84 FR 30234 - United States v. Canon Inc. and Toshiba Corporation; Proposed Final Judgment and Competitive Impact Statement

[Federal Register Volume 84, Number 123 (Wednesday, June 26, 2019)]
[Notices]
[Pages 30234-30243]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2019-13534]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Canon Inc. and Toshiba Corporation; 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 Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States v. Canon Inc. and Toshiba Corporation, Civil Action No. 1:19-cv-
01680. On June 10, 2019, the United States filed a Complaint alleging 
that Canon Inc. and Toshiba Corporation violated the premerger 
notification and waiting period requirements of the Hart-Scott-Rodino 
Antitrust Improvements Act of 1976, 15 U.S.C. 18a, in connection with 
Canon Inc.'s acquisition of Toshiba Medical Systems Corporation from 
Toshiba Corporation. The proposed Final Judgment, filed at the same 
time as the Complaint, requires the companies each to pay a civil 
penalty of $2.5 million and to implement HSR compliance programs and 
comply with inspection and reporting requirements, among other 
obligations imposed under the consent order.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at http://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 Kenneth A. Libby, 
Special Attorney, United States, c/o Federal Trade Commission, 600 
Pennsylvania Avenue NW, CC-8404, Washington, DC

[[Page 30235]]

20580 (telephone: 202-326-2694; email: [email protected]).

Patricia A. Brink,
Director of Civil Enforcement.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    UNITED STATES OF AMERICA, 450 Fifth Street, NW, Washington, D.C. 
20530; Plaintiff, v. CANON INC., 30-2, Shimomaruko 3-chome, Ohta-Ku, 
Tokyo, Japan; and TOSHIBA CORPORATION, 1-1, Shibaura 1-chome, 
Minato-ku, Tokyo, Japan; Defendants.

Civil Action No. 1:19-cv-01680
Judge: Hon. Tanya S. Chutkan

COMPLAINT FOR CIVIL PENALTIES FOR FAILURE TO COMPLY WITH THE PREMERGER 
NOTIFICATION AND WAITING REQUIREMENTS OF THE HART-SCOTT RODINO ACT

    1. In July 2015, Toshiba Corporation (``Toshiba'') revealed that it 
had overstated its profits by billions of dollars. In an effort to 
avoid the consequences of those financial irregularities, Toshiba 
implemented a scheme to sell a subsidiary to Canon Inc. (``Canon''), 
while evading the United States' premerger-notification laws. In March 
2016, Toshiba sold to Canon its subsidiary Toshiba Medical Systems 
Corporation (``TMSC''), and Canon paid Toshiba $6.1 billion, all before 
United States antitrust authorities were notified of the transaction. 
Toshiba's sale of TMSC to Canon, prior to notifying antitrust 
authorities, violated the Hart-Scott-Rodino Antitrust Improvements Act 
of 1976, 15 U.S.C. Sec.  18a (``HSR Act'' or ``Act''). Thus, the United 
States of America, Plaintiff, by its attorneys, acting under the 
direction of the Attorney General of the United States and at the 
request of the Federal Trade Commission, brings this civil antitrust 
action to obtain monetary relief in the form of civil penalties against 
Canon and Toshiba (collectively, ``Defendants'').

INTRODUCTION

    2. The HSR Act is an essential part of modern antitrust 
enforcement. It requires the buyer and the seller of voting securities 
or assets in excess of a certain value to notify the Department of 
Justice and the Federal Trade Commission prior to consummating the 
acquisition, and to observe a waiting period after the notification is 
filed. Advance notification of significant transactions, and adherence 
to the waiting period, are the essential elements of the Act, providing 
the federal antitrust agencies with an opportunity to investigate and, 
when necessary, to seek an injunction to prevent the consummation of 
anticompetitive acquisitions.
    3. In 2015, Toshiba had put itself into a precarious financial 
position. In July 2015, an independent investigation (triggered by an 
earlier investigation by financial regulators) publicly revealed long-
running financial irregularities within Toshiba. Toshiba was forced to 
restate its earnings for several years, and to incur a significant 
accounting charge for fiscal year 2015. To shore up its financial 
statement, Toshiba decided to sell TMSC, a company that does 
substantial business in the United States.
    4. In December 2015, Toshiba began the process of selling TMSC. 
Canon was one of the interested bidders. Toshiba's desire to sell TMSC 
had a deadline: Toshiba needed to recognize the proceeds from the sale 
before the end of its fiscal year on March 31, 2016. Yet despite the 
public disclosure of financial irregularities in July 2015, Toshiba 
failed to resolve the TMSC sales process as the end of its fiscal year 
approached. As a result, in early 2016 Toshiba faced a time frame that 
would make it difficult, if not impossible, to file premerger 
notifications and receive the necessary premerger clearances in several 
jurisdictions, including the United States. Eventually, in early March 
2016, Toshiba and Canon devised a scheme to enable Canon to acquire 
TMSC, allow Toshiba to recognize the proceeds from the sale by the 
close of its fiscal year, and avoid filing the notification and 
observing the waiting period required by the HSR Act.
    5. Pursuant to this scheme, Toshiba and Canon caused the creation 
of a special purpose company, MS Holding Corporation (``MS Holding''). 
MS Holding was the device that Toshiba and Canon used to evade the 
premerger-notification law.
    6. During March 15-17, 2016, in a multi-step process, Toshiba 
transferred ownership of TMSC to Canon, but in a way designed to evade 
notification requirements. First, Toshiba rearranged the corporate 
ownership structure of TMSC to make the scheme possible: it created new 
classes of voting shares, a single non-voting share with rights custom-
made for Canon, and options convertible to ordinary shares. Second, 
Toshiba sold Canon TMSC's special non-voting share and the newly-
created options in exchange for $6.1 billion, and at the same time 
transferred the voting shares of TMSC (a $6.1 billion company) to MS 
Holding in exchange for a nominal payment of nine hundred dollars. 
Later--in December 2016--Canon exercised its options and obtained 
formal control of TMSC's voting shares.
    7. Canon and Toshiba implemented this scheme to avoid observing the 
waiting period required by the HSR Act. If Canon had purchased all of 
TMSC's voting securities for $6.1 billion, it would have required 
filing notification and observing the 30-day HSR waiting period, which 
Toshiba feared it could not accomplish by March 31, 2016. Instead, MS 
Holding paid only nine hundred dollars for the voting shares in TMSC, a 
company valued by Canon at $6.1 billion, while Canon nominally acquired 
only a non-voting share and options. Canon and Toshiba structured the 
transaction in such a way that, if these transactions were not part of 
a larger scheme, they would not require notification and observation of 
the HSR waiting period.
    8. This scheme masked the true nature of the acquisition. When 
Toshiba sold its interests in TMSC, while nominal voting-share 
ownership was divested by Toshiba and passed to MS Holding, true 
beneficial ownership passed to Canon. MS Holding bore no risk of loss, 
and no meaningful benefit of gain, for any decrease or increase in 
TMSC's value. Rather, it was Canon which bore that risk or would 
realize any potential gain from TMSC's operations. MS Holding merely 
served to temporarily hold TMSC voting securities for Canon's benefit. 
Therefore, Canon became the owner of TMSC in March 2016 when it paid 
Toshiba the $6.1 billion purchase price for the company.
    9. Defendants violated the HSR Act's notice and waiting 
requirements when Canon acquired ownership of TMSC on March 17, 2016. 
The court should assess each Defendant a civil penalty of at least 
$6,360,000 for this scheme to avoid the HSR Act's requirements.

