[Federal Register: September 20, 2006 (Volume 71, Number 182)]
[Notices]
[Page 55015-55028]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20se06-79]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Alltel 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 Complaint, proposed Final
Judgment, Preservation of Assets Stipulation, and Competitive Impact
Statement were filed with the United States District Court for the
District of Minnesota in United States v. ALLTEL Corp., Civ. Action No.
0:06-cv-03631 (RHK/AJB). On September 7, 2006, the United States filed
a Complaint alleging that the proposed acquisition of Midwest Wireless
Holdings L.L.C. by ALLTEL Corp. would violate Section 7 of the Clayton
Act, 15 U.S.C. 18, by substantially lessening competition in the
provision of mobile wireless telecommunications services in four
Minnesota markets. The proposed Final Judgment, lodged at the same time
as the Complaint, requires ALLTEL to divest its mobile wireless
telecommunication business assets in four markets in rural Minnesota in
order to proceed with ALLTEL's acquisition of Midwest Wireless. A
Competitive Impact Statement filed by the United States describes the
Complaint, the proposed Final Judgment, and the remedies available to
private litigants who may have been injured by the alleged violation.
Copies of the Complaint, proposed Final Judgment, Preservation of
Assets Stipulation, and Competitive Impact Statement are available for
inspection at the U.S. Department of Justice, Antitrust Division, 325
Seventh Street, NW., Suite 215, Washington, DC 20530 (202-514-2481), on
the Internet at http://www.usdoj.gov/atr, and at the Clerk's Office of
the United States District Court for Minnesota. Copies of these
materials may be obtained upon request and payment of a copying fee.
Public comment is invited within the statutory 60-day comment
period. Such comments and responses thereto will be published in the
Federal Register and filed with the Court. Comments should be directed
to Nancy Goodman, Chief, Telecommunications & Media Enforcement
Section, Antitrust Division, U.S. Department of Justice, 1401 H Street,
NW., Suite 8000, Washington, DC 20530 (202-514-5621).
J. Robert Kramer II,
Director of Operations Antitrust Division.
United States of America Department of Justice, Antitrust Division,
1401 H Street, NW., Suite 8000 Washington, DC 20530, and State of
Minnesota Minnesota Attorney General's Office, 445 Minnesota Street,
Suite 1200, St. Paul, Minnesota 55101, Plaintiffs, v. ALLTEL
Corporation, One Allied Drive, Little Rock, Arkansas 72202, and
Midwest Wireless Holdings L.L.C., 2000 Technology Drive, Mankato,
Minnesota 56002, Defendants
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, and the State of Minnesota, by
its Attorney General Mike Hatch, bring this civil action to enjoin the
merger of two mobile wireless telecommunications service providers,
ALLTEL Corporation (``ALLTEL'') and Midwest Wireless Holdings L.L.C.
(``Midwest Wireless''), and to obtain other relief as appropriate.
Plaintiffs allege as follows:
1. ALLTEL entered into an agreement to acquire Midwest Wireless,
dated November 17, 2005, under which the two companies would combine
their mobile wireless telecommunications services businesses
(``Transaction Agreement''). Plaintiffs seek to enjoin this transaction
because it will substantially lessen competition for mobile wireless
telecommunications services in several geographic markets where ALLTEL
and Midwest Wireless are each other's most significant competitor.
2. ALLTEL provides mobile wireless telecommunications services in
35 states serving approximately 11 million subscribers. Midwest
Wireless provides mobile wireless telecommunications services in three
Midwestern states serving approximately 440,000 subscribers. The
combination of ALLTEL and Midwest Wireless will substantially lessen
competition for mobile wireless telecommunications services in four
geographic areas in southern Minnesota where currently both ALLTEL and
Midwest Wireless operate. As a result of the proposed acquisition,
residents of these mostly rural areas will face the likelihood of
increased prices, diminished quality or quantity of services provided,
and less investment in network improvements for these services.
I. Jurisdiction and Venue
3. This Complaint is filed by the United States under Section 15 of
the Clayton Act, 15 U.S.C. 25, to prevent and restrain defendants from
violating Section 7 of the Clayton Act, 15 U.S.C. 18. Plaintiff
Minnesota, by and through its Attorney General, brings this action in
its sovereign capacity and as parens patriae on behalf of the citizens,
general welfare, and economy of the State of Minnesota under Section 16
of the Clayton Act, 15 U.S.C. 26, to prevent defendants from violating
Section 7 of the Clayton Act, 15 U.S.C. 18.
4. ALLTEL and Midwest Wireless both provide mobile wireless
telecommunications services in the State of Minnesota, as well as other
states. The provision of mobile wireless telecommunications services is
a commercial activity that substantially affects, and is in the flow
of, interstate trade and commerce. The defendants purchase substantial
quantities of handsets and equipment from sources
[[Page 55016]]
outside of Minnesota. They also have entered into roaming and other
service agreements with companies located outside of Minnesota. The
Court has jurisdiction over the subject matter of this action and
jurisdiction over the parties pursuant to 15 U.S.C. 22, 25, and 26, and
28 U.S.C. 1331, 1337.
5. Venue in the District is proper under 15 U.S.C. 22 and 28 U.S.C.
1391(c).
II. The Defendants and the Transaction
6. ALLTEL, with headquarters in Little Rock, Arkansas, is a
corporation organized and existing under the laws of the state of
Delaware. ALLTEL is the fifth largest provider of mobile wireless voice
and data services in the United States by number of subscribers; it
serves approximately 11 million customers. It provides mobile wireless
telecommunications services in 233 Rural Service Areas and 116
Metropolitan Statistical Areas located within 35 states and roaming
services to other mobile wireless providers who use CDMA, TDMA and GSM
technology in these areas. In 2005, ALLTEL earned wireless revenues of
approximately $6.572 billion.
7. Midwest Wireless, with headquarters in Mankato, Minnesota, is a
privately-held Delaware limited-liability company. Midwest Wireless
provides wireless service in 14 Rural Service Areas and one
Metropolitan Statistical Area located in Minnesota, Iowa, and Wisconsin
and has approximately 440,000 customers. In 2005, Midwest Wireless
earned approximately $264 million in revenues.
8. Pursuant to the Transaction Agreement dated November 17, 2005,
ALLTEL will acquire Midwest Wireless for approximately $1.075 billion
in cash. If this transaction is consummated, ALLTEL and Midwest
Wireless combined would have approximately 11.5 million subscribers in
the United States, with $7.8 billion in revenues and operations in 35
states.
III. Trade and Commerce
A. Nature of Trade and Commerce
9. Mobile wireless telecommunications services allow customers to
make and receive telephone calls and use data services using radio
transmissions without being confined to a small area during the call or
data session, and without the need for unobstructed line-of-sight to
the radio tower. Mobility is highly prized by customers, as
demonstrated by the more than 180 million people in the United States
who own mobile wireless telephones. In 2005, revenues from the sale of
mobile wireless services in the United States were over $113 billion.
To meet this desire for mobility, mobile wireless telecommunications
services providers must deploy an extensive network of switches and
radio transmitters and receivers, and interconnect this network with
the networks of wireline carriers and with other wireless providers.
10. The first wireless voice systems were based on analog
technology, now referred to as first-generation or ``1G'' technology.
These analog systems were launched after the Federal Communications
Commission (``FCC'') issued the first licenses for mobile wireless
telephone service: two cellular licenses (A-block and B-block) in each
geographic area in the early to mid-1980s. The licenses are in the 800
MHz range of the radio spectrum, each license consists of 25 MHz of
spectrum, and they are issued for each Metropolitan Statistical Area
(``MSA'') and Rural Service Area (``RSA'') (collectively, ``Cellular
Marketing Areas'' or ``CMAs''), with a total of 734 CMAs covering the
entire United States. In 1982, one of the licenses was issued to the
incumbent local exchange carrier in the market, and the other was
issued by lottery to someone other than the incumbent. In the relevant
geographic markets, ALLTEL and Midwest Wireless each own one of the
cellular licenses.
11. In 1995, the FCC allocated and subsequently issued licenses for
additional spectrum for the provision of Personal Communications
Services (``PCS''), a category of services that includes mobile
wireless telecommunications services comparable to those offered by
cellular licensees. These licenses are in the 1.9 GHz range of the
radio spectrum and are divided into six blocks: A, B, and C, which
consist of 30 MHz each; and D, E, and F, which consist of 10 MHz each.
Geographically, the A and B-block 30 MHz licenses are issued by Major
Trading Areas (``MTAs''), and C, D, E, and F-block licenses are issued
by Basic Trading Areas (``BTAs''), several of which comprise each MTA.
MTAs and BTAs do not generally correspond to MSAs and RSAs. With the
introduction of the PCS licenses, both cellular and PCS licensees began
offering digital services, thereby increasing capacity, shrinking
handsets, and extending battery life. In 1996, one provider, a
specialized mobile radio (``SMR'' or ``dispatch'') spectrum licensee,
began to use its SMR spectrum to offer mobile wireless
telecommunications services comparable to those offered by other mobile
wireless telecommunications services providers, in conjunction with its
dispatch, or ``push-to-talk,'' service. Although there are a number of
providers holding spectrum licenses in each area of the country, not
all providers have fully built out their networks throughout each
license area. In particular, because of the characteristics of PCS
spectrum, providers holding this type of spectrum have found it less
attractive to build out in rural areas.
