Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE  
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel,   BELGIË  
 
Tel: +32 229 -91111. Fax: +32 229 -64301. E -mail: COMP -MERGER -REGISTRY@ec.europa.eu .  EUROPEAN COMMISSION  
Brussels,  13.03.2020  
C(2020 ) 1718 final  
PUBLIC VERSION  
 
To the notifying party  
Subject : Case M.9434 – UTC/Raytheon  
Commission decision pursuant to Article 6(1)(b) in conjunction with 
Article 6(2)  of Council Regulation No  139/20041 and Article 57 of the 
Agreement on the European Economic Area2 
Dear Sir or Madam,  
(1) On 24 January 2020 , the  European Commission received notification of a 
concentration pursuant to Article 4 of the Merger Regulation result ing from a 
proposed transaction whereby  United Technologies Corporation ( “UTC ”, USA)  
intends to acquire  control , within the meaning of Article  3(1)(b) of the Merger 
Regulation , of the whole of Raytheon Company (“Raytheon ”, USA).3 UTC  is 
referred to  hereinafter as the “Notifying Party” and together with  Raytheon  as the 
“Parties ”. The undertaking that would result from the proposed transaction is 
referred to as “the merged entity ”. 
                                                 
1  OJ L 24, 29.1.2004, p. 1 (the ‘Merger Regulation ’). With effect from 1 December 2009,  the Treaty on 
the Functioning of the European Union ( ‘TFEU ’) has introduced certain changes, such as the 
replacement of ‘Community ’ by ‘Union ’ and ‘common market ’ by ‘internal market ’. The terminology 
of the TFEU will be used throughout this decision.  
2  OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).  
3  Publication in the Official Journal of the European Union No C 32, 31.1.2020 , p. 19. 
In the published version of this decision, 
some information has been omitted 
pursuant to Article 17(2) of Council 
Regulation (EC) No 139/2004 concerning 
non-disclosure of business secrets and other  
confidential information. The omissions are 
shown thus […] . Where possible the 
information omitted has been replaced by 
ranges of figures or a general description.  
 
 
2 1. THE PARTIES  
(2) UTC  supplies  products and services for the building system s and aerospace 
industries. In the aerospace industry, via its subsidiary Collins Aerospace Systems  
(USA) , UTC supplies  aerospace products and aftermarket service solutions for 
aircraft manufacturers and operators mainly in the commercial sector but also f or 
integration into military aircraft. Furthermore, via its subsidiary Pratt & Whitney  
(USA) , UTC supplies aircraft engines for the commercial, military, business jet, and 
general aviation industries, as well as fleet management services and aftermarket 
maintenance, repair, and overhaul services. UTC also produces, sells, and services 
auxiliary power units for military and commercial aircraft.  
(3) By way of context, UTC currently comprises Otis Elevator Company, Carrier, Pratt 
& Whitney and Collins Aerospace Sy stems. Before closing the proposed acquisition 
of Raytheon, UTC has announced its intention  to spin off its Otis and Carrier 
business units into standalone, publicly traded companies. It will then combine the 
remainder of UTC (consisting of UTC’s aerospace  businesses Pratt & Whitney and 
Collins Aerospace Systems) with Raytheon.  
(4) Raytheon  is a defence contractor that supplies defence, civil government and 
cybersecurity solutions with a core focus on missiles and air defence systems, radars 
and electronic warf are. 
2. THE CONCENTRATION  
(5) On 9 June 2019, the Parties entered into a binding agreement setting out the terms of 
the acquisition by UTC of sole control over Raytheon (hereinafter the “Transaction” 
or the “Concentration”). The Transaction is structured as a mer ger of a subsidiary of 
UTC with Raytheon. In consideration for their existing shareholdings, Raytheon 
shareholders will receive 2.3348 shares in the merged entity for each Raytheon share 
they hold. Consequently, following the Transaction, UTC shareo wners w ill own 
approximately 57 % of the merged entity, while Raytheon shareowners will own 
approximately 43%.  
(6) Prior to the Transaction, no  shareholder holds an interest in any of the Parties’ issued 
share capital that is sufficient to confer control  within the meaning of Article 3 of the 
Merger Regulation.  
(7) It follows that t he Transaction would result in a concentration within the meaning of 
Article 3(1)(b) of the Merger Regulation . 
3. UNION  DIMENSION  
(8) The Parties  have a combined aggregate worldwide  turno ver of more than EUR 5 000 
million  (UTC: EUR 53  377.1 million, Raytheon: EUR 22  951 million).4 Each of 
them  has a Union-wide turnover in excess of EUR 250 million  (UTC: EUR […] 
million, Raytheon: EUR […] million) , but each of them does not achieve more tha n 
                                                 
4  Turnover calculated in acc ordance with Article 5(1) of the Merger Regulation and the Commission 
Consolidated Jurisdictional Notice (OJ C95, 16.4.2008, p. 1).  
 
 
3 two-thirds of its aggregate Union-wide turnover within one and the same Member 
State. The Concentration  therefore has a Union dimension  pursuant to Articl e 1(2) of 
the Merger Regulation . 
4. INTRODUCTION TO THE MILITARY AEROSPACE  INDUSTRY  
(9) The Transaction brings together UTC’s and Raytheon’s production and supply of 
systems and components for military airborne platforms , in particular for military 
aircrafts  and precision -guided munities (“PGMs”) . Military aircrafts comprise 
aircrafts designe d for military activities, be it combat aircraft s or non -combat 
aircraft s – i.e. designed for search and rescue, reconnaissance, transport, observation 
and training. For the purpose of the merger control assessment of the Transaction, 
this section introduc es the Commission's understanding of the basic  features of the 
military aerospace industry.  
4.1. Supply chain  in the military aerospace industry  
(10) The supply chain in the aerospace industry mainly comprises tier suppliers: Tier -1 
suppliers , Tier-2 suppliers  (and Tier-3 suppliers  as the case may be)  and aircraft and 
helicopter manufacturer s (referred to as  original equipment manufacturers or 
“OEMs ”). Tier -1 suppliers generally have integration capabilities and provide whole 
systems and equipment.  Tier-2 suppliers tend to be active at an upstream stage, 
supplying components and sub -components for integration  into the 
systems/equipment by either the Tier -1 supplier or the OEM . 
(11) Systems and equipment for military aircrafts are purchased by the OEMs or by 
armed forces and ministries of defence depending on the equipment or system in 
question . Helicopter/military aircraft OEMs carry out  the integration of main 
systems and equipment  in both cases . 
4.2. Procurement of US military  aerospace  equipment  
(12) Due to the lower volume s of military aircraft (compared to commercial aircraft) and 
the complexity of the ir integrated systems , the procurement process for equipment 
and systems for military aircraft requires close cooperation between  the relevant 
OEM , system supplie rs and the national p rocurement authorities  acting on behalf of 
the end -users . 
(13) The Parties produce military equipment in the US  that is ultimately acquired by  the 
US Department of Defence (“ US DoD”)  and armed forces  of EEA countries and 
other allied countr ies. 
(14) The production of military systems and components  in the US  is driven by the 
requirements of the US government and its annual defence budget. The US DoD 
plans the development of new platforms, defines product specifications, funds 
development, and manages suppliers. Manufacturers then compete to persuade the 
US DoD and OEMs  that they should select them  to develop and supply products for 
these opportunities . 
(15) After developing their defence products in the US, suppliers  also market  them in US 
allied countries, including in the EEA. These sales to countries in the EEA largely 
 
 
4 take place through the US Foreign Military Sales (“FMS”) program and to a limited 
extent through direct commerc ial sales (“DCS”).5 
(16) The US  FMS  program is a program administered by the US Defence Security 
Cooperation Agency ( “DSCA ”)6 for transferring defence articles, services, and 
training to US allied countries  and international organizations. The US FMS 
program is  funded by administrative charges levied on  foreign purchasers.  
(17) Under the FMS program, the DSCA  serves as an intermediary (usually handling 
procurement, logistics, and delivery and providing product support and training) 
between foreign customers and US d efence contractors. This framework provides 
several advantages to foreign customers in US allied countries, such as, inter alia , 
the US DoD’s procurement infrastructure and purchasing practices and greater 
economies of scale  (although i t includes administr ative charges ). The US F MS 
program  uses a total package approach for its contracts , which means that  they 
include  training, spare parts, and other support needed to sustain a system through its 
first few years.7 
(18) Besides administrative charges , purchases via the US F MS program may include 
nonrecurring costs, which are those one -time costs incurred by the US government 
in support of research, development, or production of certain major defence 
equipment . The US DoD may waive nonrecurring costs to allied cou ntries  if (i) the 
sale would significantly advance US government’s interests in standardization with 
allied armed forces, (ii) the imposition of the charge likely would result in the loss of 
the sale ; or (iii) the increase in quantity resulting from the sa le would result in a 
reduced unit cost for the same item being procured by the  US government.  
(19) US allied countries, including in the EEA, can also acquire military equipment from 
US defence manufacturers via DCS.  
(20) Cost comparisons between FMS  and DCS are of ten not possible as , if a purchaser 
requests US FMS data after soliciting bids from contractors, the purchaser must 
demonstrate that commercial acquisition efforts have ceased before any US FMS 
data is provided. If the purchaser obtains FMS data and later determines to request a 
commercial price quote, the FMS offer may be withdrawn.  DCS purchasing 
agreements may or may not include training, spare parts, and general  support .  
(21) Military equipment  produced in the US is subject to International Traffic in Arms 
Regulations (“ITAR”) and Export Administration Regulations  (“EAR”) and can only 
be exported to the EEA subject to relevant U S legislation and/or authorization.  
5. PRODUCT MARKET DEFINI TION  
(22) The Transaction brings together UTC’s aerospace businesses, which incl ude 
commercial and military aero engines and aircraft systems, and Raytheon’s defence 
business, which focuses on missiles and missile systems, electronic warfare, and 
other defence systems .  
                                                 
5  Questionnaire to European (EEA) armed forces Q2, question 10.  
6  The DSCA administers the US FMS program for the US DoD.  
7  https://www.dsca.mil/resources/faq  
 
 
5 (23) Both Parties are active in the production and supply of systems a nd components for 
military aircraft  platforms . Although their respective product portfolio is largely 
complementary, there are some horizontal overlaps between the Parties’ activities. 
Those  horizontal overlaps lie in the supply of military global navigati on satellite 
systems (“GNSS”) receivers, military airborne communications systems (voice and 
data) and electro -optical/infrared (EO/IR) sensors for military aircraft platforms.  
(24) The Transaction also gives rise to some vertical links because of UTC’s supply of 
components for PGMs  manufactured by Raytheon and rival suppliers. Those v ertical 
links involve primarily the supply of GNSS  receivers, actuation systems, inertial 
measurement units ( “IMUs ”) and propulsion syst ems for  PGMs .  
(25) According to the Notifying Party, there  are no overlaps between UTC’s commercial 
aerospace products and Raytheon’s activities.  
(26) The present section examines product market definition for all products in relation to 
which the Parties’ activiti es overlap horizontally, are vertically related or could 
potentially be regarded as complementary to one another.  
5.1. GNSS  receivers  
5.1.1.  Introduction  
(27) GNSS serve to determine position and follow a route. GNSS have three components: 
(1) constellations of satellites orbitin g the earth,  (2) ground control systems 
managing the s atellites  and (3) equipment that receives and processes GNSS signals 
(GNSS receivers ). All GNSS receivers calculate their location by measuring the 
distance between their position and four or mor e satellites.  
Figure 1: GNSS constellation of satellites  
 
Source: Form CO, Chapter  D, para 11.  
(28) GNSS receivers interact with satellites and calculate their position through an 
Application -Specific Integrated Circuit (“ASIC”), which  is a semiconductor chip 
that receives, digitizes, and processes GNSS signals and shares the data with other 
systems (e.g., avionics). ASICs used in military GNSS receivers also incorporate 
cryptographic processing capabilities to decode encrypted signals.  
(29) The ASIC is incorporated into a receiver card, which  includes ancillary hardware 
and software (e.g., storage, memory, and a basic operating system). GNSS r eceiver 

 
 
6 cards can be sold as standalone products or incorporated into other systems  
(e.g., missile guidance ) or in boxes, which are then mounted on a platform like an 
airframe. These boxes house the receiver card and related components (e.g., an 
inertial measurement unit).  
Figure 2: ASIC, receiver card and navigation box  
 
Sour ce: Form C O, Chapter  D, para 14.  
(30) GNSS can operate signals that are openly available to anyone (typically used for 
civil purposes) and encrypted signals that can only be accessed with governmental 
consent (typically used for military or security -related pur poses).  Armed  forces use 
military GNSS receivers to decrypt secure d GNSS signals. Anti-jamming, which 
counters interference with GNSS signals, is not a component of GNSS receivers but 
is an ancillary capability typically included alongside a military GNSS receiver . 
(31) The first GNSS  system was the Global Positioning System (“GPS”), which was 
developed by the US government in the 1970s. Other countries have since developed 
similar systems , including the EU Galileo  system.8 Both the US GPS and EU Galileo 
systems  operate  both signals openly available to anyone and encrypted signals.  
(32) GPS receivers can use different ranging signals. These include  (i) C/A-code , an 
unencrypted civil signal used by the vast majority of civilian GPS applications 
(e.g.,  mobile  phones and passenger vehicles);  (ii) P(Y) -code , an encrypted signal 
used for government applications, e.g., missile and aircraft guidance, ground 
vehicles, handheld devices, and as a source of precision timing informatio n for a 
                                                 
8  Further GNSS systems are the Russian GLONASS and Chinese BeiDou systems. India and Japan 
operate smaller constellations (NAVIC and QZSS) with regional coverage.  

 
 
7 variety of applications; an d (iii) military code (“M -code”), an encrypted GPS signal 
for military use that is currently under development . 
(33) The US  DoD has a warded funding to UTC, L3Harris, Raytheon  and Trimble to 
develop M-code GPS receivers. According to the  Notifying Party,9 all GP S 
equipment purchased by the U S DoD after 2017 must be M -code compatible  by law. 
However, a s this would  not yet  be feasible, the US DoD has issued individual 
waivers permitting continued use of P(Y) -code GPS  receivers. The Notifying Party  
expects that an e xhaustive transition to M -code will take approximately 
10-15 years .10 
(34) The authorization  of the US  DoD is required to manufacture, sell, and use P(Y) -code 
or M -code receivers. Such  authorization covers the entire receiver, not just the ASIC.  
(35) The EU Galileo s ystem is a GNSS developed by the European Union and operated 
by the European GNSS Agency and European Space Agency.  Although it already 
enjoys widespread adoption in the mobile, automotive, marine, search -and-rescue, 
and industrial sectors , it is only scheduled to reach full operational capacity in 2020 
with 30 satellites.11 
(36) Member States and the Commission, Council, and European External Action Service 
may authorize companies established in the EU to manufacture Galileo PRS 
receivers. Non -EU countries may a lso be authorized to produce Galileo PRS 
receivers under bilateral agreements . The Parties understand that EU companies with 
access to the Galileo  PRS signal currently include, at a minimum, GMV (Spain), 
Leonardo (Italy), QinetiQ (UK), Siemens (Germany), a nd Thales (France).12 
5.1.2.  The Notifying Party’s view  
(37) The Notifying Party  submit s that civilian and military GNSS  receivers likely 
constitute distinct markets and that it is appropriate to define a relevant product 
market for the supply of military GNSS receivers without further segmentation.13  
(38) First, according to the Notifying Party, while civilian GNSS receivers are 
manufactured by a wide range of suppliers for applications available to the public 
(e.g., handheld devices, sports watches, and passenger v ehicles), both the 
manufacture and purchase of military GNSS receivers require authorization from 
national authorities (e.g., the U.S. DoD for GPS and EU Member States and 
institutions for Galileo). Once that authorization is granted, it would generally be  
possible for a civilian GNSS receiver supplier to start producing military receivers. 
Nevertheless, the Notifying Party submits that the additional needs of military users 
and the need for manufacturers to obtain governmental authorization likely provide 
sufficient supply - and demand -side differentiation to warrant a distinction for 
purposes of product market definition.14 
                                                 
9  Form CO, Chapter D, para. 21.  
10  Form CO, Chapter D, para. 21.  
11  Form CO, Chapter D, para. 23.  
12  Form CO, Chapter D, para. 26.  
13  Form CO, Chapter D, para. 34.  
14  Form CO , Chapter D, para s. 35 -36. 
 
 
8 (39) Second, the Notifying Party argues that there is no  need to segment the supply of 
GNSS receivers based by military application .15 From a  demand -side perspective, 
UTC argues that the same GNSS receiver card can typically be used in a variety of 
platforms. On the supply side, UTC submits that suppliers of military GNSS 
receivers for one platform could start producing receivers for another, pr ovided they 
have the necessary US DoD authorization.  
(40) Finally, according to the Notifying Party, the GPS and the EU Galileo system s (once 
it is fully operational ) are substitutes .16 
5.1.3.  The Commission’s precedents  
(41) In the past, the Commission has identified an ov erall market for GPS receivers but 
has ultimately left open the question of whether the market should be further 
segmented by pro duct type  (type of mission and class of reliability ) or by final 
customer  (military , commercial  or institutional ).17  
5.1.4.  The Commission’s assessment  
(42) From a demand side perspective, according to the results of the market investigation , 
most market participants consider that  civili an and military GNSS receivers 
constitute separate product markets due to limited substitutability fo r customers in 
terms of, e.g., product characteristics, applications and prices.18 One respondent to 
the market investigation indicated that ‘ [m]ilitary receivers utilize a different signal 
and have technical features that ordinary, civilian receivers do no t include, such as 
enhanced security to prevent disruption of signals ’.19  
(43) From the point of view of suppliers, the results of the market investigation have 
revealed that the production of civilian and military GNSS receivers entail 
significantly different technical features, expertise and costs.20 This is irrespective of 
the fact that the manufacture and supply of military GNSS receivers requires 
authorisation from relevant national authorities.  One market participant indicated 
that ‘ in terms of technical fe atures, the military receivers are more complex and 
require much more expertise and costs ’.21 In line with this, another respondent to the 
market investigation indicated that ‘ the product complexity is far higher for a 
military GNSS receiver, due to cyber c onstraints and cyber certification ’.22 
(44) Respondents to the market investigation indicated  that, for assessing the relevant 
competitive dynamics, it may be  appropriate to consider further segmentations of 
military GNSS receivers by military application (i.e. by platform).23 In particular, t he 
results of the market investigation suggest that the strengths and market position of 
                                                 
15  Form CO , Chapter D, para . 37. 
16  Form CO , Chapter D, para 38. 
17  Case M.3680 – Alcatel /Finmeccanica /Alcatel Alenia Space & Telespazio . 
18  Questionnaire to s uppliers of military equipment Q1, question 98.  
19  Questionnaire to s uppliers of military equipment  Q1, question 98.1.  
20  Questionnaire to s uppliers o f military equipment  Q1, question 99.  
21  Questionnaire to s uppliers of military equipment  Q1, question 99.1.  
22  Questionnaire to s uppliers of military equipment  Q1, question 99.1.  
23  Questionnaire to s uppliers of military equipment  Q1, question 100.  
 
 
9 the different suppl iers of GPS receivers may vary for ground equipment, aviation , 
maritime  equipment, PGMs  and handheld applications , respectively .24  
(45) In turn, t he results of the market investigation are not conclusive on the demand and 
supply -side substitutability between  Galileo PRS receivers and P(Y) -code and M -
code GPS receivers. Some  respondent s indicated that with the introduction of the 
Galileo PRS receivers, the situation has shifted from single mode receivers to dual 
mode receivers  integrating multi -constellation capabilities.  Accordingly, Galileo 
PRS receivers appear to be perceived as a complementary constellation to GPS 
receiv ers rather than a substitute.25 However, although the Galileo PRS signal should 
be operational as of 2020, the final operational capabilities (e.g., the infrastructure 
dedicated to maintenance the signal) will be delayed.26 Furthermore, military Galileo 
PRS receivers have not yet been fielded.  
(46) Based on the assessment laid down in paragraphs (42) to (45), the Commission 
considers it appropriate to define a separate product market for military GPS 
receivers. The Commission will in addition  factor into its assessment a possible 
differentiation in the  production and supply of military GP S receivers  by type of 
application/platform.  
5.2. Military c ommunication systems  
5.2.1.  Introduction  
(47) Communication systems are devices used for the transmission of information for 
military or civil purposes. While civil and military communication systems share 
some basics features, military communication systems require specific features 
necessary to ensure reliability in the demanding environments of battlespace. These 
include anti -jamming, anti -spoofing, multi -band, multi -channel, encryption 
capabilities and resili ence under arduous climate and transport conditions. Military 
communication systems include military (air and ground) radios, data links and 
satellite communication systems (SATCOMs).  
(48) Military airborne radios provide secure air -to-air and air -to-ground con nectivity to 
support voice and data communications, therefore enabling an aircraft to 
communicate with other (air or ground) platforms. Depending on the operational 
requirements of an aircraft, military airborne radios will operate in the high 
frequency (H F), very high frequency (VHF) or ultra -high frequency band (UHF).  
(49) HF radios enable single -channel communication at frequencies up to 30 MHz and 
provide beyond line -of-sight communications (they are typically used by armed 
forces for communications over gr eat distances, such as cross -continental 
communication). VHF/UHF radios enable single -channel communication at 
frequencies between 30 MHz and 1000 MHz and can only support line -of-sight 
communication (they are typically used at distances up to hundreds of kilometres). 
VHF/UHF radios can incorporate narrowband SATCOM functionality, which allows 
for beyond line -of-sight communications.  
                                                 
24  Questionnaire to s uppliers of military equipment  Q1, question 100.1.  
25  Questionnaire to s uppliers of military equipment  Q1, question 101.1.  
26  Questionnaire to s uppliers of military equipment  Q1, question 101.2.  
 
 
10 Figure 3: HF military airborne radio  
 
Source: Form CO, Chapter C, para 11.  
Figure 4: VHF/UHF military airborne radio  
 
Source: Form CO, Chapter C, para 11.  
(50) Military ground radios enable secure ground -to-ground and ground -to-air 
communications. Since they usually need to communicate with airborne radios, 
ground radios generally o perate at the same frequency bands as airborne radios (HF 
or VHF/UHF) and may as well feature narrowband SATCOM capabilities. 
Depending on the frequency band and other technical characteristics, ground radios 
allow data, image, voice and video communicatio n. They can be fixed (typically at a 
military or government building) or deployable. Deployable ground radios can be 
used in land vehicles or carried by a soldier (in the hand or in the back).  
(51) Military data links provide secure air -to-air, air -to-ground an d ground -to-ground 
communications. While radios are primarily used for voice communications , the 
main purpose  of data links  is to transfer data , even though they can also transfer 
voice . Moreover, while radios allow only for point -to-point communications, data 
links devices enable communications between multiple points simultaneously. 
Finally, data links have higher bandwidth than radios. T here are t wo types of data 
links: situational awareness (“SA”) data links , which use radio waves to create a 
“picture” of where assets and targets are in the battlespace ; and intelligence, 
surveillance and reconnaissance (“ISR”) data links , which provide connectivity to 
offload large amounts of intelligence information  from platforms such as aircraft 
carrying cameras . 
(52) Different data links communicate using different protocols generally designed and 
implemented by governments. The main military data links protocols are Link 11, 
Link 22, Link 16, Situational Awareness Data Link (“SADL”) and Enhanced 
Position Locati on Reportin g System (“EPLRS”). To enable interoperability between 

 
 
11 armed forces, protocols are sometimes defined at a military alliance level. NATO 
countries, for example, use the Link 16 data link network.  
Figure 5: NATO Link 16 data link arc hitecture  
 
Source: Form CO, Chapter C, para 17.  
(53) Military platforms may also use commercial data link prod ucts and related network 
services when operating in commercial airspace  or other. The main commercial data 
links networks are ARINC27 and SITA. Both ne tworks use the traditional, low -
bandwidth Aircraft Communications Addressing and Reporting System (“ACARS”) 
protocol, first deployed in 1978.  
(54) Military SATCOMs relay their radio signals via satellite, enabling secure 
communications between two locations at significant distances, including beyond 
line-of-sight communications. They can be narrowband, wideband or protected. 
narrowband SATCOMs operate in the UHF frequency. Wideband SATCOMs 
operate in frequencies higher than UHF and are used to transfer large amo unts of 
data. Protected SATCOMs offer additional levels of resistance to interference.  
5.2.2.  The Notifying Party’s view  
(55) First, the Notifying Party  submit s that civilian and military communication systems 
are not substitutable and likely constitute distinct markets. According to the 
Notifying Party, m ilitary customers require distinct features (e.g., anti -jamming, 
anti-spoofing, multi -band, multi -channel, encryption capabilities, and resilience 
under arduous climate or transport conditions) which requires man ufacturers to make 
significant investments in engineering , which applies equally across radios and data 
links.28 
(56) Second, with regard to military airborne radios in particular, the Notifying Party 
argues that military airborne and ground radios may be  distin ct markets , although 
there is significant supply -side substitutability. In this regard, according to the 
Notifying Party, there are significant demand -side differences between airborne and 
ground radios, given the conditions in which they operate  (e.g.,  vibration and 
                                                 
27  UTC  owns  and operate s the ARINC network.  However, SAE International stewards the  ARINC 
standards , which  are a set of communications standards for avionics, wiring, and other aircraft 
electronics . 
28  Form CO, Chapter C, para. 67.  

