35032 Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices the agreement and proposed order or to (Sec. 6, 38 Stat. 721; 15 U.S.C. 46. Interpret (Sec. 6, 38 Stat. 721; 15 U.S.C. 46. Interpret modify in any way their terms. or apply sec. 5, 38 Stat. 719, as amended; sec. or apply sec. 5, 38 Stat. 719, as amended; sec. Donald S. Clark, 7, 38 Stat. 731, as amended; 15 U.S.C. 45, 18) 7, 38 Stat. 731, as amended; 15 U.S.C. 45, 18) Secretary. Donald S. Clark, Donald S. Clark, [FR Doc. 95–16447 Filed 7–3–95; 8:45 am] Secretary. Secretary. [FR Doc. 95–16452 Filed 7–3–95; 8:45 am] BILLING CODE 6750±01±M [FR Doc. 95–16451 Filed 7–3–95; 8:45 am] BILLING CODE 6750±01±M BILLING CODE 6750±01±M

[Dkt. C±3579] [File No. 951±0064] [Dkt. C±3584] Service Corporation International; Silicon Graphics, Inc.; Proposed Prohibited Trade Practices, and Schwegmann Giant Super Markets, Consent Agreement With Analysis To Affirmative Actions Inc.; Prohibited Trade Practices, and Aid Public Comment Affirmative Corrective Actions AGENCY: Federal Trade Commission. AGENCY: Federal Trade Commission. AGENCY: Federal Trade Commission. ACTION: Proposed consent agreement. ACTION: Consent order. ACTION: Consent order. SUMMARY: In settlement of alleged SUMMARY: In settlement of alleged violations of federal law prohibiting violations of federal law prohibiting SUMMARY: In settlement of alleged unfair acts and practices and unfair unfair acts and practices and unfair violations of federal law prohibiting methods of competition, this consent methods of competition—in connection unfair acts and practices and unfair agreement, accepted subject to final with Service Corporation International’s methods of competition—in connection Commission approval, would require, acquisition of Uniservice Corporation— with Schwegmann’s proposed among other things, a Mountain View, this consent order requires, among other acquisition of supermarkets owned by California company to take steps to things, the Texas corporation to divest, National Holdings, Inc.—this consent ensure that companies other than the to a Commission-approved acquirer, the order requires among other things, the two it is acquiring can develop and sell Uniservice Corporation assets and Louisiana-based corporation to divest, entertainment graphics software and the businesses in Medford, Oregon, within within twelve months, seven stores in workstations to run it to produce twelve months or transfer responsibility the New Orleans area to Commission- sophisticated computer-based graphics for the divestiture to a trustee appointed approved purchasers, and requires the for the entertainment industry. by the Commission, and to obtain prior respondent, for ten years, to obtain DATES: Comments must be received on Commission approval, for a period of Commission approval before acquiring or before September 5, 1995. ten years, before acquiring any interest an interest in a supermarket, or another ADDRESSES: Comments should be in funeral establishments or cemeteries entity that operates a supermarket, in directed to: FTC/Office of the Secretary, in Jackson County, Oregon. the relevant area. Room 159, 6th Street and Pennsylvania DATES: Complaint and Order issued May DATES: Complaint and Order issued June Avenue NW., Washington, DC 20580. 16, 1995.1 2, 1995.1 FOR FURTHER INFORMATION CONTACT: Mary Lou Steptoe, FTC/H–374, FOR FURTHER INFORMATION CONTACT: FOR FURTHER INFORMATION CONTACT: Washington, DC 20580. (202) 326–2584 K. Shane Woods or Charles A. Harwood, Ronald Rowe, FTC/S–2105, or Howard Morse, FTC/S–3627, FTC/Seattle Regional Office, 2806 Washington, D.C. 20580. (202) 326– Washington, DC 20580. (202) 326–6320. 2610. Federal Bldg., 915 Second Ave., Seattle, SUPPLEMENTARY INFORMATION: Pursuant WA 98174 (206) 220–6350. SUPPLEMENTARY INFORMATION: On to section 6(f) of the Federal Trade SUPPLEMENTARY INFORMATION: On Wednesday, March 15, 1995, there was Commission Act, 38 Stat. 721, 15 U.S.C. Thursday, March 9, 1995, there was published in the Federal Register, 60 FR 46 and § 2.34 of the Commission’s rules published in the Federal Register, 60 FR 13993, a proposed consent agreement of practice (16 CFR 2.34), notice is 12955, a proposed consent agreement with analysis In the Matter of hereby given that the following consent with analysis In the Matter of Service Schwegmann Giant Super Markets, Inc., agreement containing a consent order to Corporation International, for the for the purpose of soliciting public cease and desist, having been filed with purpose of soliciting public comment. comment. Interested parties were given and accepted, subject to final approval, Interested parties were given sixty (60) sixty (60) days in which to submit by the Commission, has been placed on days in which to submit comments, comments, suggestions or objections the public record for a period of sixty suggestions or objections regarding the regarding the proposed form of the (60) days. Public comment is invited. proposed form of the order. order. Such comments or views will be No comments having been received, No comments having been received, considered by the Commission and will the Commission has ordered the the Commission