(.PICT.)(.PICT.) |EUROPEAN COMMISSION |

Brussels , 09.08.2010

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. PUBLIC VERSION SG-Greffe(2010) D/12153 C(2010) 5667

MERGER PROCEDURE ARTICLE 6(1)(b) DECISION IN CONJUNCTION WITH ARTICLE 6(2)

To the notifying party

Dear Sir/Madam,

Subject: Case No COMP/M.5778 – Novartis/Alcon Notification of 18 June 2010 pursuant to Article 4 of Council Regulation No 139/2004 [1]

1. On 18 June 2010, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertaking Novartis AG ("Novartis") proposes to acquire sole control within the meaning of Article 3(1)(b) of the Merger Regulation of Alcon Inc. ("Alcon") by way of purchase of shares.

I. THE PARTIES AND THE OPERATION

2. Novartis is a global pharmaceutical company that develops, distributes and markets medical products which include: prescription and over-the-counter medicines (including ophthalmic products), human vaccines and animal health products.

3. Alcon is a global pharmaceutical company that develops, manufactures, and distributes eye care products and to a lesser extent products for the treatment of ear and nose diseases.

4. Pursuant to the call option foreseen in the Share Purchase Agreement dated 6 April 2008 with Nestlé, Novartis intends to acquire the remaining 52.15% of Alcon's shares from Nestlé for USD 28.1 billion (EUR 20.15 billion) in addition to Novartis' present shareholding of approximately 25% in Alcon. As a result of this transaction, Novartis would acquire a 77% stake in Alcon and would have sole control over it.

II. CONCENTRATION

5. The transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III. EU DIMENSION

6. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion [2] (Novartis: EUR 31.74 billion, Alcon: EUR 4.65 billion). Each of them has an EU-wide turnover in excess of EUR 250 million (Novartis: EUR […], Alcon: EUR […]), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

IV. COMPETITIVE ASSESSMENT

1. Relevant Product Markets

7. The transaction concerns both ophthalmic pharmaceutical products (pharmaceuticals used in the treatment of diseases of the eye) and other eye care products that do not qualify as pharmaceuticals (consumer vision products).

8. The present sections and section 2 below outline common aspects of market definition for both ophthalmic pharmaceuticals and consumer vision products. In Section 3 more specific market definition issues and competitive assessment are outlined in detail for the relevant specific product category concerned.

1.1. Ophthalmic pharmaceuticals

1.1.1. ATC classification

9. In previous decisions, the Commission noted that pharmaceuticals may be subdivided into therapeutic classes by reference to the "Anatomical Therapeutic Chemical" classification ("ATC"), devised by the European Pharmaceutical Marketing Research Association ("EphMRA") and maintained by EphMRA and Intercontinental Medical Statistics ("IMS"). The ATC has 16 categories (A, B, C, D etc.) each with different levels. At the third ATC level ("ATC3"), pharmaceuticals are grouped in terms of their therapeutic indication, i.e. their intended use. This level has in the past been generally used as the starting point for investigating and defining relevant product markets in competition cases, in particular, for competition between innovator companies.

10. However, it is appropriate to carry out analyses also at other ATC levels, or a mixture thereof, if the circumstances of a case show that sufficiently strong competitive constraints faced by the undertakings involved are situated at another level and there are indications that the ATC3 class does not lead to a correct market definition. [3] The Commission has previously departed from the ATC3 class in cases where the market investigation indicated that another market definition was more appropriate, for example the ATC4 class or medicines based on the same active pharmaceutical ingredient (molecule level). [4]

11. None of these levels was a priori excluded as a possible basis for market definition in the present case. The parties were consequently requested to identify affected markets based on all possible levels, including ATC3, ATC4 and molecule. The appropriateness of these levels for market definition purposes depends on the market concerned and will be addressed separately under each product market category.

1.1.2. Prescription pharmaceuticals and over-the-counter pharmaceuticals

12. In the past, the Commission has considered that drugs available over-the-counter ("OTC") – i.e. without prescription – normally belong to a different product market than drugs available only on prescription ("Rx"). [5] Medical indications, side effects, the legal framework, distribution and marketing tend to differ between these drug categories, even if the active ingredients are sometimes identical. OTC pharmaceuticals may be advertised to the general public, whereas advertising of prescription pharmaceuticals is restricted in most Member States. In most cases, consumers choose OTC pharmaceuticals themselves and purchases are not reimbursed. Prescription pharmaceuticals are prescribed by a doctor and part of the patient's purchase price is reimbursed by the public health-care system. Marketing of prescription pharmaceuticals is therefore targeted at the prescribers and not the patients.

13. Notwithstanding such differences, it has been outlined in previous decisions, that, in certain cases, products which are available OTC are still reimbursable if bought on prescription [6] .

14. The market investigation overall supported the view that OTC and prescription drugs belong to separate markets. However, in some specific circumstances it may not be excluded that these products compete with each other, especially in cases where the status of the drug is not clearly limited to either OTC or prescription. These situations will be addressed specifically for the markets below where applicable. For other markets, the distinction does not make a difference in the assessment notwithstanding overall indications that this distinction is in general appropriate.

1.1.3. Originator pharmaceuticals and generic pharmaceuticals

15. In line with previous decisions [7] , the Commission considers that originator drugs and their generic copies belong to the same relevant product market. It was found in previous decisions that generics can efficiently substitute originator drugs after patent expiry, especially if the regulatory system encourages switching. When assessing the competitive situation in a given product market, the Commission takes into account the fact that the originator drug is exposed to generic competition. Most off-patent drugs are available both in their original version and as generic copies. Once a drug goes off-patent and generic producers enter the market, it is possible that the originator may lose market share.

1.1.4. Galenic forms

16. As already noted in Sanofi-Aventis/Zentiva, medicines are differentiated not only by their active ingredient(s), but also, in particular, as recognized by the European regulatory framework for medicines for human use, by their dosage, pharmaceutical form and route of administration and this may limit their substitutability [8] . This combination of features is loosely referred to for the purposes of the present decision as "galenic form".

17. In the present case the most significant overlaps occur in pharmaceuticals with specific galenic forms (e.g. eye-drops, eye gels, intraocular injections). The active pharmaceutical ingredient of the products in these product categories (ATC3) may be identical to products in other ATC3 categories with a different galenic form (e.g. oral solid or liquid forms, nasal sprays/drops etc). The Commission therefore investigated the substitutability between products based on the same or similar APIs but with a different galenic form..

18. The Commission has in recent decisions in particular noted differences in galenic forms for market definition purposes. [9]

19. The market investigation confirmed significant differences between galenic forms to be relevant for market definition purposes in the present case. It was confirmed in particular that drugs with oral routes of administration and nasal administration cannot frequently and effectively substitute for eye-drops. Within the eye-care segment, the relevance of a distinction between intraocular or intravenous injections and eye drops/gels was also confirmed as these have different applications. On the other hand, there are less pertinent differences in the presentational forms of drugs within the relevant markets concerned by the transaction. These include for example the distinction between single dose (non-preserved) and multi-dose (preserved) products as well as differences between eye drops, ointment and gels. Based on the market investigation, general conclusions cannot be drawn on the relevance of these differences. These differences will therefore be discussed in the specific product markets where they are relevant.

1.2. Consumer vision

20. Consumer vision care products, such as lens care preparations, ocular lubricants and eye vitamins, are often not registered as pharmaceutical products. As regards lens care preparations, they are all registered as medical devices, while for ocular lubricants it is at the choice of the manufacturer whether to register it as a pharmaceutical or a medical device. Medical devices are subject to the EC Medical Device Directive 93/42/EEC, as amended by Directive 2007/47/EC. After obtaining a "CE" conformity mark associated with specific manufacturing processes (the process of obtaining a "CE" mark may take up to 1 to 2 years), medical devices can be marketed throughout the EEA without further national approvals. Each country has a right to require use of the local language for product labelling and listing of products in a country-based register. Eye vitamins are registered as food supplements. [10] "CE" marked products and food supplements are available only as over the counter.

21. The active ingredients in lens care preparations and ocular lubricants are generally common chemical compositions and not under patent protection. Similarly, eye vitamins also do not contain active pharmaceutical ingredients and the ingredients are not patent protected. The patents found in this category concern particular formulations or form of packing, which preclude direct copies. In the absence of patented active ingredients, the distinction between originator and generic products or a categorisation at molecule level does not apply to consumer vision products. Both parties to the transaction have only formulation patents.

22. Notwithstanding that consumer vision products are not pharmaceutical products, they are classified under the ATC2 category S1. Each wider consumer vision product category is grouped under a specific ATC3 class (S1K, S1M and S1L). For ease of reference, the relevant ATC3 level codes will therefore be used in the assessment below.

2. Relevant Geographic Markets

2.1. Ophthalmic pharmaceuticals

23. The Commission has previously defined geographic markets for pharmaceutical products as being national in scope, inter alia on the basis of the different national regulatory frameworks, authorisations procedures, reimbursement rules, etc.. [11] The market investigation has confirmed that this is still the case. Competition between pharmaceutical firms still generally takes place at national level.

2.2. Consumer vision

24. The Commission has previously defined geographic markets for consumer products as being national in scope. The market investigation has confirmed that this is still the case. [12] Competition between consumer vision care companies still generally takes place at a national level. This is mainly because marketing of consumer vision products takes place at a national level, packaging and language information requirements differ across Member States, and customers largely purchase via national distribution channels. The markets are highly fragmented, there is a number of very small local players present in individual countries together with larger international companies. The national delineation of markets is further substantiated by different market shares across the countries.

3. competitive assessment

3.1. Introduction

25. In previous cases, the Commission has generally focused its market investigation to examine in more detail markets where the Parties achieved a combined share of over 35% and the increment in the share was over 1%. Such markets are referred to as "Group 1 markets". This was also the approach in the present case. In addition, the Commission also investigated in more detail markets where i) the parties would have a combined market share of below 35%, but where only one other competitor would remain and ii) markets with a combined market share of over 35% and an increment of less than 1% if the party with the small increment is a recent entrant. For the purposes of the present Decision, markets meeting the above criteria will be referred to collectively as Group 1 "Plus" markets.

