[Federal Register Volume 62, Number 216 (Friday, November 7, 1997)]
[Notices]
[Pages 60267-60278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29474]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Raytheon Company, General Motors Corporation, 
and HE Holdings, Inc.; 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 Order, Hold Separate and Partition Plan Stipulation and 
Order, and Competitive Impact Statement have been filed with the United 
States District Court in the District of Columbia, Civil No. 
1:97CV02397.
    On October 16, 1997, the United States filed a Complaint alleging 
that the proposed acquisition by Raytheon Company of Hughes Aircraft 
Company, a wholly owned subsidiary of HE Holdings, Inc. and an indirect 
subsidiary of General Motors Corporation, would violate Section 7 of 
the Clayton Act, 15 U.S.C. Sec. 18. The proposed Final Judgment, filed 
contemporaneously with the Complaint, requires Raytheon to: (1) Divest 
the second generation and third generation focal plane array business 
of Raytheon TI Systems (``RTIS'') and the second generation ground 
electro-optical business of Hughes Aircraft Company's Sensors and 
Communications Segment; (2) establish a firewall that prevents the flow 
of information concerning the Follow-on-to-TOW (``FOTT'') missile 
program between the RTIS/Lockheed Martin Corp. joint venture FOTT team 
and the Hughes FOTT team, and between each FOTT team and any other 
employee of Raytheon; and (3) provide incentives to the RTIS/Lockheed 
Martin FOTT team to pursue its bid to ensure competition between 
Raytheon and Hughes in bids for the FOTT missile.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereto will be published in the 
Federal Register and

[[Page 60268]]

filed with the Court. Comments should be directed to J. Robert Kramer 
II, Chief, Litigation II Section, Antitrust Division, United States 
Department of Justice, 1401 H Street, NW., Suite 3000, Washington, DC 
20530 (telephone: 202/307-0924).
    Copies of the Complaint, Stipulation and Order, Hold Separate and 
Partition Plan Stipulation and Order, Proposed Final Judgment, and 
Competitive Impact Statement are available for inspection in Room 215 
of the U.S. Department of Justice, Antitrust Division, 325 7th Street, 
NW., Washington, DC 20530, (202) 514-2841. Copies of these materials 
may be obtained upon request and payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court for the District of Columbia

[Civil No: 97 2397]

United States of America, Plaintiff, v. Raytheon Company, General 
Motors Corp., and H E Holdings, Inc., Defendants

Stipulation and Order

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, as follows:
    (1) The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the United States District Court for the District of 
Columbia.
    (2) The parties stipulate that a Final Judgment in the form hereto 
attached may be filed and entered by the Court, upon the motion of any 
party or upon the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. Sec. 16), and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on defendants and by filing that 
notice with the Court.
    (3) Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment pending entry of the Final Judgment by the 
Court, or until expiration of time for all appeals of any Court ruling 
declining entry of the proposed Final Judgment, and shall, from the 
date of the signing of this Stipulation by the parties, comply with all 
the terms and provisions of the proposed Final Judgment as though the 
same were in full force and effect as an Order of the Court.
    (4) This Stipulation shall apply with equal force and effect to any 
amended proposed Final Judgment agreed upon in writing by the parties 
and submitted to the Court.
    (5) In the event plaintiff withdraws its consent, as provided in 
paragraph 2 above, or in the event the proposed Final Judgment is not 
entered pursuant to this Stipulation, the time has expired for all 
appeals of any Court ruling declining entry of the proposed Final 
Judgment, and the Court has not otherwise ordered continued compliance 
with the terms and provisions of the proposed Final Judgment, then the 
parties are released from all further obligations under this 
Stipulation, and the making of this Stipulation shall be without 
prejudice to any party in this or any other proceeding.
    (6) Defendants represent that the divestiture ordered in the 
proposed Final Judgment can and will be made, and that defendants will 
later raise no claim of hardship or difficulty as grounds for asking 
the Court to modify any of the divestiture provisions contained 
therein.
    Dated: October 16, 1997.
    For Plaintiff United States of America:
Willie L. Hudgins,
Esquire (D.C. Bar #37127), U.S. Department of Justice, Antitrust 
Division, Litigation II, Suite 3000, Washington, D.C. 20005, (202) 307-
0924.

    For Defendant Raytheon Company
Robert D. Paul,
Esquire (D.C. Bar #416314), Michael S. Shuster, Esquire, White & Case, 
601 13th St., N.W., Washington, D.C. 20005-3807, (202) 626-3614.

    For Defendants H E Holdings, Inc. and General Motors Corp.:
Robert C. Odle, Jr.,
Esquire (D.C. Bar #389845), Peter D. Standish, Esquire, Douglas A. 
Nave, Esquire, Weil, Gotshal & Manges LLP, 767 Fifth Ave., New York, NY 
10153-0119.

    It is so Ordered by the Court, this ________ day of 
____________, 1997.

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United States District Judge.

United States District Court for the District Of Columbia

United States of America, Plaintiff. v. Raytheon Company, General 
Motors Corp., and H E Holdings, Inc., Defendants

Final Judgment

    Whereas, plaintiff, the United States of America, filed its 
Complaint in this action on October 16, 1997, and plaintiff and 
defendants by their respective attorneys, having consented to the entry 
of this Final Judgment without trial or adjudication of any issue of 
fact or law herein, and without this Final Judgment constituting any 
evidence against or an admission by any party with respect to any issue 
of law or fact herein;
    And whereas, defendants have agreed to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And whereas, plaintiff intends defendants to be required to 
preserve competition by: (1) Promptly divesting the second generation 
(``2nd Gen.'') and third generation (``3rd Gen.'') focal plane array 
(``FPA'') business of Raytheon TI Systems (``RTIS'') and the 2nd Gen. 
ground electro-optical (``EO'') business of Hughes Aircraft Company's 
Sensors and Communications System Segment; (2) establishing a firewall 
that prevents the flow of information concerning the Follow-on-to-TOW 
(``FOTT'') missile program between the RTIS Missile Systems Division 
(``RTIS Missiles'') of Raytheon and any other part of Raytheon and 
between Hughes Missile Systems and any other part of Raytheon: and (3) 
incentivizing RTIS Missiles to pursue its bid through a joint venture 
with Lockheed Martin Corp. to ensure competition in bids for the FOTT 
missile;
    And whereas, plaintiff requires defendants to make the divestitures 
for the purpose of establishing a viable competitor in the development, 
production, and sale of FPAs and ground EO systems, and to construct 
firewalls and incentivize RTIS Missiles for the purpose of preserving 
competition in bidding for the FOTT missile program;
    And whereas, defendants have represented to the plaintiff that the 
divestitures ordered herein can and will be made and that the firewalls 
can be constructed and that defendants will later raise no claims of 
hardship or difficulty as grounds for asking the Court to modify any of 
the divestiture or firewall provisions contained below;
    Now, therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby ordered, adjudged, and 
decreed as follows:

I. Jurisdiction

    This Court has jurisdiction over each of the parties hereto and 
over the subject matter of this action. The Complaint states a claim 
upon which relief may be granted against defendants, as hereinafter 
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 
Sec. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``A-Kit'' means all components necessary to fit a B-Kit into a 
particular

