Federal Trade Commission Clears Boeing Co.'s Acquisition of Hughes Space and Communications

The Federal Trade Commission today announced a proposed consent agreement with The Boeing Company (Boeing) that would allow its acquisition of Hughes Space and Communications (Hughes), a subsidiary of General Motors Corporation, while remedying the potential anti-competitive effects of the $3.75 billion transaction. Under the proposed consent agreement, Boeing would be prohibited from providing systems engineering and technical assistance (SETA) services to the U.S. Department of Defense (DoD) for a classified program. The proposed consent agreement also prohibits Boeing's launch vehicle division from gaining access to nonpublic information that its satellite division receives from competing suppliers that launch Boeing satellites. Similarly, its satellite division would be prohibited from gaining access to nonpublic information that its launch vehicle business receives from competing satellite suppliers. In addition, Boeing would be required to provide all necessary satellite interface information -- which is used to make satellites compatible with launch vehicles -- to all other launch vehicle suppliers.

"This consent agreement will ensure that competition in the highly specialized markets for satellites and launch vehicles will be maintained," said Richard Parker, Director of the FTC's Bureau of Competition. Parker noted that the provisions of the proposed consent agreement are similar to past Commission consent agreements in matters within this industry. Parker also noted the FTC's close cooperation with DoD and the European Commission during the course of the investigation and in the settlement of this matter. The settlement announced today demonstrates again the value of enforcement cooperation between U.S. and EU authorities pursuant to the 1991 EC/U.S. Cooperation Agreement, Parker said.

According to the FTC's complaint, Boeing's acquisition of Hughes, as proposed, would violate Section 7 of the Clayton Act and Section 5 of the FTC Act by reducing [or eliminating] competition in a number of areas. First, the complaint alleges that the proposed transaction would reduce competition by enabling Boeing/Hughes to potentially disadvantage or raise the costs of other competitors for a certain classified program for which Boeing is the sole supplier of SETA services and Hughes is one of two competing contractors. Second, the complaint alleges that Boeing/Hughes may gain access to competitively sensitive nonpublic information concerning satellite and launch vehicle suppliers which would reduce competition, as well as innovation and quality, for satellites and launch vehicles in the future. Lastly, as a supplier of satellites and launch vehicles, the complaint alleges that Boeing/Hughes may be able to disadvantage or raise the costs of competing launch vehicle suppliers by withholding satellite information necessary to make a satellite compatible with a launch vehicle.

The terms of the proposed consent agreement would remedy the anticompetitive effects alleged in the FTC's complaint. Under the terms of the order, Boeing would be prohibited from performing SETA services for a certain classified program and would be required to provide technical assistance to enable DoD to take over SETA services responsibilities for that program. In addition, the proposed consent agreement requires Boeing to erect firewalls between its satellite and launch vehicle divisions to ensure that proprietary and competitively sensitive information of satellite and launch vehicle competitors is protected. The proposed consent agreement also would require Boeing to provide satellite interface information to all launch vehicle suppliers to ensure that all launch vehicle suppliers will be able to integrate their launch vehicles with Boeing/Hughes's satellites.

The proposed consent agreement also names Sheila Widnall as a monitor trustee to ensure that Boeing complies with the terms of the proposed order. The monitor trustee's responsibilities include, among other things, assisting the Commission in monitoring Boeing's compliance with the firewall requirements of the agreement, evaluating the contents of the satellite interface information and ensuring that satellite interface information is distributed to all launch vehicle suppliers.

The Commission vote to accept the proposed consent agreement and appoint the monitor trustee was 5-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until October 27, 2000, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.