[Federal Register Volume 73, Number 27 (Friday, February 8, 2008)]
[Notices]
[Pages 7593-7607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-532]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Pearson PLC, Pearson Education Inc., Reed 
Elsevier PLC, Reed Elsevier NV, and Harcourt Assessment Inc.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States v. Pearson plc, Pearson Education Inc., Reed Elsevier PLC, Reed 
Elsevier NV, and Harcourt Assessment Inc., Civil Action No. 1:08-cv-
00143. On January 24, 2008, the United States filed a Complaint to 
enjoin the proposed acquisition by Pearson plc and Pearson Education 
Inc. (collectively ``Pearson''), of Harcourt Assessment Inc. 
(``Harcourt''), a wholly-owned subsidiary of Reed Elsevier PLC and Reed 
Elsevier, NV, and to obtain equitable and other relief. The Complaint 
alleges that Pearson's acquisition of Harcourt would substantially 
lessen competition in the markets for adaptive behavior, speech and 
language, and adult abnormal personality clinical tests in violation of 
section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final 
Judgment, filed at the same time as the Complaint, requires Pearson to 
divest: (1) Harcourt's adaptive behavior clinical test, the Adaptive 
Behavior Assessment System; (2) Harcourt's adult abnormal personality 
clinical test, the Emotional Assessment System, which is under 
development; and (3) in the speech and language clinical test market, 
either Pearson's Comprehensive Assessment of Spoken Language and the 
Oral and Written Language Scales or Harcourt's Clinical Evaluation of 
Language Fundamentals.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the United States 
Department of Justice, Antitrust Division, Antitrust Documents Group, 
325 7th Street, NW., Room 215, Washington, DC 20530 (telephone: 202-
514-2481), on the United States Department of Justice's Web site at 
http://www.usdoj.gov/atr, and at the Office of the Clerk of the United 
States District Court for the District of Columbia. Copies of these 
materials may be obtained from the Antitrust Division upon request and 
payment of the copying fee set by United States Department of Justice 
regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to James J. Tierney, Chief, Networks and Technology Enforcement 
Section, Antitrust Division, United States Department of Justice, 600 E 
Street, NW., Suite 9500, Washington, DC 20530 (telephone: 202-307-
6200).

Patricia A. Brink,
Deputy Director of Operations.
UNITED STATES OF AMERICA Department of Justice, Antitrust Division, 
600 E Street, NW., Suite 9500, Washington, DC 20530, Plaintiff, v. 
Pearson PLC, 80 Strand WC2R 0RL London, England; Pearson Education 
Inc., One Lake Street, Upper Saddle River, New Jersey 07458; Reed 
Elsevier PLC, 1-3 Strand WC2N 5JR London, England; Reed Elsevier NV, 
Radarweg 29, 1043 NX Amsterdam, The Netherlands; Harcourt Assessment 
Inc., 14500 Bulverde Road, San Antonio, Texas 78259, Defendants.

[Case No.: 1:08-cv-00143, Judge: Kollar-Kotelly, Colleen, Deck Type: 
Antitrust, Date Stamp: 1/24/2008]

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil antitrust 
action to enjoin the proposed acquisition by Pearson plc and Pearson 
Education Inc. (collectively ``Pearson''), of Harcourt Assessment Inc. 
(hereafter ``Harcourt''), a wholly-owned subsidiary of Reed Elsevier 
PLC and Reed Elsevier, NV (collectively ``Reed Elsevier''), and to 
obtain equitable and other relief. The United States complains and 
alleges as follows:

I. Nature of the Action

    1. On or about May 4, 2007, and amended on May 21, 2007, Pearson 
and Reed Elsevier signed a sale and purchase agreement for Pearson to 
acquire all of the outstanding voting securities of Harcourt, as well 
as additional Reed Elsevier assets, for approximately $950 million in 
cash.
    2. Pearson and Harcourt both develop, publish, market, sell, and 
distribute individually-administered standardized norm-referenced 
comprehensive clinical tests (hereafter ``clinical tests''), including 
adaptive behavior and speech and language clinical tests. Pearson's 
proposed acquisition of Harcourt would combine the two largest 
publishers of such tests in the United States. Pearson also develops, 
publishes, markets, sells, and distributes market-leading adult 
abnormal personality clinical tests. Harcourt has invested substantial 
resources in the development of a new adult abnormal personality 
clinical test and plans to enter the market for such tests within the 
next year.
    3. The markets for adaptive behavior, speech and language, and 
adult abnormal personality clinical tests are highly concentrated and 
there are high barriers to enter these markets. Pearson's proposed 
acquisition of Harcourt will eliminate competition between Pearson and 
Harcourt in these markets.
    4. The United States brings this action to prevent Pearson's 
proposed acquisition of Harcourt because it would substantially lessen 
competition in the markets for adaptive behavior, speech and language, 
and adult abnormal personality clinical tests in violation of Section 7 
of the Clayton Act, 15 U.S.C. 18.

II. Parties to the Proposed Acquisition

    5. Pearson plc, a U.K. corporation with its headquarters in London, 
England, operates businesses in educational publishing, business 
information, and consumer publishing. Pearson Education Inc. (hereafter 
``Pearson Education''), a wholly-owned subsidiary of Pearson plc, is a 
Delaware corporation with its headquarters in Upper Saddle River, New 
Jersey. Pearson Education develops, markets, sells, and distributes 
clinical tests throughout the United States.
    6. Reed Elsevier PLC; a U. K. corporation with its headquarters 
located in London, England, and Reed Elsevier NV, a Dutch corporation 
with

[[Page 7594]]

its headquarters located in Amsterdam, Netherlands, jointly own 
Harcourt. Harcourt, a New York corporation with its headquarters 
located in San Antonio, Texas, develops, markets, sells, and 
distributes clinical tests throughout the United States.

III. Jurisdiction and Venue

    7. The United States brings this action under Section 15 of the 
Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain the 
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    8. Defendants develop, market, sell, and distribute clinical tests 
in the flow of interstate commerce. Defendants' activities in 
developing, marketing, selling, and distributing these products 
substantially affect interstate commerce. This Court has subject matter 
jurisdiction over this action pursuant to Section 12 of the Clayton 
Act, 15 U.S.C. 22, and 28 U.S.C. 1331, 1337(a), and 1345.
    9. Defendants have consented to venue and personal jurisdiction in 
this judicial district and venue is proper under 28 U.S.C. 1391 (d).

IV. Trade and Commerce

A. Clinical Tests Generally

    10. Psychologists and clinicians, among others, use a variety of 
clinical tests to test for, and diagnose individuals with, certain 
disorders or disabilities, as well as to identify individuals at risk 
for such disorders or disabilities. Clinical tests can also be used to 
develop and provide intervention strategies for, and to monitor the 
progress of treatments for, such disorders or disabilities.
    11. Publishers, including the Defendants, develop, edit, 
standardize, norm-reference, market, and distribute clinical tests for 
a wide range of disorders and disabilities that have been designed and 
authored by leading experts in such disciplines.
    12. Standardization is the process of developing a test that 
reliably, validly, and consistently assesses a specific discipline. 
Standardized tests are authored, designed, and developed so that the 
test materials, test procedures, and test scoring are consistent across 
each test administration. Standardized test scores can then be 
documented empirically and compared across test administrations.
    13. Norm-referencing is the process of determining average test 
scores across demographics. Publishers norm-reference a standardized 
test by administering the test to a representative sample of 
individuals and then determining an average test score. Norm-referenced 
tests can then be used to compare an individual's test score to an 
average test score of similarly-situated individuals.
    14. Comprehensive tests are tests that fully assess the subject 
area being tested, as well as its various domains and degrees of 
affliction. By contrast, non-comprehensive tests, often termed 
``screeners,'' are far less thorough and may be designed simply to 
indicate the likely presence or absence of a disorder or disability.
    15. In addition to clinical tests, non-standardized, non-norm-
referenced assessments (e.g., charts published in books or journals, 
single-scale tests, and free material available on the internet) are 
available to school psychologists and clinicians. However, such test 
materials are inferior to clinical tests because they do not provide 
the same levels of validity and reliability, nor can they be used in 
many situations in which a clinical test is required, for example, 
where such tests must be administered before a certain diagnosis or 
classification can be made in order for an individual to qualify for 
special services, such as special education or speech and language 
instruction.

