Lockheed Corporation, et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 951 0005]

Lockheed Corporation, et al.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

allow, among other things, the completion of the merger between

Lockheed Corporation and Martin Marietta Corporation, to form Lockheed

Martin Corporation, but would prohibit the respondents from enforcing

exclusivity provisions contained in teaming arrangements that each

individual firm now has with infrared sensor producers. The consent

agreement also would prohibit certain divisions of the merged firm from

gaining access through other divisions to nonpublic information that

the respondents' electronics division receives from competing military

aircraft manufacturers when providing a navigation and targeting system

known as ``LANTIRN'' to competing aircraft producers; or that the

respondents' satellite divisions receive from competing expendable

launch vehicle suppliers when those competing suppliers launch the

respondents' satellites.

DATES: Comments must be received on or before March 28, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th Street and Pennsylvania Avenue, NW., Washington, DC

20580.

FOR FURTHER INFORMATION CONTACT:

Mary Lou Steptoe, Ann Malester, or Laura Wilkinson, FTC/H-374 or S-

2224, Washington, DC 20580 (202) 326-2584, 326-2820 or 326-2830.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period [[Page 5409]] of sixty (60) days. Public comment is

invited. Such comments or views will be considered by the Commission

and will be available for inspection and copying at its principal

office in accordance with Section 4.9(b)(6)(ii) of the Commission's

Rules of Practice (16 CFR 4.9(b)(6)(ii).

In the Matter of LOCKHEED CORPORATION, a corporation, MARTIN

MARIETTA CORPORATION, a corporation, and LOCKHEED MARTIN

CORPORATION, a corporation, File No. 951-0005.

Agreement Containing Consent Order

The Federal Trade Commission (``the Commission''), having initiated

an investigation of the merger of Lockheed Corporation (``Lockheed'')

and Martin Marietta Corporation (``Martin Marietta''), and it now

appearing that Lockheed, Martin Marietta and Lockheed Martin

Corporation (``Lockheed Martin''), hereinafter sometimes referred to as

proposed respondents, are willing to enter into an agreement containing

an order to refrain from certain acts and to provide for other relief:

It is hereby agreed by and between proposed respondents, by their

duly authorized officers and attorneys, and counsel for the Commission

that:

1. Proposed respondent Lockheed is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Delaware, with its office and principal place of business

located at 4500 Park Granada Boulevard, Calabasas, California 91399.

2. Proposed respondent Martin Marietta is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Maryland, with its office and principal place of business

located at 6801 Rockledge Drive, Bethesda, Maryland 20817.

3. Proposed respondent Lockheed Martin is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of Maryland, with its office and principal place of business

located at 6801 Rockledge Drive, Bethesda, Maryland 20817.

4. Proposed respondents admit all the jurisdictional facts set

forth in the draft of complaint.

5. Proposed respondents waive:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the other entered pursuant to this agreement;

and

d. Any claim under the Equal Access to Justice Act.

6. Proposed respondents shall submit within thirty (30) days of the

date this agreement is signed by proposed respondents an initial

report, pursuant to Section 2.33 of the Commission's Rules, signed by

the proposed respondents setting forth in detail the manner in which

the proposed respondents will comply with Paragraphs II, III, IV, V,

VI, VII and VIII of the order when and if entered. Such report will not

become part of the public record unless and until the accompanying

agreement and order are accepted by the Commission.

7. This agreement shall not become a part of the public record of

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify proposed respondents, in which event it

will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

8. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondents that the law has been

violated as alleged in the draft complaint, other than jurisdictional

facts, are true.

9. This agreement contemplates that, if it is accepted by the

Commission, if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to

proposed respondents, (1) issue its complaint corresponding in form and

substance with the draft of complaint and its decision containing the

following order to refrain from certain acts in disposition of the

proceeding, and (2) make information public with respect thereto. When

so entered, the order shall have the same force and effect and may be

altered, modified, or set aside in the same manner and within the same

time provided by statute for other orders. The order shall become final

upon service. Delivery by the U.S. Postal Service of the complaint and

decision containing the agreed-to order to proposed respondents'

addresses as stated in this agreement shall constitute service.

