Competition Policy Newsletter

Alberto BACCHIEGA, Stphane DIONNET and Mario TODINO, unit E-3, and
Chlo MACEWEN, unit A-2, Directorate-General Competition
1. Introduction
Following an in-depth investigation, on 25 August
2005 the European Commission authorised under
the Merger Regulation the planned $24 billion
(around 18 billion) acquisition by US healthcare
group Johnson & Johnson (J&J) of its competitor
Guidant, a US company specialised in cardiovascular medical products, subject to a number of
conditions designed to address the competition
concerns identified in the course of the investigation.
Both J&J and Guidant are active worldwide in
the development, production and sale of vascular
medical devices. Their products are used by physicians in procedures to treat vascular diseases both
in the heart (coronary arteries) and in peripheral
parts of the human body (e.g. carotid, renal, femoral arteries). The firms are direct competitors in
respect of a number of vascular devices and are
among a limited number of leading companies in
this field in Europe and worldwide.
The case presents a number of noteworthy aspects
both of a substantive and procedural nature.
To begin with, the investigation confirms the gradual shift in emphasis in the Commissions analysis
when it comes to mergers between differentiated
products. Consistent with the new Commission
guidelines on horizontal mergers, in the assessment of the effects of the merger more emphasis
was put on the issue of closeness of substitution
and the relevance of the competitive constraint
being removed, rather than on the conventional
concepts of single dominance and market definition.
The decision, in line with the most recent precedents such as Procter/Gillette and GE/Amersham,
also confirms that the Commission is adopting a
cautious attitude when assessing the risk of foreclosure effects stemming from bundling strategies.
As in past cases, the key questions the Commission had to address were: is it feasible and rational
to engage in bundling strategies, having regard to
the features of the market-place (the characteristics of the products and the possibility to bundle
them, the purchasing practices of customers and
their bargaining power, etc.)? And if so, can a bunNumber 3 Autumn 2005

dling strategy bring about a foreclosure effect, i.e.

can this strategy be replicated by other competitors in a successful way?
The case is also interesting as it deals extensively
with the issue of the removal of a potential competitor and the manner in which this should be
assessed in the context of merger control.
From a procedural standpoint, the case is a good
example of fruitful cooperation between the Commission and the US FTC in handling a merger
investigation with a view to reaching a consistent
outcome with respect to some common issues.
In particular, one of the most complicated issues
in the case that the Commission had to address
involved the patent situation in the US as regards
coronary stents. It was argued by some competitors that the merger would enable the parties to
significantly strengthen their patent portfolio in
the US in the field of Drug Eluting Stents (DES),
and that foreclosure in the market for DES in the
US as a result of that situation could in turn cause
detrimental spill-over effects in Europe. Given the
alleged link between the US and Europe, and the
fact the claim put forward by the competitor had
a direct and primary impact in the US, the Commission cooperated closely with the FTC in order
to deal with the issue.
Another notable aspect of the case has to do with
the magnitude of the Commission investigation
given the large number of markets affected by
the merger. As markets for vascular devices have
a national geographic scope due to non negligible differences across European countries of
reimbursement schemes, procurement processes,
prices, the Commission had to deal with several
hundred affected markets within the meaning of
the Form CO. This required an extensive investigative effort in order to collect the view of competitors
and customers across Europe; the latter, namely
hospitals, traditionally have a poor response rate
to the Commissions market inquiries. In line with
the recent EC case law (see Babyliss), no national
market was neglected in the investigation. However, after a first round of investigation and information requests addressed to customers based in
virtually all the countries of the EEA, the Commission concentrated its inquiry on the largest European countries mostly affected by the merger. It is
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MERGER CONTROL

Johnson & Johnson/Guidant: potential competition and unilateral

effects in innovative markets

Merger control

also worth mentioning that in the assessment of

the impact of the merger on coronary and vascular
stents, a key contribution to the investigation came
from a small number of eminent experts who were
interviewed by the Commission.
As to the substance of the case, the investigation
focused on three major areas: coronary drug eluting stents and accessories, endovascular stents and
accessories used in peripheral arteries and cardiac surgery. The latter area posed only relatively
straightforward competition concerns relating to
significant horizontal overlaps for a specific product (Endoscopic Vessel Harvesting devices) and
will not be presented in detail in this article, that
will focus on the markets that constituted the core
of investigation, i.e. the stents in coronary arteries
(Interventional cardiology), in particular the coronary Drug Eluting Stents (DES), and the stents in
vessels found in other parts of the body (endovascular stents).

