[Federal Register Volume 59, Number 164 (Thursday, August 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20854]
[[Page Unknown]]
[Federal Register: August 25, 1994]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. S.C. Johnson & Son, Inc. and Bayer A.G.;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the Northern District of Illinois at
Rockford in United States v. S.C. Johnson & Son, Inc. and Bayer A.G.,
Civil No. 94 C 50249, as to both defendants.
The Complaint alleges that the defendants violated Section 1 of the
Sherman Act by entering into an agreement by which Bayer licensed S.C.
Johnson to use Cyfluthrin in household insecticides in the United
States, refrained from licensing other firms to use Cyfluthrin, and
ended its own plans to compete with S.C. Johnson in the sale of
household insecticides in the United States. S.C. Johnson is the
country's largest maker of household insecticides with total sales
between 45-60% of the market.
The proposed Final Judgment enjoins defendants from entering into
any agreement to allocate markets for the sale of household
insecticides, and it requires them to license others, on reasonable
terms, to use or sell Cyfluthrin. The judgment also enjoins defendants
from entering into any exclusive license for any active ingredient, if
the license agreement has been disapproved by the United States, and it
requires S.C. Johnson to provide the government prior notice of any
such exclusive license with any person other than Bayer.
Household insecticides are chemical products sold in a wide variety
of forms (e.g. aerosols, bait traps) for use by consumers to kill ants,
roaches, and other insects that infest dwellings.
Public comment on the proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to Gail Kursh, Chief Professions and
Intellectual Property Section, Room 9903, U.S. Department of Justice,
Antitrust Division, 555 4th Street, N.W., Washington, D.C. 20001
[(telephone: 202) 307-5799)].
Joseph H. Widmar,
Deputy Assistant Attorney General,
Antitrust Division.
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Bayer A.G., Defendants. Civil No. 94C50249.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action to
obtain equitable and other relief against the defendants named herein,
and complains and alleges as follows:
I
Jurisdiction, Venue, And Defendants
1. This complaint is filed under Section 4 of the Sherman Act, 15
U.S.C. 4, in order to prevent and restrain violations, as hereinafter
alleged, by defendants of Section 1 of the Sherman Act, 15 U.S.C. 1.
2. Bayer A.G. (``Bayer''), a German corporation with its principal
place of business at 5090 Leverkusen-Bayerwerk, Germany, is made a
defendant. Bayer wholly owns and closely controls Miles, Inc., an
Indiana corporation that maintains an established place of business at
9801 West Higgins Road, Rosemont, Illinois, in the Northern District of
Illinois. Bayer, through its subsidiary, Miles, Inc., is found and
transacts business in the Northern District of Illinois. Venue as to
Bayer is proper under 15 U.S.C. 22 and 28 U.S.C. 1391 (c).
3. S.C. Johnson & Son, Inc. (``Johnson''), a Wisconsin corporation
with its principal place of business at 1525 Howe Street, Racine,
Wisconsin, is made a defendant. Johnson is found and transacts business
in the Northern District of Illinois. Venue as to Johnson is proper
under 15 U.S.C. 22 and 28 U.S.C. 1391 (c).
II
Trade And Commerce
4. Defendant Bayer and its subsidiaries receive large amounts of
money in the form of payments from manufacturers for the sale of active
ingredients for use in household insecticides in the United States, and
defendant Johnson and its subsidiaries receive large amounts of money
from the sale of household insecticides to retailers and consumers
throughout the United States. Defendants' business activities and
operations, as hereinafter described, involve or affect the interstate
and international flow of funds and are within the flow of, and have a
substantial effect upon, interstate and foreign commerce.
III
Background
5. Household insecticides are chemical products that are sold in a
wide variety of forms (e.g., aerosols, baits, powders, and traps) for
use by consumers to trap or kill ants, roaches, crickets, and other
undesirable insects that invade and infest houses, apartments and other
dwellings. Because of their low cost, superior efficacy, and ease of
use, there are no good substitutes for household insecticides, and thus
they constitute a relevant product market.
6. The relevant geographic market for the sale of household
insecticides is the United States. Annual retail sales of household
insecticides in the United States exceeded $450 million in 1993.
