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Since 1974, the Antitrust Procedures and Penalties Act-commonly known as the Tunney Act-has required the federal courts to review each consent decree in civil antitrust cases filed by the U.S. Department of Justice (DOJ) to ensure that the remedy proposed in the consent is in the public interest. The act provides the court with broad discretion to seek all of the information it needs to fulfill this obligation. While courts in a limited number of cases have used this flexibility to conduct evidentiary hearings and investigate the merits of the proposed remedy, the judicial review process has often been described as a “rubber stamp” of DOJ’s decision to settle the case. In merger cases, DOJ even allows the parties to close their transaction before the judge has approved the consent decree. In response to the perception that judicial review was often merely a “rubber stamp,” Congress amended the Tunney Act in 2004. While the modifications were relatively minor-DOJ apparently believed that nothing had changed-the legislative history indicates that Congress intended to strengthen the court’s role in the process and provide more effective oversight of antitrust consent decrees. Now these amendments are being put to the test as a U.S. district court reviews DOJ’s consent decrees in two of the largest telecommunications mergers of the last decade-Verizon Communications Inc./MCI Inc. and AT&T Inc./SBC Communications-and a number of critics have filed briefs arguing that the amendments require the court to play an extremely active supervisory role. The history of the Tunney Act Prior to the Tunney Act, there were no formal statutory procedures governing DOJ’s antitrust consent decrees. The act was inspired largely by DOJ’s settlement of antitrust suits challenging International Telephone & Telegraph Corp.’s (ITT’s) mergers with several corporations during the Nixon administration. The settlements prompted allegations of improper influence by ITT because they contained far less relief than was sought in the original complaint and they came on the heels of a $400,000 donation by ITT to the Republican National Committee. To avoid future allegations of impropriety in antitrust consent decrees, the act imposed specific rules for the notification of consents, the opportunity for third parties to provide comments and judicial review of the consents. DOJ must prepare and file a complaint and competitive impact statement simultaneously with the proposed consent decree explaining both the alleged antitrust violation and the proposed remedy. These documents must be published in the Federal Register at least 60 days before the decree becomes final. During this period, the public may comment and DOJ must respond. The comments and responses are published in the Federal Register. Before entering the consent, the court must determine whether it is in the public interest. The act lays out two sets of factors for the court to consider. First, the court assesses the decree’s competitive impact, including the duration of relief sought, the anticipated effects of alternative remedies actually considered by DOJ and “any other considerations bearing upon the adequacy” of the decree. Second, the court examines the impact of the decree “upon the public generally and individuals alleging specific injury” from the violations stated in the complaint. It may hold hearings; take testimony of government officials or experts; appoint special masters, consultants or expert witnesses; admit amicus curiae or intervenors; review written comments, responses and objections; and “take other such action in the public interest as the court may deem appropriate.” Courts have generally deferred to DOJ, but judges in a few instances have used their Tunney Act powers expansively. The first widely publicized use of the Tunney Act was the 1982 review of the AT&T consent decree. U.S. v. American Tel. and Tel. Co., 552 F. Supp. 131 (D.D.C. 1982). In a lengthy opinion, Judge Harold H. Greene stated that, although the act required some deference to the prosecutorial discretion of DOJ, “[i]t does not follow . . . that courts must unquestioningly accept a proffered decree as long as it somehow, and however inadequately, deals with the antitrust and other public policy problems implicated in the lawsuit. To do so would be to revert to the ‘rubber stamp’ role which was at the crux of the congressional concerns when the Tunney Act became law.” Id. at 151. He refused to approve the consent decree as written, insisting that the court’s ongoing oversight authority was not robust enough. The parties consented to his proposed modifications, and the modified decree was entered. The debate intensified in the 1995 review of DOJ’s first consent decree with Microsoft Corp., when a court refused to enter a consent decree for the first time. U.S. v. Microsoft, 159 F.R.D. 318, 338 (D.D.C. 1995). The district court denied DOJ’s motion to grant the decree because DOJ did not “provide the court with the information it needs to make a proper public interest determination,” the scope of the decree was too narrow and the decree did not adequately address some practices that concerned the court. The U.S. Circuit Court of Appeals for the District of Columbia held that the district court had overstepped its bounds by reformulating the issues and “effectively redraft[ing] the complaint.” 