[Federal Register Volume 59, Number 183 (Thursday, September 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23472]
[[Page Unknown]]
[Federal Register: September 22, 1994]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. MCI Communications Corporation and BT Forty-
Eight Company (``Newco''); Public Comments and Response on Proposed
Final Judgment
Pursuant to the antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States of America hereby publishes below the
comments received on the proposed Final Judgment in United States v.
MCI Communications Corporation, et al., Civil Action No. 94-1317, filed
in the United States District Court for the District of Columbia,
together with the United States' response to the comments.
Copies of the comments and response are available for inspection in
Room 3235 of the Antitrust Division, U.S. Department of Justice, Tenth
Street and Pennsylvania Avenue N.W., Washington, D.C. 20530 (202-514-
2481) and at the office of the Clerk of the United States District
Court for the District of Columbia, United States Courthouse, Third
Street and Constitution Avenue N.W., Washington, D.C. 20001.
Constance K. Robinson,
Director of Operations, Antitrust Division.
Comments Relating to Proposed Final Judgment and Response of the United
States to Comments
United States of America, Plaintiff, v. MCI Communications
Corporation and BT Forty-Eight Company (``NewCo''); Defendants.
[Civil Action No. 94-1317 (TFH)]
Pursuant to Section 2(b) of the Antitrust Procedures and
Penalties Act (15 U.S.C. 16(b)-(h)) (``APPA''), the United States of
America hereby files the public comments it has received relating to
the proposed Final Judgment in this civil antitrust proceeding, and
herein responds to the public comments. The United States has
carefully reviewed the public comments on the proposed Final
Judgment and remains convinced that entry of the proposed Final
Judgment is in the public interest.
I. Background
This action was commenced on June 15, 1994, when the United
States filed a civil antitrust complaint under Section 15 of the
Clayton Act, as amended, 15 U.S.C. 25, alleging that the proposed
acquisition of a 20% equity interest in MCI Communications
Corporation (``MCI'') by British Telecommunications plc (``BT''),
and the proposed formation of a joint venture between MCI and BT to
provide international enhanced telecommunications services, would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, by
lessening competition in the markets for global seamless
telecommunications services and for international telecommunications
services between the United States and the United Kingdom.
On the same date, the United States submitted a proposed Final
Judgment, a Competitive Impact Statement, and a Stipulation signed
by the defendants consenting to entry of the proposed Final
Judgment. The proposed Final Judgment contains terms and conditions
safeguarding against discriminatory and other anticompetitive
practices that would favor the defendants over competing United
States providers of international telecommunications services and
harm competition. The Competitive Impact Statement explains the
basis for the Complaint and the reasons why entry of the proposed
Final Judgment would be in the public interest. In the Stipulation,
defendants and the United States consent to entry of the proposed
Final Judgment by the Court after completion of the procedures
required by the APPA.
II
Compliance With the APPA
The APPA requires a sixty-day period for the submission of
public comments on the proposed Final Judgment, 15 U.S.C. 16(b). In
this case, the sixty-day comment period commenced on June 27, 1994,
and terminated on August 26, 1994. During this period, the United
States received comments by one competitor of MCI and BT relating to
the proposed Final Judgment.\1\ The United States responds herein to
those comments. Upon publication in the Federal Register these
comments and the following response of the United States to these
comments, pursuant to 15 U.S.C. 16(d) of the APPA, the procedures
required by the APPA prior to entry of the proposed Final Judgment
will be completed, and the Court may enter the proposed Final
Judgment. The United States will move the Court for entry of the
proposed Final Judgment after the public comments and this response
of the United States have been published in the Federal Register.
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\1\These comments are attached as Exhibit A.
