United States v. Thales S.A. and Gemalto N.V.; Proposed Final Judgment and Competitive Impact Statement, 8745-8762 [2019-04293]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 84, Number 47 (Monday, March 11, 2019)]
[Notices]
[Pages 8745-8762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04293]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Thales S.A. and Gemalto N.V.; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and

[[Page 8746]]

Competitive Impact Statement have been filed with the United States 
District Court for the District of Columbia in United States of America 
v. Thales S.A. and Gemalto N.V., Civil Action No. 1:19-cv-00569-BAH. On 
February 28, 2019, the United States filed a Complaint alleging that 
Thales S.A.'s proposed acquisition of Gemalto N.V. 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 Thales S.A. 
to divest to an acquirer, subject to the United States' approval, its 
General Purpose HSM Products business.
    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 District of 
Columbia. Copies of these materials may be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, 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 Aaron Hoag, Chief, 
Technology and Financial Services Section, Antitrust Division, 
Department of Justice, 450 Fifth Street NW, Suite 7100, Washington, DC 
20530 (telephone: 202-307-6153).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, United States Department of Justice 
Antitrust Division, 450 Fifth Street NW, Suite 7100, Washington, DC 
20530, Plaintiff, v. Thales S.A. Tour Carpe Diem, 31 Place des 
Corolles--CS 20001, 92098 Paris La Defense Cedex, France, and 
Gemalto N.V. Barbara Strozzilaan 382, Amsterdam, The Netherlands, 
1083 HN Defendants.

Case No.: 1:19-cv-00569-BAH
Judge: Beryl A. Howell

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 of Gemalto N.V. (Gemalto) by Thales S.A. 
(Thales) and to obtain other equitable relief. The United States 
alleges as follows:

I. NATURE OF THE ACTION

    1. Thales intends to acquire all of the outstanding ordinary shares 
of Gemalto for approximately $5.64 billion. Thales and Gemalto are the 
world's leading providers of general purpose (GP) hardware security 
modules (HSMs) and are significant direct competitors in the United 
States.
    2. Organizations, including corporations and governmental agencies, 
use GP HSMs to protect their most sensitive data. GP HSMs are hardened, 
tamper-resistant hardware devices that strengthen data security by, 
among other things, making encryption key generation and management, 
data encryption and decryption, and digital signature creation and 
verification more secure. GP HSMs are used to achieve higher levels of 
data security and to meet or exceed established and emerging industry 
and regulatory standards for cybersecurity.
    3. Together, Thales and Gemalto dominate the U.S. market for GP 
HSMs and face limited competition from a few, much smaller rivals. 
Thales and Gemalto are each other's closest competitors. They compete 
head-to-head in the development, marketing, service, and sale of GP 
HSMs. Thales' proposed acquisition of Gemalto would eliminate this 
competition, resulting in higher prices; lower quality products, 
support, and service; and reduced innovation.
    4. Accordingly, the transaction is likely to substantially lessen 
competition in the provision of GP HSMs in the United States, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18, and 
should be enjoined.

II. DEFENDANTS AND THE PROPOSED ACQUISITION

    5. Thales is an international company incorporated in France with 
its principal office in Paris. Thales is active globally in five main 
industries: (i) aeronautics; (ii) space; (iii) ground transportation; 
(iv) defense; and (v) security. In 2017, it had global revenue of 
approximately $19.6 billion, operations in fifty-six countries, and 
approximately 65,100 employees. Thales eSecurity is a business unit of 
Thales. Thales eSecurity primarily encompasses three legal entities: 
(1) Thales eSecurity Inc. (based in the United States with offices in 
Plantation, Florida; San Jose, California; and Boston, Massachusetts), 
(2) Thales UK Ltd. (based in the United Kingdom), and (3) Thales 
Transport & Security HK Ltd. (based in Hong Kong). Thales eSecurity 
specializes in developing, marketing, and selling data security 
products including but not limited to GP HSMs, payment HSMs, and 
encryption and key management software and hardware. Thales sells GP 
HSMs to customers worldwide, including government and commercial 
organizations throughout the United States, under the brand name 
nShield. In 2008, Thales acquired nCipher, a company that specialized 
in cryptographic security and sold, among other things, GP HSMs under 
the brand name nCipher. After that acquisition, Thales changed the 
brand name of those GP HSMs to nShield.
    6. Pursuant to its commitments to the European Commission, entered 
into on November 7, 2018, Thales has agreed to divest its nShield 
business. As part of these commitments, Thales has separated the 
nShield business and related assets and personnel from the rest of its 
businesses and appointed a hold separate manager whose responsibility 
it is to manage the nShield business as a distinct and separate entity 
from the businesses retained by Thales until the divestiture is 
completed. This new business unit is operating under the name nCipher 
Security.
    7. Gemalto is an international digital security company 
incorporated in the Netherlands with its principal office in Amsterdam. 
Gemalto is active globally in providing authentication and data 
protection technology, platforms, and services in five main areas: (i) 
banking and payment; (ii) enterprise and cybersecurity; (iii) 
government; (iv) mobile; and (v) machine-to-machine Internet of Things. 
In 2017, Gemalto had global revenue of approximately $3.7 billion, 
operations in forty-eight countries, and approximately 15,000 
employees. Gemalto develops, markets, and sells GP HSMs, as well as 
other security solutions and services including but not limited to 
payment HSMs and encryption and key management software and hardware. 
In the United States, Gemalto sells its products and services primarily 
through SafeNet, Inc. (based in Belcamp, Maryland), SafeNet Assured 
Technologies, LLC (based in Abingdon, Maryland), and Gemalto Inc. 
(based in Austin, Texas). Gemalto sells GP HSMs to customers worldwide, 
including government and commercial organizations throughout the United 
States, under the brand name SafeNet Luna.
    8. On December 17, 2017, Thales and Gemalto entered into an 
agreement on a recommended all-cash offer by Thales to acquire all of 
the issued and outstanding ordinary shares of Gemalto for approximately 
$5.64 billion.

[[Page 8747]]

III. JURISDICTION, VENUE, AND INTERSTATE COMMERCE

    9. The United States brings this action under Section 15 of the 
Clayton Act, 15 U.S.C. Sec.  25, to prevent and restrain Defendants 
from violating Section 7 of the Clayton Act, 15 U.S.C. Sec.  18. This 
Court has subject-matter jurisdiction over this action under Section 15 
of the Clayton Act, 15 U.S.C. Sec.  25, and 28 U.S.C. Sec. Sec.  1331, 
1337(a), and 1345.
    10. Defendants market, sell, and service their products, including 
their GP HSMs, throughout the United States and regularly and 
continuously transact business and transmit data in connection with 
these activities in the flow of interstate commerce, which has a 
substantial effect upon interstate commerce.
    11. Defendants consent to personal jurisdiction and venue in this 
district. This Court has personal jurisdiction over each Defendant and 
venue is proper under Section 12 of the Clayton Act, 15 U.S.C. Sec.  
22, and 28 U.S.C. Sec.  1391(b) and (c).

IV. THE RELEVANT MARKET

A. Industry Background

    12. Many U.S. organizations, including commercial enterprises and 
government agencies, use, transmit, and maintain sensitive electronic 
data. The universe of sensitive electronic data has been expanding 
rapidly and relates to a wide range of subjects, such as personally 
identifiable information, classified information, health records, 
financial information, tax records, trade secrets and other 
confidential business information, software code, and other nonpublic 
information. Access to this data is often critical to an organization's 
ability to operate effectively and efficiently. Inappropriate use, 
theft, corruption, or disclosure of this data could result in 
significant harm to an organization's customers or constituents and the 
organization itself.
    13. U.S. organizations increasingly rely on encryption as a crucial 
component of the security measures implemented to safeguard sensitive 
data from internal and external threats. Encryption is a process that 
converts readable data (plain text) into an unreadable format (cipher 
text) using an algorithm and an encryption key. Decryption is the 
reverse of encryption, converting cipher text back to plain text. 
Encryption algorithms are based on highly complex math and are often 
standardized and open source. Encryption keys consist of a randomly 
generated series of numbers or pairs of randomly generated prime 
numbers, expressed in bits. Because encryption algorithms are virtually 
impossible to decipher using today's technology, attackers who want 
unauthorized access to sensitive data generally focus their efforts on 
obtaining private encryption keys instead of trying to break the 
encryption algorithm directly. With the right key, an attacker can 
freely access an organization's sensitive data. Moreover, a lost or 
corrupted key could make encrypted data unrecoverable by the 
organization. Organizations therefore must implement processes and 
products that create, maintain, protect, and control their encryption 
keys in a manner that safeguards against improper access or use while 
simultaneously ensuring the keys are readily available when required 
for authorized use.
    14. GP HSMs provide the most secure way for organizations to 
effectively manage and protect their encryption keys, and many U.S. 
organizations use them to protect their most sensitive data. GP HSMs 
are tamper-resistant hardware environments for secure encryption 
processing and key management. GP HSMs provide additional security as 
compared to software-based key management solutions because they are 
isolated from the host information technology (IT) environment and 
segregate encryption keys from encrypted data and encryption 
applications. GP HSMs also enable organizations to implement strong 
authentication regimes for key management administrators that prevent 
unauthorized access.
    15. GP HSMs are typically independently validated to confirm they 
provide a level of security specified by various standards. 
Certifications of compliance with these standards provides assurance to 
customers that GP HSMs satisfy certain minimum security performance 
benchmarks. For example, U.S. GP HSM customers frequently rely on the 
Federal Information Processing Standard (FIPS) 140-2 to assess the 
level of security provided by a particular GP HSM. FIPS 140-2 is a 
standard defined by the U.S. National Institute of Standards, which is 
part of the U.S. Department of Commerce. The standard is mandatory for 
U.S. government IT security systems that use cryptographic modules to 
protect sensitive but unclassified information. Commercial enterprises 
also rely heavily on the standard to assess the security provided by 
cryptographic modules. FIPS 140-2 comprises four increasing, 
qualitative levels of security--Levels 1 through 4--for cryptographic 
modules used to protect sensitive information. Cryptographic modules go 
through an expensive and time consuming testing process in order to be 
validated at a particular FIPS 140-2 level. Although software-only 
modules can be validated under FIPS 140-2, due to increasingly 
stringent security requirements, organizations must use an HSM to 
attain Level 3 security. Thales and Gemalto both provide highly secure 
GP HSMs that have been validated at FIPS 140-2, Level 3.
    16. Thales and Gemalto sell GP HSMs and related services directly 
to end-user organizations, to resellers who often combine the GP HSMs 
with additional security products or services, and to cloud service 
providers (CSPs) who then sell GP HSM services, or HSM-as-a-service 
(HSMaaS), to their cloud customers. The leading CSPs purchase GP HSMs 
from third-party suppliers, including Thales and Gemalto.
    17. There are, however, many organizations that are reluctant to 
move their sensitive data to the cloud and use HSMaaS because of 
security concerns. These organizations continue to rely, to at least 
some degree, on purchasing and using their own GP HSMs to protect their 
sensitive data.
    18. GP HSMs typically must be integrated into or configured to 
operate within an organization's existing IT environment. An 
organization needs assurance that a GP HSM will be an effective 
component of what may be an already complex data security 
infrastructure. Because of this, the GP HSM sales process typically 
includes a comprehensive exchange of information between the potential 
customer organization and GP HSM supplier.
    19. Once an organization has installed a GP HSM into its IT 
environment and is using it to protect its keys and to provide a secure 
data encryption environment, any breakdowns or malfunctions in the GP 
HSM could not only compromise the sensitive data but also jeopardize 
the organization's ability to perform day-to-day tasks that are 
necessary for the organization to carry out its business. Post-sales 
customer support and service are therefore essential conduct carried 
out by successful GP HSM suppliers. Many customers will not even 
consider a potential GP HSM supplier who has not established a strong 
reputation for providing quality GP HSMs and continuous and effective 
post-sales service and support. Thales and Gemalto both have strong 
reputations for high-quality post-sales service and support. Thales and 
Gemalto provide this service and support to their direct customers and 
indirectly to other customers by assisting their resellers.
    20. Thales and Gemalto both create and maintain confidential price 
lists for