B. Relevant Product Markets

1. Adaptive Behavior Clinical Tests
    16. Pearson and Harcourt each publish the market-leading adaptive 
behavior clinical tests. Pearson publishes the Vineland Adaptive 
Behavior Scales, which is currently in its second edition, and Harcourt 
publishes the Adaptive Behavior Assessment System, which is currently 
in its second edition.
    17. School psychologists and clinicians, among others, use adaptive 
behavior clinical tests to assess an individual's competence in meeting 
their independent needs and satisfying the social demands of their 
environment. Generally, adaptive behavior tests assess three broad 
domains of adaptive behavior: conceptual (e.g., communication, 
functional academics, self-direction, and health and safety), social 
(e.g., social skills and leisure), and practical (e.g., self-care, home 
living, community use, and work).
    18. Non-comprehensive adaptive behavior tests, such as those that 
only assess narrow adaptive behavior domains, are not substitutes for 
adaptive behavior clinical tests because such tests are not 
sufficiently broad to assess all relevant areas of adaptive behavior. 
Other adaptive behavior assessment scales, such as neuropsychological 
behavioral or emotional scales, do not assess the same domains as do 
adaptive behavior clinical tests. Moreover, non-standardized, non-norm-
referenced adaptive behavior tests are not substitutes for adaptive 
behavior clinical tests because they do not provide the same levels of 
validity or reliability as clinical tests.
    19. A small but significant post-acquisition increase in the price 
of adaptive behavior clinical tests would not cause customers to 
substitute other types of tests, or to otherwise reduce their purchases 
of adaptive behavior clinical tests, in sufficient quantities so as to 
make such a price increase unprofitable.
    20. Accordingly, the development, marketing, sale, and distribution 
of adaptive behavior clinical tests constitutes a line of commerce and 
a relevant product market pursuant to Section 7 of the Clayton Act.
2. Speech and Language Clinical Tests
    21. Pearson and Harcourt each publish market-leading speech and 
language clinical tests. Pearson publishes two such tests known as the 
Comprehensive Assessment of Spoken Language and the Oral and Written 
Language Scales, each of which is in its first edition. Harcourt 
publishes a speech and language clinical test known as the Clinical 
Evaluation of Language Fundamentals, which is currently in its fourth 
edition.
    22. Speech-language pathologists, among others, use speech and 
language clinical tests to diagnose individuals having difficulties 
with understanding others, expressing thoughts and ideas, producing 
speech sounds, as well as other related difficulties. Speech and 
language clinical tests assess various domains, including receptive and 
expressive language.
    23. Non-comprehensive speech and language tests, such as those that 
only assess narrow speech and language domains, are not substitutes for 
speech and language clinical tests because such tests are not 
sufficiently broad to assess all relevant areas of speech and language. 
Moreover, non-standardized, non-norm-referenced speech and language 
tests are not substitutes for speech and language clinical tests 
because they do not provide the same levels of validity or reliability 
as clinical tests.
    24. A small but significant post-acquisition increase in the price 
of speech and language clinical tests would not cause customers to 
substitute other types of tests, or to otherwise reduce their purchases 
of speech and language clinical tests, in sufficient

[[Page 7595]]

quantities so as to make such a price increase unprofitable.
    25. Accordingly, the development, marketing, sale, and distribution 
of speech and language clinical tests constitutes a line of commerce 
and a relevant product market pursuant to Section 7 of the Clayton Act.
3. Adult Abnormal Adult Personality Clinical Tests
    26. Pearson publishes two series of adult abnormal personality 
clinical tests known as the Minnesota Multiphasic Personality 
Inventories, which are currently in their second edition, and the 
Millon Clinical Multiaxial Inventories, which are currently in their 
third edition. Harcourt is developing an adult abnormal personality 
clinical test known as the Emotional Assessment System that it expects 
to make commercially available in late 2008.
    27. Adult abnormal personality tests are generally used by 
clinicians and psychologists to diagnose and assess chronic, 
inflexible, and maladaptive patterns of perceiving, thinking, and 
behaving that seriously impair an individual's ability to function in 
social settings. Such disorders include clinical disorders, such as 
anxiety, as well as personality disorders, such as paranoia. Many 
clinicians employ adult abnormal personality clinical tests to obtain 
comprehensive diagnoses of both kinds.
    28. Other methods of assessing abnormal personality, such as using 
structured interviews or non-standardized tests (including developing 
one's own tests), are inferior to adult abnormal personality clinical 
tests because they do not have the same degree of reliability, and 
because interpreting one's own tests would introduce subjective 
elements into the analysis not present with the use of clinical tests. 
In addition, in some locations, for some applications, clinical tests 
are required by law and other methods of assessment cannot be used.
    29. Non-comprehensive adult abnormal personality tests, such as 
those that only assess certain clinical or personality disorders, are 
not substitutes for adult abnormal personality clinical tests because 
such tests are not sufficiently broad to assess all relevant disorders 
of adult abnormal personality. Moreover, non-standardized, non-norm-
referenced adult abnormal personality tests are not substitutes for 
adult abnormal personality clinical tests because they do not provide 
the same levels of validity or reliability as clinical tests.
    30. A small but significant post-acquisition increase in the price 
of adult abnormal personality clinical tests would not cause customers 
to substitute other types of tests, or to otherwise reduce their 
purchases of adult abnormal personality clinical tests, in sufficient 
quantities so as to make such a price increase unprofitable.
    31. Accordingly, the development, marketing, sale, and distribution 
of adult abnormal personality clinical tests constitutes a line of 
commerce and a relevant product market pursuant to Section 7 of the 
Clayton Act.

C. Relevant Geographic Market

    32. The Defendants sell adaptive behavior, and speech and language 
clinical tests throughout the United States to psychologists, 
clinicians, speech-language pathologists, and others. Pearson also 
sells adult abnormal personality tests to psychologists, clinicians, 
and others in the United States. In the United States, customers would 
not purchase clinical tests published outside the United States because 
such tests have not been standardized or norm-referenced on samples of 
individuals located in the United States.
    33. A small but significant post-acquisition increase in the price 
of adaptive behavior, speech and language, and adult abnormal 
personality clinical tests would not cause customers to turn to 
clinical tests published outside of the United States for the purchase 
of such tests.
    34. Accordingly, the United States constitutes the relevant 
geographic market pursuant to Section 7 of the Clayton Act.

D. Anticompetitive Effects: Reduced Price and Innovation Competition

1. Adaptive Behavior Clinical Tests
    35. The proposed acquisition will eliminate price and innovation 
competition between Pearson and Harcourt in the market for adaptive 
behavior clinical tests throughout the United States.
    36. The adaptive behavior clinical test market is highly 
concentrated. Pearson and Harcourt's revenues currently account for 
approximately 66 percent and 26 percent of the revenues of the market, 
respectively. Pearson's proposed acquisition of Harcourt would 
therefore result in a post-merger share of approximately 92 percent of 
the adaptive behavior clinical test market.
    37. The proposed acquisition will substantially increase the 
likelihood that Pearson will unilaterally increase the price, or reduce 
the number or quality, of adaptive behavior clinical tests published in 
the United States.
    38. Any response of competing publishers of adaptive behavior 
clinical tests would not be sufficient to constrain the unilateral 
exercise of market power by Pearson after the acquisition. A 
significant number of customers regard Pearson and Harcourt as their 
first and second choices when purchasing adaptive behavior clinical 
tests, and consider such tests from other publishers to be a distant 
third choice. Therefore, an insufficient number of customers of 
adaptive behavior clinical tests would purchase a competing publisher's 
test to defeat an anti-competitive price increase by Pearson.
    39. The proposed acquisition will therefore substantially lessen 
competition in the development, marketing, sale, and distribution of 
adaptive behavior clinical tests in the United States in violation of 
Section 7 of the Clayton Act.
2. Speech and Language Clinical Tests
    40. The proposed acquisition will eliminate price and innovation 
competition between Pearson and Harcourt in the market for speech and 
language clinical tests throughout the United States.
    41. The speech and language clinical test market is highly 
concentrated. Harcourt and Pearson's revenues currently account for 
approximately 64 percent and 26 percent ofthe revenues of the market, 
respectively. Pearson's proposed acquisition of Harcourt would 
therefore result in a post-merger share of approximately 90 percent of 
the speech and language clinical test market. Only one other firm in 
the United States develops, markets, and publishes a competing speech 
and language clinical test, and that test accounts for the remaining 10 
percent of the market, on a revenue basis.
    42. The proposed acquisition will substantially increase the 
likelihood that Pearson will unilaterally increase the price, or reduce 
the number or quality, of speech and language clinical tests published 
in the United States.
    43. Any response of the competing publisher of speech and language 
clinical tests would not be sufficient to constrain the unilateral 
exercise of market power by Pearson after the acquisition because there 
are a significant number of customers who regard Pearson and Harcourt's 
speech and language clinical tests as their first and second choices, 
and consider the competing publisher's test to be a distant third. 
Therefore, an insufficient number of customers of speech and language 
clinical tests would purchase the competing publisher's test to defeat 
an anti-competitive price increase by Pearson.

