us v. springleaf holdings complaint.pdf

7/24/2019 US v. Springleaf Holdings complaint.pdf

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U N I T E D S T A T E S D I S T R I C T C O U R T

R

T H E D I S T R I C T O F C O L U M B I A

U N I TED STATES OF AMERICA,

STATE OF COLORADO,STATE OF IDAHO,

C O M M O N W E A L T H OF PENN SYLVA NIA,

STATE OF TEXAS,

C O M M O N W E A L T H OF VIRGINIA,

STATE OF WASHINGTON,

and

STATE OF WEST VIRGINIA,

Plaintiffs,

v.

SPRINGLEAF HOLDINGS, INC.,

ONEMAIN FINANCIAL HOLDINGS, LLC,

and

CITIFINANCIAL CREDIT COMPANY,

Defendants.

CASE NO.

JUDGE:

C O M P E T I T I V E I M P A C T S T A T E M E N T

Plaintiff United Statesof America ("United States"),pursuantto Section 2(b) of the

AntitrustProceduresandPenalties Act ("APPA" or "Tunney Act"), 15 U.S.C. 16(b)-(h), files

this Competitive Impact Statement relating to the proposedFinal Judgment submitted forentry

in this civil antitrustproceeding.

I . N A T U R E AND P U R P O S E O F T H E P R O C E E D I N G

Pursuantto aStockPurchaseAgreementdated March 2,2015, Springleaf Holdings, Inc.

proposest o acquire OneMain Financial Holdings, LLC from CitiFinancial Credit Company, a

wholly owned subsidiary of Citigroup, Inc., for approximately $4.25 billion. The proposed

Case 1:15-cv-01992 Document 3 Filed 11/13/15 Page 1 of 20


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mergerwould combine the tw o largest providers of personal i nsta llment loans to subprime

borrowers i n the UnitedStates.

TheUnitedStatesfileda civilantitrust Complaint on November 13, 2015, seeking to

enjoin the proposed acquisition. The Complaint alleges that the acqu isition likely would

substantiallylessencompetit ion fo r personal insta llment loans to subprime borrowers in

numerous localmarkets acrosselevenstates,i nviolationo f Section 7 of the Clay ton Ac t,15

U.S.C. 18. That loss o fcompetition likely wouldresult i n a reducti on of consumer choice that

may drivefinanciallystrug gling borrowers to mu ch more expensive f orm s of credit or, worse,

leavethemwith noreasonablealternative.

At the sametime the C ompl aint was filed,the UnitedStatesf i led an Asset Preservation

Stipulationand Order and a proposed FinalJudgment designed to elim inate the anticompetitive

effectsof the acquisition. Under the proposed Final Judgment, which is explained more fully

below, Springleaf is required to divest 127branchesi n elevenstatesto Lendmark Financial

Services,or to one or more other Acquirers acceptable to the United States. Under the terms of

theAsset Preservation Sti pulatio n and Order, Springleafw i l l take certainstepstoensure that the

divestiturebranchesare operated as co mpet itively independent, econ omically viable, and

ongoingbusinessconcerns; that they remain independent and uninflu enced by the consumm ation

ofthe acquisition; and that compe tition is maintained duri ng the pendency of the ordered

divestiture.

TheUnitedStatesand Defendantshavestipulated that the proposed Final Judgment may

be entered after compliancewi th the APP A. Entry of the proposed Final Judgment would

terminate this action, except that the Courtwould retainjurisdiction to construe, modify,or

enforcethe provisions o f the proposed Final Judgment and to punish violatio ns thereof.

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I I . D E S C R I P T I O N O FT H E E V E N T S G I V I N G R I S E T OT H E A L L E G E D

V I O L A T I O N

A. TheDefendants and the Proposed Transaction

Defendant Springleaf Holdings, Inc. ("Springleaf) is a Delaware corporation with its

headquartersin Evansvill e, Indiana. Springleaf is the second-largestprovider of personal

installment loans to subprime borrowers in the UnitedStates. Springleafoperates approximately

830branchesi n 27 states and has aconsumerloan portfolioo fabout$4.0 billion.

DefendantOneMain Financial Holdings, LLC ("OneMain") is a Delaware limited

liability company, headquartered in Baltimo re, Mary lan d. OneM ain is the largestprovider of

personalinstallment loansto subprime borrowers i n the Uni tedStates. OneMainoperates 1,139

branchesin 43 states and has aconsumer loanportfolio that totals $8.4 billion. OneM ain is a

subsidiaryo fCitiFinancial Credit Company, a holding company that is awholly owned

subsidiary o fCitigroup, Inc.

