Senator Warren, Representatives Garamendi, Pocan Raise Concerns, Call for Increased Oversight, Transparency from DoD Following the L3Harris-Aerojet Merger

Letter

Dear Secretary Austin and Under Secretary LaPlante:

We are writing in response to the news that the Federal Trade Commission (FTC) has allowed
the $4.7 billion merger between L3Harris Technologies (L3Harris) and Aerojet Rocketdyne
(Aerojet) to close, 1 and our concerns about the U.S. Department of Defense's (DoD, the
Department) role in the decision to allow the merger. I am specifically concerned about your
letter dated July 21, 2023,2 sent in response to our July 11, 20233 letter seeking transparency on
DoD's role. Regrettably, your response did not address several important questions. Now that the
merger is complete, it is imperative that the public be informed about potential conditions of the
deal, what enforcement and oversight mechanisms exist to enforce promises made by L3Harris
about the deal, and what information the DoD provided to the Federal Trade Commission (FTC)
regarding the deal.

On July 26, 2023, L3Harris told investors that "the FTC will not block [L3Harris's] acquisition
of Aerojet Rocketdyne."4 This merger adds further urgency to the concerns DoD revealed in
February 2022 when the Department released a report finding that the defense industrial base is
"historically consolidated" due to excessive merger-and-acquisition activity, and that additional
"consolidations that reduce required capability and capacity and the depth of competition would
have serious consequences for national security."5 The report specifically noted "recent

1 Wall Street Journal, "Defense Contractor L3Harris Plans to Buy Aerojet Rocketdyne for $4.7 Billion," Doug Cameron, December 18, 2022, https://www.wsj.com/articles/defense-contractor-l3harris-plans-to-buyaerojetrocketdyne-for-4-7-billion-11671412218.
2 Letter from DoD Under Secretary of Defense for Acquisition and Sustainment LaPlante to Senator Warren, July 21, 2023, p. 1, [Letter on file with the Office of Sen. Warren].
3 Letter from Senator Warren to DoD Secretary Austin and Under Secretary of Defense for Acquisition and Sustainment LaPlante, July 9, 2023, https://www.warren.senate.gov/imo/media/doc/2023.07.09%20Letter%20to %20DoD%20on%20L3Harris-Aerojet%20Merger.pdf.
4 L3Harris, "Investor Letter 2Q 2023," July 26, 2023, p. 2,
https://www.l3harris.com/sites/default/files/2023-07/L3Harris%20Q22023%20Investor %20Letter_Final_WithLinks.pdf.
5 U.S. Department of Defense, Office of the Under Secretary of Defense for Acquisition and Sustainment, "State of Competition within the Defense Industrial Base," February 2022, p. 1,
https://media.defense.gov/2022/Feb/15/2002939087/-1/-1/1/STATE-OF-COMPETITION-WITHINTHEDEFENSE-INDUSTRIAL-BASE.PDF.

consolidation in the solid rocket motors sector has resulted in only two domestic suppliers."6 we
are therefore concerned about the decision not to block the deal, and what role DoD played in
informing this decision, given its assessment that promoting competition is a "critical
Department priority."7

We are particularly troubled by reports that "[t]he company did not negotiate or sign a consent
agreement," but instead L3Harris CEO Chris Kubasik gave the DoD "assurances" that the
company would be a supplier of rocket motors and engines.8 It is entirely unclear what
"assurances" were given or how they can be enforced absent a consent agreement.

In the case of the Northrop Grumman-Orbital ATK deal, the FTC, with input from the DoD,
permitted the transaction subject to an enforceable9 behavioral remedy10 -- including to "make its
solid rocket motors and related services available on a non-discriminatory basis to all
competitors for missile contracts."11 We have serious concerns about reliance on these behavioral
remedies, which do not work to protect consumers and competitors from unfair and monopolistic
post-merger actions,12 and both the FTC and the U.S. Department of Justice have a stated
preference for structural remedies.13 But these behavioral remedies are better than nothing -- and
it is inconceivable to us that DoD would not install any legally enforceable safeguards to protect
national security from the risks of this merger.

We are also troubled by DoD's lack of transparency about this decision, and the Department's
refusal to share with Congress or the public the information the Department relied on for its
assessment of the deal and what it shared with the FTC, or any information about the national
security risks from this merger, and how they will be mitigated post-merger. DoD shared with us
that "the Department of Defense provides the FTC information and conducts its own assessment
of the proposed transaction subject to the Hart-Scott-Rodino (HSR) Antitrust Improvements Act