Proposed respondents waive any right they may have to any other manner

of service. The compliant may be used in construing the terms of the

order, and no agreement, understanding, representation or

interpretation not contained in the order of the agreement may be used

to vary or contradict the terms of the order.

10. Proposed respondents have read the draft of complaint and order

contemplated hereby. Proposed respondents understand that once the

order has been issued, they will be required to file one or more

compliance reports showing that they have fully complied with the

order. Proposed respondents further understand that they may be liable

for civil penalties in the amount provided by law for each violation of

the order after it becomes final.

Order

I

It is ordered that, as used in this order, the following

definitions shall apply:

A. ``Lockheed'' means Lockheed Corporation and its predecessors,

successors, subsidiaries, divisions, groups and affiliates controlled

by Lockheed, and their respective directors, officers, employees,

agents and representatives, and their respective successors and

assigns.

B. ``Missile Systems'' means the Missile Systems Division of

Lockheed Missiles & Space Company, Inc., an entity with its principal

place of business at 1111 Lockheed Way, Sunnyvale, California 94088,

which is engaged in, among other things, the research, development,

manufacture and sale of Expendable Launch Vehicles, and its

subsidiaries, divisions, groups and affiliates controlled by Missiles

Systems, and their respective directors, officers, employees, agents

and representatives, and their respective successors and assigns.

C. ``Commercial Space'' means Lockheed Commercial Space Company,

Inc., an entity with its principal place of business at 1111 Lockheed

Way, Sunnyvale, California 94088, and Lockheed-Khrunichev-Energia

International (``LKEI''), a joint venture between Lockheed Commercial

Space Company, Inc., Khrunichev Enterprise and Energia Scientific-

Productive Entity with its principal place of business at 2099 Gateway

Place, Suite 220, San Jose, California 95110, which are engaged in,

among other things, the research, development, manufacture, marketing

and sale of Expendable Launch Vehicles, and its subsidiaries,

[[Page 5410]] divisions, joint venture partners, groups and affiliates

controlled by Commercial Space, and their respective directors,

officers, employees, agents and representatives, and their respective

successors and assigns.

D. ``Space Systems'' means the Space Systems Division of Lockheed

Missiles & Space Company, Inc., an entity with its principal place of

business at 1111 Lockheed Way, Sunnyvale, California 94088, which is

engaged in, among other things, the research, development, manufacture

and sale of Satellites, and its subsidiaries, divisions, groups and

affiliates controlled by Space Systems, and their respective directors,

officers, employees, agents and representatives, and their respective

successors and assigns.

E. ``Aeronautical Systems'' means Lockheed Aeronautical Systems

Group, an entity with its principal place of business at 2859 Paces

Ferry, Suite 1800, Atlanta, Georgia 30339, which is engaged in, among

other things, the research, development, manufacture and sale of

Military Aircraft, and its subsidiaries, divisions, groups and

affiliates controlled by Aeronautical Systems, and their respective

directors, officers, employees, agents and representatives, and their

respective successors and assigns.

F. ``Martin Marietta'' means Martin Marietta Corporation and its

predecessors, successors, subsidiaries, divisions, groups and

affiliates controlled by Martin Marietta, and their respective

directors, officers, employees, agents and representatives, and their

respective successors and assigns.

G. ``Astronautics'' means Martin Marietta's Astronautics Company,

an entity with its principal place of business at P.O. Box 179, Denver,

Colorado 80201, which is engaged in, among other things, the research,

development, manufacture and sale of Satellites and Expendable Launch

Vehicles, and its subsidiaries, divisions, groups and affiliates

controlled by Astronautics, and their respective directors, officers,

employees, agents and representatives, and their respective successors

and assigns.

H. ``Astro Space'' means Martin Marietta's Astro Space Company, an

entity with its principal place of business at P.O. Box 800, Princeton,

New Jersey 08543, which is engaged in, among other things, the

research, development, manufacture and sale of Satellites, and its

subsidiaries, divisions, groups and affiliates controlled by Astro

Space, and their respective directors, officers, employees, agents and

representatives, and their respective successors and assigns.

