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Topic: Chrysler Corporation
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| Agency: Federal Trade Commission
Date: 13 June 1996 |
The FTC charged that the proposed deal would violate antitrust laws by reducing competition for the U.S. Navy’s upcoming procurement of a Submarine High Data Rate (“Submarine HDR”) system, a satellite communications system to be used on U.S. Navy submarines. Both Raytheon and GTE Corporation (“GTE”) bid on the program in April and may submit further proposals in about one month in a “best and final offer” competition. CTH is presently a second-tier subcontractor to GTE, supplying antenna/terminal controls--a component of the submarine HDR system.
To settle the FTC charges, Raytheon has agreed to erect an information “firewall” for the duration of the Navy competition. Under the terms of the settlement, Raytheon would be prohibited from disseminating any non-public information concerning Raytheon’s proposal in the upcoming procurement to CTH officials or employees, or receiving any non-public information about GTE’s proposal from CTH.
Raytheon, headquartered in Lexington, Massachusetts, is an international, high technology company. The division of Raytheon which is competing for the Submarine HDR program is Raytheon Electronic Systems Division, located in Marlborough, Massachusetts.
Raytheon Electronic Systems Division specializes in the manufacture and sale of a wide variety of defense electronics products, including missiles, radar and sonar systems, and communications systems and equipment. In 1995, Raytheon had sales of approximately $11.7 billion.
CTH, a wholly-owned subsidiary of Chrysler Corporation, consists of two business units. Electrospace Systems, Inc. (ESI), the unit bidding on the Submarine HDR program, is located in Richardson, Texas, and in 1995 had annual revenues of about $170 million.
According to the complaint, the merger of Raytheon and CTH would allow Raytheon to gain access to competitively sensitive information about GTE’s proposal. In its capacity as the antenna/terminal control supplier for GTE, CTH has received a significant amount of competitively sensitive information about the overall GTE proposal. Raytheon’s proposed acquisition of CTH may compromise the competitiveness of the upcoming procurement by giving Raytheon access to this information.
The proposed agreement to settle the charges would require Raytheon to erect an information “firewall” to preclude the exchange of sensitive information concerning the Submarine HDR system prior to the completion of the competitive procurement. Specifically, the agreement prohibits Raytheon from giving any non-public information to CTH officials and employees concerning Raytheon’s proposal in the upcoming procurement, and it orders Raytheon not to obtain or seek to obtain any non-public information concerning GTE’s bid. Similar “firewall” provisions have been used in previous Commission orders.
The Commission vote to announce the proposed consent agreement for public comment was 5-0. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.
Copies of the complaint, consent and an analysis to aid public comment are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202- 326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(FTC File No. 961-0057)