[Federal Register: May 21, 2003 (Volume 68, Number 98)]
[Notices]
[Page 27851-27863]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21my03-70]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
[Civil Action No. 1: 03CV 000758]
United States v. Univision Communications Inc. & Hispanic
Broadcasting Corp.
Proposed Final Judgment and Competitive Impact Statement. Notice is
hereby given pursuant to the Antitrust Procedures and Penalties Act, 15
U.S.C. 16(b)-(h), that a proposed Final Judgment, Stipulation and
Order, and Competitive Impact Statement have been filed with the United
States District Court for the District of Columbia in United States v.
Univision Communications Inc., Civil Action No. 03CV000758. On March
26, 2003, the United States filed a Complaint alleging that Univision
Communications Inc. (``Univision'') and Hispanic Broadcasting Corp.
(``HBC'') violated Section 7 of the Clayton Act, 15 U.S.C. 18. The
Complaint alleges that, due to Univision's partial ownership of
Entravision Communications Corp. (``Entravision''), a principal
competitor of HBC, the proposed acquisition, if consummated, will
substantially lessen competition in the sale of advertising time on
Spanish-language radio stations in many geographic markets. The
proposed Final Judgment requires Univision to exchange its Entravision
shares for a nonvoting equity interest, divest a substantial portion of
its
[[Page 27852]]
ownership in Entravision, give up its seats on Entravision's Board of
Directors, eliminate certain rights Univision has to veto important
Entravision actions, and restrain certain conduct that would interfere
with the governance of Entravision's radio business. The proposed Final
Judgment specifically requires Univision, presently owning
approximately thirty percent of Entravision, to divest down to fifteen-
percent owership within three years, and ten-percent ownership within
six years. Copies of the Complaint, proposed Final Judgment, and
Competitive Impact Statement are available for inspection at the
Department of Justice in Washington, DC., Room 200, 325 Seventh Street,
NW., on the Internet at http://www.usdoj.gov/atr, and at the Office of
the Clerk of the United States District Court for the District of
Columbia, 333 Constitution Avenue, NW., Washington, DC 20001.
Public comment is invited within sixty 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 James R. Wade, Chief, Litigation III Section, Anitrust Division,
Department of Justice, 325 Seventh Street, NW., Suite 300, Washington,
D.C. 20530 (telephone: (202) 616-5935).
Constance K. Robinson,
Director of Operations.
Competitive Impact Statement
Plaintiff, the United States of America, by and through the
Antitrust Division of the Department of Justice (``Department''),
pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act
(``APPA''), 15 U.S.C. 16(b)-(h), files this competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
The Department filed a civil antitrust complaint on March 26, 2003,
alleging that the proposed acquisition of Hispanic Broadcasting
Corporation (``HBC'') by Univision Communications Inc. (``Univision'')
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
HBC is the nation's largest Spanish-language radio broadcaster.
Univision, the largest Spanish-language media company in the United
States, owns a significant equity interest, and possesses governance
rights, in Entravision Communications Corporation (``Entravision''),
another Spanish-language media company and HBC's principal competitor
in Spanish-language radio in many markets. The Complaint alleges that,
due to Univision's substantial partial ownership and governance rights
in Entravision, the proposed acquisition of HBC would lessen
competition substantially in the provision of Spanish-language radio
advertising time to a significant number of advertisers in several
geographic areas of the United States. The request for relief seeks:
(a) A judgment that Univision's proposed acquisition would violate
Section 7 of the Clayton Act; (b) preliminary and permanent injunctive
relief preventing the consummation of the proposed merger; (c) an award
to the United States of the costs of this action; and (d) such other
relief as is just and proper.
Before this suit was filed, the Department reached an agreement
with Univision and HBC on the terms of a proposed consent decree,
which, if entered, would require Univision to reduce its equity
interest in Entravision to 15 percent of outstanding shares within
three years from the filing of the proposed decree and to 10 percent
within six years. The decree would also require Univision to relinquish
its rights to place directors on Entravision's Board, eliminate certain
rights Univision has to veto important Entravision actions, and
restrain certain conduct that would interfere with the governance of
Entravision's radio business.
A Stipulation and proposed Final Judgment embodying the settlement
were filed simultaneously with the Complaint on March 26, 2003. The
Department and the defendants have stipulated that they will be bound
by the proposed Final judgment upon its filing. The proposed Final
Judgment may be entered after compliance with the APPA unless rejected
by the Court. Entry of the proposed Final Judgment would terminate this
action, except that the Court would retain jurisdiction to construe,
modify, or enforce the provisions of the proposed Final Judgment and to
punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Univision, a Delaware corporation with its principal place of
business in Los Angeles, California, is the largest broadcaster of
Spanish-language television programming in the United States with two
broadcast networks, Univision and Telefutura, and one cable channel,
Galavision. It also has several other Spanish-language media
operations, including Internet sites and services, music recording,
distribution, and publishing.
Univision has a significant and long-standing relationship with
Entravision, a Spanish-language media company with television, radio,
outdoor advertising, and publishing businesses. Entravision, which is
not a party to this action, currently owns or operates approximately 55
radio stations throughout the United States, most of which broadcast
Spanish-language programming. Entravision also owns or operates 49
television stations that broadcast Univision programming pursuant to an
affiliation agreement that does not expire until December 31, 2021. As
part of this affiliation agreement, Univision serves as Entravision's
sole representative for the sale of television advertisements sold on a
national basis.
At the time the proposed acquisition was announced, Univision owned
an approximate 30-percent equity and seven-percent voting interest in
Entravision. In addition, Univision, as the sole holder of
Entravision's Class C common stock, has significant governance rights
with respect to Entravision. Although Univision's representatives
resigned after the proposed acquisition was announced, Univision has
the right to place two representatives on Entravision's Board of
Directors. Univision also has the right to veto important Entravision
business decisions. Entravision's Bylaws provide Univision the right to
veto Entravision's (a) Issuance of equity, (b) incurrence of debt at
certain levels, and (c) acquisitions or dispositions of assets valued
at greater than $25 million. Entravision's Certificate of Incorporation
provides Univision the right to approve any Entravision (a) Merger,
consolidation, business combination or reorganization, (b) dissolution,
liquidation, or termination, and (c) transfer of any FCC license with
respect to a television station that is an affiliate of Univision.
HBC, a Delaware corporation with its principal place of business in
Dallas, Texas, is a media company that owns or operates more than 60
radio stations in 18 geographic regions in the United States. Nearly
all of the HBC's stations broadcast in Spanish. HBC's other businesses
include a marketing group and interactive online services.
On June 11, 2002, Univision agreed to acquire all of the voting
securities of HBC. This transaction, if consummated, would result in a
reduction in competition between HBC and Entravision in the provision
of Spanish-
[[Page 27853]]
language radio advertising in certain markets where the firms compete.
B. Markets
The Complaint alleges that the provision of advertising time on
Spanish-language radio stations to advertisers that consider Spanish-
language radio to be a particularly effective medium is a relevant
product market, and that the Dallas, Texas; El Paso, Texas; Las Vegas,
Nevada; McAllen-Brownsville-Harlingen, Texas; Phoenix, Arizona; and San
Jose, California metro areas (``Overlap Markets'') are each a relevant
geographic market.
1. Relevant Product Market
Radio broadcasters, like HBC and Entravision, sell advertising time
to local and national advertisers in areas where their stations are
located. HBC and Entravision each negotiate these transactions
individually with each local and national advertiser, and the resulting
price for advertising time reflects the circumstances of these
individual negotiations and the preferences of each advertiser.
