Download the
WordPerfect version
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) Civil No. 83-1298 (HHG)
v. )
)
GTE CORPORATION, )
)
Defendant. )
______________________________)
RESPONSE OF THE UNITED STATES IN
OPPOSITION TO GTE'S MOTION TO TERMINATE THE DECREE
ANNE K. BINGAMAN
Assistant Attorney General
DAVID TURETSKY
Senior Counsel to the
Assistant Attorney General
WILLARD K. TOM
Counselor to the Assistant
Attorney General
DONALD J. RUSSELL NANCY C. GARRISON
Chief, Telecommunications MARK S. POPOFSKY
Task Force Attorneys
LAWRENCE M. FRANKEL Antitrust Division
Attorney U.S. Department of Justice
10th & Pennsylvania Ave., N.W.
Antitrust Division Washington, D.C. 20530
U.S. Department of Justice (202) 514-1531
Washington, D.C. 20001
June 5, 1995
Page I
TABLE OF CONTENTS
STATEMENT.........................................................
2
SUMMARY OF ARGUMENT..............................................
7
ARGUMENT.....................................................
9
I. GTE AGREED TO A DECREE THAT DOES NOT TERMINATE
AUTOMATICALLY UPON DIVESTITURE OF SPRINT ..............
9
II. ABSENT A SHOWING THAT THE DECREE'S PURPOSES HAVE BEEN
FULLY ACHIEVED, DIVESTITURE OF THE ACQUIRED ASSETS DOES
NOT WARRANT TERMINATION OF A DECREE ENTERED TO REMEDY
AN ALLEGED CLAYTON 7 VIOLATION ........................16
III. GTE HAS NOT SHOWN THAT THIS DECREE'S PURPOSES HAVE BEEN
FULLY ACHIEVED ........................................25
A. The GTE Decree Remedies Anticompetitive Effects of
Vertical Integration by This Local Telephone
Monopolist .......................................25
B. GTE Has Not Shown That the Purpose of the
Interexchange Restrictions Has Been Fully Achieved
by Divestiture of Sprint .........................33
C. GTE Has Not Shown That the Purpose of the
Information Services Restrictions Has Been Fully
Achieved by the FCC's Rules ......................36
CONCLUSION...................................................37
Page ii
TABLE OF AUTHORITIES
CASES
American Horse Protection Association v.
Watt, 694 F.2d 1310 (D.C. Cir. 1982) ...................22
Berger v. Heckler, 771 F.2d 1556 (2d Cir.
1985) ......................................................23
Board of Education v. Dowell, 498 U.S. 237 (1991)....passim
FTC v. National Lead Co., 352 U.S. 419 (1957) ........19
Ford Motor Co. v. United States, 405 U.S. 562
(1972) .....................................................19
Freeman v. Pitts, 502 U.S. 467 (1992).................23,24,25
Hartford-Empire Co. v. United States, 323 U.S.
386 (1945), modified, 324 U.S. 570 (1945) ............18
International Salt Co. v. United States, 332
U.S. 392 (1947) ............................................18,19
Kozlowski v. Couglin, 871 F.2d 241 (2d Cir.
(1989) .....................................................22
Local No. 93, International Association of
Firefighters v. Cleveland, 478 U.S. 501 (1986) .........22
Milliken v. Bradley, 418 U.S. 717 (1974) .............23,25
National Society of Professional Eng'rs v.
United States, 435 U.S. 679 (1978) .....................18,19
Rufo v. Inmates of Suffolk Co. Jail, 502 U.S.
367 (1992) .................................................7,16,24,31
Swann v. Charlotte-Mecklenburg Board of
Education, 402 U.S. 1 (1971) ...........................24
Swift & Co. v. United States, 276 U.S. 311
(1928) .....................................................21,23
_________________________________
*Authorities upon which we chiefly reply are marked with
asterisks.
United States v. Agri-Mark, 156 F.R.D. 87
(D. Vt. 1994) ..............................................10,20
Page iii
United States v. American Cyanamid Co., 598
F. Supp. 1516 (S.D.N.Y. 1984) ..............................10,11,20
United States v. American Telephone &
Telegraph Co., 552 F. Supp. 131, aff'd sub
nom. Maryland v. United States, 483
U.S. 1001 (1983) ..........................................18
United States v. Armour & Co., 402 U.S. 673
(1971) .....................................................13
*United States v. GTE Corp., 603 F. Supp. 730
(D.D.C. 1984) passim
United States v. ITT Continental Baking Co.,
420 U.S. 223 (1975) ........................................9
United States v. National Association of
Broadcasters, 553 F. Supp. 621 (D.D.C.
1982) ......................................................9
*United States v. United Shoe Machinery Corp.,
391 U.S. 244 (1968) passim
United States v. United States Gypsum Co.,
340 U.S. 76 (1950) .........................................18,19
United States v. Western Electric Co., 154
F.R.D. 1 (D.D.C. 1994) .....................................13
United States v. Western Electric Co.,
158 F.R.D. 211 (D.D.C. 1994), aff'd,
46 F.3d 1198 (1995) ........................................17
United States v. Western Electric Co., 797
F.2d 1082 (D.C. Cir. 1986), cert. denied,
480 U.S. 922 (1987) ........................................9,13
United States v. Western Electric Co., 894
F.2d 1387 (D.C. Cir. 1990) .................................17
United States v. Western Electric Co., 900
F.2d 283 (D.C. Cir.), cert. denied, 498
U.S. 911 (1990) ............................................36
United States v. Western Electric Co., 46
F.3d 1198 (D.C. Cir. 1995) .................................10,17
Page iv
Zenith Radio Corp. v. Hazeltine Research,
Inc., 395 U.S. 100 (1969) ..............................19,33
MISCELLANEOUS
Fed. R. Civ. P. 60(b) passim
119 Cong. Rec. S13926 (Daily ed. July 18, 1973).............11
Antitrust Div., U.S. Dep't of Justice, Antitrust Division
Manual (2d ed. 1987) ..............................10
Page 1
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) Civil No. 83-1298 (HHG)
v. )
)
GTE CORPORATION, )
)
Defendant. )
______________________________)
RESPONSE OF THE UNITED STATES IN
OPPOSITION TO GTE'S MOTION TO TERMINATE THE DECREE
Defendant GTE Corporation ("GTE") has moved to terminate the
consent decree entered against it in this antitrust case. GTE
seeks termination "as a matter of law," on the sole grounds (1)
that there can be no continuing restrictions on its interexchange
services because it has "divested itself of all the asset whose
acquisition gave rise to the government's sole legal
claim with respect to interexchange services," i.e., GTE Sprint
and certain other assets, and (2) that the remaining information
services provisions have been "superseded by federal regulation."
Memorandum of GTE Corporation in Support of Motion To Terminate
the Decree, at 1 (Apr. 13, 1995) ("GTE Mem.") (GTE's emphasis).
GTE claims that its motion "requires no factual inquiry or
assessment of the competitive conditions of the marketplace,"
id., and it offers none.
The United States opposes GTE's motion. The decree's
interexchange provisions do not terminate automatically upon
divestiture of Sprint, and GTE is not entitled to termination
Page 2.
under Fed. R. Civ. P. 60(b) because it has not shown that the
decree's purpose has been fully achieved.
