DOJ"S Response to Comments - West-Thomson-Merger - September 23, 1996 10/14/96 HyperLaw, Inc.®

DOJ DOJ"S Response to Comments - West-Thomson-Merger - September 23, 1996

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96/9/23—U.S. et al v The Thomson Corporation and West Publishing Company,

Plaintiff's Response to Public Comments




1401 H Street, NW )

Suite 4000 )

Washington, DC 20530 )

(202) 307-5779 )






STATE OF WASHINGTON, and ) Civil No. 96-1415 (PLF)



Plaintiffs, )

v. )





Defendants. )





A. Divestiture of the Publications Enumerated in the Decree Adequately Protects Competition

1. Divestiture of competing products, not companies and supporting infrastructure

2. Availability of legal editors

3. Divestiture products independent of a cross-referencing "system"

4. California

5. Brand names

B. The Option to Official Reporter Contract States Provision is Appropriate and Adequate Relief for the Violation Alleged in the Complaint

1. California

2. Washington

3. Wisconsin

4. Other states

C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option to Extend Critical Thomson Content Licenses Adequately Protects Competition in the Comprehensive Online Legal Research Services Market


2 Product differentiation

3. Auto-Cite divestiture

4. Overall competition in the comprehensive online legal research services market

D. The Star Pagination License Eases a Significant Barrier to Entry and is Procompetitive

1. Validity of West's star pagination copyright claim

2. Abandonment of star pagination copyright claim

3. Text copyright

4. Other antitrust violations

5. Citation to first page of an opinion

6. Level of license royalty fees

7. Large publishers

8. Other markets

9. The need for a text license in unrelated to this merger transaction

10. Selection of cases

11. Description of product or service

12. License fee per format

13. Challenges of West's copyright

14. The confidentiality provision is intended to protect the licensee and could encourage procompetitive discounting

15. Arbitration

16. The Internet

17. License fee for books

18. Other comments regarding the star pagination license

E. Plaintiffs Used Appropriate Merger Analysis in Examining this Merger

F. Plaintiffs Should Not Require Divestiture of the Juris Database

1. There is no conflict of interest within the Department on this matter

2. Familiarity with legal publishing industry

G. Miscellaneous Comments — unrelated to merger or unsupported by the investigation



Pursuant to the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16 (b)-(h) ("Tunney Act"), the United States and the attorneys general of the states of California, Illinois, Massachusetts, New York, Washington, and Wisconsin hereby respond to the public comments received regarding the proposed Final Judgment in this case. [1]



On June 19, 1996, the United States Department of Justice ("the Department") and the seven plaintiff state attorneys general's offices filed the Complaint in this matter. The Complaint alleges that defendants Thomson Corporation ("Thomson") and West Publishing Company ("West"), in violation of Section 7 of the Sherman Act, 15 U.S.C. § 18, proposed a merger that was likely substantially to lessen competition.

Simultaneously with the filing of the Complaint, the plaintiffs filed the proposed Final Judgment and a Stipulation signed by all the parties that allows for entry of the Final Judgment following compliance with the Tunney Act. A Competitive Impact Statement ("CIS") was filed and published in the Federal Register on July 5, 1996. The CIS explains in detail the provisions of the proposed Final Judgment, the nature and purpose of these proceedings, and the practices giving rise to the alleged violation.

As the Complaint and CIS explain, the merger as originally proposed was likely to reduce or eliminate competition between Thomson and West in several specific markets in three categories: enhanced primary law, secondary law, and comprehensive online legal research services. Complaint ¶¶ 24 and 25. The proposed Final Judgment is intended to prevent the expected lessening of competition caused by the merger in those specific markets.

As a remedy to particular competitive concerns in enhanced primary and secondary law product markets, the Department, seven states, Thomson, and West agreed to certain product divestitures, the mandatory licensing of the internal pagination from West's National Reporter System ("star pagination"), and, in the case of official reporter contract states, an option to those states to obtain a new official publisher and to require divestiture of Thomson's official reporter assets.

These divestitures of enhanced primary and secondary law products are also intended to protect consumers by ensuring continued vigorous competition between Lexis-Nexis and WESTLAW in the "comprehensive online legal research services" market after the merger, but the plaintiffs agreed also to the extension of certain licenses to Lexis-Nexis, a division of Reed Elsevier, Inc., and the divestiture of Auto-Cite to address this concern.

The 60-day period for public comments expired on September 3, 1996. As of September 23, 1996, plaintiffs had received comments from 26 persons.2

The comments come from a variety of sources. The most extensive comments are submitted by Lexis/Reed Elsevier; Alan Sugarman, President of HyperLaw, Inc. ("HyperLaw"); and Matthew Bender & Company, Inc. ("Matthew Bender"). Lexis/Reed Elsevier is the owner of the only existing competitor to West in the comprehensive online legal research services product market. Alan Sugarman and Matthew Bender are currently engaged in copyright litigation with West in the District Court for the Southern District of New York. Other comments are from private attorneys, librarians, individuals, non-profit organizations, government organizations, and one anonymous commenter.



In the legal publishing industry, there are a number of contentious legal, business, and public policy issues being debated. Many of these issues involve the merging parties or the Department of Justice. This fact has generated a large number of comments that do not relate to the specific law violations charged in the Complaint or even to the merger in any way.

The Court's responsibility under the Tunney Act is to determine whether entry of the proposed Final Judgment is Awithin the reaches of the public interest." United States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993) (emphasis added, internal quotation and citation omitted). The Court may not look beyond the Complaint "to evaluate claims that the government did not make and to inquire as to why they were not made." United States v. Microsoft, 56 F.3d 1448, 1459 (D.C. Cir. 1995) (emphasis in original). Thus, comments that relate to conduct plaintiffs did not pursue are beyond the scope of Tunney Act review for the reasons set forth fully in section III, below.

Many of the comments raise issues not relevant to this merger or in this Tunney Act proceeding. Rather, they are statements about:

- other public policy issues in the legal publishing industry;

- issues in litigation in other non-merger cases;

- conditions in the legal publishing industry — unrelated to the merger — that make it less competitive than the commenter believes it could be;

- arguments that plaintiffs should have brought a different case; and

- individual complaints about behavior of one of the merging parties, unrelated to the merger.

In general, this Response mentions these comments and explains why they are not the proper subject of this proceeding. Where appropriate, the comments are placed in context.

Each of the comments that is relevant to this Tunney Act proceeding is addressed below. In general, they fall in three categories:

- Some comments raise relevant issues that the decree has already resolved. Plaintiffs explain the proper interpretation of the decree and demonstrate why this is the case.

- In three instances, comments raise issues of ambiguity in the decree. To resolve the matter, plaintiffs have agreed with defendants on new, clarifying language for the decree.

- Other comments make criticisms that simply are not warranted. For example, they are premature, or go to matters that will happen after the Final Judgment is entered, or are otherwise unfounded.

Because a number of the commenters adopted or replicated the comments of other commenters, plaintiffs have organized this Response by subject to avoid redundancy. An appendix lists the comments submitted and cross-references to the places where they are discussed in this Response. Many of the arguments made by Lexis/Reed Elsevier in its Motion to Intervene and accompanying papers were essentially comments on the decree, or they repeated or elaborated their previous comments; accordingly, such Lexis/Reed Elsevier arguments are addressed in this Response.

A. Divestiture of the Publications Enumerated in the Decree Adequately Protects Competition

Several commenters expressed concern that the divested publications will not be viable without divestiture of additional products and rights.[3] Viability of divestiture assets is an important concern in virtually every merger case, and plaintiffs in this case carefully reviewed these issues and took steps in the proposed Final Judgment to ensure viability of the divested publications. We believe that when the terms of the proposed Final Judgment are carefully examined, it will be clear that these concerns have been adequately addressed.

1. Divestiture of competing products, not companies, and supporting infrastructure

Professor Robert Oakley of the Georgetown Law Center comments as Washington Affairs Representative of the American Association of Law Libraries ("AALL"). The AALL stated, at the beginning of the governments' investigation, that it was neutral on the Thomson/West merger, and in its comment it reiterates that it remains neutral. At the same time, the AALL questions certain aspects of the proposed Final Judgment.

AALL states that some of its members are concerned that individual titles are required to be divested rather than subsidiary companies.[4] They think this may mean some individual titles will not continue to be viable entities in the market after divestiture. They are concerned that the divestiture products share a "supporting infrastructure" with other, non-divested products, and that at least some of the divestiture publications are an essential component of a "larger system of legal research." Divestiture of such non-divested products would mean ordering defendants to divest products where there were no product overlaps.

Plaintiffs agree that the future viability of divestiture products is a legitimate concern and assert that this concern is fully addressed in the decree. The governments' investigation examined the supporting infrastructure of the parties very carefully. Except in the case of California Reports and Deering's California Code [5], production costs are not formally allocated between or among Thomson products to an extent sufficient to question the viability of individual products, and plaintiffs discovered relatively little evidence of joint production of Thomson products. This means such products can be viable on a stand alone basis, provided the acquirer has the necessary editorial staff and production infrastructure. For this reason, plaintiffs have ensured that acquirers of divestiture products will have access to these resources. The proposed Final Judgment provides that acquirers receive all production assets of the divestiture products, including intellectual property, work in progress, plates, films, master tapes, machine-readable codes for CD-ROM production, existing inventory, pertinent correspondence and files, a copy of the current subscriber list, all related subscriber information, advertising materials, contracts with authors, software, and, at the acquirer's option, computers and other physical assets. Proposed Final Judgment at ¶II.B. Also at the acquirer's option, Thomson must agree to provide transition production of the product on behalf of the acquirer (essentially as a contract publisher) for a reasonable period of time and a reasonable price.[6] In order to facilitate divestiture, provisions in the Proposed Final Judgment specifically say prospective purchasers can have access to personnel, physical facilities, and financial documents. Id. at ¶II.E. And, the proposed Final Judgment states that Thomson/West shall not interfere with any negotiations by acquirers to make offers of employment to Thomson/West employees whose primary responsibility is the production, sale or marketing of divestiture products. Id. at ¶II.F. Thomson/West must preserve the divestiture products until divestiture is made, must not reassign employees to avoid their being hired by acquirers, except for transfer bids initiated by employees which must be reported to plaintiffs. Id. at ¶VIII.A-C. Finally, all divestitures are subject to the approval of the United States with the consultation of the state plaintiffs, and divestitures of state-specific products are subject to the approval of the United States and the appropriate state plaintiff. Approval of the divestitures will only be made if, to the sole satisfaction of the appropriate plaintiffs, the divestiture product(s) can and will be operated by the acquirer as viable, ongoing product lines. Thus, the decree has properly addressed the issue of viability of divested assets and contains adequate provisions to protect viability.

2. Availability of legal editors

Gary L. Reback at the law firm of Wilson Sonsini Goodrich & Rosati submitted comments on behalf of Lexis/Reed Elsevier. Reed Elsevier, the Anglo-Dutch corporation that owns Lexis-Nexis, had 1995 revenues of $5.8 billion. Lexis-Nexis is the sole competitor to West's WESTLAW service. The comments of Lexis/Reed Elsevier express concern that there is an inadequate supply of qualified legal editors to maintain the divestiture products. In its Motion to Intervene and accompanying papers, Lexis/Reed Elsevier claims that Thomson/West has a "monopoly in editorial staff." Memorandum in Support of Motion to Intervene at 22.

Plaintiffs agree that a capable editorial staff is needed to continue these divested products. But a qualified purchaser of the divestiture products can hire editorial staff pursuant to the divestiture terms or secure them elsewhere in the market.