There are a significant number of local and national advertisers in
the geographic markets identified below that consider Spanish-language
radio to be particularly effective in reaching desired customers who
speak Spanish and who listen predominately or exclusively to Spanish-
language radio. Such advertisers view Spanish-language radio, either
alone or in conjunction with other media, to be the most effective way
to reach their target audience and do not consider other media,
including non-Spanish-language radio, to be a reasonable substitute.
These advertisers would not turn to other media, including radio that
is not broadcast in Spanish, if faced with a small but significant
increase in the price of advertising time on Spanish-language radio or
a reduction in the value of the services provided.
Given the nature of individualized negotiations between radio
stations and advertisers discussed above, Spanish-language radio
stations are likely able to identify advertisers that place a high
value on utilizing Spanish-language radio to reach their targeted
audience. Such advertisers would not find it economical to switch, or
credibly threaten to switch, to other media to avoid a post-merger
price increase. In the geographic markets identified below, there are a
significant number of advertisers that consider Spanish-language radio
advertising to be a particularly effective medium, and the provision of
advertising time on Spanish-language radio stations to these
advertisers is a relevant product market within the meaning of Section
7 of the Clayton Act.
2. Relevant Geographic Markets
Advertising placed by local and national advertisers on radio
stations in the Overlap Markets is aimed at reaching listening
audiences within each of those Overlap Markets, and radio stations
outside an Overlap Market do not provide effective access to that
audience. If there were a small but significant increase in the price
of advertising time on Spanish-language radio stations within an
Overlap Market, advertisers would not switch enough purchases of
advertising time to stations outside the Overlap Market and/or
otherwise reduce their purchases to defeat the price increase. Thus,
the Overlap Markets of Dallas, El Paso, Las Vegas, McAllen-Brownsville-
Harlengen, Phoenix, and San Jose are each relevant geographic markets
for the purpose of Section 7 of the Clayton Act.
C. Harm to Competition in Radio Advertising Markets
1. Current Competition Between HBC and Entravision
The Compliant alleges that Entravision and HBC are vigorous
competitors in the provision of Spanish-language radio. They heavily
promote their stations against each other in order to gain ratings;
they program and format their stations with an eye toward attracting
listeners from each other; they aggressively seek to acquire stations;
and they closely monitor each other's competitive positions in the
Overlap Markets. Most importantly, the Compliant alleges that HBC and
Entravision compete aggressively to sell advertising time to
advertisers that seek to reach Spanish-language audiences. During
individualized rate negotiations, advertisers targeting Spanish-
language listeners benefit from its competition, including the ability
to play off HBC stations against Entravision stations to reach better
terms.
2. Reduction in Competition From the Acquisition
The Complaint alleges that, given Univision's significant ownership
stake and governance rights in HBC's principal competitor, Entravision,
the acquisition of HBC by Univision will lessen competition
substantially in the sale of advertising time on Spanish-language radio
in the Overlap Markets. The market for the provision of Spanish-
language radio in the Overlap Markets is highly concentrated, with HBC
and Entravision's combined share of advertising revenue ranging from 70
to 95 percent. HBC and Entravision face few other significant
competitors and, for many local and national advertisers buying
advertising time on Spanish-language radio, they are the next best
substitutes for each other.
The Complaint alleges that Univision's ownership of a substantial
equity stake in Entravision, and its ability to influence or control
competitively significant Entravision decisions, will lessen the
incentives of both companies to compete aggressively against each other
and will result in higher prices and lower service quality in the sale
of Spanish-language radio advertising time. Univision's right to place
directors on Entravision's board and right to veto certain strategic
business decisions (namely any Entravision issuance of equity or debt,
or acquisitions over $25 million) give it a significant degree of
control or influence over Entravision and will likely impair
Entravision's ability and incentive to compete with Univision/HBC. For
example, Univision's right to veto any Entravision acquisition of
assets over $25 million would allow Univision/HBC to prevent
Entravision from purchasing any significant radio station assets in a
market where HBC competes. A Univision veto on the issuance of new
stock or debt could leave Entravision without access to capital it may
need to make acquisition or otherwise compete effectively with HBC.
Entravision has frequently taken actions in the past that have been
subject to these Univision veto rights and, because its plans call for
more growth through acquisition, Entravision is likely to need
Univision's approval on many occasions in the future. Indeed, the
existence of these veto rights lessons competitions even if they are
not exercised because Entravision will have the incentive to constrain
its normal competitive behavior against Univision/HBC to ensure that
Univision/HBC provides the necessary approval.
Univision's approximately 30-percent equity interest in Entravision
also will substantially reduce competition between Univision/HBC and
Entravision. Univision/HBC will have reduced incentives to compete
against Entravision for advertisers seeking a Spanish-language radio
audience because Univision/HBC, as a substantial owner of Entravision
stock, will benefit even if a customer chooses Entravision rather than
HBC. Consequently, HBC will compete less aggressively to gain customers
at the expense of Entravision, resulting in an increase in prices for a
significant number of advertisers in the
[[Page 27854]]
Overlap Markets. Advertisers that consider Spanish-language radio to be
a particularly effective medium will find it difficult or impossible to
``buy around'' Univision/HBC and Entravision, i.e., to effectively
reach their targeted audience without using Univision/HBC and
Entravision radio stations.
Entry of new Spanish-language radio stations into the relevant
geographic markets would not be timely, likely, or sufficient to
mitigate the competitive harm likely to result from this acquisition.
In theory, entry could occur by obtaining a license for new radio
spectrum or by reformatting an existing station. New radio spectrum
acquisition is highly unlikely, however, because spectrum is a scarce
and expensive commodity and reformatting by existing stations is
unlikely to defeat a price increase by Univision/HBC or Entravision.
Radio stations are unlikely to undertake a format change solely in
response to small but significant increases in price being charged to
advertisers by a firm such as Univision/HBC, and even given such a
format change, radio stations that did change formats would be unlikely
to attract enough listeners to provide sufficient alternatives to the
merged entity. Reformatting is an expensive endeavor that involves the
loss of the station's existing audience, a significant expense to
attract new listeners, and no assurance of attracting a significant
listening base to justify the costs involved. It generally occurs when
a station believes that a particular format is not being sufficiently
served or when a station finds an niche between existing formats. An
increase in the price of advertising rates charged by existing stations
serving a specific format does not in itself provide assurance that a
newly formatted station would attract a sufficient audience base,
particularly if there are strong incumbents already in that format.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment is designed to preserve competition in
the sale of advertising time on Spanish-language radio stations in the
Overlap Markets by restricting Univision's ability to control or
influence Entravision's radio business and by significantly reducing
Univision's equity stake in Entravision. The proposed Final Judgment
has three principal provisions: (1) Exchange of Univision's Entravision
stock for a nonvoting equity interest with limited shareholder rights;
(2) divestitures of a substantial portion of the defendants' equity
stake in Entravision; and (3) restrictions on the defendant's ability
to interfere with the governance of Entravision's radio business. The
proposed Final Judgment also has several sections designed to ensure
its effectiveness and adequate compliance. Each of these sections is
discussed below.
A. Exchange of Shares for Nonviting Equity
Section IV of the proposed Final Judgment requires Univision to
exchange all of its Entravision Class A and Class C common stock for a
nonvoting equity interest with limited rights and to certify that the
voting and director rights that Univision has held in connection with
its Entravision stock has been eliminated. The limited rights to be
associated with the new class of stock to be issued to defendants are
set forth in a Certificate of Designations, Preferences and Rights of
Series U Preferred Stock, which is attached to the proposed Final
Judgment. The exchange of stock must occur prior to the closing of the
Univision/HBC merger.
