United States of America, and the State of Texas v. Aetna Inc. and The Prudential Insurance Company of America Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

[Civil Action No. 3-99CV1398-H]

United States of America, and the State of Texas v. Aetna Inc.

and The Prudential Insurance Company of America Proposed Final Judgment

and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed

Final Judgment, Stipulation, Hold Separate Stipulation and Order, and

Competitive Impact Statement have been filed with the United States

District Court for the Northern District of Texas (Dallas Division) in

United States of America and the State of Texas v. Aetna Inc. and The

Prudential Insurance Company of America, Civil Action No. 3-99CV1398-H.

On June 21, 1999, the United States and the State of Texas filed a

Complaint to enjoin defendant Aetna's proposed acquisition of certain

health insurance-related assets of the Prudential Insurance Company of

America, an acquisition which would have violated section 7 of the

Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed with the

Complaint requires Aetna to divest its interests in NYLCare Health

Plans of the Gulf Coast, Inc. and NYLCare Health Plans of the

Southwest, Inc., providers of health insurance in the Houston and

Dallas areas, respectively. Copies of the Complaint, proposed Final

Judgment, Hold Separate Stipulation and Order, and Competitive Impact

Statement are available for inspection at the Department of Justice in

Washington, DC in Suite 200, 325 Seventh Street, NW, and at the Office

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

District of Texas (Dallas Division).

Public comment on the proposed Final Judgment is invited within 60

days of the date of this notice. Such comments, and responses thereto,

will be published in the Federal Register and filed with the Court.

Comments should be directed to Gail Krush, Chief, Healthcare Task

Force, 325 Seventh Street, NW, Room 404, Antitrust Division, Department

of Justice, Washington, DC 20530 (telephone: (202) 307-5799).

Constance Robinson,

Director of Operation & Merger Enforcement.

United States District Court for the Northern District of Texas

(Dallas Division)

[Civil Action No.: 3-99CV1398-H]

United States of America, and the State of Texas, Plaintiffs, v.

Aetna Inc., and The Prudential Insurance Company of America,

Defendants.

Stipulation

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

respective attorneys, as follows:

(1) This Court has jurisdiction over the subject matter of this

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

Court.

(2) The proposed Final Judgment attached hereto 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 the

plaintiffs have not withdrawn their consent, which they may do at any

time before entry of the proposed Final Judgment by serving notice

thereof on all other parties 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 and effect to any

amended proposed Final Judgment agreed upon in writing by the parties

and submitted to the Court.

(5) In the event the plaintiffs withdraw their consent, as provided

in paragraph (2) above, or in the event that the Court declines to

enter the proposed Final 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

[[Page 44947]]

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 divestitures 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.

Respectfully submitted,

Dated: June 21, 1999.

For Plaintiff, United States of America.

Paul J. O'Donnell,

Massachusetts Bar #547125, U.S. Department of Justice, Antitrust

Division, Health Care Task Force, 325 Seventh Street, NW., Suite 400,

Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.

For Plaintiff, State of Texas.

Mark Tobey,

State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust

Section, Office of the Attorney General, P.O. Box 12548, Austin, TX

78711-2548; Tel: (512) 463-2185, Facsimile: (512) 320-0975.

For Defendant, Aetna Inc.

Robert E. Bloch,

D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW., Washington,

DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.

For Defendant, The Prudential Insurance Company of America.

Michael L. Weiner,

New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919

Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)

451-7446.

[Civil Action No.: 3-99CV1398-H]

United States of America, and the State of Texas, Plaintiffs, v.

Aetna Inc., and the Prudential Insurance Company of America,

Defendants.

Hold Separate Stipulation and Order

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

their respective attorneys, subject to approval and entry by the Court,

that:

I. Definitions

As used in this Hold Separate Stipulation and Order:

A. ``Aetna'' means defendant Aetna Inc., a Connecticut corporation

with its headquarters and principal place of business in Hartford,

Connecticut, its successors, assigns, subsidiaries, divisions, groups,

affiliates, partnerships, and joint ventures, and its directors,

officers, managers, agents, and employees.

B. ``NYLCare-Gulf Coast'' means NYLCare Health Plans of the Gulf

Coast, Inc., a wholly-owned subsidiary of Aetna that operates a

licensed HMO and HMO-based POS business under that name in Houston,

Brazoria, Galveston, Austin, San Antonio, and Corpus Christi, Texas.

C. ``NYLCare-Southwest'' means NYLCare Health Plans of the

Southwest, Inc., a wholly-owned subsidiary of Aetna that operates a

licensed HMO and HMO-based POS business under that name in Dallas, Fort

Worth, and several smaller cities in North Texas, including Paris,

Tyler, Longview, and Amarillo.

D. ``Prudential'' means defendant The Prudential Insurance Company

of America, a New Jersey mutual insurance company with its principal

place of business in Newark, New Jersey, its successors, assigns,

subsidiaries, divisions, groups, affiliates, partnerships, and joint

ventures, and its directors, officers, managers, agents, and employees.

II. Objectives

A. The proposed Final Judgment filed in this case is meant to

ensure Aetna's prompt divestiture of NYLCare-Gulf Coast and NYLCare-

Southwest for the purpose of maintaining viable competitors in the sale

of HMO and HMO-based POS plans and the purchase of physician services,

and to remedy the effects that the United States and the State of Texas

allege would otherwise result from Aetna's proposed acquisition of

Prudential's health care assets.

B. This Hold Separate Stipulation and Order is intended to ensure,

prior to such divestiture, that NYLCare-Gulf Coast and NYLCare-

Southwest, which are being divested, be maintained as independent,

economically viable, ongoing business concerns, and that competition is

maintained during the pendency of the divestiture.

III. Hold Separate Provisions

Until the divestiture required by the Final Judgment has been

accomplished:

A. Aetna shall immediately begin to take all steps necessary to

preserve, maintain, and operate NYLCare-Gulf Coast and NYLCare-

Southwest as independent competitors with management, sales, service,

underwriting, administration, and operations held entirely separate,

distinct, and apart from those of Aetna. Aetna shall not coordinate the

pricing, marketing, or sale of health care services from NYLCare-Gulf

Coast and NYLCare-Southwest with the pricing, marketing, or sale of

health care services by Aetna. Within twenty-five (25) calendar days of

the filing of the Complaint in this matter, Aetna will comply and

inform plaintiffs of the steps taken to comply with this provision.

B. Aetna shall take all steps necessary to ensure that NYLCare-Gulf

Coast and NYLCare-Southwest are maintained and operated as independent,

ongoing, economically viable, and active competitors, including but not

limited to the following:

1. Aetna will appoint experienced senior management to run the

combined business of NYLCare-Gulf Coast and NYLCare-Southwest until the

divestiture required by the Final Judgment has been accomplished. These

executives may be recruited from within the existing Aetna or NYLCare

organizations, with plaintiffs' approval, subject to Section IV.C, or

from outside the company.

2. Aetna will create a separate and independent sales organization

for NYLCare-Gulf Coast and NYLCare-Southwest.

3. Aetna will create a separate and independent provider relations

organization for NYLCare-Gulf Coast and NYLCare-Southwest.

4. Aetna will create a separate and independent patient management/

quality management organization for NYLCare-Gulf Coast and NYLCare-

Southwest.

5. Aetna will create a separate and independent commercial

operations organization for the combined NYLCare-Gulf Coast and

NYLCare-Southwest.

6. Aetna will create a separate and independent network operations

organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.

7. Aetna will create a separate and independent underwriting

organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.

8. Pursuant to transition services agreements approved by

plaintiffs, subject to Section IV.C, Aetna will provide certain support

services to NYLCare-Gulf Coast and NYLCare-Southwest until the

divestiture. These services may include human resources, legal,

finance, actuarial, software and computer operations support, and other

services which are now provided to NYLCare-Gulf Coast and NYLCare-

Southwest by other Aetna companies. These transition services

agreements will contain appropriate confidentiality provisions to

ensure that Aetna employees (other than the employees performing

services under the agreements) do not receive information that Aetna is

prohibited from receiving under paragraph III.C of this Hold Separate

Stipulation and Order.

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

management of NYLCare-Gulf Coast and NYLCare-Southwest will not be

influenced by Aetna except as necessary to meet

[[Page 44948]]

Aetna's obligations as described below, and that the books, records,

competitively sensitive sales, marketing and pricing information, and

decision-making associated with NYLCare-Gulf Coast and NYLCare-

Southwest will be kept separate and apart from the operations of Aetna.

Aetna's influence over NYLCare-Gulf Coast and NYLCare-Southwest shall

be limited to that necessary to carry out Aetna's obligations under

this Hold Separate Stipulation and Order, the Final Judgment, and any

applicable regulatory requirements, including all reserve or capital

requirements. Aetna may receive aggregate historical financial

information (excluding rate or pricing information) relating to

NYLCare-Gulf Coast and NYLCare-Southwest to the extent necessary to

allow Aetna to prepare financial reports, tax returns, personnel

reports, regulatory filings, and other necessary or legally required

reports.

