2006/430/EC: Commission Decision of  25 August 2005  declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.3687 — Johnson & Johnson/Guidant)  (notified under document number C(2005) 3230) Text with EEA relevance
Date: 2005-08-25
Institutions: European Commission
Subjects: cardiovascular disease, economic concentration, exchange of information, medical device, merger control, pharmaceutical industry

L 173/16

EN

Official Journal of the European Union

27.6.2006

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 25 August 2005

declaring a concentration compatible with the common market and the functioning of the EEA
Agreement
(Case COMP/M.3687 — Johnson & Johnson/Guidant)

(notified under document number C(2005) 3230)

(Only the English text is authentic)

(Text with EEA relevance)

(2006/430/EC)

On 25 August 2005 the Commission adopted a Decision in a merger case pursuant to Council
Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between under-
takings (1), and in particular Article 8(1) of that Regulation. A non-confidential version of the full
Decision can be found in the authentic language of the case and in the working languages of the
Commission on the website of
the following address:
http://europa.eu.int/comm/competition/index_en.html

the Directorate-General

for Competition, at

(1)

(2)

(3)

I. INTRODUCTION

On 15 March 2005, the Commission received a notifi-
cation of a proposed concentration pursuant to Article 4
of Regulation (EC) No 139/2004 (Merger Regulation) by
which the undertaking Johnson & Johnson (J & J, USA)
acquires within the meaning of Article 3(1)(b) of that
Regulation control of
the undertaking
Guidant Corporation (Guidant, USA) by way of
purchase of shares.

the whole of

A. The Parties

J & J is a company incorporated in the USA. In 2003, it
had 111 000 employees worldwide and generated a
turnover of around EUR 37 billion. Its activities span
over three main businesses: consumer goods (18 % of
turnover), pharmaceuticals (47 %) and medical devices
and diagnostics (MD & D, 36 % of turnover).

Guidant is a company incorporated in the United States
of America (USA) that is active in the design and devel-
opment of cardiovascular medical products. In 2003, it

(1) OJ L 24, 29.1.2004, p. 1.

had around 12 000 employees worldwide
and a
turnover of around EUR 3,3 billion. Guidant’s presence
covers four main areas within the fast-growing cardio-
vascular medical products business: cardiac rhythm
management,
endovascular
interventional
devices and cardiac surgery.

cardiology,

B. The operation

(4)

The concentration is an acquisition of sole control by
J & J over Guidant, within the meaning of Article 3(1)(b)
of the EC Merger Regulation.

II. THE RELEVANT MARKETS

(5)

The market investigation confirmed that the areas mostly
affected by the merger are the following: 1.
interven-
tional cardiology devices; 2. endovascular devices; 3.
rhythm
cardiac
management devices.
are no
In the
overlaps, as J & J is currently not active in the business.

cardiac
there

and 4.

devices;

surgery

latter,

27.6.2006

EN

Official Journal of the European Union

L 173/17

(6)

(7)

(8)

(9)

A. The relevant product markets

1. Interventional cardiology devices

Interventional cardiology devices are designed to treat,
through minimally invasive procedures, coronary artery
diseases. In this area the main device is the stent, a small
expandable wire tube that
is placed in an occluded
coronary artery to remove the plaque and support the
walls of the vessel, thus enabling the blood to flow
properly.

products

(12) As far as the accessories are concerned, endovascular
guiding catheters, steerable guidewires and PTA balloon
function to the corre-
catheters perform a similar
sponding
cardiology.
Similarly to the coronary area, a relevant market
should be defined for each of these accessories, due to
the high degree of supply side substitutability and the
fact
that all major manufacturers offer, within each
accessory, a very broad range of models in terms of
dimensions and shapes.

interventional

in

Bare metal stents (BMS) and drug eluting stents (DES) are
two separate product markets for the following reasons:
no significant price correlation, no supply side substitut-
ability, very significant differences in clinical outcomes,
and different reimbursement systems. Moreover, despite
the fact that BMS and DES share the same stent structure
and delivery system, a number of components are speci-
fically important
to a coronary DES (the drug, drug
dosage and rate of release, and polymer coatings).

3. Cardiac surgery devices

(13)

Coronary artery bypass graft surgery (CABG) is used to
treat coronary artery disease;
the blocked artery is
‘bypassed’ by sewing (grafting) another blood vessel to
the aorta at one end and to the coronary artery beyond
the damaged area the other end. After the operation,
to the
blood flows through the new grafted vessel
heart muscle. The vessel used for
is
removed (harvested)
from the leg (saphenous vein
graft), chest or arm.

the bypass

Concerning the accessories coronary guiding catheters,
coronary steerable guidewires, coronary PTCA balloon
catheters, the Commission’s market inquiry has estab-
constitutes
lished that
a
separate relevant product market. Most
interventions
will require a specific set of accessories, with different
dimensions and shape.

these products

each of

(14)

(i) beating-heart CABG products

The following markets are affected in the cardiac surgery
area:
(stabilisation
systems and accessories as blowers/misters); and (ii)
endoscopic vessel harvesting (EVH) devices.

