United States, et al. v. Cinemark Holdings, Inc., et al.; Proposed Final Judgment and Competitive Impact Statement, 32443-32457 [2013-12762]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32443-32457]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12762]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. Cinemark Holdings, Inc., 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, 
Hold Separate Stipulation and Order and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia in United States of America et al. v. Cinemark Holdings, 
Inc., et al., Civil Action No. 1:13-cv-727. On May 20, 2013, the United 
States filed a Complaint alleging that the proposed acquisition by 
Cinemark Holdings, Inc. of movie theatres and related assets from Rave 
Cinemas, LLC 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 Cinemark Holdings, Inc. to divest certain theatre assets and 
requires Alder Wood Partners, L.P., which is controlled by Cinemark's 
Chairman, to divest Movie Tavern, Inc.
    Copies of the Complaint, proposed Final Judgment, Hold Separate 
Stipulation and Order 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.justice.gov/atr, and at the Office of 
the Clerk of the United States District Court for the District of 
Columbia. Copies of these materials may be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments and responses thereto will be filed with the 
Court and posted on the U.S. Department of Justice, Antitrust 
Division's Web site, and, under certain circumstances published in the 
Federal Register. Comments should be directed to John R. Read, Chief, 
Litigation III Section, Antitrust Division, Department of Justice, 450 
Fifth Street NW., Suite 4000, Washington, DC 20530 (telephone: 202-307-
0468).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, Antitrust Division, 450 Fifth Street 
NW., Suite 4000, Washington, DC 20530, and State of Texas, Office of 
the Attorney General, State of Texas, 300 W. 15th Street, 7th Floor, 
Austin, TX 78701, Plaintiffs, v. Cinemark Holdings, Inc., 3900 
Dallas Parkway, Suite 500, Plano, TX 75093, Rave Holdings, LLC, 2101 
Cedar Springs Road, Suite 800, Dallas, TX 75201, and Alder Wood 
Partners, L.P., 12400 Coit Road, Suite 800, Dallas, TX 75251, 
Defendants.

Civil Action No.: 1:13-cv-00727.
Judge: Beryl A. Howell.
Filed: 05/20/2013.

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the State of Texas, acting 
through its Attorney General, bring this civil antitrust action to 
prevent the proposed acquisition by Cinemark Holdings, Inc. 
(``Cinemark'') of thirty-two movie theatres owned and operated by Rave 
Holdings, LLC (``Rave Cinemas'').
    Cinemark is a significant competitor to Rave Cinemas in the 
exhibition of first-run, commercial movies in the area in and around 
Voorhees and Somerdale

[[Page 32444]]

in southern New Jersey, the eastern sector of Louisville, Kentucky, and 
the area in and around Denton, Texas. Another movie theatre company, 
Movie Tavern, Inc. (``Movie Tavern''), which is controlled by 
Cinemark's founder and Chairman of the Board and majority owned by 
Defendant Alder Wood Partners, L.P. (``Alder Wood Partners''), is a 
significant competitor with Rave Cinemas in the exhibition of first-
run, commercial movies in the western portion of Fort Worth, Texas. If 
Cinemark's acquisition of Rave Cinemas is permitted to proceed, in 
these markets, it would either give Cinemark direct control of its most 
significant competitor or leave theatres controlled by Cinemark's 
Chairman as the most significant competitor to the Cinemark-acquired 
theatre. The acquisition likely would substantially lessen competition 
in the exhibition of first-run, commercial movies in each of these 
markets in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.

I. Jurisdiction and Venue

    1. This action is filed by the United States pursuant to Section 15 
of the Clayton Act, as amended, 15 U.S.C. 25, to obtain equitable 
relief and to prevent a violation of Section 7 of the Clayton Act, as 
amended, 15 U.S.C. 18. The State of Texas brings this action under 
Section 16 of the Clayton Act, 15 U.S.C. 26, to prevent the defendants 
from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
    2. The distribution and theatrical exhibition of first-run, 
commercial films is a commercial activity that substantially affects, 
and is in the flow of, interstate trade and commerce. Defendants' 
activities in purchasing equipment, services, and supplies as well as 
licensing films for exhibition substantially affect interstate 
commerce. The Court has jurisdiction over the subject matter of this 
action and jurisdiction over the parties pursuant to 15 U.S.C. 22, 25, 
and 26, and 28 U.S.C. 1331, 1337(a), and 1345.
    3. Venue in this District is proper under 28 U.S.C. 1391(c). 
Defendants have consented to venue and personal jurisdiction in this 
judicial district.

 II. Defendants and the Proposed Acquisition

    4. Defendant Rave Holdings, Inc. (``Rave Cinemas'') is a Delaware 
limited liability company with its headquarters in Dallas, Texas. Rave 
Cinemas owns and operates 35 movie theatres with 518 screens in a dozen 
states. Rave Cinemas is the seventh-largest movie theatre exhibitor in 
the United States based on box office revenues.
    5. Defendant Cinemark Holdings, Inc. (``Cinemark'') is a Delaware 
corporation with its headquarters in Plano, Texas. Cinemark owns and 
operates 298 movie theatres with a total of 3,916 screens in thirty-
nine states. Cinemark is the third-largest movie theatre exhibitor in 
the United States based on box office revenues. Lee Roy Mitchell is the 
founder, a significant shareholder, and Chairman of the Board of 
Directors of Cinemark.
    6. Defendant Alder Wood Partners, L.P. (``Alder Wood Partners'') is 
a Texas limited partnership with its headquarters in Dallas, Texas. 
Alder Wood Partners owns 100% of the voting shares of Movie Tavern, 
Inc. (``Movie Tavern''). Mr. Lee Roy Mitchell and his wife own 99% of 
Alder Wood Partners. Through Alder Wood Partners, they control Movie 
Tavern and receive approximately 92% of its profits. The other 
approximately 8% of Movie Tavern's profits are reserved for the benefit 
of its management. Movie Tavern is a Texas corporation with its 
headquarters in Dallas, Texas. In addition to serving as Cinemark's 
Chairman, Mr. Mitchell serves as a Director of Movie Tavern. Movie 
Tavern owns and operates 16 movie theatres, with a total of 130 screens 
in seven states.
    7. Cinemark and Movie Tavern are not independent competitors. Mr. 
Mitchell, as Cinemark's founder and Chairman of the Board, has 
influence over Cinemark's pricing and other strategic decisions, as 
well as access to competitively-sensitive information. He also has a 
significant holding of Cinemark shares. At the same time, Mr. Mitchell, 
as a Director of Movie Tavern who together with his wife owns nearly 
all of the voting shares and profits of Movie Tavern, has influence 
over Movie Tavern's pricing and other strategic decisions. Thus, Mr. 
Mitchell has an ability and financial incentive to encourage, 
facilitate, and enforce coordination between the companies. Because of 
Mr. Mitchell's substantial influence over pricing and strategic 
decisions at the two companies, Cinemark and Movie Tavern are unlikely 
to compete aggressively with each other. For example, were Cinemark to 
determine that it is in its unilateral interest to build a new theatre 
close to a Movie Tavern, Mr. Mitchell would be in a position to 
undermine that effort. Similarly, were Movie Tavern to consider an 
aggressive price cut to the detriment of Cinemark, Mr. Mitchell would 
be in a position to undermine that effort.
    8. On November 16, 2012, Cinemark and Rave Cinemas executed a 
purchase and sale agreement. The acquisition is structured as an asset 
purchase for approximately $220 million. Cinemark will acquire thirty-
two of Rave Cinemas' thirty-five movie theatres and will manage the 
three theatres it is not acquiring until Rave Cinemas has sold them.

III. Background of the Movie Theatre Industry

    9. Viewing movies in the theatre is a popular pastime. Over one 
billion movie tickets were sold in the United States in 2012, with 
total box office revenue reaching approximately $9.7 billion.
    10. Companies that operate movie theatres are called 
``exhibitors.'' Some exhibitors own a single theatre, whereas others 
own a circuit of theatres within one or more regions of the United 
States. Cinemark, Rave Cinemas, and Movie Tavern are exhibitors in the 
United States, as are Regal Entertainment Group (``Regal'') and AMC 
Entertainment, Inc. (``AMC'').
    11. Exhibitors set ticket prices for a theatre based on a number of 
factors, including the age and condition of the theatre, the number and 
type of amenities the theatre offers (such as the range of snacks, food 
and beverages offered, the size of its screens and quality of its sound 
systems, and stadium and/or reserved seating), the competitive 
situation facing the theatre (such as the price of tickets at nearby 
theatres, the age and condition of those theatres, and the number and 
type of amenities they offer), and the population demographics and 
density surrounding the theatre.

