[Federal Register Volume 64, Number 12 (Wednesday, January 20, 1999)]
[Notices]
[Pages 3130-3131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1179]


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FEDERAL TRADE COMMISSION

[File No. 9910040]


ABB AB et al.; 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 March 22, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Pamela Taylor or Ann Malester, FTC/S-
2308, 601 Pa. Ave., N.W., Washington, D.C. 20580, (202) 326-2237 or 
326-2820.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 sixty (60) days. The following analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for January 8, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, N.W., Washington, 
D.C. 20580, either in person or by calling (202) 326-3627. Public 
comment is invited. Such comments or views will be considered by the 
Commission and will be available for inspection and copying at its 
principal office in accordance with Section 4.9(b)(6)(ii) of the 
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, 
subject to final approval, an agreement containing a proposed 
Consent Order from ABB AB and ABB AG (hereinafter collectively 
``ABB''), which is designed to remedy the anticompetitive effects 
resulting from ABB's acquisition of Elsag Bailey Process Automation 
N.V. (``Elsag Bailey''). Under the terms of the agreement, ABB will 
be required to divest the Analytical Division of Elsag Bailey's 
Applied Automation, Inc. subsidiary, which is involved in the 
manufacture and sale of process gas chromatographs and the research 
and development of process mass spectrometers, to a Commission-
approved buyer within six (6) months. If the sale of these assets is 
not made within six (6) months, the Commission may appoint a trustee 
to divest Elsag Bailey's entire Applied Automation, Inc. subsidiary.
    The proposed Consent Order has been placed on the public record 
for sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
proposed Consent Order and the comments received and will decide 
whether it should withdraw from the proposed Consent Order or make 
final the proposed Order.
    Pursuant to an October 26, 1998 cash tender offer, ABB agreed to 
acquire 100% of the issued and outstanding voting securities of 
Elsag Bailey for $1.1 billion. The proposed Complaint alleges that 
the acquisition, if consummated, would violate Section 7 of the 
Clayton Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the 
Federal Trade Commission Act, as amended, 15 U.S.C. Sec. 45, in the 
markets for process gas chromatographs and process mass 
spectrometers.
    Process gas chromatographs are analytical instruments used in 
process manufacturing applications to measure the chemical 
composition of a gas or a liquid by separating a sample into its 
individual components through selective chemical interaction or 
solubility, and measuring the separated components using a detector. 
ABB and Elsag Bailey are the world's two leading suppliers of 
process gas chromatographs.
    ABB is also one of the world's leading suppliers of process mass 
spectrometers. Process mass spectrometers are analytical instruments 
used in process manufacturing applications to determine the chemical 
composition of a gas or vapor stream by taking a sample, ionizing 
the sample, separating the ions for a particular atomic or molecular 
species by their mass to charge ration and measuring the 
concentrations using a detector. While Elsag Bailey does not 
currently manufacture process mass spectrometers, it is involved in 
the research and development of a process mass spectrometer which it 
plans to begin manufacturing and selling in 1999. Thus, Elsag Bailey 
is an actual potential competitor in the market for process mass 
spectrometers.
    The worldwide process gas chromatograph market is highly 
concentrated, and the proposed acquisition would substantially 
increase concentration in that market. The acquisition would result 
in a Herfindahl-Hirschman Index (``HHI'') of 4,764 points, which is 
an increase of 2,310 points over the pre-acquisition HHI level. The 
combined firm would have a market share of almost 70%. By 
eliminating competition between the top two competitors in this 
highly concentrated market, the proposed acquisition would allow ABB 
to unilaterally exercise market power, thereby increasing the 
likelihood that process gas chromatograph customers would be forced 
to pay higher prices and that innovation in the process gas 
chromatograph market would decrease.
    The worldwide process mass spectrometer market is also highly 
concentrated, with a pre-acquisition HHI of 4,150. Although Elsag

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Bailey does not currently manufacture and sell process mass 
spectrometers, it is involved in the research and development of a 
new mass spectrometer product, which it plans to introduce in 1999. 
It appears that the introduction of this product would result in 
increased competition in the process mass spectrometer market, 
leading to lower prices and increased innovation. ABB's proposed 
acquisition of Elsag Bailey would eliminate this significant source 
of future competition and leave the process mass spectrometer market 
highly concentrated for the foreseeable future.
    Substantial barriers to new entry exist in the process gas 
chromatograph and process mass spectrometer markets. A new entrant 
into either of these markets would need to undertake the difficult, 
expensive and time-consuming process of developing and testing a 
product, establishing a track record for product quality, and 
developing a service and support network. Because of the difficulty 
of accomplishing these tasks, new entry into either the process gas 
chromatograph or process mass spectrometer market, other than Elsag 
Bailey's imminent introduction of a process mass spectrometer, could 
not be accomplished in a timely manner and is therefore unlikely to 
deter or counteract the anticompetitive effects resulting from the 
transaction.
    The proposed Consent Order effectively remedies the 
acquisition's anticompetitive effects in the process gas 
chromatograph and process mass spectrometer markets by requiring ABB 
to divest the assets of the Analytical Division of Elsag Bailey's 
Applied Automation, Inc. subsidiary. Pursuant to the Consent 
Agreement, ABB is required to divest these assets no later than six 
(6) months from the date ABB signs the Consent Agreement. In the 
event that ABB fails to divest the assets of the Analytical Division 
within this six-month time frame, the Consent Agreement contains a 
``crown jewel'' provision which allows the Commission to appoint a 
trustee to divest Elsag Bailey's entire Applied Automation, Inc. 
subsidiary.
    In order to ensure that the acquirer of the divested assets has 
access to all of the employees currently involved in Elsag Bailey's 
process gas chromatograph and process mass spectrometer businesses, 
the Consent Agreement requires ABB to provide financial incentives 
for these individuals to accept employment with the acquirer. The 
Order also requires ABB to provide the Commission a report of 
compliance with the divestiture provisions of the Order within 
thirty (30) days following the date the Order becomes final, and 
every thirty (30) days thereafter until ABB has completed the 
required divestiture. Finally, an Agreement to Hold Separate signed 
by ABB requires that the Applied Automation Assets, which includes 
the Analytical Division Assets, be operated independently of ABB 
until the divestiture required by the Order is completed.

    The purpose of this analysis is to facilitate public comment on the 
proposed Order, and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.

    By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-1179 Filed 1-19-99; 8:45 am]
BILLING CODE 6750-01-M