[[Page 60269]]

ground vehicle, including the optics, electronics, software, visual 
display, stabilization, and fire control as required.
    B. ``B-Kit'' means the common components for 2nd Gen. Forward 
Looking Infrared Systems (``FLIRs'') designed under the HTI program, 
including SADA II integrated cooler/dewar detector assemblies, afocal 
assemblies, and associated electronics.
    C. ``DoD'' means the Department of Defense.
    D. ''DoJ'' means the Antitrust Division of the Department of 
Justice.
    E. ``EO Business'' means the 2nd Gen. ground EO business of Hughes 
operated out of the El Segundo, California and La Grange, Georgia 
facilities that produces A-Kits and B-Kits for ground vehicles and 
other applications, including the IBAS. M-1 TIS, LRASSS, and HTT 
programs, and all employees listed in confidential Attachment A, 
including:
    a. All tangible assets used to produce A-Kits and B-Kits; all real 
property (owned or leased), including interests in the El Segundo, 
California and La Grange, Georgia facilities used to produce A-Kits and 
B-Kits, research and development activities, as identified pursuant to 
the Court's Hold Separate and Partition Plan Stipulation and Order; all 
manufacturing, personal property, inventory, office furniture, fixed 
assets and fixtures, materials, supplies, on-site warehouses or storage 
facilities, and other tangible property or improvements used in the 
production of A-Kits and B-Kits; all licenses, permits and 
authorizations issued by any governmental organization relating to A-
Kits and B-Kits; all contracts, teaming arrangements, agreements, 
leases, commitments and understandings pertaining to A-Kits and B-Kits; 
supply agreements; all customer lists and credit records; and other 
records maintained by Hughes in connection with the production of A-
Kits and B-Kits;
    b. All intangible assets relating to the research, development, and 
production of A-Kits and B-Kits, including but not limited to a non-
exclusive, transferable, royalty-free license to use all patents 
utilized by Hughes in the EO Business, licenses and sublicenses, 
intellectual property, technical information, 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, and all manuals and 
technical information Hughes provides to its own employees, customers, 
suppliers, agents or licensees;
    c. All research data concerning historic and current research and 
development efforts relating to the production of A-Kits and B-Kits, 
including designs of experiments, and the results of unsuccessful 
designs and experiments;
    d. At the option of the purchasers, a supply contract for computer 
support services and information and communications services sufficient 
to support the EO Business over a period of one year; and
    e. At the option of the purchaser, at the time of purchase, an 
option to purchase or lease an additional 10,000 square feet of 
manufacturing space for the EO Business in addition to the space set 
aside for the EO Business in the Hold Separate and Partition Plan and 
Order.
    F. ``FOTT Information'' means all information relating to the FOTT 
Program, including but not limited to, information relating to any and 
all proposals, technology, cost data, suppliers, designs, plans, test 
results, specifications, pricing, technical interface with IBAS and 
ITAS or other sensitive competitive information. FOTT Information shall 
be stamped as ``Confidential and Competition Sensitive.''
    G. ``FOTT Program'' means the Follow-on-to-TOW missile program, for 
which the Hughes FOTT Team and the TI/Martin Javelin Joint Venture (as 
defined below) will be competing for the Engineering Manufacturing 
Developing (``EMD'') contract, scheduled to be awarded by the United 
States Army in 1998.
    H. ``FPA'' means a matrix of detectors or pixels made of material 
that is sensitive to infrared (``IR'') radiation, which is mated to a 
silicon processor and used to detect and analyze IR radiation.
    L. ``FPA Business'' means the 2nd Gen. and 3rd Gen. scanning and 
staring IR detector businesses of RTIS operated out of the 
Semiconductor Building and the Research West Building located at the 
Expressway site in Dallas, Texas, including all dewar and cryogenic 
cooler manufacturing and dewar and cryogenic cooler assembly (except 
for RTIS' uncooled FPA Business), and including all employees listed in 
confidential Attachment, including:
    a. All tangible assets used to produce scanning IR detectors, 
including SADA detectors, staring detectors, dewars, and cryogenic 
coolers, including, but not limited to, all real property (owned or 
leased), including interests in the Dallas facilities, used in the 
operation of the RTIS FPA Business, including research and development 
activities, as identified pursuant to the Court's Hold Separate and 
Partition Plan Stipulation and Order; all manufacturing, personal 
property, inventory, office furniture, fixed assets and fixtures, 
materials, supplies, on-site warehouses or storage facilities, and 
other tangible property or improvements used in the operation of the 
RTIS FPA Business; all licenses, permits and authorizations issued by 
any governmental organization relating to the RTIS FPA Business; all 
contracts, teaming arrangements, agreements, leases, commitments and 
understandings pertaining to the RTIS FPA Business and its operations; 
supply agreements; all customer lists and credit records; and other 
records maintained by Raytheon in connection with the RTIS FPA 
Business;
    b. All intangible assets relating to the RTIS FPA Business, 
including but not limited to all patents, licenses and sublicenses, 
intellectual property, maskwork rights, technical information, know-
how, trade secrets, drawings, blueprints, designs, design protocols, 
cell libraries, specifications for materials, specifications for parts 
and devices, safety procedures for the handling of materials and 
substances, quality assurance and control procedures, designed tools 
and simulation capability, and all manuals and technical information 
Raytheon provides to its own employees, customers, suppliers, agents or 
licensees, except that the purchaser shall agree to grant to the seller 
a non-exclusive, transferable, royalty-free license for any invention 
disclosed in U.S. Patent No. 5,274,578; and any invention disclosed in 
U.S. Patent Applications Nos. 08/474,229, 08/097,522, 08/478,570 and 
08/487,820 and Provisional Patent Application No. 60/014,812; and
    c. All research data concerning historic and current research and 
development efforts relating to the RTIS FPA Business, including 
designs of experiments, and the results of unsuccessful designs and 
experiments.
    J. ``HTI'' means the Horizontal Technology Integration program to 
develop a common B-Kit to be used on different ground vehicle 
platforms.
    K. ``Hughes'' means Hughes Aircraft Company, an indirect subsidiary 
of General Motors Corp., with its headquarters in Arlington, Virginia, 
and its successors, assigns, subsidiaries, divisions, groups, 
affiliates, partnership and joint ventures, and directors, officers, 
managers, agents and employees.
    L. ``Hughes FOTT Team'' means all Hughes Missile Systems managers 
and employees who have been assigned to or

[[Page 60270]]

consulted in connection with the FOTT program.
    M. ``IBAS'' means the Integrated Bradley Acquisition System, a 
program to upgrade the sights on a Bradley Fighting Vehicle.
    N. ``ITAS'' means the Improved Target Acquisition System, a program 
to improve TOW missile launching capabilities.
    O. ``LRASSS'' means the Long-Range Advanced Scout Surveillance 
System, a future surveillance system to be mounted on light ground 
vehicles.
    P. ``M1-TIS'' means the Thermal Imaging System for the M1 Abrams 
tank.
    Q. ``Raytheon'' means Raytheon Company, a Delaware corporation with 
its headquarters and principal place of business in Lexington, 
Massachusetts, and its successors, assigns, subsidiaries, divisions, 
groups, affiliates, partnerships and joint ventures, and directors, 
officers, managers, agents, and employees.
    R. ``RTIS'' means Raytheon TI Systems, Inc.
    S. ``RTIS FOTT team'' means Mr. Lawrence Schmidt, all RTIS managers 
and employees of the TI/Martin Javelin Joint Venture, and all other 
RTIS employees who have been assigned to or consulted in connection 
with the FOTT program. One attorney in the General Counsel's Office of 
Raytheon, to be designated by Raytheon, shall be deemed a member of the 
RTIS FOTT Team and may be consulted for the purpose of obtaining legal 
or regulatory advice, but shall not receive FOTT Information concerning 
pricing or other bid information.
    T. ``SADA'' means the Standardized Advanced Dewar Assembly and 
consists of a scanning FPA mounted in an evacuated dewar. The SADA 
program is an effort by the United States Army to develop a family of 
IR detectors that can be used in a variety of battlefield systems.
    U. ``TI/Martin Javelin Joint Venture'' means the joint venture 
between Texas Instruments a/k/a RTIS and Lockheed Martin, which will be 
a competitor for the FOTT Program.
    V. ``Uncooled FPA Business'' means the technology, production 
equipment, and all tangible and intangible assets used by RTIS solely 
in the production of uncooled FPAs.

III. Applicability

    A. The provisions of this Final Judgment apply to Raytheon, its 
successor and assigns, their subsidiaries, directors, officers, 
managers, agents, and employers, and all other persons in active 
concert or participation with any of them who shall have received 
actual notice of this Final Judgment by personal service or otherwise.
    B. Raytheon shall require, as a condition of the sale or other 
disposition of all or substantially all of its assets or of a lesser 
business unit that includes Raytheon's business of developing and 
producing FPAs and ground EO Systems, that the transferee agree to be 
bound by the provisions of this Final Judgment.

