[Federal Register Volume 64, Number 221 (Wednesday, November 17, 1999)]
[Notices]
[Pages 62676-62678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29997]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 991 0240]
Precision Castparts Corp., et al.; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
-----------------------------------------------------------------------
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 December 10, 1999.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Richard Parker or Matthew Reilly, FTC/
H-374, 600 Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-2574
or 326-2350.
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 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 November 10, 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, NW,
Washington, DC 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW,
Washington, DC 20580. Two paper copies of each comment should be filed,
and should be accompanied, if possible, by a 3\1/2\ inch diskette
containing an electronic copy of the comment. 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 Consent Orders (``Consent
Agreement'') and Decision & Order from Precision Castparts Corp.
(``PCC'') and Wyman-Gordon Company (``Wyman-Gordon'') designed to
remedy the anticompetitive effects resulting from PCC's acquisition of
all of the voting securities of Wyman-Gordon. Under the terms of the
Consent Agreement, PCC and Wyman-Gordon will be required to divest the
following assets that are involved in the development, manufacture and
sale of titanium, stainless steel and nickel-based superalloy aerospace
investment cast components: (1) Wyman-Gordon's titanium foundry located
in Albany, Oregon; and (2) Wyman-Gordon's Large Cast Parts foundry
located in Groton, Connecticut.
The proposed Consent Agreement and Decision & Order have been
placed on the public record for thirty (30) days for reception of
comments by 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 Order and the
comments received, and will decide whether it should withdraw from the
proposed Consent Agreement or make final the proposed Decision & Order.
Pursuant to a May 17, 1999 cash tender offer, PCC agreed to acquire
100% of the voting securities of Wyman-Gordon for approximately $721
million. The proposed Complaint alleges that this agreement violates
section 5 of the FTC Act, as amended, 15 U.S.C. 18, and the acquisition
of Wyman-Gordon by PCC, if consummated, would violate Section 7 of the
Clayton Act, as amended, 15 U.S.C. 45, and Section 5 of the FTC Act, as
amended, 15 U.S.C. 18, in the markets for titanium, large stainless
steel, and large nickel-based superalloy aerospace investment cast
structural components.
Investment casting is a method of manufacturing metal components
whereby a wax model of the metal component is dipped into a ceramic
slurry which dries to form a ceramic shell. The wax is then melted out
using a special furnace, leaving a cavity within the ceramic shell into
which molten metal is poured. Once the metal cools, the ceramic shell
removed, producing dimensionally precise metal components. Aerospace
investment cast structural components are components that are used
primarily in aerospace jet engine and aerospace airframe applications
and are manufactured using a variety of metal alloys, including
titanium, stainless steel, and nickel-based superalloy. PCC and Wyman-
Gordon are two of the world's leading suppliers of titanium, stainless
steel, and nickel-based superalloy aerospace investment cast structural
components. While each of these metals, and others including aluminum,
can be used in many aerospace applications, for a particular
application, one metal is typically far superior to the alternatives
based on cost, weight, and strength considerations. Therefore, based on
design specifications and performance characteristics, a component
produced from a particular metal is not a reasonable competitive
alternative for an investment cast aerospace structural component
manufactured using a different metal.
Metal aerospace structural components can also be produced
utilizing other methods of manufacturing, such as forging and
fabrication. While these other methods of manufacturing are
alternatives to investment casting, the investment casting process
provides the most cost-effective method of producing the required
components for those aerospace applications where investment castings
are currently used. In view of this cost distinction, other methods of
manufacturing are not
[[Page 62677]]
reasonable competitive alternatives for the production of titanium,
stainless steel, and nickel-based superalloy aerospace investment cast
structural components.
Titanium, large stainless steel, and large nickel-based superalloy
investment cast structural aerospace components are each relevant
markets. The worldwide market for titanium aerospace investment cast
structural components is highly concentrated, and the proposed
acquisition would substantially increase concentration in the market.
PCC and Wyman-Gordon are two of only four viable suppliers of titanium
aerospace investment cast structural components, and one of the
remaining two competitors is significantly smaller than the other
three.
The worldwide market for large (greater than 24 inches in diameter)
stainless steel aerospace investment cast structural components is also
highly concentrated, and the acquisition would substantially increase
concentration in this market. PCC and Wyman-Gordon are two of only six
viable suppliers of large stainless steel aerospace investment cast
structural components.
The worldwide market for large (greater than 24 inches in diameter)
nickel-based superalloy aerospace investment cast structural components
is also highly concentrated, and the acquisition would substantially
increase concentration in this market. PCC and Wyman-Gordon are two of
only four viable suppliers of large nickel-based superalloy aerospace
investment cast structural components.
By eliminating competition between PCC and Wyman-Gordon in these
highly concentrated markets, the proposed acquisition would have
allowed PCC to unilaterally exercise market power, and would have
enhanced the likelihood of coordinated interaction among the remaining
firms in these markets, thereby increasing the likelihood that: (1)
consumers of titanium, large stainless steel, and large nickel-based
superalloy aerospace investment cast components would be forced to pay
higher prices; and (2) innovation in these markets would decrease.
