updated 10/3/2006 9:20:01 PM ET 2006-10-04T01:20:01

The Federal Trade Commission said Tuesday it has approved the joint venture between defense contractors Lockheed Martin Corp. and the Boeing Co. to launch government satellites, lifting a final barrier to the long-delayed proposal.

While the commission concluded that the $1.06 billion partnership between the nation’s two biggest defense firms could unfairly muscle out competitors, it said that concern was outweighed by the national security demands for a reliable and cheaper way to send military and other satellites into space.

The so-called United Launch Alliance, or ULA, was proposed in May 2005 to resolve a longstanding dispute between Lockheed and Boeing, then the two major suppliers of rockets for government launches.

It also came after Boeing was stripped of $1 billion in launch contracts and suspended for 20 months from launches by the Air Force after accusations that it used thousands of sensitive documents stolen from Lockheed to gain an edge in the bitter rivalry. Boeing later agreed to pay $615 million to end a Justice Department probe of the case.

The FTC decision “brings the ULA closer to the goal of meeting the government’s need for reliable, lower-cost launch services for national security, civil and scientific payloads,” Boeing spokesman Dan Beck said.

Paperwork still needs to be done
Lockheed spokesman Tom Jurkowsky, calling the decision good news, said the two companies still needed to complete reams of legal documents before the deal closes.

ULA will be a 50-50 venture between the two companies, each providing a $530.7 million stake. The venture, to be headquartered in Denver, would combine launch services for Boeing’s Delta and Lockheed’s Atlas rockets, known as expendable launch vehicles. The venture is expected to save about $150 million annually.

The government already had few contractors to choose from. Maryland-based Lockheed and Chicago-based Boeing are the only domestic suppliers of medium to heavy rockets. California-based Northrop Grumman is the only other major competitor in the domestic space launch vehicle business, according to the FTC.

The FTC set conditions on the deal, such as requiring that ULA not favor Lockheed and Boeing on issues such as who makes the satellites that are launched and other contracting issues. It also requires ULA to guard trade secrets closely.

Rivals review decision
Northrop said in a statement that it was still reviewing the FTC decision. The California rocket company SpaceX, which had sued to try to stop ULA, said the FTC appeared to protect only other large companies like Northrop.

“It appears to do very little to ensure free and fair competition in the launch vehicle market,” said Elon Musk, SpaceX's founder and chief executive officer.

The commission voted 5-0 to approve the venture, which will now be open for public comment for 30 days before it becomes permanent.

Defense Department argued for deal
The FTC appeared to be swayed by arguments from the Defense Department that the single launch provider was needed even though it would cut competition. In an August letter to the commission, Undersecretary of Defense for Acquisitions Kenneth Krieg said ULA would launch satellites for tasks such as guiding missiles to targets. He said two types of rockets were needed in case one failed.

Slideshow: Month in space: Future frontiers “The national security advantages of ULA are paramount to the Department’s support of this transaction,” Krieg wrote.

But a month earlier, Michael Moiseyev, the assistant director of the FTC’s bureau of competition, wrote in a letter to the Pentagon that “a consolidation of the only two market participants would create a durable monopoly.” He also challenged whether the government would actually benefit from the $150 million the companies claim ULA will save.

In a separate statement released Tuesday with the FTC decision, Commissioner Pamela Jones Harbour deferred to the Pentagon while expressing concern about the anticompetitive nature of the deal.

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