26. The Commission has systematically examined all possible Group 1 "Plus" markets on all possible market definitions in order to verify whether or not serious doubts arose. In the Decision, all Group 1 "Plus" markets are discussed individually on all market definitions that were indicated as relevant by the market investigation. For all other markets where the Parties' activities overlap and their joint market shares do not exceed 35% under any plausible market definition and/or where the increment is below 1%, and which do not meet the additional criteria in para [26] [13] (i.e. for all market that are not Group 1 "Plus" markets), competition concerns may be excluded on the basis of the arguments presented below. In this regard, on the basis of the information provided by the Parties, no competition concerns arise. In addition, third parties did not indicate that the transaction could have a negative impact on any of those markets. It may therefore be concluded that for such markets, the transaction does not raise serious doubts as to its compatibility with the internal market and the EEA-agreement (hereafter referred to as "serious doubts"). [14]

27. Due to a lack of reliable market data for consumer vision care products [15] , the Commission has reconstructed the markets in question following a market investigation and has verified the Parties' estimates for market shares throughout the EEA. Due to the confidential nature of information submitted during the market investigation, the sections for consumer vision products (Section 3.3) present market share estimates in terms of ranges and do not specify the names of competitors. [16]

28. In previous pharmaceutical decisions, the Commission has generally relied on sales values to assess the competitive structure and impact of the transactions unless specific circumstances indicated volume data to be particularly relevant, in particular in markets involving generic products [17] The present case involves the merger between companies which sell mainly branded products (and in the pharmaceutical segment mostly branded originator products). The risk that sales values would understate the position of the parties is therefore not apparent.

29. The transaction creates significant horizontal overlaps in a number of areas. This notwithstanding, some of the parties' products could in principle be considered to belong to neighbouring markets. The parties also have some ancillary activities upstream to the markets where horizontal overlaps occur. Such relationships will be assessed specifically under the markets where these other overlaps are relevant.

3.2. Ophthalmic pharmaceuticals

3.2.1. Ophthalmological anti-infective and anti-inflammatory products (ATC3 classes S1A, S1B, S1C, S1R)

Market definition -general

30. Ophthalmological anti-infective and anti-inflammatory products are split into four ATC3 classes. These are: (1) ophthalmological anti-infectives (ATC3 class S1A), (2) ophthalmological corticosteroids (ATC3 class S1B), (3) ophthalmological anti-inflammatory and anti-infective combinations (ATC3 class S1C) and (4) ophthalmological non steroidal anti-inflammatories (ATC3 class S1R). Out of these ATC3 classes, S1B and S1R are anti-inflammatories.

31. Inflammation is the complex biological response of vascular tissues to harmful stimuli, such as pathogens, damaged cells, or irritants. Inflammation is a protective attempt by the organism to remove the injurious stimuli as well as to initiate the healing process of the tissue. Inflammation may be caused by infection, but the two are not synonymous: infection is caused by an exogenous pathogen, while inflammation is one of the responses of the organism to the pathogen. Infections are generally treated by anti-infectives, such as antibiotics or anti-fungals, while the inflammation is treated by corticosteroids and non-steroidal anti-inflammatory drugs.

32. The parties submit that for the ATC3 classes S1A, S1B and S1R, a market definition based on the ATC3 level would be appropriate, while for S1C, the ATC4 level (S1C1, S1C2, etc.) would be the appropriate class (see below para. 68 et seq.).

33. The market investigation broadly confirmed that for S1A (ophthalmological anti-infectives), S1B (ophthalmological corticosteroids) and S1R (ophthalmological non steroidal anti-inflammatories) the appropriate level for the market definition should be the ATC3 level, while for S1C (ophthalmological anti-inflammatory and anti-infective combinations) it was not conclusive whether the appropriate level should be the ATC3 or the ATC4 level. In the following, the ATC3 classes S1A, S1C and S1R will be discussed separately. [18]

34. However, some responses, both of competitors and key medical opinion leaders also suggested that some products from different ATC3 classes may compete with each other. These respondents specified in particular that products from the following classes compete with each other: S1B and S1C1, S1R and S1C2, S1A and S1C1 and S1B, S1C and S1R. However, as the commitments offered by the Parties in S1A, S1C and S1R will resolve also any possible competition concerns under these alternative market definitions [19] , the market definitions can be left open.

3.2.1.1. Ophthalmological anti-infectives (ATC3 class S1A)

Market definition

35. Both parties are active in ophthalmological anti-infective products classified in ATC3 class S1A, which is not further subdivided into ATC4 classes. The Commission has previously identified the S1A category as an affected market but ultimately left the market definition open given the absence of any competition concerns. [20]

36. All products in the ATC3 class are prescription only.

Competitive assessment

37. Novartis' products are Okacin (lomefloxacin) [21] , Bivacyn (Bacitracin, Neomycin), and Pom Oculos Epiteli (chloramphenicol, aminoacids, methoinine, retinol) which is sold only in Spain. Alcon's main products are Ciloxan/Oftacilox (ciprofloxacin), Tobrex (tobramycin), Stratrol (polymycin B, neomycin), Polyspectran Opht (bacitracin, neomycin, polymyxin B, gramicidin), Kanamytrex (kanamycin).

38. According to the parties, the relevant product market should be antibiotics for ocular infections caused by bacteria belonging to the S1A category, excluding ocular anti-fungals. This market definition has been broadly confirmed by the market investigation. It should also be noted that the parties, in any event, do not have overlapping activities in antifungal products in the EEA. These products are used to treat bacterial conjunctivitis, blepharitis, keratitis and external hordeola.

39. The market investigation indicated that the parties' products are the closest competitors in all the countries where Group 1 markets arise and that major barriers to entry and expansion are R&D expenses, reputation, and marketing expenses.

40. The parties submit that Novartis' product Okacin will be deregistered according to a decision taken in […]and that its production has been discontinued at the end of […]. As such, there would be no overlap in several group 1 countries (namely, Bulgaria, Latvia and Luxembourg). However current inventories are still being sold throughout the EEA, the de-registration process has not been completed yet [22] , and the discontinuation appears to be a potentially reversible business decision, in particular as long as the market authorization is still valid. Therefore, on a conservative basis, the horizontal overlap associated with the pruned product Okacin will be taken into account for the purposes of the competitive assessment in the present Decision.

41. The market investigation did not show any peculiarities regarding the above-specified findings for individual countries where serious doubts arise.

S1A-Bulgaria

42. In Bulgaria the transaction leads to a combined market share of [50-60]% with an increment of [5-10]% contributed by Novartis. Other competitors remaining in the market are Santen Seiyaku ([10-20]%), Actavis ([10-20]%), Leo Pharma ([5-10]%), Unimed Pharma ([5-10]%) and Bausch & Lomb (hereinafter, "B&L") [0-5]%. On the basis of the high market shares and the results of the market investigation indicating barriers to entry, serious doubts arise.

S1A-Latvia

43. In Latvia the transaction leads to a combined market share of [30-40]% with an increment of [0-5]% contributed by Novartis. Other competitors remaining in the market are Santen Seiyaku [30-40]%, Leo Pharma [20-30]% Unimed Pharma [5-10]%. On the basis of the relatively moderate combined market shares and a small increment and a presence of three other competitors with higher market shares than Novartis (two of which would be comparable to the merged entity), serious doubts do not arise.

S1A-Luxembourg

44. In Luxembourg the transaction leads to a combined market share of [60-70]% with an increment of [0-5]% contributed by Novartis. Other competitors are Thea [10-20]%, Leo Pharma [5-10]%, Mann [5-10]%, Pfizer [5-10]% and a tail end of 3 others. Given the high market share, the results of the market investigation indicating at barriers to entry, and the fragmented market structure, serious doubts arise.

S1A-Slovenia

45. In Slovenia the Parties would achieve a very high combined market share ([90-100]%), with an increment of [5-10]% contributed by Novartis, facing competition from only one competitor, Krka. Given the high market share and the quasi-duopolistic market structure, and the results of the market investigation indicating barriers to entry, serious doubts arise.

S1A-Spain

46. In Spain, the Parties would have a combined market share of [70-80]%, with an increment of [20-30]% contributed by Novartis, while the other main competitors are UCB, Allergan, Leo Pharma and Thea, each with market shares of less than [5-10]% and a tail end of 4 others. Given the high market share, the results of the market investigation indicating barriers to entry, and the fragmented market structure, serious doubts arise.

3.2.1.2. Ophthalmic non steroidal anti-inflammatories (ATC3 class S1R)

Market definition

47. Both parties are active in ophthalmological non-steroidal anti-inflammatory drugs (NSAIDs), classified in ATC3 class S1R which is not further subdivided into ATC4 classes. These products are indicated for the treatment or prevention of inflammations of the anterior segment of the eye and inflammations mainly post cataract surgery (and to a limited extent, other types of surgical procedures). The Commission has not considered the market definition for ophthalmological NSAIDs in previous decisions. The parties submit that the relevant market definition should include all products classified in the S1R class. This definition has been broadly confirmed by the market investigation.

48. All S1R products are sold prescription only.

Competitive assessment

49. Novartis' product Voltaren Ophta [23] is based on the molecule diclofenac, and is no longer patent-protected in any EEA country. [24] Alcon's product Nevanac based on the molecule nepafenac is patent-protected and has been successfully launched in some EEA countries in 2008-2010. [25] […]The parties submit that Alcon's Nevanac is a technically superior product and causes fewer side-effects. […]

50. The transaction would result in five group 1 markets at ATC3 level: Bulgaria, Denmark, Greece, Netherlands and Sweden with combined market shares of between [40-50]% and [90-100]%, and one group 2 market, the UK, where Alcon is a recent entrant. […] [26]

51. The Parties argue that the transaction would not raise competition concerns due to generic competition constraining Novartis' product, the remaining competitors and potential entry from competitors already active in other EEA countries.

