United States v. General Electric Co., et al., Proposed Final Judgment and Competitive Impact Statement, 28877-28886 [2017-13327]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 82, Number 121 (Monday, June 26, 2017)]
[Notices]
[Pages 28877-28886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13327]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. General Electric Co., et al., Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States of America v. General Electric Co., et al., Civil Action No. 
1:17-cv-1146. On June 12, 2017, the United States filed a Complaint 
alleging that the proposed acquisition by General Electric Co. of Baker 
Hughes Incorporated, would violate Section 7 of the Clayton Act, 15 
U.S.C. 18. The proposed Final Judgment, filed the same time as the 
Complaint, requires General Electric Co. to sell its GE Water & Process 
Technologies business, including certain tangible and intangible 
assets, to one or more acquirers approved by the United States.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice's Web site at https://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the District of 
Columbia. Copies of these materials may be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's Web site, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Kathleen S. 
O'Neill, Chief, Transportation, Energy & Agriculture Section, Antitrust 
Division, Department of Justice, 450 Fifth Street NW., Suite 8000, 
Washington, DC 20530.

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, U.S. Department of Justice, Antitrust 
Division, 450 5th Street NW., Suite 8000, Washington DC 20001, 
Plaintiff, v. General Electric Co., 41 Farnsworth Street, Boston MA 
02210, and Baker Hughes Incorporated, 2929 Allen Parkway, Suite 
2100, Houston TX 77019, Defendants.

Case No.: 1:17-cv-01146
Judge: Beryl A. Howell

COMPLAINT

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
enjoin the acquisition of Baker Hughes Incorporated (``Baker Hughes'') 
by General Electric Co. (``GE'') and to obtain other equitable relief. 
The United States alleges as follows:

I. NATURE OF THE ACTION

    1. GE's acquisition of Baker Hughes would combine two of the 
leading providers of refinery process chemicals and services in the 
United States. Refineries process crude oil and natural gas extracted 
from wells (``hydrocarbons'') into finished products like gasoline. To 
perform this process, refineries rely on a variety of special 
chemicals, collectively known as refinery process chemicals, to remove 
salts, solids, metals, and other impurities from the hydrocarbons and 
to prevent corrosion and damage to refinery equipment. Refineries rely 
on process chemical and service providers to evaluate the specific 
hydrocarbons flowing into their refineries and to formulate and apply 
customized

[[Page 28878]]

chemical solutions to ensure the safe and efficient processing of those 
hydrocarbons. To develop the chemical solutions needed to address 
current and future challenges, these service providers maintain 
dedicated research and development facilities.
    2. Failures can be costly. If the refinery process chemical and 
service provider selects the wrong chemicals or fails to provide 
adequate and timely service, the result may be millions of dollars in 
lost production or damage to the refinery's equipment. For these 
reasons, oil and gas refiners choose a provider based on a number of 
factors that include not just pricing but the provider's experience, 
ability to offer timely and high-quality service, and research and 
development capabilities.
    3. GE and Baker Hughes vigorously compete to win the business of 
oil and gas refiners. If the transaction is allowed to proceed, this 
competition will be lost, and the merged firm will control over 50% of 
the market, leading to higher prices, reduced service quality, and 
diminished innovation.
    4. Accordingly, as alleged more specifically below, the 
acquisition, if consummated, would likely substantially lessen 
competition in violation of Section 7 of the Clayton Act, 15 U.S.C. 
Sec.  18, and should be enjoined.

II. DEFENDANTS AND THE TRANSACTION

    5. Defendant GE is a New York corporation headquartered in Boston, 
Massachusetts. GE is a large, diversified corporation that, among other 
lines of business, supplies the oil and gas industry with refinery 
process chemicals and services through its GE Water & Process 
Technologies business unit. GE generated $16 billion in revenues from 
oil- and gas-related products and services in 2015.
    6. Defendant Baker Hughes is a Delaware corporation headquartered 
in Houston, Texas. Baker Hughes supplies the oil and gas industry with 
refinery process chemicals and services through its Downstream 
Chemicals business, which is part of Baker Hughes's Chemicals and 
Industrial Services organization. Baker Hughes's 2015 revenues were 
$15.7 billion.
    7. Pursuant to a Transaction Agreement and Plan of Merger dated 
October 30, 2016 (``Transaction''), GE will acquire Baker Hughes.

III. JURISDICTION AND VENUE

    8. The United States brings this action pursuant to Section 15 of 
the Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain 
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    9. Defendants provide refinery process chemicals and services in 
the flow of interstate commerce, and their provision of refinery 
process chemicals and services substantially affects interstate 
commerce. The Court has subject matter jurisdiction over this action 
pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 
1331, 1337(a), and 1345.
    10. Defendants have consented to venue and personal jurisdiction in 
the District of Columbia for the purpose of this matter. Venue is 
therefore proper in this district under Section 12 of the Clayton Act, 
15 U.S.C. 22 and 28 U.S.C. 1391(b) and (c).

