United Technologies/Raytheon Highlights Key Issues in Aerospace and Defense Industry Merger Review
John B. Dubrow & Anthony S. Ferrara (McDermott, Will & Emory)
The DOJ Antitrust Division’s (DOJ) recent challenge to the United Technologies (UTC)/Raytheon (RTN) merger highlights a few key considerations for antitrust reviews of aerospace and defense industry transactions. The case is a useful illustration of important principles applicable to this unique industry.
First, the case highlights that defense product markets will be narrowly defined based on the specific product application, and suppliers of the same type of system may be in different antitrust markets if they supply the system for different applications (e.g., aircraft versus ground vehicle). Second, the case shows that theories of harm from vertical integration are flexible, and they frequently focus on whether a transaction will create the incentive and ability for a company to use its control over one capability to foreclose competition in another product market.
Vertical issues often arise in the aerospace and defense industry because of the frequent subcontracting and teaming relationships among firms at different levels of the supply chain in order to create the highly complex products demanded by military and other government customers…
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