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their respective GP HSMs, additional GP HSM components and accessories, 
and services. Confidential discount rates are then applied to the price 
list to determine the prices that are applicable to resellers. Thales 
and Gemalto authorize, customer-by-customer, confidential discounts 
from the prices on the price list, and in the case of resellers, 
additional discounts to the discounted prices already available to the 
reseller. Thales and Gemalto regularly approve significant discounts on 
GP HSMs when competing against each other.

B. Relevant Market

    21. GP HSMs are most frequently included as components of complex 
encryption solutions used by government and private organizations to 
safeguard their most sensitive data. Use of GP HSMs is often specified 
by regulations, industry standards, or an organization's auditors or 
security policies, or is otherwise deemed necessary to safeguard the 
organization's most sensitive data or provide the organization's 
customers or constituents with confidence that their sensitive data 
will be adequately protected. Organizations that use GP HSMs have 
determined that less expensive alternatives to GP HSMs, such as 
software-based key management solutions, provide inadequate security 
for their most sensitive data. Some organizations will not even use 
cloud-based GP HSMaaS, and, if they do, will require an on-premises GP 
HSM to provide an additional layer of encryption security for 
encryption keys stored in a cloud-based GP HSM. Many customers are 
unwilling to entrust the protection of their most sensitive data to 
HSMaaS provided by a CSP. In order to provide HSMaaS to those customers 
that are willing to outsource at least some their GP HSM needs, CSPs 
purchase GP HSMs from the Defendants and the Defendants' GP HSM 
competitors.
    22. Defendants market, sell, and service GP HSMs for use by 
organizations across the United States. Because GP HSMs are used to 
protect an organization's most sensitive data, U.S. customers require 
GP HSM suppliers to possess the demonstrated ability to provide both 
high-quality GP HSMs and high-quality post-sales service and support in 
the United States.
    23. A hypothetical GP HSM monopolist could profitably impose a 
small but significant and non-transitory increase in price on GP HSM 
customers in the United States. Accordingly, GP HSMs sold to U.S. 
customers is a relevant market for purposes of analyzing the likely 
competitive effects of the proposed acquisition under Section 7 of the 
Clayton Act, 15 U.S.C. Sec.  18.

V. ANTICOMPETITIVE EFFECTS OF THE PROPOSED ACQUISITION

    24. Together, Thales and Gemalto dominate the GP HSM market in the 
United States. Thales and Gemalto are the two leading providers of GP 
HSMs in the United States, with individual market shares of 
approximately 30% and 36%, respectively, and a combined market share of 
approximately 66%. Thales' proposed acquisition of Gemalto likely would 
substantially lessen competition and harm customers in the U.S. GP HSM 
market by eliminating head-to-head competition between the two leading 
suppliers in the United States. The acquisition likely would result in 
higher prices, lower quality, reduced choice, and reduced innovation. 
Thales' proposed acquisition of Gemalto would substantially increase 
market concentration in an already highly concentrated market. The 
proposed acquisition violates Section 7 of the Clayton Act.
    25. Thales and Gemalto currently compete head-to-head and their 
respective GP HSMs are each other's closest substitutes. Thales and 
Gemalto regularly approve significant discounts on GP HSMs when 
competing against each other. Competition between the two companies has 
also spurred innovation in the past. Thales' proposed acquisition of 
Gemalto would eliminate this head-to-head competition and reduce 
innovation, in addition to significantly increasing concentration in a 
highly concentrated market. As a result, Thales would emerge as the 
clearly dominant provider of GP HSMs in the United States with the 
ability to exercise substantial market power, increasing the likelihood 
that Thales could unilaterally increase prices or reduce its efforts to 
improve the quality of its products and services.

VI. ABSENCE OF COUNTERVAILING FACTORS

    26. It is unlikely that any firm would enter the relevant product 
and geographic markets alleged herein in a timely manner sufficient to 
defeat the likely anticompetitive effects of the proposed acquisition. 
Successful entry in the development, marketing, sale, and service of GP 
HSMs is difficult, time-consuming, and costly.
    27. Any new entrant would be required to expend significant time 
and capital to design and develop a series of GP HSMs that are at least 
comparable to Defendants' GP HSM product lines in terms of 
functionality and ability to interoperate with a wide range of 
encryption solutions and IT resources. Moreover, a new entrant, as well 
as any existing GP HSM provider seeking to expand and become a viable 
competitor in the supply of GP HSMs for use by individual organizations 
in the United States in on-premises security solutions, would need to 
spend significant time and effort to demonstrate its ability to provide 
quality GP HSMs for such use and continuous, high-quality post-sales 
service in the United States. It is unlikely that any such entry or 
expansion effort would produce an economically viable alternative to 
the merged firm in time to counteract the competitive harm likely to 
result from the proposed transaction.
    28. Defendants cannot demonstrate merger-specific, verifiable 
efficiencies sufficient to offset the proposed merger's likely 
anticompetitive effects.

VII. VIOLATION ALLEGED

    29. The United States incorporates the allegations of paragraphs 1 
through 28 above.
    30. The proposed acquisition of Gemalto by Thales is likely to 
substantially lessen competition for the development and supply of GP 
HSMs in the United States in violation of Section 7 of the Clayton Act, 
15 U.S.C. Sec.  18.
    31. Unless enjoined, the proposed acquisition likely will have the 
following anticompetitive effects, among others:
    (a) actual and potential competition between Thales and Gemalto in 
the development, sale, and service of GP HSMs in the United States will 
be eliminated;
    (b) competition in the development, sale, and service of GP HSMs in 
the United States in general will be substantially lessened;
    (c) prices of GP HSMs will increase;
    (d) improvements or upgrades to the quality or functionality of GP 
HSMs will be less frequent and less substantial;
    (e) the quality of service for GP HSMs will decline; and
    (f) organizations in the United States that require GP HSMs for use 
in on-premises security solutions will be especially vulnerable to an 
exercise of market power by the merged firm.

VIII. REQUEST FOR RELIEF

    32. The United States requests that this Court:
    (a) adjudge and decree that Thales' proposed acquisition of Gemalto 
would be unlawful and would violate Section 7 of the Clayton Act, 15 
U.S.C. Sec.  18;
    (b) permanently enjoin and restrain Defendants and all persons 
acting on

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their behalf from carrying out the December 17, 2017, agreement on a 
recommended all-cash offer by Thales to acquire all of the issued and 
outstanding ordinary shares of Gemalto, or from entering into or 
carrying out any other contract, agreement, plan, or understanding, or 
taking any other action, to combine Thales and Gemalto;
    (c) award the United States its costs for this action; and
    (d) award the United States such other and further relief as this 
Court deems just and proper.

Dated: February 28, 2019

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

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Makan Delrahim (D.C. Bar  457795),
Assistant Attorney General for Antitrust.

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Bernard A. Nigro, Jr. (D.C. Bar  412357),
Deputy Assistant Attorney General.

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Patricia A. Brink,
Director of Civil Enforcement.

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Aaron D. Hoag,
Chief, Technology and Financial Services.

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Danielle G. Hauck,
Adam T. Severt,
Assistant Chiefs, Technology and Financial Services Section.

