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West-Thomson Merger

  These were our comments today on the Proposed Final Judgment in the 
  DOJ/West/Thomson case on the merger.  jamie
                                     James P. Love
                                     Consumer Project on Technology
                                     P.O. Box 19367
                                     Washington, DC 20036
  September 3, 1996
  Craig S. Conrath, Esq
  Chief, Merger Task Force
  U.S. Department of Justice
  Antitrust Division
  1401 H. Street, Suite 4000, N.W.
  Washington, DC 20530
  via fax 202-307-5802
  re:    United States v. The Thomson Corporation and West 
         Publishing Company
         Case No. 1:96CV01415 (U.S. District Court for the 
         District of Columbia)
  Dear Mr. Conrath:
       This letter presents the comments of the Consumer Project on 
  Technology (CPT) on the Proposed Final Judgment in the above 
  referenced case.  CPT is a project of the Center for Study of 
  Responsive Law.  CPT was created by Ralph Nader in 1995.  We 
  maintain a page on the World Wide Web which describes our 
  activities, at: 
       When the Proposed Final Judgment (PFJ) was first made public, 
  CPT made comments to several news organizations expressing 
  satisfaction with the proposed divestitures, while expressing 
  reservations about the economic terms of the compulsory license 
  agreement.  After having the opportunity to more closely examine the 
  PFJ, we reiterate our concerns about the onerous economic terms of 
  the compulsory license, and we express our additional concerns about 
  the proposed divestitures.  It is our opinion that the PFJ does not 
  adequately protect the public interest, and that the proposed merger 
  should not be permitted.
       Proposed Divestitures
       CPT was pleased see that the divestiture would include the U.S. 
  Code Service (USC), the U.S. Reports, Lawyers Edition (L.Ed.), and 
  Auto-Cite, three important Thomson valued-added services which 
  compete with products currently offered by West Publishing.  
  However, legal publishers and law librarians have expressed 
  persuasive concerns about omissions in the list of divested 
  products, and raised questions about the viability of USC and L.Ed., 
  if Thomson does not also divest its American Law Reports (ALRs) and 
  American Jurisprudence 2d (Am Jur). 
       At the heart of the problems over the enhanced legal products 
  that will be divested are the issues of economies of scope in 
  publishing, and the inter-related nature of the various value-added 
  products.  The USC, L.Ed., and Auto-Cite products rely upon access 
  to research and analysis from ALRs in a fundamental way, and to 
  exclude the ALRs from the products to be divested will greatly 
  diminish the value of the products which are divested. 
       The economies of scope issue is also important.  Other legal 
  publishers do not believe that USC and L.Ed. are economically 
  viable, if they are spun off without the ALRs and Am Jur products, 
  because of the lower cost of producing the products jointly, as 
  compared to the stand alone cost of producing enhanced case 
  analysis.  These publishers believe the PFJ will create a set of 
  "product fragments" which cannot succeed economically on their own.
       CPT did not fully appreciate the importance of the ALRs and Am 
  Jur publications at the time the PFJ was announced, and we would 
  like the record to reflect our views after having the opportunity to 
  more closely examine the agreement.
       A third area of concern is the implementation of the 
  divestitures. Reed-Elsevier, the owner of Lexis-Nexis, has held 
  discussions with Thomson to determine what assets will actually be 
  sold.  While we do not have access to the confidential documents 
  that have been shown to Reed-Elsevier, we do know that Reed-Elsevier 
  believes that Thomson intends to retain the Auto-Cite trained staff 
  and database, along with the exclusive rights to integrate Auto-Cite 
  with the ALRs and other Thomson products.  It is one thing to divest 
  a trademark plus copies of the database and software, and yet 
  another to divest a product as a going concern.  If Thomson 
  effectively guts the product and sells the service in name only, the 
  purpose of the divestiture will be undermined.  Potential bidders on 
  these products have apparently raised these issues with DOJ.
      The Compulsory License
      In a June 19, 1996 press release, the DOJ emphasized the fact 
  that the PFJ would require Thomson to "openly license" West's page 
  numbering system under a system of "capped" fees.  In fact, the 
  proposed compulsory licensing system seems to permit very little new 
  entry into the market for primary source case law with the use of 
  the West citation.  Basically, publishers who seek licenses must 
  agree to purchase the right to use the citation for each and every 
  case that is cited, in each and every product that is published, in 
  each and every year the product is sold.  A publisher who licenses 
  the citation to a single case for use in CD-ROM and online products 
  would have to pay twice for the citation, and renew the payment year 
  after year, with fees increasing each year.  The costs for those 
  licenses are very high.  
       According to publishers, typical federal circuit court opinions 
  run from 20 to 40 thousand characters, and U S. Supreme Court cases 
  often exceed 150 thousand characters.  The PFJ requires publishers 
  to pay 9 cents per thousand characters in the first year, increasing 
  to 13 cents after two years, with annual increases for inflation.  
  Thus, for a 30 thousand character opinion, Thomson will receive 
  $3.90, for each product where the opinion is published, in every 
  year the product is sold. This is a very high price to pay simply to 
  publish the law of the land.
       These "capped fees" are also likely to be the minimum fees. 
  This particular fee structure sets very high hurdles for entry into 
  the market. The fee structure is strongly biased in favor of the 
  largest competitors to Thomson, and strongly prejudiced against 
  small businesses.  Of course, the most important competitor to a 
  foreign owned Thomson/West is foreign owned Lexis-Nexis.  Lexis-
  Nexis will surely license the citations.  But the proposed 
  compulsory licensing system makes it nearly impossible for many of 
  the innovative American small technology firms who are seeking entry  
  into this market to obtain the citations and become effective 
  competitors.  This is a kind of reverse industrial policy that will 
  hurt consumers and American small businesses.
       These fees must be paid by anyone, including not-for-profit 
  institutions.  The license agreement is written in such a way that 
  the subscribers must agree to the terms of the license, and Thomson 
  must approve the license, making it extremely unlikely that the 
  citations will ever be available for browsing on the Internet.
       We are concerned that the compulsory license agreement will 
  have the perverse effect of adding credibility to West's assertions 
  of copyright to the text and citations of federal court opinions, 
  without providing the public with any real improvements in access to 
  legal information. 
       For these reasons, we urge DOJ and the court to reject the PFJ, 
  and we urge the DOJ to bring an antitrust case against West 
  Publishing which addresses the serious anticompetitive problems in 
  the market for legal information.
       James P. Love
       Consumer Project on Technology
  James Love / love@tap.org / P.O. Box 19367, Washington, DC 20036
  Voice: 202/387-8030; Fax 202/234-5176
  Center for Study of Responsive Law
     Consumer Project on Technology; http://www.essential.org/cpt
     Taxpayer Assets Project; http://www.tap.org