[[Page 7596]]

    44. The proposed acquisition will therefore substantially lessen 
competition in the development, marketing, sale, and distribution of 
speech and language clinical tests in the United States in violation of 
Section 7 of the Clayton Act.
3. Adult Abnormal Personality Clinical Tests
    45. The proposed acquisition will eliminate price and innovation 
competition between Pearson and Harcourt in the market for adult 
abnormal personality clinical tests.
    46. The adult abnormal personality clinical test market is highly 
concentrated and dominated by Pearson, which accounts for approximately 
93 percent of the revenues for such tests. After many years of trying, 
only one other publisher in the United States has managed to obtain 
more than an insignificant share of this market. Customers prefer 
Pearson's tests and have made a significant investment in learning how 
to work with and use Pearson's tests. Such customers are committed to 
Pearson's tests and thus far have been unwilling to substitute another 
test. The small share that Pearson's only competitor has gained after 
many years is an indicator that customers consider the competitor's 
test to be a distant second choice to Pearson's tests.
    47. Harcourt has invested substantial resources over a prolonged 
period of time in the development of a new computer-based adaptive 
adult abnormal personality clinical test that will utilize computer 
technology to reduce test administration time. Harcourt is in the 
standardization and norm-referencing phase of development and is in the 
process of collecting data from clinical and non-clinical examinees. 
Harcourt plans to enter the market for such tests to compete with 
Pearson in 2008. To date, no other publisher has formed plans to enter 
this market, and any potential entry by another publisher would require 
considerable lead time and development effort of the sort that Harcourt 
has already incurred.
    48. Harcourt plans to enter the market with a new adult abnormal 
personality clinical test that will offer new features and 
functionality that customers desire. Such new features and 
functionality are not currently offered by either Pearson or the other 
competing publisher. Accordingly, Harcourt's entry would likely benefit 
clinicians and their patients through price and innovation competition 
for adult abnormal personality clinical tests.
    49. The proposed acquisition will therefore substantially lessen 
competition in the development, marketing, sale, and distribution of 
adult abnormal personality clinical tests in the United States in 
violation of section 7 of the Clayton Act.

E. Entry: New Entrants Will Not Defeat an Exercise of Market Power

    50. Successful entry into the markets for the development, 
marketing, sale, and distribution of adaptive behavior, speech and 
language, and adult abnormal personality clinical tests in the United 
States is difficult, time consuming, and costly.
    51. Entry into such markets in the United States takes many years. 
A new entrant would need to contract with an author qualified to write 
a clinical test and then assemble a sophisticated editorial staff to 
develop the test. Clinical test development requires analyzing, 
editing, standardizing, and norm-referencing a new test, which takes 
two to four years to complete.
    52. New entrants also would need to convince customers to switch 
from their current adaptive behavior, speech and language, or adult 
abnormal personality clinical test of choice to the entrant's new test.
    53. Therefore, entry by any firm into the markets for the 
development, marketing, sale, and distribution of adaptive behavior, 
speech and language, and adult abnormal personality clinical tests 
would not be timely, likely, or sufficient to counter the 
anticompetitive effects of Pearson's proposed acquisition of Harcourt.

V. Violations Alleged

Cause of Action

(Violation of Section 7 of the Clayton Act)
    54. The United States incorporates the allegations of paragraphs 1 
through 53 above.
    55. The proposed acquisition of Harcourt by Pearson would 
substantially lessen competition in interstate trade and commerce in 
violation of section 7 of the Clayton Act, 15 U.S.C. 18.
    56. Unless restrained, the acquisition will have the following 
anticompetitive effects, among others:
    a. Competition in the adaptive behavior clinical test market in the 
United States will be lessened substantially;
    b. Actual and potential competition between Pearson and Harcourt in 
the development, marketing, sale, and distribution of adaptive behavior 
clinical tests in the United States will be eliminated;
    c. Prices for adaptive behavior clinical tests in the United States 
likely will increase, and innovation likely will decline;
    d. Competition in the speech and language clinical test market in 
the United States will be lessened substantially;
    e. Actual and potential competition between Pearson and Harcourt in 
the development, marketing, sale, and distribution of speech and 
language clinical tests in the United States will be eliminated;
    f. Prices for speech and language clinical tests in the United 
States likely will increase, and innovation likely will decline;
    g. Competition in the adult abnormal personality clinical test 
market in the United States will be lessened substantially;
    h. Actual and potential competition between Pearson and Harcourt in 
the development, marketing, sale, and distribution of adult abnormal 
personality clinical tests in the United States will be eliminated; and
    i. Potential decreases in prices for adult abnormal personality 
clinical tests in the United States likely will be eliminated, and 
innovation likely will decline.

VI. Request for Relief

    57. The United States requests that this Court:
    a. Adjudge and decree the proposed acquisition to violate section 7 
of the Clayton Act, 15 U.S.C. 18;
    b. Enjoin and restrain the Defendants and all persons acting on 
their behalf from consummating the proposed acquisition or from 
entering into or carrying out any contract, agreement, plan, or 
understanding, the effect of which would be to combine Pearson with the 
operations of Harcourt;
    c. Award the United States its costs for this action; and
    d. Grant the United States such other and further relief as the 
Court deems just and proper.

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

--------/s/--------

Thomas O. Barnett (D.C. Bar <greek-i>426840),
Assistant Attorney General, Antitrust Division.
--------/s/--------

David L. Meyer (D.C. Bar <greek-i>414420),
Deputy Assistant Attorney General, Antitrust Division.
--------/s/--------

Patricia A. Brink,

[[Page 7597]]

Deputy Director of Operations, Antitrust Division.
--------/s/--------

James J. Tierney (D.C. Bar <greek-i>434610),
Chief, Networks and Technology, Enforcement Section, Antitrust 
Division.
--------/s/--------

Scott A. Scheele (D.C. Bar <greek-i>429061),
Assistant Chief, Networks and Technology, Enforcement Section, 
Antitrust Division.
--------/s/--------

Damon J. Kalt
Sanford M. Adler
John C. Filippini (D.C. Bar <greek-i>165159)
Danielle M. Ganzi
Attorneys, United States Department of Justice, Antitrust Division, 
Networks and Technology, Enforcement Section, 600 E Street, NW., 
Suite 9500, Washington, DC 20530, (202) 307-6200.

Dated: January 24, 2008.

Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on January 24, 2008, and the United States and Defendants, Pearson plc 
and Pearson Education Inc. (collectively ``Pearson'') and Reed Elsevier 
PLC, Reed Elsevier NV, and Harcourt Assessment Inc. (collectively 
``Reed Elsevier''), by their respective attorneys, have consented to 
the entry of this Final Judgment without trial or adjudication of any 
issue of fact or law, and without this Final Judgment constituting any 
evidence against or admission by any party regarding any issue of fact 
or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the Defendants to 
assure that competition is not substantially lessened;
    And whereas, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the United States that 
the divestitures required below can and will be made and that 
Defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained below;
    Now therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ordered, adjudged and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter and each of the 
parties to this action. The Complaint states a claim upon which relief 
may be granted against Defendants under Section 7 of the Clayton Act, 
as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Pearson'' means Defendants Pearson plc, a U.K. corporation 
with its headquarters in London, England, and Pearson Education Inc., a 
Delaware corporation with its headquarters in Upper Saddle River, New 
Jersey, and includes their successors and assigns, and their 
subsidiaries, divisions, groups, affiliates, partnerships, and joint 
ventures, and their directors, officers, managers, agents, and 
employees.
    B. ``Reed Elsevier'' means Defendants Reed Elsevier PLC, a U.K. 
corporation with its headquarters in London, England, Reed Elsevier NV, 
a Dutch corporation with its headquarters in Amsterdam, Netherlands, 
and Harcourt Assessment Inc., (``Harcourt'') a New York corporation 
with its headquarters in San Antonio, Texas and includes their 
successors and assigns, and their subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``ABAS Assets'' means Reed Elsevier's Adaptive Behavior 
Assessment System (``ABAS'') first- and second-edition titles, 
incorporating the Downward Extension of the ABAS, and Reed Elsevier's 
ABAS Second Edition Intervention Planner.
    D. ``Speech and Language Assets'' means (1) Pearson's Comprehensive 
Assessment of Spoken Language, (``CASL'') which is in its first edition 
(``CASL Assets'') and Pearson's Oral and Written Language Scales 
(``OWLS''), including the Oral Expression and Listening Comprehension 
Scales, the Written Expression Scale, and the OWLS second edition, 
which is under development (collectively ``OWLS Assets'') or (2) Reed 
Elsevier's Clinical Evaluation of Language Fundamentals (``CELF'') 
including the first-, second-, third-, and fourth-edition titles, the 
CELF Screener first-, second-, third-, and fourth-edition titles, the 
CELF Preschool first- and second-edition titles, the CELF Spanish 
first-, second-, third-, and fourth-edition titles, and the CELF 
Spanish Preschool, which is under development; excluding however, the 
Retained CMS and WMS Content (collectively ``CELF Assets'').
    E. ``EAS Assets'' means Reed Elsevier's Emotional Assessment System 
(``EAS''), which is under development.
    F. ``Divestiture Assets'' means: (1) the ABAS Assets; (2) the 
Speech and Language Assets; and (3) the EAS Assets.
    The Divestiture Assets include:
    1. All tangible assets that comprise each of the Divestiture Assets 
including, but not limited to, all historic and current research data 
and activities and development activities relating to the Divestiture 
Assets; all original and digital artwork, film plates and other 
reproductive materials relating to the Divestiture Assets including, 
but not limited to, all manuscripts, illustrations, any other content, 
and any revisions or revision plans thereof in print or digital form; 
all finished inventory of the Divestiture Assets including, but not 
limited to, all examination kits, manuals, test booklets, record forms, 
and response booklets; all contracts, agreements, commitments, 
certifications, and understandings relating to the Divestiture Assets, 
including, but not limited to, publishing agreements, author 
agreements, research agreements, author permissions and other similar 
agreements, supply and distribution agreements for the Divestiture 
Assets; all customer lists, contracts, accounts, and credit records or 
similar records of all sales and potential sales of the Divestiture 
Assets; all sales support and promotional materials, advertising 
materials, and production, sales and marketing files, and all other 
records relating to the Divestiture Assets;
    2. All intangible assets used in the development, production, 
servicing, sale and distribution of each of the Divestiture Assets, 
including, but not limited to, all patents, licenses and sublicenses, 
adaptation licenses, intellectual property, copyrights, contract 
rights, trademarks (registered and unregistered), trade names, service 
marks, and service names relating to the Divestiture Assets, but 
excluding corporate-level trademarks of Pearson and Harcourt; all 
technical information, computer software and related documentation, 
know-how, trade secrets, drawings, blueprints, designs, design 
protocols, scoring rules, scoring algorithms, and specifications for 
materials relating to the Divestiture Assets; all quality assurance and 
control procedures, design tools and simulation capability relating to 
the Divestiture Assets; all manuals and technical information used for 
any purpose relating to the Divestiture Assets or that Defendants 
provide to their own employees, customers, suppliers, agents or 
licensees for use in relation with the Divestiture Assets; and all 
other intangible research data concerning historic and current research 
and development efforts relating to the