7. The United States market for household insecticides is highly
concentrated. Johnson is the largest manufacturer of household
insecticides in the United States, with total sales between 45-60% of
the market. Johnson's two next-largest competitors in the sale of
household insecticides each have sales of no more than 12% of the
market, and the shares of Johnson's three other major competitors range
from 6 to 10% of the market.
8. Successful new entry into or expansion within the United States
market for household insecticides is difficult. To be successful, a new
entrant must demonstrate that its household insecticide has superior
safety and efficacy, attributes that are solely dependent upon the
active ingredient chosen for use in the product. Active ingredients
must comply with state and federal government regulations for safety
and efficacy prior to sale in the United States. Compliance with such
laws and regulations is an expensive and time-consuming process that
often takes more than three years and costs over $10 million to
complete.
9. Bayer is one of a small number of firms in the world that engage
in research and development of active ingredients for household
insecticides. Bayer has numerous patents in countries around the world,
including United States patents, on such active ingredients. Bayer
makes and sells, or licenses others to make and sell, such active
ingredients in various countries, including the United States.
10. Bayer, which makes and sells household insecticides in many
countries outside the United States, is one of the few significant
potential entrants into the United States household insecticides
market. Bayer earlier had planned and made preparations to enter the
United States household insecticides market with a new product, called
Laser. Laser's chief active ingredient was Cyfluthrin, developed and
patented by Bayer and widely considered to be superior to other active
ingredients because of its long-lasting killing power. Through Laser,
Bayer could have become one of Johnson's major competitors in the
household insecticides market in the United States.
IV
Violation Alleged
11. Beginning at least as early as March 1988 and continuing to the
present, Johnson and Bayer entered into an agreement to unreasonably
restrain trade and commerce and lessen competition in the manufacture
and sale of household insecticides in the United States in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1.
12. For the purpose of forming and effectuating this agreement,
defendants did the following things, among others:
(a) Bayer licensed Johnson to use Clyfluthrin in household
insecticides in the United States, and granted Johnson a right of first
refusal for exclusive rights for the United States on future active
ingredients developed by Bayer for household insecticides;
(b) Bayer refrained from licensing Johnson's competitors to use or
sell Cyfluthrin; and
(c) Bayer ended its plans to market Laser and compete with Johnson
in the United States household insecticides market.
V
Competitve Effects
13. Defendants agreement and activities have had the following
direct, substantial, and reasonably foreseeable effects, among others:
(a) Incentives for Bayer to compete with Johnson in the manufacture
and sale of household insecticides in the United States have been
substantially reduced; and
(b) Competition generally in the market for the sale of household
insecticides in the United States has been unnecessarily and
unreasonably restrained.
VI
Prayer For Relief
Wherefore, plaintiff prays:
1. That Johnson and Bayer be enjoined and restrained from entering
into any agreement or understanding the purpose or effect of which is
to allocate or divide territories or markets for the sale of household
insecticides;
2. That Johnson and Bayer be enjoined from entering into any
exclusive license for an active ingredient patented by Bayer without
plaintiff's prior approval;
3. That Johnson and Bayer be enjoined from entering into or
carrying out an exclusive license to make, use or sell Cyfluthrin in
the United States without plaintiff's prior approval;
4. That Johnson be enjoined and restrained from obtaining from
anyone an exclusive license for any active ingredient for use in any
household insecticide without prior notice (and if necessary, provision
of additional information regarding the arrangement) to plaintiff;
5. That plaintiff have such other relief as may be just and proper;
and
6. That plaintiff be awarded its costs in this action.
Dated: August 3, 1994.
