United States v. S.C. Johnson & Son, Inc. and Bayer A.G.; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. S.C. Johnson & Son, Inc. and Bayer A.G.;

Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,

Stipulation, and Competitive Impact Statement have been filed with the

United States District Court for the Northern District of Illinois at

Rockford in United States v. S.C. Johnson & Son, Inc. and Bayer A.G.,

Civil No. 94 C 50249, as to both defendants.

The Complaint alleges that the defendants violated Section 1 of the

Sherman Act by entering into an agreement by which Bayer licensed S.C.

Johnson to use Cyfluthrin in household insecticides in the United

States, refrained from licensing other firms to use Cyfluthrin, and

ended its own plans to compete with S.C. Johnson in the sale of

household insecticides in the United States. S.C. Johnson is the

country's largest maker of household insecticides with total sales

between 45-60% of the market.

The proposed Final Judgment enjoins defendants from entering into

any agreement to allocate markets for the sale of household

insecticides, and it requires them to license others, on reasonable

terms, to use or sell Cyfluthrin. The judgment also enjoins defendants

from entering into any exclusive license for any active ingredient, if

the license agreement has been disapproved by the United States, and it

requires S.C. Johnson to provide the government prior notice of any

such exclusive license with any person other than Bayer.

Household insecticides are chemical products sold in a wide variety

of forms (e.g. aerosols, bait traps) for use by consumers to kill ants,

roaches, and other insects that infest dwellings.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments and responses thereto

will be published in the Federal Register and filed with the Court.

Comments should be directed to Gail Kursh, Chief Professions and

Intellectual Property Section, Room 9903, U.S. Department of Justice,

Antitrust Division, 555 4th Street, N.W., Washington, D.C. 20001

[(telephone: 202) 307-5799)].

Joseph H. Widmar,

Deputy Assistant Attorney General,

Antitrust Division.

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Bayer A.G., Defendants. Civil No. 94C50249.

Complaint

The United States of America, acting under the direction of the

Attorney General of the United States, brings this civil action to

obtain equitable and other relief against the defendants named herein,

and complains and alleges as follows:

I

Jurisdiction, Venue, And Defendants

1. This complaint is filed under Section 4 of the Sherman Act, 15

U.S.C. 4, in order to prevent and restrain violations, as hereinafter

alleged, by defendants of Section 1 of the Sherman Act, 15 U.S.C. 1.

2. Bayer A.G. (``Bayer''), a German corporation with its principal

place of business at 5090 Leverkusen-Bayerwerk, Germany, is made a

defendant. Bayer wholly owns and closely controls Miles, Inc., an

Indiana corporation that maintains an established place of business at

9801 West Higgins Road, Rosemont, Illinois, in the Northern District of

Illinois. Bayer, through its subsidiary, Miles, Inc., is found and

transacts business in the Northern District of Illinois. Venue as to

Bayer is proper under 15 U.S.C. 22 and 28 U.S.C. 1391 (c).

3. S.C. Johnson & Son, Inc. (``Johnson''), a Wisconsin corporation

with its principal place of business at 1525 Howe Street, Racine,

Wisconsin, is made a defendant. Johnson is found and transacts business

in the Northern District of Illinois. Venue as to Johnson is proper

under 15 U.S.C. 22 and 28 U.S.C. 1391 (c).

II

Trade And Commerce

4. Defendant Bayer and its subsidiaries receive large amounts of

money in the form of payments from manufacturers for the sale of active

ingredients for use in household insecticides in the United States, and

defendant Johnson and its subsidiaries receive large amounts of money

from the sale of household insecticides to retailers and consumers

throughout the United States. Defendants' business activities and

operations, as hereinafter described, involve or affect the interstate

and international flow of funds and are within the flow of, and have a

substantial effect upon, interstate and foreign commerce.

III

Background

5. Household insecticides are chemical products that are sold in a

wide variety of forms (e.g., aerosols, baits, powders, and traps) for

use by consumers to trap or kill ants, roaches, crickets, and other

undesirable insects that invade and infest houses, apartments and other

dwellings. Because of their low cost, superior efficacy, and ease of

use, there are no good substitutes for household insecticides, and thus

they constitute a relevant product market.