On the basis of our investigation, plaintiffs believe that the divestiture products will attract a strong, capable buyer, which has the capability to ensure their viability. Plaintiffs understand, from the reports submitted pursuant to the proposed Final Judgment, that several significant publishing firms, including Lexis/Reed Elsevier itself, have indicated interest in purchasing the divestiture assets. These potential buyers already possess editorial staffs and publishing infrastructure. Other possible buyers include firms that could hire staff and create infrastructure to accompany the divestiture product.

Furthermore, the decree provides, as noted above, that the acquirer of the divestiture products will have access to relevant Thomson employees for purposes of making offers of employment. Of course, such employees are free to decide whether or not to accept such an offer of employment. But they may be expected to carefully consider whether future prospects are better at the acquiring firm, if the product on which they have worked is being divested.

In addition, there is market evidence of the ability of prospective acquirers to obtain qualified legal editors. A number of legal publishers and some states employ trained editorial staffs who editorially enhance their respective law products. For example, Michie, which is also owned by Reed Elsevier, employs an editorial staff which enhances over 20 state code products. Another commenter, CD Law (a company which has been very successful with its own Washington state product) prepares headnotes for the official Washington state reports. Another such example is the editorial staff at the Bureau of National Affairs ("BNA"), which editorially enhances United States Law Week. Similarly, the States of New York, Illinois, and Massachusetts write their own headnotes for their official case reporters. Thomson uses contract employees for some of its editing. The preceding is not intended to be an exhaustive list, but is included only to provide representative examples of the fact that qualified editorial staffs are now widely employed, and there is no "monopoly" of legal editors, as Lexis/Elsevier claims. A suitable publisher which uses the provisions of the decree and other sources could assemble a capable editorial staff.[7]

3. Divestiture products independent of a cross-referencing "system"

Other comments suggested that the divestiture products are integrated in a "research system." Lexis/Reed Elsevier's Motion to Intervene also raises this issue. See Declaration of Kendall F. Svengalis in Support of Lexis-Nexis' Opposition to the Entry of the Proposed Final Judgment ¶¶ 7-9.

Some of these comments relate to the viability of the divested products, an appropriate Tunney Act comment. This was an issue the plaintiffs considered carefully and concluded that divestiture of independent products was sufficient. Other comments, however, essentially suggest that the plaintiffs should have brought a different case — one based on loss of competition between research systems. For reasons stated in Section III, the latter sort of comment is not appropriate in a Tunney Act proceeding.

The proposed Final Judgment is the culmination of an extensive investigation by Plaintiffs. In the course of the investigation, plaintiffs subpoenaed documents from defendants, deposed employees and officers of defendants, and interviewed numerous law librarians, legal publishers that compete against defendants, and other legal publishing industry participants. Plaintiffs carefully examined whether significant numbers of users of legal research tools consider Thomson's "Total Client Service Library" or "TCSL"[8] to be a substitute for West's "Key Number" system. See section II.C.1 below.

In fact, most law schools do not teach that the TCSL and West Key Number system are substitutes. This is true, for example at the Georgetown University Law Center, at which Professor Oakley, who commented on behalf of AALL, teaches.

Nor did our investigation reveal that competition between the parties' individual products is based on competition between TCSL and Key Numbers. Rather, the competition between individual products is based primarily on substantive content in the publications. For example, in New York, both firms have annotated statutes. They are substitutes primarily because they both offer statutory text and annotations to relevant case law. For case law reporters, both firms offer case law publications that are substitutes primarily on the basis of containing case law and editorial enhancements such as headnotes and summaries. The parties' divestiture publications do compete in part because they are enhanced with cross-references.

At the conclusion of the investigation of these issues the Department carefully considered, under the prevailing legal standard, the evidence supporting the theory that the merger harmed competition between competing research systems, and determined that no further action was warranted on the evidence before it.

After careful investigation, the governments decided that it would not be necessary to divest all the publications to which divestiture products are cross-referenced in order to keep the divestiture products competitive. Lexis/Reed Elsevier complains that "the Consent Decree exacerbates the proposed acquisition's anticompetitive effects in its failure to require Thomson to provide continued access to, and use of, the portions of the Thomson system that the Department is not proposing for divestiture."

Divestiture products that contain cross-references to Thomson products will still be able to include those cross-references. Thomson has never objected to, and has in fact encouraged, cross-references (of the kind contained in the TCSL) to their products by other publishers. The governments' investigation revealed many instances of other publishers cross-referencing to Thomson, West, and other firms' publications. For example, Matthew Bender includes American Law Reports ("ALR") references in several of its publications. Thomson has confirmed to the Department that it will continue this practice of open citation to Total Client Service Library products. [9] See attachment A. Plaintiffs expect that the acquirer(s) of the divestiture products will continue to be able to cross-reference Thomson publications, which will help the divestiture products remain competitive.

Lexis/Reed Elsevier's comments express concern that Thomson will charge monopoly prices for cross-referencing to ALR and other Thomson publications that are part of the TCSL. This concern is unfounded as Thomson has never claimed a proprietary interest in such cross-references and has never charged a royalty for them. Lexis/Reed Elsevier is also concerned that Thomson may "save itself the cost of maintaining ALR." The implication is that Thomson would stop publishing this popular publication because ALR is a substitute for a West product or products. This fear is not supported by substantial evidence. See II.C.1.

Similarly, Lexis/Reed Elsevier comments that the acquirer of United States Reports, Lawyers Edition will not have access to the annotations at the back of each reporter. Plaintiffs disagree. The proposed Final Judgment provides that defendants will divest to the acquirer the annotations in existing volumes. Proposed Final Judgment at ¶ II.B. The acquirer will be responsible for continuing to provide such annotations in future volumes.

4. California

Mr. L. David Cole, an attorney in Beverly Hills, California, a subscriber to Thomson's CD-ROM titles in California, is concerned that the divestiture of Deering's California Code Annotated will separate it from other titles such as California Reports, the Witkin Library, and Miller & Starr, and that such separation will result in "unintegrated sets, thereby frustrating the reason for my choice of products . . . . " He states, "my . . . investment in Deering's and California Reports will be rendered substantially less valuable when the related treatises are no longer under common ownership and integrated."

The precise issue identified by Mr. Cole's comment was considered seriously during the investigation of potential competitive effects caused by the Thomson/West merger — that is, whether any of the parties' competing products involve such integration with other, non-competing products that they could not after divestiture, compete in the marketplace. Specifically, the issue of integration of Thomson's California products was investigated and reviewed. It was determined by the plaintiffs that Deering's Code and the California Reporter are integrated sufficiently to indicate that they should both be divested. [10] On the other hand, there was insufficient evidence that one or both of those two products are sufficiently integrated, in the minds of consumers, with Witkin or any other Thomson product, to warrant a challenge involving more titles.

5. Brand names

Mr. Alois V. Gross, an attorney in Minneapolis, Minnesota, comments that trade names must be divested, including Lawyer's Cooperative, Bancroft-Whitney, LawDesk, TCSL, and American Jurisprudence. He believes these names carry valuable goodwill and brand recognition and are essential to the divestiture products' viability. Where brand names appeared important to the divestiture product, their divestiture has been included. For example, Deering's Annotated California Code, Corbin on Contracts, and United States Reports, Lawyers Edition, all will be divested. The brand names Mr. Gross mentions cover a broad range of products and are not those primarily associated with the specific divestiture products.

B. The Option to Official Reporter Contracts States Provision is Appropriate and Adequate Relief for the Violation Alleged in the Complaint

Several commenters expressed concerns about the scope and terms of the decree provision which requires Thomson to grant the Official Reporter Contract States the option to terminate their Thomson contracts for publishing official reporters. [11]

1. California

On August 7, 1996, Mr. Edward Jessen submitted comments as Official Reporter of Decisions and Secretary of the Advisory Committee for Publication of the Official Reports of the State of California. He questioned whether the proposed Final Judgment adequately addressed the fact that California Reports and Deering's California Codes share costs and text and should be together to stay competitive. Lexis/Reed Elsevier' Motion to Intervene and accompanying papers also expressed this concern.

Deering's and its assets are required to be divested. California Reports, and all its related assets, also must be divested if the governing entity in California awards the official publisher contract to another firm. Mr. Jessen is the head of that governing body. This provision was inserted into the Final Judgment (Washington and Wisconsin are treated similarly) for the sole purpose of allowing the state governing bodies to concur in the need for divestiture of official reporter assets and to decide who should buy the official reporter assets.

Plaintiffs believed this would be a superior approach to attempting directly to require the abrogation and assignment of the contracts with the state judicial branch entities. [12] Therefore, the affected states were effectively given the option to obtain full divestiture. Mr. Jessen and his committee are given control over whether to require divestiture of California's official reporter assets or continue with Thomson. The committee can re-open bidding for the state contract, and give significant weight to ownership of Deering's Code. This places California in a similar position to its pre-merger position. This action should satisfy Mr. Jessen's concerns completely.

Mr. Jessen has now indicated he no longer has the concerns he initially addressed. On September 17, 1996, Mr. Jessen sent a letter to Thomas Greene, Senior Assistant Attorney General at the State of California Department of Justice, in which he stated that, "I now fully support the proposed consent decree for the Thomson/West transaction as sufficient to protect California's interests as far as my office is concerned." (The entire correspondence is contained in attachment B). This letter appended Mr. Jessen's September 16, 1996 letter to Brian Hall, President of the West Information Publishing Group.

In his letter to Mr. Hall, Mr. Jessen stated,

I now understand that this issue was thoroughly investigated by the California Attorney General's Office and by the United States Department of Justice. I also understand that any sale of Deering's and the other California products to be divested must be approved under the consent decree by the California Attorney General's Office and the United States Department of Justice, and that Thomson is not free to select any purchaser of its choosing regardless of its qualifications. I am confident that the California Attorney General's Office and the United States Department of Justice will exercise their powers of approval as provided in the proposed consent decree to ensure that the purchaser of any divested product will have the managerial, operational and financial capability to compete effectively in the publication and sale of that product.

The plaintiffs agree that there is a nexus between California Reports and Deering's California Code.

2. Washington

E. Scott Wetzel comments on behalf of CD Law, Inc. of Seattle, Washington. CD Law publishes case law, administrative law, and other Washington state legal materials on CD-ROM and the Internet. CD Law comments that "Thomson and West competed vigorously for the contract to publish the official Washington state reports." Plaintiffs agree. However, as CD Law concedes, Thomson and West were not the only competitors for the contract — Darby, Michie, and CD Law also submitted bids.

CD Law comments that "there are virtually no publishers capable of competing with West/Thomson" and summarily dismisses companies such as Darby and Michie. Darby currently holds the official reporter contracts for Georgia and the Virginia Supreme Court, and recently was named the successful bidder in Michigan, beating out Thomson among others. Darby has in the past had the official reporter contract for Massachusetts and Arkansas. Michie publishes numerous print and CD-ROM codes and case reporters. Further, Michie is owned by Reed Elsevier, the second largest legal publisher in the United States. In addition to these two serious bidders, the governments' investigation revealed that there are a number of other companies which have bid on and/or published official reporters in other states and which possibly could bid in Washington.

CD Law is also concerned that defendants will not renew its contract to write the headnotes for the official state reports. This concern does not necessarily flow from the merger, as Thomson could have decided not to renew the contract and instead to write its own headnotes in the absence of the merger. In addition, CD Law is not precluded from contracting with the successful bidder for a contract to write headnotes in the event that the state of Washington decides to exercise its option to terminate its contract with Thomson and awards the contract to another bidder.