JURISDICTION AND VENUE

    10. This Court has jurisdiction over the Defendants and over the 
subject matter of this action pursuant to Section 7A(g) of the Clayton 
Act, 15 U.S.C. Sec.  18a(g), and 28 U.S.C. Sec. Sec.  1331, 1337(a), 
1345, and 1355.
    11. Venue is proper in this District under 28 U.S.C. Sec. Sec.  
1391(b)(1), (b)(2), (b)(3), (c)(2), (c)(3), and 15 U.S.C. Sec.  22. A 
substantial part of the omission or events giving rise to the claim 
occurred within this District; to the extent that Canon Inc. and 
Toshiba Corporation are alien corporations they may be properly sued in 
this District; and Defendants and other parties to the transaction 
(including at least Canon U.S.A., Inc.) can be found or transact 
business in this District.

[[Page 30236]]

THE DEFENDANTS

    12. Defendant Canon is a corporation organized under the laws of 
Japan, with its principal office and place of business at 30-2, 
Shimomaruku 3-chome, Ohta-Ku, Tokyo, Japan.
    13. Defendant Toshiba is a corporation organized under the laws of 
Japan, with its principal office and place of business at 1-1, Shibaura 
1-chome, Minato-ku, Tokyo, Japan.
    14. Defendants are engaged in commerce, or in activities affecting 
commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 
Sec.  12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. 
Sec. 18a(a)(1).

OTHER ENTITIES

    15. Toshiba Medical Systems Corporation (``TMSC'') is a corporation 
organized under the laws of Japan, with its principal office and place 
of business at 1385, Shimoishigami, Otawara-shi, Tochigi 324-8550, 
Japan. TMSC is engaged in commerce, or in activities affecting 
commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 
Sec.  12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. Sec.  
18a(a)(1). Prior to March 17, 2016, TMSC was a wholly-owned subsidiary 
of Toshiba. At all times relevant to this complaint, TMSC had sales in 
or into the United States of approximately $280 million.
    16. MS Holding Corporation (``MS Holding'') is a corporation 
organized under the laws of Japan, with its principal office and place 
of business at 6-10-1 Roppongi, Minato-ku, Tokyo, Japan. Defendants 
Canon and Toshiba directed their law firms to have MS Holding created 
for the specific purpose of acquiring and holding certain of TMSC's 
shares pending antitrust clearance for Canon's proposed acquisition of 
TMSC.
    17. Canon U.S.A., Inc. is a wholly-owned subsidiary of Canon with 
its headquarters in Melville, New York. Canon U.S.A., Inc. conducts 
sales and marketing of Canon products in the Americas, including the 
District of Columbia. Canon U.S.A., Inc. participated in the 
transaction at issue by receiving from Toshiba a minority share of the 
options to acquire TMSC voting securities, which were used as part of 
the scheme to transfer TMSC to Canon, and committing to pay Toshiba for 
such options.

