July 01, 2024

Warren, Pocan, Garamendi Call For DoD, FTC, DOJ Scrutiny of TransDigm Acquisitions

Lawmakers raise concerns about TransDigm’s history of consolidation, price gouging

"There is no indication that these mergers and acquisitions will have a beneficial impact on taxpayers or national security."

Text of Letter (PDF) 

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) and Representatives Mark Pocan (D-Wis.) and John Garamendi (D-Calif.) wrote to the Department of Defense (DoD), Federal Trade Commission (FTC), and Department of Justice (DOJ), urging them to review TransDigm Group Inc.’s (TransDigm’s) acquisitions of two specialized aerospace contractors, SEI Industries LTD (SEI Industries) and Raptor Labs Holdco, LLC (Raptor Scientific). 

“Given TransDigm’s rapid pace of acquisitions and demonstrated history of price gouging, we urge the Federal Trade Commission (FTC), the Department of Justice (DOJ), and DoD to closely scrutinize the impact of these transactions on competition in the defense industry,” wrote the lawmakers.

Since its founding in 1993, TransDigm has acquired at least 88 businesses. The companies it acquires specialize in engineering sole-source parts and products, leaving the DoD with no other options but to contract with them. TransDigm has been accused of rampant price-gouging, evading oversight by selling these parts to the DoD in small quantities, resulting in contracts that fall below the threshold that would require it to report cost or pricing data. This has allowed TransDigm to hide price mark-ups that brought in profit margins as high as 4,436 percent.

In May, TransDigm acquired SEI, and announced plans to acquire Raptor Scientific, putting the company in place to once again run the same price-gouging playbook. Despite rampant consolidation and reduced competition in the defense industry, reports by the Government Accountability Office (GAO) have found that the DoD does not review transactions proactively or does not comprehensively assess the full range of risks that mergers and acquisitions of smaller suppliers pose to taxpayer costs and national security.  

“TransDigm’s pattern of roll-ups — including its proposed acquisition of Raptor Scientific — heightens the need for DoD to course correct in order to prevent future price gouging by TransDigm and fight consolidation in the defense industry,” wrote the lawmakers. 

The lawmakers request that the DoD conduct its own analysis of Transdigm’s proposed mergers with SEI Industries and Raptor Scientific. They also urged the DoD to recommend the transactions to the DOJ and FTC for further review, even if they fall below the threshold that triggers reporting requirements to antitrust agencies.

“DOJ and FTC must closely scrutinize these TransDigm transactions, as unique acquisitions and in the context of previous TransDigm acquisitions, to determine if they may have an adverse impact on competition,” concluded the lawmakers. 

Senator Warren has led the fight to hold DoD accountable and transparent to ensure taxpayers are not being price gouged and the defense industrial base remains resilient: 

  • In May 2024, Senators Warren and Chuck Grassley (R-Iowa), led a letter with Mike Braun (R-Ind.) and John Fetterman (D-Pa.) demanding the Department of Defense (DoD) provide answers about military contractors’ practice of “sweeping” and other price gouging tactics. 
  • In February 2024, Senator Warren and Representative Garamendi (D-Calif.), sent a letter to Secretary of Defense Lloyd J. Austin III, expressing concerns with the Department of Defense’s (DoD) insufficient review process for consolidation in the defense industrial base and the resulting impact on supply chains, innovation, and national security.
  • In November 2023, Senator Warren and Representative Garamendi sent letters to the Department of Defense and TransDigm, pressing them to provide transparency on cost and pricing data to ensure that taxpayers aren’t being overcharged for expensive DoD contracts.
  • In July 2023, chairing a hearing of the Senate Armed Services Subcommittee on Personnel, Senator Warren called out DoD for wasting billions in taxpayers dollars due to price gouging by defense contractors for services and in health care, and identified opportunities for cost savings when DoD buys personnel-related goods and services.
  • In June 2023, Senators Warren and Mike Braun (R-Ind.), alongside Rep. Garamendi, reintroduced the bipartisan Stop Price Gouging the Military Act, which would close loopholes in current acquisition laws, tie financial incentives for contractors to performance, and provide DoD the information necessary to prevent future rip-offs.
  • On May 25, 2023, Senators Warren, Sanders, Braun, Grassley, and Wyden sent a letter to DoD urging an investigation into contractor price gouging.
  • In October 2022, Senator Warren obtained a commitment from DoD not to increase contract prices due to inflation.
  • In October 2022 Senator Warren sent a letter to DoD urging them to insist on receiving certified cost or pricing data to justify any contract adjustments.
  • In June 2022, Senator Warren and Representative Garamendi introduced the bicameral Stop Price Gouging the Military Act, which would enhance DoD’s ability to access certified cost and pricing data. Part of Senator Warren’s legislation was incorporated into the FY 2023 National Defense Authorization Act reported to the Senate.
  • In September 2020, Senator Warren and Representative Ro Khanna (D-Calif.) formally requested that the Department of Defense (DoD) Inspector General (IG) investigate reports that the Pentagon redirected hundreds of millions of dollars of funds meant for COVID-19 response via the Defense Production Act (DPA) to defense contractors for "jet engine parts, body armor and dress uniforms.”
  • In May 2020, Senator Warren wrote to the Department requesting clarification on how the Department would prevent profiteering following a recent change to increase payments to contractors in response to the COVID-19 pandemic.
  • In May 2017, Senator Warren wrote to the DoD Inspector General, requesting an investigation into TransDigm for potential waste, fraud, and abuse in the military spares market.

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