[Federal Register Volume 59, Number 70 (Tuesday, April 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8743]
[[Page Unknown]]
[Federal Register: April 12, 1994]
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FEDERAL TRADE COMMISSION
[File No. 941 0038]
Martin Marietta Corporation; 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
permit Martin Marietta, a Maryland-based corporation, to acquire
General Dynamics Corporation's Space Systems Division and would
prohibit, among other things, the respondent's Expendable Launch
Vehicle (ELV) division from disclosing to its satellite division any
non-public information that its ELV division receives from a satellite
manufacturer, and would require the respondent to give a copy of the
final consent order to U.S. satellite owners or manufacturers before
obtaining any non-public information from them.
DATES: Comments must be received on or before June 13, 1994.
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:
Ann Malester, FTC/S-2224, 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 Sec. 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
Sec. 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 (``the Commission''), having initiated
an investigation of the acquisition by Martin Marietta Corporation
(``Martin Marietta''), of certain assets of the Space Systems Division
of General Dynamics Corporation (``General Dynamics''), and it now
appearing that Martin Marietta, 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 other relief:
It is hereby agreed by and between proposed respondent, by its duly
authorized officers and attorneys, and counsel for the Commission that:
1. 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.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint here attached.
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 validity of the order entered pursuant to this agreement;
and
d. Any claim under the Equal Access to Justice Act.
4. This agreement shall not become a 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. Provided, however, if, prior to the date the Commission
issues its complaint and decision, proposed respondent notifies the
Commission in writing that it has abandoned its proposed acquisition as
described in the draft of complaint and has withdrawn any related
notifications filed pursuant to Section 7A of the Clayton Act, as
amended, 15 U.S.C. 18a, the Commission will not issue its complaint and
decision.
5. 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 here attached, or that
the facts as alleged in the draft complaint, other than jurisdictional
facts, are true.
6. 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 Sec. 2.34 of the Commission's
Rules, and if proposed respondent has not notified the Commission that
it has abandoned its proposed acquisition pursuant to paragraph 4 of
this agreement, the Commission may, without further notice to proposed
respondent, (1) issue its complaint corresponding in form and substance
with the draft of complaint here attached 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 this 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.
7. Proposed respondent has read the draft of 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 that 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. ``Martin Marietta'' or ``Respondent'' means Martin Marietta
Corporation, its predecessors, subsidiaries, divisions, groups and
affiliates controlled by Martin Marietta, and their respective
directors, officers, employees, agents and representatives, and their
respective successors and assigns.
B. ``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 Expendable Launch Vehicles and
Satellites, as well as its officers, employees, agents, divisions,
subsidiaries, successors, and assigns, and the officers, employees or
agents of Astronautics' divisions, subsidiaries, successors and
assigns.
C. ``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 08543-800, which is principally engaged in the research,
development, manufacture and sale of Satellites, its officers,
employees, agents, divisions, subsidiaries, successors and assigns, and
the officers, employees or agents of Astro Space's divisions,
subsidiaries, successors and assigns.
D. ``General Dynamics'' means General Dynamics Corporation, a
corporation organized, existing and doing business under the laws of
Delaware with its principal place of business at 3190 Fairview Park
Drive, Falls Church, Virginia 22042-4523.
E. ``Person'' means any natural person, corporate entity,
partnership, association, joint venture, government entity, trust or
other business or legal entity.
F. ``Commission'' means the Federal Trade Commission.
G. ``Expendable Launch Vehicle'' means a vehicle that launches
satellites from the Earth's surface that is consumed during the process
of launching a Satellite and therefore cannot be launched more than one
time.
H. ``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.
I. ``Acquisition'' means the acquisition by Martin Marietta of
substantially all of the assets relating to General Dynamics
Corporation's Space Systems Division.
