[Federal Register Volume 77, Number 149 (Thursday, August 2, 2012)]
[Notices]
[Pages 46186-46212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18767]



[[Page 46185]]

Vol. 77

Thursday,

No. 149

August 2, 2012

Part III





 Department of Justice





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Antitrust Division





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United States v. United Technologies Corporation and Goodrich 
Corporation; Proposed Final Judgment and Competitive Impact Statement; 
Notice

  Federal Register / Vol. 77 , No. 149 / Thursday, August 2, 2012 / 
Notices  

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. United Technologies Corporation and Goodrich 
Corporation; Proposed Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia in United States v. United Technologies Corporation and 
Goodrich Corporation, Civil Action No. 1:12-cv-01230. On July 26, 2012, 
the United States filed a Complaint alleging that the proposed 
acquisition of Goodrich Corporation (``Goodrich'') by United 
Technologies Corporation (``UTC'') would violate Section 7 of the 
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed at the 
same time as the Complaint, requires UTC to divest assets comprising 
Goodrich's small engine control products business, including Goodrich's 
facility in West Hartford, Connecticut and other tangible and 
intangible assets used in this business. The proposed Final Judgment 
also requires UTC to divest Goodrich's electric generation and 
distribution systems business, including Goodrich's facilities in 
Pitstone, United Kingdom and Twinsburg, Ohio, other tangible and 
intangible assets used in this business, and Goodrich's shares in the 
TRW-Thales Aerolec SAS joint venture. Finally, the proposed Final 
Judgment requires UTC to divest Goodrich's shares in the AEC joint 
venture, as well as provide Rolls-Royce plc an additional time period 
in which it would be able to purchase certain assets relating to the 
aftermarket services utilized by that joint venture.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street NW., Suite 1010, Washington, DC 20530 (telephone: (202) 514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the U.S. Department of Justice, 
Antitrust Division's internet Web site, filed with the Court and, under 
certain circumstances, published in the Federal Register. Comments 
should be directed to Maribeth Petrizzi, Chief, Litigation II Section, 
Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW., 
Suite 8700, Washington, DC 20530 (telephone: (202) 307-0924).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, United States Department of Justice, 
Antitrust Division, 450 Fifth Street NW., Suite 8700, Washington, DC 
20530, Plaintiff, v. United Technologies Corporation, United 
Technologies Building,) Hartford, Connecticut 06101 and Goodrich 
Corporation, Four Coliseum Centre,) 2730 West Tyvola Road,) 
Charlotte, North Carolina 28217, Defendants

[Civil Action No. 1:12-cv-01230]

Complaint

    The United States of America (``United States''), acting under the 
direction of the Attorney General of the United States, brings this 
civil antitrust action against Defendants United Technologies 
Corporation (``UTC'') and Goodrich Corporation (``Goodrich'') to enjoin 
UTC's proposed acquisition of Goodrich. The United States complains and 
alleges as follows:

I. Nature of the Action

    1. Pursuant to an asset purchase agreement dated September 21, 
2011, UTC proposes to acquire all the shares of Goodrich. The 
transaction is valued at approximately $18.4 billion. If consummated, 
the acquisition would constitute the largest aerospace acquisition in 
history.
    2. UTC and Goodrich are the only two significant suppliers in the 
worldwide market for large main engine generators. The proposed 
acquisition would eliminate competition between UTC and Goodrich for 
large main engine generators.
    3. UTC is one of only a few producers of aircraft turbine engines 
in the world. Either on its own or through a partnership, Goodrich 
produces and services engine control systems, a critical component on 
such engines, for several of UTC's leading competitors. Following the 
acquisition, UTC could disadvantage its engine competitors by 
withholding or delaying delivery, increasing prices, or reducing the 
quality of its servicing of engine control systems for competitors' 
engines. UTC also could exploit confidential information gained through 
its work on those engine control systems to disadvantage its 
competitors. The proposed acquisition therefore is likely to reduce 
competition substantially for aircraft turbine engines.
    4. UTC and a joint venture in which Goodrich has a fifty percent 
share are two of the world's three leading producers of engine control 
systems for large aircraft turbine engines. The proposed acquisition 
likely would reduce competition substantially for engine control 
systems for large aircraft turbine engines.
    5. As a result, the proposed acquisition likely would substantially 
lessen competition in the worldwide markets for the development, 
manufacture, and sale of large main engine generators, aircraft turbine 
engines, and engine control systems for large aircraft turbine engines, 
in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.

II. The Defendants

    6. UTC is incorporated in Delaware and has its headquarters in 
Hartford, Connecticut. UTC produces a wide range of products for the 
aerospace industry and other industries, including, among other 
products, aircraft generators, aircraft engine control systems and 
components, aircraft engines, and helicopters. UTC's main aerospace 
divisions are Pratt & Whitney, Hamilton Sundstrand, and Sikorsky. In 
2010, UTC had revenues of approximately $54 billion.
    7. Goodrich is incorporated in New York and has its headquarters in 
Charlotte, North Carolina. Goodrich manufactures a variety of products 
for the aerospace industry, including, among other products, aircraft 
generators, aircraft engine control systems and components, landing 
gear, and actuation systems. In 2010, Goodrich had revenues of 
approximately $7.2 billion. In 2001, Goodrich began a joint venture 
with Thales Avionics Electrical Systems SA called TRW-Thales Aerolec 
SAS (``Aerolec'') for the purpose of collaborating on the development 
of variable-frequency main engine generators for large aircraft. 
References to Goodrich throughout the remainder of this Complaint also 
refer to Aerolec.

III. Jurisdiction and Venue

    8. The United States brings this action under Section 15 of the 
Clayton Act, 15 U.S.C. 4 and 25, as amended, to prevent and restrain 
Defendants from violating

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Section 7 of the Clayton Act, 15 U.S.C. 18.
    9. Defendants develop, manufacture, and sell aircraft systems and 
components and other products in the flow of interstate commerce. 
Defendants' activities in the development, manufacture, and sale of 
these products substantially affect interstate commerce. This Court has 
subject matter jurisdiction over this action pursuant to Section 15 of 
the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
    10. Defendants have consented to venue and personal jurisdiction in 
this judicial district. Venue is therefore proper in this District 
under Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 
1391(c).

IV. Large Main Engine Generators

A. Background

    11. An electrical generator is a device that converts mechanical 
energy into electrical energy. The main engine of an aircraft generates 
mechanical energy. The main engine has a generator, which through 
electromagnetic induction converts the mechanical energy created by the 
engine to electrical energy.
    12. The generator is responsible for generating power for all the 
in-flight systems that run on electricity, including pumping breathable 
air into the fuselage, operating the lights, and running the navigation 
and communication equipment in the cockpit.
    13. To operate, the generator depends on the motion of the main 
engine. As the engine turns, it rotates a shaft leading to the 
generator, which generates electric power through electromagnetic 
induction. The outgoing electricity flows into the primary electrical 
distribution system, which routes it through the aircraft to the 
lighting system, environmental control systems, and other systems 
requiring electric power.
    14. Aircraft power generation is a complicated process because 
aircraft engines change speed, according to the rate of acceleration or 
deceleration, the density of the air through which the aircraft is 
flying, and the angle of flight. Such variations require the generator 
to smooth out the peaks and valleys of propulsion to deliver the 
consistent power required by the aircraft's electrical systems.
    15. The specifications of the main engine generator vary based on 
the size of the aircraft on which it is used. That aircraft size--large 
or small--determines the amount of power required from the generator. 
Large aircraft include primarily aircraft that seat 100 passengers or 
more, such as commercial aircraft like the Airbus A380 and A320 or the 
Boeing 777 and 737. Aircraft that do not qualify as large aircraft 
include regional jets, business jets, and helicopters, which are 
smaller and have considerably fewer seats than large aircraft.
    16. Electrical systems on large aircraft are significantly 
different from those used on smaller aircraft. Large aircraft require 
more power than smaller aircraft. In addition, large aircraft and 
smaller aircraft have substantial differences in terms of power rating, 
voltage, speed, and cooling system. Further, large aircraft 
systematically use alternating current (``AC''), but smaller aircraft 
can use either AC or direct current (``DC''). AC generators can produce 
variable frequency or constant frequency electrical power. The 
generators that are able to power large aircraft generally have outputs 
above approximately 75 thousand volt-amps (``Kva''). Hereinafter, main 
engine generators with outputs of 75Kva or more will be referred to as 
``large main engine generators.''
    17. Designing a large main engine generator is generally more 
difficult than designing a main engine generator for a smaller aircraft 
because of the need to operate large main engine generators efficiently 
at high rotation speeds. Design engineering staff must be experienced 
with the impact of operating at higher speeds, which requires a more 
complex cooling system, more complex controls, and mechanically sizing 
the generator to fit the plane.
    18. The friction created by the heavier rotor operating at faster 
speeds in a large main engine generator also requires a more complex 
cooling system. Main engine generators for smaller aircraft, generating 
30 to 45Kva or less, are cooled sufficiently by air circulated within 
the generator chamber. Large main engine generators, however, require a 
system of tubing and gears to deliver mists of oil around the rotor to 
avoid over-heating. Oil-cooling systems are more complex and 
challenging to design.
    19. The need for a heavier rotor and a more complex cooling system 
also makes it difficult to minimize the size and weight of a generator. 
Therefore, large main engine generators are designed to more demanding 
specifications than main engine generators for smaller aircraft.
    20. Using two generators designed for smaller aircraft in place of 
one large main engine generator with the same total output would weigh 
more, take more space, require more connections to the electrical 
distribution system and the gearbox, and would be more costly. Weight 
and space, in particular, are important factors in generator selection 
and likely would dissuade a customer from approving such a design.
    21. A generator used in an auxiliary power unit (``APU'') cannot be 
used in place of a main engine generator. APU generators are designed 
to perform a function different from main engine generators and, 
therefore, differ in mechanical design, electrical design, and cooling 
technique.

B. Relevant Markets

1. Product Market
    22. Large main engine generators have specific applications, for 
which other products cannot be employed. An aircraft needs a main 
engine generator and cannot operate without one. In addition, main 
engine generators for use on smaller aircraft, such as regional or 
business jets, cannot be used in large aircraft because they do not 
provide sufficient output to power the aircraft and have other 
different specifications. Further, generators for other parts of an 
aircraft, such as the APU, cannot be used on a main engine for a large 
aircraft because they do not have the same performance characteristics 
as main engine generators.
    23. A small but significant increase in the price of large main 
engine generators would not cause customers of those generators to 
substitute a smaller generator, a generator for an APU, or any other 
product, or to reduce purchases of large main engine generators, in 
volumes sufficient to make such a price increase unprofitable. 
Accordingly, the development, manufacture, and sale of large main 
engine generators is a line of commerce and relevant market within the 
meaning of Section 7 of the Clayton Act.
2. Geographic Market
    24. Aircraft manufacturers purchase large main engine generators 
primarily from companies located in the United States or Europe. 
However, suppliers typically offer a worldwide organization to support 
the provision of maintenance and repair services. Customers do not 
consider transportation costs, a small proportion of the cost of the 
finished aircraft, to be a significant cost driver.
    25. Accordingly, the world is the relevant geographic market within 
the meaning of Section 7 of the Clayton Act.

C. Anticompetitive Effects of the Proposed Acquisition

    26. UTC's proposed acquisition of Goodrich likely would lessen

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competition substantially in the market for the development, 
manufacture, and sale of large main engine generators. UTC and Goodrich 
are the only significant competitors for large main engine generators. 
For the past twelve years, either UTC or Goodrich has won every 
competition for large main engine generators. Indeed, UTC and Goodrich 
were the top two bidders in almost every one of those competitions. UTC 
and Goodrich have been each other's closest competitor based on 
technical and commercial considerations.
    27. UTC's and Goodrich's bidding behaviors often have been 
constrained by the possibility of losing sales of large main engine 
generators to the other. Each firm has often considered the other 
company's offering when planning bids and research and development 
activities.
    28. Customers have benefited from the competition between UTC and 
Goodrich for sales of large main engine generators by receiving lower 
prices, more favorable contractual terms, more innovative products, and 
shorter delivery times. The combination of UTC and Goodrich would 
eliminate this competition and its future benefits to customers. Post-
acquisition, UTC likely would have the incentive and the ability 
profitably to increase prices and reduce innovation.
    29. UTC and Goodrich invest significantly to remain the two leading 
suppliers of large main engine generators in the future, and customers 
expect them to remain the leading suppliers. Future product development 
for large main engine generators likely would benefit from vigorous 
innovation competition between UTC and Goodrich.
    30. Other companies that have some capability to develop large main 
engine generators are not close competitors to UTC and Goodrich. For 
example, no other company has an installed base of large main engine 
generators. Any other firm would need substantial time and expense to 
achieve UTC's or Goodrich's record of experience, flight time, and 
reliability. UTC's and Goodrich's installed base of large main engine 
generators also provides them the ability to develop new large main 
engine generators more efficiently and at a lower cost than other 
companies.
    31. Companies that manufacture main engine generators for small 
aircraft do not compete effectively with UTC and Goodrich for large 
main engine generators because those companies' experiences with main 
engine generators for smaller aircraft do not provide them the ability 
to design and manufacture large main engine generators, which are more 
complicated products. Similarly, companies that make generators for 
APUs do not compete effectively with UTC and Goodrich for large main 
engine generators because those companies' experiences with APU 
generators do not provide them the ability to design and manufacture 
large main engine generators, which again are more complicated 
products.
    32. The proposed acquisition, therefore, likely would substantially 
lessen competition for the development, manufacture, and sale of large 
main engine generators. This likely would lead to higher prices, less 
favorable contractual terms, and less innovation in violation of 
Section 7 of the Clayton Act.

D. Difficulty of Entry

    33. Sufficient, timely entry of additional competitors into the 
market for large main engine generators is unlikely. Therefore, entry 
or the threat of entry into this market would not prevent the harm to 
competition caused by the elimination of Goodrich as a supplier of 
these products.
    34. Firms attempting to enter into the market for the development, 
manufacture, and sale of large main engine generators face several 
barriers to entry. Main engine generators perform critical functions on 
the aircraft and likely will be used throughout the life of the 
aircraft program, which may be twenty or thirty years. As a result, 
aircraft manufacturers are reluctant to purchase a product from a 
supplier not already known for its expertise in large main engine 
generators. A manufacturer must be able to demonstrate that its large 
main engine generator meets the necessary specifications and need for 
reliability. While some companies may have demonstrated experience in 
other types of generators, such experience is not considered by 
customers to be as relevant as experience specifically in large main 
generators.
    35. UTC and Goodrich emphasize to customers their prior experience 
in large main engine generators to demonstrate reliability. Moreover, 
this experience allows them to develop a new large main engine 
generator at an initial development cost lower than that of companies 
that do not already have similar generators in operation. They also are 
able to demonstrate the technical and financial ability successfully to 
manage production, aftermarket service, and warranty work for large 
main engine generators, which companies trying to enter this market 
would not be able to do.
    36. Developing a large main engine generator is technically 
difficult. Manufacturers of main engine generators for smaller aircraft 
or generators for other parts of the aircraft, such as APUs, face 
significant technical hurdles in designing and developing large main 
engine generators. Large main engine generators present unique 
technical challenges relating to the preservation of power quality at 
speeds much higher than those reached in main engine generators for 
smaller aircraft and generators for APUs. Large main engine generators 
also generate higher current levels than other generators, and require 
an oil cooling system. The manufacturer of main engine generators for 
smaller aircraft and APU generators cannot design and produce a large 
main engine generator simply by making a main engine generator for a 
smaller aircraft or an APU generator proportionately larger, but must 
instead completely redesign the generator.
    37. Further, substantial time and significant financial investment 
would be required for a company to design and develop a large main 
engine generator. Even companies that already make other types of 
generators, or that already are attempting to develop a large main 
engine generator, would require up to five years or more and an 
investment of over $50 million to develop a product that is competitive 
with those offered by UTC and Goodrich.
    38. As a result of these barriers, entry into the market for large 
main engine generators would not be timely, likely, or sufficient to 
defeat the substantial lessening of competition that likely would 
result from UTC's acquisition of Goodrich.

V. Aircraft Turbine Engines

A. Background

    39. Most modern commercial, business, and military aircraft are 
powered by turbine engines. These engines operate by burning a fuel-
and-air mixture in a combustion chamber, with the resulting combustion 
products turning a propeller blade on a turboprop engine, a rotor shaft 
on a turboshaft engine, or a fan in front of a turbofan engine.
    40. Turbofan engines power most commercial transport aircraft, 
business jets, and many military aircraft. Generally, large commercial 
aircraft, regional jets, and military aircraft use the most powerful 
turbofan engines, while business jets use turbofan engines of lower 
power. The power delivered by a turbofan engine is measured in terms of 
pounds of thrust (``pounds thrust''),

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and such engines are generally categorized by their thrust class.
    41. Turboprop engines primarily are used to power smaller aircraft, 
such as commuter aircraft. Turboshaft engines power helicopters. The 
power delivered by turboprop and turboshaft engines is measured in 
terms of shaft horsepower (shp).
    42. Due to their complexity and the degree of expertise and skill 
required for their design, development and production, few companies 
produce aircraft turbine engines.
    43. Aircraft turbine engines typically continue in service for 
decades and require regular maintenance, repair, and overhaul. When 
selecting an engine, customers take into account the difficulty and 
cost of servicing the engine. Engines that require more frequent 
servicing or are otherwise more difficult or costly to own and operate 
are less attractive to customers and therefore less competitive.
    44. There are only three main producers of aircraft turbine engines 
of greater than 10,000 pounds thrust. (Hereinafter the term ``large 
aircraft turbine engines'' will refer to engines of this thrust range.) 
UTC, through its Pratt & Whitney subsidiary, and Rolls-Royce Group plc 
(``Rolls-Royce'') are two of these three producers. UTC manufactures 
turbine engines of up to 90,000 pounds thrust, while Rolls-Royce 
manufactures turbine engines of up to 97,000 pounds thrust.
    45. There are only a few producers of aircraft turbine engines of 
10,000 pounds thrust or less. (Hereinafter the term ``small aircraft 
turbine engines'' will refer to engines of this thrust range.) UTC, 
through its Pratt & Whitney subsidiary, is one of these producers.
    46. It is critical that fuel be fed into aircraft turbine engines 
in a precise manner, so that the engine responds to the pilot's 
instructions in the most efficient manner possible. The system that 
accomplishes this is the engine control system, or ECS. The core of the 
ECS is a computer, usually called an electronic engine control, or EEC, 
that receives information from multiple sensors in the engine and from 
the pilot's controls, and calculates the amount of fuel to be sent to 
the engine. The ECS also includes the engine's main fuel pump and a 
fuel metering unit, or FMU, which controls the amount of fuel coming 
into the engine from the main fuel pump.
    47. In virtually all modern aircraft turbine engines, the EEC 
within the ECS is a full-authority digital engine control, or FADEC. 
The FADEC consists of hardware and two types of software: the operating 
system and the application software. The operating system is provided 
by the FADEC supplier. The application software contains sensitive 
performance data relating to the particular engine and is usually 
provided by the engine manufacturer.
    48. An ECS, including the FADEC, is designed and developed to meet 
the specific performance requirements for the particular engine on 
which it will be installed. As a result, the ECS supplier has insight 
into the design and cost of not only its ECS, but also the customer's 
engine. Some ECS suppliers also provide the application software on the 
FADEC. Such suppliers have access to competitively sensitive 
confidential business information about the fuel efficiency and 
performance principles around which the customer's engine is designed.
    49. In 2008, Goodrich and Rolls-Royce formed Aero Engine Controls 
(AEC), a joint venture to produce ECSs. The AEC joint venture agreement 
requires Rolls-Royce to purchase all of its ECSs for engines of over 
4000 pounds thrust or 2000 shp from AEC. Therefore, there are no 
alternative suppliers of ECSs for Rolls-Royce large aircraft turbine 
engines.
    50. The AEC joint venture agreement gives Goodrich the exclusive 
right to provide replacement parts and undertake maintenance, repair 
and overhaul of ECSs for Rolls-Royce large aircraft turbine engines. 
Because the volume of commerce for aftermarket service of any given ECS 
is quite small, there are no secondary suppliers for ECS replacement 
parts or service. Aftermarket parts and service for ECSs must be 
provided by the original ECS manufacturer or a reseller designated by 
that manufacturer. Therefore, it would not be possible for purchasers 
of these Rolls-Royce engines to obtain parts or service for these ECSs 
from any supplier other than Goodrich.

