[Federal Register Volume 72, Number 230 (Friday, November 30, 2007)]
[Notices]
[Pages 67727-67729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-23291]


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FEDERAL TRADE COMMISSION

[File No. 071 0132]


Schering-Plough Corporation; Analysis of Agreement Containing 
Consent Orders 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 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 19, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Schering-Plough, File No. 071 0132,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper 
form be sent by courier or overnight service, if possible, because U.S. 
postal mail in the Washington area and at the Commission is subject to 
delay due to heightened security precautions. Comments that do not 
contain any nonpublic information may instead be filed in electronic 
form as part of or as an attachment to email messages directed to the 
following email box: [email protected].
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC website, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Jacqueline K. Mendel, Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-2603.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission 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 thirty (30) 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 November 16, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/11/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

[[Page 67728]]

Analysis of Agreement Containing Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Schering-Plough Corporation (``Schering-Plough''), 
which is designed to remedy the anticompetitive effects of its 
acquisition of Organon BioSciences N.V. (``Organon BioSciences'') from 
Akzo-Nobel N.V. (``Akzo-Nobel''). Under the terms of the proposed 
Consent Agreement, Schering-Plough would be required to divest to 
Wyeth: (1) the Schering-Plough rights and assets necessary to develop, 
manufacture, and market live vaccines for the prevention and treatment 
of the Georgia 98 strain of infectious bronchitis virus in poultry; (2) 
the rights and assets necessary to develop, manufacture, and market 
live vaccines for the prevention and treatment of fowl cholera due to 
Pasteurella multocida in poultry; and (3) the rights and assets 
necessary to develop, manufacture, and market live vaccines for the 
prevention and treatment of Mycoplasma gallisepticum (``MG'') in 
poultry.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and the comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement, modify 
it, or make final the Decision and Order (``Order'').
    Pursuant to the terms of a Letter of Intent dated March 12, 2007, 
Schering-Plough proposes to acquire from Akzo Nobel 100 percent of the 
outstanding shares of Organon BioSciences voting stock. The 
Commission's Complaint alleges that the proposed acquisition, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. Sec.  18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. Sec.  45, by lessening competition in the U.S. 
markets for the manufacture and sale of the following poultry vaccines: 
(1) live vaccines for the prevention and treatment of the Georgia 98 
strain of infectious bronchitis virus in poultry; (2) live vaccines for 
the prevention and treatment of fowl cholera due to Pasteurella 
multocida in poultry; and (3) live vaccines for the prevention and 
treatment of Mycoplasma gallisepticum in poultry. The proposed Consent 
Agreement will remedy the alleged violations by replacing the lost 
competition that would result from the acquisition in each of these 
markets.

