UNITED STATES OF AMERICA
In the Matter of
Tyco International Ltd., a corporation.
Docket No. C-3985
The Federal Trade Commission ("Commission"), having reason to believe that Respondent, Tyco International Ltd. ("Tyco"), a corporation subject to the jurisdiction of the Commission, has agreed to acquire Mallinckrodt Inc. ("Mallinckrodt"), a corporation subject to the jurisdiction of the Commission, in 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, 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:
1. "Acquisition Agreement" means the Agreement and Plan of Merger By and Among Tyco Acquisition Corp. VI (NV), EVM Merger Corp. and Mallinckrodt Inc. Including Guarantee of Tyco International Ltd., dated June 28, 2000.
2. "Endotracheal Tube" means a device inserted into the trachea via the nose or mouth and used to maintain an open airway and to administer anesthesia or oxygen, and any related accessories attached to the device used to accomplish those ends.
3. "Respondent" means Tyco.
II. THE PARTIES
4. Respondent Tyco International Ltd. is a corporation organized, existing and doing business under and by virtue of the laws of Bermuda with its office and principal place of business located at The Zurich Center, Second Floor, 90 Pitts Bay Road, Pembroke HM08, Bermuda. Tyco's principal operating subsidiary in the United States is located at One Tyco Park, Exeter, New Hampshire 03833. Respondent Tyco, among other things, is engaged in the manufacture and sale of Endotracheal Tubes.
5. Mallinckrodt is a corporation organized, existing, and doing business under and by virtue of the laws of the state of New York, with its principal executive offices located at 675 McDonnell Boulevard, St. Louis, Missouri, 63134. Mallinckrodt, among other things, is engaged in the manufacture and sale of Endotracheal Tubes.
6. Pursuant to the Acquisition Agreement, Tyco will acquire 100 percent of the outstanding voting securities of Mallinckrodt.
7. Respondent and Mallinckrodt are, and at all times relevant herein have been, engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and are corporations whose businesses are in or affect commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.
III. THE ACQUISITION
8. On June 28, 2000, Respondent and Mallinckrodt entered into an Agreement and Plan of Merger, under which Tyco is to acquire 100 percent of the voting securities of Mallinckrodt in a stock-for-stock transaction valued at approximately $4.2 billion ("Acquisition").
IV. THE RELEVANT MARKETS
9. For the purposes of this Complaint, the relevant line of commerce in which to analyze the effects of the Acquisition is the manufacture and sale of Endotracheal Tubes.
10. For the 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.
V. THE STRUCTURE OF THE MARKET
11. The market for the manufacture and sale of Endotracheal Tubes in the United States is highly concentrated. Tyco accounts for approximately 14% of the Endotracheal Tube market in the United States. Mallinckrodt is the leading supplier of Endotracheal Tubes in the United States with a market share of 72%. The proposed acquisition would provide Tyco with a combined market share in the Endotracheal Tube market of over 86%.
VI. BARRIERS TO ENTRY
12. The United States market for Endotracheal Tubes is characterized by significant barriers to entry. Entry into the endotracheal tube market in the relevant geographic area requires the development of a full line of products in a range of sizes and configurations, procurement of manufacturing equipment and establishment of production practices in conformity with FDA regulations, and development of a track record and customer acceptance. Entry into the Endotracheal Tube market in the United States would be relatively costly and is not likely to occur because sales opportunities would likely be too small to justify the costs and risks associated with new entry.
VII. EFFECTS OF THE ACQUISITION
13. The effects of the Acquisition, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the Endotracheal Tube market in the relevant area 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:
VIII. VIOLATIONS CHARGED
14. The Acquisition agreement described in Paragraph 8 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.
15. The Acquisition described in Paragraph 8, 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 FTC Act, as amended, 15 U.S.C. § 45.
WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this first day of December, 2000, issues its Complaint against said Respondent.
By the Commission.
Donald S. Clark