CD Law complains that it will not be able to compete with defendants because its product will lack headnotes and case summaries; however, even if Thomson does not contract with CD Law to perform these editorial enhancements, CD Law has not explained why it cannot continue to create the enhancements for its own CD-ROM products. The governments' investigation revealed that CD Law has been a vigorous competitor in Washington for a number of years, and CD Law has not advanced any reasons why that should not continue to be the case.

3. Wisconsin

John H. Lederer, Esq., a retired attorney in Oregon, Wisconsin, expresses concern that defendants will be the only bidders for the Wisconsin official reporter contract. As noted above, the governments' investigation revealed that a number of companies bid for various official reporter contracts in a number of states. Any of these companies potentially could bid for the Wisconsin contract.

4. Other states

Ms. Karen Ehmer comments on behalf of Darby Printing Company, a printer of court opinions in a number of states. Darby asks that Illinois, Massachusetts, and New York (where Thomson publishes other official reporters) also be given the opportunity to re-open bidding for official reporter contracts.

With respect to the official reporters for Illinois, Massachusetts, and New York, competition for these was considered carefully by the plaintiffs in the course of the investigation. This comment relates to markets not included in the Complaint, and thus it is not an appropriate Tunney Act comment. Plaintiffs note, however, that as Darby knows (it was the official printer of Massachusetts opinions until 1995 when it lost the contract to Thomson), in these three states the states themselves write the headnotes and summaries and make other editorial judgments about content. Thomson acts as a printer, rather than an editorial writer in these states. In these states, then, existing editorial competition is only between the state and West. More important, however, is that a court-ordered divestiture of assets is not required for the state to choose a new printer that is capable and adequate to replace Thomson. Printers do not also need to be law publishers in order to compete. There are many printers that can do the job, including Darby (e.g., in Massachusetts, or in Michigan where Darby won the printing contract in 1995). Finally, plaintiffs note that the state attorneys general's offices from Illinois, Massachusetts and New York joined the Complaint and settlement.

Ms. Kathleen Jo Gibson comments on behalf of the New Mexico Compilation Commission. The Commission wants the proposed Final Judgment to include language giving New Mexico, and other states that have official reporters, an option to re-open bidding similar to that now in the proposed Final Judgment for California, Washington, and Wisconsin. The Commission would also like a permanent, royalty-free license to New Mexico court opinions reported by West.

The merger does not affect competition for the sale of official reporters in New Mexico. Thus, it would be inappropriate to require the relief requested by the New Mexico Compilation Commission. West has been the official reporter of New Mexico opinions since 1933. Thomson simply does not compete in New Mexico with an official reporter. In fact, Thomson has not represented even potential competition with West; according to the Commission, "For a number of reasons, it is not economical for small states such as New Mexico to contract with any other publisher . . . " New Mexico's dispute with West over the copyrightability of West-reported New Mexico opinions likewise is not related to any actual or potential competition likely to be lost as a result of the Thomson/West merger.

C. Divestiture of Auto-Cite and Lexis/Reed Elsevier's Option to Extend Critical Thomson Content Licenses Adequately Protects Competition in the Comprehensive Online Legal Research Services Market

The complaint alleged that the merger could harm consumers by adversely affecting competition in the comprehensive online legal research services market. Specifically, there was a risk that Thomson, a supplier of content to Lexis-Nexis, could use this position to harm Lexis-Nexis and benefit WESTLAW (which Thomson would now own) in a way that would harm consumers. [13] In reviewing the situation created by this merger, thus, the question is whether the Lexis-Nexis service could be so degraded by Thomson's postmerger actions that consumers (not Lexis/Reed Elsevier) would be hurt.

In reviewing how competition in this market functions, plaintiffs observed that Lexis/Nexis and WESTLAW compete not only by offering virtually identical data bases of court decisions, but also by offering various, different secondary legal materials and a wide variety of non-legal materials; their products are differentiated. Competition in the market to date has resulted in two services that are partly similar, partly differentiated and constantly changing. The merger does not affect the similar part of the services — the text of court decisions. Thus plaintiffs considered the effect on the differentiated portion of the services. Plaintiffs noted that Lexis/Reed Elsevier itself, of course, is a large multinational publishing corporation. Plaintiffs are also aware that shortly after the Thomson/West merger announcement, Lexis/Reed Elsevier entered a new arrangement with Matthew Bender (another significant legal publisher) in which Matthew Bender's content will be included in the Lexis/Nexis service. Plaintiffs also noted that this market is evolving extremely rapidly —indeed, it virtually did not exist before the Lexis-Nexis service was created in the 1970s.

In this context, plaintiffs evaluated a possible case and potential relief. Prior to the governments' review of this merger, Thomson and Lexis negotiated extensions of the most important licenses for Thomson content, both legal and non-legal.[14] Virtually all of the licenses were extended for five additional years and generally at the existing price, i.e., prices that had been negotiated when Thomson did not own WESTLAW and thus could have no anticompetitive incentives with regard to Lexis/Nexis. With the extensions, the average length of the licenses was about seven years.

The plaintiffs thus evaluated whether additional relief was necessary to ensure vigorous competition in this market. Two additional protections were determined to be necessary. First, for certain key non-legal data bases, Thomson was required to offer to extend Lexis/Reed Elsevier's licenses for an additional five years. These data bases (ASAP, Predicasts and Investext) had been identified by Lexis/Reed Elsevier as particularly significant. Second, Auto-Cite was required to be divested, so that Lexis/Reed Elsevier could obtain it from a source independent of Thomson (or buy it itself). These two provisions, together with the previously negotiated license extensions, and the normal market incentives and capabilities of Lexis/Reed Elsevier (such as those that led it to a new partnership with Matthew Bender), should be sufficient to maintain vigorous competition that would protect consumers in the comprehensive online legal research services market.

Lexis/Reed Elsevier comments that these actions are not enough. These arguments are not new. Plaintiffs heard them from Lexis/Reed Elsevier during the investigation and investigated them extensively and intensively.

Specifically, Lexis/Reed-Elsevier makes two complaints. First, they seek divestiture of TCSL. Second, they criticize the divestiture of Auto-Cite. These points are essentially reiterated in their Motion to Intervene.


Lexis/Reed Elsevier complains that plaintiffs should have obtained an additional divestiture — the TCSL — in order to enable Lexis/Reed Elsevier to use the components of the TCSL to compete with WESTLAW's Key Numbers and headnotes. Plaintiffs disagree. Plaintiffs carefully considered this argument and all the evidence relevant to it — and found it wanting. The information filed by Lexis/Reed Elsevier with its Motion to Intervene itself demonstrates why this argument is without merit.

Lexis/Reed Elsevier asserts that there are four "portions of the TCSL" that are "the most important . . . enhancements" and that Lexis/Nexis must license "[i]n order to compete with Westlaw": "the annotations found in ALR and Lawyer's Edition, the AmJur encyclopedia, and Auto-Cite." Emrick Declaration ¶7. In fact, the enhancements that are important to Lexis/Reed Elsevier will continue to be available. First, Lawyer's Edition is, of course, a divestiture product. The new buyer, if other than Lexis/Reed Elsevier, certainly will have every incentive that Thomson had to earn revenue by licensing Lawyer's Edition to Lexis/Nexis. Second, Auto-Cite, too, is a divestiture product. If Lexis is not the buyer of this product, it will have access to Auto-Cite, as explained more fully in the next section. Third, the claim that AmJur is essential to Lexis/Nexis is undercut by Lexis/Nexis' own behavior. AmJur was only added to the Lexis/Nexis service in February 1996 after Lexis/Nexis fitfully negotiated for it over a course of several years.

Fourth, ALR is touted by Lexis/Reed Elsevier as a substitute for West's Key Number system in finding cases. Emrick Declaration ¶8. But a document attached to the Emrick Declaration directly undercuts this claim. This Thomson document reports on research with focus groups of lawyers and librarians, addressing the issue of whether ALR is a substitute for West Key Numbers. The results were that "ALR was not well received as being a place to start research" even among groups "where familiarity with ALR was skewed in ALR's favor." Emrick Declaration Exhibit B at 11, 12.[15] In focus groups of Lexis/Nexis sales people, "No one understood the analogy of ALR as a competitive alternative to Headnotes." Id. at 9. [16]

There is simply insufficient evidence that ALR must be divested to preserve competition with the West key number system. Under the Tunney Act the Department has the duty to review the evidence and determine the litigative prospects. Lexis/Reed Elsevier asks the court to adopt this prosecutorial function.

2. Product differentiation

Similarly, Lexis/Reed Elsevier argues that divestiture of TCSL is necessary to allow Lexis/Reed Elsevier to offer a product that is differentiated from that offered by defendants. Plaintiffs disagree. The governments' investigation revealed that the Lexis-Nexis and Westlaw services are today quite different and that Lexis-Nexis continues to add new, non-Thomson publications and databases to its service. In addition, we note that Lexis/Reed Elsevier, on its own, was able to negotiate and extend its licenses for these components into the next decade. For example, Lexis/Reed Elsevier negotiated a license for ALR through 2002 and a license for AmJur2d through 2006. This may provide an additional cushion for further differentiation of Lexis-Nexis and addition of additional secondary sources. Furthermore, Lexis/Reed Elsevier's joint venture with Matthew Bender, a leading legal publisher with numerous primary and secondary law products, will bolster its ability to continue to offer a good quality, differentiated product. Finally, the proposed Final Judgment requires Thomson to grant Lexis/Reed Elsevier the option to extend its License Agreements for three non-legal databases — Investext, ASAP, and Predicasts[17] — which are offered on Nexis, for an additional five years. Thus, Lexis/Reed Elsevier may, at its option, extend these contracts until 2010. Proposed Final Judgment at ¶ X. (As with the legal publications above, Lexis/Reed Elsevier and Thomson have already negotiated extended contracts for these databases into the next decade.) In the judgment of plaintiffs, this is sufficient time for Lexis/Reed Elsevier to seek other sources, differentiate its product in other ways, or create competing databases.

3. Auto-Cite divestiture

Lexis/Reed Elsevier also comments that the proposed Final Judgment "impairs Lexis-Nexis' contract rights to Auto-Cite, thus affirmatively damaging its ability to compete." The plaintiffs disagree. As explained above, Thomson has never discouraged citations to its publications and the acquirer of Auto-Cite will be able to continue to cite to defendants' publications, including ALR. In addition, the acquirer of Auto-Cite will be bound by the terms of the existing license between Thomson and Lexis/Reed Elsevier. Further, the acquirer — if it is a firm other than Lexis/Reed Elsevier — has every incentive to continue to offer Lexis/Reed Elsevier a competitive citator rather than risk losing that revenue stream.

Lexis/Reed Elsevier further comments that defendants should have been required to divest "all rights and interests" in Auto-Cite and complains that

Thomson is thus not divesting itself of Auto-Cite at all: it is retaining the database itself, the staff trained in its use; the (apparently exclusive) right to use important elements of the system, i.e., the cross-references and integration with the ALRs and other Thomson products; and other important incidents of ownership, such as the ability to sublicense. [18]

The governments' investigation revealed that Lexis/Reed Elsevier needed to be able to license Auto-Cite and provide it on its system in order to effectively compete in the comprehensive online legal research service market. The proposed Final Judgment addresses this concern and ensures that the acquirer of Auto-Cite will be able to continue to provide Auto-Cite to Lexis/Reed Elsevier. The proposed Final Judgment provides that the divestiture of Auto-Cite:

shall include the sale of all Auto-Cite trademarks and service markets, the assignment of the Auto-Cite License Agreement, and delivery of a transferrable royalty-free perpetual license of the Auto-Cite case database as of the time of the divestiture and all software, trade secrets, and know-how used in producing and updating the Auto-Cite case database.