52. The market investigation showed that future entries by competitors are not generally envisaged in the short term and that generic diclofenac-based products, which the Parties view as the closest competitors to Novartis Voltaren Ophta products, are not for the moment a real constraint, in particular due to […] which have led demand to revert back to originator brands. Many respondents pointed to barriers to entry and to expansion represented by marketing expenses, loyalty, brand awareness, and reputation which favour well-established products, such as Novartis' old Voltaren Ophta products, or R&D expenses which favour newly discovered formulations or molecules, such as Alcon's Nevanac.

53. According to most of the respondents of the market investigation, in the event that the prices of the parties' products were to rise, no switching would be anticipated, partly due to the reimbursement regimes in place in the affected countries and sometimes simply due to the fact that Novartis' product is either the only one present in some countries (Norway and Slovenia) or the other available alternative in a market with only two credible players (Austria, Estonia, Finland, Hungary, Ireland, Lithuania, Poland, Sweden and the UK).

54. Finally, in some of the remaining EEA countries, there are very few alternatives on the market since some of the competing players are parallel importers which sell, amongst others, Novartis' products (Germany, the Netherlands).

55. The market investigation did not show any particularities regarding these findings for individual countries.

S1R-Bulgaria

56. The transaction leads to a combined market share of [90-100]% with an increment of [20-30]% contributed by Novartis. The parties' products are originators and Alcon's Nevanac product is still patent protected. Alcon's products are successful and increasing in sales and its new generation product has been just launched in 2009. […] Other competitors are Unimed Pharma ([5-10]%), and B&L ([0-5]%), both decreasing in share. Novartis' product is well known and still retaining shares even though decreasing. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […] new generation products by Alcon (which have proved to be successful), serious doubts arise.

S1R-Cyprus

57. Novartis' products are the only available NSAIDs in the market and Alcon has just launched its Nevanac product in 2010. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, […] serious doubts arise.

S1R-Denmark

58. The transaction leads to a combined market share of [70-80]% and the increment is significant (Novartis [40-50]% and Alcon [20-30]%). The parties' products are originators and Alcon's Nevanac product is still patent protected. Alcon has just launched its new generation product in 2008 […]. Other competitors are Allergan ([20-30]%), and Stulln ([5-10]%). Novartis' product is well known and still retaining shares even though these are decreasing. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […] new generation products by Alcon (which have proved to be successful), serious doubts arise.

S1R-Germany

59. Novartis has a [20-30]% market share (which amounts to [30-40]% if sales of its products via parallel importers are taken into account). […] Other major competitors are Allergan [20-30]%, B&L [10-20]% and a tail end of smaller competitors and parallel importers. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, […] serious doubts arise.

S1R-Greece

60. The transaction leads to a combined market share of [40-50]% and the increment is significant (Novartis [10-20]% and Alcon [20-30]%). Alcon's products are originators and Alcon's Nevanac product is still patent protected. Alcon has just launched its new generation product in 2009 […]. Other major competitors are Alvia ([30-40]%), and Pharmathen ([10-20]%) which are generics of Novartis' products. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […] new generation products by Alcon (which have proved to be successful), serious doubts arise.

S1R-Hungary

61. Novartis has [80-90]% market share […]. The other major competitor in the market would be B&L ([10-20]%). In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, […] serious doubts arise.

S1R-Ireland

62. Novartis has [40-50]% market share and the only other competitor is Allergan. […] In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion[…], serious doubts arise.

S1R-Netherlands

63. The transaction leads to a combined market share of [40-50]% and the increment is significant (Novartis [5-10]% and Alcon [30-40]%). The parties' products are originators and whereas Novartis' Nafloc product has recently lost its patent protection, Alcon's Nevanac product, just launched in 2008, is still patent protected. […] Five other competitors remain in the market (Allergan [10-20]%, OPG [5-10]%, B&L [5-10]%, Thea [5-10]%, Fisher Farma [0-5]%, and Phoenix [0-5]%). However the last two are parallel importers which also sell Novartis' products. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […] new generation products by Alcon (which have proved to be successful), serious doubts arise.

S1R-Norway

64. Novartis is the only player […]. […] In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, […] serious doubts arise.

S1R-Slovenia

65. Novartis is the only player […]. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, […] serious doubts arise.

S1R-Sweden

66. The transaction leads to a merger to monopoly (Novartis [50-60]% and Alcon [40-50]%). The parties' products are originators and Alcon's Nevanac product is still patent protected. Alcon has just launched its new generation product in 2008, gaining almost [50-60]% market share in 2 years[…]. In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […] new generation products by Alcon (which have proved to be successful), serious doubts arise.

S1R-UK

67. The transaction leads to a combined market share of [40-50]% (Novartis [40-50]% (increasing) and Alcon [0-5]%, thanks to the launch of its new generation product, Nevanac, in May 2009). The parties' products are originators and Alcon's Nevanac product is still patent protected whereas Novartis' product recently lost its patent protection. […] There remains one other major competitor, Allergan ([50-60]%).In view of the high market shares, the results of the market investigation which indicate barriers to entry and expansion, and the recent […]new generation products by Alcon (which have proved to be successful), serious doubts arise.

3.2.1.3. Ophthalmological anti-inflammatory/anti-infective combinations (ATC3 class S1C)

Market definition

68. Products in the ATC3 class S1C are combination products of anti-inflammatory ingredients, such as corticosteroids on the one hand and anti-infective ingredients, i.e. mainly anti-bacterial ingredients on the other hand. The ATC3 class is subdivided in ATC4 classes depending on the anti-inflammatory ingredient they contain (ATC4 S1C1 contains corticosteroids, S1C2 contains non-steroidal anti-inflammatories and S1C9 other ophthalmological anti-inflammatory and anti-infective combinations.).

69. The parties argue that a market definition on the ATC4 level would be appropriate, whereby each ATC4 class constitutes a separate market.

70. The market investigation was not conclusive if the market should be defined at the ATC3 level (S1C) or ATC4 level (S1C1). The products of both parties belong to the S1C1 class. Since the market shares of the parties and competitors are the same in S1C as in the S1C1 category, it is not necessary to conclude on the product market definition. The market investigation indicated that the product market should not be further subdivided by specific anti-bacterial ingredient contained in the different products. Most anti-bacterial ingredients in S1C products are broad spectrum anti-bacterials and can as such be used for a number of infections and are substitutable with each other. The parties' products are prescription-bound in the affected markets. According to the information submitted, the products of the parties' competitors are also prescription bound, so the issue of a possible segmentation between prescription bound and OTC-products does not arise.

71. The market investigation also confirmed that it would not be appropriate to distinguish products according to the context in which they are used. While some products are more frequently used after eye surgery, they are all also used in day care practices.

Competitive assessment

72. Within the S1C category, the parties are active with the following products: Alcon markets the brands Tobradex/Tobrsone, Maxitrol, Tobrafen and Isopto Max and Novartis is active with Spersadex Comp/Spersadex M/Kloram/Dispersadron C, Cibaflam/Infectoflam, and Cortiphenol H. [27]

73. As regards Cibaflam/Infectoflam and Cortiphenol H, Novartis decided in […] to prune these products […] and has discontinued production in […] and last shipments were made in […]. In terms of group 1 markets, Infectoflam is currently sold in Luxembourg and Slovakia, while Cortiphenol H is sold in Greece. Novartis has recently instructed its country offices to start the de-registration process of these products. However, it is not known how long the de-registration process will take and both products are still available on the market. Furthermore, the discontinuation appears to be mainly a business decision which is potentially reversible, in particular as long as the market authorization is still valid. Therefore, on a conservative basis, the horizontal overlap associated with the pruned products Cibaflam/Infectoflam and Cortiphenol H will be taken into account for the purposes of the competitive assessment in the present Decision.

74. The market investigation indicated that some of the parties' products in this category are closely competing products, although it was also mentioned that Alcon's products are often used post-surgery while Novartis' products are not. The investigation also showed that R&D expenses and patents are considered to be a barrier to entry in this market.

75. The market structure in above mentioned countries is as follows [28] :

S1C -Bulgaria

76. In Bulgaria, the combined market share of the parties is [90-100]% with an increment of [5-10]% contributed by Novartis. The only other competitor is Actavis with [0-5]%. In light of the very high combined market share and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 products in Bulgaria.

S1C-Czech Republic

77. In the Czech Republic the transaction would result in a merger to monopoly (Alcon: [90-100]% and Novartis: [5-10]%). In light of this and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 markets in the Czech Republic.

S1C-Denmark

78. In Denmark the combined market share of the parties amounts to [90-100]%. The parties are similarly strong: Novartis with [40-50]% and Alcon with [40-50]%. The only other competitors are Orifarm ([5-10]% market share) and Singad Pharma (less than [0-5]%), which are in any case parallel importers of Novartis' and Alcon's products respectively. In light of the very high combined market share and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 products in Denmark.

S1C-Greece

79. In Greece the combined market share of the parties would amount to [80-90]% with an increment of [20-30]% contributed by Novartis. The only other competitors are B&L with [10-20]% and four other competitors below 5% market share. In light of the very high combined market share, the high increment and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 products in Greece.

S1C-Luxembourg

80. In Luxembourg the combined market share of the parties would amount to [60-70]% with an increment of [10-20]% contributed by Novartis. The only other competitors are Mann Lab with [10-20]% market share, Pfizer with [10-20]% and three other competitors with market shares below 5%. In light of the very high combined market share and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 products in Luxembourg.

S1C-Norway

81. In Norway, the transaction would result in a monopoly (Novartis with [70-80]% and Alcon with [20-30]%). Accordingly, the transaction raises serious doubts in the market for S1C/S1C1 products in Norway.

