[Federal Register Volume 61, Number 149 (Thursday, August 1, 1996)]
[Notices]
[Pages 40220-40225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19594]


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FEDERAL TRADE COMMISSION

[File No. 961-0053]


Fresenius AG; Fresenius USA, Inc.; Proposed Consent Agreement 
With Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require, among other things, the Walnut 
Creek, California-based subsidiary of Fresenius AG to divest its 
Lewisberry, Pennsylvania hemodialysis concentrate plant to Di-Chem, 
Inc. The consent agreement settles antitrust concerns stemming from 
Fresenius' proposed acquisition of National Medical Care, Inc. (NMC) 
from W.R. Grace & Co. Fresenius is one of the world's leading producers 
of kidney dialysis equipment, and NMC is the largest dialysis services 
company in the United States. The draft complaint alleges that 
Fresenius' acquisition of NMC would produce a firm with a market share 
of approximately 45-50 percent of the hemodialysis concentrate market.

DATES: Comments must be received on or before September 30, 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: Howard Morse, Federal Trade 
Commission, 6th and Pennsylvania Avenue, NW., S-3627, Washington, DC 
20850. (202) 326-2949.
    Robert Tovsky, Federal Trade Commission, 6th and Pennsylvania 
Avenue, NW, S-3627, Washington, DC 20850. (202) 326-2949.

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 acquisition by Fresenius AG of National 
Medical Care, Inc. from W.R. Grace & Co., and it now appearing that 
Fresenius AG and Fresenius USA, Inc. (hereinafter sometimes referred to 
as ``proposed respondents'') are willing to enter into an agreement 
containing an order to divest certain assets, and to cease and desist 
from making certain acquisitions without providing advance written 
notification to the Commission, and providing for other relief:
    It is Hereby agreed by and between proposed respondents, by their 
duly authorized officers and attorneys, and counsel for the Commission 
that:
    i. Proposed respondent Fresenius AG is a corporation organized, 
existing and doing business under and by virtue of the laws of Germany 
with its office and principal place of business located at Borkenberg 
14, 61440 Oberursel/Ts, Bad Homburg, Germany.
    ii. Proposed respondent Fresenius USA, Inc. is a corporation 
organized, existing and doing business under and by virtue of the laws 
of Massachusetts with its principal place of business located at 2637 
Shadelands Drive, Walnut Creek, California 94598.
    iii. Proposed respondents admit all the jurisdictional facts set 
forth in the draft of complaint.
    iv. Proposed respondents waive:
    (1) Any further procedural steps;
    (2) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    (3) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    (4) Any claim under the Equal Access to Justice Act.

[[Page 40221]]

    5. Proposed respondents shall submit, within thirty (30) days of 
the date this agreement is signed by proposed respondents, an initial 
report signed by the proposed respondents setting forth in detail the 
manner in which the proposed respondents will comply with Paragraph II 
of the order when and if entered. Such report will not become part of 
the public record unless and until the accompanying order is made final 
by the Commission and the required divestiture accomplished.
    6. 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 respondents, 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.
    7. This agreement is for settlement purposes only and does not 
constitute an admission by proposed respondents that the law has been 
violated as alleged in the draft of complaint, or that the facts as 
alleged in the draft complaint, other than jurisdictional facts, are 
true.
    8. 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 Sec. 2.34 of the Commission's 
Rules, the Commission may, without further notice to the proposed 
respondents, (1) issue its complaint corresponding in form and 
substance with the draft of complaint 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 to divest 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 United States Postal Service 
of the complaint and decision containing the agreed-to order to 
proposed respondents' addresses as stated in this agreement shall 
constitute service. Proposed respondents waive any right they 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.
    9. Proposed respondents have read the proposed complaint and order 
contemplated hereby. Proposed respondents understand that once the 
order has been issued, they will be required to file one or more 
compliance reports showing that they have fully complied with the 
order. Proposed respondents further understand that they may be liable 
for civil penalties in the amount provided by law for each violation of 
the order after it becomes final.

