UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

AGREEMENT CONTAINING CONSENT ORDER

The Federal Trade Commission ("Commission"), having initiated an investigation of certain acts and practices of Warner Communications Inc., and it now appearing that Warner Communications Inc., hereinafter sometimes referred to as "Proposed Respondent," is willing to enter into this Agreement Containing Consent Order ("Consent Agreement") to cease and desist from certain acts and practices and providing for other relief;

IT IS HEREBY AGREED by and between Proposed Respondent, by its duly authorized officers and attorneys, and counsel for the Commission that:

1. Proposed Respondent Warner Communications Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 75 Rockefeller Plaza, New York, New York 10019. Proposed Respondent is an indirect subsidiary of AOL Time Warner Inc.

2. Proposed Respondent admits all the jurisdictional facts set forth in the draft of Complaint here attached.

3. Proposed Respondent waives:

a. any further procedural steps;

 

the requirement that the Commission's Decision and Order, attached hereto and made a part hereof, contain a statement of findings of fact and conclusions of law;

 

b. all rights to seek judicial review or otherwise to challenge or contest the validity of the Decision and Order entered pursuant to this Consent Agreement; and

 

c. any claim under the Equal Access to Justice Act.

4. Proposed Respondent shall submit an initial compliance report within twenty (20) days of the date it signs this Consent Agreement, pursuant to Commission Rule 2.33, 16 C.F.R. § 2.33, signed by Proposed Respondent setting forth in detail the manner in which the Proposed Respondent has to date complied, has prepared to comply, and will comply with the Decision and Order. Such report will not become part of the public record unless and until the accompanying Consent Agreement and Decision and Order are accepted by the Commission for public comment.

5. This Consent Agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this Consent Agreement is accepted by the Commission, it, together with the draft of Complaint contemplated thereby, will be placed on the public record for a period of thirty (30) days and information with respect thereto publicly released. The Commission thereafter may either withdraw its acceptance of this Consent Agreement and so notify Proposed Respondent, in which event it will take such action as it may consider appropriate, or issue and serve its Complaint (in such form as the circumstances may require) and Decision and Order, in disposition of the proceeding.

6. This Consent Agreement is for settlement purposes only and does not constitute an admission by Proposed Respondent that the law has been violated as alleged in the draft of Complaint here attached, or that the facts as alleged in the draft Complaint, other than jurisdictional facts, are true.

7. This Consent Agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission may, without further notice to Proposed Respondent, (1) issue its Complaint corresponding in form and substance with the draft of Complaint here attached and the Decision and Order in disposition of the proceeding, and (2) make information public with respect thereto. When so entered, the Decision and Order shall have the same force and effect, and may be altered, modified or set aside in the same manner and within the same time provided by statute for other orders. The Decision and Order shall become final upon service. Delivery of the Complaint and the Decision and Order to Proposed Respondent by any means specified in Commission Rule 4.4(a), 16 C.F.R. § 4.4(a), shall constitute service. Proposed Respondent waives any right it may have to any other manner of service. The Complaint may be used in construing the terms of the Decision and Order, and no agreement, understanding, representation, or interpretation not contained in the Decision and Order or the Consent Agreement may be used to vary or contradict the terms of the Decision and Order.

8. By signing this Consent Agreement, Proposed Respondent represents and warrants that it can accomplish the full relief contemplated by this Consent Agreement, and that all subsidiaries, affiliates, and successors necessary to effectuate the full relief contemplated by this Consent Agreement are parties to the Consent Agreement and are bound thereby as if they had signed this Consent Agreement and were made parties to this proceeding and to the Decision and Order.

9. Proposed Respondent has read the draft of Complaint and the Decision and Order contemplated hereby. Proposed Respondent understands that once the Decision and Order has been issued, it will be required to file one or more compliance reports showing that it has fully complied with the Decision and Order. Proposed Respondent agrees to comply with the terms of the Decision and Order from the date it signs this Consent Agreement. Proposed Respondent further understands that it may be liable for civil penalties in the amount provided by law for each violation of the Decision and Order after the Decision and Order becomes final.

Signed this ____ day of ______________, 2001

WARNER COMMUNICATIONS INC.