¶II.B. Thus, Thomson must divest to the acquirer everything it needs to be able to continue to offer Auto-Cite to Lexis/Reed Elsevier, other than new cases, which the acquirer can get from a number of sources, including Lexis/Reed Elsevier.

Furthermore, the plaintiffs will ensure that Auto-Cite will be acquired by a qualified bidder. The proposed Final Judgment provides that the United States after consultation with the state plaintiffs must be satisfied that: (1) the acquirer can and will operate Auto-Cite as a viable, ongoing product; (2) the purchase is for the purpose of competing effectively in the sale of Auto-Cite; and (3) the acquirer has the managerial, operational, and financial capability to compete effectively in the sale of Auto-Cite.[19]

Professor Saloner's concern that (1) "the acquirer will merely be given a license to the product, without the personnel that currently produce Auto-Cite," and that (2) "Lexis-Nexis has lost effective access to Auto-Cite because of the failure to include critical components of the service (e.g., prospective access to ALR) in the divestiture" are addressed above and also in Sections II.A.2 and II.A.3. Declaration of Saloner ¶¶19-23.

Lexis/Reed Elsevier also complains that Thomson has not provided it with basic information about Auto-Cite, including cost information, so that it could "evaluate and make a meaningful bid." Plaintiffs investigated this complaint and requested additional information from Thomson about the bidding process. The governments' inquiry revealed that the bidding process is at an early stage. At this point, only non-binding expressions of interest, not actual bids, have been requested by defendants. A number of interested companies, including Lexis/Reed Elsevier, have expressed interest in bidding.

During the next stage of the bidding process, prospective bidders will receive a presentation by Thomson personnel and access to a due diligence room containing proprietary documents. Ironically, because of its confidential license agreements with Thomson, Lexis has access to key data that no other bidder can obtain and therefore has more information than any other bidder. Thus, prospective bidders will have adequate information before formulating their bids.[20]

4. Overall competition in the comprehensive online legal research service market

Matthew Lee, Executive Director of Inner City Press/Community on the Move ("ICP") also expressed concerns about competition in the comprehensive online legal research services product market. ICP comments that the comprehensive online legal research service product market was already an "over-concentrated and anticompetitive" duopoly and faults plaintiffs for taking no action to change this situation. ICP's complaint is unrelated to the merger. ICP's complaint essentially seeks a Sherman Act section 2 monopolization case in the comprehensive online legal research services market. Whatever the merits of such an action, it is far beyond the scope of this Tunney Act proceeding on a Clayton Act section 7 matter.

O.R. Armstrong submitted comments on behalf of Geronimo Development Corporation, St. Cloud, Minnesota. Geronimo Development publishes in CD-ROM format, Virginia case law, statutes and administrative materials, along with U.S. Fourth Circuit and Supreme Court case law. Geronimo claims that because Lexis will be weakened by the merger, West's enhanced lower federal court case law monopoly therefore will be strengthened. Plaintiffs disagree. Our response to Lexis' comments relating to the merger's effect on it are above in II.C. However, even if Geronimo's claim about weakening Lexis were true, the merger cannot accurately be described as strengthening West's position in any enhanced federal case reporters, because there is insufficient evidence to support a successful allegation that Lexis is an actual or potential competitor in that market.

D. The Star Pagination License Eases a Significant Barrier to Entry and is Procompetitive

A number of commenters raised concerns about the decree provision which requires defendants to grant licenses to star paginate to West's National Reporter System publications.[21] This license provision was included in the proposed final judgment because West's prior refusal to grant such licenses was a barrier to entry into some markets affected by the merger, particularly emerging electronic forms (particularly CD-ROM) of enhanced primary law and secondary law.

West's claim of copyright infringement by "star pagination" is controversial. It has been the subject of litigation. In current litigation the United States has stated its position that use of star pagination does not constitute copyright infringement.[22] If that position prevails, then licenses pursuant to the decree will be unnecessary. If that position does not prevail, then the license provisions will reduce existing entry barriers and thus make these markets more competitive.

Because the issue of West's alleged pagination copyright has been so controversial, this provision of the decree attracted a substantial number of comments. Most of them are comments about this general public policy issue and do not relate to harm caused by the merger and to the violation alleged in the complaint. Each is discussed below.

1. Validity of West's star pagination copyright claim

Many of the commenters questioned the propriety of including the Star Pagination License provision in the proposed Final Judgment.[23] Specifically, these commenters believe that the license provision somehow endorses West's claim that star pagination infringes its copyright. This argument ignores the plain language of the decree.

Language in the Stipulation, proposed Final Judgment, and Competitive Impact Statement clearly states that the license provisions created in settling this case shall not have any bearing, in any forum, on any West intellectual property claim. This provision was added specifically in anticipation that some persons might incorrectly infer that the proposed star pagination license endorses West's star pagination claim. If defendants ever attempt to use the Final Judgment, or any pleading in this case, to support any intellectual property claim in any other forum, any opposing party can simply cite the relevant disclaimer language to rebut Thomson/West.

In addition, the proposed final judgment has been revised with the addition of the following language to the disclaimer:

Defendants have agreed that they will not use the model license contained in this Final Judgment, or the fact that any such license was included in the Final Judgment, in any litigation or negotiations with third parties to support the validity of their position on star pagination.

2. Abandonment of star pagination copyright claim.

Several of the commenters who made the foregoing point also argued that plaintiffs should have insisted on total abandonment of the claim that star pagination infringes West's copyright. For example, Morgan Chu at the law firm of Irell & Manella submitted comments on behalf of Matthew Bender. Matthew Bender cites two cases for the proposition that this decree should require abandonment of star pagination claims; however, these cases presented entirely different factual situations. United States v. Borland International, Inc., 1992-1 Trade Cas. (CCH) ¶ 69,774 (N.D. Cal. 1992), involved a merger of firms that controlled competing database programs and related intellectual property. Had Borland not been barred from pursuing Ashton-Tate's copyright infringement claims against "clones," the resulting increase in concentration from the acquisition would have been anticompetitive. Thus, the abandonment of infringement claims directly addressed competitive harm posed by the transaction. In this case, the deal does not combine two competing sets of intellectual property rights; no one is seeking the right to star-paginate to Thomson products. Therefore, Borland does not apply.

The relief in Hoechst AG, 60 Fed. Red. 49609 (F.T.C. 1995), was even more narrowly drawn. Hoechst's acquisition of Marion Merrell Dow, Inc. ("MMD"), put it in control of Cardizem CD, the dominant product in the market for once-a-day Dilitiazem, which is used to treat, among other things, high blood pressure and angina. Before the acquisition, Hoechst and another firm had been developing a drug to compete with Cardizem CD, and MMD had sued them for patent infringement. In ensuring that the third company would be able to continue to develop the competitive drug as effectively as it would have absent the merger, the decree required dismissal of the infringement suit. Since Hoechst had left the new drug in the other firm's hands and the infringement suit was dismissed, there was no need for the sweeping relief obtained in Borland.

Matthew Bender further comments that defendants should have been forced to abandon West's star pagination claims because they will give Thomson and West an unfair advantage in creating new products which integrate Thomson's secondary law with West's primary law. Matthew Bender argues that other publishers will not be able to compete with these new, integrated products because of the star pagination claim. However, Matthew Bender does not explain how the star pagination license leaves it worse off. If it prevails in its litigation with West, of course, Matthew Bender will not need a license at all to star paginate. If however, it loses, the license ensures that Matthew Bender will be able to obtain a star pagination license at a reasonable rate. The creation of new, integrated products is a procompetitive development, which the antitrust laws encourage. To the extent this acquisition makes that creation possible, the proposed Final Judgment should not prevent it.

3. Text copyright

Mr. Sugarman claims the proposed Final Judgment unfairly benefits Thomson/West in HyperLaw's private suit with defendants, for infringement of a West (claimed) copyright in the text of cases reported in West reporters. He apparently believes the proposed star pagination license will be falsely characterized by West to sway and mislead courts and the United States Congress, to persuade them to adopt West's view of its copyright claim in the text of West-reported cases. Plaintiffs disagree. The proposed Final Judgment does not support or even address West's claim to a text copyright. The decree's disclaimer language applies equally to any West text copyright claim.

4. Other antitrust violations

Mr. Sugarman states that, "the Antitrust Division has punched a free antitrust waiver ticket to West-Thomson. It will be able to throw its weight around in the legal market without any concern as to enforcement from the Antitrust Division." There is no support for this statement. Thomson/West remains subject to full antitrust investigation and enforcement on any conduct other than this specific merger.

Mr. Sugarman states, "there is nothing in Hart-Scott-Rodino [the premerger notification filing statute, codified at 15 U.S.C. § 18a] that prohibits the United States from initiating antitrust enforcement action when it develops evidence of violation of the antitrust laws in the course of a Hart-Scott-Rodino investigation." Plaintiffs agree. If an antitrust violation unrelated to this merger were to be uncovered during the course of the investigation, or in any other investigation, the appropriate remedies would necessarily be sought in other fora, for example, by challenging the conduct in a civil complaint, a grand jury proceeding and/or indictment in a potentially criminal matter, by amicus brief in a private suit, or by competition advocacy in legislative or regulatory forums.

Mr. Sugarman worries that the Department, West and others mischaracterize the star pagination license as "resolv[ing] any possible antitrust concern regarding the availability of star-pagination licenses." We agree that such a statement, by itself, would be a mischaracterization of the intended effect of the proposed license. The plaintiffs believe only that the proposed license, along with the other relief obtained in this settlement, resolves any possible antitrust concerns arising from this merger. The plaintiffs have no control over the mischaracterization of any part of the proposed Final Judgment by any other person. However, the terms and circumstances of the star pagination license are sufficiently clear to make successful mischaracterizations of the kind that concerns Mr. Sugarman highly unlikely.

5. Citation to first page of an opinion

Matthew Bender comments that it believes that West claims to have "a copyright interest in the initial parallel citations (i.e., the cite to the first page of a case) in the National Reporter System that may be infringed when a competitor uses such citations." The governments' investigation revealed that West claims it has a copyright interest in such "initial parallel citations," but concedes that third party use of such citations is a fair use and as such is a defense to infringement and that such citations are "effectively in the public domain." Further, West has never enforced such a copyright interest, and defendants have stated that they have no intention of enforcing such a copyright interest in the future. See Attachment A.

6. Level of license royalty fees.

There were many comments on the level of the pagination license fees. After carefully reviewing these comments and after obtaining more information about license fees, the parties negotiated a revision to the schedule of pagination license fees contained in the proposed Final Judgment. With this revision, the fees per thousand characters would be as follows:

1st year of a license 4¢

2d year of a license 4¢

3d year of a license 6¢

4th year of a license 6¢

5th year of a license 8¢

6th year of a license 8¢

7th year of a license 9¢

Subsequent years 9¢

This new schedule, compared to that in the initial proposal, reflects the comments on the need for lower fees to more effectively encourage new entrants. The new schedule has overall lower fees for such entrants. Furthermore, the new schedule both begins at a lower rate and allows a longer period in which a new entrant benefits from low rates.

7. Large Publishers

A number of commenters express concerns that the star pagination graduated royalty rate (license fee) structure will benefit only large publishers.[24] The revised fee structure is likely to result in entry by some legal publishers, which should result in competition being preserved and perhaps enhanced by new competition. The "graduated" structure is specifically aimed at encouraging entry of publishers who are new or small, by providing a lower license price in the early years. This should assist start-up firms with less capital in the early years. Then, after the entrant has had a few years to establish its new publication the rate levels off.

