[Federal Register Volume 61, Number 1 (Tuesday, January 2, 1996)]
[Notices]
[Pages 66-72]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31558]



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FEDERAL TRADE COMMISSION

[File No. 961-0014]


Johnson & Johnson; Consent Agreement With Analysis To Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require the New Brunswick, New Jersey-based manufacturer of health care 
products to divest the Cordis Neuroscience Business, which develops 
cranial shunts used in the treatment of hydrocephalus. The Commission 
had alleged that Johnson & Johnson's acquisition of Cordis Corporation 
would reduce competition in the market for neurological shunts by 
giving two firms control of 85 percent of the market.

DATES: Comments must be received on or before March 4, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Ann Malester, Federal Trade 
Commission, S-2035, 6th and Pennsylvania Avenue, NW, Washington, DC 
20580, (202) 326-2682. Michael R. Moiseyev, Federal Trade Commission, 
S.-2025, 6th and Pennsylvania Avenue, NW, Washington, DC 20580. (202) 
326-3106.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the following consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of sixty (60) days. Public comment is invited. Such 
comments or views will be considered by the Commission and will be 
available for inspection and copying at its principal office in 
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of 
Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation of the proposed merger of Johnson & Johnson, a 
corporation, and Cordis Corporation (``Cordis''), a corporation, and it 
now appearing that Johnson & Johnson, hereinafter sometimes referred to 
as ``Proposed Respondent,'' is willing to enter into an agreement 
containing an order to divest certain assets, and providing for certain 
other relief:
    It is hereby agreed by and between Proposed Respondent Johnson & 
Johnson, by its duly authorized officers and attorneys, and counsel for 
the Commission that:
    1. Proposed Respondent Johnson & Johnson is a corporation 
organized, existing, and doing business under and by virtue of the laws 
of the state of New Jersey with its principal executive offices located 
at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933.
    2. Proposed Respondent admits all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. Proposed Respondent waives:
    a. Any further procedural steps;
    b. The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    d. Any claims under the Equal Access to Justice Act.
    
[[Page 67]]

    4. This agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this agreement and so notify the Proposed Respondent, in which event 
it will take such action as it may consider appropriate, or issue and 
serve its complaint (in such form as the circumstances may require) and 
decision, in disposition of the proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by Proposed Respondent that the law has been 
violated as alleged in the draft of complaint here attached, or that 
the facts as alleged in the draft complaint, other than jurisdictional 
facts, are true.
    6. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to 
Proposed Respondent, (1) issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following order to divest and to cease and desist in 
disposition of the proceeding, and (2) make information public with 
respect thereto. When so entered, the order shall have the same force 
and effect and may be altered, modified, or set aside in the same 
manner and within the same time provided by statute for other orders. 
The order shall become final upon service. Delivery by the U.S. Postal 
Service of the complaint and decision containing the agreed-to order to 
Proposed Respondent shall constitute service. Proposed Respondent 
waives any right it may have to any other manner of service. The 
complaint may be used in construing the terms of the order, and no 
agreement, understanding, representation, or interpretation not 
contained in the order or the agreement may be used to vary or 
contradict the terms of the order.
    7. Proposed Respondent has read the proposed complaint and order 
contemplated hereby. Proposed Respondent understands that once the 
order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the order. 
Proposed Respondent further understands it may be liable for civil 
penalties in the amount provided by law for each violation of the order 
by Proposed Respondent or any agent of Proposed Respondent after it 
becomes final. By signing this Agreement, Proposed Respondent 
represents that the relief contemplated by this Agreement can be 
accomplished.

