[Federal Register Volume 63, Number 142 (Friday, July 24, 1998)]
[Notices]
[Pages 39894-39900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19857]
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement; United
States v. General Electric Company and InnoServ Technologies, Inc.
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States v. General Electric Company and InnoServ Technologies, Inc., No.
1:98CV01744RCL (D.D.C., filed July 14, 1998). On July 14, 1998, the
United States filed a Complaint alleging that the proposed acquisition
of InnoServ by General Electric would violate Section 7 of the Clayton
Act, 15 U.S.C. 18. The proposed Final Judgment, filed the same time as
the Complaint, permits General Electric to acquire InnoServ but
requires that General Electric divest InnoServ's PREVU diagnostic
software used in the maintenance and repair of diagnostic imaging
machines (e.g., CT scanners, MRIs, x-ray machines). Copies of the
Complaint, proposed Final Judgment, and Competitive Impact Statement
are available for inspection at the Department of Justice in
Washington, D.C., in Room 215, 325 Seventh Street, N.W., and at the
Office of the Clerk of the United States District Court for the
District of Columbia, 333 Constitution Avenue, N.W., Washington, D.C.
Public comment is invited within 60 days of this notice. Such
comments, and responses thereto, will be published in the Federal
Register and filed with the Court. Comments should be directed to Mary
Jean Moltenbrey, Chief, Civil Task Force, Antitrust Division,
Department of Justice, Suite 300, 325 7th Street, N.W., Washington,
D.C. 20530 (telephone: 202/616-5935).
Constance Robinson,
Director of Operations and Merger Enforcement, Antitrust Division.
Stipulation and Order
The undersigned parties, by their respective attorneys, stipulate
that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties, and venue of this action is proper
in the District of Columbia.
2. The Court may enter and file a Final Judgment in the form hereto
attached upon the motion of any party or upon the Court's own motion at
any time after compliance with the Antitrust Procedures and Penalties
Act (15 U.S.C. 16(b)-(h)), and without further notice to any party or
other proceedings, provided that the United States has not withdrawn
its consent, which it may do at any time before the entry of the
proposed Final Judgment by serving notice on defendants and by filing
that notice with the Court.
3. The defendants agree to comply with the proposed Final Judgment
pending its approval by the Court, and shall, from the date of signing
this Stipulation, comply with all the terms and provisions of the
proposed Final Judgment as though it were in full force and effect as
an order of the Court, provided, however, that defendants shall not be
bound by the terms and provisions of the proposed Final Judgment unless
and until the closing of any transaction in which General Electric
Company directly or indirectly acquires all or any part of the assets
or stock of InnoServ Technologies, Inc.
4. If the United States withdraws its consent, or the court does
not enter the proposed Final Judgment pursuant to the terms of the
Stipulation, the time for all appeals of any Court ruling declining
entry of the Final Judgment has expired, and the Court has not
otherwise ordered continued compliance with the Final Judgment, then
the parties are released from all further obligations under this
Stipulation, and the making of this Stipulation shall be without
prejudice to any party in this or any other proceeding.
5. The parties request that the Court acknowledge the terms of this
Stipulation by entering the Order in this Stipulation and Order.
Dated: July 14, 1998.
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA:
Joel I. Klein,
Assistant Attorney General.
John M. Nannes,
Deputy Assistant Attorney General.
Constance K. Robinson,
Director of Operations and Merger Enforcement.
Mary Jean Moltenbrey,
Chief, Civil Task Force.
Susan L. Edelheit,
Assistant Chief, Civil Task Force.
Jon B. Jacobs, Fred E. Haynes, Joan H. Hogan, Peter J. Mucchetti,
Attorneys for the United States.
Bernard M. Hollander,
Senior Trial Attorney, Antitrust Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 300, Washington, DC 20530,
(202) 514-5012.
For Defendant General Electric Company:
Richard L. Rosen,
Arnold & Porter, 555 Twelfth Street, NW., Washington, DC 20004, (202)
942-5499.
For Defendant Innoserv Technologies, Inc.:
Malcolm R. Pfunder,
Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, NW., Washington,
DC 20036, (202) 955-8227.
So ordered on this ____ day of ____________
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United States District Judge.
Final Judgment
Plaintiff, United States of America, filed its Complaint on July
14, 1998. Plaintiff and defendants, General Electric Company (``GE'')
and InnoServ Technologies, Inc. (``InnoServ''), by their attorneys,
have consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law. This Final Judgment shall not
be evidence or admission by any party with respect to any issue of fact
or law. Defendants have agreed to be bound by the provisions of this
Final Judgment pending its approval by the Court.