6. The relevant geographic market for the sale of household

insecticides is the United States. Annual retail sales of household

insecticides in the United States exceeded $450 million in 1993.

7. The United States market for household insecticides is highly

concentrated. Johnson is the largest manufacturer of household

insecticides in the United States, with total sales between 45-60% of

the market. Johnson's two next-largest competitors in the sale of

household insecticides each have sales of no more than 12% of the

market, and the shares of Johnson's three other major competitors range

from 6 to 10% of the market.

8. Successful new entry into or expansion within the United States

market for household insecticides is difficult. To be successful, a new

entrant must demonstrate that its household insecticide has superior

safety and efficacy, attributes that are solely dependent upon the

active ingredient chosen for use in the product. Active ingredients

must comply with state and federal government regulations for safety

and efficacy prior to sale in the United States. Compliance with such

laws and regulations is an expensive and time-consuming process that

often takes more than three years and costs over $10 million to

complete.

9. Bayer is one of a small number of firms in the world that engage

in research and development of active ingredients for household

insecticides. Bayer has numerous patents in countries around the world,

including United States patents, on such active ingredients. Bayer

makes and sells, or licenses others to make and sell, such active

ingredients in various countries, including the United States.

10. Bayer, which makes and sells household insecticides in many

countries outside the United States, is one of the few significant

potential entrants into the United States household insecticides

market. Bayer earlier had planned and made preparations to enter the

United States household insecticides market with a new product, called

Laser. Laser's chief active ingredient was Cyfluthrin, developed and

patented by Bayer and widely considered to be superior to other active

ingredients because of its long-lasting killing power. Through Laser,

Bayer could have become one of Johnson's major competitors in the

household insecticides market in the United States.

IV

Violation Alleged

11. Beginning at least as early as March 1988 and continuing to the

present, Johnson and Bayer entered into an agreement to unreasonably

restrain trade and commerce and lessen competition in the manufacture

and sale of household insecticides in the United States in violation of

Section 1 of the Sherman Act, 15 U.S.C. 1.

12. For the purpose of forming and effectuating this agreement,

defendants did the following things, among others:

(a) Bayer licensed Johnson to use Clyfluthrin in household

insecticides in the United States, and granted Johnson a right of first

refusal for exclusive rights for the United States on future active

ingredients developed by Bayer for household insecticides;

(b) Bayer refrained from licensing Johnson's competitors to use or

sell Cyfluthrin; and

(c) Bayer ended its plans to market Laser and compete with Johnson

in the United States household insecticides market.

V

Competitve Effects

13. Defendants agreement and activities have had the following

direct, substantial, and reasonably foreseeable effects, among others:

(a) Incentives for Bayer to compete with Johnson in the manufacture

and sale of household insecticides in the United States have been

substantially reduced; and

(b) Competition generally in the market for the sale of household

insecticides in the United States has been unnecessarily and

unreasonably restrained.

VI

Prayer For Relief

Wherefore, plaintiff prays:

1. That Johnson and Bayer be enjoined and restrained from entering

into any agreement or understanding the purpose or effect of which is

to allocate or divide territories or markets for the sale of household

insecticides;

2. That Johnson and Bayer be enjoined from entering into any

exclusive license for an active ingredient patented by Bayer without

plaintiff's prior approval;

3. That Johnson and Bayer be enjoined from entering into or

carrying out an exclusive license to make, use or sell Cyfluthrin in

the United States without plaintiff's prior approval;

4. That Johnson be enjoined and restrained from obtaining from

anyone an exclusive license for any active ingredient for use in any

household insecticide without prior notice (and if necessary, provision

of additional information regarding the arrangement) to plaintiff;

5. That plaintiff have such other relief as may be just and proper;

and

6. That plaintiff be awarded its costs in this action.

Dated: August 3, 1994.