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 Kelly M. Schoolmeester,
(D.C. Bar  1008354),
Maureen T. Casey,
(D.C. Bar  415893)
(D.C. Bar  1019454),
Chinita M. Sinkler,
Bindi R. Bhagat,
 Cory Brader Leuchten,
R. Cameron Gower,
Ryan T. Karr,
David J. Shaw, (D.C. Bar  996525),
Aaron Comenetz, (D.C. Bar  479572),
Kent Brown,
Attorneys for the United States, United States Department of 
Justice, Antitrust Division, 450 Fifth Street, NW, Suite 7100, 
Washington, D.C. 20530, Tel.: (202) 598-2693, Fax: (202) 616-8544, 
Email: kelly.schoolmeester@usdoj.gov.

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Thales S.A. and Gemalto 
N.V., Defendants.

Case No.: 1:19-cv-00569-BAH
Judge: Beryl A. Howell

PROPOSED FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed its Complaint 
on February 28, 2019, the United States and Defendants, Thales S.A. and 
Gemalto N.V., 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 Defendants to assure 
that competition is not substantially lessened;
    AND WHEREAS, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    AND WHEREAS, Defendants have represented to the 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. ``Acquirer'' means the entity to whom Defendants divest the 
Divestiture Assets.
    B. ``Thales'' means Defendant Thales S.A., a French corporation 
with its principal office in Paris, France; its successors and assigns; 
and its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint ventures, and their directors, officers, managers, agents, and 
employees.
    C. ``Gemalto'' means Defendant Gemalto N.V., a Netherlands 
corporation with its headquarters in Amsterdam; its successors and 
assigns; and its subsidiaries, divisions, groups, affiliates, 
partnerships, and joint ventures, and their directors, officers, 
managers, agents, and employees.
    D. ``Defendants'' means Thales and Gemalto, acting individually or 
collectively.
    E. ``Transaction'' means Thales' acquisition of Gemalto through a 
public offer by Thales for all issued and outstanding ordinary shares 
of Gemalto pursuant to the Merger Agreement between Thales and Gemalto 
dated December 17, 2017.
    F. ``Confidential Information'' means non-public information 
related to the Divestiture Assets.
    G. ``Divestiture Assets'' means Thales' GP HSM Products business, 
including:
    (1) all tangible assets primarily related to the production, 
operation, research, development, sale, or support of any GP HSM 
Product, including but not limited to manufacturing equipment, tooling 
and fixed assets, computers, tapes, disks, other storage devices, other 
IT hardware, equipment used in research and development, testing 
equipment, tools used in design or simulation, personal property, 
inventory, office furniture, materials, supplies, and other tangible 
property;
    (2) all Shared Intangible Assets; and
    (3) all other intangible assets primarily related to the 
production, operation, research, development, sale, or support of any 
GP HSM Product, including but not limited to (i) licenses, permits, 
certifications, and authorizations issued by any governmental 
organization; contracts or portions of contracts, teaming arrangements, 
agreements, leases, commitments, certifications, and understandings, 
including supply agreements; customer lists, histories, contracts, 
accounts, and credit records; repair and performance records; 
documentation relating to software development and changes; manuals and 
technical information Defendants provide to their own employees, 
customers, suppliers, agents, or licensees; data and records relating 
to historic and current research and development efforts, including but 
not limited to designs of experiments and the results of successful and 
unsuccessful experiments; records relating to designs or simulations, 
safety procedures for the handling of materials and substances, and 
quality assurance and control procedures; and other records; and (ii) 
intellectual property rights, including but not limited to patents, 
licenses and sublicenses, copyrights, trademarks, trade names, service 
marks, service names, technical information, computer software and 
related documentation, know-how, trade secrets, drawings, blueprints, 
designs, design protocols, specifications for materials, and 
specifications for parts and devices (but not including the name 
``THALES'' in any trademark, domain name, trade name, or service).

[[Page 8750]]

    The Divestiture Assets include but are not limited to: CodeSafe, 
nShield Remote Administration, nShield Bring Your Own Key, Key 
Authority (at the option of Acquirer), and Security World Architecture 
and monitoring tool nShield Monitor. The Divestiture Assets do not 
include any assets owned by Gemalto prior to the closing of the 
Transaction.
    H. ``Divestiture Closing Date'' means the date on which Thales 
divests the Divestiture Assets to Acquirer.
    I. ``GP HSM Product'' means a hardened, tamper-resistant general 
purpose hardware security module and includes all add-ons, value-added 
features, and accessories. ``GP HSM Product'' does not include the 
Vormetric Data Security Manager, but does include any GP HSM Product 
that is incorporated into or otherwise used with the Vormetric Data 
Security Manager.
    J. ``Regulatory Approvals'' means any approvals or clearances 
pursuant to filings with the Committee on Foreign Investments in the 
United States (``CFIUS''), or under antitrust, competition, or other 
U.S. or international laws in connection with Acquirer's acquisition of 
the Divestiture Assets.
    K. ``Relevant Personnel'' means all Thales employees who have 
supported or whose job related to the Divestiture Assets at any time 
between July 1, 2017 and the Divestiture Closing Date.
    L. ``Retained Solution'' means any solution that is sold by 
Defendants, including but not limited to Vormetric Data Security 
Manager, Vormetric Transparent Encryption, CipherTrust Cloud Key 
Manager, SafeNet KeySecure, SafeNet Virtual KeySecure, SafeNet 
ProtectApp, and any upgrades, revisions, or new versions of any such 
solutions, in each case solely to the extent such solution has 
interfaced or interoperated with any of the Divestiture Assets at any 
time since January 1, 2017.
    M. ``Shared Intangible Assets'' means intangible assets that are 
used, or have been under development for use as of January 7, 2019, in 
relation to (i) Thales' GP HSM Products business and (ii) Thales' 
business relating to products other than GP HSM Products.

III. APPLICABILITY

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

IV. DIVESTITURES

    A. Defendants are ordered and directed, within thirty-five (35) 
calendar days following the signing by the parties of the Stipulation 
and Order in this matter or five (5) calendar days after the notice of 
entry of this Final Judgment by the Court, whichever is later, to 
divest the Divestiture Assets to Acquirer in a manner consistent with 
this Final Judgment. The United States, in its sole discretion, may 
agree to one or more extensions of this time period and shall notify 
the Court in such circumstances. If Acquirer, and/or Defendants, as 
applicable, have initiated contact with any governmental unit to seek 
any Regulatory Approval within five (5) calendar days after the United 
States provides written notice pursuant to Paragraph VI(C) that it does 
not object to the proposed Acquirer, the period shall be extended (if 
necessary) until fifteen (15) calendar days after such Regulatory 
Approval is received. The extension allowed for Regulatory Approvals 
shall be no longer than ninety (90) calendar days, unless further 
extended by the United States, in its sole discretion. Nothing in this 
section shall require Defendants to divest the Divestiture Assets 
earlier than five (5) calendar days after the closing of the 
Transaction. Defendants agree to use their best efforts to divest the 
Divestiture Assets as expeditiously as possible.
    B. For Divestiture Assets that are Shared Intangible Assets, the 
divestiture shall be completed in the following manner:
    (1) For each Shared Intangible Asset listed on Schedule 1 and any 
other Shared Intangible Asset that has been used, or has been under 
development for use, primarily in relation to Thales' GP HSM Products 
business, Thales shall transfer or otherwise assign to Acquirer all of 
Thales' ownership interest or other rights in the Shared Intangible 
Asset, and (a) for any asset listed on Schedule 1, Acquirer shall 
provide Defendants a non-exclusive, perpetual, worldwide, fully paid-up 
license to use (or, at the Acquirer's option, a covenant not to sue 
Defendants for using) the asset in the manner specified on Schedule 1, 
and (b) for any other Shared Intangible Asset transferred to Acquirer 
under this paragraph, Acquirer shall provide Defendants a non-
exclusive, perpetual, worldwide, fully paid-up license to use (or, at 
the Acquirer's option, a covenant not to sue Defendants for using) the 
asset in the manner in which it is currently used, or currently under 
development for use, in relation to any Thales product other than GP 
HSM Products.
    (2) For each Shared Intangible Asset listed on Schedule 2 and any 
other Shared Intangible Asset that has been used, or has been under 
development for use, primarily in relation to Thales' business relating 
to products other than GP HSM Products, Defendants shall provide 
Acquirer a, perpetual, worldwide, fully paid-up license to use (or, at 
the Acquirer's option, a covenant not to sue Acquirer for use of) the 
asset. At the Acquirer's option, such licenses shall (i) be exclusive 
in relation to GP HSM Products and/or (ii) include non-exclusive rights 
in relation to products other than GP HSM products.
    C. In accomplishing the divestiture ordered by this Final Judgment, 
Defendants promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendants 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 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.
    D. Defendants shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities included in 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. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.