IV. Relevant Market

A. Product Market

    12. Movies are a unique form of entertainment. The experience of 
viewing a movie in a theatre is an inherently different experience from 
live entertainment (e.g., a stage production or attending a sporting 
event) or viewing a movie in the home (e.g., through streaming video, 
on a DVD, or via pay-per-view).
    13. Reflecting the significant differences of viewing a movie in a 
theatre, ticket prices for movies are generally very different from 
prices for other forms of entertainment. For example, live 
entertainment is typically significantly more expensive than a movie 
ticket, whereas home viewing through streaming video, DVD rental, or 
pay-per-view is usually significantly less expensive than viewing a 
movie in a theatre.
    14. Viewing a movie at home typically lacks several characteristics 
of viewing

[[Page 32445]]

a movie in a theatre, including the size of screen, the sophistication 
of sound systems, and the social experience of viewing a movie with 
other patrons. In addition, the most popular, newly released or 
``first-run'' movies are not available for home viewing at the time 
they come out in theatres.
    15. Movies are considered to be in their ``first-run'' during the 
four to five weeks following initial release in a given locality. If 
successful, a movie may be exhibited at other theatres after the first-
run as part of a second or subsequent run (often called a ``sub-run'' 
or ``second-run''). Moviegoers generally do not regard sub-run movies 
as an adequate substitute for first-run movies. Reflecting the 
significant difference between viewing a newly-released, first-run 
movie and an older sub-run movie, tickets at theatres exhibiting first-
run movies usually cost significantly more than tickets at sub-run 
theatres.
    16. Art movies and foreign language movies are also not adequate 
substitutes for commercial, first-run movies. Art movies, which include 
documentaries, are sometimes referred to as independent films. Although 
art and foreign language movies appeal to some viewers of commercial 
movies, the potential audience for art movies is quite distinct as art 
movies tend to have more narrow appeal and typically attract an older 
audience. Exhibitors consider art theatre operations as distinct from 
the operations of theatres that exhibit commercial movies. Similarly, 
foreign-language movies do not widely appeal to U.S. audiences. As a 
result, most moviegoers do not regard art movies or foreign-language 
movies as adequate substitutes for first-run, commercial movies.
    17. The relevant product market within which to assess the 
competitive effects of this acquisition is the exhibition of first-run, 
commercial movies. A hypothetical monopolist controlling the exhibition 
of all first-run, commercial movies would profitably impose at least a 
small but significant and non-transitory increase in ticket prices.

B. Geographic Markets

    18. Moviegoers typically are not willing to travel very far from 
their home to attend a movie. As a result, geographic markets for the 
exhibition of first-run, commercial movies are relatively local.
Area in and Around Voorhees and Somerdale in Southern New Jersey
    19. Cinemark and Rave Cinemas account for the majority of the 
first-run, commercial movie tickets sold in and around Voorhees 
Township, New Jersey and the close-by town of Somerdale, New Jersey 
(``Voorhees-Somerdale''), an area which encompasses Rave Cinemas' Ritz 
Center 16 and the Cinemark 16. These two theatres are located less than 
3 miles apart. Two non-party theatres in this area also show first-run, 
commercial movies.
    20. Moviegoers who reside in Voorhees-Somerdale are unlikely to 
travel significant distances out of that area to attend a first-run, 
commercial movie except in unusual circumstances. A small but 
significant post-acquisition increase in the price of first-run, 
commercial movie tickets in Voorhees-Somerdale would likely not cause a 
sufficient number of moviegoers to travel out of that area to make the 
increase unprofitable. Voorhees-Somerdale constitutes a relevant 
geographic market in which to assess the competitive effects of this 
acquisition.
East Louisville, Kentucky Area
    21. Rave Cinemas and Cinemark account for the vast majority of the 
first-run, commercial movie tickets sold in the eastern portion of 
Louisville, Kentucky (``East Louisville''), an area which encompasses 
Rave Cinemas' Stonybrook 20 + IMAX, Cinemark's Tinseltown USA and XD 
with 19 screens, and the future Cinemark Mall of St. Matthews 10, which 
will exhibit first-run, commercial movies and is projected to open in 
July 2013. One non-party theatre in this area shows a mix of first-run, 
commercial movies and foreign-language and art/independent films.
    22. Moviegoers who reside in East Louisville are unlikely to travel 
significant distances out of that area to attend a first-run, 
commercial movie except in unusual circumstances. A small but 
significant post-acquisition increase in the price of first-run, 
commercial movie tickets in East Louisville would likely not cause a 
sufficient number of moviegoers to travel out of that area to make the 
increase unprofitable. East Louisville constitutes a relevant 
geographic market in which to assess the competitive effects of this 
acquisition.
Western Fort Worth, Texas Area
    23. Rave Cinemas and Movie Tavern account for the majority of the 
first-run, commercial movie tickets sold in the western portion of Fort 
Worth, Texas (``Western Fort Worth''), an area which encompasses Rave 
Cinemas' Ridgmar 13 + Xtreme and three Movie Tavern theatres: the 
Ridgmar with six screens, the West 7th Street with seven screens, and 
the Hulen with 13 screens. Three non-party theatres in this area show 
first-run, commercial movies.
    24. Moviegoers who reside in Western Fort Worth are unlikely to 
travel significant distances out of that area to attend a first-run, 
commercial movie except in unusual circumstances. A small but 
significant post-acquisition increase in the price of first-run, 
commercial movie tickets in Western Fort Worth would likely not cause a 
sufficient number of moviegoers to travel out of that area to make the 
increase unprofitable. Western Fort Worth constitutes a relevant 
geographic market in which to assess the competitive effects of this 
acquisition.
Greater Denton, Texas Area
    25. Cinemark, Movie Tavern, and Rave Cinemas account for the 
majority of the first-run, commercial movie tickets sold in the area in 
and around Denton, Texas (``Greater Denton''), an area which 
encompasses the Cinemark 14 in Denton, the Denton Movie Tavern with 4 
screens, and the Rave Cinemas' Hickory Creek 16 in nearby Hickory 
Creek, Texas. One non-party theatre in this area shows first-run, 
commercial movies.
    26. Moviegoers who reside in Greater Denton are unlikely to travel 
significant distances out of that area to attend a first-run, 
commercial movie except in unusual circumstances. A small but 
significant post-acquisition increase in the price of first-run, 
commercial movie tickets in Greater Denton would likely not cause a 
sufficient number of moviegoers to travel out of that area to make the 
increase unprofitable. Greater Denton constitutes a relevant geographic 
market in which to assess the competitive effects of this acquisition.

V. Competitive Effects

    27. Exhibitors compete to attract moviegoers to their theatres over 
the theatres of their rivals. They do that by competing on price, 
knowing that if they charge too much (or do not offer sufficient 
discounted tickets for matinees, seniors, children, etc.) moviegoers 
will begin to frequent their rivals. Exhibitors also seek to license 
the first-run movies that are likely to attract the largest numbers of 
moviegoers. In addition, they compete over the quality of the viewing 
experience by offering moviegoers the most sophisticated sound systems, 
largest screens, best picture clarity, best seating (including stadium 
and reserved seating), and the broadest range and highest quality 
snacks, food, and drinks at concession

[[Page 32446]]

stands or cafes in the lobby or served to moviegoers at their seats.
    28. Cinemark and/or Movie Tavern currently compete with Rave 
Cinemas for moviegoers in the relevant markets at issue. These markets 
are concentrated, and in each market, Cinemark and/or Movie Tavern and 
Rave Cinemas are the other's most significant competitor, given their 
close proximity to one another. Their rivalry spurs each to improve the 
quality of their theatres and keeps ticket prices in check. For various 
reasons, the other theatres in the relevant geographic markets offer 
less attractive options for the moviegoers that are served by the 
Cinemark and/or Movie Tavern and Rave theatres. For example, they are 
located farther away from these moviegoers, or they are a relatively 
smaller size or have fewer screens.
    29. In the relevant markets at issue, the acquisition of Rave 
Cinemas likely will result in a substantial lessening of competition. 
In the Voorhees-Somerdale, East Louisville, and Greater Denton markets, 
the transaction will lead to significant increases in concentration and 
eliminate existing competition between Cinemark and Rave Cinemas. In 
the Western Fort Worth and Greater Denton markets, where Rave currently 
competes closely with Movie Tavern, Cinemark's acquisition of the Rave 
Cinemas theatres likely will also reduce competition because Cinemark 
will not have the same incentive that Rave Cinemas has to compete 
aggressively against Movie Tavern. In those markets, Mr. Mitchell, as 
both the Chairman of Cinemark and a Director of Movie Tavern, and, 
together with his wife, majority owner of Movie Tavern, will have both 
the incentive and ability to dampen competition after Rave Cinemas is 
acquired by Cinemark.
    30. In Voorhees-Somerdale, the proposed acquisition would give 
Cinemark control of two of the four first-run, commercial movie 
theatres in that area, with 32 out of 48 total screens and an 
approximately 71% share of 2012 box office revenues, which totaled 
about $14.7 million. Using a measure of market concentration called the 
Herfindahl-Hirschman Index (``HHI''),\1\ the acquisition would yield a 
post-acquisition HHI of approximately 5,861, representing an increase 
of roughly 2,416 points.
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    \1\ See U.S. Dep't of Justice and Federal Trade Commission, 
Horizontal Merger Guidelines Sec.  5.3 (2010), available at https://www.justice.gov/atr/public/guidelines/hmg-2010.html. The HHI is 
calculated by squaring the market share of each firm competing in 
the market and then summing the resulting numbers. For example, for 
a market consisting of four firms with shares of 30, 30, 20, and 20 
percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). 
The HHI takes into account the relative size distribution of the 
firms in a market. It approaches zero when a market is occupied by a 
large number of firms of relatively equal size and reaches its 
maximum of 10,000 points when a market is controlled by a single 
firm. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
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    31. In East Louisville, after the completion of Cinemark's Mall of 
St. Matthews 10 in July 2013, the proposed acquisition would give 
Cinemark control of three of the four theatres showing first-run, 
commercial movies, with 49 out of 53 total screens. As measured by 
total screens only (since Cinemark's Mall of St. Matthews 10 does not 
yet have box office revenues), the acquisition would result in Cinemark 
having a market share of approximately 93% in East Louisville. The 
acquisition would yield a post-acquisition HHI of 8,604, representing 
an increase of roughly 4,130 points.
    32. In Western Fort Worth, the proposed acquisition would give 
Cinemark/Movie Tavern control of four of the seven first-run, 
commercial movie theatres in that area, with 39 out of 71 total screens 
and approximately 60% of 2012 box office revenues, which totaled almost 
$17 million. The acquisition would yield a post-acquisition HHI of 
approximately 4,828 representing an increase of roughly 1,736 points.
    33. In Greater Denton, the proposed acquisition would give 
Cinemark/Movie Tavern control of three of the four first-run, 
commercial movie theatres, with 34 out of 46 total screens and 
approximately 62% of 2012 box office revenues, which totaled about $11 
million. The acquisition would yield a post-acquisition HHI of 
approximately 5,265, representing an increase of roughly 1,640 points.
    34. Today, were one of Defendants' theatres to unilaterally 
increase ticket prices in a relevant market, the exhibitor that 
increased price would likely suffer financially as a substantial number 
of its patrons would patronize the other exhibitor. The acquisition 
would eliminate this pricing constraint. After the acquisition, 
Cinemark and/or Movie Tavern would re-capture a significant proportion 
of such losses, making price increases more profitable than they would 
be pre-acquisition. Thus, the acquisition is likely to lead to higher 
ticket prices for moviegoers, which could take the form of a higher 
adult evening ticket price or reduced discounting, e.g., for matinees, 
children, seniors, and students.
    35. The proposed acquisition likely would also reduce competition 
between Cinemark and/or Movie Tavern and Rave Cinemas over the quality 
of the viewing experience in the relevant markets at issue. If no 
longer motivated to compete, Cinemark and/or Movie Tavern and Rave 
Cinemas would have reduced incentives to maintain, upgrade, and 
renovate their theatres in the relevant markets, to improve those 
theatres' amenities and services, and to license the most popular 
movies, thus reducing the quality of the viewing experience for a 
moviegoer.