STATEMENT
1. In 1983, the United States filed an antitrust complaint
against GTE. The GTE complaint, which closely paralleled the
theory of the then recently-settled AT&T case, was premised on
the structure of the telecommunications industry in 1983 and the
resulting incentives and opportunities for anticompetitive
conduct by local exchange carriers affiliated with interexchange
carriers, or information service providers.1
As the complaint explained, a "partnership" among AT&T's
Long Lines Department, AT&T's local operating company
subsidiaries, the Bell Operating Companies ("BOCs"), and other
local operating companies, including GTE's subsidiaries, the
General Telephone Operating Companies ("GTOCs"), was the
principal provider of interexchange services. Complaint � In
addition, since 1971, other common carriers ("OCCs"), not members
of the partnership, had been authorized by the FCC to provide
interexchange service. �. The BOC and GTOC operating
companies, however, controlled facilities necessary to originate
and terminate interexchange calls and, therefore, had "the power
to control the price of, and exclude competition for, the
provision of exchange access to interexchange carriers." �.
Page 3
Further, the complaint alleged, GTE and the GTOCs had an
incentive to misallocate costs and cross-subsidize unregulated
services in order to evade rate-of-return regulation. �.
Accordingly, the complaint alleged, vertical integration by
GTE's local operating companies into the interexchange business
had two anticompetitive effects:
[First, s]ince the firm with monopoly control
over exchange access is simultaneously
competing with non-integrated firms for
interexchange telecommunications services,
non-integrated firms are forced to depend on
the local operating company acting against
its own economic interest to provide equal
exchange access to competitors. Second,
. . . vertical integration gives [the
operating company] the incentive and ability,
through cross-subsidization, to eliminate or
substantially impair competition from non-
integrated competitors.
�. Indeed, the complaint alleged that the members of the AT&T
partnership, including GTE, had used their control of "essential
local switching and transmission facilities" to discriminate
against OCCs and prevent OCCs from competing with the
interexchange services provided by the partnership. 抖13, 14,
15.
The complaint also alleged that provision of information
services in connection with regulated exchange services presented
similar threats to competition, and that GTE had begun to offer
information services. �.
The complaint further alleged that GTE had entered into an
agreement to acquire "various telecommunications enterprises of
SP [Southern Pacific], including SPCC [Southern Pacific
Page 4
Communications Company] and SPSC [Southern Pacific Satellite
Company]." �. At the time of the complaint, SPCC was an OCC
and "the second largest interexchange carrier . . . other than
the [AT&T] partnership, in the United States." �.
Because of the potential for abuse of the local exchange
monopoly, the complaint alleged that the effect of GTE's
acquisition of SPCC and SPSC "may be substantially to lessen
competition in [interexchange telecommunications] in violation of
Section 7 of the Clayton Act," �, and that "GTE's provision of
information services creates a substantial probability of
monopolization in the provision of information services, in
violation of Section 2 of the Sherman Act," �. The complaint
sought an injunction to prohibit GTE from acquiring the
telecommunications enterprises of SP, to prohibit the GTOCs from
providing information services, and to provide other appropriate
relief. 禫I.
2. A proposed consent decree to settle the case was filed
simultaneously with the complaint. As the United States'
Competitive Impact Statement and the parties' responses to public
comments and arguments to the Court in the Tunney Act proceeding
explained, the GTE decree addressed the same competitive concern
as the AT&T decree -- abuse of local telephone bottlenecks. The
GTE decree did not prohibit GTE from acquiring SPCC and SPSC or
providing interexchange services or information services, but it
imposed a variety of conditions designed to prevent GTE from
abusing its local exchange monopolies to impair competition.
Page 5
Section V(A) and (B) required the GTOCs to provide equal access
to all interexchange carriers and information service providers;
sections IV and V(C) required strict structural separation
between the GTOCs and all GTE interexchange services, whether or
not provided through the acquired entities; and section V(D)
prohibited the GTOCs from providing information services, except
through a separate subsidiary or division.2
The Court approved the proposed decree. United States v.
GTE Corp., 603 F. Supp. 730 (D.D.C. 1984) ("GTE Decree
Op.").3 It found that the decree (with
certain modifications to which the parties consented) was "in the
public interest," because it would "adequately prevent GTE from
engaging in the anticompetitive activities alleged in the
complaint and . . . open up the relevant markets to competition."
Id. at 753. In reaching this conclusion, the Court expressly
noted that the GTE decree and the AT&T decree "have a common
purpose: to prevent the defendant companies from impeding
competition, by the use of local
Page 6
telecommunications monopoly bottlenecks, in markets where such competition is
technologically
feasible." Id. at 752.4
3. GTE owned and operated the acquired interexchange
businesses for twelve years.5 In a series of transactions
between 1986 and 1992, GTE divested its interests in Sprint and
Spacenet; it represents that it no longer has any ownership
interest (aside from minor pension fund investments) or
involvement in the affairs of Sprint or Spacenet. See GTE Mem.
at 9-10, App. A 抖2, 3. Shortly thereafter, GTE requested that
the Department of Justice consent to termination of the decree in
light of the divestiture and the Federal Communication
Commission's adoption of regulations for local exchange carriers'
provision of information services. The Department asked GTE to
provide documents and information relevant to its claim that, in
light of these developments, there is no continuing need for the
decree restrictions. The Department is in the process of
analyzing this information, and also has informed GTE that it
would consider any request for an appropriate modification.
In addition, the Department considered whether GTE's
divestiture of Sprint requires termination of the decree as a
matter of law without regard to potential competitive
Page 7..
consequences. Concluding that it does not, the Department
informed GTE that the United States would oppose a motion for
termination on that ground.
GTE filed its motion on April 13, 1995.6
SUMMARY OF ARGUMENT
The decree to which GTE consented contains no express or
implied provision for automatic termination in the event GTE
divests Sprint. Accordingly, GTE's motion for termination is
governed by the equitable principles embodied in Fed. R. Civ. P.
60(b).
These principles mandate that an antitrust consent decree
"may not be changed in the interest of the defendants if the
purposes of the litigation as incorporated in the decree . . .
have not been fully achieved." United States v. United Shoe
Machinery Corp., 391 U.S. 244, 248 (1968); Rufo v. Inmates
of Suffolk Co. Jail, 502 U.S. 367, 379-80 (1992); Board of
Education v. Dowell, 498 U.S. 237, 247 (1991). Contrary to
GTE's contention (Mem. at 2) there is no legal rule requiring
that "provisions in a consent decree that are predicated on
remedying an allegedly unlawful acquisition must be terminated
upon divestiture of the acquired assets" without inquiry as to
competitive conditions. A decree in a section 7 case should
prevent or remedy the anticompetitive consequences of the
particular transaction challenged in the complaint; it also may
Page 8
contain provisions to protect the public from similar threats to
competition. When a decree providing such relief has been
entered as a final judgment, the court retains the power to
enforce it.
GTE has not shown that the purposes of the decree entered in
this case have been fully achieved. As not only the United
States but GTE itself emphasized throughout the Tunney Act
proceedings, and as the Court expressly found, the GTE decree's
purpose was the same as that of the AT&T decree: to prevent
abuse of local telephone exchange monopolies to impair
competition in interexchange services and information services.
To implement this purpose, the parties agreed to restrictions
that provided significant prophylactic relief that addressed, but
was not confined to, GTE's relationship with Sprint. The
decree's equal access provisions prohibited discrimination in
favor of any interexchange carrier, and its structural separation
provisions precluded future vertical integration by the GTOCs as
well as integration with Sprint.