BACKGROUND

A. The Hart-Scott-Rodino Antitrust Improvements Act and Rules

    18. The HSR Act requires certain acquiring persons and certain 
persons whose voting securities or assets are acquired both to file 
notifications with the federal antitrust agencies and to observe a 
waiting period before consummating certain acquisitions. See 15 U.S.C. 
Sec.  18a(a). The required notifications to the federal antitrust 
agencies must be delivered to the District of Columbia offices of each 
agency. These notification and waiting period requirements apply to 
acquisitions that meet the HSR Act's dollar-value thresholds, which are 
adjusted annually. At all times relevant to this complaint, the HSR 
Act's notification and waiting period requirements applied to 
qualifying transactions involving foreign companies which made more 
than $78.2 million of sales in or into the United States. TMSC made at 
least $280 million of sales in or into the United States during its 
2015 fiscal year.
    19. Pursuant to Section (d)(2) of the HSR Act, 15 U.S.C. Sec.  
18a(d)(2), the Federal Trade Commission promulgated rules to carry out 
the purpose of the HSR Act. 16 C.F.R. Sec. Sec.  801-803 (``HSR 
Rules'').
    20. Parties may not structure transactions for the purpose of 
avoiding the HSR Act. Section 801.90 of the HSR Rules, 16 C.F.R. Sec.  
801.90, provides that ``[a]ny transaction(s) or other device(s) entered 
into or employed for the purpose of avoiding the obligation to comply 
with the requirements of the act shall be disregarded, and the 
obligation to comply shall be determined by applying the act and these 
rules to the substance of the transaction.''
    21. Section 801.2(a) of the HSR Rules, 16 C.F.R. Sec.  801.2(a), 
defines an acquiring person: ``Any person which, as a result of an 
acquisition, will hold voting securities or assets, either directly or 
indirectly, or through fiduciaries, agents, or other entities acting on 
behalf of such person, is an acquiring person.''
    22. Section 801.1(c) of the HSR Rules, 16 C.F.R. Sec.  801.1(c), 
provides that one holds voting securities if she has beneficial 
ownership: ``the term hold (as used in the terms hold(s), holding, 
holder and held) means beneficial ownership, whether direct, or 
indirect through fiduciaries, agents, controlled entities or other 
means.'' (emphasis in original). ``[T]he existence of beneficial 
ownership is to be determined in the context of particular cases with 
reference to the person or persons that enjoy the indicia of beneficial 
ownership.'' 43 Fed. Reg. 33,458 (July 31, 1978). These indicia include 
(1) the right to any increase in value or dividends, (2) the risk of 
loss of value, (3) the right to vote or determine who may vote the 
stock, and (4) investment discretion, including the power to dispose of 
the stock. Id.
    23. In summary, under the HSR Rules, (a) if parties structure a 
transaction ``for the purpose of avoiding'' the HSR Act's requirements, 
then determining whether an HSR notification should have been filed, 
and by whom, is based on an analysis of the ``substance of the 
transaction,'' as opposed to the form of the avoidance scheme; and (b) 
in carrying out this notification analysis, identifying the acquiring 
person (with the associated HSR notification and waiting period 
obligations) involves an assessment of who, upon completion of the 
transaction, ``enjoy[ed] the indicia of beneficial ownership.''

B. Canon and Toshiba's HSR Avoidance Scheme

    24. In late February 2016, Toshiba and Canon were actively 
negotiating the sale of TMSC. Rather than complete their negotiations 
in time to allow compliance with regulatory requirements, the firms 
decided instead to devise a way to allow Toshiba to recognize the 
profits from its sale of TMSC by its fiscal year end on March 31, 2016 
without complying with HSR requirements. Toshiba and Canon jointly 
decided to restructure TMSC's securities and to sell TMSC to Canon 
through the device of MS Holding, a newly-formed special purpose 
vehicle which they had created specifically for this transaction. This 
scheme allowed Toshiba to relinquish all ownership rights in TMSC and 
recognize the entire proceeds of the TMSC sale prior to March 31, 2016 
and delayed Canon's filing of premerger notification for its 
acquisition of TMSC.
    25. By early March 2016, Toshiba and Canon agreed to the following 
transaction structure, which they ultimately executed:
    a. Toshiba and Canon directed their law firms to have a third law 
firm form MS Holding, a special purpose vehicle created solely to hold 
temporarily the voting shares of TMSC, pending antitrust clearance of 
Canon's acquisition of TMSC;
    b. Toshiba revised the corporate ownership structure of TMSC (its 
wholly-owned subsidiary) in a way that would permit ownership rights of 
TMSC to be split. After the revision, Toshiba owned:
    1) 20 Class A voting shares of TMSC;
    2) 1 Class B non-voting share of TMSC; and
    3) 100 options to acquire 134,980,000 TMSC ``ordinary shares'' 
(which remained unissued until step ``e'' below);

[[Page 30237]]

    c. MS Holding paid Toshiba approximately nine hundred dollars for 
the 20 Class A voting shares. MS Holding thus nominally gained 
temporary ownership of a business valued by Canon at approximately $6.1 
billion;
    d. Canon and Canon U.S.A., Inc., paid Toshiba approximately $6.1 
billion for the 1 Class B non-voting share and for the 100 options to 
acquire 134,980,000 TMSC's ``ordinary shares'' that it intended to 
exercise once the TMSC sale had cleared antitrust review in the 
necessary jurisdictions. The exercise price on each option was [yen]1, 
for a total of [yen]100, or approximately one dollar, to be paid to 
TMSC upon exercise of the options. The ``ordinary shares'' remained 
unissued until Canon and Canon U.S.A. exercised their options; and
    e. Later, after HSR notification had been made and the waiting 
period had passed, Canon and Canon U.S.A., Inc., exercised their 
options (for a total exercise price of about one dollar) and so 
acquired the 134,980,000 TMSC ``ordinary shares'';
    f. After Canon and Canon U.S.A., Inc., exercised their options, 
TMSC bought out MS Holding's 20 Class A shares at a fixed price that 
did not vary depending on the financial performance of TMSC during the 
period MS Holding held the Class A shares.
    26. While the motive of selling TMSC was to shore up Toshiba's 
financial statement, the purpose of the unusual transaction structure 
selected by Canon and Toshiba was to avoid the HSR Act's waiting period 
and complete the sale of TMSC prior to March 31, 2016. By their own 
admission, Canon and Toshiba believed that Canon could not acquire TMSC 
outright because ``it simply was not possible to complete a significant 
acquisition of TMSC voting securities before the end of Toshiba's 
fiscal year due to the review periods under various merger control 
laws.''