B. Backg roun d on Persona l Installment Loa ns to Subprim e Borro wers

Personalinstallment loans to subprime borrowers are closed-end,fixed-rate, fixed-term,

and ful lyamortized loan products that typicallyrangef rom$3,000 to $6,000. Both the princi pal

and interest are paid ful lythrough scheduled installments by the end of the loan term, which

typically isbetween 18and 60 months in duration . Each monthl y payment is the same amount

andthe scheduleofpayments is clear.

Personalinstallment lenderstargeta unique segment o f borrowers who may not be able

to obtaincheaper sourceso f credit f romother finan cial institutions buthaveenough cashf l o w to

affordthe monthl ypayments o fpersonal installment loans. Borrowers ofpersonal installment

loans are considered "subprime" becauseo fblemishes in their credit histories, suchas serious

delinquenciesor defaults. Theseborrowers likelyhave beendenied credit by a bank in the past

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and turn to personal in stallmen t lenders f or the speed,ease,and likelihood o fsuccessin

obtaining credit. Theirborrowingneedsvary, f or example, f rompaying for unexpected

expenses, such as car repairs or medicalbills, to consolida ting debts. A typical subprime

borrow er's annual income is in therangeof $35,000 to $45,000.

Theblemis hed credit histories of subprime borrowerssuggesta higher propensity for

defaulton futur e loans relative to so-called "pr ime" borrowers. Personal installment lenders

mitigatethis creditriskby closely analyzing a borro wer' s characteristics and ability to repay the

loan, includingthe borro wer's credit history , income and outstanding debts, stabilityo f

employment, and availabilityor value ofcollateral. Lenders typicallyrequire borrowers to meet

face-to-faceat a branch location to close the loan, even i f the application begins online. This

face-to-facemeeting allows the lender toefficientlycollectinformationused inunderwriting and

verify key documents (reducing the risk o ffraud). Subprime borrowers seeking installment

loansalso value having a branch officeclose to where they live orwork; a nearby branchreduces

theborrower's travel cost to close the loan and allows convenient and timelyaccessto loan

proceeds. I f approved, borrowers immedia tely obta in the funds at the branch.

Local branchpresence also helps lenders and borrowers establish close customer

relationshipsduring the l ifeo f the loan. Local branch employees monitor delinquent payments

of existing customers andassistborrowers i n meeting their payment ob ligations to minim ize loan

loss. Borrowers also benefitf romk now ing the localbranch employees. Borrow ers mayvisit a

branch to make payments, refinance their loans, orspeakwith a branch employee at times of

financialdifficulties. Lenders placebrancheswhere their target borrowers live orwork so that it

is convenient for their borrowers to come in to a branch.

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The interest rate on a personal installment loan is the largest component of thetotal cost

ofa loan, but otherfeesincrease the effectiveinterest rate that a borrowerw i l l pay. TheAnnual

PercentageRate ("APR") combines the interestratesandfeesto indicate the annualcharges

associatedwith the loan. Although the maximum interestratesandfeescharged on personal

installment loans vary by state, Springleaf andOneMainhave a self-imposed interest rate cap o f

36percent on their respective loans.

While subprime borrowers consider A PR in selecting a loan, theytypicallyfo cus most on

themonthlypayment and o n theeaseand speed ofobtaining approval. Forthesereasons,

negotiationsbetween borro wers and lenders tend to foc us more on the amount o f the loan, the

repayment terms, and collatera l requirements than on therates and fees.

Everystaterequires personal installment lenders to obtain licenses toofferloans to

subprimeborrowers. Many states also have regulations governing the interestratesandfeeson

personal installme nt loans,with some statesimposingmaximumratesandfees and others

utilizing a tiered-rate system that establishes differentinterestratesandfeesfo rdifferent,

loan

amounts. The nature o fstateregulationssignificantlyaff ects the number o f personal installme nt

lendersoperating in a state.

C . Relevant ProductMarket

Subprimeborrowersturn to personal insta llment loans when they need cash but have

limited accessto creditf rombanks, credit card companies, and other lenders. As expla ined i n

theComplaint,the productsofferedbytheselenders are notmeaningfulsubstitutes for personal

installmentloans fo r a substantial number o f subprime borrowers.

For example, banks and credit unionsofferpersonal ins tallmen t loans atratesand terms

much better than those offeredby personal insta llment lenders, but subprime borrowers typically

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donot meet the underwriting criteria ofthoseinstitutions and are unlikely to be approved.

Further, the loan app lication andunderwritingprocessat banks and credit unions typically take

much longer than that of personal installment lenders.

Payday and title lenders provide short-termcash,but charge muc h higherratesandfees,

usuallylend in amounts wellb elo w $1,000, and require far quicker repayment than personal

installment lenders. Ratesandfeesf orthesetypes o f short-termcashadvances can exceed 250

percentA PRwith repayment generally due inless than 30 days.