GTE has not shown that the potential anticompetitive effects
of its integration into interexchange services have been
eliminated by its divestiture of Sprint. GTE does not claim that
the GTOCs' local exchange monopolies have been eliminated. Nor
has GTE shown that, absent the decree restrictions, it would lack
the incentive and ability to use its control of the GTOCs to
favor its own interexchange services and impede interexchange
competition. Further, the severance of GTE's relationship with
Page 9.....
Sprint does not necessarily eliminate the effects of their 12-
year affiliation. Nor has GTE presented evidence that it will
not, in the future, acquire interexchange stock or assets, or
that such acquisitions would not require the decree's safeguards.
As to information services, GTE has made no showing that the
administrative regulations on which it relies provide safeguards
equivalent to those of the decree. Thus, GTE has failed to
establish that the decree's purposes have been fully achieved,
and it is not entitled to termination.
ARGUMENT
I. GTE AGREED TO A DECREE THAT DOES NOT TERMINATE
AUTOMATICALLY UPON DIVESTITURE OF SPRINT
GTE's first argument (Mem. at 19-30), in essence, is that
the decree must be construed to terminate automatically if GTE
divests Sprint. Questions of decree construction turn on the
language of the decree, considered in light of the "aids to
construction" provided by the parties' contemporaneous statements
and surrounding circumstances. See United States v. ITT
Continental Baking Co., 420 U.S. 223, 238 (1975); United States
v. Western Elec. Co., 797 F.2d 1082, 1089 (D.C. Cir. 1986),
cert. denied, 480 U.S. 922 (1987) ("Out-of-Region Exchange
Services").
1. Many antitrust consent decrees provide that they will
terminate a specified number of years after entry, or on the
occurrence of specified events. See, e.g., United States v.
Nat'l Ass'n of Broadcasters, 553 F. Supp. 621, 627 (D.D.C. 1982)
(antitrust consent decree "shall remain in effect until ten (10)
years from the date of entry"); see generally Antitrust Div.,
Page 10....
U.S. Dep't of Justice, Antitrust Division Manual at IV-76 (2d
ed. 1987) ("Consent Decree Standard Provisions" provide that
"judgment will expire on the tenth anniversary of its date of
entry or, with respect to any particular provision, on any
earlier date specified"). Decree restrictions not covered by
express termination provisions are construed not to expire
automatically, but to continue in force until modified or
terminated by the decree court under Rule 60(b), as conditions
warrant. See United States v. Western Elec. Co., 46 F.3d 1198,
1202-04 (D.C. Cir. 1995) ("AT&T-McCaw Appeal"); United States v.
American Cyanamid Co., 598 F. Supp. 1516, 1519, 1522-25 (S.D.N.Y.
1984) (decree provisions perpetual on their face may be
terminated only as specified in decree or pursuant to court's
inherent modification powers).7 In many cases, divestiture will
be found sufficient to warrant termination of a section 7 decree
upon an appropriate factual showing under Rule 60(b). E.g.,
Cyanamid, 598 F. Supp. at 1516; United States v. Agri-Mark, 156
F.R.D. 87 (D. Vt. 1994). But that is not necessarily the case
and does not mean that section 7 decrees must be construed as
Page 11..
providing automatic termination upon divestiture.8
There is no "natural understanding in �cases" that consent
decrees terminate automatically upon divestiture, as GTE claims
(Mem. at 14, 22).9
2. This decree contains no express provision for automatic
termination in the event GTE divests Sprint, and GTE does not
assert that it does. There are several automatic termination
provisions in the GTE decree, but none of them provides for
termination if GTE divests Sprint. Most significantly, Section X
Page 12
provides that the entire decree "shall expire if GTE no longer
provides exchange or exchange access services pursuant to any
federal or state regulation." This provision confirms that the
parties did not agree to automatic termination in any other
event, presumably because there likely would be a continuing
justification for the decree as long as GTE was a provider of
such local exchange service.
The GTE decree also contains more limited automatic
termination provisions. Under section VI(A), the requirement
that GTE not acquire an interest in any interexchange carrier
without first obtaining approval of the Department or the Court,
applies only "[f]or ten (10) years after the effective date of
this Final Judgment." And, Section V(D)(3) provides that the
restrictions on GTOC provision of information services "shall
expire . . . whenever and to the extent that a BOC is relieved of
the provisions of Section II(D) of [the AT&T decree]." Like
Section X, these specific provisions support the conclusion that,
with these exceptions, the parties agreed and intended that
the GTE decree restrictions would continue in effect unless and
until terminated by the Court under Rule 60(b).
3. Sections III, V(D)(3) and VII(B) of the decree do not
provide that the decree terminates if GTE divests Sprint. Nor,
contrary to GTE's contention (Mem. at 22-27), do these sections
indicate that the parties had any agreement or understanding to
that effect. The decree does not provide for automatic
termination upon divestiture, and it "must be construed as it is
Page 13...
written." United States v. Armour & Co., 402 U.S. 673, 682
(1971). Even if the parties failed to consider a particular
factual circumstance, that circumstance is not exempt from the
plain language of the decree. See United States v. Western Elec.
Co., 154 F.R.D. 1, 7 (D.D.C. 1994) ("AT&T-McCaw I"); Out-of-
Region Exchange Services, 797 F.2d at 1090-91.
a. Section III, the successors and assigns provision,
states that the decree "shall not apply to any GTOC, or any
portion thereof, as to which GTE may . . . dispose of its
interests . . . to any nonaffiliated person." Neither the CIS
nor either party's response to comments discusses this exemption,
but its effect is to allow GTE to transfer portions of its
exchange businesses to other carriers that had not consented to,
and might be unwilling to assume, decree obligations.10
In any event, section III neither provides nor implies that the
decree ceases to apply to GTE and the GTOCs owned by GTE if GTE
divests Sprint.
Page 14
b. Section V(D)(3) provides the conditions for
termination of the separation requirements imposed on GTOC
information services. GTE (Mem. at 25-26) argues that the
absence of similar termination provisions for the interexchange
restrictions implies that the latter were intended to terminate
upon divestiture of Sprint. But a more plausible inference is
that the parties intended the interexchange restrictions to be
subject to removal only under the common law standards
incorporated in Fed. R. Civ. P. 60(b) and section VII(A) of the
decree. For there is no indication that the parties or the Court
viewed the decree as providing for any automatic termination of
the interexchange restriction. Indeed, the Court required
amendment of section V(D)(3) to eliminate the 5-year automatic
termination provision the parties originally proposed for the
information services restrictions, concluding that there would be
no justification for automatic expiration of the restrictions
governing either interexchange services or information services.
GTE Decree Op., 603 F. Supp. at 743.
c. Section VII(B) allows the Court to order additional
relief, including a divestiture of Sprint (or, at the election of
GTE, divestiture of the GTOCs), if it finds that GTE has engaged
in serious violations of the decree. This section expressly
provides that if the Court orders further relief "the GTOCs will
continue to be bound by all injunctive provisions of [the
decree]." GTE (Mem. at 26-27) argues that this express provision
for continuation of decree restrictions in the event of
Page 15
involuntary divestiture -- a provision not included in the decree
as originally proposed by the parties -- implies that voluntary
divestiture of the Sprint assets would result in automatic
termination of the decree. Any such inference is conclusively
refuted by the record concerning the section VII(B) language.
At the Tunney Act hearing, government counsel explained that
if the Court were to order divestiture under section VII(B):
of course, the way 7(b) works the rest of the
injunctive provisions would not disappear
. . . . [T]he rest of the decree enjoining
them and forcing them to provide full equal
access would continue to operate.
