Northrop Grumman Acquires Orbital ATK for $9.2 Billion, Creating Solid Rocket Motor Monopoly

Northrop Grumman completed its $9.2 billion acquisition of Orbital ATK on June 6, 2018, gaining control of the premier supplier of solid rocket motors essential for missile systems and creating anticompetitive market dominance that the Federal Trade Commission warned would “reduce competition in the market for missile systems purchased by the U.S. government, resulting in less innovation and higher prices for taxpayers.” The acquisition, which involved $7.8 billion in cash and assumption of $1.4 billion in debt, gave Northrop vertical integration from missile prime contractor to critical propulsion component supplier, enabling the company to control both the production of complete weapons systems and the essential solid rocket motors that competitors depend on to build their own missile systems.

The FTC approved the acquisition only after imposing conditions requiring Northrop Grumman to supply solid rocket motors to competitors on a non-discriminatory basis and to create firewalls preventing the company from using proprietary information received from competing missile prime contractors in ways that harm competition. The settlement required the Department of Defense to appoint a compliance officer to oversee Northrop’s conduct, acknowledging that without active monitoring, the company would have overwhelming incentives to disadvantage competitors through delayed deliveries, inflated pricing, or misuse of confidential technical information shared by rivals who must purchase solid rocket motors from their own competitor.

The acquisition’s anticompetitive impact became immediately apparent when Boeing withdrew from the $13.3 billion Ground Based Strategic Deterrent ICBM competition in July 2019, explicitly citing Northrop Grumman’s acquisition of Orbital ATK and resulting dominance of the solid rocket motor market as creating an insurmountable competitive disadvantage. Boeing’s withdrawal left Northrop as the sole bidder for the massive nuclear weapons contract, demonstrating how the Orbital ATK acquisition eliminated meaningful competition for one of the largest defense contracts in history and enabled Northrop to dictate terms without competitive pressure. The FTC’s conditions requiring non-discriminatory supply proved inadequate to preserve genuine competition when competitors correctly assessed that relying on their rival for critical components created unacceptable business risk.

The Orbital ATK acquisition exemplifies how defense industry consolidation destroys competition, increases taxpayer costs, and concentrates economic and political power in fewer corporations with growing influence over Pentagon decision-making and Congressional appropriations. The merger reduced the number of major missile system prime contractors while simultaneously giving one of the remaining competitors control over critical inputs that all others depend on—a textbook example of vertical integration creating anticompetitive market structure. The renamed Northrop Grumman Innovation Systems division now controls solid rocket motor production for ICBMs, missile defense interceptors, tactical missiles, and space launch vehicles, making virtually every major U.S. military and NASA program dependent on a supplier owned by a competitor.

The FTC’s decision to approve the merger with conditions rather than blocking it outright demonstrates regulatory capture where antitrust enforcement accommodates defense industry consolidation despite obvious anticompetitive consequences. The conditions requiring non-discriminatory supply and information firewalls are effectively unenforceable, as determining whether Northrop disadvantaged competitors through subtle pricing, delivery schedule manipulations, or misuse of confidential information requires continuous monitoring that regulatory agencies lack resources to conduct. The requirement for DOD to appoint a compliance officer creates perverse incentives where the Pentagon—itself dependent on Northrop for critical weapons programs—must police the contractor’s compliance with conditions designed to preserve competition for contracts the Pentagon awards.

The acquisition’s $9.2 billion price tag represented a massive investment that Northrop expects to recoup through enhanced pricing power, reduced competition, and strategic control of an essential input to missile production. The solid rocket motor monopoly enables Northrop to extract economic rents from competitors forced to purchase components from their rival, cross-subsidize competitive bids by inflating prices charged to competitors, and leverage component supply as a strategic weapon to disadvantage rivals in future contract competitions. The Boeing ICBM withdrawal proves the acquisition achieved exactly what the FTC warned against—reduced competition and elimination of meaningful rivals for major weapons contracts, ensuring higher taxpayer costs and reduced innovation as Northrop’s monopoly power grows unchecked.