83 FR 27776 - Northrop Grumman Corporation and Orbital ATK, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

Federal Register Volume 83, Issue 115 (June 14, 2018)

Page Range		27776-27778
FR Document		2018-12750

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

Federal Register, Volume 83 Issue 115 (Thursday, June 14, 2018)

[Federal Register Volume 83, Number 115 (Thursday, June 14, 2018)]
[Notices]
[Pages 27776-27778]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-12750]

[[Page 27776]]

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FEDERAL TRADE COMMISSION

[File No. 181 0005]

Northrop Grumman Corporation and Orbital ATK, Inc.; Analysis To
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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

DATES: Comments must be received on or before July 5, 2018.

ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write: ``In the Matter of
Northrop Grumman Corporation and Orbital ATK, Inc., File No. 181 0005''
on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/northropgrumman by following the
instructions on the web-based form. If you prefer to file your comment
on paper, write ``In the Matter of Northrop Grumman Corporation and
Orbital ATK, Inc., File No. 181 0005'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: James Southworth (202-326-2822),
Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for June 5, 2018), on the World Wide Web, at
https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before July 5, 2018.
Write ``In the Matter of Northrop Grumman Corporation and Orbital ATK,
Inc., File No. 181 0005'' on your comment. Your comment--including your
name and your state--will be placed on the public record of this
proceeding, including, to the extent practicable, on the public
Commission website, at https://www.ftc.gov/policy/public-comments.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/northropgrumman by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that website.
If you prefer to file your comment on paper, write ``In the Matter
of Northrop Grumman Corporation and Orbital ATK, Inc., File No. 181
0005'' on your comment and on the envelope, and mail your comment to
the following address: Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC
20024. If possible, submit your paper comment to the Commission by
courier or overnight service.
Because your comment will be placed on the publicly accessible FTC
website at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure that your comment does not include
any sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC website--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website at http://www.ftc.gov to read this Notice and
the news release describing it. The FTC Act and other laws that the
Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments that it
receives on or before July 5, 2018. For information on the Commission's
privacy policy, including routine uses permitted by the Privacy Act,
see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'') has accepted an
Agreement Containing Consent Order (``Consent Agreement'') designed to
remedy the anticompetitive effects resulting from Northrop Grumman
Corporation's (``Northrop'') proposed acquisition of Orbital ATK, Inc.
(``Orbital ATK''). Under the terms of the Consent Agreement, Northrop
would be

[[Page 27777]]

required to (1) continue to act as a non-discriminatory merchant
supplier of Orbital ATK's solid rocket motors (``SRMs'') rather than
favor its now-vertically integrated missile system business, and (2)
protect SRM and missile system competitors' competitively sensitive
information from improper use or disclosure.
The Consent Agreement has been placed on the public record for
thirty days for receipt of comments by interested persons. Given that
the acquisition could impact a current ongoing missile system
competition, the Commission issued the accompanying Decision and Order
(``Order'') as final prior to seeking public comment, as provided in
Section 2.34(c) of the Commission's Rules. This will allow the
Commission to enforce the Order if there are any violations of its
provisions during the public comment period. Comments received during
this period will become part of the public record. After thirty days,
the Commission will again review the proposed Consent Agreement and the
comments received, and will decide whether it should withdraw from the
Consent Agreement or modify the accompanying Order.
Pursuant to an Agreement and Plan of Merger dated September 17,
2017, Northrop agreed to acquire 100 percent of the issued and
outstanding voting securities of Orbital ATK for approximately $7.8
billion (the ``Acquisition''). The Commission's Complaint alleges that
the Acquisition is in violation of Section 5 of the FTC Act, as
amended, 15 U.S.C. 45, and that the acquisition, if consummated, would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and
Section 5 of the FTC Act, as amended, 15 U.S.C. 45, by lessening the
competition in the United States market for missile systems. The
Acquisition would provide Northrop with the ability and incentive to
withhold its SRMs from competing missile system prime contractors, or
only offer its SRMs at disadvantageous terms, thereby raising rivals'
costs or otherwise undermining their ability to compete on future
missile system bids. The Consent Agreement will remedy the alleged
violations by prohibiting Northrop from discriminating against
competing missile prime customers in supplying SRMs.

