United States v. United Technologies Corporation, et al.; Proposed Final Judgment and Competitive Impact Statement, 23144-23170 [2020-08764]

Download as PDF 23144 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices Civil Action No. 1:20–cv–00824 Judge: Hon. Dabney L. Friedrich DEPARTMENT OF JUSTICE Antitrust Division United States v. United Technologies Corporation, et al.; Proposed Final Judgment and Competitive Impact Statement Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h), that a proposed Final Judgment, Stipulation, and Competitive Impact Statement have been filed with the United States District Court for the District of Columbia in United States of America v. United Technologies Corporation, et al., Civil Action No. 1:20–cv–00824. On March 26, 2020, the United States filed a Complaint alleging that the proposed merger of United Technologies Corporation (‘‘UTC’’) and Raytheon Company (‘‘Raytheon’’) would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed at the same time as the Complaint, requires the Defendants to divest the military GPS and optical systems businesses of UTC and the military airborne radios business of Raytheon. Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Antitrust Division’s website at http://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 Katrina Rouse, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC 20530 (telephone: 202–307–0924). khammond on DSKJM1Z7X2PROD with NOTICES2 Suzanne Morris, Chief, Premerger and Division Statistics. United States District Court for the District of Columbia United States of America, U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, Plaintiff, v. United Technologies Corporation, 10 Farm Springs Road, Farmington, CT 06032, and Raytheon Company, 870 Winter Street, Waltham, MA 02451, Defendants. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 Complaint The United States of America (‘‘United States’’), acting under the direction of the Attorney General of the United States, brings this civil antitrust action against Defendants United Technologies Corporation (‘‘UTC’’) and Raytheon Company (‘‘Raytheon’’) to enjoin the proposed merger of UTC and Raytheon. The United States complains and alleges as follows: I. Nature of the Action 1. Pursuant to an agreement and plan of merger dated June 9, 2019, UTC and Raytheon propose to merge in a transaction that would create the nation’s second-largest aerospace and defense contractor. UTC is an aerospace company whose core products include engines, aerostructures, aircraft subsystems, and other aircraft components. Raytheon is a defense company whose core businesses include missiles, air defense systems, radars, sensors, and electronic warfare systems. Although the core businesses of UTC and Raytheon are different, they overlap in the supply of multiple products to the Department of Defense (‘‘DoD’’) and U.S. intelligence community. 2. UTC and Raytheon are the primary suppliers of radios for use in military aircraft (‘‘military airborne radios’’) operated by DoD. UTC’s AN/ARC–210 is the standard radio for Air Force and Navy aircraft, and Raytheon’s AN/ARC– 231 is the standard radio for Army helicopters. As the only military airborne radios that have been supplied to DoD customers for years, the parties’ products represent the two competitive alternatives to DoD customers, and the sole constraint on either company exercising market power. The proposed merger would eliminate competition between UTC and Raytheon for military airborne radios, likely resulting in higher prices, lower quality, and diminished innovation for these critical defense products. 3. UTC and Raytheon are two of the leading suppliers of military global positioning system (‘‘GPS’’) receivers and anti-jam products (collectively, ‘‘military GPS systems’’) to DoD. To enhance security, in 2012, DoD began the process of developing a new generation of military GPS systems for aviation/maritime and ground-based applications. UTC and Raytheon are likely to be the only competitors for military GPS systems for aviation/ maritime applications, and two of only three competitors for military GPS systems for ground-based applications. PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 The proposed merger would eliminate competition between UTC and Raytheon for military GPS systems for these applications, likely resulting in higher prices, lower quality, and diminished innovation for these critical defense products. 4. The merger also would substantially lessen competition through the vertical integration of the two companies. UTC and Raytheon each have capabilities in critical inputs for electro-optical/infrared (‘‘EO/IR’’) reconnaissance satellites, which provide images for DoD and U.S. intelligence community customers. Specifically, Raytheon has a dominant position in electronic detectors known as focal plane arrays (‘‘FPAs’’), and is one of several builders of EO/IR satellite payloads. The payload is the system that performs the reconnaissance mission of a satellite, and includes components such as FPAs. UTC is one of only two companies with the capability to build large space-based optical systems for EO/IR satellite payloads. Today, Raytheon has no incentive to favor one optical systems provider over the other when it sells its FPAs to EO/IR payload builders, and UTC has no incentive to favor one EO/IR payload builder over another when it sells its optical systems. 5. The combination of UTC and Raytheon will bring these EO/IR reconnaissance satellite components under control of a single company and provide it with the incentive and ability to harm competition in two ways. First, the merger would provide the combined company with the incentive and ability to refuse to supply EO/IR payload builders with FPAs, or supply them only at higher cost, if the payload builders did not also agree to purchase UTC’s optical system. Second, the merger would give the combined company the incentive and ability to harm Raytheon’s satellite payload builder rivals by raising the prices for UTC’s optical systems, or denying them access to these systems altogether. The proposed merger therefore likely would result in higher prices, lower quality, and diminished innovation for large space-based optical systems and EO/IR reconnaissance satellite payloads. 6. As a result, the proposed acquisition likely would substantially lessen competition in the markets for the design, development, production, and sale of military airborne radios, military GPS systems for aviation/ maritime applications, military GPS systems for ground-based applications, large space-based optical systems, and EO/IR reconnaissance satellite payloads in the United States in violation of E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices Section 7 of the Clayton Act, 15 U.S.C. 18. II. The Defendants 7. UTC is a Delaware corporation with its headquarters in Farmington, Connecticut. UTC produces a wide range of products for the aerospace and defense industries, including military airborne radios, military GPS systems, and large space-based optical systems. UTC had sales of approximately $77 billion in 2019. 8. Raytheon is a Delaware corporation with its headquarters in Waltham, Massachusetts. Raytheon is one of the world’s largest defense manufacturers, with significant capabilities in radars and missiles. It also produces military airborne radios, military GPS systems, and FPAs and payloads for EO/IR reconnaissance satellites. Raytheon had sales of approximately $29 billion in 2019. III. Jurisdiction and Venue 9. The United States brings this action under Section 15 of the Clayton Act, 15 U.S.C. 25, as amended, to prevent and restrain Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18. 10. Defendants develop, manufacture, and sell military airborne radios, military GPS systems, large space-based optical systems, and EO/IR reconnaissance satellite payloads throughout the United States, and their activities in these areas substantially affect interstate commerce. This Court therefore has subject matter jurisdiction over this action pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345. 11. Defendants have consented to venue and personal jurisdiction in this judicial district. Venue is therefore proper in this district under Section 12 of the Clayton Act, 15 U.S.C. 22 and under 28 U.S.C. 1391(c). khammond on DSKJM1Z7X2PROD with NOTICES2 IV. Military Airborne Radios A. Background 12. Military airborne radios allow for secure voice, data, and video communication between aircraft and from aircraft to the ground. This communication occurs either through direct communications links or through a satellite uplink system. Military airborne radios have two main components: Radios (transmitter and receiver) and waveforms (communication protocols and related hardware/software). Specialized elements in both the radios and waveforms protect military airborne radio transmissions from being intercepted and decrypted. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 13. There are multiple military airborne radios on every airplane and helicopter used by DoD today, as well as thousands of spares in military depots throughout the world. DoD regularly purchases new military airborne radios as new aircraft are developed and to replace those currently in the field as military airborne radio suppliers develop improved radios with additional waveforms and other features. 14. UTC’s AN/ARC–210 military airborne radio is specified on almost all Air Force and Navy aircraft. Raytheon’s AN/ARC–231 military airborne radio is specified on almost all Army helicopters. Military airborne radios from UTC and Raytheon are each the closest substitute for the other, and represent the only competitive alternative for a DoD customer in the event that either UTC or Raytheon increases prices for its military airborne radios or otherwise exercises market power. B. Relevant Markets 1. Product Market 15. The quality and usefulness of a military airborne radio is defined by several characteristics, the most important of which are reliability, security, and the ability to access numerous communications networks. For instance, DoD requires highly ruggedized radios that can withstand the extreme environments encountered by military aircraft, including the rapid temperature changes and G-forces experienced on fighter jets. To ensure constant contact and to enable the flow of information throughout the battlefield, DoD radios must also communicate with multiple platforms— including aircraft, ships, ground forces, and smart weapons—using various waveforms, and must also keep those communications secure and encrypted to prevent signals from being intercepted by adversaries. 16. Other communications technologies are not substitutes for military airborne radios. Radios developed for other military purposes, including ground and ship-based radios, cannot withstand the high G-forces and extreme temperature fluctuations experienced by military aircraft, particularly fighter jets. Furthermore, military airborne radios are smaller and more power-efficient than those designed for ground and ship-based uses. 17. Airborne radios developed for commercial purposes—including commercial aviation—are also not substitutes for military airborne radios. PO 00000 Frm 00003 Fmt 4701 Sfmt 4703 23145 Commercial airborne radios lack the high level of encryption and jamming resistance required for military airborne radios. In addition, while commercial airborne radios can access numerous civil and governmental communications networks, they do not incorporate the waveforms and software algorithms necessary to access the numerous specialized networks used by purchasers of military airborne radios. 18. For the foregoing reasons, substitution away from military airborne radios in response to a small but significant and non-transitory increase in price will not be sufficient to render such a price increase unprofitable. Accordingly, the design, development, production, and sale of military airborne radios is a relevant product market and line of commerce under Section 7 of the Clayton Act, 15 U.S.C. 18. 2. Geographic Market 19. For national security reasons, DoD, which is the only purchaser of these products in the United States, strongly prefers domestic suppliers of military airborne radios. DoD is unlikely to turn to any foreign suppliers in the face of a small but significant and nontransitory price increase by domestic suppliers of military airborne radios. 20. The United States is therefore a relevant geographic market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. C. Anticompetitive Effects of the Proposed Transaction 21. UTC and Raytheon today are the leading suppliers of military airborne radios to DoD. The merger would therefore give the merged firm a dominant share of the market for the design, development, production, and sale of military airborne radios, leaving DoD few competitive alternatives for this critical component of military communications. 22. UTC and Raytheon compete in the market for the design, development, production, and sale of military airborne radios on the basis of quality, price, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, and shorter delivery times for military airborne radios. Competition between UTC and Raytheon has also fostered important industry innovation. The combination of UTC and Raytheon would eliminate this competition and its future benefits to DoD customers. Post-acquisition, the merged firm likely would have the incentive and ability to increase prices, offer less favorable contractual terms, and diminish investments in research E:\FR\FM\24APN2.SGM 24APN2 23146 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices and development efforts that lead to innovative and high-quality products. 23. The proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of military airborne radios in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. D. Difficulty of Entry 24. Sufficient timely entry or expansion of additional competitors into the market for the design, development, production, and sale of military airborne radios is unlikely to prevent the harm to competition that is likely to result if the proposed acquisition is consummated. Because UTC’s AN/ARC–210 and Raytheon AN/ ARC–231 are established designs produced in high volumes for many years, they are well-understood by DoD customers and have significant economies of scale. Any new products manufactured by an alternative supplier would require extensive testing and qualification before they would be acceptable to DoD, and even at the end of that process the new supplier still would not have the reputation of UTC and Raytheon with DoD. Moreover, no potential alternative supplier has the large-scale military airborne radio production facilities of UTC or Raytheon, or the expertise of those firms in developing the complex software algorithms necessary for military airborne radios. Accordingly, entry or expansion would be costly and timeconsuming. 25. As result of these barriers, entry or expansion of additional competitors into the market for the design, development, production, and sale of military airborne radios would not be timely, likely, or sufficient to defeat the anticompetitive effects likely to result from UTC’s merger with Raytheon. V. Military GPS Systems khammond on DSKJM1Z7X2PROD with NOTICES2 A. Background 26. Military GPS systems allow ground vehicles, ships, and planes to receive and process information regarding their position, navigation, and timing. Military GPS systems guide missiles and projectiles to their intended targets, locate friendly fighters in theaters of war, and enable remote operators to fly unmanned aerial vehicles thousands of miles away. 27. Military GPS systems contain technology that protects them from two forms of enemy interference: ‘‘Spoofing,’’ a signal disruption causing a GPS system to calculate a false position, and ‘‘jamming,’’ which occurs VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 when a GPS system’s satellite signals are overpowered. To ensure that spoofing and jamming do not interfere with U.S. military missions, military GPS systems contain encryption modules and anti-jamming technology. 28. In 2011, the U.S. government announced that ‘‘M-Code,’’ a modernized encryption system, would be incorporated into military GPS systems. In September 2012, DoD awarded technology development contracts (and accompanying funds) to UTC, Raytheon, and a third firm to develop M-Code compliant GPS systems that the military could implement quickly. DoD requested two discrete types of GPS systems—one for ground applications and another for aviation/ maritime applications. UTC and Raytheon have been working to develop products for both applications—ground and aviation/maritime—while to date the third firm is under contract only for ground applications. 29. While other defense contractors may eventually develop acceptable military GPS systems for these applications, those contractors are years behind, will not be eligible for funding from the U.S. government, and will not enjoy the incumbent’s advantage held by the three leading suppliers. B. Relevant Markets 1. Product Markets 30. Military GPS systems for aviation/ maritime applications and military GPS systems for ground applications serve different functions and cannot be substituted for one another. For example, there are different power, performance, and form factor requirements for aviation/maritime GPS systems and ground GPS systems. Customers therefore cannot substitute an aviation/maritime GPS system for a ground GPS system (or vice versa) without sacrificing important functionality. 31. Military GPS systems for both applications are highly customized to suit the needs of military end users. With each competition, DoD specifies the form factor (i.e., the physical size and shape), performance metrics, and encryption standards that must be met. Due to the mission-critical nature of military GPS systems, DoD is far more exacting than commercial customers, and as a result, commercial GPS systems cannot be substituted for military GPS systems for either application. Nor can any alternative technology provide the functionality that a GPS system provides, such as instantaneous position, navigation, and timing information. PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 32. For the foregoing reasons, customers would not switch to a commercial GPS system or to an alternative technology, nor would they switch between military GPS systems for different applications, in the face of a small but significant and nontransitory increase in the price of a military GPS system for aviation/ maritime applications or a military GPS system for ground applications. Accordingly, the design, development, production, and sale of (i) military GPS systems for aviation/maritime applications and (ii) military GPS systems for ground applications are lines of commerce and relevant product markets within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. 2. Geographic Market 33. For national security reasons, DoD, which is the sole purchaser of these products within the United States, prefers domestic suppliers of military GPS systems. DoD is unlikely to turn to any foreign suppliers in the face of a small but significant and non-transitory price increase by domestic suppliers of military GPS systems. 34. The United States is therefore a relevant geographic market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. C. Anticompetitive Effects of the Proposed Transaction 35. UTC and Raytheon are the only suppliers of military GPS systems for aviation/maritime applications in the United States. The merger therefore would give the combined firm a monopoly in the market for this product and leave DoD without any competitive alternatives. The merger also would create a duopoly in the supply of military GPS systems for ground applications, as UTC and Raytheon are two of only three suppliers of those products. 36. UTC and Raytheon compete to design, develop, produce, and sell military GPS systems for aviation/ maritime applications and ground applications on the basis of quality, price, technological capabilities, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, innovation, and shorter delivery times for military GPS systems for both applications. The combination of UTC and Raytheon would eliminate this competition and its future benefits to DoD customers. Post-acquisition, the merged firm likely would compete less along the dimensions of innovation, quality, price, or contractual terms. E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices VI. EO/IR Reconnaissance Satellites 37. The proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of military GPS systems for aviation/ maritime applications and for ground applications in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. khammond on DSKJM1Z7X2PROD with NOTICES2 D. Difficulty of Entry 38. Sufficient, timely entry of additional competitors into the markets for the design, development, production, and sale of military GPS systems for aviation/maritime applications and for ground applications is unlikely to prevent the harm to competition likely to result if the proposed acquisition is consummated. A new entrant would need significant capital to develop prototypes and establish a manufacturing operation. Even with a prototype, an entrant would need a network of government and prime contractor contacts to assist with testing and troubleshooting. Finally, an entrant would need to clear the qualification process to become a supplier to DoD. Together, these steps would take years to complete. Accordingly, entry would be costly and time-consuming. 39. Timely and sufficient expansion of capabilities by a producer of military GPS systems for ground-based applications is also unlikely to prevent the harm to competition in military GPS systems for aviation/maritime applications that is likely to result if the proposed acquisition is consummated. A producer of ground-based military GPS systems would need to ruggedize its product to withstand the high Gforces and temperature extremes experienced by military aircraft. It would also need to match its system to the size, weight, and power restrictions imposed on all aircraft based electronic systems. These modifications would require substantial investments in skilled personnel and modification of production, and the product would require extensive development and subsequent testing by customers. Accordingly, expansion into this different application would be costly and time-consuming. 40. As result of these barriers, entry into the markets for the design, development, production, and sale of military GPS systems for aviation/ maritime applications and military GPS systems for ground applications would not be timely, likely, or sufficient to defeat the anticompetitive effects likely to result from UTC’s merger with Raytheon. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 A. Background 41. Space-based reconnaissance systems provide essential information to end-users in DoD and the intelligence community, including communications intelligence, early warning of missile launches, and near real-time imagery to United States armed forces to support the war on terrorism and other operations. They also provide data essential for managing disaster relief, monitoring global warming, and assessing crop production. 42. Space-based reconnaissance systems generally are deployed on satellites, where they constitute the ‘‘payload,’’ a term for the system that performs the primary mission of the satellite. Payload suppliers are subcontractors to satellite prime contractors, who combine payloads, structural components, power supply systems, ground communications systems, and other components into a complete satellite for delivery to the DoD or intelligence community enduser customer. 43. One important type of reconnaissance satellite payload is an electro-optical/infrared (‘‘EO/IR’’) payload, which is a camera-based system that collects visible and infrared light. The components of an EO/IR reconnaissance satellite payload are advanced versions of the components found in consumer digital cameras: An optical system—a lens or mirror— focuses light onto an electronic detector, known as a focal plane array (‘‘FPA’’), which converts light to digital images for transmission via radio signals. Optical systems and FPAs are critical inputs in EO/IR reconnaissance satellite payloads. 44. Raytheon has industry-leading capabilities in the provision of FPAs for EO/IR reconnaissance satellite payloads, having been the beneficiary of decades of large investments by government enduser customers. Specifically, Raytheon is the leading provider of FPAs sensitive to visible light and one of the two leading providers of FPAs sensitive to infrared light. Raytheon is also one of multiple firms that supply EO/IR reconnaissance satellite payloads to the satellite prime contractors who assemble the satellite for the DoD or intelligence community customer. 45. UTC is one of only two firms capable of producing large space-based optical systems such as those used in EO/IR reconnaissance satellite payloads. While other suppliers have the capability to produce smaller optical systems for use in space, none can produce optical systems in sizes PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 23147 comparable to those produced by UTC and the other industry leader. 46. The FPAs and large space-based optical system used in a particular EO/ IR reconnaissance satellite payload usually are selected by the payload supplier. In some cases, however, the DoD or intelligence community customer will specify the FPA or large space-based optical system supplier. As explained below, the combination of UTC’s market-leading position in largespace based optical systems and Raytheon’s market-leading position in FPAs will provide the merged firm with the ability and incentive to foreclose or otherwise harm its rivals in large spacebased optical systems and EO/IR reconnaissance satellite payloads. B. Relevant Markets 1. Product Markets a. Large Space-Based Optical Systems 47. Large space-based optical systems have specific requirements that distinguish them from other optical systems. Smaller space-based optical systems have insufficient light-gathering and resolving power. Optical systems designed for use on the ground do not possess the high strength, rigidity, low weight, temperature stability, and radiation-hardening that large spacebased optical systems require to be safely and cost-effectively launched into orbit and used in space. 48. Customers would not switch to smaller optical systems or optical systems designed for use on the ground in the face of a small but significant and non-transitory increase in the price of large space-based optical systems. Accordingly, the design, development, production, and sale of large spacebased optical systems is a line of commerce and relevant product market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. b. EO/IR Reconnaissance Satellite Payloads 49. EO/IR reconnaissance satellite payloads have specific capabilities that distinguish them from other reconnaissance satellite payloads. Other types of payloads such as radar and electronic intelligence payloads do not provide the same type of information as imagery. 50. Aerial reconnaissance imagery cannot substitute for the imagery produced by EO/IR reconnaissance satellite payloads. Many parts of the globe that are of critical interest to DoD and the intelligence community are effectively closed to reconnaissance aircraft operated by the United States. Even for areas open to overflight, E:\FR\FM\24APN2.SGM 24APN2 23148 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices satellite surveys are quicker and more efficient than aerial reconnaissance. 51. Consequently, customers will not switch to other types of payloads or to aerial reconnaissance imagery in the event of a small but significant and nontransitory price increase for EO/IR reconnaissance satellite payloads. The design, development, production, and sale of EO/IR reconnaissance satellite payloads therefore is a line of commerce and product market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. 2. Geographic Market 52. Much of the information regarding EO/IR reconnaissance satellites is highly sensitive, and data concerning the capabilities required in such satellites is released only to a select group of U.S.based manufacturers that possess the necessary security clearances and are subject to close government oversight. For this reason, DoD and intelligence community customers, who are the only customers for these products in the United States, are unlikely to purchase large space-based optical systems or EO/ IR reconnaissance satellite payloads from sources located outside the United States in the event of small but significant and non-transitory price increases by domestic producers of those products. 53. The United States is therefore a relevant geographic market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. khammond on DSKJM1Z7X2PROD with NOTICES2 C. Anticompetitive Effects of the Proposed Transaction 54. As discussed below, the vertical integration of Raytheon and UTC will change the merged firm’s incentives to sell FPAs and large space-based optical systems and enable the merged firm to use its significant market position in these products to harm its large spacebased optical systems and EO/IR satellite payload competitors. 1. Large Space-Based Optical Systems 55. First, by combining UTC’s capabilities in large space-based optical systems with Raytheon’s dominant position in FPAs, the merger would give the combined company the incentive and ability to reduce competition from UTC’s only large space-based optical systems competitor. Because Raytheon does not build large space-based optical systems today, it has no incentive to demand that a particular optical system supplier be selected by the payload builder. Following the merger, this incentive would change. The combined company likely would refuse to supply payload builders with FPAs, or supply VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 them only at higher cost, if the payload builders do not also agree to purchase UTC’s optical system. With visible-light FPAs, and in situations where the DoD or intelligence community end-user directed payload providers to use Raytheon’s infrared FPAs, the payload provider would have no alternative but to accept UTC’s large space-based optical system, even if it was of lower quality or higher priced than large space-based optical systems available from the other source. As a result, the merged company would be able to charge higher prices for its optical system, or provide a system of lower quality, than would have been possible before the merger. 56. UTC competes to design, develop, produce, and sell large space-based optical systems on the basis of quality, price, and innovation, as well as contractual terms such as delivery times. This competition leads to more innovation, higher quality, lower prices, and shorter delivery times. The combination of UTC and Raytheon would give the merged firm the incentive and ability to weaken this competition and its future benefits to DoD and intelligence community endusers, likely resulting in less innovative, more expensive products with lower quality and longer delivery times. 57. The proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of large space-based optical systems in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 2. EO/IR Reconnaissance Satellite Payloads 58. Second, by combining Raytheon’s position as a producer of EO/IR reconnaissance satellite payloads with UTC’s position as one of only two companies with the capability to build large space-based optical systems, the merger would give the combined company the incentive and ability to harm its payload rivals. Because UTC does not produce payloads today, it has a strong incentive to make its optical systems available to all payload builders. Following the merger, this incentive would change, and, particularly in situations where the DoD or intelligence community end-user directed payload providers to use UTC’s large space-based optical systems, the combined company likely would raise prices for UTC’s optical systems to rival payload builders, or simply refuse to provide UTC’s optical systems at any price. As a result, the merged company would be able to charge higher prices for its payload, or provide a payload of PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 lower quality, than would have been possible before the merger. 59. Raytheon competes with other EO/IR reconnaissance satellite payload suppliers on the basis of quality, price, and innovation, as well as contractual terms such as delivery times. This competition leads to innovation, higher quality, lower prices, and shorter delivery times. The combination of UTC and Raytheon would give the merged firm the incentive and ability to weaken this competition and its future benefits to DoD and intelligence community end-users, likely resulting in less innovative, more expensive products with lower quality and longer delivery times. 60. The proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of EO/IR reconnaissance satellite payloads in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. D. Difficulty of Entry 61. Sufficient, timely entry of additional competitors into the markets for the design, development, production, and sale of visible-light or infrared FPAs for EO/IR reconnaissance satellite payloads is unlikely. Production facilities for these FPAs require a substantial investment in both capital equipment and human resources, and a new entrant would largely need to re-create the investment made in Raytheon by the United States government over the course of several decades. A new entrant would need to set up a foundry to produce electronic components, establish production lines capable of manufacturing read-out integrated circuits and other electronic components, and build assembly lines and testing facilities. Engineering and research personnel would need to be assigned to develop, test, and troubleshoot the detailed manufacturing processes, involving hundreds of steps, that are necessary to produce these FPAs. Any new products would require extensive testing and qualification before they could be used in payloads. These steps would require years to complete. 62. Sufficient, timely entry of additional competitors into the market for the design, development, production, and sale of large spacebased optical systems is also unlikely. A new entrant would require significant investment in the facilities and skilled personnel required to grind and polish the complex curved surfaces required for large-space based optical systems, and then test these optics in an E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices environment that replicates conditions in space. In addition, because spaceflight is an exceptionally demanding and high-risk endeavor, payload builders, satellite prime contractors, and end-user customers have a strong preference to purchase from established suppliers. Years of dedicated and costly effort would be required for a new entrant to demonstrate expertise comparable to UTC. 63. As result of these barriers, entry into the markets for the design, development, production, and sale of visible-light and infrared FPAs for EO/ IR reconnaissance satellite payloads and large space-based optical systems would not be timely, likely, or sufficient to defeat the anticompetitive effects in the markets for the design, development, production, and sale of large spacebased optical systems and EO/IR reconnaissance satellite payloads likely to result from UTC’s merger with Raytheon. khammond on DSKJM1Z7X2PROD with NOTICES2 VII. Violations Alleged 64. The merger of UTC and Raytheon likely would substantially lessen competition in the relevant markets alleged above in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 65. Unless enjoined, the acquisition likely would have the following anticompetitive effects, among others, in the relevant markets: (a) Actual and potential competition between UTC and Raytheon would be eliminated; (b) competition generally likely would be substantially lessened; and (c) prices likely would increase, quality and innovation likely would decrease, and contractual terms likely would be less favorable to customers. VIII. Request for Relief 66. The United States requests that this Court: (a) Adjudge and decree that the proposed merger of UTC and Raytheon would be unlawful and violate Section 7 of the Clayton Act, 15 U.S.C. 18; (b) preliminarily and permanently enjoin and restrain Defendants and all persons acting on their behalf from consummating the proposed merger of UTC and Raytheon, or from entering into or carrying out any other contract, agreement, plan, or understanding, the effect of which would be to combine UTC with Raytheon; (c) award the United States its costs for this action; and (d) award the United States such other and further relief as the Court deems just and proper. Dated: March 26, 2020. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 Respectfully submitted, FOR PLAINTIFF UNITED STATES: lllllllllllllllllllll Makan Delrahim (D.C. Bar #457795) Assistant Attorney General. lllllllllllllllllllll Bernard A. Nigro, Jr. (D.C. Bar #412357) Principal Deputy Assistant Attorney General. lllllllllllllllllllll Alexander P. Okuliar (D.C. Bar #481103) Deputy Assistant Attorney General. lllllllllllllllllllll Kathleen S. O’Neill Senior Director of Investigations & Litigation. lllllllllllllllllllll Katrina H. Rouse (D.C. Bar #1013035) Chief Defense, Industrials, and Aerospace Section. lllllllllllllllllllll David E. Altschuler (D.C. Bar #983023) Assistant Chief, Defense, Industrials, and Aerospace Section. lllllllllllllllllllll Kevin Quin* (D.C. Bar #415268) Jay D. Owen Rebecca Valentine (D.C. Bar #989607) Attorneys for the United States, Defense, Industrials, and Aerospace Section, U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, Telephone: (202) 307–0922, Facsimile: (202) 514–9033, Email: kevin.quin@usdoj.gov. * Lead Attorney to be Noticed. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA United States of America, Plaintiff, v. United Technologies Corporation, and Raytheon Company, Defendants. Civil Action No. 1:20–cv–00824 Judge: Hon. Dabney L. Friedrich Proposed Final Judgment Whereas, Plaintiff, United States of America, filed its Complaint on March 26, 2020, the United States and Defendants, United Technologies Corporation and Raytheon Company, by their respective attorneys, have consented to 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 a party regarding any issue of fact or law; And whereas, Defendants agree to be bound by the provisions of this Final Judgment pending its approval by the Court; And whereas, the essence of this Final Judgment is the prompt and certain divestiture of certain rights or assets by Defendants to assure that competition is not substantially lessened; And whereas, Defendants agree to make certain divestitures for the purpose of remedying the loss of competition alleged in the Complaint; And whereas, Defendants represent that the divestitures and other relief PO 00000 Frm 00007 Fmt 4701 Sfmt 4703 23149 required by this Final Judgment can and will be made and that Defendants will not later raise a claim of hardship or difficulty as grounds for asking the Court to modify any provision of this Final Judgment; 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 The Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 7 of the Clayton Act, as amended (15 U.S.C. 18). II. Definitions As used in this Final Judgment: A. ‘‘Acquirer’’ or ‘‘Acquirers’’ means the entity or entities to whom Defendants divest any of the Divestiture Assets. B. ‘‘Acquirer of the Military Airborne Radios Divestiture Assets’’ means BAE or another entity to whom Defendants divest the Military Airborne Radios Divestiture Assets. C. ‘‘Acquirer of the Military GPS Divestiture Assets’’ means BAE or another entity to whom Defendants divest the GPS Divestiture Assets. D. ‘‘Acquirer of the Optical Systems Divestiture Assets’’ means the entity to whom Defendants divest the Optical Systems Divestiture Assets. E. ‘‘Divestiture Assets’’ means the Military Airborne Radios Divestiture Assets, the Military GPS Divestiture Assets, and the Optical Systems Divestiture Assets. F. ‘‘UTC’’ means Defendant United Technologies Corporation, a Delaware corporation with its headquarters in Farmington, Connecticut, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. G. ‘‘Raytheon’’ means Defendant Raytheon Company, a Delaware corporation with its headquarters in Waltham, Massachusetts, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. H. ‘‘BAE’’ means BAE Systems, Inc., a Delaware corporation with its headquarters in Arlington, Virginia, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 23150 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices ventures, and their directors, officers, managers, agents, and employees. I. ‘‘Military Airborne Radios’’ means radios that enable military aircraft to communicate with other aircraft and with the ground, either as standalone devices or as part of an integrated communication, navigation, and identification suite. ‘‘Military Airborne Radios’’ does not include Cryptographic Modules, identification friend or foe systems, or data links. J. ‘‘Cryptographic Modules’’ means hardware and software for encryption and decryption of radio signals and related application-specific integrated circuits and field-programmable gate arrays for the Military Airborne Radios Business. K. ‘‘Military Airborne Radios Business’’ means the business of the design, development, production, and sale of Military Airborne Radios by Raytheon’s Tactical Communication Systems division. L. ‘‘Military Airborne Radios Divestiture Assets’’ means the Military Airborne Radios Business, including: 1. All of Defendants’ rights, title, and interests in the facilities located at the following addresses: a. 5001 U.S. 30 Highway, Fort Wayne, Indiana 46818 (the ‘‘Fort Wayne Facility’’); b. Office 135 of Building 100 located at the county-owned facility at 7887 Bryan Dairy Road, Largo, Florida 33777; 2. All tangible assets related to or used in connection with the Military Airborne Radios Business, including but not limited to: All manufacturing equipment, quality assurance equipment, research and development equipment, machine assembly equipment, tooling and fixed assets, personal property, inventory, office furniture, materials, supplies, and other tangible property; all licenses, permits, certifications, and authorizations issued by any governmental organization; all contracts, teaming arrangements, agreements, leases, commitments, certifications, and understandings, including supply agreements; all customer lists, contracts, accounts, and credit records; all repair and performance records; and all other records; 3. All intangible assets related to or used in connection with the Military Airborne Radios Business, including but not limited to: All patents; licenses and sublicenses; intellectual property; copyrights; trademarks, trade names, service marks, and service names (excluding any trademarks, trade names, service marks, or service names containing the name ‘‘Raytheon’’); technical information; computer VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 software and related documentation; customer relationships, agreements, and contracts; 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; all manuals and technical information Raytheon provides to its own employees, customers, suppliers, agents, or licensees; and all research data concerning historic and current research and development efforts, including but not limited to designs of experiments and the results of successful and unsuccessful designs and experiments; and 4. At the option of the Acquirer of the Military Airborne Radios Divestiture Assets, a worldwide, non-exclusive, royalty-free, irrevocable, paid-up, perpetual license to any intellectual property related to Cryptographic Modules that is held by Raytheon at the time of the filing of the Complaint in this action, or is developed by Raytheon during the term of the supply contract required by Paragraph IV(H) of this Final Judgment, including any extensions of that term approved by the United States; Provided, however, that the assets specified in Paragraphs II(L)(1)–(4) above, do not include (i) the space leased by Raytheon at 1010 Production Road, Fort Wayne, Indiana 46818; (ii) the space leased by Raytheon in Buildings 100, 400, and 600 at the county-owned facility located at 7887 Bryan Dairy Road, Largo, Florida 33777 (other than Office 135 of Building 100); or (iii) intellectual property solely related to Cryptographic Modules, except as set forth in Paragraph II(L)(4). M. ‘‘Military Airborne Radios Personnel’’ means all full-time, parttime, or contract personnel who are or were, at any time between June 9, 2019 and the date on which the Military Airborne Radios Divestiture Assets are divested, (i) employees of the Military Airborne Radios Business, (ii) employees of Raytheon primarily involved in the design, development, production, and sale of Military Airborne Radios (except for Raytheon employees primarily engaged in human resources, legal, or other general or administrative support functions), or (iii) at the option of the Acquirer of the Military Airborne Radios Divestiture Assets, up to sixteen (16) employees of Raytheon knowledgeable in the design, development, production, and use of Cryptographic Modules, to be selected by the Acquirer of the Military Airborne Radios Divestiture Assets. The United PO 00000 Frm 00008 Fmt 4701 Sfmt 4703 States, in its sole discretion, will resolve any disagreement regarding which employees are Military Airborne Radios Personnel. N. ‘‘Military Airborne Radios Transition Assets’’ means those Military Airborne Radios Divestiture Assets required for Defendants to comply with their obligations under the supply contract required by Paragraph IV(H) of this Final Judgment. O. ‘‘Military GPS Systems’’ means military receivers and anti-jam products for global positioning satellite systems. P. ‘‘Military GPS Business’’ means UTC’s business in the design, development, production, and sale of Military GPS Systems. Q. ‘‘Military GPS Divestiture Assets’’ means the Military GPS Business, including: 1. All tangible assets related to or used in connection with the Military GPS Business, including but not limited to: All manufacturing equipment, quality assurance equipment, research and development equipment, machine assembly equipment, tooling and fixed assets, personal property, inventory, office furniture, materials, supplies, and other tangible property; all licenses, permits, certifications, and authorizations issued by any governmental organization; all contracts, teaming arrangements, agreements, leases, commitments, certifications, and understandings, including supply agreements; all customer lists, contracts, accounts, and credit records; all repair and performance records; and all other records; 2. All intangible assets related to or used in connection with the Military GPS Business, including but not limited to: All patents; licenses and sublicenses; intellectual property; copyrights; trademarks, trade names, service marks, and service names (excluding any trademarks, trade names, service marks, or service names containing the name ‘‘United Technologies,’’ ‘‘Rockwell,’’ ‘‘Collins,’’ ‘‘UTC,’’ or ‘‘UTX’’); technical information; computer software and related documentation; customer relationships, agreements, and contracts; 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; all manuals and technical information UTC provides to its own employees, customers, suppliers, agents, or licensees; and all research data concerning historic and current research E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices and development efforts, including but not limited to designs of experiments and the results of successful and unsuccessful designs and experiments; Provided, however, the assets specified in Paragraphs II(Q)(1)–(2) above do not include (i) the facility located at 855 35th Street NE, Cedar Rapids, Iowa 52498 (the ‘‘Cedar Rapids Facility’’) or (ii) the facility located at 2855 Heartland Drive, Coralville, Iowa 52241 (the ‘‘Coralville Facility’’). R. ‘‘Military GPS Personnel’’ means all full-time, part-time, or contract personnel who are or were, at any time between June 9, 2019 and the date on which the Military GPS Divestiture Assets are divested, (i) employees of the Military GPS Business, or (ii) employees of UTC primarily involved in the design, development, production, and sale of Military GPS Systems (except for UTC employees primarily engaged in human resources, legal, or other general or administrative support functions). The United States, in its sole discretion, will resolve any disagreement regarding which employees are Military GPS Personnel. S. ‘‘Military GPS Transition Assets’’ means those Military GPS Divestiture Assets required for Defendants to comply with their obligations under the supply contract required by Paragraph V(H) of this Final Judgment. T. ‘‘Optical Systems’’ means electrooptical/infrared systems for national security space missions and defense laser warning survivability subsystems. U. ‘‘Optical Systems Business’’ means UTC’s business in the design, development, production, and sale of Optical Systems. V. ‘‘Optical Systems Divestiture Assets’’ means the Optical Systems Business, including: 1. All of Defendants’ rights, title, and interests in the facility located at 100 Wooster Heights, Danbury, Connecticut 06810; 2. All tangible assets related to or used in connection with the Optical Systems Business, including but not limited to: All manufacturing equipment, quality assurance equipment, research and development equipment, machine assembly equipment, tooling and fixed assets, personal property, inventory, office furniture, materials, supplies, and other tangible property; all licenses, permits, certifications, and authorizations issued by any governmental organization; all contracts, teaming arrangements, agreements, leases, commitments, certifications, and understandings, including supply agreements; all customer lists, contracts, accounts, and credit records; all repair and VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 performance records; and all other records; and 3. All intangible assets related to or used in connection with the Optical Systems Business, including but not limited to: All patents; licenses and sublicenses; intellectual property; copyrights; trademarks, trade names, service marks, and service names (excluding any trademarks, trade names, service marks, or service names containing the name ‘‘United Technologies,’’ ‘‘Rockwell,’’ ‘‘Collins,’’ ‘‘UTC,’’ or ‘‘UTX’’); technical information; computer software and related documentation; customer relationships, agreements, and contracts; 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; all manuals and technical information UTC provides to its own employees, customers, suppliers, agents, or licensees; and all research data concerning historic and current research and development efforts, including but not limited to designs of experiments and the results of successful and unsuccessful designs and experiments. W. ‘‘Optical Systems Personnel’’ means all full-time, part-time, or contract personnel who are or were, at any time between June 9, 2019 and the date on which the Optical Systems Divestiture Assets are divested, (i) employees of the Optical Systems Business, or (ii) employees of UTC involved in the design, development, production, and sale of Optical Systems (except for UTC employees primarily engaged in human resources, legal, or other general or administrative support functions). The United States, in its sole discretion, will resolve any disagreement regarding which employees are Optical Systems Personnel. X. ‘‘Transaction Regulatory Approvals’’ means any approvals or clearances pursuant to filings with the Committee on Foreign Investment in the United States (‘‘CFIUS’’) or under antitrust or competition laws required for the Transaction to proceed. Y. ‘‘Military Airborne Radios Divestiture Assets Regulatory Approvals’’ means any approvals or clearances pursuant to filings with CFIUS, or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Military Airborne Radios Divestiture Assets by the Acquirer of the PO 00000 Frm 00009 Fmt 4701 Sfmt 4703 23151 Military Airborne Radios Divestiture Assets. Z. ‘‘Military GPS Divestiture Assets Regulatory Approvals’’ means any approvals or clearances pursuant to filings with CFIUS, or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Military GPS Divestiture Assets by the Acquirer of the Military GPS Divestiture Assets. AA. ‘‘Optical Systems Divestiture Assets Regulatory Approvals’’ means any approvals or clearances pursuant to filings with CFIUS, or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Optical Systems Divestiture Assets by the Acquirer of the Optical Systems Divestiture Assets. BB. The ‘‘Transaction’’ means the proposed merger between UTC and Raytheon. III. Applicability A. This Final Judgment applies to UTC and Raytheon, as defined above, and all other persons, in active concert or participation with any Defendant, who receive actual notice of this Final Judgment. B. If, prior to complying with Section IV, Section V, Section VI, and Section VII of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of lesser business units that include the Divestiture Assets, Defendants must require the purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from Acquirers. IV. Divestiture of the Military Airborne Radios Business A. Defendants are ordered and directed, within the later of forty-five (45) calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, or fifteen (15) calendar days after the Transaction Regulatory Approvals and the Military Airborne Radios Divestiture Assets Regulatory Approvals have been received, to divest the Military Airborne Radios Divestiture Assets in a manner consistent with this Final Judgment to BAE or 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 will notify the Court of any extensions. Defendants agree to use their best efforts to divest the Military Airborne Radios Divestiture E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 23152 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices Assets as expeditiously as possible. Notwithstanding the foregoing, at the option of the Acquirer of the Military Airborne Radios Divestiture Assets, and subject to approval by the United States in its sole discretion, Defendants may, for the sole purpose of fulfilling the supply contract required by Paragraph IV(H) of this Final Judgment, retain the Military Airborne Radios Transition Assets until the earlier of (i) thirty (30) calendar days after the Acquirer of the Military Airborne Radios Divestiture Assets terminates the supply contract required by Paragraph IV(H) of this Final Judgment and requests the transfer of such assets or (ii) thirty (30) calendar days following the expiration of the supply contract required by Paragraph IV(H) of this Final Judgment. B. In the event Defendants are attempting to divest the Military Airborne Radios Divestiture Assets to an Acquirer other than BAE, Defendants promptly must make known, by usual and customary means, the availability of the Military Airborne Radios Divestiture Assets. Defendants must inform any person making an inquiry regarding a possible purchase of the Military Airborne Radios Divestiture Assets that the Military Airborne Radios Divestiture Assets are being divested in accordance with this Final Judgment and must provide that person with a copy of this Final Judgment. Defendants must offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Military Airborne Radios Divestiture Assets customarily provided in a due-diligence process; provided, however, that Defendants need not provide information or documents subject to the attorney-client privilege or workproduct doctrine. Defendants must make this information available to the United States at the same time that the information is made available to any other person. C. Defendants must cooperate with and assist the Acquirer of the Military Airborne Radios Divestiture Assets in identifying and hiring all Military Airborne Radios Personnel, including: 1. Within ten (10) business days following the filing of the Complaint in this matter, Defendants must identify all Military Airborne Radios Personnel to the Acquirer of the Military Airborne Radios Divestiture Assets and the United States, including by providing organization charts covering all Military Airborne Radios Personnel. 2. Within ten (10) business days following receipt of a request by the Acquirer of the Military Airborne Radios Divestiture Assets or the United VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 States, Defendants must provide to the Acquirer of the Military Airborne Radios Divestiture Assets and the United States the following additional information related to Military Airborne Radios Personnel: Name; job title; current salary and benefits including most recent bonus paid, aggregate annual compensation, current target or guaranteed bonus, if any, and any other payments due to or promises made to the employee; descriptions of reporting relationships, past experience, responsibilities, and training and educational histories; lists of all certifications; and all job performance evaluations. If Defendants are barred by any applicable laws from providing any of this information, within ten (10) business days following receipt of the request, Defendants must provide the requested information to the full extent permitted by law and also must provide a written explanation of Defendants’ inability to provide the remaining information. 3. At the request of the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must promptly make Military Airborne Radios Personnel available for private interviews with the Acquirer of the Military Airborne Radios Divestiture Assets during normal business hours at a mutually agreeable location. 4. Defendants must not interfere with any efforts by the Acquirer of the Military Airborne Radios Divestiture Assets to employ any Military Airborne Radios Personnel. Interference includes but is not limited to offering to increase the salary or improve the benefits of Military Airborne Radios Personnel unless the offer is part of a companywide increase in salary or benefits that was announced prior to June 9, 2019 or has been approved by the United States, in its sole discretion. Defendants’ obligations under this paragraph will expire (i) for Military Airborne Radios Personnel whose services are not required for Defendants to perform under the supply contract required by Paragraph IV(H) of this Final Judgment, six (6) months after the divestiture of the Military Airborne Radios Divestiture Assets pursuant to this Final Judgment, and (ii) for Military Airborne Radios Personnel whose services are required for Defendants to perform under the supply contract required by Paragraph IV(H) of this Final Judgment, six (6) months after the expiration of that supply contract. 5. For Military Airborne Radios Personnel who elect employment with the Acquirer of the Military Airborne Radios Divestiture Assets within the periods set forth in Paragraph IV(C)(4), PO 00000 Frm 00010 Fmt 4701 Sfmt 4703 Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that those Military Airborne Radios Personnel otherwise would have been provided had the Military Airborne Radios Personnel continued employment with Defendants, including but not limited to any retention bonuses or payments. Defendants may maintain reasonable restrictions on disclosure by Military Airborne Radios Personnel of Defendants’ proprietary non-public information that is unrelated to Military Airborne Radios Divestiture Assets and not otherwise required to be disclosed by this Final Judgment. 