has ordered the be available for inspection and copying issuance of the complaint in the form issuance of the complaint in the form at its principal office in accordance with contemplated by the agreement, made contemplated by the agreement, made § 4.9(b)(6)(ii) of the Commission’s rules its jurisdictional findings and entered its jurisdictional findings and entered of practice (16 CFR 4.9(b)(6)(ii)). an order divest, as set forth in the an order to divest, as set forth in the Agreement Containing Consent Order proposed consent agreement, in proposed consent agreement, in The Federal Trade Commission disposition of this proceeding. disposition of this proceeding. (‘‘Commission’’) having initiated an investigation of the proposed 1 Copies of the Complaint and the Decision and 1 Copies of the Complaint and the Decision and Order are available from the Commission’s Public Order are available from the Commission’s Public acquisition by Silicon Graphics, Inc. Reference Branch, H–130, 6th Street & Pennsylvania Reference Branch, H–130, 6th Street & Pennsylvania (‘‘SGI’’) of the stock of Alias Research Avenue, N.W., Washington, D.C. 20580. Avenue NW., Washington, D.C. 20580. Inc. (‘‘Alias’’), and the stock of Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices 35033

Wavefront Technologies, Inc. issue its Complaint corresponding in F. ‘‘Entertainment Software’’ means (‘‘Wavefront’’), and it now appearing form and substance with the draft of modelling, animation, rendering, that SGI is willing to enter into an Complaint and its decision containing compositing and painting software, as Agreement Containing Consent Order the following Order in disposition of the individual software programs or in (‘‘Agreement’’) to port certain computer proceeding, and (2) make information combination, used in the production of software to a computer system other public with respect thereto. When so two-dimensational or three-dimensional than that of SGI, to establish and entered, the Order shall have the same images for film, video, electronic games, maintain an open architecture for SGI force and effect and may be altered, interactive programming, or other computers, and to provide for other modified, or set aside in the same entertainment or educational uses, that relief, manner and within the same time compete with Entertainment Products or It is hereby agreed by and between provided by statute for other orders. The with any component thereof. SGI, by its duly authorized officers and Order shall become final upon service. G. ‘‘Porting Agreement’’ means an its attorneys, and counsel for the Delivery by the United States Postal agreement between Respondent and a Commission that: Service of the complaint and decision Platform Partner, entered in good fatih, 1. Proposed respondent SGI is a containing the agreed-to Order to SGI’s to work together to port the corporation organized, existing, and address as stated in this Agreement Entertainment Products to be doing business under and by virtue of shall constitute service. SGI waives any compatible with the Platform Partner’s the laws of the State of Delaware, with right it may have to any other manner computer systems in their supported its office and principal place of business of service. The Complaint may be used configurations and with associated located at 2011 North Shoreline in construing the terms of the Order, peripherals, which agreement shall Boulevard, Mountain View, California, and no agreement, understanding, provide, among other things, that 94043. representation, or interpretation not Respondent shall use reasonable best 2. SGI admits all the jurisdictional contained in the Order or the Agreement efforts to optimize the operation of the facts set forth in the draft of Complaint. may be used to vary or contradict the Entertainment Products in the context of 3. SGI waives: terms of the Order. the Platform Partner’s computer (a) Any further procedural steps; 7. SGI has read the proposed systems; and which Agreement shall (b) The requirement that the Complaint and Order contemplated provide that the porting shall occur as Commission’s decision contain a hereby. It understands that once the soon as reasonably practicable after the statement of findings of fact and Order has been issued, it will be Porting Agreement is entered and conclusions of law; required to file one or more compliance receives the approval of the (c) All rights to seek judicial review reports showing it has fully complied Commission; and which agreement shall or otherwise to challenge or contest the with the Order. SGI further understands state the method in which the ported validity of the Order entered pursuant to that it may be liable for civil penalties Entertainment Products shall be sold this Agreement; and in the amount provided by law for each and marketed on terms competitive with (d) Any claim under the Equal Access those applicable to Entertainment to Justice Act. violation of the Order after it becomes final. Products compatible with Respondent’s 4. This Agreement shall not become computers; and which agreement shall part of the public record of the Order provide for protection from