 
 
12 temperature ranges ). That said, the Notifying Party argues that companies that 
currently manufacture military ground radios can switch production to manufacture 
military airborne radios, given the similarity of the fundamental radio technology 
and design, and vice versa.29  
(57) Third, a ccording to the Notifying Party , there is no need to segment  radios by 
frequency (i.e. HF, VHF/UHF) because although HF and VHF/UHF radios are not 
perfect substitutes from the demand -side due to their different operati onal 
functionalities, the addition of n arrowband SATCOM functionality to VHF/UHF 
radios enables beyond line -of-sight communications similar to that of HF radios. In 
addition, the Notifying Party argues that HF and VHF/UHF radios are highly 
substitutable fr om a supply -side perspective as current manufacturers of HF radios 
would able to produce VHF/UHF radio without any significant increase in cost or 
change of expertise, and vice versa.30 
(58) Lastly, the Notifying Party  submit s that data link s (i.e., SA and ISR d ata links) may 
comprise a distinct market, though data link functionality is increasingly 
incorporated into airborne radios – and there is increasing technological convergence  
between radios and data links.31 
5.2.3.  The Commission’s precedents  
(59) In M.3735 – Finmeccanica /AMS , the Commission identified different segments 
within military communication systems depending on the functionality, the platform 
(ground, air, sea) and the force for which they are intended.32 In that case , the 
Commission distinguished betw een (i) military ground communications systems and 
(ii) military naval information and communication systems , while leaving open the 
exact market definition and the potential need for further segmentation . 
5.2.4.  The Commission’s assessment  
(60) From a demand -side per spective, according to the results of the market investigation , 
most market participants consider that military  airborne radios and military ground 
radios constitute separate product markets due to limited substitutability for 
customers in terms of, e.g., product characteristics, applications and prices.33 As a 
market participant explained, ‘ [m]ilitary airborne radios and military ground radios 
have different requirements to suit different environmental conditions (e.g. vibration, 
temperature and atmospheric  pressure etc.) and differ in size, and weight ’.34 
Another market participant indicated that ‘ requirements of airborne and ground 
radios are different enough that there is almost no overlap in utilization ’.35 
(61) From a supply -side perspective , the market invest igation has revealed that most 
market participants consider that the production of military airborne radios and the 
production of military ground radios entail significantly different technical features, 
                                                 
29  Form CO, Chapter C, paras. 68 -70. 
30  Form CO, Chapter C, paras.7 2-74. 
31  Form CO, Chapter C, para. 75.  
32  See case M.3735 – Finmeccanica /AMS , paras. 12 -15. 
33  Questionnaire to s uppliers of military equipment  Q1, question 35.  
34  Questionnaire to s uppliers of military equipment  Q1, question 35.1.  
35  Questionnaire to s uppliers of military equipment  Q1, question 35.1.  
 
 
13 expertise and costs.36 One market participant explain ed that ‘[a]lthough the basic 
technology (i.e. software defined radios) can be the same for both airborne and 
ground radios, that notwithstanding the main steps for the development, production 
and, even more, certification are different, with direct conseq uences on the required 
expertize and the final cost of the equipment ’.37 Another market participant indicated 
that ‘[i] t is often very difficult to use systems that were designed for ground use in an 
airborne environment ’ and ‘ [t]his is because the control,  integration with other 
avionic systems, environmental, size, weight and power of the systems for the 
different environments can differ significantly and are not easy to adapt ’.38 
(62) Respondents to the market investigation indicated that, for assessing the rel evant 
competitive dynamics, it may be appropriate  to consider further segmentations of 
military airborne radios by frequency band between HF and VHF/UHF.39 In turn, t he 
market investigation has revealed that military HF and VHF/UHF radios have 
different cha racteristics and applications, irrespective of whether VHF/UHF ra dios 
include n arrowband SATCOM capabilities.40 The results of the market investigation 
are however not conclusive as to whether, from the point of view of the suppliers, 
the production of mili tary radios of different frequency bands (e.g. HF, VHF/UHF) 
entail significantly different technical features, expertise and costs. However, at least 
one market participant indicated that ‘[t]he production of every new airborne radio 
requires major investm ents in terms of production and test equipment on modul - and 
radio level, e.g. coating procedures, soldering and quality adjustments ’ and ‘[s]ame 
for new ground based radios ’.41 
(63) With regard to military ground radios, the results of the market investigation show 
that most market participants consider that fixed and deployable ground radios 
constitute separate product markets due to limited substitutability for customers.42 
The results of the market investigation are however not conclusive as to whether, 
from t he point of view of suppliers, the production of fixed and deployable military 
ground radios entail significantly different technical features, expertise and costs. 
The results of the market investigation are similarly not conclusive as to whether 
further segmentations within deployable ground radios should be considered.  
(64) With regard to military data links, the market investigation has revealed that most 
market participants consider that, from both demand and supply side perspectives, it 
is appropriate to consider that military radios and data links constitute separate 
product markets.43 One market participant has explained that, ‘ [r]adios are largely 
narrow band and low data rate, whereas data links can be very wide band, high 
bandwidth, and specialized to handle advanced network topologies and data 
routing ’ and ‘ [d]ata links are therefore different products and are not substitutable 
with radios ’.44 Within data links, the results of the market investigation are however 
                                                 
36  Questionnaire to s uppliers of military equipment  Q1, question 36.  
37  Questionnaire to s uppliers of military equipment  Q1, question 35.1.  
38  Questionnaire to s uppliers of military equipment  Q1, question 3 6.1. 
39  Questionnaire to s uppliers of military equipment  Q1, question 38.  
40  Questionnaire to s uppliers of military equipment  Q1, questions 38.1 and 39.  
41  Questionnaire to s uppliers of military equipment  Q1, question 40.1.  
42  Questionnaire to s uppliers of  military equipment  Q1, question 41.  
43  Questionnaire to s uppliers of military equipment  Q1, question 46.  
44  Questionnaire to s uppliers of military equipment  Q1, question 46.1.  
 
 
14 not conclusive as to whether further segmentations of the market between SA and 
ISR data links are appropriate.  
(65) As to SATCOMs, most respondents to the market investigation indicated that it is 
appropriate to consider that SATCOMs constitute a separate pro duct market from 
other military airborne communications systems (i.e. military radios and data links)  
due to limited substitutability for customers and suppliers.45 Within SATCOMs, 
most respondents consider that, from a demand side perspective, further 
segm entations between (i) narrowband SATCOMs, (ii) wideband SATCOMs and 
(iii) protected SATCOMs are should be considered due to limited substitutability for 
customers.46 However, the results of the market investigation are not conclusive as to 
whether, from the  supply side perspective, the market for the supply of SATCOMs 
should be further segmented.  
(66) Based on the assessment laid down in paragraphs (60) to (65), the Commission 
considers it appropriate to define separate product markets for the production and 
supply of , respectively,  military airborne radios, military ground radios, mili tary data 
links and SATCOMs.  The Commission concludes that , for the purposes of the 
present D ecision, no further segmentation of said markets is necessary , as the 
conclusion  would remain the same , though a possible differentiation of military 
airborne radi os by frequency band will be taken into account in the competitive 
assessment . 
5.3. EO/IR sensors  
5.3.1.  Introduction  
(67) Electro -optical and i nfra-red sensors (“EO/IR sensors”)  are devices that convert 
light, changes thereof, or changes of its infrared radiation, into an  electrical signal. 
These devices are installed on certain equipment  used by military forces, law 
enforcement personnel, and other government and industry operators  and allow users 
to identify and track objects, conduct threat assessments, assess intent, a nd, in some 
cases, provide laser targeting for guided precision munitions.  
(68) EO/IR sensors working principle is based on measuring the light that is reflected by 
an object or, in the absence of light, on measuring the infrared radiation emitted by a 
heated object (such as a building,  an engines, a person, or an animal ).  
(69) EO/IR sensors can be classified according to different criteria. The most common 
ways to classify them is according to their technical c haracteristics and to the 
intended use.  
(70) From a technical characteristic point of view, EO/IR sensors can be classified 
according to their range  of use , i.e. according to the distance within which an object 
can be detected by the sensor. In this respect, E O/IR sensors can be classified as 
low-, mid - and long -range.  
(71) From an end -use point of view, EO/IR sensors can be classified according to the 
intended mission of the aircraft where they are installed. In this respect, EO/IR 
                                                 
45  Questionnaire to s uppliers of military equipment  Q1, questions 53 and 54.  
46  Questionnaire to s uppliers of military equipment  Q1, question 55.  
 
 
15 sensors  can be classified as for targeting,  for reconnaissance  and for surveillance 
missions. While the objective of a targeting mission is to detect , identif y, and track a 
certain target in sufficient detail in order to, for example,  permit the effective 
delivery of a guided munition , a surveillance mission involve s the persistent and 
systematic observation of an already known and usually static point of interest for an 
extended period of time. Compared to a surveillance mission, a r econnaissance 
mission involve s broader intelligence gath ering, covering multiple points of interest 
in a limited period of time .47  
(72) In terms of integration into an aircraft, EO/IR sensors can be podded on or embedded 
in the aircraft. For illustration purposes, Figure 6 shows two different EO/IR sensors 
podded in the Dassault ’s jet fighter named Rafale.  
Figure 6: Dassault’s Rafale jet fighter carrying a podded EO/IR sensor  for 
reconnaissance (left) and a podded EO/IR sensor for targeting (right)  
 
Source: Form CO, Chapter B, figure 1.  
5.3.2.  The Notifying Party’s view  
(73) According to the Notifying Party, EO/IR sensors  of long-, mid -, and short -range 
should be considered as separate product markets , due to limited demand - and 
supply -side substitutability .48  
(74) From a demand -side view point, the Notifying Party argues that customers cannot 
substitute sensors of different ranges because: (i) EO/IR s ensors of different ranges 
are not substitutable for the same application ; (ii) EO/IR sensors of different ranges 
generally are not mounted on the same types of platform ; (iii) EO/IR sensors of 
different ranges are procured by distinct customer groups  because long -range EO/IR 
sensors tend to be purchased by the final customer, whereas short - and mid -range 
EO/IR sensors are typically purchased by OEMs . The Notifying Party also claims 
that the strong price difference between short -, medium - and long -range EO/IR 
sensors is an indication of the lack of demand -side substitutability.  
(75) From a supply -side view point, the Notifying Party considers that no substitutability 
between long -, mid -, and short -range sensors  exist because: (i) EO/IR s ensors of 
                                                 
47  Form CO, Chapter B, para. 8.  
48  Form CO, Chapter B, paras. 34 -62. 

 
 
16 different ranges require different production processes  and technologies and are 
typicall y manufactured in different production lines; (ii) s uppliers active in one 
category of EO/IR sensors cannot easily enter other segments  because they would 
require to develop new technologies, to procure different materials, to establish new 
production faci lities and to develop commercial relationships with different customer 
groups. According to the Notifying Party, the lack of supply -side substitutability is 
confirmed by the fact that most manufacturers of short -range EO/IR sensors are not 
active in mid - or long -range EO/IR sensors.  
(76) The Notifying Party considers that a market segmentation by application s, as for 
example, by  targeting, reconnaissance and surveillance missions , would not be 
appropriate because it would include entirely different products in the same category 
(without reflecting differences in size, weight, range, coverage, and, ultimately, their 
prices ).49  
(77) With respect to a possible distinction between podded and integrated EO/IR sensors, 
the Notifying Party considers that these two types of EO/IR sensors do not belong to 
separate product markets because they have the sam e capabilities and applications 
and often compete with each other.50  
5.3.3.  The Commission’s precedents  
(78) In a previous decision,51 the Commission considered electro -optic systems as “ active 
or passive systems used in military applications such as targeting, fire control or 
surveillance ”. Due to limited supply -side substitutability, and a lack of demand -side 
substitutability, the Commission considered electro -optic systems as distinct m arket s 
“as they are conceived, designed and manufactured according to the very specific 
requirements of the applications they serve ”.  
(79) With respect to possible segmentations of EO/IR sensors, i n a more recent 
decision,52 the Commission considered that the s upply and demand landscapes are 
not necessarily the same for all EO/IR products , and therefore the segment of 
“sights” where a vertical relationship arose from that transaction, may constitute a 
distinct relevant market separate from other optronics equipm ent. Ultimately, the 
Commission left  the market definition open because  no competition concerns arose 
irrespective of the exact product market definition.  
5.3.4.  The Commission’s assessment  
(80) The market investigation indicates that the Notifying Party’s proposed pr oduct 
market segmentation by range of EO/IR sensors, that is to say EO/IR sensors with 
short -, mid -, and long -range , reflects market conditions in terms of, for example, 
product characteristics, applications and prices . However, alternative market 
segmenta tions have also been suggested by respondents  to the market investigation. 
In any event , as explained below,  the exact product market definition can ultimately 
be left open because no competition concern would arise as a result of the 
Transaction, irrespec tively of the exact product market definition.  
                                                 
49  Form CO, Chapter B, paras. 38 -40. 
50  Form CO, Chapter B, paras. 50-51. 
51  M.3649 – Finmeccanica/BAES Avionics & Communications , paragraphs 9 –10. 
52  M.8425 – Safran/Zodiac Aerospace , paragraph 257.  
 
 
17 (81) First, with respect to demand -side substitutability, the market investigation confirm s 
the Notifying Party’s claim that customers have limited possibilities of substitution 
among  EO/IR sensors wi th short -, mid-, and long -range.  
(82) In particular, a  large majority of the suppliers of military equipment that replied to 
the market investigation agree with the Notifying Party’s view that short -, mid -, and 
long-range EO/IR sensors should be considered to constitute s eparate product 
markets due to limited substitutability for customers in terms of, e.g., product 
characteristics, applications and prices.53  
(83) However, the market investigation does not seem to confirm the Notifying Party’s 
claim that long -, mid - and short -range EO/IR sensors are typically mounted on 
different types of aircrafts .54 
(84) Second, with respect to supply -side substitutability, a  large majority of the suppliers 
of military equipment that replied to the market investigation agree  with the 
Notifying Party ’s view that  the production of long -, mid - and short -range sensors 
entail significantly different technical features, expertise and costs, therefore 
suggesting limited supply -side substitutability among these three types of EO/IR 
sensors.  
(85) One supplier man ufacturer also explained that ‘[a] supplier of sensors in one of 
these ranges cannot begin producing sensors in another range without making 
significant investments and engaging in substantial design efforts’ .55 While another 
manufacturer explained that ‘[t]he production of long -range sensors requires 
telephoto optics, high spatial stability, high sensitivity, and high resolution, which 
require very specialized skills and trigger much higher costs of production. On the 
other hand, short -range sensors require  much lower technology and expertise. The 
costs of production are  also much lower compared to long -range sensors’ .56 
(86) Third, notwithstanding the lack of demand - and supply -side substitutability for 
short -, mid -, and long -range EO/IR sensors, a majority of t he suppliers of military 
equipment that expressed a view in  the market investigation  considers that for 
assessing the  relevant competitive dynamics,  it may also be  appropriate to consider 
an alternative segmentation based for example on the type of mission they serve 
(e.g., surveillance, reconnaissance, targeting).57 In that respect, however, the 
Notifying Party has explained that there was a significant overlap between the 
segmentation by ranges and by mission types.58  
(87) Further, s ome of the suppliers of military equipment that repli ed to the market 
investigation suggested  other p ossible marke t segmentations. For example,  a 
prominent EEA -based defence contractor  indicated that ‘the relevant airborne 
product segmentation within EO/IR sensors is the destinat ion in terms of missions: - 
Targeting pods (delivering a laser guided ammunition from a fighter type aircraft); - 
                                                 
53  Questionnaire to suppliers of military equipment Q1, question 8.  
54  Questionnaire to suppliers of military equipment Q1, question  12. 
55  Questionnaire to suppliers of m ilitary equipment Q1, question 9.1. 
56  Questionnaire to suppliers of military equipment Q1, question 9.1.  
57  Questionnaire to suppliers of military equipment Q1, question s 10 and 11.  
58  Form CO, Chapter B, paras. 37-41.  
 
 
18 Reconnaissance pod; - Surveillance products (for UAVs and mission aircraft) ’.59 
Similarly, an OEM indicated that it ‘[…] segments EO/IR sensors differently due to 
their functionalities, but not on the ranges particularly ’.60 Another supplier of 
military equipment further explained that ‘[a]ll these applications [i.e. surveillance, 
reconnaissance, targeting] require different technical approaches. T arget tracking 
systems need much more accuracy, resolution, sightline spin rate than surveillance 
systems ’.61  
(88) With respect to a possible distinction between integrated and podded EO/IR sensors, 
a large majority of suppliers of military equipment, including  OEMs , confirmed the 
Notifying Party’s claim that embedded and podded EO/IR sensors can have the same 
capabilities and applications .62 However, a number of respondents also highlighted 
several differences between these two types of sensors, in terms of, e.g., 
performance, effects on aerodynamic and observability,  and space requirements , thus 
highlighting that the two types of sensors are not completely interchangeable.63  
(89) In conclusion, the market investigation appears  to confirm the Notifying Party’s 
claim that long -, mid -, and short -range EO/IR sensor s constitute three distinct 
product markets due to limited demand -side and supply -side substitutability. 
However, the market investigation also suggests that an alternati ve way of defining 
product markets for EO/IR sensors would be based on their final use, i.e. that the 
markets for EO/IR sensors for surveillance, for reconnaissance, and for targeting  
would constitute three distinct product markets. At the end though , while there might 
be some overlaps between a segmentation by ranges and by mission types, the exact 
product market definition can be left open because , as explained in Section 7.1.3  and 
for the purposes of this Decision , no competition concern would arise as a result of 
the Tra nsaction, irrespective  of whether  product markets are defined based on 
sensors range or based on final application . 
5.4. Precision guided munitions  (‘PGM s’) 
5.4.1.  Introduction  
(90) Innovation  in the field of military weapons and munitions increased exponentially 
during the 20th century driven by advances in technology. Basic projectiles and 
unguided missiles (known as rockets) developed into sophisticated guided syst ems, 
which are now commonplace today.  
(91) Modern day PGMs rely on sophisticated subsystems and components to strike their 
intended target. As a result , the number of aircrews and equipment in high -risk 
environments, in particular,  is considerably reduced. The  advent of PGMs resulted in 
the renaming of older unguided bombs as “dumb” or “gravity” bombs.  
(92) PGMs contain a number of subsystems and components. Each subsystem performs a 
particular function that allows the PGM to perform specific actions; e.g., propulsi on, 
flight, target identification, and detonation. The same subsystems and components 
                                                 
59  Questionnaire to suppliers of mi litary equipment Q1, question 8.1.  
60  Questionnaire to suppliers of military equipment Q1, question 8. 1.  
61  Questionnaire to suppliers of military equipment Q1, question 10.1  
62  Questionnaire to suppliers of mili tary equipment Q1, question 13.  
63  Questio nnaire to suppliers of military equipment Q1, question s 13.1 and 13.2.  
 
 
19 are used to provide the guidance capabilities to guided projectiles, guided bombs and 
guided missiles.  Additional subsystems and components are required for a guided 
missile to function i.e., propulsion systems.  The precise specifications of those 
subsystems and components may vary and be tailored to the specific mission 
purpose . 
Figure 7: General anatomy of a conventional guided missile . 
 
