[Federal Register Volume 78, Number 144 (Friday, July 26, 2013)]
[Notices]
[Pages 45194-45196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17947]


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FEDERAL TRADE COMMISSION

[File No. 131 0069]


General Electric Company; Analysis of Proposed Agreement 
Containing Consent Order 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 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 August 19, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/geavioconsent online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``General Electric, File 
No. 131 0069'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/geavioconsent, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Stephen W. Rodger (202-326-3643), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 July 19, 2013), on the World Wide Web, at 
http://www.ftc.gov/os/actions.shtm. 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.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before August 19, 2013. 
Write AGeneral Electric, File No. 131 0069'' on your comment. Your 
comment B including your name and your state B will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any A[t]rade secret or any commercial or financial information 
which * * * is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/geavioconsent by following the instructions on the web-based form. 
If this Notice appears at http://www.regulations.gov/#!home. you also 
may file a comment through that Web site.
    If you file your comment on paper, write AGeneral Electric, File 
No. 131 0069'' on your comment and on the envelope, and mail or deliver 
it to the following address: Federal Trade Commission, Office of the 
Secretary,

[[Page 45195]]

Room H-113 (Annex D), 600 Pennsylvania Avenue NW, Washington, DC 20580. 
If possible, submit your paper comment to the Commission by courier or 
overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before August 19, 2013. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission=s privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') with General Electric Company (``GE''), which is designed 
to remedy the anticompetitive effects of its proposed acquisition of 
the aviation business of Avio S.p.A. (``Avio''). Under the terms of the 
proposed Consent Agreement, GE would be required, among other things, 
to avoid interference with Avio's design and development work on a 
critical engine component--the accessory gearbox (``AGB'')--on the 
Pratt & Whitney PW1100G engine for the Airbus S.A.S. (``Airbus'') 
A320neo aircraft. GE and Pratt & Whitney are the only manufacturers of 
engines for the A320neo, and compete head-to-head for sales of engines 
to purchasers of that aircraft.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty 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, modify it, or make 
final the accompanying Decision and Order (``Order'').
    Pursuant to an Agreement dated December 21, 2012, GE proposes to 
acquire Avio's aviation business for approximately $4.3 billion. The 
Commission's Complaint alleges that the proposed acquisition is in 
violation of Section 5 of the FTC Act, as amended, 15 U.S.C 45, and 
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 FTC Act, as 
amended, 15 U.S.C. 45, by lessening the competition in the worldwide 
market for engine sales on the A320neo aircraft. That is because the 
acquisition would provide GE with the ability and incentive to disrupt 
the design and certification of the AGB for the Pratt & Whitney PW1100G 
engine, which in turn would provide GE with market power in the market 
for engines for the A320neo aircraft, allowing it to raise prices, 
reduce quality, or delay delivery of engines to A320neo customers. The 
proposed Consent Agreement will remedy the alleged violations by 
eliminating GE's ability and incentive to engage in such 
anticompetitive conduct post-merger.

II. The Parties

    GE, headquartered in Connecticut, is one of the world's largest 
companies, with business segments serving a wide variety of industries 
throughout the globe. GE's aviation segment, among other things, 
designs and manufactures jet engines for commercial and military 
aircraft. GE sells narrow-body commercial aircraft engines through its 
50% stake in CFM International (``CFM''), a joint venture with the 
French engine manufacturer Snecma S.A.
    Avio is headquartered in Torino, Italy, and is an important 
designer and manufacturer of component parts for civil and military 
aircraft engines. Avio provides, among other things, structural parts, 
gearboxes, and electrical systems for aircraft engines. Avio is 
currently the sole designer of the AGB on the Pratt & Whitney PW1100G 
engine.

