Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC reaches proposed settlement with General Electric over acquisition of Avio’s aviation business, (Jul 19, 2013)

By Tobias J. Gillett, J.D., LL.M.

The FTC announced today a proposed settlement agreement with General Electric Company (GE) that would prevent GE’s acquisition of the AeroEngine division of Italy’s AvioS.p.A. from interfering with GE competitor Pratt & Whitney’s access to a component necessary to manufacture its engines (In the Matter of General Electric Company, FTC File No. 131 0069). The agreement would resolve FTC charges that the proposed $4.3 billion transaction would substantially lessen competition and tend to create a monopoly in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act.

The FTC filed a complaint before the Federal Trade Commission, alleging that GE’s purchase of the AeroEngine Division would substantially lessen competition by permitting GE to disrupt the design and certification of an accessory gearbox Pratt & Whitney needed to produce its PW1100G engine. GE, through CFM International, its joint venture with France’s Snecma S.A., and Pratt & Whitney were the only manufacturers of engines for Airbus’s A320neo aircraft, and Pratt and Whitney had no viable alternatives to Avio for its accessory gearbox. The FTC charged that the reduction in competition could lead to higher prices, reduced quality, and engine delivery delays for customers of the A320neo aircraft.

The FTC’s proposed order incorporated portions of a commercial agreement negotiated between GE, Avio, and Pratt &Whiteney, as well as Pratt & Whitney’s original contract with Avio. The order bars GE from interfering with Avio’s staffing decisions as they relate to Pratt & Whitney’s accessory gearbox, and permits Pratt & Whitney to have representatives on-site at the facility. If Pratt & Whitney terminates its agreement with Avio following the merger, GE must provide transitional services to help Pratt & Whitney manufacture its accessory gearbox and related arts. The order also prohibits GE from accessing proprietary information that Pratt & Whitney may provide to Avio about the accessory gearbox. The FTC may also appoint a monitor to oversee GE’s compliance with the agreement.

The FTC worked with the European Commission in investigating GE’s acquisition of Avio. Once GE entered into its private agreement with Pratt & Whitney, the EC closed its investigation without taking additional action regarding its impact on commercial aircraft engine competition.

The agreement will be subject to public comment for 30 days, through August 19, 2013. After that, the FTC will decide whether to make the proposed order final.

Companies: General Electric Co.; AvioS.p.A.; Pratt & Whitney

News: Antitrust FederalTradeCommissionNews