[Federal Register Volume 79, Number 234 (Friday, December 5, 2014)]
[Notices]
[Pages 72181-72183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28609]


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FEDERAL TRADE COMMISSION

[File No. 141 0187]


Medtronic, Inc. and Covidien plc; Analysis of Proposed 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 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 29, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/covidienmedtronicconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``Medtronic and 
Covidien--Consent Agreement; File No. 141 0187'' on your comment and 
file your comment online at https://ftcpublic.commentworks.com/ftc/covidienmedtronicconsent by following the instructions on the web-based 
form. If you prefer to file your comment on paper, write ``Medtronic 
and Covidien--Consent Agreement; File No. 141 0187'' 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: Christine E. Tasso, Bureau of 
Competition, (202-326-2232), 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 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 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 ``Medtronic and Covidien--Consent Agreement; File No. 141 
0187'' 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/covidienmedtronicconsent 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 ``Medtronic and Covidien--
Consent Agreement; File No. 141 0187'' 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 Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted from 
Medtronic, Inc. (``Medtronic'') and Covidien plc (``Covidien''), 
subject to final approval, an Agreement Containing Consent Order 
(``Consent Agreement'') designed to remedy the anticompetitive effects 
resulting from

[[Page 72182]]

Medtronic's proposed acquisition of Covidien. Under the terms of the 
proposed Decision and Order (``Order'') contained in the Consent 
Agreement, the parties are required to divest Covidien's drug-coated 
balloon catheter business to The Spectranetics Corporation 
(``Spectranetics'').
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Consent Agreement and the 
comments received, and decide whether it should withdraw from the 
Consent Agreement, modify it, or make it final.
    Pursuant to a Transaction Agreement dated June 15, 2014, Medtronic 
proposes to merge with Covidien in exchange for cash and stock valued 
at approximately $42.9 billion (the ``Proposed Acquisition''). 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 substantially lessening competition in the 
U.S. market for drug-coated balloon catheters indicated for the 
femoropopliteal (``fem-pop'') artery. The proposed Consent Agreement 
will remedy the alleged violations by preserving the competition that 
would otherwise be eliminated by the Proposed Acquisition.

The Parties

    Headquartered in Minneapolis, Minnesota, Medtronic is a global 
leader in medical technology that develops, manufactures, and sells 
device-based medical therapies. Medtronic is developing a drug-coated 
balloon catheter indicated for the fem-pop artery that is currently in 
the Food and Drug Administration (``FDA'') approval process.
    Headquartered in Dublin, Ireland, Covidien develops, manufactures, 
and sells medical devices and medical supplies. Like Medtronic, 
Covidien has a drug-coated balloon catheter indicated for the fem-pop 
artery under development for which it is seeking FDA approval.

The Relevant Product and Market Structure

    Drug-coated balloon catheters indicated for the fem-pop artery are 
used to treat peripheral arterial disease in the fem-pop artery, an 
artery located above the knee. Peripheral arterial disease results from 
atherosclerosis, the narrowing of blood vessels due to plaque buildup. 
Percutaneous transluminal angioplasty (``PTA'') balloon catheters are 
catheters with balloons that, once inserted into an artery, are 
expanded to push plaque against the artery's lumen wall to reopen blood 
flow. Drug-coated balloon catheters are a type of PTA balloon catheter 
that releases paclitaxel, a cell-proliferation inhibiting drug, into 
the artery wall during a medical procedure to prevent restenosis, or 
re-narrowing, of the artery.
    The United States is the relevant geographic market in which to 
assess the competitive effects of the Proposed Acquisition. Drug-coated 
balloon catheters are medical devices that are regulated by the FDA. As 
such, drug-coated balloon catheters sold outside the United States, but 
not approved for sale in the United States, do not provide viable 
competitive alternatives for U.S. consumers.
    The U.S. market for drug-coated balloon catheters indicated for the 
fem-pop artery is highly concentrated with only one current supplier, 
C.R. Bard, Inc. Medtronic and Covidien are likely to enter as the 
second and third U.S. suppliers, respectively. While there are other 
firms with drug-coated balloon catheters in development for sale in the 
U.S. market, Medtronic and Covidien are the only two anticipated market 
participants that have advanced to the clinical-trial stage of the FDA 
approval process for drug-coated balloon catheters indicated for the 
fem-pop artery.

