[Federal Register Volume 81, Number 177 (Tuesday, September 13, 2016)]
[Notices]
[Pages 62904-62906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21902]


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FEDERAL TRADE COMMISSION

[File No. 161 0061]


ON Semiconductor Corporation; 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 methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the 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 September 26, 2016.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/fairchildconsent online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of ON 
Semiconductor Corporation, File No. 161-0061--Consent Agreement'' on 
your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/fairchildconsent by following the 
instructions on the Web-based form. If you prefer to file your comment 
on paper, write ``In the Matter of ON Semiconductor Corporation, File 
No. 161-0061--Consent Agreement'' on your comment and on the envelope, 
and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Llewellyn Davis (202-326-3394), 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 Sec.  
2.34, notice is hereby given that the above-captioned consent agreement 
containing 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 August 25, 2016), on the World Wide Web, at 
http://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before September 26, 
2016. Write ``In the Matter of ON Semiconductor Corporation, File No. 
161-0061-- Consent Agreement'' 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. Sec.  46(f), and FTC Rule Sec.  
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 Sec.  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 Sec.  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

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comment, you must file it at https://ftcpublic.commentworks.com/ftc/fairchildconsent 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 ``In the Matter of ON 
Semiconductor Corporation, File No. 161-0061--Consent Agreement'' on 
your comment and on the envelope, and mail your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 
20580, or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC. 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 September 26, 2016. 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

1. Introduction
    The Federal Trade Commission (``Commission'') has accepted from ON 
Semiconductor Corporation (``ON''), subject to final approval, an 
Agreement Containing Consent Order (``Consent Agreement'') designed to 
remedy the anticompetitive effects that would likely result from ON's 
proposed acquisition of Fairchild Semiconductor International, Inc. 
(``Fairchild'').
    On November 18, 2015, ON announced that it had entered into a 
definitive agreement involving an all-cash tender offer to acquire all 
of the outstanding shares of common stock of Fairchild for 
approximately $2.4 billion (``Acquisition''). The proposed Acquisition 
would combine the two largest suppliers of insulated-gate bipolar 
transistors (IGBTs) used in automotive ignition systems (``Ignition 
IGBTs'') worldwide. 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. Sec.  18, and Section 5 of the FTC 
Act, as amended, 15 U.S.C. Sec.  45, by substantially lessening 
competition in the worldwide market for Ignition IGBTs.
    Under the terms of the proposed Decision and Order (``Order'') 
contained in the Consent Agreement, ON is required to divest its 
Ignition IGBT business to Littelfuse, Inc. (``Littelfuse'') no later 
than 10 days from the close of the Acquisition. The divestiture package 
includes design files and intellectual property associated with the 
manufacture and sale of Ignition IGBTs, customer and distributor 
relationships with respect to Ignition IGBTs, and technology transfers 
and transitional services such as manufacturing support. In short, the 
Consent Agreement provides Littelfuse with everything it needs to 
compete effectively in the Ignition IGBT market.
    The Commission has placed the Consent Agreement 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 again review the Consent 
Agreement and the comments received, and decide whether it should 
withdraw from the Consent Agreement, modify it, or make the Order 
final.
2. The Parties
    Headquartered in Phoenix, Arizona, ON is a semiconductor developer 
and manufacturer providing a highly diversified portfolio of 
semiconductor products, including power and signal management, image 
sensing, and other standard and custom devices, for a variety of end-
use applications, including communications, computing, consumer, 
industrial, and automotive. ON designs, manufactures, and sells 
Ignition IGBTs, among other products, in its Automotive Product 
Division.
    Fairchild, headquartered in Sunnyvale, California, develops and 
manufactures a wide variety of low to high voltage power semiconductor 
products and devices as well as certain non-power semiconductor 
devices, which are used in a variety of end-use applications, including 
automotive, consumer, computing, and industrial applications. Fairchild 
designs, manufactures, and sells Ignition IGBTs in its Automotive 
Business Unit.
3. The Relevant Product and Market Structure
    The relevant product market in which to assess the competitive 
effects of the proposed Acquisition is no broader than Ignition IGBTs. 
IGBTs are a type of semiconductor that transmits, converts, and 
switches electrical power. Ignition IGBTs are a type of IGBT 
specifically designed and calibrated for automotive ignition systems in 
gasoline engine vehicles. They function as switches that control the 
electrical current that passes through the ignition coil. ON and 
Fairchild sell Ignition IGBTs to Tier 1 automotive suppliers, who then 
incorporate them into the ignition systems that they sell to automotive 
manufacturers. Currently, there is no functional substitute for 
Ignition IGBTs.
    The relevant geographic market for Ignition IGBTs is worldwide. The 
two major Ignition IGBT suppliers--ON and Fairchild-- manufacture the 
products in facilities around the world, and ship them to customer 
locations worldwide. There are no regulatory barriers, tariffs, or 
technical specifications to impede worldwide trade, and transportation 
costs are low.
    The Ignition IGBT market is characterized by a limited number of 
suppliers. ON and Fairchild are by far the two largest suppliers of 
Ignition IGBTs. Fairchild is the market leader and ON is the second-
largest supplier. Their combined share of the Ignition IGBT market 
would exceed 60%. The parties' next closest competitor has a 
significantly smaller share of the market. Other market participants 
are even smaller and do not constrain the parties. There are also 
several other suppliers located in Japan, but they primarily supply 
Japanese automotive manufacturers. Due to burdensome qualification 
requirements for customers outside of Japan, it would take several 
years before these suppliers could be qualified to supply the parties' 
customers with Ignition IGBTs.
    The proposed ON/Fairchild combination would cause a highly 
concentrated market for Ignition IGBTs to become even more 
concentrated, increasing the Herfindahl-Hirschman Index (``HHI'') by 
more than 1500. This increase in concentration far exceeds the 
thresholds set out in the Horizontal Merger Guidelines for raising a 
presumption that the Acquisition would create or enhance market power.
4. Effects of the Acquisition
    Absent a divestiture, the proposed Acquisition is likely to cause 
competitive harm in the Ignition IGBT market. ON and Fairchild compete 
directly against each other for Ignition IGBT sales, and customers 
benefit from that competition in terms of both pricing and product 
innovation. Customers describe ON and Fairchild as each other's closest 
competitor.