12. Today, more than 99% of the total U.S. population lives in
counties where mobile wireless telecommunications services operators
offer digital service, and nearly all mobile wireless voice service has
migrated to second-generation or ``2G'' digital technologies: TDMA
(time division multiple access), GSM (global standard for mobile, a
type of TDMA standard used by all carriers in Europe), and CDMA (code
division multiple access). Mobile wireless telecommunications services
providers have chosen to build their networks on these incompatible
technologies and most have chosen CDMA or GSM, with TDMA having been
orphaned by equipment vendors. (The SMR providers use a fourth
incompatible technological standard better suited to the spectrum they
own, and, as SMR licensees, they have no obligation to support a
specific technology standard.) Even more advanced technologies
(``2.5G'' and ``3G'') have begun to be deployed for voice and data.
B. Relevant Product Market
13. Mobile wireless telecommunications services is a relevant
product market. Mobile wireless telecommunications services include
both voice and data services provided over a radio network and allows
customers to maintain their telephone calls or data sessions without
wires, such as when traveling. There are no cost-effective alternatives
to mobile wireless telecommunications services. Fixed wireless services
are not mobile (e.g., Wi-Fi), and therefore are not a viable
alternative to mobile wireless telecommunications service. It is
unlikely that a sufficient number of customers would switch away from
mobile wireless telecommunications services to make a small but
significant price increase in those services unprofitable. Mobile
wireless telecommunications services is a relevant product market under
Section 7 of the Clayton Act, 15 U.S.C. 18.
C. Relevant Geographic Markets
14. The large majority of customers use mobile wireless
telecommunications services in close proximity to their
[[Page 55017]]
workplaces and homes. Thus, customers purchasing mobile wireless
telecommunications services choose among mobile wireless
telecommunications services providers that offer services where they
are located and travel on a regular basis: home, work, other areas they
commonly visit, and areas in between. The number and identity of mobile
wireless telecommunications services providers varies among geographic
areas, along with the quality of their services and the breadth of
their geographic coverage, all of which are significant factors in
customers' purchasing decisions. Mobile wireless telecommunications
services providers can and do offer different promotions, discounts,
calling plans, and equipment subsidies in different geographic areas,
effectively varying the price for customers by geographic area.
15. The United States comprises numerous local geographic markets
for mobile wireless telecommunications services. The FCC has licensed a
limited number of mobile wireless telecommunications services providers
in each local area based upon the availability of radio spectrum. These
FCC spectrum licensing areas often represent the core of the business
and social sphere where customers face the same competitive choices for
mobile wireless telecommunications services. The relevant geographic
markets in which this transaction will substantially lessen competition
in mobile wireless telecommunications services are effectively
represented, but not defined, by FCC spectrum licensing areas.
16. The relevant geographic markets, under Section 7 of the Clayton
Act, 15 U.S.C. 18, where the transaction will substantially lessen
competition for mobile wireless telecommunications services are
represented by the following FCC spectrum licensing areas which are all
RSAs located in southern Minnesota: Minnesota RSA-7 (CMA 488),
Minnesota RSA-8 (CMA 489), Minnesota RSA-9 (CMA 490), and Minnesota
RSA-10 (CMA 491). It is unlikely that a sufficient number of customers
would switch to mobile wireless telecommunications services providers
in a different geographic market to make a small but significant price
increase in the relevant geographic markets unprofitable for mobile
wireless telecommunications services.
D. Anticompetitive Effects
1. Mobile Wireless Telecommunications Services
17. The companies' combined market shares for mobile wireless
telecommunications services in the relevant markets described above, as
measured in terms of subscribers, range from over 60% to nearly 95%. In
each relevant geographic market, Midwest Wireless has the largest
market share and, in all but one RSA, ALLTEL is the second-largest
mobile wireless telecommunications services provider. In all of the
relevant geographic markets, ALLTEL and Midwest Wireless own the only
800 MHz band cellular spectrum licenses, which are more efficient in
serving rural areas than 1900 MHz band PCS spectrum. As a result of
holding the cellular spectrum licenses and being early entrants into
these markets, ALLTEL's and Midwest Wireless's networks provide greater
depth and breadth of coverage than their competitors, which are
operating on PCS spectrum in the relevant geographic markets, and thus
are more attractive to consumers.
In addition, mobile wireless telecommunications services providers
with partial coverage in a geographic area do not aggressively market
their services in these markets because potential customers would use
their wireless telephones primarily in areas where these providers have
no network. In theory, these less-built-out providers could serve
residents of the rural areas through roaming agreements but, as a
practical matter, when service is provided on another carrier's
network, the providers have to pay roaming charges to, and rely on,
that provider to maintain the quality of the network. Because of these
constraints, carriers with limited network coverage in an area are
reluctant to market their services to residents of that area.
Therefore, ALLTEL and Midwest Wireless are likely closer substitutes
for each other than the other mobile wireless telecommunications
services providers who own only PCS spectrum in the relevant geographic
markets.
18. The relevant geographic markets for mobile wireless services
are highly concentrated. As measured by the Herfindahl-Hirschman Index
(``HHI''), which is commonly employed in merger analysis and is defined
and explained in Appendix A to this Complaint, concentration in these
markets ranges from over 3600 to more than 5600, which is well above
the 1800 threshold at which the Department considers a market to be
highly concentrated. After ALLTEL's proposed acquisition of Midwest
Wireless is consummated, the HHIs in the relevant geographic markets
will range from over 4700 to over 9100, with increases in the HHI as a
result of the merger ranging from over 1000 to over 4100, significantly
beyond the thresholds at which the Department considers a transaction
likely to cause competitive harm.
19. Competition between ALLTEL and Midwest Wireless in the relevant
geographic markets has resulted in lower prices and higher quality in
mobile wireless telecommunications services, than would otherwise have
existed in these geographic markets. In these areas, consumers consider
ALLTEL and Midwest Wireless to be the most attractive competitors
because other providers' networks lack coverage or provide lower-
quality service. If ALLTEL's proposed acquisition of Midwest Wireless
is consummated, the relevant geographic markets for mobile wireless
telecommunications services will become substantially more
concentrated, and the competition between ALLTEL and Midwest Wireless
in mobile wireless telecommunications services will be eliminated in
these markets. As a result, the loss of competition between ALLTEL and
Midwest Wireless increases the likelihood of unilateral actions by the
merged firm in the relevant geographic markets to increase prices,
diminish the quality or quantity of services provided, and refrain from
or delay making investments in network improvements. Therefore,
ALLTEL's proposed acquisition of Midwest Wireless will likely result in
substantially less competition in mobile wireless telecommunications
services in the relevant geographic markets.
2. Entry
20. Entry by a new mobile wireless telecommunications services
provider in the relevant geographic markets would be difficult, time-
consuming, and expensive, requiring the acquisition of spectrum
licenses and the build-out of a network. Expansion by providers who
hold spectrum in these areas is also unlikely as the relevant
geographic markets are rural service areas where the combined firm
would own all of the available 800 MHz cellular spectrum. Due to
propagation characteristics of 800 MHz cellular spectrum and 1900 MHz
PCS spectrum, the 800 MHz signals can cover a substantially broader
area than the 1900 MHz signals. The estimated coverage advantage of the
800 MHz cellular spectrum in rural areas ranges from two to as much as
five times greater than PCS. In rural markets, this difference results
in higher build-out costs for PCS networks than for cellular networks.
The high costs of constructing PCS networks in rural markets combined
with the relatively low population density makes it less likely that
carriers that own PCS spectrum
[[Page 55018]]
would build out in the relevant geographic markets. Therefore, new
entry in response to a small but significant price increase for mobile
wireless services by the merged firm in the relevant geographic markets
would not be timely, likely, or sufficient to thwart the competitive
harm resulting from ALLTEL's proposed acquisition of Midwest Wireless,
if it were to be consummated.
IV. Violation Alleged
21. The effect of ALLTEL's proposed acquisition of Midwest
Wireless, if it were to be consummated, may be substantially to lessen
competition in interstate trade and commerce in the relevant geographic
markets for mobile wireless telecommunications services, in violation
of Section 7 of the Clayton Act, 15 U.S.C. 18.
22. Unless restrained, the transaction will likely have the
following effects in mobile wireless telecommunications services in the
relevant geographic markets, among others:
a. Actual and potential competition between ALLTEL and Midwest
Wireless will be eliminated;
b. Competition in general will be lessened substantially;
c. Prices are likely to increase;
d. The quality and quantity of services are likely to decrease; and
e. Incentives to improve wireless networks will be reduced.
V. Requested Relief
The plaintiffs request:
23. That ALLTEL's proposed acquisition of Midwest Wireless be
adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. 18;
24. That defendants be permanently enjoined from and restrained
from carrying out the Transaction Agreement, dated November 17, 2005,
or from entering into or carrying out any agreement, understanding, or
plan, the effect of which would be to bring the wireless services
businesses of ALLTEL and Midwest Wireless under common ownership or
control;
25. That plaintiffs be awarded their costs of this action; and
26. That plaintiffs have such other relief as the Court may deem
just and proper.
