The Federal Trade Commission today charged that Thermo Electron Corporation’s proposed $12.8 billion acquisition of Fisher Scientific International, Inc. would harm competition in the U.S. market for high-performance centrifugal vacuum evaporators (CVEs) in violation of the antitrust laws.
Thermo and Fisher are the only two significant suppliers of high-performance CVEs in the United States and the proposed transaction would eliminate the direct price, service, and innovation competition that exists between them. To settle the Commission’s charges, Thermo is required to divest Fisher’s Genevac division, which includes Fisher’s entire CVE business, within five months of the date the consent agreement was signed.
“High-performance CVEs play an important role in the U.S. healthcare industry as one of the tools scientists use in discovering new drugs to fight disease,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The Commission’s action today preserves competition for these critical devices, preventing the adverse effects on price, service, and product features the transaction would likely have caused.”
High-Performance CVEs: High-performance CVEs are used primarily in combinatorial chemistry labs, such as those engaged in drug discovery and research, to process large collections of potentially biologically active molecules at the same time – a process known as parallel synthesis. By applying a combination of heat, vacuum, and centrifugal force, high-performance CVEs rapidly remove solvents from samples suspended in solution in the wells of microtiter plates or test tubes without causing molecular degradation or cross-contamination of the samples.
High-performance CVEs differ from their lower-performance counterparts in that they can process hundreds of samples at a time, achieve higher evaporation rates, include specific capabilities to help prevent cross-contamination of samples, and are compatible with corrosive and environmentally sensitive solvents. Because of these features, high-performance and lower-performance CVEs are not considered interchangeable by purchasers.
Parties to the Proposed Transaction: Thermo, headquartered in Waltham, Massachusetts, is one of the largest and most diversified suppliers of analytical instruments in the world. The company employs 11,000 people worldwide, maintains offices in 30 countries, and owns many well-known laboratory equipment brands, including Savant Speedvac, which offers high-performance CVEs.
Fisher is based in Hampton, New Hampshire, and employs 19,500 people worldwide, most of whom work in the United States. The company has many well-known laboratory, scientific equipment, and instrument brands and sells its CVE products under the Genevac brand. Fisher sells approximately 600,000 scientific and laboratory products and serves more than 350,000 customers worldwide.
Under the terms of an agreement dated May 7, 2006, Thermo proposes to buy Fisher for approximately $12.8 billion.
The Commission’s Complaint: According to the Commission’s complaint, Thermo’s acquisition of Fisher as proposed would violate Section 7 of the Clayton Act and Section 5 of the FTC Act, as amended, by lessening competition in the U.S. market for high-performance CVEs. Thermo and Fisher are the only two significant suppliers in the approximately $10 million U.S. market for high-performance CVEs, accounting for approximately 30 percent and 70 percent market share, respectively. As a result of the competition between Thermo and Fisher, purchasers of high-performance CVEs receive lower prices and other economic benefits, such as favorable service or payment terms. The parties also compete directly on the basis of product performance, features, and innovation resulting in significant product improvements, such as enhanced vacuum and monitoring capabilities. This competition would be eliminated by the transaction as proposed, and the transaction would have left Thermo with a virtual monopoly.
Entry into the high-performance CVE market would neither be timely nor sufficient to counteract the alleged anticompetitive impact of the proposed acquisition in this market. The specific barriers to entry in the high-performance CVE market are detailed in the Analysis to Aid Public Comment on this matter, which can be found on the FTC’s Web site as a link to this press release.
Terms of the Consent Agreement: The consent agreement is designed to remedy the alleged anticompetitive effects of Thermo’s proposed acquisition of Fisher. Under its terms, Thermo is required to divest Genevac, Fisher’s stand-alone CVE business, to a Commission-approved buyer within five months of signing the consent agreement. If Thermo is not able to find an acceptable buyer within that time, the consent agreement allows the FTC to appoint a trustee to oversee the sale of the assets. The trustee would then have six months to sell the assets to a Commission-approved buyer.
The consent agreement contains an Order to Hold Separate and Maintain Assets that requires Thermo to maintain the viability of Genevac pending its divestiture. This order is designed to prevent interim harm to competition in the high-performance CVE market before the divestiture takes place and ensure that no material confidential information is shared between Thermo and Genevac. The Commission has appointed Harry Cole, a former Genevac executive, to serve as Hold Separate Trustee and oversee Thermo’s compliance with the Order to Hold Separate and Maintain Assets. The consent agreement also contains provisions designed to ensure that the divestiture is successful and that the parties comply with its terms.
The Commission voted to approve the consent agreement 5-0. The consent agreement will be subject to public comment for 30 days, until November 15, 2006, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent agreement on a final basis, it carries the force of law with respect to future actions. Each violation of such an agreement may result in a civil penalty of $11,000.
Copies of the complaint, consent agreement, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: email@example.com; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.