United States v. Grupo Bimbo S.A.B. de C.V., et al.; Proposed Final Judgment and Competitive Impact Statement, 67209-67224 [2011-28037]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 76, Number 210 (Monday, October 31, 2011)]
[Notices]
[Pages 67209-67224]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28037]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Grupo Bimbo S.A.B. de C.V., 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. Grupo Bimbo S.A.B. de C.V., et al., Civil Action 
No. 1:11-cv-01857. On October 21, 2011, the United States filed a 
Complaint alleging that the proposed acquisition by Grupo Bimbo S.A.B. 
de C.V. (``Grupo Bimbo'') and BBU, Inc. (collectively ``BBU'') of the 
North American Fresh Bakery business of Sara Lee Corporation (``Sara 
Lee'') 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 
BBU to divest certain brands of sliced bread and related 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, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street NW., Suite 1010, Washington, DC 20530 (telephone: (202) 514-
2481), on the Department of Justice's Web site at https://www.usdoj.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, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, 
Department of Justice,

[[Page 67210]]

Washington, DC 20530 (telephone: (202) 307-0827).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

United States of America, United States Department of Justice, 
Antitrust Division, Litigation I Section, 450 Fifth Street NW., Suite 
4100, Washington, DC 20530, Plaintiff, v. Grupo Bimbo, S.A.B. de C.V., 
Prolongacion Paseo de la Reforma No. 1000, Col. Pena Blanca Santa Fe, 
Delegacon Alvaro Obregon, Mexico D.F., 01210 Mexico, BBU, INC., 225 
Business Center Drive, Horsham, Pennsylvania 19044, and Sara Lee 
Corporation, 3500 Lacey Road, Downers Grove, Illinois 60515, 
Defendants.

Case: 1:11-cv-01857.
Assigned To: Sullivan, Emmet G.
Assign Date: 10/21/2011.
Description: Antitrust.

Complaint

    The United States of America (``United States''), acting under the 
direction of the Attorney General of the United States, brings this 
civil action to enjoin the proposed acquisition of the North American 
Fresh Bakery business of Defendant Sara Lee Corporation (``Sara Lee'') 
by Defendants Grupo Bimbo S.A.B. de C.V. (``Grupo Bimbo'') and BBU, 
Inc. (collectively ``BBU''), and to obtain other equitable relief. The 
acquisition would likely substantially lessen competition in the market 
for sliced bread in eight relevant geographic markets in the United 
States, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and 
result in higher prices for consumers of sliced bread in these markets. 
The United States alleges as follows:

I. Nature of the Action

    1. On November 9, 2010, BBU agreed to acquire the North American 
Fresh Bakery business of Sara Lee (by acquiring all of the shares of 
Sara Lee Bakery Group, Inc. and Sara Lee Vernon LLC).
    2. BBU and Sara Lee compete in the sale of sliced bread, which they 
sell under a variety of well-known brands. They are among the four 
largest sellers of sliced bread in the eight relevant geographic 
markets alleged below; in four of the relevant geographic markets, they 
are the two largest.
    3. BBU and Sara Lee compete aggressively with each other in the 
relevant markets. The head-to-head competition between the companies 
results in lower prices for consumers and improved service to 
retailers.
    4. As alleged in greater detail below, the proposed acquisition 
would substantially increase concentration among sellers of sliced 
bread in each of the relevant geographic markets and eliminate the 
substantial head-to-head competition between BBU and Sara Lee, likely 
leading to higher prices and reduced service, and substantially 
lessening competition in the sale of sliced bread in the relevant 
markets. Therefore, the proposed acquisition violates Section 7 of the 
Clayton Act.

II. Jurisdiction, Venue, and Interstate Commerce

    5. 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. 
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.
    6. BBU and Sara Lee manufacture, market, and sell sliced bread and 
other consumer products in the flow of interstate commerce, and their 
production and sale of these products substantially affect interstate 
commerce. BBU and Sara Lee transact business and are found in the 
District of Columbia, through, among other things, the sale of consumer 
products to grocery stores in this District. Venue is proper in this 
District for Sara Lee and BBU, Inc. under Section 12 of the Clayton 
Act, 15 U.S.C. 22. Venue is proper in this District for Grupo Bimbo, a 
Mexican corporation, under 28 U.S.C. 1391(d).
    7. Defendants have consented to personal jurisdiction and venue in 
this judicial district.

III. The Defendants

    8. Grupo Bimbo is a corporation organized under the laws of Mexico, 
with headquarters in Mexico City. It controls BBU, Inc., a Delaware 
corporation headquartered in Horsham, Pennsylvania, through which Grupo 
Bimbo carries out its baking business in the United States, including 
but not limited to sliced bread. Grupo Bimbo had more than $8 billion 
in worldwide sales in 2009. In the same year, BBU's sales in the United 
States totaled approximately $3.9 billion. BBU sells sliced bread under 
a variety of national and regional brand names, including Bimbo, 
Arnold, Brownberry, Oroweat, Roman Meal, Freihofer's, Maier's, Mrs 
Baird's, Stroehmann, and Weber's. BBU also makes and sells Thomas' 
English muffins and Entenmann's sweet baked goods.
    9. Sara Lee is a corporation organized under the laws of Maryland, 
with headquarters in Downers Grove, Illinois. Sara Lee had more than 
$10 billion in worldwide revenues in fiscal 2010. That year, Sara Lee's 
North American Fresh Bakery division had approximately $2.1 billion in 
sales. Sara Lee sells sliced bread under a variety of brand names, 
including the ``Sara Lee'' brand family (including Sara Lee, Sara Lee 
Classic, Sara Lee Soft & Smooth, Sara Lee Hearty & Delicious, and Sara 
Lee Delightful), EarthGrains, and regional brands such as Milton's, 
Mother's, Grandma Sycamore's, Rainbo, San Luis Sourdough, Old Home, and 
Holsum.