Dated:
Respectfully Submitted,
For Plaintiff United States of America
Thomas O. Barnett,
Assistant Attorney General, Antitrust Division.
J. Bruce McDonald,
Deputy Assistant Attorney General, Antitrust Division.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
Nancy Goodman,
Chief, Telecommunications & Media, Enforcement Section, Antitrust
Division.
Laury Bobbish,
Assistant Chief, Telecommunications & Media Enforcement Section,
Antitrust Division.
Hillary B. Burchuk, Lawrence M. Frankel.
Attorneys, Telecommunications & Media, Enforcement Section,
Antitrust Division, U.S. Department of Justice, City Center
Building, 1401 H Street, NW., Suite 8000, Washington, DC 20530,
(202) 514-5621, Facsimile: (202) 514-6381.
Rachel K. Paulose,
United States Attorney.
Perry F. Sekus,
Assistant United States Attorney, Attorney I.D. No. 0309412, 600
United States Courthouse, 300 South Fourth Street, Minneapolis, MN
55415, (612) 664-5600, Facsimile: (612) 664-5788.
For Plaintiff State of Minnesota
Mike Hatch,
Attorney General, State of Minnesota.
Kristen M. Olsen,
Assistant Attorney General, Atty. Reg. No. 030489X, 445 Minnesota
Street, Suite 1200, St. Paul, Minnesota 55101-2130, (651) 296-2921,
Facsimile: (651) 282-5437.
Appendix A--Herfindahl-Hirschman Index
``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted
measure of market concentration. It is calculated by squaring the
market share of each firm competing in the market and then summing the
resulting numbers. For example, for a market consisting of four finns
with shares of 30, 30, 20, and 20 percent, the HHI is 2600 (30\2\ +
30\2\ + 20\2\ + 20\2\ = 2600). (Note: Throughout the Complaint, market
share percentages have been rounded to the nearest whole number, but
HHIs have been estimated using unrounded percentages in order to
accurately reflect the concentration of the various markets.) The HHI
takes into account the relative size distribution of the firms in a
market and approaches zero when a market consists of a large number of
small firms. The HHI increases both as the number of firms in the
market decreases and as the disparity in size between those firms
increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI is
in excess of 1800 points are considered to be highly concentrated. See
Horizontal Merger Guidelines ]1.51 (revised Apr. 8, 1997). Transactions
that increase the HHI by more than 100 points in concentrated markets
presumptively raise antitrust concerns under the guidelines issued by
the U.S. Department of Justice and Federal Trade Commission. See id.
In the United States District Court for the District of Minnesota
United States of America and State of Minnesota Plaintiffs, v. ALLTEL
Corporation and Midwest Wireless Holdings L.L.C., Defendants
Final Judgment
Whereas, plaintiffs, United States of America and the State of
Minnesota, filed their Complaint on September 7, 2006, plaintiffs and
defendants, ALLTEL Corporation (''ALLTEL'') and Midwest Wireless
Holdings L.L.C. (``Midwest Wireless''), by their respective 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 admission by any party
regarding any issue of fact or law;
And Whereas, defendants agree 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 defendants to assure
that competition is not substantially lessened;
And Whereas, plaintiffs require defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And Whereas, defendants have represented to plaintiffs that the
divestitures required below can and will be made and that defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, Adjudged and Decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, 15 U.S.C. 18.
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the entity to whom defendants divest the
Divestiture Assets.
B. ``ALLTEL'' means defendant ALLTEL Corporation, a Delaware
[[Page 55019]]
corporation with headquarters in Little Rock, Arkansas, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``CMA'' means cellular market area which is used by the Federal
Communications Commission (``FCC'') to define cellular license areas
and which consists of Metropolitan Statistical Areas (``MSAs'') and
Rural Service Areas (``RSAs'').
D. ``Divestiture Assets'' means each mobile wireless
telecommunications services business to be divested under this Final
Judgment, including all types of assets, tangible and intangible, used
by defendants in the operation of the mobile wireless
telecommunications services businesses to be divested. ``Divestiture
Assets'' shall be construed broadly to accomplish the complete
divestiture of the entire business of ALLTEL in each of the following
RSA license areas as required by this Final Judgment and to ensure that
the divested mobile wireless telecommunications services businesses
remain viable, ongoing businesses:
(1) Minnesota RSA-7 (CMA 488);
(2) Minnesota RSA-8 (CMA 489);
(3) Minnesota RSA-9 (CMA 490); and
(4) Minnesota RSA-10 (CMA 491)
provided that ALL TEL may retain all of the PCS spectrum it currently
holds in each of these RSAs and equipment that is used only for
wireless transmissions over this PCS spectrum, and provided that ALL
TEL need not divest the assets used solely to operate ALLTEL's GSM
roaming business in these RSAs, including GSM roaming contracts and
equipment.
The Divestiture Assets shall include, without limitation, all types
of real and personal property, monies and financial instruments,
equipment, inventory, office furniture, fixed assets and furnishings,
supplies and materials, contracts, agreements, leases, commitments,
spectrum licenses issued by the FCC and all other licenses, permits and
authorizations, operational support systems, cell sites, network
infrastructure, switches, customer support and billing systems,
interfaces with other service providers, business and customer records
and information, customer contracts, customer lists, credit records,
accounts, and historic and current business plans which relate
primarily to the wireless businesses being divested, as well as any
patents, licenses, sub-licenses, trade secrets, know-how, drawings,
blueprints, designs, technical and quality specifications and
protocols, quality assurance and control procedures, manuals and other
technical information defendant ALLTEL supplies to its own employees,
customers, suppliers, agents, or licensees, and trademarks, trade names
and service marks or other intellectual property, including all
intellectual property rights under third-party licenses that are
capable of being transferred to an Acquirer either in their entirety,
for assets described in (1) below, or through a license obtained
through or from ALLTEL, for assets described in (2) below; provided
that defendants shall only be required to divest Multi-line Business
Customer contracts, if the primary business address for that customer
is located within any of the four license areas described herein, and
further, any subscriber who obtains mobile wireless telecommunications
services through any such contract retained by defendants and who are
located within the four geographic areas identified above, shall be
given the option to terminate their relationship with defendants,
without financial cost, at any time within one year of the closing of
the Transaction. Defendants shall provide written notice to these
subscribers within 45 days after the closing of the Transaction of the
option to terminate.
The divestiture of the Divestiture Assets shall be accomplished by:
(1) Transferring to the Acquirer the complete ownership and/or
other rights to the assets (other than those assets used substantially
in the operations of ALL TEL's overall wireless telecommunications
services business which must be retained to continue the existing
operations of the wireless properties that defendants are not required
to divest, and that either are not capable of being divided between the
divested wireless telecommunications services businesses and those not
divested, or are assets that the defendants and the Acquirer agree,
subject to approval of plaintiff United States upon consultation with
plaintiff Minnesota, shall not be divided); and
(2) Granting to the Acquirer an option to obtain a nonexclusive,
transferable license from defendants for a reasonable period, subject
to approval of plaintiff United States upon consultation with plaintiff
Minnesota, at the election of an Acquirer to use any of ALLTEL's
retained assets under paragraph (1) above, used in the operation of the
mobile wireless telecommunications services businesses being divested,
so as to enable the Acquirer to continue to operate the divested mobile
wireless telecommunications services businesses without impairment.
Defendants shall identify in a schedule submitted to plaintiffs and
filed with the Court, as expeditiously as possible following the filing
of the Complaint and in any event prior to any divestiture and before
the approval by the Court of this Final Judgment, any intellectual
property rights under third-party licenses that are used by the mobile
wireless telecommunications services businesses being divested but that
defendants could not transfer to an Acquirer entirely or by license
without third-party consent, and the specific reasons why such consent
is necessary and how such consent would be obtained for each asset.
E. ``GSM'' means global system for mobile communications which is
one of the standards used for the infrastructure of digital cellular
service.
F. ``Midwest Wireless'' means defendant Midwest Wireless Holdings
L.L.C., a Delaware Limited Liability Company, with headquarters in
Mankato, Minnesota, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships and joint ventures, and
their directors, officers, managers, agents, and employees.
G. ``Multi-line Business Customer'' means a corporate or business
customer that contracts with ALLTEL for mobile wireless services to
provide multiple telephones to its employees or members whose services
are provided pursuant to a contract with the corporate or business
customer.
H. ``Transaction'' means the Transaction Agreement between ALLTEL
and Midwest Wireless, dated November 17, 2005.
III. Applicability
A. This Final Judgment applies to defendants ALLTEL and Midwest
Wireless, as defined above, 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.
B. Defendants shall require, as a condition of the sale or other
disposition of all or substantially all of their assets or of lesser
business units that include the Divestiture Assets, that the purchaser
agrees to be bound by the provisions of this Final Judgment, provided
that defendants need not obtain such an agreement from the Acquirer.
