[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74582-74584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31713]


-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 031 0097]


General Electric Company; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

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: [email protected], 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: [email protected]. 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