I. ``Electronics and Missiles'' means Martin Marietta's Electronics

and Missiles Company, an entity with its principal place of business at

5600 Sand Lake Road, Orlando, Florida 32819, which is engaged in, among

other things, the manufacture and sale of LANTIRN Systems, and its

subsidiaries, divisions, groups and affiliates controlled by

Electronics and Missiles, and their respective directors, officers,

employees, agents and representatives, and their respective successors

and assigns.

J. ``Lockheed Martin'' means Lockheed Martin Corporation and its

predecessors, successors, subsidiaries, divisions, groups and

affiliates controlled by Lockheed Martin, and their respective

directors, officers, employees, agents and representatives, and their

respective successors and assigns.

K. ``Respondents'' means Lockheed, Martin Marietta and Lockheed

Martin.

L. ``Hughes'' means GM Hughes Electronics Corporation, a

corporation, organized, existing, and doing business under and by

virtue of the laws of the State of Delaware, with its office and

principal place of business located at 7200 Hughes Terrace, Los

Angeles, California 90045.

M. ``Grumman'' means Northrop Grumman Corporation, a corporation,

organized, existing, and doing business under and by virtue of the laws

of the State of Delaware, with its office and principal place of

business located at 1840 Century Park East, Los Angeles, California

90067.

N. ``Person'' means any natural person, corporate entity,

partnership, association, joint venture, government entity, trust or

other business or legal entity.

O. ``Commission'' means the Federal Trade Commission.

P. ``Lockheed/Hughes Teaming Agreement'' means the teaming

agreement entered into on January 15, 1985, between Lockheed and the

Electro-Optical and Data Systems Group of the Hughes Aircraft Company

for the purpose of submitting a proposal to the United States

Department of Defense for the Demonstration/Validation phase of the

Follow-On Early Warning System, and all subsequent amendments or other

modifications thereto.

Q. ``Martin Marietta/Grumman Teaming Agreement'' means the teaming

agreement entered into on June 20, 1994, between Martin Marietta and

Grumman for the purpose of bidding on or otherwise competing for the

United States Department of Defense's Alert, Locate and Report Missiles

program, and all subsequent amendments or other modifications thereto.

R. ``Space Based Early Warning System'' means any Satellite system

designed to be used for tactical warning and attack assessment, theater

and strategic missile defense, and related military purposes by the

United States Department of Defense, including but not limited to the

Space Based InfraRed (``SBIR'') system and successor systems considered

by the United States Department of Defense to follow SBIR

programmatically.

S. ``Military Aircraft'' means aircraft manufactured for sale to

the United States Department of Defense, whether for use by the United

States Department of Defense or for transfer to a foreign military sale

purchaser.

T. ``LANTIRN Systems'' means dual pod, externally mounted, Low-

Altitude Navigation and Targeting Infrared for Night Systems

manufactured by Martin Marietta for use on Military Aircraft.

U. ``Expendable Launch Vehicle'' means a vehicle that launches a

Satellite(s) from the Earth's surface that is consumed during the

process of launching a Satellite(s) and therefore cannot be launched

more than one time.

V. ``Satellite'' means an unmanned machine that is launched from

the Earth's surface for the purpose of transmitting data back to Earth

and which is designed either to orbit the Earth or travel away from the

Earth.

W. ``Non-Public LANTIRN Information'' means any information not in

the public domain furnished by any Military Aircraft manufacturer to

Electronics and Missiles in its capacity as the provider of LANTIRN

Systems, and (1) if written information, designated in writing by the

Military Aircraft manufacturer as proprietary information by an

appropriate legend, marking, stamp, or positive written identification

on the face thereof, or (2) if oral, visual or other information,

identified as proprietary information in writing by the Military

Aircraft manufacturer prior to the disclosure or within thirty (30)

days after such disclosure. Non-Public LANTIRN Information shall not

include: (i) information already known to Respondents, (ii) information

which subsequently falls within the public domain through no violation

of this order by Respondents, (iii) information which subsequently

becomes known to Respondents from a third party not in breach of a

confidential disclosure agreement, or (iv) information after six (6)

years from the date of disclosure of such Non-Public LANTIRN

Information to Respondents, or such other period as

[[Page 5411]] agreed to in writing by Respondents and the provider of

the information.