Order

I
    It is ordered that, as used in this Order, the following 
definitions shall apply:
    A. ``Respondents'' or ``Fresenius'' means Fresenius AG and 
Fresenius USA, Inc., their directors, officers, employees, agents and 
representatives, their predecessors, successors, and assigns; their 
subsidiaries, divisions, and groups and affiliates controlled by 
Fresenius, and the respective directors, officers, employees, agents, 
representatives, successors and assigns of each; their domestic and 
foreign parents, and the subsidiaries, divisions, and groups and 
affiliates controlled by any other domestic or foreign parent, and the 
respective directors, officers, employees, agents, representatives, 
successors and assigns of each.
    B. ``NMC'' means National Medical Care, Inc., its directors, 
officers, employees, agents and representatives, its predecessors, 
successors, and assigns; its subsidiaries, divisions, and groups and 
affiliates controlled by NMC, and the respective directors, officers, 
employees, agents, representatives, successors and assigns of each; its 
domestic and foreign parents, including W.R. Grace & Co., and the 
subsidiaries, divisions, and groups and affiliates controlled by any 
other domestic or foreign parent, and the respective directors, 
officers, employees, agents, representatives, successors and assigns of 
each.
    C. ``Commission'' means the Federal Trade Commission.
    D. ``NMC Acquisition'' means the acquisition by Fresenius AG of NMC 
that is the subject of an Agreement and Plan of Reorganization entered 
into on or about February 4, 1996.
    E. ``Hemodialysis Concentrate'' means the acid portion of the 
dialysate solution used in hemodialysis treatment of End Stage Renal 
Disease to carry waste materials from the patient's blood during the 
treatment.
    F. ``Assets and Businesses'' means assets, properties, businesses, 
and goodwill, tangible and intangible, including, without limitation, 
the following:
    1. All plant facilities, machinery, fixtures, equipment, vehicles, 
transportation and storage facilities, furniture, tools, supplies, 
stores, spare parts, and other tangible personal property;
    2. All customer lists, vendor lists, catalogs, sales promotion 
literature, advertising materials, research materials, technical 
information, dedicated management information systems, information 
contained in management information systems, rights to software, 
trademarks, patents and patent rights, inventions, trade secrets, 
technology, know-how, ongoing research and development, specifications, 
designs, drawings, processes and quality control data;
    3. Raw material and finished product inventories and goods in 
process;
    4. All right, title and interest in and to real property, together 
with appurtenances, licenses, and permits;
    5. All right, title, and interest in and to the contracts entered 
into in the ordinary course of business with customers (other than 
contracts in which Hemodialysis Concentrate is sold as part of a 
package of products), 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 separately maintained, as well as relevant portions of not 
separately maintained, books, records and files; and
    8. All items of prepaid expense.
    G. ``Hemodialysis Business to Be Divested'' means the Fresenius 
Lewisberry, Pennsylvania Hemodialysis Manufacturing Facility, and any 
additional Fresenius Hemodialysis Concentrate Assets and Businesses (as 
defined) as are necessary to assure the Viability and Competitiveness 
of the Hemodialysis Business to Be Divested in the manufacture, 
marketing or distribution of Hemodialysis Concentrate.
    H. ``Viability and Competitiveness'' means that the Hemodialysis 
Concentrate Business to Be Divested is capable of functioning 
independently and competitively in the Hemodialysis Concentrate 
business in substantially