IV. Relevant Markets

A. Relevant Product Market--Sliced Bread

    10. The relevant product market is no broader than sliced bread. 
``Sliced bread,'' as the term is used in the industry and in this 
Complaint, is fresh sliced and bagged loaf bread sold by supermarkets, 
mass merchandisers (such as Wal-Mart), club stores (such as Costco), 
other grocery stores, and convenience stores. For purposes of this 
Complaint, ``sliced bread'' does not include breakfast breads (such as 
raisin bread or cinnamon swirl), buns and rolls, bagels or English 
muffins, or products sold by in-store bakeries.
    11. There is substantial variety and differentiation among sliced-
bread products. Sliced breads vary in price, brand, flavor, texture, 
nutritional content, ingredients (e.g., the inclusion or exclusion of 
sweeteners or artificial ingredients), and other factors. Sliced breads 
range from traditional white bread to a wide variety of wheat and whole 
grain breads, rye, sourdough, and other varieties.
    12. Sliced breads also vary in shape. ``Traditional'' breads are 
baked in longer, narrower loaf pans and are often used as sandwich 
bread; ``wide pan'' breads are shorter and wider (and typically denser) 
than traditional breads. Traditional breads are often targeted to 
families with younger children. Wide pan breads are marketed as having 
greater nutritional value, and are typically sold at higher prices than 
traditional breads.
    13. Sliced breads include both branded products, which bear a brand 
owned by or licensed to the baker (such as BBU's Arnold or Sara Lee's 
EarthGrains), and private-label products, which bear a brand owned by 
the retailer (such as Wal-Mart's Great Value). Large baking companies, 
including BBU and Sara Lee, make and

[[Page 67211]]

sell both branded and private-label bread.
    14. Industry participants consider sliced breads to be a distinct 
set of products from other bakery products. Sliced bread sellers 
monitor the prices of competing sliced-bread products and set the 
prices of their sliced-bread products accordingly, and do not typically 
set sliced-bread prices based on prices of consumer products other than 
sliced bread.
    15. There are no adequate substitutes for sliced bread for most 
consumers. Most consumers purchase sliced bread to make sandwiches or 
toast, among other uses. Consumers are unlikely to substitute other 
bakery or food products for sliced bread for these and other uses. 
Therefore, a hypothetical monopolist producer of sliced bread would 
find it profitable to increase its prices by a small but significant 
and non-transitory amount. Accordingly, sliced bread is a relevant 
product market and a line of commerce within the meaning of Section 7 
of the Clayton Act.

B. Relevant Geographic Markets

    16. The metropolitan and surrounding areas of San Diego, Los 
Angeles, San Francisco and Sacramento, California; Kansas City, Kansas; 
Omaha, Nebraska; Oklahoma City, Oklahoma; and Harrisburg/Scranton, 
Pennsylvania, each are relevant geographic markets.
    17. The relevant geographic markets for analyzing the effects of 
this acquisition on competition are best defined by reference to the 
locations of the retailers that purchase sliced bread for sale to 
consumers, rather than by the location of bakeries. This approach to 
defining the relevant geographic markets is appropriate because bakers 
can price discriminate to their retailer customers based on location--
i.e., price differently to retailers in different locations based on 
local competitive conditions--and the retailers cannot defeat these 
price differences through arbitrage.
    18. Where sellers can successfully price discriminate based on 
customer location, the goal of geographic market definition is to 
identify the area encompassing the locations of potentially targeted 
customers. The relevant geographic markets identified above encompass 
the locations of retailers that could likely be targeted for price 
increases for sliced bread as a result of this transaction. For each of 
these geographic markets, the participants in each market are those 
sellers who currently sell sliced bread into that area, regardless of 
the location of the sellers' production facilities.
    19. Arbitrage across each of these geographic areas is unlikely to 
occur. Arbitrage would occur if a retailer in a higher-priced area were 
supplied with goods that had been sold to a retailer in a lower-priced 
area. Arbitrage of sliced bread between metropolitan areas is 
prohibitively costly because the retailer would incur substantial 
transportation costs to ship bread from another retailer to its store 
locations. In addition, arbitrage would be costly because it would 
require retailers to forego the ``direct store delivery'' (``DSD'') 
services provided by the bakery, which include delivering bread up to 
five times a week, stocking their shelves and displays, and removing 
stale or dated loaves.
    20. Accordingly, a hypothetical monopolist seller of sliced bread 
to retailers in each of the eight geographic areas identified in 
Paragraph 16 would find it profitable to increase its prices by a small 
but significant and non-transitory amount. Therefore, the geographic 
areas identified in Paragraph 16 are relevant geographic markets and 
``sections of the country'' within the meaning of Section 7 of the 
Clayton Act.