C. Canon--not MS Holding--Acquired Beneficial Ownership of TMSC from 
Toshiba

    27. Because Canon and Toshiba chose to structure the sale of TMSC 
as an HSR avoidance scheme, determining the proper acquiring person for 
HSR notification purposes requires an analysis of the substance of the 
transaction to identify to whom passed beneficial ownership of TMSC.
    28. Toshiba and Canon, acting at times through their respective law 
firms, implemented their scheme for the sale of TMSC as follows:
    a. On March 5, 2016, Toshiba and Canon jointly approached TMI 
Associates (``TMI''), a Japanese law firm, to consult on the formation 
of the special purpose vehicle (which became MS Holding upon its 
creation);
    b. On March 6, 2016, Toshiba and Canon met with TMI regarding the 
formation of the special purpose vehicle (which became MS Holding) to 
consist of three principals/shareholders: a business leader, an 
attorney, and an accountant;
    c. On or about March 6, 2016, advisors for Canon and Toshiba put 
together a list of possible accountants to be one of the other 
principals of MS Holding. The list included Mr. Motoharu Yokose, who 
became a principal of MS Holding;
    d. On March 7, 2016, Toshiba and Canon cleared Mr. Shuichi 
Yoshikai, a lawyer at TMI, as a shareholder and principal of MS 
Holding;
    e. On March 8, 2016, Toshiba and Canon approved the formation 
documents of MS Holding, having previously provided comments and 
suggested changes to the drafts of the formation documents;
    f. On March 8, 2016, Toshiba and Canon both participated in 
briefing Mr. Kenji Miyahara who became an MS Holding principal on March 
11, 2016;
    g. On March 8, 2016, Toshiba and Canon both participated in 
briefing Mr. Yokose who became an MS Holding principal on March 11, 
2016;
    h. On March 8, 2016, MS Holding was incorporated with three shares 
and a total capital of approximately three hundred dollars;
    i. On March 15, 2016, Toshiba formally changed the corporate 
ownership structure of TMSC, with the agreement of Canon. Prior to the 
transaction, TMSC had authorized a single class of 134,980,060 common 
(voting) shares, all of which was held by Toshiba. In order to 
facilitate the transaction, Toshiba caused TMSC to authorize 20 Class A 
voting shares, 1 Class B non-voting share, 134,980,000 ``ordinary'' 
shares, and 134,980,060 ``Class C'' shares. Toshiba converted its 
134,980,060 common shares into ``Class C'' shares, and transferred all 
such Class C shares to TMSC in exchange for (i) the 20 Class A shares; 
(ii) the single Class B non-voting share; and (iii) 100 options to 
acquire 134,980,000 ``ordinary'' shares. The change in corporate 
ownership structure thus resulted in TMSC holding 134,980,060 of its 
own Class C shares, and 134,980,000 of its own ``ordinary'' shares, 
while Toshiba held 20 Class A shares, the single Class B non-voting 
share, and 100 options to acquire the 134,980,000 ``ordinary'' shares.
    j. On March 17, 2016, Toshiba and Canon executed the agreement 
(``acquisition agreement'') pursuant to which Canon and Canon U.S.A., 
Inc., agreed to pay Toshiba approximately $6.1 billion to acquire 
TMSC's single Class B non-voting share and 100 options to acquire 
134,980,000 ``ordinary'' voting shares. According to the terms of the 
acquisition agreement, Canon and Canon U.S.A., Inc.'s payment of $6.1 
billion was non-refundable, even if Canon and Canon U.S.A., Inc.'s 
exercise of the TMSC options was later blocked as a result of antitrust 
review;
    k. On the same day, March 17, 2016, Toshiba and MS Holding executed 
an agreement whereby MS Holding acquired the 20 Class A voting shares 
for approximately nine hundred dollars. Prior to this, Canon had 
provided comments to the drafts of the agreement between Toshiba and MS 
Holding;
    l. On or about December 19, 2016, after obtaining the necessary 
antitrust clearances, Canon exercised its options to acquire the 
``ordinary'' shares; and
    m. On or about December 21, 2016, TMSC acquired the 20 Class A 
shares from MS Holding, and MS Holding had no further ownership 
interest in or involvement with TMSC.
    29. As of March 17, 2016, Toshiba no longer had any interest in, 
ownership rights in, or control over TMSC. Canon and Canon U.S.A., 
Inc.'s payment of $6.1 billion and MS Holding's payment of nine hundred 
dollars was all the proceeds it would receive for its interests in 
TMSC. Toshiba would not benefit in any way from the financial 
performance of TMSC after March 17, 2016. That same day, Canon issued a 
press release stating that it had concluded a share transfer agreement 
with Toshiba concerning the acquisition of TMSC shares ``to make TMSC a 
Canon subsidiary.''
    30. The true substance of the transactions described in Paragraph 
28 was Canon's acquisition of beneficial ownership of TMSC on March 17, 
2016 for $6.1 billion.
    31. At all times relevant to this complaint, MS Holding was not an 
entity independent of Canon. Canon exercised direction and control over 
MS Holding during its formation. Canon caused the creation of MS 
Holding; it participated in the selection of the principals of MS 
Holding; it briefed the proposed principals of MS Holding about the 
transaction; it participated in the drafting of the formation documents 
of MS Holding; it commented on the appropriateness of the name MS 
Holding; it reviewed, commented on, and approved the share transfer