Anne K. Bingaman, Assistant Attorney General; Robert E. Litan,
Deputy Assistant Attorney General; Mark C. Schechter, Deputy
Director, Office of Operations; Gail Kursh, Chief, Professions &
Intellectual Property Section, Antitrust Division, U.S. Department
of Justice
Anthony E. Harris, Bar No. 01133713; Kurt Shaffert, Attorneys,
Antitrust Division, U.S. Dept. of Justice, 555 4th Street, N.W.,
Room 9903, JCB, Washington, D.C. 20001, (202) 307-0951
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Bayer A.G., Defendants Civil 94C50249 No. Filed:
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in the Northern District of Illinois, Western Division;
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on defendants and by filing that
notice with the Court; and
3. Defendants agree to be bound by the provisions of the proposed
Final Judgment pending its approval by the Court. If plaintiff
withdraws its consent, or if the proposed Final Judgment is not entered
pursuant to the terms of the Stipulation, this Stipulation shall be of
no effect whatsoever, and the making of this Stipulation shall be
without prejudice to any party in this or in any other proceeding.
For Plaintiff: Anne K. Bingaman, Assistant Attorney General;
Robert E. Litan, Deputy Assistant Attorney General; Mark C.
Schechter, Deputy Director, Office of Operations; Gail Kursh, Chief,
Professions & Intellectual Property Section, Antitrust Division,
U.S. Department of Justice.
Anthony E. Harris, Bar No. 01133713; Kurt Shaffert, Attorneys,
Antitrust Division, U.S. Dept. of Justice, 555 4th Street, N.W.,
Room 9903, JCB, Washington, D.C. 20001, (202) 307-0951.
For Defendant S.C. Johnson & Son, Inc.: Maurice J. McSweeney,
Esquire Foley & Lardner 777 East Wisconsin Avenue Milwaukee,
Wisconsin 53202-5367
For Defendant Bayer A.G.: Tefft W. Smith, Esquire, Bar No.
2655314, Kirkland & Ellis, 50th Floor, 200 East Randolph Drive,
Chicago, Illinois 60601, (312) 861-2000.
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Bayer A.G., Defendants. Civil No. 94C50249.
Final Judgment
Plaintiff, the United States of America, having filed its Complaint
on August 4, 1994, and plaintiff and defendants, S.C. Johnson & Son,
Inc. and Bayer A.G., by their respective attorneys, having consented to
the entry of this Final Judgment without trial or adjudication of any
issue of fact or law, and without this Final Judgment constituting
evidence against or admission by any party with respect to any issue of
fact or law;
Now, therefore, before the taking of any testimony and without
trial or adjudication of any issue of fact or law, it is hereby
Ordered, Adjudged and Decreed:
I
Jurisdiction
This Court has jurisdiction of the subject matter and each of the
parties to this action. The Complaint states a claim upon which relief
may be granted against S.C. Johnson & Son, Inc. and Bayer A.G. under
Section 1 of the Sherman Act, as amended, 15 U.S.C. Sec. 1.
II
Definitions
As used in this Final Judgment:
(A) ``Active ingredient'' means any chemical compound or substance
used or contemplated for use in the United States as a knock-down,
debilitating, or killing agent in a household insecticide, regardless
of whether that compound or substance has been approved by federal or
state regulatory authorities.
(B) ``Exclusive license'' means any agreement for the license or
supply of an active ingredient that directly or indirectly, implicitly
or explicitly, limits access to S.C. Johnson & Son, Inc. or to S.C.
Johnson & Son, Inc. and the licensor.
III
Applicability
This Final Judgment applies to S.C. Johnson & Son, Inc.'s and to
Bayer A.G.'s officers, directors, subsidiaries, agents, employees,
successors, and assigns, and to all other persons in active concert of
participation with any of them who receive actual notice of this Final
Judgment pursuant to F.R.C.P. 65(d).
IV
Injunctive Relief
(A) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and
restrained from entering into or carrying out any agreement or
understanding, the purpose or effect of which would be to allocate or
divide territories or markets for the distribution or sale of household
insecticides, unless any such agreement or understanding relates
exclusively to markets other than the United States and has no effect
on United States commerce.
(B) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and
restrained from entering into any exclusive license between them for
any active ingredient, the patent rights to which are beneficially
owned by Bayer A.G., if such license has been disapproved by the U.S.
Department of Justice as provided herein.
S.C. Johnson & Son, Inc. and Bayer A.G. each must provide the U.S.