IV. Divestitures
A. Defendants are ordered and directed, within 120 days after
consummation of the Transaction, or five days after notice of entry of
this Final Judgment, whichever is later, to
[[Page 55020]]
divest the Divestiture Assets to an Acquirer acceptable to plaintiff
United States in its sole discretion upon consultation with plaintiff
Minnesota, or, if applicable, to a Divestiture Trustee designated
pursuant to Section V of this Final Judgment. Plaintiff United States,
in its sole discretion upon consultation with plaintiff Minnesota, may
agree to one or more extensions of this time period not to exceed 60
days in total, and shall notify the Court in such circumstances. With
respect to divestiture of the Divestiture Assets by defendants or the
Divestiture Trustee, if applications have been filed with the FCC
within the period permitted for divestiture seeking approval to assign
or transfer licenses to the Acquirer of the Divestiture Assets, but an
order or other dispositive action by the FCC on such applications has
not been issued before the end of the period permitted for divestiture,
the period shall be extended with respect to divestiture of those
Divestiture Assets for which FCC approval has not been issued until
five days after such approval is received. Defendants agree to use
their best efforts to accomplish the divestitures set forth in this
Final Judgment and to seek all necessary regulatory approvals as
expeditiously as possible. This Final Judgment does not limit the FCC's
exercise of its regulatory powers and process with respect to the
Divestiture Assets. Authorization by the FCC to conduct the divestiture
of a Divestiture Asset in a particular manner will not modify any of
the requirements of this decree.
B. In accomplishing the divestitures ordered by this Final
Judgment, defendants shall promptly make known, if they have not
already done so, by usual and customary means, the availability of the
Divestiture Assets. Defendants shall inform any person making inquiry
regarding a possible purchase of the Divestiture Assets that they are
being divested pursuant to this Final Judgment and provide that person
with a copy of this Final Judgment. Defendants shall offer to furnish
to all prospective Acquirers, subject to customary confidentiality
assurances, all information and documents relating to the Divestiture
Assets customarily provided in a due diligence process except such
information or documents subject to the attorney-client or work product
privileges. Defendants shall make available such information to
plaintiffs at the same time that such information is made available to
any other person.
C. Defendants shall provide to the Acquirer and plaintiffs
information relating to the personnel involved in the operation,
development, and sale of mobile wireless telecommunications services in
the relevant RSAs to enable the Acquirer to make offers of employment.
Defendants will not interfere with any negotiations by the Acquirer to
employ any defendant employee whose primary responsibility is the
operation, development, or sale of mobile wireless services in the
relevant RSAs.
D. Defendants shall permit prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel and to make inspections
of the Divestiture Assets; access to any and all environmental, zoning,
and other permit documents and information; and access to any and all
financial, operational, and other documents and information customarily
provided as part of a due diligence process.
E. Defendants shall warrant to the Acquirer that (1) The
Divestiture Assets will be operational on the date of sale, and (2)
every wireless spectrum license is in full force and effect on the date
of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, licensing, operation, or divestiture of the Divestiture
Assets.
G. Defendants shall warrant to the Acquirer of the Divestiture
Assets that there are no defects in the environmental, zoning,
licensing or other permits pertaining to the operation of each asset
that will have a material adverse effect on the operator of the mobile
wireless telecommunications services business in which the asset is
primarily used, and that following the sale of the Divested Assets,
defendants will not undertake, directly or indirectly, any challenges
to the environmental, zoning, licensing or other permits relating to
the operation of the Divestiture Assets.
H. Unless plaintiff United States upon consultation with plaintiff
Minnesota otherwise consents in writing, the divestitures pursuant to
Section IV, or by a Divestiture Trustee appointed pursuant to Section V
of this Final Judgment, shall include the entire Divestiture Assets,
and shall be accomplished in such a way as to satisfy plaintiff United
States in its sole discretion upon consultation with plaintiff
Minnesota that these assets can and will be used by the Acquirer as
part of a viable, ongoing business engaged in the provision of mobile
wireless telecommunications services. The Divestiture Assets shall all
be divested to a single Acquirer. The divestiture of the Divestiture
Assets, whether pursuant to Section IV or Section V of this Final
Judgment,
(1) Shall be made to an Acquirer that, in plaintiff United States's
sole judgment upon consultation with plaintiff Minnesota, has the
intent and capability (including the necessary managerial, operational,
technical, and financial capability) of competing effectively in the
provision of mobile wireless telecommunications services; and
(2) Shall be accomplished so as to satisfy plaintiff United States
in its sole discretion upon consultation with plaintiff Minnesota, that
none of the terms of any agreement between the Acquirer and any
defendant shall give defendants the ability unreasonably to raise the
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to
interfere with the ability of the Acquirer to compete effectively.
I. At the option of the Acquirer of the Divestiture Assets,
defendants shall enter into a contract for transition services
customarily provided in connection with the sale of a business
providing mobile wireless telecommunications services sufficient to
meet all or part of the needs of the Acquirer for a period of up to one
year. The terms and conditions of any contractual arrangement meant to
satisfy this provision must be reasonably related to market conditions.
J. To the extent that the Divestiture Assets use intellectual
property, as required to be identified by Section II.D, that cannot be
transferred or assigned without the consent of the licensor or other
third parties, defendants shall use their best efforts to obtain those
consents.
V. Appointment of Divestiture Trustee
A. If defendants have not divested the Divestiture Assets within
the time period specified in Section IV.A, defendants shall notify
plaintiffs of that fact in writing, specifically identifying the
Divestiture Assets that have not been divested. Then, upon application
of plaintiff United States upon consultation with plaintiff Minnesota,
the Court shall appoint a Divestiture Trustee selected by plaintiff
United States and approved by the Court to effect the divestiture of
the Divestiture Assets. The Divestiture Trustee will have all the
rights and responsibilities of the Management Trustee appointed
pursuant to the Preservation of Assets Order, and will be responsible
for:
(1) Accomplishing divestiture of all Divestiture Assets transferred
to the Divestiture Trustee from defendants, in accordance with the
terms of this Final Judgment, to an Acquirer approved by plaintiff
United States upon consultation with plaintiff Minnesota,
[[Page 55021]]
under Section IV.A of this Final Judgment; and
(2) exercising the responsibilities of the licensee of any
transferred Divestiture Assets and controlling and operating any
transferred Divestiture Assets, to ensure that the businesses remain
ongoing, economically viable competitors in the provision of mobile
wireless telecommunications services in the four license areas
specified in Section II.D, until they are divested to an Acquirer, and
the Divestiture Trustee shall agree to be bound by this Final Judgment.
B. Defendants shall submit a proposed trust agreement (``Trust
Agreement'') to plaintiffs, which must be consistent with the terms of
this Final Judgment and which must receive approval by plaintiff United
States in its sole discretion upon consultation with plaintiff
Minnesota, who shall communicate to defendants within 10 business days
its approval or disapproval of the proposed Trust Agreement, and which
must be executed by the defendants and the Divestiture Trustee within
five business days after approval by plaintiff United States.
C. After obtaining any necessary approvals from the FCC for the
assignment of the licenses of the Divestiture Assets to the Divestiture
Trustee, defendants shall irrevocably divest the Divestiture Assets to
the Divestiture Trustee, who will own such assets (or own the stock of
the entity owning such assets, if divestiture is to be effected by the
creation of such an entity for sale to Acquirer) and control such
assets, subject to the terms of the approved Trust Agreement.
D. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer acceptable
to plaintiff United States, in its sole judgment upon consultation with
plaintiff Minnesota, at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee, subject
to the provisions of Sections IV, V, and VI of this Final Judgment, and
shall have such other powers as this Court deems appropriate. Subject
to Section V.G of this Final Judgment, the Divestiture Trustee may hire
at the cost and expense of defendants the Management Trustee appointed
pursuant to the Preservation of Assets Order, and any investment
bankers, attorneys or other agents, who shall be solely accountable to
the Divestiture Trustee, reasonably necessary in the Divestiture
Trustee's judgment to assist in the divestiture.
E. In addition, notwithstanding any provision to the contrary,
plaintiff United States, in its sole discretion upon consultation with
plaintiff Minnesota, may require defendants to include additional
assets, or allow, with the written approval of plaintiff United States
upon consultation with plaintiff Minnesota, defendants to substitute
substantially similar assets, which substantially relate to the
Divestiture Assets to be divested by the Divestiture Trustee to
facilitate prompt divestiture to an acceptable Acquirer.
F. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by defendants must be conveyed in writing to plaintiffs
and the Divestiture Trustee within 10 calendar days after the
Divestiture Trustee has provided the notice required under Section VI.
G. The Divestiture Trustee shall serve at the cost and expense of
defendants, on such terms and conditions as plaintiff United States
approves, and shall account for all monies derived from the sale of the
assets sold and all costs and expenses so incurred. After approval by
the Court of the Divestiture Trustee's accounting, including fees for
its services and those of any professionals and agents retained by the
Divestiture Trustee, all remaining money shall be paid to defendants
and the trust shall then be terminated. The compensation of the
Divestiture Trustee and any professionals and agents retained by the
Divestiture Trustee shall be reasonable in light of the value of the
Divestiture Assets and based on a fee arrangement providing the
Divestiture Trustee with an incentive based on the price and terms of
the divestiture, and the speed with which it is accomplished, but
timeliness is paramount.
H. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestitures
including their best efforts to effect all necessary regulatory
approvals and will provide any necessary representations or warranties
as appropriate related to sale of the Divestiture Assets. The
Divestiture Trustee and any consultants, accountants, attorneys, and
other persons retained by the Divestiture Trustee shall have full and
complete access to the personnel, books, records, and facilities of the
businesses to be divested, and defendants shall develop financial and
other information relevant to the assets to be divested as the
Divestiture Trustee may reasonably request, subject to reasonable
protection for trade secret or other confidential research,
development, or commercial information. Defendants shall take no action
to interfere with or to impede the Divestiture Trustee's accomplishment
of the divestitures.
I. After its appointment, the Divestiture Trustee shall file
monthly reports with plaintiffs and the Court setting forth the
Divestiture Trustee's efforts to accomplish the divestitures ordered
under this Final Judgment. To the extent such reports contain
information that the Divestiture Trustee deems confidential, such
reports shall not be filed in the public docket of the Court. If the
Divestiture Trustee designates any information as ``confidential'' in
any report or notice he submits pursuant to this Final Judgment, within
five business days after the submission of such report, any plaintiff
that objects to the designation of information as ``confidential'' will
notify the Divestiture Trustee. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in the Divestiture Assets, and
shall describe in detail each contact with any such person. The
Divestiture Trustee shall maintain full records of all efforts made to
divest the Divestiture Assets.
J. If the Divestiture Trustee has not accomplished such
divestitures within six months after its appointment, the Divestiture
Trustee shall promptly file with the Court a report setting forth (1)
The Divestiture Trustee's efforts to accomplish the required
divestitures, (2) the reasons, in the Divestiture Trustee's judgment,
why the required divestitures have not been accomplished, and (3) the
Divestiture Trustee's recommendations. To the extent such reports
contain information that the Divestiture Trustee deems confidential,
such reports shall not be filed in the public docket of the Court. The
Divestiture Trustee shall at the same time furnish such report to the
plaintiffs, who shall have the right to make additional recommendations
consistent with the purpose of the trust. The Court thereafter shall
enter such orders as it shall deem appropriate to carry out the purpose
of the Final Judgment, which may, if necessary, include extending the
trust and the term of the Divestiture Trustee's appointment by a period
requested by plaintiff United States upon consultation with plaintiff
Minnesota.
[[Page 55022]]
K. After defendants transfer the Divestiture Assets to the
Divestiture Trustee, and until those Divestiture Assets have been
divested to an Acquirer approved by plaintiff United States pursuant to
Sections IV.A and IV.R, the Divestiture Trustee shall have sole and
complete authority to manage and operate the Divestiture Assets and to
exercise the responsibilities of the licensee, and shall not be subject
to any control or direction by defendants. Defendants shall not use or
retain any economic interest in the Divestiture Assets transferred to
the Divestiture Trustee, apart from the right to receive the proceeds
of the sale or other disposition of the Divestiture Assets.
L. The Divestiture Trustee shall operate the Divestiture Assets
consistent with the Preservation of Assets Order and this Final
Judgment, with control over operations, marketing, and sales.
Defendants shall not attempt to influence the business decisions of the
Divestiture Trustee concerning the operation and management of the
Divestiture Assets, and shall not communicate with the Divestiture
Trustee concerning divestiture of the Divestiture Assets or take any
action to influence, interfere with, or impede the Divestiture
Trustee's accomplishment of the divestitures required by this Final
Judgment, except that defendants may communicate with the Divestiture
Trustee to the extent necessary for defendants to comply with this
Final Judgment and to provide the Divestiture Trustee, if requested to
do so, with whatever resources or cooperation may be required to
complete divestiture of the Divestiture Assets and to carry out the
requirements of the Preservation of Assets Order and this Final
Judgment. Except as provided in this Final Judgment and the
Preservation of Assets Order, in no event shall defendants provide to,
or receive from, the Divestiture Trustee or the mobile wireless
telecommunications services businesses to be divested any non-public or
competitively sensitive marketing, sales, pricing or other information
relating to their respective mobile wireless telecommunications
services businesses.
VI. Notice of Proposed Divestitures
A. Within two business days following execution of a definitive
divestiture agreement, defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestitures required herein,
shall notify plaintiffs in writing of any proposed divestiture required
by Section IV or V of this Final Judgment. If the Divestiture Trustee
is responsible, it shall similarly notify defendants. The notice shall
set forth the details of the proposed divestiture and list the name,
address, and telephone number of each person not previously identified
who offered or expressed an interest in or desire to acquire any
ownership interest in the Divestiture Assets, together with full
details of the same.
B. Within 15 calendar days of receipt by plaintiffs of such notice,
plaintiffs may request from defendants, the proposed Acquirer, any
other third party, or the Divestiture Trustee if applicable additional
information concerning the proposed divestiture, the proposed Acquirer,
and any other potential Acquirer. Defendants and the Divestiture
Trustee shall furnish any additional information requested within 15
calendar days of the receipt of the request, unless the parties shall
otherwise agree.
C. Within 30 calendar days after receipt of the notice or within 20
calendar days after plaintiffs have been provided the additional
information requested from defendants, the proposed Acquirer, any third
party, and the Divestiture Trustee, whichever is later, plaintiff
United States upon consultation with plaintiff Minnesota, shall provide
written notice to defendants and the Divestiture Trustee, if there is
one, stating whether it objects to the proposed divestiture. If
plaintiff United States provides written notice that it does not
object, the divestiture may be consummated, subject only to defendants'
limited right to object to the sale under Section V.F of this Final
Judgment. Absent written notice that plaintiff United States does not
object to the proposed Acquirer or upon objection by plaintiff United
States, a divestiture proposed under Section IV or Section V shall not
be consummated. Upon objection by defendants under Section V.F, a
divestiture proposed under Section V shall not be consummated unless
approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any divestiture
made pursuant to Section IV or V of this Final Judgment.
VIII. Preservation of Assets
Until the divestitures required by this Final Judgment have been
accomplished, defendants shall take all steps necessary to comply with
the Preservation of Assets Order entered by this Court and cease use of
the Divestiture Assets during the period that the Divestiture Assets
are managed by the Management Trustee, except to the extent use of such
assets is permitted under Section XI. Defendants shall take no action
that would jeopardize the divestitures ordered by this Court.
IX. Affidavits
A. Within 20 calendar days of the filing of the Complaint in this
matter, and every 30 calendar days thereafter until the divestitures
have been completed under Section IV or V of this Final Judgment,
defendants shall deliver to plaintiffs an affidavit as to the fact and
manner of its compliance with Section IV or V of this Final Judgment.
Each such affidavit shall include the name, address, and telephone
number of each person who during the preceding 30 days, made an offer
to acquire, expressed an interest in acquiring, entered into
negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in the Divestiture Assets, and shall describe
in detail each contact with any such person during that period. Each
such affidavit shall also include a description of the efforts
defendants have taken to solicit buyers for the Divestiture Assets, and
to provide required information to prospective Acquirers, including the
limitations, if any, on such information. Assuming the information set
forth in the affidavit is true and complete, any objection by plaintiff
United States upon consultation with plaintiff Minnesota, to
information provided by defendants, including limitation on
information, shall be made within 14 calendar days of receipt of such
affidavit.
B. Within 20 calendar days of the filing of the Complaint in this
matter, defendants shall deliver to plaintiffs an affidavit that
describes in reasonable detail all actions defendants have taken and
all steps defendants have implemented on an ongoing basis to comply
with Section VIII of this Final Judgment. Defendants shall deliver to
plaintiffs an affidavit describing any changes to the efforts and
actions outlined in defendants' earlier affidavits provided pursuant to
this section within 15 calendar days after the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestitures have been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time
[[Page 55023]]
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 United States' option, to require defendants provide
copies of, all books, ledgers, accounts, records and documents in the
possession, custody, or control of defendants, relating to any matters
contained in this Final Judgment; and
(2) To interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the 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 United States to any person
other than an authorized representative of the executive branch of the
United States or, pursuant to a customary protective order or waiver of
confidentiality by defendants, the FCC, 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 United States, 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
United States shall give defendants 10 calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XI. No Reacquisition
Defendants may not reacquire or lease any part of the Divestiture
Assets during the term of this Final Judgment provided however that
defendants shall not be precluded from entering commercially reasonable
agreements, for a period not to exceed two years from the date of the
closing of the Transaction, with the Acquirer to obtain the right to
use equipment that defendant ALLTEL used to support both its GSM
roaming business and the provision of wireless services using other
technological formats, and provided however that defendants may lease,
for a period not to exceed 30 days, from the Management Trustee
appointed by this Court pursuant to the Preservation of Assets Order,
2.5 MHz of spectrum in each RSA included in the Divestiture Assets.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire 10 years from the date of its entry.
XIV. Public Interest Determination
Entry of this Final Judgment is in the public interest.
Dated:-----------------------------------------------------------------
[fxsp0]----------------------------------------------------------------
United States District Judge
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 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
Defendants entered into a Transaction Agreement dated November 17,
2005, pursuant to which ALLTEL Corporation (``ALLTEL'') will acquire
Midwest Wireless Holdings L.L.C. (``Midwest Wireless''). Plaintiffs
filed a civil antitrust Complaint on September 7, 2006 seeking to
enjoin the proposed acquisition. The Complaint alleges that the likely
effect of this acquisition would be to lessen competition substantially
for mobile wireless telecommunications services in four geographic
areas in the state of Minnesota in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18. This loss of competition would result in
consumers facing higher prices and lower quality or quantity of mobile
wireless telecommunications services.
