FTC gloats after 2nd big merger goes down in flames

For the second time in a week, a billion-dollar merger has been terminated due to legal challenges by the Federal Trade Commission.

On Tuesday the commission celebrated the news of the termination, calling the planned acquisition of Aerojet Rocketdyne Holdings Inc. by aerospace company Lockheed Martin Corp. for more than $4 billion an anticompetitive vertical transaction.

"The acquisition would have eliminated the country's last independent supplier of key missile propulsion inputs and given Lockheed the ability to cut off its competitors' access to these critical components," Bureau of Competition Director Holly Vedova said in a statement. "Simply put, the deal would have resulted in higher prices and diminished quality and innovation for programs that are critical to national security."

Vedova continued, "The FTC's enforcement action in this matter dovetails with the [Department of Defense] report released this week recommending stronger merger oversight of the highly concentrated defense industrial base."

In a statement announcing the termination, Lockheed Martin Chairman, President and CEO James Taiclet said the acquisition, announced in December 2020, would have benefited the entire industry.

"However, we determined that in light of the FTC's actions, terminating the transaction is in the best interest of our stakeholders," Taiclet said.

The commission had sued the company on Jan. 25, seeking a preliminary injunction to block the transaction. The acquisition was also publicly opposed by Raytheon Technologies, which like Lockheed uses Aerojet engines in its missiles, citing concerns over the company being acquired by one of its competitors.

Also during the past week, Santa Clara technology company Nvidia Corp. dropped its plans to purchase a chip design provider for $40 billion due to regulatory challenges it had faced, the commission announced Monday.

The company had been in litigation with the commission for two months over claims the acquisition would harm competition in three worldwide markets.

Steve Cernak, a former in-house antitrust attorney at General Motors, said Tuesday he doesn't consider the Lockheed Martin challenge evidence of a new antitrust regime, but said it is evidence FTC Chair Lina M. Khan is trying to make changes.

"The new leadership at both the FTC and DOJ have said they'd look at something other than the consumer welfare standard for all antitrust law," Cernak, partner at Bona Law PC, said in an email. "For mergers in particular, they also are in the middle of reconsidering both the horizontal and vertical merger guidelines. So I think we can expect changes, maybe bolder challenges -- but I don't think this particular challenge is evidence of a brand-new antitrust regime."

"But the 4-0 vote to challenge this proposed merger shows that even some who might not agree with the proposed changes, like Commissioners Wilson and Phillips, still want to enforce the antitrust laws and stop mergers that they think are bad for consumers," he said.

Commissioners Noah J. Phillips and Christine S. Wilson were nominated by President Donald J. Trump and appointed in 2018. Khan was appointed last June after nomination by President Joe Biden.