Anne K. Bingaman, Assistant Attorney General; Robert E. Litan,

Deputy Assistant Attorney General; Mark C. Schechter, Deputy

Director, Office of Operations; Gail Kursh, Chief, Professions &

Intellectual Property Section, Antitrust Division, U.S. Department

of Justice

Anthony E. Harris, Bar No. 01133713; Kurt Shaffert, Attorneys,

Antitrust Division, U.S. Dept. of Justice, 555 4th Street, N.W.,

Room 9903, JCB, Washington, D.C. 20001, (202) 307-0951

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Bayer A.G., Defendants Civil 94C50249 No. Filed:

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the Northern District of Illinois, Western Division;

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

which it may do at any time before the entry of the proposed Final

Judgment by serving notice thereof on defendants and by filing that

notice with the Court; and

3. Defendants agree to be bound by the provisions of the proposed

Final Judgment pending its approval by the Court. If plaintiff

withdraws its consent, or if the proposed Final Judgment is not entered

pursuant to the terms of the Stipulation, this Stipulation shall be of

no effect whatsoever, and the making of this Stipulation shall be

without prejudice to any party in this or in any other proceeding.

For Plaintiff: Anne K. Bingaman, Assistant Attorney General;

Robert E. Litan, Deputy Assistant Attorney General; Mark C.

Schechter, Deputy Director, Office of Operations; Gail Kursh, Chief,

Professions & Intellectual Property Section, Antitrust Division,

U.S. Department of Justice.

Anthony E. Harris, Bar No. 01133713; Kurt Shaffert, Attorneys,

Antitrust Division, U.S. Dept. of Justice, 555 4th Street, N.W.,

Room 9903, JCB, Washington, D.C. 20001, (202) 307-0951.

For Defendant S.C. Johnson & Son, Inc.: Maurice J. McSweeney,

Esquire Foley & Lardner 777 East Wisconsin Avenue Milwaukee,

Wisconsin 53202-5367

For Defendant Bayer A.G.: Tefft W. Smith, Esquire, Bar No.

2655314, Kirkland & Ellis, 50th Floor, 200 East Randolph Drive,

Chicago, Illinois 60601, (312) 861-2000.

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Bayer A.G., Defendants. Civil No. 94C50249.

Final Judgment

Plaintiff, the United States of America, having filed its Complaint

on August 4, 1994, and plaintiff and defendants, S.C. Johnson & Son,

Inc. and Bayer A.G., by their respective attorneys, having consented to

the entry of this Final Judgment without trial or adjudication of any

issue of fact or law, and without this Final Judgment constituting

evidence against or admission by any party with respect to any issue of

fact or law;

Now, therefore, before the taking of any testimony and without

trial or adjudication of any issue of fact or law, it is hereby

Ordered, Adjudged and Decreed:

I

Jurisdiction

This Court has jurisdiction of the subject matter and each of the

parties to this action. The Complaint states a claim upon which relief

may be granted against S.C. Johnson & Son, Inc. and Bayer A.G. under

Section 1 of the Sherman Act, as amended, 15 U.S.C. Sec. 1.

II

Definitions

As used in this Final Judgment:

(A) ``Active ingredient'' means any chemical compound or substance

used or contemplated for use in the United States as a knock-down,

debilitating, or killing agent in a household insecticide, regardless

of whether that compound or substance has been approved by federal or

state regulatory authorities.

(B) ``Exclusive license'' means any agreement for the license or

supply of an active ingredient that directly or indirectly, implicitly

or explicitly, limits access to S.C. Johnson & Son, Inc. or to S.C.

Johnson & Son, Inc. and the licensor.

III

Applicability

This Final Judgment applies to S.C. Johnson & Son, Inc.'s and to

Bayer A.G.'s officers, directors, subsidiaries, agents, employees,

successors, and assigns, and to all other persons in active concert of

participation with any of them who receive actual notice of this Final

Judgment pursuant to F.R.C.P. 65(d).

IV

Injunctive Relief

(A) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and

restrained from entering into or carrying out any agreement or

understanding, the purpose or effect of which would be to allocate or

divide territories or markets for the distribution or sale of household

insecticides, unless any such agreement or understanding relates

exclusively to markets other than the United States and has no effect

on United States commerce.

(B) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and

restrained from entering into any exclusive license between them for

any active ingredient, the patent rights to which are beneficially

owned by Bayer A.G., if such license has been disapproved by the U.S.

Department of Justice as provided herein.