[[Page 40222]]

the same manner achieved by Fresenius prior to the divestiture.
II
    It is further ordered that:
    A. Respondents shall, absolutely and in good faith, divest the 
Hemodialysis Business to Be Divested to Di-Chem, Inc. (``Di-Chem''), 
within 10 business days of either (i) the date this Order is made 
final, or (ii) the closing of the NMC Acquisition, whichever is later, 
pursuant to and in accordance with the May 17, 1996 agreement between 
Fresenius USA, Inc. and Di-Chem (``Divestiture Agreement''). If the 
terms of such Divestiture Agreement are changed or supplemented in any 
way, notice of such changes or supplementations must be provided to the 
Commission, and any material changes or supplementations may be made 
only with the prior approval of the Commission. In the event that the 
Divestiture Agreement is terminated through no fault of Respondents, 
Respondents shall divest the Hemodialysis Business to Be Divested 
within four (4) months of either (i) the date this Order is made final, 
or (ii) the closing of the NMC Acquisition, whichever is later, and 
Respondents shall also effect such additional arrangements so as to 
assure the Viability and Competitiveness of the Hemodialysis Business 
to Be Divested. Respondents shall divest the Hemodialysis Business to 
Be Divested 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 enable the acquirer to compete 
in the manufacture and sale of Hemodialysis Concentrate in the United 
States and to remedy the lessening of competition resulting from the 
NMC Acquisition as alleged in the Commission's Complaint.
    B. Pending divestiture of the Hemodialysis Business to Be Divested, 
Respondents shall take such actions as are necessary to maintain the 
marketability, viability and competitiveness of the Hemodialysis 
Business to Be Divested, including, but not limited to, taking 
necessary steps to ensure that the Lewisberry plant is capable of, and 
has been approved for, commercial production, and to prevent 
destruction, removal, wasting, deterioration or impairment of the 
Hemodialysis Business to Be Divested, other than ordinary wear and 
tear.
III
    It is further ordered that:
    A. If Respondents have not divested the Hemodialysis Business to Be 
Divested within four (4) months of either (i) the date this Order 
becomes final, or (ii) the closing of the NMC Acquisition, whichever is 
later, the Commission may appoint a trustee to divest the Hemodialysis 
Business to Be Divested pursuant to Paragraph II of this Order. 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. 45(l), or any other statute enforced by the Commission, 
Respondents 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 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 the Respondents to 
comply with this Order. The Commission shall select the trustee under 
this Paragraph, subject to the consent of Respondents, which consent 
shall not be unreasonably withheld. The trustee shall be a person with 
experience and expertise in acquisitions, divestitures, and licensing. 
If Respondents have 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 Respondents of the 
identity of any proposed trustee, Respondents shall be deemed to have 
consented to the selection of the proposed trustee.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III.A of this Order, Respondents shall consent to the 
following terms and conditions regarding the trustee's powers, duties, 
authority, and responsibilities:
    1. Subject to the prior approval of the Commission and consistent 
with the provisions of Paragraph II of this Order, the trustee shall 
have the exclusive power and authority to divest the Hemodialysis 
Business to Be Divested.
    2. Within ten (10) days after the appointment of the trustee, 
Respondents 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.
    3. The trustee shall have twelve (12) months from the date the 
trust agreement described in this Paragraph III.B is approved by the 
Commission to accomplish the divestiture of the Hemodialysis Business 
to Be Divested, which shall be subject to the prior approval of the 
Commission. If, however, at the end of this twelve (12) 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.
    4. The trustee shall have full and complete access to the 
personnel, books, records and facilities related to the Hemodialysis 
Business to Be Divested and to any other relevant information as the 
trustee may reasonably request. Respondents shall develop such 
financial or other information as the trustee may reasonably request 
and shall cooperate with the trustee. Respondents shall take no action 
to interfere with or impede the trustee's accomplishment of the 
divestiture. Any delays in divestiture caused by Respondents 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.
    5. 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 Respondents' absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to an acquirer as set out in Paragraph 
II of this Order; 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 or entities selected by 
Respondents from among those approved by the Commission.
    6. The trustee shall serve without bond or other security at the 
cost and expense of Respondents, and 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 expense of 
Respondents, such consultants, accountants, attorneys, investment 
bankers, business brokers, appraisers, and other representatives and 
assistants as are reasonably 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