At the same time the Complaint was filed, the parties moved this
Court to enter a Preservation of Assets Order and plaintiff United
States lodged a proposed Final Judgment, which are designed to
eliminate the anticompetitive effects of the acquisition. Under the
proposed Final Judgment, which is explained more fully below,
defendants are required to divest ALLTEL's mobile wireless
telecommunications services businesses and related assets in four
markets (``Divestiture Assets''). Under the terms of the Preservation
of Assets Order, defendants will take certain steps to ensure that: (a)
These assets are preserved and that the Divestiture Assets are operated
as competitively independent, economically viable and ongoing
businesses; (b) they will remain independent and uninfluenced by
defendants or the consummation of the transaction; and (c) competition
is maintained during the pendency of the ordered divestiture.
Plaintiffs and defendants have stipulated that the proposed Final
Judgment may be entered after compliance with the APPA. Entry of the
proposed Final Judgment would terminate this action, except that the
Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof. Defendants have also stipulated that they will comply with the
terms of the Preservation of Assets Order and the proposed Final
Judgment from the date of signing of the Preservation of Assets
Stipulation, pending entry of the proposed Final Judgment by the Court
and the required divestiture. Should the Court decline to enter the
proposed Final Judgment, defendants have also committed to continue to
abide by its requirements and those of the Preservation of Assets Order
until the expiration of time for appeal.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
ALLTEL, with headquarters in Little Rock, Arkansas, is a
corporation organized and existing under the laws of
[[Page 55024]]
the state of Delaware. ALLTEL is the fifth largest provider of mobile
wireless voice and data services in the United States by number of
subscribers; it serves approximately 11 million customers. It provides
mobile wireless telecommunications services in 233 rural service areas
and 116 metropolitan statistical areas located within 35 states and
roaming services to other mobile wireless providers who use CDMA, TDMA
and GSM technology in these areas. In 2005, ALLTEL earned wireless
revenues of approximately $6.572 billion.
Midwest Wireless, with headquarters in Mankato, Minnesota, is a
privately held Delaware limited liability company. Midwest Wireless
provides wireless service in 14 rural service areas and one
metropolitan statistical area located in Minnesota, Iowa and Wisconsin
and has approximately 440,000 customers. In 2004, Midwest Wireless
earned approximately $264 million in revenues.
Pursuant to a Transaction Agreement dated November 17, 2005, ALLTEL
will acquire Midwest Wireless for $1.075 billion in cash. If this
transaction is consummated, ALLTEL and Midwest Wireless combined would
have approximately 11.5 million subscribers, with $7.8 billion in
revenues and operations in 35 states.
The proposed transaction, as initially agreed to by defendants,
would lessen competition substantially for mobile wireless
telecommunications services in four markets. This acquisition is the
subject of the Complaint and proposed Final Judgment filed by
plaintiffs.
B. Mobile Wireless Telecommunications Services Industry
Mobile wireless telecommunications services allow customers to make
and receive telephone calls and use data services using radio
transmissions without being confined to a small area during the call or
data session, and without the need for unobstructed line-of-sight to
the radio tower. This mobility is highly prized by customers, as
demonstrated by the more than 180 million people in the United States
who own mobile wireless telephones. In 2005, revenues for the sale of
mobile wireless telecommunications services in the United States were
over $113 billion. To provide these services, mobile wireless
telecommunications services providers must acquire adequate and
appropriate spectrum, deploy an extensive network of switches, radio
transmitters, and receivers, and interconnect this network with those
of local and long-distance wireline telecommunications providers and
other mobile wireless telecommunications services providers.
The first wireless voice systems were based on analog technology,
now referred to as first-generation or ``IG'' technology. These analog
systems were launched after the FCC issued the first licenses for
mobile wireless telephone service: two cellular licenses (A-block and
B-block) in each geographic area in the early to mid-1980s. The
licenses are in the 800 MHz range of the radio spectrum, each license
consists of 25 MHz of spectrum, and they are issued for each
Metropolitan Statistical Area (``MSA'') and Rural Service Area
(``RSA'') (collectively, ``Cellular Marketing Areas'' or ``CMAs''),
with a total of 734 CMAs covering the entire United States. In 1982,
one of the licenses was issued to the incumbent local exchange carrier
in the market, and the other was issued by lottery to someone other
than the incumbent.
In 1995, the FCC allocated and subsequently issued licenses for
additional spectrum for the provision of Personal Communications
Services (``PCS''), a category of services that includes mobile
wireless telecommunications services comparable to those offered by
cellular licensees. These licenses are in the 1.9 GHz range of the
radio spectrum and are divided into six blocks: A, B, and C, which
consist of 30 MHz each; and D, E, and F, which consist of 10 MHz each.
Geographically, the A and B-block 30 MHz licenses are issued by Major
Trading Areas (``MTAs''), and C, D, E, and F-block licenses are issued
by Basic Trading Areas (``BTAs''), several of which comprise each MTA.
MTAs and BTAs do not generally correspond to MSAs and RSAs. With the
introduction of the PCS licenses, both cellular and PCS licensees began
offering digital services, thereby increasing capacity, shrinking
handsets, and extending battery life. In 1996, one provider, a
specialized mobile radio (``SMR'' or ``dispatch'') spectrum licensee,
began to use its SMR spectrum to offer mobile wireless
telecommunications services comparable to those offered by other mobile
wireless telecommunications services providers, in conjunction with its
dispatch, or ``push-to-talk,'' service.
Today, more than 99% of the U.S. population lives in counties where
mobile wireless telecommunications services operators offer digital
service, and nearly all mobile wireless voice service has migrated to
second-generation or ``2G'' digital technologies: TDMA (time division
multiple access), GSM (global standard for mobile, a type of TDMA
standard used by all carriers in Europe), and CDMA (code division
multiple access). Mobile wireless telecommunications services providers
have chosen to build their networks on these incompatible technologies
and most have chosen CDMA or GSM, with TDMA having been orphaned by
equipment vendors. (The SMR providers use a fourth incompatible
technological standard better suited to the spectrum they own, and, as
SMR licensees, they have no obligation to support a specific technology
standard.) Even more advanced technologies (``3G'') have begun to be
deployed for voice and data. In all of the geographic areas alleged in
the complaint, ALLTEL and Midwest Wireless own the 25 MHz cellular
licenses and each own some additional PCS licenses. Cellular spectrum,
because of its propagation characteristics, is more efficient to use in
serving rural areas.
C. The Competitive Effects of the Transaction on Mobile Wireless
Telecommunications Services
ALLTEL's proposed acquisition of Midwest Wireless will
substantially lessen competition in mobile wireless telecommunications
services in four relevant geographic areas. Mobile wireless
telecommunications services include both voice and data services
provided over a radio network and allow customers to maintain their
telephone calls or data sessions without wires, such as when traveling.
Fixed wireless services and other wireless services that have a limited
range (e.g., Wi-Fi) do not offer a viable alternative to mobile
wireless telecommunications services primarily because customers using
these services cannot maintain a call or data session while moving from
one location to another.
Most customers use mobile wireless telecommunications services in
close proximity to their workplaces and homes. Thus, customers
purchasing mobile wireless telecommunications services choose among
mobile wireless telecommunications services providers that offer
services where they are located and travel on a regular basis: home,
work, other areas they commonly visit, and areas in between. The number
and identity of mobile wireless telecommunications services providers
varies from geographic area to geographic area, along with the quality
of their services and the breadth of their geographic coverage, all of
which are significant factors in customers' purchasing decisions.
Mobile wireless telecommunications services providers can and do offer
different promotions, discounts, calling plans, and equipment subsidies
in different geographic areas,
[[Page 55025]]
effectively varying the actual price for customers by geographic area.
The relevant geographic markets for mobile wireless
telecommunications services are, therefore, local in nature. The FCC
has licensed a limited number of mobile wireless telecommunications
services providers in these and other geographic areas based upon the
availability of radio spectrum. These FCC spectrum licensing areas
often represent the core of the business and social sphere where
customers face the same competitive choices for mobile wireless
telecommunications services. Although not all FCC spectrum licensing
areas are relevant geographic areas for the purpose of analyzing the
antitrust impact of this transaction, the FCC spectrum licensing areas
that encompass the four geographic areas of concern in this transaction
are where consumers in these communities principally use their mobile
wireless telecommunications services. As described in the Complaint,
the relevant geographic markets where the transaction will
substantially lessen competition for mobile wireless telecommunications
services are represented by the following FCC spectrum licensing areas
which are all RSAs in southern Minnesota: Minnesota RSA-7 (CMA 488),
Minnesota RSA-8 (CMA 489), Minnesota RSA-9 (CMA 490), and Minnesota
RSA-10 (CMA 491). These four RSAs include the counties of Blue Earth,
Brown, Chippewa, Cottonwood, Fairbault, Freeborn, Jackson, Kandiyohi,
Lac qui Parle, Le Sueuer, Lincoln, Lyon, Martin, McLeod, Meeker,
Murray, Nicollet, Nobles, Pipestone, Redwood, Renville, Rice, Rock,
Sibley, Steele, Waseca, Watowan and Yellow Medicine.