disclosure proceeding unless and until it is I or improper use of Non-public accepted by the Commission. If this Information. Agreement is accepted by the It is ordered That, as used in this H. ‘‘ISV Programs’’ means programs Commission it, together with the draft of Order, the following definitions shall and other arrangements that Respondent Complaint contemplated thereby, will apply: makes avilable generally to independent be placed on the public record for a A. ‘‘SGI’’ means Silicon Graphics, software developers that facilitate the period of sixty (60) days and Inc., its directors, officers, employees, development of software compatible information in respect thereto publicly agents and representatives, with Respondent’s computers and released. The Commission thereafter predecessors, successors and assigns; its operating systems. may either withdraw its acceptance of subsidiaries, divisions, groups and I. ‘‘Platform Partner’’ means a this Agreement and so notify SGI, in affiliates controlled by SGI; and the company with which Respondent has which event it will take such action as respective directors, officers, employees, entered into a Porting Agreement it may consider appropriate, or issue agents, representatives, successors and pursuant to this Order. and serve its Complaint (in such form as assigns of each. J. ‘‘Non-public Information’’ means the circumstances may require) and B. ‘‘Alias’’ means Alias Research Inc. any information not in the public decision in dispositon of the C. ‘‘Wavefront’’ means Wavefront domain furnished by the Platform proceeding. Technologies, Inc. Partner to Respondent in its capacity as 5. This Agreement is for settlement D. ‘‘Respondent’’ means SGI. porter of the Entertainment Products, purposes only and does not constitute E. ‘‘Entertainment Products’’ means and (1) if written information, an admission by SGI that the law has the computer software ALIAS designated in writing by the Platform been violated as alleged in the draft of AnimatorTM and ALIAS Partner as proprietary information by an Complaint, or that the facts as alleged in PowerAnimatorTM products sold as of appropriate legend, marking, stamp, or the draft Complaint, other than May 1, 1995, including Additional positive written identification on the jurisdictional facts, are true. Fonts and the Advanced Options for face thereof, or (2) if oral, visual or other 6. This Agreement contemplates that, ALIAS PowerAnimatorTM, and any information, identified as proprietary if it is accepted by the Commission, and successor products or future versions or information in writing by the Platform if such acceptance is not subsequently general releases of such products, Partner prior to the disclosure or within withdrawn by the Commission pursuant including any additions, modifications, thirty (30) days after such disclosure. to the provisions of § 2.34 of the updates, and enhancements thereto Non-public Information shall not Commission’s rules, the Commission released during such period as specified include: (1) Information already known may, without further notice to SGI, (1) in the Porting Agreement. to Respondent, (2) information which is 35034 Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices within the public domain through no Application Program Interfaces A. Access, during office hours and in violation of this order by Respondent, or (‘‘APIs’’), for Respondent’s computers the presence of counsel, to inspect and (3) information which is known to and operating systems in such manner copy all books, ledgers, accounts, Respondent from a person other than that software developers and producers correspondence, memoranda and other the Platform Partner not in breach of a may develop and sell Entertainment records and documents in the confidential disclosure agreement. Software, for use on Respondent’s possession or under the control of K. ‘‘Acquisitions’’ means the computers, in competition with Respondent relating to any matters acquisitions of Alias and Wavefront by Entertainment Software offered by contained in this order; and SGI. Respondent; and B. Upon five (5) days notice to L. ‘‘Commission’’ means the Federal B. Respondent shall extend to Respondent, and without restraint or Trade Commission. developers of Entertainment Software interference from Respondent, to interview officers or employees of II the right to participate in ISV Programs on terms no less favorable to such Respondent, who may have counsel It is further ordered That, developers than those terms applicable present, regarding such matters. A. Not later than March 31, 1996, to developers of other software for use VIII Respondent shall enter into a Porting on Respondent’s computers and Agreement that receives the prior operating systems. It is further ordered That Respondent approval of the Commission. After such shall notify the Commission at least C. The purpose of this Paragraph IV Commission approval, Respondent shall thirty (30) days prior to any proposed is to allow Entertainment Software port the Entertainment Products to the change in Respondent, such as developers and producers to develop Platform Partner’s computer systems as