V. Likely Anticompetitive Effects

    21. Each of the relevant markets for sliced bread would be highly 
concentrated, and concentration would increase substantially in each of 
the relevant markets, as a result of the acquisition. Specifically,
    a. In San Diego, Defendants are the two largest sellers of sliced 
bread, with a combined market share of approximately 63 percent (in 
dollars).
    b. In Los Angeles, Defendants are the two largest sellers of sliced 
bread, with a combined market share of approximately 58 percent.
    c. In San Francisco, BBU is the largest seller of sliced bread, and 
Sara Lee is the third largest, with a combined market share of 
approximately 56 percent.
    d. In Sacramento, Defendants are the two largest sellers of sliced 
bread, with a combined market share of approximately 59 percent.
    e. In Kansas City, Sara Lee is the largest seller of sliced bread, 
and BBU is the third largest, with a combined market share of 
approximately 52 percent.
    f. In Omaha, Sara Lee is the largest seller of sliced bread, and 
BBU is the third largest, with a combined market share of approximately 
52 percent.
    g. In Oklahoma City, Sara Lee is the largest seller of sliced 
bread, and BBU is the fourth largest, with a combined market share of 
approximately 53 percent.
    h. In Harrisburg and Scranton, Defendants are the two largest 
sellers of sliced bread, with a combined market share of approximately 
56 percent.
    22. BBU and Sara Lee compete vigorously in the sale of sliced bread 
in the relevant geographic markets on price, promotions, variety, 
flavor, texture, shape, nutrition, and ingredients. They compete for 
retailers' business and for shelf and display space in retailers' 
stores by, among other things, offering lower wholesale prices and 
larger promotional discounts, which lower the prices paid by consumers 
of sliced bread.
    23. Consumers vary in their preferences for particular sliced bread 
products, and bakers and retailers offer a wide variety of sliced bread 
products to meet consumer preferences. Consumers consider many factors 
when choosing sliced-bread products, including brand, flavor, texture, 
nutritional content, shape, ingredients, and price. BBU and Sara Lee 
each make and sell a wide variety of sliced-bread products, under a 
portfolio of brands that have been developed over many years, to meet 
this diverse consumer demand.
    24. Bread brands convey information to consumers regarding quality, 
value, nutrition, and other attributes, and are an important factor in 
many consumers' buying decisions. Branded sliced breads typically sell 
at significantly higher prices than similar private-label sliced 
breads, indicating that many consumers value the qualities they 
associate with branded sliced breads.
    25. BBU's wide-pan variety breads, sold under the Oroweat and 
Arnold brands in the relevant markets, are similar in shape, flavor, 
texture, image, and price to Sara Lee's wide-pan variety breads sold 
under the Sara Lee Hearty & Delicious and EarthGrains brands in the 
relevant markets. Similarly, Sara Lee sells traditional soft white and 
wheat bread in the relevant markets under the Sara Lee Soft & Smooth 
brand and other brands, which are similar in shape, flavor, texture, 
image, and price to traditional soft white bread sold by BBU under the 
Bimbo, Mrs Baird's, Stroehmann, Freihofer's, Weber's, and other brands 
in the relevant markets.
    26. BBU and Sara Lee recognize that many of their sliced-bread 
products are close substitutes for each other's products, and a 
significant number of consumers in the relevant markets regard BBU and 
Sara Lee branded sliced-bread products as their first and second 
choices in sliced-bread products.
    27. The acquisition would eliminate the substantial head-to-head 
competition between BBU and Sara Lee

[[Page 67212]]

for sliced-bread sales to retailers and consumers, and allow BBU 
profitably to raise prices and decrease the services that it provides 
to retailers in the relevant markets.
    28. A price increase by BBU in a relevant market likely would 
result in the loss of substantial sales to Sara Lee, because, as 
previously alleged, a substantial number of consumers view BBU and Sara 
Lee breads as close substitutes. Prior to the acquisition, BBU would 
have lost the profits on the sales it loses to Sara Lee (and others) as 
a result of such a price increase. Following the acquisition, BBU would 
own the Sara Lee products, and would retain the profits that it would 
otherwise lose when consumers switch to Sara Lee products, in addition 
to earning higher profits on the sale of BBU products, which it would 
retain. Because those sales of Sara Lee products are likely profitable, 
a price increase by BBU would be profitable after the acquisition. The 
same profit motive would apply to an increase in the prices of Sara Lee 
bread, recaptured through sales of BBU bread. Therefore, BBU likely 
would unilaterally raise prices as a result of the acquisition.
    29. The significant increase in market concentration that the 
proposed acquisition would produce in the relevant markets, combined 
with the loss of head-to-head competition between BBU and Sara Lee, is 
likely to substantially lessen competition in violation of Section 7 of 
the Clayton Act, resulting in higher prices for retailers and consumers 
of sliced bread.

VI. Absence of Countervailing Factors

A. Entry

    30. Responses from competitors and new entry are unlikely to 
prevent the acquisition's likely anticompetitive effects. Barriers to 
entering these markets include: (i) The substantial time and expense 
required to build a brand reputation to overcome existing consumer 
preferences; (ii) the substantial sunk costs for promotional and 
advertising activity needed to secure the distribution and placement of 
a new entrant's sliced-bread products in retail outlets; (iii) the 
difficulty of securing shelf-space in retail outlets; (iv) the time and 
cost of building new bakeries and other facilities; and (v) the time 
and cost of developing delivery routes.

B. Efficiencies

    31. The proposed acquisition is unlikely to generate verifiable, 
merger-specific, cognizable efficiencies sufficient to reverse the 
likely competitive harm of the acquisition.

VII. Violation Alleged

    32. The United States hereby repeats and realleges the allegations 
of paragraphs 1 through 31 as if fully set forth herein.
    33. BBU's proposed acquisition of Sara Lee would likely 
substantially lessen competition in interstate trade and commerce, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and would 
likely have the following effects, among others:
    (a) Actual and potential competition in the relevant markets 
between BBU and Sara Lee for sales of sliced bread would be eliminated; 
and
    (b) Competition generally in the relevant markets for sliced bread 
would be substantially lessened.

