Mahle GmbH; Mahle, Inc.; Metal Leve S.A.; Metal Leve, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 961-0085]

Mahle GmbH; Mahle, Inc.; Metal Leve S.A.; Metal Leve, Inc.;

Analysis To Aid Public Comment

agency: Federal Trade Commission.

action: Proposed consent agreement.

-----------------------------------------------------------------------

summary: In settlement of alleged violations of federal law prohibiting

unfair or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require, among other things, Mahle, Inc.,

the Morristown, Tennessee-based subsidiary of a German company, and

Metal Leve, Inc., the Ann Arbor, Michigan-based subsidiary of a

Brazilian firm, to divest Metal Leve's United States piston business.

The complaint accompanying the consent agreement alleges that, by

acquiring Metal Leve, Mahle would become a monopolist in the research,

development, manufacture, and sale of (1) articulated pistons in the

United States, and (2) large bore two-piece pistons worldwide. Pursuant

to a separate federal court stipulation, Mahle and Metal Leve will pay

in excess of $5 million for failing to give antitrust enforcers advance

notice of Mahle's acquisition of a controlling interest in Metal Leve.

dates: Comments must be received on or before May 6, 1997.

addresses: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

for further information contact:

William J. Baer, Federal Trade Commission, H-374, 6th St. and Pa. Ave.,

NW., Washington, DC 20580, (202) 326-2932.

George S. Cary, Federal Trade Commission, H-374, 6th St. and Pa. Ave.,

NW., Washington, DC 20580, (202) 326-3741.

Howard Morse, Federal Trade Commission, S-3627, 6th St. and Pa. Ave.,

NW., Washington, DC 20580, (202) 326-2949.

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

[[Page 10567]]

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 accompanying complaint.

An electronic copy of the full text of the consent agreement package

can be obtained from the Commission Actions section of the FTC Home

Page (for February 27, 1997), on the World Wide Web, at ``http://

www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC

Public Reference Room, Room H-130, Sixth Street and Pennsylvania

Avenue, N.W., Washington, DC 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 Mahle GmbH, Mahle, Inc., Metal Leve, S.A., and

Metal Leve, Inc. (``Proposed Respondents'').

The proposed 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.

Mahle GmbH, a German piston manufacturer, operates in the United

States through its wholly-owned subsidiary Mahle, Inc., while Metal

Leve, S.A., a competing Brazilian piston manufacturer, operates in the

United States through its wholly-owned subsidiary Metal Leve, Inc. On

June 26, 1996, Mahle GmbH acquired a controlling interest in Metal

Leve, S.A. for approximately $40 million without first filing

notification and report forms with the Federal Trade Commission or the

Department of Justice Antitrust Division as required by the Hart-Scott-

Rodino Act, Section 7A of the Clayton Act, 15 U.S.C. Sec. 18a. The

Commission has approved a Stipulation providing for civil penalties

under the Hart-Scott-Rodino Act for Mahle and Metal Leve's failure to

file the required notifications, and has accepted, subject to final

approval, the Agreement Containing Consent Order resolving

administrative charges that the acquisition may substantially lessen

competition in violation of Section 7 of the Clayton Act, as amended,

15 U.S.C. 18, Section 5 of the Federal Trade Commission Act, as

amended, 15 U.S.C. 45.

The Stipulation provides for maximum civil penalties from both

Mahle and Metal Leve from the date of the acquisition until Proposed

Respondents file an application for divestiture as required by the

proposed Order, which application is subsequently approved by the

Commission and which divestiture is thereafter accomplished. Mahle and

Metal Leve will each pay civil penalties of $10,000 per day from June

26, 1996, through November 20, 1996, and $11,000 per day thereafter,

pursuant to the Debt Collection Improvement Act of 1996, Pub. L. 104-

134 Sec. 31001(s) and FTC Rule 1.98, 16 CFR 1.98, 61 FR 54549 (Oct. 21,

1996). The Stipulation, along with a complaint alleging a cause of

action under Section 7A(g)(1) of Clayton Act, 15 U.S.C. 18A(g)(1), will

be filed, with the concurrence of the Department of Justice Antitrust

Division, by Commission attorneys acting as special attorneys to the

Attorney General, on behalf of the United States.

