systems, and shall not communicate with the
trustee concerning the divestiture of the Cellular System Asset or take
any action to influence, interfere with, or impede
[[Page 23104]]
the trustee's accomplishment of the divestitures required by this Final
Judgment, except that defendants may communicate with the trustee to
the extent necessary for defendants to comply with this Final Judgment
and to provide the trustee, if requested to do so, with whatever
resources or cooperation may be required to complete the divestitures
of the Cellular System Assets and to carry out the requirements of this
Final Judgment. In no event shall defendants provide to, or receive
from, the trustee or the cellular systems under the trustee's control
any non-public or competitively sensitive marketing, sales, or pricing
information relating to their respective cellular mobile wireless
telecommunications service businesses.
VI
Notification
A. Within two (2) business days following execution of a binding
agreement to effect, in whole or in part, any proposed divestiture
required by this Final Judgment, whichever defendant is divesting the
cellular system, or the trustee if the trustee is divesting the
cellular system, shall notify plaintiff of the proposed divestiture. If
the trustee is responsible for the divestiture, the trustee shall
similarly notify the defendants. 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 theretofore offered
to, or expressed an interested in or a desire to, acquire any ownership
interest in the Cellular System Assets that are the subject of the
binding agreement, together with full details of same.
B. Within fifteen (15) calendar days of receipt by plaintiff of
such notice, plaintiff may request from defendants, the proposed
purchaser(s), any other third party, or the trustee (if applicable),
additional information concerning the proposed divestiture and the
proposed purchaser(s) or any other potential purchasers. Defendants and
the trustee shall furnish any such additional information requested
within fifteen (15) calendar days of the receipt of the request, unless
the parties shall otherwise agree. Within thirty (30) calendar days
after receipt of the notice, or within twenty (20) calendar days after
plaintiff has been provided the additional information requested from
defendants, the proposed purchaser(s), any third party, or the trustee,
whichever is later, plaintiff shall provide written notice to
defendants and the trustee, if there is one, stating whether or not
plaintiff objects to the proposed divestiture. If plaintiff provides
written notice to defendants and the trustee, if there is one, that it
does not object, then the divestiture may be consummated subject only
to defendants' limited right to object to the sale under Section V.B of
this Final Judgment. Absent written notice that plaintiff does not
object to the proposed purchaser(s) or in the event of an objection by
plaintiff, a divestiture shall not be consummated. Upon objection by a
defendant under the proviso of Section V.B. a divestiture proposed
under Section V shall not be consummated unless approved by the Court.
VII
Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter and every thirty (30) calendar days thereafter until the
divestitures have been completed, defendants shall deliver to plaintiff
an affidavit as to the fact and manner of defendants' compliance with
this Final Judgment. With respect to the period preceding the
consummation of the SBC/Ameritech Merger, each such affidavit shall (i)
include, inter alia, the name, address, and telephone number of each
person who, at any time after the period covered by the last such
report, 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 or all of the Cellular System Assets
required to be divested, (ii) describe in detail each contact with any
such person during that period, and (iii) include a summary of the
efforts that defendants have made to solicit a purchaser(s) for the
Cellular System Assets to be divested in the Overlapping Cellular
Markets pursuant to this Final Judgment and to provide required
information to prospective purchasers.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to plaintiff an affidavit
which describes in reasonable detail all actions defendants have taken
and all steps defendants have implemented on an ongoing basis to
preserve the Cellular System Assets to be divested pursuant to this
Final Judgment. Defendants shall deliver to plaintiff another affidavit
describing any changes to the efforts and actions outlined in
defendants' earlier affidavits filed pursuant to Section VII.B of this
Final Judgment within fifteen (15) calendar days after the change is
implemented.
VIII
Financing
Defendants shall not finance all or any part of any purchase by an
acquirer made pursuant to Sections IV or V of this Final Judgment.
IX
Hold Separate Order
A. Until accomplishment of the divestitures of the Cellular System
Assets to purchaser(s) approved by plaintiff pursuant to Section IV.C,
each defendant shall take all steps necessary to ensure that each of
the cellular systems that it owns or operates in the Overlapping
Cellular Markets shall continue to be operated as a separate,
independent, ongoing, economically viable and active competitor to the
other cellular system and mobile wireless telecommunications providers
operating in the same license area; and that except as necessary to
comply with this Final Judgment, the operation of said cellular systems
(including the performance of decision-making functions relating to
marketing and pricing) will be kept separate and apart from, and not
influenced by, the operation of the other cellular system, and the
books, records, and competitively sensitive sales, marketing, and
pricing information associated with said cellular systems will be kept
separate and apart from the books, records, and competitively sensitive
sales, marketing, and pricing information associated with the other
cellular system.
B. Until the Cellular System Assets in each Overlapping Cellular
Market have been divested to purchaser(s) approved by the plaintiff, or
transferred to a trustee pursuant to Section V of this Final Judgment,
defendants shall in accordance with past practices, with respect to the
Cellular System Assets in the Overlapping Cellular Markets (including
the assets of both cellular systems in any Overlapping Cellular Market
where the cellular system that will be divested has not yet been
decided):
1. Use all reasonable efforts to maintain and increase sales of
cellular mobile telephone services, and maintain and increase
promotional, advertising, sales, and marketing support for the cellular
mobile telephone services sold by the cellular systems;
2. Take all steps necessary to ensure that the Cellular System
Assets are fully maintained in operable condition and shall maintain
and adhere to normal maintenance schedules;
3. Provide and maintain sufficient lines of sources of credit and
working
[[Page 23105]]
capital to maintain the Cellular System Assets as viable ongoing
businesses;
4. Be prohibited from, except as part of a divestiture approved by
plaintiff, removing or selling any of the Cellular System Assets, other
than sales in the ordinary course of business;
5. Be prohibited from terminating, transferring, or reassigning any
employees who work with the Cellular System Assets, except (a) in the
ordinary course of business, (b) for transfer bids initiated by
employees pursuant to defendants' regular, established job posting
policies, or (c) as necessary to promote accomplishment of defendants'
obligations under this Final Judgment; and
6. Take no action that would impede in any way or jeopardize the
sale of the Cellular System Assets.
C. Following consummation of the SBC/Ameritech Merger, defendants
shall take no action that would impede in any way or jeopardize the
sale of the Cellular System Assets.
D. Defendants shall, during the period before all Cellular System
Assets have been divested to a purchaser(s) or transferred to the
trustee pursuant to Section V of this Final Judgment, each appoint a
person or persons to oversee the Cellular System Assets owned by that
defendant, who will be responsible for defendants' compliance with the
requirements of Sections VII and IX of this Final Judgment. Such
person(s) shall not be an officer, director, manager, employee, or
agent of the other defendant.
X
Compliance Inspection
For the purposes of determining or securing compliance of
defendants with this Final Judgment, and subject to any legally
recognized privilege, from time to time.
A. Duly authorized representatives of the United States Department
of Justice, upon written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to the relevant defendant made to its principal
office, shall be permitted without restraint or interference from
defendants.
1. to have access during office hours of defendants to inspect and
copy all books, ledgers, accounts, correspondence, memoranda, and other
records and documents in the possession or under the control of
defendants, who may have counsel present, relating to any matters
contained in this Final Judgment; and
2. to interview, either informally or on the record, and to take
sworn testimony from the officers, directors, employees, or agents of
defendants, who may have counsel present, relating to any matters
contained in this Final Judgment.