VI. Entry

    36. Sufficient, timely entry that would deter or counteract the 
anticompetitive effects alleged above is unlikely. Exhibitors are 
reluctant to locate new first-run, commercial theatres near existing 
first-run, commercial theatres or near those already under construction 
unless the population density, demographics, or the quality of existing 
theatres makes new entry viable. Over the next two years, demand by 
moviegoers to see first-run, commercial movies in the geographic 
markets at issue will likely not be sufficient to support entry of new 
first-run, commercial movie theatres that are not already under 
construction.

VII. Violation Alleged

    37. Plaintiffs hereby reincorporate paragraphs 1 through 36.
    38. The likely effect of the proposed transaction would be to 
lessen competition substantially in the relevant product and geographic 
markets in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    39. The transaction would likely have the following effects, among 
others: (a) The prices of tickets at first-run, commercial movie 
theatres in the relevant markets would likely increase to levels above 
those that would prevail absent the acquisition; and (b) the quality of 
first-run, commercial theatres and the viewing experience at those 
theatres would likely decrease in the relevant markets below levels 
that would prevail absent the acquisition.

VIII. Requested Relief

    40. Plaintiffs request: (a) Adjudication that the proposed 
acquisition would violate Section 7 of the Clayton Act; (b) permanent 
injunctive relief to prevent the consummation of the proposed 
acquisition; (c) an award to each plaintiff of its costs in this 
action; and (d) such other relief as is proper.

DATED: May 20, 2013.

    FOR PLAINTIFF UNITED STATES OF AMERICA.

/s/--------------------------------------------------------------------
WILLIAM J. BAER (D.C. Bar 324723)

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Assistant Attorney General, Antitrust Division

/s/--------------------------------------------------------------------
LESLIE C. OVERTON
Deputy Assistant Attorney General

/s/--------------------------------------------------------------------
PATRICIA A. BRINK
Director of Civil Enforcement

/s/--------------------------------------------------------------------
JOHN R. READ (D.C. Bar 419373)
Chief, Litigation III

DAVID C. KULLY (D.C. Bar 448763)
Assistant Chief, Litigation III

/s/--------------------------------------------------------------------
JUSTIN M. DEMPSEY (D.C. Bar 425976)
GREGG I. MALAWER (D.C. Bar 481685)
U.S. Department of Justice, Antitrust Division, 450 5th Street NW., 
Suite 4000, Washington, DC 20530. Fax: (202) 514-7308. Telephone: 
Justin Dempsey (202) 307-5815. Email: justin.dempsey@usdoj.gov. 
Telephone: Gregg Malawer (202) 616-5943, Email: 
gregg.malawer@usdoj.gov. Attorneys for Plaintiff the United States

    FOR PLAINTIFF STATE OF TEXAS:

GREG ABBOTT, Attorney General

DANIEL T. HODGE, First Assistant Attorney General

JOHN SCOTT, Deputy Attorney, General for Civil Litigation

JOHN T. PRUD'HOMME, Chief, Consumer Protection Division

/s/--------------------------------------------------------------------
By: Kim VanWinkle (Texas Bar 24003104)
Chief, Antitrust Section, Office of the Attorney General, State of 
Texas, 300 W. 15th Street, Austin, TX 78701, Telephone: (512) 463-
1266, Fax: (512) 320-0975, kim.vanwinkle@texasattorneygeneral.gov.

United States District Court for the District of Columbia

    United States of America and State of Texas, Plaintiffs, v. 
Cinemark Holdings, Inc., Rave Holdings, LLC, and Alder Wood 
Partners, L.P., Defendants.

Civil Action No.: 1:13-cv-00727.
Judge: Beryl A. Howell.
Filed: 05/20/2013.

Competitive Impact Statement

    Plaintiff, United States of America, 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

    On November 16, 2012, Defendant Cinemark Holdings, Inc. 
(``Cinemark'') agreed to acquire most of the assets of Rave Holdings, 
LLC (``Rave Cinemas''). Cinemark is a significant competitor with Rave 
Cinemas in the exhibition of first-run, commercial movies in parts of 
New Jersey, Kentucky, and Texas. Another movie theatre company, Movie 
Tavern, Inc. (``Movie Tavern''), which is controlled by Cinemark's 
founder and Chairman of the Board and majority owned by Defendant Alder 
Wood Partners, L.P. (``Alder Wood Partners''), is a significant 
competitor with Rave Cinemas in the exhibition of first-run, commercial 
movies in parts of Texas. Plaintiffs filed a civil antitrust complaint 
on May 20, 2013, seeking to enjoin the proposed acquisition and to 
obtain equitable relief. The Complaint alleges that the acquisition, if 
permitted to proceed, would either give Cinemark direct control of its 
most significant competitor or leave theatres controlled by Cinemark's 
Chairman as the most significant competitor to the Cinemark-acquired 
theatre. The likely effect of this acquisition would be to 
substantially lessen competition in the exhibition of first-run, 
commercial movies in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18.
    At the same time the Complaint was filed, the Plaintiffs also filed 
a Hold Separate Stipulation and Order (``Hold Separate'') and a 
proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the acquisition. Under the proposed Final 
Judgment, which is explained more fully below, Cinemark and Rave 
Cinemas are required to divest three theatres located in New Jersey, 
Kentucky, and Texas to acquirer(s) acceptable to the United States, 
which will consult with the State of Texas on the purchaser of the 
Texas theatre. In addition, under the proposed Final Judgment, Alder 
Wood Partners is required to divest the entire business of Movie 
Tavern, which includes theatres located in parts of Fort Worth and 
Denton, Texas, to acquirer(s) acceptable to the United States, which 
will consult with the State of Texas as appropriate.
    Under the terms of the Hold Separate, Defendants will take all 
steps necessary to ensure that the three theatres to be divested and 
the whole of the Movie Tavern business are operated as competitively 
independent, economically viable, and ongoing business concerns, and 
that competition is maintained and not diminished during the pendency 
of the ordered divestitures.
    The Plaintiffs and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Rave Cinemas is a Delaware limited liability company with its 
headquarters in Dallas, Texas. Rave Cinemas owns and operates 35 movie 
theatres containing 518 screens in a dozen states throughout the United 
States. Rave Cinemas is the seventh-largest theatre exhibitor in the 
United States and earned domestic box office revenue of approximately 
$169 million in 2012.
    Cinemark is a Delaware corporation with its headquarters in Plano, 
Texas. It owns and operates 298 theatres with 3,916 screens in various 
states. Cinemark is the third-largest theatre exhibitor in the United 
States and earned domestic box office revenues of approximately $1 
billion in 2012. Lee Roy Mitchell is a founder, a significant 
shareholder, and Chairman of the Board of Directors of Cinemark.
    Defendant Alder Wood Partners, L.P. (``Alder Wood Partners'') is a 
Texas limited partnership with its headquarters in Dallas, Texas. Alder 
Wood Partners owns 100% of the voting shares of Movie Tavern. Mr. Lee 
Roy Mitchell and his wife own 99% of Alder Wood Partners. Through Alder 
Wood Partners, they control Movie Tavern and receive approximately 92% 
of its profits. The other approximately 8% of Movie Tavern's profits is 
reserved for the benefit of its management. Movie Tavern is a Texas 
corporation with its headquarters in Dallas, Texas. In addition to 
serving as Cinemark's Chairman, Mr. Mitchell serves as a Director of 
Movie Tavern. Movie Tavern owns and operates 16 movie theatres, with a 
total of 130 screens in seven states and earned box office revenues of 
approximately $31 million in 2012.
    On November 16, 2012, Cinemark and Rave Cinemas executed a purchase 
and sale agreement under which Cinemark will acquire, for approximately 
$220 million, thirty-two of Rave Cinemas' thirty-five movie theatres 
and will manage the three theatres it is not acquiring until Rave 
Cinemas has sold them.
    The proposed transaction, as initially agreed to by Cinemark and 
Rave Cinemas on November 16, 2012, would lessen competition 
substantially as a result of Cinemark's acquisition of Rave Cinemas. 
This acquisition is the subject of the Complaint and proposed Final 
Judgment filed by the Plaintiffs on May 20, 2013.