6. For a period of twelve (12) months from the date on which the Military Airborne Radios Divestiture Assets are divested to the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants may not solicit to rehire Military Airborne Radios Personnel who were hired by the Acquirer of the Military Airborne Radios Divestiture Assets within the period set forth in Paragraph IV(C)(4)(i), unless (a) an individual is terminated or laid off by the Acquirer of the Military Airborne Radios Divestiture Assets or (b) the Acquirer of the Military Airborne Radios Divestiture Assets agrees in writing that Defendants may solicit to rehire that individual. Nothing in this paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements. 7. For a period of twelve (12) months following the expiration of the supply contract required by Paragraph IV(H) of this Final Judgment, Defendants may not solicit to rehire Military Airborne Radios Personnel whose services were required for Defendants to perform under that supply contract and who were hired by the Acquirer of the Military Airborne Radios Divestiture Assets within the period set forth in Paragraph IV(C)(4)(ii), unless (a) an individual is terminated or laid off by the Acquirer of the Military Airborne Radios Divestiture Assets or (b) the Acquirer of the Military Airborne Radios Divestiture Assets agrees in writing that Defendants may solicit to rehire that individual. Nothing in this paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements. D. Defendants must permit prospective Acquirers of the Military Airborne Radios Divestiture Assets to have reasonable access to make inspections of the physical facilities and access to all environmental, zoning, and other permit documents and information, and all financial, E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices operational, or other documents and information customarily provided as part of a due diligence process. E. Defendants must warrant to the Acquirer of the Military Airborne Radios Divestiture Assets that each asset to be divested will be fully operational and without material defect on the date of their transfer to the Acquirer of the Military Airborne Radios Divestiture Assets. F. Defendants must not take any action that will impede in any way the permitting, operation, or divestiture of the Military Airborne Radios Divestiture Assets. G. Defendants must make best efforts to assign, subcontract, or otherwise transfer all contracts related to the Military Airborne Radios Divestiture Assets, including all supply and sales contracts, to the Acquirer of the Military Airborne Radios Divestiture Assets. Defendants must not interfere with any negotiations between the Acquirer of the Military Airborne Radios Divestiture Assets and a contracting party. H. At the option of the Acquirer of the Military Airborne Radios Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Military Airborne Radios Divestiture Assets are divested to the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must enter into a supply contract for Military Airborne Radios sufficient to meet the needs of the Military Airborne Radios Business, as determined by the Acquirer of the Military Airborne Radios Divestiture Assets, for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for Military Airborne Radios. The United States, in its sole discretion, may approve one or more extensions of this supply contract, for a total of up to an additional twelve (12) months. If the Acquirer of the Military Airborne Radios Divestiture Assets seeks an extension of the term of this supply contract, Defendants must notify the United States in writing at least three (3) months prior to the date the supply contract expires. The Acquirer of the Military Airborne Radios Divestiture Assets may terminate this supply contract without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with supporting this supply contract must not share any competitively sensitive information of the Acquirer of the Military Airborne Radios Divestiture Assets with any other employee of Defendants. I. At the option of the Acquirer of the Military Airborne Radios Divestiture VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Military Airborne Radios Divestiture Assets are divested to the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must enter into a supply contract for the manufacture of Cryptographic Modules sufficient to meet the needs of the Military Airborne Radios Business, as determined by the Acquirer of the Military Airborne Radios Divestiture Assets, for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for Cryptographic Modules. The United States, in its sole discretion, may approve one or more extensions of this supply contract, for a total of up to an additional twelve (12) months. If the Acquirer of the Military Airborne Radios Divestiture Assets seeks an extension of the term of this supply contract, Defendants must notify the United States in writing at least three (3) months prior to the date the supply contract expires. The Acquirer of the Military Airborne Radios Divestiture Assets may terminate this supply contract without cost or penalty at any time upon commercially reasonable notice. Defendants must maintain any National Security Agency certifications or approvals necessary to supply the products manufactured under the supply contract entered into pursuant to this paragraph. The employee(s) of Defendants tasked with supporting this supply contract must not share any competitively sensitive information of the Acquirer of the Military Airborne Radios Divestiture Assets with any other employee of Defendants. J. At the option of the Acquirer of the Military Airborne Radios Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Military Airborne Radios Divestiture Assets are divested to the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must enter into a contract to provide transition services for back office, human resource, and information technology services and support for the Military Airborne Radios Business for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for the transition services. The United States, in its sole discretion, may approve one or more extensions of this contract for transition services, for a total of up to an additional twelve (12) months. If the Acquirer of the Military Airborne Radios Divestiture Assets seeks an extension of the term of this contract for transition services, Defendants must PO 00000 Frm 00011 Fmt 4701 Sfmt 4703 23153 notify the United States in writing at least three (3) months prior to the date the contract expires. The Acquirer of the Military Airborne Radios Divestiture Assets may terminate a contract for transition services without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with providing these transition services must not share any competitively sensitive information of the Acquirer of the Military Airborne Radios Divestiture Assets with any other employee of Defendants. K. At the option of the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must provide the Acquirer of the Military Airborne Radios Divestiture Assets with complete and sole access to the laboratories located in rooms 01–007V004 and 01– 002V001 in Building C1–SW, 1010 Production Road, Fort Wayne, Indiana 46818, until the Acquirer of the Military Airborne Radios Divestiture Assets receives any necessary certifications for its own laboratory space, for a period not to exceed three (3) months. The United States, in its sole discretion, may approve one or more extensions of this period, for a total of up to an additional three (3) months. If the Acquirer of the Military Airborne Radios Divestiture Assets seeks an extension of this period, Defendants must notify the United States in writing at least thirty (30) days prior to the date this period expires. L. At the option of the Acquirer of the Military Airborne Radios Divestiture Assets, Defendants must provide the Acquirer of the Military Airborne Radios Divestiture Assets with complete and sole access to rooms C1–W–HWL– M, C1–W–Demo, and C1–W–TCS–CR in Building C1–SW, 1010 Production Road, Fort Wayne, Indiana 46818, for three (3) pre-scheduled, 8-hour shifts per room each week, selected by the Acquirer of the Military Airborne Radios Divestiture Assets, until the Acquirer of the Military Airborne Radios Divestiture Assets receives any necessary certifications for its own laboratory space, for a period not to exceed six (6) months. The United States, in its sole discretion, may approve one or more extensions of this period, for a total of up to an additional six (6) months. If the Acquirer of the Military Airborne Radios Divestiture Assets seeks an extension of this period, Defendants must notify the United States in writing at least thirty (30) days prior to the date this period expires. M. Defendants must warrant to the Acquirer of the Military Airborne Radios Divestiture Assets that there are no material defects in the environmental, zoning, or other permits E:\FR\FM\24APN2.SGM 24APN2 23154 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices pertaining to the operation of the Military Airborne Radios Divestiture Assets. Following the sale of the Military Airborne Radios Divestiture Assets, Defendants must not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Military Airborne Radios Divestiture Assets. N. Unless the United States otherwise consents in writing, the divestiture pursuant to Section IV or by a Divestiture Trustee appointed pursuant to Section VII of this Final Judgment must include the entire Military Airborne Radios Divestiture Assets and must be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Military Airborne Radios Divestiture Assets can and will be used by the Acquirer of the Military Airborne Radios Divestiture Assets as part of a viable, ongoing business in the design, development, production, and sale of Military Airborne Radios, and will remedy the competitive harm alleged in the Complaint. The divestiture, whether pursuant to Section IV or Section VII of this Final Judgment: (1) Must 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 the design, development, production, and sale of Military Airborne Radios; and (2) must 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 Defendants give Defendants the ability unreasonably to raise the Acquirer of the Military Airborne Radios Divestiture Assets’ costs, to lower the Acquirer of the Military Airborne Radios Divestiture Assets’ efficiency, or otherwise to interfere in the ability of the Acquirer of the Military Airborne Radios Divestiture Assets to compete effectively. khammond on DSKJM1Z7X2PROD with NOTICES2 P. If any term of an agreement between Defendants and the Acquirer of the Military Airborne Radios Divestiture Assets to effectuate the divestiture required by this Final Judgment varies from a term of this Final Judgment then, to the extent that Defendants cannot fully comply with both, this Final Judgment determines Defendants’ obligations. V. Divestiture of the Military GPS Business A. Defendants are ordered and directed, within the later of forty-five (45) calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, or fifteen (15) calendar days after the Transaction Regulatory Approvals VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 and the Military GPS Divestiture Assets Regulatory Approvals have been received, to divest the Military GPS Divestiture Assets in a manner consistent with this Final Judgment to BAE or 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 will notify the Court of any extensions. Defendants agree to use their best efforts to divest the Military GPS Divestiture Assets as expeditiously as possible. Notwithstanding the foregoing, at the option of the Acquirer of the Military GPS Divestiture Assets, and subject to approval by the United States in its sole discretion, Defendants may retain, for the sole purpose of fulfilling the supply contract required by Paragraph V(H) of this Final Judgment, the Military GPS Transition Assets until the earlier of (i) thirty (30) calendar days after the Acquirer of the Military GPS Divestiture Assets terminates the supply contract required by Paragraph V(H) of this Final Judgment and requests the transfer of such assets or (ii) thirty (30) calendar days following the completion of the supply contract required by Paragraph V(H) of this Final Judgment. B. In the event Defendants are attempting to divest the Military GPS Divestiture Assets to an Acquirer other than BAE, Defendants promptly must make known, by usual and customary means, the availability of the Military GPS Divestiture Assets. Defendants must inform any person making an inquiry regarding a possible purchase of the Military GPS Divestiture Assets that the Military GPS Divestiture Assets are being divested in accordance with this Final Judgment and must provide that person with a copy of this Final Judgment. Defendants must offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Military GPS Divestiture Assets customarily provided in a due-diligence process; provided, however, that Defendants need not provide information or documents subject to the attorney-client privilege or work-product doctrine. Defendants must make this information available to the United States at the same time that the information is made available to any other person. C. Defendants must cooperate with and assist the Acquirer of the Military GPS Divestiture Assets in identifying and hiring all Military GPS Personnel, including: PO 00000 Frm 00012 Fmt 4701 Sfmt 4703 1. Within ten (10) business days following the filing of the Complaint in this matter, Defendants must identify all Military GPS Personnel to the Acquirer of the Military GPS Divestiture Assets and the United States, including by providing organization charts covering all Military GPS Personnel. 2. Within ten (10) business days following receipt of a request by the Acquirer of the Military GPS Divestiture Assets or the United States, Defendants must provide to the Acquirer of the Military GPS Divestiture Assets and the United States the following additional information related to Military GPS Personnel: Name; job title; current salary and benefits including most recent bonus paid, aggregate annual compensation, current target or guaranteed bonus, if any, and any other payments due to or promises made to the employee; descriptions of reporting relationships, past experience, responsibilities, and training and educational histories; lists of all certifications; and all job performance evaluations. If Defendants are barred by any applicable laws from providing any of this information, within ten (10) business days following receipt of the request, Defendants must provide the requested information to the full extent permitted by law and also must provide a written explanation of Defendants’ inability to provide the remaining information. 3. At the request of the Acquirer of the Military GPS Divestiture Assets, Defendants must promptly make Military GPS Personnel available for private interviews with the Acquirer of the Military GPS Divestiture Assets during normal business hours at a mutually agreeable location. 4. Defendants must not interfere with any efforts by the Acquirer of the Military GPS Divestiture Assets to employ any Military GPS Personnel. Interference includes but is not limited to offering to increase the salary or improve the benefits of Military GPS Personnel unless the offer is part of a company-wide increase in salary or benefits that was announced prior to June 9, 2019 or has been approved by the United States, in its sole discretion. Defendants’ obligations under this paragraph will expire (i) for Military GPS Personnel whose services are not required for Defendants to perform under the supply contract required by Paragraph V(H) of this Final Judgment, six (6) months after the divestiture of the Military GPS Divestiture Assets pursuant to this Final Judgment, and (ii) for Military GPS Personnel whose services are required for Defendants to perform under the supply contract E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices required by Paragraph V(H) of this Final Judgment, six (6) months after the expiration of that supply contract. 5. For Military GPS Personnel who elect employment with the Acquirer of the Military GPS Divestiture Assets within the periods set forth in Paragraph V(C)(4), Defendants must waive all noncompete and non-disclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that those Military GPS Personnel otherwise would have been provided had the Military GPS Personnel continued employment with Defendants, including but not limited to any retention bonuses or payments. Defendants may maintain reasonable restrictions on disclosure by Military GPS Personnel of Defendants’ proprietary non-public information that is unrelated to Military GPS Divestiture Assets and not otherwise required to be disclosed by this Final Judgment. 6. For a period of twelve (12) months from the date on which the Military GPS Divestiture Assets are divested to the Acquirer of the Military GPS Divestiture Assets, Defendants may not solicit to rehire Military GPS Personnel who were hired by the Acquirer of the Military GPS Divestiture Assets within the period set forth in Paragraph V(C)(4)(i) unless (a) an individual is terminated or laid off by the Acquirer of the Military GPS Divestiture Assets or (b) the Acquirer of the Military GPS Divestiture Assets agrees in writing that Defendants may solicit to rehire that individual. Nothing in this paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements. 7. For a period of twelve (12) months following the expiration of the supply contract required by Paragraph V(H) of this Final Judgment, Defendants may not solicit to rehire Military GPS Personnel whose services were required for Defendants to perform under that supply contract and who were hired by the Acquirer of the Military GPS Divestiture Assets within the period set forth in Paragraph V(C)(4)(ii) unless (a) an individual is terminated or laid off by the Acquirer of the Military GPS Divestiture Assets or (b) the Acquirer of the Military GPS Divestiture Assets agrees in writing that Defendants may solicit to rehire that individual. Nothing in this paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements. D. Defendants must permit prospective Acquirers of the Military GPS Divestiture Assets to have reasonable access to make inspections of the physical facilities and access to all VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 environmental, zoning, and other permit documents and information, and all financial, operational, or other documents and information customarily provided as part of a due diligence process. E. Defendants must warrant to the Acquirer of the Military GPS Divestiture Assets that each asset to be divested will be fully operational and without material defect on the date of their transfer to the Acquirer of the Military GPS Divestiture Assets. F. Defendants must not take any action that will impede in any way the permitting, operation, or divestiture of the Military GPS Divestiture Assets. G. Defendants must make best efforts to assign, subcontract, or otherwise transfer all contracts related to the Military GPS Divestiture Assets, including all supply and sales contracts, to the Acquirer of the Military GPS Divestiture Assets. Defendants must not interfere with any negotiations between the Acquirer of the Military GPS Divestiture Assets and a contracting party. H. At the option of the Acquirer of the Military GPS Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Military GPS Divestiture Assets are divested to the Acquirer of the Military GPS Divestiture Assets, Defendants must enter into a supply contract for Military GPS Systems sufficient to meet the needs of the Military GPS Business, as determined by the Acquirer of the Military GPS Divestiture Assets, for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for Military GPS Systems. The United States, in its sole discretion, may approve one or more extensions of this supply contract, for a total of up to an additional twelve (12) months. If Acquirer of the Military GPS Divestiture Assets seeks an extension of the term of this supply contract, Defendants must notify the United States in writing at least three (3) months prior to the date the supply contract expires. The Acquirer of the Military GPS Divestiture Assets may terminate this supply contract without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with supporting this supply contract must not share any competitively sensitive information of the Acquirer of the Military GPS Divestiture Assets with any other employee of Defendants. I. At the option of Acquirer of the Military GPS Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the PO 00000 Frm 00013 Fmt 4701 Sfmt 4703 23155 date on which the Military GPS Divestiture Assets are divested to the Acquirer of the Military GPS Divestiture Assets, Defendants must enter into a contract to provide transition services for back office, human resource, and information technology services and support for the Military GPS Business for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for the transition services. The United States, in its sole discretion, may approve one or more extensions of this contract for transition services, for a total of up to an additional twelve (12) months. If the Acquirer of the Military GPS Divestiture Assets seeks an extension of the term of this contract for transition services, Defendants must notify the United States in writing at least three (3) months prior to the date the contract expires. The Acquirer of the Military GPS Divestiture Assets may terminate a contract for transition services without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with providing these transition services must not share any competitively sensitive information of the Acquirer of the Military GPS Divestiture Assets with any other employee of Defendants. J. At the option of the Acquirer of the Military GPS Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Military GPS Divestiture Assets are divested to the Acquirer of the Military GPS Divestiture Assets, Defendants must enter into a lease for the Cedar Rapids Facility for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions. The United States, in its sole discretion, may approve one or more extensions of this lease, for a total of up to an additional six (6) months. If the Acquirer of the Military GPS Divestiture Assets seeks an extension of the term of this lease, Defendants must notify the United States in writing at least three (3) months prior to the date the contract expires. The Acquirer of the Military GPS Divestiture Assets may terminate a lease without cost or penalty at any time upon commercially reasonable notice. K. For a period of six (6) months following the divestiture of the Military GPS Divestiture Assets, Defendants must provide the Acquirer of the Military GPS Divestiture Assets with complete and sole access to Laboratories 43, 44, 44 Room 6, 53B, 53C, 53D, 60A, 60B, 60C, 60D, 60F, and 60G located in the Cedar Rapids Facility and Laboratories 2, 4, 1CD100, 1CB100, and 1C0200 located in the Coralville Facility E:\FR\FM\24APN2.SGM 24APN2 23156 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES2 for two (2) pre-scheduled, 8-hour shifts per laboratory each day, with the Acquirer of the Military GPS Divestiture Assets having first choice among the shifts at each laboratory for three business days per week. After that six (6) month period, until the expiration of the supply contract required by Paragraph V(H) of this Final Judgment, Defendants must provide the Acquirer of the Military GPS Divestiture Assets with unlimited complete and sole access to all the laboratories identified in this Paragraph located in the Cedar Rapids Facility and the Coralville Facility, except that the access to Laboratories 1CB100, 1C0200, and 2 of the Coralville Facility and Laboratories 60A, 60D, and 60G of the Cedar Rapids Facility will continue to be for two (2) pre-scheduled, 8-hour shifts each day, with the Acquirer of the Military GPS Divestiture Assets having first choice among the shifts for three business days per week. L. Defendants must warrant to the Acquirer of the Military GPS Divestiture Assets that there are no material defects in the environmental, zoning, or other permits pertaining to the operation of the Divestiture Assets. Following the sale of the Military GPS Divestiture Assets, Defendants must not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Military GPS Divestiture Assets. M. Unless the United States otherwise consents in writing, the divestiture pursuant to Section V or by a Divestiture Trustee appointed pursuant to Section VII of this Final Judgment must include the entire Military GPS Divestiture Assets and must be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Military GPS Divestiture Assets can and will be used by the Acquirer of the Military GPS Divestiture Assets as part of a viable, ongoing business in the design, development, production, and sale of Military GPS Systems, and will remedy the competitive harm alleged in the Complaint. The divestiture, whether pursuant to Section V or Section VII of this Final Judgment: (1) Must 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 the design, development, production, and sale of Military GPS Systems; and (2) must 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 Defendants give Defendants the ability unreasonably to raise the Acquirer of the Military GPS Divestiture Assets’ costs, VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 to lower the Acquirer of the Military GPS Divestiture Assets’ efficiency, or otherwise to interfere in the ability of the Acquirer of the Military GPS Divestiture Assets to compete effectively. N. If any term of an agreement between Defendants and the Acquirer of the Military GPS Divestiture Assets to effectuate the divestiture required by this Final Judgment varies from a term of this Final Judgment then, to the extent that Defendants cannot fully comply with both, this Final Judgment determines Defendants’ obligations. VI. Divestiture of the Optical Systems Business A. Defendants are ordered and directed, within the later of ninety (90) calendar days after the Court’s entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, or fifteen (15) calendar days after the Transaction Regulatory Approvals and the Optical Systems Divestiture Assets Regulatory Approvals have been received, to divest the Optical Systems Divestiture Assets in a manner consistent with this Final Judgment to an Acquirer acceptable to the United States, in its sole discretion. The United States, in its sole discretion, may agree to one or more extensions of this time period not to exceed sixty (60) calendar days in total and will notify the Court of any extensions. Defendants agree to use their best efforts to divest the Optical Systems Divestiture Assets as expeditiously as possible. B. Defendants promptly must make known, by usual and customary means, the availability of the Optical Systems Divestiture Assets. Defendants must inform any person making an inquiry regarding a possible purchase of the Optical Systems Divestiture Assets that the Optical Systems Divestiture Assets are being divested in accordance with this Final Judgment and must provide that person with a copy of this Final Judgment. Defendants must offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Optical Systems Divestiture Assets customarily provided in a due-diligence process; provided, however, that Defendants need not provide information or documents subject to the attorney-client privilege or work-product doctrine. Defendants must make this information available to the United States at the same time that the information is made available to any other person. C. Defendants must cooperate with and assist the Acquirer of the Optical Systems Divestiture Assets in PO 00000 Frm 00014 Fmt 4701 Sfmt 4703 identifying and hiring all Optical Systems Personnel, including: 1. Within ten (10) business days following receipt of a request by the Acquirer of the Optical Systems Divestiture Assets or the United States, Defendants must identify all Optical Systems Personnel to the Acquirer of the Optical Systems Divestiture Assets and the United States, including by providing organization charts covering all Optical Systems Personnel. 2. Within ten (10) business days following receipt of a request by the Acquirer of the Optical Systems Divestiture Assets or the United States, Defendants must provide to the Acquirer of the Optical Systems Divestiture Assets the information set forth in Paragraph VI(C)(1), and to the Acquirer of the Optical Systems Divestiture Assets and the United States the following additional information related to Optical Systems Personnel: Name; job title; current salary and benefits including most recent bonus paid, aggregate annual compensation, current target or guaranteed bonus, if any, and any other payments due to or promises made to the employee; descriptions of reporting relationships, past experience, responsibilities, and training and educational histories; lists of all certifications; and all job performance evaluations. If Defendants are barred by any applicable laws from providing any of this information, within ten (10) business days following receipt of the request, Defendants must provide the requested information to the full extent permitted by law and also must provide a written explanation of Defendants’ inability to provide the remaining information. 3. At the request of the Acquirer of the Optical Systems Divestiture Assets, Defendants must promptly make Optical Systems Personnel available for private interviews with the Acquirer of the Optical Systems Divestiture Assets during normal business hours at a mutually agreeable location. 4. Defendants must not interfere with any efforts by the Acquirer of the Optical Systems Divestiture Assets to employ any Optical Systems Personnel. Interference includes but is not limited to offering to increase the salary or improve the benefits of Optical Systems Personnel unless the offer is part of a company-wide increase in salary or benefits that was announced prior to June 9, 2019 or has been approved by the United States, in its sole discretion. Defendants’ obligations under this paragraph will expire six (6) months after the divestiture of the Optical Systems Divestiture Assets pursuant to this Final Judgment. E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices 5. For Optical Systems Personnel who elect employment with the Acquirer of the Optical Systems Divestiture Assets within six (6) months of the date on which the Optical Systems Divestiture Assets are divested to the Acquirer of the Optical Systems Divestiture Assets, Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that those Optical Systems Personnel otherwise would have been provided had the Optical Systems Personnel continued employment with Defendants, including but not limited to any retention bonuses or payments. Defendants may maintain reasonable restrictions on disclosure by Optical Systems Personnel of Defendants’ proprietary non-public information that is unrelated to Optical Systems Divestiture Assets and not otherwise required to be disclosed by this Final Judgment. 6. For a period of twelve (12) months from the date on which the Optical Systems Divestiture Assets are divested to the Acquirer of the Optical Systems Divestiture Assets, Defendants may not solicit to rehire Optical Systems Personnel who were hired by the Acquirer of the Optical Systems Divestiture Assets within six (6) months of the date on which the Optical Systems Divestiture Assets are divested to the Acquirer of the Optical Systems Divestiture Assets unless (a) an individual is terminated or laid off by the Acquirer of the Optical Systems Divestiture Assets or (b) the Acquirer of the Optical Systems Divestiture Assets agrees in writing that Defendants may solicit to rehire that individual. Nothing in this paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements. D. Defendants must permit prospective Acquirers of the Optical Systems Divestiture Assets to have reasonable access to make inspections of the physical facilities and access to all environmental, zoning, and other permit documents and information, and all financial, operational, or other documents and information customarily provided as part of a due diligence process. E. Defendants must warrant to the Acquirer of the Optical Systems Divestiture Assets that each asset to be divested will be fully operational and without material defect on the date of sale. F. Defendants must not take any action that will impede in any way the permitting, operation, or divestiture of the Optical Systems Divestiture Assets. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 G. Defendants must make best efforts to assign, subcontract, or otherwise transfer all contracts related to the Optical Systems Divestiture Assets, including all supply and sales contracts, to the Acquirer of the Optical Systems Divestiture Assets. Defendants must not interfere with any negotiations between the Acquirer of the Optical Systems Divestiture Assets and a contracting party. H. At the option of the Acquirer of the Optical Systems Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Optical Systems Divestiture Assets are divested to Acquirer of the Optical Systems Divestiture Assets, Defendants must enter into a supply contract to meet the needs of the Acquirer of the Optical Systems Divestiture Assets for image processing software to support projects of the Optical Systems Business for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for image processing software. The United States, in its sole discretion, may approve one or more extensions of this supply contract, for a total of up to an additional twelve (12) months. If the Acquirer of the Optical Systems Divestiture Assets seeks an extension of the term of this supply contract, Defendants must notify the United States in writing at least three (3) months prior to the date the supply contract expires. The Acquirer of the Optical Systems Divestiture Assets may terminate the supply contract without cost or penalty at any time upon commercially reasonable notice. I. At the option of the Acquirer of the Optical Systems Divestiture Assets, and subject to approval by the United States in its sole discretion, on or before the date on which the Optical Systems Divestiture Assets are divested to the Acquirer of the Optical Systems Divestiture Assets, Defendants must enter into a contract to provide transition services for back office, human resource, and information technology services and support for the Optical Systems Business for a period of up to twelve (12) months on terms and conditions reasonably related to market conditions for the provision of the transition services. The United States, in its sole discretion, may approve one or more extensions of this contract for transition services, for a total of up to an additional six (6) months. If the Acquirer of the Optical Systems Divestiture Assets seeks an extension of the term of this contract for transition services, Defendants must notify the United States in writing at least three (3) PO 00000 Frm 00015 Fmt 4701 Sfmt 4703 23157 months prior to the date the contract expires. The Acquirer of the Optical Systems Divestiture Assets may terminate a contract for transition services without cost or penalty at any time upon commercially reasonable notice. The employee(s) of Defendants tasked with providing these transition services must not share any competitively sensitive information of the Acquirer of the Optical Systems Divestiture Assets with any other employee of Defendants. J. Defendants must warrant to the Acquirer of the Optical Systems Divestiture Assets that there are no material defects in the environmental, zoning, or other permits pertaining to the operation of the Optical Systems Divestiture Assets. Following the sale of the Optical Systems Divestiture Assets, Defendants must not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Optical Systems Divestiture Assets. K. Unless the United States otherwise consents in writing, the divestiture pursuant to Section VI or by a Divestiture Trustee appointed pursuant to Section VII of this Final Judgment must include the entire Optical Systems Divestiture Assets and must be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Optical Systems Divestiture Assets can and will be used by the Acquirer of the Optical Systems Divestiture Assets as part of a viable, ongoing business in the design, development, production, and sale of Optical Systems, and will remedy the competitive harm alleged in the Complaint. The divestiture, whether pursuant to Section VI or Section VII of this Final Judgment: (1) Must 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 the design, development, production, and sale of Optical Systems; and (2) must 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 Defendants give Defendants the ability unreasonably to raise the Acquirer of the Optical Systems Divestiture Assets’ costs, to lower the Acquirer of the Optical Systems Divestiture Assets’ efficiency, or otherwise to interfere in the ability of the Acquirer of the Optical Systems Divestiture Assets to compete effectively. L. If any term of an agreement between Defendants and the Acquirer of the Optical Systems Divestiture Assets to effectuate the divestiture required by this Final Judgment varies from a term E:\FR\FM\24APN2.SGM 24APN2 23158 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES2 of this Final Judgment then, to the extent that Defendants cannot fully comply with both, this Final Judgment determines Defendants’ obligations. VII. Appointment of Divestiture Trustee A. If Defendants have not divested all of the Divestiture Assets within the periods specified in Paragraphs IV(A), V(A) and VI(A), Defendants must immediately notify the United States of that fact in writing. Upon application of the United States, the Court will appoint a Divestiture Trustee selected by the United States and approved by the Court to effect the divestiture(s) of any of the Divestiture Assets that have not been sold during the time periods specified in Paragraphs IV(A), V(A) and VI(A). B. After the appointment of a Divestiture Trustee by the Court, only the Divestiture Trustee will have the right to sell those Divestiture Assets that the Divestiture Trustee has been appointed to sell. The Divestiture Trustee will have the power and authority to accomplish the divestiture(s) to an Acquirer(s) acceptable to the United States, in its sole discretion, at a price and on terms as are then obtainable upon reasonable effort by the Divestiture Trustee, subject to the provisions of Sections IV, V, VI, VII, and VIII of this Final Judgment, and will have other powers as the Court deems appropriate. Subject to Paragraph VII(D) of this Final Judgment, the Divestiture Trustee may hire at the cost and expense of Defendants any agents or consultants, including, but not limited to, investment bankers, attorneys, and accountants, who will be solely accountable to the Divestiture Trustee, reasonably necessary in the Divestiture Trustee’s judgment to assist in the divestiture. Any such agents or consultants will serve on such terms and conditions as the United States approves, including confidentiality requirements and conflict of interest certifications. C. Defendants may not object to a sale by the Divestiture Trustee on any ground other than malfeasance by the Divestiture Trustee. Objections by Defendants 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 VIII. D. The Divestiture Trustee will serve at the cost and expense of Defendants pursuant to a written agreement, on such terms and conditions as the United States approves, including confidentiality requirements and conflict of interest certifications. The VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 Divestiture Trustee will 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 any of its services yet unpaid and those of agents and consultants retained by the Divestiture Trustee, all remaining money will be paid to Defendants and the trust will then be terminated. The compensation of the Divestiture Trustee and any agents or consultants retained by the Divestiture Trustee must be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement that provides the Divestiture Trustee with incentives based on the price and terms of the divestiture and the speed with which it is accomplished, but the timeliness of the divestiture is paramount. If the Divestiture Trustee and Defendants are unable to reach agreement on the Divestiture Trustee’s or any agents’ or consultants’ compensation or other terms and conditions of engagement within fourteen (14) calendar days of the appointment of the Divestiture Trustee, the United States may, in its sole discretion, take appropriate action, including making a recommendation to the Court. Within three (3) business days of hiring any agent or consultant, the Divestiture Trustee must provide written notice of the hiring and rate of compensation to Defendants and the United States. E. Defendants must use their best efforts to assist the Divestiture Trustee in accomplishing the required divestiture(s). The Divestiture Trustee and any agents or consultants retained by the Divestiture Trustee must have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Defendants must provide or develop financial and other information relevant to such business as the Divestiture Trustee may reasonably request, subject to reasonable protection for trade secrets; other confidential research, development, or commercial information; or any applicable privileges. Defendants may not take any action to interfere with or to impede the Divestiture Trustee’s accomplishment of the divestiture(s). F. After appointment, the Divestiture Trustee will file monthly reports with the United States setting forth the Divestiture Trustee’s efforts to accomplish the divestiture(s) ordered by this Final Judgment. Reports must include the name, address, and telephone number of each person who, during the preceding month, made an PO 00000 Frm 00016 Fmt 4701 Sfmt 4703 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 will describe in detail each contact with any such person. The Divestiture Trustee will maintain full records of all efforts made to divest the Divestiture Assets. G. If the Divestiture Trustee has not accomplished the divestiture(s) ordered by this Final Judgment within six months of appointment, the Divestiture Trustee must promptly file with the Court a report setting forth: (1) The Divestiture Trustee’s efforts to accomplish the required divestiture(s); (2) the reasons, in the Divestiture Trustee’s judgment, why the required divestiture(s) 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 will not be filed in the public docket of the Court. The Divestiture Trustee will at the same time furnish such report to the United States, which will have the right to make additional recommendations to the Court consistent with the purpose of the trust. The Court thereafter may enter such orders as it deems appropriate to carry out the purpose of this Final Judgment, which, if necessary, may 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 is not acting diligently or in a reasonably costeffective manner, the United States may recommend that the Court appoint a substitute Divestiture Trustee. VIII. Notice of Proposed Divestiture A. Within two (2) business days following execution of a definitive divestiture agreement, Defendants or the Divestiture Trustee, whichever is then responsible for effecting the divestiture required herein, must notify the United States of a proposed divestiture required by this Final Judgment. If the Divestiture Trustee is responsible for effecting the divestiture, the Divestiture Trustee also must notify Defendants. The notice must 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 this notice, the United States may request E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices from Defendants, the proposed Acquirer(s), other third parties, or the Divestiture Trustee, if applicable, additional information concerning the proposed divestiture, the proposed Acquirer and other prospective Acquirer(s). Defendants and the Divestiture Trustee must furnish the additional information requested within fifteen (15) calendar days of the receipt of the request, unless the United States provides written agreement to a different period. C. Within forty-five (45) 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 Defendants, the proposed Acquirer(s), other third parties, and the Divestiture Trustee, whichever is later, the United States must provide written notice to Defendants and the Divestiture Trustee, if there is one, stating whether or not the United States, in its sole discretion, objects to the proposed Acquirer(s) or any other aspect of the proposed divestiture. If the United States provides written notice that it does not object, the divestiture may be consummated, subject only to Defendants’ limited right to object to the sale under Paragraph VII(C) of this Final Judgment. Absent written notice that the United States does not object or upon objection by the United States, a divestiture may not be consummated. Upon objection by Defendants pursuant to Paragraph VII(C), a divestiture by the Divestiture Trustee may not be consummated unless approved by the Court. D. No information or documents obtained pursuant to Section VIII may 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), for the purpose of evaluating a proposed Acquirer or securing compliance with this Final Judgment, or as otherwise required by law. E. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. 552, the Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 CFR part 16, including the provision on confidential commercial information, at 28 CFR 16.7. Persons submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 CFR 16.7. Designations of confidentiality expire ten years after VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 submission, ‘‘unless the submitter requests and provides justification for a longer designation period.’’ See 28 CFR 16.7(b). F. If at the time a person furnishes information or documents to the United States pursuant to Section VIII, that person represents and identifies in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and 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,’’ the United States must give that person ten calendar days’ notice before divulging the material in any legal proceeding (other than a grand-jury proceeding). IX. Financing Defendants may not finance all or any part of Acquirer’s purchase of all or part of the Divestiture Assets made pursuant to this Final Judgment. X. Asset Preservation and Hold Separate Until the divestiture required by this Final Judgment has been accomplished, Defendants must take all steps necessary to comply with the Asset Preservation and Hold Separate Stipulation and Order entered by the Court. Defendants will take no action that would jeopardize the divestiture ordered by the Court. XI. 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 required by this Final Judgment has been completed, Defendants must deliver to the United States an affidavit, signed by each Defendant’s Chief Financial Officer and General Counsel, describing the fact and manner of Defendants’ compliance with this Final Judgment. Each affidavit must include the name, address, and telephone number of each person who, during the preceding thirty (30) calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, an interest in the Divestiture Assets, and must describe in detail each contact with such persons during that period. Each affidavit also must include a description of the efforts Defendants have taken to solicit buyers for and complete the sale of the Divestiture Assets, and to provide required information to prospective Acquirers. Each affidavit also must include a PO 00000 Frm 00017 Fmt 4701 Sfmt 4703 23159 description of any limitations placed by Defendants on information provided to prospective Acquirers. If the information set forth in the affidavit is true and complete, objection by the United States to information provided by Defendants to prospective Acquirers must be made within fourteen (14) calendar days of receipt of the affidavit. B. Within twenty (20) calendar days of the filing of the Complaint in this matter, Defendants must deliver to the United States an affidavit that describes in reasonable detail all actions Defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with Section X of this Final Judgment. Defendants must deliver to the United States an affidavit describing any changes to the efforts and actions outlined in Defendants’ earlier affidavits filed pursuant to Section XI within fifteen (15) calendar days after the change is implemented. C. Defendants must keep all records of all efforts made to preserve and divest the Divestiture Assets until one year after the divestiture has been completed. XII. Appointment of Monitoring Trustee A. Upon application of the United States, the Court will appoint a Monitoring Trustee selected by the United States and approved by the Court. B. The Monitoring Trustee will have the power and authority to monitor Defendants’ compliance with the terms of this Final Judgment and the Asset Preservation and Hold Separate Stipulation and Order entered by the Court, and will have other powers as the Court deems appropriate. The Monitoring Trustee will be required to investigate and report on Defendants’ compliance with this Final Judgment and the Asset Preservation and Hold Separate Stipulation and Order, and Defendants’ progress toward effectuating the purposes of this Final Judgment, including but not limited to: Defendants’ sale of the Divestiture Assets and Defendants’ compliance with the terms of the transition services agreements, supply contracts, laboratory access arrangements, and short-term leases provided for in this Final Judgment. C. Subject to Paragraph XII(E) of this Final Judgment, the Monitoring Trustee may hire at the cost and expense of Defendants any agents and consultants, including, but not limited to, investment bankers, attorneys, and accountants, who will be solely accountable to the Monitoring Trustee, reasonably necessary in the Monitoring Trustee’s judgment. Any such agents or consultants will serve on such terms E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 23160 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices and conditions as the United States approves, including confidentiality requirements and conflict of interest certifications. D. Defendants may not object to actions taken by the Monitoring Trustee in fulfillment of the Monitoring Trustee’s responsibilities under any Order of the Court on any ground other than malfeasance by the Monitoring Trustee. Objections by Defendants must be conveyed in writing to the United States and the Monitoring Trustee within ten (10) calendar days after the action taken by the Monitoring Trustee giving rise to Defendants’ objection. E. The Monitoring Trustee will serve at the cost and expense of Defendants pursuant to a written agreement with Defendants, on such terms and conditions as the United States approves, including confidentiality requirements and conflict of interest certifications. The compensation of the Monitoring Trustee and any agents or consultants retained by the Monitoring Trustee must be on reasonable and customary terms commensurate with the individuals’ experience and responsibilities. If the Monitoring Trustee and Defendants are unable to reach agreement on the Monitoring Trustee’s or any agents’ or consultants’ compensation or other terms and conditions of engagement within fourteen (14) calendar days of the appointment of the Monitoring Trustee, the United States may, in its sole discretion, take appropriate action, including making a recommendation to the Court. Within three (3) business days of hiring any agents or consultants, the Monitoring Trustee must provide written notice of the hiring and rate of compensation to Defendants and the United States. F. The Monitoring Trustee will have no responsibility or obligation for the operation of Defendants’ businesses. G. Defendants must use their best efforts to assist the Monitoring Trustee in monitoring Defendants’ compliance with their individual obligations under this Final Judgment and under the Asset Preservation and Hold Separate Stipulation and Order. The Monitoring Trustee and any agents or consultants retained by the Monitoring Trustee must have full and complete access to the personnel, books, records, and facilities relating to compliance with this Final Judgment, subject to reasonable protection for trade secrets; other confidential research, development, or commercial information; or any applicable privileges. Defendants may not take any action to interfere with or to impede the Monitoring Trustee’s VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 accomplishment of the Monitoring Trustee’s responsibilities. H. After appointment, the Monitoring Trustee will file reports monthly, or more frequently as needed, with the United States setting forth Defendants’ efforts to comply with Defendants’ obligations under this Final Judgment and under the Asset Preservation and Hold Separate Stipulation and Order. I. The Monitoring Trustee will serve until the divestiture of all the Divestiture Assets is finalized pursuant to this Final Judgment, or until the term of any transition services agreements, supply contracts, laboratory access arrangements, and short-term leases required by this Final Judgment have expired, whichever is later. J. If the United States determines that the Monitoring Trustee is not acting diligently or in a reasonably costeffective manner, the United States may recommend that the Court appoint a substitute Monitoring Trustee. XIII. Compliance Inspection A. For the purposes of determining or securing compliance with this Final Judgment, or of related orders such as an Asset Preservation and Hold Separate Stipulation and Order, or of determining whether this Final Judgment should be modified or vacated, and subject to any legally-recognized privilege, from time to time authorized representatives of the United States, including agents retained by the United States, must, upon written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division and reasonable notice to Defendants, be permitted: (1) Access during Defendants’ office hours to inspect and copy or, at the option of the United States, to require Defendants to provide electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants relating to any matters contained in this Final Judgment; and (2) to interview, either informally or on the record, Defendants’ officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews must be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants. B. Upon the written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, Defendants must submit written reports or respond to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment. C. No information or documents obtained pursuant to Section XIII may be divulged by the United States to any PO 00000 Frm 00018 Fmt 4701 Sfmt 4703 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), for the purpose of securing compliance with this Final Judgment, or as otherwise required by law. D. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. 552, the Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 CFR part 16, including the provision on confidential commercial information, at 28 CFR 16.7. Defendants submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 CFR 16.7. Designations of confidentiality expire ten years after submission, ‘‘unless the submitter requests and provides justification for a longer designation period.’’ See 28 CFR 16.7(b). E. If at the time that Defendants furnish information or documents to the United States pursuant to Section XIII, Defendants represent and identify in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material, ‘‘Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,’’ the United States must give Defendants ten (10) calendar days’ notice before divulging the material in any legal proceeding (other than a grand jury proceeding). XIV. Limitations on Reacquisition Defendants may not reacquire any part of or any interest in the Divestiture Assets during the term of this Final Judgment. XV. Retention of Jurisdiction The Court retains jurisdiction to enable any party to this Final Judgment to apply to the Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and to punish violations of its provisions. XVI. Enforcement of Final Judgment A. The United States retains and reserves all rights to enforce the provisions of this Final Judgment, including the right to seek an order of contempt from the Court. Defendants E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices agree that in a civil contempt action, a motion to show cause, or a similar action brought by the United States regarding an alleged violation of this Final Judgment, the United States may establish a violation of this Final Judgment and the appropriateness of a remedy therefor by a preponderance of the evidence, and Defendants waive any argument that a different standard of proof should apply. B. This Final Judgment should be interpreted to give full effect to the procompetitive purposes of the antitrust laws and to restore the competition the United States alleged was harmed by the challenged conduct. Defendants agree that they may be held in contempt of, and that the Court may enforce, any provision of this Final Judgment that, as interpreted by the Court in light of these procompetitive principles and applying ordinary tools of interpretation, is stated specifically and in reasonable detail, whether or not it is clear and unambiguous on its face. In any such interpretation, the terms of this Final Judgment should not be construed against either party as the drafter. C. In an enforcement proceeding in which the Court finds that Defendants have violated this Final Judgment, the United States may apply to the Court for a one-time extension of this Final Judgment, together with other relief that may be appropriate. In connection with a successful effort by the United States to enforce this Final Judgment against a Defendant, whether litigated or resolved before litigation, that Defendant agrees to reimburse the United States for the fees and expenses of its attorneys, as well as all other costs, including experts’ fees, incurred in connection with that enforcement effort, including in the investigation of the potential violation. D. For a period of four (4) years following the expiration of this Final Judgment, if the United States has evidence that a Defendant violated this Final Judgment before it expired, the United States may file an action against that Defendant in this Court requesting that the Court order: (1) Defendant to comply with the terms of this Final Judgment for an additional term of at least four years following the filing of the enforcement action; (2) all appropriate contempt remedies; (3) additional relief needed to ensure the Defendant complies with the terms of this Final Judgment, and (4) fees or expenses as called for by Section XII. XVII. Expiration of Final Judgment Unless the Court grants an extension, this Final Judgment will expire ten (10) years from the date of its entry, except VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 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 Defendants that the divestitures have been completed and the continuation of this Final Judgment no longer is necessary or in the public interest. 