UNITED STATES OF AMERICA In the Matter of Docket No. COMPLAINT The Federal Trade Commission ("Commission"), having reason to believe that Respondent, Medtronic, Inc. ("Medtronic"), a corporation subject to the jurisdiction of the Commission, has agreed to acquire all of the voting stock of Physio-Control International Corporation ("Physio-Control"), 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: I. DEFINITIONS 1. "Automated External Defibrillators" means portable, automated devices used in emergency situations by persons with limited or no medical training to diagnose and treat persons suffering from sudden cardiac arrest. 2. "SurVivaLink" means SurVivaLink Corporation, a Minnesota corporation, with its principal place of business located at 5420 Feltl Road, Minnetonka, Minnesota 55343. SurVivaLink is engaged in, among other things, the research, development, manufacture and sale of Automated External Defibrillators. 3. "Investment Agreements" means the Investment Agreement, dated April 29, 1994, by and among SurVivaLink Corporation, Medtronic, Inc. and the following shareholders of SurVivaLink: Bryon L. Gilman, Karl J.F. Kroll, Kenneth C. Maki, and Mark W. Kroll; and the Investment Agreement dated October 31, 1996, by and among SurVivaLink Corporation and Medtronic, Inc. 4. "Respondent" means Medtronic. II. RESPONDENT 5. Respondent Medtronic is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Minnesota, with its principal place of business located at 7000 Central Avenue, Northwest, Minneapolis, Minnesota 55432. Respondent is engaged in, among other things, the research, development, manufacture and sale of a wide-range of medical devices. 6. Through the Investment Agreements, Respondent owns below ten (10) percent of the overall securities in SurVivaLink, and possesses a number of rights, including but not limited to: (a) the right to receive competitively sensitive non-public information relating to SurVivaLink; (b) the right to appoint one member to SurVivaLink's Board of Directors; and (c) the right to vote on all matters requiring a shareholder vote. 7. Respondent 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 affects commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44. III. THE ACQUIRED COMPANY 8. Physio-Control is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Washington, with its principal place of business located at 11811 Willows Road, N.E., Redmond, Washington 98073. Physio-Control is engaged in, among other things, the research, development, manufacture and sale of Automated External Defibrillators. 9. Physio-Control 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 affects commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44. IV. THE ACQUISITION 10. On June 27, 1998, Medtronic entered into an Agreement and Plan of Merger with Physio-Control to acquire all of the voting stock of Physio-Control in exchange for Medtronic voting stock valued at $530 million. V. THE RELEVANT MARKET 11. For purposes of this Complaint, the relevant line of commerce in which to analyze the effects of the Acquisition is the research, development, manufacture and sale of Automated External Defibrillators. 12. For 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. VI. STRUCTURE OF THE MARKET 13. The market for the research, development, manufacture and sale of Automated External Defibrillators is highly concentrated as measured by the Herfindahl-Hirschman Index ("HHI"). SurVivaLink and Physio-Control are two of only three significant suppliers of Automated External Defibrillators in the United States. 14. Medtronic, through its ownership interest in SurVivaLink, and Physio-Control are actual, direct competitors in the relevant market for the research, development, manufacture and sale of Automated External Defibrillators in the United States. VII. BARRIERS TO ENTRY 15. Entry into the market for the research, development, manufacture and sale of Automated External Defibrillators is unlikely and would not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 16, because of, among other things, the time and expense required to design and develop a competitively viable product, obtain approvals from the United States Food and Drug Administration necessary to manufacture and sell Automated External Defibrillators in the United States, and establish a sales and distribution network. VIII. EFFECTS OF THE ACQUISITION 16. The effects of the Acquisition, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the relevant market 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:
IX. VIOLATIONS CHARGED 17. The Acquisition agreement described in Paragraph 10 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45. 18. The Acquisition described in Paragraph 10, 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 day of A.D., 1998, issues its Complaint against said Respondent. By the Commission. Donald S. Clark SEAL: |