VIII. Request for Relief

    The United States requests:
    (a) That the Court adjudge the proposed acquisition to violate 
Section 7 of the Clayton Act, 15 U.S.C. 18;
    (b) That the Court permanently enjoin and restrain the Defendants 
from carrying out the proposed acquisition or from entering into or 
carrying out any other agreement, understanding, or plan by which Sara 
Lee would be acquired by, acquire, or merge with BBU;
    (c) That the Court award the United States the costs of this 
action; and
    (d) That the Court award such other relief to the United States as 
the Court may deem just and proper.

    Respectfully submitted,

    Dated: October 21, 2011.

    For Plaintiff United States:

/s/ Sharis A. Pozen
Sharis A. Pozen (DC Bar 446732),
Acting Assistant Attorney General for Antitrust.

/s/ Patricia A. Brink
PATRICIA A. BRINK
Director of Civil Enforcement.

/s/ Joshua H. Soven
JOSHUA H. SOVEN (DC Bar 436633)
Chief.

PETER J. MUCCHETTI (DC Bar 463202)
Assistant Chief, Litigation I Section.

/s/ Michelle Seltzer
Michelle Seltzer* (DC Bar 475482)
Attorney, Litigation I Section, Antitrust Division, U.S. Department 
of Justice, 450 Fifth Street NW., Suite 4100, Washington, DC 20530, 
Telephone: (202) 353-3865, Facsimile: (202) 307-5802, Email: 
michelle.seltzer@usdoj.gov.

Alvin Chu,
Barry Creech (DC Bar 421070),
Scott Fitzgerald,
Adam Gitlin,
Peter Gray,
David Gringer,
Ryan Kantor,
David Kelly,
Richard Liebeskind (DC Bar 479309),
Mark Merva (DC Bar 451743),
Julie Tenney,
Kevin Yeh,
Attorneys for the United States.

    *Attorney of Record.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. Grupo Bimbo, S.A.B. de C.V., et 
al., Defendants.

Case: 1:11-cv-01857.
Assigned To: Sullivan, Emmet G.
Assign Date: 10/21/2011.
Description: Antitrust.

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 filed a civil antitrust Complaint on October 21, 
2011, seeking to enjoin the proposed acquisition of the North American 
Fresh Bakery business of Defendant Sara Lee Corporation (``Sara Lee'') 
by Defendants Grupo Bimbo S.A.B. de C.V. (``Grupo Bimbo'') and BBU, 
Inc. (collectively ``BBU''), alleging that the acquisition likely would 
substantially lessen competition in the market for sliced bread in 
eight relevant geographic markets in the United States, in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18. The loss of competition 
caused by the acquisition likely would result in higher prices for 
consumers of sliced bread in those markets.
    At the same time the Complaint was filed, the United States filed a 
Hold Separate Stipulation and Order (``Hold Separate'') and proposed 
Final Judgment, which will substantially eliminate the anticompetitive 
effects that would result from the acquisition. Under the proposed 
Final Judgment, which is explained more fully below, BBU is required to 
divest certain brands of sliced bread and related assets to one or more 
acquirers approved by the United States, in the markets where 
anticompetitive effects are likely. Under the Hold Separate, BBU and 
Sara Lee must take certain steps to ensure that the assets being 
divested continue to be operated in a competitively and economically 
viable manner and that competition for the products being

[[Page 67213]]

divested is maintained during the pendency of the divestiture.
    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered by the Court 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 Final Judgment and 
to punish violations thereof.

II. Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Acquisition

    Defendant BBU is the largest sliced-bread baker and seller in the 
United States, operating 33 bakeries, 21 transportation depots, and 
more than 7,000 sales routes.\1\ In 2009, BBU's sales in the United 
States totaled approximately $3.9 billion. BBU owns many of the major 
brand names in the sliced-bread industry, including Bimbo, Arnold, 
Brownberry, Oroweat, Mrs Baird's, Stroehmann, Freihofer, and Weber's.
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    \1\ Defendant Grupo Bimbo, a Mexican corporation headquartered 
in Mexico City, operates in the United States through its subsidiary 
BBU, Inc.
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    Defendant Sara Lee's North American Fresh Bakery division is the 
third largest sliced-bread producer in the United States. Sara Lee 
operates 41 bakeries and approximately 4,800 sales routes in the United 
States. In fiscal year 2010, Sara Lee's North American Fresh Bakery 
division had $2.1 billion in sales. The majority of Sara Lee's bread 
sales are made under brands in the ``Sara Lee'' brand family, but Sara 
Lee also has substantial sales under its EarthGrains brand and various 
regional brands, including Milton's, Mother's, Grandma Sycamore's, 
Rainbo, San Luis Sourdough, Old Home, and Holsum.
    On or about November 9, 2010, BBU entered into an agreement to 
acquire Sara Lee's North American bread-baking business by acquiring 
all of the shares of Sara Lee Bakery Group, Inc. and Sara Lee Vernon 
LLC (the ``Acquisition'').