Department of Justice at least 90 days' written notice of their intent
to enter into any exclusive license between them. If requested by the
Department of Justice within 30 days after its receipt of such notice,
S.C. Johnson & Son, Inc. and Bayer A.G. must supply, within 30 days of
such request, all information in their possession reasonably necessary
to enable the Department to determine the competitive effect of their
exclusive license. The Department must exercise its unconditional right
to disapprove an exclusive license between S.C. Johnson & Co., Inc. and
Bayer A.G. by so notifying them in writing within 90 days after
receiving defendants' notice of intent.
(C) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and
restrained from entering into, carrying out, or operating under any
exclusive license to make, use or sell Cyfluthring in the United
States. Bayer A.G. must offer, to any person who requests it, a license
to use or sell Cyfluthrin in the United States, upon reasonable and
mutually agreeable terms and conditions, but no minimum royalty payment
shall be required under such license. Nothing herein, however, shall
prohibit Bayer A.G. from reserving exclusively for itself Cyfluthrin or
any other active ingredient, or from discontinuing the manufacture,
sale or use in the United States of Cyfluthrin or any other active
ingredient.
(D) No more than 180 days and not less than 90 days before entering
into any exclusive license with any person other than Bayer A.G., for
any active ingredient other than Cyfluthrin, S.C. Johnson & Son, Inc.
must provide the U.S. Department of Justice written notice of such
license agreement. If requested by the Department of Justice within 30
days after its receipt of such notice, S.C. Johnson & Son, Inc. must
supply within 30 days after such request, all information in its
possession reasonably necessary to determine the competitive effect of
such license agreement.
V
Compliance Program: S.C. Johnson & Son, Inc.
S.C. Johnson & Son, Inc. shall maintain an antitrust compliance
program, which shall include:
(A) distributing within 60 days from the entry of this Final
Judgment, a copy of the Final Judgment and Competitive Impact Statement
to all officers with responsibility for research and development,
manufacturing, sales or marketing of household insecticides in the
United States;
(B) distributing in a timely manner a copy of the Final Judgment
and Competitive Impact Settlement to any person who succeeds to a
position described in Paragraph V(A);
(C) briefing annually those persons designated in Paragraph V(A)
and (B) on the meaning and requirements of this Final Judgment and the
antitrust laws, including potential antitrust concerns raised by patent
licensing agreement;
(D) obtaining from each person designated in Paragraph V(A) and (B)
an annual written certification that he or she: (1) Has read,
understands and agrees to abide by this Final Judgment; (2) has been
advised and understands that noncompliance with this Final Judgement
may result in his or her conviction for criminal contempt of court and/
or fine; and (3) is not aware of any violation of this Final Judgment;
and
(E) maintaining for inspection by plaintiff a record of recipients
to whom this Final Judgment and Competitive Impact Statement have been
distributed and from whom the certification required by Paragraph V(D)
has been obtained.
VI
Compliance Program: Bayer A.G.
Bayer A.G. shall maintain an antitrust compliance program, which
shall include:
(A) distributing within 60 days from the entry of this Final
Judgment, a copy of the Final Judgment and Competitive Impact Statement
to all officers, directors, and employees of Bayer A.G.'s household
insecticide unit having signing authority on behalf of Bayer A.G.;
(B) distributing in a timely manner a copy of the Final Judgment
and Competitive Impact Statement to any person who succeeds to a
position described in Paragraph VI (A);
(C) briefing those persons designated in Paragraph VI (A) and (B)
on the meaning and requirements of this Final Judgment and the
antitrust laws, including potential antitrust concerns raised by patent
licensing agreements;
(D) obtaining from each person designated in Paragraph VI (A) and
(B) an annual written certification that he or she: (1) has read,
understands and agrees to abide by this Final Judgment; (2) has been
advised and understands that noncompliance with this Final Judgment may
result in his or her conviction for criminal contempt of court and/or
fine; and (3) is not aware of any violation of this Final Judgment; and
(E) maintaining for inspection by plaintiff a record of recipients
to whom this Final Judgment and Competitive Impact Statement have been
distributed and from whom the certification required by Paragraph VI
(D) has been obtained.
VII
Certifications
(A) Within 75 days after the entry of this Final Judgment, S.C.