[[Page 8751]]

F. Employees

    (1) Within ten (10) business days following the filing of the 
Complaint in this matter, Thales shall provide to Acquirer, the United 
States, and the Monitoring Trustee organization charts including any 
Relevant Personnel for each year since July 1, 2017. Within ten (10) 
business days of receiving a request from Acquirer, Thales shall 
provide, subject to applicable law, to Acquirer, the United States, and 
the Monitoring Trustee, additional information related to identified 
Relevant Personnel, including name, job title, reporting relationships, 
past experience, and responsibilities from July 1, 2017 through the 
Divestiture Closing Date, training and educational history, relevant 
certifications, job performance evaluations, and current salary and 
benefits information to enable Acquirer to make offers of employment.
    (2) Upon request by the Acquirer, Thales shall make Relevant 
Personnel available for interviews with Acquirer during normal business 
hours at a mutually agreeable location. Defendants will not interfere 
with any negotiations by Acquirer to employ any Relevant Personnel. 
Interference includes but is not limited to offering to increase the 
salary or benefits of Relevant Personnel other than as part of an 
increase in salary or benefits granted in the ordinary course of 
business.
    (3) For any Relevant Personnel who elect employment with Acquirer 
as part of the divestiture required by this Final Judgment, or pursuant 
to Paragraph IV(F)(7) of this Final Judgment, Thales shall waive all 
non-compete and non-disclosure agreements (except as noted in Paragraph 
IV(F)(6)), vest all unvested pension and other equity rights, and 
provide all benefits which those Relevant Personnel would be provided 
if transferred to a buyer of an ongoing business.
    (4) For a period of two (2) years from the Divestiture Closing 
Date, Thales may not solicit to hire Relevant Personnel who were hired 
by Acquirer as part of the divestiture required by this Final Judgment, 
or pursuant to Paragraph IV(F)(7) of this Final Judgment, unless (a) 
such individual is terminated or laid off by Acquirer or (b) Acquirer 
agrees in writing that Thales may solicit or hire that individual; 
provided, however, that nothing in this paragraph shall be construed as 
prohibiting Defendants from utilizing general solicitations or 
advertisements.
    (5) For a period of one (1) year from the Divestiture Closing Date, 
Thales may not hire Relevant Personnel who were hired by Acquirer as 
part of the divestiture pursuant to this Final Judgment or pursuant to 
Paragraph IV(F)(7) of this Final Judgment, unless (a) such individual 
is terminated or laid off by Acquirer or (b) Acquirer agrees in writing 
that Thales may solicit or hire that individual.
    (6) Nothing in Paragraph IV(F) shall prohibit Thales from 
maintaining any reasonable restrictions on the disclosure by any 
employee who accepts an offer of employment with Acquirer of Thales' 
proprietary non-public information that is (a) not otherwise required 
to be disclosed by this Final Judgment, (b) related solely to Thales' 
retained businesses and clients, and (c) unrelated to the Divestiture 
Assets.
    (7) Acquirer's right to hire Relevant Personnel pursuant to 
Paragraph IV(F)(2) and Thales' obligations under Paragraph IV(F)(3) 
shall remain in effect for a period of ninety (90) days after the 
Divestiture Closing Date.

G. Asset Warranties

    In addition to any other warranties in the divestiture-related 
agreements entered into by Defendants, Thales shall warrant to Acquirer 
(a) that each asset will be operational and without material defect as 
of the Divestiture Closing Date; (b) that there are no material defects 
in the environmental, zoning, or other permits pertaining to the 
operation of the Divestiture Assets; and (c) that, following the sale 
of the Divestiture Assets, Defendants will not undertake, directly or 
indirectly, any challenges to the environmental, zoning, or other 
permits relating to the operation of the Divestiture Assets.

H. Additional Assets

    In addition to any other remedial provisions in the divestiture-
related agreements entered into by Defendants, for a period of up to 
one (1) year following the Divestiture Closing Date, if Acquirer 
determines that any assets not included in the Divestiture Assets were 
related to the GP HSM Products business and reasonably necessary for 
the continued competitiveness of the divested GP HSM Products business, 
it shall notify the United States, the Monitoring Trustee, and the 
Defendants in writing that it requires such assets. If, after taking 
into account Acquirer's assets and business and providing Defendants an 
opportunity to demonstrate that such assets were not related to, and/or 
not reasonably necessary for the continued competitiveness of the 
divested GP HSM Products business, the United States, in its sole 
discretion, determines that such assets should be transferred or 
licensed, Defendants and Acquirer will negotiate an agreement within 
thirty (30) calendar days providing for the transfer or licensing of 
such assets in a period to be determined by the United States in 
consultation with the Defendants. The terms of any such transfer or 
license agreement shall be commercially reasonable and must be 
acceptable to the United States, in its sole discretion.

I. Transition Services

    At the option of Acquirer, on or before the Divestiture Closing 
Date, Thales shall enter into transition services or reverse transition 
services agreements to provide any transition services reasonably 
necessary to allow Acquirer to operate any Divestiture Assets or to 
facilitate the transfer of Thales facilities to Acquirer. Thales will 
provide transition services under any such agreement for an initial 
period of up to one (1) year, on terms and conditions reasonably 
related to market conditions for the provision of the relevant 
services, subject to the approval of the United States in its sole 
discretion. Upon Acquirer's request, the United States, in its sole 
discretion, may approve one or more extensions of any such agreement 
for a total of up to an additional one (1) year.

J. Third-Party Agreements

    At Acquirer's option, on or before the Divestiture Closing Date, 
Thales shall use its best efforts to assign or otherwise transfer to 
Acquirer all transferable or assignable agreements, or any assignable 
portions thereof, included in the Divestiture Assets, including but not 
limited to customer contracts, licenses, and collaborations. If Thales 
is unable to assign or transfer any such agreements, Thales shall use 
best efforts to ensure that Acquirer is put in the same economic 
position as if such agreements were assigned or transferred to Acquirer 
on the Divestiture Closing Date. The terms and conditions of any 
contractual arrangement intended to satisfy this provision must be 
reasonably related to market conditions for the provision of such 
services.

K. Licenses, Registrations, and Permits

    Thales will make best efforts to assist Acquirer with acquiring new 
licenses, registrations, and permits to support the Divestiture Assets 
and, until Acquirer has the necessary licenses, registrations, and 
permits, Thales will provide Acquirer with the benefit of Thales' 
licenses, registrations, and permits in Acquirer's operation of the 
Divestiture Assets to the extent permissible by law.

[[Page 8752]]

L. Interoperability

    (1) In order for the Divestiture Assets to have the uninterrupted 
ability to interface and interoperate with any solution that is 
provided by Defendants, for two (2) years following the date of sale of 
the Divestiture Assets, Defendants shall continue to enable, at cost 
and on the same quality and terms, the interface and interoperation 
between any GP HSM Product offered by Acquirer using the Divested 
Assets and any Retained Solutions to the extent such interface or 
interoperation existed at any time since January 1, 2017 in the then-
current release of that Retained Solution. Defendants shall, upon 
receiving a written request from Acquirer at least thirty (30) calendar 
days before expiration of the second year, continue to provide the 
capability covered by this Section for another one (1) year, if 
approved by the United States in its sole discretion.
    (2) Defendants may impose, as a condition of enabling any interface 
and interoperation that is required by Paragraph IV(L)(1), conditions 
that are reasonably related to maintaining the security, integrity, and 
confidentiality of customer data or the composition or means of 
operation of the applicable Retained Solution, except that Defendants 
may not impose conditions that are materially less favorable than the 
conditions under which Defendants provide or would provide an interface 
and interoperation between any of Defendants' GP HSMs and any Retained 
Solution.
    (3) Defendants shall not change, during the period of Defendants' 
obligations under Paragraph IV(L)(1), except for good cause, the format 
of any interface and interoperation that is required by Paragraph 
IV(L)(1). For any such change, Defendants shall provide adequate notice 
and information for Acquirer to modify its Divested Assets, including 
any such products that are already installed with customers, to use the 
new format without disruption.
    (4) Defendants shall take all reasonable steps to cooperate with 
and assist Acquirer in obtaining any third-party license or permission 
that may be required for Defendants to convey, license, sublicense, 
assign, or otherwise transfer to Acquirer rights, any interface or 
interoperability required by Paragraph IV(L)(1), or the use of any data 
transmitted as a result of any such interface or interoperation.

M. Patents

    Thales shall provide a worldwide, non-exclusive, irrevocable, 
perpetual covenant not to assert against Acquirer or its customers in 
the field of use of GP HSM Products all U.S. or international patents, 
patent applications, or rights related to a patent or patent 
application (e.g., continuation, continuation-in-part, divisional, 
counterpart foreign application, or related international patent 
application filed under the Patent Cooperation Treaty), with a priority 
date or invention date prior to the closing of the Transaction (a) 
related to the Divestiture Assets and (b) owned, controlled, licensed, 
or used by Thales prior to the closing of the Transaction.
    N. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV or by the Divestiture Trustee 
appointed pursuant to Section V of this Final Judgment shall include 
the entire Divestiture Assets and shall 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 Acquirer (approval of which 
is in the United States' sole discretion) as part of a viable, ongoing 
business of the production, operation, research, development, sale, and 
support of the GP HSM Products. The divestitures, whether pursuant to 
Section IV or Section V of this Final Judgment,
    (1) shall be made to an Acquirer 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 producing, operating, 
researching, developing, selling, and supporting GP HSM Products; 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 an 
Acquirer and Defendants give Defendants the ability unreasonably to 
raise the Acquirer's costs, to lower the Acquirer's efficiency, or 
otherwise to interfere in the ability of the Acquirer to compete 
effectively.

