[Federal Register Volume 66, Number 73 (Monday, April 16, 2001)]
[Notices]
[Pages 19500-19501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9350]


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FEDERAL TRADE COMMISSION

[File No. 001 0212]


Siemens AG, 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 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 May 9, 2001.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Yolanda Gruendel, FTC/S-2308, 600 
Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-2971.

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 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 complaint. 
An electronic copy of the full text of the consent agreement package 
can be obtained from the FTC Home Page (for April 6, 2001), on the 
World Wide Web, at ``http://www.ftc.gov/os/2001/04/index.htm.'' A paper 
copy can be obtained from the FTC Public Reference Room, Room H-130, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or 
by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW., 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. 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 Agreement Containing Consent Order To Aid Public 
Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Siemens AG (``Siemens'') and Vodafone Group Plc 
(``Vodafone''), which is designed to remedy the anticompetitive effects 
resulting from Siemen's acquisition of certain voting securities of 
Atecs Mannesmann AG (``Atecs''), a subsidiary of Vodafone. Atecs is 
comprised of Mannesmann Rexroth AG (``Rexroth''), Mannesmann Dematic AG 
(``Dematic''), Mannesmann Demag Krauss-Maffei Kunststofftechnik GmbH 
(``Demag Krauss-Maffei''), Mannesmann VDO AG (``VDO'') and Mannesmann 
Sachs AG (``Sachs''). Under the terms of the Consent Agreement, Siemens 
and Vodafone will be required to divest Vodafone's Mannesmann Dematic 
Postal Automation business (``MDPA business'') to Northrop Grumman 
Corp. (``Northrop'') no later than ten (10) days from the date Siemens 
consummates its acquisition.\1\
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    \1\ Because Vodafone will no longer have control over the assets 
to be divested following the acquisition, its obligations under the 
Consent Agreement terminate at the time the acquisition is 
consummated.
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    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for the reception of comments by 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 final the Decision and Order.
    Pursuant to an April 14, 2000 Share Purchase Agreement and related 
amendments, Siemens agreed to acquire just over 50% of the voting 
securities of Atecs from Vodafone, and subsequently to purchase the 
remainder of the Atecs voting securities through the exercise of a 
``Put-Call-Option.'' The total value of the transaction is expected to 
exceed $9 billion. Under the terms of the agreement, Siemens will 
operate and retain ownership of four Atecs subsidiaries, Dematic, VDO, 
Demag Krauss-Maffei and Sachs. Robert Bosch GmbH will lease from 
Siemens the right to operate the fifth Atecs subsidiary, Rexroth. The 
Commission's complaint alleges that the 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, 15 U.S.C. 45, in the 
market for the research, development, manufacture, integration, sale 
and service of postal automation systems.
    Siemens and Vodafone, through its Atecs Dematic subsidiary, are the 
two leading suppliers of postal automation systems in the world. Public 
postal services throughout the world purchase these systems to process 
letter mail and flat mail, which includes over-sized envelopes, 
catalogs, and magazines. These highly integrated systems are able to 
cancel stamps or meter marks, read addresses using optical character 
recognition technology, translate

[[Page 19501]]

addresses into destination barcodes, and use these barcodes to sort 
mail by country, state, city and/or street. Postal automation systems 
reduce the amount of labor needed to reliably handle the millions of 
pieces of mail received daily by public postal services.
    The world market for postal automation systems is highly 
concentrated, and the proposed acquisition would allow Siemens, the 
largest supplier of these systems, to purchase its closest competitor. 
Siemens and Dematic regularly bid against each other for significant 
public postal contracts, and they supply postal automation systems to 
virtually all of the major public postal services in the world, 
including the United States Postal Service. By eliminating competition 
between these two leading suppliers, the proposed acquisition would 
allow Siemens to exercise market power unilaterally, thereby increasing 
the likelihood that purchasers of postal automation systems would be 
forced to pay higher prices and that innovation and service levels in 
the market would decrease. Siemens's proposed acquisition of Vodafone 
would also increase the likelihood that the remaining suppliers of 
postal automation systems could collude to the detriment of customers 
in the market for postal automation systems.
    Significant impediments to new entry exist in the postal automation 
systems market. Customers require highly sophisticated and reliable 
systems in order to process the large volume of mail they handle daily. 
Consequently, customers do not consider new suppliers of postal 
automation systems unless they first establish a track record of 
successfully delivering smaller component parts. A supplier must then 
develop a competitive system and have the resources to participate in 
the very lengthy competitions typical in this market. These steps are 
difficult, expensive and time-consuming. For this reason, new entry 
into the market for postal automation systems would not be accomplished 
in a timely manner or be likely to occur at all even if prices 
increased substantially after the proposed acquisition.
    The Consent Agreement effectively remedies the acquisition's 
anticompetitive effects in the postal automation systems market by 
requiring Siemens and Vodafone to divest the MDPA business. Pursuant to 
the Consent Agreement, Siemens and Vodafone are required to divest the 
MDPA business to Northrop no later than ten (10) days from the date 
Siemens consummates its acquisition of certain voting securities of 
Vodafone. If the Commission determines that Northrop is not an 
acceptable buyer or that the manner of divestiture is not acceptable, 
Siemens and Vodafone must divest the MDPA business to a Commission-
approved buyer within three (3) months from the date the Order becomes 
final. Should they fail to do so, the Commission may appoint a trustee 
to divest the MDPA business.
    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 Northrop 
is a well-qualified acquirer of the divested assets. Northrop is a 
publicly-traded corporation and a leading systems integrator. It has 
the necessary industry expertise to replace the competition that 
existed prior to the proposed acquisition. Furthermore, Northrop poses 
no separate competitive issues as the acquirer of the divested assets.
    The Consent Agreement contains several provisions designed to 
ensure that the divestiture of the MDPA business is successful. The 
Consent Agreement requires Siemens and Vodafone to provide incentives 
to certain employees to continue in their positions until the 
divestiture is accomplished. Under certain circumstances, Siemens is 
also required to provide additional incentives to key employees to 
accept employment, and remain employed, by the acquirer. For a period 
of one (1) year from the date the divestiture of the MDPA business is 
accomplished, Siemens and Vodafone are prohibited from soliciting or 
inducing any employees or agents of the MDPA business to terminate 
their employment with MDPA. Furthermore, for a period of four (4) 
months following the date the divestiture is accomplished, Siemens and 
Vodafone are prohibited from hiring any employees or agents of MDPA. 
Siemens and Vodafone are also prohibited from soliciting MDPA customers 
for a period of two (2) years from the date Siemens signs its 
divestiture agreement with the acquirer of the MDPA business. Finally, 
Siemens is not permitted to disclose to any person or use any 
information it obtains relating to the MDPA business.
    In order to ensure that the Commission remains informed about the 
status of the MDPA business pending divestiture, and about the efforts 
being made to accomplish the divestiture, the Consent Agreement 
requires Siemens and Vodafone to file reports with the Commission 
within thirty (30) days of the date they sign the Consent Agreement, 
and periodically thereafter, 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 Consent Agreement or to modify in any way its 
terms.

    By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 01-9350 Filed 4-13-01; 8:45 am]
BILLING CODE 6750-01-M