B. Relevant Markets

1. Product Markets
a. Aircraft Turbine Engines
    51. To a large extent, each aircraft platform is limited in the 
type and size of engine with which it may be powered. The choice of a 
turbofan, turboprop or turboshaft engine is dictated by aircraft type, 
range and speed, and is specified by the manufacturer. The engine must 
provide the amount of power needed for that particular aircraft to 
perform properly and safely, while at the same time being as light as 
possible. Thus, only a limited range of engine sizes is considered for 
any particular aircraft.
    52. For any given aircraft, a small but significant increase in the 
price of an aircraft turbine engine of the required type and thrust 
would not cause sufficient purchases of such engines to be shifted to 
engines of a different type or significantly higher or lower thrust so 
as to make such a price increase unprofitable. Accordingly, the 
development, manufacture, and sale of the turbine engine required for 
each type of aircraft is a line of commerce and a relevant product 
market within the meaning of Section 7 of the Clayton Act.
    53. Although the engine required for each such aircraft thus may be 
deemed a separate product market, in each such market there are few 
competitors.
    54. The proposed acquisition of Goodrich by UTC would affect 
competition in each large aircraft turbine engine market in the same 
manner. It is therefore appropriate to aggregate large aircraft turbine 
engine markets for purposes of analyzing the effects of the 
acquisition.
    55. The proposed acquisition of Goodrich by UTC would affect 
competition in each small aircraft turbine engine market in the same 
manner. It is therefore appropriate to aggregate small aircraft turbine 
engine markets for purposes of analyzing the effects of the 
acquisition.
b. ECSs for Aircraft Turbine Engines
    56. All aircraft turbine engines require an ECS in order to operate 
properly. No aircraft engine can be sold or operated without an ECS. 
There are no other products that perform the functions of an ECS in 
receiving and analyzing data from sensors and pilot controls, 
calculating the optimal flow rate of fuel into the engine combustion 
chamber, and feeding the proper amount of fuel into the engine 
combustion chamber.
    57. Each ECS is designed to work on a specific engine, and one ECS 
cannot be substituted for an ECS on another engine. Therefore, a small 
but significant increase in the price of the ECS designed for a 
particular engine would not cause enough purchases to be shifted to a 
different ECS so as to make such a price increase unprofitable. 
Accordingly, the development, manufacture, sale, and aftermarket 
service of the ECS for each aircraft turbine engine is a line of 
commerce and relevant product market within the meaning of Section 7 of 
the Clayton Act.
    58. Although the ECS required for each particular engine thus may 
be deemed a separate product market, the AEC joint venture agreement 
requires Rolls-Royce to purchase all ECSs for large aircraft turbine 
engines from AEC

[[Page 46190]]

and grants exclusive aftermarket rights to such ECSs to Goodrich. Thus 
the proposed acquisition would affect competition in each such market 
in the same manner. It is therefore appropriate to aggregate the 
markets for ECSs for large aircraft turbine engines for purposes of 
analyzing the effects of the acquisition.
    59. The proposed acquisition would have the same effect in each 
market for ECSs for small aircraft turbine engines. It is therefore 
appropriate to aggregate the markets for ECSs for small aircraft 
turbine engines for purposes of analyzing the effects of the 
acquisition.
2. Geographic Market
    60. Aircraft manufacturers purchase aircraft turbine engines and 
the ECSs for those engines primarily from companies located in the 
United States or Europe. However, suppliers typically offer a worldwide 
organization to support the provision of maintenance and repair 
services. Customers do not consider transportation costs, a small 
proportion of the cost of the finished aircraft, to be a significant 
cost driver.
    61. Accordingly, the world is the relevant geographic market within 
the meaning of Section 7 of the Clayton Act.

C. Anticompetitive Effects of the Proposed Acquisition

1. Large Aircraft Turbine Engines
    62. As discussed in paragraph 43 above, there are only three 
primary competitors in the markets for the development, manufacture, 
and sale of large aircraft turbine engines. UTC, through its Pratt & 
Whitney subsidiary, and Rolls-Royce are two of those competitors. 
Goodrich is a partner in AEC, from which Rolls-Royce must obtain its 
ECSs for most such engines. If UTC were to purchase Goodrich, and thus 
Goodrich's share of AEC, UTC would be both a producer of large aircraft 
turbine engines and the sole-source supplier of ECSs to one of its 
leading engine competitors.
    63. After the acquisition UTC, through its position as a partner in 
the AEC joint venture, would have the incentive and ability to cause 
AEC to withhold or delay delivery of ECSs to its competitor, Rolls-
Royce, resulting in the inability of Rolls-Royce to deliver engines on 
the schedule required by customers.
    64. In addition, after the acquisition UTC, through its position as 
the exclusive supplier of aftermarket parts and services for ECSs on 
Rolls-Royce large aircraft turbine engines, would have the incentive 
and ability to raise the costs of such parts and services, or to lower 
the availability of such parts and services, making Rolls-Royce a less 
reliable supplier of large aircraft large turbine engines.
    65. Such strategies to raise Rolls-Royce's costs and reduce its 
reliability would be profitable to UTC post-merger because the sale of 
large aircraft turbine engines provides much more revenue and profit 
than the sale of ECSs or the aftermarket service of ECSs for those 
engines. Therefore, if UTC were able to gain additional engine sales by 
causing AEC to withhold or delay delivery of ECSs for Rolls-Royce 
engines, or by increasing the cost or difficulty of obtaining 
aftermarket service on such ECSs, the additional engine sales would 
result in considerably more revenue and profit to UTC than the revenue 
and profit lost from any decrease in sales of or aftermarket service on 
such ECSs.
    66. These actions by UTC likely would harm purchasers of large 
aircraft turbine engines because UTC and Rolls-Royce have been, and 
likely will continue to be, in some competitions the two best-
positioned suppliers of large aircraft turbine engines. By making 
Rolls-Royce unable to deliver engines or by raising its costs, UTC may 
substantially affect competition and gain the ability to raise prices 
or reduce quality.
    67. In addition, because AEC produces the ECSs for Rolls-Royce 
engines, AEC has accurate information concerning the cost of the ECS 
and each of the ECS components used on each Rolls-Royce engine covered 
by the AEC agreement. Moreover, because AEC provides the application 
software for the FADECs for these Rolls-Royce engines, it has access to 
competitively-sensitive confidential business information concerning 
the engine itself, including the fuel efficiency and performance 
principles around which each engine is designed.
    68. Following the acquisition of Goodrich and its share of AEC, UTC 
would have the incentive and ability to use this information to its 
advantage in bidding on large aircraft turbine engines. For example, 
such information would reveal to UTC when it could offer higher pricing 
or less innovative solutions without risk of losing a large aircraft 
turbine engine sale.
    69. Therefore, UTC's acquisition of Goodrich would give UTC both 
the ability and the incentive to reduce the competitiveness of Rolls-
Royce in the supply of large aircraft turbine engines. If UTC were to 
reduce the competitiveness of Rolls-Royce in the markets for these 
engines, customers for those engines would have significantly fewer 
choices, and competition thus would be lessened substantially.
2. Small Aircraft Turbine Engines
    70. As discussed in paragraph 44 above, UTC, through its Pratt & 
Whitney subsidiary, is one of a small number of significant competitors 
in the markets for the development, manufacture, and sale of small 
aircraft turbine engines. Several of UTC's competitors purchase the 
ECSs for certain of their small aircraft turbine engines from Goodrich. 
Therefore, if UTC were to purchase Goodrich, UTC would be both a 
producer of small aircraft turbine engines and a supplier of ECSs to 
its competitors.
    71. At least three years are required to design and develop an ECS 
for a small aircraft turbine engine. Therefore, if an engine 
manufacturer must replace the supplier of the ECS on a specific engine, 
at least three years will pass before the engine manufacturer can 
deliver an engine with a replacement ECS. Aircraft manufacturers often 
demand delivery of an engine in less than three years.
    72. If, after the acquisition, UTC were to withhold or delay 
delivery of Goodrich ECSs to companies that compete with UTC for the 
design, development, manufacture, and sale of small aircraft turbine 
engines, those companies might be unable to deliver engines on the 
schedule required by their customers. Such customers likely would have 
to turn to a different engine supplier.
    73. In such circumstances, UTC might be the best positioned 
alternative engine supplier. As a result, customers that would 
otherwise choose a competing engine could be forced to purchase an 
engine from UTC.
    74. The sale of small aircraft turbine engines provides much more 
revenue and profit than the sale of ECSs for those engines. Therefore, 
if UTC were able to gain additional engine sales by withholding or 
delaying delivery of ECSs to its engine competitors, the additional 
engine sales would result in considerably more revenue and profit to 
UTC than the revenue and profit lost from any decrease in sales of such 
ECSs.
    75. UTC's acquisition of Goodrich therefore would give UTC both the 
ability and the incentive to make its competitors unable to compete 
effectively to supply small aircraft turbine engines. If UTC were to 
make its competitors unable to compete effectively in the development, 
manufacture, and sale of small aircraft turbine engines, customers for 
those engines would have significantly fewer choices, and competition 
would be lessened substantially.

[[Page 46191]]

D. Difficulty of Entry

    76. Sufficient, timely entry of additional competitors into the 
markets for aircraft turbine engines is unlikely to prevent the harm to 
competition in the markets for aircraft turbine engines that is likely 
to occur as a result of the proposed acquisition.
    77. Entry of any new competitor into the development, manufacture, 
and sale of aircraft turbine engines is unlikely and cannot happen in a 
time period that would prevent significant competitive harm. The 
primary purchasers of aircraft turbine engines are aircraft 
manufacturers, of which there are very few in the world. Aircraft 
manufacturers are extremely hesitant to purchase components from 
unproven sources, particularly such major components as engines. A firm 
seeking to enter this business would need many years and an enormous 
financial investment to design and develop a new aircraft turbine 
engine. No firm has successfully entered this business in decades.
    78. Such entry is unlikely to occur in a timeframe sufficient to 
prevent competitive harm. Engine purchasers typically expect delivery 
of the first engine for a new aircraft from one to five years after 
contract award. A new entrant into any market for aircraft turbine 
engines, even a firm already manufacturing other aircraft turbine 
engines, would require much more time to develop and market a new 
engine.
    79. As a result of these barriers, entry into the markets for 
aircraft turbine engines would not be timely, likely, or sufficient to 
defeat the substantial lessening of competition that is likely to 
result from UTC's acquisition of Goodrich.

VI. Engine Control Systems for Large Aircraft Turbine Engines

A. Background

    80. The ECS in a large aircraft turbine engine is a major 
determinant of key engine performance parameters including fuel 
economy, safe operation, and thrust in different situations. In order 
to maximize engine performance, the ECS must be closely integrated with 
the engine during both the design stage and the assembly process. 
Changes in an engine design can necessitate changes in an ECS design, 
and vice versa.
    81. As a result, large aircraft turbine engines and the ECSs for 
those engines are not sold separately to engine purchasers. It would 
not be practical for even the most sophisticated engine purchasers to 
integrate an ECS and an engine. All large aircraft turbine engines are 
sold with an ECS installed by the ECS producer and the engine 
manufacturer.
    82. In large part because of the highly integrated nature of 
engines and ECSs, each of the three major producers of large aircraft 
turbine engines has a preferred supplier for the ECSs used on its 
engines. Each engine manufacturer purchases the great majority of the 
ECSs used on its engines from its preferred supplier.
    83. Because of these preferred supplier relationships, there are 
only three significant suppliers of ECSs for large aircraft turbine 
engines, one for each engine producer. UTC and AEC, the Goodrich-Rolls-
Royce joint venture, are two of the three suppliers. UTC, through its 
Hamilton Sundstrand subsidiary, supplies the ECSs used on most of its 
own engines. AEC supplies the ECSs used on most Rolls-Royce engines.

B. Relevant Markets

1. Product Market
    84. As discussed in paragraphs 56 to 58 above, the development, 
manufacture, sale, and aftermarket service of the ECS for large 
aircraft turbine engines is a line of commerce and relevant product 
market within the meaning of Section 7 of the Clayton Act.
2. Geographic Market
    85. Aircraft manufacturers purchase ECSs for large aircraft turbine 
engines primarily from companies located in the United States or 
Europe. However, suppliers typically offer a worldwide organization to 
support the provision of maintenance and repair services. ECS customers 
do not consider transportation costs, a small proportion of the cost of 
the finished aircraft, to be a significant cost driver.
    86. Accordingly, the world is the relevant geographic market within 
the meaning of Section 7 of the Clayton Act.

C. Anticompetitive Effects of the Proposed Transaction

    87. UTC's proposed acquisition of Goodrich likely would lessen 
competition substantially in the market for ECSs for large aircraft 
turbine engines. UTC and AEC are two of the three producers of such 
ECSs. If UTC were to purchase Goodrich and thus Goodrich's share of 
AEC, UTC would control fifty percent of one of its two leading 
competitors for such ECSs.
    88. Although an ECS for a large aircraft turbine engine is 
generally purchased by an engine builder from its preferred supplier, 
independent source selections can and do take place. For example, an 
aircraft manufacturer may purchase a replacement ECS from an ECS 
manufacturer other than its preferred supplier to upgrade the ECS on an 
engine already in service. This occurs when an existing ECS becomes 
difficult to repair due to parts obsolescence issues. In addition, 
engine manufacturers occasionally form teams to compete for new large 
aircraft turbine engine projects. In either of these situations, an ECS 
supplier may be selected by competition rather than on the basis of an 
existing preferred supplier arrangement. After the acquisition UTC, 
through its position as a partner in the AEC joint venture, would have 
the incentive and ability to impede AEC's pursuit of such projects in 
competition with UTC. Competition for ECSs for large aircraft turbine 
engines thus would be lessened substantially.
    89. UTC, through its Pratt & Whitney subsidiary, and Rolls-Royce 
are two of the world's three primary manufacturers of large aircraft 
turbine engines. The companies conduct independent work into the 
research, development and design of new ECSs for such engines, UTC 
through its Hamilton Sundstrand subsidiary and Rolls-Royce through AEC. 
After UTC acquires Goodrich, UTC and Rolls-Royce would share control of 
AEC, and UTC has explored using AEC as a vehicle to combine its ECS 
business with that of Rolls-Royce, to share intellectual property and 
research and development results, and to eliminate some product lines, 
rather than competing with Rolls-Royce to independently develop 
innovative and cost-effective ECS solutions. Competition for ECSs for 
large aircraft turbine engines thus would be lessened substantially, as 
engine customers would be offered two engines from UTC and Rolls-Royce, 
but only a single ECS. This loss of competition would result in less 
innovative and cost-effective ECSs for large aircraft turbine engines.

D. Difficulty of Entry

    90. Sufficient, timely entry of additional competitors into the 
market for ECSs for large aircraft turbine engines is unlikely. 
Therefore, entry or the threat of entry into this market would not 
prevent the harm to competition caused by UTC's acquisition of Goodrich 
and its share of AEC.
    91. A firm seeking to enter this market would need substantial time 
and a significant financial investment to design and develop a new ECS 
for a large aircraft turbine engine. Even those firms that produce ECSs 
for smaller engines would need at least five years and an investment of 
$50 million or

[[Page 46192]]

more to develop an ECS for a large aircraft turbine engine that is 
competitive with those produced today by UTC and AEC.
    92. A firm attempting to enter this market would be unlikely to 
obtain sufficient sales to be economically viable. Because most of 
these products are purchased by the three primary engine manufacturers 
from their existing preferred suppliers, a new entrant would have few 
opportunities to recover the considerable investment required to 
develop a new ECS for large aircraft turbine engines. Independent 
competitions are unlikely to occur with sufficient frequency to permit 
an entrant to recover its costs.
    93. As a result of these barriers, entry into the market for ECSs 
for large aircraft turbine engines would not be timely, likely, or 
sufficient to defeat the substantial lessening of competition that 
likely would result from UTC's acquisition of Goodrich.

VII. Violations Alleged

    94. UTC's proposed acquisition of Goodrich likely would lessen 
competition substantially in the development, manufacture, and sale of 
large main engine generators, aircraft turbine engines, and engine 
control systems for large aircraft turbine engines, in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
    95. Unless enjoined, the proposed acquisition likely would have the 
following anticompetitive effects relating to large main engine 
generators, among others:
    (a) Actual and potential competition between UTC and Goodrich would 
be eliminated;
    (b) competition likely would be substantially lessened;
    (c) prices likely would increase, contractual terms likely would be 
less favorable to the customers, and innovation likely would decrease.
    96. Unless enjoined, the proposed acquisition likely would have the 
following anticompetitive effects relating to aircraft turbine engines, 
among others:
    (a) Competition likely would be substantially lessened;
    (b) prices would likely increase, contractual terms likely would be 
less favorable to the customers, and innovation likely would decrease.
    97. Unless enjoined, the proposed acquisition likely would have the 
following anticompetitive effects relating to ECSs for large aircraft 
turbine engines, among others:
    (a) Actual and potential competition between UTC and Goodrich would 
be eliminated;
    (b) competition likely would be substantially lessened;
    (c) prices would likely increase, contractual terms likely would be 
less favorable to the customers, and innovation likely would decrease.

VIII. Requested Relief

    98. The United States requests that this Court:
    (a) Adjudge and decree that UTC's acquisition of Goodrich would be 
unlawful and violate Section 7 of the Clayton Act, 15 U.S.C. 18;
    (b) preliminarily and permanently enjoin and restrain Defendants 
and all persons acting on their behalf from consummating the proposed 
acquisition of Goodrich by UTC, or from entering into or carrying out 
any other contract, agreement, plan, or understanding, the effect of 
which would be to combine UTC with Goodrich;
    (c) award the United States its costs for this action; and
    (d) award the United States such other and further relief as the 
Court deems just and proper.

For Plaintiff United States of America:

Jamillia Ferris
(D.C. Bar 493479),
Acting Assistant Attorney General.

Patricia A. Brink,
Director of Civil Enforcement.

Maribeth Petrizzi
(D.C. Bar 435204),
Chief, Litigation II Section.

Dorothy B. Fountain
(D.C. Bar 439469),
Assistant Chief, Litigation II Section.

Kevin C. Quin
(D.C. Bar 415268),
Robert W. Wilder,
Christine A. Hill
(D.C. Bar 461048),
Soyoung Choe,

Attorneys, United States Department of Justice, Antitrust Division, 
450 Fifth Street NW., Suite 8700, Washington, DC 20530, (202) 307-
0922.

