Competitive impact statements and proposed consent judgments: AlliedSignal Inc. et al.,

 
CONTENT

[Federal Register: March 20, 2000 (Volume 65, Number 54)]

[Notices]

[Page 15013-15016]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr20mr00-146]

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. AlliedSignal Inc. and Honeywell Inc., Case No. 1:99 CV 02959 (PLF) (D.D.C.); Response to Public Comments on Antitrust Consent Decree

Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), that on March 9, 2000, the United States filedis responses to public comments on the proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc. Case No. 1:99 CV 02959 (PLF) (D.D.C., filedNovember 8, 1999), with the United States District Court for the District of Columbia.

On November 8, 1999, the United States fileda Complaint which alleged that AlliedSignal's proposed merger with Honeywell would violate Section 7 of the Clayton Act, 15 U.S.C. 18, by substantially lessening competition in the traffic alert and collision avoidance systems (``TCAS'') market, the search and surveillance weather radar (``SSWR'') market, the reaction and momentum wheel market, and the inertial systems market. The proposed Final Judgment, also filedon November 8, 1999, requires AlliedSignal and Honeywell to divest the TCAS business of Honeywell located in Glendale, Arizona; the SSWR business of AlliedSignal located in Olathe, Kansas; the space and navigation business of AlliedSignal located in Teterboro, New Jersey; the mechanical rate gyroscope business of AlliedSignal located in Cheshire, Connecticut, and a related repair business in Newark, Ohio; the microSCIRAS technology business of AlliedSignal located in Redmond, Washington, or, in the alternative, the micro-electro-mechanical systems inertial sensor business of Honeywell located in Minneapolis and Plymouth, Minnesota; and the AlliedSignal micromachined silicon accelerator and micromachined accelerometer gyroscope technology business.

Public comment was invited within the statutory 60-day comment period. The public comments and the United States' responses thereto are hereby published in the Federal Register and have been filedwith the Court. Copies of the Complaint, Hold Separate Stipulation and Order, proposed Final Judgment, Competitive Impact Statement, and the United States' Certificate of Compliance with Provisions of the Antitrust Procedures and Penalties Act (to which the public comments and the United States' responses are attached) are available for inspection in Room 215 of the Antitrust Division, Department of Justice, 325 7th Street, NW, Washington, DC 20530 (telephone: 202-514- 2481) and at the Office of the Clerk of the United States District Court for the District of Columbia, 333 Constitution Avenue, NW, Washington, DC 20001.

Copies of any of these materials may be obtained upon request and payment of a copying fee.

Constance K. Robinson, Director of Operations & Merger Enforcement, Antitrust Division.

INSPEC Japan

January 17, 2000

Mr. J. Robert Kramer II Chief, Litigation II Section, Antitrust Division, United States Department of Justice, 1401 H Street, N.W., Suite 3000, Washington D.C. 20530

Dear Sir: Subject: Antitrust Case # 1:99CV02959, United States of America v. Allied Signal Inc and Honeywell Inc. Invitation to submit written comment

My company, INSPEC International Co. Ltd., a Japanese registered corporation, is a long term Supplier to Honeywell of an electro- mechanical sub-assembly which is used in the TCAS cockpit display, as well as a number of individual piece parts.

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As a result of the United States request of Honeywell to sell the TCAS product line, it is conceivable that the new Owner will not continue to procure either products or services from the existing Honeywell Suppliers, which could include INSPEC.

Avionics products such as this are generally known, and reasonably anticipated, to continue in production for many years. INSPEC, as a Honeywell Supplier in good standing, and an asset friendly to the United States, may suffer losses or unexpected costs in the event of prematurely terminated procurement by the new Owner.

Furthermore, as a Small Business, with limited resources, the effect on my company could be much more severe than that experienced by other larger Honeywell Suppliers but, nonetheless, significantly effect the livelihood of staff employed by any Supplier, large or small. This may also include Suppliers of Allied Signal company.

Based on this, I would like to offer the comment that the United States, as the party requiring the divestiture as approval for the merger, may damage Suppliers unfairly and should seek to protect and preserve the manufacturing ability and know-how of them after the divestiture has taken place, as well as the revenue they could reasonably expect for their continuing products and services throughout the life of a program, particularly as the risk of a government forcing a complete stoppage of an existing program in this way is not one which is generally anticipated by a business owner such as myself.

