The Boeing Company - Decision & Order

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:: Robert Pitofsky, Chairman; Sheila F. Anthony; Mozelle W. Thompson; Orson Swindle; Thomas B. Leary

In the Matter of

The Boeing Company, a corporation.

Docket No. C-____

DECISION AND ORDER

The Federal Trade Commission ("Commission"), having initiated an investigation of the proposed acquisition by Respondent The Boeing Company ("Boeing") of certain assets of General Motors Corporation, and Respondent having been furnished thereafter with a copy of a draft of Complaint which the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge Respondent with violations of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45; and

Respondent, its attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Order ("Consent Agreement"), containing an admission by Respondent of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it has reason to believe that Respondent has violated the said Acts and that a Complaint should issue stating its charges in that respect, and having accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby issues its Complaint, makes the following jurisdictional findings and issues the following Decision and Order ("Order"):

1. Respondent Boeing is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 7755 E. Marginal Way South, Seattle, Washington 98108.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Respondent, and the proceeding is in the public interest.

ORDER

IT IS ORDERED that, as used in this Order, the following definitions shall apply:

A. "Respondent" or "Boeing" means The Boeing Company, its directors, officers, employees, agents, representatives, predecessors, successors and assigns; its subsidiaries, divisions, groups, affiliates, partnerships and joint ventures controlled by Boeing, and the respective directors, officers, employees, agents, representatives, successors and assigns of each.

B. "Hughes" means Hughes Space and Communications Company, Hughes Space and Communications International, Hughes Space and Communications International Service Company, Spectrolab, Inc., Hughes Electron Dynamics, Hughes Telecommunications and Space Company's 2.69% interest in ICO Global Communications Ltd., and Hughes Telecommunications and Space Company's 2% interest in Thuraya Satellite Telecommunications Private Joint Stock Company.

C. "Acquisition" means the proposed acquisition of Hughes by Boeing pursuant to the Stock Purchase Agreement dated January 13, 2000.

D. "Commission" means the Federal Trade Commission.

E. "Satellite Interface Information" means any information necessary for a Launch Vehicle Supplier to research, develop, manufacture or modify any Launch Vehicle for use with Respondent's Satellites.

F. "Launch Vehicle" means any vehicle with the lift capability to launch any Satellite manufactured by Respondent.

G. "Launch Vehicle Supplier" means any entity engaged in the research, development, manufacture or sale of Launch Vehicles, including any Boeing Launch Vehicle Business or Sea Launch.

H. "Satellite" means an unmanned machine that is launched from the Earth's surface for the purpose of transmitting data back to Earth and which is designed either to orbit the Earth or to travel away from the Earth. The term Satellite does not include missiles and unmanned aerial vehicles.

I. "Satellite Manufacturer" means any entity engaged in the research, development, manufacture or sale of Satellites.

J. "Sea Launch" means the Launch Vehicle company jointly owned by Boeing, Kvaerner Maritime A.S., RSC Energia, and KB Yuzhnoye/PO Yuzmash, which is headquartered at Sea Launch Home Port, 2700 Nimitz Road, Long Beach, California 90802-1047.

K. "Boeing Launch Vehicle Business" means any Boeing entity engaged in the research, development, manufacture or sale of Launch Vehicles.

L. "Boeing Satellite Business" means any Boeing entity engaged in the research, development, manufacture or sale of Satellites.

M. "Non-Public Launch Vehicle Information" means any information disclosed by any Launch Vehicle Supplier to any Boeing Satellite Business. Non-Public Launch Vehicle Information shall not include: (1) information already within the public domain; (2) information that falls within the public domain through no violation of this Order by Respondent; (3) information disclosed by any Boeing Launch Vehicle Business; (4) information that becomes known to Respondent from a third party not in breach of a confidentiality or non-disclosure agreement with respect to such information; and (5) information after six (6) years from the date of disclosure of such Non-Public Launch Vehicle Information to Boeing's Satellite Business, or such other period as agreed to in writing by Respondent and a provider of the information.

N. "Non-Public Satellite Information" means any information disclosed by any Satellite Manufacturer to Boeing's Launch Vehicle Business or Sea Launch. Non- Public Satellite Information shall not include: (1) information already within the public domain; (2) information that falls within the public domain through no violation of this Order by Respondent; (3) information disclosed by any Boeing Satellite Business; (4) information that becomes known to Respondent from a third party not in breach of a confidentiality or non-disclosure agreement with respect to such information; and (5) information after six (6) years from the date of disclosure of such Non-Public Satellite Information to any Boeing Launch Vehicle Business or Sea Launch, or such other period as agreed to in writing by Respondent and a provider of the information.