IV. Divestiture

    A. Raytheon is hereby ordered and directed in accordance with the 
terms of this Final Judgment, within one-hundred and eighty (180) 
calendar days after October 3, 1997 or five (5) days after notice of 
the entry of this Final Judgment by the Court, whichever is later, to 
divest the FPA Business and the EO Business to an acquirer(s) 
acceptable to DoJ and DoD in their sole discretion.
    B. Raytheon shall use its best efforts to accomplish the 
divestitures as expeditiously and timely as possible. DoJ in its sole 
determination, in consultation with DoD, may extend the time period for 
any divestitures for an additional period of time not to exceed thirty 
(30) calendar days.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, Raytheon, promptly shall make known, by usual and customary 
means, the availability of the EPA Business and the EO Business 
described in this Final Judgment. Raytheon shall inform any person 
making an inquiry regarding a possible purchase that the sale is being 
made pursuant to this Final Judgment and provide such person with a 
copy of this Final Judgment. Raytheon shall also offer to furnish to 
all bona fide prospective purchasers, subject to customary 
confidentiality assurances, all information regarding the FPA Business 
and the EO Business customarily provided in a due diligence process 
except such information subject to attorney-client privilege or 
attorney work-product privilege. Raytheon shall make available such 
information to DoJ at the same time that such information is made 
available to any other person.
    D. Raytheon shall permit bona fide prospective purchasers of the 
FPA Business and the EO Business to have reasonable access to personnel 
and to make such inspection of the physical facilities of the FPA 
Business and EO Business and any and all financial, operational, or 
other documents and information customarily provided as part of a due 
diligence process.
    E. Raytheon shall not take any action that will impede in any way 
the operation of the FPA Business or the EO Business.
    F. Unless both DoJ and DoD otherwise consent in writing, the 
divestitures pursuant to Section IV, or by trustee appointed pursuant 
to Section V of this Final Judgment, shall include the entire FPA 
Business and the entire EO Business, operated in place pursuant to the 
Hold Separate and Partition Plan Stipulation and Order, and be 
accomplished by selling or otherwise conveying the FPA Business and the 
EO Business to a purchaser(s) in such a way as to satisfy DoJ and DoD, 
in their sole discretion, that the FPA Business and the EO Business can 
and will be used by the purchaser(s) as part of a viable, ongoing 
business or businesses engaged in the development, production, and sale 
of FPAs and ground EO systems. Divestiture of the FPA Business and EO 
Business may be made to one or more purchasers provided that in each 
instance it is demonstrated to the sole satisfaction of DoJ and DoD 
that the FPA Business and EO Business will remain viable. The 
divestitures, whether pursuant to Section IV or Section V of this Final 
Judgment, shall be made to a purchaser(s) who it is demonstrated to 
DoJ's and DoD's sole satisfaction: (1) Has the capability and intent of 
competing effectively in the development, production and sale of FPAs 
or ground EO systems as the case may be; (2) has managerial, 
operational, and financial capability to compete effectively in the 
development, production and sale of FPAs or ground systems as the case 
may be; (3) is eligible to receive applicable DoD security clearances; 
and (4) that none of the terms of any agreement between the purchaser 
and Raytheon give Raytheon the ability unreasonably to raise the 
purchaser's costs, to lower the purchaser's efficiency, or otherwise to 
interfere in the ability of the purchaser to compete effectively.
    G. For a period of two years from the filing of the Complaint in 
this matter, Raytheon and Hughes shall not solicit to hire any 
individual who, on the date of the filing of the Complaint in this 
matter, was an employee of the FPA Business or the EO Business. For a 
period of two years from the filing of the Complaint in this matter, 
Raytheon and Hughes shall not hire any individual who, on the date of 
the filing of the Complaint in this matter, was an employee of the FPA 
Business or the EO Business unless such individual has a written offer 
of employment from a third party for a like position.
    H. Raytheon shall comply with all agreements with DoD regarding the

[[Page 60271]]

protection of information related to classified programs.
    I. Raytheon shall not charge to DoD any costs directly or 
indirectly incurred in complying with this Final Judgment.

V. Appointment of Trustee

    A. In the event that Raytheon has not divested the FPA Business and 
the EO Business within the time specified in Section IV of this Final 
Judgment, the Court shall appoint, on application of the United States, 
a trustee selected by DoJ, in consultation with DoD, to effect the 
divestiture of the FPA Business and the EO Business.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the FPA Business described in 
Section II(I) and the EO Business described in Section II(E) of this 
Final Judgment. The trustee shall have the power and authority to 
accomplish the divestiture at the best price then obtainable upon a 
reasonable effort by the trustee, subject to the provisions of Sections 
IV and IX of this Final Judgment, and shall have such other powers as 
the Court shall deem appropriate. Subject to Section V(C) of this Final 
Judgment, the trustee shall have the power and authority to hire at the 
cost and expense of Raytheon any investment bankers, attorneys, or 
other agents reasonably necessary in the judgment of the trustee to 
assist in the divestitures, and such professionals and agents shall be 
accountable solely to the trustee. The trustee shall have the power and 
authority to accomplish the divestitures at the earliest possible time 
to a purchaser acceptable to DoJ and DoD, and shall have such other 
powers as this Court shall deem appropriate. Raytheon shall not object 
to a sale by the trustee on any grounds other than the trustee's 
malfeasance. Any such objections by Raytheon must be conveyed in 
writing to DoJ and the trustee within ten (10) calendar days after the 
trustee has provided the notice required under Section VII of this 
Final Judgment.
    C. The trustee shall serve at the cost and expense of Raytheon, on 
such terms and conditions as the Court may prescribe, and shall account 
for all monies derived from the sale of the assets sold by the trustee 
and all costs and expenses so incurred. After approval by the Court of 
the trustee's accounting, including fees for its services and those of 
any professionals and agents retained by the trustee, all remaining 
money shall be paid to Raytheon and the trust shall then be terminated. 
The compensation of such trustee and of any professionals and agents 
retained by the trustee shall be reasonable in light of the value of 
the divested business and based on a fee arrangement providing the 
trustee with an incentive based on the price and terms of the 
divestiture and the speed with which it is accomplished.
    D. Raytheon shall use its best efforts to assist the trustee in 
accomplishing the required divestitures, including best efforts to 
effect all necessary regulatory approvals. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the businesses to be divested, and Raytheon 
shall develop financial or other information relevant to the business 
to be divested customarily provided in a due dilligence process as the 
trustee may reasonably request, subject to customary confidentiality 
assurances. Raytheon shall permit bona fide prospective acquirers of 
the assets to have reasonable access to personnel and to make such 
inspection of physical facilities and nay and all financial, 
operational or other documents and other information as may be relevant 
to the divestitures required by this Final Judgment.
    E. After its appointment, the trustee shall file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestitures ordered under this Final Judgment; 
provided, however, that to the extent such reports contain information 
that the trustee deems confidential, such reports shall not be filed in 
the public docket of the Court. Such reports shall 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 business to be divested, 
and shall describe in detail each contact with any such person during 
that period. The trustee shall maintain full records of all efforts 
made to divest the businesses to be divested.
    F. If the trustee has not accomplished such divestitures within six 
(6) months after its appointment, the trustee thereupon shall file 
promptly with the Court a report setting forth (1) The trustee's 
efforts to accomplish the required divestitures, (2) the reasons, in 
the trustee's judgment, why the required divestitures have not been 
accomplished, and (3) the trustee's recommendations; provided, however, 
that to the extent such reports contain information that the trustee 
deems confidential, such reports shall not be filed in the public 
docket of the Court. The trustee shall at the same time furnish such 
report to the parties, who shall each have the right to be heard and to 
make additional recommendations consistent with the purpose of the 
trust. The Court shall enter thereafter such orders as it shall deem 
appropriate in order to carry out the purpose of the trust which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by DoJ.