The essence of this Final Judgment is the prompt and certain
divestiture through sale or licensing of certain rights or assets by
the defendants to establish a viable competitor in the sale of service
for certain models of GE diagnostic imaging equipment, in the sale of
comprehensive asset-management or multi-vendor services, or in the
licensing of advanced diagnostic software for use in any such service.
Defendants have represented to the United States that the sale required
below can and will be accomplished and that defendants will later raise
no claims of hardship or difficulty as grounds for asking the Court to
modify
[[Page 39895]]
any of the divestiture provisions contained below.
Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, Adjudged and Decreed:
I Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against GE and InnoServ under Section 7 of the
Clayton Act, as amended, 15 U.S.C. 18.
II Definitions
As used in this Final Judgment:
(A) ``Diagnostic imaging equipment'' means equipment that produces
images of the interior of the human body used for diagnostic or
therapeutic purposes in the practice of medicine.
(B) ``GE'' means defendant General Electric Company, a New York
corporation with headquarters in Fairfield, Connecticut, its
successors, assigns, divisions, subsidiaries, and affiliates, each
other person directly or indirectly, wholly or in part, owned or
controlled by it, and each partnership or joint venture to which any of
them is a party, and its directors, officers, employees, agents,
consultants, or other persons acting for or on behalf of any of them.
(C) ``InnoServ'' means defendant InnoServ Technologies, Inc., a
California corporation with headquarters in Arlington, Texas, its
successors, assigns, divisions, subsidiaries, and affiliates, each
other person directly or indirectly, wholly or in part, owned or
controlled by it, and each partnership or joint venture to which any of
them is a party, and its directors, officers, employees, agents,
consultants, or other persons acting for or on behalf of any of them.
(D) ``PREVU diagnostic package'' means the intellectual property
and any other related assets owned by InnoServ as part of its
proprietary advanced diagnostic service, including its PREVU remote
access software, PREVU computer, and cables necessary to interface the
PREVU computer to diagnostic imaging equipment for the purpose of
performing on-site and remote diagnostics.
III Applicability
This Final Judgment applies to the defendants, and each of their
successors and assigns, subsidiaries, affiliates, directors, officers,
managers, agents, and employees, and all other persons in active
concert or participation with any of them who receive actual notice of
this Final Judgment by personal service or otherwise.
IV Sale of Prevu Diagnostic Package
(A) GE is ordered, within 180 calendar days from the date of the
filing of the Complaint in this action or five days after notice of
entry of this Final Judgment by the Court, whichever is later, to sell
InnoServ's PREVU diagnostic package to an acquirer acceptable to the
United States in its sole discretion. The United States, in its sole
discretion, may agree to an extension of this time period of up to 30
calendar days, and shall notify the Court in such circumstances. GE
agrees to use its best efforts to accomplish the sale as expeditiously
as possible.
(B) Unless the United States otherwise consents in writing, the
sale of the PREVU diagnostic package shall include the entire PREVU
diagnostic package and be accomplished in such a way as to satisfy the
United States, in its sole discretion, that the PREVU diagnostic
package can and will be utilized by the purchaser as a part of a
viable, ongoing business. The sale, whether made by GE under this
section or by a trustee under Section V, shall be made to a purchaser
that, in the United State's sole judgment: (1) has the capability and
intent of competing effectively, and (2) has the managerial,
operational, and financial capability to compete effectively, in the
sale of service for certain models of GE diagnostic imaging equipment,
in the sale of comprehensive asset-management or multi-vendor services,
or in the licensing of advanced diagnostic software for use in any such
service. Furthermore, none of the terms of any agreement between the
purchaser and GE shall give GE the ability unreasonably to raise the
purchaser's costs, to lower the purchaser's efficiency, or otherwise to
interfere in the ability of the purchaser to compete effectively.
(C) In accomplishing the sale ordered by this Final Judgment, GE
promptly shall make known, by usual and customary means, the
availability of the PREVU diagnostic package. GE shall inform any
person making inquiry regarding a possible purchase of the PREVU
diagnostic package that the package is being sold pursuant to this
Final Judgment and provide that person with a copy of this Final
Judgment. GE shall offer to furnish to all bona fide prospective
purchasers, subject to confidentiality assurances, all information and
documents relating to the PREVU diagnostic package customarily provided
in a due diligence process--including access to personnel, inspection
of the assets, and any financial, operational or other documents
relevant to the sale--except such information or documents subject to
the attorney-client or work-product privileges. GE shall make available
such information to the United States at the same time that such
information is made available to any other person.
