[Federal Register Volume 59, Number 230 (Thursday, December 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29574]


[[Page Unknown]]

[Federal Register: December 1, 1994]


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FEDERAL TRADE COMMISSION

[File No. 941 0123]

 

Alliant Techsystems Inc.; 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, among other things, Alliant Techsystems Inc. (Alliant), a 
Minnesota-based defense contractor, to acquire Hercules Inc.'s 
propellant division, Hercules Aerospace Company, under certain 
conditions, and would require Alliant to prevent its newly acquired 
propellant division from sharing non-public information with Alliant's 
ammunition and munitions division. Alliant also would have to notify 
its propellant customers of the Commission order before obtaining any 
non-public information from them.

DATES: Comment must be received on or before January 30, 1995.

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:
Laura Wilkinson, FTC/S-2224, Washington, DC 20580. (202) 326-2830.

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 Alliant Techsystems Inc. 
(``Alliant''), of certain assets of the Hercules Aerospace Company of 
Hercules Incorporated (``Hercules''), and it now appearing that 
Alliant, hereinafter sometimes referred to as proposed respondent, is 
wiling 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 Alliant is a corporation, organized, 
existing, and doing business under and by virtue of the laws of the 
State of Delaware, with its office and principal place of business 
located at 600 Second Street, NE., Hopkins, Minnesota 55343.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint.
    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. Proposed respondent shall submit with this agreement an initial 
report signed by the proposed respondent setting forth in precise 
detail the manner in which the proposed respondent will comply with 
Paragraphs II and III of the order when and if entered. Such report 
will not become part of the public record unless and until the 
accompanying agreement and order are accepted by the Commission. At the 
time such report is submitted, proposed respondent may request 
confidentiality for any portion thereof with a precise showing of 
justification therefor.
    5. This agreement shall not become 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.
    6. 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, or that the facts as 
alleged in the draft complaint, other than jurisdictional facts, are 
true.
    7. 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 Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to 
proposed respondent, (1) issue its complaint corresponding in form and 
substance with the draft of complaint 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.
    8. 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. ``Alliant'' or ``Respondent'' means Alliant Techsystems Inc., 
its predecessors, subsidiaries, divisions, groups and affiliates 
controlled by Alliant, and their respective directors, officers, 
employees, agents and representatives, and their respective successors 
and assigns.
    B. ``Defense Systems'' means Alliant's Defense Systems Business 
Group, an unincorporated division of Alliant with its principal place 
of business at 600 Second Street, NE., Hopkins, Minnesota 55343, as 
well as its officers, employees, agents, divisions, subsidiaries, 
successors, and assigns, and the officers, employees or agents of 
Defense System's divisions, subsidiaries, successors and assigns. 
Defense Systems is principally engaged in the research, development, 
manufacture and sale of Weapons and weapon systems.
    C. ``Hercules'' means Hercules Incorporated, a corporation 
organized, existing and doing business under the laws of Delaware with 
its principal place of business at Hercules Plaza, Wilmington, Delaware 
19894-0001.
    D. ``Person'' means any natural person, corporate entity, 
partnership, association, joint venture, government entity, trust or 
other business or legal entity.
    E. ``Commission'' means the Federal Trade Commission.
    F. ``Propellant or Explosives'' means substances used to propel or 
activate Weapons.
    G. ``Weapons'' means ammunition and munitions.
    H. ``Acquisition'' means the acquisition by Alliant of 
substantially all of the assets and stock relating to Hercules 
Aerospace Company, an unincorporated division of Hercules.
    I. ``Non-Public Information'' means any information not in the 
public domain furnished by a Weapons developer, manufacturer or systems 
contractor to Alliant in Alliant's capacity as a provider of Propellant 
or Explosives; provided (a) if written information is furnished, it is 
designated in writing by the Weapons developer, manufacturer or systems 
contractor 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 is furnished, it is 
identified as proprietary information in writing by the Weapons 
developer, manufacturer or systems contractor prior to the disclosure 
to Alliant or within thirty (30) days after such disclosure. Non-Public 
Information shall not include (i) information already known to Alliant, 
(ii) information which subsequently falls within the public domain 
through no violation of this Order by Alliant, (iii) information which 
subsequently becomes known to Alliant from a third party not in breach 
of a confidential disclosure agreement with a Weapons developer, 
manufacturer or systems contractor, or (iv) information after six (6) 
years from the date of disclosure to Alliant or such other period as 
agreed to in writing by Alliant and the Weapons developer, manufacturer 
or systems contractor.

