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1
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DECISION & ORDER
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EXTRACTED KEY WORDS
SANDOZ COMMISSION RESPONDENT NOVARTIS ANIMAL HEALTH BUSINESS AGREEMENT PATENT COMPETITION MERGER TRUSTEE HSV-TK LICENSE COMPLAINT PARAGRAPH GENE THERAPY PATENT RIGHTS AGRICULTURAL CHEMICALS FEDERAL TRADE COMMISSION SUBSIDIARIES UNITED STATES CYTOKINE LICENSED PRODUCT DIVESTITURE HEALTH BUSINESS ACQUIRER HSV-TK LICENSEE FLEA CONTROL PRODUCTS RPR RESPONDENT CHIRON METHOPRENE LICENSED PRODUCTS CORN HERBICIDE BUSINESS |
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Robert Pitofsky, Chairman
Mary L. Azcuenaga
Janet D. Steiger
Roscoe B. Starek, III
Christine A. Varney
______________________________ )
In the Matter of ))
Ciba-Geigy Limited, )
a corporation, ))
Ciba-Geigy Corporation, )
a corporation, ))
Chiron Corporation, )
a corporation, ) Docket No. C-3725
)
Sandoz Ltd., ) DECISION AND
a corporation, ) ORDER
)
Sandoz Corporation, )
a corporation, and ))
Novartis AG, )
a corporation. )
______________________________)
The Federal Trade Commission having initiated an investigation of the proposed merger
between respondent Ciba-Geigy Limited, including its wholly-owned subsidiary Ciba-Geigy
Corporation, and respondent Sandoz Ltd., including its wholly-owned subsidiary, Sandoz
Corporation, into respondent Novartis AG, and respondents 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 respondents with violations
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
The respondents, their attorneys, and counsel for the Commission having thereafter
executed an agreement containing a consent order, an admission by respondents of all the
jurisdictional facts set forth in the aforesaid draft of the complaint, a statement that the
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2
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CONSENT AGREEMENT
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EXTRACTED KEY WORDS
RESPONDENTS COMMISSION NOVARTIS ANIMAL HEALTH BUSINESS AGREEMENT PROPOSED RESPONDENTS CHIRON DIVEST ASSETS TRUSTEE HSV-TK PATENT PARAGRAPH FEDERAL TRADE COMMISSION CONSENT ORDER CIBA AGRICULTURAL CHEMICALS SUBSIDIARIES PATENT RIGHTS UNITED STATES HSV-TK LICENSEE GENE THERAPY HEALTH BUSINESS ACQUIRER CYTOKINE LICENSED PRODUCT DIVESTITURE FLEA CONTROL PRODUCTS METHOPRENE RPR HEREINAFTER |
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
____________________________)
In the Matter of ))
Ciba-Geigy Limited, )
a corporation, ))
Ciba-Geigy Corporation, )
a corporation, ))
Chiron Corporation, )
a corporation, ) File No. 961-0055
)
Sandoz Ltd., )
a corporation, ))
Sandoz Corporation, )
a corporation, and ))
Novartis AG, )
a corporation. )
____________________________)
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission ("Commission"), having initiated an investigation of the
proposed merger ( Merger ) between Ciba-Geigy Limited, including its wholly-owned subsidiary
Ciba-Geigy Corporation (collectively, Ciba ), and Sandoz Ltd., including its wholly-owned
subsidiary, Sandoz Corporation (collectively, Sandoz ), into Novartis AG ("Novartis"), and it
now appearing that Ciba, Sandoz, Novartis, and Chiron Corporation ( Chiron") in whom Ciba-
Geigy Limited, together with its subsidiaries, is the largest shareholder, holding as of September
30, 1996, not solely as an investment, approximately 46.5% of the Chiron capital stock,
hereinafter sometimes collectively referred to as "Proposed Respondents," are willing to enter into
an agreement containing an Order to divest certain assets and businesses and to provide for other
relief:
IT IS HEREBY AGREED by and between Proposed Respondents, by their duly
authorized officers and attorneys, and counsel for the Commission that:
Ciba-Geigy Limited and Sandoz Ltd.
Agreement Containing Consent Order Page 2 of 36
1. Proposed Respondent Ciba-Geigy Limited is a corporation organized, existing and
doing business under and by virtue of the laws of Switzerland with its office and principal place of
business located at Klybeckstrasse 141, CH-4002 Basel, Switzerland.
