[Federal Register Volume 59, Number 70 (Tuesday, April 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8743]


[[Page Unknown]]

[Federal Register: April 12, 1994]


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FEDERAL TRADE COMMISSION
[File No. 941 0038]

 

Martin Marietta Corporation; Proposed Consent Agreement With 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
permit Martin Marietta, a Maryland-based corporation, to acquire 
General Dynamics Corporation's Space Systems Division and would 
prohibit, among other things, the respondent's Expendable Launch 
Vehicle (ELV) division from disclosing to its satellite division any 
non-public information that its ELV division receives from a satellite 
manufacturer, and would require the respondent to give a copy of the 
final consent order to U.S. satellite owners or manufacturers before 
obtaining any non-public information from them.

DATES: Comments must be received on or before June 13, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Ann Malester, FTC/S-2224, Washington, DC 20580. (202) 326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Agreement Containing Consent Order

    The Federal Trade Commission (``the Commission''), having initiated 
an investigation of the acquisition by Martin Marietta Corporation 
(``Martin Marietta''), of certain assets of the Space Systems Division 
of General Dynamics Corporation (``General Dynamics''), and it now 
appearing that Martin Marietta, hereinafter sometimes referred to as 
proposed respondent, is willing to enter into an agreement containing 
an order to refrain from certain acts and to provide for other relief:
    It is hereby agreed by and between proposed respondent, by its duly 
authorized officers and attorneys, and counsel for the Commission that:
    1. Proposed respondent Martin Marietta is a corporation, organized, 
existing, and doing business under and by virtue of the laws of the 
State of Maryland, with its office and principal place of business 
located at 6801 Rockledge Drive, Bethesda, Maryland 20817.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. Proposed respondent waives: a. Any further procedural steps;
    b. The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    d. Any claim under the Equal Access to Justice Act.
    4. This agreement shall not become a part of the public record of 
the proceeding unless and until it is accepted by the Commission. If 
this agreement is accepted by the Commission it, together with the 
draft of complaint contemplated thereby, will be placed on the public 
record for a period of sixty (60) days and information in respect 
thereto publicly released. The Commission thereafter may either 
withdraw its acceptance of this agreement and so notify proposed 
respondent, in which event it will take such action as it may consider 
appropriate, or issue and serve its complaint (in such form as the 
circumstances may require) and decision, in disposition of the 
proceeding. Provided, however, if, prior to the date the Commission 
issues its complaint and decision, proposed respondent notifies the 
Commission in writing that it has abandoned its proposed acquisition as 
described in the draft of complaint and has withdrawn any related 
notifications filed pursuant to Section 7A of the Clayton Act, as 
amended, 15 U.S.C. 18a, the Commission will not issue its complaint and 
decision.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by proposed respondent that the law has been 
violated as alleged in the draft of complaint here attached, or that 
the facts as alleged in the draft complaint, other than jurisdictional 
facts, are true.
    6. This agreement contemplates that, if it is accepted by the 
Commission, if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
Rules, and if proposed respondent has not notified the Commission that 
it has abandoned its proposed acquisition pursuant to paragraph 4 of 
this agreement, the Commission may, without further notice to proposed 
respondent, (1) issue its complaint corresponding in form and substance 
with the draft of complaint here attached and its decision containing 
the following order to refrain from certain acts in disposition of the 
proceeding, and (2) make information public with respect thereto. When 
so entered, the order shall have the same force and effect and may be 
altered, modified, or set aside in the same manner and within the same 
time provided by statute for other orders. The order shall become final 
upon service. Delivery by the U.S. Postal Service of the complaint and 
decision containing the agreed-to order to proposed respondent's 
address as stated in this agreement shall constitute service. Proposed 
respondent waives any right it may have to any other manner of service. 
The complaint may be used in construing the terms of the order, and no 
agreement, understanding, representation or interpretation not 
contained in the order or the agreement may be used to vary or 
contradict the terms of the order.
    7. Proposed respondent has read the draft of complaint and order 
contemplated hereby. Proposed respondent understands that once the 
order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the order. 
Proposed respondent further understands that it may be liable for civil 
penalties in the amount provided by law for each violation of the order 
after it becomes final.

