Proposed Final Judgment and Competitive Impact Statement: United States v. TransDigm Group Incorporated, 2200-2214 [2018-00544]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Notices]
[Pages 2200-2214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00544]


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DEPARTMENT OF JUSTICE

Antitrust Division


Proposed Final Judgment and Competitive Impact Statement: United 
States v. TransDigm Group Incorporated

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  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 of America v. TransDigm Group 
Incorporated, Civil Action No. 1:17-cv-2735. On December 21, 2017, the 
United States filed a Complaint alleging that TransDigm Group 
Incorporated's (TransDigm) February 2017 acquisition of SCHROTH Safety 
Products GmbH and substantially all the assets of Takata Protection 
Systems, Inc. (collectively, ``SCHROTH'') from Takata Corporation 
violated Section 7 of the Clayton Act, 15 U.S.C. Sec.  18. The proposed 
Final Judgment, filed at the same time as the Complaint, requires 
TransDigm to divest the entirety of SCHROTH.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at https://www.justice.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 Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Maribeth Petrizzi, 
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, 
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, Department of Justice, Antitrust 
Division, 450 5th Street NW, Suite 8700, Washington, DC 20530, 
Plaintiff, v. TransDigm Group Incorporated, 1301 East 9th Street, Suite 
3000, Cleveland, Ohio 44114, Defendant.

Civil Action No.: 1:17-cv-2735

Judge: Amy Berman Jackson

COMPLAINT

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil antitrust 
action for equitable relief against defendant TransDigm Group 
Incorporated (``TransDigm'') to remedy the harm to competition caused 
by TransDigm's acquisition of SCHROTH Safety Products GmbH and 
substantially all the assets of Takata Protection Systems, Inc. from 
Takata Corporation (``Takata''). The United States alleges as follows:

I. NATURE OF THE ACTION

    1. In February 2017, TransDigm acquired SCHROTH Safety Products 
GmbH and substantially all the assets of Takata Protection Systems, 
Inc. (collectively, ``SCHROTH'') from Takata. TransDigm's AmSafe, Inc. 
(``AmSafe'') subsidiary is the world's dominant supplier of restraint 
systems used on commercial airplanes. Prior to the acquisition, SCHROTH 
was AmSafe's closest competitor and, indeed, its only meaningful 
competitor for certain types of restraint systems.
    2. Restraint systems are critical safety components on every 
commercial airplane seat that save lives and reduce injuries in the 
event of turbulence, collision, or impact. There are a wide range of 
restraint systems used on commercial airplanes, including traditional 
two-point lapbelts, three-point shoulder belts, technical restraints, 
and more advanced ``inflatable'' restraint systems such as airbags. The 
airplane type, seat type, and seating configuration dictate the proper 
restraint type for each airplane seat.
    3. Prior to the acquisition, SCHROTH was a growing competitive 
threat to AmSafe. Until 2012, AmSafe, the long-standing industry 
leader, was nearly unrivaled in the markets for restraint systems used 
on commercial airplanes. Certification requirements and other entry 
barriers reinforced AmSafe's position as the dominant supplier to the 
industry. However, beginning in 2012, after being acquired by Takata, 
SCHROTH embarked on an ambitious plan to capture market share from 
AmSafe by competing with AmSafe on price and heavily investing in 
research and development of new restraint technologies. Over the next 
five years, the increasing competition between AmSafe and SCHROTH 
resulted in lower prices for restraint system products for commercial 
airplanes and the development of innovative new restraint technologies 
such as inflatable restraints. TransDigm's acquisition of SCHROTH 
removed SCHROTH as an independent competitor and eliminated the myriad 
benefits that customers had begun to realize from competition in this 
industry.
    4. Accordingly, TransDigm's acquisition of SCHROTH is likely to 
substantially lessen competition in the development, manufacture, and 
sale of restraint systems used on commercial airplanes worldwide, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and should be 
enjoined.

II. DEFENDANT AND THE TRANSACTION

    5. TransDigm is a Delaware corporation headquartered in Cleveland, 
Ohio. TransDigm operates as a holding company and owns over 100 
subsidiaries. Through its subsidiaries, TransDigm is a leading global 
designer, manufacturer, and supplier of highly engineered airplane 
components. TransDigm's fiscal year 2016 revenues were approximately 
$3.1 billion. TransDigm is the ultimate parent company of AmSafe, a 
Delaware corporation headquartered in Phoenix, Arizona. AmSafe 
develops, manufactures, and sells a wide range of restraint systems 
used on commercial airplanes. AmSafe had global revenues of 
approximately $198 million in fiscal year 2016.
    6. Takata is a global automotive and aerospace parts manufacturer 
based in Japan. Takata was the ultimate parent entity of SCHROTH Safety 
Products GmbH, a German limited liability corporation base in Arnsberg, 
Germany, and Takata Protection Systems, Inc., a

[[Page 2201]]

Colorado corporation based in Pompano Beach, Florida. SCHROTH Safety 
Products and Takata Protection Systems collectively had approximately 
$37 million in revenue in fiscal year 2016.
    7. On February 22, 2017, TransDigm completed its acquisition of 
SCHROTH Safety Products and substantially all the assets of Takata 
Protection Systems from Takata for approximately $90 million. Because 
of the way the transaction was structured, it was not required to be 
reported under the Hart-Scott-Rodino Antitrust Improvements Act, 15 
U.S.C. 18a. After the acquisition was completed, the Takata Protection 
Systems assets were incorporated as SCHROTH Safety Products LLC.

III. JURISDICTION AND VENUE

    8. The United States brings this action under Section 15 of the 
Clayton Act, 15 U.S.C. 25, to prevent and restrain TransDigm from 
violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    9. TransDigm sells restraint systems used on commercial airplanes 
throughout the United States. It is engaged in the regular, continuous, 
and substantial flow of interstate commerce, and its activities in the 
development, manufacture, and sale of restraint systems used on 
commercial airplanes have had a substantial effect upon interstate 
commerce. The Court has subject matter jurisdiction over this action 
under Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 
1337(a), and 1345.
    10. TransDigm has consented to venue and personal jurisdiction in 
this District. Venue is proper in this District under Section 12 of the 
Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(c).

IV. TRADE AND COMMERCE

A. Industry Overview

    11. Commercial airplanes are fixed-wing aircraft used for scheduled 
passenger transport. Restraint systems used on commercial airplanes are 
critical safety devices that secure the occupant of a seat to prevent 
injury in the event of turbulence, collision, and impact.
    12. Restraint systems used in the economy and premium cabins in 
commercial airplanes vary based on the airplane type, seat type (e.g., 
economy, premium, crew, ``lie-flat,'' etc.), and seating configuration 
of the airplane.
    13. Restraint systems used on commercial airplanes come in two 
primary forms: (i) conventional belt systems with two or more belts or 
``points'' that are connected to a central buckle; or (ii) inflatable 
systems with one or more airbags that may be installed in combination 
with a conventional belt system. The airbags can be installed either 
within the belt itself (called an ``inflatable lapbelt'') or in a 
structural monument within the airplane (called a ``structural mounted 
airbag'').
    14. Economy cabin seats typically require two-point lapbelts, 
though other restraint systems such as inflatable restraint systems may 
be necessary in limited circumstances to comply with Federal Aviation 
Administration (``FAA'') safety requirements.
    15. Premium cabin seats come in many different seating 
configurations, and passenger restraint systems used in premium cabin 
seats vary as well. Premium cabin restraint systems include two-point 
lapbelts, three-point shoulder belts, and inflatable restraint systems. 
While two-point lapbelts and three-point shoulder belts are used widely 
throughout the premium cabins, the use of inflatable restraint systems 
is more common in first-class and other ultra-premium cabins.
    16. Flight crew seats on commercial airplanes require special 
restraint systems called ``technical'' restraints. Technical restraints 
are multipoint restraints with four or more belts that provide 
additional protection to the flight crew.
    17. Restraint systems typically are purchased by commercial 
airlines and airplane seat manufacturers. Because certification of a 
restraint system is expensive and time-consuming, once a restraint 
system is certified for a particular seat and airplane type it is 
rarely substituted in the aftermarket for a different restraint system 
or supplier. Accordingly, competition between suppliers of restraint 
systems generally only occurs when a customer is designing a new seat 
or purchasing a new seat design, either when retrofitting existing 
airplanes or purchasing new airplanes.