2. Proposed Respondent Ciba-Geigy Corporation, a wholly-owned subsidiary of
Ciba-Geigy Limited, is a corporation organized, existing, and doing business under and by virtue
of the laws of New York with its office and principal place of business located at 520 White
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3
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COMPLAINT
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EXTRACTED KEY WORDS
GENE THERAPY FLEA CONTROL PRODUCTS ACT CORN HERBICIDE FEDERAL TRADE COMMISSION VIRTUE RESPONDENT CIBA-GEIGY MARKET CIBA SALES PROPOSED MERGER CLAYTON ACT NOVARTIS VIOLATION PATENTS COMMERCIALIZE CLINICAL DEVELOPMENT UNITED STATES BROADLEAF WEEDS GENE THERAPY TECHNOLOGIES MANUFACTURING TREATED ACRES COMPETITION AGREEMENTS HSV-TK GENE THERAPY COMMERCIAL DEVELOPERS COMMERCIALLY DEVELOPING PATENT APPLICATIONS JURISDICTION |
9610055
B216805
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
____________________________ )
In the Matter of ))
Ciba-Geigy Limited, )
a corporation, ))
Ciba-Geigy Corporation, )
a corporation, )
)
Chiron Corporation, )
a corporation, ) Docket No. C-3725
)
Sandoz Ltd., )
a corporation, ))
Sandoz Corporation, )
a corporation, and ) )
Novartis AG, )
a corporation. )
___________________________ )
COMPLAINT
Pursuant to the provisions of the Federal Trade Commission Act and of the Clayton Act,
and by virtue of the authority vested in it by said Acts, the Federal Trade Commission (the
"Commission"), having reason to believe that respondents Ciba-Geigy Ltd., a corporation
including its wholly-owned subsidiary, Ciba-Geigy Corporation, (collectively, "Ciba"), and
Sandoz Ltd., a corporation, including its wholly-owned subsidiary, Sandoz Corporation,
(collectively, "Sandoz"), corporations subject to the jurisdiction of the Commission, have agreed
to merge into Novartis Ltd. ("Novartis"), a corporation, 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:
I. RESPONDENTS
1. Respondent Ciba-Geigy Limited is a corporation organized, existing and doing
business under and by virtue of the laws of Switzerland, with its office and principal place of
business located at Klybeckstrasse 141, CH-4002 Basel, Switzerland. Ciba operates in the United
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4
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AZCUENAGA STATEMENT
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EXTRACTED KEY WORDS
GENE THERAPY PATENT SANDOZ VIVO PATENT DIVESTITURE COMPLAINT CIBA-GEIGY REMEDY ALLEGES COMPETITION MERGER LICENSING REQUIREMENT MARKET INTELLECTUAL PROPERTY COMPULSORY LICENSING COMMISSION CLAYTON ACT INVENTION CONTROL GENE THERAPY BUSINESS CHIRON NIH HSV-TK GENE THERAPY TECHNOLOGY VALIDITY AGENCY ANTITRUST FTC DELIVERY |
STATEMENT OF COMMISSIONER MARY L. AZCUENAGA,
CONCURRING IN PART AND DISSENTING IN PART,
in Ciba-Geigy Limited, Docket C-3725
The order in this matter seeks to remedy the alleged anticompetitive
effects of the merger of Ciba-Geigy Limited and Sandoz Ltd. in several
product markets, corn herbicides, flea control products, and various
gene therapy markets. I concur in the requirements of the order that
the merged firm, Novartis, divest the corn herbicide business and the
flea control product business that belonged to Sandoz. I do not concur
with the order in the gene therapy markets, in which the Commission
has bypassed the obvious, simple and effective remedy of divestiture
in favor of a complex regulatory concoction that promises to be less
effective and more costly.
Given the allegations of the complaint, the obvious remedy in the gene
therapy markets is to require the divestiture of the gene therapy
business of either Ciba-Geigy or Sandoz. A divestiture of GTI or of
Ciba-Geigy's interest in Chiron would eliminate the alleged
anticompetitive overlaps in the gene therapy markets and preserve the
competition that existed before the merger. It is a remedy that would
be simple, complete, and easily reviewable. Normally, divestiture
would be the remedy of choice, and no persuasive reason for a
different remedy has been presented in this case.