(D) GE shall provide to the purchaser of the PREVU diagnostic
package and to the United States information relating to the personnel
who have the primary responsibility for the development, maintenance,
and distribution of the PREVU diagnostic package, and training thereon,
to enable the purchaser to make offers of employment. GE will not
interfere with any negotiations by the purchaser to employ any such
person.
(E) If a sale is accomplished under this Final Judgment, GE may
retain a non-exclusive, nonassignable license (without right to
sublicense) to use the PREVU diagnostic package solely:
(1) In connection with fulfilling InnoServ service contracts in
effect on the date of GE's acquisition of InnoServ;
(2) In connection with fulfilling any service contracts resulting
from written proposals made by InnoServ to prospective customers that
are outstanding on the date of GE's acquisition of InnoServ, provided
that any such contract is entered into within 90 days of GE's
acquisition of InnoServ; and
(3) in connection with fulfilling any renewals of any service
contracts described in Section IV(E)(1) or (2), so long as the renewal
was entered into prior to any sale of the PREVU diagnostic package.
Such a license pursuant to Section IV(E)(1), (2), and (3) shall expire,
for each such contract, on the expiration date of the contract in
effect on the date that the PREVU diagnostic package is sold.
(F) Nothing in this Final Judgment shall prevent the buyer of the
PREVU diagnostic package from granting GE any non-exclusive rights to
use the PREVU diagnostic package in addition to those rights listed in
Section IV(E), but GE shall not make any such grant of additional
rights a condition of the sale.
V Appointment of Trustee
(A) If GE has not sold the PREVU diagnostic package within the time
period specified in Section IV(A), GE shall notify the United States of
that fact in writing. Upon application of the United States, the Court
shall appoint a trustee selected by the United States to effect the
sale of the PREVU diagnostic package. Until such time as a trustee has
been appointed, GE shall continue to
[[Page 39896]]
use its best efforts to accomplish the sale of the PREVU diagnostic
package.
(B)After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the PREVU diagnostic package. The
trustee shall have the power and authority to accomplish a sale at the
earliest possible time to a purchaser acceptable to the United States
at the best price and on the best terms as are then obtainable upon the
reasonable effort by the trustee, subject to the provisions of Sections
IV, V, and VI of this Final Judgment, and shall have such other powers
respecting the PREVU diagnostic package as this Court deems
appropriate. Subject to Section V(D) of this Final Judgment, the
trustee may hire at the cost and expense of GE any investment bankers,
attorneys, or other agents, who shall be solely accountable to the
trustee, reasonably necessary in the trustee's judgment to assist in
the sale.
(C) GE shall not object to a sale by the trustee on any grounds
other than the trustee's malfeasance. Any such objections by GE must be
conveyed in writing to the United States and the trustee within ten
calendar days after the trustee has provided the notice required under
Section VI.
(D) The trustee shall serve at the cost and expense of GE, 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 this services and those of any
professionals and agents retained by the trustee, any remaining money
shall be paid to GE, or GE shall pay to the trustee any expenses not
covered by the proceeds of the sale, and the trust shall then be
terminated. The compensation and expenses of the trustee and any
professionals and agents retained by the trustee shall be reasonable in
light of the value of the PREVU diagnostic package and based on a fee
arrangement providing the trustee with an incentive based on the price
and terms of the sale and the speed with which it is accomplished.
(E) GE shall use its best efforts to assist the trustee in
accomplishing a sale. 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
relating to the assets to be sold, and GE shall develop financial and
other information relevant to such assets customarily provided in a due
diligence process as the trustee may reasonably request, subject to
reasonable protection for trade secret or other confidential research,
development, or commercial information. GE shall take not action to
interfere with or to impede the trustee's accomplishment of a sale. GE
shall permit bona fide prospective purchasers of the assets to have
reasonable access to personnel and to make such inspection of any and
all financial, operational, or other documents and other information as
may be relevant to a sale under this Final Judgment.
(F) After its appointment, the trustee, shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish a sale or license (as provided in V(G)-(H)) under this Final
Judgment. To the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire or license, expressed an interest in
acquiring or licensing, entered into negotiations to acquire or
license, or was contacted or made an inquiry about acquiring or
licensing, and interest in the PREVU diagnostic package, and shall
describe in detail each contact with any such person. The trustee shall
maintain full records of all efforts made to sell or license the PREVU
diagnostic package.