S.C. Johnson & Son, Inc. and Bayer A.G. each must provide the U.S.

Department of Justice at least 90 days' written notice of their intent

to enter into any exclusive license between them. If requested by the

Department of Justice within 30 days after its receipt of such notice,

S.C. Johnson & Son, Inc. and Bayer A.G. must supply, within 30 days of

such request, all information in their possession reasonably necessary

to enable the Department to determine the competitive effect of their

exclusive license. The Department must exercise its unconditional right

to disapprove an exclusive license between S.C. Johnson & Co., Inc. and

Bayer A.G. by so notifying them in writing within 90 days after

receiving defendants' notice of intent.

(C) S.C. Johnson & Son, Inc. and Bayer A.G. are each enjoined and

restrained from entering into, carrying out, or operating under any

exclusive license to make, use or sell Cyfluthring in the United

States. Bayer A.G. must offer, to any person who requests it, a license

to use or sell Cyfluthrin in the United States, upon reasonable and

mutually agreeable terms and conditions, but no minimum royalty payment

shall be required under such license. Nothing herein, however, shall

prohibit Bayer A.G. from reserving exclusively for itself Cyfluthrin or

any other active ingredient, or from discontinuing the manufacture,

sale or use in the United States of Cyfluthrin or any other active

ingredient.

(D) No more than 180 days and not less than 90 days before entering

into any exclusive license with any person other than Bayer A.G., for

any active ingredient other than Cyfluthrin, S.C. Johnson & Son, Inc.

must provide the U.S. Department of Justice written notice of such

license agreement. If requested by the Department of Justice within 30

days after its receipt of such notice, S.C. Johnson & Son, Inc. must

supply within 30 days after such request, all information in its

possession reasonably necessary to determine the competitive effect of

such license agreement.

V

Compliance Program: S.C. Johnson & Son, Inc.

S.C. Johnson & Son, Inc. shall maintain an antitrust compliance

program, which shall include:

(A) distributing within 60 days from the entry of this Final

Judgment, a copy of the Final Judgment and Competitive Impact Statement

to all officers with responsibility for research and development,

manufacturing, sales or marketing of household insecticides in the

United States;

(B) distributing in a timely manner a copy of the Final Judgment

and Competitive Impact Settlement to any person who succeeds to a

position described in Paragraph V(A);

(C) briefing annually those persons designated in Paragraph V(A)

and (B) on the meaning and requirements of this Final Judgment and the

antitrust laws, including potential antitrust concerns raised by patent

licensing agreement;

(D) obtaining from each person designated in Paragraph V(A) and (B)

an annual written certification that he or she: (1) Has read,

understands and agrees to abide by this Final Judgment; (2) has been

advised and understands that noncompliance with this Final Judgement

may result in his or her conviction for criminal contempt of court and/

or fine; and (3) is not aware of any violation of this Final Judgment;

and

(E) maintaining for inspection by plaintiff a record of recipients

to whom this Final Judgment and Competitive Impact Statement have been

distributed and from whom the certification required by Paragraph V(D)

has been obtained.

VI

Compliance Program: Bayer A.G.

Bayer A.G. shall maintain an antitrust compliance program, which

shall include:

(A) distributing within 60 days from the entry of this Final

Judgment, a copy of the Final Judgment and Competitive Impact Statement

to all officers, directors, and employees of Bayer A.G.'s household

insecticide unit having signing authority on behalf of Bayer A.G.;

(B) distributing in a timely manner a copy of the Final Judgment

and Competitive Impact Statement to any person who succeeds to a

position described in Paragraph VI (A);

(C) briefing those persons designated in Paragraph VI (A) and (B)

on the meaning and requirements of this Final Judgment and the

antitrust laws, including potential antitrust concerns raised by patent

licensing agreements;

(D) obtaining from each person designated in Paragraph VI (A) and

(B) an annual written certification that he or she: (1) has read,

understands and agrees to abide by this Final Judgment; (2) has been

advised and understands that noncompliance with this Final Judgment may

result in his or her conviction for criminal contempt of court and/or

fine; and (3) is not aware of any violation of this Final Judgment; and

(E) maintaining for inspection by plaintiff a record of recipients

to whom this Final Judgment and Competitive Impact Statement have been

distributed and from whom the certification required by Paragraph VI

(D) has been obtained.

