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Transcript of US v. Springleaf Holdings complaint.pdf
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U N I T E D S T A T E S D I S T R I C T C O U R T
R
T H E D I S T R I C T O F C O L U M B I A
U N I TED STATES OF AMERICA,
STATE OF COLORADO,STATE OF IDAHO,
C O M M O N W E A L T H OF PENN SYLVA NIA,
STATE OF TEXAS,
C O M M O N W E A L T H OF VIRGINIA,
STATE OF WASHINGTON,
and
STATE OF WEST VIRGINIA,
Plaintiffs,
v.
SPRINGLEAF HOLDINGS, INC.,
ONEMAIN FINANCIAL HOLDINGS, LLC,
and
CITIFINANCIAL CREDIT COMPANY,
Defendants.
CASE NO.
JUDGE:
C O M P E T I T I V E I M P A C T S T A T E M E N T
Plaintiff United Statesof America ("United States"),pursuantto Section 2(b) of the
AntitrustProceduresandPenalties Act ("APPA" or "Tunney Act"), 15 U.S.C. 16(b)-(h), files
this Competitive Impact Statement relating to the proposedFinal Judgment submitted forentry
in this civil antitrustproceeding.
I . N A T U R E AND P U R P O S E O F T H E P R O C E E D I N G
Pursuantto aStockPurchaseAgreementdated March 2,2015, Springleaf Holdings, Inc.
proposest o acquire OneMain Financial Holdings, LLC from CitiFinancial Credit Company, a
wholly owned subsidiary of Citigroup, Inc., for approximately $4.25 billion. The proposed
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mergerwould combine the tw o largest providers of personal i nsta llment loans to subprime
borrowers i n the UnitedStates.
TheUnitedStatesfileda civilantitrust Complaint on November 13, 2015, seeking to
enjoin the proposed acquisition. The Complaint alleges that the acqu isition likely would
substantiallylessencompetit ion fo r personal insta llment loans to subprime borrowers in
numerous localmarkets acrosselevenstates,i nviolationo f Section 7 of the Clay ton Ac t,15
U.S.C. 18. That loss o fcompetition likely wouldresult i n a reducti on of consumer choice that
may drivefinanciallystrug gling borrowers to mu ch more expensive f orm s of credit or, worse,
leavethemwith noreasonablealternative.
At the sametime the C ompl aint was filed,the UnitedStatesf i led an Asset Preservation
Stipulationand Order and a proposed FinalJudgment designed to elim inate the anticompetitive
effectsof the acquisition. Under the proposed Final Judgment, which is explained more fully
below, Springleaf is required to divest 127branchesi n elevenstatesto Lendmark Financial
Services,or to one or more other Acquirers acceptable to the United States. Under the terms of
theAsset Preservation Sti pulatio n and Order, Springleafw i l l take certainstepstoensure that the
divestiturebranchesare operated as co mpet itively independent, econ omically viable, and
ongoingbusinessconcerns; that they remain independent and uninflu enced by the consumm ation
ofthe acquisition; and that compe tition is maintained duri ng the pendency of the ordered
divestiture.
TheUnitedStatesand Defendantshavestipulated that the proposed Final Judgment may
be entered after compliancewi th the APP A. Entry of the proposed Final Judgment would
terminate this action, except that the Courtwould retainjurisdiction to construe, modify,or
enforcethe provisions o f the proposed Final Judgment and to punish violatio ns thereof.
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I I . D E S C R I P T I O N O FT H E E V E N T S G I V I N G R I S E T OT H E A L L E G E D
V I O L A T I O N
A. TheDefendants and the Proposed Transaction
Defendant Springleaf Holdings, Inc. ("Springleaf) is a Delaware corporation with its
headquartersin Evansvill e, Indiana. Springleaf is the second-largestprovider of personal
installment loans to subprime borrowers in the UnitedStates. Springleafoperates approximately
830branchesi n 27 states and has aconsumerloan portfolioo fabout$4.0 billion.
DefendantOneMain Financial Holdings, LLC ("OneMain") is a Delaware limited
liability company, headquartered in Baltimo re, Mary lan d. OneM ain is the largestprovider of
personalinstallment loansto subprime borrowers i n the Uni tedStates. OneMainoperates 1,139
branchesin 43 states and has aconsumer loanportfolio that totals $8.4 billion. OneM ain is a
subsidiaryo fCitiFinancial Credit Company, a holding company that is awholly owned
subsidiary o fCitigroup, Inc.
B. Backg roun d on Persona l Installment Loa ns to Subprim e Borro wers
Personalinstallment loans to subprime borrowers are closed-end,fixed-rate, fixed-term,
and ful lyamortized loan products that typicallyrangef rom$3,000 to $6,000. Both the princi pal
and interest are paid ful lythrough scheduled installments by the end of the loan term, which
typically isbetween 18and 60 months in duration . Each monthl y payment is the same amount
andthe scheduleofpayments is clear.
