[Federal Register Volume 79, Number 234 (Friday, December 5, 2014)]
[Notices]
[Pages 72178-72181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28605]
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FEDERAL TRADE COMMISSION
[File No. 141 0141]
GlaxoSmithKline, PLC and Novartis AG; Analysis of Proposed
Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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[[Page 72179]]
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting 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
orders--embodied in the consent agreement--that would settle these
allegations.
DATES: Comments must be received on or before December 29, 2014.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/gsknovartisconsent online or on paper,
by following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``GlaxoSmithKline, PLC
and Novartis AG--Consent Agreement; File No. 141-01414'' on your
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/gsknovartisconsent by following the
instructions on the Web-based form. If you prefer to file your comment
on paper, write ``GlaxoSmithKline, PLC and Novartis AG--Consent
Agreement; File No. 141-01414'' on your comment and on the envelope,
and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Mark Silvia, Bureau of Competition,
(202-326-3291), 600 Pennsylvania Avenue NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent orders 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 26, 2014), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before December 29,
2014. Write ``GlaxoSmithKline, PLC and Novartis AG--Consent Agreement;
File No. 141-01414'' 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 privileged or confidential,'' as discussed 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/gsknovartisconsent 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 ``GlaxoSmithKline, PLC and
Novartis AG--Consent Agreement; File No. 141-01414'' on your comment
and on the envelope, and mail your comment to the following address:
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania
Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, or deliver
your comment to the following address: Federal Trade Commission, Office
of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor,
Suite 5610 (Annex D), Washington, DC 20024. 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 December 29, 2014. 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 Orders 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 Novartis AG (``Novartis''), which is designed to
remedy the anticompetitive effects of Novartis's proposed consumer
healthcare joint venture with GlaxoSmithKline, PLC (``GSK'').
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again evaluate the
proposed Consent Agreement, along with the comments received, in order
to make a final decision as to whether it should withdraw from the
proposed Consent Agreement, modify it, or make final the Decision and
Order (``Order'').
Pursuant to a series of agreements dated April 22, 2014, GSK and
Novartis intend to combine the GSK consumer healthcare business and
most of the Novartis consumer healthcare business
[[Page 72180]]
(excluding Novartis's nicotine replacement therapy (``NRT'')
transdermal patch business) into a joint venture in which GSK will hold
a 63.5% controlling share and Novartis will hold the remaining 36.5%
share (the ``Transaction''). Both parties sell over-the-counter
(``OTC'') NRT transdermal patches in the United States. The Commission
alleges in its Complaint that the Transaction, 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 lessening competition in the market for the manufacture,
marketing, distribution, and sale of NRT transdermal patches. The
proposed Consent Agreement will remedy the alleged violations by
preserving the competition that would otherwise be eliminated by the
Transaction. Specifically, under the terms of the Consent Agreement,
Novartis would be required to divest all of its rights and assets
related to U.S. NRT transdermal patches, including its branded product,
Habitrol. Novartis has proposed Dr. Reddy's Laboratories (``Dr.
Reddy's'') as the buyer of these assets.
II. The Product and Structure of the Market
The proposed joint venture would likely substantially increase
concentration in the market for NRT transdermal patches. Tobacco
consumption introduces nicotine into the body, and nicotine addiction
is a major contributor to addiction to tobacco. Nicotine replacement
therapies work by providing nicotine to the body through sources other
than smoking, thereby replacing the nicotine that would have come from
tobacco and helping to ease tobacco cravings in those who are
attempting to quit. Users of NRT products are therefore more likely to
have success in quitting tobacco. NRT transdermal patches work by
adhering to the skin, much like an adhesive bandage, and slowly
providing a steady amount of nicotine through the skin over the course
of a day. Patches are usually provided in decreasing dosages to help
the user step down their nicotine intake over time.
Novartis markets and sells the branded NRT transdermal patch
Habitrol. The only other branded patch is GSK's NicoDerm CQ. Both
companies also market private label versions of their branded patch.