Dated: July 26, 2012.

United States District Court For the District of Columbia

    United States Of America Plaintiff, v. United Technologies 
Corporation and Goodrich Corporation, Defendants.

[Civil Action No. 1:12-cv-01230]

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On September 21, 2011, defendants United Technologies Corporation 
(``UTC'') and Goodrich Corporation (``Goodrich'') entered into an 
agreement whereby UTC proposes to acquire Goodrich for approximately 
$18.4 billion.
    The United States filed a civil antitrust Complaint against UTC and 
Goodrich on July 26, 2012, seeking to enjoin the proposed acquisition. 
The Complaint alleged that the proposed acquisition likely would 
substantially lessen competition in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18, in the worldwide markets for the 
development, manufacture, and sale of large main engine generators, 
aircraft turbine engines, and engine control systems for large aircraft 
turbine engines. That loss of competition likely would result in 
increased prices, less favorable contractual terms, and decreased 
innovation in the markets for these products.
    At the same time the Complaint was filed, the United States filed a 
Hold Separate Stipulation and Order (``Hold Separate'') and proposed 
Final Judgment, which are designed to eliminate the anticompetitive 
effects that would have resulted from UTC's acquisition of Goodrich. 
Under the proposed Final Judgment, which is explained more fully below, 
UTC is required to divest assets relating to Goodrich's main engine 
generator business and Goodrich's engine controls business. UTC is also 
required to divest Goodrich's shares in a joint venture related to 
engine controls, and extend until December 31, 2023 the option of a 
third party to purchase a portion of the Goodrich engine controls 
business related to that joint venture.\1\ Each of the products 
discussed in the Complaint and the proposed transaction's potential 
anticompetitive effects on each relevant product market are discussed 
in turn below.
---------------------------------------------------------------------------

    \1\ Throughout its investigation of the UTC/Goodrich 
acquisition, the United States has worked closely with the European 
Commission and has obtained substantially the same remedies. The 
United States will continue to cooperate with the European 
Commission as appropriate in implementing the remedies provided in 
the proposed Final Judgment.
---------------------------------------------------------------------------

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the Final Judgment and to punish violations thereof.

[[Page 46193]]

II. Description of the Events Giving Rise to the Alleged Violations

A. The Defendants

    UTC is incorporated in Delaware and has its headquarters in 
Hartford, Connecticut. UTC produces a wide range of products for the 
aerospace and other industries, including, among other products, 
aircraft generators, aircraft engine control systems and components, 
aircraft engines, and helicopters. UTC's main aerospace divisions are 
Pratt & Whitney, Hamilton Sundstrand, and Sikorsky. In 2010, UTC had 
revenues of approximately $54 billion.
    Goodrich is incorporated in New York and has its headquarters in 
Charlotte, North Carolina. Goodrich manufactures a variety of products 
for the aerospace industry, including, among other products, aircraft 
generators, aircraft engine control systems and components, landing 
gear, and actuation systems. In 2010, Goodrich had revenues of 
approximately $7.2 billion.

B. The Competitive Effects of the Acquisition in the Market for Large 
Main Engine Generators

    An aircraft electrical generator is a device that converts some of 
the mechanical energy created by an aircraft engine into electrical 
power used by communication and navigation equipment, environmental 
control systems, interior and exterior lighting, and other aircraft 
systems. As the engine turns, it rotates a shaft connected to the 
generator, which by electromagnetic induction converts some of the 
mechanical energy into electrical power. Electricity flows into the 
primary electrical distribution system, which routes it through the 
aircraft to the lighting bus, environmental control systems, and other 
systems requiring electric power.
    Aircraft electrical power generation is quite complex. Because 
aircraft engines change speed according to the rate of acceleration or 
deceleration, air density, and angle of flight, the shaft connected to 
the generator will rotate at higher or lower rates. This variability 
must be taken into account by the generator, which must deliver a 
steady level of power to the aircraft systems.
    Large aircraft (which include commercial aircraft seating 100 or 
more passengers) generally require much more electrical power than 
smaller aircraft. Main engine generators for large aircraft generally 
have power output above approximately 75 thousand volt-amps 
(``Kva'').\2\ Main engine generators for large and small aircraft also 
have substantial differences in terms of rotational speed and cooling 
system. Moreover, large aircraft almost always use alternating current 
(``AC'') rather than direct current (``DC''), while smaller aircraft 
use either AC or DC. AC generators can produce variable frequency or 
constant frequency electrical power.
---------------------------------------------------------------------------

    \2\ Hereinafter, main engine generators with outputs of 75Kva or 
more will be referred to as ``large main engine generators.''
---------------------------------------------------------------------------

    Designing a large main engine generator is generally more difficult 
than designing a small main engine generator because of the need to 
operate large generators efficiently at high rotational speeds. This 
requires a more complex cooling system to deal with the friction 
created by a heavier rotor operating at faster speeds. Small 
generators, generating 30 to 45Kva or less, are cooled sufficiently by 
air circulated within the generator chamber. Large generators, however, 
require a system of tubing and gears to deliver mists of oil around the 
rotor to avoid over-heating. Oil-cooling systems are more complex and 
challenging to design.
    The need for a heavier rotor and a more complex cooling system also 
makes it difficult to minimize the size and weight of a large main 
engine generator. Therefore, such generators are designed to more 
demanding specifications than small main engine generators. Design 
engineering staffs must be familiar with the more demanding 
requirements of large main engine generators.
    While multiple smaller generators could produce the same total 
power output as a single large main engine generator, multiple 
generators would weigh more, consume more space, require more 
connections to the electrical distribution system and the gearbox, and 
be more costly than a single generator. Weight and space, in 
particular, are important factors in generator selection and likely 
would dissuade a customer from approving a multiple-generator design.
    Generators used in auxiliary power units (``APUs'') cannot be used 
in place of large main engine generators. APU generators are designed 
to perform a function different from main engine generators and, 
therefore, differ in mechanical design, electrical design, and cooling 
technique.
1. Relevant Product Market
    Large main engine generators have specific applications, for which 
other products cannot be employed. An aircraft needs a main engine 
generator and cannot operate without one. In addition, main engine 
generators for use on smaller aircraft cannot be used in large aircraft 
because they do not provide sufficient output to power the aircraft and 
have other different specifications. Further, generators for other 
parts of an aircraft, such as the APU, cannot be used on the main 
engine of a large aircraft because they do not have the same 
performance characteristics as main engine generators.
    A small but significant increase in the price of large main engine 
generators would not cause customers of those generators to substitute 
a smaller generator, a generator for an APU, or any other product, or 
to reduce purchases of large main engine generators, in volumes 
sufficient to make such a price increase unprofitable. Accordingly, the 
development, manufacture, and sale of large main engine generators is a 
line of commerce and relevant market within the meaning of Section 7 of 
the Clayton Act.
2. Relevant Geographic Market
    Aircraft manufacturers purchase large main engine generators 
primarily from companies located in the United States or Europe. 
However, suppliers typically offer a worldwide organization to support 
the provision of maintenance and repair services. Customers do not 
consider transportation costs, a small proportion of the cost of the 
finished aircraft, to be a significant cost driver. Accordingly, the 
world is the relevant geographic market within the meaning of Section 7 
of the Clayton Act.
3. Anticompetitive Effects
    UTC's proposed acquisition of Goodrich likely would lessen 
competition substantially in the market for the development, 
manufacture, and sale of large main engine generators. UTC and Goodrich 
are the only significant competitors for large main engine generators. 
For the past twelve years, either UTC or Goodrich has won every 
competition for large main engine generators. Indeed, UTC and Goodrich 
were the top two bidders in almost every one of those competitions. The 
firms have been each other's closest competitors based on technical and 
commercial considerations.
    The bidding behaviors of UTC and Goodrich often have been 
constrained by the possibility of losing sales of large main engine 
generators to the other. Each firm has often considered the other 
company's offering when planning bids

[[Page 46194]]

and research and development activities.
    Customers have benefited from the competition between UTC and 
Goodrich for sales of large main engine generators by receiving lower 
prices, more favorable contractual terms, more innovative products, and 
shorter delivery times. The combination of UTC and Goodrich would 
eliminate this competition and its future benefits to customers. Post-
acquisition, UTC likely would have the incentive and the ability 
profitably to increase prices and reduce innovation.
    UTC and Goodrich invest significantly to remain the two leading 
suppliers of large main engine generators in the future, and customers 
expect them to maintain these positions. Future product development for 
large main engine generators would benefit from vigorous innovation 
competition between UTC and Goodrich.
    Other companies that have some capability to develop large main 
engine generators are not close competitors to UTC and Goodrich. For 
example, no other company has an installed base of large main engine 
generators. Any other firm would need substantial time and expense to 
achieve UTC's or Goodrich's record of experience, flight time, and 
reliability. UTC's and Goodrich's installed base of large main engine 
generators also provides them the ability to develop new large main 
engine generators more efficiently and at a lower cost than other 
companies.
    Companies that manufacture main engine generators for small 
aircraft do not compete effectively with UTC and Goodrich for large 
main engine generators because those companies' experiences with main 
engine generators for smaller aircraft do not provide them the ability 
to design and manufacture large main engine generators, which are more 
complicated products. Similarly, companies that make generators for 
APUs do not compete effectively with UTC and Goodrich for large main 
engine generators because those companies' experiences with APU 
generators do not provide them the ability to design and manufacture 
large main engine generators, which again are more complicated 
products.
    The proposed acquisition, therefore, likely would substantially 
lessen competition for the development, manufacture, and sale of large 
main engine generators. This likely would lead to higher prices, less 
favorable contractual terms, and less innovation in violation of 
Section 7 of the Clayton Act.
4. Difficulty of Entry
    Sufficient, timely entry of additional competitors into the market 
for large main engine generators is unlikely. Therefore, entry or the 
threat of entry into this market would not prevent the harm to 
competition caused by the elimination of Goodrich as a supplier of 
these products.
    Firms attempting to enter into the market for the development, 
manufacture, and sale of large main engine generators face several 
barriers to entry. Main engine generators perform critical functions on 
the aircraft and likely will be used throughout the life of the 
aircraft program, which may be twenty or thirty years. As a result, 
aircraft manufacturers are reluctant to purchase a product from a 
supplier not already known for its expertise in large main engine 
generators. A manufacturer must be able to demonstrate that its large 
main engine generator meets the necessary specifications and need for 
reliability. While some companies may have demonstrated experience in 
other types of generators, such experience is not considered by 
customers to be as relevant as experience specifically in large main 
generators.
    UTC and Goodrich emphasize to customers their prior experience in 
large main engine generators to demonstrate reliability. Moreover, this 
experience allows them to develop a new large main engine generator at 
an initial development cost lower than that of companies that do not 
already have similar generators in operation. They also are able to 
demonstrate the technical and financial ability successfully to manage 
production, aftermarket service, and warranty work for large main 
engine generators, which companies trying to enter this market would 
not be able to do.
    Developing a large main engine generator is technically difficult. 
Manufacturers of main engine generators for smaller aircraft or 
generators for other parts of the aircraft, such as APUs, face 
significant technical hurdles in designing and developing large main 
engine generators. Large main engine generators present unique 
technical challenges relating to the preservation of power quality at 
speeds much higher than those reached in main engine generators for 
smaller aircraft and generators for APUs. Large main engine generators 
also generate higher current levels than other generators, and require 
an oil cooling system. Manufacturers of main engine generators for 
smaller aircraft and APU generators cannot design and produce a large 
main engine generator simply by making a main engine generator for a 
smaller aircraft or an APU generator proportionately larger, but must 
instead completely redesign the generator.
    Further, substantial time and significant financial investment 
would be required for a company to design and develop a large main 
engine generator. Even companies that already make other types of 
generators, or that already are attempting to develop a large main 
engine generator, would require up to five years or more and an 
investment of over $50 million to develop a product that is competitive 
with those offered by UTC and Goodrich.
    As a result of these barriers, entry into the market for large main 
engine generators would not be timely, likely, or sufficient to defeat 
the substantial lessening of competition that likely would result from 
UTC's acquisition of Goodrich.

C. The Competitive Effects of the Acquisition in the Market for 
Aircraft Turbine Engines

    Most modern commercial, business, and military aircraft are powered 
by turbine engines. These engines operate by burning a fuel-and-air 
mixture in a combustion chamber, with the resulting combustion products 
turning a propeller blade on a turboprop engine, a rotor shaft on a 
turboshaft engine, or a fan in front of a turbofan engine. Turbofan 
engines power most commercial transport aircraft, business jets, and 
many military aircraft. Generally, large commercial aircraft, regional 
jets, and military aircraft use the most powerful turbofan engines, 
while business jets use turbofan engines of lower power. The power 
delivered by a turbofan engine is measured in terms of pounds of thrust 
(``pounds thrust''), and such engines are generally categorized by 
their thrust class. Turboprop engines primarily are used to power 
smaller aircraft, such as commuter aircraft. Turboshaft engines power 
helicopters. The power delivered by turboprop and turboshaft engines is 
measured in terms of shaft horsepower (shp).
    Due to their complexity and the degree of expertise and skill 
required for their development, and production, few companies produce 
aircraft turbine engines of any kind. Aircraft turbine engines 
typically continue in service for decades and require regular 
maintenance, repair, and overhaul. When selecting an engine, customers 
take into account the difficulty and cost of servicing the engine, 
including the engine control system (``ECS'') on the engine. Engines 
that require more frequent servicing or are otherwise more difficult or 
costly to own and operate

[[Page 46195]]

are less attractive to customers and therefore less competitive. There 
are only three main producers of aircraft turbine engines of greater 
than 10,000 pounds thrust. (Hereinafter the term ``large aircraft 
turbine engines'' will refer to engines of this thrust range.) UTC, 
through its Pratt & Whitney subsidiary, and Rolls-Royce Group plc 
(``Rolls-Royce'') are two of these three producers. UTC manufactures 
turbine engines of up to 90,000 pounds thrust, while Rolls-Royce 
manufactures turbine engines of up to 97,000 pounds thrust. There are 
only a few producers of aircraft turbine engines of 10,000 pounds 
thrust or less. (Hereinafter the term ``small aircraft turbine 
engines'' will refer to engines of this thrust range.) UTC, through its 
Pratt & Whitney subsidiary, is one of these producers.
    It is critical that fuel be fed into aircraft turbine engines in a 
precise manner, so that the engine responds to the pilot's instructions 
in the most efficient manner possible. The system that accomplishes 
this is the ECS. The core of the ECS is a computer, usually called an 
electronic engine control, or EEC, that receives information from 
multiple sensors in the engine and from the pilot's controls, and 
calculates the amount of fuel to be sent to the engine. The ECS also 
includes the engine's main fuel pump and a fuel metering unit, or FMU, 
which controls the amount of fuel coming into the engine from the main 
fuel pump.
    In virtually all modern aircraft turbine engines, the EEC within 
the ECS is a full-authority digital engine control, or FADEC. The FADEC 
consists of hardware and two types of software: the operating system 
and the application software. The operating system is provided by the 
FADEC supplier. The application software contains sensitive performance 
data relating to the particular engine and is usually provided by the 
engine manufacturer, although in some cases the ECS supplier provides 
this software.
    An ECS, including the FADEC, is designed and developed to meet the 
specific performance requirements of the particular engine on which it 
will be installed. As a result, the ECS supplier has insight into the 
design and cost of not only its ECS, but also the customer's engine. 
ECS suppliers that provide the application software also have access to 
competitively sensitive confidential business information about the 
fuel efficiency and performance principles around which the customer's 
engine is designed.
    In 2008, Goodrich and Rolls-Royce formed Aero Engine Controls 
(``AEC''), a joint venture to produce ECSs. The AEC joint venture 
agreement requires Rolls-Royce to purchase all of its ECSs for engines 
of over 4000 pounds thrust or 2000 shp from AEC. Therefore, there are 
no alternative suppliers of ECSs for Rolls-Royce large aircraft turbine 
engines.
    The AEC joint venture agreement gives Goodrich the exclusive right 
to provide replacement parts and undertake maintenance, repair, and 
overhaul of ECSs for Rolls-Royce large aircraft turbine engines. 
Because the volume of commerce for aftermarket service of any given ECS 
is quite small, there are no secondary suppliers for ECS replacement 
parts or service. Aftermarket parts and service for ECSs must be 
provided by the original ECS manufacturer or a reseller designated by 
that manufacturer. Therefore, it would not be possible for purchasers 
of these Rolls-Royce engines to obtain parts or service for these ECSs 
from any supplier other than Goodrich.
1. Relevant Product Markets
a. Aircraft Turbine Engines
    To a large extent, each aircraft platform is limited in the type 
and size of engine with which it may be powered. The choice of a 
turbofan, turboprop, or turboshaft engine is dictated by aircraft type, 
range and speed, and is specified by the manufacturer. The engine must 
provide the amount of power needed for that particular aircraft to 
perform properly and safely, while at the same time being as light as 
possible. Thus, only a limited range of engine sizes is considered for 
any particular aircraft.
    For any given aircraft, a small but significant increase in the 
price of an aircraft turbine engine of the required type and thrust 
would not cause sufficient purchases of such engines to be shifted to 
engines of a different type or significantly higher or lower thrust so 
as to make such a price increase unprofitable. Accordingly, the 
development, manufacture, and sale of the turbine engine required for 
each type of aircraft is a line of commerce and a relevant product 
market within the meaning of Section 7 of the Clayton Act.
    Although the engine required for each such aircraft thus may be 
deemed a separate product market, in each such market there are few 
competitors. The proposed acquisition of Goodrich by UTC would affect 
competition in each large aircraft turbine engine market in the same 
manner. It is therefore appropriate to aggregate large aircraft turbine 
engine markets for purposes of analyzing the effects of the 
acquisition. Similarly, the proposed acquisition of Goodrich by UTC 
would affect competition in each small aircraft turbine engine market 
in the same manner. It is therefore also appropriate to aggregate small 
aircraft turbine engine markets for purposes of analyzing the effects 
of the acquisition.
b. ECSs for Aircraft Turbine Engines
    All aircraft turbine engines require an ECS in order to operate 
properly. No aircraft engine can be sold or operated without an ECS. 
There are no other products that perform the functions of an ECS in 
receiving and analyzing data from sensors and pilot controls, 
calculating the optimal flow rate of fuel into the engine combustion 
chamber, and feeding the proper amount of fuel into the engine 
combustion chamber.
    Each ECS is designed to work on a specific engine, and one ECS 
cannot be substituted for an ECS on another engine. Therefore, a small 
but significant increase in the price of the ECS designed for a 
particular engine would not cause enough purchases to be shifted to a 
different ECS so as to make such a price increase unprofitable. 
Accordingly, the development, manufacture, sale, and aftermarket 
service of the ECS for each aircraft turbine engine is a line of 
commerce and relevant product market within the meaning of Section 7 of 
the Clayton Act.
    Although the ECS required for each particular engine thus may be 
deemed a separate product market, the AEC joint venture agreement 
requires Rolls-Royce to purchase all ECSs for large aircraft turbine 
engines from AEC and grants exclusive aftermarket rights to such ECSs 
to Goodrich. Thus the proposed acquisition would affect competition in 
each such market in the same manner. It is therefore appropriate to 
aggregate the markets for ECSs for large aircraft turbine engines for 
purposes of analyzing the effects of the acquisition.
    The proposed acquisition would have the same effect in each market 
for ECSs for small aircraft turbine engines. It is therefore 
appropriate to aggregate the markets for ECSs for small aircraft 
turbine engines for purposes of analyzing the effects of the 
acquisition.
2. Relevant Geographic Market
    Aircraft manufacturers purchase aircraft turbine engines and the 
ECSs for those engines primarily from companies located in the United 
States or Europe. However, suppliers typically offer a worldwide 
organization to support the provision of maintenance and repair 
services. Customers do not consider transportation costs, a small 
proportion of the cost of the finished aircraft, to be