S1C-Romania

82. In Romania the combined market share of the parties would amount to [50-60]% with an increment of [0-5]% contributed by Novartis. Other competitors are Thea with [20-30]%, Sifi with [20-30]% and one other with less than [0-5]%. In light of the high combined market share and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C/S1C1 products in Romania.

S1C-Slovakia

83. In Slovakia the combined market share of the parties would amount to [90-100]% with an increment of [20-30]% contributed by Novartis. The other competitors are Ursapharm with [0-5]% and Unimed Pharma with less than [0-5]%. In light of the very high combined market share, the high increment and the results of the market investigation indicating barriers to entry, the transaction raises serious doubts for S1C products in Slovakia.

3.2.2. Miotics and anti-glaucoma (ATC3 class S1E)

Product market definition

84. According to the parties, S1E should be divided according to injectable miotics (used in ocular surgery to induce the constriction of the pupil) and Anti-glaucoma (used mainly as an eyedrop to relieve intraocular pressure, which frequently accompanies glaucomas).

85. The market investigation confirmed that injectable miotics and anti-glaucoma products belong to separate product markets based on the difference in indications.

86. The market investigation also confirmed that the parties' injectable miotics products are substitutable and that there are no alternatives to the parties' injectable miotics products (carbachol and acetylcholine chloride) to induce miosis (constriction of the pupil) during ocular surgery.

87. All anti-glaucoma products are aimed at reducing intraocular pressure. Anti-glaucoma products can however be further divided into the following sub-segments based on their mode of action: Prostaglandin Analogues, Beta-blockers, Alpha-adrenergic agonists, Carbonic Anhydrase Inhibitors and Miotics.

88. Based on the market investigation, a sub-segmentation of anti-glaucoma products cannot be excluded. This especially applies for beta-blockers, where significant overlaps between the Parties' products arise in several countries. It appears from the market investigation that beta-blockers may to some extent be substitutable with other anti-glaucoma products, in particular prostaglandin analogues (the two have been indicated as the most likely products to be used as first-line treatments). This notwithstanding, it does not appear likely, based on the market investigation, that a significant part of demand would switch to other anti-glaucoma products in case of a 10% price increase in beta-blockers. The market investigation indicated beta-blockers to be already significantly cheaper than other types of anti-glaucoma products.

89. The market definition can however be left open for anti-glaucoma products as competition concerns do not arise even on a narrower sub-segmentation of anti-glaucoma products.

90. Molecular overlaps between the parties are infrequent and are limited to timolol (beta-blocker) and pilocarpine (a miotics product in eye-drop form used in the treatment of glaucomas). The market investigation indicated substitutability between timolols and other beta-blockers. In any event, the market definition can be left open as the transaction does not raise competition concerns either under a market definition including timolol-based products only or any wider market definition..

91. On the other hand, the market investigation, and in particular users (hospitals and doctors) indicated limited substitutability between pilocarpine and other molecules. Pilocarpine appears to be a niche product and is mainly used in the treatment of one specific and relatively rare type of glaucoma (angle-closure glaucoma). In Finland, where the parties overlap in pilocarpine, it is the only type of molecule in its category (topical miotics used to treat glaucomas). A market definition based on the molecule level therefore cannot be excluded.

Competitive assessment for Injectable miotics

Finland , France, Netherlands, Portugal, Slovenia, Sweden and UK

92. In injectable miotics, the proposed transaction is a merger to monopoly in several countries (albeit in Finland, the Netherlands, Portugal and the UK with an increment of less than [0-5]%) and the parties are essentially the only two suppliers in the EEA (except for another supplier active only in Italy). With the exception of Italy, the parties therefore have a monopoly in the countries where they do not overlap. This leads to a combined market share of c. [90-100]% at EEA level. The [5-10]% remaining market share is held by Farmigea, only active in Italy.

93. In light of their overall presence in the EEA in terms of injectable miotics sales and overall marketing and distribution capabilities, the parties are the most likely entrants in countries where they are not present (and where, with the exception of Italy, the other party has a monopoly). The market investigation did not indicate any significant likely entry within a reasonable time-frame that would constrain the merged entity in the countries concerned (i.e. where the merger would lead to a monopoly).

94. In light of the high combined market shares and the competitive situation described above, serious doubts therefore arise in injectable miotics in all the markets where the parties overlap (Finland, France, Netherlands, Portugal, Slovenia, Sweden and UK).

Competitive assessment Anti -glaucoma

95. In the overall market of anti-glaucoma products, combined market shares are less than 35% in each country where the parties overlap. However, the parties achieve higher market shares in some sub-segments of anti-glaucoma products, in particular in beta blockers (seven countries with 40-70% combined market shares). Based on molecular overlaps, two Group 1 markets arise: timolol in Bulgaria and pilocarpine in Finland.

96. However, the significant overlaps in most of the Group 1 Plus markets do not raise serious doubts due to the presence of other credible competitors and in some cases small increments. There are also indications from the market investigation of possibilities for expansion in a number of countries. The beta blocker product of Novartis - based on timolol - is a mature generic product with several other suppliers. Also, the main products of the parties are often based on different molecules and, based on this characteristic, the parties do not appear to be the closest competitors.

S1E Anti-glaucoma - Finland

97. On the basis of a molecular market definition, the transaction would lead to a merger to monopoly in pilocarpine in Finland (Novartis [50-60]%; Alcon [40-50]%). Novartis distributes a [third party] product in Finland […]. [29] Novartis has exclusive rights to commercialise this product in Finland. […] However, pilocarpine appears to be a niche product and the market is very small (EUR […]), which may not make it attractive for entry. Serious doubts therefore arise for pilocarpine in Finland.

S1E Anti-glaucoma - Austria

98. In Austria the parties would have a combined market share of [30-40]% (Novartis [20-30]%; Alcon [10-20]%) of beta blockers. The parties do not overlap on the molecule level. There are three competitors with larger market shares than Novartis: Huhtamaki and Allergan with [10-20]% each and Merck & Co with [10-20]%. Agepha also has a significant ([5-10]%) market share. Merck & Co, Agepha and Huhtamaki products are based on the same molecule (timolol) as the Novartis product. Based on the relatively modest market share, the fact that the parties are not the closest competitors and the presence of a sufficient number of other significant competitors, competition concerns do not arise

S1E Anti-glaucoma - Bulgaria

99. In Bulgaria, the parties would have a combined market share of [60-70]% in beta-blockers, but with a small increment of [0-5]% contributed by Novartis. Both parties sell products based on timolol, but Alcon also has another product, betaxolol. According to the IMS market information provided by the parties, there are two other competitors with higher market shares than Novartis (Santen with [20-30]% and Merck&Co with [5-10]%) and two with comparable market shares (B&L and Unimed with just above [0-5]% each). All these companies are internationally active. Due to the fact that the main product in this market is timolol, the market structure is not materially different based on a molecular market definition, although the parties would have a smaller combined market share of [60-70]% as Alcon also has another product, betaxolol. There are indications of possibilities for expansion. Due to the small increment by Novartis, the relative homogeneity of the products and the presence of internationally active competitors, the transaction does not raise competition concerns [30] .

S1E Anti-glaucoma - Czech Republic

100. In 2009, the parties had a combined market share of [40-50]% (Novartis [10-20]%, Alcon [30-40]%). However, the leading product of Novartis had been divested as part of a sale of a number of products to […]. In the absence of this product, the combined market share of the parties would be below 35%. There are in any case other competitors remaining, in particular B&L ([20-30]%), Ursapharm ([20-30]%), Merck&Co ([5-10]%), Unimed Pharma ([0-5]%) and Santen ([0-5]%). Most of these competitors sell the same molecule product as Novartis (timolol). Alcon sells a product based on another molecule (betaxolol). Serious doubts therefore do not arise.

S1E Anti-glaucoma - Greece

101. The parties have a combined market share of [50-60]% (Novartis [10-20]%; Alcon [30-40]%). The parties do not overlap at the molecule level. Merck&Co has a market share of [20-30]% with a product that is based on the same molecule as the Novartis product (i.e timolol). Pharmanel, B&L and Alvia each have [5-10]% of the market. Pharmanel's and Alvia's products were indicated by the market investigation to be close competitors to Alcon's products, while Merck's product is the closest competitor to the Novartis product. The market investigation also indicated possibilities of expansion. On the basis of the above, serious doubts can be excluded.

S1E Anti-glaucoma – Netherlands

102. The parties would have a combined market share of [30-40]% for the possible sub-category of alpha adrenergic agonists. Novartis contributes [5-10]%. The parties do not overlap on the molecule. Novartis supplies a generic product based on brimonidine, whereas Alcon has an originator product. The originator for brimonidine (Allergan) has [10-20]% of the market and Mylan and Teva also supply generic versions of Brimonidine with comparable market shares to Novartis ([0-5]-[5-10]%). Serious doubts therefore do not arise.

103. The parties would also have a combined market share of [40-50]% in the sub-segment of Carbonic Anhydrase Inhibitors (Novartis [10-20]%; Alcon [30-40]%). Again, Alcon has an originator product and Novartis a generic and the parties do not overlap on the molecule. Furthermore, the galenic forms of their products are different (Alcon's product is an eyedrop and Novartis' product is a tablet). The originator product of the Novartis product is present with [10-20]% of the market through a parallel importer. Merck&Co also has [20-30]% of the market with another originator drug. 15-20% of the market is supplied by parallel importers of Merck&Co's and to a lesser extent, Alcon's product. As the parties' products are not close competitors due to the difference in active ingredient and galenic form, the transaction does not raise serious doubts.

S1E Anti-glaucoma – Poland

104. In 2009 the parties had a combined market share of [50-60]% in beta-blockers in Poland (Novartis [5-10]%; Alcon [40-50]%). However, as in the Czech Republic, the main product of Novartis (accounting for [5-10]% of the market) has been divested […]. The divestment has already been completed in Poland. The parties' combined market share without this product would be [30-40]% with a small increment of [0-5]% contributed by Novartis. The transaction does not therefore raise serious doubts.