[[Page 30238]]

agreement between MS Holding and Toshiba; and it commented on draft 
questions and answers regarding MS Holding.
    32. MS Holding had no meaningful risk of loss or benefit of gain in 
connection with its ownership of the Class A shares. It was to be paid 
a fixed amount that did not go up or down depending on the financial 
performance of TMSC.
    33. MS Holding did not act as an independent owner of TMSC during 
the period it nominally controlled TMSC through its ownership of the 
Class A shares. Because it existed precisely to be bought out after 
Canon exercised its options for the ``ordinary'' voting shares at a 
fixed price, MS Holding had no incentive to maintain the long term 
viability of TMSC. Accordingly, if MS Holding had been a truly 
independent owner of TMSC, its economic self-interest would have been 
to take as much of the proceeds out of TMSC as it could prior to Canon 
exercising the options for the ``ordinary'' shares. Despite this 
economic self-interest, MS Holding made no efforts to sell any of 
TMSC's assets and declared dividends that amounted to only a small 
fraction of the profits earned by TMSC during the period of its nominal 
control.
    34. Neither the Defendants nor the principals of MS Holding 
expected MS Holding to be involved in the operation of TMSC during the 
period that MS Holding nominally controlled the Class A shares. Indeed, 
Canon itself has admitted that ``TMSC's management board ran TMSC's 
day-to-day business during the time MS Holding'' controlled the Class A 
shares. This was consistent with Defendants' choice of a corporate form 
for MS Holding, as ``under Japanese law for the type of stock company 
in which MS Holding was formed, TMSC's shareholders are not expected or 
required to be involved in the operation of TMSC's day-to-day 
business.''

VIOLATION ALLEGED

    35. Plaintiff alleges and incorporates paragraphs 1 through 34 as 
if set forth fully herein.
    36. Canon's acquisition of TMSC from Toshiba on March 17, 2016, was 
subject to the notification and waiting period requirements of the HSR 
Act and the regulations promulgated thereunder. 16 C.F.R. Sec.  800 et. 
seq.
    37. Defendants did not comply with the notification and waiting 
period requirements of the HSR Act and regulations. Although Defendant 
Canon and MS Holding both filed HSR Act notifications on April 26, 2016 
for the exercise of the options to acquire the TMSC ``ordinary'' 
shares, these filings were not timely or effective because the transfer 
of beneficial ownership to Canon from Toshiba had occurred in March 
2016. Moreover, Toshiba did not make a filing in connection with the 
April 26, 2016 notifications, and thus failed to provide information 
that it had relevant to the transaction.
    38. On July 22, 2016, Canon and Toshiba each amended, under 
protest, the original HSR filings made by Canon and MS Holding to 
substitute Toshiba as the acquired person in the sale of TMSC. The 
waiting period on the amended filings expired on August 22, 2016.
    39. The Defendants were each in violation of the HSR Act each day 
during the period beginning on March 17, 2016, and ending on August 22, 
2016.
    40. Section 7A(g)(1) of the Clayton Act, 15 U.S.C. Sec.  18a(g)(1), 
provides that any person, or any officer, director, or partner thereof, 
who fails to comply with any provision of the HSR Act is liable to the 
United States for a civil penalty for each day during which such person 
is in violation. For violations occurring on or after November 2, 2015 
and assessed after August 1, 2016, the maximum amount of civil penalty 
is $40,000 per day, pursuant to the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015, Pub. L. 114-74, Sec.  701 
(further amending the Federal Civil Penalties Inflation Adjustment Act 
of 1990, 28 U.S.C. Sec.  2461 note), and Federal Trade Commission Rule 
1.98, 16 C.F.R. Sec.  1.98, 81 Fed. Reg. 42,476 (June 30, 2016). As of 
February 14, 2019, the penalty was further increased to $42,530 per day 
for civil penalties assessed after that date. 84 Fed. Reg. 3980 (Feb. 
14, 2019).

REQUEST FOR RELIEF

    Wherefore, the Plaintiff requests:
    1. That the Court adjudge and decree that Defendants violated the 
HSR Act, 15 U.S.C. Sec.  18a, and that Defendants were in violation of 
the Act on each day of the period from March 17, 2016, through August 
22, 2016;
    2. That the Court order each Defendant to pay to the United States 
at least $6,360,000, or the maximum civil penalty as provided by the 
HSR Act, 15 U.S.C. Sec.  18a(g)(1), the Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114-74, 
Sec.  701 (further amending the Federal Civil Penalties Inflation 
Adjustment Act of 1990, 28 U.S.C. Sec.  2461 note), Federal Trade 
Commission Rule 1.98, 16 C.F.R. Sec.  1.98, 84 Fed. Reg. 3980 (Feb. 14, 
2019);
    3. That the Court order such other and further relief as the Court 
may deem just and proper; and
    4. That the Court award the Plaintiff its costs of this suit.

Dated:-----------------------------------------------------------------

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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Craig W. Conrath,

Director of Litigation.
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Daniel E. Haar,

Acting Chief, Competition Policy and Advocacy Section.