VI. Firewall

    A. Members of the RTIS FOTT Team are prohibited from giving or 
receiving, either directly or indirectly, any FOTT Information to or 
from the Hughes FOTT Team or any other Raytheon employee. Members of 
the Hughes FOTT Team are prohibited from giving or receiving, either 
directly or indirectly, any FOTT Information to or from the RTIS FOTT 
Team or any other Raytheon employee. To implement this provision, 
Raytheon is required to construct a firewall within Raytheon that 
prevents the flow of FOTT Information between the RTIS FOTT Team and 
any other segment or official of Raytheon. Raytheon is also required to 
construct a firewall within Raytheon that prevents the flow of any FOTT 
Information between the Hughes FOTT Team and any other segment or 
official of Raytheon. These firewalls are intended to ensure 
competition between RTIS Missiles and Hughes Missile Systems in bidding 
on the FOTT Program. Raytheon shall, within five (5) business days of 
its signing the Stipulation and Order consenting to the entry of this 
Final Judgment, submit to DoJ and DoD a document setting forth in 
detail its procedures to effect compliance with this provision. DoJ and 
DoD shall have the sole discretion to approve Raytheon's compliance 
plan and shall notify Raytheon within three (3) business days whether 
they approve of or reject Raytheon's compliance plan. In the event that 
Raytheon's compliance plan is rejected, the reasons for the rejection 
shall be provided to Raytheon by DoJ and Raytheon shall be given the 
opportunity to submit, within two (2) business days of receiving the 
notice of rejection, a revised compliance plan. If the parties cannot 
agree on a compliance plan within an additional three (3) business 
days, a plan will be devised by DoD and implemented by Raytheon. All 
Raytheon employees shall abide by the provisions of the compliance 
plan. The prohibitions in this paragraph shall remain in effect until 
final determination of the EMD contract award for the FOTT Program is 
made by DoD. Raytheon shall use all

[[Page 60272]]

reasonable efforts to submit a competitive bid by the RTIS FOTT Team 
for the FOTT Program.
    B. Raytheon shall delegate to Mr. Lawrence Schmidt, Senior Vice 
President, Missile Systems Division of RTIS, in his sole discretion, 
the right to review and determine on behalf of Raytheon all matters 
relating to the TI/Martin Javelin Joint Venture bid, including any best 
and final offer and responses to any inquiry from DoD, on the FOTT 
Program; to invest Raytheon's funds in the FOTT Program; and to draw on 
other resources within RTIS Missiles to compete for the FOTT Program.
    C. Raytheon shall provide an economic incentive to the RTIS 
management personnel of the TI/Martin Javelin Joint Venture to ensure 
all reasonable efforts will be made by Raytheon to submit a competitive 
bid by the TI/Martin Javelin Joint Venture for the FOTT Program. As an 
incentive to win the FOTT Program, Raytheon shall pay, conditioned 
solely upon the TI/Martin Javelin Joint Venture being awarded the EMD 
contract for the FOTT Program, bonuses to certain RTIS Missiles 
employees. Each employee to receive a bonus upon award of the EMD 
contract for the FOTT Program and the amount of each applicable bonus 
is listed in confidential Attachment ``C.''
    D. Raytheon shall notify and train all RTIS Missiles, Hughes 
Missile Systems, and other Raytheon employees likely to see FOTT 
Information regarding the restrictions on FOTT Information and require 
that all such employees sign a statement acknowledging the restrictions 
on the FOTT Information. In addition, all RTIS Missiles employees 
having access to FOTT Information must sign a certification stating 
that they understand the restrictions of the firewall and agree to 
adhere to the firewall restrictions.

VII. Notification

    Within two (2) business days following execution of a definitive 
agreement, contingent upon compliance with the terms of this Final 
Judgment, to effect, in whole or in part, any proposed divestitures 
pursuant to Sections IV or V of this Final Judgment. Raytheon or the 
trustee, whichever is then responsible for effecting the divestitures, 
shall notify DoJ and DoD of the proposed divestitures. If the trustee 
is responsible, if shall similarly notify Raytheon. The notice shall 
set for the details of the proposed transaction and list the name, 
address, and telephone number of each person not previously identified 
who offered to, or expressed an interest in or a desire to, acquire any 
ownership interest in the businesses to be divested that is the subject 
of the binding contract, together with full details of same. Within 
fifteen (15) calendar days of receipt by DoJ and DoD of such notice, 
DoJ, in consultation with DoD, may request from Raytheon, the proposed 
purchaser, or any other third party additional information concerning 
the proposed divestitures and the proposed purchaser. Raytheon and the 
trustee shall furnish any additional information requested from them 
within fifteen (15) calendar days of the receipt of the request, unless 
the parties shall otherwise agree. Within thirty (30) calendar days 
after receipt of the notice or within twenty (20) calendar days after 
DoJ has been provided the additional information requested from 
Raytheon, the proposed purchaser, and any third party, whichever is 
later, DoJ and DoD shall each provide written notice to Raytheon and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If DoJ and DoD provide written notice to Raytheon 
and the trustee that they do not object, then the divestiture may be 
consummated, subject only to Raytheon's limited right to object to the 
sale under Section V(B) of this Final Judgment. Absent written notice 
that NoJ and DoD do not object to the proposed purchaser or upon 
objection by DoJ or DoD, a divestiture proposed under Section IV or 
Section V may not be consummated. Upon objection by Raytheon under the 
provision in Section V(B), a divestiture proposed under Section V shall 
not be consummated unless approved by the Court.

VIII. Affidavits

    A. Within twenty (2) calendar days of the filing of the Complaint 
in this matter and every thirty (30) calendar days thereafter until the 
divestiture has been completed whether pursuant to Section IV or 
Section V of this Final Judgment, Raytheon shall deliver to DoJ and DoD 
an affidavit as to the fact and manner of compliance with Sections IV 
or V of this Final Judgment. Each such affidavit shall include, inter 
alia, the name, address, and telephone number of each person who, at 
any time after the period covered by the last such report, 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 business to be divested, and shall 
describe in detail each contact with any such person during that 
period. Each such affidavit shall also include a description of the 
efforts that Raytheon has taken to solicit a buyer for the relevant 
assets and to provide required information to prospective purchasers 
including the limitations, if any, on such information. Assuming the 
information set forth in the affidavit is true and complete, any 
objection by DoJ to information provided by Raytheon, including 
limitations on information, shall be made within fourteen (14) days of 
receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Raytheon shall deliver to DoJ and DoD an affidavit 
which describes in detail all actions Raytheon has taken and all steps 
Raytheon has implemented on an on-going basis to comply with the 
firewall provisions pursuant to Section VI of this Final Judgment and 
to preserve the FPA Business and the EO Business pursuant to Section IX 
and this Final Judgment and the Hold Separate and Partition Order 
entered by the Court. The affidavit also shall describe, but not be 
limited to, Raytheon's efforts to maintain and operate the FPA Business 
and the EO Business as an active competitor, maintain the management, 
staffing, research and development activities, sales, marketing and 
pricing of the FPA Business and the EO Business, and maintain the FPA 
Business and the EO Business in operable condition at current capacity 
configurations. Raytheon shall deliver to DoJ and DoD an affidavit 
describing any changes to the efforts and actions outlined in 
Raytheon's earlier affidavit(s) filed pursuant to this Section within 
fifteen (15) calendar days after the change is implemented.
    C. Until one year after such divestiture has been completed, 
Raytheon shall preserve all records of all efforts made to preserve the 
business to be divested and effect the divestitures.

IX. Hold Separate Order

    Until the divestitures required by the Final Judgment have been 
accomplished, Raytheon shall take all steps necessary to comply with 
the Hold Separate and Partition Plan Stipulation and Order entered by 
this Court and to preserve the assets of the FPA Business and the EO 
Business. Defendants shall take no action that would jeopardize the 
divestiture ordered by this Court.

X. Financing

    Raytheon is ordered and directed not to finance all or any part of 
any purchase by an acquirer(s) made pursuant to Sections IV or V of 
this Final Judgment.

