[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Notices]
[Pages 8273-8275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4377]
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DEPARTMENT OF JUSTICE
Antitrust Division
U.S. v. US WEST, Inc. and Continental Cablevision, Inc.; Public
Comments and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
Sec. 16(c)-(h), the United States publishes below the comments received
on the proposed final judgment in U.S. v. US WEST, Inc. and Continental
Cablevision, Inc., Civil Action No. 96-2529 TPS, filed in the United
States District Court for the District of Columbia, together with the
United States' response to that comment.
Copies of the comments and response to the comments are available
for inspection and copying in Room 215 of the U.S. Department of
Justice, Antitrust Division, 325 7th Street, N.W., Washington, D.C.
20530 (telephone: (202) 514-2481), and at the Office of the Clerk of
the United States District Court for the District of Columbia. Copies
of these materials may be obtained upon request and payment of a
copying fee.
Constance K. Robinson,
Director of Operations.
In The United States District Court for The District of Columbia
United States of America, Plaintiff, v. US West, Inc. and
Continental Cablevision, Inc., Defendants.
[No. 96-2529 TPS (Antitrust)]
Comments Relating to Proposed Final Judgment and Response of The
United States to Comments
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act (15 U.S.C. Sec. 16(b)-(h) (``APPA''), the United States of America
hereby files the public comments it has received relating to the
proposed Final Judgment in this civil antitrust proceeding, and herein
responds to the public comments. The United States has carefully
reviewed the public comments on the proposed Final Judgment and remains
convinced that entry of the proposed Final Judgment is in the public
interest.
I.--Background
This action was commenced on November 5, 1996, when the United
States filed a civil antitrust complaint under Section 15 of the
Clayton Act, as amended, 15 U.S.C. Sec. 25, alleging that the proposed
acquisition of Continental Cablevision, Inc. (``Continental'') by US
WEST, Inc. (``US WEST''), would violate Section 7 of the Clayton Act,
as amended, 15 U.S.C. Sec. 18. US WEST is the dominant provider of
local telecommunications services, including dedicated services, within
its telephone service area in the States of Arizona, Colorado, Idaho,
Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon,
South Dakota, Utah, Washington, and Wyoming. At the time the
acquisition was announced, Continental owned 20% of Teleport
Communications Group, Inc. (``TCG''), a competitive access provider
(``CAP'') providing dedicated services in various cities across the
nation, including Denver, Omaha, Phoenix and Seattle. The complaint
alleges that US WEST's acquisition of Continental's interest in TCG
would substantially lessen competition in the sale of dedicated
services in the areas within Denver, Omaha, Phoenix and Seattle in
which TCG provides such services.
Contemporaneously with filing its Complaint, the United States
submitted a proposed Final Judgment, a Competitive Impact Statement and
a Stipulation signed by the defendants consenting to entry of the
proposed Final Judgment. The proposed Final Judgment orders US WEST to
divest the TCG Common Stock by certain specified dates and contains
other provisions designed to bar US WEST's access to highly sensitive
TCG business information, and to treat TCG as a passive business
investment. The Competitive Impact Statement explains the basis for the
Complaint and the reasons why entry of the proposed Final Judgment
would be in the public interest. In the Stipulation, the defendants and
the United States consented to entry of the proposed Final Judgment by
the Court after completion of the procedures required by the APPA.
II.--Compliance With the APPA
The APPA requires a sixty-day period for the submission of public
comments on the proposed Final Judgment, 15 U.S.C. 16(b). In this case,
the sixty-day comment period commenced on November 18, 1996, and
terminated on January 16, 1997. During this period, the United States
received only one comment relating to the proposed Final Judgment.\1\
The United States herein responds to this comment. Upon publication of
this comment and the following response of the United States to this
comment in the Federal Register pursuant to 15 U.S.C. 16(d) of the
APPA, the procedures required by the APPA prior to entry of the
proposed Final Judgment will be completed, and the Court may enter the
proposed Final
[[Page 8274]]
Judgment. The United States will move the Court for entry of the
proposed Final Judgment after the public comment and this response of
the United States have been published in the Federal Register.
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\1\ This comment is attached hereto as Exhibit A.
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III.--Response to Public Comments
The only comment received by the United States was filed by TCG.
