27 October 2008

[Federal Register: October 27, 2008 (Volume 73, Number 208)]
[Notices]               
[Page 63711-63713]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc08-62]                         

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FEDERAL TRADE COMMISSION

[File No. 081 0133]

 
Reed Elsevier NV, Reed Elsevier PLC, Reed Elsevier Group plc, 
Reed Elsevier Inc., ChoicePoint Inc., ChoicePoint Services Inc., and 
ChoicePoint Government Services LLC; Analysis of Agreement Containing 
Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before October 29, 2008.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Reed Elsevier ChoicePoint, File No. 081 
0133,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 135-H, 600 
Pennsylvania Avenue, N.W., Washington, D.C. 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form by following the instructions on the web-based form at 
(http://secure.commentworks.com/ftc-ChoicePoint). To ensure that the 
Commission considers an electronic comment, you must file it on that 
web-based form.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm)

FOR FURTHER INFORMATION CONTACT: Brendan McNamara, FTC Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-3703.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 16, 2008), on the World Wide Web, at (http://
www.ftc.gov/os/2008/09/index.htm). A paper copy can be obtained from 
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments

[[Page 63712]]

should be filed as prescribed in the ADDRESSES section above, and must 
be received on or before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Reed Elsevier NV, Reed Elsevier PLC, Reed Elsevier 
Group plc, and Reed Elsevier Inc. (collectively ``Reed Elsevier''), and 
ChoicePoint Inc., ChoicePoint Services Inc., and ChoicePoint Government 
Services LLC (collectively ``ChoicePoint''). The purpose of the 
proposed Consent Agreement is to remedy the anticompetitive effects 
that would otherwise result from Reed Elsevier's proposed acquisition 
of ChoicePoint in the U.S. market for electronic public records 
services to law enforcement customers. Under the terms of the proposed 
Consent Agreement, Reed Elsevier and ChoicePoint are required to divest 
assets related to ChoicePoint's AutoTrackXP and Consolidated Lead 
Evaluation and Reporting (``CLEAR'') electronic public records 
services.
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the proposed 
Consent Agreement and the comments received, and will decide whether it 
should withdraw from the proposed Consent Agreement, modify it, or make 
it final.
    Pursuant to an Agreement and Plan of Merger dated February 20, 
2008, Reed Elsevier has agreed to acquire ChoicePoint for approximately 
$4.1 billion (``Proposed Acquisition''). The Commission's complaint 
alleges that the Proposed Acquisition, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
Sec.  45, by lessening competition in the market for electronic public 
record services sold to law enforcement customers in the United States. 
The proposed Consent Agreement would remedy the alleged violations by 
replacing the competition that would be lost in this market as a result 
of the Proposed Acquisition.

II. The Parties

    Reed Elsevier is a worldwide, leading information services provider 
and publisher with headquarters in London, Amsterdam, and New York. 
Reed Elsevier's LexisNexis division provides information and risk 
management products and services to financial, business, law 
enforcement, and government customers. LexisNexis's Risk and 
Information Analytics Group (``RIAG'') provides public records services 
and risk management and information analytics applications designed to 
assist customers in managing risk through fraud detection and 
prevention, identity authentication and verification, and background 
screening. Reed Elsevier reported revenues of 4.6 billion ($9.3 
billion) for 2007.
    ChoicePoint, headquartered in Alpharetta, Georgia, is a leading 
provider of a variety of services used by customers to manage economic 
risk. ChoicePoint has four primary service groups: Insurance Services, 
Screening and Authentication Services, Business Services, and Marketing 
Services. For 2007, ChoicePoint reported revenues of $982 million.