These provisions will significantly curtail Univision's ability to
influence or control Entravision's business conduct. As part of the
acquisition of a new class of stock, Univision will relinquish certain
rights it previously had in connection with Entravision governance.
First, Univision will relinquish all shareholder voting rights so that
it will not be able to vote on any corporate matters. Second, Univision
will relinquish its two seats on Entravision's Board of Directors so
that it will no longer have access to confidential Entravision
information or the ability to vote on matters before the Board. Third,
Univision will relinquish certain ``veto'' rights over important
Entravision decisions, namely Univision's rights under the Entravision
Bylaws to veto Entravision's issuance of equity, incurrence of debt at
certain levels, and acquisitions or dispositions of assets valued at
greater than $25 million. Retention of these rights would have allowed
Univision to affect Entravision's strategic decision-making by
preventing, or threatening to prevent, Entravision from making
acquisitions or raising capital. Moreover, the continued existence of
these veto rights would lessen competition even if they were not
exercised because Entravision would have the incentive to constrain its
normal competitive behavior against Univision/HBC to ensure that
Univision/HBC would grant necessary approvals for future transactions
subject to the veto rights.
The proposed Final Judgment does not require elimination of all
shareholder rights that Univision currently possesses. As set forth in
the Certificate of Designations, Univision will retain the modified
right to veto any decision by Entravision to merge, consolidate, or
otherwise reorganize Entravision with or into one or more entities that
results in a transfer of all or substantially all of the assets of
Entravision or a transfer of a majority of the voting power of
Entravision.\1\ Univision also retains the right to veto any
Entravision dissolution, liquidation, or termination. Finally,
Univision will also have the right to veto any disposition of any
interest in any FCC license with respect to television stations that
are affiliates of Univision. The proposed Final Judgment makes clear
that these rights may be terminated if Entravision and the defendants
choose not to do so. See Section VILC. Defendants, however, are
restrained from seeking to expand or modify these limited rights in any
manner.
---------------------------------------------------------------------------
\1\ Section D(i) of the Certificate provides that without
Univision's approval, Entravision will not ``merge, consolidate or
enter into a business combination, or otherwise reorganize this
Corporation with or into one or more entities (other than a merger
of a wholly-owned subsidiary of this Corporation into another
wholly-owned subsidiary of this Corporation).'' This approval right
is identical to one that Univision possessed previously. Section
VI.C of the proposed Final Judgment, however, limits Univision's
rights in that it provides that Univision may not exercise its
rights under D(i) unless the transaction at issue ``results in a
transfer of all or substantially all of the assets of Entravision or
a transfer of a majority of the voting power of Entravision.''
---------------------------------------------------------------------------
B. Divestiture of Defendants' Entravision Holdings
Section V of the proposed Final Judgment requires Univision to
reduce its equity stake in Entravision so that it owns no more than 15
percent of all outstanding Entravision stock by March 26, 2006, and no
more than 10 percent by March 26, 2009. The divestitures of this stock
may be made by any combination of open-market sale, public offering,
private sale, or repurchase by Entravision. The stock may not be sold
by private sale or placement to any Spanish-language radio broadcaster
other than Entravision unless the Department agrees to such a
transaction in writing.
As explained above, if Univision/HBC owned a substantial, partial-
ownership interest in Entravision, Univision/HBC would have an
incentive to compete less aggressively. This is because Univision/HBC
would receive some significant benefit even on sales it loses to
Entravision. Reducing Univision/HBC's stake in Entravision to a much
lower
[[Page 27855]]
percentage reduces substantially the likelihood that Univision/HBC's
competitive incentives will be affected by its partial ownership of
Entravision, thus preserving Univision/HBC's incentive to compete with
Entravision.
The terms of the proposed Final Judgment reflect a balancing of the
potential harm to competition that might arise from a divestiture that
proceeds either too slowly or too rapidly. In merger cases in which the
Department seeks a divestiture of assets as a remedy, the Department
requires completion of the divestiture within the shortest time period
reasonable under the circumstances. In this case, the time periods for
divestiture of stock are appropriate, however, because of concerns that
a more rapid divestiture might harm competition by adversely affecting
Entravision's ability to raise capital to fund expansion of its radio
business.
C. Restrictions on Defendants Ability to Participate in the Governance
of Entravision
Section VI of the proposed Final Judgment restrains defendants from
directly or indirectly: (1) Suggesting or nominating any candidate for
election to Entravision's board or serving as an officer, director,
manager, or employee of Entravision; (2) accessing any nonpublic
information relating to the governance of Entravision; (3) voting or
permitting to be voted any shares of Entravision stock that defendants
own; (4) using or attempting to use any ownership interest in
Entravision to exert any influence over Entravision in the conduct of
Entravision's radio business; (5) using or attempting to use any rights
or duties under the television affiliation agreement or relationship to
influence Entravision in the conduct of Entravision's radio business;
and (6) communicating to or receiving from Entravision any nonpublic
information relating to Entravision's radio business.
Collectively, these provisions are intended to prevent defendants
from participating in Entravision's governance or in the conduct of
Entravision's radio business, notwithstanding the defendants' remaining
equity interest in Entravision and the television affiliation
relationship. While recognizing that Univision and Entravision have a
mutual interest in matters affecting their television affiliation
relationship, these provisions seek to ensure the competitive
independence of the two companies in matters involving the radio
business.
D. Permitted Conduct
Section VII of the proposed Final Judgment identifies certain
conduct that is permitted. Individual managers, agents, and employees
of the defendants are allowed to hold, acquire, or sell Entravision
stock solely for personal investment. Officers and directors also may
hold or sell Entravision stock but may not acquire any additional
Entravision stock. Any Entravision stock held by these individuals is
not subject to the stock-exchange or divestiture requirements of
Sections IV and V of the proposed Final Judgment.
Section VII also provides that Univision may acquire a majority of
Entravision's voting securities so long as the transaction is subject
to the reporting and waiting requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, 15 U.S.C. 18a,
provided, however, that Univision cannot acquire or retain any interest
in Entravision's radio assets in any of the Overlap Markets as part of
such a transaction without the approval of the Department, in its sole
discretion. This provision makes clear that the proposed Final Judgment
does not prohibit a transaction in which Univision would acquire a
majority stake in Entravision so long as the Department is afforded the
ability to review the transaction pursuant to the established Hart-
Scott-Rodino framework. The Department, of course, would review any
such transaction to determine whether it was likely to lessen
competition in any relevant market. Because the Department has
determined that a combination of Univision and Entravision would lessen
competition in the sale of advertising on Spanish-language radio in the
Overlap Markets, a transaction in which Univision acquired Entravision
may not include any Entravision radio assets from the markets that are
the subject of the Complaint unless the Department gives its approval.
E. Compliance, Inspection, and Other Provisions Designed To Ensure
Effectiveness of the Proposed Final Judgment
Section VIII of the proposed Final Judgment provides for
appointment of a trustee should defendants not comply with the terms of
the proposed Final Judgment that require stock divestitures within the
established time periods. The trustee would have the power to
accomplish the divestitures. Section IX requires the defendants to
distribute the proposed Final Judgment to certain officers, directors,
and appropriate employees, and obtain statements from these individuals
that they understand their obligations under the Final Judgment. The
terms of this provision are designed to ensure that those individuals
responsible for complying with the Final Judgment are aware of its
existence and understand its requirements. Section IX also requires
annual reports and certifications during the life of the decree.
