[Federal Register Volume 61, Number 1 (Tuesday, January 2, 1996)]
[Notices]
[Pages 66-72]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31558]
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FEDERAL TRADE COMMISSION
[File No. 961-0014]
Johnson & Johnson; Consent Agreement With Analysis To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
require the New Brunswick, New Jersey-based manufacturer of health care
products to divest the Cordis Neuroscience Business, which develops
cranial shunts used in the treatment of hydrocephalus. The Commission
had alleged that Johnson & Johnson's acquisition of Cordis Corporation
would reduce competition in the market for neurological shunts by
giving two firms control of 85 percent of the market.
DATES: Comments must be received on or before March 4, 1996.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Ann Malester, Federal Trade
Commission, S-2035, 6th and Pennsylvania Avenue, NW, Washington, DC
20580, (202) 326-2682. Michael R. Moiseyev, Federal Trade Commission,
S.-2025, 6th and Pennsylvania Avenue, NW, Washington, DC 20580. (202)
326-3106.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
Agreement Containing Consent Order
The Federal Trade Commission (``Commission''), having initiated an
investigation of the proposed merger of Johnson & Johnson, a
corporation, and Cordis Corporation (``Cordis''), a corporation, and it
now appearing that Johnson & Johnson, hereinafter sometimes referred to
as ``Proposed Respondent,'' is willing to enter into an agreement
containing an order to divest certain assets, and providing for certain
other relief:
It is hereby agreed by and between Proposed Respondent Johnson &
Johnson, by its duly authorized officers and attorneys, and counsel for
the Commission that:
1. Proposed Respondent Johnson & Johnson is a corporation
organized, existing, and doing business under and by virtue of the laws
of the state of New Jersey with its principal executive offices located
at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933.
2. Proposed Respondent admits all the jurisdictional facts set
forth in the draft of complaint here attached.
3. Proposed Respondent waives:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
d. Any claims under the Equal Access to Justice Act.
[[Page 67]]
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the Proposed Respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by Proposed Respondent that the law has been
violated as alleged in the draft of complaint here attached, or that
the facts as alleged in the draft complaint, other than jurisdictional
facts, are true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Section 2.34 of the
Commission's Rules, the Commission may, without further notice to
Proposed Respondent, (1) issue its complaint corresponding in form and
substance with the draft of complaint here attached and its decision
containing the following order to divest and to cease and desist in
disposition of the proceeding, and (2) make information public with
respect thereto. When so entered, the order shall have the same force
and effect and may be altered, modified, or set aside in the same
manner and within the same time provided by statute for other orders.
The order shall become final upon service. Delivery by the U.S. Postal
Service of the complaint and decision containing the agreed-to order to
Proposed Respondent shall constitute service. Proposed Respondent
waives any right it may have to any other manner of service. The
complaint may be used in construing the terms of the order, and no
agreement, understanding, representation, or interpretation not
contained in the order or the agreement may be used to vary or
contradict the terms of the order.
7. Proposed Respondent has read the proposed complaint and order
contemplated hereby. Proposed Respondent understands that once the
order has been issued, it will be required to file one or more
compliance reports showing that it has fully complied with the order.
Proposed Respondent further understands it may be liable for civil
penalties in the amount provided by law for each violation of the order
by Proposed Respondent or any agent of Proposed Respondent after it
becomes final. By signing this Agreement, Proposed Respondent
represents that the relief contemplated by this Agreement can be
accomplished.
Order
I
It is ordered that, as used in this order, the following
definitions shall apply:
A. ``Respondent'' or ``Johnson & Johnson'' means Johnson & Johnson,
its directors, officers, employees, agents and representatives,
predecessors, successors and assigns; its subsidiaries, divisions, and
groups and affiliates controlled by Johnson & Johnson, and the
respective directors, officers, employees, agents, and representatives,
successors, and assigns of each.
B. ``Cordis'' means Cordis Corporation, its directors, officers,
employees, agents and representatives, predecessors, successors and
assigns; its subsidiaries, divisions, and groups and affiliates
controlled by Cordis, and the respective directors, officers,
employees, agents, and representatives, successors, and assigns of
each.
C. ``Cordis Innovasive Systems'' means Cordis Innovasive Systems
Inc., its directors, officers, employees, agents and representatives,
predecessors, successors and assigns; its subsidiaries, divisions, and
groups and affiliates controlled by Cordis Innovasive Systems, and the
respective directors, officers, employees, agents, and representatives,
successors, and assigns of each.
D. ``Nobles-Lai'' means Nobles-Lai Engineering, Inc. (formerly
known as Visioneering, Inc.), its directors, officers, employees,
agents and representatives, predecessors, successors and assigns; its
subsidiaries, divisions, and groups and affiliates controlled by
Nobles-Lai, and the respective directors, officers, employees, agents,
and representatives, successors, and assigns of each.