D. Aetna shall maintain at either current levels or at the highest

levels approved during the year prior to Aetna's acquisition of

NYLCare-Gulf Coast and NYLCare-Southwest, whichever are higher,

promotional, advertising, sales, technical assistance, marketing, and

merchandising support for NYLCare-Gulf Coast and NYLCare-Southwest, but

in any event at levels sufficient to ensure that NYLCare-Gulf Coast and

NYLCare-Southwest are economically viable businesses.

E. Aetna shall provide and maintain all required reserves and

sufficient working capital to maintain NYLCare-Gulf Coast and NYLCare-

Southwest as economically viable, ongoing businesses.

F. Aetna shall provide and maintain sufficient lines and sources of

credit to maintain NYLCare-Gulf Coast and NYLCare-Southwest as

economically viable, ongoing businesses.

G. Aetna shall not take any action to consummate the proposed

acquisition of Prudential's health care business pursuant to the Asset

Transfer and Acquisition Agreement, dated as of December 9, 1998, or

any subsequent agreement between Aetna and Prudential, until such time

as the plaintiffs in their sole discretion, subject to Section IV.C,

have determined that NYLCare-Gulf Coast and NYLCare-Southwest are

independent, viable competitors and that Aetna has complied with this

Hold Separate Stipulation and Order, or until the divestitures required

by the Final Judgment are complete.

H. Aetna shall not, except in the ordinary course of business, or

as otherwise permitted under this Hold Separate Stipulation and Order,

or as part of a divestiture approved by the plaintiffs in their sole

discretion, subject to Section IV.C, remove, sell, lease, assign,

transfer, pledge as collateral for loans, or otherwise dispose of, any

asset, tangible or intangible, of NYLCare-Gulf Coast and NYLCare-

Southwest.

I. Aetna shall maintain, in accordance with sound accounting

principles, separate, true, accurate, and complete financial ledgers,

books, and records that report, on a periodic basis, such as the last

business day of every month, consistent with past practices, the

assets, liabilities, expenses, revenues, income, profit, and loss of

NYLCare-Gulf Coast and NYLCare-Southwest.

J. Until such time as NYLCare-Gulf Coast and NYLCare-Southwest are

divested, except in the ordinary course of business or as is otherwise

consistent with this Hold Separate Stipulation and Order, Aetna shall

not hire, transfer, terminate, or alter, to the detriment of any

employee, any current employment or salary agreement for any employee

who on the date of the signing of this Hold Separate Stipulation and

Order is employed at NYLCare-Gulf Coast or NYLCare-Southwest.

K. Aetna may retain an independent consultant (the ``Consultant'')

to monitor the operations of NYLCare-Gulf Coast and NYLCare-Southwest

until the divestiture(s) required by the Final Judgment has been

accomplished. The Consultant shall have no role in the management of

NYLCare-Gulf Coast and NYLCare-Southwest, but shall be given reasonable

access to files, data, reports, and other information regarding the

operations of NYLCare-Gulf Coast and NYLCare-Southwest. The

Consultant's sole responsibility will be to report at least monthly to

Aetna's Director of Internal Audit, stating the Consultant's opinion on

the question whether NYLCare-Gulf Coast and NYLCare-Southwest are being

managed in accordance with applicable law, consistent with prudent

underwriting and other industry standards, and consistent with the

fiduciary duties of its management. If the Consultant's opinion on this

question is anything other than an unqualified ``yes,'' the Consultant

shall submit a written report stating the basis for its opinion to the

Director of Internal Audit, with a copy to the plaintiffs. The

Consultant shall not transmit to Aetna any information that Aetna is

prohibited from receiving under paragraph III.C of this Hold Separate

Stipulation and Order. After receiving the Consultant's written report,

and with the consent of the plaintiffs in their sole discretion,

subject to Section IV.C, Aetna may take appropriate corrective action.

IV. Other Provisions

A. Aetna shall take no action that would interfere with the ability

of any trustee appointed pursuant to the Final Judgment to complete the

divestitures pursuant to the Final Judgment to a suitable purchaser.

B. Prudential shall take no action that would hinder or obstruct

Aetna's ability or efforts to comply with this Hold Separate

Stipulation and Order.

C. In the event plaintiffs are unable to agree on a course of

action regarding any item within their discretion in seven days, then

the United States may, in its sole discretion, act alone (or decline to

act) with respect to that course of action.

D. With the consent of the plaintiffs, in their sole discretion,

subject to Section IV.C, Aetna may exclude certain NYLCare-Gulf Coast

and NYLCare-Southwest assets from this Hold Separate Stipulation and

Order.

E. This Hold Separate Stipulation and Order shall remain in effect

until the divestitures required by the Final Judgment are complete, or

until further Order of this Court.

Respectfully submitted,

For Plaintiff, United States of America.

Paul J. O'Donnell,

Massachusetts Bar #547125, U.S. Department of Justice, Antitrust

Division, Health Care Task Force, 325 Seventh Street, NW, Suite 400,

Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.

For Plaintiff, State of Texas.

Mark Tobey,

State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust

Section, Office of the Attorney General, P.O. Box 12548, Austin, TX

78711-2548; Tel: (512) 463-2185, Facsimile (512) 320-0975.

For Defendant, Aetna Inc.

Robert E. Bloch,

D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington,

DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.

For Defendant, The Prudential Insurance Company of America.

Michael L. Weiner,

New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919

Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)

451-7446.

It Is So Ordered.

Dated ______, 1999.

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

United States District Judge.

C. This Hold Separate Stipulation and Order shall remain in effect

until the divestitures required by the Final Judgment are complete, or

until further Order of this Court.

[[Page 44949]]

Respectfully submitted,

For Plaintiff, United States of America.

Paul J. O'Donnell,

Massachusetts Bar #547125, U.S. Department of Justice, Antitrust

Division, Health Care Task Force, 325 Seventh Street, NW, Suite 400,

Washington, DC 20530; Tel: (202) 616-5933, Facsimile: (202) 514-1517.

For Plaintiff, State of Texas.

Mark Tobey,

State Bar No. 20082960, Assistant Attorney General, Chief, Antitrust

Section, Office of the Attorney General, P.O. Box 12548, Austin, TX

78711-2548; Tel: (512) 463-2185, Facsimile (512) 320-0975.

For Defendant, Aetna Inc.

Robert E. Bloch,

D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington,

DC 20006; Tel: (202) 263-3203, Facsimile: (202) 263-3300.

For Defendant, The Prudential Insurance Company of America.

Michael L. Weiner,

New York Bar #MW0294, Skadden, Arps, Slate, Meagher & Flom, LLP, 919

Third Avenue, New York, NY 10022; Tel: (212) 735-2632, Facsimile: (212)

451-7446.

[Civil Action No. 3-99CV 1398-H]

United States of America, and the State of Texas, Plaintiff, v.

Aetna Inc., and The Prudential Insurance Company of America,

Defendants.

Revised Final Judgment

Whereas, plaintiffs, the United States of America and the State of

Texas, filed a Complaint in this action on June 21, 1999, and

plaintiffs and defendants, by their respective attorneys, having

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

adjudication of any issue of fact or law herein, and without this

Revised Final Judgment constituting any evidence against or an

admission by any party with respect to any issue of law or fact herein;

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

of this Revised Final Judgment pending its approval by the Court;

And whereas, plaintiffs intend to preserve competition by requiring

Aetna to divest its interests in the Houston operations of NYLCare

Health Plans of the Gulf Coast, Inc., and the Dallas operations of

NYLCare Health Plans of the Southwest, Inc., consisting of, among other

assets, approximately two hundred sixty thousand (260,000) and one

hundred sixty seven thousand (167,000) commercially insured HMO and

HMO-based POS enrollees, respectively;

And whereas, plaintiffs require defendants to make the divestitures

for the purpose of establishing a viable competitor in the development,

marketing, and sale of HMO and HMO-based POS health plans in the

Houston and Dallas areas;

And whereas, plaintiffs require defendants to make the divestitures

for the purpose of redressing the effects that the United States and

the State of Texas allege would otherwise result from Aetna's proposed

acquisition of Prudential's health care assets, including the ability

to depress physicians' reimbursement rates in Houston and Dallas, which

is likely to lead to a reduction in quantity or a degradation in the

quality of physician services provided to patients in those areas;

And whereas, defendants have represented to plaintiffs that the

divestitures ordered herein 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

below;

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

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

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

decreed as follows:

I. Jurisdiction

This Court has jurisdiction over each of the parties hereto and

over the subject matter of this action. The Complaint states a claim

upon which relief may be granted against defendants, as hereinafter

defined, under Section 7 of the Clayton Act, as amended (15 U.S.C.

Sec. 18).