23161 critical inputs for electro-optical/ infrared (‘‘EO/IR’’) reconnaissance satellites, including large space-based optical systems and EO/IR reconnaissance satellite payloads. The United States filed a civil antitrust Complaint on March 26, 2020, seeking to enjoin the proposed merger. The Complaint alleges that the likely XVIII. Public Interest Determination effect of the merger would be to Entry of this Final Judgment is in the substantially lessen competition for the public interest. The parties have design, development, production, and complied with the requirements of the sale of military airborne radios, military Antitrust Procedures and Penalties Act, GPS systems for aviation/maritime 15 U.S.C. 16, including by making applications, military GPS systems for available to the public copies of this ground-based applications, large spaceFinal Judgment, the Competitive Impact based optical systems, and EO/IR Statement, comments thereon, and the reconnaissance satellite payloads in the United States’ responses to comments. United States, in violation of Section 7 Based upon the record before the Court, of the Clayton Act, 15 U.S.C. 18. which includes the Competitive Impact At the same time the Complaint was Statement and any comments and filed, the United States filed an Asset responses to comments filed with the Preservation and Hold Separate Court, entry of this Final Judgment is in Stipulation and Order (‘‘Stipulation and the public interest. Order’’) and proposed Final Judgment, Date: llllllllllllllllll which are designed to address the anticompetitive effects of the [Court approval subject to procedures of Antitrust Procedures and Penalties Act, 15 acquisition. Under the proposed Final U.S.C. 16] Judgment, which is explained more lllllllllllllllllllll fully below, the Defendants are required United States District Judge to divest UTC’s military GPS and optical systems businesses as well as UNITED STATES DISTRICT COURT Raytheon’s military airborne radios FOR THE DISTRICT OF COLUMBIA business. Under the terms of the United States of America, Plaintiff, v. Stipulation and Order, the Defendants United Technologies Corporation, and must take certain steps to ensure that Raytheon Company, Defendants. the military airborne radios, military Case No. 1:20–cv–00824 (DLF) GPS, and optical systems businesses are Judge: Hon. Dabney L. Friedrich operated in such a way as to ensure that the businesses continue to be ongoing, Competitive Impact Statement economically viable, and competitive The United States of America, under business concerns during the pendency Section 2(b) of the Antitrust Procedures of the required divestitures, and that the and Penalties Act, 15 U.S.C. 16(b)–(h) optical systems business is held (the ‘‘APPA’’ or ‘‘Tunney Act’’), files separate from Defendants’ other this Competitive Impact Statement operations during this period. relating to the proposed Final Judgment The United States and the Defendants submitted for entry in this civil antitrust have stipulated that the proposed Final proceeding. Judgment may be entered after I. Nature and Purpose of the Proceeding compliance with the APPA. Entry of the On June 9, 2019, United Technologies proposed Final Judgment will terminate this action, except that the Court will Corporation (‘‘UTC’’) and Raytheon Company (‘‘Raytheon’’) agreed to merge retain jurisdiction to construe, modify, or enforce the provisions of the in a transaction that would create the proposed Final Judgment and to punish nation’s second-largest aerospace and violations thereof. defense contractor. UTC and Raytheon are leading manufacturers of certain II. Description of Events Giving Rise to systems and components used by the the Alleged Violation Department of Defense (‘‘DoD’’) and A. The Defendants and the Proposed U.S. intelligence community. The Transaction companies are the primary suppliers of UTC is a Delaware corporation with radios for use in military aircraft (‘‘military airborne radios’’), and are two its headquarters in Farmington, Connecticut. UTC produces a wide of the leading suppliers of military range of products for the aerospace and global positioning system (‘‘GPS’’) defense industries, including military receivers and anti-jam products airborne radios, military GPS systems, (collectively, ‘‘military GPS systems’’). The companies also have capabilities in and large space-based optical systems. PO 00000 Frm 00019 Fmt 4701 Sfmt 4703 E:\FR\FM\24APN2.SGM 24APN2 23162 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices UTC had sales of approximately $77 billion in 2019. Raytheon is a Delaware corporation with its headquarters in Waltham, Massachusetts. Raytheon is one of the world’s largest defense manufacturers, with significant capabilities in radars and missiles. It also produces military airborne radios, military GPS systems, and payloads for EO/IR reconnaissance satellites. Raytheon had sales of approximately $29 billion in 2019. On June 9, 2019, UTC and Raytheon reached an agreement and plan of merger to combine their operations. B. Military Airborne Radios khammond on DSKJM1Z7X2PROD with NOTICES2 1. Background Military airborne radios allow for secure voice, data, and video communication between aircraft and from aircraft to the ground. This communication occurs either through direct communications links or through a satellite uplink system. Military airborne radios have two main components: Radios (transmitter and receiver) and waveforms (communication protocols and related hardware/software). Specialized elements in both the radios and waveforms protect military airborne radio transmissions from being intercepted and decrypted. There are multiple military airborne radios on every airplane and helicopter used by DoD today, as well as thousands of spares in military depots throughout the world. DoD regularly purchases new military airborne radios as new aircraft are developed and to replace those currently in the field as military airborne radio suppliers develop improved radios with additional features. UTC’s AN/ARC–210 military airborne radio is specified on almost all Air Force and Navy aircraft. Raytheon’s AN/ ARC–231 military airborne radio is specified on almost all Army helicopters. Military airborne radios from UTC and Raytheon are each the closest substitute for the other, and represent the only competitive alternative for a DoD customer in the event that either UTC or Raytheon increases prices for its military airborne radios or otherwise exercises market power. 2. Relevant Markets a. Product Market The quality and usefulness of a military airborne radio is defined by several characteristics, the most important of which are reliability, security, and the ability to access numerous communications networks. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 For instance, DoD requires highly ruggedized radios that can withstand the extreme environments encountered by military aircraft, including the rapid temperature changes and G-forces experienced on fighter jets. To ensure constant contact and to enable the flow of information throughout the battlefield, DoD radios must also communicate with multiple platforms— including aircraft, ships, ground forces, and smart weapons—using various waveforms, and must also keep those communications secure and encrypted to prevent signals from being intercepted by adversaries. As alleged in the Complaint, there are no substitutes for military airborne radios. Radios developed for other military purposes, including ground and ship-based radios, cannot withstand the high G-forces and extreme temperature fluctuations experienced by military aircraft, particularly fighter jets. Furthermore, military airborne radios are smaller and more power-efficient than those designed for ground and ship-based uses. Airborne radios developed for commercial purposes— including commercial aviation—are also not substitutes for military airborne radios. Commercial airborne radios lack the high level of encryption and jamming resistance required for military airborne radios. In addition, while commercial airborne radios can access numerous civil and governmental communications networks, they do not incorporate the waveforms and software algorithms necessary to access the numerous specialized networks used by purchasers of military airborne radios. The Complaint alleges that substitution away from military airborne radios in response to a small but significant and non-transitory increase in price will not be sufficient to render such a price increase unprofitable. Accordingly, the Complaint alleges that the design, development, production, and sale of military airborne radios is a relevant product market and line of commerce within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. b. Geographic Market As alleged in the Complaint, for national security reasons, DoD, which is the only purchaser of these products in the United States, strongly prefers domestic suppliers of military airborne radios. DoD is unlikely to turn to any foreign suppliers in the face of a small but significant and non-transitory price increase by domestic suppliers of military airborne radios. The Complaint therefore alleges that the United States is a relevant geographic market within PO 00000 Frm 00020 Fmt 4701 Sfmt 4703 the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. 3. Anticompetitive Effects of the Proposed Transaction According to the Complaint, UTC and Raytheon today are the leading suppliers of military airborne radios to DoD. The merger would therefore give the merged firm a dominant share of the market for the design, development, production, and sale of military airborne radios, leaving DoD few competitive alternatives for this critical component of military communications. UTC and Raytheon compete in the market for the design, development, production, and sale of military airborne radios on the basis of quality, price, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, and shorter delivery times for military airborne radios. Competition between UTC and Raytheon has also fostered important industry innovation. The combination of UTC and Raytheon would eliminate this competition and its future benefits to DoD customers. Post-acquisition, the merged firm likely would have the incentive and ability to increase prices, offer less favorable contractual terms, and diminish investments in research and development efforts that lead to innovative and high-quality products. The Complaint alleges that the proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of military airborne radios in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 4. Difficulty of Entry According to the Complaint, sufficient timely entry or expansion of additional competitors into the market for the design, development, production, and sale of military airborne radios is unlikely to prevent the harm to competition that is likely to result if the proposed acquisition is consummated. Because UTC’s AN/ARC–210 and Raytheon AN/ARC–231 are established designs that have been produced in high volumes for many years, they are wellunderstood by DoD customers and have significant economies of scale. Any new products manufactured by an alternative supplier would require extensive testing and qualification before they would be acceptable to DoD, and even at the end of that process the new supplier still would not have the reputation of UTC and Raytheon with DoD. Moreover, no potential alternative supplier has the large-scale military airborne radio production facilities of UTC or Raytheon, or the expertise of those firms E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices in developing the complex software algorithms necessary for military airborne radios. Accordingly, entry or expansion would be costly and timeconsuming. The Complaint therefore alleges that entry or expansion of additional competitors into the market for the design, development, production, and sale of military airborne radios would not be timely, likely, or sufficient to defeat the anticompetitive effects likely to result from UTC’s merger with Raytheon. C. Military GPS Systems khammond on DSKJM1Z7X2PROD with NOTICES2 1. Background Military GPS systems allow ground vehicles, ships, and planes to receive and process information regarding their position, navigation, and timing. Military GPS systems guide missiles and projectiles to their intended targets, locate friendly fighters in theaters of war, and enable remote operators to fly unmanned aerial vehicles thousands of miles away. Military GPS systems contain technology that protects them from two forms of enemy interference: ‘‘spoofing,’’ a signal disruption causing a GPS system to calculate a false position, and ‘‘jamming,’’ which occurs when a GPS system’s satellite signals are overpowered. To ensure that spoofing and jamming do not interfere with U.S. military missions, military GPS systems contain encryption modules and anti-jamming technology. In 2011, the U.S. government announced that ‘‘M-Code,’’ a modernized encryption system, would be incorporated into military GPS systems. In September 2012, DoD awarded technology development contracts (and accompanying funds) to UTC, Raytheon, and a third firm to develop M-Code compliant GPS systems that the military could implement quickly. DoD requested two discrete types of GPS systems—one for ground applications and another for aviation/ maritime applications. UTC and Raytheon have been working to develop products for both applications—ground and aviation/maritime—while to date the third firm is under contract only for ground applications. While other defense contractors may eventually develop acceptable military GPS systems for these applications, those contractors are years behind, will not be eligible for funding from the U.S. government, and will not enjoy the incumbents’ advantage held by the three leading suppliers. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 2. Relevant Markets a. Product Markets Military GPS systems for aviation/ maritime applications and military GPS systems for ground applications serve different functions and cannot be substituted for one another. For example, there are different power, performance, and form factor requirements for aviation/maritime GPS systems and ground GPS systems. Customers therefore cannot substitute an aviation/maritime GPS system for a ground GPS system (or vice versa) without sacrificing important functionality. Military GPS systems for both applications are highly customized to suit the needs of military end users. For each military GPS system, DoD specifies the form factor (i.e., the physical size and shape), performance metrics, and encryption standards that must be met. Due to the mission-critical nature of military GPS systems, DoD is far more exacting than commercial customers, and as a result, commercial GPS systems cannot be substituted for military GPS systems for either application. Nor can any alternative technology provide the functionality that a GPS system provides, such as instantaneous position, navigation, and timing information. The Complaint therefore alleges that customers would not switch to a commercial GPS system or to an alternative technology, nor would they switch between military GPS systems for different applications, in the face of a small but significant and nontransitory increase in the price of a military GPS system for aviation/ maritime applications or a military GPS system for ground applications. Accordingly, the Complaint alleges that the design, development, production, and sale of (i) military GPS systems for aviation/maritime applications and (ii) military GPS systems for ground applications are lines of commerce and relevant product markets within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. c. Geographic Market As alleged in the Complaint, for national security reasons, DoD, which is the sole purchaser of these products in the United States, prefers domestic suppliers of military GPS systems. DoD is unlikely to turn to any foreign suppliers in the face of a small but significant and non-transitory price increase by domestic suppliers of military GPS systems. The Complaint therefore alleges that the United States is a relevant geographic market within PO 00000 Frm 00021 Fmt 4701 Sfmt 4703 23163 the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. 3. Anticompetitive Effects of the Proposed Transaction According to the Complaint, UTC and Raytheon are the only suppliers of military GPS systems for aviation/ maritime applications in the United States. The merger therefore would give the combined firm a monopoly in the market for this product and leave DoD without any competitive alternatives. The merger also would create a duopoly in the supply of military GPS systems for ground applications, as UTC and Raytheon are two of only three suppliers of those products. UTC and Raytheon compete to design, develop, produce, and sell military GPS systems for aviation/maritime applications and ground applications on the basis of quality, price, technological capabilities, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, innovation, and shorter delivery times for military GPS systems for both applications. The combination of UTC and Raytheon would eliminate this competition and its future benefits to DoD customers. Post-acquisition, the merged firm likely would compete less along the dimensions of innovation, quality, price, or contractual terms. The Complaint therefore alleges that the proposed acquisition likely would substantially lessen competition in the design, development, production, and sale of military GPS systems for aviation/maritime applications and for ground applications in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 4. Difficulty of Entry According to the Complaint, sufficient, timely entry of additional competitors into the markets for the design, development, production, and sale of military GPS systems for aviation/maritime applications and for ground applications is unlikely to prevent the harm to competition likely to result if the proposed acquisition is consummated. A new entrant would need significant capital to develop prototypes and establish a manufacturing operation. Even with a prototype, an entrant would need a network of government and prime contractor contacts to assist with testing and troubleshooting. Finally, an entrant would need to clear the qualification process to become a supplier to DoD. Together, these steps would take years to complete. Accordingly, entry would be costly and time-consuming. E:\FR\FM\24APN2.SGM 24APN2 23164 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices The Complaint also alleges that timely and sufficient expansion of capabilities by a producer of military GPS systems for ground-based applications is unlikely to prevent the harm to competition in military GPS systems for aviation/maritime applications that is likely to result if the proposed acquisition is consummated. A producer of ground-based military GPS systems would need to ruggedize its product to withstand the high G-forces and temperature extremes experienced by military aircraft. It would also need to match its system to the size, weight, and power restrictions imposed on all aircraft based electronic systems. These modifications would require substantial investments in skilled personnel and modification of production, and the product would require extensive development and subsequent testing by customers. Accordingly, expansion into this different application would be costly and time-consuming. The Complaint alleges that, as result of these barriers, entry into the markets for the design, development, production, and sale of military GPS systems for aviation/maritime applications and military GPS systems for ground applications would not be timely, likely, or sufficient to defeat the anticompetitive effects likely to result from UTC’s merger with Raytheon khammond on DSKJM1Z7X2PROD with NOTICES2 D. EO/IR Reconnaissance Satellites 1. Background Space-based reconnaissance systems provide essential information to endusers in DoD and the intelligence community, including communications intelligence, early warning of missile launches, and near real-time imagery to United States armed forces to support the war on terrorism and other operations. They also provide data essential for managing disaster relief, monitoring global warming, and assessing crop production. Space-based reconnaissance systems generally are deployed on satellites, where they constitute the ‘‘payload,’’ a term for the system that performs the primary mission of the satellite. Payload suppliers are subcontractors to satellite prime contractors, who combine payloads, structural components, power supply systems, ground communications systems, and other components into a complete satellite for delivery to the DoD or intelligence community end-user customer. One important type of reconnaissance satellite payload is an electro-optical/ infrared (‘‘EO/IR’’) payload, which is a camera-based system that collects visible and infrared light. The VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 components of an EO/IR reconnaissance satellite payload are advanced versions of the components found in consumer digital cameras: An optical system—a lens or mirror—focuses light onto an electronic detector, known as a focal plane array (‘‘FPA’’), which converts light to digital images for transmission via radio signals. Optical systems and FPAs are critical inputs in EO/IR reconnaissance satellite payloads. Raytheon has industry-leading capabilities in the provision of FPAs for EO/IR reconnaissance satellite payloads, having been the beneficiary of decades of large investments by government enduser customers. Specifically, Raytheon is the leading provider of FPAs sensitive to visible light and one of the two leading providers of FPAs sensitive to infrared light. Raytheon is also one of multiple firms that supply EO/IR reconnaissance satellite payloads to the satellite prime contractors who assemble the satellite for the DoD or intelligence community customer. UTC is one of only two firms capable of producing large space-based optical systems such as those used in EO/IR reconnaissance satellite payloads. While other suppliers have the capability to produce smaller optical systems for use in space, none can produce optical systems in sizes comparable to those produced by UTC and the other industry leader. The FPAs and large space-based optical system used in a particular EO/ IR reconnaissance satellite payload usually are selected by the payload supplier. In some cases, however, the DoD or intelligence community customer will specify the FPA or large space-based optical system supplier. space-based optical systems. Accordingly, the design, development, production, and sale of large spacebased optical systems is a line of commerce and relevant product market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. 2. Relevant Markets b. Geographic Market As alleged in the Complaint, much of the information regarding EO/IR reconnaissance satellites is highly sensitive, and data concerning the capabilities required in such satellites is released only to a select group of U.S.based manufacturers that possess the necessary security clearances and are subject to close government oversight. For this reason, DoD and intelligence community customers, who are the only customers for these products in the United States, are unlikely to purchase large space-based optical systems or EO/ IR reconnaissance satellite payloads from sources located outside the United States in the event of small but significant and non-transitory price increases by domestic producers of those products. The Complaint therefore alleges that the United States is a relevant geographic market within the meaning a. Product Markets i. Large Space-Based Optical Systems According to the Complaint, large space-based optical systems have specific requirements that distinguish them from other optical systems. Smaller space-based optical systems have insufficient light-gathering and resolving power. Optical systems designed for use on the ground do not possess the high strength, rigidity, low weight, temperature stability, and radiation-hardening that large spacebased optical systems require to be safely and cost-effectively launched into orbit and used in space. The Complaint therefore alleges that customers would not switch to smaller optical systems or optical systems designed for use on the ground in the face of a small but significant and nontransitory increase in the price of large PO 00000 Frm 00022 Fmt 4701 Sfmt 4703 ii. EO/IR Reconnaissance Satellite Payloads According to the Complaint, EO/IR reconnaissance satellite payloads have specific capabilities that distinguish them from other reconnaissance satellite payloads. Other types of payloads such as radar and electronic intelligence payloads do not provide the same type of information as imagery. The Complaint alleges that aerial reconnaissance imagery cannot substitute for the imagery produced by EO/IR reconnaissance satellite payloads. Many parts of the globe that are of critical interest to DoD and the intelligence community are effectively closed to reconnaissance aircraft operated by the United States. Even for areas open to overflight, satellite surveys are quicker and more efficient than aerial reconnaissance. The Complaint alleges that customers will not switch to other types of payloads or to aerial reconnaissance imagery in the event of a small but significant and non-transitory price increase for EO/IR reconnaissance satellite payloads. The Complaint therefore alleges that the design, development, production, and sale of EO/IR reconnaissance satellite payloads therefore is a line of commerce and product market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18. E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices of Section 7 of the Clayton Act, 15 U.S.C. 18. b. EO/IR Reconnaissance Satellite Payloads 3. Anticompetitive Effects of the Proposed Transaction As alleged in the Complaint, by combining Raytheon’s position as a producer of EO/IR reconnaissance satellite payloads with UTC’s position as one of only two companies with the capability to build large space-based optical systems, the merger would also give the combined company the incentive and ability to harm its payload rivals. Because UTC does not produce payloads today, it has a strong incentive to make its optical systems available to all payload builders. Following the merger, this incentive would change, and, particularly in situations where the DoD or intelligence community enduser directed payload providers to use UTC’s large space-based optical systems, the combined company likely would raise prices for UTC’s optical systems to rival payload builders, or simply refuse to provide UTC’s optical systems at any price. As a result, the merged company would be able to charge higher prices for its payload, or provide a payload of lower quality, than would have been possible before the merger. According to the Complaint, Raytheon competes with other EO/IR reconnaissance satellite payload suppliers on the basis of quality, price, and innovation, as well as contractual terms such as delivery times. This competition leads to innovation, higher quality, lower prices, and shorter delivery times. The combination of UTC and Raytheon would give the merged firm the incentive and ability to weaken this competition and its future benefits to DoD and intelligence community end-users, likely resulting in less innovative, more expensive products with lower quality and longer delivery times. The Complaint therefore alleges that the proposed acquisition likely would substantially lessen competition in the design, development, production, and sale of EO/IR reconnaissance satellite payloads in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. khammond on DSKJM1Z7X2PROD with NOTICES2 a. Large Space-Based Optical Systems As alleged in the Complaint, by combining UTC’s capabilities in large space-based optical systems with Raytheon’s dominant position in FPAs, the merger would give the combined company the incentive and ability to reduce competition from UTC’s only large space-based optical systems competitor. Because Raytheon does not build large space-based optical systems today, it has no incentive to demand that a particular optical system supplier be selected by the payload builder. Following the merger, this incentive would change. The combined company likely would refuse to supply payload builders with FPAs, or supply them only at higher cost, if the payload builders do not also agree to purchase UTC’s optical system. With visible-light FPAs, and in situations where the DoD or intelligence community end-user directed payload providers to use Raytheon’s infrared FPAs, the payload provider would have no alternative but to accept UTC’s large space-based optical system, even if it was of lower quality or higher priced than large space-based optical systems available from the other source. As a result, the merged company would be able to charge higher prices for its optical system, or provide a system of lower quality, than would have been possible before the merger. The Complaint alleges that UTC competes to design, develop, produce, and sell large space-based optical systems on the basis of quality, price, and innovation, as well as contractual terms such as delivery times. This competition leads to more innovation, higher quality, lower prices, and shorter delivery times. The combination of UTC and Raytheon would give the merged firm the incentive and ability to weaken this competition and its future benefits to DoD and intelligence community end-users, likely resulting in less innovative, more expensive products with lower quality and longer delivery times. The Complaint alleges that the proposed acquisition, therefore, likely would substantially lessen competition in the design, development, production, and sale of large space-based optical systems in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 4. Difficulty of Entry According to the Complaint, sufficient, timely entry of additional competitors into the markets for the design, development, production, and sale of visible-light or infrared FPAs for EO/IR reconnaissance satellite payloads is unlikely. Production facilities for these FPAs require a substantial investment in both capital equipment and human resources, and a new entrant would largely need to re-create the investment made in Raytheon by the PO 00000 Frm 00023 Fmt 4701 Sfmt 4703 23165 United States government over the course of several decades. A new entrant would need to set up a foundry to produce electronic components, establish production lines capable of manufacturing read-out integrated circuits and other electronic components, and build assembly lines and testing facilities. Engineering and research personnel would need to be assigned to develop, test, and troubleshoot the detailed manufacturing processes, involving hundreds of steps, that are necessary to produce these FPAs. Any new products would require extensive testing and qualification before they could be used in payloads. These steps would require years to complete. The Complaint also alleges that sufficient, timely entry of additional competitors into the market for the design, development, production, and sale of large space-based optical systems is also unlikely. A new entrant would require significant investment in the facilities and skilled personnel required to grind and polish the complex curved surfaces required for large-space based optical systems, and then test these optics in an environment that replicates conditions in space. In addition, because spaceflight is an exceptionally demanding and high-risk endeavor, payload builders, satellite prime contractors, and end-user customers have a strong preference to purchase from established suppliers. Years of dedicated and costly effort would be required for a new entrant to demonstrate expertise comparable to UTC. The Complaint alleges that, as result of these barriers, entry into the markets for the design, development, production, and sale of visible-light and infrared FPAs for EO/IR reconnaissance satellite payloads and large space-based optical systems would not be timely, likely, or sufficient to defeat the anticompetitive effects in the markets for the design, development, production, and sale of large spacebased optical systems and EO/IR reconnaissance satellite payloads likely to result from UTC’s merger with Raytheon. III. Explanation of the Proposed Final Judgment The divestitures required by the proposed Final Judgment will remedy the loss of competition alleged in the Complaint by establishing one or more viable competitors in the design, development, production, and sale of military airborne radios, military GPS systems for aviation/maritime applications, military GPS systems for E:\FR\FM\24APN2.SGM 24APN2 23166 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices ground-based applications, and optical systems in the United States. khammond on DSKJM1Z7X2PROD with NOTICES2 A. Military Airborne Radios Divestiture Paragraph IV(A) of the proposed Final Judgment requires the Defendants, within the later of 45 calendar days after the entry of the Stipulation and Order by the Court or 15 calendar days after all regulatory approvals needed to complete the transaction and divestiture have been received, to divest the Military Airborne Radios Divestiture Assets to BAE Systems, Inc., or an alternative acquirer acceptable to the United States, in its sole discretion. The regulatory approvals are defined in Paragraphs II(X) and II(Y) of the proposed Final Judgment, and include approvals or clearances pursuant to filings with the Committee on Foreign Investment in the United States (‘‘CFIUS’’) or under antitrust or competition laws required for the merger between UTC and Raytheon and approvals or clearances pursuant to filings with CFIUS or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Military Airborne Radios Divestiture Assets. The Military Radios Divestiture Assets are defined as Raytheon’s Military Airborne Radios Business,1 and include two facilities (a manufacturing facility in Fort Wayne, Indiana and an office in Largo, Florida); all tangible and intangible assets related to or used in connection with the Military Airborne Radios Business (except for the Raytheon brand name); and, at the acquirer’s option, a worldwide, nonexclusive, royalty-free, irrevocable, perpetual, and fully-paid up license to any intellectual property related to cryptographic modules that is held by Raytheon at the time of the filing of the Complaint or that is developed by Raytheon during the term of a supply contract for military airborne radios, which is described below. Cryptographic modules are hardware and software for encryption and decryption of radio signals, as defined in Paragraph II(J) of the proposed Final Judgment. As their use is not limited to military airborne radios, they are being retained by Raytheon subject to the license and supply contracts set forth in Paragraphs II(L)(4) and IV(I), respectively, of the proposed Final Judgment. 1 Paragraph II(K) of the proposed Final Judgment defines the ‘‘Military Airborne Radios Business’’ as ‘‘the business of the design, development, production, and sale of Military Airborne Radios by Raytheon’s Tactical Communication Systems division.’’ VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 Paragraph IV(N) of the proposed Final Judgment requires that the Military Airborne Radios Divestiture Assets be divested in such a way as to satisfy the United States in its sole discretion that they can and will be operated by the purchaser as part of a viable, ongoing business that can compete effectively in the design, development, production, and sale of military airborne radios. Defendants must take all reasonable steps necessary to accomplish the divestiture quickly and must cooperate with prospective purchasers. The proposed Final Judgment contains several provisions to facilitate the transition of the Military Airborne Radios Business to the acquirer. First, Paragraphs IV(H) and IV(I) of the proposed Final Judgment require the Defendants, at the acquirer’s option, to enter into supply contracts for military airborne radios and cryptographic modules, respectively, sufficient to meet the needs of the Military Airborne Radios Business for a period of up to twelve months. Upon the acquirer’s request, the United States, in its sole discretion, may approve one or more extensions of either or both supply contracts for up to an additional twelve months. As described in Paragraph IV(A), at the option of the acquirer and subject to approval by the United States in its sole discretion, the Defendants temporarily may retain assets required to fulfill their obligations under the military airborne radios supply contract. These assets must be transferred to the acquirer 30 days after the termination or expiration of the supply contract. Second, Paragraph IV(J) of the proposed Final Judgment requires the Defendants, at the acquirer’s option, to enter into a transition services agreement for back office, human resource, and information technology services and support for the Military Airborne Radios Business for a period of up to twelve months. The paragraph further provides that the United States, in its sole discretion, may approve one or more extensions of this transition services agreement for a total of up to an additional twelve months. Paragraphs IV(H), IV(I), and IV(J) each provide that employees of the Defendants tasked with supporting any of these agreements must not share any competitively sensitive information of the acquirer with any other employee of the Defendants. Finally, Paragraphs IV(K) and IV(L) require the Defendants to provide the acquirer with complete and sole access to certain laboratories at Raytheon’s facilities in Fort Wayne, Indiana. These laboratories will be used to support classified and non-classified military PO 00000 Frm 00024 Fmt 4701 Sfmt 4703 airborne radio development projects while the acquirer transitions these projects to its own laboratories. The acquirer will have access to the laboratories identified in Paragraph IV(K) for a period not to exceed three months, but the United States, in its sole discretion, may approve one or more extensions of this period for a total of up to an additional three months. The acquirer will have access to the laboratories identified in Paragraph IV(L) on a scheduled shift basis for a period not to exceed six months, but the United States, in its sole discretion, may approve one or more extensions of this period for a total of up to an additional six months. The proposed Final Judgment also contains provisions intended to facilitate the acquirer’s efforts to hire employees engaged in the Military Airborne Radios Business. Paragraph IV(C) of the proposed Final Judgment requires the Defendants to provide the acquirer and the United States with organization charts and information relating to these employees and to make them available for interviews, and it provides that the Defendants must not interfere with any negotiations by the acquirer to hire them. In addition, for employees who elect employment with the acquirer, the Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights, and provide all benefits that the employees would generally be provided if transferred to a buyer of an ongoing business. This paragraph further provides that the Defendants may not solicit to rehire any employee engaged in the Military Airborne Radios Business who was hired by the acquirer, unless that individual is terminated or laid off by the acquirer or the acquirer agrees in writing that the Defendants may solicit or hire that individual. The nonsolicitation period runs for 12 months from the date of the divestiture, except that with respect to employees whose services are required for the Defendants to carry out their obligations under the military airborne radios supply contract, the non-solicitation period runs for 12 months from the expiration of that supply contract. B. Military GPS Systems Divestiture Paragraph V(A) of the proposed Final Judgment requires the Defendants, within the later of 45 calendar days after the entry of the Stipulation and Order by the Court or 15 calendar days after all regulatory approvals needed to complete the transaction and divestiture have been received, to divest the Military GPS Divestiture Assets to BAE E:\FR\FM\24APN2.SGM 24APN2 khammond on DSKJM1Z7X2PROD with NOTICES2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices Systems, Inc., or an alternative acquirer acceptable to the United States, in its sole discretion. The regulatory approvals are defined in Paragraphs II(X) and II(Z) of the proposed Final Judgment, and include approvals or clearances pursuant to filings with CFIUS or under antitrust or competition laws required for the merger between UTC and Raytheon and approvals or clearances pursuant to filings with CFIUS or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Military GPS Divestiture Assets. The Military GPS Divestiture Assets are defined as UTC’s Military GPS Systems Business, and include all tangible and intangible assets related to or used in connection with the Military GPS Business (except for UTC’s brand names).2 Because the assets will be transferred to facilities owned by the acquirer, UTC’s facilities are excluded from the divestiture. Paragraph V(J) of the proposed Final Judgment, however, requires the Defendants, at the option of the acquirer, to enter into a lease for UTC’s facility in Cedar Rapids, Iowa for a period of up to twelve months. The United States, in its sole discretion, may approve one or more extensions of this lease, for a total of up to an additional six months. This lease option provides the acquirer with the opportunity to lease UTC’s facility while it prepares a facility of its own. Paragraph V(M) of the proposed Final Judgment requires that the Military GPS Divestiture Assets be divested in such a way as to satisfy the United States in its sole discretion that they can and will be operated by the purchaser as part of a viable, ongoing business that can compete effectively in the design, development, production, and sale of military GPS systems for aviation/maritime applications and military GPS systems for ground-based applications. Defendants must take all reasonable steps necessary to accomplish the divestiture quickly and must cooperate with prospective purchasers. As with the Military Airborne Radios Business, the proposed Final Judgment contains several provisions to facilitate the transition of the Military GPS Business to the acquirer. Paragraphs V(H) and V(I) of the proposed Final Judgment require the Defendants, at the acquirer’s option, to enter into contracts to supply military GPS systems and to provide transition services, under terms and conditions similar to those 2 Paragraph II(P) of the proposed Final Judgment defines the ‘‘Military GPS Business’’ as ‘‘UTC’s business in the design, development, production, and sale of Military GPS Systems.’’ VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 applicable to the contracts described above for the Military Airborne Radios Business. As described in Paragraph V(A), the Defendants temporarily may retain assets required to fulfill their obligations under the supply contract under terms and conditions similar to those applicable to the supply contract for the Military Airborne Radios Business. Paragraph V(K) of the proposed Final Judgment requires the Defendants to provide the acquirer with complete and sole access to certain laboratories at UTC’s facilities in Cedar Rapids, Iowa and Coralville, Iowa during the term of the military GPS systems supply contract. These laboratories will be used to support classified and non-classified military GPS system development projects while the acquirer transitions these projects to its own laboratories. For the first six months, this access will be provided on a scheduled shift basis, and after that period the acquirer will obtain unlimited access to certain of these laboratories and will continue to access the other laboratories on a scheduled shift basis. Paragraph V(C) of the proposed Final Judgment also contains provisions intended to facilitate the acquirer’s efforts to hire employees engaged in the Military GPS Business. These provisions are similar to those applicable to employees of the Military Airborne Radios Business, as described above. C. Optical Systems Divestiture Paragraph VI(A) of the proposed Final Judgment requires the Defendants, within the later of 90 calendar days after the entry of the Stipulation and Order by the Court or 15 calendar days after all regulatory approvals needed to complete the transaction and divestiture have been received, to divest the Optical Systems Divestiture Assets to an acquirer acceptable to the United States, in its sole discretion. The regulatory approvals are defined in Paragraphs II(X) and II(AA) of the proposed Final Judgment, and include approvals or clearances pursuant to filings with CFIUS or under antitrust or competition laws required for the merger between UTC and Raytheon and approvals or clearances pursuant to filings with CFIUS or under antitrust, competition, or other U.S. or international laws or regulations required for the acquisition of the Optical Systems Divestiture Assets. The Optical Systems Divestiture Assets are defined as UTC’s Optical Systems Business, and includes UTC’s facility in Danbury, Connecticut, and all tangible and intangible assets related to or used in connection with the Optical Systems Business (except for UTC’s PO 00000 Frm 00025 Fmt 4701 Sfmt 4703 23167 brand names).3 Paragraph VI(K) of the proposed Final Judgment requires that the Optical Systems Divestiture Assets be divested in such a way as to satisfy the United States in its sole discretion that they can and will be operated by the purchaser as part of a viable, ongoing business that can compete effectively in the design, development, production, and sale of Optical Systems. Defendants must take all reasonable steps necessary to accomplish the divestiture quickly and must cooperate with prospective purchasers. As with the Military Airborne Radios Business and the Military GPS Business, the proposed Final Judgment contains provisions to facilitate the immediate use of the Optical Systems Business by the acquirer. Paragraphs VI(H) and VI(I) of the proposed Final Judgment require the Defendants, at the acquirer’s option, to enter into contracts to supply image processing software and to provide transition services, under terms and conditions similar to those applicable to the contracts described above for the Military Airborne Radios Business and the Military GPS Business. Paragraph VI(C) of the proposed Final Judgment also contains provisions intended to facilitate the acquirer’s efforts to hire employees engaged in the Optical Systems Business, which are similar to those described above for employees of the Military Airborne Radios Business and the Military GPS Business, except that the non-solicitation provision expires 12 months from the date of the divestiture. D. Divestiture Trustee If the Defendants do not accomplish all of the divestitures within the periods prescribed in Sections IV, V, and VI of the proposed Final Judgment, Section VII of the proposed Final Judgment provides that the Court will appoint a divestiture trustee selected by the United States to effect any remaining divestitures. If a divestiture trustee is appointed, the proposed Final Judgment provides that the Defendants will pay all costs and expenses of the trustee. The divestiture 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 any remaining divestitures are accomplished. After the divestiture trustee’s appointment becomes effective, the trustee will provide periodic reports 3 Paragraph II(U) defines the ‘‘Optical Systems Business’’ as ‘‘UTC’s business in the design, development, production, and sale of Optical Systems.’’ Paragraph II(T) defines ‘‘Optical Systems’’ as ‘‘electro-optical/infrared systems for national security space missions and defense laser warning survivability subsystems.’’ E:\FR\FM\24APN2.SGM 24APN2 23168 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices to the United States setting forth his or her efforts to accomplish the remaining divestitures. At the end of six months, if any divestiture remains to be accomplished, the divestiture trustee and the United States will make recommendations to the Court, which will enter such orders as appropriate, in order to carry out the purpose of the trust, including by extending the trust or the term of the divestiture trustee’s appointment. khammond on DSKJM1Z7X2PROD with NOTICES2 E. Monitoring Trustee Section XII of the proposed Final Judgment provides that the United States may apply to the Court for appointment of a monitoring trustee with the power and authority to investigate and report on the Defendants’ compliance with the terms of the proposed Final Judgment and Stipulation and Order, including the sale of the divestiture assets and the implementation of the transition services agreements, supply contracts, laboratory access arrangements, and short-term leases provided for in the proposed Final Judgment. The monitoring trustee will not have any responsibility or obligation for the operation of the Defendants’ businesses. The monitoring trustee will serve at the expense of the Defendants, on such terms and conditions as the United States approves, and Defendants must assist the monitoring trustee in fulfilling its obligations. The monitoring trustee will file monthly reports with the United States and shall serve until all of the divestitures required by the proposed Final Judgment have been accomplished, or until the term of any transition services agreements, supply contracts, laboratory access arrangements, and short-term leases required by the proposed Final Judgment have expired, whichever is later. F. Other Provisions The proposed Final Judgment also contains provisions designed to promote compliance and make the enforcement of the Final Judgment as effective as possible. Paragraph XVI(A) provides that the United States retains and reserves all rights to enforce the provisions of the Final Judgment, including its rights to seek an order of contempt from the Court. Under the terms of this paragraph, the Defendants have agreed that in a civil contempt action, a motion to show cause, or a 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 VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 preponderance of the evidence and that the Defendants have 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 XVI(B) provides additional clarification regarding the interpretation of the provisions of the proposed Final Judgment. The proposed Final Judgment was drafted to restore competition the United States alleged would otherwise be harmed by the transaction. The Defendants agree that they will abide by the proposed Final Judgment, and that they may be held in contempt by the Court for failing to comply with any provision of the proposed Final Judgment that is stated specifically and in reasonable detail, as interpreted in light of this procompetitive purpose. Paragraph XVI(C) of the proposed Final Judgment provides that if the Court finds in an enforcement proceeding that the Defendants have violated the Final Judgment, the United States may apply to the Court for a onetime extension of the Final Judgment, together with such other relief as may be appropriate. In addition, to compensate American taxpayers for any costs associated with investigating and enforcing violations of the Final Judgment, Paragraph XVI(C) provides that in any successful effort by the United States to enforce the Final Judgment against a Defendant, whether litigated or resolved before litigation, that the Defendants will reimburse the United States for attorneys’ fees, experts’ fees, and other costs incurred in connection with any enforcement effort, including the investigation of the potential violation. Paragraph XVI(D) states that the United States may file an action against a Defendant for violating the Final Judgment for up to four years after the Final Judgment has expired or been terminated. This provision is meant to address circumstances such as when evidence that a violation of the Final Judgment occurred during the term of the Final Judgment is not discovered until after the Final Judgment has expired or been terminated or when there is not sufficient time for the United States to complete an investigation of an alleged violation until after the Final Judgment has expired or been terminated. This provision, therefore, makes clear that, for four years after the Final Judgment has expired or been terminated, the United States may still challenge a PO 00000 Frm 00026 Fmt 4701 Sfmt 4703 violation that occurred during the term of the Final Judgment. Finally, Section XVII of the proposed Final Judgment provides that the Final Judgment will expire ten years from the date of its entry, except that after five years from the date of its entry, the Final Judgment may be terminated upon notice by the United States to the Court and the Defendants 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 neither impairs nor assists 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 the Defendants. V. Procedures Available for Modification of the Proposed Final Judgment The United States and the Defendants have stipulated that the proposed Final Judgment may be entered by the Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry upon the Court’s determination that the proposed Final Judgment is in the public interest. The APPA provides a period of at least 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 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 U.S. Department of Justice, which remains free to withdraw its consent to the proposed Final Judgment at any time before the Court’s entry of the Final Judgment. The comments and the response of the United States will be filed with the Court. In addition, comments will be E:\FR\FM\24APN2.SGM 24APN2 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices posted on the U.S. Department of Justice, Antitrust Division’s internet website and, under certain circumstances, published in the Federal Register. Written comments should be submitted to: Katrina Rouse, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. 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 As an alternative to the proposed Final Judgment, the United States considered a full trial on the merits against the Defendants. The United States could have continued the litigation and sought preliminary and permanent injunctions against the merger of UTC and Raytheon. The United States is satisfied, however, that the divestiture of assets described in the proposed Final Judgment will remedy the anticompetitive effects alleged in the Complaint in each of the relevant markets. Thus, the proposed Final Judgment achieves 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. khammond on DSKJM1Z7X2PROD with NOTICES2 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 60-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 VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 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); United States v. U.S. Airways Grp., 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. 08–1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 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’’). As the U.S. 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 in the government’s complaint, whether the proposed Final Judgment is sufficiently clear, whether its enforcement mechanisms are sufficient, and whether it may positively harm third parties. See Microsoft, 56 F.3d at 1458–62. With respect to the adequacy of the relief secured by the proposed Final Judgment, a court may not ‘‘make de novo determination of facts and issues.’’ United States v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also Microsoft, 56 F.3d at 1460–62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Instead, ‘‘[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.’’ W. Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ‘‘The court should bear in mind the flexibility of the public interest inquiry: the court’s function is not to determine whether the resulting array of rights and liabilities is one that will best serve society, but only to confirm that the resulting settlement is within the reaches of the public interest.’’ Microsoft, 56 F.3d at 1460 (quotation marks omitted). More demanding PO 00000 Frm 00027 Fmt 4701 Sfmt 4703 23169 requirements would ‘‘have enormous practical consequences for the government’s ability to negotiate future settlements,’’ contrary to congressional intent. Id. at 1456. ‘‘The Tunney Act was not intended to create a disincentive to the use of the consent decree.’’ Id. The United States’ predictions about the efficacy of the remedy are to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 1461 (recognizing courts should give ‘‘due respect to the Justice Department’s . . . view of the nature of its case’’); United States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152–53 (D.D.C. 2016) (‘‘In evaluating objections to settlement agreements under the Tunney Act, a court must be mindful that [t]he government need not prove that the settlements will perfectly remedy the alleged antitrust harms[;] it need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms.’’) (internal citations omitted); United States v. Republic Servs., Inc., 723 F. Supp. 2d 157, 160 (D.D.C. 2010) (noting ‘‘the deferential review to which the government’s proposed remedy is accorded’’); United States v. ArcherDaniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (‘‘A district court must accord due respect to the government’s prediction as to the effect of proposed remedies, its perception of the market structure, and its view of the nature of the case.’’). The ultimate question is whether ‘‘the remedies [obtained by the Final Judgment are] so inconsonant with the allegations charged as to fall outside of the ‘reaches of the public interest.’ ’’ Microsoft, 56 F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309). 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 U.S. 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 (‘‘[T]he ‘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 E:\FR\FM\24APN2.SGM 24APN2 23170 Federal Register / Vol. 85, No. 80 / Friday, April 24, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES2 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. In its 2004 amendments to the APPA, Congress made clear its intent to preserve the practical benefits of using consent judgments proposed by the United States in antitrust enforcement, Public Law 108–237 § 221, and added 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 U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not required VerDate Sep<11>2014 18:24 Apr 23, 2020 Jkt 250001 to hold an evidentiary hearing or to permit intervenors as part of its review under the Tunney Act). This language explicitly wrote into the statute what Congress intended when it first 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). ‘‘A court can make its public interest determination based on the competitive impact statement and response to public comments alone.’’ U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 F. Supp. 2d at 17). PO 00000 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: April 14, 2020. Respectfully submitted, FOR PLAINTIFF, UNITED STATES OF AMERICA lllllllllllllllllllll Kevin C. Quin (D.C. Bar #415268) * Attorney, United States Department of Justice, Antitrust Division Defense, Industrials, and Aerospace Section, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, (202) 307–0922, kevin.quin@ usdoj.gov. * Lead Attorney to be Noticed. [FR Doc. 2020–08764 Filed 4–23–20; 8:45 am] BILLING CODE 4410–11–P Frm 00028 Fmt 4701 Sfmt 9990 E:\FR\FM\24APN2.SGM 24APN2

