Category Archives: National News

FTC Sues to Block Lockheed Martin Corporation’s $4.4 Billion Vertical Acquisition of Aerojet Rocketdyne Holdings Inc.

Agency Seeks to Prevent World’s Largest Defense Contractor from Eliminating Last Independent U.S. Missile Propulsion Provider

February 1, 2022 – Mike Spillan, Editor

Today, the Federal Trade Commission sued to block Lockheed Martin Corporation’s $4.4 billion proposed vertical acquisition of Aerojet Rocketdyne Holdings Inc, the last independent U.S. supplier of missile propulsion systems. Aerojet supplies advanced power, propulsion, and armament systems, which are critical components for the missiles made by Lockheed and other defense prime contractors.

The agency’s complaint alleges that if the deal is allowed to proceed, Lockheed will use its control of Aerojet to harm rival defense contractors and further consolidate multiple markets critical to national security and defense. This is the agency’s first litigated defense merger challenge in decades.“The FTC is suing to block Lockheed Martin, the world’s largest defense contractor, from eliminating Aerojet, our nation’s last independent supplier of key missile inputs,” said FTC Bureau of Competition Director Holly Vedova. “Lockheed is one of a few missile middlemen the U.S. military relies on to supply vital weapons that keep our country safe. If consummated, this deal would give Lockheed the ability to cut off other defense contractors from the critical components they need to build competing missiles. Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation. We cannot afford to allow further concentration in markets critical to our national security and defense.”

The U.S. Department of Defense (“DoD”) reviewed the acquisition and considered the potential impacts of the transaction on national security, the nation’s industrial and technological base, competition, and innovation.

As part this assessment, the DoD facilitated a series of FTC-led interviews with DoD-impacted stakeholders. DoD’s assessment was provided to the FTC for its deliberations and final decision-making.“I deeply appreciate the collaborative relationship between DoD and FTC staff who worked closely throughout this investigation,” said Director Vedova. “The FTC determined that the proposed transaction harms competition for several weapons systems that DoD relies on to defend the nation and there is no sufficient remedy to alleviate those harms.”

Lockheed is the world’s largest defense contractor and a leading missile supplier in a highly concentrated sector. Lockheed, and its U.S missile competitors—Raytheon Technologies, Inc., Northrop Grumman Corporation, and The Boeing Company—act as missile system prime contractors to DoD. These prime contractors are key intermediaries between the U.S. government and the rest of the missile systems supply chain, including the subcontractors such as Aerojet which provide system components to them.

DoD relies on prime contractors to develop, produce, sustain, and source a variety of weapons, including missile systems, hypersonic cruise missiles, and missile defense kill vehicles. Each of these weapons depend on critical propulsion technologies of the type supplied by Aerojet.Aerojet, as a subcontractor, is the last independent U.S. supplier of critical inputs for missile systems, hypersonic cruise missiles, and missile defense kill vehicles. Aerojet and only one other competitor – Northrop Grumman – compete to provide propulsion inputs for missile systems and hypersonic cruise missiles to defense prime contractors.

Aerojet and Northrop Grumman both provide solid rocket motors for missile systems and supersonic combustion ramjets, or “scramjets,” which are air-breathing engines that propel hypersonic cruise missiles. Further, Aerojet is the only proven U.S. supplier of divert-and-attitude control systems that propel missile defense kill vehicles. Lockheed’s proposed acquisition of Aerojet would give Lockheed control over critical propulsion inputs that its rivals require to compete against Lockheed. Specifically, the complaint alleges that the proposed acquisition would give Lockheed the ability and incentive to deny, limit, or otherwise disadvantage competitors’ access to critical propulsion inputs for various weapons systems. The combined firm could disadvantage rivals by affecting the price or quality of the product, the quality of the engineering support, and the schedule and contract terms for developing and supplying it or otherwise disadvantage its rivals.

