United States v. The Walt Disney Company, et al.; Proposed Final Judgment and Competitive Impact Statement, 40553-40567 [2018-17521]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Notices]
[Pages 40553-40567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17521]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. The Walt Disney Company, 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. Sec.  16(b)-(h), that a proposed Final 
Judgment, Stipulation, and Competitive Impact Statement have been filed 
with the United States District Court for the Southern District of New 
York in United States of America v. The Walt Disney Company, et al., 
Civil Action No. 1:18-cv-05800. On June 27, 2018, the United States 
filed a Complaint alleging that The Walt Disney Company's proposed 
acquisition of certain assets from Twenty-First Century Fox, Inc. would 
violate Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final 
Judgment, filed at the same time as the Complaint, requires The Walt 
Disney Company to divest Fox's interests in the following regional 
sports networks: (i) Fox Sports Arizona; (ii) Fox Sports Carolinas; 
(iii) Fox Sports Detroit; (iv) Fox Sports Florida; (v) Fox Sports 
Indiana; (vi) Fox Sports Kansas City; (vii) Fox Sports Midwest; (viii) 
Fox Sports New Orleans; (ix) Fox Sports North; (x) Fox Sports Ohio; 
(xi) SportsTime Ohio; (xii) Fox Sports Oklahoma; (xiii) Fox Sports San 
Diego; (xiv) Fox Sports South; (xv) Fox Sports Southeast; (xvi) Fox 
Sports Southwest; (xvii) Fox Sports Sun; (xviii) Fox Sports Tennessee; 
(xix) Fox Sports West; (xx) Prime Ticket; (xxi) Fox Sports Wisconsin; 
and (xxii) the YES Network.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at https://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the Southern District 
of New York. Copies of these materials may be obtained from the 
Antitrust Division upon request and payment of the copying fee set by 
Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Owen M. Kendler, 
Chief, Media, Entertainment, and Professional Services Section, 
Antitrust Division, Department of Justice, Washington, DC 20530, 
(telephone: 202-305-8376).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the Southern District of New York

    United States of America, Plaintiff, v. The Walt Disney Company, 
and Twenty-First Century Fox, Inc., Defendants.

Civil Action No.: 1:18-cv-05800 (CM)(KNF)

COMPLAINT

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
enjoin the acquisition by The Walt Disney Company (``Disney'') of 
certain assets and businesses of Twenty-First Century Fox, Inc. 
(``Fox'') and to obtain other equitable relief.

I. NATURE OF THE ACTION

    1. Cable sports programming is one of the most popular forms of 
entertainment in the United States. Disney's proposed acquisition of 
Fox's assets would combine two of the country's most valuable cable 
sports properties--Disney's ESPN franchise of networks and Fox's 
portfolio of Regional Sports Networks (``RSNs'')--and thereby likely 
substantially lessen competition in the multiple Designated Market 
Areas (``DMAs'') throughout the United States in which these two firms 
compete.
    2. Pursuant to an Agreement and Plan of Merger dated December 13, 
2017, as amended on June 20, 2018, Disney agreed to acquire certain 
assets and businesses, including Fox's ownership

[[Page 40554]]

of or interests in its RSNs, FX cable networks, National Geographic 
cable networks, television studio, Hulu, film studio, and international 
television businesses, (the ``Sale Assets'') from Fox for approximately 
$71.3 billion (the ``Transaction''). Fox operates and proposes to sell 
to Disney its interests in the following RSNs: (i) Fox Sports Arizona, 
(ii) Fox Sports Carolinas, (iii) Fox Sports Detroit, (iv) Fox Sports 
Florida, (v) Fox Sports Indiana, (vi) Fox Sports Kansas City, (vii) Fox 
Sports Midwest, (viii) Fox Sports New Orleans, (ix) Fox Sports North, 
(x) Fox Sports Ohio, (xi) SportsTime Ohio, (xii) Fox Sports Oklahoma, 
(xiii) Fox Sports San Diego, (xiv) Fox Sports South, (xv) Fox Sports 
Southeast, (xvi) Fox Sports Southwest, (xvii) Fox Sports Sun, (xviii) 
Fox Sports Tennessee, (xix) Fox Sports West, (xx) Prime Ticket, (xxi) 
Fox Sports Wisconsin, and (xxii) the YES Network.
[GRAPHIC] [TIFF OMITTED] TN15AU18.000

    3. An RSN is a cable network that telecasts live games of one or 
more local professional sports team--i.e., a ``home'' team or teams 
within that particular region. An RSN's contract with a local sports 
team typically provides the RSN with the exclusive rights, within a 
team's local region, to telecast live nearly all that team's games. 
Collectively, the Fox RSNs are the largest group of commonly controlled 
RSNs. In the aggregate, the Fox RSNs have approximately 61 million 
subscribers across the country and have rights to telecast live games 
of 44 of 91 (48%) U.S. professional sports teams in three of the four 
major sports leagues: Major League Baseball (``MLB''), the National 
Basketball Association (``NBA'') and the National Hockey League 
(``NHL''). More specifically, the Fox RSNs have the local rights to 15 
of 30 (50%) MLB teams, 17 of 30 (57%) NBA teams, and 12 of 31 (39%) NHL 
teams.
    4. Cable sports television networks--including RSNs--compete to be 
carried in the programming packages that multichannel video programming 
distributors (``MVPDs''), such as Comcast, Charter, DISH, and FiOS, 
offer to their subscribers. For RSNs, the carriage license typically is 
limited to the DMAs comprising the ``home'' territory of the team or 
teams carried on the RSN; whereas, licenses for national television 
networks typically comprise all DMAs in a MVPD's footprint. Disney's 
and Fox's cable sports television programming compete head-to-head to 
be carried on MVPDs in all the DMAs where Fox's RSNs are located: 
Phoenix, Arizona; Detroit, Michigan; Milwaukee, Wisconsin; Cleveland, 
Ohio; Cincinnati, Ohio; Columbus, Ohio; Miami, Florida; Oklahoma City, 
Oklahoma; Tampa Bay, Florida; Dallas, Texas; St. Louis, Missouri; 
Atlanta, Georgia; Indianapolis, Indiana; Orlando, Florida; San Antonio, 
Texas; Minneapolis, Minnesota; Nashville, Tennessee; Memphis, 
Tennessee; San Diego, California; Raleigh-Durham, North Carolina; New 
Orleans, Louisiana; Kansas City, Kansas; Charlotte, North Carolina; Los 
Angeles, California; and New York, New York (collectively, the ``DMA 
Markets'').
    5. If consummated, the proposed acquisition would eliminate the 
substantial head-to-head competition that currently exists between 
Disney and Fox and would likely result in higher prices for cable 
sports programming in each of the DMA Markets. Consequently, 
Defendants' proposed Transaction likely would substantially lessen 
competition in those markets in violation of Section 7 of the Clayton 
Act, 15 U.S.C. Sec.  18.

II. JURISDICTION, VENUE, AND COMMERCE

    6. The United States brings this action pursuant to Section 15 of 
the Clayton Act, 15 U.S.C. Sec.  25, to prevent and restrain Disney and 
Fox from violating Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.
    7. The Court has subject-matter jurisdiction over this action 
pursuant to Section 15 of the Clayton Act, 15 U.S.C. Sec.  25, and 28 
U.S.C. Sec. Sec.  1331, 1337(a), and 1345.
    8. Disney and Fox are engaged in interstate commerce and in 
activities substantially affecting interstate commerce. They each 
license programming to MVPDs located across the country in exchange for 
license, or ``affiliate,'' fees. They each own and operate television 
networks that are distributed to viewers throughout the United States. 
Their television programming licenses have had a substantial effect on 
interstate commerce.
    9. Defendants have consented to venue and personal jurisdiction in 
this

[[Page 40555]]

District. Venue is also proper in this District under Section 12 of the 
Clayton Act, 15 U.S.C. Sec.  22, and 28 U.S.C. Sec.  1391(c).

III. THE DEFENDANTS

    10. Disney is a Delaware corporation headquartered in Burbank, 
California. It reported revenue of $55 billion for fiscal year 2017. 
Disney owns various television programming assets, including 80% of 
ESPN--a sports entertainment company that operates several domestic 
sports television networks. Disney's other television programming 
assets include: (i) the ABC television network; (ii) eight owned-and-
operated ABC broadcast stations; (iii) Disney-branded television 
networks; and (iv) Freeform, a television network geared toward 
teenagers and young adults.
    11. Fox is a Delaware corporation headquartered in New York, New 
York. It reported revenue of $28.5 billion for fiscal year 2017. The 
Fox Sale Assets, which include several television programing assets and 
all of the Fox RSNs, generated $19 billion in revenue for fiscal year 
2017.