Personalinstallment lenderstargeta unique segment o f borrowers who may not be able
to obtaincheaper sourceso f credit f romother finan cial institutions buthaveenough cashf l o w to
affordthe monthl ypayments o fpersonal installment loans. Borrowers ofpersonal installment
loans are considered "subprime" becauseo fblemishes in their credit histories, suchas serious
delinquenciesor defaults. Theseborrowers likelyhave beendenied credit by a bank in the past
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and turn to personal in stallmen t lenders f or the speed,ease,and likelihood o fsuccessin
obtaining credit. Theirborrowingneedsvary, f or example, f rompaying for unexpected
expenses, such as car repairs or medicalbills, to consolida ting debts. A typical subprime
borrow er's annual income is in therangeof $35,000 to $45,000.
Theblemis hed credit histories of subprime borrowerssuggesta higher propensity for
defaulton futur e loans relative to so-called "pr ime" borrowers. Personal installment lenders
mitigatethis creditriskby closely analyzing a borro wer' s characteristics and ability to repay the
loan, includingthe borro wer's credit history , income and outstanding debts, stabilityo f
employment, and availabilityor value ofcollateral. Lenders typicallyrequire borrowers to meet
face-to-faceat a branch location to close the loan, even i f the application begins online. This
face-to-facemeeting allows the lender toefficientlycollectinformationused inunderwriting and
verify key documents (reducing the risk o ffraud). Subprime borrowers seeking installment
loansalso value having a branch officeclose to where they live orwork; a nearby branchreduces
theborrower's travel cost to close the loan and allows convenient and timelyaccessto loan
proceeds. I f approved, borrowers immedia tely obta in the funds at the branch.
Local branchpresence also helps lenders and borrowers establish close customer
relationshipsduring the l ifeo f the loan. Local branch employees monitor delinquent payments
of existing customers andassistborrowers i n meeting their payment ob ligations to minim ize loan
loss. Borrowers also benefitf romk now ing the localbranch employees. Borrow ers mayvisit a
branch to make payments, refinance their loans, orspeakwith a branch employee at times of
financialdifficulties. Lenders placebrancheswhere their target borrowers live orwork so that it
is convenient for their borrowers to come in to a branch.
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The interest rate on a personal installment loan is the largest component of thetotal cost
ofa loan, but otherfeesincrease the effectiveinterest rate that a borrowerw i l l pay. TheAnnual
PercentageRate ("APR") combines the interestratesandfeesto indicate the annualcharges
associatedwith the loan. Although the maximum interestratesandfeescharged on personal
installment loans vary by state, Springleaf andOneMainhave a self-imposed interest rate cap o f
36percent on their respective loans.
While subprime borrowers consider A PR in selecting a loan, theytypicallyfo cus most on
themonthlypayment and o n theeaseand speed ofobtaining approval. Forthesereasons,
negotiationsbetween borro wers and lenders tend to foc us more on the amount o f the loan, the
repayment terms, and collatera l requirements than on therates and fees.
Everystaterequires personal installment lenders to obtain licenses toofferloans to
subprimeborrowers. Many states also have regulations governing the interestratesandfeeson
personal installme nt loans,with some statesimposingmaximumratesandfees and others
utilizing a tiered-rate system that establishes differentinterestratesandfeesfo rdifferent,
loan
amounts. The nature o fstateregulationssignificantlyaff ects the number o f personal installme nt
lendersoperating in a state.
C . Relevant ProductMarket
Subprimeborrowersturn to personal insta llment loans when they need cash but have
limited accessto creditf rombanks, credit card companies, and other lenders. As expla ined i n
theComplaint,the productsofferedbytheselenders are notmeaningfulsubstitutes for personal
installmentloans fo r a substantial number o f subprime borrowers.
For example, banks and credit unionsofferpersonal ins tallmen t loans atratesand terms
much better than those offeredby personal insta llment lenders, but subprime borrowers typically
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donot meet the underwriting criteria ofthoseinstitutions and are unlikely to be approved.
Further, the loan app lication andunderwritingprocessat banks and credit unions typically take
much longer than that of personal installment lenders.
Payday and title lenders provide short-termcash,but charge muc h higherratesandfees,
usuallylend in amounts wellb elo w $1,000, and require far quicker repayment than personal
installment lenders. Ratesandfeesf orthesetypes o f short-termcashadvances can exceed 250
percentA PRwith repayment generally due inless than 30 days.