IV. RELEVANT MARKET

    11. The provision of refinery process chemicals and services is a 
relevant product market and line of commerce under Section 7 of the 
Clayton Act. Oil and gas refiners have no reasonable substitutes for 
refinery process chemicals and services. Because oil and gas refiners 
have no reasonable alternatives to refinery process chemicals and 
services, few, if any, would substitute to other products in response 
to a price increase.
    12. Oil and gas refiners choose from those suppliers that have 
service staff and support infrastructure in their local area. GE and 
Baker Hughes have such infrastructure and compete with one another for 
customers in local areas throughout the United States. One well-
accepted methodology for assessing whether a group of products and 
services sold in a particular area constitutes a relevant market under 
the Clayton Act is to ask whether a hypothetical monopolist over all 
the products sold in the area would raise prices for a non-transitory 
period by a small but significant amount, or whether enough customers 
would switch to other products or services or purchase outside the area 
such that the price increase would be unprofitable. Fed. Trade Comm'n & 
U.S. Dep't of Justice Horizontal Merger Guidelines (2010). A 
hypothetical monopolist of refinery process chemicals and services in 
the United States likely would impose at least a small but significant 
price increase because few if any customers would substitute to 
purchasing other products or to purchasing outside the United States. 
Therefore, the provision of refinery process chemicals and services in 
the United States is a relevant market under Section 7 of the Clayton 
Act.

V. LIKELY ANTICOMPETITIVE EFFECTS

    13. The relevant market is highly concentrated and would become 
more concentrated as a result of the Transaction. GE's share of the 
refinery process chemicals and services market in the United States is 
approximately 20% while Baker Hughes's is approximately 35%.
    14. Concentration in relevant markets is typically measured by the 
Herfindahl-Hirschman Index (``HHI'').\1\ Market concentration is one 
useful indicator of the likely competitive effects of a merger. The 
more concentrated a market and the more a transaction would increase 
concentration in a market, the more likely it is that a transaction 
would result in a meaningful reduction in competition. Markets in which 
the HHI is above 2,500 points are considered highly concentrated. 
Transactions that increase the HHI by more than 200 points in highly 
concentrated markets are presumed likely to enhance market power.
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    \1\ See U.S. Dep't of Justice and Federal Trade Commission, 
Horizontal Merger Guidelines Sec.  5.3 (2010), available at https://www.justice.gov/atr/public/guidelines/hmg-2010.html. The HHI 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 firms with shares of 30, 30, 20, and 20 
percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). 
The HHI takes into account the relative size distribution of the 
firms in a market. It approaches zero when a market is occupied by a 
large number of firms of relatively equal size and reaches its 
maximum of 10,000 points when a market is controlled by a single 
firm. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
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    15. The refinery process chemicals and services market in the 
United States currently is highly concentrated, with an HHI over 2,900. 
The Transaction would increase the HHI by about 1,450, rendering the 
Transaction presumptively anticompetitive. Fed. Trade Comm'n & U.S. 
Dep't of Justice Horizontal Merger Guidelines (2010).
    16. Defendants are two of a few firms that have the technical 
capabilities and expertise to provide refinery process chemicals and 
services in the United States. Defendants vigorously compete on price, 
service quality, and product development, and customers have benefitted 
from this competition.
    17. The Transaction would eliminate the competition between 
Defendants to provide refinery process chemicals and services in the 
United States. After the Transaction, GE would gain the incentive and 
ability to raise its bid prices significantly above competitive levels, 
reduce its investment in research

[[Page 28879]]

and development, and provide lower levels of service.

VI. ABSENCE OF COUNTERVAILING FACTORS

    18. Entry by a new provider of refinery process chemicals and 
services or expansion of existing marginal providers would not be 
timely, likely, and sufficient to prevent the substantial lessening of 
competition caused by the elimination of Baker Hughes as an independent 
competitor.
    19. Successful entry into the provision of refinery process 
chemicals and services in the United States is difficult, costly, and 
time consuming. An entrant would need to develop local infrastructure, 
a full line of chemicals designed for refineries, and a track record of 
successfully treating the products processed by refineries. Because of 
the significant investment oil and gas refiners make in acquiring 
hydrocarbons to process and the high costs of any problem or delay, 
refinery oil and gas refiners are unlikely to switch away from 
established providers, making it difficult for new refinery process 
chemical and service providers to enter the market.
    20. Defendants cannot demonstrate cognizable and merger-specific 
efficiencies that would be sufficient to offset the Transaction's 
anticompetitive effects.

