The Dun & Bradstreet Corporation; Analysis of Agreement Containing Consent Order to Aid Public Comment, 57272-57274 [2010-23436]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 75, Number 181 (Monday, September 20, 2010)]
[Notices]
[Pages 57272-57274]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-23436]


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FEDERAL TRADE COMMISSION

[Docket No. 9342]


The Dun & Bradstreet Corporation; Analysis of Agreement 
Containing Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the complaint and 
the terms of the consent order -- embodied in the consent agreement -- 
that would settle these allegations.

DATES: Comments must be received on or before October 12, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to``Dun & 
Bradstreet, Docket No. 9342'' to facilitate the organization of 
comments. Please note that your comment -- including your name and your 
state -- will be placed on the public record of this proceeding, 
including on the publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(copyright)), 16 CFR 4.9(copyright)).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://ftcpublic.commentworks.com/ftc/mdr) and following the instructions on 
the web-based form. To ensure that the Commission considers an 
electronic

[[Page 57273]]

comment, you must file it on the web-based form at the weblink: 
(https://ftcpublic.commentworks.com/ftc/mdr). If this Notice appears at 
(https://www.regulations.gov/search/index.jsp), you may also file an 
electronic comment through that website. The Commission will consider 
all comments that regulations.gov forwards to it. You may also visit 
the FTC website at (https://www.ftc.gov/) to read the Notice and the 
news release describing it.
    A comment filed in paper form should include the ``Dun & 
Bradstreet, Docket No. 9342'' reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-135 (Annex 
D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (https://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Jonathan W. Platt (212-607-2819), FTC 
Northeast Regional Office, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  3.25(f) 
of the Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 10, 2010), on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC 
Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

I. Overview

    The Federal Trade Commission (``Commission'') has accepted for 
public comment an Agreement Containing Consent Order (``Consent 
Agreement'') with Respondent The Dun & Bradstreet Corporation 
(``D&B''), and has issued a final Decision and Order (``Order'') that 
resolves an administrative Complaint issued by the Commission on May 7, 
2010. The Complaint alleges that the $29 million acquisition by Market 
Data Retrieval (``MDR'') (a division of D&B) of Quality Educational 
Data (``QED'') (a division of Scholastic, Inc.) in February 2009 
eliminated its closest rival and created a near monopoly in the United 
States K-12 data market, in violation of Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. Sec.  45, and Section 7 of the 
Clayton Act, as amended, 15 U.S.C. Sec.  18.
    The Commission issued the administrative Complaint because it had 
reason to believe that MDR and QED were the only significant U.S. 
suppliers of kindergarten through twelfth-grade educational marketing 
data (``K-12 data''), which is used by customers for their direct mail 
and email marketing efforts. The K-12 data that companies like MDR and 
QED sell include contact, demographic, and other information that allow 
their customers to market to teachers, administrators, schools, and 
individual school districts. MDR, QED, and Mailings Clearing House 
(``MCH'') were the only companies prior to the acquisition that 
provided that data. Other sources of marketing data, such as teacher 
association membership lists, are not close substitutes because of 
their more limited coverage, reduced functionality, and less frequent 
updating. Customers indicated that they would not shift their purchases 
toward these alternatives in response to a small but significant 
nontransitory increase in price.
    According to documentary evidence and customers, competition from 
QED had constrained MDR's pricing and spurred MDR to improve product 
quality, including the development of new product features. Customers 
viewed MDR and QED as offering the most comparable products and were 
able to obtain better terms by the threat of turning to the other 
company. By contrast, MCH lacked a K-12 database comparable to MDR or 
QED's, generally served a different customer base, was not viewed by 
many MDR and QED customers as capable of meeting their needs, and had a 
very small share of the K-12 data market. MDR's near-monopoly position 
in the K-12 data market after the transaction is protected in part by 
significant barriers to entry, including the time and cost to develop a 
database with market coverage and accuracy comparable to MDR or QED's 
pre-merger databases and the need to obtain a reputation for data 
quality. A small firm that has begun to offer K-12 data is unlikely to 
be able to replace the lost competition resulting from the acquisition 
of QED for at least several years.
    One of MDR's primary defenses to the acquisition was that MDR's 
purportedly high margins created a disincentive to raise prices post-
merger. The Bureau of Economics and the Bureau of Competition were not 
persuaded by this critical loss argument because, as set forth in 
Section 4.1.3 of the 2010 Merger Guidelines, it failed to account for 
the possibility that high margins might also imply highly inelastic 
demand and thus fewer lost sales from a price increase. Indeed, as 
described above, the weight of the evidence indicated that post-merger 
market conditions would provide an incentive to raise prices.
    The Consent Agreement is designed to remedy the likely 
anticompetitive effects of the acquisition by restoring, to the extent 
possible, the lost competition between MDR and QED. Among other things, 
it requires that D&B divest an updated and augmented K-12 database of 
names, addresses, and other pertinent information to MCH, a competitor 
in the K-12 data market. The Order also provides for the divestiture to 
MCH of the QED name and associated intellectual property as well as the 
appointment by the Commission of a monitor to ensure that all of the 
terms

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of the Consent Agreement are fully implemented by D&B.