[[Page 40223]]

shall be paid at the direction of the Respondents, 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 Hemodialysis Business to Be Divested.
    7. Respondents 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 duties of 
the trustee, 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.
    8. 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.
    9. 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.
    10. The trustee shall have no obligation or authority to operate or 
maintain the Hemodialysis Business to Be Divested.
    11. The trustee shall report in writing to Respondents and the 
Commission every thirty (30) days concerning efforts to accomplish the 
divestiture.
IV
    It is further ordered that:
    A. Within twenty (20) days after the date this Order becomes final 
and every thirty (30) days thereafter until Respondents have fully 
complied with the provisions of Paragraphs II and III of this Order, 
Respondents shall submit to the Commission a verified written report 
setting forth in detail the manner and form in which they intend to 
comply, are complying, and have complied with this Order. Respondents 
shall include in their compliance reports, among other things that are 
required from time to time, a full description of the efforts being 
made to comply with Paragraph II of the Order, including a description 
of all substantive contacts or negotiations for the divestiture and the 
identity of all parties contacted. Respondents shall include in their 
compliance reports copies of all written communications to and from 
such parties, all internal memoranda, and all reports and 
recommendations concerning divestiture.
V
    It is further ordered that, for a period of ten (10) years from the 
date this Order becomes final, Respondents shall cease and desist from 
acquiring, without Prior Notification to the Commission (as defined 
below), directly or indirectly, through subsidiaries or otherwise, any 
assets for manufacturing Hemodialysis Concentrate or any Hemodialysis 
Concentrate manufacturing facility, that have been employed in 
Hemodialysis Concentrate manufacturing in the United States within one 
(1) year of the date of an offer by Fresenius to purchase the assets, 
or any interest in a Hemodialysis Concentrate manufacturing facility in 
the United States, or any interest in any individual, firm, 
partnership, corporation or other legal or business entity that 
directly or indirectly owns or operates a Hemodialysis Concentrate 
manufacturing facility in the United States. Provided, however, that 
this Paragraph V shall not be deemed to require Prior Notification to 
the Commission for (i) the construction of new facilities by Fresenius, 
(ii) the acquisition of new or used equipment in the ordinary course of 
business from a person other than the acquirer of the Hemodialysis 
Business to Be Divested, or any other present producer of Hemodialysis 
Concentrate; or (iii) the purchase or lease by Fresenius of a facility 
that has not been operated as a Hemodialysis Concentrate manufacturing 
facility at any time during the year immediately prior to the purchase 
or lease by Fresenius.
    ``Prior Notification to the Commission'' required by Paragraph V 
shall be given on the Notification and Report Form set forth in the 
Appendix to Part 803 of Title 16 of the Code of Federal Regulations, as 
amended (hereinafter referred to as ``the Notification Form''), and 
shall be prepared and transmitted in accordance with the requirements 
of that part, except that no filing fee will be required for any such 
notification, notification shall be filed with the Secretary of the 
Commission, notification need not be made to the United States 
Department of Justice, and notification is required only of Fresenius 
and not of any other party to the transaction. Fresenius shall provide 
the Notification Form to the Commission at least thirty (30) days prior 
to consummating any such transaction (hereinafter referred to as the 
``first waiting period''). If, within the first waiting period, 
representatives of the Commission make a written request for additional 
information, Fresenius shall not consummate the transaction until 
twenty (20) days after substantially complying with such request for 
additional information. Early termination of the waiting periods in 
this paragraph may be requested and, where appropriate, granted by 
letter from the Bureau of Competition. Notwithstanding, Fresenius shall 
not be required to provide Prior Notification to the Commission 
pursuant to this order for a transaction for which notification is 
required to be made, and has been made, pursuant to Section 7A of the 
Clayton Act, 15 U.S.C. Sec. 18a.
VI
    It is further ordered that until the obligations set forth in 
Paragraphs II, III and V are met, Respondents shall notify the 
Commission at least thirty (30) days prior to any proposed change in 
the corporate Respondents 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 corporations 
that may affect compliance obligations arising out of the Order.
VII
    It is further ordered that Respondents, for the purpose of 
determining or securing compliance with this Order, and subject to any 
legally recognized privilege, upon written request and on five days 
notice to Respondents, shall permit any duly authorized 
representative(s) 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 Respondents relating to any matters contained in this 
Order; and
    B. Without restraint or interference from Respondents, to interview 
Respondents' officers, directors, or employees, who may have counsel 
present, regarding such matters.

