9810329
B257370

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of
Medtronic, Inc. a corporation.

Docket No. C-3879
COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("Commission"), having reason to believe that respondent Medtronic, Inc. ("Medtronic"), a corporation, has entered into an agreement and plan of merger with Avecor Cardiovascular, Inc. ("Avecor"), a corporation, whereby Medtronic proposes to acquire all of the outstanding common stock of Avecor, that such agreement and plan of merger violates Section 5 of the Federal Trade Commission Act, 15 U.S.C.  45, as amended, and that such agreement and plan of merger, if consummated would violate Section 7 of the Clayton Act, 15 U.S.C. 18, as amended, and Section 5 of the Federal Trade Commission Act, 15 U.S.C.  45, as amended, 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. RESPONDENT

1. 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, Northeast, Minneapolis, Minnesota 55432.

2. Respondent Medtronic is, and at all times relevant herein has been, engaged in the research, development, manufacture and sale of medical devices, including implantable devices, such as pacemakers and defibrillators, that regulate heart rhythm, tissue and mechanical heart valves, coronary stents, and perfusion devices that are used in heart/lung machines. Medtronic's perfusion devices include non-occlusive arterial pumps.

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

II. THE ACQUIRED COMPANY

4. Avecor is a corporation organized, existing and doing business under the laws of the State of Minnesota with its office and principal place of business located at 7611 Northland Drive, Minneapolis, Minnesota, 55428.

5. Avecor is, and at all times relevant herein has been, engaged in, the research, development, manufacture and sale of perfusion devices used in heart/lung machines, including non-occlusive arterial pumps.

6. Avecor 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.S.C.  12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C.  44.

III. THE PROPOSED ACQUISITION

7. Pursuant to an agreement and plan of merger, dated July 12, 1998, as amended, Medtronic intends to acquire all of the outstanding common voting stock of Avecor in exchange for stock of Medtronic valued at approximately $106 million.

IV. TRADE AND COMMERCE

8. Perfusion devices are the blood-handling products used in heart/lung machines. These devices circulate and oxygenate the blood and regulate body temperature during heart bypass surgery and other procedures where the heart must be relieved of its pumping function. Arterial pumps are the devices that circulate the blood. Non-occlusive arterial pumps are safer and less damaging than occlusive arterial pumps. There are no close substitutes for non-occlusive arterial pumps.

9. The research, development, manufacture and sale of non-occlusive arterial pumps is a relevant line of commerce in which to evaluate the effects of this proposed acquisition.

10. The United States as a whole is the relevant section of the country in which to evaluate the effects of this proposed acquisition on the research, development, manufacture and sale of non-occlusive arterial pumps.

11. The United States market for research, development, manufacture and sale of non-occlusive arterial pumps is highly concentrated and would become significantly more concentrated as a result of the proposed acquisition. Premerger concentration in the research, development, manufacture and sale of non-occlusive arterial pumps, as measured by the Herfindahl-Hirschman Index, is over 5700, and as a result of the proposed acquisition concentration would increase by more than 340 points to a level of more than 6050.

12. Entry into the United States market for research, development, manufacture and sale of non-occlusive arterial pumps is difficult and would not be timely, likely or sufficient to prevent anticompetitive effects that may result from the proposed acquisition.

V. VIOLATIONS CHARGED

13. Respondent Medtronic and Avecor are actual competitors in the United States market for research, development, manufacture and sale of non-occlusive arterial pumps.

14. The effects of the proposed acquisition, if consummated, may be substantially to lessen competition or to tend to create a monopoly in the United States market for research, development, manufacture and sale of non-occlusive arterial pumps in violation of Section 7 of the Clayton Act, as amended, 15 U.S.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 Medtronic and Avecor in the United States market for research, development, manufacture and sale of non-occlusive arterial pumps;

b. by increasing the likelihood that Medtronic would unilaterally exercise market power in the United States market for research, development, manufacture and sale of non-occlusive arterial pumps;

c. by increasing the likelihood that consumers in the United States will be charged higher prices for non-occlusive arterial pumps; and

d. by reducing the likelihood of innovation in the United States market for the research, development, manufacture and sale of non-occlusive arterial pumps.

VI. STATUTES VIOLATIONS

15. The agreement and plan of merger between Medtronic and Avecor constitutes a violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45.

16. The proposed acquisition, if consummated, would constitute a violation of 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 WITNESS WHEREOF, the Federal Trade Commission has caused this complaint to be signed by the Secretary and its official seal to be affixed, at Washington, D.C., this third day of June, 1999.

By the Commission.
SEAL:
Donald S. Clark
Secretary