B. Industry Regulation and Certification Requirements

    18. All commercial airplanes must contain FAA-certified restraint 
systems on every seat installed on the airplane. The process for 
obtaining FAA certification is complex and involves several distinct 
stages.
    19. Before selling a restraint system, a supplier of airplane 
restraint systems must first obtain a technical standard order 
authorization (``TSOA''). A TSOA certifies that the supplier's 
restraint system meets the minimum design requirements of the codified 
FAA Technical Standard Order (``TSO'') for that object, and that the 
manufacturer has a quality system necessary to produce the object in 
conformance with the TSO. To obtain a TSOA for a restraint system, a 
supplier must test its restraint system for durability and other 
characteristics. Once a TSOA is issued for the restraint system, the 
supplier must then obtain a TSOA for the entire seat system--i.e., the 
seat and belt combination. To obtain a TSOA for the seat system, the 
seat system must successfully complete dynamic crash testing to 
demonstrate that the seat system meets the FAA required g-force and 
head-injury-criteria safety requirements. Dynamic crash-testing is 
expensive and can be cost prohibitive to potential suppliers. Once a 
supplier obtains a TSOA for the seat system, it must then obtain a 
supplemental type certificate, which certifies that the seat system 
meets the applicable airworthiness requirements for the particular 
airplane type on which it is to be installed.
    20. Certain restraint system types such as inflatable restraint 
systems do not have a codified TSO and must instead satisfy a ``special 
condition'' from the FAA prior to manufacture and installation of the 
restraint system. In those circumstances, the FAA must first determine 
and then publish the terms of the special condition. Once the special 
condition is published, the supplier must then satisfy the terms of the 
special condition to install the object on an airplane.

V. RELEVANT MARKETS

    21. AmSafe and SCHROTH compete across the full range of restraint 
systems used on commercial airplanes. However, restraint systems are 
designed for specific airplane configurations and seat types and are 
therefore not interchangeable or substitutable for different restraint 
systems. FAA regulations dictate which restraint system may be used for 
a particular airplane configuration and seat type. In the event of a 
small but significant price increase for a given type of restraint 
system, commercial customers would not substitute another restraint 
system in sufficient numbers so as to render the price increase 
unprofitable. Thus, each restraint system described below is a separate 
line of commerce and a relevant product market within the meaning of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
    22. The relevant geographic market for restraint systems used on 
commercial airplanes is worldwide. Restraint systems are marketed 
internationally and may be sourced economically from suppliers 
globally.

[[Page 2202]]

A. Relevant Market 1: Two-Point Lapbelts Used on Commercial Airplanes

    23. A two-point lapbelt is a restraint harness that connects two 
fixed belts to a single buckle and restrains an occupant at his or her 
waist. Two-point lapbelts are used on nearly every seat in the economy 
cabins of commercial airplanes; they also are regularly used in the 
premium cabins. Commercial airline companies prefer lightweight two-
point lapbelts in the economy cabins to save fuel costs, reduce 
CO2 emissions, and provide convenience to their passengers. 
Two-point lapbelts are significantly less expensive than other 
restraint system types.
    24. The market for the development, manufacture, and sale of two-
point lapbelts used on commercial airplanes is already highly 
concentrated and has become significantly more concentrated as a result 
of TransDigm's acquisition of SCHROTH. Prior to the acquisition, there 
were only three significant suppliers of two-point lapbelts used on 
commercial airplanes: AmSafe, SCHROTH, and a third firm, a small, 
privately-held company that has been supplying two-point lapbelts for 
many years. Although a handful of other firms served the market, they 
only sell a negligible quantity of two-point lapbelts each year. AmSafe 
is by far the largest supplier of two-point lapbelts used on commercial 
airplanes, and serves the vast majority of major commercial airlines 
around the world. However, SCHROTH recently entered this market after 
developing a new, innovative lightweight two-point lapbelt and had 
emerged as AmSafe's most significant competitor as it aggressively 
sought to market its lapbelt to major international airline customers.

B. Relevant Market 2: Three-Point Shoulder Belts Used on Commercial 
Airplanes

    25. A three-point shoulder belt is a restraint harness that 
restrains an occupant at his or her waist and shoulder. It consists of 
both a lapbelt component and shoulder belt (or sash) component. Three-
point shoulder belts are widely used in the premium cabins of 
commercial airplanes where the seating configurations often necessitate 
the additional protection provided by three-point shoulder belts.
    26. The market for the development, manufacture, and sale of three-
point shoulder belts used on commercial airplanes was already highly 
concentrated prior to the acquisition. In fact, AmSafe and SCHROTH were 
the only two significant suppliers of three-point shoulder belts used 
on commercial airplanes although a handful of other firms made a 
negligible quantity of sales each year. As with two-point lapbelts, 
AmSafe was the dominant supplier of three-point shoulder belts, and 
SCHROTH was aggressively seeking to grow its business at AmSafe's 
expense.

C. Relevant Market 3: Technical Restraints Used on Commercial Airplanes

    27. Technical restraints are multipoint restraint harnesses 
(usually four or five points) that restrain an occupant at his or her 
waist and shoulders. Technical restraints consist of multiple belts 
that connect to a single fixed buckle--typically a rotary-style buckle. 
Technical restraints are used by the flight crew in commercial 
airplanes. The critical nature of the flight crew's responsibilities 
and the design of their seats necessitate the additional protections 
provided by technical restraints.
    28. The market for the development, manufacture, and sale of 
technical restraint systems used on commercial airplanes was already 
highly concentrated and became significantly more concentrated as a 
result of the acquisition. Prior to the acquisition, there were only 
three significant suppliers of technical restraints used on commercial 
airplanes: AmSafe, SCHROTH, and a third firm, an international 
aerospace equipment manufacturer. Although a handful of other firms 
supplied technical restraints, they only sold a negligible quantity of 
technical restraints each year. As with passenger restraints, AmSafe 
was the leading supplier of technical restraints, and SCHROTH was 
aggressively seeking to grow its business at AmSafe's expense.

D. Relevant Market 4: Inflatable Restraint Systems Used on Commercial 
Airplanes

    29. Inflatable restraint systems, which include both inflatable 
lapbelts and structural mounted airbags, are restraint systems that 
utilize one or more airbags to restrain an airplane seat occupant. 
Inflatable restraint systems are most commonly used in the premium 
cabin of commercial airplanes, particularly in first-class and other 
ultra-premium cabins that have ``lie-flat'' or oblique-facing seats. 
Inflatable restraint systems also are used in the economy cabin in 
certain circumstances, for example, in bulkhead rows to prevent an 
occupant's head from impacting the bulkhead. When required by FAA 
regulations, inflatable restraint systems provide airplane passengers 
with additional safety.
    30. The market for the development, manufacture, and sale of 
inflatable restraint systems used on commercial airplanes was already 
highly concentrated prior to the acquisition. The only two suppliers of 
inflatable restraint systems used on commercial airplanes were AmSafe 
and SCHROTH. AmSafe and SCHROTH both offered structural mounted 
airbags, while AmSafe was the exclusive supplier of inflatable 
lapbelts. In recent years, SCHROTH had emerged as a strong competitor 
to AmSafe in the development of inflatable restraint technologies.

VI. ANTICOMPETITIVE EFFECTS

    31. Mergers and acquisitions that reduce the number of competitors 
in highly concentrated markets are likely to substantially lessen 
competition. Before TransDigm's acquisition of SCHROTH, the markets for 
all restraint system types set forth above were highly concentrated. In 
each of these markets, SCHROTH and at most one other smaller firm 
competed with AmSafe prior to the acquisition and AmSafe had at least a 
substantial--and often a dominant--share of the market. TransDigm's 
acquisition of SCHROTH therefore significantly increased concentration 
in already highly concentrated markets and is unlawful.
    32. TransDigm's acquisition of SCHROTH also eliminated head-to-head 
competition between AmSafe and SCHROTH in the development, manufacture, 
and sale of restraint systems used on commercial airplanes worldwide. 
Prior to the acquisition, SCHROTH was a growing competitive threat to 
AmSafe and was challenging AmSafe on pricing and innovation.
    33. In 2012, Takata acquired SCHROTH with the stated intention to 
``overtake AmSafe'' in the markets for restraint systems used on 
commercial airplanes. AmSafe had traditionally dominated these markets 
with few, if any, significant competitors. Sensing a demand for new 
competitors and restraint technologies, SCHROTH began to compete with 
AmSafe on price and to invest heavily in research and development to 
create new restraint technologies.
    34. Customers were already beginning to see the benefits of 
increased competition in these markets. Between 2012 and 2017, SCHROTH 
introduced several new innovative restraint products, challenging older 
products from AmSafe. These products included a new lightweight two-
point lapbelt called the ``Airlite,'' structural mounted

[[Page 2203]]

airbag systems, and other advanced restraint systems. Prior to the 
acquisition, SCHROTH had already found customers--including major U.S. 
commercial airlines--for both its new Airlite belt and structural 
mounted airbag systems. With the introduction of these new products, 
potential customers also had begun qualifying SCHROTH as an alternative 
supplier to AmSafe and leveraging SCHROTH against AmSafe to obtain more 
favorable pricing. As new commercial airplanes were expected to be 
ordered, SCHROTH believed that its market share would continue to grow. 
Indeed, SCHROTH expected that it would capture nearly 20% of the sales 
of restraint systems used on commercial airplanes by 2020, with most of 
the gains coming at the expense of AmSafe.
    35. Prior to the acquisition, SCHROTH and AmSafe competed head-to-
head on price. The resulting loss of a competitor indicates that the 
acquisition likely will result in significant harm from expected price 
increases. Furthermore, prior to the acquisition, AmSafe and SCHROTH 
also competed to develop new restraint technologies. The transaction 
eliminated that competition depriving customers of more innovative and 
life-saving restraint systems.
    36. The transaction, therefore, is likely to substantially lessen 
competition in the development, manufacture, and sale of restraint 
systems used on commercial airplanes worldwide in violation of Section 
7 of the Clayton Act.

