In re: High-Tech Employee Antitrust Litigation

Filing 93

DECLARATION of Dean M. Harvey in Opposition to #79 MOTION to Dismiss Consolidated Amended Complaint filed byMichael Devine, Mark Fichtner, Siddharth Hariharan, Brandon Marshall, Daniel Stover. (Attachments: #1 Exhibit A, #2 Exhibit B, #3 Exhibit C, #4 Exhibit D, #5 Exhibit E, #6 Exhibit F)(Related document(s) #79 ) (Harvey, Dean) (Filed on 11/4/2011)

Exhibit E

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA
U.S. Department of Justice
Antitrust Division
450 Fifth Street, N.W., Suite 7100
Washington, DC 20530,
Plaintiff,
v.
LUCASFILM LTD.
1110 Gorgas Avenue
San Francisco, CA 94129,
Defendant.

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
The United States brought this lawsuit against Defendant Lucasfilm Ltd. (“Lucasfilm”)
on December 21, 2010, to remedy a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
The Complaint alleges that Lucasfilm entered an agreement with Pixar, pursuant to which each
agreed to restrict certain employee recruiting practices. The effect of this agreement was to
reduce competition for highly-skilled digital animators and other employees, diminish potential
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employment opportunities for those same employees, and interfere in the proper functioning of
the price-setting mechanism that would otherwise have prevailed. The agreement is a naked
restraint of trade and violates Section 1 of the Sherman Act, 15 U.S.C. § 1.
At the same time the Complaint was filed, the United States also filed a proposed Final
Judgment, which would remedy the violation by having the Court declare the agreement illegal,
enjoin Lucasfilm from enforcing any such agreements currently in effect, and prohibit Lucasfilm
from entering similar agreements in the future. The United States has sought a similar proposed
Final Judgment against Pixar in a separate civil action, United States v. Adobe Systems, Inc.,
No. 1:10-cv-01629, 75 Federal Register 60820, 60828-30 (D.D.C. filed Sept. 24, 2010). The
United States and Lucasfilm have stipulated that the proposed Final Judgment may be entered
after compliance with the APPA, unless the United States withdraws its consent. Entry of the
proposed Final Judgment would terminate this action, except that this Court would retain
jurisdiction to construe, modify, and enforce the proposed Final Judgment and to punish
violations thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE
ALLEGED VIOLATION OF THE ANTITRUST LAWS
Lucasfilm and Pixar are rival digital animation studios. Beginning no later than January
2005, Lucasfilm and Pixar agreed to a three-part protocol that restricted recruiting of each other’s
employees. First, Lucasfilm and Pixar agreed they would not cold call each other’s employees.
Cold calling involves communicating directly in any manner (including orally, in writing,
telephonically, or electronically) with another firm’s employee who has not otherwise applied for
a job opening. Second, they agreed to notify each other when making an offer to an employee of

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the other firm. Third, they agreed that, when offering a position to the other company’s
employee, neither would counteroffer above the initial offer.
The protocol covered all digital animators and other employees of both firms and was not
limited by geography, job function, product group, or time period. Senior executives at the two
firms agreed on the protocol through direct and explicit communications. In furtherance of this
agreement, Pixar drafted the terms of the agreement with Lucasfilm and communicated those
written terms to Lucasfilm. Both firms communicated the agreement to management and select
employees with hiring or recruiting responsibilities. Twice in 2007, Pixar complained to
Lucasfilm about recruiting efforts Lucasfilm had made. Complaints about breaches of the
agreement led the two firms to alter their conduct going forward to conform to the agreement.
Lucasfilm’s and Pixar’s agreed-upon protocol disrupted the competitive market forces for
employee talent. It eliminated a significant form of competition to attract digital animation
employees and other employees covered by the agreement. Overall, it substantially diminished
competition to the detriment of the affected employees who likely were deprived of information
and access to better job opportunities.
The agreement was a naked restraint of trade that was per se unlawful under Section 1 of
the Sherman Act, 15 U.S.C. § 1.
III. THE AGREEMENT WAS A NAKED RESTRAINT AND NOT ANCILLARY
TO ACHIEVING LEGITIMATE BUSINESS PURPOSES
Section 1 of the Sherman Act outlaws “[e]very contract, combination in the form of trust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States.”
15 U.S.C. § 1. The Sherman Act is designed to ensure “free and unfettered competition as the