Creditcardsare also not a viable alternative fo r most subpr ime borrowers. Subpr ime

borrowers mayhavediff icultyobta ining credit cards, andthosew hohave creditcardshaveoften

reachedtheir credit limits andhavelimitedaccessto additio nal credit extensions. Although

subprimeborrowers may use creditcardsf or everydaypurchases,theytypicallyhaveinsufficient

remaining credit to pay f or largerexpensessuch as major car repairs or significantmedical bills.

Finally, although online lenders havebeensuccessful i n makin g loans to pri me

borrowers, they face challenges i n meeting theneedso f andmitigating the creditrisk posed by

subprime borrowers. Without a localbranchpresence, online lenders do not maintain close

customerrelationships, nor can they conduct face-to-face meetings to verifykey documents,

measureswhich reduce the risk o ffraudand borrower default. Onl ine lenders are also unable to

processapplications and distribute loanproceedsas quickly as local personal installment lenders.

For all ofthesereasons,as explained in the Com plain t, subprime borrowers generally

would notturn to banks and credit unions, payday and title lenders, credit cards, or online

lendersin the event lenders offering personal installment loans to subprime borrowers were to

increase the interest rateor otherwise make their loan terms lessappealing by a small but

significantamount. Accordingly,the Compla int alleges that the pro visio n of personal installm ent

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loans to subprime borrowers is a lineo f commerce and a relevant product market within the

meaning of Section 7o f t heClayton Act.

D. Relevant Geographic Mark et

As explained in the C ompla int, subprime borrowers seeking personal insta llment loans

value convenience, includingquickaccessto borrowed funds and minimaltravel time, and look

fora branchnearwhere they live orwork. While the distance a borrower iswil l ingto travel may

varyby geography, the vastmajorityo f subprime borrowers travellessthan twen ty miles to a

branchfo r a personal installment loan.

Personalin stallment lendershaveestablished local trade areasf or theirbranches.

Lendersusuallyrelyon directmail solicitations as the prima rymeanso f marketing and solicit

customersw ho livewithin close proximityto theirbranches. Lenders who placebranchesin the

sameareas compete toservethesametarget borrowerbase. Borrowersview lenders with

branchesin close proximity toeachother as close substitutes.

Forthesereasons,the ov erlappin g tradeareasof competin g personal ins tallment lenders

form geographic markets where the lenders locatedwithin the trade areascompete fo r subprime

borrowers who live orworknearthebranches. The size andshapeo f the o verlappin g tradeareas

ofthesebranchesmay vary as the distance borrowers are wil l ing to traveldependson factors

specific toeach localarea. Even so, typicallymore than three-quarters of the personal

installment loans to subprime borrowersmadeby a give n branch aremadeto borrowers residing

withintw enty miles of the branch. Personal installment lenders withbranches located outside

thesetrade areas usually are not convenient alternatives for borrowers.

Springleaf and OneMainhaveahighdegree of geographic overlap between their branch

networks. Inlocalareaswithin and around 126 towns and mun icipali ties in elevenstates -

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Arizona, California,Colorado, Idaho,North Carolina , Ohio , Pennsylvania, Texas, Virginia,

Washington, and West Virginia - Springleaf and OneMainhavebrancheslocatedwithin close

proximity o f one another, o fte nwithin f i v emiles. Intheseoverlapping trade areaso f

SpringleafsandOneMain'sbranches,fe w, i f any, other lenders havebranchesofferingpersonal

installment loans to subprime borrowers.

Accordingto the Complaint, inlocalareaswithinand around the 126towns and

municipalities i nArizona, California,Colorado, Idaho,NorthCarolina, Ohio, Pennsylvania,

Texas,Virginia,Washington, and West Virginia, subprime borrowers of personal installment

loanswould no tseeksuch loans outside the localareasi n the event lenders offeringpersonal

installment loans to subprime borrowers were toincreasethe interest rate or otherwise make their

loanslessappealing by a small butsignificantamount. Accordingly,the overlapping tradeareas

located in the 126

towns andmunicipalities identifiedi n the App end ix attached to the Com plaint

constitute relevant geographic markets withinthe meaning of Section 7 of the Clayton Ac t.

E . Anticompetitive Effec ts

As alleged i n the Com plaint, Springlea f and On eM ain are the two largest providers of

personal installment loans to subprime borrowers in theUnitedStates. Bothcompanies have a

longhis tory in thebusiness,an extensive branch network, and close ties to the local communities

inwhich they operate. Both companies have used theiryearso f experience and large customer

base to develop sophisticated risk analytics that allowthem to minim ize expected creditlosses.

Other lenders thatoffer personal installment loans to subprime borrowershavemuch smaller

branch footprintsand arepresenti n fewerstatesand localmarkets than Springleaf and OneMain.