B. Upon the written request of the Attorney General or the
Assistant Attorney General in charge of the Antitrust Division, made to
defendants at their principal offices, defendants shall submit written
reports, under oath if requested, relating to any of the matters
contained in this Final Judgment.
C. No information or documents obtained by the means provided in
this section X or sections VI and VII shall be divulged by the
plaintiff to any person other than a duly authorized representative of
the Executive Branch of the United States, or to the FCC (pursuant to a
customary protective order or a waiver of confidentiality by
defendants), except in the course of legal proceedings to which the
United States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If, at the time information or documents are furnished by
defendants to plaintiff, defendants represent and identify in writing
the material in any such information or documents as to which a claim
of protection may be asserted under Rule 26(c)(7) of the Federal Rules
of Civil Procedure, and mark each pertinent page of such material,
``Subject to claim of protection under rule 26(c)(7) of the Federal
Rules of Civil Procedure,'' then ten (10) calendar days' notice shall
be given by plaintiff to defendants prior to divulging such material in
any legal proceeding (other than a grand jury proceeding) to which
defendants are not a party.
XI
Retention of Jurisdiction
Jurisdiction is retained by this Court for the purposes of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders or directions as may be necessary or
appropriate for the construction or carrying out of this Final
Judgment, for the modification of any of the provisions hereof, for the
enforcement of compliance herewith, and for the punishment of any
violations hereof.
XII
Further Provisions and Termination
A. The entry of this judgment is in the public interest.
B. Unless this Court grants an extension, this Final Judgment shall
expire on the tenth anniversary of the date of its entry.
----------------------------------------------------------------------
United States District Judge.
Competitive Impact Statement
The United States, pursuant to section 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (``APPA''),
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 March 23,
1999, alleging that the proposed acquisition of Ameritech Corporation
(``Ameritech'') by SBC Communications, Inc. (``SBC'') would violate
Section 7 of the Clayton Act, 15 U.S.C. 18 by lessening competition in
the markets for wireless mobile telephone services in seventeen
cellular license areas in Illinois, Indiana and Missouri. In these
seventeen areas, which are identified in the Complaint as the
``Overlapping Markets'', Ameritech is one of two providers of cellular
mobile telephone services. The other provider of cellular mobile
telephone services in the Overlapping Markets is either SBC or Comcast
Cellular Corporation (``Comcast''), which SBC has entered into an
agreement to acquire.
Shortly before the Complaint in this matter was filed, the
Department and the defendants reached agreement on the terms of a
proposed Final Judgment, which requires SBC and Ameritech to divest one
of the cellular telephone systems in each of the Overlapping
Markets.\1\ In nine of the Overlapping Markets in Illinois and Indiana,
the defendants can choose which cellular system to divest, but in the
five Overlapping Markets in Missouri in the St. Louis area, as well as
the three Overlapping Markets in Illinois where Comcast and Ameritech
both own cellular systems, the Ameritech cellular systems must be the
ones divested. The proposed Final Judgment also contains provisions,
explained below, designed to minimize any risk of competitive harm that
otherwise might arise pending completion of the divestiture. The
proposed Final Judgment embodying the settlement, and a Stipulation by
plaintiff and defendants consenting to
[[Page 23106]]
its entry, were filed simultaneously with the Complaint.
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\1\ The proposed Final Judgment describes the seventeen license
areas containing overlapping cellular systems as the ``Overlapping
Cellular Markets.'' That term has the same meaning as the
``Overlapping Markets'' referred to in the Complaint, and the two
terms are used interchangeably herein.
---------------------------------------------------------------------------
The United States and the defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16 (``APPA''). Entry
of the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof. The United States and the defendants have also stipulated that
the defendants will comply with the terms of the proposed Final
Judgment from the date of signing of the Stipulation, pending entry of
the Final Judgment by the Court, permitting the required divestitures
to be carried out and the acquisition to be consummated prior to
completion of the APPA procedures. Should the Court decline to enter
the Final Judgment, the defendants have also committed to continue to
abide by its requirements until the expiration of time for any appeals
of such ruling.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
SBC and Ameritech are two of the remaining five Regional Bell
Operating Companies (``RBOCs'') created in 1984 by the consent decree
settling the United States' antitrust case against American Telephone &
Telegraph Co. SBC and Ameritech each provide local exchange telephone
services indistinct regions, and also provide wireless mobile telephone
services, including cellular mobile telephone services, both within and
outside of their local exchange service regions.
SBC, with headquarters in San Antonio, Texas, is the second largest
RBOC in the United States, with approximately 43 million total local
access lines. In 1998, SBC had revenues in excess of $28 billion. SBC
provides local telephone services to retail customers in Arkansas,
California, Connecticut, Kansas, Missouri, Nevada, Oklahoma, and Texas
as well as cellular mobile telephone services or other wireless mobile
telephone services in those states. SBC also provides cellular mobile
telephone services or other wireless mobile telephone services in some
areas outside its local exchange service region, including the District
of Columbia and areas within the states of Illinois, Indiana, Maryland,
Massachusetts, Rhode Island, New York, Virginia, and West Virginia.
SBC, through its Cellular One cellular systems out of region and its
in-region Southwestern Bell, Pacific Bell, Nevada Bell and SNET
cellular or other wireless mobile systems, is the nation's third
largest wireless mobile telephone service provider, serving areas with
a total population of about 82 million, and it has about 6.5 million
subscribers nationwide.
Ameritech, with headquarters in Chicago, Illinois, is the fourth
largest RBOC in the United States, with approximately 24 million total
local access lines. In 1998, Ameritech had revenues in excess of $17
billion. Ameritech provides local telephone service to retail customers
in Illinois, Indiana, Michigan, Ohio, and Wisconsin, and also provides
cellular mobile telephone service in these states, as well as in some
states outside its local exchange service region including Missouri and
Hawaii. Ameritech is a major wireless mobile telephone service
providers, serving areas with a total population of about 30 million,
and it has about 3.2 million subscribers nationwide.
On May 10, 1998, SBC and Ameritech entered into a purchase
agreement, the Agreement and Plan of Merger, whereby SBC would acquire
Ameritech in exchange for SBC stock valued at approximately $58 billion
dollars at the time of the agreement. Defendants filed a notification
of this transaction pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act, 15 U.S.C. 18a, on July 20, 1998.
SBC has also entered into an agreement as of January 19, 1999, to
acquire Comcast Cellular Corporation for $1.67 billion, which would
give SBC all of Comcast's cellular telephone systems. Notification of
this transaction also was filed pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act. By acquiring Comcast's cellular telephone
systems, SBC would become a provider of cellular mobile telephone
services in additional areas in Delaware, Illinois, Indiana, New Jersey
and Pennsylvania. The acquisition of the Comcast cellular systems would
add about 800,000 subscribers to SBC's total of wireless subscribers
nationwide.
If both transactions were consummated, the combined total of SBC's
and Ameritech's cellular and other wireless mobile telephone service
subscribers would be 10.5 million, including the number of subscribers
SBC would receive from its acquisition of Comcast.