Entry

    Entry into the U.S. market for drug-coated balloon catheters 
indicated for the fem-pop artery would not be timely, likely, or 
sufficient in magnitude, character, and scope to deter or counteract 
the anticompetitive effects of the Proposed Acquisition. The 
development process for a drug-coated balloon catheter is difficult, 
time-consuming, and expensive. It can take tens of millions of dollars 
of research and development, significant further funding for clinical 
trials, and an extensive amount of time to even reach the stage of 
applying to the FDA for approval. The regulatory approval process 
itself can also be time-consuming as the FDA reviews the volume of 
material and data a company submits in support of its application.

Effects of the Acquisition

    The Proposed Acquisition would cause significant competitive harm 
to consumers in the U.S. market for drug-coated balloon catheters 
indicated for the fem-pop artery. The merger would combine the second 
and third anticipated entrants into the market, likely prolonging a 
duopoly in the U.S. market for drug-coated balloon catheters indicated 
for the fem-pop artery. Because Medtronic and Covidien are the only two 
anticipated entrants that have advanced to the clinical trial stage of 
the FDA approval process, the consolidation of the two firms would 
deprive consumers of the benefits of a third competitive entrant into 
the market for a substantial period of time. As a result, the Proposed 
Acquisition likely would reduce the substantial additional price 
competition that would have resulted from an additional U.S. supplier 
of drug-coated balloon catheters indicated for the fem-pop artery. 
Further, the Proposed Acquisition likely would reduce innovation in the 
U.S. market for drug-coated balloon catheters indicated for the fem-pop 
artery.

The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
Medtronic's proposed acquisition of Covidien by requiring the parties 
divest to Spectranetics all of the assets and resources needed for it 
to become an independent, viable, and effective competitor in the U.S. 
market for drug-coated balloon catheters indicated for the fem-pop 
artery.
    Spectranetics possesses the industry and regulatory experience to 
achieve FDA approval of Covidien's drug-coated balloon catheter and 
become the third entrant into the U.S. market. Headquartered in 
Colorado Springs, Colorado, Spectranetics is a leader in peripheral 
vascular solutions with a portfolio of products that is highly 
complementary to Covidien's drug-coated balloon catheter. Spectranetics 
manufactures and markets a range of devices to treat peripheral and 
coronary arterial disease and is well positioned to restore the 
benefits of competition that would be lost through the Proposed 
Acquisition.
    Pursuant to the Order, Spectranetics will receive all rights and 
assets related to Covidien's drug-coated balloon catheter products, 
including all of the intellectual property used in the drug-coated 
balloon catheter business. In addition, Spectranetics will take over 
the manufacturing facility where Covidien currently coats the PTA 
balloon catheters with paclitaxel. The Order further requires that 
Covidien provide Spectranetics with a worldwide license to produce the 
PTA balloon catheters incorporated into the drug-coated balloon 
catheters. In order to

[[Page 72183]]

ensure continuity of supply of a critical input, the Order requires 
that the parties supply Spectranetics with PTA balloon catheters for up 
to three years while Spectranetics transitions to independent 
manufacturing. This provision ensures that drug-coated balloon 
catheters will continue to be available for ongoing clinical trials 
while Spectranetics works to obtain FDA approval to manufacture the PTA 
balloon catheters independently.
    To ensure that the divestiture is successful, the Order requires 
the parties to enter into a transitional services agreement with 
Spectranetics to assist the company in establishing its manufacturing 
capabilities and securing all necessary FDA approvals. Further, the 
Order requires that the parties transfer all confidential business 
information to Spectranetics, as well as provide access to employees 
who possess or are able to identify such information. Spectranetics 
also will have the right to interview and offer employment to employees 
associated with Covidien's drug-coated balloon catheter business.
    The parties must accomplish the divestiture no later than ten days 
after the consummation of the Proposed Acquisition. If the Commission 
determines that Spectranetics is not an acceptable acquirer, or that 
the manner of the divestiture is not acceptable, the Order requires the 
parties to unwind the sale and accomplish the divestiture within 180 
days of the date the Order becomes final to another Commission-approved 
acquirer.
    To ensure compliance with the Order, the Commission has agreed to 
appoint an Interim Monitor to ensure that Medtronic and Covidien comply 
with all of their obligations pursuant to the Consent Agreement and to 
keep the Commission informed about the status of the transfer of the 
rights and assets to Spectranetics. Further, the Order allows the 
Commission to appoint a Divestiture Trustee to accomplish the 
divestiture should the parties fail to comply with their divestiture 
obligations. Lastly, the Order terminates after ten years.
    The purpose of this analysis is to facilitate public comment on the 
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. 2014-28609 Filed 12-4-14; 8:45 am]
BILLING CODE 6750-01-P