United States v. United Technologies Corporation and Goodrich Corporation; Public Comments and Response on Proposed Final Judgment, 22302-22331 [2013-08700]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 78, Number 72 (Monday, April 15, 2013)]
[Notices]
[Pages 22302-22331]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08700]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. United Technologies Corporation and Goodrich 
Corporation; Public Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response of 
Plaintiff United States to Public Comments on the proposed Final 
Judgment in United States v. United Technologies Corporation and 
Goodrich Corporation, Civil Action No. 1:12-cv-01230-RC, which was 
filed in the United States District Court for the District of Columbia 
on February 12, 2013. Copies of the two comments received by the United 
States from the public were also filed with the court.
    Copies of the comments, as redacted to preserve confidential 
business information, and the response 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.justice.gov/atr/cases/f295000/295087.pdf, and at the Office 
of the Clerk of the United States District Court for the District of 
Columbia. Copies of any of these materials may also be obtained upon 
request and payment of a copying fee.

Patricia A. Brink,
Director of Civil Enforcement.

Response of Plaintiff United States to Public Comments on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby responds to the public comments

[[Page 22303]]

received regarding the Proposed Final Judgment in this case. After 
careful consideration of the comments submitted, the United States 
continues to believe that the Proposed Final Judgment will provide an 
effective and appropriate remedy for the antitrust violations alleged 
in the Complaint. The United States will move the Court for entry of 
the Final Judgment after the public comments and this response have 
been published in the Federal Register, pursuant to 15 U.S.C. 16(d).

I. Procedural History

    The United States filed a civil antitrust Complaint on July 26, 
2012, seeking to enjoin United Technologies Corporation's (``UTC'') 
proposed acquisition of Goodrich Corporation (``Goodrich''). The 
Complaint alleged that the proposed acquisition likely would 
substantially lessen competition in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18, in the worldwide markets for the 
development, manufacture, and sale of large main engine generators, 
aircraft turbine engines, and engine control systems for large aircraft 
turbine engines. That loss of competition likely would result in 
increased prices, less favorable contractual terms, and decreased 
innovation in the markets for these products.
    Simultaneously with the filing of the Complaint, the United States 
filed a Proposed Final Judgment, which is designed to remedy the 
expected anticompetitive effects of the acquisition, and a Hold 
Separate Stipulation and Order signed by the plaintiffs and the 
defendants, consenting to the entry of the Proposed Final Judgment 
after compliance with the requirements of the Tunney Act, 15 U.S.C. 16. 
Pursuant to those requirements, the United States filed its Competitive 
Impact Statement (``CIS'') with the Court on July 26, 2012; the 
Proposed Final Judgment and CIS were published in the Federal Register 
on August 2, 2012, see United States v. United Technologies Corp., et 
al., 77 FR 46186; and summaries of the terms of the Proposed Final 
Judgment and CIS, together with directions for the submission of 
written comments relating to the Proposed Final Judgment, were 
published in The Washington Post for seven days beginning on July 31, 
2012 and ending on August 6, 2012. The sixty-day period for public 
comment ended on October 5, 2012; two comments were received, as 
described below and attached hereto.

II. The Investigation and the Proposed Resolution

    On September 21, 2011, UTC and Goodrich entered into a purchase 
agreement pursuant to which UTC would purchase all of the shares of 
Goodrich, a transaction that was valued at approximately $18.4 billion. 
Immediately following the announcement of the merger, the United States 
Department of Justice (the ``Department'') opened an investigation into 
the likely competitive effects of the transaction that spanned about 
ten months. As part of this detailed investigation, the Department 
issued Second Requests to the merging parties and twenty-four Civil 
Investigative Demands (``CIDs'') to third parties. The Department 
considered more than half a million documents submitted by the merging 
parties in response the Second Requests and by third parties in 
response to CIDs. The Department also took oral testimony from nine 
executives of the merging parties, and conducted approximately one 
hundred interviews with customers, competitors, and other market 
participants. The investigative staff carefully analyzed the 
information provided and thoroughly considered all of the issues 
presented.
    As part of its investigation, the Department considered the 
potential competitive effects of the merger on the markets for numerous 
products and services and on a variety of customer groups. The 
Department concluded, as explained more fully in the Complaint and CIS, 
that the acquisition of Goodrich by UTC likely would have substantially 
lessened competition in the worldwide markets for the development, 
manufacture and sale of large main engine generators, aircraft turbine 
engines, and engine control systems for large aircraft turbine engines.