Order

I
    It is ordered that, as used in this order, the following 
definitions shall apply:
    A. ``Respondent'' or ``Johnson & Johnson'' means Johnson & Johnson, 
its directors, officers, employees, agents and representatives, 
predecessors, successors and assigns; its subsidiaries, divisions, and 
groups and affiliates controlled by Johnson & Johnson, and the 
respective directors, officers, employees, agents, and representatives, 
successors, and assigns of each.
    B. ``Cordis'' means Cordis Corporation, its directors, officers, 
employees, agents and representatives, predecessors, successors and 
assigns; its subsidiaries, divisions, and groups and affiliates 
controlled by Cordis, and the respective directors, officers, 
employees, agents, and representatives, successors, and assigns of 
each.
    C. ``Cordis Innovasive Systems'' means Cordis Innovasive Systems 
Inc., its directors, officers, employees, agents and representatives, 
predecessors, successors and assigns; its subsidiaries, divisions, and 
groups and affiliates controlled by Cordis Innovasive Systems, and the 
respective directors, officers, employees, agents, and representatives, 
successors, and assigns of each.
    D. ``Nobles-Lai'' means Nobles-Lai Engineering, Inc. (formerly 
known as Visioneering, Inc.), its directors, officers, employees, 
agents and representatives, predecessors, successors and assigns; its 
subsidiaries, divisions, and groups and affiliates controlled by 
Nobles-Lai, and the respective directors, officers, employees, agents, 
and representatives, successors, and assigns of each.
    E. ``Commission'' means the Federal Trade Commission.
    F. ``Merger'' means the stock-for-stock merger of Johnson & Johnson 
and Cordis pursuant to the merger agreement dated November 12, 1995.
    G. ``Assets and Businesses'' means all assets, properties, business 
and goodwill, tangible and intangible, including, without limitation, 
the following:
    1. All real property interests, including rights, title and 
interest in and to owned or leased property, together with all 
buildings, improvements, appurtenances, licenses and permits;
    2. All machinery, fixtures, equipment, vehicles, transportation 
facilities, furniture, tools and other tangible personal property;
    3. All customer lists, vendor lists, catalogs, sales promotion 
literature, advertising materials, research materials, technical 
information, management information systems, software, software 
licenses, inventions, copyrights, trademarks, trade names, trade 
secrets, intellectual property, patents, technology, know-how, 
specifications, designs, drawings, processes and quality control data;
    4. Inventory, supplies and storage capacity;
    5. All rights, title and interest in and to the contracts entered 
into in the ordinary course of business with Nobles-Lai, customers 
(together with associated bid and performance bonds), suppliers, sales 
representatives, distributors, agents, personal property lessors, 
personal property lessees, licensors, licensees, consignors and 
consignees;
    6. All rights under warranties and guarantees, express or implied;
    7. All books, records, and files; and
    8. All items of prepaid expense.
    H. ``Cordis Neuroscience Business'' means:
    1. Cordis Innovasive Systems and all of its Assets and Businesses; 
and
    2. All of Cordis's rights, title, and interest, as of November 11, 
1995, in all Assets and Businesses relating to the development, 
manufacture, distribution and sale of Neuroscience Products, including, 
but not limited to, all interest in Nobles-Lai.
    I. ``Neuroscience Products'' means:
    1. Neurological shunts, including, but not limited to, the Orbis-
Sigma and Hakim shunt products;
    2. Neurological external drainage systems, including, but not 
limited to, External Drainage Systems (EDS) and External Ventricular 
Drainage System Set (EDVS) products; and
    3. Neuroendoscopy products, including, but not limited to, the 
Vision 2020 neuroendoscope product and the Cordis HawkVision 
Neuroendoscopy System.
    J. ``Neurological Shunts'' means systems consisting of a 
ventricular catheter, a distal catheter, and a valve that are implanted 
in the brain to divert cerebrospinal fluid (CSF) into the bloodstream 
of patients experiencing excessive intercranial pressure because of a 
surplus of CSF inside the skull.

[[Page 68]]