V. APPOINTMENT OF DIVESTITURE TRUSTEE

    A. If Defendants have not divested the Divestiture Assets to 
Acquirer within the time period specified in Paragraph IV(A), 
Defendants shall notify the United States of that fact in writing. Upon 
application of the United States, the Court shall appoint a Divestiture 
Trustee selected by the United States and approved by the Court to 
effect the divestiture of the Divestiture Assets.
    B. After the appointment of a Divestiture Trustee becomes 
effective, only the Divestiture Trustee shall have the right to sell 
the Divestiture Assets. The Divestiture Trustee shall have the power 
and authority to accomplish the divestiture to an Acquirer acceptable 
to the United States, in its sole discretion, at such price and on such 
terms as are then obtainable upon reasonable effort by the Divestiture 
Trustee, subject to the provisions of Sections IV and V of this Final 
Judgment, and shall have such other powers as the Court deems 
appropriate. Subject to Paragraph V(D) of this Final Judgment, the 
Divestiture Trustee may hire at the cost and expense of Defendants any 
agents, investment bankers, attorneys, accountants, or consultants, who 
shall be solely accountable to the Divestiture Trustee, reasonably 
necessary in the Divestiture Trustee's judgment to assist in the 
divestiture. Any such agents or consultants 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 Divestiture Trustee 
on any ground other than the Divestiture Trustee's malfeasance. Any 
such objections by Defendants must be conveyed in writing to the United 
States and the Divestiture Trustee within ten (10) calendar days after 
the Divestiture Trustee has provided the notice required under Section 
VI.
    D. The Divestiture Trustee shall serve at the cost and expense of 
Defendants pursuant to a written agreement, on such terms and 
conditions as the United States approves, including confidentiality 
requirements and conflict of interest certifications. The Divestiture 
Trustee shall account for all monies derived from the sale of the 
assets sold by the Divestiture Trustee and all costs and expenses so 
incurred. After approval by the Court of the Divestiture Trustee's 
accounting, including fees for any of its services yet unpaid and those 
of any professionals and agents retained by the Divestiture Trustee, 
all remaining money shall be paid to Defendants and the trust shall 
then be terminated. The compensation of the Divestiture Trustee and any 
professionals and agents retained by the Divestiture Trustee shall be 
reasonable in light of the value of the Divestiture Assets and based on 
a fee arrangement that provides the Divestiture Trustee with incentives 
based on the price and terms of the divestiture and the speed with 
which it is accomplished, but the timeliness of the divestiture is 
paramount. If the Divestiture Trustee and Defendants are unable to 
reach agreement on the Divestiture Trustee's or any agents' or 
consultants' compensation or other terms and conditions of engagement 
within fourteen (14) calendar days of the

[[Page 8753]]

appointment of the Divestiture Trustee, the United States may, in its 
sole discretion, take appropriate action, including making a 
recommendation to the Court. The Divestiture Trustee shall, within 
three (3) business days of hiring any other agents or consultants, 
provide written notice of such hiring and the rate of compensation to 
Defendants and the United States.
    E. Defendants shall use their best efforts to assist the 
Divestiture Trustee in accomplishing the required divestiture. The 
Divestiture Trustee and any agents or consultants retained by the 
Divestiture Trustee shall have full and complete access to the 
personnel, books, records, and facilities of the business to be 
divested, and Defendants shall provide or develop financial and other 
information relevant to such business as the Divestiture Trustee may 
reasonably request, subject to reasonable protection for trade secrets; 
other confidential research, development, or commercial information; or 
any applicable privileges. Defendants shall take no action to interfere 
with or to impede the Divestiture Trustee's accomplishment of the 
divestiture.
    F. After its appointment, the Divestiture Trustee shall file 
monthly reports with the United States and, as appropriate, the Court, 
setting forth the Divestiture Trustee's efforts to accomplish the 
divestiture ordered under this Final Judgment. To the extent such 
reports contain information that the Divestiture Trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. Such reports shall include the name, address, and telephone 
number of each person who, during the preceding month, made an offer to 
acquire, expressed an interest in acquiring, entered into negotiations 
to acquire, or was contacted or made an inquiry about acquiring any 
interest in the Divestiture Assets and shall describe in detail each 
contact with any such person. The Divestiture Trustee shall maintain 
full records of all efforts made to divest the Divestiture Assets.
    G. If the Divestiture Trustee has not accomplished the divestiture 
ordered under this Final Judgment within six (6) months after its 
appointment, the Divestiture Trustee shall promptly file with the Court 
a report setting forth (1) the Divestiture Trustee's efforts to 
accomplish the required divestiture; (2) the reasons, in the 
Divestiture Trustee's judgment, why the required divestiture has not 
been accomplished; and (3) the Divestiture Trustee's recommendations. 
To the extent such reports contain information that the Divestiture 
Trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. The Divestiture 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 
Divestiture Trustee's appointment by a period requested by the United 
States.
    H. If the United States determines that the Divestiture Trustee has 
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, the United States may recommend the Court appoint a 
substitute Divestiture Trustee.

VI. NOTICE OF PROPOSED DIVESTITURE

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendants or the Divestiture Trustee, whichever 
is then responsible for effecting the divestiture required herein, 
shall notify the United States of any proposed divestiture required by 
Section IV or Section V of this Final Judgment. If the Divestiture 
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 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(s), any other third party, or the Divestiture 
Trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer(s), and any other potential 
Acquirer. Defendants and the Divestiture 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 Divestiture Trustee, 
whichever is later, the United States shall provide written notice to 
Defendants and the Divestiture Trustee, if there is one, stating 
whether or not, in its sole discretion, it objects to the Acquirer or 
any other aspect of 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

    Neither Thales nor Gemalto shall finance all or any part of any 
purchase made pursuant to this Final Judgment.

VIII. HOLD SEPARATE AND ASSET PRESERVATION

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendants shall take all steps necessary to comply with 
the Stipulation and Order entered by the Court. Defendants shall take 
no action that would jeopardize the divestiture ordered by the 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, 
Thales and Gemalto 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 Defendants' 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 the Divestiture Assets, 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

[[Page 8754]]

information provided by Thales and Gemalto, including limitation 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 and the 
Monitoring Trustee 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. 
Each of the Defendants shall deliver to the United States and the 
Monitoring Trustee an affidavit describing any changes to the efforts 
and actions outlined in Defendants' 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 (1) year after 
such divestiture has been completed.

X. APPOINTMENT OF MONITORING TRUSTEE

    A. Upon application of the United States, the Court shall appoint a 
Monitoring Trustee selected by the United States and approved by the 
Court.
    B. The Monitoring Trustee shall have the power and authority to 
monitor Defendants' compliance with the terms of this Final Judgment 
and the Stipulation and Order entered by the Court and shall have such 
other powers as the Court deems appropriate. The Monitoring Trustee 
shall be required to investigate and report on the Defendants' 
compliance with this Final Judgment and the Stipulation and Order, and 
Defendants' progress toward effectuating the purposes of this Final 
Judgment, including but not limited to reviewing (1) the implementation 
and execution of the compliance plan required by Section XI, and (2) 
any applications by the Acquirer for additional employees or assets 
under Paragraphs IV(F) and IV(H) respectively.
    C. Subject to Paragraph X(E) of this Final Judgment, the Monitoring 
Trustee may hire at the cost and expense of Defendants any agents, 
investment bankers, attorneys, accountants, or consultants, who shall 
be solely accountable to the Monitoring Trustee, reasonably necessary 
in the Monitoring Trustee's judgment. Any such agents or consultants 
shall serve on such terms and conditions as the United States approves, 
including confidentiality requirements and conflict of interest 
certifications.
    D. Defendants shall not object to actions taken by the Monitoring 
Trustee in fulfillment of the Monitoring Trustee's responsibilities 
under any Order of the Court on any ground other than the Monitoring 
Trustee's malfeasance. Any such objections by Defendants must be 
conveyed in writing to the United States and the Monitoring Trustee 
within ten (10) calendar days after the action taken by the Monitoring 
Trustee giving rise to Defendants' objection.
    E. The Monitoring Trustee shall serve at the cost and expense of 
Defendants, pursuant to a written agreement with Defendants and on such 
terms and conditions as the United States approves, including 
confidentiality requirements and conflict of interest certifications. 
The compensation of the Monitoring Trustee and any agents or 
consultants retained by the Monitoring Trustee shall be on reasonable 
and customary terms commensurate with the individuals' experience and 
responsibilities. If the Monitoring Trustee and Defendants are unable 
to reach agreement on the Monitoring Trustee's or any agents' or 
consultants' compensation or other terms and conditions of engagement 
within fourteen (14) calendar days of the appointment of the Monitoring 
Trustee, the United States may, in its sole discretion, take 
appropriate action, including making a recommendation to the Court. The 
Monitoring Trustee shall, within three (3) business days of hiring any 
agents or consultants, provide written notice of such hiring and the 
rate of compensation to Defendants and the United States.
    F. The Monitoring Trustee shall have no responsibility or 
obligation for the operation of Defendants' businesses.
    G. Defendants shall use their best efforts to assist the Monitoring 
Trustee in monitoring Defendants' compliance with their individual 
obligations under this Final Judgment and under the Stipulation and 
Order. The Monitoring Trustee and any agents or consultants retained by 
the Monitoring Trustee shall have full and complete access to the 
personnel, books, records, and facilities relating to compliance with 
this Final Judgment, subject to reasonable protection for trade 
secrets; other confidential research, development, or commercial 
information; or any applicable privileges. Defendants shall take no 
action to interfere with or to impede the Monitoring Trustee's 
accomplishment of its responsibilities.
    H. After its appointment, the Monitoring Trustee shall file reports 
semiannually, or more frequently as needed, with the United States and, 
as appropriate, the Court setting forth Defendants' efforts to comply 
with Defendants' obligations under this Final Judgment and under the 
Stipulation and Order. To the extent such reports contain information 
that the Monitoring Trustee deems confidential, such reports shall not 
be filed in the public docket of the Court.
    I. The Monitoring Trustee shall serve until the divestiture of all 
the Divestiture Assets is finalized pursuant to either Section IV or 
Section V of this Final Judgment, any agreement entered into pursuant 
to Paragraph IV(I) has expired, and until Thales' obligations pursuant 
to Paragraphs IV(F) and IV(H) have concluded, unless the United States, 
in its sole discretion, terminates earlier or extends this period.
    J. If the United States determines that the Monitoring 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 
Monitoring Trustee.