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rule of trade. It rests on the premise that the unrestrained interaction of competitive forces will
yield the best allocation of our economic resources, the lowest prices, the highest quality and the
greatest material progress . . . .” National Collegiate Athletic Ass’n v. Board of Regents of Univ.
of Okla., 468 U.S. 85, 104 n.27 (1984) (quoting Northern Pac. Ry. v. United States, 356 U.S. 1,
4-5 (1958)).
The law has long recognized that “certain agreements or practices which because of their
pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to
be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have
caused or the business excuse for their use.” Northern Pac. Ry., 356 U.S. at 545; accord,
Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 646 n.9 (1980). Such naked restraints of
competition among horizontal competitors (i.e., agreements that have a pernicious effect on
competition with no redeeming virtue) are deemed per se unlawful.
The United States has previously challenged restraints on employment as per se illegal.
In September 2010, the United States filed suit charging six high technology firms with a per se
violation of Section 1 for entering bilateral agreements to prohibit each firm from cold calling the
other firm’s employees. United States v. Adobe Systems, Inc., No. 1:10-cv-01629, Complaint, 75
Federal Register at 60822 (D.D.C. filed Sept. 24, 2010); Competitive Impact Statement, 75
Federal Register at 60823 (D.D.C. filed Sept. 24, 2010).
The restraint challenged here is broader than the no cold call restraints challenged in
United States v. Adobe Systems, Inc. The prohibition on counteroffers by non-employing firms
renders the Lucasfilm-Pixar agreement, taken as a whole, more pernicious than an agreement to
refrain from cold-calling, and is per se unlawful. See National Soc'y of Prof. Engineers v. United
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States, 435 U.S. 679, 695 (1978); Harkins Amusement Enterprises, Inc. v. General Cinema
Corp., 850 F.2d 477, 487 (9th Cir. 1988).
Prior to United States v. Adobe Systems, Inc., the United States brought a per se challenge
in 1996 to employment restraints contained within guidelines designed to curb competition
between residency programs for senior medical students and residents of other programs.
Members of the Association of Family Practice Residency Directors had agreed not to directly
solicit residents from each other, conduct recognized as “per se unlawful” under Section 1.
United States v. Association of Family Practice Residency Doctors, No. 96-575-CV-W-2,
Complaint at 6 (W.D.Mo. May 28, 1996); Competitive Impact Statement, 61 Federal Register
28891, 28894 (W.D.Mo. May 28, 1996). The Court entered an agreed-upon Final Judgment,
enjoining the association from restraining competition among residency programs for residents,
including enjoining all prohibitions on direct and indirect solicitation of residents from other
programs. 1996-2 Trade Cases ¶ 71,533, 28894 (W.D.Mo. Aug. 15, 1996).
In analogous circumstances, the Sixth Circuit has held that an agreement among
competitors not to solicit one another's customers was a per se violation of the antitrust laws.
U.S. v. Cooperative Theaters of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988). In that case, two
movie theater booking agents agreed to refrain from actively soliciting each other's customers.
Despite the defendants’ arguments that they “remained free to accept unsolicited business from
their competitors’ customers,” id. (emphasis in original), the Sixth Circuit found their
“no-solicitation agreement” was “undeniably a type of customer allocation scheme which courts
have often condemned in the past as a per se violation of the Sherman Act.” Id. at 1373.
Antitrust analysis of downstream customer-related restraints applies equally to upstream
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monopsony restraints on employment opportunities. In 1991, the Antitrust Division brought an
action against conspirators who competed to procure billboard leases and who had agreed to
refrain from bidding on each other’s former leases for a year after the space was lost or
abandoned by the other conspirator. United States v. Brown, 936 F.2d 1042 (9th Cir. 1991)
(affirming jury verdict convicting defendants of conspiring to restrain trade in violation of 15
U.S.C. §1). The agreement was limited to an input market (the procurement of billboard leases)
and did not extend to downstream sales (in which the parties also competed). In affirming
defendants’ convictions, the appellate court held that the agreement was per se unlawful:
The agreement restricted each company's ability to compete for the other's
billboard sites. It clearly allocated markets between the two billboard companies.
A market allocation agreement between two companies at the same market level
is a classic per se antitrust violation.
Id. at 1045.
Allocation agreements cannot be distinguished from one another based solely on whether
they involve input or output markets. Anticompetitive agreements in both input and output
markets create allocative inefficiencies.1 Hence, naked restraints on cold calling customers,
suppliers, or employees are similarly per se unlawful.
Still, an agreement that would normally be condemned as a per se unlawful restraint on
competition may nonetheless be lawful if it is ancillary to a legitimate procompetitive venture
and reasonably necessary to achieve the procompetitive benefits of the collaboration. Ancillary
restraints therefore are not per se unlawful, but rather evaluated under the rule of reason, which