Creditcardsare also not a viable alternative fo r most subpr ime borrowers. Subpr ime
borrowers mayhavediff icultyobta ining credit cards, andthosew hohave creditcardshaveoften
reachedtheir credit limits andhavelimitedaccessto additio nal credit extensions. Although
subprimeborrowers may use creditcardsf or everydaypurchases,theytypicallyhaveinsufficient
remaining credit to pay f or largerexpensessuch as major car repairs or significantmedical bills.
Finally, although online lenders havebeensuccessful i n makin g loans to pri me
borrowers, they face challenges i n meeting theneedso f andmitigating the creditrisk posed by
subprime borrowers. Without a localbranchpresence, online lenders do not maintain close
customerrelationships, nor can they conduct face-to-face meetings to verifykey documents,
measureswhich reduce the risk o ffraudand borrower default. Onl ine lenders are also unable to
processapplications and distribute loanproceedsas quickly as local personal installment lenders.
For all ofthesereasons,as explained in the Com plain t, subprime borrowers generally
would notturn to banks and credit unions, payday and title lenders, credit cards, or online
lendersin the event lenders offering personal installment loans to subprime borrowers were to
increase the interest rateor otherwise make their loan terms lessappealing by a small but
significantamount. Accordingly,the Compla int alleges that the pro visio n of personal installm ent
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loans to subprime borrowers is a lineo f commerce and a relevant product market within the
meaning of Section 7o f t heClayton Act.
D. Relevant Geographic Mark et
As explained in the C ompla int, subprime borrowers seeking personal insta llment loans
value convenience, includingquickaccessto borrowed funds and minimaltravel time, and look
fora branchnearwhere they live orwork. While the distance a borrower iswil l ingto travel may
varyby geography, the vastmajorityo f subprime borrowers travellessthan twen ty miles to a
branchfo r a personal installment loan.
Personalin stallment lendershaveestablished local trade areasf or theirbranches.
Lendersusuallyrelyon directmail solicitations as the prima rymeanso f marketing and solicit
customersw ho livewithin close proximityto theirbranches. Lenders who placebranchesin the
sameareas compete toservethesametarget borrowerbase. Borrowersview lenders with
branchesin close proximity toeachother as close substitutes.
Forthesereasons,the ov erlappin g tradeareasof competin g personal ins tallment lenders
form geographic markets where the lenders locatedwithin the trade areascompete fo r subprime
borrowers who live orworknearthebranches. The size andshapeo f the o verlappin g tradeareas
ofthesebranchesmay vary as the distance borrowers are wil l ing to traveldependson factors
specific toeach localarea. Even so, typicallymore than three-quarters of the personal
installment loans to subprime borrowersmadeby a give n branch aremadeto borrowers residing
withintw enty miles of the branch. Personal installment lenders withbranches located outside
thesetrade areas usually are not convenient alternatives for borrowers.
Springleaf and OneMainhaveahighdegree of geographic overlap between their branch
networks. Inlocalareaswithin and around 126 towns and mun icipali ties in elevenstates -
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Arizona, California,Colorado, Idaho,North Carolina , Ohio , Pennsylvania, Texas, Virginia,
Washington, and West Virginia - Springleaf and OneMainhavebrancheslocatedwithin close
proximity o f one another, o fte nwithin f i v emiles. Intheseoverlapping trade areaso f
SpringleafsandOneMain'sbranches,fe w, i f any, other lenders havebranchesofferingpersonal
installment loans to subprime borrowers.
Accordingto the Complaint, inlocalareaswithinand around the 126towns and
municipalities i nArizona, California,Colorado, Idaho,NorthCarolina, Ohio, Pennsylvania,
Texas,Virginia,Washington, and West Virginia, subprime borrowers of personal installment
loanswould no tseeksuch loans outside the localareasi n the event lenders offeringpersonal
installment loans to subprime borrowers were toincreasethe interest rate or otherwise make their
loanslessappealing by a small butsignificantamount. Accordingly,the overlapping tradeareas
located in the 126
towns andmunicipalities identifiedi n the App end ix attached to the Com plaint
constitute relevant geographic markets withinthe meaning of Section 7 of the Clayton Ac t.
E . Anticompetitive Effec ts
As alleged i n the Com plaint, Springlea f and On eM ain are the two largest providers of
personal installment loans to subprime borrowers in theUnitedStates. Bothcompanies have a
longhis tory in thebusiness,an extensive branch network, and close ties to the local communities
inwhich they operate. Both companies have used theiryearso f experience and large customer
base to develop sophisticated risk analytics that allowthem to minim ize expected creditlosses.
Other lenders thatoffer personal installment loans to subprime borrowershavemuch smaller
branch footprintsand arepresenti n fewerstatesand localmarkets than Springleaf and OneMain.