[[Page 32448]]

B. The Competitive Effects of the Transaction on the Exhibition of 
First-Run, Commercial Movies

    The exhibition of first-run, commercial movies in parts of New 
Jersey, Kentucky, and Texas constitute lines of commerce and relevant 
markets for antitrust purposes.
1. The Relevant Product and Geographic Markets
    The exhibition of first-run, commercial movies is a relevant 
product market under Section 7 of the Clayton Act. The experience of 
viewing a film in a theatre is an inherently different experience from 
live entertainment (e.g., a stage production or attending a sporting 
event), or viewing a movie in the home (e.g., through streaming video, 
on a DVD, or via pay-per-view).
    Reflecting the significant differences between viewing a movie in a 
theatre and other forms of entertainment, ticket prices for movies are 
generally very different from prices for other forms of entertainment. 
Live entertainment is typically significantly more expensive than a 
movie ticket, whereas renting a DVD or ordering a pay-per view movie 
for home viewing is usually significantly cheaper than viewing a movie 
in a theatre.
    Moviegoers generally do not regard theatres showing ``sub-run'' 
movies, art movies, or foreign language movies as adequate substitutes 
for commercial, first-run movies.
    The transaction substantially lessens competition in four relevant 
geographic markets: one in part of New Jersey, one in part of Kentucky, 
and two in Texas. Each geographic market contains a number of 
theatres--the majority of which are owned by the Defendants--at which 
consumers can view first-run, commercial movies. These relevant 
geographic markets are, specifically, as follows: the area in and 
around Voorhees and Somerdale in southern New Jersey (``Voorhees-
Somerdale''), the eastern portion of Louisville, Kentucky (``East 
Louisville''), the western portion of Fort Worth, Texas (``Western 
Forth Worth''), and the area in and around Denton, Texas (``Greater 
Denton'').
Voorhees-Somerdale
    Rave Cinemas' Ritz Center 16 is located in Voorhees Township, New 
Jersey, and the Cinemark 16 operates in Somerdale, New Jersey. These 
theatres are located less than 3 miles apart. Two non-party theatres 
show first-run, commercial movies in the area around these towns.
East Louisville
    The eastern portion of Louisville, Kentucky encompasses Rave 
Cinemas' Stonybrook 20 + IMAX, Cinemark's Tinseltown USA and XD with 19 
screens, and the future Cinemark Mall of St. Matthews 10, which will 
exhibit first-run, commercial movies and is projected to open in July 
2013. In this area, one non-party theatre shows a mix of first-run 
commercial movies, and foreign-language and art/independent films.
Western Fort Worth
    The western portion of Fort Worth, Texas, encompasses Rave Cinemas' 
Ridgmar 13 + Xtreme and three Movie Tavern theatres: the Ridgmar with 
six screens, the West 7th Street with seven screens, and the Hulen with 
13 screens. Three non-party theatres in the area show first-run, 
commercial movies.
Greater Denton
    The area of Greater Denton, Texas, encompasses the Cinemark 14 in 
Denton, the Denton Movie Tavern with 4 screens, and Rave Cinemas' 
Hickory Creek 16 in nearby Hickory Creek, Texas. One non-party theatre 
in this area shows first-run, commercial movies.
    The relevant markets in which to assess the competitive effects of 
this transaction are the first-run, commercial theatres in the above-
mentioned geographic areas: Voorhees-Somerdale, East Louisville, 
Western Fort Worth, and Greater Denton. A hypothetical monopolist 
controlling the exhibition of all first-run, commercial movies in each 
of these areas would profitably impose at least a small but significant 
and non-transitory increase in ticket prices.
2. Competitive Effects in the Relevant Markets
    Exhibitors that operate first-run, commercial theatres compete on 
multiple dimensions. Exhibitors compete on price, knowing that if they 
charge too much (or do not offer sufficient discounted tickets for 
matinees, seniors, children, etc.), moviegoers will begin to frequent 
their rivals. Exhibitors also seek to license the first-run movies that 
are likely to attract the largest numbers of moviegoers. In addition, 
they compete over the quality of the viewing experience. They compete 
to offer the most sophisticated sound systems, largest screens, best 
picture clarity, best seating (including stadium and reserved seating), 
and the broadest range and highest quality snacks, food, and drinks at 
concession stands or cafes in the lobby or served to moviegoers at 
their seats.
    Cinemark and/or Movie Tavern currently compete with Rave Cinemas 
for moviegoers in the relevant markets at issue. Each of these markets 
is concentrated, and Cinemark and/or Movie Tavern and Rave Cinemas are 
each other's most significant competitor, given their close proximity 
to one another. Their rivalry spurs each to improve the quality of 
their theatres and keeps ticket prices in check. For various reasons, 
the other theatres in these markets offer less attractive options for 
the moviegoers that are served by the Cinemark and/or Movie Tavern and 
Rave theatres. For example, they are located farther away from these 
moviegoers, or they are a relatively smaller size or have fewer 
screens.
    In these relevant markets, the acquisition of Rave Cinemas likely 
will result in a substantial lessening of competition. In the Voorhees-
Somerdale, East Louisville, and Greater Denton markets, the transaction 
will lead to significant increases in concentration and eliminate 
existing competition between Cinemark and Rave Cinemas. In the Western 
Fort Worth and Greater Denton markets, where Rave currently competes 
closely with Movie Tavern, Cinemark's acquisition of the Rave Cinemas 
theatres likely will also reduce competition because Cinemark will not 
have the same incentive that Rave Cinemas has to compete aggressively 
against Movie Tavern. In those markets, Mr. Mitchell will have both the 
incentive and ability to dampen competition after Rave Cinemas is 
acquired by Cinemark. He is the Chairman and a significant shareholder 
of Cinemark and a Director of Movie Tavern, and, together with his 
wife, majority owner of Movie Tavern, and has access to competitively-
sensitive information at both companies.
    In Voorhees-Somerdale, the proposed acquisition would give the 
newly-merged entity control of two of the four first-run, commercial 
theatres, with 32 out of 48 total screens and a 71% share of 2012 box 
office revenues, which totaled approximately $14.7 million. Using a 
measure of market concentration called the Herfindahl-Hirschman Index 
(``HHI''),\2\ the

[[Page 32449]]

acquisition would yield a post-acquisition HHI of approximately, 5,861, 
representing an increase of roughly 2,416 points.
---------------------------------------------------------------------------

    \2\ See U.S. Dep't of Justice and Federal Trade Commission, 
Horizontal Merger Guidelines Sec.  5.3 (2010), available at https://www.justice.gov/atr/public/guidelines/hmg-2010.html. The HHI is 
calculated by squaring the market share of each firm competing in 
the market and then summing the resulting numbers. For example, for 
a market consisting of four firms with shares of 30, 30, 20, and 20 
percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). 
The HHI takes into account the relative size distribution of the 
firms in a market. It approaches zero when a market is occupied by a 
large number of firms of relatively equal size and reaches its 
maximum of 10,000 points when a market is controlled by a single 
firm. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
---------------------------------------------------------------------------

    In East Louisville, after the completion of Cinemark's Mall of St. 
Matthews 10 in July 2013, the proposed acquisition would give the newly 
merged entity control of three of the four first-run, commercial 
theatres, with 49 of 53 total screens. As measured by total screens 
only (since Cinemark's Mall of St. Matthews 10 does not yet have box 
office revenues), the acquisition would result in Cinemark having a 
market share of approximately 93% in East Louisville. The acquisition 
would yield a post-acquisition HHI of 8,604, representing an increase 
of roughly 4,130 points.
    In Western Fort Worth, the proposed acquisition would give 
Cinemark/Movie Tavern control of four of the seven first-run, 
commercial movie theatres in that area, with 39 out of 71 total screens 
and approximately 60% of 2012 box office revenues, which totaled almost 
$17 million. The acquisition would yield a post-acquisition HHI of 
approximately 4,828, representing an increase of roughly 1,736 points.
    In Greater Denton, the proposed acquisition would give Cinemark/
Movie Tavern control of three of the four first-run, commercial movie 
theatres, with 34 out of 46 total screens and an approximately 62% of 
2012 box office revenues, which totaled approximately $11 million. The 
acquisition would yield a post-acquisition HHI of approximately 5,265, 
representing an increase of roughly 1,640 points.
    In the four relevant markets today, were one of Defendants' 
theatres to increase ticket prices unilaterally, the exhibitor that 
increased price would likely suffer financially as a substantial number 
of its customers would patronize the other exhibitor's theatre. The 
other theatres are smaller and/or more distant than the parties' 
theatres and unlikely to offer enough of a competitive constraint to 
prevent such a price increase. After the acquisition, Cinemark or Movie 
Tavern would recapture such losses, making price increases more 
profitable than they would have been pre-acquisition. The acquisition 
is, therefore, likely to lead to higher ticket prices for moviegoers, 
which could take the form of a higher adult evening ticket price or 
reduced discounting, e.g., for matinees, children, seniors, and 
students.
    Likewise, the proposed transaction would eliminate competition 
between Cinemark and/or Movie Tavern and Rave Cinemas over the quality 
of the viewing experience at their theatres in each of the geographic 
markets at issue. If no longer required to compete, Cinemark and/or 
Movie Tavern and Rave Cinemas would have a reduced incentive to 
maintain, upgrade, and renovate their theatres in the relevant markets, 
to improve those theatres' amenities and services, and to license the 
most popular movies, thus reducing the quality of the viewing 
experience for a moviegoer.
    The entry of a first-run, commercial theatre sufficient to deter or 
counteract an increase in movie ticket prices or a decline in theatre 
quality is unlikely in all of the relevant markets. Exhibitors are 
reluctant to locate new first-run, commercial theatres near existing 
first-run, commercial theatres or near those already under 
construction, unless the population density, demographics, or the 
quality of existing theatres makes new entry viable. Over the next two 
years, demand by moviegoers to see first-run, commercial movies in the 
geographic markets at issue will likely not be sufficient to support 
entry of any new first-run, commercial movie theatres that are not 
already under construction.
    For all of these reasons, the proposed transaction would lessen 
competition substantially in the exhibition of first-run, commercial 
movies in the Voorhees-Somerdale, East Louisville, Western Fort Worth, 
and Greater Denton geographic markets, eliminate actual and potential 
competition between Cinemark and/or Movie Tavern and Rave Cinemas, and 
likely result in increased ticket prices and lower quality theatres in 
those markets. The proposed transaction therefore violates Section 7 of 
the Clayton Act.

