By Julian Hattem - 06/10/13 09:03 PM EDT
Both companies manufacture rocket engines for spacecraft and components of the military's missile defense system.
They are also the only main suppliers of a high-performance liquid rocket propulsion system that the military uses for missile defense.
On Thursday, the assistant director of the FTC's competition bureau, Michael Moiseyev, warned the Defense Department in a letter that the acquisition "is likely to have a substantial adverse effect on competition" in the rocket system's American market. Buying Aerojet's primary competitor "will likely provide Aerojet a durable monopoly in this market," Moiseyev added.
The Pentagon, however, pushed for the sale.
In a letter responding to the FTC, Susan Raps, the deputy general counsel for acquisition and logistics, wrote that the merger would preserve the industrial base for liquid rocket engines and prevent a potentially harmful disruption in the market.
"While the Department of Defense recognizes that allowing the transaction to go forward without remedying its anticompetitive effects in the [rocket systems] market would not be the normal course for the Commission," she wrote, "the Department nevertheless requests that the transaction be allowed to proceed for both national security and industrial base reasons."