Whilst unsure of the exact vehicle to do this, it would seem the most simplest solution could perhaps be by way of an Order requiring continued procurement by the new Owner.

A further comment would be that divestiture will result in forced termination of our existing Supplier relationship with Honeywell. A hard earned relationship which we value greatly. Re-establishing that relationship on another program is not easy. Whilst there appears to be no right to a continuing relationship, I feel there is a presumption that Suppliers in good standing should be granted the opportunity re- establish a relationship with the new Allied Signal/Honeywell organization. In view of this, it would be appropriate if the United States would also consider the additional costs and effort this will involve Suppliers in.

In closing, I would like to make it clear that INSPEC only recently learnt of the divestiture and we do not oppose it because of its obvious merits to the two organizations nor, to date, have we been in discussion with Honeywell concerning it. I am sure that when we are, we will enjoy their usual highly professional handing of our concerns.

Finally, whilst I would argue, from an academic point of view, that a merger would not necessarily involve reduced Quality of products or services in experienced companies such as Honeywell and Allied Signal as you have stated, but could actually result in an improvement of the many aspects which contribute to our perception and experience of Quality in its overall sense, whilst reducing specific Costs Of Quality to the benefit of the government, public and shareholders. I understand the position of the Untied States in the other concerns you have outlined. Nevertheless, I would strongly urge you to consider the potential negative impact upon Suppliers outlined above that this forced divestiture entails without proper safeguards, and who may not be aware or adequately represented or considered in this case.

Thank you for your kind consideration of my comments.

Very Truly Yours,

INSPEC International Co. Ltd.

Richard Wicks, President.

U.S. Department of Justice

March 9, 2000.

Mr. Richard Wicks, President, INSPEC International Company Ltd., 1-1-4 Wakamatsu Cho, Fuchu, Tokyo, 183, Japan

Re: Comment on Proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., No. 1:99 CV 002959 (PLF)(D.D.C. November 8, 1999)

Dear Mr. Wicks: Thank you for your letter of January 17, 2000 concerning the proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., currently pending before the federal district court for the District of Columbia. The United States' complaint alleges that the merger as proposed between AlliedSignal Inc. and Honeywell Inc. would have substantially lessened competition in four product areas--traffic alert and collision avoidance systems; search and surveillance weather radar; reaction and momentum wheels, and inertial systems. The proposed Final Judgment would settle the case by requiring the post-merger company, now known as Honeywell International Inc. (``Honeywell''), to divest, among other assets, its traffic alert and collision avoidance system (``TCAS'') business in Glendale, Arizona. Negotiations to divest this business consistent with the terms of the proposed Final Judgment are ongoing.

Your letter states that INSPEC INTERNATIONAL Company Ltd. (``INSPEC'') manufactures an electro-mechanical product which is supplied to the Honeywell TCAS business soon to be divested. INSPEC is concerned that the proposed divestiture may damage its business unfairly and terminate its hard-earned relationship with Honeywell. Given INSPEC's investment in the products it now sells to Honeywell, it requests that the United States consider requiring the new owner of the TCAS assets to purchase products from INSPEC.

Every change in corporate ownership, whether by divestiture or otherwise, raises the potential that a new owner may seek new suppliers. Since U.S. antitrust laws are intended to preserve competition, not specific competitors, the United States respectfully declines to require the new purchaser of the TCAS assets to deal with INSPEC or any other specific supplier. INSPEC' competitive assets, the technological know-how and manufacturing ability referenced in your letter, and your company's reputation with the employees of the TCAS business in Glendale, Colorado (who overwhelmingly will remain with the business) will be unaffected by the divestiture and will provide a platform for your firm to continue to compete successfully against other potential suppliers.

Thank you for bringing your concerns to our attention; we hope this letter will help you understand the reasons for our position. Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(d), a copy of your comment and his response will be published in the Federal Register and filedwith the Court.

Sincerely yours,

J. Robert Kramer II, Chief, Litigation II Section.

January 6, 2000.