2. Coronary stents in Interventional

cardiology
2.1. Features of the market
Interventional cardiology involves minimally
invasive treatment procedures designed to cure
Coronary Artery Disease (CAD): a reduction
of the blood flow to the heart muscle due to the
gradual build-up of cholesterol against the coronary artery walls. CAD is the number one cause
of death among men and women in Europe. The
coronary arteries are reached by navigating wires
and catheters from a small cut at the level of the
groin or arm through the blood vessels to reach
the affected coronary arteries. The core of the
interventional cardiologists kit is constituted by
the stent, an expandable wire tube which is placed
in an occluded coronary artery in order to remove
the plaque and support the walls of the vessel.
Stents have registered dramatic growth over the
last few years, as they have proved to cure lifethreatening cardiovascular diseases through noninvasive treatment. These devices are differentiated
products, where quality of performance and innovation are key parameters. A recent breakthrough
has seen the development of a new generation of
stents, called Drug Eluting Stents (DES), which
were first marketed in Europe by J&J in 2002. In
DES, the metallic structure of the stent is coated
with a polymer and a drug. The drug is gradually
released locally to prevent the re-narrowing of the
artery due to cell proliferation. DES are rapidly
replacing the old generation bare metal stents
(BMS) in a large number of operations, despite
being approximately three times as expensive, and
88

are at the same time expanding the number of

CAD pathologies that can be treated with interventional cardiology. Given the substantial differences
in terms of manufacturing process, therapeutic
effects and prices, it was concluded that DES and
BMS constituted two separate product markets.
In the market for DES, there are currently only
two major suppliers world-wide, J&J and Boston Scientific (BSX), plus a number of imminent
entrants, including Guidant. BSX has recently
taken the lead in Europe with a share of about
58%, with J&J counting for the rest of the market.
Guidant s entry has been delayed due to difficulties in product development, although, at the time
of the announcement of the merger its DES launch
appeared imminent (likely to be early 2006). In
the meantime, Guidant remains one of the leading
BMS suppliers in Europe (whereas J&J is progressively withdrawing from this market with a market
share on average below 5% at the EEA level) and
is considered one of the most credible entrants in
DES. Medtronic and Abbott are also in the process
of launching their DES.

2.2. Competitive assessment

In its investigation the Commission had to assess
whether by eliminating Guidant as a potential
competitor, the merger would remove the major
competitive constraint in the DES market with the
other new entrants being unable to compensate for
the loss of competition resulting from Guidants
elimination from the market.
The investigation showed that, notwithstanding
some typical pro-competitive features, such as
fast growth and innovation, the market place is
characterised by a number of significant barriers
to entry. Firstly, it is a highly innovative area with
rapidly evolving products, which requires substantial investments in R&D. Secondly, the major
medical devices suppliers hold numerous patents
on the essential features of these products. Thirdly,
the launch of a new innovative product entails
very long and costly clinical trials to demonstrate
their safety and efficacy. Fourthly, established suppliers are very well known by the customers and
have dedicated and technically experienced sales
forces. Additionally, they have close relationships
with key opinion leaders in the medical profession,
sponsoring research and carrying out their clinical
trials at the most prestigious medical institutions.
Finally, all major suppliers offer a wide range of
products in interventional cardiology.
Moreover, the investigation revealed that cardiovascular devices suppliers active on the marketplace had very different size and ambitions, as a
result of which two leagues of players could be
Number 3 Autumn 2005