II. The Parties

Northrop is a Delaware corporation with its principal place of
business in Falls Church, Virginia. Northrop is a global aerospace and
defense company that acts as a prime contractor or preferred supplier
on many high-priority programs for the United States Department of
Defense (``DOD'') and other United States Government agencies. Northrop
is one of only a few companies capable of acting as a prime contractor
for tactical, missile defense, and strategic missile systems for DOD
[the United States Government]. From 1997 to 2013, Northrop was the
prime contractor responsible for maintaining, sustaining, and
modernizing the Minuteman III strategic missile system. Northrop is
currently competing to develop the nation's next intercontinental
ballistic missile system, the Ground Based Strategic Deterrent.
Northrop has also successfully competed for United States Government
research and development contracts for tactical missiles and missile
defense interceptors.
Orbital ATK is a Delaware corporation with its principal place of
business in Dulles, Virginia. The company is a prime contractor and
merchant supplier of space, defense, and aviation-related systems to
customers around the world. Orbital ATK is the nation's leading
producer of SRMs for both defense and commercial applications. For
defense programs, Orbital ATK produces strategic-grade SRMs for the
Trident II D-5 and Minuteman III and the Missile Defense Agency's
Ground-based Midcourse Defense interceptor. In addition, Orbital ATK is
a leading producer of SRMs for air-, sea- and land-based tactical
missiles and missile defense interceptors. Orbital ATK supplies these
SRMs to prime contractors for use in their missile systems.

III. The Products and Structure of the Markets

Northrop is one of only four companies capable of supplying missile
systems to the United States Government. Missile systems provide
essential national defense capabilities for the United States
Government. The United States Armed Forces employ multiple types of
missile systems, including short-range tactical missiles, longer-range
strategic missiles, and missile defense interceptors designed to defeat
ballistic missile threats. Each type of missile system purchased by DOD
has unique capabilities and is designed specifically to perform its
given mission(s).
Orbital ATK is one of only two viable suppliers of SRMs for U.S.
Government missile systems and the dominant supplier of large SRMs used
for long-range strategic missiles. SRMs are used to propel tactical,
missile defense, and strategic missiles to their intended targets. SRMs
are used for virtually all missile systems purchased by the United
States Government because they offer numerous advantages over all other
existing propulsion technologies.
The relevant geographic market in which to analyze the effects of
the proposed transaction is the United States. The missile systems that
are the subject of the Complaint are solely purchased by the United
States Government, which also typically funds their development.
National security considerations and other factors limit DOD's ability
to procure its missile systems from foreign suppliers. Federal law,
national security, and other considerations similarly drive missile
system prime contractors to procure SRMs from domestic suppliers.

IV. Entry

Entry into the relevant markets would not be timely, likely, or
sufficient in magnitude, character, and scope to deter or counteract
the anticompetitive effects of the Acquisition. There are significant
barriers to entry into the development, manufacture, and sale of both
SRMs and missile systems in the United States. The relevant products
are high technology, defense-specific products that require specialized
expertise and facilities to develop, test, and manufacture. It would be
extremely difficult and costly for a new entrant to establish the
technological expertise and specialized facilities necessary to compete
successfully in either of these markets.

V. Effects of the Acquisition

Following the Acquisition, Northrop, will be one of only two viable
suppliers of SRMs for U.S. Government missile systems. The choice of
SRM can have a significant impact on the final determination of a
missile system prime competition because the propulsion system is a
critical element of the overall missile design. SRMs comprise a large
portion of the cost of the integrated missile and their performance
affects the range, accuracy, and payload capacity of the missile.
Absent the protections of the Consent Agreement, Northrop would have
the ability to disadvantage competitors for future missile prime
contracts by denying or limiting their access to Northrop's SRM
products and technologies, which would lessen the ability of Northrop's
missile system competitors to compete successfully for a given missile
system prime contract. The Acquisition would also give Northrop access,
through the former Orbital ATK SRM business, to the proprietary
information that rival missile prime contractors must share with its
SRM vendor. Similarly, the Acquisition creates a risk that the

[[Page 27778]]

proprietary, competitively sensitive information of a rival SRM
supplier supporting Northrop's missile system business could be
transferred to Northrop's vertically integrated SRM business.

