The Department of Justice and the Federal Trade Commission (FTC) have issued a joint statement explaining the need to police mergers of defense firms to preserve competition and ensure the military and taxpayers are getting the best deals on weapons.

Both departments perform watchdog duties for mergers and acquisitions in all industries, but take particular care in overseeing defense industry consolidations.

“Competition is the essential ingredient that leads to high-quality products at lower prices,” said Chairwoman Edith Ramirez of the Federal Trade Commission.  “This is especially critical when it comes to America’s defense industry, which provides the weapons and equipment that our men and women in uniform rely on every day.”  

The defense industry has unique qualities not found in other sectors, such as high barriers to entry, heavy investment in research and development over many years and the need to rapidly ramp up production of certain technologies in wartime. All those attributes are key to the agencies’ review of defense industry consolidation, the statement said.

The agencies are on the lookout for transactions that could hinder innovation, reduce the number of competitive options for the Defense Department or harm national security, DoJ and the FTC said in a joint statement issued on Tuesday. When detected, “the Agencies will not hesitate to take appropriate enforcement action, including a suit to block the transaction” found to present a threat to the defense industry or national security, the statement said.

“Mergers should not be permitted to create, enhance, or entrench market power or to facilitate its exercise,” the statement said. “A merger can produce these harmful outcomes if it is likely to enhance the ability of one or more firms to raise price, lower output, reduce innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.”

In the defense industry, the agencies are concerned with preserving “short- and long-term innovation and ensuring a “sufficient number of competitors – including both prime and subcontractors – remain to ensure that current, planned and future procurement is robust.”

“Many sectors of the defense industry are already highly concentrated,” the statement said. “Others appear to be on a similar trajectory.”

The statement describes the agencies’ framework for analyzing defense industry mergers and acquisitions and emphasizes that the antitrust agencies work closely with the Department of Defense, which is in a unique position to assess the impact of proposed defense industry consolidation on its ability to fulfill its mission.

“The Department of Justice is committed to preserving competition for current and future defense procurement,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “In light of recent speculation about possible future consolidation, we thought it timely to reinforce that message.  Working with our colleagues at the Department of Defense, our mission in reviewing proposed defense industry consolidation is to ensure that our military continues to receive the most effective and innovative products at competitive prices in both the short- and long-term thereby protecting  our national security, American soldiers, sailors, marines and air crews, and our nation’s taxpayers.”