United Launch Alliance’s exclusivity deal with rocket engine maker RD Amross is being probed by the US Federal Trade Commission (FTC).
The investigation is looking into whether the agreement violates antitrust laws by restraining competition in the…
United Launch Alliance’s exclusivity deal with rocket engine maker RD Amross is being probed by the US Federal Trade Commission (FTC).
The investigation is looking into whether the agreement violates antitrust laws by restraining competition in the provision of state launch services, according to reports citing a 22 April memo.
ULA, a joint venture between Boeing and Lockheed Martin, has reportedly been preventing RD Amross from selling the engines to other rocket makers that are eager to tap the government launch market.
RD Amross, which is itself a joint venture between Russia’s NPO Energomash and Pratt & Whitney Rocketdyne of the US, sells the RD-180 engine to ULA to power its Atlas 5 rocket.
ULA was formed in 2006 and has been the contractor of choice for the US government’s so-called Expendable Launch Vehicle (EELV) programme.
However, as alternatives from companies such as Orbital Sciences and SpaceX become available, the government’s five-year EELV block-buying policy that has favoured ULA has come under increasing criticism.
In a statement on the matter emailed to SatelliteFinance, ULA said: “United Launch Alliance has and will continue to fully cooperate with the FTC and to provide requested data. ULA’s contracts to purchase the RD-180 engine are lawful, pro-competitive and designed to provide the most reliable launch vehicle possible for critical U.S. Government missions. Because this is an ongoing investigation, it would be inappropriate for us to comment on specifics.”
The FTC would not comment on the investigation.
SpaceX’s Elon Musk has been campaigning hard to break what he describes as ULA’s stranglehold on EELV missions. And, amid efforts to spur more competition in the US space sector, SpaceX recently got its foot in the door with two new contracts that will allow it to test the capabilities of its Falcon 9 and Falcon Heavy rockets in 2014 and 2015, respectively.
ULA rivals argue that opening EELV up to more competition will help ease public sector budgets as the government looks to make savings. However, ULA has proved itself to be a reliable launcher for the US government to date.
Reports suggest the FTC launched its probe after repeated unsuccessful attempts by Orbital to buy the RD-180 engines for its own Antares rocket, which recently celebrated its maiden flight. Orbital ended up using AJ-26 engines from US maker Aerojet, but supplies are limited because the engine is no longer in production.
Commission ends Rocketdyne investigation after DoD steps in
The Federal Trade Commission has closed its investigation into the proposed acquisition of rocket engine manufacturer Pratt & Whitney Rocketdyne by aerospace company GenCorp.
Although the FTC concluded that the deal will give GenCorp a monopoly in the Liquid Divert and Attitude Control Systems (LDACS) market, the Commission decided not to challenge the transaction, primarily because the Department of Defense wishes to see the transaction go forward for national security reasons.
GenCorp first announced its agreement to buy Rocketdyne from parent company United Technologies for approximately US$550m back in mid-2012. However, in October the FTC sent both parties a request for additional information focusing in particular on the LDACS business.
In response, the companies amended their purchase agreement, removing the provision that provided that GenCorp would not be required to divest its LDACS business.
A modified request for additional information was then sent by the FTC at the beginning of 2013, adjusting its original investigation by excluding GenCorp’s large and medium liquid rocket engines for launch vehicles and spacecraft and focussing purely on its LDACS operations.
This prompted GenCorp to look into selling the its LDACS business to appease the FTC but no such transaction has taken place and the FTC reiterated its concern that this would create a monopolistic position.
In a lette to Defense Department deputy general counsel Susan Raps, the FTC’s assistant director Michael Moiseyev said: “The transaction is likely to lead to an increase in price and a reduction in the pace of innovation for LDACS, to the detriment of the Defense Department, the ultimate customer for LDACS.”
In addition, the FTC concluded that there are few, if any, cognizable efficiencies that would result from the merger.
The Department of Defense, however, identified potential non-economic benefits that may result from the transaction, including sustainment of certain industrial base assets and capabilities necessary to meet its space launch requirements and determined that a divestiture of either company’s LDACS business is “impossible due to highly unusual national security circumstances.”
The Department requested in a letter to the FTC that “the Commission allow [Aerojet] to acquire PWR despite the anticompetitive result in the LDACS market.”
