Medtronic, Inc

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IN THE MA TTER OF MEDTRONIC, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLA TION OF SEe. 7 OF THE CLA YTON ACT AND SEe. OF THE FEDERAL TRADE COMMISSION ACT Docket C-3842. Complaint, Dec. 1998--Decision, Dec. , 1998 This consent order allows Medtronic, Inc., a Minnesota-based corporation that manufactures and sells medical devices, to acquire Physio-Control International Corporation s automated external defibrillator business, and requires, among other things, that Medtronic limit its interest in SurVivaLink to that ofa passive investor and prohibits Medtronic from naming a member to SurVivaLink's Board of Directors.

Participants For the Commission: Norman Armstrong, Jr. , Andrew J. Topps, Ann Malester, Willam Baer, Bart Wilson and Jonathan Baker. F or the respondent: Philip Larson, Hogan Hartson Washington COMPLAINT The Federal Trade Commission ("Commission ), having reason to believe that respondent, Medtronic, Inc. ("Medtronic ), a corporation subject to the jurisdiction ofthe Commission, has agreed to acquire all of the voting stock of Physio-Control International Corporation ("Physio-Control" ), a corporation subject to the jurisdiction of the Commission, in violation of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U. c. 45 , and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

I. DEFINITO'iS 1. "Automated External Defibrilators means portable automated devices used in emergency situations by persons with limited or no medical training to diagnose and treat persons suffering from sudden cardiac arrest.

Complaint t26FTC 2. " SurVivaLink" means SurVivaLink Corporation, a Minnesota corporation, with its principal place of business located at 5420 Feltl Road, Minnetonka, Minnesota. SurVivaLink is engaged in, among other things, the research, development, manufacture and sale of Automated External Defibrillators.

3. "Investment Agreements means the Investment Agreement dated April 29, 1994 , by and among SurVivaLink Corporation Medtronic, Inc. and the following shareholders of SurVivaLink: Bryon 1. Gilman, Karl J.F. Kroll, Kenneth C. Maki, and Mark W. Kroll; and the Investment Agreement dated October 31 , 1996, by and among SurVivaLink Corporation and Medtronic, Inc. 4. "Respondent means Medtronic.

11. RESPONDENT 5. Respondent Medtronic is a corporation organized, existing, and doing business under and by virtue of the laws of the state Minnesota, with its principal place of business located at 7000 Central Avenue, Northwest, Minneapolis, Minnesota. Respondent is engaged in, among other things, the research, development manufacture and sale of a wide-range of medical devices. 6. Through the Investment Agreements, respondent owns below ten (10) percent of the overall securities in SurVivaLink, and possesses a number of rights, including but not limited to: (a) the right to receive competitively sensitive non-public information relating to SurVivaLink; (b) the right to appoint one member to SurVivaLink' s Board of Directors; and (c) the right to vote on all matters requiring a shareholder vote.

7. Respondent is, and at all times relevant herein has been engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U. c. 12, and is a corporation whose business is in or affects commerce as "commerce " is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 c. 44.

II THE ACQUIRED COMPANY 8. Physio-Control is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Washington with its principal place of business located at 11811 Willows Road , Redmond, Washington. Physio-Control is engaged in, among MEDTRONIC, INe. 867 86S Complaint other things, the researeh, development, manufacture and sale of Automated External Defibri1ators.

9. Physio-Control is, and at al1 times relevant herein has been engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U. c. 12, and is a corporation whose is defined inbusiness is in or affects commerce as "commerce" 15Section 4 of the Federal Trade Commission Act, as amended, c. 44.

IV. THE ACQUISITON 10. On June 27 1998, Medtronic entered into an Agreement and Plan of Merger with Physio-Control to acquire al1 of the voting stock of Physio-Control in exchange for Medtronic voting stock valued at $530 million.