IV. RELEVANT MARKETS

    12. The licensing of cable sports programming to MVPDs constitutes 
a relevant product market and line of commerce under Section 7 of the 
Clayton Act. This includes licensing to both MVPDs and virtual MVPDs. 
Cable sports programming includes cable networks that devote a 
substantial portion of programming time to airing live sports events, 
such as MLB games.
    13. The DMA Markets constitute geographic markets under Section 7 
of the Clayton Act. A DMA is a geographical unit for which A.C. Nielsen 
Company--a firm that surveys television viewers--furnishes MVPDs, among 
others, with data to aid in evaluating audience size and composition in 
a particular area. DMAs are widely accepted by MVPDs as the standard 
geographic area to use in evaluating television audience size and 
demographic composition. The Federal Communications Commission also 
uses DMAs as geographic units with respect to its MVPD regulations.
    14. Disney and Fox license cable sports programming to MVPDs in 
each of the DMA Markets in which MVPDs provide programming to 
subscribers as part of bundled channel packages. Disney's and Fox's 
cable sports programming in each of the DMA Markets generates a 
significant amount of revenue through licensing fees to MVPDs in those 
markets.
    15. Sports programming is important to MVPDs because sports viewers 
comprise an important customer group for MVPDs, and MVPDs could not 
attract many of these sports viewers without including sports 
television programming in the MVPDs' packages of available networks.
    16. For MVPDs, sports programming on broadcast television is 
unlikely a sufficient substitute for cable sports programming. MVPDs do 
not typically consider broadcast networks as providing the same type of 
content as cable networks like ESPN and the RSNs. Broadcast networks 
and their affiliates aim to have broad appeal by offering a variety of 
highly-rated programming content including primetime entertainment 
shows, syndicated shows, and local and national news and weather in 
addition to sports, with marquee sports events making up a small 
percentage of a broadcast network's airtime. For that reason, MVPDs do 
not typically consider broadcast network programming as a replacement 
for cable sports programming.
    17. Accordingly, a hypothetical monopolist of all cable sports 
programming in a DMA Market likely would profitably increase licensing 
fees to MVPDs in that DMA Market by at least a small but significant 
amount.

V. LIKELY ANTICOMPETITIVE EFFECTS

    18. The cable sports programming market in nearly all of the DMA 
Markets is already highly concentrated. As a result of the Transaction, 
Disney's networks would account for at least 60 percent of cable sports 
programming revenue in 19 of the DMA Markets and over 45 percent in the 
remaining six DMA Markets. Consequently, bringing Disney's ESPN 
networks and Fox's RSNs under common ownership would significantly 
concentrate the cable sports programming market in each of the DMA 
Markets.
    19. Market concentration is often a useful indicator of the likely 
competitive effects of a merger. The more concentrated a market, and 
the more a transaction would increase concentration in a market, the 
more likely it is that the transaction would result in a meaningful 
reduction in competition that harms consumers.
    20. The Herfindahl-Hirschman Index (``HHI'') is a standard measure 
of market concentration. Under the Horizontal Merger Guidelines issued 
by the Department of Justice and the Federal Trade Commission, mergers 
resulting in highly concentrated markets (with an HHI in excess of 
2,500) that involve an increase in the HHI of more than 200 points are 
presumed to be likely to enhance market power.
    21. Using 2017 gross cable sports programming revenue, in each of 
the DMA Markets, the combination of Disney and the Fox Sale Assets 
would result in HHIs in excess of 2,500 and involve an increase in the 
HHI of more than 200. Therefore, in each DMA Market, the HHI levels are 
above the thresholds at which a merger is presumed likely to enhance 
market power.
    22. For example, in the Detroit DMA Market, where Fox operates Fox 
Sports Detroit, the Transaction would result in a post-merger HHI of 
over 4,000 with an increase of over 1,400. Therefore, in this market, 
the Transaction results in a presumptively anticompetitive level of 
concentration. Similarly, the Transaction would result in presumptively 
anticompetitive levels of concentration in each of the other DMA 
Markets.
    23. In addition to substantially increasing concentration levels in 
each of the DMA Markets, the proposed Transaction would combine cable 
sports networks that are at least partial substitutes. Accordingly, the 
proposed Transaction would likely diminish competition in the 
negotiation of licenses for cable sports programming with MVPDs that 
have subscribers in the DMA Markets. Post-acquisition, Disney would 
gain the ability to threaten MVPDs in each of the DMA Markets with the 
simultaneous blackout of two of the most significant cable networks 
carrying sports programming: ESPN and a local RSN. ESPN and the local 
Fox RSN generate the highest and second-highest affiliate fees per 
subscriber in most of the 25 DMAs, and they are among the networks that 
generate the highest affiliate fees per subscriber in every one of the 
25 DMAs.
    24. The threat of double blackouts in the DMA Markets--and the 
resulting disproportionate loss of an MVPD's subscribers and profits--
likely would significantly strengthen Disney's bargaining position with 
MVPDs. Before the merger, an MVPD's failure to reach an agreement with 
Disney could result in a blackout of Disney's networks in the MVPD's 
footprint and threaten it with some subscriber loss. But the MVPD would 
still be able to offer the sports programming on Fox's RSNs during a 
Disney blackout, thereby minimizing subscription cancellations. After 
the merger, an MVPD negotiating with Disney would face the prospect of 
a dual blackout of ESPN and the local RSN in one or more DMA Markets, 
likely resulting in disproportionately

[[Page 40556]]

more subscriber loss. Because the leverage that a television programmer 
has in negotiations with the MVPD is derived at least in part from its 
leverage within each DMA Market in the MVPD's footprint, the threat of 
a dual blackout would likely cause an MVPD to accede to a demand by 
Disney for higher license fees. For these reasons, the loss of 
competition between Disney and the Fox Sale Assets in each DMA Market 
would likely lead to an increase in total licensing fees in each DMA 
Market and, because increased licensing fees typically are passed on to 
consumers, would result in higher subscription fees for customers of 
MVPDs.

VI. ABSENCE OF COUNTERVAILING FACTORS

    25. Entry would not be timely, likely or sufficient to prevent the 
Transaction's likely anticompetitive effects. Professional sport teams 
auction the exclusive rights to telecast their games under long-term 
contracts. Because these contracts typically last many years, there are 
infrequent opportunities for entrants to bid for these highly valuable 
licensing rights.
    26. Defendants cannot demonstrate acquisition-specific and 
cognizable efficiencies that would be sufficient to offset the proposed 
acquisition's likely anticompetitive effects.

VII. VIOLATIONS ALLEGED

    27. Disney's proposed acquisition of the Fox Sale Assets likely 
would substantially lessen competition in interstate trade and 
commerce, in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  
18. The proposed acquisition likely would:

    a. substantially lessen competition in the licensing of cable 
sports programming in each of the DMA Markets;
    b. eliminate actual and potential competition among Disney and Fox 
in the licensing of cable sports programming in each of the DMA 
Markets; and
    c. cause prices for cable sports programming in each of the DMA 
Markets to increase.

VIII. REQUEST FOR RELIEF

    28. The United States requests that the Court:

    a. adjudge the proposed acquisition to violate Section 7 of the 
Clayton Act, 15 U.S.C. Sec.  18;
    b. permanently enjoin and restrain Defendants from carrying out the 
Transaction, or entering into any other agreement, understanding, or 
plan by which Disney would acquire the Fox Sale Assets;
    c. award the United States the costs of this action; and
    d. award such other relief to the United States as the Court may 
deem just and proper.

Dated: June 27, 2018

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA
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MAKAN DELRAHIM
Assistant Attorney General for Antitrust
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ANDREW C. FINCH

Principal Deputy Assistant Attorney General
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PATRICIA A. BRINK

Director of Civil Enforcement
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OWEN M. KENDLER

Chief, Media, Entertainment & Professional Services Section
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YVETTE TARLOV

Assistant Chief, Media, Entertainment & Professional Services 
Section
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CRAIG D. MINERVA
LEE F. BERGER
JEREMY EVANS
RACHEL FLIPSE
BRIAN HANNA
MARK MERVA
KATE RIGGS
LAUREN RIKER
MONSURA SIRAJEE
ADAM C. SPEEGLE
LOWELL STERN

United States Department of Justice, Antitrust Division, Media, 
Entertainment & Professional, Services Section, 450 Fifth Street NW, 
Suite 4000, Washington, DC 20530, Telephone: (202) 353-2384, 
Facsimile: (202) 514-730

United States District Court for the Southern District of New York

    United States of America, Plaintiff, v. The Walt Disney Company, 
and Twenty-First Century Fox, Inc., Defendants.