1

See Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312, 321
(2007) (“Predatory-pricing and predatory-bidding are analytically similar. This similarity results from
the close theoretical connection between monopoly and monopsony.”)

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balances a restraint’s procompetitive benefits against its anticompetitive effects.2 To be
considered “ancillary” under established antitrust law, however, the restraint must be a necessary
or intrinsic part of the procompetitive collaboration.3 Restraints that are broader than reasonably
necessary to achieve the efficiencies from a business collaboration are not ancillary and are
properly treated as per se unlawful.
Although Lucasfilm and Pixar have at times engaged in legitimate collaborative projects,
the recruiting agreement into which they entered was not, under established antitrust law,
properly ancillary to those collaborations. The agreement was not tied to any specific
collaboration. The agreement extended to all employees at the firms, regardless of any

2

See generally Department of Justice, Antitrust Division, and Federal Trade Commission,
Antitrust Guidelines for Collaborations Among Competitors § 1.2 (2000) (“Collaboration Guidelines”).
See also Major League Baseball v. Salvino, 542 F.3d 290, 339 (2d Cir. 2008) (Sotomayor, J., concurring)
(“a per se or quick look approach may apply . . . where a particular restraint is not reasonably necessary
to achieve any of the efficiency-enhancing benefits of a joint venture and serves only as a naked restraint
against competition.”); Dagher v. Saudi Refining, Inc., 369 F.3d 1108, 1121 (9th Cir. 2004) (“reasonably
necessary to further the legitimate aims of the joint venture”); rev’d on other grounds sub nom. Texaco v.
Dagher, 547 U.S. 1, 8 (2006); Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 227
(D.C. Cir. 1986) (“the restraints it imposes are reasonably necessary to the business it is authorized to
conduct”); In re Polygram Holdings., Inc., 2003 WL 21770765 (F.T.C. 2003) (parties must prove that
the restraint was “reasonably necessary” to permit them to achieve particular alleged efficiency), aff’d,
Polygram Holdings, Inc. v. F.T.C., 416 F.3d 29 (D.C. Cir. 2005).
3

See Rothery Storage & Van Co., 792 F.2d at 227 (national moving network in which the
participants shared physical resources, scheduling, training, and advertising resources, could forbid
contractors from free riding by using its equipment, uniforms, and trucks for business they were
conducting on their own); Salvino, 542 F.3d at 337 (Sotomayor, J., concurring) (Major League Baseball
teams created a formal joint venture to exclusively license, and share profits for, team trademarks,
resulting in “decreased transaction costs, lower enforcement and monitoring costs, and the ability to
one-stop shop. . . .” Such benefits “could not exist without the . . . agreements.”); Addamax v. Open
Software Found., 152 F.3d 48 (1st Cir. 1998) (computer manufacturers formed nonprofit joint research
and development venture to develop operating system; agreement on price to be paid for security
software that was used by joint venture was ancillary to effort to develop a new system). See also
Collaboration Guidelines at § 3.2 ( “[I]f the participants could achieve an equivalent or comparable
efficiency-enhancing integration through practical, significantly less restrictive means, then . . . the
agreement is not reasonably necessary.”).

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employee’s relationship to any collaboration. The agreement was not limited by geography, job
function, product group, or time period. The agreement was not reasonably necessary for any
collaboration and hence, not a legitimate ancillary restraint.
Lucasfilm’s agreement with Pixar is per se unlawful under Section 1 of the Sherman Act.
The two firms’ concerted behavior both reduced their ability to compete for employees and
disrupted the normal price-setting mechanisms that apply in the labor setting. The agreement is
facially anticompetitive because it eliminated a significant form of competition to attract digital
animators and other employees. Overall, it substantially diminished competition to the detriment
of the affected employees who likely were deprived of competitively important information and
access to better job opportunities.
IV. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The proposed Final Judgment sets forth (1) conduct in which Lucasfilm may not engage;
(2) conduct in which Lucasfilm may engage without violating the proposed Final Judgment;
(3) certain actions Lucasfilm is required to take to ensure compliance with the terms of the
proposed Final Judgment; and (4) oversight procedures the United States may use to ensure
compliance with the proposed Final Judgment. Section VI of the proposed Final Judgment
provides that these provisions will expire five years after entry of the proposed Final Judgment.
A.

