FTC sues to block Lockheed Martin’s acquisition of Aerojet following companies’ lobbying push
- By William Gavin
- February 1, 2022 5:58 pm
- (Photo by Richard Baker via Getty Images Images)
After Lockheed Martin Corp. announced plans to acquire Aerojet Rocketdyne Inc. in December 2020, the two companies aggressively lobbied the federal government for approval. But the Federal Trade Commission sued on Jan. 25 to block the $4.4 billion merger, marking the agency’s first litigated defense merger challenge in decades.
The proposed merger would see the only large independent U.S. producer of engines for rockets and missiles, Aerojet, merge with the largest defense contractor in the world, Lockheed Martin. The merger, if successful, would give Lockheed a significant advantage over competitors and obtain “sensitive, non-public information” about its rivals’ technology, the FTC report alleged.
“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,” said FTC Bureau of Competition Director Holly Vedova. “Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation.”
Lockheed hired the Carmen Group, a veteran Washington lobbying firm, to lobby the FTC, Department of Defense, both chambers of Congress and other institutions, on its behalf on several issues, including the merger. The firm has experience with acquisitions — President David M. Carmen led Softbank’s Corp.’s acquisition of Sprint Nextel Corp. in 2012 and the merger of Sprint and T-Mobile in 2020.
The Carmen Group’s three lobbyists made $100,000 from Lockheed for their work throughout 2021, beginning in April. The defense giant also paid the firm $30,000 for other issues earlier that year.
Former President of the American Israel Public Affairs Committee Marshall A. Brachman was paid $64,561 by Lockheed Martin Aeronautics for work on the merger, alongside other issues. Brachman received an additional $57,350 by the company for his other work on its behalf in 2021.
Aerojet paid the Nickles Group LLC $140,000 for lobbying on issues including the merger and steered another $100,000 to FifeStrategies LLC for its work on the merger as well as other issues.
Lockheed spent $14.4 million total in 2021, up from $12.9 million in 2020. Aerojet’s lobbying spending also increased, topping $1.6 million in 2021, up from $1.4 million the prior year.
Aerojet and Lockheed weren’t alone in advocating for the merger. The United Auto Workers labor union spent $366,000 on lobbying efforts, including the merger, in 2021 according to Lobbying Disclosure Act filings for the third and fourth quarters. Brian Rothenberg, director of public relations for UAW, told OpenSecrets in an email the union has enrolled members of both companies who, “after discussion,” support the merger.
In an earnings call held the same day the FTC announced its lawsuit, Lockheed President and CEO Jim Taiclet said the company would review the lawsuit and evaluate their options. Later in the call Taiclet said the merger agreement allowed for a 30-day period post-filing of a lawsuit to decide whether or not they would defend or terminate the agreement.
Industry analyst Bryron Callan, of Capital Alpha Partners, has seen the lawsuit as an indicator that President Joe Biden’s FTC is less tolerant of mergers than the FTC under former President Donald Trump.
“The FTC during the Biden administration has taken a different view on market concentration and vertical integration than the last one, which approved the Northrop Grumman-Orbital ATK deal,” said Callan in a note to investors.
The FTC’s lawsuit also comes just a week before the Senate Commerce Committee votes on Biden’s nominees to fill positions at the FTC and the Federal Communications Committee. The FTC nominee, Alvaro Bedoya, said the agency should use its authority to crack down on unfair practices that hinder competition during a November congressional hearing. The FTC is led by five commissioners, currently two Democrats and two Republicans; if confirmed, Bedoya could be a critical vote for a new Democratic majority.
The Senate Commerce Committee is slated to start voting on Biden’s FTC and FCC nominees Feb. 2.
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