FTC to require Northrop to take additional steps on solid-rocket motors following Orbital deal

By Marjorie Censer / June 7, 2018

The Federal Trade Commission said this week it is imposing conditions on Northrop Grumman to ensure continued competition in the missile systems market following Northrop's acquisition of Orbital ATK.

In an announcement of the proposed consent agreement, the FTC notes that Northrop is one of four companies capable of supplying the U.S. government with missile systems. Orbital ATK, it adds, “is the premier supplier of [solid-rocket motors], which propel missiles to their intended targets and are an essential input for missile systems.”

The FTC's complaint alleged that the acquisition of Orbital ATK “would provide Northrop with the incentive and ability to harm competition for missile contracts by either withholding access to its solid-rocket motors or increasing SRM prices to competitors,” according to the agency's announcement.

“As a result, competitors would be forced to raise the prices of their missile systems, invest less aggressively to win missile programs, or decide not to compete at all, which, in turn, would decrease competitive pressure on Northrop,” the FTC announcement continues.

Under the proposed consent agreement, Northrop “must make its solid-rocket motors and related services available on a non-discriminatory basis to all competitors for missile contracts.

“The non-discrimination prohibitions of the settlement are comprehensive and apply to any potential discriminatory conduct affecting price, schedule, quality, data, personnel, investment, technology, innovation, design or risk,” the FTC says.

Additionally, Northrop must establish firewalls that prevent it from transferring or using proprietary information it receives from competing missile prime contractors or SRM suppliers. Also, DOD's acquisition chief must appoint a compliance officer to ensure Northrop complies.

“The compliance officer will have all the necessary investigative powers, including the right to interview Northrop’s personnel, inspect the company’s facilities, and require it to provide documents, data, and other information,” the FTC announcement states. “The compliance officer is also authorized to retain third-party advisers, at Northrop’s expense.”

The FTC said the agreement will preserve the “procompetitive benefits of the transaction while addressing the potential anticompetitive harms.”

The agreement will be open for public comment through July 5, after which the FTC will decide whether to modify or withdraw the proposed order.