Private label products are competitive with the branded products, but
there is only one other manufacturer of private label patches, Aveva
Drug Delivery Systems. Therefore, without a remedy, the Transaction
will consolidate the only two providers of branded NRT transdermal
patches, and two of the three producers of private label NRT
transdermal patches.
III. Entry
Entry into the manufacture and sale of NRT transdermal patches
would not be timely, likely, or sufficient in magnitude, character, and
scope to deter or counteract the anticompetitive effects of the
Transaction. Developing a patch that adheres to the skin and properly
delivers nicotine to the body over time is expensive and time
consuming, and has a high risk of failure. Even if an entrant is able
to successfully develop a new patch, it must then obtain an FDA
approval to market the product, which adds several years to the entry
process.
IV. Effects
The Transaction is likely to result in significant competitive harm
in the market for NRT transdermal patches. Although the Novartis NRT
patch business has been excluded from the consumer healthcare joint
venture, GSK's patch business will be included. Thus, Novartis's
partial interest in the joint venture means it will benefit from any
sales lost to GSK NRT patches in the future. With an interest in its
most significant competing product, Novartis would have an increased
incentive to raise prices for its NRT patches post-transaction. The
Transaction, by altering the interactions between Novartis's and GSK's
branded and private label NRT transdermal patches, would likely result
in price increases for NRT patches in several ways. First, the
Transaction would reduce the competition between the only two branded
NRT transdermal patches, and reduce the competition between Novartis's
branded Habitrol product and GSK's private label patches, both of which
would increase the likelihood that Novartis would increase the prices
of Habitrol. Second, the Transaction would reduce the competition
between Novartis's private label patches and GSK's NicoDerm CQ and
private label patches, which would create incentives for Novartis to
increase the price of its private label NRT transdermal patches.
V. The Consent Agreement
The proposed Consent Agreement effectively remedies the
Transaction's anticompetitive effects in the relevant market. Pursuant
to the Consent Agreement, the parties are required to divest Novartis's
rights and assets related to its U.S. NRT transdermal patch business to
Dr. Reddy's. Further, the proposed Consent Agreement requires Novartis
to assign to Dr. Reddy's its contract manufacturing agreements for the
divested assets. Finally, Novartis will provide a short term packaging
agreement to Dr. Reddy's for secondary packaging of the product while
Dr. Reddy's seeks a contract packager. The parties must accomplish
these divestitures and relinquish their rights no later than ten days
after the Transaction is consummated.
Dr. Reddy's is well positioned to assume Novartis's role in the NRT
transdermal patch market. Dr. Reddy's manufactures a wide range of
branded and private label OTC products for sale in the United States,
including private label versions of popular allergy and
gastrointestinal products. Thus, Dr. Reddy's is already a supplier to
most major retailers of OTC consumer healthcare products. In addition,
because Novartis will be transferring its existing contract
manufacturing arrangement for its NRT transdermal patches, the
divestiture to Dr. Reddy's will not require a transfer of manufacturing
processes or facilities. Dr. Reddy's will therefore be able to step
into Novartis's current position and immediately begin competing in the
market for NRT transdermal patches.
The Commission's goal in evaluating possible purchasers of divested
assets is to maintain the competitive environment that existed prior to
the Transaction. If the Commission determines that Dr. Reddy's is not
an acceptable acquirer of the divested assets, or that the manner of
the divestiture is not acceptable, the parties must unwind the sale of
rights to Dr. Reddy's, and divest the U.S. NRT transdermal patch assets
to a Commission-approved acquirer within six months of the date the
Order becomes final. In that circumstance, the Commission may appoint a
trustee to divest the product if the parties fail to divest the
business as required.
The proposed Consent Agreement contains several provisions to help
ensure that the divestiture is successful. The Order requires Novartis
to take all action necessary to maintain the economic viability,
marketability, and competitiveness of the product to be divested until
such time that they are transferred to a Commission-approved acquirer.
The Order also requires that Novartis transfer all confidential
business information, including customer information related to the
divestiture product, to Dr. Reddy's.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official
[[Page 72181]]
interpretation of the proposed Order or to modify its terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-28605 Filed 12-4-14; 8:45 am]
BILLING CODE 6750-01-P