Tr. 48-49 (Nov. 22, 1983) (Blumenfeld). Counsel for GTE did not
disagree. Nonetheless, as a condition to approving the decree,
the Court required that "the parties incorporate into the decree
the Department's representations to the Court concerning section
VII(B)." GTE Decree Op., 603 F. Supp. at 740, 753.11
Thus, the express
continuation language of section VII(B) merely confirmed the
parties' understanding that, even without the Court's addition to
VII(B), divestiture would not extinguish the decree's injunctive
provisions. Because the decree history contains no evidence to
the contrary, this understanding should be assumed to have
encompassed voluntary, as well as involuntary, divestiture.
Page 16..
II. ABSENT A SHOWING THAT THE DECREE'S PURPOSES HAVE
BEEN FULLY ACHIEVED, DIVESTITURE OF THE ACQUIRED ASSETS DOES NOT
WARRANT TERMINATION OF A DECREE ENTERED TO REMEDY AN ALLEGED
CLAYTON 7 VIOLATION
Because the GTE decree does not provide for automatic
termination in the event GTE divests Sprint, GTE's motion for
termination is governed by Rule 60(b) of the Federal Rules of
Civil Procedure. Under Rule 60(b)(5),12
the Court may terminate an injunction if "it is no longer
equitable that the judgment should have prospective application."
1. In United States v. United Shoe Machinery, 391 U.S. 244,
248 (1968), the Supreme Court articulated more specifically the
standard for termination of antitrust consent decrees over the
government's objection: such a decree "may not be changed in the
interest of the defendants if the purposes of the litigation as
incorporated in the decree (the elimination of monopoly and
restrictive practices) have not been fully achieved." The Court
has reaffirmed this standard in subsequent cases. See, e.g.,
Dowell, 498 U.S. at 247; see also Rufo, 502 U.S. at 379-80
(approving United Shoe).
Recent decisions of this Court and the Court of Appeals
elucidate the analysis required under this standard. To
ascertain "the purposes of the litigation as incorporated in the
decree," in an antitrust case, the court should take into
account the theory of competitive harm set forth in the
complaint, the scope of the remedial provisions of the decree
itself, and, in
Page 17...
the case of a consent decree, the explanations provided by the
parties in the Tunney Act review proceeding and
the court's opinion explaining its public interest finding. See
AT&T McCaw Appeal, 46 F.3d at 1205-06; United States v. Western
Elec. Co., 158 F.R.D. 211, 218-19 (D.D.C. 1994) ("AT&T-McCaw
II"), aff'd, 46 F.3d 1198 (1995); see also United States v.
Western Elec. Co., 894 F.2d 1387, 1391-94 (D.C. Cir. 1990)
("Manufacturing"). To determine whether the defendant has
carried its burden of showing that those purposes have been fully
achieved, rendering the decree unnecessary, the court should then
assess current market conditions.
GTE, however, fails even to mention United Shoe, and it
ignores the approach to ascertaining a decree's purpose followed
by this Court and the Court of Appeals. Instead, it seeks to
draw from Dowell and two district court cases the unprecedented
legal rule that "provisions in a consent decree that are
predicated on remedying an unlawful acquisition must be
terminated upon divestiture of the acquired assets." (GTE Mem.
at 2, 16-19.)
GTE's argument rests on the erroneous assumptions that
divestiture necessarily constitutes "full relief" in a section 7
case and, therefore, that decrees in section 7 cases must
terminate upon divestiture. (See GTE Mem. at 17-18.) But a
section 7 decree, whether entered by consent or resulting from
litigation, may contain prophylactic and remedial provisions
instead of, or in addition to, requiring immediate or eventual
Page 18.....
divestiture. Such a decree, like other antitrust decrees, may be
terminated under Rule 60(b) only upon a proper showing that its
purposes have been achieved.
It is well-established that an antitrust decree should "both
. . . avoid a recurrence of the violation and . . . eliminate its
consequences." National Soc'y of Professional Eng'rs v. United
States, 435 U.S. 679, 697 (1978) ("NSPE"); accord United
States v. United States Gypsum Co., 340 U.S. 76, 88 (1950). See
generally United States v. American Tel. & Tel. Co., 552 F.
Supp. 131, 150-51 & nn.79-80 & 82 (D.D.C. 1982), aff'd sub nom.
Maryland v. United States, 483 U.S. 1001 (1983). However, a
court is not limited to "deal[ing] only with the exact type of
acts found to have been committed," Hartford-Empire Co. v. United
States, 323 U.S. 386, 409 (1945), modified, 324 U.S. 570
(1945), if additional relief is necessary to accomplish either
objective, see, e.g., International Salt Co. v. United States,
332 U.S. 392, 400-01 (1947). To eliminate the effects of a
violation, therefore, a court may take appropriate steps to
"den[y] [the violator] future benefits from [its] forbidden
conduct," Gypsum, 340 U.S. at 89, including placing restrictions
on the firm's otherwise lawful conduct, see NSPE, 435 U.S. at
698. And, to prevent a recurrence of the violation, the decree
may "range broadly through practices connected with acts actually
found to be illegal," Gypsum, 340 U.S. at 89; see also Zenith
Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 132-33
(1969). See generally FTC v. National Lead Co., 352 U.S. 419,
429-30 (1957).
Page 19......
The remedial powers of the federal courts, moreover, are as broad
when an acquisition is challenged under Clayton Act section 7 as
they are in a Sherman Act section 1 or 2
case. See Ford Motor Co. v. United States, 405 U.S. 562, 573 & n.8,
575, 577-78 (1972).
Contrary to GTE's assumption, therefore, divestiture is not
the maximum possible relief that the government may obtain in a
section 7 case. A section 7 decree may both require divestiture
and include provisions designed to eliminate anticompetitive
effects that are predicted to persist after divestiture. See id.
at 575-78. Prophylatic relief, which also may supplement
divestiture, permissibly extends to practices that threaten
future section 7 violations and other practices of the "`same
type or class,'" Zenith, 395 U.S. at 132 (quoting NLRB v. Express
Publishing Co., 312 U.S. 426, 435 (1941)), as those challenged
in the complaint that threaten to violate the antitrust laws, see
International Salt, 332 U.S. at 400, or that might enable such
violations in the future, see NSPE, 435 U.S. at 684 & n.5, 696-98
(permissible to ban Society from adopting "any official
opinion, policy statement or guideline stating or implying that
competitive bidding is unethical" when the violation proved was
the Society's enforcement of a ban on competitive bidding);
National Lead, 352 U.S. at 430. Such prophylatic relief
is equally appropriate in a decree that imposes conditions
designed to eliminate the anticompetitive effects of an
aquisition without barring the acquisition itself or requiring
divestiture.
Page 20..
Under United Shoe, the purposes embodied in the decree must
be achieved before the decree may be terminated over the
government's objection. And divestiture may not achieve a
section 7 decree's full purposes, particularly when the decree
protects the public against future anticompetitive conduct by
including prophylatic relief that substitutes for, or
complements, divestiture. Accordingly, divestiture, in and of
itself, is an insufficient basis for terminating such a section 7
consent decree.