II. Definitions

As used in this Revised Final Judgment:

A. ``Aetna'' means Aetna, Inc., a Connecticut corporation with its

headquarters and principal place of business in Hartford, Connecticut,

its successors, assigns, subsidiaries, divisions, groups, affiliates,

partnerships and joint ventures, and its directors, officers, managers,

agents, and employees.

B. ``Dallas'' means the entire service area of NYLCare-Southwest

including, but not limited to, the following Texas counties: Collin,

Dallas, Denton, Ellis, Grayson, Henderson, Hood, Hunt, Johnson,

Kaufman, Parker, Rockwall, and Tarrant.

C. ``Excluded Assets'' means those businesses of NYLCare-Gulf Coast

and NYLCare-Southwest that need not be divested, which consist of: (1)

All Medicare HMO plans; (2) commercial HMO and HMO-based POS accounts

not located in Houston or Dallas; (3) provider network rental

arrangements for PPO plans; and (4) administrative services contracts

with self-funded plans.

D. ``Houston'' means the following Texas counties: Brazoria,

Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and

Waller.

E. ``NYCare-Gulf Coast'' means NYLCare Health Plans of the Gulf

Coast, Inc., a wholly owned subsidiary of Aetna that operates a

licensed HMO and HMO-based POS business under that name in Central and

Southeastern Texas, excepting the Excluded Assets, and includes:

1. All tangible assets necessary to compete in the sale or

administration of HMO and HMO-based POS plans; all personal property,

inventory, office furniture, fixed assets and fixtures, materials,

supplies, facilities, and other tangible property or improvements used

in the sale or administration of HMO and HMO-based POS plans, all

licenses, permits, and authorizations issued by any governmental

organization relating to HMO and HMO-based POS plans; contracts or

agreements for coverage of approximately two hundred sixty thousand

(260,000) commercially insured HMO and HMO-based POS plan enrollees;

all other contracts, agreements, leases, commitments, and

understandings pertaining to HMO and HMO-based POS plans; all contracts

with accounts located in Houston, all customer lists and credit

records; and all other records maintained in connection with the sale

and administration of HMO and HMO-based POS plans in Houston or Dallas;

2. All intangible assets relating to the sale or administration of

HMO and HMO-based POS plans, including but not limited to any licenses

and sublicenses, intellectual property, technical information, know-

how, trade secrets, programs, and all manuals and technical information

provided to employees, customers, suppliers, agents, or licenses.

F. ``NYLCare-Southwest'' means NYLCare Health Plans of the

Southwest, Inc., a wholly owned subsidiary of Aetna that operates a

licensed HMO and HMO-based POS business under that name in Dallas, Fort

Worth, and several smaller cities in North Texas, including Paris,

Tyler, Longview and Amarillo, excepting the Excluded Assets, and

includes:

1. All tangible assets necessary to compete in the sale or

administration of HMO and HMO-based POS plans; all personal property,

inventory, office furniture, fixed assets and fixtures, materials,

supplies, facilities, and other tangible property or improvements used

in the sale or administration of HMO

[[Page 44950]]

and HMO-based POS plans; all licenses, permits, and authorizations

issued by any governmental organization relating to HMO and HMO-based

POS plans; contracts or agreements for coverage of approximately one

hundred sixty seven thousand (167,000) commercially insured HMO and

HMO-based POS plan enrollees; all other contracts, agreements, leases,

commitments, and understandings pertaining to HMO and HMO-based POS

plans; all contracts with accounts located in Dallas; all customer

lists and credit records,; and all other records maintained in

connection with the sale and administration of HMO and HMO-based POS

plans in Dallas or Houston;

2. All intangible assets relating to the sale or administration of

HMO and HMO-based POS plans, including but not limited to any licenses

and sublicenses, intellectual property, technical information, know-

how, trade secrets, programs, and all manuals and technical information

provided to employees, customers, suppliers, agents, or licenses.

G. ``Prudential'' means The Prudential Insurance Company of

America, a New Jersey mutual insurance company with its principal place

of business in Newark, New Jersey, its successors, assigns,

subsidiaries, divisions, groups, affiliates, partnerships and joint

ventures, and directors, officers, managers, agents, and employees.

III. Applicability

A. The provisions of this Revised Final Judgment apply to Aetna and

Prudential and to all other persons in active concert or participation

with any of them who shall have received actual notice of this Revised

Final Judgment by personal service or otherwise.

B. Aetna shall require, as a condition of the sale or other

disposition of NYLCare-Gulf Coast and NYLCare-Southwest, that the

acquirer agree to be bound by the provisions of this Revised Final

Judgment.

IV. Divestiture

A. Aetna is hereby ordered and directed in accordance with the

terms of this Revised Final Judgment to divest its interests in

NYLCare-Gulf Coast and NYLCare-Southwest, excepting only the Excluded

Assets, to an acquirer(s) acceptable to the plaintiffs, in their sole

discretion, subject to Section XII.

B. Aetna is obligated to cause NYLCare-Gulf Coast and NYLCare-

Southwest to maintain contracts or agreements for coverage of

approximately two hundred sixty thousand (260,000) commercially insured

HMO and HMO-based POS plan enrollees in Houston and contracts or

agreements for coverage of approximately one hunded sixty seven

thousand (167,000) commerically insured HMO and HMO-based POS plan

enrollees in Dallas through the date of signing the definitive purchase

and sale agreement(s) for the divestiture of the two NYLCare entities.

Aetna may include related PPO business as a part of the sale of the

NYLCare entities, and the actual number of such PPO enrollees as of the

date of signing of the definitive purchase and sale agreement(s) of the

divestiture of the NYLCare entities will be taken into account in

determining Aetna's compliance with the membership targets described

herein.

C. Aetna shall use its best efforts to accomplish the divestitures

as expeditiously as possible and will accelerate the timetable for

executing the definitive purchase and sale agreement(s) for the

divestiture of the NYLCare entities to a target date of October 1,

1999. In any event, Aetna shall execute definitive purchase and sale

agreement(s) and shall file all required applications for regulatory

approval within one-hundred and twenty (120) calendar days after June

21, 1999. Aetna shall complete the divestitures within five (5)

business days after it receives all necessary regulatory approvals for

divestiture of NYLCare-Gulf Coast and NYLCare-Southwest and the

acquisition of Prudential, or five (5) business days after notice of

the entry of this Revised Final Judgment by the Court, whichever is

later.

D. The plaintiffs, in their sole discretion, subject to Section

XII, may extend the time period for any divestitures for an additional

period of time not to exceed sixty (60) calendar days. If a further

extension is required to obtain necessary regulatory approvals, the

plaintiffs, in their sole discretion, subject to Section XII, may grant

the time necessary to obtain such approvals.

E. In accomplishing the divestitures ordered by this Revised Final

Judgment, Aetna promptly shall make known, by usual and customary

means, the availability for purchase of NYLCare-Gulf Coast and NYLCare-

Southwest. Aetna shall inform any person making an inquiry regarding a

possible purchase that the sale is being made pursuant to this Revised

Final Judgment and shall provide such person with a copy of this

Revised Final Judgment. Aetna shall also offer to furnish to all

prospective purchasers, subject to reasonable confidentiality

assurances, all information regarding NYLCare-Gulf Coast and NYLCare-

Southwest customarily provided in a due diligence process, except

information subject to the attorney-client privilege or the attorney

work-product privilege. Aetna shall make available such non-privileged

information to the United States and the State of Texas at the same

time that such information is made available to prospective purchasers.

F. Aetna shall permit prospective purchasers to have reasonable

access to all NYLCare-Gulf Coast's and NYLCare-Southwest personnel,

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

documents and information customarily provided as part of a due

diligence process.

G. Aetna shall not take any action that will impede in any way the

operation of NYLCare-Gulf Coast and NYLCare-Southwest; shall

immediately cease all actions directed at the integration of NYLCare-

Gulf Coast and NYLCare-Southwest into Aetna.

H. Aetna shall take all steps necessary to ensure that NYLCare-Gulf

Coast and NYLCare-Southwest are maintained and operated as independent,

on-going, economically viable, and active competitors until completion

of the divestitures ordered by this Revised Final Judgment, including

but not limited to the following:

1. Aetna will appoint experienced senior management to run the

combined business of NYLCare-Gulf Coast and NYLCare-Southwest. These

executives may be recruited from within the existing Aetna or NYLCare

organizations, with plaintiff's approval, subject to Section XII, or

from outside the company.

2. Aetna will create a separate and independent sales organization

for NYLCare-Gulf Coast and NYLCare-Southwest.

3. Aetna will create a separate and independent provider relations

organization for NYLCare-Gulf Coast and NYLCare-Southwest.

4. Aetna will create a separate and independent management/quality

management organization for NYLCare-Gulf Coast and NYLCare-Southwest.

5. Aetna will create a separate and independent commercial

operations organization for the combined NYLCare-Gulf Coast and

NYLCare-Southwest.