Agencies

[Federal Register Volume 85, Number 80 (Friday, April 24, 2020)]
[Notices]
[Pages 23144-23170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08764]



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Vol. 85

Friday,

No. 80

April 24, 2020

Part II





 Department of Justice





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Antitrust Division





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United States v. United Technologies Corporation, et al.; Proposed 
Final Judgment and Competitive Impact Statement; Notice

Federal Register / Vol. 85 , No. 80 / Friday, April 24, 2020 / 
Notices

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. United Technologies Corporation, et al.; 
Proposed Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States of America v. United Technologies Corporation, et al., Civil 
Action No. 1:20-cv-00824. On March 26, 2020, the United States filed a 
Complaint alleging that the proposed merger of United Technologies 
Corporation (``UTC'') and Raytheon Company (``Raytheon'') would violate 
Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final 
Judgment, filed at the same time as the Complaint, requires the 
Defendants to divest the military GPS and optical systems businesses of 
UTC and the military airborne radios business of Raytheon.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at http://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 Katrina Rouse, 
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, 
Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC 
20530 (telephone: 202-307-0924).

Suzanne Morris,
Chief, Premerger and Division Statistics.

United States District Court for the District of Columbia

    United States of America, U.S. Department of Justice, Antitrust 
Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, 
Plaintiff, v. United Technologies Corporation, 10 Farm Springs Road, 
Farmington, CT 06032, and Raytheon Company, 870 Winter Street, 
Waltham, MA 02451, Defendants.

Civil Action No. 1:20-cv-00824

Judge: Hon. Dabney L. Friedrich

Complaint

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

I. Nature of the Action

    1. Pursuant to an agreement and plan of merger dated June 9, 2019, 
UTC and Raytheon propose to merge in a transaction that would create 
the nation's second-largest aerospace and defense contractor. UTC is an 
aerospace company whose core products include engines, aerostructures, 
aircraft subsystems, and other aircraft components. Raytheon is a 
defense company whose core businesses include missiles, air defense 
systems, radars, sensors, and electronic warfare systems. Although the 
core businesses of UTC and Raytheon are different, they overlap in the 
supply of multiple products to the Department of Defense (``DoD'') and 
U.S. intelligence community.
    2. UTC and Raytheon are the primary suppliers of radios for use in 
military aircraft (``military airborne radios'') operated by DoD. UTC's 
AN/ARC-210 is the standard radio for Air Force and Navy aircraft, and 
Raytheon's AN/ARC-231 is the standard radio for Army helicopters. As 
the only military airborne radios that have been supplied to DoD 
customers for years, the parties' products represent the two 
competitive alternatives to DoD customers, and the sole constraint on 
either company exercising market power. The proposed merger would 
eliminate competition between UTC and Raytheon for military airborne 
radios, likely resulting in higher prices, lower quality, and 
diminished innovation for these critical defense products.
    3. UTC and Raytheon are two of the leading suppliers of military 
global positioning system (``GPS'') receivers and anti-jam products 
(collectively, ``military GPS systems'') to DoD. To enhance security, 
in 2012, DoD began the process of developing a new generation of 
military GPS systems for aviation/maritime and ground-based 
applications. UTC and Raytheon are likely to be the only competitors 
for military GPS systems for aviation/maritime applications, and two of 
only three competitors for military GPS systems for ground-based 
applications. The proposed merger would eliminate competition between 
UTC and Raytheon for military GPS systems for these applications, 
likely resulting in higher prices, lower quality, and diminished 
innovation for these critical defense products.
    4. The merger also would substantially lessen competition through 
the vertical integration of the two companies. UTC and Raytheon each 
have capabilities in critical inputs for electro-optical/infrared 
(``EO/IR'') reconnaissance satellites, which provide images for DoD and 
U.S. intelligence community customers. Specifically, Raytheon has a 
dominant position in electronic detectors known as focal plane arrays 
(``FPAs''), and is one of several builders of EO/IR satellite payloads. 
The payload is the system that performs the reconnaissance mission of a 
satellite, and includes components such as FPAs. UTC is one of only two 
companies with the capability to build large space-based optical 
systems for EO/IR satellite payloads. Today, Raytheon has no incentive 
to favor one optical systems provider over the other when it sells its 
FPAs to EO/IR payload builders, and UTC has no incentive to favor one 
EO/IR payload builder over another when it sells its optical systems.
    5. The combination of UTC and Raytheon will bring these EO/IR 
reconnaissance satellite components under control of a single company 
and provide it with the incentive and ability to harm competition in 
two ways. First, the merger would provide the combined company with the 
incentive and ability to refuse to supply EO/IR payload builders with 
FPAs, or supply them only at higher cost, if the payload builders did 
not also agree to purchase UTC's optical system. Second, the merger 
would give the combined company the incentive and ability to harm 
Raytheon's satellite payload builder rivals by raising the prices for 
UTC's optical systems, or denying them access to these systems 
altogether. The proposed merger therefore likely would result in higher 
prices, lower quality, and diminished innovation for large space-based 
optical systems and EO/IR reconnaissance satellite payloads.
    6. As a result, the proposed acquisition likely would substantially 
lessen competition in the markets for the design, development, 
production, and sale of military airborne radios, military GPS systems 
for aviation/maritime applications, military GPS systems for ground-
based applications, large space-based optical systems, and EO/IR 
reconnaissance satellite payloads in the United States in violation of

[[Page 23145]]

Section 7 of the Clayton Act, 15 U.S.C. 18.