As a subcontractor, Aerojet also has had access to prime contractors’ sensitive information about technological advancements, cost, schedule, and business strategies. The FTC complaint alleges that post-acquisition, Lockheed would have an incentive to exploit its access to its rivals’ proprietary information to gain an advantage in competitions against them and that the U.S. government, in turn, would be harmed because the cost of missile systems, missile defense kill vehicles, and hypersonic cruise missiles would likely increase, innovation would be lessened, and quality would be reduced, hindering national security and defense interests.

According to the complaint, the proposed transaction could impact research and development as well as innovation into the future, which is vital to ensure that the U.S. remains a leader in these technologies. As an independent supplier, Aerojet has the incentive to allocate its research and development funds based on the potential return the funds would generate regardless of which prime contractor it is supporting.

The complaint further claims that, post-acquisition, the combined firm would be incentivized to allocate Aerojet investment dollars for the combined firm’s benefit alone, which could stifle innovation.

The Commission vote to issue the administrative complaint (a public version of which will be available and linked to this article as soon as possible) and to authorize staff to seek a preliminary injunction was 4-0.The FTC will file a complaint in the U.S. District Court for the District of Columbia seeking a Preliminary Injunction to stop the deal pending an administrative trial. The administrative trial is scheduled to begin on June 16, 2022.

Federal Trade Commission and Justice Department Move to Strengthen Ties

Agencies Launch Joint Public Inquiry Aimed at Modernizing Merger Guidelines to Better Detect and Prevent Anticompetitive Deals at the Cost of Privacy – January 2022

WASHINGTON – The Federal Trade Commission (FTC) and the Justice Department’s Antitrust Division launched a joint public inquiry aimed at strengthening enforcement against illegal mergers.

According to the FTC, recent evidence indicates that many industries across the economy are becoming more concentrated and less competitive – imperiling choice and economic gains for consumers, workers, entrepreneurs, and small businesses. The agencies claim that these problems are likely to persist or worsen due to an ongoing merger surge that has more than doubled merger filings from 2020 to 2021. To address mounting concerns, the agencies are soliciting public input on ways to modernize federal merger guidelines to better detect and prevent illegal, anticompetitive deals in today’s modern markets.

“Illegal mergers can inflict a host of harms, from higher prices and lower wages to diminished opportunity, reduced innovation, and less resiliency,” said FTC Chair Lina M. Khan. “This inquiry launched by the FTC and DOJ is designed to ensure that our merger guidelines accurately reflect modern market realities and equip us to forcefully enforce the law against unlawful deals. Hearing from a broad set of market participants, especially those who have experienced first-hand the effects of mergers and acquisitions, will be critical to our efforts.”

“Our country depends on competition to drive progress, innovation, and prosperity,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “We need to understand why so many industries have too few competitors, and to think carefully about how to ensure our merger enforcement tools are fit for purpose in the modern economy.”

Competition is critical to the success of the economy. It ensures that Americans have the freedom to choose among different suppliers and different employers. When businesses face competition, it spurs them to improve their products, develop new ones, and lower prices. Mergers can reduce choices for consumers, workers, and other businesses, leaving them increasingly dependent on larger and more powerful firms that have purchased greater power to dictate the terms of their deals. To protect competition and prevent increased consolidation, Congress passed a series of antitrust laws and authorized the FTC and the Justice Department to enforce them.

The antitrust laws charge the FTC and the Justice Department with preventing mergers that may substantially lessen competition or tend to create a monopoly. Merger guidelines are frameworks for the analysis of mergers under the antitrust laws. The Justice Department first published merger guidelines in 1968, with the goal of providing transparency into the standards it applied in reviewing mergers. Since then, the agencies have published a number of updates, generally specified by whether the transaction is considered horizontal (within the same market) or vertical (within the same supply chain). Although the guidelines identify some of the competitive harms mergers present, markets may fall outside the frameworks under the current approach.

