[Federal Register Volume 63, Number 194 (Wednesday, October 7, 1998)]
[Notices]
[Pages 53919-53920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26855]


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FEDERAL TRADE COMMISSION

[File No. 981-0324]


Medtronic, Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before December 7, 1998.

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:
William Baer, FTC/H-374, Washington, DC 20580, (202) 326-2932 or Ann 
Malester, FTC/S-2308, Washington, DC 20580, (202) 326-2820.

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

[[Page 53920]]

Rules of Practice (16 CFR 2.34), notice is hereby given that the above-
captioned 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. The following Analysis to Aid Public Comment describes 
the terms of the consent agreement, and the allegations in the 
complaint. An electronic copy of the full text of the consent agreement 
package can be obtained from the FTC Home Page (for October 1, 1998), 
on the World Wide Web, at ``http://www.ftc.gov/os/actions97.htm.'' A 
paper copy can be obtained from the FTC Public Reference Room, Room H-
130, Sixth Street and Pennsylvania Avenue, NW, Washington, DC 20580, 
either in person or by calling (202) 326-3627. 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)).

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 Medtronic, Inc. (``Medtronic''). The proposed Consent Order 
contains a number of provision designed to remedy the anticompetitive 
effects resulting from Medtronic's acquisition of Physio-Control 
International Corporation's (``Physio-Control'') automated external 
defibrillator business and its ownership interest in SurVivaLink 
Corporation ``SurVivaLink), a direct competitor of Physio-Control.
    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 proposed Order.
    On June 27, 1998, Medtronic entered into an Agreement and Plan of 
Merger with Physio-Control to acquire all of the voting stock of 
Physio-Control in exchange for Medtronic voting stock valued at $530 
million. The proposed compliant alleges that the transaction, if 
consummated, would constitute a violation of Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as 
amended, 15 U.S.C 45, in the market for the research, development, 
manufacture and sale of automated external defibrillators.
    Automated external defrillators are portable, automated devices 
used in emergency situation, by persons with limited medical training, 
such as policemen, firemen and lifeguards, to treat people suffering 
from sudden cardiac arrest. The market for automated external 
defibrillators is highly concentrated with only three significant 
players in the United States: Physio-Control, SurVivaLink and Hewlett-
Packard/Heartstream.
    The relevant geographic market is the United States. Only companies 
that have received U.S. Food and Drug Administration approval to sell 
their devices in the United States may supply automated external 
defibrillators to U.S. customers.
    In addition, new entry into the market for automated external 
defibrillators is unlikely and would not occur in a timely manner to 
deter or counteract the adverse competitive effects of Medtronic's 
acquisition of Physio-Control. Entry into this market is unlikely and 
would not be timely because of the time and expense required to design 
and develop a competitively viable product, obtain approvals from the 
U.S. Food and Drug Administration, and establish a sales and 
distribution network.
    Medtronic's acquisition of Physio-Control raises serious 
competitive concerns in the market for automated external 
defibrillators because of its ownership interest in SurVivaLink, 
Physio-Control's direct competitor. Pursuant to an investment agreement 
entered into between Medtronic and SurVivaLink, Medtronic was given the 
explicit right to name a member to SurVivaLink's Board of Directors and 
to receive certain non-public competitively sensitive information. 
Medtronic also has the right to receive certain non-public 
competitively sensitive information under Minnesota law. In addition, 
Medtronic has the right as a shareholder in SurVivaLink to vote on all 
matters requiring a shareholder vote. Medtronic's entanglements with 
SurVivaLink and its acquisition of Physio-Control would cause 
anticompetitive harm in the market for automated external 
defibrillators by potentially eliminating direct competition, 
increasing the likelihood of coordinated interaction, reducing 
innovation and ultimately increasing prices for automated external 
defibrillator customers.
    The proposed Consent Order remedies the acquisition's 
anticompetitive effects in the market for automated external 
defibrillators by making Medtronic a passive investor in SurVivaLink 
and by preventing Medtronic from exercising its right to name a member 
to SurVivaLink's Board of Directors. The proposed Consent Order also 
prevents Medronic from exercising its rights, pursuant to its 
investment agreement with SurVivaLink or under Minnesota law, to 
receive non-public competitively sensitive information relating to 
SurVivaLink.
    The proposed Consent Order also limits Medtronic's ability to vote 
on any matter that requires a vote of SurVivaLink's shareholders by 
requiring Medtronic to delegate its voting rights to be voted in a 
manner proportional to the votes of all other shareholders. The propose 
Consent Order would also prohibit Medronic from proposing any corporate 
action or participating in any business decisions of SurVivaLink. 
Additionally, the proposed Consent Order prevents Medronic from 
increasing its ownership interest in SurVivaLink without prior written 
notice to the Commission. Finally, the proposed Consent Order requires 
Medtronic to return to SurVivaLink any documents that contain any trade 
secrets, commercial information or financial information relating to 
SurVivaLink.
    Under the provisions of the proposed Order, Medtronic is also 
required to provide the Commission with a report of compliance with the 
provisions of the order within sixty (60) days following the date this 
Order becomes final, and annually thereafter until such time as 
Medtronic sells or transfers all of its ownership interest in 
SurVivaLink or Physio-Control.
    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.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-26855 Filed 10-6-98; 8:45 am]
BILLING CODE 6750-01-M