B. The relevant geographic markets

2. Endovascular devices

(15)

Endovascular devices are used for the minimally invasive
treatment of peripheral
endovascular)
diseases such as the build up of plaque (i.e. vessel calci-
fication) in peripheral vessels (peripheral arterial disease)
and aneurysm (the enlargement of a weak area of an
artery).

vascular

(or

between

investigation confirmed that

relevant
The market
geographic markets are all national because of significant
and
differences
between
procurement
countries; need to establish a local sales office;
the
parties’ and competitors’ market share variations across
Member States.

reimbursement
price

processes;

variations

schemes

(10)

Similar to interventional cardiology stents, endovascular
stents are small expandable tubes designed to treat a
narrowing or blockage in a peripheral artery.

III. COMPETITIVE ASSESSMENT

A. Interventional cardiology

(11)

The parties submitted, and the Commission’s market
inquiry confirmed, that two separate markets should be
identified for endovascular stents: a market for balloon
expandable stents (BX) (usually made of stainless steel
and which come mounted on a PTA balloon catheter),
and a market for self-expandable stents (SX), which use a
technology. The Commission
different deployment
inquiry established a clear trend towards more speciali-
sation in the endovascular area, both for BX stents (e.g.
segments for renal (BX) stents and for iliac-femoral (BX)
stents) and for SX stents (e.g. segments for femoral (SX)
stents, iliac (SX) stents and carotid stents).

(16)

(17)

inno-
Interventional cardiology is a relatively recent,
vation driven business which is
characterised by
significant barriers to entry, i.e. R & D financing, intel-
long
lectual property rights for product development,
trials, and
time-to-market
product range.

for new products, clinical

In the area of interventional cardiology there are two
leagues of players:
large global companies competing
on a worldwide level (J & J, Guidant, Medtronic, Boston
Scientific
(Sorin,
Biotronik and others).

and ‘local players’

and Abbott)

L 173/18

EN

Official Journal of the European Union

27.6.2006

1. Drug-eluting stents

(18)

In the market for DES, the concentration would result in
the removal of a potential competitor given that Guidant
is present only in BMS and not yet in DES, while J & J is
the only two players already active in this
one of
segment, the other being Boston Scientific.

(19) Despite the fact that there is an indication that Guidant
would likely have been one of the key players in the
market for DES, acting as a major competitive constraint
vis-à-vis the two current competitors J & J and Boston
the evidence collected in the investigation
Scientific,
also proved that the other new entrants will be likely
to exert sufficient competitive constraints on the market
for DES, compensating for
the loss of competition
resulting from J & J’s acquisition of Guidant (Medtronic,
Abbott, Conor/Biotronik and Sorin).

(20)

The Commission, therefore, concluded that the notified
concentration does not raise any serious doubts as to its
compatibility with the common market with regard to
DES and thus, the concentration will not significantly
impede effective competition in the common market
for DES.

(21)

(22)

2. Steerable guidewires

for steerable
In the interventional cardiology market
guidewires virtually all national markets are strongly
affected by the concentration (above 40 % and with an
increment of at
these,
including the largest countries of the EU, the parties’
combined market shares are above (65 to 75 %) and
even (75 to 85 %).

least 5 %), and in many of

3. Conclusion

The Commission, therefore, concluded that the notified
concentration raises serious doubts as to its compat-
ibility with the common market by enabling the
merging parties to strengthen Guidant’s uncontested
leadership, in so far as it removes one of the only two
main competitors in this market. Further, the remaining
firms in the market may even be expected to benefit
from the reduction in competition which will result
the increase in concentration will
from the merger;
enable
than would
otherwise have been the case.

them to attain higher prices

all product or geographic markets. Moreover, the market
investigation has highlighted that the disappearance of
Guidant as a competitor will eliminate the closest
substitute to J & J stents.

(24)

In the endovascular market
for balloon expandable
stents, at EEA level, the combined market share of the
merging parties amounts to (60 to 70 %), (J & J, (30 to
40 %), Guidant, (25 to 35 %)). Those market shares have
been relatively stable for the past four years.

(25) When looking at the relevant geographic markets,

i.e.
each Member State, for the purpose of the competitive
assessment, there are nine countries more substantially
affected, namely: Austria, Belgium, France, Germany,
Italy, Luxembourg, Netherlands, Portugal and Spain.

(26) Having regard to the fact that the merger combines the
strongest and second strongest player,
it will create a
dominant position in virtually all the markets considered
lead to a significant impediment to effective
and will
competition.

(27)

(28)

(29)

(30)

In the endovascular market for Carotid stents in the EEA,
substantially affected are:
the member States most
Austria, Belgium, Finland, France, Germany,
Italy, the
Netherlands, Portugal and Spain.