In localmarkets within and around the 126towns andmunicipalities in Arizona,
California,Colorado, Idaho,North Carolina, Oh io, Pennsylvania, Texas, Virginia, Washington,
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andWestVirginia identifiedin the App end ix to the Complai nt, the market f or the prov isio n of
personal installment loans to subprime borrowers ishighly concentrated. Inthese local markets,
Springleafand O neM ain are the largest providers o f personal installment loans to subprime
borrowers, and face little, i fany, competitionf romother personal insta llme nt lenders. The
Complaint alleges that the proposed acquisitionwouldsubstantiallyincreaseconcentration in
theselocal markets and likelywould result in subprime borrowers f ac ing higher interestratesor
fees,greater limitson the amount they can borrow and restraints on theirability to obtain loans,
andmore onerous loan terms. The proposed acquisi tion thereforel ikely w i l l substantially lessen
competitioni n the prov isio n o f personal instal lment loans to subprime borrowers.
F . Difficu lty of Entry
Accordingto the Compla int, entry ofadditionalcompetitors into the provi sio n o f personal
installment loans to subprime borrowers in the 126localmarkets inArizona, Ca lifornia,
Colorado, Idaho,North Carolina, Ohio, Pennsylvania, Texas, Virginia,Washington, and West
Virginia identifiedi n the Complain t isunlikely to be timely or sufficientto defeat the likely
anticompetitiveeffec ts o f the proposed acquisition. Insomestates,thestateregulatoryratecaps
createunattr active markets f or entry. I n others, lenders face entry barriers i n terms o f cost and
time to establish a localbranchpresence. Personal instal lment lenders need experienced branch
employeeswithknowledge of the localmarket to build abaseo f customer rela tionships. A new
lender i n alocal market facesmore risks as itdoesnothaveknowledge oflocal market
conditions. A lender also must obtain fundingand devoteresourcestobuilding a successful
localpresence. As a result o fthesebarriers, entry isunlikelyto remedy the anticompetitive
effectsof the proposed acquisition.
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I I I . E X P L A N A T I O N O FT H E P R O P O S E D F I N A L J U D G M E N T
Thedivestiture required by the proposed Final Judgment w i l l eliminate the
anticompetitive effects of the acquis ition by establishing an independent and economica lly viable
competitor in the provision of personal installment loans to subprime borrowers ineacho f the
local markets of concern.
Specifically,Paragraphs IV A ) and IV(B) o f the proposed F ina l Judgment requires
Defendantsto divest 127
Springleafbranches,which are identified in the Attachment to the
proposed Final Judgment, to Lendmark Financial Services or to one or more alternative
Acquirersacceptableto the UnitedStates. Thebranches to be divested are located in the local
marketswithin and around the 126 towns and municipalitiesidentifiedin the App end ix to the
Complaint. The divestiturew i l l establish Lendmark or an alternative Acquirer as a new,
independentand economically viable competitor insomestatesand w i l l allo w Lendmark or an
alternative Acquirer to compete in new l ocalareasand toenhanceits competitivepresencei n
others.
The divestitureo f t he 127 Springleafbranches includes all active loans originated or
serviced atthosebranches,inc ludin g all historical performance information(including account-
levelpayment histories) and all customers' creditscoresand other credit metrics withrespect to
loansthat are active, closed, paid-off,or defaulted thathave beenoriginated or serviced at the
DivestitureBranches at any point since January 1,2010. The historical performance information
w i l l a llo w a lender to gain an understanding oflocalma rket conditions and to perfo rm risk
analytics essential to maki ng personal ins tallment loans to subprime borrowers. In the event that
Lendmark is not the Acquirer,Paragraph11(G)(3) provides that Springleafw i l l further divest, at
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the Acquirer's option,assetsrelated to back office and technical support that would provide the
Acquirerwi th additional capability and know-how.
ParagraphIV(A) of the proposedFinalJudgment requires Springleaf to divest the
DivestitureAssetswithin 120calendardaysafter the filing of the Complaint orwithin five (5)
calendardaysafter satisfaction ofallstatelicensing requirements, w hich ever issooner. The
United States,in itssolediscretion, after consultation with the PlaintiffStates,may agree to one
ormore extensionsof the time period, not to exceedsix ty (60) calendardays in total. In
addition,i n the event that Lendmark has initiated the statelicensingprocessi n a particular state
bu t has not satisfied the state's licensing requirementsbefore the end o f t heperiod specified in
Paragraph I V A ) , the period to divest the DivestitureAssetso f that particular state shall be
extendedto five (5)calendardaysafter satisfaction of the statelicensing requirements.
ParagraphIV(A) alsorequires Springleaf to use itsbestefforts to divest the Div estitureAssets as
expeditiously as possible.