dissolution, assignment, sale resulting and sell Entertainment Software for use provided in the Porting Agreement. in the emergence of a successor, or the on Respondent’s computers and B. Respondent shall enter into such creation or dissolution of subsidiaries or operating systems in competition with Porting Agreement either with Digital any other change that may affect Respondent, and to remedy the Equipment Corporation, Hewlett- compliance obligations arising out of lessening of competition resulting from Packard Corporation, IBM Corporation, this Order. or Sun Microsystems, Inc., or with the proposed Acquisitions as alleged in another company that receives the prior the Commission’s compliant. IX approval of the Commission. Provided V It is further ordered That this Order however, nothing in this Order shall shall expire five (5) years from the date prohibit Respondent from entering into It is further ordered That, within sixty it becomes final. additional porting agreements with one (60) days after the date this order becomes final and every sixty (60) days Analysis to Aid Public Comment on the or more platform partners without the Provisionally Accepted Consent Order prior approval of the Commission. thereafter until Respondent has fully C. The purpose of the Porting complied with the provisions of The Federal Trade Commission (‘‘the Agreement and the porting of the Paragraph II of this order, Respondent Commission’’) has accepted, for public Entertainment Products, pursuant to the shall submit to the Commission a comment, an agreement containing a Porting Agreement, is to ensure that verified written report setting forth in proposed Consent Order from Silicon ported Entertainment Products detail the manner and form in which it Graphics, Inc. (‘‘SGI’’). The proposed compatible with the Platform Partner’s intends to comply, is complying, or has Consent Order has been placed on the computer system will be marketed and complied with those provisions. public record for sixty (60) days for sold in competition with the Respondent shall include in its reception of comments from interested Entertainment Products operating on compliance reports, among other things persons. Comments received during this Respondent’s computer systems, and to that are required from time to time, a period will become part of the public remedy the lessening of competition full description of the efforts being record. After sixty (60) days, the resulting from the proposed made to comply with Paragraph II of Commission will again review the Acquisitions as alleged in the this order. agreement and the comments received Commission’s complaint. VI and will decide whether it should withdraw from the agreement or make III It is further ordered That, one year final the agreement’s proposed Order. It is further ordered That, absent the from the date this Order becomes final, The Commission’s investigation of prior written consent of the proprietor annually thereafter for the next four (4) this matter concerns the proposed of Non-public Information or unless years, and at other times as the acquisitions of Alias Research Inc. expressly permitted by any Porting Commission may require, Respondent (‘‘Alias’’) and Wavefront Technology, Agreement, (1) Respondent shall use shall file with the Commission verified Inc. (‘‘Wavefront’’) by SGI. The any Non-public Information only in written reports setting forth in detail the Commission’s proposed complaint porting the Entertain Products pursuant manner and form in which it has alleges that Alias and Wavefront are two to such porting agreement, and (2) any complied and is complying with of the top three developers of Unix- persons involved in porting the Paragraphs II, III and IV of this order. based, entertainment graphics and animation software (‘‘entertainment Entertainment Products shall not VII provide, disclose, or otherwise make graphics software’’) in the world. available any Non-public Information to It is further ordered That, for the Entertainment graphics software other employees of Respondent. purposes of determining or securing consists of compatible modelling, compliance with this order, and subject animation, rendering, compositing and IV to any legally recognized privilege, painting software tools for use on It is further ordered That Respondent upon written request and on reasonable entertainment graphics workstations in shall: notice to Respondent, Respondent shall the production of high-resolution, 2D A. Establish and maintain an open permit any duly authorized and 3D digital images for film, video, architecture, and publish the representatives of the Commission: electronic games, interactive Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices 35035 programming, or other entertainment or The Commission alleges further that partner porting the Alias software and educational, graphic media. anticompetitive effects of the those SGI/Alias employees not Entertainment graphics workstations are acquisitions may include, among other participating in the porting procedures. computer workstations compatible with things, a foreclosure of workstation The purpose of the porting agreement