XI. Compliance Inspection

    For purposes of determining or securing compliance with the Final

[[Page 60273]]

Judgment and subject to any legally recognized privilege, from time to 
time:
    A. Duly authorized representatives of the United States Department 
of Justice, upon written request of the Attorney General or of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to Raytheon made to its principal offices, shall be 
permitted:
    1. Access during office hours of Raytheon to inspect and copy all 
books, ledgers, accounts, correspondence, memoranda, and other records 
and documents in the possession or under the control of Raytheon, who 
may have counsel present, relating to the matters contained in this 
Final Judgment and the Hold Separate Stipulation and Order; and
    2. Subject to the reasonable convenience of Raytheon and without 
restraint or interference from it, to interview, either informally or 
on the record, its officers, employees, and agents, who may have 
counsel present, regarding any such matters.
    B. Upon the written request of the Attorney General or of the 
Assistant Attorney General in charge of the Antitrust Division, made to 
Raytheon's principal offices, Raytheon shall submit such written 
reports, under oath if requested, with respect to any matter contained 
in the Final Judgment and the Hold Separate and Partition Order.
    C. No information or documents obtained by the means provided in 
Sections VIII or XI of this Final Judgment shall be divulged by a 
representative of the plaintiff to any person other than a duly 
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), or for the purpose of 
securing compliance with this Final Judgment, or as otherwise required 
by law.
    D. If at the time information or documents are furnished by 
Raytheon to DoJ or DoD, Raytheon represents and identifies in writing 
the material in any such information or documents to which a claim of 
protection may be asserted under Rule 26(c)(7) of the Federal Rules of 
Civil Procedure, and Raytheon marks each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure.'' then ten (10) calendar days notice 
shall be given by DoJ or DoD to Raytheon prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding) 
to which Raytheon is not a party.

XII. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

XIII. Termination

    Unless this Court grants an extension, this Final Judgment will 
expire upon the tenth anniversary of the day of its entry.

XIV. Public Interest

    Entry of this Final Judgment is in the public interest.

    Dated ____________________, 1998.

----------------------------------------------------------------------
United States District Judge.

United States District Court for the District of Columbia

[Civil No. 1:97CV02397]

United States of America, Plaintiff, v. Raytheon Company, General 
Motors Corporation, and He Holdings, Inc., Defendants

United States District Judge Emmet G. Sullivan

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16(b)-(h), 
files this Competivie Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On October 16, 1997, the United States filed a civil antitrust 
Complaint alleging that the proposed acquisition by Raytheon Company 
(``Raytheon'') of Hughes Aircraft Co. (``Hughes'') would violate 
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint alleges 
that Raytheon and Hughes are the only two firms that design, develop, 
and produce second generation (``2nd Gen.'') electro-optical (``EO'') 
systems for Department of Defense (``DoD'') ground applications. It 
alleges that Raytheon and Hughes are also the only two firms that 
design, develop, and produce critical infared (``IR'') detectors, 
called ``SADA II'' detectors, used in ground EO systems, and are the 
leading firms that develop and produce staring IR detectors used for 
sensors in missile seeker heads and aircraft and missile warning system 
applications. The Complaint further alleges that Raytheon, through its 
majority ownership in a joint venture with Lockheed Martin Corporation 
(``Lockheed Martin''), and Hughes are competitors for the Follow-On-To-
TOW (``FOTT'') new advanced antitank missile program that will replace 
the current inventory of TOW antitank missiles.
    The prayer for relief in the Complaint seeks: (1) A judgment that 
the proposed acquisition would violate Section 7 of the Clayton Act; 
and (2) a permanent injunction preventing Raytheon from acquiring 
Hughes.
    When the Complaint was filed, the United States also filed a 
proposed settlement that would permit Raytheon to complete its 
acquisition of Hughes, but require a divestiture and other terms that 
will preserve competition in the relevant markets. This settlement 
consists of a Stipulation and Order, Hold Separate and Partition Plan 
Stipulation and Order, and a proposed Final Judgment.
    The proposed Final Judgment orders Raytheon to divest, within one-
hundred and eighty (180) calendar days after October 3, 1997 or five 
(5) days after notice of the entry of the Final Judgment by the Court, 
whichever is later, the FPA Business (as defined in the Final Judgment) 
of Raytheon TI Systems (``RTIS''), and the EO Business (as defined in 
the Final Judgment) of Hughes, to an acquirer(s) acceptable to the 
Antitrust Division of the Department of Justice (``DoJ'') and DoD. 
RTIS's FPA Business includes the 2nd Gen. scanning and third generation 
(``3rd Gen.'') staring IR detector businesses (operated out of the 
Semiconductor Building and the Research West Building, located at the 
Expressway site in Dallas, Texas), all tangible and intangible assets 
used in producing those detectors, including production facilities, 
research and development activities, and all dewar and cryogenic cooler 
manufacturing assembly.
    Hughes' EO Business includes the 2nd Gen. ground EO business 
operated out of the El Segundo, California and La Grange, Georgia 
facilities, which produce A-kits and B-kits for ground vehicles and 
other applications, including the Integrated Bradley Acquisition System 
(``IBAS''), Thermal Imaging System for the M1 Abrams tank (``M-1 
TIS''), Long-Range Advanced Scout Surveillance System (``LRASSS''), and 
Horizontal Technology Integration Program (``HTI'') programs, all 
tangible and intangible assets used in producing A-kits and B-kits, 
production facilities, and research development activities. In 
addition, Raytheon is required to

[[Page 60274]]

provide, at the option of the purchaser, a contract for computer 
support services and information and communications services sufficient 
to support the EO Business over a period of one year, and, at the 
option of the purchaser, an option to purchase or lease manufacturing 
space in addition to that currently set aside for the EO Business.
    Until such divestitures are completed, the terms of the Hold 
Separate and Partition Plan Stipulation and Order entered into by the 
parties apply to ensure that the FPA Business and the EO Business shall 
be maintained as an independent competitor from Raytheon.
    In addition to the divestitures, the proposed Final Judgment 
requires that Raytheon establish firewalls to preserve the independence 
of the Hughes team competing for the FOTT program (``Hughes ROTT 
Team'') from the RTIS/Lockheed Martin FOTT joint venture (RTIS FOTT 
Team). The firewall provisions prohibit the flow of information between 
the two teams and between either team and any other employee of 
Raytheon. The Proposed Final Judgment requires Raytheon to delegate to 
the head of RTIS Missile Systems Division the sole discretion to 
determine all matters relating to RTIS FOTT Team's bid and to create 
economic incentives for the RTIS FOTT Team members to ensure all 
reasonable efforts will be made to submit a competitive bid for the 
FOTT Program.
    The plaintiff and defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with APPA. Entry of the 
proposed Final Judgment would terminate the action, except that the 
Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Raytheon is a Delaware corporation headquartered in Lexington, 
Massachusetts. Raytheon produces heavy construction equipment; 
refrigerators and freezers; radio and TV broadcasting and 
communications equipment; semiconductors and related devices; aircraft; 
guided missiles and space vehicles; search, detection and navigation 
systems; and engineering services. RTIS, a division of Raytheon, 
produces ground EO systems at a facility in McKinney, Texas and IR 
detectors at its Expressway facility in Dallas, Texas. Amber, a 
separate unit of Raytheon, produces detectors at a facility in Goleta, 
California. In 1996, Raytheon reported total sales of about $12 
billion.
    General Motors Corporation (``General Motors'') is a Delaware 
corporation headquartered in Detroit, Michigan. Hughes, a missle and 
defense electronics company, is an indirect subsidiary of General 
Motors. Hughes produces ground EO systems at facilities in El Segundo, 
California and LaGrange, Georgia. Hughes operates the industry's 
premier detector facility, Santa Barbara Research Center (``SBRC''), in 
Santa Barbara, California. In 1996, Hughes reported total sales of 
approximately $6 billion.
    HE Holdings, Inc. (``HE Holdings'') is a Delaware corporation 
headquartered in Detroit, Michigan. Hughes is a direct subsidiary of HE 
Holdings.
    On January 16, 1997, Raytheon entered into an agreement with 
General Motors to purchase HE Holdings, the parent of Hughes. This 
transaction, which would, in part, take place in the highly 
concentrated SADA II detector, staring FPA, ground EO systems, and FOTT 
missile markets, precipitated the government's suit.