III. Explanation of the Proposed Final Judgment

    The divestiture requirement of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisitions in each 
relevant geographic market, establishing new, independent, and 
economically-viable competitors. The proposed Final Judgment requires 
Cinemark within ninety (90) calendar days after the filing of the 
Complaint, or five (5) days after the notice of the entry of the Final 
Judgment by the Court, whichever is later, to divest as viable, ongoing 
businesses three theatres in the Voorhees-Somerdale, East Louisville, 
and Greater Denton geographic markets: the Rave Stonybrook 20 + IMAX 
(East Louisville), the Rave Ritz Center 16 (Voorhees-Somerdale), and 
either the Rave Hickory Creek 16 (Greater Denton) or the Cinemark 14 
(Greater Denton).
    The assets must be divested in such a way as to satisfy the 
Plaintiffs that the theatres can and will be operated by the purchaser 
as viable, ongoing businesses that can compete effectively in the 
relevant markets as first-run, commercial theatres. To that end, the 
proposed Final Judgment provides the acquirer(s) of the theatres with 
an option to enter into a transitional supply agreement with Cinemark 
of up to 120 days in length, with the possibility of one or more 
extensions not to exceed six months in total, for the supply of any 
goods, services, support, including software service and support, and 
reasonable use of the name Cinemark, the name Rave, and any registered 
service marks of Cinemark, for use in operating those theatres during 
the period of transition. This ensures the acquirer(s) of the theatres 
can operate without interruption while long-term supply agreements are 
arranged and the theatres rebranded. Without the option to enter into a 
transitional supply agreement, the acquirer(s) might find itself 
temporarily without provisions, including concessions, necessary to 
operate the theatres.
    The proposed Final Judgment also requires Alder Wood Partners 
within ninety (90) calendar days after the filing of the Complaint, or 
five (5) days after the notice of the entry of the Final Judgment by 
the Court, whichever is later, to divest the entire business of Movie 
Tavern, including the Movie Tavern theatres in the Western Fort Worth 
and the Greater Denton geographic markets. The assets must be divested 
in such a way as to satisfy the Plaintiffs that the sale will remedy 
the competitive harm alleged in the Complaint.
    Until the divestitures take place, Cinemark, Alder Wood Partners, 
and Rave Cinemas must maintain the sales and marketing of the theatres, 
and maintain the theatres in operable condition at current capacity 
configurations. In addition, Cinemark, Alder Wood Partners, and Rave 
Cinemas must not transfer or reassign to other areas within the company 
their employees with primary responsibility for the operation of the 
theatres, except for transfer bids initiated by employees pursuant to 
Defendants' regular, established job posting policies. In the event 
that Cinemark and/or Alder Wood Partners do not accomplish the 
divestitures within the periods prescribed in the proposed Final

[[Page 32450]]

Judgment, the Final Judgment provides that the Court will appoint a 
trustee selected by the United States to effect the divestitures.
    If Cinemark is unable to effect any of the divestitures required 
herein due to its inability to obtain the consent of the landlord from 
whom a theatre is leased, Section VI.A of the proposed Final Judgment 
requires it to divest alternative theatre assets that compete 
effectively with the theatres for which the landlord consent was not 
obtained. If Alder Wood Partners is unable to effect the divestitures 
of any of the three Movie Tavern theatres, defined as the Western Fort 
Worth, Texas Movie Tavern Theatres in the proposed Final Judgment, due 
to the inability to obtain the landlords' consent, Section VI.B of the 
proposed Final Judgment requires Cinemark to divest the Ridgmar 13 + 
Xtreme theatre assets located at 2300 Green Oaks Road, Fort Worth, 
Texas that it will be acquiring from Rave Cinemas. These provisions 
will insure that any failure by Cinemark and/or Alder Wood Partners to 
obtain landlord consent does not thwart the relief obtained in the 
proposed Final Judgment. In addition, pursuant to Section V.G of the 
proposed Final Judgment, if a trustee has been appointed to effect the 
divestiture of the Movie Tavern Divestiture Assets and that trustee is 
unable for any reason to accomplish the divestiture of the portion of 
those assets that includes any of the Western Fort Worth, Texas Movie 
Tavern Theatres, the trustee will then divest the Ridgmar 13 + Xtreme 
theatre assets.
    The proposed Final Judgment also prohibits Cinemark, without 
providing at least thirty (30) days notice to the United States 
Department of Justice, from acquiring any other theatres in the 
following counties: Tarrant County, Texas; Denton County, Texas; Camden 
County, New Jersey; and Jefferson County, Kentucky. These counties 
correspond to the relevant geographic markets in this case. The 
proposed Final Judgment also prohibits Alder Wood Partners, without 
providing at least thirty (30) days notice to the United States 
Department of Justice, from acquiring any theatres in any county in 
which Cinemark owns or operates a theatre exhibiting first-run, 
commercial movies in any state; however this requirement will terminate 
in the event that no one serving as a limited partner of Alder Wood 
Partners as of May 13, 2013 serves as an officer or director of 
Cinemark. Such acquisitions could raise competitive concerns but might 
be too small to be reported under the Hart-Scott-Rodino (``HSR'') 
premerger notification statute. However, neither company is required to 
provide advance notification when making an acquisition of not more 
than two percent of the outstanding voting securities of a publicly-
traded company, or comparable non-corporate interest in an 
unincorporated entity, with theatres exhibiting first-run, commercial 
movies where such investment is made solely for the purpose of 
investment.
    The divestiture provisions of the proposed Final Judgment will 
eliminate the anticompetitive effects of Cinemark's acquisition of Rave 
Cinemas.

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 Plaintiffs and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's Internet Web site and, under certain 
circumstances, published in the Federal Register.
    Written comments should be submitted to: John R. Read, Chief, 
Litigation III, Antitrust Division, United States Department of 
Justice, 450 5th Street NW., Suite 4000, 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 Plaintiffs considered, as an alternative to the proposed Final 
Judgment, a full trial on the merits against Defendants. The Plaintiffs 
could have continued the litigation and sought preliminary and 
permanent injunctions against Cinemark's acquisition of Rave Cinemas. 
The Plaintiffs are satisfied, however, that the divestiture of assets 
described in the proposed Final Judgment will preserve competition for 
the provision of exhibition of first-run, commercial movies in the 
relevant markets identified by the United States. Thus, the proposed 
Final Judgment would achieve all or substantially all of the relief the 
Plaintiffs would have obtained through litigation, but avoids the time, 
expense, and uncertainty of a full trial on the merits of the 
Complaint.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the court, in accordance with the statute as amended in 2004, is 
required to consider:

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and

[[Page 32451]]

    (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, 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 mechanism to enforce the final judgment are clear and 
manageable.'') \3\
---------------------------------------------------------------------------

    \3\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
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).\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 this Court confirmed in SBC Communications, courts ``cannot look 
beyond the complaint in making the public interest determination unless 
the complaint is drafted so narrowly as to make a mockery of judicial 
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing in 
this section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2). 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.\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, 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.'').

---------------------------------------------------------------------------

[[Page 32452]]

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: May 20, 2013.
Respectfully submitted,

------/s/--------------------------------------------------------------
JUSTIN M. DEMPSEY (D.C. Bar 425976),
GREGG I. MALAWER (D.C. Bar 481685),

U.S. Department of Justice, Antitrust Division, 450 5th Street NW., 
Suite 4000, Washington, DC 20530, Phone: Justin Dempsey (202) 307-
5815, Phone: Gregg Malawer (202) 616-5943, Fax: (202) 514-7308, E-
mail: justin.dempsey@usdoj.gov, E-mail: gregg.malawer@usdoj.gov, 
Attorneys for Plaintiff the United States.

United States District Court for the District of Columbia

    United States of America and State Of Texas, Plaintiffs, v. 
Cinemark Holdings, Inc., Rave Holdings, LLC and Alder Wood Partners, 
L.P. Defendants.

Civil Action No.: 1:13-cv-00727.
Judge: Beryl A. Howell.
Filed: 05/20/2013.

