Antitrust Lawyer Blog
The Commission charged on October 17 that Thermo Electron Corporation’s proposed $12.8 billion acquisition of Scientific International, Inc. would harm competition in the U.S. market for high-performance centrifugal vacuum evaporators (“CVEs”) in violation of the antitrust laws.
Thermo and Fisher are the only two significant suppliers of high-performance CVEs in the United States and the proposed transaction would have eliminated the direct price, service, and innovation competition that exists between them. To settle the Commission’s charges, Thermo is required to divest Fisher’s Genevac division, which includes Fisher’s entire CVE business, within five months of the date the consent agreement was signed.
High-performance CVEs are used primarily in combinatorial chemistry labs, such as those engaged in drug discovery and research, to process large collections of potentially biologically active molecules at the same time – a process known as parallel synthesis. By applying a combination of heat, vacuum, and centrifugal force, high-performance CVEs rapidly remove solvents from samples suspended in solution in the wells of microtiter plates or test tubes without causing molecular degradation or cross-contamination of the samples.
High-performance CVEs differ from their lower-performance counterparts in that they can process hundreds of samples at a time, achieve higher evaporation rates, include specific capabilities to help prevent cross-contamination of samples, and are compatible with corrosive and environmentally sensitive solvents. Because of these features, high-performance and lower-performance CVEs are not considered interchangeable by purchasers.
Thermo, headquartered in Waltham, Massachusetts, is one of the largest and most diversified suppliers of analytical instruments in the world. The company employs 11,000 people worldwide, maintains offices in 30 countries, and owns many well-known laboratory equipment brands, including Savant Speedvac, which offers high-performance CVEs.
According to the Commission’s complaint, Thermo’s acquisition of Fisher as proposed would violate Section 7 of the Clayton Act and Section 5 of the FTC Act, as amended, by lessening competition in the U.S. market for high-performance CVEs. Thermo and Fisher are the only two significant suppliers in the approximately $10 million U.S. market for high-performance CVEs, accounting for approximately 30 percent and 70 percent market share, respectively. As a result of the competition between Thermo and Fisher, purchasers of high-performance CVEs receive lower prices and other economic benefits, such as favorable service or payment terms. The parties also compete directly on the basis of product performance, features, and innovation resulting in significant product improvements, such as enhanced vacuum and monitoring capabilities. This competition would be eliminated by the transaction as proposed, and the transaction would have left Thermo with a virtual monopoly.
The consent agreement is designed to remedy the alleged anticompetitive effects of Thermo’s proposed acquisition of Fisher. Under its terms, Thermo is required to divest Genevac, Fisher’s stand-alone CVE business, to a Commission-approved buyer within five months of signing the consent agreement. If Thermo is not able to find an acceptable buyer within that time, the consent agreement allows the FTC to appoint a trustee to oversee the sale of the assets. The trustee would then have six months to sell the assets to a Commission-approved buyer. The consent agreement contains an Order to Hold Separate and Maintain Assets that requires Thermo to maintain the viability of Genevac pending its divestiture. This order is designed to prevent interim harm to competition in the high-performance CVE market before the divestiture takes place and ensure that no material confidential information is shared between Thermo and Genevac.
The Commission voted to approve the consent agreement 5-0.
Authored by
Andre Barlow
202-589-1838
abarlow@dbmlawgroup.com