# SNIA S.p.A; Analysis To Aid Public Comment

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URL: https://www.frixlaw.com/law-library/documents/fr%3A99-12658

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** May 20, 1999
- **Citation:** 64 FR 27548

## Text

FEDERAL TRADE COMMISSION

[File No. 9910095]

SNIA S.p.A; Analysis 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 or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement 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 July 19, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
Christina Perez or Michael Barnett, FTC/S-2308, 601 Pennsylvania
Avenue, N.W., Washington, D.C. 20580, (202) 326-2048 or (202) 326-2541.

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 complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for May 14th, 1999), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, 600 Pennsylvania Avenue, N.W., Washington,
D.C. 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Avenue, N.W.,
Washington, D.C. 20580. Two paper copies of each comment should be
filed, and should be accompanied, if possible, by a 3\1/2\ inch
diskette containing an electronic copy of the comment. 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
(``Order'') from SNIA S.p.A. (``SNIA''), which is designed to remedy
the anticompetitive effects of SNIA's acquisition of all of the
outstanding voting securities of COBE Cardiovascular, Inc. (``COBE''),
as well as certain cardiopulmonary and other cardiovascular assets and
liabilities from other subsidiaries of Gambro AB (``Gambro''). Both
SNIA and Gambro manufacture and sell a wide variety of cardiovascular
products, including heart-lung machines. The proposed Order remedies
the acquisition's anticompetitive effects by requiring SNIA to divest
COBE's heart-lung machine business.
The proposed 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 review the proposed Order
and the comments received and will decide whether it should withdraw
from the proposed Order or make final the proposed Order.
Pursuant to an Asset and Stock Purchase Agreement signed on
November 23, 1998, SNIA, through its Sorin Biomedica, Inc. subsidiary
(``Sorin''), has agreed to purchase 100% of the outstanding voting
securities of COBE, as well as certain other assets and liabilities
from other subsidiaries of Gambro, for approximately $260 million. The
proposed Complaint alleges that the 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, in the U.S. market for heart-lung machines.
Heart-lung machines are life-sustaining medical devices that are
essential for any surgery that requires the heart to be stopped, such
as surgeries to implant coronary artery bypass grafts, repair or
replace heart valves, repair cerebral aneurysms, or transplant livers
and hearts. A heart-lung machine is the equipment portion of an
extracorporeal bypass system, which replaces the function of the heart
and lungs during surgery by circulating and providing oxygen to the
patient's blood throughout the procedure. In addition to a heart-lung
machine, a complete extracorporeal bypass system is comprised of
various single-use products, called disposables, that come into direct
contact with the patient's blood, and therefore cannot be reused for
safety reasons. Approximately 450-550 new units are sold worldwide each
year, amounting to $50 million in sales.
The U.S. market for heart-lung machines is highly concentrated and
the proposed acquisition would substantially increase concentration in
this market. The acquisition would result in a Herfindahl-Hirschman
Index (``HHI'') of 4,638 points, which is an increase of 1,554 points
over the preacquisition level. SNIA and COBE are two of only four
suppliers of heart-lung machines in the United States, with the fourth
competitor being significantly smaller than the other three. By
eliminating the competition between SNIA and COBE in this highly
concentrated market, the proposed acquisition would enhance the
likelihood of coordinated interaction between or among the remaining
firms in the market, thus increasing the likelihood that consumers in
the United States would be forced to pay higher prices for heart-lung
machines.
It is unlikely that this lost competition would have been replaced
by new entrants into the relevant market due to the substantial
barriers to entry into the U.S. market for heart-lung machines. A new
entrant into this market would need to undertake the difficult,
expensive and time-consuming process of researching and developing a
new product, obtaining approval from the U.S. Food and Drug
Administration, establishing a nationwide service and sales network and
gaining customer acceptance. This is a very difficult

[[Page 27549]]

process for new entrants because manufacturers are reluctant to
establish a nationwide service and sales network until they have gained
customer acceptance and have an established customer base, and
customers are reluctant to purchase from a supplier unless it has an
established service and sales network. As a result, a new entrant often
finds itself in a ``Catch 22'' problem. For these reasons, new entry
into the market would not be timely, likely or sufficient to deter or
counteract the anticompetitive effects resulting from the acquisition.
The proposed Order remedies the anticompetitive effects in the
heart-lung machine market by requiring SNIA to divest COBE's heart-lung
machine business to Baxter Healthcare Corporation, a large manufacturer
of medical products, including disposables for heart-lung machines,
within ten (10) days after the Commission accepts the Agreement
Containing Consent Order for public comment, or to another Commission-
approved buyer within one hundred eighty (180) days after the Agreement
Containing Consent Order is accepted for public comment. In the event
that SNIA fails to divest the heart-lung machine assets, or the
acquirer fails to obtain FDA approval and the ability to manufacture
and sell heart-lung machines, the Commission may appoint a trustee to
divest the COBE heart-lung machine business to a new acquirer. The
divestiture trustee will have the authority and power to divest the
heart-lung machine assets in a manner that satisfies the requirements
of the Order.
The proposed Order requires SNIA to provide assistance to the
acquirer so that it can compete effectively in the heart-lung machine
business. First, SNIA must contract manufacture a supply of heart-lung
machines for a limited time period while the acquirer obtains its own
FDA approval and obtains the commercial capability to manufacture and
sell heart-lung machines in the United States. Second, SNIA must
provide technical assistance and advice to help the acquirer in its
efforts to begin manufacturing and selling heart-lung machines. The
proposed Order enables the acquirer to hire former COBE employees
associated with the research, development, manufacture, marketing, or
sales of heart-lung machines. Finally, the Order requires SNIA to
cooperate with the acquirer in any patent dispute in which a third
party attempts to challenge any of the patents divested pursuant to the
Order and in which the ability of the acquirer to become an effective
competitor in the heart-lung machine market could be affected.
In order to facilitate the smooth transfer of assets and ensure
that the acquirer will get the assistance necessary to independently
manufacture the products, the proposed Order provides for the
appointment of an interim trustee. The interim trustee will serve until
the acquirer has received all necessary FDA approvals and obtains the
commercial capability to manufacture and sell heart-lung machines. The
Order also requires SNIA to provide to the Commission a report of
compliance with the divestiture provisions of the Order within thirty
(30) days following the date the Order becomes final, and every ninety
(90) days thereafter until SNIA has completed the divestiture. The
Order also requires SNIA to notify the Commission at least thirty (30)
days prior to any change in SNIA that may affect compliance obligations
arising out of the Order.
The purpose of this analysis is to facilitate public comment on the
proposed Order and the divestiture to Baxter Healthcare Corporation,
and it is not intended to constitute an official interpretation of the
agreement and proposed Order or to modify their terms in any way.

By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-12658 Filed 5-19-99; 8:45 am]
BILLING CODE 6750-01-M

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-12658. Public record. Not legal advice.