[Federal Register Volume 69, Number 183 (Wednesday, September 22, 2004)]
[Notices]
[Pages 56766-56769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21262]


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FEDERAL TRADE COMMISSION

[File No. 041 0106]


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 October 14, 2004.

ADDRESSES: Comments should refer to ``General Electric Company, File 
No. 041 0106,'' to facilitate the organization of comments. A comment 
filed in paper form should include this reference both in the text and 
on the envelope, and should be mailed or delivered to the following 
address: Federal Trade Commission/Office of the Secretary, Room H-159, 
600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
Supplementary Information section. The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form (except comments containing any 
confidential material) should be sent to the following email box: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Sean Dillon, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3575.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), 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 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 September 15, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/09/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.

[[Page 56767]]

    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before October 14, 2004. Comments should refer to ``General 
Electric Company, File No. 041 0106,'' to facilitate the organization 
of comments. A comment filed in paper form should include this 
reference both in the text and on the envelope, and should be mailed or 
delivered to the following address: Federal Trade Commission/Office of 
the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 
20580. If the comment contains any material for which confidential 
treatment is requested, it must be filed in paper (rather than 
electronic) form, and the first page of the document must be clearly 
labeled ``Confidential.'' \1\ The FTC is requesting that any comment 
filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form should be sent to the following email 
box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission has accepted, subject to final 
approval, an Agreement Containing Consent Orders from General Electric 
Company, which is designed to remedy the anticompetitive effects 
resulting from GE's acquisition of InVision Technologies, Inc. Under 
the terms of the Consent Agreement, GE will be required to divest 
InVision's nondestructive testing (``NDT'') business, including 
InVision's YXLON NDT subsidiaries, within six months after the date GE 
signed the Consent Agreement. The Consent Agreement also includes an 
Order to Hold Separate and Maintain Assets that requires GE to preserve 
the YXLON 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 purchase agreement dated March 15, 2004, GE 
proposes to acquire InVision (``Proposed Acquisition''). The total 
value of the Proposed Acquisition is approximately $900 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. market for 
the research, development, manufacture, and sale of certain types of x-
ray NDT and inspection equipment, specifically: (1) Standard x-ray 
cabinets, (2) x-ray NDT and inspection systems equipped with automated 
defect recognition software (``ADR-capable x-ray systems''), and (3) x-
ray generators capable of producing energy levels higher than 350 
kilovolts (``high-energy x-ray generators'').

II. The Parties

    GE is a diversified technology and services company headquartered 
in Fairfield, Connecticut. GE is made up of a broad range of primary 
business units, each with its own divisions. GE Infrastructure, the 
business unit that proposes to acquire InVision, oversees the 
operations of GE's security and sensing, water technologies, and 
automation enterprises. Another business unit of GE, GE Inspection 
Technologies, designs, manufactures, and sells various NDT and 
inspection equipment, including x-ray, ultrasound and eddy current 
equipment under the Seifert, Pantak, Krautkramer and Hocking brand 
names. GE Inspection Technologies is headquartered in H[uuml]rth, 
Germany. The company's NDT and inspection products serve customers in 
the aerospace, energy, petrochemical and automotive industries.
    Headquartered in Newark, California, InVision is the leading 
supplier of explosive detection systems (``EDS'') to the U.S. 
government for civil aviation security. InVision's EDS devices are used 
at airports for screening checked passenger baggage. InVision also 
offers industrial NDT and inspection equipment through its YXLON 
subsidiary. YXLON, headquartered in Hamburg, Germany, was acquired by 
InVision in 2003. YXLON designs, manufactures and sells x-ray NDT and 
inspection equipment for use in a wide range of industries, including 
the aerospace, automotive, and security industries.

III. X-Ray NDT and Inspection Equipment

    GE and InVision, through its YXLON subsidiary, are the two largest 
suppliers of x-ray NDT and inspection equipment in the United States. 
X-ray NDT and inspection equipment includes, among other products: (1) 
Standard x-ray cabinets; (2) ADR-capable x-ray systems; and (3) high-
energy x-ray generators. X-ray NDT and inspection equipment is used to 
inspect the structure and tolerance of materials, or identify objects 
inside materials, without damaging the materials or impairing their 
future usefulness.
    Standard x-ray cabinets are x-ray NDT and inspection systems with 
generic configurations and uniform prices. Standard x-ray cabinets are 
multi-purpose inspection systems, as opposed to customized systems that 
are designed for particular customer needs, or application-specific x-
ray systems utilized for specific tasks such as tire or airbag 
inspection. A single standard x-ray cabinet is capable of inspecting a 
variety of products as diverse as, for example, metal die-castings, 
turbine engine parts, steel components, plastics and ceramics.
    ADR-capable x-ray systems are inspection systems that utilize 
automated defect recognition, or ADR, software that completely 
automates the inspection process. Unlike traditional x-ray NDT and 
inspection systems that require a manual operator, ADR-capable x-ray 
systems eliminate the need to make subjective human decisions regarding 
the objects being inspected. The benefits of ADR-capable x-ray systems 
for customers are improved

