[Federal Register: November 30, 2007 (Volume 72, Number 230)]
[Notices]
[Page 67727-67729]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no07-51]
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FEDERAL TRADE COMMISSION
[File No. 071 0132]
Schering-Plough Corporation; Analysis of Agreement Containing
Consent Orders 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 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 19, 2007.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``Schering-Plough, File No. 071 0132,'' to
facilitate the organization of comments. A comment filed in paper form
should include this reference both in the text and on the envelope, and
should be mailed or delivered to the following address: Federal Trade
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential
material must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper
form 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. Comments that do not
contain any nonpublic information may instead be filed in electronic
form as part of or as an attachment to email messages directed to the
following email box: consentagreement@ftc.gov.
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
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The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC website, to the extent
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes
every effort to remove home contact information for individuals from
the public comments it receives before placing those comments on the
FTC website. More information, including routine uses permitted by the
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm
.
FOR FURTHER INFORMATION CONTACT: Jacqueline K. Mendel, Bureau of
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202)
326-2603.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of
the Commission 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 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 16, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/11/index.htm.
A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington,
D.C. 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
[[Page 67728]]
Analysis of Agreement Containing Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from Schering-Plough Corporation (``Schering-Plough''),
which is designed to remedy the anticompetitive effects of its
acquisition of Organon BioSciences N.V. (``Organon BioSciences'') from
Akzo-Nobel N.V. (``Akzo-Nobel''). Under the terms of the proposed
Consent Agreement, Schering-Plough would be required to divest to
Wyeth: (1) the Schering-Plough rights and assets necessary to develop,
manufacture, and market live vaccines for the prevention and treatment
of the Georgia 98 strain of infectious bronchitis virus in poultry; (2)
the rights and assets necessary to develop, manufacture, and market
live vaccines for the prevention and treatment of fowl cholera due to
Pasteurella multocida in poultry; and (3) the rights and assets
necessary to develop, manufacture, and market live vaccines for the
prevention and treatment of Mycoplasma gallisepticum (``MG'') in
poultry.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days for receipt of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement, modify
it, or make final the Decision and Order (``Order'').
Pursuant to the terms of a Letter of Intent dated March 12, 2007,
Schering-Plough proposes to acquire from Akzo Nobel 100 percent of the
outstanding shares of Organon BioSciences voting stock. 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. Sec. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. Sec. 45, by lessening competition in the U.S.
markets for the manufacture and sale of the following poultry vaccines:
(1) live vaccines for the prevention and treatment of the Georgia 98
strain of infectious bronchitis virus in poultry; (2) live vaccines for
the prevention and treatment of fowl cholera due to Pasteurella
multocida in poultry; and (3) live vaccines for the prevention and
treatment of Mycoplasma gallisepticum in poultry. The proposed Consent
Agreement will remedy the alleged violations by replacing the lost
competition that would result from the acquisition in each of these
markets.
The Products and Structure of the Markets
The markets for the Georgia 98 strain of infectious bronchitis,
fowl cholera, and live MG vaccines are highly concentrated, with
Schering-Plough and Intervet accounting for significant market shares
in each of these markets. The proposed acquisition would create a
monopolist in the live Georgia 98 vaccine market and would give
Schering-Plough shares of approximately eighty-five percent and
seventy-two percent in the markets for live fowl cholera and live MG
vaccines, respectively.
The Georgia 98 strain of infectious bronchitis is a highly
contagious respiratory disease in poultry spread by contact with
infected respiratory discharge and feces. Live Georgia 98 vaccines are
the only vaccines that can effectively prevent and treat the Georgia 98
strain of infectious bronchitis virus. Other infectious bronchitis
virus vaccine strains, administered either individually or in multiple-
antigen combination vaccines, do not provide adequate protection
against the Georgia 98 serotype to act as a sufficient alternative to
the live Georgia 98 vaccines. The relevant market for the manufacture,
distribution, and sale of live vaccines for the prevention and
treatment of the Georgia 98 strain of infectious bronchitis virus in
poultry in the United States is highly concentrated. Respondent
Schering-Plough and Organon BioSciences are the only suppliers of live
vaccines for the prevention and treatment of the Georgia 98 strain of
infectious bronchitis virus in poultry in the United States. Schering-
Plough's Avimune IB98 product is the market leader with an estimated
seventy-nine percent market share, while Intervet competes with its
MILDVAC GA-98 product, selling the remaining twenty-one percent in the
United States. The acquisition would create a monopoly by combining the
only two companies with products on the market.