A. Large Main Engine Generators

    As explained more fully in the Complaint and CIS, the acquisition 
of Goodrich by UTC likely would have lessened competition substantially 
in the market for the development, manufacture, and sale of large main 
engine generators, because UTC and Goodrich were the only significant 
competitors for those generators. As a result of the acquisition, 
customers likely would face higher prices, less favorable contractual 
terms, and less innovation, in violation of Section 7 of the Clayton 
Act.
    The Proposed Final Judgment will preserve competition by requiring 
UTC to divest the Electrical Power Divestiture Assets, i.e., all the 
Goodrich assets used to design, develop, manufacture, market, service, 
distribute, repair and/or sell aircraft electrical generation and 
electrical distribution systems. The tangible assets to be divested 
include Goodrich's facilities in Pitstone, United Kingdom, and 
Twinsburg, Ohio, as well as other tangible and intangible assets such 
as manufacturing equipment, fixed and personal property, contracts, and 
patents, licenses, know-how, trade secrets, designs, and other 
intellectual property. In addition, the Proposed Final Judgment 
provides for transition services agreements and supply agreements that 
will make the divestiture as seamless as possible and enhance the 
ability of the acquirer of the divestiture assets to operate those 
assets as a successful and competitive business.
    The Proposed Final Judgment also requires that UTC divest all of 
the Goodrich shares in the Aerolec joint venture between Goodrich and 
Thales Avionics Electrical Systems SA. The Proposed Final Judgment 
requires that the Electrical Power Divestiture Assets and Goodrich's 
Aerolec shares be divested to the same acquirer. This provision ensures 
that the interests of the acquirer of the Aerolec shares are aligned 
with the interests of the acquirer of the Electrical Power Divestiture 
Assets, which is necessary because the acquirer of the Electrical Power 
Divestiture Assets will perform the majority of the work within the 
Aerolec joint venture. In the view of the United States, the 
divestiture of the Electrical Power Divestiture Assets and the sale of 
the Goodrich shares in the Aerolec joint venture is sufficient to 
remedy the anticompetitive effects in the market for large main engine 
generators that were alleged in the Complaint.

B. Aircraft Turbine Engines

    As described more fully in the Complaint and CIS, the acquisition 
of Goodrich by UTC likely would have lessened competition substantially 
in both the large aircraft turbine engine market and the small aircraft 
turbine engine market.
1. Large Aircraft Turbine Engines
    UTC, through its Pratt & Whitney subsidiary, and Rolls-Royce are 
two of only three primary competitors for the development, manufacture, 
and sale of large aircraft turbine engines. Goodrich was a partner with 
Rolls-Royce in a joint venture called Aero Engine Controls (``AEC''), 
from which Rolls-Royce is required to purchase the engine control 
systems (``ECSs'') for most of its engines. Thus, after the acquisition 
of Goodrich,

[[Page 22304]]