There are three main players in the carotid stent market:
J & J, Guidant and Boston Scientific. Together
they
account for 83 to 96 % of the market. The concentration
will either reinforce the leadership of J & J or Guidant (in
Austria, Finland, the Netherlands, Portugal and Spain) or
combine the second and third player to create a new
market leader (Belgium, Germany and Italy).

to entry,

In the above national markets, given the degree of
concentration, barriers
loyalty,
closeness of substitution and, as a result of the elimi-
nation of a major competitive constraint, the operation
in those
will give rise to unilateral adverse effects
markets and therefore impede effective competition in
the common market.

customer

for non-carotid
In the endovascular devices market
stents,
the Member States most substantially affected
are: Austria, Belgium, Germany and the Netherlands. In
most of
leader and
J & J
Guidant is one of the leading players and is considered
by the majority of the customers as the closest substitute
to J & J.

these markets,

is market

B. Endovascular devices

(23)

Both J & J and Guidant are leading suppliers in the area
of endovascular devices in the EEA. Although there is a
fair number of competitors in the endovascular markets
(Abbott, Bard, Boston Scientific, B.Braun, Cook, Edwards
Lifesciences, ev3, Invatec, Medtronic, Sorin and Terumo),
not all players have the same strength or are present in

(31) With regard to non-carotid SX stents in the above
the concentration will give rise to
national markets,
non-coordinated adverse
in those national
markets and therefore impede effective competition in
the common market and the EEA as a result of the
creation or strengthening of a dominant position.

effects

27.6.2006

EN

Official Journal of the European Union

L 173/19

(32)

(33)

(34)

The Commission, therefore, concluded that the notified
concentration raises serious doubts as to its compat-
ibility with the common market with regard to endo-
vascular stents market. The concentration will create a
dominant position in balloon expandable stents market
and will give rise to unilateral adverse effects in carotid
and non-carotid stents markets and therefore will
impede effective competition in the common market.

C. Cardiac surgery: endoscopic vessel harvesting
systems

(c)

teams, which are based in the USA and operate on
a worldwide basis. The parties offer to the purchaser
an interim OEM supply agreement followed by either
the continuation of such agreement or
the full
assistance to replicate the USA production facility
in Europe. The divestment also includes embolic
protection devices and endovascular accessories on
top of
stents on which the
Commission’s analysis was focused;

endovascular

the

the

for
proposed to divest alternatively either:

surgery area,

cardiac

the parties have

The EEA sales of EVH systems are significantly lower
than in the United States but show a growing trend.
In Europe, traditional vessel harvesting is used in the
large majority (98 %) of procedures. J & J and Guidant
are virtually the only two suppliers of EVH systems, with
market shares estimated at 90 to 95 % by the parties and
100 % by market players across Europe.

The Commission, therefore, concluded that the notified
concentration raises serious doubts as to its compat-
ibility with the common market with regard to the
EVH systems and will result
in creation of a virtual
monopoly across Europe.

(a)

J & J’s
endoscopic vessel harvesting products
(EVH) and endoscopic radial artery harvesting
(ERA kits); or

(b) GDT worldwide assets and personnel of cardiac

surgery business division; or

(c) Guidant’s endoscopic vessel harvesting products,
namely procedural kits for EVH (EVH kits).

V. ASSESSMENT OF THE COMMITMENTS SUBMITTED

IV. COMMITMENTS OFFERED BY THE PARTIES

(35)

In order to address the aforementioned competition
concerns in the steerable guidewires, the endovascular
and the cardiac surgery markets, the Parties submitted
the undertakings described below:

the Commission,

(36) As confirmed by the results of the market test conducted
by
can be
these
considered sufficient to properly remedy the competition
concerns in the steerable guidewires, the endovascular
and the cardiac surgery markets, as outlined above.

undertakings

(37)

(38)

(a)

in the steerable guidewires business,
the parties
propose to divest the assets associated predominantly
with the supply, marketing and sale of J & J steerable
guidewires business in the EEA. In essence, the dives-
titure would consist of the transfer of the inventory
and the customer list, the assignment of rights for
use of
the
transfer of specifications relating to the design of
J & J guidewires. The divestment has a field of use
limited to Europe and does not include manufac-
turing, assembly, sterilisation (these operations are
currently outsourced by J & J to a third party), distri-
bution and warehousing;

the licence of

trademarks,

IP rights,

(b) in the endovascular area, the parties have proposed
to divest the entire operations (products,
logistics,
inventory, customer list, sales force, brand names,
and intellectual property) of Guidant’s endovascular
solutions business in the EEA. The divestment does
not include manufacturing, finance, administration,
research
regulatory, quality and clinical
R & D,

The Commission, therefore, reached the conclusion that,
on the basis of
the commitments submitted by the
Parties, the notified concentration will not significantly
impede effective competition, in the common market or
in a substantial part of it. Consequently, the Decision
suggests declaring the concentration compatible with
the common market and the EEA Agreement,
in
accordance with Articles 2(2) and 8(2) of the Merger
Regulation and Article 57 of the EEA Agreement.

VI. CONCLUSION

above,

impede

reasons

set out

the Commission
the
For
the proposed concentration does not
concluded that
significantly
competition in the
effective
common market or a substantial part of it. The concen-
therefore declared compatible with the
tration was
common market and the EEA Agreement in a decision
on 25 August 2005, in accordance with Article 8(1) of
the Merger Regulation and Article 57 of
the EEA
Agreement.