(G) If the trustee has not accomplished a sale of the PREVU
diagnostic package within six months after its appointment, the trustee
shall promptly file with the Court a report setting forth (i) the
trustee's efforts to accomplish a sale, (ii) the reasons, in the
trustee's judgment, why a sale has not been accomplished, and (iii) the
trustee's recommendations. To the extent such reports contain
information that the trustee deems confidential, such reports shall not
be filed in the public docket of the Court. The trustee shall at the
same time furnish such report to the parties, who shall each have the
right to be heard and to make additional recommendations consistent
with the purpose of the trust. The Court shall thereafter enter an
order either:
(1) Extending the trust and the term of the trustee's appointment
to sell the PREVU diagnostic package by a period that is reasonable in
light of the trustee's earlier efforts and any additional efforts that
the Court believes can reasonably be made to sell the PREVU diagnostic
package; or
(2) Directing the trustee to proceed with licensing the PREVU
diagnostic package pursuant to Section V(H).
(H) Upon entry of an order by the Court pursuant to Section V(G)(2)
directing the trustee to license the PREVU diagnostic package, or upon
the expiration of any extended period for the sale of the PREVU
diagnostic package ordered by the Court pursuant to Section V(G)(1),
the trustee shall, for one year, offer perpetual, fully paid-up (at a
reasonable royalty rate), non-exclusive licenses to the PREVU
diagnostic package to any interested service providers of diagnostic
imaging equipment. The rights granted to such licensees shall include
the perpetual right to use, copy, and sublicense the PREVU diagnostic
package and to make and copyright derivative works from it. The trustee
shall advertise the availability of such non-exclusive licenses in at
least one national general circulation newspaper and one medical
diagnostic imaging equipment trade publication, which publications
shall be approved by the United States. GE shall pay for all expenses
reasonably incurred by the trustee in its attempts to license the PREVU
diagnostic package under this section. The trustee shall promptly
notify the United States and GE of any persons who acquire a license
under this section.
(I) If the trustee sells the PREVU diagnostic package, the trust
will terminate when the trustee has fulfilled all its duties regarding
the sale. Otherwise, at the end of the one-year licensing period, the
trustee shall promptly file with the Court a report setting forth: (i)
the trustee's efforts to license the PREVU diagnostic package, (ii) the
name, address, and telephone number of each person who acquired a
license, made an offer to license, expressed an interest in licensing,
entered into negotiations to license, or was contacted or made an
inquiry about licensing, any interest in the PREVU diagnostic package,
and shall describe in detail each contact with any such person, and
(iii) the trustee's recommendations about whether the trustee's
continuing to license the PREVU diagnostic package would serve the
public interest. To the extent such reports contain information that
the trustee deems confidential, such reports shall not be filed in the
public docket of the Court. The trustee shall at the same time furnish
such report to the parties, who shall each have the right to be heard
and to make additional recommendations consistent with the purpose of
the trust. The Court shall thereafter enter an order either:
(1) Extending the trust and the term of the trustee's appointment
to license the PREVU diagnostic package by a period that is reasonable
in light of the
[[Page 39897]]
trustee's earlier efforts and any additional benefits to the public
interest that the Court believes would result from continuing attempts
to license the PREVU diagnostic package; or
(2) Terminating the trust.
VI. Notification
(A) Within two business days following execution of a definitive
agreement, contingent upon compliance with the terms of this Final
Judgment, to effect any proposed sale pursuant to Section IV or V of
this Final Judgment, GE or the trustee, whichever is then responsible
for effecting the sale required herein, shall notify the United States
of the proposed sale. If the trustee is responsible, it shall similarly
notify GE. The notice shall set forth the details of the proposed
transaction and list the name, address, and telephone number of each
person not previously identified who offered or expressed an interest
in or desire to acquire any ownership interest in the PREVU diagnostic
package, together with full details of the same.
(B) Within 15 calendar days of receipt by the United States of such
notice, the United States may request from GE, the proposed purchaser
or purchasers, any other third party, or the trustee (if applicable)
additional information concerning the proposed sale and the proposed
purchaser or purchasers, and any other potential purchaser. GE and the
trustee shall furnish any additional information requested from them
within 15 calendar days of the receipt of the request, unless the
parties shall otherwise agree.
(C) Within 30 calendar days after receipt of the notice or within
20 calendar days after the United States has been provided the
additional information requested from GE, the proposed purchaser or
purchasers, any third party, and the trustee, whichever is later, the
United States shall provide written notice to GE and the trustee, if
there is one, stating whether or not it objects to the proposed sale.
