Getinge AB has settled Federal Trade Commission charges that its proposed $865 million acquisition of rival Datascope Corporation would be anticompetitive and would violate federal antitrust laws. Under the settlement with the Commission, Datascope is required to divest its endoscopic vessel harvesting (EVH) product line to an FTC-approved buyer within 10 days of the date the deal is consummated. Datascope has proposed to sell the assets to Sorin Group USA, Inc.
“Getinge’s acquisition of Datascope would give the company a near-monopoly share of the market for endoscopic vessel harvesting devices used in coronary bypass surgeries,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The FTC’s order will ensure that competition continues in this important healthcare market, and that consumers are not faced with higher prices or less innovation as a result of the transaction.”
EVH devices are used in coronary artery bypass graft (CABG) surgery to remove a vein from the patient’s leg or arm for use as a conduit to bypass one or more blocked coronary arteries. A minimally invasive procedure, EVH provides several benefits compared to the two other vessel harvesting methods, both of which are substantially more invasive, cause more pain and scarring, and carry a greater risk of infection and prolonged hospital stays. As a result of the drawbacks of the alternatives, neither method is a viable alternative to the use of EVH devices in CABG procedures.
Getinge is a global provider of healthcare and life sciences equipment and systems. Its Medical Systems segment manufactures and sells, among other things, surgical tables and decontamination equipment. In January 2008, Getinge acquired the cardiac and vascular divisions of Boston Scientific Corporation, including Guidant’s EVH business, which Boston Scientific had itself acquired in 2006. The Boston Scientific divisions were integrated into Getinge’s Medical Systems segment, and the products are now sold under the Maquet brand.
Datascope is the world’s leading supplier of intra-aortic balloon pump counter pulsation devices, and is a diversified medical device company that develops, manufactures, and sells products used in critical care, interventional cardiology, and other cardiovascular procedures. Datascope acquired the EVH devices at issue in this case from Ethicon, a Johnson & Johnson company, in January 2006. Under a merger agreement dated September 15, 2008, Getinge proposed to acquire all outstanding shares of Datascope for approximately $865 million.
According to the Commission’s complaint, Getinge’s proposed acquisition of Datascope would lessen competition in the U.S. market for EVH devices. The complaint alleges that the U.S. market is highly concentrated, and that the combined Getinge/Datascope would account for approximately 90 percent of it. This duopoly, the Commission contends, is likely to lead to increased prices and decrease innovation for EVH devices.
The complaint further alleges that entry into the market for EVH devices is difficult, as potential competitors face regulatory hurdles and significant entry barriers. Accordingly, entry into the relevant market in the next two to three years is highly unlikely. In addition, while the use of EVH devices in CABG surgery is increasing, the number of CABG procedures has declined as minimally invasive stenting procedures have increased. Therefore, it is unlikely that firms would find it profitable to enter the EVH device market in response to a modest increase in the devices’ price.
The FTC’s order is designed to remedy the anticompetitive effects of the proposed transaction in the U.S. market for EVH devices. It requires Datascope to divest its EVH assets to a Commission-approved buyer. Datascope has reached an agreement to sell the business to Sorin Group USA, Inc., a diversified medical company that already markets and sells a line of cardiovascular products, including artificial cardiac valves and coronary stents.
The consent order requires Datascope to complete the divestiture to Sorin Group within 10 days of when the deal is completed. The assets to be sold include all third-party contracts to supply the components of the EVH product line. The order also requires Getinge to grant the buyer a covenant not to sue for infringement of any EVH-related patents that Getinge or Datascope hold at the time of the acquisition. Further, it will allow Datascope to provide certain transitional services to the buyer of the EVH assets in order to provide a smooth transfer to the buyer and continued uninterrupted service to consumers during the transition.
The order also includes a provision that would allow the FTC to appoint an interim monitor to oversee Getinge’s compliance. If appointed, the monitor would be required to file periodic reports with the Commission to ensure that the agency is informed of the status of the divestiture, the efforts being made to accomplish it, and the provision of the requisite transition services. Finally, the order would allow the FTC to appoint a divestiture trustee if the divestitures are not completed in the time specified in the order.
The Commission vote to accept the complaint and consent order and place copies on the public record was 3-0, with Commissioner Pamela Jones Harbour recused. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The complaint, consent order, and an analysis to aid public comment can be found now on the Commission’s Web site at http://www.ftc.gov/os/caselist/0910000/index.shtm.
The agreement will be subject to public comment for 30 days, beginning today and continuing through March 2, 2009, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period 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.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the documents related to this matter are available from the FTC’s web site at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.
(FTC File No. 091-0000)