Antitrust Law Daily Wrap Up, TOP STORY: FTC requires Honeywell to license patents to proceed with acquisition of scanner engine maker Intermec, (Sep 13, 2013)

By Jeffrey May, J.D.

Honeywell International Inc. has received conditional approval from the FTC for its proposed $600 million acquisition of Intermec Inc.—a leading manufacturer and seller of scan engines and other automated identification and data capture equipment. Under the terms of a proposed FTC consent order that is intended to remedy the transaction’s possible anticompetitive effects in the U.S. market for two-dimensional scan engines (2D scan engines), Honeywell would be required to license all of the U.S. patents necessary to make 2D scan engines to Datalogic IPTECH s.r.l., a subsidiary of Datalogic S.p.A. (In the Matter of Honeywell International Inc., File No. 131-0070).

According to the FTC complaint, Honeywell, Intermec, and Motorola are the three most significant participants in the 2D scan engine market in the United States. These scan engines are hardware components found in products such as retail store scanners that capture a barcode image and then use a proprietary algorithm to decode the image. The complaint limits the relevant market to 2D scan engines, as one-dimensional scan engines are purportedly not viable substitutes.

The FTC alleged that the acquisition would increase the likelihood of coordinated interaction among competitors in the relevant market. Post-acquisition, the combined share of the two firms-Honeywell and Motorola-would be in excess of 80 percent, the FTC alleged.

The proposed consent order would require Honeywell to license the relevant patents to Datalogic, or another licensee approved by the FTC, through a license agreement approved by the Commission. The FTC contends that Datalogic is well positioned to replace the competition that will be eliminated as a result of the proposed acquisition.

The proposed remedy does not include divestiture relief. In a statement announcing the settlement, FTC Bureau of Competition Director Deborah Feinstein explained that the licensing obligations were sufficient in this case.

“Although divestiture of assets is the preferred remedy in merger cases, licensing requirements can preserve competition in markets where access to needed technology is the main barrier to entry,” said Feinstein. “By requiring Honeywell to license its technology, the proposed order gives Datalogic access to the patents it needs to enter the U.S. market immediately and restore the competition lost due to the merger.”

Companies: Intermec Inc.; Honeywell International Inc.; Datalogic IPTECH s.r.l.; Datalogic S.p.A.

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