B. The Relevant Markets

SADA II Detectors
    IR detectors are sensing devices that convert IR radiation into an 
electrical signal. The devices detect the differences in that heat 
emissions between an object and its surroundings, and can therefore 
produce a thermal image of objects in the device's field of view. The 
detector consists of linear or mosaic arrays of individual diodes made 
from semiconductor materials such as mercury cadmium telluride 
(``MCT'') or indium antimonide ``(InSb''). The detector is attached to 
a silicon chip or ``readout'' device that contains the circuitry which 
stores the energy captured by the detector and converts this energy to 
a voltage signal. When mated to the readout circuit, the detector is 
often called a focal plane array (``FPA''). The FPA is typically housed 
in an evacuated cooler dewar assembly which isolates the FPA and cools 
it to cryogenic temperatures.
    The combination of FPA cooler dewar assembly, optics, electronics, 
software, and a visual display is commonly called a FLIR (Forward 
Looking Infrared). FLIRs are used for surveillance and weapons fire 
control purposes in ground and airborne EO systems. FPAs are also used 
in heat-seeking missile guidance systems and missile warning systems, 
applications for which no pictorial image is required. Since the Gulf 
War, great strides have been made in IR technology, and the military is 
switching from older first generation (''1st Gen.'') lower performance 
technology to more advanced 2nd Gen. technology in a variety of 
applications.
    Second generation scanning FPAs consist of individual detector 
elements arranged in two dimensions varying in size from 240 x 2 to 
480 x 4. The detector is scanned mechanically with mirrors across a 
field of view. Second generation scanning FPAs differ from 1st. Gen. 
scanning FPAs in that the readout circuit is mounted directly to the 
detector material. For this reason, 2nd Gen. FPAs are photovoltaic, 
while 1st. Gen. FPAs are photo conductive. Scanning FPAs are preferred 
on ground vehicles because of their wide field of view.
    FPAs are distinguished by the spectrum of the electromagnetic 
wavelength they detect--longwave (``LW''), midwave (``MW'') or 
shortwave (``SW''). LW is visible in the 8 to 12 micron range, MW in 
the 3 to 5 micron range, and SW in the 1 to 2 micron range. Short wave 
is not typically used for tactical applications. InSb is the primary 
material used for detecting MW IR radiation, and it is only used in 
staring arrays. MCT, the leading material for detecting LW IR 
radiation, is used in virtually all scanned arrays, but is also used in 
staring FPAs.
    In the late 1960s, DoD started to develop an IR detector common 
across all the services. This effort resulted in the 1st Gen. ``common 
module'' detectors, which were placed in the field in approximately 
1970. Since the common module detector is not mounted directly to an 
integrated readout circuit, fewer detector elements can be placed on 
the array. Because it has fewer detector elements, the sensitivity and 
resolution of 1st Gen. FPAs are not as good as that of 2nd Gen. FPAs. 
First generation detectors were used in Desert Storm, and it was 
discovered that U.S. weaponry could fire further than the FLIR systems 
could detect. The desire for EO systems with a range closer to that of 
the weapon systems motivated the development of 2nd Gen. devices. First 
generation FPAs are still in use today, although in the early 1990s, 
the U.S. military stopped placing new 1st Gen FLIRs in the field.
    In the late 1980s, the Army's Night Vision Laboratory began 
development of 2nd Gen. detectors under the Standardized Advanced Dewar 
Assembly (``SADA'') program. SADA assemblies use a two dimensional MCT 
array sensitive to LW IR radiation. SADA detectors include four 
different configurations: SADA I, SADA II, SADA

[[Page 60275]]

III A and SADA III B. Each type has different specifications so that 
one does not substitute for another.
    The Army uses a SADA II for ground vehicles. As part of a broader 
effort undertaken in 1992 to insert a common 2nd Gen. FLIR system into 
various battlefield platforms, the Army decided to use SADA II 
detectors in the M1A2 Abrams Tank, the M2A3 Bradley Fighting Vehicle, 
and the LRASSS. The SADA II is also used in the FLIR for the Improved 
Targeting Acquisition System (``ITAS'') for the High Mobility Motorized 
Wheeled Vehicle (``HMMWV'').
    Because they do not match the field of view achievable with SADA II 
detectors, staring FPAs are not viable substitutes for a SADA II 
detector. Staring FPAs of a size needed to match the field of view 
obtainable from a scanning FPA are not yet available in LW MCT, which 
is the only material that meets the Army's needs to see through 
battlefield smoke, dust, and clutter.
    Even if large format LW MCT arrays became available in the future, 
a switch to such arrays would not be economically justified in response 
to a small but significant and nontransitory price increase in the SADA 
II detectors, because of the substantial configuration changes and 
consequent costs required to replace SADA II detectors in ground 
vehicles with staring detectors.
    Raytheon and Hughes are the only two firms that have sold SADA II 
detectors to DoD. Hughes qualified as a SADA II supplier in mid-1996, 
and Raytheon was permitted to bid for 1997 purchases based on its 
demonstrated success toward completing the qualification process. 
Raytheon is expected to be fully qualified by the end of 1997. In 1997, 
about 103 SADA II detectors having a total dollar value of about $6.6 
million were purchased, of which 70 percent were supplied by Hughes and 
30 percent by Raytheon. DoD projects purchases of 2,945 SADA II 
detectors through the year 2002, having a total dollar value of about 
$138.8 million.
    Raytheon's acquisition of Hughes would eliminate all competition in 
the development, production, and sale of SADA II detectors. The 
proposed acquisition will result in a single supplier with the 
incentive and ability to raise prices and little or no incentive to 
minimize cost.
    Successful entry into the production and sale of SADA II detectors 
is difficult, time consuming, and costly. A potential entrant would 
have to design and develop a product, establish production processes, 
and complete a rigorous qualification process. A new facility capable 
of producing SADA II detectors could cost over $20 million. Only one 
other firm, Sofradir of France, is trying to qualify under the SADA II 
program. Sofradir, which is partially owned by the French government, 
is beginning the qualification process. It is unrealistic to expect 
sufficient new entry in a timely fashion to protect competition in 
upcoming SADA II purchases.
Staring FPAs
    Staring or third generation (``3rd Gen.'') FPAs consist of a mosaic 
of diodes typically square or rectangular in shape. Since they contain 
no scanning mechanism, staring FPAs provide an image by staring at the 
scene and rapidly updating changes in the scene. Staring FPAs are 
lighter weight than scanning, and they can be more economical to use. 
Staring FPAs are produced in sizes ranging from 64  x  64 to 1024  x  
1024. The largest size currently produced for tactical applications, 
however, is 640  x  480. Staring FPAs provide greater sensitivity and 
resolution than scanning FPAs, because they have a larger number of 
detectors. However, staring FPAs are more difficult to produce than 
scanning FPAs because of the difficulty in producing large InSb or MCT 
wafers. Due to their smaller physical size and lighter weight, staring 
FPAs are used in missile seeker heads and airborne applications where 
small size and light weight are a premium. Staring FPAs are also the 
detector of choice for missile warning systems.
    Staring FPAs have primarily been made of InSb because it was the 
first technology capable of producing staring FPAs and the material 
itself is easier to work with. Staring FPAs are now available using MCT 
technology.
    Raytheon and Hughes are the two leading suppliers of staring FPAs 
for military programs. Raytheon produces staring FPAs at its RTIS 
facility in Dallas, Texas and its Amber facility, in Goleta, 
California. Hughes operates SBRC, the industry's premier staring FPA 
facility, in Santa Barbara, California. Hughes and Raytheon have 
supplied or are contracted to supply the staring FPAs on most DoD 
missile and aircraft programs. DoD projects purchases of about 14,000 
staring FPAs over the next five years having a value of about $35 
million.
    Raytheon's acquisition of Hughes would combine the two leading 
suppliers of staring FPAs with over 90 percent of the market. The 
acquisition would create a clear dominant supplier with the incentive 
and ability to raise prices and little or no incentive to minimize 
cost.
    Boeing Company (``Boeing'') and Lockheed Martin make staring FPAs 
for military applications, but neither is a major supplier in the 
tactical market. Boeing has focused on space applications, where the 
FPA must meet more rigid durability and quality standards. 
Consequently, FPAs for space applications cost significantly more than 
FPAs for tactical applications. Lockheed Martin operates a very small, 
research-oriented staring FPA operation. Boeing would need to refocus 
its staring FPA business from the higher price space applications and 
Lockheed Martin would need to invest in a production-oriented facility 
in order for either to be a more significant supplier in the tactical 
market.
    Successful entry into the production and sale of staring FPAs is 
difficult, time consuming, and costly. A potential entrant would have 
to design and develop a product and establish production processes. A 
new facility capable of producing staring FPAs could cost over $20 
million. It is unrealistic to expect new entry in a timely fashion to 
protect competition in upcoming staring FPA purchases.
    The acquisition also likely will result in lessening of competition 
in the market for missile systems. Raytheon and Hughes are not only 
suppliers of staring FPAs, but are also major suppliers of the missile 
systems of which these devices are critical components. With the 
acquisition of Hughes, Raytheon will control access to virtually all 
currently viable staring FPAs for tactical applications. Raytheon will 
have an incentive to refuse to sell, or to sell on disadvantageous 
terms, its state-of-the-art staring FPAs to its missile competitors. 
Without access to the latest staring FPAs, a missile manufacturer is at 
a serious competitive disadvantage.
2nd Gen. Ground EO Systems
    A ground EO system is an integrated system with a thermal imager 
(usually a FLIR), including an integrated cooler dewar assembly with 
detector, afocal assemblies, and associated electronics. It might also 
include the optics, electronics, software, visual displays, fire 
control and stabilization necessary to adapt the system to a particular 
platform.
    Targeting and navigation are the two major types of ground infrared 
EO systems. Targeting systems, sometimes called ``fire control 
systems,'' acquire the target and direct the missile or gun round to 
the target. These systems are much more complex than those used for