VII. VIOLATION ALLEGED

    21. The effect of the Transaction, if consummated, would likely be 
to lessen substantially competition for refinery process chemicals and 
services in the United States in violation of Section 7 of the Clayton 
Act, 15 U.S.C. Sec.  18. Unless restrained, the Transaction would 
likely have the following effects, among others:
    (a) Competition in the market for refinery process chemicals and 
services in the United States would be substantially lessened;
    (b) prices for refinery process chemicals and services in the 
United States would increase;
    (c) the quality of refinery process chemicals and services in the 
United States would decrease; and
    (d) innovation in the refinery process chemicals and services 
market in the United States would diminish.

VIII. REQUESTED RELIEF

    22. The United States requests that this Court:
    (a) Adjudge GE's proposed acquisition of Baker Hughes to violate 
Section 7 of the Clayton Act, 15 U.S.C. Sec.  18;
    (b) Permanently enjoin and restrain Defendants from consummating 
the proposed acquisition by GE of Baker Hughes or from entering into or 
carrying out any contract, agreement, plan, or understanding, the 
effect of which would be to combine GE and Baker Hughes;
    (c) Award the United States its costs for this action; and
    (d) Award the United States such other and further relief as the 
Court deems just and proper.

Dated: June 12, 2017

Respectfully submitted,

FOR PLAINTIFF UNITED STATES:

/s/--------------------------------------------------------------------
Andrew C. Finch,
Acting Assistant Attorney General

/s/--------------------------------------------------------------------
Patricia A. Brink,
Director of Civil Enforcement

/s/--------------------------------------------------------------------
Kathleen S. O'Neill,
Chief, Transportation, Energy & Agriculture Section

/s/--------------------------------------------------------------------
Robert Lepore,
Assistant Chief, Transportation, Energy & Agriculture Section

/s/--------------------------------------------------------------------
Tracy Fisher
Tracey Chambers
Jeremy Evans (DC Bar # 478097)
Chinita Sinkler
Trial Attorneys

U.S. Department of Justice, Antitrust Division, Transportation, 
Energy & Agriculture Section, 450 5th Street NW., Suite 8000, 
Washington, DC 20530, (202) 616-1650, tracy.fisher@usdoj.gov.

United States District Court District of Columbia

    United States of America, Plaintiff, v. General Electric Co. and 
Baker Hughes Incorporated, Defendants.

Case No.: 1:17-cv-01146
Judge: Beryl A. Howell

FINAL JUDGMENT

    Whereas, Plaintiff, United States of America, filed its Complaint 
on June 12, 2017, the United States and Defendants, General Electric 
Co. and Baker Hughes Incorporated, 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, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the United States 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, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means Suez or another entity to whom Defendants 
divest any of the Divestiture Assets or with whom Defendants have 
entered into definitive contracts to sell any of the Divestiture 
Assets.
    B. ``GE'' means defendant General Electric Co., a New York 
corporation with its headquarters in Boston, Massachusetts, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Baker Hughes'' means defendant Baker Hughes Incorporated, a 
Delaware corporation with its headquarters in Houston, Texas, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Suez'' means SUEZ, a French soci[eacute]t[eacute] anonyme with 
its headquarters in Paris, France, its successors and assigns, and its 
subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures, and their directors, officers, managers, agents, and 
employees. Suez is the proposed purchaser of the Divestiture Assets as 
identified by GE.
    E. ``GE Water & Process Technologies'' means the GE Water & Process 
Technologies business unit of GE as it operated prior to the filing of 
the Complaint in this matter, including but not limited to the entities 
listed in the Appendix.

[[Page 28880]]