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III
Response to Public Comments
The only comments received by the United States were filed by
ACC Global Corporation (``ACC''), one of the companies recognized by
the United States and the defendants in the Stipulation as a
competitor entitled to receive information concerning the
defendants, under the provisions of the proposed Final Judgment. ACC
is a resale provider of international telecommunications services in
the United States, and one of its subsidiaries has received a
license to provide international simple resale services in the
United Kingdom. ACC does not oppose prompt resolution of this matter
through a consent decree, and indeed it considers the transparency
requirements in Section II.A of the proposed Final Judgment as ``of
vital importance in ameliorating the potential anticompetitive
impact of the agreements that gave rise to the complaint filed by
the DOJ in this matter.'' ACC Comments at 2. These transparency
requirements, ACC states, provide ``substantial protection to
Competitors such as ACC'' because they ensure the availability of
evidence that can be used in enforcement proceedings under the
decree, or in proceedings before the Federal Communications
Commission and British regulatory authorities. Id. at 3. ACC's
concerns pertain solely to two limited aspects of the transparency
provisions, which it recommends be clarified or modified. After
consideration of ACC's comments, the United States is of the view
that neither of the modifications recommended by ACC are necessary
to achieve the competitive purposes of the proposed Final Judgment.
A. Provision of Information Directly to Competitors
First, ACC contends that the information to be disclosed by
defendants under Section II.A should be provided by defendants
simultaneously both to competitors and to the Department of Justice,
rather than being submitted first to the Department and then being
furnished by the Department to qualified competitors, as the
proposed Final Judgment now specifies. Although ACC recognizes that
it is qualified to receive the information from the Department, and
does not suggest that it would be refused access, it believes that
for the defendants to provide the information directly to the
competitors would involve only a ``slight incremental burden,''
would facilitate monitoring by competitors, and would relieve the
Department of the ``burden of handling the distribution function.''
ACC Comments at 3.
The procedure for providing information from defendants to their
competitor through the Department, as described in Section IV.E of
the proposed Final Judgment and the Stipulation, was developed in
response to the concerns of defendants that they not be required to
disclose to the public at large, or to competitors for use in the
marketing and sales of their services, information that may be
competitively sensitive. The provision of this information to
competitors, as ACC appreciates, is intended to aid in detecting
discriminatory or other anticompetitive conduct and making
appropriate complaints to government authorities.
While the United States, in the circumstances of this case,
accepted that some protection against general public disclosure of
the defendants' information should be provided, it opposed allowing
the defendants to have any role in screening their competitors and
determining which ones would have accress to the information, or
being able to influence the timing of such access. The United States
was reasonably concerned that the defendants would have incentives
to frustrate and delay access to their information by competitors,
and might impose unreasonable confidentiality restrictions that
would discourage competitors from availing themselves of access to
the information, were they assigned the responsibility of
disseminating the information to competitors directly.
ACC's proposal, if adopted, could have the unintended
consequence of impairing rather than facilitating monitoring of
defendants by their competitors, and could impose the additional
burden on the Department of refereeing disputes over access
procedures between defendants and firms such as ACC. There is no
reason for ACC to be concerned that the Department will postpone
dissemination of the information that it receives from defendants.
Rather, qualified competitors such as ACC that enter into a simple
form confidentiality agreement with the Department and abide by the
agreement will be sent promptly copies of any information furnished
by defendants pursuant to Section II.A of the Final Judgment,
following the Department's receipt of the information.
B. Waiver of Transparency Requirements by the United States
Second, ACC objects to the provision in Section II.A that would
allow the United States to waive compliance with the transparency
requirements, in whole or in part, through written notice to
defendants and the Court. ACC believes that giving the United States
discretion to waive the transparency requirements without prior
public notice and comment and approval by the Court would ``defeat
the purpose of the Tunney Act,'' ACC Comments at 4, and could lead
to the United States vitiating the decree, whether intentionally or
unwittingly due to lack of the knowledge of the industry possessed
by defendant's competitors.
The transparency requirements are the most detailed and complex
substantive provisions of the proposed Final Judgment, and therefore
the most likely to be affected by regulatory changes in the United
States and the United Kingdom as well as marketplace developments.