XI. PROTECTION OF CONFIDENTIAL INFORMATION

    A. Thales and Gemalto shall implement and maintain reasonable 
procedures to prevent the disclosure or use of Confidential Information 
for any purpose other than:
    (1) in connection with complying with this Final Judgment;
    (2) in connection with complying with regulatory, financial 
reporting, audit, legal, compliance, or similar administrative 
purposes; or
    (3) Defendants' use of Shared Intangible Assets as permitted by 
this Final Judgment.
    B. Any representative of Thales who possesses any Confidential 
Information shall disclose or use such information only to the extent 
necessary to perform activities authorized in Paragraph XI(A).
    C. Defendants shall implement procedures to prevent Confidential 
Information from being used or accessed by representatives of 
Defendants other than those with a need for such information in 
connection with the permitted uses set forth in Paragraph XI(A) (such 
procedures constituting a ``compliance plan''). Defendants' compliance 
plan shall include identification of an individual with primary 
responsibility for implementing the compliance plan, monitoring 
adherence to the compliance plan, taking measures against individuals 
who fail to adhere to the compliance plan, and developing instruction 
materials and providing instruction to Defendants' representatives 
relating to their obligations under this Section.

[[Page 8755]]

    D. Defendants shall, within twenty (20) business days of the entry 
of the Stipulation and Order, submit to the United States and the 
Monitoring Trustee a document setting forth in detail the compliance 
plan. Upon receipt of the document, the United States shall notify the 
Defendants within twenty (20) business days whether, in its sole 
discretion, it approves of or rejects the compliance plan. In the event 
that the compliance plan is rejected, the United States shall provide 
the reasons for the rejection. Defendants shall be given the 
opportunity to submit, within ten (10) business days of receiving a 
notice of rejection, a revised compliance plan. If Defendants cannot 
agree with the United States on a compliance plan, the United States 
shall have the right to request that this Court rule on whether the 
Defendants' proposed compliance plan fulfills the requirements of 
Section XI.
    E. Defendants shall:
    (1) furnish a copy of this Final Judgment and related Competitive 
Impact Statement within five (5) business days of entry of the Final 
Judgment to (a) each officer, director, and any other employee who 
possesses, will possess, or may receive Confidential Information;
    (2) furnish a copy of this Final Judgment and related Competitive 
Impact Statement to any successor to a person designated in Paragraph 
XI(C) upon assuming that position;
    (3) annually brief each person designated in Paragraph XI(C) on the 
meaning and requirements of this Final Judgment and the antitrust laws; 
and
    (4) obtain from each person designated in Paragraph XI(C), within 
ten (10) business days of that person's receipt of the Final Judgment 
and annually thereafter for five (5) years, a certification that he or 
she (a) has read and, to the best of his or her ability, understands 
and agrees to abide by the terms of this Final Judgment; (b) is not 
aware of any violation of the Final Judgment that has not been reported 
to the company; and (c) understands that any person's failure to comply 
with this Final Judgment may result in an enforcement action for civil 
or criminal contempt of court against each Defendant or any person who 
violates this Final Judgment; and
    (5) six (6) months from the Divestiture Closing Date and annually 
thereafter for five (5) years, furnish an affidavit to the United 
States and the Monitoring Trustee, certifying compliance with Section 
XI. For five (5) years following the Divestiture Closing Date, if 
violations of Section XI are found, affidavits describing such 
violations will be furnished to the United States and the Monitoring 
Trustee within five (5) days of the discovery of a violation.
    F. The provisions of this Section shall expire five (5) years after 
the Divestiture Closing Date.

XII. COMPLIANCE INSPECTION

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as any 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, including the 
Monitoring Trustee or any other agents and consultants 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 
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 
Section XI 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), for the purpose 
of securing compliance with this Final Judgment, or as otherwise 
required by law.
    D. If at the time that Defendants furnish information or documents 
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).

XIII. NOTIFICATION OF FUTURE TRANSACTIONS

    A. Unless such transaction has a value less than $10 million or is 
otherwise subject to the reporting and waiting period requirements of 
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 
15 U.S.C. Sec.  18a (the ``HSR Act''), Defendants, without providing 
advance notification to the United States, shall not directly or 
indirectly acquire any assets of or any interest, including any 
financial, security, loan, equity, or management interest, in any 
company that researches, develops, or manufactures GP HSM Products 
during the term of this Final Judgment.
    B. Such notification shall be provided to the United States in the 
same format as, and per the instructions relating to, the Notification 
and Report Form set forth in the Appendix to Part 803 of Title 16 of 
the Code of Federal Regulations as amended, except that the information 
requested in Items 5 through 8 of the instructions must be provided 
only about GP HSM Products and related services. Notification shall be 
provided at least thirty (30) calendar days prior to acquiring any such 
interest, and shall include, beyond what may be required by the 
applicable instructions, the names of the principal representatives of 
the parties to the agreement who negotiated the agreement, and any 
management or strategic plans discussing the proposed transaction. If 
within the 30-day period after notification, representatives of the 
United States make a written request for additional information, 
Defendants shall not consummate the proposed transaction or agreement 
until thirty (30) calendar days after submitting all such additional 
information. Early termination of the waiting periods in this Paragraph 
may be requested and, where appropriate, granted in the same manner as 
is applicable under the requirements and provisions of the HSR Act and 
rules promulgated thereunder. Section XIII shall be broadly construed 
and any ambiguity or uncertainty regarding the filing of notice under

[[Page 8756]]

Section XII shall be resolved in favor of filing notice.

XIV. NO REACQUISITION OF DIVESTITURE ASSETS

    Defendants may not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment.

XV. RETENTION OF JURISDICTION

    The Court retains jurisdiction to enable any party to this Final 
Judgment to apply to the 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.

XVI. ENFORCEMENT OF FINAL JUDGMENT

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including the right to seek an order 
of contempt from the 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 Defendants 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 the United States alleged was 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 
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 
Judgment against a Defendant, whether litigated or resolved prior to 
litigation, that Defendant agrees to reimburse the United States for 
the fees and expenses of its attorneys, as well as any other costs 
including experts' fees, incurred in connection with that enforcement 
effort, including in the investigation of the potential violation.

XVII. EXPIRATION OF FINAL JUDGMENT

    Unless the Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry, except that after 
five (5) years from the date of its entry, this 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 no longer is necessary or in the public interest.

XVIII. 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, 
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

Schedule 1

Shared Intangible Assets Transferred to Acquirer and Licensed Back to 
Defendants

    In each case the ``Field of Use for License-Back to Defendants`` is 
limited to the manner in which the listed asset is currently used, or 
currently under development for use.

                                                     Patents
----------------------------------------------------------------------------------------------------------------
                                                                                        Field of use for license-
              Title                    Patent/application No.          Jurisdiction        back to defendants
----------------------------------------------------------------------------------------------------------------
A method of data transfer, a       BR11201801525-44..............  Brazil.............  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       3013687.......................  Canada.............  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       20178000986.41................  China..............  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       17704057.3....................  European Patent      (1) Payment HSMs and
 method of controlling use of                                       Office.              their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       2018-540867...................  Japan..............  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       PCT/GB2017/050264.............  Patent Cooperation   (1) Payment HSMs and
 method of controlling use of                                       Treaty.              their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       10-2018-7025706...............  Republic of Korea..  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       1602088.5.....................  United Kingdom.....  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method of data transfer, a       16/075575.....................  United States......  (1) Payment HSMs and
 method of controlling use of                                                            their derived
 data and a cryptographic device.                                                        applications and (2)
                                                                                         encryption software
                                                                                         products (not including
                                                                                         key management).
A method and system of securely    GB2413880.....................  United Kingdom.....  Payment HSMs and their
 enforcing a computer policy.                                                            derived applications.

[[Page 8757]]

 
Cryptographic security module      GB2409387.....................  United Kingdom.....  Payment HSMs and their
 method and apparatus.                                                                   derived applications.
Secure transmission of data        GB2404535.....................  United Kingdom.....  Encryption software
 within a distributed computer                                                           products.
 system.
Secure transmission of data        US7266705.....................  United States of     Encryption software
 within a distributed computer                                      America.             products.
 system.
Controlling access to a resource   CA2400940.....................  Canada.............  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   EP1257892.....................  Switzerland........  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   EP1257892.....................  Germany............  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   EP1257892.....................  France.............  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   EP1257892.....................  United Kingdom.....  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   EP1257892.....................  Ireland............  Payment HSMs and their
 by a program using a digital                                                            derived applications.
 signature.
Controlling access to a resource   US7900239.....................  United States of     Payment HSMs and their
 by a program using a digital                                       America.             derived applications.
 signature.
----------------------------------------------------------------------------------------------------------------


                                                    Software
----------------------------------------------------------------------------------------------------------------
            Category                  Software               Field of use for license-back to defendants
----------------------------------------------------------------------------------------------------------------
External API...................  SmartCards........  Payment HSMs and their derived applications.
                                 TVD (Remote Admin)  Payment HSMs and their derived applications.
CodeSafe.......................  CodeSafe v2.......  Payment HSMs and their derived applications.
Remote Administration..........  JavaCard Applet...  Payment HSMs and their derived applications.
Solo XC Source.................  security-processor  Payment HSMs and their derived applications.
                                 signing--infra....  Payment HSMs and their derived applications.
----------------------------------------------------------------------------------------------------------------

Schedule 2

Shared Intangible Assets Retained by Thales and Licensed to Acquirer

                                Software
------------------------------------------------------------------------
                 Category                             Software
------------------------------------------------------------------------
Cipher Trust Monitor......................  Cipher Trust Monitor common
                                             code.
                                            Agate.
                                            Augite.
                                            Bauxite.
                                            Cordierite.
                                            Fabric core / Authorizer.
                                            Fabric core / building-block-
                                             template.
                                            Fabric core / crypto.
TD & Fabric Activities....................  Fabric core / protector.
                                            FIDO U2F.
                                            Granite.
                                            OpenID Connect Study.
                                            Phenakite.
                                            Pyrite.
                                            TLS Token Binding Study.
------------------------------------------------------------------------

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Thales S.A. and Gemalto 
N.V., Defendants.