O. "SETA Services" means systems engineering, technical assistance, and support services relating to a certain classified contract between the United States Department of Defense and Boeing identified for purposes of this Order as Contract 4208.

P. "Non-Public SETA Services Information" means any information not in the public domain disclosed by the United States Department of Defense or any company, other than Hughes, to Respondent in its capacity as the provider of SETA Services.

II.

IT IS FURTHER ORDERED that:

A. Respondent shall provide no further SETA Services on classified programs identified in Section 3.2 of a modification dated August 1, 2000, to a certain classified contract between the United States Department of Defense and Respondent, identified for purposes of this Order as Contract 4208.

B. Upon reasonable notice from the United States Department of Defense, Respondent shall provide such training and assistance to the United States Department of Defense as is reasonably necessary to enable the United States Department of Defense to provide SETA Services in substantially the same manner and quality as provided by Respondent prior to the Acquisition. Such assistance shall include reasonable consultation with knowledgeable employees and training at a facility designated by the United States Department of Defense for a period of time sufficient to satisfy the United States Department of Defense that its personnel are appropriately trained in the skills necessary to perform SETA Services in substantially the same manner and quality provided by Respondent prior to the Acquisition. However, Respondent shall not be required to continue providing such technical assistance for more than one (1) year from the date the Respondent signs the Consent Agreement. Respondent shall charge the United States Department of Defense at a rate no more than its own costs for providing such technical assistance.

C. Respondent shall use any Non-Public SETA Services Information only in Respondent's capacity as provider of technical assistance to the United States Department of Defense, pursuant to Paragraph II.B. of this Order, or SETA work authorized by the August 1, 2000, modification to a certain classified contract between the United States Department of Defense and Respondent, identified for purposes of this Order as Contract 4208.

D. Respondent shall not provide, disclose, or otherwise make available Non-Public SETA Services Information to any Boeing Satellite Business.

E. Within ten (10) days of the date the Commission accepts the Consent Agreement for public comment, Respondent shall return or submit to the United States Department of Defense all documents, including all copies, in the possession of Respondent that were received or created by Respondent in its capacity as a provider of the SETA Services identified in Section 3.2 of a modification dated August 1, 2000, to a certain classified contract between the United States Department of Defense and Respondent, identified for purposes of this Order as Contract 4208, except for documents necessary to provide the technical assistance identified in Paragraph II.B.

III.

IT IS FURTHER ORDERED that:

A. Respondent shall not, absent the prior written consent of the proprietor of Non-Public Satellite Information, provide, disclose or otherwise make available to any Boeing Satellite Business any Non-Public Satellite Information.

B. Respondent shall use any Non-Public Satellite Information only in Respondent's capacity as a Launch Vehicle Supplier, absent the prior written consent of the proprietor of Non-Public Satellite Information.

IV.

IT IS FURTHER ORDERED that:

A. Respondent shall not, absent the prior written consent of the proprietor of Non-Public Launch Vehicle Information, provide, disclose or otherwise make available to any Boeing Launch Vehicle Business or Sea Launch any Non-Public Launch Vehicle Information.

B. Respondent shall use any Non-Public Launch Vehicle Information only in Respondent's capacity as a Satellite Manufacturer, absent the prior written consent of the proprietor of Non-Public Launch Vehicle Information.

IT IS FURTHER ORDERED that within thirty (30) days from the date on which the Respondent signs the Consent Agreement, Respondent shall take steps to ensure that all employees of any Boeing Launch Vehicle Business and any Boeing Satellite Business comply with Paragraphs II., III. and IV. of this Order. Such steps shall include without limitation: (1) distribution of this Order to Sea Launch, and to the directors, officers, and employees of any Boeing Launch Vehicle Business and any Boeing Satellite Business; (2) development of procedures, policies, and practices relating to the receipt, identification, custody, use, and disposal of any Non-Public Satellite Information, Non-Public Launch Vehicle Information, and Non-Public SETA Services Information; (3) incorporation of such procedures, policies, and practices into Respondent's operations manuals or other systems used for disseminating such procedures, policies, and practices; (4) in-person training of the employees of any Boeing Launch Vehicle Business and any Boeing Satellite Business; and (5) development of new procedures or incorporation into existing procedures measures to be used in the event an employee of any Boeing Launch Vehicle Business or any Boeing Satellite Business fails to comply with such procedures, policies, and practices.

VI.

