[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Notices]
[Pages 2200-2214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00544]
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement: United
States v. TransDigm Group Incorporated
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final
Judgment, Hold Separate Stipulation and Order, and Competitive Impact
Statement have been filed with the United States District Court for the
District of Columbia in United States of America v. TransDigm Group
Incorporated, Civil Action No. 1:17-cv-2735. On December 21, 2017, the
United States filed a Complaint alleging that TransDigm Group
Incorporated's (TransDigm) February 2017 acquisition of SCHROTH Safety
Products GmbH and substantially all the assets of Takata Protection
Systems, Inc. (collectively, ``SCHROTH'') from Takata Corporation
violated Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The proposed
Final Judgment, filed at the same time as the Complaint, requires
TransDigm to divest the entirety of SCHROTH.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Maribeth Petrizzi,
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC
20530 (telephone: 202-307-0924).
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, Department of Justice, Antitrust
Division, 450 5th Street NW, Suite 8700, Washington, DC 20530,
Plaintiff, v. TransDigm Group Incorporated, 1301 East 9th Street, Suite
3000, Cleveland, Ohio 44114, Defendant.
Civil Action No.: 1:17-cv-2735
Judge: Amy Berman Jackson
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action for equitable relief against defendant TransDigm Group
Incorporated (``TransDigm'') to remedy the harm to competition caused
by TransDigm's acquisition of SCHROTH Safety Products GmbH and
substantially all the assets of Takata Protection Systems, Inc. from
Takata Corporation (``Takata''). The United States alleges as follows:
I. NATURE OF THE ACTION
1. In February 2017, TransDigm acquired SCHROTH Safety Products
GmbH and substantially all the assets of Takata Protection Systems,
Inc. (collectively, ``SCHROTH'') from Takata. TransDigm's AmSafe, Inc.
(``AmSafe'') subsidiary is the world's dominant supplier of restraint
systems used on commercial airplanes. Prior to the acquisition, SCHROTH
was AmSafe's closest competitor and, indeed, its only meaningful
competitor for certain types of restraint systems.
2. Restraint systems are critical safety components on every
commercial airplane seat that save lives and reduce injuries in the
event of turbulence, collision, or impact. There are a wide range of
restraint systems used on commercial airplanes, including traditional
two-point lapbelts, three-point shoulder belts, technical restraints,
and more advanced ``inflatable'' restraint systems such as airbags. The
airplane type, seat type, and seating configuration dictate the proper
restraint type for each airplane seat.
3. Prior to the acquisition, SCHROTH was a growing competitive
threat to AmSafe. Until 2012, AmSafe, the long-standing industry
leader, was nearly unrivaled in the markets for restraint systems used
on commercial airplanes. Certification requirements and other entry
barriers reinforced AmSafe's position as the dominant supplier to the
industry. However, beginning in 2012, after being acquired by Takata,
SCHROTH embarked on an ambitious plan to capture market share from
AmSafe by competing with AmSafe on price and heavily investing in
research and development of new restraint technologies. Over the next
five years, the increasing competition between AmSafe and SCHROTH
resulted in lower prices for restraint system products for commercial
airplanes and the development of innovative new restraint technologies
such as inflatable restraints. TransDigm's acquisition of SCHROTH
removed SCHROTH as an independent competitor and eliminated the myriad
benefits that customers had begun to realize from competition in this
industry.
4. Accordingly, TransDigm's acquisition of SCHROTH is likely to
substantially lessen competition in the development, manufacture, and
sale of restraint systems used on commercial airplanes worldwide, in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and should be
enjoined.
II. DEFENDANT AND THE TRANSACTION
5. TransDigm is a Delaware corporation headquartered in Cleveland,
Ohio. TransDigm operates as a holding company and owns over 100
subsidiaries. Through its subsidiaries, TransDigm is a leading global
designer, manufacturer, and supplier of highly engineered airplane
components. TransDigm's fiscal year 2016 revenues were approximately
$3.1 billion. TransDigm is the ultimate parent company of AmSafe, a
Delaware corporation headquartered in Phoenix, Arizona. AmSafe
develops, manufactures, and sells a wide range of restraint systems
used on commercial airplanes. AmSafe had global revenues of
approximately $198 million in fiscal year 2016.
6. Takata is a global automotive and aerospace parts manufacturer
based in Japan. Takata was the ultimate parent entity of SCHROTH Safety
Products GmbH, a German limited liability corporation base in Arnsberg,
Germany, and Takata Protection Systems, Inc., a
[[Page 2201]]
Colorado corporation based in Pompano Beach, Florida. SCHROTH Safety
Products and Takata Protection Systems collectively had approximately
$37 million in revenue in fiscal year 2016.
7. On February 22, 2017, TransDigm completed its acquisition of
SCHROTH Safety Products and substantially all the assets of Takata
Protection Systems from Takata for approximately $90 million. Because
of the way the transaction was structured, it was not required to be
reported under the Hart-Scott-Rodino Antitrust Improvements Act, 15
U.S.C. 18a. After the acquisition was completed, the Takata Protection
Systems assets were incorporated as SCHROTH Safety Products LLC.
III. JURISDICTION AND VENUE
8. The United States brings this action under Section 15 of the
Clayton Act, 15 U.S.C. 25, to prevent and restrain TransDigm from
violating Section 7 of the Clayton Act, 15 U.S.C. 18.
9. TransDigm sells restraint systems used on commercial airplanes
throughout the United States. It is engaged in the regular, continuous,
and substantial flow of interstate commerce, and its activities in the
development, manufacture, and sale of restraint systems used on
commercial airplanes have had a substantial effect upon interstate
commerce. The Court has subject matter jurisdiction over this action
under Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331,
1337(a), and 1345.
10. TransDigm has consented to venue and personal jurisdiction in
this District. Venue is proper in this District under Section 12 of the
Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(c).
IV. TRADE AND COMMERCE
A. Industry Overview
11. Commercial airplanes are fixed-wing aircraft used for scheduled
passenger transport. Restraint systems used on commercial airplanes are
critical safety devices that secure the occupant of a seat to prevent
injury in the event of turbulence, collision, and impact.
12. Restraint systems used in the economy and premium cabins in
commercial airplanes vary based on the airplane type, seat type (e.g.,
economy, premium, crew, ``lie-flat,'' etc.), and seating configuration
of the airplane.
13. Restraint systems used on commercial airplanes come in two
primary forms: (i) conventional belt systems with two or more belts or
``points'' that are connected to a central buckle; or (ii) inflatable
systems with one or more airbags that may be installed in combination
with a conventional belt system. The airbags can be installed either
within the belt itself (called an ``inflatable lapbelt'') or in a
structural monument within the airplane (called a ``structural mounted
airbag'').
14. Economy cabin seats typically require two-point lapbelts,
though other restraint systems such as inflatable restraint systems may
be necessary in limited circumstances to comply with Federal Aviation
Administration (``FAA'') safety requirements.
15. Premium cabin seats come in many different seating
configurations, and passenger restraint systems used in premium cabin
seats vary as well. Premium cabin restraint systems include two-point
lapbelts, three-point shoulder belts, and inflatable restraint systems.
While two-point lapbelts and three-point shoulder belts are used widely
throughout the premium cabins, the use of inflatable restraint systems
is more common in first-class and other ultra-premium cabins.
16. Flight crew seats on commercial airplanes require special
restraint systems called ``technical'' restraints. Technical restraints
are multipoint restraints with four or more belts that provide
additional protection to the flight crew.
17. Restraint systems typically are purchased by commercial
airlines and airplane seat manufacturers. Because certification of a
restraint system is expensive and time-consuming, once a restraint
system is certified for a particular seat and airplane type it is
rarely substituted in the aftermarket for a different restraint system
or supplier. Accordingly, competition between suppliers of restraint
systems generally only occurs when a customer is designing a new seat
or purchasing a new seat design, either when retrofitting existing
airplanes or purchasing new airplanes.
B. Industry Regulation and Certification Requirements
18. All commercial airplanes must contain FAA-certified restraint
systems on every seat installed on the airplane. The process for
obtaining FAA certification is complex and involves several distinct
stages.
19. Before selling a restraint system, a supplier of airplane
restraint systems must first obtain a technical standard order
authorization (``TSOA''). A TSOA certifies that the supplier's
restraint system meets the minimum design requirements of the codified
FAA Technical Standard Order (``TSO'') for that object, and that the
manufacturer has a quality system necessary to produce the object in
conformance with the TSO. To obtain a TSOA for a restraint system, a
supplier must test its restraint system for durability and other
characteristics. Once a TSOA is issued for the restraint system, the
supplier must then obtain a TSOA for the entire seat system--i.e., the
seat and belt combination. To obtain a TSOA for the seat system, the
seat system must successfully complete dynamic crash testing to
demonstrate that the seat system meets the FAA required g-force and
head-injury-criteria safety requirements. Dynamic crash-testing is
expensive and can be cost prohibitive to potential suppliers. Once a
supplier obtains a TSOA for the seat system, it must then obtain a
supplemental type certificate, which certifies that the seat system
meets the applicable airworthiness requirements for the particular
airplane type on which it is to be installed.