6 Id., p. 24.
7 Id., p. 1.
8 Defense One, "L3Harris rejects fears it will deny Aerojet rockets to competitors," Audrey Decker, July 27, 2023, https://www.defenseone.com/business/2023/07/l3harris-rejects-fears-it-will-deny-aerojet-rockets-competitors/388885/.
9 Inside Defense, "Northrop says it has received "civil investigative demand' from Federal Trade Commission," Marjorie Censer, October 24, 2019, https://insidedefense.com/insider/northrop-says-it-has-receivedcivilinvestigative-demand-federal-trade-commission.
10 Letter from Senator Warren to FTC Chair Khan, July 16, 2021, https://www.warren.senate.gov/imo/media/doc/FTC%20%20DOD%20Letter%20re%20Behavioral%20Remedies%20-%207.16.21%20(Warren).pdf; Inside Defense, "Northrop says it has received "civil investigative demand' from Federal Trade Commission," Marjorie Censer, October 24, 2019, https://insidedefense.com/insider/northropsays-it-has-received-civilinvestigative-demand-federal-trade-commission.
11 Federal Trade Commission, "FTC Imposes Conditions on Northrop Grumman's Acquisition of Solid Rocket Motor Supplier Orbital ATK, Inc.," June 5, 2018, https://www.ftc.gov/news-events/news/press-releases/2018/06/ftcimposes-conditions-northrop-grummans-acquisition-solid-rocket-motor-supplier-orbital-atk-inc.
12 Letter from Senator Warren to FTC Chair Khan, July 16, 2021, https://www.warren.senate.gov/imo/media/doc/FTC%20-%20DOD%20Letter%20re%20Behavioral%20Remedies%20-%207.16.21%20(Warren).pdf.
13 Letter from FTC Chair Khan to Senator Warren, August 6, 2021,
https://www.warren.senate.gov/imo/media/doc/chair_khan_response_on_behavioral_remedies.pdf; 2 U.S. DEP'T
OF JUST., MERGER REMEDIES MANUAL, 16 (Sept. 2020) ("Structural remedies are strongly preferred in horizontal and vertical merger cases because they are clean and certain, effective, and avoid ongoing government regulation of the market.").

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of 1976"14 without further explanation. This is unacceptable: this opaque answer and
unwillingness to provide further details leaves Congress and the public without the ability to
evaluate this decision and its long-term impacts.

To better understand DoD's role and decision-making in the L3Harris-Aerojet transaction we
request answers -- in a non-classified format -- to the following questions by September 28, 2023:

1. As we have previously noted,15 behavioral remedies are "difficult to craft" and
"eas[y]… to circumvent," and they also require "courts to expend resources on
monitoring and enforcement," in large part because behavioral remedies are designed
to "require a merged firm to operate in a manner inconsistent with its own profitmaximizing incentives."16 Did DoD recommend any structural or behavioral remedies
in the L3Harris-Aerojet merger?

a. Please provide any correspondence between DoD, Aerojet, and L3Harris
regarding potential conditions surrounding the deal.

b. How would conditions/remedies be implemented, enforced, and accessed?

2. Reports indicate that there is no consent agreement with behavioral remedies for the
merged entity, and that instead the L3Harris CEO Chris Kubasik gave the DoD
"assurances" that the company would be a supplier of rocket motors and engines.17

a. Are there reports accurate? Is there any enforceable consent agreement?

b. What were the specific assurances provided by L3Harris related to the
merger? How will they be enforced?

3. Did DoD provide the FTC with information regarding national security concerns
resulting from this merger and/or a recommendation regarding whether the merger
should be approved? If so, please provide additional detail on the specific concerns
and/or recommendations.

4. The DoD has committed over $215 million in funding for "the expansion and
modernization of Aerojet Rocketdyne operations."18 What is the funding planned to
be used for? Are their mechanisms in place for DoD oversight of this funding?

5. Which major defense programs does DoD anticipate will be impacted by L3Harris
merging with Aerojet? Please describe the anticipated impact.

6. Has DoD performed any analysis of future program costs, or analysis of impacts on
innovation, the defense supply chain, or other national security concerns related to the
L3Harris-Aerojet merger? If so, what were the findings of these analyses?

14 Letter from DoD Under Secretary of Defense for Acquisition and Sustainment LaPlante to Senator Warren, July 21, 2023, p. 1, [Letter on file with the Office of Sen. Warren].
15 Letter from Senator Warren to FTC Chair Khan, July 16, 2021, https://www.warren.senate.gov/imo/media/doc/FTC%20%20DOD%20Letter%20re%20Behavioral%20Remedies%20-%207.16.21%20(Warren).pdf.
16 American Antitrust Institute, "Behavioral Merger Remedies: Evaluation and Implications for Antitrust Enforcement," John Kwoka and Diana Moss, 2011, p. 5, 8, https://www.antitrustinstitute.org/wpcontent/uploads/2011/11/AAI_wp_behavioral-remedies_final.pdf.
17 Defense One, "L3Harris rejects fears it will deny Aerojet rockets to competitors," Audrey Decker, July 27, 2023, https://www.defenseone.com/business/2023/07/l3harris-rejects-fears-it-will-deny-aerojet-rockets-competitors/388885/.
18 U.S. Department of Defense, "DoD Strengthens Supply Chain for Solid Rocket Motors," press release, April 14, 2023, https://www.defense.gov/News/Releases/Release/Article/3362263/dod-strengthens-supply-chain-for-solidrocket-motors/.

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7. What concerns has DoD received from DoD stakeholders regarding the impact of this
merger? Did DoD incorporate these concerns into its assessment and any assurances
or agreement sought regarding post-merger behavior by the merged companies?

Sincerely,

Source