It also should be remembered that the license fee is a function of the number of cases for which star pagination is licensed. Thus, the size of the total fee payment should be compared to the number of cases and expected sales, not the size of the publisher. Finally, the license provides that the fee is not to exceed the stated rates; therefore, the license specifically allows for negotiation and payment of a lower fee.

8. Other markets

Ms. Lyn Warmath, Library Director at Hirschler, Fliescher, Weinberg, Cox & Allen in Richmond, Virginia expresses concern about the level of the fee anticipated for the star pagination license. Ms. Warmath calculates the license fees for various publications, for example, she calculated the license to duplicate West's Federal Supplement to be $632,000 in the first year. This product, however, is not affected by the merger, so the relevance of this point is dubious.

Essentially, the plaintiffs' approach to this case is to encourage competition in the enhanced primary and secondary law product markets alleged in the Complaint where a star pagination license might be useful. Simply, competition for federal reported case law (other than the enhanced Supreme Court reporters for which divestiture is required) is not affected by the merger of Thomson and West, because Thomson does not publish products that compete with West's Federal Supplement or Federal Reporter series. The proposed Final Judgment therefore addresses the relief deemed necessary to preserve competition.

The Department has said publicly that it hopes the mandatory star pagination license encourages entrants in other markets. These generally pro-competitive results, if they occur, would be ancillary to the remedy sought in the proposed Final Judgment.

9. The need for a text license is unrelated to this merger transaction

Mr. Sugarman insists that the proposed star pagination license should also include a mandatory text license and a waiver of any Thomson/West copyright claims on intermediate copying as long as any published case does not include West head notes and summaries. Similarly, Eleanor J. Lewis of the American Association of Legal Publishers ("AALP"), comments on the unavailability of an archive of federal judicial decisions. Norman Wolfe of International Compu Research, Inc. ("ICRI") comments that "[t]here is no provision in either the settlement document or the licensing agreement for obtaining the full text of judicial opinions." Plaintiffs disagree with the proposition that a text license should have been included in the decree.

The relevant question is not what license would be the best possible license to address all possible issues involving the legal publishing industry in a vacuum. The proposed license is an attempt, in connection with the other relief, to remedy the effect of this particular merger. The straightforward purpose of the star-pagination license is to open access to the de facto star pagination standard in the markets alleged in the Complaint. A text license or intermediate copying waiver is not necessary to address any competitive harms flowing from this merger. In fact, in the enhanced primary case law markets alleged in the Complaint for which the proposed star pagination license is intended to encourage entry, court opinions are available to potential entrants from the courts, so a text license and an intermediate copying waiver are not necessary.

Mr. Sugarman insists that the Final Judgment include relief on the issue of West's claimed text copyright merely because the text of judicial opinions is difficult to obtain. HyperLaw alleges that West has made it difficult to obtain opinions in some jurisdictions and that this places firms like HyperLaw at a competitive disadvantage. Plaintiffs agree that judicial opinions may be difficult to obtain in some jurisdictions, and that this is an entry barrier to some enhanced primary law markets. Complaint ¶30. However, there is no evidence that the merger of Thomson and West, or the proposed Final Judgment, will affect in any way HyperLaw's ability to obtain the text of judicial opinions. Mr. Sugarman states, "Thomson was not only a potential competitor in the creation of archives of opinions, but was well on the way to doing so." Plaintiffs are unaware of any basis for this assertion. The most likely broad-scope source of opinions competing with West, in those instances where the difficulty in obtaining opinions may be a barrier to competition, is Lexis/Reed Elsevier. Moreover, in the enhanced primary law markets alleged in the Complaint, the text of opinions is not difficult to obtain.

10. Selection of cases

Mr. Sugarman complains that Section 1.03 of the proposed star pagination license defines "Licensee Case Reports" as reports of decisions "selected for reporting by Licensees," and it therefore will allow Thomson/West to refuse to license if it determines that the potential licensee did not select the decisions, but instead copied the selection of West, a state, or some other party. Ms. Lewis of the AALP expresses concern that "only licensing original compilations and West's right to determine what is an original compilation" will undermine the purpose of the license. Matthew Bender comments, "West apparently can still challenge a licensee's use of star pagination if West contends that the licensee has not made its own selection, coordination, and arrangement of cases." Plaintiffs disagree.

The plaintiffs interpret the proposed license to mean that a license must be issued for star pagination any set of cases selected by the licensee, even if West or any other person had previously selected a similar set of cases. Defendants have stated to plaintiffs that they would not consider a CD-ROM product which included exactly the same cases included in a West print reporter to be an infringement. Indeed, Matthew Bender has introduced such a product and we are informed defendants have not challenged it as a "selection" infringement. Defendants would object to a print product which simply replicated a West print reporter; however, there is no reason to expect entry into print products and, in any event, CD-ROM products compete with print productsand thus provide competitive constraint..

11. Description of product or service

A number of commenters think the proposed star pagination license should not unnecessarily require licensees to disclose competitive product information to defendants in order to obtain a star pagination license.[25] For example, Eleanor Lewis of AALP comments, "A licensee should be required to disclose to West only the most general ideas about the proposed use of the licensed materials."

Plaintiffs agree. There is no requirement in the proposed license that detailed information be disclosed. Section 1.03 merely requires licensees to provide a short, general description of the licensee's product or service to defendants, i.e., a title. This limited disclosure is necessary so that it is clear what product is covered by the license. Ultimately, the licensee must disclose what cases are included in their product so that the license fee can be calculated. This simple information is not the type that should or could be considered sensitive competitive information, as the cases selected by the licensee for publication will subsequently be public information.

12. License fee per format

A number of comments maintain that the provision in the proposed star pagination license that requires the payment of a separate license fee for each format — books, CD-ROM, on-line or the Internet — erects too high a barrier to potential entrants.[26] However, the governments' investigation indicated that many, perhaps most, prospective entrants would only consider one medium — CD-ROM. One of the main objectives of the licensing provision was to facilitate entry specifically into the new technology/new product of CD-ROMs incorporating analytical material and hypertext links to relevant primary law. Because enhanced primary case law on CD-ROM competes with enhanced primary law in print, CD-ROM entry should be sufficient (with the other relief in the decree) to deter anticompetitive behavior by Thomson/West in either print or CD-ROM.[27]

Additionally, the governments' investigation revealed that for those existing publishers who publish in more than one format, for example CD-ROM and on-line, the latter medium is used primarily to provide updates (new cases) and therefore does not duplicate the cases on the CD-ROM and would not require multiple payment of the license fee.

13. Challenges to West's copyright

Mr. Sugarman and Matthew Bender, who are currently engaged in copyright litigation with West, contend that the prohibition in the proposed star pagination license that bars licensees from challenging the validity of West star pagination copyright claims ignores Lear v. Adkins, 395 U.S. 653 (1969), and assures that no West copyright claim will be challenged. Ms. Lewis states that the license "requires competing publishers to renounce their First Amendment right to express their opinions about the Licensor's alleged copyright during the term of the license." Mr. Wolfe of ICRI also comments regarding "this obvious abandonment of our First Amendment rights." Plaintiffs disagree.

First, the prohibition in Exhibit B is limited to challenges only to the star pagination claim, not to any other West copyright claim, and is limited in time — only during the duration of the license. Second, it is questionable as to whether the progeny or policy of Lear, a patent case, applies to copyright licenses. See, e.g., Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir. 1987); Nimmer on Copyright § 10.15[B] at 10-134-137 (questioning Rumbleseat). In addition, this prohibition is much more narrowly tailored than the broad no-challenge clauses courts have struck down in patent-license contexts.

Third, this provision will not prevent challenges to the validity of West's star pagination infringement claims; publishers may still choose the option they have today — publish without a license and litigate the star pagination copyright claim's validity. The proposed Final Judgment simply provides prospective publishers with an entry option they would not otherwise have.

Fourth, a licensee may exercise his First Amendment rights and speak out publicly and lobby for changes relating to this issue.

14. The confidentiality provision is intended to protect the licensee and could encourage procompetitive discounting

Mr. Sugarman, Ms. Lewis, and Mr. Wolfe comment that the confidentiality provision in the proposed star pagination license will permit Thomson/West to engage in preferential licensing and to continue to engage in abusive licensing practices in secret. Plaintiffs disagree. The confidentiality provision in the star pagination license is intended to protect the product development and marketing plans of the licensee, not any secrets of Thomson/West. Thomson/West's minimum license terms are already public in Exhibit B. The company is required to grant a license — in at least this favorable a form — to anyone who wants one. Failure to fulfill this requirement and any licensing obligation would be a violation of the Final Judgment and grounds for contempt.

Concerns about secret, preferential licensing and abusive licensing practices may in fact be concerns that Thomson/West might enter some licenses that are more favorable to the licensee than Exhibit B. But entering into licenses with more favorable terms will generally be desirable and pro-competitive. Moreover, a "most-favored-nation" clause (one that states Thomson/West will not grant to any licensee a more favorable license) would discourage pro-competitive discounting that Thomson/West may undertake on its own in response to market forces.

15. Arbitration

Mr. Sugarman states that provisions in the proposed star pagination license requiring arbitration in West's home state will lead to bias in favor of West on any arbitrated matter. Ms. Lewis agrees and comments that arbitration should occur in Washington, D.C. or the home state of the licensee. Mr. Wolfe comments, "[i]t is not appropriate for the jurisdiction for any dispute to be any place other than Washington, DC."

Plaintiffs disagree. Such provisions are standard in licenses which are negotiated at arms length in the context of private business transactions, and are usually included only for the convenience of traveling. There is no reason to call into question the honesty, integrity, or ability of any impartially appointed arbitrator based solely on his or her location or citizenship in the State of Minnesota. In addition, the decision of the panel of arbitrators is appealable to the appropriate state or federal court.

16. The Internet

James P. Love of CPT comments that the "license agreement is written in such a way that the subscribers must agree to the terms of the license, and Thomson must approve the license, making it extremely unlikely that the citations will ever be available for browsing on the Internet." We interpret Mr. Love's concern to be that the license provisions to which a licensee's subscribers must agree may be used to restrict some form of Internet publication of licensed material on the Internet.

The possibility that Mr. Love suggests appears unrelated to the acquisition. Provisions of this kind are conventional in intellectual property licenses. Nothing would have prevented West, prior to the acquisition, from insisting on such provisions in licenses. The acquisition should not aggravate Mr. Love's concern, and therefore, there is no need for the remedy to alleviate it. In short, this comment addresses a public policy concern not related to the merger.

17. License fee for books

Mr. Sugarman claims that the proposed star pagination license is ambiguous as to the license fee charged for books. Plaintiffs intended that the fee would be paid by the licensee in the year the book is printed. In other words, books first printed, then stored, and sold in later years would not require additional fee payments for the later years. In order to avoid any confusion, the language of the proposed License Agreement will be modified. Defendants have agreed to the following modification, which plaintiffs will include when we later move the Court to enter the decree:

2.01. Star Pagination License. During the term of this Agreement, subject to the terms and conditions hereof, including, without limitation, the timely payment by Licensee to Licensor of the licensee fees provided for in Section 2.03 hereof, Licensor hereby grants to Licensee, and Licensee hereby accepts from Licensor, a non-exclusive, non-transferable (except as specifically provided in Section 6.05 hereof), limited License (i) . . . (iii) to license and/or distribute such [Licensee Product(s)/Service(s) ] to Licensee Subscribers subject to Licensee Subscriber Limitations; . . .

2.03. License Fees. In consideration of the license granted under Section 2.01 hereof, Licensee shall pay

Licensor the license fees provided for in this Section 2.03;

provided, however, that the license fee for [print Licensee

Product(s)] need only be paid for the year in which the

[print Licensee Product(s)] are printed.