In the event that Lendmark isunable to acquire the DivestitureAssets in one or more
states,ParagraphsIV(B)provides that Springleaf shall divest the remaining DivestitureAssets to
an alternative Acquirer(s) acceptableto the Unite dStates,i n itssole discretion, after consultation
with the relevant PlaintiffStates. Springleaf shall divest the remaining DivestitureAssets within
thirty (30)daysafter the UnitedStatesreceivesnotice that Lendmark is not the Acquirer ofsuch
DivestitureAssets, or within five (5)daysof satisfaction ofa llstatelicensing requirements,
whichever issooner. The UnitedStates,i n itssolediscretion, after consultation with the relevant
PlaintiffStates,mayagree to one or more extensionsof thetime period, not toexceed sixty (60)
calendardaysi n total. PursuanttoParagraph V I ) , Springleaf must divest to a single Acquirer all
of the DivestitureBrancheslocated i n a particular state.
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Paragraph IV(G) prohib its Defendants f romenteringinto non-compete agreements with
any employee at any of Defendants' branches orwith any regional manager with responsibility
formana ging any o f Defendants' branches fo r a per iod o ftwo (2) years f r omthe date o f the
f i l ing o f the Complaint. Defendants also must wa ive any existing non-compete agreements with
such employees. Paragraph IV(G) ensuresthat competing providerso fpersonal installment
loans, includingthe Acquirer,may hire Defendan ts' branch employees and region al managers
who are experienced i n mak ing personal insta llment loans to subprime borrowers.
Paragraph IV(H) provides fo r thepossibility o f atransition services agreement between
Springleafand theAcquirer(s)f or a per iod o f up to six (6) months. Thisprovision isnecessary
becausethe transfer o floan records and customer informationf romSpringleafs data system to
theA cqu ire r's data system w i l l require system testing, and the transitionm ay take a period o f
months afte r the divestiture. Thetransition services provid ed pursuant to such an agreement
shall includeproviding the Acquirer(s)accessto aseparateinformationtechnology environment
within Springleafs informationsystem fo r loanorigination,administrationand services. During
theterm o f thetransition services agreement, Springleafshall impleme nt and mainta in
proceduresto preclude the sharing o f data between Spring leaf and the Acquirer(s). TheUnited
States,i n its sole discretion, may approve one or more extensions o fthisagreement fo r atotalo f
up to an additional six (6) months.
SectionX o f the proposedFinal Judgment provides that theUnited Statesmay appoint a
Monitoring Trustee withthe power and aut hority to investigate and report on Defendants'
compliancewi th the termso f t heproposedFinal Judgment and the Asset Preservation
Stipulation and Order duringthe pendency o f the divestiture. Becausesatisfaction of the state
licensing requirements may take 120calendar days or longer, aMonitoring Trustee w i l l assist
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Plaintiffsi nmonitoring the divestitureprocess and ensuring Defendants' compliancewith the
AssetPreservation Stipu lation and Order. The Monitoring Trustee shallfilemonthly reports
with the UnitedStatesand shallserveuntilthe comp letion of the divestiture and the expiratio n o f
anytransition services agreement.
In the event that Springleafdoesnot accomplish the divestiture to either Len dmark or an
alternative Acquirer(s)within the periods prescribed in the proposed Final Judgment, pursuant to
Sect ion V , the Cour t shall appo int a Divest iture Trustee selected by theUnited Statesand
approved by the Court to eff ect the divestiture. I f aDivestiture Trustee is appointed, the
proposedFinal Judgment provides that Springleafw i l l pay allcostsandexpenseso f the trustee.
Afterits appointmentbecomeseffective,the D ivestitur e Trustee w i l l f i l emo nth ly reports with
theCourt and theUnitedStatessettingforthi tseffortsto accomplish the divestiture. A t the end
of six (6) months, i f the divestiture has notbeenaccomplished, the Div estitu re Trustee and the
United Statesw i l lmake recommendations to the Court,which shall enter such orders as
appropriate, in order to carry out the purpose of the Final Judgment, including extending the trust
orthe term of the DivestitureTrustee's appointment.
I V . R E M E D I E S A V A I L A B L E T OP O T E N T I A L P R I V A T E L I T I G A N T S
Section 4 of the Cla yton Act ,15U.S.C. 15, provides that any person who has been
injuredas a result o f conduct pro hib ited by the antitrust laws may bringsuit in federal court to
recoverthree times the damages the person has suffered, aswell ascostsandreasonable
attorneys' fees. Entry of the proposed Final Judgment w i l lneither impair norassistthe bringing
of any private antitrustdamageaction. Under the provisions o f Section 5(a) o f the Clay ton Act ,
15
U.S.C. 16(a), the proposed Final Judgment has no prima facie eff ect in any subsequent
private lawsuit that may be brought against Defendants.