Prohibited Conduct
The proposed Final Judgment is substantially similar to that proposed in United States v.

Adobe Systems, Inc., No. 1:10-cv-01629, Proposed Final Judgment, 75 Federal Register at
60828-30 (D.D.C. Sept. 24, 2010). Section IV of the proposed Final Judgment preserves
competition for employees by prohibiting Lucasfilm, and all other persons in active concert or
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participation with Lucasfilm with notice of the proposed Final Judgment, from agreeing, or
attempting to agree, with another person to refrain from cold calling, soliciting, recruiting, or
otherwise competing for employees of the other person. It also prohibits Lucasfilm from
requesting or pressuring another person to refrain from cold calling, soliciting, recruiting, or
otherwise competing for employees of the other person. These provisions prohibit agreements
not to make counteroffers and agreements to notify each other when making an offer to each
other’s employee.
B.

Conduct Not Prohibited
The Final Judgment does not prohibit all agreements related to employee solicitation and

recruitment. Section V makes clear that the proposed Final Judgment does not prohibit “no
direct solicitation provisions”4 that are reasonably necessary for, and thus ancillary to, legitimate
procompetitive collaborations.5 Such restraints remain subject to scrutiny under the rule of
reason.
Section V.A.1 does not prohibit no direct solicitation provisions contained in existing
and future employment or severance agreements with Lucasfilm’s employees. Narrowly tailored
no direct solicitation provisions are often included in severance agreements and rarely present
competition concerns. Sections V.A.2-5 also make clear that the proposed Final Judgment does

4

Section II.C. of the proposed Final Judgment defines "no direct solicitation provision" as "any
agreement, or part of an agreement, among two or more persons that restrains any person from cold
calling, soliciting, recruiting, or otherwise competing for employees of another person."
5

The Complaint alleges a violation of the Sherman Antitrust Act, 15 U.S.C. §1. The scope of
the Final Judgment is limited to violations of the federal antitrust laws. It prohibits certain conduct and
specifies other conduct that the Judgment would not prohibit. The Judgment does not address whether
any conduct it does not prohibit would be prohibited by other federal or state laws, including California
Business & Professions Code § 16600 (prohibiting firms from restraining employee movement).

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not prohibit no direct solicitation provisions reasonably necessary for:
1.

mergers or acquisitions (consummated or unconsummated), investments, or
divestitures, including due diligence related thereto;

2.

contracts with consultants or recipients of consulting services, auditors,
outsourcing vendors, recruiting agencies or providers of temporary employees or
contract workers;

3.

the settlement or compromise of legal disputes; and

4.

contracts with resellers or OEMs; contracts with certain providers or recipients of
services; or the function of a legitimate collaboration agreement, such as joint
development, technology integration, joint ventures, joint projects (including
teaming agreements), and the shared use of facilities.