E. ``Commission'' means the Federal Trade Commission.
F. ``Merger'' means the stock-for-stock merger of Johnson & Johnson
and Cordis pursuant to the merger agreement dated November 12, 1995.
G. ``Assets and Businesses'' means all assets, properties, business
and goodwill, tangible and intangible, including, without limitation,
the following:
1. All real property interests, including rights, title and
interest in and to owned or leased property, together with all
buildings, improvements, appurtenances, licenses and permits;
2. All machinery, fixtures, equipment, vehicles, transportation
facilities, furniture, tools and other tangible personal property;
3. All customer lists, vendor lists, catalogs, sales promotion
literature, advertising materials, research materials, technical
information, management information systems, software, software
licenses, inventions, copyrights, trademarks, trade names, trade
secrets, intellectual property, patents, technology, know-how,
specifications, designs, drawings, processes and quality control data;
4. Inventory, supplies and storage capacity;
5. All rights, title and interest in and to the contracts entered
into in the ordinary course of business with Nobles-Lai, customers
(together with associated bid and performance bonds), suppliers, sales
representatives, distributors, agents, personal property lessors,
personal property lessees, licensors, licensees, consignors and
consignees;
6. All rights under warranties and guarantees, express or implied;
7. All books, records, and files; and
8. All items of prepaid expense.
H. ``Cordis Neuroscience Business'' means:
1. Cordis Innovasive Systems and all of its Assets and Businesses;
and
2. All of Cordis's rights, title, and interest, as of November 11,
1995, in all Assets and Businesses relating to the development,
manufacture, distribution and sale of Neuroscience Products, including,
but not limited to, all interest in Nobles-Lai.
I. ``Neuroscience Products'' means:
1. Neurological shunts, including, but not limited to, the Orbis-
Sigma and Hakim shunt products;
2. Neurological external drainage systems, including, but not
limited to, External Drainage Systems (EDS) and External Ventricular
Drainage System Set (EDVS) products; and
3. Neuroendoscopy products, including, but not limited to, the
Vision 2020 neuroendoscope product and the Cordis HawkVision
Neuroendoscopy System.
J. ``Neurological Shunts'' means systems consisting of a
ventricular catheter, a distal catheter, and a valve that are implanted
in the brain to divert cerebrospinal fluid (CSF) into the bloodstream
of patients experiencing excessive intercranial pressure because of a
surplus of CSF inside the skull.
[[Page 68]]
K. ``Neurological External Drainage Systems'' means systems
consisting of a ventricular catheter, a drainage bag, tubing, and a
stopcock that are used for draining CSF to control intracranial
pressure and for monitoring intracranial pressure.
L. ``Neuroendoscopy Products'' means:
1. Neuroendoscopes, which are hand-held devices with an optical and
light system that permit viewing of the neural cavity for use in
neurosurgical procedures;
2. Neuroendoscopy systems, which are imaging systems used in
conjunction with neuroendoscopes; and
3. Neuroendoscopy disposables and accessories, including, but not
limited to, cannulas, irrigators, plugs, probes, forceps, scissors,
graspers, aspirators, couplers, pumps, cameras and other products used
in conjunction with neuroendoscopes and neuroendoscopy systems.
II
It is further ordered that:
A. Johnson & Johnson shall divest, absolutely and in good faith,
within twelve (12) months of the date this order becomes final, the
Cordis Neuroscience Business, and shall also divest such additional
ancillary Assets and Businesses and effect such arrangements as are
necessary to assure the marketability, viability and competitiveness of
the Cordis Neuroscience Business.
B. Johnson & Johnson shall divest the Cordis Neuroscience Business
only to an acquirer that receives the prior approval of the Commission
and only in a manner that receives the prior approval of the
Commission. The purpose of the divestiture is to ensure the
continuation of the Cordis Neuroscience Business as an ongoing, viable
operation, engaged in the same business in which the Cordis
Neuroscience Business is engaged at the time of the proposed
divestiture, and to remedy the lessening of competition resulting from
the Merger as alleged in the Commission's complaint.
C. Pending divestiture of the Cordis Neuroscience Business, Johnson
& Johnson shall take such actions as are necessary to maintain the
viability, marketability, and competitiveness of the Cordis
Neuroscience Business, and to prevent the destruction, removal,
wasting, deterioration or impairment of the Cordis Neuroscience
Business except for ordinary wear and tear.
D. If Johnson & Johnson is prevented from divesting the Cordis
Neuroscience Business because of, or as a result of, the assertion by
Nobles-Lai of any contractual rights, requirements or prohibitions,
then for a period of five (5) years commencing on the date that this
order is accepted by the Commission, Johnson & Johnson shall not:
1. Contract with Nobles-Lai for the research, development or
manufacture of any Neuroendoscopy Product; or
2. Purchase any Neuroendoscopy Product from, or distribute any
Neuroendoscopy Product for, Nobles-Lai.