Johnson & Son, Inc. and Bayer A.G. each shall certify to plaintiff
whether it has made the distribution of this Final Judgment in
accordance with Paragraphs V(A) and VI(A), respectively.
(B) For ten years after the entry of this Final Judgment, on or
before its anniversary date, S.C. Johnson & Son, Inc. and Bayer A.G.
shall each certify annually to plaintiff whether it has complied with
the provisions of Paragraphs V and VI, respectively.
VIII
Plaintiff's Access
For the sole purpose of determining or securing compliance with
this Final Judgment, and subject to any legally recognized privilege,
authorized representatives of the U.S. Department of Justice, upon
written request of the Assistant Attorney General in charge of the
Antitrust Davison shall on reasonable notice be permitted;
(A) access during regular business hours of S.C. Johnson & Son,
Inc. and Bayer A.G. to inspect and copy all records and documents
relating to any matters contained in this Final Judgment;
(B) to interview S.C. Johnson & Son, Inc. and Bayer A.G. officers,
directors, and employees, who may have counsel present, concerning such
matters; and
(C) to obtain written reports from S.C. Johnson & Son, Inc. and
Bayer A.G. relating to any of the matters contained in the Final
Judgment.
Information provided to the Department of Justice pursuant to this
provision or pursuant to Paragraph IV (B) or (D) of the Final Judgment
must be kept confidential to the full extent permitted by law.
IX
Jurisdiction Retained
Jurisdiction is retained by this Court for the purpose of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for further orders and directions as may be necessary or
appropriate to carry out or construe this Final Judgment, to modify or
terminate any of its provisions, to enforce compliance, and to punish
violations of its provisions.
X
Expiration of Final Judgment
This Final Judgment shall expire 10 years from the date of its
entry. Paragraph IV(D) of this Final Judgment, however, shall expire
six years from the date of its entry.
XI
Public Interest Determination
Entry of this Final Judgment is in the public interest.
Dated:
United States District Judge.
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Bayer A.G., Defendants, Civil No. 94C50249.
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. Sec. 16(b)-(h), the United States submits this
Competitive Impact Statement relating to the proposed Final Judgment
(or ``the Judgment'') submitted for entry against S.C. John & Son. Inc.
(``Johnson'') and Bayer A.G. (``Bayer'') in this civil antitrust
proceeding.
I
Nature and Purpose of the Proceeding
The United States of America, acting under the direction of its
Attorney General, filed this civil antitrust suit on August 4, 1994,
alleging that defendants violated Section 1 of the Sherman Act, 15
U.S.C. Sec. 1, by entering into an agreement and understanding that
unreasonably restrained interstate trade in the manufacture and sale of
household insecticides. The agreement featured an exclusive license
arrangement and the transfer by Bayer to Johnson of the assets
assembled by a Bayer subsidiary, Miles,Inc., to compete in the sale of
household insecticides in the United States with a new product, called
Laser. Laser's chief active ingredient was Cyfluthrin, which Bayer
developed and patented. Specifically, the Complaint alleges that
defendants engaged in the following activities:
(a) Bayer licensed Johnson to use Clyfluthrin in household
insecticides in the United States, and granted Johnson a right of first
refusal for exclusive rights for the United States on future active
ingredients developed by Bayer for household insecticides;
(b) Bayer refrained from licensing Johnson's competitors to use or
sell Cyflutrhin; and
(c) Bayer ended its plans to market Laser and compete with Johnson
in the United States household insecticides market.
The Complaint alleges that the appropriate product market in which to
access the competitive effect of the Cyfluthrin license and transfer of
assets is the market for the manufacture and sale of household
insecticides. This is the appropriate market because other types of
insect killers, such as agricultural pesticides, are not good
substitutes for household insecticides used to kill ants, roaches, and
other insects that typically infest dwellings. The Complaint alleges
that the entire United States is the relevant geographic market. In
this market, the Complaint alleges, Johnson is the largest firm, and
the licensing arrangement helped it to maintain its commanding
position.
