Competition Law and Launch Services Market Power Assessment

1. Introduction

The launch services market concerns the provision of services for placing satellites, spacecraft, cargo, or other payloads into designated orbits. Competition-law assessment in this sector is unusually complex because launch services combine very high fixed costs, technological barriers, reliability requirements, government procurement, limited launch capacity, long development cycles, strategic infrastructure, and strong vertical relationships with satellite manufacturers and operators.

Competition authorities therefore do not assess market power merely by looking at a launch provider's percentage of launches. They also consider:

• the relevant type of launch;
• payload mass and orbital destination;
• commercial versus government customers;
• reliability and demonstrated launch history;
• available launch capacity;
• switching possibilities;
• entry barriers;
• government procurement restrictions;
• vertical integration with satellite manufacturers;
• access to launch vehicles and propulsion systems;
• confidential technical and commercial information; and
• the ability to foreclose competing satellite or launch-service providers.

The European Commission has, for example, treated commercial launch services as potentially worldwide markets, while government launch procurement may be national or regional because of security and procurement considerations.

2. Relevant Product Market

A. Launch services are not necessarily one single market

A launch provider may offer different services depending upon:

1. Payload mass
2. Orbit
3. Launch vehicle capability
4. Reliability
5. Launch frequency
6. Government or commercial customer
7. Required launch schedule

The European Commission has previously considered distinctions between:

• intermediate/heavy GEO satellite launches; and
• other launches, including smaller GEO and NGSO launches. 

This means that a provider could have substantial power in a heavy-GEO launch segment without necessarily possessing equivalent power across every launch-service segment.

3. Commercial Versus Government Launch Services

A fundamental distinction is between commercial launches and government launches.

Commercial launches

Commercial customers generally have greater ability to source launch services internationally. The Commission has therefore considered commercial launch services to be worldwide in geographic scope in several investigations.

Government launches

Government procurement can be considerably narrower because of:

• national-security requirements;
• domestic procurement rules;
• security clearances;
• trusted suppliers;
• export controls;
• strategic autonomy policies.

The FTC's investigation into United Launch Alliance treated U.S. government medium-to-heavy launch services as a distinct U.S. market because federal law and national-security requirements restricted procurement to domestic suppliers.

Thus:

The same launch provider can face global competition in commercial launches but much narrower competition in government launches.

4. Geographic Market

The geographic market depends heavily on the customer.

Commercial market

Commercial launch services may be worldwide because satellite operators can contract with providers located in different countries. The European Commission specifically found the supply of commercial launch services to operate on a global basis.

Government market

Government launch services may be national or regional.

The Commission's Boeing/Lockheed Martin assessment similarly distinguished commercial and government launch markets, observing that governments tend to prefer national or regional providers.

Therefore, geographical market definition should consider:

Customer → Procurement rules → Security restrictions → Export controls → Available launch providers.

5. Market Share and Concentration

Market share is an important starting point but is not conclusive evidence of market power.

A launch provider's market share should ideally be measured by:

• number of launches;
• number of contracts;
• launch revenue;
• payload capacity;
• orbital category;
• launch capacity sold;
• customer type.

The European Commission's ASL/Arianespace investigation illustrates this complexity. Arianespace was the market leader in the worldwide open GTO launch market, but the Commission also considered alternatives such as SpaceX and ILS and the dynamic nature of the market.

Consequently:

A high market share does not automatically establish dominance where credible alternative launch providers can constrain the firm's behaviour.

6. Barriers to Entry

Launch services have unusually high barriers to entry.

Major barriers include

1. Capital requirements

Developing a competitive launch vehicle requires enormous investment.

2. Technology

New entrants require expertise in:

• propulsion;
• guidance systems;
• avionics;
• materials;
• staging;
• telemetry;
• launch infrastructure.

3. Reliability

Customers are reluctant to entrust extremely valuable satellites to an untested launch provider.

4. Regulatory approvals

Launch providers may require:

• governmental licences;
• safety approvals;
• spectrum permissions;
• environmental approvals;
• export-control compliance.

5. Launch infrastructure

A provider may require access to:

• launch pads;
• tracking stations;
• testing facilities;
• integration facilities;
• recovery infrastructure.

6. Reputation

Reliability is commercially important. A history of successful launches can therefore constitute a significant competitive advantage.

