The legal issues that relate to mergers and acquisitions (M&A) of businesses.

Today, the FTC announced that it will challenge Hologic Inc.’s 2005 purchase of the breast cancer screening and diagnosis business of Fischer Imaging Corporation. In its complaint, the FTC alleged that Hologic’s acquisition of Fischer’s prone stereotactic breast biopsy systems (SBBSs) business harmed American consumers by eliminating its only significant competitor for the sale of SBBSs in the United States.

Hologic paid $32 million for Fischer’s intellectual property and other assets in September 2005. The assets related to Fischer's mammography and breast biopsy businesses, including patents, trademarks, and customer and vendor lists for Fischer’s prone SBBS product, MammoTest. At the time, Fischer was Hologic’s only significant competitor in the U.S. market for prone SBBSs. As a result of the acquisition, Fischer relinquished all of its rights to develop, market, and sell prone SBBSs in the United States. According the government's complaint, the deal gave Hologic a "a virtual monopoly in the U.S. prone SBBS market."

Because this deal was worth less than the $56.7 million filing threshold under the Hart-Scott-Rodino Premerger Notification Act (HSR Act), it was not reportable to the federal antitrust agencies. The FTC nevertheless learned of it--likely as a result of a customer complaint--and challenged it anyway.  Hologic must now divest itself of the assets, which it has agreed to do. Siemens AG will buy the assets.

The FTC's enforcement action here is a reminder to us all--any deal, big or small, reportable or not--can get the attention of the government. There are any number of ways that could happen: news of the parties' deal gets picked up by trade press monitored by government lawyers; the acquiring company starts raising prices thereby inducing customers to contact the government and complain; or a disgruntled competitor could complain. By closing the deal with Fischer, Hologic gambled. Now, ten months later, we know the results. It lost.

Comptel has filed comments in connection with Tunney Act proceedings pending in United States v. SBC Communications, Inc., which involved SBC's merger with AT&T, and United States v. Verizon Communications, Inc., which involved Verizon's merger with MCI. When the government proposes an antitrust consent decree, as it did in these cases, a court cannot enter it as final until it has reviewed it and made a finding that the decree is in the "public interest" pursuant to the Tunney Act. The government proposed two consent decrees--one for each merger.  Comptel apparently opposes the entry of both.

In its response to Comptel's opposition, the Justice Department argues that the government has met the requirements of the Tunney Act by providing the public with all of the documents and information required by the statute. The government defended its investigation of the proposed mergers and the consent decrees:

• that the government properly defined the relevant geographic market as individual buildings because "markets are properly defined based on what options a customer faces" and as "customers for local private lines can select only from the set of providers that offer service to the particular building to which those customers need to connect and the set of providers varies from building to building, it is appropriate to consider markets as small as an individual building";

• that the proposed decrees redress the harm in all 2-to-1 buildings where the government concluded that the proposed merger would cause competitive harm;

• that the resolution of the Qwest/Allegiance merger is irrelevant;

• that the proposed decrees do not increase the risk of collusion; and
  

• that several sophisticated telecommunications carriers bid for the divestiture assets demonstrates the viability of the divestiture package.

Today, the FTC announced a consent agreement on the Boston Scientific/Guidant deal. According to the complaint, the transaction would have anticompetitive effects in each of the relevant product markets defined as 1) drug eluting stents (DES) with the rapid exchange delivery system; 2) percutaneous transluminal coronary angioplasty (PTCA) balloon catheters; 3) coronary guidewires; and 4) implantable cardioverter defibrillators (ICD).

The complaint alleges that Boston Scientific’s acquisition of Guidant 1) would remove Guidant as the only potential competitor in a DES market that includes only two competitors, Boston Scientific and Johnson & Johnson; 2) would cause competitive harm in the markets for PTCA balloon catheters and coronary guidewires by eliminating competition between Boston Scientific and Guidant and reducing the number of significant competitors in the market, allowing the combined Boston Scientific/Guidant to raise prices unilaterally for both PTCA balloon catheters and coronary guidewires; and 3) may adversely affect competition in the ICD market by allowing Boston Scientific to receive information and exercise control over Cameron Health, Inc. (Cameron), a potential significant competitor.

The consent agreement purports to address these competitive concerns by requiring Boston Scientific and Guidant to:

• Divest all assets – including intellectual property – related to Guidant’s vascular business to a third party, enabling that third party to sell DES products, PTCA's, and coronary guidewires; and

• Reform certain contractual rights between Boston Scientific and Cameron to limit Boston Scientific’s control over certain Cameron actions and the sharing of nonpublic information about Cameron’s ICD product.