B. Wireless Mobile Telephone Services
Wireless mobile telephone services permit users to make and receive
telephone calls, using radio transmissions, while traveling by car or
by other means. The mobility afforded by this service is a valuable
feature to consumers, and cellular and other wireless mobile telephone
services are commonly priced at a substantial premium above landline
services. In order to provide this capability, wireless carriers must
deploy an extensive network of switches and radio transmitters and
receivers, and interconnect this network with the networks of local and
long distance landline carriers, and with the networks of other
wireless carriers. In 1998, revenues from the sale of wireless mobile
telephone services totaled approximately $30 billion in the United
States.
Initially, wireless mobile telephone services were provided
principally by two cellular systems in each license area, as was the
case in the Overlapping Markets. Cellular licenses were awarded by the
Federal Communications Commission (``FCC'') beginning in the early
1980s, within any given Metropolitan Statistical Area (``MSA'') or
Rural Service Area (``RSA'').\2\ Providers of Specialized Mobile Radio
(``SMR'') services typically were also authorized to operate with some
additional spectrum in these areas, including the Overlapping Markets.
---------------------------------------------------------------------------
\2\ 25 MHZ of spectrum was allocated to each cellular system in
an MSA or RSA. MSAs are the 306 urbanized areas in the United States
defined by the federal government, used by the FCC to define the
license areas for urban cellular systems. RSAs are the 428 areas
defined by the FCC used to define the license areas for rural
cellular systems outside of MSAs.
---------------------------------------------------------------------------
In 1995 the FCC allocated (and subsequently issued licenses for)
additional spectrum for the provisions of PCS, a category of services
which includes wireless mobile telephone services comparable to those
offered by cellular carriers. In 1996 one SMR spectrum licensee began
to use its SMR spectrum to offer wireless mobile telephone services,
comparable to that offered by cellular providers and bundled with
dispatch services, in a number of areas including some of the
Overlapping Markets. The areas for which PCS providers are licensed
differ from the cellular MSAs and RSAs but overlap with them.\3\
However, in many areas, including the Overlapping Markets, not all of
the PCS license holders have started to offer services or
[[Page 23107]]
have even begun to construct the facilities necessary to begin offering
service. The PCS providers have tended to enter first in the largest
cities, entering in smaller markets only later and not to as great an
extent. Moreover, even in those are where one or more PCS providers
have constructed their networks and have started to offer service or
some SMR spectrum is also used for wireless mobile telephone services,
including the Overlapping Markets, the incumbent cellular providers,
such as SBC and Ameritech, still typically control the great majority
of the market.
---------------------------------------------------------------------------
\3\ There can be as many as three PCS providers, with 30 MHZ of
spectrum each, authorized to serve areas considerably larger than a
single MSA or RSA. In addition, there can be as many as three PCS
providers, with 10 MHZ of spectrum each, licensed to provide service
in smaller areas that overlap more closely with a given MSA or RSA.
---------------------------------------------------------------------------
C. Anticompetitive Consequences of the Proposed Acquisition
SBC and Ameritech are the sole providers of cellular mobile
telephone services, and the two primary providers of all wireless
mobile telephone services, in fourteen cellular license areas in the
states of Illinois, Indiana, and Missouri. These fourteen areas are
referred to in the Complaint as the ``SBC/Ameritech Overlapping
Markets.'' SBC and Ameritech are direct competitors in the markets for
wireless mobile telephone services in the SBC/Ameritech Overlapping
Markets.
In three cellular license areas in the state of Illinois, the
cellular systems owned entirely or in part by Ameritech and Comcast are
the sole providers of cellular mobile telephone services, and the two
primary providers of all wireless mobile telephone services. These
three areas, which are in addition to the fourteen cellular license
areas where Ameritech and SBC own overlapping cellular systems, are
referred to in the Complaint as the ``Comcast/Ameritech Overlapping
Markets.'' Comcast and Ameritech are direct competitors in the markets
for wireless mobile telephone services in the Comcast/Ameritech
Overlapping Markets. SBC already manages the Comcast cellular systems
in the Comcast/Ameritech Overlapping Markets. When the Comcast
acquisition is consummated, SBC and Ameritech will own, entirely or in
part, the overlapping cellular systems in these additional three
cellular license areas in the state of Illinois.
In the Overlapping Markets, the population potentially addressable
by cellular mobile telephone systems totals about 11 million, including
over 10.8 million in the SBC/Ameritech Overlapping Markets and nearly
200,000 in the Comcast/Ameritech Overlapping Markets. The Overlapping
Markets are listed below:
SBC/Ameritech Overlapping Markets
MSAs
Chicago, IL
St. Louis, MO-IL
Gary-Hammond-East Chicago, IN
Springfield, IL
Champaign-Urbana-Rantoul, IL
Bloomington-Normal, Il
Decatur, IL
RSAs
Illinois 2--Bureau
Illinois 5--Mason
Illinois 6--Montgomery
Missouri 8--Callaway
Missouri 12--Maries
Missouri 18--Perry
Missouri 19--Stoddard
Comcast/Ameritech Overlapping Markets
MSAs
Joliet, IL
Aurora-Elgin, IL
Kankakee, IL (Comcast has a 10.07% interest in this cellular system)
If SBC's plan to acquire Ameritech were consummated, only one
provider of cellular mobile telephone services would remain available
to consumers in the Overlapping Markets. SBC would own both cellular
systems in the SBC/Ameritech Overlapping Markets. In addition, because
SBC already manages the Comcast cellular systems in Illinois, SBC would
operate both of the cellular systems in the Comcast/Ameritech
Overlapping Markets if SBC were to acquire Ameritech. If both the
Comcast and Ameritech acquisitions were consummated, SBC would own,
entirely or in part, both of the cellular systems in the Comcast/
Ameritech Overlapping Markets.
Therefore, SBC's acquisition of Ameritech would cause the level of
concentration among firms providing wireless mobile telephone services
in the Overlapping Markets to increase significantly. Already a high
level of concentration in the provision of wireless mobile telephone
services exists in the Overlapping Markets. In the SBC/Ameritech
Overlapping Markets, the individual market shares of SBC and Ameritech,
measured on the basis of the numbers of subscribers or wireless lines
served, range from 30% to over 50%. The combined market share of SBC
and Ameritech in the provision of wireless mobile telephone services is
in the range of 80 to 90%, taking into account other operational
wireless mobile competitors.\4\ As measured by the Herfindahl-Hirschman
Index (HHI), which is commonly employed by the Department of Justice in
merger analyses and is explained in more detail in Appendix A to the
Complaint, concentration in these markets is already in the range of
3200 to 4100, well above the 1800 threshold at which the Department
normally considers a market to be concentrated. After the merger, the
HHI in these markets will greatly increase and will range from 6400 to
8100. In the Comcast/Ameritech Overlapping Markets, the combined market
share of Comcast and Ameritech similarly is much larger than that of
all other wireless mobile competitors, and the merger would similarly
lead to large increases in concentration.
---------------------------------------------------------------------------
\4\ The United States has used subscriber data here to estimate
market shares because those data are more readily available. In some
contexts, however, other measures of market share may provide a more
precise indication of market concentration or a firm's competitive
significance. The use of subscriber data here is reasonable, given
that measuring market share in other ways would not affect the
Department's conclusions. The market shares of SBC and Ameritech
would also be very high if measured on a variety of dimensions other
than subscribers or lines served, such as revenues or volumes of
traffic handled.