The FTC's ULA complaint specifically identified the cost and time required to develop launch vehicles and the importance of demonstrated reliability as major barriers to entry.

7. Reliability as a Competition Parameter

Price is not the only competitive parameter.

Launch customers may evaluate:

• probability of mission success;
• historical failure rates;
• insurance costs;
• schedule reliability;
• payload compatibility;
• launch cadence;
• technical support.

Consequently, a provider may possess market power even without the highest nominal market share if customers have limited substitutes that satisfy their reliability and technical requirements.

8. Capacity Constraints

Launch capacity can itself become a source of market power.

A provider controlling scarce:

• launch slots;
• launch pads;
• qualified rockets;
• integration facilities; or
• orbital opportunities

may be able to exercise bargaining power over satellite operators.

This becomes particularly important where:

• demand exceeds available launches;
• competing providers have long waiting periods;
• a particular orbit requires specialised vehicles; or
• government launches receive priority.

9. Vertical Integration

Vertical integration is particularly important in launch services because the sector contains complementary markets:

Satellite manufacturer → Launch service → Satellite operator

A company active at several stages may have an ability and incentive to favour its affiliated businesses.

Potential theories include:

• input foreclosure;
• customer foreclosure;
• discriminatory launch slots;
• bundling;
• tying;
• preferential pricing;
• technical discrimination;
• discriminatory access to information.

10. Confidential Information

Confidential information is an especially significant competition issue.

A launch provider can receive sensitive information concerning:

• satellite specifications;
• payload requirements;
• competitor bids;
• launch schedules;
• technical requirements;
• pricing;
• satellite design.

If the launch provider is vertically integrated with a competing satellite manufacturer, this information may facilitate competitive advantage.

The European Commission's ASL/Arianespace investigation specifically found competition concerns concerning the flow of sensitive information between Arianespace's launch-services business and Airbus's satellite business.

11. Important Case Laws and Competition Decisions

Case 1 — FTC: Boeing/Rockwell International (1996–1997)

This is an important U.S. precedent concerning competition in space launch vehicles and launch-vehicle propulsion systems.

Boeing's proposed acquisition of Rockwell raised concerns because Boeing would simultaneously operate as:

• a competitor in space launch vehicles; and
• a supplier of propulsion systems to competing launch-vehicle manufacturers.

The FTC was concerned that Boeing could obtain competitors' confidential technical information through its propulsion-supplier relationship and potentially use that information against them.

The settlement imposed information-firewall protections.

Competition principle

A vertically integrated launch-services firm can create competitive harm not merely through pricing but through access to competitively sensitive information.

Case 2 — FTC: Boeing/Lockheed Martin — United Launch Alliance (2006)

The FTC challenged the proposed creation of United Launch Alliance (ULA) because Boeing and Lockheed Martin were the only two suppliers of U.S. government medium-to-heavy launch services at the time.

The FTC identified the relevant market as U.S. government medium-to-heavy launch services and concluded that combining the two principal competitors would substantially reduce competition.

However, the Department of Defense concluded that the national-security benefits of ULA outweighed the direct competitive loss in the circumstances.

The final settlement therefore focused on ancillary competitive harms, including:

• nondiscrimination;
• equal consideration of competing space-vehicle providers;
• protection of confidential information.

Competition principle

This case demonstrates that market power analysis in government launch markets can involve national-security considerations, while still requiring safeguards against ancillary anticompetitive conduct.

Case 3 — European Commission: Boeing/Hughes, Case M.1879 (2000)

The Boeing/Hughes transaction is highly important for understanding the relationship between satellite manufacturing and launch services.

The Commission examined launch services as well as satellite markets and considered whether the combination could allow Boeing to use its satellite position to strengthen its launch position.

The investigation considered the fact that satellite manufacturing and launch services are complementary products.

The Commission considered possible strategies such as:

• directing satellite customers toward Boeing launchers;
• designing satellite specifications to favour Boeing launchers;
• influencing launch-vehicle selection;
• leveraging satellite market power into launch services.

Competition principle

The case demonstrates the importance of conglomerate and vertical leverage even where the parties do not have a direct horizontal overlap in launch services.

Case 4 — European Commission: ASL/Arianespace, Case M.7724 (2016)

This is one of the most directly relevant modern European launch-services decisions.

Airbus Safran Launchers sought control over Arianespace.