entertainment graphics software. producers other than SGI from and the porting of Alias software is to The Complaint alleges that the significant, independent sources of remedy the lessening of competition entertainment graphics workstation and entertainment graphics software; SGI resulting from the acquisitions as software markets are extremely gaining proprietary, competitively alleged in the Commission’s complaint. concentrated with SGI the dominant sensitive information pertaining to other The order also requires SGI to provider of entertainment graphics workstation producers if such maintain an open architecture and workstations, with over 90% of the workstation producers are able to get publish its application programming market. According to the complaint, Alias or Wavefront entertainment interfaces. Additionally, pursuant to the although various other companies graphics software ported to their order, SGI is required to refrain from manufacture workstations, most workstations; a foreclosure of, or an discriminating against those software entertainment graphics software was increase in costs to, competitors to Alias companies, other than Alias and developed for use on SGI workstations and Wavefront in the entertainment Wavefront, that develop software for the and is available only for SGI graphics software market in developing SGI platform by continuing to maintain workstations. The complaint further software for use in connection with a software development program with states that alias and Wavefront compete future entertainment graphics no less favorable terms than those principally with SoftImage Inc., a workstation products developed by SGI; development programs SGI maintains subsidiary of Microsoft Corp, and that and causing consumers to pay higher for software developers who develop other developers and producers of prices for, or reducing innovation software for applications other than for entertainment graphics software competition among producers of, entertainment graphics. The purpose of produce particular software tools that entertainment graphics software and the open architecture and non- are used as complements rather than workstations. discrimination provisions is to allow substitutes for the product suites offered The agreement containing consent entertainment graphics software by Alias, Wavefront and SoftImage, or order would, if finally accepted by the developers and producers to develop produce software suites that have found Commission, settle charges that the and sell entertainment graphics software limited customer acceptance relative to acquisition may substantially lessen for use on SGI’s computers and the entertainment graphics software competition in the entertainment operating systems in competition with offered by Alias, Wavefront and Soft graphics software and hardware SGI, and to remedy the lessening of Image. markets. competition resulting from the The complaint further alleges that The order, accepted for public acquisitions as alleged in the Alias, Wavefront, and SoftImage are the comment, contains provisions requiring Commission’s complaint. industry standards, and the ability to SGI to enter into a Commission- The purpose of this analysis is to run Alias, Wavefront, or SoftImage approved porting agreement, by March facilitate public comment on the entertainment graphics software is 31, 1996, with Digital Equipment Corp., proposed order, and it is not intended critical for any computer workstation Hewlett-Packard Corp., IBM Corp. or to constitute an official interpretation of manufacturer to compete successfully in Sun Microsystems, Inc., or another the agreement and proposed order or to the entertainment graphics workstation Commission-approved platform partner, modify in any way their terms. market. According to the complaint, and port Alias’s two major Donald S. Clark, before the proposed acquisitions, Alias entertainment graphics software Secretary. negotiated with manufacturers of programs, AnimatorTM and workstations, other than SGI, to port its PowerAnimatorTM, and their successor Dissenting Statement of Commissioner entertainment graphics software programs. The porting agreement, to be Mary L. Azcuenaga in Silicon Graphics, products to those manufacturers’ approved by the Commission, will be an Inc., File 951–0064 workstation platforms. The complaint independent contract between SGI/Alias The proposed complaint in this alleges that the effect of such and a platform partner. The order matter alleges that the two companies agreements, if consummated, would be requires, however, that the porting that Silicon Graphics proposes to to enable such workstation agreement contain provisions requiring acquire, Alias and Wavefront, are two of manufacturers to compete in the SGI to exercise reasonable best efforts to the three leading developers and sellers entertainment graphics workstation optimize the operation of the of entertainment graphics software in a market. Also, according to the entertainment graphics software in the highly concentrated market in which complaint, before the proposed context of the platform partner’s entry is difficult and time consuming.1 