99-21368. 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

[Federal Register Volume 64, Number 159 (Wednesday, August 18, 1999)]
[Notices]
[Pages 44946-44958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21368]


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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: [phone]).
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: [phone], Facsimile: [phone].

    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: [phone], Facsimile: [phone].

    For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW., Washington, 
DC 20006; Tel: [phone], Facsimile: [phone].

    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: [phone], 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: [phone], Facsimile: [phone].

    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: [phone], Facsimile [phone].

    For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington, 
DC 20006; Tel: [phone], Facsimile: [phone].

    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: [phone], 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: [phone], Facsimile: [phone].

    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: [phone], Facsimile [phone].

    For Defendant, Aetna Inc.
Robert E. Bloch,
D.C. Bar #175927, Mayer, Brown & Platt, 1909 K Street, NW, Washington, 
DC 20006; Tel: [phone], Facsimile: [phone].

    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: [phone], 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: [phone], Facsimile: [phone].

[FR Doc. 99-21368 Filed 8-17-99; 8:45 am]
BILLING CODE 4410-11-M