Source: Form CO, Chapter E, figure 1.  
(93) The exact combination of systems and components will vary depending on the type 
of PGM, and the mission -specific purpose it is intended for (e.g., a guided bomb or 
guided projectile would not contain a propulsion syste m). However, PGMs will 
generally include some or all of the following subsystems , as described by the 
Parties .64  
(a) Seeker: Acquires and tracks the target. The seeker is mounted at the head of 
the weapon and allows the weapon to detect energy; e.g., infrared or radar to 
help direct the weapon to its target. A GPS guided weapon may contain an 
infrared or radar seeker (referred to as multi -mode) but GPS guidance itself 
does not require a seeker and uses the GPS satellite constellation to provide 
position and vel ocity information to enable the weapon to strike its target.  
(b) Warhead: The energetic, explosive part of the weapon. There are a range of 
conventional warheads (blast, fragmentation, continues -rod, etc.) or 
alternatively a nuclear or chemical/biological warh ead could be used.  
(c) Fuze: Detects that the weapon is in the vicinity of the target and detonates a 
weapon’s warhead. The triggering functionality is normally based on 
engaging in contact with or close proximity to the target but can also be 
based on time, l aser functionality, etc. A safety and arming mechanism is 
built into the fuse to prevent premature detonation.  
(d) GPS Receiver: The receiver uses the GPS satellite constellation to provide 
position and velocity information to enable the weapon to strike its t arget.  
                                                 
64  Form CO, Chapter E, para 52.  

 
 
20 (e) Actuation System: Helps control the weapon’s flight. The actuation system 
controls the adjustable aerodynamic surfaces of the weapon to determine its 
flight path. The weapon’s fins or thrust vector move in response to steering 
commands from the flig ht computer to steer the weapon.  
(f) The IMU measures the weapon’s rotation, angular rate, and 
acceleration/force.  
(g) Propulsion System: Provides the required initial thrust to enable the weapon 
to fly with sufficient velocity to reach the target. Various technol ogies can be 
used in the propulsion system of a weapon, e.g., solid rocket motors, ramjets, 
turbojets, etc.  
(94) In addition to the main systems and components described above, other components 
may be necessary depending on the type of PGM and its mission -speci fic purpose.  
5.4.2.  The Notifying Party’s view  
(95) The Parties define three criteria  that drive the segmentation of the  weapons market  
‘There are three common ways to distinguish between military weapons: (i) the 
warhead; (ii) whether the weapon is self -propelled or not; and (iii) whether it uses a 
guidance system ’65.  
(96) The Parties view on the market segmentation is the following: ‘The Parties consider 
that it is likely appropriate to segment the weapons market between: (i) bombs; 
(ii) projectiles; (iii) rockets; and (i v) missiles. The Parties do not consider it 
necessary to segment these further. ’66 
(97) With regards to PGMs , more specifically , the Parties distinguish three different 
markets:  
(a) Guided Bombs : A bomb is typically deployed by an aircraft and uses only 
gravity to f ind its target. As with projectiles, technological advances now 
enable bombs to include guidance systems and other components that 
increase the accuracy of their strike rate. These are referred to as guided 
bombs. Guided bombs differ from guided missiles i n that they do not contain 
any propulsion technology.  
(b) Guided Projectiles : Projectiles, also referred to as shells, are non -self-
propelled airborne explosive devices fired from a separate object (gun) with 
force.  As technology has evolved, projectiles have become more 
sophisticated and now commonly contain additional guidance systems or 
components that increase the accuracy of their strike. Guided projectiles 
differ from guided missiles in that they do not contain their own propulsion 
technology but rely on the force from the  propellant platform . 
(c) Guided Missiles : Guided missiles are powered by jet or rocket propulsion 
and rely on a guidance system, which has the ability to change course mid -air 
and direct the missile to a precise target. This minimizes collat eral damage, 
                                                 
65  Form CO, Chapter E, para 7.  
66 Form CO, Chapter E, para 34.  
 
 
21 increases the effectiveness of the strike and creates fewer risks for the person 
and/or equipment deploying the missile. Guided missiles are also referred to 
as precision missiles.   
(98) Considering specifically guided missiles , the Parties specify that that they are 
designed or adapted for specific operational purposes, primarily:  
(a) Surface -to-surface missiles, launched from the land (or from a ship) to strike 
targets located elsewhere on land or sea;  
(b) Air-to-surface missiles, laun ched from aircraft to strike targets on land or at 
sea; 
(c) Surface -to-air missiles, launched from land (or from a ship) to strike targets 
in the air;  
(d) Air-to-air missiles, launched from aircraft to strike targets in the air.  
(99) The Parties do not consider the poi nt of origin or destination as a relevant 
segmentation. ‘The Parties consider that all guided missiles should be considered 
part of the same product market irrespective of their point of origin and destination. 
Guided missiles are designed or adapted for s pecific operational purposes. The 
point of origin and destination of a missile are largely immaterial for the majority of 
missiles. ’67 The Parties state that even if, at conception, a guided missile is typically 
designed for a specific launch platform, base d on the needs of the customer  it is 
common for guided missiles to be subsequently adapted for other launch platforms . 
Raytheon gives example s of guided missile product that can be used across different 
launch platforms. ‘ For example, the AIM -9X Sidewinder  may be operated as an air -
to-air, air -to-surface and surface -to-air missile,14 and the AMRAAM (Advanced 
Medium -Range Air -to-Air Missile) has also been adapted for use as a surface -to-air 
interceptor missile, where it is the baseline weapon on the NASAMSTM  launcher. ’68 
There are numerous guided missiles that span categories based on point of origin and 
destination as described in Figure 8 below.  
                                                 
67  Form CO, Chapter E, para 36.  
68  Form CO, Chapter E, para 36.  
 
 
22 Figure 8: Selected Examples of Raytheon Missiles Spanning Categories of Point of 
Origin and Destination  
 
Source: Form CO, Chapter E, Table 1.  
(100)  The Parties consi der that the traditional “strategic” versus “tactical” distinction  is not 
anymore relevant with t echnological advancements blurring the segmentation. 
Strategic missiles are , historically,  weapons designed to strike targets far beyond the 
battle area wherea s tactical missiles are intended for battlefield use  or shorter range 
and usually employ conventional warheads . Raytheon , to substantiate the irrelevance 
of this segmentation,  gives example of guided missile product that would be 
qualified as “tactical” that can now be fired from much further distances with greater 
accuracy . ‘For example, Raytheon’s Tomahawk cruise missile is designed to be 
launched at long range away from the battlefield and to strike distant targets 
(previously considered a “strategic” ca pability) but with a conventional high 
explosive warhead (previously considered “tactical”). They are guided missiles that 
follow a controlled, non -ballistic profile to remain within the Earth’s atmosphere 
during flight but have the range of a strategic mi ssile. ’69 
5.4.3.  The Commission’s precedents  
(101)  The Commission has not previously assessed the relevant product market for 
projectiles and bombs. The Commission has previously assessed the relevant product 
                                                 
69  Form CO, Chapter E, para  35. 

 
 
23 market for guided weapons and guided weapons systems (herein also referred to as 
“guided missiles”), competition for which takes place at the prime contract level.70 
In particular, t he Commission has previously distinguished between “strategic” and 
“tactical” guided weapons.  
(102)  In Roxe l/Protac  the Commission stated ‘ [t]actical missiles are used for specific, 
geographically limited actions, either to protect territorial property against the 
threat of attack (e.g., from tanks, planes or ships) or to dispose of enemy capacity in 
destroying or damaging its infrastructure. Ta ctical weapons typically carry a 
conventional high explosive warhead. Strategic missiles, on the other hand, are 
dedicated to State defense and typically have a longer range and greater destruction 
capabilities than tactical missiles. The decision to emplo y strategic missiles is 
generally reserved to the highest levels whereas the decision to use tactical missiles 
is normally made by commanders in the field. ’71 In Airbus/Safra n/JV, the 
Commission described ‘ [m]issiles are guided weapons carrying either a hig h 
explosive (tactical missiles) or a nuclear (strategic missiles) warhead. ’72 
(103)  Most recently, in Safran/Zodiac Aerospace , the Commission stat ed that strategic 
missiles are ‘ dedicated to critical state defense applications. They have a long range 
and great de struction capabilities relying on nuclear warheads ’ whereas tactical 
missiles have historically been used for ‘specific geographically limited actions to 
protect against the threat of attack or to destroy the enemy infrastructure or 
capacity ’.73 
(104)  Further, th e Com mission previously stated that ‘ tactical missiles can be classified 
according to functionality and products characteristics such as their point of origin 
and destination (e.g., air -to-air, surface -to-air/land, surface -to-air/naval, air -to-
surface, ant i-ships and anti -tanks) and range (very short range, short range, medium 
range and long range), ’ but ultimately left the exact product market definition 
open.74 
5.4.4.  The Commission’s assessment  
(105)  The results of the market investigation reveal that the Notifying Pa rty’s proposed 
product market segmentation by type of weapon, that is to say bombs, projectiles 
and missiles, reflects market conditions in terms of  product characteristics, 
applications and prices . However, alternative market segmentations have also been 
suggested by respondents  to the market investigation. In any event, a s explained 
below, the exact product market definition can ultimately be left open because no 
competition concern arise as a result of the Transaction, irrespectively of the exact 
product  market definition.  
(106)  First, with respect to demand -side substitutability, the market investigation confirm s 
the Notifying Party’s claim that customers have limited possibilities of substitution 
among bombs, projectiles and missiles.  
                                                 
70  COMP/M.7353 – Airbus/Safran/JV , paragraph 496.  
71 COMP/M.5032 – Roxel/Protac , footnote. 5.  
72  COMP/M.7353 – Airbus/Safran/JV , paragraph 495.  
73  COMP/M.8425 – Safran/Zodiac Aerospace , paragraph 249.  
74 COMP/M.8425 – Safran/Zodiac Aerospace , para. 250; COMP/M.5032 – Roxel/Protac , para. 14; 
COMP/M.1745 – EADS , para. 122; and COMP/M.4653 – MBDA/Bayern -Chemie , para. 17.  
 
 
24 (107)  A large majority of the  suppliers of military equipment that replied to the market 
investigation agree with the Notifying Party’s view that bombs, projectiles and 
missiles constitute separate product markets due to limited substitutability for 
customers in terms of, e.g., produc t characteristics, applications and prices.75 As 
described by a market participant: ‘ The capabilities and market pricing associated 
with each product market would be different. Customers would look at each 
category independently. For example, if they wished  to purchase a bomb, they would 
purchase one, it would not be substituted for a projectile or missile. ’76 
(108)  Second, with respect to supply -side substitutability, a large majority of the suppliers 
of military equipment that replied to the market investigation agree that the 
production of bombs, projectiles and missiles  entail significantly different technical 
features, expertise and costs.  
(109)  One supplier manufacturer also explained that ‘Cost – the price of bombs is 
significantly lower; and Technical features – the capability of each will differ. For 
example, a bomb could be dropped on an intended target from above. However, a 
missile would contain other key technical features such as an engine to ensure that  it 
could travel to its intended target. ’.77 While anothe r manufacturer explained that 
‘[v]ery specific knowhow and technical/engineering experience required for each of 
the niches .’78 
(110)  Third, s ome of the suppliers of military equipment that repli ed to the market 
investigation suggested  alternative  market segmenta tions. For example  a 
segmentation based on the distinction between tactical and strategic missiles. A 
majority of the respondents to the market investigation considered that is it 
appropriate to consider that tactical missiles (used for specific, geographi cally 
limited actions) and strategic missiles (dedicated to state defence with longer range 
and greater destruction capabilities) constitute separate product markets due to 
limited substitutability for customers in terms o f, e.g., product characteristics, 
applications and prices .79 A military equipment supplier explains: ‘ There is no 
substitution in product application between tactical and strategic systems. They 
perform different functions. Strategic systems also tend to be extremely expensive 
systems given  their massive size and other attributes, such as nuclear warheads. ’80 
(111)  With respect to supply -side substitutability, a large majority of the suppliers of 
military equipment that replied to the market investigation agree that  - bombs, 
projectiles and missile s entail significantly different technical features, expertise and 
costs.81 A market participant describes the difference in facilities able to produce the 
tactical and strategic missiles: ‘ The manufacture of strategic missiles requires 
different types of facilities and capabilities than the manufacture of tactical missiles. 
Strategic missiles are much larger weapons systems, so the equipment needed to 
handle and manufacture systems of that s ize is different in scale than that needed for 
                                                 
75  Questionnaire to suppliers of military equipment Q1, question 126. 
76  Questionnaire to suppliers of military equipment Q1, qu estion 126.1 . 
77  Questionnaire to suppliers of military equipment Q1, question 127.1 . 
78  Questionnaire to suppliers of military equipment Q1, question 127.1. 
79  Questionnaire to suppliers of military equipment Q1, question 130. 
80  Questionnaire to suppliers of military equipment Q1, question 130.1 . 
81  Questionnaire to suppliers of military equipment Q1, question 131. 
 
 
25 manufacturing tactical missiles. ’82 The market investigation further substantiate the 
absence of supply -side substitutability with a majority of the market participants 
confirming the inability for a company th at produces either strategic missiles or 
tactical missiles, to start producing the other type of missiles without having to incur 
major investments and within a short timeframe (based on industry standards)83. 
(112)  With respect to a possible distinction  based on  point of origin and destination , the 
market investigation provides mixed results. Some market participants responded 
that is it necessary to consider further segmentations within tactical missiles based 
on their point of origin and destination (air -to-air, surface -to-air/land, surface -to-
air/naval, air -to-surface).  A military equipment supplier explains that ‘ [t]he different 
mission sets lead to specific missile designs that make it difficult to be 
interchangeable. For example, an air -to-air missile may ha ve a much higher end 
propulsion or seeker solution compared to an air -to-surface missile intended for 
stationary targets .’84 Other market participant claim that this further segmentation of 
the market is not relevant arguing that ‘ [o]verall, the same class of products and 
technologies is currently used for the different applications .’85 
(113)  In conclusion, the market investigation confirm s the Notifying Party’s claim that the 
markets for bombs, projectiles and missiles constitute distinct product markets due to 
limited demand -side and supply -side substitutability. However, the market 
investigation also suggests that a further segmentation of product markets 
specifically for missiles could be based on their final use, i.e. that strategic and 
tactical missiles would constitute distinct product markets . At the end, though , the 
exact product market definition can be left open because no competition concern 
would arise as a result of the Tra nsaction, irrespective  of whether  product markets 
are defined based on the type o f PGM, or based on their final use . 
5.5. Actuation systems  
5.5.1.  Introduction  
(114)  As described in paragraph (93), PGMs contain a number of subsystems and 
components. Each subsystem performs a particular function that allows the PGM to 
perform specific actions.  
(115)  Actuation System s help  control the weapon’s flight. The actuation system controls 
the adjustable aerodynamic  surfaces of the weapon to determine its flight path. The 
weapon’s fins or thrust vector move in response to steering commands from the 
flight computer to steer the weapon.  
(116)  There are two main types of PGM actuation systems: (i) thrust vector -based 
actuatio n systems (‘TVA ’); and (ii) fin -based actuation systems. While there are 
limited other types of actuation systems, TVA and fin -based are used for the vast 
majority of PGMs.  
                                                 
82  Questionnaire to suppliers of military equipment Q1, question 131.1.  
83  Questionnaire to suppliers of military equ ipment Q1, question 132.  
84  Questionnaire to suppliers of military equipment Q1, question 133.1.  
85  Questionnaire to suppliers of military equipment Q1, question 13 3.1. 
 
 
26 (117)  TVA typically relies on engines or thrust nozzles to change the weapon’s trajectory , 
and is therefore used only if the weapon is self -propelled (i.e., guided missiles). In 
general, the technology, components, and production costs for TVA systems are 
significantly higher than fin -based solutions. TVA systems are typically used on 
higher -end guided missile systems, and in particular, are required for systems which 
fly at very high altitudes where the atmosphere is too thin for a guided missile’s 
actuation fins to be effective. TVA is becoming more common with the increasing 
development of g uided missiles which exit the Earth’s atmosphere.  
(118)  Fin-based actuation systems use control surfaces (i.e., fins) to alter the flight path of 
a PGM, in the same way as a conventional commercial aircraft. The fins use air 
resistance to guide the PGM, and need  only be small because tiny movements are 
capable of having a directional impact when the PGM is travelling at high speed. 
Due to the reliance on air resistance, fin -based actuation systems must have adequate 
air density and require airflow across the surf ace to maintain the necessary control 
authority. For this reason, they are inoperable in low air density or exoatmospheric 
conditions.   
5.5.2.  The Notifying Party’s view  
(119)  The Parties consider that fin -based actuation systems are suitable for a vast majority 
of the  lower end missile systems but are not applicable to guided bombs or guided 
projectiles while TVA is most commonly used in strategic and high -end tactical 
guided missiles. Although the underlying actuation technology is consistent across 
multiple PGMs, eac h system is tailored to the specific application. In contrast to fin -
based actuation systems, the Parties are not aware of TVA systems being used 
interchangeably across multiple PGMs.  
(120)  Therefore the Parties consider it may also be appropriate to segment th e relevant 
product market for PGM actuation systems between: (i) TVA, and (ii) fin -based 
actuation systems.  
5.5.3.  The Commission’s precedents  
(121)  The Commission has previously decided that guided missile actuation systems 
constit ute a separate product market.86 
(122)  The C ommission’s market investigations into these products have previously 
suggested a potential delineation between fin -based actuation systems and TVA 
systems: ‘In fin -based missiles, the actuation system controls the position of 
aerodynamic fins in response to steering commands from the flight computer, while 
the actuation system in thrust vector control missiles steers the missile by moving the 
missile engine’s exhaust nozzle and thereby changing the direction of the thrust 
coming from the engine. Thrust vec tor control is used for ballistic missiles (missiles 
that fly outside the atmosphere) since aerodynamic control surfaces (movable fins) 
are ineffective for ballistic missiles that fly outside the atmosphere ’.87 
                                                 
86  COMP/M.6410 – UTC/Goodrich , para. 92; COMP/M.2892 – Goodrich/TRW Aeronautical Syst ems 
Group , paras. 6 and 7.  
87  COMP/M.6410 – UTC/Goodrich , para. 99.  
 
 
27 5.5.4.  The Commission’s assessment  
(123)  The market investi gation indicates that a market segmentation distinguishing TVA 
and fin -based actuation systems for PGMs reflects market conditions in terms of, 
e.g., product characteristics, applications and prices . In any event, t he exact product 
market definition can ul timately be left open because no competition concern would 
arise as a result of the Transaction, irrespectively of the exact product market 
definition.  
(124)  First, with respect to demand -side substitutability, a majority of the suppliers of 
military equipment that replied to the market investigation agree with the view that it 
is appropriate to consider that thrust vector -based (TVA) and fin -based actuation 
systems for PGMs constitute separate product markets due to limited substitutability 
for customers in ter ms of, e.g., product characteristics, applications and prices.88  
(125)  As described by a market participant, ‘ [a]s is the case with many other aspects of 
precision guided munitions, the application and environment in which a missile will 
operate will drive the s election of the guidance system to be used. If the operating 
parameters call for a TVA, then the missile provider cannot use a fin -based guidance 
setup, and vice versa .’89 
(126)  Second, with respect to supply -side substitutability, a large majority of the supplie rs 
of military equipment that replied to the market investigation agree that the 
production of TVA and fin -based actuation systems for PGMs entail significantly 
different technical features, expertise and costs.90 A market participant explains that 
‘[t]he m aterials, technology and complexity can be significantly different between 
these two systems. ’91. 
(127)  The absence of substitutability and the inability to switch between TVA and fin 
based actuators is also explained by a market participant ‘ The choice between TVA 
and fin -based actuation is done at the beginning of the programme. The switch from 
one solution to another solution is likely not to be a realistic option ’92. 
(128)  In conclusion, the market investigation confirm s that TVA and fin -based actuation 
systems  constitute distinct product markets due to the limited demand -side and 
supply -side substitutability. At the end, though, t he exact product market definition 
can be left open because no competition concern would arise as a result of the 
Transaction, irresp ectively if product markets are defined based on the type of 
actuators, or not . 
5.6. IMUs  
5.6.1.  Introduction  
(129)  An IMU  is an electronic device that measures and reports how specific forces cause 
a body to change its vector. The IMU works from within a PGM’s control syst ems 
                                                 
88  Questionnaire to suppliers of military equipment Q1, question 141. 
89  Questionnaire to suppliers of military equipment Q1, question 141.1 . 
90  Questionnaire to suppliers of military equi pment Q1, question 142. 
91  Questionnaire to suppliers of military equipment Q1, question 142.1 .  
92  Questionnaire to suppliers of military equipment Q1, question 142.2 .  
 
 
28 where gyroscopes and accelerometers measure the PGM’s rotation and angular rate 
in relation to a fixed point and to control the PGM’s velocity and flight path. The 
IMU system communicates these measurements to the PGM’s guidance and control 
systems.  
5.6.2.  The Notifying Party’s view  
(130)  The Parties submit that the relevant product market for IMUs should be segmented 
by grade: (i) high performance navigation grade IMUs, (ii) lower performance 
tactical grade IMUs, and (iii) consumer grade IMUs.93 
(131)  The Parties argue th at IMU products across these three categories are generally not 
interchangeable. This is based on the fact that a  customer’s product selection is 
based on the specific performance and cost requirements. Therefore, s witching to a 
navigation grade IMU where this is not functionally required would be cost 
prohibitive. Alternatively, switching to a tactical grade IMU for an aircraft or long 
range guided missile application would not be possible as it would be unable to 
achieve the required operational performan ce level.  
(132)  More specifically for PGMs, n avigation grade systems for aircraft and cruise 
missiles op erate over long periods of time,  must provide highly accurate information  
and use much more sophisticated components . By contrast, other types of PGM have 
much shorter flight times  and ground vehicles operate at much lower speeds so these 
applications are able to use lower performing tactical grade sensors  
(133)  For tactical IMUs , the Parties submit that  the relevant product market includes all 
tactical grade IMUs irrespective of their application (missiles, land vehicles, UAVs, 
etc.). UTC estimates that its market share in the overall market of tactical grade 
IMUs is lower than [20-30]%.  
5.6.3.  The Commission’ s precedents  
(134)  The Commission has previously considered there to be a separate product market for 
inertial guidance  systems within guided weapons.94 In other cases, the Commission 
has referred to separate markets for: (i) sensor avionics, and (ii) mission avi onics, 
itself further segmented into flight avionics and CNI avi onics.95 
5.6.4.  The Commission’s assessment  
(135)  The results of the market investigation indicate  that a market segmentation 
distinguishing lower end tactical IMUs from navigation IMUs systems for PGMs 
reflects market conditions in terms of, e.g., product characteristics, applications and 
prices . In any event, though, t he exact product market definition can ultimately be 
left open because no competition concern would arise as a result of the Transaction, 
irrespectively of the exact product market definition. Consumer grade IMUs are used 
in electronic s products  (smartphones use IMU sensors to determine movement ). The 
consumer grade sensor s price point  is no more than USD 1 per unit  and these sensors 
                                                 
93  Form CO, Chapter E, para 105. 
94  COMP/M.1745 – EADS , para. 126; COMP/M.797 – SAAB/Celsius, para. 19.  
95  COMP/M.3649 – Finmeccanica/BAES Avionics & Communications , para. 9; COMP/M.3735 – 
Finmeccanica/AMS , para. 9. 
 
 
29 are not used for PGMs . Therefore they are not considered in this section  and in the 
remaining of the Decision . 
(136)  First, with respect to demand -side substitutability, a large majority of the suppliers of 
military equipment that replied to the market investigation agr ee with the view that 
lower performance tactical grade IMUs (used in short -range PGMs, land vehicles, 
sensor stabilization, and low altitude tactical UAVs) constitute a product market 
separate from other IMUs  due to limited substitutability for customers i n terms of, 
e.g., product characteristics, applications and prices.96  
(137)  As described by a market participant, ‘ [l]ower performance tactical grade IMUs 
constitute a product market separate from other IMUs, due to the important 
difference in terms of performan ce. These IMUs are suited for low cost and short 
range PGMs. ’97 Another market participant explain s that ‘ Performance 
characteristics, complexity and price vary significantly between short range and 
longer range applications .’98 
(138)  Second, with respect to suppl y-side substitutability, a majority of the suppliers of 
military equipment that replied to the market investigation agree that the production 
of lower performance tactical grade IMUs and other IMUs for PGMs entail 
significantly different technical features , expertise and costs.99 A market participant 
explains that ‘ [t]he materials, technology and complexity can be significantly 
different between these two systems. ’100 
(139)  The absence of substitutability is mainly explained by the fact that it would not be 
economic ally viable to substitute one with another given the prices of IMUs is 
strongl y linked to their performance. As explained by a market participant ‘The price 
is a key parameter for the cost of operations and the IMU must be optimized to the 
use case require ment. ’101 Another  market participant confirms ‘ Performance drives 
cost at IMUs! ’102 
(140)  In conclusion, the market investigation seems to confirm that tactical IMUs  systems  
and other IMUs for PGMs constitute distinct product markets due to the limited 
demand -side a nd supply -side substitutability. At the end, t he exact product market 
definition can be left open because no competition concern would arise as a result of 
the Tra nsaction, irrespectively if product markets are defined based on the type of 
IMU , or not . 
5.7. ARINC  
(141)  As a matter of clarity , the ARINC network should be distinguished from ARINC 
standards.   
                                                 
96  Questionnaire to suppliers of military equipment Q1, question 143.  
97  Questionnaire to suppliers of military equipmen t Q1, question 143.1 . 
98  Questionnaire to suppliers of military equipment Q1, question 143.1 . 
99  Questionnaire to suppliers of military equipment Q1, question 142. 
100  Questionnaire to suppliers of military equipment Q1, question 142.1 . 
101  Questionnaire to suppliers of military equipment Q1, question 143.1 . 
102  Questionnaire to suppliers of military equipment Q1, question 143.1 . 
 
