[Federal Register Volume 78, Number 184 (Monday, September 23, 2013)]
[Notices]
[Pages 58305-58307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22966]


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FEDERAL TRADE COMMISSION

[File No. 131 0070]


Honeywell International, Inc.; Analysis of 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 October 15, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/honeywellintermecconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``Honeywell 
Intermec, File No. 131 0070'' on your comment and file your comment 
online at https://ftcpublic.commentworks.com/ftc/honeywellintermecconsent 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: David Morris (202-326-3156), 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 September 13, 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 October 15, 
2013. Write ``Honeywell Intermec, File No. 131 0070'' on your comment. 
Your comment--including your name and your state--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 ``[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/honeywellintermecconsent 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 ``Honeywell Intermec, File 
No. 131 0070'' on your comment and on the envelope, and mail or deliver 
it to the following address: Federal Trade Commission, Office of the 
Secretary, 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.

[[Page 58306]]

    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 October 15, 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 from 
Honeywell International Inc. (``Honeywell''), subject to final 
approval, an Agreement Containing Consent Orders (``Consent 
Agreement''). The Consent Agreement, which contains a proposed Decision 
and Order (``Order''), is designed to remedy the anticompetitive 
effects resulting from Honeywell's proposed acquisition of Intermec 
Inc. (``Intermec'').
    Pursuant to an agreement signed on December 9, 2012 (the 
``Agreement''), Honeywell plans to acquire 100 percent of the voting 
securities of Intermec for an aggregate purchase price of approximately 
$600 million (the ``Acquisition''). The proposed Acquisition would 
result in an effective duopoly in the market for two-dimensional scan 
engines (``2D scan engines'') in the United States. 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 market for 2D scan engines in the 
United States.
    The Consent Agreement remedies the alleged violation by replacing 
the lost competition in the 2D scan engine market that would result 
from the proposed Acquisition. Under the terms of the Consent 
Agreement, Honeywell will license all of the United States patents 
necessary to make two-dimensional scan engines (``2D scan engines'') to 
Datalogic IPTECH s.r.l., a subsidiary of Datalogic S.p.A. 
(``Datalogic'').
    The Consent Agreement and proposed Order have been placed on the 
public record for 30 days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will review the Consent Agreement 
and the comments received, and decide whether it should withdraw, 
modify or make final the Consent Agreement and proposed Order.

II. The Parties

    Honeywell is a diversified technology and manufacturing company 
headquartered in Morristown, New Jersey with worldwide operations. 
Honeywell develops, manufactures and sells 2D scan engines and devices 
into which 2D scan engines are incorporated through its wholly-owned 
subsidiaries, Hand Held Products, Inc. and Metrologic Instruments, Inc. 
d/b/a Honeywell Scanning and Mobility.
    Headquartered in Everett, Washington, Intermec is a leading 
manufacturer and seller of scan engines and other automated 
identification and data capture equipment including barcode scanners, 
barcode printers, RFID systems and voice recognition systems.

