European Commission - Press release
Mergers: Commission opens in-depth investigation into proposed acquisition of Synthes by Johnson and Johnson
Brussels, 04 November 2011 - The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of Synthes Inc. by Johnson and Johnson, both US companies active in the area of orthopaedic medical devices. The decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission now has 90 working days, until 19 March 2012, to take a final decision on whether the transaction would reduce effective competition in the European Economic Area (EEA)1.
Commission Vice President in charge of competition policy Joaquín Almunia said: “The proposed acquisition would remove a competitor from some markets which are already concentrated. The Commission needs to make sure that effective competition is preserved, in order to maintain innovation and prevent harm to patients."
Johnson and Johnson and Synthes produce and/or distribute trauma devices (used to treat bone fractures), spine devices (used to correct various deformities of the spine), shoulder replacement devices (used to reconstruct shoulder joints), cranio-maxillofacial devices ("CMF" - used for the treatment of facial and skull fractures) and surgical power tools such as drill systems, drill bits, reamers and saws.
The Commission’s initial investigation showed that the proposed transaction would combine two of the leading suppliers of spine devices and would strengthen the position of Synthes as the current market leader in trauma and CMF devices and of Johnson and Johnson in shoulder devices in a substantial number of EEA Member States.
At this stage of the investigation, the Commission has concerns that the remaining competitors in many of the markets may not be able to exert a sufficiently strong restraint on the behaviour of the merged entity. The removal of an important competitor may also have a negative impact on the level of innovation, leading to a reduction of choice for patients and potentially an increase in prices for the orthopaedic medical devices concerned. Consequently, at this stage, the acquisition raises serious doubts as to its impact on competition.
The Commission will now investigate the proposed merger in-depth to find out whether these initial concerns are confirmed or not.
Merger control rules and procedures
The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Art 1 of the Merger Regulation). The Commission clears the vast majority of mergers after a one-month review, but if it has competition concerns it must open an in-depth investigation (Phase II review). The opening of a full probe does not prejudge its outcome.
There are currently two other Phase II investigations. The first one concerns the proposed acquisition of the hard disk drive business of Japan's Hitachi by Western Digital Corporation of the US (see IP/11/660, deadline is 30 November 2011). The second phase II investigation assesses the proposed acquisition of NYSE Euronext by Deutsche Börse (see IP/11/948, deadline here is 22 December 2011).
More information on the case will be available at:
The EU plus Iceland, Liechtenstein and Norway.