United States Department of Justice, Antitrust Division, 950 
Pennsylvania Ave, N.W., Washington, DC 20530, Telephone: (202) 532-
4560, Facsimile: (202) 616-2645.
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Daniel J. Matheson (D.C. Bar 502490),
Kenneth A. Libby,
Jennifer Lee,
Jonathan Lasken (D.C. Bar 997251),

Special Attorneys by appointment, Federal Trade Commission, Bureau 
of Competition, 400 Seventh Street, S.W., Washington, DC 20024, 
Telephone: (202) 326-2075, Email: [email protected].

Kara Kuritz (D.C. Bar 991349),

United States Department of Justice, Antitrust Division, 450 Fifth 
Street, N.W., Washington, DC 20530.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    UNITED STATES OF AMERICA, Plaintiff, v. CANON INC. and TOSHIBA 
CORPORATION, Defendants.

Civil Action No. 1:19-cv-01680

[PROPOSED] FINAL JUDGMENT

    WHEREAS the United States of America filed its Complaint on [DATE], 
2019, alleging that Defendants Canon Inc. and Toshiba Corporation 
violated Section 7A of the Clayton Act, 15 U.S.C. Sec.  18a, commonly 
known as the Hart[dash]Scott[dash]Rodino Antitrust Improvements Act of 
1976 (the ``Hart[dash]Scott[dash]Rodino Act''), and the United States 
and Defendants Canon Inc. and Toshiba Corporation, 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 an

[[Page 30239]]

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;
    NOW, THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon the consent of the 
parties hereto, it is ORDERED, ADJUDGED, AND DECREED:
I. JURISDICTION
    The Court has jurisdiction over the subject matter of this action. 
The Defendants consent solely for the purpose of this action and the 
entry of this Final Judgment that this Court has jurisdiction over each 
of the parties to this action. The Complaint states a claim upon which 
relief may be granted against the Defendants under Section 7A of the 
Clayton Act, 15 U.S.C. Sec.  18a.
II. DEFINITIONS
    A. ``Canon Inc.'' means Canon Inc., a corporation organized under 
the laws of Japan, with its principal office and place of business at 
30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo, Japan, including its 
successors and assigns, and its subsidiaries and divisions.
    B. ``Toshiba Corporation'' means Toshiba Corporation, a corporation 
organized under the laws of Japan, with its principal office and place 
of business at 1-1, Shibaura 1-chome, Minato-ku, Tokyo, Japan, 
including its successors and assigns, and its subsidiaries and 
divisions.
    C. ``Voting Securities'' shall have the same meaning as defined in 
the HSR Act and Regulations promulgated thereunder, 16. C.F.R. Sec.  
801(f)(1)(i).
    D. ``Regulation'' means any rule, regulation, statement, or 
interpretation under the Hart-Scott-Rodino Act that has legal effect 
with respect to the implementation or application of the Hart-Scott-
Rodino Act or any section or subsection within 16 C.F.R. Sec. Sec.  
801-803.
    E. ``Significant Sales'' means sales in excess of $90 million in 
the most recent fiscal year.
III. APPLICABILITY
    This Final Judgment applies to Canon Inc. and Toshiba Corporation, 
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.
IV. CIVIL PENALTY
    A. Judgment is hereby entered in this matter in favor of Plaintiff 
and against Defendants, and, pursuant to Section 7A(g)(1) of the 
Clayton Act, 15 U.S.C. Sec.  18a(g)(1), the Debt Collection Improvement 
Act of 1996, Pub. L. 104[dash]134 Sec.  31001(s) (amending the Federal 
Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. Sec.  
2461), the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015, Pub. L. 114-74 Sec.  701 (further amending 
the Federal Civil Penalties Inflation Adjustment Act of 1990), and 
Federal Trade Commission Rule 1.98, 16 C.F.R. Sec.  1.98, 84 Fed. Reg. 
3980 (February 14, 2019), each Defendant is hereby ordered to pay a 
civil penalty in the amount of $2.5 million, for a total of $5 million. 
Payment of the civil penalty ordered hereby shall be made by wire 
transfer of funds or cashier's check. If the payment is made by wire 
transfer, Defendants shall contact Janie Ingalls of the Antitrust 
Division's Antitrust Documents Group at (202) 514-2481 for instructions 
before making the transfer. If the payment is made by cashier's check, 
the check shall be made payable to the United States Department of 
Justice and delivered to:

Janie Ingalls
United States Department of Justice
Antitrust Division, Antitrust Documents Group
450 5th Street NW
Suite 1024
Washington, D.C. 20530