VI. The Consent Agreement

The Consent Agreement remedies the acquisition's likely
anticompetitive effects by requiring, whenever Northrop competes for a
missile system prime contract, that Northrop must make its SRM products
and related services available on a non-discriminatory basis to all
other third-party competing prime contractors that wish to purchase
them. The non-discrimination prohibitions of the Consent Agreement are
comprehensive and apply to any potential discriminatory conduct
affecting price, schedule, quality, data, personnel, investment,
technology, innovation, design, or risk.
The Consent Agreement requires Northrop to establish firewalls to
ensure that Northrop does not transfer or use any proprietary
information that it receives from competing missile prime contractors
or SRM suppliers in a manner that harms competition. These firewall
provisions require that Northrop maintain separate firewalled teams to
support offers of SRMs to different third-party missile prime
contractors and to maintain these firewalled teams separate from the
team supporting Northrop's missile prime contractor activities. The
firewall provisions also prohibit Northrop's missile business from
sharing proprietary information it may receive from third-party SRM
suppliers with Northrop's SRM business.
The Consent Agreement also provides that the DOD's Under Secretary
of Defense for Acquisition and Sustainment shall appoint a compliance
officer to oversee Northrop's compliance with the Order. The compliance
officer will have all the necessary investigative powers to perform his
or her duties, including the right to interview respondent's personnel,
inspect respondent's facilities, and require respondents to provide
documents, data, and other information. The compliance officer has the
authority to retain third-party advisors, at the expense of Northrop,
as appropriate to perform his or her duties. Access to these extensive
resources will ensure that the compliance officer is fully capable of
overseeing the implementation of, and compliance with, the Order.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.

By direction of the Commission.
Janice Frankle,
Acting Secretary.
[FR Doc. 2018-12750 Filed 6-13-18; 8:45 am]
BILLING CODE 6750-01-P