The Products and Structure of the Markets

    The markets for the Georgia 98 strain of infectious bronchitis, 
fowl cholera, and live MG vaccines are highly concentrated, with 
Schering-Plough and Intervet accounting for significant market shares 
in each of these markets. The proposed acquisition would create a 
monopolist in the live Georgia 98 vaccine market and would give 
Schering-Plough shares of approximately eighty-five percent and 
seventy-two percent in the markets for live fowl cholera and live MG 
vaccines, respectively.
    The Georgia 98 strain of infectious bronchitis is a highly 
contagious respiratory disease in poultry spread by contact with 
infected respiratory discharge and feces. Live Georgia 98 vaccines are 
the only vaccines that can effectively prevent and treat the Georgia 98 
strain of infectious bronchitis virus. Other infectious bronchitis 
virus vaccine strains, administered either individually or in multiple-
antigen combination vaccines, do not provide adequate protection 
against the Georgia 98 serotype to act as a sufficient alternative to 
the live Georgia 98 vaccines. The relevant market for the manufacture, 
distribution, and sale of live vaccines for the prevention and 
treatment of the Georgia 98 strain of infectious bronchitis virus in 
poultry in the United States is highly concentrated. Respondent 
Schering-Plough and Organon BioSciences are the only suppliers of live 
vaccines for the prevention and treatment of the Georgia 98 strain of 
infectious bronchitis virus in poultry in the United States. Schering-
Plough's Avimune IB98 product is the market leader with an estimated 
seventy-nine percent market share, while Intervet competes with its 
MILDVAC GA-98 product, selling the remaining twenty-one percent in the 
United States. The acquisition would create a monopoly by combining the 
only two companies with products on the market.
    Live fowl cholera vaccines prevent an infectious bacterial disease 
in poultry caused by a common pathogenic bacterium, Pasteurella 
multocida. The relevant market for the manufacture, distribution, and 
sale of live vaccines for the prevention and treatment of fowl cholera 
due to Pasteurella multocida in poultry in the United States is highly 
concentrated. Respondent Schering-Plough and Organon BioSciences are 
two of only three suppliers of live fowl cholera vaccines, and the only 
providers of a PM-1 strain of the vaccine. Organon BioSciences is the 
market leader with its CHOLERVAC-PM-1 product, accounting for 
approximately fifty-three percent of the live fowl cholera vaccines 
sold in the United States. Schering-Plough is the second leading 
supplier with its PM-ONEVAC-C and M-NINEVAX products, accounting for 
thirty-two percent of sales in the market. Together, Schering-Plough 
and Organon BioSciences account for approximately eighty-five percent 
of the sales in this highly concentrated market. Accordingly, the 
Acquisition would significantly increase the concentration levels in 
the United States in the market for live vaccines for the prevention 
and treatment of fowl cholera due to Pasteurella multocida in poultry.
    MG is a respiratory disease that is transmitted laterally between 
chickens or through infected eggs. The relevant market for the 
manufacture, distribution, and sale of live Mycoplasma gallisepticum 
vaccines in the United States is highly concentrated. Respondent 
Schering-Plough and Organon BioSciences are the two leading suppliers 
of live vaccines for the prevention and treatment of Mycoplasma 
gallisepticum in poultry in the United States. Akzo Nobel is the market 
leader with its MYCOVAC-L product, while Schering Plough competes with 
its F-VAX MG. Together, they account for over seventy-two percent of 
the sales in this highly concentrated market. Accordingly, the 
Acquisition would significantly increase theconcentration levels in the 
United States in the market for live vaccines for the prevention and 
treatment of Mycoplasma gallisepticum in poultry.

Entry

    Entry into any relevant line of commerce would not be timely, 
likely, or sufficient to deter or counteract the anticompetitive 
effects of the Acquisition. Entry into any of these markets would 
require overcoming three major obstacles: lengthy development periods, 
USDA approval requirements, and customer acceptance. As a result, new 
entry into any of these markets sufficient to achieve a significant 
market impact within two years is unlikely.

Effects

    The markets for the Georgia 98 strain of infectious bronchitis, 
fowl cholera, and MG live vaccines are highly concentrated, with 
Schering-Plough and Intervet accounting for substantial shares of sales 
in each of these markets. The proposed acquisition would create a 
monopolist in the live Georgia 98

[[Page 67729]]

vaccine market and would give Schering-Plough shares of approximately 
eighty-five percent and seventy-two percent in the markets for live 
fowl cholera vaccine and live MG vaccines, respectively.
    The competitive concerns can be characterized as unilateral in 
nature. Schering-Plough and Organon BioSciences are each other's 
closest competitors in all of the relevant markets. Consumers have 
benefitted from the price competition between Schering-Plough and 
Organon BioSciences. If unremedied, the proposed acquisition would 
likely cause higher prices and reduce incentives to improve service or 
product quality, resulting in significant harm to consumers in the U.S. 
markets for these vaccines.

