Biden’s Bold Antitrust Agenda Faces Early Test With Defense Industry

The FTC should block Lockheed Martin's proposed acquisition of Aerojet Rocketdyne.

The Biden administration’s recent announcement to be more aggressive in reducing consolidation and monopolies in the American marketplace has the potential to reshape the economy positively for decades.

The first big test of this commitment will likely be an upcoming decision by the Federal Trade Commission (FTC) and the Pentagon on whether or not to allow one major defense company to acquire another.

Lockheed, Aerojet Merger

Lockheed Martin, the world’s largest military contractor, is seeking to buy rocket and missile propulsion manufacturer Aerojet Rocketdyne. Lockheed is undoubtedly making this move to corner the market on missile technology, providing the company a serious advantage over their few remaining competitors.

Let there be no doubt, the FTC and the Pentagon should block this proposed acquisition. After all, if you consider that missile technology is the costliest part of our massive defense budget, eliminating competition in that sector will almost surely mean that Lockheed will show no ambition for cost-cutting. Because why should they?

No one else will be able to compete with Lockheed, which is especially critical at a time when our nation is facing serious missile threats from near-peer competitors like Russia and China as well as Iran and North Korea. Lockheed will capitalize on the arms race and the taxpayer will be left holding the bag.

Flight test of the hypersonic cruise missile Zircon
Russia flight-tested its hypersonic cruise missile Zircon in July 2021. Image: Russian Ministry of Defense

Concerns About the Acquisition

A few months ago, Senator Elizabeth Warren (D-MA) sent a letter to the FTC raising concerns about this proposed acquisition — focusing her concerns on the inability of the government to enforce “behavioral” remedies, or concessions that the company makes to ensure fair competition, should the government allow the deal to go through.

Keep in mind, the FTC is currently investigating a similar merger between two defense contractors, where Northrup Grumman blocked Boeing from competing for a massive $80 billion defense project.

How can the FTC allow Lockheed and Aerojet’s merger to go through, while they haven’t even determined if they can enforce any “behavioral” remedies to ensure free and fair competition in the defense marketplace?

The new FTC Chair, Lina Khan, responded to Senator Warren: “While structural remedies generally have a stronger track record than behavioral remedies, studies show that divestitures, too, may prove inadequate in the face of an unlawful merger… In light of this, I believe the antitrust agencies should more frequently consider opposing problematic deals outright.” This statement seems like the FTC is skeptical of Lockheed’s proposed acquisition of Aerojet.

Cornering Market on Missile Technologies

Clearly, Lockheed is pulling out all of the stops and calling in favors to get this acquisition approved. In fact, 13 US Members of Congress just wrote a letter to the FTC, putting pressure on the agency to support the deal.

Wall Street thinks that allowing Lockheed to almost corner the market on missile technologies would be profitable for the company; from Reuters: “Shares of Aerojet rose more than 2% after the Reuters report as investors cheered congressional support for a deal that has run into headwinds among some lawmakers.” Killing competition is profitable for Lockheed and almost assuredly bad for taxpayers and innovation.

I look forward to the Biden administration getting serious about eliminating consolidation in our economy. With their upcoming decision on Lockheed Martin, and whether or not to allow them to corner the market on missile technology, we’ll get a glimpse of just how serious the White House is about using that Executive Order.

Headshot Hank NaughtonHank Naughton is a former Massachusetts state legislator who chaired the House Committee on Public Safety and Homeland Security and served on the State Department’s International Security Advisory Board during the Obama administration.

The views and opinions expressed here are those of the author and do not necessarily reflect the editorial position of The Defense Post.

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