J. ``Non-Public Information'' means any information not in the
public domain furnished by a Satellite owner or manufacturer to
Astronautics or General Dynamics in their capacity as providers of
Expendable Launch Vehicles and (a) if written information, designated
in writing by the Satellite owner or manufacturer as proprietary
information by an appropriate legend, marking, stamp, or positive
written identification on the face thereof, or (b) if oral, visual or
other information, identified as proprietary information in writing by
the Satellite owner or manufacturer prior to the disclosure or within
thirty (30) days after such disclosure. Non-Public Information shall
not include (i) information already known to Martin Marietta, (ii)
information which subsequently falls within the public domain through
no violation of this Order by Martin Marietta, (iii) information which
subsequently becomes known to Martin Marietta from a third party not in
breach of a confidential disclosure agreement with such Satellite owner
or manufacturer, or (iv) information after six (6) years from the date
of disclosure of such Non-Public information to Martin Marietta or such
other period as agreed to in writing by Martin Marietta and the
Satellite owner or manufacturer.
II
It is further ordered That: A. Martin Marietta shall not, absent
the prior written consent of the proprietor of Non-Public Information,
provide, disclose, or otherwise make available to Astro Space any Non-
Public Information; and
B. Martin Marietta shall use any Non-Public Information obtained by
Astronautics only in Astronautics' capacity as a provider of Expendable
Launch Vehicles, absent the prior written consent of the proprietor of
Non-Public Information.
III
It is further ordered That Martin Marietta shall deliver a copy of
this order to any United States Satellite owner or manufacturer prior
to first obtaining any information relating to the owner's or
manufacturer's Satellites outside the public domain either from the
Satellite owner or manufacturer or through the Acquisition.
IV
It is further ordered That one (1) year from the date this order
becomes final, annually for the next nine (9) years on the anniversary
of the date this order becomes final, 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 compiled and is complying with this order. To the extent
not prohibited by United States Government national security
requirements, Respondent shall include in its reports information
sufficient to identify all United States Satellite owners or
manufacturers with whom Respondent has entered an agreement for the
research, development, manufacture or sale of Expendable Launch
Vehicles.
V
It is further ordered That Respondent shall notify the Commission
at least thirty days prior to any proposed change in Respondent, such
as dissolution, assignment or sale resulting in the emergence of a
successor corporation, the creation or dissolution of subsidiaries or
any other change in Respondent, that may affect compliance obligations
arising out of this 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 security
requirements, upon written request, and on reasonable notice,
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 Respondent relating to any matters contained in this
order; and
B. Upon five (5) days' notice to Respondent and without restraint
or interference from it, to interview officers, directors, or employees
of Respondent, who have counsel present, regarding such matters.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has provisionally
accepted an agreement containing a proposed Consent Order from Martin
Marietta Corporation (``Martin Marietta''), under which Martin
Marietta's satellite division would be prohibited from gaining access
to any non-public information that Martin Marietta's expendable launch
vehicle division receives from competing satellite producers in its
capacity as a provider of launch vehicles.
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.
Martin Marietta is a significant competitor in the market for the
manufacture and sale of satellites. On December 22, 1993, Martin
Marietta agreed to acquire General Dynamics Corporation's Space Systems
Division, which manufactures the Atlas expendable launch vehicles.
Following this acquisition, Martin Marietta would be the only United
States supplier in the market for Atlas-class expendable launch
vehicles as well as a competitor in the satellite market. The proposed
complaint alleges that the acquisition, 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, because
Martin Marietta's satellite division could gain access to competitively
significant and non-public information concerning other satellite
suppliers' products. As a result, the proposed acquisition increases
the likelihood that competition between satellite suppliers would
decrease and that advancements in satellite research, innovation, and
quality would be reduced.
The proposed Consent Order prohibits Martin Marietta from
disclosing any non-public information Martin Marietta receives in its
capacity as a provider of expendable launch vehicles from a satellite
owner or manufacturer to Martin Marietta's satellite division. Under
the proposed Order, Martin Marietta may only use such information in
its capacity as a provider of expendable launch vehicles. Non-public
information is defined in the Order as any information not in the
public domain furnished by a satellite owner or manufacturer to Martin
Marietta's expendable launch vehicle division or General Dynamics in
their capacity as providers of expendable launch vehicles and
designated as proprietary information.