B. Relevant Markets

1. The Relevant Product Market Is No Broader Than Sliced Bread
    The Complaint alleges that the relevant product market is no 
broader than sliced bread. Sliced bread is fresh sliced and bagged loaf 
bread sold by supermarkets, mass merchandisers (such as Wal-Mart), club 
stores (such as Costco), other grocery stores, and convenience stores. 
There is substantial variety and differentiation among sliced-bread 
products. Sliced breads vary in price, brand, flavor, texture, 
nutritional content, ingredients (e.g., the inclusion or exclusion of 
sweeteners or artificial ingredients), and other factors. Sliced breads 
range from traditional white bread to a wide variety of wheat and whole 
grain breads, rye, sourdough, and other varieties.
    Sliced breads also vary in shape. ``Traditional'' breads are baked 
in longer, narrower loaf pans and often used as sandwich bread. ``Wide 
pan'' breads are shorter and wider (and typically denser) than 
traditional breads. Traditional breads are often targeted to families 
with younger children. Wide-pan breads are marketed as having greater 
nutritional value, and are typically sold at higher prices than 
traditional breads.
    Sliced breads include branded products, which bear a brand owned by 
or licensed to the baker (such as BBU's Arnold or Sara Lee's 
EarthGrains), and private-label products, which bear a brand owned by 
the retailer (such as Wal-Mart's Great Value). Most large baking 
companies, including BBU and Sara Lee, make and sell branded and 
private-label bread.
    There are no adequate substitutes for sliced bread for most 
consumers. Most consumers purchase sliced bread to make sandwiches or 
toast, among other uses, and are unlikely to substitute other bakery or 
food products for sliced bread for these and other uses. Therefore, a 
hypothetical monopolist producer of sliced bread would find it 
profitable to increase its prices by a small but significant and non-
transitory amount. Accordingly, sliced bread is a relevant product 
market and a line of commerce within the meaning of Section 7 of the 
Clayton Act.
2. The Relevant Geographic Markets Are Local
    The Complaint alleges that the San Francisco, San Diego, 
Sacramento, Los Angeles, Harrisburg/Scranton, Kansas City, Kansas, 
Omaha, and Oklahoma City metropolitan and surrounding areas each 
constitute relevant geographic markets for the sale of sliced bread. 
Each geographic market is defined with respect to the location of 
customers (e.g., grocery stores), rather than the location of 
manufacturers (i.e., bakeries), because, as the Complaint alleges, 
sliced-bread suppliers can price discriminate across local geographic 
markets.
    The appropriateness of defining the geographic market as a price-
discrimination market based on the location of the customers is 
explained in the 2010 Horizontal Merger Guidelines issued by the U.S. 
Department of Justice and the Federal Trade Commission. Under the 
Guidelines analysis, ``[f]or price discrimination to be feasible, two 
conditions typically must be met: differential pricing and limited 
arbitrage.'' U.S. Dept. of Justice & FTC, Horizontal Merger Guidelines 
3 (2010) (hereinafter ``Horizontal Merger Guidelines''). If these 
conditions are met, ``a hypothetical profit-maximizing firm that was 
the only present or future seller of the relevant product(s) to 
customers in the region would impose at least a [small price increase] 
on some customers in the specified region.'' Horizontal Merger 
Guidelines 4.2.2. So long as this price increase would not be defeated 
by arbitrage, the targeted region constitutes a relevant geographic 
market. Id.
    Sliced-bread suppliers can charge different prices for the same 
product (net of transportation costs) in different metropolitan areas. 
Sliced-bread suppliers compete for retailers' business and for shelf 
and display space in retailers' stores by, among other things, offering 
lower wholesale list prices and larger promotional discounts, which 
lower the prices paid by consumers of sliced bread. List prices and 
promotional activity are regularly determined after a consideration of 
the competitive conditions in a particular geographic area. Even with 
larger retailers that have a national or regional footprint, there are 
different pricing and promotional strategies that are influenced by the 
degree of competition in a particular area.
    Geographic price discrimination by sliced-bread suppliers is 
possible because the cost of arbitrage is prohibitively expensive. 
Arbitrage would occur if a retailer in a higher-priced area were 
supplied with goods previously sold to a retailer in a lower-priced 
area. Arbitrage of sliced bread between metropolitan areas is very 
costly because the retailer would incur substantial transportation 
costs to ship bread from another retailer to its store locations. In 
addition, arbitrage would require retailers to forego the ``direct 
store delivery'' (``DSD'') services provided by the bread manufacturer, 
which include delivering bread to their stores up to five times a week, 
stocking their shelves and displays, and removing stale or dated 
loaves. Accordingly, arbitrage of sliced bread is unlikely to occur or 
to eliminate disparities in wholesale prices between metropolitan 
areas. Therefore, a hypothetical monopolist seller of sliced bread to 
retailers in each of the geographic areas identified above would find 
it profitable to increase its prices by

[[Page 67214]]

a small but significant and non-transitory amount. Therefore, the eight 
geographic areas identified in the Complaint are relevant geographic 
markets and ``sections of the country'' within the meaning of Section 7 
of the Clayton Act.

C. The Acquisition Is Likely To Substantially Lessen Competition in the 
Sale of Sliced Bread in Each of the Relevant Geographic Markets

    The Complaint alleges that the Acquisition is likely to 
substantially lessen competition in the sale of sliced bread in the 
relevant geographic markets. The Acquisition would result in the 
relevant markets being highly concentrated, giving BBU a dominant share 
of the sliced bread market. In San Diego, BBU would have 63 percent of 
the sliced bread market; in Sacramento 59 percent; in Los Angeles 58 
percent; in San Francisco 56 percent; in Omaha 52 percent; in Oklahoma 
City 53 percent; in Kansas City 52 percent; and in Harrisburg/Scranton 
56 percent.\2\
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    \2\ All of the market shares in the following paragraphs are 
rounded off to the nearest percentage point. As a consequence, the 
post-Acquisition market share of BBU need not be exactly equal to 
the sum of the pre-Acquisition shares of the BBU brands and the Sara 
Lee brands minus the pre-Acquisition share attributable to the 
divested brands.
---------------------------------------------------------------------------