    B. Defendants shall pay the full amount of the civil penalty within 
thirty (30) days of entry of this Final Judgment. In the event of a 
default or delay in payment, interest at the rate of eighteen (18) 
percent per annum shall accrue thereon from the date of the default or 
delay to the date of payment.
V. COMPLIANCE PROGRAM
    A. To ensure compliance with Section 7A of the Clayton Act, 15 
U.S.C. Sec.  18a, each Defendant shall initiate and maintain a 
compliance program that shall include designating, within thirty (30) 
days of the entry of this Final Judgment, a Compliance Officer with 
responsibility for achieving compliance with Section 7A of the Clayton 
Act and identify to the United States his or her name, business 
address, telephone number, and email address. Within forty-five (45) 
days of a vacancy in the Compliance Officer position, a Defendant shall 
appoint a replacement, and shall identify to the United States the 
Compliance Officer's name, business address, telephone number, and 
email address. Defendants' initial or replacement appointments of 
Compliance Officers are subject to the approval of the United States, 
in its sole discretion.
    B. The Compliance Officer for each Defendant shall institute a 
Hart-Scott-Rodino Act compliance program for that Defendant's employees 
who have direct responsibility for or authority over execution of 
acquisitions by that Defendant of (1) assets that generate Significant 
Sales in or into the United States or (2) Voting Securities of an 
issuer that has Significant Sales in or into the United States 
(``Relevant Employees''). The compliance program shall provide at least 
two hours of training for each Relevant Employee (including, for the 
avoidance of doubt, any individual who becomes a Relevant Employee 
after entry of this Final Judgment) on the requirements of Section 7A 
of the Clayton Act, such training to be delivered by an attorney with 
expertise in United States antitrust law. For each Defendant, the 
attorney conducting such training shall provide the Defendant's 
Compliance Officer with annual certification that he or she has the 
required expertise and has provided each Relevant Employee with the 
training described in this subsection.
    C. Each Defendant's Compliance Officer shall obtain, within six 
months after entry of this Final Judgment, and on an annual basis 
thereafter, on or before each anniversary of the entry of this Final 
Judgment, from each person identified in Section V.B of this Final 
Judgment, a certification that each such person has received the 
required two hours of Hart-Scott-Rodino Act training.
    D. Each Defendant's Compliance Officer shall communicate annually 
to Relevant Employees of the relevant Defendant that they may disclose 
to that Defendant's Compliance Officer, without reprisal, information 
concerning any potential violation of Section 7A of the Clayton Act.
    E. Each Defendant's Compliance Officer shall provide to the United 
States within six months after entry of this Final Judgment, and on an 
annual basis thereafter, on or before each anniversary of the entry of 
this Final Judgment, a written statement as to the fact and manner of 
Defendant's compliance with Section V of this Final Judgment.
VI. COMPLIANCE INSPECTION
    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally-recognized privilege, 
from time to time authorized representatives of the United States, 
including agents and consultants retained by the United States, shall, 
upon written request of an authorized

[[Page 30240]]

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 response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
Section VI 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).
VII. RETENTION OF JURISDICTION
    This Court retains jurisdiction to enable any of the parties to 
this Final Judgment to apply to this Court at any time for further 
orders and directions as may be necessary or appropriate to carry out 
or construe this Final Judgment, to modify or terminate any of its 
provisions, to enforce compliance, and to punish violations of its 
provisions.
VIII. 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, including Section 7A 
of the Clayton Act and Regulations promulgated thereunder. 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 a 
Defendant has violated this Final Judgment, the United States may apply 
to the Court for a one-time extension of this Final Judgment for that 
Defendant, 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, each 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.
    D. For a period of four (4) years after the expiration of the Final 
Judgment pursuant to Section VIII, if the United States has evidence 
that a Defendant violated this Final Judgment before it expired, the 
United States may file an action against that Defendant in this Court 
requesting that the Court order (1) Defendant to comply with the terms 
of this Final Judgment for an additional term of at least four years 
following the filing of the enforcement action under this Section, (2) 
any appropriate contempt remedies, (3) any additional relief needed to 
ensure the Defendant complies with the terms of the Final Judgment, and 
(4) fees or expenses as called for in Section VIII.C.
IX. EXPIRATION OF FINAL JUDGMENT
    Unless this Court grants an extension, this Final Judgment shall 
expire three (3) years from the date of its entry if each Defendant has 
paid the civil penalty in full.
X. COSTS
    Each party shall bear its own costs of this action.
XI. PUBLIC INTEREST DETERMINATION
    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16, including making copies available to 
the public of this Final Judgment, the Competitive Impact Statement, 
and any comments thereon and the United States' responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Dated:-----------------------------------------------------------------

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

United States District Judge.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    UNITED STATES OF AMERICA, Plaintiff, v. CANON INC., and TOSHIBA 
CORPORATION, Defendants.
Civil Action No. 1:19-cv-01680

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA''), 
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

    On June 10, 2019, the United States filed a Complaint against 
Defendants Canon Inc. (``Canon'') and Toshiba Corporation 
(``Toshiba''), related to the acquisition of Toshiba Medical Systems 
Corporation (``TMSC'') by Canon from Toshiba on March 17, 2016 for 
approximately $6.1 billion. The Complaint alleges that Canon and 
Toshiba (collectively, ``Defendants'')

[[Page 30241]]

violated Section 7A of the Clayton Act, 15 U.S.C. Sec.  18a, commonly 
known as the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the 
``HSR Act''). The HSR Act provides that ``no person shall acquire, 
directly or indirectly, any voting securities or assets of any person'' 
exceeding certain thresholds until that person has filed pre-
acquisition notification and report forms with the Department of 
Justice and the Federal Trade Commission (collectively, the ``federal 
antitrust agencies'' or ``agencies'') and the post-filing waiting 
period has expired. 15 U.S.C. Sec.  18a(a). A key purpose of the 
notification and waiting period requirements is to protect consumers 
and competition from potentially anticompetitive transactions by 
providing the agencies an opportunity to conduct an antitrust review of 
proposed transactions before they are consummated.
    The Complaint alleges that Defendant Canon acquired beneficial 
ownership of TMSC from Defendant Toshiba without making the required 
pre-acquisition HSR Act filings with the agencies and without observing 
the waiting period. The Complaint alleges that the price paid by Canon 
to Toshiba exceeded the then-existing threshold of $312.6 million for 
filing notification.
    At the same time the Complaint was filed in the present action, the 
United States also filed a Stipulation and proposed Final Judgment that 
eliminates the need for a trial in this case. The proposed Final 
Judgment is designed to address the violation alleged in the Complaint, 
deter Defendants from future HSR Act violations, and deter violations 
by similarly situated entities in the future. Under the proposed Final 
Judgment, Defendants must each pay a civil penalty to the United States 
in the amount of $2.5 million (for a total of $5 million) and are 
subject to an injunction requiring them to establish procedures to 
prevent future violations.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA, unless 
the United States first withdraws its consent. Entry of the proposed 
Final Judgment would terminate this case, except that the Court would 
retain jurisdiction to construe, modify, or enforce the provisions of 
the proposed Final Judgment and punish violations thereof.