    F. ``Divestiture Assets'' means all the assets of GE Water & 
Process Technologies, including:
    1. All tangible assets that comprise the GE Water & Process 
Technologies business, including but not limited to all worldwide 
manufacturing plants; service centers; labs; warehouse and distribution 
facilities; offices; the global headquarters located in Trevose, 
Pennsylvania; all global research and development facilities; 
manufacturing equipment; tooling and fixed assets; personal property; 
inventory; office furniture; materials; supplies; other property; all 
licenses, permits and authorizations issued by any governmental 
organization relating to GE Water & Process Technologies; assignment 
and/or transfer of all contracts, agreements (including supply 
agreements), leases, commitments, certifications, and understandings 
exclusively relating to GE Water & Process Technologies; all customer 
lists, contracts, accounts, credit records; all other business and 
administrative records; and all other assets used exclusively by GE 
Water & Process Technologies;
    2. The following intangible assets:
    (a) all intangible assets owned, licensed, controlled, or used 
primarily by the GE Water & Process Technologies business, including 
but not limited to all patents, licenses and sublicenses, intellectual 
property, copyrights, trademarks, trade names, service marks, service 
names (excluding any trademark, trade name, service mark, or service 
name containing the GE monogram or the names ``GE'' or ``General 
Electric''), technical information, computer software and related 
documentation, know-how, trade secrets, drawings, blueprints, designs, 
design protocols, specifications for materials, specifications for 
parts and devices, safety procedures for the handling of materials and 
substances, quality assurance and control procedures, design tools and 
simulation capability, all manuals and technical information provided 
by GE Water & Process Technologies to its own employees, customers, 
suppliers, agents, or licensees, and all research data concerning 
historic and current research and development efforts relating to the 
Divestiture Assets, including but not limited to designs of experiments 
and the results of successful and unsuccessful designs and experiments; 
and
    (b) a worldwide, non-exclusive, royalty-free license to all 
intellectual property, including but not limited to all patents, 
copyrights, trademarks, trade names, service marks, service names, and 
trade secrets owned by GE or that GE has the right to license and used 
by the GE Water & Process Technologies business at any time during the 
period that the GE Water & Process Technologies business has been owned 
by GE. Such license (except for any license for trademarks, trade 
names, service marks, and service names containing the names ``GE'' or 
``General Electric'') shall be perpetual and shall grant the Acquirer 
the right to make, have made, use, sell or offer for sale, copy, create 
derivative works, modify, improve, display, perform, and enhance the 
licensed intangible assets. Any improvements or modifications to these 
intangible assets developed by the Acquirer shall be owned solely by 
that Acquirer.

III. Applicability

    A. This Final Judgment applies to GE and Baker Hughes, 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. If, prior to complying with Section IV and Section V of this 
Final Judgment, Defendants sell or otherwise dispose of all or 
substantially all of their assets or of lesser business units that 
include the Divestiture Assets, they shall require the purchaser to be 
bound by the provisions of this Final Judgment. Defendants need not 
obtain such an agreement from the acquirers of the assets divested 
pursuant to this Final Judgment.

IV. Divestitures

    A. Defendants are ordered and directed, within 90 calendar days 
after the signing of the Hold Separate Stipulation and Order in this 
matter, or five (5) calendar days after notice of the entry of the 
Final Judgment by the Court, whichever is later, to divest the 
Divestiture Assets in a manner consistent with this Final Judgment to 
an Acquirer acceptable to the United States, in its sole discretion. 
The United States, in its sole discretion, may agree to one or more 
extensions of this time period, not to exceed 90 calendar days in 
total, and shall notify the Court in such circumstances. Defendants 
agree to use their best efforts to divest the Divestiture Assets as 
expeditiously as possible.
    B. In the event Defendants are divesting the Divestiture Assets to 
an Acquirer other than Suez, Defendants shall promptly make known, by 
usual and customary means, the availability of the Divestiture Assets 
to be divested.
    C. Defendants shall inform any person making an 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.
    D. In accomplishing the divestiture ordered by 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 privileges or work-product doctrine. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    E. Defendants shall provide the Acquirer and the United States 
information relating to the personnel employed by the Divestiture 
Assets to enable the Acquirer(s) to make offers of employment. 
Defendants will not interfere with any negotiations by the Acquirer(s) 
to employ any defendant employee whose primary responsibility is 
related to the production, operation, development or sale of products 
and services by GE Water & Process Technologies.
    F. Defendants shall permit the prospective Acquirer of the 
Divestiture Assets to have reasonable access to personnel and to make 
inspections of the physical facilities of GE Water & Process 
Technologies; access to any and all environmental, zoning, and other 
permit documents and information; and access to any and all financial, 
operational, or other documents and information customarily provided as 
part of a due diligence process.
    G. Defendants shall warrant to the Acquirer that each asset will be 
operational on the date of sale.
    H. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    I. Defendants shall warrant to the Acquirer (1) that there are no 
material defects in the environmental, zoning or other permits 
pertaining to the operation of each asset and (2) that, following the 
sale of the Divestiture Assets, Defendants will not undertake, directly 
or indirectly, any challenges to the environmental, zoning, or other 
permits relating to the operation of the Divestiture Assets.
    J. Unless the United States otherwise consents in writing, the 
divestiture 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

[[Page 28881]]

such a way as to satisfy the United States, in its sole discretion, 
that the Divestiture Assets can and will be used by the Acquirer(s) as 
part of a viable, ongoing business providing refinery process chemicals 
and services. The divestitures, whether pursuant to Section IV or 
Section V of this Final Judgment,

    (1) shall be made to an Acquirer that, in the United States' 
sole judgment, has the intent and capability (including the 
necessary managerial, operational, technical and financial 
capability) of competing effectively in the provision of refinery 
process chemicals and services; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion, that none of the terms of any agreement between 
an Acquirer and Defendants give Defendants the ability unreasonably 
to raise the Acquirer's costs, to lower the Acquirer's efficiency, 
or otherwise to interfere in the ability of the Acquirer to compete 
effectively.