If the United States provides written notice that it does not object,
then the sale may be consummated, subject only to GE's limited right to
object to the sale under Section V(C) of this Final Judgment. Absent
written notice that the United States does not object to the proposed
purchaser or upon objection by the United States, a sale proposed under
Section IV or Section V shall not be consummated. Upon objection by GE
under Section V(C), a sale proposed under Section V shall not be
consummated unless approved by the Court.
VII. Financing
GE shall not finance all or any part of any purchase made pursuant
to Section IV or V of this Final Judgment.
VIII. Preservation of Assets
Until any sale under this Final Judgment has been accomplished:
(A) GE shall preserve the PREVU diagnostic package in its existing
condition and shall take no action with respect to the PREVU diagnostic
package to cause any deterioration in the value of, or to deter any
person from buying or licensing, the PREVU diagnostic package.
(B) GE shall continue to license, on reasonable terms, the PREVU
diagnostic package to the persons who are licensees on the date of GE's
acquisition of InnoServ.
(C) GE shall not, except as part of a divestiture approved by the
United States, sell any part of the PREVU diagnostic package.
(D) GE shall appoint a person or persons to oversee the PREVU
diagnostic package, and who will be responsible for GE's compliance
with this section.
IX Affidavits
(A) Within 20 calendar days of the filing of the Complaint in this
action, and every 30 calendar days thereafter until the sale has been
completed under Section IV or V, GE shall deliver to the United States
an affidavit as to the fact and manner of its compliance with Section
IV or V of this Final Judgment. Each such affidavit shall include the
name, address, and telephone number of each person who, during the
preceding 30 days, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring, any interest in the PREVU diagnostic
package, 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 GE has taken to solicit a purchaser for the
PREVU diagnostic package and to provide required information to
prospective purchasers including the limitations, if any, on such
information. Assuming the information set forth in the affidavit is
true and complete, any objection by the United States to information
provided by GE, including limitations on information, shall be made
within fourteen (14) days of receipt of such affidavit.
(B) Within 20 calendar days of the filing of the Complaint in this
action, GE shall deliver to the United States an affidavit that
describes in reasonable detail all actions GE has taken and all steps
GE has implemented on an ongoing basis to comply with Section VIII of
this Final Judgment. GE shall deliver to the United States an affidavit
describing any changes to the efforts and actions outlined in GE's
earlier affidavit(s) filed pursuant to this section within 15 calendar
days after the change is implemented.
(C) Until one year after a sale has been completed or, if a sale is
not completed, one year after the trust under Section V is terminated,
GE shall preserve all records of all efforts made to preserve, sell,
and license the PREVU diagnostic package.
X Compliance Inspection
(A) For the purposes of determining or securing compliance with
this Final Judgment, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon written request of the Assistant
Attorney General in charge of the Antitrust Division, and on reasonable
notice to GE, be permitted:
(1) Access during GE's office hours to inspect and copy all books,
ledgers, accounts, correspondence, memoranda and other records and
documents in the possession or control of GE, which may have counsel
present, relating to any matters contained in this Final Judgment; and
(2) To interview, either informally or on the record, GE's
officers, employees, or agents, who may have counsel present, regarding
such matters. The interviews shall be subject to GE's reasonable
convenience and without restraint or interference by GE.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division, GE shall submit such written reports,
under oath if requested, relating to any of the matters contained in
this Final Judgment as may be requested.
(C) No information or documents obtained by the means provided in
this section or Section IX shall be divulged by the United States to
any person other than a duly-authorized representative of the executive
branch of the United States, except in the course of legal proceedings
to which the United States is a party (including grand jury
proceedings), or for the purpose of securing compliance with this Final
Judgment, or as otherwise required by law.
(D) If at the time information or documents are furnished by GE to
the
[[Page 39898]]
United States, GE represents and identifies in writing the material in
any such information or documents to which a claim of protection may be
asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure,
and GE 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 10 calendar days notice shall be given by the United
States to GE prior to divulging such material in any legal proceeding
(other than a grand jury proceeding) to which GE is not a party.
XI Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
Competitive Impact Statement
Plaintiff, the United States of America, pursuant to Section 2(b)
of the Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C.
16(b)-(h), files this Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. Nature and Purpose of the Proceeding
The United States filed a civil antitrust Complaint on July 14,
1998, alleging that General Electric Company's (``GE'') proposed
acquisition of InnoServ Technologies, Inc. (``InnoServ'') would violate
Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint alleges that
GE and InnoServ compete in servicing individual pieces of GE medical
imaging equipment and in the sale of comprehensive multi-vendor or
asset-management services (``multi-vendor service''). Multi-vendor
service involves contracting to service all or a significant portion of
a hospital's medical equipment.