The Judgment enjoins Johnson and Bayer from entering into any
agreement to allocate territories or markets for the distribution or
sale of household insecticides, unless such an agreement relates
exclusively to markets other than the United States and has no effect
on United States commerce, and requires that Bayer license Cyfluthrin
to any person on reasonable terms and conditions.\1\ Further, the Final
Judgment provides the Department with the opportunity to review any
future exclusive licenses for new active ingredients that Johnson might
seek to obtain from Bayer or any other person.\2\
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\1\In this respect, the Judgment provides relief somewhat
similar to the terms of a settlement of private litigation to which
the defendants were also parties, Koerber v. S.C. Johnson & Son,
Inc. and Bayer A.G., Civil No. 93C 20267, N.D. Ill. 1993. However,
the Judgment, unlike the private settlement, leaves Bayer free to
decide whether to license Cyfluthrin to others on terms more
favorable than its license with Johnson.
\2\The Judgment would prevent Bayer and Johnson from entering
into any exclusive license for any active ingredient if the
Department of Justice has disapproved such license within 90 days
after receiving notice of defendants' intent to enter into the
agreement.
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The Judgment requires the defendants to file annual reports with
the Government that certify that each has distributed the Final
Judgment to responsible executives and explained the terms of the
Judgment to them. Entry of the Final Judgment will terminate the
Government's action against the defendants,\3\ except that the Court
will retain jurisdiction over the matter for further proceedings that
may be required to interpret, enforce or modify the Judgment, or to
punish violations of any of its provisions.
---------------------------------------------------------------------------
\3\Bayer and Johnson have cooperated with the Department of
Justice in this matter.
---------------------------------------------------------------------------
II
Description of the Activities Involved in the Alleged Violations
During a three-year period between 1985 and March 1988, Miles,
Inc., a U.S. subsidiary of Bayer, developed a new line of household
insecticides to be marketed under the brand name ``Laser.'' The Laser
products were to have contained a potent new active ingredient,
Cyfluthrin, a chemical compound developed and patented by Bayer.
Cyfluthrin promised to provide Laser a significant competitive
advantage over existing U.S. household insecticides because it extended
the insecticide's killing power up to three months after initial
application.
By early 1988, Miles had substantially completed its preparations
to enter the U.S. household insecticides market. Evidence indicates
that its entry would have been successful. According to Miles'
projections, first-year sales of Laser products would have made Miles
one of the nation's leading makers of household insecticides.
In March 1988, however, Bayer canceled the Laser project. It
instead agreed to sell Miles' Laser-related product research and
packaging design to Johnson, and to license Johnson to use Cyfluthrin
in its household insecticide products.\4\
---------------------------------------------------------------------------
\4\Although the patent license states that it is nonexclusive,
the United States believes that the license was actually exclusive.
Bayer was subsequently approached by several Johnson competitors for
Cyfluthrin licenses; it declined to license them to use the
compound.
---------------------------------------------------------------------------
Under the terms of that ten-year license agreement, Johnson agreed
to pay Bayer a minimum of $5.2 million annually in addition to a
specified per pound fee for the use of Cyfluthrin. In addition, Johnson
acquired a right of first refusal to any other active ingredient Bayer
later developed.
Through this agreement, the United States alleges, Bayer
effectively chose not to compete in the U.S. household insecticides
market, instead, licensing to Johnson the right to use those assets
Bayer had assembled and would require to compete in the United States.
The agreement helped ensure Johnson's continued dominance of the
highly concentrated U.S. household insecticides market. Johnson is the
leading maker of household insecticides with somewhere between 45-60
percent of total market sales. It is significantly larger than any of
its six major competitors, whose market shares range from 6 to 12
percent of overall sales. By purchasing some of the assets Bayer would
have used in entering the market, and entering into what was in effect
an exclusive license for Cyfluthrin, Johnson effectively eliminated
competition that could have helped drive down prices or improve the
quality of household insecticides. Because new entry or expansion in
this market is difficult in light of the high cost and significant time
it takes to comply with federal and state governmental regulations, new
entry into or expansion within this market is unlikely to militate
against the anti-competitive effects of the defendants' agreement.
