[Federal Register Volume 65, Number 194 (Thursday, October 5, 2000)]
[Notices]
[Pages 59428-59430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25571]


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FEDERAL TRADE COMMISSION

[File No. 001-0092]


The Boeing Company; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before October 27, 2000.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Norman A. Armstrong, Jr., FTC/S-2311, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-2072.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned 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 thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 27, 2000), on the World Wide Web, at ``http://
www.ftc.gov/os/2000/09/index.htm.'' A paper copy can be obtained from 
the FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue, 
NW., Washington, DC 20580, either in person or by calling (202) 326-
3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. Such comments or views 
will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from The Boeing Company (``Boeing'') designed to remedy 
the anticompetitive effects resulting from Boeing's acquisition of 
certain assets of General Motors Corporation. The proposed Consent 
Agreement prohibits Boeing from providing systems engineering and 
technical assistance (``SETA'') services to the United States 
Department of Defense (``DoD'') for a certain classified program. The

[[Page 59429]]

proposed Consent Agreement also prohibits Boeing's launch vehicle 
division from gaining access to any non-public information that 
Boeing's satellite division receives from competing launch vehicle 
suppliers when those competing suppliers launch Boeing's satellites. 
Similarly, the proposed Consent Agreement prohibits Boeing's satellite 
division from gaining access to any non-public information that 
Boeing's launch vehicle business receives from competing satellite 
suppliers. In addition, the proposed Consent Agreement requires Boeing 
to make available all necessary satellite interface information, which 
is used to make a satellite compatible with a launch vehicle, to all 
launch vehicle suppliers.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and any comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement or make 
final the proposed Decision & Order.
    Pursuant to a Stock Purchase Agreement entered into on January 13, 
2000, Boeing agreed to acquire certain assets of General Motors 
Corporation, including Hughes Space and Communications Company, Hughes 
Space and Communications International, Hughes Space and Communications 
International Service Company, Spectrolab, Inc., Hughes Electron 
Dynamics, Hughes Telecommunications and Space Company's 2.69% interest 
in ICO Global Communications Ltd., and Hughes Telecommunications and 
Space Company's 2% interest in Thuraya Satellite Telecommunications 
Private Joint Stock Company, for approximately $3.75 billion. The 
Commission's Complaint alleges that the transaction, if consummated, 
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 45, 
and Section 5 of the FTC Act, as amended, 15 U.S.C. 18, in the 
following markets:
    (1) A certain classified program for which Boeing is providing SETA 
services; \1\
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    \1\ The complaint includes an additional line of commerce, the 
provision of SETA Services, in which to analyze the effects of the 
transaction. This line of commerce is included in the complaint 
because the proposed merger results in the integration of Boeing 
into two non-horizontal markets: (1) the provision of SETA Services; 
and (2) a competitor for a certain classified program for which 
Boeing is providing SETA services. It is necessary to analyze the 
competitive conditions in the market for provision of SETA Services 
in order to determine whether there would be anticompetitive effects 
in the related market for a certain classified program for which 
Boeing is providing SETA services.
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    (2) The research, development, manufacture, and sale of commercial 
geosynchronous earth orbit satellites;
    (3) The research, development, manufacture, and sale of commercial 
medium earth orbit satellites;
    (4) The research, development, manufacture, and sale of commercial 
low earth orbit satellites;
    (5) The research, development, manufacture, and sale of government 
satellites; and
    (6) The research, development, manufacture, and sale of launch 
vehicles.
    The proposed Consent Agreement remedies the alleged violations in 
each market. First, Boeing is the sole supplier of SETA services to DoD 
for a certain classified program. Boeing provides these services to DoD 
under a classified contract identified for purposes of the Complaint as 
Contract 4208. Hughes is one of two competing contractors for the 
classified program for which Boeing is providing SETA services. Thus, 
as result of the proposed acquisition, Boeing would be both the 
provider of SETA services and a competing contractor for this 
classified program.
    As a SETA contractor, Boeing must receive a great deal of 
competitively sensitive information, including detailed cost and 
bidding data, from contractors competing for the classified program. 
With access to such information, Boeing may be able to raise prices for 
the classified program by bidding less aggressively than it otherwise 
would. In addition, Boeing's position as SETA contractor could enable 
it anticompetitively to favor itself and/or disfavor its competitors in 
a number of ways, such as submitting unfair evaluations of its 
competitors' proposals.
    The proposed Consent Agreement remedies the proposed acquisition's 
potential anticompetitive effects in this classified program by 
prohibiting Boeing from performing certain SETA services for this 
classified program in the future. To prevent the anticompetitive 
exchange of information, the Consent Agreement requires Boeing to: (1) 
Use non-public SETA services information only its capacity as provider 
of technical assistance to DoD, or for the provision of SETA services 
not prohibited by the Order; and (2) erect a ``firewall'' between its 
SETA services division and Boeing's satellite division. In addition, to 
assist DoD in the transition of these SETA services responsibilities to 
one of its own research and development centers, the Consent Agreement 
further requires Boeing to: (1) Provide technical assistance, at the 
request of DoD, for a period not to exceed one year; and (2) provide to 
DoD all documents relating to certain SETA services that Boeing has 
received in its role as SETA contractor.
    Second, Hughes is a significant supplier of satellites and Boeing 
is a significant supplier of launch vehicles, which are used to launch 
satellites from the Earth's surface into space. In order for a launch 
vehicle to launch a satellite, launch vehicle suppliers and satellite 
suppliers must work closely together and share a substantial amount of 
proprietary and competitively sensitive information to integrate the 
two products. Thus, as a significant supplier of launch vehicles, 
Boeing/Hughes would have access to competitively sensitive information 
of competing satellite manufacturers which it could share with its 
satellite divisions. If Boeing's satellite divisions gained access to 
this information, Boeing would be able to determine the cost and 
technology involved in its competitors' satellite proposals. This could 
have immediate anticompetitive consequences on upcoming satellite 
procurements by allowing Boeing to bid less aggressively than it 
otherwise would. In addition, the incentives of other satellite 
suppliers to invest in future technological advancements could be 
reduced due to concerns that Boeing would be able to ``free-ride'' off 
its competitors' technological innovations. As a significant supplier 
of satellites, Boeing/Hughes likewise would have access to sensitive 
information of competing launch vehicle providers. If Boeing's launch 
vehicle division were to gain access to this information, it could 
allow Boeing to bid less aggressively in upcoming launch vehicle 
procurements and reduce incentives of competitors to invest in 
technological innovation.
    The proposed Consent Agreement is designed to protect the 
proprietary and competitively sensitive information of launch vehicle 
and satellite suppliers. Specifically, the Consent Agreement prohibits 
Boeing's satellite business from making any non-public launch vehicle 
information obtained from any launch vehicle provider available to 
Boeing's launch vehicle business. Under the proposed Consent Agreement, 
Boeing may only use such information as a provider of satellites. 
Similarly, the proposed Consent Agreement prohibits Boeing's launch 
vehicle business from

