American Home Products Corporation; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 971-0009]

American Home Products Corporation; Analysis To Aid Public

Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, will settle antitrust concerns stemming from the

Madison, New Jersey-based company's proposed acquisition of Solvay,

S.A.'s animal health business. The complaint accompanying the consent

agreement alleges that the proposed $463 million acquisition would give

American Home Products a dominant position in the market for canine

lyme vaccines, canine corona virus vaccines, and feline leukemia

vaccines. The agreement would require, among other things, that

American Home Products divest Solvay's U.S. and Canadian rights to the

three types of vaccines to the Schering-Plough Corporation or another

Commission-approved buyer.

DATES: Comments must be received on or before May 5, 1997.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: William J. Baer, Federal Trade

Commission, H-374, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

(202) 326-2932; George S. Cary, Federal Trade Commission, H-374, 6th

St. and Pa. Ave., N.W., Washington, D.C. 20580. (202) 326-3741; Casey

R. Triggs, Federal Trade Commission, S-2308, 6th St. and Pa. Ave.,

N.W., Washington, D.C. 20580. (202) 326-2804.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of

the Commission's 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 sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for February 25,

1997), on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.''

A paper copy can be obtained from the FTC Public Reference Room, Room

H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C.

20580, either in person or by calling (202) 326-3627. Public comment is

invited. Such comments or views will be considered by the Commission

and will be available for inspection and copying at its principal

office in accordance with Section 4.9(b)(6)(ii) of the Commission's

Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement containing a proposed Consent Order

from American Home Products Corporation (``AHP'') under which AHP would

divest Solvay S.A.'s (``Solvay''), canine lyme vaccine, canine corona

virus combination vaccines and feline leukemia combination vaccines.

The agreement is designed to remedy the anticompetitive effects

resulting from AHP's acquisition of Solvay's animal health business.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

Order.

The proposed complaint alleges that the proposed acquisition, if

consummated, would constitute a violation of Section 7 of the Clayton

Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the FTC Act, as

amended, 15 U.S.C. Sec. 45, in the markets for canine lyme vaccine,

canine corona virus combination vaccines and feline leukemia

combination vaccines.

The canine lyme, canine corona virus combination and feline

leukemia combination vaccines are the only effective method to prevent

certain companion animal diseases. These vaccines work by exposing the

host animal's own immune system to specific antigens for the disease.

These antigens in turn stimulate the immune system's production of

antibodies, which protect the host animal against future exposure to

the disease.

Companion animal vaccine manufacturers sell vaccines such as canine

lyme, canine corona virus combination and feline leukemia combination

to veterinarians, who then charge consumers when they bring their

companion animals in for treatment. Veterinarians rely on competition

among the vaccine manufacturers to drive down the cost of services they

provide. Where a single vaccine manufacturer controls a large share of

a vaccine market, that manufacturer is able to extract higher prices as

a result.

AHP's proposed acquisition of Solvay's animal health business would

give the combined entity a dominant position in the canine lyme, canine

corona virus combination and feline leukemia combination vaccine

markets. As a result, the combined entity would have the ability to

raise prices in each of these markets. Furthermore, entry into these

markets is difficult and time consuming because of lengthy development

periods and the need for approvals by the United States Department of

Agriculture (``USDA'') and is unlikely to offset the competitive harm

that would result from the combination of AHP and Solvay's animal

health business.

The proposed consent order requires AHP to divest certain assets to

Schering-Plough, Ltd. (``Schering-Plough'') relating to Solvay's canine

lyme, canine corona virus combination and feline leukemia combination

vaccines including, but not limited to, master seeds and cell stock,

know-how, intellectual property and research and development. In

addition, AHP is required to assist Schering-Plough in obtaining USDA

certification. These

[[Page 10059]]

assets in the hands of Schering-Plough are sufficient to replace the

lost competition that would result from the acquisition.

Public comments regarding all aspects of the proposed divestiture

to Schering-Plough will be considered with other comments on the

proposed Order.

Under the proposed Order, if Schering-Plough ceases to sell

contract manufactured canine lyme, canine corona virus combination and

feline leukemia combination vaccines prior to obtaining USDA

certification, abandons its efforts to obtain USDA approval, or fails

to obtain timely USDA approval, or in the event AHP fails to divest the

assets absolutely and in good faith, the Commission may terminate the

divestiture agreement and appoint a trustee to divest Solvay's canine

lyme vaccine, canine corona virus combination vaccines, and feline

leukemia combination vaccines, as well as Solvay's Charles City

Facility and equine vaccines. The crown jewel provision also includes,

at AHP's discretion, a supply contract for a term not to exceed (3)

three years from the date of the divestiture, which requires the new

acquirer to supply AHP (i) any swine or poultry vaccines for sale

worldwide, (ii) any canine lyme vaccine, canine corona virus

combination vaccines and feline leukemia combination vaccines for sale

by AHP outside the United States and Canada and (iii) single antigen

rabies vaccine and feline leukemia combination vaccine with rabies for

sale worldwide being produced at the Charles City Facility at the time

of divestiture, priced at each vaccine's average total cost. This crown

jewel provision will ensure that a trustee can divest a package of

assets that is sufficiently attractive to potential buyers.

Under the provisions of the proposed Order, AHP is also required to

provide the Commission with a report of compliance with the divestiture

provisions of the Order within sixty (60) days following the date this

Order becomes final, and every ninety (90) days thereafter until AHP

has fully complied with the divestiture provisions of the proposed

Order.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

Concurring Statement of Commissioner Mary L. Azcuenaga in American Home

Products Corp., File No. 971-0009

I concur in the decision to accept the consent agreement for public

comment and write separately to invite comment on whether and when the

Commission should require the firm divesting assets to give up patent

rights beyond those acquired in the transaction at issue. Paragraph IID

of the proposed order requires American Home Products (AHP) not only to

license the intellectual property that is acquired from Solvay S.A.,

but also to agree not to sue the acquiring firm for infringement of

vaccine patents that AHP owned before the acquisition. The firm

purchasing the divested assets will obtain Solvay's intellectual

property free and clear of any claim that the Solvay vaccines infringe

AHP's patents. Should the Commission resolve the patent dispute

regarding whether Solvay's vaccines infringed AHP's patents, and if so,

how should such a dispute be resolved?

[FR Doc. 97-5343 Filed 3-4-97; 8:45 am]

BILLING CODE 6750-01-M