Case No.: 1:19-cv-00569-BAH
Judge: Beryl A. Howell

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

    Defendant Thales S.A. (Thales) and Defendant Gemalto N.V. (Gemalto) 
entered into an agreement, dated December 17, 2017, pursuant to which 
Thales would acquire, by means of an all-cash tender offer, all of the 
outstanding ordinary shares of Gemalto for approximately $5.64 billion. 
The United States filed a civil antitrust Complaint on February 28, 
2019, seeking to enjoin the proposed acquisition. The Complaint alleges 
that the likely effect of this acquisition would be to substantially 
lessen competition in the provision of General Purpose (GP) Hardware 
Security Modules (HSMs) in the United States in violation of Section 7 
of the Clayton Act, 15 U.S.C. Sec.  18. This loss of competition likely 
would result in higher prices for GP HSMs as well as a reduction in 
quality, product support, and innovation.
    At the same time the Complaint was filed, the United States filed a 
Stipulation and Order and proposed Final Judgment, which are designed 
to eliminate the anticompetitive effects of the acquisition. Under the 
proposed Final Judgment, which is explained more fully below, 
Defendants are required to make certain divestures for the purpose of 
remedying the loss of competition in the U.S. market for GP HSMs that 
would have resulted from the merger. Under the terms of the Stipulation 
and Order, Defendants will take certain steps to ensure that the 
divested GP HSM Products business is operated as a competitively 
independent, economically viable and ongoing business concern, that 
will remain independent and uninfluenced by the consummation of the 
acquisition, 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

    Thales is an international company incorporated in France with its 
principal office in Paris. Thales is active globally in five main 
industries: (i)

[[Page 8758]]

aeronautics; (ii) space; (iii) ground transportation; (iv) defense; and 
(v) security. In 2017, it had global revenue of approximately $19.6 
billion, operations in fifty-six countries, and approximately 65,100 
employees. Thales eSecurity is a business unit of Thales that primarily 
encompasses three legal entities: (1) Thales eSecurity Inc. (based in 
the United States with offices in Plantation, Florida; San Jose, 
California; and Boston, Massachusetts); (2) Thales UK Ltd. (based in 
the United Kingdom); and (3) Thales Transport & Security HK Ltd. (based 
in Hong Kong). Thales eSecurity specializes in developing, marketing, 
and selling data security products, including but not limited to GP 
HSMs, payment HSMs, and encryption and key management software and 
hardware.
    Thales sells GP HSMs to customers worldwide, including government 
and commercial organizations throughout the United States. In 2008, 
Thales acquired nCipher, a company that specialized in cryptographic 
security and sold, among other things, GP HSMs under the brand name 
nCipher. After that acquisition, Thales changed the brand name of those 
GP HSMs to nShield. To resolve the United States' concerns in this 
matter, and pursuant to commitments made to the European Commission on 
November 7, 2018, Thales has agreed to divest its nShield business. As 
part of the commitments to the European Commission, Thales has already 
separated the nShield business and related assets and personnel from 
the rest of its businesses and appointed a hold separate manager whose 
responsibility it is to manage the nShield business as a distinct and 
separate entity from the businesses retained by Thales until the 
divestiture is completed. This new business unit is operating under the 
name nCipher Security.
    Gemalto is an international digital security company incorporated 
in the Netherlands with its principal office in Amsterdam. Gemalto is 
active globally in providing authentication and data protection 
technology, platforms, and services in five main areas: (i) banking and 
payment; (ii) enterprise and cybersecurity; (iii) government; (iv) 
mobile; and (v) machine-to-machine Internet of Things. In 2017, Gemalto 
had global revenue of approximately $3.7 billion, operations in forty-
eight countries, and approximately 15,000 employees. Gemalto develops, 
markets, and sells GP HSMs, as well as other security solutions and 
services, including but not limited to payment HSMs and encryption and 
key management software and hardware. In the United States, Gemalto 
sells its products and services primarily through SafeNet, Inc. (based 
in Belcamp, Maryland), SafeNet Assured Technologies, LLC (based in 
Abingdon, Maryland), and Gemalto Inc. (based in Austin, Texas). Gemalto 
sells GP HSMs to customers worldwide, including government and 
commercial organizations throughout the United States, under the brand 
name SafeNet Luna.
    The proposed acquisition of Gemalto by Thales, as initially agreed 
to by Defendants on December 17, 2017, would lessen competition 
substantially in the U.S. market for GP HSMs. This acquisition is the 
subject of the Complaint and proposed Final Judgment filed by the 
United States on February 28, 2019.

B. The Competitive Effects of the Transaction on the Market for GP HSMs

    GP HSMs are tamper-resistant hardware environments for secure 
encryption processing and key management. They are most frequently 
included as components of complex encryption solutions used by 
government and private organizations to safeguard their most sensitive 
data. The universe of sensitive electronic data has been expanding 
rapidly and relates to a wide range of subjects, such as personally 
identifiable information, health records, financial information, tax 
records, trade secrets, software code, and other confidential 
information. Inappropriate use, theft, corruption, or disclosure of 
this data could result in significant harm to an organization's 
customers or constituents and the organization itself.
    Organizations increasingly rely on encryption as a crucial 
component of the security measures implemented to safeguard sensitive 
data from internal and external threats. Encryption is a process that 
converts readable data (plain text) into an unreadable format (cipher 
text) using an algorithm and an encryption key. Decryption is the 
reverse of encryption, converting cipher text back to plain text. 
Encryption algorithms are based on highly complex math and are often 
standardized and open source.
    Encryption keys consist of a randomly generated series of numbers. 
Because encrypted data is virtually impossible to decipher using 
today's technology without the encryption key, attackers who want 
unauthorized access to sensitive data generally focus their efforts on 
obtaining those encryption keys. With the right key, an attacker can 
freely access an organization's sensitive data. Conversely, a lost or 
corrupted key could make encrypted data unrecoverable by the 
organization. Organizations therefore must implement processes that 
safeguard against improper use of the encryption keys while 
simultaneously ensuring they are readily available when required for 
authorized use.
    GP HSMs provide the most secure way for organizations to 
effectively manage and protect their encryption keys, and many 
organizations use them to protect their most sensitive data. Key 
management functionality is also available from software-based 
solutions. While these software solutions are generally less expensive 
than GP HSMs, GP HSMs are more secure. GP HSMs provide additional 
security, in part, because they are isolated from the rest of the 
organization's IT system. Use of GP HSMs is often required by 
regulations, industry standards, or an organization's auditors or 
security policies.
    GP HSMs are typically validated by independent testing 
organizations to confirm they meet certain specified levels of 
security; software-based key systems, by contrast, are not able to meet 
the most stringent levels of security.
    Thales and Gemalto sell GP HSMs and related services directly to 
end-user organizations and through resellers who often combine the GP 
HSMs with additional security products or services. Thales and Gemalto 
also sell GP HSMs to cloud service providers (CSPs) such as Amazon Web 
Services and Microsoft Azure, who then sell GP HSM services, or HSM-as-
a-service (HSMaaS), to their cloud customers. There are, however, many 
organizations that are reluctant to use HSMaaS because they want more 
control over the security of their data. Even if an organization 
chooses to use HSMaaS, it may also require an on-premises GP HSM to 
provide an additional layer of encryption security.
    GP HSMs typically must be integrated into or configured to operate 
within an organization's existing IT environment. An organization needs 
assurance that a GP HSM will be an effective component of what may be 
an already complex data security infrastructure. Because of this, the 
GP HSM sales process typically includes a comprehensive exchange of 
information between the potential customer organization and GP HSM 
supplier.
    Once an organization has installed a GP HSM into its IT 
infrastructure and is using it to protect its keys and to provide a 
secure data encryption environment, any breakdowns or malfunctions in 
the GP HSM could not only compromise the sensitive data but

[[Page 8759]]

