ARCHIVED: Proposed Merger of West Publishing with Thomson Corporation

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July 29, 1996

Mr. Craig Conrath, Chief
Merger Task Force
Antitrust Division
U.S. Department of Justice
Suite 4000
1401 H Street, N.W.
Washington, D.C. 20530

SUBJECT: Proposed Merger of West Publishing with Thomson Corporation

Dear Mr. Conrath:

I am writing today to comment on the proposed consent order in the sale of West Publishing Company to the Thomson Corporation. The American Association of Law Libraries presented its views on the merger at an earlier stage of the proceeding in a letter to Ms. Anne Bingaman dated March 26, 1996. We appreciate the attention the Department has given to this issue, and we very much appreciate the effort the Department has made to respond to our concerns. Nonetheless, in light of the proposed settlement, we do wish submit some additional comments for your consideration.

The American Association of Law Libraries is a nonprofit educational organization headquartered in Chicago with nearly 5,000 members nationwide. Our members build legal and law-related collections in over 1,900 libraries, and they respond to the legal and governmental information needs of attorneys and law students, judges and legislators, and the general public. We are almost certainly the largest single identifiable consumer group for the products of the companies involved. As our immediate past-President, Patrick E. Kehoe, said when the merger was first announced: "the merger of Thomson and West will change legal publishing forever."

The American Association of Law Libraries remains neutral on the issue of the merger itself. In filing these comments A.A.L.L. does not wish to be understood as opposing the sale of West to Thomson, and nothing we say here should to be construed in that manner. Rather, the American Association of Law Libraries remains committed to the larger goal of ensuring the continuation of high quality legal information products at reasonable prices in a healthy competitive environment. With that general goal in mind, A.A.L.L. would like to comment on three aspects of the settlement including: the proposal to sell selected individual titles from the publishers' inventory, rather than selling off companies, the amount of the proposed license fee for the use of star pagination from West's National Reporter System, and the requirement in the license agreement that a licensee relinquish their legal right to challenge West's claim of copyright. We also want to reiterate our concern for the impact of the sale on competition in the online environment.

The viability of individual titles. The proposed settlement relies heavily on spinning off some 52 titles to maintain competition in the legal publishing industry. With those sales as the basis of the future competitive environment, it will to be essential that those titles to be able to survive in the marketplace.

From the beginning of this process, the members of American Association of Law Libraries have been concerned about the impact of the merger on their ability to choose among competing print products and their ability to obtain the benefits of competition in matters of product pricing and product quality (see letter to Anne Bingaman, March 26, 1996, pp. 2-5). The settlement is plainly responsive to those concerns, since it proposes to maintain the competitive environment by requiring the companies to sell off those individual products where the impact of the merger on competition would be the greatest.

Some members of our Association are concerned, however, about the decision to require the sale of individual titles rather than subsidiary companies. To them, it is not clear that individual titles will continue to to be viable entities in the market when separated from the larger organizations of which they have been a part.

First, the production of a complex legal title requires the existence of a substantial supporting infrastructure. Most obviously, it requires a trained and knowledgeable staff, skilled in the identification and analysis of legal developments, whether statutory or judicial, and skilled in the presentation of those developments in a format that is useful to attorneys. Although the settlement allows the purchaser to attempt to hire the staff that has been involved in the creation of the titles in question, it is by no means clear that staff would choose to leave a larger parent organization to follow an individual stand-alone title.

The supporting infrastructure also includes production, including design and layout, marketing and sales, computer support, and printing. Each of these operations is substantial and is frequently shared across product lines within a single company. Again, it is not clear that it is economically viable to establish this kind of production and printing support for a single title, or even for a small group of titles that have been split off from a larger company.

Second, at least some of the publications in question have long been an essential component of a larger system of legal research. The Total Client Service Library provides a system by which the many products of Lawyer's Coop have been integrated into a research system. Cross references among the products provide a helpful and seamless way for the lawyer to move from one Lawyer's Coop product to another, including the American Law Reports, American Jurisprudence, 2d, and other practice materials that are not being sold as part of the divestiture.

A booklet published by Lawyer's Coop in 1990 described Am Jur 2d, ALR and USCS as being "part of a comprehensive legal research system." (See A Student's Guide to Am Jur 2d, ALR and USCS, Lawyers Coop, 1990.) The booklet states: "The comprehensive legal research system published by Lawyers Cooperative Publishing covers everything from on-point cases in both state and federal jurisdictions, to principles of law, statutes, procedure, model forms, trial techniques ... in short, everything you need to handle almost any legal matter. And since it is fully cross-referenced, you can go quickly from one aspect of your matter to another with assurance that no aspect will to be overlooked."