In localmarkets within and around the 126towns andmunicipalities in Arizona,

California,Colorado, Idaho,North Carolina, Oh io, Pennsylvania, Texas, Virginia, Washington,

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andWestVirginia identifiedin the App end ix to the Complai nt, the market f or the prov isio n of

personal installment loans to subprime borrowers ishighly concentrated. Inthese local markets,

Springleafand O neM ain are the largest providers o f personal installment loans to subprime

borrowers, and face little, i fany, competitionf romother personal insta llme nt lenders. The

Complaint alleges that the proposed acquisitionwouldsubstantiallyincreaseconcentration in

theselocal markets and likelywould result in subprime borrowers f ac ing higher interestratesor

fees,greater limitson the amount they can borrow and restraints on theirability to obtain loans,

andmore onerous loan terms. The proposed acquisi tion thereforel ikely w i l l substantially lessen

competitioni n the prov isio n o f personal instal lment loans to subprime borrowers.

F . Difficu lty of Entry

Accordingto the Compla int, entry ofadditionalcompetitors into the provi sio n o f personal

installment loans to subprime borrowers in the 126localmarkets inArizona, Ca lifornia,

Colorado, Idaho,North Carolina, Ohio, Pennsylvania, Texas, Virginia,Washington, and West

Virginia identifiedi n the Complain t isunlikely to be timely or sufficientto defeat the likely

anticompetitiveeffec ts o f the proposed acquisition. Insomestates,thestateregulatoryratecaps

createunattr active markets f or entry. I n others, lenders face entry barriers i n terms o f cost and

time to establish a localbranchpresence. Personal instal lment lenders need experienced branch

employeeswithknowledge of the localmarket to build abaseo f customer rela tionships. A new

lender i n alocal market facesmore risks as itdoesnothaveknowledge oflocal market

conditions. A lender also must obtain fundingand devoteresourcestobuilding a successful

localpresence. As a result o fthesebarriers, entry isunlikelyto remedy the anticompetitive

effectsof the proposed acquisition.

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I I I . E X P L A N A T I O N O FT H E P R O P O S E D F I N A L J U D G M E N T

Thedivestiture required by the proposed Final Judgment w i l l eliminate the

anticompetitive effects of the acquis ition by establishing an independent and economica lly viable

competitor in the provision of personal installment loans to subprime borrowers ineacho f the

local markets of concern.

Specifically,Paragraphs IV A ) and IV(B) o f the proposed F ina l Judgment requires

Defendantsto divest 127

Springleafbranches,which are identified in the Attachment to the

proposed Final Judgment, to Lendmark Financial Services or to one or more alternative

Acquirersacceptableto the UnitedStates. Thebranches to be divested are located in the local

marketswithin and around the 126 towns and municipalitiesidentifiedin the App end ix to the

Complaint. The divestiturew i l l establish Lendmark or an alternative Acquirer as a new,

independentand economically viable competitor insomestatesand w i l l allo w Lendmark or an

alternative Acquirer to compete in new l ocalareasand toenhanceits competitivepresencei n

others.

The divestitureo f t he 127 Springleafbranches includes all active loans originated or

serviced atthosebranches,inc ludin g all historical performance information(including account-

levelpayment histories) and all customers' creditscoresand other credit metrics withrespect to

loansthat are active, closed, paid-off,or defaulted thathave beenoriginated or serviced at the

DivestitureBranches at any point since January 1,2010. The historical performance information

w i l l a llo w a lender to gain an understanding oflocalma rket conditions and to perfo rm risk

analytics essential to maki ng personal ins tallment loans to subprime borrowers. In the event that

Lendmark is not the Acquirer,Paragraph11(G)(3) provides that Springleafw i l l further divest, at

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the Acquirer's option,assetsrelated to back office and technical support that would provide the

Acquirerwi th additional capability and know-how.

ParagraphIV(A) of the proposedFinalJudgment requires Springleaf to divest the

DivestitureAssetswithin 120calendardaysafter the filing of the Complaint orwithin five (5)

calendardaysafter satisfaction ofallstatelicensing requirements, w hich ever issooner. The

United States,in itssolediscretion, after consultation with the PlaintiffStates,may agree to one

ormore extensionsof the time period, not to exceedsix ty (60) calendardays in total. In

addition,i n the event that Lendmark has initiated the statelicensingprocessi n a particular state

bu t has not satisfied the state's licensing requirementsbefore the end o f t heperiod specified in

Paragraph I V A ) , the period to divest the DivestitureAssetso f that particular state shall be

extendedto five (5)calendardaysafter satisfaction of the statelicensing requirements.

ParagraphIV(A) alsorequires Springleaf to use itsbestefforts to divest the Div estitureAssets as

expeditiously as possible.

