United States v. United Technologies Corporation, et al.; Proposed Final Judgment and Competitive Impact Statement, 23144-23170 [2020-08764]
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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
https://www.justice.gov/atr and at the
Office of the Clerk of the United States
District Court for the District of
Columbia. Copies of these materials may
be obtained from the Antitrust Division
upon request and payment of the
copying fee set by Department of Justice
regulations.
Public comment is invited within 60
days of the date of this notice. Such
comments, including the name of the
submitter, and responses thereto, will be
posted on the Antitrust Division’s
website, filed with the Court, and, under
certain circumstances, published in the
Federal Register. Comments should be
directed to 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).
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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.
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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.
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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
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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).
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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.
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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.
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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
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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
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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
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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.
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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.
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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.
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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.
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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
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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,
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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.
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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),
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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,
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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
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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
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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
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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.
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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
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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:
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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
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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
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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
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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
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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,
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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
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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.
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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.
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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.
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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.
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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.
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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
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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
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ground-based applications, and optical
systems in the United States.
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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.’’
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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
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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
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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.’’
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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
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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.’’
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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.
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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
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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
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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
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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.
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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
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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
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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
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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
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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).
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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
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]]>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]
[[Page 23143]]
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
[[Page 23144]]
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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 https://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to 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
-----------------------------------------------------------------------
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