    In addition, BBU and Sara Lee are among each other's most important 
competitors in the relevant markets, and in some relevant markets are 
particularly close competitors within certain market segments, such as 
wide-pan and traditional sliced bread. The Defendants regularly set 
prices and offer promotions in response to competition from each other, 
or to win market share from each other. Consumers benefit from this 
competition in the form of lower prices, innovative and healthier 
products, and a greater variety of choices of sliced-bread products. As 
discussed below, new entry is unlikely to eliminate the Acquisition's 
anticompetitive effects.
1. The Loss of Competition Between the Defendants in the Relevant 
Geographic Markets Is Likely To Lead to Post-Acquisition Price 
Increases
    For a substantial number of consumers in the relevant markets, BBU 
and Sara Lee branded sliced-bread products are close substitutes. BBU's 
wide-pan variety breads, sold under the Oroweat and Arnold brands in 
the relevant markets, are similar in shape, flavor, texture, image, and 
price to Sara Lee's wide-pan variety breads sold under the Sara Lee 
Hearty & Delicious and EarthGrains brands in the relevant geographic 
markets. Similarly, Sara Lee sells traditional soft white and wheat 
bread in the relevant markets under the Sara Lee Soft & Smooth brand 
and other brands, which are similar in shape, flavor, texture, image, 
and price to traditional soft white bread sold by BBU under the Bimbo, 
Mrs Baird's, Stroehmann, Freihofer's, Weber's, and other brands in the 
relevant geographic markets. BBU and Sara Lee recognize that many of 
their sliced-bread products are close substitutes for each other's 
products, and they engage in substantial head-to-head competition for 
sales of these substitute products.
    The loss of the head-to-head competition between the Defendants is 
likely to produce unilateral anticompetitive effects. See Horizontal 
Merger Guidelines 6.0. Because a substantial number of consumers view 
BBU and Sara Lee breads as closest substitutes, BBU is likely to 
increase prices post-transaction. Prior to the Acquisition, a price 
increase by BBU in a relevant market likely would result in the loss of 
substantial sales to Sara Lee. BBU would have lost the profits on the 
sales it loses to Sara Lee (and others) as a result of the price 
increase. Following the Acquisition, however, BBU would own the Sara 
Lee products, and would retain the profits that it would otherwise lose 
when consumers switch to Sara Lee products, in addition to earning 
higher profits on the sale of BBU products, which it would retain. 
Because those sales of Sara Lee products likely are profitable, a price 
increase by BBU likely would be profitable after the Acquisition. The 
same profit motive would apply to an increase in the prices of Sara Lee 
bread, recaptured through sales of BBU bread. Therefore, BBU likely 
would raise prices unilaterally as a result of the Acquisition.
    For a unilateral price increase to be profitable, the brands at 
issue need not be the closest substitutes for all consumers. A merger 
``may produce significant unilateral effects for a given product even 
though many more sales are diverted to products sold by non-merging 
firms than to products previously sold by the merger partner.'' 
Horizontal Merger Guidelines Sec.  6.1. All that is required is that a 
significant proportion of customers regard the breads as their first 
and second choices. Id. The Complaint alleges that this condition is 
met in each of the relevant geographic markets with respect to the BBU 
and Sara Lee brands.
2. Entry Is Unlikely To Prevent the Acquisition's Anticompetitive 
Effects
    The Complaint alleges that entry by new firms is not likely to 
prevent the Acquisition's anticompetitive effects. Entry by new firms 
will not prevent an acquisition's anticompetitive effects unless that 
entry is likely to occur in a timely manner and is sufficient to deter 
those anticompetitive effects. Horizontal Merger Guidelines Sec.  9.
    Entry into the sliced-bread business is unlikely to prevent 
anticompetitive effects because there are substantial barriers to entry 
in a timely manner. First, a well-established brand is crucial to the 
sale of sliced bread, and developing that brand equity is difficult and 
time-consuming. Consumers are reluctant to try new brands unless they 
are heavily promoted through advertising and especially aggressive 
pricing. In addition, constructing a new bakery is time-consuming. From 
the time a decision to build a new bakery is made, it can take six 
months to acquire the land; construction can then take 12 to 18 months.
    Nor is it likely that any existing competitors in the relevant 
markets would expand their output or reposition their products to 
constrain a price increase by the leading firms. The other competitors 
either lack sufficient brand equity, or their production capacity 
serving the relevant markets is too small to constrain a post-merger 
price increase.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment requires significant divestitures that 
will preserve competition in the market for sliced bread. Within 90 
calendar days after filing of the Complaint (subject to up to two 30-
day extensions) or five calendar days after entry of a Final Judgment 
by the Court, whichever is later, the Defendants are required to divest 
a perpetual, royalty-free, assignable, transferable, exclusive license 
to use the following brands and associated assets to an acquirer or 
acquirers that has or have the intent and capability (including the 
necessary managerial, operational, technical, and financial capability) 
to compete effectively in the manufacture and sale of sliced bread in 
each geographic market. To prevent the splitting of a divested brand 
between BBU and the acquirer within a relevant market, in most 
instances the proposed Final Judgment provides that for each brand of 
sliced bread required to be divested, the divestiture will include 
additional fresh bread products sold under that brand, i.e., buns, 
rolls, sandwich thins, thin buns, etc.
    In Los Angeles, San Diego, San Francisco, and Sacramento, 
California, the Defendants are required to divest the

[[Page 67215]]