Order

I
    It is ordered That, as used in this order, the following 
definitions shall apply:
    A. ``Martin Marietta'' or ``Respondent'' means Martin Marietta 
Corporation, its predecessors, subsidiaries, divisions, groups and 
affiliates controlled by Martin Marietta, and their respective 
directors, officers, employees, agents and representatives, and their 
respective successors and assigns.
    B. ``Astronautics'' means Martin Marietta's Astronautics Company, 
an entity with its principal place of business at P.O. Box 179, Denver, 
Colorado 80201, which is engaged in, among other things, the research, 
development, manufacture and sale of Expendable Launch Vehicles and 
Satellites, as well as its officers, employees, agents, divisions, 
subsidiaries, successors, and assigns, and the officers, employees or 
agents of Astronautics' divisions, subsidiaries, successors and 
assigns.
    C. ``Astro Space'' means Martin Marietta's Astro Space Company, an 
entity with its principal place of business at P.O. Box 800, Princeton, 
New Jersey 08543-800, which is principally engaged in the research, 
development, manufacture and sale of Satellites, its officers, 
employees, agents, divisions, subsidiaries, successors and assigns, and 
the officers, employees or agents of Astro Space's divisions, 
subsidiaries, successors and assigns.
    D. ``General Dynamics'' means General Dynamics Corporation, a 
corporation organized, existing and doing business under the laws of 
Delaware with its principal place of business at 3190 Fairview Park 
Drive, Falls Church, Virginia 22042-4523.
    E. ``Person'' means any natural person, corporate entity, 
partnership, association, joint venture, government entity, trust or 
other business or legal entity.
    F. ``Commission'' means the Federal Trade Commission.
    G. ``Expendable Launch Vehicle'' means a vehicle that launches 
satellites from the Earth's surface that is consumed during the process 
of launching a Satellite and therefore cannot be launched more than one 
time.
    H. ``Satellite'' means an unmanned machine that is launched from 
the Earth's surface for the purpose of transmitting data back to Earth 
and which is designed either to orbit the Earth or travel away from the 
Earth.
    I. ``Acquisition'' means the acquisition by Martin Marietta of 
substantially all of the assets relating to General Dynamics 
Corporation's Space Systems Division.
    J. ``Non-Public Information'' means any information not in the 
public domain furnished by a Satellite owner or manufacturer to 
Astronautics or General Dynamics in their capacity as providers of 
Expendable Launch Vehicles and (a) if written information, designated 
in writing by the Satellite owner or manufacturer as proprietary 
information by an appropriate legend, marking, stamp, or positive 
written identification on the face thereof, or (b) if oral, visual or 
other information, identified as proprietary information in writing by 
the Satellite owner or manufacturer prior to the disclosure or within 
thirty (30) days after such disclosure. Non-Public Information shall 
not include (i) information already known to Martin Marietta, (ii) 
information which subsequently falls within the public domain through 
no violation of this Order by Martin Marietta, (iii) information which 
subsequently becomes known to Martin Marietta from a third party not in 
breach of a confidential disclosure agreement with such Satellite owner 
or manufacturer, or (iv) information after six (6) years from the date 
of disclosure of such Non-Public information to Martin Marietta or such 
other period as agreed to in writing by Martin Marietta and the 
Satellite owner or manufacturer.
II
    It is further ordered That: A. Martin Marietta shall not, absent 
the prior written consent of the proprietor of Non-Public Information, 
provide, disclose, or otherwise make available to Astro Space any Non-
Public Information; and
    B. Martin Marietta shall use any Non-Public Information obtained by 
Astronautics only in Astronautics' capacity as a provider of Expendable 
Launch Vehicles, absent the prior written consent of the proprietor of 
Non-Public Information.
III
    It is further ordered That Martin Marietta shall deliver a copy of 
this order to any United States Satellite owner or manufacturer prior 
to first obtaining any information relating to the owner's or 
manufacturer's Satellites outside the public domain either from the 
Satellite owner or manufacturer or through the Acquisition.
IV
    It is further ordered That one (1) year from the date this order 
becomes final, annually for the next nine (9) years on the anniversary 
of the date this order becomes final, and at such other times as the 
Commission may require, Respondent shall file a verified written report 
with the Commission setting forth in detail the manner and form in 
which it has compiled and is complying with this order. To the extent 
not prohibited by United States Government national security 
requirements, Respondent shall include in its reports information 
sufficient to identify all United States Satellite owners or 
manufacturers with whom Respondent has entered an agreement for the 
research, development, manufacture or sale of Expendable Launch 
Vehicles.
V
    It is further ordered That Respondent shall notify the Commission 
at least thirty days prior to any proposed change in Respondent, such 
as dissolution, assignment or sale resulting in the emergence of a 
successor corporation, the creation or dissolution of subsidiaries or 
any other change in Respondent, that may affect compliance obligations 
arising out of this order.
VI
    It is further ordered That, for the purpose of determining or 
securing compliance with this order, and subject to any legally 
recognized privilege and applicable United States Government security 
requirements, upon written request, and on reasonable notice, 
Respondent shall permit any duly authorized representative of the 
Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Respondent relating to any matters contained in this 
order; and
    B. Upon five (5) days' notice to Respondent and without restraint 
or interference from it, to interview officers, directors, or employees 
of Respondent, who have counsel present, regarding such matters.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has provisionally 
accepted an agreement containing a proposed Consent Order from Martin 
Marietta Corporation (``Martin Marietta''), under which Martin 
Marietta's satellite division would be prohibited from gaining access 
to any non-public information that Martin Marietta's expendable launch 
vehicle division receives from competing satellite producers in its 
capacity as a provider of launch vehicles.
    The proposed Consent Order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
Order.
    Martin Marietta is a significant competitor in the market for the 
manufacture and sale of satellites. On December 22, 1993, Martin 
Marietta agreed to acquire General Dynamics Corporation's Space Systems 
Division, which manufactures the Atlas expendable launch vehicles. 
Following this acquisition, Martin Marietta would be the only United 
States supplier in the market for Atlas-class expendable launch 
vehicles as well as a competitor in the satellite market. The proposed 
complaint alleges that the acquisition, if consummated, would violate 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, because 
Martin Marietta's satellite division could gain access to competitively 
significant and non-public information concerning other satellite 
suppliers' products. As a result, the proposed acquisition increases 
the likelihood that competition between satellite suppliers would 
decrease and that advancements in satellite research, innovation, and 
quality would be reduced.
    The proposed Consent Order prohibits Martin Marietta from 
disclosing any non-public information Martin Marietta receives in its 
capacity as a provider of expendable launch vehicles from a satellite 
owner or manufacturer to Martin Marietta's satellite division. Under 
the proposed Order, Martin Marietta may only use such information in 
its capacity as a provider of expendable launch vehicles. Non-public 
information is defined in the Order as any information not in the 
public domain furnished by a satellite owner or manufacturer to Martin 
Marietta's expendable launch vehicle division or General Dynamics in 
their capacity as providers of expendable launch vehicles and 
designated as proprietary information.
    The Commission anticipates that the effect of the proposed Order 
will be to maintain the opportunity for full competition in the market 
for the research, development, manufacture and sale of satellites by 
limiting the ability of one significant competitor to use information 
obtained from other competitors.
    Under the provisions of the Consent Order, Martin Marietta is also 
required to deliver a copy of the Order to any United States satellite 
owner or manufacturer prior to obtaining any information that is 
outside the public domain. One year from the date the Order becomes 
final and annually thereafter for nine (9) years, Martin Marietta will 
be required to provide to the Commission a report of its compliance 
with the Order.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order, and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.