    K. ``Neurological External Drainage Systems'' means systems 
consisting of a ventricular catheter, a drainage bag, tubing, and a 
stopcock that are used for draining CSF to control intracranial 
pressure and for monitoring intracranial pressure.
    L. ``Neuroendoscopy Products'' means:
    1. Neuroendoscopes, which are hand-held devices with an optical and 
light system that permit viewing of the neural cavity for use in 
neurosurgical procedures;
    2. Neuroendoscopy systems, which are imaging systems used in 
conjunction with neuroendoscopes; and
    3. Neuroendoscopy disposables and accessories, including, but not 
limited to, cannulas, irrigators, plugs, probes, forceps, scissors, 
graspers, aspirators, couplers, pumps, cameras and other products used 
in conjunction with neuroendoscopes and neuroendoscopy systems.
II
    It is further ordered that:
    A. Johnson & Johnson shall divest, absolutely and in good faith, 
within twelve (12) months of the date this order becomes final, the 
Cordis Neuroscience Business, and shall also divest such additional 
ancillary Assets and Businesses and effect such arrangements as are 
necessary to assure the marketability, viability and competitiveness of 
the Cordis Neuroscience Business.
    B. Johnson & Johnson shall divest the Cordis Neuroscience Business 
only to an acquirer that receives the prior approval of the Commission 
and only in a manner that receives the prior approval of the 
Commission. The purpose of the divestiture is to ensure the 
continuation of the Cordis Neuroscience Business as an ongoing, viable 
operation, engaged in the same business in which the Cordis 
Neuroscience Business is engaged at the time of the proposed 
divestiture, and to remedy the lessening of competition resulting from 
the Merger as alleged in the Commission's complaint.
    C. Pending divestiture of the Cordis Neuroscience Business, Johnson 
& Johnson shall take such actions as are necessary to maintain the 
viability, marketability, and competitiveness of the Cordis 
Neuroscience Business, and to prevent the destruction, removal, 
wasting, deterioration or impairment of the Cordis Neuroscience 
Business except for ordinary wear and tear.
    D. If Johnson & Johnson is prevented from divesting the Cordis 
Neuroscience Business because of, or as a result of, the assertion by 
Nobles-Lai of any contractual rights, requirements or prohibitions, 
then for a period of five (5) years commencing on the date that this 
order is accepted by the Commission, Johnson & Johnson shall not:
    1. Contract with Nobles-Lai for the research, development or 
manufacture of any Neuroendoscopy Product; or
    2. Purchase any Neuroendoscopy Product from, or distribute any 
Neuroendoscopy Product for, Nobles-Lai.
III
    It is further ordered that:
    A. If Johnson & Johnson has not divested, absolutely and in good 
faith, and with the prior approval of the Commission, the Cordis 
Neuroscience Business within twelve (12) months of the date this order 
becomes final, the Commission may appoint a trustee to divest the 
Cordis Neuroscience Business
    B. In the event that the Commission or the Attorney General brings 
an action pursuant to Sec. 5(l) of the Federal Trade Commission Act, 15 
U.S.C. (Sec. 45l), or any other statute enforced by the Commission, 
Johnson & Johnson shall consent to the appointment of a trustee in such 
action. Neither the appointment of a trustee nor a decision not to 
appoint a trustee under this Paragraph III shall preclude the 
Commission or the Attorney General from seeking civil penalties or any 
other relief available to it, including a court-appointed trustee, 
pursuant to Sec. 5(l) of the Federal Trade Commission Act, or any other 
statute enforced by the Commission, for any failure by Johnson & 
Johnson to comply with this order.
    C. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III.A., Johnson & Johnson shall consent to the following 
terms and conditions regarding the trustee's powers, duties, authority, 
and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of Johnson & Johnson, which consent shall not be unreasonably withheld. 
The trustee shall be a person with experience and expertise in mergers 
and divestitures. If Johnson & Johnson has not opposed, in writing, 
including the reasons for opposing, the selection of any proposed 
trustee within ten (10) days after notice by the staff of the 
Commission to Johnson & Johnson of the identity of any proposed 
trustee, Johnson & Johnson shall be deemed to have consented to the 
selection of the proposed trustee.
    2. Subject to the prior approval of the Commission, the trustee 
shall have the exclusive power and authority to divest the Cordis 
Neuroscience Business.
    3. Within ten (10) days after appointment of the trustee, Johnson & 
Johnson shall execute a trust agreement that, subject to the prior 
approval of the Commission and, in the case of a court-appointed 
trustee, of the court, transfers to the trustee all rights and powers 
necessary to permit the trustee to effect the divestiture required by 
this order.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves the trust agreement described in Paragraph III.C.3. 
to accomplish the divestiture, which shall be subject to the prior 
approval of the Commission. If, however, at the end of the twelve month 
period, the trustee has submitted a plan of divestiture or believes 
that divestiture can be achieved within a reasonable time, the 
divestiture period may be extended by the Commission, or, in the case 
of a court-appointed trustee, by the court; provided, however, the 
Commission may extend this period only two (2) times.
    5. The trustee shall have full and complete access to the 
personnel, books, records and facilities related to the Cordis 
Neuroscience Business, or to any other relevant information, as the 
trustee may request. Johnson & Johnson shall develop such financial or 
other information as such trustee may request and shall cooperate with 
the trustee. Johnson & Johnson shall take no action to interfere with 
or impede the trustee's accomplishment of the divestiture. Any delays 
in divestiture caused by Johnson & Johnson shall extend the time for 
divestiture under this Paragraph in an amount equal to the delay, as 
determined by the Commission or, for a court-appointed trustee, by the 
court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission, subject to Johnson & Johnson's absolute 
and unconditional obligation to divest at no minimum price. The 
divestiture shall be made in the manner and to acquirer as set out in 
Paragraph II of this order, as appropriate; provided, however, if the 
trustee receives bona fide offers from more than one acquiring entity, 
and if the Commission determines to approve more than one such 
acquiring entity, the trustee shall divest to the acquiring entity 
selected by Johnson & Johnson from among those approved by the 
Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of Johnson & Johnson, on such reasonable and customary 
terms and conditions as the Commission or a court may set. The trustee 
shall have the authority to employ, at the cost and 