Competition Policy Newsletter

Against this background, in its market investigation the Commission first carefully scrutinised the
position of the two incumbent players in the DES
market to see whether the current market situation
adequately reflected each players real strength. In
this respect, the investigation revealed that BSXs
leadership in DES was likely to be more robustly
challenged in the short/mid run, primarily by J&J,
as well as by other new entrants.
Secondly, the Commission had to assess the prospect of success of the various new entrants in the
DES market. This was essentially done by reviewing the clinical evidence available with respect to
each new entrants ongoing DES programme. To
this end, the Commission relied upon the assistance of a small number of eminent physicians,
selected from a list of names provided by the parties and the competitors, involved at the highest
level in clinical trials of DES. Significant weight
was also given to the large number of studies prepared by specialised consultants as well as to the
periodic reports published by the major financial
analysts.
With respect to Guidant the investigation proved
that the merger removed one of the new entrants
with the best prospect of success in the market for
DES. In particular, Guidant could rely on the following assets: i) excellent stent platform, already
established on the market; ii) good drug: Guidants
Everolimus drug belongs to the same family as
J&Js sirolimus compound; iii) promising results of
the first clinical trials on its DES; iv) great reputation of innovator; v) excellent sales forces; vi)
strong customer base in BMS and accessories; and
vii) strong product portfolio. The investigation also
revealed that there were not yet compelling clinical
data showing Guidants drug efficacy as the sample
of patients having been treated with Everolimus
Number 3 Autumn 2005

was too small. Furthermore, Guidants DES clinical trials were still at an early stage, and the availability of only indirect parameters (angiographic
parameters) proving Guidants stent efficacy.
The Commission concluded that, on balance,
according to the prevailing view in the scientific
and business community, Guidant would have
been likely to become one of the key players in
the market for DES, acting as a major competitive
constraint vis--vis the two current competitors
J&J and BSX.
However, the evidence collected in the investigation also showed that the other new entrants, above
all Medtronic and Abbott, would be likely to exert
a sufficient competitive constraint on the market
for DES, compensating for the loss of competition
resulting from J&Js acquisition of Guidant.
First, the evidence collected in the investigation
indicated that Medtronic, together with Guidant,
was well placed to enter the DES market successfully and gain a significant share in Europe. In particular, the investigation confirmed that Medtronic
could rely upon the following assets: i) excellent
stent platform already established on the market;
ii) good drug; iii) imminent entry in the European
DES market (which took place in July 2005); iv)
good customer base, strong foothold in old generation stents (it is together with Guidant market
leader in BMS in Europe) and accessories; v) excellent sales forces; and vi) strong product portfolio.
Moreover, Medtronics trials were very advanced,
had been undergone on a large sample of patients,
and their results were positive based on clinical parameters which are more direct predictors
of success. The market also signalled as a potential problem the issue of Medtronic DES poorer
performance than its competitors DES as regards
a specific angiographic parameter generally connected to the risk of restenosis (late lumen loss).
However, the prevailing view was that this issue
might ultimately have only modest negative implications, and essentially in the long term.
According to the findings of the investigation,
Abbott, a big US pharmaceuticals company with
significant financial strength, a deep expertise in
pharmaceuticals (an important asset for the development of the next generation DES), and commercial experience with hospitals, was also considered
a credible entrant with a very promising DES programme capable of exerting a non negligible competitive constraint in the marketplace.
Based on the above, it was concluded that the concentration would not significantly impede effective
competition in the Common market and the EEA
for DES.
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MERGER CONTROL

distinguished. In the top tier, to which the merging parties belong, there is only a small number of
large global companies competing on a worldwide
level and having the following assets: top quality
devices, primarily the stents, supported by good
and abundant clinical data; strong relationships
with customers and a good reputation as well as
support from prestigious medical institutions and
key opinion leaders; vast financial capabilities to
finance massive R&D programmes; wide geographic reach that is a strong and widespread
presence in the three most lucrative markets, the
US, Japan and Europe; a strong patent portfolio and
broad product range. To date, the only firms which
can rely upon the above assets are J&J, Guidant,
Medtronic and BSX. In addition, Abbott, a big
pharmaceutical company, has recently entered the
market with the ambition to become a key player
in vascular devices.