GTE's reliance on United States v. Agri-Mark. Inc., 156
F.R.D. 87 (D. Vt. 1994), and United States v. American Cyanamid
Co., 598 F. Supp. 1516 (S.D.N.Y. 1984), is misplaced. In
both cases, the district courts terminated section 7 decrees upon
divestiture, but neither case establishes the rule of law that
GTE advocates. Rather, the courts determined on the facts of
each case that divestiture did fulfill the purposes of the
particular decrees at issue. See Agrimark, 156 F.R.D. at 88
(court considered "the facts of this case" and found that the
"divestiture eliminates the vertical integration, which was the
threat to competition"); Cyanamid, 598 F. Supp. at 1518, 1521
(court found that "the purpose of the Consent Judgment was to
dissolve Cyanamid's monopoly . . . and encourage the entry of new
producers" and that "[t]o the extent it is possible to do so,
this has already been achieved").13
Page 21.
2. GTE also is wrong in contending (Mem. at 31-35) that,
regardless of the decree's provisions or purposes, the Court
lacks Article III power to enforce the decree. As a threshold
matter, objections to the Article III power of the court to
enforce a decree that were available at the time an antitrust
consent decree was entered are "not open on a motion to vacate."
Swift & Co. v. United States, 276 U.S. 311, 326 (1928). While
there is no merit to the argument that failure to provide for the
decree's termination upon GTE's divestiture of Sprint would
create an Article III problem, GTE could have raised that
argument in 1983, and it did not. Accordingly, GTE's attempt to
raise such objections now constitutes a collateral attack on the
consent decree that is impermissible under Swift.
GTE (Mem. at 32-35) nonetheless contends that the Court now
lacks Article III power to enforce the decree because the
interexchange provisions, following divestiture, no longer
"remedy" a "live legal claim." This contention is flawed in its
premise. Despite the divestiture, the decree continues to
provide relief for both the section 7 and the section 2 claims
alleged in the complaint that is within the confines of the
remedial principles described above. See supra pp. 17-20; infra
Part III.
Page 22...
Further, the Supreme Court made clear in Local No. 93, Int'l
Ass'n of Firefighters v. Cleveland, 478 U.S. 501 (1986)
("Firefighters"), that a consent decree falls within the equity
powers of the federal court to enter if it (1) "spring[s] from
and serve[s] to resolve a dispute within the court's subject-
matter jurisdiction"; (2) "com[es] within the general scope of
the case made by the pleadings"; and (3) "further[s] the
objectives of the law upon which the complaint was based." Id.
at 525 (internal quotations omitted). As long as a decree as a
whole meets this test,14 a court has continuing Article
III power to enforce all the terms of the decree. See Kozlowski
v. Couglin, 871 F.2d 241, 244-45 (2d Cir. 1989) (explaining that
"[i]f a federal court can validly enter a consent decree under
[Firefighters] it can surely enforce that decree" and noting that
a contrary result would "impugn the integrity of the courts").
As GTE does not contest (See Mem. at 34), the consent decree in
this case met the Firefighters test; accordingly, there can be
no Article III objection to the decree's enforcement.15
Page 23....
Indeed, GTE's core contention, that "when the underlying
violation alleged in the complaint goes away, so does the power
of the court to enforce the provisions of a consent decree that
were initially justified as remedying that violation" (Mem. at
32), is fundamentally flawed. Termination of an alleged
violation in compliance with a court order neither renders the
underlying action moot nor the judgment unenforceable, cf. Berger
v. Heckler, 771 F.2d 1556, 1562 (2d Cir. 1985), and the
"termination of the violation" following entry of the decree is
no different. As we have shown, moreover, antitrust decrees not
only permissibly put an end to the illegal practices alleged in
the complaint, but also may include prophylactic relief. See
supra pp. 17-20. GTE's view accordingly cannot be the law for
it would render unenforceable the permissible prophylactic
provisions of many antitrust decrees.
3. GTE rests its argument for automatic "termination-upon-
divestiture" primarily on three Supreme Court cases involving
school desegregation decrees, Board of Education v. Dowell, 498
U.S. 237 (1991); Milliken v. Bradley, 418 U.S. 717 (1974); and
Freeman v. Pitts, 502 U.S. 467 (1992). (See GTE Mem. at 31.)
None of these supports GTE's position. Dowell and Freeman
reinterated the basic principle that a decree should be
terminated if, but only if, its purposes have been fully
achieved. Neither case altered the standard for termination of
antitrust decrees articulated in United Shoe or cast doubt on the
proposition that the provisions and purposes of an antitrust
Page 24...
consent decree entered to resolve a section 7 case may extend
beyond divestiture of the particular assets challenged in the
complaint.
Dowell held that the district court should vacate the
litigated desegregation decree at issue if it found that the
decree's purposes "had been fully achieved." 498 U.S. at 247.
The Court, moreover, expressly distinguished decrees entered in
desegregation cases, which, because of competing federalism
concerns, "are not intended to operate in perpetuity," id. at
248, from antitrust decrees. See also Rufo, 502 U.S. at 380
(discussing Dowell). Dowell accordingly does not imply that a
court is required to terminate an antitrust consent decree before
its purposes have been achieved.
Freeman involved the scope of a court's discretion partially
to terminate a school desegregation consent decree when some but
not all of the decree's purposes had been achieved. There, the
Court relied on Swann v. Charlotte-Mecklenburg Bd. of Educ., 402
U.S. 1 (1971), to conclude that "[a] remedy is justifiable only
insofar as it advances the ultimate objective of alleviating the
initial constitutional violation." Id. at 498. Thus, the Court
held that federal courts have equitable discretion to withdraw
judicial control over a school district incrementally, to the
extent that doing so would not undermine the decree's purposes.
Id. The Court did not address, much less call into question, the
Article III power of a court to continue to enforce an antitrust
Page 25....
consent decree entered in conformity with Firefighters until the
defendant shows that its purposes have been achieved.
The same is true of Milliken. There, the Court, addressing
the limits on a court's discretion to fashion a remedy in a
litigated school desegregation decree, relied on Swann's
principle that "[a] federal remedial power may be exercised `only
on the basis of a constitutional violation' and, `as with any
equity case, the nature of the violation determines the scope
of the remedy.'" 418 U.S. at 738 (quoting Swann, 402 U.S. at
16). But GTE does not dispute that this Court acted within its
power in entering the GTE decree. Accordingly, Milliken casts no
doubt on the Court's Article III power to enforce the GTE
decree.
III. GTE HAS NOT SHOWN THAT THIS DECREE'S PURPOSES HAVE BEEN
FULLY ACHIEVED
A. The GTE Decree Remedies Anticompetitive
Effects of Vertical Integration by This Local Telephone
Monopolist
1. The United States challenged GTE's acquisition of Sprint
and GTE's provision of information services because such vertical
integration presented the potential for the same type of
anticompetitive conduct in which the Bell System had engaged:
abuse of local telephone monopolies to impede competition in
interexchange services and other dependent markets. The
allegations in the complaint filed against GTE closely paralleled
the government's contentions in the AT&T case. The AT&T
complaint alleged that AT&T had used the BOCs' local exchange
monopolies to impede competition in interexchange services and
manufacturing, thereby violating section 2 of the Sherman Act.
Page 26
The GTE complaint alleged that GTE, through its GTOCs' local
exchange monopolies, also had the incentive and ability to engage
in anticompetitive discrimination and cross-subsidization that
would cause similar competitive harm in interexchange and
information services markets.