Dissenting Statement of Commissioner Deborah K. Owen on Proposed 
Consent Agreement With Martin Marietta Corp. File No. 941-0038

    Respondent Martin Marietta Corporation manufactures satellites, 
which are launched into orbit by expendable launch vehicles, some of 
which it also manufactures. It proposes to acquire the Space Systems 
Division of General Dynamics Corporation, which manufactures Atlas-
class expendable launch vehicles. The theory of the complaint is that 
if this acquisition is consummated, Martin Marietta's launch vehicle 
division will gain access to trade secrets concerning the products of 
other satellite manufacturers, and will transfer such information to 
Martin Marietta's satellite division, which will use it to injure its 
competitors. The Commission's order would enjoin Martin Marietta from 
misusing its rivals' confidential information in this manner.
    Vertical integration, and combinations designed to achieve the 
efficiencies of such integration, are common phenomena, particularly in 
the aerospace industry. Accordingly, it would seem that there are 
already ample opportunities for the sort of abusive information-sharing 
which concerns the Commission. However, equally common are contractual 
obligations between vertically integrated companies, and firms that do 
business with one of their divisions, to prevent the sharing of those 
firms' confidential business information with other parts of the 
conglomerate with which they compete. The question then is whether such 
contracts are sufficient to avoid any competitive problem, or whether 
government-imposed requirements are necessary; if there exists a 
significant number of substantiated incidents of such activity, then 
private agreements would not seem adequate. However, the opposite 
appears to be the case.
    While various Commission personnel have, in recent years, exhorted 
the business community to be sensitive to antitrust concerns stemming 
from the sharing of business information, Commission enforcement 
actions in this area have been rare, and no case has involved the 
strategic misuse of proprietary information so as to injure a 
competitor. Furthermore, Martin Marietta currently manufactures both 
satellites and launch vehicles, and is already privy to competitively 
significant information from other satellite manufacturers, yet I am 
unaware of any instance where it has been alleged that proprietary 
information has been used for exclusionary purposes by Martin Marietta, 
or indeed by any other aerospace manufacturer. As a result, it seems 
fair to conclude that contractual obligations prohibiting such 
behavior, coupled with the threat of business tort and treble-damage 
antitrust suits, are sufficient deterrents. Moreover, as the amount of 
available business in the aerospace industry continues to dwindle, it 
is hard to imagine that developing a reputation for abusing 
confidential information would enhance any company's competitiveness.
    The Commission's proposed consent is somewhat puzzling in its 
coverage. If the theory of the complaint is correct--that Martin 
Marietta's dominant power in the launch vehicle market would facilitate 
anticompetitive information-sharing in the satellite market--why would 
the company stop there? The theory would seem to support as well 
allegations of other exclusionary and tying practices, yet these are 
not included. The Commission, correctly I believe, concluded that there 
was no evidence to support such charges; I therefore find it strange 
that it chose to go forward on the equally speculative information-
sharing allegations.
    In short, I do not believe that the evidence supports the theory 
behind the Commission's complaint, nor that a Commission order would be 
superior to privately negotiated confidentiality agreements for 
protecting the trade secrets of satellite manufacturers. I dissent.

[FR Doc. 94-8743 Filed 4-11-94; 8:45 am]
BILLING CODE 6750-01-M