56 F.3d 1448, 1459 (D.C. Cir. 1995). It noted that DOJ’s allegations are the product of DOJ’s discretion, and a judicial challenge of the complaint’s scope would implicate separation of powers issues. The court implied that district courts should accept all decrees that do not “appear[] to make a mockery of judicial power.” Id. at 1462. It reversed and ordered the district court to enter the consent decree. In 2002, DOJ agreed to settle its civil suit regarding Microsoft’s monopolization of the operating system market. DOJ had already won on the issue of liability, and the only remaining issue was the proper remedy. This time-despite a prior district court ruling that had ordered the breakup of the company, as well as intense opposition from Microsoft’s competitors, customers and many voices in academia-the court entered the consent decree with only minor modifications. In 2004, following this ruling, Congress enacted two relatively minor changes to the Tunney Act. First, the act now states that courts “shall” (instead of “may”) take the enumerated factors into account in an analysis of the consent decree. Second, a provision was added stating that the act did not require the court to conduct an evidentiary hearing or to permit anyone to intervene. The statements in the Congressional Record by the amendments’ supporters indicated that they believed the legislation would “make clear” that the D.C. Circuit’s 1995 interpretation of the Tunney Act in Microsoft was too narrow. Amendments in practice in the recent merger cases The meaning of the 2004 amendments became the subject of intense debate this summer when DOJ sought approval of its consent decrees regarding the Verizon/MCI and SBC/AT&T transactions. The settlements provided narrow relief involving only partial divestitures of fiber-optic networks into specific buildings. As in the Microsoft cases, the proposed decrees received strong criticism from many industry participants and commentators who believed that the remedies were insufficient. Critics argued that DOJ should have sought additional divestitures and that the amended Tunney Act requires more in-depth review. The merging parties and DOJ argued that the court’s inquiry was limited to the competitive issues identified in the complaint, and DOJ asserted that the amendments “do not alter this law.” On July 12, U.S. District Judge Emmet G. Sullivan held an unprecedented hearing to determine whether the court should rely on DOJ’s examination of the evidence, or if it needed to review the evidence itself; whether DOJ had produced sufficient evidence; and the proper scope of the court’s review. Sullivan asked the parties to consider a number of questions, including: “Through the eyes of a layperson, the mergers, in and of themselves, appear to be against public interest given the apparent loss in competition. In layperson’s terms, why isn’t that the case?” At the hearing, Sullivan expressed concern that DOJ and the merging parties had not submitted enough evidence to support the remedies. He also granted motions by several critics to participate as amici. On July 25, Sullivan refused to sign the consent decrees without more information. He ordered DOJ to produce “any material necessary for the Court to satisfy its judicial and statutory function” by Aug. 7. He also indicated that it was “premature” to order a full evidentiary hearing, but refused to rule out the possibility of one in the future. The ultimate effects of the 2004 amendments-and Sullivan’s review of the two mergers-is still unclear. At a minimum, these developments create uncertainty in the merger process. If future consent decrees could be subjected routinely to this level of judicial scrutiny and delay, merging parties may be more inclined to hold off closing their transaction until the Tunney Act process has run its course, or they may be more inclined to litigate, rather than negotiate, consent decrees. There is also an increased risk that some transactions would fall through. It is further likely that future DOJ complaints accompanying consent decrees will be drafted more narrowly to prevent objecting parties from arguing that the proposed remedy does not adequately address the alleged violations. Janet L. McDavid is a partner at Hogan & Hartson in Washington, and Logan Breed is an associate at the firm.

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