[[Page 69]]
expense of Johnson & Johnson, such consultants, accountants, attorneys, 
investment bankers, business brokers, appraisers, and other 
representatives and assistants as are necessary to carry out the 
trustee's duties and responsibilities. The trustee shall account for 
all monies derived from the divestiture and all expenses incurred. 
After approval by the Commission and, in the case of a court-appointed 
trustee, by the court, of the account of the trustee, including fees 
for his or her services, all remaining monies shall be paid at the 
direction of Johnson & Johnson, and the trustee's power shall be 
terminated. The trustee's compensation shall be based at least in 
significant part on a commission arrangement contingent on the 
trustee's divesting the Cordis Neuroscience Business.
    8. Johnson & Johnson shall indemnify the trustee and hold the 
trustee harmless against any losses, claims, damages, liabilities, or 
expenses arising out of, or in connection with, the performance of the 
trustee's duties, including all reasonable fees of counsel and other 
expenses incurred in connection with the preparation for, or defense of 
any claim, whether or not resulting in any liability, except to the 
extent that such liabilities, losses, damages, claims, or expenses 
result from misfeasance, gross negligence, willful or wanton acts, or 
bad faith by the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph III.A. of this order.
    10. The Commission or, in the case of a court-appointed trustee, 
the court, may on its own initiative or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this order.
    11. The trustee shall have no obligation or authority to operate or 
maintain the Cordis Neuroscience Business.
    12. In the event that the trustee determines that he or she is 
unable to divest the Cordis Neuroscience Business in a manner 
consistent with the Commission's purpose as described in Paragraph II, 
the trustee may divest additional ancillary assets of Johnson & Johnson 
and effect such arrangements as are necessary to satisfy the 
requirements of this order.
    13. The trustee shall report in writing to Johnson & Johnson and 
the Commission every sixty (60) days concerning the trustee's efforts 
to accomplish divestiture.
IV
    It is further ordered that Johnson & Johnson shall comply with all 
terms of the Cordis Neuroscience Business Agreement to Hold Separate, 
attached to this order and made a part hereof as Appendix I. The Cordis 
Neuroscience Business Agreement to Hold Separate shall continue in 
effect until Johnson & Johnson has divested all of the Cordis 
Neuroscience Business.
V
    It is further ordered that:
    A. Within sixty (60) days after the date this order becomes final 
and every sixty (60) days thereafter until Johnson & Johnson has fully 
complied with Paragraphs II, III, and IV of this order, Johnson & 
Johnson shall submit to the Commission a verified written report 
setting forth in detail the manner and form in which it intends to 
comply, is complying, and has complied with Paragraphs II, III, and IV 
of this order. Johnson & Johnson shall include in its compliance 
reports, among other things that are required from time to time, a full 
description of the efforts being made to comply with Paragraphs II, 
III, and IV, including a description of all substantive contacts or 
negotiations for the divestiture required by this order, including the 
identity of all parties contacted. Johnson & Johnson shall include in 
its compliance reports copies of all written communications to and from 
such parties, all internal memoranda, and all reports and 
recommendations concerning the divestiture.
    B. If Johnson & Johnson is precluded from purchasing from, 
contracting with, or distributing for Nobles-Lai pursuant to Paragraph 
II.D. of this order, then one (1) year from the date this order becomes 
final, annually for the next (5) years on the anniversary of the date 
this order becomes final, and at other times as the Commission may 
require, Respondent shall file a verified written report with the 
Commission setting forth in detail the manner and form in which it has 
complied and is complying with Paragraph II.D. of this order.
VI
    It is further ordered that, for the purpose of determining or 
securing compliance with this order, Johnson & Johnson shall permit any 
duly authorized representatives of the Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Johnson & Johnson, relating to any matters contained in 
this order; and
    B. Upon five (5) days' notice to Johnson & Johnson, and without 
restraint or interference from Johnson & Johnson, to interview 
officers, directors, or employees of Johnson & Johnson. Officers and 
employees of Johnson & Johnson whose places of employment are outside 
the United States shall be made available on reasonable notice.
VII
    It is further ordered that Johnson & Johnson shall notify the 
Commission at least thirty (30) days prior to any proposed change in 
the corporate Johnson & Johnson such as dissolution, assignment, sale 
resulting in the emergence of a successor corporation, or the creation 
or dissolution of subsidiaries or any other change in the corporation 
that may affect compliance obligations arising out of the order.
Benjamin I. Berman,
Acting Secretary.

Appendix I

Cordis Neuroscience Business Agreement To Hold Separate

    This Agreement to Hold Separate (``Hold Separate'') is by and 
between Johnson & Johnson, a corporation organized, existing, and 
doing business under and by virtue of the laws of the state of New 
Jersey, with its office and principal place of business at One 
Johnson & Johnson Plaza, New Brunswick, New Jersey 08933; and the 
Federal Trade Commission (``Commission''), an independent agency of 
the United States Government, established under the Federal Trade 
Commission Act of 1914, 15 U.S.C. Sec. 41, et seq. (collectively, 
the ``Parties'').

Premises

    Whereas, Johnson & Johnson and Cordis Corporation (``Cordis''), 
on November 12, 1995, entered into a stock-for stock merger 
(hereinafter ``Merger''); and
    Whereas, Cordis, with its principal office and place of business 
located at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 
develops, manufactures and markets, among other things, neurological 
shunts; and
    Whereas, Johnson & Johnson, with its principal office and place 
of business located at One Johnson & Johnson Plaza, New Brunswick, 
New Jersey 08933, through its subsidiary Johnson & Johnson 
Professional, Inc., develops, manufactures and markets, among other 
things, neurological shunts; and
    Whereas, the Commission is now investigating the Merger to 
determine whether it would violate any of the statutes enforced by 
the Commission; and
    Whereas, if the Commission accepts the Agreement Containing 
Consent Order (``Consent Agreement''), the Commission must place it 
on the public record for a 

