FTC Puts Conditions on LabCorp's Acquisition of Rival Orchid Cellmark, Inc.

The Federal Trade Commission will require laboratory testing companies Laboratory Corporation of America Holdings (LabCorp) and Orchid Cellmark Inc. (Orchid) to divest a portion of Orchid's paternity testing business, to resolve the FTC complaint alleging that LabCorp's $85.4 million acquisition of Orchid would have an anticompetitive impact in the market for paternity testing services used by government agencies.

The proposed settlement with LabCorp and Orchid is the most recent example of the FTC's ongoing effort to promote competition in the health care sector, which benefits U.S. consumers by keeping prices low while preserving quality and choice of products and services.

The FTC's complaint alleges that LabCorp's acquisition of Orchid would illegally reduce competition in the U.S. market for paternity testing services provided to government agencies. Under the proposed settlement order, the portion of Orchid's U.S. paternity testing business that is focused on sales to government agencies, and related assets, will be sold to another testing company, DNA Diagnostics Center (DDC).

Government agencies contract with laboratory testing companies to provide DNA testing services, and use those tests to resolve paternity issues. LabCorp and Orchid are the two most significant providers of these paternity testing services in the country, and have an overwhelming majority of that $27 million market. They consistently have been head-to-head competitors for these contracts, the FTC complaint alleged.

Under the proposed settlement, Orchid will provide certain contract and service information needed by DDC to compete in the market, and LabCorp will provide assistance in assigning all current government paternity testing contracts to DDC. The settlement also requires LabCorp to service existing government contracts for paternity testing until the paternity testing business is successfully transferred and Orchid's government contracts are assigned to DDC. In addition, DDC will have access to the staff and facilities at Orchid's Dayton, Ohio, facility and LabCorp will not be allowed to keep any of Orchid's confidential business information for use in competitive endeavors.

The Commission vote approving the complaint and proposed consent order was 4-0. The proposed order will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until January 9, 2012, after which the Commission will decide whether to make it final.

NOTE: The Commission issues a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order 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 up to $16,000.

The FTC's Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an email to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.