The four geographic markets of concern for mobile wireless
telecommunications services were identified by a fact-specific, market-
by-market analysis that included consideration of, but was not limited
to, the following factors: The number of mobile wireless
telecommunications services providers and their competitive strengths
and weaknesses; ALLTEL's and Midwest Wireless's market shares along
with those of the other providers; whether additional spectrum is or is
likely soon to be available; whether any providers are limited by
insufficient spectrum or other factors in their ability to add new
customers; the concentration of the market, and the breadth and depth
of coverage by different providers in each market; and the likelihood
that any provider would expand its existing coverage.
ALLTEL and Midwest Wireless both own businesses that offer mobile
wireless telecommunications services in the four relevant geographic
areas. The companies' combined market shares for mobile wireless
telecommunications services in the relevant markets as measured in
terms of subscribers range from over 60% to nearly 95%. In each
relevant geographic market, Midwest Wireless has the largest market
share, and, in all but one RSA, ALLTEL is the second-largest mobile
wireless telecommunications services provider. In all of the relevant
geographic markets, ALLTEL and Midwest Wireless own the only 800 MHz
band cellular spectrum licenses which are more efficient in serving
rural areas than 1900 MHz band PCS spectrum. As a result of holding the
cellular spectrum licenses and being early entrants into these markets,
ALLTEL's and Midwest Wireless's networks provide greater depth and
breadth of coverage than their competitors, which are operating on PCS
spectrum in the relevant geographic markets, and thus are more
attractive to consumers.
In addition, mobile wireless telecommunications services providers
with partial coverage in a geographic area do not aggressively market
their services in this location because potential customers would use
their wireless telephones primarily in places where these providers
have no network. In theory, these less built-out providers could
service residents of these rural areas through roaming agreements but,
as a practical matter, when service is provided on another carrier's
network, the providers would have to pay roaming charges to, and rely
on, that carrier to maintain the quality of the network. Because of
these constraints, the other providers who own partially built-out
networks in the four geographic areas are reluctant to market their
services to rural residents of these areas. Therefore, ALLTEL and
Midwest Wireless are likely closer substitutes for each other than the
other mobile wireless telecommunications services providers in the
relevant geographic markets. Additionally, postmerger in these markets,
there will be insufficient remaining competitors, with the type of
coverage desired by customers, and the ability to compete effectively
to defeat a small, but significant price increase by the merged firm.
The relevant geographic markets for mobile wireless
telecommunications services are highly concentrated. As measured by the
Herfindahl-Hirschman Index (``HHI''), which is commonly employed in
merger analysis and is defined and explained in Appendix A to the
Complaint, concentration in these markets ranges from over 3600 to more
than 5600, which is well above the 1800 threshold at which the
Department considers a market to be highly concentrated. After ALLTEL's
proposed acquisition of Midwest Wireless is consummated, the HHIs in
the relevant geographic markets will range from over 4700 to over 9100,
with increases in the HHI as a result of the merger ranging from over
1000 to over 4100.
Competition between ALLTEL and Midwest Wireless in the relevant
geographic markets has resulted in lower prices and higher quality in
mobile wireless telecommunications services than would otherwise have
existed in these geographic markets. If ALLTEL's proposed acquisition
of Midwest Wireless is consummated, the competition between ALLTEL and
Midwest Wireless in mobile wireless telecommunications services will be
eliminated in these markets and the relevant geographic markets for
mobile wireless telecommunications services will become substantially
more concentrated. As a result, the loss of competition between ALLTEL
and Midwest Wireless increases the likelihood of unilateral actions by
the merged firm in the relevant geographic markets to increase prices,
diminish the quality or quantity of services provided, and refrain from
or delay making investments in network improvements.
Entry by a new mobile wireless telecommunications services provider
in the relevant geographic markets would be difficult, time-consuming,
and expensive, requiring the acquisition of spectrum licenses and the
build-out of a network. Expansion by providers who hold spectrum in
these areas and are only partially built-out is also unlikely as the
relevant geographic markets are rural service areas where the combined
firm would own all of the available 800 MHz spectrum. Due to
propagation characteristics of 800 MHz cellular spectrum and 1900 MHz
PCS spectrum, the 800 MHz signals can cover a substantially broader
area than the 1900 MHz signals. The estimated coverage advantage of the
800 MHz spectrum in rural areas ranges from two to as much as five
times greater than PCS. In rural markets, this difference results in
higher build-out costs for PCS networks than for cellular networks. The
high costs of constructing PCS networks in rural markets combined with
the relatively low population density makes it less likely that
carriers that own PCS spectrum would build out in the relevant
geographic markets. Therefore, new entry in response to a small but
significant price increase for mobile wireless telecommunications
services by the merged firm in the relevant
[[Page 55026]]
geographic markets would not be timely, likely, or sufficient to thwart
the competitive harm that would result from ALLTEL's proposed
acquisition of Midwest Wireless.
For these reasons, plaintiffs concluded that ALLTEL's proposed
acquisition of Midwest Wireless will likely substantially lessen
competition, in violation of Section 7 of the Clayton Act, in the
provision of mobile wireless telecommunications services in the
relevant geographic markets.
III. Explanation of the Proposed Final Judgment
The divestiture requirements of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in mobile
wireless telecommunications services in the four geographic markets of
concern. The proposed Final Judgment requires defendants, within 120
days after the filing of the Complaint, or 5 days after notice of the
entry of the Final Judgment by the Court, whichever is later, to divest
the Divestiture Assets. The Divestiture Assets are essentially ALLTEL's
entire mobile wireless telecommunications services business and 800 MHz
cellular spectrum in the four markets where ALLTEL and Midwest Wireless
are each other's closest competitors for mobile wireless
telecommunications services. These assets must be divested in such a
way as to satisfy plaintiff United States in its sole discretion upon
consultation with plaintiff Minnesota, that they will be operated by
the purchaser as a viable, ongoing business that can compete
effectively in the relevant market. Defendants must take all reasonable
steps necessary to accomplish the divestitures quickly and shall
cooperate with prospective purchasers.
The merged firm may retain ALLTEL's PCS wireless spectrum in the
four geographic areas and ALLTEL's GSM roaming business, including GSM
roaming contracts and equipment. ALLTEL's PCS spectrum is used
primarily to provide roaming services to other providers who use GSM
technology. Midwest Wireless does not currently provide GSM roaming and
therefore the proposed acquisition will not lessen competition in
providing these services. In requiring divestitures, plaintiffs seek to
make certain that the potential buyer acquires all the assets it may
need to be a viable competitor and replace the competition lost by the
merger. The 25 MHz of cellular spectrum that must be divested will
support the operation and expansion of the mobile wireless
telecommunications services businesses being divested, allowing the
buyer to be a viable competitor to the merged entity.
The proposed Final Judgment requires that the Divestiture Assets be
divested to a single acquirer who, as a result, will be able to supply
service to customers that require mobile wireless telecommunications
service throughout southern rural Minnesota in the same way that ALLTEL
is currently able to provide that service. This provision resolves
concerns about the loss of competition for customers that demand
coverage over a combination of Minnesota FCC licensing areas, in
addition to the concerns due to eliminating competition within each
licensing area.
A. Timing of Divestitures
In antitrust cases involving mergers or joint ventures in which
plaintiff United States seeks a divestiture remedy, it requires
completion of the divestitures within the shortest time period
reasonable under the circumstances. In this case, Section IV.A of the
proposed Final Judgment requires the divestiture of the Divestiture
Assets, within 120 days after the filing of the Complaint, or 5 days
after notice of the entry of the Final Judgment by the Court, whichever
is later. Plaintiff United States in its sole discretion upon
consultation with plaintiff Minnesota may extend the date for
divestiture of the Divestiture Assets by up to 60 days. Because the
FCC's approval is required for the transfer of the wireless licenses to
a purchaser, Section IV.A provides that if applications for transfer of
a wireless license have been filed with the FCC, but the FCC has not
acted dispositively before the end of the required divestiture period,
the period for divestiture of those assets shall be extended until 5
days after the FCC has acted.
The divestiture timing provisions of the proposed Final Judgment
will ensure that the divestitures are carried out in a timely manner,
and at the same time will permit defendants an adequate opportunity to
accomplish the divestitures through a fair and orderly process. Even if
all Divestiture Assets have not been divested upon consummation of the
transaction, there should be no adverse impact on competition given the
limited duration of the period of common ownership and the detailed
requirements of the Preservation of Assets Order.
B. Use of a Management Trustee
The Preservation of Assets Stipulation and the Preservation of
Assets Order, submitted simultaneously with this Competitive Impact
Statement, ensures that, prior to divestiture, the Divestiture Assets
are maintained and remain an economically viable ongoing business
concern. The Divestiture Assets will remain preserved, independent and
uninfluenced by defendants, so that competition is maintained during
the pendency of the ordered divestiture.