---------------------------------------------------------------------------
Competition between SBC and Ameritech, and between Comcast and
Ameritech, as the two largest providers of wireless mobile telephone
services in the Overlapping Markets, has resulted in lower prices and
higher quality of service in these markets than would otherwise have
existed absent such competition. If SBC and Ameritech were to merge,
the competition between SBC and Ameritech and between Comcast and
Ameritech in wireless mobile telephone services in these markets would
be eliminated, and competition overall for wireless mobile
telecommunications services would be substantially lessened in the
Overlapping Markets by SBC's acquisition of Ameritech. As a result of
the loss in competition between SBC and Ameritech, and between Comcast
and Ameritech, there would be an increased likelihood both of
unilateral actions by the combined firm in these markets to increase
prices, diminish the quality or quantity of service provided, or
refrain from making investments in network improvements, and of
coordinated interaction among the limited number of remaining
competitors that could lead to similar anticompetitive results.
Competition would also be adversely affected in another, related
way by the consummation of SBC's acquisition of Ameritech. In the SBC/
Ameritech Overlapping Markets in the St. Louis area, including the St.
Louis MSA and the four RSAs in Missouri, Ameritech planned, prior to
its announcement of its agreement to be acquired by SBC, to
[[Page 23108]]
provide local exchange and long distance telephone services in SBC's
local telephone service area. Ameritech would have competed with SBC
primarily by selling bundled packages of such local exchange and long
distance telephone services, together with its cellular mobile
telephone service, to existing Ameritech residential cellular
customers. There is no alternative source of such a bundled product in
the St. Louis area at present. Ameritech expected that its plan would
enhance its ability to retain existing cellular customers. Ameritech
had made extensive preparations for entry, over the course of more than
a year, and was ready to begin providing local exchange and long
distance telephone services to its cellular mobile telephone customers
at the time it agreed to be acquired by SBC. Shortly thereafter,
because it was being acquired by SBC, Ameritech decided not to
implement its local exchange and long distance entry plans in the St.
Louis area. The consummation of SBC's acquisition of Ameritech thus
would preclude such competition by Ameritech.
It is unlikely that entry within the next two years into wireless
mobile telephone services in the Overlapping Markets would be
sufficient to mitigate the competitive harm resulting from this
acquisition, if it were to be consummated.
For these reasons, the United States concluded that the merger as
proposed may substantially lessen competition, in violation of Section
7 of the Clayton Act, in the provision of wireless mobile telephone
services in the Overlapping Markets.
III. Explanation of the Proposed Final Judgment
A. The Divestiture Requirement
The proposed Final Judgment will preserve competition in the sale
of mobile wireless services in the Overlapping Markets by requiring the
defendants to divest one of their two cellular telephone systems in
each of the Overlapping Markets. This divestiture will eliminate the
change in market structure caused by the merger.
The divestiture requirements of the proposed Final Judgment, as
stated in Sections IV.A and II.B, direct Ameritech to divest its
cellular telephone systems in St. Louis and other markets in Missouri,
as well as its cellular telephone systems in the three markets in
Illinois where is overlaps with Comcast. In the remaining markets in
Illinois and Indiana where SBC's and Ameritech's cellular telephone
systems overlap, SBC and Ameritech may choose which of the two systems
in each market must be divested. Section IV.C permits the different
cellular systems in separate Overlapping Cellular Markets to be
divested to different purchasers, but requires that, for any individual
cellular system, the Cellular System Assets be divested entirely to a
single purchaser, unless the United States otherwise consents in
writing.
In the Comcast/Ameritech Overlapping Markets, because Comcast is
not a party to the consent decree, the necessary divestitures to avoid
loss of competition between the overlapping cellular systems could be
effected only through Ameritech. Comcast was not considered a necessary
party to this action because SBC's acquisition of Comcast, standing
alone, is not a competitive problem. A violation of Section 7 of the
Clayton Act only arises in the three Comcast/SBC Overlapping Markets
when the Comcast acquisition is considered together with SBC's merger
with Ameritech.
The reason for requiring the divestiture of the five Ameritech
cellular systems in the St. Louis area is different, arising from
Ameritech's plans prior to the merger to compete with SBC in providing
local exchange and long distance telephone services together with its
cellular mobile telephone services in St. Louis. Ameritech had made
extensive preparations to provide local exchange and long distance
services in SBC's local telephone service area, over the course of the
year preceding the announcement of the merger, and was ready to launch
its bundled offering of these services together with cellular telephone
service at the time the merger was announced. In contrast, the SBC
cellular systems in the St. Louis area, being owned by the incumbent
local telephone service provider, had made no preparations to offer
local exchange telephone service competition in any of the relevant
markets in Missouri.
The loss of competition in cellular mobile telephone services
between the Ameritech and SBC cellular systems in Missouri, standing
alone, required one of the two cellular systems to be divested, as in
the other Overlapping Markets. However, a buyer of the Ameritech
cellular systems would be much more favorably positioned to enter
rapidly into local exchange and long distance telephone services in St.
Louis and provide a bundled product together with its cellular services
than would a buyer of the SBC cellular systems in the St. Louis area.
Therefore, in order to remedy this aspect of the competitive harm
arising from the merger, the United States concluded that the
divestiture of the Ameritech cellular systems in the St. Louis area,
together with ``those assets acquired, developed, used or intended for
use in connection with the provision of local exchange
telecommunications services and long distance telecommunications
services by such system[s],'' would be necessary, as required by
Section II.B of the proposed Final Judgment.
The proposed Final Judgment's divestiture provisions are intended
to accomplished the ``complete divestiture of the entire business of
one of the two cellular systems in each of the Overlapping Cellular
Markets,'' as Section II.B states. Section II.B also specifies in
detail the types of assets to be divested, which collectively are
described throughout the consent decree as ``Cellular System Assets,''
and addresses some special circumstances concerning the divestiture of
those assets. In all of the Overlapping Markets, Cellular System Assets
means all types of assets, tangible and intangible, used by defendants
in the operation of each of the cellular systems to be divested,
including the provision of long distance telecommunications service for
wireless calls. For the five Ameritech cellular systems to be divested
in the St. Louis area, additional types of assets related to
Ameritech's plans for providing local exchange and long distance
telecommunications services are also included, as described above.
Section II.B enumerates in detail, without limitation, particular types
of assets covered by the divestiture requirement.
For the most part, the divesting defendant is required to transfer
to the purchaser the complete ownership and/or other rights to the
Cellular System Assets. However, the merged firm will retain a number
of other cellular systems in areas that do not overlap, and prior to
the merger each defendant may have had certain assets that were used
substantially in the operations of its overall cellular business and
that must be retained to some extent to continue the exiting operations
of the cellular properties not being divested. Section II.B permits
special divestiture arrangements for such assets either if they are not
capable of being divided between the divested and retained cellular
systems, or if the divesting defendant and the purchaser agree not to
divide them. For these assets, the divestiture requirement is satisfied
if the divesting defendant grants to the purchaser, at the election of
the purchurer, an option to obtain a non-exclusive, transferable
license for a reasonable period to use the assets in
[[Page 23109]]
the operation of the cellular system being divested, so as to enable
the purchaser to continue to operate the divested cellular systems
without impairment. None of the Cellular System Assets associated with
Ameritech's plans to provide local exchange and long distance
telecommunications service in the St. Louis are covered by this
licensing requirement, because all of those assets are required to be
transferred completely to the purchaser.
