SpaceX sues Lock-Mart and Boeing

by Braddock Gaskill

Details about the lawsuit filed by SpaceX last week against Lockheed-Martin and Boeing have come to light over the weekend, with the release of the full text of the court filing on

SpaceX filed the lawsuit late last Wednesday with the US federal District Court for the Central District of Central California.

They are seeking a jury trial to rule that Lockheed-Martin and Boeing have conspired to violate US anti-trust and racketeering law, to block the formation of the United Space Alliance (ULA), and to recover unspecified damages.

In the 44 page formal Complaint and Summons filed last week, SpaceX alleges a long history of anti-competitive conspiracy between the Atlas V and Delta IV launch programs. 

SpaceX alleges that Boeing and Lockheed-Martin are guilty of manipulating the US Government-sponsored Evolved Expendable Launch Vehicle (EELV) rocket procurement program. They are accused of multiple violations of the Sherman, Clayton, Cartwright, and even RICO Acts since the very inception of the EELV program in 1995.

The lawsuit comes at a pivotal time for the US medium and heavy launch industry.  The industry is dominated almost exclusively by the Boeing Delta IV and Lockheed-Martin Atlas V rockets, and sponsored primarily by the US Air Force for military and reconnaissance satellites. 

Last spring, the two launch contractors convinced the US Air Force to purchase EELV-class launch services exclusively from them until at least 2011. 

In a single large Request for Proposals (RFP) covering over 20 expected launches, the US Air Force changed the nature of the EELV program from an open, competitive, per-launch bidding process to an exclusive, subsidized-infrastructure program for Lockheed-Martin and Boeing.

The two companies soon afterwards announced that they were combining their separate rocket programs into a single cooperative joint-venture, the United Launch Alliance (ULA).  The justification for the joint-venture is to reduce operational costs by up to $100 million per year by combining the infrastructure for the Delta IV and Atlas V.

The Federal Trade Commission (FTC) has not yet approved the ULA joint venture.  The FTC decision was expected this week, but the lawsuit by SpaceX has complicated matters.  The FTC is required to look into any civil violation of the Sherman Act.

This is not the first delay to a ULA FTC ruling; Boeing and Lockheed Martin withdrew and resubmitted their prior request on September 22 to give the commission more time. The European Union’s own commission cleared the merger in August, believing that it would not inhibit competition.

The new exclusive contract process emerged largely from the US Government’s fear that either Boeing or Lockheed-Martin might discontinue their launch system because of low commercial demand.  The Air Force has expressed a strong desire not to rely on a single launch system which might be grounded for years in the event of an accident.

SpaceX alleges that Boeing and Lockheed-Martin have actually forced the Air Force into making these changes to the EELV program by conspiring to pressure the Air Force under the threat of discontinuing their launch systems. 

This new exclusive contract arrangement between the Air Force and a consortium of the two former competitors has come just as the tiny rocket startup, SpaceX, announces their plans to launch its EELV-class Falcon 9 launch system within two years.

SpaceX claims that its Falcon 9 will cost a fraction of the price of the existing Atlas V and Delta IV rockets.  But SpaceX has yet to even make its first small launch into orbit.  The maiden flight of their tiny Falcon 1 rocket has just been delayed again from the end of October to the middle of November. 

However, SpaceX has already announced a US Government customer for its maiden Falcon 9 flight in the second quarter of 2007.  If the new non-competitive, subsidized Air Force EELV procurement model and ULA consolidation become a reality, that may be the last EELV-class US Government payload SpaceX will be permitted to launch until after 2011.

The new Air Force procurement rules approved in March fundamentally changed the model of the EELV program from a series of competitive fixed-price launch contracts for specific satellites to a non-competitive cost-reimbursement capability contract.  This model treats the EELV launch services more as an on-going US Government subsidized industry than a competitive marketplace for launch contracts.

Boeing and Lockheed-Martin are accused of violating the trust-busting Sherman and Clayton Acts, dating back to the end of the 19th century. They are accused of violating the first and second sections of the Sherman Act, which declares any restraint of trade or commerce illegal, and any corporation attempting to monopolize trade as guilty of a felony.  The Clayton Act prohibits mergers where the effect would substantially lessen competition or would create a monopoly.

California’s Cartwright Act is essentially a state version of the Sherman Act, parallelling it in many ways.

Boeing and Lockheed are also accused of conspiring to violate the RICO Act. Originally created to criminally prosecute the Mafia, the Racketeer Influenced and Corrupt Organizations Act (RICO) has been used since the 1980’s in civil cases because of its large financial windfalls and its very broad applications.  Under the statute, RICO prohibits companies from operating through a pattern of racketeering.

To view the documents in full, see here:
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