The Preservation of Assets Order appoints a management trustee
selected by plaintiff United States upon consultation with plaintiff
Minnesota to oversee the Divestiture Assets in the relevant geographic
markets. The appointment of a management trustee in this unique
situation is required because the Divestiture Assets are not
independent facilities that can be held separate and operated as
standalone units by the merged firm. Rather, the Divestiture Assets are
an integral part of a larger network, and to maintain their competitive
viability and economic value, they should remain part of that network
during the divestiture period. To insure that these assets are
preserved and supported by defendants during this period, yet run
independently, a management trustee is necessary to oversee the
continuing relationship between defendants and these assets. The
management trustee will have the power to operate the Divestiture
Assets in the ordinary course of business, so that they will remain
preserved, independent, and uninfluenced by defendants, and so that the
Divestiture Assets remain an ongoing and economically viable competitor
to defendants and to other mobile wireless telecommunications services
providers. The management trustee will preserve the confidentiality of
competitively sensitive marketing, pricing, and sales information;
insure defendants' compliance with the Preservation of Assets Order and
the proposed Final Judgment; and maximize the value of the Divestiture
Assets so as to permit expeditious divestiture in a manner consistent
with the proposed Final Judgment.
The Preservation of Assets Order provides that defendants will pay
all costs and expenses of the management trustee, including the cost of
consultants, accountants, attorneys, and other representatives and
assistants hired by the management trustee as are reasonably necessary
to carry out his or her duties and responsibilities. After his or her
appointment becomes effective, the management trustee will file monthly
reports with plaintiffs setting forth the efforts to accomplish the
goals of the Preservation of Assets Order and the proposed Final
Judgment and the extent to which defendants are fulfilling their
responsibilities. Finally, the
[[Page 55027]]
management trustee may become the divestiture trustee, pursuant to the
provisions of Section V of the proposed Final Judgment.
C. Use of a Divestiture Trustee
In the event that defendants do not accomplish the divestiture
within the periods prescribed in the proposed Final Judgment, the Final
Judgment provides that the Court will appoint a trustee selected by
plaintiff United States upon consultation with plaintiff Minnesota to
effect the divestitures. As part of this divestiture, defendants must
relinquish any direct or indirect financial ownership interests and any
direct or indirect role in management or participation in control.
Pursuant to Section V of the proposed Final Judgment, the divestiture
trustee will own and control the Divestiture Assets until they are sold
to a final purchaser, subject to safeguards to prevent defendants from
influencing their operation.
Section V details the requirements for the establishment of the
divestiture trust, the selection and compensation of the divestiture
trustee, the responsibilities of the divestiture trustee in connection
with the divestiture and operation of the Divestiture Assets, and the
termination of the divestiture trust. The divestiture trustee will have
the obligation and the sole responsibility, under Section V.D, for the
divestiture of any transferred Divestiture Assets. The divestiture
trustee has the authority to accomplish divestitures at the earliest
possible time and ``at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee.'' In
addition, to insure that the divestiture trustee can promptly locate
and divest to an acceptable purchaser, plaintiff United States, in its
sole discretion upon consultation with plaintiff Minnesota, may require
defendants to include additional assets, or allow defendants to
substitute substantially similar assets, which substantially relate to
the Divestiture Assets to be divested by the divestiture trustee.
The divestiture trustee will not only have responsibility for sale
of the Divestiture Assets, but will also be the authorized holder of
the wireless licenses, with full responsibility for the operations,
marketing, and sales of the wireless businesses to be divested, and
will not be subject to any control or direction by defendants.
Defendants will no longer have any role in the ownership, operation, or
management of the Divestiture Assets following consummation of the
transaction, as provided by Section V, other than the right to receive
the proceeds of the sale, and certain obligations to provide support to
the Divestiture Assets, and cooperate with the divestiture trustee in
order to complete the divestiture, as indicated in Section V.L and in
the Preservation of Assets Order.
The proposed Final Judgment provides that defendants will pay all
costs and expenses of the divestiture trustee. The divestiture
trustee's commission will be structured, under Section V.G of the
proposed Final Judgment, so as to provide an incentive for the
divestiture trustee based on the price obtained and the speed with
which the divestitures are accomplished. After his or her appointment
becomes effective, the divestiture trustee will file monthly reports
with the Court and plaintiffs setting forth his or her efforts to
accomplish the divestitures. Section V.J requires the divestiture
trustee to divest the Divestiture Assets to an acceptable purchaser no
later than six months after the assets are transferred to the
divestiture trustee. At the end of six months, if all divestitures have
not been accomplished, the trustee and plaintiff United States upon
consultation with plaintiff Minnesota, will make recommendations to the
Court, which shall enter such orders as appropriate in order to carry
out the purpose of the trust, including extending the trust or term of
the trustee's appointment.
The divestiture provisions of the proposed Final Judgment will
eliminate the anticompetitive effects of the transaction in the
provision of mobile wireless telecommunications services. The
divestitures of the Divestiture Assets will preserve competition in
mobile wireless telecommunications services by maintaining an
independent and economically viable competitor in the relevant
geographic markets.
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 effect in any
subsequent private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
Plaintiffs and defendants have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that plaintiff United States 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 plaintiff United States 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. All comments received during this
period will be considered by the Department of Justice, which remains
free to withdraw its consent to the proposed Final Judgment at any time
prior to the Court's entry of judgment. The comments and the response
of plaintiff United States will be filed with the Court and published
in the Federal Register.
Written comments should be submitted to: Nancy M. Goodman, Chief,
Telecommunications and Media Enforcement Section, Antitrust Division,
U.S. Department of Justice, 1401 H Street, NW., Suite 8000, Washington,
DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and 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
Plaintiff United States considered, as an alternative to the
proposed Final Judgment, a full trial on the merits against defendants.
Plaintiff United States could have continued the litigation and sought
preliminary and permanent injunctions against ALLTEL's acquisition of
Midwest Wireless. Plaintiff United States is satisfied, however, that
the divestiture of assets and other relief described in the proposed
Final Judgment will preserve competition for the provision of mobile
wireless telecommunications services in the relevant markets and, thus,
would achieve all or substantially all of the relief the government
would
[[Page 55028]]
have obtained through litigation, but without the time and expense of a
trial.
VII. Standard of Review Under the APPA for the 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.'' 15 U.S.C.
16(e)(1). In making that determination, the Court shall consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, 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)(l)(A) & (B).\1\ As the United States Court of Appeals
for the District of Columbia Circuit has held, the APPA 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 consent judgment is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the consent judgment
may positively harm third parties. See United States v. Microsoft
Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
---------------------------------------------------------------------------
\1\ In 2004, Congress amended the APPA to ensure that courts
take into account the above-quoted list of relevant factors when
making a public interest determination. Compare 15 U.S.C. 16(e)
(2004), with 15 U.S.C. 16 (e)(1) (2006) (substituting ``shall'' for
``may'' in directing relevant factors for courts to consider and
amending list of factors to focus on competitive considerations and
to address potentially ambiguous judgment terms). On the points
discussed herein, the 2004 amendments did not alter the substance of
the Tunney Act, and the pre-2004 precedents cited below remain
applicable.
---------------------------------------------------------------------------
With respect to the adequacy of the relief secured by the decree, a
court may not ``engage in an unrestricted evaluation of what relief
would best serve the public.'' United States v. BNS, Inc., 858 F.2d
456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648
F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62.
Courts have held 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).\2\ In
making its public interest determination, a district court must accord
due respect to the government's prediction as to the effect of proposed
remedies, its perception of the market structure, and its views of the
nature of the case. United States v. Archer-Daniels-Midland Co., 272 F.
Supp. 2d 1, 6 (D.D.C. 2003).
---------------------------------------------------------------------------
\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (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' '').
---------------------------------------------------------------------------
Court approval of a final judgment requires a standard more
flexible and less strict than the standard required for a funding 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. AT&T Co., 552 F. Supp. 131, 151
(D.D.C. 1982) (citations omitted) (quoting Gillette Co., 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 did not pursue. Id.
at 1459-60.
In its 2004 amendments to the Tunney Act, Congress made clear its
intent to preserve the practical benefits of utilizing consent decrees
in antitrust enforcement, adding the unambiguous instruction
``[n]othing in this section shall be construed to require the court to
conduct an evidentiary hearing or to require the court to permit anyone
to intervene.'' 15 U.S.C. Sec. 16(e)(2). This language codified the
intent of the original 1974 statute, expressed by Senator Tunney in the
legislative history: ``The 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). Rather:
Absent a showing of corrupt failure of the government to
discharge its duty, the Court, in making its public interest
finding, should * * * carefully consider the explanations of the
government in the competitive impact statement and its responses to
comments in order to determine whether those explanations are
reasonable under the circumstances.
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977).
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by plaintiff United States in
formulating the proposed Final Judgment.
Dated: September 7, 2006.
Respectfully submitted,
Rachel K. Paulose,
United States Attorney.
Perry F. Sekus (No. 0309412),
Assistant United States Attorney, 600 United States Courthouse, 300
South Fourth Street, Minneapolis, MN 55415, (612) 664-5600,
Facsimile: (612) 664-5788.
Hillary B. Burchuk,
Lawrence M. Frankel,
Attorneys, Telecommunications & Media, Enforcement Section,
Antitrust Division.
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Suite 8000, Washington, DC 20530, (202) 514-5621, Facsimile:
(202) 514-6381.
[FR Doc. 06-7766 Filed 9-19-06; 8:45 am]
BILLING CODE 4410-11-M