6. Aetna will create a separate and independent commercial

operations organization for the combined NYLCare-Gulf Coast and

NYLCare-Southwest.

7. Aetna will create a separate and independent underwriting

organization for the combined NYLCare-Gulf Coast and NYLCare-Southwest.

8. Pursuant to transition services agreements approved by

plaintiffs, subject to Section XII, Aetna will

[[Page 44951]]

provide certain support services to NYLCare-Gulf Coast and NYLCare-

Southwest. These services may include human resources, legal, finance,

actuarial, software and computer operations support, and other services

which are now provided to NYLCare-Gulf Coast and NYLCare-Southwest by

other Aetna companies. These transition services agreements will

contain appropriate confidentiality provisions to ensure that Aetna

employees (other than the employees performing services under the

agreements) do not receive information that Aetna is prohibited from

receiving under Section III.E of the Revised Hold Separate Stipulation

and Order entered earlier.

9. Aetna will provide any additional transitional services

requested by the management of NYLCare-Gulf Coast and/or NYLCare-

Southwest in order to maintain the membership targets described in

Section IV.B. Such additional services may include, but not be limited

to, funding of service quality guarantees, subject to the approval of

the plaintiffs in their sole discretion, pursuant to Section XII.

10. Aetna will fund an incentive pool of at least $500,000, which

will be available to management of the NYLCare entities if they meet

the membership targets described in Section IV.B as of the closing date

for the sale of the NYLCare entities.

I. Aetna shall not take any action to consummate the proposed

acquisition of Prudential's heath care business pursuant to the Asset

Transfer and Acquisition Agreement, date as of December 9, 1998, or any

subsequent agreement between Aetna and Prudential, until such time as

plaintiffs, to their sole satisfaction, subject to Section XII, have

determined that NYLCare-Gulf Coast and NYLCare-Southwest are

independent, viable competitors, that Aetna has complied with the terms

of the Revised Hold Separate Stipulation and Order entered previously,

or until the divestitures required by this Revised Final Judgment are

complete.

J. Aetna shall request that the NYLCare entities provide the

plaintiffs with bi-weekly reports on total membership of the entities

until the divestitures required by this Revised Final Judgment are

complete.

K. Unless the plaintiffs, in their sole discretion, subject to

Section XII, consent in writing, the divestitures pursuant to Section

IV (or by trustee appointed pursuant to Section V) shall include the

entire NYLCare-Gulf Coast and NYLCare-Southwest businesses, excepting

only the Excluded Assets, operated pursuant to the Revised Hold

Separate Stipulation and Order entered previously in this proceeding,

and shall be accomplished by selling or otherwise conveying NYLCare-

Gulf Coast and NYLCare-Southwest to a purchaser(s) in such a way as to

satisfy the plaintiffs in their sole discretion, subject to Section

XII, that NYLCare-Gulf Coast and NYLCare-Southwest can and will be used

by the purchaser(s) as part of a viable, ongoing business engaged in

the sale of HMO and HMO-based POS plans. These divestitures may be made

to one or more purchasers provided that in each instance it is

demonstrated to the sole satisfaction of the plaintiffs, subject to

Section XII, that the acquirer(s) will remain viable competitors. The

divestitures, whether pursuant to Section IV or Section V, shall be

made to a purchaser(s) for whom it is demonstrated to the plaintiffs'

sole satisfaction, subject to Section XII: (1) Has the capability and

intent of competing effectively in the sale of HMO and HMO-based POS

plans in Dallas and Houston; (2) has the managerial, operational, and

financial capability to compete effectively in the sale of HMO and HMO-

based POS plans in Houston and Dallas; and (3) is not restrained

through any agreement with Aetna or otherwise in its ability to compete

effectively in the sale of HMO and HMO-based POS plans in Dallas and

Houston.

L. For a period of one year from the date of the completion of the

divestiture, Aetna shall not hire or solicit to hire any individual

who, on the date of the divestiture, was an employee of NYLCare-Gulf

Coast and NYLCare-Southwest, unless such individual has (1) a written

offer of employment from a third party for a like position, or (2) a

written notice from the acquirer of NYLCare-Gulf Coast or NYLCare-

Southwest, stating that the company does not intend to continue to

employ the individual in a like position.

V. Appointment of Trustee

A. In the event that Aetna has not divested NYLCare-Gulf Coast and

NYLCare-Southwest within the time specified in Section IV, the Court

shall appoint, on application of the plaintiffs, a trustee selected by

the plaintiffs in their sole discretion, subject to Section XII, to

effect the required divestitures.

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

trustee shall have the right to sell NYLCare-Gulf Coast and NYLCare-

Southwest, as described in Sections II.E and II.F. The trustee shall

have the power and authority to accomplish the divestitures at the best

price then obtainable upon a reasonable effort by the trustee, subject

to the provisions of Sections IV and VI, and shall have such other

powers as the Court shall deem appropriate. Subject to Section V.C, the

trustee shall have the power and authority to hire, at the cost and

expense of Aetna, any investment bankers, attorneys, or other agents

reasonably necessary in the judgment of the trustee to assist in the

divestitures, and such professionals and agents shall be accountable

solely to the trustee. The trustee shall have the power and authority

to accomplish the divestitures at the earliest possible time to a

purchaser acceptable to the plaintiffs in their sole discretion,

subject to Section XII, shall have the power and authority to require

Aetna to sell NYLCare's PPO business in Houston and Dallas if the

plaintiffs, in the exercise of their sole discretion, subject to

Section XII, determine that such a sale is necessary for the

preservation of competition, and shall have such other power and

authority at this Court shall deem appropriate. Aetna shall not object

to a sale by the trustee on any grounds other than the trustee's

malfeasance. Any such objections by Aetna must be conveyed in writing

to the plaintiffs and the trustee within ten (10) calendar days after

the trustee has provided the notice required under Section VI.

C. The trustee shall serve at the cost and expense of Aetna, on

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

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

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

the trustee's accounting, including fees for its services and those of

any professionals and agents retained by the trustee, all remaining

money shall be paid to Aetna and the trust shall then be terminated.

The compensation of such trustee and of any professionals and agents

retained by the trustee shall be reasonable in light of the value of

the divested business and based on a fee arrangement providing the

trustee with an incentive based on the price and terms of the

divestitures and the speed with which they are accomplished.

D. Aetna shall use its best efforts to assist the trustee in

accomplishing the required divestitures, including 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 facilities of the businesses to be divested, and Aetna

shall develop financial or other information relevant to the business

to be divested customarily provided in a due diligence

[[Page 44952]]

process as the trustee may reasonably request, subject to customary

confidentiality assurances. Aetna shall permit prospective purchasers

of NYLCare-Gulf Coast and NYLCare-Southwest to have reasonable access

to personnel and to make such inspection of physical facilities and any

and all financial, operational or other documents and other information

as may be relevant to the divestitures required by this Revised Final

Judgment.

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

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

accomplish the divestitures ordered under this Revised Final Judgment,

provided, however, that to the extent such reports contain information

that the trustee deems confidential, such reports may be filed under

seal for in camera review. Such reports shall include the name, address

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

made an offer to acquire, expressed an interest in acquiring, entered

into negotiations to acquire, or was contacted or made an inquiry about

acquiring, any interest in the business to be divested, 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 businesses to be divested.

F. If the trustee has not accomplished such divestitures within six

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

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

efforts to accomplish the required divestitures; (2) the reasons, in

the trustee's judgment, why the required divestitures have not been

accomplished; and (3) the trustee's recommendations; provided, however,

that to the extent such reports contain information that the trustee

deems confidential, such reports may be filed under seal for in camera

review. 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 shall deem

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

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

appointment by a period requested by the plaintiffs, subject to Section

XII.

VI. Notification

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

agreement, contingent upon compliance with the terms of this Revised

Final Judgment, to effect, in whole or in part, any proposed

divestitures pursuant to Section IV or Section V, Aetna or the trustee,

whichever is then responsible for effecting the divestitures, shall

notify the United States and the State of Texas of the proposed

divestitures. If the trustee is responsible, it shall similarly notify

Aetna. The notice shall set forth the details of the proposed

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

person not previously identified who offered to, or expressed an

interest in or a desire to, acquire any ownership interest in the

businesses to be divested that is the subject of the binding contract,

together with full details of same. Within ten (10) calendar days of

their receipt of such notice, the United States or the State of Texas

may request from Aetna, the trustee, the proposed purchaser, or any

other third party additional information concerning the proposed

divestitures and the proposed purchaser. Aetna and the trustee shall

furnish any additional information requested from them within ten (10)

calendar days of the receipt of the request, unless the parties shall

otherwise agree. Within thirty (30) calender days after receipt of the

notice or within twenty (20) calender days after the plaintiffs have

been provided the additional information requested from Aetna, the

trustee, the proposed purchaser, and any third party, whichever is

later, the plaintiffs, in their sole discretion, subject to Section

XII, shall provide written notice to Aetna and the trustee, if there is

one, stating whether it objects to the proposed divestitures. If the

plaintiffs provide written notice to Aetna and the trustee that they do

not object, then the divestitures may be consummated, subject only to

Aetna's limited right to object to the sale under Section V.B. Absent

written notice that the plaintiffs do not object to the proposed

purchaser or upon objection by the plaintiffs, such divestitures

proposed under Section IV or Section V may not be consummated. Upon

objection by Aetna under Section V.B, a divestiture proposed under

Section V shall not be consummated unless approved by the Court.