The public inquiry launched today seeks comments on developments in the modern economy and new evidence of mergers’ effects on competition to inform potential revisions to the guidelines. The agencies encourage the public, including market participants, government entities, economists, attorneys, academics, unions, employees, farmers, workers, businesses, franchisees, and consumers, to share feedback, evidence, and ideas that may inform revisions to the guidelines. Some of the specific areas of inquiry on which the agencies are seeking public input and information include:

Purpose and scope of merger review: The agencies seek information on whether the guidelines explain and implement the statutory ban on transactions that “may” substantially lessen competition or tend to create a monopoly, and what harms are contemplated by those standards. The agencies further seek input on whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy.
Presumptions that certain transactions are anticompetitive: The guidelines identify certain market circumstances that justify a presumption of competitive harm based on market concentration. The agencies seek information on whether concentration thresholds should be adjusted to improve the efficiency and effectiveness of enforcement, whether alternative metrics or qualitative factors should also trigger presumptions of competitive harm, and evidence regarding the accuracy of such presumptions.
Use of market definition in analyzing competitive effects: The agencies seek input on potential updates to the guidelines’ market definition analysis to better account for non-price competition. They also seek to input on when direct evidence of a transaction’s likely competitive effects, such as evidence of head-to-head competition, may eliminate the need for a separate market definition exercise.
Threats to potential and nascent competition: The agencies seek input on potential updates to the guidelines’ discussion of potential and nascent competitors, which may be key sources of innovation and competition.
Impact of monopsony power, including in labor markets: The agencies seek input on how to address the issue of buyer power in more detail in the guidelines. Labor markets are a key example of buyer power, and the agencies seek information regarding how the guidelines should analyze labor market effects of mergers.
Unique characteristics of digital markets: The agencies seek information on how to account for key areas of the modern economy like digital markets in the guidelines, which often have characteristics like zero-price products, multi-sided markets, and data aggregation that the current guidelines do not address in detail.

The Request for Information is available at: https://www.regulations.gov/docket/FTC-2022-0003/document.

The comment period is open for 60 days. Comments can be submitted to regulations.gov and must be received no later than Monday, March 21, 2022. The information will be used by the agencies to consider updates and revisions to the guidelines. If such revisions are contemplated in light of the evidence received and the agencies’ independent research, the agencies will publish proposed guidelines for public comment.

In a press event, Chair Lina M. Khan gave remarks as did Assistant Attorney General Jonathan Kanter. Commissioners Noah Joshua Phillips and Christine S. Wilson issued a statement.

Editorial Note: The Sentinel is deeply concerned about the possibility of any increased governmental “cooperation” when it represents a high likelihood of individual rights being compromised, especially on such a significant scale, and encourages the Reader to examine the intended operational changes and, if you are concerned as well, visit the Public Comment site at: https://www.ftc.gov/policy/public-comments.

Original source material from this post can be found here.

Trump Attacks US ‘foolishness’ Heading Into Putin Powwow

President Donald Trump headed into his first summit with Vladimir Putin on Monday determined to forge a personal bond with the Kremlin chief and adamant that only “stupidity” by prior administrations had brought US-Russian ties to their present low.

Hours before the Helsinki summit, Trump was asked if he would press Putin over Russia’s alleged manipulation of the 2016 election that brought the mercurial property tycoon to power. He said only: “We’ll do just fine.”

Democrats had called for the summit’s cancellation after new revelations surrounding the election meddling. But Trump has insisted it is “a good thing to meet”, as he attempts to replicate with Putin the sort of personal rapport he proclaims with the autocratic leaders of China and North Korea.

If his instinct proves right and the pair find common ground, then the summit may take the heat out of some of the world’s most dangerous conflicts including Syria.

But the Washington-Moscow rivalry has rarely been more bitter, and there are many points of friction that could yet spoil Trump’s hoped-for friendship.

Trump began the day’s talks by meeting Finland’s President Sauli Niinisto, who has loaned his harbour-front palace for the occasion. But first he took a moment to fire a Twitter broadside at his domestic opponents, blaming the diplomatic chill on the investigation into Russian election meddling.

“Our relationship with Russia has NEVER been worse thanks to many years of U.S. foolishness and stupidity and now, the Rigged Witch Hunt!” Trump tweeted.

After a stormy NATO summit in Brussels last week, Trump was accused by critics of cosying up to Putin while undermining the alliance.

But, over breakfast with Niinisto, he insisted NATO “has never been stronger” and “never been more together” thanks to his insistence on all allies paying their fair share.