X. ``Non-Public ELV Information'' means any information not in the

public domain furnished by an Expendable Launch Vehicle manufacturer to

Space Systems, Astro Space or Astronautics in their capacities as

providers of Satellites, and (1) if written information, designated in

writing by the Expendable Launch Vehicle manufacturer as proprietary

information by an appropriate legend, marking, stamp, or positive

written identification on the face thereof, or (2) if oral, visual or

other information, identified as proprietary information in writing by

the Expendable Launch Vehicle manufacturer prior to the disclosure or

within thirty (30) days after such disclosure. Non-Public ELV

Information shall not include: (i) information already known to

Respondents, (ii) information which subsequently falls within the

public domain through no violation of this order by Respondents, (iii)

information which subsequently becomes known to Respondents from a

third party not in breach of a confidential disclosure agreement, or

(iv) information after six (6) years from the date of disclosure of

such Non-Public ELV Information to Respondents, or such other period as

agreed to in writing by Respondents and the provider of the

information.

Y. ``Merger'' means the merger of Martin Marietta and Lockheed.

II

It is further ordered that Respondents shall not enforce or attempt

to enforce any provision contained in the Lockheed/Hughes Teaming

Agreement that prohibits in any way Hughes from (1) Competing against

Lockheed for any part of any Space Based Early Warning System, or (2)

teaming or otherwise contracting with any other person for the purpose

of bidding on, developing, manufacturing, or supplying any part of any

Space Based Early Warning System. Respondents shall not enforce or

attempt to enforce any proprietary rights in the electro-optical

sensors developed by Hughes in connection with or by virtue of the

Lockheed/Hughes Teaming Agreement in a manner that would inhibit Hughes

from competing with Respondents for any part of any Space Based Early

Warning System.

III

It is further ordered that Respondents shall not enforce or attempt

to enforce any provision contained in the Martin Marietta/Grumman

Teaming Agreement that prohibits in any way Grumman from (1) Competing

against Martin Marietta for any part of any Space Based Early Warning

System, or (2) teaming or otherwise contracting with any other person

for the purpose of bidding on, developing, manufacturing, or supplying

any part of any Space Based Early Warning System. Respondents shall not

enforce or attempt to enforce any proprietary rights in the electro-

optical sensors developed by Grumman in connection with or by virtue of

the Martin Marietta/Grumman Teaming Agreement in a manner that would

inhibit Grumman from competing with Respondents for any part of any

Space Based Early Warning System.

IV

It is further ordered that:

A. Respondents shall not, absent the prior written consent of the

proprietor of Non-Public LANTIRN Information, provide, disclose, or

otherwise make available to Aeronautical Systems any Non-Public LANTIRN

Information; and

B. Respondents shall use any Non-Public LANTIRN Information

obtained by Electronics and Missiles only in Electronics and Missiles'

capacity as the provider of LANTIRN Systems, absent the prior written

consent of the proprietor of Non-Public LANTIRN Information.

V

It is further ordered that Respondents shall deliver a copy of this

order to any United States Military Aircraft manufacturer prior to

obtaining any Non-Public LANTIRN Information relating to the

manufacturer's Military Aircraft either from the Military Aircraft's

manufacturer or through the Merger; provided that for Non-Public

LANTIRN Information described in Paragraph I.W.(2) of this order,

Respondents shall deliver a copy of this order within ten (10) days of

the written identification by the Military Aircraft manufacturer.