III
It is further ordered that:
A. If Johnson & Johnson has not divested, absolutely and in good
faith, and with the prior approval of the Commission, the Cordis
Neuroscience Business within twelve (12) months of the date this order
becomes final, the Commission may appoint a trustee to divest the
Cordis Neuroscience Business
B. In the event that the Commission or the Attorney General brings
an action pursuant to Sec. 5(l) of the Federal Trade Commission Act, 15
U.S.C. (Sec. 45l), or any other statute enforced by the Commission,
Johnson & Johnson shall consent to the appointment of a trustee in such
action. Neither the appointment of a trustee nor a decision not to
appoint a trustee under this Paragraph III shall preclude the
Commission or the Attorney General from seeking civil penalties or any
other relief available to it, including a court-appointed trustee,
pursuant to Sec. 5(l) of the Federal Trade Commission Act, or any other
statute enforced by the Commission, for any failure by Johnson &
Johnson to comply with this order.
C. If a trustee is appointed by the Commission or a court pursuant
to Paragraph III.A., Johnson & Johnson shall consent to the following
terms and conditions regarding the trustee's powers, duties, authority,
and responsibilities:
1. The Commission shall select the trustee, subject to the consent
of Johnson & Johnson, which consent shall not be unreasonably withheld.
The trustee shall be a person with experience and expertise in mergers
and divestitures. If Johnson & Johnson has not opposed, in writing,
including the reasons for opposing, the selection of any proposed
trustee within ten (10) days after notice by the staff of the
Commission to Johnson & Johnson of the identity of any proposed
trustee, Johnson & Johnson shall be deemed to have consented to the
selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to divest the Cordis
Neuroscience Business.
3. Within ten (10) days after appointment of the trustee, Johnson &
Johnson shall execute a trust agreement that, subject to the prior
approval of the Commission and, in the case of a court-appointed
trustee, of the court, transfers to the trustee all rights and powers
necessary to permit the trustee to effect the divestiture required by
this order.
4. The trustee shall have twelve (12) months from the date the
Commission approves the trust agreement described in Paragraph III.C.3.
to accomplish the divestiture, which shall be subject to the prior
approval of the Commission. If, however, at the end of the twelve month
period, the trustee has submitted a plan of divestiture or believes
that divestiture can be achieved within a reasonable time, the
divestiture period may be extended by the Commission, or, in the case
of a court-appointed trustee, by the court; provided, however, the
Commission may extend this period only two (2) times.
5. The trustee shall have full and complete access to the
personnel, books, records and facilities related to the Cordis
Neuroscience Business, or to any other relevant information, as the
trustee may request. Johnson & Johnson shall develop such financial or
other information as such trustee may request and shall cooperate with
the trustee. Johnson & Johnson shall take no action to interfere with
or impede the trustee's accomplishment of the divestiture. Any delays
in divestiture caused by Johnson & Johnson shall extend the time for
divestiture under this Paragraph in an amount equal to the delay, as
determined by the Commission or, for a court-appointed trustee, by the
court.
6. The trustee shall use his or her best efforts to negotiate the
most favorable price and terms available in each contract that is
submitted to the Commission, subject to Johnson & Johnson's absolute
and unconditional obligation to divest at no minimum price. The
divestiture shall be made in the manner and to acquirer as set out in
Paragraph II of this order, as appropriate; provided, however, if the
trustee receives bona fide offers from more than one acquiring entity,
and if the Commission determines to approve more than one such
acquiring entity, the trustee shall divest to the acquiring entity
selected by Johnson & Johnson from among those approved by the
Commission.
7. The trustee shall serve, without bond or other security, at the
cost and expense of Johnson & Johnson, on such reasonable and customary
terms and conditions as the Commission or a court may set. The trustee
shall have the authority to employ, at the cost and
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expense of Johnson & Johnson, such consultants, accountants, attorneys,
investment bankers, business brokers, appraisers, and other
representatives and assistants as are necessary to carry out the
trustee's duties and responsibilities. The trustee shall account for
all monies derived from the divestiture and all expenses incurred.
After approval by the Commission and, in the case of a court-appointed
trustee, by the court, of the account of the trustee, including fees
for his or her services, all remaining monies shall be paid at the
direction of Johnson & Johnson, and the trustee's power shall be
terminated. The trustee's compensation shall be based at least in
significant part on a commission arrangement contingent on the
trustee's divesting the Cordis Neuroscience Business.