With Washington and Moscow at loggerheads over Ukraine, Iran and trade tariffs as well as Syria, even Trump has cautioned that he is not approaching the Putin summit “with high expectations”.

The 72-year-old brash billionaire has been president for 18 months, while the former KGB officer, 65, has run Russia for the past 18 years.

In an interview with CBS News that aired before he touched down in Helsinki, Trump admitted that Russia remains a foe, but he put Moscow on a par with China and the European Union as economic and diplomatic rivals.

The Kremlin has also played down hopes that the odd couple will emerge from their first formal one-on-one summit with a breakthrough.

Putin, who played host at the World Cup final in Moscow on Sunday and was due to arrive in Finland later Monday, has remained terse in the run-up to the summit.

On Friday his adviser Yuri Ushakov also played down expectations, saying: “The state of bilateral relations is very bad…. We have to start to set them right.”

– Giving up ground? –

Indeed, after the bad-tempered NATO summit and a contentious trip by Trump to Britain, anxious European leaders may be relieved if not much comes out of the Helsinki meeting.

Those leaders are already fuming over Trump’s imposition of trade tariffs on various countries, including Russia.

European Union President Donald Tusk called on the United States, China and Russia to work together to cool the global trade tensions, warning that they could spiral into violent “conflict and chaos”.

For their part, protesters have been on the streets of Helsinki to denounce the policies of both Trump and Putin. Greenpeace draped a giant banner down a church tower urging: “Warm our hearts not our planet.”

Trump is also under pressure from Britain to press Putin over the nerve agent poisoning of four people in the city of Salisbury.

One of the victims, Dawn Sturgess, has died and her 19-year-old son Ewan Hope told the Sunday Mirror newspaper: “We need to get justice for my mum.”

– Extradition demand? –

Many fear that Trump — in his eagerness to prove that he was right to seek the summit with Putin despite US political opposition — may give up too much ground.

Ahead of the talks, Trump has refused to personally commit to the US refusal to recognise Russia’s annexation of Crimea, leaving open the possibility of a climb-down linked to a promise by Putin to somehow rein in Iranian influence in Syria.

If Washington were to de facto accept Russia’s 2014 land-grab, this would break with decades of US policy and send tremors through NATO’s exposed eastern flank.

And there will be outrage at home if Trump does not confront Putin over the election scandal.

But the US leader would not say whether he would demand the extradition of 12 Russian intelligence officers who were indicted last week by US special prosecutor Robert Mueller, for allegedly hacking Trump rival Hillary Clinton’s computer server.

Supreme Court Hears States Beg For Your Bucks

Online shoppers have gotten used to seeing that line on checkout screens before they click “purchase.” But a case before the Supreme Court could change that.

At issue is a rule stemming from two, decades-old Supreme Court cases: If a business is shipping to a state where it doesn’t have an office, warehouse or other physical presence, it doesn’t have to collect the state’s sales tax.

That means large retailers such as Apple, Macy’s, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from customers who buy from them online. But other online sellers, from 1-800 Contacts to home goods site Wayfair, can often sidestep charging the tax.

More than 40 states are asking the Supreme Court to reconsider that rule in a case being argued Tuesday. They say they’re losing out on “billions of dollars in tax revenue each year, requiring cuts to critical government programs” and that their losses compound as online shopping grows. But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business.

Large retailers want all businesses to “be playing by the same set of rules,” said Deborah White, the president of the litigation arm of the Retail Industry Leaders Association, which represents more than 70 of America’s largest retailers.

For years, the issue of whether out-of-state sellers should collect sales tax had to do mostly with one company: Amazon.com. The online giant is said to account for more than 40 percent of U.S. online retail sales. But as Amazon has grown, dotting the country with warehouses, it has had to charge sales tax in more and more places.

President Donald Trump has slammed the company, accusing it of paying “little or no taxes” to state and local governments. But since 2017, Amazon has been collecting sales tax in every state that charges it. Third-party sellers that use Amazon to sell products make their own tax collection decisions, however.