IT IS FURTHER ORDERED that:

A. Respondent shall notify all Launch Vehicle Suppliers, in writing, that Satellite Interface Information relating to any Respondent Satellite bus, model, or product line is available upon request for any Respondent Satellite; provided, however, Respondent shall not provide such notification for any United States Government Satellite. Respondent shall make such notification:

1. Within thirty (30) days from the date this Order becomes final for each Satellite manufactured prior to the date this Order becomes final; and

2. No later than thirty (30) days before the date Respondent provides any Satellite Interface Information to any Boeing Launch Vehicle Business or to Sea Launch for any Respondent Satellite bus, model, or product line manufactured after the date this Order becomes final.

B. Respondent shall furnish each Launch Vehicle Supplier with instructions for requesting Satellite Interface Information relating to any Respondent Satellite bus, model or product line at the same time Respondent notifies the Launch Vehicle Supplier pursuant to Paragraph VI.A.

C. Respondent shall provide all Satellite Interface Information relating to any Respondent Satellite bus, model, or product line to any Launch Vehicle Supplier:

1. For any Satellite manufactured prior to the date this Order becomes final, within thirty (30) days from the date Respondent receives a request from such Launch Vehicle Supplier; provided, however, that Respondent shall not be required by this Paragraph VI.C.1 to provide Satellite Interface Information for any Satellite manufactured for the United States Government prior to the date this Order becomes final.

2. For any Satellite manufactured after the date this Order becomes final, (i) who requests such information, or (ii) to whom Respondent has previously supplied such information, at a time no later than Respondent provides any Satellite Interface Information to any Boeing Launch Vehicle Business or to Sea Launch; provided, however, that if Respondent receives a request for Satellite Interface Information after it has provided such information to any Boeing Launch Vehicle Business or Sea Launch pursuant to the requirements of this Paragraph, Respondent shall provide the Satellite Interface Information within twenty (20) days after receiving the request; provided, further, that for each Satellite manufactured for the United States Government, Respondent shall only be required to provide Satellite Interface Information to any Launch Vehicle Suppliers specified by the United States Government.

D. Respondent shall provide to any Launch Vehicle Supplier to whom Satellite Interface Information relating to any Respondent Satellite bus, model, or product line has been previously supplied any revisions to such Satellite Interface Information at a time no later than it provides such revisions to any Boeing Launch Vehicle Business or Sea Launch.

E. Respondent shall provide Satellite Interface Information to any Launch Vehicle Supplier specified by any Satellite customer at a time no later than Respondent provides such information to any Boeing Launch Vehicle Business or to Sea Launch.

F. All obligations of this Paragraph shall be subject to Respondent's compliance with the export licensing laws, rules and regulations of the United States that may be applicable to Respondent's export of Satellite Interface Information. Respondent shall use its best efforts to obtain permission pursuant to such export licensing laws, rules and regulations relating to the export of Satellite Interface Information required by this Paragraph.

G. Respondent may make the receipt of Satellite Interface Information subject to a Launch Vehicle Supplier's prior execution of a confidentiality agreement comparable to industry standards of confidentiality.

H. Respondent shall create and maintain records sufficient to identify: (1) the contents of any Satellite Interface Information provided to each Launch Vehicle Supplier for each of Respondent's Satellites, and (2) all Launch Vehicle Suppliers to whom Respondent has provided Satellite Interface Information or notification pursuant to this Paragraph. Such Launch Vehicle Supplier records shall include the name of the Launch Vehicle Supplier, its address, the name and telephone number of the contact person, and the date on which Respondent provided Satellite Interface Information.

I. Nothing in this Paragraph shall preclude Respondent from entering into any agreement for the purpose of facilitating integration between any Respondent Satellite and any Launch Vehicle.

VII.

IT IS FURTHER ORDERED that:

A. Sheila Widnall is hereby appointed to serve as Monitor Trustee to assure that Respondent fully performs its responsibilities in a timely manner as required by this Order.

B. Respondent shall consent to the following terms and conditions regarding the powers, duties, authorities, and responsibilities of the Monitor Trustee:

1. The Monitor Trustee shall have the power and authority to monitor Respondent's compliance with the terms of this Order and shall exercise such power and authority and carry out the duties and responsibilities of the Monitor Trustee in a manner consistent with the purposes of this Order and in consultation with the Commission.

2. Within twenty (20) days after it signs the Consent Agreement, Respondent shall execute a trust agreement that, subject to the approval of the Commission, confers on the Monitor Trustee all the rights and powers necessary to permit the Monitor Trustee to monitor Respondent's compliance with the terms of this Order in a manner consistent with the purposes of this Order. The Monitor Trustee shall sign a confidentiality agreement prohibiting the use, or disclosure to anyone other than the Commission, of any competitively sensitive or proprietary information gained as a result of his or her role as Monitor Trustee.

