American Hospital Supply Corporation

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IN THE MATTER OF AMERICAN HOSPITAL SUPPLY CORPORATION CONSENT ORDER , ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 7 OF THE CLAYTON ACT Docket C-3067. Complaint, J1J.e 1981-Decisiun, June 2 1981 This consent order requires, among other things, American Hospital Supply Corporation ("AHSC"), an Evanston, Ilinois manufacturer and distributor of health care products, to timely divest, in accordance with the terms of the order, either 100 percent of the stock of American Latex Corporation ("ALC" , all assets and properties constituting ALC together with all the assets of American Cystoscope Makers, Inc. The order further requires respondents to maintain ALC as a viable business entity pending divestiture; offer to purchase for a period of one year all urological catheters from the acquirer of ALC; and refrain for five years from acquiring more than 1 percent of stock or any interest in an entity engaged in the manufacture and distribution of urological catheters.

Appearances For the Commission: Norman A. Drezin, Karen G. Bokat, Randall 8. Lcff and Peter A. Sklarew.

For the respondent: Seymour D. Lewis, Rosenman Colin Freund Lewis Cohen Washington, D.

COMPLAINT The Federal Trade Commission, having reason to believe that the above named respondent, subject to the jurisdiction of the Commission, has acquired all the assets of American Cystoscope Makers, Inc. in violation of Section 7 of the Clayton Act, as amended, (15 UB. 18) and Section 5 of the Federal Trade Commission Act, as amended (15 U. C. 45), and having found that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, pursuant to Section 11 of the Clayton Act (15 U. C. 21) and Section 5(b) of the ederal Trade Commission Act (15 U. C. 45(b)), stating its chargesas follows: DEFINITIONS 1. For purposes of this complaint, the term urological catheters means any flexible product designed, promoted, and sold for insertion into the urethral orifice of a human or other animal in order to .u._- 920 Complaint drain, irrigate or otherwise provide access to the urinary bladder of said human or animal.

urological catheter products means all urological 2. The term kits or trays thatcatheters sold separately and all urological catheter include a urological catheter and accessories used in conjunction with the insertion of a urological catheter. II. RESPONDENT 3. American Hospital Supply Corporation (AHSC) is a corporation organized, existing, and doing business under and by virtue of thc laws of the State of Ilinois with its office and principal place of business located at One American Plaza, Evanston, Illinois. 4. In 1979 AHSC, including its foreign subsidiaries, had consolidated revenues of approximately $2.04 billon and consolidated assets of approximately $1.28 billion.

5. AHSC is a multinational manufacturer and distributor of a wide range of products used and consumed in the health care field including medical supplies, pharmaceuticals, medical and surgical instruments and laboratory supplies.

6. AHSC has been engaged in the manufacture and distribution of urological catheters through its American Pharmaseal Division and in the distribution of urological catheters through its American Hospital Supply Division and its American V. Muellcr Division. Ill. THE ACQUIRED CORPORATION 7. American Cystoscope Makcrs, Inc. (ACMI) is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New York with its office and principal place of business at 300 Stillwater Avenue, Stamford, Connecticut. Prior to the acquisition of ACMI by respondent AHSC, American Latex Corporation (ALC) was a subsidiary of ACMI, organized, existing, and doing business under and by virtue of the laws of the State of Delaware with its office and principal place of business in Sullivan Indiana.

8. In 1979 ACMI, including its foreign subsidiaries, had consolidated revenues of approximately $40.2 million and consolidated assets of $27.3 million.

9. ACMI is engaged primarily in the research, development manufacture, and marketing of endoscopes. 10. ACMI through its subsidiary, American Latex Corporation, is engaged in the manufacture and sale of urological catheters. Complaint 97 F.

IV. JURISDICTION 11. At all times relevant herein, respondent AIISC and ACMI have been and are engaged in commerce within the meaning of the Clayton Act, as amended, and engaged in or affecting commerce within the meaning of the Federal Trade Commission Act, as amended.

THE ACQUISITION 12. On October 10, 1980 , respondent AHSC acquired ubstantially all of the assets of ACMI for approximately $38.5 million including 100% of the stock of ALe.

VI. TRADE AND COMMERCE 13. For the purpose of this complaint, the relevant product market is the manufacture and sale of urological catheter products and the relevant geographic market is the United States. 14. Urological catheters are comprised primarily of urethral and Foley type catheters used to drain and/or irrigate the urinary bladder.

15. Sales to hospitals of urological catheter products in the United States in 1979 are estimated to have been approximately $70.4 million.

16. Prior to the acquisition of ACMI by AHSC, AHSC and ACMI were actual competitors in the manufacture and sale of urological catheter products. In 1979, AHSC, throug-h its American Pharmaseal Division, ranked approximately fifth in total sales among- all urological catheter product manufacturers. AHSC's share of urological catheter products sales is estimated to have been approximately 1 % and ACMI's share approximately 3.6% in 1979. 17. The urological catheter products market is hig-hly concentrated. In 1979 the four top ranking firms accounted for approximately 82_7% of domestic sales.

VII. EFFECTS OF' THE ACQUISITION; VIOLATIONS CHARGED 18. The effects of the acquisition by AHSC of ACMI may be substantially to lessen competition or tend to create a monopoly the manufacture and sale of urological catheter products in the United States in violation of Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, as amended, in the following ways among others: 920 Dccision and Order a. Actual competition between respondent and ACMI in the manufacture and sale of urological catheter products will he eliminated;

b. ACMI as a substantial, independent competitive factor in the manufacture and sale of urological catheter products will be eliminated;

c. Concentration in the manufacture and sale of urological catheter products wil be increased, and the possibility of deconcentration may be diminished; and d. Additional acquisitions and mergers in the industry may be encouraged.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of the proposed acquisition of American Cystoscopc Makers, Inc. by American Hospital Supply Corporation, and the respondent having been furnished thereafter with a copy of a draft of a complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Clayton and Fcdcral Trade Commission Acts; and The respondent and counsel for the Commission having thercaftcr executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Acts, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and entcrs the following order:

1. Respondent American Hospital Supply Corporation is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Ilinois with its office and the principal place of business located at One American Plaza, Evanston, Ilinois. Decision and 97 F.T.C. American Cystoscope Makers, Inc. , was a corporation organized, existing, and doing business under and by virtue of the laws of the State of New York with its offices and principal place of business located at 300 Stillwater Avenue, Stamford, Connecticut. American Latex Corporation was a subsidiary of American Cystoscope Makers, Inc., organized, existing and doing business under and by virtue of the laws of the State of Delaware with its offce and principal place of business in Sullivan, Indiana.. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER It is ordered That, subject to the prior approval of the Federal Trade Commission, respondent, through its officers, directors, employees, subsidiaries, affiliates, divisions, successors, and assigns shall within eighteen (IS) months from the date on which this order becomes final divest absolutely and in good faith either 100% of the stock of American Latex Corporation (hereinafter "ALC") or all asscts, properties, rights, and privilegcs, tangible and intangible, of ALC, including but not limited to corporate name, real property, plant, equipment, machinery, raw material inventory, product inventory, lists of customers, product trade names, product trademarks, patents, licenses, manufacturing specifications and procedures, marketing materials, sales training materials, research and development projects, and together therewith shall also divest those assets of American Cystoscope Makers, Inc. (hereinafter "ACMI" intrinsically related to the manufacture, distribution, sale, research or development of the products manufactured by ALC including but not limitcd to copies of all customer lists, records of sales in the previous two years, market projections and surveys, marketing plans and studies, and promotional or advertising materials. Such divestiture shall be made to a third party which represents that it intends to use the assets in the manufacture, distribution or sale of urological catheters in the United States. It is further ordered That, at the option of the acquirer of the stock or assets of ALC, respondent (including its newly acquired ACMI subsidiary or any successor organization) shall, for a period of one .u.

920 Decision and Order year from the date of compliance with Paragraph I of this order purchase from ALC all catheters that respondent purchases durihg such one year period for resale under any trademark or trade name of ACMI of a type which ACMI obtained from ALC at the time of the acquisition of ACMI by respondent.

It is further ordered That, pending the divestiture required by this order, respondent shall not cause, and shall use its best efforts to prevent, any diminution of the value of the products or assets of ALC and shall preserve ALC as a viable, ongoing business. It is further ordered That, pursuant to the requirements of Paragraph I above, none of the assets of ALC shall be divested directly or indirectly to anyone who is, at the time of divestiture, an officer, director, employee, or agent of, or under the control direction, or influence of, respondent or any of respondent's subsidiaries or affiliated corporations, whether direct or indirect, or who owns or controls more than one (1) percent of the outstanding shares of the capital stock of respondent.

It is further ordered That, for a period of five (5) years from the date this order becomes final, neither respondent, nor its subsidiaries, affiliates, divisions, successors or assigns shall, without the prior approval of the Federal Trade Commission, directly or indirectly acquire more than one percent (10/0) of any stock, share capital, or equity interest in any concern, corporate or non corporate engaged , or any of the assets of such concern relating to, the manufacture distribution, or sale in the United States of urological catheters. It is further ordered That respondent shall, within ninety (90) days after the date of service of this order, and every ninety (90) days thereafter until respondent has fully complied with the divestiture provision of this order, and annually thereafter, for the duration of this order, submit in writing to the Federal Trade Commission a verified report setting forth in detail the manner and form in which respondent intends to comply, is complying or has complied with this .

Decision and Order 97 FTC. order. Until divestiture is accomplished, all compliance reports shall include, among other things that ate from time to tirtfe require, a summary of contacts or negotiations with anyone for the disposition of the assets or stock specified in Paragraph I of this order, the identity of all such persons and copies of all written communications between such persons and respondent.

VII It is further ordered That respondent notify the Federal Trade Commission at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of this order. THE COCA-COLA CO. 927 927 Modifying Orde