Live fowl cholera vaccines prevent an infectious bacterial disease
in poultry caused by a common pathogenic bacterium, Pasteurella
multocida. The relevant market for the manufacture, distribution, and
sale of live vaccines for the prevention and treatment of fowl cholera
due to Pasteurella multocida in poultry in the United States is highly
concentrated. Respondent Schering-Plough and Organon BioSciences are
two of only three suppliers of live fowl cholera vaccines, and the only
providers of a PM-1 strain of the vaccine. Organon BioSciences is the
market leader with its CHOLERVAC-PM-1 product, accounting for
approximately fifty-three percent of the live fowl cholera vaccines
sold in the United States. Schering-Plough is the second leading
supplier with its PM-ONEVAC-C and M-NINEVAX products, accounting for
thirty-two percent of sales in the market. Together, Schering-Plough
and Organon BioSciences account for approximately eighty-five percent
of the sales in this highly concentrated market. Accordingly, the
Acquisition would significantly increase the concentration levels in
the United States in the market for live vaccines for the prevention
and treatment of fowl cholera due to Pasteurella multocida in poultry.
MG is a respiratory disease that is transmitted laterally between
chickens or through infected eggs. The relevant market for the
manufacture, distribution, and sale of live Mycoplasma gallisepticum
vaccines in the United States is highly concentrated. Respondent
Schering-Plough and Organon BioSciences are the two leading suppliers
of live vaccines for the prevention and treatment of Mycoplasma
gallisepticum in poultry in the United States. Akzo Nobel is the market
leader with its MYCOVAC-L product, while Schering Plough competes with
its F-VAX MG. Together, they account for over seventy-two percent of
the sales in this highly concentrated market. Accordingly, the
Acquisition would significantly increase theconcentration levels in the
United States in the market for live vaccines for the prevention and
treatment of Mycoplasma gallisepticum in poultry.
Entry
Entry into any relevant line of commerce would not be timely,
likely, or sufficient to deter or counteract the anticompetitive
effects of the Acquisition. Entry into any of these markets would
require overcoming three major obstacles: lengthy development periods,
USDA approval requirements, and customer acceptance. As a result, new
entry into any of these markets sufficient to achieve a significant
market impact within two years is unlikely.
Effects
The markets for the Georgia 98 strain of infectious bronchitis,
fowl cholera, and MG live vaccines are highly concentrated, with
Schering-Plough and Intervet accounting for substantial shares of sales
in each of these markets. The proposed acquisition would create a
monopolist in the live Georgia 98
[[Page 67729]]
vaccine market and would give Schering-Plough shares of approximately
eighty-five percent and seventy-two percent in the markets for live
fowl cholera vaccine and live MG vaccines, respectively.
The competitive concerns can be characterized as unilateral in
nature. Schering-Plough and Organon BioSciences are each other's
closest competitors in all of the relevant markets. Consumers have
benefitted from the price competition between Schering-Plough and
Organon BioSciences. If unremedied, the proposed acquisition would
likely cause higher prices and reduce incentives to improve service or
product quality, resulting in significant harm to consumers in the U.S.
markets for these vaccines.
The Consent Agreement
The proposed Consent Agreement remedies the competitive harm caused
by the proposed transaction. Pursuant to the Consent Agreement,
Schering-Plough must divest or license all of the assets relating to
Schering-Plough's live vaccine for the Georgia 98 strain of infectious
bronchitis (Avimune IB98), Intervet's live fowl cholera vaccine
(CHOLERVAC-PM-1) and Schering-Plough's live MG vaccine (F VAX-MG)(``the
assets to be divested''), to the Fort Dodge division of Wyeth, within
ten days after the date Schering-Plough acquires Organon BioSciences.