S1E Anti-glaucoma – Romania

105. The parties would have a combined market share of [40-50]% (Novartis [5-10]%; Alcon [40-50]%). They do not overlap on the molecule. There are three competitors that supply products based on the same molecule as the Novartis product (timolol) which have higher market shares than Novartis: Eipico ([20-30]%); Rompharm ([5-10]%) and Merck&Co ([5-10]%). The transaction does not therefore raise serious doubts.

S1E Anti-glaucoma – Slovenia

106. In Slovenia, the combined market share of the parties would be [30-40]% in beta-blockers (Novartis [5-10]%; Alcon [30-40]%). The parties do not overlap on the molecule. The market leader would continue to be Merck with the remaining [60-70]% of the market and with a product based on the same molecule as Novartis. Expansion has been indicated to be possible by the market investigation. On the basis of the above, serious doubts do not arise.

Potential competition- Anti-glaucoma

107. Alcon is a strong originator in the overall anti-glaucoma market (the second biggest with [10-20]% at the EEA level after Pfizer ([30-40]%) and before Merck&Co and Allergan with around [10-20]% each). Novartis is the biggest generic (albeit with only [0-5]% of the EEA market of all glaucoma products). The share of generics in the anti-glaucoma market is generally low.

108. Novartis has[…]generic pipeline […] including the versions of the bestselling [drug A]. Both of these drugs are in the sub-segment of prostaglandin analogues. Based on current overlaps, no Group 1 "Plus" markets arise in prostaglandin analogues.

109. According to the information of the Parties, [competitor A] and [competitor B], both active in the EEA […], have already applied in the US for authorisation for the generic version of […].

110. The possibility that as a result of the merger, Alcon could launch generic versions of its own products before patent expiry and capture market shares was raised as an issue by one party in the market investigation. However, as the Commission already outlined in an earlier decision involving an originator and a generic, [31] the merger specificity of such strategy is not evident (i.e. originators may use independent generics to launch authorised generics).

111. [Drug A] has sales of EUR […] million in the EEA. Novartis plans to launch the generic version […] and achieve only EUR […] million sales […]. In previous decisions relating to originator pipelines, a pipeline was considered to be in a sufficiently advanced stage of development to be considered as a possible competitive constraint when it reached clinical trials (Phase III). This cannot be applied in the case of generics as no clinical trials are required for the authorisation of a generic. The development of generics also takes significantly less time than originators. Despite the […] timeline, the Novartis pipeline cannot be considered to be already at a sufficiently advanced stage to pose a concrete competitive restraint on [drug A]. This is all the more the case given the […] turnover projections relative to the turnover of [drug A]. Moreover, even if the pipeline were assumed to be in a sufficiently advanced stage, a number of competitors which could maintain sufficient competitive pressure on […] would remain.

112. In general, the market investigation indicated other generics to have comparable capabilities to Novartis in anti-glaucoma markets, and the majority of respondents to the market investigation did not raise any concerns on this issue.

113. In light of the above, serious doubts based on the possible elimination of potential competition in anti-glaucoma markets, and, in particular for prostaglandin analogues, do not arise.

3.2.3. Ocular anti-allergics, decongestants and anti-septics (ATC3 class S1G)

Product market definition

114. The ATC3 category S1G comprises ocular anti-allergics, decongestants and antiseptics. These products are eye drops that principally treat eye allergies, such as seasonal allergic conjunctivitis (i.e. hay fever) or perennial allergic conjunctivitis. Eye allergies occur when a foreign substance, known as an allergen, enters the eye. The body's immune system reacts to the allergen by releasing histamine from mast cells. Histamine causes eye itching, as well as redness and swelling. S1G products treat these symptoms.

115. There are some differences between the mode of action/indications of different S1G products. The ATC category contains three broad categories of products.

i) Anti allergics target the cause of the allergy but have different modes of action. Anti-allergics comprise anti-histamines, mast cell stabilisers and multiple action products. Anti-histamines, classified in S1G1, inhibit the action of histamines thereby relieving eye itching. Mast cell stabilisers (S1G2 ATC4 category) target the source of histamine to prevent its release and reduce eye swelling. Multiple action products in S1G3 contain both of these agents and address all the symptoms of eye allergies.

ii) Decongestants – Decongestants are classified under S1G5. They relieve the same symptoms by constricting the blood vessels on the conjunctiva. They reduce eye redness but do not treat the underlying causes of allergy.

iii) Ocular anti-septics S1G6 – these products are relatively simple products to clean the eye. They have no specific action relating to allergies.

116. The Commission considered S1G markets in previous decisions [32] , but left the market definition open. The Commission in particular considered whether all anti-allergics together or anti-allergics and decongestants together could comprise the relevant product market. The Commission considered prescription and OTC products separately.

117. The parties argue that all S1G products belong to the same relevant product market. Notwithstanding the differences in their mode of action/indication, they argue that they are substituted in practice to a significant extent. This is due to consumers who suffer from seasonal allergies. The parties argue that these consumers self-medicate with cheaper decongestants and antiseptics available in pharmacies and supermarkets. The Parties further argue that OTC products compete with prescription products.

118. The transaction gives rise to the most significant overlaps in ocular anti-allergics, and in particular, anti-histamines and combination products. The market investigation therefore focused on these.

119. While customer (doctors and hospitals) replies to the market investigation overall indicated that OTC and prescription drugs were not substitutable, there were indications from competitors that there were possibilities of substitution between the two. In view of the customer replies in particular, it cannot be concluded with sufficient certainty that these products belong to the same relevant market. This notwithstanding, the classification of a drug as OTC or Rx is not always evident in the S1G category as some products are available OTC, but they can be reimbursed if prescribed. This means that they can be sold both as OTC and Rx. Furthermore, the regulatory framework regarding the availability of these drugs may also differ from country to country, i.e. the same drug may be prescription only in one country and might be available OTC in another country. Consistent with such differences, the market investigation also indicated some possible national differences in the degree of competition between OTC and Rx drugs. In light of such specificities and of the indications that there may be to some extent a competitive relationship between OTC and Rx drugs at least for a part of the S1G markets concerned, this relationship will be examined in greater detail in the respective national markets where it makes a difference to the assessment.

120. On the question of whether multiple action products in S1G3 were substituted frequently and effectively with other products, the market investigation, and in particular customers' replies, indicated limited substitution. This may be explained by the difference in efficacy/strength, mode of action and price (multiple action products seem to have stronger effects and are sold at a significantly higher price - a fact also submitted by the parties).

121. There were more indications from competitors for the substitution of anti-histamines in S1G1 with other products, in particular S1G3 and to a slightly lesser extent S1G2. Based on customers' replies, however, substitution again appears to be more limited. One exception seems to be the UK, where anti-histamines seem to be constrained to a significant degree by other products.

122. Furthermore, it does not appear likely based on the market investigation that a significant part of demand would switch from anti-histamines and from multiple action products to other products in the case of a price increase of 10%.

123. Overall, there were no indications of frequent substitution of anti-allergic products in S1G1, S1G2 and S1G3 with products in other ATC4 categories in S1G, in particular decongestants (S1G5) and ocular anti-septics (S1G6), which suggests that the ATC3 level market definition proposed by the parties is inappropriate.

124. The market investigation did not indicate the appropriateness of a molecular market definition. Despite some evident differentiation between the products (which often includes strong brands), the market investigation indicated substitution between products based on different molecules.

125. Based on the lack of conclusive evidence on the frequent and effective substitution among ATC4 categories, the assessment will take ATC4 as a basis for market definition. The exception is the anti-histamine segment in the UK, where the market evidence indicated substitution from other ATC4 categories to be likely. As for the distinction between OTC and Rx medicines, this can be left open for a number of national markets. Where this makes a difference for the competitive assessment, it will be assessed specifically in light of the characteristics of the national markets concerned.

Competitive assessment

126. Concerns would mostly arise in multiple action (S1G3) products due to high combined market shares and the lack of competitors (in some cases, the parties are the only suppliers of these products). The parties have strong and well-known brands in this category (Opatanol and Zaditen). In most cases, the prescription/OTC division does not make a difference as these products are mostly sold on prescription.

127. The parties also have strong positions in anti-histamines (S1G1) in some countries, which raise serious doubts.

128. It is only in the Czech Republic that competition concerns are likely to arise in mast cell stabilizers (S1G2).

129. The market investigation highlighted that brands and reputation as well as marketing expenses generally play a significant role in competition and may be considered as significant barriers to entry. Barriers to expansion are more specific to the markets concerned and will be assessed in the national markets, where relevant.

S1G Czech Republic

130. In the Czech Republic, the transaction would lead to Group 1 "Plus" markets in several categories of S1G products.

131. The parties would have a combined market share of [50-60]% (Novartis [40-50]%; Alcon [10-20]%) in S1G1. Only two competitors remain, Johnson & Johnson (hereinafter referred to as J&J) with [30-40]% and Allergan with [5-10]%. The parties' combined market shares would be even higher in the prescription anti-histamine segment: [80-90]% (Novartis [70-80]%; Alcon [10-20]%). Only one other competitor, Allergan, remains with a much smaller market share.

132. The parties would have a combined market share of [40-50]% in mast cell stabilisers (S1G2) (Novartis [30-40]%; Alcon [5-10]%) with only one other competitor (Ursapharm) remaining. In addition, the entire class is prescription only, so the assessment does not change based on this distinction.

133. The merger would lead to a merger to monopoly (Novartis [30-40]%; Alcon [70-80]%) in prescription multiple action products. In the overall S1G3 segment the parties would still have very high combined market shares ([80-90]%; Novartis [20-30]%; Alcon [50-60]%) and there would only be one significantly smaller competitor remaining (Meda).