PROPOSED FINAL JUDGMENT

    WHEREAS, Plaintiff, the United States of America, filed its 
Complaint on June 27, 2018, and defendant The Walt Disney Company 
(``Disney'') and defendant Twenty-First Century Fox, Inc. (``Fox''), 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 Disney to assure 
that competition is not substantially lessened;
    AND WHEREAS, the United States requires Disney to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    AND WHEREAS, Disney has represented to the United States that the 
divestitures required below can and will be made and that defendants 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the divestiture provisions contained 
below;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED, AND DECREED:

I. JURISDICTION

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

II. DEFINITIONS

    As used in this Final Judgment:
    A. ``Disney'' means defendant The Walt Disney Company, a Delaware 
corporation headquartered in Burbank, California, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships, and joint ventures, and their directors, officers, 
managers, agents, and employees.
    B. ``Fox'' means defendant Twenty-First Century Fox, Inc., a 
Delaware corporation headquartered in New York, New York, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Acquirer'' means an entity to which defendants divest any of 
the Divestiture Assets.
    D. ``Fox RSNs'' means all of Fox's interests in the following video 
networks or programming assets:
    (1) Fox Sports Arizona;
    (2) Fox Sports Carolinas;
    (3) Fox Sports Detroit;
    (4) Fox Sports Florida;
    (5) Fox Sports Indiana;
    (6) Fox Sports Kansas City;
    (7) Fox Sports Midwest;
    (8) Fox Sports New Orleans;
    (9) Fox Sports North;
    (10) Fox Sports Ohio;

[[Page 40557]]

    (11) SportsTime Ohio;
    (12) Fox Sports Oklahoma;
    (13) Fox Sports San Diego;
    (14) Fox Sports South;
    (15) Fox Sports Southeast;
    (16) Fox Sports Southwest;
    (17) Fox Sports Sun;
    (18) Fox Sports Tennessee;
    (19) Fox Sports West;
    (20) Prime Ticket;
    (21) Fox Sports Wisconsin; and
    (22) the YES Network.
    E. ``Divestiture Assets'' means all of Fox's interests in the Fox 
RSNs, including all of the assets, tangible or intangible, necessary 
for the operations of the Fox RSNs as viable, ongoing video networks or 
programming assets, including, but not limited to, all real property 
(owned or leased), all broadcast equipment, office furniture, fixtures, 
materials, supplies, and other tangible property; all licenses, permits 
and authorizations issued by any governmental organization relating to 
the operation of the asset; all contracts (including content, 
programming and distribution contracts and rights), agreements 
(including transition services agreements), leases, and commitments and 
understanding of defendants; all trademarks, service marks, trade 
names, copyrights, patents, slogans, programming materials, and 
promotional materials relating to each video network; all customer 
lists, contracts, accounts, credit records, and all logs and other 
records maintained by Fox in connection with each video network. Except 
as set forth in Paragraph IV(H) of this Final Judgment, Divestiture 
Assets do not include trademarks, trade names, service marks, or 
service names containing the name ``Fox.''
    F. The term ``Transaction'' means the transaction that is the 
subject of the Agreement and Plan of Merger among Twenty-First Century 
Fox, Inc., The Walt Disney Company, TWDC Holdco 613 corp., WDC Merger 
Enterprises II Corp., and WDC Merger Enterprises I, LLC, dated June 20, 
2018.

III. APPLICABILITY

    A. This Final Judgment applies to Disney and Fox, 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, after the closing and prior to complying with Section IV and 
Section V of this Final Judgment, Disney sells or otherwise disposes of 
all or substantially all of the assets or lesser business units that 
include the Divestiture Assets, it shall require the purchaser to be 
bound by the provisions of this Final Judgment. Disney need not obtain 
such an agreement from the Acquirer(s) of the assets divested pursuant 
to this Final Judgment.

IV. DIVESTITURES

    A. Disney is ordered and directed, within ninety (90) calendar days 
after the closing of the Transaction, or five (5) calendar days after 
notice of entry of this Final Judgment by the Court, whichever is 
later, to divest the Divestiture Assets in a manner consistent with 
this Final Judgment to one or more Acquirers acceptable to the United 
States, in its sole discretion. The United States, in its sole 
discretion, may agree to one or more extensions of this time period not 
to exceed ninety (90) calendar days in total, and shall notify the 
Court in such circumstances. With respect to divestiture of the 
Divestiture Assets by Disney or a trustee appointed pursuant to Section 
V of this Final Judgment, Disney agrees to use its best efforts to 
divest the Divestiture Assets as expeditiously as possible after the 
closing of the Transaction. For the avoidance of doubt, nothing in this 
Final Judgment shall require Fox to divest any of the Divestiture 
Assets prior to the closing of the Transaction.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
Disney promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Disney shall inform any person 
making an inquiry regarding a possible purchase of the Divestiture 
Assets that they are being divested pursuant to this Final Judgment and 
provide that person with a copy of this Final Judgment. Defendants 
shall offer to furnish to all prospective Acquirers, subject to 
customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process, except such information or documents subject to the 
attorney-client privilege or work-product doctrine. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    C. Defendants shall provide the Acquirer(s) and the United States 
information relating to the personnel involved in the production and 
operation of the Divestiture Assets to enable the Acquirer(s) to make 
offers of employment. Defendants will not interfere with any 
negotiations by the Acquirer(s) to employ upon closing of the sale of 
each of the Divestiture Assets any defendant employee whose primary 
responsibility is the production and operation of the Divestiture 
Assets.
    D. Defendants shall permit the prospective Acquirer(s) of the 
Divestiture Assets to have reasonable access to personnel and to make 
inspections of the 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.
    E. Disney shall warrant to the Acquirer(s) that each Divestiture 
Asset will be operational on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    G. Disney shall warrant to the Acquirer(s) (1) that there are no 
material defects in the environmental, zoning, or other permits 
pertaining to the operation of each Divestiture Asset, and (2) that 
following the sale of the Divestiture Assets, Disney will not 
undertake, directly or indirectly, any challenges to the environmental, 
zoning, or other permits relating to the operation of the Divestiture 
Assets.
    H. Notwithstanding Paragraph II(E), that the Divestiture Assets do 
not include trademarks, trade names, service marks, or service names 
containing the name ``Fox,'' the defendants shall offer any Acquirer(s) 
of a Fox RSN a non-exclusive royalty-free license for use of the 
``Fox'' trademark consistent with that RSN's current usage of that 
trademark for a time period of at least eighteen (18) months.
    I. At the option of Acquirer(s), on or before the closing date of 
any divestiture, Disney shall enter into one or more transition 
services agreements, approved in advance by the United States in its 
sole discretion, to provide any transition services reasonably 
necessary to operate any Divestiture Assets as viable, ongoing video 
networks or programming assets.
    J. Unless the United States otherwise consents in writing, the 
divestitures pursuant to Section IV, or by trustee appointed pursuant 
to Section V of this Final Judgment, shall include the entire 
Divestiture Assets and be accomplished in such a way as to satisfy the 
United States, in its sole discretion, that the Divestiture Assets can 
and will be used by the Acquirer(s) as part of a viable, ongoing 
business of selling, supplying, or licensing video programming. 
Divestiture 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

[[Page 40558]]

the United States that the Divestiture Assets will remain viable, and 
the divestiture of such assets will achieve the purposes of this Final 
Judgment and 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 an Acquirer(s) that, in the United States' sole 
judgment, has the intent and capability (including the necessary 
managerial, operational, technical, and financial capability) of 
competing effectively in the business of selling, supplying, and 
licensing video programming; and
(2) shall be accomplished so as to satisfy the United States, in its 
sole discretion, that none of the terms of any agreement between the 
Acquirer(s) and defendants gives defendants the ability unreasonably to 
raise the costs of the Acquirer(s), to lower the efficiency of the 
Acquirer(s), or otherwise to interfere in the ability of the 
Acquirer(s) to compete effectively.