III. Electronic Public Records Services to Law Enforcement Customers

    Electronic public records encompasses a wide array of public and 
non-public records about individuals and businesses, including credit 
header data, criminal records, motor vehicle records, property records, 
and employment records. Electronic public records service providers 
such as LexisNexis and ChoicePoint compile these records, either by 
going directly to the source or by purchasing these records from third 
parties, and present them to end users via an online, web-based 
interface.
    Law enforcement customers utilize electronic public records 
services as an investigatory tool in complex criminal investigations, 
such as combating terrorism, locating fugitives, and detecting illegal 
drug transactions. Unlike other consumers of electronic public records 
services, such as collections agencies who use these services for 
simple and discrete tasks such as locating an individual, law 
enforcement customers use electronic public records services to uncover 
previously unknown information and to generate leads in their 
investigations. Law enforcement customers, therefore, only work with 
electronic public records services providers with the most 
comprehensive, up-to-date, and accurate records available, as 
deficiencies in the underlying database could cost them a critical lead 
in an investigation. In addition to demanding the most complete 
database of electronic public records, law enforcement customers 
require that the provider have sophisticated search algorithms, 
sometimes called analytics, that identify and display non-obvious 
relationships between records.
    The relevant geographic market in which to assess the impact of the 
Proposed Acquisition is the United States. Market participants indicate 
that successful participation in this market requires an established 
U.S. sales and support presence. As a practical matter, there are no 
firms serving non-U.S. customers that a law enforcement customer 
located in the United States could turn to as an alternative.
    The market for electronic public records services to law 
enforcement customers is highly concentrated, with LexisNexis, 
primarily through its Accurint for Law Enforcement service, and 
ChoicePoint, with its AutoTrackXP service, accounting for over 80 
percent of this approximately $60 million market. The Proposed 
Acquisition would significantly increase market concentration and 
eliminate substantial competition between the only two significant 
suppliers of electronic public records services to law enforcement 
customers in the United States.
    The anticompetitive implications of such a dramatic increase in 
concentration are buttressed by evidence of intense head-to-head 
competition that would be lost with the Proposed Acquisition. Law 
enforcement customers have benefitted from the rivalry between 
LexisNexis and ChoicePoint in the form of lower prices, improved 
products, and better service and support. In addition, this fierce 
competition prompted ChoicePoint to introduce CLEAR--a new and advanced 
electronic public records service--designed specifically for law 
enforcement customers. Left unremedied, the Proposed Acquisition likely 
would cause anticompetitive harm by enabling LexisNexis to profit by 
unilaterally raising the prices of electronic public records services 
to law enforcement customers, as well as reducing its incentives to 
innovate and develop new services.
    New entry or fringe expansion into the market for the sale of 
electronic public records services to law enforcement customers 
sufficient to deter or counteract the competitive effects of the 
proposed transaction is unlikely to occur within two years. Firms 
existing in the market would need to improve their software and

[[Page 63713]]

underlying analytics substantially, increase the breadth and depth of 
their public records data, and overcome the resistance of many law 
enforcement customers to switch to a product that lacks the track 
record of effectively serving the needs of the law enforcement 
community in order to seriously contend for the customers that 
currently work with LexisNexis or ChoicePoint. As a result, new entry 
or fringe expansion sufficient to achieve a significant market impact 
within two years is unlikely.

IV. The Consent Agreement

    The proposed Consent Agreement effectively remedies the Proposed 
Acquisition's likely anticompetitive effects in the market for 
electronic public records services to law enforcement customers. The 
proposed Consent Agreement preserves competition by requiring the 
divestiture of assets related to ChoicePoint's AutoTrackXP and CLEAR 
electronic public records services to Thomson Reuters Legal Inc. 
(``West'') within fifteen (15) days after the Proposed Acquisition is 
consummated.
    The Commission is satisfied that West is a well-qualified acquirer 
of the AutoTrackXP and CLEAR assets. West has the resources, 
capabilities, experience, and reputation to ensure that it will be an 
effective competitor in the market for electronic public records 
services to law enforcement customers. West, headquartered in Eagan, 
Minnesota, is a subsidiary of Thomson Reuters, one of the world's 
leading information service providers to the legal and business 
community. West already has a large and experienced sales force with 
existing relationships with many law enforcement agencies which use 
West's legal research services. With the divested assets, West will be 
particularly well-situated to replicate ChoicePoint's success and 
compete against the combined firm immediately after the Proposed 
Acquisition.
    The proposed Consent Agreement contains several provisions designed 
to ensure that the divestiture of the AutoTrackXP and CLEAR assets to 
West is successful. First, the proposed Consent Agreement requires Reed 
Elsevier to provide various transitional services such as customer 
service, billing support, and database and network maintenance for up 
to two years to enable West to compete against Reed Elsevier 
immediately following the divestiture. Second, the proposed Consent 
Agreement ensures that Reed Elsevier will maintain the viability and 
marketability of the AutoTrackXP and CLEAR assets prior to the 
divestiture. Finally, the proposed Consent Agreement allows the 
Commission to appoint an Interim Monitor to ensure that Reed Elsevier 
fulfills all of its obligations related to the divestiture of the 
assets.
    In order to ensure that the Commission remains informed about the 
status of the AutoTrackXP and CLEAR assets pending divestiture, and 
about the efforts being made to accomplish the divestiture, the 
proposed Consent Agreement requires Reed Elsevier to file periodic 
reports with the Commission until the divestiture is accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. E8-25400 Filed 10-24-08: 8:45 am]

BILLING CODE 6750-01-S