By:

_______________________
Paul T. Cappuccio
Executive Vice President & General Counsel
Warner Communications Inc.

_______________________
Robert D. Joffe
Cravath, Swaine & Moore
Counsel for Warner Communications Inc.

_______________________
George S. Cary
Cleary, Gottlieb, Steen & Hamilton
Counsel for Warner Communications Inc.

FEDERAL TRADE COMMISSION

By:

_______________________
Geoffrey M. Green
Attorney
Bureau of Competition

Approved:

_____________________

Richard B. Dagen
Assistant Director
Bureau of Competition

____________________
M. Sean Royall
Deputy Director
Bureau of Competition

____________________
Michael E. Antalics
Deputy Director
Bureau of Competition

____________________
Joseph J. Simons
Director
Bureau of Competition

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:

Timothy J. Muris, Chairman

Sheila F. Anthony

Mozelle W. Thompson

Orson Swindle

Thomas B. Leary

The Federal Trade Commission having initiated an investigation of certain acts and practices of Respondent, Warner Communications Inc., and Respondent having been furnished thereafter with a copy of the draft of Complaint that the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued, would charge Respondent with violations of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45; and

Respondent, its attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Order ("Consent Agreement"), containing an admission by Respondent of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that Respondent has violated the said Act, and that a Complaint should issue stating its charges in that respect, and having accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby issues its Complaint, makes the following jurisdictional findings and issues the following Order:

1. Proposed Respondent Warner Communications Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 75 Rockefeller Plaza, New York, New York 10019.

 

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the Respondent, and the proceeding is in the public interest.

ORDER

I.

IT IS ORDERED that, as used in this Decision and Order, the following definitions shall apply:

A. "WCI" or "Respondent" means Warner Communications Inc., its directors, officers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups, and affiliates controlled by Warner Communications Inc., except Time Warner Entertainment Company, L.P.; and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

 

B. "Commission" means the Federal Trade Commission.

 

C. "Audio Product" means any prerecorded music in any physical, electronic, or other predominantly audio form or format, now or hereafter known, including, but not limited to, any compact disc, magnetic recording tape, audio DVD, audio cassette, album, audiotape, digital audio tape, phonograph record, electronic recording, or digital audio file (i.e., digital files delivered to the consumer electronically to be stored on the consumer's hard drive or other storage device).

 

D. "Video Product" means any prerecorded visual or audiovisual product in any physical, electronic, or other form or format, now or hereafter known, including, but not limited to, any videocassette, videotape, videogram, videodisc, compact disc, electronic recording, or digital video file (i.e., digital files delivered to the consumer electronically to be stored on the consumer's hard drive or other storage device), that includes a performance by The Three Tenors.

 

E. "Seller" means any Person other than Respondent that produces or sells at wholesale any Audio Product or Video Product.

 

F. "Joint Venture Agreement" means an agreement between Respondent and a Seller that provides that the parties to the agreement shall collaborate in the production or distribution (including, without limitation, through the licensing of intellectual property) of Audio Products or Video Products.

 

G. An Audio Product or Video Product is "Jointly Produced" by Respondent and a Seller when, pursuant to an agreement between Respondent and such Seller, each contributes significant assets to the production or distribution of the Audio Product or Video Product (including, without limitation, personal artistic services, intellectual property, technology, manufacturing facilities, or distribution networks) to achieve procompetitive benefits. For example and without limitation, an Audio Product or Video Product is "Jointly Produced" by Respondent and a Seller when (1) such product is manufactured or packaged by such Seller and sold at wholesale by Respondent, or (2) such product is manufactured or packaged by Respondent and sold at wholesale by such Seller.

 

H. "The Three Tenors" means Jose Carreras, Placido Domingo and Luciano Pavarotti.

 

I. "Person" means both natural persons and artificial persons, including, but not limited to, corporations, partnerships, and unincorporated entities.

 

J. "Officer, Director, or Employee" means any officer or director or management employee of WCI with responsibility for the pricing, marketing, or sale in the United States of Audio Products or Video Products.