They have been designed to be consistent with existing regulatory
requirements in both countries, and they do not conflict in any way
with the additional obligations recently imposed by the Federal
Communications Commission as a precondition to its approval of the
transactions between BT and MCI, following the filing of the
proposed Final Judgment with the Court.\2\
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\2\In re Request of MCI Communications Corporation [and] British
Telecommunications plc Joint Petition for declaratory Ruling
Concerning Section 310(b)(4) and (d) of the Communications Act of
1934, as amended, File No. I-S-P-93-013, FCC 94-188 (released July
25, 1994).
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It remains possible, however, that future actions by
telecommunications regulatory authorities in the United States or
the United Kingdom could give rise to conflicts with the Final
Judgment, or that some of the transparency provisions could become
unnecessary as the result of regulatory decisions or significant
changes in the competitive environment in the United Kingdom
affecting international telecommunications. Accordingly, the
proposed Final Judgment was drafted to provide some flexibility for
limited adjustments without unduly burdening the Court. The United
States agreed to include in the proposed Final Judgment language
giving it authority, upon express written notice to defendants and
to the Court, to waive the transparency requirements in whole or in
part without a prior public comment process or formal approval by
the Court. This will enable the United States to respond rapidly to
changing conditions that affect the enforcement and usefulness of
these requirements.
The United States would not, of course, be obliged to waive any
of the transparency requirements merely because a regulatory agency
adopted similar obligations for defendants, or took action giving
rise to a conflict with the defendants' decree obligations. Nor
would a decline in BT's market shares or other changes in its
competitive position necessarily warrant modification.\3\ The United
States would, however, be able to modify the transparency
requirements where desirable to further the public interest, without
the need for lengthy comment filing periods or delays engendered
from crowded court dockets. Often it will be useful, as ACC
suggests, for the United States to obtain information from
competitors as well as defendants before agreeing to modify any of
the transparency requirements. There is nothing in the proposed
Final Judgment that precludes the United States from soliciting the
views of affected competitors on a case-by-case basis before
reaching a decision, and indeed the United States expects that it
would frequently do so.
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\3\Information disclosed in BT's most recent public report for
1994, which the United States obtained after the filing of the
Complaint and proposed Final Judgment, indicates that BT's current
market shares are no more than one to three percentage points below
those stated in the Complaint and the Competitive Impact Statement.
This report also acknowledges that there are signs that the rate of
attrition of BT's market share for business customers is declining.
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ACC is incorrect in suggesting that this authority for the
United States to waive the transparency requirements is somehow
improper under the Tunney Act. The APPA requires that any proposal
for a consent judgment submitted by the United States in a civil
antitrust proceeding be filed with the district court, and directs
that the consent judgment only be entered after the district court
has found that it is in the public interest. 15 U.S.C. 16(b), (e).
It nowhere precludes the district court, however, from concluding
that it would be in the public interest to permit the United States
to waive compliance with certain specified provisions of a consent
judgment after its entry, so as to respond to regulatory or
marketplace changes. ACC cites no authority to the contrary.
Were the United States and the defendants to agree to a
modification of this consent judgment after its entry, this Court
would in any event be ``bound to accept any modification that the
Department * * * reasonably regarded as advancing the public
interest.'' United States v. Western Electric Co., 993 F.2d 1572,
1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993). Section VII
of the proposed Final Judgment, with which ACC does not quarrel,
specifies that ``[i]f a motion to modify this Final Judgment is not
contested by any party, it shall be granted if the proposed
modification is within the reaches of the public interest.'' The
discretionary waiver authority in Section II.A of the proposed Final
Judgment simply averts the risk of prolonged litigation over every
change to the transparency requirements, litigation that would in
the great majority if not all cases result in no public benefit, but
would simply confirm that the modification agreed to by the United
States and the defendants was within the reaches of the public
interest.
