Exxon Corp., trying to save its proposed merger with Cleveland-based Reliance Electric Co., yesterday pressed a federal judge here for permission to consummate the deal on the condition it licenses other firms to make a new motor device it has invented.
But the Federal Trade Commission, which has opposed the merger every step of the way, objected to the compromise. The commission maintained that licensing of Exxon's invention would do little to offset the anticompetitive effects of the acquisition, and urged the court instead to keep Exxon and Reliance Electric separate pending later full-scale antitrust proceedings. Reliance is a leading manufacturer of electric motors.
U.S. District Judge John Pratt gave both sides until Sept. 7 to file further facts in support of their positions.
Exxon is seeking to purchase Reliance in order to produce and market what Exxon claims is a revolutionary device that controls the speed of electric motors and thus saves considerable amounts of energy.
At the moment, the merger is in a state of tense suspension. Pratt issued an order 10 days ago allowing Exxon to purchase Reliance but said the oil giant, in effect, could not run the company until the antitrust case against the deal had been heard weeks from now.
Under such terms, Exxon said it would delay a decision on whether to make the purchase at all.
The FTC has objected to the merger on the grounds it would eliminate a potential competitor in the electric motor field. It has suggested that Exxon enter the field on its own instead of taking over an existing firm.
Searching for an interim compromise, Pratt ordered all parties to court yesterday to debate the acceptability of some kind of merger-with-licensing arrangement.
Strongly opposing any such arrangement, the FTC argued there was no precedent for it. In addition, the commission maintained that the licensing of new technologies has been ineffective in diffusing them among other firms and stimulating competition in an industry.
In presenting its case, the FTC quoted extensively from one of Exxon's own internal reports -- a study prepared by the consulting firm Booz, Allen & Hamilton called "Why Not License?" that makes a forceful case against the licensing of Exxon's inventions.
The FTC noted that the study had been made in preparation for Exxon's testimony before the Senate Judiciary Committee earlier this summer. The commission accused the oil company of saying one thing on Capitol Hill and the opposite thing in court.
While conceding to being somewhat embarrassed by the earlier report, Exxon's lawyer Edwin Zimmerman said the study did not apply in the current circumstances.
The report had been prepared, Zimmerman said, based on the assumption that Exxon would not be getting into the electric motor business itself. But with Exxon now hoping to enter the market -- thereby putting its own money behind its new device and cultivating a market for it -- the effect and benefits of licensing become more attractive from a public interest standpoint, Zimmerman said.
To show that other manufacturers would, in fact, be interested in obtaining a license, Exxon produced affidavits from more than a dozen firms, both large and small.
The FTC called the affidavits meaningless, since details of Exxon's new technology have not been made public and therefore the other firms could not have really known what they were considering.