Section X provides a means for the Department to obtain information
from the defendants to determine or secure compliance with the proposed
Final Judgment. Under Section XI, the Court would retain jurisdiction
over this matter to modify or terminate any of its provisions, to
enforce compliance, and to punish any violations of its provisions.
Section XII provides that the proposed Final Judgment will expire 10
years after it is entered by the Court. Section XIII states that the
entry of the proposed Final Judgment is in the public interest.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie in any subsequent
private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The Department and the defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the Department has not withdrawn
its consent. The APPA conditions entry upon the Court's determination
that the proposed Final Judgment is in the public interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the Department written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within 60
days of the date of publication of this Competitive Impact Statement in
the Federal Register. The Department will evaluate and respond to the
comments. All comments will be given due
[[Page 27856]]
consideration by the Department, which remains free to withdraw its
consent to the proposed Final Judgment at any time prior to entry. The
comments and the response of the Department will be filed with the
Court and published in the Federal Register.
Written comments should be submitted to: James R. Wade, Chief,
Litigation III Section, Antitrust Division, United States Department of
Justice, 325 7th Street, NW., Suite 300, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and that the parties may apply to the
Court for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The Department considered, as an alternative to the proposed Final
Judgment, a full trial on the merits of its Complaint for Injunctive
Relief against Univision and HBC as well as a proposal by the
defendants that they would, in lieu of divestitures, place their
Entravision stock in a long-term trust. The Department is satisfied,
however, that the divestiture of a substantial portion of equity
interest in Entravision by Univision, the surrender of several key
control rights, and the other relief contained in the proposed Final
Judgment will preserve competition in the sale of radio advertising
time on Spanish-language stations serving the Overlap Markets. Thus,
the proposed Final Judgment would achieve substantially all 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 Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a 60-day comment
period, after which the Court shall determine whether entry of the
proposed Final Judgment ``is in the public interest.'' In making that
determination, the Court may consider:
(1) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects to
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) The impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e). As the United States Court of Appeals for the D.C.
Circuit 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 government'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, 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.'' 119 Cong. Rec. 24,598 (1973)
(statement of Senator Tunney).\2\ Rather,
---------------------------------------------------------------------------
\2\ See also United States v. Gillette Co., 406 F. Supp. 713,
716 (D. Mass. 1975) (recognizing it was not the court's duty to
settle; rather, the court must only answer ``whether the settlement
achieved [was] within the reaches of the public interest''). A
``public interest'' determination can be made properly on the basis
of the Competitive Impact Statement and Response to Comments filed
pursuant to the APPA. Although the APPA authorizes the use of
additional procedures, 15 U.S.C. Sec. 16(f), those procedures are
discretionary. A court need not invoke any of them unless it
believes that the comments have raised significant issues and that
further proceedings would aid the court in resolving those issues.
See H.R. Rep. No. 93-1463, 93rd Cong., 2d Sess. 8-9 (1974),
reprinted in 1974 U.S.C.C.A.N. 6535, 6538.
[a]bsent a showing of corrupt failure of the government to
discharge its duty, the Court, in making its public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
---------------------------------------------------------------------------
reasonable under the circumstances.
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. May 17, 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 State 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. Precedent requires that
[t]he 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.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\
---------------------------------------------------------------------------
\3\ Cf. BNS, 858 F.2d at 463 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); Gillette, 406 F. Supp. at 716
(noting that, in this way, the court is constrained to ``look at the
overall picture not hypercritically, nor with a microscope, but with
an artist's reducing glass''). See generally Microsoft, 56 F.3d at
1461 (discussing whether ``the remedies [obtained in the decree are]
so inconsonant with the allegations charged as to fall outside of
the `reaches of the public interest' '').
---------------------------------------------------------------------------
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest' '' United
States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982)
(citations omitted) (quoting Gillette, 406 F. Supp. at 716), aff'd sub
nom. Maryland v. United States, 460 U.S. 1001 (1983); see also United
States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985)
(approving the consent decree even though the court would have imposed
a greater remedy).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States might have but did
not pursue. Id. at 1459-60.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the
[[Page 27857]]
Department in formulating the proposed Final Judgment.
Dated this 7th day of May 2003.
Respectfully submitted,
/s/-------------------------------------------------------------------
William H. Stallings,
Litigation III Section, Antitrust Division, United States Department
of Justice, 325 7th Street, NW., Suite 300, Washington, DC 20530.
Certificate of Service
The undersigned certifies that a copy of the foregoing Competitive
Impact Statement was served on the following counsel, by electronic
mail in PDF format and by hand delivery, this 7th day of May, 2003:
John M. Taladay,
Howrey, Simon, Arnold & White L.L.P., 1299 Pennsylvania Avenue, NW.,
Washington, DC 20004-2402.
Neil W. Imus,
Vinson & Elkins L.L.P., The Willard Office Building, 1455
Pennsylvania Avenue, NW., Washington, DC 20004-1008.
/s/-------------------------------------------------------------------
William H. Stallings,
Stipulation and Order
It is hereby stipulated by and between the undersigned parties,
through their respective counsel as follows:
1. The Court has jurisdiction over the subject matter of
plaintiff's Complaint alleging defendants Univision Communications Inc.
(``Univision'') and Hispanic Broadcasting Corporation (``HBC'')
violated Section 7 of the Clayton Act (15 U.S.C. 18), and the parties
do not object either to the Court's exercise of personal jurisdiction
over them in this case, or to the propriety of venue of this action in
the United States District Court for the District of Columbia. The
defendants authorize John M. Taladay, Esq. of Howrey, Simon, Arnold &
White L.L.P. to accept service of all process in this matter on their
behalf.
2. The parties stipulate that a Final Judgment in the form hereto
attached 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 Procedure and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on defendants 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 by the parties, comply with all
the terms and provisions of the proposed Final Judgment as though they
were in full force and effect as an order of the Court.
4. This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
5. In the event that (1) plaintiff withdraws its consent, as
provided in paragraph two above, (2) defendants provide notice to
plaintiff and the Court that the Agreement and Plan of Reorganization
dated June 11, 2002 has been terminated or that the Merger of Univision
and HBC (as defined in the Agreement and Plan of Reorganization) has
been abandoned; or (3) that the proposed Final Judgment is not entered
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 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 required actions set forth in
Sections IV, V, and VI of the proposed Final Judgment can and will be
implemented and followed and that the defendants will later raise no
claim of hardship or difficulty as grounds for asking the Court to
modify any of the provisions contained therein.
Respectfully submitted,
For Plaintiff United States of America:
-----------------------------------------------------------------------
William H. Stallings,
U.S. Department of Justice, Antitrust Division, Litigation III
Section, 325 7th Street, NW., Suite 300, Washington, D.C. 20530,
Tel: (202) 514-9323, Fax: (202) 307-9952.
Dated: March 26, 2003.
For Defendant Univision Communications Inc.:
-----------------------------------------------------------------------
John M. Taladay
Howrey, Simon, Arnold & White, L.L.P. 1299 Pennsylvania Avenue, NW.,
Washington, D.C. 20004-2402, Tel: (202) 383-6564, Fax: (202) 383-
6610.
For Defendant Hispanic Broadcasting Corporation:
-----------------------------------------------------------------------
Neil W. Imus,
Vinson & Elkins L.L.P. The Willard Office Building, 1455
Pennsylvania Avenue, NW., Washington, D.C. 20004-1008, Tel: (202)
639-6675, Fax: (202) 879-8875 D.C. Bar 394544.