II. Respondent D&B

    D&B is a corporation organized, existing and doing business under 
the laws of the State of Delaware, with its principal place of business 
at 103 JFK Parkway, Short Hills, New Jersey 07078. D&B is the world's 
leading supplier of commercial information on businesses. In 2008, 
D&B's revenue exceeded $1.7 billion. MDR, a division of D&B, has its 
headquarters at 6 Armstrong Road, Suite 301, Shelton, Connecticut 
06484. MDR also has offices in Chicago, Illinois, and San Francisco, 
California.

III. The Commission's Complaint

    The Complaint alleges that, prior to MDR's acquisition of QED, MDR 
was the largest provider of K-12 data in the United States. K-12 data 
is sold or leased to customers, including book publishers and other 
suppliers of educational products and services, that use the 
information to market the various products and services that they offer 
to education institutions. The Complaint further alleges that MDR's 
closest competitor in the K-12 data market was QED. After acquiring 
QED, MDR attained a near monopoly. Two firms, one of which was MCH, 
accounted for the remaining competition.
    The Complaint alleges that if allowed to stand, the acquisition 
would likely enable MDR unilaterally to exercise market power in 
various ways, including by increasing prices and reducing product 
quality and services.

IV. Terms of the Order

A. MCH is the Acquirer.
    MCH is a privately held company with offices located at 601 E. 
Marshall Street, Sweet Springs, Missouri 65351. The Commission believes 
that MCH is an appropriate acquirer of the assets to be divested, and 
that with those assets, it will be in a position to restore the 
competition that was lost when MDR acquired QED. MCH currently has a 
small share of the K-12 data market, but is a company with over 80 
years of experience in the broader data market industry.
B. The Assets to be Divested.
    The key asset that MCH will acquire is an updated K-12 database. As 
a result, MCH's database not only will rival MDR's, but will exceed the 
size and scope of the QED database when MDR acquired it.
    A second important asset that MCH will acquire is the QED name and 
its associated intellectual property. The combination of the QED name 
and the updated database has the potential to enable MCH to compete for 
and offer customers K-12 data comparable to what QED had been offering 
when it was acquired by MDR.
C. Other Requirements Imposed upon MDR.
    The Order also includes several provisions that will facilitate the 
ability of MCH to compete on a more even footing with MDR. The Order 
grants certain categories of MDR customers the option to terminate 
their contracts with MDR, without penalty, for a period of 21 months, 
upon 30 days notice to MDR that the customer intends to terminate its 
contract(s) for the purpose of considering alternative sources of K-12 
data. The Order does not require that these customers actually make a 
purchase from an alternative source, nor does it require that the 
alternative source be limited to MCH. MDR will be required to notify 
customers with potentially terminable contracts, by certified mail, of 
their termination rights.
    To facilitate the ability of customers to switch away from MDR to 
MCH, the Order also requires that MDR grant such customers access to a 
data translation table containing both MDR's and QED's unique 
identification numbers assigned to educational institutions contained 
in their K-12 databases [PIN/PID numbers]. The table assists customers 
in converting their internal marketing data systems from MDR's data 
reference numbering system [PIN] to QED's data reference numbering 
system [PID].
    Former QED employees and certain MDR employees also are released 
from any restrictions on their ability to join MCH.
    Another provision of the Order requires that for a period of 21 
months, MDR offer all third parties placing orders for K-12 data with 
MDR a ``net names'' discount of up to 30% for names obtained from MCH 
(i.e., a discount for overlap names).
    The Order also requires that MDR, for up to one year, provide MCH 
with reasonably necessary technical assistance within five days of such 
a request and further requires MDR to facilitate the ability of MCH to 
enter into contracts with any vendor that had been doing business with 
QED.
D. A Monitor Will Help Ensure Compliance.
    The Order provides for the appointment by the Commission of an 
independent monitor, with fiduciary responsibilities to the Commission, 
to help ensure that D&B carries out all of its responsibilities and 
obligations under the Order. The Commission has appointed Mr. Richard 
Casabonne, a person with significant experience in the K-12 data 
market, as monitor. Mr. Casabonne is chief executive officer of 
Casabonne Associates, Inc., a consulting firm that focuses on 
educational activities. In the event D&B fails to comply with its 
divestiture obligations, the Order also provides that the Commission 
may also appoint a divestiture trustee to fulfill those requirements.

V. Opportunity for Public Comment

    The Consent Agreement has been placed on the public record for 30 
days to receive comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will review the comments received and determine 
whether to take further action.\2\ The purpose of this analysis is to 
facilitate comment on the Order. This analysis does not constitute an 
official interpretation of the Consent Agreement or Order, nor does it 
modify their terms in any way. The Consent Agreement does not 
constitute an admission by D&B that it violated the law or that the 
facts as alleged in the Complaint, other than jurisdictional facts, are 
true.
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    \2\ The Commission normally will issue an order for public 
comment but not issue a final order until it considers all comments 
received during the comment period. Here, however, consistent with 
the provisions of Commission Rule 2.34(c)(2), 16 C.F.R. Sec.  
2.34(c)(2), the Commission has issued the final Order in advance of 
the comment period. The Commission took this step because it 
believed it was important to enable MCH expeditiously to acquire the 
divested assets and begin to compete during the upcoming back-to-
school selling season. After the public comment period, the 
Commission will have the option to initiate a proceeding to reopen 
and modify the Decision and Order or commence a new administrative 
proceeding - if the public comments lead it to believe that such 
action is appropriate.
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    By direction of the Commission.

Donald S. Clark
Secretary.
[FR Doc. 2010-23436 Filed 9-17-10: 8:45 am]
BILLING CODE: 6750-01-S