V. APPOINTMENT OF TRUSTEE

    A. If Disney has not divested the Divestiture Assets within the 
time period specified in Section IV(A), Disney shall notify the United 
States of that fact in writing, specifically identifying the 
Divestiture Assets that have not been divested (the ``relevant 
Divestiture Assets''). 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 divestiture of the relevant Divestiture Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the relevant Divestiture Assets. 
The trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States 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, and VI of 
this Final Judgment, and shall have such other powers as this Court 
deems appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of Disney any investment 
bankers, attorneys, or other agents, who shall be solely accountable to 
the trustee, reasonably necessary in the trustee's judgment to assist 
in the divestiture. Any such investment bankers, attorneys, or other 
agents shall serve on such terms and conditions as the United States 
approves, including confidentiality requirements and conflict of 
interest certifications.
    C. Defendants shall not object to a sale by the 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 VI.
    D. The trustee shall serve at the cost and expense of Disney 
pursuant to a written agreement, on such terms and conditions as the 
United States approves, including confidentiality requirements and 
conflict of interest certifications. The trustee shall account for all 
monies derived from the sale of the relevant Divestiture Assets and all 
costs and expenses so incurred. After approval by the Court of the 
trustee's accounting, including fees for its services yet unpaid and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Disney 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 relevant Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount. If the trustee and Disney are unable to reach 
agreement on the trustee's or any agents' or consultants' compensation 
or other terms and conditions of engagement within 14 calendar days of 
appointment of the trustee, the United States may, in its sole 
discretion, take appropriate action, including making a recommendation 
to the Court. The trustee shall, within three (3) business days of 
hiring any other professionals or agents, provide written notice of 
such hiring and the rate of compensation to defendants and the United 
States.
    E. Disney shall use its best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other agents retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Disney 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information or any applicable privileges. Defendants shall 
take no action to interfere with or to impede the trustee's 
accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and, as appropriate, 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. The trustee's 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 relevant Divestiture Assets.
    G. 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 divestiture, (2) 
the reasons, in the trustee's judgment, why the required divestiture 
has not been accomplished, and (3) the trustee's recommendations. To 
the extent such report contains information that the trustee deems 
confidential, such report 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.
    H. If the United States determines that the trustee has ceased to 
act or failed to act diligently or in a reasonably cost-effective 
manner, it may recommend the Court appoint a substitute trustee.

VI. NOTICE OF PROPOSED DIVESTITURE

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Disney or the trustee, whichever is then 
responsible for effecting the divestitures required herein, shall 
notify the United States of any proposed divestiture required by 
Section IV or Section 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 divestiture and list the name, 
address, and telephone number of each person not previously identified 
who offered or expressed an interest in or

[[Page 40559]]

desire to acquire any ownership interest in the Divestiture Assets, 
together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from defendants, 
the proposed Acquirer, any other third party, or the trustee, if 
applicable, additional information concerning the proposed divestiture, 
the proposed Acquirer, and any other potential Acquirers. Defendants 
and the trustee shall furnish any additional information requested 
within fifteen (15) calendar days of the receipt of the request, unless 
the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
proposed Acquirer(s), any third party, and the trustee, whichever is 
later, the United States shall provide written notice to defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice that 
it does not object, the divestiture may be consummated, subject only to 
defendants' limited right to object to the sale under Paragraph 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 Paragraph V(C), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VII. FINANCING

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

VIII. HOLD SEPARATE

    Until the 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. After 
the Transaction has been consummated or closed, defendants shall take 
no action that would jeopardize the divestiture ordered by this Court.

IX. AFFIDAVITS

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or Section V of 
this Final Judgment, defendants shall deliver to the United States an 
affidavit, signed by each defendant's Chief Financial Officer and 
General Counsel, which shall describe the fact and manner of 
defendant's compliance with Section IV or Section 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 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 defendants have taken to solicit buyers for 
and complete the sale of the Divestiture Assets, including efforts to 
secure regulatory approvals, and to provide required information to 
prospective Acquirers, including the limitations, if any, on such 
information.
    Assuming the information set forth in the affidavit is true and 
complete, any objection by the United States to information provided by 
defendants, including limitations on information, shall be made within 
fourteen (14) calendar days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendant's earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. COMPLIANCE INSPECTION

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as any Hold Separate 
Stipulation and Order, or of determining whether the Final Judgment 
should be modified or vacated, and subject to any legally recognized 
privilege, from time to time authorized representatives of the United 
States Department of Justice, including consultants and other persons 
retained by the United States, shall, upon written request of an 
authorized representative of the Assistant Attorney General in charge 
of the Antitrust Division, and on reasonable notice to defendants, be 
permitted:

(1) access during defendants' office hours to inspect and copy, or at 
the option of the United States, to require defendants to provide hard 
copies 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 responses 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 in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and defendants mark each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give defendants ten (10) calendar days' notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

[[Page 40560]]

XI. NO REACQUISITION

    Disney may not reacquire any of the Divestiture Assets during the 
term of this Final Judgment without prior written approval of the 
United States.

XII. RETENTION OF JURISDICTION

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

XIII. ENFORCEMENT OF FINAL JUDGMENT

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including its right to seek an order 
of contempt from this Court. Defendants agree that in any civil 
contempt action, any motion to show cause, or any similar action 
brought by the United States regarding an alleged violation of this 
Final Judgment, the United States may establish a violation of the 
decree and the appropriateness of any remedy therefor by a 
preponderance of the evidence, and they waive any argument that a 
different standard of proof should apply.
    B. The Final Judgment should be interpreted to give full effect to 
the procompetitive purposes of the antitrust laws and to restore all 
competition harmed by the challenged conduct. Defendants agree that 
they may be held in contempt of, and that the Court may enforce, any 
provision of this Final Judgment that, as interpreted by the Court in 
light of these procompetitive principles and applying ordinary tools of 
interpretation, is stated specifically and in reasonable detail, 
whether or not it is clear and unambiguous on its face. In any such 
interpretation, the terms of this Final Judgment should not be 
construed against either party as the drafter.
    C. In any enforcement proceeding in which the Court finds that the 
defendants have violated this Final Judgment, the United States may 
apply to the Court for a one-time extension of this Final Judgment, 
together with such other relief as may be appropriate. In connection 
with any successful effort by the United States to enforce this Final 
Judgement against a Defendant, whether litigated or resolved prior to 
litigation, that Defendant agrees to reimburse the United States for 
any attorneys' fees, experts' fees, and costs incurred in connection 
with that enforcement effort, including the investigation of the 
potential violation.

XIV. EXPIRATION OF FINAL JUDGMENT

    Unless this Court grants an extension, this Final Judgment shall 
expire seven (7) years from the date of its entry, except that this 
Final Judgment may be terminated upon notice by the United States to 
the Court and the defendants that the divestitures have been completed 
and that the continuation of the Final Judgment no longer is necessary.

XV. 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. Sec.  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 responses to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

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

United States District Judge

United States District Court for the Southern District of New York

    United States of America, Plantiff, v. The Walt Disney Company, 
and Twenty-First Century Fox, Inc., Defendants.

Civil Action No. 1:18-cv-05800 (CM) (KNF)

HOLD SEPARATE STIPULATION AND ORDER

    It is hereby stipulated and agreed by and between the undersigned 
parties, subject to approval and entry by the Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
which defendants divest any of the Divestiture Assets.
    B. ``Disney'' means defendant The Walt Disney Company, a Delaware 
corporation headquartered in Burbank, California, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships, and joint ventures, and their directors, officers, 
managers, agents, and employees.
    C. ``Fox'' means defendant Twenty-First Century Fox, Inc., a 
Delaware corporation headquartered in New York, New York, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Fox RSNs'' means all of Fox's interests in the following video 
networks or programming assets:
    (1) Fox Sports Arizona;
    (2) Fox Sports Carolinas;
    (3) Fox Sports Detroit;
    (4) Fox Sports Florida;
    (5) Fox Sports Indiana;
    (6) Fox Sports Kansas City;
    (7) Fox Sports Midwest;
    (8) Fox Sports New Orleans;
    (9) Fox Sports North;
    (10) Fox Sports Ohio;
    (11) SportsTime Ohio;
    (12) Fox Sports Oklahoma;
    (13) Fox Sports San Diego;
    (14) Fox Sports South;
    (15) Fox Sports Southeast;
    (16) Fox Sports Southwest;
    (17) Fox Sports Sun;
    (18) Fox Sports Tennessee;
    (19) Fox Sports West;
    (20) Prime Ticket;
    (21) Fox Sports Wisconsin; and
    (22) the YES Network.
    E. ``Divestiture Assets'' means all of Fox's interests in the Fox 
RSNs, including, all of the assets, tangible or intangible, necessary 
for the operations of the Fox RSNs as viable, ongoing video networks or 
programming assets, including, but not limited to, all real property 
(owned or leased), all broadcast equipment, office furniture, fixtures, 
materials, supplies, and other tangible property; all licenses, permits 
and authorizations issued by any governmental organization relating to 
the operation of the asset; all contracts (including content, 
programming and distribution contracts and rights), agreements 
(including transition services agreements), leases, and commitments and 
understanding of defendants; all trademarks, service marks, trade 
names, copyrights, patents, slogans, programming materials, and 
promotional materials relating to each video network; all customer 
lists, contracts, accounts, credit records, and all logs and other 
records maintained by Fox in connection with each video network. Except 
as provided in the Final Judgment, Divestiture Assets does not include 
trademarks, trade names, service marks, or service names containing the 
name ``Fox.''
    F. The term ``Transaction'' means the transaction that is the 
subject of the Agreement and Plan of Merger among Twenty-First Century 
Fox, Inc., The

[[Page 40561]]

Walt Disney Company, TWDC Holdco 613 corp., WDC Merger Enterprises II 
Corp., and WDC Merger Enterprises I, LLC, dated June 20, 2018.