VII

Certifications

(A) Within 75 days after the entry of this Final Judgment, S.C.

Johnson & Son, Inc. and Bayer A.G. each shall certify to plaintiff

whether it has made the distribution of this Final Judgment in

accordance with Paragraphs V(A) and VI(A), respectively.

(B) For ten years after the entry of this Final Judgment, on or

before its anniversary date, S.C. Johnson & Son, Inc. and Bayer A.G.

shall each certify annually to plaintiff whether it has complied with

the provisions of Paragraphs V and VI, respectively.

VIII

Plaintiff's Access

For the sole purpose of determining or securing compliance with

this Final Judgment, and subject to any legally recognized privilege,

authorized representatives of the U.S. Department of Justice, upon

written request of the Assistant Attorney General in charge of the

Antitrust Davison shall on reasonable notice be permitted;

(A) access during regular business hours of S.C. Johnson & Son,

Inc. and Bayer A.G. to inspect and copy all records and documents

relating to any matters contained in this Final Judgment;

(B) to interview S.C. Johnson & Son, Inc. and Bayer A.G. officers,

directors, and employees, who may have counsel present, concerning such

matters; and

(C) to obtain written reports from S.C. Johnson & Son, Inc. and

Bayer A.G. relating to any of the matters contained in the Final

Judgment.

Information provided to the Department of Justice pursuant to this

provision or pursuant to Paragraph IV (B) or (D) of the Final Judgment

must be kept confidential to the full extent permitted by law.

IX

Jurisdiction Retained

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for further orders and directions as may be necessary or

appropriate to carry out or construe this Final Judgment, to modify or

terminate any of its provisions, to enforce compliance, and to punish

violations of its provisions.

X

Expiration of Final Judgment

This Final Judgment shall expire 10 years from the date of its

entry. Paragraph IV(D) of this Final Judgment, however, shall expire

six years from the date of its entry.

XI

Public Interest Determination

Entry of this Final Judgment is in the public interest.

Dated:

United States District Judge.

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Bayer A.G., Defendants, Civil No. 94C50249.

Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. Sec. 16(b)-(h), the United States submits this

Competitive Impact Statement relating to the proposed Final Judgment

(or ``the Judgment'') submitted for entry against S.C. John & Son. Inc.

(``Johnson'') and Bayer A.G. (``Bayer'') in this civil antitrust

proceeding.

I

Nature and Purpose of the Proceeding

The United States of America, acting under the direction of its

Attorney General, filed this civil antitrust suit on August 4, 1994,

alleging that defendants violated Section 1 of the Sherman Act, 15

U.S.C. Sec. 1, by entering into an agreement and understanding that

unreasonably restrained interstate trade in the manufacture and sale of

household insecticides. The agreement featured an exclusive license

arrangement and the transfer by Bayer to Johnson of the assets

assembled by a Bayer subsidiary, Miles,Inc., to compete in the sale of

household insecticides in the United States with a new product, called

Laser. Laser's chief active ingredient was Cyfluthrin, which Bayer

developed and patented. Specifically, the Complaint alleges that

defendants engaged in the following activities:

(a) Bayer licensed Johnson to use Clyfluthrin in household

insecticides in the United States, and granted Johnson a right of first

refusal for exclusive rights for the United States on future active

ingredients developed by Bayer for household insecticides;

(b) Bayer refrained from licensing Johnson's competitors to use or

sell Cyflutrhin; and

(c) Bayer ended its plans to market Laser and compete with Johnson

in the United States household insecticides market.

The Complaint alleges that the appropriate product market in which to

access the competitive effect of the Cyfluthrin license and transfer of

assets is the market for the manufacture and sale of household

insecticides. This is the appropriate market because other types of

insect killers, such as agricultural pesticides, are not good

substitutes for household insecticides used to kill ants, roaches, and

other insects that typically infest dwellings. The Complaint alleges

that the entire United States is the relevant geographic market. In

this market, the Complaint alleges, Johnson is the largest firm, and

the licensing arrangement helped it to maintain its commanding

position.

