exv10w2



 




EXHIBIT 10.2




051 0154




UNITED STATES OF AMERICA




BEFORE FEDERAL TRADE COMMISSION




	 	 	 
	
    
    COMMISSIONERS:

    	 	
    Deborah Platt Majoras, Chairman
	 	 	
    Pamela Jones Harbour
	 	 	
    Jon Leibowitz
	 	 	
    William E. Kovacic
	 	 	
    J. Thomas Rosch





	 	 	 	 
	 	
    
    In the Matter of

    	 	
    Docket No. C-
	
    
    FRESENIUS AG,

    	 	 
	 	
    
    a corporation

    	 	 





COMPLAINT



     
Pursuant to the provisions of the Federal Trade Commission Act,
as amended, 15 U.S.C. § 41 et seq., and by
virtue of the authority vested in it by said Act, the Federal
Trade Commission (“Commission”), having reason to
believe that Fresenius AG (“Fresenius AG”), a
corporation, and entities controlled by Fresenius AG, including
Fresenius Medical Care AG & Co. KGaA (“FME
KGaA”), a partnership; Fresenius Medical Care
Holdings, Inc. (“FME”), a corporation; and
Florence Acquisition, Inc. (“FAI”), a
corporation, (collectively “Fresenius”), all subject
to the jurisdiction of the Commission, have agreed to acquire
Renal Care Group, Inc. (“RCG”), a corporation
subject to the jurisdiction of the Commission, in violation of
Section 7 of the Clayton Act, 15 U.S.C.
§ 18, and Section 5 of the Federal Trade
Commission Act (“FTC 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 this Complaint stating its
charges as follows:




I. NATURE OF THE CASE



     
1. This matter concerns an agreement whereby Fresenius
would acquire RCG; if consummated, this acquisition would
substantially lessen competition for services relating to
administering outpatient chronic kidney dialysis treatment
(“outpatient dialysis services”) to end stage renal
disease (“ESRD”) patients in 66 local geographic
markets across the United States. ESRD is a disease
characterized by a near total loss of function of the kidneys.
Outpatient chronic dialysis treatments are a life-sustaining
therapy that replaces the function of the kidneys by removing
toxins and excess fluid from the blood (“dialysis”).
Fresenius and RCG are two of the three largest operators of
clinics providing outpatient dialysis services throughout the
United







 




States. The post-acquisition firm would be able to exercise
unilateral market power in the relevant geographic markets,
which would result in higher prices and reduced incentives to
improve service or quality for outpatient dialysis services.




II. RESPONDENTS



     
2. Respondent Fresenius AG is a corporation organized,
existing, and doing business under and by virtue of the laws of
the Federal Republic of Germany, with its office and principal
place of business located at
Else-Kröner-Straße 1, 61352 Bad Homburg, Germany.
Fresenius AG is the ultimate parent of Respondents (1) FME
KGaA, a partnership limited by shares, organized, existing, and
doing business under and by virtue of the laws of the Federal
Republic of Germany, the general partner of which is majority
owned by Fresenius AG, with its office and principal place of
business located at Else-Kröner-Straße 1, 61352
Bad Homburg, Germany; (2) FME, a corporation organized,
existing, and doing business under and by virtue of the laws of
the State of New York, majority owned by FME KGaA, with its
office and principal place of business located at 95 Hayden
Avenue, Lexington, MA 02420; and (3) FAI, a corporation
organized, existing, and doing business under and by virtue of
the laws of the State of Delaware, wholly owned by FME, with its
office and principal place of business located at 95 Hayden
Avenue, Lexington, MA 02420.



     
3. After acquiring RCG, Respondent Fresenius will be the
largest provider of outpatient dialysis services in the United
States. In 2005, Fresenius had approximately $4.1 billion
in revenues from the provision of outpatient dialysis services
to approximately 89,000 ESRD patients at approximately 1,155
outpatient dialysis clinics nationwide.



     
4. Respondents are, and at all times 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 or a partnership 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 ACQUIRED COMPANY



     
5. RCG is a corporation organized, existing, and doing
business under and by virtue of the laws of the State of
Delaware, with its office and principal place of business
located at 2100 West End Avenue, Suite 600, Nashville,
Tennessee 37203.



     
6. RCG is the third largest provider of outpatient dialysis
services in the United States, with approximately 450 outpatient
dialysis clinics nationwide, at which approximately 32,000 ESRD
patients receive treatment. In 2005, RCG had approximately
$1.5 billion in revenues from the provision of outpatient
dialysis services.



     
7. RCG is, and at all times 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



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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 PROPOSED ACQUISITION



     
8. Fresenius entered into an agreement with RCG dated
May 3, 2005 (the “Agreement”), to acquire RCG in
a transaction valued at approximately $3.5 billion (the
“Acquisition”).




V. THE RELEVANT MARKET



     
9. For the purposes of this Complaint, the relevant line of
commerce in which to analyze the effects of the Acquisition is
the provision of outpatient dialysis services. The only
alternative to outpatient dialysis treatments for ESRD patients
is a kidney transplant. However, the wait-time for donor
kidneys — during which ESRD patients must receive
dialysis treatments — can exceed five years.
Additionally, many ESRD patients are not viable transplant
candidates. As a result, many ESRD patients have no alternative
to outpatient dialysis treatments.