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V. P R O C E D U R E S A V A I L A B L E F O R M O D I F I C A T I O N O FT H E P R O P O S E D
F I N A L J U D G M E N T
TheUnited Statesand Defendants have stipulated that the proposed Final Judgment may
beentered b y the Court after complianc ewiththe p rovisions of theAPPA,p rov ided that the
United Stateshas no twithdrawn its consent. TheAPPA conditions entry upon the Co urt's
determinationthat the proposed FinalJudgment is in thepublic interest.
TheAPPAp rovides a per iod o f at least sixty (60) days preceding theeffectivedateo f the
proposedFinalJudgment withinwhichany person may submit to the United Stateswritten
comments regard ing the proposedFinalJudgment. A n y person who wishes to comment should
do sowithin sixty (60) days o f thedateo fpublicationo fthisCompetitive Impact Statement in
theFederal Register, or the lastdateo fpublication i n a newspaper o f the summary o f this
Competitive Impact Statement, whichever is later. A l l comments receivedduringthis period
w i l lbe considered by theUnitedStatesDepartment of Justice, which remains free towithdraw
it sconsent to the proposed Final Judgment at any timeprior to the Court's entry of judgment.
The comments and theresponseo f t heUnited Statesw i l l be filed with the Court. Inaddition,
commentsw i l lbe posted on the U.S. Department of Justice, AntitrustDivision's Internet website
and, under certain circumstances, publi shed in theFederal Register.
Written comments should be submitted to:
MaribethPetrizzi
Chief,Litigation I I Section
Antitrust Division
UnitedStatesDepartment of Justice
450F i f thStreet, N.W. , Suite 8700
Washington,D C 20530
Th eproposed FinalJudgment provides that the Court retainsjurisdictionover this action, and the
partiesmay apply to the Court fo r any ordernecessaryor appropriate f or themodification,
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interpretation,or enforcement of the Final Judgment.
V I . A L T E R N A T I V E S T OT H E P R O P O S E D F I N A L J U D G M E N T
TheUnitedStatesconsidered,as analternativeto theproposed Fin al Judgment, aful l
trial onthemerits against Defendants. The Un ite dStatescouldhavecontinuedthelitigationand
soughtpreli minar y and permanent injunctio ns against Springleafsacquisition ofOneMain. The
United Statesissatisfied, however, thatthedivestiture o fassets described intheproposed Final
Judgment w i l lpreservecomp etition for personal installment loans tosubprime borrowers. Thus,
theproposed Final Judgment would achieve allorsubstantially al l of the reliefthe UnitedStates
wouldhaveobtained through litigation,butavoidsthetime,expense,and uncertainty ofafull
trial onthemerits o f t heComplaint.
V I I . S T A N D A R D O FR E V I E W U N D E R T H E A PPA
R
T H E P R O P O S E D F I N A L J U D G M E N T
TheClayton Ac t,asamended by the APPA, requires that proposed consentjudgmentsi n
antitrustcasesbroughtby theUnitedStatesbesubjectto asixty-day comment perio d, after
which the Court shall determine whether entryo f the proposed Final Judgment "isin the p ublic
interest." 15U.S.C.16(e)(1). In mak ing that determination,theCourt, inaccordancewiththe
statuteas amended in 2004,isrequiredto consider:
(A) thecompetitive impact of such judgment , includi ng
terminationo f allegedviolations,provisions for enforcementand
modification,duration ofrelief sought, anticipated effects of alternative
remedies actually considered, whether its terms areambiguous, and any
other competitive considerations bearing upon the adequacyof such
judgment thatthecourtdeems necessaryto adetermination o f whetherthe
consentjudgment isinthepub lic interest;and
(B) theimpact of entry of such judgment upo n comp etitioni n
the relevant marketormarkets, uponthepublic generally and individ uals
alleging specific injury fromtheviolationssetforthi nthecomplaint
including consideration o f the public benefit, i f any,to bederived f roma
determination o f the issuesattrial.
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15U.S.C. 16(e)(1)(A)& (B). In consideringthesestatutory factors, the Co urt' s inquiry is
necessarilya limitedone as the government is ent itled to "broad d iscretion to settle with the
defendantwithin thereacheso f the publ ic interest." United States v.Microsoft Corp., 56 F.3d
1448, 1461 (D .C . Cir. 1995);see generally United States v. SBC Commc'ns, Inc., 489 F. Supp.