8. Johnson & Johnson shall indemnify the trustee and hold the
trustee harmless against any losses, claims, damages, liabilities, or
expenses arising out of, or in connection with, the performance of the
trustee's duties, including all reasonable fees of counsel and other
expenses incurred in connection with the preparation for, or defense of
any claim, whether or not resulting in any liability, except to the
extent that such liabilities, losses, damages, claims, or expenses
result from misfeasance, gross negligence, willful or wanton acts, or
bad faith by the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph III.A. of this order.
10. The Commission or, in the case of a court-appointed trustee,
the court, may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the divestiture required by this order.
11. The trustee shall have no obligation or authority to operate or
maintain the Cordis Neuroscience Business.
12. In the event that the trustee determines that he or she is
unable to divest the Cordis Neuroscience Business in a manner
consistent with the Commission's purpose as described in Paragraph II,
the trustee may divest additional ancillary assets of Johnson & Johnson
and effect such arrangements as are necessary to satisfy the
requirements of this order.
13. The trustee shall report in writing to Johnson & Johnson and
the Commission every sixty (60) days concerning the trustee's efforts
to accomplish divestiture.
IV
It is further ordered that Johnson & Johnson shall comply with all
terms of the Cordis Neuroscience Business Agreement to Hold Separate,
attached to this order and made a part hereof as Appendix I. The Cordis
Neuroscience Business Agreement to Hold Separate shall continue in
effect until Johnson & Johnson has divested all of the Cordis
Neuroscience Business.
V
It is further ordered that:
A. Within sixty (60) days after the date this order becomes final
and every sixty (60) days thereafter until Johnson & Johnson has fully
complied with Paragraphs II, III, and IV of this order, Johnson &
Johnson shall submit to the Commission a verified written report
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with Paragraphs II, III, and IV
of this order. Johnson & Johnson shall include in its compliance
reports, among other things that are required from time to time, a full
description of the efforts being made to comply with Paragraphs II,
III, and IV, including a description of all substantive contacts or
negotiations for the divestiture required by this order, including the
identity of all parties contacted. Johnson & Johnson shall include in
its compliance reports copies of all written communications to and from
such parties, all internal memoranda, and all reports and
recommendations concerning the divestiture.
B. If Johnson & Johnson is precluded from purchasing from,
contracting with, or distributing for Nobles-Lai pursuant to Paragraph
II.D. of this order, then one (1) year from the date this order becomes
final, annually for the next (5) years on the anniversary of the date
this order becomes final, and at other times as the Commission may
require, Respondent shall file a verified written report with the
Commission setting forth in detail the manner and form in which it has
complied and is complying with Paragraph II.D. of this order.
VI
It is further ordered that, for the purpose of determining or
securing compliance with this order, Johnson & Johnson shall permit any
duly authorized representatives of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy all books, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or under
the control of Johnson & Johnson, relating to any matters contained in
this order; and
B. Upon five (5) days' notice to Johnson & Johnson, and without
restraint or interference from Johnson & Johnson, to interview
officers, directors, or employees of Johnson & Johnson. Officers and
employees of Johnson & Johnson whose places of employment are outside
the United States shall be made available on reasonable notice.
VII
It is further ordered that Johnson & Johnson shall notify the
Commission at least thirty (30) days prior to any proposed change in
the corporate Johnson & Johnson such as dissolution, assignment, sale
resulting in the emergence of a successor corporation, or the creation
or dissolution of subsidiaries or any other change in the corporation
that may affect compliance obligations arising out of the order.
Benjamin I. Berman,
Acting Secretary.
Appendix I
Cordis Neuroscience Business Agreement To Hold Separate
This Agreement to Hold Separate (``Hold Separate'') is by and
between Johnson & Johnson, a corporation organized, existing, and
doing business under and by virtue of the laws of the state of New
Jersey, with its office and principal place of business at One
Johnson & Johnson Plaza, New Brunswick, New Jersey 08933; and the
Federal Trade Commission (``Commission''), an independent agency of
the United States Government, established under the Federal Trade
Commission Act of 1914, 15 U.S.C. Sec. 41, et seq. (collectively,
the ``Parties'').