V. THE RELEV ANT MARKET 11. For purposes ofthis complaint, the relevant line of commerce in which to analyze the effects of the Acquisition is the research development, manufacture and sale of Automated External Defibrillators. 12. For purposes of this complaint, the United States is the relevant geographic area in which to analyze the effects of the Acquisition in the relevant line of commerce. VI. STRUCTURE OF THE MARKET 13. The market for the research, development, manufacture and sale of Automated External Defibril1ators is highly concentrated as measured by the Herfindahl-Hirschman Index ("HHI"). SurVivaLink and Physio-Control are two of only three significant suppliers of Automated External Defibrillators in the United States. 14. Medtronic, through its ownership interest in SurVivaLink, and Physio-Control are actual, direct competitors in the relevant market for the research, development, manufacture and sale of Automated External Defibrillators in the United States. VII. BARRIERS TO E?-TR Y 15. Entry into the market for the research, development manufacture and sale of Automated External Defibrillators is unlikely and would not occur in a timely manner to deter or counteract the adverse competitive effects described in paragraph sixteen, because , among other things, the time and expense required to design and Decision and Order 126 F. develop a competitively viable product, obtain approvals from the United States Food and Drug Administration necessary to manufacture and sell Automated External Defibrillators in the United States, and establish a sales and distribution network. VII EFFECTS OF THE ACQUISITON 16. The effects of the Acquisition, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the relevant market in violation of Section 7 of the Clayton Aet, as amended, l5 U. c. 18, and Section 5 of the FTC Act, as amended 15 U.S.C. 45, in the following ways, among others: A. By eliminating actual, direct and substantial competition between respondent, through Survival ink, and Physio-Control in the relevant market;

B. By increasing the likelihood of collusion or coordinated interaction among the firms in the relevant market; C. By increasing the likelihood that customers of Automated External Defibrillators would be forced to pay higher prices; and D. By reducing innovation in the relevant market. IX. VIOLATIONS CHARGED 17. The Acquisition agreement described in paragraph ten constitutes a violation of Section 5 of the FTC Act, as amended, 15 c. 45.

18. The Acquisition described in paragraph ten, if consummated would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the FTC Act, as amended 15 U. C. 45.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of the proposed acquisition by respondent of Physio-Control International Corporation ("Physio-Control" ) and the respondent having been furnished thereafter with a copy of a draft of complaint that the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violations of Section 7 of the Clayton Act, as MEDTRONIC, INC. 869 86S Decision and Order amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U. c. 45; and Respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by 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, or that the facts as alleged in such complaint, other than jurisdictional facts, are true 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 a 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 described in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order;

I. Respondent Medtronic, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the state of Minnesota, with its office and principal place of business located at 7000 Central Avenue, Northwest, Minneapolis, Minnesota. 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, as used in this order, the following definitions shall apply:

A. Medtronic or respondent means Medtronic, Inc. , its directors, offcers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Medtronic, Inc, not including Survival ink Corporation, and the respective directors, offcers, employees, agents, representatives successors, and assigns of each.

Decision and Order 126 F. B. SurVivaLink" means Survival ink Corporation, a corporation organized, existing and doing business under the laws of Minnesota with its headquarters located at 5420 Feltl Road, Minnetonka Minnesota, its directors, offcers, employees, agents, representatives successors, and assigns; its subsidiaries, divisions, groups and affliates controlled by SurVivaLink Corporation, and the respective directors, offcers, employees, agents, representatives, successors, and assigns of each.