[[Page 7598]]

Divestiture Assets, including, but not limited to, designs of 
experiments, and the results of successful and unsuccessful designs and 
experiments;
    3. The OWLS Assets also specifically include all tangible assets 
relating to the development of the OWLS second-edition titles 
including, but not limited to, all research data and development 
activities; all tryout and standardization easels, administration 
materials, record forms, tryout data, standardization data, and data 
for reliability and validity studies;
    4. The EAS Assets also specifically include all tangible and 
intangible assets relating to the development of the EAS including, but 
not limited to, all research data and development activities; all 
tryout and standardization easels, administration materials, record 
forms, tryout data, standardization data, and data for reliability and 
validity studies; and all algorithmic data including, but not limited 
to, data relating to item banking, continuous item rotation, item 
analysis, item calibration, norming, test equating, scale development, 
computer-based testing, and computer-adaptive testing; and all 
applications of Sampling Theory, the Generalized Graded Unfolding 
model, Generalizability Theory model, Structural Equation model, and 
other Item Response Theory models;
    5. A royalty-free license to the Acquirer(s) of the ABAS Assets and 
CELF Assets to use the Harcourt corporate trademark and trade name for 
the sole and limited purpose of distributing finished inventory of the 
ABAS Assets and CELF Assets;
    6. At the option of the Acquirer( s) of the ABAS Assets and CELF 
Assets, a non-exclusive license to distribute the Scoring Assistant 
Software for use with the ABAS Assets and CELF Assets; and in the event 
that the Acquirer exercises such option, the Defendants shall provide 
to the Acquirer(s) of the ABAS Assets and CELF Assets all technical 
information and support necessary for the distribution and 
administration of the Scoring Assistant Software;
    7. A royalty-free license to the Acquirer of the CASL Assets and 
OWLS Assets to use the Pearson corporate trademark and trade name for 
the sole and limited purpose of distributing finished inventory of the 
CASL Assets and OWLS Assets;
    8. At the option of the Acquirer of the CASL Assets and OWLS 
Assets, a non-exclusive license to distribute the ASSIST Software for 
use with the CASL Assets and OWLS Assets; and in the event that the 
Acquirer exercises such option, the Defendants shall provide to the 
Acquirer of the CASL Assets and OWLS Assets all technical information 
and support necessary for the distribution and administration of the 
ASSIST Software; and
    A license to the Acquirer of the CELF Assets to use the Retained 
CMS and WMS Content to market, sell or distribute any tests produced by 
the CELF Assets.
    G. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
whom Defendants divest the Divestiture Assets.
    H. ``Scoring Assistant Software'' means Reed Elsevier's software 
for computerized scoring of individually-administered standardized 
norm-referenced comprehensive clinical tests (``clinical tests'') to 
assist test administrators including, but not limited to, software 
related to scoring of test results; tracking test scores and test 
history; raw-to-derived score conversion; score interpretation; 
outcomes analysis and reporting capabilities; problem identification 
and eligibility determination; discrepancy analysis; and intervention 
recommendations.
    1. ``ASSIST Software'' means Pearson's Automated System for Scoring 
and Interpreting Standardized Tests and encompasses software for 
computerized scoring of clinical tests to assist test administrators 
including, but not limited to, software related to scoring of test 
results; tracking test scores and test history; raw-to-derived score 
conversion; score interpretation; outcomes analysis and reporting 
capabilities; problem identification and eligibility determination; 
discrepancy analysis; and intervention recommendations.
    J. ``Licensed-Back ABAS Content'' means the two hundred and forty 
one (241) ABAS items described in Exhibit A that, as of the filing of 
the Complaint in this matter, are also employed in the marketing, sale, 
and distribution of Reed Elsevier's Bayley Scales of Infant and Toddler 
Development second- and third-edition titles.
    K. ``Retained CMS and WMS Content'' means the fifty (50) Children's 
Memory Scale (``CMS '') and Wechsler Memory Scale (``WMS '') items 
that, as of the filing of the Complaint in this matter, are also 
employed in the marketing, sale, and distribution of the CELF Assets 
appearing as the Number Repetition 1 (15 items) and Familiar Sequences 
1 (12 items) subtests of the CELF-4, which are borrowed from the 
Numbers and Sequences CMS subtests, respectively, and Number Repetition 
2 (15 items) and Familiar Sequences 2 (8 items) subtests of the CELF-4, 
which are borrowed from the Digit Span and Mental Control WMS subtests, 
respectively.

III. Applicability

    A. This Final Judgment applies to Pearson and Reed Elsevier, as 
defined above, and all other persons in active concert or participation 
with any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. If, prior to complying with Sections IV and V of this Final 
Judgment, Defendants sell or otherwise dispose of all or substantially 
all of their assets or of lesser business units that include the 
Divestiture Assets, they shall require the purchaser to be bound by the 
provisions of this Final Judgment. Defendants need not obtain such an 
agreement from the Acquirer(s) of the Divestiture Assets pursuant to 
this Final Judgment.

IV. Divestitures

    A. Defendants are ordered and directed, within ninety (90) calendar 
days after the filing of the Complaint in this matter, or five (5) 
calendar days after notice of the entry of this Final Judgment by the 
Court, whichever is later, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to one or more Acquirers acceptable 
to the United States, in its sole discretion. The United States, in its 
sole discretion, may agree to one or more extensions of this time 
period not to exceed sixty (60) calendar days in total, and shall 
notify the Court in such circumstances. Defendants agree to use their 
best efforts to divest the Divestiture Assets as expeditiously as 
possible.
    B. In accomplishing the divestitures ordered by this Final 
Judgment, Defendants promptly shall make known, by usual and customary 
means, the availability of the Divestiture Assets. Defendants shall 
inform any person making inquiry regarding a possible purchase of the 
Divestiture Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client privilege or work-product doctrine. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    C. Defendants shall provide the Acquirer(s) and the United States 
the

[[Page 7599]]

identity of any personnel responsible for any editorial content of any 
Divestiture Asset, and any personnel responsible for the sale, 
development, production, design, layout, standardization, norming, 
analysis, or research relating to any of the Divestiture Assets, to 
enable the Acquirer(s) to make offers of employment. Defendants will 
not interfere with any negotiations or attempts by the Acquirer(s) to 
employ or contract with any persons responsible for any such activity 
related to any Divestiture Asset.
    D. Defendants shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel responsible for the 
Divestiture Assets; and to have access to any and all financial, 
operational, or other documents and information customarily provided as 
part of a due diligence process.
    E. Defendants shall have the right to obtain, from the Acquirer of 
the ABAS assets, a license to use the Licensed-Back ABAS Content for a 
period of time no longer than is necessary for Defendants to market, 
sell or distribute Reed Elsevier's Bayley Scales of Infant and Toddler 
Development second- and third-edition titles; such license shall be 
subject to final review and approval by the United States.
    F. To the extent Defendants receive any orders or inquiries for the 
ABAS, the CASL, the OWLS, or the CELF, and an Acquirer has obtained the 
Divestiture Assets relating to such test, Defendants shall forward such 
orders and inquiries to the respective Acquirer for a period of time 
not to exceed two (2) years.
    G. Defendants shall warrant to the respective Acquirer or Acquirers 
of the ABAS Assets, the CASL Assets and OWLS Assets, and the CELF 
Assets, that the respective Divestiture Assets will be operational on 
the date of sale. Defendants shall warrant to the Acquirer of the EAS 
Assets that the EAS Assets have been developed in a manner no less 
vigorous than existing development plans, as of the filing of the 
Complaint in this matter, and maintained in a manner that has preserved 
the economic viability of the assets, and that, upon divestiture, 
Acquirer will receive good title to all the assets that comprise the 
EAS Assets as of the date of sale. Defendants shall warrant to the 
Acquirer or Acquirers that the Divestiture Assets they acquire have 
been maintained and operated separately in a manner as required under 
the Hold Separate Stipulation and Order (``Hold Separate'') filed 
simultaneously with the Court.
    H. Nothing in this Final Judgment shall be construed to require the 
Acquirer or Acquirers as a condition of any license granted by or to 
Defendants pursuant to Sections II(F)(6), (8), and (9) and IV(E) to 
extend to Defendants the right to use any improvements made by the 
Acquirer or Acquirers to any software or content used in the marketing, 
sale or distribution of clinical tests.
    I. Defendants shall not take any action that will impede in any way 
the operation or divestiture of the Divestiture Assets.
    J. Unless the United States otherwise consents in writing, the 
divestitures pursuant to Section IV, or by trustee appointed pursuant 
to Section V, of this Final Judgment, shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the Divestiture 
Assets can and will be used by the Acquirer(s) as part of a viable, 
ongoing business of publishing clinical tests. Divestiture of the 
Divestiture Assets may be made to one or more Acquirers, provided that 
in each instance it is demonstrated to the sole satisfaction of the 
United States that the Divestiture Assets will remain viable and the 
divestiture of such assets will remedy the competitive harm alleged in 
the Complaint. The divestitures, whether pursuant to Section IV or 
Section V of this Final Judgment,
    (1) Shall be made to an Acquirer(s) that, in the United States's 
sole judgment, has the intent and capability (including the necessary 
managerial, operational, technical and financial capability) of 
competing effectively in the business of publishing clinical tests; and
    (2) Shall be accomplished so as to satisfy the United States, in 
its sole discretion, that none of the terms of any agreement between an 
Acquirer(s) and Defendants give Defendants the ability unreasonably to 
raise the Acquirer's costs, to lower the Acquirer's efficiency, or 
otherwise to interfere in the ability of the Acquirer to compete 
effectively.