UTC would have been both a producer of large aircraft turbine engines 
and the sole-source supplier of ECSs to one of its leading engine 
competitors. In this position, UTC would have had the ability to 
adversely affect the delivery and cost of the ECSs for Rolls-Royce, and 
thus the competitiveness of Rolls-Royce's engines. Moreover, UTC would 
have had the incentive to do so, as the potential resulting additional 
engine sales for Pratt & Whitney would have produced much higher 
revenues and profits for UTC than UTC would have lost from the lower 
sales of ECSs to Rolls-Royce. In addition, UTC would have had access to 
Rolls-Royce's competitively sensitive information, which could have 
been used to advantage UTC when competing against Rolls-Royce. If UTC 
were to reduce the competitiveness of Rolls-Royce as a supplier of 
large aircraft turbine engines, customers would have had significantly 
fewer choices, and competition thus would have been lessened 
substantially.
    The Proposed Final Judgment preserves competition by requiring UTC 
to divest Goodrich's shares of AEC to Rolls-Royce, thus giving Rolls-
Royce complete ownership of AEC and preventing UTC from disadvantaging 
Rolls-Royce in future competitions for large aircraft turbine engines. 
The United States believes that the divestiture of Goodrich's AEC 
shares, along with the other requirements in the Proposed Final 
Judgment, is sufficient to remedy the anticompetitive effects in the 
market for large aircraft turbine engines, as alleged in the Complaint.
2. Small Aircraft Turbine Engines
    UTC, through its Pratt & Whitney subsidiary, is one of only a few 
significant competitors in the market for the development, manufacture, 
and sale of small aircraft turbine engines. Several of UTC's 
competitors purchased from Goodrich the ECSs for certain of their small 
aircraft turbine engines. Therefore, after the acquisition, UTC would 
have been both a producer of small aircraft turbine engines and a 
supplier of ECSs to its competitors. In that position, UTC would have 
been able to withhold or delay delivery of ECSs to its small aircraft 
turbine engine competitors, adversely affecting their competitiveness. 
Moreover, UTC would have had the incentive to do so, as the potential 
resulting additional engine sales for Pratt & Whitney would have 
produced much higher revenues and profits for UTC than it would have 
lost from the lower sales of ECSs to the other small aircraft turbine 
engine manufacturers. If UTC were to reduce the competitiveness of its 
competitors in the supply of large aircraft turbine engines, customers 
would have had significantly fewer choices, and competition thus would 
have been lessened substantially.
    The Proposed Final Judgment will preserve competition by requiring 
UTC to divest the Engine Control Divestiture Assets, i.e., all the 
Goodrich assets that are used to design, develop, and manufacture 
engine control products for small engines. The assets to be divested 
include Goodrich's manufacturing facility located in West Hartford, 
Connecticut, and all tangible and intangible assets used by or located 
at that facility. The divested assets also include certain assets used 
or located in Goodrich's Montreal facility, as well as assets related 
to certain maintenance, repair and overhaul services. In addition, the 
Proposed Final Judgment provides for transition services agreements and 
supply agreements that will make the divestiture as seamless as 
possible and enhance the ability of the acquirer of the Engine Control 
Divestiture Assets to operate them as a successful and competitive 
business. The United States believes that the divestiture of the Engine 
Control Divestiture Assets, along with the other requirements in the 
Proposed Final Judgment, is sufficient to remedy the anticompetitive 
effects in the market for small aircraft turbine engines, as alleged in 
the Complaint.

C. Engine Control Systems for Large Aircraft Turbine Engines

    In addition to adversely affecting the competitiveness of Rolls-
Royce in the supply of large aircraft turbine engines, UTC's purchase 
of Goodrich's share in AEC also likely would lessen competition 
substantially in the market for ECSs for large aircraft turbine 
engines. UTC and AEC are two of the only three producers of such ECSs, 
and UTC's purchase of Goodrich would give UTC fifty percent ownership 
of AEC, one of UTC's two main competitors. Competition would be 
lessened substantially if UTC were to impede AEC's competing to provide 
replacement ECSs or to form teams to supply ECSs for new engines. 
Moreover, competition would be lessened substantially, if, as a result 
of the acquisition, UTC and Rolls-Royce were to use AEC to combine 
their ECS intellectual property and research and development results, 
rather than competing independently to develop innovative and cost-
effective ECS solutions. The United States believes that the 
divestiture of the Goodrich AEC shares is sufficient to remedy the 
anticompetitive effects in the market for ECSs for large aircraft 
turbine engines, as alleged in the Complaint.