2d 1(D.D.C. 2007)(assessingpublic interest standard under the TunneyAct) ; United States v,
U.S. Airways Group, Inc.,38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the "court's
inquiry isl imited"i n Tunney Ac t settlements); United States v.InBev N.V./S.A.,No. 08-1965
(JR), 2009-2 Trade Cas. (CCH) 76,736, 2009 U.S.Dist.LEXIS84787, at *3,(D.D.C.Aug . 11,
2009) (notingthat the court's review of a consent judgment islimited andonly inquires"into
whetherthe government's determination that the proposed remedies w i l l cure the antitrust
violationsalleged i n the com plaint was reasonable, and whether the mechanis m to enforce the
finaljud gme nt are clear and manageable."). 1
As theUnitedStatesCour t of Appeals f or theDistrict o fColumbiaCircuit has held,
underthe AP P A a court considers, amon g other things, the relationship between the remedy
securedand the specific allegations set forth in the govern ment's complaint, whether thedecree
is sufficientlyclear, whether enforcement mechanisms are sufficient,and whether thedecree
may positivelyharmthirdparties. See Microsoft, 56 F.3d at 1458-62. With respect to the
adequacyo f the relief secured by thedecree,a court may not"engagei n an unrestricted
evaluation o f wha treliefwouldbest servethepublic." United States v. BNS, Inc., 858 F.2d 456,
462(9th Cir. 1988) (quotingUnited States v.Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981));
The 2004 amendments substituted"shall"fo r "may" indirectingrelevant factors for courts to
considerand amended thelistoffactorsto focus on competitive considerations and toaddresspotentially
ambiguousjudgment terms. Compare 15 U.S.C. 16(e) (2004),with 15 U.S.C. 16(e)(1) (2006);see
also SBCCommc 'ns,489 F. Supp. 2d at 11(concludingthat the 2004 amendments "effectedminimal
changes"to Tunney Ac treview).
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see also Microsoft, 56 F.3d at 1460-62; United States v.Alcoa, Inc., 152F. Supp. 2d 37, 40
(D.D.C.2001);InBev, 2009 U.S.Dist. LEXIS 84787, at *3. Courtshavehe ld that:
[t]hebalancing o fcompetingsocial andpolitical interests affec ted by a proposed antitrust
consentdecreemust be left,i n the first instance, to the di scre tion o f theAttorney General.The court's ro le in prot ecting thepublic interest is one ofinsuringthat the government
hasnot breached its duty to thepublici n consenting to thedecree. The court is required
to determine not whether a particulardecree is the one that w i l lbest servesociety, but
whether the settlement is within the reaches of the public interest.'''' More elaborate
requirementsmightundermine the effectiveness of antitrust enforcement by consent
decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citationsomitted). 2 I ndeterminingwhether a
proposed settlement is in thepublic interest, adistrict court "must accord deference to the
governmen t's predictions about the efficacyof its remedies, and ma y not require that the
remediesperfectlymatch the allegedviolations." SBC Commc 'ns,489 F. Supp. 2d at 17; see
also U.S.Airways, 38F. Supp.3dat 75 (notingthat a cou rt should notreject the proposed
remediesbecauseit believes others arepreferable);Microsoft, 56 F.3d at 1461(noting the need
fo rcourts to be "deferentialto the government's predictio ns as to the eff ect o f the proposed
remedies ); United States v. Archer-Daniels-Midland Co.,272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(notingthat the court should grant duerespectto theUnited States'spredictionas to theeffecto f
proposed remedies, its perceptiono fthe market structure, and its views o f the nature o f the case).
Courtshavegreater flexibility i n approving proposed consentdecreesthan incrafting
theirowndecreesfollowinga finding o fliability i n a litigatedmatter. " [A] proposed decree
must be approved even i f i tfallsshort o f the remedy the court would impose on its ow n, as long
asi tfallswithin therangeo facceptabilityor is 'w i thin thereacheso fpublicinterest.'" United
2
Cf.
BNS,858 F.2d at 464(holdingthat the court's "ultimate authority under the [APPA]is
limitedtoapprovingordisapprovingthe consent decree"); United States v. Gillette Co.,406 F. Supp. 713,
716(D.Mass. 1975)(notingthat, inthis way, the court is constrained to"lookat theoverallpicture not
hypercritically,nor with a microscope, butwithan artist's reducing glass").Seegenerally Microsoft, 56
F.3dat 1461 (discussing whether "the remedies [obtainedinthedecreeare] so inconsonantwith the
allegations charged as tofalloutsideofthe 'reachesofthepublic interest' ).
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States v. Am. Tel. & Tel. Co., 552 F. Supp. 131,151 (D.D.C.1982) (citations omitted)(quoting
United States v.Gillette Co., 406 F. Supp. 713, 716 (D . Mass. 1975)),aff'dsub nom. Maryland
v. United States, 460 U.S. 1001 (198 3);see also U.S.Airways, 38 F. Supp. 3d at 76 (noting that
roommus t be made f or the government to grant concessions in the negotiationprocessfor
settlements) (citingMicrosoft, 56 F.3d at 1461); United States v.Alcan Aluminum Ltd., 605 F.