II. The Defendants

    7. UTC is a Delaware corporation with its headquarters in 
Farmington, Connecticut. UTC produces a wide range of products for the 
aerospace and defense industries, including military airborne radios, 
military GPS systems, and large space-based optical systems. UTC had 
sales of approximately $77 billion in 2019.
    8. Raytheon is a Delaware corporation with its headquarters in 
Waltham, Massachusetts. Raytheon is one of the world's largest defense 
manufacturers, with significant capabilities in radars and missiles. It 
also produces military airborne radios, military GPS systems, and FPAs 
and payloads for EO/IR reconnaissance satellites. Raytheon had sales of 
approximately $29 billion in 2019.

III. Jurisdiction and Venue

    9. The United States brings this action under Section 15 of the 
Clayton Act, 15 U.S.C. 25, as amended, to prevent and restrain 
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    10. Defendants develop, manufacture, and sell military airborne 
radios, military GPS systems, large space-based optical systems, and 
EO/IR reconnaissance satellite payloads throughout the United States, 
and their activities in these areas substantially affect interstate 
commerce. This Court therefore has subject matter jurisdiction over 
this action pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, 
and 28 U.S.C. 1331, 1337(a), and 1345.
    11. Defendants have consented to venue and personal jurisdiction in 
this judicial district. Venue is therefore proper in this district 
under Section 12 of the Clayton Act, 15 U.S.C. 22 and under 28 U.S.C. 
1391(c).

IV. Military Airborne Radios

A. Background

    12. Military airborne radios allow for secure voice, data, and 
video communication between aircraft and from aircraft to the ground. 
This communication occurs either through direct communications links or 
through a satellite uplink system. Military airborne radios have two 
main components: Radios (transmitter and receiver) and waveforms 
(communication protocols and related hardware/software). Specialized 
elements in both the radios and waveforms protect military airborne 
radio transmissions from being intercepted and decrypted.
    13. There are multiple military airborne radios on every airplane 
and helicopter used by DoD today, as well as thousands of spares in 
military depots throughout the world. DoD regularly purchases new 
military airborne radios as new aircraft are developed and to replace 
those currently in the field as military airborne radio suppliers 
develop improved radios with additional waveforms and other features.
    14. UTC's AN/ARC-210 military airborne radio is specified on almost 
all Air Force and Navy aircraft. Raytheon's AN/ARC-231 military 
airborne radio is specified on almost all Army helicopters. Military 
airborne radios from UTC and Raytheon are each the closest substitute 
for the other, and represent the only competitive alternative for a DoD 
customer in the event that either UTC or Raytheon increases prices for 
its military airborne radios or otherwise exercises market power.

B. Relevant Markets

1. Product Market
    15. The quality and usefulness of a military airborne radio is 
defined by several characteristics, the most important of which are 
reliability, security, and the ability to access numerous 
communications networks. For instance, DoD requires highly ruggedized 
radios that can withstand the extreme environments encountered by 
military aircraft, including the rapid temperature changes and G-forces 
experienced on fighter jets. To ensure constant contact and to enable 
the flow of information throughout the battlefield, DoD radios must 
also communicate with multiple platforms--including aircraft, ships, 
ground forces, and smart weapons--using various waveforms, and must 
also keep those communications secure and encrypted to prevent signals 
from being intercepted by adversaries.
    16. Other communications technologies are not substitutes for 
military airborne radios. Radios developed for other military purposes, 
including ground and ship-based radios, cannot withstand the high G-
forces and extreme temperature fluctuations experienced by military 
aircraft, particularly fighter jets. Furthermore, military airborne 
radios are smaller and more power-efficient than those designed for 
ground and ship-based uses.
    17. Airborne radios developed for commercial purposes--including 
commercial aviation--are also not substitutes for military airborne 
radios. Commercial airborne radios lack the high level of encryption 
and jamming resistance required for military airborne radios. In 
addition, while commercial airborne radios can access numerous civil 
and governmental communications networks, they do not incorporate the 
waveforms and software algorithms necessary to access the numerous 
specialized networks used by purchasers of military airborne radios.
    18. For the foregoing reasons, substitution away from military 
airborne radios in response to a small but significant and non-
transitory increase in price will not be sufficient to render such a 
price increase unprofitable. Accordingly, the design, development, 
production, and sale of military airborne radios is a relevant product 
market and line of commerce under Section 7 of the Clayton Act, 15 
U.S.C. 18.
2. Geographic Market
    19. For national security reasons, DoD, which is the only purchaser 
of these products in the United States, strongly prefers domestic 
suppliers of military airborne radios. DoD is unlikely to turn to any 
foreign suppliers in the face of a small but significant and non-
transitory price increase by domestic suppliers of military airborne 
radios.
    20. The United States is therefore a relevant geographic market 
within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.

C. Anticompetitive Effects of the Proposed Transaction

    21. UTC and Raytheon today are the leading suppliers of military 
airborne radios to DoD. The merger would therefore give the merged firm 
a dominant share of the market for the design, development, production, 
and sale of military airborne radios, leaving DoD few competitive 
alternatives for this critical component of military communications.
    22. UTC and Raytheon compete in the market for the design, 
development, production, and sale of military airborne radios on the 
basis of quality, price, and contractual terms such as delivery times. 
This competition has resulted in higher quality, lower prices, and 
shorter delivery times for military airborne radios. Competition 
between UTC and Raytheon has also fostered important industry 
innovation. The combination of UTC and Raytheon would eliminate this 
competition and its future benefits to DoD customers. Post-acquisition, 
the merged firm likely would have the incentive and ability to increase 
prices, offer less favorable contractual terms, and diminish 
investments in research

[[Page 23146]]

and development efforts that lead to innovative and high-quality 
products.
    23. The proposed acquisition, therefore, likely would substantially 
lessen competition in the design, development, production, and sale of 
military airborne radios in the United States in violation of Section 7 
of the Clayton Act, 15 U.S.C. 18.

D. Difficulty of Entry

    24. Sufficient timely entry or expansion of additional competitors 
into the market for the design, development, production, and sale of 
military airborne radios is unlikely to prevent the harm to competition 
that is likely to result if the proposed acquisition is consummated. 
Because UTC's AN/ARC-210 and Raytheon AN/ARC-231 are established 
designs produced in high volumes for many years, they are well-
understood by DoD customers and have significant economies of scale. 
Any new products manufactured by an alternative supplier would require 
extensive testing and qualification before they would be acceptable to 
DoD, and even at the end of that process the new supplier still would 
not have the reputation of UTC and Raytheon with DoD. Moreover, no 
potential alternative supplier has the large-scale military airborne 
radio production facilities of UTC or Raytheon, or the expertise of 
those firms in developing the complex software algorithms necessary for 
military airborne radios. Accordingly, entry or expansion would be 
costly and time-consuming.
    25. As result of these barriers, entry or expansion of additional 
competitors into the market for the design, development, production, 
and sale of military airborne radios would not be timely, likely, or 
sufficient to defeat the anticompetitive effects likely to result from 
UTC's merger with Raytheon.

V. Military GPS Systems

A. Background

    26. Military GPS systems allow ground vehicles, ships, and planes 
to receive and process information regarding their position, 
navigation, and timing. Military GPS systems guide missiles and 
projectiles to their intended targets, locate friendly fighters in 
theaters of war, and enable remote operators to fly unmanned aerial 
vehicles thousands of miles away.
    27. Military GPS systems contain technology that protects them from 
two forms of enemy interference: ``Spoofing,'' a signal disruption 
causing a GPS system to calculate a false position, and ``jamming,'' 
which occurs when a GPS system's satellite signals are overpowered. To 
ensure that spoofing and jamming do not interfere with U.S. military 
missions, military GPS systems contain encryption modules and anti-
jamming technology.
    28. In 2011, the U.S. government announced that ``M-Code,'' a 
modernized encryption system, would be incorporated into military GPS 
systems. In September 2012, DoD awarded technology development 
contracts (and accompanying funds) to UTC, Raytheon, and a third firm 
to develop M-Code compliant GPS systems that the military could 
implement quickly. DoD requested two discrete types of GPS systems--one 
for ground applications and another for aviation/maritime applications. 
UTC and Raytheon have been working to develop products for both 
applications--ground and aviation/maritime--while to date the third 
firm is under contract only for ground applications.
    29. While other defense contractors may eventually develop 
acceptable military GPS systems for these applications, those 
contractors are years behind, will not be eligible for funding from the 
U.S. government, and will not enjoy the incumbent's advantage held by 
the three leading suppliers.

B. Relevant Markets

1. Product Markets
    30. Military GPS systems for aviation/maritime applications and 
military GPS systems for ground applications serve different functions 
and cannot be substituted for one another. For example, there are 
different power, performance, and form factor requirements for 
aviation/maritime GPS systems and ground GPS systems. Customers 
therefore cannot substitute an aviation/maritime GPS system for a 
ground GPS system (or vice versa) without sacrificing important 
functionality.
    31. Military GPS systems for both applications are highly 
customized to suit the needs of military end users. With each 
competition, DoD specifies the form factor (i.e., the physical size and 
shape), performance metrics, and encryption standards that must be met. 
Due to the mission-critical nature of military GPS systems, DoD is far 
more exacting than commercial customers, and as a result, commercial 
GPS systems cannot be substituted for military GPS systems for either 
application. Nor can any alternative technology provide the 
functionality that a GPS system provides, such as instantaneous 
position, navigation, and timing information.
    32. For the foregoing reasons, customers would not switch to a 
commercial GPS system or to an alternative technology, nor would they 
switch between military GPS systems for different applications, in the 
face of a small but significant and non-transitory increase in the 
price of a military GPS system for aviation/maritime applications or a 
military GPS system for ground applications. Accordingly, the design, 
development, production, and sale of (i) military GPS systems for 
aviation/maritime applications and (ii) military GPS systems for ground 
applications are lines of commerce and relevant product markets within 
the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.
2. Geographic Market
    33. For national security reasons, DoD, which is the sole purchaser 
of these products within the United States, prefers domestic suppliers 
of military GPS systems. DoD is unlikely to turn to any foreign 
suppliers in the face of a small but significant and non-transitory 
price increase by domestic suppliers of military GPS systems.
    34. The United States is therefore a relevant geographic market 
within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.

C. Anticompetitive Effects of the Proposed Transaction

    35. UTC and Raytheon are the only suppliers of military GPS systems 
for aviation/maritime applications in the United States. The merger 
therefore would give the combined firm a monopoly in the market for 
this product and leave DoD without any competitive alternatives. The 
merger also would create a duopoly in the supply of military GPS 
systems for ground applications, as UTC and Raytheon are two of only 
three suppliers of those products.
    36. UTC and Raytheon compete to design, develop, produce, and sell 
military GPS systems for aviation/maritime applications and ground 
applications on the basis of quality, price, technological 
capabilities, and contractual terms such as delivery times. This 
competition has resulted in higher quality, lower prices, innovation, 
and shorter delivery times for military GPS systems for both 
applications. The combination of UTC and Raytheon would eliminate this 
competition and its future benefits to DoD customers. Post-acquisition, 
the merged firm likely would compete less along the dimensions of 
innovation, quality, price, or contractual terms.

[[Page 23147]]

    37. The proposed acquisition, therefore, likely would substantially 
lessen competition in the design, development, production, and sale of 
military GPS systems for aviation/maritime applications and for ground 
applications in the United States in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.

D. Difficulty of Entry

    38. Sufficient, timely entry of additional competitors into the 
markets for the design, development, production, and sale of military 
GPS systems for aviation/maritime applications and for ground 
applications is unlikely to prevent the harm to competition likely to 
result if the proposed acquisition is consummated. A new entrant would 
need significant capital to develop prototypes and establish a 
manufacturing operation. Even with a prototype, an entrant would need a 
network of government and prime contractor contacts to assist with 
testing and troubleshooting. Finally, an entrant would need to clear 
the qualification process to become a supplier to DoD. Together, these 
steps would take years to complete. Accordingly, entry would be costly 
and time-consuming.
    39. Timely and sufficient expansion of capabilities by a producer 
of military GPS systems for ground-based applications is also unlikely 
to prevent the harm to competition in military GPS systems for 
aviation/maritime applications that is likely to result if the proposed 
acquisition is consummated. A producer of ground-based military GPS 
systems would need to ruggedize its product to withstand the high G-
forces and temperature extremes experienced by military aircraft. It 
would also need to match its system to the size, weight, and power 
restrictions imposed on all aircraft based electronic systems. These 
modifications would require substantial investments in skilled 
personnel and modification of production, and the product would require 
extensive development and subsequent testing by customers. Accordingly, 
expansion into this different application would be costly and time-
consuming.
    40. As result of these barriers, entry into the markets for the 
design, development, production, and sale of military GPS systems for 
aviation/maritime applications and military GPS systems for ground 
applications would not be timely, likely, or sufficient to defeat the 
anticompetitive effects likely to result from UTC's merger with 
Raytheon.

VI. EO/IR Reconnaissance Satellites

A. Background

    41. Space-based reconnaissance systems provide essential 
information to end-users in DoD and the intelligence community, 
including communications intelligence, early warning of missile 
launches, and near real-time imagery to United States armed forces to 
support the war on terrorism and other operations. They also provide 
data essential for managing disaster relief, monitoring global warming, 
and assessing crop production.
    42. Space-based reconnaissance systems generally are deployed on 
satellites, where they constitute the ``payload,'' a term for the 
system that performs the primary mission of the satellite. Payload 
suppliers are subcontractors to satellite prime contractors, who 
combine payloads, structural components, power supply systems, ground 
communications systems, and other components into a complete satellite 
for delivery to the DoD or intelligence community end-user customer.
    43. One important type of reconnaissance satellite payload is an 
electro-optical/infrared (``EO/IR'') payload, which is a camera-based 
system that collects visible and infrared light. The components of an 
EO/IR reconnaissance satellite payload are advanced versions of the 
components found in consumer digital cameras: An optical system--a lens 
or mirror--focuses light onto an electronic detector, known as a focal 
plane array (``FPA''), which converts light to digital images for 
transmission via radio signals. Optical systems and FPAs are critical 
inputs in EO/IR reconnaissance satellite payloads.
    44. Raytheon has industry-leading capabilities in the provision of 
FPAs for EO/IR reconnaissance satellite payloads, having been the 
beneficiary of decades of large investments by government end-user 
customers. Specifically, Raytheon is the leading provider of FPAs 
sensitive to visible light and one of the two leading providers of FPAs 
sensitive to infrared light. Raytheon is also one of multiple firms 
that supply EO/IR reconnaissance satellite payloads to the satellite 
prime contractors who assemble the satellite for the DoD or 
intelligence community customer.
    45. UTC is one of only two firms capable of producing large space-
based optical systems such as those used in EO/IR reconnaissance 
satellite payloads. While other suppliers have the capability to 
produce smaller optical systems for use in space, none can produce 
optical systems in sizes comparable to those produced by UTC and the 
other industry leader.
    46. The FPAs and large space-based optical system used in a 
particular EO/IR reconnaissance satellite payload usually are selected 
by the payload supplier. In some cases, however, the DoD or 
intelligence community customer will specify the FPA or large space-
based optical system supplier. As explained below, the combination of 
UTC's market-leading position in large-space based optical systems and 
Raytheon's market-leading position in FPAs will provide the merged firm 
with the ability and incentive to foreclose or otherwise harm its 
rivals in large space-based optical systems and EO/IR reconnaissance 
satellite payloads.

B. Relevant Markets

1. Product Markets
a. Large Space-Based Optical Systems
    47. Large space-based optical systems have specific requirements 
that distinguish them from other optical systems. Smaller space-based 
optical systems have insufficient light-gathering and resolving power. 
Optical systems designed for use on the ground do not possess the high 
strength, rigidity, low weight, temperature stability, and radiation-
hardening that large space-based optical systems require to be safely 
and cost-effectively launched into orbit and used in space.
    48. Customers would not switch to smaller optical systems or 
optical systems designed for use on the ground in the face of a small 
but significant and non-transitory increase in the price of large 
space-based optical systems. Accordingly, the design, development, 
production, and sale of large space-based optical systems is a line of 
commerce and relevant product market within the meaning of Section 7 of 
the Clayton Act, 15 U.S.C. 18.
b. EO/IR Reconnaissance Satellite Payloads
    49. EO/IR reconnaissance satellite payloads have specific 
capabilities that distinguish them from other reconnaissance satellite 
payloads. Other types of payloads such as radar and electronic 
intelligence payloads do not provide the same type of information as 
imagery.
    50. Aerial reconnaissance imagery cannot substitute for the imagery 
produced by EO/IR reconnaissance satellite payloads. Many parts of the 
globe that are of critical interest to DoD and the intelligence 
community are effectively closed to reconnaissance aircraft operated by 
the United States. Even for areas open to overflight,

[[Page 23148]]

satellite surveys are quicker and more efficient than aerial 
reconnaissance.
    51. Consequently, customers will not switch to other types of 
payloads or to aerial reconnaissance imagery in the event of a small 
but significant and non-transitory price increase for EO/IR 
reconnaissance satellite payloads. The design, development, production, 
and sale of EO/IR reconnaissance satellite payloads therefore is a line 
of commerce and product market within the meaning of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
2. Geographic Market
    52. Much of the information regarding EO/IR reconnaissance 
satellites is highly sensitive, and data concerning the capabilities 
required in such satellites is released only to a select group of U.S.-
based manufacturers that possess the necessary security clearances and 
are subject to close government oversight. For this reason, DoD and 
intelligence community customers, who are the only customers for these 
products in the United States, are unlikely to purchase large space-
based optical systems or EO/IR reconnaissance satellite payloads from 
sources located outside the United States in the event of small but 
significant and non-transitory price increases by domestic producers of 
those products.
    53. The United States is therefore a relevant geographic market 
within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.

C. Anticompetitive Effects of the Proposed Transaction

    54. As discussed below, the vertical integration of Raytheon and 
UTC will change the merged firm's incentives to sell FPAs and large 
space-based optical systems and enable the merged firm to use its 
significant market position in these products to harm its large space-
based optical systems and EO/IR satellite payload competitors.
1. Large Space-Based Optical Systems
    55. First, by combining UTC's capabilities in large space-based 
optical systems with Raytheon's dominant position in FPAs, the merger 
would give the combined company the incentive and ability to reduce 
competition from UTC's only large space-based optical systems 
competitor. Because Raytheon does not build large space-based optical 
systems today, it has no incentive to demand that a particular optical 
system supplier be selected by the payload builder. Following the 
merger, this incentive would change. The combined company likely would 
refuse to supply payload builders with FPAs, or supply them only at 
higher cost, if the payload builders do not also agree to purchase 
UTC's optical system. With visible-light FPAs, and in situations where 
the DoD or intelligence community end-user directed payload providers 
to use Raytheon's infrared FPAs, the payload provider would have no 
alternative but to accept UTC's large space-based optical system, even 
if it was of lower quality or higher priced than large space-based 
optical systems available from the other source. As a result, the 
merged company would be able to charge higher prices for its optical 
system, or provide a system of lower quality, than would have been 
possible before the merger.
    56. UTC competes to design, develop, produce, and sell large space-
based optical systems on the basis of quality, price, and innovation, 
as well as contractual terms such as delivery times. This competition 
leads to more innovation, higher quality, lower prices, and shorter 
delivery times. The combination of UTC and Raytheon would give the 
merged firm the incentive and ability to weaken this competition and 
its future benefits to DoD and intelligence community end-users, likely 
resulting in less innovative, more expensive products with lower 
quality and longer delivery times.
    57. The proposed acquisition, therefore, likely would substantially 
lessen competition in the design, development, production, and sale of 
large space-based optical systems in the United States in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
2. EO/IR Reconnaissance Satellite Payloads
    58. Second, by combining Raytheon's position as a producer of EO/IR 
reconnaissance satellite payloads with UTC's position as one of only 
two companies with the capability to build large space-based optical 
systems, the merger would give the combined company the incentive and 
ability to harm its payload rivals. Because UTC does not produce 
payloads today, it has a strong incentive to make its optical systems 
available to all payload builders. Following the merger, this incentive 
would change, and, particularly in situations where the DoD or 
intelligence community end-user directed payload providers to use UTC's 
large space-based optical systems, the combined company likely would 
raise prices for UTC's optical systems to rival payload builders, or 
simply refuse to provide UTC's optical systems at any price. As a 
result, the merged company would be able to charge higher prices for 
its payload, or provide a payload of lower quality, than would have 
been possible before the merger.
    59. Raytheon competes with other EO/IR reconnaissance satellite 
payload suppliers on the basis of quality, price, and innovation, as 
well as contractual terms such as delivery times. This competition 
leads to innovation, higher quality, lower prices, and shorter delivery 
times. The combination of UTC and Raytheon would give the merged firm 
the incentive and ability to weaken this competition and its future 
benefits to DoD and intelligence community end-users, likely resulting 
in less innovative, more expensive products with lower quality and 
longer delivery times.
    60. The proposed acquisition, therefore, likely would substantially 
lessen competition in the design, development, production, and sale of 
EO/IR reconnaissance satellite payloads in the United States in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18.

D. Difficulty of Entry

    61. Sufficient, timely entry of additional competitors into the 
markets for the design, development, production, and sale of visible-
light or infrared FPAs for EO/IR reconnaissance satellite payloads is 
unlikely. Production facilities for these FPAs require a substantial 
investment in both capital equipment and human resources, and a new 
entrant would largely need to re-create the investment made in Raytheon 
by the United States government over the course of several decades. A 
new entrant would need to set up a foundry to produce electronic 
components, establish production lines capable of manufacturing read-
out integrated circuits and other electronic components, and build 
assembly lines and testing facilities. Engineering and research 
personnel would need to be assigned to develop, test, and troubleshoot 
the detailed manufacturing processes, involving hundreds of steps, that 
are necessary to produce these FPAs. Any new products would require 
extensive testing and qualification before they could be used in 
payloads. These steps would require years to complete.
    62. Sufficient, timely entry of additional competitors into the 
market for the design, development, production, and sale of large 
space-based optical systems is also unlikely. A new entrant would 
require significant investment in the facilities and skilled personnel 
required to grind and polish the complex curved surfaces required for 
large-space based optical systems, and then test these optics in an

[[Page 23149]]

environment that replicates conditions in space. In addition, because 
spaceflight is an exceptionally demanding and high-risk endeavor, 
payload builders, satellite prime contractors, and end-user customers 
have a strong preference to purchase from established suppliers. Years 
of dedicated and costly effort would be required for a new entrant to 
demonstrate expertise comparable to UTC.
    63. As result of these barriers, entry into the markets for the 
design, development, production, and sale of visible-light and infrared 
FPAs for EO/IR reconnaissance satellite payloads and large space-based 
optical systems would not be timely, likely, or sufficient to defeat 
the anticompetitive effects in the markets for the design, development, 
production, and sale of large space-based optical systems and EO/IR 
reconnaissance satellite payloads likely to result from UTC's merger 
with Raytheon.

VII. Violations Alleged

    64. The merger of UTC and Raytheon likely would substantially 
lessen competition in the relevant markets alleged above in violation 
of Section 7 of the Clayton Act, 15 U.S.C. 18.
    65. Unless enjoined, the acquisition likely would have the 
following anticompetitive effects, among others, in the relevant 
markets:
    (a) Actual and potential competition between UTC and Raytheon would 
be eliminated;
    (b) competition generally likely would be substantially lessened; 
and
    (c) prices likely would increase, quality and innovation likely 
would decrease, and contractual terms likely would be less favorable to 
customers.

VIII. Request for Relief

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

Dated: March 26, 2020.

Respectfully submitted,
FOR PLAINTIFF UNITED STATES:
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Makan Delrahim (D.C. Bar #457795)
Assistant Attorney General.

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Bernard A. Nigro, Jr. (D.C. Bar #412357)
Principal Deputy Assistant Attorney General.

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Alexander P. Okuliar (D.C. Bar #481103)
Deputy Assistant Attorney General.

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Kathleen S. O'Neill
Senior Director of Investigations & Litigation.

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Katrina H. Rouse (D.C. Bar #1013035)
Chief Defense, Industrials, and Aerospace Section.

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David E. Altschuler (D.C. Bar #983023)
Assistant Chief, Defense, Industrials, and Aerospace Section.

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Kevin Quin* (D.C. Bar #415268)

Jay D. Owen

Rebecca Valentine (D.C. Bar #989607)

Attorneys for the United States, Defense, Industrials, and Aerospace 
Section, U.S. Department of Justice, Antitrust Division, 450 Fifth 
Street NW, Suite 8700, Washington, DC 20530, Telephone: (202) 307-
0922, Facsimile: (202) 514-9033, Email: [email protected].

* Lead Attorney to be Noticed.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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

Civil Action No. 1:20-cv-00824

Judge: Hon. Dabney L. Friedrich

Proposed Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on March 26, 2020, the United States and Defendants, United 
Technologies Corporation and Raytheon Company, by their respective 
attorneys, have consented to 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 a party 
regarding any issue of fact or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by Defendants to assure 
that competition is not substantially lessened;
    And whereas, Defendants agree to make certain divestitures for the 
purpose of remedying the loss of competition alleged in the Complaint;
    And whereas, Defendants represent that the divestitures and other 
relief required by this Final Judgment can and will be made and that 
Defendants will not later raise a claim of hardship or difficulty as 
grounds for asking the Court to modify any provision of this Final 
Judgment;
    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

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

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' or ``Acquirers'' means the entity or entities to 
whom Defendants divest any of the Divestiture Assets.
    B. ``Acquirer of the Military Airborne Radios Divestiture Assets'' 
means BAE or another entity to whom Defendants divest the Military 
Airborne Radios Divestiture Assets.
    C. ``Acquirer of the Military GPS Divestiture Assets'' means BAE or 
another entity to whom Defendants divest the GPS Divestiture Assets.
    D. ``Acquirer of the Optical Systems Divestiture Assets'' means the 
entity to whom Defendants divest the Optical Systems Divestiture 
Assets.
    E. ``Divestiture Assets'' means the Military Airborne Radios 
Divestiture Assets, the Military GPS Divestiture Assets, and the 
Optical Systems Divestiture Assets.
    F. ``UTC'' means Defendant United Technologies Corporation, a 
Delaware corporation with its headquarters in Farmington, Connecticut, 
its successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    G. ``Raytheon'' means Defendant Raytheon Company, a Delaware 
corporation with its headquarters in Waltham, Massachusetts, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    H. ``BAE'' means BAE Systems, Inc., a Delaware corporation with its 
headquarters in Arlington, Virginia, its successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint

[[Page 23150]]

ventures, and their directors, officers, managers, agents, and 
employees.
    I. ``Military Airborne Radios'' means radios that enable military 
aircraft to communicate with other aircraft and with the ground, either 
as standalone devices or as part of an integrated communication, 
navigation, and identification suite. ``Military Airborne Radios'' does 
not include Cryptographic Modules, identification friend or foe 
systems, or data links.
    J. ``Cryptographic Modules'' means hardware and software for 
encryption and decryption of radio signals and related application-
specific integrated circuits and field-programmable gate arrays for the 
Military Airborne Radios Business.
    K. ``Military Airborne Radios Business'' means the business of the 
design, development, production, and sale of Military Airborne Radios 
by Raytheon's Tactical Communication Systems division.
    L. ``Military Airborne Radios Divestiture Assets'' means the 
Military Airborne Radios Business, including:
    1. All of Defendants' rights, title, and interests in the 
facilities located at the following addresses:
    a. 5001 U.S. 30 Highway, Fort Wayne, Indiana 46818 (the ``Fort 
Wayne Facility'');
    b. Office 135 of Building 100 located at the county-owned facility 
at 7887 Bryan Dairy Road, Largo, Florida 33777;
    2. All tangible assets related to or used in connection with the 
Military Airborne Radios Business, including but not limited to: All 
manufacturing equipment, quality assurance equipment, research and 
development equipment, machine assembly equipment, tooling and fixed 
assets, personal property, inventory, office furniture, materials, 
supplies, and other tangible property; all licenses, permits, 
certifications, and authorizations issued by any governmental 
organization; all contracts, teaming arrangements, agreements, leases, 
commitments, certifications, and understandings, including supply 
agreements; all customer lists, contracts, accounts, and credit 
records; all repair and performance records; and all other records;
    3. All intangible assets related to or used in connection with the 
Military Airborne Radios Business, including but not limited to: All 
patents; licenses and sublicenses; intellectual property; copyrights; 
trademarks, trade names, service marks, and service names (excluding 
any trademarks, trade names, service marks, or service names containing 
the name ``Raytheon''); technical information; computer software and 
related documentation; customer relationships, agreements, and 
contracts; 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; all manuals and technical information Raytheon 
provides to its own employees, customers, suppliers, agents, or 
licensees; and all research data concerning historic and current 
research and development efforts, including but not limited to designs 
of experiments and the results of successful and unsuccessful designs 
and experiments; and
    4. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, a worldwide, non-exclusive, royalty-free, 
irrevocable, paid-up, perpetual license to any intellectual property 
related to Cryptographic Modules that is held by Raytheon at the time 
of the filing of the Complaint in this action, or is developed by 
Raytheon during the term of the supply contract required by Paragraph 
IV(H) of this Final Judgment, including any extensions of that term 
approved by the United States; Provided, however, that the assets 
specified in Paragraphs II(L)(1)-(4) above, do not include (i) the 
space leased by Raytheon at 1010 Production Road, Fort Wayne, Indiana 
46818; (ii) the space leased by Raytheon in Buildings 100, 400, and 600 
at the county-owned facility located at 7887 Bryan Dairy Road, Largo, 
Florida 33777 (other than Office 135 of Building 100); or (iii) 
intellectual property solely related to Cryptographic Modules, except 
as set forth in Paragraph II(L)(4).
    M. ``Military Airborne Radios Personnel'' means all full-time, 
part-time, or contract personnel who are or were, at any time between 
June 9, 2019 and the date on which the Military Airborne Radios 
Divestiture Assets are divested, (i) employees of the Military Airborne 
Radios Business, (ii) employees of Raytheon primarily involved in the 
design, development, production, and sale of Military Airborne Radios 
(except for Raytheon employees primarily engaged in human resources, 
legal, or other general or administrative support functions), or (iii) 
at the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, up to sixteen (16) employees of Raytheon 
knowledgeable in the design, development, production, and use of 
Cryptographic Modules, to be selected by the Acquirer of the Military 
Airborne Radios Divestiture Assets. The United States, in its sole 
discretion, will resolve any disagreement regarding which employees are 
Military Airborne Radios Personnel.
    N. ``Military Airborne Radios Transition Assets'' means those 
Military Airborne Radios Divestiture Assets required for Defendants to 
comply with their obligations under the supply contract required by 
Paragraph IV(H) of this Final Judgment.
    O. ``Military GPS Systems'' means military receivers and anti-jam 
products for global positioning satellite systems.
    P. ``Military GPS Business'' means UTC's business in the design, 
development, production, and sale of Military GPS Systems.
    Q. ``Military GPS Divestiture Assets'' means the Military GPS 
Business, including:
    1. All tangible assets related to or used in connection with the 
Military GPS Business, including but not limited to: All manufacturing 
equipment, quality assurance equipment, research and development 
equipment, machine assembly equipment, tooling and fixed assets, 
personal property, inventory, office furniture, materials, supplies, 
and other tangible property; all licenses, permits, certifications, and 
authorizations issued by any governmental organization; all contracts, 
teaming arrangements, agreements, leases, commitments, certifications, 
and understandings, including supply agreements; all customer lists, 
contracts, accounts, and credit records; all repair and performance 
records; and all other records;
    2. All intangible assets related to or used in connection with the 
Military GPS Business, including but not limited to: All patents; 
licenses and sublicenses; intellectual property; copyrights; 
trademarks, trade names, service marks, and service names (excluding 
any trademarks, trade names, service marks, or service names containing 
the name ``United Technologies,'' ``Rockwell,'' ``Collins,'' ``UTC,'' 
or ``UTX''); technical information; computer software and related 
documentation; customer relationships, agreements, and contracts; 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; all manuals and technical information UTC provides to its 
own employees, customers, suppliers, agents, or licensees; and all 
research data concerning historic and current research

[[Page 23151]]

and development efforts, including but not limited to designs of 
experiments and the results of successful and unsuccessful designs and 
experiments; Provided, however, the assets specified in Paragraphs 
II(Q)(1)-(2) above do not include (i) the facility located at 855 35th 
Street NE, Cedar Rapids, Iowa 52498 (the ``Cedar Rapids Facility'') or 
(ii) the facility located at 2855 Heartland Drive, Coralville, Iowa 
52241 (the ``Coralville Facility'').
    R. ``Military GPS Personnel'' means all full-time, part-time, or 
contract personnel who are or were, at any time between June 9, 2019 
and the date on which the Military GPS Divestiture Assets are divested, 
(i) employees of the Military GPS Business, or (ii) employees of UTC 
primarily involved in the design, development, production, and sale of 
Military GPS Systems (except for UTC employees primarily engaged in 
human resources, legal, or other general or administrative support 
functions). The United States, in its sole discretion, will resolve any 
disagreement regarding which employees are Military GPS Personnel.
    S. ``Military GPS Transition Assets'' means those Military GPS 
Divestiture Assets required for Defendants to comply with their 
obligations under the supply contract required by Paragraph V(H) of 
this Final Judgment.
    T. ``Optical Systems'' means electro-optical/infrared systems for 
national security space missions and defense laser warning 
survivability subsystems.
    U. ``Optical Systems Business'' means UTC's business in the design, 
development, production, and sale of Optical Systems.
    V. ``Optical Systems Divestiture Assets'' means the Optical Systems 
Business, including:
    1. All of Defendants' rights, title, and interests in the facility 
located at 100 Wooster Heights, Danbury, Connecticut 06810;
    2. All tangible assets related to or used in connection with the 
Optical Systems Business, including but not limited to: All 
manufacturing equipment, quality assurance equipment, research and 
development equipment, machine assembly equipment, tooling and fixed 
assets, personal property, inventory, office furniture, materials, 
supplies, and other tangible property; all licenses, permits, 
certifications, and authorizations issued by any governmental 
organization; all contracts, teaming arrangements, agreements, leases, 
commitments, certifications, and understandings, including supply 
agreements; all customer lists, contracts, accounts, and credit 
records; all repair and performance records; and all other records; and
    3. All intangible assets related to or used in connection with the 
Optical Systems Business, including but not limited to: All patents; 
licenses and sublicenses; intellectual property; copyrights; 
trademarks, trade names, service marks, and service names (excluding 
any trademarks, trade names, service marks, or service names containing 
the name ``United Technologies,'' ``Rockwell,'' ``Collins,'' ``UTC,'' 
or ``UTX''); technical information; computer software and related 
documentation; customer relationships, agreements, and contracts; 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; all manuals and technical information UTC provides to its 
own employees, customers, suppliers, agents, or licensees; and all 
research data concerning historic and current research and development 
efforts, including but not limited to designs of experiments and the 
results of successful and unsuccessful designs and experiments.
    W. ``Optical Systems Personnel'' means all full-time, part-time, or 
contract personnel who are or were, at any time between June 9, 2019 
and the date on which the Optical Systems Divestiture Assets are 
divested, (i) employees of the Optical Systems Business, or (ii) 
employees of UTC involved in the design, development, production, and 
sale of Optical Systems (except for UTC employees primarily engaged in 
human resources, legal, or other general or administrative support 
functions). The United States, in its sole discretion, will resolve any 
disagreement regarding which employees are Optical Systems Personnel.
    X. ``Transaction Regulatory Approvals'' means any approvals or 
clearances pursuant to filings with the Committee on Foreign Investment 
in the United States (``CFIUS'') or under antitrust or competition laws 
required for the Transaction to proceed.
    Y. ``Military Airborne Radios Divestiture Assets Regulatory 
Approvals'' means any approvals or clearances pursuant to filings with 
CFIUS, or under antitrust, competition, or other U.S. or international 
laws or regulations required for the acquisition of the Military 
Airborne Radios Divestiture Assets by the Acquirer of the Military 
Airborne Radios Divestiture Assets.
    Z. ``Military GPS Divestiture Assets Regulatory Approvals'' means 
any approvals or clearances pursuant to filings with CFIUS, or under 
antitrust, competition, or other U.S. or international laws or 
regulations required for the acquisition of the Military GPS 
Divestiture Assets by the Acquirer of the Military GPS Divestiture 
Assets.
    AA. ``Optical Systems Divestiture Assets Regulatory Approvals'' 
means any approvals or clearances pursuant to filings with CFIUS, or 
under antitrust, competition, or other U.S. or international laws or 
regulations required for the acquisition of the Optical Systems 
Divestiture Assets by the Acquirer of the Optical Systems Divestiture 
Assets.
    BB. The ``Transaction'' means the proposed merger between UTC and 
Raytheon.

