[Federal Register Volume 63, Number 7 (Monday, January 12, 1998)]
[Notices]
[Pages 1866-1867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-709]


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FEDERAL TRADE COMMISSION

[File No. 981-0081]


TRW Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal prohibiting unfair or deceptive acts or practices 
or unfair methods of competition. The attached Analysis to Aid Public 
Comment describes both the allegations in the draft complaint that 
accompanies the consent agreement and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before March 13, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
William Baer, Federal Trade Commission, 6th & Pennsylvania Ave., NW, H-
374, Washington, DC 20580. (202) 326-2932. George S. Cary, Federal 
Trade Commission, 6th & Pennsylvania Ave., NW, H-374, Washington, DC 
20580. (202) 326-3741.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned 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. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the accompanying complaint. An electronic copy of the 
full text of the consent agreement package can be obtained from the 
Commission Actions section of the FTC Home page (for December 24, 
1997), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580, either in person or by calling (202) 326-3627. 
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 Section 4.9(b)(6)(ii) of the 
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted subject 
to final approval an agreement containing a proposed Consent Order from 
TRW Inc. (``TRW''), under which TRW will be required to divest all of 
the assets relating to the provision of systems engineering and 
technical assistance (``SETA'') services in support of the Department 
of Defense's Ballistic Missile Defense Organization (``BMDO'').
    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 
proposed Consent Order and the comments received, and will decide 
whether it should withdraw from the proposed Consent Order or make 
final the proposed Order.
    On November 20, 1997, TRW and BDM International Inc. (``BDM'') 
entered into an Agreement and Plan of Merger whereby TRW will acquire 
all of the issued and outstanding common shares of BDM for 
approximately $942 million. The proposed Complaint alleges that the 
acquisition, if consummated, would violate Section 7 of the Clayton 
Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. Sec. 45, in the market for the 
research, development, manufacture and sales of a Ballistic Missile 
Defense System.
    The United Missile Defense Corporation, a joint venture including 
TRW, is one of only two competitors for the Ballistic Missile Defense 
Organization's Lead Systems Integrator (``LSI'') contract, and BDM is 
the Ballistic Missile Defense Organization's sole supplier of SETA 
services for the LSI program. In its capacity as SETA contractor for 
the LSI program, BDM is charged with the responsibility for, among 
other things, developing technical and other specifications for the LSI 
procurement, assessing bid and other proposals submitted by the two 
competitors, and evaluating the cost and quality performance of the 
winning bidder. If the proposed acquisition takes place, TRW, one of 
the two LSI competitors, would become the LSI SETA contractor as well.
    The proposed acquisition of BDM by TRW raises antitrust concerns in 
two areas. First, to perform the function of SETA contractor for the 
LSI program, it is necessary for BDM to obtain a great deal of highly 
competitively sensitive information from the two LSI competitors. If 
TRW acquires BDM, and thus becomes the SETA contractor, TRW will have 
access to this information from its only LSI program competitor. Access 
to this information may enable TRW to raise prices for the LSI contract 
by bidding less aggressively than it otherwise would. Second, if TRW 
assumes the role of LSI SETA contractor, it may be able to 
anticompetitively favor itself and disfavor its competitor in a variety 
of ways, such as setting unfair procurement specifications or 
submitting unfair performance evaluations.
    The proposed Consent Order requires TRW to divest BDM's SETA 
services contract with the BMDO, including its SETA responsibilities 
for the LSI program, and all of BDM's assets associated with the 
performance of that contract, within one hundred and twenty (120) days 
from the date TRW consummates its proposed acquisition of BDM. The 
proposed Consent Order states that this divestiture shall be to an 
acquirer approved by the Commission and the Department of Defense. If 
TWR fails to divest the assets within one hundred and twenty (120) days 
from the date it consummates the proposed acquisition of BDM, a trustee 
may be appointed to accomplish the divestiture. An Agreement to Hold 
Separate signed by TRW provides that until BDM's SETA services contract 
is divested, BDM's SETA services business will be operated 
independently of TRW. The proposed Consent Order also requires TRW to 
provide technical assistance to the acquirer for a period of one (1) 
year, at the request of either the acquirer or the Ballistic Missile 
Defense Organization.
    The Order also requires TRW to provide the Commission a report of 
compliance with the divestiture

[[Page 1867]]

provisions of the Order within thirty (30) days following the date the 
Order becomes final, and every thirty (30) days thereafter until TRW 
has completed the required divestiture.
    The purpose of this analysis is to facilitate the 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.

Concurring Statement of Commissioner Mary L. Azcuenaga in TRW Inc./
BDM, File No. 981 0081

    I agree with my colleagues that the final decision and order that 
the Commission accepts today for public comment properly addresses the 
anticompetitive implications of the proposed transaction. I concur in 
the Commission's action except to the extent that Paragraph II.B. of 
the proposed order makes the Department of Defense a participant with 
the Commission in giving antitrust approval to any divestiture proposed 
under Paragraph II.A. of the order.
    As I said in my concurring statement in Litton Industries, Inc./
PRC, File No. C-3656 (decision and order, May 7, 1996), with due 
deference to the Department of Defense and in full recognition that it 
has the power to decide with which firms it will contract for the 
provision of goods and services vital to the national security, no 
persuasive argument has been presented to suggest that the Department 
has or should have a role in deciding the competitive implications of a 
particular divestiture. In addition, no showing has been made that this 
case is unique, that national security issues or concerns relating to 
the integrity of the Ballistic Missile Defense Organization's Lead 
Systems Integrator Program, to the extent they may be affected by this 
order, could not have been addressed, as they apparently have been in 
other defense-related transactions,\1\ without inclusion of the 
Department of Defense as a necessary participant in a decision 
committed by statute to the Commission.
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    \1\ See Lockheed Corporation, C-3576, decision and order (May 9, 
1995); see also ARKLA, Inc., 112 F.T.C. 509 (1989).
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    The need to obtain technical assistance in reviewing commercial 
transactions in sophisticated markets is not uncommon. Nor should the 
Commission forget that national security is the province of the 
country's defense agencies. The Commission might well find it necessary 
to consult with the Department of Defense both to assess the viability 
of a proposed buyer of the BDM assets to be divested and to ensure that 
a proposed transaction is not inconsistent with national security. I 
would have preferred, however, to accommodate that need in this case by 
means other than making the Department of Defense a partner with the 
Commission in interpreting and applying a final order of the 
Commission.

[FR Doc. 98-709 Filed 1-9-98; 8:45 am]
BILLING CODE 6750-01-M