II. Objectives

    The Final Judgment filed in this case is meant to ensure 
defendants' prompt divestiture of the Divestiture Assets for the 
purpose of establishing one or more viable competitors in the sale, 
supply, or licensing of video programming in the United States in order 
to remedy the effects that the United States alleges would otherwise 
result from the Transaction. This Hold Separate Stipulation and Order 
ensures, prior to such divestitures, that the Divestiture Assets will 
remain economically viable, and ongoing business concerns that will 
remain independent and uninfluenced by Disney or, after the Transaction 
has been consummated, by Fox, and that competition is maintained during 
the pendency of the ordered divestitures.

III. Jurisdiction and Venue

    The Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto, and venue of this action is proper 
in the United States District Court for the Southern District of New 
York.

IV. Compliance with and Entry of the Proposed Final Judgment

    A. The parties stipulate that a Final Judgment in the form attached 
hereto as Exhibit A may be filed with and entered by the Court, upon 
the motion of any party or upon the Court's own motion, at any time 
after compliance with the requirements of the Antitrust Procedures and 
Penalties Act (``APPA''), 15 U.S.C. Sec.  16, and without further 
notice to any party or other proceedings, provided that the United 
States has not withdrawn its consent, which it may do at any time 
before the entry of the proposed Final Judgment by serving notice 
thereof on the defendants and by filing that notice with the Court. 
Disney agrees to arrange, at its expense, publication as quickly as 
possible of the newspaper notice required by the APPA, which shall be 
drafted by the United States, in its sole discretion. The publication 
shall be arranged no later than three business days after defendants' 
receipt from the United States of the text of the notice and the 
identity of the newspaper within which the publication shall be made. 
Disney shall promptly send to the United States (1) confirmation that 
publication of the newspaper notice has been arranged, and (2) the 
certification of the publication prepared by the newspaper within which 
the notice was published.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment pending the Final Judgment's entry by the 
Court, or until expiration of time for all appeals of any Court ruling 
declining entry of the proposed Final Judgment and shall, from the date 
of the signing of this Stipulation by the parties, comply with all the 
terms and provisions of the proposed Final Judgment. The United States 
shall have the full rights and enforcement powers in the proposed Final 
Judgment as though the same were in full force and effect as the Final 
Order of the Court.
    C. Defendants shall not consummate the Transaction sought to be 
enjoined by the Complaint herein before the Court has signed this Hold 
Separate Stipulation.
    D. This Hold Separate Stipulation and Order shall apply with equal 
force and effect to any amended proposed Final Judgment agreed upon in 
writing by the parties and submitted to the Court.
    E. In the event (1) the United States has withdrawn its consent, as 
provided in Paragraph IV(A) above, or (2) the proposed Final Judgment 
is not entered pursuant to this Hold Separate Stipulation and Order, 
the time has expired for all appeals of any court ruling declining 
entry of the proposed Final Judgment, and the Court has not otherwise 
ordered continued compliance with the terms and provisions of the 
proposed Final Judgment, then the parties are released from all further 
obligations under this Hold Separate Stipulation and Order, and the 
making of this Hold Separate Stipulation and Order shall be without 
prejudice to any party in this or any other proceeding.
    F. Disney represents that the divestitures ordered in the proposed 
Final Judgment can and will be made, and that defendants will later 
raise no claim of mistake, hardship or difficulty of compliance as 
grounds for asking the Court to modify any of the provisions contained 
therein.

V. Notice of Compliance

    . Within twenty (20) days after the entry of the Hold Separate 
Stipulation and Order, and every thirty (30) calendar days thereafter 
(1) Fox shall deliver to the United States an affidavit, signed by 
Fox's Chief Financial Officer and General Counsel, which shall describe 
the fact and manner of Fox's compliance with Section VI until 
defendants consummate the Transaction; and
    (2) Disney shall deliver to the United States an affidavit, signed 
by Disney's Chief Financial Officer and General Counsel, which shall 
describe the fact and manner of Disney's compliance with Section VII 
until the divestitures required by the Final Judgment have been 
accomplished.

VI. Pre-Closing Asset Preservation Provisions

    Until defendants consummate the Transaction:
    A. Fox shall preserve, maintain, and continue to operate each 
Divestiture Asset as an ongoing, economically viable, competitive video 
network or programming asset.
    B. Fox shall take all steps reasonably necessary to ensure that the 
Divestiture Assets will be maintained and operated as ongoing, 
economically viable and active competitors in the video network or 
programming business.
    C. Fox shall use all reasonable efforts, consistent with past 
practices, to maintain and increase the sales and revenues associated 
with each of the Divestiture Assets.
    D. Fox, consistent with past practices, shall provide sufficient 
working capital and lines and sources of credit to continue to maintain 
each Divestiture Asset as an ongoing, economically viable, and 
competitive video network or programming asset.
    E. Fox shall maintain, in accordance with sound accounting 
principles, separate, accurate and complete financial ledgers, books, 
and records that report on a periodic basis, such as the last business 
day of every month, consistent with past practices, the assets, 
liabilities, expenses, revenues and income of each of the Divestiture 
Assets.
    F. Fox shall preserve the existing relationships between the 
Divestiture Assets and with each customer that advertises on or 
licenses content to a Divestiture Asset, each distributor that licenses 
content from a Divestiture Asset, and with others having business 
relations with any of the Divestiture Assets, in accordance with the 
ordinary course of business.

VII. Post-Closing Hold Separate and Asset Preservation Provisions

    Once the Transaction has been consummated and until the 
divestitures required by the Final Judgment have been accomplished:
    A. Disney shall preserve, maintain, and continue to operate each 
Divestiture Asset as an independent, ongoing, economically viable, 
competitive video network or programming asset, management, 
programming, distribution, sales and operations of such assets held 
entirely separate, distinct and apart from those of Disney's

[[Page 40562]]

other operations. Disney shall not coordinate its programming, 
production, distribution, marketing, content purchases, or terms of 
sale of any products with those of any of the Divestiture Assets.
    B. Disney shall take all steps necessary to ensure that (1) the 
Divestiture Assets will be maintained and operated as independent, 
ongoing, economically viable and active competitors in the video 
network or programming business; (2) management of the Divestiture 
Assets will not be influenced by Disney; and (3) the books, records, 
competitively sensitive production, programming, distribution, sales, 
content purchases, marketing and pricing information, and decision 
making concerning production, programming, distribution, sales, content 
purchases, pricing and marketing by or under any of the Divestiture 
Assets will be kept separate and apart from Disney's other operations.
    C. Disney shall use all reasonable efforts to maintain and increase 
the sales and revenues associated with each of the Divestiture Assets, 
and shall maintain at 2018 or previously approved levels for 2017, 
whichever is higher, all promotional, advertising, sales, technical 
assistance, marketing and other support for each of the Divestiture 
Assets.
    D. Disney shall provide sufficient working capital and lines and 
sources of credit to continue to maintain each Divestiture Asset as an 
ongoing, economically viable, and competitive video network or 
programming asset.
    E. Disney shall not, except as part of a divestiture approved by 
the United States in accordance with the proposed Final Judgment, 
remove, sell, lease, assign, transfer, destroy, pledge, or otherwise 
dispose of any of the Divestiture Assets.
    F. Disney shall maintain, in accordance with sound accounting 
principles, separate, accurate and complete financial ledgers, books, 
and records that report on a periodic basis, such as the last business 
day of every month, consistent with past practices, the assets, 
liabilities, expenses, revenues and income of each of the Divestiture 
Assets.
    G. Disney shall preserve the existing relationships between the 
Divestiture Assets and with each customer that advertises on or 
licenses content to a Divestiture Asset, each distributor that licenses 
content from a Divestiture Asset, and with others having business 
relations with any of the Divestiture Assets, in accordance with the 
ordinary course of business.
    H. Defendants shall take no action that would jeopardize, delay, or 
impede the sale of the Divestiture Assets.
    I. Defendants shall take no action that would interfere with the 
ability of any trustee appointed pursuant to the proposed Final 
Judgment to fulfill its obligations.
    J. Disney shall appoint a person or persons to oversee the 
Divestiture Assets, who also will be responsible for defendants' 
compliance with this section. Such person or persons shall have 
complete managerial responsibility for the Divestiture Assets, subject 
to the provisions of this Final Judgment. In the event such person is 
unable to perform such duties, Disney shall appoint, subject to the 
approval of the United States, a replacement within ten (10) working 
days. Should Disney fail to appoint a replacement acceptable to the 
United States within this time period, the United States shall appoint 
a replacement.