III. Summary of Public Comments and the Responses of the United States

    During the 60-day comment period, the United States received 
comments from (1) Williams International and (2) Joseph C. Jefferis. 
The comments are attached to this response. As explained in detail 
below, after consideration of the two comments, the United States 
continues to believe that the Proposed Final Judgment is in the public 
interest.

A. Williams International

1. Summary of the Comment
    Williams International (``Williams'') competes with UTC's Pratt & 
Whitney in the development, manufacture and sale of small aircraft 
turbine engines, and purchases the ECSs for some of its engines from 
Goodrich. In its Comment, Williams notes that it had serious concerns 
regarding the likely impact of the acquisition on both the pricing and 
continued availability of the full authority digital engine control 
(``FADEC'') systems of the Engine Control Divestiture Assets. Williams 
states that the Proposed Final Judgment ``does appear to be a 
thoughtful, good faith attempt to deal with those concerns,'' but that 
``there are still a number of discrete issues that Williams 
International believes the [Proposed Final Judgment] does not fully and 
adequately address.'' Williams then describes ``three remaining primary 
areas of concern.''
    First, Williams is concerned that the Proposed Final Judgment does 
not adequately protect from disclosure to either UTC or potential 
acquirers the confidential information of customers of the Engine 
Control Divestiture Assets, such as Williams. For example, Williams 
considers Section V.A of the Hold Separate Stipulation and Order, which 
requires UTC to keep competitively sensitive information of the Engine 
Control Divestiture Assets separate from UTC's, to be ambiguous as to 
whether it applies to customer information in the possession of the 
Engine Control Divestiture Assets. Williams also notes that this 
provision does not appear to apply to the sharing of information with 
potential purchasers of the engine control assets.
    Similarly, Williams finds ``woefully inadequate'' Section IV.B of 
the Proposed Final Judgment, which requires UTC to provide to 
prospective purchasers of the Engine Control Divestiture Assets, 
``subject to customary confidentiality assurance, all

[[Page 22305]]