[[Page 70]]
period of at least sixty (60) days and may subsequently withdraw such 
acceptance pursuant to the provisions of Section 2.34 of the 
Commission's Rules; and
    Whereas, the Commission is concerned that if an understanding is 
not reached, preserving the status quo ante of Cordis Neuroscience 
Business, as defined in Paragraph I.H. of the Consent Agreement, 
during the period prior to the final acceptance and issuance of the 
Consent Agreement by the Commission (after the 60-day public comment 
period), divestiture resulting from any proceeding challenging the 
legality of the Merger might not be possible, or might be less than 
an effective remedy; and
    Whereas, the Commission is concerned that if the Merger is 
consummated, it will be necessary to preserve the Commission's 
ability to require the divestiture of the Cordis Neuroscience 
Business and the Commission's right to have the Cordis Neuroscience 
Business continue as a viable competitor; and
    Whereas, the purpose of this Hold Separate and the Consent 
Agreement are:
    A. To preserve the Cordis Neuroscience Business as a viable, 
competitive, and independent business pending divestiture of the 
Cordis Neuroscience Business, and
    B. To remedy any anticompetitive effects of the Merger; and
    Whereas, Johnson & Johnson's entering into this Hold Separate 
shall in no way be construed as an admission by Johnson & Johnson 
that the Merger is illegal; and
    Whereas, Johnson & Johnson understands that no act or 
transaction contemplated by this Hold Separate shall be deemed 
immune or exempt from the provisions of the antitrust laws or the 
Federal Trade Commission Act by reason of anything contained in this 
Hold Separate.
    Now, therefore, the Parties agree, upon the understanding that 
the Commission has not yet determined whether the Merger will be 
challenged, and in consideration of the Commission's agreement that, 
at the time it accepts the Consent Agreement for public comment, it 
will grant early termination of the Hart-Scott-Rodino waiting 
period, as follows:
    1. Johnson & Johnson agrees to execute and be bound by the 
Consent Agreement.
    2. Johnson & Johnson agrees that from the date this Hold 
Separate is accepted until the earliest of the times listed in 
subparagraphs 2.a.-2.b., it will comply with the provisions of 
Paragraph 3. of this Hold Separate:
    a. Three (3) business days after the Commission withdraws its 
acceptance of the Consent Agreement pursuant to the provisions of 
Section 2.34 of the Commission's Rules; or
    b. The time that divestiture of the Cordis Neuroscience Business 
is required by Paragraph II of the Consent Agreement is completed.
    3. To assure the complete independence and viability of the 
Cordis Neuroscience Business, and to assure that no material 
confidential information is exchanged between Johnson & Johnson and 
the Cordis Neuroscience Business, Johnson & Johnson shall hold the 
Cordis Neuroscience Business separate and apart on the following 
terms and conditions:
    a. The Cordis Neuroscience Business, as defined in Paragraph 
I.H. of the Consent Agreement, shall be held separate and apart and 
shall be managed and operated independently of Johnson & Johnson 
(meaning here and hereinafter, Johnson & Johnson excluding the 
Cordis Neuroscience Business and excluding all personnel connected 
with the Cordis Neuroscience Business as of the date this Agreement 
is signed, but including all other portions of Cordis), except to 
the extent that Johnson & Johnson must exercise direction and 
control over the Cordis Neuroscience Business to assure compliance 
with this Hold Separate or the Consent Agreement.
    b. Johnson & Johnson shall maintain the marketability, 
viability, and competitiveness of the Cordis Neuroscience Business 
and shall not cause or permit the destruction, removal, wasting, 
deterioration, or impairment of any assets or business it may have 
to divest except in the ordinary course of business and except for 
ordinary wear and tear, and it shall not sell, transfer, encumber 
(other than in the normal course of business), or otherwise impair 
the marketability, viability or competitiveness of the Cordis 
Neuroscience Business.
    c. Johnson & Johnson shall appoint a knowledgeable person among 
the top management of the Cordis Neuroscience Business, as Manager 
to manage and maintain the Cordis Neuroscience Business on a day to 
day basis during the Hold Separate. The Manager shall have exclusive 
management and control of the Cordis Neuroscience Business, and 
shall manage the Cordis Neuroscience Business independently of 
Johnson & Johnson's other businesses.
    d. The Manager shall report exclusively to the Cordis 
Neuroscience Business Management Committee (``Management 
Committee''), which shall be appointed by Johnson & Johnson. The 
Committee shall consist of two knowledgeable persons from among the 
top management of the Cordis Neurological Products business; and a 
Johnson & Johnson financial officer or a comparable, knowledgeable 
person from Johnson & Johnson's financial office who has no direct 
involvement with Johnson & Johnson's Neurological Products Business 
(``Johnson & Johnson Management Committee Member''). The Manager 
shall be the Chairman of the Management Committee. Except for the 
Johnson & Johnson Management Committee Member serving on the 
Management Committee, Johnson & Johnson shall not permit any 
officer, employee, or agent of Johnson & Johnson also to be an 
officer, employee or agent of the Cordis Neuroscience Business. Each 
Management Committee member shall enter into a confidentiality 
agreement agreeing to be bound by the terms and conditions set forth 
in Attachment A, appended to this Hold Separate. The Management 
Committee shall meet monthly during the course of the Hold Separate, 
and as otherwise necessary. Meetings of the Management Committee 
during the term of the Hold Separate shall be audio recorded, and 
the recording shall be retained for two (2) years after the 
termination of the Hold Separate.
    e. All material transactions, out of the ordinary course of 
business and not precluded by Paragraph 3 hereof, shall be subject 
to a majority vote of the Management Committee.
    f. Johnson & Johnson shall not exercise direction or control 
over, or influence directly or indirectly, the Cordis Neuroscience 
Business, the Management Committee, or the Manager of the Cordis 
Neuroscience Business, any of their operations, assets, or 
businesses; provided, however, that Johnson & Johnson may exercise 
only such direction and control over the Cordis Neuroscience 
Business as is necessary to assure compliance with this Hold 
Separate, the Consent Order and with all applicable laws and except 
as otherwise provided in this Hold Separate.
    g. Except as required by law, and except to the extent that 
necessary information is exchanged in the course of evaluating and 
consummating the Merger, defending investigations or litigation, 
obtaining legal advice, complying with this Hold Separate or the 
Consent Order or negotiating agreements to divest assets, Johnson & 
Johnson shall not receive or have access to, or the use of, any 
material confidential information of the Cordis Neuroscience 
Business or the activities of the Manager or Management Committee 
not in the public domain, nor shall the Cordis Neuroscience 
Business, Manager, or the Management Committee receive or have 
access to, or the use of, any material confidential information 
about Johnson & Johnson. Johnson & Johnson may receive on a regular 
basis from the Cordis Neuroscience Business aggregate financial 
information necessary and essential to allow Johnson & Johnson to 
file financial reports, tax returns, and personnel reports. Any such 
information that is obtained pursuant to this subparagraph shall be 
used only for the purposes set forth in this subparagraph. 
(``Material confidential information,'' as used herein, means 
competitively sensitive or proprietary information not independently 
known to:
    1. Johnson & Johnson, with regard to the Cordis Neuroscience 
Business, from sources other than the Cordis Neuroscience Business 
or its employees or the Management Committee; or
    2. The Management Committee or the Cordis Neuroscience Business 
or its employees, with regard to Johnson & Johnson, from sources 
other than Johnson & Johnson,