V. Appointment of Trustee

    A. If Defendants have not divested the Divestiture Assets within 
the time period specified in Section IV(A), Defendants shall notify the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United States 
and approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer(s) acceptable to the United States at such 
price and on such terms as are then obtainable upon reasonable effort 
by the trustee, subject to the provisions of Sections IV, V, and VI of 
this Final Judgment, and shall have such other powers as this Court 
deems appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of Defendants any investment 
bankers, attorneys, or other agents, who shall be solely accountable to 
the trustee, reasonably necessary in the trustee's judgment to assist 
in the divestitures.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of Defendants, 
on such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information. Defendants shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestitures.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth

[[Page 7600]]

the trustee's efforts to accomplish the divestitures ordered under this 
Final Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished the divestitures ordered 
under this Final Judgment within six months after its appointment, the 
trustee shall promptly file with the Court a report setting forth (1) 
the trustee's efforts to accomplish the required divestitures, (2) the 
reasons, in the trustee's judgment, why the required divestitures have 
not been accomplished, and (3) the trustee's recommendations. To the 
extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the United States which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final Judgment, which may, if necessary, 
include extending the trust and the term of the trustee's appointment 
by a period requested by the United States.

VI. Notice of Proposed Divestitures

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendants or the trustee, whichever is then 
responsible for effecting the divestitures required herein, shall 
notify the United States of any proposed divestiture required by 
Section IV or V of this Final Judgment. If the trustee is responsible, 
it shall similarly notify Defendants. The notice shall set forth the 
details of the proposed divestiture and list the name, address, and 
telephone number of each person not previously identified who offered 
or expressed an interest in or desire to acquire any ownership interest 
in the Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from Defendants, 
the proposed Acquirer(s), any other third party, or the trustee, if 
applicable, additional information concerning the proposed divestiture, 
the proposed Acquirer, and any other potential Acquirer. Defendants and 
the trustee shall furnish any additional information requested within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendants, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States shall provide written notice to Defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice that 
it does not object, the divestiture may be consummated, subject only to 
Defendants' limited right to object to the sale under Section V(C) of 
this Final Judgment. Absent written notice that the United States does 
not object to the proposed Acquirer or upon objection by the United 
States, a divestiture proposed under Section IV or Section V shall not 
be consummated. Upon objection by Defendants under Section V(C), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Hold Separate

    Until the divestitures required by this Final Judgment have been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate entered by this Court. Defendants shall take no 
action that would jeopardize the divestitures ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestitures have been completed under Section IV or V, Defendants 
shall deliver to the United States an affidavit as to the fact and 
manner of its compliance with Section IV or V of this Final Judgment. 
Each such affidavit shall include the name, address, and telephone 
number of each person who, during the preceding thirty (30) calendar 
days, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person during that 
period. Each such affidavit shall also include a description of the 
efforts Defendants have taken to solicit buyers for the Divestiture 
Assets, and to provide required information to prospective Acquirers, 
including the limitations, if any, on such information. Assuming the 
information set forth in the affidavit is true and complete, any 
objection by the United States to information provided by Defendants, 
including limitation on information, shall be made within fourteen (14) 
calendar days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions Defendants 
have taken and all steps Defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in Defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestitures have been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice, including consultants and other persons retained 
by the United States, shall, upon written request of an authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to Defendants, be 
pennitted:
    (1) Access during Defendants' office hours to inspect and copy, or 
at the option of the United States, to require Defendants to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendants, relating to any matters contained in this Final Judgment; 
and
    (2) To interview, either informally or on the record, Defendants' 
officers,

[[Page 7601]]

employees, or agents, who may have their individual counsel present, 
regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
Defendants to the United States, Defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and Defendants mark each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give Defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

XI. No Reacquisition

    Pearson may not reacquire any part of the Divestiture Assets during 
the term of this Final Judgment.

XII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States's responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date: --------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16

-----------------------------------------------------------------------

United States District Judge

Exhibit A

    The Licensed-Back ABAS Content includes all of the items appearing 
in the ABAS-II Parent/Primary Caregiver (Ages 0-5) that, as of the 
filing of the Complaint in this matter, also appear as the Adaptive 
Behavior Scale subtest in Reed Elsevier's Bayley Scales of Infant and 
Toddler Development (``Bayley-III''). Specifically, the shared content 
includes all items in the following scales: Communication, Community 
Use, Functional Pre-Academics, Home Living, Health and Safety, Leisure, 
Self-Care, Self-Direction, Social, and Motor.
    In addition to the shared items, the shared content within the 
scales listed above also includes the following:
    1. Administration instructions and sample items (appearing on pp. 
4-5 of the Bayley-III Social-Emotional and Adaptive Behavior 
Questionnaire, or the ``record form'');
    2. Record form summary page content and design, including the 
following tables: raw-score to scaled-score conversions, sum of scaled 
scores to composite-score conversions, skill area scaled score profile, 
composite score profile and supplemental analysis--discrepancy 
comparisons (appearing on page 14 of the Bayley-III Social Emotional 
and Adaptive Behavior Questionnaire);
    3. Norms for the Bayley-III Adaptive Behavior subtest appearing in 
the Bayley-III Administration Manual, which include references 
describing the adaptive behavior scale, and administration and scoring 
instructions on pages 4, 30-39 and 173-176; and the following norms 
tables: A.3 Adaptive Behavior Skill Area Scales Scores by Age (p. 191-
197), A.6 Sum of GAC and Adaptive Domain Scaled Scores Converted to 
Composite Scores and GAC and Adaptive Domain Percentile Ranks and 
Confidence Intervals (p. 200-209), B.3 Differences Between Adaptive 
Domain Composite Scores Required For Statistical Significance (p. 216), 
and B.4 Differences Between Adaptive Domain Composite Scores Obtained 
By Various Percentages (p. 217); and
    4. Norms for the Bayley-III Adaptive Behavior subtest appearing in 
the Bayley-III Technical Manual, which include references describing 
the adaptive behavior scale, administration and scoring instructions, 
and technical information on pages 9, 10, 28, 45-53, 57-59, 61-62, 64-
66, 70, 80-83, 97-98, and 116-119.