TCG does not object to the substantive provisions of the proposed Final
Judgment. In particular, TCG does not object to the requirement that US
WEST divest its interest in TCG nor to the timing or manner in which
such divestiture must be carried out. Indeed, TCG's comments do not
relate to either the anticompetitive consequences of the acquisition or
the adequacy of relief provided by the proposed Final Judgment to
remedy the antitrust violations alleged in the Complaint. The only
objection that TCG raises with respect to the proposed Final Judgment
relates to the provision requiring US WEST to deliver to the United
States periodic affidavits setting forth the fact and manner of US
WEST's efforts to comply with the divestiture provisions of the
proposed Final Judgment. Because these affidavits are likely to contain
sensitive business information relating to the sale or attempted sale
of TCG Common Stock, TCG requests that the proposed Final Judgment be
modified so as to require that such affidavits ``be submitted
confidentially to the plaintiff and not filed in the public docket of
the Court.'' Letter from W. Terrell Wingfield to Donald J. Russell,
dated December 18, 1996, Exhibit A at 2.
The United States shares TCG's concerns about the potential
disclosure of highly confidential and sensitive business information.
For the following reasons, however, the United States does not believe
that a modification of the proposed Final Judgment is necessary to
protect affidavits containing such information. First, it is not the
standard practice of the United States to voluntarily disclose
affidavits submitted pursuant to a consent decree. Second, there are
only two situations in which disclosure could occur: (1) If the United
States is ordered or otherwise finds it necessary to file such
affidavits on the public docket in any legal proceeding; and/or (2) If
a request is made under the Freedom of Information Act, 5 U.S.C. 552 et
seq. (``FOIA''), and the United States determines that any such
affidavit does not fall into one of the FOIA exemptions to disclosure.
In the event that the United States receives an order, a subpoena
and/or otherwise intends to use such information in any legal
proceeding, Section IX.D of the proposed Final Judgment requires the
United States to give the defendants ten (10) calendar days notice
prior to divulging any material to which a claim of protection may be
asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure
and which the defendants have marked as being, ``Subject to claim of
protection under Rule 26(c)(7) of the Federal Rules of Civil
Procedure.''
In the event that the United States determines that any such
affidavit is not exempt from FOIA, then the United States would follow
the procedures set forth in 28 CFR 16.7. Section 16.7 provides, in
relevant part, that the United States:
shall, to the extent permitted by law, provide a submitter [of
confidential and sensitive business information] with prompt written
notice of a Freedom of Information Act request or administrative
appeal encompassing its business information. * * * in order to
afford the submitter an opportunity to object to disclosure * * *
Such written notice shall either describe the exact nature of the
business information requested or provide copies of the records or
portions thereof containing the business information.
16 CFR 16.7(c). Section 16.7(b) defines a submitter as ``any person or
entity who provides business information, directly or indirectly to the
Department.'' Absent exigent circumstances, the United States generally
gives the submitter ten (10) calendar days notice of a request or
intention to disclose the business information so as to allow the
submitter sufficient time to file an objection to disclosure or
otherwise move to protect the information. TCG has been informed of the
foregoing protections and has authorized the United States to inform
the Court that these protections are adequate to address TCG's
concerns. Given these facts, the United States does not believe that a
modification of the proposed Final Judgment is warranted in the public
interest.
IV.--Standard of Review
Pursuant to 15 U.S.C. Sec. 16(e), the proposed Modified Final
Judgment cannot be entered unless the Court determines that it is in
the public interest. The focus of this determination is whether the
relief provided by the proposed Modified Final Judgment is adequate to
remedy the antitrust violations alleged in the Complaint. United States
v. Bechtel Corp., 648 F.2d 660, 665-66 (9th Cir.), cert. denied. 454
U.S. 1083 (1981), quoted with approval in United States v. Microsoft
Corp., 56 F.3d 1448, 1457-58, see also 56 F.3d at 1459-60 (D.C. Cir.
1995). In the recent Microsoft decision by the United States Court of
Appeals for the District of Columbia Circuit, which reversed the
district court's refusal to enter an antitrust consent decree proposed
by the United States, the court of appeals held that the provision in
Section 16(e)(1) of the Tunney Act allowing the district court to
consider ``any other considerations bearing upon the adequacy of such
judgment,`` does not authorize extensive inquiry into the conduct of
the case. 56 F.3d at 1458-60. The court of appeals concluded that
``Congress did not mean for a district judge to construct his own
hypothetical case and then evaluate the decree against that case.'' Id.