Analysis To Aid Public Comment on the Provisionally Accepted Consent 
Order

    The Federal Trade Commission (``the Commission'') has accepted for 
public comment, from Fresenius AG and Fresenius USA, Inc., an agreement 
containing a consent order. This agreement has been placed on the 
public record for sixty days for reception of comments from interested 
persons.

[[Page 40224]]

    Comments received during this period will become part of the public 
record. After sixty 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 order.
    The Commission's investigation of this matter concerns the proposed 
acquisition by Fresenius of the businesses of W.R. Grace & Co. that 
comprise National Medical Care, Inc. (``NMC''). The Commission's 
proposed complaint alleges that Fresenius and NMC compete with each 
other in hemodialysis concentrate, a chemical solution that is 
necessary in hemodialysis treatment of patients with End Stage Renal 
Disease, or chronic kidney failure.
    The agreement containing consent order would, if finally accepted 
by the Commission, settle charges that the acquisition may 
substantially lessen competition in the production and sale of 
hemodialysis concentrate. The Commission has reason to believe that the 
acquisition agreement violates Section 5 of the Federal Trade 
Commission Act and the acquisition would have anticompetitive effects 
and would violate Section 7 of the Clayton Act and Section 5 of the 
Federal Trade Commission Act if consummated, unless an effective remedy 
eliminates such anticompetitive effects.
    The Commission's Complaint alleges that hemodialysis concentrate is 
a necessary product in hemodialysis treatment, and that the use of this 
product would not be significantly affected by a price increase. The 
Complaint further alleges that imports of hemodialysis concentrate are 
small and, because of high shipping costs, would not be responsive to a 
price increase in the United States. The market for hemodialysis 
concentrate in the United States is highly concentrated. In addition, 
the entry of other producers is unlikely. The Commission's Complaint 
alleges that the proposed acquisition would lessen competition by 
eliminating competition between Fresenius and NMC, and would make more 
likely coordinated interaction among the remaining producers of 
hemodialysis concentrate, leading to higher prices. Company planning 
documents, in fact, project that ``increased consolidation'' among 
concentrate producers will lead to ``stabilization'' of prices.
    The proposed order accepted for public comment requires Fresenius 
to divest its Lewisberry, Pennsylvania concentrate manufacturing plant 
to Di-Chem, Inc. (``Di-Chem''), along with other assets. The purpose of 
the proposed divestiture is to create a viable and competitive producer 
of hemodialysis concentrate and thereby to remedy the lessening of 
competition alleged in the complaint. Di-Chem already manufactures and 
markets other dialysis products. In addition, Di-Chem's management has 
substantial experience in the hemodialysis concentrate business and in 
other products used in hemodialysis. Public comments regarding all 
aspects of the proposed divestiture to Di-Chem will be considered along 
with other comments on the proposed order.
    Under the terms of the proposed order, Fresenius must divest the 
Lewisberry plant to Di- Chem within ten (10) days after the proposed 
Order is made final by the Commission. If the divestiture to Di-Chem is 
not accomplished, then Fresenius must divest the Lewisberry plant 
within four (4) months to an acquirer that is approved by the 
Commission. If Fresenius fails to accomplish the divestiture, then the 
Commission may appoint a trustee to divest the Lewisberry plant, along 
with ancillary assets or other arrangements that may be necessary to 
assure that the Lewisberry plant is capable of being operated 
independently and competitively by its acquirer. The proposed order 
also requires that Fresenius provide prior notice to the Commission of 
future acquisitions of either assets used to manufacture hemodialysis 
concentrate or companies that produce hemodialysis concentrate.
    The purpose of this analysis is to invite public comment concerning 
the proposed order. This analysis is not intended to constitute an 
official interpretation of the agreement and order or to modify their 
terms in any way.
Donald S. Clark,
Secretary.