20. Certain restraint system types such as inflatable restraint
systems do not have a codified TSO and must instead satisfy a ``special
condition'' from the FAA prior to manufacture and installation of the
restraint system. In those circumstances, the FAA must first determine
and then publish the terms of the special condition. Once the special
condition is published, the supplier must then satisfy the terms of the
special condition to install the object on an airplane.
V. RELEVANT MARKETS
21. AmSafe and SCHROTH compete across the full range of restraint
systems used on commercial airplanes. However, restraint systems are
designed for specific airplane configurations and seat types and are
therefore not interchangeable or substitutable for different restraint
systems. FAA regulations dictate which restraint system may be used for
a particular airplane configuration and seat type. In the event of a
small but significant price increase for a given type of restraint
system, commercial customers would not substitute another restraint
system in sufficient numbers so as to render the price increase
unprofitable. Thus, each restraint system described below is a separate
line of commerce and a relevant product market within the meaning of
Section 7 of the Clayton Act, 15 U.S.C. 18.
22. The relevant geographic market for restraint systems used on
commercial airplanes is worldwide. Restraint systems are marketed
internationally and may be sourced economically from suppliers
globally.
[[Page 2202]]
A. Relevant Market 1: Two-Point Lapbelts Used on Commercial Airplanes
23. A two-point lapbelt is a restraint harness that connects two
fixed belts to a single buckle and restrains an occupant at his or her
waist. Two-point lapbelts are used on nearly every seat in the economy
cabins of commercial airplanes; they also are regularly used in the
premium cabins. Commercial airline companies prefer lightweight two-
point lapbelts in the economy cabins to save fuel costs, reduce
CO2 emissions, and provide convenience to their passengers.
Two-point lapbelts are significantly less expensive than other
restraint system types.
24. The market for the development, manufacture, and sale of two-
point lapbelts used on commercial airplanes is already highly
concentrated and has become significantly more concentrated as a result
of TransDigm's acquisition of SCHROTH. Prior to the acquisition, there
were only three significant suppliers of two-point lapbelts used on
commercial airplanes: AmSafe, SCHROTH, and a third firm, a small,
privately-held company that has been supplying two-point lapbelts for
many years. Although a handful of other firms served the market, they
only sell a negligible quantity of two-point lapbelts each year. AmSafe
is by far the largest supplier of two-point lapbelts used on commercial
airplanes, and serves the vast majority of major commercial airlines
around the world. However, SCHROTH recently entered this market after
developing a new, innovative lightweight two-point lapbelt and had
emerged as AmSafe's most significant competitor as it aggressively
sought to market its lapbelt to major international airline customers.
B. Relevant Market 2: Three-Point Shoulder Belts Used on Commercial
Airplanes
25. A three-point shoulder belt is a restraint harness that
restrains an occupant at his or her waist and shoulder. It consists of
both a lapbelt component and shoulder belt (or sash) component. Three-
point shoulder belts are widely used in the premium cabins of
commercial airplanes where the seating configurations often necessitate
the additional protection provided by three-point shoulder belts.
26. The market for the development, manufacture, and sale of three-
point shoulder belts used on commercial airplanes was already highly
concentrated prior to the acquisition. In fact, AmSafe and SCHROTH were
the only two significant suppliers of three-point shoulder belts used
on commercial airplanes although a handful of other firms made a
negligible quantity of sales each year. As with two-point lapbelts,
AmSafe was the dominant supplier of three-point shoulder belts, and
SCHROTH was aggressively seeking to grow its business at AmSafe's
expense.
C. Relevant Market 3: Technical Restraints Used on Commercial Airplanes
27. Technical restraints are multipoint restraint harnesses
(usually four or five points) that restrain an occupant at his or her
waist and shoulders. Technical restraints consist of multiple belts
that connect to a single fixed buckle--typically a rotary-style buckle.
Technical restraints are used by the flight crew in commercial
airplanes. The critical nature of the flight crew's responsibilities
and the design of their seats necessitate the additional protections
provided by technical restraints.
28. The market for the development, manufacture, and sale of
technical restraint systems used on commercial airplanes was already
highly concentrated and became significantly more concentrated as a
result of the acquisition. Prior to the acquisition, there were only
three significant suppliers of technical restraints used on commercial
airplanes: AmSafe, SCHROTH, and a third firm, an international
aerospace equipment manufacturer. Although a handful of other firms
supplied technical restraints, they only sold a negligible quantity of
technical restraints each year. As with passenger restraints, AmSafe
was the leading supplier of technical restraints, and SCHROTH was
aggressively seeking to grow its business at AmSafe's expense.
D. Relevant Market 4: Inflatable Restraint Systems Used on Commercial
Airplanes
29. Inflatable restraint systems, which include both inflatable
lapbelts and structural mounted airbags, are restraint systems that
utilize one or more airbags to restrain an airplane seat occupant.
Inflatable restraint systems are most commonly used in the premium
cabin of commercial airplanes, particularly in first-class and other
ultra-premium cabins that have ``lie-flat'' or oblique-facing seats.
Inflatable restraint systems also are used in the economy cabin in
certain circumstances, for example, in bulkhead rows to prevent an
occupant's head from impacting the bulkhead. When required by FAA
regulations, inflatable restraint systems provide airplane passengers
with additional safety.
30. The market for the development, manufacture, and sale of
inflatable restraint systems used on commercial airplanes was already
highly concentrated prior to the acquisition. The only two suppliers of
inflatable restraint systems used on commercial airplanes were AmSafe
and SCHROTH. AmSafe and SCHROTH both offered structural mounted
airbags, while AmSafe was the exclusive supplier of inflatable
lapbelts. In recent years, SCHROTH had emerged as a strong competitor
to AmSafe in the development of inflatable restraint technologies.
VI. ANTICOMPETITIVE EFFECTS
31. Mergers and acquisitions that reduce the number of competitors
in highly concentrated markets are likely to substantially lessen
competition. Before TransDigm's acquisition of SCHROTH, the markets for
all restraint system types set forth above were highly concentrated. In
each of these markets, SCHROTH and at most one other smaller firm
competed with AmSafe prior to the acquisition and AmSafe had at least a
substantial--and often a dominant--share of the market. TransDigm's
acquisition of SCHROTH therefore significantly increased concentration
in already highly concentrated markets and is unlawful.
32. TransDigm's acquisition of SCHROTH also eliminated head-to-head
competition between AmSafe and SCHROTH in the development, manufacture,
and sale of restraint systems used on commercial airplanes worldwide.
Prior to the acquisition, SCHROTH was a growing competitive threat to
AmSafe and was challenging AmSafe on pricing and innovation.
33. In 2012, Takata acquired SCHROTH with the stated intention to
``overtake AmSafe'' in the markets for restraint systems used on
commercial airplanes. AmSafe had traditionally dominated these markets
with few, if any, significant competitors. Sensing a demand for new
competitors and restraint technologies, SCHROTH began to compete with
AmSafe on price and to invest heavily in research and development to
create new restraint technologies.
34. Customers were already beginning to see the benefits of
increased competition in these markets. Between 2012 and 2017, SCHROTH
introduced several new innovative restraint products, challenging older
products from AmSafe. These products included a new lightweight two-
point lapbelt called the ``Airlite,'' structural mounted
[[Page 2203]]
airbag systems, and other advanced restraint systems. Prior to the
acquisition, SCHROTH had already found customers--including major U.S.
commercial airlines--for both its new Airlite belt and structural
mounted airbag systems. With the introduction of these new products,
potential customers also had begun qualifying SCHROTH as an alternative
supplier to AmSafe and leveraging SCHROTH against AmSafe to obtain more
favorable pricing. As new commercial airplanes were expected to be
ordered, SCHROTH believed that its market share would continue to grow.
Indeed, SCHROTH expected that it would capture nearly 20% of the sales
of restraint systems used on commercial airplanes by 2020, with most of
the gains coming at the expense of AmSafe.
35. Prior to the acquisition, SCHROTH and AmSafe competed head-to-
head on price. The resulting loss of a competitor indicates that the
acquisition likely will result in significant harm from expected price
increases. Furthermore, prior to the acquisition, AmSafe and SCHROTH
also competed to develop new restraint technologies. The transaction
eliminated that competition depriving customers of more innovative and
life-saving restraint systems.
36. The transaction, therefore, is likely to substantially lessen
competition in the development, manufacture, and sale of restraint
systems used on commercial airplanes worldwide in violation of Section
7 of the Clayton Act.
VII. ENTRY
37. New entry and expansion by existing competitors are unlikely to
prevent or remedy the acquisition's likely anticompetitive effects.