VI

It is further ordered that Respondents shall not make any

modifications, upgrades, or other changes to LANTIRN Systems or any

component or subcomponent thereof that discriminate against any other

Military Aircraft manufacturer with regard to the performance of the

Military Aircraft or the time or cost required to integrate LANTIRN

Systems into the Military Aircraft. Provided, however, that nothing in

this paragraph shall prohibit Respondents from making any such

modifications, upgrades, or other changes that are: (1) necessary to

meet competition from (a) foreign military aircraft, or (b) other

products designed to provide targeting, terrain following, or night

navigation functions comparable in performance to LANTIRN Systems; or

(2) approved in writing by the Secretary of Defense or his or her

designee.

VII

It is further ordered that:

A. Respondents shall not, absent the prior written consent of the

proprietor of Non-Public ELV Information, provide, disclose, or

otherwise make available to Astronautics, Missile Systems or Commercial

Space any Non-Public ELV Information obtained by Astro Space or Space

Systems; and

B. Respondents shall use any Non-Public ELV Information obtained by

Astronautics, Astro Space or Space Systems only in Astronautics', Astro

Space's and Space System's capacities as providers of Satellites,

absent the prior written consent of the proprietor of Non-Public ELV

Information.

VIII

It is further ordered that Respondents shall deliver a copy of this

order to any United States Expendable Launch Vehicle manufacturer prior

to obtaining any Non-Public ELV Information relating to the

manufacturer's Expendable Launch Vehicle(s) either from the Expendable

Launch Vehicle manufacturer or through the Merger; provided that for

Non-Public ELV Information described in Paragraph I.X.(2) of this

order, Respondents shall deliver a copy of this order within ten (10)

days of the written identification by the Expendable Launch Vehicle

manufacturer.

IX

It is further ordered that Respondents shall comply with all terms

of the Interim Agreement, attached to this order and made a part hereof

as Appendix I. Said Interim Agreement shall continue in effect until

the provisions in Paragraphs II, III, IV, V, VI, VII and VIII are

complied with or until such other time as is stated in said Interim

Agreement.

X

It is further ordered that within sixty (60) days of the date this

order becomes final and annually for the next ten (10) years on the

anniversary of the date this order becomes final, and at such other

times as the Commission may require, Respondents shall file a verified

written report with the Commission setting forth in detail the manner

and form in which they have complied and are complying with this order.

To the extent not prohibited by United States [[Page 5412]] Government

national security requirements, Respondents shall include in their

reports information sufficient to identify (a) all modifications,

upgrades, or other changes to LANTIRN Systems for which Respondents

have requested and/or received written approval from the Secretary of

Defense or his or her designee pursuant to Paragraph VI of this order,

(b) all United States Military Aircraft manufacturers with whom

Respondents have entered into an agreement for the research,

development, manufacture or sale of LANTIRN Systems, and (c) all United

States Expendable Launch Vehicle manufacturers with whom Respondents

have entered into an agreement for the research, development,

manufacture or sale of Satellites.

XI

It is further ordered that Respondents shall notify the Commission

at least thirty days prior to any proposed change in Respondents, such

as dissolution, assignment, sale resulting in the emergence of a

successor corporation, or the creation or dissolution of subsidiaries

or any other change in Respondent that may affect compliance

obligations arising out of this order.

XII

It is further ordered that, for the purpose of determining or

securing compliance with this order, and subject to any legally

recognized privilege and applicable United States Government national

security requirements, upon written request, and on reasonable notice,

any Respondent shall permit any duly authorized representative of the

Commission:

A. Access, during office hours and in the presence of counsel, to

inspect and copy all books, ledgers, accounts, correspondence,

memoranda and other records and documents in the possession or under

the control of that Respondent relating to any matters contained in

this order; and

B. Upon five (5) days' notice to any Respondent and without

restraint or interference from it, to interview officers, directors, or

employees of that Respondent, who may have counsel present, regarding

such matters.

XIII

It is further ordered that this order shall terminate twenty (20)

years from the date this order becomes final.

Appendix I

In the Matter of LOCKHEED CORPORATION, a corporation, MARTIN

MARIETTA CORPORATION, a corporation, and LOCKHEED MARTIN

CORPORATION, a corporation, File No. 951-0005.