    Any questions that arise concerning whether particular assets are 
appropriately considered Divestiture Assets subject to Section IV shall 
be resolved by the United States, in its sole discretion, consistent 
with the terms of this Final Judgment.

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 the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a Divestiture Trustee selected by the 
United States and approved by the Court to effect the divestiture of 
the Divestiture Assets.
    B. 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(s) 
acceptable to the United States 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.D of this Final Judgment, the 
Divestiture Trustee may hire at the cost and expense of Defendants 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. Any such 
investment bankers, attorneys, or other agents shall serve on such 
terms and conditions as the United States approves including 
confidentiality requirements and conflict of interest certifications.
    C. 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 the United 
States and the Divestiture Trustee within ten (10) calendar days after 
the Divestiture Trustee has provided the notice required under Section 
VI.
    D. The Divestiture Trustee shall serve at the cost and expense of 
Defendants pursuant to a written agreement, on such terms and 
conditions as the United States approves including confidentiality 
requirements and conflict of interest certifications. The Divestiture 
Trustee shall account for all monies derived from the sale of the 
assets sold by the Divestiture Trustee and all costs and expenses so 
incurred. After approval by the Court of the Divestiture Trustee's 
accounting, including fees for its services yet unpaid 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. If the 
Divestiture Trustee and Defendants are unable to reach agreement on the 
Divestiture Trustee's or any agents' or consultants' compensation or 
other terms and conditions of engagement within 14 calendar days of 
appointment of the Divestiture Trustee, the United States may, in its 
sole discretion, take appropriate action, including making a 
recommendation to the Court. The Divestiture Trustee shall, within 
three (3) business days of hiring any other professionals or agents, 
provide written notice of such hiring and the rate of compensation to 
Defendants and the United States.
    E. Defendants shall use their best efforts to assist the 
Divestiture Trustee in accomplishing the required divestiture. The 
Divestiture Trustee and any consultants, accountants, attorneys, and 
other agents retained by the Divestiture Trustee shall have full and 
complete access to the personnel, books, records, and facilities of the 
business to be divested, and Defendants shall develop financial and 
other information relevant to such business as the Divestiture Trustee 
may reasonably request, subject to reasonable protection for trade 
secret or other confidential research, development, or commercial 
information or any applicable privileges. Defendants shall take no 
action to interfere with or to impede the Divestiture Trustee's 
accomplishment of the divestiture.
    F. After its appointment, the Divestiture Trustee shall file 
monthly reports with the United States and, as appropriate, the Court 
setting forth the Divestiture Trustee's efforts to accomplish the 
divestiture 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. 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.
    G. If the Divestiture Trustee has not accomplished the divestiture 
ordered under this Final Judgment 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 divestiture, (2) the reasons, in the 
Divestiture Trustee's judgment, why the required divestiture has not 
been accomplished, and (3) the Divestiture Trustee's recommendations. 
To the extent such reports contains 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 United States which 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 the United 
States.
    H. If the United States determines that the Divestiture Trustee has 
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute 
Divestiture Trustee.

[[Page 28882]]

VI. Notice of Proposed Divestiture

    A. In the event Defendants are divesting the Divestiture Assets to 
an Acquirer other than Suez, within two (2) business days following 
execution of a definitive divestiture agreement, Defendants or the 
Divestiture Trustee, whichever is then responsible for effecting the 
divestiture required herein, shall notify the United States of any 
proposed divestiture required by Section IV or Section 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 fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from Defendants, 
the proposed Acquirer(s), any other third party, or the Divestiture 
Trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer(s), and any other potential 
Acquirer. Defendants and the Divestiture Trustee shall furnish any 
additional information requested within fifteen (15) calendar days of 
the receipt of the request, unless the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendants, the 
proposed Acquirer(s), any third party, and the Divestiture Trustee, 
whichever is later, the United States shall provide written notice to 
Defendants and the Divestiture Trustee, if there is one, stating 
whether or not it objects to the proposed divestiture. If the 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.C of this Final Judgment. Absent written 
notice that the United States does not object to the proposed 
Acquirer(s) or upon objection by the United States, a divestiture 
proposed under Section IV or Section V shall not be consummated. Upon 
objection by Defendants under Section V.C, 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 purchase made 
pursuant to Section IV or Section V of this Final Judgment.

