UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

IN THE MATTER OF
GENERAL ELECTRIC COMPANY

FTC Docket No. C-4119

COMMENTS OF CITIZENS FOR VOLUNTARY TRADE

Proposed Decision and Order Announced September 13, 2004

Comments Filed October 14, 2004

Citizens for Voluntary Trade (CVT), a Virginia nonprofit

corporation, files the following comments in response to the
Federal Trade Commission’s proposed Decision and Order in the
above-captioned case.

Introduction
In March 2004, General Electric (GE) signed a contract to
purchase InVision Technologies for approximately $900 million.
Both companies manufacture non-destructive testing (NDT) x-ray
and inspection equipment. According to GE’s website:
“The use of NDT is widespread. NDT equipment can help
ensure the quality of newly manufactured components for cars, rail
or planes. It can also be used in the field to determine the level of
corrosion in oil, gas or water pipelines or check the structural
condition of an aircraft or railcar.”
The Federal Trade Commission challenged GE’s acquisition of
InVision, claiming the combined firms would eliminate “actual,
direct, and substantial competition” for three types of NDT
equipment: standard x-ray cabinets, ADR-capable x-ray systems,
and high-energy x-ray generators. The FTC’s complaint said the
merger would make GE the “dominant supplier” in all three
markets, allowing the company to “unilaterally exercise market
power” and raise prices. The FTC argues that allowing a firm to
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Comments of Citizens for Voluntary Trade

raise prices five to ten percent post-merger is illegal if “a significant

number of customers” are unlikely to purchase a lower-priced
alternative product.
Rather than contest the FTC’s charges, GE signed an FTC
“consent order” that permits the acquisition of InVision in
exchange for GE divesting InVision’s YXLON subsidiary to an
FTC-approved buyer. YXLON produces NDT equipment in the
three markets described above. (InVision’s principal business is
producing explosive detection systems for civil aviation security;
the FTC apparently raised no objections to this part of the merger.)

Comments
The FTC’s complaint and supporting documents provide no
verifiable evidence to support the Commission’s broad antitrust
claims. The complaint refers to the three markets as “highly
concentrated,” but no specific data is provided. In most merger
review cases, the FTC relies on the Herfindahl index to measure
market concentration. Although the Herfindahl index has little
economic merit, it is still the principal statistical analysis used in
government merger challenges. The FTC did not disclose any
Herfindahl index information for the three markets.
The proposed order is designed to “ensure that the competitive
environment that existed prior to the acquisition is maintained.”
The FTC believes new competitors won’t enter the market absent
government coercion. The complaint says, “[e]ntry into into each of
the relevant markets is a difficult and time-consuming process,”
because of the time and cost of developing products, establishing a
service and support network, and “developing the necessary brand
reputation and customer acceptance.”
The FTC’s negative view of free markets, however, exposes a
flaw in the agency’s demand for intervention. If the market cannot
produce viable competition because the process is too “difficult and
time-consuming,” then how can a competitor created by nothing
more than the government’s initiation of force succeed? The FTC
assumes it can predict market outcomes and intervene to produce a
desired result (or avoid an undesirable result). But markets
represent a dynamic process of trial, error, and feedback. A free
market rewards firms that invest the time and resources into
creating wealth by developing new and more efficient methods to

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Comments of Citizens for Voluntary Trade

satisfy consumer demand. Market competition does not mean, as

the FTC believes, dividing up a static pool of resources. To the
contrary, economic competition creates wealth that did not
previously exist. The size and nature of this new wealth, however,
cannot be predicted in advance, nor can it be produced through the
type of ad hoc economic planning represented by the FTC’s
proposed order in this case.
The FTC’s only principal argument for challenging the GE-
InVision merger, as originally proposed, is that it “might” lead to
an increase in short-term prices. There is no evidence, however,
that a hypothetical price increase would injure consumers or impede
the free market. Customers might welcome a price increase if they
believed it would help GE produce a better quality product in the
future. And in any case, GE and InVision are free to set prices for
their own products. Government controls are not warranted merely
because the FTC thinks the market should maintain a given price
level indefinitely. The FTC is imposing its own preference—higher
prices following a merger are always bad—upon customers. This is
precisely the opposite of how a free market operates.

Conclusion
For the reasons discussed above, the FTC should withdraw the
proposed order and dismiss its complaint against General Electric.

Respectfully Submitted,

S.M. Oliva
President
Citizens for Voluntary Trade
Post Office Box 66
Arlington, VA 22210
(703) 740-8309

Dated: October 14, 2004

(CVT File No. 5F01)