     
10. For the purposes of this Complaint, the relevant
geographic market for the provision of outpatient dialysis
services is defined by the distance ESRD patients are willing
and/or able to travel to receive dialysis treatments, and is
thus local in nature. Most ESRD patients receive dialysis
treatments in an outpatient dialysis clinic three times per
week, in sessions lasting between three and five hours. Because
ESRD patients often suffer from multiple health problems and may
require assistance traveling to and from the dialysis clinic,
these patients are unwilling and/or unable to travel long
distances to receive dialysis treatment. The time and distance a
patient will travel in a particular location are significantly
affected by traffic patterns; whether an area is urban,
suburban, or rural; local geography; and a patient’s
proximity to the nearest dialysis clinic. The size of relevant
geographic markets is also influenced by a variety of other
factors including population density, roads, geographic
features, and political boundaries.



     
11. For the purposes of this Complaint, the 66 geographic
markets within which to assess the competitive effects of the
proposed merger are the following 39 metropolitan statistical
areas (“MSAs”), other areas, or, particular geographic
areas contained therein: (1) Birmingham-Hoover, Alabama
MSA; (2) Osceola and Blytheville, Arkansas;
(3) Phoenix-Mesa-Scottsdale, Arizona MSA;
(4) Prescott, Arizona MSA; (5) Naples-Marco Island,
Florida MSA; (6) Sarasota-Bradenton-Venice, Florida MSA;
(7) Tampa-St. Petersburg-Clearwater, Florida MSA;
(8) Atlanta-Sandy Springs-Marietta, Georgia MSA;
(9) Chicago-Naperville-Joliet, Illinois MSA; (10) Lake
County-Kenosha County, Illinois-Wisconsin MSA; (11) Auburn,
Indiana; (12) Fort Wayne, Indiana MSA;
(13) Huntington, Indiana; (14) Indianapolis, Indiana
MSA; (15) Logansport, Indiana; (16) Seymour and
Scottsburg, Indiana; (17) Louisville, Kentucky-Indiana MSA;
(18) Baton Rouge, Louisiana MSA; (19) Houma-Bayou
Cane-Thibodaux, Louisiana MSA; (20) Essex County,
Massachusetts MSA; (21) Jackson, Mississippi MSA;
(22) Carthage



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and Philadelphia, Mississippi; (23) Lexington and
Kosciusko, Mississippi; (24) Kansas City, MO-KS MSA;
(25) Las Cruces, New Mexico MSA; (26) Las
Vegas-Paradise, Nevada MSA; (27) Akron, Ohio MSA;
(28) Portland-Vancouver-Beaverton, Oregon-Washington MSA;
(29) Philadelphia, Pennsylvania MSA;
(30) Providence-New Bedford-Fall River, Rhode
Island-Massachusetts MSA; (31) Greenville, South Carolina
MSA; (32) Memphis, Tennessee-Mississippi-Arkansas MSA;
(33) Alice, Texas; (34) Brownsville-Harlingen, Texas
MSA; (35) Corpus Christi, Texas MSA;
(36) McAllen-Edinburg-Mission, Texas MSA;
(37) El Paso, Texas MSA; (38) Terrell and Sulphur
Springs, Texas; and (39) Spokane, Washington MSA.




VI. THE STRUCTURE OF THE MARKET



     
12. The market for the provision of outpatient dialysis
services in each of the relevant geographic markets identified
in Paragraph 11 is highly concentrated, as measured by the
Herfindahl-Hirschman Index (“HHI”). The Acquisition
would increase concentration significantly in each relevant
market, leaving Fresenius as the dominant provider of outpatient
dialysis services.



     
13. Fresenius and RCG are actual and substantial
competitors in each of the relevant markets.




VII. ENTRY CONDITIONS



     
14. The most significant barrier to entry into the relevant
markets is locating a nephrologist with an established referral
base who is willing and able to enter into a contract with a
dialysis clinic to serve as the clinic’s medical director.
Federal law requires each dialysis clinic to have a physician
medical director. Having a nephrologist serve as medical
director is essential to the competitiveness of the clinic,
because he or she is the clinic’s primary source of
referrals. A medical director’s contract with a clinic
typically prevents the medical director (and often his or her
partners) from serving as a medical director for a competing
clinic while serving as the clinic’s medical director. The
lack of available nephrologists with an established referral
stream is a significant barrier to entry into each of the
relevant geographic markets identified in Paragraph 11.



     
15. Additionally, certain attributes are necessary to
attract new entry into particular relevant markets, including a
rapidly growing ESRD population, a favorable regulatory
environment (including no state certificate of need requirements
regulating the development of new clinics), average or lower
nursing and labor costs, and a relatively low penetration of
managed care. The absence of any of these attributes constitutes
an additional barrier to entry into particular relevant markets.



     
16. New entry into the relevant markets sufficient to deter
or counteract the anticompetitive effects described in
Paragraph 17 is unlikely to occur, and would not occur in a



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timely manner because it would take over two years to enter and
achieve significant market impact.




VIII. EFFECTS OF THE ACQUISITION



     
17. The effects of the Acquisition, if consummated, may be
substantially to lessen competition and tend to create a
monopoly in the relevant markets 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:






		
	 	     
    a. eliminating actual, direct, and substantial competition
    between Fresenius and RCG;
	 
	 	     
    b. increasing the ability of the merged entity unilaterally
    to raise prices; and
	 
	 	     
    c. reducing incentives to improve service or quality.




IX. VIOLATIONS CHARGED



     
18. The Agreement described in Paragraph 8 constitutes
a violation of Section 5 of the FTC Act, as amended,
15 U.S.C. § 45.



     
19. 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       day of
                    ,
2006, issues its Complaint against said Respondents.




By the Commission.






		
	 	
    Donald S. Clark
	 	
    Secretary




SEAL:



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