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FTC Accepts New Entrant as a Remedy to Consolidation among Labware Suppliers

Leigh Oliver

Charlie Dickinson

12 November 2012
The FTC recently approved Corning’s proposed $730 million acquisition of Discovery Labware, a division of Becton, Dickinson, subject to a Consent Agreement.  The agreement requires Corning to supply Sigma-Aldrich, a competitor in adjacent markets, with the necessary products and technical assistance to immediately compete in the supply of certain specialty lab products (tissue culture treated labware) sold to bio-tech companies, drug companies, and universities.  By requiring Corning to sponsor new entry, rather than to completely divest overlapping assets, this case is an example of a situation in which the FTC is willing to accept new entry as an adequate fix to the alleged loss of competition from a merger.
FTC Accepts New Entrant as a Remedy to Consolidation among Labware Suppliers

This remedy is somewhat unusual because the federal antitrust agencies typically require the divestiture of an autonomous, on-going business to remedy any alleged anticompetitive effects of a merger between competitors.  Continuing relationships—like the one that will exist between Corning and Sigma-Aldrich for as long as 5 years if the Consent Agreement becomes final—are disfavored, according to the FTC’s Statement on Negotiating Merger Remedies, and usually only acceptable as additional relief to support a divestiture.  This case, however, is an excellent example of how a supply agreement, without a divestiture, may satisfy FTC concerns about lost competition from a merger.

This issue may be of particular interest to:

 • Firms considering strategic transactions. Companies should be aware of, and ask their counsel for advice on, the range of remedies that have been employed by    the agencies in order to resolve competitive concerns; and

• Third-parties. Firms that are active in markets related to those in which an agency is reviewing competitive issues related to a transaction (similar to Sigma-Aldrich in this case) should be aware, and ask their counsel to keep tabs on, potential antitrust agency challenges in related industries. Potential agency challenges often present opportunities for third-parties to become buyers of divested assets, licensees of divested technology, or wholly new entrants.

 

Leigh Oliver

Charlie Dickinson

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