VII. Affidavits

A. Within twenty-five (25) calendar days of the June 21, 1999

filing of the original Hold Separate Order and Stipulation in this

matter and every thirty (30) calendar days thereafter until the

divestitures have been completed, whether pursuant to Section IV or

Section V, Aetna shall deliver to the United States and the State of

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

IV or Section V. Each such affidavit shall 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

interest in the business to be divested, and shall describe in detail

each contact with any such person during that period. Each such

affidavit shall also include a description of the efforts that Aetna

has made to solicit a buyer for NYLCare-Gulf Coast and NYLCare-

Southwest and to provide required information to prospective purchasers

including the limitations, if any, on such information.

B. Within twenty-five (25) calendar days of the June 21, 1999

filing of the original Hold Separate Order and Stipulation in this

matter. Aetna shall deliver to the United States and the State of Texas

an affidavit that describes in detail all actions Aetna has taken and

all steps Aetna has implemented on an on-going basis to preserve

NYLCare-Gulf Coast and NYLCare-Southwest pursuant to Section VIII and

the Revised Hold Separate Stipulation and Order previously entered by

this Court. The affidavit also shall describe, but not be limited to,

Aetna's efforts to maintain and operate NYLCare-Gulf Coast and NYLCare-

Southwest as active competitors, and the plans and timetable for

Aetna's integration of Prudential's healthcare assets. Aetna shall

deliver to the United States and the State of Texas an affidavit

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

earlier affidavit(s) filed pursuant to this Section VII.B within

fifteen (15) calendar days after such change is implemented.

C. Until one year after the divestitures required by this Revised

Final Judgment have been completed, Aetna shall preserve all records of

all efforts made to preserve the businesses to be divested and effect

the divestitures.

VIII. Hold Separate Order

Until the divestitures required by this Revised Final Judgment have

been accomplished, Aetna shall take all steps necessary to comply with

Section IV and the Revised Hold Separate Stipulation and Order entered

by this Court, to preserve the assets of NYLCare-Gulf Coast and

NYLCare-Southwest, and to ensure that NYLCare-Gulf Coast and NYLCare-

Southwest remain viable competitors in the sale of HMO and HMO-based

POS plans in Dallas and Houston. Defendants shall take no action that

would jeopardize the

[[Page 44953]]

divestitures of NYLCare-Gulf Coast and NYLCare-Southwest.

IX. Financing

Aetna is ordered and directed not to finance all or any part of any

purchase by an acquirer(s) made pursuant to Section IV or Section V.

X. Compliance Inspection

For the purpose of determining or securing compliance with this

Revised Final Judgment or for determining whether this Revised Final

Judgment should be modified or terminated, 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 of the United

States or the Assistant Attorney General in charge of the Antitrust

Division, or the State of Texas, upon written request by the Texas

Attorney General, and on reasonable notice to Aetna made to its

principal offices, shall be permitted:

1. Access during Aetna's office hours to inspect and copy all

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

and documents, including computerized records, in the possession or

under the control of Aetna, which may have counsel present, relating to

any matters contained in this Revised Final Judgment and the Revised

Hold Separate Stipulation and Order;

2. Subject to the reasonable convenience of Aetna and without

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

on the record, its officers, employees, and agents, who may have

counsel present, regarding any such matters.

B. Upon the written request of the Attorney General of the United

States, the Assistant Attorney General in charge of the Antitrust

Division, or the Attorney General of the State of Texas, made to

Aetna's principal offices, Aetna shall submit such written reports,

under oath if required, with respect to any matter contained in this

Revised Final Judgment and the Revised Hold Separate Stipulation and

Order entered earlier by this Court.

C. No information or documents obtained by the means provided in

Section VII or Section X shall be divulged by any representative of the

plaintiffs to any person other than a duly authorized representative of

the Executive Branch of the United States or of the State of Texas,

except in the course of legal proceedings to which the United States or

the State of Texas is a party (including grand jury proceedings), or

for the purpose of securing compliance with this Revised Final

Judgment, or as otherwise required by law.

D. If at any time Aetna furnishes to the United States or the State

of Texas information or documents, Aetna represents and identifies in

writing the material in any such information or documents for which a

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

Rules of Civil Procedure, and Aetna marks each pertinent page of such

material, ``Subject to claim of protection under Rule 26(c)(7) of the

Federal Rules of Civil Procedure,'' then the United States or the State

of Texas shall give ten (10) calendar days' notice to Aetna prior to

divulging such material in any legal proceeding (other than a grand

jury proceeding) to which Aetna is not a party.

XI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Revised Final Judgment to apply to this

Court at any time for such further orders and directions as may be

necessary or appropriate for the construction or carrying out of this

Revised Final Judgment, for the modification of any of the provisions

hereof, for the enforcement of compliance herewith, and for the

punishment of any violation hereof.

XII. Miscellaneous

In the event plaintiffs are unable to agree on a course of action

regarding Sections IV.A, IV.D, IV.H, IV.I, IV.K, V.A, V.B, V.F, and VI

in seven days, then the United States may, in its sole discretion, act

alone (or decline to act) with respect to the course of action.

XIII. Termination

Unless this Court grants an extension, this Revised Final Judgment

will expire on the tenth anniversary of the date of its entry.

XIV. Public Interest

Entry of this Revised Final Judgment is in the public interest.

Dated ______, 1999.

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

United States District Judge.

[Civil Action No.: 3-99CV1398-H]

United States of America, and the State of Texas, Plaintiffs, v.

Aetna Inc., and The Prudential Insurance Company of America,

Defendants.

Revised Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act (``APPA''), 15 U.S.C 16(b)-(h), the United States submits this

Competitive Impact Statement to assist the Court in assessing the

proposed Revised Final Judgment submitted for entry in this civil

antitrust proceeding.

I. Nature and Purpose of This Proceeding

The United States filed a civil antitrust Complaint under Section

15 of the Clayton Act, 15 U.S.C. 25, on June 21, 1999, alleging that

the proposed acquisition by Aetna Inc. (``Aetna'') of The Prudential

Insurance Company of America's (``Prudential'') health care business

would violate Section 7 of the Clayton Act (``Section 7''), 15 U.S.C.

18. The State of Texas, by and through its Attorney General, is co-

plaintiff with the United States in this action.

The Complaint alleges that Aetna and Prudential compete head-to-

head in the sale of health maintenance organization (``HMO'') and HMO-

based point-of-service (``HMO-POS'') health plans in Houston and

Dallas, Texas; that such competition has benefited consumers by keeping

prices low and quality high; and that the proposed acquisition would

end such competition and give Aetna sufficient market power to increase

prices or reduce quality in the sale of HMO and HMO-POS plans in these

geographic areas (Complaint para. 26.) The Complaint also alleges that

the acquisition would enable Aetna to unduly depress physicians'

reimbursement rates in Houston and Dallas, resulting in a reduction of

quantity or a degradation in quality of physicians' services in these

area. (Complaint para. 33.)

When the Complaint was filed, the plaintiffs also filed a proposed

settlement that would permit Aetna to complete its acquisition of

Prudential but would require divestitures of certain assets sufficient

to preserve competition in the sale of HMO and HMO-POS plans and the

purchase of physicians' services in Houston and Dallas. This settlement

consisted of a proposed Final Judgment, Hold Separate Stipulation and

Order, and Stipulation. To further clarify certain aspects of the

proposed Final Judgment, on August 4, 1999, the parties made a joint

motion to the Court for entry of a Revised Hold Separate Stipulation

and Order, as well as a joint motion to file a Revised Final Judgment

and Revised Stipulation.

The proposed Revised Final Judgment requires Aetna to divest its

interests in the Houston-area commercial HMO and HMO-POS businesses of

NYLCare Health Plans of the Gulf Coast, Inc. (``NYLCare-Gulf Coast''),

a previously acquired health plan serving Houston and other areas in

south and central Texas, and the commercial HMO and

[[Page 44954]]

HMO-POS businesses of NYLCare Health Plans of the Southwest, Inc.