Final Judgment

    Whereas, Plaintiffs, United States of America and State of Texas, 
filed their Complaint on May 20, 2013, the Plaintiffs and Defendants, 
Cinemark Holdings, Inc. (``Cinemark''), Rave Holdings, LLC (``Rave 
Cinemas''), and Alder Wood Partners, L.P. (``Alder Wood Partners''), by 
their respective attorneys, have consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law, and 
without this Final Judgment constituting any evidence against or 
admission by any party regarding any issue of fact or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the Defendants to 
assure that competition is not substantially lessened;
    And whereas, Plaintiffs require Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the Plaintiffs that the 
divestitures required below can and will be made and that Defendants 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the divestiture provisions contained 
below;
    Now therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ordered, adjudged and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
which Cinemark divests the Cinemark Divestiture Assets, and the entity 
or entities to which Alder Wood Partners divests the Movie Tavern 
Divestiture Assets.
    B. ``Cinemark'' means Defendant Cinemark Holdings, Inc., a Delaware 
corporation with its headquarters in Plano, Texas, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents, and employees.
    C. ``Rave Cinemas'' means Defendant Rave Holdings, LLC, a Delaware 
limited liability company with its headquarters in Dallas, Texas, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Alder Wood Partners'' means Defendant Alder Wood Partners, 
L.P., a Texas limited partnership with its headquarters in Dallas, 
Texas, its partners, its successors and assigns, and its subsidiaries, 
divisions, groups, affiliates, partnerships and joint ventures, and 
their directors, officers, managers, agents, and employees.
    E. Movie Tavern, Inc. means (``Movie Tavern''), a Texas corporation 
with its headquarters in Dallas, Texas and 16 movie theatres in seven 
states, and that is majority-owned by Alder Wood Partners.
    F. ``Divestiture Assets'' means the Cinemark Divestiture Assets and 
the Movie Tavern Divestiture Assets.
    G. ``Landlord Consent'' means any contractual approval or consent 
that the landlord or owner of one or more of the Divestiture Assets, or 
of the property on which one or more of the Divestiture Assets is 
situated, must grant prior to the transfer of one of the Divestiture 
Assets to an Acquirer.
    H. ``Cinemark Divestiture Assets'' means the following theatre 
assets:

------------------------------------------------------------------------
                Theatre                              Address
------------------------------------------------------------------------
1 Rave Stonybrook 20 + IMAX............  2745 South Hurstbourne Parkway,
                                          Louisville, KY 40220.
2 Rave Ritz Center 16..................  900 Haddonfield-Berlin Road,
                                          Voorhees, NJ 08043.
3 Rave Hickory Creek 16................  8380 South Stemmons Freeway,
 OR....................................   Hickory Creek, TX 75065.
 Cinemark 14...........................  2825 Wind River Lane, Denton,
                                          TX 76210.
------------------------------------------------------------------------

    The term ``Cinemark Divestiture Assets'' also includes:
    1. All tangible assets that comprise the business of operating 
theatres that exhibit first-run, commercial movies, including, but not 
limited to real property and improvements, research and development 
activities, all equipment, fixed assets, and fixtures, personal 
property, inventory, office furniture, materials, supplies, and other 
tangible property and all assets used in connection with the Cinemark 
Divestiture Assets; all licenses, permits, and authorizations issued by 
any governmental organization relating to the Cinemark Divestiture 
Assets; all contracts (including management contracts), teaming 
arrangements, agreements, leases, commitments, certifications, and 
understandings relating primarily to the Cinemark Divestiture Assets, 
including supply agreements, (provided however, that supply agreements 
that apply to all

[[Page 32453]]

Cinemark theatres may be excluded from the Cinemark Divestiture Assets, 
subject to the transitional agreement provisions specified in Section 
IV (F)); all customer lists (including loyalty club data at the option 
of the Acquirer(s), copies of which may be retained by Cinemark at its 
option), contracts, accounts, and credit records relating to the 
Cinemark Divestiture Assets; all repair and performance records and all 
other records relating to the Cinemark Divestiture Assets;
    2. All intangible assets relating to the operation of the Cinemark 
Divestiture Assets, including, but not limited to all patents, licenses 
and sublicenses, intellectual property, copyrights, trademarks, trade 
names, service marks, service names, (provided however, that the name 
Cinemark, the name Rave, and any registered service marks of Cinemark 
may be excluded from the Cinemark Divestiture Assets, subject to the 
transitional agreement provisions specified in Section IV (F)), 
technical information, computer software and related documentation 
(provided however, that Cinemark's proprietary software may be excluded 
from the Cinemark Divestiture Assets, subject to the transitional 
agreement provisions specified in Section IV (F)), know-how and trade 
secrets relating primarily to the Cinemark Divestiture Assets, 
drawings, blueprints, designs, design protocols, specifications for 
materials, specifications for parts and devices, safety procedures for 
the handling of materials and substances, all research data concerning 
historic and current research and development relating to the Cinemark 
Divestiture Assets, quality assurance and control procedures, design 
tools and simulation capability, all manuals and technical information 
Cinemark and/or Rave Cinemas provide to their own employees, customers, 
suppliers, agents, or licensees (except for the employee manuals that 
Cinemark provides to all its employees), and all research data 
concerning historic and current research and development efforts 
relating to the Cinemark Divestiture Assets.
    I. ``Movie Tavern Divestiture Assets'' means the entire business of 
Movie Tavern, Inc., including, but not limited to, the 16 theatres it 
currently operates as well as the theatres it has plans to open. The 
term ``Movie Tavern Divestiture Assets'' also includes:
    1. All tangible assets that comprise the business of operating 
theatres that exhibit first-run, commercial movies, including, but not 
limited to real property and improvements, research and development 
activities, all equipment, fixed assets, and fixtures, personal 
property, inventory, office furniture, materials, supplies, and other 
tangible property and all assets used in connection with the Movie 
Tavern Divestiture Assets; all licenses, permits, and authorizations 
issued by any governmental organization relating to the Movie Tavern 
Divestiture Assets; all contracts (including management contracts), 
teaming arrangements, agreements, leases, commitments, certifications, 
and understandings relating to the Movie Tavern Divestiture Assets, 
including supply agreements; all customer lists (including loyalty club 
data at the option of the Acquirer(s)), contracts, accounts, and credit 
records; all repair and performance records and all other records 
relating to the Movie Tavern Divestiture Assets;
    2. All intangible assets used in the development, production, 
servicing, and sale of the Movie Tavern Divestiture Assets, including, 
but not limited to all patents, licenses and sublicenses, intellectual 
property, copyrights, trademarks, trade names, service marks, service 
names, technical information, computer software and related 
documentation, know-how, trade secrets, drawings, blueprints, designs, 
design protocols, specifications for materials, specifications for 
parts and devices, safety procedures for the handling of materials and 
substances, all research data concerning historic and current research 
and development relating to the Movie Tavern Divestiture Assets, 
quality assurance and control procedures, design tools and simulation 
capability, all manuals and technical information Movie Tavern provides 
to its employees, customers, suppliers, agents, or licensees, and all 
research data concerning historic and current research and development 
efforts relating to the Movie Tavern Divestiture Assets.
    J. ``Western Fort Worth, Texas Movie Tavern Theatres'' means the 
Ridgmar Movie Tavern, the West 7th Street Movie Tavern, and the Hulen 
Movie Tavern, which are three of the 16 currently operating Movie 
Tavern theatres included among the Movie Tavern Divestiture Assets.

III. Applicability

    A. This Final Judgment applies to Cinemark, Rave Cinemas, and Alder 
Wood Partners, as defined above, and all other persons in active 
concert or participation with any of them who receive actual notice of 
this Final Judgment by personal service or otherwise.
    B. If, prior to complying with Sections IV and V of this Final 
Judgment, Defendants sell or otherwise dispose of all or substantially 
all of their assets or of lesser business units that include the 
Divestiture Assets, they shall require the purchaser to be bound by the 
provisions of this Final Judgment. Defendants need not obtain such an 
agreement from the Acquirer(s) of the assets divested pursuant to this 
Final Judgment.

IV. Divestitures

    A. Cinemark is ordered and directed, within ninety (90) calendar 
days after the filing of the Complaint in this matter, or five (5) 
calendar days after notice of the entry of this Final Judgment by the 
Court, whichever is later, to divest the Cinemark Divestiture Assets in 
a manner consistent with this Final Judgment to one or more Acquirer(s) 
acceptable to the United States in its sole discretion (after 
consultation with the State of Texas, as appropriate). The United 
States, in its sole discretion, may agree to one or more extensions of 
this time period, not to exceed sixty (60) calendar days in total, and 
shall notify the Court in such circumstances. Cinemark agrees to use 
its best efforts to divest the Cinemark Divestiture Assets as 
expeditiously as possible.
    B. Alder Wood Partners is ordered and directed, within ninety (90) 
calendar days after the filing of the Complaint in this matter, or five 
(5) calendar days after notice of the entry of this Final Judgment by 
the Court, whichever is later, to divest the Movie Tavern Divestiture 
Assets in a manner consistent with this Final Judgment to one or more 
Acquirer(s) acceptable to the United States in its sole discretion 
(after consultation with the State of Texas, as appropriate). The 
United States, in its sole discretion, may agree to one or more 
extensions of this time period not to exceed ninety (90) calendar days 
in total, and shall notify the Court in such circumstances. Alder Wood 
Partners agrees to use its best efforts to divest the Movie Tavern 
Divestiture Assets as expeditiously as possible.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, Defendants Cinemark and Alder Wood Partners shall each 
promptly make known, by usual and customary means, the availability of 
their respective Divestiture Assets. (For Cinemark, its respective 
Divesture Assets are the Cinemark Divestiture Assets; and for Alder 
Wood Partners, its respective Divestiture Assets are the Movie Tavern 
Divestiture Assets.) Defendants shall each inform any person making an 
inquiry regarding a possible purchase of their respective Divestiture 
Assets that they are being divested pursuant to this

[[Page 32454]]

