[Federal Register Volume 77, Number 116 (Friday, June 15, 2012)]
[Notices]
[Pages 35978-35981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14660]


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FEDERAL TRADE COMMISSION

[File No. 111 0160]


Johnson & Johnson and Synthes, Inc.; 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 July 12, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Johnson & Johnson, 
File No. 111 0160'' on your comment, and file your comment online at 
https://ftcpublic.commentworks.com/ftc/j&jsynthesconsent, by following 
the instructions on the Web-based form. If you prefer to file your 
comment on

[[Page 35979]]

paper, mail or deliver your comment to the following address: Federal 
Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 
Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Mark D. Seidman (202-326-3296), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

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 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 June 11, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC 
20580, either in person or by calling (202) 326-2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before July 12, 2012. 
Write ``Johnson & Johnson, File No. 111 0160'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/j&jsynthesconsent by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``Jonhson & Johnson, File 
No. 111 0160'' on your comment and on the envelope, and mail or deliver 
it to the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW, 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before July 12, 2012. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

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 Orders (``Consent 
Agreement'') from Johnson & Johnson (``J&J''). The purpose of the 
proposed Consent Agreement is to remedy the anticompetitive effects 
that would otherwise result from J&J's acquisition of the volar distal 
radius plating system assets of Synthes, Inc. (``Synthes''). Under the 
terms of the proposed Consent Agreement, J&J is required to divest all 
assets (including intellectual property) related to its ``DVR'' volar 
distal radius plating system business to a third party, enabling that 
third party to make and sell the DVR for the treatment of distal radius 
wrist fractures.
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty 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 or make it final.
    Pursuant to an Agreement and Plan of Merger dated April 26, 2011, 
J&J proposes to acquire Synthes in exchange for cash and voting 
securities in a transaction valued at approximately $21.3 billion. 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. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, by combining the two largest competitors in the 
U.S. market for volar distal radius plating systems. The proposed 
Consent Agreement would remedy the alleged violations by replacing the 
competition that otherwise would be lost in these markets as a result 
of the acquisition.

II. The Parties

    J&J is a comprehensive and broad-based manufacturer of products 
related to all aspects of human health care. In 2011, J&J generated 
global sales of $65 billion and U.S. sales of $28.9 billion. J&J is 
divided into three business segments: Consumer, Pharmaceutical, and 
Medical Devices and Diagnostics. The products impacted by the proposed

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transaction, volar distal radius plating systems, fall within J&J's 
Medical Devices and Diagnostics segment.
    Synthes is a medical device company that manufactures products in 
five main product groups: trauma, spine, cranio-maxillofacial, 
biomaterials, and power tools. In 2011, Synthes generated global sales 
of $3.97 billion worldwide and U.S. sales of $2.14 billion. Synthes's 
volar distal radius plating system sales are part of its trauma unit.

III. Volar Distal Radius Plating Systems

    Volar distal radius plates are internal fixation devices that are 
implanted surgically from the underside of the wrist to achieve and 
maintain proper alignment of the radius bone following a fracture. 
Distal radius fractures, which are fractures of the portion of the 
radius bone closest to the wrist, are among the most common fractures 
in the human body. Distal radius fractures generally occur as a result 
of an individual bracing for a fall, whether it is a routine slip and 
fall by an elderly patient with a weak bone structure or a high-energy 
fall by a young, active patient engaged in sporting activities.
    Most patients who experience distal radius fractures do not require 
surgical intervention and can be treated with simple casting. If the 
radius bone is displaced, however, it is almost always necessary to 
realign the fracture surgically. Volar distal radius plating systems 
are the primary option for treating displaced distal radius fractures 
in the United States. They are favored by surgeons because they provide 
solid fracture alignment, are easy to implant, and enable greater 
patient post-surgical freedom of movement and shorter patient recovery 
times. Other options exist to treat displaced distal radius fractures, 
but those alternative methods are typically used only in specialized 
cases. For the large percentage of displaced distal radius fractures, 
the clinical benefits of volar distal radius plating systems cannot be 
matched by the alternative products available on the market, and 
doctors and their patients would not switch to using products other 
than volar distal radius plating systems in response to a small but 
significant increase in the price of these systems.
    The U.S. market for volar distal radius plating systems is highly 
concentrated, with J&J and Synthes controlling over 70 percent of the 
market as measured by 2010 revenue. The design of the DVR incorporates 
unique, clinically relevant features that are protected by intellectual 
property rights. Many surgeons still consider the DVR to be the best 
volar distal radius plating system on the market, and it accounted for 
approximately 29 percent of U.S. volar distal radius sales in 2010. 
Synthes is the leading manufacturer of volar distal radius plating 
systems in the United States, and accounted for approximately 42 
percent of the market by 2010 revenue. Synthes's success selling distal 
radius plating systems derives in part from its leading position and 
strong clinical reputation in the overall trauma field. The next 
closest competitors to J&J and Synthes--Stryker and Acumed--would each 
be less than one-sixth the size of the combined firm.
    The relevant geographic market for volar distal radius plating 
systems is the United States. Volar distal radius plating systems are 
medical devices that are regulated by the United States Food and Drug 
Administration (``FDA''). Volar distal radius plating systems sold 
outside the United States, but not approved for sale in the United 
States, are not viable competitive alternatives for U.S. consumers and 
hence are not in the relevant market.