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    The United States filed a civil antitrust Complaint on January 24, 
2008, seeking to enjoin the proposed acquisition by Pearson plc and 
Pearson Education Inc. (collectively ``Pearson'') of Harcourt 
Assessment Inc. (hereafter ``Harcourt''), a wholly-owned subsidiary of 
Reed Elsevier PLC and Reed Elsevier NV (collectively ``Reed 
Elsevier''). The Complaint alleges that the likely effects of this 
acquisition would be to lessen competition substantially in the markets 
for individually-administered standardized norm-referenced 
comprehensive clinical tests (hereafter ``clinical tests'') in the 
subject areas of: (1) Adaptive behavior; (2) speech and language; and 
(3) adult abnormal personality, in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18. The loss of competition caused by the 
acquisition will result in increased prices and decreased innovation 
for adaptive behavior and speech and language clinical tests in the 
United States. It will also eliminate likely reductions in prices for 
adult abnormal personality clinical tests and increased innovation for 
such tests that would otherwise result from Harcourt's impending entry 
into this market.
    At the same time the Complaint was filed, the United States also 
filed a Hold Separate Stipulation and Order (``Hold Separate'') and a 
proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the acquisition. Under the proposed

[[Page 7602]]

Final Judgment, which is explained more fully below, the Defendants are 
required to divest certain adaptive behavior, speech and language, and 
adult abnormal personality clinical tests (hereafter ``Divestiture 
Assets''). Until the divestitures required by the Final Judgment have 
been accomplished, the Hold Separate requires Pearson and Harcourt to 
take steps to ensure that their clinical assessment businesses--Pearson 
Clinical Assessments (as defined in the Hold Separate) and Harcourt 
Clinical Assessments (as defined in the Hold Separate)--will continue 
to operate as separate, independent, economically viable, and ongoing 
competitive businesses; that the Divestiture Assets will be maintained 
and operated by Pearson Clinical Assessments and Harcourt Clinical 
Assessments as ongoing, economically viable, and active business 
concerns; and that competition is maintained during the pendency of the 
ordered divestitures.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violations

A. The Defendants and the Proposed Transaction

    Pearson plc, a U.K. corporation with its headquarters in London, 
England, operates businesses in educational publishing, business 
information, and consumer publishing. Pearson Education Inc. (hereafter 
``Pearson Education''), a wholly-owned subsidiary of Pearson plc, is a 
Delaware corporation with its headquarters in Upper Saddle River, New 
Jersey. Pearson Education develops, markets, sells, and distributes 
clinical tests throughout the United States.
    Reed Elsevier PLC, a U.K. corporation with its headquarters located 
in London, England, and Reed Elsevier NV, a Dutch corporation with its 
headquarters located in Amsterdam, Netherlands, jointly own Harcourt. 
Harcourt, a New York corporation with its headquarters located in San 
Antonio, Texas, develops, markets, sells, and distributes clinical 
tests throughout the United States.
    On or about May 4, 2007, and amended on May 21, 2007, Pearson and 
Reed Elsevier signed a sale and purchase agreement for Pearson to 
acquire all of the outstanding voting securities of Harcourt, as well 
as additional assets, for approximately $950 million in cash.

B. The Competitive Effects of the Transaction on Clinical Test 
Publishing

1. Clinical Test Publishing
    Clinical tests are used to screen, diagnose, provide intervention 
strategies for, and to monitor progress of individuals with 
disabilities or individuals at risk for disabilities. These tests are 
individually administered and scored by trained clinicians such as 
psychologists or speech-language pathologists rather than being 
administered and scored on a mass scale like state-wide summative 
educational achievement tests. These tests are also standardized by 
publishers. Standardization is the process of developing a test that 
reliably, validly, and consistently assesses a specific discipline. 
Standardized tests are authored, designed, and developed so that the 
test materials, test procedures, and test scoring are consistent across 
each test administration. Standardized test scores can be documented 
empirically and compared across test administrations, and if normed, 
compared across populations and relative to others in similarly-
situated groups. Norming is the expensive and time-consuming process of 
giving a standardized test to a representative sample of individuals in 
order to determine average (or normal) test scores. Norms can then be 
used to compare the scores of an individual with those of other 
individuals in the specified representative sample.
    In addition to clinical tests, non-standardized, non-norm-
referenced assessments (e.g., charts published in books or journals, 
single-scale tests, and free material available on the internet) are 
available to school psychologists and clinicians. However, such test 
materials are inferior to clinical tests because they do not provide 
the same levels of validity and reliability, nor can they be used in 
many situations in which a clinical test is required, for example, 
where such tests must be administered before a certain diagnosis or 
classification can be made in order for an individual to qualify for 
special services, such as special education or speech and language 
instruction.

2. Relevant Product Markets

    The Complaint alleges that the development and sale of adaptive 
behavior, speech and language, and adult abnormal personality clinical 
tests are relevant product markets pursuant to Section 7 of the Clayton 
Act.
a. Adaptive Behavior Clinical Tests
    Pearson and Harcourt each publish the market-leading adaptive 
behavior clinical tests. Pearson publishes the Vineland Adaptive 
Behavior Scales, which is currently in its second edition, 
(``Vineland'') and Harcourt publishes the Adaptive Behavior Assessment 
System, which is currently in its second edition (``ABAS'').
    Adaptive behavior generally reflects an individual's competence in 
meeting their independent needs and satisfying the social demands of 
their environment in three broad domains: conceptual (i.e., 
communication, functional academics, self-direction, and health and 
safety), social (i.e., social skills and leisure), and practical (i.e., 
self-care, home living, community use, and work). School psychologists 
and clinicians, among others, use adaptive behavior clinical tests to 
assess an individual's ability to meet these needs and demands. Other 
adaptive behavior assessment scales, such as neuropsychological 
behavioral or emotional scales, do not assess the same domains as do 
adaptive behavior clinical tests. Moreover, non-standardized charts or 
scales for adaptive behavior provide inferior assessments of adaptive 
behavior and do not provide the same levels of validity and reliability 
as do clinical tests.
    A small but significant post-acquisition increase in the price of 
adaptive behavior clinical tests would not cause customers to 
substitute other types of tests, charts, or scales, or to otherwise 
reduce their purchases of adaptive behavior clinical tests, in 
sufficient quantities so as to make such a price increase unprofitable. 
For these reasons, such other tests, charts, and scales are not in the 
same product market as adaptive behavior clinical tests. Accordingly, 
the development, marketing, sale, and distribution of adaptive behavior 
clinical tests constitutes a line of commerce and a relevant product 
market pursuant to Section 7 of the Clayton Act.
b. Speech and Language Clinical Tests
    Pearson and Harcourt each publish market-leading speech and 
language clinical tests. Pearson publishes two such tests, known as the 
Comprehensive Assessment of Spoken Language (``CASL'') and the Oral and 
Written Language Scales (``OWLS''), which are each in their first 
edition. Harcourt publishes a speech and language clinical test known 
as the Clinical Evaluation of Language Fundamentals,

[[Page 7603]]

which is currently in its fourth edition (``CELF'').
    Speech and language disorders generally refer to problems with 
understanding others, expressing thoughts and ideas, and producing 
speech sounds. Speech and language clinical tests may assess several 
areas such as vocabulary, grammar, receptive and expressive language, 
semantics, morphology, and pragmatics. Other speech and language 
assessments, such as those that only assess narrow areas like phonology 
or grammar, are not as broad as clinical tests. Moreover, non-
standardized, non-norm-referenced comprehensive speech and language 
tests are inferior to clinical tests as they do not provide the same 
levels of validity or reliability as do clinical tests.
    A small but significant post-acquisition increase in the price of 
speech and language clinical tests would not cause customers to 
substitute other types of tests or non-standardized, non-norm-
referenced tests, or to otherwise reduce their purchases of speech and 
language clinical tests, in sufficient quantities so as to make such a 
price increase unprofitable. For these reasons, such other tests are 
not in the same product market as speech and language clinical tests. 
Accordingly, the development, marketing, sale, and distribution of 
speech and language clinical tests constitutes a line of commerce and a 
relevant product market pursuant to Section 7 of the Clayton Act.
c. Adult Abnormal Personality Clinical Tests
    Pearson publishes two series of adult abnormal personality clinical 
tests known as the Minnesota Multiphasic Personality Inventories, which 
are currently in their second edition (``MMPI''), and the Millon 
Clinical Multiaxial Inventories, which are currently in their third 
edition (``MCMI''). Harcourt is developing an adult abnormal 
personality clinical test known as the Emotional Assessment System 
(``EAS'') that it expects to make commercially available in late 2008.
    Generally, abnormal personality disorders are chronic, inflexible, 
maladaptive patterns of perceiving, thinking, and behaving that 
seriously impair an individual's ability to function in social 
settings. Adult abnormal personality disorders include: (1) Clinical 
disorders such as anxiety, and (2) personality disorders such as 
paranoia. Many clinicians employ adult abnormal personality clinical 
tests to obtain comprehensive diagnoses of both kinds. Other methods of 
assessing abnormal personality, such as using structured interviews or 
non-standardized tests (including developing one's own tests), are 
inferior to adult abnormal personality clinical tests because they do 
not have the same degree of reliability, and because interpreting one's 
own tests would introduce subjective elements into the analysis not 
present with the use of clinical tests. In addition, in some locations, 
for some applications, clinical tests are required by law and other 
methods of assessment cannot be used.
    A small but significant post-acquisition increase in the price of 
adult abnormal personality clinical tests would not cause customers to 
substitute structured interviews or non-standardized tests, or to 
otherwise reduce their purchases of adult abnormal personality clinical 
tests, in sufficient quantities so as to make such a price increase 
unprofitable. For these reasons, structured interviews and non-
standardized tests are not in the same product market as adult abnormal 
personality clinical tests. Accordingly, the development, marketing, 
sale, and distribution of adult abnormal personality clinical tests 
constitutes a line of commerce and a relevant product market pursuant 
to Section 7 of the Clayton Act.
3. Relevant Geographic Market
    The Complaint alleges that the Defendants sell adaptive behavior 
and speech and language clinical tests throughout the United States, 
and that Pearson also sells adult abnormal personality clinical tests 
throughout the United States. United States customers of Defendants' 
clinical tests would not purchase other clinical tests published 
outside the United States because such other tests have not been 
standardized or norm-referenced on samples of individuals located in 
the United States. Because customers in the United States would not 
substitute other clinical tests published outside of the United States 
for the Defendants' clinical tests published in the United States, the 
United States constitutes the relevant geographic market for all three 
relevant products pursuant to Section 7 of the Clayton Act.
4. Anticompetitive Effects of the Acquisition
a. Adaptive Behavior and Speech and Language Clinical Test Markets
    The proposed acquisition will eliminate competition between Pearson 
and Harcourt and substantially increase market concentration in the 
already highly-concentrated markets for adaptive behavior and speech 
and language clinical tests. In the adaptive behavior clinical test 
market, the proposed acquisition will result in Pearson controlling 92 
percent of the market for such tests in which Pearson's Vineland and 
Harcourt's ABAS are considered to be the best substitutes for each 
other. In the speech and language clinical test market, the proposed 
acquisition will result in Pearson controlling 90 percent of the market 
for such tests where Pearson's CASL and OWLS are considered substitutes 
for Harcourt's CELF.
    The loss of this head-to-head competition in these markets will 
make it likely that Pearson will unilaterally increase the price of, or 
reduce innovation with respect to, these clinical tests. The responses 
of other publishers of adaptive behavior and speech and language 
clinical tests would not be sufficient to constrain a unilateral 
exercise of market power by Pearson after the acquisition, and new 
entry would not be timely, likely, or sufficient to defeat the likely 
anticompetitive effects of Pearson's proposed acquisition of Harcourt. 
For all of these reasons, the proposed transaction would substantially 
lessen competition in the development, marketing, sale, and 
distribution of adaptive behavior and speech and language clinical 
tests in the United States in violation of Section 7 of the Clayton 
Act.
b. Adult Abnormal Personality Clinical Tests
    Pearson is the dominant supplier of adult abnormal personality 
clinical tests, with its MMPI and MCMI having approximately 93 percent 
share of the market for such tests sold in the United States. Harcourt 
is developing a computer-based adaptive adult abnormal personality 
clinical test known as the EAS, which it plans to make commercially 
available in late 2008. Harcourt is in the standardization and norm-
referencing phase of development and is in the process of collecting 
data from clinical and non-clinical examinees. The EAS will offer new, 
desirable features and functionality that are not currently offered by 
either Pearson or the other competitor. Harcourt plans to sell and 
market the EAS to Pearson's adult abnormal personality clinical test 
customers and projects that the EAS will achieve a significant market 
share within a number of years.
    The proposed acquisition would eliminate Harcourt as a new supplier 
of adult abnormal personality clinical tests and thereby prevent the 
reduction in prices and greater innovation for such