Merger control

2.3. The role of Intellectual Property Rights

The Commissions market investigation focussed
on the intellectual property (IP) rights involved
in the design of BMS and DES; some competitors
argued that the merger would result in the concentration under single ownership of a very valuable portfolio of patents in the area of coronary
stents in the US and to a lesser extent in the EU.
It was alleged that as a consequence, entry to the
DES market would become extremely difficult, the
merging parties incentives to license key patents to
other players would be reduced and that problems
in competing effectively in the US would result in
competitors being forced to exit the European DES
market.
2.3.1. The background
During its investigation the Commission found
that the intellectual property landscape differed
widely as between the US and Europe. In the USA,
patent disputes and litigation are commonplace in
the BMS and DES markets; they can be considered
to be a cost of doing business. Patent disputes are
often resolved through cross-licensing agreements
between competitors. Court actions can result in
the award of damages or occasionally in injunctions against the infringing products.
In Europe the market investigation revealed that
patent coverage of these devices tends to be far
narrower than in the US, the patents that do exist
have earlier expiry dates than in the US, European
courts tend to be less interventionist than their
US counterparts and injunctions are rarer in the
EU than in the US. Competitors indicated that
European patents are not regarded as a significant
impediment to operating in the coronary stent
field.
2.3.2.The importance of Rapid Exchange
Technology
One of the key patented technologies in the use of
BMS and DES is the method by which the stent
is placed inside the patients coronary artery, or
the delivery method. Historically different delivery methods have been developed by companies
operating in this field but the one that has gained
greatest acceptance with physicians is that known
as Rapid Exchange or RX. In the US the RX delivery system is covered by a number of patents, as a
result of which only three firms, namely Guidant,
J&J and BSX have the right to commercialise it
thanks to cross licensing agreement. The fact that
IP rights over RX constitute an impediment to
entry in the US market for DES is illustrated by
the fact that over 70% of US catheterization labo90

ratories use RX exclusively, the remainder using

alternative technologies such as Over The Wire
(OTW).
In contrast, in Europe there is no patent protection of the RX technology. Hence, coronary stent
suppliers have encountered no problem in selling stents combined with the RX delivery system,
which has therefore become a standard of care, the
rate of use by physicians approaching 100%.
Against this background, in the course of the
proceedings some competitors claimed that the
merger would reduce the merged entitys willingness to license the RX technology in the US to
those who lacked it and that a lack of access to RX
in the US would result in competitors being forced
to exit that market; this in turn would drastically
reduce their profitability with the result being that
their ability to compete effectively in the EU would
be hampered.
The Commission devoted part of its market investigation towards assessing the plausibility of these
arguments but was not ultimately convinced by
them. Firstly there was no evidence that the merger
changed the merging parties incentives to license
RX. As for the lack of access to RX rendering competitors unable to compete effectively in the US,
the Commission also examined these arguments
carefully. Aside from the problem of predicting
what may eventually be the outcome of patent litigation in the US courts, the investigation revealed
nonetheless that in this fast moving and innovative
market, while a lack of access to RX reduced the
attractiveness of interventional cardiology projects
in the US, it was not realistic to assume that this
would necessarily translate into direct and significant adverse effects on competition in Europe.
In fact, the Commission found that in the interventional cardiology business companies regularly
develop and market products that risk infringing
on competitors IP rights portfolio; while litigation is frequent, injunctions preventing the sale
of products are not issued very often, even in the
US; and given the importance and fast pace of
innovation in this industry, the IP landscape can
change significantly over a short period of time,
in directions that cannot be predicted in advance.
Moreover, and more importantly, regarding the
risk of negative spill-over effects from the US into
Europe, it should be borne in mind that those suppliers lacking access to RX in the US, were about
to launch their DES in Europe based on the RX
delivery system. Therefore, it was not demonstrated that the IP rights hurdles in the US could
cause a tangible adverse effect on these suppliers
DES sales in Europe within a foreseeable and sufficiently close timeframe.
Number 3 Autumn 2005