J. Robert Kramer, II, Chief, Litigation II Section, Antitrust Division, U.S. Dep't. of Justice, 1401 H St., NW., Suite 3000, Washington, DC 20005, (202) 307-0924

This protest is being submitted in accordance with the opportunity offered to submit written comment concerning the proposed decree during a 60-day comment period.

I represent a significant number of Honeywell employees who have eligibility for retirement and have been offered employment with the 1.3 Corporation, Space and Navigation Systems Division. We submit the comments below for your consideration. We (the potential retirees) only recently inadvertently obtained a copy of the Honeywell memo citing the 60-day comment period (Honeywell issued the memo to certain people Nov. 10, 1999).

The items listed below encourage resignation of key employees, adversely affecting the viability of the 1.3 Space and Navigation Div, in conflict with the spirit if not the intent of the Divestiture agreement. Additional comments may be forthcoming next week.

Whereas Honeywell has reneged on its commitment to provide retiree medical benefits to divested Space and Navigation personnel accepting comparable employment with 1.3 subsequent to retirement from 1.3.

Whereas, 1.3 is requiring approval for previously accepted divested retiree-eligible Space and Navigation personnel on a non- comparable employment basis in exchange

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for Honeywell retirement pension and medical benefits in conflict with the intent of published AlliedSignal commitments to their employees.

Whereas divested Honeywell Space and Navigation employees are excluded from the ``foster the employment and the retention of employees'' specified in para. F. of Section 4 ``Divestiture'' contained in U.S. District Court for the District of Columbia Civil No. 992959 filedon 11/8/99.

Your attention to this matter would be appreciated.

Sincerely Yours,

Stephen Suckenick, 3951 Gouverneur Ave., New York, New York 10463.

December 27, 1999

J. Robert Kramer II, Chief Litigation II Section, Antitrust Division, U.S. Department of Justice

Dear Sir: With reference to the Consent Decree between the Department of Justice and Allied Signal/Honeywell, I represent a group of approximately 60 employees of the new Honeywell International Corporation who are being divested in the Teterboro- based Navigation/Space operation. They would like to know why the Teterboro operation was not given the same severance benefit as the other operations listed on page 16, paragraph E?

Sincerely,

Stephen Suckenick, 3951 Gouverneur Ave, New York, NY 10463.

November 30, 1999.

Dear Sir, the following regards the planned divestiture of the AlliedSignal Space and Navigation business located in Teterboro, New Jersey. My understanding is that this divestiture is a result of an agreement between AlliedSignal and the Department of Justice (DOJ) and is a condition of the DOJ approval of the merger of AlliedSignal, Inc. and Honeywell, Inc. My further understanding is that this divestiture is intended to maintain the former AlliedSignal Space and Navigation business as a viable long term aerospace subsystems supplies.

This letter is intended to inform your office of a situation which could prevent the Space and Navigation business from being a viable long term aerospace subsystems supplier and to solicit DOJ intervention in precluding this outcome. The specific situation concerns the large number of senior staff employees who are pension eligible and are likely to retire at the time of the divestiture rather than sustain the risks associated with having their vested pension and retiree health benefits redefined by the new owner's benefit policy changes and the risk associated with the new owner's long-term financial stability. This outcome did in fact occur as a result of two recent sales of AlliedSignal divisions (the communications Division in Towson, Maryland and the Ocean Systems Division in Sylmar, California). It is estimated that at the Space and Navigation business one third of the employees are pension eligible and they clearly represent a critical mass of technical and business knowledge essential to the continuing success of this business.

The Space and navigation business sale is targeted to be closed by December 24, 1999. It is requested that the DOJ involve itself immediately in the issue described above and assure an outcome which will support the DOJ's stated objective.

Sincerely,

Stephen Suckenik, 3951 Gouverneur Avenue, New York, N.Y. 10463, (718-884-6986)

U.S. Department of Justice

March 9, 2000.