The Judgment enjoins Johnson and Bayer from entering into any

agreement to allocate territories or markets for the distribution or

sale of household insecticides, unless such an agreement relates

exclusively to markets other than the United States and has no effect

on United States commerce, and requires that Bayer license Cyfluthrin

to any person on reasonable terms and conditions.\1\ Further, the Final

Judgment provides the Department with the opportunity to review any

future exclusive licenses for new active ingredients that Johnson might

seek to obtain from Bayer or any other person.\2\

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\1\In this respect, the Judgment provides relief somewhat

similar to the terms of a settlement of private litigation to which

the defendants were also parties, Koerber v. S.C. Johnson & Son,

Inc. and Bayer A.G., Civil No. 93C 20267, N.D. Ill. 1993. However,

the Judgment, unlike the private settlement, leaves Bayer free to

decide whether to license Cyfluthrin to others on terms more

favorable than its license with Johnson.

\2\The Judgment would prevent Bayer and Johnson from entering

into any exclusive license for any active ingredient if the

Department of Justice has disapproved such license within 90 days

after receiving notice of defendants' intent to enter into the

agreement.

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The Judgment requires the defendants to file annual reports with

the Government that certify that each has distributed the Final

Judgment to responsible executives and explained the terms of the

Judgment to them. Entry of the Final Judgment will terminate the

Government's action against the defendants,\3\ except that the Court

will retain jurisdiction over the matter for further proceedings that

may be required to interpret, enforce or modify the Judgment, or to

punish violations of any of its provisions.

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\3\Bayer and Johnson have cooperated with the Department of

Justice in this matter.

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II

Description of the Activities Involved in the Alleged Violations

During a three-year period between 1985 and March 1988, Miles,

Inc., a U.S. subsidiary of Bayer, developed a new line of household

insecticides to be marketed under the brand name ``Laser.'' The Laser

products were to have contained a potent new active ingredient,

Cyfluthrin, a chemical compound developed and patented by Bayer.

Cyfluthrin promised to provide Laser a significant competitive

advantage over existing U.S. household insecticides because it extended

the insecticide's killing power up to three months after initial

application.

By early 1988, Miles had substantially completed its preparations

to enter the U.S. household insecticides market. Evidence indicates

that its entry would have been successful. According to Miles'

projections, first-year sales of Laser products would have made Miles

one of the nation's leading makers of household insecticides.

In March 1988, however, Bayer canceled the Laser project. It

instead agreed to sell Miles' Laser-related product research and

packaging design to Johnson, and to license Johnson to use Cyfluthrin

in its household insecticide products.\4\

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\4\Although the patent license states that it is nonexclusive,

the United States believes that the license was actually exclusive.

Bayer was subsequently approached by several Johnson competitors for

Cyfluthrin licenses; it declined to license them to use the

compound.

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Under the terms of that ten-year license agreement, Johnson agreed

to pay Bayer a minimum of $5.2 million annually in addition to a

specified per pound fee for the use of Cyfluthrin. In addition, Johnson

acquired a right of first refusal to any other active ingredient Bayer

later developed.

Through this agreement, the United States alleges, Bayer

effectively chose not to compete in the U.S. household insecticides

market, instead, licensing to Johnson the right to use those assets

Bayer had assembled and would require to compete in the United States.

The agreement helped ensure Johnson's continued dominance of the

highly concentrated U.S. household insecticides market. Johnson is the

leading maker of household insecticides with somewhere between 45-60

percent of total market sales. It is significantly larger than any of

its six major competitors, whose market shares range from 6 to 12

percent of overall sales. By purchasing some of the assets Bayer would

have used in entering the market, and entering into what was in effect

an exclusive license for Cyfluthrin, Johnson effectively eliminated

competition that could have helped drive down prices or improve the

quality of household insecticides. Because new entry or expansion in

this market is difficult in light of the high cost and significant time

it takes to comply with federal and state governmental regulations, new

entry into or expansion within this market is unlikely to militate

against the anti-competitive effects of the defendants' agreement.

III

Explanation of the Proposed Final Judgment

The United States, Johnson and Bayer have stipulated that the Court

may enter the proposed Final Judgment at any time after compliance with

the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h).