Entry into the development, manufacture, and sale of restraint systems
used on commercial airplanes is costly, and unlikely to be timely or
sufficient to prevent the harm to competition caused by the elimination
of SCHROTH as an independent supplier.
38. Barriers to entry and expansion include certification
requirements. Before a supplier may sell restraint systems, it must
first obtain several authorizations, including a TSOA for the restraint
system, a TSOA for the seat system, a supplemental type certificate,
and, in certain cases, a special condition. These certification
requirements discourage entry by imposing substantial sunk costs on
potential suppliers with no guarantee that their restraint systems will
be successful in the market. They also take substantial time--in some
cases, years--to complete.
39. Barriers to entry and expansion also include the significant
technical expertise required to design a restraint system that
satisfies the certification requirements. The technical expertise
required to design a restraint system is proportionate to the
complexity of the restraint system design. However, while more advanced
restraint systems such as inflatable restraint systems require more
expertise than simpler belt-type restraint systems, even belt-type
restraint systems require significant expertise to design the belt to
be strong, lightweight, and functional.
40. Additional barriers to entry and expansion include economies of
scale and reputation. Customers of restraint systems used on commercial
airplanes require large volumes of restraint systems at low prices.
Companies that cannot manufacture restraint systems at these volumes
efficiently cannot compete effectively. Furthermore, customers of
restraint systems used on commercial airplanes prefer established
suppliers with known reputations.
VIII. VIOLATIONS ALLEGED
41. The acquisition of SCHROTH by TransDigm is likely to
substantially lessen competition in each of the relevant markets set
forth above in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
42. The transaction will likely have the following anticompetitive
effects, among others:
a. actual and potential competition between AmSafe and SCHROTH in
the relevant markets will be eliminated;
b. competition generally in the relevant markets will be
substantially lessened; and
c. prices in the relevant markets will likely increase and
innovation will likely decline.
IX. REQUEST FOR RELIEF
43. The United States requests that this Court:
a. adjudge and decree TransDigm's acquisition of SCHROTH to be
unlawful and in violation of Section 7 of the Clayton Act, 15 U.S.C.
18;
b. order TransDigm to divest all assets acquired from Takata
Corporation on February 22, 2017 relating to SCHROTH Safety Products
GmbH and Takata Protection Systems and to take any further actions
necessary to restore the market to the competitive position that
existed prior to the acquisition;
c. award the United States its costs of this action; and
d. grant the United States such other relief as the Court deems
just and proper.
Dated: December 21, 2017
Respectfully submitted,
For Plaintiff United States:
/s/--------------------------------------------------------------------
Makan Delrahim,
Assistant Attorney General, Antitrust Division.
/s/--------------------------------------------------------------------
Andrew C. Finch,
Principal Deputy Assistant Attorney General, Antitrust Division.
/s/--------------------------------------------------------------------
Bernard A. Nigro, Jr. (D.C. Bar #412357),
Deputy Assistant Attorney General, Antitrust Division.
/s/--------------------------------------------------------------------
Patricia A. Brink,
Director of Civil Enforcement.
/s/--------------------------------------------------------------------
Maribeth Petrizzi (D.C. Bar #435204),
Chief, Defense, Industrials, and Aerospace Section, Antitrust
Division.
/s/--------------------------------------------------------------------
David E. Altschuler (D.C. Bar #983023),
Assistant Chief, Defense, Industrials, and Aerospace Section,
Antitrust Division.
/s/--------------------------------------------------------------------
Jeremy Cline* (D.C. Bar #1011073),
Tara Shinnick (D.C. Bar #501462),
Rebecca Valentine (D.C. Bar #989607),
Defense, Industrials, and Aerospace Section, Antitrust Division, 450
Fifth Street NW, Suite 8700, Washington, D.C. 20530, Telephone:
(202) 598-2294, Facsimile: (202) 514-9033, [email protected].
*Lead Attorney to be Noticed
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, Plaintiff, v. TransDigm Group
Incorporated, Defendant.
Civil Action No.: 1:17-cv-2735
Judge: Amy Berman Jackson
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America, pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act (``APPA'' or ``Tunney Act''), 15
U.S.C. 16(b)-(h), files this Competitive Impact Statement relating to
the proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
On February 22, 2017, Defendant TransDigm Group Incorporated
(``TransDigm'') acquired SCHROTH Safety Products GmbH and substantially
all the assets of Takata Protection Systems, Inc. (collectively,
``SCHROTH'') from Takata Corporation (``Takata'') for approximately $90
million. Due to the structure of the transaction, it was not required
to be reported under the Hart-Scott-Rodino Antitrust Improvements Act,
15 U.S.C. 18a.
[[Page 2204]]
The United States filed a civil antitrust Complaint on December 21,
2017, seeking the divestiture of SCHROTH and such other relief as
necessary to restore the market to the competitive position that
existed prior to the acquisition. The Complaint alleges that the likely
effect of this acquisition would be to lessen competition substantially
for the development, manufacture, and sale of restraint systems used on
commercial airplanes worldwide in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18. This loss of competition likely would result in
higher prices for several types of restraint systems used on commercial
airplanes and diminished innovation in the development of new airplane
restraints.
At the same time the Complaint was filed, the United States also
filed a Hold Separate Stipulation and Order (``Hold Separate'') and
proposed Final Judgment, which are designed to eliminate the
anticompetitive effects of the acquisition. Under the proposed Final
Judgment, which is explained more fully below, TransDigm is expected to
divest all SCHROTH shares and assets acquired from Takata (the
``Divestiture Assets'') to Perusa Partners Fund 2, L.P. and SSP MEP
Beteiligungs GmbH & Co. KG, a management buyout group composed of
former SCHROTH executives. Under the terms of the Hold Separate,
TransDigm will take steps to ensure that the Divestiture Assets are
operated as a competitively independent, economically viable, and
ongoing business concern that will remain independent and uninfluenced
by TransDigm, and that competition is maintained during the pendency of
the ordered divestiture.
The United States and TransDigm have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION
A. The Defendant and the Transaction
TransDigm is a Delaware corporation headquartered in Cleveland,
Ohio. TransDigm operates as a holding company and owns over 100
subsidiaries. Through its subsidiaries, TransDigm is a leading global
designer, manufacturer, and supplier of highly engineered airplane
components. TransDigm's fiscal year 2016 revenues were approximately
$3.1 billion. TransDigm is the ultimate parent company of AmSafe Inc.
(``AmSafe''), a Delaware corporation headquartered in Phoenix, Arizona.
AmSafe develops, manufactures, and sells a wide range of restraint
systems used on commercial airplanes. AmSafe had global revenues of
approximately $198 million in fiscal year 2016.
Takata is a global automotive and aerospace parts manufacturer
based in Japan.\1\ Prior to the acquisition, Takata was the ultimate
parent entity of SCHROTH Safety Products GmbH and Takata Protection
Systems, Inc. SCHROTH Safety Products is a German limited liability
corporation based in Arnsberg, Germany. Takata Protection Systems was a
Colorado corporation based in Pompano Beach, Florida.\2\ SCHROTH Safety
Products and Takata Protection Systems develop, manufacture, and sell a
wide range of restraint systems used on commercial airplanes. SCHROTH
Safety Products and Takata Protection Systems collectively had
approximately $37 million in revenue in fiscal year 2016.
---------------------------------------------------------------------------
\1\ Takata filed for bankruptcy protection on June 25, 2017.
\2\ After the acquisition was completed, the Takata Protection
Systems assets were incorporated as SCHROTH Safety Products LLC.
---------------------------------------------------------------------------
On February 22, 2017, TransDigm acquired SCHROTH Safety Products
and substantially all the assets of Takata Protection Systems for
approximately $90 million. The transaction combined the two leading
suppliers of restraint systems used on commercial airplanes worldwide.
AmSafe is the dominant supplier of airplane restraint systems used on
commercial airplanes; SCHROTH was its closest competitor and, indeed,
its only meaningful competitor for certain types of restraint systems.
As a result, the acquisition would lessen competition substantially in
the development, manufacture, and sale of several types of restraint
systems used on commercial airplanes. This acquisition is the subject
of the Complaint and proposed Final Judgment filed today by the United
States.
B. Industry Overview
Commercial airplanes are fixed-wing aircraft used for scheduled
passenger transport. Restraint systems used on commercial airplanes are
critical safety devices that secure the occupant of a seat to prevent
injury in the event of turbulence, collision, and impact.
Restraint systems used in the economy and premium cabins in
commercial airplanes vary based on the airplane type, seat type, and
seating configuration of the airplane. Restraint systems used on
commercial airplanes come in two primary forms: (i) conventional belt
systems with two or more belts or ``points'' that are connected to a
central buckle; or (ii) inflatable systems with one or more airbags
that may be installed in combination with a conventional belt system.
The airbags can be installed either within the belt itself (called an
``inflatable lapbelt'') or in a structural monument (such as a seat
back or wall) within the airplane (called a ``structural mounted
airbag'').
Economy cabin seats typically require two-point lapbelts, though
other restraint systems such as inflatable restraint systems may be
necessary in limited circumstances to comply with Federal Aviation
Administration (``FAA'') safety requirements. Premium cabin seats come
in many different seating configurations, and passenger restraint
systems used in premium cabin seats vary as well. Premium cabin
restraint systems include two-point lapbelts, three-point shoulder
belts, and inflatable restraint systems. While two-point lapbelts and
three-point shoulder belts are used widely throughout the premium
cabins, the use of inflatable restraint systems is more common in
first-class and other ultra-premium cabins. Flight crew seats on
commercial airplanes require special restraint systems called
``technical'' restraints. Technical restraints are multipoint
restraints with four or more belts that provide additional protection
to the flight crew.
Restraint systems typically are purchased by commercial airlines
and airplane seat manufacturers. Because certification of a restraint
system is expensive and time consuming, once a restraint system is
certified for a particular seat and airplane type, it is rarely
substituted in the aftermarket for a different restraint system or
supplier. Accordingly, competition between suppliers of restraint
systems generally only occurs when a customer is designing a new seat
or purchasing a new seat design, either when retrofitting existing
airplanes or purchasing new airplanes.
C. Industry Regulation and Certification Requirements
All commercial airplanes must contain FAA-certified restraint
systems on every seat installed on the airplane. The process for
obtaining FAA certification is complex and involves several distinct
stages.
[[Page 2205]]
Before selling a restraint system, a supplier of airplane restraint
systems must first obtain a technical standard order authorization
(``TSOA''). A TSOA certifies that the supplier's restraint system meets
the minimum design requirements of the codified FAA Technical Standard
Order (``TSO'') for that object, and that the manufacturer has a
quality system necessary to produce the object in conformance with the
TSO. To obtain a TSOA for a restraint system, a supplier must test its
restraint system for durability and other characteristics. Once a TSOA
is issued for the restraint system, the supplier must then obtain a
TSOA for the entire seat system--i.e., the seat and belt combination.
To obtain a TSOA for the seat system, the seat system must successfully
complete dynamic crash testing to demonstrate that the seat system
meets the FAA required g-force and head-injury-criteria safety
requirements. Dynamic crash-testing is expensive and can be cost
prohibitive to potential suppliers. Once a supplier obtains a TSOA for
the seat system, it must then obtain a supplemental type certificate,
which certifies that the seat system meets the applicable airworthiness
requirements for the particular airplane type on which it is to be
installed.
Certain restraint system types such as inflatable restraint systems
do not have a codified TSO and must instead satisfy a ``special
condition'' from the FAA prior to manufacture and installation of the
restraint system. In those circumstances, the FAA must first determine
and then publish the terms of the special condition. Once the special
condition is published, the supplier must then satisfy the terms of the
special condition to install the object on an airplane.
D. Relevant Markets Affected by the Proposed Acquisition
AmSafe and SCHROTH compete across the full range of restraint
systems used on commercial airplanes. As alleged in the Complaint,
restraint systems are not generally interchangeable or substitutable
for different restraint systems; restraint systems are designed for
specific aircraft configurations and seat types. FAA regulations
dictate which restraint system may be used for a particular aircraft
configuration and seat type. In the event of a small but significant
price increase for a given type of restraint system, commercial
customers would not substitute another restraint system in sufficient
numbers so as to render the price increase unprofitable. For these
reasons, the Complaint alleges that each restraint system identified in
the Complaint is a separate line of commerce and a relevant product
market within the meaning of Section 7 of the Clayton Act, 15 U.S.C.
18.
As alleged in the Complaint, the relevant geographic market for the
development, manufacture, and sale of restraint systems used on
commercial airplanes is worldwide. Restraint systems are marketed
internationally and may be sourced economically from suppliers
globally.
The Complaint alleges likely harm in four distinct product markets
for restraint systems used on commercial airplanes worldwide: (1) two-
point lapbelts; (2) three-point shoulder belts; (3) technical
restraints; and (4) inflatable restraint systems.
A two-point lapbelt is a restraint harness that connects two fixed
belts to a single buckle and restrains an occupant at his or her waist.
Two-point lapbelts are used on nearly every seat in the economy cabins
of commercial airplanes; they also are regularly used in the premium
cabins. A three-point shoulder belt is a restraint harness that
restrains an occupant at his or her waist and shoulder. It consists of
both a lapbelt component and shoulder belt (or sash) component. Three-
point shoulder belts are widely used in the premium cabins of
commercial airplanes where the seating configurations often necessitate
the additional protection provided by three-point shoulder belts.
Technical restraints are multipoint restraint harnesses (usually four
or five points) that restrain an occupant at his or her waist and
shoulders. Technical restraints consist of multiple belts that connect
to a single fixed buckle--typically a rotary-style buckle. Technical
restraints are used by the flight crew in commercial airplanes. The
critical nature of the flight crew's responsibilities and the design of
their seats necessitate the additional protections provided by
technical restraints. Inflatable restraint systems, which include both
inflatable lapbelts and structural mounted airbags, are restraint
systems that utilize one or more airbags to restrain an airplane seat
occupant. Inflatable restraint systems are most commonly used in the
premium cabin of commercial airplanes, particularly in first-class and
other ultra-premium cabins that have ``lie-flat'' or oblique-facing
seats. Inflatable restraint systems also are used in the economy cabin
in certain circumstances. When required by FAA regulations, inflatable
restraint systems provide airplane passengers with additional safety.
E. Anticompetitive Effects
According to the Complaint, the acquisition reduced the number of
competitors in already highly concentrated markets. Before TransDigm's
acquisition of SCHROTH, the markets for all four restraint system types
alleged in the Complaint were highly concentrated. In each of these
markets, SCHROTH and at most one other smaller firm competed with
AmSafe prior to the acquisition and AmSafe had at least a substantial--
and often a dominant--share of the market. The Complaint alleges that
TransDigm's acquisition of SCHROTH therefore significantly increased
concentration in already highly concentrated markets and is likely to
enhance market power.
In addition to increasing concentration, the Complaint alleges that
TransDigm's acquisition of SCHROTH would eliminate head-to-head
competition between AmSafe and SCHROTH in the development, manufacture,
and sale of restraint systems used on commercial airplanes worldwide.
According to the Complaint, prior to the acquisition, SCHROTH was a
growing competitive threat to AmSafe and was challenging AmSafe on
pricing and innovation. In 2012, Takata acquired SCHROTH with the
intention of challenging AmSafe in the markets for restraint systems
used on commercial airplanes. SCHROTH began to compete with AmSafe on
price and to invest heavily in research and development to create new
restraint technologies. Customers were already beginning to see the
benefits of increased competition in these markets. Between 2012 and
2017, SCHROTH introduced several new innovative restraint products,
challenging older products from AmSafe. Prior to the acquisition,
SCHROTH had already found customers--including major U.S. commercial
airlines--for its new products. With the introduction of these new
products, potential customers also had begun qualifying SCHROTH as an
alternative supplier to AmSafe and leveraging SCHROTH against AmSafe to
obtain more favorable pricing. As new commercial airplanes were
expected to be ordered, SCHROTH believed that its market share would
continue to grow. For all of these reasons, the Complaint alleges that
the loss of SCHROTH as an independent competitor to AmSafe is likely to
result in higher prices for several types of restraints used on
commercial airplanes and diminished innovation worldwide in violation
of Section 7 of the Clayton Act.
[[Page 2206]]
F. Barriers to Entry
As alleged in the Complaint, new entry and expansion by existing
competitors are unlikely to prevent or remedy the acquisition's likely
anticompetitive effects. Entry into the development, manufacture, and
sale of restraint systems used on commercial airplanes is costly, and
unlikely to be timely or sufficient to prevent the harm to competition
caused by the elimination of SCHROTH as an independent supplier.
Barriers to entry and expansion include certification requirements.
Before a supplier may sell restraint systems, it must first obtain
several authorizations, including a TSOA for the restraint system, a
TSOA for the seat system, a supplemental type certificate, and, in
certain cases, a special condition. These certification requirements
discourage entry by imposing substantial sunk costs on potential
suppliers with no guarantee that their restraint systems will be
successful in the market. They also take substantial time--in some
cases, years--to complete.
Barriers to entry and expansion also include the significant
technical expertise required to design a restraint system that
satisfies the certification requirements. The technical expertise
required to design a restraint system is proportionate to the
complexity of the restraint system design. However, while more advanced
restraint systems such as inflatable restraint systems require more
expertise than simpler belt-type restraint systems, even belt-type
restraint systems require significant expertise to design the belt to
be strong, lightweight, and functional.
Additional barriers to entry and expansion include economies of
scale and reputation. Customers of restraint systems used on commercial
airplanes require large volumes of restraint systems at low prices.
Companies that cannot manufacture restraint systems at these volumes
efficiently cannot compete effectively. Furthermore, customers of
restraint systems used on commercial airplanes prefer established
suppliers with known reputations.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The divestiture requirement of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition by
establishing a new, independent, and economically viable competitor in
the development, manufacture, and sale of commercial airplane restraint
systems worldwide.
A. Divestiture
Pursuant to the proposed Final Judgment, TransDigm must divest all
of the SCHROTH assets it acquired from Takata pursuant to the February
2017 transaction. Specifically, Paragraph II(J) defines the Divestiture
Assets to include all of the assets TransDigm acquired pursuant to the
parties' Share and Asset Purchase Agreement and Share Transfer
Agreement, including SCHROTH's owned real property and leases in
Arnsberg, Germany, and Pompano Beach, Florida, and all other tangible
and intangible assets that comprise SCHROTH.
Paragraph IV(A) of the proposed Final Judgment provides that
TransDigm must divest the Divestiture Assets to Perusa Partners Fund 2,
L.P. (``Perusa'') and SSP MEP Beteiligungs GmbH & Co. KG (``MEP KG''),
or to an alternative acquirer acceptable to the United States, within
30 days after all necessary regulatory approvals have been obtained
from the Committee on Foreign Investment in the United States
(``CFIUS'') and the German Federal Ministry of Economic Affairs and
Energy (the ``Bundesministerium f[uuml]r Wirtschaft und Energie''), or
30 days after the Court's signing of the Hold Separate, whichever is
later. The assets must be divested in such a way as to satisfy the
United States in its sole discretion that the assets can and will be
operated by Perusa and MEP KG as a viable, ongoing business that can
compete effectively in the relevant markets. TransDigm must take all
reasonable steps necessary to accomplish the divestiture quickly and
shall cooperate with Perusa and MEP KG, or any other prospective
purchaser.
The proposed Acquirer is a consortium between Perusa and certain
members of the current management team of SCHROTH. Perusa is a
diversified German private equity firm that invests in mid-sized
companies. The SCHROTH management buyout group, which is acquiring an
equity stake in SCHROTH through an investment entity (MEP KG), consists
of 11 current SCHROTH executives, including several individuals who
have had significant responsibilities related to SCHROTH's engineering,
manufacture, and sale of airplane restraints. Under the terms of the
divestiture agreement, Perusa will own a majority stake of SCHROTH.
In order to facilitate the Acquirer's immediate use of the
Divestiture Assets, Paragraph IV(J) of the proposed Final Judgment
provides the Acquirer with the option to enter into a transition
services agreement with TransDigm, for a period of up to 12 months, to
obtain information technology services and other such transition
services that are reasonably necessary for the Acquirer to operate the
Divestiture Assets. The United States, in its sole discretion, may
approve one or more extensions of this agreement for a total of up to
an additional 6 months.
The proposed Final Judgment also contains provisions intended to
facilitate the Acquirer's efforts to hire the employees involved with
the SCHROTH business. Paragraph IV(D) of the proposed Final Judgment
requires TransDigm to provide the Acquirer with information relating to
the personnel involved in the operation of the Divestiture Assets to
enable the Acquirer to make offers of employment, and provides that
TransDigm will not interfere with any negotiations by the Acquirer to
hire them. In addition, Paragraph IV(E) provides that for employees
that elect employment with the Acquirer, TransDigm shall waive all
noncompete and nondisclosure agreements, vest all unvested pension and
other equity rights, and provide all benefits to which the employees
would generally be provided if transferred to a buyer of an ongoing
business. The Paragraph further provides, that for a period of two
years from filing of the Complaint, TransDigm may not solicit to hire,
or hire any such person who was hired by the Acquirer, unless such
individual is terminated or laid off by the Acquirer or the Acquirer
agrees in writing that TransDigm may solicit to hire that individual.
In the event that TransDigm does not accomplish the divestiture
within the period provided in the proposed Final Judgment, Paragraph
V(A) provides that the Court will appoint a trustee selected by the
United States to effect the divestiture. If a trustee is appointed, the
proposed Final Judgment provides that TransDigm will pay all costs and
expenses of the trustee. The trustee's commission will be structured so
as to provide an incentive for the trustee based on the price obtained
and the speed with which the divestiture is accomplished. After its
appointment becomes effective, the trustee will file monthly reports
with the Court and the United States setting forth its efforts to
accomplish the divestiture. At the end of six months, if the
divestiture has not been accomplished, the trustee and the United
States will make recommendations to the Court, which shall enter such
orders as appropriate, in order to carry out the purpose of the trust,
including extending the trust or the term of the trustee's appointment.
[[Page 2207]]
B. Firewalls
The proposed Final Judgment also contains a firewall provision
intended to ensure that TransDigm's AmSafe subsidiary does not obtain
SCHROTH's competitively sensitive information. During the U.S.
Department of Justice, Antitrust Division's (``Antitrust Division'')
investigation of the acquisition, TransDigm entered into an asset
preservation agreement with the United States to ensure that the
SCHROTH assets were preserved and operated independently during the
pendency of the investigation. As part of that agreement, the United
States agreed to allow three TransDigm executives to assist in the day-
to-day management of SCHROTH on the condition that the executives would
have no decision-making responsibility or participation in the business
of AmSafe while they served in this capacity.\3\ Section IX of the
proposed Final Judgment includes a firewall provision to ensure that
for the duration of the Final Judgment these three TransDigm employees
do not share competitively sensitive information regarding SCHROTH that
they obtained during the pendency of the investigation with individuals
with responsibilities relating to AmSafe.
---------------------------------------------------------------------------
\3\ Under Section V(B) of the Hold Separate, those three
TransDigm executives may continue to assist with the management of
SCHROTH for the term of the Hold Separate.
---------------------------------------------------------------------------
C. Notification
Section XII of the proposed Final Judgment requires TransDigm to
provide notification to the Antitrust Division of certain proposed
acquisitions not otherwise subject to filing under the Hart-Scott-
Rodino Act, 15 U.S.C 18a (the ``HSR Act''), and in the same format as,
and per the instructions relating to the notification required under
that statute. The notification requirement applies in the case of any
direct or indirect acquisitions of any assets of or interest in any
entity engaged in the development, manufacture, or sale of airplane
restraint systems. Section XII further provides for waiting periods and
opportunities for the United States to obtain additional information
similar to the provisions of the HSR Act before such acquisitions can
be consummated.
D. Enforcement and Expiration of the Final Judgment
The proposed Final Judgment contains provisions designed to promote
compliance and make the enforcement of Division consent decrees as
effective as possible. Paragraph XV(A) provides that the United States
retains and reserves all rights to enforce the provisions of the
proposed Final Judgment, including its rights to seek an order of
contempt from the Court. Under the terms of this paragraph, TransDigm
has agreed that in any civil contempt action, any motion to show cause,
or any similar action brought by the United States regarding an alleged
violation of the Final Judgment, the United States may establish the
violation and the appropriateness of any remedy by a preponderance of
the evidence and that TransDigm has waived any argument that a
different standard of proof should apply. This provision aligns the
standard for compliance obligations with the standard of proof that
applies to the underlying offense that the compliance commitments
address.
Paragraph XV(B) of the proposed Final Judgment further provides
that should the Court find in an enforcement proceeding that TransDigm
has violated the Final Judgment, the United States may apply to the
Court for a one-time extension of the Final Judgment, together with
such other relief as may be appropriate. In addition, in order to
compensate American taxpayers for any costs associated with the
investigation and enforcement of violations of the proposed Final
Judgment, Paragraph XV(B) requires TransDigm to reimburse the United
States for attorneys' fees, experts' fees, or costs incurred in
connection with any enforcement effort.
Finally, Section XVI of the proposed Final Judgment provides that
the Final Judgment shall expire ten (10) years from the date of its
entry, except that after five (5) years from the date of its entry, the
Final Judgment may be terminated upon notice by the United States to
the Court and TransDigm that the divestiture has been completed and
that the continuation of the Final Judgment is no longer necessary or
in the public interest.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against TransDigm.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
The United States and TransDigm have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court. In
addition, comments will be posted on the Antitrust Division's internet
website and, under certain circumstances, published in the Federal
Register.
Written comments should be submitted to: Maribeth Petrizzi, Chief,
Defense, Industrials, and Aerospace Section, Antitrust Division, United
States Department of Justice, 450 Fifth Street NW, Suite 8700,
Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against TransDigm. The
United States could have continued the litigation and sought a
divestiture of all SCHROTH assets acquired from Takata by TransDigm.
The United States is satisfied, however, that the divestiture of assets
described in the proposed Final Judgment will preserve competition in
the development,
[[Page 2208]]
manufacture, and sale of commercial airplane restraint systems
worldwide. Indeed, the divestiture includes all SCHROTH assets acquired
from Takata. Thus, the proposed Final Judgment would achieve all or
substantially all of the relief the United States would have obtained
through litigation, but avoids the time, expense, and uncertainty of a
full trial on the merits of the Complaint.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act); United States v. US Airways
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the
``court's inquiry is limited'' in Tunney Act settlements); United
States v. InBev N.V./S.A., No. 08[dash]1965 (JR), 2009[dash]2 Trade
Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, at *3, (D.D.C. Aug.
11, 2009) (noting that the court's review of a consent judgment is
limited and only inquires ``into whether the government's determination
that the proposed remedies will cure the antitrust violations alleged
in the complaint was reasonable, and whether the mechanism to enforce
the final judgment are clear and manageable.'').\4\
---------------------------------------------------------------------------
\4\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004) with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3. Courts have held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\5\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also US Airways, 38 F. Supp. 3d at 75 (noting that
a court should not reject the proposed remedies because it believes
others are preferable); Microsoft, 56 F.3d at 1461 (noting the need for
courts to be ``deferential to the government's predictions as to the
effect of the proposed remedies''); United States v. Archer-Daniels-
Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the United States' prediction as to the
effect of proposed remedies, its perception of the market structure,
and its views of the nature of the case).
---------------------------------------------------------------------------
\5\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest''').
---------------------------------------------------------------------------
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also US
Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the
government to grant concessions in the negotiation process for
settlements) (citing Microsoft, 56 F.3d at 1461); United States v.
Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving
the consent decree even though the court would have imposed a greater
remedy). To meet this standard, the United States ``need only provide a
factual basis for concluding that the settlements are reasonably
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp.
2d at 17.
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also US Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the
[[Page 2209]]
`public interest' is not to be measured by comparing the violations
alleged in the complaint against those the court believes could have,
or even should have, been alleged''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first place,''
it follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60. As this Court confirmed in SBC Communications, courts
``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also US Airways, 38 F. Supp. 3d at
76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the Tunney
Act). The language wrote into the statute what Congress intended when
it enacted the Tunney Act in 1974, as Senator Tunney explained: ``[t]he
court is nowhere compelled to go to trial or to engage in extended
proceedings which might have the effect of vitiating the benefits of
prompt and less costly settlement through the consent decree process.''
119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). Rather, the
procedure for the public interest determination is left to the
discretion of the Court, with the recognition that the Court's ``scope
of review remains sharply proscribed by precedent and the nature of
Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.\6\ A
court can make its public interest determination based on the
competitive impact statement and response to public comments alone. US
Airways, 38 F. Supp. 3d at 76
---------------------------------------------------------------------------
\6\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D.Mo. 1977) (``Absent a
showing of corrupt failure of the government to discharge its duty,
the Court, in making its public interest finding, should . . .
carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
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VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: December 21, 2017
Respectfully submitted,
/s/
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JEREMY CLINE* (D.C. Bar #1011073)
United States Department of Justice,
Antitrust Division,
Defense, Industrials, and Aerospace Section,
450 Fifth Street NW, Suite 8700,
Washington, D.C. 20530,
Tel: (202) 598-2294,
Fax: (202) 514-9033,
Email: [email protected].
* Attorney of Record
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, Plaintiff, v. TransDigm Group
Incorporated, Defendant.
Civil Action No.: 1:17-cv-2735
Judge: Amy Berman Jackson
[PROPOSED] FINAL JUDGMENT
WHEREAS, Plaintiff, United States of America, filed its Complaint
on December 21, 2017, the United States and Defendant, TransDigm Group
Incorporated, by their respective attorneys, have consented to the
entry of this Final Judgment without trial or adjudication of any issue
of fact or law, and without this Final Judgment constituting any
evidence against or admission by any party regarding any issue of fact
or law;
AND WHEREAS, TransDigm agrees to be bound by the provisions of this
Final Judgment pending its approval by the Court;
AND WHEREAS, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by TransDigm to assure
that competition is substantially restored;
AND WHEREAS, the United States requires TransDigm to make a certain
divestiture for the purpose of remedying the loss of competition
alleged in the Complaint;
AND WHEREAS, TransDigm has represented to the United States that
the divestiture required below can and will be made and that TransDigm
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
NOW THEREFORE, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ORDERED, ADJUDGED, AND DECREED:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against TransDigm under Section 7 of the Clayton
Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means Perusa and MEP KG, or another entity to whom
TransDigm divests the Divestiture Assets.
B. ``TransDigm'' means Defendant TransDigm Group Incorporated, a
Delaware corporation with its headquarters in Cleveland, Ohio, its
successors and assigns, and its subsidiaries (including, but not
limited to, SCHROTH Safety Products LLC, SCHROTH Safety Products GmbH,
and AmSafe, Inc.), divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers, managers, agents, and
employees.
C. ``SCHROTH'' means, collectively, SCHROTH Germany and SCHROTH
U.S.
D. ``SCHROTH Germany'' means SCHROTH Safety Products GmbH, a German
limited liability company headquartered in Arnsberg, Germany, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
E. ``SCHROTH U.S.'' means SCHROTH Safety Products LLC, a Delaware
limited liability company, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees.
F. ``Share and Asset Purchase Agreement'' means the Share and Asset
Purchase Agreement among Takata Europe GmbH, Takata Protection Systems,
Inc., Interiors In Flight, Inc., Takata Corporation, TransDigm, and TDG
Germany GmbH, dated February 22, 2017.
G. ``Share Transfer Agreement'' means the Share Transfer Agreement
among Takata Europe GmbH and TDG Germany GmbH, dated February 21, 2017.
[[Page 2210]]
H. ``Perusa'' means Perusa Partners Fund 2, L.P., a Guernsey
limited partnership with its headquarters in St. Peter Port, Guernsey,
its successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
I. ``MEP KG'' means SSP MEP Beteiligungs GmbH & Co. KG, a German
limited partnership with its headquarters in Munich, Germany, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
J. ``Divestiture Assets'' means all SCHROTH shares and assets
acquired by TransDigm pursuant to the Share and Asset Purchase
Agreement and Share Transfer Agreement including, but not limited to:
1. SCHROTH Germany's owned real property listed in Appendix A
including, but not limited to, SCHROTH Germany's warehouses located at
Im Ohl 14, 59757 Arnsberg, Germany;
2. SCHROTH Germany's leases for the real property listed in
Appendix A including, but not limited to, SCHROTH Germany's
headquarters located at Im Ohl 14, 59757 Arnsberg, Germany;
3. SCHROTH U.S.'s leases for the real property listed in Appendix A
including, but not limited to, SCHROTH U.S.'s facility at 1371 SW 8th
Street, Pompano Beach, Florida;
4. All tangible assets that comprise SCHROTH, including research
and development activities; all manufacturing equipment, tooling and
fixed assets, personal property, inventory, office furniture,
materials, supplies, and other tangible property and all assets used by
SCHROTH; all licenses, permits, certifications, and authorizations
issued by any governmental organization (including, but not limited to,
the Federal Aviation Administration and the European Aviation Safety
Agency) or industry standard-setting body (including, but not limited
to, the Society of Automotive Engineers and the International
Organization for Standardization) relating to SCHROTH; all contracts,
teaming arrangements, agreements, leases, commitments, and
understandings, relating to SCHROTH, including supply agreements; all
customer lists, contracts, accounts, and credit records; all repair and
performance records and all other records relating to SCHROTH;
5. All intangible assets relating to the SCHROTH businesses,
including, but not limited to, all patents, licenses and sublicenses,
intellectual property, copyrights, trademarks, trade names, service
marks, service names, technical information, computer software and
related documentation, know-how, trade secrets, drawings, blueprints,
designs, design protocols, specifications for materials, specifications
for parts and devices, safety procedures for the handling of materials
and substances, quality assurance and control procedures, design tools
and simulation capability, and all manuals and technical information
provided to SCHROTH employees, customers, suppliers, agents, or
licensees. Intangible assets also include all research data concerning
historic and current research and development efforts relating to the
development, manufacture, and sale of airplane restraint systems,
designs of experiments, and the results of successful and unsuccessful
designs, experiments, and testing.
K. ``Airplane restraint system'' means a belt, harness, or airbag
used to restrain airplane passengers and crew.
III. Applicability
A. This Final Judgment applies to TransDigm, as defined above, and
all other persons in active concert or participation with TransDigm who
receive actual notice of this Final Judgment by personal service or
otherwise.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, TransDigm sells or otherwise disposes of all or
substantially all of its assets or of lesser business units that
include the Divestiture Assets, TransDigm shall require the purchaser
to be bound by the provisions of this Final Judgment. TransDigm need
not obtain such an agreement from the acquirer of the assets divested
pursuant to this Final Judgment.
IV. Divestiture
A. TransDigm is ordered and directed, within 30 calendar days after
all necessary regulatory approvals have been obtained from the
Committee on Foreign Investment in the United States (``CFIUS'') and
the German Federal Ministry of Economic Affairs and Energy (the
``Bundesministerium f[uuml]r Wirtschaft und Energie''), or 30 calendar
days after the Court's signing of the Hold Separate Stipulation and
Order in this matter, whichever is later, to divest the Divestiture
Assets in a manner consistent with this Final Judgment to Perusa and
MEP KG, or to an alternative Acquirer acceptable to the United States,
in its sole discretion. The United States, in its sole discretion, may
agree to one or more extensions of this time period not to exceed sixty
(60) calendar days in total, and shall notify the Court in such
circumstances. TransDigm agrees to use its best efforts to divest the
Divestiture Assets as expeditiously as possible.
B. In the event TransDigm is attempting to divest the Divestiture
Assets to an Acquirer other than Perusa and MEP KG, TransDigm promptly
shall make known, by usual and customary means, the availability of the
Divestiture Assets. TransDigm shall inform any person making inquiry
regarding a possible purchase of the Divestiture Assets that they are
being divested pursuant to this Final Judgment and provide that person
with a copy of this Final Judgment.
C. In accomplishing the divestiture ordered by this Final Judgment,
TransDigm shall offer to furnish to all prospective Acquirers, subject
to customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to the
attorney-client privileges or work-product doctrine. TransDigm shall
make available such information to the United States at the same time
that such information is made available to any other person.
D. TransDigm shall provide the Acquirer and the United States
information relating to the personnel involved in the operation of the
Divestiture Assets to enable the Acquirer to make offers of employment.
TransDigm will not interfere with any negotiations by the Acquirer to
employ any TransDigm employee whose primary responsibility is the
operation of the Divestiture Assets.
E. For any personnel involved in the operation of the Divestiture
Assets that elect employment with the Acquirer, TransDigm shall waive
all noncompete and nondisclosure agreements, vest all unvested pension
and other equity rights, and provide all benefits to which the relevant
employees would generally be provided if transferred to a buyer of an
ongoing business. For a period of two (2) years from the filing of the
Complaint in this matter, TransDigm may not solicit to hire, or hire,
any such person who was hired by the Acquirer, unless (1) such
individual is terminated or laid off by the Acquirer or (2) the
Acquirer agrees in writing that TransDigm may solicit or hire that
individual. Nothing in this paragraph shall prohibit TransDigm from
maintaining any reasonable restrictions on the disclosure by any
employee who accepts an offer of employment with the Acquirer of
TransDigm's proprietary
[[Page 2211]]
non-public information that is (1) not otherwise required to be
disclosed by this Final Judgment, (2) related solely to TransDigm's
businesses and clients, and (3) unrelated to the Divestiture Assets.
F. TransDigm shall permit prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel and to make inspections
of the physical facilities of SCHROTH; access to any and all
environmental, zoning, and other permit documents and information; and
access to any and all financial, operational, or other documents and
information customarily provided as part of a due diligence process.
G. TransDigm shall warrant to the Acquirer that each asset will be
operational on the date of sale.
H. TransDigm shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
I. TransDigm shall warrant to the Acquirer that there are no
material defects in the environmental, zoning, or other permits
pertaining to the operation of each asset, and that following the sale
of the Divestiture Assets, TransDigm will not undertake, directly or
indirectly, any challenges to the environmental, zoning, or other
permits relating to the operation of the Divestiture Assets.
J. At the Acquirer's option, and subject to approval by the United
States, TransDigm shall enter a Transition Services Agreement for
information technology services and other such transition services that
are reasonably necessary for the Acquirer to operate the Divestiture
Assets for a period of up to twelve months. The United States, in its
sole discretion, may approve one or more extensions of this agreement
for a total of up to an additional six months. The terms and conditions
of any contractual arrangement meant to satisfy this provision must be
reasonably related to market conditions. Any amendments or
modifications of the Transition Services Agreement may only be entered
into with the approval of the United States, in its sole discretion.
K. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by Divestiture Trustee appointed
pursuant to Section V, of this Final Judgment, shall include the entire
Divestiture Assets, and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the Divestiture
Assets can and will be used by the Acquirer as part of a viable,
ongoing business of developing, manufacturing, and selling airplane
restraint systems. The divestiture, whether pursuant to Section IV or
Section V of this Final Judgment,
(1) shall be made to an Acquirer that, in the United States' sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) of
competing effectively in the business of developing, manufacturing, and
selling airplane restraint systems; and
(2) shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between an
Acquirer and TransDigm give TransDigm the ability unreasonably to raise
the Acquirer's costs, to lower the Acquirer's efficiency, or otherwise
to interfere in the ability of the Acquirer to compete effectively.
V. Appointment of Divestiture Trustee
A. If TransDigm has not divested the Divestiture Assets within the
time period specified in Paragraph IV(A), TransDigm shall notify the
United States of that fact in writing. Upon application of the United
States, the Court shall appoint a Divestiture Trustee selected by the
United States and approved by the Court to effect the divestiture of
the Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer acceptable
to the United States at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee, subject
to the provisions of Sections IV, V, and VI of this Final Judgment, and
shall have such other powers as this Court deems appropriate. Subject
to Paragraph V(D) of this Final Judgment, the Divestiture Trustee may
hire at the cost and expense of TransDigm any investment bankers,
attorneys, or other agents, who shall be solely accountable to the
Divestiture Trustee, reasonably necessary in the Divestiture Trustee's
judgment to assist in the divestiture. Any such investment bankers,
attorneys, or other agents shall serve on such terms and conditions as
the United States approves, including confidentiality requirements and
conflict of interest certifications.
C. TransDigm shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by TransDigm must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VI.
D. The Divestiture Trustee shall serve at the cost and expense of
TransDigm pursuant to a written agreement, on such terms and conditions
as the United States approves, including confidentiality requirements
and conflict of interest certifications. The Divestiture Trustee shall
account for all monies derived from the sale of the assets sold by the
Divestiture Trustee and all costs and expenses so incurred. After
approval by the Court of the Divestiture Trustee's accounting,
including fees for its services yet unpaid and those of any
professionals and agents retained by the Divestiture Trustee, all
remaining money shall be paid to TransDigm and the trust shall then be
terminated. The compensation of the Divestiture Trustee and any
professionals and agents retained by the Divestiture Trustee shall be
reasonable in light of the value of the Divestiture Assets and based on
a fee arrangement providing the Divestiture Trustee with an incentive
based on the price and terms of the divestiture and the speed with
which it is accomplished, but timeliness is paramount. If the
Divestiture Trustee and TransDigm are unable to reach agreement on the
Divestiture Trustee's or any agents' or consultants' compensation or
other terms and conditions of engagement within 14 calendar days of
appointment of the Divestiture Trustee, the United States may, in its
sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee shall, within
three (3) business days of hiring any other professionals or agents,
provide written notice of such hiring and the rate of compensation to
TransDigm and the United States.
E. TransDigm shall use its best efforts to assist the Divestiture
Trustee in accomplishing the required divestiture. The Divestiture
Trustee and any consultants, accountants, attorneys, and other agents
retained by the Divestiture Trustee shall have full and complete access
to the personnel, books, records, and facilities of the business to be
divested, and TransDigm shall develop financial and other information
relevant to such business as the Divestiture Trustee may reasonably
request, subject to reasonable protection for trade secret or other
confidential research, development, or commercial information or any
applicable privileges. TransDigm shall take no action to interfere with
or to impede the Divestiture Trustee's accomplishment of the
divestiture.
F. After its appointment, the Divestiture Trustee shall file
monthly reports with the United States and, as
[[Page 2212]]
appropriate, the Court setting forth the Divestiture Trustee's efforts
to accomplish the divestiture ordered under this Final Judgment. To the
extent such reports contain information that the Divestiture Trustee
deems confidential, such reports shall not be filed in the public
docket of the Court. Such reports shall include the name, address, and
telephone number of each person who, during the preceding month, made
an offer to acquire, expressed an interest in acquiring, entered into
negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in the Divestiture Assets, and shall describe
in detail each contact with any such person. The Divestiture Trustee
shall maintain full records of all efforts made to divest the
Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestiture
ordered under this Final Judgment within six months after its
appointment, the Divestiture Trustee shall promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestiture has not
been accomplished, and (3) the Divestiture Trustee's recommendations.
To the extent such report contains information that the Divestiture
Trustee deems confidential, such report shall not be filed in the
public docket of the Court. The Divestiture Trustee shall at the same
time furnish such report to the United States which shall have the
right to make additional recommendations consistent with the purpose of
the trust. The Court thereafter shall enter such orders as it shall
deem appropriate to carry out the purpose of the Final Judgment, which
may, if necessary, include extending the trust and the term of the
Divestiture Trustee's appointment by a period requested by the United
States.
H. If the United States determines that the Divestiture Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Divestiture Trustee.
VI. Notice of Proposed Divestiture
A. In the event TransDigm divests the Divestiture Assets to an
Acquirer other than Perusa and MEP KG, within two (2) business days
following execution of a definitive divestiture agreement, TransDigm or
the Divestiture Trustee, whichever is then responsible for effecting
the divestiture required herein, shall notify the United States of any
proposed divestiture required by Section IV or Section V of this Final
Judgment. If the Divestiture Trustee is responsible, it shall similarly
notify TransDigm. The notice shall set forth the details of the
proposed divestiture and list the name, address, and telephone number
of each person not previously identified who offered or expressed an
interest in or desire to acquire any ownership interest in the
Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from TransDigm,
the proposed Acquirer, any other third party, or the Divestiture
Trustee, if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer, and any other potential Acquirer.
TransDigm and the Divestiture Trustee shall furnish any additional
information requested within fifteen (15) calendar days of the receipt
of the request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from TransDigm, the
proposed Acquirer, any third party, and the Divestiture Trustee,
whichever is later, the United States shall provide written notice to
TransDigm and the Divestiture Trustee, if there is one, stating whether
or not it objects to the proposed divestiture. If the United States
provides written notice that it does not object, the divestiture may be
consummated, subject only to TransDigm's limited right to object to the
sale under Paragraph V(C) of this Final Judgment. Absent written notice
that the United States does not object to the proposed Acquirer or upon
objection by the United States, a divestiture proposed under Section IV
or Section V shall not be consummated. Upon objection by TransDigm
under Paragraph V(C), a divestiture proposed under Section V shall not
be consummated unless approved by the Court.
VII. Financing
TransDigm shall not finance all or any part of any purchase made
pursuant to Section IV or Section V of this Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, TransDigm shall take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by this Court.
TransDigm shall take no action that would jeopardize the divestiture
ordered by this Court.
IX. Firewalls
A. TransDigm shall implement and maintain procedures to prevent the
sharing by the TransDigm Executive Vice President currently assigned to
SCHROTH, the TransDigm Controller currently assigned to SCHROTH, and
the TransDigm Executive Vice President of Mergers & Acquisitions of
competitively sensitive information from SCHROTH with personnel with
responsibilities relating to AmSafe, Inc.
B. TransDigm shall, within thirty (30) calendar days of the Court's
entry of the Hold Separate Stipulation and Order, submit to the United
States a document setting forth in detail the procedures implemented to
effect compliance with this Section. The United States shall notify
TransDigm within ten (10) business days whether, in its sole
discretion, it approves or rejects TransDigm's compliance plan.
C. In the event TransDigm's compliance plan is rejected, the
reasons for the rejection shall be provided to TransDigm and TransDigm
shall be given the opportunity to submit, within ten (10) business days
of receiving the notice of rejection, a revised compliance plan. If the
parties cannot agree on a compliance plan, the United States shall have
the right to request that the Court rule on whether TransDigm's
proposed compliance plan fulfills the requirements of Paragraph IX(A).
D. TransDigm may at any time submit to the United States evidence
relating to the actual operation of any firewall in support of a
request to modify any firewall set forth in this Section. In
determining, in its sole discretion, whether it would be appropriate
for the United States to consent to modify the firewall, the United
States, shall consider the need to protect competitively sensitive
information of SCHROTH and the impact the firewall has had on
TransDigm's ability to efficiently manage AmSafe, Inc.
X. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or Section V,
TransDigm shall deliver to the United States an affidavit, signed by
TransDigm's Chief Financial Officer and General Counsel, which shall
describe the fact and manner of TransDigm's compliance with Section IV
or Section V of this Final Judgment. Each such affidavit shall include
the name, address, and telephone number of each person who, during the
preceding thirty (30) calendar days, made an offer to
[[Page 2213]]
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person during that period. Each such affidavit
shall also include a description of the efforts TransDigm has taken to
solicit buyers for the Divestiture Assets, and to provide required
information to prospective Acquirers, including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by TransDigm, including limitation on information,
shall be made within fourteen (14) calendar days of receipt of such
affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, TransDigm shall deliver to the United States an
affidavit that describes in reasonable detail all actions TransDigm has
taken and all steps TransDigm has implemented on an ongoing basis to
comply with Section VIII of this Final Judgment. TransDigm shall
deliver to the United States an affidavit describing any changes to the
efforts and actions outlined in TransDigm's earlier affidavits filed
pursuant to this Section within fifteen (15) calendar days after the
change is implemented.
C. TransDigm shall keep all records of all efforts made to preserve
and divest the Divestiture Assets until one year after such divestiture
has been completed.
XI. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as any Hold Separate
Stipulation and Order, or of determining whether the Final Judgment
should be modified or vacated, and subject to any legally-recognized
privilege, from time to time authorized representatives of the United
States Department of Justice, including consultants and other persons
retained by the United States, shall, upon written request of an
authorized representative of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to TransDigm, be
permitted:
(1) access during TransDigm's office hours to inspect and copy, or
at the option of the United States, to require TransDigm to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
TransDigm, relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record, TransDigm's
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by TransDigm.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
TransDigm shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this Section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
TransDigm to the United States, TransDigm represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and TransDigm marks each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United
States shall give TransDigm ten (10) calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XII. Notification
A. Unless such transaction is otherwise subject to the reporting
and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),
TransDigm, without providing advance notification to the Antitrust
Division, shall not directly or indirectly acquire any assets of or any
interest, including any financial, security, loan, equity, or
management interest, in any entity engaged in the development,
manufacture, or sale of airplane restraint systems during the term of
this Final Judgment.
B. Such notification shall be provided to the Antitrust Division in
the same format as, and per the instructions relating to, the
Notification and Report Form set forth in the Appendix to Part 803 of
Title 16 of the Code of Federal Regulations as amended, except that the
information requested in Items 5 through 8 of the instructions must be
provided only about airplane restraint systems. Notification shall be
provided at least thirty (30) calendar days prior to acquiring any such
interest, and shall include, beyond what may be required by the
applicable instructions, the names of the principal representatives of
the parties to the agreement who negotiated the agreement, and any
management or strategic plans discussing the proposed transaction. If
within the 30-day period after notification, representatives of the
Antitrust Division make a written request for additional information,
TransDigm shall not consummate the proposed transaction or agreement
until thirty (30) calendar days after submitting all such additional
information. Early termination of the waiting periods in this paragraph
may be requested and, where appropriate, granted in the same manner as
is applicable under the requirements and provisions of the HSR Act and
rules promulgated thereunder. This Section shall be broadly construed
and any ambiguity or uncertainty regarding the filing of notice under
this Section shall be resolved in favor of filing notice.
XIII. No Reacquisition
TransDigm may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XIV. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XV. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including its right to seek an order
of contempt from this Court. TransDigm agrees that in any civil
contempt action, any motion to show cause, or any similar action
brought by the United States regarding an alleged violation of this
Final Judgment, the United States may establish a violation of the
decree and the appropriateness of any remedy therefor by a
preponderance of the evidence, and TransDigm waives any
[[Page 2214]]
argument that a different standard of proof should apply.
B. In any enforcement proceeding in which the Court finds that
TransDigm has violated this Final Judgment, the United States may apply
to the Court for a one-time extension of this Final Judgment, together
with such other relief as may be appropriate. TransDigm agrees to
reimburse the United States for any attorneys' fees, experts' fees, and
costs incurred in connection with any effort to enforce this Final
Judgment.
XVI. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and TransDigm
that the divestiture has been completed and that the continuation of
the Final Judgment no longer is necessary or in the public interest.
XVII. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge.
APPENDIX A: Real Property
(Owned and Leased)
SCHROTH U.S. Leased Real Property
------------------------------------------------------------------------
Facility name Address Type of facility
------------------------------------------------------------------------
Pompano Beach............... 1371 SW 8th Street, Manufacturing Plant,
Pompano Beach, FL. Office, and
Warehouse.
------------------------------------------------------------------------
SCHROTH Germany Leased Real Property
------------------------------------------------------------------------
Facility name Address Type of facility
------------------------------------------------------------------------
Headquarters ``Im Ohl''..... Im Ohl 14, 59757, Manufacturing Plant
Arnsberg, Germany. and Office
(Headquarters).
Parking Area ``Im Ohl''..... Im Ohl 14, 59757, Parking Area.
Arnsberg, Germany.
------------------------------------------------------------------------
SCHROTH Germany Owned Real Property
------------------------------------------------------------------------
Facility name Address Type of facility
------------------------------------------------------------------------
Warehouse ``Im Ohl''........ Im Ohl 14, 59757, Warehouse.
Arnsberg, Germany;
Land Register of
Neheim-Husten of
the local court of
Arnsberg; Page
13024; Plot 5,
Parcel 390.
Warehouse ``Im Ohl''........ Im Ohl 14, 59757, Warehouse.
Arnsberg, Germany;
Land Register of
Neheim-Husten of
the local court of
Arnsberg; Page
9777; Plot 5,
Parcel 88.
------------------------------------------------------------------------
[FR Doc. 2018-00544 Filed 1-12-18; 8:45 am]
BILLING CODE 4410-11-P