IV. Competitive Effects and Entry Conditions

    The acquisition would cause significant competitive harm in the 
market for volar distal radius plating systems. J&J and Synthes are the 
leading suppliers of volar distal radius plating systems and each 
other's most significant competitors. J&J and Synthes have responded 
directly to competition from each other with lower prices and improved 
products. Although there are a number of other suppliers of volar 
distal radius plates, they have not gained significant traction among 
surgeons and have substantially smaller market shares than the merging 
parties. By eliminating its closest competitor, the acquisition would 
allow J&J to unilaterally raise prices in the market for volar distal 
radius plating systems.
    Entry would not be timely, likely, or sufficient in magnitude, 
character, and scope to deter or counteract the anticompetitive effects 
of the acquisition. Both J&J and Synthes employ patented technology in 
their volar distal radius plating systems. The patents owned by the two 
companies have prevented competitors from developing products that 
surgeons consider to be equally effective. Manufacturer product 
reputation and effective distribution also are important to surgeons 
and hospitals. Many fringe competitors are limited by their lack of a 
strong distribution system, and it would take a significant amount of 
time for one or more current fringe competitors to develop a sufficient 
reputation for quality, service, and consistency. Therefore, timely and 
sufficient entry in response to a small but significant price increase 
is unlikely.

V. The Proposed Consent Agreement

    The proposed Decision and Order resolves the competitive concerns 
raised by J&J's proposed acquisition of Synthes by requiring the 
divestiture of J&J's U.S. DVR assets to a qualified buyer no later than 
ten (10) days after the acquisition is consummated. The parties have 
selected Biomet, Inc. (``Biomet'') as the buyer for the assets to be 
divested. Although the Commission's competitive concerns are limited to 
the manufacture and sale of volar distal radius plating systems, the 
parties elected to divest the entire J&J trauma portfolio, including 
the volar distal radius plating systems, to Biomet. Biomet is a 
successful orthopedics company with a recognized brand name, an 
extensive nationwide sales force, and existing service relationships 
with surgeons and hospitals, but it currently has no meaningful 
presence in the volar distal radius plating or trauma product markets. 
Biomet is thus well positioned to replace the competition that will be 
eliminated as a result of the proposed transaction. A divestiture of 
J&J's volar distal radius assets will ensure that Biomet has a 
recognized high-quality volar distal radius plating system offering, 
enabling it to compete immediately with the merged entity.
    The Commission's merger remedies are intended to maintain or to 
restore the competitive status quo. Based on the evidence gathered in 
the investigation, the Commission has determined that the divestiture 
of J&J's volar distal radius plating system assets to Biomet should 
replicate the competitive conditions for volar distal radius plating 
systems that existed prior to the proposed transaction between J&J and 
Synthes.
    The proposed Consent Agreement contains a provision that allows the 
Commission to appoint an interim monitor to oversee J&J's compliance 
with all of its obligations and performance of its responsibilities 
pursuant to the Commission's Decision and Order. The interim monitor is 
required to file periodic reports with the Commission to ensure that 
the Commission remains informed about the status of the divestitures, 
about the efforts being made to accomplish the divestitures, and about 
the provision of services and assistance during the transition period 
to ensure the success of the DVR divestiture.
    Finally, the proposed Consent Agreement contains provisions that 
allow the Commission to appoint a

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divestiture trustee if any or all of the above remedies are not 
accomplished within the time frames required by the Consent Agreement.
    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 Decision and Order or to modify 
its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-14660 Filed 6-14-12; 8:45 am]
BILLING CODE 6750-01-P