Order
It is so ordered, this--day of March, 2003.
-----------------------------------------------------------------------
United States District Court Judge
Final Judgment
Whereas, plaintiff, United States of America, filed its Complaint
on March 26, 2003, alleging that defendants, Univision Communications
Inc. (``Univision'') and Hispanic Broadcasting Corporation (``HBC''),
violated Section 7 of the Clayton Act, 15 U.S.C. 18, and plaintiff and
defendants, by their attorneys, have consented to the entry of this
Final Judgment without trial or adjudication of any issue of fact or
law, and without this Final Judgment constituting any evidence against,
or an admission by, any party with respect to any issue of fact or law;
And Whereas, defendant have agreed to be bound by the provisions of
this Final Judgment pending its approval by the Court:
And Whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by and the imposition
of related injunctive relief against the defendants to ensure that
competition is not substantially lessened:
And Whereas, defendants have represented to plaintiff that the
divestitures required below can and will be made and that defendants
will later raise no claim of hardship of 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, and upon the consent
of the parties, it is Ordered, adjudged and decreed as follows:
I. Jurisdiction
This Court has jurisdiction over the subject matter of, and each of
the parties to, this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended 15 U.S.C. 18.
II. Definitions
As used in this Final Judgment:
A. ``Univision'' means defendant Univision Communications Inc., a
Delaware corporation with its principal place of business in Los
Angeles, California, its successors and assigns,
[[Page 27858]]
and its subsidiaries, divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers, managers, agents, and
employees.
B. ``HBC'' means defendant Hispanic Broadcasting Corporation, a
Delaware corporation with its principal place of business in Dallas,
Texas, its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint ventures, and their
directors, officers, managers, agents, and employees.
C. Entravision means Entravision Communications Corporation, a
Delaware corporation with its principal place of business in Santa
Monica, California, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships, and joint ventures, and
their directors, officers, managers, agents, and employees.
D. Divestiture Assets means that portion of the Entravision
Holdings required to be divested under this Final Judgment.
E. Entravision Holdings means any equity interest, whether voting
or nonvoting, of Entravision that defendants own or control, directly
or indirectly, including, but not limited to, the 21,983,392 shares of
Entravision's Class C common shares and the 14,943,231 shares of
Entravision's Class A common shares owned by Univision as of the date
of the filing this Final Judgment.
F. The Univision/HBC Merger means the Agreement and Plan of
Reorganization dated June 11, 2002, by and among Univision and HBC
under which Univision will acquire 100 percent of the voting securities
of HBC.
G. Own means to have or retain any right, title, or interest in any
asset, including any ability to control or direct actions with respect
to such asset, either directly or indirectly, individually or through
any other party.
H. Overlap Markets are the following Metro Survey Areas: Dallas,
Texas; El Paso, Texas; Las Vegas, Nevada; McAllen-Brownsville-
Harlingen, Texas: Phoenix, Arizona; and San Jose, California. A Metro
Survey Area is a geographical unit for which Arbitron, a company that
surveys radio listeners, furnishes radio stations, advertisers, and
advertising agencies in a particular area with data to aid in
evaluating radio size composition.
III. Applicability
This final Judgment applies to Univision and HBC, both individually
and jointly, and all other persons in active concert or participation
with any of them who receive actual notice of this Final Judgment by
personal service or otherwise.
IV. Exchange or Entravision Shares
A. Univision is hereby ordered and directed, prior to closing of
the Univision/HBC Merger, to exchange all of its Entravision Class A
and Class C common stock for a nonvoting equity interest with rights
and restrictions as specified in the Certificate of Designations.
Preferences and Rights of Series U Preferred Stock (attached hereto as
Schedule A and made a part of this Final Judgment).
B. Univision is hereby ordered and directed, prior to closing of
the Univision/BBC Merger, to provide written certification and
supporting documentation to plaintiff that all voting and director
rights associated with Entravision's Class C common shares contained in
Univision's First Restated Certificate of Incorporation, dated July 24,
2000, and Entravision's Second Amended and Restated Bylaws, dated July
11, 2002, have been eliminated.
V. Divestiture of Entravision Holdings
A. Defendants are hereby ordered and directed, in accordance with
the terms of this Final Judgment, on or before three (3) years from the
date of filing of this Final Judgment, to divest that portion of the
Entravision Holdings sufficient to cause defendants to own no more than
fifteen (15) percent of all outstanding shares of Entravision on a
fully converted basis. On or before six (6) years from the date of this
Final Judgment, defendants shall divest that portion of the Entravision
Holdings sufficient to cause defendants to own no more than ten (10)
percent of all outstanding shares of Entravision on a fully converted
basis.
B. Defendants are enjoined and restrained from the date of the
filing of this Final Judgment until the completion of the divestitures
required by Section V.A from acquiring, directly or indirectly, any
additional share of Entravision stock, except pursuant to a transaction
that does not increase defendants' proportion of the outstanding equity
of Entravision, such as a stock split, stock dividend, rights offering,
recapitalization, reclassification, merger, consolidation, or corporate
reorganization. Any additional Entravision equity acquired by
defendants as specifically permitted in this Section V.B. shall be part
of the Entravision Holdings and be subject (1) the divestiture
obligations of Section V.A of this Final Judgment: and (2) to the
rights and restrictions set forth in Section IV.A and embodied in the
attached Certificate of Designations, Preferences and Rights of Series
U Preferred Stock.
C. Upon completion of the divestitures required by Section V.A.
defendants may acquire additional shares of Entravision, but defendants
are enjoined and restrained from owning any more than ten (10) percent
of all outstanding shares of Entravision on a fully converted basis.
Any additional Entravision shares acquired by defendants shall be
subject to the rights and restrictions set forth in Section IV.A and
embodied in the attached Certificate of Designations. Preferences and
Rights of Series U Preferred Stock.
D. The divestitures required by Section V.A may be made by open
market sale, public sale, repurchase by Entravision, or a combination
thereof. Such divestitures shall not be made by private sale or
placement to any person who provides Spanish-language radio
broadcasting services other than Entravision unless plaintiff, in its
sole discretion, shall otherwise agree in writing.
E. Univision shall notify plaintiff no less than sixty (60)
calendar days prior to the expiration of each of the time periods for
the divestitures required by Section V.A of this Final Judgment of the
arrangements it has made to complete each required divestiture in a
timely fashion.
VI. Entravision Governance
A. From the date of the filing of this Final Judgment and until its
expiration, defendants are enjoined and restrained, directly or
indirectly, from:
1. Suggesting or nominating, individually or as part of a group,
any candidate for election to Entravision's Board of Directors, or
having any officer, director, manager, employee, or agent serve as an
officer, director, manager, employee, or in a comparable position with
or for Entravision:
2. Participating in, being present at, or receiving any notes,
minutes, or agendas of, information from, or any documents distributed
in connection with, any nonpublic meeting of Entravision's Board of
Directors or any committee thereof, or any other governing body of
Entravision. For purposes of this provision, the term ``meeting''
includes any action taken by consent of the relevant directors in lieu
of a meeting:
3. Voting or permitting to be voted any Entravision shares that
defendants own, provided, however, that Univision shall have the right
to vote on matters arising under the attached Certificate of
Designations. Preferences and Rights of Series U Preferred Stock:
[[Page 27859]]
4. Using or attempting to use any ownership interest in Entravision
to exert any influence over Entravision in the conduct of Entravision's
radio business:
5. Using or attempting to use any rights or duties under any
television affiliation agreement or relationship between Univision and
Entravision (including any duties Univision may have as national
television sales representative for Entravision), to influence
Entravision in the conduct of Entravision's radio business: and
6. Communicating to or receiving from any officer, director,
manager, employee, or agent or Entravision any nonpublic information
regarding any aspect of defendants' or Entravision radio business,
including any plans or proposals with respect thereto. Nothing in this
prohibition, however, is intended to prevent: (1) Entravision from
advertising its radio business on defendants' stations or to prevent
defendants from advertising on Entravision stations: (2) joint
promotions between Entravision and defendants and communications
regarding the same; (3) Univision from hiring Entravision personnel or
Entravision from hiring Univision personnel: and (4) nonpublic
communications regarding industry-wide issues or possible potential
business transactions between the two companies provided that such
communications do not violate the antitrust laws or any other
applicable law or regulation.