 
30 (142)  The ARINC network is a low -bandwidth air -to-ground and ground -to-ground 
communications network that is owned and operated by UTC. It is used 
predominantly by airlines to transfer data between aircraft and counterparties on the 
ground (e.g., between an airline’s operation centre, air traffic control, border control, 
and airline partners). Military aircraft may use ARINC to communicate with air 
traffic control or  operations centres while operating in commercial airspace, or – 
notably for VIP and maritime patrol aircraft – to transmit data or messages in 
support of their operations.  
(143)  ARINC standards are a set of communications standards for avionics, wiring, and 
other aircraft electronics. They are stewarded by SAE International, an independent 
industry body that is unrelated to UTC. An example of an ARINC standard is 
ARINC Specification 618, which defines the low -bandwidth ACARS protocol used 
to send short messages between aircraft and the ground.  
(144)  As described by t he Parties : ‘The ARINC and SITA networks use the traditional, low -
bandwidth Aircraft Communications Addressing and Reporting System (“ACARS”) 
protocol, first deployed in 1978. The ACARS protocol also allows  aircraft operators 
to transmit low -volume snapshot information on the aircraft status (akin to text 
messages), typically several times per flight, or repair messages in case of a 
component fault in flight .’103 
(145)  Only the ARINC network is controlled by UTC. It  shares the “ARINC” name with 
the ARINC standards because both the network and standards were previously under 
the umbrella of ARINC Incorporated, which UTC (then Rockwell Collins) acquired 
in 2013. As part of this acquisition, however, UTC transferred man agement of the 
ARINC standards to SAE International, precisely to preserve  independence and pre-
empt foreclosure . 
5.7.1.  The Notifying Party’s view  
(146)  The Notifying Party submits that there is a high degree of substitutability among 
datalink network services that re ly on different types of connectivity, including VHF 
and SATCOM as provided by ARINC and SITA. The Notifying Party explains that 
for safety and efficiency reasons, airlines generally have access to both ARINC and 
SITA networks.   
5.7.2.  The Commission’s precedents  
(147)  In UTC/Rockwell Collins ‘The results of the Commission's market investigation 
have shown that the majority of airlines consider the datalink services offered by 
ARINC and SITA to be interchangeable. The geographic coverage difference has 
nonetheless been singled out. In fact, while Rockwell Collins is the exclusive supplier 
of VHF in […], SITA is the exclusive supplier of VHF in […]. Nonetheless both 
airlines can provide coverage using other connectivity means. The majority of OEMs 
therefore considered tha t ARINC and SITA compete’ .104 
                                                 
103  Form CO, Chapter E, para 105. 
104  COMP/M.8 658 UTC/Rockwell Collins, paragraph 1 57. 
 
 
31 5.7.3.  The Commission’s assessment  
(148)  Market investigation shows that both ARINC and SITA are used as datalink network 
services  and that market participant consider that they are alternative providing a 
similar service. A market participant explains that ‘ [the company] considers that 
SITA is the alternative to ARINC ’105 and further specifies  that ‘the question refers to 
the role of ARINC as Communication Service Provider (CSP) for civil Datalink 
services. The same service is provided by SITA in Europe .'106 
(149)  In conclusion, the market investigation appears  to confirm that ARINC and SITA  are 
considered to offer alternative  datalink network  service s. However, the question of 
whether ARINC and SITA  constitute separate markets or belong to a single product 
market can be left open as the Transaction does not raise serious doubts regarding its 
compatibility with the internal market  under any of those segmentations . 
6. GEOGRAPHIC MARKET DEF INITION  
(150)  As explained in its Market Definition Notice, a relevant geographic market is the 
geographic area in which the conditions of competition are sufficiently 
homogeneous and which can be distinguished from neig hbouring areas because the 
conditions of competition are appreciably different in those area s.107 
6.1. The Notifying Party’s view  
(151)  The Notifying Party submits that  the relevant geographic market for military 
products is EEA -wide . In particular, the Notifying Party  submits that , although 
transportation costs represent a negligible share of the overall cost of the supply of 
military products, conditions of competition in the EEA are differentiated from those 
prevailing elsewhere (including in the US) for several reas ons.108  
(152)  First, the Notifying Party submits that some military products produced in the US are 
subject to ITAR or EAR restrictions and can only be exported t o the EEA subject to 
relevant U S legislation and/or authorization . Second, the Notifying Party argues  that 
the EEA feature s an autonomous legal regime for the international trade of military 
products , which do not apply to non -EEA suppliers . Third, according to the 
Notifying Party , EEA g overnments would typically have preferred long -established 
relationsh ips with local suppliers . Fourth, the leading suppliers to the EEA defence 
industry would be  distinct from the US-based manufacturers that typically supply the 
US DoD.   
(153)  In addition , the Notifying Party submits that, although some  early Commission 
decisions  concerning the defence industry defined national markets on the basis of  
national preferences of the monopsonistic buyers, a national geographic market 
definition is not instructive for purposes of th e assessment of the  Transaction . This 
would be because these Commission decisions tended to concern concentrations 
involving the incumbent supplier in a Member State  and the Parties are not 
                                                 
105  Questionnaire to suppliers of military equipment Q1, question 58.1. 
106  Questionnaire to suppliers of military equipment Q1, question 57.1. 
107  Commission Notice on the definition of the relevant market for the purposes of Community 
competition law (OJ C372,  9.12.1997, p.  5), paragraphs 8 and seq. and 28 and seq.  
108  Form CO, Chapters B, C, D and E.  
 
 
32 incumbent players in any Member State . Further, according to the Notifying Party, 
there would be a trend towards internat ionalization in the defence industry 
(partic ularly among EEA Member States).  
6.2. The Commission’s precedents  
(154)  In the past, the Commission has left open the possibility of defining  markets for 
specific military and defence applications on an EEA -wide or national  basis due to, 
e.g., the existence of specific government regulations (such export restrictions) or 
national security -related preferences for local supplier s.109 
6.3. The Commission’s assessment  
(155)  The results of the market investigation suggest that the geographic scope of the 
relevant product markets is EEA -wide. This is because , when asked at what 
geographical level EEA -based customers procure the relevant products,  none or very 
few respondents to the market investigation indicated that  EEA -based custom ers 
typically procure the relevant products at nation -wide level. Conversely, most 
respondents indicated that EEA -based customers typically procure the relevant 
products at EEA level and from the US.110 The geographic scope of the relevant 
product markets should thus reflect the fact that sales of defence equipment  in the 
EEA generally originate from EEA -based or US-based  suppliers.   
(156)  The market investigation has also revealed that the conditions of competition are not 
homogeneous in the EEA and in the US.  In particular,  relevant segments of  the US 
market are de facto  closed to EEA suppliers  of military equipment ,111 as it is difficult  
for EEA -based suppliers to be awarded  military projects in the US  unless they 
collaborate with US -based suppliers .  
(157)  The Commissio n therefore considers that the geographic market for all military  
equipment discussed in Section 7 below,  is EEA -wide  in scope.  
7. COMPETITIVE  ASSESSMENT  
(158)  Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess 
whether a proposed concentration would significantly impede effective competition 
in the internal market or in a substantial part of it, in particular through the creation 
or strengthening of a dominant position. In this respect, a merger can entail 
horizontal and/or non -horizontal effects.  
(159)  In this respect, horizontal effects are those deriving from a concentration where the 
undertakings concerned are actual or potential competitors of each other in one or 
more of the relevant markets concerned. The Commission appraises horiz ontal 
                                                 
109  COMP/M.8425 – Safran/Zodiac Aerospace , paragraph 300.  
110  Questionnaire to suppliers of military equipment Q1, question s 18, 60, 106 and 145.  
111  Minutes of a cal l with a EEA -based competitor, 30.09.2019.  
 
 
33 effects in accordance with the guidance set out in the Horizontal Merger 
Guidelines.112 
(160)  As regards non -horizontal effects, the Commission Non-Horizontal Merger 
Guidelines113 distinguish between the effects of vertical mergers , which inv olve 
companies ope rating at different levels of the supply chain , and of conglomerate 
mergers , which involve companies that are active in closely related markets.  
(161)  The Horizontal Merger Guidelines and the  Non-Horizontal Merger Guidelines 
distinguish between two main ways in  which mergers may significantly impede 
competition, namely non -coordinated or coordinated effects. The present section 
assesses successively whether the Transaction  is likely to raise horizontal, vertical or 
conglomerate  non-coordinated effects on the mar kets examined in Section  5 above.  
7.1. Horizontal non -coordinated effects  
7.1.1.  Military GPS receivers  
7.1.1.1.  Introduction  
(162)  Both UTC and Raytheon p roduce military P(Y) -code GPS receivers114 and are 
currently  being funded by the DoD t o develop military M -code GPS receivers.  […].  
(163)  Both UTC and Raytheon produce ASICs (chips) for use in their own military  GPS 
receiver cards . Raytheon also supplies ASICs to third parties, but UTC does n ot.115 
UTC produces military GPS receiver  cards for use in embedded systems or other 
circuitry (e.g., that does not require the interface or chassis provided by a navigation 
box) and for its own navigation boxes or those of third parties. Raytheon  produces 
military GPS receiver cards  for incorporation into its own navigation boxes but does 
not sell any receiver cards as stand -alone products to third parties.  Both UTC and 
Raytheon manufacture military navigation boxes that include receiver cards and use 
the US  GPS satellite constellation to sell them to third parties.  
(164)  For the purposes of the competitive assessment of the Transaction, military GPS 
receivers refer to military GPS receiver cards, including (i) those for use in 
embedded systems or other circuitry , and (ii) navigation boxes.  
(165)  The Commission assesses in the following section the impact of the combination of 
the Parties’ production and supply of military GPS receivers in the EEA.  
7.1.1.2.  Market structure  
(166)  According to the Parties, and apart from them, there are a number of suppliers of 
military GPS receivers in the EEA and worldwide. These include L3Harris, Trimble, 
Mayflower and Thales .  
                                                 
112  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of 
concentrations between undertakings (“Horizontal Merger Guidelines”), OJ C 31, 05.02,2014 . 
113  Guidelines on the assessment of non -horizontal mergers under the Council Regulation on the control 
of concentrations between undertakings (“Non-Horizontal Merger Guidelines”)  (2008/C 265/07).  
114  UTC also supplies  commercial GPS receiver s but Raytheon does not.  
115  Raytheon sells ASICs (chi ps) to third parties in the EEA.  Raytheon’s sales of ASICS in the EEA 
amounted to USD […], USD […] and USD […] in 2016, 2017 and 2018, respectively.  

 
 
35 (172)  According to the Notifying Party, the Transaction should not give rise to competitive 
concerns in the EEA in res pect of military GPS receivers  as post-Transaction the 
merged entity will remain constrained by several established DoD authorised 
competitors including L3Harris, Trimble and Mayflo wer.116  
(173)  However, in the EEA, the market shares of such  of alternative manufacturers of 
military GPS receivers remains well below the combined  market share of the Parties. 
In 2018, for instance, the market share of Trimble  and L3Harris only amounted 
to [10-20]% and [0-5]%, respectively.  In addition, it appears that in the past years  
Trimble ’s and L3Harris ’ market shares have declined . Moreover, as reported by the 
Notifying Party, Mayflower  [confidential insight into the Parties’ knowledge of the 
market ]. 
(174)  The Notifying Party further claims that, a s M-code GPS receivers are still in 
development and military Galileo receivers have not yet been fielded, current market 
shares  would essentially reflect sales of P(Y) -code GPS r eceivers, which are 
becoming obsole te, and likely overstate the Parties’ position going forward .117  
(175)  However, as also explained by the Notifying Party, the DoD has awarded funding 
only to three companies, including the Parties, to produce M -code GPS receivers for 
ground equipment, aviation, maritime  equipment, PGMs  and handheld 
applications .118 Thus, f ollowing the Transaction, only the merged entity and 
L3Harris would be receiving DoD funding to develop the future generation of GPS 
receivers. As a respondent to the market investigation pointed,  ‘it is difficult to 
predict as of now the market positions on M -code which can evolve during the next 
four years ’.119 Nonetheless, when M -Code GPS receivers will be operational, the 
market would be even more concentrated and the merged entity would likely b e in a 
similar dominant position as it is for P(Y) -code GPS r eceivers, if not more . 
Precisely, a market participant indicated that ‘ absent a remedy, the proposed 
transaction would eliminate competition for airborne, maritime and ground M -Code 
receivers ’ as ‘UTC and Raytheon are two of only three suppliers, along with 
L3Harris (…), developing new, congressionally mandated ASIC based M -Code 
receivers ’.120  
(176)  Moreover, c ontrary to what the Notifying Party argues , the results of the market 
investigation suggest tha t military Galileo  PRS receivers , when fully operational, 
will be a complementary, rather than a competing product in the EEA compared to  
military GPS receivers.121  
(177)  Lastly, the Notifying Party  claims that  the Parties’ customers (the DoD, prime 
contractors, etc.) are powerful, sophisticated entities that can – and do – determine 
competitive conditions  for military GPS receivers . Therefore, according to the 
Notifying Party , should the merged entity  attempt to increase its prices for military 
GPS receivers post-Transaction , the DoD could simply authorize more companies to 
                                                 
116  Form CO, Chapter D, para . 47. 
117  Form CO, Chapter D, paras. 49-51. 
118  Form CO, Chapter D , para. 20.  
119  Questionnaire to suppliers of mi litary equipment Q1, question 110.3.1.  
120  Letter from a market participant, 07.02.2020.  
121  Questionnaire to suppliers of mi litary equipment Q1, question 101.1. 
 
 
36 produce such products .122 For this, third  parties could  produce military GPS 
receivers using ASICs (sourced from the US) provided they have  US DoD 
authorization to do  so. 
(178)  In this regard, wher eas suppliers of GPS receivers pr oducing ASICs internally 
(e.g.,  the Parties, Trimble) appear  to compete with suppliers of GPS receivers 
sourcing ASICs externally (e.g., Thales) ,123 the latter are inherently dependent on the 
former.  Conversely , one market pa rticipant indicated that ‘ the price of ASICs (sold 
from GPS receivers producing ASICs internally to suppliers of GPS receivers 
sourcing ASICs externally) is regulated by the government ’.124  
(179)  In any event , for existing platforms, most customers  indicated during the market 
investigation that, when sourcing military GPS receivers, it is not possible to switch 
to an alternative supplier in a cost efficient and timely manner and without 
integration and interoperability constraints.125  
(180)  In particular, a respondent to  the market investigation explained that :126 ‘[s]witching 
to a new GPS receiver will require many changes to the platform to accommodate 
differences between the current and new GPS receivers, such as: power 
requirements, weight, physical volume (height / wid th), the precise timing of its 
processing and outputs, and many others ’. Therefore, ‘ [s]ystem integrators cannot 
simply “swap in” off -the-shelf receivers from alternative suppliers ’. The same 
market participant indicated that ‘ once a GPS receiver has been designed into a 
platform such as a missile, switching to an alternative supplier will be difficult, 
expensive and time consuming ’ and ‘ [i]n some cases, it may be impossible ’. 
(181)  In addition to the necessary changes for existing platforms, adding a new  supplie r 
generally implies costly and lengthy qualification processes. In this regard, one 
respondent to the market investigation indicated that there are ‘ significant costs and 
schedule impacts associated with qualifying a new source ’.127  
(182)  Overall, the Transaction  is likely to result in both direct and indirect effects in the 
EEA. In turn, the significant industry concentration resulting from the combination 
of the Parties’ activities raises serious doubts in relation to the supply of military 
GPS receivers.  
(183)  The T ransaction will give rise to direct anti -competitive effects  in the EEA as it is 
clear from the market investigation that the Parties are the two main suppliers of the 
core military GPS receiver technology in the EEA . Such technology constitutes 
critical i nput for a broad range of systems with ground, sea, airborne or weapon 
applications , as well as for competing suppliers of GPS receivers sourcing ASICs 
externally . Direct effects would primarily affect EEA -based OEMs acquiring 
military GPS receivers for th e manufacture of new military platforms (as there is no 
material competition for existing platforms) or PGMs .  
                                                 
122  Form CO, Chapter D, paras. 54 -55. 
123  Question naire to suppliers of mi litary equipment Q1, question 111.  
124  Questionnaire to suppliers of mi litary equipment Q1, question 111.1.  
125  Questionnaire to suppliers of mi litary equipment Q1, question 119.  
126  Questionnaire to suppliers of mi litary equipment Q1,  question 119.1.  
127  Questionnaire to suppliers of mi litary equipment Q1, question 119.1.  
 
 
37 (184)  In this regard, one market participant  expressed that the combination of the Parties’ 
capabilities in the supply of GPS receivers would result in  ‘fewer choices of supply 
for customers, a reduction in the incentive and ability to innovate, giving the 
customers fewer options, and less of a constraint on price increases ’.128 
(185)  Further to the direct anti -competitive effects of the Transaction in the suppl y of GPS 
receivers in the EEA, the merger between UTC and Raytheon will also give rise to 
indirect effects  in the EEA . Indirect effects would result from purchases by EEA 
armed forces of military platforms or PGMs containing military GPS receivers 
manufactured by US OEMs (through the FMS program or DCS ). One market 
participant indicated that ‘ European armed forces do rely on US platforms 
significantly, and increasingly so for some of them ’.129 In this regard, the results of 
the market investigation show that most armed forces generally procure military  
equipment “as a complete package” (with all systems/subsystems/components 
selected by the OEM/DoD)130 and that only exceptionally could they buy GPS 
receivers on a standalone basis.131 
(186)  The results of the market investigation suggest that the majority of the EEA armed 
forces consider it either possible or very likely that an increase  in the price of GPS 
receivers would typically be reflected in the price of the platform in question (and 
therefore “passed on” to the customers of such platform, i.e., armed forces).132 In this 
regard, the highly concentrated nature of the market at OEM lev el and the critical 
nature of GPS receivers in military platforms makes it more likely that any price 
increase of such products will be passed on to the acquirers of the platforms. 
Moreover, armed forces and OEMs would not have sufficient countervailing bu yer 
power to avoid it. Furthermore, a s one competitor expressed during the market 
investigation, GPS receivers are used every day by European armed forces and any 
supply -chain disruption would be “ highly catastrophic ”.133  
(187)  Based on the combined market shares  of the Parties and further qualitative evidence 
available to the Commission  as explained in this Section , the Commission concludes 
that the Transaction raises serious doubts as to its compatibility with the internal 
market due to the creation  or strengthe ning of a dominant position  in the supply of 
military GPS receivers in the EEA . 
7.1.2.  Military c ommunication systems  
7.1.2.1.  Introduction  
(188)  Both UTC and Raytheon supply military airborne radios, military  ground radios and 
military  data links devices in the EEA, either through the US FMS program or via 
DCS . The Parties integrate SATCOM capabilities in their military airborne radios 
but do not supply such systems as stand -alone systems.  
                                                 
128  Letter from a market participant, 21.10.2019.  
129  Minutes of a call with a market participant, 30.09.2019.  
130  Questionnaire to European (EEA) armed forces Q2, questi on 11.  
131  Questionnaire to European (EEA) armed forces Q2, question 19.  
132  Questionnaire to European (EEA) armed forces Q2, question 21.  
133  Questionnaire to suppliers of mi litary equipment Q1, question 119.1.  
 
 
38 (189)  UTC manufactures and supplies military airborne  radios operating at HF and 
VHF/UHF frequencies, certain of which include narrowband SATCOM 
capabilities .134 UTC provides military narrowband SATCOM capabilities integrated 
in its airborne radios  but does not supply stand -alone Narrowband SA TCOM for 
military  applications.135 In addition, UTC manufactures fixed HF and VHF/UHF 
ground radios  and a deployable VHF/UHF ground radio. Lastly, UTC produces  
military Link 16 SA data links  and owns the ARINC network .136 
(190)  Raytheon manufactures and supplies VHF/UH F military air borne  radios , certain of 
which include Narrowband SATCOM capabilities . Raytheon also manufactures and 
supplies military ground radios. However, according to the information made 
available to the Commission,137 it is Raytheon’s intention to exit the segment a nd it 
has ceased responding to tenders for  military  ground radios opportunities both 
globally and in the EEA . Moreover, Raytheon […]. Lastly, Raytheon produces  SA 
data links  that use SADL and EPLRS protocols138 (which cannot communicate 
direc tly with data links using more advanced protocols  such as Link 16 data links 
produced by UTC)  and it  manufactures and supplies military wideband SATCOM 
products.   
(191)  According to the Notifying Party, there are no affected markets in the area of 
military commu nication systems . 
(192)  The Commission assesses in section 7.1.2.3  the impact of the combination of the 
Parties’ production and supply of military airborne radios, militar y ground radios 
and data links in the  EEA.  
7.1.2.2.  Market structure  
(A) Military airborne radios  
(193)  Apart from the Parties, there are a number of suppliers of military airborne radios  in 
the EEA and the US . These include Thales , Leonardo, Rohde & Schwarz , Cobham 
and Viasat , among others.  
(194)  The Notifying Party submitted EEA estimated market  shares  for military airborne 
radios expressed in sales value of the Parties and their rivals.  Total sales include 
direct sales of military airborne radios made by US and EEA -based su ppliers to 
EEA -based OEMs and armed forces. EEA market shares provided by the Notifying 
Party cover the period 201 4 to 2018.  
(195)  Table 3 shows  the Parties’ and their competitors’ EEA market shares (value) in the 
supply of military air borne radios for 2014 to 2018  period . 
                                                 
134  UTC also supplies radios for civil applications , although Raytheon does not.  
135  UTC does not produce  military Wideband or protected SATCOM. UTC only produces stand -alone 
Wideband SATCOM transceiv ers for commercial applications.  
136  UTC produces and sells most of its data links through Data L ink Solutions (“DLS”), a joint venture 
formed with BAE Systems.  
137  Form CO, Chapter C, paras. 53 -56. 
138  Raytheon […]. 


 
 
41 military airborne radios in Europe is low and they  will remain far behind the market 
leaders in Europe . Second, the Notifying Party argues that  the Pa rties have not 
competed against each other for the supply of any military communication systems 
in the EEA within at least the last five years . Third, the Notifying Party argues that 
the Transaction would have no material effect on procurement for existing  
applications, as  competition for upgrades to existing platforms is limited . Fourth, 
according to the Notifying Party, competition for future opportunities is robust and 
market entry is likely. Lastly, sophisticated buyers for these products would have 
significant buyer power.  
(206)  According to the Parties’ estimates, their combined EEA market shares in  the supply 
of military airborne radios remained below 20% in the past years (2014 -2018). 
Moreover, there are at least three other EEA -based competitors with similar or 
higher market shares compared to the Parties, namely, Rohde & Schwarz , Thales  and 
Leona rdo. Rohde & Schwarz  and Thales  would seem to have particularly strong 
positions in the supply of military airborne radios in the EEA, with Rohde & 
Schwarz  holding near half of the sales value.  
(207)  Notwithstanding the above, in the US market for the supply of  military airborne 
radios, the combined market share of the Parties would remain well above 50%, at 
almost 70 %, with the next competitor, Northrop Grumman , with a fifth of the market 
share of the merged entity. Post -Transaction, the Parties would have a prevailing 
position in the US market for the supply of military airborne radios, being the only 
real supplier option for some US based OEMs. In this context, most respondents 
pointed to the fact that US based OEMs generally favour US based suppliers.141 
(208)  Indeed , although there are alternative EEA -based suppliers serving EEA -based 
OEMs with military airborne radios, the US market is de facto  closed to those EEA 
suppliers. As one competitor of the Parties has explained, ‘ it is impossible for 
European suppliers to be awarded projects for radio or other communication 
systems for US platforms ’.142 At the same time, EEA armed forces procure a variety 
of US military aircraft platforms via the FMS program or DCS. Consequently , it is 
likely that the Transaction  may result a t least in indirect harm to European armed 
forces , notably as they consider likely that an increase in the price of military 
airborne  radios would typically be reflected in the price of the platform in question 
(and therefore “passed on” to the customers o f such platform, i.e., armed forces).143 
In this regard, as for military GPS receivers, the highly concentrated nature of the 
market at OEM level and the critical nature of radios in military aircrafts makes it 
more likely that any price increase of such pro ducts will be passed on to the 
acquirers of the aircrafts. Moreover, armed forces and OEMs would not have 
sufficient countervailing buyer power to avoid it.  
(209)  Regarding the overall buyer power of customers of military airborne radios, one 
competitor of the P arties explained during the market investigation that ‘ [f]or small 
quantities the buyer power is very limited ’ and that ‘ [i]f the supplier base reduces 
buyer power will only be given to customers who order large quantities ’.144 With 
                                                 
141  Questionnaire to suppliers of mi litary equipment Q1, question 89 .3. 
142  Minutes of a call with a EEA -based competitor, 30.09.2019.  
143  Questionnaire to European (EEA) armed forces Q2, question 21.  
144  Questionnaire to suppliers of mi litary equipment Q1, q uestion 83. 
 
