[Federal Register Volume 63, Number 53 (Thursday, March 19, 1998)]
[Notices]
[Pages 13410-13412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7115]
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FEDERAL TRADE COMMISSION
[File No. 981-0011]
Federal-Mogul Corporation, 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 May 18, 1998.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT: Joseph Krauss, FTC/H-386, Washington,
D.C. 20580. (202) 326-2713.
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 March 6, 1998), 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, Sixth Street and 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 Consent Order
(``Agreement'') from Federal-Mogul Corporation (``Federal-Mogul'') and
T&N plc (``T&N'').
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
Agreement and the comments received and will decide whether it should
withdraw from the Agreement or make final the Agreement's proposed
Order.
Both Federal-Mogul, a Michigan corporation, and T&N, a corporation
organized under the laws of the United Kingdom, design, manufacture and
sell fluid film or ``plain'' thinwall bearings (``thinwall bearings'').
These are bearings that do not have roller or ball elements, but have a
surface coating of oil which reduces friction. Among the thinwall
bearings Federal-Mogul and T&N manufacture and sell are thinwall
bearings for use in automobile and light truck engines (``light duty
engine bearings'') and thinwall bearings for use in heavy truck and
heavy equipment engines (``heavy duty engine bearings''). Both Federal-
Mogul and T&N sell light duty and heavy duty engine bearings to
original equipment manufacturers (``OEMs''), which buy bearings and use
them to manufacture engines, and to aftermarket companies, which buy
bearings and use them to repair or service engines after the engines'
warranty periods have expired. Federal-Mogul and T&N are the largest
competitors in the manufacture and sale of thinwall bearings to OEMs
and the aftermarket in the United States. On October 16, 1997, Federal-
Mogul notified T&N of Federal-Mogul's intention to commence a cash
tender offer to acquire 100 percent of the voting securities of T&N for
approximately $2.4 billion.
The Proposed Complaint
The proposed complaint alleges that the proposed acquisition may
substantially lessen competition in the development, manufacture, and
sale of (1) thinwall bearings, (2) light duty engine bearings sold to
OEMs, (3) heavy duty engine bearings sold to OEMs, and (4) engine
bearings sold to the aftermarket. The proposed complaint also alleges
that the relevant geographic market for evaluating the acquisition's
effect on the thinwall bearings market is the world. Every engine has a
unique set of bearings which, with few exceptions, cannot be used in
any other engine. The bearings are engineered in terms of materials,
shapes and sizes to meet the bearing performance demands of a
particular engine. While engines built for the United States market
have different performance characteristics from engines built for other
markets, and require bearings engineered for those performance
requirements, engine manufacturers in the United States are willing to
buy engine bearings from anywhere in the world if the bearings meet the
performance requirements for the United States market.
The proposed complaint alleges that Federal-Mogul and T&N are the
two leading producers in the four different bearings markets. The
complaint further alleges that the proposed transaction would give
Federal-Mogul the ability to unilaterally exercise market power and
that the transaction could also substantially increase the likelihood
of collusion or coordinated anticompetitive conduct between Federal-
Mogul and the other remaining bearings producers.
The proposed complaint alleges that entry into the four alleged
markets would not be timely, likely, or sufficient to deter or offset
the adverse effects of the acquisition on competition in these markets.
Entry into the markets to sell engine bearings to OEM customers
requires developing appropriate bearings and precision manufacturing
capabilities and extensive testing before sales can be made. This
process, from development to the completion of testing, would take
substantially more than two years. In the aftermarket, the entrant
would have to develop a broad product line to compete with Federal-
Mogul and T&N, which would take more than two years, and a new entrant
would be at a significant cost disadvantage to the incumbent firms.
The Proposed Order
The proposed Order would remedy the alleged violation by preserving
the competition that would otherwise be lost as a result of Federal-
Mogul's acquisition of T&N. The proposed Order requires Federal-Mogul
to divest the thinwall bearing business of T&N, which includes the
assets and plants that T&N now uses to make thinwall bearings, as well
as the assets, including intellectual property, that T&N now uses to
develop and design new bearings to meet the bearings needs of engines
that OEMs will develop in the future. To insure that the divested
thinwall bearing business would be in the same position that T&N had
been in terms of research, the proposed Order specifically identifies
the individuals in T&N who worked on bearings research and development
and requires Federal-Mogul and T&N to assign those personnel to the
business to be divested. In addition, certain employees who are
believed to be particularly important to the future research success of
the divested T&N thinwall business will be given incentives to remain
with the divested thinwall business. Finally, certain assets relating
the aftermarket
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sales of bearings in North America, including the brand names under
which T&N has sold bearings, must be included in the divestiture.
The proposed Order also addresses a relationship that T&N's
thinwall bearings business had with Daido Metals (``Daido''), a
Japanese bearing producer. For a number of years, T&N had cooperative
technology exchange arrangements with Daido, as well as a joint venture
to produce bearings at Bellefontaine, Ohio. In the past, these
arrangements between T&N and Daido may have allowed the two companies
together to compete better against other bearings producers and to meet
their customers' needs for high quality, low cost, sophisticated
bearings, better than either company could on its own. To allow for the
continuation of cooperation between Daido and the divested T&N bearings
business, the proposed Order prohibits Federal-Mogul from entering into
such arrangements with Daido for a period of five years. In addition,
because certain individuals at T&N are believed to be important to
maintaining the cooperative relationships between T&N and Daido, these
individuals are given incentives under the proposed Order to stay with
the divested T&N thinwall bearings business. The purpose of these
provisions is not to force the divested T&N thinwall bearing business
or Daido to form any particular cooperative arrangements, but to allow
any efficient cooperation between the two firms to continue as if T&N
had not been acquired by Federal-Mogul.
The proposed Order also identifies certain assets related to dry
bearings or polymer bearings that are to be included in the
divestiture. Dry or polymer bearings are bearings that do not rely on a
film of oil, but instead on a polymer coating, to reduce friction.
These bearings are produced at T&N plants that also produce thinwall
bearings, and the inclusion of these bearings in the assets to be
divested may be important to the viability of the T&N plants to be
divested. Absent the specific references to polymer bearings, the
identification of the plants to be divested would require the
divestiture of the manufacturing lines for these dry or polymer
bearings that are contained in the named plants. However, Federal-Mogul
wishes to include these products by name in the proposed Order, to
insure the German Federal Cartel Office that the dry bearing products
listed will be divested. The German Federal Cartel Office has raised
concerns about a product overlap between Federal-Mogul and T&N in dry
bearings that would adversely impact competition in dry bearings in
Germany. By including these products in the Commission's proposed
Order, Federal-Mogul avoids having to enter into a separate divestiture
procedure, relating to the same plants, to satisfy the Federal Cartel
Office.
The proposed Order requires that Federal-Mogul divest the
identified assets within six months after the proposed Order becomes
final. If Federal-Mogul does not divest the assets within that time
period, the proposed Order provides for the appointment of a trustee to
divest the assets.
The purpose of this analysis is to facilitate public comment on the
proposed Order. This analysis is not intended to constitute an official
interpretation of the Agreement or the proposed Order or in any way to
modify the terms of the Agreement or the proposed Order.
By direction of the Commission, Commissioner Azcuenaga not
participating.
Donald S. Clark,
Secretary.
[FR Doc. 98-7115 Filed 3-18-98; 8:45 am]
BILLING CODE 6750-01-M