In the event that Lendmark isunable to acquire the DivestitureAssets in one or more

states,ParagraphsIV(B)provides that Springleaf shall divest the remaining DivestitureAssets to

an alternative Acquirer(s) acceptableto the Unite dStates,i n itssole discretion, after consultation

with the relevant PlaintiffStates. Springleaf shall divest the remaining DivestitureAssets within

thirty (30)daysafter the UnitedStatesreceivesnotice that Lendmark is not the Acquirer ofsuch

DivestitureAssets, or within five (5)daysof satisfaction ofa llstatelicensing requirements,

whichever issooner. The UnitedStates,i n itssolediscretion, after consultation with the relevant

PlaintiffStates,mayagree to one or more extensionsof thetime period, not toexceed sixty (60)

calendardaysi n total. PursuanttoParagraph V I ) , Springleaf must divest to a single Acquirer all

of the DivestitureBrancheslocated i n a particular state.

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Paragraph IV(G) prohib its Defendants f romenteringinto non-compete agreements with

any employee at any of Defendants' branches orwith any regional manager with responsibility

formana ging any o f Defendants' branches fo r a per iod o ftwo (2) years f r omthe date o f the

f i l ing o f the Complaint. Defendants also must wa ive any existing non-compete agreements with

such employees. Paragraph IV(G) ensuresthat competing providerso fpersonal installment

loans, includingthe Acquirer,may hire Defendan ts' branch employees and region al managers

who are experienced i n mak ing personal insta llment loans to subprime borrowers.

Paragraph IV(H) provides fo r thepossibility o f atransition services agreement between

Springleafand theAcquirer(s)f or a per iod o f up to six (6) months. Thisprovision isnecessary

becausethe transfer o floan records and customer informationf romSpringleafs data system to

theA cqu ire r's data system w i l l require system testing, and the transitionm ay take a period o f

months afte r the divestiture. Thetransition services provid ed pursuant to such an agreement

shall includeproviding the Acquirer(s)accessto aseparateinformationtechnology environment

within Springleafs informationsystem fo r loanorigination,administrationand services. During

theterm o f thetransition services agreement, Springleafshall impleme nt and mainta in

proceduresto preclude the sharing o f data between Spring leaf and the Acquirer(s). TheUnited

States,i n its sole discretion, may approve one or more extensions o fthisagreement fo r atotalo f

up to an additional six (6) months.

SectionX o f the proposedFinal Judgment provides that theUnited Statesmay appoint a

Monitoring Trustee withthe power and aut hority to investigate and report on Defendants'

compliancewi th the termso f t heproposedFinal Judgment and the Asset Preservation

Stipulation and Order duringthe pendency o f the divestiture. Becausesatisfaction of the state

licensing requirements may take 120calendar days or longer, aMonitoring Trustee w i l l assist

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Plaintiffsi nmonitoring the divestitureprocess and ensuring Defendants' compliancewith the

AssetPreservation Stipu lation and Order. The Monitoring Trustee shallfilemonthly reports

with the UnitedStatesand shallserveuntilthe comp letion of the divestiture and the expiratio n o f

anytransition services agreement.

In the event that Springleafdoesnot accomplish the divestiture to either Len dmark or an

alternative Acquirer(s)within the periods prescribed in the proposed Final Judgment, pursuant to

Sect ion V , the Cour t shall appo int a Divest iture Trustee selected by theUnited Statesand

approved by the Court to eff ect the divestiture. I f aDivestiture Trustee is appointed, the

proposedFinal Judgment provides that Springleafw i l l pay allcostsandexpenseso f the trustee.

Afterits appointmentbecomeseffective,the D ivestitur e Trustee w i l l f i l emo nth ly reports with

theCourt and theUnitedStatessettingforthi tseffortsto accomplish the divestiture. A t the end

of six (6) months, i f the divestiture has notbeenaccomplished, the Div estitu re Trustee and the

United Statesw i l lmake recommendations to the Court,which shall enter such orders as

appropriate, in order to carry out the purpose of the Final Judgment, including extending the trust

orthe term of the DivestitureTrustee's appointment.

I V . R E M E D I E S A V A I L A B L E T OP O T E N T I A L P R I V A T E L I T I G A N T S

Section 4 of the Cla yton Act ,15U.S.C. 15, provides that any person who has been

injuredas a result o f conduct pro hib ited by the antitrust laws may bringsuit in federal court to

recoverthree times the damages the person has suffered, aswell ascostsandreasonable

attorneys' fees. Entry of the proposed Final Judgment w i l lneither impair norassistthe bringing

of any private antitrustdamageaction. Under the provisions o f Section 5(a) o f the Clay ton Act ,

15

U.S.C. 16(a), the proposed Final Judgment has no prima facie eff ect in any subsequent

private lawsuit that may be brought against Defendants.