 
42 regard to existing platfo rms in particular, one respondent explained that ‘ [a]n 
aircraft integrator cannot simply “swap in” a radio from a new supplier without 
make other changes to the aircraft ’ and that ‘[t]he time and cost required to switch 
to a new supplier of airborne radios  depends on the platform and the degree of 
difference between the old and new radios ’.145 
(210)  In addition, the market investigation confirms that there has not been any new 
supplier of military radios to EEA -based customers  over the last five years and there 
are no alternative suppliers likely to start supplying military radios to EEA -based 
customers  in the coming future.146  
(211)  Therefore, with regard to military airborne radios,  it cannot be excluded that  the 
Transaction give s rise to indirect effects  in the EEA  that would result  from 
purchases by EEA armed forces of military platforms containing military airborne 
radios manufactured by US OEMs (through the FMS program or DCS).   
(212)  With regard to military ground radios, the combined market share of the Parties 
would rema in well below 20% in the EEA. In particular, UTC’s market share only 
amounts to [0-5]% at EEA level (period 2016 -2018), and it appears that Raytheon is 
no longer competing in the market. A number of alternative suppliers with higher 
market shares would com pete with the merged entity in the supply of military 
ground radios post -Transaction, including L3Harris , Rohde & Schwarz , Thales and 
Leonardo. Consequently, the Transaction does not raise serious doubts as to its 
compatibility with the internal market wit h regard to military ground radios.  
(213)  With regard to military data links, the combined market share of the Parties would 
remain below 20% in the EEA. Furthermore, the data links products offered by the 
Parties do not use the same protocols, as UTC’s data lin ks use the Link 16 NATO 
protocol and Raytheon’s data links use SADL and EPLRS protocols. A number of 
alternative suppliers would compete with the merged entity in the supply of data 
links post -Transaction, including L3Harris , EuroMIDS  and Viasat (at least 
EuroMIDS  and Viasat supply Link 16 data links). At EEA  level , 
EuroMIDS  ([50-60]%), L3Harris  ([10-20]%), Viasat  ([10-20]%) and 
TransDigm  ([5-10]%) would have larger market shares than the merged entity. 
Consequently, the Transaction does not raise serious doubts as to its compatibility 
with the internal market with regard to military data links.  
(214)  One market participant indicated that the Parties are the two primary Identification 
Friend -or-Foe (“IFF”) transponder manufacturers serving the US and two of the 
three major IFF transponder manufacturers in the EEA.147 IFF transponders  perform 
identification friend or foe functionality  and thus serve to determine whether  other 
platforms  are ally or enemy operated . According to this market participant, t he 
Transaction would effectively reduce the major players in the supply of IFF 
transponders.  However, according to the information provided by the Parties, UTC 
does not develop or supply such technology.148 The same market participant 
indicated that there is a potential ho rizontal concern as the Parties  have important 
                                                 
145  Questionnaire to suppliers of mi litary equipment Q1,  question 73 . 
146  Questionnaire to suppliers of mi litary equipment Q1, questions 84 and 85.  
147  Letter from a market participant, 21.10.2019.   
148  Form CO, Chapter C, para. 42.  


 
 
45 unchanged or would further reduce, because such a distinction would entail an 
narrower definition of the relevant markets.  
7.1.3.3.  The Commission’s assessment   
(229)  The Transaction gives  rise to a horizontal overlap  between  the activities of the 
Parties with regard to long-range EO/IR sensors  or EO/IR sensors for surveillance 
missions . However, the Transaction would result in  limited impact on the EEA 
markets for EO/IR sensors because the Parties’ EO/IR sensors are complemen tary in 
nature  and because , pre-Transaction, no close competition took place  between them . 
(230)  According to the Notifying Party, the overlap between the Parties’ activities in 
relation to EO/IR sensors is limited as UTC only supplies short - and long -range 
EO/IR sensors and Raytheon mainly supplies mid -range EO/IR sensors, and, to a 
limited extent, l ong-range EO/IR capabilities .153 Alternatively, UTC would only 
supply  EO/IR sensors for r econnaissance and surveillance  missions, while Raytheon 
would mainly supply EO/IR sensors for targeting missions.  
(231)  In this respect, Raytheon has only one product that includes  long-range EO/IR and 
surveillance functionalities , which is the EISS  sensor . According to the Notifying 
Party ,154 this product cannot be offered as a stand -alone EO/IR sensor, but is part of 
a sensor suite that has a synthetic -apertu re radar as its pri mary element. Further, the 
Notifying Party explains that Raytheon has never sold EISS to the EEA market, […].  
(232)  Therefore, although an overlap between the Parties exists in terms of products 
offering, no material overl ap in terms of sales occurred over  the period 2016 -2018 
because , […],155 […] at EEA -level [Raytheon] never sold any [long -range EO/IR]  
sensors at all.156 
(233)  According to the market shares estimates provided by the Notifying Party, UTC’s  
market share in the EEA amounts  only to [5-10]%. Table 7 also sho ws that in the 
EEA Thales had the largest sales in the period 2016 -2018, representing [70-80]% 
market share, followed by Rafael with a market share of [20-30]%.  
(234)  Therefore , the combination of the Parties’ capabilities in long -range EO/IR sensors 
will have no impact on the EEA  as pre-Transaction Raytheon has never sold any 
EISS sensor  in the EEA  […]. 
(235)  In addition , the market investigation has confirmed  that the Parties’ EO/IR sensor 
capabilities  are complementary.157 Thus, the Transaction  will result in the mer ged 
entity having a full range of sensor capabilities but this will not result in a direct 
and/or significant loss of competition. In this regard, whereas customers do 
sometimes procure different types of sensors together or as part of a suite of mission 
systems, other suppliers appear to be able to offer the same range of sensors .158  
                                                 
153  Form CO, Chapter B, Table 2. 
154  Form CO, Chapter B, paragraph 28.  
155  Form CO, Chapter B, paragraph 86.  
156  Form CO, Chapter B, paragraph 68.  
157  Questionnaire to suppliers of military equipment Q1, question  22. 
158   Questionnaire to suppliers of military equipment Q1, question  2. 
 
 
46 (236)  Furthermore , the majority of the respondents to the market investigation indicated 
that EEA -based customers would have sufficient alternative suppliers of EO/IR 
sensors availab le upon completion of the proposed acquisition of Raytheon by 
UTC.159  
(237)  Lastly, the majority of the Parties’ customers that expressed a view in the market 
investigation consider that the Transaction would not have any impact on their 
businesses with regard to  the supply of EO/IR sensors.160  
(238)  Based on the information available as explained in this section, the Commission 
concludes that  Transaction does not raise serious doubts as to its compatibility with 
the internal market with regard to EO/IR sensors . 
7.1.4.  Conclusi on on h orizontal non -coordinated effects  
(239)  In light of the considerations in section 7.1 and based on the results of the market 
investigation and on all the information available to it, the Commission concludes 
that the Concentration raises serious doubts as to its compatibility with internal 
market with respect to horizontal non -coordinated effects in the market s for the 
supply of military GPS receivers and military airborne radios. The Commission 
considers that the commitments offered by UTC as described in Section 8 are 
adequate and sufficient to eliminate any serious doubts as to the compatibility of the 
Transaction with the internal market in relation to  those markets .  
7.2. Vertical non -coordinated effects  
(240)  This section considers the following vertical re lationships: UTC's (upstream) 
manufacture and supply of:  
(a) GNSS receivers ; 
(b) actuation systems;  
(c) lower performance tactical grade IMUs ; 
(d) And the supply of ARINC certification for military equipment ; and  
(e) Raytheon’s (downstream) integration of these systems into PGMs.  
(241)  As shown in Table 4 below, the Transaction only results in one affected market in 
the EEA for the supply of GPS Receivers used in PGMs. In effect, UTC’s market 
shares in the upstream markets are negligible in the EEA and modest on a worldwide 
basis , with the exception of GPS receivers ( [30-40]% EEA and [40-50]% 
worldwide).  
(242)  Equally, Raytheon’s downstream market shares in the manufacture of PGMs are low 
in the EEA [5-10]% and modest worldwide [10-20]%. This picture holds true for the 
relevant individual narrower segments within PGMs. Raytheon’s estimated EEA and 
worldwide shares remains below 30% in all cases.  
                                                 
159  Questionnaire to suppliers of military equipment Q1, question  24. 
160  Questionnaire to suppliers of military equipment Q1, question  32. 


 
 
49 (254)  The specific components or subsystems that raised concerns are further assessed in 
the following sections.  
7.2.1.2.  Customer foreclosure ability: PGM  
(255)  A market participant mentioned that p ost-transaction, the merged entity  would have 
no incentive to source from alternative suppliers  (contrary to Raytheon pre -
transaction) , foreclosing UTCs competitors  from a significant part of the market  and 
reduction in incentives to innovate and develop products to the detriment of 
custom ers.  
(256)  First, Raytheon’s estimated market share for PGMs in the EEA is limited. In  2018 
Raytheon had an estimated market share for all PGMs of [5-10]% in the EEA and 
[10-20]% worldwide.  
(257)  Raytheon’s estimated EEA shares are also below 30% in the narrower segm ents 
within PGMs: [0-5]% for precision guided projectiles, [20-30]% for precision guided 
bombs and [0-5]% for precision guided missiles.  
(258)  Second, there are a number of competitors  producing PGMs, on both an EEA and a 
global basis, which suppliers could turn  to in order to frustrate a customer 
foreclosure strategy. These include MBDA (the largest guided missile prime 
contractor in Europe) and Lockheed Martin (the largest guided missile prime 
contractor globally) , as well as other smaller competitors.  
(259)  Third, f or existing contracts the ability to switch is limited. Cont racts between 
Raytheon and the customer (typically the U.S. Government) for a PGM will specify 
that a change in certain components (including GPS receivers) are classified as a 
‘Class 1’ change. A ll Class 1 changes require buyer approval prior to 
implementation. This reflects the importance of these components in the 
performance of PGMs. As such, Raytheon is not authorized to make this change 
without first submitting an engineering change proposal for prior customer approval. 
Raytheon is therefore not able to foreclose demand on any of its GPS receiver 
suppliers  
(260)  Fourth , more specifically on the components mentioned by the complainants such as 
IMUs and Actuators Raytheon’s spend on this components do es only provide limited 
downstream market power . As a result, it is unlikely that Raytheon is a sufficiently 
important customer to suppliers in the EEA to foreclose demand.  
7.2.2.  Upst ream components and subsystems   
7.2.2.1.  Introduction  
(261)  A market participant raised concer ns about the impact of the vertical integration on 
some components and subsystems for PGMs stating that ‘ Raytheon could become 
more competitive and aggressive downstream due to the vertical integration 
resulting from the transaction.  On this point, the Com pany believes that issues may 
potentially arise at the supply chain level as the new company resulting from the 
merger could stop supplying the Company, could do so at worse conditions, based 
on the influence that Raytheon could have on this activity .’ How ever the same 
market participant specifies that ‘ [o]n balance, however, the Company believes that 
 
 
50 the risks that may arise post -transaction are manageable. There are alternative 
suppliers [...]. ’165 
(262)  The coming sections will further assess the incentives and ability of the merged 
entity to engage into input foreclosure in components and subsystems for PGMs.  
7.2.2.2.  Input foreclosure ability: GPS Receivers  
(A) Description of the vertical relationship and market context  
(263)  The market structure of GPS receivers is further described in detail in section  7.1.1 . 
(264)  The Parties’ combined market share in the supply of military GPS receivers is 
particularly high and has constantly been above 5 0% for the past years.  
(265)  The Transaction results in a vertically affected market in the EEA – the supply of 
GPS r eceivers which are used in precision guided bombs, precision guided 
projectiles, and precision guided missiles.  
(266)  Both UTC and Raytheon produce P(Y )-code military GPS receivers. Both are also 
being funded by the DoD to develop M -code GPS receivers.  
(267)  In 2018, UTC generated military GPS receiver revenues of USD […] million, of 
which USD […] million were generated in the EEA. UTC supplies GPS receivers t o 
third parties, […], for incorporation into a range of different military applications.  
(268)  Raytheon produces military GPS receivers through its Space and Airborne Systems 
business unit. Raytheon has historically focused on the supply of GPS customized 
for high performance weapons. Raytheon’s military GPS receiver activity is 
vertically integrate d […], with approximately […]% of its GPS receiver production 
used internally ( […]% for Raytheon’s guided weapons alone). As well as sourcing 
internally, Raytheon purchases GPS receivers from various third parties, including 
UTC.  
(B) Commission assessment  
(269)  First Raytheon’s PGMs are predominantly sold to the U.S. Government, which 
controls the suppliers of GPS receivers. Some of Raytheon’s PGMs are sold to 
customers in the EEA through the FMS channels. Raytheon is unable to sell PGMs 
to any customer without DoD a pproval and the vast majority of its sales in PGM are 
made through FMS . The DoD therefore plays an important, if not decisive role in 
defining product characteristics and specifications.  
(270)  The DoD funds new product development and determines which suppliers  will to 
produce these products. Indeed, the development of a significant proportion of 
military products are directly funded by the U.S. Government.  The DoD’s significant 
role in the market, makes it significantly more difficult to  successfully adopt 
foreclosure strategies. The U.S. Government’s ability to influence the competitive 
landscape mean any such strategies could result in intervention by the DoD . 
                                                 
165  Minutes of a call with a market participant, 11.10.2019 and Questionnaire to suppliers of military 
equipment Q1, question 16 6.1.  
 
 
51 (271)  Second , the procurement process makes it difficult to engage into foreclosure  
strategies. PGM prime contractor will issue a competitive tender for various 
components and request associated pricing over a series of production lots and 
quantities over multi -year timeframes. These typically mirror the duration of the 
contract the cust omer has negotiated for the supply of PGMs, so that the components 
supplier remains consistent for the duration of the contract.  Moreover, GPS receivers 
are classified as a ‘Class 1’ change  as further explained in paragraph xx. All Class 1 
changes require buyer approval prior to implementation . As a result, in respect to 
PGMs supplied to a customer under an existing contract, a components supplier 
would not be able to engage in foreclosure strategies as this would be in breach of 
contract.  
(272)  Third, with regar d to PGMs produced for the U.S. Government, while a prime 
contractor will typically determine the suppliers it uses (so long as the product and 
components meet the required specifications of the U.S. Government), under the  
Federal Acquisitions Regulation  ‘FAR ’, the U.S. Government is permitted to direct 
procurement when it has a requirement for a particular subsystem or component (or 
supplier).  
(273)  The regulatory rights of the U.S. Government under FAR , allows the  U.S. 
Government to prevent  an input foreclosure  strategy.  This legislation  also benefits 
European customers as it means that when the original PGM procurement occurs, it 
occurs competitively and subsequent sales of already designed off -the-shelf PGM 
products yields competitively influenced pricing.  
(274)  Fourth, although  the Parties are currently the two main suppliers of the core military 
GPS receiver technology worldwide however, t he commitments further developed in 
section 8.3.4  will result in the divestment of the entirety of UTC’s military GPS 
receiver activities. Accordingly, it will alleviate the merged entity market power and  
ability to engage in input foreclosure strategies.  
7.2.2.3.  Input foreclosure ability: Actuators  
(A) Description of the vertical relationship and market context  
(275)  As described in section 5.5, actuation systems control the altitude or angular velocity 
of the PGM and effectively steer the PGM. There is  a distinction between: 
(i) fin-based actuation systems; and (ii) TVA systems.  
(276)  Raytheon uses all types of actuation systems across its PGM portfolio. Raytheon 
uses TVA in its high -end guided missiles, such as its ballisti c missile intercept 
systems, and fin -based actuation in a number of guided missiles. UTC is active in the 
supply of both TVA and fin -based actuation systems and supplies Raytheon with 
both of these for integration into various PGMs.  
(277)  However, considering t he market for actuators, UTC has limited market shares in 
actuators under any plausible market definition.  
(B) Commission assessment  
(278)  First, considering fin -based actuation systems, in Europe UTC does not supply 
actuation systems. Its market share in this segme nt is therefore [0-5]%. In the United 
States the market  share is [10-20]% in 2019 and there are other competitors 
 
 
52 including  Woodward  ([40-50]%), Parker ( [20-30]%), Moog ( [10-20]%), and 
GD-OTS ( [0-5]%).  
(279)  Considering t hrust vector -based actuation systems , in Europe UTC does not supply 
actuation. Its market share in this segment is therefore [0-5]%. In the United States 
UTC only supplies thrust vector -based actuation systems for […]. Accordingly, it 
has no significant market share in this area.   
(280)  Second, there are several credible competitors are active in the supply of each of 
TVA and fin -based actuation systems, both globally and the EEA. These players are 
well-established and sophisticated defence  contractors. The main competitors to 
UTC in the supply of each  of TVA and fin -based actuation systems include:  
- Parker Hannifin Corporation - Parker Hannifin is a U.S. based company. It is one 
of the largest companies in the world in motion control technologies, Parker’s 
Aerospace actuator and cylinder selection compr ises hydraulic, pneumatic, and 
electromechanical actuators and cylinders.  
- Woodward Inc. Woodward is one of the oldest and largest designers, 
manufacturers and service providers of control systems and control system 
components in the world. The company deli vers an array of actuation 
technologies, systems and components for a broad range of U.S. missile 
programs.  
- Nordic Ammunition Company (Nammo). Nammo is a Norwegian/Finnish 
aerospace and defence  group specialising in ammunition, rocket engines and 
space app lications. Nammo provides missile actuation systems for various 
applications and platforms.  
(281)  Therefore, such that any attempt at input foreclosure would be frustrated by the 
ability of downstream competitors to switch to an alternative supplier.  
(282)  Third, UTC does not supply any actuation products directly to customers in the 
EEA. As such, the merger cannot give rise to input foreclosure in respect of PGM 
prime contractors in the EEA. The PGM actuation systems produced by UTC are 
[details of UTC’s PGM actuation  sales ]. 
(283)  The respective market shares in the US and in the EEA indicates that input 
foreclosure concerns is unlikely to  arise, due to the lack of market power on the 
upstream market and the availability of alternative sources of supply for customers.  
Moreover, other purchasers of each of TVA and fin -based actuation systems include 
major missile primes with strong buyer power such as MBDA, Lockheed Martin, 
Northrop Grumman, Boeing, BAE Systems, etc.  
7.2.2.4.  Input foreclosure ability: IMUs  
(A) Description of the ve rtical relationship and market context  
(284)  As described in section 5.6, there are two segments of IMUs for PGMs: (i) high 
performance navigation grade; (ii) lower perfor mance tactical grade.  
(285)  UTC is […] active in the supply of lower performance tactical grade IMUs, and 
currently supplies […] with this grade of IMU.  
 
 
53 (286)  Raytheon purchases both high performance navigation grade IMUs, which it 
incorporates into products such as its ballistic missile defence systems and cruise 
missiles; and lower performance tactical grade IMUs, which it integrates within a 
number of different products, including guided missiles.  
(B) The C ommission ’s assessment  
(287)  First, considering tactical grade IMUs, UTC ’s market share in the United States 
was [20-30]% in 2019. Considering a  product market including  all tactical grade 
IMUs irrespective of their application (missiles, land vehicles, UAVs, etc .), UTC’s  
market share is lower than 20%.  
(288)  Although UTC supplie s tactical IMUs to certain European missile manufacturers, its 
market position is […]. UTC market share in the European segment of tactical IMUs 
for missiles to be below [10-20]%. 
(289)  Second, there are a number of alternative providers for tactical IMUs, which UTC 
competes with on a regular basis. These competitors include Honeywell, Northrop 
Grumman, Analog Devices, L3, Emcore (which acquired Systron Donner in 
June 2019), Sensonor, Saf ran (Sagem brand), and SBG Systems. The existence of 
these competitors means that UTC’s customers can switch their IMU demand to any 
one of a wide range of alternative suppliers, thus frustrating any attempt at an input 
foreclosure strategy.  
(290)  Third, some o f Raytheon’s largest competitors with regard to the supply of PGMs, 
including Lockheed Martin and Northrop Grumman, are vertically integrated with 
regard to the supply of IMUs, meaning that they also have the option of diverting 
some of their demand to in -house supply.  
(291)  Fourth, lower performance tactical IMUs are largely similar and allow for demand 
side substitution across a number of applications. As such, competition between 
suppliers at a given performance requirements is typically based around price, 
delivery and quality performance of the supplier.  
(C) Input foreclosure incentive: components and subsystems for PGMs  
(292)  There are several  reasons why the merged entity would have no incentive to engage 
in any foreclosure strategies, regardless of the nature of the  vertical relationships.  
(293)  First, a fear of retaliation as PGM systems are comprised of a large number of highly 
technical subsystems and components and the market is characterized by significant 
cross -supply between competitors.  
(294)  Raytheon estimates that it r elies on third party sourcing for over [50-60]%  of its 
PGM subsystems and components; which is equivalent to between USD […] worth 
of expenditure across the business. This includes individual components across a 
range of applications (e.g., guidance and c ontrol, propulsion, etc.) as well as 
subsystems and assemblies, and notably, includes a number of components for 
which it also manufactures and supplies.  
(295)  Raytheon spends an estimated USD […] on subsystems and components for its PGM 
business each year. In t his context, UTC is only a mid -sized supplier to Raytheon, 
 
 
54 supplying components worth approximately […] per year – approximately […]% of 
its total annual component spend for PGMs.  
(296)  In this context, the merged company would not stand to gain by adopting any 
foreclosure strategies. If the merged entity engaged in input or customer foreclosure 
towards its competitors , it would risk facing similar retaliation strategies.  
(297)  Retaliation  from competitors may occur, including exclusion by a PGM prime 
contractor from b idding for a future opportunity to supply components for a 
program , or an active move by a PGM prime contractor to introduce an additional or 
alternative supplier, subject to DoD’s approval in respect of existing programs 
involving UTC components.  
(298)  Moreover , PGMs prime contractors such as Raytheon typically have a number of 
customer -supplier commercial relationships with their competitors. If the merged 
company were to engage in foreclosure strategies, it would risk missing the contracts 
for PGM systems to i ts downstream competitors, who would still be sourcing 
components based on the most advantageous quality and price.  
(299)  Second, foreclosure strategies would undermine existing business strategies as UTC 
supplies PGM components to many different PGM prime contr actors. Indeed a 
significant proportion of UTC’s business is dedicated to supplying various 
components to PGM prime contractors with well -established relations and strong 
reputation in the market. UTC has significant historical relationships with a number 
of PGM prime contractors. Changing business strategy and diminishing the business 
relationships would impact UTC’s position as a PGM components supplier.  
(300)  The merged entity could also expect to lose profits as a result of withholding PGM 
subsystems and comp onents in the upstream market without any confidence that 
they could be recouped through increased business in the downstream business. The 
relatively small downstream market share of Raytheon in PGMs in the EEA 
([5-10]% for a ll PGMs in 2018 as further dev eloped in section  7.2.1 ) and the 
competitive dynamics in the downstream PGM market makes it unlikely that the 
Parties would have incentive to engage in a foreclosure strategy . 
(301)  Similarly, Raytheon seems to have followed a strategy that is not or not always  
based on vertically integrating components. To obtain the highest quality 
components for the most competitive price, Raytheon has moved to sourcing PGM 
components fro m third parties notwithstanding that it is already has vertically 
integrated capabilities, for example:  
- moving from in -house supply to purchase from […] of […], to obtain a higher 
quality product and to lower the cost of production; and  
- moving from in -house supply to third party supply of […] on […], to increase 
quality and lower cost.166 
(302)  Third , the merged entity would face the risk of reputational damage  by attempting to 
engage in such a strategy . The impact on the merged entities reputati on would be 
particularly important in the market  given the importance of c ross-supplies . 
                                                 