They then list as part of the "system" some fourteen separate titles ranging from encyclopedias and form books to ALR, the USCS, and Lawyers Edition, to several services and texts on specialized legal topics. With extensive cross-referencing among these products, it is again not clear that one or two can to be pulled out, scrubbed clean of the value-added cross-referencing, and then be expected to stand alone in the market place. Pulled out of the system, they will be a different products, and the market may no long find them to to be so desirable or so valuable.

The American Association of Law Libraries would very much like to see further analysis on the issue of the viability of individual titles and they would like to receive some assurance that those titles will be able to continue to compete in the marketplace following the merger.

Pricing of the license for use of the West pagination. The Association is concerned about the pricing of the proposed license for the use of the pagination in the West Reporter system.

The Association has long believed that the system of citation to legal publications should to be in the public domain. In testimony on behalf of the American Association of Law Libraries in favor of H.R. 4426 in the 102d Congress, Professor Laura Gasaway stated: "Copyright protection should not extend to volume and page numbers of these materials for two reasons: because page numbers lack sufficient originality to merit protection, and [because] allowing one publisher to control the means of citation to important public domain materials gives that publisher the power to exclude others from the market. Such protection would become a mechanism by which one publisher could turn public domain materials into protected materials that they can control."

At the same hearing, the representative of Thomson Legal Publishing was even more forceful. Accompanied by a representative of Lawyers Cooperative, she argued that the copyright of legal citation information had led to the monopolization of the "publication of lower federal court opinions, statutory law in Illinois and Texas and elsewhere, and the appellate case law of many states."

The proposed license illustrates the problem. The American Association of Law Libraries welcomes the development of an open structure for the pricing of West's citation information. But the level of the pricing involved seems designed to accomplish precisely what the proponents of H.R. 4426 feared: exclusion of others from the marketplace. Nine cents does not sound like a great deal of money until one does the math. But when the numbers are multiplied out for some of the very large sets in the National Reporter System, the price seems to us to be significant. Such pricing could be a major barrier to using the data and entering the legal publishing market to anyone except a very large existing enterprise.

The Association does note that this issue could become moot or largely irrelevant if the courts and organs of legal scholarship would accept a medium neutral/vendor neutral system of citation, such as the one previously endorsed by this Association.

The Association takes no position on what the appropriate level of pricing ought to to be. Nonetheless, in view of the Association's interest in promoting a healthy competitive environment for access to legal information, we believe that the level ought to to be set such that a prospective entrepreneur can enter the market, and with a reasonable increment on its other costs add the system of pagination to its new product. The current proposal strikes us as excessive to meet that goal.

The requirement that a licensee give up a some of their legal rights. The Association believes that the license approved by the United States Department of Justice and the United States District Court for the District of Columbia should not contain a provision that requires the licensee to give up its legal right to contest West's claim of copyright in the system of pagination.

The proposed license agreement states in relevant part:

3.01. Copyrights. During the term of this Agreement, Licensee (I) shall respect and not contest the validity of the copyrights claimed by Licensor in Licensor's arrangements of case reports in NRS Reporters as expressed by NRS Pagination ...

We understand why West-Thomson would want such a provision as part of the agreement. However, in this case, the provision will have the approval of the U.S. Department of Justice and approval is now being sought from the United States District Court for the District of Columbia as well. We see no reason why those organs of justice should approve a provision requiring a licensee to give up a legal right when they sign the agreement.

We respectfully request that this provision to be stricken from the proposed license.

Online competition. The Association remains concerned about the impact of the merger on the market for online legal information.

In its earlier letter to the Department, the American Association of Law Libraries expressed concern about the impact the merger could have in the competition for online legal services, citing the need that LEXIS has to acquire source data from existing publications that will now to be under the sole control of its chief competitor. Insofar as the record shows, nothing has changed in this regard.

The Order does direct the sale of one legal database --Auto-Cite --and grants an option to extend the License Agreements for Investext, ASAP, and Predicasts, three non-legal databases. But nothing is said about access to other legal databases to which LEXIS might want access such as state statutory materials, American Law Reports Annotated, and other ancillary material such as the RIA Tax Coordinator. We worry that if one company is the sole source for certain important information, it could use that control to make its competitor's product less desirable and thereby squeeze it out of the market. In view of the fact that there are only two major competitors in the market for online legal information, we believe it is critical to address the issue of licensing, or equitable access to such sole source information, in the final order.

The American Association of Law Libraries appreciates the opportunity to comment again on the proposed merger of the two largest legal publishers. This change in the legal publishing landscape is almost certainly the most important development in the field that any of us will see during our careers. It is critical to do it in a way that maintains a competitive market for high quality legal information products at reasonable prices.

If we may to be of further assistance or answer any questions about any of these matters, I hope you will not hesitate to call upon me at (202) 662-9161.

Sincerely,

Robert L. Oakley
American Association of Law Libraries
Washington Affairs Representative