information and documents relating to [the Engine Control Divestiture 
Assets] customarily provided in due diligence.'' Williams argues that 
standard due diligence protections are not sufficient in this matter, 
because the Proposed Final Judgment could be considered to supersede 
private nondisclosure agreements.
    Second, Williams takes issue with the United States having ``sole 
discretion'' to accept or reject an acquirer of the Engine Control 
Divestiture Assets. Williams assumes that this means that the United 
States's evaluation of potential purchasers will be performed without 
any input from engine manufacturers. Williams also takes issue with the 
requirement that the purchaser of the assets have ``the intent and 
capability * * * of competing effectively'' in engine controls, 
asserting that an acquirer also should demonstrate that it is likely to 
become a ``suitable long-term business partner'' to the engine 
manufacturers.
    Finally, Williams has concerns about the provisions in the Proposed 
Final Judgment and Hold Separate Stipulation and Order designed to 
protect the viability of the divested assets prior to their sale. 
Williams asserts that the Proposed Final Judgment provides ``virtually 
nothing'' relating to UTC's obligations to maintain the Engine Control 
Divestiture Assets prior to their sale, ``particularly with respect to 
personnel.'' It also argues that the provisions of the Hold Separate 
Stipulation and Order are inadequate to prevent the movement of 
personnel away from the divested business. Williams cites as an example 
of its concerns the appointment of Curtis Reusser, former president of 
Goodrich's Electronic Systems segment, to the position of president of 
the Aircraft Systems business within UTC Aerospace Systems, in which 
capacity he oversees portions of the acquired Goodrich business that 
are not subject to divestiture. Williams claims that, during his tenure 
with Goodrich, Mr. Reusser was directly involved in dealings with 
Williams regarding Goodrich's performance under its contract, and with 
all details of the parties' business relationship.
3. Response of the United States
    Regarding Williams's concerns about the confidentiality of its 
information in the possession of the Engine Control Divestiture Assets, 
the United States believes that the protections of the Hold Separate 
Stipulation and Order and the Proposed Final Judgment are sufficient. 
Paragraph V.A of the Hold Separate Stipulation and Order requires UTC 
to operate the Engine Control Divestiture Assets so that the 
``management, sales, and operations * * * are held entirely separate, 
distinct, and apart from those of UTC's other operations.'' This 
paragraph also specifically requires that sensitive information 
relating to these products be ``kept separate and apart from other UTC 
operations.'' To assert that customer information will be accessible by 
UTC despite these provisions would require a strained interpretation 
contrary to the plain language of the Hold Separate Stipulation and 
Order.\1\
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    \1\ In virtually every lawsuit in which it agrees to a 
divestiture remedy to resolve the competitive harm from a proposed 
acquisition, the United States enters into a Hold Separate 
Stipulation and Order with the merging parties. The language of 
Paragraph V.A of the Hold Separate Stipulation and Order is 
routinely included in such documents. The United States is unaware 
of other instances in which customers of a divested business have 
expressed similar concerns.
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    As for Williams's assertion that its confidential information might 
not be properly protected against discovery by potential acquirers of 
the divestiture assets, the United States sees no reason to provide 
additional protection for this type of information. In most 
acquisitions, the purchaser undertakes a ``due diligence'' 
investigation to confirm the value of the business that is being 
purchased. This investigation necessarily involves information that is 
confidential, possibly including information relating to the acquired 
company's customers.\2\ Potential acquirers who wish to review such 
information generally are required to hold such information 
confidential, often signing nondisclosure agreements that bar 
dissemination or use of the information. Williams provides no reason to 
believe that such information is at greater risk of disclosure or 
improper use here than in any other asset sale. The additional degree 
of protection apparently sought by Williams would make the divestiture 
process unnecessarily burdensome, possibly deterring potential 
acquirers and thus thwarting the central goal of the Proposed Final 
Judgment, which is expeditious divestiture to a suitable purchaser.\3\ 
Williams also provides no support for its concern that the ``scrutiny 
of the DOJ'' will somehow lead to reduced confidentiality protections, 
or for its view that the Proposed Final Judgment might be held to 
``take precedence over private non-disclosure agreements.'' Nothing in 
either the Proposed Final Judgment or the Hold Separate Stipulation and 
Order suggests any such counterintuitive outcome. If anything, fear of 
the ``scrutiny of the DOJ''--and surely that of this court--will lead 
to more protection of confidential information rather than less.
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    \2\ In fact, Paragraph IV.B of the Proposed Final Judgment 
requires the defendants to disclose such information as is 
``customarily provided in a due diligence process,'' in part to help 
ensure that the assets are sold to an acquirer that will maintain 
them as a competitive force in the market. However, the information 
so provided is ``subject to customary confidentiality assurances.''
    \3\ In its Comment, Williams notes that ``[t]he DOJ may respond 
that requiring customary confidentiality assurances pursuant to the 
due diligence process is no different than what would generally 
apply in the case of any private contractor of Williams 
International being sold to a prospective buyer, and that this level 
of protection in the [Proposed Final Judgment] should be 
sufficient.'' Williams Comment, p.6. That is precisely the case. 
Williams provides no justification for burdening the divestiture 
process by giving this information additional protection not 
typically provided in due diligence investigations.
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    Williams need have no concern about the scope of the review 
undertaken by the United States. While the United States has sole 
discretion to decide whether a divestiture to a particular proposed 
acquirer meets the objectives of the Proposed Final Judgment, the 
United States's evaluation includes consideration of information from 
numerous sources, including affected customers. Information gathered by 
the United States during its investigation of UTC's proposed 
acquisition of Goodrich, including conversations with dozens of 
customers, is taken into account in this evaluation, and new interviews 
with customers also are undertaken. The United States also considers 
the financial resources and business plans of the proposed acquirer, to 
ensure that the divested assets will be maintained as a long-term 
competitive force in the market. This is no mere cursory review. 
Indeed, after a thorough evaluation of documentary information, 
responses to questions, and information provided by potentially 
affected customers, the United States rejected the first acquirer 
proposed by the defendants for the Engine Control Divestiture Assets.
    Finally, the United States disagrees with Williams's assertion that 
the Proposed Final Judgment and Hold Separate Stipulation and Order do 
not adequately protect the viability of the assets pending their sale. 
As Williams notes, the Hold Separate Stipulation and Order contains 
provisions requiring the defendants to maintain the viability of the 
assets. Paragraph V.D requires defendants to use ``all reasonable 
efforts to maintain and increase the sales and revenues of all products 
produced by or sold by'' the Engine Control Divestiture Assets, as well 
as maintaining promotional, sales, technical assistance,