VII. ENTRY

    37. New entry and expansion by existing competitors are unlikely to 
prevent or remedy the acquisition's likely anticompetitive effects. 
Entry into the development, manufacture, and sale of restraint systems 
used on commercial airplanes is costly, and unlikely to be timely or 
sufficient to prevent the harm to competition caused by the elimination 
of SCHROTH as an independent supplier.
    38. Barriers to entry and expansion include certification 
requirements. Before a supplier may sell restraint systems, it must 
first obtain several authorizations, including a TSOA for the restraint 
system, a TSOA for the seat system, a supplemental type certificate, 
and, in certain cases, a special condition. These certification 
requirements discourage entry by imposing substantial sunk costs on 
potential suppliers with no guarantee that their restraint systems will 
be successful in the market. They also take substantial time--in some 
cases, years--to complete.
    39. Barriers to entry and expansion also include the significant 
technical expertise required to design a restraint system that 
satisfies the certification requirements. The technical expertise 
required to design a restraint system is proportionate to the 
complexity of the restraint system design. However, while more advanced 
restraint systems such as inflatable restraint systems require more 
expertise than simpler belt-type restraint systems, even belt-type 
restraint systems require significant expertise to design the belt to 
be strong, lightweight, and functional.
    40. Additional barriers to entry and expansion include economies of 
scale and reputation. Customers of restraint systems used on commercial 
airplanes require large volumes of restraint systems at low prices. 
Companies that cannot manufacture restraint systems at these volumes 
efficiently cannot compete effectively. Furthermore, customers of 
restraint systems used on commercial airplanes prefer established 
suppliers with known reputations.

VIII. VIOLATIONS ALLEGED

    41. The acquisition of SCHROTH by TransDigm is likely to 
substantially lessen competition in each of the relevant markets set 
forth above in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    42. The transaction will likely have the following anticompetitive 
effects, among others:
    a. actual and potential competition between AmSafe and SCHROTH in 
the relevant markets will be eliminated;
    b. competition generally in the relevant markets will be 
substantially lessened; and
    c. prices in the relevant markets will likely increase and 
innovation will likely decline.

IX. REQUEST FOR RELIEF

    43. The United States requests that this Court:
    a. adjudge and decree TransDigm's acquisition of SCHROTH to be 
unlawful and in violation of Section 7 of the Clayton Act, 15 U.S.C. 
18;
    b. order TransDigm to divest all assets acquired from Takata 
Corporation on February 22, 2017 relating to SCHROTH Safety Products 
GmbH and Takata Protection Systems and to take any further actions 
necessary to restore the market to the competitive position that 
existed prior to the acquisition;
    c. award the United States its costs of this action; and
    d. grant the United States such other relief as the Court deems 
just and proper.

Dated: December 21, 2017

Respectfully submitted,

For Plaintiff United States:

/s/--------------------------------------------------------------------

Makan Delrahim,

Assistant Attorney General, Antitrust Division.

/s/--------------------------------------------------------------------

Andrew C. Finch,

Principal Deputy Assistant Attorney General, Antitrust Division.

/s/--------------------------------------------------------------------

Bernard A. Nigro, Jr. (D.C. Bar #412357),

Deputy Assistant Attorney General, Antitrust Division.

/s/--------------------------------------------------------------------

Patricia A. Brink,

Director of Civil Enforcement.

/s/--------------------------------------------------------------------

Maribeth Petrizzi (D.C. Bar #435204),

Chief, Defense, Industrials, and Aerospace Section, Antitrust 
Division.

/s/--------------------------------------------------------------------

David E. Altschuler (D.C. Bar #983023),

Assistant Chief, Defense, Industrials, and Aerospace Section, 
Antitrust Division.

/s/--------------------------------------------------------------------

Jeremy Cline* (D.C. Bar #1011073),
Tara Shinnick (D.C. Bar #501462),
Rebecca Valentine (D.C. Bar #989607),

Defense, Industrials, and Aerospace Section, Antitrust Division, 450 
Fifth Street NW, Suite 8700, Washington, D.C. 20530, Telephone: 
(202) 598-2294, Facsimile: (202) 514-9033, [email protected].

*Lead Attorney to be Noticed

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    United States of America, Plaintiff, v. TransDigm Group 
Incorporated, Defendant.

Civil Action No.: 1:17-cv-2735

Judge: Amy Berman Jackson

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America, 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 February 22, 2017, Defendant TransDigm Group Incorporated 
(``TransDigm'') acquired SCHROTH Safety Products GmbH and substantially 
all the assets of Takata Protection Systems, Inc. (collectively, 
``SCHROTH'') from Takata Corporation (``Takata'') for approximately $90 
million. Due to the structure of the transaction, it was not required 
to be reported under the Hart-Scott-Rodino Antitrust Improvements Act, 
15 U.S.C. 18a.

[[Page 2204]]

    The United States filed a civil antitrust Complaint on December 21, 
2017, seeking the divestiture of SCHROTH and such other relief as 
necessary to restore the market to the competitive position that 
existed prior to the acquisition. The Complaint alleges that the likely 
effect of this acquisition would be to lessen competition substantially 
for the development, manufacture, and sale of restraint systems used on 
commercial airplanes worldwide in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18. This loss of competition likely would result in 
higher prices for several types of restraint systems used on commercial 
airplanes and diminished innovation in the development of new airplane 
restraints.
    At the same time the Complaint was filed, the United States also 
filed a Hold Separate Stipulation and Order (``Hold Separate'') and 
proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the acquisition. Under the proposed Final 
Judgment, which is explained more fully below, TransDigm is expected to 
divest all SCHROTH shares and assets acquired from Takata (the 
``Divestiture Assets'') to Perusa Partners Fund 2, L.P. and SSP MEP 
Beteiligungs GmbH & Co. KG, a management buyout group composed of 
former SCHROTH executives. Under the terms of the Hold Separate, 
TransDigm will take steps to ensure that the Divestiture Assets are 
operated as a competitively independent, economically viable, and 
ongoing business concern that will remain independent and uninfluenced 
by TransDigm, and that competition is maintained during the pendency of 
the ordered divestiture.
    The United States and TransDigm 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 proposed Final Judgment and to punish violations 
thereof.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION

A. The Defendant and the Transaction

    TransDigm is a Delaware corporation headquartered in Cleveland, 
Ohio. TransDigm operates as a holding company and owns over 100 
subsidiaries. Through its subsidiaries, TransDigm is a leading global 
designer, manufacturer, and supplier of highly engineered airplane 
components. TransDigm's fiscal year 2016 revenues were approximately 
$3.1 billion. TransDigm is the ultimate parent company of AmSafe Inc. 
(``AmSafe''), a Delaware corporation headquartered in Phoenix, Arizona. 
AmSafe develops, manufactures, and sells a wide range of restraint 
systems used on commercial airplanes. AmSafe had global revenues of 
approximately $198 million in fiscal year 2016.
    Takata is a global automotive and aerospace parts manufacturer 
based in Japan.\1\ Prior to the acquisition, Takata was the ultimate 
parent entity of SCHROTH Safety Products GmbH and Takata Protection 
Systems, Inc. SCHROTH Safety Products is a German limited liability 
corporation based in Arnsberg, Germany. Takata Protection Systems was a 
Colorado corporation based in Pompano Beach, Florida.\2\ SCHROTH Safety 
Products and Takata Protection Systems develop, manufacture, and sell a 
wide range of restraint systems used on commercial airplanes. SCHROTH 
Safety Products and Takata Protection Systems collectively had 
approximately $37 million in revenue in fiscal year 2016.
---------------------------------------------------------------------------

    \1\ Takata filed for bankruptcy protection on June 25, 2017.
    \2\ After the acquisition was completed, the Takata Protection 
Systems assets were incorporated as SCHROTH Safety Products LLC.
---------------------------------------------------------------------------

    On February 22, 2017, TransDigm acquired SCHROTH Safety Products 
and substantially all the assets of Takata Protection Systems for 
approximately $90 million. The transaction combined the two leading 
suppliers of restraint systems used on commercial airplanes worldwide. 
AmSafe is the dominant supplier of airplane restraint systems used on 
commercial airplanes; SCHROTH was its closest competitor and, indeed, 
its only meaningful competitor for certain types of restraint systems. 
As a result, the acquisition would lessen competition substantially in 
the development, manufacture, and sale of several types of restraint 
systems used on commercial airplanes. This acquisition is the subject 
of the Complaint and proposed Final Judgment filed today by the United 
States.