The case now before the Supreme Court could affect those third-party Amazon sellers and many other sellers that don’t collect taxes in all states — sellers such as jewelry website Blue Nile, pet products site Chewy.com, clothing retailer L.L. Bean, electronics retailer Newegg and internet retailer Overstock.com. Sellers on eBay and Etsy, which provide platforms for smaller sellers, also don’t collect sales tax nationwide.

States generally require consumers who weren’t charged sales tax on a purchase to pay it themselves, often through self-reporting on their income tax returns. But states have found that only about 1 percent to 2 percent actually pay.

States would capture more of that tax if out-of-state sellers had to collect it, and states say software has made sales tax collection simple.

Out-of-state sellers disagree, calling it costly and extraordinarily complex, with tax rates and rules that vary not only by state but also by city and county. For example, in Illinois, Snickers are taxed at a higher rate than Twix because foods containing flour don’t count as candy. Sellers say free or inexpensive software isn’t accurate, more sophisticated software is expensive and that collecting tax nationwide would also subject them to potentially costly audits.

“For small businesses on tight margins, these costs are going to be fatal in many cases,” said Andy Pincus, who filed a brief on behalf of eBay and small businesses that use its platform.

The case now before the Supreme Court involves South Dakota, which has no income tax and relies heavily on sales tax for revenue. South Dakota’s governor has said the state loses out on an estimated $50 million a year in sales tax that doesn’t get collected by out-of-state sellers.

In 2016 the state passed a law requiring those sellers to collect taxes on sales into the state, a law challenging the Supreme Court precedents. The state, conceding it could win only if the Supreme Court reverses course, has lost in lower courts.

South Dakota says the high court’s previous decisions don’t reflect today’s world. The court first adopted its physical presence rule on sales tax collection in a 1967 case dealing with a catalog retailer. At the time, the court was concerned in part about the burden collecting sales tax would place on the catalog company. The court reaffirmed that ruling in 1992.

It’s unclear how the justices might align on the question this time. But three justices — Neil Gorsuch, Clarence Thomas and Anthony Kennedy — have suggested a willingness to rethink those decisions. Kennedy has written that the 1992 case was “questionable even when decided” and “now harms states to a degree far greater than could have been anticipated earlier.”

“Although online businesses may not have a physical presence in some states, the Web has, in many ways, brought the average American closer to most major retailers,” he wrote in suggesting the days of inconsistent sales tax collection may be numbered. “A connection to a shopper’s favorite store is a click away regardless of how close or far the nearest storefront.”

AG Sessions Announces Zero-Tolerance For Illegal Entry & New Charging Policies

On April 6, 2018, Attorney General Jefferson Beauregard Sessions III notified all U.S. Attorney’s Offices along the Southwest Border of a new “zero-tolerance policy” for offenses under 8 U.S.C. § 1325(a)(prohibiting both attempted illegal entry and illegal entry in the United States by an alien). “The situation at our Southwest Border is unacceptable. Congress has failed to pass effective legislation that serves the national interest—that closes dangerous loopholes and fully funds a wall along our southern border. As a result, a crisis has erupted at our Southwest Border that necessitates an escalated effort to prosecute those who choose to illegally cross our border,” said Attorney General Jeff Sessions.

The new policy comes as the Department of Homeland Security reported a 203 percent increase illegal border crossings from March 2017 to March 2018, and a 37 percent increase from February 2018 to March 2018. SeeDHS Southwest Border Migration FY2018.

The recent increase follows a steep drop in illegal border crossings after President Trump’s inauguration, which were historically low through most of his first summer in office.

On April 11, in a follow-up to his zero-tolerance policy, the Attorney General sent a memorandum for all federal prosecutors titled Renewed Commitment to Criminal Immigration Enforcement, detailing the new charging-practice policies in immigration cases.

(The American Sentinel Newsletter notes that while the problem of illegal entry into our nation must be and remain a priority for the Trump Administration, zero-tolerance policies which strip local authorities of their discretion fly in the face of the very reasoning underlying the creation of local United States Attorneys – the need for charging decisions to reflect the will of the people in the district such decisions are being made – and are, in the opinion of the Sentinel, dangerously federalistic.)