The order of the Commission instead imposes licensing requirements
that do not necessarily preserve the competition that existed before
the merger. The only explanation offered for preferring licensing over
an asset divestiture is the assertion in the Analysis To Aid Public
Comment that a divestiture "might create a substantial disruption in
the parties' research and development efforts." What this means is not
clear. Any divestiture is likely to involve substantial disruption,
and if concerns about "disruption" were sufficient to avert a
divestiture, that remedy would never be used. No doubt the parties
prefer the negotiated licensing arrangement, but the preferences of
the parties should not define the remedy.
The implication that divestiture in this case somehow would be
counterproductive does not ring quite true. This is an industry in
which cooperative research and development often is undertaken and in
which innovative companies frequently change hands. Indeed, Ciba-Geigy
and Sandoz only recently acquired their interests in the gene therapy
field. The gene therapy products at issue require years of research,
and the FDA approval process also takes years. If the respective
acquisitions by Ciba-Geigy and Sandoz in 1994 and 1995 of gene therapy
companies did not hamper ongoing and future R&D projects, one must
wonder why a divestiture in 1997 of one of those companies would be
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5
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PITOFSKY STATEMENT
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EXTRACTED KEY WORDS
COMMISSION PATENT COMPETITION GENE THERAPY DIVESTITURE MERGER FIRM SANDOZ GENE THERAPY PRODUCTS RIGHTS COMPLAINT COMMISSIONER AZCUENAGA REMEDY CIBA MERGED FIRM INTELLECTUAL PROPERTY ROYALTY TECHNOLOGIES CONTROL PRESERVING BUSINESS PARTIES MARKET COMMERCIALIZE CRITICISM PORTFOLIOS PRICE VIVO PATENT RPR |
SEPARATE STATEMENT OF CHAIRMAN ROBERT PITOFSKY, AND
COMMISSIONERS JANET D. STEIGER, ROSCOE B. STAREK, III,
AND CHRISTINE A. VARNEY
in Ciba-Geigy, Ltd., C-3725
We write to respond to Commissioner Azcuenaga's suggestion that the
Commission erred by requiring licensing rather than divestiture in
order to remedy competitive problems in the gene therapy markets.
The Commission's Complaint in this matter alleges that the merger of
Ciba-Geigy Ltd. ("Ciba") and Sandoz Ltd. ("Sandoz") may substantially
lessen competition or tend to create a monopoly in several gene
therapy markets, including "gene therapy technologies" and "research
and development of gene therapies" as well as specific gene therapy
product markets. No gene therapy product is currently marketed or even
approved by the Food and Drug Administration, and none is expected to
obtain regulatory approval until the year 2000. The Complaint notes,
however, that sales of gene therapy products are projected to reach
$45 billion by 2010. The Complaint emphasizes that patent rights to
proprietary inputs sufficient to provide a firm in this industry with
reasonable assurances of freedom to operate are necessary for the firm
to reach advanced stages of development. Moreover, the Complaint
alleges not only that Ciba and Sandoz "are two of only a few" entities
capable of commercially developing gene therapy products, but also
that they "control the substantial proprietary rights necessary to
commercialize gene therapy products" and "control critical gene
therapy proprietary portfolios, including patents, patent
applications, and know-how." We are left with a post-merger picture of
potentially life-saving therapies whose competitive development could
be hindered by the merged firm's control of substantially all of the
proprietary rights necessary to commercialize gene therapy products.
Preserving long-run innovation in these circumstances is critical.
Commissioner Azcuenaga argues that the Commission should have required
the divestiture of Ciba's or Sandoz's gene therapy businesses, rather
than licensing, in order to "preserve the competition that existed
before the merger." Of course, an injunction or divestiture is often
the remedy chosen to resolve competition problems arising from mergers
and acquisitions. In this case, however, patent licensing not only
alleviated the competitive problems but also avoided divestiture's
potentially disruptive effects on the parties' ongoing research.
As the Commission explained in the Analysis to Aid Public Comment that
accompanied acceptance of the proposed consent agreement in this case,
licensing was as effective in preserving competition as the
traditional remedy of divestiture:
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