III
Explanation of the Proposed Final Judgment
The United States, Johnson and Bayer have stipulated that the Court
may enter the proposed Final Judgment at any time after compliance with
the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h).
The Judgment provides that its entry does not constitute any evidence
or admission by any party with respect to any issue of fact or law.
Under the provisions of Section 2(e) of the Antitrust Procedures
and Penalties Act, 15 U.S.C. Sec. 16(e), the Judgment may not be
entered unless the Court finds entry is in the public interest. Section
XI of the proposed Final Judgment set forth such a finding.
A. Terms
The Judgment provides that:
(1) Johnson and Bayer are each enjoined and restrained from
entering into any agreement or understanding, the purpose or effect of
which would be to allocate or divide, territories or markets for the
distribution or sale of household insecticides, unless any such
agreement or understanding relates exclusively to markets other than
the United States and has no effect on United States commerce.
(2) Johnson and Bayer are each enjoined and restrained from
entering into any exclusive license between them for any active
ingredient, the patent rights to which are beneficially owned by Bayer,
that the U.S. Department of Justice disapproves in writing. To ensure
the Department of Justice has adequate notice of such agreements,
Johnson and Bayer each must provide the Department at least 90 days'
written notice of their intent to enter into such an exclusive license
agreements, and if requested by the Department of Justice within 30
days after its receipt of such notice, Johnson and Bayer must supply
within 30 days of such request, all information in their possession
reasonably necessary to enable the Department of Justice to determine
the competitive effect of such license agreement.
(3) Johnson and Bayer are each enjoined and restrained from
entering into, carrying out, or operating under any exclusive license
to make, use or sell Cyfluthrin in the United States. Bayer must offer
to any person who requests, a license to use or sell Cyfluthrin in the
United States, upon reasonable and mutually agreeable terms and
conditions, but no minimum royalty payment shall be required under such
license; and
(4) No more than 180 days nor less than 90 days before entering
into any exclusive license with any person other than Bayer, for any
active ingredient other than Cyfluthrin, Johnson must provide the
Department of Justice written notice of such license and, if requested
by the Department of Justice within 30 days after its receipt of such
notice, Johnson must supply within 30 days after such request, all
information in its possession reasonably necessary to determine the
competitive effect of such license agreement.
B. Effect on Competition
The proposed Final Judgment will ensure that Johnson's competitors
will have access to Cyfluthrin and thus likely promote competition in
the household insecticide market. Nonexclusive licenses will be made
available to Johnson's competitors on reasonable terms and conditions
that are at least as favorable as the terms and conditions Bayer
accorded Johnson, except that there will be no minimum royalty payments
under such licenses. In addition, by prohibiting any market allocation
agreements between the defendants, the Final Judgment ensures that the
defendants will not be able to restrict potential competition in the
U.S. household insecticides market.
In addition, the proposed Final Judgment ensures that any exclusive
or co-exclusive license agreement between Johnson, which is dominant in
the household insecticides market, and Bayer for new active ingredients
will not restrict competition in the household insecticides market. The
proposed relief also ensures that the United States receives prior
notice of any exclusive or co-exclusive license agreement between
Johnson and any active ingredient manufacturer other than Bayer, and
thus an opportunity to challenge any such agreement that the United
States believes may substantially lessen competition in the household
insecticides market. At the same time, Department of Justice review of
any exclusive or co-exclusive license agreement for active ingredients
contemplated by Johnson should not unreasonably restrict Johnson's
ability to obtain the necessary active ingredients to formulate its
household insecticide products and remain competitive in the household
insecticides market.
IV
Remedies Available To Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorney's fees.
Entry of the proposed Final Judgment will neither impair nor assist the
bringing of such actions. Under the provisions of Section 5(a) of the
Clayton Act, 15 U.S.C. Sec. 16(a), the Judgment has no prima facie
effect in any subsequent lawsuits that may be brought against Johnson
and Bayer in this matter.