III. Applicability

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

IV. Divestiture of the Military Airborne Radios Business

    A. Defendants are ordered and directed, within the later of forty-
five (45) calendar days after the Court's entry of the Asset 
Preservation and Hold Separate Stipulation and Order in this matter, or 
fifteen (15) calendar days after the Transaction Regulatory Approvals 
and the Military Airborne Radios Divestiture Assets Regulatory 
Approvals have been received, to divest the Military Airborne Radios 
Divestiture Assets in a manner consistent with this Final Judgment to 
BAE or 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 will notify the Court of any extensions. 
Defendants agree to use their best efforts to divest the Military 
Airborne Radios Divestiture

[[Page 23152]]

Assets as expeditiously as possible. Notwithstanding the foregoing, at 
the option of the Acquirer of the Military Airborne Radios Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, Defendants may, for the sole purpose of fulfilling the 
supply contract required by Paragraph IV(H) of this Final Judgment, 
retain the Military Airborne Radios Transition Assets until the earlier 
of (i) thirty (30) calendar days after the Acquirer of the Military 
Airborne Radios Divestiture Assets terminates the supply contract 
required by Paragraph IV(H) of this Final Judgment and requests the 
transfer of such assets or (ii) thirty (30) calendar days following the 
expiration of the supply contract required by Paragraph IV(H) of this 
Final Judgment.
    B. In the event Defendants are attempting to divest the Military 
Airborne Radios Divestiture Assets to an Acquirer other than BAE, 
Defendants promptly must make known, by usual and customary means, the 
availability of the Military Airborne Radios Divestiture Assets. 
Defendants must inform any person making an inquiry regarding a 
possible purchase of the Military Airborne Radios Divestiture Assets 
that the Military Airborne Radios Divestiture Assets are being divested 
in accordance with this Final Judgment and must provide that person 
with a copy of this Final Judgment. Defendants must offer to furnish to 
all prospective Acquirers, subject to customary confidentiality 
assurances, all information and documents relating to the Military 
Airborne Radios Divestiture Assets customarily provided in a due-
diligence process; provided, however, that Defendants need not provide 
information or documents subject to the attorney-client privilege or 
work-product doctrine. Defendants must make this information available 
to the United States at the same time that the information is made 
available to any other person.
    C. Defendants must cooperate with and assist the Acquirer of the 
Military Airborne Radios Divestiture Assets in identifying and hiring 
all Military Airborne Radios Personnel, including:
    1. Within ten (10) business days following the filing of the 
Complaint in this matter, Defendants must identify all Military 
Airborne Radios Personnel to the Acquirer of the Military Airborne 
Radios Divestiture Assets and the United States, including by providing 
organization charts covering all Military Airborne Radios Personnel.
    2. Within ten (10) business days following receipt of a request by 
the Acquirer of the Military Airborne Radios Divestiture Assets or the 
United States, Defendants must provide to the Acquirer of the Military 
Airborne Radios Divestiture Assets and the United States the following 
additional information related to Military Airborne Radios Personnel: 
Name; job title; current salary and benefits including most recent 
bonus paid, aggregate annual compensation, current target or guaranteed 
bonus, if any, and any other payments due to or promises made to the 
employee; descriptions of reporting relationships, past experience, 
responsibilities, and training and educational histories; lists of all 
certifications; and all job performance evaluations. If Defendants are 
barred by any applicable laws from providing any of this information, 
within ten (10) business days following receipt of the request, 
Defendants must provide the requested information to the full extent 
permitted by law and also must provide a written explanation of 
Defendants' inability to provide the remaining information.
    3. At the request of the Acquirer of the Military Airborne Radios 
Divestiture Assets, Defendants must promptly make Military Airborne 
Radios Personnel available for private interviews with the Acquirer of 
the Military Airborne Radios Divestiture Assets during normal business 
hours at a mutually agreeable location.
    4. Defendants must not interfere with any efforts by the Acquirer 
of the Military Airborne Radios Divestiture Assets to employ any 
Military Airborne Radios Personnel. Interference includes but is not 
limited to offering to increase the salary or improve the benefits of 
Military Airborne Radios Personnel unless the offer is part of a 
company-wide increase in salary or benefits that was announced prior to 
June 9, 2019 or has been approved by the United States, in its sole 
discretion. Defendants' obligations under this paragraph will expire 
(i) for Military Airborne Radios Personnel whose services are not 
required for Defendants to perform under the supply contract required 
by Paragraph IV(H) of this Final Judgment, six (6) months after the 
divestiture of the Military Airborne Radios Divestiture Assets pursuant 
to this Final Judgment, and (ii) for Military Airborne Radios Personnel 
whose services are required for Defendants to perform under the supply 
contract required by Paragraph IV(H) of this Final Judgment, six (6) 
months after the expiration of that supply contract.
    5. For Military Airborne Radios Personnel who elect employment with 
the Acquirer of the Military Airborne Radios Divestiture Assets within 
the periods set forth in Paragraph IV(C)(4), Defendants must waive all 
non-compete and non-disclosure agreements, vest all unvested pension 
and other equity rights, and provide all benefits that those Military 
Airborne Radios Personnel otherwise would have been provided had the 
Military Airborne Radios Personnel continued employment with 
Defendants, including but not limited to any retention bonuses or 
payments. Defendants may maintain reasonable restrictions on disclosure 
by Military Airborne Radios Personnel of Defendants' proprietary non-
public information that is unrelated to Military Airborne Radios 
Divestiture Assets and not otherwise required to be disclosed by this 
Final Judgment.
    6. For a period of twelve (12) months from the date on which the 
Military Airborne Radios Divestiture Assets are divested to the 
Acquirer of the Military Airborne Radios Divestiture Assets, Defendants 
may not solicit to rehire Military Airborne Radios Personnel who were 
hired by the Acquirer of the Military Airborne Radios Divestiture 
Assets within the period set forth in Paragraph IV(C)(4)(i), unless (a) 
an individual is terminated or laid off by the Acquirer of the Military 
Airborne Radios Divestiture Assets or (b) the Acquirer of the Military 
Airborne Radios Divestiture Assets agrees in writing that Defendants 
may solicit to rehire that individual. Nothing in this paragraph 
prohibits Defendants from advertising employment openings using general 
solicitations or advertisements.
    7. For a period of twelve (12) months following the expiration of 
the supply contract required by Paragraph IV(H) of this Final Judgment, 
Defendants may not solicit to rehire Military Airborne Radios Personnel 
whose services were required for Defendants to perform under that 
supply contract and who were hired by the Acquirer of the Military 
Airborne Radios Divestiture Assets within the period set forth in 
Paragraph IV(C)(4)(ii), unless (a) an individual is terminated or laid 
off by the Acquirer of the Military Airborne Radios Divestiture Assets 
or (b) the Acquirer of the Military Airborne Radios Divestiture Assets 
agrees in writing that Defendants may solicit to rehire that 
individual. Nothing in this paragraph prohibits Defendants from 
advertising employment openings using general solicitations or 
advertisements.
    D. Defendants must permit prospective Acquirers of the Military 
Airborne Radios Divestiture Assets to have reasonable access to make 
inspections of the physical facilities and access to all environmental, 
zoning, and other permit documents and information, and all financial,

[[Page 23153]]

operational, or other documents and information customarily provided as 
part of a due diligence process.
    E. Defendants must warrant to the Acquirer of the Military Airborne 
Radios Divestiture Assets that each asset to be divested will be fully 
operational and without material defect on the date of their transfer 
to the Acquirer of the Military Airborne Radios Divestiture Assets.
    F. Defendants must not take any action that will impede in any way 
the permitting, operation, or divestiture of the Military Airborne 
Radios Divestiture Assets.
    G. Defendants must make best efforts to assign, subcontract, or 
otherwise transfer all contracts related to the Military Airborne 
Radios Divestiture Assets, including all supply and sales contracts, to 
the Acquirer of the Military Airborne Radios Divestiture Assets. 
Defendants must not interfere with any negotiations between the 
Acquirer of the Military Airborne Radios Divestiture Assets and a 
contracting party.
    H. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, and subject to approval by the United States in its 
sole discretion, on or before the date on which the Military Airborne 
Radios Divestiture Assets are divested to the Acquirer of the Military 
Airborne Radios Divestiture Assets, Defendants must enter into a supply 
contract for Military Airborne Radios sufficient to meet the needs of 
the Military Airborne Radios Business, as determined by the Acquirer of 
the Military Airborne Radios Divestiture Assets, for a period of up to 
twelve (12) months on terms and conditions reasonably related to market 
conditions for Military Airborne Radios. The United States, in its sole 
discretion, may approve one or more extensions of this supply contract, 
for a total of up to an additional twelve (12) months. If the Acquirer 
of the Military Airborne Radios Divestiture Assets seeks an extension 
of the term of this supply contract, Defendants must notify the United 
States in writing at least three (3) months prior to the date the 
supply contract expires. The Acquirer of the Military Airborne Radios 
Divestiture Assets may terminate this supply contract without cost or 
penalty at any time upon commercially reasonable notice. The 
employee(s) of Defendants tasked with supporting this supply contract 
must not share any competitively sensitive information of the Acquirer 
of the Military Airborne Radios Divestiture Assets with any other 
employee of Defendants.
    I. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, and subject to approval by the United States in its 
sole discretion, on or before the date on which the Military Airborne 
Radios Divestiture Assets are divested to the Acquirer of the Military 
Airborne Radios Divestiture Assets, Defendants must enter into a supply 
contract for the manufacture of Cryptographic Modules sufficient to 
meet the needs of the Military Airborne Radios Business, as determined 
by the Acquirer of the Military Airborne Radios Divestiture Assets, for 
a period of up to twelve (12) months on terms and conditions reasonably 
related to market conditions for Cryptographic Modules. The United 
States, in its sole discretion, may approve one or more extensions of 
this supply contract, for a total of up to an additional twelve (12) 
months. If the Acquirer of the Military Airborne Radios Divestiture 
Assets seeks an extension of the term of this supply contract, 
Defendants must notify the United States in writing at least three (3) 
months prior to the date the supply contract expires. The Acquirer of 
the Military Airborne Radios Divestiture Assets may terminate this 
supply contract without cost or penalty at any time upon commercially 
reasonable notice. Defendants must maintain any National Security 
Agency certifications or approvals necessary to supply the products 
manufactured under the supply contract entered into pursuant to this 
paragraph. The employee(s) of Defendants tasked with supporting this 
supply contract must not share any competitively sensitive information 
of the Acquirer of the Military Airborne Radios Divestiture Assets with 
any other employee of Defendants.
    J. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, and subject to approval by the United States in its 
sole discretion, on or before the date on which the Military Airborne 
Radios Divestiture Assets are divested to the Acquirer of the Military 
Airborne Radios Divestiture Assets, Defendants must enter into a 
contract to provide transition services for back office, human 
resource, and information technology services and support for the 
Military Airborne Radios Business for a period of up to twelve (12) 
months on terms and conditions reasonably related to market conditions 
for the transition services. The United States, in its sole discretion, 
may approve one or more extensions of this contract for transition 
services, for a total of up to an additional twelve (12) months. If the 
Acquirer of the Military Airborne Radios Divestiture Assets seeks an 
extension of the term of this contract for transition services, 
Defendants must notify the United States in writing at least three (3) 
months prior to the date the contract expires. The Acquirer of the 
Military Airborne Radios Divestiture Assets may terminate a contract 
for transition services without cost or penalty at any time upon 
commercially reasonable notice. The employee(s) of Defendants tasked 
with providing these transition services must not share any 
competitively sensitive information of the Acquirer of the Military 
Airborne Radios Divestiture Assets with any other employee of 
Defendants.
    K. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, Defendants must provide the Acquirer of the 
Military Airborne Radios Divestiture Assets with complete and sole 
access to the laboratories located in rooms 01-007V004 and 01-002V001 
in Building C1-SW, 1010 Production Road, Fort Wayne, Indiana 46818, 
until the Acquirer of the Military Airborne Radios Divestiture Assets 
receives any necessary certifications for its own laboratory space, for 
a period not to exceed three (3) months. The United States, in its sole 
discretion, may approve one or more extensions of this period, for a 
total of up to an additional three (3) months. If the Acquirer of the 
Military Airborne Radios Divestiture Assets seeks an extension of this 
period, Defendants must notify the United States in writing at least 
thirty (30) days prior to the date this period expires.
    L. At the option of the Acquirer of the Military Airborne Radios 
Divestiture Assets, Defendants must provide the Acquirer of the 
Military Airborne Radios Divestiture Assets with complete and sole 
access to rooms C1-W-HWL-M, C1-W-Demo, and C1-W-TCS-CR in Building C1-
SW, 1010 Production Road, Fort Wayne, Indiana 46818, for three (3) pre-
scheduled, 8-hour shifts per room each week, selected by the Acquirer 
of the Military Airborne Radios Divestiture Assets, until the Acquirer 
of the Military Airborne Radios Divestiture Assets receives any 
necessary certifications for its own laboratory space, for a period not 
to exceed six (6) months. The United States, in its sole discretion, 
may approve one or more extensions of this period, for a total of up to 
an additional six (6) months. If the Acquirer of the Military Airborne 
Radios Divestiture Assets seeks an extension of this period, Defendants 
must notify the United States in writing at least thirty (30) days 
prior to the date this period expires.
    M. Defendants must warrant to the Acquirer of the Military Airborne 
Radios Divestiture Assets that there are no material defects in the 
environmental, zoning, or other permits

[[Page 23154]]

pertaining to the operation of the Military Airborne Radios Divestiture 
Assets. Following the sale of the Military Airborne Radios Divestiture 
Assets, Defendants must not undertake, directly or indirectly, any 
challenges to the environmental, zoning, or other permits relating to 
the operation of the Military Airborne Radios Divestiture Assets.
    N. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV or by a Divestiture Trustee 
appointed pursuant to Section VII of this Final Judgment must include 
the entire Military Airborne Radios Divestiture Assets and must be 
accomplished in such a way as to satisfy the United States, in its sole 
discretion, that the Military Airborne Radios Divestiture Assets can 
and will be used by the Acquirer of the Military Airborne Radios 
Divestiture Assets as part of a viable, ongoing business in the design, 
development, production, and sale of Military Airborne Radios, and will 
remedy the competitive harm alleged in the Complaint. The divestiture, 
whether pursuant to Section IV or Section VII of this Final Judgment:

    (1) Must 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 the design, development, 
production, and sale of Military Airborne Radios; and
    (2) must 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 Defendants give Defendants the ability unreasonably 
to raise the Acquirer of the Military Airborne Radios Divestiture 
Assets' costs, to lower the Acquirer of the Military Airborne Radios 
Divestiture Assets' efficiency, or otherwise to interfere in the 
ability of the Acquirer of the Military Airborne Radios Divestiture 
Assets to compete effectively.

    P. If any term of an agreement between Defendants and the Acquirer 
of the Military Airborne Radios Divestiture Assets to effectuate the 
divestiture required by this Final Judgment varies from a term of this 
Final Judgment then, to the extent that Defendants cannot fully comply 
with both, this Final Judgment determines Defendants' obligations.

V. Divestiture of the Military GPS Business

    A. Defendants are ordered and directed, within the later of forty-
five (45) calendar days after the Court's entry of the Asset 
Preservation and Hold Separate Stipulation and Order in this matter, or 
fifteen (15) calendar days after the Transaction Regulatory Approvals 
and the Military GPS Divestiture Assets Regulatory Approvals have been 
received, to divest the Military GPS Divestiture Assets in a manner 
consistent with this Final Judgment to BAE or 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 
will notify the Court of any extensions. Defendants agree to use their 
best efforts to divest the Military GPS Divestiture Assets as 
expeditiously as possible. Notwithstanding the foregoing, at the option 
of the Acquirer of the Military GPS Divestiture Assets, and subject to 
approval by the United States in its sole discretion, Defendants may 
retain, for the sole purpose of fulfilling the supply contract required 
by Paragraph V(H) of this Final Judgment, the Military GPS Transition 
Assets until the earlier of (i) thirty (30) calendar days after the 
Acquirer of the Military GPS Divestiture Assets terminates the supply 
contract required by Paragraph V(H) of this Final Judgment and requests 
the transfer of such assets or (ii) thirty (30) calendar days following 
the completion of the supply contract required by Paragraph V(H) of 
this Final Judgment.
    B. In the event Defendants are attempting to divest the Military 
GPS Divestiture Assets to an Acquirer other than BAE, Defendants 
promptly must make known, by usual and customary means, the 
availability of the Military GPS Divestiture Assets. Defendants must 
inform any person making an inquiry regarding a possible purchase of 
the Military GPS Divestiture Assets that the Military GPS Divestiture 
Assets are being divested in accordance with this Final Judgment and 
must provide that person with a copy of this Final Judgment. Defendants 
must offer to furnish to all prospective Acquirers, subject to 
customary confidentiality assurances, all information and documents 
relating to the Military GPS Divestiture Assets customarily provided in 
a due-diligence process; provided, however, that Defendants need not 
provide information or documents subject to the attorney-client 
privilege or work-product doctrine. Defendants must make this 
information available to the United States at the same time that the 
information is made available to any other person.
    C. Defendants must cooperate with and assist the Acquirer of the 
Military GPS Divestiture Assets in identifying and hiring all Military 
GPS Personnel, including:
    1. Within ten (10) business days following the filing of the 
Complaint in this matter, Defendants must identify all Military GPS 
Personnel to the Acquirer of the Military GPS Divestiture Assets and 
the United States, including by providing organization charts covering 
all Military GPS Personnel.
    2. Within ten (10) business days following receipt of a request by 
the Acquirer of the Military GPS Divestiture Assets or the United 
States, Defendants must provide to the Acquirer of the Military GPS 
Divestiture Assets and the United States the following additional 
information related to Military GPS Personnel: Name; job title; current 
salary and benefits including most recent bonus paid, aggregate annual 
compensation, current target or guaranteed bonus, if any, and any other 
payments due to or promises made to the employee; descriptions of 
reporting relationships, past experience, responsibilities, and 
training and educational histories; lists of all certifications; and 
all job performance evaluations. If Defendants are barred by any 
applicable laws from providing any of this information, within ten (10) 
business days following receipt of the request, Defendants must provide 
the requested information to the full extent permitted by law and also 
must provide a written explanation of Defendants' inability to provide 
the remaining information.
    3. At the request of the Acquirer of the Military GPS Divestiture 
Assets, Defendants must promptly make Military GPS Personnel available 
for private interviews with the Acquirer of the Military GPS 
Divestiture Assets during normal business hours at a mutually agreeable 
location.
    4. Defendants must not interfere with any efforts by the Acquirer 
of the Military GPS Divestiture Assets to employ any Military GPS 
Personnel. Interference includes but is not limited to offering to 
increase the salary or improve the benefits of Military GPS Personnel 
unless the offer is part of a company-wide increase in salary or 
benefits that was announced prior to June 9, 2019 or has been approved 
by the United States, in its sole discretion. Defendants' obligations 
under this paragraph will expire (i) for Military GPS Personnel whose 
services are not required for Defendants to perform under the supply 
contract required by Paragraph V(H) of this Final Judgment, six (6) 
months after the divestiture of the Military GPS Divestiture Assets 
pursuant to this Final Judgment, and (ii) for Military GPS Personnel 
whose services are required for Defendants to perform under the supply 
contract

[[Page 23155]]

required by Paragraph V(H) of this Final Judgment, six (6) months after 
the expiration of that supply contract.
    5. For Military GPS Personnel who elect employment with the 
Acquirer of the Military GPS Divestiture Assets within the periods set 
forth in Paragraph V(C)(4), Defendants must waive all non-compete and 
non-disclosure agreements, vest all unvested pension and other equity 
rights, and provide all benefits that those Military GPS Personnel 
otherwise would have been provided had the Military GPS Personnel 
continued employment with Defendants, including but not limited to any 
retention bonuses or payments. Defendants may maintain reasonable 
restrictions on disclosure by Military GPS Personnel of Defendants' 
proprietary non-public information that is unrelated to Military GPS 
Divestiture Assets and not otherwise required to be disclosed by this 
Final Judgment.
    6. For a period of twelve (12) months from the date on which the 
Military GPS Divestiture Assets are divested to the Acquirer of the 
Military GPS Divestiture Assets, Defendants may not solicit to rehire 
Military GPS Personnel who were hired by the Acquirer of the Military 
GPS Divestiture Assets within the period set forth in Paragraph 
V(C)(4)(i) unless (a) an individual is terminated or laid off by the 
Acquirer of the Military GPS Divestiture Assets or (b) the Acquirer of 
the Military GPS Divestiture Assets agrees in writing that Defendants 
may solicit to rehire that individual. Nothing in this paragraph 
prohibits Defendants from advertising employment openings using general 
solicitations or advertisements.
    7. For a period of twelve (12) months following the expiration of 
the supply contract required by Paragraph V(H) of this Final Judgment, 
Defendants may not solicit to rehire Military GPS Personnel whose 
services were required for Defendants to perform under that supply 
contract and who were hired by the Acquirer of the Military GPS 
Divestiture Assets within the period set forth in Paragraph V(C)(4)(ii) 
unless (a) an individual is terminated or laid off by the Acquirer of 
the Military GPS Divestiture Assets or (b) the Acquirer of the Military 
GPS Divestiture Assets agrees in writing that Defendants may solicit to 
rehire that individual. Nothing in this paragraph prohibits Defendants 
from advertising employment openings using general solicitations or 
advertisements.
    D. Defendants must permit prospective Acquirers of the Military GPS 
Divestiture Assets to have reasonable access to make inspections of the 
physical facilities and access to all environmental, zoning, and other 
permit documents and information, and all financial, operational, or 
other documents and information customarily provided as part of a due 
diligence process.
    E. Defendants must warrant to the Acquirer of the Military GPS 
Divestiture Assets that each asset to be divested will be fully 
operational and without material defect on the date of their transfer 
to the Acquirer of the Military GPS Divestiture Assets.
    F. Defendants must not take any action that will impede in any way 
the permitting, operation, or divestiture of the Military GPS 
Divestiture Assets.
    G. Defendants must make best efforts to assign, subcontract, or 
otherwise transfer all contracts related to the Military GPS 
Divestiture Assets, including all supply and sales contracts, to the 
Acquirer of the Military GPS Divestiture Assets. Defendants must not 
interfere with any negotiations between the Acquirer of the Military 
GPS Divestiture Assets and a contracting party.
    H. At the option of the Acquirer of the Military GPS Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, on or before the date on which the Military GPS Divestiture 
Assets are divested to the Acquirer of the Military GPS Divestiture 
Assets, Defendants must enter into a supply contract for Military GPS 
Systems sufficient to meet the needs of the Military GPS Business, as 
determined by the Acquirer of the Military GPS Divestiture Assets, for 
a period of up to twelve (12) months on terms and conditions reasonably 
related to market conditions for Military GPS Systems. The United 
States, in its sole discretion, may approve one or more extensions of 
this supply contract, for a total of up to an additional twelve (12) 
months. If Acquirer of the Military GPS Divestiture Assets seeks an 
extension of the term of this supply contract, Defendants must notify 
the United States in writing at least three (3) months prior to the 
date the supply contract expires. The Acquirer of the Military GPS 
Divestiture Assets may terminate this supply contract without cost or 
penalty at any time upon commercially reasonable notice. The 
employee(s) of Defendants tasked with supporting this supply contract 
must not share any competitively sensitive information of the Acquirer 
of the Military GPS Divestiture Assets with any other employee of 
Defendants.
    I. At the option of Acquirer of the Military GPS Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, on or before the date on which the Military GPS Divestiture 
Assets are divested to the Acquirer of the Military GPS Divestiture 
Assets, Defendants must enter into a contract to provide transition 
services for back office, human resource, and information technology 
services and support for the Military GPS Business for a period of up 
to twelve (12) months on terms and conditions reasonably related to 
market conditions for the transition services. The United States, in 
its sole discretion, may approve one or more extensions of this 
contract for transition services, for a total of up to an additional 
twelve (12) months. If the Acquirer of the Military GPS Divestiture 
Assets seeks an extension of the term of this contract for transition 
services, Defendants must notify the United States in writing at least 
three (3) months prior to the date the contract expires. The Acquirer 
of the Military GPS Divestiture Assets may terminate a contract for 
transition services without cost or penalty at any time upon 
commercially reasonable notice. The employee(s) of Defendants tasked 
with providing these transition services must not share any 
competitively sensitive information of the Acquirer of the Military GPS 
Divestiture Assets with any other employee of Defendants.
    J. At the option of the Acquirer of the Military GPS Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, on or before the date on which the Military GPS Divestiture 
Assets are divested to the Acquirer of the Military GPS Divestiture 
Assets, Defendants must enter into a lease for the Cedar Rapids 
Facility for a period of up to twelve (12) months on terms and 
conditions reasonably related to market conditions. The United States, 
in its sole discretion, may approve one or more extensions of this 
lease, for a total of up to an additional six (6) months. If the 
Acquirer of the Military GPS Divestiture Assets seeks an extension of 
the term of this lease, Defendants must notify the United States in 
writing at least three (3) months prior to the date the contract 
expires. The Acquirer of the Military GPS Divestiture Assets may 
terminate a lease without cost or penalty at any time upon commercially 
reasonable notice.
    K. For a period of six (6) months following the divestiture of the 
Military GPS Divestiture Assets, Defendants must provide the Acquirer 
of the Military GPS Divestiture Assets with complete and sole access to 
Laboratories 43, 44, 44 Room 6, 53B, 53C, 53D, 60A, 60B, 60C, 60D, 60F, 
and 60G located in the Cedar Rapids Facility and Laboratories 2, 4, 
1CD100, 1CB100, and 1C0200 located in the Coralville Facility

[[Page 23156]]

for two (2) pre-scheduled, 8-hour shifts per laboratory each day, with 
the Acquirer of the Military GPS Divestiture Assets having first choice 
among the shifts at each laboratory for three business days per week. 
After that six (6) month period, until the expiration of the supply 
contract required by Paragraph V(H) of this Final Judgment, Defendants 
must provide the Acquirer of the Military GPS Divestiture Assets with 
unlimited complete and sole access to all the laboratories identified 
in this Paragraph located in the Cedar Rapids Facility and the 
Coralville Facility, except that the access to Laboratories 1CB100, 
1C0200, and 2 of the Coralville Facility and Laboratories 60A, 60D, and 
60G of the Cedar Rapids Facility will continue to be for two (2) pre-
scheduled, 8-hour shifts each day, with the Acquirer of the Military 
GPS Divestiture Assets having first choice among the shifts for three 
business days per week.
    L. Defendants must warrant to the Acquirer of the Military GPS 
Divestiture Assets that there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation of 
the Divestiture Assets. Following the sale of the Military GPS 
Divestiture Assets, Defendants must not undertake, directly or 
indirectly, any challenges to the environmental, zoning, or other 
permits relating to the operation of the Military GPS Divestiture 
Assets.
    M. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section V or by a Divestiture Trustee appointed 
pursuant to Section VII of this Final Judgment must include the entire 
Military GPS Divestiture Assets and must be accomplished in such a way 
as to satisfy the United States, in its sole discretion, that the 
Military GPS Divestiture Assets can and will be used by the Acquirer of 
the Military GPS Divestiture Assets as part of a viable, ongoing 
business in the design, development, production, and sale of Military 
GPS Systems, and will remedy the competitive harm alleged in the 
Complaint. The divestiture, whether pursuant to Section V or Section 
VII of this Final Judgment:

    (1) Must 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 the design, development, 
production, and sale of Military GPS Systems; and
    (2) must 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 Defendants give Defendants the ability unreasonably 
to raise the Acquirer of the Military GPS Divestiture Assets' costs, 
to lower the Acquirer of the Military GPS Divestiture Assets' 
efficiency, or otherwise to interfere in the ability of the Acquirer 
of the Military GPS Divestiture Assets to compete effectively.

    N. If any term of an agreement between Defendants and the Acquirer 
of the Military GPS Divestiture Assets to effectuate the divestiture 
required by this Final Judgment varies from a term of this Final 
Judgment then, to the extent that Defendants cannot fully comply with 
both, this Final Judgment determines Defendants' obligations.

VI. Divestiture of the Optical Systems Business

    A. Defendants are ordered and directed, within the later of ninety 
(90) calendar days after the Court's entry of the Asset Preservation 
and Hold Separate Stipulation and Order in this matter, or fifteen (15) 
calendar days after the Transaction Regulatory Approvals and the 
Optical Systems Divestiture Assets Regulatory Approvals have been 
received, to divest the Optical Systems Divestiture Assets in a manner 
consistent with this Final Judgment to an Acquirer acceptable to the 
United States, in its sole discretion. The United States, in its sole 
discretion, may agree to one or more extensions of this time period not 
to exceed sixty (60) calendar days in total and will notify the Court 
of any extensions. Defendants agree to use their best efforts to divest 
the Optical Systems Divestiture Assets as expeditiously as possible.
    B. Defendants promptly must make known, by usual and customary 
means, the availability of the Optical Systems Divestiture Assets. 
Defendants must inform any person making an inquiry regarding a 
possible purchase of the Optical Systems Divestiture Assets that the 
Optical Systems Divestiture Assets are being divested in accordance 
with this Final Judgment and must provide that person with a copy of 
this Final Judgment. Defendants must offer to furnish to all 
prospective Acquirers, subject to customary confidentiality assurances, 
all information and documents relating to the Optical Systems 
Divestiture Assets customarily provided in a due-diligence process; 
provided, however, that Defendants need not provide information or 
documents subject to the attorney-client privilege or work-product 
doctrine. Defendants must make this information available to the United 
States at the same time that the information is made available to any 
other person.
    C. Defendants must cooperate with and assist the Acquirer of the 
Optical Systems Divestiture Assets in identifying and hiring all 
Optical Systems Personnel, including:
    1. Within ten (10) business days following receipt of a request by 
the Acquirer of the Optical Systems Divestiture Assets or the United 
States, Defendants must identify all Optical Systems Personnel to the 
Acquirer of the Optical Systems Divestiture Assets and the United 
States, including by providing organization charts covering all Optical 
Systems Personnel.
    2. Within ten (10) business days following receipt of a request by 
the Acquirer of the Optical Systems Divestiture Assets or the United 
States, Defendants must provide to the Acquirer of the Optical Systems 
Divestiture Assets the information set forth in Paragraph VI(C)(1), and 
to the Acquirer of the Optical Systems Divestiture Assets and the 
United States the following additional information related to Optical 
Systems Personnel: Name; job title; current salary and benefits 
including most recent bonus paid, aggregate annual compensation, 
current target or guaranteed bonus, if any, and any other payments due 
to or promises made to the employee; descriptions of reporting 
relationships, past experience, responsibilities, and training and 
educational histories; lists of all certifications; and all job 
performance evaluations. If Defendants are barred by any applicable 
laws from providing any of this information, within ten (10) business 
days following receipt of the request, Defendants must provide the 
requested information to the full extent permitted by law and also must 
provide a written explanation of Defendants' inability to provide the 
remaining information.
    3. At the request of the Acquirer of the Optical Systems 
Divestiture Assets, Defendants must promptly make Optical Systems 
Personnel available for private interviews with the Acquirer of the 
Optical Systems Divestiture Assets during normal business hours at a 
mutually agreeable location.
    4. Defendants must not interfere with any efforts by the Acquirer 
of the Optical Systems Divestiture Assets to employ any Optical Systems 
Personnel. Interference includes but is not limited to offering to 
increase the salary or improve the benefits of Optical Systems 
Personnel unless the offer is part of a company-wide increase in salary 
or benefits that was announced prior to June 9, 2019 or has been 
approved by the United States, in its sole discretion. Defendants' 
obligations under this paragraph will expire six (6) months after the 
divestiture of the Optical Systems Divestiture Assets pursuant to this 
Final Judgment.