Competition Policy Newsletter

3.1. Features of the markets

Endovascular devices are used for the minimally
invasive treatment of peripheral vascular diseases.
These include the build up of plaque in peripheral
vessels. Although less likely to be life threatening
than coronary artery diseases, endovascular diseases have a life-limiting impact on patients.
The European endovascular stent markets are
much smaller than the market for coronary stents,
although they often show higher growth rates.
Endovascular stenting is a relatively new way to
treat arteriosclerosis of the peripheral arteries with
a minimally invasive procedure. It is increasingly
popular but its growth is limited by the existence
of more established and cheaper traditional treatments, primarily surgery.
The Commissions inquiry has focused on the markets for endovascular stents.
3.1.1. Market definition
The Commissions inquiry revealed the presence
of three separate markets for endovascular stents:
balloon expandable (BX) stents, similar in design
to coronary stents, self expandable (SX) stents for
the carotid arteries, and SX stents for other peripheral arteries. SX stents are automatically deployed
once placed in the target vessel and return to their
original shape after a shock or contorsion. Carotid
stents form a separate market due to the particularly strict regulatory and approval procedures
they have to comply with. In fact, there is no substitutability between carotid and non-carotid SX
stents.
The Commissions inquiry also indicated a clear
trend towards more specialisation in the endovascular area, with a growing number of stents being
dedicated to specific procedures (e.g. renal, femoral, iliac procedures). This process has lead to a
high degree of differentiation within the markets
for BX stents and for non-carotid SX stents.
3.1.2. Innovation
The markets for endovascular devices in Europe
show some features resembling those of the Interventional Cardiology area, although there are also
notable differences. Indeed, innovation appears
to play a more modest role in the markets for
endovascular devices. One may explain the lower
pace of innovation in endovascular as compared
with interventional cardiology due to the overall
smaller size of the endovascular market. Additionally, peripheral procedures are not as homoNumber 3 Autumn 2005

geneous as for interventional cardiology. Therefore, demand is more diversified and the expected
return from investments in innovation lower.
3.1.3. Market share and concentration
Many European markets for endovascular stents
are highly concentrated (). Although the number
of active competitors is significant, not all players
have the same strength or are present in all product or geographic markets. In a number of national
markets, the first three suppliers accounted for
between 70% and 95% of the market in 2004, and
the first four between 85% and 99%. () Three companies represent the lions share of the endovascular stents markets: J&J, BSX and Guidant. Guidants
market shares have consistently increased over the
past five years, albeit from a relatively low base,
while J&Js remained stable.
The merger would reduce the number of most significant competitors from three to two in a number
of national markets. At the EEA level, the 2004
combined market share of the merging parties
would exceed 60% for BX stents (HHI of around
4500 with a delta in excess of 2000), reach around
50% for carotid stents (HHI of around 3700 with
a delta in excess of 1000) and above 35% for noncarotid stents (HHI of around 2700 with an increment of 600).
3.1.4. Closeness of substitution
As mentioned above, endovascular stents markets
are characterised by a high degree of product differentiation. Clinical trials funded by stent suppliers as well as by independent bodies regularly
compare the characteristics of different products
along a number of dimensions that include efficacy and ease of use. These studies are carefully
examined by practitioners (who most often decide
which model the hospital purchases), who may
also have strong personal preferences. In order to
inquire on the closeness of substitution between
J&Js and Guidants stent, the market investigation
asked physicians to indicate the closest alternative
to the product they actually use. The investigation
highlighted that the disappearance of Guidant
would eliminate the competitor that was considered the closest substitute to J&Js stents across the
whole range of products. The closeness of substi(1) The Commission has carried out its analysis at national
level, coherently with the relevant geographic market
definition. The EEA level figures quoted in this article at
nevertheless a good summary of the competitive situation
in most Member States, and have the advantage of being
more easily presentable.
(2) The most affected countries included Austria, Belgium,
France, Germany, Italy, The Netherlands, Portugal and
Spain.