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V. P R O C E D U R E S A V A I L A B L E F O R M O D I F I C A T I O N O FT H E P R O P O S E D

F I N A L J U D G M E N T

TheUnited Statesand Defendants have stipulated that the proposed Final Judgment may

beentered b y the Court after complianc ewiththe p rovisions of theAPPA,p rov ided that the

United Stateshas no twithdrawn its consent. TheAPPA conditions entry upon the Co urt's

determinationthat the proposed FinalJudgment is in thepublic interest.

TheAPPAp rovides a per iod o f at least sixty (60) days preceding theeffectivedateo f the

proposedFinalJudgment withinwhichany person may submit to the United Stateswritten

comments regard ing the proposedFinalJudgment. A n y person who wishes to comment should

do sowithin sixty (60) days o f thedateo fpublicationo fthisCompetitive Impact Statement in

theFederal Register, or the lastdateo fpublication i n a newspaper o f the summary o f this

Competitive Impact Statement, whichever is later. A l l comments receivedduringthis period

w i l lbe considered by theUnitedStatesDepartment of Justice, which remains free towithdraw

it sconsent to the proposed Final Judgment at any timeprior to the Court's entry of judgment.

The comments and theresponseo f t heUnited Statesw i l l be filed with the Court. Inaddition,

commentsw i l lbe posted on the U.S. Department of Justice, AntitrustDivision's Internet website

and, under certain circumstances, publi shed in theFederal Register.

Written comments should be submitted to:

MaribethPetrizzi

Chief,Litigation I I Section

Antitrust Division

UnitedStatesDepartment of Justice

450F i f thStreet, N.W. , Suite 8700

Washington,D C 20530

Th eproposed FinalJudgment provides that the Court retainsjurisdictionover this action, and the

partiesmay apply to the Court fo r any ordernecessaryor appropriate f or themodification,

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interpretation,or enforcement of the Final Judgment.

V I . A L T E R N A T I V E S T OT H E P R O P O S E D F I N A L J U D G M E N T

TheUnitedStatesconsidered,as analternativeto theproposed Fin al Judgment, aful l

trial onthemerits against Defendants. The Un ite dStatescouldhavecontinuedthelitigationand

soughtpreli minar y and permanent injunctio ns against Springleafsacquisition ofOneMain. The

United Statesissatisfied, however, thatthedivestiture o fassets described intheproposed Final

Judgment w i l lpreservecomp etition for personal installment loans tosubprime borrowers. Thus,

theproposed Final Judgment would achieve allorsubstantially al l of the reliefthe UnitedStates

wouldhaveobtained through litigation,butavoidsthetime,expense,and uncertainty ofafull

trial onthemerits o f t heComplaint.

V I I . S T A N D A R D O FR E V I E W U N D E R T H E A PPA

R

T H E P R O P O S E D F I N A L J U D G M E N T

TheClayton Ac t,asamended by the APPA, requires that proposed consentjudgmentsi n

antitrustcasesbroughtby theUnitedStatesbesubjectto asixty-day comment perio d, after

which the Court shall determine whether entryo f the proposed Final Judgment "isin the p ublic

interest." 15U.S.C.16(e)(1). In mak ing that determination,theCourt, inaccordancewiththe

statuteas amended in 2004,isrequiredto consider:

(A) thecompetitive impact of such judgment , includi ng

terminationo f allegedviolations,provisions for enforcementand

modification,duration ofrelief sought, anticipated effects of alternative

remedies actually considered, whether its terms areambiguous, and any

other competitive considerations bearing upon the adequacyof such

judgment thatthecourtdeems necessaryto adetermination o f whetherthe

consentjudgment isinthepub lic interest;and

(B) theimpact of entry of such judgment upo n comp etitioni n

the relevant marketormarkets, uponthepublic generally and individ uals

alleging specific injury fromtheviolationssetforthi nthecomplaint

including consideration o f the public benefit, i f any,to bederived f roma

determination o f the issuesattrial.

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15U.S.C. 16(e)(1)(A)& (B). In consideringthesestatutory factors, the Co urt' s inquiry is

necessarilya limitedone as the government is ent itled to "broad d iscretion to settle with the

defendantwithin thereacheso f the publ ic interest." United States v.Microsoft Corp., 56 F.3d

1448, 1461 (D .C . Cir. 1995);see generally United States v. SBC Commc'ns, Inc., 489 F. Supp.