The GTE complaint (抖14, 15) alleged further that GTE, as a
member of the AT&T partnership, had denied competing
interexchange carriers (the OCCs) equal access to GTE's local
exchanges. GTE's acquisition of Sprint would give it an even
greater stake in the interexchange market and thus would
exacerbate the risk that GTE would impair interexchange
competition through GTOC discrimination and cross-subsidization.
Because of this increased potential for abuse of monopoly power,
the complaint alleged that the proposed acquisition would violate
section 7 of the Clayton Act, which prohibits acquisitions that
may "substantially lessen competition or tend to create a
monopoly"; the same potential for abuse was the basis for the
allegation that GTE's provision of information services violated
section 2 of the Sherman Act.
2. To resolve the controversy between the government and
GTE as to whether GTE's acquisition of Sprint and the GTOCs'
provision of information services violated federal antitrust law,
the parties agreed to a consent decree. The theory and purpose
of the decree were essentially the same as those of the AT&T
decree. The parties consistently explained in the Tunney Act
proceedings that the purpose of the litigation as incorporated in
Page 27
the decree was to prevent the type of potentially anticompetitive
effects of vertical integration that formed the basis for the
complaint in this case and in the AT&T case. By preventing GTE
from using its local telephone monopolies to impede competition
in interexchange services, the decree's interexchange provisions
remedied the alleged anticompetitive effects of GTE's affiliation
with Sprint. GTE, as well as the United States, in urging the
Court to enter the decree, also emphasized that it would provide
prophylactic relief applicable to other instances of vertical
integration by GTE that could pose similar risks of abuse of
local exchange monopoly power.
The Competitive Impact Statement (May 4, 1983), reprinted in
48 Fed. Reg. 22020 ("CIS") explained the purposes of the
litigation as embodied in the provisions of the proposed decree.
The CIS emphasized that "the potential for abuse of monopoly
power over exchange access and for evasion of regulatory
constraints underlies the present action and the proposed Final
Judgment," CIS at 5, 48 Fed. Reg. at 22027, and that "[t]he basic
antitrust theories of [the GTE] action are the same as those of
[the AT&T case]." CIS at 6, 48 Fed. Reg. at 22027.
Accordingly,
[t]he proposed Final Judgment is designed to
circumscribe GTE's ability, through cross-
subsidization or discriminatory actions, to leverage the power
the GTOCs enjoy in their regulated monopoly markets to foreclose
or impair the development of competition in the related markets
for the provision of interexchange telecommunications services
and information services.
CIS at 9, 48 Fed. Reg. at 22027.
Page 28
To this end, the decree required the GTOCs to provide equal
access to all interexchange carriers and information services
providers. The decree's equal access provisions are not confined
to preventing discrimination in favor of Sprint; they prohibit
GTOCs from discriminating in favor of or against any
interexchange carrier or information service provider. See CIS
at 15-17, 48 Fed. Reg. at 22028-29. The decree also imposed
conditions on GTE's own provision of interexchange services.
GTE's existing partnership with AT&T was to be phased out; its
affiliation with Sprint was permitted, but subject to structural
separation; and any other interexchange services GTE might
provide also were required to be structurally separate from the
GTOCs. With respect to the interexchange restrictions, the CIS
explained that "Paragraph V(C) of the proposed Final Judgment is
designed to redress the long-standing competitive problems
created by the GTOCs' integration into interexchange services."
CIS at 15, 48 Fed. Reg. at 22028 (emphasis added). Specifically,
"by requiring a phased-out termination of GTE's cooperation with
AT&T, Paragraphs V(C)(2), V(C)(3) and V(C)(4) of the Proposed
Final Judgment eliminate any lingering incentive the GTOCs may
have to discriminate in favor of AT&T." Id. In addition, "by
precluding future vertical integration by the GTOCs, Paragraph
V(C)(1)" (which prohibits "the GTOCs from providing interexchange
telecommunications services and from owning
facilities that are used to provide such services") " Page 29
monopolization of interexchange markets by
the GTOCs in the future." Id. (emphasis added).
GTE's assent to safeguards against abuse of its local
exchange monopolies, whether or not directly arising from its
affiliation with Sprint, was a major factor in the United States'
consent to the decree. The Department of Justice concluded that
the public interest in competition would be served by a decree
providing such protections, which would not have been achieved
merely by blocking the specific transaction at issue. Therefore,
although the GTE decree's line-of-business restrictions were not
as severe as those imposed on the BOCs by the AT&T decree, the
GTE decree would, on balance, promote the public interest in
competition. As the Department explained: "the United States
decided to accept a negotiated resolution dealing with a wide
range of concerns related to GTE's position in the
telecommunications industry," CIS at 50, 48 Fed. Reg. at 22034,
in order to "significantly reduce the present anticompetitive
potential of the acquisition and . . . allow for the development
of competition in those markets where . . . realistic competition
is now possible," CIS at 51, 48 Fed. Reg. at 22034.
The responses of the United States and GTE to comments
attacking the decree as too lenient reiterated that the decree
would provide affirmative benefits by preventing abuse of the
GTOCs' local exchange monopolies not only in connection with the
Sprint acquisition but also in other situations in which GTE in
Page 30
the future might provide interexchange services or information
services.
[T]he essential compromise of the decree is
that the Department does not oppose the
acquisition itself. In return, however, the
Department obtained concessions which we
believe not only effectively constrain GTE's
ability to act anticompetitively, but also
represent significant achievements in the
creation of a more competitive environment in
the telecommunications industry.
Response of the United States of America to Comments Filed
Pursuant to the Antitrust Procedures and Penalties Act at 5
(Sept. 26, 1983) ("US Response to Comments"), reprinted in 48
Fed. Reg. 46655, 46656 (1983). The decree "entails a reasonable
remedy for the violations alleged in the complaint, and, in its
interconnection mandates and partnership provisions, provides
some significant competitive benefits, continuing the transition
to a competitive interexchange telecommunications industry begun
in the AT&T case." US Response to Comments at 8, 48 Fed. Reg. at
46657 (emphasis added). Again, at the Court's Tunney Act
hearing, government counsel told the Court that
We have obtained the relief that we believe
on net would allow GTE to acquire Sprint
without being anticompetitive but also more
importantly than that would also provide
other significant procompetitive benefits in
the decree.
Tr. (Nov. 22, 1983) 45 (Blumenfeld).
GTE not only agreed to the decree's provisions in return for
removal of objections to its acquisition of Sprint. It
affirmatively endorsed -- rather than ever questioning or
disputing -- the government's statements as to the decree's scope
Page 31.
and purpose. In GTE's own words: "the proposed judgment goes
substantially farther than merely remedying the anticompetitive
potential identified in the Complaint -- it contains substantive
provisions, totally unrelated to the acquisition, which were
crafted to foster increased competition in the telecommunications
industry." GTE Response to Comments at 12 (Sept. 13, 1983).
Further, GTE represented:
The decree mandates far-reaching changes in
areas totally unrelated to the acquisition.
What we have here is a situation where the
government has negotiated two key provisions
which it had stated provide important public
benefits designed to foster increased
competition in the telecommunications
industry. . . . Because they are unrelated to
the Sprint acquisition and the violations
alleged in the complaint, those negotiated
benefits would be lost even if the decree
were not approved and the government were to
prosecute this case to a successful
conclusion.
Tr. 27-28 (Topper). GTE thus confirmed that the Department had
accurately described the purposes incorporated in the decree and
not merely the government's views as to what those purposes
should be. Having agreed to the decree and obtained the benefits
of this compromise, GTE has no right to avoid the analysis United
Shoe mandates and thereby to deprive the public of the
competitive benefits for which the United States bargained. Cf.
