Senator Warren questions Lockheed’s antitrust solution to buy Aerojet
WASHINGTON, July 20 (Reuters) – U.S. Senator Elizabeth Warren has asked the Federal Trade Commission to take a closer look at mergers in the defense industry, questioning a Lockheed Martin proposal that would allow her to buy the largest independent manufacturer of rocket engines, Aerojet Rocketdyne Holdings.
The Democratic senator, who has a keen interest in corporate behavior, has asked the FTC to examine the premises and effectiveness of internal firewalls like the ones Lockheed is proposing to prevent it from gaining a competitive advantage over its peers once the deal is done, according to a July 16 letter. seen by Reuters.
Lockheed Martin (LMT.N) announced a $ 4.4 billion deal to purchase Aerojet (AJRD.N) late last year, a deal that raised eyebrows as it would give Lockheed – the # 1 defense contractor – owned a vital part of the U.S. missile industry whose engines are used in everything from the homeland missile shield to Stinger missiles.
Lockheed said after closing the deal that the “Rocketdyne Aerojet business will continue to serve as a merchant supplier” to the entire defense industry, a premise that has been met with skepticism by Raytheon Technologies (RTX. N), a major customer for rocket engines. Read more
Internal firewalls would be required in the new company to protect intellectual property, prices and product development from competitors in the highly competitive arms industry.
Warren’s letter urged the FTC to take a stronger antitrust stance on defense deals and said the Lockheed tie-up should not be allowed until the FTC understands the effectiveness of old firewalls internal, which it considers necessary to maintain competition, as well as national security. .
A firewall is an example of a “behavioral remedy,” one of the tools the FTC has to keep it competitive. This is why Warren’s letter to FTC President Lina Khan asked whether “behavioral remedies” had protected competition and prevented monopoly behavior in the defense industry.
Behavioral remedies usually expire after a few years.
A “structural remedy,” a more common enforcement mechanism, typically requires a company to sell a line of business to prevent monopoly behavior.
In February, the FTC extended its review of the agreement under the Hart-Scott-Rodino Act to examine potentially anti-competitive mergers.
Lockheed did not immediately respond to a request for comment. He previously said he expects the deal to be done by the end of the year.
Reporting by Mike Stone in Washington; Additional reporting by Diane Bartz; Editing by Dan Grebler
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