IV
Standard of Review
Pursuant to 15 U.S.C. Sec. 16(e), the proposed Final Judgment
cannot be entered unless the court determines that it is in the
public interest. The focus of this determination is whether the
relief provided by the proposed Final Judgment is adequate to remedy
the antitrust violations alleged in the Complaint. United States v.
Bechtel Corp., 1979-1 Trade Cas. (CCH) 62,430, at 76,565 (N.D. Cal.
1979), aff'd, 648 F.2d 660, 665-66 (9th Cir.), cert. denied, 454
U.S. 1083 (1981).
Absent a showing of corrupt failure of the government to
discharge its duty, the Court, in making its public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its response to
comments in order to determine whether those explanations are
reasonable under the circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas.
61,508, at 71,980 (W.D. Mo. 1977). The court may reject the
agreement of the parties as to how the public interest is best
served only if it has ``exceptional confidence that adverse
antitrust consequences will result * * *.'' United States v. Western
Electric Co., 993 F.2d at 1577.
V
Conclusion
After careful consideration of the comments, the United States
continues to believe that, for the reason stated herein and in the
Competitive Impact Statement, the proposed Final Judgment is
adequate to remedy the antitrust violations alleged in the
Complaint. There has been no showing that the proposed settlement
constitutes an abuse of the United States' discretion or that it is
not within the zone of settlements consistent with the public
interest. Therefore, entry of the proposed Final Judgment should be
found to be in the pubic interest.
Dated: September 8, 1994.
Respectfully submitted,
Carl Willner,
Attorney, U.S. Department of Justice, Antitrust Division.
Certificate of Service
I hereby certify that on this date I have caused to be served by
first class mail, postage prepaid, or by hand, if so indicated, a
copy of the foregoing Response to Public Comment upon the following
persons, counsel for defendants in the matter of United States of
America v. MCI Communications Corporation:
Michael H. Salsbury, Esquire, Jenner & Block, 601 13th Street, NW.,
Washington, D.C. 20005
Counsel for Defendant, MCI BY HAND
Janet L. McDavid, Esquire, Hogan & Hartson, 555 13th Street, NW.,
Washington, D.C. 20004
Counsel for Defendant, BT Forty-Eight Company BY HAND
Dated: September 8, 1994.
Carl Willner,
Attorney, Communications & Finance Section, Antitrust Division.
Exhibit A
Richard L. Rosen, Esq.,
Chief, Communication and Finance Section, Antitrust Division, Room
8104, 555 Fourth Street, NW., Washington, DC 20001
Re: United States v. MCI Comm. Corp. and BT Forty-Eight Co., Civil
Action No. 94 1317 (TFH) (D.D.C.)--Comments of ACC Global Corp.
August 26, 1994.
Dear Mr. Rosen: On behalf of ACC Global Corp. (``ACC''), we
respectfully submit these comments on the Proposed Final Judgment in
the above captioned case. ACC, a wholly-owned subsidiary of ACC
Corp., headquartered in Rochester, New York, is an international
resale interexchange carrier that is an applicant for authority to
provide international private line resale service between the United
States and the United Kingdom. Another ACC Corp. subsidiary, ACC
Long Distance UK Limited, received the first U.K. license to provide
international simple resale service. ACC is one of only seven
entities which the parties have stipulated are ``qualified United
States international telecommunications providers''
(``Competitors''), as defined in Section II.E. of the proposed Final
Judgment. As such, ACC competes with BT Forty-Eight Co. and its
parent firms, MCI Communications Corp. (``MCI'') and British
Telecommunications plc (``BT'') (collectively ``Defendants'').
ACC does not oppose prompt resolution of this matter through
entry of a consent decree. ACC strongly recommends, however, that
``the transparency'' requirements of the proposed Final Judgment be
clarified and modified so as to ensure that they achieve the
intended effect of minimizing the potential anticompetitive effects
of the Defendants' concerted activities. Specifically, ACC's
comments address two respects in which ACC believes that the
``transparency'' provisions of the proposed Final Judgment are
deficient or unclear. First, ACC believes that the proposed decree
should be clarified to ensure that the Competitors as well as the
Department of Justice (``DOJ'') receive copies of the information
required to be furnished under the transparency requirements.