2d 1(D.D.C. 2007)(assessingpublic interest standard under the TunneyAct) ; United States v,

U.S. Airways Group, Inc.,38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the "court's

inquiry isl imited"i n Tunney Ac t settlements); United States v.InBev N.V./S.A.,No. 08-1965

(JR), 2009-2 Trade Cas. (CCH) 76,736, 2009 U.S.Dist.LEXIS84787, at *3,(D.D.C.Aug . 11,

2009) (notingthat the court's review of a consent judgment islimited andonly inquires"into

whetherthe government's determination that the proposed remedies w i l l cure the antitrust

violationsalleged i n the com plaint was reasonable, and whether the mechanis m to enforce the

finaljud gme nt are clear and manageable."). 1

As theUnitedStatesCour t of Appeals f or theDistrict o fColumbiaCircuit has held,

underthe AP P A a court considers, amon g other things, the relationship between the remedy

securedand the specific allegations set forth in the govern ment's complaint, whether thedecree

is sufficientlyclear, whether enforcement mechanisms are sufficient,and whether thedecree

may positivelyharmthirdparties. See Microsoft, 56 F.3d at 1458-62. With respect to the

adequacyo f the relief secured by thedecree,a court may not"engagei n an unrestricted

evaluation o f wha treliefwouldbest servethepublic." United States v. BNS, Inc., 858 F.2d 456,

462(9th Cir. 1988) (quotingUnited States v.Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981));

The 2004 amendments substituted"shall"fo r "may" indirectingrelevant factors for courts to

considerand amended thelistoffactorsto focus on competitive considerations and toaddresspotentially

ambiguousjudgment terms. Compare 15 U.S.C. 16(e) (2004),with 15 U.S.C. 16(e)(1) (2006);see

also SBCCommc 'ns,489 F. Supp. 2d at 11(concludingthat the 2004 amendments "effectedminimal

changes"to Tunney Ac treview).

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see also Microsoft, 56 F.3d at 1460-62; United States v.Alcoa, Inc., 152F. Supp. 2d 37, 40

(D.D.C.2001);InBev, 2009 U.S.Dist. LEXIS 84787, at *3. Courtshavehe ld that:

[t]hebalancing o fcompetingsocial andpolitical interests affec ted by a proposed antitrust

consentdecreemust be left,i n the first instance, to the di scre tion o f theAttorney General.The court's ro le in prot ecting thepublic interest is one ofinsuringthat the government

hasnot breached its duty to thepublici n consenting to thedecree. The court is required

to determine not whether a particulardecree is the one that w i l lbest servesociety, but

whether the settlement is within the reaches of the public interest.'''' More elaborate

requirementsmightundermine the effectiveness of antitrust enforcement by consent

decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citationsomitted). 2 I ndeterminingwhether a

proposed settlement is in thepublic interest, adistrict court "must accord deference to the

governmen t's predictions about the efficacyof its remedies, and ma y not require that the

remediesperfectlymatch the allegedviolations." SBC Commc 'ns,489 F. Supp. 2d at 17; see

also U.S.Airways, 38F. Supp.3dat 75 (notingthat a cou rt should notreject the proposed

remediesbecauseit believes others arepreferable);Microsoft, 56 F.3d at 1461(noting the need

fo rcourts to be "deferentialto the government's predictio ns as to the eff ect o f the proposed

remedies ); United States v. Archer-Daniels-Midland Co.,272 F. Supp. 2d 1, 6 (D.D.C. 2003)

(notingthat the court should grant duerespectto theUnited States'spredictionas to theeffecto f

proposed remedies, its perceptiono fthe market structure, and its views o f the nature o f the case).

Courtshavegreater flexibility i n approving proposed consentdecreesthan incrafting

theirowndecreesfollowinga finding o fliability i n a litigatedmatter. " [A] proposed decree

must be approved even i f i tfallsshort o f the remedy the court would impose on its ow n, as long

asi tfallswithin therangeo facceptabilityor is 'w i thin thereacheso fpublicinterest.'" United

2

Cf.

BNS,858 F.2d at 464(holdingthat the court's "ultimate authority under the [APPA]is

limitedtoapprovingordisapprovingthe consent decree"); United States v. Gillette Co.,406 F. Supp. 713,

716(D.Mass. 1975)(notingthat, inthis way, the court is constrained to"lookat theoverallpicture not

hypercritically,nor with a microscope, butwithan artist's reducing glass").Seegenerally Microsoft, 56

F.3dat 1461 (discussing whether "the remedies [obtainedinthedecreeare] so inconsonantwith the

allegations charged as tofalloutsideofthe 'reachesofthepublic interest' ).

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States v. Am. Tel. & Tel. Co., 552 F. Supp. 131,151 (D.D.C.1982) (citations omitted)(quoting

United States v.Gillette Co., 406 F. Supp. 713, 716 (D . Mass. 1975)),aff'dsub nom. Maryland

v. United States, 460 U.S. 1001 (198 3);see also U.S.Airways, 38 F. Supp. 3d at 76 (noting that

roommus t be made f or the government to grant concessions in the negotiationprocessfor

settlements) (citingMicrosoft, 56 F.3d at 1461); United States v.Alcan Aluminum Ltd., 605 F.