The definition of Cellular system Assets in section II.B contains
the special provisions relating to intellectual property. One addresses
intellectual property rights that defendants may have under third-party
licenses that could not be transferred to a purchaser entirely or by
license without the consent of the third-party licensor. If any such
assets are used by the cellular systems being divested, defendants must
identify them in a schedule submitted to plaintiff and filed with the
Court as expeditiously as possible following the filing of the
Complaint, in any event, prior to any divestiture and before the Court
approves the proposed Final Judgment. Defendants must explain the
necessary consents and how a consent would be obtained for each asset.
This proviso is not intended to afford defendants any opportunity to
withhold intellectual property rights over which they have any control,
which could impair the ability of a purchaser to use the divested
cellular system to compete effectively. It relates only to intellectual
property assets that defendants have no power to transfer themselves,
and defendants must do all that is possible to transfer the entire
business of the divested cellular systems. To make this clear, section
IV.G obligates defendants to cooperate with any purchaser as well as a
trustee, if any, to seek to obtain the necessary third-party consents,
if any assets require such consents before they may be transferred to a
purchaser.
The second proviso relates to certain specific trademarks, trade
names and service marks. Section II.B, defining the Cellular System
Assets to be divested, generally requires the divestiture of
trademarks, trade names and service marks, with the four specified
exceptions of ones containing ``SBC'', ``Southwestern Bell'',
``Ameritech'', or ``Cellular One,'' which are the names under which the
defendants' retained cellular systems, or their corporate parents, do
business. Such trademarks, trade names and service marks, like other
assets, are either to be divested in their entirety or in the case of
such marks and names that must be retained to continue the existing
operations of defendants' remaining cellular properties, and that are
not capable of being divided or that the divesting defendant and
purchaser agree not to divide, are to be made available to the
purchaser through a non-exclusive, transferable license. Section II.B
therefore creates an obligation on the part of SBC and Ameritech to
license the ``Clearpath'' trade name, currently used in connection with
Ameritech's digital cellular services, to a purchaser of Cellular
System Assets currently owned by Ameritech. The Department has been
advised by Ameritech, and recognizes on that basis, that (1)
Ameritech's use of the trade name ``Clearpath'' is subject to a letter
agreement between Ameritech and Unisys Corporation, (2) any use by a
purchaser of Ameritech Cellular System Assets would be pursuant to a
license agreement which the purchaser would need to enter into with SBC
and/or Ameritech; and (3) such a license agreement would need to
contain terms and conditions that would protect SBC and Ameritech from
claims by Unisys related to the use of that trade name.
Section IV contains other provisions to facilitate divestiture,
including notification of the availability of the Cellular System
Assets for purchase in Section IV.D, access to information about the
Cellular System Assets in Section IV.E, and preservation of records in
Section IV.H. In addition, to ensure that a purchaser will be able to
operate the divested cellular systems without impairment, section IV.F
prohibits defendants from interfering with a purchaser's negotiations
to retain any employees who work or have worked since the date of the
announcement of the merger with the Cellular System Assets, or whose
principal responsibility relates to the Cellular System Assets.\5\
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\5\ There is a limited exception for employees working with the
Cellular System Assets solely on a temporary basis from another part
of SBC or Ameritech.
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B. Timing of Divestiture
In antitrust cases involving mergers in which the United States
seeks a divestiture remedy, it requires completion of the divestiture
within the shortest time period reasonable under the circumstances. The
proposed Final Judgment in this case requires, in section IV.A, that
the divestitures of the Cellular System Assets in the seventeen
Overlapping Cellular Markets to a purchaser or purchasers approved by
the United States must be completed within 180 days of the time that
SBC and Ameritech consummate their merger, or the time that they
receive the final regulatory approvals from the FCC and state
regulatory commissions that are necessary preconditions to consummation
of the merger, whichever is earlier. These alternative starting dates
were chosen because, at the time SBC and Ameritech entered into the
Stipulation and agreed to the proposed Final Judgment, the FCC and two
state regulatory commissions, the Illinois Commerce Commission and the
Ohio Public Utilities Commission, were still reviewing SBC's
acquisition of Ameritech. The approval of these three regulatory bodies
is necessary for the acquisition to be consummated.\6\ If SBC's
acquisition of Ameritech were not consummated because any of those
regulatory bodies denied the necessary approval, defendants would not
be required to divest their cellular systems in the Overlapping
Markets.
---------------------------------------------------------------------------
\6\ The merger is also being reviewed by other state
telecommunications regulators, e.g., in Indiana, but the United
States understands that prior approval by other state regulators is
not necessary for the merger to proceed.
---------------------------------------------------------------------------
Even though approval by these three regulatory bodies is a
necessary precondition for the merger to be consummated, after an
initial favorable decision by any of those regulatory bodies, a brief
period of time would exist for reconsideration before the decision
would become final Defendants could agree to consummate their merger
based on the initial decisions, before the period for reconsideration
has run. Therefore, the time for divestiture has been linked to the
first event that would allow the acquisition to take place, either the
last of the three necessary final regulatory approvals or a decision by
the defendants to consummate the merger without any or all of these
final regulatory approvals.
Defendants are also required by Section IV.B to use their best
efforts to accomplish the divestitures of the Cellular System Assets in
the Overlapping Cellular Markets to a purchaser or purchasers at or
before the consummation of the merger of SBC and Ameritech, and to do
so as expeditiously as possible, including obtaining all required
regulatory approvals.
In addition, the proposed Final Judgment requires in Section IV.B
that defendants comply with all of the applicable rules of the FCC in
carrying out the divestitures. These rules include 47 CFR 20.6
(spectrum aggregation) and 47 CFR 22.942 (cellular cross-
[[Page 23110]]
ownership).\7\ These FCC requirements may add to, but cannot subtract
from or impair, the requirements of this proposed Final Judgment, since
Section IV.B specifies that authorization by the FCC to conduct
divestiture of a cellular system in a particular manner will not modify
any of the requirements of the decree. The provisions of the proposed
Final Judgment have been designed to avoid any conflict with the FCC's
rules. In particular, the inclusion of the trusteeship requirements
discussed below ensures that impermissible control of both cellular
systems by the merged company should not arise even if defendants were
to consummate their merger during the 180-day period authorized for
divestiture, at a time when some of the cellular systems have not yet
been sold to any purchaser approved by the Department of Justice. Since
the FCC's approval is required for the transfer of the cellular system
licenses to a purchaser, Section IV. A provides one exception to the
180-day divestiture period. If applications for transfer of a cellular
license have been filed by the FCC within the 180 day period, but the
FCC has not granted approval before the end of that time, the period
for divestiture of the specific Cellular System Assets covered by the
license that cannot yet be transferred shall be extended until five
days after FCC's approval is received. This extension is to be applied
only to the individual cellular system affected by the delay in
approval of the license transfer and does not entitle defendants to
delay the divestiture of any other Cellular System Assets for which
license transfer approval has been granted.