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

    Canon is a Japanese corporation that sells a variety of products in 
or into the United States, including printing products, cameras, and 
medical imaging equipment. Toshiba is also a Japanese corporation that 
sells a variety of products and services in or into the United States. 
TMSC was a wholly owned subsidiary of Toshiba that manufactured and 
sold medical imaging equipment worldwide, including into the United 
States.
    As a result of accounting irregularities causing it to restate 
several years' worth of earnings, Toshiba needed to improve its balance 
sheet prior to the end of its fiscal year on March 31, 2016. 
Accordingly, Toshiba decided to sell TMSC. In December 2015, Toshiba 
started the process to sell TMSC. Canon was one of the buyers 
interested in TMSC. By the beginning of March 2016, Canon and Toshiba 
were actively negotiating the terms of the possible sale of TMSC to 
Canon. At this point, Canon and Toshiba did not believe that they could 
file under the HSR Act and observe the waiting period and have the sale 
of TMSC close by March 31. Toshiba and Canon devised a scheme to enable 
Canon to acquire TMSC, allow Toshiba to recognize the proceeds from the 
sale by the close of its fiscal year, and avoid observing the waiting 
period required by the HSR Act.
    Pursuant to this scheme, Toshiba and Canon caused the creation of a 
special purpose company, MS Holding Corporation (``MS Holding''). MS 
Holding was the device that Toshiba and Canon used to evade the HSR 
Act. During March 15-17, 2016, in a multi-step process, Toshiba 
transferred ownership of TMSC to Canon in a manner designed to evade 
notification requirements. First, Toshiba rearranged the corporate 
ownership structure of TMSC to make the scheme possible: it created new 
classes of voting shares, a single non-voting share with rights custom-
made for Canon, and options convertible to ordinary shares. Second, 
Toshiba sold Canon TMSC's special non-voting share and the newly-
created options in exchange for $6.1 billion, and at the same time 
transferred the voting shares of TMSC (a $6.1 billion company) to MS 
Holding in exchange for a nominal payment of nine hundred dollars. 
Later--in December 2016--Canon exercised its options and obtained 
formal control of TMSC's voting shares. This scheme masked the true 
nature of the acquisition. When Toshiba sold its interests in TMSC, 
while nominal voting-share ownership was divested by Toshiba and passed 
to MS Holding, true beneficial ownership passed to Canon. MS Holding 
bore no risk of loss, and no meaningful benefit of gain, for any 
decrease or increase in TMSC's value. Rather, it was Canon which bore 
that risk or would realize any potential gain from TMSC's operations. 
MS Holding merely served to temporarily hold TMSC voting securities for 
Canon's benefit. Therefore, Canon became the owner of TMSC in March 
2016 when it paid Toshiba the $6.1 billion purchase price for the 
company.
    The transactions described above were subject to the notification 
and waiting periods of the HSR Act. The HSR Act and the thresholds in 
effect during the time period relevant to this proceeding required that 
each Defendant file a notification and report form with the Department 
of Justice and the Federal Trade Commission and observe a waiting 
period before Canon acquired TMSC.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The proposed Final Judgment imposes a $2.5 million civil penalty 
against each Defendant (a total of $5 million) and an injunction 
designed to address the violation alleged in the Complaint and deter 
Defendants and others from violating the HSR Act. The United States 
adjusted the penalty downward from the maximum permitted under the HSR 
Act because Defendants are willing to resolve the matter by consent 
decree and avoid prolonged litigation. The relief will have a 
beneficial effect on competition because the agencies will be properly 
notified of future acquisitions, in accordance with the law. At the 
same time, neither the penalty nor the injunctive relief will have any 
adverse effect on competition.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    There is no private antitrust action for HSR Act violations; 
therefore, entry of the proposed Final Judgment will neither impair nor 
assist the bringing of any private antitrust action.

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

[[Page 30242]]

Court's determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court. In 
addition, comments will be posted on the U.S. Department of Justice, 
Antitrust Division's internet website and, under certain circumstances, 
published in the Federal Register. Written comments should be submitted 
to:

Kenneth A. Libby
Special Attorney, United States
c/o Federal Trade Commission
600 Pennsylvania Avenue, NW
CC-8404
Washington, DC 20580
Email: [email protected]

    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 is satisfied, however, that the proposed relief is an 
appropriate remedy in this matter. Given the facts of this case, 
including Defendants' willingness to settle this matter, the United 
States is satisfied that the proposed civil penalty and injunction are 
sufficient to address the violation alleged in the Complaint and to 
deter violations by similarly situated entities in the future, without 
the time, expense, and uncertainty of a full trial on the merits.

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 Grp., 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 mechanisms to enforce the final 
judgment are clear and manageable'').
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations 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\
---------------------------------------------------------------------------

    \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

[[Page 30243]]

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 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 to the APPA,\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.'').
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    \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).
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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.

Date: June 10, 2019

Respectfully submitted,

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Kenneth A. Libby,

Special Attorney, U.S. Department of Justice, Antitrust Division, c/
o Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, 
DC 20580, Phone: (202) 326-2694, Email: [email protected].

[FR Doc. 2019-13534 Filed 6-25-19; 8:45 am]
 BILLING CODE 6750-01-P