VIII. Duration of Hold Separate Obligations

    Defendants' obligations under Section VI and VII of this Hold 
Separate Stipulation and Order shall remain in effect until (1) 
consummation of the divestitures required by the proposed Final 
Judgment or (2) until further order of the Court. If the United States 
voluntarily dismisses the Complaint in this matter, defendants are 
released from all further obligations under this Hold Separate 
Stipulation and Order.

Dated: June 27, 2018

    Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA
-----------------------------------------------------------------------

Craig Minerva

United States Department of Justice, Antitrust Division, Media, 
Entertainment & Professional Services Section, 450 Fifth Street 
N.W., Suite 4000, Washington, DC 20530, Telephone: (202) 353-2384, 
Facsimile: (202) 514-730

FOR DEFENDANT THE WALT DISNEY COMPANY

COVINGTON & BURLING LLP
-----------------------------------------------------------------------

Andrew A. Ruffino
([email protected])

The New York Times Building, 620 Eighth Avenue, New York, New York 
10018, (212) 841-1097

Thomas 0. Barnett
([email protected])
(pro hac vice application forthcoming)
Anne Y. Lee
([email protected])
James Dean
([email protected])
Megan Gerking ([email protected])

One CityCenter, 850 10th Street NW, Washington, DC 20001, (202) 662-
6000

Kenneth Newman
([email protected])

Associate General Counsel and Assistant Secretary, The Walt Disney 
Company, 77 West 66th Street, 15th Floor, New York, NY 10023, (212) 
456-6080

FOR DEFENDANT
TWENTY-FIRST CENTURY FOX, INC.

CLEARY GOTTLIEB STEEN & HAMILTON LLP
-----------------------------------------------------------------------

George S. Cary
(pro hac vice application forthcoming)
Kenneth S. Reinker
Tara Lynn Tavernia
(pro hac vice application forthcoming)
2000 Pennsylvania Avenue NW, Washington, DC 20006, Phone: (202) 974-
1743, Fax: (202) 974-1999, [email protected], [email protected], 
[email protected]

ORDER

    IT IS SO ORDERED by the Court, this __ day of __, 2018.
-----------------------------------------------------------------------

United States District Judge

United States District Court for the Southern District of New York

    United States of America, Plaintiff, v. The Walt Disney Company, 
and Twenty-First Century Fox, Inc., Defendants.

Civil Action No.
18-CV-5800 (CM) (KNF)

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. Sec.  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

    Defendants The Walt Disney Company (``Disney'') and Twenty-First 
Century Fox, Inc. (``Fox'') (collectively, ``Defendants'') entered into 
an Agreement and Plan of Merger dated December 13, 2017, amended on 
June 20, 2018, pursuant to which Disney agreed to acquire certain 
assets, including Fox's ownership of, or interests in, twenty-two 
regional sports networks (``RSNs''), the FX cable networks, the 
National Geographic cable networks, television and film studios, Hulu, 
and international television businesses (the ``Fox Sale Assets'') from 
Fox for approximately $71.3 billion (the ``Transaction'').
    Specifically, Fox proposes to sell to Disney its interests in the 
following RSNs: (i) Fox Sports Arizona; (ii) Fox Sports Carolinas; 
(iii) Fox Sports Detroit; (iv) Fox Sports Florida; (v) Fox

[[Page 40563]]

Sports Indiana; (vi) Fox Sports Kansas City; (vii) Fox Sports Midwest; 
(viii) Fox Sports New Orleans; (ix) Fox Sports North; (x) Fox Sports 
Ohio; (xi) SportsTime Ohio; (xii) Fox Sports Oklahoma; (xiii) Fox 
Sports San Diego; (xiv) Fox Sports South; (xv) Fox Sports Southeast; 
(xvi) Fox Sports Southwest; (xvii) Fox Sports Sun; (xviii) Fox Sports 
Tennessee; (xix) Fox Sports West; (xx) Prime Ticket; (xxi) Fox Sports 
Wisconsin; and (xxii) the YES Network.
    The proposed acquisition would combine two of the country's most 
valuable cable sports properties--Disney's ESPN franchise of networks 
and Fox's portfolio of twenty-two RSNs. Cable sports television 
networks compete to be carried in the programming packages that 
distributors, such as cable companies (e.g., Charter Communications and 
Comcast), direct broadcast satellite services (e.g., DISH Network and 
DirecTV), fiber optic networks services (e.g., Verizon's Fios and 
CenturyLink's Prism TV), and online distributors of linear cable 
programming (e.g., Hulu Live and DISH's Sling TV) (hereinafter, 
collectively referred to as ``MVPDs'') offer to their subscribers. 
Consequently, Disney's proposed acquisition of Fox's portfolio of RSNs 
would end the head-to-head competition between them and likely would 
result in higher prices for cable sports programming in each of the 
Designated Market Areas (``DMAs'') in which Disney and Fox compete.
    The United States filed a civil antitrust Complaint on June 27, 
2018, seeking to enjoin the proposed Transaction. The Complaint alleges 
that the likely effect of this acquisition would be to lessen 
competition substantially for the licensing of cable sports programming 
to MVPDs in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  
18, in each of the following twenty-five DMAs: Phoenix, Arizona; 
Detroit, Michigan; Milwaukee, Wisconsin; Cleveland, Ohio; Cincinnati, 
Ohio; Columbus, Ohio; Miami, Florida; Oklahoma City, Oklahoma; Tampa 
Bay, Florida; Dallas, Texas; St. Louis, Missouri; Atlanta, Georgia; 
Indianapolis, Indiana; Orlando, Florida; San Antonio, Texas; 
Minneapolis, Minnesota; Nashville, Tennessee; Memphis, Tennessee; San 
Diego, California; Raleigh-Durham, North Carolina; New Orleans, 
Louisiana; Kansas City, Kansas; Charlotte, North Carolina; Los Angeles, 
California; and New York, New York (collectively, the ``DMA Markets''). 
This loss of competition likely would result in increased MVPD 
licensing fees in each DMA Market and because licensing fees typically 
are passed onto consumers, higher subscription fees for MVPD customers.
    At the same time the Complaint was filed, the United States also 
filed a Hold Separate Stipulation and Order (``Hold Separate'') and 
proposed Final Judgment, which are designed to eliminate the likely 
anticompetitive effects of the Transaction. Under the proposed Final 
Judgment, which is explained more fully below, Disney is required to 
divest all of Fox's interests in the Fox RSNs, including all assets 
necessary for the operation of each Fox RSN as a viable, ongoing cable 
sports programming network, to one or more buyers acceptable to the 
United States, in its sole discretion. Under the terms of the Hold 
Separate Stipulation and Order, Disney and Fox will take certain steps 
to ensure that each Fox RSN continues to operate as an ongoing, 
economically viable, competitive cable sports programming network that 
will remain independent and uninfluenced by the consummation of the 
Transaction, and that competition is maintained during the pendency of 
the ordered divestiture.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION

A. The Defendants and the Proposed Transaction

    Disney is a Delaware corporation headquartered in Burbank, 
California. It reported revenue of $55 billion for fiscal year 2017. 
Disney owns various television programming assets, including 80% of 
ESPN--a sports entertainment company that operates several national 
cable sports programming networks. Disney's other programming assets 
include: (i) the ABC television network; (ii) eight owned-and-operated 
ABC broadcast stations; (iii) Disney-branded cable television networks; 
and (iv) Freeform, a cable television network geared toward teenagers 
and young adults. Disney licenses its cable programming networks to 
MVPDs throughout the United States.
    Fox is a Delaware corporation headquartered in New York, New York. 
It reported revenue of $28.5 billion for fiscal year 2017. The Fox Sale 
Assets, which include several cable television programing networks and 
all of the Fox RSNs, generated $19 billion in revenue in fiscal year 
2017. Fox licenses its cable programming networks to MVPDs throughout 
the United States. The Fox Sale Assets do not include Fox Business 
Network, Fox Broadcasting Company, Fox Sports, Fox Television Stations 
Group, FS1, FS2, Fox Deportes, or the Big Ten Network.
    Collectively, the twenty-two Fox RSNs serve approximately 61 
million subscribers in twenty-five separate DMA Markets and license 
local and regional rights to telecast live games of 44 of 91 (48%) U.S. 
professional sports teams in three of the four major sports leagues: 
Major League Baseball (``MLB''), the National Basketball Association 
(``NBA''), and the National Hockey League (``NHL''). More specifically, 
the Fox RSNs have the local or regional broadcast rights to 15 of 30 
(50%) MLB teams, 17 of 30 (57%) NBA teams, and 12 of 31 (39%) NHL 
teams.
    The proposed Transaction would likely lessen competition 
substantially in each of the DMA Markets as a result of Disney's 
acquisition of Fox's RSNs. This Transaction is the subject of the 
Complaint and proposed Final Judgment filed by the United States on 
June 27, 2018.