and includes, but is not limited to, customer lists, price lists, 
marketing methods, patents, technologies, processes, or other trade 
secrets.)
    h. Except as is permitted by this Hold Separate, the Johnson & 
Johnson Management Committee Member shall not receive any Cordis 
Neuroscience Business material confidential information and shall 
not disclose any such information obtained through his or her 
involvement with the Cordis Neuroscience Business to Johnson & 
Johnson or use it to obtain any advantage for Johnson & Johnson. The 
Johnson & Johnson Management Committee Member shall participate in 
matters that come before the Management Committee only for the 
limited purpose of considering any capital investment of over 
$250,000, approving any 

[[Page 71]]
proposed budget and operating plans, authorizing dividends and 
repayment of loans consistent with the provisions hereof, reviewing 
material transactions described in subparagraph 3.e, and carrying 
out Johnson & Johnson's responsibilities under the Hold Separate and 
the Consent Agreement. Except as permitted by the Hold Separate, the 
Johnson & Johnson Management Committee Member shall not participate 
in any matter, or attempt to influence the votes of the other 
directors on the Management Committee with respect to matters that 
would involve a conflict of interest between Johnson & Johnson and 
the Cordis Neuroscience Business.
    i. Johnson & Johnson shall not change the composition of the 
Management Committee unless a majority of the Management Committee 
consents. The Chairman of the Management Committee shall have the 
power to remove members of the Management Committee for cause and to 
require Johnson & Johnson to appoint replacement members to the 
Management Committee in the same manner as provided in Paragraph 
3.d. of this Hold Separate. Johnson & Johnson shall not change the 
composition of the management of the Cordis Neuroscience Business, 
except that the Management Committee shall have the power to remove 
management employees for unsatisfactory performance or for cause.
    j. If the Chairman of the Management Committee ceases to act or 
fails to act diligently, a substitute Chairman shall be appointed in 
the same manner as provided in Paragraphs 3.c. and 3.d.
    k. Cordis personnel connected with the Cordis Neuroscience 
Business or providing support services to the Cordis Neuroscience 
Business as of the date this Hold Separate is signed shall continue, 
as employees of Johnson & Johnson, to provide such services as of 
the date of this Hold Separate. Such Johnson & Johnson personnel 
must retain and maintain all material confidential information 
relating to the Cordis Neuroscience Business on a confidential basis 
and, except as is permitted by this Hold Separate, such persons 
shall be prohibited from providing, discussing, exchanging, 
circulating, or otherwise furnishing any such information to or with 
any other person whose employment involves any other Johnson & 
Johnson business.
    Such Johnson & Johnson personnel shall also execute a 
confidentiality agreement prohibiting the disclosure of any material 
confidential Cordis Neuroscience Business or Johnson & Johnson 
information.
    1. The Cordis Neuroscience Business shall be staffed with 
sufficient employees to maintain the viability and competitiveness 
of the Cordis Neuroscience Business, which employees shall be the 
Cordis Neuroscience Business's employees and may also be hired from 
sources other than Johnson & Johnson. Each management employee of 
the Cordis Neuroscience Business shall execute a confidentiality 
agreement prohibiting the disclosure of any Cordis Neuroscience 
Business confidential information.
    m. Johnson & Johnson shall circulate to the management employees 
of the Cordis Neuroscience Business and appropriately display a 
notice of this Hold Separate and Consent Order in the form attached 
hereto as Attachment A.
    n. Johnson & Johnson shall cause the Cordis Neuroscience 
Business to expend funds for research and development, quality 
control, manufacturing and marketing of Cordis Neuroscience Business 
products at a level not lower than that budgeted for either the 1994 
or 1995 fiscal year, and shall increase such spending as deemed 