[[Page 46196]]

a significant cost driver. Accordingly, the world is the relevant 
geographic market within the meaning of Section 7 of the Clayton Act.
3. Anticompetitive Effects
a. Large Aircraft Turbine Engines
    As discussed above, there are only three primary competitors in the 
markets for the development, manufacture, and sale of large aircraft 
turbine engines. UTC, through its Pratt & Whitney subsidiary, and 
Rolls-Royce are two of those competitors. Goodrich is a partner in AEC, 
from which Rolls-Royce must obtain its ECSs for most such engines. If 
UTC were to purchase Goodrich, and thus Goodrich's share of AEC, UTC 
would be both a producer of large aircraft turbine engines and the 
sole-source supplier of ECSs to one of its leading engine competitors.
    After the acquisition UTC, through its position as a partner in the 
AEC joint venture, would have the incentive and ability to cause AEC to 
withhold or delay delivery of ECSs to its competitor Rolls-Royce, 
resulting in the inability of Rolls-Royce to deliver engines on the 
schedule required by customers. In addition, after the acquisition UTC, 
through its position as the exclusive supplier of aftermarket parts and 
services for ECSs on Rolls-Royce large aircraft turbine engines, would 
have the incentive and ability to raise the costs of such parts and 
services, or to reduce the availability of such parts and services, 
making Rolls-Royce a less reliable supplier of large aircraft turbine 
engines. Such strategies to raise Rolls-Royce's costs and reduce its 
reliability would be profitable to UTC post-merger because the sale of 
large aircraft turbine engines provides much more revenue and profit 
than the sale of ECSs or the aftermarket service of ECSs for those 
engines. Therefore, if UTC were able to gain additional engine sales by 
causing AEC to withhold or delay delivery of ECSs for Rolls-Royce 
engines, or by increasing the cost or difficulty of obtaining 
aftermarket service on such ECSs, the additional engine sales would 
result in considerably more revenue and profit to UTC than the revenue 
and profit lost from any decrease in sales of or aftermarket service on 
such ECSs. These actions by UTC likely would harm purchasers of large 
aircraft turbine engines because UTC and Rolls-Royce have been, and 
likely will continue to be, in some competitions the two best-
positioned suppliers of large aircraft turbine engines. By making 
Rolls-Royce unable to deliver engines or by raising its costs, UTC may 
substantially affect competition and gain the ability to raise prices 
or reduce quality.
    In addition, because AEC produces the ECSs for Rolls-Royce engines, 
AEC has accurate information concerning the cost of the ECS and each of 
the ECS components used on each Rolls-Royce engine covered by the AEC 
agreement. Moreover, because AEC provides the application software for 
the FADECs for these Rolls-Royce engines, it has access to 
competitively-sensitive confidential business information concerning 
the engine itself, including the fuel efficiency and performance 
principles around which each engine is designed. Following the 
acquisition of Goodrich and its share of AEC, UTC would have the 
incentive and ability to use this information to its advantage in 
bidding on large aircraft turbine engines. For example, such 
information would reveal to UTC when it could offer higher pricing or 
less innovative solutions without risk of losing a large aircraft 
turbine engine sale.
    Therefore, UTC's acquisition of Goodrich would give UTC both the 
ability and the incentive to reduce the competitiveness of Rolls-Royce 
in the supply of large aircraft turbine engines. If UTC were to reduce 
the competitiveness of Rolls-Royce in the markets for these engines, 
customers for those engines would have significantly fewer choices, and 
competition thus would be lessened substantially.
b. Small Aircraft Turbine Engines
    As discussed above, UTC, through its Pratt & Whitney subsidiary, is 
one of a small number of significant competitors in the markets for the 
development, manufacture, and sale of small aircraft turbine engines. 
Several of UTC's competitors purchase the ECSs for certain of their 
small aircraft turbine engines from Goodrich. Therefore, if UTC were to 
purchase Goodrich, UTC would be both a producer of small aircraft 
turbine engines and a supplier of ECSs to its competitors.
    At least three years are required to design and develop an ECS for 
a small aircraft turbine engine. Therefore, if an engine manufacturer 
must replace the supplier of the ECS on a specific engine, at least 
three years will pass before the engine manufacturer can deliver an 
engine with a replacement ECS. Aircraft manufacturers often demand 
delivery of an engine in less than three years.
    If, after the acquisition, UTC were to withhold or delay delivery 
of Goodrich ECSs to companies that compete with UTC for the 
development, manufacture, and sale of small aircraft turbine engines, 
those companies might be unable to deliver engines on the schedule 
required by their customers. Such customers likely would have to turn 
to a different engine supplier. In such circumstances, UTC might be the 
best-positioned alternative engine supplier. As a result, customers 
that would otherwise choose a competing engine could be forced to 
purchase an engine from UTC.
    The sale of small aircraft turbine engines provides much more 
revenue and profit than the sale of ECSs for those engines. Therefore, 
if UTC were able to gain additional engine sales by withholding or 
delaying delivery of ECSs to its engine competitors, the additional 
engine sales would result in considerably more revenue and profit to 
UTC than the revenue and profit lost from any decrease in sales of such 
ECSs.
    UTC's acquisition of Goodrich therefore would give UTC both the 
ability and the incentive to make its competitors unable to compete 
effectively to supply small aircraft turbine engines. If UTC were to 
make its competitors unable to compete effectively in the development, 
manufacture, and sale of small aircraft turbine engines, customers for 
those engines would have significantly fewer choices, and competition 
would be lessened substantially.
4. Difficulty of Entry
    Sufficient, timely entry of additional competitors into the markets 
for aircraft turbine engines is unlikely to prevent the harm to 
competition in the markets for aircraft turbine engines that is likely 
to occur as a result of the proposed acquisition. Entry of any new 
competitor into the manufacture and sale of aircraft turbine engines is 
unlikely and cannot happen in a time period that would prevent 
significant competitive harm. The primary purchasers of aircraft 
turbine engines are aircraft manufacturers, of which there are very few 
in the world. Aircraft manufacturers are extremely hesitant to purchase 
components from unproven sources, particularly such major components as 
engines. A firm seeking to enter this business would need many years 
and an enormous financial investment to design and develop a new 
aircraft turbine engine. No firm has successfully entered this business 
in decades.
    Such entry is unlikely to occur in a timeframe sufficient to 
prevent competitive harm. Engine purchasers typically expect delivery 
of the first engine for a new aircraft from one to five years after 
contract award. A new entrant into any market for aircraft turbine 
engines, even a firm already manufacturing other aircraft turbine

[[Page 46197]]

engines, would require much more time to develop and market a new 
engine.
    As a result of these barriers, entry into the markets for aircraft 
turbine engines would not be timely, likely, or sufficient to defeat 
the substantial lessening of competition that is likely to result from 
UTC's acquisition of Goodrich.

D. The Competitive Effects of the Acquisition in the Market for Engine 
Control Systems for Large Aircraft Turbine Engines

    The ECS in a large aircraft turbine engine is a major determinant 
of key engine performance parameters including fuel economy, safe 
operation, and thrust in different situations. In order to maximize 
engine performance, the ECS must be closely integrated with the engine 
during both the design stage and the assembly process. Changes in an 
engine design can necessitate changes in an ECS design, and vice versa. 
As a result, large aircraft turbine engines and the ECSs for those 
engines are not sold separately to engine purchasers. It would not be 
practical for even the most sophisticated engine purchasers to 
integrate an ECS and an engine. All large aircraft turbine engines are 
sold with an ECS installed by the ECS producer and the engine 
manufacturer.
    In large part because of the highly integrated nature of engines 
and ECSs, each of the three major producers of large aircraft turbine 
engines has a preferred supplier for the ECSs used on its engines. Each 
engine manufacturer purchases the great majority of the ECSs used on 
its engines from its preferred supplier.
    Because of these preferred supplier relationships, there are only 
three significant suppliers of ECSs for large aircraft turbine engines, 
one for each engine producer. UTC and AEC, the Goodrich-Rolls-Royce 
joint venture, are two of the three suppliers. UTC, through its 
Hamilton Sundstrand subsidiary, supplies the ECSs used on most of its 
own engines. AEC supplies the ECSs used on most Rolls-Royce engines.
1. Relevant Product Market
    As discussed in Paragraph II(C)(1)(a) of this Competitive Impact 
Statement, the development, manufacture, sale, and aftermarket service 
of the ECS for large aircraft turbine engines is a line of commerce and 
relevant product market within the meaning of Section 7 of the Clayton 
Act.
2. Relevant Geographic Market
    Aircraft manufacturers purchase ECSs for large aircraft turbine 
engines primarily from companies located in the United States or 
Europe. However, suppliers typically offer a worldwide organization to 
support the provision of maintenance and repair services. ECS customers 
do not consider transportation costs, a small proportion of the cost of 
the finished aircraft, to be a significant cost driver. Accordingly, 
the world is the relevant geographic market within the meaning of 
Section 7 of the Clayton Act.
3. Anticompetitive Effects
    UTC's proposed acquisition of Goodrich likely would lessen 
competition substantially in the market for ECSs for large aircraft 
turbine engines. UTC and AEC are two of the three producers of such 
ECSs. If UTC were to purchase Goodrich and thus Goodrich's share of 
AEC, UTC would control fifty percent of one of its two leading 
competitors for such ECSs.
    Although an ECS for a large aircraft turbine engine is generally 
purchased by an engine builder from its preferred supplier, independent 
source selections can and do take place. For example, an aircraft 
manufacturer may purchase a replacement ECS from an ECS manufacturer 
other than its preferred supplier to upgrade the ECS on an engine 
already in service. This occurs when an existing ECS becomes difficult 
to repair due to parts obsolescence issues. In addition, engine 
manufacturers occasionally form teams to compete for new large aircraft 
turbine engine projects. In either of these situations, an ECS supplier 
may be selected by competition rather than on the basis of an existing 
preferred supplier arrangement. After the acquisition UTC, through its 
position as a partner in the AEC joint venture, would have the 
incentive and ability to impede AEC's pursuit of such projects in 
competition with UTC. Competition for ECSs for large aircraft turbine 
engines would thus be lessened substantially.
    Competition also could be substantially lessened in other ways. 
UTC, through its Pratt & Whitney subsidiary, and Rolls-Royce are two of 
the world's three primary manufacturers of large aircraft turbine 
engines. The companies conduct independent work into the research, 
development and design of new ECSs for such engines, UTC through its 
Hamilton Sundstrand subsidiary and Rolls-Royce through AEC. After UTC 
acquires Goodrich, UTC and Rolls-Royce would share control of AEC, and 
UTC has explored using AEC as a vehicle to combine its ECS business 
with that of Rolls-Royce, to share intellectual property and research 
and development results, and to eliminate some product lines, rather 
than competing with Rolls-Royce to independently develop innovative and 
cost-effective ECS solutions. Competition for ECSs for large aircraft 
turbine engines thus would be lessened substantially, as engine 
customers would be offered two engines from UTC and Rolls-Royce, but 
only a single ECS. This loss of competition would result in less 
innovative and cost-effective ECSs for large aircraft turbine engines.
4. Difficulty of Entry
    Sufficient, timely entry of additional competitors into the market 
for ECSs for large aircraft turbine engines is unlikely. Therefore, 
entry or the threat of entry into this market would not prevent the 
harm to competition caused by UTC's acquisition of Goodrich and its 
share of AEC.
    A firm seeking to enter this market would need substantial time and 
a significant financial investment to design and develop a new ECS for 
a large aircraft turbine engine. Even those firms that produce ECSs for 
smaller engines would need at least five years and an investment of $50 
million or more to develop an ECS for a large aircraft turbine engine 
that is competitive with those produced today by UTC and AEC.
    Moreover, a firm attempting to enter this market would be unlikely 
to obtain sufficient sales to be economically viable. Because most of 
these products are purchased by the three primary engine manufacturers 
from their existing preferred suppliers, a new entrant would have few 
opportunities to recover the considerable investment required to 
develop a new ECS for large aircraft turbine engines. Independent 
competitions are unlikely to occur with sufficient frequency to permit 
an entrant to recover its costs.
    As a result of these barriers, entry into the market for ECSs for 
large aircraft turbine engines would not be timely, likely, or 
sufficient to defeat the substantial lessening of competition that 
likely would result from UTC's acquisition of Goodrich.

III. Explanation of the Proposed Final Judgment

    The divestitures required by the proposed Final Judgment will 
eliminate the anticompetitive effects that likely would result from 
UTC's acquisition of Goodrich. These divestitures will preserve the 
current state of competition in the development, manufacture, and sale 
of large main engine generators, aircraft turbine engines, and engine 
control systems for large aircraft turbine engines.

[[Page 46198]]

A. Divestitures

1. Engine Controls
a. Divestiture Assets
    The proposed Final Judgment requires UTC to divest all of the 
Goodrich assets that are used to design, develop, and manufacture 
engine control products for small engines, such as electronic engine 
controls, fuel metering units, and main fuel pumps (hereinafter, the 
``Engine Controls Divestiture Assets,'' defined in Section II(M) of the 
proposed Final Judgment).\3\ The assets to be divested include 
Goodrich's manufacturing facility located in West Hartford, 
Connecticut, and all tangible and intangible assets used by or located 
in that facility. The assets to be divested also include the assets 
used by or located in Goodrich's facility in Montreal, Canada, for 
engine control products for small engines.\4\ The divestiture assets 
include all assets used for maintenance, repair, and overhaul (``MRO'') 
services that are performed at the West Hartford facility and the 
assets used for MRO services for small engines that are performed at 
the Goodrich Montreal facility.\5\ The divestiture assets exclude 
assets relating to MRO services at other Goodrich facilities that are 
not being divested.\6\ The divestiture of the Engine Controls 
Divestiture Assets will provide the acquirer with all the assets it 
needs to successfully develop, manufacture, and sell engine control 
products.
---------------------------------------------------------------------------

    \3\ The divestiture assets also include ancillary engine control 
products such as engine actuators and various pumps and valves that 
are currently manufactured at the facilities being divested. The 
divestiture of these product lines is necessary to ensure the 
continued viability of the West Hartford facility and the overall 
viability of the assets.
    \4\ Goodrich is in the process of closing its Montreal facility 
and transitioning the assets to various other Goodrich facilities. 
Goodrich is transitioning the assets relating to engine control 
products for small engines to the West Hartford facility and those 
assets are included in the divestiture assets.
    \5\ The divestiture assets specifically exclude those assets 
relating to MRO services for several large engines currently 
performed at the Montreal facility because those services are not 
related to the small engine control products being divested.
    \6\ The assets relating to MRO services performed at Goodrich 
facilities that are not being divested are excluded because most of 
the MRO services for engine control products for small engines are 
performed at the West Hartford facility. In addition, as discussed 
more fully below, a transition services agreement will provide the 
acquirer any MRO services it needs for a period of up to two years.
---------------------------------------------------------------------------

    In addition, to address intellectual property that Goodrich is 
unable to transfer outright, Paragraphs II(M)(5) and (6) include as a 
part of the Engine Controls Divestiture Assets an exclusive, 
irrevocable, royalty-free license for Goodrich intellectual property 
that is used exclusively for engine control products and a similar, but 
non-exclusive, license for such intellectual property that is used 
primarily, but not exclusively, for engine control products. These 
licenses will further ensure that the acquirer has the assets it needs 
to be a viable competitor in the engine controls systems business.
b. Divestiture Timing
    In antitrust cases involving mergers in which the United States 
seeks a divestiture remedy, the United States generally requires that 
divestitures take place within the shortest time period reasonable 
under the circumstances. A quick divestiture has the benefits of 
restoring competition lost because of the acquisition and reducing the 
possibility of dissipation of the value of the assets. Paragraph IV(A) 
requires UTC to divest the Engine Control Divestiture Assets as a 
viable ongoing business within one hundred eighty days after the 
Complaint is filed, or five days after notice of the entry of the Final 
Judgment by the Court.
    This divestiture period is longer than those often found in 
antitrust consent decrees, but is warranted in this case. The Engine 
Control Divestiture Assets do not currently comprise a separate, stand-
alone business, making their separation from the remainder of Goodrich 
more difficult than would otherwise be the case. Also, the Engine 
Controls Divestiture Assets include assets that are currently in the 
process of being relocated from Goodrich's facility in Montreal to the 
West Hartford facility, which will take a few months to complete. In 
addition, in the particular circumstances of this case and given the 
large number of complex and critical products produced by the divested 
business, due diligence by the acquirer of the divestiture assets is 
likely to be a lengthy process. The proposed Final Judgment allows this 
divestiture period to be extended until ten calendar days after the 
receipt of any governmental approvals, including those from authorities 
outside the United States, that are required by the acquirer as a 
condition of closing. UTC and Goodrich must use their best efforts to 
seek all necessary approvals as expeditiously as possible.
2. Aircraft Electrical Generation
a. Divestiture Assets
    The proposed Final Judgment requires UTC to divest the Goodrich 
assets used to design, develop, manufacture, market, service, 
distribute, repair and/or sell aircraft electrical generation and 
electrical distribution systems (hereinafter, the ``Electrical Power 
Divestiture Assets,'' defined in Section II(Q) of the proposed Final 
Judgment). The tangible assets to be divested include Goodrich's 
facilities in Pitstone, Buckinghamshire in the United Kingdom \7\ and 
in Twinsburg, Ohio. The tangible assets to be divested also include 
manufacturing equipment, tooling, fixed assets, personal property, 
inventory, materials, licenses, permits, authorizations, agreements, 
contracts, customer lists, and repair, performance and other records. 
The intangible assets to be divested include patents, licenses, 
sublicenses, technical information, intellectual property, know-how, 
trade secrets, designs, design protocols, research data concerning 
historic and current research and development efforts, design tools, 
and simulation capability.\8\ This divestiture will provide the 
acquirer with the assets it needs to successfully develop, manufacture, 
and sell aircraft electrical generation and electrical distribution 
systems.\9\
---------------------------------------------------------------------------

    \7\ The Pitstone facility also houses Goodrich's motor drives 
business. The motor drives are unrelated to electrical power 
generation and distribution and are not complementary products. In 
addition, the inclusion of the motor drives business is not 
necessary to ensure the viability of the Pitstone facility and the 
electrical power divestiture assets. The physical assets associated 
with the motor drives business are minimal and easily removed from 
the Pitstone facility. Further, any equipment shared by the two 
businesses will remain at the Pitstone facility. Therefore, the 
motor drives business is not included in the divestiture assets and 
is required to be removed from the Pitstone facility prior to the 
divestiture of the Electrical Power Divestiture Assets.
    \8\ The Electrical Power Divestiture Assets also include 
Goodrich's obligations to provide warranty services to BAE Systems 
on a torpedo program and all assets necessary to fulfill those 
obligations. This program is not related to electrical generation 
and distribution systems. However, this program has been 
manufactured and serviced from the Pitstone facility for several 
years and it would be disruptive to remove the services from the 
Pitstone facility.
    \9\ The Electrical Power Divestiture Assets exclude Goodrich's 
assets in and personnel operating out of Goodrich's development 
center in Bengaluru, India, and Goodrich's facilities that provide 
customer support for Goodrich's aircraft electrical generation 
systems and electrical distribution systems products, other than the 
facilities in Pitstone and Twinsburg. These facilities provide some 
services to the divested business. However, these services are minor 
and can be replicated by the acquirer of the divested assets. In 
addition, as discussed more fully below, a transition services 
agreement will provide the acquirer any engineering or maintenance, 
repair, and overhaul services it needs for a period of up to two 
years.
---------------------------------------------------------------------------