B. The Transaction's Likely Anticompetitive Effects

1. Relevant Markets

    The Complaint alleges that licensing of cable sports programming to 
MVPDs in each DMA Market constitutes a relevant market under Section 7 
of the Clayton Act.
    Cable sports programming includes cable television networks that 
devote a substantial portion of their programming time to airing live 
sporting events, including MLB, NBA, and NHL games. Consumers that view 
live sporting events are an important customer group for MVPDs. MVPDs 
could not attract or retain those consumers as subscribers without 
including cable sports programming in the packages of cable programming 
networks they offer their subscribers. ESPN and the local Fox RSN 
generate the highest and second-highest affiliate fees per subscriber 
of all networks carried by an MVPD in most of the 25 DMAs and they are 
among the networks that generate the highest affiliate fees per 
subscriber in every one of the 25 DMAs. The high per-subscriber fees 
that MVPDs pay to license these networks reflects the importance of 
these networks to MVPDs and their subscribers.

[[Page 40564]]

    For MVPDs, sports programming on broadcast television is unlikely a 
sufficient substitute for cable sports programming. MVPDs do not 
typically consider broadcast networks as providing the same type of 
content as cable sports networks like ESPN and the RSNs. Broadcast 
networks and their affiliates aim to have broad appeal by offering a 
variety of highly-rated programming content including primetime 
entertainment shows, syndicated shows, and local and national news and 
weather, with live sports events making up a small percentage of a 
broadcast network's airtime. Many MVPD customers demand programming 
focused on, if not dedicated to, live sporting events, and a broadcast 
network's occasional programming of live sporting events does not 
suffice for many customers. For that reason, MVPDs do not typically 
consider broadcast network programming as a replacement for cable 
sports programming.
    With respect to the licensing of cable sports programming to MVPDs, 
each DMA Market constitutes a separate relevant geographic market under 
Section 7 of the Clayton Act. A DMA is a geographic unit for which A.C. 
Nielsen Company--a firm that surveys television viewers--furnishes 
MVPDs, among others, with data to aid in evaluating audience size and 
composition in a particular area. DMAs are widely accepted by MVPDs as 
the standard geographic area to use in evaluating television audience 
size and demographic composition. The Federal Communications Commission 
also uses DMAs as geographic units with respect to its MVPD 
regulations.

2. Harm to Competition in Each of the DMA Markets

    The Complaint alleges that the proposed Transaction likely would 
substantially lessen competition in interstate trade and commerce, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18, and have 
the following effects, among others:
    a. substantially lessen competition in the licensing of cable 
sports programming to MVPDs in each of the DMA Markets;
    b. eliminate actual and potential competition among Disney and Fox 
in the licensing of cable sports programming to MVPDs in each of the 
DMA Markets; and
    c. cause prices for cable sports programming to MVPDs in each of 
the DMA Markets to increase.
    The Transaction, by eliminating the Fox RSNs as separate 
competitors and combining their operations under common ownership and 
control with ESPN, would allow Disney to increase its market share of 
cable sports programming in each DMA Market and likely increase 
licensing fees to MVPDs for ESPN and/or the Fox RSNs. As a result of 
the Transaction, Disney's networks would account for at least 60 
percent of cable sports programming in 19 of the DMA Markets and over 
45 percent in the remaining six DMA Markets.
    As alleged in the Complaint, Disney's acquisition of the Fox RSNs 
would further concentrate already highly concentrated cable sports 
programming markets in each of the DMA Markets. Using the Herfindahl-
Hirschman Index (``HHI''), a standard measure of market concentration, 
the post-acquisition HHI in each of the DMA Markets would exceed 2,500 
and the Transaction would increase each DMA Market's HHI by over 200 
points. As a result, the proposed Transaction is presumed to likely 
enhance market power under the Horizontal Merger Guidelines issued by 
the Department of Justice and the Federal Trade Commission.
    Moreover, the Transaction combines networks that are at least 
partial substitutes and therefore competitors in a product market with 
limited alternatives. The Transaction would provide Disney with the 
ability to threaten MVPDs in each of the DMA Markets with the 
simultaneous blackout of at least two major cable sports programming 
networks: the ESPN networks and the local Fox RSN, thereby diminishing 
competition in the negotiation of licensing agreements with MVPDs in 
each of the DMA markets.
    The threatened loss of cable sports programming, and the resulting 
diminution of an MVPD's subscribers and profits, would significantly 
strengthen Disney's bargaining position. Prior to the Transaction, an 
MVPD's failure to reach a licensing agreement with Disney would result 
in the blackout of Disney's networks, including ESPN, and threaten some 
subscriber loss for the MVPD, including those subscribers that value 
ESPN's content. But because the MVPD still would be able to offer its 
subscribers the local Fox RSN, many MVPD subscribers simply would watch 
the local RSN instead of cancelling their MVPD subscriptions. In the 
event of a Fox RSN blackout, many subscribers likely would switch to 
watching ESPN. After the Transaction, an MVPD negotiating with Disney 
would be faced with the prospect of a dual blackout of significant 
cable sports programming, a result more likely to cause the MVPD to 
lose incremental subscribers (that it would not have lost in a pre-
transaction blackout of only ESPN or the Fox RSN) and therefore accede 
to Disney's demand for higher licensing fees. For these reasons, the 
loss of competition between ESPN and the Fox RSN in each DMA Market 
would likely lead to an increase in MVPD licensing fees in those 
markets. Some of these increased programming costs likely would be 
passed onto consumers, resulting in higher MVPD subscription fees for 
millions of U.S. households.

3. Entry

    The Complaint alleges that entry or expansion into cable sports 
programming would not be timely, likely, or sufficient to prevent the 
Transaction's anticompetitive effects. With respect to RSN sports 
programming, there are a limited number of professional sports teams in 
a given DMA, and these teams auction the exclusive local rights to 
telecast their games under long-term contracts. Because these contracts 
typically last many years, there are infrequent opportunities to bid 
for these licensing rights to expand an existing RSN or create a new 
RSN. Moreover, non-local RSNs cannot enter because their licenses 
typically are limited to the DMAs that comprise the ``home'' territory 
of the team or teams that the RSN carries; and local MVPD subscribers 
would not generally have demand for extensive coverage of another DMA's 
home team. Thus, an MVPD cannot substitute an RSN from another DMA for 
the local RSN in response to an anticompetitive price increase.
    Entry or expansion into national cable sports programming also is 
difficult. For a national sports network to compete effectively, it 
needs to obtain the national broadcast rights from professional sports 
leagues (i.e., MLB, NBA, and NHL), which are expensive and infrequently 
available. Although both Fox and NBCUniversal have national cable 
sports programming networks (FS1 and NBC Sports, respectively), neither 
company has been able to replicate ESPN's competitive position (as 
evidenced by their lower MVPD licensing fees and viewership ratings).

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture requirement of the proposed Final Judgment will 
eliminate the likely anticompetitive effects of the Transaction in each 
DMA Market by establishing an independent and economically viable 
competitor. The proposed Final Judgment requires

[[Page 40565]]