The proposed combination would substantially lessen competition and
tend to create a monopoly in the markets for servicing certain models
of GE imaging equipment, especially GE CT scanners and magnetic
resonance imagers (MRIs), and in multi-Vendor service. InnoServ is an
effective competitor of GE in part because InnoServ is one of very few
companies that has developed proprietary diagnostic software for
servicing certain models of GE imaging equipment. The prayer for relief
in the Complaint seeks: (a) an adjudication that the proposed merger
would violate Section 7 of the Clayton Act; (b) a permanent injunction
preventing the transaction's consummation; (c) plaintiff's costs of
this action; and (d) such other relief as is just and proper.
Prior to filing this suit, the parties reached a proposed
settlement that permits GE to acquire InnoServ, yet preserves
competition in the markets in which the transaction would raise
significant competitive concerns. Along with the Complaint, the parties
filed a Stipulation and proposed Final Judgment setting out the
settlement terms.
The proposed Final Judgment orders GE to divest InnoServ's
proprietary diagnostic service software and related materials, which
are collectively known as the PREVU diagnostic package, to an acquirer
acceptable to the United States. Unless the United States agrees to a
time extension, GE must complete the divestiture within 180 calendar
days after the filing of the Complaint or five days after notice of the
entry of this Final Judgment by the court, whichever is later.
If GE does not complete the divestiture within the divestiture
period, the Court, upon application of the United States, is to appoint
a trustee selected by the United States to sell the PREVU diagnostic
package. The proposed Final Judgment also requires that, until the
divestiture mandated by the Final Judgment has been accomplished, GE
must continue to license, on reasonable terms, the PREVU diagnostic
package to persons who were PREVU licensees on the date GE acquires
InnoServ.
If the trustee has not sold the PREVU diagnostic package within six
months of its appointment, it will, for one year, license the package
at a reasonable royalty rate to any service provider unless the Court
grants the trustee additional time to complete a sale. The licenses
will be perpetual, fully paid-up, and non-exclusive and include the
perpetual right to use, copy, and sublicense the package and to make
and copyright derivative works.
The plaintiff and defendants have stipulated that the court may
enter the proposed Final Judgment after compliance with the APPA. Entry
of the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce
provisions of the Final Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
GE is a New York corporation headquartered in Fairfield,
Connecticut. GE is a diversified technology, manufacturing, and
services company. In 1997, GE's total revenues exceeded $90 billion.
Its wholly owned subsidiary General Electric Medical Systems
(``GEMS''), located in Waukesha, Wisconsin, manufactures medical-
imaging equipment such as CT scanners. MRIs, X-ray units, and nuclear-
medicine cameras. GEMS is the leading servicer of GE imaging equipment
in the United States. GEMS also services imaging equipment manufactured
by other companies through GE HealthCare Services, GE's wholly owned
multi-vendor and asset-management service group.
InnoServ, a California corporation headquartered in Arlington,
Texas, is one of the nation's largest independent service organizations
(``ISOs''). InnoServ services individual pieces of medical equipment
and provides comprehensive asset management, multi-vendor maintenance
and repair, and other specialized services for radiology, cardiology,
biomedical, and laboratory equipment. For the fiscal year ending April
30, 1997, InnoServ's service revenues exceeded $37 million. It has
struggled financially for the past two years, however, losing over $1.5
million for the nine months ending January 31, 1998. In March 1998,
InnoServ publicly expressed concern about its ability to continue to
meet its working capital requirements. For some time, InnoServ has been
seeking potential buyers of the company, but only GE has made such an
offer.
On May 19, 1998, the defendants signed a merger agreement providing
that GE would acquire InnoServ's common stock for a purchase price of
$16 million. The United States filed this suit because the proposed
merger threatened to decrease competition.
B. Anticompetitive Consequences of the Proposed Transaction
Competition between original equipment manufacturers such as GE and
ISOs such as InnoServ has benefited hospitals and other owners of
medical imaging equipment by driving down the cost of servicing their
equipment. GE and InnoServ have been competitors in the market for
servicing certain models of GE imaging equipment on a discrete basis
and in the multi-vendor service market.
[[Page 39899]]
InnoServ is one of the few competitors of GE that has developed
proprietary diagnostic software for servicing certain models of GE
imaging equipment. Advanced diagnostic software enables a service
engineer to more quickly service and maintain imaging equipment. GE
also has developed and uses its own advanced diagnostic software for
servicing imaging equipment.