134. In addition to the general barriers to entry for S1G products indicated by the market investigation, the market investigation did not indicate that the merged entity would be sufficiently constrained by remaining competitors in any of these markets in the Czech Republic.

135. Based on high combined market shares and the fact that the competitive pressure from remaining competitors is unlikely to be sufficient to constrain the merged entity, the transaction would raise serious doubts in each of the S1G1 (Rx and overall), S1G2 (Rx and overall), and S1G3 (Rx and overall) categories. Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Denmark

136. In Denmark the transaction would lead to Group 1 "Plus" markets in the overall S1G category, in anti-histamines (S1G1) and multiple action products (S1G3).

137. The parties would have a combined market share of [30-40]% (Novartis [20-30]%; Alcon [10-20]%) in S1G1. However, the transaction is a 3 to 2 merger with only one other competitor, J&J remaining. As the Novartis product (Antistina Privin) is OTC and Alcon's product (Emadine) is prescription only, there is no overlap based on the distinction between OTC and prescription products. In Denmark, it was mainly other anti-histamine products that were indicated by the market investigation to be close competitors to Antistina Privin, i.e. there was no consistent indication of any other type of product to be a close competitor to Antistina Privin.

138. The closest competitor to Antistina Privin was indicated to be J&J's product (Livostin), which is also OTC. However, Alcon's prescription only product (Emadine) was also indicated to be a close competitor despite being a prescription only product. In general, the market investigation indicated that OTC S1G products do not frequently and effectively substitute prescription products. The reasons cited were the difference in price (Rx products are reimbursed) and the reluctance by patients to switch from either type of product to another. This does not exclude, however, that customers would switch to Rx products in case of a price increase in OTC products. It should be noted to this effect that Antistina Privin is also reimbursed when prescribed, although at current price levels (2009) it is currently sold predominantly as an OTC product in Denmark (Novartis estimates that only [0-5]% of sales were made through prescription in Denmark).

139. In light of the overall indications of the market investigation, however, it appears that the main competitive pressure on Novartis stems from J&J, which would continue to be the market leader with almost twice the market shares of the merged entity. Competition concerns are therefore unlikely to arise in the S1G1 segment.

140. The parties would have a combined market share of [80-90]% (Novartis [20-30]%; Alcon [50-60]%) in multiple action products in S1G3. Orifarm has [10-20]% of the market, but this is due to the parallel import of the Novartis product, Zaditen. The only other product on the market is Meda's Allergodil with [50-10]%. The Alcon product (Opatanol) is an Rx only product. Exceptionally, Zaditen in this category is available OTC (in most countries it is a prescription only product). This distinction is less clear in Denmark, however, because Novartis only relatively recently received approval to sell Zaditen as an OTC drug in Denmark. This notwithstanding, Zaditen continues to be reimbursed when prescribed and the share of prescription sales is not insignificant ([10-20]%).

141. It should also be noted that Zaditen has in general been indicated by the market investigation to be a substitute for the relevant patent-protected Alcon product (Opatanol) more often than other products. It has also been indicated as a close substitute for Opatanol in Denmark (as well as the Zaditen product sold by a parallel importer). On balance, therefore and due to the very specific circumstances relating to the OTC/prescription status of Zaditen in Denmark, it cannot be excluded that the Novartis product would act as a significant competitive constraint on Opatanol in Denmark in view of its mixed OTC/Rx sales. In light of the high concentration of the market (HHI of [6000-7000] with a delta of [2000-3000]) and the likelihood that the merger would raise barriers to entry and expansion, competition concerns arise in the overall S1G3 segment. Competition concerns would also arise on an Rx only segment - if [10-20]% of the sales of Zaditen were attributed to this segment - as the transaction would lead to a duopoly in the Rx only segment as well, with a significantly smaller competitor.

142. Based on high combined market shares, the lack of competitors and general barriers to entry in the S1G segment, serious doubts cannot therefore be excluded for the S1G3 (overall and Rx) market in Denmark. Serious doubts can be excluded for the S1G1 segment for the reasons cited above.

S1G Finland

143. In Finland the transaction would lead to very high combined market shares in the multiple action anti-allergic category (S1G3). Here the parties would have a combined market share of [90-100]% (Novartis [70-80]%; Alcon [10-20]%). The only other competitor is a parallel importer, which imports the Novartis product. The whole category is prescription only.

144. Based on high combined market shares and the lack of competitors, and in light of general barriers to entry indicated for S1G products, serious doubts arise for the S1G3 segment (Rx and overall). Serious doubts arise irrespective of the OTC/Rx distinction

S1G Germany

145. In Germany, the parties' products are the leading prescription brands. The parties therefore have an [80-90}% combined market share (Novartis [50-60]%; Alcon [20-30]%) in the prescription segment of the S1G category. The only other competitor which supplies its own product is Allergan with only [0-5]% of the market. The remaining [10-20]% of the market belongs to parallel traders supplying mostly the parties' products.

146. Since the main Rx products of the parties are multiple action products, the parties' combined market share is also very high in the overall prescription S1G3 category ([80-90]% with an increment of [20-30]% by Alcon). The remaining competitors are parallel importers of the parties' products. In the overall segment of S1G3 (including both Rx and OTC), the parties' combined market share is significantly lower, [30-40]% (Novartis [20-30]%, Alcon [10-20]%). There are two significant competitors remaining (B&L with [30-40]% and Meda with [20-30]%). However, the remaining [5-10]% of the market is accounted for by parallel traders supplying mostly the parties' products.

147. The parties submit that their S1G3 products have very similar modes of action and indications and they can be considered to be close competitors in Germany. There were some indications, however, that non-prescription multiple action products in S1G3 (from B&L and Meda) may be closer competitors to the Novartis multiple action prescription product (Zaditen) in Germany than the Alcon product, Opatanol. It should also be noted that products based on the API of the B&L and Meda product are usually sold by prescription only in other countries. Furthermore, expansion has been indicated by the market investigation as possible and likely.

148. The transaction also gives rise to a Group 1 market in mast cell stabilisers (S1G2), with a combined market share of [30-40]% (Novartis [30-40]%; Alcon [5-10]%). There are other significant competitors remaining (B&L [30-40]%, Ratiopharm [10-20]% and Ursapharm ([5-10]%). The situation is not materially different if the OTC/Rx separation is considered. The market investigation confirmed that for S1G2, there are credible competitors remaining that could constrain the merged entity.

149. On balance, therefore, serious doubts can be excluded with respect to multiple action products (S1G3) and mast cell stabilisers (S1G2) in Germany.

S1G Greece

150. The parties have combined market shares of [30-40]% in the anti-histamine segment (S1G1), with a relatively small increment by Novartis ([5-10]%, due to sales of the Spersallerg product). The market leader would continue to be Allergan with [40-50]% and there is another competitor, J&J with significantly higher market shares than Novartis ([10-20]%). The Novartis product is OTC and the Alcon product is Rx. The transaction does not therefore lead to any overlaps based on this distinction. Serious doubts do not therefore arise.

151. The parties achieve the highest combined market share in the S1G3 segment in Greece with [50-60]% (Novartis [10-20]%, Alcon [30-40]%). Even though both parties' products are Rx, the parties did not identify higher combined market shares in the Rx only segment (the OTC/Rx status of competitors' products is not always clear). In any event, there are a number of competitors with products based on the same molecule (ketotifen) as the Novartis product (Zaditen). These include Zwitter ([30-40]%), Rafarm ([5-10]%) and two other competitors with [0-5]%. The market investigation did not find that Novartis' product was the closest competitor to Alcon's product: the products of two other competitors were also indicated to be close competitors to Alcon's Olopatadine. Zwitter and Rafarm have increased their sales in the past three years but this does not appear to be at the expense of the Novartis originator product. There has been an overall growth in the market. It appears from the market investigation that expansion is to some extent possible.

152. In light of the presence of a number of competitors, the lack of clear indications that Novartis is Alcon's closest competitor and evidence of possibilities of expansion, serious doubts can be excluded in Greece.

S1G Hungary

153. In Hungary the parties achieve high market shares due to their strong anti-histamine and multiple action sales.

154. In the anti-histamine segment (S1G1) the parties would have a combined market share of [80-90]% (Novartis [60-70]%; Alcon [20-30]%) with only Allergan remaining. As all products in this segment are Rx there would be no difference on the basis of the Rx/OTC separation.

155. The parties combined would be also by far the largest supplier of multiple action products (S1G3, combined market share of [70-80]% (Novartis [10-20]%; Alcon [50-60]%). The parties are the only suppliers of prescription-bound multiple action products. The only other supplier of multiple action products is Meda with an OTC product.

156. On the basis of the high concentration of the market, the significant change resulting from the transaction and general barriers of entry indicated by the market investigation for S1G products, serious doubts arise in antihistamines S1G1 (Rx and overall) and combination products (Rx and overall). Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Iceland

157. In Iceland the proposed transaction would lead to a merger to monopoly in both anti-histamines (increment of [0-5]% by Alcon) and multiple action products (increment of [5-10]% by Alcon).

158. In light of the resulting monopoly and general barriers to entry the transaction therefore raises serious doubts in anti-histamines (S1G1 Rx and overall), multiple action products (S1G3- Rx and overall). Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Ireland

159. In Ireland, the parties are the only suppliers of multiple action products, so the transaction would lead to a merger to monopoly in S1G3 (increment of [5-10]% by Novartis). Both products are Rx.

160. The parties are also very strong in anti-histamines with a combined market share of [90-100]% (Novartis [70-80]%, Alcon [10-20]%). There is only one other competitor, Allergan ([5-10]%). However, while Alcon's product (Emadine) and Allergan's product (Relestat) are prescription only, Novartis has an OTC product in this category, Otrivine Antistine. It should be noted on the other hand that Otrivine Antistine is reimbursed when prescribed and is therefore both sold as prescription and OTC. The market investigation did not indicate any specifics of the S1G market in Ireland which would indicate that OTC drugs frequently and effectively substitute Rx drugs. As in Denmark, however, it cannot be excluded that Rx drugs constrain the price of OTC drugs, i.e. that customers would switch to Rx drugs in case of a significant price increase in OTC drugs.

