Federal Register, Volume 78 Issue 144 (Friday, July 26, 2013)

[Federal Register Volume 78, Number 144 (Friday, July 26, 2013)]
[Notices]
[Pages 45194-45196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17947]

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FEDERAL TRADE COMMISSION

[File No. 131 0069]

General Electric Company; Analysis of Proposed 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 August 19, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/geavioconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``General Electric, File
No. 131 0069'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/geavioconsent, 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: Stephen W. Rodger (202-326-3643), 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 July 19, 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 August 19, 2013.
Write AGeneral Electric, File No. 131 0069'' on your comment. Your
comment B including your name and your state B 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 A[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/geavioconsent 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 AGeneral Electric, File
No. 131 0069'' on your comment and on the envelope, and mail or deliver
it to the following address: Federal Trade Commission, Office of the
Secretary,

[[Page 45195]]

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.
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 August 19, 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, subject
to final approval, an Agreement Containing Consent Order (``Consent
Agreement'') with General Electric Company (``GE''), which is designed
to remedy the anticompetitive effects of its proposed acquisition of
the aviation business of Avio S.p.A. (``Avio''). Under the terms of the
proposed Consent Agreement, GE would be required, among other things,
to avoid interference with Avio's design and development work on a
critical engine component--the accessory gearbox (``AGB'')--on the
Pratt & Whitney PW1100G engine for the Airbus S.A.S. (``Airbus'')
A320neo aircraft. GE and Pratt & Whitney are the only manufacturers of
engines for the A320neo, and compete head-to-head for sales of engines
to purchasers of that aircraft.
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After thirty days, the Commission will again review the proposed
Consent Agreement and the comments received, and will decide whether it
should withdraw from the proposed Consent Agreement, modify it, or make
final the accompanying Decision and Order (``Order'').
Pursuant to an Agreement dated December 21, 2012, GE proposes to
acquire Avio's aviation business for approximately $4.3 billion. The
Commission's Complaint alleges that the proposed acquisition is in
violation of Section 5 of the FTC Act, as amended, 15 U.S.C 45, and
that the acquisition, if consummated, would violate Section 7 of the
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as
amended, 15 U.S.C. 45, by lessening the competition in the worldwide
market for engine sales on the A320neo aircraft. That is because the
acquisition would provide GE with the ability and incentive to disrupt
the design and certification of the AGB for the Pratt & Whitney PW1100G
engine, which in turn would provide GE with market power in the market
for engines for the A320neo aircraft, allowing it to raise prices,
reduce quality, or delay delivery of engines to A320neo customers. The
proposed Consent Agreement will remedy the alleged violations by
eliminating GE's ability and incentive to engage in such
anticompetitive conduct post-merger.

II. The Parties

GE, headquartered in Connecticut, is one of the world's largest
companies, with business segments serving a wide variety of industries
throughout the globe. GE's aviation segment, among other things,
designs and manufactures jet engines for commercial and military
aircraft. GE sells narrow-body commercial aircraft engines through its
50% stake in CFM International (``CFM''), a joint venture with the
French engine manufacturer Snecma S.A.
Avio is headquartered in Torino, Italy, and is an important
designer and manufacturer of component parts for civil and military
aircraft engines. Avio provides, among other things, structural parts,
gearboxes, and electrical systems for aircraft engines. Avio is
currently the sole designer of the AGB on the Pratt & Whitney PW1100G
engine.

