Public Comments and Plaintiff's Responses; United States v. Mercury PCS II, L.L.C.

DEPARTMENT OF JUSTICE

Antitrust Division

Public Comments and Plaintiff's Responses; United States v.

Mercury PCS II, L.L.C.

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a public comment and

plaintiff's response thereto has been filed with the United States

District Court for the District of Columbia in United States v. Mercury

PCS II, L.L.C., Civil Case No. 98-2751 (PLF).

On November 10, 1998, the United States filed a civil antitrust

complaint alleging that Mercury PCS II, L.L.C. (``Mercury) violated

Section 1 of the Sherman Act, 15 U.S.C. 1. In its complaint, the

plaintiff alleged that the defendant used coded bids during a Federal

Communications Commission auction of radio spectrum licenses for

personal communication services. The complaint further alleges that,

through the use of these coded bids, the defendant reached an agreement

to stop bidding against another bidder in violation of Section 1 of the

Sherman Act, 15 U.S.C. 1. The proposed Final Judgment, filed the same

time as the Complaint, prohibits Mercury from entering into

anticompetitive agreements and from using coded bids in future FCC

auctions.

Public comment was invited within the statutory sixty-day comment

period. One comment was received, and the response thereto, are hereby

published in the Federal Register and filed with the Court. Copies of

the comment and the response are available for inspection in Room 215

of the U.S. Department of Justice, Antitrust Division, 325 Seventh

[[Page 13599]]

Street, N.W., Washington, DC 20530 (telephone: (202) 514-2481) and at

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

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

20001. Copies of these materials may be obtained on request and payment

of a copying fee.

Rebecca P. Dick,

Director of Civil Non-Merger Enforcement Antitrust Division.

United States of America, Plaintiff, v. Mercury PCS II, L.L.C.,

Defendant. Civil Case No. 98-2751 (PLF).

Plaintiff's Response to Public Comment

I

Background

Pursuant to section 2(d) of the Antitrust Procedures and Penalties

Act (the ``APPA''), 15 U.S.C.A Sec. 16(d), the United States files this

response to the single public comment received regarding the proposed

Final Judgment submitted for entry in this case.

Plaintiff filed a civil antitrust complaint on November 10, 1998,

alleging that Mercury PCS II, L.L.C. (``Mercury) violated Section 1 of

the Sherman Act, 15 U.S.C. 1. In its complaint, the plaintiff alleged

that the defendant used coded bids during a Federal Communications

Commission (``FCC'') auction of radio spectrum licenses for personal

communication services. The complaint further alleges that, through the

use of these coded bids, the defendant reached an agreement to stop

bidding against another bidder in violation of Section 1 of the Sherman

Act, 15 U.S.C. 1.

The proposed Final Judgment, filed the same time as the complaint,

prohibits Mercury from entering into anticompetitive agreements and

from using coded bids in future FCC auctions. A competitive impact

statement (``CIS'') filed by the United States describes the complaint,

the proposed Final Judgment, and the remedies available to private

litigants who may have been injured by the alleged violation. The

plaintiff and the defendant have stipulated that the proposed Final

Judgment may be entered after compliance with the APPA.

The APPA requires a sixty-day period of the submission of public

comments on the proposed Final Judgment following publication of the

proposed Final Judgment in the Federal Register. 15 U.S.C. 16(b). The

proposed Final Judgment was published in the Federal Register on

November 25, 1998; the comment period terminated on January 25, 1999.

The United States received only on comment, from High Plains Wireless,

L.P. (``High Plains'').\1\

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\1\ The comment is attached. The United States plans to publish

promptly the comment and this response in the Federal Register. The

United States will provide the Court with a certificate of

compliance with the requirements of the Tunney Act and file a motion

for entry of the Final Judgment once publication takes place.

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II

Response to the Public Comment

In its comment, High Plains states that the factual descriptions in

the complaint and CIS do not distinguish between the conduct of Mercury

and High Plains--the two parties to the alleged illegal agreement. High

Plains claims it was a ``victim of Mercury's scheme'' and notes that

High Plains notified the FCC about Mercury's use of BTA numbers in its

bids for the Amarillo and Lubbock licenses shortly after it detected

the message contained within Mercury's bids. High Plains requests that

the plaintiff amend the complaint and CIS to reflect its role as a

victim and a whistle blower. High Plains' comment does not address the

adequacy of the proposed Final Judgment.