V
Procedures Available For Modification Of The Proposed Final Judgment
As provided by the Antitrust Procedures and Penalties Act, any
person believing that the proposed Final Judgment should be modified
may submit written comments to Gail Kursh, Chief, Professions and
Intellectual Property Section, U.S. Department of Justice, Antitrust
Division, 555 4th Street, NW., Room 9903, Washington, DC 20001, within
the 60-day period set forth in the Act. These comments, and the
Department's responses, will be filed with the Court and published in
the Federal Register. All comments will be given due consideration by
the Department of Justice, which remains free, pursuant to a
stipulation signed by the United States and Bayer and Johnson, to
withdraw its consent to the Judgment at any time prior to entry.
Section IX of the Judgment provides that the Court retains jurisdiction
over this action, and the parties may apply to the Court for any order
necessary or appropriate for modification, interpretation, or
enforcement of the Judgment.
VI
Determinative Materials/Documents
Materials or documents of the type described in Section 2(b) of the
Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were
considered in formulating the proposed Final Judgment.
VII
Alternative To The Proposed Final Judgment
The alternative to the proposed Judgment is a full trial on the
merits. While the Department is confident of its ability to succeed in
such a trial, the litigation involves difficult issues of law and fact.
A favorable outcome is not a certainty. The Final Judgment agreed to by
the parties provides all the relief that the United States sought in
its complaint.
Dated: August 3, 1994.
Respectfully submitted,
Anthony E. Harris,
Bar No. 01133713.
Kurt Shaffert
Attorneys, Antitrust Division, U.S. Department of Justice, 555
4th Street, NW., Room 9901, Washington, DC 20001, 202/307-0951.
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Bayer A. G., Defendants. Civil No. 94C50249.
United States' Explanation of Consent Decree Procedures
The United States submits this short memorandum summarizing the
procedures regarding the Court's entry of the proposed Final Judgment.
The Judgment would settle this case pursuant to the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA''), which
applies to civil antitrust cases brought and settled by the United
States.
1. Today, the United States has filed a proposed Final Judgment and
a Stipulation between the parties by which they agreed to the Court's
entry of the proposed Final Judgment following compliance with the
APPA.
2. The United States has also filed a Competitive Impact Statement
relating to the proposed Judgment [15 U.S.C. 16(b)].
3. The APPA requires that the United States publish the proposed
Final Judgment and Competitive Impact Statement in the Federal Register
and in certain newspapers at least 60 days prior to entry of the Final
Judgment. The notice will inform members of the public that they may
submit comments about the Final Judgment to the United States
Department of Justice, Antitrust Division [15 U.S.C. 16(b)-(c)].
4. During the 60-day period, the United States will consider and
respond to any comments it receives, and it will publish the comments
and responses in the Federal Register.
5. After the expiration of the 60-day period, the United States
will file with the Court the comments, the government's responses, and
a Motion For Entry of the Final Judgment (unless the United States
decide to withdraw its consent to entry of the Final Judgment, as
permitted by Paragraph 2 of the Stipulation) [see 15 U.S.C.
Sec. 16(d)].
6. At that time, pursuant to the APPA, 15 U.S.C. Sec. 16(e)-(f),
the Court may enter the Final Judgment without a hearing, if the Court
determines that the Final Judgment is in the public interest.
Dated: August 4, 1994.
Respectfully submitted,
Anthony E. Harris,
Bar No. 011333753.
Kurt Shaffert
Attorneys, U.S. Department of Justice, Antitrust Division, 555
4th Street, NW., Rm. 9901, Washington, DC 20001, 202/307-0951.
United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.
and Defendants. Civil No. 94C50249.
Certificate of Service
I hereby certify that on or before August 3, 1994, I hand-delivered
a copy of the following set of pleadings to counsel for S.C. Johnson &
Son, Inc. and Bayer A. G., respectively, Maurice J. McSweeney, Foley &
Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-5367;
and Tefft W. Smith, Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois 60601:
1. Complaint;
2. Stipulation;
3. Proposed Final Judgment;
4. Competitive Impact Statement; and
5. United States' Explanation of Consent Decree Procedures.
Dated: August 3, 1994.
Anthony E. Harris,
Bar No. 01133753.
[FR Doc. 94-20854 Filed 8-24-94; 8:45 am]
BILLING CODE 4410-01-M