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or Section V, 
Defendants shall deliver to the United States an affidavit as to the 
fact and manner of its compliance with Section IV or Section V of this 
Final Judgment. In the event Defendants are divesting the Divestiture 
Assets to an Acquirer other than Suez, each such affidavit shall 
include the name, address, and telephone number of each person who, 
during the preceding thirty (30) calendar 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. In the event 
Defendants are divesting the Divestiture Assets to an Acquirer other 
than Suez, 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 the United States to information provided by Defendants, 
including limitation on information, shall be made within fourteen (14) 
calendar days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendants shall deliver to the United States 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 the United States an affidavit describing any changes 
to the efforts and actions outlined in Defendants' earlier affidavits 
filed pursuant to this section within fifteen (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 
divestiture has been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as any Hold Separate 
Stipulation and Order, or of determining whether the Final Judgment 
should be modified or vacated, and subject to any legally recognized 
privilege, from time to time authorized representatives of the United 
States Department of Justice, including consultants and other persons 
retained by the United States, shall, upon written request of an 
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 the option of the United States, to require Defendants to 
provide hard copy or electronic copies of, all books, ledgers, 
accounts, records, data, 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 an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or response to written 
interrogatories, 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 the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
Defendants to the United States, Defendants represent and identify in 
writing the

[[Page 28883]]

material in any such information or documents to which a claim of 
protection may be asserted under Rule 26(c)(1)(g) 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)(1)(g) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give Defendants ten (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 any part of the Divestiture Assets 
during the term of this Final Judgment.

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 ten years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States' responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------
[Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16]

-----------------------------------------------------------------------
United States District Judge

Appendix

GE Betz, Inc. (US)
Chemical Water Treatment Investments SRL (Argentina)
GE Betz (UK)
GE Betz Ireland Limited (Ireland)
GE Betz South Africa Pty Ltd (South Africa)
GE Betz Pty Limited (Australia) and GE Betz Pty Limited (New Zealand 
Branch)
GE Infrastructure (Shanghai) Co. Ltd. (China)
GE Ionics Hamma Holdings (IRE) Ltd (Ireland)
GE Power Controls Portugal Unipessoal LDA (Portugal)
GE Water & Process Technologies (Wuxi) Co. Ltd. (China)
GE Water & Process Technologies Asia Pte. Ltd. (Singapore)
GE Water & Process Technologies Austria GmbH (Austria)
GE Water & Process Technologies BVBA (Belgium)
GE Water & Process Technologies France SAS (France)
GE Water & Process Technologies GmbH (Germany)
GE Water & Process Technologies Hungary KFT (Hungary)
GE Water & Process Technologies Mexico, S. de R.L de C.V. (Mexico)
GE Water & Process Technologies Middle East FZE (Dubai)
GE Water & Process Technologies Netherlands BV (NL)
General Electric Water & Process Technologies Caribbean Holdings BV 
(Netherlands Antilles)
Ionics Iberica S.L.U. (Spain)
Water & Process Technologies SRL (Argentina)
Zenon Services Limited (Virgin Islands)
Zenon Systems Manufacturing and Services Limited Liability Company 
(Hungary)

United States District Court

for The District of Columbia

    United States of America, Plaintiff, v. General Electric Co. and 
Baker Hughes Incorporated, Defendants.

Case No.: 1:17-cv-01146
Judge: Beryl A. Howell

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

    Defendant General Electric Co. (``GE'') and Defendant Baker Hughes 
Incorporated (``Baker Hughes'') entered into a Transaction Agreement 
and Plan of Merger dated October 30, 2016 (``Transaction''). GE and 
Baker Hughes are two of the leading providers of refinery process 
chemicals and services used by oil and gas refineries to remove 
impurities from the oil and gas and to prevent damage to refinery 
equipment.
    The United States filed a civil antitrust Complaint on June 12, 
2017 seeking to enjoin the Transaction. The Complaint alleges that the 
likely effect of the Transaction would be to lessen competition 
substantially for refinery process chemicals and services in the United 
States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18, 
resulting in higher prices, reduced service quality, and diminished 
innovation.
    At the same time the Complaint was filed, the United States also 
filed a proposed Final Judgment and a Hold Separate Stipulation and 
Order (``Hold Separate'') that are designed to eliminate the 
anticompetitive effects of the Transaction. Under the proposed Final 
Judgment, which is explained more fully below, GE is required to divest 
its GE Water & Process Technologies business unit. Under the terms of 
the Hold Separate, GE will take certain steps during the pendency of 
the ordered divestiture to ensure that GE Water & Process Technologies 
is operated as a competitively independent, economically viable, and 
ongoing business concern.
    The United States 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.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO ALLEGED VIOLATION

A. The Defendants and the Proposed Transaction

    GE is a New York corporation headquartered in Boston, 
Massachusetts. GE is a large, diversified corporation that, among other 
lines of business, supplies the oil supplies the oil and gas industry 
through a number of business units, including GE Water & Process 
Technologies, a standalone business unit that sells refinery process 
chemicals and services. GE earned $16 billion in revenues from its oil 
and gas businesses in 2015.
    Baker Hughes is a Delaware corporation headquartered in Houston, 
Texas, with extensive operations in the oil and gas industry, including 
selling refinery process chemicals and services. Baker Hughes earned 
$15.7 billion in revenues in 2015.
    The Transaction, as initially agreed to by Defendants, would lessen 
competition substantially.