Interim Agreement

This Interim Agreement is by and between Lockheed Corporation

(``Lockheed''), a corporation organized and existing under the laws of

the State of Delaware, Martin Marietta Corporation (``Martin

Marietta''), a corporation organized and existing under the laws of the

State of Maryland, Lockheed Martin Corporation (``Lockheed Martin''), a

corporation organized and existing under the laws of the State of

Maryland (collectively referred to as ``Proposed Respondents''), and

the Federal Trade Commission (the ``Commission''), an independent

agency of the United States Government, established under the Federal

Trade Commission Act of 1914, 15 U.S.C. 41, et seq. (collectively, the

``Parties'').

Premises

Whereas, Martin Marietta and Lockheed have proposed the merger of

their businesses by the formation of a new corporation, Lockheed

Martin; and

Whereas, the Commission is now investigating the proposed Merger to

determine if it would violate any of the statutes the Commission

enforces; and

Whereas, if the Commission accepts the Agreement Containing Consent

Order (``Consent Agreement''), the Commission will place it on the

public record for a period of at least sixty (60) days and subsequently

may either withdraw such acceptance or issue and serve its Complaint

and decision in disposition of the proceeding pursuant to the

provisions of Section 2.34 of the Commission's Rules; and

Whereas, the Commission is concerned that if an understanding is

not reached, preserving competition during the period prior to the

final acceptance of the Consent Agreement by the Commission (after the

60-day public notice period), there may be interim competitive harm and

divestiture or other relief resulting from a proceeding challenging the

legality of the proposed Merger might not be possible, or might be less

than an effective remedy; and

Whereas, Proposed Respondents entering into this Interim Agreement

shall in no way be construed as an admission by Proposed Respondents

that the proposed Merger constitutes a violation of any statute; and

Whereas, Proposed Respondents understand that no act or transaction

contemplated by this Interim Agreement shall be deemed immune or exempt

from the provisions of the antitrust laws or the Federal Trade

Commission by reason of anything contained in this Interim Agreement.

Now, therefore, the Parties agree, upon the understanding that the

Commission has not yet determined whether the proposed Merger will be

challenged, and in consideration of the Commission's agreement that,

unless the Commission determines to reject the Consent Agreement, it

will not seek further relief from Proposed Respondents with respect to

the proposed Merger, except that the Commission may exercise any and

all rights to enforce this Interim Agreement, the Consent Agreement,

and the final order in this matter, and, in the event that Proposed

Respondents do not comply with the terms of this Interim Agreement, to

seek further relief pursuant to Section 5 of the Federal Trade

Commission Act, 15 U.S.C. Sec. 45, and Section 7 of the Clayton Act, 15

U.S.C. Sec. 18, as follows:

1. Proposed Respondents agree to execute and be bound by the terms

of the Other contained in the Consent Agreement, as if it were final,

from the date the Consent Agreement is accepted for public comment by

the Commission.

2. Proposed Respondents agree to deliver within three (3) days of

the date the Consent Agreement is accepted for public comment by the

Commission, a copy if the Consent Agreement and a copy of this Interim

Agreement to the United States Department of Defense, GM Hughes

Electronics Corporation, Loral Corporation, Northorp Grumman

Corporation, Rockwell International Corporation and TRW Incorporated.

3. Proposed Respondents agree to submit within thirty (30) days of

the date the Consent Agreement is signed by the Proposed Respondents,

an initial report, pursuant to Section 2.33 of the Commission's Rules,

signed by the Proposed Respondents setting forth in detail the manner

in which the Proposed Respondents will comply with Paragraphs II, III,

IV, V, VI, VII and VIII of the Consent Agreement.

4, Proposed Respondents agree that, from the date the Consent

Agreement is accepted for public comment by the Commission until the

first of the dates listed in subparagraphs 4.a and 4.b, they will

comply with the provisions of this Interim Agreement:

a. Ten business days after the Commission withdraws its acceptance

of the Consent Agreement pursuant to the provisions of Section 2.34 of

the Commission's rules;

b. The date the Commission finally accepts the Consent Agreement

and issues its Decision and Order. [[Page 5413]]

5. Proposed Respondents waive all rights to contest the validity of

this Interim Agreement.

