ARCHIVED: Proposed Sale of Shepard's to Times Mirror and Reed-Elsevier

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September 13, 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 Sale of Shepard's to Times Mirror and Reed-Elsevier

Dear Mr. Conrath:

I am writing today to comment on the proposed sale of Shepard's to the Times Mirror Co. and Reed Elsevier. For over a century Shepard's has published a unique set of products relied on by lawyers throughout the nation to validate and update their research. The sale of Shepard's to one of the two major competitors in the online information market will significantly change the balance in the marketplace. That impact on the market raises serious questions about the anti-competitive effect of the sale.

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.

The American Association of Law Libraries does not oppose the sale of Shepard's to Times Mirror and Reed Elsevier. Rather, the goal of the Association in this matter is to work with you towards the larger goal of assuring 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 the significance of the sale to legal researchers and to express its concern about the potential impact of the sale on competition in the online environment.


    Shepard's is a unique resource that is essential for high quality legal research.

Shepard's began operations over a century ago through the printing of gummed stickers that attorneys could put in the margins of printed case reporters in Illinois to keep them up to date with what had happened to any particular case since it was issued. This innovation was so successful that it grew to the point where gummed stickers were no longer practical and the data was compiled into books. It has now become an essential part of legal research, and every law student is taught that the use of Shepard's is vital to their research. In the textbook How to Find the Law, for example, Professor Morris L. Cohen and Professor Robert C. Berring underlined the importance of using Shepard's:


    When you have found the statute which governs your legal problem, and the cases which have interpreted and applied that statute, one further task remains before your research may be considered complete. You must now ascertain the current authority of your statute and cases .... Nothing can be more devastating to a lawyer's case -- and professional reputation -- than to have opposing counsel inform the court that a statute cited has been repealed or adversely construed, or that the cases relied upon have been overruled, limited, or otherwise so treated by subsequent opinions that they no longer constitute authority for the argument stated. Such a disaster is avoided by the use of a tool called Shepard's Citation's... (Cohen and Berring, How to Find the Law, 8th ed. 13 (West, 1983).)

    A lawyer who neglects this step in the research process may base arguments on cases subsequently reversed or limited in scope, thereby risking embarrassment and practicing law incompetently. In a recent federal case, defense counsel failed to inform the court that a case on which it relied had been specifically overruled and was "admonished that diligent research,, which includes Shepardizing cases, is a professional responsibility." (Cohen and Berring How to Find the Law, 9th ed. 55, (West 1989), citing Cimino v. Yale University, 638 F.Supp. 952, 959 nt.7 (D.Conn. 1986).)

Shepard's has reached this level of importance to the legal research process because it is a unique tool that provides essential information. Over the years there have been other methods of ascertaining later developments in a case, including most recently Autocite and Instacite, both of which are online citators. Autocite and Instacite are provided by LEXIS and WESTLAW, respectively. None of the alternate methods is as comprehensive as Shepard's, and for that reason, none can replace it. Autocite and Instacite, for example, focus only on cases which have a precedential impact on the decision being verified. Shepard's remains the means to find all later cases citing a decision.


    For many years, Shepard's has been independent of the publishers of primary legal information to which the Shepard's system refers. Even as they have adopted LEXIS and WESTLAW as channels for the distribution of their information, their neutrality has been maintained by the use of both systems for that purpose.

For most of its corporate life, Shepard's has been independent of the publishers of primary legal information. For many years, it had no other products beyond its primary product line of citators, and it was not directly affiliated with any other publisher. Its citators referred to state and Federal reporters from a number of publishers, the U.S. and state codes, administrative materials, and law reviews. Because of the independence of Shepard's, no single primary law publisher could direct a change in the coverage or scope of the citators to give itself a competitive edge. Such independence and neutrality have been a key part of what has given Shepard's the unique position of authority described above.

In more recent years, Shepard's was sold to McGraw Hill. Still, Shepard's remained independent of other legal publishers, and although it expanded its offerings of texts and treatises, the core product line remained essentially unchanged.

During this period, however, LEXIS and WESTLAW continued to expand the market for online legal information, and Shepard's began to make its information available through both of the two major online systems. No longer could it be said that Shepard's was completely independent; now, it was using the systems of these other two dominant legal publishers as a major distribution channel. Nonetheless, they retained their essential neutrality by distributing their data through both of the two major systems. Although we are not in a position to estimate the percentage of Shepard's sales that comes through the online systems, we do observe as librarians that today a significant amount of Shepardizing is done online. Indeed, in some libraries, it seems that virtually all Shepardizing is done online, and some libraries have, as a result, cancelled their subscriptions to the paper versions of the state and regional citators.


    A.A.L.L. is concerned about maintaining competition in the online legal information marketplace. The sale of Shepard's to one of the two major competitors in that market gives that competitor substantially increased power in the marketplace, and some steps should be taken to assure equitable access to the information and continued competititon in the online environment.

The sale of Shepard's will put it under the direct control of LEXIS, one of the two major competitors in the online information environment. In view of the unique and essential nature of the information, A.A.L.L. is concerned now, as we have also been concerned in the past, about giving one of two competitors monopoly power over essential information. In a letter written to you in another proceeding, we stated:

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.

LEXIS could, for example, make a decision to become the sole provider of the Shepard's database and to withdraw its availability to other providers. Such a step would put WESTLAW (and potentially others) at a serious disadvantage. It would mean that no matter which system a user preferred, before they could complete their work, they would have to turn to LEXIS for access to the Shepard's database. While this might be a boon to LEXIS, it would drive up the costs to users, who would either have to pay for two systems or migrate to the monopoly provider, which could, in turn, drive up its prices.

Furthermore, if there were only one source for this information, the bidding process by which many offices -- especially those in Federal and state agencies -- identify and secure a legal research system, would effectively preclude any other company from competing. The request for a proposal would almost certainly stipulate that to be chosen, a legal research system would have to provide access to Shepard's. Without that capability, any other company would be disadvantaged and would almost certainly be out of the running at the outset.


    The Department of Justice should ensure that the sale goes forward under terms and conditions that permit continued reasonable competition in the marketplace.

The American Association of Law Libraries takes no position on the nature of the remedy for the concerns we have identified in this letter. We do hope the Department will give serious attention to these considerations and will develop solutions to minimize the anti-competitive effects of the sale.

One solution might be to extend the terms of existing contracts for the Shepard's database for a specified period. Such a solution would help to mitigate, but not eliminate, the concerns of the Association. In any case, the Association believes that to avoid the anti-competitive impact of the sale, there must be some guarantee of equitable access to the Shepard's data at reasonable royalty rates, and we hope the Department will work with the parties to achieve that result.

Thank you very much for your time and attention on this issue. This is clearly a watershed moment in the future of legal information. If I may be of any help to you whatsoever, as you work through these issues, please do not hesitate to call upon me at (202) 662-9160.


Robert L. Oakley