acquisitions, SGI maintained an open computer systems; requiring SGI to port The Commission alleges, and I agree, software interface for its entertainment the entertainment graphics software as that the elimination of competition graphics workstations, sponsored soon as reasonably practicable after the between Alias and Wavefront will independent software developer porting agreement is entered and substantially lessen competition in programs and shared with developers of receives the approval of the violation of section 7 of the Clayton entertainment graphics software Commission; and stating the method in Act.2 The evidence persuades me that advance information concerning new which the ported entertainment the Commission has a strong case under SGI products to facilitate and promote graphics software shall be sold and section 7 based on this horizontal competitive development of marketed on terms competitive with combination, and the obvious course of entertainment graphics software. those applicable to entertainment action would be to challenge the The Commission complaint also graphics software compatible with SGI’s acquisitions on this basis. Such a alleges that the acquisition would have computers. The order requires an challenge, if successful, would leave anticampetitive effects an would violate information firewall, specifically Section 7 of the Clayton Act and section prohibiting the exchange of non-public 1 Complaint paragraphs 10, 11, and 15. 5 of the Federal Trade Commission Act. information between the platform 2 Complaint paragraph 16e. 35036 Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices either Alias or Wavefront free to theories generally provide a weak basis It is perhaps more plausible that the contract to produce entertainment for Section 7 enforcement;3 and this transaction could result in reduced graphics software for other hardware double foreclosure scenario has supplies of software, or higher costs of manufacturers. particular problems, both logical and obtaining software, for SGI’s Instead, the Commission chooses to factual. workstation rivals. Even so, this would rely on vertical foreclosure theory to In general, the two types of be primarily a consequence of the impose requirements that fail to foreclosure tend toward mutual horizontal aspects of the transaction— preserve existing competition and that exclusion. The very possibility of i.e., the combining of two of the three ultimately may create inefficiency and excluding independent software principal vendors of the relevant reduce competition. To the extent that producers from the SGI-platform software—rather than the vertical any vertical problems should concern suggests the means by which competing aspects. The Commission eschews an us, they would be resolved by stopping workstation producers will avoid enforcement action based on a the horizontal transaction. The foreclosure. The nonintegrated software horizontal theory, however, because of proposed decision and order having producers surely have incentives to its cost in foregone efficiencies. If the failed to achieve straightforward relief supply the ‘‘foreclosed’’ workstation horizontal software combination is for the real competitive problem, the producers, and each workstation efficiency-enhancing, the net combination of Alias and Waterfront, I producer has incentives to induce anticompetitive impact of these dissent. nonintegrated software suppliers to transactions comes from SGI’s vertical integration with Alias and Wavefront. If Dissenting Statement of Commissioner write for its platform. Otherwise, ‘‘we this is so, why not seek injunctive relief Roscoe B. Starek, III in the Matter of are left to imagine eager suppliers and against the vertical integration, and Silicon Graphics, Inc. (Alias Research, hungry customers, unable to find each avoid the costs of the ineffective Inc., and Wavefront Technologies, Inc.) other, forever foreclosed and left to languish.’’4 This predicament is regulatory remedy presented in the File No. 951–0064 improbable in the dynamic markets at proposed order? I respectfully dissent from the issue. There are at least two reasons for Commission’s decision to initiate this The acquisition appears very unlikely rejecting this course of action. The first proceeding against Silicon Graphics, to give rise to significant, is that there are demonstrable Inc. (‘‘SGI’’). The proposed complaint anticompetitive foreclosure of efficiencies associated with exclusive nonintegrated software producers. The arrangements between hardware and alleges anticompetitive effects arising 5 from the vertical integration of the proposed complaint’s own description software vendors; the second is that the leading manufacturer of entertainment of the premerger state of competition merger’s anticompetitive effects are commensurately difficult to establish. graphics workstations, SGI, with two tends to exclude this possibility. The More generally, in order to establish leading suppliers of entertainment complaint alleges that software SGI’s preeminence among producers of graphics software, Alias Research, Inc., producers other than Alias, Wavefront, entertainment