    In addition, the proposed Final Judgment requires that UTC divest 
all of its shares in the Aerolec joint venture, as defined in Paragraph 
II(T). The acquirer of the Aerolec shares and the acquirer of the 
Electrical Power Divestiture Assets must be the same,

[[Page 46199]]

unless Thales acquires the Aerolec shares. This provision is necessary 
to avoid a situation in which the interests of the acquirer of the 
Aerolec shares potentially are not aligned with the interests of the 
acquirer of the Electrical Power Divestiture Assets, especially because 
the acquirer of the Electrical Power Divestiture Assets would be 
performing the majority of the work within the Aerolec joint venture.
    Further, Paragraph II(Q)(5) ensures that any rights to intellectual 
property and know-how that Goodrich has pursuant to a certain agreement 
with Thales relating to the Aerolec joint venture will be divested to 
the acquirer of the Engine Control Divestiture Assets and will not 
remain with Goodrich.
b. Divestiture Timing
    Paragraph V(A) of the proposed Final Judgment requires UTC to 
divest the Electrical Power Divestiture Assets within one hundred 
eighty days after the Complaint is filed, or five days after notice of 
the entry of the Final Judgment by the Court. This divestiture period 
is warranted by the specific circumstances related to these assets. The 
divestiture of the Electrical Power Divestiture Assets is likely to 
take up to six months because Defendants must move the motor drives 
business from the Pitstone facility prior to the divestiture. In 
addition to the time necessary to locate suitable space near the 
Pitstone facility and to transition the business, it is necessary to 
replace one piece of testing equipment at the Pitstone facility that 
currently is shared between the motor drives business and the 
Electrical Power Divestiture Assets. Although this equipment will 
remain at the Pitstone facility, the motor drives business will need 
new equipment once the business is removed from the Pitstone facility. 
The proposed Final Judgment allows the divestiture period to be 
extended until ten calendar days after the receipt of any governmental 
approvals that are required by the acquirer as a condition of closing. 
UTC and Goodrich must use their best efforts to seek all necessary 
approvals as expeditiously as possible.
    Pursuant to Paragraph V(S), UTC must divest the Aerolec shares 
either to the acquirer of the Electrical Power Divestiture Assets or to 
Thales, which has various rights to purchase the shares pursuant to the 
Aerolec shareholders agreement between Thales and Goodrich. Due to 
Thales's rights and the time periods permitted for Thales to exercise 
these rights in the Aerolec shareholders agreement, Defendants may be 
unable to divest the Aerolec shares at the same time as the Electrical 
Power Divestiture Assets. In particular, Thales has two options by 
which it may purchase the Aerolec shares--a change of control option, 
which would allow Thales to purchase the Aerolec shares once the UTC/
Goodrich merger is consummated, and a transfer option, by which Thales 
has the right to purchase the Aerolec shares once Goodrich has selected 
a potential third-party acquirer and agreed on a price.
    The timing of the divestiture of the Aerolec shares will vary 
depending on whether Thales exercises these options. The divestiture 
periods for the Aerolec shares, provided in Paragraphs V(C), (D), and 
(E), are designed to require the divestiture of the Aerolec shares as 
soon as possible while taking into account the contractually permitted 
time periods for Thales to exercise its various rights. When Goodrich 
is required to select a potential third-party acquirer of the Aerolec 
shares prior to Thales exercising its rights, the divestiture period 
includes time for UTC to reach a deal with the acquirer of the 
Electrical Power Divestiture Assets and have the acquirer approved by 
the United States. Paragraph V(E) addresses the situation where Thales 
does not exercise any of its options to purchase the Aerolec shares. 
The proposed Final Judgment provides time for Defendants to comply with 
additional procedures required by the Aerolec shareholders agreement 
relating to the sale of the shares to a third party.
3. AEC Shares
    Paragraph VI(A) of the proposed Final Judgment requires the 
divestiture to Rolls-Royce of Goodrich's shares in the AEC joint 
venture, defined in Paragraph II(Y), within one hundred eighty days 
after the filing of the Complaint, or five days after the notice of 
entry of the Final Judgment. The divestiture of Goodrich's AEC shares 
will prevent UTC from jointly developing engine control systems with 
Rolls-Royce through the AEC joint venture or from disadvantaging Rolls-
Royce in future competitions for large aircraft turbine engines. The 
one hundred eighty-day divestiture period provides sufficient time for 
Rolls-Royce to complete the process of acquiring Goodrich's shares 
under the procedures established in the AEC joint venture agreement, 
including time to determine the price of the AEC shares. The proposed 
Final Judgment allows the divestiture period to be extended until ten 
calendar days after the receipt of any governmental approvals that are 
required by Rolls-Royce as a condition of closing. UTC and Goodrich 
must use their best efforts to seek all necessary approvals as 
expeditiously as possible.
    In the unlikely event that Goodrich's shares in AEC are not 
divested to Rolls-Royce, Paragraph VI(B) of the proposed Final Judgment 
requires the divestiture of the shares to another acquirer within one 
hundred eighty days after the date that Rolls-Royce waives its option 
to acquire the shares or its option expires. While it is unlikely that 
Rolls-Royce will not purchase Goodrich's AEC shares,\10\ this provision 
ensures that Goodrich's AEC shares will be divested even if the sale to 
Rolls-Royce does not go through. The one hundred eighty-day divestiture 
period provides sufficient time for operation of the procedures 
established by the AEC joint venture agreement for the sale of 
Goodrich's shares to a third party.
---------------------------------------------------------------------------

    \10\ Rolls-Royce has entered into agreements with Defendants to 
exercise its option to purchase the AEC shares.
---------------------------------------------------------------------------

B. Other Provisions

1. Transition Services Agreements
    Because the acquirer will be purchasing equipment and other assets 
that must be integrated into its existing operations, it may need the 
assistance of the former Goodrich employees to enable the acquirer to 
supply the divested engine controls systems, aircraft electrical 
generation and electrical distribution systems, and other products 
produced with the divested assets as seamlessly as possible. Therefore, 
Paragraphs IV(H) and V(L) of the proposed Final Judgment require that, 
at the option of the acquirer, UTC enter into transition services 
agreements by which UTC will provide technical and engineering 
assistance, and maintenance, repair, and overhaul services to the 
acquirer for up to one year, with the possibility of a one-year 
extension upon approval by the United States.
    These transition services agreements do not raise competitive 
concerns under the circumstances of this particular case. The 
agreements are limited in duration to one year, plus the opportunity 
for a one-year extension. Also, the supply of these services from UTC 
to the acquirer is unlikely to provide UTC any competitive insight into 
the operations of the acquirer, and therefore will not harm 
competition.
2. Supply Agreements
    The proposed Final Judgment provides for several supply agreements 
between UTC and the acquirers of the divestiture assets, at the option 
of the party receiving the supplied product, to allow the acquirers and 
UTC to fulfill current contractual obligations. These supply 
arrangements are necessary

[[Page 46200]]

because some contractual obligations that will be divested to the 
acquirer require the supply of products and services from parts of 
Goodrich that are not being divested, while other contractual 
obligations that will not be divested require the supply of products 
and services from the divested businesses.
    Paragraphs IV(I) and V(M) require that UTC provide each acquirer, 
at the option of the acquirer, with any components that the acquirer 
may need to operate the divested assets for up to one year, with the 
possibility of an extension of up to one additional year upon approval 
by the United States. These general components agreements guarantee the 
acquirer a source for components that currently are provided from parts 
of Goodrich that are not being divested, and give the acquirer time to 
identify alternative sources of supply or to manufacture the products 
on its own.
    Paragraphs IV(J), IV(K), V(N), and V(O) provide for specific supply 
agreements to each acquirer that require UTC, at the option of the 
acquirer, to supply certain parts, engineering expertise, and/or 
maintenance service necessary to allow the acquirer to fulfill 
contractual obligations it will acquire from Goodrich as a part of the 
divestiture. These supply arrangements and their terms are tailored to 
the particular contracts that make them necessary. Accordingly, the 
lengths of the supply agreements in Paragraphs IV(J) and (K) in 
practice will amount to the life of the program for which the products 
and services are necessary.\11\ The supply agreement in Paragraph V(N) 
will last for the life of the program for one product and for one year 
for another product, with the option of a one-year extension upon 
approval by the United States.\12\ The supply agreement in Paragraph 
V(O) will last until the underlying contract expires in December 2013.
---------------------------------------------------------------------------

    \11\ As an alternative to the agreement in Paragraph IV(K), UTC 
is required, at the acquirer's option, to provide a non-exclusive, 
irrevocable, royalty-free license to manufacture the parts necessary 
for the acquirer to fulfill its relevant contractual obligations. 
This license may be used only to manufacture the parts necessary to 
fulfill the acquirer's relevant contractual obligations, and the 
acquirer is prohibited from transferring this license, except as a 
part of the sale of the divestiture assets. This option allows the 
acquirer to determine whether it is more attractive to manufacture 
the parts on its own rather than to buy the parts from UTC.
    \12\ The agreement in Paragraph V(N) is limited to a one-year 
term with the option of an extension for one product (machined 
housings) because that product is a simple component that can be 
made by the acquirer relatively quickly and easily. Paragraph V(N) 
also provides an alternative similar to that provided in Paragraph 
IV(K), except that it allows for UTC to provide the acquirer with 
manufacturing know-how sufficient to enable the acquirer to 
manufacture the parts, as opposed to a license, because the products 
provided for by Paragraph V(N) require only know-how to manufacture.
---------------------------------------------------------------------------

    The proposed Final Judgment also provides for supply agreements, at 
UTC's option, whereby the acquirers of the divestiture assets will 
provide UTC with certain parts and/or services for specified programs 
to enable UTC to fulfill certain Goodrich contractual obligations that 
will not be divested. These supply agreements, described in Paragraphs 
IV(L) and V(P), are limited to specified engines and/or engine control 
systems. Like the other supply agreements, each agreement is tailored 
to the particular contract that makes it necessary, and accordingly its 
length in practice amounts to the life of the program for which the 
parts and/or services are required.
    These supply agreements do not raise competitive concerns under the 
circumstances of this particular case, as the supply agreements are not 
likely to provide UTC or the acquirers with any competitive insight 
into the other's business. While some of these supply agreements will 
be longer than a typical supply agreement in the divestiture context, 
the contracts for the particular products being supplied have already 
been awarded and there is no ability to affect future competitions 
based on the supply of components for these previously awarded 
contracts.
    Finally, Paragraphs IV(M) and V(Q) require that, at UTC's option, 
the acquirers provide UTC a non-exclusive license for intellectual 
property that currently is used both for the products being divested 
and for other Goodrich products that UTC will retain. Under these 
provisions, UTC may not use these licenses for engine control products, 
systems, or services or for aircraft electrical generation and 
electrical distribution systems, respectively. UTC also would be 
prohibited from transferring the license, except as a part of a sale of 
the business in which the license is used. These provisions are 
necessary to ensure that UTC has access to intellectual property 
required to run other portions of Goodrich, but prevents UTC from using 
these licenses to compete against the acquirers in the respective 
divested businesses.
3. Contract Extensions
    Paragraph IV(N) requires UTC to offer to extend any contracts 
between the divested engine controls business and manufacturers of 
aircraft turbine engines that are scheduled to expire prior to the 
divestiture, unless the contracts have been renegotiated in the 
meantime. Such contracts will be extended until thirty days after the 
divestiture of the Engine Control Divestiture Assets. This extension 
will ensure that UTC's turbine engine competitors have access to the 
necessary engine control system components prior to the divestiture of 
the Engine Controls Divestiture Assets.
4. Extension of the AEC Aftermarket Option
    Paragraph VI(C) of the proposed Final Judgment requires that UTC 
offer Rolls-Royce a new option for an additional period of time to 
purchase assets relating to the Goodrich aftermarket business, which 
services AEC products. The new option extends until the earlier of: (1) 
December 31, 2023 (when the exclusivity period of the aftermarket 
agreement between AEC and Goodrich expires); or (2) the date on which 
UTC no longer owns or controls substantially all of the Goodrich 
aftermarket business. This provision is necessary to eliminate any risk 
that UTC could disadvantage Rolls-Royce in its sale of engine control 
products for large aircraft turbine engines by making it difficult for 
customers to obtain parts or services for those engines. This new 
period does not affect any prior agreements between either of the 
Defendants and Rolls-Royce and does not affect UTC's ability to sell 
the Goodrich aftermarket business to a third party. However, this 
provision provides a specific procedure to be followed by UTC relating 
to its potential sale of the Goodrich aftermarket business. This 
procedure provides Rolls-Royce the ability to purchase the aftermarket 
business, but provides some limitations to ensure that UTC effectively 
retains the ability to sell the Goodrich aftermarket business to a 
third party.
5. Use of Divestiture Trustee
    In the event that Defendants do not accomplish the divestitures 
within the period allotted, Section VII of the proposed Final Judgment 
provides that the Court will appoint a trustee selected by the United 
States to effect the divestiture. This requirement to appoint a 
divestiture trustee, if necessary, will encourage quick, effective 
divestitures in this matter. If a trustee is appointed, the proposed 
Final Judgment provides that UTC will pay all costs and expenses of the 
trustee. The trustee's commission will be structured so as to provide 
an incentive for the trustee based on the price and terms obtained and 
the speed with which the divestiture is accomplished. After his or her

[[Page 46201]]

appointment becomes effective, the trustee will file monthly reports 
with the Court and the United States setting forth his or her efforts 
to accomplish the divestiture. At the end of the six months, if the 
divestiture has not been accomplished, the trustee and the United 
States will make recommendations to the Court, which shall enter such 
orders as are appropriate to carry out the purpose of the trust, 
including extending the trust or the term of the trustee's appointment.
6. Use of Monitoring Trustee
    Section XI provides that the United States may appoint a Monitoring 
Trustee for the Electrical Power Divestiture Assets and the Aerolec 
shares and/or the AEC shares. The Monitoring Trustee would have the 
power and authority to monitor the parties' compliance with the terms 
of the Final Judgment during the pendency of the divestiture. The 
Monitoring Trustee would also exercise control over the Aerolec shares 
and/or the AEC shares under the Hold Separate. The Monitoring Trustee 
would not have any responsibility or obligation for the operation of 
the parties' businesses. The proposed Final Judgment provides for a 
Monitoring Trustee because of the complexities of the divestiture, 
including the need to carve out the motor drives business from the 
Pitstone facility and the need for an independent individual to 
exercise control over Goodrich's shares in Aerolec and in AEC until 
they are divested. The Monitoring Trustee will serve at the Defendants' 
expense and on such terms and conditions as the United States approves, 
and the Defendants must assist the trustee in fulfilling its 
obligations. The Monitoring Trustee will file monthly reports and will 
serve until the divestitures are complete.

IV. Hold Separate Stipulation and Order

    The Hold Separate ensures the viability of the assets being 
divested during the divestiture periods. Until the divestitures take 
place, the Hold Separate requires UTC to preserve and continue to 
operate the Engine Control Divestiture Assets and the Electrical Power 
Divestiture Assets as independent, ongoing, and economically viable 
businesses that are held entirely separate, distinct, and apart from 
UTC's assets and the other assets UTC acquires from Goodrich. During 
the divestiture period, UTC also is prohibited from coordinating the 
production, marketing, or terms of sale of the divested assets with any 
of its own assets or the other assets it acquires from Goodrich. To 
oversee UTC's compliance with its obligations under the Hold Separate, 
UTC is required to appoint, subject to the approval of the United 
States, a Hold Separate Manager for the Engine Control Divestiture 
Assets and a Hold Separate Manager for the Electrical Power Divestiture 
Assets. Duties of the latter include, until the motor drives business 
is removed from the Pitstone facility, ultimate responsibility for 
resolving conflicting demands for shared resources between the motor 
drives business and the business of the Electrical Power Divestiture 
Assets. This provision will limit UTC's involvement with the Pitstone 
facility during the period before the motor drives business is removed.
    Regarding the Aerolec and AEC shares, the Hold Separate ensures 
that the Aerolec and AEC joint ventures remain viable, independent, 
competitive businesses. This includes requiring Defendants to keep the 
books, records, competitively-sensitive sales, marketing, or pricing 
information, and decision-making concerning both Aerolec and AEC 
separate, distinct, and apart from UTC's other operations. The Hold 
Separate also requires Defendants to assign control of the Aerolec 
shares and the AEC shares to the Monitoring Trustee within thirty days 
of the entry of the Hold Separate to ensure that the shares are held 
and managed separate and apart from UTC. During the thirty-day period 
before control is assigned to the Monitoring Trustee, Defendants may 
not exercise any rights or interests deriving from ownership of the 
Aerolec shares or AEC shares.

V. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendants.

VI. Procedures Available for Modification of the Proposed Final 
Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wishes to comment should do so within 
sixty days of the date of publication of this Competitive Impact 
Statement in the Federal Register, or the last date of publication in a 
newspaper of the summary of this Competitive Impact Statement, 
whichever is later. All comments received during this period will be 
considered by the United States Department of Justice, which remains 
free to withdraw its consent to the proposed Final Judgment at any time 
prior to the Court's entry of judgment. The comments and the response 
of the United States will be filed with the Court. In addition, 
comments will be posted on the U.S. Department of Justice, Antitrust 
Division's internet Web site, and, under certain circumstances, 
published in the Federal Register. Written comments should be submitted 
to: Maribeth Petrizzi, Chief, Litigation II Section, Antitrust 
Division, United States Department of Justice, 450 Fifth Street NW., 
Suite 8700, Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VII. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions preventing UTC's acquisition of 
Goodrich. The United States is satisfied, however, that the divestiture 
of the assets described in the proposed Final Judgment will preserve 
competition for the development, manufacture, and sale of large main 
engine generators, aircraft turbine engines, and engine control systems 
for large aircraft turbine engines in the United States. Thus, the 
proposed Final Judgment would achieve all or substantially all of the 
relief the United States would have obtained through litigation, but 
would avoid the time,

[[Page 46202]]

expense, and uncertainty of a full trial on the merits of the 
Complaint.

