The opinion of the court was delivered by: LOUIS F. OBERDORFER
Plaintiff has demonstrated a substantial likelihood of success on the merits before the Federal Trade Commission. The record in this case, necessarily developed hurriedly and informally,
yields some provable facts and considerable speculation about the future course of world events, business judgments, and a variety of other unprovable contingencies.
The relevant proven facts are essentially as follows. The United States Army is the sole domestic customer for 120 millimeter tank ammunition. The United States constitutes the geographic market. For the purposes of this case, there are four varieties of the product currently under production: 120 millimeter CE and KE training rounds and 120 millimeter CE and KE tactical rounds. All current tactical and training rounds are manufactured for, and sold to, the Army by the two defendant firms, Alliant Techsystems Inc. and Olin Corporation. In addition to the current rounds, advanced KE tactical rounds are being developed for the Army exclusively by Olin. Advanced CE tactical rounds are being developed for the Army exclusively by Alliant. Collectively, the products and services involved in the manufacture of the current 120mm rounds and in the development of the advanced tactical rounds constitute the relevant product market. See e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 325, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962). Between the two companies, defendants share a complete monopoly over the relevant market.
Defendants have presented testimony that suggests the Army supports the merger and that the acquisition is, therefore, in the public interest. The defendants called as witnesses Stephen K. Conver, Assistant Secretary of the Army for Research, Development, and Acquisition, and Colonel Franklin Y. Hartline, Program Manager, Tank Main Armament Systems at the U.S. Army Armament Research, Development and Engineering Center at Picatinny Arsenal. Both witnesses indicated a professional and individual preference for the merger and sole source procurement of the five-year contract over a competitive bid. Colonel Hartline, however, testified that "the Army's . . . policy is it has no objection to the merger, it's not for it or against it." P.I. Tr. at 133. Conver, the officer authorized to represent the official Army position, testified that the Army "has no objection to the proposed merger," and "takes no official position concerning the antitrust implications of this transaction." Conver Declaration, Def. Ex. 7 P 2.
It remains theoretically and legally possible that if the non-competitive sole source bid is too high, the Army could manufacture one or all of the varieties of the product with its own resources. It is also theoretically possible that another private source might appear. However, Alliant and Olin are well-qualified to produce all the varieties of the product. Both companies are involved in the production of all current training and tactical rounds. Alliant, in addition, helped develop both types of advanced tactical rounds. Entry into the market by either the Army or a new private source likely would be more costly and time consuming than would the development and production by either Alliant or Olin of the rounds presently contracted from the other. Thus, if the monopoly created by the merger abuses its power, it is not likely to be broken by a new entry or restrained by a threat thereof.
The public interest in market competition for a product paid for directly by the taxpayers and protection of the product against monopoly power is manifest and is defined by Congress in the Clayton Act, as amended, 15 U.S.C. § 12 et seq., and the Competition in Contracting Act. 10 U.S.C. § 3604. This public interest would be best served if the merger did not occur.
Overhanging the conventional public interest considerations is the possible risk in this case that a national emergency could find the Army short of advanced 120 millimeter tactical ammunition. There is evidence that the merged companies may require less time to fulfill the requirements of the new contract than would the survivor of a competition between Alliant and Olin. An unforeseen emergency could develop in that window of time. The Army, however, has not intervened directly or through the Department of Justice to oppose this merger for this or any other reason. The Army's official position is unconcern. With all respect for the two conscientious and impressive Army witnesses who testified on behalf of the defendants, their testimony regarding risk was too muted and speculative to overcome the critical fact that the Army as an institution does not recommend the merger or seek to bar the injunction of it.
There is a "presumption in favor of a preliminary injunction when the Commission establishes a strong likelihood of success on the merits." F.T.C. v. PPG Industries, 255 U.S. App. D.C. 69, 798 F.2d 1500, 1507 (D.C. Cir. 1986). Defendants' invocation of the public interest in avoiding risk has failed to overcome that presumption here.
UNITED STATES DISTRICT ...