Nortek to Settle FTC Charges Deal to Buy Nutones Intercom Business Would Violate Antitrust Laws, Ftc Says

Nortek, Inc., has agreed to settle Federal Trade Commission charges that its $242.5 million acquisition of NuTone, its closest competitor in the hard-wired residential intercom business, would violate federal antitrust laws by creating a dominant firm that could drive up prices in the market. To settle the FTC charges, Nortek would divest M & S, its wholly-owned subsidiary and the second-largest seller of hard-wired residential intercoms in the United States.

Nortek, based in Providence, Rhode Island, controls 31 percent of the market for hard- wired residential intercoms, through its M & S subsidiary. NuTone is the leading seller of residential intercoms, with about 56 percent of the market. Together, the merged firm would control about 87 percent of U.S. hard-wired residential intercom sales.

The FTC alleges that the merger would violate federal antitrust laws by increasing the likelihood that Nortek would exercise market power, and increasing the likelihood that prices for the intercoms would rise and that services and innovation would be reduced. The complaint also alleges that the difficulty and expense of entering the market would make new competition unlikely.

To settle the FTC charges, Nortek would divest M & S to a Commission-approved third- party within six months, and would provide technical assistance at the purchaser’s request, for up to one year after the sale. To assure the continued viability of M & S as a competitor, the settlement would require divestiture of all M & S assets, including those relating to its central vacuum and wholehouse stereo products. If Nortek fails to divest M & S within the six-month period, the Commission may appoint a trustee to complete the divestiture. The agreement also would requires that Nortek "preserve and maintain" the competitive viability of M & S and operate M & S separately from Nortek until the divestiture is completed.

The FTC’s Boston Regional Office conducted the investigation.

The Commission vote to accept the proposed consent agreement was 4-0. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and 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 proposed consent agreement, the complaint and an analysis to aid public comment are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 981 0111)