B. The Competitive Effects of the Transaction on Refinery Process 
Chemicals and Services in the United States

    The Complaint alleges that the provision of refinery process 
chemicals

[[Page 28884]]

and services is a line of commerce and a relevant market within the 
meaning of Section 7 of the Clayton Act. Refineries process crude oil 
and natural gas extracted from wells (``hydrocarbons'') into finished 
products like gasoline. Refineries rely on a variety of special 
chemicals, collectively known as refinery process chemicals, to remove 
salts, solids, metals, and other impurities from the hydrocarbons and 
to prevent corrosion and damage to refinery equipment. Refineries rely 
on process chemical and service providers to evaluate the specific 
hydrocarbons flowing into their refineries and to formulate and apply 
customized chemical solutions to ensure the safe and efficient 
processing of those hydrocarbons. To develop the chemical solutions 
needed to address current and future challenges, these service 
providers maintain dedicated research and development facilities. 
Although refinery process chemicals and services represent just a 
fraction of an oil and gas refiner's overall cost of processing 
hydrocarbons, using the wrong chemicals can cost a refiner millions in 
lost production or compromised equipment. As a result, oil and gas 
refineries are unlikely to stop using refinery process chemicals or 
switch to other products in response to a small but significant and 
non-transitory increase in price.
    Oil and gas refiners choose from those suppliers that have service 
staff and support infrastructure in their local area. GE and Baker 
Hughes have such infrastructure, and compete with one another for 
customers, in areas throughout the United States. A hypothetical 
monopolist of refinery process chemicals and services in the United 
States likely would impose at least a small but significant price 
increase because few if any customers would substitute to purchasing 
other products or to purchasing outside the United States. Therefore, 
the United States is a relevant geographic market under Section 7 of 
the Clayton Act for the provision of refinery process chemicals and 
services.
    The market for the provision of refinery process chemicals and 
services in the United States is highly concentrated and would become 
more concentrated as a result of the proposed transaction. A combined 
GE and Baker Hughes would control over 50% of the market for refinery 
process chemicals and services in the United States. The Transaction 
would eliminate significant head-to-head competition between GE and 
Baker Hughes and give the merged firm the incentive and ability to 
raise its prices above competitive levels, reduce its investment in 
research and development, and provide lower levels of service.
    Entry by new refinery process chemical and service providers or 
expansion by existing providers would not be timely, likely, and 
sufficient to prevent the substantial lessening of competition caused 
by the Transaction. Successful entry into the refinery process 
chemicals and services business is difficult, costly, and time 
consuming. In addition to local infrastructure, a new refinery process 
chemicals and services provider would have to develop a portfolio of 
production chemicals and hire experienced staff. In addition, because 
of the significant investment oil and gas refiners make in 
infrastructure and the high costs of any problem or delay, refiners 
disfavor using new providers and typically only switch providers if 
their existing provider performs poorly over a long period of time. As 
a result, it is difficult and time consuming for a new provider to 
enter the market, develop a track record of successful work, and grow 
its business.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture requirement of the proposed Final Judgment will 
eliminate the anticompetitive effects of the proposed transaction by 
establishing GE Water & Process Technologies as an independent and 
economically viable competitor in refinery process chemicals and 
services. The sale of GE Water & Process Technologies will provide the 
buyer of the divestiture assets with the necessary assets to maintain a 
significant presence in the United States and remain an effective 
competitor.

A. The Divestiture Package

    To ensure continued vigorous competition, the proposed Final 
Judgment requires the divestiture of all of the tangible and intangible 
assets of GE Water & Process Technologies that are currently used to 
serve customers. Under the proposed Final Judgment, the tangible assets 
of GE Water & Process Technologies that must be divested include 
worldwide manufacturing plants, service centers, labs, warehouse and 
distribution facilities, and offices, including the business's global 
headquarters located in Trevose, Pennsylvania. The transfer will also 
include all six global research and development facilities. This will 
ensure that the acquirer of the divestiture assets has the 
infrastructure necessary to continue providing refinery process 
chemicals and services to refiners and compete for opportunities.
    The proposed Final Judgment also requires the transfer and 
licensing of intangible assets, such as intellectual property rights, 
sufficient to allow the buyer to be an effective competitor. GE must 
fully divest the complete portfolio of intellectual property used 
primarily by GE Water & Process Technologies. GE will keep intellectual 
property used primarily by other GE business units in addition to GE 
Water & Process Technologies, but will grant the buyer of the 
divestiture assets a perpetual, royalty-free license for the use of 
such technology.