The assets to be divested include research and development, customer,
supplier and manufacturing contracts and any intellectual property
including existing licenses, but excluding trademarks. Fort Dodge plans
to bring all manufacturing of the three vaccines in-house to its own
manufacturing facilities and to add the three to its own portfolio of
poultry vaccines. While Fort Dodge undertakes the process of obtaining
USDA regulatory approvals and bringing vaccine production in-house,
Schering-Plough will provide Fort Dodge with the vaccines pursuant to a
supply and transition services agreement with a term of two years, and
an option to extend it another year, individually for each of the three
vaccines, if required.
The acquirer of the divested assets must receive the prior approval
of the Commission. The Commission's goal in evaluating possible
purchasers of divested assets is to maintain the competitive
environment that existed prior to the acquisition. A proposed acquirer
of divested assets must not itself present competitive problems.
Wyeth, headquartered in Madison, New Jersey, is a global leader in
pharmaceuticals, consumer health care products and animal health care
products. In 2006, it had net sales of $20 billion. Wyeth's Fort Dodge
Animal Health division offers a broad range of biological and
pharmaceutical products for the companion animal, equine, livestock,
swine and poultry industries. Significantly, Wyeth already has an
established poultry vaccine line comprised of internally developed
vaccines as well as several vaccines that it has acquired and
transferred to its manufacturing facilities. Fort Dodge has its own
distribution network and an experienced sales force with existing
relationships with major poultry producers. The three vaccines being
divested to Fort Dodge are all established products that have been on
the market for at least two years. Fort Dodge has its own manufacturing
facilities with excess capacity and intends to bring the manufacturing
of all of the products it is acquiring from Schering-Plough in-house.
For these reasons, Wyeth is a strong buyer that appears well positioned
to replace the competition lost by the acquisition.
If the Commission determines that Wyeth is not an acceptable
acquirer of the assets to be divested, the parties must unwind the sale
and divest the Products within six months of the date the Order becomes
final to another Commission-approved acquirer. If the parties fail to
divest within six months, the Commission may appoint a trustee to
divest the Product assets.
The proposed remedy contains several provisions to ensure that the
divestitures are successful. The Order requires Schering-Plough to
provide transitional services to enable the Commission-approved
acquirer to obtain all of the necessary approvals from the USDA. These
transitional services include technology transfer assistance to
manufacture the Products in substantially the same manner and quality
employed or achieved by Schering-Plough and Akzo-Nobel.
The Commission has appointed Dr. David A. Espeseth to oversee the
implementation of the Order as the Interim Monitor Trustee. Dr.
Espeseth retired in 1998 from a career at the USDA, where his last
position was as Special Assistant to the Deputy Administrator of
Veterinary Services and where he spent the majority of his 37 years
regulating veterinary biologic products (vaccines). Today, he is a
consultant to animal health companies, assisting with regulatory issues
before the USDA and technology transfers. Dr. Espeseth's strengths are
his strong regulatory background, his experience overseeing technology
transfers, and experience resolving disputes between companies and the
USDA.
Dr. Espeseth is an excellent candidate to handle the expected
duties and responsibilities of the Interim Monitor Trustee in this
matter. He has the requisite capability and applicable knowledge to
ensure the proper transfer of the divested assets, oversee the transfer
of the relevant technology, monitor the critical manufacturing and
supply activities of the Respondent, ensure the Respondent's compliance
with the Order and related agreements, respond to Commission needs, and
perform other related services as may be required. Accordingly, the
Commission has appointed Dr. Espeseth as the Interim Monitor Trustee.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Order or to modify its terms in
any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E7-23291 Filed 11-29-07: 8:45 am]
BILLING CODE 6750-01-S