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making any non-public satellite information obtained from any satellite 
supplier available to Boeing's satellite business. Under the terms of 
the Consent Agreement, Boeing may only use such information in its 
capacity as a launch vehicle provider. The Commission has issued 
similar orders limiting potentially anticompetitive information 
transfers following mergers or acquisitions, including: Lockheed 
Martin, (C-3685) (September 20, 1996); Raytheon Company, (C-3681) 
(September 10, 1996); Lockheed Corporation/Martin Marietta Corporation, 
(C-3576) (May 9, 1995); Alliant Techsystems Inc., (C-3567) (April 7, 
1995); Martin Marietta, (C-3500) (June 28, 1994).
    Third, the proposed acquisition raises concern that Boeing could 
withhold satellite interface information, which is necessary to 
integrate a satellite with a launch vehicle, from its launch vehicle 
competitors. If Boeing were to withhold such satellite interface 
information, it could potentially disadvantage or raise the costs of 
other launch vehicle suppliers that are competing to launch Boeing's 
satellites, and ultimately to customers. The proposed Consent Agreement 
remedies this concern by requiring that for any satellite manufactured 
by Boeing/Hughes prior to the date the Consent Agreement becomes final, 
Boeing must provide satellite interface information, as that term is 
defined in the Consent Agreement, to any launch vehicle supplier within 
thirty (30) days from the date Boeing receives a request for such 
information. The Order also requires Boeing to notify all launch 
vehicle suppliers, in writing, that satellite interface information 
relating to any Boeing/Hughes satellite bus, model, or product line is 
available upon request. Boeing/Hughes is also required to provide each 
launch vehicle supplier with instructions on how to request such 
information. The Consent Agreement further requires Boeing to provide 
satellite interface information relating to any of its satellite buses, 
models, or product lines manufactured after the date this Consent 
Agreement becomes final, to any launch vehicle supplier that requests 
such information or to whom Boeing previously supplied satellite 
interface information. However, for each satellite manufactured for the 
United States Government, Boeing shall only be required to provide 
satellite interface information to any launch vehicle supplier 
specified by the United States Government. In addition, the Consent 
Agreement requires Boeing/Hughes to provide satellite interface 
information to any launch vehicle supplier specified by any satellite 
customer no later than Boeing provides such information to its own 
launch vehicle businesses.
    Fourth, the Commission has appointed Sheila Widnall as a monitor 
trustee pursuant to the proposed Consent Agreement to ensure that 
Boeing complies with the provisions of the Order. The monitor trustee 
will, among other things, assist the Commission in monitoring Boeing's 
compliance with the firewall requirements of the Order and Boeing's 
efforts to provide satellite interface information to other launch 
vehicle competitors. Because satellite interface information often 
involves technical information, the monitor trustee will aid in 
evaluating the contents of the satellite interface information that is 
to be distributed. Under the provisions of the Consent Agreement, the 
monitor trustee will serve for a period of ten (10) years and provide, 
among other things, written reports sixty (60) days after she is 
appointed detailing Boeing's compliance with the proposed Consent 
Agreement and annually thereafter for the next ten (10) on the 
anniversary of the date the Decision and Order becomes final.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement and Decision & Order, and it is not intended to 
constitute an official interpretation of the Consent Agreement and 
Decision & Order or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-25571 Filed 10-4-00; 8:45 am]
BILLING CODE 6750-01-M