The Consent Agreement

    The proposed Consent Agreement remedies the competitive harm caused 
by the proposed transaction. Pursuant to the Consent Agreement, 
Schering-Plough must divest or license all of the assets relating to 
Schering-Plough's live vaccine for the Georgia 98 strain of infectious 
bronchitis (Avimune IB98), Intervet's live fowl cholera vaccine 
(CHOLERVAC-PM-1) and Schering-Plough's live MG vaccine (F VAX-MG)(``the 
assets to be divested''), to the Fort Dodge division of Wyeth, within 
ten days after the date Schering-Plough acquires Organon BioSciences. 
The assets to be divested include research and development, customer, 
supplier and manufacturing contracts and any intellectual property 
including existing licenses, but excluding trademarks. Fort Dodge plans 
to bring all manufacturing of the three vaccines in-house to its own 
manufacturing facilities and to add the three to its own portfolio of 
poultry vaccines. While Fort Dodge undertakes the process of obtaining 
USDA regulatory approvals and bringing vaccine production in-house, 
Schering-Plough will provide Fort Dodge with the vaccines pursuant to a 
supply and transition services agreement with a term of two years, and 
an option to extend it another year, individually for each of the three 
vaccines, if required.
    The acquirer of the divested assets must receive the prior approval 
of the Commission. The Commission's goal in evaluating possible 
purchasers of divested assets is to maintain the competitive 
environment that existed prior to the acquisition. A proposed acquirer 
of divested assets must not itself present competitive problems.
    Wyeth, headquartered in Madison, New Jersey, is a global leader in 
pharmaceuticals, consumer health care products and animal health care 
products. In 2006, it had net sales of $20 billion. Wyeth's Fort Dodge 
Animal Health division offers a broad range of biological and 
pharmaceutical products for the companion animal, equine, livestock, 
swine and poultry industries. Significantly, Wyeth already has an 
established poultry vaccine line comprised of internally developed 
vaccines as well as several vaccines that it has acquired and 
transferred to its manufacturing facilities. Fort Dodge has its own 
distribution network and an experienced sales force with existing 
relationships with major poultry producers. The three vaccines being 
divested to Fort Dodge are all established products that have been on 
the market for at least two years. Fort Dodge has its own manufacturing 
facilities with excess capacity and intends to bring the manufacturing 
of all of the products it is acquiring from Schering-Plough in-house. 
For these reasons, Wyeth is a strong buyer that appears well positioned 
to replace the competition lost by the acquisition.
    If the Commission determines that Wyeth is not an acceptable 
acquirer of the assets to be divested, the parties must unwind the sale 
and divest the Products within six months of the date the Order becomes 
final to another Commission-approved acquirer. If the parties fail to 
divest within six months, the Commission may appoint a trustee to 
divest the Product assets.
    The proposed remedy contains several provisions to ensure that the 
divestitures are successful. The Order requires Schering-Plough to 
provide transitional services to enable the Commission-approved 
acquirer to obtain all of the necessary approvals from the USDA. These 
transitional services include technology transfer assistance to 
manufacture the Products in substantially the same manner and quality 
employed or achieved by Schering-Plough and Akzo-Nobel.
    The Commission has appointed Dr. David A. Espeseth to oversee the 
implementation of the Order as the Interim Monitor Trustee. Dr. 
Espeseth retired in 1998 from a career at the USDA, where his last 
position was as Special Assistant to the Deputy Administrator of 
Veterinary Services and where he spent the majority of his 37 years 
regulating veterinary biologic products (vaccines). Today, he is a 
consultant to animal health companies, assisting with regulatory issues 
before the USDA and technology transfers. Dr. Espeseth's strengths are 
his strong regulatory background, his experience overseeing technology 
transfers, and experience resolving disputes between companies and the 
USDA.
    Dr. Espeseth is an excellent candidate to handle the expected 
duties and responsibilities of the Interim Monitor Trustee in this 
matter. He has the requisite capability and applicable knowledge to 
ensure the proper transfer of the divested assets, oversee the transfer 
of the relevant technology, monitor the critical manufacturing and 
supply activities of the Respondent, ensure the Respondent's compliance 
with the Order and related agreements, respond to Commission needs, and 
perform other related services as may be required. Accordingly, the 
Commission has appointed Dr. Espeseth as the Interim Monitor Trustee.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Order or to modify its terms in 
any way.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E7-23291 Filed 11-29-07: 8:45 am]
BILLING CODE 6750-01-S