[[Page 56768]]

inspection quality, increased throughput and decreased labor costs.
    High-energy x-ray generators are components of x-ray NDT and 
inspection systems that generate the power needed to produce an x-ray 
beam and display an x-ray image. There are different categories of x-
ray generators that are distinguished by the amount of power they can 
produce. High-energy x-ray generators produce levels of power 
sufficient for x-rays to penetrate dense materials, such as steel, that 
other types of x-ray generators cannot produce.
    Manufacturers and end users in a variety of industries use standard 
x-ray cabinets, ADR-capable x-ray systems, and high-energy x-ray 
generators for quality control and safety purposes. Purchasers of these 
products purchase the type of x-ray NDT and inspection equipment that 
is best-suited for their application 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 standard x-ray cabinets, ADR-
capable x-ray systems, or high-energy x-ray generators 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 standard 
x-ray cabinets, ADR-capable x-ray systems, and high-energy x-ray 
generators in which to analyze the competitive effects of the Proposed 
Acquisition. Because x-ray NDT and inspection equipment frequently 
needs to be serviced and repaired to ensure proper operation, customers 
purchase from suppliers with local service and support networks. 
Furthermore, customers 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 such 
service and support. Foreign suppliers that have not established the 
necessary service and support networks, brand reputation, and customer 
acceptance in the United States are not effective competitors for U.S. 
customers and would not be able to constrain a price increase for 
standard x-ray cabinets, ADR-capable x-ray systems, or high-energy x-
ray generators in the United States.
    The U.S. markets for standard x-ray cabinets, ADR-capable x-ray 
systems, and high-energy x-ray generators are all highly concentrated. 
GE and InVision are the two largest suppliers in each of these markets. 
If the Proposed Acquisition is consummated, GE would become the 
dominant supplier in each of these markets. For many customers, GE and 
InVision are the top two choices when considering a supplier of 
standard x-ray cabinets, ADR-capable x-ray systems, or high-energy x-
ray generators. By eliminating competition between these two leading 
suppliers, the Proposed Acquisition would allow GE to unilaterally 
exercise market power, thereby increasing the likelihood that 
purchasers of standard x-ray cabinets, ADR-capable x-ray systems, and 
high-energy x-ray generators would be forced to pay higher prices and 
that innovation in these markets would decrease.
    Significant impediments to new entry exist in the U.S. markets for 
x-ray NDT and inspection equipment. First, a new entrant would need to 
devote significant time and expense researching and developing a 
product. Second, a new entrant must undertake the lengthy and costly 
process of establishing a track record of reliability for its product. 
This track record is critical to customers because x-ray NDT and 
inspection equipment is relied upon to ensure the quality, performance, 
and safety of their products. Finally, a new supplier of standard x-ray 
cabinets, ADR-capable x-ray systems, and high-energy x-ray generators 
would have to spend a great deal of time and money to develop a broad 
service and support network upon which customers can rely. For these 
reasons, new entry into the markets for standard x-ray cabinets, ADR-
capable x-ray systems, and high-energy x-ray generators is not likely 
to occur in a timely manner even if prices increased substantially 
after the Proposed Acquisition. Additionally, new entry into these 
markets is unlikely because the costs of entering these markets are too 
high relative to the limited sales opportunities available to new 
entrants.

IV. The Consent Agreement

    The Consent Agreement effectively remedies the Proposed 
Acquisition's anticompetitive effects in the U.S. markets for the 
research, development, manufacture, and sale of standard x-ray 
cabinets, ADR-capable x-ray systems, and high-energy x-ray generators 
by requiring GE to divest InVision's YXLON NDT business. Pursuant to 
the Consent Agreement, GE is required to divest the YXLON NDT business, 
including the YXLON NDT subsidiaries, to a buyer, at no minimum price, 
within six (6) months from the date GE signed the Consent Agreement. 
The acquirer of the YXLON NDT business must receive the prior approval 
of the Commission. The Commission's goal in evaluating possible 
purchasers of divested assets is to ensure that the competitive 
environment that existed prior to the acquisition is maintained. A 
proposed acquirer of divested assets must not itself present 
competitive problems.
    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 these assets. If approved, the trustee 
would have the exclusive power and authority to accomplish the 
divestiture within six (6) months of being appointed, subject to any 
necessary extensions by the Commission. The Consent Agreement requires 
GE to provide the trustee with access to information related to the 
YXLON NDT business as necessary to fulfill his or her obligations.
    The Order to Hold Separate and Maintain Assets that is included in 
the Consent Agreement requires that GE hold separate and maintain the 
viability of the YXLON NDT business as a competitive operation until 
the business is transferred to the Commission-approved acquirer. 
Furthermore, it contains measures designed to ensure that no material 
confidential information is exchanged between GE and the YXLON NDT 
business (except as otherwise provided in the Consent Agreement) and 
provisions designed to prevent interim harm to competition in each x-
ray NDT and inspection equipment market pending divestiture. The Order 
to Hold Separate and Maintain Assets provides that the Commission may 
appoint a Hold Separate Trustee who is charged with the duty of 
monitoring GE's compliance with the Consent Agreement. Pursuant to that 
Order, the Commission has appointed Hartmut G. Grossmann of H. 
Grossmann Consulting LLC as Hold Separate Trustee to oversee the YXLON 
NDT business prior to its divestiture and to ensure that GE complies 
with its obligations under the Consent Agreement. Mr. Grossmann, who 
holds law degrees from both the United States and Germany, has more 
than 25 years of experience advising and managing companies both inside 
and outside of Germany. He has held several key management positions, 
including chief counsel, managing director, and chief operating 
officer, and during his professional career has developed experience 
related to corporate governance, litigation, business integration and 
restructuring, and regulatory compliance matters.
    In order to ensure that the Commission remains informed about the 
status of the YXLON NDT business pending divestiture, and about the 
efforts being made to accomplish the divestiture, the Consent Agreement 
requires GE to file periodic reports with

[[Page 56769]]

the Commission until the divestiture is accomplished.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and 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, Commissioner Harbour recused, 
and Commissioner Leibowitz not participating.
Donald S. Clark,
Secretary.
[FR Doc. 04-21262 Filed 9-21-04; 8:45 am]
BILLING CODE 6750-01-P