Second, ACC is seriously concerned about the adverse impact of the
provision permitting the DOJ to waive the transparency requirements
of the decree without notice or comment by the beneficiaries of
those requirements and without Court approval.
I. Importance of Transparency Requirements
ACC considers the transparency requirements of the Proposed
Final Judgment (Section II.A) to be of vital importance in
ameliorating the potential anticompetitive impact of the agreements
that gave rise to the complaint by the DOJ in this matter.
As the DOJ alleges in its Complaints, the challenged agreements
between BT and MCI will provide BT with an ``increased incentive''
as well as the ``ability'' to
use its market power in the provision of local and domestic and
international long distance telecommunications services in the UK to
discriminate in favor of MCI and NewCo against other US
international telecommunications and enhanced telecommunications
providers.\1\
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\1\Complaint, 30(a).
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and
favor MCI over its competitors in the allocation of international
telecommunications traffic from the UK, substantially lessening
competition in the US.\2\
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\2\Complaint, 30(c).
ACC is, of course, one of the potentially disfavored Competitors.
The proposed Final Judgment provides ACC and others subject to
this discrimination with important protection against such
discrimination in the Section II.A. transparency requirements. Under
Section II.A., NewCo and MCI would be required to ``disclose'' a
broad array of information regarding their dealings with BT. Under
Section IV.E., such ``disclosure'' would be made to the DOJ which
may, in turn, disclose such information to any U.S. corporation that
holds or has applied for a license to provide international
telecommunication services between the U.S. and the U.K. (This would
include ACC.)
As the DOJ recognizes in its Competitive Impact Statement, the
benefit of this requirement is that it:
Will enable the principal competitors of MCI and NewCo to
monitor whether either of these companies is receiving
discriminatory treatment in their favor from BT, and provide them
with evidence that could be used to make a complaint to any
governmental authorities in the United States or the United Kingdom.
This provision provides substantial protection to Competitors
such as ACC because it ensures the availability of evidence relevant
to enforcement proceedings under the consent decree. Moreover, such
evidence would be significant in complaint and licensing proceedings
before the Federal Communications Commission, which has enforcement
and oversight authority over the U.S. common carrier Defendants.
Similarly, such evidence would be relevant to oversight proceedings
in the U.K. before Oftel and other supervisory agencies.
II. Necessary Clarification and Modifications of the Transparency
Requirement
Competitors should not have to rely on the DOJ to provide them,
in timely fashion, with copies of information required to be
furnished under the transparency provisions. Rather, the information
should be provided promptly and simultaneously to both the DOJ and
Competitors. Without such information, Competitors cannot provide a
monitoring function contemplated by the Competitive Impact Statement
as a check on potential anticompetitive activity. Particularly in
light of the unusually short term of the proposed decree, any slight
incremental burden on the Defendants by providing additional copies
of the required information to the small number of identified
Competitors is more than justified by the greater protection of the
public afforded by facilitating Competitors' monitoring activities,
and by relieving the Plaintiff DOJ from the burden of handling the
distribution function. (The DOJ could, however, be required to
modify the class of Competitors entitled to receive the information
from time to time as additional potential class members request
inclusion in it, and to notify the Defendants accordingly.)
Similarly, ACC is also concerned that Section II.A. of the
Proposal Final Judgment permits, without either public notice or
comment or Court approval, the waiver of ``such disclosure * * * by
plaintiff through written notice to defendants and the Court.'' The
only explanation offered by the DOJ for this waiver provision is
that the ``transparency requirements may be affected by changes in
regulation or other circumstances.3''
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\3\Id.
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In ACC's view, providing the DOJ unfettered discretion to waive
this critical provision of the decree without Court approval or
public notice or comment would defeat the purpose of the Tunney Act.