GE's proposed acquisition of InnoServ would eliminate InnoServ as
an independent competitor in the market for servicing certain models of
GE imaging equipment on a discrete basis and in the multi-vendor
service market. It would also give GE exclusive control over InnoServ's
advanced service software. GE does not license its own advanced
diagnostic software to competing service providers and likely would not
license PREVU to its service competitors. Because InnoServ is an
experienced service provider with access to advanced diagnostic
software, GE's proposed acquisition of InnoServ would decrease
competition and likely increase prices for imaging equipment service.
Given InnoServ's financial difficulties, however, it is not clear
whether it can continue as an independent competitor in these markets.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment would promote additional competition in
servicing certain models of GE imaging equipment and in multi-vendor
service by requiring GE to divest InnoServ's proprietary diagnostic
service software and related materials to an acquirer acceptable to the
United States. These service materials, which are collectively known as
the PREVU diagnostic package, give InnoServ a competitive advantage in
servicing certain models of imaging equipment and in multi-vendor
service. Unless the United States agrees to a time extension, GE must
complete the divestiture within 180 calendar days after the filing of
the Complaint in this matter or five days after notice of the entry of
this Final Judgment by the Court, whichever is later.
If GE does not complete the divestiture within the divestiture
period, the Court, upon application of the United States, is to appoint
a trustee selected by the United States to sell the assets. The
proposed Final Judgment also requires that, until the divestiture
mandated by the Final Judgment has been accomplished, GE must continue
to license, on reasonable terms, the PREVU diagnostic package to
persons who were PREVU licensees on the date GE acquires InnoServ.
If the trustee has not accomplished the divestiture within six
months after its appointment, the trustee shall promptly file with the
Court a report setting forth (1) the trustee's efforts to accomplish
the sale, (2) the reasons, in the trustee's judgment, why the sale has
not been accomplished, and (3) the trustee's recommendations. At the
same time, the trustee will furnish such report to the plaintiff and
defendants, who will each have the right to be heard and to make
additional recommendations.
The Court will then either give the trustee additional time to
accomplish a sale, depending on the trustee's earlier efforts and any
additional efforts that the Court believes can reasonably be made to
the accomplish the sale, or direct the trustee, for one year, to
license the PREVU diagnostic package at a reasonable royalty rate to
any service provider. The licenses will be perpetual, fully paid-up,
and non-exclusive and include the perpetual right to use, copy, and
sublicense the package and to make and copyright derivative works.
At the end of the one-year licensing period, the trustee shall
promptly file with the Court a report setting forth: (1) the trustee's
efforts to license the PREVU diagnostic package and (2) the trustee's
recommendations as to whether the trustee's continuing to license the
PREVU diagnostic package would serve the public interest. 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.
The Court will then either: (1) have the trustee continue to license
the PREVU diagnostic package for a period that is reasonable in light
of the trustee's earlier efforts and any additional benefits to the
public interest that would result from continuing attempts to license
the package, or (2) terminate the trust.
If a trustee is appointed, the proposed Final Judgment provides
that GE will pay all reasonable costs and expenses of the trustee and
any professionals and agents retained by the trustee. After
appointment, the trustee will file monthly reports with the parties and
the Court, setting forth the trustee's efforts to divest or license the
PREVU diagnostic package as ordered under the proposed Final Judgment.
The divestiture of the PREVU diagnostic package will allow one or
more third parties to use the software, which in turn will enable them
to service more efficiently certain models of imaging equipment and
better compete in the markets for servicing individual pieces of
imaging equipment and providing multi-vendor service. In addition to
using the package in its service business, a buyer of PREVU could
resell or license PREVU to other parties. Similarly, PREVU licensees
could also use the package for servicing imaging equipment and/or
sublicense PREVU to other parties. Both a buyer and licensees would be
free to make and copyright derivative works. The ability to improve
upon PREVU will encourage investment in developing advanced service
software, which would further improve an entity's ability to compete
with GE.
In conjunction with this settlement, GE has also agreed to consent
to all of the relief that the Government was seeking in another case,
United States v. General Electric Company, No. CV-96-121-M-CCL (D.
Mont. Filed Aug. 1, 1996) (hereinafter ``Montana case''). The
settlement of the Montana case should help to alleviate some of the
competitive concerns raised by this transaction, by eliminating
agreements that prevented numerous hospitals around the country from
competing with GE in some of the markets affected by this transaction.
