Laboratory Corporation of America Holdings and Orchid Cellmark Inc.; Analysis of Proposed Agreement Containing Consent Orders To Aid Public Comment, 78008-78009 [2011-32125]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Pages 78008-78009]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32125]



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FEDERAL TRADE COMMISSION

[File No. 111 0155]


Laboratory Corporation of America Holdings and Orchid Cellmark 
Inc.; Analysis of Proposed Agreement Containing Consent Orders To Aid 
Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before January 9, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``LabCorp/Orchid, File 
No. 111 0155'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/labcorporchidconsent, by following the 
instructions on the Web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael Barnett (202) 326-2362), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that 
the above-captioned consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for December 8, 2011), on the World Wide Web, at https://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC 
20580, either in person or by calling (202) 326-2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 9, 2012. 
Write ''LabCorp/Orchid, File No. 111 0155'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ''[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential,`` as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/labcorporchidconsent by following the instructions on the Web-based 
form. If this Notice appears at https://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ''LabCorp/Orchid, File No. 
111 0155'' on your comment and on the envelope, and mail or deliver it 
to the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at https://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before January 9, 2012. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at https://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') with Laboratory Corporation of America Holdings 
(``LabCorp''), which is designed to remedy the anticompetitive effects 
of its proposed acquisition of Orchid Cellmark Inc. (``Orchid''). Under 
the terms of the Consent Agreement, LabCorp is required to divest 
Orchid's U.S. government paternity testing services business to DNA 
Diagnostics Center (``ADDC''). The Consent Agreement also requires 
LabCorp to facilitate the assignment of Orchid's current government 
contracts to provide paternity testing services. The assets involved 
include all of the necessary relevant equipment, books and records, and 
other information necessary for DDC to bid competitively for future 
government paternity testing services

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business. With this Consent Agreement, the competition that would 
otherwise be eliminated through the proposed acquisition of Orchid by 
LabCorp will be fully preserved.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the proposed 
Consent Agreement and the comments received, and will decide whether it 
should withdraw from the proposed Consent Agreement, modify it, or make 
final the accompanying Decision and Order (``Order'').
    Pursuant to an Agreement and Plan of Merger dated April 5, 2011, 
LabCorp intends to acquire Orchid in a cash tender offer valued at 
approximately $85.4 million. Both parties provide paternity testing 
services to government agencies, and are by far the largest providers 
of those services in the United States. The Commission's complaint 
alleges that the proposed acquisition, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 
of the Federal Trade Commission Act, as amended, 15 U.S.C. Sec.  45, in 
U.S. markets for the provision of paternity testing services to state 
and local government agencies. The proposed Consent Agreement remedies 
the alleged violations by replacing the lost competition in the 
relevant market that would result from the acquisition.

II. The Products and Structure of the Markets

    DNA paternity testing services for government agencies is a 
relevant product market in which to analyze the competitive effects of 
the proposed acquisition. No other types of paternity testing services, 
like blood testing, meet government agencies' requirements. LabCorp and 
Orchid are the two principal competitors in the United States for 
government paternity testing services contracts--they are the only two 
firms that consistently bid for these contracts, they account for the 
overwhelming majority of awarded contracts, and they have been the 
winner and runner-up in most of these bids. As a result, LabCorp and 
Orchid accounted for the overwhelming majority of the business in this 
roughly $27 million market.

III. Entry

    The anticompetitive impact of LabCorp's acquisition of Orchid is 
not likely to be averted by entry or expansion from other DNA testing 
labs. Most other DNA testing laboratories do not have the scale or the 
experience needed to compete effectively for government contracts.

IV. Effects of the Acquisition

    The proposed acquisition likely would result in significant 
anticompetitive harm in the highly-concentrated relevant market for 
government paternity testing services. LabCorp and Orchid are the only 
significant competitors in this highly-concentrated market. Over the 
past five years, LabCorp and Orchid consistently participated in the 
vast majority of state and local government bids conducted in the 
United States, almost always as head-to-head competitors. They bid more 
often, and typically at lower prices, than any other labs. The 
acquisition will eliminate this significant head-to-head competition 
and is likely to result in higher prices for government paternity 
testing services contracts.

V. The Consent Agreement

    The proposed Consent Agreement remedies the competitive concerns 
raised by the transaction by requiring the parties to divest Orchid's 
U.S. government paternity testing business to DDC. LabCorp also must 
divest testing equipment along with contract and service information 
necessary to enable DDC to replicate Orchid's market position. LabCorp 
also must facilitate the assignment of all existing government 
paternity testing services contracts to DDC. This divestiture preserves 
competition that would otherwise be eliminated as a result of the 
acquisition.
    The proposed Consent Agreement also contains several provisions 
designed to ensure that the divestiture is successful. LabCorp must 
provide lab testing services to DDC until the assets are fully 
transferred and Orchid's government contracts are assigned to DDC. In 
addition, DDC will have access to the personnel and information that 
are at Orchid's Dayton facility. Finally, LabCorp cannot use or retain 
any confidential business information except as necessary to maintain 
the assets for DDC's use during the transition period. To prevent 
improper sharing of information, a manager of the business being 
transferred who reports directly to Commission staff will be put in 
place.
    DDC is a respected provider of paternity testing services for both 
private and government customers. DDC operates a testing laboratory 
located in Fairfield, Ohio that, with the divested assets and business, 
will enable DDC to effectively replace Orchid as the primary competitor 
to LabCorp. DDC has the resources and experience necessary to acquire 
the divested assets and assume responsibility for Orchid's existing 
government contracts.
    If the Commission determines that either DDC is not an acceptable 
acquirer of the assets to be divested, or that the manner of the 
divestitures is not acceptable, LabCorp must unwind the divestiture and 
divest the assets within six months of the date the Order becomes final 
to another Commission-approved acquirer. If LabCorp fails to divest the 
assets within the six months, the Commission may appoint a trustee to 
divest the relevant assets.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-32125 Filed 12-14-11; 8:45 am]
BILLING CODE 6750-01-P