II

    It is further ordered that:
    A. Alliant shall not, absent the prior written consent of the 
proprietor of Non-Public Information, provide, disclose, or otherwise 
make available to Defense Systems any Non-Public Information; and
    B. Alliant shall use any Non-Public Information it obtains only in 
its capacity as a provider of Propellant or Explosives, absent the 
prior written consent of the proprietor of Non-Public Information.

III

    It is further ordered that Alliant shall deliver a copy of this 
order to any United States Weapons developer, manufacturer or systems 
contractor prior to first obtaining any Non-Public Information relating 
to the developer's, manufacturer's or systems contractor's Weapons 
either from the Weapons developer, manufacturer, or systems contractor 
or through the Acquisition; provided that for Non-Public Information 
described in Paragraph I. Section I.(b) of this order, Alliant shall 
deliver a copy of this order within ten (10) days of the written 
identification by the Weapons developer, manufacturer or systems 
contractor.

IV

    It is further ordered that:
    A. Within sixty (60) days after the date this order becomes final, 
Respondent shall submit to the Commission a verified written report 
setting forth in detail the manner and form in which it intends to 
comply, is complying, and has complied with Paragraphs II and III of 
this order; and
    B. 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 complied 
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 Weapons developers, manufacturers or systems contractors 
with whom Respondent has entered an agreement for the research, 
development, manufacture or sale of Propellant or Explosives.

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 may have counsel present, regarding such matters.

VII

    It is further ordered that, this order shall terminate twenty (20) 
years from the date this order becomes final.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted an 
agreement to a proposed Consent Order from Alliant Techsystems Inc. 
(``Alliant''), under which Alliant's ammunition and munitions divisions 
would be prohibited from gaining access to any non-public information 
from competing ammunition and munitions producers that Alliant receives 
in its capacity as a provider of propellant.
    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.
    Alliant is a significant competitor in the market for ammunition 
and munitions. Alliant proposes to acquire Hercules Incorporated's 
aerospace division, the only United States supplier of propellant used 
in large caliber ammunition. 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 Alliant's ammunition and 
munitions divisions could gain access to competitively significant and 
non-public information concerning other ammunition and munitions 
suppliers' products due to Alliant's role as a supplier of propellant. 
As a result, the proposed acquisition increases the likelihood that 
competition between ammunition and munitions suppliers would decrease 
and that advancements in ammunition and munitions research, innovation, 
and quality would be reduced.
    The proposed Consent Order prohibits Alliant from disclosing any 
non-public information Alliant receives in its capacity as a provider 
of propellant from an ammunition or munitions manufacturer to Alliant's 
ammunition or munitions divisions. Under the proposed Order, Alliant 
may only use such information in its capacity as a provider of 
propellant. Non-public information is defined in the Order as any 
information not in the public domain furnished by an ammunition or 
munitions manufacturer to Alliant's propellant division 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 ammunition and 
munitions by limiting the ability of one significant competitor to use 
information obtained from other competitors.
    Under the provisions of the Consent Order, Alliant is also required 
to deliver a copy of the Order to any United States propellant 
customers prior to obtaining any information from them that is outside 
the public domain. One year from the date the Order becomes final and 
annually thereafter for nine (9) years, Alliant 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.
Benjamin I. Berman,
Acting Secretary.

Concurring Statement of Commissioner Mary L. Azcuenaga

In Alliant Techsystems Inc., File No. 941-0123

    Today, the Commission accepts for public comment a consent 
agreement that resolves allegations that the acquisition of the stock 
and assets of Hercules Aerospace Company, an unincorporated division of 
Hercules Incorporated, by Alliant Techsystems Inc. may substantially 
lessen competition in the research, development, manufacture and sale 
of propellant, explosives or weapons. I concur in the finding of reason 
to believe the law has been violated, but write separately to add two 
observations about the remedy.
    First, the consent order omits the ten-year prior approval 
provision that the Commission usually imposes in cases brought under 
Section 7 of the Clayton Act. My vote in favor of accepting the consent 
order despite this omission is based on the highly unusual facts of 
this case. I continue to believe that prior approval requirements 
should be standard in section 7 cases.
    Second, the order prohibits Alliant from misusing or appropriating 
nonpublic information obtained from a competitor in the development of 
weapons. Although we have had few similar cases, recently the 
Commission imposed a similar remedy in Martin Marietta Corp., Dkt. No. 
3500 (June 22, 1994). I joined in that decision and again do so here. 
Nonetheless, I question the extent to which this provision of the order 
adds to the protection afforded by private contracts to respect 
confidentiality and the extent to which the Commission can effectively 
monitor compliance with this requirement. Enforcement experience and 
further analysis may well suggest a need for different, more effective 
remedies.

[FR Doc. 94-29574 Filed 11-30-94; 8:45 am]
BILLING CODE 6750-01-M