18. Other comments regarding the star pagination license

Mr. Sugarman believes that third party information providers should be able to sell or license case law data which includes licensed star pagination and text as long as the purchasers or licensees have entered into or are subject to a pagination license agreement with Thomson/West.[28]

Plaintiffs agree. Section 2.02 of the license addresses this point specifically: "nothing in this Agreement shall prohibit Licensee from selling, leasing, licensing or otherwise transferring Licensee Case Reports that contain Licensed NRS Pagination to third party information providers, but such transfers shall not include or grant any right to reproduce, publish, broadcast, distribute, loan, rent, lease, sell or otherwise transfer, make available or use the Licensed NRS Pagination contained in such Licensee Case Reports." Any third party information provider that obtained a star pagination license could, of course, use the transferred star pagination under its own license with Thomson/West. There is nothing in the proposed license to the contrary. Nevertheless, to clarify that the license fee need only be paid by the publisher, and not also by the third party information provider, plaintiffs proposed and defendants reviewed and agreed to the following language:

2.01. Star Pagination License. . . . (iv) to have a third party obtain, on behalf of Licensee, NRS Pagination from West Case Reports contained in NRS Reporter publications and include such NRS Pagination (which shall become Licensed NRS Pagination when so included) in corresponding Licensee Case Reports contained in [Licensee Product(s)/Service(s)].

Mr. Sugarman comments that Thomson/West should be required to agree not to assert future database protection legislation and anti-RAM copying claims against licensees, for use of star pagination. This issue is specifically addressed in the proposed license in Exhibit B. The proposed license ensures that Thomson/West will not contend that a licensee's use of star pagination infringes any intellectual property right. Section 2.01 also provides that "Licensor [Thomson] shall not challenge, under any present or future legislation, any use by the Licensee of Licensed NRS Pagination if Licensee's use of same conforms to the terms of this Agreement." (emphasis added).

Mr. Sugarman comments that the proposed Final Judgment should require West-Thomson to negotiate star pagination licenses in good faith. Plaintiffs disagree because the proposed Final Judgment requires Thomson/West to grant the license contained in Exhibit B to the Judgment to anyone who wants one; therefore, good faith is not relevant. Any refusal to license would be punishable as contempt.

Mr. Sugarman states that the proposed star pagination license is not an "open license," ". . . when it will be negotiated in private and arbitrated in private pursuant to confidentiality provisions agreed to by the Antitrust Division." Plaintiffs disagree. The proposed license is in fact "open" within the common meaning of that word. The terms are public and mandatory, and are attached to the proposed Final Judgment as Exhibit B. While it is true that negotiations with potential licensees seeking more favorable terms than the proposed license may be non-public, licenses arranged for under more favorable terms will not cause an anticompetitive effect and in fact should be pro-competitive.

Mr. Sugarman feels that the requirement in the proposed star pagination license that licensees prominently display West internal pagination should be deleted. In fact, Section 2.05 of the license merely requires licensees to present NRS Pagination "no less prominently than any other unofficial pagination or pinpoint locators." (emphasis added). Plaintiffs cannot determine what possible anticompetitive effects, if any, could arise from this provision. Mr. Sugarman does not state any.

Mr. Sugarman is concerned that the proposed star pagination license does not include a mandatory license agreement for statutes. Star pagination to West's statutes has not become an issue. We are aware of no jurisdiction where it is conventional to cite to statutes by West pages. A license agreement on the text of statutes themselves is not called for in the context of the competitive issues raised in this merger investigation. Statute text is available in every jurisdiction, for every potential entrant, and in every product market involving statutes affected by the merger.

E. Plaintiffs Used Appropriate Merger Analysis in Examining this Merger

Ms. Trembley comments that "[i]n the past, Thomson practices have made acquired products both more labor intensive and costly to maintain." She is concerned that Thomson-owned products in the past have had their price raised at a higher rate than West products. Similarly, Mr. Marc Ames, an attorney in New York City, comments that he has been involved in a lengthy billing dispute with Lawyers Cooperative Publishing, a part of Thomson. He brings this to our attention to "point out and underscore a shift in attitude when business becomes too large as the result of mergers and acquisitions."

Past price increases by Thomson are beyond the scope of this merger challenge. To the extent they indicate that price rises have resulted when Thomson takes over specific competing products, evidence of past price increases is useful as evidence that similar product pairings should be prohibited. Plaintiffs believe such pairings have been identified and prohibited in this case by the required divestitures. Plaintiffs note that it does not necessarily follow that a large firm always will engage in harmful pricing or service practices to its customers. Competition leads to lower prices and increased service, quality and innovation. However, there is no way to prove a likely decrease in competition due to a merger without first carefully examining the factual details in specific product markets.

Mr. David C. Harrison, an attorney in Philadelphia, Pennsylvania, asks how the Justice Department can approve the merger of "the second largest legal publisher with the largest legal publisher, giving the new company a virtual monopoly." Even if it was true, a merger of the second largest and largest legal publisher would not necessarily lead to an irreplaceable reduction in competition in legal publishing.[29] As stated above, increases in industry concentration is an important indicator of possible anticompetitive effects of any merger, however, courts require more before a merger challenge will be successful. Generally, courts require provable relevant product markets and a lack of likely substitutes or entry. The plaintiffs believe every plausible, legally recognizable, anticompetitive effect of the Thomson/West merger has been addressed in the Complaint and proposed Final Judgment.[30]

F. Plaintiffs Should Not Require Divestiture of the JURIS Database

1. There is no conflict of interest within the Department on this matter

Tax Analysts ("TA") comments that the United States Justice Department ("the Department") should be forced to disclose the contents of its former JURIS database in order to remove an alleged barrier to entry described in paragraph 30 of the Complaint — that in many jurisdictions case law is difficult to obtain. TA also believes that because the Department's Civil Division, joined by West, is defending a Freedom of Information Act ("FOIA") (5 U.S.C. §552 et. seq.) request by TA for the JURIS database in another action, the Department has an irreconcilable conflict of interest that causes the Department to act against the public interest. TA filed a motion to intervene in this Tunney Act proceeding on July 25, 1996, which was denied by an order of Judge Richey of this Court.

TA is a non-profit vendor of publications relating to legal tax issues, that logically wishes to obtain historic reports of legal opinions and statutes cheaply, or for free, in order to offer these to its customers. It applied for but was denied a FOIA request to obtain the JURIS database.[31] TA filed a FOIA action against the Department in the District of Columbia in January, 1994, seeking an order requiring disclosure of the database. West intervened. It sought to protect its interest as the original provider of the case reports to the Department; West continues to sell similar reports to its other customers. The Department has been defended at all times in that matter by attorneys of the Federal Programs Branch of the Civil Division. In January 1996, Judge Kessler granted the partial motion of the Department to dismiss the suit as it related to the status of the West-supplied case reports as an "agency record" under FOIA. The order was certified as final on April 1, 1996. Tax Analysts v. Department of Justice and West Publishing Company, 913 F. Supp. 599 (D. D.C. 1996).

TA was denied the database it sought because Judge Kessler held that the Department did not control the West-supplied case reports, which were provided under a contract with West. The contract restricts the Department's right to use, dispose of, or transfer the database; and it therefore does not qualify as an "agency record" for purposes of disclosure under FOIA. Tax Analysts, at 604. At no time has the Department asserted any proprietary or copyright interest in the database, nor has it made any assertion on behalf of West's copyright claim. The Department's defense in the FOIA matter is not related to any conduct of Thomson or West relating to the merger. TA has appealed Judge Kessler's ruling.

The Antitrust Division's unrelated investigation of the proposed merger of Thomson and West began on March 12, 1996, pursuant to the Clayton Antitrust Act, 15 U.S.C. §12 et. seq. At all times, the Department's investigation, challenge and settlement negotiations of the Thomson/West matter have been conducted by attorneys of the Merger Task Force of the Antitrust Division or their direct supervisors within the Antitrust Division, and in direct coordination with several state attorneys general's offices. At no time during the investigation or subsequent challenge has the Department or any plaintiff made any assertion relating to the JURIS database.

In the Tax Analysts defense, the Department seeks to protect against unwarranted disclosures under FOIA and to protect against violating its contract with a private entity. The Thomson/West merger challenge and settlement, on the other hand, involves the public interest reflected in the federal antitrust statutes for the preservation of competition in markets affected by mergers. There is simply no conflict or inconsistency between the public interests sought to be protected by the two cases.

TA argues that the Department has an irreconcilable conflict of interest resulting from its litigating relationship with West in the Tax Analysts case. At all times the Department has conducted an independent FOIA defense in the Tax Analysts case. West intervened on its own initiative and has made its own pleadings and assertions. To the extent West's views in that matter coincide with the Department's, joint pleadings were appropriate for judicial economy.

West is not the Department's client in either this or the Tax Analysts matter. TA avers that the Department has adopted the interests of West in the Tax Analysts case, and substituted them for the public interest. The Department has a clearly articulated and valuable role in protecting the public interest against unwarranted FOIA disclosure and breach of government contracts with private persons. Department attorneys are strictly prohibited from representing other persons in matters involving the United States. 18 U.S.C. §203. Moreover, West's interest in the Tax Analysts case is commercial, while the Department has no commercial interest whatsoever in the JURIS database.

There have been no Department attorneys involved at any time in both matters. The first time any attorney from the Antitrust Division's Merger Task Force (handling the Thomson/West matter) had any contact or even knew the identity of any attorney from the Civil Division handling the Tax Analysts matter was after Tax Analysts filed a motion to intervene in this matter.

TA does not seek to protect rights that would be impaired by the entry of the proposed Final Judgment. TA seeks relief directed at the conduct of the Department and which would place requirements on it alone. Essentially, TA seeks to prohibit a merger between two parties unless and until another party not involved in the proposed merger takes some affirmative action to increase competition (they believe) in the legal publishing industry. The paragraphs in the Complaint towards which TA points as examples of the harm not remedied by the proposed settlement are pre-existing industry facts that will not be changed by the merger. (See e.g., paragraph 30 of the Complaint, which states, "[p]ast and/or current opinions simply are not available from many courts, and in many others, obtaining access is costly and time-consuming."). In short, this is a public policy issue unrelated to the merger.

2. Familiarity with LegalPublishing Industry

Another allegation made by TA is that the Department is unfamiliar with the workings of the legal publishing industry, particularly with the role of online legal publishing. The Department regularly investigates, challenges, and reaches settlement with participants in many industries in which it is not a participant. In order to develop expertise in an industry for purposes of merger enforcement, the Department uses past experience, examines documents, conducts interviews and depositions, employs industry experts, and reviews publicly available materials. These activities were all done in the investigation of the Thomson/West merger.

In addition, during this merger investigation, an unprecedented level of cooperation was established between the Department and several states, and the expertise of seven state attorneys general's offices was combined. The state attorneys general have joined in the Complaint and proposed Final Judgment after participating in fact-gathering and legal analysis. Two of the states, New York and California, devoted full-time employees to the investigation throughout its duration. All of the state governments provided valuable assistance due to their intimate knowledge of state-related publications.

TA states the Department has mischaracterized existing competition between Lexis and WESTLAW in the "comprehensive online legal research services" market and argues that other small legal publishers exist. However, the existence of small, online legal publisher has no impact on the anticompetitive effects alleged to result from the Thomson/West merger in the comprehensive online legal research services market in which there are only two participants at this time.

G. Miscellaneous Comments — unrelated to merger or unsupported by the investigation

A number of comments were received which raised concerns which are either unrelated to the merger or asserted conclusions which were not supported by the governments' investigation.