166  Form CO, Chapter E, para. 201.  
 
 
55 Attempting to engage in foreclosure strategies would do lasting damage to the 
reputation of the merged entity.  
(303)  The reputational damage could  not only influence  compet itors and suppliers , but also 
the U.S. Government and its allies rely on the Parties  for elements of their national 
defence  infrastructure. They have the ability to punish the companies and divert 
future business elsewhere if they consider a party’s action s are undermining their 
defence  capabilities and national security. Therefore, risking the market reputation 
by engaging into foreclosure strategies would be a very high risk for the Parties 
given the specifies of  national security and defence industry.  
7.2.3.  ARINC 
(304)  As explained above in  Section  5.7, ARINC is a commercial datalink network that is 
owned and operated by UTC. As operator of the ARINC network, UTC is 
responsible for testing and approving aircraft communications equipment that send 
and receive data via ARINC, including testing and approving other manufacturers’ 
products for compatibility with the network.  
(305)  One market participant expressed concern s that post -merger t he merge d entity would 
deprioritise competitors ’ ARINC testing and approvals, and that the combined entity 
would have an increased ability and incentive to influence the testing data centres to 
this end. This would put competitors’ products at a disadvanta ge in terms of testing 
out some products, including new products, which will involve incorporation with 
the ARINC network.  
(306)  Raytheon is a defence  contractor. According to the Notifying Party, n one of 
Raytheon’s existing products are developed or sold for use with ARINC167, and 
Raytheon is not aware of any of its products having been tested and qualified to 
enable use with ARINC.  
7.2.3.1.  Input foreclosure ability  
(307)  First, as regards the testing of equipment for compatibility with t he ARINC network, 
the procedure  known as Aviation Qualifica tion Procedures (“AQP”) testing  treats all 
manufacturers equally and is explicitly provided for in ARINC’s AQP policy: 
ARINC does not discriminate among avionics manufacturers in connection with the 
testing processes described in this Policy.  
(308)  This means that (a) ARINC processes testing requests on a “first in, first out” basis; 
(b) ARINC provides all parties with the same level of service; and (c) ARINC grants 
the same official AQP status or classification designation to avionics that achieve the 
same AQP testing results . 
(309)  Second, as regards the operation of the ARINC network, UTC is contractually bound 
to neutrality and quality requirements, which can be monitored by airlines 
(i.e., ARINC customers) throug h regular performance reports. For example:  
(a) Open standards. Airlines require that ARINC adhere to strict open access 
standards to ensure complete int eroperability on all aircraft. UTC’s contracts 
                                                 
167  Form CO, Chapter E, para. 347. 
 
 
56 with these airlines require, for instance, that the exchange of data messages 
from aircraft s conform to the industry -wide standards.  
(b) Quality requirements. UTC is bound by strict quality requirements set out i n 
its contracts with airlines. These requirements include a series of high -
standard service goals such as > [90-100]% availability rate of t he datalink 
network services and > [90-100]% success del ivery rate of uplink messages. 
UTC is required to provide airlines on a regular basis with performance 
reports, which identify the actual performance statistics compared t o these 
overall service goals.  Failure to achieve the service goals typically gives 
airlines the right to rebates or early termination.  
(310)  UTC therefore does not have the ability to discriminate between  ARINC data flows. 
As explained above, ARINC directly competes with SITA  as confirmed b y a market 
participant ‘ [the company] considers that SITA is the alternative to ARINC ’168. Any 
attempt by UTC to reduce the performance of data flows related to third party 
aircraft components (or in any other way to discriminate against such third parties, 
e.g., through its pricing policy) would likely result in ARINC data traffic being 
diverted to SITA.   
7.2.3.2.  Input foreclosure incentive  
(311)  UTC has no incentive to engage into input foreclosure strategies  post-Transaction as 
Raytheon’s portfolio does not include prod ucts that could benefit from 
discriminatory treatment  and could potentially result into traffic diverted from 
ARINC to SITA . 
7.2.4.  Conclusion  
(312)  The Commission finds that the merged entity would have no ability  and incentive  to 
foreclose competitors through the inp ut foreclosure  of components and subsystems 
for PGMs  or testing and certification of ARINC products . 
(313)  The downstream shares of PGMs are not indicative of the significant degree of 
market power required to have the ability to foreclose competitors through  input 
foreclosure strategies. The merged entity  will continue to face at strong competitors 
with equivalent alternative products. Moreover , US DoD control of the procurement 
process make successful foreclosure strategies unlikely.  
(314)  Furthermore, potential r etaliation, business strategy rational and reputational damage 
are a combination of factors that remove the incentive to engage into foreclosure 
strategies. This indicates that the merged entity is unlikely  to have the incentives to 
engage in foreclosure a fter the Transaction.  
(315)  Based on the assessment  laid down  in paragraphs (244)  to (313)  and in view of the 
results of the market investigation and of all the evidence available to it, the 
Commission concludes that  the Transaction does not raise serious doubts as to its 
compatibility with the internal market with regard to vertical non -coordinated 
effects . 
                                                 
168  Questionnaire to suppliers of military equipment Q1, question 57.1.  
 
 
57 7.3. Conglomerate effects  
(316)  Considering the complementary nature of the product portf olio of the Parties a 
market participant expressed concerns that ‘ [r]egarding electro -optical sensors and 
GPS receivers, the Company does not anticipate any horizontal issue but rather 
conglomerate effects as the Parties would be able to supply combination  of 
components, such combination being expected to be more and more required by 
customers. ’169 
(317)  While the combination of UTC and Raytheon will increase the number of systems 
that both Parties can supply to OEMs, this is unlikely to give rise to harm to 
compet ition. 
(318)  First, the customers for the Parties’ products are largely different. Raytheon’s focus 
is guided weapons manufactured by its five business units, among which Raytheon 
Missile Systems generates the most global sales. While these guided weapons are 
deployed by aircraft, it is unlikely that they could form the basis for any bundling or 
other foreclosure strategy with UTC aircraft components and systems, as Raytheon’s 
guided weapons are directly sold to armed forces , not aircraft OEMs.  
(319)  Second, UTC’s flight -critical systems and Raytheon’s mission -critical systems are 
not procured simultaneously. UTC’s flight -critical systems are procured early in an 
aircraft’s development, while Raytheon’s mission -critical systems are procured at a 
later stage .  
(320)  Third, OEMs selec t systems suppliers and control the procurement process, 
determining supply opportunities, as well as who will be the supplier. OEMs set the 
specifications of each component and system being procured, bidding timing and 
process, and the suppliers participa ting in each procurement opportunity.  
(321)  Generally, the Parties will increase  scale, engineering capabilities  and financial 
strength from the transaction. However, the combined entity  will not be come  
uniquely placed  in that respect . In fact, t he market inves tigation has revealed that the  
Transaction will enable  the Parties to gain  the critical size to compete with other 
large Tier 1 supplier s and OEMs . As further explained by the same market 
participant that mentioned  potential  conglomerate effects : ‘the prop osed transaction 
will enable the Parties to become a premier defence contractor, on par with the likes 
of Boeing, Northrop Grumman or Lockheed Martin. Their combined size, 
capabilities and capacities will impact their competitiveness, for example by limiti ng 
their exposure to safety risks and by spreading qualification costs. It will also give 
the Parties a wider portfolio of systems, which will further enable them to expand 
their combined systems’ range and functions in the areas of, e.g., surveillance, 
targeting, reconnaissance (so -called “ISR”), as well as, communication and 
ammunition. ’170 
(322)  Based on the information available and the outcome of the market investigation, the 
Commission concludes that  the Transaction does not raise serious doubts as to its 
compatibility with the internal market in relation to possible  conglomerate effects . 
                                                 
169  Minutes of a call with a market participant, 25.09.2019.  
170  Minutes of a call with a market participant, 25.09.2019.  
 
 
58 8. MODIFICATIONS TO  THE TRANSACTION  
8.1. Framework of assessment  
(323)  The Commission recalls that the following principles apply where parties to a 
concentration  offer commitments in ord er to have  the transaction approved in Phase 
1 after serious doubts have been identified by the Commission.  Those principles are  
referred to in Commission Regulation (EC) No 802/2004 and in the Commission 
Notice on remedies acceptable under the Merger Regulation (the “Remedies 
Notice ”).171  
(324)  In Phase I commitments offered by the parties can only be accepted where the 
competition probl em is readily identifiable and can be remedied  easily . The 
competition problem therefore needs to be so straightforward and the remedies so 
clear -cut that it is not necessary to enter into an in -depth investigation . The  
commitments should be  sufficient to clearly rule out serious doubts within the 
meaning of Article 6(1)(c) of the Merger Regulation. Where the assessment confirms 
that the proposed commitments remove the grounds for serious doubts on this basis, 
the Commission clears the merger in Phase I.  
(325)  In assessing whether the proposed commitments will likely eliminate the 
competition concerns identified, the Commission considers all relevant factors 
including the type, scale and scope of the proposed commitments . It does so on the 
basis of  the structure a nd particular characteristics of the market in which the 
competition concerns arise, including the position of the parties and other 
participants on the market. As set out in the Remedies Notice, the commitments have 
to eliminate the competition concerns e ntirely, and have to be comprehensive and 
effective from all points of view. The Commission only has power to accept 
commitments that can make  the concentration compatible with the internal market . 
In order to do so,  they need to  prevent the significant im pediment to effective 
competition in all relevant markets where competition concerns have been  identified.  
(326)  In order for the commitments to comply with those principles, they must be able to 
be implemented effectively within a short period of time. The Com mission must 
determine with the requisite degree of certainty, at the time of its decision, that they 
will be implemented fully and that they are likely to maintain effective competition 
in the market.  
(327)  As regards  the form of acceptable commitments, the Me rger Regulation leaves 
discretion to the Commission as long as the commitments meet the requisite 
standard.  
(328)  Divestiture commitments are often the most effective way to eliminate competition 
concerns resulting from horizontal overlaps. The intended effects of a divestiture 
will only be achieved if and once the business to divest is transferred to a suitable 
purchaser in whose hands it will become an active competitive force in the market.  
(329)  In order to ensure that the business is divested to a suitable purchas er, the 
commitments have to include criteria to define its suitability , which will allow the 
                                                 
171  Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under 
Commission Regulation (EC) No 802/2004 . 
 
 
59 Commission to conclude that the divestiture of the business to such a purchaser will 
likely remove the competition concerns identified.  
8.2. Procedure  
(330)  In order to rende r the Concentration compatible with the internal  market, the Parties  
modified the notified concentration by proposing remedies, which were originally 
the result of discussions between the Parties and the US DOJ , with which the case 
team has been cooperatin g closely .  
(331)  On 21 February 2020 the Parties submitted commitments  pursuant to Article  6(2) of 
the Merger Regulation  (the “Initial Commitments”) . The Commission launched a 
market test of the Initial Commitments on 25 February 2020 , seek ing responses from 
competitors and customers. On 3 March 2020 t he Commission informed the 
Notifying Party of the results of the market test.  
(332)  On 5 March 2020 a  number of  items were  clarified  with the Parties , notably about: 
(i) the appropriateness of the li st of key personnel who need to be specifically 
incentivised to remain with the divestment businesses and are subject to a non -
solicitation requirement; and (ii) the transfer of the active security clearances of the 
relevant Raytheon employees to BAE .  
(333)  On 11 March 2020 the Parties submitted a revised set of commitments addressing 
the Commission’s comments , notably  regarding Key Personnel (the “Final 
Commitments ”). 
(334)  The Initial Commitments submitted by the Notifying Party were conceived as a pure 
fix-it-first remedy as described in paragraphs 56 and 57 of the Remedies Notice. The 
Final Commitments are structured in a more conventional way , providing for a 
post-closing buyer approval . However,  the new approach  still include s elements of a 
fix-it-first solution in that the Parties have  already signed agreements with BAE as  
the purchaser  of the Divestment Businesses .  
(335)  The Final  Commitments are annexed to , and form an integral part  of, this decision . 
8.3. Initial Commitments  
8.3.1.  Description of the Initial Commitments  
(336)  The Initial  Commitments provide for  the divestiture  of two different businesses (the 
“Divestment Businesses”):  
(a) Raytheon’s military airborne radios (the “Radios Divestment Business”);  
(b) UTC’s GPS receivers business (th e “GPS Divestment Business”).   
(337)  The Radios Divestment Business consists of Raytheon’s existing military airborne 
radios business , which develops, assembles, tests, markets, sells, and repairs airborne 
radios for military aircraft together with the necessary  crypto capabilities to encrypt 
these products for military use.  
(338)  The GPS Divestment Business consists of UTC’s military GPS receiver and anti -
jamming business located in Cedar Rapids and Coralville, Iowa, United States, 
 
 
60 which designs, develops, manufactur es, assembles,  tests, certifies, and provides 
support for its military GPS receivers and anti -jamming products.  
(339)  The Divestment Businesses include all assets and staff that contribute to the current 
operation or are necessary to ensure the viability and co mpetitiveness of the 
Divestment Businesses, in particular:  
(a) all tangible and intangible assets (including intellectual property rights);  
(b) all licences, permits and authorisations issued by any governmental 
organisation for the benefit of the Divestment Bus inesses, to the extent 
transferable;  
(c) all contracts, leases, commitments and customer orders of the Divestment 
Businesses; all customer, credit and other records of the Divestment 
Businesses;  
(d) the Personnel, including Key Personnel; and  
(e) transitional servi ce agreements with UTC and Raytheon to ensure the orderly 
separation of the Divestment Businesses.  
(340)  In addition , the Parties  have entered into related commitments regarding matters 
such as the separation of the divested businesses from their retained busine sses, the 
preservation of the viability, marketability and competitiveness of the divested 
businesses, including the appointment of a monitoring trustee .  
(341)  The Initial  Commitments include a proposal to sell both Divestment Businesses to 
BAE Systems Informat ion and Electronic Systems Integration Inc. ( “BAE ”), with 
whom UTC and Raytheon entered into bindi ng asset purchase agreements 
on January 17, 2020.  
8.3.2.  The Parties’ arguments  
(342)  With regard to the Radios  Divestment Business  the Parties submit that  the Initial 
Commitments (i) will remove the entire horizontal overlap between the Parties for 
military airborne radios globally ; (ii) create the conditions for the emergence of a 
new competitive entity in military airborne radios with the necessary resources and 
capab ilities to operate the divested business as a standalone viable competitor and 
(iii), as a result, effectively and comprehensively eliminate any potential loss of 
competition as a result of combining the Parties’ military airborne radios businesses . 
(343)  As for  the GPS Divestment Business  the Parties contend that the Initial 
Commitments (i) will remove all overlap between UTC and Raytheon in the area of 
military GPS receivers on a global basis; (ii) allow for the emergence of a new 
competitive entity in military  GPS receivers with the necessary resources and 
capabilities to compete; (iii) eliminate any concerns in this area  and (iv) can be 
implemented effectively within a short period of time .  
 
 
61 8.3.3.  Commission’s assessment of the c ommitments regarding military airborn e radios   
8.3.3.1.  Results of the market test  
(344)  On 25 February 2020 , the Commission launched a market test  on the Initial 
Commitments and the suitability of BAE as a purchaser , seeking responses from 
both competitors and customers . 
(345)  With regard to the elimination of competition concerns, a large majority of 
respondents expressing an opinion considered that the Initial Commitments 
regarding Radios  are suitable to effectively remove any competition concerns raised 
by the Transaction in the supply of military airborne radios.172 
(346)  As regards the viability of the remedy, a large majority of those expressing an 
opinion considered the Initial Commitments regarding Radios to be sufficient in 
scale and scope to ensure the immediate viability and c ompetitiveness of the Radios 
Divestment Business.173 
(347)  A large majority of respondents expressing an opinion  considered  that the 
Commitments  regarding Radios include all necessary tangible and intangible assets 
to ensure the viability and competitiveness of th e Radios Divestment Business on a 
lasting basis .174  
(348)  With regard to personnel, a  large majority of respondents expressing an opinion  
considered  that the transfer of the personnel specified in the Initial Commitments 
would be sufficient to ensure the viability and competitiveness of the Radios 
Divestment Business .175 
(349)  As for the transitional agreements for the supply of services, a large majority of 
those expressing an opinion consider ed that the proposed arrangements would enable 
BAE to operate  the Radio s Divestment Business as a viable and competitive force .176 
8.3.3.2.  Assessment of the Initial Commitments  regarding Radios  
(A) Suitability to remove serious doubts  
(350)  In the EEA the Parties’ combined market share for military airborne radios 
amounted to [10-20]% (UTC: [10-20]%; Raytheon: [5-10]%) in 2018. The 
Commission’s investigation has confirmed that the Parties are two major suppliers of 
airborne radios  worldwide and that it is likely that the Transaction will result in at 
least indirect harm to competition . This is notably because any price increases  on 
US-based platforms will also affect the procurement conditions for EEA -based 
customers . The Commission has therefore concluded  that the combination of the 
Parties’ activities raised potential  serious doubts as to its compatibility with the 
internal market with regard to the supply of military airborne radios in the EEA . 
                                                 
172  Questionnaire on Commitments offered by UTC and Raytheon,  Question 1. 
173  Questionnaire on Commitments offered by UTC and Raytheon, Question 3 . 
174  Questionnaire on Commitments offered by UTC and Raytheon, Questions 5 and 6.  
175  Questionnaire on Commitments offered by UTC and Raytheon, Question 7.  
176  Questionnaire on Commitments offered by UTC and Raytheon, Question 24.  
 
 
62 (351)  The Initial  Commitments offer a structural remedy encompassing the entirety of 
Raytheon’s military airborne radios business. This covers the developing, 
assembling, testing, marketing, selling and repairing of airborne radios for military 
aircraft along with rights to the necessary crypto capabilities required to encrypt 
these products for military use. The Initial  Commitments w ill therefore remove the 
entire horizontal overlap between the Parties for military airborne radios globally.  
(352)  The Commission considers that the Initial Commitments create the conditions for the 
emergence of a new competitive entity in military airborne ra dios with the necessary 
resources and capabilities to operate the divested business as a standalone viable 
competitor following completion of the Proposed Transaction.  
(353)  On the basis of its assessment and taking into account the results of the market test 
and its investigation , the Commission concludes  that the Initial Commitments are 
sufficient to remove  any serious doubts with regard to the supply of military airborne 
radios in the EEA . 
(B) Viability  and competitiveness of the Radios Divestment Business  
(354)  The Radios Divestment Business  consists of (i) the full suite of Raytheon’s existing 
military airborne radio product portfolio; (ii) access to product engineering and 
product testing, repair and assembly facilities; (iii) supply and transitional support 
arrangeme nts, where necessary; (iv) about […] highly skilled, full -time employees 
with significant prior experience across the entire military airborne radio product and 
process spectrum  including Key Personnel ; (v) rights in related IP and know -how; 
(vi) existing R&D projects (both internal and customer funded); and (vii)  the transfer 
of all existing customer relationships worldwide.  
(355)  The Commission considers that t his set of products, assets, personnel and 
transitional support will be suitable to enable  the Radios  Divestment Business to 
continue to compete in the military airborne radios sector on a viable basis. The 
Radios Divestment Business will have access to the expertise and resources that 
Raytheon currently accesses and will be able to build on the R&D effor ts already  
undertaken by Raytheon.  
(356)  In addition, the Commission considers that the transitional arrangements are 
sufficient to  ensure a smooth and effective transition of all assets, equipment and 
personnel from Raytheon’s existing multi -use facilities to t he new location operated 
by the Purchaser. This will limit the risk of  disruption to the Radios Divestment 
Business and ensure that it can operate as a viable standalone business as soon as 
possible.  
(357)  On the basis of its assessment and taking into account t he results of the market test 
and its investigation , the Commission concludes  that the Commitments are sufficient 
to ensure  the viability and competitiveness of the Radios Divestment Business . 
8.3.4.  Commission’s assessment of the c ommitments  regarding military GPS 
8.3.4.1.  Results of the market  test 
(358)  With regard to the elimination of competition concerns, a large majority of 
respondents expressing an opinion considered that the Initial Commitments are 
 
 
63 suitable to effectively remove any competition concerns raised by the Tr ansaction in 
the supply of GPS receivers .177 
(359)  As regards the viability of the remedy, a large majority of those expressing an 
opinion considered the Commitments to be sufficient in  scale and scope to ensure 
the immediate viability and competitiveness of the GPS Divestment Business.178 
(360)  A large majority of respondents expressing an opinion  considered  that the 
Commitments  regarding GPS include all necessary tangible and intangible assets to 
ensure the viability and competitiveness of the GPS Divestment Business on  a 
lasting basis .179  
(361)  With regard to personnel, a  large majority of respondents expressing an opinion  
considered  that the transfer of the personnel specified in the Commitments would be 
sufficient to ensure the viability and competitiveness of the GPS Divest ment 
Business .180 
(362)  As for the transitional agreements for the supply of services, a large majority of 
those expressing an opinion consider that the proposed arrangements would enable 
BAE to operate  the GPS Divestment Business as a viable and competitive force .181 
8.3.4.2.  Assessment of the Commitments  regarding GPS  
(A) Suitability to remove serious doubts  
(363)  The combined market share of the Parties in the supply of military GPS receivers 
amounted to [80-90]% (UTC: [70-80]%; Raytheon: [10-20]%) in the EEA  in 2018.  
The Commission’s  investigation has confirmed that the Parties are the two main 
suppliers of the core military GPS receiver technology worldwide  and that  the 
Transaction would be  likely to result in both direct and indirect effects in the EEA. 
The Commission has therefore concluded  that the combination of the Parties’ 
activities raises serious doubts as to its compatibility with the internal market due to 
the creation or strengthening of a dominant position in the supply of military GPS 
receivers in the EEA . 
(364)  The GPS Commitments provide for the divestment of the entirety of UTC’s  military 
GPS receiver activities to BAE . The GPS Divestment Business designs, develops, 
manufactures, assembles, tests, certifies, and provides support for its military GPS 
receivers an d anti -jamming products. Accordingly, they remove all overlap between 
the Parties in this area on a global basis.   
(365)  The Commission considers that the Commitments regarding GPS will also enable  a 
new competitive entity to emerge in military GPS receivers wit h the necessary 
resources and capabilities to compete.  
                                                 
177  Questionnaire on Commitm ents offered by UTC and Raytheon, Question 14.  
178  Questionnaire on Commitments offered by UTC and Raytheon, Question 16.  
179  Questionnaire on Commitments offered by UTC and Raytheon, Questions 18 and 19.  
180  Questionnaire on Commitments offered by UTC and Ra ytheon, Question 20.  
181  Questionnaire on Commitments offered by UTC and Raytheon, Question 24.  
 