B. Industry Overview

    Commercial airplanes are fixed-wing aircraft used for scheduled 
passenger transport. Restraint systems used on commercial airplanes are 
critical safety devices that secure the occupant of a seat to prevent 
injury in the event of turbulence, collision, and impact.
    Restraint systems used in the economy and premium cabins in 
commercial airplanes vary based on the airplane type, seat type, and 
seating configuration of the airplane. Restraint systems used on 
commercial airplanes come in two primary forms: (i) conventional belt 
systems with two or more belts or ``points'' that are connected to a 
central buckle; or (ii) inflatable systems with one or more airbags 
that may be installed in combination with a conventional belt system. 
The airbags can be installed either within the belt itself (called an 
``inflatable lapbelt'') or in a structural monument (such as a seat 
back or wall) within the airplane (called a ``structural mounted 
airbag'').
    Economy cabin seats typically require two-point lapbelts, though 
other restraint systems such as inflatable restraint systems may be 
necessary in limited circumstances to comply with Federal Aviation 
Administration (``FAA'') safety requirements. Premium cabin seats come 
in many different seating configurations, and passenger restraint 
systems used in premium cabin seats vary as well. Premium cabin 
restraint systems include two-point lapbelts, three-point shoulder 
belts, and inflatable restraint systems. While two-point lapbelts and 
three-point shoulder belts are used widely throughout the premium 
cabins, the use of inflatable restraint systems is more common in 
first-class and other ultra-premium cabins. Flight crew seats on 
commercial airplanes require special restraint systems called 
``technical'' restraints. Technical restraints are multipoint 
restraints with four or more belts that provide additional protection 
to the flight crew.
    Restraint systems typically are purchased by commercial airlines 
and airplane seat manufacturers. Because certification of a restraint 
system is expensive and time consuming, once a restraint system is 
certified for a particular seat and airplane type, it is rarely 
substituted in the aftermarket for a different restraint system or 
supplier. Accordingly, competition between suppliers of restraint 
systems generally only occurs when a customer is designing a new seat 
or purchasing a new seat design, either when retrofitting existing 
airplanes or purchasing new airplanes.

C. Industry Regulation and Certification Requirements

    All commercial airplanes must contain FAA-certified restraint 
systems on every seat installed on the airplane. The process for 
obtaining FAA certification is complex and involves several distinct 
stages.

[[Page 2205]]

    Before selling a restraint system, a supplier of airplane restraint 
systems must first obtain a technical standard order authorization 
(``TSOA''). A TSOA certifies that the supplier's restraint system meets 
the minimum design requirements of the codified FAA Technical Standard 
Order (``TSO'') for that object, and that the manufacturer has a 
quality system necessary to produce the object in conformance with the 
TSO. To obtain a TSOA for a restraint system, a supplier must test its 
restraint system for durability and other characteristics. Once a TSOA 
is issued for the restraint system, the supplier must then obtain a 
TSOA for the entire seat system--i.e., the seat and belt combination. 
To obtain a TSOA for the seat system, the seat system must successfully 
complete dynamic crash testing to demonstrate that the seat system 
meets the FAA required g-force and head-injury-criteria safety 
requirements. Dynamic crash-testing is expensive and can be cost 
prohibitive to potential suppliers. Once a supplier obtains a TSOA for 
the seat system, it must then obtain a supplemental type certificate, 
which certifies that the seat system meets the applicable airworthiness 
requirements for the particular airplane type on which it is to be 
installed.
    Certain restraint system types such as inflatable restraint systems 
do not have a codified TSO and must instead satisfy a ``special 
condition'' from the FAA prior to manufacture and installation of the 
restraint system. In those circumstances, the FAA must first determine 
and then publish the terms of the special condition. Once the special 
condition is published, the supplier must then satisfy the terms of the 
special condition to install the object on an airplane.

D. Relevant Markets Affected by the Proposed Acquisition

    AmSafe and SCHROTH compete across the full range of restraint 
systems used on commercial airplanes. As alleged in the Complaint, 
restraint systems are not generally interchangeable or substitutable 
for different restraint systems; restraint systems are designed for 
specific aircraft configurations and seat types. FAA regulations 
dictate which restraint system may be used for a particular aircraft 
configuration and seat type. In the event of a small but significant 
price increase for a given type of restraint system, commercial 
customers would not substitute another restraint system in sufficient 
numbers so as to render the price increase unprofitable. For these 
reasons, the Complaint alleges that each restraint system identified in 
the Complaint is a separate line of commerce and a relevant product 
market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 
18.
    As alleged in the Complaint, the relevant geographic market for the 
development, manufacture, and sale of restraint systems used on 
commercial airplanes is worldwide. Restraint systems are marketed 
internationally and may be sourced economically from suppliers 
globally.
    The Complaint alleges likely harm in four distinct product markets 
for restraint systems used on commercial airplanes worldwide: (1) two-
point lapbelts; (2) three-point shoulder belts; (3) technical 
restraints; and (4) inflatable restraint systems.
    A two-point lapbelt is a restraint harness that connects two fixed 
belts to a single buckle and restrains an occupant at his or her waist. 
Two-point lapbelts are used on nearly every seat in the economy cabins 
of commercial airplanes; they also are regularly used in the premium 
cabins. A three-point shoulder belt is a restraint harness that 
restrains an occupant at his or her waist and shoulder. It consists of 
both a lapbelt component and shoulder belt (or sash) component. Three-
point shoulder belts are widely used in the premium cabins of 
commercial airplanes where the seating configurations often necessitate 
the additional protection provided by three-point shoulder belts. 
Technical restraints are multipoint restraint harnesses (usually four 
or five points) that restrain an occupant at his or her waist and 
shoulders. Technical restraints consist of multiple belts that connect 
to a single fixed buckle--typically a rotary-style buckle. Technical 
restraints are used by the flight crew in commercial airplanes. The 
critical nature of the flight crew's responsibilities and the design of 
their seats necessitate the additional protections provided by 
technical restraints. Inflatable restraint systems, which include both 
inflatable lapbelts and structural mounted airbags, are restraint 
systems that utilize one or more airbags to restrain an airplane seat 
occupant. Inflatable restraint systems are most commonly used in the 
premium cabin of commercial airplanes, particularly in first-class and 
other ultra-premium cabins that have ``lie-flat'' or oblique-facing 
seats. Inflatable restraint systems also are used in the economy cabin 
in certain circumstances. When required by FAA regulations, inflatable 
restraint systems provide airplane passengers with additional safety.

E. Anticompetitive Effects

    According to the Complaint, the acquisition reduced the number of 
competitors in already highly concentrated markets. Before TransDigm's 
acquisition of SCHROTH, the markets for all four restraint system types 
alleged in the Complaint were highly concentrated. In each of these 
markets, SCHROTH and at most one other smaller firm competed with 
AmSafe prior to the acquisition and AmSafe had at least a substantial--
and often a dominant--share of the market. The Complaint alleges that 
TransDigm's acquisition of SCHROTH therefore significantly increased 
concentration in already highly concentrated markets and is likely to 
enhance market power.
    In addition to increasing concentration, the Complaint alleges that 
TransDigm's acquisition of SCHROTH would eliminate head-to-head 
competition between AmSafe and SCHROTH in the development, manufacture, 
and sale of restraint systems used on commercial airplanes worldwide. 
According to the Complaint, prior to the acquisition, SCHROTH was a 
growing competitive threat to AmSafe and was challenging AmSafe on 
pricing and innovation. In 2012, Takata acquired SCHROTH with the 
intention of challenging AmSafe in the markets for restraint systems 
used on commercial airplanes. SCHROTH began to compete with AmSafe on 
price and to invest heavily in research and development to create new 
restraint technologies. Customers were already beginning to see the 
benefits of increased competition in these markets. Between 2012 and 
2017, SCHROTH introduced several new innovative restraint products, 
challenging older products from AmSafe. Prior to the acquisition, 
SCHROTH had already found customers--including major U.S. commercial 
airlines--for its new products. With the introduction of these new 
products, potential customers also had begun qualifying SCHROTH as an 
alternative supplier to AmSafe and leveraging SCHROTH against AmSafe to 
obtain more favorable pricing. As new commercial airplanes were 
expected to be ordered, SCHROTH believed that its market share would 
continue to grow. For all of these reasons, the Complaint alleges that 
the loss of SCHROTH as an independent competitor to AmSafe is likely to 
result in higher prices for several types of restraints used on 
commercial airplanes and diminished innovation worldwide in violation 
of Section 7 of the Clayton Act.