The Commission examined the worldwide market for GTO launch services and observed that Arianespace was the market leader, while SpaceX and ILS provided competitive alternatives.

The Commission also examined:

• satellite/launch-service relationships;
• vertical foreclosure;
• information flows;
• launch slots;
• technical discrimination;
• potential bundling.

The Commission ultimately identified a significant competition concern relating to sensitive information flows between Arianespace and Airbus, while finding insufficient evidence that foreclosure of rival satellite manufacturers would significantly impede competition.

Competition principle

Market power must be analysed together with:

ability + incentive + likely effect

rather than simply market share.

Case 5 — European Commission: Boeing/Lockheed Martin, Case M.3856 (2005)

The European Commission examined the creation of ULA from a European competition perspective.

It distinguished:

• government launch services; and
• commercial launch services.

For commercial launch services, the Commission considered the market to be worldwide. It also recognised distinctions based on satellite mass and orbit.

The Commission concluded that ULA would not directly affect EEA competition because the proposed ULA would serve U.S. governmental customers and lacked a relevant EEA commercial presence.

Competition principle

A transaction can substantially reduce competition in one geographic market while having little or no competitive effect in another.

Case 6 — European Commission: Aérospatiale-Matra/MMS/DASA — Astrium

The Commission examined the creation of Astrium and the concentration of European space-sector activities.

The case illustrates the importance of analysing competition at multiple levels, including:

• satellite systems;
• launch-related systems;
• subsystems;
• equipment;
• related space activities.

The Commission's investigation proceeded to an in-depth examination after identifying serious doubts about the transaction.

Competition principle

In technologically complex industries, competition analysis should not stop at the final service. Upstream components and specialised inputs can create or reinforce market power.

Case 7 — European Commission: Boeing/Hughes and intermediate/heavy GEO launches

The Boeing/Hughes investigation also provides a particularly useful example of credible-substitute analysis.

The Commission considered launchers from Boeing, Sea Launch, ILS and Arianespace and examined whether other launchers, including Japanese and Chinese systems, constituted credible alternatives for the relevant market.

The analysis demonstrates that a theoretically available launch vehicle is not necessarily a competitive substitute.

Factors such as:

• technical compatibility;
• export restrictions;
• launch failures;
• payload capability;
• customer eligibility

can determine whether a competitor actually constrains market power.

12. Relevant Competition-Law Tests

A. Dominance

Where dominance is alleged, authorities generally examine:

Relevant market → Market share → Entry barriers → Buyer power → Substitutes → Capacity → Reliability → Innovation → Competitive constraints

A high market share may support an inference of market power, but the conclusion requires consideration of the entire competitive structure.

13. Abuse of Dominance

Potential abuses by a dominant launch provider could include:

1. Excessive pricing

Charging prices substantially above competitive levels where customers lack meaningful alternatives.

2. Discriminatory pricing

Charging similarly situated satellite operators materially different terms without objective justification.

3. Refusal to supply

Refusing access to:

• launch facilities;
• launch slots;
• integration services;
• necessary technical interfaces.

4. Discriminatory technical access

Providing affiliated satellite manufacturers with better technical treatment.

5. Bundling

Requiring customers to purchase:

Satellite + launch service

from affiliated businesses.

6. Loyalty arrangements

Using contractual arrangements to prevent customers from using competing launch providers.

7. Information exploitation

Using confidential information obtained from competitors or customers to disadvantage them.

14. Essential-Facility Considerations

In exceptional circumstances, a launch facility could raise essential-facility issues.

Relevant questions include:

1. Is the facility indispensable?
2. Can competitors realistically duplicate it?
3. Is access technically feasible?
4. Is capacity objectively limited?
5. Is there a legitimate justification for refusal?
6. Would access materially improve competition?
7. Can access be provided without compromising safety or national security?

However, not every scarce launch facility is an essential facility. The stringent requirements normally associated with refusal-to-deal doctrines remain important.

15. Buyer Power

Launch-service buyers may sometimes possess substantial countervailing power.

Large customers may include:

• satellite operators;
• telecommunications companies;
• governments;
• defence agencies;
• large institutional customers.

They may negotiate:

• launch price;
• insurance requirements;
• launch windows;
• backup arrangements;
• technical specifications;
• contractual remedies.