As Judge Harold Greene recognized in United States v. American Tel.
& Tel. Co., 552 F. Supp. 131, 148 (D.D.C. (1982), aff'd sub nom.
Maryland v. United States, 460 U.S. 1001 (1983), Congress enacted
the Tunney Act because ``prior practice, which gave the Department
almost total control of the consent decree process,'' failed to
``fully promote the goals of the antitrust laws and foster public
confidence in their fair enforcement.'' Judge Greene went on to
observe that:
The legislative history shows that Congress was particularly
concerned that the ``excessive secrecy'' of the consent decree
process deprived the public of the opportunity to scrutinize and
comment upon proposed decrees, thereby undermining confidence in the
legal system. In addition, the legislators found that consent
decrees often failed to provide appropriate relief, either because
of miscalculations by the Justice Department or because of the
``great influence and economic power'' wielded by antitrust
violators. The history, indeed, contains references to a number of
antitrust settlements deemed ``blatantly inequitable and improper''
on these bases.
Id. (footnote omitted). Judge Greene also quoted the following
statement of Senator Tunney, the bill's chief sponsor:
Regardless of the ability and negotiating skill of the
Government's attorneys, they are neither omniscient nor infallible.
The increasing expertise of so-called public interest advocates and
for that matter the more immediate concern of a defendant's
competitors, employees, or antitrust victims may well serve to
provide additional data, analysis, or alternatives which would
improve the outcome.
Id. at 148 n. 70.
As Judge Greene and Senator Tunney recognized, ``mandating an
opportunity for public comment'' (id. at 148-49), including comment
from the defendants' competitors, can play a major role in ensuring
that a consent decree fully promotes the goals of the antitrust
laws.4 Moreover, as Judge Greene went on to observe: ``It is
clear that Congress wanted the courts to act as an independent check
upon the terms of decrees negotiated by the Department of Justice.''
Id. at 149.
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\4\See also United States v. Airline Tariff Pub. Co., 1993-2
Trade Cas. 70,409 (D.D.C. 1993).
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The blanket waiver authority conferred on the DOJ by the
proposed Final Judgment, however, is not limited by any standards or
guidelines and is totally at odds with this reasoning. Through its
unfettered discretion to waive a critical requirement of the decree,
absent judicial approval or the comment of the public or Defendants'
competitors, the DOJ could, either unwittingly or intentionally,
vitiate the decree. No adequate explanation has been offered why, if
modification of the decree becomes necessary because of changed
circumstances, the modification could not be submitted for public
comment and Court approval in accordance with the Tunney Act, as is
usually done.5 Such a requirement could avert the clearly
undesirable possibility of the DOJ's inadvertently, because of its
lack of the intimate knowledge of the industry possessed by
Defendants' competitors, authorizing the Defendants to engage in
anticompetitive conduct. Thus, at a minimum, the DOJ should be
required, prior to waiving any Section II.A. requiring, to provide
notice and an opportunity to comment to the Competitors to whom
information is to be provided pursuant to Section IV.E.
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\5\E.g., United States v. American Tel. & Tel. Co., supra;
United States v. Motor Vehicle Mfrs. Ass'n., 1981-2 Trade Cas.
64,370 (C.D. Cal. 1981).
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In sum, ACC believes that the transparency provisions are
critical to the efficacy of the proposed decree. In order to ensure
their implementation in an effective manner, however, they should be
clarified or modified to ensure automatic and timely disclosure also
to Competitors of the information required to be furnished to the
DOJ, and to ensure that they cannot be waived unilaterally by the
DOJ without judicial approval following notice to and an opportunity
for comment by the Competitors.
Very truly yours,
Helen E. Disenhaus,
Counsel for ACC Global Corp.
Of Counsel
Francis D.R. Coleman,
ACC Long Distance Corp.
[FR Doc. 94-23472 Filed 9-21-94; 8:45 am]
BILLING CODE 4410-01-M