[[Page 2206]]

F. Barriers to Entry

    As alleged in the Complaint, new entry and expansion by existing 
competitors are unlikely to prevent or remedy the acquisition's likely 
anticompetitive effects. Entry into the development, manufacture, and 
sale of restraint systems used on commercial airplanes is costly, and 
unlikely to be timely or sufficient to prevent the harm to competition 
caused by the elimination of SCHROTH as an independent supplier.
    Barriers to entry and expansion include certification requirements. 
Before a supplier may sell restraint systems, it must first obtain 
several authorizations, including a TSOA for the restraint system, a 
TSOA for the seat system, a supplemental type certificate, and, in 
certain cases, a special condition. These certification requirements 
discourage entry by imposing substantial sunk costs on potential 
suppliers with no guarantee that their restraint systems will be 
successful in the market. They also take substantial time--in some 
cases, years--to complete.
    Barriers to entry and expansion also include the significant 
technical expertise required to design a restraint system that 
satisfies the certification requirements. The technical expertise 
required to design a restraint system is proportionate to the 
complexity of the restraint system design. However, while more advanced 
restraint systems such as inflatable restraint systems require more 
expertise than simpler belt-type restraint systems, even belt-type 
restraint systems require significant expertise to design the belt to 
be strong, lightweight, and functional.
    Additional barriers to entry and expansion include economies of 
scale and reputation. Customers of restraint systems used on commercial 
airplanes require large volumes of restraint systems at low prices. 
Companies that cannot manufacture restraint systems at these volumes 
efficiently cannot compete effectively. Furthermore, customers of 
restraint systems used on commercial airplanes prefer established 
suppliers with known reputations.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture requirement of the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition by 
establishing a new, independent, and economically viable competitor in 
the development, manufacture, and sale of commercial airplane restraint 
systems worldwide.

A. Divestiture

    Pursuant to the proposed Final Judgment, TransDigm must divest all 
of the SCHROTH assets it acquired from Takata pursuant to the February 
2017 transaction. Specifically, Paragraph II(J) defines the Divestiture 
Assets to include all of the assets TransDigm acquired pursuant to the 
parties' Share and Asset Purchase Agreement and Share Transfer 
Agreement, including SCHROTH's owned real property and leases in 
Arnsberg, Germany, and Pompano Beach, Florida, and all other tangible 
and intangible assets that comprise SCHROTH.
    Paragraph IV(A) of the proposed Final Judgment provides that 
TransDigm must divest the Divestiture Assets to Perusa Partners Fund 2, 
L.P. (``Perusa'') and SSP MEP Beteiligungs GmbH & Co. KG (``MEP KG''), 
or to an alternative acquirer acceptable to the United States, within 
30 days after all necessary regulatory approvals have been obtained 
from the Committee on Foreign Investment in the United States 
(``CFIUS'') and the German Federal Ministry of Economic Affairs and 
Energy (the ``Bundesministerium f[uuml]r Wirtschaft und Energie''), or 
30 days after the Court's signing of the Hold Separate, whichever is 
later. The assets must be divested in such a way as to satisfy the 
United States in its sole discretion that the assets can and will be 
operated by Perusa and MEP KG as a viable, ongoing business that can 
compete effectively in the relevant markets. TransDigm must take all 
reasonable steps necessary to accomplish the divestiture quickly and 
shall cooperate with Perusa and MEP KG, or any other prospective 
purchaser.
    The proposed Acquirer is a consortium between Perusa and certain 
members of the current management team of SCHROTH. Perusa is a 
diversified German private equity firm that invests in mid-sized 
companies. The SCHROTH management buyout group, which is acquiring an 
equity stake in SCHROTH through an investment entity (MEP KG), consists 
of 11 current SCHROTH executives, including several individuals who 
have had significant responsibilities related to SCHROTH's engineering, 
manufacture, and sale of airplane restraints. Under the terms of the 
divestiture agreement, Perusa will own a majority stake of SCHROTH.
    In order to facilitate the Acquirer's immediate use of the 
Divestiture Assets, Paragraph IV(J) of the proposed Final Judgment 
provides the Acquirer with the option to enter into a transition 
services agreement with TransDigm, for a period of up to 12 months, to 
obtain information technology services and other such transition 
services that are reasonably necessary for the Acquirer to operate the 
Divestiture Assets. The United States, in its sole discretion, may 
approve one or more extensions of this agreement for a total of up to 
an additional 6 months.
    The proposed Final Judgment also contains provisions intended to 
facilitate the Acquirer's efforts to hire the employees involved with 
the SCHROTH business. Paragraph IV(D) of the proposed Final Judgment 
requires TransDigm to provide the Acquirer with information relating to 
the personnel involved in the operation of the Divestiture Assets to 
enable the Acquirer to make offers of employment, and provides that 
TransDigm will not interfere with any negotiations by the Acquirer to 
hire them. In addition, Paragraph IV(E) provides that for employees 
that elect employment with the Acquirer, TransDigm shall waive all 
noncompete and nondisclosure agreements, vest all unvested pension and 
other equity rights, and provide all benefits to which the employees 
would generally be provided if transferred to a buyer of an ongoing 
business. The Paragraph further provides, that for a period of two 
years from filing of the Complaint, TransDigm may not solicit to hire, 
or hire any such person who was hired by the Acquirer, unless such 
individual is terminated or laid off by the Acquirer or the Acquirer 
agrees in writing that TransDigm may solicit to hire that individual.
    In the event that TransDigm does not accomplish the divestiture 
within the period provided in the proposed Final Judgment, Paragraph 
V(A) provides that the Court will appoint a trustee selected by the 
United States to effect the divestiture. If a trustee is appointed, the 
proposed Final Judgment provides that TransDigm 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 obtained 
and the speed with which the divestiture is accomplished. After its 
appointment becomes effective, the trustee will file monthly reports 
with the Court and the United States setting forth its efforts to 
accomplish the divestiture. At the end of 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 appropriate, in order to carry out the purpose of the trust, 
including extending the trust or the term of the trustee's appointment.

[[Page 2207]]

B. Firewalls

    The proposed Final Judgment also contains a firewall provision 
intended to ensure that TransDigm's AmSafe subsidiary does not obtain 
SCHROTH's competitively sensitive information. During the U.S. 
Department of Justice, Antitrust Division's (``Antitrust Division'') 
investigation of the acquisition, TransDigm entered into an asset 
preservation agreement with the United States to ensure that the 
SCHROTH assets were preserved and operated independently during the 
pendency of the investigation. As part of that agreement, the United 
States agreed to allow three TransDigm executives to assist in the day-
to-day management of SCHROTH on the condition that the executives would 
have no decision-making responsibility or participation in the business 
of AmSafe while they served in this capacity.\3\ Section IX of the 
proposed Final Judgment includes a firewall provision to ensure that 
for the duration of the Final Judgment these three TransDigm employees 
do not share competitively sensitive information regarding SCHROTH that 
they obtained during the pendency of the investigation with individuals 
with responsibilities relating to AmSafe.
---------------------------------------------------------------------------

    \3\ Under Section V(B) of the Hold Separate, those three 
TransDigm executives may continue to assist with the management of 
SCHROTH for the term of the Hold Separate.
---------------------------------------------------------------------------

C. Notification

    Section XII of the proposed Final Judgment requires TransDigm to 
provide notification to the Antitrust Division of certain proposed 
acquisitions not otherwise subject to filing under the Hart-Scott-
Rodino Act, 15 U.S.C 18a (the ``HSR Act''), and in the same format as, 
and per the instructions relating to the notification required under 
that statute. The notification requirement applies in the case of any 
direct or indirect acquisitions of any assets of or interest in any 
entity engaged in the development, manufacture, or sale of airplane 
restraint systems. Section XII further provides for waiting periods and 
opportunities for the United States to obtain additional information 
similar to the provisions of the HSR Act before such acquisitions can 
be consummated.