Rufo, 502 U.S. at 391-92 ("a consent decree is a final judgment
that may be reopened only to the extent equity requires"; court
should not inquire whether defendant could have succeeded if it
had opposed certain provisions of a consent decree).
Page 32
3. This Court's conclusion that the proposed decree should
be approved under the "public interest" standard of the Tunney
Act was based on its understanding of the competitive concerns
that led to the complaint and the scope of the decree's remedial
provisions and purposes as the parties had explained them. The
Court noted that arguments in favor of barring GTE from
competitive markets had "substantial weight" and that "the issue
is a close one." GTE Decree Op., 603 F. Supp. at 737. It found
that the decree was in the public interest "only because of the
strictness and firmness of the decree's injunctive and separate
subsidiary provisions." Id. In this regard, it found that the
decree's "equal access and non-discrimination provisions are
likely to extend a significant benefit both to the public and to
GTE's competitors, and they represent a significant step forward
toward the creation of a more competitive environment in the
telecommunications industry--a step, moreover, which would not be
possible without the decree." Id. at 743.
Finally, the Court itself could not have been clearer in
identifying the GTE decree's purpose, and the direct relationship
between that purpose and the decree's provisions:
Both the AT&T decree and the [GTE] decree have a
common purpose: to prevent the defendant
companies from impeding competition, by the use of
local telecommunications monopoly bottlenecks, in
markets where such competition is technologically
feasible. To achieve that objective, each
decree contains provisions designed to prevent the
local Operating Companies from discriminating in
favor of their own affiliates engaged in
competitive enterprises and from subsidizing these
enterprises with profits derived from monopoly
operations.
Page 33..
603 F. Supp. at 752 (emphasis added).
B. GTE Has Not Shown That the Purpose of the Interexchange
Restrictions Has Been Fully Achieved by
Divestiture of Sprint
1. As we have just shown, the decree prohibition on GTOC
provision of interexchange services is intended to "preclude
future vertical integration by the GTOCs [and] eliminate the
potential for monopolization of interexchange markets by the
GTOCs in the future." CIS at 15, 48 Fed. Reg. at 22028.16
As we also have shown, a decree entered in a section 7 case may
appropriately seek to avert, in their incipiency, potential
antitrust problems caused by practices similar to those
challenged in the complaint, whether or not they arise directly
from the challenged acquisition itself.17
Accordingly, this is a sufficient rationale for the continuing
application of the GTE decree's interexchange provisions,
notwithstanding divestiture of Sprint. GTE has offered no
evidence from which the Court could
Page 34
conclude that this purpose has been fully achieved or that it
would not be frustrated if the decree were vacated.
The only factual support GTE provides for its motion to
terminate the interexchange restrictions is a declaration that it
no longer owns Sprint or Spacenet and that it has no involvement
in the affairs of those entities (except for voting shares held
by its pension trusts for investment purposes only). GTE Mem.
App. A. The United States does not dispute these facts, but they
are insufficient to establish that the purposes of the decree
have been fully achieved. The divestiture of Sprint does not
alter the GTOCs' monopoly power in the local exchange market.
Nor does it eliminate the risk that the GTOCs would engage in
anticompetitive discrimination or cross-subsidization if the
decree were vacated and GTE were allowed to provide interexchange
services directly through the GTOCs (rather than through separate
subsidiaries), and without any decree-imposed equal access
obligations. Unless and until GTE makes a persuasive showing on
these issues, it is not entitled to termination of the decree's
interexchange restrictions under Rule 60(b) and United Shoe; the
decree restrictions must remain in effect to protect the public
interest in competition.
2. Further, even if the decree's purposes were viewed as
limited to remedying the effects of GTE's acquisition of Sprint
or preventing anticompetitive consequences of other acquisitions,
the present record would be insufficient to show that divestiture
of Sprint has fully achieved those purposes.
Page 35
In asserting that divestiture necessarily provided full
relief for the violation alleged, GTE implicitly asks the Court
to assume that the decree restrictions eliminated all the
anticompetitive consequences of GTE's owning Sprint for twelve
years. But whether the restrictions had this effect is a factual
question, and GTE has presented no evidence to support its
assumption. The GTOCs or Sprint may continue to be affected by
their past affiliation so that continued application of the
interexchange provisions is needed to prevent anticompetitive
consequences of that relationship. Even if this were the only
relevant consideration -- which it is not -- it is GTE's burden
to show that there are no such continuing effects.
Moreover, if GTE's present motion for termination of the
decree were granted, GTE could vertically integrate not only
through internal expansion, but also through future acquisitions,
and the GTOCs' relationships with any acquired interexchange
carriers would not be subject to the decree safeguards. GTE's
acquisition of an interexchange carrier was the precise conduct
challenged in the complaint, and GTE has not shown that it will
not acquire any interexchange carriers' stock or assets in the
future. Nor has GTE shown that the decree restrictions would not
be necessary to eliminate the threat to competition that such
acquisitions likely would pose.
C. GTE Has Not Shown That the Purpose of the Information
Services Restrictions Has Been Fully Achieved by
the FCC's Rules
Page 36..
GTE also seeks termination of the decree's few remaining
information services restrictions, sections V(a) and V(B), which
require only that GTE provide equal access to and not
discriminate among information service providers. (See
GTE Mem. at 39-41.) In support of this aspect of its motion, GTE
relies solely on the Federal Communications Commission's adoption
of rules intended to prevent local exchange carriers from
discriminating against information services competitors. While
the FCC's rules are relevant in determining whether the decree
provisions should be vacated, the mere fact that the FCC has
adopted such rules does not compel the Court to vacate decree
provisions that serve a similar purpose. GTE has not shown
either that the substance of the FCC rules duplicates the decree
restrictions or that the sanctions available for violations are
equally as effective as the Court's contempt power. See United
States v. Western Elec. Co., 900 F.2d 283, 298 (D.C. Cir.),
cert. denied, 498 U.S. 911 (1990) ("Triennial Review Appeal")
(assessment of how FCC rules have performed would bear on whether
decree restrictions should be removed). Accordingly, the
information services restrictions also should not be vacated on
the present record.
Page 37.
CONCLUSION
The Court should deny GTE's motion to terminate the decree.
Respectfully submitted,
ANNE K. BINGAMAN
Assistant Attorney General
DAVID TURETSKY
Senior Counsel to the
Assistant Attorney General
WILLARD K. TOM
Counselor to the Assistant
Attorney General
______________________________
DONALD J. RUSSELL NANCY C. GARRISON
Chief, Telecommunications MARK S. POPOFSKY
Task Force Attorneys
LAWRENCE M. FRANKEL Antitrust Division
Attorney U.S. Department of Justice
10th & Pennsylvania Ave., N.W.
Antitrust Division Washington, D.C. 20530
U.S. Department of Justice (202) 514-1531
Washington, D.C. 20001
June 5, 1995
Page 38
Certificate of Service
I certify that on June 5, 1995, copies of the foregoing
Response of the United States In Opposition To GTE's Motion To
Terminate the Decree was served upon counsel for defendant GTE
Paul D. Clement, Esq.
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
(202) 879-5000
and
James F. Rill, Esq.