The existence of sophisticated buyers can constrain a provider's market power, although this depends on whether alternative launch providers actually exist.

16. Innovation Competition

Innovation is particularly important because competition may occur through:

• reusable launch vehicles;
• lower launch costs;
• increased launch cadence;
• improved reliability;
• flexible orbital insertion;
• rapid launch scheduling;
• recovery technology;
• propulsion improvements.

A merger can therefore harm competition even without immediately increasing prices if it eliminates an important innovation rival.

The FTC's Boeing/Rockwell analysis expressly connected competition in launch vehicles with innovation and quality concerns.

17. Government Procurement and Competition

Government procurement can simultaneously create and restrict competition.

Potential pro-competitive effects

• competitive tenders;
• multiple-award contracts;
• open qualification procedures;
• transparent technical specifications.

Potential restrictive effects

• security restrictions;
• domestic-content requirements;
• preferred-supplier systems;
• classified technology;
• long-term exclusive contracts.

Government procurement therefore needs to be assessed separately from the ordinary commercial market.

18. Market Power Assessment Framework

A practical competition-law investigation can use the following sequence:

Step 1 — Define the service

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Step 2 — Identify payload/orbit category

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Step 3 — Separate commercial and government demand

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Step 4 — Determine geographic scope

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Step 5 — Calculate market shares

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Step 6 — Examine credible substitutes

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Step 7 — Assess entry barriers

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Step 8 — Assess reliability and capacity

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Step 9 — Examine buyer power

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Step 10 — Examine vertical relationships

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Step 11 — Test ability and incentive to foreclose

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Step 12 — Assess actual or likely effects on price, quality, reliability, innovation and choice

19. Application to a Hypothetical Dominant Launch Provider

Suppose LaunchCo controls 55% of commercial heavy-GEO launches.

That percentage alone would not conclusively establish dominance.

The authority should additionally ask:

Competition constraints

• Does SpaceX or another provider offer technically equivalent launches?
• Are those alternatives available to the same customers?
• Can customers switch without significant delay?
• Is spare launch capacity available?

Entry

• Can new launch providers enter within a commercially relevant period?
• How expensive is certification?
• How long does vehicle development take?

Reliability

• Does LaunchCo have a substantial reliability advantage?
• Would customers pay more for that reliability?

Capacity

• Are competing launch slots available?

Vertical integration

• Does LaunchCo own satellite manufacturers?
• Does it control payload adapters or other essential inputs?

Information

• Does it receive competitors' confidential satellite information?

Effects

• Could it increase prices?
• Reduce launch quality?
• Delay competing customers?
• Restrict launch slots?
• Reduce innovation?
• Foreclose rival satellite manufacturers?

Only after considering these factors can market power be properly assessed.

20. Remedies

Where competition concerns are established, possible remedies include:

Structural remedies

• divestiture;
• separation of competing businesses;
• disposal of overlapping assets.

Behavioural remedies

• nondiscrimination obligations;
• information firewalls;
• transparent launch-slot allocation;
• access obligations;
• restrictions on exclusive dealing;
• prohibition of discriminatory technical treatment.

The ULA settlement and ASL/Arianespace commitments illustrate the importance of firewalls and nondiscrimination safeguards in this sector.

21. Key Legal Principles from the Cases

22. Conclusion

Competition-law assessment of launch services market power requires a sector-specific approach. The relevant market may be worldwide for commercial launches but substantially narrower for government procurement. Market definition may also depend on payload mass, orbital destination, launch capability and customer requirements.

The major competition concerns are not limited to excessive pricing. They include:

• concentration of launch capacity;
• barriers to entry;
• reliability advantages;
• elimination of competing launch providers;
• vertical foreclosure;
• bundling of satellites and launch services;
• discriminatory launch slots;
• access to launch infrastructure;
• exploitation of confidential information; and
• suppression of technological innovation.

The Boeing/Rockwell, Boeing/Lockheed Martin–ULA, Boeing/Hughes, ASL/Arianespace, Boeing/Lockheed Martin M.3856, and Astrium matters collectively demonstrate that launch-services competition can be affected by both horizontal concentration and vertical/conglomerate relationships. The central analytical question is therefore not simply “What is the launch provider's market share?” but rather whether customers have credible alternatives and whether the provider can profitably restrict, disadvantage, or otherwise weaken those alternatives.