FTC Challenges Hologic/Fischer Imaging Deal

The Federal Trade Commission today announced its decision to challenge Hologic Inc.’s 2005 purchase of the breast cancer screening and diagnosis business of Fischer Imaging Corporation. In its complaint, the FTC alleged that Hologic’s acquisition of Fischer’s prone stereotactic breast biopsy systems (SBBSs) business harmed American consumers by eliminating its only significant competitor for the sale of SBBSs in the United States. In settling the Commission’s charges, Hologic is required to sell the Fischer prone SBBS assets to Siemens AG, a leader in the business of medical imaging.

“Left unchallenged, Hologic’s purchase from Fischer would have deprived American women of the benefits of competition for these critical healthcare services,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The Commission’s action today ensures that these essential services will be provided at lower prices and higher quality.”

Prone SBBSs

Prone SBBSs are integrated systems that allow doctors to conduct highly precise, minimally invasive breast biopsies using X-ray guidance. While there are several other methods of performing breast biopsies, including other minimally invasive systems and surgical biopsies, none are viable economic substitutes for prone SBBSs. Most hospitals, in fact, have the capability to perform breast biopsies using multiple methods to ensure that the most appropriate system is used for each patient’s procedure. Both the Hologic and Fischer SBBSs perform potentially life-saving services by enabling doctors to detect breast cancer at a critical early stage of development. More detailed information on prone SBBSs and other breast biopsy systems is available in the analysis to aid public comment in this matter on the FTC’s Web site.

The Consummated Transaction

On September 29, 2005, Hologic paid $32 million to acquire all of Fischer’s intellectual property and other assets related to its mammography and breast biopsy businesses, including patents, trademarks, and customer and vendor lists for Fischer’s prone SBBS product, MammoTest. At the time, Fischer was Hologic’s only significant competitor in the U.S. market for prone SBBSs. As a result of the acquisition, Fischer relinquished all of its rights to develop, market, and sell prone SBBSs in the United States. This left Hologic with a virtual monopoly in the U.S. prone SBBS market. Hologic’s acquisition of Fischer’s assets was not reportable under the Hart-Scott-Rodino Premerger Notification Act (HSR Act), as it was valued at less than the $56.7 million filing threshold.

The Commission’s Complaint

According to the Commission’s complaint, the acquisition violated Section 7 of the Clayton Act and Section 5 of the FTC Act, as amended, by eliminating Hologic’s only significant competitor in the U.S. market for prone SBBSs. While one other firm, Giotto USA, sells a prone SBBS in the United States, it is not a significant competitor, having achieved only minimal sales in its three years in the market. Further, it is unlikely, the FTC contends, that Giotto could significantly expand its U.S. sales because it does not have access to critical prone SBBS patents, and lacks the necessary infrastructure, track record, and reputation to compete effectively in this market.

In addition, there is little prospect for new entry by other competitors in the U.S. prone SBBS marketplace. The strength and breadth of Hologic’s patent portfolio in this area, including the patents it acquired from Fischer, effectively insulate the U.S. market from new entry. In fact, Hologic’s MultiCare prone SBBS product, the only such product ever to compete effectively with Fischer’s MammoTest, could only compete in the U.S. market under a license to the Fischer patents that Hologic acquired as part of the settlement of patent infringement litigation. Finally, other barriers to new entry exist, including research, development, and regulatory hurdles.

Terms of the Order

The FTC’s consent order is designed to remedy the competitive harm resulting from Hologic’s acquisition of Fischer’s prone SBBS assets. It requires Hologic to divest to Siemens all of the prone SBBS-related assets Hologic acquired from Fischer no later than five days after the consent order is accepted for public comment. Hologic will retain a license to Fischer’s prone SBBS patents to ensure that it can continue to compete in the U.S. prone SBBS market after the divestiture. Siemens is particularly well-positioned to manufacture and sell prone SBBSs in the United States, as it already is an established supplier of breast cancer-related imaging products, and has earned a strong reputation in the field of breast cancer screening and detection.

If the Commission determines that Siemens is not an acceptable purchaser of the prone SBBS assets, however, or that the manner of the divestiture is not acceptable, the order would require Hologic to unwind the sale and divest the assets to another FTC-approved buyer within six months of the order becoming final. If Hologic does not complete the divestiture within six months, the Commission may appoint a trustee to divest the assets.

The Commission vote to approve the consent order was 5-0. The order will be subject to public comment for 30 days, until August 5, 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 order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent order, 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: antitrust@ftc.gov; 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.

(FTC File No. 051-0263)