III. Scan Engines

    The relevant line of commerce in which to analyze the effects of 
the proposed Acquisition is 2D scan engines. 2D scan engines have a 2D 
image sensor that captures an image (such as a barcode) through a 
digital photograph. The 2D scan engine then translates the image into a 
digital format that computer processors can interpret and analyze. 
Products such as retail store scanners, kiosks and rugged mobile 
handheld computers utilize 2D scan engines to capture and decode 
digital data.
    Customers of 2D scan engines demand compact scanners that can 
accurately read all types of one-dimensional and 2D images, and that 
have a good field of view and reading range. 2D scan engines are the 
only scanning products that meet these specifications. One-dimensional 
scan engines are unable to read most types of 2D images and are not 
viable substitutes for 2D scan engines. Scanning functions on smart 
phones and similar consumer devices do not offer the speed, accuracy, 
reading range or field of view of 2D scan engines. As a result, 
customers would likely not switch to alternate scanning products (such 
as one-dimensional scan engines or smart phones) in response to a five 
to ten percent increase in the price of 2D scan engines in sufficient 
numbers to make that price increase unprofitable to a hypothetical 
monopolist.
    The relevant geographic area in which to analyze the effects of the 
Acquisition on the 2D scan engine market is the United States. 2D scan 
engine suppliers who want to sell their scan engines to customers who 
intend to incorporate the scan engines into products that will be sold 
into the United States must own or have a license to U.S. patents 
covering 2D scan engine technology and be able to indemnify their 
customers against the threat of a patent suit.
    The market for 2D scan engines in the United States is highly 
concentrated. Honeywell, Intermec and Motorola are the three most 
significant participants in the 2D scan engine market in the United 
States. Post-Acquisition, the combined share of the two firms--
Honeywell and Motorola--would be in excess of 80%. Additionally, 
Honeywell, Intermec and Motorola are the only 2D scan engine firms in 
the U.S. that have deep and broad portfolios of relevant intellectual 
property (``IP'') that insulate them and their customers from 
infringement suits.
    There are a number of fringe 2D scan engine manufacturers who sell 
2D scan engines to customers outside of the United States, and to a 
lesser extent, to customers who incorporate the scan engines into 
products sold in the United States. In aggregate, the fringe 
competitors' account for less than 20% of all 2D scan engines sold in 
the United States. While the fringe competitors are increasingly 
important competitors to Honeywell, Intermec and Motorola outside of 
the United States as a result of their growing technical capabilities, 
they are constrained from expanding their sales of 2D scan engines into 
products that will be sold in the United States because they do not 
possess the relevant U.S. IP rights. Without ownership of, or a license 
to, the relevant IP, the fringe competitors are not a significant 
competitive constraint to Honeywell, Intermec and Motorola for the sale 
of 2D scan engines for use in products sold in the United States.
    The proposed Acquisition increases the likelihood of coordinated 
interaction between Honeywell and the major remaining player in the 
market, Motorola. Industry participants recognize that Honeywell, 
Intermec and Motorola are the ``Big Three'' players in the market. As 
noted above, the fringe 2D scan engine competitors do not constrain the 
pricing of the ``Big Three.'' Accordingly, the proposed Acquisition 
increases the risk that the two remaining players, Honeywell and 
Motorola, will compete less aggressively, diminishing the level of 
competition in the market.
    New entry, repositioning or expansion will not be sufficient to 
deter or counteract the anticompetitive effects of the proposed 
Acquisition in a timely manner. The most significant barrier to entry 
and expansion in the United

[[Page 58307]]

States is IP. For example, although 2D scan engine companies other than 
Honeywell, Intermec and Motorola have the ability to, and do, 
manufacture 2D scan engines, customers who incorporate the scan engines 
into products for sale into the United States are generally unwilling 
to purchase from them because they cannot provide customers with 
indemnification from patent infringement suits.

IV. The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
Honeywell's proposed acquisition of Intermec by requiring Honeywell to 
license Honeywell and Intermec's U.S. patents covering technology used 
in 2D scan engines. The Consent Agreement requires Honeywell to license 
the relevant patents to Datalogic, or another licensee approved by the 
Commission through a license agreement approved by the Commission.
    Datalogic has the industry experience, reputation and resources to 
replace Intermec as an effective competitor in the U.S. 2D scan engine 
market. It is headquartered in Bologna, Italy, with its North American 
design headquarters in Eugene, Oregon. Datalogic is well positioned to 
replace the competition that will be eliminated as a result of the 
proposed Acquisition. The company has developed 2D scan engines that it 
markets outside of the U.S. These 2D scan engines are of similar 
quality to those offered by Honeywell and Intermec. However, Datalogic 
does not currently compete against Honeywell and Intermec in the sale 
of 2D scan engines in the U.S. Datalogic also sells products that 
incorporate 2D scan engines, such as in-counter checkout scanners and 
airport kiosk scanners (where it is one of the global leaders), hand 
held scanners (where it is a top player globally), and rugged mobile 
computers (where it is the fourth-largest player globally).
    Pursuant to the Consent Agreement, Datalogic (or another approved 
licensee) would receive a license to all of the Honeywell and Intermec 
U.S. IP covering technology used in 2D scan engines and related devices 
(excluding non-retail fixed scanners) necessary to produce and sell 2D 
scan engines in the U.S. Obtaining the proposed license from Honeywell 
would enable the approved licensee to sell products without fear of an 
IP suit and to offer the required indemnification to market 2D scan 
engines in the U.S. The license extends for twelve years, which is the 
life of the primary blocking patents owned by Honeywell. In addition to 
licensing the U.S. patents, the Consent Agreement prohibits Honeywell 
from filing infringement actions against the approved licensee, its 
suppliers and customers based on the approved licensee's 2D scan 
engines or related devices. This provides the approved licensee with 
global freedom to research, develop, market and sell its 2D scan 
engines and related devices without fear of infringement suits by 
Honeywell. The Consent Agreement also prohibits Honeywell from selling 
or assigning the patents included in the license to anyone who does not 
agree to abide by the terms of the Order with respect to those acquired 
patents.
    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 Order or to modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2013-22966 Filed 9-20-13; 8:45 am]
BILLING CODE 6750-01-P