III. The Products and Structure of the Markets

    AGBs use the mechanical power of the rotating turbine shaft in a 
jet engine to power various accessory systems needed by the engine and 
the aircraft, including oil and hydraulic pumps and electrical systems. 
Although AGBs on different aircraft engines perform similar functions, 
AGBs are designed for the specific engine in which it will be used to 
account for the shape of that engine, the position of the AGB in the 
engine, and the configuration and specifications of the various 
accessory systems the gearbox will power. Because AGBs require 
significant cost and time to develop, and because the aircraft engine--
with its AGB--must be tested extensively and certified for flight by 
aviation authorities before it can be put into service, an engine 
manufacturer cannot quickly or easily replace an engine's AGB if it 
encounters difficulties with its component supplier.
    Avio has the sole design responsibility for the AGB on the 
forthcoming Pratt & Whitney PW1100G engine, which will be one of two 
engines available on the Airbus A320neo aircraft. While Avio is in the 
advanced stages of designing this AGB, further development and testing 
must be completed before the AGB and the PW1100G engine will be 
certified for use by aviation authorities. Beyond that, further design 
work may be necessary even after the AGB and engine receive 
certification. Pratt & Whitney has no viable alternative to continuing 
to work with Avio to develop the AGB for the PW1100G, even after its 
rival engine manufacturer, GE, acquires Avio.
    Aircraft engines provide the thrust necessary for flight and must 
be specifically engineered for the requirements and mission profile of 
the aircraft on which they are to be installed. When designing a new 
airplane, an aircraft manufacturer typically approaches engine 
manufacturers as potential suppliers and selects one or more to provide 
engines for the aircraft under development. These engines become 
customers' only options for that aircraft platform. Airbus chose to 
work with only Pratt & Whitney and CFM to develop engines for the 
A320neo platform. Aside from the PW1100G, the only other engine 
available for the Airbus A320neo is the CFM Leap 1-A engine, in which 
GE has a 50% interest. These two engines compete for sales on the 
A320neo aircraft platform, and because other engine manufacturers could 
not design, or attain certification for, an alternate A320neo engine 
within several years, purchasers of this aircraft do not have other 
viable substitutes for these engines.
    The relevant geographic market in which to analyze the effects of 
the proposed transaction is the entire world. Engine component 
developers located around the world supply components to engine 
manufacturers who are also located worldwide. The aircraft 
manufacturers themselves are located across the globe, sell to 
customers worldwide, and do not significantly alter aircraft features 
for specific national markets.

IV. Entry

    Entry into the relevant markets would not be timely, likely, or 
sufficient in magnitude to deter or counteract the anticompetitive 
effects likely to result from the proposed transaction. AGB design for 
large commercial aircraft like the A320neo requires significant

[[Page 45196]]

experience and resources, and it would take several years for a third-
party provider to complete the development process and begin supplying 
AGBs for the PW1100G. This delay would make such third-party entry 
insufficient to prevent any potential anticompetitive effects from the 
proposed transaction. Similarly, entry into the market for engines 
powering the A320neo is also unlikely to deter or counter the 
anticompetitive effects of the proposed transaction. The design and 
production of an aircraft engine, along with the necessary 
certification of that engine on the aircraft platform, takes many years 
and a large financial investment.

V. Effects of the Acquisition

    The proposed transaction, if consummated, would provide GE with 
both the ability and the incentive to disrupt the design and 
certification of the Avio-supplied AGB for the Pratt & Whitney PW1100G 
engine. A delay in the development of the PW1100G engine would 
substantially increase GE's market power for the sale of engines for 
the A320neo, as it manufactures the only other engine option for that 
aircraft. In response to such a delay, a significant number of Pratt 
&Whitney customers would likely switch to the CFM Leap 1-A, and GE 
would likely use its increased market power to raise price, reduce 
quality, or delay delivery of engines to customers of the A320neo 
aircraft.

VI. The Consent Agreement

    The proposed Consent Agreement remedies the acquisition's likely 
anticompetitive effects by removing GE's ability and incentive to 
disrupt Avio's AGB work during the design, certification, and initial 
production ramp-up phase. The proposed Consent Agreement incorporates 
portions of a recent commercial agreement between GE, Avio, and Pratt & 
Whitney and Pratt & Whitney's original contract with Avio that relate 
to the design and development of the AGB and related parts for the 
PW1100G. A breach by GE of these aspects of these agreements therefore 
would constitute a violation of the Consent Agreement.
    The Consent Agreement further requires GE not to interfere with 
Avio staffing decisions as they relate to work on the AGB for the 
PW1100G. It allows Pratt & Whitney to have a technical representative 
and a customer representative on-site at GE/Avio's facility to observe 
work on the PW1100G AGB. In addition, should Pratt & Whitney terminate 
its agreement with Avio, GE will be required to provide certain 
transition services, including licenses to intellectual property and 
access to specialized Avio tools, to help Pratt & Whitney or a third-
party supplier produce AGBs and related parts for the PW1100G. The 
Consent Agreement also contains a firewall provision that limits GE's 
access, through Avio, to Pratt & Whitney's proprietary information 
relating to the AGB. Finally, the Consent Agreement allows for the 
appointment of an FTC-approved monitor to oversee GE's compliance with 
its obligations under the Consent Agreement.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission, Commissioner Wright recused.
Donald S. Clark
Secretary.
[FR Doc. 2013-17947 Filed 7-25-13; 8:45 am]
BILLING CODE 6750-01-P