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Likewise, ON and Fairchild view each other the same way. By eliminating 
the competition between ON and Fairchild, the proposed Acquisition 
likely would lead to unilateral effects in the form of higher prices 
and reduced innovation.
5. Entry
    Entry into the Ignition IGBT market is not likely to deter or 
counteract any anti-competitive effects of the proposed Acquisition. 
Given the niche nature of the Ignition IGBT market, declining demand, 
and the lengthy time it would take to qualify new products with 
customers, entry is unlikely and would not be timely. Market 
participants confirmed that it would take at least three to four years 
before a new entrant could become a viable supplier. Existing IGBT 
manufacturers, moreover, are not rapid entrants. The process of 
designing an IGBT for ignition systems and qualifying it with customers 
would take years.
6. The Proposed Consent Agreement
    The Consent Agreement restores the competition lost from the 
proposed Acquisition by requiring ON to divest its Ignition IGBT 
business to Littelfuse, a publicly traded company based in Chicago, 
Illinois. The proposed divestiture includes everything needed for 
Littelfuse to compete effectively in the worldwide market for Ignition 
IGBTs.
    Under the Order, ON is required to divest its Ignition IGBT 
business to Littelfuse no later than 10 days from the close of the 
Acquisition. The divestiture package consists of the following assets: 
Design files, patents and technologies for Ignition IGBTs; licenses to 
manufacturing process technology; a process to facilitate the transfer 
of customer and distributor relationships with respect to Ignition 
IGBTs; technology transfers and transitional services including 
manufacturing support; and, if Littelfuse requests, secondment of ON 
personnel to support the transfer from ON to Littelfuse of the 
technology and know-how for production of Ignition IGBTs. No physical 
assets are being divested because a third party will manufacture 
Ignition IGBTs for Littelfuse.
    The Order requires that, at the request of Littelfuse and in a 
manner approved by the Commission, ON must provide transitional 
manufacturing for a period of up to three years with a possible option 
to extend the period by up to two years. Similarly, the Order also 
requires ON to provide support services such as logistical and 
administrative support for up to three years with a possible option to 
extend the period for up to two years. In addition, the Order includes 
other standard terms designed to ensure the viability of the divested 
business.
    A Monitor will monitor ON's compliance with the obligations set 
forth in the Order. If ON does not fully comply with the divestiture 
and requirements of the Order, the Commission may appoint a Divestiture 
Trustee to divest the Ignition IGBT business and perform ON's other 
obligations consistent with the Order.
    The divestiture of ON's Ignition IGBT business to Littelfuse will 
preserve competition that would otherwise have been lost as a result of 
the Acquisition. Potential customers have confirmed that the divested 
assets include everything necessary to compete effectively as a viable 
business. Similarly, potential customers have confirmed that Littelfuse 
would be a competitive option as a supplier.
7. Opportunity for Public Comment
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement to aid the Commission in determining whether it 
should make the Consent Agreement final. This analysis is not an 
official interpretation of the proposed Consent Agreement and does not 
modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016-21902 Filed 9-12-16; 8:45 am]
 BILLING CODE 6750-01-P