Premises
Whereas, Johnson & Johnson and Cordis Corporation (``Cordis''),
on November 12, 1995, entered into a stock-for stock merger
(hereinafter ``Merger''); and
Whereas, Cordis, with its principal office and place of business
located at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014
develops, manufactures and markets, among other things, neurological
shunts; and
Whereas, Johnson & Johnson, with its principal office and place
of business located at One Johnson & Johnson Plaza, New Brunswick,
New Jersey 08933, through its subsidiary Johnson & Johnson
Professional, Inc., develops, manufactures and markets, among other
things, neurological shunts; and
Whereas, the Commission is now investigating the Merger to
determine whether it would violate any of the statutes enforced by
the Commission; and
Whereas, if the Commission accepts the Agreement Containing
Consent Order (``Consent Agreement''), the Commission must place it
on the public record for a
[[Page 70]]
period of at least sixty (60) days and may subsequently withdraw such
acceptance pursuant to the provisions of Section 2.34 of the
Commission's Rules; and
Whereas, the Commission is concerned that if an understanding is
not reached, preserving the status quo ante of Cordis Neuroscience
Business, as defined in Paragraph I.H. of the Consent Agreement,
during the period prior to the final acceptance and issuance of the
Consent Agreement by the Commission (after the 60-day public comment
period), divestiture resulting from any proceeding challenging the
legality of the Merger might not be possible, or might be less than
an effective remedy; and
Whereas, the Commission is concerned that if the Merger is
consummated, it will be necessary to preserve the Commission's
ability to require the divestiture of the Cordis Neuroscience
Business and the Commission's right to have the Cordis Neuroscience
Business continue as a viable competitor; and
Whereas, the purpose of this Hold Separate and the Consent
Agreement are:
A. To preserve the Cordis Neuroscience Business as a viable,
competitive, and independent business pending divestiture of the
Cordis Neuroscience Business, and
B. To remedy any anticompetitive effects of the Merger; and
Whereas, Johnson & Johnson's entering into this Hold Separate
shall in no way be construed as an admission by Johnson & Johnson
that the Merger is illegal; and
Whereas, Johnson & Johnson understands that no act or
transaction contemplated by this Hold Separate shall be deemed
immune or exempt from the provisions of the antitrust laws or the
Federal Trade Commission Act by reason of anything contained in this
Hold Separate.
Now, therefore, the Parties agree, upon the understanding that
the Commission has not yet determined whether the Merger will be
challenged, and in consideration of the Commission's agreement that,
at the time it accepts the Consent Agreement for public comment, it
will grant early termination of the Hart-Scott-Rodino waiting
period, as follows:
1. Johnson & Johnson agrees to execute and be bound by the
Consent Agreement.
2. Johnson & Johnson agrees that from the date this Hold
Separate is accepted until the earliest of the times listed in
subparagraphs 2.a.-2.b., it will comply with the provisions of
Paragraph 3. of this Hold Separate:
a. Three (3) business days after the Commission withdraws its
acceptance of the Consent Agreement pursuant to the provisions of
Section 2.34 of the Commission's Rules; or
b. The time that divestiture of the Cordis Neuroscience Business
is required by Paragraph II of the Consent Agreement is completed.
3. To assure the complete independence and viability of the
Cordis Neuroscience Business, and to assure that no material
confidential information is exchanged between Johnson & Johnson and
the Cordis Neuroscience Business, Johnson & Johnson shall hold the
Cordis Neuroscience Business separate and apart on the following
terms and conditions:
a. The Cordis Neuroscience Business, as defined in Paragraph
I.H. of the Consent Agreement, shall be held separate and apart and
shall be managed and operated independently of Johnson & Johnson
(meaning here and hereinafter, Johnson & Johnson excluding the
Cordis Neuroscience Business and excluding all personnel connected
with the Cordis Neuroscience Business as of the date this Agreement
is signed, but including all other portions of Cordis), except to
the extent that Johnson & Johnson must exercise direction and
control over the Cordis Neuroscience Business to assure compliance
with this Hold Separate or the Consent Agreement.
b. Johnson & Johnson shall maintain the marketability,
viability, and competitiveness of the Cordis Neuroscience Business
and shall not cause or permit the destruction, removal, wasting,
deterioration, or impairment of any assets or business it may have
to divest except in the ordinary course of business and except for
ordinary wear and tear, and it shall not sell, transfer, encumber
(other than in the normal course of business), or otherwise impair
the marketability, viability or competitiveness of the Cordis
Neuroscience Business.
c. Johnson & Johnson shall appoint a knowledgeable person among
the top management of the Cordis Neuroscience Business, as Manager
to manage and maintain the Cordis Neuroscience Business on a day to
day basis during the Hold Separate. The Manager shall have exclusive
management and control of the Cordis Neuroscience Business, and
shall manage the Cordis Neuroscience Business independently of
Johnson & Johnson's other businesses.
d. The Manager shall report exclusively to the Cordis
Neuroscience Business Management Committee (``Management
Committee''), which shall be appointed by Johnson & Johnson. The
Committee shall consist of two knowledgeable persons from among the
top management of the Cordis Neurological Products business; and a
Johnson & Johnson financial officer or a comparable, knowledgeable
person from Johnson & Johnson's financial office who has no direct
involvement with Johnson & Johnson's Neurological Products Business
(``Johnson & Johnson Management Committee Member''). The Manager
shall be the Chairman of the Management Committee. Except for the
Johnson & Johnson Management Committee Member serving on the
Management Committee, Johnson & Johnson shall not permit any
officer, employee, or agent of Johnson & Johnson also to be an
officer, employee or agent of the Cordis Neuroscience Business. Each
Management Committee member shall enter into a confidentiality
agreement agreeing to be bound by the terms and conditions set forth
in Attachment A, appended to this Hold Separate. The Management
Committee shall meet monthly during the course of the Hold Separate,
and as otherwise necessary. Meetings of the Management Committee
during the term of the Hold Separate shall be audio recorded, and
the recording shall be retained for two (2) years after the
termination of the Hold Separate.