To the contrary, ``[t]he court's authority to review the decree depends
entirely on the government's exercising its prosecutorial discretion by
bringing a case in the first place,'' and so the district court ``is
only authorized to review the decree itself,'' not other matters that
the government might have but did not pursue. Id.
Under the public interest standard, the Court's role is limited to
determining whether the proposed decree is within the ``zone of
settlements'' consistent with the public interest, not whether the
settlement diverges from the Court's view of what would best serve the
public interest. United States v. Western Electric Co. 993 F.2d 1572,
1576 (quoting United States v. Western Electric Co., 900 F.2d 283, 307
(D.C. Cir. 1990)); United States v. Microsoft Corp., 56 F.3d at 1460.
Moreover, the Court should give a request for entry of a proposed
decree even more deference that a request by a party to an existing
decree for approval of a modification, for in dealing with an initial
settlement the Court is unlikely to have substantial familiarity with
the market involved. United States v. Microsoft Corp., 56 F.3d at 1460-
61.
Absent a showing of corrupt failure of the government to
discharge its duty, the Court, in making its public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
reasonable under the circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.
61,508, at 71,980 (W.D. Mo. 1977). The Court may reject the agreement
of the parties as to how the public interest is best served only if it
has ``exceptional confidence that adverse antitrust consequence will
result.* * *'' United States v. Western Electric Co., 993 F.2d at 1577
(D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993), quoted with approval
in
[[Page 8275]]
United States v. Microsoft Corp., 56 F.3d at 1460.
V.--Conclusion
After careful consideration of the comments and for the reasons
stated herein and in the Competitive Impact Statement, the United
States continues to believe that the proposed Final Judgment is
adequate to remedy the antitrust violations alleged in the Complaint.
There has been no allegation or showing that the proposed settlement
constitutes an abuse of the United States' discretion nor that it is
inconsistent with the public interest. Accordingly, entry of the
proposed Final Judgment should be deemed to be in the public interest.
Dated: February 7, 1997.
Respectfully submitted,
Yvette Benguerel,
Attorney, Telecommunications Task Force, U.S. Department of Justice,
Antitrust Division, 555 4th Street, N.W., Room 8104, Washington, D.C.
20001, (202) 514-5808.
[December 18, 1996--Via Federal Express]
Donald J. Russell, Esq.,
Chief, Telecommunications Task Force, Antitrust Division, U.S.
Department of Justice, Room 8104, 555 4th Street, N.W., Washington,
D.C. 20001.
Re: United States of America v. U S West Inc. and Continental
Cablevision, Inc., United States District Court for the District of
Columbia
On behalf of Teleport Communications Group Inc. (TCG), and in
accordance with the provisions of 15 U.S.C. Sec. 16(d), we hereby
submit the following comments in connection with the matter of
United States of America v. U S West Inc. and Continental
Cablevision Inc. TCG seeks an amendment to the Final Judgment
providing that the Affidavits submitted pursuant to Section VII will
be submitted confidentially and not be filed in the public docket of
the Court. The undersigned has been in communication with Robert J.
Sachs, counsel for Continental, and has been advised that they do
not oppose this request.
The proposed Final Judgment provides, inter alia, that U S West
use its best efforts to divest the approximately 11% interest of TCG
held by Continental as expeditiously as possible. The proposed Final
Judgment further provides that U S West divest a portion of its
interest in TCG sufficient to cause it to own less than 10% by June
30, 1997, and divest any remaining portion of the TCG interest by
December 31, 1998. The divestiture must be made to a purchaser or
purchasers in a manner that ``shall not injure TCG.''
The proposed Final Judgment orders U S West to deliver periodic
Affidavits to the plaintiff setting forth its efforts in connection
with the ordered divestiture. Said Affidavits are to include such
information as the names of potential purchasers contacted or
expressing interest, and describe ``in detail each contact.'' These
Affidavits could be subject to public disclosure unless they are
submitted confidentially pursuant to an Order of this Court.