Final Judgment and provide that person with a copy of this Final 
Judgment. Defendants shall each offer to furnish to all prospective 
Acquirers, subject to customary confidentiality assurances, all 
information and documents relating to Defendants' respective 
Divestiture Assets customarily provided in a due diligence process 
except such information or documents subject to the attorney-client 
privilege or work-product doctrine. Defendants shall each make 
available such information to the Plaintiffs at the same time that such 
information is made available to any other person.
    D. Defendants Cinemark and Alder Wood Partners shall provide the 
Acquirer(s) and the United States information relating to the personnel 
involved in the operation of their respective Divestiture Assets to 
enable the Acquirer(s) to make offers of employment. Defendants will 
not interfere with any negotiations by the Acquirer(s) to employ any 
Defendant employee with primary responsibility for the operation of 
their respective Divestiture Assets.
    E. Defendants shall permit prospective Acquirer(s) of their 
respective Divestiture Assets to have reasonable access to personnel 
and to make inspections of the physical facilities of their respective 
Divestiture Assets; access to any and all environmental, zoning, and 
other permit documents and information; and access to any and all 
financial, operational, or other documents and information customarily 
provided as part of a due diligence process.
    F. In connection with the divestiture of the Cinemark Divestiture 
Assets pursuant to Section IV, or by a trustee appointed pursuant to 
Section V, of this Final Judgment, at the option of the Acquirer(s), 
Cinemark shall enter into a commercially reasonable transitional 
supply, service, support, and use agreement (``transitional 
agreement''), up to 120 days in length, for the supply of any goods, 
services, support, including software service and support, and 
reasonable use of the name Cinemark, the name Rave, and any registered 
service marks of Cinemark, that the Acquirer(s) request for the 
operation of the Cinemark Divestiture Assets during the period covered 
by the transitional agreement. At the request of the Acquirer(s), the 
United States in its sole discretion (after consultation with the State 
of Texas, as appropriate), may agree to one or more extensions of this 
time period not to exceed six (6) months in total. The terms and 
conditions of the transitional agreement must be acceptable to the 
United States in its sole discretion (after consultation with the State 
of Texas, as appropriate). The transitional agreement shall be deemed 
incorporated into this Final Judgment and a failure by Cinemark to 
comply with any of the terms or conditions of the transitional 
agreement shall constitute a failure to comply with this Final 
Judgment.
    G. Cinemark shall warrant to the Acquirer(s) of the Cinemark 
Divestiture Assets that each asset will be operational on the date of 
sale. Alder Wood Partners shall warrant to the Acquirer(s) of the Movie 
Tavern Divestiture Assets that each asset will be operational on the 
date of sale.
    H. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestitures of their respective 
Divestiture Assets.
    I. Defendants shall warrant to the Acquirer(s) that there are no 
material defects in the environmental, zoning, or other permits 
pertaining to the operation of their respective Divestiture Assets. 
Following the sale of the Divestiture Assets, Defendants will not 
undertake, directly or indirectly, any challenges to the environmental, 
zoning, or other permits relating to the operation of the Divestiture 
Assets.
    J. Unless the United States otherwise consents in writing, the 
divestitures made pursuant to Section IV, and/or by a trustee appointed 
pursuant to Section V of this Final Judgment, shall include all 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion (after consultation 
with the State of Texas, as appropriate) that the Divestiture Assets 
can and will be used by the Acquirer(s) as part of a viable, ongoing 
business of operating theatres that exhibit first-run, commercial 
movies. Divestitures of the Divestiture Assets may be made to one or 
more Acquirers, provided that in each instance it is demonstrated to 
the sole satisfaction of the United States (after consultation with the 
State of Texas, as appropriate) that the Divestiture Assets will remain 
viable and the divestitures of such assets will remedy the competitive 
harm alleged in the Complaint. The divestitures, whether pursuant to 
Section IV or Section V of this Final Judgment,
    (1) shall be made to Acquirers that, in the United States' sole 
judgment (after consultation with the State of Texas, as appropriate) 
have the intent and capability (including the necessary managerial, 
operational, technical, and financial capability) of competing 
effectively in the business of theatres exhibiting first-run, 
commercial movies; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion (after consultation with the State of Texas, as 
appropriate) that none of the terms of any agreement between Acquirers 
and Defendants give the ability unreasonably to raise the Acquirers' 
costs, to lower the Acquirers' efficiency, or otherwise to interfere in 
the ability of the Acquirers to compete effectively.

 V. Appointment of Trustee

    A. If Cinemark has not divested the Cinemark Divestiture Assets 
within the time period specified in Section IV(A), Cinemark shall 
notify the United States of that fact in writing. If Alder Wood 
Partners has not divested the Movie Tavern Divestiture Assets within 
the time period specified in Section IV(B), Alder Wood Partners shall 
notify the United States of that fact in writing. Upon application of 
the United States, the Court shall appoint a trustee selected by the 
United States and approved by the Court to effect the divestitures of 
the Cinemark Divestiture Assets and/or the Movie Tavern Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Cinemark Divestiture Assets 
and/or the Movie Tavern Divestiture Assets, as the case may be. The 
trustee shall have the power and authority to accomplish the 
divestitures to Acquirer(s) acceptable to the United States (after 
consultation with the State of Texas, as appropriate) at such price and 
on such terms as are then obtainable upon reasonable effort by the 
trustee, subject to the provisions of Sections IV, V, VI, and VII of 
this Final Judgment, and shall have such other powers as this Court 
deems appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of Cinemark and/or Alder Wood 
Partners, as the case may be, any investment bankers, attorneys, or 
other agents, who shall be solely accountable to the trustee and 
reasonably necessary in the trustee's judgment to assist in the 
divestiture(s).
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VII.
    D. The trustee shall serve at the cost and expense of Cinemark and/
or Alder Wood Partners, depending on which Divestiture Assets the 
trustee is selling, pursuant to a written agreement or agreements with 
the applicable

[[Page 32455]]

Defendant(s) and on such terms and conditions as the United States 
approves, and shall account for all monies derived from the sale of the 
assets sold by the trustee and all costs and expenses so incurred. 
After approval by the Court of the trustee's accounting, including fees 
for its services and those of any professionals and agents retained by 
the trustee, all remaining money shall be paid to Cinemark and/or Movie 
Tavern, depending on which Divestiture Assets the trustee sold, and the 
trust shall then be terminated. The compensation of the trustee and any 
professionals and agents retained by the trustee shall be reasonable in 
light of the value of the Divestiture Assets and based on a fee 
arrangement providing the trustee with an incentive based on the price 
and terms of the divestitures and the speed with which it is 
accomplished, but timeliness is paramount.
    E. The applicable Defendant(s) shall use their best efforts to 
assist the trustee in accomplishing the divestiture of their respective 
Divesture Assets. The trustee and any consultants, accountants, 
attorneys, and other persons retained by the trustee shall have full 
and complete access to the personnel, books, records, and facilities of 
the assets and business to be divested, and the applicable Defendant(s) 
shall develop financial and other information relevant to such assets 
and business as the trustee may reasonably request, subject to 
reasonable protection for trade secret or other confidential research, 
development, or commercial information. The applicable Defendant(s) 
shall take no action to interfere with or to impede the trustee's 
accomplishment of the divestitures.
    F. After its appointment, the trustee shall file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestitures ordered under this Final Judgment. To the 
extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. Such reports shall include the name, address, and telephone 
number of each person who, during the preceding month, made an offer to 
acquire, expressed an interest in acquiring, entered into negotiations 
to acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Divestiture Assets, and shall describe in detail each 
contact with any such person. The trustee shall maintain full records 
of all efforts made to divest the Cinemark Divestiture Assets and/or 
Movie Tavern Divestiture Assets, as the case may be.
    G. If the trustee is responsible for effecting divestiture of all 
or any part of the Movie Tavern Divestiture Assets, it shall notify the 
United States and Alder Wood Partners within five (5) business days 
following a determination that it is unable for any reason to 
accomplish the divestiture. If the Movie Tavern Divestiture Assets that 
the trustee is unable to divest include any of the Western Fort Worth, 
Texas Movie Tavern Theatres, the trustee shall then divest the Ridgmar 
13 + Xtreme theatre assets located at 2300 Green Oaks Road, Fort Worth, 
Texas.
    H. If the trustee has not accomplished the divestitures ordered 
under this Final Judgment within six (6) months after its appointment, 
the trustee shall promptly file with the Court a report setting forth 
(1) the trustee's efforts to accomplish the required divestitures, (2) 
the reasons, in the trustee's judgment, why the required divestitures 
have not been accomplished, and (3) the trustee's recommendations. To 
the extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the United States, which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final Judgment, which may, if necessary, 
include extending the trust and the term of the trustee's appointment 
by a period requested by the United States.

VI. Landlord Consent

    A. If Cinemark is unable to effect any of the divestitures required 
herein due to the inability to obtain the Landlord Consent for any of 
the Cinemark Divestiture Assets, Cinemark shall divest alternative 
theatre assets that compete effectively with the theatre or theatres 
for which the Landlord Consent was not obtained. The United States 
shall, in its sole discretion (after consultation with the State of 
Texas, as appropriate) determine whether such theatre assets compete 
effectively with the theatres for which Landlord Consent was not 
obtained.
    B. If Alder Wood Partners is unable to effect divestiture of any of 
the Western Fort Worth, Texas Movie Tavern Theatres due to the 
inability to obtain the Landlord Consent, Cinemark shall then divest 
the Ridgmar 13 + Xtreme theatre assets located at 2300 Green Oaks Road, 
Fort Worth, Texas, and such assets shall be deemed to be part of the 
Cinemark Divestiture Assets.
    C. Within five (5) business days following a determination that 
Landlord Consent cannot be obtained for any of the Divestiture Assets, 
Cinemark and/or Alder Wood Partners, as applicable, shall notify the 
United States, and Cinemark shall propose an alternative divestiture 
pursuant to Section VI (A). The United States (after consultation with 
the State of Texas, as appropriate) shall have then ten (10) business 
days in which to determine whether such theatre assets are a suitable 
alternative pursuant to Section VI (A). If Cinemark's selection is 
deemed not to be a suitable alternative, the United States shall in its 
sole discretion select alternative theatre assets to be divested (after 
consultation with the State of Texas, as appropriate) from among those 
theatre(s) that the United States has determined, in its sole 
discretion, to compete effectively with the theatre(s) for which 
Landlord Consent was not obtained.
    D. If the trustee is responsible for effecting divestiture of the 
Cinemark Divestiture Assets, it shall notify the United States and 
Cinemark within five (5) business days following a determination that 
Landlord Consent cannot be obtained for one or more of the Cinemark 
Divestiture Assets. Cinemark shall thereafter have five (5) business 
days to propose an alternative divestiture pursuant to Section VI (A). 
The United States (after consultation with the State of Texas, as 
appropriate) shall then have ten (10) business days to determine 
whether the proposed theatre assets are a suitable competitive 
alternative pursuant to Section VI (A). If Cinemark's selection is 
deemed not to be a suitable competitive alternative, the United States 
shall in its sole discretion select alternative theatre assets to be 
divested (after consultation with the State of Texas, as appropriate) 
from among those theatre(s) that the United States has determined, in 
its sole discretion, to compete effectively with the theatre(s) for 
which Landlord Consent was not obtained.