[[Page 7604]]

tests that would have otherwise resulted from Harcourt's entry. Other 
new entry would not be timely, likely, or sufficient to defeat the 
likely anticompetitive effects of Pearson's proposed acquisition of 
Harcourt. For all of these reasons, the proposed transaction would 
substantially lessen actual and potential competition in the 
development, marketing, sale, and distribution of adult abnormal 
personality clinical tests in the United States in violation of Section 
7 of the Clayton Act.

III. Explanation of the Proposed Final Judgment

A. The Divestiture Assets

    The proposed Final Judgment requires that the Defendants divest all 
of its assets related to clinical tests in these markets where 
competition would otherwise be harmed. The divestitures provided for in 
the proposed Final Judgment will eliminate the anticompetitive effects 
of the proposed acquisition in the markets for adaptive behavior, 
speech and language, and adult abnormal personality clinical tests. The 
Divestiture Assets must be divested in such a way as to satisfy the 
United States in its sole discretion that they can and will be operated 
by the acquirer(s) as viable, ongoing clinical test publishing concerns 
that can compete effectively in their respective relevant markets; and 
the Defendants must take all reasonable steps necessary to accomplish 
the divestitures quickly and shall cooperate with prospective 
acquirers.
    Specifically, the Divestiture Assets include:
    a. In the adaptive behavior clinical tests market, Harcourt's ABAS 
first- and second-edition titles, incorporating the Downward Extension 
of the ABAS, and Harcourt's ABAS Second Edition Intervention Planner 
(collectively ``ABAS Assets'');
    b. In the speech and language clinical tests market, either:
    (1) Pearson's CASL, which is in its first edition (``CASL 
Assets''); and, Pearson's OWLS, including the Oral Expression and 
Listening Comprehension Scales, the Written Expression Scale, and the 
OWLS second edition, which is under development (collectively ``OWLS 
Assets''); or
    (2) Harcourt's CELF, including the first-, second-, third-, and 
fourth-edition titles, the CELF Screener first-, second-, third-, and 
fourth-edition titles, the CELF Preschool first-, and second-edition 
titles, the CELF Spanish first-, second-, third-, and fourth-edition 
titles, and the CELF Spanish Preschool, which is under development; 
excluding however, the Retained CMS and WMS Content (collectively 
``CELF Assets''); and
    c. In the adult abnormal personality clinical tests market, 
Harcourt's EAS, which is under development (``EAS Assets'').
    The Divestiture Assets also include all tangible and intangible 
assets that comprise each of the above-listed Divestiture Assets; the 
OWLS Assets also include all tangible assets relating to the 
development of the OWLS second-edition titles; and the EAS Assets also 
include all tangible and intangible assets relating to the development 
of the EAS.
    The sale of the Divestiture Assets according to the terms of the 
proposed Final Judgment will eliminate the anticompetitive effects of 
the acquisition in the markets for adaptive behavior, speech and 
language, and adult abnormal personality clinical tests. In each 
market, the divestitures will establish a new, independent, and 
economically viable competitor.

B. Selected Provisions of the Proposed Final Judgment

    In antitrust cases involving acquisitions in which the United 
States seeks a divestiture remedy, it requires completion of the 
divestiture within the shortest period of time reasonable under the 
circumstances. A quick divestiture has the benefits of restoring 
competition lost in the acquisition and reducing the possibility of 
dissipation of the value of the assets. Paragraph IV(A) of the proposed 
Final Judgment requires the Defendants to divest, as independent and 
economically viable ongoing clinical test publishing concerns, the 
Divestiture Assets within ninety (90) calendar days after the filing of 
the Complaint in this matter, or five (5) calendar days after notice of 
the entry of this Final Judgment by the Court, whichever is later.\1\ 
The Divestiture Assets must be divested in such a way as to satisfy the 
United States in its sole discretion that they can and will be operated 
by the acquirer(s) as viable, ongoing clinical test publishing concerns 
that can compete effectively in their respective relevant markets; and 
Defendants must take all reasonable steps necessary to accomplish the 
divestitures quickly and shall cooperate with prospective acquirers.
---------------------------------------------------------------------------

    \1\ The proposed Final Judgment also provides that this ninety-
(90) day time period may be extended by the United States in its 
sole discretion for a total period not exceeding sixty (60) calendar 
days, and that the Court will receive prior notice of any such 
extension.
---------------------------------------------------------------------------

    Several provisions of the proposed Final Judgment address licenses 
needed to effectuate the divestitures or to tailor the proposed relief 
to the anticompetitive concerns without disrupting the Defendants' 
other businesses. For example, paragraph II(F)(5) provides that the 
acquirer(s) of the ABAS Assets and CELF Assets will obtain royalty-free 
licenses to use the Harcourt corporate trademark and trade name for the 
purpose of distributing finished inventory of the ABAS Assets and CELF 
Assets held by Harcourt. Similarly, paragraph II(F)(7) provides that 
the acquirer of the CASL Assets and OWLS Assets will obtain a royalty-
free licenses to use the Pearson corporate trademark and trade name for 
the purpose of distributing finished inventory of the CASL Assets and 
OWLS Assets held by Pearson. These licenses will ensure that the 
acquirer(s) of the Divestiture Assets will not infringe the Defendants' 
intellectual property rights in the course of distributing the finished 
inventory of products sold by or under any of the Divestiture Assets.
    Paragraphs II(F)(6) and II(F)(8) provide for licenses relating to 
Pearson and Harcourt's scoring software, which the Defendants currently 
distribute for use with products sold by or under the Divestiture 
Assets. Paragraph II(F)(6) provides that the acquirer(s) of the ABAS 
Assets and CELF Assets will have the option to obtain a non-exclusive 
license to distribute Harcourt's Scoring Assistant Software (as defined 
in the proposed Final Judgment) for use with the ABAS Assets and CELF 
Assets; if the acquirer(s) exercise this option, the Defendants shall 
provide to the acquirer(s) all technical information and support 
necessary for the distribution and administration of the Scoring 
Assistant Software. Similarly, paragraph II(F)(8) provides that the 
acquirer of the CASL Assets and OWLS Assets will have the option to 
obtain a non-exclusive license to distribute Pearson's ASSIST Software 
(as defined in the proposed Final Judgment) for use with the CASL 
Assets and OWLS Assets; if the acquirer exercises this option, the 
Defendants shall provide to the acquirer all technical information and 
support necessary for the distribution and administration of the ASSIST 
Software. These provisions assure the acquirer(s)' access to scoring 
software that may be needed to facilitate the future sale and marketing 
of products sold by or under the Divestiture Assets by the acquirer(s).
    Paragraphs II(F)(9) and IV(E) provide for licenses relating to 
certain content of the Divestiture Assets that is also employed in the 
marketing, sale, and