B. Defendants are enjoined and restrained from preventing, or
attempting to prevent, Entravision from making any changes in any
corporate governance documents (including its First Restated
Certificate of Incorporation and Second Amended and Restated Bylaws) to
implement the prohibitions contained in Section VI.A.
C. Defendants are enjoined and restrained from exercising the
rights contained in Section D(i) of the attached Certificate of
Designations, Preferences and Rights of Series U Preferred Stock except
in connection with a decision by Entravision to merge, consolidate or
otherwise reorganize Entravision with or into one or more entities
which results in a transfer of all or substantially all of the assets
of Entravision or a transfer of a majority of the voting power of
Entravision.
VII. Permitted Conduct
A. Nothing in this Final Judgment shall prohibit individual
managers, agents, and employees of defendants, other than individual
directors and officers of defendants, from holding, acquiring, or
selling shares of Entravision stock solely for personal investment, and
any shares so held will not be subject to the requirements of Sections
IV and V of this Final Judgment.
B. Nothing in this Final Judgment shall prohibit individual
directors or officers of defendants from continuing to hold, sell, or
otherwise dispose of shares of Entravision stock acquired prior to the
filing of this Final Judgment and held solely for personal investment,
and any shares so held will not be subject to the requirements of
Sections IV and V of this Final Judgment. Individual directors and
officers of defendants shall not acquire any additional shares of
Entravision stock after the filing of this Final Judgment.
C. Nothing in this Final Judgment shall prohibit defendants from
agreeing with Entravision to terminate the rights under Section D of
the attached Certificate of Designations. Preferences and Rights of
Series U Preferred Stock.
D. Nothing in this Final Judgment shall prohibit defendants from
entering into a transaction in which Univision would acquire a majority
of the voting securities of Entravision so long as the transaction is
subject to the reporting and waiting period requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C.
18a; provided however, that Univision shall not acquire or retain any
direct or indirect interest in Entravision's radio assets in any of the
Overlap Markets as part of that transaction without the approval of
plaintiff, in its sole discretion.
VIII. General Powers and Duties of the Trustee
In the event that plaintiff, in its sole discretion, determines (a)
that, upon receipt of the notice called for in Section V.E. defendants
have not made arrangements that will result in completion of any
divestiture within the time limits specified in Section V.A, or (b)
that defendants have not completed any of the divestitures required in
Section V.A. within the specified time limits, the Court shall, upon
application of plaintiff, appoint a trustee selected by plaintiff to
effect such divestiture. Plaintiff may request, and the Court may
appoint, a trustee before any of the time periods for divestiture
specified in Section V.A. expire. The following provisions apply to the
trustee:
A. After the appointment of a trustee becomes effective, only that
trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestitures to an acquirer(s) acceptable to plaintiff at such price
and on such terms as are then obtainable upon the best reasonable
effort by the trustee, and shall have such other powers as the Court
shall deem appropriate. The trustee may hire at the cost and expense of
defendants any investment bankers, attorneys, or other agents, who
shall be solely accountable to the trustee, reasonably necessary in the
trustee's judgment to assist in the divestitures.
B. Defendants shall not object to a sale by the trustee on any
grounds other than the trustee's malfeasance. Any such objections by
defendants must be conveyed in writing to plaintiff and the trustee
within ten (10) calendar days after the trustee has provided the notice
required under sectioons VIII.E and F.
C. The trustee shall serve at the cost and expense of defendants on
such terms and conditions as plaintiff approves, 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 defendants and the trust shall then be terminated. The
compensation of the trustee and any professionals and agents retained
by the trustee shall be reasonable in light of the Divestiture Assets
and based on a fee arrangement providing the trustee with incentives
based on the price and terms of the divestitures and the speed with
which they are accomplished.
D. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestitures. The trustee and any
consultants, accountant, attorney's, and other persons retained by the
trustee shall have full and complete access to all information held by
defendants relating to the Divestiture Assets. Defendants shall take no
action to interfere with or impede the trustee's accomplishment of the
divestitures.
E. After his or her appointment becomes effective, the trustee
shall file monthly reports with the Court and plaintiff, setting forth
the trustee's efforts to accomplish the divestitures ordered under this
Final Judgment. To the extent that such reports contain information
that the trustee deems confidential, such reports shall not be in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring ,
entered into negotiations to acquire, or was contacted or made an
[[Page 27860]]
inquiry about acquiring, any interest in the Divestiture Assets by
means of private sale or placement, and shall describe in detail each
contact with any such person. The trustee shall maintain full records
of all efforts made to divest the Divestiture Assets.
F. If the trustee has not accomplished such divestitures within
sixty (60) calendar days after his or her appointment, the trustee
shall promptly file with the Court a report setting forth: (1) the
trustee's efforts to accomplish the required divestitures, (2) the
reasons, in the trustees judgment, why the required divestitures have
not been accomplished, and (3) the trustee's recommendations. To the
extent such reports contain in formation that the trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. The trustee at the same time shall furnish such reports to
plaintiff, who shall have the right to make additional recommendations
consistent with the purpose of the trust. The Court thereafter shall
enter such order as it deems appropriate to carry out the purpose of
this Final Judgment, which may, if necessary, include extending the
trust and the term of the trustee's appointment by a period requested
by the United States.
IX. Compliance
A. Defendants shall maintain an antitrust compliance program which
shall include designating, within thirty (30) days of filing of this
Final Judgment, an Antitrust Compliance Officer with responsibility for
achieving compliance with this Final Judgment. The Antitrust Compliance
Officer shall, on a continuing basis, supervise the review of current
and proposed activities to ensure compliance with this Final Judgment.
In the event that individual is unable to perform his or her duties,
defendants shall appoint, subject to plaintiff's approval, a
replacement Antitrust Compliance Officer within five (5) working days.
Should defendants fail to appoint a replacement acceptable to plaintiff
within this time period, plaintiff shall appoint a replacement.
B. The Antitrust Compliance Officer shall be responsible for
accomplishing the following activities:
(1) Distributing within forty-five (45) days of the filing of this
Final Judgment, a copy of this Final Judgment to each current director
and each current officer, and obtaining within ninety (90) days from
the filing of this Final Judgment and retaining for the duration of
this Final Judgment, a written certification from each such director or
officer that he or she: (a) Has received, read, understands, and agrees
to abide by the terms of this Final Judgment; (b) understands that
failure to comply with this Final Judgment may result in conviction for
contempt of court: and (c) is not aware of any violation of this Final
Judgment that has not been reported to plaintiff.