e. All material transactions, out of the ordinary course of
business and not precluded by Paragraph 3 hereof, shall be subject
to a majority vote of the Management Committee.
f. Johnson & Johnson shall not exercise direction or control
over, or influence directly or indirectly, the Cordis Neuroscience
Business, the Management Committee, or the Manager of the Cordis
Neuroscience Business, any of their operations, assets, or
businesses; provided, however, that Johnson & Johnson may exercise
only such direction and control over the Cordis Neuroscience
Business as is necessary to assure compliance with this Hold
Separate, the Consent Order and with all applicable laws and except
as otherwise provided in this Hold Separate.
g. Except as required by law, and except to the extent that
necessary information is exchanged in the course of evaluating and
consummating the Merger, defending investigations or litigation,
obtaining legal advice, complying with this Hold Separate or the
Consent Order or negotiating agreements to divest assets, Johnson &
Johnson shall not receive or have access to, or the use of, any
material confidential information of the Cordis Neuroscience
Business or the activities of the Manager or Management Committee
not in the public domain, nor shall the Cordis Neuroscience
Business, Manager, or the Management Committee receive or have
access to, or the use of, any material confidential information
about Johnson & Johnson. Johnson & Johnson may receive on a regular
basis from the Cordis Neuroscience Business aggregate financial
information necessary and essential to allow Johnson & Johnson to
file financial reports, tax returns, and personnel reports. Any such
information that is obtained pursuant to this subparagraph shall be
used only for the purposes set forth in this subparagraph.
(``Material confidential information,'' as used herein, means
competitively sensitive or proprietary information not independently
known to:
1. Johnson & Johnson, with regard to the Cordis Neuroscience
Business, from sources other than the Cordis Neuroscience Business
or its employees or the Management Committee; or
2. The Management Committee or the Cordis Neuroscience Business
or its employees, with regard to Johnson & Johnson, from sources
other than Johnson & Johnson,
and includes, but is not limited to, customer lists, price lists,
marketing methods, patents, technologies, processes, or other trade
secrets.)
h. Except as is permitted by this Hold Separate, the Johnson &
Johnson Management Committee Member shall not receive any Cordis
Neuroscience Business material confidential information and shall
not disclose any such information obtained through his or her
involvement with the Cordis Neuroscience Business to Johnson &
Johnson or use it to obtain any advantage for Johnson & Johnson. The
Johnson & Johnson Management Committee Member shall participate in
matters that come before the Management Committee only for the
limited purpose of considering any capital investment of over
$250,000, approving any
[[Page 71]]
proposed budget and operating plans, authorizing dividends and
repayment of loans consistent with the provisions hereof, reviewing
material transactions described in subparagraph 3.e, and carrying
out Johnson & Johnson's responsibilities under the Hold Separate and
the Consent Agreement. Except as permitted by the Hold Separate, the
Johnson & Johnson Management Committee Member shall not participate
in any matter, or attempt to influence the votes of the other
directors on the Management Committee with respect to matters that
would involve a conflict of interest between Johnson & Johnson and
the Cordis Neuroscience Business.
i. Johnson & Johnson shall not change the composition of the
Management Committee unless a majority of the Management Committee
consents. The Chairman of the Management Committee shall have the
power to remove members of the Management Committee for cause and to
require Johnson & Johnson to appoint replacement members to the
Management Committee in the same manner as provided in Paragraph
3.d. of this Hold Separate. Johnson & Johnson shall not change the
composition of the management of the Cordis Neuroscience Business,
except that the Management Committee shall have the power to remove
management employees for unsatisfactory performance or for cause.
j. If the Chairman of the Management Committee ceases to act or
fails to act diligently, a substitute Chairman shall be appointed in
the same manner as provided in Paragraphs 3.c. and 3.d.
k. Cordis personnel connected with the Cordis Neuroscience
Business or providing support services to the Cordis Neuroscience
Business as of the date this Hold Separate is signed shall continue,
as employees of Johnson & Johnson, to provide such services as of
the date of this Hold Separate. Such Johnson & Johnson personnel
must retain and maintain all material confidential information
relating to the Cordis Neuroscience Business on a confidential basis
and, except as is permitted by this Hold Separate, such persons
shall be prohibited from providing, discussing, exchanging,
circulating, or otherwise furnishing any such information to or with
any other person whose employment involves any other Johnson &
Johnson business.
