[Federal Register Volume 64, Number 97 (Thursday, May 20, 1999)]
[Notices]
[Pages 27548-27549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12658]


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FEDERAL TRADE COMMISSION

[File No. 9910095]


SNIA S.p.A; 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 July 19, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
Christina Perez or Michael Barnett, FTC/S-2308, 601 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580, (202) 326-2048 or (202) 326-2541.

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 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 May 14th, 1999), 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, 600 Pennsylvania Avenue, N.W., Washington, 
D.C. 20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Avenue, N.W., 
Washington, D.C. 20580. Two paper copies of each comment should be 
filed, and should be accompanied, if possible, by a 3\1/2\ inch 
diskette containing an electronic copy of the comment. 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 
(``Order'') from SNIA S.p.A. (``SNIA''), which is designed to remedy 
the anticompetitive effects of SNIA's acquisition of all of the 
outstanding voting securities of COBE Cardiovascular, Inc. (``COBE''), 
as well as certain cardiopulmonary and other cardiovascular assets and 
liabilities from other subsidiaries of Gambro AB (``Gambro''). Both 
SNIA and Gambro manufacture and sell a wide variety of cardiovascular 
products, including heart-lung machines. The proposed Order remedies 
the acquisition's anticompetitive effects by requiring SNIA to divest 
COBE's heart-lung machine business.
    The proposed 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 review the proposed Order 
and the comments received and will decide whether it should withdraw 
from the proposed Order or make final the proposed Order.
    Pursuant to an Asset and Stock Purchase Agreement signed on 
November 23, 1998, SNIA, through its Sorin Biomedica, Inc. subsidiary 
(``Sorin''), has agreed to purchase 100% of the outstanding voting 
securities of COBE, as well as certain other assets and liabilities 
from other subsidiaries of Gambro, for approximately $260 million. The 
proposed Complaint alleges that the acquisition, if consummated, would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, in the U.S. market for heart-lung machines.
    Heart-lung machines are life-sustaining medical devices that are 
essential for any surgery that requires the heart to be stopped, such 
as surgeries to implant coronary artery bypass grafts, repair or 
replace heart valves, repair cerebral aneurysms, or transplant livers 
and hearts. A heart-lung machine is the equipment portion of an 
extracorporeal bypass system, which replaces the function of the heart 
and lungs during surgery by circulating and providing oxygen to the 
patient's blood throughout the procedure. In addition to a heart-lung 
machine, a complete extracorporeal bypass system is comprised of 
various single-use products, called disposables, that come into direct 
contact with the patient's blood, and therefore cannot be reused for 
safety reasons. Approximately 450-550 new units are sold worldwide each 
year, amounting to $50 million in sales.
    The U.S. market for heart-lung machines is highly concentrated and 
the proposed acquisition would substantially increase concentration in 
this market. The acquisition would result in a Herfindahl-Hirschman 
Index (``HHI'') of 4,638 points, which is an increase of 1,554 points 
over the preacquisition level. SNIA and COBE are two of only four 
suppliers of heart-lung machines in the United States, with the fourth 
competitor being significantly smaller than the other three. By 
eliminating the competition between SNIA and COBE in this highly 
concentrated market, the proposed acquisition would enhance the 
likelihood of coordinated interaction between or among the remaining 
firms in the market, thus increasing the likelihood that consumers in 
the United States would be forced to pay higher prices for heart-lung 
machines.
    It is unlikely that this lost competition would have been replaced 
by new entrants into the relevant market due to the substantial 
barriers to entry into the U.S. market for heart-lung machines. A new 
entrant into this market would need to undertake the difficult, 
expensive and time-consuming process of researching and developing a 
new product, obtaining approval from the U.S. Food and Drug 
Administration, establishing a nationwide service and sales network and 
gaining customer acceptance. This is a very difficult

[[Page 27549]]

process for new entrants because manufacturers are reluctant to 
establish a nationwide service and sales network until they have gained 
customer acceptance and have an established customer base, and 
customers are reluctant to purchase from a supplier unless it has an 
established service and sales network. As a result, a new entrant often 
finds itself in a ``Catch 22'' problem. For these reasons, new entry 
into the market would not be timely, likely or sufficient to deter or 
counteract the anticompetitive effects resulting from the acquisition.
    The proposed Order remedies the anticompetitive effects in the 
heart-lung machine market by requiring SNIA to divest COBE's heart-lung 
machine business to Baxter Healthcare Corporation, a large manufacturer 
of medical products, including disposables for heart-lung machines, 
within ten (10) days after the Commission accepts the Agreement 
Containing Consent Order for public comment, or to another Commission-
approved buyer within one hundred eighty (180) days after the Agreement 
Containing Consent Order is accepted for public comment. In the event 
that SNIA fails to divest the heart-lung machine assets, or the 
acquirer fails to obtain FDA approval and the ability to manufacture 
and sell heart-lung machines, the Commission may appoint a trustee to 
divest the COBE heart-lung machine business to a new acquirer. The 
divestiture trustee will have the authority and power to divest the 
heart-lung machine assets in a manner that satisfies the requirements 
of the Order.
    The proposed Order requires SNIA to provide assistance to the 
acquirer so that it can compete effectively in the heart-lung machine 
business. First, SNIA must contract manufacture a supply of heart-lung 
machines for a limited time period while the acquirer obtains its own 
FDA approval and obtains the commercial capability to manufacture and 
sell heart-lung machines in the United States. Second, SNIA must 
provide technical assistance and advice to help the acquirer in its 
efforts to begin manufacturing and selling heart-lung machines. The 
proposed Order enables the acquirer to hire former COBE employees 
associated with the research, development, manufacture, marketing, or 
sales of heart-lung machines. Finally, the Order requires SNIA to 
cooperate with the acquirer in any patent dispute in which a third 
party attempts to challenge any of the patents divested pursuant to the 
Order and in which the ability of the acquirer to become an effective 
competitor in the heart-lung machine market could be affected.
    In order to facilitate the smooth transfer of assets and ensure 
that the acquirer will get the assistance necessary to independently 
manufacture the products, the proposed Order provides for the 
appointment of an interim trustee. The interim trustee will serve until 
the acquirer has received all necessary FDA approvals and obtains the 
commercial capability to manufacture and sell heart-lung machines. The 
Order also requires SNIA to provide to the Commission a report of 
compliance with the divestiture provisions of the Order within thirty 
(30) days following the date the Order becomes final, and every ninety 
(90) days thereafter until SNIA has completed the divestiture. The 
Order also requires SNIA to notify the Commission at least thirty (30) 
days prior to any change in SNIA that may affect compliance obligations 
arising out of the Order.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order and the divestiture to Baxter Healthcare Corporation, 
and it is not intended to constitute an official interpretation of the 
agreement and proposed Order or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-12658 Filed 5-19-99; 8:45 am]
BILLING CODE 6750-01-M