(2) Distributing within forty-five (45) days of the filing of this
Final Judgment, a copy of this Final Judgment to each employee and any
manager of any such employee who has any responsibility for or
authority over the sale of advertising time on radio stations, and
obtaining within ninety (90) days from the filing of this Final
Judgment and retaining for the duration of this Final Judgment, a
written certification from each such employee or manager that he or
she: (a) Has received this Final Judgment and has read, understands,
and agrees to abide by the terms of Section VI of this Final Judgment;
(b) understands that failure to comply with Section VI of this Final
Judgment may result in conviction for contempt of court; (c) is not
aware of any violation of Section VI of this Final Judgment that has
not been reported to plaintiff.
(3) Obtaining, within thirty (30) days from the time of such
succession, a written certification from each director or officer
identified in Section IX.B.1 who succeeds to such a position that he or
she: (a) Has received, read, understands, and agrees to abide by the
terms of this Final Judgment: (b) understands that failure to comply
with this Final Judgment may result in conviction for contempt of
court; and (c) is not aware of any violation of this Final Judgment
that has not been reported to plaintiff.
(4) Obtaining within thirty (30) days from the time of such
succession, a written certification from each employee or manager
identified in Section IX.B.2. who succeeds to such a position that he
or she: (a) Has received this Final Judgment and has read, understands,
and agrees to abide by the terms of Section VI of this Final Judgment;
(b) understands that failure to comply with Section VI of this Final
Judgment may result in conviction for contempt of court; and (c) is not
aware of any violation of Section VI of this Final Judgment that has
not been reported to plaintiff.
(5) Obtaining annually thereafter, and retaining for the duration
of this Final Judgment, a written certification from (a) each director;
(b) each officer with responsibility for or authority over the sale of
advertising time on radioi stations; (c) the individual or individuals
with primary operational responsibility for the Univision Television
Group (currently the co-Presidents of UTG); and (d) the individual or
individuals with primary supervisory responsibility for National Sales
within the Univision Television Group (currently the Senior Vice
President of National Sales for UTG), that he or she: (i) Has received,
read, understands, and agrees to abide by the terms of this Final
Judgment; (ii) understands that failure to comply with this Final
Judgment may result in conviction for contempt of court; and (iii) is
not aware of any violation of this Final Judgment that has not been
reported to plaintiff.
C. Within sixty (60) days of filing of this Final Judgment,
defendants shall certify to plaintiff that it has: (1) Designated an
Antitrust Compliance Officer, specifying his or her name, business
address, and telephone number: and (2) distributed the Final Judgment
in accordance with Section IX.B.1 and 2.
D. For the term of this Final Judgment, on or before each annual
anniversary of the date of its filing, defendants shall file with
plaintiff a statement as to the fact and manner of its compliance with
the provisions of Section V, VI, and IX.B, including a statement of the
percentage of all outstanding shares of Entravision owned by
defendants.
E. If the Antitrust Compliance Officer or any of defendants'
director, officers, or employees learn of any violation of this Final
Judgment, defendant shall: (1) Within three (3) business days take
appropriate action to terminate or modify the activity so as to assure
compliance with this Final Judgment, and (2) within ten (10) business
days notify plaintiff of any such violation and the actions taken with
respect to it.
X. Plaintiff's Access and Inspection
A. For the purpose of determining or securing compliance with this
Final Judgment, and subject to any legally recognized privilege, duly
authorized representatives of the United States Department of Justice,
including consultants and other persons retained by the United States,
shall, upon written request of a duly authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to defendants, be permitted:
(1) Access during defendants' office hours to inspect and copy, or
at plaintiff's option, to require defendants to provide copies of, all
records and documents in its possession or control relating to any
matters contained in this Final Judgment; and
[[Page 27861]]
(2) To interview, either informally or on the record, defendants'
director, officers, employees, agents or other persons, who may have
their individual counsel present, relating to any matters contained in
this Final Judgment. The interviews shall be subject to the reasonable
convenience of the interviewee and without restraint or interference by
defendants.
B. Upon written request of a duly authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports, under oath if requested,
relating to any of the matters contained in this Final Judgment as may
be requested.
C. No information or documents obtained by the means provided in
this Section shall be divulged by plaintiff to any person other than an
authorized representative of the executive branch of the United States,
except in the course of legal proceedings to which the United States is
a party (including grand jury proceedings), or for the purpose of
securing compliance with this Final Judgment, or as otherwise required
by law.
D. If, at the time information or documents are furnished by
defendants to plaintiff, defendants represent and identify in writing
the material in any such information or documents to which a claim of
protection may be asserted under Rule 26(c)(7) of the Federal Rules of
Civil Procedure, and defendants mark each pertinent page of such
material. ``Subject to claim of protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then plaintiff shall give
defendants ten (10) calendar days' notice prior to divulging such
material in any legal proceeding (other than a grand jury proceeding)
to which defendants are not a party.
XI. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for such further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify or terminate any of its provisions, to
enforce compliance, and to punish any violations of its provisions.
XII. Expiration of Final Judgment
Unless extended by this Court, this Final Judgment shall expire ten
(10) years from the date of its entry.
XIII. Public Interest Determination
Entry of this Final Judgment is in the public interest.
DATED:------
Court approval subject to the Antitrust Procedures and Penalties
Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge
Certificate of Designations, Preferences and Rights of Series U
Preferred Stock of Entravision Communications Corporation
Pursuant to Section 151 of the General Corporation Law of the State
of Delaware:
Whereas, Entravision Communications Corporation, a corporation
organized and existing under the laws of the State of Delaware (this
``Corporation''), does hereby certify that, pursuant to the authority
conferred on the Board of Directors of this Corporation by the First
Restated Certificate of Incorporation, as amended, of this Corporation
in accordance with Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of this Corporation adopted
the following resolution establishing a new series of preferred stock
of this Corporation.
Resolved, that pursuant to the authority conferred on the Board of
Directors of this Corporation by Article 4 of the First Restated
Certificate of Incorporation, as amended, the Board of Directors of
this Corporation hereby establishes a series of the authorized
preferred stock of this Corporation, $0.0001 per value per share, which
series will be designated as ``Series U Preferred Stock,'' and which
will consist of 369,266 shares and will have the following rights,
preferences, privileges and restrictions (capitalized terms not defined
herein shall have the meaning given to such terms in the First Restated
Certificate of Incorporation, as amended, of this Corporation):
A. Dividends and Distributions. The holders of shares of Series U
Preferred Stock will be entitled to participate with the holders of
Class A Common Stock with respect to any dividend declared on the Class
A Common Stock in proportion to the number of shares of Class A Common
Stock issuable upon conversion of the shares of Series U Preferred
Stock held by them.
B. Liquidation Preference. (i) In the event of any liquidation,
dissolution or winding up of this Corporation, either voluntary or
involuntary, subject to the rights of the Series A Preferred Stock and
any other series of Preferred Stock to be established by the Board of
Directors of this Corporation (collectively, the ``Senior Preferred
Stock''), the holders of the Series U Preferred Stock shall be entitled
to receive, after any distribution with respect to the Senior Preferred
Stock and prior to and in preference to any distribution of any of the
assets of this Corporation to the holders of Common Stock by reason of
their ownership thereof, $0.0001 for each share (as adjusted for any
stock split, stock division or consolidation) of Series U Preferred
Stock then-outstanding.
(ii) Upon the completion of the distribution required by
subparagraph (i) of this Section B, the remaining assets of this
Corporation available for distribution to stockholders shall be
distributed among the holders of Series U Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by
each (assuming conversion of all such Series U Preferred Stock.)
