[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
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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