VII. Notice of Proposed Divestitures

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Cinemark and/or Alder Wood Partners or the 
trustee, whichever is then responsible for effecting the divestitures 
required herein, shall notify the United States (and, as appropriate, 
the State of Texas), of any proposed divestitures required by Sections 
IV or V of this Final Judgment. If the trustee is responsible, it shall 
similarly notify Defendants. The notice shall set forth the details of 
the proposed divestitures and list the name, address, and telephone 
number of each person not previously identified who

[[Page 32456]]

offered or expressed an interest in or desire to acquire any ownership 
interest in the Divestiture Assets, together with full details of the 
same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States, in its sole discretion, after 
consultation with the State of Texas, as appropriate, may request from 
Defendants, the proposed Acquirer(s), any other third party, or the 
trustee, if applicable, additional information concerning the proposed 
divestitures, the proposed Acquirer(s), and any other potential 
Acquirer(s). Defendants and the trustee shall furnish any additional 
information requested to the United States within fifteen (15) calendar 
days of receipt of the request, unless the parties otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendants, the 
proposed Acquirer(s), any third party, and the trustee, whichever is 
later, the United States shall provide written notice to Cinemark and/
or Alder Wood Partners, as applicable, and the trustee, if there is 
one, stating whether it objects to the proposed divestitures. If the 
United States provides written notice that it does not object, the 
divestitures may be consummated, subject only to the applicable 
Defendant(s)' limited right to object to the sale under Section V(C) of 
this Final Judgment. Absent written notice that the United States does 
not object to the proposed Acquirer(s) or upon objection by the United 
States, a divestiture proposed under Section IV or Section V shall not 
be consummated. Upon objection by Defendants under Section V(C), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VIII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

IX. Hold Separate

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

X. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestitures have been completed under Sections IV or V, Cinemark 
and Alder Wood Partners shall each deliver to the United States an 
affidavit as to the fact and manner of its compliance with Sections IV 
or V of this Final Judgment. Each such affidavit shall include the 
name, address, and telephone number of each person who, during the 
preceding thirty (30) calendar days, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Cinemark Divestiture Assets or the Movie Tavern 
Divestiture Assets, and shall describe in detail each contact with any 
such person during that period. Each such affidavit shall also include 
a description of the efforts Cinemark and Alder Wood Partners has each 
taken to solicit buyers for their respective Divestiture Assets, and to 
provide required information to prospective purchasers, including the 
limitations, if any, on such information. Assuming the information set 
forth in the affidavit is true and complete, any objection by the 
United States to information provided by Cinemark or by Alder Wood 
Partners, including limitation on information, shall be made within 
fourteen (14) calendar days of receipt of each such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Cinemark and Alder Wood Partners shall each deliver to 
the United States an affidavit that describes in reasonable detail all 
actions it has taken and all steps it has implemented on an ongoing 
basis to comply with Section IX of this Final Judgment. Cinemark and 
Alder Wood Partners shall each deliver to the United States an 
affidavit describing any changes to the efforts and actions outlined in 
their earlier affidavits filed pursuant to this section within fifteen 
(15) calendar days after the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest their respective Divestiture Assets until one year 
after such divestitures have been completed.

XI. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the United States 
Department of Justice Antitrust Division (``DOJ''), including 
consultants and other persons retained by the United States, shall, 
upon written request of an authorized representative of the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
notice to Defendants, be permitted:

    (1) access during Defendants' office hours to inspect and copy, 
or at plaintiffs' option, to require Defendants to provide hard copy 
or electronic copies of, all books, ledgers, accounts, records, 
data, and documents in the possession, custody, or control of 
Defendants, relating to any matters contained in this Final 
Judgment; and
    (2) to interview, either informally or on the record, 
Defendants' officers, employees, or agents, who may have their 
individual counsel present, regarding such matters. The interviews 
shall be subject to the reasonable convenience of the interviewee 
and without restraint or interference by Defendants.

    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
Defendants to the United States, Defendants represent and identify in 
writing the material to which a claim of protection may be asserted 
under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and 
Defendants mark each pertinent page of such material, ``Subject to 
claim of protection under Rule 26(c)(1)(G) of the Federal Rules of 
Civil Procedure,'' then the Plaintiffs shall give Defendants ten (10) 
calendar days notice prior to divulging such material in any legal 
proceeding (other than a grand jury proceeding).

XII. Notification

    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
Cinemark, without providing advance notification to the DOJ, shall not 
directly or indirectly acquire any assets of or any interest,

[[Page 32457]]

including any financial, security, loan, equity or management interest, 
in a business exhibiting first-run, commercial movies in Tarrant 
County, Texas; Denton County, Texas; Camden County, New Jersey; or 
Jefferson County, Kentucky during the ten years following the filing of 
the Complaint in this action. Notwithstanding the preceding sentence, 
in no event shall Cinemark be required to provide advance notification 
under this provision when making an acquisition of (1) not more than 
two percent of the outstanding ``voting securities'' (as that term is 
defined in 16 CFR 801.1) of a publicly-traded company with theatres 
exhibiting first-run, commercial movies where such acquisition is made 
``solely for the purpose of investment'' (as that term is defined in 16 
CFR 801.1), or (2) not more than two percent of ``non-corporate 
interest'' (as that term is defined in 16 CFR 801.1) in any 
unincorporated entity that holds any interest in a business with 
theatres exhibiting first-run, commercial movies where such acquisition 
is made ``solely for the purpose of investment'' (as that term is 
defined in 16 CFR 801.1).
    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
Alder Wood Partners, without providing advance notification to the DOJ, 
shall not directly or indirectly acquire any assets of or any interest, 
including any financial, security, loan, equity or management interest, 
in a business exhibiting first-run, commercial movies in any county 
which Cinemark owns or operates a theatre exhibiting first-run, 
commercial movies in any state during the earlier of (a) the ten years 
following the filing of the Complaint in this action, or (b) the date 
on which any person who is a limited partner of Alder Wood Partners as 
of May 13, 2013, no longer serves as an officer or director of 
Cinemark. Notwithstanding the preceding sentence, in no event shall 
Alder Wood Partners be required to provide advance notification under 
this provision when making an acquisition of (1) not more than two 
percent of the outstanding ``voting securities'' (as that term is 
defined in 16 CFR 801.1) of a publicly-traded company with theatres 
exhibiting first-run, commercial movies where such acquisition is made 
``solely for the purpose of investment'' (as that term is defined in 16 
CFR 801.1), or (2) not more than two percent of ``non-corporate 
interest'' (as that term is defined in 16 CFR 801.1) in any 
unincorporated entity that holds any interest in a business with 
theatres exhibiting first-run, commercial movies where such acquisition 
is made ``solely for the purpose of investment'' (as that term is 
defined in 16 CFR 801.1).
    Such notification by Cinemark and/or Alder Wood Partners shall be 
provided to the DOJ in the same format as, and per the instructions 
relating to, the Notification and Report Form set forth in the Appendix 
to Part 803 of Title 16 of the Code of Federal Regulations as amended, 
except that the information requested in Items 5 through 9 of the 
instructions must be provided only about theatres that exhibit first-
run, commercial movies. Notification shall be provided at least thirty 
(30) calendar days prior to acquiring any such interest, and shall 
include, beyond what may be required by the applicable instructions, 
the names of the principal representatives of the parties to the 
agreement who negotiated the agreement, and any management or strategic 
plans discussing the proposed transaction. If within the 30-day period 
after notification, representatives of the DOJ make a written request 
for additional information, Defendants shall not consummate the 
proposed transaction or agreement until thirty (30) days after 
submitting all such additional information. Early termination of the 
waiting periods in this paragraph may be requested and, where 
appropriate, granted in the same manner as is applicable under the 
requirements and provisions of the HSR Act and rules promulgated 
thereunder. This Section shall be broadly construed and any ambiguity 
or uncertainty regarding the filing of notice under this Section shall 
be resolved in favor of filing notice.

XIII. No Reacquisition

    Neither Cinemark nor Alder Wood Partners may acquire or reacquire 
any part of the Cinemark Divestiture Assets or Movie Tavern Divestiture 
Assets divested under this Final Judgment during the term of this Final 
Judgment.

XIV. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XVI. Public Interest Determination

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

Date: ------------, 2013

    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16

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United States District Judge

[FR Doc. 2013-12762 Filed 5-29-13; 8:45 am]
BILLING CODE P