VIII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the court, in accordance with the statute as amended in 2004, is 
required to consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A) & (B).
    In considering these statutory factors, the court's inquiry is 
necessarily a limited one as the government is entitled to ``broad 
discretion to settle with the defendant within the reaches of the 
public interest.'' United States v. Microsoft Corp., 56 F.3d 1448, 1461 
(D.C. Cir. 1995); see generally United States v. SBC Commc'ns, Inc., 
489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public interest standard 
under the Tunney Act); United States v. InBev N.V./S.A., 2009-2 Trade 
Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at 
*3, (D.D.C. Aug. 11, 2009) (noting that the court's review of a consent 
judgment is limited and only inquires ``into whether the government's 
determination that the proposed remedies will cure the antitrust 
violations alleged in the complaint was reasonable, and whether the 
mechanism to enforce the final judgment are clear and 
manageable.'').\13\
---------------------------------------------------------------------------

    \13\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3. Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

    Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\14\ 
In determining whether a proposed settlement is in the public interest, 
a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not require 
that the remedies perfectly match the alleged violations.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 
(noting the need for courts to be ``deferential to the government's 
predictions as to the effect of the proposed remedies''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 
(noting that the court should grant due respect to the United States' 
prediction as to the effect of proposed remedies, its perception of the 
market structure, and its views of the nature of the case).
---------------------------------------------------------------------------

    \14\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009 
U.S. Dist. LEXIS 84787, at *20 (``the `public interest' is not to be 
measured by comparing the violations alleged in the complaint against 
those the court believes could have, or even should have, been 
alleged'') (citations omitted). Because the ``court's authority to 
review the decree depends entirely on the government's exercising its 
prosecutorial discretion by bringing a case in the first place,'' it 
follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Microsoft, 56 
F.3d at 1459-60. As this Court recently confirmed in SBC 
Communications, courts ``cannot look beyond the complaint in making the 
public interest determination unless the complaint is drafted so 
narrowly as to make a mockery of judicial power.'' SBC Commc'ns, 489 F. 
Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing in 
this section shall be construed to require the court to

[[Page 46203]]

conduct an evidentiary hearing or to require the court to permit anyone 
to intervene.'' 15 U.S.C. 16(e)(2). The language wrote into the statute 
what Congress intended when it enacted the Tunney Act in 1974, as 
Senator Tunney explained: ``[t]he court is nowhere compelled to go to 
trial or to engage in extended proceedings which might have the effect 
of vitiating the benefits of prompt and less costly settlement through 
the consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement 
of Senator Tunney). Rather, the procedure for the public interest 
determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC 
Commc'ns, 489 F. Supp. 2d at 11.\15\
---------------------------------------------------------------------------

    \15\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

IX. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: July 26, 2012.

Respectfully submitted,

Kevin C. Quin (DC Bar  415268),
U.S. Department of Justice, Antitrust Division, Litigation II 
Section, 450 Fifth Street NW., Suite 8700, Washington, DC 20530, 
(202) 307-0922, [email protected].

Certificate of Service

    I, Kevin C. Quin, hereby certify that on July 26, 2012, I caused a 
copy of the foregoing Competitive Impact Statement, as well as the 
Complaint, Hold Separate Stipulation and Order, and Explanation of 
Consent Decree Procedures filed in this matter, to be served upon 
Defendants United Technologies Corporation and Goodrich Corporation by 
mailing the documents electronically to the duly authorized legal 
representatives of Defendants as follows:

Counsel for United Technologies Corporation

Michael H. Byowitz, Esq., Wachtell, Lipton, Rosen & Katz, 51 West 
52nd Street, New York, NY 10019, [email protected].
Wm. Randolph Smith, Esq., Crowell & Moring LLP, 1001 Pennsylvania 
Avenue NW., Washington, DC 20004, [email protected].

Counsel for Goodrich Corporation

Tom D. Smith, Esq., Jones Day, 51 Louisiana Avenue NW., Washington, 
DC 20001-2113, [email protected].
Kevin C. Quin, United States Department of Justice, Antitrust 
Division, Litigation II Section, 450 Fifth Street NW., Suite 8700, 
Washington, DC 20530, [email protected].

United States District Court for the District Of Columbia

    United States of America, Plaintiff v. United Technologies 
Corporation and Goodrich Corporation, Defendants.

[Civil Action No. 1:12-cv-01230]

Proposed Final Judgment

    WHEREAS, Plaintiff, United States of America, filed its Complaint 
on July ----, 2012, the United States and Defendants United 
Technologies Corporation (``UTC'') and Goodrich Corporation 
(``Goodrich''), by their respective attorneys, have consented to the 
entry of this Final Judgment without trial or adjudication of any issue 
of fact or law, and without this Final Judgment constituting any 
evidence against or admission by any party regarding any issue of fact 
or law;
    AND WHEREAS, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    AND WHEREAS, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights and assets by Defendants to 
assure that competition is not substantially lessened;
    AND WHEREAS, the United States requires Defendants to make certain 
divestitures and make certain commitments for the purpose of remedying 
the loss of competition alleged in the Complaint;
    AND WHEREAS, Defendants have represented to the United States that 
the divestitures required below can and will be made and that 
Defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained below;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED, AND DECREED:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
which Defendants divest the Divestiture Assets.
    B. ``Acquirer of the Electrical Power Divestiture Assets'' means 
the entity to which Defendants divest the Electrical Power Divestiture 
Assets.
    C. ``Acquirer of the Engine Control Divestiture Assets'' means the 
entity to which Defendants divest the Engine Control Divestiture 
Assets.
    D. ``Acquirer of the AEC Shares'' means Rolls-Royce or another 
entity to which Defendants divest the AEC Shares.
    E. ``Acquirer of the Aerolec Shares'' means Thales or another 
entity to which Defendants divest the Aerolec Shares.
    F. ``UTC'' means Defendant United Technologies Corporation, a 
Delaware corporation with its headquarters in Hartford, Connecticut, 
its successors, assigns, subsidiaries, divisions, groups, affiliates, 
and partnerships, and their directors, officers, managers, agents, and 
employees.
    G. ``Goodrich'' means Defendant Goodrich Corporation, a New York 
corporation with its headquarters in Charlotte, North Carolina, its 
successors, assigns, subsidiaries, divisions, groups, affiliates, and 
partnerships, and their directors, officers, managers, agents, and 
employees.
    H. ``Rolls-Royce'' means Rolls-Royce Group plc, a company 
incorporated in England and Wales with a registered office in London, 
its successors, assigns, subsidiaries, divisions, groups, affiliates, 
and partnerships, and their directors, officers, managers, agents, and 
employees.
    I. ``Thales'' means Thales Avionics Electrical Systems SA, a 
company incorporated in France with a registered office in Neuilly-Sur-
Seine, France, its successors, assigns, subsidiaries, divisions, 
groups, affiliates, and partnerships, and their directors, officers, 
managers, agents, and employees.
    J. ``West Hartford Facility'' means Goodrich's facility located at 
Charter Oak Boulevard, West Hartford, Connecticut 06133.
    K. ``Montreal Facility'' means Goodrich's facility located at 5595

[[Page 46204]]

Royalmount Avenue, Montreal H4P 1J9 QU, Canada, which will be 
transitioned to the West Hartford Facility.
    L. ``Engine Control Products'' means all Goodrich products and 
services that are designed, developed, manufactured, marketed, 
serviced, distributed, repaired, and/or sold out of or using the assets 
located in the West Hartford Facility and/or the Montreal Facility on 
the date the Complaint is filed in this matter, including but not 
limited to electronic engine controls, fuel metering units, main fuel 
pumps, and ancillary engine control products (including but not limited 
to, engine actuators, ejector pumps and tanks, hot oil valves, shut-off 
valves, flow dividers, start flow control valves, lube pumps, and lube 
and scavenge pumps). Engine Control Products exclude maintenance, 
repair, and overhaul services currently performed at the Montreal 
Facility for the following: (1) Products designed specifically to be 
used on the Rolls-Royce Tay and Spey engines; (2) products designed 
specifically to be used on the General Electric F404 engine; (3) 
products designed specifically to be used on the Pratt & Whitney PW305 
engine; and (4) the servo actuator and yaw damper product lines.
    M. ``Engine Control Divestiture Assets'' means:
    (1) The West Hartford Facility and all tangible and intangible 
assets used by or located in the West Hartford Facility;
    (2) All tangible and intangible assets used by or located in the 
Montreal Facility that are used to design, develop, manufacture, 
market, service, distribute, repair, and/or sell Engine Control 
Products;
    (3) All tangible assets, wherever located, that are used to design, 
develop, and/or manufacture Engine Control Products, including, but not 
limited to, assets relating to research and development activities, 
manufacturing equipment, tooling, fixed assets, personal property, 
inventory, office furniture, materials, supplies, licenses, permits, 
authorizations issued by any governmental organization, contracts, 
teaming arrangements, agreements, leases, commitments, certifications, 
supply agreements, understandings, customer lists, contracts, accounts, 
credit records, information technology systems, and repair, 
performance, and other records; and
    (4) All intangible assets, wherever located, that are used to 
design, develop, and/or manufacture Engine Control Products, including, 
but not limited to, contractual rights, patents, licenses, sublicenses, 
intellectual property, copyrights, trademarks, trade names, service 
marks, service names, technical information, computer software and 
related documentation, know-how, trade secrets, drawings, blueprints, 
designs, design protocols, specifications for materials, specifications 
for parts and devices, safety procedures, quality assurance and control 
procedures, design tools, simulation capability, manuals and technical 
information provided to Goodrich employees, customers, suppliers, 
agents, or licensees, and research data concerning historic and current 
research and development efforts, including, but not limited to, 
designs of experiments and results of successful and unsuccessful 
designs and experiments;
    (5) for intellectual property that is used exclusively for Engine 
Control Products that is owned and/or controlled by Goodrich, but for 
which Goodrich's ownership or control is in any way encumbered, an 
exclusive, irrevocable, royalty-free license for that intellectual 
property; and
    (6) for intellectual property that is used primarily, but not 
exclusively, for Engine Control Products that is owned and/or 
controlled by Goodrich, but for which Goodrich's ownership or control 
is in any way encumbered, a non-exclusive, irrevocable, royalty-free 
license for that intellectual property.
    N. ``Qualifying Customer Contracts'' means any contract or 
agreement: (1) Having an initial duration of longer than two years; (2) 
for the supply of any Engine Control Products to turbine engine 
manufacturers; (3) to which the business comprising the Engine Control 
Divestiture Assets is a party; (4) that are unexpired on the date the 
Complaint is filed in this matter; (5) the term of which will expire 
prior to the date of the consummation of the divestiture of the Engine 
Control Divestiture Assets; and (6) which have not been renegotiated 
prior to such consummation.
    O. ``Twinsburg Facility'' means Goodrich's facility located at 8380 
Darrow Road, Twinsburg, Ohio 44087.
    P. ``Pitstone Facility'' means Goodrich's facility located at 
Pitstone Business Park, Westfield Road, Pitstone, Buckinghamshire LU7 
9GT, United Kingdom.
    Q. ``Electrical Power Divestiture Assets'' means:
    (1) The Twinsburg Facility;
    (2) The Pitstone Facility, provided, however, that the assets used 
exclusively for the motor drive business located at the Pitstone 
Facility shall not be divested pursuant to this Final Judgment;
    (3) All tangible assets that are used to design, develop, 
manufacture, market, service, distribute, repair, and/or sell aircraft 
electrical generation systems and electrical distribution systems that 
currently are or have been designed, developed, manufactured, marketed, 
serviced, distributed, repaired, and/or sold by Goodrich Engine Control 
and Electrical Power Systems, including, but not limited to, assets 
relating to research and development activities, manufacturing 
equipment, tooling, fixed assets, personal property, inventory, office 
furniture, materials, supplies, licenses, permits, authorizations 
issued by any governmental organization, contracts, teaming 
arrangements, agreements, leases, commitments, certifications, supply 
agreements, understandings, customer lists, contracts, accounts, credit 
records, information technology systems, and repair, performance, and 
other records;
    (4) All intangible assets that are used to design, develop, 
manufacture, market, service, distribute, repair and/or sell aircraft 
electrical generation systems and electrical distribution systems that 
currently are or have been designed, developed, manufactured, marketed, 
serviced, distributed, repaired, and/or sold by Goodrich Engine Control 
and Electrical Power Systems, including, but not limited to, 
contractual rights, patents, licenses, sublicenses, intellectual 
property, copyrights, trademarks, trade names, service marks, service 
names, technical information, computer software and related 
documentation, know-how, trade secrets, drawings, blueprints, designs, 
design protocols, specifications for materials, specifications for 
parts and devices, safety procedures, quality assurance and control 
procedures, design tools, simulation capability, manuals and technical 
information provided to Goodrich employees, customers, suppliers, 
agents, or licensees, and research data concerning historic and current 
research and development efforts, including, but not limited to, design 
of experiments and results of successful and unsuccessful designs and 
experiments;
    (5) All intellectual property and know-how that is owned by 
Goodrich pursuant to the Intellectual Property Agreement between TRW 
Limited and Thales dated June 27, 2001; and
    (6) Goodrich's obligations to BAE Systems pursuant to the Norwegian 
Sting Ray Mod 1 Torpedo System Programme Procurement Specification and 
Sub Contract for the Power Supply (5000) Section and Motor Control 
(6000) Section 296401001/01-02 Issue 1, dated

[[Page 46205]]

April 30, 2009 and all assets necessary to fulfill those obligations.
    The Electrical Power Divestiture Assets exclude assets in or 
personnel operating out of Goodrich's development center located in 
Bengaluru, India and Goodrich's MRO Campuses.
    R. ``Goodrich's MRO Campuses'' means all Goodrich facilities, 
except the Twinsburg Facility and the Pitstone Facility, from which 
customer support for Goodrich's aircraft electrical generation systems 
and electrical distribution systems products is provided.
    S. ``Aerolec Shareholders Agreement'' means the Shareholders' 
Agreement dated May 31, 2001, between TRW France Holding SAS, TRW 
Limited, and Thales.
    T. ``Aerolec Shares'' means all shares of TRW-Thales Aerolec SAS 
that are owned and/or controlled by Goodrich, TRW France Holding SAS, 
and/or TRW Limited that were acquired pursuant to the Aerolec 
Shareholders Agreement.
    U. ``Change of Control Option'' means Thales's option to acquire 
the Aerolec Shares pursuant to section 7.2(H) of the Aerolec 
Shareholders Agreement.
    V. ``Transfer Option'' means Thales's option to acquire the Aerolec 
Shares pursuant to section 7.2(E) of the Aerolec Shareholders 
Agreement.
    W. ``AEC Joint Venture Agreement'' means the Joint Venture 
Agreement dated December 31, 2008, between Rolls-Royce Engine Controls 
Holdings Limited, Rolls-Royce Group plc, Goodrich Controls Holding 
Limited, Goodrich Actuation Systems Limited, Goodrich Corporation, and 
Rolls-Royce Goodrich Engine Control Systems Limited.
    X. ``AEC'' means the joint venture established pursuant to the AEC 
Joint Venture Agreement.
    Y. ``AEC Shares'' means all the shares in AEC that are owned and/or 
controlled by Goodrich.
    Z. ``Goodrich Aftermarket Business'' means the worldwide 
aftermarket business conducted by Goodrich prior to the date Goodrich 
is acquired by UTC involving the maintenance, repair, and overhaul of 
units, equipment, and parts (including hardware and software) that are 
designed, assembled, manufactured, supported, or procured by AEC, the 
provision of training and documentation and support equipment, and the 
sale and supply of spare parts and initial provisioning for engine 
control systems for Rolls-Royce engines.
    AA. ``Divestiture Assets'' means the Electrical Power Divestiture 
Assets, Aerolec Shares, Engine Control Divestiture Assets, and AEC 
Shares.

III. Applicability

    A. This Final Judgment applies to UTC and Goodrich, as defined 
above, and all other persons in active concert or participation with 
any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. If, prior to complying with Section IV, Section V, and Section 
VI of this Final Judgment, Defendants sell or otherwise dispose of all 
or substantially all of their assets or of lesser business units that 
include the Divestiture Assets, Defendants shall require the 
purchaser(s) to be bound by the provisions of this Final Judgment. 
Defendants need not obtain such an agreement from the Acquirers of the 
assets divested pursuant to this Final Judgment.

IV. Divestiture of the Engine Control Divestiture Assets

    A. Defendants are ordered and directed, within one hundred and 
eighty calendar days after the filing of the Complaint in this matter, 
or five calendar days after notice of the entry of this Final Judgment 
by the Court, whichever is later, to divest the Engine Control 
Divestiture Assets in a manner consistent with this Final Judgment to 
an Acquirer acceptable to the United States, in its sole discretion. 
The United States, in its sole discretion, may agree to one or more 
extensions of this period, not to exceed sixty calendar days in total, 
and shall notify the Court in such circumstances. If, however, 
applications seeking approval to sell the Engine Control Divestiture 
Assets have been filed within the period permitted for the divestiture 
of the Engine Control Divestiture Assets with authorities from which 
approval for the divestiture of the Engine Control Divestiture Assets 
is required by the Acquirer of the Engine Control Divestiture Assets as 
a condition of closing, but orders or other dispositive actions by such 
authorities on such applications have not been issued before the end of 
the period permitted for this divestiture, the period shall be extended 
with respect to the divestiture of the Engine Control Divestiture 
Assets until ten calendar days after such approvals are received. 
Defendants agree to use their best efforts to accomplish the 
divestiture of the Engine Control Divestiture Assets and to seek all 
necessary approvals as expeditiously as possible.
    B. In accomplishing the divestitures ordered by this Final 
Judgment, Defendants promptly shall make known, by usual and customary 
means, the availability of the Engine Control Divestiture Assets. 
Defendants shall inform any person making inquiry regarding a possible 
purchase of any of the Engine Control Divestiture Assets that they are 
being divested pursuant to this Final Judgment and provide that person 
with a copy of this Final Judgment. Defendants shall offer to furnish 
to all prospective Acquirers, subject to customary confidentiality 
assurances, all information and documents relating to the Engine 
Control Divestiture Assets customarily provided in a due diligence 
process except such information or documents subject to the attorney-
client privilege or work-product doctrine. Defendants shall make 
available such information to the United States at the same time that 
such information is made available to any other person.
    C. Defendants shall provide the Acquirer of the Engine Control 
Divestiture Assets and the United States information relating to the 
personnel involved in the design, development, manufacture, marketing, 
servicing, distribution, repair, and/or sale of Engine Control Products 
to enable the Acquirer of the Engine Control Divestiture Assets to make 
offers of employment. Defendants shall not interfere with any 
negotiations by the Acquirer of the Engine Control Divestiture Assets 
to employ any Goodrich employee who is responsible for the design, 
development, manufacture, marketing, servicing, distribution, repair, 
and/or sale of Engine Control Products. Interference with respect to 
this paragraph includes, but is not limited to, enforcement of non-
compete clauses and offers to increase salary or other benefits apart 
from those offered company-wide.
    D. Defendants shall permit prospective Acquirers of the Engine 
Control Divestiture Assets to have reasonable access to personnel and 
to make inspections of the physical facilities to be divested; access 
to any and all environmental, zoning, and other permit documents and 
information; and access to any and all financial, operational, or other 
documents and information customarily provided as part of a due 
diligence process.
    E. Defendants shall warrant to the Acquirer of the Engine Control 
Divestiture Assets that each asset included in the Engine Control 
Divestiture Assets will be operational on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Engine Control 
Divestiture Assets.