 

K. "United States" means the fifty states, the District of Columbia, the Commonwealth of Puerto Rico, and all territories, dependencies, and possessions of the United States of America.

II.

IT IS FURTHER ORDERED that Respondent shall cease and desist from, directly, indirectly, or through any corporate or other device, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, soliciting, participating in, entering into, attempting to enter into, implementing, attempting to implement, continuing, attempting to continue, or otherwise facilitating or attempting to facilitate any combination, conspiracy, or agreement, either express or implied, with any Seller:

A. to fix, raise, or stabilize prices or price levels, in connection with the sale in or into the United States of any Audio Product or any Video Product; or

 

B. that prohibits, restricts, regulates, or otherwise places any limitation on any truthful, non-deceptive advertising or promotion in the United States for any Audio Product or any Video Product.

III.

IT IS FURTHER ORDERED that:

A. It shall not, of itself, constitute a violation of Paragraph II.A. of this Decision and Order for Respondent to enter into, attempt to enter into, or comply with an agreement to set the prices or price levels for any Audio Product or Video Product when such agreement is reasonably related to a lawful Joint Venture Agreement and reasonably necessary to achieve its procompetitive benefits.

 

B. It shall not, of itself, constitute a violation of Paragraph II.B. of this Decision and Order for Respondent to enter into, attempt to enter into, or comply with an agreement that regulates or restricts the advertising or promotion for any Audio Product or Video Product where such agreement is reasonably related to a lawful Joint Venture Agreement and reasonably necessary to achieve its procompetitive benefits.

 

C. It shall not, of itself, constitute a violation of Paragraph II.A. of this Decision and Order for Respondent and a Seller to enter into, attempt to enter into, or comply with an agreement to set the prices or price levels for any Audio Product or Video Product that is Jointly Produced by Respondent and such Seller.

 

D. It shall not, of itself, constitute a violation of Paragraph II.B. of this Decision and Order for Respondent and a Seller to enter into, attempt to enter into, or comply with an agreement that regulates or restricts the advertising or promotion for any Audio Product or Video Product that is Jointly Produced by Respondent and such Seller.

 

E. It shall not, of itself, constitute a violation of Paragraph II.B. of this Decision and Order for Respondent to enter into, attempt to enter into, or comply with a written agreement, industry code, or industry ethical standard that is: (1) intended to prevent or discourage the advertising, marketing, promotion, or sale to children of Audio Products or Video Products labeled or rated with a parental advisory or cautionary statement as to content, and (2) reasonably tailored to such objective.

IV.

IT IS FURTHER ORDERED that:

A. Within sixty (60) days after the date this Decision and Order becomes final, Respondent shall submit to the Commission a verified written report setting forth in detail the manner and form in which that Respondent has complied and is complying with this Order.

B. One (1) year after the date this Decision and Order becomes final, annually for the next four (4) years on the anniversary of the date this Decision and Order becomes final, and at other times as the Commission may require, Respondent shall file with the Commission a verified written report setting forth in detail the manner and form in which it has complied and is complying with this Decision and Order.

V.

IT IS FURTHER ORDERED that Respondent shall notify the Commission at least thirty (30) days prior to any proposed change in Respondent such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in the corporation that may affect compliance obligations arising out of the order.

VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this order, upon written request, Respondent shall permit any duly authorized representative of the Commission:

A. Access, during office hours and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and other records and documents in the possession or under the control of Respondent relating to any matters contained in this Decision and Order; and

 

B. Upon five (5) days' notice to Respondent and without restraint or interference from it, to interview officers, directors, or employees of Respondent.

VII.

IT IS FURTHER ORDERED that Respondent shall:

A. Within thirty (30) days after the date on which this Decision and Order becomes final, send a copy of this Decision and Order by first class mail to each Officer, Director, or Employee;

B. Mail a copy of this Decision and Order by first class mail to each person who becomes an Officer, Director, or Employee, no later than (30) days after the commencement of such person's employment or affiliation with Respondent.

VIII.

IT IS FURTHER ORDERED that this Decision and Order shall terminate twenty (20) years after the date on which it is issued.

By the Commission.

Donald S. Clark
Secretary

SEAL

ISSUED: