[Federal Register Volume 82, Number 2 (Wednesday, January 4, 2017)]
[Notices]
[Pages 847-850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31848]
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FEDERAL TRADE COMMISSION
[File No. 161 0077]
C.H. Boehringer Sohn AG & Co. KG; 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 methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.
DATES: Comments must be received on or before January 27, 2017.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/FTC/chboehringersohnagcokgconsent online or
on paper, by following the instructions in the Request for Comment part
of the SUPPLEMENTARY INFORMATION section below. Write ``C.H. Boehringer
Sohn AG & Co. KG File No. 1610077--Consent Agreement'' on your comment
and file your comment online at https://ftcpublic.commentworks.com/FTC/chboehringersohnagcokgconsent by following the instructions on the web-
based form. If you prefer to file your comment on paper, write ``C.H.
Boehringer Sohn AG & Co. KG File No. 1610077--Consent Agreement'' on
your comment and on the envelope, and mail your comment to the
following address: Federal Trade Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC
20580, or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Michael Barnett (202-326-2362), Bureau
of Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent orders 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 December 28, 2016), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 27,
2017. Write ``C.H. Boehringer Sohn AG & Co. KG File No. 1610077--
Consent Agreement'' on your comment. Your comment--including your name
and your state--will be placed on the public record of this proceeding,
including, to the extent practicable, on the public Commission Web
site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of
discretion, the Commission tries to remove individuals' home contact
information from comments before placing them on the Commission Web
site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/FTC/chboehringersohnagcokgconsent by following the instructions on the
web-based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
If you file your comment on paper, write ``C.H. Boehringer Sohn AG
& Co. KG File No. 1610077--Consent Agreement'' on your comment and on
the envelope, and mail your comment to the following address: Federal
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW.,
Suite CC-5610 (Annex D), Washington, DC 20580, or deliver your comment
to the following address: Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th Street SW., 5th Floor, Suite
5610 (Annex D), Washington, DC. If possible, submit your paper comment
to the Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before January 27, 2017. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from C.H. Boehringer Sohn
[[Page 848]]
AG & Co. KG (``Boehringer Ingelheim''), which is designed to remedy the
anticompetitive effects of Boehringer Ingelheim's acquisition of the
Merial Animal Health business (``Merial'') from Sanofi. Under the terms
of the proposed Decision and Order (``Order'') contained in the Consent
Agreement, Boehringer Ingelheim is required to divest its relevant U.S.
companion animal vaccine business to Eli Lily and Company, which
participates in the animal health industry through its Elanco Animal
Health (``Elanco'') division. Boehringer Ingelheim is also required to
divest its U.S. Cydectin parasiticide product to Bayer AG (``Bayer'').
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again evaluate the
proposed Consent Agreement, along with the comments received, in order
to make a final decision as to whether it should withdraw from the
proposed Consent Agreement, modify it, or make it final.
The Transaction
Pursuant to an Exclusivity Agreement dated December 15, 2015,
Boehringer Ingelheim proposes to swap its consumer health care business
for Sanofi's Merial animal health business (the ``Proposed
Acquisition''). In the proposed swap, Boehringer Ingelheim obtains
Merial, valued at $13.53 billion, and Sanofi obtains Boehringer
Ingelheim's Consumer Health Care business unit, valued at $7.98
billion, as well as cash compensation of $5.54 billion. The Commission
alleges in its Complaint that the Proposed 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. markets for two types of animal health products:
(1) Companion animal vaccines--which include various canine, feline,
and rabies vaccines--and (2) cattle and sheep parasiticides. The
proposed Consent Agreement will remedy the alleged violations by
preserving the competition that would otherwise be eliminated by the
Proposed Acquisition.
The Parties
Headquartered in Germany, Boehringer Ingelheim is one of the
world's leading pharmaceutical companies. It manufacturers, researches,
develops and markets an array of human and animal health products. The
company's animal health division, Boehringer Ingelheim Vetmedica, Inc.,
is the sixth-largest animal health supplier in the world.
Sanofi is a multinational pharmaceutical company headquartered in
Gentilly, France. The company develops and markets a diverse portfolio
of products, including pharmaceuticals, human vaccines, and, through
its subsidiary Merial, animal health products. Merial is the fourth-
largest animal health supplier in the world.
The Relevant Products and Structure of the Markets
Companion Animal Vaccines
There are three classes of companion animal vaccines in which to
analyze the effects of the Proposed Acquisition: Canine vaccines,
feline vaccines, and rabies vaccines. A vaccine is a version of an
antigen that triggers an immune response to the antigen but not the
disease, causing the animal to develop an immunity that prevents the
disease. Only vaccines containing an antigen of a specific virus can
provide the desired immunity response to that virus and the
corresponding disease. No substitute product immunizes against a
disease. Nor is treatment following infection a substitute for the
vaccinations at issue. For these reasons, each vaccine containing an
antigen to immunize against a particular disease constitutes a relevant
market in which to analyze the effects of the acquisition.
Canine vaccines prevent specific illnesses in dogs. The Proposed
Acquisition raises competitive concerns in the markets for seven canine
vaccines: Canine distemper virus, canine parvovirus, leptospirosis,
canine adenovirus, canine parainfluenza virus, canine coronavirus, and
borreliosis (``Lyme disease''). In addition, the proposed transaction
raises future competition concerns in the canine vaccine market for
Bordetella bronchiseptica bacterium, in which Boehringer Ingelheim
currently competes and Merial is the most likely entrant in the near
future. The canine vaccine markets are highly concentrated. Boehringer
Ingelheim, Merial, Zoetis, Inc. (``Zoetis''), and Merck & Co.
(``Merck'') are the only four suppliers offering or likely to offer
canine vaccines in the United States. In 2015, Boehringer Ingelheim,
Merial, Zoetis and Merck had market shares of approximately 30%, 11%,
35%, and 24%, respectively, of all revenues from canine vaccines sold
in the United States and comparable shares in each relevant market,
except Bordetella bronchiseptica bacterium, where Merial is the next
likely entrant. The Proposed Acquisition would reduce the number of
current or likely competitors in each market from four to three.
Feline vaccines prevent diseases common to cats. The transaction
raises competitive concerns in the feline vaccine markets for five
diseases: Panleukopenia, calicivirus, viral rhinotracheitis, Chlamydia
psittaci bacterium, and feline leukemia. The feline vaccine industry in
the United States is highly concentrated with the same four market
participants--Boehringer Ingelheim, Merial, Zoetis, and Merck--as the
canine vaccine industry. In 2015, these four companies had market
shares of approximately 28%, 33%, 16%, and 23%, respectively, of all
revenues from feline vaccines sold in the United States and comparable
shares in each relevant market. The proposed transaction would combine
the two leading feline vaccine suppliers, reducing the number of
competitors in each market from four to three.
The rabies virus, transmitted through bites from infected animals,
triggers a fatal neurological condition culminating in paralysis,
respiratory failure, and eventual death. Because this fatal disease is
transmittable to humans, most U.S. states have mandatory rabies
vaccination requirements. Regular vaccination for all animals is the
only means of protection, and there are no substitutes for rabies
vaccines. All rabies vaccines are approved for use in both dogs and
cats, although some are approved for use in additional species as well.
The market for the sale of rabies vaccines in the United States is
highly concentrated. Boehringer Ingelheim, Merial, Zoetis, and Merck
are the only four significant suppliers of rabies vaccines in the
United States, with market shares of 10%, 65%, 13%, and 12% of
revenues, respectively.
Cattle and Sheep Parasiticides
Parasiticides prevent and control outbreaks of parasites such as
worms, flies, lice, and ticks.
Cattle Parasiticides
Parasiticides are a key part of cattle health care regimens. If
left unchecked, parasites reduce milk production in dairy cattle and
prevent weight gain in beef cattle. There are two primary types of
cattle parasiticides: Macrocyclic lactones, which prevent both internal
and external parasites, and benzimidazoles, which prevent only internal
parasites. Because macrocyclic lactones reach a much broader spectrum
of parasites, other parasiticides, including benzimidazoles, are not
viable substitutes.
[[Page 849]]
Boehringer Ingelheim, Merial, and Zoetis are the three primary
participants in the macrocyclic lactone cattle parasiticide market, and
the Proposed Acquisition would combine the two most significant
competitors. Merial, the market leader, offers three brands: Ivomec,
Eprinex, and LongRange. After Merial, Boehringer Ingelheim is the next
largest supplier of macrocyclic lactone cattle parasiticides.
Boehringer Ingelheim's sole product is Cydectin, a parasiticide that is
functionally identical to Ivomec and Eprinex for beef cattle. Zoetis
also offers a macrocyclic lactone product, Dectomax, that is similar to
the products of Merial and Boehringer Ingelheim. Merial, Boehringer
Ingelheim and Zoetis accounted for 45%, 22%, and 17% of revenues,
respectively, of U.S. sales in 2015. Beyond these three companies,
multiple manufacturers produce generic versions of Merial's Ivomec.
Although these generic products are significantly cheaper than the
branded products, they have limited competitive significance. Many
customers prefer the branded products because the branded product
manufacturers offer valuable technical support, field support, and
education. In addition, many customers also perceive the generic
products to be inferior and unreliable, preferring to pay a higher
price for the guaranteed success of branded products.
Merial and Boehringer Ingelheim are the only two macrocyclic
lactone cattle parasiticide suppliers that offer ``zero-day milk
withhold'' products--Cydectin and Eprinex, respectively. The Proposed
Acquisition would eliminate the competition between them, effectively
leaving dairy cattle customers with a sole supplier.
Sheep Parasiticides
Sheep parasiticides are critical for optimizing wool and meat
production. Sheep parasiticides utilize the same compounds as cattle
parasiticides, but use a different route of administration. Because a
sheep's wool and skin prevent the absorption of topical products and
the thickness of a sheep's wool makes injections difficult, customers
view oral administration as the only viable option for sheep
parasiticides. Both macrocyclic lactones and benzimidazoles can be used
as sheep parasiticides, but benzimidazoles are not economic substitutes
for macrocyclic lactones in most cases because they do not treat
external parasites and are less efficacious.
Merial and Boehringer Ingelheim are the two primary suppliers of
macrocyclic lactone sheep parasiticides. Boehringer Ingelheim offers
Cydectin Oral Drench and Merial offers Ivomec Oral Drench. Following
the Proposed Acquisition, the merged firm would control more than 78%
of this market. The other macrocyclic lactone sheep parasiticides are
generic versions of the Merial product, which are of limited
competitive significance.
Relevant Geographic Market
The United States is the relevant geographic market in which to
assess the competitive effects of the Proposed Acquisition. The USDA
must approve companion animal vaccines before they are sold in the
United States. Cattle and sheep parasiticides must be approved by the
FDA before being sold in the United States. Thus, products sold outside
the United States, but not approved for sale in the United States, are
not alternatives for U.S. consumers.
Entry
Entry into the U.S. markets for companion animal vaccines and
cattle and sheep parasiticides would not be timely, likely or
sufficient in magnitude, character and scope to deter or counteract the
anticompetitive effects of the Proposed Acquisition. Three major
obstacles stand in the way of a prospective entrant into the relevant
markets: Lengthy development periods, FDA and USDA approval
requirements, and difficulty of establishing a brand name and
reputation and convincing veterinarians to prescribe new products.
Effects of the Acquisition
The Proposed Acquisition would cause significant competitive harm
to consumers in the relevant U.S. markets for companion animal vaccines
and cattle and sheep parasiticides by eliminating actual or future,
direct, and substantial competition between Boehringer Ingelheim and
Merial. The transaction would increase the likelihood that Boehringer
Ingelheim will be able to unilaterally exercise market power, increase
the likelihood of coordinated interaction between or among suppliers,
and increase the likelihood that consumers will pay higher prices.
The Consent Agreement
The proposed Consent Agreement effectively remedies the Proposed
Acquisition's anticompetitive effects by requiring Boehringer Ingelheim
to divest its relevant companion animal vaccine business and certain of
its cattle and sheep parasiticides assets to Elanco and Bayer,
respectively.
Under the proposed Order, Boehringer Ingelheim will divest its
relevant U.S. rights and interests in its companion animal vaccine
business to Elanco no later than ten days after the consummation of the
Proposed Acquisition or on the date on which the proposed Order becomes
final, whichever is earlier. Similarly, the proposed Order requires
Boehringer Ingelheim to divest all of its respective U.S. rights and
interests in its parasiticide product, Cydectin, to Bayer. These
divestitures include all regulatory approvals, brand names, marketing
materials, confidential business information, customer information, and
other assets associated with marketing and selling both products. To
ensure the divestitures are successful, the proposed Order requires
Boehringer Ingelheim to secure all third-party consents and waivers
required to permit both buyers to conduct business with the divested
assets. Additionally, Elanco and Bayer also will have the right to
interview and offer employment to employees associated with the
divested businesses.
Elanco is an experienced supplier in the global animal health
industry and has the resources and expertise to replicate Boehringer
Ingelheim's role in the companion animal vaccine markets. In 2015,
Elanco generated approximately $1 billion in revenue. Elanco currently
offers a limited portfolio of companion animal pharmaceutical products
such as parasiticides, pain relievers, and dermatological products.
Elanco, however, is not a meaningful participant in any of the
companion animal vaccines subject to divestiture, and its proposed
acquisition of those assets will complement and expand its existing
companion animal portfolio. Elanco is well positioned to replicate
immediately Boehringer Ingelheim's competitive position in all
companion animal vaccine markets.
Bayer is similarly well qualified to replicate Boehringer
Ingelheim's competitive position in the United States with respect to
the Cydectin product line. Bayer is currently the fifth-largest animal
health company both worldwide and in the United States. Bayer had 2015
worldwide sales of $1.6 billion, of which $595 million derived from its
animal health business. Bayer does not currently offer a parasiticide
that controls external and internal parasites to cattle and sheep
farmers. However, Bayer offers a variety of other products to cattle
and sheep farmers, such as ear tags and external parasite control
products.
The Commission has agreed to appoint a Monitor to ensure that
Boehringer Ingelheim complies with all of its obligations pursuant to
the Consent Agreement and to keep the
[[Page 850]]
Commission informed about the status of the transfer of the rights and
assets to Elanco and Bayer.
The Commission's goal in evaluating possible purchasers of divested
rights and assets is to maintain the competitive environment that
existed prior to the Proposed Acquisition. If the Commission determines
that either buyer is not an acceptable acquirer, or that the manner of
the divestiture is not acceptable, the proposed Order requires the
parties to unwind the sale and then divest the products to another
Commission-approved acquirer within six months of the date that the
proposed Order becomes final. The proposed Order further allows the
Commission to appoint a trustee in the event the parties fail to divest
the products.
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.
April J. Tabor,
Acting Secretary.
[FR Doc. 2016-31848 Filed 1-3-17; 8:45 am]
BILLING CODE 6750-01-P