On October 11, 2007, the European Commission (the Commission), under the EC Merger Regulation, cleared the US Schering-Plough Corporation acquisition of the Dutch Organon BS, after Schering-Plough agreed to divest a substantial portion of the Organon animal health business. Schering-Plough was able to secure clearance in Phase I, thereby avoiding a lengthy and uncertain Phase II investigation.
Organon is the Dutch holding company for the human and animal healthcare activities of Akzo Nobel, which comprises two operating units: the human pharmaceutical business, Organon International BV, and the animal health business, Intervet International BV. The Commission did not identify competition concerns with respect to the human health business because of the number of credible alternative competitors in that area.
The Commission raised competitive concerns with respect to veterinary products covering five vaccine areas (swine E.Coli; equine influenza and tetanus; ruminant neonatal diarrhea; ruminant clostridia; and multi-species rabies) and seven pharmaceutical areas (endocrines for reproductive use, insulin, antibiotics/sulphonamides, antibiotics/intra-mammary mastitis treatment, euthanasia, parasiticides and anti-inflammatories). The Commission’s preliminary conclusion was that the merged entity would have either a high combined market share or a monopoly in any relevant markets. The Commission also concluded that in many instances Organon’s and Schering-Plough’s competing animal health products were each other’s closest substitutes.
Schering-Plough obtained Phase I clearance by offering to divest more than twenty animal health formulations and trademarks covering the European Environment Agency (EEA). This illustrates how merging parties are increasingly offering far-reaching merger remedies in Europe to secure Phase I clearance in order to avoid the risk and costs associated with a lengthy Phase II review. This deal was also reviewed in the U.S. by the Federal Trade Commission (FTC). On November 16, 2007, the FTC announced that it had reached an agreement with Schering-Plough that would allow the deal to close conditioned on the divestiture of a more limited portfolio of vaccines than that which Schering-Plough offered to the European Commission. The FTC consent order requires Schering-Plough to divest three vaccines: 1) live vaccines for the prevention and treatment of the Georgia 98 strain of infectious bronchitis virus in poultry; 2) live vaccines for the prevention and treatment of fowl cholera due to Pasteurella multocida in poultry; and 3) live vaccines for the prevention and treatment of Mycoplasma gallisepticum (MG) in poultry. The FTC concluded that the transaction would have resulted in Schering-Plough controlling a large market share in each of these vaccine markets. The FTC order also approved Wyeth as an approved buyer of each of the vaccines to be divested