[[Page 60276]]

navigation, which only need to permit the operator to see the general 
area.
    A ground EO system operating in or on a ground combat vehicle, in 
the dust, heat and smoke of a battlefield, faces risks and demands that 
are different from those faced by an EO system on a fighter aircraft or 
a helicopter operating substantially above the battlefield. Many 
problems that are unique to designing EO systems for the ground combat 
environment are not faced in designing and EO system for airborne 
applications. Among these is the requirement that any FLIR on a tank be 
able to absorb the tremendous shock of a direct hit and keep 
functioning. In addition, the shock of the recoil of the gun and the 
extreme vibrations that constantly accompany the operation of a ground 
combat vehicle must also be accounted for in designing and producing a 
group EO system. An EO system operating on the ground may also have to 
see through several miles of battlefield smoke and debris. For these 
reasons, the Army spent over $90 million in the early 1990s to 
specifically develop an EO system for its ground vehicles.
    Raytheon and Hughes are the only two firms that develop and produce 
2nd Gen. EO systems for ground vehicles. Raytheon's RTIS and Hughes are 
the only two firms that have established the developmental capacity and 
low-cost production processes needed to economically produce 2nd Gen. 
ground EO system.
    During the next five years, DoD expects to spend about $200 million 
a year for 2nd Gen. ground EO systems to be purchased for the following 
programs: the Improved Target Acquisition System for the HMMWV; the 
Improved Bradley Acquisition System for the Bradley Fighting Vehicle; 
the Commander's Independent Thermal Viewer for the M1 Abrams tank; the 
Thermal Independent Sight for the M1 Abrams tank; the Commander's 
Independent Viewer for the Bradley Fighting Vehicle; and the Long Range 
Advanced Scout Surveillance System. Raytheon and Hughes are the only 
sources for these ground EO systems.
    Raytheon's acquisition of Hughes would eliminate all competition in 
the development, production, and sale of 2nd Gen. ground EO systems for 
military applications. The proposed acquisition would result in a 
single supplier with the incentive and ability to raise prices and 
little or no incentive to minimize cost.
    Sucessful entry into the production and sale of 2nd Gen. ground DoD 
is difficult, time consuming, and costly, Entry requires advanced 
technology, skilled engineers and specialized equipment. A potential 
entrant would have to engage in difficult, expensive, and time 
consuming research to develop and produce 2nd Gen. ground EO systems. 
It is unrealistic to expect new entry in a timely fashion to protect 
competition in upcoming 2nd Gen. ground EO systems purchases.
FOTT Program
    FOTT is a U.S. Army engineering, manufacturing, and development 
(``EMD'') program for an advanced missile to replace the current 
inventory of TOW anti-tank missiles. The program started on March 30, 
1995 when the Army issued a Request for Information. An initial draft 
Request for Proposal was issued on May 15, 1996, a second draft Request 
for Proposal was issued on February 12, 1997, and a third draft Request 
for Proposal was issued on August 8, 1997. The Army currently 
anticipates issuing a formal Request for Proposal for the FOTT program 
at the end of 1997 or early 1998. A contract for EMD is expected to be 
awarded in the first half of 1998. Hughes and a joint venture between 
RTIS and Lockheed Martin, in which RTIS owns a 60 percent interest, are 
competing for the FOTT program.
    The U.S. Army has determined that development of an advanced anti-
tank missile is necessary and that no other missile system meets the 
mission objectives set for the FOTT program.
    If Raytheon acquires Hughes, it will control the Hughes FOTT 
proposal and it will control a 60 percent interest in the RTIS/Lockheed 
Martin joint venture FOTT proposal. In such a situation, Raytheon has a 
strong economic incentive to favor its Hughes proposal, where it stands 
to win 100 percent of the program, over the team in which it has only a 
60 percent interest. Raytheon's acquisition of Hughes will eliminate 
the aggressive competition that would otherwise exist between these 
independent teams. FOTT is a potential $8 billion to $10 billion 
program.
    It would be very difficult for another firm to successfully enter 
the FOTT competition at this stage. The Hughes and RTIS/Lockheed Martin 
Joint venture teams have completed the validation and demonstration 
stage and have each spent over $20 million during the last three years 
developing a missile to demonstrate during the EMD selection. Selection 
of a contractor for the EMD contract is expected during the first half 
of 1998.

C. Harm to Competition as a Consequence of the Acquisition

    Raytheon's acquisition of Hughes would eliminate competition in the 
research, development, and production of SADA II detectors and ground 
EO systems, both necessary to ground military weapons systems in the 
United States. It would combine the two leading suppliers of staring 
FPAs with over 90 percent of the market. In addition, Raytheon's 
acquisition of Hughes would eliminate the aggressive competition that 
would otherwise exist between Hughes and the RTIS/Lockheed Martin joint 
venture for the FOTT antitank missile. Entry by a new company would not 
be timely, likely or sufficient to prevent harm to competition in any 
of these product areas.
    The Complaint alleges that the transaction would have the following 
effects, among others: competition generally in the innovation, 
development, production, and sale of SADA II detectors, staring FPAs, 
ground EO systems, and the FOTT missile in the United States would be 
lessened substantially; actual and future competition between Raytheon 
and Hughes in the development, production and sale of SADA II 
detectors, staring FPAs, ground EO systems, and the FOTT missile in the 
United States will be eliminated; and prices for SADA II detectors, 
staring FPAs, ground EO systems, and the FOTT missile in the United 
States would likely increase.

