Kathleen A. Buck
To Call Writer Direct:
December 22, 1995
VIA HAND DELIVERY
Mr. Donald S. Clark
Office of the Secretary
Federal Trade Commission
6th Street and Pennsylvania Avenue, N.W.
Washington, DC 20580
Re: Comments on Hearings on Global Competition and Innovation
Dear Mr. Clark:
This letter, on behalf of Hughes Aircraft Company ("Hughes"), is in response to the Federal Trade Commission's ("FTC") notice of July 20, 1995, soliciting public comments on FTC policy in relation to the changing nature of competition. Hughes commends the FTC's efforts to review its antitrust enforcement policy in light of changes stemming from global and innovation-based competition. The dynamics of global markets, changes in national security requirements, and changes and cuts in defense programs have had a profound impact on the defense industry. A review of antitrust enforcement policy at this time is appropriate and timely.
During the FTC's November hearings, Norm Augustine, President of Lockheed Martin, made certain recommendations that Hughes and other members of the defense industry support, including that:
- A specific set of guidelines for defense industry transactions should be adopted by the FTC;
- The guidelines for defense industry transactions should be based on the Defense Science Board Task Force report; and
- Our nation is better served by strong competitors within the defense industry.
While we support many of the recommendations made by Mr. Augustine, we strongly disagree with the assertion he made criticizing the FTC's action in the Lockheed Martin merger. As a prerequisite to allowing the merger, the FTC issued a consent order prohibiting Lockheed Martin from enforcing exclusivity provisions contained in teaming agreements with infrared sensor producers. Specifically, the FTC prohibited Lockheed Martin from enforcing or attempting to enforce any provision in a Lockheed-Hughes teaming agreement that would have prohibited Hughes from competing against Lockheed or otherwise working with anyone on the Space-Based Early Warning System. The teaming agreement referred to had actually expired with the cancellation of the FEWS Program by the Defense Department. Nonetheless, Lockheed had continued to assert an exclusive claim to the Hughes' sensor technology.
Lockheed Martin's true complaint is that Hughes competed this past summer as a prime contractor (using Hughes' sensor technology) against Lockheed Martin's proposals on the Space-Based Early Warning System. Eventually, the Hughes proposal was one of the two which were selected. In point of fact, three proposals were submitted -- Lockheed Martin was allowed to submit two. Without the Hughes proposal, only one company, Lockheed Martin, would have been in the competition, thus ensuring that Lockheed Martin would be the winner in the imminent down select to one contractor. The truth is that the FTC's actions in the consent order ensured that there was true competition on this important defense program.
We appreciate the opportunity to submit our comments and to set the record straight.
Kathleen A. Buck