---------------------------------------------------------------------------
\7\ The FCC's spectrum aggregation rules, in 47 CFR 20.6, do not
permit a licensee to have an attributable interest in more than 45
MHz of spectrum licensed for cellular, PCS or SMR with significant
overlap in any geographic area. The FCC will attribute an interest
if it is controlling, or if in most cases it is 20% or more of the
equity, outstanding stock or voting stock of the licensee. The FCC's
cellular cross-ownership rules, in 47 CFR 22.942, also prohibit a
licensee or any person controlling a licensee from having a direct
or indirect ownership interest of more than 5% in both cellular
systems in an overlapping cellular geographic service area, unless
such interests pose ``no substantial threat to competition.''
---------------------------------------------------------------------------
C. Use of a Trustee Subsequent to Consummation of the Acquisition
The proposed Final Judgment provides in Section IV.A that, at or
before the time that SBC and Ameritech consummate their merger, they
must divest the Cellular System Assets in each of the Overlapping
Cellular Markets, either to purchasers acceptable to plaintiff in its
sole discretion, or to a trustee designated pursuant to Section V of
the Final Judgment. As part of this divestiture, SBC and Ameritech must
relinquish any direct or indirect financial ownership interests and any
direct or indirect role in management or participation in control.
Thus, if SBC and Ameritech want to consummate their merger before they
have completed the divestitures of Cellular System Assets to approved
purchasers, by the time of consummation, they must have transferred any
remaining Cellular System Assets to a trustee chosen by the Department
of Justice. Pursuant to Section V of the proposed Final Judgment, the
trustee will own and control the systems until they are sold to a final
purchaser, subject to safeguards to prevent SBC and Ameritech from
influencing their operation.
This trust arrangement is an option available to defendants, to
enable them to consummate their merger once all regulatory approvals
have been received, even if the 180-day period for divestitures has not
yet run and some Cellular System Assets that must be divested have not
yet been purchased. It is not the preferred option, however, as
indicated by the requirement in Section IV.B that defendants use their
best efforts to accomplish the divestitures before consummation of the
merger. The overall period of 180 days to complete the divestitures
continues to apply, whether the divestitures are made by SBC and
Ameritech or by the trustee. In other words, the transfer of any
Cellular System Assets to the trustee does not extend the time to
complete the divestitures. The trustee simply has whatever part of the
180-day period remains from the time SBC and Ameritech transfer the
cellular systems. If, for any reason, the trustee has not completed all
of the required divestitures to purchasers within this period, the
trustee is required, under Section V.F, to report to the Court on the
efforts made and the reasons why divestiture has not been accomplished,
but the trust period may be extended by the Court only if plaintiff
agrees to the period involved.
Section V details the requirements for the establishment of the
trust, the selection and compensation of the trustee, the
responsibilities of the trustee in connection with divestiture and
operation of the Cellular System Assets, and the termination of the
trust. If defendants have not divested all of their Cellular System
Assets in the Overlapping Cellular Markets to approved purchasers by
the time of consummation of the merger, Section V.A requires that
before consummating the merger: (1) defendants must have notified the
United States which Cellular System Assets in each Overlapping Market
will be divested; (2) the Court must have appointed a trustee, which
shall be selected by the United States; (3) defendants must have
submitted a form of Trust Agreement consistent with the terms of the
Final Judgment, and the form agreement must have received approval by
the United States; and (4) after receiving FCC approval for the license
transfers, defendants must irrevocably divest the unsold Cellular
System Assets to the trustee. As a practical matter, the process of
establishing a trust arrangement for any Cellular System Assets will
take some time, so if defendants plan to make use of this option, they
will need to begin preparations for it soon after the 180 days has
begun to run.
The trustee will have the obligation and the sole responsibility,
under Section V.B, for the divestiture of any transferred Cellular
System Assets. The trustee has the authority to accomplish divestitures
at the earliest possible time and ``at the best price then obtainable
upon a reasonable effort by the trustee.'' The defendants are not
entitled to object to divestiture based on the adequacy of the price
the trustee obtains or any other ground, unless the trustee's conduct
amounts to malfeasance. The terms of the trustee's compensation, under
Section V.C, will provide incentives based on the price and terms of
the divestiture and the speed with which it is accomplished. As
provided by Sections V.B and V.C., defendants will pay the compensation
and expenses of the trustee, and of any investment bankers, attorneys
or other agents that the trustee finds reasonably necessary in his
judgment to assist in the divestiture and the management of the
Cellular System Assets.
The trusteeship mechanism has been used by the FCC, in a variety of
contexts, to provide a short period of time in which to complete a sale
of a spectrum licensee that must be divested, while permitting the
broader merger or acquisition that necessitates the divestiture to go
forward. In this context, the critical feature of the trusteeship
arrangement is that the trustee will not only have responsibility for
sale of the Cellular System Assets, but will also be the authorized
holder of the cellular system license, with full responsibility for the
operations, marketing and sales of the cellular system to be divested,
and will not be subject to any control or direction by defendants. The
defendants will no longer have any role in the ownership, operation or
management of the Cellular
[[Page 23111]]
System Assets to be divested following consummation of their merger, as
provided by Section V.G, other than the right to receive the proceeds
of the sale, and certain obligations to provide cooperation to the
trustee in order to complete the divestiture, as indicated in Section
V.D. Defendants are precluded under Section V.G from communicating with
the trustee, or seeking to influence the trustee, concerning the
divestiture or the operation and management of the cellular systems
transferred, apart from the limited communications necessary to carry
out the Final Judgment and to provide the trustee with the necessary
resources and cooperation to complete the divestitures. Defendants and
the trustee are subject to an absolute prohibition on exchanging any
non-public or competitively sensitive marketing, sales or pricing
information relating to either of the cellular system businesses in the
Overlapping Markets. These safeguards will protect against any
competitive harm that could arise from coordinated behavior or
information sharing between the two cellular systems after the merger,
during the limited period while sale of the Cellular System Assets is
not yet complete. They ensure that the trusteeship arrangement is
consistent with the FCC's rules.
D. Criteria for the United States' Approval of Purchasers
Under the proposed Final Judgment, the United States has an
important role in the approval of purchasers for each of the divested
cellular systems, to ensure that the purchasers chosen by the
defendants or the trustee are adequate from a competitive viewpoint.
The United States' approval or rejection of a purchaser is at its sole
discretion, as Section IV.A specifies, but the consent decree also
embodies certain criteria that the United States will apply in making
the approval decision.
Specifically, Section IV.C of the proposed Final Judgment requires
that the divestitures of Cellular System Assets be made to a purchaser
or purchasers for whom it is demonstrated to plaintiff's sole
satisfaction that: (1) the purchaser(s) has the capability and intent
of competing effectively in the provision of cellular mobile telephone
service using the Cellular System Assets; (2) the purchaser(s) has the
managerial, operational and financial capability to compete effectively
in the provision of cellular mobile telephone service using the
Cellular System Assets; (3) with respect to the purchaser of the
Cellular System Assets in the St. Louis Area, if such Cellular System
Assets are divested to the purchaser by Ameritech rather than by the
trustee, the purchaser has the capability of competing effectively in
the provision of local exchange telecommunications services and long
distance telecommunications services in the St. Louis Area, and (4)
none of the terms of any agreement between the purchaser(s) and either
of the defendants shall give defendants the ability unreasonably (i) to
raise the purchaser(s)'s costs, (ii) to lower the purchaser(s)'s
efficiency, (iii) to limit any line of business which a purchaser(s)
may choose to pursue using the Cellular System Assets (including, but
not limited, to entry into local telecommunications services on a
resale or facilities basis or long distance telecommunications services
on a resale or facilities basis), or otherwise to interfere with the
ability of the purchaser(s) to compete effectively.
