Raytheon Company; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 961-0057]

Raytheon Company; 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require the Lexington, Massachusetts-based

company to erect an information ``firewall'' between it and Chrysler

Technologies Holding, Inc. (CTH). The consent agreement settles

allegations that Raytheon's acquisition of CTH may compromise the

competitiveness of an upcoming procurement for the Navy's Submarine

High Data Rate system (Submarine HDR), on which Raytheon has bid. CTH

is presently a second-tier subcontractor to GTE Corporation, which also

bid on the Submarine HDR contract.

DATES: Comments must be received on or before August 19, 1996.

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

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

James Holden, Federal Trade Commission, 6th and Pennsylvania Ave, NW.,

Washington, DC 20580, (202) 326-2682.

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 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)).

Agreement Containing Consent Order

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

investigation of the proposed acquisition by Raytheon Company

(``Raytheon'') of Chrysler Technologies Holding, Inc. (``CTH''), and it

now appearing that Raytheon, hereinafter sometimes referred to as

``Proposed Respondent,'' is willing to enter into an agreement

containing an order to refrain from certain acts and to provide for

certain other relief:

It is hereby agreed by and between Proposed Respondent Raytheon, by

its duly authorized officers and attorneys, and counsel for the

Commission that:

1. Proposed Respondent Raytheon 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 141 Spring Street, Lexington, Massachusetts 02173.

2. Proposed Respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed Respondent waives:

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

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validity of the order entered pursuant to this agreement; and

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

4. Proposed Respondent shall submit within twenty (20) days of the

date this agreement is signed by Proposed Respondent, an initial

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

Proposed Respondent setting forth in detail the manner in which

Proposed Respondent will comply with Paragraph II. 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 for public comment.

5. This agreement shall not become part of the public record of the

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 Respondent, 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.

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

constitute an admission by Proposed Respondent that the law has been

violated as alleged in the draft of complaint, or that the facts as

alleged in the draft complaint, other than jurisdictional facts, are

true.

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

Commission, and 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 Respondent, (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 Respondent's

address as stated in the agreement shall constitute service. Proposed

Respondent waives any right it may have to any other manner of service.

The complaint may be used in construing the terms of the order, and no

agreement, understanding, representation or interpretation not

contained in the order or the agreement may be used to vary or

contradict the terms of the order.

8. Proposed Respondent has read the proposed complaint and order

contemplated hereby. Proposed Respondent understands that once the

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

compliance reports showing that it has fully complied with the order.

Proposed Respondent further understands it 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. ``Respondent'' or ``Raytheon'' means Raytheon Company, its

directors, officers, employees, agents, representatives, predecessors,

successors and assigns; its subsidiaries, divisions, groups,

affiliates, partnerships and joint ventures controlled by Raytheon

Company, and the respective directors, officers, employees, agents,

representatives, successors and assigns of each. For purposes of

Paragraph II. of this order, Raytheon does not include ESI.

B. ``CTH'' means Chrysler Technologies Holding, Inc., a corporation

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

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

business located in 1000 Chrysler Drive, Auburn Hills, Michigan 48326-

2766, its directors, officers, employees, agents, representatives,

predecessors, successors and assigns; its subsidiaries, divisions,

groups, affiliates, partnerships and joint ventures controlled by CTH,

and the respective directors, officers, employees, agents,

representatives, successors and assigns of each.

C. ``ESI'' means Electrospace Systems, Inc., a wholly-owned

subsidiary of Chrysler Technologies Holding, Inc., with its principal

office and place of business located at 1301 East Collins Boulevard,

Richardson, Texas 75083, or by any other entity within or controlled by

Chrysler Technologies Holding, Inc. that is engaged in, among other

things, the research, development, manufacture or sale of Antenna and

Terminal Controls, its directors, officers, employees, agents,

representatives, predecessors, successors and assigns; its

subsidiaries, divisions, groups, affiliates, partnerships and joint

ventures controlled by ESI (or such similar entity), and the respective

directors, officers, employees, agents, representatives, successors and

assigns of each.

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

E. ``Submarine High Data Rate Satellite Communications Terminal''

means the system to be procured in the United States Department of the

Navy's scheduled competitive procurement of the Submarine High Data

Rate Satellite Communications Terminal, a satellite communications

system for use on U.S. Navy submarines that is capable of, among other

things, transmitting and receiving both super high frequency and

extremely high frequency signals.