[[Page 22306]]

and other forms of support for the business. Paragraph V.E requires UTC 
to provide sufficient working capital and lines and sources of credit 
to maintain the Engine Control Divestiture Assets as an economically 
viable and competitive, ongoing business. Paragraph V.F requires UTC to 
take ``all steps necessary to ensure that the [Engine Control 
Divestiture Assets] are fully maintained in operable condition at no 
less than current capacity and sales.'' The requirements of the Hold 
Separate Stipulation and Order are sufficient to mandate a level of 
support from UTC for the Engine Control Divestiture Assets, without 
being so detailed that the operation of the assets is encumbered rather 
than maintained at its former level of independence.
    As for the concern about the retention of employees of the Engine 
Control Divestiture Assets, the provisions of the Hold Separate 
Stipulation and Order are designed to prevent UTC from stripping 
valuable employees from the Engine Control Divestiture Assets by 
transferring them, or soliciting or encouraging them to move, within 
UTC. Section V.J of the Hold Separate Stipulation and Order bars the 
defendants from transferring or reassigning individuals who have 
``primary responsibility'' for the products produced by the assets to 
be divested. The interests and desires of individual employees must be 
respected, however, and they cannot be forced to remain with the Engine 
Control Divestiture Assets against their will.
    In the specific case of Mr. Reusser, the United States was aware of 
the plan for his transfer during the negotiation of the Proposed Final 
Judgment. Although Mr. Reusser supervised the Goodrich organization 
responsible for products produced by the Engine Control Divestiture 
Assets, he was also responsible for other Goodrich divisions producing 
a wide range of products not at issue in this case, such as sensors, 
integrated systems, and intelligence, surveillance and reconnaissance 
systems.\4\ Therefore, the products of the divestiture assets were not 
Mr. Reusser's ``primary responsibility'' as that term is used in 
Section V.J of the Hold Separate Stipulation and Order, and his 
transfer thus is not prohibited.
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    \4\ Williams also complains that Alan Oak, the Vice President 
and General Manager of GPECS, has left the company. Mr. Oak has 
retired, and the United States does not believe it would be 
reasonable to require UTC to persuade Mr. Oak not to do so.
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B. Joseph C. Jefferis