TCG is a publicly traded company with approximately 30 million
shares traded on the NASDAQ National Market. TCG is concerned that
information concerning efforts to sell a major block of the
company's stock could have a significant adverse impact on the
market for TCG stock. Traders may engage in speculative activity
based on information contained in these Affidavits causing
significant volatility in TCG's stock price. As a result, premature
disclosure of U S West's activities could significantly disrupt the
market for TCG's securities. Further, the information contained in
these Affidavits is subject to being available selectively to
certain investors and not others, thereby possibly requiring TCG to
fully disseminate such information so as to be in full compliance
with securities laws.
Additionally, there may be a chilling effect on some of the
prospective purchasers of U S West's interest in TCG if the
possibility exists that an inquiry or expression of interest is
subject to being publicly disclosed. Such prospective purchasers may
not even want their interests made public, much less risk a ``public
negotiation'' for TCG. This may have the effect of reducing the
universe of prospective purchasers, some of whom may be best suited
to insure the continued viability of TCG. Furthermore, public
disclosure of the negotiations may jeopardize or render unavailable
any exemption under federal and state securities law upon which the
parties intend to rely. This would cause additional expense and may
complicate or even terminate negotiations.
TCG proposes that the required Affidavits be submitted
confidentially to the plaintiff and not filed in the public docket
of the Court. In the event the divestiture is not accomplished in
the time frame set out in the Final Judgment, a Trustee is appointed
to effect the divestiture. Although the Trustee is similarly
required to submit monthly status reports, such reports are
specifically to be submitted confidentially. It appears the failure
of the proposed Final Judgment to contain similar confidentiality
protection was an oversight by the parties, and a similar
restriction should be imposed upon the pre-Trustee status reports as
well.
TCG believes the overriding principle in the Final Judgment is
to force a divestiture of U S West's interest in TCG in a fashion
that is not injurious to TCG and that could not lessen competition.
However, information contained in the status Affidavits could impact
TCG's financial well-being pending the disposition. If there is any
possibility that such an outcome may occur, it is in the best
interest of the public to support TCG's request and maintain the
confidentiality of such information.
TCG further submits that existing federal securities laws
provide an appropriate framework for the public disclosure of the
disposition of U S West's holdings in TCG. Because U S West will be
subject to the public reporting obligations under both Section 13
and 16 of the Securities Exchange Act of 1934 with respect to its
TCG stock, U S West is already required to make public filings as to
changes in its TCG stock holdings when it enters into binding
agreements to dispose of such stock. TCG believes that the public
disclosure mandated by these securities laws provides the best and
most orderly mechanism for the public disclosure of changes in U S
West's holdings.
In conclusion, TCG asserts that its request is consistent with
the underlying premise of the proposed Order--to cause a divestiture
of U S West's holdings in TCG in a manner that is not injurious to
TCG. In light of the fact that the request is not contested by
Continental, we request the United States concur and submit such
request to the Court.
Sincerely,
W. Terrell Wingfield, Jr.,
Vice President and General Counsel.
Service List
C. Loring Jetton, Jr., Wilmer, Cutler & Pickering, 2445 M Street,
NW., Washington, DC 20037.
John McGrew, Wilkie Farr & Gallagher, Three Lafayette Center, 1155
21st Street, NW., Washington, DC 20036-3384.
W. Terrell Wingfield, Jr., Vice President and General Counsel,
Teleport Communications Group, 429 Ridge Road, Dayton, NJ 08810.
Sean C. Lindsay, U.S. West, Inc., 7800 East Orchard Road, Suite 490,
P.O. Box 6508, Englewood, CO 80155-6508.
Robert J. Sachs, Senior Vice President, Corporate and Legal Affairs,
Continental Cablevision, Inc., The Pilot House, Lewis Wharf, Boston,
MA 02110.
Certificate of Service
I, Tracy Varghese, hereby certify under penalty of perjury that
I am not a party to this action, that I am not less than 18 years of
age, and that I have on this day caused the Comments Relating to
Proposed Final Judgment and Response of the United States to
Comments to be served on defendants, intervenors, and other
interested persons by mailing a copy, postage prepaid, to each of
the individuals and organizations on the attached service list.
February 7, 1997.
Tracy Varghese.
[FR Doc. 97-4377 Filed 2-21-97; 8:45 am]
BILLING CODE 4410-11-M