Dissenting Statement of Commissioner Roscoe B. Starek, III

    In the Matter of Fresenius AG, et al., File No. 961 0053.

    I cannot join in the Commission's decision to accept a consent 
agreement for public comment in this matter. The evidence accumulated 
in the investigation is not sufficient to give rise to reason to 
believe that respondents' acquisition of National Medical Care, Inc. 
(``NMC'') from W.R. Grace & Co. is likely to lessen competition 
substantially in a United States market for hemodialysis concentrate 
(``HD concentrate'').
    HD concentrate consists of various salts (sodium chloride, 
magnesium chloride, calcium chloride, and potassium chloride) and 
dextrose in purified water, with sodium bicarbonate (i.e., baking soda) 
added at a later stage. Because this easily formulated mixture does not 
enter the body and therefore is not a ``drug'' for purposes of Food and 
Drug Administration (``FDA'') regulation, the FDA applies to HD 
concentrate the somewhat more lenient regulations applicable to medical 
devices. Regulatory delay thus does not significantly constrain entry 
by new firms or expansion by incumbents.
    The investigation revealed that various producers of HD 
concentrate--including Fresenius itself--entered quickly and easily 
into the manufacture of the product, and some stated that they could 
inexpensively increase their capacity to make HD concentrate by as much 
as 60 percent within 30 days, without substantial investment or the 
need for additional FDA approval.1 These indicia of cheap and 
simple entry and expansion may explain why the delivered price of HD 
concentrate has fallen continuously since the product first became 
available.2
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    \1\ Given the contrast between the time required for entry in 
the United States and that required in Germany, it is perhaps 
unsurprising that the latter nation's Bundeskartellamt concluded 
that Fresenius' acquisition of a competitor in HD concentrate would 
have anticompetitive effects. Entry into the German HD concentrate 
business apparently takes three to five years. In the United States, 
entry requires around nine months.
    \2\ It is difficult to accept the proposition that ``[m]ost of 
the investment in production would likely be sunk in the event that 
entry were unsuccessful'' (proposed complaint, para. 13). The 
equipment used in the manufacture of HD concentrate appears to be 
adaptable to alternate uses, and indeed there is evidence of firms 
planning to convert some HD concentrate facilities to other 
purposes.
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    Thus, any assessment of this acquisition's potential to increase 
concentration in the market for HD concentrate--and in turn make 
likelier an exercise of market power--must take into account several 
strongly mitigating factors, including approximately 40 percent current 
excess capacity, the aforementioned ability of manufacturers to expand 
capacity speedily and at minimal cost, and the evident ability of 
customers (hemodialysis clinics) to integrate into the manufacture of 
HD concentrate in the event concentrate producers behave 
anticompetitively. Certain customers that speculated that the 
acquisition might lead to higher prices for HD concentrate appear to 
have been unaware of current plans for significant entry or capacity 
expansion by firms other than Fresenius and NMC. Moreover, other 
customer complaints

[[Page 40225]]

seem to have been motivated by a fear that the vertical integration of 
Fresenius (a manufacturer of kidney dialysis products) and NMC (an 
operator of hemodialysis treatment centers, among its other businesses) 
could make the merged firm a stronger competitor in dialysis treatment.
    It is always tempting to accept the ``bird in the hand'' 
represented by a consent agreement proffered in the early stages of an 
investigation, such as the one entered into (apparently without 
significant resistance) by Fresenius. Nevertheless, when the evidence 
on entry, expansion, and the absence of anticompetitive effects is as 
clear as in this case, the issuance of a consent order is unwarranted.
    I therefore dissent.

[FR Doc. 96-19594 Filed 7-31-96; 8:45 am]
BILLING CODE 6750-01-P