D. Enforcement and Expiration of the Final Judgment

    The proposed Final Judgment contains provisions designed to promote 
compliance and make the enforcement of Division consent decrees as 
effective as possible. Paragraph XV(A) provides that the United States 
retains and reserves all rights to enforce the provisions of the 
proposed Final Judgment, including its rights to seek an order of 
contempt from the Court. Under the terms of this paragraph, TransDigm 
has agreed that in any civil contempt action, any motion to show cause, 
or any similar action brought by the United States regarding an alleged 
violation of the Final Judgment, the United States may establish the 
violation and the appropriateness of any remedy by a preponderance of 
the evidence and that TransDigm has waived any argument that a 
different standard of proof should apply. This provision aligns the 
standard for compliance obligations with the standard of proof that 
applies to the underlying offense that the compliance commitments 
address.
    Paragraph XV(B) of the proposed Final Judgment further provides 
that should the Court find in an enforcement proceeding that TransDigm 
has violated the Final Judgment, the United States may apply to the 
Court for a one-time extension of the Final Judgment, together with 
such other relief as may be appropriate. In addition, in order to 
compensate American taxpayers for any costs associated with the 
investigation and enforcement of violations of the proposed Final 
Judgment, Paragraph XV(B) requires TransDigm to reimburse the United 
States for attorneys' fees, experts' fees, or costs incurred in 
connection with any enforcement effort.
    Finally, Section XVI of the proposed Final Judgment provides that 
the Final Judgment shall expire ten (10) years from the date of its 
entry, except that after five (5) years from the date of its entry, the 
Final Judgment may be terminated upon notice by the United States to 
the Court and TransDigm that the divestiture has been completed and 
that the continuation of the Final Judgment is no longer necessary or 
in the public interest.

IV. 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 TransDigm.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States and TransDigm 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 (60) 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 (60) 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 Antitrust Division's internet 
website and, under certain circumstances, published in the Federal 
Register.
    Written comments should be submitted to: Maribeth Petrizzi, Chief, 
Defense, Industrials, and Aerospace 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.

VI. 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 TransDigm. The 
United States could have continued the litigation and sought a 
divestiture of all SCHROTH assets acquired from Takata by TransDigm. 
The United States is satisfied, however, that the divestiture of assets 
described in the proposed Final Judgment will preserve competition in 
the development,

[[Page 2208]]

manufacture, and sale of commercial airplane restraint systems 
worldwide. Indeed, the divestiture includes all SCHROTH assets acquired 
from Takata. Thus, the proposed Final Judgment would achieve all or 
substantially all of the relief the United States would have obtained 
through litigation, but avoids the time, expense, and uncertainty of a 
full trial on the merits of the Complaint.

VII. 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. US Airways 
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the 
``court's inquiry is limited'' in Tunney Act settlements); United 
States v. InBev N.V./S.A., No. 08[dash]1965 (JR), 2009[dash]2 Trade 
Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, 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.'').\4\
---------------------------------------------------------------------------

    \4\ 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. 
Sec.  16(e) (2004) with 15 U.S.C. Sec.  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) (quoting 
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).\5\ 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 US Airways, 38 F. Supp. 3d at 75 (noting that 
a court should not reject the proposed remedies because it believes 
others are preferable); 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).
---------------------------------------------------------------------------

    \5\ 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 US 
Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the 
government to grant concessions in the negotiation process for 
settlements) (citing Microsoft, 56 F.3d at 1461); 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 US Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the

[[Page 2209]]

`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''). 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 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 conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2); see also US Airways, 38 F. Supp. 3d at 
76 (indicating that a court is not required to hold an evidentiary 
hearing or to permit intervenors as part of its review under the Tunney 
Act). 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 Sen. 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.\6\ A 
court can make its public interest determination based on the 
competitive impact statement and response to public comments alone. US 
Airways, 38 F. Supp. 3d at 76
---------------------------------------------------------------------------

    \6\ 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., No. 73-CV-681-W-1, 1977-1 
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (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, 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.'').
---------------------------------------------------------------------------

VIII. 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: December 21, 2017

Respectfully submitted,

/s/
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JEREMY CLINE* (D.C. Bar #1011073)

United States Department of Justice,
Antitrust Division,
Defense, Industrials, and Aerospace Section,
450 Fifth Street NW, Suite 8700,
Washington, D.C. 20530,
Tel: (202) 598-2294,
Fax: (202) 514-9033,
Email: [email protected].
* Attorney of Record

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    United States of America, Plaintiff, v. TransDigm Group 
Incorporated, Defendant.

Civil Action No.: 1:17-cv-2735

Judge: Amy Berman Jackson

[PROPOSED] FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed its Complaint 
on December 21, 2017, the United States and Defendant, TransDigm Group 
Incorporated, 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, TransDigm agrees 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 or assets by TransDigm to assure 
that competition is substantially restored;
    AND WHEREAS, the United States requires TransDigm to make a certain 
divestiture for the purpose of remedying the loss of competition 
alleged in the Complaint;
    AND WHEREAS, TransDigm has represented to the United States that 
the divestiture required below can and will be made and that TransDigm 
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 TransDigm under Section 7 of the Clayton 
Act, as amended (15 U.S.C. Sec.  18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means Perusa and MEP KG, or another entity to whom 
TransDigm divests the Divestiture Assets.
    B. ``TransDigm'' means Defendant TransDigm Group Incorporated, a 
Delaware corporation with its headquarters in Cleveland, Ohio, its 
successors and assigns, and its subsidiaries (including, but not 
limited to, SCHROTH Safety Products LLC, SCHROTH Safety Products GmbH, 
and AmSafe, Inc.), divisions, groups, affiliates, partnerships, and 
joint ventures, and their directors, officers, managers, agents, and 
employees.
    C. ``SCHROTH'' means, collectively, SCHROTH Germany and SCHROTH 
U.S.
    D. ``SCHROTH Germany'' means SCHROTH Safety Products GmbH, a German 
limited liability company headquartered in Arnsberg, Germany, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    E. ``SCHROTH U.S.'' means SCHROTH Safety Products LLC, a Delaware 
limited liability company, its successors and assigns, and its 
subsidiaries, divisions, groups, affiliates, partnerships, and joint 
ventures, and their directors, officers, managers, agents, and 
employees.
    F. ``Share and Asset Purchase Agreement'' means the Share and Asset 
Purchase Agreement among Takata Europe GmbH, Takata Protection Systems, 
Inc., Interiors In Flight, Inc., Takata Corporation, TransDigm, and TDG 
Germany GmbH, dated February 22, 2017.
    G. ``Share Transfer Agreement'' means the Share Transfer Agreement 
among Takata Europe GmbH and TDG Germany GmbH, dated February 21, 2017.

[[Page 2210]]

    H. ``Perusa'' means Perusa Partners Fund 2, L.P., a Guernsey 
limited partnership with its headquarters in St. Peter Port, Guernsey, 
its successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    I. ``MEP KG'' means SSP MEP Beteiligungs GmbH & Co. KG, a German 
limited partnership with its headquarters in Munich, Germany, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    J. ``Divestiture Assets'' means all SCHROTH shares and assets 
acquired by TransDigm pursuant to the Share and Asset Purchase 
Agreement and Share Transfer Agreement including, but not limited to:
    1. SCHROTH Germany's owned real property listed in Appendix A 
including, but not limited to, SCHROTH Germany's warehouses located at 
Im Ohl 14, 59757 Arnsberg, Germany;
    2. SCHROTH Germany's leases for the real property listed in 
Appendix A including, but not limited to, SCHROTH Germany's 
headquarters located at Im Ohl 14, 59757 Arnsberg, Germany;
    3. SCHROTH U.S.'s leases for the real property listed in Appendix A 
including, but not limited to, SCHROTH U.S.'s facility at 1371 SW 8th 
Street, Pompano Beach, Florida;
    4. All tangible assets that comprise SCHROTH, including research 
and development activities; all manufacturing equipment, tooling and 
fixed assets, personal property, inventory, office furniture, 
materials, supplies, and other tangible property and all assets used by 
SCHROTH; all licenses, permits, certifications, and authorizations 
issued by any governmental organization (including, but not limited to, 
the Federal Aviation Administration and the European Aviation Safety 
Agency) or industry standard-setting body (including, but not limited 
to, the Society of Automotive Engineers and the International 
Organization for Standardization) relating to SCHROTH; all contracts, 
teaming arrangements, agreements, leases, commitments, and 
understandings, relating to SCHROTH, including supply agreements; all 
customer lists, contracts, accounts, and credit records; all repair and 
performance records and all other records relating to SCHROTH;
    5. All intangible assets relating to the SCHROTH businesses, 
including, but not limited to, all patents, licenses and 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 for the handling of materials 
and substances, quality assurance and control procedures, design tools 
and simulation capability, and all manuals and technical information 
provided to SCHROTH employees, customers, suppliers, agents, or 
licensees. Intangible assets also include all research data concerning 
historic and current research and development efforts relating to the 
development, manufacture, and sale of airplane restraint systems, 
designs of experiments, and the results of successful and unsuccessful 
designs, experiments, and testing.
    K. ``Airplane restraint system'' means a belt, harness, or airbag 
used to restrain airplane passengers and crew.