(``NYLCare-Southwest''), a previously acquired health plan serving the

Dallas area. If Aetna does not complete the divestitures within the

time frame established in the proposed Revised Final Judgment, a

trustee appointed by the Court will be empowered to sell NYLCare-Gulf

Coast and NYLCare-Southwest. If the assets are not sold within six (6)

months after the appointment of the trustee, the Court shall enter such

orders as it shall deem appropriate to carry out the purpose of the

trust. (Revised Final Judgment para. V.A., F.)

The Revised Hold Separate Stipulation and Order ensure that

NYLCare-Gulf Coast and NYLCare-Southwest function as independent,

economically viable, ongoing business concerns and that competition is

maintained prior to the divestitures. It requires Aetna to immediately

take steps to preserve, maintain, and operate NYLCare-Gulf Coast and

NYLCare-Southwest as independent competitors until the completion of

the divestitures ordered by the Revised Final Judgment, with

management, sales, service, underwriting, administration, and

operations held entirely separate, distinct, and apart from those of

Aetna. In addition, Aetna is obligated to cause NYLCare-Gulf Coast and

NYLCare-Southwest to maintain contracts or agreements for coverage of

approximately two hundred sixty thousand (260,000) commercially insured

HMO and HMO-based POS plan enrollees in Houston and contracts or

agreements for coverage of approximately one hundred sixty seven

thousand (167,000) commercially insured HMO and HMO-based POS plan

enrollees in Dallas through the date of signing the definitive purchase

and sale agreement(s) for the divestiture of the two NYLCare entities.

Until the plaintiffs, in their sole discretion, determine the NYLCare-

Gulf Coast and NYLCare-Southwest can function as effective competitors,

Aetna may not take any action to consummate the proposed acquisition of

Prudential. (Revised Final Judgment para. IV,I.)

The United States, the State of Texas, and the defendants have

stipulated that the proposed Revised Final Judgment may be entered

after compliance with the APPA. Entry of the proposed Revised Final

Judgment would terminate this action, except that the Court would

retain jurisdiction to construe, modify, or enforce the provisions of

the proposed Revised Final Judgment and to punish violations thereof.

II. The Alleged Violations

A. The Defendants

Aetna is a Connecticut corporation providing health and retirement

benefits and financial services with its principal place of business in

Hartford, Connecticut. Through its wholly owned subsidiary, Aetna U.S.

Healthcare, Aetna offers an array of health insurance products,

including indemnity (``fee-for-service''), preferred provider

organization (``PPO''), POS, and HMO plans. Aetna also purchases

physicians' services for its health plan members, which it offers to

members through Aetna's health plans. In 1998, Aetna U.S. Healthcare

reported revenues of over $14 billion and was the largest health

insurance company in the country, providing health care benefits to

approximately 15.8 million people in 50 states and the District of

Columbia.

Prudential is a New Jersey mutual life insurance company with its

principal place of business in Newark, New Jersey. Like Aetna,

Prudential offers indemnity, PPO, POS, and HMO plans and also buys

physicians' services, which it offers to its enrollees through

Prudential's health plans. In 1998, Prudential HealthCare reported

total revenues of approximately $7.5 billion and was the nation's ninth

largest health insurance company, serving approximately 4.9 million

health insurance beneficiaries in 28 states and the District of

Columbia.

B. Description of the Events Giving Rise to the Alleged Violations

Aetna and Aetna Life Insurance Company, a wholly owned subsidiary

of Aetna, entered into an Asset Transfer and Acquisition Agreement

(``Agreement'') dated December 9, 1998, with Prudential and PRUCO,

Inc., a wholly owned subsidiary of Prudential. Under the terms of the

Agreement, Aetna would acquire substantially all of Prudential's assets

related to issuing, selling, and administering group medical, dental

indemnity, and managed care plans, including HMO and HMO-POS plans. The

purchase price stated in the Agreement is $1 billion, consisting of

$465 million in cash, $500 million in three-year promissory notes, $15

million in cash payable under a Coinsurance Agreement, and $20 million

in cash to be paid under a Risk-Sharing Agreement.

C. Anticompetitive Effects of the Proposed Acquisition

1. The Sale of HMO and HMO-POS Plans

Aetna's proposed acquisition of Prudential would be likely to

substantially lessen competition in the sale of HMO and HMO-POS plans

in Houston and Dallas, Texas, in violation of Section 7.

a. Product Market

Managed care companies, such as Aetna and Prudential, contract with

employers and other group purchasers to provide health insurance

services or to administer health care coverage to employees and other

group members. There are a variety of managed care products available

to employers and other group purchasers which provide health care

services at an agreed-upon rate, subject to certain utilization review

and management requirements. These products, which include HMO, PPO,

and POS plans, have become increasingly popular options for employers,

largely because of the managed care companies' ability to obtain

competitive rates from health care providers and to control utilization

of health care services.

As the Complaint alleges, HMO and HMO-POS products differ from PPO

or indemnity plans in terms of benefit design, cost, and other factors.

(Complaint para. 15.) For example, HMOs provide superior preventative

care benefits, but they place limits on treatment options and generally

require use of a primary care physician ``gatekeeper.'' PPO plans,

which do not require enrollees to go through a ``gatekeeper'' and do

not emphasize preventative care, are generally more expensive than

HMOs. POS plans can be based on either an HMO or PPO network and fall

between HMO and PPO plans in terms of access and cost. That is, POS

plans offer patients more flexibility at a higher cost relative to

HMOs. In general, then, PPOs and indemnity options are more expensive,

provide better benefits with respect to coverage when ill, and allow

greater access to providers. In contrast, HMO and HMO-based POS options

are generally less expensive, provide better benefits with respect to

health maintenance or preventaive care, place greater limits on

treatment, and restrict access to providers. (Id.)

Not only do these plans in fact differ by cost and benefit

configuration, they are perceived as different by purchasers; neither

employers nor employees view PPO plans as adequate substitutes for HMO

or HMO-POS plans. Instead, they

[[Page 44955]]

view them as distinct products, meeting different needs and appealing

to different types of enrollees. Indeed, enrollees who leave an HMO

disproportionately select another HMO (or HMO-POS), not a PPO, for

their next health care benefit plan. (Complaint para. 17.)

Moreover, analyses of the data obtained from the parties and from

other plans strongly indicate that consumers--employers and employees--

view HMO and HMO-POS plans as distinct from other health plans and that

PPO or indemnity plans are not thought to be ready substitutes for HMO

and HMO-POS plans. These analyses demonstrate that the elasticity of

demand for HMO and HMO-POS plans is sufficiently low that a small but

significant price increase for all HMO and HMO-POS plans would be

profitable because consumers would not shift to PPO and indemnity plans

in sufficient numbers to render such an increase unprofitable.

Together with consistent evidence from numerous witnesses

interviewed, these analyses support the conclusion that HMO and HMO-POS

plans constitute the relevant product for analysis of the proposed

transaction. (Complaint para. 18.)

b. Geographic Markets

Virtually all managed care companies establish provider networks in

the areas where employees work and live, and they compete on the basis

of these local provider networks. The relevant geographic markets in

which HMO and HMO-POS plans compete are thus generally no larger than

the local areas within which HMO and HMO-POS enrollees demand access to

providers. More specifically, a small but significant increase in the

price of HMO and HMO-POS plans would not cause a sufficient number of

customers to switch to health plans outside of these regions to make

such a price increase unprofitable. For this reason, the Department's

analysis focused on MSAs in and around Houston and Dallas as the

relevant geographic markets. (Complaint para. 20.)

c. Competitive Effects

Aetna and Prudential are among each other's principal competitors

in the sale of HMO and HMO-POS plans in Houston and Dallas, and

employers currently view them as close substitutes based on product

design and quality. Maintaining Prudential as a competitor to Aetna in

Houston and Dallas has become particularly important since Aetna's 1998

acquisition of NYLCare, a transaction that propelled Aetna's HMO and

HMO-POS market share from 13% to 44% in Houston and from 11% to 26% in

Dallas. (Complaint para. 22.) The proposed acquisition of Prudential

would further enhance Aetna's position by eliminating competition

between the two companies, giving Aetna market shares of 63% in Houston

and 42% in Dallas. (Id.)

As the Complaint alleges, potential or current competitors will not

be able to constrain Aetna's exercise of its post-merger market power

in the defined geographic markets. (Complaint para. 25). Effective new

entry for a HMO or HMO-POS plan in Houston or Dallas typically takes

two to three years and costs approximately $50 million. (Complaint

para. 23.) In such an environment, de novo entry is unlikely to defeat

a price increase over the short term. (Id.) Furthermore, companies

currently offering PPO or indemnity plans are unlikely to shift their

resources to provide HMO or HMO-POS plans in Houston or Dallas in the

event of a small but significant price increase. A number of managed

care providers have stated during interviews that such a shift would be

difficult, expensive, and time consuming, and that they would not enter

the HMO or HMO-POS markets even if Aetna were to raise its prices a

``small but significant amount.'' (Merger Guidelines para. 1.11.)