C. Physio- Control" means Physio-Control International Corporation, a corporation organized, existing and doing business under the laws of Washington with its headquarters located at 11811 Willows Road, N. , Redmond, Washington, its directors, officers employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups and affliates controlled by Physio- Controllntemational Corporation, and the respective directors, offcers employees, agents, representatives, successors, and assigns of each. D. Commission means the Federal Trade Commission. E. Ownership Interest means any right(s), present or contingent to hold voting or nonvoting interest(s), equity interest(s), and/or beneficial ownership(s) in the capital stock of Survival ink. F. Voting Agreements means the Agreement Regarding The Election of Director by and among SurVivaLink Corporation, the purchasers of the Company s Series A Convertible Preferred Stock and the persons named in Appendix B of that agreement ("the Shareholders ) and the Agreement Regarding Election of Directors made on June 12, 1997, by and among SurVivaLink and its stockholders. G. The Rights of First Refusal Agreement means the Rights of First Refusal Agreement signed by Medtronic, Inc. on May 8, 1997. H. Contractual Agreements means the following agreements: the Investment Agreement made and entered into as of April 29 1994, by and among SurVivaLink Corporation and Medtronic and the following shareholders of Survival ink: Byron 1. Gilman, Karl J. Kroll, Kenneth C. Maki, and Mark W. Kroll; the Investment Agreement made and entered into as of October 31 , 1996, by and among SurVivaLink Corporation and Medtronic, Inc. ; Voting Agreements; the Rights of First Refusal Agreement; the Amended and Restated Promissory Note dated May 12 , 1997 , between Medtronic and SurVivaLink; and any other agreements between Medtronic and Survival ink relating to Medtronic s Ownership Interest in SurVivaLink.

MEDTRONIC, INC. 871 865 Decision and Order II.

It is further ordered That:

A. Within ten (10) days of the date on which the Commission accepts the agreement containing consent order for public comment respondent shall delegate its voting rights held pursuant to all of its Ownership Interests to SurVivaLink in a manner that directs and authorizes SurVivaLink to cast any votes related to such interest in each class of SurVivaLink capital stock in an amount and manner proportional to the vote of all other votes cast by other SurVivaLink shareholders in such class on a particular matter; provided, however that in any voting matter to which either or both of the Voting Agreements may apply, such delegation shan direct and authorize Survival ink to cast any votes related to Medtronic s Ownership Interests in accordance with such Voting Agreement(s). Should any such delegation expire by operation of Minnesota law or otherwise respondent shan redelegate its rights to SurVivaLink prior to such expiration. Provided, however, that respondent' s delegation of its rights as to a particular Ownership Interest may terminate upon respondent' complete and absolute divestiture of that Ownership Interest. B. Respondent shan not sell or otherwise transfer any of its Ownership Interest to an acquirerwithout permitting SurVivaLink the opportunity to purchase such interest in accordance with the terms of the Rights of First Refusal Agreement, including Section 6 of such agreement.

C. Respondent shan not join a partnership, limited partnership, syndicate or other group, or otherwise act in concert with any other person, for the purpose of acquiring, holding, voting, or disposing of an Ownership Interest in Survival ink.

D. Respondent shall not acquire or exercise any present or contingent right to acquire any additional Ownership Interest in SurVivaLink without providing thirty (30) days' prior written notice to the Commission. In the event that respondent learns that one of its respective employees, agents, or representatives has engaged in such an acquisition or exercise on bis or her own initiative and not on behalf of respondent, respondent shan provide written notice of such acquisition or exercise to the Commission within ten (10) days after respondent learns of such acquisition or exercise. Nothing in paragraph II.D shan be construed to prevent Medtronic from receiving stock dividends which are issued to SurVivaLink share- Decision and Order 126 F. holders in proportion to their respective voting Ownership Interests. Medtronic shall provide written notice to the Commission of its receipt of any such dividend within ten (10) days of such receipt. It is further ordered That respondent shall not: A. Exercise any right to name, nominate or vote for a member of SurVivaLink' s Board of Directors;

B. Participate in the formulation, determination or direction of any business decisions of SurVivaLink;

C. Propose corporate action requiring the approval of SurVivaLink shareholders;

D. Have any of its directors, offcers or employees serve simultaneously as an officer or director of SurVivaLink; E. Inspect or otherwise obtain aecess to the books and records of SurVivaLink (other than the stock register), even if respondent is entitled to such access pursuant to Minnesota Law, the Contractual Agreements, or otherwise; provided, however, that nothing in paragraph II.E shall prohibit Medtronic, after written notice to the Commission, from seeking or obtaining discovery in any litigation or other proceeding to resolve a claim between SurVivaLink and Medtronic in accordance with the procedures of the forum before which the dispute is pending. With respect to any such discovery, respondent shall enter into a protective order to prevent any information from being used for any purpose other than providing legal representation or evidence as to the particular dispute and to prevent any information from being disclosed to any person(s) not necessary to the resolution of such dispute; and F. Obtain information from SurVivaLink other than documents available to the general public, except as permitted under paragraph II.E IV.