III. Applicability

    A. This Final Judgment applies to TransDigm, as defined above, and 
all other persons in active concert or participation with TransDigm who 
receive actual notice of this Final Judgment by personal service or 
otherwise.
    B. If, prior to complying with Section IV and Section V of this 
Final Judgment, TransDigm sells or otherwise disposes of all or 
substantially all of its assets or of lesser business units that 
include the Divestiture Assets, TransDigm shall require the purchaser 
to be bound by the provisions of this Final Judgment. TransDigm need 
not obtain such an agreement from the acquirer of the assets divested 
pursuant to this Final Judgment.

IV. Divestiture

    A. TransDigm is ordered and directed, within 30 calendar days after 
all necessary regulatory approvals have been obtained from the 
Committee on Foreign Investment in the United States (``CFIUS'') and 
the German Federal Ministry of Economic Affairs and Energy (the 
``Bundesministerium f[uuml]r Wirtschaft und Energie''), or 30 calendar 
days after the Court's signing of the Hold Separate Stipulation and 
Order in this matter, whichever is later, to divest the Divestiture 
Assets in a manner consistent with this Final Judgment to Perusa and 
MEP KG, or to an alternative 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 sixty 
(60) calendar days in total, and shall notify the Court in such 
circumstances. TransDigm agrees to use its best efforts to divest the 
Divestiture Assets as expeditiously as possible.
    B. In the event TransDigm is attempting to divest the Divestiture 
Assets to an Acquirer other than Perusa and MEP KG, TransDigm promptly 
shall make known, by usual and customary means, the availability of the 
Divestiture Assets. TransDigm shall inform any person making inquiry 
regarding a possible purchase of the Divestiture Assets that they are 
being divested pursuant to this Final Judgment and provide that person 
with a copy of this Final Judgment.
    C. In accomplishing the divestiture ordered by this Final Judgment, 
TransDigm shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client privileges or work-product doctrine. TransDigm shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    D. TransDigm shall provide the Acquirer and the United States 
information relating to the personnel involved in the operation of the 
Divestiture Assets to enable the Acquirer to make offers of employment. 
TransDigm will not interfere with any negotiations by the Acquirer to 
employ any TransDigm employee whose primary responsibility is the 
operation of the Divestiture Assets.
    E. For any personnel involved in the operation of the Divestiture 
Assets that elect employment with the Acquirer, TransDigm shall waive 
all noncompete and nondisclosure agreements, vest all unvested pension 
and other equity rights, and provide all benefits to which the relevant 
employees would generally be provided if transferred to a buyer of an 
ongoing business. For a period of two (2) years from the filing of the 
Complaint in this matter, TransDigm may not solicit to hire, or hire, 
any such person who was hired by the Acquirer, unless (1) such 
individual is terminated or laid off by the Acquirer or (2) the 
Acquirer agrees in writing that TransDigm may solicit or hire that 
individual. Nothing in this paragraph shall prohibit TransDigm from 
maintaining any reasonable restrictions on the disclosure by any 
employee who accepts an offer of employment with the Acquirer of 
TransDigm's proprietary

[[Page 2211]]

non-public information that is (1) not otherwise required to be 
disclosed by this Final Judgment, (2) related solely to TransDigm's 
businesses and clients, and (3) unrelated to the Divestiture Assets.
    F. TransDigm shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities of SCHROTH; 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.
    G. TransDigm shall warrant to the Acquirer that each asset will be 
operational on the date of sale.
    H. TransDigm shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    I. TransDigm shall warrant to the Acquirer that there are no 
material defects in the environmental, zoning, or other permits 
pertaining to the operation of each asset, and that following the sale 
of the Divestiture Assets, TransDigm will not undertake, directly or 
indirectly, any challenges to the environmental, zoning, or other 
permits relating to the operation of the Divestiture Assets.
    J. At the Acquirer's option, and subject to approval by the United 
States, TransDigm shall enter a Transition Services Agreement for 
information technology services and other such transition services that 
are reasonably necessary for the Acquirer to operate the Divestiture 
Assets for a period of up to twelve months. The United States, in its 
sole discretion, may approve one or more extensions of this agreement 
for a total of up to an additional six months. The terms and conditions 
of any contractual arrangement meant to satisfy this provision must be 
reasonably related to market conditions. Any amendments or 
modifications of the Transition Services Agreement may only be entered 
into with the approval of the United States, in its sole discretion.
    K. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by Divestiture Trustee appointed 
pursuant to Section V, of this Final Judgment, shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the Divestiture 
Assets can and will be used by the Acquirer as part of a viable, 
ongoing business of developing, manufacturing, and selling airplane 
restraint systems. The divestiture, whether pursuant to Section IV or 
Section V of this Final Judgment,

    (1) shall be made to an Acquirer that, in the United States' sole 
judgment, has the intent and capability (including the necessary 
managerial, operational, technical, and financial capability) of 
competing effectively in the business of developing, manufacturing, and 
selling airplane restraint systems; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion, that none of the terms of any agreement between an 
Acquirer and TransDigm give TransDigm 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. Appointment of Divestiture Trustee

    A. If TransDigm has not divested the Divestiture Assets within the 
time period specified in Paragraph IV(A), TransDigm shall notify the 
United States of that fact in writing. 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 
the Divestiture Assets.
    B. After the appointment of a Divestiture Trustee becomes 
effective, only the Divestiture Trustee shall have the right to sell 
the Divestiture Assets. The Divestiture Trustee shall have the power 
and authority to accomplish the divestiture to an Acquirer 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 Sections IV, V, and VI of this Final Judgment, and 
shall have such other powers as this Court deems appropriate. Subject 
to Paragraph V(D) of this Final Judgment, the Divestiture Trustee may 
hire at the cost and expense of TransDigm 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 the divestiture. Any such investment bankers, 
attorneys, or other agents shall serve on such terms and conditions as 
the United States approves, including confidentiality requirements and 
conflict of interest certifications.
    C. TransDigm shall not object to a sale by the Divestiture Trustee 
on any ground other than the Divestiture Trustee's malfeasance. Any 
such objections by TransDigm must be conveyed in writing to the United 
States and the Divestiture Trustee within ten (10) calendar days after 
the Divestiture Trustee has provided the notice required under Section 
VI.
    D. The Divestiture Trustee shall serve at the cost and expense of 
TransDigm pursuant to a written agreement, on such terms and conditions 
as the United States approves, including confidentiality requirements 
and conflict of interest certifications. The Divestiture Trustee shall 
account for all monies derived from the sale of the 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 yet unpaid and those of any 
professionals and agents retained by the Divestiture Trustee, all 
remaining money shall be paid to TransDigm 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 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. If the 
Divestiture Trustee and TransDigm are unable to reach agreement on the 
Divestiture Trustee's or any agents' or consultants' compensation or 
other terms and conditions of engagement within 14 calendar days of 
appointment of the Divestiture Trustee, the United States may, in its 
sole discretion, take appropriate action, including making a 
recommendation to the Court. The Divestiture Trustee shall, within 
three (3) business days of hiring any other professionals or agents, 
provide written notice of such hiring and the rate of compensation to 
TransDigm and the United States.
    E. TransDigm shall use its best efforts to assist the Divestiture 
Trustee in accomplishing the required divestiture. The Divestiture 
Trustee and any consultants, accountants, attorneys, and other agents 
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 TransDigm 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 or any 
applicable privileges. TransDigm shall take no action to interfere with 
or to impede the Divestiture Trustee's accomplishment of the 
divestiture.
    F. After its appointment, the Divestiture Trustee shall file 
monthly reports with the United States and, as

[[Page 2212]]

appropriate, the Court setting forth the Divestiture Trustee's efforts 
to accomplish the 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, and shall describe 
in detail each contact with any such person. The Divestiture Trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the Divestiture Trustee has not accomplished the 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 report contains information that the Divestiture 
Trustee deems confidential, such report 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, include extending the trust and the term of the 
Divestiture Trustee's appointment by a period requested by the United 
States.
    H. If the United States determines that the Divestiture Trustee has 
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute 
Divestiture Trustee.