F. ``Antenna and Terminal Controls'' means any current or future

equipment and services designed, developed, proposed or provided by ESI

in connection with the United States Department of the Navy's

procurement of the Submarine High Data Rate Satellite Communications

Terminal.

G. ``Non-Public Information of Raytheon'' mean any information not

in the public domain and in the possession or control of Raytheon

relating to the Submarine High Data Rate Satellite Communications

Terminal.

H. ``Non-Public Information of ESI'' means any information not in

the public domain and in the possession or control of ESI relating to

the Submarine High Data Rate Satellite Communications Terminal, and any

information not in the public domain furnished by Rockwell

International Corporation or GTE Corporation or any other company to

ESI in its capacity as subcontractor to Rockwell International

Corporation in connection with the U.S. Navy's procurement of the

Submarine High Data Rate Satellite Communications Terminal.

I. ``Acquisition'' means Raytheon's acquisition of all of the

voting securities of Chrysler Technologies Holding, Inc.

II

It is further ordered that:

A. Raytheon shall not provide, disclose or otherwise make

available, directly or indirectly, to ESI any Non-Public Information of

Raytheon until either: (1) The United States Department of the Navy

selects only one supplier for the Submarine High Data Rate Satellite

Communications Terminal; or (2) the

[[Page 31528]]

United States Department of the Navy cancels its procurement of the

Submarine High Data Rate Satellite Communications Terminal entirely.

B. Raytheon shall not obtain or seek to obtain, directly or

indirectly, any Non-Public Information of ESI until either: (1) the

United States Department of the Navy selects only one supplier for the

Submarine High Data Rate Satellite Communications Terminal; or (2) the

United States Department of the Navy cancels its procurement of the

Submarine High Data Rate Satellite Communications Terminal entirely.

III

It is further ordered that Respondent 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 Paragraph II. of this order are complied with or

until such other time as is stated in said Interim Agreement.

IV

It is further ordered that within twenty (20) days of the date this

order becomes final, and annually on the anniversary of the date this

order become final until either the United States Department of the

Navy selects only one supplier for the Submarine High Data Rate

Satellite Communications Terminal or cancels its procurement of the

Submarine High Data Rate Satellite Communications Terminal entirely,

and at such other times as the Commission may require, Respondent shall

file a verified written report with the Commission setting forth in

detail the manner and form in which it has complied and it complying

with Paragraph II of this order.

V

It is further ordered that Respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in the corporate

Respondent such as dissolution, assignment, sale resulting in the

emergence of a successor corporation, or the creation or dissolution of

subsidiaries or sale of any division or any other change in the

corporation, in each instance where such change may affect compliance

obligations arising out of the order.

VI

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,

Respondent shall permit any duly authorized representatives 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 Respondent, relating to any matters contained in this

order; and

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

or interference from Respondent, to interview officers, directors, or

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

such matters.

VII

It is further ordered that Respondent's obligations under this

order shall terminate when either: (1) the United States Department of

the Navy selects only one supplier for the Submarine High Data Rate

Satellite Communications Terminal; or (2) the United States Department

of the Navy cancels its procurement of the Submarine High Data Rate

Satellite Communications Terminal entirely.

Appendix I

Interim Agreement

This Interim Agreement is by and between Raytheon Company

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

the State of Delaware, 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.

Sec. 41, et seq.

Premises

Whereas, Raytheon has proposed to acquire all of the outstanding

voting securities of Chrysler Technologies Holding, Inc., and

Whereas, the Commission is now investigating the proposed

Acquisition 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 during the period prior to the final issuance 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 Acquisition might not be possible, or might be less than

an effective remedy; and

Whereas, Raytheon entering into this Interim Agreement shall in no

way be construed as an admission by Raytheon that the proposed

Acquisition constitutes a violation of any statute; and

Whereas, Raytheon understands 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 Act by reason of anything contained in this Interim

Agreement.

Now, therefore, Raytheon agrees, upon the understanding that the

Commission has not yet determined whether the proposed Acquisition will

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

at the time it accepts the Consent Agreement for public comment, it

will grant early termination of the Hart-Scott-Rodino waiting period,

as follows:

1. Raytheon agrees to execute and be bound by the terms of the

Order contained in the Consent Agreement, as if it were final, from the

date Raytheon signs the Consent Agreement.

