0210002

Pursuant to the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("Commission"), having reason to believe that Respondents INA-Holding Schaeffler KG ("INA"), a corporation, and FAG Kugelfischer Georg Schäfer AG ("FAG"), a corporation, both subject to the jurisdiction of the Commission, have entered into an agreement whereby INA would acquire all of the issued and outstanding securities and convertible debentures of FAG in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act ("FTC Act"), as amended, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its Complaint, stating its charges as follows:

I. RESPONDENTS

1. Respondent INA is a corporation organized, existing and doing business under and by virtue of the laws of Germany, with its office and principal place of business located at Industriestrasse 1-3, D-91072 Herzogenaurach, Germany. INA's principal subsidiary in the United States is located at 308 Springhill Farm Road, Fort Mill, South Carolina 29715.

2. Respondent FAG is a corporation organized, existing and doing business under and by  virtue of the laws of Germany, with its office and principal place of business located at Georg-Schäfer-Straße 30, 97421 Schweinfurt, Germany. FAG's principal subsidiary in the United States, Barden Corporation, is located at 200 Park Avenue, P.O. Box 2449, Danbury, Connecticut 06813.

3. Respondents INA and FAG are engaged in, among other things, the research, development, manufacture and sale of ball and roller bearings, including, but not limited to, cartridge ball screw support bearings ("CBSSBs").

4. Respondents are, and at all times herein have been, engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act as amended, 15 U.S.C. § 12, and are corporations whose business is in or affects commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

II. THE PROPOSED ACQUISITION

5. On or about September 13, 2001, INA announced a cash tender offer to acquire all of the issued and outstanding shares of FAG ("Acquisition"). On or about October 15, 2001, FAG announced that it had reached a legally binding agreement with INA regarding the pricing of the Acquisition and the management of the combined firm ("Agreement"). Under the terms of the Agreement, the Acquisition is valued at approximately $650 million.

III. THE RELEVANT MARKET

6. For the purposes of this Complaint, the relevant line of commerce in which to analyze the effects of the Acquisition is the research, development, manufacture and sale of CBSSBs. CBSSBs are a type of bearing used in the manufacturing of machine tool equipment. CBSSBs are sold both to original equipment manufacturers as well as after-market customers for replacement purposes.

7. For the purposes of this Complaint, the world is the relevant geographic area in which to analyze the effects of the Acquisition in the relevant line of commerce.

IV. THE STRUCTURE OF THE MARKET

8. INA and FAG are the only two suppliers of CBSSBs in the world. Thus, the market for the research, development, manufacture and sale of CBSSBs is extremely highly concentrated, as measured by the Herfindahl-Hirschman Index. The proposed acquisition, if consummated, would result in a monopoly in the relevant market.

V. ENTRY CONDITIONS

9. Entry into the research, development, manufacture and sale of CBSSBs is a difficult process because of, among other things, the time and cost associated with researching and developing a line of CBSSB products, acquiring the necessary production assets, and developing the expertise needed to successfully design, produce, and market these products.

10. New entry into the relevant market for CBSSBs is not likely to occur to deter or counteract the adverse competitive effects described in Paragraph 12 because the costs of entering the market and producing CBSSBs are high relative to the potential sales opportunities available to an entrant.

11. New entry into the relevant market for CBSSBs would not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 12 because it would take over two years for an entrant to accomplish the steps required for entry and achieve a significant market impact.

VI. EFFECTS OF THE ACQUISITION

12. The effects of the Acquisition, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the relevant market in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45, in the following ways, among others:

a. by eliminating actual, direct, and substantial competition between INA and FAG in the relevant market;

b. by creating a monopoly in the relevant market, thereby substantially increasing the likelihood that INA will unilaterally exercise market power in the relevant market;

 

c. by reducing current incentives to improve service or product quality, or pursue further innovation in the relevant market; and

 

d. by increasing the likelihood that customers of CBSSBs would be forced to pay higher prices.

VII. VIOLATIONS CHARGED

13. The Agreement constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.

14. The Acquisition, if consummated, would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this twentieth day of December, 2001, issues its Complaint against said Respondents.

By the Commission, Chairman Muris not participating.

Donald S. Clark
Secretary

SEAL