Sara Lee family of brands (which includes Sara Lee, Sara Lee Classic, 
Sara Lee Soft & Smooth, Sara Lee Hearty & Delicious, and Sara Lee 
Delightful) and the EarthGrains brand. In Harrisburg/Scranton, 
Pennsylvania, the Defendants are required to divest the Holsum and 
Milano brands. In Kansas City, Kansas, the Defendants are required to 
divest the EarthGrains and Mrs Baird's brands. In Omaha, Nebraska, the 
Defendants are required to divest the EarthGrains and Healthy Choice 
brands. In Oklahoma City, Oklahoma, the Defendants are required to 
divest the EarthGrains brand. These divestitures target the loss of 
competition between BBU and Sara Lee in each particular market and will 
prevent or significantly reduce the increase in concentration that the 
transaction would otherwise produce in the relevant markets.
     In Los Angeles, BBU brands currently account for 41 
percent of the sliced bread market and Sara Lee brands currently 
account for 18 percent. The divestiture in Los Angeles of EarthGrains 
and the Sara Lee family brands, which together account for 17 percent 
of the sliced-bread market, will reduce the merged firm's post-
Acquisition market share to 41 percent.
     In San Diego, BBU brands currently account for 46 percent 
of the sliced-bread market and Sara Lee brands currently account for 17 
percent. The divestiture in San Diego of EarthGrains and the Sara Lee 
family of brands, which together account for 15 percent of the sliced-
bread market, will reduce the merged firm's post-Acquisition market 
share to 48 percent.
     In San Francisco, BBU brands currently account for 44 
percent of the sliced-bread market and Sara Lee brands currently 
account for 12 percent. The divestiture in San Francisco of EarthGrains 
and the Sara Lee family of brands, which together account for 8 percent 
of the sliced-bread market, will reduce the merged firm's post-
Acquisition market share to 47 percent.
     In Sacramento, BBU brands currently account for 34 percent 
of the sliced-bread market and Sara Lee brands currently account for 25 
percent. The divestiture in Sacramento of EarthGrains and the Sara Lee 
family of brands, which together account for 15 percent of the sliced-
bread market, will reduce the merged firm's post-Acquisition market 
share to 44 percent.
     In Kansas City, BBU brands currently account for 17 
percent of the sliced-bread market and Sara Lee brands currently 
account for 35 percent. The divestiture in Kansas City of EarthGrains 
and Mrs Baird's, which together account for 9 percent of the sliced-
bread market, will reduce the merged firm's post-Acquisition market 
share to 43 percent.
     In Omaha, BBU brands currently account for 14 percent of 
the sliced-bread market and Sara Lee brands currently account for 38 
percent. The divestiture in Omaha of EarthGrains and Healthy Choice, 
which together account for 5 percent of the sliced-bread market, will 
reduce the merged firm's post-Acquisition market share to 47 percent.
     In Oklahoma City, BBU brands currently account for 7 
percent of the sliced-bread market and Sara Lee brands currently 
account for 46 percent. The divestiture in Oklahoma City of 
EarthGrains, which accounts for 6 percent of the sliced-bread market, 
will reduce the merged firm's post-Acquisition market share to 47 
percent.
     In Harrisburg/Scranton, BBU brands currently account for 
44 percent of the sliced-bread market and Sara Lee brands currently 
account for 12 percent. The divestiture in Harrisburg/Scranton of 
Holsum and Milano, which together account for 8 percent of the sliced-
bread market, will reduce the merged firm's post-Acquisition market 
share to 49 percent.
    The United States' analysis of the proposed Acquisition indicates 
that the acquisition of all of the Sara Lee brands of sliced bread in 
each of these eight geographic areas would have created an incentive 
for BBU to raise prices on BBU and Sara Lee brands of sliced bread 
because, in the event of a price increase, a significant portion of the 
lost sales from either the BBU or the Sara Lee portfolio of brands 
would be diverted to the other. In each geographic area, the 
divestiture, by separating the ownership of several closely competing 
brands, prevents the Acquisition from creating any significant 
incentive for the merged firm to raise the price of sliced bread.
    In addition, as stated above, without the required divestitures, 
the Acquisition would have created substantial increases in the merged 
firm's sliced-bread market share in multiple geographic markets. The 
divestitures reduce those increases to no more than 4 percentage points 
in all but three markets: Sacramento (10 points), Omaha (9 points), and 
Kansas City (9 points). These incremental share gains in these three 
geographic markets do not pose substantial competitive concerns because 
they will result from the combination of brands that are largely in 
different segments of the sliced-bread market--i.e., combining 
traditional breads and wide pan breads. Combining ownership of brands 
that consumers consider to be relatively distant substitutes for each 
other is less likely to raise competitive concerns than combining 
closer substitutes. The required divestitures mandate the sale of the 
Defendants' brands that most closely and directly compete in order to 
preserve competition in the segments of the market where they are very 
close substitutes for each other.
    In Sacramento, the Sara Lee brands required to be divested are 
those that compete strongly with BBU brands. The Sara Lee brands that 
BBU will retain, in particular Rainbo, San Luis Sourdough, and Old 
Home, do not compete as directly with BBU brands, and thus present BBU 
with little incentive to increase prices post-Acquisition. In Omaha, 
BBU and Sara Lee primarily compete in the sale of wide-pan bread. BBU 
is not a significant competitor in Omaha in the traditional bread 
segment. Although wide-pan bread is a small part of the overall sliced-
bread market, the divestiture of the EarthGrains and Healthy Choice 
brands protects the competition in this segment that the Acquisition 
would otherwise have reduced. The increased market share that BBU will 
retain in Omaha after the divestiture largely comes from BBU's 
acquisition of Sara Lee's traditional bread products, which is unlikely 
to reduce competition because BBU has not been a significant competitor 
in the sale of traditional bread in the Omaha metropolitan area.
    In Kansas City, BBU and Sara Lee compete in both the traditional 
and wide-pan segments. The required divesture of BBU's traditional Mrs 
Baird's brand and Sara Lee's wide-pan EarthGrains brand targets 
competition in each of these segments. The small increase in market 
share of sliced bread that BBU likely will retain after the 
divestitures in Kansas City largely comes from combining BBU's wide-pan 
bread brands with Sara Lee's traditional bread brands, which is 
unlikely to create a significant competitive concern.
    In addition to a perpetual, royalty-free, assignable, transferable, 
exclusive license to use the particular brands of sliced bread, the 
proposed Final Judgment requires with respect to each relevant 
geographic market the divestiture of related tangible assets, including 
records, customer information, and other assets related to the divested 
brands. It also requires the divestiture of related intangible assets, 
including the rights to trade dress, trademarks, trade secrets, and 
other intellectual property used in the research, development, 
production, marketing, servicing, distribution, or sale of the brands 
being divested.
    In addition, effective divestitures probably will require the sale 
of

