[Federal Register Volume 74, Number 2 (Monday, January 5, 2009)]
[Notices]
[Pages 293-295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-31366]


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FEDERAL TRADE COMMISSION

[File No. 061 0123]


Inverness Medical Innovations, Inc.; Agreement Containing Consent 
Order 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 January 20, 2009.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Inverness Medical Innovations, File No. 061 
0123,'' 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 by following the instructions on the web-based form at 
(http://secure.commentworks.com/ftc-Inverness). To ensure that the 
Commission considers an electronic comment, you must file it on that 
web-based form.
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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.shtm).

FOR FURTHER INFORMATION CONTACT: Lore Unt, FTC Bureau of Competition, 
600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 326-3019.

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 December 23, 2008), on the World Wide Web, at (http://www.ftc.gov/os/2008/12/index.htm). A paper copy can be obtained from the

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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.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Inverness Medical Innovations, Inc. (``Inverness'').
    The proposed Consent Agreement is designed to remedy the harm to 
competition from Inverness' conduct in acquiring certain assets of ACON 
Laboratories, Inc. (``ACON''). It would settle charges that Inverness 
engaged in an unlawful course of conduct to maintain its monopoly power 
in the lateral flow consumer pregnancy test market and hamper the 
development of future competition in that market, by restricting ACON's 
digital consumer pregnancy test supply and development joint venture 
with Church & Dwight Co., Inc. (``Church & Dwight''), and by acquiring 
ACON's competing water-soluble dye consumer pregnancy test technology.
    Under the terms of the proposed Decision and Order, Inverness will 
divest ACON's water-soluble dye consumer pregnancy test product assets. 
In addition, Inverness will remove barriers to ACON's continued supply 
of digital tests to Church & Dwight during the remaining term of their 
joint venture. The proposed Decision and Order also limits Inverness' 
ability to interfere with the unwinding of the ACON/Church & Dwight 
joint venture by, among other things, requiring Inverness to disclaim 
ownership of intellectual property developed by ACON and Church & 
Dwight during their joint venture.

II. Background

    Inverness is a leader in the research, development, manufacture, 
and sale of consumer pregnancy tests in the United States. Nearly all 
retail consumer pregnancy tests use immunoassay-based ``lateral flow'' 
technology, which tests a urine sample for the presence of the human 
chorionic gonadotropin (``hCG'') hormone produced by pregnant women. 
Consumer pregnancy tests consist of a plastic handheld stick device, 
which contains a test strip embedded beneath an indicator window. The 
test strip contains chemical agents that react to the presence of hCG 
in the urine sample. If the test is positive for hCG, a colored line 
will develop within the indicator window.
    Lateral flow consumer pregnancy tests are more accurate, easier to 
use, and less costly than other pregnancy tests, which resemble 
laboratory test kits. There are no viable substitutes for consumer 
pregnancy tests based on lateral flow technology.
    ``Digital'' consumer pregnancy tests use and improve upon lateral 
flow technology. Rather than a colored line indicator, a digital 
pregnancy test indicates results through a digital display of words, 
such as ``PREGNANT'' or ``NOT PREGNANT.'' Digital consumer pregnancy 
tests are more difficult to develop and manufacture than standard 
consumer pregnancy tests, because they require more extensive know-how 
and more exacting manufacturing tolerances. Digital consumer pregnancy 
tests are a growing segment of the consumer pregnancy test market.
    Inverness is the dominant firm in the market for consumer pregnancy 
tests. Inverness maintains an approximately 70% share of the U.S. 
consumer pregnancy test market. At the time of Inverness' acquisition 
of ACON, Inverness was one of only three independent companies 
marketing or manufacturing digital consumer pregnancy tests. The other 
firms exited the market in 2006.
    ACON developed, manufactured, and sold consumer pregnancy tests in 
competition with Inverness. Before Inverness' acquisition of the ACON 
assets, ACON was developing digital consumer pregnancy tests in a joint 
venture with Church & Dwight, Inverness' leading competitor. The 
collaboration with Church & Dwight envisioned that ACON would 
manufacture and supply the resulting digital consumer pregnancy test 
products on Church & Dwight's behalf.
    ACON also had invested in the development of new lateral flow tests 
that used water-soluble dyes, rather than colored particles, as the 
reactive agents in the test strip. ACON was one of the only, if not the 
only, firm involved in the development of consumer pregnancy tests that 
used water-soluble dye technology. Before the acquisition, ACON had 
completed prototypes of the product, and supplied sample quantities to 
U.S. customers.
    In 2006, Inverness acquired certain assets from ACON, which 
included assets relating to ACON's water-soluble dye technology and 
assets relating to ACON's digital consumer pregnancy test joint venture 
with Church & Dwight.