All of these criteria must be satisfied whether the divestiture is
accomplished by defendants or the trustee, with the exception of (3),
which applies only to divestitures made by defendants and not if the
trustee assumes control over the Cellular System Assets in the St.
Louis Area. In the case of any divestiture, by defendants or the
trustee, it is important to ensure that the ongoing cellular businesses
go to purchasers with the capability and intent of operating them as
effective competitors in the lines of business they already serve, and
that there are no conditions restricting competition in the terms of
the sale. The United States, however, viewed the issue of potential
competition in local exchange and long distance telecommunications
services in the St. Louis Area somewhat differently. Defendants have
incentives to divest Ameritech's Missouri cellular properties in a way
that could minimize the risk of their use for such competition to SBC,
while a trustee charged with seeking the best price obtainable would
not have similar incentives. Also, the United States has sought only to
ensure that the purchaser of Ameritech's St. Louis-area cellular
systems would have the capability to compete effectively in these
additional lines of business; it has not insisted on proof of intent to
compete. Such claims of intent are inherently less subject to
verification when dealing with a new line of business, and, unlike the
situation with an ongoing profitable business, a purchaser could
reasonably decide to enter local exchange and long distance
telecommunications services in St. Louis in a somewhat different way
than Ameritech had planned to do, or not to pursue those lines of
business, depending on their economic attractiveness.
In exercising its sole discretion to approve a purchaser under
Section IV.C, the United States will take into account the following
considerations. In evaluating the capability of a purchaser to provide
cellular mobile telephone service under (1) or (2), or local exchange
telecommunications services and long distance telecommunications
services under (3), the United States will consider the capabilities
not only of the immediate purchaser of Cellular System Assets, but also
of any parent, subsidiary, corporate affiliate or partner of the
immediate purchaser, to the extent that the United States is satisfied
that such capabilities of related entities would actually be available
to the immediate purchaser to provide the services. Moreover, in
evaluating a purchaser's capability to provide services under (1), (2),
or (3), the United States will consider all of the assets and
capabilities of the purchaser (including their affiliated entities
where it is appropriate to take these into account, as discussed above)
that are actually available at present to provide the relevant
services, including, without limitation, financial assets, the assets
being acquired from SBC and/or Ameritech, and the experience of members
of the purchaser's management team. The capability to compete
effectively in providing both local exchange service and long distance
service under (3) can be on either a resale or facilities basis. The
United States would look most favorably, in assessing capability, on
those purchasers (including their affiliated entities where these are
appropriate to take into account, as discussed above) that have
significant experience in providing cellular mobile telephone service
for purposes of (1) and (2), and on those purchasers that have
significant experience in providing local exchange and long distance
services for purposes of (3). Conversely, a purchaser without such
experience would need to make a more compelling demonstration to
satisfy the United States. The United States' evaluation of a purchaser
with limited or no experience in providing the relevant services would
take into account the nature and extent of efforts made by the
defendants (or trustee, if applicable) to find purchasers with more
substantial experience. A conclusion by the United States that a
purchaser satisfies (1) and (2) is relevant to whether (3) is also
satisfied, but not determinative, since (3) represents an additional
requirement that must be met by a purchaser of the St. Louis Area
[[Page 23112]]
Cellular System Assets. No single factor or group of factors is
determinative in the United States' exercise of its sole discretion in
evaluation of a purchaser, and none of these considerations necessarily
predetermines the outcome of the United States' review of any
particular purchaser.
E. Other Provisions of the Decree
Section III specifies the persons to whom the Final Judgment is
applicable, and provides for the Final Judgment to be applicable to
certain Interim Parties to whom defendants might transfer the Cellular
System Assets, other than purchasers approved by the United States.
Section VI obliges defendants, or the trustee if applicable, to
notify the United States of any planned divestiture of Cellular System
Assets within two business days of executing a binding agreement with a
purchaser. It enables the United States to obtain information to
evaluate the chosen purchaser as well as other prospective purchasers
who expressed interest and establishes procedure for the United States
to notify defendants and the trustee whether it objects to a
divestiture. The United States' notification of its lack of objection
is necessary for a divestiture to proceed. This section also provides
for an objection by defendants to a sale by the trustee under the
limited situation of alleged malfeasance, but in that case it is
possible for the Court to approve a sale over defendants' objection.
Section VII establishes affidavit requirements for defendants to
report to the United States on their compliance with the proposed Final
Judgment, their activities in seeking to divest the Cellular System
Assets prior to consummating their merger, and their actions to
preserve the Cellular System Assets to be divested. Under V.E, the
trustee also has monthly reporting obligations concerning the efforts
made to divest the Cellular System Assets.
Section VIII prohibits defendants from financing all or any part of
a purchase made by an acquirer of the Cellular System Assets, whether
the divestiture is carried out by defendants or by the trustee.
Section IX, the Hold Separate Order, contains important
requirements concerning the operation of the cellular systems before
divestiture is complete, and the preservation of the Cellular System
Assets as a viable, ongoing business. The obligations of Section IX.A
fall on both defendants and both cellular systems in any Overlapping
Market, obliging them to ensure that such cellular systems continue to
be operated as separate, independent, ongoing, economically viable and
active competitors to the other cellular system and all other wireless
mobile telecommunications providers in the same area. Section IX.A
requires separation of the operations of the two cellular systems and
their books, records and competitively sensitive information. The
requirements of Section IX.A both serve to ensure that defendants
maintain their two cellular systems in the Overlapping Markets as fully
separate competitors prior to consummating their merger,
notwithstanding their expectations that the merger will take place, and
reinforce the provisions of Section V.G concerning the separation of
defendants and the trustee after the merger is consummated but while
there are still Cellular System Assets awaiting sale.
Because SBC already operates the three Comcast systems in the
Comcast/Ameritech Overlapping Markets, and the hold separate
requirements of Section IX.A of the Final Judgment apply to ``each of
the cellular systems'' that either defendant ``owns or operates'' in
the Overlapping Markets, SBC is obliged to ensure that the three
Comcast systems are operated in a way that complies with Section IX.A,
pending divestiture of the Ameritech systems in these areas to
purchasers approved by the Department of Justice.
Section IX.B, in contrast, applies only to the Cellular System
Assets to be divested and to the period before consummation of the
merger, while defendants still control those assets. It requires the
defendant whose assets will be divested (or both, if it has not yet
been decided which system will be divested in a particular market) to
take certain specified steps to preserve the assets in accordance with
past practices. These steps include maintaining and increasing sales,
maintaining the assets in operable condition, providing sufficient
credit and working capital, not removing the assets, not terminating,
transferring or reassigning employees who work with the assets (with
certain limited exceptions), and not taking any actions to impede or
jeopardize the sale of the assets. Section IX.C similarly obliges
defendants not to take any actions that would impede or jeopardize the
sale of the assets after the merger has been consummated but while
Cellular System Assets remain in the control of a trustee. Finally,
Section IX.D obliges each defendant, during the period while they still
control Cellular System Assets, to appoint persons not affiliated with
the other defendant to oversee the Cellular System Assets to be
divested and to be responsible for compliance with the Final Judgment.