It is further ordered That respondent shall designate an outside agent to receive such information from SurVivaLink as required to be provided by SurVivaLink pursuant to applicable state law and such additional information as would normally be provided to the other shareholders of SurVivaLink. Such information is limited to information provided to a shareholder by virtue of such shareholder ownership of the shares of SurVivaLink and not as a result of such MEDTRONIC, INC. 873 865 Decision and Order shareholder s position as an offcer, director or employee of Survival ink. Such information shall not be disseminated to respondent but may only be used by the outside agent to solicit offers for respondent s Ownership Interests or to render an opinion to the respondent as to the overall percentage and value of respondent's Ownership Interests. Such an opinion may disclose the types of information relied upon in formulating such an opinion but shall not disclose any specific information regarding Survival ink. Respondent shall notify the Commission and SurVivaLink as to the identity of such outside agent and any change as to the identity of the outside agent to which this information is to be sent. It is filrther ordered That within ten (10) days of the date on which the Commission accepts the agreement containing consent order for public comment, respondent shall return or submit to SurVivaLink al1 documents, including al1 copies, whether created by SurVivaLink or any other person, in the possession ofMedtronic that contain any trade secrets or other confidential non-public information commercial information or financial information, other than the Contractual Agreements, received from or relating to SurVivaLink including, but not limited to, al1 documents received from SurVivaLink pursuant to the Contractual Agreements. VI.

It is further ordered That within thirty (30) days of the date on which this order becomes final, respondent shall distribute a copy of this order to each of its U. S. based directors, offcers and employees. VII.

It is further ordered That within ten (l 0) days of the date on which the Commission accepts the agreement containing consent order for public comment, respondent shall deliver a copy of this agreement to SurVivaLink by certified or registered U.S. mail. VII It is further ordered That within sixty (60) days of the date this order becomes final and annually thereafter on the anniversary of the date this order becomes final, Medtronic shall submit to the Decision and Order 126 F. Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with the provisions of this order. Medtronic shall include in its compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with this order, including a description of all substantive eontacts or negotiations with SurVivaLink, including the identity of all parties contacted. Medtronic shall include in its compliance reports copies ofall written communications between Medtronic and SurVivaLink and all written communications between Medtronic and the outside agent designated in paragraph IV.

IX.

It is further ordered That, for the purpose of determining or securing compliance with this order, and subject to any Jegally recognized privilege, upon written request and on reasonable notice to respondent, respondent shall permit any duly authorized representatives of the Commission:

A. Access, during offce hours and in the presence of counsel, to any facilities and access to inspect and copy all books, ledgers, accounts correspondence, memoranda and other records and documents in the possession or under the control of respondent, relating to any matters contained in this consent order; and B. Upon five (5) days' notice to respondent, and without restraint or interference from respondent, to interview officers or employees of respondent, who may have counsel present, regarding such matters. It is further ordered That respondent shall notify the Commission at least thirt (30) days prior to any change in respondent such as dissolution, assignment or sale resulting in the emergence of a successor, the creation or dissolution of subsidiaries or any other change that may affect compliance obligations arising out of the order. XI.

It isfurther ordered That this order shall terminate on the earliest of: (I) respondent's absolute and complete divestiture of all of its Ownership Interest in Survival ink; (2) respondent' s absolute and complete divestiture of all of the assets or securities of Physio- Control held by Medtronic; or (3) on December 21 , 2018. SHELL OIL COMPANY, ET AL. 875 87S Complaint