Such Johnson & Johnson personnel shall also execute a
confidentiality agreement prohibiting the disclosure of any material
confidential Cordis Neuroscience Business or Johnson & Johnson
information.
1. The Cordis Neuroscience Business shall be staffed with
sufficient employees to maintain the viability and competitiveness
of the Cordis Neuroscience Business, which employees shall be the
Cordis Neuroscience Business's employees and may also be hired from
sources other than Johnson & Johnson. Each management employee of
the Cordis Neuroscience Business shall execute a confidentiality
agreement prohibiting the disclosure of any Cordis Neuroscience
Business confidential information.
m. Johnson & Johnson shall circulate to the management employees
of the Cordis Neuroscience Business and appropriately display a
notice of this Hold Separate and Consent Order in the form attached
hereto as Attachment A.
n. Johnson & Johnson shall cause the Cordis Neuroscience
Business to expend funds for research and development, quality
control, manufacturing and marketing of Cordis Neuroscience Business
products at a level not lower than that budgeted for either the 1994
or 1995 fiscal year, and shall increase such spending as deemed
reasonably necessary in light of competitive conditions. Within
thirty (30) days of the date of this Hold Separate, the Chairman of
the Management Committee shall develop a budget and operating plan
for the 1996 fiscal year that complies with the provisions of this
Paragraph and present it to the Management Committee for approval.
If necessary, Johnson & Johnson shall provide the Cordis
Neuroscience Business with any funds to accomplish the foregoing.
Johnson & Johnson shall provide to the Cordis Neuroscience Business
such support services as provided by Cordis prior to the Merger.
o. Johnson & Johnson shall provide the Cordis Neuroscience
Business with sufficient working capital to operate at a level not
less than the rate of operation in effect during the twelve (12)
months preceding the date of this Hold Separate.
p. The Management Committee shall serve at the cost and expense
of Johnson & Johnson. Johnson & Johnson shall indemnify the
Management Committee against any losses or claims of any kind that
might arise out of its involvement under this Hold Separate, except
to the extent that such losses or claims result from misfeasance,
gross negligence, willful or wanton acts, or bad faith by the
Management Committee members.
q. The Management Committee shall have access to and be informed
about all companies who inquire about, seek or propose to buy the
Cordis Neuroscience Business.
r. Notwithstanding the provisions of Paragraph 3.h., companies
who undertake a due diligence process in the course of negotiations
to purchase the Cordis Neuroscience Business may be accompanied and
assisted by the Johnson & Johnson Management Committee Member, in
addition to appropriate Cordis Neuroscience Business employees
selected by the Management Committee. The Johnson & Johnson
Management Committee Member may delegate tasks relating to such due
diligence to attorneys, accountants and/or other financial employees
of Johnson & Johnson who are not directly engaged in the Johnson &
Johnson Neurological Products Business; provided, however, that such
Johnson & Johnson employees, accountants and attorneys shall execute
a confidentiality agreement prohibiting the disclosure of any Cordis
Neuroscience Business material confidential information.
4. Should the Federal Trade Commission seek in any proceeding to
compel Johnson & Johnson to divest itself of the Cordis Neuroscience
Business, or any additional assets, as provided in the Consent
Agreement, or to seek any other injunctive or equitable relief,
Johnson & Johnson shall not raise any objection based on the
expiration of the applicable Hart-Scott-Rodino Antitrust
Improvements Act waiting period or the fact that the Commission has
permitted the Merger. Johnson & Johnson shall also waive all rights
to contest the validity of this Hold Separate.
5. To the extent that this Hold Separate requires Johnson &
Johnson to take, or prohibits Johnson & Johnson from taking, certain
actions that otherwise may be required or prohibited by contract,
Johnson & Johnson shall abide by the terms of this Hold Separate or
the Consent Agreement, and shall not assert as a defense such
contract requirements in a civil penalty action brought by the
Commission to enforce the terms of this Hold Separate or the Consent
Agreement.
6. For the purpose of determining or securing compliance with
this Hold Separate, subject to any legally recognized privilege or
provision of applicable law, and upon written request with
reasonable notice to Johnson & Johnson made to its General Counsel,
Johnson & Johnson shall permit any duly authorized representative or
representatives of the Commission:
a. Access during the office hours of Johnson & Johnson and in
the presence of counsel to inspect and copy all books, ledgers,
accounts, correspondence, memoranda, and other records and documents
in the possession or under the control of Johnson & Johnson or
relating to compliance with this Hold Separate;
b. Upon five (5) days' notice to Johnson & Johnson, and without
restraint or interference from it, to interview officers or
employees of Johnson & Johnson, who may have counsel present,
regarding any such matters.