The proposed administrative complaint alleges that the acquisition

may substantially lessen competition in the research, development,

manufacture, and sale of articulated pistons in the United States and

large bore two-piece pistons worldwide. The proposed complaint alleges

a market of articulated pistons up to 150 millimeter in diameter used

in diesel engine applications, such as Class 8 truck engines for buses

and big highway rigs, which require pistons that can withstand high

temperatures and pressures to maintain engine performance while meeting

increasingly stringent government emissions requirements. The proposed

complaint also alleges a market of large bore two-piece pistons of more

than 150 millimeters in diameter that are used in high output diesel

and natural gas engines, such as locomotive engines and stationary

power generators as well as engines for various marine and industrial

applications. The proposed complaint alleges that the relevant

geographic market for evaluating the acquisition's effect on

articulated pistons is the United States, while the relevant geographic

market for evaluating the acquisition's effect on large bore two-piece

pistons is worldwide.

The proposed complaint alleges that, prior to the acquisition,

Mahle had more than a 50 percent share and Metal Leve had nearly a 45

percent share of the articulated piston market, producing a combined

market share of more than 95 percent. The only other firm in the market

is a weak competitor that has been losing business to Mahle and Metal

Leve. Thus, the Mahle/Metal Leve acquisition results in a monopoly or

near monopoly in the articulated pistons market.

The proposed complaint alleges that the market for two-piece large

bore pistons is also highly concentrated. There are only four producers

of two-piece large bore pistons in the world. The proposed complaint

alleges that Mahle and one other firm dominate the market, while Metal

Leve has gained sales and is aggressively bidding.

The proposed complaint alleges that entry into the relevant piston

markets would not be timely, likely, or sufficient to deter or offset

the adverse effects of Mahle's acquisition of Metal Leve on

competition, because an entrant would have to develop manufacturing

expertise, satisfy time-consuming customer qualification requirements,

and acquire manufacturing equipment at a significant sunk cost. Entry

would likely take three to five years or more.

The proposed complaint alleges that Mahle's acquisition of Metal

Leve substantially lessened competition in both the articulated and

large bore two-piece piston markets, by among other things, eliminating

Metal Leve as an independent competitor that has been a substantial,

direct, head-to-head competitor with Mahle and a maverick in the

relevant markets. In the articulated piston market, the acquisition has

created a monopoly or near monopoly. The proposed complaint alleges

that the Mahle/Metal Leve acquisition substantially lessened

competition in the large bore two-piece piston market, by giving

control of Metal Leve, an aggressive and innovative competitor, to

Mahle, one of only two firms that together have dominated the market

for large bore two-piece pistons.

The proposed Order would remedy the alleged violation by restoring

the competition lost as a result of Mahle's acquisition. The proposed

Order would require divestiture of Metal Leve's U.S. piston business,

which is defined to include, among other things, assets used by Metal

Leve for the manufacture and sale of pistons in the United States,

[[Page 10568]]

including plants in Orangeburg and Sumter, South Carolina, and a

research and development center in Ann Arbor, Michigan, as well as

technology outside the United States which supports that business.

Metal Leve and Mahle will cease to have any rights to what was formerly

the Metal Leve articulated piston technology once the divestiture

required by the proposed Order has been accomplished.

The proposed Order requires that the divestiture be completed

within ten days of the Order becoming final. Thus, the Proposed

Respondents must file an acceptable application for divestiture well

before the proposed Order is made final, so that the application can be

placed on the public record for thirty days, the Commission can

determine whether to approve it, and Respondents can complete the

required divestiture within the time period set forth in the proposed

Order.

If the required divestiture is not accomplished within ten days of

the Order being made final, then a trustee may be appointed to divest

the business. The trustee may add some or all of the Metal Leve, S.A.

piston business to accomplish the divestiture. This crown jewel

provision ensures that the required divestiture will be accomplished in

a timely manner.

A Hold Separate Agreement accepted by the Commission on August 30,

1996, will continue in effect until the divestiture required by the

proposed Order is accomplished. The Hold Separate requires Metal Leve

to be operated independently of Mahle on a worldwide basis and requires

Metal Leve, Inc. to be maintained as a viable competitor in the

business in which it was engaged prior to Mahle's acquisition of Metal

Leve.

Finally, the proposed Order prohibits Mahle or Metal Leve from

acquiring any interest in any other company engaged in the manufacture

or sale of articulated pistons in the United States, without prior

notice to the Commission, for a period of ten (10) years.

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.

Donald S. Clark,

Secretary.

[FR Doc. 97-5708 Filed 3-6-97; 8:45 am]

BILLING CODE 6750-01-M