graphics workstations, and Wavefront Technologies, Inc.1 I am and Microsoft’s SoftImage are either the complaint alleges that entry into not persuaded that these vertical competitively insignificant or such hardware is extremely unlikely acquisitions are likely ‘‘substantially to complementary, and that there is because of the substantial costs of lessen competition’’ in violation of virtually no likelihood of entry by porting SGI-specific software (especially section 7 of the Clayton Act, 15 U.S.C. producers of substitutable SGI- the ‘‘high end’’ variants) to non-SGI 18. Moreover, even if one assumes the compatible software owing to the platforms. This undermines the validity of the theories of entrenched positions of Alias and contention that the merger would anticompetitive effects, the proposed Wavefront. If both propositions are true, induce a substantial lessening of order does not appear to prevent the then the merger cannot appreciably competition in the entertainment alleged effects and may create foreclose software entry or expansion. graphics workstation market.6 inefficiency. One cannot find both that the premerger The Commission alleges, inter alia, supply elasticity of substitutable software is virtually zero and that the 5 A software producer’s premerger exclusive that the acquisitions will reduce commitment to SGI suggests an efficiency rationale competition through two types of merger would result in the substantial for its subsequent integration with SGI: to avoid the foreclosure: (i) Nonintegrated software post-merger foreclosure of software expropriation by SGI of the software producer’s vendors will be excluded from the SGI producers. In addition, SGI has strong SGI-specific assets. This is a well established incentives to induce expanded supply procompetitive rationale for vertical mergers. See, platform; and (ii) rival hardware e.g., Benjamin Klein, Robert G. Crawford, and manufacturers will be denied access to of SGI-compatible software: increasing Armen A. Alchian, Vertical Integration, Alias and Wavefront software, without the supply of compatible software (or of Appropriable Rents, and the Competitive which they cannot effectively compete any complementary product) increases Contracting Process, 21 J.L. & ECON. 297 (1978); Kirk Monteverde and David J. Teece, Supplier 2 the demand for SGI’s workstations. against SGI. Vertical foreclosure Switching Costs and Vertical Integration in the Automobile Industry, 13 BELL J. ECON. 206 1 The Commission apparently finds that the foreclose manufacturers of (gloves) from access to (1982a); Kirk Monteverde and David J. Teece, horizontal combination of Alias and Wavefront is Spalding as a purchaser thereof.’’ 56 F.T.C. at 2269. Appropriable Rents and Quasi-Vertical Integration, not anticompetitive on net: the order addresses 3 For a description of criticisms of pre- and post- 25 J.L. & ECON. 321 (1982); Benjamin Klein, alleged vertical problems only. Chicago theories of foreclosure, see David Reiffen Vertical Integration as Organizational Ownership: 2 Precedent for this ‘‘double foreclosure’’ analysis and Michael Vita, Is there New Thinking on Vertical The Fisher Body-General Motors Relationship lies uncomfortably in A.G. Spalding & Bros., Inc., Mergers? A comment, 63 ANTITRUST L.J. lll Revisited, 4 J.L., ECON. & ORG. 199 (1988). 56 F.T.C. 1125 (1960), in which the Commission (1995). See also Roscoe B. Starek, III, ‘‘Reinventing 6 All of the preceding assumes, arguendo, rejected Spalding’s acquisition of Rawlings Antitrust Enforcement? Antitrust at the FTC in 1995 defining the relevant markets that are most Manufacturing Co. Before the acquisition, Spalding and Beyond,’’ Remarks at ‘‘A New Age of Antitrust favorable to the Commission’s theory of competitive did not manufacture baseball gloves, but instead Enforcement: Antitrust in 1995,’’ Marina Del Rey, harm from vertical integration. Whether these purchased them for resale; Rawlings manufactured CA, Feb. 24, 1995. narrowly defined markets are appropriate is baseball gloves and sold them to other resellers. The 4 Robert Bork, THE ANTITRUST PARADOX 232 questionable. For example, to the extent that PCs Commission found that, ‘‘by acquiring Rawlings, (1978). Referring to A.G. Spalding, Bork concludes are becoming closer substitutes for entertainment Spalding can not only prevent competitors from that ‘‘the Commission could cure (this problem) by graphics workstations, it is increasingly unlikely purchasing (gloves) from Rawlings but can also throwing an industry social mixer.’’ that a prerequisite for anticompetitive effects from Federal Register / Vol. 60, No. 128 / Wednesday, July 5, 1995 / Notices 35037

