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ANALYSIS OF AGREEMENT CONTAINING CONSENT ORDERS

TO AID PUBLIC COMMENT

In the Matter of Panasonic Corporation and Sanyo Electric Co., Ltd

File No. 091-0050

I. Introduction

The Federal Trade Commission (“Commission”) has accepted from Panasonic

Corporation (“Panasonic”), subject to final approval, an Agreement Containing Consent Orders

(“Consent Agreement”), which is designed to remedy the anticompetitive effects resulting from

Panasonic’s proposed acquisition of 100% of the voting securities of Sanyo Electric Co., Ltd.

(“Sanyo”). Under the terms of the Consent Agreement, Sanyo will divest its assets relating to

the manufacture and sale of portable NiMH batteries to FDK Corporation (“FDK”), a subsidiary

of Fujitsu, Ltd.

The proposed Consent Agreement has been placed on the public record for 30 days to

solicit comments from interested persons. Comments received during this period will become

part of the public record. After 30 days, the Commission will again review the proposed

Consent Agreement, and will decide whether it should withdraw from the proposed Consent

Agreement or make final the accompanying Decision and Order (“Order”).

Pursuant to an agreement concluded on December 19, 2008 (the “Agreement”),

Panasonic announced its intention to commence a cash tender offer to acquire 100 percent of the

voting securities of Sanyo for an aggregate purchase price of approximately $9 billion (the

“Acquisition”). The Commission’s complaint alleges the facts described below and that the

proposed Acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended,

15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. §

45, by lessening competition in the market for portable NiMH batteries.

II. The Parties

Panasonic, headquartered in Osaka, Japan, is a leading manufacturer of consumer

electronics such as televisions, DVD players, and computers. Panasonic’s Components and

Devices Division produces rechargeable batteries, as well as semiconductors and mechanical

components.

Headquartered in Osaka, Japan, Sanyo Electric Co., Ltd., is a leading producer of

electronic devices and components, including digital cameras, televisions, car navigation

systems, home appliances, and consumer electronics. Sanyo’s rechargeable battery business is

operated out of its Components Division, which also manufacturers batteries, semiconductors,

capacitors, small motors, and optical pickups. 
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III. Portable NiMH Batteries

There are three rechargeable battery chemistries: nickel cadmium (“NiCd”), nickel metal

hydride (“NiMH”) and lithium-ion (“Li-ion”). While each battery chemistry is used in varying

degrees to power batteries for portable electronic devices, the evidence shows that portable

NiMH batteries are a relevant antitrust market. First of all, there are a number of products, most

notably two-way radios, that have a large installed base of customers that cannot switch to

another type of rechargeable battery because the products were designed specifically to

accommodate portable NiMH batteries. Second, even for customers who use NiMH batteries

but are not locked in to purchasing them, there is a strong preference for portable NiMH batteries

for performance and cost reasons. Both sets of customers would not switch to a different battery

technology in response to a five to ten percent increase in the price of portable NiMH batteries. 

The relevant geographic market for portable NiMH batteries is worldwide. 

Manufacturing of portable NiMH batteries is concentrated in Asia, and orders are shipped to

customers located throughout the world. 

Panasonic and Sanyo produce the highest quality portable NiMH batteries, and

consequently the two firms are uniquely close competitors. The remaining suppliers of portable

NiMH batteries produce lower quality batteries and are therefore more distant competitors to

Panasonic and Sanyo. As the only suppliers of high quality portable NiMH batteries, Panasonic

and Sanyo control the vast majority of the market. The lower quality suppliers have fringe

positions and do not affect competition between Panasonic and Sanyo. 

As each other’s most significant competitors for portable NiMH batteries, Panasonic and

Sanyo respond directly to competition from each other with lower prices, better services and

improved products, to the benefit of consumers. By eliminating this direct and substantial

competition, the proposed acquisition would allow Panasonic to exercise market power

unilaterally, thereby increasing the likelihood that purchasers of portable NiMH batteries would

be forced to pay higher prices and restraining the direct competition that promoted innovation

and high quality service. The proposed acquisition eliminates a competitor to which customers

otherwise could have diverted their sales – in a market where the alternative sources of supply

are usually not viable options. 