B. Procedures

    The proposed Final Judgment requires Defendants to sell the 
divestiture package within 90 days after the Court signs the Hold 
Separate in this matter, subject to one or more extensions up to a 
total of 90 days by the United States. The proposed Final Judgment 
contemplates the sale of the divestiture assets to SUEZ, a French 
soci[eacute]t[eacute] anonyme, which GE has identified as the proposed 
buyer of the divestiture assets. Suez provides water and wastewater 
treatment and waste management systems to customers throughout the 
world, and serves a range of industrial customers and municipalities in 
the United States. The proposed Final Judgment also provides for a 
process to sell the divestiture assets to an alternative acquirer in 
the event that the proposed sale to Suez is not completed.
    The assets must be divested in such a way as to satisfy the United 
States in its sole discretion that the operations can and will be 
operated by the purchaser as a viable, ongoing business that can 
compete effectively to provide refinery process chemicals and services. 
Defendants must take all reasonable steps necessary to accomplish the 
divestiture quickly and shall cooperate with prospective purchasers.
    In the event that Defendants do not accomplish the divestiture 
within the prescribed period, the proposed Final Judgment provides that 
upon application by the United States, the Court will appoint a trustee 
selected by the United States to effect the divestiture. If a trustee 
is appointed, the proposed Final Judgment provides that Defendants will 
pay all of the trustee's costs and expenses. The trustee will have the 
authority to divest the divestiture assets to an acquirer acceptable to 
the United States. The trustee's commission will be structured so as to 
provide an incentive for the trustee based on the price obtained and 
the speed with which the divestiture is accomplished. After his or her

[[Page 28885]]

appointment becomes effective, the trustee will file monthly reports 
with the Court and the United States setting forth his or her efforts 
to accomplish the divestiture. At the end of six (6) months, if the 
divestiture has not been accomplished, the trustee and the United 
States 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 the term of the trustee's appointment. 
The divestiture provisions of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition in the 
provision of refinery process chemicals and services in the United 
States.

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

    The United States 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 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 Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States 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 the United States will be filed with the Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's internet Web site and, under certain 
circumstances, published in the Federal Register.
    Written comments should be submitted by mail to:

Kathleen S. O'Neill, Chief, Transportation, Energy & Agriculture 
Section, Antitrust Division, United States Department of Justice, 450 
5th 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

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against the Transaction proposed 
by Defendants. The United States is satisfied, however, that the 
divestiture of assets described in the proposed Final Judgment will 
preserve competition for the provision of refinery process and water 
treatment chemicals and services in the United States. 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.

VII. STANDARD OF REVIEW UNDER THE APPA FOR THE 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 government 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, U.S. Airways 
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the court has 
broad discretion of the adequacy of the relief at issue); United States 
v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736, 
2009 U.S. Dist. LEXIS 84787, 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 
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.'').\2\
---------------------------------------------------------------------------

    \2\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for 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).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
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

[[Page 28886]]

unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting 
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.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\ 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 U.S. Airways, 38 F. Supp. 3d at 75 (noting 
that a court should not reject the proposed remedies because it 
believes others are preferable); 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).
---------------------------------------------------------------------------

    \3\ 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' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting 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 U.S. 
Airways, 38 F. Supp. 3d at 74 (noting that room must be made for the 
government to grant concessions in the negotiation process for 
settlements (citing Microsoft, 56 F.3d at 1461); 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.
    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 U.S. Airways, 
38 F. Supp. 3d at 74 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable; InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `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. As this Court recently confirmed in SBC 
Communications, 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); see also U.S. Airways, 38 F. Supp. 3d 
at 75 (indicating that a court is not required to hold an evidentiary 
hearing or to permit intervenors as part of its review under the Tunney 
Act). The language wrote into the statute 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 Sen. Tunney). Rather, the 
procedure for the public interest determination is left to the 
discretion of the court, 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.\4\ A 
court can make its public interest determination based on the 
competitive impact statement and response to public comments alone. 
U.S. Airways, 38 F. Supp. 3d at 75.
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    \4\ 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., No. 73-CV-681-W-1, 1977-1 
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (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, 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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VIII. DETERMINATIVE DOCUMENTS

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: June 12, 2017

Respectfully submitted,

/s/--------------------------------------------------------------------
Tracy Fisher
Tracey Chambers
Jeremy Evans (DC Bar No. 478097)
Chinita Sinkler
Trial Attorneys
U.S. Department of Justice, Antitrust Division, Transportation, 
Energy & Agriculture Section, 450 5th Street NW., Suite 8000, 
Washington DC 20530, Telephone: (202) 616-1650, 
tracy.fisher@usdoj.gov.

[FR Doc. 2017-13327 Filed 6-23-17; 8:45 am]
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