Mr. Stephen Suckenik, 3951 Gouveneur Avenue, New York, New York 10463

Re: Comments on Proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., No. 1:99 CV 002959 (PLF) (D.D.C. November 8, 1999)

Dear Mr. Suckenik: This letter responds to your comments dated November 30, 1999, December 27, 1999 and January 6, 2000 concerning the proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., currently pending before the federal district court for the District of Columbia. The United States' complaint alleges that the merger as proposed between AlliedSignal Inc. and Honeywell Inc. would have substantially lessened competition in four product areas--traffic alert and collision avoidance systems; search and surveillance whether radar; reaction and momentum wheels, and inertial systems. The proposed Final Judgment would settle the case by requiring the post-merger company, now known as Honeywell International Inc. (``Honeywell''), to divest, among other assets, its space and navigation business in Teterboro, New Jersey. That business produces numerous products, including ring laser gyroscopes, fiber optic gyroscopes and reaction and momentum wheels.

In a transaction approved in advance by both the U.S. Department of Justice and the U.S. Department of Defense in December 1999, L-3 Communications Corporation (``L-3'') has now purchased the space and navigation business and certain other divested assets from Honeywell. The purchase was approved by the Government only after a careful review of L-3 led to the conclusion that L-3 had the financial capability, the intent and the managerial expertise to operate the space and navigation business in competition with other businesses making the same products, including Honeywell.

Your letters state that you represent a significant number of Honeywell employees (approximately 60) who are eligible for retirement with Honeywell but have received offers of employment from L-3 to work in the divested space and navigation business in Teterboro. The letters collectively raise several concerns about the proposed Final Judgment as it affects the divestiture of Honeywell's space and navigation business to L-3. Your November 30 comment suggests that the long-term viability of the divested space and navigation business may be affected negatively by the likely retirement of a large number of senior staff members in lieu of their acceptance of the risks related to L-3's potential redefining of their vested pension and retiree health benefits. In your December 27 letter, you ask why the Teterboro space and navigation business employees did not receive severance benefits identical to those received by certain other employees pursuant to Section IV(E) of the proposed Final Judgment. Your January 6, 2000 comment again states that the resignation of key Honeywell employees could affect the viability of the divested space and navigation business. You note, among other reasons, that Honeywell has reneged on its commitment to provide retiree medical benefits to former Honeywell employees accepting employment with L-3, after their retirement from L-3, and that the incentives given to certain Honeywell employees under Section IV(E) of the proposed Final Judgment are not offered to space and navigation employees who join L-3.

Differences in the retirement or severance benefits offered by a new employer as compared to those afforded by a prior one are always a concern when a business is sold. The facts here strongly suggest, however, that L-3 has successfully avoided the potential resignation of key Honeywell employees involved with the space and navigation business in Teterboro. L-3 considered approximately 430 applicants who had been previously employed by Honeywell in its space and navigation business. L-3 subsequently offered jobs to roughly 383 persons, and virtually all of those offers (about 94 percent) have been accepted. L-3 believes it has successfully recruited the key Honeywell employees it requires to insure the long-term viability of the divested space and navigation business.

In addition, Section IV(E) of the proposed Final Judgment intentionally provides a different incentive package to specific groups of Honeywell employees based on the United States' assessment that certain employee groups would require greater motivation to join the new purchaser of a divested business. Where a product to be divested constitutes less than an entire Honeywell business unit or sub-unit, the opportunity for affected employees to remain at Honeywell in a similar capacity is greater because the Honeywell business unit in which the employee works will still be part of Honeywell. In those situations, incentives to motivate movement to the new purchaser of a divested product were increased by requiring Honeywell to vest all unvested pension rights of the employee and to provide that employee with all severance benefits to which the employee would have been entitled if terminated without cause. The Teterboro space and navigation business functioned as a separate Honeywell business sub-unit, and was not therefore entitled to the additional incentives described above. The virtual unanimity with which key employees of the space and navigation business accepted L- 3's offers of employment confirms the correctness of the United States' judgment on this issue.

Thank you for bringing your concerns to our attention; we hope this information will help alleviate them. Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.

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Sec. 16(d), a copy of your comments and this response will be published in the Federal Register and filedwith the Court.