[[Page 46206]]

    G. Defendants shall warrant to the Acquirer of the Engine Control 
Divestiture Assets that there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation of 
the Engine Control Divestiture Assets, and that following the sale of 
the Engine Control Divestiture Assets, Defendants will not undertake, 
directly or indirectly, any challenges to the environmental, zoning, or 
other permits relating to the operation of any of the Engine Control 
Divestiture Assets.
    H. At the option of the Acquirer of the Engine Control Divestiture 
Assets, UTC shall enter into a transition services agreement with the 
Acquirer of the Engine Control Divestiture Assets. This agreement shall 
include technical and engineering assistance and maintenance, repair, 
and overhaul services relating to Engine Control Products. The terms 
and conditions of any contractual arrangement meant to satisfy this 
provision must be commercially reasonable. The terms and conditions of 
any such transition services agreement shall be subject to the approval 
of the United States, in its sole discretion. The duration of this 
transition services agreement shall not be longer than one year. The 
United States, in its sole discretion, may approve an extension of the 
term of this transition services agreement for a period of up to one 
year. If the Acquirer of the Engine Control Divestiture Assets seeks an 
extension of the term of this transition services agreement, it shall 
so notify the United States in writing at least four months prior to 
the date the transition services agreement expires. The United States 
shall respond to any such request for extension in writing at least 
three months prior to the date the transition services agreement 
expires.
    I. At the option of the Acquirer of the Engine Control Divestiture 
Assets, UTC shall enter into a supply agreement to supply components 
used in or necessary for the design, development, manufacture, 
marketing, servicing, distribution, repair, and/or sale of the Engine 
Control Products sufficient to meet the needs identified by the 
Acquirer of the Engine Control Divestiture Assets. The terms and 
conditions of any contractual arrangement intended to satisfy this 
provision must be reasonably related to market conditions for these 
products. The terms and conditions of any such supply agreement shall 
be subject to the approval of the United States, in its sole 
discretion. The duration of this supply agreement shall not be longer 
than one year. The United States, in its sole discretion, may approve 
an extension of the term of this supply agreement for a period of up to 
one year. If the Acquirer of the Engine Control Divestiture Assets 
seeks an extension of the term of this supply agreement, it shall so 
notify the United States in writing at least four months prior to the 
date the supply agreement expires. The United States shall respond to 
any such request for extension in writing at least three months prior 
to the date the supply agreement expires.
    J. At the option of the Acquirer of the Engine Control Divestiture 
Assets, UTC shall enter into a supply agreement to supply parts and 
provide engineering expertise sufficient to meet the needs identified 
by the Acquirer of the Engine Control Divestiture Assets to enable that 
Acquirer to provide maintenance, repair, and overhaul services for the 
following products: Engine control unit and fuel pump metering unit for 
the AE1107 engine; engine control unit and fuel pump metering unit for 
the AE3007 engine; engine control unit and fuel pump for the RB211 
engine; engine control unit for the BR710 engine; engine control unit 
for the PW305 engine; engine control unit for the Tay engine; fuel 
metering unit for the Trent 700 engine; fuel metering unit for the 
Trent 800 engine; and fuel metering unit and actuator for the V2500 
engine. The terms and conditions of any contractual arrangement 
intended to satisfy this provision must be reasonably related to market 
conditions for these products. The terms and conditions of any such 
supply agreement shall be subject to the approval of the United States, 
in its sole discretion. At the option of the Acquirer of the Engine 
Control Divestiture Assets, this agreement may remain in effect so long 
as three or more of any aircraft equipped with an engine listed in this 
paragraph are in service.
    K. At the option of the Acquirer of the Engine Control Divestiture 
Assets, UTC shall enter into a supply agreement to supply pressure 
sensors and transducers for the Goodrich EMC51, EMC60, and EMC101 
electronic engine controls, and any derivatives of those electronic 
engine controls, sufficient to meet the needs identified by the 
Acquirer of the Engine Control Divestiture Assets. The terms and 
conditions of any contractual arrangement intended to satisfy this 
provision must be reasonably related to market conditions for these 
products. The terms and conditions of any such supply agreement shall 
be subject to the approval of the United States, in its sole 
discretion. At the option of the Acquirer of the Engine Control 
Divestiture Assets, this agreement may remain in effect so long as five 
or more aircraft equipped with an electronic engine control listed in 
this paragraph are in service. In the alternative, at the option of the 
Acquirer of the Engine Control Divestiture Assets, UTC shall provide 
the Acquirer of the Engine Control Divestiture Assets a non-exclusive, 
irrevocable, royalty-free license solely to manufacture the pressure 
sensors and transducers necessary to fulfill the contractual 
obligations of the Acquirer of the Engine Control Divestiture Assets 
relating to the Goodrich EMC51, EMC60, and EMC101 electronic engine 
controls that exist on the date the Engine Control Divestiture Assets 
are divested. The Acquirer shall not transfer such license except as 
part of a sale of the Engine Control Divestiture Assets.
    L. At the option of UTC, the Acquirer of the Engine Control 
Divestiture Assets shall enter into a supply agreement for parts 
sufficient to meet the needs identified by UTC to enable UTC to provide 
maintenance, repair, and overhaul services for the fuel control system 
for the LF507 engine; the fuel control system and the power turbine 
governor for the T53 engine; the fuel pump for the LTS101 engine; and 
the fuel pump for the PW100 engine. The terms and conditions of any 
contractual arrangement intended to satisfy this provision must be 
reasonably related to market conditions for these products. The terms 
and conditions of any such supply agreement shall be subject to the 
approval of the United States, in its sole discretion. At the option of 
UTC, this agreement may remain in effect so long as five or more 
aircraft equipped with an engine listed in this paragraph are in 
service.
    M. At the option of UTC, the Acquirer of the Engine Control 
Divestiture Assets shall provide UTC with a non-exclusive license for 
intellectual property that is included in the Engine Control 
Divestiture Assets but used for both Engine Control Products and other 
Goodrich products not being divested pursuant to this Final Judgment. 
UTC shall not transfer the license described in this paragraph except 
as part of a sale of the business in which the license is used. UTC 
shall not use the license described in this paragraph for engine 
control products, systems, and services. The terms and conditions of 
any contractual arrangement intended to satisfy this provision must be 
reasonably related to market conditions for these products. The terms 
and conditions of any such license shall be subject to the approval of 
the United States, in its sole discretion.
    N. Defendants shall offer to extend, with the same pricing and 
other terms and conditions, the Qualifying Customer Contracts for a 
period

[[Page 46207]]

expiring thirty calendar days after the date of the consummation of the 
divestiture of the Engine Control Divestiture Assets.
    O. Unless the United States otherwise consents in writing, the 
divestiture of the Engine Control Divestiture Assets pursuant to 
Section IV or by the Divestiture Trustee appointed pursuant to Section 
VII of this Final Judgment shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the Engine 
Control Divestiture Assets can and will be used by the Acquirer of the 
Engine Control Divestiture Assets as part of a viable, ongoing business 
that is engaged in the design, development, manufacture, marketing, 
servicing, distribution, repair, and sale of Engine Control Products 
and that the divestiture of the Engine Control Divestiture Assets will 
remedy the competitive harm alleged in the Complaint. The divestiture 
of the Engine Control Divestiture Assets, whether pursuant to Section 
IV or Section VII of this Final Judgment, shall be made to an Acquirer 
that, in the United States's sole judgment, has the intent and 
capability (including the necessary managerial, operational, technical 
and financial capability) of competing effectively in the design, 
development, manufacture, marketing, servicing, distribution, repair, 
and sale of Engine Control Products. The divestiture of the Engine 
Control Divestiture Assets shall be accomplished so as to satisfy the 
United States, in its sole discretion, that none of the terms of any 
agreement between the Acquirer of the Engine Control Divestiture Assets 
and Defendants give Defendants the ability unreasonably to raise the 
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to 
interfere in the ability of the Acquirer to compete effectively.

V. Divestiture of the Electrical Power Divestiture Assets and Aerolec 
Shares

    A. Defendants are ordered and directed to divest the Electrical 
Power Divestiture Assets in a manner consistent with this Final 
Judgment to an Acquirer acceptable to the United States, in its sole 
discretion, no later than one hundred eighty calendar days after the 
filing of the Complaint in this matter, or five calendar days after 
notice of the entry of this Final Judgment by the Court, whichever is 
later. The United States, in its sole discretion, may agree to one or 
more extensions of this time period, not to exceed sixty calendar days 
in total, and shall notify the Court in such circumstances. If, 
however, applications seeking approval to sell the Electrical Power 
Divestiture Assets have been filed within the period permitted for the 
divestiture of the Electrical Power Divestiture Assets with authorities 
from which approval for the divestiture of the Electrical Power 
Divestiture Assets is required by the Acquirer of the Electrical Power 
Divestiture Assets as a condition of closing, but orders or other 
dispositive actions by such authorities on such applications have not 
been issued before the end of the period permitted for this 
divestiture, the period shall be extended with respect to the 
divestiture of the Electrical Power Divestiture Assets until ten 
calendar days after such approvals are received. Defendants agree to 
use their best efforts to accomplish the divestiture of the Electrical 
Power Divestiture Assets and to seek all necessary approvals as 
expeditiously as possible.
    B. Defendants shall remove from the Pitstone Facility prior to the 
consummation of the divestiture of the Electrical Power Divestiture 
Assets all assets used exclusively for the motor drive business.
    C. If Thales exercises the Change of Control Option, Defendants are 
ordered and directed, within one hundred eighty calendar days after the 
filing of the Complaint in this matter, or five calendar days after 
notice of the entry of this Final Judgment by the Court, whichever is 
later, to divest the Aerolec Shares to Thales in a manner consistent 
with this Final Judgment. The United States, in its sole discretion, 
may agree to one or more extensions of this time period not to exceed 
sixty calendar days in total, and shall notify the Court in such 
circumstances. Defendants agree to use their best efforts to divest the 
Aerolec Shares as expeditiously as possible.
    D. If Thales does not exercise the Change of Control Option, but 
Thales does exercise the Transfer Option, Defendants are ordered and 
directed to divest the Aerolec Shares to Thales in a manner consistent 
with this Final Judgment within thirty calendar days after the date 
Thales notifies UTC that it will exercise the Transfer Option. The 
United States, in its sole discretion, may agree to one or more 
extensions of this time period not to exceed sixty calendar days in 
total, and shall notify the Court in such circumstances. Defendants 
agree to divest the Aerolec Shares as expeditiously as possible. If 
Thales does not exercise the Change of Control Option, Defendants 
further agree to provide notice to Thales pursuant to paragraph 7.2(E) 
of the Aerolec Shareholders Agreement no later than two business days 
after the sale of the Electrical Power Divestiture Assets is 
consummated.
    E. If Thales does not exercise the Change of Control Option and 
does not exercise the Transfer Option, Defendants are ordered and 
directed to divest the Aerolec Shares in a manner consistent with this 
Final Judgment to an Acquirer acceptable to the United States, in its 
sole discretion, within one hundred fifty calendar days after the 
earlier of: (1) The date Thales notifies UTC that it will not exercise 
the Transfer Option; or (2) the time period for Thales to exercise the 
Transfer Option expires. The United States, in its sole discretion, may 
agree to one or more extensions of this time period not to exceed sixty 
calendar days in total, and shall notify the Court in such 
circumstances. If, however, applications seeking approval to sell the 
Aerolec Shares have been filed within the period permitted for the 
divestiture of the Aerolec Shares with authorities from which approval 
for the divestiture of the Aerolec Shares is required by the Acquirer 
of the Aerolec Shares as a condition of closing, but orders or other 
dispositive actions by such authorities on such applications have not 
been issued before the end of the period permitted for this 
divestiture, the period shall be extended with respect to the 
divestiture of the Aerolec Shares until ten calendar days after such 
approvals are received. Defendants agree to use their best efforts to 
accomplish the divestiture of the Aerolec Shares and to seek all 
necessary approvals as expeditiously as possible.
    F. In accomplishing the divestitures ordered by this Final 
Judgment, Defendants promptly shall make known, by usual and customary 
means, the availability of the Electrical Power Divestiture Assets. 
Defendants shall inform any person making inquiry regarding a possible 
purchase of any of the Electrical Power Divestiture Assets that they 
are being divested pursuant to this Final Judgment and provide that 
person with a copy of this Final Judgment. Defendants shall offer to 
furnish to all prospective Acquirers, subject to customary 
confidentiality assurances, all information and documents relating to 
the Electrical Power Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client privilege or work-product doctrine. Defendants shall 
make available such information to the United States and any Monitoring 
Trustee at the same time that such information is made available to any 
other person.

[[Page 46208]]

    G. Defendants shall provide the Acquirer of the Electrical Power 
Divestiture Assets, the United States, and any Monitoring Trustee 
information relating to the Goodrich personnel involved in the design, 
development, manufacture, marketing, service, distribution, repair, 
and/or sale of aircraft electrical generation systems and electrical 
distribution systems to enable the Acquirer of the Electrical Power 
Divestiture Assets to make offers of employment. Defendants will not 
interfere with any negotiations by the Acquirer of the Electrical Power 
Divestiture Assets to employ any Goodrich employee who is responsible 
for the design, development, manufacture, marketing, service, 
distribution, repair, and/or sale of aircraft electrical generation 
systems and electrical distribution systems. Interference with respect 
to this paragraph includes, but is not limited to, enforcement of non-
compete clauses and offers to increase salary or other benefits apart 
from those offered company-wide. However, interference with respect to 
this paragraph shall not include acts by Defendants relating to 
employees of the Pitstone Facility that are necessary to comply with 
the employment laws of the United Kingdom.
    H. Defendants shall permit prospective Acquirers of the Electrical 
Power Divestiture Assets to have reasonable access to personnel and to 
make inspections of the physical facilities to be divested; access to 
any and all environmental, zoning, and other permit documents and 
information; and access to any and all financial, operational, or other 
documents and information customarily provided as part of a due 
diligence process.
    I. Defendants shall warrant to the Acquirer of the Electrical Power 
Divestiture Assets that each asset included in the Electrical Power 
Divestiture Assets will be operational on the date of sale.
    J. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Electrical Power 
Divestiture Assets.
    K. Defendants shall warrant to the Acquirer of the Electrical Power 
Divestiture Assets that there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation of 
each asset included in the Electrical Power Divestiture Assets, and 
that following the sale of the Electrical Power Divestiture Assets, 
Defendants will not undertake, directly or indirectly, any challenges 
to the environmental, zoning, or other permits relating to the 
operation of any of the Electrical Power Divestiture Assets.
    L. At the option of the Acquirer of the Electrical Power 
Divestiture Assets, UTC shall enter into a transition services 
agreement with the Acquirer of the Electrical Power Divestiture Assets. 
This agreement shall include technical and engineering assistance and 
maintenance, repair, and overhaul services relating to aircraft 
electrical generation systems and electrical distribution systems. The 
terms and conditions of any contractual arrangement meant to satisfy 
this provision must be commercially reasonable. The terms and 
conditions of any such transitional services agreement shall be subject 
to the approval of the United States, in its sole discretion. The 
duration of this transition services agreement shall not be longer than 
one year. The United States, in its sole discretion, may approve an 
extension of the term of this transition services agreement for a 
period of up to one year. If the Acquirer of the Electrical Power 
Divestiture Assets seeks an extension of the term of this transition 
services agreement, it shall so notify the United States in writing at 
least four months prior to the date the transition services agreement 
expires. The United States shall respond to any such request for 
extension in writing at least three months prior to the date the 
transition services agreement expires.
    M. At the option of the Acquirer of the Electrical Power 
Divestiture Assets, UTC shall enter into a supply agreement to supply 
components used in or necessary for the design, development, 
manufacture, marketing, servicing, distribution, repair, and/or sale of 
aircraft electrical generation systems and electrical distribution 
systems sufficient to meet the needs identified by the Acquirer of the 
Electrical Power Divestiture Assets. The terms and conditions of any 
contractual arrangement intended to satisfy this provision must be 
reasonably related to market conditions for these products. The terms 
and conditions of any such supply agreement shall be subject to the 
approval of the United States, in its sole discretion. The duration of 
this supply agreement shall not be longer than one year. The United 
States, in its sole discretion, may approve an extension of the term of 
this supply agreement for a period of up to one year. If the Acquirer 
of the Electrical Power Divestiture Assets seeks an extension of the 
term of this supply agreement, it shall so notify the United States in 
writing at least four months prior to the date the supply agreement 
expires. If the United States approves such an extension, it shall so 
notify the Acquirer of the Engine Control Divestiture Assets in writing 
at least three months prior to the date the supply agreement expires.
    N. At the option of the Acquirer of the Electrical Power 
Divestiture Assets, UTC shall enter into a supply agreement to supply 
machined parts, including machined housings for AC generators and 
accessory gearboxes for the SAAB Gripen (JAS 39), sufficient to meet 
the needs identified by the Acquirer of the Electrical Power 
Divestiture Assets. The terms and conditions of any contractual 
arrangement intended to satisfy this provision must be reasonably 
related to market conditions for these products. The terms and 
conditions of any such supply agreement shall be subject to the 
approval of the United States, in its sole discretion. At the option of 
the Acquirer of the Electrical Power Divestiture Assets, the portion of 
this supply agreement relating to the accessory gearboxes may remain in 
effect so long as any SAAB Gripen (JAS 39) is in service. The portion 
of this supply agreement relating to the machined housings for the AC 
generators and any other products covered shall not be longer than one 
year. The United States, in its sole discretion, may approve an 
extension of the term of the portion of this supply agreement relating 
the machined housings for the AC generators and any other products 
covered to for a period of up to one year. If the Acquirer of the 
Electrical Power Divestiture Assets seeks an extension of the term of 
this supply agreement, it shall so notify the United States in writing 
at least four months prior to the date the supply agreement expires. If 
the United States approves such an extension, it shall so notify the 
Acquirer of the Electrical Power Divestiture Assets in writing at least 
three months prior to the date the supply agreement expires. In the 
alternative, at the option of the Acquirer of the Electrical Power 
Divestiture Assets, UTC shall provide the Acquirer of the Electrical 
Power Divestiture Assets the manufacturing know-how sufficient to 
enable the Acquirer of the Electrical Power Divestiture Assets to 
manufacture the machined parts necessary to fulfill the contractual 
obligations of the Acquirer of the Electrical Power Divestiture Assets 
that exist on the date the Electrical Power Divestiture Assets are 
divested.
    O. At the option of the Acquirer of the Electrical Power 
Divestiture Assets, UTC shall enter into an agreement to supply 
maintenance services for the Tornado aircraft secondary power system 
equipment sufficient to meet the needs identified by the Acquirer of 
the

[[Page 46209]]

Electrical Power Divestiture Assets. The terms and conditions of any 
contractual arrangement intended to satisfy this provision must be 
reasonably related to market conditions for these products. The terms 
and conditions of any such supply agreement shall be subject to the 
approval of the United States, in its sole discretion. At the option of 
the Acquirer of the Electrical Power Divestiture Assets, this supply 
agreement may remain in effect until December 31, 2013.
    P. At the option of UTC, the Acquirer of the Electrical Power 
Divestiture Assets shall enter into an agreement to supply maintenance, 
repair, and overhaul services to UTC to enable UTC to provide and 
support the engine starter motor on the Rolls-Royce Gnome turboshaft 
engine. The terms and conditions of any contractual arrangement 
intended to satisfy this provision must be reasonably related to market 
conditions for these products. The terms and conditions of any such 
supply agreement shall be subject to the approval of the United States, 
in its sole discretion. At the option of UTC, this agreement may remain 
in effect so long as five or more aircraft equipped with a Rolls-Royce 
Gnome turboshaft engine are in service.
    Q. At the option of UTC, the Acquirer of the Electrical Power 
Divestiture Assets shall provide UTC with a non-exclusive license for 
intellectual property that is included in the Electrical Power 
Divestiture Assets but also is used for both aircraft electrical 
generation systems and electrical distribution systems and other 
Goodrich products not being divested pursuant to this Final Judgment. 
UTC shall not transfer the license described in this paragraph except 
as part of a sale of the business in which the license is used. UTC 
shall not use the license described in this paragraph for aircraft 
electrical generation systems and electrical distribution systems. The 
terms and conditions of any contractual arrangement intended to satisfy 
this provision must be reasonably related to market conditions for 
these products. The terms and conditions of any such license shall be 
subject to the approval of the United States, in its sole discretion.
    R. Unless the United States otherwise consents in writing, the 
divestiture of the Electrical Power Divestiture Assets pursuant to 
Section V or by the Divestiture Trustee appointed pursuant to Section 
VII of this Final Judgment shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the Electrical 
Power Divestiture Assets can and will be used by the Acquirer of the 
Electrical Power Divestiture Assets as part of a viable, ongoing 
business that is engaged in the design, development, manufacture, 
marketing, servicing, distribution, repair, and sale of aircraft 
electrical generation systems and that the divestiture of the 
Electrical Power Divestiture Assets will remedy the competitive harm 
alleged in the Complaint. The divestiture of the Electrical Power 
Divestiture Assets, whether pursuant to Section V or Section VII of 
this Final Judgment, shall be made to an Acquirer that, in the United 
States's sole judgment, has the intent and capability (including the 
necessary managerial, operational, technical and financial capability) 
of competing effectively in the design, development, manufacture, 
marketing, servicing, distribution, repair, and sale of aircraft 
electrical generation systems. The divestiture of the Electrical Power 
Divestiture Assets shall be accomplished so as to satisfy the United 
States, in its sole discretion, that none of the terms of any agreement 
between the Acquirer of the Electrical Power Divestiture Assets and 
Defendants give Defendants the ability unreasonably to raise the 
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to 
interfere in the ability of the Acquirer to compete effectively.
    S. Unless Thales acquires the Aerolec Shares pursuant to the 
Aerolec Shareholders Agreement, the Electrical Power Divestiture Assets 
and the Aerolec Shares must be divested to the same Acquirer.