The Judgment provides that its entry does not constitute any evidence

or admission by any party with respect to any issue of fact or law.

Under the provisions of Section 2(e) of the Antitrust Procedures

and Penalties Act, 15 U.S.C. Sec. 16(e), the Judgment may not be

entered unless the Court finds entry is in the public interest. Section

XI of the proposed Final Judgment set forth such a finding.

A. Terms

The Judgment provides that:

(1) Johnson and Bayer are each enjoined and restrained from

entering into any agreement or understanding, the purpose or effect of

which would be to allocate or divide, territories or markets for the

distribution or sale of household insecticides, unless any such

agreement or understanding relates exclusively to markets other than

the United States and has no effect on United States commerce.

(2) Johnson and Bayer are each enjoined and restrained from

entering into any exclusive license between them for any active

ingredient, the patent rights to which are beneficially owned by Bayer,

that the U.S. Department of Justice disapproves in writing. To ensure

the Department of Justice has adequate notice of such agreements,

Johnson and Bayer each must provide the Department at least 90 days'

written notice of their intent to enter into such an exclusive license

agreements, and if requested by the Department of Justice within 30

days after its receipt of such notice, Johnson and Bayer must supply

within 30 days of such request, all information in their possession

reasonably necessary to enable the Department of Justice to determine

the competitive effect of such license agreement.

(3) Johnson and Bayer are each enjoined and restrained from

entering into, carrying out, or operating under any exclusive license

to make, use or sell Cyfluthrin in the United States. Bayer must offer

to any person who requests, a license to use or sell Cyfluthrin in the

United States, upon reasonable and mutually agreeable terms and

conditions, but no minimum royalty payment shall be required under such

license; and

(4) No more than 180 days nor less than 90 days before entering

into any exclusive license with any person other than Bayer, for any

active ingredient other than Cyfluthrin, Johnson must provide the

Department of Justice written notice of such license and, if requested

by the Department of Justice within 30 days after its receipt of such

notice, Johnson must supply within 30 days after such request, all

information in its possession reasonably necessary to determine the

competitive effect of such license agreement.

B. Effect on Competition

The proposed Final Judgment will ensure that Johnson's competitors

will have access to Cyfluthrin and thus likely promote competition in

the household insecticide market. Nonexclusive licenses will be made

available to Johnson's competitors on reasonable terms and conditions

that are at least as favorable as the terms and conditions Bayer

accorded Johnson, except that there will be no minimum royalty payments

under such licenses. In addition, by prohibiting any market allocation

agreements between the defendants, the Final Judgment ensures that the

defendants will not be able to restrict potential competition in the

U.S. household insecticides market.

In addition, the proposed Final Judgment ensures that any exclusive

or co-exclusive license agreement between Johnson, which is dominant in

the household insecticides market, and Bayer for new active ingredients

will not restrict competition in the household insecticides market. The

proposed relief also ensures that the United States receives prior

notice of any exclusive or co-exclusive license agreement between

Johnson and any active ingredient manufacturer other than Bayer, and

thus an opportunity to challenge any such agreement that the United

States believes may substantially lessen competition in the household

insecticides market. At the same time, Department of Justice review of

any exclusive or co-exclusive license agreement for active ingredients

contemplated by Johnson should not unreasonably restrict Johnson's

ability to obtain the necessary active ingredients to formulate its

household insecticide products and remain competitive in the household

insecticides market.

IV

Remedies Available To Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages suffered, as well as costs and reasonable attorney's fees.

Entry of the proposed Final Judgment will neither impair nor assist the

bringing of such actions. Under the provisions of Section 5(a) of the

Clayton Act, 15 U.S.C. Sec. 16(a), the Judgment has no prima facie

effect in any subsequent lawsuits that may be brought against Johnson

and Bayer in this matter.

