[Federal Register: December 24, 2003 (Volume 68, Number 247)]
[Notices]
[Page 74582-74584]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24de03-87]
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FEDERAL TRADE COMMISSION
[File No. 031 0097]
General Electric Company; Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before January 20, 2004.
ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW.,
Washington, DC 20580. Comments filed in electronic form should be
directed to: consentagreement@ftc.gov, as prescribed in the
Supplementary Information section.
FOR FURTHER INFORMATION CONTACT: Joanne Lewers, FTC, Bureau of
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202)
326-2667.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of
the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the
[[Page 74583]]
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the FTC Home Page (for December 18, 2003),
on the World Wide Web, at http://www.ftc.gov/os/2003/12/index.htm. A
paper copy can be obtained from the FTC Public Reference Room, Room
130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in
person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. Comments filed in paper form should
be directed to: FTC/Office of the Secretary, Room 159-H, 600
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains
nonpublic information, it must be filed in paper form, and the first
page of the document must be clearly labeled ``confidential.'' Comments
that do not contain any nonpublic information may instead be filed in
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as
part of or as an attachment to e-mail messages directed to the
following e-mail box: consentagreement@ftc.gov. Such comments will be
considered by the Commission and will be available for inspection and
copying at its principal office in accordance with Sec. 4.9(b)(6)(ii)
of the Commission's Rules of Practice, 16 CFR 4.9(b)(6)(ii)).
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from General Electric Company (``GE''), which is designed
to remedy the anticompetitive effects resulting from GE's acquisition
of the nondestructive testing (``NDT'') business group of Agfa-Gevaert
N.V. (``Agfa''). Under the terms of the Consent Agreement, GE will be
required to divest its Panametrics ultrasonic NDT business to R/D Tech,
Inc. (``R/D Tech''). The divestiture will take place no later than
twenty (20) days from the date GE consummates its acquisition of the
Agfa NDT business. The Consent Agreement also includes an Order to
Maintain Assets that requires GE to preserve the Panametrics ultrasonic
NDT business as a viable, competitive and ongoing operation until the
divestiture is achieved.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement or make
it final.
Pursuant to a stock and asset purchase agreement dated January 17,
2003, and amended September 19, 2003, GE proposes to acquire Agfa's NDT
business group (``Proposed Acquisition''). The total value of the
Proposed Acquisition is approximately $437 million. The Commission's
Complaint alleges that the Proposed Acquisition, if consummated, would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.
45, by lessening competition in the U.S. markets for the research,
development, manufacture, and sale of certain types of ultrasonic NDT
equipment, specifically: (1) Portable flaw detectors, (2) corrosion
thickness gages, and (3) precision thickness gages.
II. The Parties
GE is a diversified technology and services company headquartered
in Fairfield, CT. GE is made up of a broad range of primary business
units, each with its own number of divisions. GE Aircraft Engines, the
business unit that proposes to acquire Agfa's NDT assets, is the
world's leading manufacturer of jet engines for military and civil
aircraft. Another business unit of GE, GE Power Systems, offers NDT
equipment through the NDT Division of Panametrics, Inc. With its
headquarters and manufacturing operations in Waltham, MA, Panametrics
researches, designs, manufactures, and sells ultrasonic NDT equipment
and systems.
Headquartered in Mortsel, Belgium, Agfa is one of the world's
leading imaging companies. Agfa researches, develops, produces, and
sells a wide variety of NDT equipment through its Krautkramer, Pantak,
Seifert, and RADView subsidiaries. Agfa offers a complete range of
ultrasonic NDT equipment, including portable and stationary
instruments, customized testing machines and accessories, as well as
application solutions, training and service.
III. Ultrasonic NDT Equipment
GE, through its Panametrics subsidiary, and Agfa, through its
Krautkramer subsidiary, are the two largest suppliers of ultrasonic NDT
equipment in the United States. Ultrasonic NDT equipment includes,
among other products: (1) Portable flaw detectors; (2) corrosion
thickness gages; and (3) precision thickness gages. Ultrasonic NDT
equipment is used to inspect the structure and tolerance of materials
without damaging the materials or impairing their future usefulness.
Manufacturers and end users in a variety of industries use ultrasonic
NDT equipment for quality control and safety purposes. Customers of
these products purchase the type of ultrasonic NDT equipment that is
best-suited for the inspection they need to conduct and, because of the
unique performance characteristics of each type of equipment, there is
little opportunity to switch to alternative equipment. In fact, even a
price increase of five to ten percent for portable flaw detectors,
corrosion thickness gages or precision thickness gages would not likely
cause a significant number of customers for these products to switch to
any alternative product.
The United States is the appropriate geographic market for portable
flaw detectors, corrosion thickness gages and precision thickness gages
in which to analyze the competitive effects of the Proposed
Acquisition. Because ultrasonic NDT equipment frequently needs to be
calibrated and repaired to ensure accuracy, customers prefer to
purchase from suppliers with local service and support. Furthermore,
customers tend to purchase from companies with a proven reputation for
accurate and reliable equipment, and are reluctant to switch to a new
company that does not have a proven track record for providing accurate
and reliable equipment. Foreign suppliers that have not established the
necessary service and support networks, brand reputation, and customer
acceptance in the U.S. are not effective competitors for U.S. customers
and would not be able to constrain a price increase for portable flaw
detectors, corrosion thickness gages or precision thickness gages in
the U.S.