161. Notwithstanding that, Otrivine Antistine is sold predominantly as a an OTC product in Ireland (Novartis estimates that only [0-5]% of sales were made by way of prescription in Ireland), Alcon's product, Emadine, was indicated to be the closest competitor to Otrivine Antistin with Allergan's product indicated also as a close competitor. As opposed to the S1G1 segment in Denmark, the parties would have very high combined market shares and the main competitive pressure on the market leader Novartis seems to be coming from Alcon. Given the highly concentrated market structure, and the very significant increase in the concentration (HHI of [6000-7000]with a delta of [2000-3000]), and indications of closeness of competition between Otrivine Antistine and prescription products (and in particular Alcon's) competition concerns therefore arise in the S1G1 segment.

162. The transaction therefore raises serious doubts in S1G3 (Rx and overall) and S1G1 (overall).

S1G Luxembourg

163. The parties achieve high combined market shares in multiple action products ([80-90}%; Novartis [60-70]%; Alcon [10-20]%). The only other supplier is Meda. Since the parties' products are Rx and Meda's product is OTC, the transaction would lead to a merger to monopoly in the Rx segment of S1G3. Since these are the main Rx products on the market, the parties have 99% of the overall S1G Rx segment as well.

164. The transaction also leads to a Group 1 market in S1G2, but with a small increment (combined [50-60]%; Novartis [40-50]%; Alcon [0-5]%). There are four other players with higher market shares than Alcon: Klosterfrau ([20-30]%); Omnivision ([10-20]%); Thea ([5-10]%) and B&L ([0-5]%). The parties do not overlap on the molecule and there are other competitors that supply the same molecule product as Novartis. The transaction therefore does not raise competition concerns in this segment.

165. The transaction therefore raises serious doubts in the S1G3 (both overall and Rx) categories. Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Malta

166. In Malta the transaction would lead to a merger to monopoly in the multiple action category (S1G3). The increment by Novartis is [0-5]%. Both products are prescription only.

167. The parties would also have a strong position in anti-histamines (prescription only category in Malta) with a combined market share of [60-70]% (Novartis [30-40]%; Alcon [20-30]%). Ursapharm would remain with [30-40]% and J&J with [10-20]%. Based on the molecule of the products, Ursapharm appears to be the closest competitor to Novartis. The market investigation did not confirm possibilities for expansion.

168. In addition, due to the small size of the market, the incentives to enter may be less than in other markets.

169. In light of the above, serious doubts therefore arise with respect to both the S1G1 and S1G3 segment. Serious doubts arise irrespective of the OTC/Rx distinction

S1G Netherlands

170. In the Netherlands the transaction would lead to a Group 1 market in multiple action products (S1G3). These products are only sold on prescription in the Netherlands. The parties would have a combined market share of [60-70]% (Novartis [20-30]%; Alcon [20-30]%). However, the only other supplier which supplies its own product is Meda with [10-20]%. The rest of the market is supplied by parallel importers, which mainly sell Alcon's product (and to a lesser extent, Meda's).

171. For this reason, and in light of general barriers to entry for S1G products indicated by the market investigation, serious doubts cannot be excluded in the S1G3 segment (Rx and overall). Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Norway

172. In Norway the parties would achieve high combined market shares in S1G3 ([80-90]%, Novartis [50-60]%; Alcon [20-30]%). The only other supplier is a parallel importer, which imports the parties' products. Both parties' products are prescription only.

173. In light of the high existing concentration and the significant increase that would result form the merger as well as general barriers to entry for S1G products indicated by the market investigation, serious doubts therefore cannot be excluded in the S1G3 segment (an Rx only segment in Norway) Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Poland

174. In Poland the parties would have a combined market share of [90-100]% in the S1G3 segment (Novartis [10-20]%; Alcon [70-80]%). Both parties' products are prescription only. The only other competitors are parallel importers of Alcon's products.

175. In the S1G2 segment the parties have a combined market share of [40-50]% (Novartis [10-20]%; Alcon [30-40]%). The product of Novartis, the main product of Alcon and the products of other competitors are all based on the same molecule (cromoglicic acid). Warszawa ZF Polfa would remain a close second competitor with [40-50]% of the market. Ursapharm and B&L would be the other two remaining competitors with market shares of [10-20]% and [0-5]% respectively. Based on the presence of an equally strong competitor and two competitors which are comparable to pre-merger Novartis and based on the fact that all competitors sell the same product under different brand names, the transaction does not lead to competition concerns.

176. Serious doubts therefore cannot be excluded in the S1G3 segment (Rx and overall) in Poland. Serious doubts arise irrespective of the OTC/Rx distinction

S1G Portugal

177. In Portugal, the transaction would lead to a merger to monopoly in S1G3 (Novartis [50-60]%; Alcon [40-50]%). In light of this and the general barriers to entry for S1G products indicated by the market investigation, serious doubts therefore arise in this segment.. Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Romania

178. In Romania, the transaction would lead to a merger to monopoly in S1G3 (Novartis [0-5]%; Alcon [90-100]%). Since these are the only prescription products sold in S1G, this would constitute a merger to monopoly in the S1G Rx segment as well.

179. In light of the above and of general barriers to entry for S1G products indicated by the market investigation, serious doubts therefore arise in the S1G3 (overall and Rx) Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Slovakia

180. In Slovakia the merger would lead to combined market shares of [40-50]% in the S1G1 segment (Novartis [40-50]%; Alcon [5-10]%). J&J is the current market leader with [40-50]%, whilst Allergan has a market share of [5-10]%. All products are prescription only. The parties' products were not indicated as the closest competitors. Based on the market investigation the main competitive pressure on Novartis seems to be stemming from J&J. The market investigation indicated possibilities for expansion in S1G1 in Slovakia.

181. In S1G3 the situation is similar. The parties would have a combined market share of [40-50]% with a [5-10]% increment by Novartis. Unimed Pharma is the current number 2 with [30-40]% and Meda is present with [10-20]%. The market structure is the same on an Rx only S1G3 segment. The market investigation confirmed all products to be close competitors to the market leader Alcon's product. Given that both competitors have higher market shares than Novartis pre-merger and that possibilities for expansion have been indicated in this segment in Slovakia, the transaction does not raise competition concerns.

182. Serious doubts can therefore be excluded in Slovakia. This conclusion stands irrespective of the OTC/Rx distinction.

S1G - Slovenia

183. In Slovenia the transaction would lead to a merger to monopoly in S1G1 (Novartis [30-40]%; Alcon [60-70]%) and S1G3 (Novartis [30-40]%; Alcon [60-70]%) and due to these overlaps, also in the prescription segment of the overall S1G category.

184. In light of the above and of barriers to entry for S1G products indicated by the market investigation, serious doubts therefore arise in the S1G1 (overall and Rx) and S1G3 (overall and Rx) segment. Serious doubts arise irrespective of the OTC/Rx distinction

S1G Spain

185. In Spain, the transaction would lead to combined market shares of [70-80]% (Novartis [30-40]%; Alcon [30-40]%) in the S1G3 segment. Meda has a [20-30]% market share and there is a small competitor, Angelina with [0-5]%. All products are prescription only. Due to high combined market shares and a small number of significantly smaller competitors remaining, serious doubts cannot be excluded. Serious doubts arise irrespective of the OTC/Rx distinction.

S1G Sweden

186. In Sweden the transaction would lead to a combined market share of [70-80]% (Novartis [40-50]%; Alcon [30-40]%) in the S1G3 segment. The only other competitor with over [0-5]% market share is a parallel importer of the Alcon product.

187. Exceptionally, Zaditen in this category is OTC (in most countries it is a prescription only product). As in Denmark, this distinction is less clear in Sweden in the S1G3 segment, because Novartis only relatively recently received approval to sell Zaditen as an OTC drug. This notwithstanding, Zaditen continues to be reimbursed when prescribed and the share of prescription sales is not insignificant ([10-20]% in 2009 according to Novartis). It should also be noted that Zaditen has in general been indicated by the market investigation to be a possible substitute for the relevant patent-protected Alcon product, Opatanol more often than other products. Opatanol was indicated to be the closest substitute to Zaditen in Sweden as well. On balance, therefore and due to the specific circumstances relating to the OTC/prescription status of Zaditen in Sweden, it is likely that the Novartis product would act as a significant competitive constraint on Opatanol in Sweden in view of its mixed OTC/Rx sales. This is especially so as there are no other significant multiple action products on the market [33] (only Alcon's product sold by a parallel importer). This means that even in the Rx segment (if [10-20]% of the sales of Zaditen were considered to be Rx) Zaditen and Opatanol would be the only two significant multiple action products on the market. Opatanol would still continue to be sold also by a parallel importer. However, the market shares of the parties would be high even at the distribution level ([60-70]% with a significant [10-20]% increment by Novartis). The parallel importer would have the remaining [30-40]% [34] ) Serious doubts therefore arise irrespective of the Rx/OTC distinction in the S1G3 segment in Sweden.

188. Sweden is the only country where the transaction leads to Group 1 "Plus" markets in decongestants (ATC4 category S1G5). The parties are the only providers of prescription decongestants (Novartis [80-90]%, Alcon [10-20]%). However, due to the presence of a large provider of an OTC decongestant (Meda), the parties would have a combined market share of only [10-20]% ([0-5]% increment by Alcon) of the combined S1G5 category that includes both prescription and OTC products. This notwithstanding, the market investigation did not provide any significant indications for Sweden, as it did in the case of the UK for example (see para 193 below), that would suggest that a general delineation of OTC and Rx drugs would be inappropriate.