Finally, managed care companies that presently offer HMO or HMO-POS

plans in Houston and Dallas are unlikely to be able to expand or

reposition themselves sufficiently to restrain anticompetitive behavior

by Aetna in either area following the transaction. (Complaint para.

24.) Not only would these companies face some of the costs and

difficulties of a new entrant, they would be unable to contend

successfully with Aetna's advantages in national reputation, quality

accreditation, product array, and provider network (Id.) It is

therefore unlikely that either new entry or expansion by competitors

could counteract a post-merger price increase. (Complaint para. 25.)

For all of these reasons, the proposed transaction would enable the

merged entity to increase prices or reduce the quality of HMO and HMO-

POS plans available to consumers in these areas, in violation of

Section 7.

2. The Purchase of Physicians' Services

As alleged in the Complaint, Aetna's acquisition of Prudential will

also consolidate its purchasing power over physicians' services in

Houston and Dallas, enabling the merged entity to unduly reduce the

rates paid for those services. 5

a. Product Market

Physician's services are those medical services provided and sold

by physicians, and the only purchasers are individual patients or the

commercial and government health insurers that purchase their services

on behalf of individual patients. (Complaint para. 27.) As a result,

physicians cannot seek other purchasers in the event of a small but

significant decrease in the prices paid by these buyers. (Id.) Nor will

such a price decrease cause physicians to stop providing their services

or shift towards other activities in numbers sufficient to make such a

price reduction unprofitable. (Id.) Physicians' services thus

constitute the relevant product market within which to assess the

likely effect of Aetna's acquisition of Prudential. (Id.)

b. Geographic Markets

The geographic markets for the purchase and sale of physicians'

services are localized. In Houston and Dallas, as elsewhere, patients

seeking medical care generally prefer to have access to treatment close

to where they work or live. As a result, commercial and government

health insurers--the primary purchasers of physicians' services--seek

to have in their provider networks physicians whose offices are

convenient to where their enrollees work or live. (Complaint para. 19.)

Consequently, physicians could not shift their services towards

purchasers outside of these areas in numbers sufficient to make a price

paid to physicians practicing in Houston or Dallas.

Furthermore, an established physician who has invested time and

expense in building a practice in Houston or Dallas (or any other

locale) would incur considerable costs in moving his or her practice to

a new geographic area, including the substantial costs of building new

relationships with hospitals, other physicians, employees, and patients

in the new area. (Complaint para. 28.) For these reasons, a small but

significant decrease in the prices paid to physicians practicing in

Houston or Dallas would not cause physicians to relocate their

practices in numbers sufficient to make such a price reduction

unprofitable. (Complaint para. 29).

For all of these reasons, the MSAs in and around Houston and Dallas

constitute the relevant geographic markets. (Id.; Merger Guidelines

para. 1.21.)

c. Competitive Effects

In Houston and Dallas, as elsewhere, the contract terms a physician

can

[[Page 44956]]

obtain from a managed care company such as Aetna or Prudential depend

on the physician's ability to terminate, or to credibly threaten to

terminate, his or her relationship if the company demands unfavorable

contract terms. (Complaint para. 30). Since physician's services,

unlike certain tangible products, cannot be stored until the physician

finds a more acceptable buyer, failing to replace lost business

expeditiously imposes an irrevocable loss of revenue upon a physician.

Consequently, a physician's ability to terminate, or credibly threaten

to terminate, a provider relationship depends on his or her ability to

make up that lost business promptly. (Id.)

Physicians, however, generally have only a limited ability to

encourage patients to switch health care plans or providers. (Complaint

para. 31.) To retain a patient after terminating a plan requires the

physician to convince the patient either to switch to another employer-

sponsored plan in which the physician participates (which might not be

an option) or to pay considerably higher out-of-pocket costs, either in

the form of increased copayments for use of an out-of-network physician

(if allowed) or by absorbing the total cost of the physicians' services

as unreimbursed medical expenses. As a result, a physician who

discontinues his or her relationship with Aetna could expect to lose a

significant share of his or her Aetna patients.

A physician's ability to replace, in a timely manner, such lost

business is significantly diminished when a large number of patients

need to be replaced. (Complaint para. 32.) Because of Aetna's all

products clause''--which requires a physician to participate in all of

Aetna's health plans if he or she participates in any Aetna plan--a

physician would lose patients from all Aetna plans if he or she rejects

the rates or other terms of any one Aetna plan. Thus, the cost of

replacing Aetna patients will be greater when Aetna plans collectively

account for a larger share of a physician's total revenue.

Furthermore, the ability to replace a given number of Aetna

patients is diminished when a physician's non-Aetna sources of patients

are more limited. Consequently, the cost of replacing Aetna patients

will be greater the larger Aetna's share of all patients in a locality.

Aetna's proposed acquisition of Prudential, following its recent

acquisition of NYLCare, will give it control over both a large share of

the revenue of a substantial number of physicians in Houston and Dallas

and a large share of all patients in those areas. (Complaint para. 33.)

In light of the limited ability of physicians to encourage patient

switching, a significantly larger number of physicians' in Houston and

Dallas would be unable to reject Aetna's demands for more adverse

contract terms if Aetna were allowed to acquire Prudential. (Id.) The

proposed acquisition thus would give Aetna the ability to unduly

depress physician reimbursement rates in Houston and Dallas, likely

leading to a reduction in quantity or degradation in the quality of

physicians' services. (Id.; see also Merger Guidelines para. 0.1.)

III. Explanation of the Proposed Revised Final Judgment

The proposed Revised Final Judgment orders and directs Aetna to

divest its interests in the Houston operations of NYLCare-Gulf Coast

and the Dallas operations of NYLCare-Southwest, consisting of, among

other assets, approximately 260,000 and 167,000 commercially insured

HMO and HMO-POS enrollees in Houston and Dallas, respectively. 6

(Revised Final Judgment para. II.E, F.)

The provisions of the proposed Revised Final Judgment are designed

to eliminate the two anticompetitive effects of the proposed

acquisition. First, the divestitures will preserve competition and

protect consumers from higher prices for HMO and HMO-POS plans by

establishing a new, independent, and economically viable competitor--or

by significantly strengthening the existing competitors--in the

development, marketing, and sale of HMO and HMO-POS plans in the

Houston and Dallas areas. Second, the divestitures will prevent the

consolidation of purchasing power over physicians' services in Houston

and Dallas and thereby deny Aetna the ability to unduly depress

physician reimbursement rates.

In order to meet these two objectives, the proposed Revised Final

Jugdment requires that Aetna promptly make NYLCare-Gulf Coast and

NYLCare-Southwest available for purchase. (Revised Final Judgment para.

IV.A.) Aetna must give all prospective purchasers reasonable access to

all NYLCare-Gulf Coast's and NYLCare-Southwest's personnel, physical

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

and information customarily provided as part of a due diligence

process. (Revised Final Judgment para. IV.F.) At the same time, Aetna

must immediately cease all actions directed at the integration of

NYLCare-Gulf Coast and NYLCare-Southwest into Aetna and must take all

steps necessary to ensure that NYLCare-Gulf Coast and NYLCare-Southwest

are maintained and operated as independent, on-going, economically

viable, and active competitors until completion of the divestitures

ordered by the Revised Final Judgment. (Revised Final Judgment para.

IV.G, H.) Such steps must include the appointment of experienced senior

management to run NYLCare-Gulf Coast and NYLCare-Southwest until the

divestitures required by the Final Judgment have been accomplished, as

well as the creation of a separate and independent sales organization,

provider relations organization, patient management/quality management

organization, commercial operations organization, network operations

organization, and underwriting organization. (Revised Final Judgment

para. IV.H.1-7.) To maintain the viability of the NYLCare entities,

Aetna is also required to provide certain support services (i.e.,

legal, financial, actuarial, software, and computer operations support)

to NYLCare-Gulf Coast and NYLCare-Southwest until the divestitures are

completed. (Revised Final Judgment para. IV.H.8, 9.)

Aetna is obligated to cause NYLCare-Gulf Coast and NYLCare-

Southwest to maintain contracts or agreements for coverage of

approximately two hundred sixty thousand (260,000) commercially insured

HMO and HMO-based POS plan enrollees in Houston and contracts or

agreements for coverage of approximately one hundred sixty-seven

thousand (167,000) commercially insured HMO and HMO-based POS plan

enrollees in Dallas through the date of signing the definitive purchase

and sale agreement for the divestitures of the two NYLCare entities.

(Revised Final Judgment para. IV.B.) Aetna is required to use its best

efforts to accomplish the divestiture as expeditiously as possible and

will accelerate the timetable for executing the definitive purchase and

sale agreement(s) for the divestiture of the NYLCare entities to a

target date of October 1, 1999. (Revised Final Judgment para. IV.C.) In

addition, Aetna will request that the NYLCare entities provide bi-

weekly reports on total enrollment to the plaintiffs until the

divestitures are complete. (Revised Final Judgment para. IV.J.) Aetna

will also fund an incentive pool of at least $500,000, which will be

available to the management of the NYLCare entities if they meet the

membership targets described above as of the closing date for the sale

of the entities. (Revised Final Judgment para. IV.H.10.)