3. The Monitor Trustee shall serve for ten (10) years from the date the trust agreement is approved by the Commission.

4. The Monitor Trustee shall have full and complete access to Respondent's personnel, books, records, documents, facilities and technical information relating to compliance with this Order, or to any other relevant information, as the Monitor Trustee may reasonably request, to the extent permissible under applicable governmental security procedures. Respondent shall cooperate with any reasonable request of the Monitor Trustee, including any request for assistance to obtain any necessary security clearances. Respondent shall take no action to interfere with or impede the Monitor Trustee's ability to monitor Respondent's compliance with this Order.

5. The Monitor Trustee shall serve, without bond or other security, at the expense of Respondent, on such reasonable and customary terms and conditions as the Commission may set. The Monitor Trustee shall have authority to employ, at the expense of Respondent, such consultants, accountants, attorneys and other representatives and assistants as are reasonably necessary to carry out the Monitor Trustee's duties and responsibilities. The Monitor Trustee shall account for all expenses incurred, including fees for his or her services, subject to the approval of the Commission.

6. Respondent shall indemnify the Monitor Trustee and hold the Monitor Trustee harmless against any losses, claims, damages, liabilities or expenses arising out of, or in connection with, the performance of the Monitor Trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for, or defense of, any claim whether or not resulting in any liability, except to the extent that such losses, claims, damages, liabilities, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the Monitor Trustee.

7. If at any time the Commission determines that the Monitor Trustee has ceased to act or failed to act diligently, or is unwilling or unable to continue to serve, the Commission may appoint a substitute to serve as Monitor Trustee. The Commission shall select a substitute Monitor Trustee subject to the consent of Respondent, which consent shall not be unreasonably withheld. If Respondent has not opposed, in writing, including the reasons for opposing, the selection of any proposed trustee within ten (10) days after notice by the staff of the Commission to Respondent of the identity of any proposed substitute Monitor Trustee, Respondent shall be deemed to have consented to the selection of the proposed substitute. Respondent shall execute the trust agreement required by Paragraph VII.B.2 of this Order within ten (10) days after the Commission appoints a substitute Monitor Trustee. The substitute Monitor Trustee shall serve according to the terms and conditions of this Paragraph VII.

8. The Commission may on its own initiative or at the request of the Monitor Trustee issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of this Order.

9. The Monitor Trustee shall report in writing to the Commission concerning Respondent's compliance with this Order:

a. Every sixty (60) days for a period of six months from the date Respondent signs the Consent Agreement; and

b. Annually thereafter on the anniversary of the date this Order becomes final during the remainder of the Monitor Trustee's period of appointment pursuant to this Order.

VIII.

IT IS FURTHER ORDERED that:

A. Respondent shall deliver a copy of this Order to any Launch Vehicle Supplier prior to obtaining from the Launch Vehicle Supplier any Non-Public Launch Vehicle Information relating to that Launch Vehicle Supplier's Launch Vehicles. Within ten (10) days of the date the Commission accepts the Consent Agreement for public comment, Respondent shall deliver a copy of this Order to any Launch Vehicle Supplier that has previously supplied Non-Public Launch Vehicle Information to Hughes.

B. Respondent shall deliver a copy of this Order to any Satellite Manufacturer prior to obtaining from the Satellite Manufacturer any Non-Public Satellite Information relating to that Satellite Manufacturer's Satellites.

IX.

IT IS FURTHER ORDERED that within sixty (60) days after the date this Order becomes final and annually for the next ten (10) years on the anniversary of the date this Order becomes final, and at such times as the Commission may require. Respondent shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with Paragraphs II. through VIII. of this Order. Respondent shall include in its compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with Paragraphs II. through VIII. of this Order.

IT IS FURTHER ORDERED THAT RESPONDENT shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate Respondent such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in the corporation that may affect compliance arising out of this Order.

XI.

IT IS FURTHER ORDERED that for the purposes of determining or securing compliance with this Order, and subject to any legally recognized privilege, and upon written request with reasonable notice to Respondent made to its principal United States office, Respondent shall permit any duly authorized representatives of the Commission:

A. Access, during office hours of Respondent and in the presence of counsel, to all facilities, and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and all other records and documents in the possession or under the control of Respondent relating to compliance with this Order; and

B. Upon five (5) days' notice to Respondent and without restraint or interference from Respondent, to interview officers, directors, or employees of Respondent, who may have counsel present, regarding such matters.

XII.

IT IS FURTHER ORDERED that this Order shall terminate twenty (20) years from the date it becomes final.

By the Commission.

Donald S. Clark
Secretary

SEAL

ISSUED: