Competition Bureau statement regarding United Technologies Corporation’s acquisition of Rockwell Collins, Inc.
On October 1, 2018, the Competition Bureau issued a No Action Letter (NAL) with respect to the proposed acquisition of Rockwell Collins, Inc. (Rockwell) by United Technologies Corporation (UTC).
The NAL confirms that the Bureau will not, at this time, challenge the proposed transaction. The terms of the NAL are subject to the implementation of a settlement agreement between the United States Department of Justice (U.S. DOJ) and the merging parties dated, October 1, 2018. Under the Competition Act, the Commissioner may challenge a transaction within one year of its completion.
In conducting its review, the Bureau worked closely with the U.S. DOJ Antitrust Division and the European Commission Directorate-General for Competition (EC). The Bureau's long-standing relationships with these agencies ensured an efficient and coordinated review of the transaction. The Bureau also conducted a large number of interviews with market participants, including customers and competitors to the parties, and reviewed documents and data obtained from the parties. This statement summarizes the approach taken by the Competition Bureau in its review of the proposed transaction.Footnote 1
Background and analysis
UTC and Rockwell are global aerospace systems suppliers that develop and manufacture extensive portfolios of aircraft systems and components, and other industrial products. The Bureau's review focused on competing products offered by both Rockwell and UTC across a variety of aircraft systems including: aircraft lighting, ice protection systems, aircraft seating, pilot controls, air data computers, aircraft interface devices, trimmable horizontal stabilizer actuators (THSAs), and oxygen systems.
The Bureau determined that the transaction would have likely resulted in a substantial lessening of competition in the markets for pneumatic ice protection systems and THSAs, due to an insufficient number of effective remaining competitors and high barriers to entry.
The parties and Zodiac Aerospace are the only companies providing certified pneumatic ice protection systems for aircraft. Pneumatic ice protection systems are tailored and must be certified by the proper authorities for use on a specific aircraft. For a large number of aircraft, UTC and Rockwell are the only companies offering certified pneumatic ice protection systems. Due to the costs and time associated with the design, manufacture and certification of pneumatic ice protection systems, the Bureau concluded that it was unlikely that a broad portfolio of pneumatic ice protection systems could be developed and certify in a timely manner to constrain a likely price increase.
UTC and Rockwell are leaders in the development and manufacture of THSAs for large commercial aircraft. THSAs are critical components of aircraft and are subject to strict testing and requirements by aviation regulatory bodies. Due to the significant resources, time and expertise required to design, manufacture and test THSAs for large commercial aircraft, and the fact that airframers have a strong preference to work with companies who have experience on similar size aircraft, the Bureau concluded that timely entry on a sufficient scale and scope to constrain a likely price increase was unlikely.
The parties have entered into separate settlement agreements with both the U.S. DOJ and the EC, the terms of which require the parties to sell Rockwell's ice protection systems and THSA businesses. These businesses, located principally in the U.S. and Mexico, encompass all of Rockwell's operations for the development, manufacture and sale of both ice protection systems and THSAs. Given that UTC and Rockwell distribute these products on a global basis, the Bureau benefited from coordinating its review with the U.S. DOJ and EC.
The Bureau, where appropriate, will take into consideration and rely on remedies agreed upon in other jurisdictions, provided that such remedies fully address the Bureau's concerns. The Bureau is satisfied that the implementation of the consent agreement in the U.S. will adequately resolve Canadian competition concerns stemming from the transaction.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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