7. This Hold Separate shall not be binding until approved by the
Commission.
Attachment A.--Notice of Divestiture and Requirement for
Confidentiality
Johnson & Johnson and Cordis Corporation have entered into a
Consent Agreement and Agreement to Hold Separate with the Federal Trade
Commission (``Commission'') relating to the divestiture of the Cordis
Neuroscience Business. Until after the Commission's Order becomes final
and the Cordis Neuroscience Business are divested, the Cordis
Neuroscience Business must be managed and maintained as a separate,
ongoing business, independent of all other Johnson & Johnson
businesses. All competitive information relating to The Cordis
Neuroscience Business must be retained and maintained by the persons
involved in the Cordis Neuroscience Business on a confidential basis
and such persons shall be prohibited from providing, discussing,
exchanging, circulating, or otherwise furnishing any such information
to or with any other person whose employment or agency involves any
other Johnson & Johnson business. Similarly, all such persons involved
in any other Johnson & Johnson business small be prohibited
[[Page 72]]
from providing, discussing, exchanging, circulating or otherwise
furnishing competitive information about such business to or with any
person whose employment or agency involves the Cordis Neuroscience
Business.
Any violation of the Consent Agreement or the Agreement to Hold
Separate, incorporated by reference as part of the Consent Order, may
subject Johnson & Johnson to civil penalties and other relief as
provided by law.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted subject
to final approval an agreement containing a proposed consent order from
Johnson & Johnson under which Johnson & Johnson would divest the Cordis
Neuroscience Business, which includes Cordis' neurological shunt
product line.
The proposed consent order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days the Commission will again review the
agreement and the comments received, and will decide whether it should
withdraw from the agreement or make final the agreement's proposed
order.
Johnson & Johnson, a New Jersey based corporation, has proposed to
acquire Cordis Corporation, a Florida based corporation, in a stock for
stock exchange worth $1.8 billion.
The proposed complaint alleges that the proposed merger, if
consummated, would constitute a violation of Section 7 of the Clayton
Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the FTC Act, as
amended, 15 U.S.C. Sec. 45, in the market for neurological shunts.
Neurological shunts are medical devices used to treat hydrocephalus, a
brain disorder that primarily afflicts young children. The merger will
substantially increase concentration in the already highly concentrated
U.S. shunt market: two firms will control over 85% of the market.
Anticompetitive effects, such as increased prices and decreased
services, are likely to result. In addition, timely entry by other
companies, both in the United States and overseas, is unlikely to
defeat these anticompetitive effects. Entry cannot occur in a timely
fashion because of the difficulty of developing competitive
neurological shunt designs, establishing manufacturing facilities,
organizing a sales and service network, receiving Food and Drug
Administration approval, and gaining physician acceptance in the
market.
The proposed consent order would remedy the alleged violation by
replacing the lost competition that would result from the merger. It
provides that Johnson & Johnson shall divest the Cordis Neuroscience
Business within twelve (12) months of the date the proposed order
becomes final. The Cordis Neuroscience Business is a single operational
unit that sells neurological shunts, intracranial pressure drainage
systems and neuroendoscopy equipment. Significant synergies between the
products manufactured and sold by the Business exist, and Cordis'
shunts are sold as part of the broader product line. Therefore, a
divestiture of the whole business is necessary to maintain competition
in the shunt market. The proposed order requires Cordis Neuroscience
Business to take all the steps necessary to assure the viability,
marketability, and competitiveness of the Cordis Neuroscience Business,
and to prevent the destruction, removal, wasting, deterioration, or
impairment of the Cordis Neuroscience Business.
If Johnson & Johnson is unable to divest the Cordis Neuroscience
Business within twelve (12) months, then a trustee may be appointed by
the Commission to divest the Cordis Neuroscience Business within an
additional twelve (12) month period. If, at the end of that twelve (12)
month period, the trustee has submitted a plan of divestiture or
believes that divestiture can be achieved within a reasonable time, the
time period for divestiture can be extended up to two (2) times by the
court.
A Hold Separate Agreement signed by Johnson & Johnson provides
that, during the time period from the date the Hold Separate is
accepted until the divestiture of the Cordis Neuroscience Business is
completed, the Cordis Neuroscience Business shall be held separate and
operated independently of Johnson & Johnson.
Under the provisions of the order, Johnson & Johnson is also
required to provide to the Commission a report of compliance with the
divestiture provisions of the order within sixty (60) days following
the date this order becomes final, and every sixty (60) days thereafter
until Johnson & Johnson has completely divested its interest in the
Cordis Neuroscience Business.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
[FR Doc. 95-31558 Filed 12-29-95; 8:45 am]
BILLING CODE 6750-01-M