In order to ensure compliance with the Final Judgment, Section X
gives the United States various rights, including inspection of
defendants' records, the ability to conduct interviews and take sworn
testimony of defendants' officers, directors, employees and agents, and
to require defendants to submit written reports. These rights are
subject to legally recognized privileges, and information the United
States obtains using these powers is protected by specified
confidentiality obligations, which do permit sharing of information
with the FCC under a customary protective order issued by that agency
or a waiver of confidentiality. Under Section III.B, purchasers of the
Cellular System Assets must also agree to give the United States
similar access to information.
The Court retains jurisdiction under Section XI, and Section XII
provides that the proposed Final Judgment will expire on the tenth
anniversary of the date of its entry, unless extended by the Court.
Although the required divestitures will be accomplished in a
considerably shorter time, defendants are also precluded from
reacquiring the divested properties within the term of the decree.
F. Divestiture-Related Developments Since the Complaint Was Filed
On April 5, 1999, Ameritech announced that it has agreed to sell 20
of its cellular telephone systems to a venture owned 97% by GTE and 7%
by Georgetown Partners, for $3.27 billion. The systems being sold,
according to Ameritech, cover a population of 11.4 million, and have
nearly 1.5 million subscribers.\8\ This agreement, of which the United
States was notified on April 7, 1999, pursuant to Section VI.A of the
proposed Final Judgment, is contingent on the closing of the merger
between SBC and Ameritech. It is intended to eliminate all of the
cellular overlaps alleged in the complaint and to satisfy all of the
divestiture requirements of the proposed Final Judgment.\9\ Ameritech
[[Page 23113]]
will continue to provide services to its cellular customers until the
closing of the merger. Up to 1,700 Ameritech employees of the cellular
systems will be transferred to GTE as a result of the sale.
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\8\ GTE's announcement of the sale estimated that the cellular
systems being transferred were slightly larger, covering a
population of 12.9 million and having 1.7 million subscribers.
\9\ In addition to the 17 cellular telephone systems in
Overlapping Markets that are specified in the proposed Final
Judgment, Ameritech and the purchasers agreed to include in the sale
three other cellular telephone systems, in parts of the Indiana 1,
Illinois 4, and Illinois 7 RSAs, which have been operated in close
association with the other properties being sold. The inclusion of
these additional properties in the agreement also has the effect of
eliminating a limited overlap between Ameritech and SBC in part of
the area of the Illinois 4 RSA.
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The United States will evaluate this proposal for sale of the
cellular systems, pursuant to Section IV and VI of the proposed Final
Judgment. Under the schedule specified by Section VI, the United
States' evaluation of the acceptability of this proposal is likely to
be completed before the 60-day period for comments pursuant to the APPA
has expired.
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.
V. Procedures Available for Modification of the Proposed Final
Judgment
The plaintiff and defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The United States will
evaluate and respond to the comments. All comments will be given due
consideration by the United States, which remains free to withdraw its
consent to the proposed Final Judgment at any time prior to entry. The
comments and the responses of the United States will be filed with the
Court and published in the Federal Register.
Written comments should be submitted to: Donald J. Russell, Chief,
Telecommunications Task Force, Antitrust Division, United States
Department of Justice, 1401 H Street, N.W., Suite 8000, Washington,
D.C. 20530.
The proposed Final Judgment provides, in Section XI, that the Court
retains jurisdiction over this action, and the parties may apply to the
Court for any order necessary or appropriate to carry out or construe
the Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish any violations of its provisions.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, seeking an injunction to block consummation of the
merger and a full trial on the merits. The United States is satisfied,
however, that the divestiture of cellular system assets and other
relief contained in the proposed Final Judgment will preserve
competition in the provision of wireless mobile telephone services in
the Overlapping Markets. This settlement will also avoid the
substantial costs and uncertainty of a full trial on the merits on the
violations alleged in the complaint. Therefore, the United States
believes that there is no reason under the antitrust laws to proceed
with further litigation if the divestitures of the cellular system
assets are carried out in the manner required by the proposed Final
Judgment.
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.
15 U.S.C. 16(e) (emphasis added). As the United States Court of Appeals
for the D.C. Circuit recently held, 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. See United States v. Microsoft, 56 F.3d
1448, 1461-62 (D.C. Cir. 1995).
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.'' \10\ Rather,
---------------------------------------------------------------------------
\10\ 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. 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, 93d 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
---------------------------------------------------------------------------
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH)
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) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981)); see also Microsoft, 56 F.3d at 1460-62. Precedent requires
that
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. 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
[[Page 23114]]
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.\11\
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\11\ Bechtel, 648 F.2d at 666 (emphasis added); see BNS, 858
F.2d at 463; United States v. National Broadcasting Co., 449 F.
Supp. 1127, 1143 (D.C. Cal. 1978); Gillette, 406 F. Supp. at 716.
See also Microsoft, 56 F.3d at 1561 (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'
'').
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.' '' United
States v. American Tel. & 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 Gillett Co., 406 F. Supp. at 716); United States v. Alcon
Aluminum, Ltd. 605 F. Supp. 619, 622 (W.D. Ky. 1985).
Moreover, the court's role under the Tunney Act is limited to
reviewing the remedy in relationship to the violations that the United
States has alleged in its complaint, and does not authorize the court
to ``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Since ``[t]he court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that the court ``is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States might have but did
not pursue. Id.
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. Consequently, the United
States has not attached any such materials to the proposed Final
Judgment.
Respectfully submitted.
Joel I. Klein,
Assistant Attorney General.
A. Douglas Melamed,
Principal Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Donald J. Russell,
Chief, Telecommunications Task Force.
Laury E. Bobbish,
Assistant Chief, Telecommunications Task Force.
Carl Willner,
D.C. Bar #412841.
Michael D. Chaleff,
Juanita Harris,
John M. Lynch,
D.C. Bar #418313.
Anne M. Purcell,
Trial Attorneys, Department of Justice, Antitrust Division,
Telecommunications Task Force, 1401 H Street, NW, Suite 8000,
Washington, DC 20530, (202) 514-5813.
Dated: April 16, 1999.
Certificate of Service
I hereby certify that copies of the foregoing Competitive Impact
Statement in the matter of United States versus SBC Communications Inc.
and Ameritech Corp., Civ. No. 99-0715, were served on April 16, 1999 by
hand and/or first-class U.S. mail, postage prepaid, upon each of the
parties listed below:
Donald L. Flexner, Esq., Crowell & Moring LLP, 1001 Pennsylvania
Avenue, NW, Washington, DC 20004-2595, Counsel for SBC Communications
Inc.
Richard Favretto, Mayer, Brown, & Platt, 1909 K Street, NW, Washington,
DC 20006-1101, Counsel for Ameritech Corporation.
Carl Willner,
Counsel for Plaintiff.
[FR Doc. 99-10678 Filed 4-28-99; 8:45 am]
BILLING CODE 4410-11-M
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.