[Federal Register Volume 64, Number 12 (Wednesday, January 20, 1999)]
[Notices]
[Pages 3130-3131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1179]
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FEDERAL TRADE COMMISSION
[File No. 9910040]
ABB AB et al.; 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 March 22, 1999.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT: Pamela Taylor or Ann Malester, FTC/S-
2308, 601 Pa. Ave., N.W., Washington, D.C. 20580, (202) 326-2237 or
326-2820.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 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 sixty (60) 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 January 8, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, 600 Pennsylvania Avenue, N.W., Washington,
D.C. 20580, either in person or by calling (202) 326-3627. Public
comment is invited. Such comments or views will be considered by the
Commission and will be available for inspection and copying at its
principal office in accordance with Section 4.9(b)(6)(ii) of the
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii).
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted,
subject to final approval, an agreement containing a proposed
Consent Order from ABB AB and ABB AG (hereinafter collectively
``ABB''), which is designed to remedy the anticompetitive effects
resulting from ABB's acquisition of Elsag Bailey Process Automation
N.V. (``Elsag Bailey''). Under the terms of the agreement, ABB will
be required to divest the Analytical Division of Elsag Bailey's
Applied Automation, Inc. subsidiary, which is involved in the
manufacture and sale of process gas chromatographs and the research
and development of process mass spectrometers, to a Commission-
approved buyer within six (6) months. If the sale of these assets is
not made within six (6) months, the Commission may appoint a trustee
to divest Elsag Bailey's entire Applied Automation, Inc. subsidiary.
The proposed Consent Order has been placed on the public record
for sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
proposed Consent Order and the comments received and will decide
whether it should withdraw from the proposed Consent Order or make
final the proposed Order.
Pursuant to an October 26, 1998 cash tender offer, ABB agreed to
acquire 100% of the issued and outstanding voting securities of
Elsag Bailey for $1.1 billion. The proposed Complaint alleges that
the acquisition, if consummated, would violate Section 7 of the
Clayton Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the
Federal Trade Commission Act, as amended, 15 U.S.C. Sec. 45, in the
markets for process gas chromatographs and process mass
spectrometers.
Process gas chromatographs are analytical instruments used in
process manufacturing applications to measure the chemical
composition of a gas or a liquid by separating a sample into its
individual components through selective chemical interaction or
solubility, and measuring the separated components using a detector.
ABB and Elsag Bailey are the world's two leading suppliers of
process gas chromatographs.
ABB is also one of the world's leading suppliers of process mass
spectrometers. Process mass spectrometers are analytical instruments
used in process manufacturing applications to determine the chemical
composition of a gas or vapor stream by taking a sample, ionizing
the sample, separating the ions for a particular atomic or molecular
species by their mass to charge ration and measuring the
concentrations using a detector. While Elsag Bailey does not
currently manufacture process mass spectrometers, it is involved in
the research and development of a process mass spectrometer which it
plans to begin manufacturing and selling in 1999. Thus, Elsag Bailey
is an actual potential competitor in the market for process mass
spectrometers.
The worldwide process gas chromatograph market is highly
concentrated, and the proposed acquisition would substantially
increase concentration in that market. The acquisition would result
in a Herfindahl-Hirschman Index (``HHI'') of 4,764 points, which is
an increase of 2,310 points over the pre-acquisition HHI level. The
combined firm would have a market share of almost 70%. By
eliminating competition between the top two competitors in this
highly concentrated market, the proposed acquisition would allow ABB
to unilaterally exercise market power, thereby increasing the
likelihood that process gas chromatograph customers would be forced
to pay higher prices and that innovation in the process gas
chromatograph market would decrease.
The worldwide process mass spectrometer market is also highly
concentrated, with a pre-acquisition HHI of 4,150. Although Elsag
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Bailey does not currently manufacture and sell process mass
spectrometers, it is involved in the research and development of a
new mass spectrometer product, which it plans to introduce in 1999.
It appears that the introduction of this product would result in
increased competition in the process mass spectrometer market,
leading to lower prices and increased innovation. ABB's proposed
acquisition of Elsag Bailey would eliminate this significant source
of future competition and leave the process mass spectrometer market
highly concentrated for the foreseeable future.
Substantial barriers to new entry exist in the process gas
chromatograph and process mass spectrometer markets. A new entrant
into either of these markets would need to undertake the difficult,
expensive and time-consuming process of developing and testing a
product, establishing a track record for product quality, and
developing a service and support network. Because of the difficulty
of accomplishing these tasks, new entry into either the process gas
chromatograph or process mass spectrometer market, other than Elsag
Bailey's imminent introduction of a process mass spectrometer, could
not be accomplished in a timely manner and is therefore unlikely to
deter or counteract the anticompetitive effects resulting from the
transaction.
The proposed Consent Order effectively remedies the
acquisition's anticompetitive effects in the process gas
chromatograph and process mass spectrometer markets by requiring ABB
to divest the assets of the Analytical Division of Elsag Bailey's
Applied Automation, Inc. subsidiary. Pursuant to the Consent
Agreement, ABB is required to divest these assets no later than six
(6) months from the date ABB signs the Consent Agreement. In the
event that ABB fails to divest the assets of the Analytical Division
within this six-month time frame, the Consent Agreement contains a
``crown jewel'' provision which allows the Commission to appoint a
trustee to divest Elsag Bailey's entire Applied Automation, Inc.
subsidiary.
In order to ensure that the acquirer of the divested assets has
access to all of the employees currently involved in Elsag Bailey's
process gas chromatograph and process mass spectrometer businesses,
the Consent Agreement requires ABB to provide financial incentives
for these individuals to accept employment with the acquirer. The
Order also requires ABB to provide the Commission a report of
compliance with the divestiture provisions of the Order within
thirty (30) days following the date the Order becomes final, and
every thirty (30) days thereafter until ABB has completed the
required divestiture. Finally, an Agreement to Hold Separate signed
by ABB requires that the Applied Automation Assets, which includes
the Analytical Division Assets, be operated independently of ABB
until the divestiture required by the Order is completed.
The purpose of this analysis is to facilitate public comment on the
proposed Order, and it is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify in any
way their terms.
By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-1179 Filed 1-19-99; 8:45 am]
BILLING CODE 6750-01-M
