In a deal designed to preserve competition in the market for structural castings for aerospace components, Precision Castparts Corp. (PCC) has agreed to divest titanium, large stainless steel and large nickel-based superalloy production assets to settle Federal Trade Commission charges that its acquisition of Wyman-Gordon Company would violate federal antitrust laws. The settlement calls for PCC to divest Wyman-Gordon's titanium foundry in Albany, Oregon, and Wyman-Gordon's Large Cast Parts foundry in Groton, Connecticut, and to provide technical and other assistance to the buyers of the divested facilities to assure that they can effectively compete in the markets for cast aerospace components.
PCC, based in Portland, Oregon, is a worldwide manufacturer of complex metal components and the world leader in the production of large structural castings for the aerospace industry. Grafton, Massachusetts-based Wyman-Gordon manufactures advanced components used in the aerospace industry, including cast components for jet engine and airframe applications. The companies are two of the world's leading suppliers of titanium, stainless steel and nickel-based superalloy aerospace investment cast components. In May, PCC agreed to acquire Wyman-Gordon for $721 million.
"It is vital to maintain vigorous competition in the market for these essential aerospace components," said Richard G. Parker, Director of the FTC's Bureau of Competition. "This settlement will insure that consumers continue to benefit from the cost and choice options that vigorous competition brings."
According to the FTC complaint detailing the charges, while titanium, stainless steel, nickel-based superalloy, aluminum and other metals are used to manufacture aerospace components, one metal is typically superior to the alternatives based on technical specifications and performance considerations. Thus, metals are not interchangeable from component to component. PCC and Wyman-Gordon are two of only four viable suppliers of titanium aerospace cast components and large nickel-based superalloy aerospace cast components and two of only six suppliers of large stainless steel components. The FTC alleged that, by eliminating competition in these highly concentrated markets, the acquisition would have allowed PCC to exercise market power and increase prices.
To settle the FTC's charges, PCC will divest Wyman-Gordon's Albany titanium foundry to a Commission-approved buyer by April 25, 2000. In the event that PCC fails to divest the foundry, the FTC may appoint a trustee to divest the assets. To remedy the acquisition's anticompetitive effects in the markets for large stainless steel and large nickel-based superalloy aerospace cast components, PCC will divest Wyman-Gordon's Groton Large Cast Parts (LCP) foundry to Doncasters plc, a leading international manufacturer of aerospace investment cast components, within the next 16 business days. In the event that PCC and Wyman-Gordon fail to divest the LCP facility to Doncasters, the Commission may appoint a trustee to divest both the LCP and the Small Cast Parts foundry also located in Groton. To insure that Doncasters and the other Commission-approved buyer can compete effectively in the titanium, stainless steel and nickel-based superalloy aerospace cast components markets, PCC and Wyman-Gordon are required to provide technical assistance and advice to the acquirers about manufacturing and selling aerospace cast components. In addition, at the request of customers at any time during the next year, PCC and Wyman-Gordon must provide all tooling and manufacturing know-how associated with producing a particular component and must pay all delivery costs and half the costs of obtaining customer-required certifications and approvals. PCC and Wyman-Gordon must also provide financial incentives to key employees of the facilities they are divesting, to encourage them to accept employment with the acquirers. The order also contains certain record keeping provisions to allow the Commission to monitor compliance.
The Commission vote to accept the proposed consent agreement was 4-0.
A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment until December 10, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint and consent are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 991-0240)