C. Voting. Except as provided in this Certificate of Designations,
the holders of shares of Series U Preferred Stock will have no right to
vote on any matters, questions or proceedings of this Corporation
including, without limitation, the election of directors.
D. Protective Provisions. So long as Univision Communications Inc.
(``Univision''), or any Permitted Transferee of Univision, owns at
least 65,950 shares of Series U Preferred Stock, without the consent of
the holders of at least a majority of the shares of Series U Preferred
Stock then outstanding, in their sole discretion, voting as a separate
series, given in writing or by vote at a meeting of such called for
such purpose, this Corporation will not:
(i) Merge, consolidate or enter into a business combination, or
otherwise reorganize this Corporation with or into one or more entities
(other than a merger of a wholly-owned subsidiary of this Corporation
into another wholly-owned subsidiary of this Corporation);
(ii) Dissolve, liquidate or terminate this Corporation;
(iii) Directly or indirectly dispose of any interest in any FCC
license with respect to television stations which are affiliates of
Univision Communications Inc.;
(iv) Amend, alter or repeal any provision of the Certificate of
Incorporation or bylaws of this Corporation or this Certificate of
Designations, each as amended, so as to adversely affect any of the
rights, preferences, privileges, limitation's or restrictions provided
for the benefit of the holders of the Series U Preferred Stock; or
(v) Issue or sell, or obligate itself to issue or sell, any
additional shares of Series U Preferred Stock, or any securities that
are convertible into or
[[Page 27862]]
exchangeable for shares of Series U Preferred Stock.
E. Conversion.
(i) Voluntary Conversion. Each share of Series U Preferred Stock
shall convert automatically without any further action by the holder
thereof into a number of shares of Class A Common Stock determined in
accordance with Section E(ii) upon its sale, conveyance, assignment,
hypothecation, disposition or other transfer (each a ``Transfer'') to
any third party other than an ``affiliate'' (as such term is defined in
Rule 405 promulgated under the Securities Act of 1933, as amended) of
the transferor and may be so converted at the option of the holder
thereof in connection with any such Transfer.
(ii) Conversion Rate. Each share of Series U Preferred Stock shall
be convertible in accordance with Section E(i) into the number of
shares of Class A Common Stock that results from multiplying (x) l by
(y) the conversion rate for the Series U Preferred Stock that is an
effect at the time of conversion (the ``Conversion Rate''). The
Conversion Rate for the Series U Preferred Stock initially shall be
100. The Conversion Rate shall be subject to adjustment from time to
time as provided in this Certificate of Designations. All references to
the Conversion Rate herein mean the Conversion Rate as so adjusted.
(iii) Mandatory Conversion. When and if this Corporation is
authorized to issue a class of Common Stock that has generally the same
rights, preferences, privileges and restrictions as the Series U
Preferred Stock (other than the liquidation preference provided for in
Section B), the final terms of such class of Common Stock to be
mutually agreed upon by this Corporation and the holders of the Series
U Preferred Stock, then this Corporation shall have the right, without
any further action by the holder of the Series U Preferred Stock, to
cause each share of Series U Preferred Stock to convert into the number
of shares of Class U Common Stock that results from multiplying (x) l
by (y) the Conversion Rate. The Conversion of the Series U Preferred
Stock pursuant to this subsection D(iii) shall be deemed to occur on
the date this Corporation deposits written notice of such conversion in
the United States mail, postage prepaid, and addressed to the holder of
the Series U Preferred Stock at its address appearing on the books of
this Corporation.
(iv) Subdivisions: Combinations. In the event this Corporation
should at any time prior to the conversion of the Series U Preferred
Stock fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Class A Common Stock or the determination
of holders of Class A Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock, then,
as of such record date (or the date of such dividend, distribution,
split or subdivision if no record date is fixed), the Conversion Rate
shall be appropriately decreased so that the number of shares of Class
A Common Stock issuable on conversion of each share of such series
shall be increased in proportion to such increase in the aggregate
number of shares of Class A Common Stock outstanding. If the number of
shares of Class A Common Stock outstanding at any time prior to the
conversion of the Series U Preferred Stock is decreased by a reverse
split or combination of the outstanding shares of Class A Common Stock,
then, following the record date for such reverse split or combination,
the Conversion Rate shall be appropriately increased so that the number
of shares of Class A Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in
outstanding shares.
(v) Recapitalizations. If at any time or from time to after the
effective date of this Certificate of Designations there is a
recapitalization, reclassification, reorganization or similar event,
then in any such event each holder of a share of Series U Preferred
Stock shall have the right thereafter to convert such share into the
kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification, reorganization or other
change by a holder of the number of shares of Class A Common Stock into
which such share of Series U Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification,
reorganization, or other change, all subject to further adjustment as
provided herein or with respect to such other securities or property by
the terms thereof.
(vi) No Impairment. This Corporation will not, by amendment of its
Certificate of Incorporation or this Certificate of Designations
(except in accordance with applicable law) or through any
reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Section E by this
Corporation, but will in good faith assist in the carrying out of all
the provisions of this Section E and in the taking of all such action
as may be necessary or appropriate in order to protect the conversion
rights of the holders of Series U Preferred Stock against impairment.
(vii) Unconverted Shares. If less than all of the outstanding
shares of Series U Preferred Stock are converted pursuant to Sections
E(i) and E(iii) above, and such shares are evidenced by a certificate
representing shares in excess of the shares being converted and
surrendered to this Corporation in accordance with the procedures as
the Board of Directors of this Corporation may determine, this
Corporation shall execute and deliver to or upon the written order of
the holder of such certificate, without charge to the holder, a new
certificate evidencing the number of shares of Series U Preferred Stock
not converted. No fractional shares shall be issued upon the conversion
of any share or shares of Series U Preferred Stock, and the number of
shares to be issued shall be rounded to the nearest whole share.
(viii) Reservation. This Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Class A
Common Stock, to effect conversions, such number of duly authorized
shares of Class A Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Series U
Preferred Stock; and if at any time the number of authorized but
unissued shares of Class A Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series U
Preferred Stock; in addition to such other remedies as shall be
available to the holder of the Series U Preferred Stock, this
corporation will take such corporate action as may, in the opinion of
counsel, be necessary to increase its authorized but unissued shares of
Class A Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary
amendment to this Corporation's Certificate of Incorporation.
F. Redemption by this Corporation. The Series U Preferred Shares
shall not be redeemable by this Corporation.
G. Reacquired Shares. Any shares of Series U Preferred Stock which
will have been converted will be retired and cancelled promptly after
the acquisition thereof. All such shares will upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance
[[Page 27863]]
set forth herein, in the Certificate of Incorporation, or in any other
certificate or designations creating a series or any similar stock or
as otherwise required by law.
Resolved, further, that the officers of this Corporation be, and
each of them hereby is, authorized and empowered on behalf of this
Corporation to execute, verify and file a certificate of designations
of preferences in accordance with Delaware law.
In Witness whereof, Entravision Communications Corporation has
caused this certificate to be duly executed by its duly authorized
officers this day of March, 2003.
Entravision Communications Corporation
By:-------------------------------------------------------------------
Walter F. Ulloa,
Chairman and Chief Executive Officer.
By:-------------------------------------------------------------------
John F. DeLorenzo,
Chief Financial Officer.
[FR Doc. 03-12746 Filed 5-20-03; 8:45 am]
BILLING CODE 4410-11-M