[[Page 23157]]

    5. For Optical Systems Personnel who elect employment with the 
Acquirer of the Optical Systems Divestiture Assets within six (6) 
months of the date on which the Optical Systems Divestiture Assets are 
divested to the Acquirer of the Optical Systems Divestiture Assets, 
Defendants must waive all non-compete and non-disclosure agreements, 
vest all unvested pension and other equity rights, and provide all 
benefits that those Optical Systems Personnel otherwise would have been 
provided had the Optical Systems Personnel continued employment with 
Defendants, including but not limited to any retention bonuses or 
payments. Defendants may maintain reasonable restrictions on disclosure 
by Optical Systems Personnel of Defendants' proprietary non-public 
information that is unrelated to Optical Systems Divestiture Assets and 
not otherwise required to be disclosed by this Final Judgment.
    6. For a period of twelve (12) months from the date on which the 
Optical Systems Divestiture Assets are divested to the Acquirer of the 
Optical Systems Divestiture Assets, Defendants may not solicit to 
rehire Optical Systems Personnel who were hired by the Acquirer of the 
Optical Systems Divestiture Assets within six (6) months of the date on 
which the Optical Systems Divestiture Assets are divested to the 
Acquirer of the Optical Systems Divestiture Assets unless (a) an 
individual is terminated or laid off by the Acquirer of the Optical 
Systems Divestiture Assets or (b) the Acquirer of the Optical Systems 
Divestiture Assets agrees in writing that Defendants may solicit to 
rehire that individual. Nothing in this paragraph prohibits Defendants 
from advertising employment openings using general solicitations or 
advertisements.
    D. Defendants must permit prospective Acquirers of the Optical 
Systems Divestiture Assets to have reasonable access to make 
inspections of the physical facilities and access to all environmental, 
zoning, and other permit documents and information, and all financial, 
operational, or other documents and information customarily provided as 
part of a due diligence process.
    E. Defendants must warrant to the Acquirer of the Optical Systems 
Divestiture Assets that each asset to be divested will be fully 
operational and without material defect on the date of sale.
    F. Defendants must not take any action that will impede in any way 
the permitting, operation, or divestiture of the Optical Systems 
Divestiture Assets.
    G. Defendants must make best efforts to assign, subcontract, or 
otherwise transfer all contracts related to the Optical Systems 
Divestiture Assets, including all supply and sales contracts, to the 
Acquirer of the Optical Systems Divestiture Assets. Defendants must not 
interfere with any negotiations between the Acquirer of the Optical 
Systems Divestiture Assets and a contracting party.
    H. At the option of the Acquirer of the Optical Systems Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, on or before the date on which the Optical Systems 
Divestiture Assets are divested to Acquirer of the Optical Systems 
Divestiture Assets, Defendants must enter into a supply contract to 
meet the needs of the Acquirer of the Optical Systems Divestiture 
Assets for image processing software to support projects of the Optical 
Systems Business for a period of up to twelve (12) months on terms and 
conditions reasonably related to market conditions for image processing 
software. The United States, in its sole discretion, may approve one or 
more extensions of this supply contract, for a total of up to an 
additional twelve (12) months. If the Acquirer of the Optical Systems 
Divestiture Assets seeks an extension of the term of this supply 
contract, Defendants must notify the United States in writing at least 
three (3) months prior to the date the supply contract expires. The 
Acquirer of the Optical Systems Divestiture Assets may terminate the 
supply contract without cost or penalty at any time upon commercially 
reasonable notice.
    I. At the option of the Acquirer of the Optical Systems Divestiture 
Assets, and subject to approval by the United States in its sole 
discretion, on or before the date on which the Optical Systems 
Divestiture Assets are divested to the Acquirer of the Optical Systems 
Divestiture Assets, Defendants must enter into a contract to provide 
transition services for back office, human resource, and information 
technology services and support for the Optical Systems Business for a 
period of up to twelve (12) months on terms and conditions reasonably 
related to market conditions for the provision of the transition 
services. The United States, in its sole discretion, may approve one or 
more extensions of this contract for transition services, for a total 
of up to an additional six (6) months. If the Acquirer of the Optical 
Systems Divestiture Assets seeks an extension of the term of this 
contract for transition services, Defendants must notify the United 
States in writing at least three (3) months prior to the date the 
contract expires. The Acquirer of the Optical Systems Divestiture 
Assets may terminate a contract for transition services without cost or 
penalty at any time upon commercially reasonable notice. The 
employee(s) of Defendants tasked with providing these transition 
services must not share any competitively sensitive information of the 
Acquirer of the Optical Systems Divestiture Assets with any other 
employee of Defendants.
    J. Defendants must warrant to the Acquirer of the Optical Systems 
Divestiture Assets that there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation of 
the Optical Systems Divestiture Assets. Following the sale of the 
Optical Systems Divestiture Assets, Defendants must not undertake, 
directly or indirectly, any challenges to the environmental, zoning, or 
other permits relating to the operation of the Optical Systems 
Divestiture Assets.
    K. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section VI or by a Divestiture Trustee 
appointed pursuant to Section VII of this Final Judgment must include 
the entire Optical Systems Divestiture Assets and must be accomplished 
in such a way as to satisfy the United States, in its sole discretion, 
that the Optical Systems Divestiture Assets can and will be used by the 
Acquirer of the Optical Systems Divestiture Assets as part of a viable, 
ongoing business in the design, development, production, and sale of 
Optical Systems, and will remedy the competitive harm alleged in the 
Complaint. The divestiture, whether pursuant to Section VI or Section 
VII of this Final Judgment:

    (1) Must 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 the design, development, 
production, and sale of Optical Systems; and
    (2) must 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 Defendants give Defendants the ability unreasonably 
to raise the Acquirer of the Optical Systems Divestiture Assets' 
costs, to lower the Acquirer of the Optical Systems Divestiture 
Assets' efficiency, or otherwise to interfere in the ability of the 
Acquirer of the Optical Systems Divestiture Assets to compete 
effectively.

    L. If any term of an agreement between Defendants and the Acquirer 
of the Optical Systems Divestiture Assets to effectuate the divestiture 
required by this Final Judgment varies from a term

[[Page 23158]]

of this Final Judgment then, to the extent that Defendants cannot fully 
comply with both, this Final Judgment determines Defendants' 
obligations.

VII. Appointment of Divestiture Trustee

    A. If Defendants have not divested all of the Divestiture Assets 
within the periods specified in Paragraphs IV(A), V(A) and VI(A), 
Defendants must immediately notify the United States of that fact in 
writing. Upon application of the United States, the Court will appoint 
a Divestiture Trustee selected by the United States and approved by the 
Court to effect the divestiture(s) of any of the Divestiture Assets 
that have not been sold during the time periods specified in Paragraphs 
IV(A), V(A) and VI(A).
    B. After the appointment of a Divestiture Trustee by the Court, 
only the Divestiture Trustee will have the right to sell those 
Divestiture Assets that the Divestiture Trustee has been appointed to 
sell. The Divestiture Trustee will have the power and authority to 
accomplish the divestiture(s) to an Acquirer(s) acceptable to the 
United States, in its sole discretion, at a price and on terms as are 
then obtainable upon reasonable effort by the Divestiture Trustee, 
subject to the provisions of Sections IV, V, VI, VII, and VIII of this 
Final Judgment, and will have other powers as the Court deems 
appropriate. Subject to Paragraph VII(D) of this Final Judgment, the 
Divestiture Trustee may hire at the cost and expense of Defendants any 
agents or consultants, including, but not limited to, investment 
bankers, attorneys, and accountants, who will be solely accountable to 
the Divestiture Trustee, reasonably necessary in the Divestiture 
Trustee's judgment to assist in the divestiture. Any such agents or 
consultants will serve on such terms and conditions as the United 
States approves, including confidentiality requirements and conflict of 
interest certifications.
    C. Defendants may not object to a sale by the Divestiture Trustee 
on any ground other than malfeasance by the Divestiture Trustee. 
Objections by Defendants 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 
VIII.
    D. The Divestiture Trustee will serve at the cost and expense of 
Defendants 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 will 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 any of its services yet unpaid and those of agents 
and consultants retained by the Divestiture Trustee, all remaining 
money will be paid to Defendants and the trust will then be terminated. 
The compensation of the Divestiture Trustee and any agents or 
consultants retained by the Divestiture Trustee must be reasonable in 
light of the value of the Divestiture Assets and based on a fee 
arrangement that provides the Divestiture Trustee with incentives based 
on the price and terms of the divestiture and the speed with which it 
is accomplished, but the timeliness of the divestiture is paramount. If 
the Divestiture Trustee and Defendants are unable to reach agreement on 
the Divestiture Trustee's or any agents' or consultants' compensation 
or other terms and conditions of engagement within fourteen (14) 
calendar days of the appointment of the Divestiture Trustee, the United 
States may, in its sole discretion, take appropriate action, including 
making a recommendation to the Court. Within three (3) business days of 
hiring any agent or consultant, the Divestiture Trustee must provide 
written notice of the hiring and rate of compensation to Defendants and 
the United States.
    E. Defendants must use their best efforts to assist the Divestiture 
Trustee in accomplishing the required divestiture(s). The Divestiture 
Trustee and any agents or consultants retained by the Divestiture 
Trustee must have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Defendants 
must provide or develop financial and other information relevant to 
such business as the Divestiture Trustee may reasonably request, 
subject to reasonable protection for trade secrets; other confidential 
research, development, or commercial information; or any applicable 
privileges. Defendants may not take any action to interfere with or to 
impede the Divestiture Trustee's accomplishment of the divestiture(s).
    F. After appointment, the Divestiture Trustee will file monthly 
reports with the United States setting forth the Divestiture Trustee's 
efforts to accomplish the divestiture(s) ordered by this Final 
Judgment. Reports must 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 will describe in detail each 
contact with any such person. The Divestiture Trustee will maintain 
full records of all efforts made to divest the Divestiture Assets.
    G. If the Divestiture Trustee has not accomplished the 
divestiture(s) ordered by this Final Judgment within six months of 
appointment, the Divestiture Trustee must promptly file with the Court 
a report setting forth: (1) The Divestiture Trustee's efforts to 
accomplish the required divestiture(s); (2) the reasons, in the 
Divestiture Trustee's judgment, why the required divestiture(s) 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 will not be filed in the public 
docket of the Court. The Divestiture Trustee will at the same time 
furnish such report to the United States, which will have the right to 
make additional recommendations to the Court consistent with the 
purpose of the trust. The Court thereafter may enter such orders as it 
deems appropriate to carry out the purpose of this Final Judgment, 
which, if necessary, may 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 is 
not acting diligently or in a reasonably cost-effective manner, the 
United States may recommend that the Court appoint a substitute 
Divestiture Trustee.

VIII. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendants or the Divestiture Trustee, whichever 
is then responsible for effecting the divestiture required herein, must 
notify the United States of a proposed divestiture required by this 
Final Judgment. If the Divestiture Trustee is responsible for effecting 
the divestiture, the Divestiture Trustee also must notify Defendants. 
The notice must 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 this notice, the United States may request

[[Page 23159]]

from Defendants, the proposed Acquirer(s), other third parties, or the 
Divestiture Trustee, if applicable, additional information concerning 
the proposed divestiture, the proposed Acquirer and other prospective 
Acquirer(s). Defendants and the Divestiture Trustee must furnish the 
additional information requested within fifteen (15) calendar days of 
the receipt of the request, unless the United States provides written 
agreement to a different period.
    C. Within forty-five (45) 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 Defendants, the 
proposed Acquirer(s), other third parties, and the Divestiture Trustee, 
whichever is later, the United States must provide written notice to 
Defendants and the Divestiture Trustee, if there is one, stating 
whether or not the United States, in its sole discretion, objects to 
the proposed Acquirer(s) or any other aspect of the proposed 
divestiture. If the United States provides written notice that it does 
not object, the divestiture may be consummated, subject only to 
Defendants' limited right to object to the sale under Paragraph VII(C) 
of this Final Judgment. Absent written notice that the United States 
does not object or upon objection by the United States, a divestiture 
may not be consummated. Upon objection by Defendants pursuant to 
Paragraph VII(C), a divestiture by the Divestiture Trustee may not be 
consummated unless approved by the Court.
    D. No information or documents obtained pursuant to Section VIII 
may 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), for the purpose of 
evaluating a proposed Acquirer or securing compliance with this Final 
Judgment, or as otherwise required by law.
    E. In the event of a request by a third party for disclosure of 
information under the Freedom of Information Act, 5 U.S.C. 552, the 
Antitrust Division will act in accordance with that statute, and the 
Department of Justice regulations at 28 CFR part 16, including the 
provision on confidential commercial information, at 28 CFR 16.7. 
Persons submitting information to the Antitrust Division should 
designate the confidential commercial information portions of all 
applicable documents and information under 28 CFR 16.7. Designations of 
confidentiality expire ten years after submission, ``unless the 
submitter requests and provides justification for a longer designation 
period.'' See 28 CFR 16.7(b).
    F. If at the time a person furnishes information or documents to 
the United States pursuant to Section VIII, that person represents and 
identifies in writing information or documents for which a claim of 
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules 
of Civil Procedure, and 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,'' the United States must give that person ten 
calendar days' notice before divulging the material in any legal 
proceeding (other than a grand-jury proceeding).

IX. Financing

    Defendants may not finance all or any part of Acquirer's purchase 
of all or part of the Divestiture Assets made pursuant to this Final 
Judgment.

X. Asset Preservation and Hold Separate

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

XI. 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 required by this Final Judgment has been completed, 
Defendants must deliver to the United States an affidavit, signed by 
each Defendant's Chief Financial Officer and General Counsel, 
describing the fact and manner of Defendants' compliance with this 
Final Judgment. Each affidavit must include the name, address, and 
telephone number of each person who, during the preceding thirty (30) 
calendar days, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, an interest in the Divestiture Assets, 
and must describe in detail each contact with such persons during that 
period. Each affidavit also must include a description of the efforts 
Defendants have taken to solicit buyers for and complete the sale of 
the Divestiture Assets, and to provide required information to 
prospective Acquirers. Each affidavit also must include a description 
of any limitations placed by Defendants on information provided to 
prospective Acquirers. If the information set forth in the affidavit is 
true and complete, objection by the United States to information 
provided by Defendants to prospective Acquirers must be made within 
fourteen (14) calendar days of receipt of the affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendants must deliver to the United States an 
affidavit that describes in reasonable detail all actions Defendants 
have taken and all steps Defendants have implemented on an ongoing 
basis to comply with Section X of this Final Judgment. Defendants must 
deliver to the United States an affidavit describing any changes to the 
efforts and actions outlined in Defendants' earlier affidavits filed 
pursuant to Section XI within fifteen (15) calendar days after the 
change is implemented.
    C. Defendants must keep all records of all efforts made to preserve 
and divest the Divestiture Assets until one year after the divestiture 
has been completed.

XII. Appointment of Monitoring Trustee

    A. Upon application of the United States, the Court will appoint a 
Monitoring Trustee selected by the United States and approved by the 
Court.
    B. The Monitoring Trustee will have the power and authority to 
monitor Defendants' compliance with the terms of this Final Judgment 
and the Asset Preservation and Hold Separate Stipulation and Order 
entered by the Court, and will have other powers as the Court deems 
appropriate. The Monitoring Trustee will be required to investigate and 
report on Defendants' compliance with this Final Judgment and the Asset 
Preservation and Hold Separate Stipulation and Order, and Defendants' 
progress toward effectuating the purposes of this Final Judgment, 
including but not limited to: Defendants' sale of the Divestiture 
Assets and Defendants' compliance with the terms of the transition 
services agreements, supply contracts, laboratory access arrangements, 
and short-term leases provided for in this Final Judgment.
    C. Subject to Paragraph XII(E) of this Final Judgment, the 
Monitoring Trustee may hire at the cost and expense of Defendants any 
agents and consultants, including, but not limited to, investment 
bankers, attorneys, and accountants, who will be solely accountable to 
the Monitoring Trustee, reasonably necessary in the Monitoring 
Trustee's judgment. Any such agents or consultants will serve on such 
terms

[[Page 23160]]

and conditions as the United States approves, including confidentiality 
requirements and conflict of interest certifications.
    D. Defendants may not object to actions taken by the Monitoring 
Trustee in fulfillment of the Monitoring Trustee's responsibilities 
under any Order of the Court on any ground other than malfeasance by 
the Monitoring Trustee. Objections by Defendants must be conveyed in 
writing to the United States and the Monitoring Trustee within ten (10) 
calendar days after the action taken by the Monitoring Trustee giving 
rise to Defendants' objection.
    E. The Monitoring Trustee will serve at the cost and expense of 
Defendants pursuant to a written agreement with Defendants, on such 
terms and conditions as the United States approves, including 
confidentiality requirements and conflict of interest certifications. 
The compensation of the Monitoring Trustee and any agents or 
consultants retained by the Monitoring Trustee must be on reasonable 
and customary terms commensurate with the individuals' experience and 
responsibilities. If the Monitoring Trustee and Defendants are unable 
to reach agreement on the Monitoring Trustee's or any agents' or 
consultants' compensation or other terms and conditions of engagement 
within fourteen (14) calendar days of the appointment of the Monitoring 
Trustee, the United States may, in its sole discretion, take 
appropriate action, including making a recommendation to the Court. 
Within three (3) business days of hiring any agents or consultants, the 
Monitoring Trustee must provide written notice of the hiring and rate 
of compensation to Defendants and the United States.
    F. The Monitoring Trustee will have no responsibility or obligation 
for the operation of Defendants' businesses.
    G. Defendants must use their best efforts to assist the Monitoring 
Trustee in monitoring Defendants' compliance with their individual 
obligations under this Final Judgment and under the Asset Preservation 
and Hold Separate Stipulation and Order. The Monitoring Trustee and any 
agents or consultants retained by the Monitoring Trustee must have full 
and complete access to the personnel, books, records, and facilities 
relating to compliance with this Final Judgment, subject to reasonable 
protection for trade secrets; other confidential research, development, 
or commercial information; or any applicable privileges. Defendants may 
not take any action to interfere with or to impede the Monitoring 
Trustee's accomplishment of the Monitoring Trustee's responsibilities.
    H. After appointment, the Monitoring Trustee will file reports 
monthly, or more frequently as needed, with the United States setting 
forth Defendants' efforts to comply with Defendants' obligations under 
this Final Judgment and under the Asset Preservation and Hold Separate 
Stipulation and Order.
    I. The Monitoring Trustee will serve until the divestiture of all 
the Divestiture Assets is finalized pursuant to this Final Judgment, or 
until the term of any transition services agreements, supply contracts, 
laboratory access arrangements, and short-term leases required by this 
Final Judgment have expired, whichever is later.
    J. If the United States determines that the Monitoring Trustee is 
not acting diligently or in a reasonably cost-effective manner, the 
United States may recommend that the Court appoint a substitute 
Monitoring Trustee.

XIII. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of related orders such as an Asset Preservation and 
Hold Separate Stipulation and Order, or of determining whether this 
Final Judgment should be modified or vacated, and subject to any 
legally-recognized privilege, from time to time authorized 
representatives of the United States, including agents retained by the 
United States, must, upon written request of an authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division and reasonable notice to Defendants, be permitted:

    (1) Access during Defendants' office hours to inspect and copy 
or, at the option of the United States, to require Defendants to 
provide electronic copies of all books, ledgers, accounts, records, 
data, and documents in the possession, custody, or control of 
Defendants relating to any matters contained in this Final Judgment; 
and
    (2) to interview, either informally or on the record, 
Defendants' officers, employees, or agents, who may have their 
individual counsel present, regarding such matters. The interviews 
must be subject to the reasonable convenience of the interviewee and 
without restraint or interference by Defendants.

    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants must submit written reports or respond to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment.
    C. No information or documents obtained pursuant to Section XIII 
may 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), for the purpose of securing 
compliance with this Final Judgment, or as otherwise required by law.
    D. In the event of a request by a third party for disclosure of 
information under the Freedom of Information Act, 5 U.S.C. 552, the 
Antitrust Division will act in accordance with that statute, and the 
Department of Justice regulations at 28 CFR part 16, including the 
provision on confidential commercial information, at 28 CFR 16.7. 
Defendants submitting information to the Antitrust Division should 
designate the confidential commercial information portions of all 
applicable documents and information under 28 CFR 16.7. Designations of 
confidentiality expire ten years after submission, ``unless the 
submitter requests and provides justification for a longer designation 
period.'' See 28 CFR 16.7(b).
    E. If at the time that Defendants furnish information or documents 
to the United States pursuant to Section XIII, Defendants represent and 
identify in writing information or documents for which a claim of 
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules 
of Civil Procedure, and Defendants mark each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of 
the Federal Rules of Civil Procedure,'' the United States must give 
Defendants ten (10) calendar days' notice before divulging the material 
in any legal proceeding (other than a grand jury proceeding).

XIV. Limitations on Reacquisition

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

XV. Retention of Jurisdiction

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

XVI. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including the right to seek an order 
of contempt from the Court. Defendants

[[Page 23161]]

agree that in a civil contempt action, a motion to show cause, or a 
similar action brought by the United States regarding an alleged 
violation of this Final Judgment, the United States may establish a 
violation of this Final Judgment and the appropriateness of a remedy 
therefor by a preponderance of the evidence, and Defendants waive any 
argument that a different standard of proof should apply.
    B. This Final Judgment should be interpreted to give full effect to 
the procompetitive purposes of the antitrust laws and to restore the 
competition the United States alleged was harmed by the challenged 
conduct. Defendants agree that they may be held in contempt of, and 
that the Court may enforce, any provision of this Final Judgment that, 
as interpreted by the Court in light of these procompetitive principles 
and applying ordinary tools of interpretation, is stated specifically 
and in reasonable detail, whether or not it is clear and unambiguous on 
its face. In any such interpretation, the terms of this Final Judgment 
should not be construed against either party as the drafter.
    C. In an enforcement proceeding in which the Court finds that 
Defendants have violated this Final Judgment, the United States may 
apply to the Court for a one-time extension of this Final Judgment, 
together with other relief that may be appropriate. In connection with 
a successful effort by the United States to enforce this Final Judgment 
against a Defendant, whether litigated or resolved before litigation, 
that Defendant agrees to reimburse the United States for the fees and 
expenses of its attorneys, as well as all other costs, including 
experts' fees, incurred in connection with that enforcement effort, 
including in the investigation of the potential violation.
    D. For a period of four (4) years following the expiration of this 
Final Judgment, if the United States has evidence that a Defendant 
violated this Final Judgment before it expired, the United States may 
file an action against that Defendant in this Court requesting that the 
Court order: (1) Defendant to comply with the terms of this Final 
Judgment for an additional term of at least four years following the 
filing of the enforcement action; (2) all appropriate contempt 
remedies; (3) additional relief needed to ensure the Defendant complies 
with the terms of this Final Judgment, and (4) fees or expenses as 
called for by Section XII.

XVII. Expiration of Final Judgment

    Unless the Court grants an extension, this Final Judgment will 
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 Defendants 
that the divestitures have been completed and the continuation of this 
Final Judgment no longer is necessary or in the public interest.

XVIII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including by making available to the 
public copies of this Final Judgment, the Competitive Impact Statement, 
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 responses 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

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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

Case No. 1:20-cv-00824 (DLF)

Judge: Hon. Dabney L. Friedrich

Competitive Impact Statement

    The United States of America, under Section 2(b) of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA'' or 
``Tunney Act''), 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 June 9, 2019, United Technologies Corporation (``UTC'') and 
Raytheon Company (``Raytheon'') agreed to merge in a transaction that 
would create the nation's second-largest aerospace and defense 
contractor. UTC and Raytheon are leading manufacturers of certain 
systems and components used by the Department of Defense (``DoD'') and 
U.S. intelligence community. The companies are the primary suppliers of 
radios for use in military aircraft (``military airborne radios''), and 
are two of the leading suppliers of military global positioning system 
(``GPS'') receivers and anti-jam products (collectively, ``military GPS 
systems''). The companies also have capabilities in critical inputs for 
electro-optical/infrared (``EO/IR'') reconnaissance satellites, 
including large space-based optical systems and EO/IR reconnaissance 
satellite payloads.
    The United States filed a civil antitrust Complaint on March 26, 
2020, seeking to enjoin the proposed merger. The Complaint alleges that 
the likely effect of the merger would be to substantially lessen 
competition for the design, development, production, and sale of 
military airborne radios, military GPS systems for aviation/maritime 
applications, military GPS systems for ground-based applications, large 
space-based optical systems, and EO/IR reconnaissance satellite 
payloads in the United States, in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    At the same time the Complaint was filed, the United States filed 
an Asset Preservation and Hold Separate Stipulation and Order 
(``Stipulation and Order'') and proposed Final Judgment, which are 
designed to address the anticompetitive effects of the acquisition. 
Under the proposed Final Judgment, which is explained more fully below, 
the Defendants are required to divest UTC's military GPS and optical 
systems businesses as well as Raytheon's military airborne radios 
business. Under the terms of the Stipulation and Order, the Defendants 
must take certain steps to ensure that the military airborne radios, 
military GPS, and optical systems businesses are operated in such a way 
as to ensure that the businesses continue to be ongoing, economically 
viable, and competitive business concerns during the pendency of the 
required divestitures, and that the optical systems business is held 
separate from Defendants' other operations during this period.
    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered after compliance with the APPA. 
Entry of the proposed Final Judgment will terminate this action, except 
that the Court will retain jurisdiction to construe, modify, or enforce 
the provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    UTC is a Delaware corporation with its headquarters in Farmington, 
Connecticut. UTC produces a wide range of products for the aerospace 
and defense industries, including military airborne radios, military 
GPS systems, and large space-based optical systems.

[[Page 23162]]

UTC had sales of approximately $77 billion in 2019.
    Raytheon is a Delaware corporation with its headquarters in 
Waltham, Massachusetts. Raytheon is one of the world's largest defense 
manufacturers, with significant capabilities in radars and missiles. It 
also produces military airborne radios, military GPS systems, and 
payloads for EO/IR reconnaissance satellites. Raytheon had sales of 
approximately $29 billion in 2019.
    On June 9, 2019, UTC and Raytheon reached an agreement and plan of 
merger to combine their operations.

B. Military Airborne Radios

1. Background
    Military airborne radios allow for secure voice, data, and video 
communication between aircraft and from aircraft to the ground. This 
communication occurs either through direct communications links or 
through a satellite uplink system. Military airborne radios have two 
main components: Radios (transmitter and receiver) and waveforms 
(communication protocols and related hardware/software). Specialized 
elements in both the radios and waveforms protect military airborne 
radio transmissions from being intercepted and decrypted.
    There are multiple military airborne radios on every airplane and 
helicopter used by DoD today, as well as thousands of spares in 
military depots throughout the world. DoD regularly purchases new 
military airborne radios as new aircraft are developed and to replace 
those currently in the field as military airborne radio suppliers 
develop improved radios with additional features.
    UTC's AN/ARC-210 military airborne radio is specified on almost all 
Air Force and Navy aircraft. Raytheon's AN/ARC-231 military airborne 
radio is specified on almost all Army helicopters. Military airborne 
radios from UTC and Raytheon are each the closest substitute for the 
other, and represent the only competitive alternative for a DoD 
customer in the event that either UTC or Raytheon increases prices for 
its military airborne radios or otherwise exercises market power.
2. Relevant Markets
a. Product Market
    The quality and usefulness of a military airborne radio is defined 
by several characteristics, the most important of which are 
reliability, security, and the ability to access numerous 
communications networks. For instance, DoD requires highly ruggedized 
radios that can withstand the extreme environments encountered by 
military aircraft, including the rapid temperature changes and G-forces 
experienced on fighter jets. To ensure constant contact and to enable 
the flow of information throughout the battlefield, DoD radios must 
also communicate with multiple platforms--including aircraft, ships, 
ground forces, and smart weapons--using various waveforms, and must 
also keep those communications secure and encrypted to prevent signals 
from being intercepted by adversaries.
    As alleged in the Complaint, there are no substitutes for military 
airborne radios. Radios developed for other military purposes, 
including ground and ship-based radios, cannot withstand the high G-
forces and extreme temperature fluctuations experienced by military 
aircraft, particularly fighter jets. Furthermore, military airborne 
radios are smaller and more power-efficient than those designed for 
ground and ship-based uses. Airborne radios developed for commercial 
purposes--including commercial aviation--are also not substitutes for 
military airborne radios. Commercial airborne radios lack the high 
level of encryption and jamming resistance required for military 
airborne radios. In addition, while commercial airborne radios can 
access numerous civil and governmental communications networks, they do 
not incorporate the waveforms and software algorithms necessary to 
access the numerous specialized networks used by purchasers of military 
airborne radios.
    The Complaint alleges that substitution away from military airborne 
radios in response to a small but significant and non-transitory 
increase in price will not be sufficient to render such a price 
increase unprofitable. Accordingly, the Complaint alleges that the 
design, development, production, and sale of military airborne radios 
is a relevant product market and line of commerce within the meaning of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
b. Geographic Market
    As alleged in the Complaint, for national security reasons, DoD, 
which is the only purchaser of these products in the United States, 
strongly prefers domestic suppliers of military airborne radios. DoD is 
unlikely to turn to any foreign suppliers in the face of a small but 
significant and non-transitory price increase by domestic suppliers of 
military airborne radios. The Complaint therefore alleges that the 
United States is a relevant geographic market within the meaning of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
3. Anticompetitive Effects of the Proposed Transaction
    According to the Complaint, UTC and Raytheon today are the leading 
suppliers of military airborne radios to DoD. The merger would 
therefore give the merged firm a dominant share of the market for the 
design, development, production, and sale of military airborne radios, 
leaving DoD few competitive alternatives for this critical component of 
military communications.
    UTC and Raytheon compete in the market for the design, development, 
production, and sale of military airborne radios on the basis of 
quality, price, and contractual terms such as delivery times. This 
competition has resulted in higher quality, lower prices, and shorter 
delivery times for military airborne radios. Competition between UTC 
and Raytheon has also fostered important industry innovation. The 
combination of UTC and Raytheon would eliminate this competition and 
its future benefits to DoD customers. Post-acquisition, the merged firm 
likely would have the incentive and ability to increase prices, offer 
less favorable contractual terms, and diminish investments in research 
and development efforts that lead to innovative and high-quality 
products. The Complaint alleges that the proposed acquisition, 
therefore, likely would substantially lessen competition in the design, 
development, production, and sale of military airborne radios in the 
United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 
18.
4. Difficulty of Entry
    According to the Complaint, sufficient timely entry or expansion of 
additional competitors into the market for the design, development, 
production, and sale of military airborne radios is unlikely to prevent 
the harm to competition that is likely to result if the proposed 
acquisition is consummated. Because UTC's AN/ARC-210 and Raytheon AN/
ARC-231 are established designs that have been produced in high volumes 
for many years, they are well-understood by DoD customers and have 
significant economies of scale. Any new products manufactured by an 
alternative supplier would require extensive testing and qualification 
before they would be acceptable to DoD, and even at the end of that 
process the new supplier still would not have the reputation of UTC and 
Raytheon with DoD. Moreover, no potential alternative supplier has the 
large-scale military airborne radio production facilities of UTC or 
Raytheon, or the expertise of those firms

[[Page 23163]]

in developing the complex software algorithms necessary for military 
airborne radios. Accordingly, entry or expansion would be costly and 
time-consuming.
    The Complaint therefore alleges that entry or expansion of 
additional competitors into the market for the design, development, 
production, and sale of military airborne radios would not be timely, 
likely, or sufficient to defeat the anticompetitive effects likely to 
result from UTC's merger with Raytheon.

