WASHINGTON — In what appears to be a swipe at Department of Defense leadership, the Department of Justice and the Federal Trade Commission issued a joint statement Tuesday defending the current oversight system for mergers and acquisitions in the defense industry as "sufficiently flexible."
The letter comes as the Pentagon's top acquisition official, Frank Kendall, is working with Congress to draft legislation that would give DoD more direct oversight into mergers of defense companies.
Kendall began that quest after Lockheed Martin, the world's largest defense company, acquired helicopter giant Sikorsky in September. The DoJ and FTC regulators quickly ok'd the sale, which Kendall later indicated he was unhappy with.
The reasoning, Kendall argued then, was that if the largest contractors continue to grow at the expense of other competitors, it limits the possibility of competition — bad news for both taxpayers and the Pentagon, which wants to avoid relying on a limited industrial base.
"With size comes power, and the department's experience with large defense contractors is that they are not hesitant to use this power for corporate advantage," Kendall said Sept 30.
Tuesday's joint statement defended the current guidelines used on defense firm mergers, highlighting a focus on protecting competitiveness in the defense marketplace.
"The Guidelines are necessarily general, as they apply to all industries," the statement reads. "They are also sufficiently flexible to address DoD concerns that reductions in current or future competitors can adversely affect competition in the defense industry and thus, national security."
In the defense industry, the Agencies are especially focused on ensuring that defense mergers will not adversely affect short- and long-term innovation crucial to our national security and that a sufficient number of competitors, including both prime and subcontractors, remain to ensure that current, planned, and future procurement competition is robust," the statement added.
In an emailed statement, Pentagon spokesman Mark Wright wrote that the DoD "welcomes the joint statement" as the agencies "affirm that the DOJ/FTC Horizontal Merger Guidelines, which set forth the analytical framework for undertaking a review of a proposed transaction under Section 7 of the Clayton Act, provide enough flexibility to address DoD concerns that reductions in present-day or future competitors, including among weapon system prime contractors, can adversely affect national security."
The entire statement can be read here.
Email: amehta@defensenews.com
Twitter: @AaronMehta
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.