VI. Divestiture of the AEC Shares and Obligations Relating to AEC

    A. Defendants are ordered and directed, within one hundred eighty 
calendar days after the filing of the Complaint in this matter, or five 
calendar days after notice of the entry of this Final Judgment by the 
Court, whichever is later, to divest the AEC Shares in a manner 
consistent with this Final Judgment to Rolls-Royce. If, however, 
applications seeking approval to assign or transfer the AEC Shares to 
Rolls-Royce have been filed within the period permitted for the 
divestiture of the AEC Shares to Rolls-Royce with authorities from 
which approval for the divestiture of the AEC Shares is required by 
Rolls-Royce as a condition of closing, but orders or other dispositive 
actions by such authorities on such applications have not been issued 
before the end of the period permitted for this divestiture, the period 
shall be extended with respect to the divestiture of the AEC Shares to 
Rolls-Royce until ten calendar days after such approvals are received. 
Defendants agree to use their best efforts to accomplish the 
divestiture of the AEC Shares to Rolls-Royce and to seek all necessary 
approvals as expeditiously as possible.
    B. In the event the AEC Shares are not divested to Rolls-Royce 
pursuant to paragraph VI(A) of this Final Judgment, Defendants are 
ordered and directed, within one hundred eighty calendar days after the 
date that Rolls-Royce waives its option to acquire the AEC Shares 
pursuant to Clause 9 of the AEC Joint Venture Agreement, or that option 
lapses or expires, to divest the AEC Shares in a manner consistent with 
this Final Judgment to an Acquirer acceptable to the United States, in 
its sole discretion. The United States, in its sole discretion, may 
agree to one or more extensions of this time period not to exceed 
ninety calendar days in total, and shall notify the Court in such 
circumstances. Defendants agree to use their best efforts to divest the 
AEC Shares as expeditiously as possible.
    C. Defendants shall offer to Rolls-Royce a new right for a new 
period in which Rolls-Royce may purchase or acquire the ``AM Package'' 
as defined in the ``Put and Call Option Agreement relating to the 
Goodrich engine control systems aftermarket business'' dated December 
31, 2008, between Rolls-Royce and Goodrich (``Put and Call Option 
Agreement'') at the price determined using the formula set forth in 
clause (b) of the definition of the ``Call Option Price'' in the Put 
and Call Option Agreement, until the earlier of: (1) December 31, 2023; 
or (2) the date on which UTC no longer owns or controls substantially 
all of the Goodrich Aftermarket Business (``Right to Purchase''). 
Nothing in this Final Judgment shall be construed to: (1) Affect any 
agreements between UTC and/or Goodrich, on the one hand, and Rolls-
Royce, on the other, relating to the option to purchase or acquire the 
Goodrich Aftermarket Business; (2) impose any obligation on UTC to 
provide Rolls-Royce any extended payments terms with respect to the 
Right to Purchase; or (3) restrict in any way UTC's ability to sell the 
Goodrich Aftermarket Business (in whole or significant part) to a party 
other than Rolls-Royce. If at any time during which Rolls-Royce may 
exercise its Right to Purchase, UTC determines to commence a process to 
sell all or a significant part of the Goodrich Aftermarket Business to 
a party other than Rolls-Royce, UTC shall first notify Rolls-Royce of 
UTC's determination and provide Rolls-Royce with no less than sixty 
days to exercise its Right to Purchase. If Rolls-Royce

[[Page 46210]]

does not exercise its Right to Purchase during such sixty-day period, 
UTC may agree to and complete such a sale, and the Right to Purchase 
will be suspended for a period of one year from the date the sixty-day 
period expires to allow the completion of such sale. If UTC ceases its 
efforts to sell the Goodrich Aftermarket Business at any time during 
the one-year period when the Right to Purchase is suspended, the Right 
to Purchase ceases to be suspended when UTC ceases its efforts to sell 
the Goodrich Aftermarket Business. If such one-year period expires 
without UTC having completed such a sale, then UTC may not again 
attempt to sell the Goodrich Aftermarket Business to a party other than 
Rolls-Royce without first complying with the procedures set forth in 
this paragraph.
    D. Unless the United States otherwise consents in writing, the 
divestiture of the AEC Shares pursuant to Section VI or by the 
Divestiture Trustee appointed pursuant to Section VII of this Final 
Judgment shall be accomplished in such a way as to satisfy the United 
States, in its sole discretion, that the AEC Shares can and will be 
used by the Acquirer of the AEC Shares to carry out the purpose of AEC 
in an ongoing and viable manner and the divestiture of the AEC Shares 
will remedy the competitive harm alleged in the Complaint. The 
divestiture of the AEC Shares, whether pursuant to Section VI or 
Section VII of this Final Judgment, shall be made to an Acquirer that, 
in the United States's sole judgment, has the intent and capability 
(including the necessary managerial, operational, technical and 
financial capability) of effectively carrying out the purpose of AEC. 
The divestiture of the AEC Shares shall be accomplished so as to 
satisfy the United States, in its sole discretion, that none of the 
terms of any agreement between the Acquirer of the AEC Shares and 
Defendants give Defendants the ability unreasonably to raise the 
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to 
interfere in the ability of the Acquirer to compete effectively.

VII. Appointment of Divestiture Trustee

    A. If Defendants have not divested all of the Divestiture Assets 
within any of the respective time periods specified in Section IV(A), 
V(A), and VI(A), they shall notify the United States of that fact in 
writing at the time the period for the relevant divestiture expires and 
identify the assets that have not been divested. Upon application of 
the United States, the Court shall appoint a Divestiture Trustee 
selected by the United States and approved by the Court to effect the 
divestiture of any of the Divestiture Assets that have not been sold 
during the time periods specified in Section IV(A), V(A), and VI(A).
    B. After the appointment of a Divestiture Trustee becomes 
effective, only the Divestiture Trustee shall have the right to sell 
those Divestiture Assets that the Divestiture Trustee has been 
appointed to sell. The Divestiture Trustee shall have the power and 
authority to accomplish the divestiture to an Acquirer or Acquirers 
acceptable to the United States at such price and on such terms as are 
then obtainable upon reasonable effort by the Divestiture Trustee, 
subject to the provisions of Section IV, Section V, Section VI, Section 
VII, and Section VIII of this Final Judgment, and shall have such other 
powers as this Court deems appropriate. Subject to Section VII(D) of 
this Final Judgment, the Divestiture Trustee may hire at the cost and 
expense of UTC any investment bankers, attorneys, or other agents, who 
shall be solely accountable to the Divestiture Trustee, reasonably 
necessary in the Divestiture Trustee's judgment to assist in any 
required divestiture.
    C. Defendants shall not object to a sale by the Divestiture Trustee 
on any ground other than the Divestiture Trustee's malfeasance. Any 
such objections by Defendants must be conveyed in writing to the United 
States and the Divestiture Trustee within ten calendar days after the 
Divestiture Trustee has provided the notice required under Section 
VIII.
    D. The Divestiture Trustee shall serve at the cost and expense of 
UTC, on such terms and conditions as the United States approves, and 
shall account for all monies derived from the sale of any of the 
Divestiture Assets sold by the Divestiture Trustee and all costs and 
expenses so incurred. After approval by the Court of the Divestiture 
Trustee's accounting, including fees for its services and those of any 
professionals and agents retained by the Divestiture Trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of the Divestiture Trustee and any 
professionals and agents retained by the Divestiture Trustee shall be 
reasonable in light of the value of the Divestiture Assets that are 
being sold by the Divestiture Trustee and based on a fee arrangement 
providing the Divestiture Trustee with an incentive based on the price 
and terms of the divestiture and the speed with which it is 
accomplished, but timeliness is paramount.
    E. Defendants shall use their best efforts to assist the 
Divestiture Trustee in accomplishing any required divestiture. The 
Divestiture Trustee and any consultants, accountants, attorneys, and 
other persons retained by the Divestiture Trustee shall have full and 
complete access to the personnel, books, records, and facilities of the 
business to be divested, and Defendants shall develop financial and 
other information relevant to such business as the Divestiture Trustee 
may reasonably request, subject to reasonable protection for trade 
secret or other confidential research, development, or commercial 
information and compliance with all export control laws and 
regulations. Defendants shall take no action to interfere with or to 
impede the Divestiture Trustee's accomplishment of any required 
divestiture.
    F. After its appointment, the Divestiture Trustee shall file 
monthly reports with the United States and the Court setting forth the 
Divestiture Trustee's efforts to accomplish any divestiture ordered 
under this Final Judgment. To the extent such reports contain 
information that the Divestiture Trustee deems confidential, such 
reports shall not be filed in the public docket of the Court. Such 
reports shall include the name, address, and telephone number of each 
person who, during the preceding month, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Divestiture Assets being sold by the Divestiture 
Trustee, and shall describe in detail each contact with any such 
person. The Divestiture Trustee shall maintain full records of all 
efforts made to divest any of the Divestiture Assets.
    G. If the Divestiture Trustee has not accomplished any divestiture 
ordered under this Final Judgment within six months after its 
appointment, the Divestiture Trustee shall promptly file with the Court 
a report setting forth: (1) The Divestiture Trustee's efforts to 
accomplish the required divestiture; (2) the reasons, in the 
Divestiture Trustee's judgment, why the required divestiture has not 
been accomplished; and (3) the Divestiture Trustee's recommendations. 
To the extent such reports contain information that the Divestiture 
Trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. The Divestiture Trustee shall at the same 
time furnish such report to the United States which shall have the 
right to make additional recommendations consistent with the purpose of 
the trust. The Court thereafter shall enter such orders as it shall 
deem appropriate to carry out the purpose of the Final Judgment, which 
may, if necessary,

[[Page 46211]]

include extending the trust and the term of the Divestiture Trustee's 
appointment by a period requested by the United States.

VIII. Notice of Proposed Divestiture

    A. Within two business days following execution of a definitive 
divestiture agreement, Defendants or the Divestiture Trustee, whichever 
is then responsible for effecting the divestitures required herein, 
shall notify the United States and any Monitoring Trustee of any 
proposed divestiture required by Section IV, Section V, or Section VI 
of this Final Judgment. If the Divestiture Trustee is responsible, it 
shall similarly notify Defendants and the Monitoring Trustee. The 
notice shall set forth the details of the proposed divestiture and list 
the name, address, and telephone number of each person not previously 
identified who offered or expressed an interest in or desire to acquire 
any ownership interest in any of the Divestiture Assets, together with 
full details of the same.
    B. Within fifteen calendar days of receipt by the United States of 
such notice, the United States may request from Defendants, the 
proposed Acquirer or Acquirers, any other third party, or the 
Divestiture Trustee, if applicable, additional information concerning 
the proposed divestiture, the proposed Acquirer or Acquirers, and any 
other potential Acquirer. Defendants and the Divestiture Trustee shall 
furnish any additional information requested within fifteen calendar 
days of the receipt of the request, unless the parties shall otherwise 
agree.
    C. Within thirty calendar days after receipt of the notice, or 
within twenty calendar days after the United States has been provided 
the additional information requested from Defendants, the proposed 
Acquirer or Acquirers, any third party, and the Divestiture Trustee, 
whichever is later, the United States shall provide written notice to 
Defendants and the Divestiture Trustee, if there is one, stating 
whether or not it objects to the proposed divestiture. If the United 
States provides written notice that it does not object, the divestiture 
may be consummated, subject only to UTC's limited right to object to 
the sale under Section VII(C) of this Final Judgment. Absent written 
notice that the United States does not object to the proposed Acquirer 
or Acquirers or upon objection by the United States, a divestiture 
proposed under Section IV, Section V, Section VI, or Section VII shall 
not be consummated. Upon objection by UTC under Section VII(C), a 
divestiture proposed under Section VII shall not be consummated unless 
approved by the Court.

IX. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV, Section V, Section VI, or Section VII of this 
Final Judgment.

X. Hold Separate

    Until the divestitures required by this Final Judgment have been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestitures 
ordered by this Court.

XI. Appointment of Monitoring Trustee

    A. Upon the filing of this Final Judgment, the United States may, 
in its sole discretion, appoint a Monitoring Trustee for the Electrical 
Power Divestiture Assets, the Aerolec Shares, and/or the AEC Shares, 
subject to approval by the Court.
    B. The Monitoring Trustee shall have the power and authority to 
monitor Defendants' compliance with the terms of this Final Judgment 
and the Hold Separate Stipulation and Order entered by this Court and 
shall have such powers as this Court deems appropriate. Subject to 
paragraph XI(D) of this Final Judgment, the Monitoring Trustee may hire 
at the cost and expense of Defendants any consultants, accountants, 
attorneys, or other persons reasonably necessary in the Monitoring 
Trustee's judgment. These individuals shall be solely accountable to 
the Monitoring Trustee.
    C. Defendants shall not object to actions taken by the Monitoring 
Trustee in fulfillment of the Monitoring Trustee's responsibilities 
under any Order of this Court on any ground other than the Monitoring 
Trustee's malfeasance. Any such objections by Defendants must be 
conveyed in writing to the United States and the Monitoring Trustee 
within ten calendar days after the action taken by the Monitoring 
Trustee giving rise to the Defendants' objection.
    D. The Monitoring Trustee and any consultants, accountants, 
attorneys, and other persons retained by the Monitoring Trustee shall 
serve, without bond or other security, at the cost and expense of 
Defendants, on such terms and conditions as the United States approves. 
The compensation of the Monitoring Trustee and any consultants, 
accountants, attorneys, and other persons retained by the Monitoring 
Trustee shall be on reasonable and customary terms commensurate with 
the individuals' experience and responsibilities.
    E. The Monitoring Trustee shall have no responsibility or 
obligation for the operation of Defendants' businesses.
    F. Defendants shall assist the Monitoring Trustee in monitoring 
Defendants' compliance with their individual obligations under this 
Final Judgment and under the Hold Separate Stipulation and Order. The 
Monitoring Trustee and any consultants, accountants, attorneys, and 
other persons retained by the Monitoring Trustee shall have full and 
complete access to the personnel, books, records, and facilities 
relating to the Electrical Power Divestiture Assets, the Aerolec 
Shares, and the AEC Shares, subject to reasonable protection for trade 
secret or other confidential research, development, or commercial 
information or any applicable privileges. Defendants shall take no 
action to interfere with or to impede the Monitoring Trustee's 
accomplishment of its responsibilities.
    G. After its appointment, the Monitoring Trustee shall file monthly 
reports with the United States and the Court setting forth the 
Defendants' efforts to comply with their individual obligations under 
this Final Judgment and under the Hold Separate Stipulation and Order. 
To the extent such reports contain information that the Monitoring 
Trustee deems confidential, such reports shall not be filed in the 
public docket of the Court.
    H. The Monitoring Trustee shall serve until the divestitures 
pursuant to Section V, Section VI, or Section VII of this Final 
Judgment are finalized.
    I. If the United States determines that the Monitoring Trustee has 
ceased to act or failed to act diligently, the United States may 
appoint a substitute Monitoring Trustee in the same manner as provided 
in this Section.

XII. Affidavits

    A. Within twenty calendar days of the filing of the Complaint in 
this matter, and every thirty calendar days thereafter until the 
divestitures have been completed under Section IV, Section V, and 
Section VI, or Section VII, Defendants shall deliver to the United 
States and any Monitoring Trustee an affidavit as to the fact and 
manner of their compliance with Section IV, Section V, and Section VI, 
or Section VII, of this Final Judgment. Each such affidavit shall 
include the name, address, and telephone number of each person who, 
during the preceding thirty calendar days, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or

[[Page 46212]]

was contacted or made an inquiry about acquiring, any interest in any 
of the Divestiture Assets, and shall describe in detail each contact 
with any such person during that period. Each such affidavit shall also 
include a description of the efforts Defendants have taken to solicit 
buyers for the Divestiture Assets, and to provide required information 
to prospective Acquirers, including the limitations, if any, on such 
information. Assuming the information set forth in the affidavit is 
true and complete, any objection by the United States to information 
provided by Defendants, including limitation on information, shall be 
made within fourteen calendar days of receipt of such affidavit.
    B. Within twenty calendar days of the filing of the Complaint in 
this matter, Defendants shall deliver to the United States and any 
Monitoring Trustee an affidavit that describes in reasonable detail all 
actions Defendants have taken and all steps Defendants have implemented 
on an ongoing basis to comply with Section X of this Final Judgment. 
Defendants shall deliver to the United States and any Monitoring 
Trustee an affidavit describing any changes to the efforts and actions 
outlined in Defendants' earlier affidavits filed pursuant to this 
section within fifteen calendar days after the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

XIII. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice Antitrust Division (``Antitrust Division''), 
including consultants and other persons retained by the United States, 
shall, upon written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to Defendants, be permitted:
    (1) Access during Defendants' office hours to inspect and copy, or 
at the option of the United States, to require Defendants to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendants, relating to any matters contained in this Final Judgment; 
and
    (2) To interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or respond to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
Defendants to the United States, Defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and Defendants mark each pertinent 
page of such material ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give Defendants ten calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XIV. No Reacquisition

    Defendants may not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment.

XV. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XVI. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire on December 31, 2023.

XVII. Notice to the United States

    All notifications to the United States required pursuant to this 
Final Judgment shall be made to the United States Department of 
Justice, Antitrust Division, Litigation II Section.

XVIII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States's responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------
    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge.
[FR Doc. 2012-18767 Filed 8-1-12; 8:45 am]
BILLING CODE P