VI. Notice of Proposed Divestiture

    A. In the event TransDigm divests the Divestiture Assets to an 
Acquirer other than Perusa and MEP KG, within two (2) business days 
following execution of a definitive divestiture agreement, TransDigm or 
the Divestiture Trustee, whichever is then responsible for effecting 
the divestiture required herein, shall notify the United States of any 
proposed divestiture required by Section IV or Section V of this Final 
Judgment. If the Divestiture Trustee is responsible, it shall similarly 
notify TransDigm. 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 the 
Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from TransDigm, 
the proposed Acquirer, any other third party, or the Divestiture 
Trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer, and any other potential Acquirer. 
TransDigm and the Divestiture Trustee shall furnish any additional 
information requested within fifteen (15) calendar days of the receipt 
of the request, unless the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from TransDigm, the 
proposed Acquirer, any third party, and the Divestiture Trustee, 
whichever is later, the United States shall provide written notice to 
TransDigm 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 TransDigm's limited right to object to the 
sale under Paragraph V(C) of this Final Judgment. Absent written notice 
that the United States does not object to the proposed Acquirer or upon 
objection by the United States, a divestiture proposed under Section IV 
or Section V shall not be consummated. Upon objection by TransDigm 
under Paragraph V(C), a divestiture proposed under Section V shall not 
be consummated unless approved by the Court.

VII. Financing

    TransDigm shall not finance all or any part of any purchase made 
pursuant to Section IV or Section V of this Final Judgment.

VIII. Hold Separate

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

IX. Firewalls

    A. TransDigm shall implement and maintain procedures to prevent the 
sharing by the TransDigm Executive Vice President currently assigned to 
SCHROTH, the TransDigm Controller currently assigned to SCHROTH, and 
the TransDigm Executive Vice President of Mergers & Acquisitions of 
competitively sensitive information from SCHROTH with personnel with 
responsibilities relating to AmSafe, Inc.
    B. TransDigm shall, within thirty (30) calendar days of the Court's 
entry of the Hold Separate Stipulation and Order, submit to the United 
States a document setting forth in detail the procedures implemented to 
effect compliance with this Section. The United States shall notify 
TransDigm within ten (10) business days whether, in its sole 
discretion, it approves or rejects TransDigm's compliance plan.
    C. In the event TransDigm's compliance plan is rejected, the 
reasons for the rejection shall be provided to TransDigm and TransDigm 
shall be given the opportunity to submit, within ten (10) business days 
of receiving the notice of rejection, a revised compliance plan. If the 
parties cannot agree on a compliance plan, the United States shall have 
the right to request that the Court rule on whether TransDigm's 
proposed compliance plan fulfills the requirements of Paragraph IX(A).
    D. TransDigm may at any time submit to the United States evidence 
relating to the actual operation of any firewall in support of a 
request to modify any firewall set forth in this Section. In 
determining, in its sole discretion, whether it would be appropriate 
for the United States to consent to modify the firewall, the United 
States, shall consider the need to protect competitively sensitive 
information of SCHROTH and the impact the firewall has had on 
TransDigm's ability to efficiently manage AmSafe, Inc.

X. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or Section V, 
TransDigm shall deliver to the United States an affidavit, signed by 
TransDigm's Chief Financial Officer and General Counsel, which shall 
describe the fact and manner of TransDigm's compliance with Section IV 
or Section V of this Final Judgment. Each such affidavit shall include 
the name, address, and telephone number of each person who, during the 
preceding thirty (30) calendar days, made an offer to

[[Page 2213]]

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, 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 TransDigm has 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 TransDigm, including limitation on information, 
shall be made within fourteen (14) calendar days of receipt of such 
affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, TransDigm shall deliver to the United States an 
affidavit that describes in reasonable detail all actions TransDigm has 
taken and all steps TransDigm has implemented on an ongoing basis to 
comply with Section VIII of this Final Judgment. TransDigm shall 
deliver to the United States an affidavit describing any changes to the 
efforts and actions outlined in TransDigm's earlier affidavits filed 
pursuant to this Section within fifteen (15) calendar days after the 
change is implemented.
    C. TransDigm shall keep all records of all efforts made to preserve 
and divest the Divestiture Assets until one year after such divestiture 
has been completed.

XI. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as any Hold Separate 
Stipulation and Order, 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, 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 TransDigm, be 
permitted:

    (1) access during TransDigm's office hours to inspect and copy, or 
at the option of the United States, to require TransDigm to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
TransDigm, relating to any matters contained in this Final Judgment; 
and
    (2) to interview, either informally or on the record, TransDigm's 
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 TransDigm.

    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
TransDigm shall submit written reports or response 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 
TransDigm to the United States, TransDigm represents and identifies 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 TransDigm marks 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 TransDigm ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XII. Notification

    A. Unless such transaction is otherwise subject to the reporting 
and waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
TransDigm, without providing advance notification to the Antitrust 
Division, shall not directly or indirectly acquire any assets of or any 
interest, including any financial, security, loan, equity, or 
management interest, in any entity engaged in the development, 
manufacture, or sale of airplane restraint systems during the term of 
this Final Judgment.
    B. Such notification shall be provided to the Antitrust Division in 
the same format as, and per the instructions relating to, the 
Notification and Report Form set forth in the Appendix to Part 803 of 
Title 16 of the Code of Federal Regulations as amended, except that the 
information requested in Items 5 through 8 of the instructions must be 
provided only about airplane restraint systems. Notification shall be 
provided at least thirty (30) calendar days prior to acquiring any such 
interest, and shall include, beyond what may be required by the 
applicable instructions, the names of the principal representatives of 
the parties to the agreement who negotiated the agreement, and any 
management or strategic plans discussing the proposed transaction. If 
within the 30-day period after notification, representatives of the 
Antitrust Division make a written request for additional information, 
TransDigm shall not consummate the proposed transaction or agreement 
until thirty (30) calendar days after submitting all such additional 
information. Early termination of the waiting periods in this paragraph 
may be requested and, where appropriate, granted in the same manner as 
is applicable under the requirements and provisions of the HSR Act and 
rules promulgated thereunder. This Section shall be broadly construed 
and any ambiguity or uncertainty regarding the filing of notice under 
this Section shall be resolved in favor of filing notice.

XIII. No Reacquisition

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

XIV. 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.

XV. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including its right to seek an order 
of contempt from this Court. TransDigm agrees that in any civil 
contempt action, any motion to show cause, or any similar action 
brought by the United States regarding an alleged violation of this 
Final Judgment, the United States may establish a violation of the 
decree and the appropriateness of any remedy therefor by a 
preponderance of the evidence, and TransDigm waives any

[[Page 2214]]

argument that a different standard of proof should apply.
    B. In any enforcement proceeding in which the Court finds that 
TransDigm has violated this Final Judgment, the United States may apply 
to the Court for a one-time extension of this Final Judgment, together 
with such other relief as may be appropriate. TransDigm agrees to 
reimburse the United States for any attorneys' fees, experts' fees, and 
costs incurred in connection with any effort to enforce this Final 
Judgment.

XVI. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry, except that after 
five (5) years from the date of its entry, this Final Judgment may be 
terminated upon notice by the United States to the Court and TransDigm 
that the divestiture has been completed and that the continuation of 
the Final Judgment no longer is necessary or in the public interest.

XVII. 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' 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.

APPENDIX A: Real Property

(Owned and Leased)

SCHROTH U.S. Leased Real Property

------------------------------------------------------------------------
        Facility name                Address          Type of facility
------------------------------------------------------------------------
Pompano Beach...............  1371 SW 8th Street,   Manufacturing Plant,
                               Pompano Beach, FL.    Office, and
                                                     Warehouse.
------------------------------------------------------------------------

SCHROTH Germany Leased Real Property

------------------------------------------------------------------------
        Facility name                Address          Type of facility
------------------------------------------------------------------------
Headquarters ``Im Ohl''.....  Im Ohl 14, 59757,     Manufacturing Plant
                               Arnsberg, Germany.    and Office
                                                     (Headquarters).
Parking Area ``Im Ohl''.....  Im Ohl 14, 59757,     Parking Area.
                               Arnsberg, Germany.
------------------------------------------------------------------------

SCHROTH Germany Owned Real Property

------------------------------------------------------------------------
        Facility name                Address          Type of facility
------------------------------------------------------------------------
Warehouse ``Im Ohl''........  Im Ohl 14, 59757,     Warehouse.
                               Arnsberg, Germany;
                               Land Register of
                               Neheim-Husten of
                               the local court of
                               Arnsberg; Page
                               13024; Plot 5,
                               Parcel 390.
Warehouse ``Im Ohl''........  Im Ohl 14, 59757,     Warehouse.
                               Arnsberg, Germany;
                               Land Register of
                               Neheim-Husten of
                               the local court of
                               Arnsberg; Page
                               9777; Plot 5,
                               Parcel 88.
------------------------------------------------------------------------

[FR Doc. 2018-00544 Filed 1-12-18; 8:45 am]
 BILLING CODE 4410-11-P