Neither new entry nor repositioning and expansion sufficient to deter or counteract the

anticompetitive effects of the proposed acquisition in the portable NiMH market is likely to

occur within two years. Existing competitors would have to significantly improve their portable

NiMH production facilities, improve the quality of their portable NiMH batteries, and overcome

the resistance of customers to switch to a portable NiMH battery supplier that lacks the track

record of effectively meeting the needs of those customers served by Panasonic and Sanyo. 

Also, because NiMH is an older battery technology, it has a relatively small growth potential for

the sale of portable NiMH batteries, so it is unlikely that a potential competitor would be able to

justify the investments necessary to enter the market for portable NiMH batteries. 
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IV. The Consent Agreement

The proposed Order eliminates the competitive concerns raised by Panasonic’s proposed

acquisition of Sanyo by requiring the divestiture of Sanyo’s assets relating to the manufacture

and sale of portable NiMH batteries to FDK Corporation (“FDK”), a subsidiary of Fujitsu, Ltd. 

This divestiture must occur with fifteen days after the Acquisition but may be extended an

additional thirty days, if necessary, to allow European Commission approval of the divestiture to

FDK. 

FDK has the industry experience, reputation, and resources to replace Sanyo as an

effective competitor in the portable NiMH battery market. Headquartered in Tokyo, Japan, FDK

manufactures and sells electronic components and batteries worldwide, and is a subsidiary of

Fujitsu, a multinational computing, telecommunications and electronics company. FDK does

not currently compete against Panasonic and Sanyo in the sale of portable NiMH batteries, but it

does manufacture and sell alkaline batteries. FDK also sources and resells a broad range of

batteries, including carbon-zinc, lithium primary, and manganese batteries. 

Pursuant to the Order, FDK would receive all the assets necessary to operate Sanyo’s

current portable NiMH battery business, including most importantly, the NiMH battery

manufacturing facility in Takasaki, Japan (“Takasaki plant”). The Takasaki plant is a premier

manufacturing facility for portable NiMH batteries, producing approximately 30 percent of the

portable NiMH batteries worldwide. The Order also requires Sanyo to supply to FDK sizes Sub

C/D portable NiMH batteries, which are the only sizes of Sanyo’s portable NiMH batteries not

produced at the Takasaki plant and account for a tiny fraction of Sanyo’s overall portable NiMH

sales. In addition to the employees of the Takasaki plant, who would automatically transfer to

FDK, the Order requires Sanyo to provide FDK access to certain other key Sanyo employees

needed to successfully operate the business. The Order also requires Sanyo to transfer all

intellectual property necessary to make and sell portable NiMH batteries, including Sanyo

patents and licenses related to portable NiMH batteries. A divestiture of Sanyo’s portable NiMH

assets will ensure that FDK has a full line of high-quality portable NiMH batteries, enabling it to

compete immediately with the merged entity.

The Commission has appointed Philip Comerford, Jr., Managing Director of ING Capital

LLC and Head of the Mergers & Acquisitions Group, as the interim monitor to oversee the

divestiture of the NiMH battery business. In order to ensure that the Commission remains

informed about the status of the proposed divestitures, the proposed Consent Agreement requires

the parties to file periodic reports with the Commission until the divestiture is accomplished.
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If the Commission determines that FDK is not an acceptable purchaser, or the manner of

the divestiture is not acceptable, the parties must unwind the sale to FDK and divest the portable

NiMH battery assets within six months of the date the Order becomes final to another

Commission-approved acquirer. If the parties fail to divest within six months, the Commission

may appoint a trustee to divest the portable NiMH battery assets.

The purpose of this analysis is to facilitate public comment on the Consent Agreement,

and it is not intended to constitute an official interpretation of the proposed Decision and Order

or the Order To Maintain Assets, or to modify their terms in any way.