The Not-So-New Antitrust Enviornment for Consolidation in the Defense Industry: The Martin Marietta-Lockheed Merger

Monday, January 1st, 1996 at 12:00 am by Mark Shwartz
Mark Shwartz, The Not-So-New Antitrust Enviornment for Consolidation in the Defense Industry: The Martin Marietta-Lockheed Merger, 1996 Colum. Bus. L. Rev. 329

The defense industry is in the midst of a restructuring of enormous and unprecedented proportions. From a peak in 1986, the procurement budget has shrunk in real terms by more than 68% to today’s level of less than $50 billion. One result of this shrinkage is a dramatic number of mergers and joint ventures. Seventy-five percent or more of the current defense contractors are expected to merge with another firm or exit the business by the year 2000. Consequently, the number, size and regulatory scrutiny of mergers and other consolidating transactions within the defense industry will clearly grow. The regulatory responsibility for reviewing mergers for possible violation of federal antitrust laws belongs principally to the Department of Justice (DoJ) and the Federal Trade Commission (FTC) — collectively, the “enforcement agencies.” From 1979 to 1994, the enforcement agencies approved more than 300 defense industry mergers. The majority of these cases were deemed of little economic consequence and, therefore, did not receive substantial scrutiny by the government. In fact, only four cases have been litigated. However, as there is no public record of how many mergers were modified to accommodate anticipated concerns or actual suggestions of the antitrust enforcement agencies, the dearth of litigation does not necessarily imply that their impact has been slight. Reflecting the increase in, and significance of, consolidation throughout the defense industry, there have been more than a dozen sizable mergers and acquisitions just within the past three years. This article, by examining the Martin Marietta-Lockheed merger (the most significant case in a wave of industry-wide consolidation), provides an analysis of the current judicial and regulatory thinking about antitrust enforcement in the defense industry, recognizing the unique characteristics of the industry and the extraordinary period in the industry’s history.

Author Information

Shwartz was, from 1988 to 1993, the Principal in a consulting practice that specialized in solving management, international marketing, and investment problems in the defense industry. He previously served in a variety of roles as Special Assistant for Policy in the Office of the Secretary of Defense from 1981 to 1988.