III. Explanation of the Proposed Final Judgment

    The provisions of the proposed Final Judgment are designed to 
eliminate the anticompetitive effects of the acquisition of Hughes by 
Raytheon.
    The proposed Final Judgment provides that Raytheon must divest, 
within one hundred eighty (180) calendar days after October 3, 1997, or 
five (5) days after notice of the entry of the Final Judgment by the 
Court, whichever is later, the FPA Business of RTIS and the EO Business 
of Hughes to an acquirer(s) acceptable to the DoJ and DoD. In addition, 
Raytheon is required to provide, at the option of the purchaser, a 
contract for computer support services and information and 
communications services sufficient to support the EO Business over a 
period of one year, and, at the option of the purchaser, an option to 
purchase or lease manufacturing space in addition to that currently set 
aside for the EO Business.
    If defendants fail to divest these businesses, a trustee (selected 
by DoJ in

[[Page 60277]]

consultation with DoD) will be appointed by the Court. The trustee will 
be authorized to sell the FPA Business and the EO Business. The Final 
Judgment provides that Raytheon will pay all costs and expenses of the 
trustee. After his or her appointment becomes effective, the trustee 
will file monthly reports with the parties and the Court, setting forth 
the trustee's efforts to accomplish divestiture. At the end of six 
months, if the divestiture has not been accomplished, the trustee and 
the parties will make recommendations to the Court, which shall enter 
such orders as appropriate in order to carry out the purpose of the 
trust, including extending the trust or the term of the trustee's 
appointment.
    Divestiture of the FPA Business, the EO Business and the options 
preserves competition because it will restore the SADA II, staring FPA, 
and the ground EO systems markets to structures that existed prior to 
the acquisition and will preserve the existence of independent 
competitors. Divestiture will keep at least two producers of SADA II 
detectors and ground EO systems in the market competing for upcoming 
contracts, which will preserve and encourage ongoing competition in 
product innovation and development, production, and sales. Divestiture 
will also maintain at least two major competitors for staring FPAs and 
prevent missile system manufacturers from being foreclosed from a 
critical input. The divestiture thus will preserve competition in 
upcoming programs.
    In addition to the divestitures, the Final Judgment requires that 
Raytheon establish procedures to assure that the current Hughes and the 
RTIS/Lockheed Martin joint venture remain independent competitors for 
the FOTT program. The firewall provisions required by the Final 
Judgment prevent the flow information between Hughes' FOTT team and the 
RTIS FOTT team and between either team and any other Raytheon employee. 
Raytheon is required to delegate to the head of its RTIS Missile 
Systems Division the sole discretion to determine all matters relating 
to the RTIS FOTT bid to create economic incentives for the RTIS FOTT 
team members to ensure all reasonable efforts will be made to submit a 
competitive bid for the FOTT program.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act (15 U.S.C. Sec. 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 will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act (15 U.S.C. 
Sec. 16(a)), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and 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 proceeding 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 
sixty (60) days of the date of publication of this Competitive Impact 
Statement in the Federal Register. The United States will evaluate and 
respond to the comments. All comments will be given due consideration 
by the Department of Justice, which remains free to withdraw its 
consent to the proposed Judgment at any time prior to entry. The 
comment and the response of the United States will be filed with the 
Court and published in the Federal Register.
    Written comments should be submitted to: J. Robert Kramer II, 
Chief, Litigation II Section, Antitrust Division, United States 
Department of Justice, 1401 H Street, N.W., Suite 3000, Washington, 
D.C. 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

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against defendants Raytheon 
and General Motors. The United States could have brought suit and 
sought preliminary and permanent injunctions against Raytheon's 
acquisition of Hughes.
    The United States is satisfied that the divestive of the described 
assets and the other terms specified in the proposed Final Judgment 
will encourage viable competition in the research, development, and 
production of SADA II detectors, staring FPAs, ground EO systems, and 
the FOTT program. The United States is satisfied that the proposed 
relief will prevent the acquisition from having anticompetitive effects 
in these markets. The divestiture of the FPA Business and the EO 
Business and the other proposed terms will restore the SADA II, staring 
FPA, ground EO systems, and FOTT missile markets to structures that 
existed prior to the acquisition and will preserve the existence of 
independent competitors in those markets.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases by the United States be subject to a sixty-day comment period, 
after which the court shall determine whether entry of the proposed 
Final Judgment ``is in the public interest.'' In making that 
determination, the court may consider--

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing the adequacy of such judgment;
    (2) The impact of entry of such judgment 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. Sec. 16(e) (emphasis added). As the Court of Appeals for the 
District of Columbia Circuit recently held, the APPA permits a court to 
consider, among other things, the relationship between the remedy 
secured and the specific allegations set forth in the government's 
complaint, whether the decree is sufficiently clear, whether 
enforcement mechanism are sufficient, and whether the decree may 
positively harm third parties. See United States v. Microsoft, 56 F.3d 
1448 (D.C. Cir. 1995).
    In conducting this inquiry. ``the Court is nowhere compelled to go 
to trail or to engage in extended proceedings which might have a effect 
of vitiating the benefits of prompt and less costly settlement through 
the consent decree process.'' \1\ Rather.

    \1\ 119 Cong. Rec. 24598 (1973). See also United States v. 
Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public 
interest'' determination can be made properly on the basis of the 
Competitive Impact Statement and Response to Comments filed pursuant 
to the APPA. Although the APPA authorizes the use of additional 
procedures, 15 U.S.C. Sec. 16(f), those procedures are 
discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues and that 
further proceedings would aid the court in resolving those issues. 
See H.R. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974) U.S. 
Code Cong. & Ad. News 6535, 6538.

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[[Page 60278]]

    Absent a showing of corrupt failure of the government to 
discharge its duty, the Court, in making its public interest 
finding, should * * * carefully consider the explanations of the 
government in the competitive impact statement and its responses to 
comments in order to determining whether those explanations are 
---------------------------------------------------------------------------
reasonable under the circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para. 
61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, (9th Cir. 1988), quoting United States v. Bechtel Corp., 
648 F.2d 660,666 (9th Cir.), cert. denied, 454 U.S. 1083 (1981); see 
also, Microsoft, 56 F.3d 1448 (D.C. Cir. 1995). Precedent requires that

    [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. The 
court's role in protecting the public interest in one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is `within the reaches of the public 
interest.' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\2\

    \2\ United States v. Bechtel, 648 F.2d at 666 (internal 
citations omitted) (emphasis added); see United States v. BNS, Inc., 
858 F.2d at 463; United States v. National Broadcasting Co., 449 F. 
Supp. 1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 
406 F. Supp. at 716. See also United States v. American Cyanamid 
Co., 719 F.2d 558, 565 (2d Cir. 1983).
---------------------------------------------------------------------------

    The proposed Final Judgment, therefore should not be reviewed under 
a standard of whether it is certain to eliminate every anticompetitive 
effect of a particular practice or whether it mandates certainty of 
free competition in the future. Court approval of a final judgment 
requires a standard more flexible and less strict than the standard 
required for a finding of liability. ``[A] proposed decree must be 
approved even if it falls short of the remedy the court would impose on 
its own, as long as it falls within the range of acceptability or is 
`within the reaches of public interest.' (citations omitted).''\3\
---------------------------------------------------------------------------

    \3\ United States v. American Tel. and Tel Co., 552 F. Supp. 
131, 150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 
460 U.S. 1001 (1983), quoting United States v. Gillette Co., supra, 
406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. 
Supp. 619, 622 (W.D. Ky 1985).
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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.

    For Plaintiff United States of America:

    Dated: October 22, 1997.
J. Robert Kramer II,
Chief, Litigation II Section, PA Bar #23963.
Willie L. Hudgins,
Assistant Chief, Litigation II Section, DC Bar #37127.

and

Janet Adams Nash,

Kevin C. Quin,

Stacy Nelson,

Laura M. Scott,

Nancy Olson,

Tara M. Higgins,

Charles R. Schwidde,

Robert W. Wilder,

Melanie Sabo,

Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
1401 H St., NW., Suite 3000, Washington, DC 20530, 202-307-0924, 
202-307-6283 (Facsimile).

Certificate of Service

    I hereby certify under penalty of perjury that on this 22nd day of 
October, 1997, I caused copies of the foregoing competitive impact 
statement to be served via hand-delivery upon the following:

    Counsel for Raytheon Company.
Robert D. Paul, Esq.,
Michael S. Shuster, Esq.,
White & Case, 601 13th St., NW., Washington, DC 20005-3807.

    Counsel for HE Holdings, Inc., and General Motors Corp.
Robert C. Odle, Esq.,
Peter D. Standish, Esq.,
Douglas A. Nave, Esq.,
Weil, Gotshal & Manges LLP, 767 Fifth Ave., New York, NY 10153-0119.

Willie L. Hudgins, Esq.,
Assistant Chief, Litigation II Section, U.S. Department of Justice, 
Antitrust Division, 1401 H Street, NW., Suite 3000, Washington, DC 
20530, (202) 307-0924.
[FR Doc. 97-29474 Filed 11-6-97; 8:45 am]
BILLING CODE 4410-11-M