Supp.619,622 (W.D. Ky. 1985)(approvingthe consent decreeeven though the courtwould

have imposed a greater reme dy) . To meet this standard, theUnitedStates"need onlyprovide a

factualbasisfo rconcluding that the settlements are reasonably adequateremedies f or the alleged

harms." SBC Commc'ns, 489 F. Supp. 2d at 17.

Moreover,the Court's rol e under theAPPA is limited to reviewingthe remedy in

relationshipto theviolationsthat theUnitedStateshas alleged i n its Compla int, anddoesnot

authorizethe Cou rt to "construct [its] ownhypotheticalcaseand then evaluate thedecree against

thatcase." Microsoft, 56 F.3d at 1459;see also U.S.Airways, 38 F. Supp. 3d at 75 (noting that

thecourt must simplydetermine whether there is afactual foundati onfo r the government's

decisionssuch that its conclusions regarding the proposed settlements are reasonable); InBev,

2009 U.S.Dist. LEXIS 84787, at *20 ("the 'publicinterest' is not to be measured by comparin g

theviolationsalleged in the complaint against those the court believes could have, or even

should have, been alleged"). Because the "court's authorityto r evie w thedecree depends

entirelyo n the government's exercising its prosecutorial discretion bybringing acasei n the first

place," itfollowsthat "the court isonly authorized to rev iew thedecreeitself,"and not to

"effectivelyredraftthecomplaint"to inquireintoother matters that theUnited Statesd id not

pursue. Microsoft, 56 F.3d at 1459-60. As this Courtconfirmedi nSBC Communications, courts

"cannot look beyond the complaint in making thepublic interest dete rmin ation unless the

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complaintis drafted so nar row ly as to make a mock ery ofjudicial power." SBC Commc 'ns, 489

F. Supp. 2d at 15.

In its 2004 amendments, Congress madeclear its intent topreservethe practical benefits

of utilizingconsentdecreesin antitrust enforcement, adding the unambiguous instru ction that

"[njothing in this section shall be construed to require the court to conduct an evidentiary hearing

or to require the court to perm it anyone to intervene ." 15 U.S.C. 16(e)(2);see also U.S.

Airways, 38 F. Supp. 3d at 76(indicating that a court is not required toholdan evidentiary

hearingor to permitintervenorsas part of its review under the Tunney Act). The languagewrote

into the statutewhatCongress intended when itenactedthe Tunne y Ac t in1974, as Senator

Tunneyexplained: "[t ]he court is nowhere compelled to go to trialor toengage in extended

proceedingswhichmighthavethe effe ct ofvitiatingthe benefits o f prompt and lesscostly

settlementthroug h the consentdecreeprocess." 119Cong.Rec. 24,598 (1973) (statement of Sen.

Tunney). Rather, the procedure fo r the pub lic interest determ ination is leftto the discre tion o f

theCourt,withthe recognition that the Court's "scopeo f rev iew remains sharply proscribed by

precedentand the nature o f Tunney A ct proceedings." SBC Commc 'ns,489 F. Supp. 2d at 1 1 . 3

A court can make its public interest determinationbasedon the competitive impactstatement and

responseto publi c comments alone. U.S.Airways, 38 F. Supp. 3d at 76.

3

See United States v. Enova Corp., 107F. Supp. 2d 10, 17(D.D.C.2000) (noting that the

"TunneyAct expressly allows the court to make its public interest determination on thebasisof thecompetitive impactstatementandresponseto comments alone"); United States v.Mid-Am. Dairymen,

Inc., No .73-CV-681-W-1, 1977-1 Trade Cas. (CCH) 61,508, at 71,980, *22(W.D. Mo. 1977)

("Absenta showing of corruptfailureofthe government to discharge its duty, the Court, in making its

publicinterest finding,should . . .carefullyconsider the explanations ofthe government inthe

competitive impactstatementand itsresponsesto comments in order to determine whetherthose

explanationsarereasonableunder the circumstances."); S. Rep. No. 93-298, at 6 (1973) ("Where the

publicinterest can be meaningfullyevaluated simply on thebasisof briefs and oral arguments, that is the

approachthat should beutilized.").

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V I I I . D E T E R M I N A T I V E D O C U M E N T S

There are no determinative materials or documents withinthe meaning of the APPA that

wereconsidered b y the UnitedStatesi nformulatingthe proposed Final Judgment.

Dated:November 13,2015

Respectfully submitted,

AngelaTing (D.C. Bar #449576)

U.S.Department of Justice

AntitrustDivision, Litigation I ISection

450Fifth Street,N.W., Suite 8700

Washington, DC 20530

(202) 616-7721

(202) 514-9033(Facsimile)

angela.ting@usdoj

.gov

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