Finally, Aetna may offer PPO related business as part of the sale

of the NYLCare entities. (Revised Final Judgment IV.B.) The actual

number of such PPO enrollees as of the signing date of the definitive

purchase and sale

[[Page 44957]]

agreement for the divestitures of the NYLCare entities will be taken

into account in determining compliance with the membership targets

described in Section IV.B of the proposed Revised Final Judgment. (Id.)

This last provision in no way lessens Aetna's obligation to divest

itself of all of the assets of NYLCare-Gulf Coast and NYLCare-

Southwest, excepting only the Excluded Assets.

The proposed Revised Final Judgment prohibits Aetna from taking any

action to consummate the proposed acquisition until such time as

plaintiffs, in their sole discretion, are satisfied that NYLCare-Gulf

Coast and NYLCare-Southwest are independent and viable competitors and

that Aetna has complied with the terms of the Revised Hold Separate

Stipulation and Order or until the divestitures required by this

Revised Final Judgment are completed. (Revised Final Judgment para.

IV.I.) The divestitures must be accomplished by selling or conveying

NYLCare-Gulf Coast and NYLCare-Southwest to a purchaser(s) in such a

way as to satisfy the plaintiffs, in their sole discretion, that the

entities conveyed can and will be used by the purchaser(s) as part of a

viable, ongoing business engaged in the sale of HMO and HMO-POS plans

in Houston and Dallas. (Revised Final Judgment para. IV.K.) The

divestitures may be made to one or more purchasers provided that in

each instance it is demonstrated, to the sole satisfaction of the

plaintiffs, that the acquirer(s) will remain viable competitors. (Id.)

The divestitures must be made to a purchaser(s) which is shown, to the

plaintiffs' sole satisfaction, to have (1) the capability and intent of

competing effectively in the sale of HMO and HMO-POS plans in Houston

and Dallas, (2) the managerial, operational, and financial capability

to complete effectively in the sale of HMO and HMO-POS plans in Houston

and Dallas, and (3) no limitation, through any agreement with Aetna or

otherwise, in its ability to compete effectively in the sale of HMO and

HMO-POS plans in Houston and Dallas. (Id.)

Aetna must file all required applications for regulatory approval

of the divestitures within one-hundred twenty (120) calender days after

June 21, 1999, the date on which the original proposed Final Judgment

was filed, and must complete the divestitures within five (5) business

days after it receives all necessary regulatory approvals, or five (5)

business days after the notice of the entry of this Revised Final

Judgment by the Court, whichever is later. (Revised Final Judgment

para. IV.C.) The plaintiffs may extend the time period for the

divestitures by no more than sixty (60) calendar days and may, in their

sole discretion, grant any further time extension needed by Aetna to

obtain regulatory approval of the divestitures. (Revised Final Judgment

para. IV.D.)

If Aetna cannot accomplish these divestitures within the above-

described period, the proposed Revised Final Judgment provides that,

upon application by the plaintiffs, the Court will appoint a trustee to

effect the divestitures. (Revised Final Judgment para. V.A.) After the

trustee's appointment becomes effective, the trustee will file monthly

reports with the parties and the Court, setting forth the trustee's

efforts to accomplish the divestitures. (Revised Final Judgment para.

V.E.) If the trustee has not accomplished such divestitures within six

(6) months after its appointment, the trustee and the parties will make

recommendations to the Court, which shall enter such orders as it deems

appropriate to carry out the purpose of the trust, including, if

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

appointment by a period requested by the plaintiffs. (Revised Final

Judgment para. V.F.)

The proposed Revised Final Judgment also requires Aetna to deliver

affidavits to plaintiffs as to the fact and manner of its compliance

with the Revised Final Judgment within twenty-five (25) calendar days

of the Court's June 21, 1999 entry of the original Hold Separate Order

and Stipulation, and every thirty (30) calendar days thereafter, until

divestitures have been completed, (Revised Final Judgment para. VII.A.)

Aetna must also submit, within twenty-five (25) calendar days of the

Court's entry of the original Hold Separate Order and Stipulation, an

affidavit that describes in detail all actions Aetna has taken and all

steps Aetna has implemented on an on-going basis to preserve NYLCare-

Gulf Coast and NYLCare-Southwest, describing Aetna's efforts to

maintain and operate NYLCare-Gulf Coast and NYLCare-Southwest as active

competitors, and the plans and timetable for Aetna's integration of

Prudential's health care assets. (Revised Final Judgment para. VII.B.)

The relief sought has been tailored to safeguard Houston and Dallas

consumers from an increase in price or a reduction in quality of HMO

and HMO-POS products. The relief sought also ensures that physicians in

these markets will be protected from an undue depression of

reimbursement rates, which could have led to a reduction in the

quantity or a degradation in the quality of physicians' services.

IV. Remedies Available to Potential Private Litigants

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

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

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

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

attorney's fees. Entry of the proposed Revised Final Judgment will

neither impair nor assist the bringing of any private antitrust damage

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

U.S.C. Sec. 16(a)), entry of the proposed Revised Final Judgment has no

prima facie effect in any subsequent private lawsuit that may be

brought against Aetna or Prudential.

V. Procedures Available for Modification of the Proposed Revised

Final Judgment

The parties have stipulated that the proposed Revised Final

Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the plaintiffs have not withdrawn

their consent. The APPA conditions entry upon the Court's determination

that the proposed Revised Final Judgment is in the public interest.

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

the effect date of the proposed Revised Final Judgment within which any

person may submit to the United States written comments regarding the

proposed Revised Final Judgment. Any person should comment within sixty

(60) days of the date this Competitive Impact Statement is published in

the Federal Register. The United States will evaluate and respond to

the comments. All comments will be given due consideration by the

Department of Justice, which remains free to withdraw its consent to

the proposed Revised Final Judgment at any time prior to entry. The

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

Court and published in the Federal Register.

Written comments should be submitted to: Gail Kursh, Chief, Health

Care Task Force, Antitrust Division, U.S. Department of Justice, 325

Seventh St., N.W., Suite 400, Washington, D.C. 20530. The proposed

Revised Final Judgment provides that the Court will retain jurisdiction

over this action and that the parties may apply to the Court for any

order necessary or appropriate for the modification, interpretation, or

enforcement of the Revised Final Judgment.

[[Page 44958]]

VI. Alternatives to the Proposed Revised Final Judgment

The Department considered, as an alternative to the proposed

Revised Final Judgment, a full trial on the merits of the Complaint

against the defendants. The Department is satisfied, however, that the

divestitures of the assets and other relief contained in the proposed

Revised Final Judgment will preserve viable competition in the sale of

HMO and HMO-POS products and in the purchase of physicians' services in

Houston and Dallas, Texas that otherwise would be affected adversely by

the acquisition. Thus, the proposed Revised Final Judgment would

achieve the relief the Department would have obtained through

litigation, but avoids the time, expense, and uncertainty of a full

trial on the merits of the Complaint.

VII. Standard of Review Under the APPA for Proposed Revised 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 determined whether entry of

the proposed Revised 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 of relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment; [and]

(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 trail.

As the United States Court of Appeals for the District of Columbia

Circuit has 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 plaintiff'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 Corp., 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.'' 7 Rather,

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

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

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

government in the competitive impact statement and its responses to

comments in order to determine whether those explanations are

reasonable under the circumstances.

United States v. MidAmerica Dairymen, Inc., 1977-1 Trade Cas. para.

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

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

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

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

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

Corp., 648 F.2d 660, 666 (9th cir. 1981)); see also Microsoft,, 56

F.3d. at 1460-62.

The law 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 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.8

A proposed final judgment, therefore, need not eliminate every

anticompetitive effect of a particular practice, nor guarantee 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.' ''9

The proposed Revised Final Judgment here offers strong and

effective relief that fully addresses the competitive harm posed by the

proposed transaction.

VIII. Determinative Documents

There are no determinative materials or documents of the type

described in Section 2(b) of the APPA, 15 U.S.C. Sec. 16(b), that were

considered by the United States in formulating the proposed Revised

Final Judgment. Consequently, none are filed herewith.

Dated: August 3, 1999.

Respectfully submitted,

Paul J. O'Donnell

John B. Arnett, Sr.

Steven Brodsky

Deborah A. Brown

Claudia H. Dulmage

Dionne C. Lomax

FredericK S. Young,

Attorneys, U.S. Department of Justice, Antitrust Division, Health Care

Task Force, 325 Seventh St., N.W., Suite 400, Washington, D.C. 20530,

Tel: (206) 616-5933, Facsimile: (202) 514-1517.

[FR Doc. 99-21368 Filed 8-17-99; 8:45 am]

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