 
64 (366)  On the basis of its assessment and taking into account the results of the market test 
and its investigation , the Commission concludes  that the Commitments are sufficient 
to remove  the serious doubts with regard to the supply of military GPS receivers  in 
the EEA . 
(B) Viability  and competitiveness of the Divestment Business  
(367)  The GPS Divestment Business includes (i) UTC’s existing military GPS receiver 
product portfolio; (ii) access to product engineering and p roduct testing, repair and 
assembly facilities; (iii) transitional support arrange ments, where necessary; 
(iv) c. […] highly skilled, full -time employees with significant prior experience 
across the entire military GPS receiver product and process spectrum; (v)  rights in 
related IP and know -how; (vi) existing R&D projects; and (vii) the transfer of 
existing customer rela tionships worldwide.  
(368)  The Commission considers that this  set of products, assets, personnel and 
transitional support will be suitable to enable the GPS Divestment Business to 
continue to compete in the military GPS sector on a viable basis. The GPS 
Divestme nt Business will have access to the expertise and resources that Raytheon 
currently accesses and will be able to build on the R&D efforts already undertaken 
by Raytheon.  
(369)  In addition, the Commission considers that the transitional arrangements will ensure 
a smooth and effective transition of all assets, equipment and personnel from 
Raytheon’s existing multi -use facilities to the new location operated by the 
Purchaser. This will limit the risk of disruption to the GPS Divestment Business and 
ensure that it ca n operate as a viable standalone business as soon as possible.  
(370)  On the basis of its assessment and taking into account the results of the market test 
and its investigation , the Commission concludes  that the Commitments are sufficient 
to ensure  the viability  and competitiveness of the GPS Divestment Business . 
8.4. Final Commitments  
8.4.1.  Description of the Final Commitments  
(371)  In addition to the extension of the list of Key Personnel for both Divestment 
Businesses , the Final Commitments  reflect the Parties’ change of appro ach in opting 
for a post -closing buyer approval  instead of a pure fix -it-first solution . This means 
that the Final Commitments now include standard clauses on potential purchasers  
and standard clauses on the Closing Period, the Divestiture Period and the 
Divestiture Trustee , and that BAE is no longer referred to  as the Purchaser. 
However, the new approach still includes aspects of a fix -it-first in that the Parties 
have already signed asset purchase agreements to transfer both Divestment 
Businesses to BAE.  
8.4.2.  Asses sment of the Final Commitments  
(372)  The Commission takes note of the Parties’  change of approach and considers that the 
Final  Commitments are in line with a conventional remedy solution whereby the 
Commission approves the buyer after the transaction has be en closed.  In addition, 
the Commission understands from the Parties and from BAE that they continue to 
 
 
65 have full confidence in their ability to complete the sale of the Divestment 
Businesses as currently contemplated.  
(373)  Likewise, materials submitted by the Parties over the course of the proceedings 
reveal that the sale of the Divestment Businesses has attracted interest from a broad 
range of market participants. The potential of a business to attract suitable purchasers  
is relevant for  the Commission’ s asses sment of the appropriateness of the proposed 
commitment.  
(374)  In any event, the appropriateness of the Divestment Businesses has been tested on a 
standalone basis and the suitability, viability and competitiveness thereof  are not 
related to, let alone dependent  on, a purchase by BAE. In other words , the 
Commission has not taken a particular purchaser ’s resources into account in its 
assessment . Thus, i n determining  to what extent the divestiture of the business will 
likely remove the competition concerns identifi ed, the Commission has assessed the 
sufficiency of the commitments irrespective of BAE’s  characteristics . 
(375)  In particular , the Commission’s questions on the scale, scope and viability of the 
Initial Commitments  in the market test , both for Radios and GPS, di d not contain a 
reference to BAE as the buyer.182 Moreover, a  large majority of respondents 
expressing an opinion considered that the scale and scope of the Divestment  
Business es and related commitments, as described in Section 8.3.1  above , are 
sufficient to ensure the immediate viability and competitiveness of both the Radios 
and the GPS Divestment Business.183 
(376)  The Commission has made its assessment in the light of the us ual principles that 
apply where parties to a concentration  offer commitments to restore effective 
competition , as set out in the Remedies Notice. In particular, t he divested activities 
must consist of a viable business that, if operated by a suitable purch aser, can 
compete effectively with the merged entity on a lasting basis and that is divested as a 
going concern. The business must include all the assets which contribute to its 
current operation or which are necessary to ensure its viability and competiti veness 
and all personnel which are currently employed or which are necessary to ensure the 
business' viability and competitiveness.  
(377)  Paragraph 17 of the Final Commitments reflects  the standard criteria for  a 
purchaser ’s suitability  as set out in the Remedie s Notice , while specifying that the 
purchaser should have proven expertise in the supply of military aerospace systems . 
Under the Final Commitments, in order to be approved by the Commission, the 
Purchaser must be (i) independent of and unconnected to the Notifying Party and its 
Affiliated Undertakings ; (ii) have  the financial resources, proven expertise in the 
supply of military aerospace systems and incentive to maintain and develop the 
Divestment Businesses as viable and active competitive forces; and (i ii) its 
acquisition of the Divestment Business must not give  rise to prima facie competition 
concerns or a risk that the implementation of the Commitments will be delayed.  
(378)  As the assessment of the Initial Commitments was carried out  on a stand -alone basis, 
the removal of the buyer’s identity from the Final Commitments does not affect  the 
                                                 
182  Questionnaire on Commitments offered by UTC and Raytheon, Questions 3 to 7 (Radios) and 
Questions 16 to 20 (GPS).  
183  Questionnaire on Commitments offered by UTC and Raytheon, Questions 3 (Radios) and 16 (GPS).  
 
 
66 validity of the Commission’s conclusions set out in paragraphs (366)  and (370) . 
Therefore, the Commission maintains its conclusion  that the Commitments are 
sufficient to ensure the viability and competitiveness of the Radios and GPS 
Divestment Business es.  
8.5. Prima facie  suitability  of BAE as a buyer of the Divestment Business es 
(379)  On the basis of the Initial  Commitments, which expressly referred to  BAE  as the 
Purchaser, the Commission assessed prima facie  its suitability as a buyer of the 
Divestment Businesses . BAE’s suitabili ty was also market -tested .  
(380)  In accordance with p aragraph 48 of the Remedies Notice BAE  must fulfil the 
following criteria:  
(a) be independent of and unconnected to the Parties;  
(b) possess the financial resources, proven relevant expertise and have the 
incentive a nd ability to maintain and develop the Divestment Businesses as a 
viable and active competitive force in competition with the Parties and other 
competitors; and  
(c) the acquisition of the Divestment Businesses by BAE must neither be likely 
to create new compet ition problems nor give rise to a risk that the 
implementation of the commitments will be delayed. Therefore , BAE must 
reasonably be expected to obtain  all necessary approvals from the relevant 
regulatory authorities for the acquisition of the Divestment Businesses.  
(381)  The Commitments submitted on 21 February 2020 propose d BAE as a purchaser of 
both Divestment Businesses  and included copies of  the Radios Purchase  Agreement 
between Raytheon and BAE and the GPS Purchase Agreement  between UTC and 
BAE . Therefore,  in accordance with paragraph 56 of the Remedies Notice, the 
Commission assess ed the suitability of BAE  as a purchaser of the Divestment 
Businesses.   
(382)  On 5 March 2020 , audit and accountancy services provider Mazars submitted  to the 
Commission, at the reques t of the Parties,184 a report  on BAE’s suitability as a 
purchaser (“the Mazars Report”) in which it concluded  that BAE fulfils the criteria 
of the purchaser requirements. In its report , Mazars  also concluded from  its review 
of the Radios and GPS Purchase Agreement s that the Divestment Business es would 
be sold in a manner consistent with the Commitments.  
(383)  On 5 March 2020 , a number of  items were  clarified  with BAE,  notably about BAE ’s 
suitability as a purchaser, including past supply chain management issues and 
allegation s of possible vertical issues arising from the acquisition of the Divestment 
Businesses.  
                                                 
184  On 19 February 2020 , UTC appointed Mazars to prepare a report assessing the proposed purchaser’s 
suitability and independence, the Divestment Businesses’ viability and whether the Divestment 
Businesse s will be sold in a manner consistent with the proposed Commitments. Under the terms of 
the agreement between UTC and Mazars, the report was to  be delivered to the European Commission 
without prior review or amendment by UTC. In addition, Mazars confirmed that it is independent of 
UTC, Raytheon, and BAE, and that neither it, nor any of its employees or experts have any direct or 
indirect work, consulting or other relationship with either of the Parties.  
 
 
67 8.5.1.  The Commission’ s assessment of BAE’s suitability  
(384)  BAE  appears , prima facie , to be a suitable buyer . It is a well -established, 
multinational defence , security  and aerospace company with extensive experience in 
the full range of defence  and security products.  BAE  is a publicly listed company 
with its common stock listed on the London Stock Exchange and FTSE 100. It is the 
largest defence contractor in Europe and  among the world's largest defence 
companies. Its largest operations are in the UK and United States (“US”), where its 
BAE Systems Inc. subsidiary is one of the six largest suppliers to the US Department 
of Defence. Other major markets include Australia, I ndia, and Saudi Arabia. BAE 
plays a significant role in the production of military equipment. The company has a 
diverse portfolio, broadly balanced between an enduring services and support 
business, long -term platform and product programmes, electronic sys tems, and 
activities in cyber and intelligence.  
(385)  A large majority of respondents to the market test consider ed that (i) BAE  is 
currently independent of and unconnected to UTC and Raytheon185; and (ii) has the 
financial resources186; (iii) the relevant expertise187; (iv) the R&D capabilities and 
resources/assets188; (v) the sales organisation189; and (vi) the incentives190 to 
maintain and develop the Divestment Businesses in a viable and competitive way so 
as to replicate UTC’s and Raytheon’s respective constraints in th e markets where the 
Comm ission has identified concerns.  
8.5.1.1.  Independence from the Parties  
(386)  A number of ownership, cooperation and commercial  links  exist among UTC, 
Raytheon and BAE.   
(387)  In particular, UTC participates with BAE in the Data Link Solutions Joint Vent ure, 
while Raytheon participates with BAE in the Exostar B to B Joint Venture.  
(388)  The existing commercial relationships between BAE and any of UTC or Raytheon 
appear to be immaterial to BAE in view of their ove rall size in terms of revenues.  
(389)  The Mazars  Report  indicates that it is a feature of the military aerospace production 
and defence industry to have supplier relationships and that cooperation among  
manufacturers is common.  
(390)  Based on the Mazars Report , and the information provided, the Commission  does 
not consider that any of these relationships impede BAE’s independence from UTC 
or Raytheon.  
(391)  On the basis of the information provided  by the Parties, the Mazars  Report and the 
results of the market test , BAE appears, prima facie , to be independent o f, and 
unconnected to, the Parties and their affiliates.  
                                                 
185 Questionnaire on Commitments offered by UTC and Ray theon, Question 27.  
186  Questionnaire on Commitments offered by UTC and Raytheon, Question 28.  
187  Questionnaire on Commitments offered by UTC and Raytheon, Question 29.  
188  Questionnaire on Commitments offered by UTC and Raytheon, Question 31.  
189  Questionnai re on Commitments offered by UTC and Raytheon, Question 32.  
190  Questionnaire on Commitments offered by UTC and Raytheon, Question 30.  
 
 
68 8.5.1.2.  Financial resources, proven expertise and incentive to maintain and develop the 
Divested Business as a viable and active competitor  
(392)  With regard to financial resources, BAE recorded net sales of GBP 20 109 million  
in 2019 . The company  has been [BAE financial data ]. 
(393)  As regards proven expertise, both Divestment Businesses will fit well into existing 
BAE operations. […]. 
(394)  As for incentives, t he GPS technology of the Divestment Business would contribute 
towards achiev ing BAE’s strategic aim to target the market for precision guided 
munitions and offers significant commonality with BAE’s own customer base, 
particularly in relation to […]. 
(395)  In addition, t he product offering of the Radios Business complements  BAE’s 
existing airborne radio product portfolio  and BAE has identified a number of its own 
products into which the technologies of the Radios Business may be incorporated.  
(396)  On the basis of the information provided  by the Parties, the Mazars  Report and the 
results of the market test , BAE appears, prima facie , to have the financial resources, 
proven expertise and incentive to maintain and develop the Divestment Business as a 
viable business and active competitor in competition with th e Parties and other 
compe titors . 
8.5.1.3.  Absence of prima facie  competition problems  
(397)  The Commission considers  that the divestiture to BAE does not appear  to give rise to 
any significant competition concerns.  There do not seem to be any  direct horizontal 
overlaps between BAE and the Divest ment Businesses. The vertical relationships 
identified so far , such as between GPS receivers and precision guided munitions 
(“PGM”) , seem  unlikely to be problematic either.  
(398)  On the basis of the information provided by the Parties, the Mazars  Report and the 
results of the market test , prima facie competition concerns are not likely to arise as 
a result of the acquisition of the Divestment Businesses by BAE . 
(399)  The Commission notes that t his prima facie assessment is based on the information 
available for the pur pose of the Commission’s assessment of BAE’s  suitability and 
does not prejudge the competition assessment of the acquisition of the Divestment 
Business es by BAE  by another  competent competition authority under applicable 
merger control rules.  
8.5.2.  Assessment o f the Purchase  Agreements  
(400)  Paragraph 101  of the Commission’s Remedies Notice  requires that the D ivestment 
Business es be divested in a manner consistent with the Commission’s decision and 
the commitments.   
(401)  On 17 January 2020 Raytheon and BAE signed the Radio s Purchase Agreement 
selling Raytheon’s military airborne radios business to BAE  and o n the same day  
UTC and BAE signed the GPS Purchase Agreement transferring UTC’s GPS 
Business to BAE. Both transactions take the form of an asset sale.  
 
 
69 (402)  Mazars  reviewed both Purchase Agreements and indicated in its draft report of 
25 February  2020  that it would seek clarification from the Parties on a number of 
subjects, including:  
(a) conditions precedent in the GPS and the Radios Purchase Agreements;  
(b) the terminat ion right by the seller in the GPS and the Radios Purchase 
Agreements;  
(c) non-solicitation periods for Key Personnel in the GPS and Radios Purchase 
Agreements;  
(d) assets not related to the Military GPS Business but necessary for a transfer of 
the business pursua nt to the Commitments ; 
(e) the exclusion of Export Control Authorizations from  the GPS  Purchase 
Agreement, the transfer of Key Personnel in the GPS and Radio Purchase 
Agreements;  
(f) the catch -all clause covering all other assets practiced or used (or held for 
practice or use) exclusively in the operation or conduct of the Military GPS 
Business ; 
(g) the relocation of the GPS Divestment Business.  
(403)  After receiving clarifications from the Parties,  Mazars  stated in its report of 4 March 
2020 that it was satisfied that the r elevant sections of the Radios and GPS Purchase 
Agreements were in line with the Commitments.  
(404)  In the same report , Mazars  concluded from  its review of the Radios and GPS 
Purchase Agreements that the agreements were broadly in line with the 
Commitments and that, as a result , the Divestment Businesses would be sold in a 
manner consistent with the Commitments.   
(405)  Based on Mazars ’s review of the Radios and GPS Purchase Agreements,  it appears , 
prima facie , that the Divestment Businesses would be sold in a manner c onsistent 
with the Commitments.  
8.6. Conclusion on the modifications to the Transaction  
(406)  In view  of the above, the Commission considers  that the Final Commitments will 
enable the Radios and GPS Divestment Business es to compete  effectively and viably  
in the relevant markets. These commitments therefore ensure that the Transaction 
will not result in adverse effect on competition in the relevant markets.  
(407)  The Commission thus concludes that the Final Commitments are adequate and 
sufficient to eliminate th e significant impediment to effective competition in the 
market s for (i) military airborne radios and  (ii) GPS receivers.  
8.7. Conditions and obligations  
(408)  Under the first sentence of the second subparagraph of Article 6(2) of the Merger 
Regulation, the Commissio n may attach to its decision conditions and obligations 
 
 
70 intended to ensure that the undertakings concerned comply with the commitments 
they have entered into vis -à-vis the Commission with a view to rendering the 
concentration compatible with the internal m arket.  
(409)  The fulfilment of the measures that give rise to the structural change of the market is 
a condition, whereas the implementing steps which are necessary to achieve this 
result are generally obligation s on the parties. Where a condition is not fulfill ed, the 
Commission’s decision declaring the concentration compatible with the internal 
market is no longer applicable. Where the undertakings concerned commit a breach 
of an obligation, the Commission may revoke the clearance decision in accordance 
with Ar ticle 6(3) of the Merger Regulation. The undertakings concerned may also be 
subject to fines and periodic penalty payments under Articles 14(2) and 15(1) of the 
Merger Regulation.  
(410)  In accordance with the distinction between conditions and obligations descri bed in 
the preceding recital, this Decision should be made conditional on full compliance 
with the requirements set out in Section s B and D of the Final Commitments 
(including the Schedules), which should constitute conditions. The remaining 
requirements s et out in other Sections of the Final Commitments should constitute 
obligations imposed on the Parties.  
9. CONCLUSION  
(411)  For the above reasons, the Commission has decided not to oppose the notified 
operation as modified by the commitments and to declare it compa tible with the 
internal market and with the functioning of the EEA Agreement, subject to full 
compliance with the conditions in Section s B and D  of the Final Commitments 
annexed to the present Decision and with the obligations contained in Sections A, C, 
E, F and G of the said commitments. This Decision is adopted in application of 
Article  6(1)(b) in conjunction with Article 6(2) of the Merger Regulation  and 
Article  57 of the EEA Agreement . 
For the Commission  
 
 
(Signed)  
Margrethe VESTAGER  
Executive  Vice-President  
 
 March 11, 2020  
Case M.9434 – UTC/Raytheon  
COMMITMENTS TO THE EUROPEAN COMMISSION  
Pursuant to Article 6(2) of Council Regulation (EC) No 139 /2004 (the “ Merger Regulation ”), 
United Technologies Corporation (“ UTC ”) (the “ Notifying Party ”) hereby enters into the 
following Commitments (the “ Commitments ”) vis -à-vis the European Commission (the 
“Commission ”) with a view to rendering the acquisition of Raytheon Company (“ Raytheon ” 
and, together with UTC, the “ Parties ”) (the “ Concentration ”) compatible with the internal 
market and the functioning of the EEA Agreement.  
This text shall be interpreted in light of the Commission’s decision pursuant to Arti cle 6(1)(b) 
of the Merger Regulation to declare the Concentration compatible  with the internal market 
and the functioning of the EEA Agreement (the “ Decision ”), in the general framework of 
European Union law, in particular in light of the Merger Regulation , and by reference to the 
Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and 
under Commission Regulation (EC) No 802/2004 (the “ Remedies Notice ”). 
Section A.  Definitions  
1. For the purpose of the Commitments, the following terms shall  have the following 
meaning:  
Affiliated Undertakings : undertakings controlled by the Parties and/or by the 
ultimate parents of the Parties, whereby the notion of control shall be interpreted 
pursuant to Article 3 of the Merger Regulation and in light of th e Commission 
Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on 
the control of concentrations between undertakings (the “ Consolidated Jurisdictional 
Notice ”). 
Assets : the assets that contribute to the current operation or are n ecessary to ensure 
the viability and competitiveness of the Divestment Businesses as indicated in 
Section  B, paragraphs ‎5 to ‎7 and described more in detail in the Schedules.  
Closing : the transfer of the legal title to the Divestment Businesses to the 
purchaser(s).  
Closing Period : each period of […] from the appr oval of the purchaser and the terms 
of sale by the Commission in relation to a Divestment Business.  
Confidential Information : any business secrets, know -how, commercial information, 
or any other information of a proprietary nature that is not in the public  domain.  
Conflict of Interest : any conflict of interest that impairs the Trustee’s objectivity and 
independence in discharging its duties under the Commitments.  
 
2 Divestment Businesses : the GPS Divestment Business and the Radios Divestment 
Business, as defin ed in Section B and in the Schedules which the Notifying Party 
commits to divest.  
Divestiture Trustee : one or more natural or legal person(s) who is/are approved by 
the Commission and appointed by UTC and who has/have received from UTC the 
exclusive Trustee Mandate to sell the Divestment Business(es) to a purchaser at no 
minimum price.  
Effective Date : the date of adoption of the Decision.  
First Divestiture Period : the period of […] from the Effective Date.  
GPS Divestment Business : the business defined  in Section B and in the GPS 
Schedule which the Notifying Party commits to divest.  
GPS Schedule : the schedule to these Commitments describing more in detail the GPS 
Divestment Businesses.  
Hold Separate Managers : the persons appointed by UTC for the Divestm ent 
Businesses to manage the day -to-day business under the supervision of the 
Monitoring Trustee.  
Key Personnel : all personnel necessary to maintain the viability and competitiveness 
of the Divestment Businesses, as listed in the Schedules, including the H old Separate 
Managers.  
Monitoring Trustee : one or more natural or legal person(s) who is/are approved by 
the Commission and appointed by UTC, and who has/have the duty to monitor UTC’s 
compliance with the conditions and obligations attached to the Decision . 
Parties : the Notifying Party and the undertaking that is the target of the concentration.  
Personnel : all staff currently employed by the Divestment Businesses, including staff 
seconded to the Divestment Businesses, shared personnel as well as the additio nal 
personnel listed in the Schedules.  
Purchaser(s) : one or more entities approved by the Commission as the acquirer(s) of 
the Divestment Businesses in accordance with the criteria set out in Section D.  
Purchaser Criteria : the criteria laid down in paragra ph ‎17 of these Commitments 
that the purchaser(s) must fulfil in order to be approved by the Commission.  
Radios Divestment Business : the business defined in Section B and in the Radios 
Schedule which the Notifying Party commits to divest.  
Radios Schedule : the schedule to these Commitments describing more in detail the 
Radios Divestment Businesses.  
Schedules : the GPS Schedule and the Radios Schedule, describing more in  detail the 
Divestment Businesses.  
Trustee(s) : the Monitoring Trustee and/or the Divestiture Trustee as the case may be.  
Trustee Divestiture Period : the period of […] from the end of the First Divestiture 
Period.  
 