2. Raytheon agrees to deliver, within three (3) days of the date

the Consent Agreement is accepted for public comment by the Commission,

a copy of the Consent Agreement and a copy of this Interim Agreement to

the United States Department of Defense, Rockwell International

Corporation, and GTE Corporation.

3. Raytheon agrees to submit, within twenty (20) days of the date

the Consent Agreement is signed by Raytheon, an initial report,

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

setting forth in detail the manner in which Raytheon will comply with

Paragraph II. of the Consent Agreement.

4. Raytheon agrees that, from the date Raytheon signs the Consent

Agreement until the first of the dates listed in subparagraphs 4.a. and

4.b., it will comply with the provisions of this interim Agreement:

a. Ten (10) 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; or

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b. The date the Commission finally issues its Compliant and its

Decision and Order.

5. Raytheon waives 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, Raytheon shall permit

any duly authorized representative or representatives of the

Commission:

a. Access, during the office hours of Raytheon 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 Raytheon relating to compliance with

this Interim Agreement; and

b. Upon five (5) days' notice to Raytheon and without restraint or

interference from it, to interview officers, directors, or employees of

Raytheon, 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

Raytheon Company (``Raytheon''), which prohibits Raytheon from gaining

access to any non-public information in the possession of Electrospace

Systems, Inc. (``ESI'') related to the Submarine High Data Rate

Satellite Communications Terminal (``Submarine HDR Terminal'') to be

procured by the United States Department of the Navy, or disclosing any

such information in its possession to ESI. In addition, the Commission

has accepted an Interim Agreement which prohibits Raytheon from

receiving any non-public information related to the Submarine HDR

Terminal from ESI, or giving any such non-public information in its

possession to ESI.

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 a Stock Purchase Agreement dated April 4, 1996,

Raytheon proposed to purchase all of the voting securities of Chrysler

Technologies Holding, Inc. (``CTH'') for approximately $455 million.

ESI is a wholly-owned subsidiary of CTH. The proposed Complaint alleges

that the acquisition, if consummated, would violate Section 7 of the

Clayton Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the

Federal Trade Commission Act, as amended, 15 U.S.C. Sec. 45, in the

market for the research, development, manufacture and sale of Submarine

HDR Terminals.

The Submarine HDR Terminal is a satellite communications system for

use on U.S. Navy submarines that is capable of, among other things,

transmitting and receiving both super high frequency and extremely high

frequency signals. Initial proposals (bids) for the Navy's procurement

of the Submarine HDR Terminal were due on April 15, 1996, and Raytheon

submitted an initial proposal. An initial proposal was also submitted

by GTE Corporation, for which ESI is a second-tier subcontractor

supplying the antenna/terminal controls (an extremely small portion of

the overall system). Having received initial proposals, the Navy now

intends to hold discussions that may culminate in a ``Best And Final

Offer'' competition. At this point in the competition for the Navy's

Submarine HDR Terminal, the market is highly concentrated, and

effective new entry is unlikely to occur in a timely manner.

In its capacity as supplier of the antenna/terminal controls for

the GTE proposal, ESI already possesses a significant amount of

competitively sensitive information concerning the GTE proposal, and

may be in a position to acquire even more such information during the

period from the present until the competition is concluded. The

upcoming competition for the Navy's Submarine HDR Terminal could be

jeopardized if either Raytheon or ESI gains access to competitively

sensitive information in the other's possession as a result of the

proposed acquisition. The proposed Consent Order remedies this

antitrust concern by prohibiting the exchange of competitively

sensitive information between Raytheon and ESI. Other than the exchange

of information, the proposed acquisition is unlikely to have an

anticompetitive effect due to, among other reasons, the fact that ESI's

role on the GTE proposal is extremely small.

Under the provisions of the Consent Order, Raytheon is also

required to provide the Commission with a report of compliance with the

Order within twenty (20) days of the date the Order becomes final, and

annually thereafter until the Navy either: (1) selects only one

Submarine HDR Terminal supplier; or (2) cancels the Submarine HDR

Terminal procurement entirely.

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

proposed Consent 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. 96-15731 Filed 6-19-96; 8:45 am]

BILLING CODE 6750-01-M