The complaint properly alleges an illegal agreement between High

Plains and Mercury--indeed High Plains does not dispute the allegations

that establish the agreement.\2\ And the complaint already

distinguishes in a fundamental way between Mercury and High Plains--

only Mercury is named as a defendant. The complaint also reflects the

different conduct engaged in by each party, it alleges that Mercury

actively solicited the agreement through repeated use of BTA numbers,

while High Plains eventually assented to Mercury's offer by ceasing to

bid in a market Mercury wanted. That High Plains immediately complained

to the FCC about Mercury's use of BTA numbers is a matter of public

record.\3\ It is, however, irrelevant to the complaint against Mercury

and for that reason was not included.

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\2\ See United States v. Mercury PCS II, LLC (Civil Case No. 98-

2751 (PLF)), Paras. 19-21 (D.D.C.)(Complaint, filed November 10,

1998).

\3\ See, e.g., Notice of Apparent Liability for Forfeiture, FCC

97-388 (Rel. October 28, 1997).

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The sole concern of this Tunney Act proceeding is with the adequacy

of the relief obtained to address the offense charged in the complaint.

After careful consideration of the comment, the plaintiff concludes

that High Plains' comment does not change its determination that entry

of the proposed Final Judgment will provide an effective and

appropriate remedy for the antitrust violation alleged in the complaint

and is in the public interest. The relief obtained as to Mercury is

fully adequate to address the complaint against that firm. The

plaintiff will move the Court to enter the proposed Final Judgment

after the public comment and this Response have been published in the

Federal Register, as 15 U.S.C. Sec. 16(d) requires.

Dated this 9th day of March, 1999.

Respectfully submitted,

Jill Ptacek,

J. Richard Doidge,

U.S. Department of Justice, Antitrust Division, 325 7th Street, NW,

Suite 500, Washington, D.C. 20530, (202) 307-6607.

Certificate of Service

I hereby certify that I have caused a copy of the foregoing

Plaintiff's Response to Public Comments, as well as the attached copy

of the public comment received from Jonathan P. Graham on behalf of

High Plains Wireless, L.P., to be served on counsel for the defendant

by first class mail, postage prepaid, as the addresses set forth below.

Charles A. James, Esq.,

Jones, Day, Reavis & Pogue, Metropolitan Square, 1450 G Street, N.W.,

Washington, D.C. 20005.

Dated: March 9, 1999.

Jill Ptacek

Williams & Connolly

725 Twelfth Street, N.W., Washington, D.C. 20005-5901, (202) 434-

5000, FAX (202) 434-5029

January 25, 1999.

By Hand

Mr. Roger W. Fones,

Chief, Transportation Energy and Agriculture Section, Antitrust

Division, 325 Seventh Street, N.W., Suite 500, Washington, D.C.

20530.

Dear Mr. Fones: We represent High Plains Wireless, L.P. (``High

Plains''). Enclosed, pursuant to the Tunney Act, 15 U.S.C.

Sec. 16(b)-(h), please find the Comments of High Plains in

connection with the antitrust complaint and competitive impact

statement filed in United States v. Mercury PCS II, L.L.C., CA No.

1:98CV02751 (D.D.C.).

If you require any further information or have any questions,

please write or call me at the address and number listed above.

Very truly yours,

Jonathan P. Graham

Comments of High Plains Wireless, L.P. on the Proposed Final

Judgment in United States v. Mercury PCS II, L.L.C., CA No.

1:98CV02751

High Plains Wireless, L.P. (``High Plains'') is a victim of the

conduct engaged in by Mercury PCS II, L.L.C. (``Mercury'') in United

States v. Mercury PCS II, L.L.C., CA No. 1:98CV02751 (D.D.C.). Because

the Complaint and

[[Page 13600]]

Competitive Impact Statement do not provide all of the background facts

necessary to understand High Plains' role in the matter and may harm

High Plains by incorrectly suggesting that it willingly participated in

an agreement to violate the antitrust laws, High Plains is making this

Tunney Act submission. See 15 U.S.C. Sec. 16(b)-(h). High Plains

respectfully requests that the Department amend its Complaint, and make

corresponding modifications in its Competitive Impact Statement, to

reflect accurately High Plains' role in this matter.