3 Section B.  The commitment to divest and the Divestment  Businesses  
Commitment to divest  
2. In order to maintain effective competition, UTC commits to divest, or procure the 
divestiture of the Divestment Businesses by the end of the Trustee Divestiture Period 
as going concerns to the purchaser(s) and on terms of sale approved by the 
Commission in accordance with the procedure described in paragraph ‎18 of these 
Commitments. To carry out the divestiture, UTC commits to find one or more 
purchasers and to enter into final binding sale and purchase agreement(s) for the sale 
of the Divestment Businesses within the First Divestiture Period.  If UTC has not 
entered into such an agreement at the end of the First Divestiture Period in relation to 
any Divestment Business, UTC shall grant the Divestiture Trustee an exclusive 
mandate to sell that Divestment Business in accordance with the procedure described 
in para graph ‎30 in the Trustee Divestiture Period.  
3. UTC  shall be deemed to have complied with this commitment if:  
a) by the end of the Trustee Divestiture Period, UTC or the Di vestiture Trustee 
has entered into final binding sale and purchase agreement(s) and the 
Commission approves the proposed purchaser(s) and the terms of sale as being 
consistent with the Commitments in accordance with the procedure described 
in paragraph ‎18; and  
b) the Closing of the sale(s) of the Divestment Businesses to the purchaser(s) 
takes place within the Closing Period(s).  
4. In order to maintain the structural effec t of the Commitments, the Notifying Party 
shall, for a period of […] after Closing, not acquire, whether directly or indirectly, the 
possibility of exercising influence (as defined in paragraph 43 of the Remedies 
Notice, footnote 3) over the whole or part of the Divestment Businesses, unless, 
following the submission of a reasoned request from the Notifying Party showing 
good cause and accompanied by a report from the Monitoring Trustee (as provided in 
paragraph ‎44 of these Commitments), the Commission finds that the structure of the 
market has changed to such an extent that the absence of influence over one or both 
the Divestment Businesses is no longer necessary to render the proposed 
concentration compatible with the internal market.  
Structure and definition of the Divestment Businesses  
5. The GPS Divestment Business consists of UTC’s military GPS receiver and anti -
jamming business located in Cedar Rapids and Coralville, Iowa, United States, which 
designs, develops, manufactures, assembles, tests, certifies, and provides support for 
its mili tary GPS receivers and anti -jamming products.  
6. The Radios Divestment Business consists of Raytheon’s existing military airborne 
radios business which develops, assembles, tests, markets, sells, and repairs airborne 
radios for military aircraft together wit h the necessary crypto capabilities to encrypt 
these products for military use.  
7. The legal and functional structure of the Divestment Businesses as operated to date is 
described in the Schedules. The Divestment Businesses, described in more detail in 
 
4 the Sc hedules, include all assets and staff that contribute to the current operation or 
are necessary to ensure the viability and competitiveness of the Divestment 
Businesses, in particular:  
(a) all tangible and intangible assets (including intellectual property rig hts); 
(b) all licences, permits and authorisations issued by any governmental 
organisation for the benefit of the Divestment Businesses, to the extent 
transferable;  
(c) all contracts, leases, commitments and customer orders of the Divestment 
Businesses; all custom er, credit and other records of the Divestment 
Businesses; and  
(d) the Personnel;  
8. In addition, the Divestment Businesses include the benefit, for certain  transitional 
periods on terms and conditions equivalent to those at present afforded to the 
Divestment Bus inesses, of all current arrangements under which UTC or its Affiliated 
Undertakings supply products or services to the Divestment Businesses, as detailed in 
the Schedules, un less otherwise agreed with the p urchaser(s).   Strict firewall 
procedures will be a dopted so as to ensure that any competitively sensitive 
information related to, or arising from such supply arrangements (for example, 
product roadmaps) will not be shared with, or p assed on to, anyone outside the 
business units/divisions providing the pro duct/service.  
Section C.  Related commitments  
Preservation of viability, marketability and competitiveness  
9. From the Effective Date until Closing, the Notifying Party shall preserve or procure 
the preservation of the economic viability, marketability and competitiveness of the 
Divestment Businesses, in accordance with good business practice, and shall 
minimise as far as possible any risk of loss of competitive potential of the Divestment 
Businesses. In particular UTC undertakes:  
(a) not to carry out any action  that might have a significant adverse impact on the 
value, management or competitiveness of the Divestment Businesses or that 
might alter the nature and scope of activity, or the industrial or commercial 
strategy or the investment policy of the Divestment  Businesses;  
(b) to make available, or procure to make available, sufficient resources for the 
development of the Divestment Businesses, on the basis and continuation of 
the existing business plans;  
(c) to take all reasonable steps, or procure that all reasonable steps are being 
taken, including appropriate incentive schemes (based on industry practice), to 
encourage all Key Personnel to remain with the Divestment Businesses, and 
not to solicit or move any Personnel to UTC’s remaining business. Where, 
nevertheless,  individual members of the Key Personnel exceptionally leave the 
Divestment Businesses, UTC  shall provide a reasoned proposal to replace the 
person or persons concerned to the Commission and the Monitoring Trustee. 
 
5 UTC must be able to demonstrate to the Co mmission that the replacement is 
well suited to carry out the functions exercised by those individual members of 
the Key Personnel. The replacement shall take place under the supervision of 
the Monitoring Trustee, who shall report to the Commission.  
Hold -separate obligations  
10. The Notifying Party commits, from the Effective Date until Closing, to keep the 
Divestment Businesses separate from the business(es) it is retaining and to ensure that 
unless explicitly permitted under these Commitments: (i) management and staff of the 
business(es) retained by UTC  have no involvement in the Divestment Businesses; (ii) 
the Key Personnel and Personnel of the Divestment Businesses have no involvement 
in any business retained by UTC  and do not report to any individual outsid e the 
Divestment Businesses.  
11. Until Closing, UTC shall assist the Monitoring Trustee in ensuring that the 
Divestment Businesses are managed as distinct and saleable entities separate from the 
business(es) which UTC is retaining. Immediately after the adopti on of the Decision, 
UTC shall appoint the Hold Separate Managers. The Hold Separate Managers, who 
shall be part of the Key Personnel, shall manage the Divestment Businesses 
independently and in the best interest of the businesses with a view to ensuring th eir 
continued economic viability, marketability and competitiveness and their 
independence from the businesses retained by UTC . The Hold Separate Managers 
shall closely cooperate with and report to the Monitoring Trustee and, if applicable, 
the Divestiture  Trustee. Any replacement of the Hold Separate Managers shall be 
subject to the procedure laid down in paragraph ‎9(c) of these Commitments. The 
Commission may, after  having heard UTC, require UTC to replace one or both Hold 
Separate Managers.  
Ring -fencing  
12. UTC shall implement, or procure to implement, all necessary measures to ensure that 
it does not, after the Effective Date, obtain any Confidential Information relati ng to 
the Divestment Businesses and that any such Confidential Information obtained by 
UTC before the Effective Date will be eliminated and not be used by UTC. In 
particular, the participation of the Divestment Businesses in any central information 
technol ogy network shall be severed to the extent possible, without compromising the 
viability of the Divestment Businesses. UTC may obtain or keep information relating 
to the Divestment Businesses which is reasonably necessary for the divestiture of the 
Divestme nt Businesses or the disclosure of which to UTC is required by law.  
Non-solicitation clause  
13. The Parties undertake, subject to customary limitations, not to solicit, and to procure 
that Affiliated Undertakings do not solicit, the Key Personnel transferred w ith the 
Divestment Businesses for a period of […] after Closing.  
Due diligence  
14. In order to enable potential purchasers to carry out a reasonable due diligence of the 
Divestment Business es, UTC  shall, subject to customary confidentiality assurances 
and depe ndent on the stage of the divestiture process: (a) provide to potential 
purchasers sufficient information as regards the Divestment Business es; (b) provide to 
 
6 potential purchasers sufficient information relating to the Personnel and allow them 
reasonable a ccess to the Personnel.  
Reporting  
15. UTC  shall submit written reports in English  on potential purchasers of the Divestment 
Business es and developments in the negotiations with such potential purchasers to the 
Commission and the Monitoring Trustee no later than 10 days after the end of every 
month following the Effective Date (or otherwise at the Commission’s request).  UTC  
shall submit a list of all potential purchasers having expressed interest in acquiring the 
Divestment Business es to the Commission at each and every stage of the divestiture 
process, as well as a copy of all the offers made by potential purchasers within five 
days of t heir receipt.  
16. UTC  shall inform the Commission and the Monitoring Trustee on the preparation of 
the data room documentation and the due diligence procedure and shall submit a copy 
of any information memorandum to the Commission and the Monitoring Trustee 
before sending the memorandum out to potential purchasers.  
Section D.  The Purchaser  
17. In order to be approved by the Commission, the purchaser(s) must fulfil the following 
criteria:  
(a) The purchaser(s) shall be independent of and unconnected to the Notifying 
Party and its Affiliated Undertakings (this being assessed having regard to the 
situation following the divestiture).  
(b) The purchaser(s) shall have the financial resources, proven expertise in the 
supply of military aerospace systems and incentive to maintain and develop 
the Divestment Businesses as viable and active competitive forces in 
competition with the Parties and other competitors;  
(c) The acquisition of the Divestment Businesses by the purchaser(s) must neither 
be likely to create, in light of the information availabl e to the Commission, 
prima facie competition concerns nor give rise to a risk that the 
implementation of the Commitments will be delayed. In particular, the 
purchaser(s) must reasonably be expected to obtain all necessary approvals 
from the relevant regula tory authorities for the acquisition of the Divestment 
Businesses.  
18. The final binding sale and purchase agreement(s) (as well as ancillary agreements) 
relating to the divestment of the Divestment Businesses shall be conditional on the 
Commission’s approval.   When UTC has reached an agreement with a purchaser, it 
shall submit a fully documented and reasoned proposal, including a copy of the final 
agreement(s), within one week to the Commission and the Monitoring Trustee.  UTC 
must be able to demonstrate to th e Commission that the purchaser(s) fulfil(s) the 
Purchaser Criteria and that the Divestment Businesses are being sold in a manner 
consistent with the Commission’s Decision and the Commitments.  For the approval, 
the Commission shall verify that the purchas er(s) fulfil(s) the Purchaser Criteria and 
that the Divestment Businesses is being sold in a manner consistent with the 
 
7 Commitments including their objective to bring about a lasting structural change in 
the market.  The Commission may approve the sale of the Divestment Businesses 
without one or more Assets or parts of the Personnel, or by substituting one or more 
Assets or parts of the Personnel with one or more different assets or different 
personnel, if this does not affect the viability and competitiven ess of the Divestment 
Businesses after the sale, taking account of the proposed purchaser(s).  
Section E.  Trustee  
I. Appointment procedure  
19. UTC shall appoint a Monitoring Trustee to carry out the functions specified in these 
Commitments for a Monitoring Trustee.  The Noti fying Party commits not to close 
the Concentration before the appointment of a Monitoring Trustee.  
20. If UTC has not entered into a binding sale and purchase agreement regarding any of 
the Divestment Businesses one month before the end of the First Divestitur e Period or 
if the Commission has rejected the purchaser(s) proposed by UTC at that time or 
thereafter, UTC shall appoint a Divestiture Trustee for the Divestment Business(es) in 
relation to which UTC  has not entered into a final and binding sale and purch ase 
agreement or in relation to which t he Commission has rejected the p urchaser(s) 
proposed by UTC.  The appointment of the Divestiture Trustee shall take effect upon 
the commencement of the Trustee Divestiture Period.  
21. The Trustee shall:  
(a) at the time of app ointment, be independent of the Notifying Party and its 
Affiliated Undertakings;  
(b) possess the necessary qualifications to carry out its mandate, for example have 
sufficient relevant experience as an investment banker or consultant or auditor; 
and 
(c) neither ha ve nor become exposed to a Conflict of Interest.  
22. The Trustee shall be remunerated by the Notifying Party in a way that does not 
impede the independent and effective fulfilment of its mandate. In particular, where 
the remuneration package of a Divestiture T rustee includes a success premium linked 
to the final sale value of the Divestment Businesses, such success premium may only 
be earned if the divestiture takes place within the Trustee Divestiture Period.  
 
8 Proposal by UTC  
23. No later than two weeks after the E ffective Date, UTC shall submit the name or 
names of one or more natural or legal persons whom UTC proposes to appoint as the 
Monitoring Trustee to the Commission for approval. No later than one month before 
the end of the First Divestiture Period or on re quest by the Commission, UTC shall 
submit a list of one or more persons whom UTC proposes to appoint as Divestiture 
Trustee to the Commission for approval. The proposal shall contain sufficient 
information for the Commission to verify that the person or pe rsons proposed as 
Trustee fulfil the requirements set out in paragraph ‎21 and shall include:  
(a) the full terms of the proposed mandate, which shall include all provisi ons 
necessary to enable the Trustee to fulfil its duties under these Commitments;  
(b) the outline of a work plan which describes how the Trustee intends to carry 
out its assigned tasks;  
(c) an indication whether the proposed Trustee is to act as both Monitoring 
Trustee and Divestiture Trustee or whether different trustees are proposed for 
the two functions.  
Approval or rejection by the Commission  
24. The Commission shall have the discretion to approve or reject the proposed Trustee(s) 
and to approve the proposed mandat e subject to any modifications it deems necessary 
for the Trustee to fulfil its obligations.  If only one name is approved, UTC shall 
appoint or cause to be appointed the person or persons concerned as Trustee, in 
accordance with the mandate approved by th e Commission.  If more than one name is 
approved, UTC shall be free to choose the Trustee to be appointed from among the 
names approved. The Trustee shall be appointed within one week of the 
Commission’s approval, in accordance with the mandate approved by  the 
Commission.  
New proposal by UTC  
25. If all the proposed Trustees are rejected, UTC shall submit the names of at least two 
more natural or legal persons within one week of being informed of the rejection, in 
accordance with paragraphs ‎19 and ‎24 of these Commitments.  
Trustee nominated by the Commission  
26. If all further proposed Trustees are rejected by the Commission, the Commission shall 
nominate a Trustee, whom UTC shall appoint, or cause to be appointed, in accordance 
with a trustee mandate approved by the Commission.  
II. Functions of the Trustee  
27. The Trustee shall assume its speci fied duties and obligations in order to ensure 
compliance with the Commitments. The Commission may, on its own initiative or at 
the request of the Trustee or UTC, give any orders or instructions to the Trustee in 
order to ensure compliance with the conditi ons and obligations attached to the 
Decision.  
 
9 Duties and obligations of the Monitoring Trustee  
28. The Monitoring Trustee shall:  
(a) propose in its first report to the Commission a detailed work plan describing 
how it intends to monitor compliance with the obligat ions and conditions 
attached to the Decision.  
(b) oversee, in close co -operation with the Hold Separate Manager, the on -going 
management of the Divestment Businesses with a view to ensuring their 
continued economic viability, marketability and competitiveness and monitor 
compliance by UTC with the conditions and obligations attached to the 
Decision. To that end the Monitoring Trustee shall:  
(i) monitor the preservation of the economic viability, marketability and 
competitiveness of the Divestment Businesses, and th e keeping 
separate of the Divestment Businesses from the business retained by 
the Parties, in accordance with paragraphs ‎9 and ‎10 of these 
Commitments;  
(ii) supervise the management of the Divestment Businesses as distinct 
and saleable entities, in accordance with paragraph ‎11 of these 
Commitments;  
(iii) with respect to Confidential Information:  
– determine all necessary measures to ensure that UTC does not 
after the Effective Date obtain any Confidential Information 
relating to the Divestment Businesse s, 
– in particular strive for the severing of the Divestment 
Businesses’ participation in a central information technology 
network to the extent possible, without compromising the 
viability of the Divestment Businesses,  
– make sure that any Confidential Inform ation relating to the 
Divestment Businesses obtained by UTC before the Effective 
Date is eliminated and will not be used by UTC, and  
– decide whether such information may be disclosed to or kept by 
UTC as the disclosure is reasonably necessary to allow UTC t o 
carry out the divestiture or as the disclosure is required by law;  
(iv) monitor the splitting of assets and the allocation of Personnel between 
the Divestment Businesses and UTC or Affiliated Undertakings;  
(c) propose to UTC such measures as the Monitoring Truste e considers necessary 
to ensure UTC’s compliance with the conditions and obligations attached to 
the Decision, in particular the maintenance of the full economic viability, 
marketability or competitiveness of the Divestment Businesses, the holding 
separate  of the Divestment Businesses and the nondisclosure of competitively 
sensitive information;  
 
10 (d) review and assess potential purchasers as well as the progress of the 
divestiture process and verify that, dependent on the stage of the divestiture 
process:  
(i) potent ial purchasers receive sufficient and correct information relating 
to the Divestment Businesses and the Personnel in particular by 
reviewing, if available, the data room documentation, the information 
memorandum and the due diligence process, and  
(ii) potential  purchasers are granted reasonable access to the Personnel;  
(e) act as a contact point for any requests by third parties, in particular potential 
purchasers, in relation to the Commitments;  
(f) provide to the Commission, sending UTC a non -confidential copy at the same 
time, a written report within 15 days after the end of every month that shall 
cover the operation and management of the Divestment Businesses as well as 
the splitting of assets and the allocation of Personnel so that the Commission 
can assess whether the businesses are held in a manner consistent with the 
Commitments and the progress of the divestiture process as well as potential 
purchasers;  
(g) promptly report in writing to the Commission, sending UTC a 
non-confidential copy at the same time, if it concl udes on reasonable grounds 
that UTC is failing to comply with these Commitments;  
(h) within one week after receipt of the documented proposal referred to in 
paragraph ‎18 of these Commitments, submit to the Commission, sending UTC 
a non -confidential copy at the same time, a reasoned opinion as to the 
suitability and independence of the proposed purchaser(s) and the viability of 
the Divestment Businesses after the Sale and  as to whether the Divestment 
Businesses are sold in a manner consistent with the conditions and obligations 
attached to the Decision, in particular, if relevant, whether the Sale of the 
Divestment Businesses without one or more Assets or not all of the Pe rsonnel 
affects the viability of the Divestment Businesses after the sale, taking account 
of the proposed purchaser(s);  
(i) assume the other functions assigned to the Monitoring Trustee under the 
conditions and obligations attached to the Decision.  
29. If the Moni toring and Divestiture Trustee are not the same legal or natural persons, 
the Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each 
other during and for the purpose of the preparation of the Trustee Divestiture Period 
in order to  facilitate each other’s tasks.  
Duties and obligations of the Divestiture Trustee  
30. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no 
minimum price the Divestment Business(es) in relation to which UTC  has not entered 
into a fina l and binding sale and purchase agreement or in relation to which t he 
Commission has rejected the p urchaser(s) proposed by UTC , to one or more 
 
11 purchasers, provided that the Commission has approved both the purchaser(s) and the 
final binding sale and purcha se agreement(s) (and ancillary agreements) as in line 
with the Commission’s Decision and the Commitments in accordance with 
paragraphs ‎17 and ‎18 of these Commitments. The Divestiture Trustee shall include in 
the sale and purchase agreement(s) (as well as in any ancillary agreements) such 
terms and conditions as it considers app ropriate for an expedient sale in the Trustee 
Divestiture Period. In particular, the Divestiture Trustee may include in the sale and 
purchase agreement(s) such customary representations and warranties and indemnities 
as are reasonably required to effect th e sale. The Divestiture Trustee shall protect the 
legitimate financial interests of UTC, subject to the Notifying Party’s unconditional 
obligation to divest at no minimum price in the Trustee Divestiture Period.  
31. In the Trustee Divestiture Period (or otherw ise at the Commission’s request), the 
Divestiture Trustee shall provide the Commission with a comprehensive monthly 
report written in English on the progress of the divestiture process. Such reports shall 
be submitted within 15 days after the end of every month with a simultaneous copy to 
the Monitoring Trustee and a non -confidential copy to the Notifying Party . 
III. Duties and obligations of the Parties  
32. UTC shall provide and shall cause its advisors to provide the Trustee with all such 
co-operation, assistance and information as the Trustee may reasonably require to 
perform its tasks. The Trustee shall have full and complete access to any of UTC’s or 
the Divestment Businesses’ books, records, documents, management or other 
personnel, facilities, sites and techni cal information necessary for fulfilling its duties 
under the Commitments and UTC and the Divestment Businesses shall provide the 
Trustee upon request with copies of any document, as permitted by law. UTC and the 
Divestment Businesses shall make available to the Trustee one or more offices on 
their premises and shall be available for meetings in order to provide the Trustee with 
all information necessary for the performance of its tasks.  
33. UTC shall provide the Monitoring Trustee with all managerial and admin istrative 
support that it may reasonably request on behalf of the management of the Divestment 
Businesses. This shall include all administrative support functions relating to the 
Divestment Businesses which are currently carried out at headquarters level. UTC 
shall provide and shall cause its advisors to provide the Monitoring Trustee, on 
request, with the information submitted to potential purchasers, in particular give the 
Monitoring Trustee access to the data room documentation and all other information 
granted to potential purchasers in the due diligence procedure. UTC shall inform the 
Monitoring Trustee on possible purchasers, submit lists of potential purchasers at each 
stage of the selection process, including the offers made by potential purchasers a t 
those stages, and keep the Monitoring Trustee informed of all developments in the 
divestiture process.  
34. UTC shall grant or procure Affiliated Undertakings to grant comprehensive powers of 
attorney, duly executed, to the Divestiture Trustee to effect the s ale (including 
ancillary agreements), the Closing and all actions and declarations which the 
Divestiture Trustee considers necessary or appropriate to achieve the sale and the 
Closing, including the appointment of advisors to assist with the sale process. Upon 
request of the Divestiture Trustee, UTC shall cause the documents required for 
effecting the sale and the Closing to be duly executed.  
 
12 35. UTC shall indemnify the Trustee and its employees and agents (each an “ Indemnified 
Party ”) and hold each Indemnified  Party harmless against, and hereby agrees that an 
Indemnified Party shall have no liability to UTC for, any liabilities arising out of the 
performance of the Trustee’s duties under the Commitments, except to the extent that 
such liabilities result from th e wilful default, recklessness, gross negligence or bad 
faith of the Trustee, its employees, agents or advisors.  
36. At the expense of UTC, the Trustee may appoint advisors (in particular for corporate 
finance or legal advice), subject to UTC’s approval (this approval not to be 
unreasonably withheld or delayed) if the Trustee considers the appointment of such 
advisors necessary or appropriate for the performance of its duties and obligations 
under the Mandate, provided that any fees and other expenses incurred by the Trustee 
are reasonable. Should UTC refuse to approve the advisors proposed by the Trustee 
the Commission may approve the appointment of such advisors instead, after having 
heard UTC. Only the Trustee shall be entitled to issue instructions to the ad visors. 
Paragraph ‎35 of these Commitments shall apply mutatis mutandis . In the Trustee 
Divestiture Period, the Divestiture Trustee may use advisors who served UTC du ring 
the Divestiture Period if the Divestiture Trustee considers this in the best interest of an 
expedient sale.  
37. UTC agrees that the Commission may share Confidential Information proprietary to 
UTC with the Trustee. The Trustee shall not disclose such info rmation and the 
principles contained in Article 17 (1) and (2) of the Merger Regulation apply mutatis 
mutandis . 
38. The Notifying Party agree that the contact details of the Monitoring Trustee are 
published on the website of the Commission’s Directorate -General for Competition 
and they shall inform interested third parties, in particular any potential purchasers, of 
the identity and the tasks of the Monitoring Trustee.  
39. For a period of 10 years from the Effective Date the Commission may request all 
informa tion from the Parties that is reasonably necessary to monitor the effective 
implementation of these Commitments.  
IV. Replacement, discharge and reappointment of the Trustee  
40. If the Trustee ceases to perform its functions under the Commitments or for any other 
good cause, including the exposure of the Trustee to a Conflict of Interest:  
(a) the Commission may, after hearing the Trustee and UTC, require UTC to 
replace the Trustee; or  
(b) UTC may, with the prior approval of the Commission, replace the Trustee.  
41. If the Truste e is removed according to paragraph ‎40 of these Commitments, the 
Trustee may be required to continue in its function until a new Trustee is in place to 
whom the Trus tee has effected a full hand over of all relevant information. The new 
Trustee shall be appointed in accordance with the procedure referred to in 
paragraphs  ‎19-‎26 of these Commitments.  
 
13 42. Unless removed according to paragraph ‎40 of these Com mitments, the Trustee shall 
cease to act as Trustee only after the Commission has discharged it from its duties 
after all the Commitments with which the Trustee has been entrusted have been 
implemented. However, the Commission may at any time require the r eappointment 
of the Monitoring Trustee if it subsequently appears that the relevant remedies might 
not have been fully and properly implemented.  
Section F.  The review clause  
43. The Commission may extend the time periods foreseen in the Commitments in 
response to a reque st from UTC or, in appropriate cases, on its own initiative. Where 
UTC requests an extension of a time period, it shall submit a reasoned request to the 
Commission no later than one month before the expiry of that period, showing good 
cause . This request s hall be accompanied by a report from the Monitoring Trustee, 
who shall, at the same time send a non -confidential copy of the report to the Notifying 
Party. Only in exceptional circumstances shall UTC be entitled to request an 
extension within the last mont h of any period.  
44. The Commission may further, in response to a reasoned request from the Notifying 
Party showing good cause waive, modify or substitute, in exceptional circumstances, 
one or more of the undertakings in these Commitments. This request shall b e 
accompanied by a report from the Monitoring Trustee, who shall, at the same time 
send a non -confidential copy of the report to the Notifying Party. The request shall 
not have the effect of suspending the application of the undertaking and, in particular,  
of suspending the expiry of any time period in which the undertaking has to be 
complied with.  
Section G.  Entry into force  
45. The Commitments shall take effect upon the date of adoption of the Decision.   
(signed)  
duly authorised for and on behalf of UTC  
(signed)  
duly authorized for and on behalf of Raytheon  
  
 
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