6. For the purpose of determining or securing compliance with this

Interim Agreement, subject to any legally recognized privilege and

applicable United States Government national security requirements, and

upon written request, and on reasonable notice, to any Proposed

Respondent made to its principal office, that Proposed Respondent shall

permit any duly authorized representative or representatives of the

Commission:

a. Access during the office hours of that Proposed Respondent and

in the presence of counsel to inspect and copy all books, ledgers,

accounts, correspondence, memoranda, and other records and documents in

the possession or under the control of that Proposed Respondent

relating to compliance with this Interim Agreement; and

b. Upon five (5) days' notice to any Proposed Respondent and

without restraint or interference from it, to interview officers,

directors, or employees of that Proposed Respondent, who may have

counsel present, regarding any such matters.

7. This Interim Agreement shall not be binding until accepted by

the Commission.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement containing a proposed Consent Order

from Lockheed Corporation (``Lockheed''), Martin Marietta Corporation

(``Martin Marietta'') and Lockheed Martin Corporation (``Lockheed

Martin''), collectively referred to as respondents. The proposed

Consent Order prohibits respondents from enforcing exclusivity

provisions contained in teaming agreements with manufacturers of

sensors for space-based early warning systems. The proposed Consent

Order also prohibits respondents' military aircraft division from

gaining access to any non-public information that respondents'

electronics division receives from competing military aircraft

manufacturers when providing a navigation and targeting system known as

``LANTIRN'' to competing aircraft producers. In addition, the proposed

Consent Order prohibits respondents from making any modifications to

the LANTIRN system that discriminate against other military aircraft

manufacturers unless such modifications either are necessary to meet

competition or are approved by the Secretary of Defense. Finally, the

proposed Consent Order prohibits respondents' expendable launch vehicle

(``ELV'') divisions from gaining access to any non-public information

that respondents' satellite divisions receive from competing ELV

suppliers when those competing suppliers launch respondents'

satellites.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

Order.

Pursuant to an August 29, 1994, Agreement and Plan of

Reorganization, Lockheed and Martin Marietta agreed to merge their

businesses into a newly created corporation, Lockheed Martin. The

proposed complaint alleges that the merger, if consummated, would

violate Section 5 of the Federal Trade Commission Act, as amended, 15

U.S.C. 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. 18,

in the following three markets in the United States:

(1) the research, development, manufacture and sale of satellites

for use in space-based early warning systems;

(2) the research, development, manufacture and sale of military

aircraft; and

(3) the research, development, manufacture and sale of expendable

launch vehicles.

The proposed Consent Order would remedy the alleged violations.

First, in the market for space-based early warning systems, Lockheed

and Martin Marietta are exclusively teamed with the Electro-Optical and

Data Systems Group of Hughes Aircraft Company (``Hughes'') and Northrop

Grumman Corporation (``Northrop Grumman''), respectively. Hughes and

Northrop Grumman are two of the leading manufacturers of sensors for

space-based early warning systems. Because the Lockheed/Hughes and

Martin Marietta/Northrop Grumman teaming agreements are both exclusive,

the proposed merger would allow Lockheed Martin to tie up two different

sensors for space-based early warning systems. The proposed Consent

Order makes these agreements non-exclusive, which allows Hughes and

Northrop Grumman to bid for space-based early warning systems either on

their own or teamed with other companies, as well as to continue

working with their current teammates, Lockheed and Martin Marietta. The

purpose of the proposed Consent Order is to increase the number of

competitors for space-based early warning systems procured by the

United States Department of Defense (``DoD'').