Supp.619,622 (W.D. Ky. 1985)(approvingthe consent decreeeven though the courtwould
have imposed a greater reme dy) . To meet this standard, theUnitedStates"need onlyprovide a
factualbasisfo rconcluding that the settlements are reasonably adequateremedies f or the alleged
harms." SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover,the Court's rol e under theAPPA is limited to reviewingthe remedy in
relationshipto theviolationsthat theUnitedStateshas alleged i n its Compla int, anddoesnot
authorizethe Cou rt to "construct [its] ownhypotheticalcaseand then evaluate thedecree against
thatcase." Microsoft, 56 F.3d at 1459;see also U.S.Airways, 38 F. Supp. 3d at 75 (noting that
thecourt must simplydetermine whether there is afactual foundati onfo r the government's
decisionssuch that its conclusions regarding the proposed settlements are reasonable); InBev,
2009 U.S.Dist. LEXIS 84787, at *20 ("the 'publicinterest' is not to be measured by comparin g
theviolationsalleged in the complaint against those the court believes could have, or even
should have, been alleged"). Because the "court's authorityto r evie w thedecree depends
entirelyo n the government's exercising its prosecutorial discretion bybringing acasei n the first
place," itfollowsthat "the court isonly authorized to rev iew thedecreeitself,"and not to
"effectivelyredraftthecomplaint"to inquireintoother matters that theUnited Statesd id not
pursue. Microsoft, 56 F.3d at 1459-60. As this Courtconfirmedi nSBC Communications, courts
"cannot look beyond the complaint in making thepublic interest dete rmin ation unless the
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complaintis drafted so nar row ly as to make a mock ery ofjudicial power." SBC Commc 'ns, 489
F. Supp. 2d at 15.
In its 2004 amendments, Congress madeclear its intent topreservethe practical benefits
of utilizingconsentdecreesin antitrust enforcement, adding the unambiguous instru ction that
"[njothing in this section shall be construed to require the court to conduct an evidentiary hearing
or to require the court to perm it anyone to intervene ." 15 U.S.C. 16(e)(2);see also U.S.
Airways, 38 F. Supp. 3d at 76(indicating that a court is not required toholdan evidentiary
hearingor to permitintervenorsas part of its review under the Tunney Act). The languagewrote
into the statutewhatCongress intended when itenactedthe Tunne y Ac t in1974, as Senator
Tunneyexplained: "[t ]he court is nowhere compelled to go to trialor toengage in extended
proceedingswhichmighthavethe effe ct ofvitiatingthe benefits o f prompt and lesscostly
settlementthroug h the consentdecreeprocess." 119Cong.Rec. 24,598 (1973) (statement of Sen.
Tunney). Rather, the procedure fo r the pub lic interest determ ination is leftto the discre tion o f
theCourt,withthe recognition that the Court's "scopeo f rev iew remains sharply proscribed by
precedentand the nature o f Tunney A ct proceedings." SBC Commc 'ns,489 F. Supp. 2d at 1 1 . 3
A court can make its public interest determinationbasedon the competitive impactstatement and
responseto publi c comments alone. U.S.Airways, 38 F. Supp. 3d at 76.
3
See United States v. Enova Corp., 107F. Supp. 2d 10, 17(D.D.C.2000) (noting that the
"TunneyAct expressly allows the court to make its public interest determination on thebasisof thecompetitive impactstatementandresponseto comments alone"); United States v.Mid-Am. Dairymen,
Inc., No .73-CV-681-W-1, 1977-1 Trade Cas. (CCH) 61,508, at 71,980, *22(W.D. Mo. 1977)
("Absenta showing of corruptfailureofthe government to discharge its duty, the Court, in making its
publicinterest finding,should . . .carefullyconsider the explanations ofthe government inthe
competitive impactstatementand itsresponsesto comments in order to determine whetherthose
explanationsarereasonableunder the circumstances."); S. Rep. No. 93-298, at 6 (1973) ("Where the
publicinterest can be meaningfullyevaluated simply on thebasisof briefs and oral arguments, that is the
approachthat should beutilized.").
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V I I I . D E T E R M I N A T I V E D O C U M E N T S
There are no determinative materials or documents withinthe meaning of the APPA that
wereconsidered b y the UnitedStatesi nformulatingthe proposed Final Judgment.
Dated:November 13,2015
Respectfully submitted,
AngelaTing (D.C. Bar #449576)
U.S.Department of Justice
AntitrustDivision, Litigation I ISection
450Fifth Street,N.W., Suite 8700
Washington, DC 20530
(202) 616-7721
(202) 514-9033(Facsimile)
angela.ting@usdoj
.gov
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