The U.S. markets for portable flaw detectors, corrosion thickness
gages, and precision thickness gages are all highly concentrated. If
the Proposed Acquisition is consummated, GE's market share would exceed
70 percent in each of the U.S. markets for: (1) Portable flaw
detectors; (2) corrosion thickness gages; and (3) precision thickness
gages. In each of these markets, GE and Agfa are the two largest
suppliers. For many customers, GE and Agfa are the two top choices when
considering a supplier of portable flaw detectors, corrosion thickness
gages and precision thickness gages. By eliminating competition between
these two leading suppliers, the Proposed Acquisition would allow GE to
exercise
[[Page 74584]]
market power unilaterally, thereby increasing the likelihood that
purchasers of portable flaw detectors, corrosion thickness gages and
precision thickness gages would be forced to pay higher prices and that
innovation in these markets would decrease.
Significant impediments to new entry exist in each of the U.S.
markets for portable flaw detectors, corrosion thickness gages and
precision thickness gages. First, a new entrant would need to devote
significant time and expense to researching and developing a product.
Second, a new entrant must undertake the lengthy and costly process of
establishing a track record of reliability and accuracy for its
product. This track record is critical to customers because ultrasonic
NDT equipment is relied upon to ensure the quality and performance of
their products. Finally, a new supplier of portable flaw detectors,
corrosion thickness gages or precision thickness gages must spend a
great deal of time and money to develop a broad service and support
network that customers depend upon. For these reasons, new entry into
the markets for portable flaw detectors, corrosion thickness gages and
precision thickness gages would not be accomplished in a timely manner
even if prices increased substantially after the Proposed Acquisition.
Additionally, new entry into the markets for portable flaw detectors,
corrosion thickness gages, and precision thickness gages is unlikely to
occur because the costs of entering the markets are high relative to
the limited sales opportunities available to new entrants.
IV. The Consent Agreement
The Consent Agreement effectively remedies the acquisition's
anticompetitive effects in the U.S. markets for the research,
development, manufacture, and sale of portable flaw detectors,
corrosion thickness gages, and precision thickness gages by requiring
GE to divest its worldwide Panametrics ultrasonic NDT business.
Pursuant to the Consent Agreement, the Panametrics ultrasonic NDT
business will be divested to R/D Tech. The divestiture will take place
no later than twenty (20) days from the date GE consummates its
acquisition. If the Commission determines that R/D Tech is not an
acceptable buyer or that the manner of the divestiture is not
acceptable, GE must unwind the sale and divest the Panametrics
ultrasonic NDT business to a Commission-approved buyer within ninety
(90) days. Should GE fail to accomplish the divestiture within the time
and in the manner required by the Consent Agreement, the Commission may
appoint a trustee to divest the Panametrics ultrasonic NDT business
subject to Commission approval. The trustee will have the exclusive
power and authority to accomplish the divestiture within twelve (12)
months of being appointed, subject to any necessary extensions by the
Commission.
The Commission's goal in evaluating possible purchasers of divested
assets is to maintain the competitive environment that existed prior to
the acquisition. A proposed buyer of divested assets must not itself
present competitive problems. The Commission is satisfied that R/D Tech
is a well-qualified acquirer of the divested assets. R/D Tech, a
private corporation headquartered in Quebec, Canada, researches,
designs, manufactures and sells eddy current, acoustic emission, and
phased array instruments for manual and automated NDT inspections. With
U.S. offices located in Massachusetts, North Carolina, Pennsylvania,
and Texas, R/D Tech has the resources, related experience and
capabilities to ensure that it will become an effective competitor in
the markets for portable flaw detectors, corrosion thickness gages and
precision thickness gages. R/D Tech has the necessary industry
expertise to replace the competition that existed prior to the Proposed
Acquisition. Furthermore, R/D Tech does not pose separate competitive
issues as the acquirer of the divested assets because R/D Tech does not
produce, or is not a major supplier of, any of the product lines being
acquired.
The Consent Agreement contains several provisions designed to
ensure that the divestiture of the Panametrics NDT business is
successful. For a period of one (1) year from the date the divestiture
of the business is accomplished, GE is prohibited from soliciting or
inducing any employees or agents of the ultrasonic NDT equipment
business involved in the divestiture to terminate their employment with
R/D Tech. The Consent Agreement also requires that, post-divestiture,
any remaining GE employees with access to confidential business
information related to the Panametrics ultrasonic NDT business sign a
confidentiality agreement. Pursuant to this agreement, employees will
be required to maintain confidential business information as strictly
confidential, including the nondisclosure of such confidential
information to other GE employees. Finally, the Decision and Order
allows the Commission to appoint an Interim Monitor, if necessary, to
assure that GE complies with all of its obligations and performs all of
its responsibilities as required by the Consent Agreement.
The Consent Agreement also contains an Order to Maintain Assets.
This will serve to protect the viability, marketability and
competitiveness of the Panametrics ultrasonic NDT business until it is
divested to R/D Tech. The Order to Maintain Assets became effective
upon the date the Commission accepted the Consent Agreement for
placement on the public record and will remain in effect until GE
successfully divests the Panametrics ultrasonic NDT business according
to the terms of the Decision and Order.
In order to ensure that the Commission remains informed about the
status of the Panametrics ultrasonic NDT business pending divestiture,
and about the efforts being made to accomplish the divestiture, the
Consent Agreement requires GE to file periodic reports with the
Commission until the divestiture is accomplished.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement, and it is not intended to constitute an official
interpretation of the proposed Decision and Order or the Order to
Maintain Assets, or to modify their terms in any way.
By direction of the Commission, Chairman Muris not participating
and Commissioner Harbour recused.
Donald S. Clark,
Secretary.
[FR Doc. 03-31713 Filed 12-23-03; 8:45 am]
BILLING CODE 6750-01-P