Collier, Shannon, Rill & Scott
3050 K Street, N.W.
Washington, D.C. 20007
by messenger delivery, and
C. Daniel Ward, Esq.
GTE Service Corporation
One Stamford Forum
Stamford, CT 06904
by Federal Express, next-day delivery, and upon the following
counsel by first-class mail, postage prepaid:
Richard E. Wiley, Esq.
Wiley, Rein & Fielding
1776 K Street, NW
Washington, DC 20006
Richard C. Warmer, Esq.
James J.R. Talbot, Esq.
O'Melveny & Myers
555 13th Street, NW
Washington, DC 20004
Don L. Keskey, Esq.
John M. Dempsey, Esq.
Assistant Attorneys General
1000 Long Boulevard, Suite 11
Lansing, MI 48910
Page 39
Thomas P. Hester, Esq.
Ameritech
30 South Wacker Drive
Chicago, IL 60606
Jim G. Kilpatric, Esq.
AT&T
1120 20th Street, NW
Washington, DC 20004
Michael H. Salsbury, Esq.
Jenner & Block
Suite 1200S
601 13th Street, N.W.
Washington, D.C. 20005
Herbert Marks, Esq.
Squire, Sanders & Dempsey
1201 Pennsylvania Avenue, NW
Washington, DC 20004
NANCY C. GARRISON
Attorney
Antitrust Division
U.S. Department of Justice
Washington, D.C. 20530
(202) 514-1531
FOOTNOTES
1
The Department of Justice and GTE agreed that "because of
the similarity of the issues with AT&T," GTE should be treated by
the Court as a related case and handled by the same Judge. See
United States v. GTE Corp., 603 F. Supp. 730, 732 (D.D.C. 1984).
2
Thus the GTE decree was less restrictive than the AT&T
decree, which barred the BOCs from almost all businesses except
local exchange service. The United States explained that the
differences in the restrictions were justified by differences
between the situations addressed by the two decrees. See
Response of the United States of America to Comments Filed
Pursuant to the Antitrust Procedures and Penalties Act, at 4-10
(Sept. 26, 1983), reprinted in 48 Fed. Reg. 46655, 46656 (1983).
3
The decree as entered is reported at 1985-1 Trade Cas.
(CCH) �,355, reprinted in GTE Mem. App. B.
4
The Court noted, however, that the differences between the
BOCs and the GTOCs justified different restrictions. Id. at 736-37.
5
Following the acquisition, GTE operated the assets of SPCC
under the name "GTE Sprint." See GTE Mem. App. A (Aff. of Ronald
J. Tuccillo) �a). GTE held the assets of SPSC, together with
its other satellite telecommunications businesses, in a wholly-
owned subsidiary named GTE Spacenet Corporation. Id. �a).
6
Pursuant to the briefing order entered by the Court, GTE
has given public notice of its motion and interested persons will
have the opportunity to comment.
7
Of course, parties may not by agreement deprive a court of
its equitable authority under the common law and Rule 60(b) to
modify or terminate decrees as appropriate, and the United States
does not contend that the parties to the GTE decree have done so.
But GTE's reliance on the principle that "the parties [to a
consent decree] cannot, by giving each other consideration,
purchase from a court of equity a continuing injunction" (GTE
Mem. at 14, 33) (internal quotations and citations omitted) in
support of its present motion, is misplaced. The question
presented by GTE's motion is whether it is entitled to
termination without satisfying the ordinary, equitable standard
for modification of decree terms to which it consented.
8
GTE (Mem. at 18-19, 22) relies on Cyanamid, 598 F. Supp.
at 1516, but the court in that case did not construe the decree
to terminate automatically upon divestiture. Rather, it
ascertained the purpose of the particular decree at issue and
then examined current competitive conditions to determine that
the decree's purpose had been fully achieved.
9
GTE maintains (Mem. at 35-39) that the decree must be
construed to terminate upon divestiture of Sprint because there
is no "unambiguous clear statement" that the parties agreed to
the contrary. As we explain, the decree's plain words and
history demonstrate that the interexchange provisions were
intended to survive divestiture. In any event, there is no basis
for departing from the normal rules of decree construction and
requiring the parties expressly to provide that the decree will
not terminate upon divestiture (or any other event). Although
GTE claims that construing the decree not to terminate upon
divestiture raises serious constitutional questions, GTE's
Article III argment is wholly insubstantial. See infra pp. 21-23.
So too is GTE's due process argument (Mem. at 38), which is
premised on the government's "tremendous unilateral bargaining
power." The postulate underlying the Tunney Act is precisely the
opposite. See, e.g., 119 Cong. Rec. S13926 (Daily ed. July 18,
1973) (explaining that antitrust defendants, due to their "`great
influence and economic power,'" often have the upper hand)
(statement of Sen. Tunney) (quoting testimony of Hon. J. Skelly
Wright)). Finally, although GTE argues that failure to require a
"clear statement" would undermine the purposes of Tunney Act
review, a consent decree cannot anticipate every contingency, and
there is no reason to treat the voluntary divestiture of Sprint
differently from any other event that the parties might not have
specifically forseen.
10
In contrast, the United States had explained that under
the AT&T decree's successors and assigns clause, which contained
no similar proviso,
any company, including an independent
telephone company, purchasing a BOC or its
franchised territory or facilities, would be
bound by the restrictions of the modification
and thus would not be permitted to engage in
activities that the BOC could not perform.
This restriction is necessary in order to
prevent circumvention of the modification by
a mere transfer of ownership.
Response of the United States to Public Comments on Proposed
Modification of Final Judgment, 47 Fed. Reg. 23320, 23343
(May 27, 1982).
11
The modification also made express the parties'
understanding that in seeking relief under section VII(B), the
United States would not be required to prove an antitrust
violation or establish the relevant market in which competition
is harmed. See Id. at 741, 753.
12
GTE does not contend that its motion relies on any other
subdivision of Rule 60(b).
13
Similarly, in Dowell, the Supreme Court remanded the case
to allow the district court to determine whether the
purposes of the desegregation litigation had been fully achieved,
i.e., whether illegal discrimination had ceased and its vestiges
had been eliminated as far as practicable. See 498 U.S. at 246-50.
14
The Court emphasized in Firefighters that the test applies
to a consent decree as a whole, not to particular terms. See id.
at 525.
15
There certainly are circumstances in which failure to
terminate a decree would constitute an abuse of discretion. See,
e.g., American Horse Protection Ass'n v. Watt, 694 F.2d 1310,
1316 (D.C. Cir. 1982) (underlying statute repealed). But it does
not follow that a court that erroneously denies a motion to
terminate acts beyond its Article III power. "The power to
enjoin includes the power to enjoin too much." Swift, 276 U.S.
at 331.
16
GTE is concerned primarily with this section V(C)(1)
restriction. (See GTE Mem. at 10 n.5.) Termination of the
decree also would eliminate GTE's continuing decree obligations
to provide equal access.
17
The government's position in United States v. Microsoft,
(D.C. Cir. Nos. 95-5037, 5039) is not to the contrary. There,
the government maintained that additional restrictions aimed at
competitive problems different from those identified in the
complaint and CIS were not necessary to bring a decree within the
reaches of the public interest. By contrast, the GTE decree's
interexchange restrictions properly remedy the violation alleged
because they are addressed to same competitive harm that the
government sought to remedy in its complaint: GTE's vertical
integration and the consequent abuse of its local exchange
monopolies to impede competition in interexchange markets.
Accordingly, the provisions of the GTE decree are directed at
practices of the "same class or type," Zenith, 395 U.S. at 132,
as those challenged in the complaint.
|