Section V of the proposed Final Judgment contains additional requirements applicable to
no direct solicitation provisions contained in these types of contracts and collaboration
agreements. The proposed Final Judgment recognizes that Lucasfilm may sometimes enter
written or unwritten contracts and collaboration agreements and sets forth requirements that
recognize the different nature of written and unwritten contracts.
Thus, for written contracts, Section V.B of the proposed Final Judgment requires
Lucasfilm to: (1) identify, with specificity, the agreement to which the no direct solicitation
provision is ancillary; (2) narrowly tailor the no direct solicitation provision to affect only
employees who are anticipated to be directly involved in the arrangement; (3) identify with
reasonable specificity the employees who are subject to the no direct solicitation provision; (4)
include a specific termination date or event; and (5) sign the agreement, including any
modifications to the agreement.
If the no direct solicitation provision relates to an oral agreement, Section V.C of the
proposed Final Judgment requires Lucasfilm to maintain documents sufficient to show the terms
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of the no direct solicitation provision, including: (1) the specific agreement to which the no
direct solicitation provision is ancillary; (2) an identification, with reasonable specificity, of the
employees who are subject to the no direct solicitation provision; and (3) the no direct
solicitation provision’s specific termination date or event.6
The purpose of Sections V.B. and V.C. is to ensure that no direct solicitation provisions
related to Lucasfilm’s contracts with resellers, OEMs, and providers of services, and
collaborations with other companies, are reasonably necessary to the contract or collaboration. In
addition, the requirements set forth in Sections V.B and V.C of the proposed Final Judgment
provide the United States with the ability to monitor Lucasfilm’s compliance with the proposed
Final Judgment.
Lucasfilm has a large number of routine consulting and services agreements that contain
no direct solicitation provisions that may not comply with the terms of the proposed Final
Judgment. To avoid the unnecessary burden of identifying these existing contracts and
re-negotiating any no direct solicitation provisions, Section V.D of the proposed Final Judgment
provides that, subject to the conditions below, Lucasfilm shall not be required to modify or
conform existing no direct solicitation provisions included in consulting or services agreements
to the extent such provisions violate this Final Judgment. The Final Judgment further prohibits
Lucasfilm from enforcing any such existing no direct solicitation provision that would violate the
proposed Final Judgment.
Finally, Section V.E of the proposed Final Judgment provides that Lucasfilm is not

6

For example, Lucasfilm might document these requirements through electronic mail or in
memoranda that it will retain.

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prohibited from unilaterally adopting or maintaining a policy not to consider applications from
employees of another person, or not to solicit, cold call, recruit or hire employees of another
person, provided that Lucasfilm does not request or pressure another person to adopt, enforce, or
maintain such a policy.
C.

Required Conduct
Section VI of the proposed Final Judgment sets forth various mandatory procedures to

ensure Lucasfilm’s compliance with the proposed Final Judgment, including providing officers,
directors, human resource managers, and senior managers who supervise employee recruiting
with copies of the proposed Final Judgment and annual briefings about its terms. Section VI.A.5
requires Lucasfilm to provide its employees with reasonably accessible notice of the existence of
all agreements covered by Section V.A.5 and entered into by the company.
Under Section VI, Lucasfilm must file annually with the United States a statement
identifying any agreement covered by Section V.A.5., and describing any violation or potential
violation of the Final Judgment known to any officer, director, human resources manager, or
senior manager who supervises employee recruiting, solicitation, or hiring efforts. If one of these
persons learns of a violation or potential violation of the Judgment, Lucasfilm must take steps to
terminate or modify the activity to comply with the Judgment and maintain all documents related
to the activity.
D.

Compliance
To facilitate monitoring of Lucasfilm’s compliance with the proposed Final Judgment,

Section VII grants the United States access, upon reasonable notice, to Lucasfilm’s records and
documents relating to matters contained in the proposed Final Judgment. Lucasfilm must also
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make its employees available for interviews or depositions about such matters. Moreover, upon
request, Lucasfilm must answer interrogatories and prepare written reports relating to matters
contained in the proposed Final Judgment.
V. 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 Lucasfilm.
VI. PROCEDURES APPLICABLE FOR APPROVAL OR MODIFICATION
OF THE PROPOSED FINAL JUDGMENT
The United States and Lucasfilm have stipulated that the proposed Final Judgment may
be entered by the Court after compliance with the provisions of the APPA, provided that the
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 sixty (60) days preceding the effective date of the
proposed Final Judgment within which any person may submit to the United States written
comments regarding the proposed Final Judgment. Any person who wishes to comment should
do so within sixty (60) days of the date of publication of this Competitive Impact Statement in
the Federal Register, or the last date of publication in a newspaper of the summary of this

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Competitive Impact Statement, whichever is later. All comments received during this period will
be considered by the United States, 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 the United States will be filed with the Court and published in the Federal Register.
Written comments should be submitted to:
James J. Tierney
Chief, Networks & Technology Enforcement Section
Antitrust Division
United States Department of Justice
450 Fifth Street, NW, Suite 7100
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.
VII. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed Final Judgment, a full trial
on the merits against Lucasfilm. The United States is satisfied, however, that the relief contained
in the proposed Final Judgment will quickly establish, preserve, and ensure that employees can
benefit from competition between Lucasfilm and others. Thus, the proposed Final Judgment
would achieve all or substantially all of the relief the United States would have obtained through
litigation, but avoids the time, expense, and uncertainty of a full trial on the merits of the
Complaint.