reasonably necessary in light of competitive conditions. Within 
thirty (30) days of the date of this Hold Separate, the Chairman of 
the Management Committee shall develop a budget and operating plan 
for the 1996 fiscal year that complies with the provisions of this 
Paragraph and present it to the Management Committee for approval. 
If necessary, Johnson & Johnson shall provide the Cordis 
Neuroscience Business with any funds to accomplish the foregoing. 
Johnson & Johnson shall provide to the Cordis Neuroscience Business 
such support services as provided by Cordis prior to the Merger.
    o. Johnson & Johnson shall provide the Cordis Neuroscience 
Business with sufficient working capital to operate at a level not 
less than the rate of operation in effect during the twelve (12) 
months preceding the date of this Hold Separate.
    p. The Management Committee shall serve at the cost and expense 
of Johnson & Johnson. Johnson & Johnson shall indemnify the 
Management Committee against any losses or claims of any kind that 
might arise out of its involvement under this Hold Separate, except 
to the extent that such losses or claims result from misfeasance, 
gross negligence, willful or wanton acts, or bad faith by the 
Management Committee members.
    q. The Management Committee shall have access to and be informed 
about all companies who inquire about, seek or propose to buy the 
Cordis Neuroscience Business.
    r. Notwithstanding the provisions of Paragraph 3.h., companies 
who undertake a due diligence process in the course of negotiations 
to purchase the Cordis Neuroscience Business may be accompanied and 
assisted by the Johnson & Johnson Management Committee Member, in 
addition to appropriate Cordis Neuroscience Business employees 
selected by the Management Committee. The Johnson & Johnson 
Management Committee Member may delegate tasks relating to such due 
diligence to attorneys, accountants and/or other financial employees 
of Johnson & Johnson who are not directly engaged in the Johnson & 
Johnson Neurological Products Business; provided, however, that such 
Johnson & Johnson employees, accountants and attorneys shall execute 
a confidentiality agreement prohibiting the disclosure of any Cordis 
Neuroscience Business material confidential information.
    4. Should the Federal Trade Commission seek in any proceeding to 
compel Johnson & Johnson to divest itself of the Cordis Neuroscience 
Business, or any additional assets, as provided in the Consent 
Agreement, or to seek any other injunctive or equitable relief, 
Johnson & Johnson shall not raise any objection based on the 
expiration of the applicable Hart-Scott-Rodino Antitrust 
Improvements Act waiting period or the fact that the Commission has 
permitted the Merger. Johnson & Johnson shall also waive all rights 
to contest the validity of this Hold Separate.
    5. To the extent that this Hold Separate requires Johnson & 
Johnson to take, or prohibits Johnson & Johnson from taking, certain 
actions that otherwise may be required or prohibited by contract, 
Johnson & Johnson shall abide by the terms of this Hold Separate or 
the Consent Agreement, and shall not assert as a defense such 
contract requirements in a civil penalty action brought by the 
Commission to enforce the terms of this Hold Separate or the Consent 
Agreement.
    6. For the purpose of determining or securing compliance with 
this Hold Separate, subject to any legally recognized privilege or 
provision of applicable law, and upon written request with 
reasonable notice to Johnson & Johnson made to its General Counsel, 
Johnson & Johnson shall permit any duly authorized representative or 
representatives of the Commission:
    a. Access during the office hours of Johnson & Johnson and in 
the presence of counsel to inspect and copy all books, ledgers, 
accounts, correspondence, memoranda, and other records and documents 
in the possession or under the control of Johnson & Johnson or 
relating to compliance with this Hold Separate;
    b. Upon five (5) days' notice to Johnson & Johnson, and without 
restraint or interference from it, to interview officers or 
employees of Johnson & Johnson, who may have counsel present, 
regarding any such matters.
    7. This Hold Separate shall not be binding until approved by the 
Commission.