1. Summary of the Comment
    Mr. Joseph C. Jefferis identifies himself as a ``former Goodrich 
Corporation Risk and Control Specialist with Sarbanes-Oxley 
responsibilities,'' who served in that capacity from September 2003 to 
June 2007, when he was ``terminated.'' He states that he filed for 
whistleblower status with the U.S. Department of Labor in August 2006.
    In his comment, Mr. Jefferis recounts several incidents that he 
says he raised with the Department of Labor relating to Goodrich's 
conduct, including allegations relating to the Foreign Corrupt 
Practices Act, insider trading, price-fixing and collusion, and 
accounting irregularities. One allegation that appears to be of 
particular interest to Mr. Jefferis relates to a ``Community Action 
Alert'' and ``a series of dormant alternative fuel cell patents.'' Mr. 
Jefferis expresses concern that ``dormant patent information I obtained 
during the secretive `Community Action Alert' scheme that [a Goodrich 
representative] engaged me in was given to United Technologies 
unbeknownst to Goodrich Corporation shareholders and the positive 
outcome of the scientific studies of the patent information I provided 
resulted in the favorable terms of the merger agreement.'' He further 
alleges that various financial institutions might have been misled 
about certain licenses in approving financing for the acquisition, and 
appears to state that the acquisition of Goodrich by UTC will create a 
monopoly ``around this technology.'' Mr. Jefferis summarizes his 
allegations as follows:

It is my worry and concern that a combined Goodrich Corporation and 
United Technologies poses significant risks to national security 
given their history of export compliance violations, the unresolved 
export compliance issues I raised, the corporate espionage I may 
have engaged in, the bizarre handling of my reporting accounting 
concerns to the external audit firm, the perjury of [the Goodrich 
representative], the secrecy surrounding the Community Action Alert 
patents, and now the `reinvention' using the prior art information.

2. Response of the United States
    The Proposed Final Judgment is designed to remedy the competitive 
concerns raised by the acquisition of Goodrich by UTC, as alleged in 
the Complaint. Most of Mr. Jefferis's complaints do not relate to the 
likely competitive effect of the acquisition. Mr. Jefferis may be 
concerned, in part, about a possible monopoly in a certain fuel cell 
technology. Even so, the United States found no evidence that the 
acquisition of Goodrich by UTC would have an anticompetitive effect in 
fuel cells; therefore, the Complaint contains no such allegation. Mr. 
Jefferis's complaint is thus beyond the purview of this proceeding.

IV. Standard of Judicial Review

    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 in accordance with the statute, 
the court 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. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ]76,736, No. 08-1965 (JR), 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 mechanisms to enforce the Final 
Judgment are clear and manageable'').
    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,

[[Page 22307]]

whether the decree is sufficiently clear, whether enforcement 
mechanisms are sufficient, and whether the decree may positively harm 
third parties. See Microsoft, 56 F.3d at 1458-62. With respect to the 
adequacy of the relief secured by the decree, a court may not ``engage 
in an unrestricted evaluation of what relief would best serve the 
public.'' United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) 
(citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 
1981)); see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, 
Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. 
LEXIS 84787, at *3. Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

    Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\5\ 
In determining whether a proposed settlement is in the public interest, 
the 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).
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    \5\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
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    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). Therefore, 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.
    In its 2004 amendments to the Tunney Act,\6\ Congress made clear 
its intent to preserve the practical benefits of utilizing consent 
decrees in antitrust enforcement, stating ``[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). 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 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.\7\
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    \6\ The 2004 amendments substituted the word ``shall'' for 
``may'' when directing the courts to consider the enumerated factors 
and amended the list of factors to focus on competitive 
considerations and 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).
    \7\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
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IV. Conclusion

    The United States continues to believe that the Proposed Final 
Judgment, as drafted, provides an effective and appropriate remedy for 
the antitrust violations alleged in the Complaint and that the Proposed 
Final Judgment therefore is in the public interest.
    The United States will move this Court to enter the Proposed Final 
Judgment after the comments and this response are published in the 
Federal Register.

Dated: February 12, 2013.
Respectfully submitted.
Kevin C. Quin, Esquire,

United States Department of Justice, Antitrust Division, Litigation 
II Section, 450 5th Street NW., Suite 8700, Washington, DC 20530, 
Phone: (202) 307-0922, Fax: (202) 514-9033, kevin.quin@usdoj.gov.
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[FR Doc. 2013-08700 Filed 4-12-13; 8:45 am]
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