C. Military GPS Systems

1. Background
    Military GPS systems allow ground vehicles, ships, and planes to 
receive and process information regarding their position, navigation, 
and timing. Military GPS systems guide missiles and projectiles to 
their intended targets, locate friendly fighters in theaters of war, 
and enable remote operators to fly unmanned aerial vehicles thousands 
of miles away. Military GPS systems contain technology that protects 
them from two forms of enemy interference: ``spoofing,'' a signal 
disruption causing a GPS system to calculate a false position, and 
``jamming,'' which occurs when a GPS system's satellite signals are 
overpowered. To ensure that spoofing and jamming do not interfere with 
U.S. military missions, military GPS systems contain encryption modules 
and anti-jamming technology.
    In 2011, the U.S. government announced that ``M-Code,'' a 
modernized encryption system, would be incorporated into military GPS 
systems. In September 2012, DoD awarded technology development 
contracts (and accompanying funds) to UTC, Raytheon, and a third firm 
to develop M-Code compliant GPS systems that the military could 
implement quickly. DoD requested two discrete types of GPS systems--one 
for ground applications and another for aviation/maritime applications. 
UTC and Raytheon have been working to develop products for both 
applications--ground and aviation/maritime--while to date the third 
firm is under contract only for ground applications. While other 
defense contractors may eventually develop acceptable military GPS 
systems for these applications, those contractors are years behind, 
will not be eligible for funding from the U.S. government, and will not 
enjoy the incumbents' advantage held by the three leading suppliers.
2. Relevant Markets
a. Product Markets
    Military GPS systems for aviation/maritime applications and 
military GPS systems for ground applications serve different functions 
and cannot be substituted for one another. For example, there are 
different power, performance, and form factor requirements for 
aviation/maritime GPS systems and ground GPS systems. Customers 
therefore cannot substitute an aviation/maritime GPS system for a 
ground GPS system (or vice versa) without sacrificing important 
functionality.
    Military GPS systems for both applications are highly customized to 
suit the needs of military end users. For each military GPS system, DoD 
specifies the form factor (i.e., the physical size and shape), 
performance metrics, and encryption standards that must be met. Due to 
the mission-critical nature of military GPS systems, DoD is far more 
exacting than commercial customers, and as a result, commercial GPS 
systems cannot be substituted for military GPS systems for either 
application. Nor can any alternative technology provide the 
functionality that a GPS system provides, such as instantaneous 
position, navigation, and timing information.
    The Complaint therefore alleges that customers would not switch to 
a commercial GPS system or to an alternative technology, nor would they 
switch between military GPS systems for different applications, in the 
face of a small but significant and non-transitory increase in the 
price of a military GPS system for aviation/maritime applications or a 
military GPS system for ground applications. Accordingly, the Complaint 
alleges that the design, development, production, and sale of (i) 
military GPS systems for aviation/maritime applications and (ii) 
military GPS systems for ground applications are lines of commerce and 
relevant product markets within the meaning of Section 7 of the Clayton 
Act, 15 U.S.C. 18.
c. Geographic Market
    As alleged in the Complaint, for national security reasons, DoD, 
which is the sole purchaser of these products in the United States, 
prefers domestic suppliers of military GPS systems. DoD is unlikely to 
turn to any foreign suppliers in the face of a small but significant 
and non-transitory price increase by domestic suppliers of military GPS 
systems. The Complaint therefore alleges that the United States is a 
relevant geographic market within the meaning of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
3. Anticompetitive Effects of the Proposed Transaction
    According to the Complaint, UTC and Raytheon are the only suppliers 
of military GPS systems for aviation/maritime applications in the 
United States. The merger therefore would give the combined firm a 
monopoly in the market for this product and leave DoD without any 
competitive alternatives. The merger also would create a duopoly in the 
supply of military GPS systems for ground applications, as UTC and 
Raytheon are two of only three suppliers of those products.
    UTC and Raytheon compete to design, develop, produce, and sell 
military GPS systems for aviation/maritime applications and ground 
applications on the basis of quality, price, technological 
capabilities, and contractual terms such as delivery times. This 
competition has resulted in higher quality, lower prices, innovation, 
and shorter delivery times for military GPS systems for both 
applications. The combination of UTC and Raytheon would eliminate this 
competition and its future benefits to DoD customers. Post-acquisition, 
the merged firm likely would compete less along the dimensions of 
innovation, quality, price, or contractual terms. The Complaint 
therefore alleges that the proposed acquisition likely would 
substantially lessen competition in the design, development, 
production, and sale of military GPS systems for aviation/maritime 
applications and for ground applications in the United States in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
4. Difficulty of Entry
    According to the Complaint, sufficient, timely entry of additional 
competitors into the markets for the design, development, production, 
and sale of military GPS systems for aviation/maritime applications and 
for ground applications is unlikely to prevent the harm to competition 
likely to result if the proposed acquisition is consummated. A new 
entrant would need significant capital to develop prototypes and 
establish a manufacturing operation. Even with a prototype, an entrant 
would need a network of government and prime contractor contacts to 
assist with testing and troubleshooting. Finally, an entrant would need 
to clear the qualification process to become a supplier to DoD. 
Together, these steps would take years to complete. Accordingly, entry 
would be costly and time-consuming.

[[Page 23164]]

    The Complaint also alleges that timely and sufficient expansion of 
capabilities by a producer of military GPS systems for ground-based 
applications is unlikely to prevent the harm to competition in military 
GPS systems for aviation/maritime applications that is likely to result 
if the proposed acquisition is consummated. A producer of ground-based 
military GPS systems would need to ruggedize its product to withstand 
the high G-forces and temperature extremes experienced by military 
aircraft. It would also need to match its system to the size, weight, 
and power restrictions imposed on all aircraft based electronic 
systems. These modifications would require substantial investments in 
skilled personnel and modification of production, and the product would 
require extensive development and subsequent testing by customers. 
Accordingly, expansion into this different application would be costly 
and time-consuming.
    The Complaint alleges that, as result of these barriers, entry into 
the markets for the design, development, production, and sale of 
military GPS systems for aviation/maritime applications and military 
GPS systems for ground applications would not be timely, likely, or 
sufficient to defeat the anticompetitive effects likely to result from 
UTC's merger with Raytheon

D. EO/IR Reconnaissance Satellites

1. Background
    Space-based reconnaissance systems provide essential information to 
end-users in DoD and the intelligence community, including 
communications intelligence, early warning of missile launches, and 
near real-time imagery to United States armed forces to support the war 
on terrorism and other operations. They also provide data essential for 
managing disaster relief, monitoring global warming, and assessing crop 
production. Space-based reconnaissance systems generally are deployed 
on satellites, where they constitute the ``payload,'' a term for the 
system that performs the primary mission of the satellite. Payload 
suppliers are subcontractors to satellite prime contractors, who 
combine payloads, structural components, power supply systems, ground 
communications systems, and other components into a complete satellite 
for delivery to the DoD or intelligence community end-user customer.
    One important type of reconnaissance satellite payload is an 
electro-optical/infrared (``EO/IR'') payload, which is a camera-based 
system that collects visible and infrared light. The components of an 
EO/IR reconnaissance satellite payload are advanced versions of the 
components found in consumer digital cameras: An optical system--a lens 
or mirror--focuses light onto an electronic detector, known as a focal 
plane array (``FPA''), which converts light to digital images for 
transmission via radio signals. Optical systems and FPAs are critical 
inputs in EO/IR reconnaissance satellite payloads.
    Raytheon has industry-leading capabilities in the provision of FPAs 
for EO/IR reconnaissance satellite payloads, having been the 
beneficiary of decades of large investments by government end-user 
customers. Specifically, Raytheon is the leading provider of FPAs 
sensitive to visible light and one of the two leading providers of FPAs 
sensitive to infrared light. Raytheon is also one of multiple firms 
that supply EO/IR reconnaissance satellite payloads to the satellite 
prime contractors who assemble the satellite for the DoD or 
intelligence community customer. UTC is one of only two firms capable 
of producing large space-based optical systems such as those used in 
EO/IR reconnaissance satellite payloads. While other suppliers have the 
capability to produce smaller optical systems for use in space, none 
can produce optical systems in sizes comparable to those produced by 
UTC and the other industry leader.
    The FPAs and large space-based optical system used in a particular 
EO/IR reconnaissance satellite payload usually are selected by the 
payload supplier. In some cases, however, the DoD or intelligence 
community customer will specify the FPA or large space-based optical 
system supplier.
2. Relevant Markets
a. Product Markets
i. Large Space-Based Optical Systems
    According to the Complaint, large space-based optical systems have 
specific requirements that distinguish them from other optical systems. 
Smaller space-based optical systems have insufficient light-gathering 
and resolving power. Optical systems designed for use on the ground do 
not possess the high strength, rigidity, low weight, temperature 
stability, and radiation-hardening that large space-based optical 
systems require to be safely and cost-effectively launched into orbit 
and used in space.
    The Complaint therefore alleges that customers would not switch to 
smaller optical systems or optical systems designed for use on the 
ground in the face of a small but significant and non-transitory 
increase in the price of large space-based optical systems. 
Accordingly, the design, development, production, and sale of large 
space-based optical systems is a line of commerce and relevant product 
market within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 
18.
ii. EO/IR Reconnaissance Satellite Payloads
    According to the Complaint, EO/IR reconnaissance satellite payloads 
have specific capabilities that distinguish them from other 
reconnaissance satellite payloads. Other types of payloads such as 
radar and electronic intelligence payloads do not provide the same type 
of information as imagery. The Complaint alleges that aerial 
reconnaissance imagery cannot substitute for the imagery produced by 
EO/IR reconnaissance satellite payloads. Many parts of the globe that 
are of critical interest to DoD and the intelligence community are 
effectively closed to reconnaissance aircraft operated by the United 
States. Even for areas open to overflight, satellite surveys are 
quicker and more efficient than aerial reconnaissance.
    The Complaint alleges that customers will not switch to other types 
of payloads or to aerial reconnaissance imagery in the event of a small 
but significant and non-transitory price increase for EO/IR 
reconnaissance satellite payloads. The Complaint therefore alleges that 
the design, development, production, and sale of EO/IR reconnaissance 
satellite payloads therefore is a line of commerce and product market 
within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.
b. Geographic Market
    As alleged in the Complaint, much of the information regarding EO/
IR reconnaissance satellites is highly sensitive, and data concerning 
the capabilities required in such satellites is released only to a 
select group of U.S.-based manufacturers that possess the necessary 
security clearances and are subject to close government oversight. For 
this reason, DoD and intelligence community customers, who are the only 
customers for these products in the United States, are unlikely to 
purchase large space-based optical systems or EO/IR reconnaissance 
satellite payloads from sources located outside the United States in 
the event of small but significant and non-transitory price increases 
by domestic producers of those products.
    The Complaint therefore alleges that the United States is a 
relevant geographic market within the meaning

[[Page 23165]]

of Section 7 of the Clayton Act, 15 U.S.C. 18.
3. Anticompetitive Effects of the Proposed Transaction
a. Large Space-Based Optical Systems
    As alleged in the Complaint, by combining UTC's capabilities in 
large space-based optical systems with Raytheon's dominant position in 
FPAs, the merger would give the combined company the incentive and 
ability to reduce competition from UTC's only large space-based optical 
systems competitor. Because Raytheon does not build large space-based 
optical systems today, it has no incentive to demand that a particular 
optical system supplier be selected by the payload builder. Following 
the merger, this incentive would change. The combined company likely 
would refuse to supply payload builders with FPAs, or supply them only 
at higher cost, if the payload builders do not also agree to purchase 
UTC's optical system. With visible-light FPAs, and in situations where 
the DoD or intelligence community end-user directed payload providers 
to use Raytheon's infrared FPAs, the payload provider would have no 
alternative but to accept UTC's large space-based optical system, even 
if it was of lower quality or higher priced than large space-based 
optical systems available from the other source. As a result, the 
merged company would be able to charge higher prices for its optical 
system, or provide a system of lower quality, than would have been 
possible before the merger.
    The Complaint alleges that UTC competes to design, develop, 
produce, and sell large space-based optical systems on the basis of 
quality, price, and innovation, as well as contractual terms such as 
delivery times. This competition leads to more innovation, higher 
quality, lower prices, and shorter delivery times. The combination of 
UTC and Raytheon would give the merged firm the incentive and ability 
to weaken this competition and its future benefits to DoD and 
intelligence community end-users, likely resulting in less innovative, 
more expensive products with lower quality and longer delivery times. 
The Complaint alleges that the proposed acquisition, therefore, likely 
would substantially lessen competition in the design, development, 
production, and sale of large space-based optical systems in the United 
States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
b. EO/IR Reconnaissance Satellite Payloads
    As alleged in the Complaint, by combining Raytheon's position as a 
producer of EO/IR reconnaissance satellite payloads with UTC's position 
as one of only two companies with the capability to build large space-
based optical systems, the merger would also give the combined company 
the incentive and ability to harm its payload rivals. Because UTC does 
not produce payloads today, it has a strong incentive to make its 
optical systems available to all payload builders. Following the 
merger, this incentive would change, and, particularly in situations 
where the DoD or intelligence community end-user directed payload 
providers to use UTC's large space-based optical systems, the combined 
company likely would raise prices for UTC's optical systems to rival 
payload builders, or simply refuse to provide UTC's optical systems at 
any price. As a result, the merged company would be able to charge 
higher prices for its payload, or provide a payload of lower quality, 
than would have been possible before the merger.
    According to the Complaint, Raytheon competes with other EO/IR 
reconnaissance satellite payload suppliers on the basis of quality, 
price, and innovation, as well as contractual terms such as delivery 
times. This competition leads to innovation, higher quality, lower 
prices, and shorter delivery times. The combination of UTC and Raytheon 
would give the merged firm the incentive and ability to weaken this 
competition and its future benefits to DoD and intelligence community 
end-users, likely resulting in less innovative, more expensive products 
with lower quality and longer delivery times. The Complaint therefore 
alleges that the proposed acquisition likely would substantially lessen 
competition in the design, development, production, and sale of EO/IR 
reconnaissance satellite payloads in the United States in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18.
4. Difficulty of Entry
    According to the Complaint, sufficient, timely entry of additional 
competitors into the markets for the design, development, production, 
and sale of visible-light or infrared FPAs for EO/IR reconnaissance 
satellite payloads is unlikely. Production facilities for these FPAs 
require a substantial investment in both capital equipment and human 
resources, and a new entrant would largely need to re-create the 
investment made in Raytheon by the United States government over the 
course of several decades. A new entrant would need to set up a foundry 
to produce electronic components, establish production lines capable of 
manufacturing read-out integrated circuits and other electronic 
components, and build assembly lines and testing facilities. 
Engineering and research personnel would need to be assigned to 
develop, test, and troubleshoot the detailed manufacturing processes, 
involving hundreds of steps, that are necessary to produce these FPAs. 
Any new products would require extensive testing and qualification 
before they could be used in payloads. These steps would require years 
to complete.
    The Complaint also alleges that sufficient, timely entry of 
additional competitors into the market for the design, development, 
production, and sale of large space-based optical systems is also 
unlikely. A new entrant would require significant investment in the 
facilities and skilled personnel required to grind and polish the 
complex curved surfaces required for large-space based optical systems, 
and then test these optics in an environment that replicates conditions 
in space. In addition, because spaceflight is an exceptionally 
demanding and high-risk endeavor, payload builders, satellite prime 
contractors, and end-user customers have a strong preference to 
purchase from established suppliers. Years of dedicated and costly 
effort would be required for a new entrant to demonstrate expertise 
comparable to UTC.
    The Complaint alleges that, as result of these barriers, entry into 
the markets for the design, development, production, and sale of 
visible-light and infrared FPAs for EO/IR reconnaissance satellite 
payloads and large space-based optical systems would not be timely, 
likely, or sufficient to defeat the anticompetitive effects in the 
markets for the design, development, production, and sale of large 
space-based optical systems and EO/IR reconnaissance satellite payloads 
likely to result from UTC's merger with Raytheon.

III. Explanation of the Proposed Final Judgment

    The divestitures required by the proposed Final Judgment will 
remedy the loss of competition alleged in the Complaint by establishing 
one or more viable competitors in the design, development, production, 
and sale of military airborne radios, military GPS systems for 
aviation/maritime applications, military GPS systems for

[[Page 23166]]

ground-based applications, and optical systems in the United States.

A. Military Airborne Radios Divestiture

    Paragraph IV(A) of the proposed Final Judgment requires the 
Defendants, within the later of 45 calendar days after the entry of the 
Stipulation and Order by the Court or 15 calendar days after all 
regulatory approvals needed to complete the transaction and divestiture 
have been received, to divest the Military Airborne Radios Divestiture 
Assets to BAE Systems, Inc., or an alternative acquirer acceptable to 
the United States, in its sole discretion. The regulatory approvals are 
defined in Paragraphs II(X) and II(Y) of the proposed Final Judgment, 
and include approvals or clearances pursuant to filings with the 
Committee on Foreign Investment in the United States (``CFIUS'') or 
under antitrust or competition laws required for the merger between UTC 
and Raytheon and approvals or clearances pursuant to filings with CFIUS 
or under antitrust, competition, or other U.S. or international laws or 
regulations required for the acquisition of the Military Airborne 
Radios Divestiture Assets. The Military Radios Divestiture Assets are 
defined as Raytheon's Military Airborne Radios Business,\1\ and include 
two facilities (a manufacturing facility in Fort Wayne, Indiana and an 
office in Largo, Florida); all tangible and intangible assets related 
to or used in connection with the Military Airborne Radios Business 
(except for the Raytheon brand name); and, at the acquirer's option, a 
worldwide, non-exclusive, royalty-free, irrevocable, perpetual, and 
fully-paid up license to any intellectual property related to 
cryptographic modules that is held by Raytheon at the time of the 
filing of the Complaint or that is developed by Raytheon during the 
term of a supply contract for military airborne radios, which is 
described below. Cryptographic modules are hardware and software for 
encryption and decryption of radio signals, as defined in Paragraph 
II(J) of the proposed Final Judgment. As their use is not limited to 
military airborne radios, they are being retained by Raytheon subject 
to the license and supply contracts set forth in Paragraphs II(L)(4) 
and IV(I), respectively, of the proposed Final Judgment.
---------------------------------------------------------------------------

    \1\ Paragraph II(K) of the proposed Final Judgment defines the 
``Military Airborne Radios Business'' as ``the business of the 
design, development, production, and sale of Military Airborne 
Radios by Raytheon's Tactical Communication Systems division.''
---------------------------------------------------------------------------

    Paragraph IV(N) of the proposed Final Judgment requires that the 
Military Airborne Radios Divestiture Assets be divested in such a way 
as to satisfy the United States in its sole discretion that they can 
and will be operated by the purchaser as part of a viable, ongoing 
business that can compete effectively in the design, development, 
production, and sale of military airborne radios. Defendants must take 
all reasonable steps necessary to accomplish the divestiture quickly 
and must cooperate with prospective purchasers.
    The proposed Final Judgment contains several provisions to 
facilitate the transition of the Military Airborne Radios Business to 
the acquirer. First, Paragraphs IV(H) and IV(I) of the proposed Final 
Judgment require the Defendants, at the acquirer's option, to enter 
into supply contracts for military airborne radios and cryptographic 
modules, respectively, sufficient to meet the needs of the Military 
Airborne Radios Business for a period of up to twelve months. Upon the 
acquirer's request, the United States, in its sole discretion, may 
approve one or more extensions of either or both supply contracts for 
up to an additional twelve months. As described in Paragraph IV(A), at 
the option of the acquirer and subject to approval by the United States 
in its sole discretion, the Defendants temporarily may retain assets 
required to fulfill their obligations under the military airborne 
radios supply contract. These assets must be transferred to the 
acquirer 30 days after the termination or expiration of the supply 
contract.
    Second, Paragraph IV(J) of the proposed Final Judgment requires the 
Defendants, at the acquirer's option, to enter into a transition 
services agreement for back office, human resource, and information 
technology services and support for the Military Airborne Radios 
Business for a period of up to twelve months. The paragraph further 
provides that the United States, in its sole discretion, may approve 
one or more extensions of this transition services agreement for a 
total of up to an additional twelve months. Paragraphs IV(H), IV(I), 
and IV(J) each provide that employees of the Defendants tasked with 
supporting any of these agreements must not share any competitively 
sensitive information of the acquirer with any other employee of the 
Defendants.
    Finally, Paragraphs IV(K) and IV(L) require the Defendants to 
provide the acquirer with complete and sole access to certain 
laboratories at Raytheon's facilities in Fort Wayne, Indiana. These 
laboratories will be used to support classified and non-classified 
military airborne radio development projects while the acquirer 
transitions these projects to its own laboratories. The acquirer will 
have access to the laboratories identified in Paragraph IV(K) for a 
period not to exceed three months, but the United States, in its sole 
discretion, may approve one or more extensions of this period for a 
total of up to an additional three months. The acquirer will have 
access to the laboratories identified in Paragraph IV(L) on a scheduled 
shift basis for a period not to exceed six months, but the United 
States, in its sole discretion, may approve one or more extensions of 
this period for a total of up to an additional six months.
    The proposed Final Judgment also contains provisions intended to 
facilitate the acquirer's efforts to hire employees engaged in the 
Military Airborne Radios Business. Paragraph IV(C) of the proposed 
Final Judgment requires the Defendants to provide the acquirer and the 
United States with organization charts and information relating to 
these employees and to make them available for interviews, and it 
provides that the Defendants must not interfere with any negotiations 
by the acquirer to hire them. In addition, for employees who elect 
employment with the acquirer, the Defendants must waive all non-compete 
and non-disclosure agreements, vest all unvested pension and other 
equity rights, and provide all benefits that the employees would 
generally be provided if transferred to a buyer of an ongoing business. 
This paragraph further provides that the Defendants may not solicit to 
rehire any employee engaged in the Military Airborne Radios Business 
who was hired by the acquirer, unless that individual is terminated or 
laid off by the acquirer or the acquirer agrees in writing that the 
Defendants may solicit or hire that individual. The non-solicitation 
period runs for 12 months from the date of the divestiture, except that 
with respect to employees whose services are required for the 
Defendants to carry out their obligations under the military airborne 
radios supply contract, the non-solicitation period runs for 12 months 
from the expiration of that supply contract.

B. Military GPS Systems Divestiture

    Paragraph V(A) of the proposed Final Judgment requires the 
Defendants, within the later of 45 calendar days after the entry of the 
Stipulation and Order by the Court or 15 calendar days after all 
regulatory approvals needed to complete the transaction and divestiture 
have been received, to divest the Military GPS Divestiture Assets to 
BAE

[[Page 23167]]

Systems, Inc., or an alternative acquirer acceptable to the United 
States, in its sole discretion. The regulatory approvals are defined in 
Paragraphs II(X) and II(Z) of the proposed Final Judgment, and include 
approvals or clearances pursuant to filings with CFIUS or under 
antitrust or competition laws required for the merger between UTC and 
Raytheon and approvals or clearances pursuant to filings with CFIUS or 
under antitrust, competition, or other U.S. or international laws or 
regulations required for the acquisition of the Military GPS 
Divestiture Assets. The Military GPS Divestiture Assets are defined as 
UTC's Military GPS Systems Business, and include all tangible and 
intangible assets related to or used in connection with the Military 
GPS Business (except for UTC's brand names).\2\ Because the assets will 
be transferred to facilities owned by the acquirer, UTC's facilities 
are excluded from the divestiture. Paragraph V(J) of the proposed Final 
Judgment, however, requires the Defendants, at the option of the 
acquirer, to enter into a lease for UTC's facility in Cedar Rapids, 
Iowa for a period of up to twelve months. The United States, in its 
sole discretion, may approve one or more extensions of this lease, for 
a total of up to an additional six months. This lease option provides 
the acquirer with the opportunity to lease UTC's facility while it 
prepares a facility of its own. Paragraph V(M) of the proposed Final 
Judgment requires that the Military GPS Divestiture Assets be divested 
in such a way as to satisfy the United States in its sole discretion 
that they can and will be operated by the purchaser as part of a 
viable, ongoing business that can compete effectively in the design, 
development, production, and sale of military GPS systems for aviation/
maritime applications and military GPS systems for ground-based 
applications. Defendants must take all reasonable steps necessary to 
accomplish the divestiture quickly and must cooperate with prospective 
purchasers.
---------------------------------------------------------------------------

    \2\ Paragraph II(P) of the proposed Final Judgment defines the 
``Military GPS Business'' as ``UTC's business in the design, 
development, production, and sale of Military GPS Systems.''
---------------------------------------------------------------------------

    As with the Military Airborne Radios Business, the proposed Final 
Judgment contains several provisions to facilitate the transition of 
the Military GPS Business to the acquirer. Paragraphs V(H) and V(I) of 
the proposed Final Judgment require the Defendants, at the acquirer's 
option, to enter into contracts to supply military GPS systems and to 
provide transition services, under terms and conditions similar to 
those applicable to the contracts described above for the Military 
Airborne Radios Business. As described in Paragraph V(A), the 
Defendants temporarily may retain assets required to fulfill their 
obligations under the supply contract under terms and conditions 
similar to those applicable to the supply contract for the Military 
Airborne Radios Business. Paragraph V(K) of the proposed Final Judgment 
requires the Defendants to provide the acquirer with complete and sole 
access to certain laboratories at UTC's facilities in Cedar Rapids, 
Iowa and Coralville, Iowa during the term of the military GPS systems 
supply contract. These laboratories will be used to support classified 
and non-classified military GPS system development projects while the 
acquirer transitions these projects to its own laboratories. For the 
first six months, this access will be provided on a scheduled shift 
basis, and after that period the acquirer will obtain unlimited access 
to certain of these laboratories and will continue to access the other 
laboratories on a scheduled shift basis.
    Paragraph V(C) of the proposed Final Judgment also contains 
provisions intended to facilitate the acquirer's efforts to hire 
employees engaged in the Military GPS Business. These provisions are 
similar to those applicable to employees of the Military Airborne 
Radios Business, as described above.

C. Optical Systems Divestiture

    Paragraph VI(A) of the proposed Final Judgment requires the 
Defendants, within the later of 90 calendar days after the entry of the 
Stipulation and Order by the Court or 15 calendar days after all 
regulatory approvals needed to complete the transaction and divestiture 
have been received, to divest the Optical Systems Divestiture Assets to 
an acquirer acceptable to the United States, in its sole discretion. 
The regulatory approvals are defined in Paragraphs II(X) and II(AA) of 
the proposed Final Judgment, and include approvals or clearances 
pursuant to filings with CFIUS or under antitrust or competition laws 
required for the merger between UTC and Raytheon and approvals or 
clearances pursuant to filings with CFIUS or under antitrust, 
competition, or other U.S. or international laws or regulations 
required for the acquisition of the Optical Systems Divestiture Assets. 
The Optical Systems Divestiture Assets are defined as UTC's Optical 
Systems Business, and includes UTC's facility in Danbury, Connecticut, 
and all tangible and intangible assets related to or used in connection 
with the Optical Systems Business (except for UTC's brand names).\3\ 
Paragraph VI(K) of the proposed Final Judgment requires that the 
Optical Systems Divestiture Assets be divested in such a way as to 
satisfy the United States in its sole discretion that they can and will 
be operated by the purchaser as part of a viable, ongoing business that 
can compete effectively in the design, development, production, and 
sale of Optical Systems. Defendants must take all reasonable steps 
necessary to accomplish the divestiture quickly and must cooperate with 
prospective purchasers.
---------------------------------------------------------------------------

    \3\ Paragraph II(U) defines the ``Optical Systems Business'' as 
``UTC's business in the design, development, production, and sale of 
Optical Systems.'' Paragraph II(T) defines ``Optical Systems'' as 
``electro-optical/infrared systems for national security space 
missions and defense laser warning survivability subsystems.''
---------------------------------------------------------------------------

    As with the Military Airborne Radios Business and the Military GPS 
Business, the proposed Final Judgment contains provisions to facilitate 
the immediate use of the Optical Systems Business by the acquirer. 
Paragraphs VI(H) and VI(I) of the proposed Final Judgment require the 
Defendants, at the acquirer's option, to enter into contracts to supply 
image processing software and to provide transition services, under 
terms and conditions similar to those applicable to the contracts 
described above for the Military Airborne Radios Business and the 
Military GPS Business. Paragraph VI(C) of the proposed Final Judgment 
also contains provisions intended to facilitate the acquirer's efforts 
to hire employees engaged in the Optical Systems Business, which are 
similar to those described above for employees of the Military Airborne 
Radios Business and the Military GPS Business, except that the non-
solicitation provision expires 12 months from the date of the 
divestiture.

D. Divestiture Trustee

    If the Defendants do not accomplish all of the divestitures within 
the periods prescribed in Sections IV, V, and VI of the proposed Final 
Judgment, Section VII of the proposed Final Judgment provides that the 
Court will appoint a divestiture trustee selected by the United States 
to effect any remaining divestitures. If a divestiture trustee is 
appointed, the proposed Final Judgment provides that the Defendants 
will pay all costs and expenses of the trustee. The divestiture 
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 
any remaining divestitures are accomplished. After the divestiture 
trustee's appointment becomes effective, the trustee will provide 
periodic reports

[[Page 23168]]

to the United States setting forth his or her efforts to accomplish the 
remaining divestitures. At the end of six months, if any divestiture 
remains to be accomplished, the divestiture trustee and the United 
States will make recommendations to the Court, which will enter such 
orders as appropriate, in order to carry out the purpose of the trust, 
including by extending the trust or the term of the divestiture 
trustee's appointment.

E. Monitoring Trustee

    Section XII of the proposed Final Judgment provides that the United 
States may apply to the Court for appointment of a monitoring trustee 
with the power and authority to investigate and report on the 
Defendants' compliance with the terms of the proposed Final Judgment 
and Stipulation and Order, including the sale of the divestiture assets 
and the implementation of the transition services agreements, supply 
contracts, laboratory access arrangements, and short-term leases 
provided for in the proposed Final Judgment. The monitoring trustee 
will not have any responsibility or obligation for the operation of the 
Defendants' businesses. The monitoring trustee will serve at the 
expense of the Defendants, on such terms and conditions as the United 
States approves, and Defendants must assist the monitoring trustee in 
fulfilling its obligations. The monitoring trustee will file monthly 
reports with the United States and shall serve until all of the 
divestitures required by the proposed Final Judgment have been 
accomplished, or until the term of any transition services agreements, 
supply contracts, laboratory access arrangements, and short-term leases 
required by the proposed Final Judgment have expired, whichever is 
later.

F. Other Provisions

    The proposed Final Judgment also contains provisions designed to 
promote compliance and make the enforcement of the Final Judgment as 
effective as possible. Paragraph XVI(A) provides that the United States 
retains and reserves all rights to enforce the provisions of the Final 
Judgment, including its rights to seek an order of contempt from the 
Court. Under the terms of this paragraph, the Defendants have agreed 
that in a civil contempt action, a motion to show cause, or a 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 the Defendants have 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 XVI(B) provides additional clarification regarding the 
interpretation of the provisions of the proposed Final Judgment. The 
proposed Final Judgment was drafted to restore competition the United 
States alleged would otherwise be harmed by the transaction. The 
Defendants agree that they will abide by the proposed Final Judgment, 
and that they may be held in contempt by the Court for failing to 
comply with any provision of the proposed Final Judgment that is stated 
specifically and in reasonable detail, as interpreted in light of this 
procompetitive purpose.
    Paragraph XVI(C) of the proposed Final Judgment provides that if 
the Court finds in an enforcement proceeding that the Defendants have 
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, to compensate American 
taxpayers for any costs associated with investigating and enforcing 
violations of the Final Judgment, Paragraph XVI(C) provides that in any 
successful effort by the United States to enforce the Final Judgment 
against a Defendant, whether litigated or resolved before litigation, 
that the Defendants will reimburse the United States for attorneys' 
fees, experts' fees, and other costs incurred in connection with any 
enforcement effort, including the investigation of the potential 
violation.
    Paragraph XVI(D) states that the United States may file an action 
against a Defendant for violating the Final Judgment for up to four 
years after the Final Judgment has expired or been terminated. This 
provision is meant to address circumstances such as when evidence that 
a violation of the Final Judgment occurred during the term of the Final 
Judgment is not discovered until after the Final Judgment has expired 
or been terminated or when there is not sufficient time for the United 
States to complete an investigation of an alleged violation until after 
the Final Judgment has expired or been terminated. This provision, 
therefore, makes clear that, for four years after the Final Judgment 
has expired or been terminated, the United States may still challenge a 
violation that occurred during the term of the Final Judgment.
    Finally, Section XVII of the proposed Final Judgment provides that 
the Final Judgment will expire ten years from the date of its entry, 
except that after five years from the date of its entry, the Final 
Judgment may be terminated upon notice by the United States to the 
Court and the Defendants 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 neither impairs 
nor assists 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 the Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least 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 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 U.S. 
Department of Justice, which remains free to withdraw its consent to 
the proposed Final Judgment at any time before the Court's entry of the 
Final Judgment. The comments and the response of the United States will 
be filed with the Court. In addition, comments will be

[[Page 23169]]

posted on the U.S. Department of Justice, Antitrust Division's internet 
website and, under certain circumstances, published in the Federal 
Register.
    Written comments should be submitted to: Katrina Rouse, Chief, 
Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. 
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

    As an alternative to the proposed Final Judgment, the United States 
considered a full trial on the merits against the Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against the merger of UTC and 
Raytheon. The United States is satisfied, however, that the divestiture 
of assets described in the proposed Final Judgment will remedy the 
anticompetitive effects alleged in the Complaint in each of the 
relevant markets. Thus, the proposed Final Judgment achieves 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 60-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); United States v. 
U.S. Airways Grp., 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. 08-1965 (JR), 2009 
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 
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'').
    As the U.S. 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 in 
the government's complaint, whether the proposed Final Judgment is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether it may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the proposed Final Judgment, a court may not ``make de novo 
determination of facts and issues.'' United States v. W. Elec. Co., 993 
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also 
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. 
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. 
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at 
*3. Instead, ``[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.'' W. 
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court 
should bear in mind the flexibility of the public interest inquiry: the 
court's function is not to determine whether the resulting array of 
rights and liabilities is one that will best serve society, but only to 
confirm that the resulting settlement is within the reaches of the 
public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks 
omitted). More demanding requirements would ``have enormous practical 
consequences for the government's ability to negotiate future 
settlements,'' contrary to congressional intent. Id. at 1456. ``The 
Tunney Act was not intended to create a disincentive to the use of the 
consent decree.'' Id.
    The United States' predictions about the efficacy of the remedy are 
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 
1461 (recognizing courts should give ``due respect to the Justice 
Department's . . . view of the nature of its case''); United States v. 
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In 
evaluating objections to settlement agreements under the Tunney Act, a 
court must be mindful that [t]he government need not prove that the 
settlements will perfectly remedy the alleged antitrust harms[;] it 
need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'') (internal 
citations omitted); United States v. Republic Servs., Inc., 723 F. 
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to 
which the government's proposed remedy is accorded''); United States v. 
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A 
district court must accord due respect to the government's prediction 
as to the effect of proposed remedies, its perception of the market 
structure, and its view of the nature of the case.''). The ultimate 
question is whether ``the remedies [obtained by the Final Judgment are] 
so inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461 
(quoting W. Elec. Co., 900 F.2d at 309).
    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 U.S. 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 (``[T]he 
`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

[[Page 23170]]

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.
    In its 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of using consent judgments proposed 
by the United States in antitrust enforcement, Public Law 108-237 Sec.  
221, and added 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 U.S. 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). This language explicitly wrote into the statute what Congress 
intended when it first 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). ``A court can make its public interest determination 
based on the competitive impact statement and response to public 
comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova 
Corp., 107 F. Supp. 2d at 17).

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: April 14, 2020.

Respectfully submitted,

FOR PLAINTIFF, UNITED STATES OF AMERICA
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Kevin C. Quin (D.C. Bar #415268) *

Attorney, United States Department of Justice, Antitrust Division 
Defense, Industrials, and Aerospace Section, 450 Fifth Street NW, 
Suite 8700, Washington, DC 20530, (202) 307-0922, 
[email protected].

* Lead Attorney to be Noticed.

[FR Doc. 2020-08764 Filed 4-23-20; 8:45 am]
 BILLING CODE 4410-11-P