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VIII. STANDARD OF REVIEW UNDER THE APPA
FOR PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA, requires that proposed consent judgments in
antitrust cases brought by the United States be subject to a sixty-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, in accordance with the
statute as amended in 2004, is required to consider:
(A)

the competitive impact of such judgment, including termination of alleged
violations, provisions for enforcement and modification, duration of relief
sought, anticipated effects of alternative remedies actually considered,
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)(1)(A) & (B). In considering these statutory factors, the Court’s inquiry is
necessarily a limited one as the United States is entitled to “broad discretion to settle with the
Defendant within the reaches of the public interest.” United States v. Microsoft Corp., 56 F.3d
1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC Commc’ns, Inc., 489 F. Supp.
2d 1 (D.D.C. 2007) (assessing public interest standard under the Tunney Act); United States v.
InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ¶ 76,736, 2009 U.S. Dist. LEXIS 84787, No. 08-1965
(JR), at *3 (D.D.C. Aug. 11, 2009) (noting that the court’s review of a consent judgment is
limited and only inquires “into whether the government’s determination that the proposed

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remedies will cure the antitrust violations alleged in the complaint was reasonable, and whether
the mechanism to enforce the final judgment are clear and manageable”).7
Under the APPA a court considers, among other things, the relationship between the
remedy secured and the specific allegations set forth in the United States’ complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are sufficient, and whether the
decree may positively harm third parties. See Microsoft, 56 F.3d at 1458-62. 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; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. 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.

7

The 2004 amendments substituted “shall” for “may” in directing relevant factors for a court to
consider and amended the list of factors to focus on competitive considerations and to address potentially
ambiguous judgment terms. Compare 15 U.S.C. § 16(e) (2004), with 15 U.S.C. § 16(e)(1) (2006); see
also SBC Commc’ns, 489 F. Supp. 2d at 11 (concluding that the 2004 amendments “effected minimal
changes” to Tunney Act review).

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Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).8 In determining whether a
proposed settlement is in the public interest, a district court “must accord deference to the
government’s predictions about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.” SBC Commc’ns, 489 F. Supp. 2d at 17; see
also Microsoft, 56 F.3d at 1461 (noting the need for courts to be “deferential to the government’s
predictions as to the effect of the proposed remedies”); United States v. Archer-Daniels-Midland
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant due respect to the
United States’ prediction as to the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case).
In addition, “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. American Tel. & Tel. Co., 552 F. Supp. 131,
151 (D.D.C. 1982) (citations omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713,
716 (D. Mass. 1975)), 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). To meet this
standard, the United States “need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.” SBC Commc’ns, 489 F. Supp. 2d at 17.

8

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.’”).

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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; see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20
(“[T]he ‘public interest’ is not to be measured by comparing the violations alleged in the
complaint against those the court believes could have, or even should have, been alleged.”).
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. Microsoft, 56 F.3d. at
1459-60. Courts “cannot look beyond the complaint in making the public interest determination
unless the complaint is drafted so narrowly as to make a mockery of judicial power.” SBC
Commc’ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve the practical benefits
of utilizing consent decrees in antitrust enforcement, adding the unambiguous instruction that
“[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. § 16(e)(2). This language
effectuates what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney
explained: “[t]he court is nowhere compelled to go to trial or to engage in extended proceedings
which might have the effect of vitiating the benefits of prompt and less costly settlement through
the consent decree process.” 119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney).
Rather, the procedure for the public interest determination is left to the discretion of the Court,
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with the recognition that the court’s “scope of review remains sharply proscribed by precedent
and the nature of Tunney Act proceedings.” SBC Commc’ns, 489 F. Supp. 2d at 11.9
IX. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the meaning of the APPA that
the United States considered in formulating the proposed Final Judgment.

9

See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the
“Tunney Act expressly allows the court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone”); United States v. Mid-Am. Dairymen,
Inc., 1977-1 Trade Cas. (CCH) ¶ 61,508, at 71,980 (W.D. Mo. 1977) (“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.”); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (“Where the public interest can
be meaningfully evaluated simply on the basis of briefs and oral arguments, that is the approach that
should be utilized.”).

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