Second, Lockheed is a significant competitor in the manufacture and

sale of military aircraft, and Martin Marietta is the only supplier of

the LANTIRN infrared navigation and targeting system, a critical

component on some military aircraft. Following the merger, Lockheed

Martin would be the sole source for LANTIRN systems, as well as a

competitor in the military aircraft market. Because military aircraft

manufacturers will have to provide proprietary information to the

Lockheed Martin division that manufacturers LANTIRN, Lockheed Martin's

military aircraft division could gain access to competitively

significant and non-public information concerning competing military

aircraft. In addition, because the LANTIRN system is periodically

modified or upgraded, Lockheed Martin could modify the LANTIRN in a

manner that discriminates against competing military aircraft

manufacturers. As a result, the proposed merger increases the

likelihood that competition between military aircraft suppliers would

decrease because Lockheed Martin would have access to its competitors'

proprietary information, which could affect the prices and services

that Lockheed Martin provides. In addition, advancements in military

aircraft research, innovation, and quality would be reduced because

Lockheed Martin's military aircraft competitors would fear that

Lockheed Martin could ``free ride'' off of its competitors'

technological developments.

Therefore, the proposed Consent Order prohibits Lockheed Martin

from disclosing any non-public information that it received from

military aircraft manufacturers in its capacity as a provider of the

LANTIRN system to Lockheed Martin's military aircraft division. Under

the proposed Order, Lockheed Martin may only use such information in

its capacity as a provider of the LANTIRN system. Non-public

information in this context means any information not in the public

domain and designated as proprietary information by any military

aircraft manufacturer that provides such information to Lockheed

Martin. The proposed Consent Order also prohibits Lockheed Martin from

making any modifications to the LANTIRN system that disadvantage other

military aircraft manufacturers unless the modification are necessary

to meet competition or are approved by the Secretary of Defense, or

[[Page 5414]] his or her designee. The purpose of the proposed Order is

to maintain the opportunity for full competition in the market for the

research, development, manufacture and sale of military aircraft.

Third, Martin Marietta and Lockheed are significant competitors in

the manufacture and sale of satellites and expendable launch vehicles.

The proposed merger increases the degree of vertical integration in the

markets for satellites and ELVs used by the United States government.

Because satellites manufactured by Lockheed Martin may be launched on

ELVs supplied by Lockheed Martin's competitors, Lockheed Martin's

satellite divisions could gain access to competitively significant and

non-public information concerning competitors' ELVs during the process

of integrating a satellite and an ELV. As a result, the proposed merger

increases the likelihood that competition between ELV suppliers would

decrease because Lockheed Martin would have access to its competitor's

proprietary information, which could affect the prices and services

that Lockheed Martin provides. In addition, advancements in ELV

research, innovation, and quality would be reduced because Lockheed

Martin's ELV competitors would fear that Lockheed Martin could ``free

ride'' off of its competitors' technological developments.

The proposed Consent Order prohibits Lockheed Martin's satellite

divisions from disclosing to Lockheed Martin's ELV divisions any non-

public information that Lockheed Martin receives from competing

suppliers of ELVs. Under the proposed Order, Lockheed Martin may only

use such information in its capacity as a satellite manufacturer. Non-

public information in this context means any information not in the

public domain and designated as proprietary information by any ELV

manufacturer that provides such information to Lockheed Martin's

satellite divisions. The purpose of the proposed Order is to maintain

the opportunity for full competition in the research, development,

manufacture and sale of ELVs.

Under the provisions of the proposed Consent Order, respondents are

required to deliver a copy of the Order to any United States military

aircraft manufacturer and to any United States ELV manufacturer prior

to obtaining any information from them that is outside the public

domain. Under the proposed Order, respondents also are required to

provide to the Commission reports of their compliance with the Order

sixty (60) days after the Order becomes final and annually for the next

ten (10) years on the anniversary of the date the Order becomes final.

In order to preserve or promote competition in the relevant markets

during the period prior to the final acceptance of the proposed Consent

Order (after the 60-day public notice period), respondents have entered

into an Interim Agreement with the Commission in which respondents

agreed to be bound by the proposed Consent Order as of January 10,

1995, the date the Commission accepted the proposed Consent Order

subject to final approval.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 95-2060 Filed 1-26-95; 8:45 am]

BILLING CODE 6750-01-M