also jeopardize the organization's ability to perform day-to-day tasks 
that are necessary for the organization to carry out its business. 
Post-sales customer support and service are therefore essential. Many 
customers will not even consider a potential GP HSM supplier who has 
not established a strong reputation for providing quality GP HSMs and 
continuous and effective post-sales service and support.
    Thales and Gemalto are the two leading providers of GP HSMs in the 
United States, with market shares of approximately 30% and 36%, 
respectively, and a combined market share of approximately 66%. 
Together, Thales and Gemalto dominate the GP HSM market in the United 
States. As originally proposed, Thales' acquisition of Gemalto would 
substantially increase market concentration in an already highly 
concentrated market. Acquisitions that reduce the number of competitors 
in already concentrated markets tend to to substantially lessen 
competition.
    Thales' proposed acquisition of Gemalto likely would substantially 
lessen competition and harm customers in the U.S. GP HSM market by 
eliminating head-to-head competition between the two leading suppliers 
in the United States. Thales and Gemalto are each other's closest 
competitors for GP HSMs. Thales and Gemalto regularly approve 
significant discounts on GP HSMs when competing against each other. 
Thales and Gemalto both have strong reputations for high-quality post-
sales service and support. Competition between the two companies has 
also spurred innovation in the past. Thales' proposed acquisition of 
Gemalto would eliminate this head-to-head competition and reduce 
innovation, in addition to significantly increasing concentration in a 
highly concentrated market. The acquisition likely would result in 
higher prices, lower quality, and reduced supplier choices for 
customers.
    It is unlikely that any firm would enter the market for GP HSM 
sales to customers in the United States in a manner sufficient to 
defeat the likely anticompetitive effects of the proposed acquisition. 
Successful entry in the development, marketing, sale, and service of GP 
HSMs would be difficult, time-consuming, and costly.
    Any new entrant would be required to expend significant time and 
capital to design and develop a series of GP HSMs that are at least 
comparable to Thales' and Gemalto's GP HSM product lines in terms of 
functionality and the ability to interoperate with a wide range of 
encryption solutions and IT resources. Moreover, a new entrant, as well 
as any existing foreign-based GP HSM provider seeking to expand and 
become a viable competitor in the supply of GP HSMs for use by 
individual organizations in the United States, would need to spend 
significant time and effort to demonstrate its ability to provide high-
quality GP HSMs and continuous, high-quality post-sales service in the 
United States. It is unlikely that any such entry or expansion effort 
would produce an economically viable alternative to the merged firm in 
time to counteract the competitive harm likely to result from the 
proposed transaction.
    As a result of its acquisition of Gemalto, as originally proposed, 
Thales would have emerged as the clearly dominant provider of GP HSMs 
in the United States with the ability to exercise substantial market 
power, increasing the likelihood that Thales could unilaterally 
increase prices or reduce its efforts to improve the quality of its 
products and services.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture requirement of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition in the market 
for GP HSMs by establishing a new, independent, and economically viable 
competitor. The proposed Final Judgment requires Thales, within thirty-
five (35) calendar days after the filing of the Complaint, or five (5) 
days after notice of the entry of the Final Judgment by the Court, 
whichever is later, to divest, as a viable ongoing business, Thales' GP 
HSM Products business. This includes all tangible and intangible assets 
primarily related to the production, operation, research, development, 
sale, or support of any Thales GP HSM Product.
    Further, the proposed Final Judgment specifies the manner in which 
shared intangible assets shall be divested. These are assets that are 
used or have been under development for use as of January 7, 2019, 
which was the date Thales' GP HSM Products business was formally 
separated from the rest of Thales, in relation to both (i) Thales' GP 
HSM Products business and (ii) Thales' business relating to products 
other than GP HSM Products.
    The proposed Final Judgment provides that, in the event that 
government approvals needed to complete the divestiture have been 
timely filed but remain outstanding at the end of the permitted 
divesture period, additional, limited extensions may be granted to 
allow Defendants and the acquirer time to obtain those approvals.
    The proposed Final Judgment also provides that Thales must provide 
the Acquirer relevant information to allow the Acquirer to evaluate 
whether to make offers of employment to Thales employees, and provides 
that Thales must not interfere in any hiring process. Under the terms 
of the proposed Final Judgment, the Acquirer may seek to hire 
additional employees up to 90 days after they acquire the divested 
assets. Thales may not re-hire employees hired by the Acquirer for one 
year after the divestiture is complete, and may not specifically 
solicit any of those individuals for two years.
    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 a viable, ongoing business that can 
compete effectively to develop, service, and sell GP HSMs to customers 
in the United States. Defendants must take all reasonable steps 
necessary to accomplish the divestiture quickly and shall cooperate 
with prospective purchasers. The proposed Final Judgment also includes 
procedures pursuant to which the Acquirer may apply to the United 
States for the right to acquire additional assets that would be 
materially useful to the divested business, or hire specific additional 
personnel, for a limited time after the divesture date.
    The proposed Final Judgment provides that Defendants must ensure 
that their products continue to interface and interoperate with the 
divested GP HSM Products for at least two years. This interoperability 
must be provided at cost, and on the same quality (which may be 
measured, for example, by reference to speed and frequency of content 
transmission, lag time, uptime, database or API synchronization, or 
data fields transmitted, exposed, or used) and terms that were provided 
at any time since January 1, 2017. Should the Acquirer determine that a 
third year of interoperability is necessary, it may request that this 
provision be extended an additional year.
    The proposed Final Judgment also provides that Thales must provide 
certain transition services to Acquirer, at the Acquirer's request for 
a period of one year. The acquirer may request that the United States 
allow the period of these transition services to be extended for 
another year if necessary.
    The proposed Final Judgment provides that Thales must use its best 
efforts to ensure that all contracts involving GP HSM Products be 
transferred to the Acquirer. When contracts involve both GP HSM 
Products and other products, the

[[Page 8760]]

portions of the contracts relating to GP HSM Products will be conveyed. 
If Thales is unable to convey any of these contractual rights, the 
proposed Final Judgment provides that it will use its best efforts to 
make the Acquirer whole.
    The proposed Final Judgment also provides that Thales will grant 
the Acquirer a covenant not to sue for breach, in the field of GP HSMs, 
of any patent held by Thales.
    The proposed Final Judgment provides that the United States may 
apply to the Court for appointment of a Monitoring Trustee with the 
power and authority to investigate and report on the parties' 
compliance with the terms of the Final Judgment and Stipulation and 
Order filed with the Court for entry during the pendency of the 
divestiture. The Monitoring Trustee's duties would include reviewing: 
(1) the implementation and execution of a compliance plan to prevent 
any misuse of confidential information relating to the divested 
business; and (2) any application by the Acquirer for additional 
employees or assets.
    The Monitoring Trustee will not have any responsibility or 
obligation for the operation of the parties' businesses. The Monitoring 
Trustee will serve at Defendants' expense, on such terms and conditions 
as the United States approves, and Defendants must assist the trustee 
in fulfilling its obligations. The Monitoring Trustee will file 
semiannual reports and shall serve until the provisions regarding 
employees, additional assets, and transition services have expired.
    In the event that Defendants do not accomplish the divestiture 
within the periods prescribed in the proposed Final Judgment, the 
proposed Final Judgment provides that the Court will appoint a 
Divestiture Trustee selected by the United States to effect the 
divestiture. Defendants will pay all costs and expenses of any such 
trustee. After his or her appointment becomes effective, the 
Divestiture 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 Divestiture 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 Divestiture Trustee's 
appointment.
    The proposed Final Judgment contains provisions to require, for 
five years, that Defendants refrain from using any Confidential 
Information that they possess about the GP HSM Products business, 
except for certain permitted uses. Defendants must prepare a compliance 
plan to promote the success of these provisions and regularly report to 
the Division whether there has been a breach.
    The proposed Final Judgment also contains provisions that require 
Defendants to report to the Division subsequent transactions that are 
related to GP HSMs, if those transactions otherwise would not be 
reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 
1976, as amended, 15 U.S.C. Sec.  18a.
    The proposed Final Judgment also contains provisions designed to 
promote compliance and make the enforcement of Division consent decrees 
as effective as possible. Paragraph XVI(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 that 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 XVI(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 XVI(C) of the proposed Final Judgment 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 
XIV(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, or costs incurred in 
connection with any enforcement effort, including the investigation of 
the potential violation.
    Finally, Section XVII of the proposed Final Judgment provides that 
the Final Judgment shall expire ten (10) years from the date of its 
entry, except that after five (5) years from the date of its entry, 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 or 
in the public interest.
    The divestiture provisions of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition in the 
provision of GP HSMs.

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

[[Page 8761]]

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 United States Department of Justice, Antitrust Division's internet 
website and, under certain circumstances, published in the Federal 
Register.
    Written comments should be submitted to:

Aaron Hoag
Chief, Technology and Financial Services Section
Antitrust Division
United States Department of Justice
450 Fifth Street, N.W., Room 7100
Washington, DC 20530

The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against Thales' acquisition of 
Gemalto. The United States is satisfied, however, that the divestiture 
of assets described in the proposed Final Judgment will preserve 
competition for the provision of GP HSMs in 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 60-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). 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). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) 
(explaining that the ``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanism to enforce the final judgment 
are clear and manageable'').
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations in the government's complaint, whether the decree is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3. Instead:

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

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\1\
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    \1\ See also BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass'').
---------------------------------------------------------------------------

    In determining whether a proposed settlement is in the public 
interest, a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not require 
that the remedies perfectly match the alleged violations.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d 
at 74-75 (noting that a court should not reject the proposed remedies 
because it believes others are preferable and that room must be made 
for the government to grant concessions in the negotiation process for 
settlements); 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 government's prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case''). The ultimate question is 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.' '' Microsoft, 56 F.3d at 1461 (quoting United States v. 
Western Elec. Co., 900 F.2d 283, 309 (D.C. Cir. 1990)). To meet this 
standard, the United States ``need only provide a

[[Page 8762]]

factual basis for concluding that the settlements are reasonably 
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp. 
2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public 
interest' is not to be measured by comparing the violations alleged in 
the complaint against those the court believes could have, or even 
should have, been alleged''). Because the ``court's authority to review 
the decree depends entirely on the government's exercising its 
prosecutorial discretion by bringing a case in the first place,'' it 
follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Microsoft, 56 
F.3d at 1459-60.
    In its 2004 amendments,\2\ 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 76 (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). This language explicitly wrote into the statute 
what Congress intended when it first 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. 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 76. See also 
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''); S. Rep. No. 93-298 93d 
Cong., 1st Sess., at 6 (1973) (``Where the public interest can be 
meaningfully evaluated simply on the basis of briefs and oral 
arguments, that is the approach that should be utilized.'').
---------------------------------------------------------------------------

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

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: February 28, 2019

Respectfully submitted,

Kelly M. Schoolmeester
(D.C. Bar  1008354)

United States Department of Justice, Antitrust Division, Technology 
and Financial Services Section, 450 Fifth Street, N.W., Washington, 
DC 20530, Phone: (202) 598-2693, Facsimile: (202) 616-8544, Email: 
kelly.schoolmeester@usdoj.gov.

[FR Doc. 2019-04293 Filed 3-8-19; 8:45 am]
 BILLING CODE 4410-11-P