[[Page 67216]]

manufacturing plants and equipment used primarily to manufacture the 
divested brands, as well as distribution facilities, routes, route 
assets, and other tangible assets used in connection with those 
manufacturing plants. Accordingly, the proposed Final Judgment requires 
the divestiture of brand-related plants and plant-related assets, but 
it also provides that the Defendants need not divest those assets in 
the event that (1) the acquirer does not want those assets, and (2) the 
United States determines in its sole discretion that a divestiture of 
some or all of such assets is not reasonably necessary to enable the 
acquirer to replace the competition that otherwise would have been lost 
pursuant to the Acquisition.
    The proposed Final Judgment provides that there will be a single 
acquirer of all brands and brand-related assets required to be divested 
in California, and that there may be different acquirers in different 
relevant markets outside of California. As stated above, to prevent the 
splitting of a divested brand between BBU and the acquirer within a 
relevant market, in most instances the proposed Final Judgment provides 
that for each brand of sliced bread required to be divested, the 
divestiture will include additional fresh-bread products sold under 
that brand, i.e., buns, rolls, sandwich thins, thin buns, etc.
    The proposed Final Judgment provides that the assets must be 
divested in such a way as to satisfy the United States, in its sole 
discretion, that an acquirer or acquirers can and will use the assets 
as part of a viable, ongoing business engaged in the sale of sliced 
bread in the metropolitan and surrounding areas of Los Angeles, San 
Diego, San Francisco, Sacramento, Harrisburg, Scranton, Kansas City, 
Kansas, Omaha, and Oklahoma City.
    Section V of the proposed Final Judgment provides that if 
Defendants do not accomplish the ordered divestitures within the 
prescribed time period, the Court will appoint a trustee, selected by 
the United States, to complete the divestitures. If a trustee is 
appointed, the proposed Final Judgment provides that Defendants must 
cooperate fully with the trustee and pay all of the trustee's costs and 
expenses. The trustee's compensation will be structured to provide an 
incentive for the trustee to maximize the price and terms of the 
divestitures and the speed with which they are accomplished. After the 
trustee's appointment becomes effective, the trustee will file monthly 
reports with the United States and the Court setting forth the 
trustee's efforts to accomplish the required divestitures.
    The proposed Final Judgment provides that if a trustee is 
appointed, the trustee may make the ordered divestitures in California 
to different acquirers, so long as the United States is satisfied that 
the California divestiture assets will remain viable and the 
divestiture of such assets will remedy the competitive harm alleged in 
the Complaint.
    At the end of six months, if the divestitures have not been 
accomplished, the trustee and the United States will make 
recommendations to the Court, which shall enter such orders as 
appropriate to carry out the purpose of the Final Judgment, including 
extending the trust or the term of the trustee's appointment.
    The proposed Final Judgment also provides that the United States 
may appoint a monitoring trustee to ensure that Defendants 
expeditiously comply with all of their obligations and perform all of 
their responsibilities under the Final Judgment and the Hold Separate 
and to ensure that the divestiture assets remain economically viable, 
competitive, and ongoing assets, and that competition in the sale of 
sliced bread in the relevant markets is maintained until the required 
divestitures have been accomplished. The monitoring trustee shall serve 
at the cost and expense of Defendants, on customary and reasonable 
terms and conditions agreed to by the monitoring trustee and 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, BBU, and Sara Lee 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 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 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 
before 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:

Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, 
United States Department of Justice, 450 Fifth Street NW., Suite 4100, 
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 a judicial 
order enjoining BBU's acquisition of Sara Lee's North American Fresh 
Bakery business. The United States is satisfied, however, that 
divestiture of the assets described in the proposed Final Judgment will 
preserve competition for the sale of sliced bread in the relevant 
geographic markets. 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.

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

[[Page 67217]]

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 
(DC 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 remedies will cure the antitrust 
violations alleged in the complaint was reasonable, and whether the 
mechanisms to enforce the final judgment are clear and 
manageable.'').\3\
---------------------------------------------------------------------------

    \3\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for courts 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).
---------------------------------------------------------------------------

    A court considers under the APPA, 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; InBev, 2009 U.S. Dist. LEXIS 84787, at *3; United States v. 
Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001). Instead:

[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).\4\ 
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'').
---------------------------------------------------------------------------

    \4\ 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 
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 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 the United States District Court for the District of Columbia 
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 using 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

[[Page 67218]]

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, 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.\5\
---------------------------------------------------------------------------

    \5\ 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 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: October 21, 2011.

    Respectfully submitted,

/s/Michelle Seltzer
Michelle Seltzer (DC Bar 475482),

David Gringer,
Attorneys, Litigation I Section, Antitrust Division, U.S. Department 
of Justice, 450 Fifth Street, NW., Suite 4100, Washington, DC 20530, 
Telephone: (202) 353-3865, Facsimile: (202) 307-5802, Email: 
michelle.seltzer@usdoj.gov.

United States District Court for the District of Columbia

United States