High Plains is concerned that the Complaint and the Competitive

Impact Statement filed by the Department of Justice neglect to explain

fully the relevant circumstances. The Complaint alleges that Mercury

and High Plains reached an agreement to refrain from bidding against

one another for PCS licenses in certain markets in violation of Section

1 of the Sherman Act. See Complaint Paras. 3, 19, 20, 21. Similarly,

the Competitive Impact Statement filed with the Court alleges that High

Plains reached an agreement with Mercury to cease bidding on particular

PCS licenses. See Competitive Impact Statement at 1-2, 6-8. Although it

is accurate that Mercury threatened, through bid-signaling, to outbid

High Plains for the Amarillo F block license, and that in order to

confirm Mercury's intention, High Plains ceased bidding on the Lubbock

F block license, the Complaint and Competitive Impact Statement fail to

explain that High Plains (1) was the object of Mercury's improper

conduct, (2) immediately reported Mercury's wrongdoing to the FCC, and

(3) did not benefit from Mercury's misconduct. The Complaint and

Competitive Impact Statement thus incorrectly suggest that High Plains

was a willing participant in a violation of the antitrust laws of the

United States.

Relevant Facts

From August 26, 1996 to January 14, 1997, both Mercury and High

Plains participated in an auction conducted by the Federal

Communications Commission (``FCC'') of licenses to use certain

broadband radio spectrum in the operation of personal communications

services (``PCS''). The auction comprised numerous rounds of bidding.

As stated in the Competitive Impact Statement, High Plains had been the

high bidder for the Amarillo F Block license since Round 68 and

continuing through round 120. High Plains was also bidding for the

Lubbock F block license. Mercury, on the other hand, had shown no

interest in the Amarillo market, but was an active participant in the

bidding for the Lubbock F block license.

In round 117 of the auction, when only Mercury and High Plains were

bidding, Mercury made the last three digits of its bid match the ``BTA

code'' assigned to the Amarillo market (``013''), for which High Plains

was then the high bidder. High Plains did not then understand that

there was any connection between the Amarillo market and Mercury's bid

amount for the Lubbock market containing the BTA code for Amarillo.

High Plains continued bidding for the Lubbock F block license over the

next three rounds. In round 121, Mercury for the first time placed a

bid for the Amarillo F block license; its bid ended in the three digits

that served as the BTA code for the Lubbock market (``264''). Still not

understanding Mercury's intent, High Plains continued to bid for the

Lubbock F block license. Mercury responded by making the message

clearer--it placed bids ending in ``013'' in the Lubbock market in

round 123, ``264'' in the Amarillo market in round 125, and ``013'' in

the Lubbock market in round 127.

After the conclusion of round 127, High Plains realized that

Mercury was signalling High Plains to stop its bidding in Lubbock. In

order to test its theory that Mercury was signaling it through the use

of BTA code numbers, High Plains stopped bidding for the F block

license in Lubbock. The theory was confirmed when Mercury immediately

ceased bidding for the F block license in Amarillo. As soon as High

Plains' fears were confirmed, it immediately contacted the FCC by

telephone on November 22 and 25, 1996 and followed up on November 26,

1996 by filing an Emergency Motion for Disqualification. That

notification led to an investigation of Mercury's conduct by the FCC

and to the FCC's referral of the matter to the Department of Justice.

Summary and Request for Amendment

In light of this history, we believe it is both inaccurate and

unfair to describe the conduct of High Plains as if that conduct were

no different that of Mercury. High Plains respectfully requests that

the Complaint and Competitive Impact Statement be amended to reflect

that the conduct and actions of Mercury and High Plains were

significantly different. High Plains was the party that first brought

this matter to the attention of the FCC. Because High Plains promptly

reported and later filed a formal complaint with the FCC identifying

the illegal conduct of Mercury. Mercury's misconduct was exposed. If

the only facts about High Plains were those alleged in the Complaint,

then presumably the United States would have pursued the same judicial

course of action against High Plains that it followed against Mercury.

Unfortunately, the only facts in the record are those alleged in the

complaint; High Plains, the good citizen that observed and reported the

crime, is condemned by association.

Having observed what it believed to be a violation of the FCC's

rules and an apparent violation of Section 1 of the Sherman Act, High

Plains was in the difficult position of no longer being completely free

to pursue its own best interests and High Plains could not just ignore

Mercury's misconduct. High Plains immediately reported Mercury's

conduct to the FAA--the only thing it could have done in the

circumstances to bring the improper conduct to a halt and to avoid

being wrongly implicated in Mercury's scheme. Thus, we respectfully

request that the Complaint and Competitive Impact Statement be amended

to reflect that High Plains was a victim of Mercury's scheme, that High

Plains promptly brought the scheme to the attention of the proper

authorities, and that High Plains did not willingly participate in any

agreement that violated the antitrust laws.

Respectfully submitted,

Williams & Connolly

Steven R. Kuney

Jonathan P. Graham

[FR Doc. 99-6677 Filed 3-18-99; 8:45 am]

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