Attachment A.--Notice of Divestiture and Requirement for 
Confidentiality

    Johnson & Johnson and Cordis Corporation have entered into a 
Consent Agreement and Agreement to Hold Separate with the Federal Trade 
Commission (``Commission'') relating to the divestiture of the Cordis 
Neuroscience Business. Until after the Commission's Order becomes final 
and the Cordis Neuroscience Business are divested, the Cordis 
Neuroscience Business must be managed and maintained as a separate, 
ongoing business, independent of all other Johnson & Johnson 
businesses. All competitive information relating to The Cordis 
Neuroscience Business must be retained and maintained by the persons 
involved in the Cordis Neuroscience Business on a confidential basis 
and such persons shall be prohibited from providing, discussing, 
exchanging, circulating, or otherwise furnishing any such information 
to or with any other person whose employment or agency involves any 
other Johnson & Johnson business. Similarly, all such persons involved 
in any other Johnson & Johnson business small be prohibited 

[[Page 72]]
from providing, discussing, exchanging, circulating or otherwise 
furnishing competitive information about such business to or with any 
person whose employment or agency involves the Cordis Neuroscience 
Business.
    Any violation of the Consent Agreement or the Agreement to Hold 
Separate, incorporated by reference as part of the Consent Order, may 
subject Johnson & Johnson to civil penalties and other relief as 
provided by law.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted subject 
to final approval an agreement containing a proposed consent order from 
Johnson & Johnson under which Johnson & Johnson would divest the Cordis 
Neuroscience Business, which includes Cordis' neurological shunt 
product line.
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    Johnson & Johnson, a New Jersey based corporation, has proposed to 
acquire Cordis Corporation, a Florida based corporation, in a stock for 
stock exchange worth $1.8 billion.
    The proposed complaint alleges that the proposed merger, if 
consummated, would constitute a violation of Section 7 of the Clayton 
Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the FTC Act, as 
amended, 15 U.S.C. Sec. 45, in the market for neurological shunts. 
Neurological shunts are medical devices used to treat hydrocephalus, a 
brain disorder that primarily afflicts young children. The merger will 
substantially increase concentration in the already highly concentrated 
U.S. shunt market: two firms will control over 85% of the market. 
Anticompetitive effects, such as increased prices and decreased 
services, are likely to result. In addition, timely entry by other 
companies, both in the United States and overseas, is unlikely to 
defeat these anticompetitive effects. Entry cannot occur in a timely 
fashion because of the difficulty of developing competitive 
neurological shunt designs, establishing manufacturing facilities, 
organizing a sales and service network, receiving Food and Drug 
Administration approval, and gaining physician acceptance in the 
market.
    The proposed consent order would remedy the alleged violation by 
replacing the lost competition that would result from the merger. It 
provides that Johnson & Johnson shall divest the Cordis Neuroscience 
Business within twelve (12) months of the date the proposed order 
becomes final. The Cordis Neuroscience Business is a single operational 
unit that sells neurological shunts, intracranial pressure drainage 
systems and neuroendoscopy equipment. Significant synergies between the 
products manufactured and sold by the Business exist, and Cordis' 
shunts are sold as part of the broader product line. Therefore, a 
divestiture of the whole business is necessary to maintain competition 
in the shunt market. The proposed order requires Cordis Neuroscience 
Business to take all the steps necessary to assure the viability, 
marketability, and competitiveness of the Cordis Neuroscience Business, 
and to prevent the destruction, removal, wasting, deterioration, or 
impairment of the Cordis Neuroscience Business.
    If Johnson & Johnson is unable to divest the Cordis Neuroscience 
Business within twelve (12) months, then a trustee may be appointed by 
the Commission to divest the Cordis Neuroscience Business within an 
additional twelve (12) month period. If, at the end of that twelve (12) 
month period, the trustee has submitted a plan of divestiture or 
believes that divestiture can be achieved within a reasonable time, the 
time period for divestiture can be extended up to two (2) times by the 
court.
    A Hold Separate Agreement signed by Johnson & Johnson provides 
that, during the time period from the date the Hold Separate is 
accepted until the divestiture of the Cordis Neuroscience Business is 
completed, the Cordis Neuroscience Business shall be held separate and 
operated independently of Johnson & Johnson.
    Under the provisions of the order, Johnson & Johnson is also 
required to provide to the Commission a report of compliance with the 
divestiture provisions of the order within sixty (60) days following 
the date this order becomes final, and every sixty (60) days thereafter 
until Johnson & Johnson has completely divested its interest in the 
Cordis Neuroscience Business.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.

[FR Doc. 95-31558 Filed 12-29-95; 8:45 am]
BILLING CODE 6750-01-M