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3. Endovascular stents

Merger control

tution between J&J and Guidants endovascular

stents was not matched by any other competitor
in the market.
3.1.5. Entry barriers
Entry barriers represent a significant cost in the
endovascular stent markets, both in monetary and
time terms.
Firstly, the key to success in this area is the performance of the devices, whose reliability needs to be
proved by lengthy and costly clinical trials. Moreover, a recent important trend in the endovascular
stent markets is towards an increased product specialisation via ad hoc clinical trials. The costs associated with the research and development, clinical
trials and marketing of a new dedicated stent are
very high, and such effort can be undertaken only
if the target market is sufficiently large to offer an
acceptable return on the investment. At the same
time, the specialisation process increases the financial and human resource investment necessary to
offer a complete range of products.
Secondly, a supplier needs to build a strong relationship with the customer and brand reputation.
Guidant enjoys a sound reputation among both
customers and competitors and has a well-perceived quality image across its product range. This
good reputation is mainly based on the quality of
Guidants products (25% of the customers who
replied to the questionnaire considered Guidant
to be a quality leader), but also on an experienced
peripheral direct sales force, and an outstanding
after-sales service, exemplified by its well-recognised training program targeted at practitioners.
Thirdly, the product range is an asset in this business. Suppliers indicated during the market investigation that having a broad product portfolio is a
success factor in the peripheral business.
Finally, suppliers need to establish dedicated sales
forces and secure a widespread presence on the
territory. The market investigation stressed that a
local presence is considered to be a determinant
feature in being a credible supplier. These types of
entry costs are not prohibitive in absolute terms,
but they are significant if compared to the relative small size of many national markets. When
looking at the investments to be made, the market
inquiry listed several hurdles, such as the establishment of a new direct sales force, that is a key
determinant of market success and would thus
require the recruitment of sales people. Competitors stressed the importance to build relationships
with customers to compete with well-entrenched
large players and break through customer loyalty.
Competitors have also explained that the existence
of long-term tenders has for consequence to lock92

on the market for established companies. Perhaps

more important than costs, timely entrance is an
essential element for success. Therefore, even a
player with an established product portfolio may
not be interested in expanding into new geographical markets, where few incumbents account for a
large part of the sales.
3.1.6. Countervailing buyer power
As demand-side is principally constituted of hospitals, the parties claimed that they have strong
countervailing buying power and practice multiple
sourcing. However, the market investigation indicated that demand is highly fragmented relative to
the size and concentration of suppliers. Multiple
sourcing is a common practice, but the majority of
hospitals tend to source from a limited number of
suppliers. Moreover, given the closeness of substitution between the products of the two companies
and the fact that hospital choice would have been
severely limited, multiple sourcing could not have
been an effective way to counter a unilateral price
increase.

3.2. Competitive assessment

Given the characteristics of the endovascular stent
markets outlined above, the Commission concluded that the merger would remove the most
important competitive constraint on J&J. No other
competitor was considered by doctors as close a
substitute to J&J as Guidant. At the same time,
no other competitor could match Guidants assets
in terms of perceived quality, sales force, training
activity and relationship with physicians. Therefore, the elimination of Guidant would allow J&J
to profitably carry out a unilateral price increase
of its stents. Doctors would not switch to different products to an extent sufficient to counter the
price increase.
The Commission concluded that the operation
would give rise to significant non-coordinated
effects and will substantially impede effective competition in the Common Market and the EEA for
endovascular stents.

4. Accessories for vascular intervention

In addition to coronary and endovascular stents,
the Commission assessed the effects of the merger
in the markets for accessories, which are medical
devices used to deliver and deploy the stents in the
target vessels. ()
(1) Accessories include Steerable Guidewires, Guiding Catheters and Balloon Catheters. Accessories for coronary
interventions are different from accessories for endovascular interventions, although they perform a similar
function.

Number 3 Autumn 2005

Competition Policy Newsletter

There was an important exception however: the

market for coronary steerable guidewires presented
consistently high (reaching 70% to 90%) combined
market shares across European countries. Furthermore, the market investigation revealed that this
accessory could not be considered a homogeneous
good and that doctors did not switch frequently
between brands.
The Commission therefore concluded that the
transaction would impede effective competition in
the EEA markets for steerable guidewires. As for
the other accessories, the Commission concluded
that the merged entity would not be in a position
to build on its existing market position to unilaterally increase prices and that the concentration
would not jeopardise effective competition in the
EEA.