Ms. Cyndi A. Trembley, President of the Association of Law Libraries of Upstate New York, comments, "Thomson will have control of a significant portion of the secondary sources that aid in interpreting the law." Kendall F. Svengalis of the Rhode Island State Law Library comments that defendants will control a large percentage of legal publications, and that they therefore should have been required to divest Lawyers Cooperative Publishing ("LCP").

It is true that Thomson has owned and now owns, as a result of its merger with West, a significant number of secondary law titles. However, that fact alone is not grounds on which to base a merger challenge under the antitrust laws. Elements of a legally recognizable merger challenge include proving that the merging firms actually compete with each other in one or more product markets and that the effects of that competition will be lost and not replaced after the merger. The burden is also on the enforcing agency or agencies to show that there are insufficient substitutes for the products of the merging firms, and that entry into the product market is difficult. Thus, plaintiffs focused on competing legal publications. A torts handbook does not compete with a contracts treatise, for example. In the proposed Final Judgment, the plaintiffs require divestiture of one of the parties' products in as many product markets as could plausibly be alleged, or that the plaintiffs believed were likely to be allegeable, in a litigated merger challenge.

Mr. Svengalis complains that some of the titles that defendants must divest are relatively small and that only three states must be given the option to rebid their respective official reporter contracts. The fact that some parts of the divestiture list are small does not mean that the entire settlement is inadequate. Mr. Gross states that the bids (for divestiture products) should not be limited to the entire list of divestiture products. The proposed Final Judgment permits Thomson/West to package, initially, the divestiture products in any manner it desires. The only requirements on bidding for divestiture products are contained in the proposed Final Judgment and relate to the need that the divestiture products are sold to some person who will keep them viable and competitive. There is no reason to believe (in fact it may be to the contrary) that the divestiture products will be more viable and competitive in the hands of two or more acquirers. In any event, the divestitures remain subject to approval by the appropriate plaintiffs, who must agree that the products will be kept viable.

There is no reason to believe that "having more legal publishers in the market will result in competitive pricing and higher quality of law products for the consumer," as suggested by Mr. Gross. The relief in this merger challenge addresses the expected loss of competition due to Thomson and West no longer competing with each other. If all the Thomson products go to one able firm, as long as there is no reduction in competition resulting from the divestiture, then any competition lost by the Thomson/West merger will be replaced and preserved.

Mr. Gross comments that Thomson should have to pay a license fee for ALR cites on Auto-Cite, after Auto-Cite is divested. Plaintiffs disagree. It is true that Auto-Cite includes ALR cites. However, there is no requirement that the acquirer of Auto-Cite continue to include ALR references. If the acquirer wants to, however, it is free to continue them. Thomson may receive some incidental benefit to continued ALR references at the option of the acquirer, but if Thomson cares about the cites remaining on Auto-Cite, Thomson can negotiate on its own a contract/license to place them there. The investigation of this merger did not reveal sufficient evidence that the competitive value of Auto-Cite derives from ALR references. Rather, Auto-Cite's value comes from an accurate, up-to-the-date display of case citations, and an accurate display of whether or not a case opinion is still good law by showing the case's direct history.

Mr. Gross claims that the competition between West's Corpus Juris Secundum ("CJS") and Thomson's American Jurisprudence 2d ("AmJur2d") will be eliminated by the merger and therefore one of them should be divested.[32] Plaintiffs disagree. This comment does not relate to any claim made in the Complaint and thus is not relevant. In fact, while they are both referred to as "encyclopedias," there was insufficient evidence that CJS is a strong competitor for AmJur2d in the minds or actual use of consumers.

Geronimo comments that the Complaint fails to address West's monopoly in reporting enhanced lower federal (U.S.) court opinions. Geronimo suggests four remedies designed to open up the market for enhanced lower federal case law. This comment also relates to a market not included in the complaint and thus is not relevant. West reports decisions of lower federal courts in its Federal Supplement and Federal Reporter series. The Complaint does not include a count involving enhanced lower federal case law because Thomson is not even a participant in that market. There also is insufficient evidence to allege that Thomson is an actual potential or perceived potential competitor to West's alleged monopoly in enhanced lower federal case law. That Thomson is a large company with financial resources and editorial expertise does not make it a potential competitor.

Lexis/Reed Elsevier comments that plaintiffs in their press release incorrectly calculated the sales of the divestiture products, which Lexis/Reed Elsevier claims is only $48 million. Plaintiffs disagree. The $72 million figure was based upon information obtained from Thomson about the sales of the divestiture products, including Auto-Cite, and products related to the Official Reporter Contracts. Lexis/Reed-Elseiver's reference to the lower figure apparently does not include the retail revenues of Auto-Cite or the sales of Official Reporters and related products.

Scott Wetzel of CD Law comments that "the Washington States legal publishing market is pervaded with anti-competitive practices that include predatory pricing, exclusive contracts for certain legal materials, and tying agreements. The Department consent decree does little or nothing to prevent or ameliorate these practices." These comments go beyond the allegations in the Complaint. Hence, they are not relevant to the Tunney Act proceeding.

Matthew Lee for ICP complains that West does not offer "any program or provision for granting access to Westlaw and other West resources to non-profits, particularly grassroots civil rights and consumers' groups at reduced or waived fees." Whether defendants offer such programs falls outside of the process of merger review and analysis.

ICP also questions "DOJ's long standing inter-relation with West, particularly the selection of West as the DOJ's legal-materials supplier after, largely due to West's anticompetitive behavior, the DOJ abandoned its 'Juris' project." Since discontinuing Juris, DOJ attorneys have used both Lexis-Nexis and Westlaw. Further, if merely using a product or service were grounds for concern, government attorneys would be unable to investigate and analyze many of the mergers that come before them.

ICP further maintains that "DOJ should attempt to better inform the affected public, especially the 'retail' and low and moderate income segment thereof, of pending DOJ merger reviews, such that the DOJ can receive, and consider, comments from those who stand to be most affected." First, the plaintiffs, during the investigation, sought to receive very wide input from affected users, and in fact received information from an unusually wide number of sources. Second, as required by the APPA, plaintiffs have filed the requisite documents with this Court and published them in the Federal Register and the Washington Post. Furthermore, it would be impossible for plaintiffs to identify all members of "the affected public" and then notify each of these individual and entities of the proposed Final Judgment. In this case, plaintiffs also personally notified many of the individuals and companies who had been involved in the investigation of the proposed Final Judgment.

Some commenters were concerned that politics played a role in governments' investigation and settlement of this matter. [33] There is no political context to this merger challenge or the proposed Final Judgment, and any comments making such accusations are wrong. Recommendations of the settlement reached were made by the Department's career professional staff. We note that the Department of Justice is joined by seven state attorneys general's offices in this matter, all of which are dedicated to impartial law enforcement regardless of politics.

An anonymous commenter alleges that West is in collusion with the United States Congress in the production of United States Code Annotated ("U.S.C.A."). The commenter says whatever company possesses this privileged, insider relationship, whether it be West or Thomson, enjoys an enormous and unwarranted market advantage. Plaintiffs received no other information to support this anonymous allegation. However, any condition of advantage enjoyed by West through its relationships with the Congress or any judicial entity is not affected by the merger of Thomson and West. Thomson may replace West in the position of advantage, but existing competition between Thomson and West is not changed. In any event, Thomson's annotated United States Code product, United States Code Service, is a divestiture product under the proposed Final Judgment.




Once the United States moves for entry of the proposed Final Judgment, the Tunney Act directs the Court to determine whether entry of the proposed Final Judgment "is in the public interest." 15 U.S.C. § 16(e). In making that determination, "the court's function is not to determine whether the resulting array of rights and liabilities is one that will best serve society, but only to confirm that the resulting settlement is within the reaches of the public interest." United States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993) (emphasis added, internal quotation and citation omitted).34 The Court should evaluate the relief set forth in the proposed Final Judgment and should enter the Judgment if it falls within the government's "rather broad discretion to settle with the defendant within the reaches of the public interest." Microsoft, 56 F.3d at 1461. Accord, Associated Milk Producers, 534 F.2d at 117-18.

The Court is not "to make de novo determination of facts and issues." Western Elec., 993 F.2d at 1577. Rather, "[t]he balancing of competing social and political interests affected by a proposed antitrust decree must be left, in the first instance, to the discretion of the Attorney General." Id. (internal quotation and citation omitted throughout). In particular, the Court must defer to the Department's assessment of likely competitive consequences, which it may reject "only if it has exceptional confidence that adverse antitrust consequences will result — perhaps akin to the confidence that would justify a court in overturning the predictive judgments of an administrative agency." Id. 35

The Court may not reject a decree simply "because a third party claims it could be better treated." Microsoft, 56 F.3d at 1461 n.9. The Tunney Act does not empower the Court to reject the remedies in the proposed Final Judgment based on the belief that "other remedies were preferable." Id. at 1460. As Judge Greene has observed:

If courts acting under the Tunney Act disapproved proposed consent decrees merely because they did not contain the exact relief which the court would have imposed after a finding of liability, defendants would have no incentive to consent to judgment and this element of compromise would be destroyed. The consent decree would thus as a practical matter be eliminated as an antitrust enforcement tool, despite Congress' directive that it be preserved.

United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 (D. D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.).

Moreover, the entry of a governmental antitrust decree forecloses no private party from seeking and obtaining appropriate antitrust remedies. Thus, Defendants will remain liable for any illegal acts, and any private party may challenge such conduct if and when appropriate. If any of the commenting parties has a basis for suing Defendants, they may do so. The legal precedent discussed above holds that the scope of a Tunney Act proceeding is limited to whether entry of this particular proposed Final Judgment, agreed to by the parties as settlement of this case, is in the public interest.

Finally, the Tunney Act does not contemplate judicial reevaluation of the wisdom of the government's determination of which violations to allege in the Complaint. The government's decision not to bring a particular case on the facts and law before it at a particular time, like any other decision not to prosecute, "involves a complicated balancing of a number of factors which are peculiarly within [the government's] expertise." Heckler v. Chaney, 470 U.S. 821, 831 (1985). Thus, the Court may not look beyond the Complaint "to evaluate claims that the government did not make and to inquire as to why they were not made." Microsoft, 56 F.3d at 1459 (emphasis in original); See also, United States v. Associated Milk Producers, Inc., 534 F.2d 113, 117-18 (8th Cir. 1976), cert. denied, 429 U.S. 940 (1976).

Similarly, the government has wide discretion within the reaches of the public interest to resolve potential litigation. E.g., United States v. Western Elec. Co., 993 F.2d 1572 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993); United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.). The Supreme Court has recognized that a government antitrust consent decree is a contract between the parties to settle their disputes and differences, United States v. ITT Continental Baking Co., 420 U.S. 223, 235-38 (1975), United States v. Armour & Co., 402 U.S. 673, 681-82 (1971), and "normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with the litigation." Armour, 402 U.S. at 681. This Judgment has the virtue of bringing the public certain benefits and protection without the uncertainty and expense of protracted litigation. Armour, 402 U.S. at 681; Microsoft, 56 F. 3d at 1459.



After careful consideration of these comments, the plaintiffs conclude that entry of the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violation alleged in the Complaint and is in the public interest. The Plaintiffs have moved the Court to enter the proposed Final Judgment after the public comments and this Response have been published in the Federal Register, as 15 U.S.C. § 16(d) requires.