It is unlikely that the competition eliminated by the proposed
acquisition would have been replaced by new entrants into the relevant
markets within two years due to the substantial barriers to entry into
the markets at issue. A new entrant into these markets would need to
undertake the difficult, expensive, and time-consuming process of
developing a new product. Moreover, a new entrant would likely have to
purchase a new facility, as well as specialized investment casting
equipment. A new entrant would also have to undertake the arduous task
of developing the required engineering and process expertise. In
addition, because of the critical nature of aerospace investment cast
structural components, a new entrant would have to obtain customer and
other third-party certifications and approvals before it could begin to
manufacture and sell aerospace investment cast components. Finally,
customers of aerospace investment cast structural components are
generally reluctant to contract with suppliers that have not developed
a proven reputation for quality and reliability. For these reasons, new
entry into the market would in all likelihood not occur in time to
deter or counteract the anticompetitive effects resulting from the
acquisition.
The proposed Consent Agreement and Decision & Order effectively
remedy the acquisition's anticompetitive effects in the market for
titanium aerospace investment cast structural components by requiring
PCC and Wyman-Gordon to divest Wyman-Gordon's titanium foundry in
Albany, Oregon to a Commission-approved acquirer. Pursuant to the
Consent Agreement and Decision & Order, PCC and Wyman-Gordon are
required to divest the Albany titanium foundry no later than six (6)
months from the date the Commission accepts the Consent Agreement and
Decision & Order for public comment. In the event that PCC and Wyman-
Gordon fail to divest the assets within the required time, the
Commission may appoint a trustee to divest the assets. Wyman-Gordon
only recently acquired control of the Albany titanium foundry and had
not yet integrated the foundry into its castings operation and
business. As a result, the Commission did not require that PCC and
Wyman-Gordon divest Wyman-Gordon's Albany titanium foundry to a
purchaser identified and approved by the Commission prior to the
consummation of the Wyman-Gordon acquisition.
The proposed Consent Agreement and Decision & Order effectively
remedy the acquisition's anticompetitive effects in the markets for
large stainless steel and large nickel-based superalloy aerospace
investment cast structural components by requiring PCC and Wyman-Gordon
to divest the Wyman-Gordon's Large Cast parts (``LCP'') foundry in
Groton, Connecticut to Doncasters plc, a leading international
manufacturer of aerospace investment cast components. Pursuant to the
Consent Agreement and Decision & Order, PCC and Wyman-Gordon are
required to divest the Groton LCP foundry to Doncasters no later than
16 business days from the date the Commission accepts the Consent
Agreement and Decision & Order for public comment. In the event PCC and
Wyman-Gordon fail to divest the Groton LCP foundry to Doncasters within
the required time, the Consent Agreement contains a ``crown jewel''
provision that allows the Commission to appoint a trustee to divest
both Wyman-Gordon's LCP and Small Cast parts (``SCP'') foundries
located in Groton, Connecticut, to an acquirer approved by the
Commission.
The proposed Consent Agreement and Decision & Order require PCC and
Wyman-Gordon to assist the acquirers of the divested assets so that
they can compete effectively in the markets for titanium, large
stainless steel, and large nickel-based superalloy aerospace investment
cast components. PCC and Wyman-Gordon must provide sufficient technical
assistance and advice to the acquirers in order that they may begin
manufacturing and selling titanium, stainless steel, and nickel-based
superalloy aerospace investment cast components. Further, at the
request of a customer of titanium, stainless steel, or nickel-based
superalloy aerospace investment cast components at any time during the
next year, PCC and Wyman-Gordon must transfer to the Albany titanium
facility, the Groton LCP foundry, or both the Groton LCP and SCP
foundries, as applicable, all tooling and manufacturing know-how
associated with producing a particular component identified by the
customer. PCC and Wyman-Gordon must also pay (a) all costs reasonably
incurred in the delivery of such tooling and manufacturing know-how;
(b) fifty (50) percent of the costs reasonably incurred in conforming
such tooling to substantially the same quality employed or achieved by
Wyman-Gordon; and (c) fifty (50) percent of the costs related to
receiving any certifications or approvals from the customer that may be
required as a result of the transfer of the assets.
To ensure that the acquirers of the divested assets have the
opportunity to retain all the key employees currently involved in
Wyman-Gordon's titanium, large stainless steel and large nickel-based
superalloy aerospace casting businesses, the Consent Agreement and
Decision & Order require that PCC and Wyman-Gordon provide financial
incentives to these individuals, including a bonus for certain
employees for accepting employment with the acquirer. Further, the
Consent Agreement and Decision & Order require PCC and Wyman-Gordon to
provide to the Commission a report of
[[Page 62678]]
compliance with the divestiture provisions of the Decision & Order
within thirty (30) days following the date the Decision & Order becomes
final, and every thirty (30) days until PCC and Wyman-Gordon have
completed the divestitures. Finally, an Order to Hold Separate issued
by the Commission requires that the Albany titanium foundry, and if
necessary the Groton LCP and Groton SCP, be operated independently of
PCC and Wyman-Gordon until the divestitures are completed.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement and Decision & Order, and it is not intended to
constitute an official interpretation of the Consent Agreement and
Decision & Order or to modify their terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-29997 Filed 11-16-99; 8:45 am]
BILLING CODE 6750-01-M