5. The risk of anticompetitive bundling

strategies
In its investigation the Commission also assessed
whether, due to the overall impact of the merger
across complementary product markets, the transaction could give rise to foreclosure effects as a
result of bundling practices by the merging entity.
In the field of interventional cardiology Guidant has
an attractive portfolio of cardiac medical devices,
it is market leader in steerable guidewires and one
of the leading suppliers of BMS in Europe, while
retaining a non negligible presence in all the other
interventional cardiology devices. J&J is present
across all the segments, and is strong in DES. The
merger would give the new entity a stronger (all
relevant segments are covered with a very significant presence, on average above 40-50%) and
broader portfolio in the area of interventional cardiology across Europe. Also in the endovascular
devices markets, the merger would strengthen the
parties product range across products.
In order to assess the risk of foreclosure effects
stemming from the merger, the Commission conNumber 3 Autumn 2005

sidered whether the merging entity has the ability

and the incentive to engage in bundling practices,
and if so, whether such a strategy could give rise to
foreclosure effects.
With regard to the ability of the merging entity
to engage in bundling practices, the investigation
revealed that package sales occur in the interventional cardiology and endovascular industry,
although they are not a dominant feature (according to the Commission estimates, they constitute
on average about 30% of the total sales in Europe).
The investigation has also shown that tendering
procedures involving single items are widespread
and that hospitals generally resort to dual sourcing practices in order to avoid dependence from
suppliers.
More importantly, as to the possibility for the
merging entity to engage in such practices with
a view to foreclosing its rivals, the investigation
showed that a bundling strategy can be matched
in a successful way by a number of competitors,
primarily BSX and Medtronic.
The Commission also enquired into whether a
bundling strategy could actually involve devices
belonging to different areas, such as endovascular, interventional cardiology, and cardiac management system devices (defibrillators and pacemakers). On this point, the evidence collected in
the investigation showed that a broader bundling
involving products of different areas was hardly
feasible as customers are generally not the same.

6. The remedies
In order to make the concentration compatible
with the common market, the parties have committed to divest Guidants EEA endovascular business (including stents and accessories), J&Js EEA
Steerable Guidewires business. ()
The EEA endovascular and steerable guidewires
businesses consist of the inventories and the customer lists, the assignment of rights for use of
trademarks, the license of IP rights, and the transfer of specifications relating to the design of the
products. The business to be divested does not
include any manufacturing or research facilities,
because the production of J&J steerable guidewires
is done by a third party on the basis of an OEM
contract, and the production of Guidant endovas(1) The parties also committed to divest either J&J or Guidant Endoscopic Vessel Harvesting products in cardiac
surgery. As noted above, the remedy in cardiac surgery
results from fairly straightforward competition concerns
and does not raise any particularly significant competition issues. As such, it is not discussed in this article.

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Combined market shares for accessories varied significantly across countries, reaching in some cases
very high levels (above 70%). This notwithstanding the Commission concluded that the merger
would not pose a threat to effective competition.
Unlike stents, accessories have very little specific
IP content and are offered by a number of international and local suppliers. They are increasingly
homogeneous and interchangeable products for
which there are low barriers to entry and production scale-up. Finally, doctors customarily use different brands and can switch easily between them.

Merger control

cular devices is done in a single US plant for its

worldwide products, and this also produces coronary products. The production of endovascular
devices for the European markets is only a very
small fraction of the plants activity, which rendered the hypothetical divestment of the physical
assets not proportionate to the competition concerns in this case.

94

The remedies include other commitments that

will allow the purchaser of the business to set up
an independent and competitive supply of the
products being divested. This makes the remedies particularly suitable for established medical
devices producers who can rely upon their existing
physical assets for the production of the acquired
products.

Number 3 Autumn 2005