Sincerely yours,

J. Robert Kramer II, Chief, Litigation II Section.

36 William Drive, Rockaway, NJ 07866, November 10, 1999

J. Robert Kramer II, Chief, Litigation II Section, Antitrust Division, U.S. Department of Justice, 1401 H St., NW., Suite 3000, Washington, DC 20005

Dear Mr. Kramer: This letter concerns the AlliedSignal divestiture of its space and navigation business at Teterboro, New Jersey. In my opinion, there will likely be unintended consequences stemming from the Government's antitrust suit and the resulting consent decree that were not mentioned in today's Department of Justice press release.

First, it is probable that the Teterboro facility will be closed. As you may know, Teterboro's business has not been on plan. Employees were told a planned sizable layoff was delayed only because of the moratorium on such action imposed by the Government. The already troubled Teterboro business will not survive as two smaller businesses.

Second, employees forced to become part of the Space and Navigation entity to be divested may lose important benefits. For example, there has been no assurance from AlliedSignal that an employee's severance benefits will be honored by the acquiring Company. This is especially important because involuntary layoffs of Space and Navigation business employees seem certain because of the poor business prospects mentioned above.

In summary, the Government's principled attempt to preserve competition has sparked a series of decisions and events detrimental to Teterboro employees.

Sincerely,

Michael J. Kelly.

cc: Hon. Frank Lautenberg, Hon. Robert Torricelli, Hon. Rodney Frelinghuysen. Mr. Michael J. Kelly, 36 William Drive, Rockaway, NJ 07866

Re: Comment on Proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., No. 1:99 CV 002959 (PLF) (D.D.C. November 8, 1999)

Dear Mr. Kelly, This letter responds to your November 10, 1999 comment on the proposed Final Judgment in United States v. AlliedSignal Inc. and Honeywell Inc., currently pending before the federal district court for the District of Columbia. The United States' complaint alleges that the merger as proposed between AlliedSignal Inc. and Honeywell Inc. would have substantially lessened competition in four product areas--traffic alert and collision avoidance systems; search and surveillance weather radar; reaction and momentum wheels, and inertial systems. The proposed Final Judgment would settle the case by requiring the post-merger company, now known as navigation business in Teterboro, New Jersey. That business produces numerous products, including ring laser gyroscopes, fiber optic gyroscopes and reaction and momentum wheels.

In a transaction approved in advance by both the U.S. Department of Justice and the U.S. Department of Defense in December 1999, L-3 Communications Corporation (``L-3'') has now purchased the space and navigation business and certain other divested assets from Honeywell. The purchase was approved by the Government only after a careful review of L-3 led to the conclusion that L-3 had the financial capability, the intent and the managerial expertise to operate the space and navigation business in competition with other businesses making the same products, including Honeywell. We disagree with the suggestion in your letter that separating the space and navigation business from the remainder of Honeywell's Teterboro operations makes it more likely that the space and navigation business, or any other operation, will fail. A more likely outcome is that L-3's specific focus on the management and growth of its recent acquisition will insure that the space and navigation business has the best chance possible to succeed.

Your November 10 letter further expresses the concern that L-3 may not honor the same severance benefits provided by Honeywell in the past, and notes that this benefit is particularly important in the context of a business struggling to survive in a tough business environment. Understanding the importance of this benefit, the United States does not generally dictate the terms and conditions pursuant to which a particular purchase is made; these details are subject to negotiation between the buyer and seller. Section IV(E) of the proposed Final Judgment encourages L-3 to make reasonable offers to those employees it desires to recruit by precluding Honeywell from hiring any employee for a period of two years once a reasonable offer has been received from L-3. This requirement, together with L-3's already-strong incentive to make attractive offers to key personnel it needs to recruit, provides reasonable protection to Honeywell employees joining L-3 or any other approved purchaser of a divested business. Following its review of the space and navigation business, L-3 offered jobs to roughly 383 persons; virtually all of those offers (about 94 percent) have now been accepted.

Thank you for bringing your concerns to our attention; we hope this information will help alleviate them. Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(d), a copy of your comment and this response will be published in the Federal Register and filedwith the Court.

Sincerely yours,

J. Robert Kramer II, Chief, Litigation II Section.

cc: Honorable Frank Lautenberg, Honorable Robert Torricelli, Honorable Rodney Frelinghuysen.

[FR Doc. 00-6749Filed3-17-00; 8:45 am]

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