III. The Products and Structure of the Markets

AGBs use the mechanical power of the rotating turbine shaft in a
jet engine to power various accessory systems needed by the engine and
the aircraft, including oil and hydraulic pumps and electrical systems.
Although AGBs on different aircraft engines perform similar functions,
AGBs are designed for the specific engine in which it will be used to
account for the shape of that engine, the position of the AGB in the
engine, and the configuration and specifications of the various
accessory systems the gearbox will power. Because AGBs require
significant cost and time to develop, and because the aircraft engine--
with its AGB--must be tested extensively and certified for flight by
aviation authorities before it can be put into service, an engine
manufacturer cannot quickly or easily replace an engine's AGB if it
encounters difficulties with its component supplier.
Avio has the sole design responsibility for the AGB on the
forthcoming Pratt & Whitney PW1100G engine, which will be one of two
engines available on the Airbus A320neo aircraft. While Avio is in the
advanced stages of designing this AGB, further development and testing
must be completed before the AGB and the PW1100G engine will be
certified for use by aviation authorities. Beyond that, further design
work may be necessary even after the AGB and engine receive
certification. Pratt & Whitney has no viable alternative to continuing
to work with Avio to develop the AGB for the PW1100G, even after its
rival engine manufacturer, GE, acquires Avio.
Aircraft engines provide the thrust necessary for flight and must
be specifically engineered for the requirements and mission profile of
the aircraft on which they are to be installed. When designing a new
airplane, an aircraft manufacturer typically approaches engine
manufacturers as potential suppliers and selects one or more to provide
engines for the aircraft under development. These engines become
customers' only options for that aircraft platform. Airbus chose to
work with only Pratt & Whitney and CFM to develop engines for the
A320neo platform. Aside from the PW1100G, the only other engine
available for the Airbus A320neo is the CFM Leap 1-A engine, in which
GE has a 50% interest. These two engines compete for sales on the
A320neo aircraft platform, and because other engine manufacturers could
not design, or attain certification for, an alternate A320neo engine
within several years, purchasers of this aircraft do not have other
viable substitutes for these engines.
The relevant geographic market in which to analyze the effects of
the proposed transaction is the entire world. Engine component
developers located around the world supply components to engine
manufacturers who are also located worldwide. The aircraft
manufacturers themselves are located across the globe, sell to
customers worldwide, and do not significantly alter aircraft features
for specific national markets.

IV. Entry

Entry into the relevant markets would not be timely, likely, or
sufficient in magnitude to deter or counteract the anticompetitive
effects likely to result from the proposed transaction. AGB design for
large commercial aircraft like the A320neo requires significant

[[Page 45196]]

experience and resources, and it would take several years for a third-
party provider to complete the development process and begin supplying
AGBs for the PW1100G. This delay would make such third-party entry
insufficient to prevent any potential anticompetitive effects from the
proposed transaction. Similarly, entry into the market for engines
powering the A320neo is also unlikely to deter or counter the
anticompetitive effects of the proposed transaction. The design and
production of an aircraft engine, along with the necessary
certification of that engine on the aircraft platform, takes many years
and a large financial investment.

V. Effects of the Acquisition

The proposed transaction, if consummated, would provide GE with
both the ability and the incentive to disrupt the design and
certification of the Avio-supplied AGB for the Pratt & Whitney PW1100G
engine. A delay in the development of the PW1100G engine would
substantially increase GE's market power for the sale of engines for
the A320neo, as it manufactures the only other engine option for that
aircraft. In response to such a delay, a significant number of Pratt
&Whitney customers would likely switch to the CFM Leap 1-A, and GE
would likely use its increased market power to raise price, reduce
quality, or delay delivery of engines to customers of the A320neo
aircraft.

VI. The Consent Agreement

The proposed Consent Agreement remedies the acquisition's likely
anticompetitive effects by removing GE's ability and incentive to
disrupt Avio's AGB work during the design, certification, and initial
production ramp-up phase. The proposed Consent Agreement incorporates
portions of a recent commercial agreement between GE, Avio, and Pratt &
Whitney and Pratt & Whitney's original contract with Avio that relate
to the design and development of the AGB and related parts for the
PW1100G. A breach by GE of these aspects of these agreements therefore
would constitute a violation of the Consent Agreement.
The Consent Agreement further requires GE not to interfere with
Avio staffing decisions as they relate to work on the AGB for the
PW1100G. It allows Pratt & Whitney to have a technical representative
and a customer representative on-site at GE/Avio's facility to observe
work on the PW1100G AGB. In addition, should Pratt & Whitney terminate
its agreement with Avio, GE will be required to provide certain
transition services, including licenses to intellectual property and
access to specialized Avio tools, to help Pratt & Whitney or a third-
party supplier produce AGBs and related parts for the PW1100G. The
Consent Agreement also contains a firewall provision that limits GE's
access, through Avio, to Pratt & Whitney's proprietary information
relating to the AGB. Finally, the Consent Agreement allows for the
appointment of an FTC-approved monitor to oversee GE's compliance with
its obligations under the Consent Agreement.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.

By direction of the Commission, Commissioner Wright recused.
Donald S. Clark
Secretary.
[FR Doc. 2013-17947 Filed 7-25-13; 8:45 am]
BILLING CODE 6750-01-P