III. The Proposed Complaint

    The proposed complaint alleges that relevant market in which to 
analyze Inverness' conduct is the research, development, manufacture, 
and sale of consumer pregnancy tests in the United States. Inverness is 
the dominant player in the market for consumer pregnancy tests. 
Barriers to entry into the consumer pregnancy test market include 
intellectual property, know-how, and advertising.
    The proposed complaint alleges that Inverness engaged in a course 
of conduct to maintain its monopoly power in this market by threatening 
to hamper or stifle future competition from two emerging alternative 
consumer pregnancy test technologies.
    First, the proposed complaint alleges that Inverness' acquisition 
of the ACON assets weakened future competition from digital consumer 
pregnancy test products. The proposed complaint alleges that, through 
its acquisition of the ACON assets, Inverness: (a) imposed a covenant 
not to compete on ACON, which limited the scope and duration of the 
ACON's digital consumer pregnancy test joint venture with Church & 
Dwight; (b) required ACON to surrender to Inverness any profits from 
ACON's joint venture with Church & Dwight; and (c) acquired rights to 
the intellectual property developed by ACON and Church & Dwight in 
their joint venture. Through these actions, Inverness interfered with 
ACON's ability and incentive to develop and manufacture digital 
consumer pregnancy tests in its joint venture with Church & Dwight. 
Inverness' conduct also injured competition that might arise after the 
unwinding of the joint venture between ACON and Church & Dwight, by 
interfering with ACON's ability and incentive to serve as an 
independent developer and supplier of digital consumer pregnancy tests, 
and by hampering Church & Dwight's ability and incentive to introduce 
competing digital consumer pregnancy test products manufactured by 
another developer.
    Second, the proposed complaint alleges that Inverness' acquisition 
of the ACON assets eliminated future competition from water-soluble dye 
lateral flow consumer pregnancy tests. After Inverness acquired the 
rights to ACON's water-soluble dye consumer pregnancy test product, 
Inverness made no use of the test, and ceased development and marketing 
efforts for

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it. Inverness' acquisition of the ACON assets further entrenched 
Inverness' monopoly power in consumer pregnancy tests by preventing 
future competition from competing water-soluble dye consumer pregnancy 
tests.

IV. The Proposed Order

    The proposed order will remedy the Commission's competitive 
concerns about Inverness' conduct in maintaining its consumer pregnancy 
test product monopoly power.
    First, the proposed order contains provisions to prevent Inverness 
from interfering with the digital consumer pregnancy test product joint 
venture between ACON and Church & Dwight, and to enable ACON and Church 
& Dwight to maintain their competitive viability after the joint 
venture ends. These provisions include a requirement that Inverness 
disclaim any ownership rights on intellectual property developed during 
the joint venture. The proposed order further requires that Inverness 
will not interfere with ACON's transfer or licensing of digital 
consumer pregnancy test technology to Church & Dwight, and that 
Inverness not interfere with ACON's ability to manufacture digital 
consumer pregnancy tests for Church & Dwight during their 
collaboration.
    Second, to prevent Inverness from harming emerging competition from 
water-soluble dye consumer pregnancy test products, the proposed order 
requires Inverness to divest, to Aemoh Products, LLC, a fully-paid 
perpetual exclusive sublicense to Inverness' water-soluble dye 
intellectual property. The proposed order seeks to ensure that water-
soluble dye products can be developed without risk of infringing 
Inverness' intellectual property, by requiring Inverness to covenant 
not to assert intellectual property infringement claims against certain 
lateral flow products that use Inverness' water-soluble dye technology. 
These provisions, among others, will give Aemoh--a start-up run by a 
successful and experienced health products entrepreneur--the ability to 
complete the commercialization of water-soluble dye based consumer 
pregnancy tests.

V. Opportunity for Public Comment

    The proposed consent order has been placed on the public record for 
30 days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission will again review the proposed consent 
order and the comments received and will decide whether it should 
withdraw from the agreement or make the proposed consent order final.
    By accepting the proposed Consent Agreement subject to final 
approval, the Commission anticipates that the competitive problems 
alleged in the complaint will be resolved. The purpose of this analysis 
is to invite public comment on the proposed Consent Agreement, in order 
to aid the Commission in its determination of whether to make the 
proposed order final. This analysis is not intended to constitute an 
official interpretation of the proposed order nor is it intended to 
modify the terms of the proposed order in any way.

    By direction of the Commission, Commissioner Harbour recused.
Richard C. Donohue,
Acting Secretary.
[FR Doc. E8-31366 Filed 1-2-09: 8:45 am]
BILLING CODE 6750-01-S