189. It should further be noted, that the Novartis product classified in this category (Antiaten Privin) is also an anti-histamine and is classified in S1G1 in other countries. If all anti-histamine products in Sweden were considered, the merger would again lead to a duopoly [35] , with only J&J remaining, albeit with a substantial market share of around [70-80]%. Parties would have a combined market share of [20-30]% (Novartis [5-10]% Alcon [10-20]%) J&J's product, however, is mostly sold as OTC (although it has a dual Rx/OTC status). On the basis of prescription antihistamines (including J&J's prescription sales), the merger would lead to combined market shares of [40-50]% with J&J's sales accounting for the remaining [50-60]%.

190. It should further be noted that the transaction would create a strong player in prescription S1G products and would significantly strengthen the current market leader, Alcon. Combined market shares in all prescription products would be [50-60]% [36] (Novartis [10-20]%; Alcon [30-40]%). The parties would have both anti-histamine and multiple action products. J&J would have [20-30]% with their anti-histamine product (Livostin) and Santen [5-10]% with their mast cell stabiliser product. The only other significant Rx player would be Orifarm, with imports of Alcon's and J&J's best selling drugs (Opatanol and Livostin). Since marketing expenses have been indicated by the market investigation as significant barriers to entry, the combination of the marketing capabilities in the prescription segment - which, as recognised by previous Commission decisions, tends to have a different marketing to OTC products [37] – may further raise barriers to entry and expansion.

191. Based on the fact that the merger would lead to a duopoly in S1G5 and a de-facto duopoly in S1G1 with very high and high combined market shares of the parties in the prescription segment of these two ATC4 classes and based on general barriers to entry indicated for S1G products, serious doubts cannot therefore be excluded for S1G5 and S1G1 products in Sweden.

192. Serious doubts therefore arise for S1G3 (Rx and overall). Serious doubts cannot further be excluded on either prescription decongestants or antihistamines depending on the classification of Antasten Privin.

S1G UK

193. In the UK, the transaction would result in combined market shares of [70-80]% (Novartis [60-70]%; Alcon [10-20]%) in anti-histamines (S1G1). Other competitors are significantly smaller (Perrigo [10-20]%; Allergan [5-10]%; Galenica [5-10]%). The product of Novartis (Otrivine Antistine) is an OTC product, whereas Alcon's product is Rx. It should be noted on the other hand that Otrivine is reimbursed when prescribed and is therefore both sold as prescription and OTC. A large proportion of Otrivine Antistine is sold as prescription ([40-50]% in 2009 according to the estimate of Novartis) suggesting that the delineation of prescription and OTC products in the UK is less clear-cut. This is further supported by some specific indications for the UK (both competitor and customer replies) that OTC products frequently and effectively substitute prescription products.

194. This notwithstanding, the market investigation did not clearly indicate other anti-histamines to be the main competitive pressure on Otrivine Antistin. Products from other ATC4 groups, including S1G2, S1G3 and S1G5 were all indicated as close competitors to a comparable extent to anti-histamines. This appears to be rather specific to the UK. In most other countries where the parties have a strong position in anti-histamines, the main competitive pressure on the parties' respective products appears to be other anti-histamines. In the UK, there appears to be a significant degree of competitive pressure on anti-histamines stemming from other types of anti-allergics (and to a lesser extent other S1G products). If all anti-allergics were considered together, the parties would have a modest combined market share of [10-20]%. In addition, possibilities for expansion were also indicated by the market investigation. In light of the apparent competitive pressure stemming from other products outside the S1G1 category competition concerns are therefore unlikely to arise in anti-histamines irrespective of the OTC/Rx distinction.

195. The parties would have a combined market share of [60-70]% (Novartis [10-20]%; Alcon [40-50]%) in the S1G3 segment. There would be only one other competitor, Meda remaining with [30-40]%. The entire segment is prescription only. As opposed to anti-histamines, the market investigation indicates that the main competitive pressure on the market leader Alcon product, Opatanol, comes from the two other multiple action product, Allergodil and Zaditen. Due to the high level of concentration and the significant increase, and in light of barriers to entry for S1G products indicated by the market investigation, competition concerns arise.

196. Serious doubts therefore cannot be excluded for multiple action products (S1G3 Rx and overall) in the UK.

3.2.4. Mydriatics and cycloplegics (ATC3 class S1F)

Product market definition

197. Both parties are active in mydriatics and cycloplegics, classified in ATC3 class S1F, which is not further subdivided into ATC4 classes. This class includes parasympathicolytics and sympathomimetics in a form of eye drops that cause mydriasis of the eye (excessive dilation of the pupil) which is required during eye examinations to allow examination of the retina. Parasympathicolytics also cause cycloplegia (paralysis of the eyes accommodation function). To the extent that an Rx/OTC categorisation is relevant, all S1F products should be considered as prescription bound, as S1F products are not available as OTC.

198. Novartis distributes on behalf of [third party] Minims branded single-dose (non-preserved) eye drops based on atropine, tropicamide, cyclopentolate and phenyleprine molecules. Alcon is active with multi-dose (preserved) eye drops based on the same molecules, depending on the country. According to the parties, instead of distinguishing between S1F products on a molecule basis, these products should be grouped into two distinct product markets based on their intended therapeutic uses and dosage forms: (1) single-dose (sterile, non-preserved) products that are used for eye examination exclusively for eye surgery, and (2) multi-dose products (preserved) that are used under non-surgical conditions. In support of their arguments, the parties have provided information showing that price per dose of Minims products (for a dose of single unit) is significantly higher than price per dose of Alcon's products (for a dose of one eye drop) in Denmark, Norway and Sweden.

199. Respondents to the market investigation confirmed the differences between therapeutic uses of single-dose and multi-dose products only in surgical contexts. In particular, only single-dose products are intended to be used in clinical contexts. In non-clinical contexts, (i.e. eye examination) in practice doctors may consider using either single-dose or multi-dose products based on the same molecule, except for limited circumstances where patients are sensitive to the preservatives contained in multi-dose products. The results of market investigation also indicated that in practice doctors are not primarily led by price considerations.

200. According to the respondents to the market investigation the molecule level would be a more appropriate level for the assessment of the present operation, especially due to the fact that the length of activity of these molecules is different and only some molecules can cause cycloplegia.

201. In light of the results of the market investigation, the Commission considers that it cannot be concluded that single-dose and multi-dose S1F products would constitute separate product markets in Denmark, Norway and Sweden.

202. In view of the foregoing, for the purposes of the present decision, product markets in the S1F category should be defined on a molecule basis.

Competitive assessment

203. The transaction leads to monopoly combined market shares for cyclopentolate and tropicamide in Denmark, for cyclopentolate in Norway and for cyclopentolate, tropicamide, atropine and phenyleprine in Sweden. Mydriatics and cycloplegics appear to be niche products. The markets are characterized by a small patient base and relatively low sales (~EUR 30,000-150,000). The market investigation confirms that on this basis, new market entry would not be commercially viable. There are no other competitors with the same molecules. In Denmark, Actavis is the sole company present in the S1F category, but only with scopolamine based products.

204. Based on the very high combined market shares and no potential entry into these markets, serious doubts arise in the markets for cyclopentolate and tropicamide in Denmark, for cyclopentolate in Norway and for cyclopentolate, tropicamide, atropine and phenyleprine in Sweden.

3.2.5. Ophthalmological diagnostic agents (ATC3 class S1T)

Product market definition

205. Both parties are active in the ATC 3 class S1T, which comprises ophthalmological diagnostic agents, primarily used to diagnose ocular disorders, e.g. wet age related macular degeneration. All ophthalmological diagnostic agents are based on the off-patent fluorescein molecule, but may also contain anaesthetics, such as proxymetacaine, lidocaine or oxybuprocaine. ATC 3 class S1T is not further subdivided into ATC 4 classes. To the extent that an Rx/OTC categorisation is relevant, all S1T products should be considered as prescription bound, as they are not available as OTC.

206. Novartis distributes on behalf of [third party] Minims branded single-dose (non-preserved) eye drops and its own injectable fluorescein diagnostic agents. Alcon is active with multi-dose (preserved) eye drops as well as injectable fluorescein diagnostic agents. According to the parties, S1T products should be grouped into the following three distinct product markets based on their intended therapeutic uses, galenic and dosage forms: (1) topical diagnostic agents used in ocular surgeries (non-preserved single-dose eye drops or strips), (2) topical diagnostic agents used in non-clinical conditions (preserved multi-dose eye drops), and (3) injectable diagnostic agents used in conjunction with fluorescein angiographies (ampoules for intravenous injection). In support of their arguments, the parties have provided information showing that price per dose of Minims products (for dose of single unit) is significantly higher than price per dose of Alcon's products (for dose of one eye drop) in Denmark, which is the only country where both parties sell topical products. [38]

207. The market investigation has broadly confirmed that injectable and topical products constitute separate product markets. As regards the proposed distinction between single-dose and multi-dose topical products, the respondents confirmed the differences between therapeutic uses of single-dose and multi-dose products only in surgical contexts. For non-surgical ocular diagnostic procedures both single-dose and multi-dose products can be used. The results of the market investigation also indicated that, although price differences might restrict the choice of single-dose products, in practice the doctors are not primarily led by price considerations.

208. In light of the results of the market investigation, the Commission considers that single-dose and multi-dose topical S1T products in Denmark belong to the same relevant product market.

209. In view of the foregoing, for the purposes of the present decision, it can be concluded that injectable and topical fluorescein diagnostic agents constitute separate relevant product markets.

Competitive assessment

210. The transaction would lead to monopoly market shares in injectable fluorescein diagnostic agents in Finland, Norway, and Poland.

211. Novartis is present with "Fluorescein" branded glass ampoules with a solution for injection, whereas Alcon is active with Fluorescite branded glass ampoules with a solution for injection. The market investigation confirmed that the parties' products are closest and sole competitors with injectable S1T products. The markets are characterized by a small patient base and relatively low sales (~EUR 10,000-300,000). The market investigation highlighted that on this basis, new market entry wo