Disney, within 90 days after the closing of the Transaction, or five 
days after notice of the entry of the Final Judgment by the Court, 
whichever is later, to divest all of Fox's interests in the Fox RSNs, 
including all assets necessary for the operation of the Fox RSNs as 
viable, ongoing video networks or programming assets. The assets must 
be divested in such a way as to satisfy the United States in its sole 
discretion that the operations can and will be operated by the 
purchaser as viable, ongoing businesses that can compete effectively in 
the relevant markets. Disney must use its best efforts to divest the 
Fox RSNs as expeditiously as possible and shall cooperate with 
prospective purchasers.
    In the event that Disney does not accomplish the divestiture within 
the period prescribed in the proposed Final Judgment, the Final 
Judgment provides that the Court will appoint a trustee selected by the 
United States to effect the divestiture. If a trustee is appointed, the 
proposed Final Judgment provides that Disney will pay all costs and 
expenses of the trustee. The trustee's commission will be structured so 
as to provide an incentive for the trustee based on the price obtained 
and the speed with which the divestiture is accomplished. After his or 
her appointment becomes effective, the trustee will file monthly 
reports with the Court and the United States setting forth his or her 
efforts to accomplish the divestiture. At the end of six months, if the 
divestiture has not been accomplished, the trustee and the United 
States will make recommendations to the Court, which shall enter such 
orders as appropriate, in order to carry out the purpose of the trust, 
including extending the trust or the term of the trustee's appointment.
    The proposed Final Judgment also contains provisions designed to 
promote compliance and make the enforcement of Division consent decrees 
as effective as possible. Paragraph XIII(A) provides that the United 
States retains and reserves all rights to enforce the provisions of the 
proposed Final Judgment, including its rights to seek an order of 
contempt from the Court. Under the terms of this paragraph, Defendants 
have agreed that in any civil contempt action, any motion to show 
cause, or any similar action brought by the United States regarding an 
alleged violation of the Final Judgment, the United States may 
establish the violation and the appropriateness of any remedy by a 
preponderance of the evidence, and Defendants have waived any argument 
that a different standard of proof should apply. This provision aligns 
the standard for compliance obligations with the standard of proof that 
applies to the underlying offense that the compliance commitments 
address.
    Paragraph XIII(B) provides additional clarification regarding the 
interpretation of the provisions of the proposed Final Judgment. The 
proposed Final Judgment was drafted to restore all competition that 
would otherwise be harmed by the merger. Defendants agree that they 
will abide by the proposed Final Judgment, and that they may be held in 
contempt of this Court for failing to comply with any provision of the 
proposed Final Judgment that is stated specifically and in reasonable 
detail, as interpreted in light of this procompetitive purpose.
    Paragraph XIII(C) of the proposed Final Judgment further provides 
that, should the Court find in an enforcement proceeding that 
Defendants have violated the Final Judgment, the United States may 
apply to the Court for a one-time extension of the Final Judgment, 
together with such other relief as may be appropriate. In addition, in 
order to compensate American taxpayers for any costs associated with 
the investigation and enforcement of violations of the proposed Final 
Judgment, Paragraph XIII(C) provides that in any successful effort by 
the United States to enforce the Final Judgment against a Defendant, 
whether litigated or resolved prior to litigation, that Defendant 
agrees to reimburse the United States for attorneys' fees, experts' 
fees, and costs incurred in connection with any enforcement effort, 
including the investigation of the potential violation.
    Finally, Section XIV of the proposed Final Judgment provides that 
the Final Judgment shall expire seven years from the date of its entry, 
except that the Final Judgment may be terminated upon notice by the 
United States to the Court and Defendants that the divestitures have 
been completed and that the continuation of the Final Judgment is no 
longer necessary.
    The divestiture provisions of the proposed Final Judgment will 
eliminate the likely anticompetitive effects of the acquisition in the 
provision of cable sports programming in the DMA Markets.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    Section 4 of the Clayton Act, 15 U.S.C. Sec.  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. 
Sec.  16(a), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against Defendants.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's internet website and, under certain circumstances, 
published in the Federal Register.
    Written comments should be submitted to:

Owen M. Kendler, Chief, Media, Entertainment & Professional Services 
Section Antitrust Division, United States Department of Justice, 450 
Fifth Street, N.W., 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 United States considered, as an alternative to the proposed 
Final

[[Page 40566]]

Judgment, a full trial on the merits against Defendants. The United 
States could have continued the litigation and sought preliminary and 
permanent injunctions against Disney's acquisition of the Fox RSNs. The 
United States is satisfied, however, that the divestiture of assets 
described in the proposed Final Judgment will preserve competition for 
the provision of cable sports programming in the DMA Markets identified 
by the United States. Thus, the proposed Final Judgment would achieve 
all or substantially all of the relief the United States would have 
obtained through litigation, but avoids the time, expense, and 
uncertainty of a full trial on the merits of the Complaint.

VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. Sec.  16(e)(1); see also United States v. 
Int'l Bus. Mach. Corp., 163 F.3d 737, 740 (2d Cir. 1998). In making 
that determination, the court, in accordance with the statute as 
amended in 2004, is required to consider:

    (A) the competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and individuals 
alleging specific injury from the violations set forth in the complaint 
including consideration of the public benefit, if any, to be derived 
from a determination of the issues at trial.

15 U.S.C. Sec.  16(e)(1)(A) & (B); see generally United States v. 
Keyspan, 763 F. Supp. 2d 633, 637-38 (S.D.N.Y. 2011) (discussing Tunney 
Act standards); United States v. Morgan Stanley, 881 F. Supp. 2d 563, 
567 (S.D.N.Y. 2012) (similar). 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); accord United States v. Alex. Brown & 
Sons, Inc., 963 F. Supp. 235, 238 (S.D.N.Y. 1997) (quoting Microsoft, 
56 F.3d at 1460, aff'd sub nom. United States v. Bleznak, 153 F.3d 16 
(2d Cir. 1998)); Keyspan, 763 F. Supp. 2d at 637 (same).
    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, ``[t]he Court's function is not to determine whether the 
proposed [d]ecree results in the balance of rights and liabilities that 
is the one that will best serve society, but only to ensure that the 
resulting settlement is within the reaches of the public interest.'' 
Morgan Stanley, 881 F. Supp. 2d at 567 (quoting Alex. Brown & Sons, 963 
F. Supp. at 238) (internal quotations omitted) (emphasis in original). 
In making this determination, ``[t]he [c]ourt is not permitted to 
reject the proposed remedies merely because the court believes other 
remedies are preferable. [Rather], the relevant inquiry is whether 
there is a factual foundation for the government's decision such that 
its conclusions regarding the proposed settlement are reasonable.'' 
Morgan Stanley, 881 F. Supp. 2d at 563 (quoting United States v. 
Abitibi-Consolidated Inc., 584 F. Supp. 2d 162, 165 (D.D.C. 2008)); see 
also United States v. Apple, Inc., 889 F. Supp. 2d 623, 631 (S.D.N.Y. 
2012); Alex. Brown & Sons, 963 F. Supp. at 238.\1\ The government's 
predictions about the efficacy of its remedies are entitled to 
deference. Apple, 889 F. Supp. 2d at 631 (citation omitted).\2\
---------------------------------------------------------------------------

    \1\ See also United States v. Bechtel Corp., 648 F.2d 660, 666 
(9th Cir. 1981) (``The 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.''); 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''').
    \2\ See 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).
---------------------------------------------------------------------------

    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) (citation 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. US Airways Grp., Inc., 38 F. Supp. 3d 69, 74 (D.D.C. 
2014) (noting that room must be made for the government to grant 
concessions in the negotiation process for settlements) (citing 
Microsoft, 56 F.3d at 1461); Morgan Stanley, 881 F. Supp. 2d at 568 
(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.'' United States v. 
SBC Commc'ns, Inc., 489 F. Supp. 2d 1, 17 (D.D.C. 2007).
    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 Morgan 
Stanley, 881 F. Supp. 2d at 567 (``A court must limit its review to the 
issues in the complaint and `give due respect to the [Government's] 
perception of . . . its case.''') (quoting Microsoft, 56 F.3d at 1461); 
United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. 
(CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, at *20, (D.D.C. Aug. 11, 
2009) (``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-

[[Page 40567]]

60. Courts cannot look beyond the complaint in making the public 
interest determination ``unless the complaint underlying the decree is 
drafted so narrowly such that its entry would appear `to make a mockery 
of judicial power.''' Apple, 889 F. Supp. 2d at 631 (S.D.N.Y. 2012) 
(citing 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. Sec.  16(e)(2); see also U.S. Airways, 38 F. 
Supp. 3d at 75 (indicating that a court is not required to hold an 
evidentiary hearing or to permit intervenors as part of its review 
under the Tunney Act). The language wrote into the statute what 
Congress intended when it enacted the Tunney Act in 1974, as Senator 
Tunney explained: ``[t]he court is nowhere compelled to go to trial or 
to engage in extended proceedings which might have the effect of 
vitiating the benefits of prompt and less costly settlement through the 
consent decree process.'' 119 Cong. Rec. 24, 598 (1973) (statement of 
Sen. Tunney). Rather, the procedure for the public interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11; see also Apple, 889 F. Supp. 2d at 632 
(``[P]rosecutorial functions vested solely in the executive branch 
could be undermined by the improper use of the APPA as an antitrust 
oversight provision.'') (citation omitted). A court can make its public 
interest determination based on the competitive impact statement and 
response to public comments alone. U.S. Airways, 38 F. Supp. 3d at 
75.\3\
---------------------------------------------------------------------------

    \3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1 
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D. Mo. 1977) (``Absent 
a showing of corrupt failure of the government to discharge its 
duty, the Court, in making its public interest finding, should . . . 
carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the 
public interest can be meaningfully evaluated simply on the basis of 
briefs and oral arguments, that is the approach that should be 
utilized.'').
---------------------------------------------------------------------------

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: August 7, 2018

Respectfully submitted,
-----------------------------------------------------------------------

Lowell R. Stern

United States Department of Justice, Antitrust Division, Media, 
Entertainment & Professional Services Section, 450 Fifth Street, 
N.W., Suite 4000, Washington, DC 20530, Telephone: (202) 514-3676, 
Facsimile: (202) 514-7308, E-mail: [email protected]

Attorney for Plaintiff United States

[FR Doc. 2018-17521 Filed 8-14-18; 8:45 am]
 BILLING CODE 4410-11-P