[[Page 7605]]

distribution of other Harcourt tests that the proposed Final Judgment 
does not require the Defendants to divest. First, Harcourt's CELF 
employs certain content used in Harcourt's Children's Memory Scale 
(``CMS'') and Harcourt's Wechsler Memory Scale (``WMS''). Since the 
proposed Final Judgment does not require the Defendants to divest the 
CMS or WMS, paragraph II(F)(9) provides that the acquirer of the CELF 
Assets will obtain a license to use the Retained CMS and WMS Content 
(as defined in the proposed Final Judgment) to market, sell or 
distribute any tests produced by the CELF Assets. This license will 
permit the acquirer of the CELF Assets unfettered rights to use the 
Defendants' Retained CMS and WMS Content, and to do so without 
infringing the Defendants' intellectual property rights.
    Second, Harcourt's Bayley Scales of Infant and Toddler Development 
(the ``Bayley''), another test that the proposed Final Judgment does 
not require the Defendants to divest, employs certain content used in 
the ABAS. That content will be divested to the acquirer, but paragraph 
IV(E) provides that the Defendants shall have the right to obtain from 
the acquirer a license to use the Licensed-Back ABAS Content (defined 
in the proposed Final Judgment) for a period of time no longer than is 
necessary for the Defendants to market, sell or distribute the Bayley, 
and that such license shall be subject to final review and approval by 
the United States. This license will permit the Defendants to continue 
to use the Licensed-Back ABAS Content without interfering with the 
acquirer's use of that content, and infringing intellectual property 
rights relating to the ABAS Assets that will be divested to the 
acquirer.
    Paragraph IV(F) of the Proposed Final Judgment provides for an 
orderly transition of the Divestiture Assets to the acquirer(s). It 
addresses the possibility that customers might continue to place orders 
for the divested clinical tests with Pearson or Harcourt. To the extent 
that Defendants receive any purchase orders or inquiries for the ABAS, 
the CASL, the OWLS, or the CELF tests, and an acquirer has already 
purchased the Divestiture Assets relating to such test, Defendants 
shall forward such orders and inquiries to the respective acquirer. The 
Defendants' obligation under this provision shall not exceed two (2) 
years.
    Paragraph V of the proposed Final Judgment provides that in the 
event the Defendants do not accomplish the divestitures within the 
periods prescribed in the proposed Final Judgment, the Court will 
appoint a trustee selected by the United States to effect the 
divestitures. If a trustee is appointed, the proposed Final Judgment 
provides that Defendants will pay all costs and expenses of the 
trustee. The trustee's commission will be structured so as to provide 
an incentive for the trustee based on the price obtained and the speed 
with which the divestitures are accomplished. After his or her 
appointment becomes effective, the trustee will file monthly reports 
with the Court and the United States setting forth his or her efforts 
to accomplish the divestiture. At the end of six (6) months, if the 
divestitures have not been accomplished, the trustee and the United 
States will make recommendations to the Court, which shall enter such 
orders as appropriate, in order to carry out the purpose of the trust, 
including extending the trust or the term of the trustee's appointment.

C. The Hold Separate Stipulation and Order

    In order to help ensure that, pending the divestitures, competition 
between the Divestiture Assets and the competing assets retained by 
Defendants is preserved, the Divestiture Assets are maintained as 
ongoing, economically viable, and active business concerns, and 
Defendants will accomplish the divestitures required by the proposed 
Final Judgment, Defendants have entered into the Hold Separate filed 
simultaneously with the Court. The Hold Separate requires Pearson and 
Harcourt to take steps to ensure that their clinical assessment 
businesses--Pearson Clinical Assessments and Harcourt Clinical 
Assessments--will each continue to operate as separate, independent, 
economically viable, and ongoing competitive businesses with 
management, development, sales, and marketing held separate and apart 
from those of each other as well as those of Defendants' other 
operations; and that management of the Divestiture Assets by Pearson 
Clinical Assessments and Harcourt Clinical Assessments will not be 
influenced by Defendants. In order to help implement the Hold Separate 
obligations, Defendants will appoint a person or persons to oversee 
Pearson Clinical Assessments and Harcourt Clinical Assessments, and 
those persons will be responsible for Defendants' compliance with the 
provisions of the Hold Separate. The Hold Separate does not require the 
Defendants to operate separate and independent support and operational 
services relating to the Divestiture Assets. Such support and 
operational services include warehousing, printing, order processing, 
accounting, customer service, technical assistance, merchandising, 
distribution, and delivery and are used by numerous Pearson and 
Harcourt products that are not being divested. The Hold Separate 
requires the Defendants to provide support and operational services to 
the businesses being held separate, including the Divestiture Assets, 
and also requires them to maintain such services relating to the 
Divestiture Assets at 2007 or previously approved levels for 2008, 
whichever are higher.

IV. Remedies Available to Potential Private Litigants

    Section 4 ofthe Clayton Act, 15 U.S.C. 15, provides that any person 
who has been injured as a result of conduct prohibited by the antitrust 
laws may bring suit in federal court to recover three times the damages 
the person has suffered, as well as costs and reasonable attorneys' 
fees. Entry of the proposed Final Judgment will neither impair nor 
assist the bringing of any private antitrust damage action. Under the 
provisions of Section 5( a) of the Clayton Act, 15 U.S.C. 16(a), the 
proposed Final Judgment has no prima facie effect in any subsequent 
private lawsuit that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the

[[Page 7606]]

Court and published in the Federal Register.
    Written comments should be submitted to: James J. Tierney, Chief, 
Networks and Technology Enforcement Section Antitrust Division, United 
States Department of Justice, 600 E Street, NW., Suite 9500, 
Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the Defendants may apply to the 
Court for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against Pearson's acquisition of 
all of the outstanding voting securities of Harcourt, as well as 
additional assets, from Reed Elsevier. The United States is satisfied, 
however, that the divestiture of assets described in the proposed Final 
Judgment will preserve competition for the provision of clinical tests 
in the relevant markets identified by the United States. Thus, the 
proposed Final Judgment would achieve all or substantially all of the 
relief the United States would have obtained through litigation, but 
avoids the time, expense, and uncertainty of a full trial on the merits 
of the Complaint.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the Court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest'' 15 U.S.C. 16(e)(1). In making that determination, the 
court, in accordance with the statute as amended in 2004, is required 
to consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors, 
the court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public 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) (assessing public 
interest standard under the Tunney Act).\2\
---------------------------------------------------------------------------

    \2\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for a court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001). Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\ In 
determining whether a proposed settlement is in the public interest, a 
district court ``must accord deference to the government's predictions 
about the efficacy of its remedies, and may not require that the 
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F. 
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need 
for courts to be ``deferential to the government's predictions as to 
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1,6 (D.D.C. 2003) (noting that the 
court should grant due respect to the United States' prediction as to 
the effect of proposed remedies, its perception of the market 
structure, and its views of the nature of the case).
---------------------------------------------------------------------------

    \3\ Cf BNS, 858 F.2d at 464 (holding that the court's ``ultimate 
authority under the [APPA] is limited to approving or disapproving 
the consent decree''); United States v. Gillette Co., 406 F. Supp. 
713, 716 (D. Mass. 1975) (noting that, in this way, the court is 
constrained to ``look at the overall picture not hypercritically, 
nor with a microscope, but with an artist's reducing glass''). See 
generally Microsoft, 56 F.3d at 1461 (discussing whether ``the 
remedies [obtained in the decree are] so inconsonant with the 
allegations charged as to fall outside of the `reaches of the public 
interest' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.' '' United 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'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that

[[Page 7607]]

``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Id. at 1459-60. As this court 
recently confirmed in SBC Communications, courts ``cannot look beyond 
the complaint in making the public interest detennination unless the 
complaint is drafted so narrowly as to make a mockery of judicial 
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made dear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing in 
this section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2). The language wrote into the statute 
what Congress intended when it enacted the Tunney Act in 1974, as 
Senator Tunney explained: ``[t]he court is nowhere compelled to go to 
trial or to engage in extended proceedings which might have the effect 
of vitiating the benefits of prompt and less costly settlement through 
the consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement 
of Senator Tunney). Rather, the procedure for the public interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11.\4\
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    \4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); S. 
Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (``Where the 
public interest can be meaningfully evaluated simply on the basis of 
briefs and oral arguments, that is the approach that should be 
utilized.''); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade 
Cas. (CCH) ] 61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing 
of corrupt failure of the government to discharge its duty, the 
Court, in making its public interest finding, should * * * carefully 
consider the explanations of the government in the competitive 
impact statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.'').
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VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: January 24, 2008.

Respectfully submitted,

--------/s/--------

Damon J. Kalt
Sanford M. Adler
John C. Filippini (D.C. Bar <greek-i> 165159)
Danielle M. Ganzi
Attorneys, United States Department of Justice, Antitrust Division, 
Networks and Technology Enforcement Section, 600 E Street, NW., 
Suite 9500, Washington, DC 20530, (202) 307-6200.
[FR Doc. 08-532 Filed 2-7-08; 8:45 am]
BILLING CODE 4410-11-M