Overall, I am unpersuaded that this itself of those efficiencies will not Stephen Calkins, Jay Shaffer, Ernest transaction diminishes competition in benefit consumers. Isenstadt, Christian White; Office of the 7 any relevant market. Even had I [FR Doc. 95–16453 Filed 7–3–95; 8:45 am] Secretary: Donald Clark; Bureau of concluded otherwise, however, I would Competition: William Baer, Mary Lou BILLING CODE 6750±01±M not endorse the proposed consent, the Steptoe, Mark Whitener, Ronald Rowe, terms of which would require (1) SGI to Michael McNeely, Walter Winslow, port its software to a workstation Senior Executive Service: Performance Mark Horoschak; Bureau of Consumer competitor and (2) SGI to maintain an Review Board Protection: Joan Bernstein, Teresa open architecture and to provide access Schwartz, Lydia Parnes, David Medine, to software developers on AGENCY: Federal Trade Commission. Eileen Harrington, Dean Graybill, C. Lee nondiscriminatory terms. The problems ACTION: Notice. Peeler; Bureau of Economics: Jonathan with remedies of this sort are Baker, Ronald Bond, Gary Roberts, Paul SUMMARY: Notice is hereby given of the 8 Pautler. significant. First, requiring a firm to names of the standing Performance sell an input to a rival is an ineffective Review Board Roster. Donald S. Clark, remedy unless the Commission also DATES: July 5, 1995. Secretary. regulates terms of the sale. Otherwise, [FR Doc. 95–16448 Filed 7–3–95; 8:45 am] the seller simply raises price and/or FOR FURTHER INFORMATION CONTACT: BILLING CODE 6750±01±M diminishes quality to the point where Elliott H. Davis, Director of Personnel, profitable entry is precluded. The Federal Trade Commission (FTC), 6th & Pennsylvania Avenue NW., Washington, Commission could seek an order that DC 20580, (202) 326–2022. confers such regulatory power (the DEPARTMENT OF HEALTH AND SUPPLEMENTARY INFORMATION: Section current order does not); however, the HUMAN SERVICES burden associated with enforcing such 4314(c) (1) through (5) of title 5, U.S.C., an order—the Commission would be requires each agency to establish, in Administration for Children and required to determine the ‘‘competitive accordance with regulations prescribed Families price’’ and ‘’competitive quality’’ for by the Office of Personnel Management, one or more performance review boards. such porting rights—cannot be Agency Information Collection Under The board shall, among other things, overestimated. For this reason, the OMB Review review and evaluate the initial appraisal Commission historically has shied away of a senior executive’s performance by Title: Small Business Innovation from such remedies. the supervisor, and make appropriate Research Program ‘‘Phase I Proposal Second, requiring SGI to port recommendations to the appointing Cover Sheet’’. entertainment graphics software to third authority. OMB No.: 0980–0193. parties will likely create substantial The following persons are appointed Description: These forms are needed inefficiencies. The evidence clearly to the FTC’s Performance Review Board for inclusion in the Administration for suggests that there are efficiencies Roster: Office of the Chairman: James Children and Families’ biennial associated with exclusive arrangements Hamill; Office of the Inspector General: Research Program’s research and between software and hardware Frederick Zirkel; Office of the Executive development solicitation. They are vendors; such arrangements existed well Director: Robert Walton, Rosemarie required by Policy Directive from the before the current transaction was Straight, Alan Proctor, James Giffin, Small Business Administration. proposed. Preventing SGI from availing Richard Arnold; General Counsel: Respondents: State governments.

Number of Number of responses Average Title respondents per re- burden per Burden spondent response

Policy Directive SBIR ...... 500 1 4 2000 Estimated Total Annual Burden: 2000.

Additional Information: Copies of the information collection should be sent Dated: June 26, 1995. proposed collection may be obtained directly to the following: Office of Roberta Katson, from Bob Sargis of the Division of Management and Budget, Paperwork Acting Director, Office of Information Information Resource Management, Reduction Project, 725 17th Street NW., Resource Management. ACF, by calling (202) 690–7275. Washington, DC 20503, Attn: Ms. [FR Doc. 95–16437 Filed 7–3–95; 8:45 am] OMB Comment: Consideration will be Wendy Taylor. BILLING CODE 4184±01±M given to comments and suggestions received within 30 days of publication. Written comments and recommendations for the proposed a vertical merger—premerger market power in a for the acquired software products), it is not clear markets, the most likely effect of vertical integration relevant market—is satisfied. how the vertical integration enhances the may be lower prices. 7 The complaint also alleges that vertical probability of price discrimination. To the extent 8 For a discussion of why nondiscrimination integration of SGI with Alias and Wavefront will that price discrimination possibilities are enhanced, remedies are problematic, see Timothy Brennan, foster anticompetitive price discrimination against it would appear to be as a result of the horizontal Why Regulated Firms Should Be Kept Out of certain entertainment graphics customers. If the combination of Alias and Wavefront. And if SGI Unregulated Markets: Understanding the customers already are differentiable according to and the combined Alias/Wavefront would have Divestiture in U.S. v. AT&T, 32 Antitrust Bulletin their demand elasticities for SGI workstations (or market power in their respective complementary 741 (1987).