The United States considered whether obtaining full relief in the
Montana case, by itself, would be a sufficient remedy for this case,
abut concluded that the Montana settlement would not fully address the
competitive problems raised by the InnoServ transaction. The United
States therefore required GE to divest PREVU in addition to settling
the Montana litigation. The United States evaluated the merits of the
settlement proposals in each case independently, concluding that the
proposed settlement of this case is in the public interest for the
reasons stated herein, and that the proposed settlement of the Montana
case is in the public interest for reasons stated in the Competitive
Impact Statement filed in that case today.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages that the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed Final Judgment will
neither impair nor assist the bringing of any private antitrust damage
action. Under the provisions of Section 5(a) of the Clayton Act, 15
U.S.C. 16(a), the proposed Final Judgment has no prima facie effect in
any subsequent private lawsuit that may be brought against defendants.
[[Page 39900]]
V. Procedures Available for Modification of the Proposed Final Judgment
The parties have stipulated that the Court may enter the proposed
Final Judgment after compliance with the APPA, provided that the United
States has not withdrawn its consent. The APPA conditions that entry
upon the Court's prior determination that the proposed Final Judgment
is in the public interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The United States will give
all comments due consideration and respond to each of them. The United
States remains free to withdraw its consent to the proposed Final
Judgment at any time prior to entry. The comments and responses will be
filed with the Court and published in the Federal Register.
Written comments should be submitted to: Mary Jean Moltenbrey,
Chief, Civil Task Force, Antitrust Division, United States Department
of Justice, 325 7th Street, N.W., Suite 300, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
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 Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits of its Complaint to enjoin
GE's acquisition of InnoServ. The United States is satisfied, however,
that the divestiture of the PREVU diagnostic package will promote
competition in the relevant markets, particularly given that InnoServ's
poor financial condition threatens its ability to continue operations.
Incurring the substantial costs and uncertainty of a full trial on the
merits of the Complaint is therefore unnecessary.
VII. Standard of Review Under the APPA for Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the Court shall determine whether entry of
the proposed Final Judgment ``is in the public interest.'' In making
that determination, the Court may consider:
(1) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) The impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.\1\
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\1\ 15 U.S.C. 16(e).
The United States Court of Appeals for the D.C. Circuit has held
that this statute permits a court to consider, among other things, the
relationship between the remedy secured and the specific allegations
set forth in the government's complaint, whether the decree is
sufficiently clear, whether enforcement mechanisms are sufficient, and
whether the decree may positively harm third parties.\2\ 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.'' \3\ Rather,
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\2\ See United States v. Microsoft, 56 F.3d 1448, 1461-62 (D.C.
Cir. 1995).
\3\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''
determination can be made properly on the basis of the Competitive
Impact Statement and Response to Comments filed pursuant to the
APPA. Although the APPA authorizes the use of additional procedures,
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court
need not invoke any of them unless it believes that the comments
have raised significant issues and that further proceedings would
aid the court in resolving those issues. See H.R. Rep. 93-1463, 93rd
Cong., 2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.
[A]bsent a showing of corrupt failure of the government to
discharge its duty, the Court, in making its public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
reasonable under the circumstances.\4\
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\4\ United States v. Mid-America Dairymen, Inc., 1977-1 Trade
Cas. para. 61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court should not engage ``in an unrestricted evaluation
of what relief would best serve the public.'' \5\ Precedent requires
that:
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\5\ 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 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.
[citations omitted] 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.'' [citations omitted] More
elaborate requirements might undermine the effectiveness of
antitrust enforcement by consent decree.\6\
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\6\ Bechtel, 648 F.2d at 666; see BNS, 858 F.2d at 463; United
States v. National Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D.
Cal. 1978); Gillette, 406 F. Supp. at 716. See also Microsoft, 56
F.3d at 1461 (whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '') (citations omitted).
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose of its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' \7\
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\7\ United States v. American Tel. and Tel. Co., 552 F. Supp.
131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,
460 U.S. 1001 (1983), quoting Gillette Co., 406 F. Supp. at 716
(citations omitted); United States v. Alcan Aluminum, Ltd., 605 F.
Supp. 619, 622 (W.D. Ky. 1985).
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VIII. Determinative Documents
There are not determinative materials or documents within the
meaning of the APPA that were considered by the plaintiff in
formulating the proposed Final Judgment.
Dated: July 14, 1998.
Respectfully submitted,
Jon B. Jacobs,
Fred E. Haynes,
Joan H. Hogan,
Peter J. Mucchetti,
Attorneys for the United States, Antitrust Division, United States
Department of Justice, 325 Seventh Street, N.W., Suite 300, Washington,
DC 20539, (202) 514-5012.
[FR Doc. 98-19857 Filed 7-23-98; 8:45 am]
BILLING CODE 4410-11-M