V

Procedures Available For Modification Of The Proposed Final Judgment

As provided by the Antitrust Procedures and Penalties Act, any

person believing that the proposed Final Judgment should be modified

may submit written comments to Gail Kursh, Chief, Professions and

Intellectual Property Section, U.S. Department of Justice, Antitrust

Division, 555 4th Street, NW., Room 9903, Washington, DC 20001, within

the 60-day period set forth in the Act. These comments, and the

Department's responses, will be filed with the Court and published in

the Federal Register. All comments will be given due consideration by

the Department of Justice, which remains free, pursuant to a

stipulation signed by the United States and Bayer and Johnson, to

withdraw its consent to the Judgment at any time prior to entry.

Section IX of the Judgment provides that the Court retains jurisdiction

over this action, and the parties may apply to the Court for any order

necessary or appropriate for modification, interpretation, or

enforcement of the Judgment.

VI

Determinative Materials/Documents

Materials or documents of the type described in Section 2(b) of the

Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were

considered in formulating the proposed Final Judgment.

VII

Alternative To The Proposed Final Judgment

The alternative to the proposed Judgment is a full trial on the

merits. While the Department is confident of its ability to succeed in

such a trial, the litigation involves difficult issues of law and fact.

A favorable outcome is not a certainty. The Final Judgment agreed to by

the parties provides all the relief that the United States sought in

its complaint.

Dated: August 3, 1994.

Respectfully submitted,

Anthony E. Harris,

Bar No. 01133713.

Kurt Shaffert

Attorneys, Antitrust Division, U.S. Department of Justice, 555

4th Street, NW., Room 9901, Washington, DC 20001, 202/307-0951.

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Bayer A. G., Defendants. Civil No. 94C50249.

United States' Explanation of Consent Decree Procedures

The United States submits this short memorandum summarizing the

procedures regarding the Court's entry of the proposed Final Judgment.

The Judgment would settle this case pursuant to the Antitrust

Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA''), which

applies to civil antitrust cases brought and settled by the United

States.

1. Today, the United States has filed a proposed Final Judgment and

a Stipulation between the parties by which they agreed to the Court's

entry of the proposed Final Judgment following compliance with the

APPA.

2. The United States has also filed a Competitive Impact Statement

relating to the proposed Judgment [15 U.S.C. 16(b)].

3. The APPA requires that the United States publish the proposed

Final Judgment and Competitive Impact Statement in the Federal Register

and in certain newspapers at least 60 days prior to entry of the Final

Judgment. The notice will inform members of the public that they may

submit comments about the Final Judgment to the United States

Department of Justice, Antitrust Division [15 U.S.C. 16(b)-(c)].

4. During the 60-day period, the United States will consider and

respond to any comments it receives, and it will publish the comments

and responses in the Federal Register.

5. After the expiration of the 60-day period, the United States

will file with the Court the comments, the government's responses, and

a Motion For Entry of the Final Judgment (unless the United States

decide to withdraw its consent to entry of the Final Judgment, as

permitted by Paragraph 2 of the Stipulation) [see 15 U.S.C.

Sec. 16(d)].

6. At that time, pursuant to the APPA, 15 U.S.C. Sec. 16(e)-(f),

the Court may enter the Final Judgment without a hearing, if the Court

determines that the Final Judgment is in the public interest.

Dated: August 4, 1994.

Respectfully submitted,

Anthony E. Harris,

Bar No. 011333753.

Kurt Shaffert

Attorneys, U.S. Department of Justice, Antitrust Division, 555

4th Street, NW., Rm. 9901, Washington, DC 20001, 202/307-0951.

United States of America, Plaintiff, v. S.C. Johnson & Son, Inc.

and Defendants. Civil No. 94C50249.

Certificate of Service

I hereby certify that on or before August 3, 1994, I hand-delivered

a copy of the following set of pleadings to counsel for S.C. Johnson &

Son, Inc. and Bayer A. G., respectively, Maurice J. McSweeney, Foley &

Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-5367;

and Tefft W. Smith, Kirkland & Ellis, 200 East Randolph Drive, Chicago,

Illinois 60601:

1. Complaint;

2. Stipulation;

3. Proposed Final Judgment;

4. Competitive Impact Statement; and

5. United States' Explanation of Consent Decree Procedures.

Dated: August 3, 1994.

Anthony E. Harris,

Bar No. 01133753.

[FR Doc. 94-20854 Filed 8-24-94; 8:45 am]

BILLING CODE 4410-01-M