27778 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices

proprietary, competitively sensitive not intended to constitute an official DEPARTMENT OF HEALTH AND
information of a rival SRM supplier interpretation of the proposed Consent HUMAN SERVICES
supporting Northrop’s missile system Agreement or to modify its terms in any
business could be transferred to way. Agency for Healthcare Research and
Northrop’s vertically integrated SRM By direction of the Commission.
Quality
business. Janice Frankle, Agency Information Collection
VI. The Consent Agreement Acting Secretary. Activities: Proposed Collection;
The Consent Agreement remedies the [FR Doc. 2018–12750 Filed 6–13–18; 8:45 am] Comment Request
acquisition’s likely anticompetitive BILLING CODE 6750–01–P
effects by requiring, whenever Northrop AGENCY: Agency for Healthcare Research
competes for a missile system prime and Quality, HHS.
contract, that Northrop must make its ACTION: Notice.
SRM products and related services GOVERNMENT ACCOUNTABILITY
available on a non-discriminatory basis OFFICE SUMMARY: This notice announces the
to all other third-party competing prime intention of the Agency for Healthcare
contractors that wish to purchase them. Request for Nominations for the Research and Quality (AHRQ) to request
The non-discrimination prohibitions of Physician-Focused Payment Model that the Office of Management and
the Consent Agreement are Technical Advisory Committee (PTAC) Budget (OMB) approve the proposed
comprehensive and apply to any information collection project
potential discriminatory conduct AGENCY: Government Accountability ‘‘Ambulatory Surgery Center Survey on
affecting price, schedule, quality, data, Office (GAO). Patient Safety Culture Database.’’
personnel, investment, technology, ACTION:Request for letters of This proposed information collection
innovation, design, or risk. nomination and resumes. was previously published in the Federal
The Consent Agreement requires Register on March 14th, 2018 and
Northrop to establish firewalls to ensure SUMMARY: The Medicare Access and allowed 60 days for public comment.
that Northrop does not transfer or use CHIP Reauthorization Act of 2015 AHRQ received no substantive
any proprietary information that it established the Physician-Focused comments from members of the public.
receives from competing missile prime Payment Model Technical Advisory The purpose of this notice is to allow an
contractors or SRM suppliers in a Committee to provide comments and additional 30 days for public comment.
manner that harms competition. These recommendations to the Secretary of DATES: Comments on this notice must be
firewall provisions require that Health and Human Services on received by July 16, 2018.
Northrop maintain separate firewalled physician payment models, and gave ADDRESSES: Written comments should
teams to support offers of SRMs to the Comptroller General responsibility
different third-party missile prime be submitted to: AHRQ’s OMB Desk
for appointing its members. GAO is now Officer by fax at (202) 395–6974
contractors and to maintain these accepting nominations of individuals
firewalled teams separate from the team (attention: AHRQ’s desk officer) or by
for this committee. email at OIRA_submission@
supporting Northrop’s missile prime
contractor activities. The firewall DATES: Letters of nomination and omb.eop.gov (attention: AHRQ’s desk
provisions also prohibit Northrop’s resumes should be submitted no later officer).
missile business from sharing than July 20, 2018, to ensure adequate FOR FURTHER INFORMATION CONTACT:
proprietary information it may receive opportunity for review and Doris Lefkowitz, AHRQ Reports
from third-party SRM suppliers with consideration of nominees prior to Clearance Officer, (301) 427–1477, or by
Northrop’s SRM business. appointment. Appointments will be email at doris.lefkowitz@AHRQ.hhs.gov.
The Consent Agreement also provides made in October 2018.
SUPPLEMENTARY INFORMATION:
that the DOD’s Under Secretary of ADDRESSES: Submit letters of
Defense for Acquisition and Proposed Project
nomination and resumes by either of the
Sustainment shall appoint a compliance following methods: Email: Ambulatory Surgery Center Survey on
officer to oversee Northrop’s compliance PTACcommittee@gao.gov. Include Patient Safety Culture Database
with the Order. The compliance officer PTAC Nominations in the subject line of
will have all the necessary investigative In accordance with the Paperwork
the message, or Mail: U.S. GAO, Attn:
powers to perform his or her duties, Reduction Act, 44 U.S.C. 3501–3521,
PTAC Nominations, 441 G Street NW,
including the right to interview AHRQ invites the public to comment on
Washington, DC 20548.
respondent’s personnel, inspect this proposed information collection.
respondent’s facilities, and require FOR FURTHER INFORMATION CONTACT: Greg Ambulatory surgery centers (ASCs) are
respondents to provide documents, Giusto at (202) 512–8268 or giustog@ a fast-growing health care setting,
data, and other information. The gao.gov if you do not receive an demonstrating tremendous growth both
compliance officer has the authority to acknowledgement within a week of in the volume and complexity of
retain third-party advisors, at the submission or if you need additional procedures being performed. ASCs
expense of Northrop, as appropriate to information. For general information, provide surgical services to patients
perform his or her duties. Access to contact GAO’s Office of Public Affairs, who are not expected to need an
these extensive resources will ensure (202) 512–4800. inpatient stay following surgery. The
daltland on DSKBBV9HB2PROD with NOTICES

that the compliance officer is fully Authority: Pub. L. 114–10, Sec. 101(e), 129 Centers for Medicare and Medicaid
capable of overseeing the Stat. 87, 115 (2015). Services (CMS) defines ASCs as distinct
implementation of, and compliance entities that operate exclusively to
with, the Order. Gene L. Dodaro, provide surgical services to patients
The purpose of this analysis is to Comptroller General of the United States. who do not require hospitalization and
facilitate public comment on the [FR Doc. 2018–12736 Filed 6–13–18; 8:45 am] are not expected to need to stay in a
proposed Consent Agreement, and it is BILLING CODE 1610–02–P surgical facility longer than 24 hours.

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Document Created: 2018-06-14 01:39:10
Document Modified: 2018-06-14 01:39:10

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Proposed consent agreement.
Dates		Comments must be received on or before July 5, 2018.
Contact		James Southworth (202-326-2822), Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC 20580.
FR Citation		83 FR 27776