Dated: September 23, 1996 Respectfully submitted,




MINAKSI BHATT (DC Bar #434448)


U.S. Department of Justice

Antitrust Division

1401 H Street, N.W., Suite 4000

Washington, D.C. 20530

Tel: 202/514-8362




Kathleen E. Foote

Deputy Attorney General

50 Fremont Street, Suite 300

San Francisco, CA 94105

(415) 356-6320




Christine H. Rosso




George K. Weber




Stephen P. Houck




Tina E. Kondo




Kevin J. O'Connor


On September 23, 1996, I caused a copy of Plaintiffs' Response to Public Comments to be served by first-class mail upon all parties to this action, and a courtesy copy to be mailed to each commenter.


Minaksi Bhatt


[1] The State of Connecticut does not join in this Response to Comments. Therefore, subsequent references to "the governments" or "the plaintiffs" refer only to the plaintiffs who have signed the response. Return to text.

[2] The comments received as of September 23, 1996, are attached, preceded by a list of the 26 commenters. The United States plans promptly to publish the comments and this response in the Federal Register. Return to text.

[3] Professor Robert Oakley, American Association of Law Libraries; Cyndi A. Trembley, Association of Law Libraries of Upstate New York; Alois V. Gross, Esq.; Gary L. Reback, Esq., Lexis/Reed Elsevier; Kendall F. Svengalis, Rhode Island State Law Library; James P. Love, Consumer Project on Technology. Return to text.

[4] Similar comments were submitted by E. Scott Wetzel, CD Law, Inc. Return to text.

[5] As explained below, both these products are to be divested pursuant to the proposed Final Judgment. Return to text.

[6] Proposed Final Judgment at ¶II.C. The acquirer will control all pricing, promotion, sales, and order fulfillment. Id. Return to text.

[7] The preceding discussion also addresses the argument of Garth Saloner in his Declaration in Support of Lexis-Nexis' Opposition to the Entry of the Proposed Final Judgment that defendants will have a unique incentive to pay editors who work with divestiture products more than the potential acquirer would in order to interfere with an offer by the divestiture buyer. (¶¶13-16). Furthermore, the decree forbids the defendants to interfere with the acquirer's attempt to hire personnel whose primary responsibility encompasses a divested product. Return to text.

[8] The Total Client Service Library includes cross-references that Thomson includes in many of its legal publications. Return to text.

[9] Professor Saloner maintains that "new entrants" are unlikely to come into the markets for enhanced primary law products even if postmerger prices increase, because the cost of developing and introducing a cross-reference methodology for a small set of products would be prohibitive. Declaration of Garth Saloner in Support of Lexis-Nexis' Opposition to the Entry of the Proposed Final Judgment ¶¶17 and 18. However, as explained above, a "new entrant" would be able to cite to the TCSL products and would therefore not have to develop its own cross-reference methodology. Return to text.

[10] The proposed Final Judgment requires immediate divestiture of Deering's Code. The proposed Final Judgment also contemplates the divestiture of California Reports; however, the concurrence of the State Reporter of Decisions is an additional requirement before its divestiture can occur. Return to text.

[11] L. David Cole, Esq.; Edward D. Jessen, California Advisory Committee on Publication of Official Reports; Kathleen Jo Gibson, New Mexico Compilation Commission; Karen Ehmer, Esq., Darby Printing Company; E. Scott Wetzel, CD Law, Inc.; John H. Lederer, Esq. Return to text.

[12] Darby believes that the official reporter assets of official reporter contract states should also be immediately divested. The part of proposed Final Judgment relating to the re-opening of bidding of official state reporter contracts involves a true option to the state governing bodies. These bodies are not required to re-open bidding. The plaintiffs have no information on the requirements that will be placed on bidders by the state governing bodies. There is nothing in the proposed Final Judgment insuring that Thomson will participate in bidding, or requiring states to allow Thomson to participate. Even if Thomson were to participate in a re-opened bidding process, there are no restrictions in the proposed Final Judgment on the state governing bodies' criteria or decision on what firm to pick as a new official reporter or a state's decision to choose Thomson if the state wishes. Return to text.

[13] This "vertical foreclosure" risk is likely to lead to anticompetitive effects on consumers, however, only to the extent that Lexis/Reed Elsevier cannot take market actions to maintain content adequate to allow it to be a vigorous competitor. If the downstream firm (here, Lexis/Reed Elsevier) in a possible vertical foreclosure situation can readily obtain its inputs (here, content) from other sources, or develop the inputs itself, then there is no antitrust violation (even though the downstream firm might prefer simply to continue its existing source of inputs). Return to text.

[14] These licenses included the following materials: (1) legal publications (including Auto-Cite, ALR, U.S.C.S., and AmJur2d); (2) non-legal databases (including ASAP, Predicasts, and Investext); and tax materials from Research Institute of America. Return to text.

[15] Among other points, it was also noted that "[b]oth attorneys and librarians view ALR as one of many available secondary sources, often cited in the same category as law reviews and treatises." Id. at 11. "ALRs were not highly regarded as definitive legal research." Id. at 12. Lexis sales people said that "Attorneys mostly use ALR as a last resort . . . ." Id. at 10. Return to text.

[16] Because the evidence does not support the proposition that ALR is a substitute for West Key Numbers, there is no basis for the claim in the Saloner Declaration (¶ 11) that the price of ALR will rise. Saloner assumed such substitutability. Return to text.

[17] Investext is a collection of approximately 200 brokerage house reports regarding individual equities and industries. ASAP is an indexed consolidation of approximately 450 specialized industry publications. Predicasts includes the following three databases: (1) PROMT, an indexed database of over 1,100 trade and business publications; (2) MARS, an indexed database that includes information relating to advertising and marketing of consumer products and services; and (3) Newsletter, an indexed international database including 650 different newsletters from 165 publishers. Return to text.

[18] James P. Love of the Consumer Project on Technology submitted a similar comment.

Return to text.

[19] Before Thomson offered Auto-Cite as a commercial product on the Lexis online service, it used it internally for editorial purposes. (The same is true of West's Insta-Cite service). The governments' investigation revealed that entirely foreclosing Thomson editors from internally using Auto-Cite for essential, editorial purposes would harm its retained products, which would clearly harm competition. Thus Thomson retains a copy of Auto-Cite and can use that copy (though not, for example, the Auto-Cite trademark). Return to text.

[20] Lexis/Reed Elsevier's real concern appears to be that Thomson could use its copy of the Auto-Cite database to improve WESTLAW, West's comprehensive online legal research service. WESTLAW's counterpart to Lexis-Nexis' Auto-Cite is called Insta-Cite. Insta-Cite only offers a portion of what Auto-Cite offers — it does not offer negative, indirect history before 1972 nor does it offer cross-references to ALR. If Thomson does "upgrade" Insta-Cite, it would be a procompetitive result. The governments' investigation did not reveal — and even Lexis/Reed Elsevier has not argued — that Auto-Cite has to be "better than" Insta-Cite for the Lexis-Nexis service to compete with WESTLAW. Continued access to Auto-Cite is sufficient. Further, West could have, absent the merger, to fill in the Insta-Cite database. Return to text.

[21] Lynn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen; Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley, American Association of Law Libraries; Alois V. Gross, Esq.; Gary L. Reback, Esq., Lexis/Reed Elsevier; O.R. Armstrong, Geronimo Development; Morgan Chu, Esq., Matthew Bender & Company; E. Scott Wetzel, CD Law; Jose is. Rojas, Esq., Oasis Publishing Company, Inc.; Eleanor J. Lewis, American Association of Legal Publishers; Professor J.C. Smith, Artificial Intelligence Research Project; John H. Lederer, Esq.; Kendall F. Svengalis, Rhode Island State Library; James P. Love, Consumer Project on Technology; Norman S. Wolfe, International Compu Research, Inc. Return to text.

[22] The United States recently filed briefs to this effect in Matthew Bender & Co., Inc. v. West Publishing Co., 94 Civ. 0589 (JSM) (S.D.N.Y.) and Oasis Publishing Co. v. West Publishing Co., No. 96-2887 (8th Cir.). Return to text.

[23] Alan D. Sugarman, HyperLaw, Inc.; Alois V. Gross, Esq.; Morgan Chu, Esq., Matthew Bender & Company; Jose is. Rojas, Esq., Oasis Publishing Company, Inc.; Eleanor J. Lewis, American Association for Legal Publishers; Professor J.C. Smith, Artificial Intelligence Research Project; Kendall F. Svengalis, Rhode Island State Library; James P. Love, Consumer Project on Technology. Return to text.

[24] Lyn Warmath, Hirschler, Fliescher, Weinberg, Cox & Allen; Alan D. Sugarman, HyperLaw, Inc.; Professor Robert L. Oakley, American Association of Law Libraries; Gary L. Reback, Esq., Lexis/Reed Elsevier; Morgan Chu, Esq., Matthew Bender; Jose is. Rojas, Esq., Oasis Publishing Company; Eleanor J. Lewis, American Association of Legal Publishers; John H. Lederer, Esq.; Kendall F. Svengalis, Rhode Island State Law Library; James P. Love, Consumer Project on Technology; Norman S. Wolfe, International Compu Research, Inc. Return to text.

[25] Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew Bender; Eleanor J. Lewis, AALP; Norman Wolfe, ICRI. Return to text.

[26] Alan D. Sugarman, HyperLaw; Morgan Chu, Esq., Matthew Bender; Eleanor J. Lewis, AALP; James P. Love, Consumer Project on Technology. Return to text.

[27] As reflected in the Complaint, Thomson and West do not compete in the provision of enhanced primary case law in the online medium. Although the plaintiffs are fully aware that several firms desire to enter the provision of case law online and on the Internet, entry into these mediums is not a remedy intended to be addressed by the proposed star pagination license. Return to text.

[28] Mr. Wolfe of ICRI offered a similar comment on behalf of ICRI, which describes itself as "a wholesale customer of legal publishers with the rights to resell, as part of our product and for the use of our product, case law data." Return to text.

[29] According to SIMBA/Cowles Professional Publishing Information Report (1996) and Lexis' own figures, measured by sales Thomson has been the number three legal publisher, behind Reed Elsevier, owner of Lexis. Thomson owns many non-legal assets unrelated to this merger. West is the largest legal publisher. Return to text.

[30] Lexis states that consumers are already feeling the loss of competition because Thomson has stopped publication of the Illinois Administrative Code, and that Thomson may be on the verge of canceling its New Jersey Adminstrative Code. Mem. at 6. However, Thomson's codes in Illinois and New Jersey do not compete in any market alleged in the Complaint, nor do they compete with any West product, as they are unenhanced. Moreover, the regulatory materials contained in these products are freely available from the states and entry into the publication of unenhanced state administrative codes is unlikely to be difficult. Return to text.

[31] JURIS was established and used by the Department for internal use by its many components for legal research. It licensed case reports and statutes from West and made them available along with other legal information and documents online across the Department and other United States Government agencies. In an effort to reduce costs, JURIS was discontinued in 1993 and replaced at the Department with contracts for direct provision of case reports and statutes from Lexis/Reed Elsevier and West. Return to text.

[32] A similar comment was submitted by Bartlett F. Cole, Esq. Return to text.

[33] David C. Harrison, Esq.; John H. Lederer, Esq. Return to text.

[34] The Western Electric decision concerned a consensual modification of an existing antitrust decree. The Court of Appeals assumed that the Tunney Act was applicable. Return to text.

[35] The Tunney Act does not give a court authority to impose different terms on the parties. See, e.g., United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 153 n.95 (D. D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (Mem.); accord H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974). A court, of course, can condition entry of a decree on the parties' agreement to a different bargain, see, e.g., AT&T, 552 F. Supp. at 225, but if the parties do not agree to such terms, the court's only choices are to enter the decree the parties proposed or to leave the parties to litigate. Return to text.