FTC Imposes Conditions on Acquisition of Industrial Valve Manufacturer Pentair plc by Emerson Electric Co.

Industrial valve manufacturer Emerson Electric Co. has agreed to sell the switchbox business of Pentair plc to Stamford, Conn.-based Crane Co. in order to settle Federal Trade Commission charges that Emerson’s proposed $3.15 billion acquisition of Pentair would violate federal antitrust law.

Emerson and Pentair are manufacturers of industrial valves and control products, including switchboxes, which are widely used in the oil and gas, chemical, petrochemical, power, and other industries. Switchboxes are devices used to monitor and control valves that regulate the flow of liquids and gases in industrial facilities.

According to the complaint, the acquisition would combine the two leading manufacturers of switchboxes in the United States – which together control about 60 percent of the U.S. market. These market share numbers may underestimate the likelihood of anticompetitive effects to switchbox customers that would otherwise result from this transaction. Switchboxes perform a critical safety function, so brand reputation and product reliability are very important to customers. Emerson’s TopWorx and Pentair’s Westlock switchboxes are the most widely-used brands nationwide and, for many customers, the only acceptable brands of switchboxes.

Because of the time and investment required to develop switchboxes along with the time required to build a sufficient reputation with customers for quality and reliability, current and future competitors in the switchbox market are unlikely to restore the loss of competition caused by the acquisition, the complaint alleges.

Under the terms of the consent agreement, within 10 days after Emerson acquires Pentair, Emerson must divest Westlock Controls Corporation, the Pentair subsidiary that designs, manufactures, and sells switchboxes, to Crane Co. The order requires Emerson to provide Crane all of Westlock’s production facilities, intellectual property, confidential business information, and the opportunity to hire Westlock employees.

As a diversified designer and manufacturer of highly engineered industrial products, Crane has the financial strength and industry expertise and experience to acquire Westlock, and Crane is not currently a competitor in the U.S. switchbox market, according to the FTC.

Further details about the consent agreement – which includes an asset maintenance order and allows the Commission to appoint a monitor trustee – are set forth in the analysis to aid public comment for this matter.

Commission staff cooperated with antitrust agencies in Canada, the European Union, and Mexico, often working closely with their staff to analyze the proposed transaction and reaching outcomes that benefit consumers in the United States.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 2-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through May 30, 2017, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $40,654.

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