The Commission anticipates that the effect of the proposed Order
will be to maintain the opportunity for full competition in the market
for the research, development, manufacture and sale of satellites by
limiting the ability of one significant competitor to use information
obtained from other competitors.
Under the provisions of the Consent Order, Martin Marietta is also
required to deliver a copy of the Order to any United States satellite
owner or manufacturer prior to obtaining any information that is
outside the public domain. One year from the date the Order becomes
final and annually thereafter for nine (9) years, Martin Marietta will
be required to provide to the Commission a report of its compliance
with the Order.
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.
Dissenting Statement of Commissioner Deborah K. Owen on Proposed
Consent Agreement With Martin Marietta Corp. File No. 941-0038
Respondent Martin Marietta Corporation manufactures satellites,
which are launched into orbit by expendable launch vehicles, some of
which it also manufactures. It proposes to acquire the Space Systems
Division of General Dynamics Corporation, which manufactures Atlas-
class expendable launch vehicles. The theory of the complaint is that
if this acquisition is consummated, Martin Marietta's launch vehicle
division will gain access to trade secrets concerning the products of
other satellite manufacturers, and will transfer such information to
Martin Marietta's satellite division, which will use it to injure its
competitors. The Commission's order would enjoin Martin Marietta from
misusing its rivals' confidential information in this manner.
Vertical integration, and combinations designed to achieve the
efficiencies of such integration, are common phenomena, particularly in
the aerospace industry. Accordingly, it would seem that there are
already ample opportunities for the sort of abusive information-sharing
which concerns the Commission. However, equally common are contractual
obligations between vertically integrated companies, and firms that do
business with one of their divisions, to prevent the sharing of those
firms' confidential business information with other parts of the
conglomerate with which they compete. The question then is whether such
contracts are sufficient to avoid any competitive problem, or whether
government-imposed requirements are necessary; if there exists a
significant number of substantiated incidents of such activity, then
private agreements would not seem adequate. However, the opposite
appears to be the case.
While various Commission personnel have, in recent years, exhorted
the business community to be sensitive to antitrust concerns stemming
from the sharing of business information, Commission enforcement
actions in this area have been rare, and no case has involved the
strategic misuse of proprietary information so as to injure a
competitor. Furthermore, Martin Marietta currently manufactures both
satellites and launch vehicles, and is already privy to competitively
significant information from other satellite manufacturers, yet I am
unaware of any instance where it has been alleged that proprietary
information has been used for exclusionary purposes by Martin Marietta,
or indeed by any other aerospace manufacturer. As a result, it seems
fair to conclude that contractual obligations prohibiting such
behavior, coupled with the threat of business tort and treble-damage
antitrust suits, are sufficient deterrents. Moreover, as the amount of
available business in the aerospace industry continues to dwindle, it
is hard to imagine that developing a reputation for abusing
confidential information would enhance any company's competitiveness.
The Commission's proposed consent is somewhat puzzling in its
coverage. If the theory of the complaint is correct--that Martin
Marietta's dominant power in the launch vehicle market would facilitate
anticompetitive information-sharing in the satellite market--why would
the company stop there? The theory would seem to support as well
allegations of other exclusionary and tying practices, yet these are
not included. The Commission, correctly I believe, concluded that there
was no evidence to support such charges; I therefore find it strange
that it chose to go forward on the equally speculative information-
sharing allegations.
In short, I do not believe that the evidence supports the theory
behind the Commission's complaint, nor that a Commission order would be
superior to privately negotiated confidentiality agreements for
protecting the trade secrets of satellite manufacturers. I dissent.
[FR Doc. 94-8743 Filed 4-11-94; 8:45 am]
BILLING CODE 6750-01-M
